AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CAPITAL PREFERRED YIELD FUND - IV, L.P.
This Amended and Restated Agreement of Limited Partnership of Capital
Preferred Yield Fund - IV, L.P. (the "Partnership") is made as of June 6, 1996
by and among CAI Equipment Leasing V Corp., a Colorado corporation (the "General
Partner"), as the General Partner, Capital Associates International, Inc., a
Colorado corporation (the "Class B Limited Partner"), as the Class B Limited
Partner, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the "Original Limited Partner"), as the original
Limited Partner, and those Persons admitted to the Partnership from time to time
as Class A Limited Partners (the "Class A Limited Partners").
Recitals
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A. The General Partner executed a Certificate of Limited Partnership,
dated as of December 15, 1995, establishing the Partnership pursuant to the
Delaware Act (as defined below) and the General Partner and the Original Limited
Partner entered into an Agreement of Limited Partnership, dated as of December
18, 1995, setting forth certain of the terms and conditions of their agreements
and understandings regarding the Partnership.
B. The parties hereto desire to enter into this Amended and Restated
Agreement of Limited Partnership to provide for the: (i) continuation of the
Partnership; (ii) admission of Class A Limited Partners and the Class B Limited
Partner; (iii) withdrawal of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as the Original Limited Partner;
and (iv) terms and conditions for the operation of the Partnership.
Agreement
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In consideration of the premises and mutual covenants and agreements
set forth below, the parties hereto, intending to be legally bound, hereby agree
as follows:
ARTICLE ONE
DEFINITIONS
Defined terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified below. Certain additional
defined terms are set forth elsewhere in this Agreement. Unless the context
requires otherwise, the singularincludes the plural and the masculine gender
includes the feminine and neuter, and vice versa, and "Article" and "Section"
references are references to the Articles and Sections of this Agreement.
1
"Accountants" means KPMG Peat Marwick LLP, or such other nationally
recognized firm of independent public accountants as may be engaged from time to
time by the General Partner on behalf of the Partnership.
"Acquisition Expenses" means expenses including but not limited to
legal fees and expenses, travel and communications expenses, costs of
appraisals, accounting fees and expenses and miscellaneous expenses relating to
selection and acquisition of Equipment for the Partnership, whether or not
acquired.
"Acquisition Fees" means the total of all fees and commissions paid
by any party in connection with the initial purchase or manufacture of Equipment
acquired by the Partnership, including without limitation the Origination Fee
and the Evaluation Fee, any commission, selection fee, construction supervision
fee, financing fee, non-recurring management fee or any fee of a similar nature,
however designated.
"Adjusted Capital Account Deficit" means, with respect to any Capital
Account as of the end of any Year, the amount by which the balance in such
Capital Account is less than zero, after giving effect through the end of such
Year to all of the capital account adjustments required under Treas. Reg.
ss.ss.1.704-1(b), 1.704-2 and 1.752-1 through -5.
"Adjusted Capital Contribution" means, as of the date of
determination, a Partner's Capital Contribution, reduced to not less than zero
by: (i) any return of Capital Contributions pursuant to Section 3.8; and (ii)
cash distributions from Cash From Operations and Cash From Sales received by the
Partnership during the period subsequent to the Termination Date and actually
paid to Partners after the Termination Date in excess of the Preferred Return. A
Partner's Adjusted Capital Contribution for the purpose of computing Payout
shall not be reduced by any cash distributions made between the Closing Date and
the Termination Date.
"Affiliate" means, when used with reference to a specified Person:
(i) any Person that directly or indirectly controls, is controlled by or is
under common control with the specified Person; (ii) any Person that is an
officer, director or trustee of or partner in, or serves in a similar capacity
with respect to, the specified Person or with respect to which the specified
Person serves in a similar capacity; and (iii) any Person that directly or
indirectly is the beneficial owner of or controls 10.0% or more of any class of
equity securities of, or otherwise has a substantial beneficial interest in, the
specified Person or of which the specified Person is directly or indirectly the
owner of or controls 10.0% or more of any class of equity securities or in which
the specified Person otherwise has a substantial beneficial interest.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership, as it may be amended, supplemented or restated from time to time.
2
"Assign" or "Assignment" means, with respect to any Partnership
Interest or any part thereof, to offer, sell, assign, transfer, give or
otherwise dispose of, 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.
"Assignee" means a Person to whom an interest in any Partnership
Interest has been Assigned in a manner permitted under this Agreement.
"Bankruptcy" or "Bankrupt" as to any Person means the: (i) filing of
a petition for relief as to such Person as debtor or bankrupt under the
Bankruptcy Code of 1978 or like provision of law (except if such petition is
contested by such Person and has been finally dismissed within 120 days); (ii)
insolvency of such Person as finally determined by a court proceeding; (iii)
filing by such Person of a petition or application for a determination of
insolvency or for the appointment of a receiver or a trustee for such Person or
a substantial part of his assets; or (iv) commencement of any proceedings
relating to such Person under any other reorganization, arrangement, insolvency,
adjustment-of-debt or liquidation law of any jurisdiction, whether now in
existence or hereinafter in effect, either by such Person or by another,
provided that if such proceeding is commenced by another, such Person indicates
his approval of such proceeding, consents thereto or acquiesces therein or such
proceeding is contested by such Person and has not been finally dismissed within
120 days.
"Basis" means, with respect to an item of property, the adjusted tax
basis of such property for federal income tax purposes.
"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.
ss.1.704-1(b)(2)(iv)(d)-(g).
"CAI" means Capital Associates, Inc., the parent corporation of the
General Partner and the Class B Limited Partner.
"Capital Account" means the capital account maintained for each
Partner pursuant to Section 3.6.
"Capital Contribution" means the amount of investment in the
Partnership whether in cash, cash equivalents or other property that a Partner
contributes to the Partnership, minus any amounts returned pursuant to Section
3.8. In the case of Units, the term "Capital Contribution" shall always mean
$100.00 per Unit, minus any amounts returned pursuant to Section 3.8.
"Cash From Operations" means the cash funds provided from the
Partnership's operations, without deduction for depreciation, but after
deducting cash funds used to pay all other expenses, debt payments, amounts
placed in Reserves (net of any amounts released from Reserves because the need
for such Reserves has ceased), capital improvements, replacements and
liabilities (other than cash funds withdrawn from Reserves), including without
limitation all fees, reimbursements and other expenses paid to the General
Partner, its Affiliates or any other Person. "Cash From Operations" does not
include Cash From Sales.
3
"Cash From Sales" means the cash received by the Partnership as a
result of a Sale or refinancing, reduced by: (i) all debts and liabilities of
the Partnership required to be paid as a result of the Sale, whether or not then
payable (including any liabilities on an item of Equipment sold that are not
assumed by the buyer and any remarketing fees required to be paid to Persons who
are not Affiliates of the General Partner) and (ii) any amounts set aside as
Reserves to the extent deemed reasonable by the General Partner. If the
Partnership takes back a promissory note or other evidence of indebtedness in
connection with any Sale, the amount of such obligations shall not be included
in Cash From Sales and all payments subsequently received in cash by the
Partnership with respect to such note or other evidence of indebtedness shall be
included in Cash From Sales only upon receipt, irrespective of the treatment of
such payments by the Partnership for tax or accounting purposes. If the
Partnership has the right to retain insurance proceeds in connection with the
damage or loss of Equipment, such proceeds shall be treated as Cash From Sales.
"Certificate" means the certificate of limited partnership for the
Partnership, as amended, restated or otherwise modified from time to time.
"Class A Limited Partners" means those Limited Partners designated as
Class A Limited Partners from time to time on the books and records of the
Partnership (in their capacities as Limited Partners).
"Class B Interest" means the Partnership Interest received by the
Class B Limited Partner in exchange for its Capital Contribution.
"Class B Limited Partner(s)" means initially Capital Associates
International, Inc. and any successor Class B Limited Partner(s) designated as
such on the books and records of the Partnership.
"Class B Majority" means Class B Limited Partners who (in their
capacities as Class B Limited Partners), at any time, have aggregate Adjusted
Capital Contributions representing more than 50.0% of the total aggregate
Adjusted Capital Contributions of all Class B Limited Partners (in their
capacities as Class B Limited Partners) at such time.
"Class B Subordinated Distributions" means cash distributions payable
to the Class B Limited Partner(s) out of Distributable Cash in an annualized,
subordinated amount equal to 10.5% of the Class B Limited Partner's Capital
Contributions.
"Closing" means the sale of Units in an amount equal to at least the
Minimum Offering and the delivery of subscribed funds held in escrow by the
Escrow Agent to the Partnership.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, and any successor law.
"Commission" means the Securities and Exchange Commission.
4
"Consent" means, as the context may require, the: (i) consent given
by a vote at a meeting called and held in accordance with the provisions of
Section 11.1; (ii) prior written consent of a Person to do the act or thing for
which the consent is solicited; or (iii) act of granting such consent.
"Controlling Person" means any person, regardless of title, who: (i)
performs executive or senior management functions for the General Partner or its
Affiliates similar to those of executive management or senior management; (ii)
is a director of the General Partner or its Affiliates; (iii) holds a 5.0% or
more equity interest in the General Partner or its Affiliates; or (iv) has the
power to direct or cause the direction of a General Partner or Affiliates
through ownership of voting securities, by contract or otherwise.
"Cost" means the reasonable, necessary and actual expenses incurred
by the General Partner or its Affiliates, as determined in accordance with
generally accepted accounting principles, in holding title to Equipment on a
temporary or interim basis.
"Dealer-Manager" means CAI Securities Corporation, a California
corporation, and any successor entity.
"Dealer-Manager Agreement" means the Dealer-Manager Agreement among
the Partnership, the General Partner and the Dealer-Manager.
"Dealer-Manager Fee" means the fee payable to the Dealer- Manager by
the Partnership pursuant to Section 5.4(a)(i)(B).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership
Act, 6 Del. C. ss.17-101, et seq., as amended and in effect from time to time,
and any successor to such Act.
"Depreciation," for any Year or other period, shall mean the
depreciation, amortization or other cost recovery deduction allowable with
respect to an item of property for such Year or other period as determined for
federal income tax purposes; provided, however, that, if the Value of such item
of property differs from its Basis at the beginning of such Year or other
period, Depreciation shall be determined as provided in Treas. Reg.
ss.1.704-1(b)(2)(iv)(g)(3).
"Disability" means that an individual is unable to perform his or her
duties as an employee at a then existing job by reason of illness, injury or
incapacity for one hundred and twenty (120) consecutive days, or such
individual's employer or disability insurer has determined that such individual
is disabled for the purposes of applicable disability insurance, if any.
"Distributable Cash" means Cash From Operations and Cash From Sales
available to the Partnership during the Period for which distributions to
Partners by the Partnership are to be made.
"Due Diligence Reimbursement" means the bona fide due diligence fees
and expenses payable by the Partnership to Selling Dealers, in an amount equal
to the lesser of: (i) 0.5% of Gross Offering Proceeds; and (ii) the maximum
amount allowable under the NASD Rules of Fair Practice.
5
"Equipment" means any new, used or reconditioned equipment and
related tangible property acquired by the Partnership and any equity interest of
the Partnership therein, whether directly or indirectly through a nominee, joint
venture or otherwise.
"Equipment Purchase Price" means the price paid upon the purchase or
Sale of a particular item of Equipment, including the amount of Acquisition Fees
and all liens and mortgages on the Equipment, but excluding points and prepaid
interest.
"Equipment Sale Commission" means the brokerage fee paid for services
rendered in connection with the purchase or sale of Equipment which is
reasonable, customary and competitive in light of the size, type and location of
the Equipment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Bank One, Colorado, N.A., a Colorado banking
association (or another banking institution named by the General Partner in the
event Bank One is unable to serve as Escrow Agent).
"Evaluation Fee" means the fee paid by the Partnership to the General
Partner pursuant to Section 5.4(a)(iii)(B).
"Fees" means all amounts payable by the Partnership to the General
Partner or its Affiliates in connection with the operations of the Partnership,
including the Evaluation Fee, the Origination Fee, O&O Expenses Reimbursement,
Sales Commissions and Management Fee.
"First Basic Rent Date" means, with respect to any Lease, the date
upon which the first periodic rent payment is due, following installation of all
of the Equipment under the Lease.
"First Cash Distributions" means cash distributions, payable to the
Class A Limited Partners out of Distributable Cash in an annualized, cumulative
preferred amount equal to 10.5% (based upon a year of 360 days with twelve
months of 30 days each), of the Class A Limited Partners' Capital Contributions,
provided, however, that the General Partner, in its sole discretion, may
increase such percentage from time to time, but not decrease it below 10.5%.
"Front-End Fees" means the fees and expenses paid by any party for
any services rendered during the Partnership's organizational or acquisition
phases, including without limitation Leasing Fees, Acquisition Expenses,
Acquisition Fees and Organizational and Offering Expenses, including Sales
Commissions, Dealer-Manager Fees, O&O Expenses Reimbursement, Due Diligence
Reimbursement and any other similar fees, however designated (including fees
paid with respect to Equipment purchased with Reinvested Proceeds). Front-End
Fees shall not include any Acquisition Fees or Acquisition Expenses paid by a
manufacturer or vendor of Equipment to any of its employees or contractors
unless such Persons are Affiliates of the Sponsor.
6
"Full Payout Lease" means a Lease under which the non-cancelable
rental payments due during the initial term of the Lease are sufficient to
permit the Partnership to recover the Equipment Purchase Price of the Equipment
leased thereby.
"General Partner" means CAI Equipment Leasing V Corp. and any
additional or successor general partner admitted to the Partnership pursuant to
Article Six.
"Gross Offering Proceeds" means the aggregate Capital Contributions
of all Class A Limited Partners admitted to the Partnership.
"Gross Rentals" means the gross dollar amount received by the
Partnership as rental payments for the use of any Equipment subject to a Lease.
"Health Emergency" means a situation in which a Class A Limited
Partner or his or her spouse or child dies, or is confined to a hospital for a
period of 90 or more consecutive days, or to a nursing home or other long-term
care facility for a period of 30 or more consecutive days or suffers a
Disability.
"Initial Lease" means the first Lease to which an item of Equipment
is subject immediately following the acquisition of such Equipment by the
Partnership, including Equipment purchased with Net Offering Proceeds as well as
Reinvested Proceeds. The term "Initial Lease" includes the Lease to which an
item of Equipment is subject on the date the Partnership acquires such item of
Equipment.
"Investment in Equipment" means the amount of Gross Offering Proceeds
actually paid or allocated to the purchase, manufacture or renovation of
Equipment acquired by the Partnership, including the purchase of Equipment,
Reserves allocable thereto (except that Reserves in excess of 3.0% shall not be
included) and other cash payments such as interest and taxes but excluding
Front-End Fees.
"▇▇▇" means an Individual Retirement Account.
"IRS" means the Internal Revenue Service.
"Lease" means a Full Payout Lease or an Operating Lease, and includes
all Initial Leases and Subsequent Leases, as well as an executed binding lease
agreement pursuant to which either the Partnership or the General Partner or any
of its Affiliates is the lessor, regardless of whether the lease term has
commenced as of the subject date or is to commence in the future, which
agreement is assignable by the General Partner or such Affiliate to the
Partnership, provided, however, that such agreement shall be held by the General
Partner or Affiliate on a temporary or interim basis, generally not longer than
six months after the acquisition of the Equipment subject to the agreement by
the General Partner or Affiliate.
7
"Leasing Fee" means the total of all fees and commissions paid by any
party in connection with the initial lease of Equipment acquired by the
Partnership.
"Lessee" means the lessee under a Lease.
"Limited Partner" means any Class A Limited Partner or the Class B
Limited Partner.
"Liquidation Period" means the period beginning on the first day
after the end of the Reinvestment Period, and ending on the date on which the
Partnership is finally liquidated.
"Liquidation Proceeds" means all cash (from whatever source)
available for distribution to the Partners upon liquidation of the Partnership.
"Majority Interest" means the holders of more than 50.0% of the
aggregate outstanding Units; provided, however, that, in the case of any matter
to be voted on in which the General Partner or its Affiliates has an interest,
the Units held by the General Partner and its Affiliates shall not be treated as
outstanding for this purpose.
"Management of Equipment" means providing the personnel and services
necessary to the leasing activities of the Partnership, including but not
limited to, leasing and re-leasing of Partnership Equipment, arranging for
necessary maintenance and repair of the Equipment, collecting revenues, paying
operating expenses, determining that the Equipment is used in accordance with
all operative contractual arrangements and providing clerical and bookkeeping
services necessary to the operation of the Partnership Equipment pursuant to
Section 5.2.
"Management Fee" means the fee payable to the General Partner
pursuant to Section 5.4(a)(iv).
"Maximum Offering" means the sale of 500,000 Units by the
Partnership.
"Minimum Offering" means the sale of 12,000 Units by the Partnership.
"NASAA Guidelines" means the Statement of Policy Regarding Equipment
Programs adopted on November 20, 1986, effective January 1, 1987, as amended on
April 22, 1988 and October 24, 1991, by the North American Securities
Administrators Association, Inc.
"Net Capital Contributions" means the Capital Contributions of the
Class A Limited Partners, reduced by the Sales Commissions, Dealer-Manager Fee
and O&O Expenses Reimbursement allocated to the Limited Partners under Section
4.3(f) (excluding any of these items that are amortizable under Code Section
709).
8
"Net Disposition Proceeds" means the proceeds realized by the
Partnership from sale, refinancing or other disposition of Partnership
equipment, including insurance proceeds or lessee indemnity payments arising
from the loss or destruction of the Equipment, less all Partnership liabilities.
"Net Offering Proceeds" means the Gross Offering Proceeds minus Sales
Commissions, Dealer-Manager Fee, O&O Expenses Reimbursement and initial Reserves
in the amount of 1.0% of Gross Offering Proceeds.
"Net Worth" means the excess of total assets over total liabilities
as determined by generally accepted accounting principles, except that if any of
such assets have been depreciated, then the amount of depreciation relative to
any particular asset may be added to the depreciated cost of such asset to
compute total assets. The amount of depreciation may be added only to the extent
that the amount resulting after adding such depreciation does not exceed the
fair market value of such asset.
"Nonrecourse Deductions" means losses, deductions or Code
ss.705(a)(2)(B) attributable to "Nonrecourse Liabilities" (as defined in Treas.
Reg. ss.1.752-1(a)(2)) of the Partnership. The amount of Nonrecourse Deductions
shall be determined pursuant to Treas. Reg. ss.1.704-2(c).
"Notice" means a writing containing the information required by this
Agreement to be communicated to any Person, personally delivered to such Person,
sent by courier service and receipted for or sent by registered or certified
mail, postage prepaid, to such Person at the last known address of such Person.
"170.0% Recovery" means the time at which the cumulative amount of
Distributable Cash distributed to the Limited Partners (as a class) (taking into
account all prior and concurrent distributions of Distributable Cash to the
Limited Partners (as a class) under Section 4.1(a)(i) and (ii)) equals 170.0% of
the Capital Contributions of the Limited Partners (as a class).
"O&O Expenses Reimbursement" means a non-accountable payment by the
Partnership to the General Partner pursuant to Section 5.4(a)(ii).
"Offering" means the offering of Units contemplated by this
Agreement.
"Operating Lease" means a Lease under which the non-cancelable rental
payments due during the initial term of the Lease are not sufficient to permit
the Partnership to recover the Equipment Purchase Price of the Equipment leased
thereby.
"Opinion of Counsel" means a written opinion of counsel (who may be
regular counsel to the Partnership) acceptable to the General Partner.
9
"Organizational and Offering Expenses" means expenses incurred in
connection with preparing the Partnership for registration and subsequently
offering and distributing it to the public, including sales commissions paid to
broker-dealers in connection with the distribution of Units and all advertising
expenses except advertising expenses related to the leasing of the Partnership's
Equipment.
"Origination Fee" means the fee paid by the Partnership to the
General Partner pursuant to Section 5.4(a)(iii)(A).
"Partner" means a General Partner or a Limited Partner.
"Partner Nonrecourse Deductions" means losses, deductions or Code
ss.705(a)(2)(B) expenditures attributable to Partner Nonrecourse Debt (as
defined in Treas. Reg. ss.1.704-2(b)(4)). The amount of Partner Nonrecourse
Deductions shall be determined pursuant to Treas. Reg. ss.1.704-2(i)(2).
"Partnership Interest" means the interest of a Partner in the
Partnership, whether held by such Partner or an immediate or subsequent Assignee
thereof, including without limitation such Partner's right to: (i) receive a
distributive share of the Profits or Losses and distributions of cash and/or
other Partnership property; (ii) receive a distributive share of the
Partnership's assets; and (iii) if a General Partner, participate in the
management of the business and affairs of the Partnership.
"Payout" means the time(s) when the aggregate amount of distributions
actually paid to the Limited Partners (as a class) from Distributable Cash and
Liquidation Proceeds, if any, during the period subsequent to the Termination
Date (taking into account all prior and concurrent distributions of
Distributable Cash to the Limited Partners (as a class) under Section 4.1(a)(i)
and (ii) received from the Partnership during the period subsequent to the
Termination Date and excluding allocations for bookkeeping purposes not actually
paid) equals the amount of the Limited Partners' aggregate Capital Contributions
plus their Preferred Return as of the date of determination.
"Period" means a time period less than or equal to a Quarter.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other legal entity.
"Preferred Return" means a 10.0% annual, cumulative return,
compounded daily (from whatever sources), on the Limited Partners' Adjusted
Capital Contributions, calculated from the Termination Date.
"Profits" or "Losses" means profits or losses, as the case may be, of
the Partnership as determined for federal income tax purposes, and items of
income, gain, loss, deduction or credit entering into the computation thereof,
with the following adjustments:
10
(a) any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Profits and Losses
shall be added to such taxable income;
(b) Code ss.705(a)(2)(B) expenditures of the Partnership that are
not otherwise taken into account in computing Profits and Losses shall be
subtracted from such taxable income;
(c) if the Value of any property is adjusted pursuant to the
definition of "Value", the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such property for purposes
of computing Profits and Losses;
(d) gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Value of such property,
notwithstanding that the Basis of such Property differs from its Value;
(e) in lieu of depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss,
Depreciation shall be taken into account in computing Profits and Losses;
(f) to the extent of any adjustment of the Basis of any Property
pursuant to Code ss.ss.734(b) or 743(b) is required pursuant to Treas. Reg.
ss.1.704-1(b)(2)(iv)(m) to be taken into account in determining Capital
Accounts as a result of a distribution other than in liquidation of
Partner's Partnership Interest, the amount of such adjustment shall be
treated as an item of gain or loss, as the case may be, from the
disposition of the property and shall be taken into account in computing
Profits and Losses;
(g) notwithstanding anything in this Agreement to the contrary, any
items of income, gain, loss or deduction specially allocated under any
provisions of Sections 4.4 and 4.6 shall not be taken into account in
computing Profits and Losses; and
(h) for purposes of this Agreement, any deduction for loss on a sale
or exchange of property which is disallowed to the Partnership under Code
ss.ss.267(a)(1) or 707(b) shall be treated as a Code ss.705(a)(2)(B)
expenditure.
"Program" means a limited or general partnership, joint venture,
unincorporated association or similar organization, other than a corporation,
formed and operated for the primary purpose of investment in and the operation
of or gain from an interest in equipment.
11
"Prospectus" means the prospectus on file with the Commission at the
time the registration statement on Form S-1 (File No. 33-80849) becomes
effective (including alternative versions of the prospectus prepared for and
disseminated in different jurisdictions in order to accommodate state securities
considerations). If the prospectus filed on behalf of the Partnership pursuant
to Rule 424 of the rules and regulations of the Commission under the Securities
Act differs from the prospectus on file at the time the registration statement
becomes effective, or if the prospectus is thereafter amended or supplemented
pursuant to such Rule 424, the term "Prospectus" shall refer to the Prospectus
filed pursuant to such Rule 424 from and after the date on which it shall have
been so filed or mailed to the Commission for filing.
"Qualified Plan" means any qualified pension, profit-sharing or stock
bonus plan.
"Quarter" means the three-calendar-month period commencing on the
first day of each Year (or such shorter period ending on the last day of the
Year), and each additional three-calendar-month period included within each Year
(or such shorter period ending on the last day of a Year).
"Record Date" means the date established by the General Partner for
determining the identity of: (i) Class A Limited Partners entitled to receive
notice of or vote at any meeting of Class A Limited Partners or entitled to vote
by ballot or give approval of Partnership action in writing without a meeting;
or (ii) Partners entitled to receive any notice, report or distribution of
Liquidation Proceeds or, with respect to distributions of Distributable Cash,
the first business day in New York, New York after the end of the Period with
respect to which such distributions shall be made.
"Record Holder" means the Limited Partner or Assignee in whose name a
Unit or the Class B Interest, as the case may be, or interest therein is
registered on the books of the Partnership, as of the close of business on a
Record Date.
"Reimbursable Organizational and Offering Expenses" means those
expenses incurred in connection with or related to the formation and
qualification of the Partnership or a nominee thereof, the registration and
qualification of the Units under applicable federal and state laws and the
marketing, distribution, sale and processing of the Units, including without
limitation the following: (i) legal fees and disbursements and accounting costs
for the Partnership, the General Partner and the Dealer-Manager, printing costs
and the costs of delivering, mailing or shipping Prospectuses (including any
amendments or supplements thereto) and related sales material; (ii) the costs of
preparing, printing, filing and delivering a registration statement with respect
to the Units (including any amendments or supplements thereto), a "Blue Sky
Survey" and all underwriting and sales agreements; (iii) the cost of preparing
and printing this Agreement, other solicitation material and related documents
and the cost of filing and recording such certificates or other documents as are
necessary to comply with the laws of the State of Delaware for the formation of
a limited partnership and thereafter for the continued good standing of a
limited partnership; (iv) the cost of any escrow arrangements, including any
compensation to the Escrow Agent; and (v) filing fees payable to the Commission,
to state securities commissions and to the NASD, but excluding Front-End Fees.
12
"Reinvested Proceeds" means any Distributable Cash remaining after
First Cash Distributions and Class B Subordinated Distributions and required
distributions to the General Partner, pursuant to Section 4.1, and used to
purchase Equipment during the Reinvestment Period.
"Reinvested Profits" means Profits, if any, for each Year (or Period)
in excess of the aggregate Profits described in Section 4.2(a)(i) and (ii).
"Reinvestment Period" means the period from the Closing Date until
the end of the Quarter during which the date that is seven years from the
Closing Date occurs.
"Removal Effective Date" means the effective date of removal of a
General Partner as provided herein or as otherwise agreed between the removed
General Partner and any successor General Partner(s).
"Reserves" means amounts allocated to reserves maintained for working
capital of the Partnership and contingencies, as provided in Section 5.2(d).
"Residual Value" means the net amount realized upon the Sale of
Equipment.
"Roll-Up" means a transaction involving the acquisition, merger,
conversion, or consolidation either directly or indirectly of the Partnership
and the issuance of securities of a Roll-Up Entity. Such term does not include:
(a) a transaction involving Partnership securities that have been
for at least 12 months listed on a national securities exchange or traded
through the National Association of Securities Dealers Automated Quotation
National Market System; or
(b) a transaction involving the conversion to corporate, trust or
association form of only the Partnership if, as a consequence of the
transaction, there will be no significant adverse change in any of the
following:
(i) Limited Partner voting rights;
(ii) the term of existence of the Partnership;
(iii) General Partner compensation; or
(iv) the Partnership's investment objectives.
"Roll-Up Entity" means the partnership, corporation, trust, or other
entity that would be created or would survive after the successful completion of
a proposed Roll-Up transaction.
13
"Sale" means the sale, exchange, involuntary conversion, casualty
(other than a casualty followed by refurbishing or replacement), condemnation or
other disposition of assets by the Partnership.
"Sales Commission" means the fee payable to the unaffiliated
broker-dealers selling the Units by the Partnership pursuant to Section
5.4(a)(i)(A).
"Schedule A" means the schedule of the General and Class B Limited
Partners' names and addresses.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Sponsor" means any Person directly or indirectly instrumental in
organizing, wholly or in part, the Partnership or any Person who shall manage or
participate in the management of the Partnership, and any Affiliate of any such
Person. Sponsor does not include a Person whose only relation with the
Partnership is that of an independent equipment manager and whose only
compensation is as such. Sponsor does not include wholly independent third
parties such as attorneys, accountants and broker-dealers whose only
compensation is for professional services rendered in connection with the
offering of Partnership interests.
"Subscription Agreement" means the Subscription Agreement included as
Exhibit C to the Prospectus.
"Subsequent Lease" means any Lease that commences after the
termination, or constitutes an extension, renewal or re-lease, of an Initial
Lease.
"Tax Counsel" means ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, or other
recognized tax counsel engaged by the General Partner.
"Tax Distributions" means amounts distributed to the Partners to
provide Partners with amounts to pay federal income taxes (assuming such
Partners are taxed in the 31.0% bracket) with respect to gains from Sales, but
only to the extent that such taxes exceed the amounts distributed pursuant to
Sections 4.1(a)(i)(A) and (B).
"Termination Date" means the earliest of: (i) the date on which the
Maximum Offering has been sold; (ii) the date 12 months from the date of the
Prospectus if the Minimum Offering has not been sold; (iii) the date 24 months
from the date of the Prospectus; and (iv) the date of the termination of the
Offering by the General Partner.
14
"Treas. Reg." means final regulations issued by the U.S. Treasury
Department pursuant to the Code, including any subsequent amendments thereto, or
any regulations subsequently issued in lieu thereof.
"Triple Net Lease" means a Lease under which the Lessee assumes
responsibility for, and bears the cost of, insurance, taxes, maintenance, repair
and operation of the leased asset and under which the non-cancelable rental
payments pursuant to such Lease are net to the Partnership.
"Unit" means a unit of limited partnership interest in the
Partnership held by a Class A Limited Partner, representing an initial Capital
Contribution of $100.
"Unrecovered Capital Contribution" means, with respect to a Unit, the
excess of (i) the Capital Contribution allocable to the Unit over (ii) the
distributions from any source paid by the Partnership with respect to such Unit.
"Upgrade" means Equipment that is designed to be added or connected
to existing Equipment in order to enhance the function and performance of such
Equipment.
"Value" with respect to any property shall mean:
(a) The fair market value of any property on the date a Partner
contributes such property to the Partnership;
(b) The fair market value of:
(i) any property on the date the Partnership distributes
all or any portion of such property to a Partner as consideration for
all or a portion of the Partner's Partnership Interest (see Treas.
Reg. ss.1.704-1(b)(2)(iv)(f)(5)(ii));
(ii) all of the Partnership's properties on the date of
liquidation of the Partnership (see Treas. Reg. ss. 1.704-1(b)(2)(iv)
(f)(5)(ii)); or
(c) The Basis of an item of property in all other circumstances.
See Section 3.6 (a) below for a discussion of instances in which the Partnership
shall increase the Capital Accounts of the Partners to reflect revaluations of
Partnership property in accordance with Treas. reg. ss.1.704-1(b)(2)(iv)(d), (f)
and (g). The Value of Property shall be increased or decreased, as the case may
be, to reflect any adjustments to the Basis of such Property pursuant to Code
ss.ss.734(b) or 743(b), but only to the extent that such adjustments are taken
into account in determining Capital Accounts pursuant to Treas. Reg.
ss.1.704-1(b)(2)(iv); provided, however, that no adjustment shall be made under
this paragraph in respect of any matter as to which an adjustment has been made
under paragraphs (i), (ii) or (iii) above.
15
"Voluntary Withdrawal" means the withdrawal of the General Partner
pursuant to subsections (1), (6), (7), (8), (9) or (10) of Section 17-402 of the
Delaware Act.
"Withdrawal" means those events of withdrawal provided for by Section
17-402 of the Delaware Act, except for subsections (4) and (5) of Section 17-402
of the Delaware Act.
"Year" means the Partnership's annual accounting period for financial
accounting and federal income tax purposes, which ends on December 31.
ARTICLE TWO
CONTINUATION, NAME, PLACE OF BUSINESS, PURPOSE AND TERM
SECTION 2.1 Continuation of Partnership.
---------------------------
The parties hereto hereby enter into and continue the Partnership
pursuant to the provisions of the Delaware Act, and such other provisions of
applicable law as shall pertain to limited partnerships organized pursuant to
the Delaware Act.
SECTION 2.2 Name, Principal Office and Name and Address of Registered Agent
----------------------------------------------------------------
for Service of Process.
----------------------
The Partnership shall continue to be conducted under the name
"Capital Preferred Yield Fund - IV, L.P." The principal place of business and
office of the Partnership shall be ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The registered office of the Partnership in the State
of Delaware shall be ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, Corporation Trust Center, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The registered agent of the Partnership for service of process
at such address shall be The Corporation Trust Company.
SECTION 2.3 Purpose.
-------
The Partnership is organized for the object and purpose of: (i)
acquiring, upgrading, purchasing, exchanging, leasing, assigning, owning,
modifying, financing, borrowing, maintaining, operating, improving, selling,
creating security interests in, pledging, reinvesting in, transferring or
otherwise disposing of Equipment and other personal property of all kinds, in
any part of the world; and (ii) establishing, acquiring, conducting and carrying
on any business or businesses suitable, necessary, useful or convenient in
connection therewith.
SECTION 2.4 Term.
----
The Partnership shall continue in full force and effect until
December 31, 2007, unless dissolved prior thereto pursuant to this Agreement or
by law.
16
ARTICLE THREE
PARTNERS AND CAPITAL
SECTION 3.1 General Partner.
---------------
The address of the General Partner is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Its Capital Contribution from time to time
shall be the amount reflected in the books and records of the Partnership. The
General Partner shall not be required to make any additional Capital
Contributions to the Partnership, other than as provided in Section 9.3.
SECTION 3.2 Original Limited Partner.
------------------------
By his execution hereof, the Original Limited Partner hereby
withdraws as the Original Limited Partner and the parties hereto agree to the
return to him of his Capital Contribution.
SECTION 3.3 Class B Limited Partner.
-----------------------
The address of the Class B Limited Partner is ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Class B Limited Partner agrees
to contribute, from time to time on or immediately after each date on which the
Partnership acquires Equipment, cash as its Capital Contributions to the
Partnership in an aggregate amount equal to $10,000 for every $1,000,000 in
Gross Offering Proceeds received by the Partnership as of that date; provided
that, as of the Termination Date, the aggregate amount of the cash shall equal
1.0% of Gross Offering Proceeds as of the Termination Date. The Class B Limited
Partner's Capital Contribution from time to time shall be the amount reflected
in the books and records of the Partnership. The Class B Limited Partner shall
not be required to make any other Capital Contributions to the Partnership. The
Class B Limited Partner shall not purchase any Units.
SECTION 3.4 Class A Limited Partners.
------------------------
(a) The General Partner is authorized to admit Class A Limited
Partners to the Partnership from time to time by selling not more than the
Maximum Offering, provided that no Class A Limited Partners shall be
admitted to the Partnership until acceptable subscriptions for the Minimum
Offering have been received.
(b) The minimum investment of each Class A Limited Partner shall be
25 Units (10 Units for IRAs and Qualified Plans) representing a Capital
Contribution of $2,500 ($1,000 for IRAs and Qualified Plans). Such Capital
Contribution shall be made in full in cash. Aggregate purchases of Units by
the General Partner, theDealer-Manager, their respective Affiliates and
employees of any of them must be less than 5.0% of total Units sold.
17
(c) The names and addresses of the Class A Limited Partners admitted
as provided herein, and their Capital Contributions from time to time,
shall be as reflected in the books and records of the Partnership. The
Partnership shall not be required to recognize any Class A Limited Partner
as a nominee, agent or representative of any beneficial owner, but shall
treat all Class A Limited Partners as the beneficial owners of their
respective Units.
(d) The offering of Units for sale shall terminate on the
Termination Date.
(e) All funds in respect of Units for which subscriptions have been
received prior to the Closing Date shall be deposited in an
interest-bearing escrow account with the Escrow Agent. Subscriptions for
Units shall be accepted or rejected by the General Partner within 30 days
after their receipt. The General Partner retains the unconditional right to
refuse to accept any subscriber as a Class A Limited Partner, in which
event the funds delivered by such subscriber shall be promptly returned to
the subscriber without deduction. Upon receipt of subscriptions acceptable
to the General Partner for not less than the Minimum Offering prior to the
Termination Date and the determination of the General Partner to proceed to
Closing, the Closing Date shall be set by the General Partner, and the
Escrow Agent shall release such subscription funds to the Partnership at
the Closing. Before commencing business, the Partnership shall have
received gross proceeds from the offering of not less than $1,200,000 after
payment of all Organizational and Offering Expenses. Any interest earned on
monies paid by each subscriber during the period that such monies are held
in escrow prior to the Closing shall be paid to each such subscriber
following release of subscription funds. If the Escrow Agent does not
receive acceptable subscriptions for at least the Minimum Offering on or
before the Termination Date, the Escrow Agent shall return all monies
deposited by subscribers, together with any interest earned thereon.
Subject to Section 3.4(b), the General Partner and its Affiliates shall
have the right to subscribe for Units for their own accounts, but any such
subscriptions shall not be included for purposes of determining whether the
Minimum Offering has been achieved.
After the Closing Date, additional subscribers whose subscriptions
are acceptable to the General Partner shall be admitted to the Partnership as
Class A Limited Partners at such times as the General Partner shall determine.
(f) To accomplish the purpose of this Section 3.4, the General
Partner is hereby authorized to do all things necessary to admit such Class
A Limited Partners, including without limitation registering the Units
under the Securities Act, qualifying the Units for sale with state
securities regulatory authorities or perfecting exemptions from
qualification and entering into underwriting or selling arrangements with
the Dealer-Manager for the solicitation of the Units, upon such terms and
conditions as the General Partner may deem advisable.
18
(g) Each subscriber whose subscription is acceptable to the General
Partner as contemplated by Section 3.4(e) shall become a Class A Limited
Partner as of the Closing Date or, in the case of subscriptions accepted
after the Closing Date, such later date as the General Partner shall
determine. Any subscriber shall be admitted to the Partnership within 15
days after release of his funds from escrow to the Partnership. Any Partner
whose subscription is accepted by the General Partner after the Closing
Date shall be admitted to the Partnership not later than the last day of
the calendar month following the date their subscription was accepted by
the General Partner.
SECTION 3.5 Partnership Capital.
-------------------
(a) No Partner shall be paid interest on any Capital Contribution.
(b) Except as otherwise provided in this Agreement, the Partnership
shall not redeem or repurchase any Unit, no Partner shall have the right to
withdraw, or receive any return of, his Capital Contribution and no Capital
Contribution may be returned in the form of property other than cash.
(c) No Class A Limited Partner shall have priority over any other
Class A Limited Partner, either as to the return of his Capital
Contribution or as to Profits or Losses or distributions, except as
otherwise specifically provided herein.
(d) The General Partner shall have no personal liability for the
repayment of the Capital Contribution of any Limited Partner.
(e) A creditor who makes a nonrecourse loan to the Partnership shall
not have or acquire at any time, solely as a result of making the loan, any
direct or indirect interest in the profits, capital or property of the
Partnership, other than as a creditor or secured creditor, as the case may
be.
SECTION 3.6 Capital Accounts.
----------------
(a) The Partnership shall establish and maintain a separate Capital
Account for each Partner according to the rules of Treas. Reg.
ss.1.704-1(b)(2)(iv). For this purpose, the Partnership shall, upon the
occurrence of the events specified in Treas. Reg. ss.1.704-1(b)(2)(iv)(d)
and (f), increase or decrease the Capital Accounts in accordance with the
rules of such regulation and Treas. Reg. ss.1.704-1(b)(2)(iv)(g) to reflect
a revaluation of Partnership property; provided, however, that the
admission of an additional subscriber to the Partnership as a Class A
Limited Partner in accordance with Section 3.4(e) shall not be treated, for
purposes of this Agreement, as an event specified in Treas. Reg.
ss.1.704-1(b)(2)(iv)(d), (f) or (g).
19
(b) For purposes of computing the amount of any item of Partnership
income, gain, loss or deduction to be allocated pursuant to Article Four,
the determination, recognition and classification of any such item shall be
the same as its determination, recognition and classification for federal
income tax purposes (including any method of Depreciation used for this
purpose).
(c) Profit or Loss shall be charged or credited to the Capital
Accounts in accordance with the manner in which such items are allocated
pursuant to Article Four, taking into account the special allocations of
Sections 4.4 and 4.6.
(d) Upon the transfer of all or any portion of a Unit, Class B
Interest or a General Partner Partnership Interest, the portion of the
Capital Account of the transferor that is attributable to the transferred
Unit, Class B Interest or General Partner Partnership Interest shall carry
over to the transferee. However, if the transfer causes a termination of
the Partnership under Code ss.708(b)(1)(B), the Capital Account that
carries over to the transferee shall be adjusted in accordance with the
constructive liquidation and reconstitution rules under Treas. Reg.
ss.1.708-1.
SECTION 3.7 Loans By Partners.
-----------------
Loans by Partners to the Partnership shall not be considered Capital
Contributions. If any Partner advances funds to the Partnership in excess of his
Capital Contribution, such advances shall not increase the Capital Account
balance of such Partner. The amount of any such advances shall be a debt of the
Partnership to such Partner and shall be payable or collectible only out of
Partnership assets in accordance with the terms and conditions upon which such
advances are made.
SECTION 3.8 Return of Capital.
-----------------
Without any deductions for sales commissions and other Front-End Fees
payable to any Person, any portion of the Class A Limited Partners' Capital
Contributions received by the Partnership within 12 months after the date of the
Prospectus (except for any amounts set aside for Reserves) and not invested in
or committed to the purchase of Equipment within 24 months after the date of the
Prospectus, and any portion of the Class A Limited Partners' Capital
Contributions received by the Partnership after 12 months after the date of the
Prospectus and not invested in or committed to the purchase of Equipment within
12 months after the Termination Date, shall be distributed pro rata to all Class
A Limited Partners (in proportion to their Capital Contributions) as a return of
capital. Any funds with respect to which the Partnership has executed, within
the applicable period described in the preceding sentence, a written agreement
in principle, commitment letter, letter of intent or understanding, option
agreement or other similar understanding or contract contemplating the
acquisition by the Partnership of Equipment, shall be deemed committed to
investment on that date for purposes hereof but shall subsequently be required
to be returned to the Class A Limited Partners if the investment of such funds
is not consummated or the contingent payments are not made.
20
SECTION 3.9 Liability of Limited Partners.
-----------------------------
The liability of each Limited Partner for the losses, debts,
liabilities and obligations of the Partnership shall, so long as such Limited
Partner complies with the provisions of Section 11.3, be limited to his Capital
Contribution and his share of the assets and any undistributed Profits of the
Partnership. No Limited Partner shall be required to lend funds to the
Partnership or, after his Capital Contribution has been paid, make any further
capital or other contribution to the Partnership. It is the intent of the
Partners that no distribution (or any part of any distribution) made to any
Limited Partner pursuant to Article Four shall be deemed, for the purposes of
the Delaware Act only, a return or withdrawal of capital, even if such
distribution represents, in full or in part, an allocation of depreciation or
any other non-cash item accounted for as a loss or deduction from or offset to
the Partnership's income, and that no Limited Partner shall be obligated to pay
any such amount to or for the account of the Partnership or any creditor of the
Partnership. If any court of competent jurisdiction holds, however, that,
notwithstanding the provisions of this Agreement, any Limited Partner is
obligated to make any such payment, such obligation shall be the obligation of
such Limited Partner and not of the General Partner.
SECTION 3.10 Investment in Equipment.
-----------------------
The General Partner shall cause Investment in Equipment to be at
least an amount that is the greater of (a) 80.0% of Gross Offering Proceeds
reduced by .0625% for each 1.0% of indebtedness encumbering Partnership
Equipment, or (b) 75.0% of Gross Offering Proceeds. The percentage of
indebtedness encumbering Partnership Equipment shall be calculated by dividing
the amount of indebtedness by the aggregate Equipment Purchase Price of
Partnership Equipment, excluding any Front-End Fees. The amount of indebtedness
encumbering Partnership Equipment shall be calculated as of the date on which
the level of Investment in Equipment is being tested, after giving effect to any
transaction occurring on such date that would affect the level of Investment in
Equipment. To the extent that such limitation is not otherwise satisfied, any
Acquisition Fees payable or paid to the General Partner by the Partnership shall
be reduced or refunded by the General Partner to the Partnership to the extent
necessary to comply with such limitation. Any such refund shall bear interest
calculated at a rate of 1.0% per month if such refund is not made within 30 days
after the end of any calendar quarter in which the Partnership's Investment in
Equipment fails to satisfy such minimum investment.
ARTICLE FOUR
DISTRIBUTIONS AND ALLOCATIONS
SECTION 4.1 Distributions.
-------------
(a) DISTRIBUTABLE CASH. Distributable Cash for each Period shall be
distributed to the Partners on the Payment Date (see Section 4.1(f) below)
in the order and priority set forth in Section 4.1(a)(i), (ii) and (iii).
21
(i) DURING THE REINVESTMENT PERIOD. During the
Reinvestment Period, Distributable Cash shall be distributed or
reinvested (as the case may be) in the following order and priority:
(A) First, 1.0% to the General Partner and 99.0% to
the Class A Limited Partners (as a class), on a pari passu
basis, until such time as the Class A Limited Partners (as
a class) receiv e an amount of Distributable Cash equal to the
First Cash Distributions;
(B) Second, any remaining Distributable Cash (after
taking into account distributions described in Section
4.1(a)(i)(A)) 1.0% to the General Partner and 99.0% to the Class
B Limited Partners (as a class), on a pari passu basis, until
such time as the Class B Limited Partners (as a class) receive
an amount of Distributable Cash equal to the Class B
Subordinated Distributions; and
(C) Third, all remaining Distributable Cash (after
taking into account distributionsdescribed in Section
4.1(a)(i)(A) and (B)) shall be treated as Reinvested Proceeds
reinvested according to the reinvestment guidelines set forth in
Section 5.2(h).
Notwithstanding the foregoing, during the Reinvestment Period,
Distributable Cash, in excess of amounts distributed pursuant to Section
4.1(a)(i)(A) and (B), shall be distributed to the Partners as Tax
Distributions, if necessary to provide funds for payment of income taxes on
the sale of Equipment. Tax Distributions shall be distributed 1.0% to the
General Partner and 99.0% to the Limited Partners (as a class), on a pari
passu basis.
(ii) AFTER THE REINVESTMENT PERIOD AND PRIOR TO ACHIEVEMENT
OF PAYOUT AND 170.0% RECOVERY. After the Reinvestment Period and
until achievement by the Limited Partners of Payout and 170.0%
Recovery, Distributable Cash for each Period shall be distributed in
the following order and priority:
(A) First, 1.0% to the General Partner and 99.0% to
the Class A Limited Partners (as a class), on a pari passu
basis, until such time as the Class A Limited Partners (as a
class) receive an amount of Distributable Cash equal to the
First Cash Distributions;
(B) Second, any remaining Distributable Cash (after
taking into account distributions described in Section 4.1
(a)(ii) (A)) 1.0% to the General Partner and 99.0% to the Class
B Limited Partners (as a class), on a pari passu basis, until
such time as the Class B Limited Partners (as a class) receive
an amount of Distributable Cash equal to the Class B
Subordinated Distributions;
22
(C) Third, any remaining Distributable Cash (after
taking into account distributions described in Section 4.1(a)
(ii)(A) and (B)) 1.0% to the General Partner and 99.0% to the
Class A Limited Partners (as a class), on a pari passu basis,
until such time as the Class A Limited Partners (as a class)
achieve Payout;
(D) Fourth, any remaining Distributable Cash (after
taking into account distributions described in Section
4.1(a)(ii)(A)- (C)) 1.0% to the General Partner and 99.0% to the
Class B Limited Partners (as a class), on a pari passu basis,
until such time as the Class B Limited Partners (as a class)
achieve Payout; and
(E) Fifth, any remaining Distributable Cash (after
taking into account distributions described in Section
4.1(a)(ii)(A)- (D)) 1.0% to the General Partner and 99.0% to the
Limited Partners (as a class), on a pari passu basis, until such
time as the Limited Partners (as a class) achieve 170.0%
Recovery.
(iii) AFTER THE REINVESTMENT PERIOD AND AFTER ACHIEVEMENT OF
PAYOUT AND 170.0% RECOVERY. After the Reinvestment Period and after
achievement by the Limited Partners of Payout and 170.0% Recovery,
Distributable Cash for each Period shall be distributed 10.0% to the
General Partners (as a class) and 90.0% to the Limited Partners (as a
class), on a pari passu basis.
Notwithstanding anything in Section 4.1(a)(ii) or (iii) to the
contrary, after the Reinvestment Period, Distributable Cash available for
distribution to the Partners (after taking into account distributions
described in Section 4.1(a)(ii)(A) and (B)), shall be distributed to the
Partners, on a pari passu basis, to the extent of and in proportion to the
aggregate amount of Reinvested Profits previously allocated to the General
Partner and the Limited Partners (as a class) pursuant to Section 4.2(a).
All distributions under this paragraph shall be applied toward the
distributions of Distributable Cash under Section 4.1(a)(ii)(C)-(E) and 4.1
(a)(iii).
(b) LIQUIDATION PROCEEDS. Liquidation Proceeds shall be distributed
to the Partners, on a pari passu basis, in proportion to the positive
balances in their Capital Accounts at the time of such distribution as
provided in Section 9.3(b).
(c) SHARING OF DISTRIBUTIONS TO PARTNERS.
(i) GENERAL PARTNERS. All distributions of Distributable
Cash to the General Partners (as a class) shall be shared by the
General Partners, on a pari passu basis, in proportion to their
respective percentage General Partner Partnership Interests as of the
Record Date for the distribution.
23
(ii) CLASS A LIMITED PARTNERS. All distributions of
Distributable Cash to the Class A Limited Partners (as a class) shall
be shared by the Class A Limited Partners, on a pari passu basis, in
proportion to their respective holdings of Units as of the Record
Date for the distribution; however, notwithstanding the foregoing,
Distributable Cash relating to Periods during which one or more Class
A Limited Partners are admitted to the Partnership shall be shared by
the Limited Partners pro rata based on the number of days during such
Period that each Class A Limited Partner is a Partner of the
Partnership and on the number of Units that each Class A Limited
Partner holds during such Period.
(iii) CLASS B LIMITED PARTNERS. All distributions of
Distributable Cash to the Class B Limited Partners (as a class) shall
be shared by the Class B Limited Partners, on a pari passu basis, in
proportion to their respective percentage Class B Interests as of the
Record Date for the distribution.
(iv) LIMITED PARTNERS. All distributions of Distributable
Cash to the Limited Partners (as a class) shall be shared 99.0% by
the Class A Limited Partners (as a class) and 1.0% by Class B
Limited Partners (as a class), on a pari passu basis.
(d) DETERMINATION OF DISTRIBUTEES. All distributions pursuant to
Section 4.1 shall be made to the Persons shown on the Partnership's books
and records as Partners as of the Record Date for the distribution.
(e) WITHHOLDING. The General Partner may withhold from distributions
to any Partner any amount required to be withheld pursuant to the Code or
any other law, rule or regulation. Any amount so withheld shall be treated
as a distribution to the affected Partner.
(f) PAYMENT DATES. Distributable Cash for each Period shall be
accrued in the name of the Partners not later than 30 days after the end of
each such Period. However, the Partners may elect to have such cash
distributed to them either monthly or quarterly by the General Partner.
SECTION 4.2 Allocations of Profits and Losses.
---------------------------------
(a) PROFITS. After first giving effect to the allocations, if any,
pursuant to Sections 4.3, 4.4 and 4.5, Profits for any Year shall be
allocated in the following order and priority:
(i) First, Profit shall be allocated to the Partners in
proportion to, and to the extent of, Losses allocated to the Partners
pursuant to Section 4.2(b) for all prior Years, in reverse
chronological order and priority (as set forth in Section 4.2(b)). To
the extent any allocations of Losses are offset pursuant to this
Section 4.2(a)(i), such Losses shall be disregarded for purposes of
computing subsequent allocations as described in this Section
4.2(a)(i);
24
(ii) Second, any remaining Profit (after taking into
account allocations described in Section 4.2(a)(i)) 1.0% to the
General Partner and 99.0% to the Class A Limited Partners (as a
class), on a pari passu basis, until such time as the General Partner
and the Class A Limited Partners (as a class) are allocated an amount
of Profit for the Year equal (when added to the Profit allocated to
the General Partner and the Class A Limited Partners (as a class)
under this Section 4.2(a) (ii) for all prior Years) to the
aggregate distributions of Distributable Cash made to them under
Section 4.1(a)(i)(A) and (a)(ii)(A) for the Year and all prior Years;
(iii) Third, any remaining Profit (after taking into
account allocations described in Section 4.2(a)(i) and (ii)) 1.0% to
the General Partner and 99.0% to the Class B Limited Partners (as a
class), on a pari passu basis, until such time as the General Partner
and the Class B Limited Partners (as a class) are allocated an amount
of Profit for the Year equal (when added to the Profit allocated to
the General Partner and Class B Limited Partners (as a class) under
this Section 4.2(a)(iii) for all prior Years) to the aggregate
distributions of Distributable Cash made to them under Section
4.1(a)(i)(B) and (a)(ii)(B) for the Year and all prior Years;
(iv) Fourth, any remaining Profit (after taking into
account allocations described in Section 4.2(a)(i)-(iii)) 1.0% to the
General Partner and 99.0% to the Class A Limited Partners (as a
class), on a pari passu basis, until such time as the General Partner
and the Class A Limited Partners (as a class) are allocated an amount
of Profit for the Year equal (when added to the Profit allocated to
the General Partner and the Class A Limited Partners (as a class)
under this Section 4.2(a) (iv) for all prior Years) to the
aggregate distributions of Distributable Cash made to them under
Section 4.1(a)(ii)(C) for the Year and all prior Years;
(v) Fifth, any remaining Profit (after taking into
account allocations described in Section 4.2(a)(i)-(iv)) 1.0% to the
General Partner and 99.0% to the Class B Limited Partners (as a
class), on a pari passu basis, until such time as the General Partner
and the Class B Limited Partners (as a class) are allocated an amount
of Profit for the Year equal (when added to the Profit allocated to
the General Partner and the Class B Limited Partners (as a class)
under this Section 4.2(a) (v) for all prior Years) to the
aggregate distributions of Distributable Cash made to them under
Section 4.1(a)(ii)(D) for the Year and all prior Years;
(vi) Sixth, any remaining Profit (after taking into
account allocations described in Section 4.2(a)(i)-(v)) 1.0% to the
General Partner and 99.0% to the Limited Partners (as a class), on a
pari passu basis, until such time as the General Partner and the
Limited Partners (as a class) are allocated an amount of Profit for
the Year equal (when added to the Profit allocated to the General
Partner and the Limited Partners (as a class) under this Section 4.2
(a)(vi) for all prior Years) to the aggregate distributions of
Distributable Cash made to them under Section 4.1(a)(ii)(E) for the
Year and all prior Years; and
25
(vii) Seventh, any remaining Profit (after taking into
account allocations described in Section 4.2(a)(i)-(vi)) 10.0% to
the General Partner and 90.0% to the Limited Partners (as a class).
Reinvested Profits shall be allocated in the same manner
described in Section 4.2(a)(iv)-(vii) as if the Reinvested Proceeds to which
such Reinvested Profits relate had actually been distributed to the Partners, in
such Year, as Distributable Cash in accordance with Section 4.1(a)(ii)(C)-(E)
and Section 4.1(a)(iii). All allocations under this paragraph shall be applied
toward the allocations of Profit under Section 4.2(a)(iv)-(vii).
All allocations of Profit for each Year shall be made after
giving effect to all distributions of Distributable Cash made on or before the
date of such allocations.
All Profits relating to transactions resulting in Liquidation
Proceeds shall be allocated in the manner set forth in this Section 4.2(a) as if
the Liquidation Proceeds relating thereto constituted Distributable Cash and had
been previously distributed in the same manner described in Section 4.1(a)(ii)
and (iii) as Distributable Cash.
(b) Losses. After giving effect to the allocations, if any,
described in Sections 4.3, 4.4 and 4.5, Losses for any Year shall be
allocated in the following order and priority:
(i) First, to the Partners in proportion to, and to the
extent of, any Profits allocated as described in Section 4.2(a)(ii)
for the Year and all prior Years, in reverse chronological order and
priority (as set forth in Section 4.2(a)(ii)-(vii)). To the extent
any allocations of Profits are offset as described in this Section
4.2(b)(i), such Profits shall be disregarded for purposes of
computing subsequent allocations as described in this Section
4.2(b)(i); and
(ii) Second, 1.0% to the General Partner and 99.0% to the
Limited Partners (as a class), on a pari passu basis.
(c) Sharing of Allocations to Partners.
(i) General Partners. All allocations of Profit and Loss
(including allocations under Sections 4.3, 4.4, 4.5 and 4.6) to the
General Partners (as a class) shall be shared by the General
Partners, on a pari passu basis, in proportion to their respective
percentage General Partner Partnership Interests as of the date of
such allocations.
26
(ii) Class A Limited Partners. All allocations of Profit
and Loss (including allocations under Sections 4.3, 4.4, 4.5 and
4.6) to the Class A Limited Partners (as a class) shall be shared by
the Class A Limited Partners, on a pari passu basis, in proportion
to their respective holdings of Units as of the date of such
allocations; however, notwithstanding the foregoing, Profit or Loss
relating to Periods during which one or more Class A Limited
Partners are admitted to the Partnership shall be shared by the
Limited Partners pro rata based on the number of days during such
Period that each Class A Limited Partner is a Partner of the
Partnership and on the number of Units that each Class A Limited
Partner holds during such Period.
(iii) Class B Limited Partners. All allocations of Profit
and Loss (including allocations under Sections 4.3, 4.4, 4.5 and
4.6) to the Class B Limited Partners (as a class) shall be shared by
the Class B Limited Partners, on a pari passu basis, in proportion
to their respective percentage Class B Interests as of the date of
such allocations.
(iv) Limited Partners. All allocations of Profit and Loss
(including allocations under Sections 4.3, 4.4, 4.5 and 4.6) to the
Limited Partners (as a class) shall be shared 99.0% by the Class A
Limited Partners (as a class) and 1.0% by the Class B Limited
Partners (as a class), on a pari passu basis.
SECTION 4.3 Special Allocations.
-------------------
(a) The interest of the General Partner in each material item of
Partnership income, gain, loss, deduction or credit shall in the aggregate
be equal to at least 1.0% of each such item at all times during the
existence of the Partnership. In determining the General Partner's interest
in such items, any Units owned by the General Partner or its Affiliates
shall not be taken into account.
(b) Losses allocated pursuant to Section 4.2(b) to any Partner for
any Year shall not exceed the maximum amount of Losses that can be so
allocated without causing or increasing a Capital Account deficit with
respect to such Partner as of the end of such Year. To the extent that
Losses allocated to a Limited Partner pursuant to Section 4.2(b) would, but
for this Section 4.3(b), exceed the limitation of the preceding sentence,
such Losses shall be allocated first to other Partners in proportion to,
and to the extent of, their positive Capital Account balances (computed
with the adjustments taken into account in determining a Partner's Capital
Account deficit, but disregarding the General Partner's obligation to make
contributions to the Partnership upon liquidation), and then to the General
Partner. The General Partner shall have the authority to allocate items of
income and gain for subsequent Years so as to offset, as quickly as
possible, any allocation of Losses under this Section 4.3(b).
27
(c) Notwithstanding anything in this Agreement to the contrary, items
of Company income and gain shall be allocated, before any other allocation
of Partnership items is made pursuant to this Agreement, so as to comply
with the minimum gain chargeback requirements of Treas. Reg.
ss.ss.1.704-2(f) and 1.704-2(i)(4), and this Section 4.3(c) shall be
interpreted consistently therewith.
(d) Notwithstanding anything in this Agreement to the contrary,
items of Company income and gain shall be allocated, before any other
allocation of Partnership items is made pursuant to this Agreement, so as
to comply with the "qualified income offset" rules of Treas. Reg. ss.
1.704-1 (b) (2)(ii)(d), and this Section 4.3(d) shall be interpreted
consistently therewith. The General Partners shall have the authority to
allocate items of deduction and loss for subsequent Years so as to offset,
as quickly as possible, any prior allocation of income and/or gain under
this Section 4.3(d).
(e) If, and to the extent that, any Partner is deemed to recognize
any item of income, gain, loss or deduction as a result of any transaction
between such Partner and the Partnership pursuant to Code ss.ss.1272-1274,
7872, 483, 482 or any similar provision now or hereafter in effect, any
corresponding item of income, gain, loss or deduction recognized by the
Partnership shall be allocated to the Partner who was charged with such
item.
(f) The Dealer-Manager Fees, Sales Commissions and O&O Expenses
Reimbursement (except to the extent amortizable under Code ss.709) shall,
immediately upon their payment by the Partnership, be allocated 1.0% to the
General Partner and 99.0% to the Class A Limited Partners (as a class), on
a pari passu basis. Items of income and gain for subsequent Years shall be
allocated to the General Partner equal to the aggregate allocations to it
under this Section 4.3(f), so as to offset, as quickly as possible, the
allocations to the General Partner under this Section 4.3(f). Reimbursable
Organizational and Offering Expenses in excess of the O&O Expenses
Reimbursement shall, as such costs are amortized or deducted by the
Partnership in accordance with the Code (or, if not amortizable or
deductible, then immediately upon their payment on behalf of the
Partnership), be allocated 100.0% to the General Partner.
(g) All items of Depreciation with respect to the Equipment and all
items of loss resulting from Sales ("Loss On Sale") shall be allocated, on
a pari passu basis, 1.0% to the General Partner, and 99.0% to the Limited
Partners (as a class), until such time as the cumulative amount of
Depreciation and Loss On Sale allocated under this Section 4.3(g) to the
Limited Partners equals their aggregate Net Capital Contributions. Items of
gain from Sales for subsequent Years shall be allocated to the General
Partner in an amount equal to the Depreciation and Loss On Sale allocated
to the General Partner pursuant to this Section 4.3(g), so as to offset, as
quickly as possible, the allocations to the General Partner under this
Section 4.3(g).
28
(h) Notwithstanding anything in this Agreement to the contrary, and
before any other allocation is made under Section 4.2, this Section 4.3, or
Sections 4.4 and 4.5, items of income and gain for the current Year (or
Period) shall be allocated, as quickly as possible, to the General Partner
to the extent of any deficit balance existing in the General Partner's
Capital Account as of the closing of the immediately preceding Year, in
order to restore the balance in the General Partner's Capital Account to
zero.
(i) The General Partners shall allocate Profits, Losses and other
items properly allocable to any Year or other period using any method
approved by the General Partners and permitted by Code ss.706 and the
Treasury Regulations thereunder.
(j) Nonrecourse Deductions for any Year or other period shall be
specially allocated among the Partners in proportion to their interest in
the Depreciation deductions attributable to the Equipment giving rise to
such Nonrecourse Deductions as set forth in Section 4.3(g) above.
(k) Any Partner Nonrecourse Deductions for any Year or other period
shall be specially allocated to the Partner who bears the economic risk of
loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions relate in accordance with Treas. Reg. ss.1.704-2(i).
(l) The purpose and the intent of the special allocations provided
for in this Section 4.3 are to comply with the provisions of Code ss.ss.704
and 752 and the Treasury Regulations thereunder, and such special
allocations are to be made so as to accomplish that result. However, to the
extent possible, the General Partners, in allocating items of income, gain,
loss, or deduction among the Partners, shall take into account the special
allocations in such a manner that the net amount of allocations to each
Partner shall be the same as such Partner's distributive share of Profits
and Losses would have been had the events requiring the special allocations
not taken place. The General Partners shall apply the provisions of this
Section 4.3 in whatever order the General Partners reasonably believe will
minimize any economic distortion that otherwise might result from the
application of the special allocations and still comply with the
requirements of Code ss.ss.704 and 752 and the Treasury Regulations
thereunder.
SECTION 4.4 Tax Allocations.
---------------
(a) Except as otherwise provided in this Section 4.4, items of
Partnership taxable income, gain, loss and deduction shall be determined in
accordance with Code ss.703, and the Partners' distributive shares of such
items for purposes of Code ss.702 shall be determined according to their
respective shares of Profits or Losses to which such items relate in
accordance with Code ss.704 and the Treasury Regulations thereunder.
29
(b) Items of Partnership taxable income, gain, loss and deduction
with respect to any property contributed to the capital of the Partnership
shall be allocated among the Partners in accordance with Code ss.704(c) and
Treas. Reg. ss.1.704-3(c) (the traditional method with curative
allocations), 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 Book Value.
(c) If the Book Value of any Partnership asset is adjusted pursuant
to Section 3.6, subsequent allocations of items of taxable income, gain,
loss and deduction 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 Book Value in the same manner as under Code ss.704(c).
(d) Allocations of tax credits, tax credit recapture and any items
related thereto shall be allocated to the Partners according to their
interests in such items as determined by the General Partner taking into
account the principles of Treas. Reg. ss.1.704-1(b)(4)(ii).
(e) Allocations pursuant to this Section 4.4 are solely for purposes
of federal, state and local taxes and shall not affect, or in any way be
taken into account in computing, any Partner's Capital Account or share of
Profits, Losses, distributions or other Partnership items pursuant to any
provision of this Agreement.
(f) The Partners' shares of nonrecourse liabilities of the
Partnership shall be determined in accordance with Treas. Reg. ss.1.752-3.
For purposes of Treas. Reg. ss.1.752-3(a)(3), the interest of the General
Partner in Profits and the interest of the Limited Partners (as a class) in
Profits shall be determined in accordance with the Partners' respective
interests in the Depreciation deductions attributable to the Equipment
giving rise to such Nonrecourse Deductions as set forth in Sections 4.3(g)
and (j) above.
SECTION 4.5 Curative Allocations; Uniformity of Units.
-----------------------------------------
If the General Partner determines, after consultation with Tax
Counsel, that (a) the allocation of any item of Partnership income, gain, loss,
deduction or credit is not specified in this Article Four (an "unallocated
item"), or (b) the allocation of any item of Partnership income, gain, loss,
deduction or credit hereunder is clearly inconsistent with the Partners'
economic interests in the Partnership (determined by reference to Treas. Reg.
ss.ss.1.704-1(b) and 1.704-2(c), Treas. Reg. ss.1.752-1 through -5 (a
"misallocated item"), or (c) the allocation of an item of Partnership income,
gain, loss, deduction or credit is inconsistent with the general intent and
purposes of this Article Four, as determined by the General Partner, in its sole
and absolute discretion acting in its fiduciary capacity as a General Partner of
the Partnership (an "erroneously allocated item"), then the General Partner may
allocate such unallocated items, or reallocate such misallocated items, or
reallocate such erroneously allocated items to reflect such economic interests
and general intent and purposes of this Article Four. In addition, the General
Partner is authorized to allocate specially items of income or gain to the
extent necessary to achieve and maintain the financial uniformity of the Units
for purposes of determining Payout for the Class A Limited Partners.
30
SECTION 4.6 Changes in Units or Partnership Interests.
----------------------------------------
(a) Except as otherwise provided in Section 4.6(b), the Partnership
shall use a semi-monthly convention to determine the Class A Limited
Partners' respective interests in Profits, Losses, other specially
allocated items and distributions of Distributable Cash hereunder in any
Year in which additional Class A Limited Partners are admitted to the
Partnership. Under the convention, a Class A Limited Partner entering the
Partnership on or before the 15th day of the month shall be treated as
having entered on the first day of the month, and a Class A Limited Partner
entering the Partnership after the 15th, and on or before the last day of
the month, shall be treated as having entered on the first day of the next
month.
(b) Class A Limited Partners who acquire Units during any month,
other than from the Partnership, shall be treated as entering the
Partnership on the first day of the next month for purposes of determining
the interest of such Class A Limited Partners in Profits, Losses and other
specially allocated items hereunder, and distributions of Distributable
Cash.
(c) A Class A Limited Partner whose Units are repurchased by the
Partnership pursuant to Section 7.6 shall, for purposes of the foregoing
allocation provisions, be treated as having reduced or eliminated his Units
as of the first day of the month immediately following the effective date
of the repurchase.
(d) Notwithstanding the provisions of paragraphs (a) and (b) above,
the General Partner may choose to treat Class A Limited Partners as being
admitted to the Partnership on the day they acquire Units for purposes of
determining the interest of such Class A Limited Partners in Profits,
Losses and other specifically allocated items hereunder and in
distributions of Distributable Cash hereunder.
ARTICLE FIVE
RIGHTS, OBLIGATIONS AND POWERS OF GENERAL PARTNER
SECTION 5.1 Multiple General Partners.
-------------------------
If, at any time during the term of the Partnership, there is more
than one General Partner, all rights, obligations and powers of the General
Partner under this Agreement shall be shared among the then-existing General
Partners as they may agree.
31
SECTION 5.2 Management of Partnership.
-------------------------
(a) The General Partner, within the authority granted to it under
this Agreement, shall have full, complete and exclusive right, power,
authority and discretion to manage and control the business of the
Partnership. In so doing, the General Partner shall take all actions and do
all things necessary or appropriate to effectuate the purposes of the
Partnership and to protect the interests of the Limited Partners. The
General Partner shall devote such time as is necessary to the affairs of
the Partnership and shall receive no compensation from the Partnership,
other than as expressly provided in this Agreement. The General Partner
shall, except as otherwise provided in this Agreement, have all the rights
and powers and shall be subject to all the restrictions and liabilities of
a partner in a partnership without limited partners.
(b) All decisions made by the General Partner on behalf of the
Partnership, pursuant to the authority granted in this Agreement and in the
Delaware Act, shall be binding upon the Partnership.
(c) No Limited Partner (except one who may also be a General
Partner, and then only in his capacity as General Partner) shall
participate in or have any control over Partnership business or shall have
any authority or right to act for or bind the Partnership.
(d) The General Partner shall, after the release of subscriptions
for Units pursuant to Section 3.4(e), establish initial Reserves out of
Capital Contributions in an amount equal to 1.0% of the Gross Offering
Proceeds. Reserves shall be varied from time to time by the General
Partner to such levels as the General Partner deems necessary and
appropriate to serve the best interests of the Partnership, but in no case
less than 1.0% of the Gross Offering Proceeds. The General Partner shall
have the authority to pay Partnership operating expenses from such
Reserves.
(e) All of the Partnership's expenses shall be billed directly to
and paid by the Partnership; provided that the General Partner hereby
agrees to pay any and all Reimbursable Organizational and Offering
Expenses, including any amounts in excess of the O&O Expenses
Reimbursement. The General Partner and its Affiliates shall be reimbursed
for the actual cost to the General Partner and its Affiliates of services,
goods and materials used for and by the Partnership and obtained from
entities unaffiliated with the General Partner for use by the Partnership.
The General Partner and its Affiliates shall be reimbursed for the
administrative services provided by them necessary to the prudent operation
of the Partnership; provided that such reimbursement shall be at the
lower of the General Partner's and Affiliates' actual cost or the amount
the Partnership would be required to pay to independent parties for
comparable administrative services in the same geographic location.
(f) The General Partner and its Affiliates shall not be reimbursed
by the Partnership for the following expenses:
32
(i) Services for which the General Partner or its
Affiliates are entitled to compensation in the form of a separate
fee;
(ii) Rent or depreciation, utilities, capital equipment,
other administrative items and salaries, fringe benefits, travel
expenses or other administrative items incurred by or allocated to
any Controlling Person of the General Partner or its Affiliates;
(iii) Reimbursable Organizational and Offering Expenses in
excess of the O&O Expenses Reimbursement; and
(iv) Any expenses that are unrelated to the business of the
Partnership.
(g) Subject to Section 5.2(e) and (f), the Partnership shall pay all
expenses of the Partnership and all expenses of the General Partner and its
Affiliates relating to the Partnership (none of which shall be deducted
from compensation and fees to which the General Partner or its Affiliates
are entitled as set forth in Section 5.4(a)), including without limitation:
(i) all costs of borrowed money, taxes and assessments on Partnership
property and other taxes applicable to the Partnership; (ii) legal,
appraisal, audit, accounting, brokerage and other third party fees,
including permitted Acquisition Expenses; (iii) printing and other expenses
and taxes incurred in connection with the issuance, distribution, transfer
and recording of documents evidencing ownership of an interest in the
Partnership or in connection with the business of the Partnership; (iv)
fees and expenses paid to independent contractors, bankers, brokers,
servicers, leasing agents and consultants; (v) expenses payable to
unaffiliated third parties in connection with the disposition, replacement,
alteration, repair, re-leasing, refinancing and operation of Equipment
(including the costs and expenses of insurance premiums, brokerage and
leasing commissions and maintenance of such property); (vi) costs of
insurance as required in connection with the business of the Partnership;
(vii) expenses of revising or amending this Agreement or converting,
modifying or terminating the Partnership; (viii) expenses in connection
with distributions made by the Partnership to, and communications and
bookkeeping and clerical work necessary in maintaining relations with,
Limited Partners, including the costs of printing and mailing to such
persons certificates for Units and reports of meetings of the Partnership,
and expenses of preparation of proxy statements and solicitations of
proxies in connection therewith; (ix) expenses in connection with preparing
and mailing reports necessary or appropriate to be furnished to Limited
Partners for tax reporting or other purposes; (x) costs in connection with
reports on the operations and activities of the Partnership; (xi) costs of
preparation and dissemination of informational material relating to
potential sale, refinancing, leasing or disposition of Equipment; (xii)
costs and expenses incurred in qualifying the Partnership to do business in
any jurisdiction, including fees and expenses of any resident agent
appointed by the Partnership; and (xiii) costs incurred in connection with
any litigation or regulatory proceedings in which the Partnership is
involved.
33
(h) During the Reinvestment Period, the General Partner shall
reinvest all Distributable Cash available, after the distributions provided
for in Section 4.1(a)(i), in Equipment, unless it determines that such
reinvestment is not in the best interests of the Partnership. After the
Reinvestment Period, the General Partner may reinvest such amount of
Distributable Cash that is available, after the distributions provided for
in Section 4.1(a)(ii)(A) and (B) and before any distributions described in
Section 4.1(a)(iii), as it determines to be reasonable in Equipment that it
made commitments to purchase on behalf of the Partnership during the
Reinvestment Period.
SECTION 5.3 Authority of General Partner.
----------------------------
(a) The General Partner, in the name and on behalf of the
Partnership, is hereby specifically authorized, without limitation, to:
(i) acquire, hold, re-lease, finance and refinance,
upgrade, sell, exchange or otherwise dispose of Equipment (except as
limited by Section 5.5), directly, or through joint ventures
pursuant to Section 5.5(h), provided that the General Partner and its
Affiliates shall give the Partnership a right of first refusal with
respect to all Upgrades leased by any of them with respect to
Equipment owned by the Partnership and, provided, further, that
Equipment that is used by a Lessee outside of the United States of
America, Canada or Mexico shall, in the aggregate, have a total
Equipment Purchase Price of less than 10.0% of the aggregate
Equipment Purchase Price of all of the Partnership's Equipment at the
time of the purchase of any Equipment to be used by the Lessee
outside of said three countries;
(ii) maintain and operate the Equipment so as to comply
with the provisions of any Lease or any indebtedness secured by the
Equipment or by any receivable;
(iii) ensure the proper application of revenues of the
Partnership;
(iv) maintain proper books of account for the Partnership
and prepare all reports of operations and tax returns that are to be
furnished to the Partners and Assignees pursuant to this Agreement or
that are required by taxing bodies or other governmental agencies;
(v) maintain or cause to be maintained, to the extent
deemed necessary by the General Partner, adequate insurance with
respect to general liability of the Partnership and with respect to
the Equipment and any other insurable assets of the Partnership
pursuant to policies of insurance in form and coverage customary to
property similar to the Equipment and such other insurable assets;
(vi) supervise the offer and sale of Units;
34
(vii) designate depositories of the Partnership's funds, and
the terms and conditions of such deposits and drawings thereon;
(viii) invest Net Offering Proceeds and, during the
Reinvestment Period, reinvest Cash From Operations and Cash From
Sales, pursuant to the policies and objectives set forth in the
Prospectus;
(ix) hold all or any portion of the Equipment and other
assets of the Partnership in the name of one or more trustees,
nominees or other agents of or for the Partnership for the purpose of
facilitating transactions involving those assets or permitting those
assets or the owner of those assets to be registered as required by
any applicable law, statute or regulation;
(x) establish and maintain sufficient Reserves for such
purposes and in such amounts as the General Partner deems appropriate
from time to time and to increase, reduce or eliminate Reserves as it
deems appropriate from time to time, subject to the minimum Reserve
requirements set forth in Section 5.2(d);
(xi) determine the appropriate accounting method or methods
to be used by the Partnership;
(xii) execute and file with any state tax authority, if
necessary or appropriate to comply with or minimize withholding
obligations under the law of any state, a statement on behalf of the
Partners acknowledging and confirming their obligations to file tax
returns with such state;
(xiii) determine the timing and amount of distributions to
the Partners;
(xiv) amend this Agreement to reflect the addition or
substitution of Partners or the reduction of Capital Contributions or
Adjusted Capital Contributions without action by the Limited
Partners;
(xv) make any expenditures, borrow money as provided in
Section 5.3(a)(xxv), guarantee or assume or contract for indebtedness
and other liabilities, issue evidences of indebtedness and secure the
same by mortgage, deed of trust or other lien or encumbrance, and
incur any obligations it deems necessary for the conduct of the
activities of the Partnership;
(xvi) subject to Section 5.5(a)(vi) and (a)(xxii), acquire,
dispose of (including through an installment sale or other
owner-financed sale), mortgage, pledge, encumber, hypothecate or
exchange any or all of the assets of the Partnership and merge the
Partnership with or into another entity in accordance with the
requirements of the Delaware Act and any other applicable law;
35
(xvii) use the assets of the Partnership (including without
limitation cash on hand) for any purpose and on any terms that are
consistent with the investment objectives and policies of the
Partnership, including without limitation to repay obligations of the
Partnership incurred by borrowing as provided in Section 5.3(a)(xxv);
(xviii) negotiate, execute and perform any contracts,
conveyances or other instruments (e.g., notes, evidences of
indebtedness, agreements, assignments, deeds, Leases, loan
agreements, mortgages, security instruments, etc.) that are useful or
necessary to the conduct of Partnership operations and that are
consistent with the investment objectives and policies of the
Partnership;
(xix) select and dismiss employees, appraisers, attorneys,
accountants, consultants and contractors, appoint agents to provide
administrative and reporting services to the Partnership and
determine their compensation and other terms of employment or hiring;
(xx) control any matters affecting the rights and
obligations of the Partnership, including the conduct of litigation
and the incurring of legal fees and expenses and the settlement of
claims and litigation;
(xxi) bring and defend actions at law or in equity and
indemnify any Person against liabilities and contingencies to the
extent permitted by law and by this Agreement;
(xxii) make or revoke tax elections on behalf of the
Partnership, including without limitation the elections provided by
Code ss.754;
(xxiii) engage in any kind of activity and perform and carry
out contracts of any kind necessary to carry out the activities
authorized in the preceding clauses of this subsection;
(xxiv) prepare and file "group" or "composite" state income
tax returns on behalf of non-resident investors in states where the
Partnership conducts business;
(xxv) borrow cash as it deems appropriate for the business
of the Partnership, including, but not limited to, nonrecourse loans
secured by items of Equipment and the refinancing of Equipment,
whether or not such Equipment secures prior borrowings, provided that
all such borrowings shall not, in the aggregate, exceed 50.0% of the
aggregate Equipment Purchase Price (excluding the amount of any
Acquisition Fees included therein) of Equipment purchased by the
Partnership as of the date of the borrowing, and provided, further,
that all recourse borrowings of the Partnership shall not exceed
10.0% of the aggregate Equipment Purchase Price (excluding the amount
of Acquisition Fees included therein) of Equipment purchased by the
Partnership as of the date of the borrowing;
36
(xxvi) allocate "unallocated items," reallocate "misallocated
items" and/or"reallocate "erroneously allocated items" in accordance
with Section 4.5 above; and
(xxvii) allocate specially items of income or gain to the
extent necessary to achieve and maintain the financial uniformity of
the Units for purposes of determining Payout for the Class A Limited
Partners in accordance with Section 4.5 above.
(xxviii) elect to treat Class A Limited Partners as being
admitted to the Partnership on the day they acquire Units for
purposes of determining the interest of such Class A Limited Partners
in Profits, Losses and other specifically allocated items and in
distributions of Distributable Cash hereunder.
(b) Any Person dealing with the Partnership may rely upon a
certificate signed by the General Partner as to:
(i) the identity of any Partner;
(ii) the existence or non-existence of any fact or facts
that constitute a condition precedent to acts by the General Partner
or are in any other manner germane to the affairs of the Partnership;
(iii) the Persons who are authorized to execute and deliver
any instrument or document of or on behalf of the Partnership; or
(iv) any act or failure to act by the Partnership or as to
any other matter whatsoever involving the Partnership or any Partner.
(c) Except as otherwise provided under this Agreement or by law, the
General Partner may delegate all or any of its duties under this Agreement
to any of its own officers, employees and agents and in furtherance of such
delegation may elect, employ, contract or deal with any Person (including
any Affiliate of the General Partner), provided that any fees payable in
connection with any such delegation shall be paid by the General Partner.
37
(d) Subject to the restriction provided in Section 5.5(a)(xxii), if,
as a result of either existing or subsequently enacted federal tax
legislation, Treasury Regulations or other IRS pronouncements, the
Partnership is or would become taxable as a corporation, or if the General
Partner determines that there is a material risk of such a result, the
General Partner, with the Consent of a Majority Interest, may take any and
all such actions it deems necessary or appropriate to prevent such result.
Such actions may include without limitation amending this Agreement or
reorganizing the Partnership into some other form of association such as a
corporation or a business trust. The General Partner shall effectuate any
such amendment or reorganization so that, to the extent possible and
legally permissible under the circumstances, the respective interests of
the Partners in the assets and income of the Partnership (or successor
entity) immediately following such qualification, amendment or
reorganization are substantially equivalent to such interests immediately
prior thereto.
SECTION 5.4 Authority of General Partner and Its Affiliates to Deal With
----------------------------------------------------------------
Partnership.
-----------
(a) Without limiting the other powers set forth herein, the General
Partner, in the name and on behalf of the Partnership, is expressly
authorized to:
(i) pay to the Dealer-Manager (A) Sales Commissions in an
amount equal to 8.0% of the Gross Offering Proceeds, which shall be
reallowed to broker-dealers who make sales of Units to Class A
Limited Partners, as set forth in the Dealer-Manager Agreement, and
(B) the Dealer-Manager Fee in an amount equal to 2.0% of the Gross
Offering Proceeds, as set forth in the Dealer-Manager Agreement;
(ii) pay to itself the O&O Expenses Reimbursement in an
amount equal to 4.0% of Gross Offering Proceeds;
(iii) subject to the limitations of Section 3.10 hereof,
pay to itself (A) the Origination Fee for arranging the acquisition
of the Equipment and the negotiation of the Lease, if originated by
the General Partner or its Affiliates, or the review and any
necessary modification of the Lease if the Lease is originated by an
unaffiliated party in an amount equal to 1.5% of the Equipment
Purchase Price (excluding the amount of any Acquisition Fees included
therein); and (B) the Evaluation Fee for services rendered in
connection with evaluating the suitability of the Equipment and the
credit worthiness of the Lessee and negotiation of nonrecourse loans,
or the assignment of existing nonrecourse loans, secured by the
Equipment in an amount equal to 2.0% of the Equipment Purchase Price
(excluding the amount of any Acquisition Fees included therein);
provided, however, that if the Partnership, or the General Partner or
its Affiliates, in connection with the purchase of any Equipment pays
any fees or reimburses any fees to unaffiliated finders and brokers,
such fees shall be deducted from the Origination Fee otherwise
payable to the General Partner in connection with the Equipment
acquired through the efforts of such finders and brokers until such
Origination Fee is reduced to zero, but the Partnership must bear the
38
cost of the third-party Acquisition Fee to the extent that it exceeds
the Origination Fee otherwise payable to the General Partner;
provided, further, however that in no case shall any Acquisition Fees
of any type be paid by the Partnership with respect to the purchase
of Equipment by the Partnership, directly, with the funds contributed
to the Partnership by the Class B Limited Partner;
(iv) pay to itself the Management Fee, monthly in arrears,
equal to 2.0% of monthly Gross Rentals paid pursuant to all Leases,
as compensation for services actually rendered in connection with the
management of the Partnership's Equipment; provided if for any month
the Class A Limited Partners do not receive the First Cash
Distributions in full, then the General Partner shall subordinate and
defer its receipt of Management Fees for such month, without any
interest, until the receipt by the Class A Limited Partners of all
accrued but previously unpaid and current installments of First Cash
Distributions, provided, further, that any fees paid by the
Partnership to third parties for equipment management shall be
deducted from the General Partner's Management Fee;
(v) reimburse itself, as provided in Section 5.2(e) and
(g);
(vi) pay interest on funds borrowed from the General
Partner or any of its Affiliates, on terms consistent with Section
5.5(d); and
(vii) pay the Equipment Purchase Price on any item of
Equipment to an Affiliate of the General Partner.
(b) Other than as specifically authorized in this Article Five, the
General Partner is prohibited from entering into any agreements, contracts
or arrangements on behalf of the Partnership with itself or any Affiliate.
In addition, any agreements, contracts or arrangements specifically
authorized in this Article Five shall be subject to the following
prohibitions:
(i) neither the General Partner nor any Affiliate shall be
given an exclusive right to sell or exclusive employment to sell any
Equipment for the Partnership;
(ii) the Sponsor shall not be paid, directly or indirectly,
a commission or fee (except as permitted under Section IV of the
NASAA Guidelines or the provisions of this Agreement) in connection
with the distribution or reinvestment of Cash From Operations and
Cash From Sales or the proceeds of the resale, exchange or
refinancing of the Program Equipment; and
(iii) neither the General Partner nor any Affiliate shall
receive any rebates or give-ups or, nor by the making of any
reciprocal business arrangements, circumvent the restrictions
contained in this Agreement the NASAA Guidelines or in applicable
state securities laws and regulations relating to transactions
between the Partnership and the General Partner and its Affiliates.
39
(c) Any agreements, contracts and arrangements with the General
Partner or its Affiliates permitted by this Agreement shall be subject to
the following conditions (except that Section 5.4(c)(iii), (iv) and (v)
shall not apply to the fees and reimbursements set forth in Sections 5.2
and 5.4(a), provided, however, that Section 5.4(c)(iii) shall apply to any
such agreements, contracts and arrangements for goods and services
including those provided for in Section 5.2(e));
(i) any such agreements, contracts or arrangements shall
be embodied in a written contract (which may be this Agreement) that
precisely describes the services to be rendered and all compensation
to be paid;
(ii) any such agreements, contracts or arrangements shall
be fully disclosed in the Prospectus, dated April 15, 1996, unless
the goods and services are provided in extraordinary circumstances.
(Where the services are available elsewhere from unaffiliated
parties, there would be a presumption that there are no extraordinary
circumstances. Extraordinary circumstances would only be presumed
where there is an emergency situation requiring immediate action by
the Sponsor, and the service is not immediately available from
unaffiliated parties. Extraordinary circumstances shall, in no event,
include general and administrative expenses, expect as otherwise
provided herein.);
(iii) any such agreements, contracts or arrangements shall
be terminable by either party, without penalty, upon 60 days prior
written notice and may be modified only by vote of a Majority
Interest of the Class A Limited Partners;
(iv) the compensation, price or fee charged for providing
such services may not exceed the lesser of cost of such services to
the General Partner or Affiliate of any General Partner or 90.0% of
the competitive compensation, price or fee of any other Person who is
rendering comparable services or selling or leasing comparable goods
and materials in the same or comparable geographic location that
could reasonably be made available to the Partnership; and
(v) the Person providing such services must be
independently engaged in the business of rendering such services to
Persons other than the Partnership or its Affiliates and at least
75.0% of such Person's gross revenue from providing such services
must be derived from sources other than the General Partner or its
Affiliates.
SECTION 5.5 Limitations and Restrictions on Exercise of Powers of General
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Partner.
-------
(a) Notwithstanding anything in this Agreement to the contrary, the
General Partner shall not:
(i) do any act in contravention of this Agreement or the
Delaware Act;
40
(ii) invest Partnership funds in limited partnership
interests or capital stock of other limited partnerships,
corporations or other entities or associations, except as permitted
under Sections 5.3(a) (ix), 5.5(h) and 10.3;
(iii) admit a Person as a General or Limited Partner, except
as permitted hereby;
(iv) underwrite or cause the Partnership to underwrite the
securities of other issuers;
(v) perform any act required to be approved or
ratified in writing by all or part of the Limited Partners under the
Delaware Act, unless the right to do so is expressly granted in this
Agreement;
(vi) without the Consent of a Majority Interest, sell,
pursuant to a single transaction or a series of related transactions,
all or substantially all of the assets of the Partnership other than
in the ordinary course of its business as set forth in the
Prospectus, except for sales in connection with the liquidation and
winding up of Partnership business upon its dissolution;
(vii) borrow or allow an Affiliate to borrow from the
Partnership;
(viii) without the Consent of a Majority Interest (or such
greater number of Limited Partners as may then be required under the
Delaware Act), elect to dissolve the Partnership;
(ix) perform any act that would make it impossible to carry
on the ordinary business of the Partnership;
(x) confess a judgment against the Partnership;
(xi) possess Partnership property, or assign the
Partnership's right in specific Partnership property, for other than
a Partnership purpose;
(xii) knowingly perform any act that the General Partner is
aware would subject any Limited Partner to liability as a general
partner in any jurisdiction;
(xiii) cause the Partnership to reinvest Cash From Operations
or Cash From Sales, other than as permitted in this Agreement;
(xiv) change the Partnership's purposes from those set forth
in Section 2.3;
41
(xv) without the Consent of a Majority Interest, amend this
Agreement, except as provided in Sections 5.3(a)(xiv), 13.1 and 13.2;
(xvi) commingle the funds of the Partnership with those of
any other Person;
(xvii) cause the Partnership to distribute any Partnership
assets in kind;
(xviii) permit any payment or award or commissions or other
compensation to be paid directly or indirectly to any person engaged
by a potential investor for investment advice as an inducement to
such advisor to advise such prospective purchaser to invest in the
Partnership except as described in the Prospectus;
(xix) pay, or cause the Partnership to pay, any Acquisition
Fee other than the Origination Fee, the Evaluation Fee and any
additional fee described in Section 5.4(a)(iii);
(xx) cause the Partnership to enter into any contract or
agreement with the General Partner or any Affiliate, except as
provided in this Agreement;
(xxi) cause the Partnership to distribute Distributable
Cash over the term of the Partnership to the General Partner pursuant
to Section 4.1 of this Agreement in an aggregate amount in excess of
the aggregate amount of such distributions that would be permitted
under Section IV.D(1) of the NASAA Guideline;
(xxii) cause or permit the Partnership to engage in any
transaction that is a Roll-Up; or
(xxiii) cause the Partnership to borrow funds solely for the
purpose of making cash distributions to the Partners and use such
funds to make distributions to the Partners.
(b) The General Partner shall cause the Partnership to follow the
criteria under "Equipment Investment Criteria" set forth in the Prospectus.
All funds held by the Partnership that are not invested in Equipment shall
be invested by the General Partner as provided in Section 10.3.
(c) The Partnership may not acquire Equipment in which the Sponsor
either has, or in the past has had, an interest, except for Equipment
acquired on a temporary or interim basis (generally not longer than six
months) by the Sponsor for the purpose of facilitating the acquisition by
the Partnership of the Equipment or obtaining financing for the Partnership
or any other purpose related to the business of the Partnership. The
Partnership may acquire any such Equipment only if the Sponsor determines
that: (i) such acquisition is in the best interests of the Partnership;
(ii) such Equipment is to be purchased by the Partnership for a price no
greater than the Cost of such Equipment to the Sponsor minus any rents or
other proceeds that are received by the Sponsor in connection with the
42
leasing of, or other arrangement with respect to, the Equipment, except
compensation in accordance with Section IV of the NASAA Guidelines, unless
the current value of Equipment to be acquired from it or an Affiliate is
less than the price so calculated, in which case such Equipment shall be
acquired at the lesser of (A) such price so calculated or (B) the then fair
market value of such Equipment, as determined by an independent
nationally-recognized equipment appraiser selected by the Sponsor; (iii)
there is no difference in interest terms of the loans secured by the
Equipment at the time acquired by the Sponsor and the time acquired by the
Partnership; and (iv) no other benefit arises out of such transaction to
the Sponsor apart from compensation otherwise permitted by this Agreement.
The Sponsor shall not purchase Equipment from an affiliated Program for
sale to the Partnership under the preceding sentence. The Partnership shall
neither purchase nor lease Equipment from, nor lease or sell Equipment to,
the Sponsor, except as provided above and in accordance with Section V of
the NASAA Guidelines, or a sale to the Sponsor, in the absence of a
secondary market for Equipment, in connection with the dissolution and
liquidation of the Partnership where the proceeds of such sale are used to
redeem or liquidate 100% of the outstanding Units together with accrued
distributions to the date of such redemption or liquidation, provided all
of the following conditions have been met: (i) the Consent of a Majority
Interest has been obtained, (ii) the Partnership has obtained, at its cost,
two independent appraisals of the fair market value of Equipment to be
sold, (iii) the sales price is at least equal to the average of the two
appraisals, (iv) the General Partner has determined that such sale is in
the best interest of the Limited Partners and (v) the Sponsor shall not
sell such Equipment to another limited partnership sponsored by the
Sponsor. Any profits earned on Equipment temporarily held by the Sponsor
will be paid to the Partnership.
(d) No loans may be made by the Partnership to the General Partner
or any Affiliate. The General Partner or any Affiliate may lend funds on a
short-term basis to the Partnership, but only with interest rates: (i) not
in excess of the General Partner's or Affiliate's own cost of borrowing;
(ii) in any event, not in excess of the interest rate charged (without
reference to the General Partner's or any Affiliate's financial abilities
or guaranties) by unrelated lenders on a comparable loan for the same
purpose in the same geographic area; and (iii) that shall not exceed by
more than 3.0% per annum the "prime rate" from time to time announced by
The Chase Manhattan Bank, N.A. Neither the General Partner nor any
Affiliate shall provide Permanent Financing for the Partnership. For this
purpose "Permanent Financing" means that some portion of principal and
interest on the financing provided by the General Partner or any Affiliates
is due and payable more than 12 months after the date of the loan. Neither
the General Partner nor any Affiliates may receive points or other
financial charges or fees in any amount in respect of any loans to the
Partnership, although the General Partner's compensation (such as the
Evaluation Fees and the Management Fee) may be increased as an indirect
result of such loans.
43
(e) If the Sponsor purchases Equipment in its own name and with its
own funds in order to facilitate the ultimate purchase of such Equipment by
the Partnership, the Sponsor shall be entitled to receive interest from the
Partnership on the funds expended for such purpose on behalf of the
Partnership as provided in the definition of "Cost," but interest shall not
be paid for any period in excess of the six-month period permitted by
Section 5.5(c) with respect to any item of Equipment. Interest on any such
temporary purchases shall be at a rate not to exceed the Sponsor's own cost
of borrowing and in any event shall not be in excess of the amounts that
are charged (without reference to the Sponsor's financial abilities or
guaranties) by unrelated banks on comparable loans for the same purpose in
the same geographic area, and the annual interest charged on any such loan
shall not exceed by more than 3.0% the "prime rate" from time to time
announced by The Chase Manhattan Bank, N.A. until the purchase of the
Equipment by the Partnership.
(f) The Partnership shall not acquire any Equipment in exchange for
Units.
(g) The Partnership shall not acquire Equipment from a Program in
which the General Partner or an Affiliate has an interest.
(h) The Partnership shall not make investments in affiliated general
or limited partnership interests of any other affiliated Program, nor shall
the Partnership enter into a joint venture or general partnership with an
unaffiliated Person except for a general or limited partnership, joint
venture, trust, or other Person or arrangement (collectively, a "Joint
Venture") with respect to which each of the following conditions is
satisfied. First, the Partnership shall acquire a controlling interest in
any such Joint Venture, which interest, in the case of a limited
partnership, shall be as a general partner. For purposes hereof, the
Partnership shall be deemed to have a "controlling interest" in the Joint
Venture if the Partnership holds an interest of not less than 50.0% in the
capital and profits of the Joint Venture, and the Joint Venture agreement
or related documents grant to the Partnership the joint (or exclusive)
right to make basic management decisions concerning the leasing,
re-leasing, financing, refinancing, sale or other disposition of the
Equipment. Second, no such Joint Venture shall be entered into by the
Partnership that involves the payment of duplicative equipment management
or other fees or that would have the effect of circumventing any of the
restrictions on and prohibitions of transactions involving conflicts of
interest contained in this Agreement. The Partnership may enter into Joint
Ventures that satisfy the preceding requirements with respect to any item
or items of Equipment at any time prior to the end of the Reinvestment
Period.
Notwithstanding the foregoing, the Partnership may enter into
Joint Ventures with Affiliates of the General Partner or Persons sponsored by
the General Partner or their Affiliates (including Joint Ventures organized
after the Partnership's Initial Closing Date) but only if (i) such Joint
Ventures have substantially identical investment objectives and management
compensation provisions to those of the Partnership, (ii) such Joint Venture
does not involve the payment of duplicative equipment management or other fees
and does not have the effect of circumventing any of the restrictions on and
prohibitions of transactions involving conflicts of interest contained in this
44
Agreement, (iii) the compensation to the General Partner and its Affiliates with
respect to such Joint Ventures is substantially identical to the compensation
described in this Agreement, (iv) in the event of a proposed Sale of the
Equipment or interest therein initiated by another Joint Venture partner, the
Partnership has a right of first refusal, pro rata with the remaining parties,
to purchase the other party's or parties' interest, (v) the Joint Venture is
entered into either for the purpose of effecting appropriate diversification for
the Partnership or for the purpose of relieving the General Partner or any
Affiliate thereof from a commitment entered into in connection with the
acquisition of Equipment which was acquired for subsequent transfer to the
Partnership, and (vi) the investment by each party is on substantially the same
terms and conditions, except as result from varying percentage interests in the
Joint Venture. The parties to a Joint Venture must agree in writing as to the
allocation of profits and losses and the distribution of cash from the Joint
Venture. The Partnership may enter into Joint Ventures that satisfy the
preceding requirements with respect to any item or items of Equipment at any
time prior to the end of the Reinvestment Period.
The Partnership may also enter into a Joint Venture with one or
more unaffiliated Persons and one or more Persons that are Affiliates of a
General Partner, or a Person sponsored by a General Partner or its Affiliates
(such joint venturers being referred to as the "Affiliated Venturers"), provided
that (i) the Partnership and its Affiliated Venturers acquire collectively a
"controlling interest" (as such term is described above) in such Joint Venture;
(ii) the conditions set forth in clauses (i)-(iii), (v) and (vi) of the
foregoing paragraph are satisfied; (iii) the Joint Venture Agreement or related
documents grant to the Partnership and its Affiliated Venturers the joint right
to make basic management decisions concerning the leasing, financing,
refinancing, sale or other disposition of the Equipment, and (iv) in the event
of a proposed Sale of the Equipment or interest therein initiated by another
Joint Venture partner, the Partnership has a right of first refusal, pro rata
with the other Affiliated Venturers only, to purchase such other joint
venturer's interest therein.
SECTION 5.6 Duties and Obligations of General Partner.
-----------------------------------------
(a) The General Partner shall devote to the affairs of the
Partnership such time as may be necessary for the proper performance of its
duties hereunder, but neither the General Partner nor the officers,
directors or shareholders of the General Partner shall be expected to
devote their full time to the performance of such duties. The General
Partner shall provide both equipment management and additional services
relating to the continued and active operation of the Equipment, such as
on-going marketing and re-leasing of equipment and maintenance, repair and
storage services.
(b) The General Partner shall take such action as may be necessary
or appropriate for the continuation of the Partnership's valid existence
under the laws of the State of Delaware and in order to form or qualify the
Partnership under the laws of any jurisdiction in which the Partnership is
doing business or in which such formation or qualification is necessary to
protect the limited liability of the Limited Partners or in order to
continue in effect such formation or qualification. The General Partner
shall file or cause to be filed for recordation in the office of the
appropriate authorities of the State of Delaware, and in the proper office
or offices in each other jurisdiction in which the Partnership is formed or
qualified, such certificates, including limited partnership and fictitious
name certificates and other documents as are required by the applicable
statutes, rules or regulations of any such jurisdiction.
45
(c) The General Partner shall prepare or cause to be prepared and
shall file on or before the due date (or any extension thereof) any
federal, state or local tax returns required to be filed by the
Partnership. The General Partner shall cause the Partnership to pay any
taxes payable by the Partnership.
(d) The General Partner shall have fiduciary responsibility for the
safekeeping and use of all funds and assets of the Partnership, whether or
not in its immediate possession or control. The General Partner shall not
employ, or permit another to employ, such funds or assets in any manner
except for the exclusive benefit of the Partnership and Partnership funds
shall not be deposited with affiliated financial institutions or be used in
compensating balance arrangements for the benefit of any entity other than
the Partnership. The General Partner shall not delegate to any party the
fiduciary duty owed by it to any Partner. In addition, no Partner shall be
permitted to contract away the fiduciary duty owed to such Partner by the
General Partner under the common law.
(e) Subject to Section 5.8(c), the General Partner is authorized, in
its sole discretion, to cause the Partnership to acquire policies of
limited partnership liability insurance, insuring the General Partner, its
officers, directors, employees, shareholders and certain of its Affiliates
against certain liabilities in connection with the business of the
Partnership and insuring the Partnership against certain liabilities with
respect to any indemnification that it is legally required or permitted to
provide under this Agreement to such General Partner, its officers,
directors, employees, shareholders and such Affiliates.
(f) Subject to the provisions of this Article Five, the General
Partner may delegate any or all of the powers, rights and obligations
hereunder, and may appoint, employ, contract or otherwise deal with any
Person for the transaction of the business of the Partnership, which Person
may, under supervision of the General Partner, perform any acts or services
for the Partnership as the General Partner may approve.
SECTION 5.7 Other Activities.
----------------
The General Partner and its Affiliates may engage independently
or with others in other business ventures of every nature and description,
including without limitation the rendering of advice or services of any kind to
other investors and the making or management of other investments, including
investments in equipment. Neither the Partnership nor any Partner shall have any
right, by virtue of this Agreement or the partnership relationship created
hereby, in or to such other ventures or activities, or to the income or proceeds
derived therefrom, and the pursuit of such ventures, even if competitive with
the business of the Partnership, shall not be deemed wrongful or improper.
Neither the General Partner nor any of its Affiliates shall be obligated to
present any particular investment opportunity to the Partnership even if such
opportunity is of a character that, if presented to the Partnership, could be
taken by the Partnership and each of such Persons shall have the right to take
for its own account (individually or as a trustee) or to recommend to others any
such particular investment opportunity. Whenever a conflict of interest arises
between another investment entity sponsored by a General Partner or its
46
Affiliates, and the Partnership or any Limited Partner, the General Partner
shall, in resolving such conflict, consider the relative interests of the
parties involved in such conflict or affected by such action, any customary or
accepted industry practices and any applicable generally accepted accounting
practices or principles.
SECTION 5.8 Limitation on Liability of General Partner and Affiliates;
----------------------------------------------------------------
Indemnification.
---------------
(a) Neither the General Partner nor its Affiliates, performing
services for, or acting on behalf of, the Partnership and acting within the
scope of the General Partner's authority as set forth in this Agreement
(the "Indemnitees"), shall have any liability, responsibility or
accountability in damages or otherwise to any Partners or the Partnership
for any loss or liability suffered by the Partnership that arises out of
any act or omission performed or omitted by such Indemnitee where such
Indemnitee has determined, in good faith, that the course of conduct which
caused the loss or liability was in the best interests of the Partnership,
and the Indemnitee was acting on behalf of or performing services for the
Partnership, and such liability or loss was not the result of negligence or
misconduct by such Indemnitee. Each Indemnitee shall be indemnified by the
Partnership and the Partnership hereby agrees to indemnify and hold
harmless each Indemnitee from and against any and all liabilities, losses,
damages, judgments, costs, and expenses ("Liabilities") provided that the
same were not the result of negligence or misconduct on the part of the
Indemnitee and the Indemnitee has determined, in good faith, that the
course of conduct which caused the Liability was in the best interests of
the Partnership, including without limitation all reasonable legal fees.
Notwithstanding the foregoing, each Indemnitee shall be liable, responsible
and accountable, and the Partnership shall not be liable to any such
Indemnitee, for any portion of such Liabilities that resulted from such
Indemnitee's own fraud, negligence, misconduct or, if applicable, breach of
fiduciary duty to the Partnership or any Partner. Subject to Section
5.8(d), such Indemnitee shall have the right to employ separate counsel of
its choice in such legal action and the reasonable legal expenses of such
counsel and other costs incurred as a result of such legal action shall
constitute disbursements for the purposes of advances from the Partnership
pursuant to Section 5.8(d). Such indemnification or agreement to hold
harmless is recoverable only out of the assets of the Partnership and not
from the Limited Partners. The payment of all such obligations shall be
made before any distributions are made from Cash from Operations or Cash
from Sales.
(b) Notwithstanding anything to the contrary contained in Section
5.8(a), the Partnership shall not furnish indemnification to an Indemnitee
or to any person acting as a broker-dealer for any Liabilities imposed by
judgment, and costs associated therewith, including attorney's fees,
arising from or out of a violation of federal or state securities laws
unless: a court either (i) approves the settlement and finds that
indemnification of the settlement and related costs should be made, or (ii)
approves indemnification of litigation costs if a successful defense is
made; and in either case, (iii) the court shall have been apprised by the
Indemnitee seeking indemnification hereunder as to the current positions of
the Commission, the Massachusetts Securities Division, the Tennessee
Securities Division and any state securities regulatory authority which is
specifically set forth in this Agreement and in which plaintiffs claim they
were offered or sold Units with respect to the issue of indemnification for
securities laws violations.
47
(c) The Partnership shall not incur the cost of that portion of any
liability insurance which insures any Indemnitee for any Liability as to
which such Indemnitee is prohibited from being indemnified under this
Section 5.8.
(d) Advances from Partnership funds to an Indemnitee, for legal
expenses and other costs incurred as a result of any legal action initiated
against the Indemnitee by a Limited Partner of the Partnership in his
capacity as such, are prohibited. Except as provided in the foregoing
sentence, advances from Partnership funds to an Indemnitee for legal
expenses and other costs incurred as a result of any initiated legal
action, are permissible if the following conditions are satisfied: (i) such
legal action relates to any action or inaction on the part of the
Indemnitee in the performance of its duties or provision of its services on
behalf of the Partnership; (ii) such legal action is initiated by a third
party who is not a Limited Partner; and (iii) such Indemnitee undertakes to
repay any funds advanced in cases in which such Indemnitee would not be
entitled to indemnification pursuant to Section 5.8(a). If advances are
permissible under Sections 5.8(a) and 5.8(d), the Indemnitee shall furnish
the Partnership with an undertaking as set forth in subsection (iii) of the
foregoing sentence and shall thereafter have the right to ▇▇▇▇ the
Partnership for, or otherwise request that the Partnership pay, at any time
and from time to time after such Indemnitee has become obligated to make
payment therefor, any and all amounts for which such Indemnitee has
determined in good faith that such Indemnitee is entitled to
indemnification under Section 5.8(a). The Partnership shall pay any and all
such bills and honor any and all such requests for payment for which the
Partnership is liable as determined in Section 5.8(a). In any case wherein
the General Partner disputes such Indemnitee's entitlement to
indemnification, the General Partner shall seek a final determination from
the applicable court as to whether the Partnership is obligated to a
particular Indemnitee. If a final determination is made by the applicable
court that the Partnership is not so obligated in respect to any amount
paid by it, such Indemnitee shall refund such amount, plus interest thereon
at the then prevailing market rate of interest, within 60 days of such
final determination and, if a final determination is made by the applicable
court that the Partnership is so obligated in respect to any amount not
paid by the Partnership to a particular Indemnitee, the Partnership shall
pay such amount to such Indemnitee.
SECTION 5.9 Tax Status of Partnership.
-------------------------
(a) The General Partner shall use its best efforts to meet such
requirements of the Code, as interpreted from time to time by the IRS, as
necessary to assure that the Partnership shall be classified as a
partnership for federal income tax purposes.
(b) The General Partner shall use its best efforts to maintain its
net worth at such levels as Tax Counsel to the Partnership requires in
order to provide Tax Counsel's favorable opinion as to the status of the
Partnership as a partnership for federal tax purposes. The General
Partner's net worth (computed in accordance with generally accepted
accounting principles, except that stockholders' equity shall not be
reduced by notes receivable from stockholders) shall not be less than the
greater of (i) $1,000,000 or (ii) 2.5% of the Gross Offering Proceeds at
any time during the term of the Partnership. To support its net worth at or
above this level, the General Partner specifically agrees not to distribute
48
or otherwise dispose of that certain Non-Negotiable Demand Note, dated
December 18, 1995, contributed to the capital of the General Partner by its
sole shareholder, Capital Associates, Inc.
ARTICLE SIX
CHANGES IN GENERAL PARTNER
SECTION 6.1 Certain Withdrawals of General Partner.
--------------------------------------
(a) The Voluntary Withdrawal of the General Partner pursuant to
Section 17-602 of the Delaware Act is not permitted without the Consent of
a Majority Interest. The designation of an Assignee to be a successor or
additional General Partner, whose Partnership Interest in the Partnership
shall be such as is agreed upon by the General Partner and such a successor
or additional General Partner, is permitted, provided that the conditions
contained in Section 6.2 have been met.
(b) If there is a Voluntary Withdrawal of the General Partner from
the Partnership or such General Partner Assigns its entire Partnership
Interest, such General Partner shall be and shall remain liable for all
obligations and liabilities incurred by the Partnership before such
Voluntary Withdrawal or Assignment becomes effective but, so long as such
Voluntary Withdrawal or Assignment was effected in accordance with the
terms of this Agreement, such General Partner shall be free of any
obligation or liability for wrongful withdrawal or incurred on account of
the activities of the Partnership from and after such Voluntary Withdrawal
or Assignment becomes effective.
(c) There shall be no Voluntary Withdrawal of the General Partner
from the Partnership pursuant to Section 17-602 of the Delaware Act unless
at least 60 days notice is given to each Limited Partner at his record
address, or at such other address that he may have furnished in writing to
the General Partner.
(d) The General Partner may be removed by the vote of the Class A
Limited Partners as provided in Section 11.2(a)(iv).
SECTION 6.2 Admission of Additional or Successor General Partner.
----------------------------------------------------
A Person shall be admitted as an additional or successor General
Partner of the Partnership only if each of the following conditions is
satisfied:
(a) the admission of such Person shall have been Consented to, or
ratified, in accordance with the terms of Section 11.2, by a Majority
Interest, in accordance with the terms of Section 11.2 and a Class B
Majority, taking into account only those Class B Limited Partners that are
not Affiliates of the General Partner;
49
(b) such Person shall have accepted and agreed to be bound by the
terms and provisions of this Agreement, by executing a counterpart hereof,
and such other documents or instruments as may be required or appropriate
in order to effect the admission of such Person as a General Partner shall
have been filed for recording, and all other actions required by law in
connection with such admission shall have been performed;
(c) if such Person is a corporation, it shall have provided the
Partnership with evidence satisfactory to counsel for the Partnership of
its authority to become a General Partner and to be bound by the terms and
provisions of this Agreement; and
(d) counsel for the Partnership shall have rendered an opinion to
the Partnership that the admission of such Person as a General Partner is
in conformity with the Delaware Act and that none of the actions taken in
connection with the admission of such Person is in violation of the
Delaware Act, shall impair the limited liability of the Limited Partners,
shall cause the termination or dissolution of the Partnership for tax
purposes or otherwise, shall cause the Partnership to be classified other
than as a partnership (including as a publicly-traded partnership) for
federal income tax purposes or shall violate federal or state securities
laws.
SECTION 6.3 Consent of Class A Limited Partners to Admission of Additional
----------------------------------------------------------------
or Successor General Partner.
----------------------------
Unless otherwise prohibited by the Delaware Act at the time that
such Consent is necessary, each of the Class A Limited Partners, by the
execution of this Agreement, Consents to the admission of any Person as a
successor or additional General Partner upon which there has been given the
express Consent of a Majority Interest. Upon receipt of such Consent, such
admission shall, without any further Consent or approval of the Class A Limited
Partners, be the act of all the Class A Limited Partners.
SECTION 6.4 Effect of Voluntary Withdrawal of General Partner or Removal of
----------------------------------------------------------------
General Partner by Class A Limited Partners.
-------------------------------------------
(a) Upon the Voluntary Withdrawal of the General Partner or the
removal of the General Partner by the Class A Limited Partners (other than
removal for cause, as defined in Section 6.4(b)), the following shall
apply:
(i) The Partnership shall pay the departing General
Partner the then present fair market value of its General Partner
Partnership Interest ("Fair Value"). The Fair Value of the departing
General Partner's Partnership Interest shall be determined by
agreement between the departing General Partner and the Partnership.
If the departing General Partner and the Partnership cannot agree on
such Fair Value within 30 days of the date of a Voluntary Withdrawal,
or the date of the Notice referred to in Section 11.2(a)(iv), in the
case of a removal, the Fair Value thereof shall be determined by
arbitration in accordance with the then current rules of the
50
American Arbitration Association, i.e., the departing General Partner
to choose one arbitrator, the Partnership to choose one arbitrator
and the two arbitrators so chosen to choose a third arbitrator. The
decision of a majority of such arbitrators as to the Fair Value shall
be final and binding and may be enforced by legal proceedings. The
departing General Partner and the Partnership shall each compensate
the arbitrator appointed by it. The compensation of the third
arbitrator shall be borne equally by such parties. Upon the Voluntary
Withdrawal of the General Partner or the removal of the General
Partner by the Class A Limited Partners (other than removal for
cause), the Class B Limited Partner shall retain the Class B Interest
on the same terms and conditions as if the General Partner had not
withdrawn. (ii) Where the departing General Partner is removed by the
Class A Limited Partners, payment of the Fair Value shall be in the
form of an interest bearing promissory note maturing in no less than
five years, which may be paid, unless the Partnership's capital would
be impaired, in five equal annual installments, the first of which
shall be paid on the first business day after the date one year after
the date of such removal. The unpaid portion of such amount shall
bear interest at the publicly announced "prime rate," from time to
time, of The Chase Manhattan Bank, N.A. from the date such first
installment is to be paid, such interest to accrue and be paid
annually in addition to each such annual installment. Where the
departing General Partner effects a Voluntary Withdrawal, payment of
the Fair Value shall be in the form of a non-interest bearing
unsecured promissory note with principal payable, if at all, from
distributions that the departing General Partner otherwise would have
received under this Agreement had the General Partner not voluntarily
withdrawn. All loans and advances from the departing General Partner
shall be repaid in the ordinary course according to their terms.
(iii) Subject to this Section 6.4, the departing General
Partner shall, as of the effective date of a Voluntary Withdrawal or
removal by the Class A Limited Partners, cease to share in any
Partnership allocations or distributions with respect to its
Partnership Interest as a General Partner.
(b) Upon the removal for cause of the General Partner by the Class A
Limited Partners, the provisions of Section 6.4(a) shall apply, except that
"Fair Value" of the removed General Partner's Partnership Interest for
purposes of this Section 6.4(b) shall be zero. The Class B Limited Partner
shall retain the Class B Interest on the same terms and conditions as if
the removal of the General Partner had not occurred. As used in this
Section 6.4(b), the term "cause" shall mean the commission of any act or
the failure to take any action that, as determined by a court of competent
jurisdiction in a final judgment subject to no further appeals, constitutes
gross negligence, willful misconduct or fraud and has a material adverse
effect on the Partnership.
51
(c) Following the Withdrawal of the General Partner, the remaining
General Partners (including a successor General Partner, if any) shall
receive and have transferred to one or more of them, and the departing
General Partner shall transfer to one or more remaining General Partners
(including a successor General Partner, if any), without cost, such
Partnership Interest as the remaining General Partners (including a
successor General Partner, if any) deem necessary to assure that the
remaining General Partners (including a successor General Partner, if any)
retain, in the aggregate, a Partnership Interest representing at least 1.0%
interest in all items of Partnership Profit or Loss and cash distributions.
(d) If, at the time of Withdrawal of the General Partner, the
departing General Partner was not the sole General Partner of the
Partnership, the remaining General Partner or Partners shall immediately:
(i) give Notice to the Limited Partners of such Withdrawal; and (ii)
prepare such amendments to this Agreement and execute and file for
recording such amendments or documents or other instruments necessary to
reflect the assignment, transfer or termination (as the case may be) of the
Partnership Interest of the departing General Partner.
(e) All parties hereto hereby agree to take all actions and to
execute all documents necessary or appropriate to effect the foregoing
provisions of this Section 6.4.
ARTICLE SEVEN
ASSIGNMENT OF PARTNERSHIP INTERESTS
OF LIMITED PARTNERS
SECTION 7.1 Assignment.
----------
There shall be no Assignment of a Limited Partner's Partnership
Interest, in whole or in part, except in accordance with the terms and
conditions set forth in this Article Seven. Any Assignment or purported
Assignment of any such Partnership Interest not made in accordance with this
Article Seven shall be null and void.
SECTION 7.2 Withdrawal of Limited Partners.
------------------------------
No Limited Partner shall have any right to withdraw from the
Partnership; provided that when an Assignee of a Limited Partner's Units or
Class B Interest, as the case may be, becomes a Record Holder, the rights of the
assignor Limited Partner shall cease with respect to such rights or interests in
the Units or Class B Interest so Assigned, but until such Assignee becomes a
substituted Limited Partner such assignor Limited Partner shall continue to be
the Limited Partner on the books and records of the Partnership and shall
continue to have the rights provided in Article Eleven, which rights shall not
be assignable.
52
SECTION 7.3 Assignment of Partnership Interests.
-----------------------------------
Except for Assignments by operation of law, a Limited Partner
may not Assign all or any part of his Units or Class B Interest and, in
addition, no such Assignment may be effected unless such Limited Partner shall
file with the Partnership, in form and substance satisfactory to the General
Partner, a duly executed counterpart of the instrument making such Assignment,
and such instrument: (i) evidences the written acceptance by the Assignee of all
of the terms and provisions of this Agreement; (ii) represents that such
Assignee has authority to enter into, and agrees to comply with and be bound by,
all the provisions of this Agreement; (iii) gives the Consents, approvals, and
waivers set forth herein; (iv) grants the Power of Attorney in Section 13.1; (v)
represents that such Assignee is not an entity exempt from federal income tax,
and is not controlled by any such entity, unless written notice thereof has been
received by the Partnership; (vi) represents that such Assignment was made in
accordance with all applicable laws and regulations (including without
limitation such minimum investment and investor suitability requirements as may
then be applicable under state securities laws); and (vii) is accompanied by a
fee set by the General Partner from time to time, in partial reimbursement of
the Partnership's costs respecting the Assignment. All Assignments shall be
effective for record purposes as of the first day of the month following the
date upon which all of the conditions of this Section 7.3 shall have been
satisfied.
SECTION 7.4 Distributions.
-------------
The Partnership shall be required to make each distribution in
respect of Units or the Class B Interest only to the Record Holders thereof as
of the Record Date set for the distribution. Such payment shall constitute full
payment and satisfaction of the Partnership's liability in respect of such
payment, regardless of any claim of any Person who may have an interest in such
payment, by reason of an Assignment or otherwise.
SECTION 7.5 Restrictions on Assignment.
--------------------------
(a) Unless in each of the following instances the General Partner
shall give its express written approval, no Units or Class B Interests may
be Assigned or otherwise transferred:
(i) to a minor or incompetent (unless a guardian,
custodian or conservator has been appointed to handle the affairs of
such Person);
(ii) to any Person not permitted to be an Assignee under
applicable law, including without limitation applicable federal and
state securities laws;
(iii) to any Assignee of Units if such Assignee would hold
after such Assignment an interest in fewer than 20 Units (8 Units in
the case of an ▇▇▇ or Qualified Plan) or if, following an Assignment
of an interest in fewer than all his Units, an assignor would retain
an interest in fewer Units than would have satisfied the minimum
investment standards applicable to his initial purchase of Units;
53
(iv) to any Person if, in the opinion of Tax Counsel,
such Assignment would result in the termination under the Code of the
Partnership's Year or its status as a partnership for federal income
tax purposes; or
(v) to any Person if such Assignment would affect the
Partnership's existence or qualification as a limited partnership
under the Delaware Act or the applicable laws of any other
jurisdiction in which the Partnership is then conducting business.
In the case of a proposed Assignment that is prohibited solely
under Section 7.5(a)(iv), however, the Partnership shall be obligated to permit
such Assignment to become effective if and when, in the opinion of Tax Counsel,
such Assignment would no longer have either of the adverse consequences under
the Code that are specified in Section 7.5(a)(iv).
(b) The General Partner is expressly authorized to suspend transfers
of Units if and when any such transfer would result in the transfer of
50.0% or more of the Units within a 12-month period.
So long as there are adverse federal income tax consequences
from being treated as a "publicly traded partnership" for federal income tax
purposes, the General Partner shall not permit any interest in a Unit to be
Assigned on a secondary public market (or a substantial equivalent thereof) as
defined under the Code and any regulations promulgated thereunder (a "Secondary
Market") and, if the General Partner determines, in its sole discretion, that a
proposed Assignment was effected on a Secondary Market, the Partnership and the
General Partner have the right to refuse to recognize any such proposed
Assignment and to take any action deemed necessary or appropriate in the General
Partner's reasonable discretion so that such Assignment is not in fact
recognized. For purposes of this Section 7.5(b), an Assignment that results in a
failure to meet one or more of the "safe harbor" provisions of Treas. Reg.
ss.1.7704-1, or any substitute safe-harbor provisions subsequently established
by Treasury Regulation, shall be treated as causing the Units to be traded on a
Secondary Market. The Class A Limited Partners agree to provide all information
respecting Assignments that the General Partner deems necessary in order to
determine whether a proposed transfer occurred on a Secondary Market. The
General Partner shall incur no liability to any investor or prospective investor
for any action or inaction by it in connection with the foregoing, provided that
it acted in good faith.
SECTION 7.6 Redemption of Partnership Units.
-------------------------------
(a) A Class A Limited Partner shall have the right, at any time
after the expiration of 36 months from the Closing Date, to request that
the Partnership repurchase all or any number of Units by submitting a
written request to the General Partner. A Class A Limited Partner who has a
Health Emergency (or his representative) may request a repurchase of Units
prior to the expiration of the 36-month period described in the preceding
sentence. To the extent permitted by applicable laws and regulations and,
if in the sole and absolute discretion of the General Partner, such
repurchase shall not (i) cause the Partnership to be taxed as a
54
corporation (or cease to be taxed as a partnership) under Code ss.7704 or
under any other provision of the Code, (ii) impair the capital or
operations of the Partnership or (iii) result in payment of an excessive
price for the Units redeemed, the Partnership shall repurchase Units from
one or more Class A Limited Partners (or assignees) who so request, up to a
maximum of 2.0% of total outstanding Units per year. The Partnership may
redeem Units in excess of this 2.0% amount if, in the General Partner's
sole discretion, the standards set forth in the preceding sentence shall
remain satisfied.
(b) Within 60 days after receipt of a written request for
redemption, the General Partner shall accept or deny the request. The
General Partner shall, in its sole and absolute discretion, decide whether
a repurchase is in the best interest of the Partnership and shall not be
required to provide any reason for the denial of a repurchase request.
(c) The repurchase price for repurchased Units shall be determined
by the General Partner as of the last day of the Quarter prior to the
Quarter during which such request was received. The repurchase price per
Unit shall equal the Unrecovered Capital Contribution of such Unit as of
such day, reduced by all distributions after the date of determination of
the Unrecovered Capital Contribution made with respect to the tendered
Units.
(d) The Class A Limited Partner shall tender the repurchased Units
upon the acceptance of the repurchase request by the General Partner, and
the Partnership shall pay the repurchase price for the tendered Units in
cash within 30 days after the end of the Quarter during which the request
was received.
(e) Upon the repurchase of any Units by the Partnership, the
tendered Units shall be cancelled and shall no longer be deemed to
represent an interest in the Partnership.
(f) The General Partner shall, if necessary or appropriate, cause
this Agreement or the Certificate to be amended to reflect the change in
the interests of the Class A Limited Partners (including the person whose
Units were repurchased) in the Partnership.
(g) Neither the General Partner nor its Affiliates may request the
Partnership to repurchase any Units owned by them.
ARTICLE EIGHT
ADMISSION OF LIMITED PARTNERS
AND SUBSTITUTED LIMITED PARTNERS
SECTION 8.1 Admission of Limited Partners.
-----------------------------
On the Closing Date or the date provided in Section 3.4(g), the
General Partner shall admit the Class A and Class B Limited Partners to the
Partnership. Each such party shall either execute a counterpart of this
55
Agreement (either individually or through the General Partner that is granted a
power-of-attorney by such party in the Subscription Agreement and in Section
13.1 hereof) and thereby agree to be bound by the terms hereof, or, without such
execution, take the actions required by Section 17-101(10) of the Delaware Act
to become bound by the terms hereof.
SECTION 8.2 Admission of Substituted Limited Partners.
-----------------------------------------
An Assignee of Units or the Class B Interest shall be admitted
to the Partnership if all of the following conditions are satisfied:
(a) the instrument of Assignment provided for in Section 7.3 sets
forth the intentions of the assignor that the Assignee succeed to the
assignor's interest as a Limited Partner in his place, and such assignor is
a Limited Partner;
(b) the Assignee shall have fulfilled the requirements of Section
7.3 and Section 13.2;
(c) the Assignee shall have paid all actual, necessary and
reasonable administrative and filing expenses incurred by the Partnership
in connection with his substitution as a Limited Partner;
(d) the General Partner shall have consented in writing to such
substitution, which Consent may be withheld or given in the sole discretion
of the General Partner; and
(e) if requested by the General Partner, the Partnership shall have
received an Opinion of Counsel (at the cost and expense of the General
Partner) to the effect that such substitution shall not cause the
Partnership to cease to be treated as a partnership that is not a
publicly-traded partnership for federal income tax purposes or cause a
termination of the Partnership pursuant to Code ss.708 or applicable state
law.
If all of the conditions of Section 7.3 and this Section 8.2
shall have been met, the Assignee of Units or the Class B Interest shall become
a substituted Limited Partner on the date as of which the General Partner
Consents in writing to his admission to the Partnership as a substituted Limited
Partner, which consent shall be evidenced by the filing, if required by law, of
an amendment to the Certificate listing the name of such substituted Limited
Partner, and the entry of the name of the Assignee on the books and records of
the Partnership. Such an amendment, if any, shall be filed no later than the
first day of the month following the completion of any Quarter of the
Partnership during which all of the conditions of this Section 8.2 shall have
been satisfied. All substitutions shall be effective for record purposes, and
for purposes of Article Four, upon the filing of such amendment or, if not
required, on the date of admission to the Partnership as a substituted Limited
Partner. At least once each calendar quarter the General Partner shall prepare
an Amendment to this Agreement reflecting any substitutions of Limited Partners
as of the last business day of the prior calendar quarter.
56
An Assignee of Units or Class B Interest who does not become a
substituted Limited Partner in accordance with this Section 8.2 and who desires
to make a further Assignment of his Units or the Class B Interest shall be
subject to all of the provisions of Sections 7.3, 7.5(c) and this Section 8.2 to
the same extent and in the same manner as any Limited Partner desiring to make
an Assignment of his Units or Class B Interest. Failure or refusal of the
General Partner to admit an Assignee as a substituted Limited Partner shall in
no way affect the right of such Assignee to receive distributions of Cash From
Operations, Cash From Sales or Liquidation Proceeds and the share of the Profits
or Losses for tax purposes to which his predecessor in interest would have been
entitled in accordance with Articles Four and Nine or to receive Partnership
reports to which his predecessor would have been entitled in accordance with
Section 10.4.
The admission of an Assignee as a substituted Limited Partner
shall be effected without the Consent of any of the Partners, other than the
General Partner.
ARTICLE NINE
DISSOLUTION AND LIQUIDATION OF PARTNERSHIP
SECTION 9.1 Events Causing Dissolution.
--------------------------
(a) The Partnership shall dissolve upon the happening of any of the
following events:
(i) the Withdrawal of the General Partner from the
Partnership, unless the remaining General Partner or General Partners
agree in writing to continue the business of the Partnership within
90 days after the occurrence of such an event, but the Partnership is
not dissolved and is not required to be wound up by reason of any
Withdrawal if, within 90 days after the Withdrawal, all Partners
agree in writing to continue the business of the Partnership and to
the appointment, effective as of the date of Withdrawal, of one or
more additional General Partners if necessary or desired;
(ii) the Sale or other disposition of all or substantially
all the assets of the Partnership;
(iii) the election by the General Partner, with the Consent
of a Majority Interest or the vote by the Limited Partners pursuant
to Section 11.2(a)(iii), to dissolve the Partnership;
(iv) the expiration of the term of the Partnership
specified in Section 2.4; or
(v) any other event causing the dissolution of the
Partnership under the Delaware Act.
57
(b) 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 after its affairs are wound up pursuant to the
Delaware Act, the assets of the Partnership are distributed as provided in
Section 9.3 and a certificate of cancellation is filed with the Secretary
of State of the State of Delaware. Notwithstanding the dissolution of the
Partnership, prior to the termination of the Partnership the business of
the Partnership and the affairs of the Partners shall continue to be
governed by this Agreement.
SECTION 9.2 Continuation of Business of Partnership After Dissolution.
---------------------------------------------------------
Upon dissolution of the Partnership in accordance with Section
9.1 and, in the case of Section 9.1(a)(i), a failure of all Partners to agree to
continue the business of the Partnership and appoint a successor General Partner
90 days after such event, then within 90 days thereafter, a Majority Interest
and a Class B Majority may elect to reconstitute the Partnership and continue
its business on the same terms and conditions set forth in this Agreement by
forming a new limited partnership on terms identical to those set forth in this
Agreement and having as a general partner a Person elected by a Majority
Interest and a Class B Majority. Upon any such election by a Majority Interest
and a Class B Majority, all Partners shall be bound thereby and shall be deemed
to have consented thereto and to have requested that the records of the new
limited partnership reflect their admission thereto as partners. In determining
a Class B Majority for purposes of this Section 9.2, the Partnership Interest of
a Class B Limited Partner that is an Affiliate of a General Partner or a
withdrawing General Partner shall not be considered. If all Class B Limited
Partners are Affiliates of a General Partner or a withdrawing General Partner, a
Class B Majority shall not be necessary for purposes of this Section 9.2. Unless
such an election is made within 180 days after dissolution, the Partnership
shall conduct only activities necessary to wind up its affairs. If such an
election is made within 180 days after dissolution, then:
(a) the reconstituted limited partnership shall continue until the
end of the term set forth in Section 2.4 unless earlier dissolved in
accordance with this Article Nine; and
(b) all necessary steps shall be taken to cancel the Certificate and
file a new Certificate, and the successor general partner may for this
purpose exercise the powers of attorney granted the General Partner
pursuant to Section 13.1, provided that the right of a Majority Interest to
select a successor General Partner and to reconstitute and to continue the
business of the Partnership shall not exist and may not be exercised unless
the Partnership has received an Opinion of Counsel that: (i) the exercise
of the right would not result in the loss of limited liability of any
Limited Partner or any materially adverse federal income tax consequences
to the Limited Partners; and (ii) neither the Partnership nor the
reconstituted limited partnership would cease to be treated as a
partnership that is not a publicly traded partnership, for federal income
tax purposes upon the exercise of such right to continue.
58
SECTION 9.3 Liquidation.
-----------
(a) Upon dissolution of the Partnership, unless the Partnership is
continued under an election to reconstitute and continue the Partnership
pursuant to Section 9.2, the General Partner or, if all General Partners
have withdrawn from the Partnership, then a liquidator or liquidating
committee approved by a Majority Interest, shall be the liquidating trustee
(the "Liquidating Trustee").
(b) The Liquidating Trustee (if other than a General Partner) shall
be entitled to receive such compensation for its services as may be
approved by a Majority Interest. The Liquidating Trustee shall agree not to
resign at any time without 15 days' prior written notice and may be removed
at any time, with or without cause, by notice of removal approved by a
Majority Interest. Upon dissolution, removal or resignation of the
Liquidating Trustee, a successor and substitute Liquidating Trustee (who
shall have and succeed to all rights, powers and duties of the original
Liquidating Trustee) shall within 30 days thereafter be approved by a
Majority Interest. The right to approve a successor or substitute
Liquidating Trustee in the manner provided herein shall be recurring and
continuing for so long as the functions and services of the Liquidating
Trustee are authorized to continue under the provisions hereof, and every
reference herein to the Liquidating Trustee shall be deemed to refer also
to any such successor or substitute Liquidating Trustee approved in the
manner herein provided. Except as expressly provided in this Article Nine,
the Liquidating Trustee approved in the manner provided herein shall have
and may exercise, without further authorization or approval of any of the
parties hereto, all of the powers conferred upon the General Partner under
the terms of this Agreement to the extent reasonable and necessary to carry
out the duties and functions of the Liquidating Trustee hereunder for and
during such period of time as shall be reasonably required to complete the
winding up and liquidation of the Partnership as provided for herein and
only for such purposes. The Liquidating Trustee shall liquidate the assets
of the Partnership, and apply and distribute the proceeds of such
liquidation, in the following order or priority (provided that no such
distributions shall be made in kind), unless otherwise required by
mandatory provisions of applicable law:
(i) First, to the payment to creditors of the
Partnership, including Partners and Assignees who are creditors, in
order of priority provided by law, and to the creation of a reserve
of cash or other assets of the Partnership for contingent or
unforeseen liabilities in an amount, if any, determined by the
Liquidating Trustee to be appropriate for such purposes (which
reserve shall be distributed as provided in Section 9.3(b)(ii) at
such times as the Liquidating Trustee determines that it is no longer
necessary); and
(ii) to the Partners, on a pari passu basis, in
proportion to the positive balances in the Partners' respective
Capital Accounts on the Record Date of the distribution, as
determined after giving effect to all adjustments to Capital
Accounts, including without limitation adjustments for allocations of
Profits or Losses relating to the Liquidation Proceeds. Distributions
of Liquidation Proceeds to Partners shall be made by the end of the
Year of the Partnership in which the final liquidation occurs or, if
later, within 90 days after the date of the final liquidation.
59
In connection with distributions in winding up the affairs of
the Partnership on dissolution, the General Partner shall be required to account
to the Partnership for any deficit that may exist in its Capital Account by
contributing to the capital of the Partnership an amount equal to the lesser of:
(A) the deficit that may exist in its Capital Account
at such time; or
(B) an amount equal to 1.01% of the Capital
Contributions to the Partnership by the Limited Partners,
reduced by the Capital Contributions to the Partnership by the
General Partner.
(c) Notwithstanding the foregoing, if the Liquidating Trustee
determines that an immediate sale of part or all of the Partnership's
assets would cause undue loss to the Partners, the Liquidating Trustee may,
after giving Notice to all the Limited Partners, to the extent not then
prohibited by an applicable law of any jurisdiction in which the
Partnership is then formed or qualified, 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.
(d) Each holder of Limited Partner Partnership Interests shall look
solely to the assets of the Partnership for all distributions with respect
to the Partnership and his Capital Contribution thereto and shall have no
recourse therefor, upon dissolution or otherwise, against the General
Partner or any other Limited Partner. No Partner shall have any right to
demand or receive property other than cash upon dissolution and termination
of the Partnership.
SECTION 9.4 Cancellation of Certificate of Limited Partnership.
--------------------------------------------------
Upon the completion of the distribution of Partnership assets as
provided in Section 9.3, the Partnership shall be terminated, and the
Certificate and all qualifications of the Partnership as a foreign limited
partnership in jurisdictions other than the State of Delaware shall be cancelled
and such other actions as may be necessary to terminate the Partnership shall be
taken.
SECTION 9.5 Reasonable Time for Winding Up.
------------------------------
A reasonable time shall be allowed for the orderly winding up of
the business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 9.3 in order to minimize any losses otherwise attendant upon
such winding up.
SECTION 9.6 Return of Capital.
-----------------
The General Partner shall not be personally liable for the
return of the Capital Contributions of the Limited Partners, or any portion
thereof, it being expressly understood that any such return shall be made solely
from Partnership assets.
60
SECTION 9.7 No Capital Account Restoration.
------------------------------
No Limited Partner or Assignee shall have any obligation to
restore any negative balance in its Capital Account upon liquidation of the
Partnership.
ARTICLE TEN
BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS
SECTION 10.1 Books and Records.
-----------------
(a) The books and records of the Partnership shall be maintained at
the office of the General Partner, at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and shall there be available for examination
by any Partner or his duly authorized representatives at all reasonable
times. Any Partner or his duly authorized representatives shall be
permitted access to all records of the Partnership at all reasonable times
for inspection or copying.
(b) An alphabetical list of the names, addresses, and business
telephone numbers of the Class A Limited Partners along with the number of
Units held by each of them (the "Participant List") shall be maintained as
a part of the books and records of the Partnership and shall be available
for inspection by any Class A Limited Partner or its designated agent at
the home office of the Program upon the request of the Class A Limited
Partner.
(c) The Participant List shall be updated at least quarterly to
reflect changes in the information contained therein.
(d) A copy of the Participant List shall be mailed to any Class A
Limited Partner requesting the Participant List within ten days of the
request. The copy of the Participant List shall be printed in alphabetical
order, on white paper, and in a readily readable type size (in no event
smaller than 10-point type). A reasonable charge for copy work may be
charged by the Partnership.
(e) The purposes for which a Class A Limited Partner may request a
copy of the Participant List include, without limitation, matters relating
to Class A Limited Partners' voting rights under this Agreement and the
exercise of their rights under federal proxy laws.
(f) If the General Partner of the Partnership neglects or refuses to
exhibit, produce, or mail a copy of the Participant List as requested, the
General Partner shall be liable to any Class A Limited Partner requesting
the list for the costs, including attorneys' fees, incurred by that Class A
Limited Partner for compelling the production of the Participant List, and
for actual damages suffered by any Class A Limited Partner by reason of
such refusal or neglect. It shall be a defense that the actual purpose and
reason for the requests for inspection or for a copy of the Participant
List is to secure such list or other information for the purpose of selling
such list or copies thereof, or of using the same for a commercial purpose
61
other than in the interest of the applicant as a Class A Limited Partner
relative to the affairs of the Partnership. The General Partner may require
the Class A Limited Partner requesting the Participant List to represent
that the list is not requested for a commercial purpose unrelated to the
Class A Limited Partner's interest in the Partnership. The remedies
provided hereunder to Class A Limited Partners requesting copies of the
Participant List are in addition to, and shall not in any way limit, other
remedies available to Class A Limited Partners under federal law, or the
laws of any state.
(g) The General Partner, at the Partnership's expense, shall retain
for five years any appraisal obtained with respect to the value of the
Equipment.
(h) The General Partner or the Dealer-Manager, at the Partnership's
expense, shall retain for the term of the Partnership all subscription
agreements received from Class A Limited Partners and any additional
written information utilized by the General Partner in determining that all
subscribers who have been admitted as Class A Limited Partners have
satisfied the suitability standards as set forth in the Prospectus.
SECTION 10.2 Accounting Method.
-----------------
The books of the Partnership initially shall be kept on the
accrual basis.
SECTION 10.3 Bank Accounts.
-------------
Except as otherwise provided in this Agreement, the bank
accounts of the Partnership shall be maintained in such banking institutions as
the General Partner shall determine. All deposits and other funds not needed in
the operation of the Partnership's business may be invested in United States
government securities, securities issued or guaranteed by United States
government agencies, certificates of deposit and time or demand deposits in
state or national banks having capital (including subordinated capital notes),
surplus and undivided profits aggregating more than $100,000,000, securities
issued or guaranteed by states or municipalities, bank repurchase agreements,
banker's acceptances, commercial paper having investment grade ratings,
securities of mutual funds that invest either in government securities or
tax-exempt securities, and other similar investments. The funds of the
Partnership shall not be commingled with the funds of any other Person.
SECTION 10.4 Reports.
-------
(a) Within 60 days after the end of each of the first 3 Quarters of
each Year, the Partnership shall send to each Person who was a Record
Holder during such Quarter: (i) a balance sheet; (ii) a statement of income
for the Quarter then ended; (iii) a statement of Cash From Operations and
Cash From Sales for the Quarter then ended (none of which need be audited);
(iv) if the Partnership is registered or required to file reports under
Section 12 or Section 15(d) of the Securities Exchange Act, any other
financial information contained or required to be contained in the
Partnership's Quarterly Report on Form 10-Q for such Quarter, pursuant to
such Exchange Act; and (v) other pertinent information regarding the
62
Partnership and its activities during such Quarter, including a detailed
statement concerning fees received in such Quarter by the General Partner
or its Affiliates for services rendered to the Partnership. Within 60 days
following the end of each Quarter, until the proceeds of the offering
pursuant to the Prospectus are fully invested or returned to the Partners,
each Partner shall be furnished a report detailing Equipment purchases,
which shall include a statement of the Equipment Purchase Price, the terms
of the purchase, a statement of the total amount of cash expended by the
Partnership to acquire such Equipment (including and itemizing all
commissions, fees, expenses and the name of each payee), and a statement of
the amount of Offering Proceeds that remain unexpended or uncommitted.
(b) The Partnership shall send to each Person who was a Record
Holder at any time during the Year then ended such tax information as shall
be necessary for inclusion by such Record Holder in his federal income tax
return and required state income tax return and other tax information with
regard to jurisdictions in which the Partnership is formed or qualified or
owns investments. The Partnership shall send this information within 75
days after the end of each calendar Year.
(c) Within 120 days after the end of each Year, the General Partner
shall send to each person who was a Record Holder at any time during the
Year then ended an annual report, including: (i) the balance sheet of the
Partnership as of the end of such Year and statements of operations,
changes in Partners' capital, cash flow, Cash From Operations and Cash From
Sales, all of which, except the statements of Cash From Operations and Cash
From Sales, shall be prepared in accordance with generally accepted
accounting principles consistently applied and accompanied by a report of
the Accountants containing an opinion of the Accountants; (ii) a report of
the activities of the Partnership during the period covered by the report;
(iii) a breakdown of distributions to Partners for the period covered,
showing separately (A) Cash From Operations, (B) Cash From Operations of
previous periods that had been held as Reserves, (C) proceeds from
disposition of Equipment and investments, and (D) Reserves attributable to
the Gross Proceeds of the Offering; (iv) a detailed statement of any
transactions with the General Partner or its Affiliates, and of fees,
commissions, compensation and other benefits paid, or accrued to the
General Partner or its Affiliates for the Year completed, showing the
amount paid or accrued to each recipient and the services performed; and
(v) a breakdown of the goods, material and services provided by, and the
amounts actually reimbursed to, the General Partner. Within the scope of
the annual audit of the General Partner's financial statements, the
Accountants shall issue a special report on the allocation of reimbursed
costs to the Partnership in accordance with the Partnership Agreement. The
special report shall at a minimum provide:
(i) a review of the time records of individual employees,
the costs of whose services were reimbursed; and
(ii) a review of the specific nature of the work performed
by each such employee.
63
The special report shall be in accordance with the American Institute of
Certified Public Accountants United States Auditing standards relating to
special reports. The additional costs of such special report shall be itemized
on a Partnership by Partnership basis and may 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
competitive rate for such services as determined above.
For each piece of Equipment acquired by the Partnership which
individually represents at least 10.0% of the Partnership's total investment in
Equipment, the General Partner shall include a status report as part of the
annual report, which status report shall indicate: (i) condition of Equipment,
(ii) how equipment is being utilized as of the end of year (leased, operated,
held for lease, repair, or sale), (iii) remaining term of leases, (iv) projected
use of Equipment for next year (renew lease, lease, retire, or sell), and (v)
such other information relevant to the value or utilization of the Equipment as
the General Partner deems appropriate. The status report shall describe the
method used or basis for valuation.
(d) A copy of each report referred to in this Section 10.4 shall be
filed with all securities commissions requiring such filing at the time
required by such commissions.
SECTION 10.5 Designation, Duties and Expenses of Tax Matters Partner.
-------------------------------------------------------
(a) The General Partner shall be the Tax Matters Partner pursuant to
Code ss.6231.
(b) The Tax Matters Partner shall have the following duties:
(i) To the extent and in the manner required by applicable
law and regulations, to furnish the name, address, profits interest
and taxpayer identification number of each Partner to the Secretary
of the Treasury or his delegate (the "Secretary"); and
(ii) To the extent and in the manner required by applicable
law and regulations, to keep each Partner informed of administrative
and judicial proceedings for the adjustment at the Partnership level
of any item required to be taken into account by a Partner for income
tax purposes ("Judicial Review").
(c) Subject to Section 5.8, the Partnership shall indemnify and
reimburse the Tax Matters Partner for all expenses, including legal and
accounting fees, claims, liabilities, losses and damages, incurred in
connection with any administrative or judicial proceeding with respect to
the tax liability of the Partners. The payment of all such expenses shall
be made before any distributions are made from Cash From Operations or Cash
From Sales. Neither the General Partner nor any Affiliate, nor any other
Person, shall have any obligation to provide funds for such purpose. The
taking of any action and the incurring of any expense by the Tax Matters
Partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole discretion of the Tax Matters
64
Partner; and the provisions on limitations of liability of the General
Partner and indemnification set forth in Section 5.8 shall be fully
applicable to the Tax Matters Partner in its capacity as such.
SECTION 10.6 Authority of Tax Matters Partner.
--------------------------------
The Tax Matters Partner is hereby authorized, but not required:
(a) to enter into any settlement with the IRS or the Secretary with
respect to any tax audit or Judicial Review, in which agreement the Tax
Matters Partner may expressly state that such agreement shall bind the
other Partners, except that such settlement agreement shall not bind any
Partner who (within the time prescribed pursuant to the Code and
regulations thereunder) files a statement with the Secretary providing that
the Tax Matters Partner shall not have the authority to enter into a
settlement agreement on the behalf of such Partner;
(b) 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 further Judicial Review of such final adjustment,
including the filing of a petition for determination 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 or the United States
Claims Court;
(c) to intervene in any action brought by any other Partner for
Judicial Review of a final adjustment;
(d) to file a request for an administrative adjustment with the
Secretary at any time and, if any part of such request is not allowed by
the Secretary, to file a petition for further Judicial Review with respect
to such request;
(e) to enter into an agreement with the IRS to extend the period for
assessing any tax that is attributable to any item required to be taken
into account by a Partner for tax purposes, or an item affected by such
item; and
(f) 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.
65
ARTICLE ELEVEN
MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS
SECTION 11.1 Meetings.
--------
(a) Meetings of the Limited Partners for any purpose may be called
by the General Partner at any time and shall be called by the General
Partner following receipt of a written request for such a meeting signed by
the holders of 10.0% or more of the Units (a "Written Request"). A Written
Request shall state the purpose of the proposed meeting and the matters
proposed to be acted upon at such meeting. Meetings called by Written
Request shall be held at such reasonable time and place specified by the
General Partner. All other meetings shall be held at the principal office
of the Partnership or at such other place as may be designated by the
General Partner. In addition, the General Partner may, and upon written
request of Class A Limited Partners holding 10.0% or more of the Units
shall, submit any matter upon which the Limited Partners are entitled to
act to the Limited Partners for a vote by written Consent without a
meeting.
(b) Notice of any meeting to be held pursuant to Section 11.1(a)
shall be given to each Limited Partner at his record address, or at such
other address that he may have furnished in writing to the General Partner.
Written Notice (either in person or by certified mail) shall be given
within 10 days following receipt of a Written Request. Such Notice shall
state the place, date and hour of the meeting (which shall be held on a
date not less than 15 days nor more than 60 days after distribution of such
Notice, at the time and place specified in a Written Request, or if none,
at a time and place convenient to the Class A Limited Partners) and shall
indicate that the Notice is being issued at or by the direction of the
Partner or Partners calling the meeting. The Notice shall state the purpose
or purposes of the meeting. If a meeting is 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 that
if there be no such quorum, holders of a majority of Units so present or
represented may adjourn the meeting from time to time without further
Notice, until a quorum is obtained. No Notice of the time, place or purpose
of any meeting of Limited Partners need be given to any Limited Partner who
attends in person or is represented by proxy, except for a Limited Partner
attending a meeting for the express purpose of objecting at the beginning
of the meeting to the transaction of any business on the ground that the
meeting is not lawfully called or convened, or to any Limited Partner
entitled to such Notice, who, in writing, executed and filed with the
records of the meeting, either before or after the time thereof, waives
such Notice.
(c) For the purpose of determining the Limited Partners entitled to
vote at any meeting of the Limited Partners, or any adjournment thereof, or
to vote by written Consent without a meeting, the General Partner or the
Limited Partners requesting such meeting or vote may fix, in advance, a
date as the Record Date of any such determination of Limited Partners. Such
date shall not be more than 50 days nor less than 10 days before any such
meeting or submission of a matter to the Limited Partners for a vote by
written Consent.
66
(d) At each meeting of Limited Partners, the Limited Partners
present or represented by proxy shall elect such officers and adopt such
rules for the conduct of such meeting as they shall deem appropriate.
SECTION 11.2 Voting Rights of Limited Partners.
---------------------------------
(a) Without the concurrence of the General Partner and any
Affiliates, Class A Limited Partners may, by the vote of a Majority
Interest:
(i) amend this Agreement, subject to the conditions that
such amendment may not (A) in any manner allow the Limited Partners
to take part in the management or control of the Partnership's
business or otherwise modify their limited liability, (B) without the
Consent of the General Partner affected, alter any of the rights,
powers and duties of such General Partner as set forth in Article
Five, the percentage interest of such General Partner in Profits or
Losses or distributions as set forth in this Agreement, or (C)
without the Consent of a Class B Majority, adversely affect the
percentage interest of the Class B Limited Partner in Profits or
Losses or distributions as set forth in this Agreement;
(ii) approve or disapprove the sale of all or substantially
all of the assets of the Partnership;
(iii) dissolve the Partnership; or
(iv) remove any General Partner and elect a replacement
therefore, which replacement shall become a General Partner only in
accordance with Section 6.2. If the Limited Partners vote to remove a
General Partner pursuant to this Section 11.2, they shall provide the
removed General Partner with notice thereof, which notice shall set
forth the Removal Effective Date, which under this Article Eleven,
shall be the date of the vote of a Majority Interest to remove any
General Partner. Any General Partner removed pursuant to this Article
Eleven shall remain liable for all obligations and liabilities
incurred by it as a General Partner arising out of events occurring
before the Removal Effective Date, but shall be free of any
obligation or liability as a General Partner incurred on account of
the activities of the Partnership from and after the Removal
Effective Date.
(b) A Class A Limited Partner shall be entitled to cast one vote for
each Unit that he owns: (i) at a meeting, in person, by written proxy or
other signed writing directing the manner in which he desires that the vote
be cast ("Proxy"), which writing must be received by the General Partner
prior to such meeting; or (ii) without a meeting, by a Proxy, which must be
received by the General Partner prior to the date upon which the votes of
Limited Partners are to be counted. Every Proxy must be signed by the Class
A Limited Partner or his attorney-in-fact. A Proxy shall not be valid after
the expiration of 12 months from the date thereof, unless otherwise
provided in the Proxy, and shall be revocable at any time at the pleasure
of the Class A Limited Partner executing it. Only the votes of Limited
Partners of record on the Record Date, whether at
67
a meeting or otherwise, shall be counted. The General Partner shall not be
entitled to vote in its capacity as General Partner. In matters submitted
to Limited Partners regarding the removal of a General Partner or any
transaction between the Partnership and a General Partner, units
beneficially owned by a General Partner (or its Affiliates) which (i) is
proposed to be removed by the vote of a Majority Interest, or (ii) has an
interest in the transaction which is the subject of the vote, shall not be
voted on any such question and shall not be counted as outstanding in
calculating whether the vote of a Majority Interest has been obtained. The
laws of the State of Delaware pertaining to the validity and use of
corporate proxies shall govern the validity and use of proxies given by the
Limited Partners.
(c) The Class B Limited Partner shall not be permitted a vote on any
matter except as provided in Sections 6.2(a), 9.2 and 11.2(a)(i). To the
extent the Class B Limited Partner is not permitted a vote on any matter
pursuant to this Section 11.2(c), the General Partner may execute any
amendment hereto or other required document on its behalf pursuant to the
power-of-attorney granted in Section 13.1.
SECTION 11.3 Management of the Partnership.
-----------------------------
No Limited Partner in his capacity as such shall take part in
the management or control of the business of the Partnership or transact any
business in the name of the Partnership. No Limited Partner shall have the power
or authority to bind the Partnership or to sign any agreement or document in the
name of the Partnership. No Limited Partner shall have any power or authority
with respect to the Partnership except insofar as the Consent of the Limited
Partners shall be expressly required by this Agreement. The exercise by the
Limited Partners of any of their voting or other rights pursuant to and in
accordance with this Agreement shall not constitute participating in or
management or control over Partnership business.
SECTION 11.4 Other Activities.
----------------
The Limited Partners may engage in or possess interests in other
business ventures of any kind and description for their own accounts. Neither
the Partnership nor any of the Partners shall have any rights by virtue of this
Agreement in or to such business ventures or to the income or profits derived
therefrom.
ARTICLE TWELVE
NON-FOREIGN STATUS
SECTION 12.1 Certification of Non-Foreign Status.
-----------------------------------
(a) Each Limited Partner shall, upon subscribing for a Unit, certify
whether he is a "United States Person" within the meaning of Code
ss.7701(a)(30) on forms to be provided by the General Partner at the time
of subscription. If at any time a Unit is transferred or Assigned, the
transferee shall certify as to whether he is a United States Person.
68
(b) Each Partner shall notify the General Partner if he is no longer
a United States Person within 30 days of such change.
(c) Prior to a distribution by the Partnership (or other event that
may create an obligation on the Partnership to withhold tax under Chapter 3
of the Code), each Partner may be required by the General Partner to
certify as to whether he is a United States Person.
(d) All certifications under this Section 12.1 shall be made on a
form to be provided by the General Partner.
SECTION 12.2 Withholding on Certain Amounts Attributable to Interests of
----------------------------------------------------------------
Non-Resident Alien Partners.
---------------------------
Any tax required to be withheld under Chapter 3 of the Code
shall be charged to that non-resident alien Partner's Capital Account as if the
amount of such tax had been distributed to such Partner. For purposes of this
Section 12.2, any person who fails to provide a certification that he is a
United States Person when requested to do so by the General Partner shall be
treated as a non-resident alien.
ARTICLE THIRTEEN
MISCELLANEOUS PROVISIONS
SECTION 13.1 Appointment of General Partner As Attorney-In-Fact.
--------------------------------------------------
(a) Each Limited Partner, by the execution of this Agreement,
irrevocably constitutes and appoints, with full power of substitution, the
General Partner, the President and any Vice-President or Director of any
corporate General Partner, the general partner of any partnership General
Partner and each of them acting singly, his true and lawful
attorney-in-fact with full power and authority in his name, place and
▇▇▇▇▇, to execute, certify, acknowledge, deliver, swear to, file and record
at the appropriate public offices such documents as may be necessary or
appropriate to carry out the provisions of this Agreement, including
without limitation the following:
(i) execution and filing of all certificates and other
instruments (including counterparts of this Agreement and the
Certificate, and any amendment thereof, that any such Person deems
appropriate to form, qualify or continue the Partnership as a limited
partnership (or a partnership in which the Limited Partners shall
have limited liability comparable to that provided by the Delaware
Act on the date hereof) in any jurisdiction in which the Partnership
may conduct business or in which such formation, qualification or
continuation is, in the opinion of any such Person, necessary to
protect the limited liability of the Limited Partners;
69
(ii) execution and filing of any other instrument or
document that may be required to be filed by the Partnership under
the laws of any state or that any such Person deems advisable to
file;
(iii) execution and filing of all amendments to this
Agreement and the Certificate adopted in accordance with the terms
hereof and all instruments that any such Person deems appropriate to
reflect a change or modification of the Partnership in accordance
with the terms of this Agreement; and
(iv) execution and filing of any instrument or document,
including amendments to this Agreement and the Certificate, that may
be required to effect the continuation of the Partnership, the
admission of a Limited Partner or substituted Limited Partner or an
additional or successor General Partner, or the dissolution and
termination of the Partnership (provided such continuation, admission
or dissolution and termination are in accordance with the terms of
this Agreement), or to reflect any reductions in the amount of
Capital Contributions.
(b) The appointment by each Limited Partner of each such Person as
his attorney-in-fact is irrevocable and shall be deemed to be a power
coupled with an interest, in recognition of the fact that each of the
Partners under this Agreement shall be relying upon the power of such
Person to act as contemplated by this Agreement in any filing and other
action by such Person on behalf of the Partnership, and shall survive the
Bankruptcy, death, incompetence or dissolution of any Person hereby giving
such power and the transfer or assignment of all or any part of the
Partnership Interests of such Person; provided that, in the event of the
transfer by a Limited Partner of all or any part of his Partnership
Interests, the foregoing power of attorney of a transferor Limited Partner
shall survive such transfer only until such time, if any, as the transferee
shall have been admitted to the Partnership as a substituted Limited
Partner and all required documents and instruments shall have been duly
executed to effect such substitution.
SECTION 13.2 Signatures; Amendments.
----------------------
(a) Each Limited Partner, General Partner, additional General
Partner and successor General Partner shall become a signatory hereto by
signing, directly or by an attorney-in-fact, this Agreement and such other
instrument or instruments, and in such manner and at such time, as the
General Partner shall determine. By so signing, each such Limited Partner,
General Partner, or additional or successor General Partner shall be deemed
to have adopted, and to have agreed to be bound by, all the provisions of
this Agreement, as amended from time to time; provided that no such
counterpart shall be binding until it shall have been accepted by the
General Partner.
(b) In addition to any amendments otherwise authorized herein,
amendments may be made to this Agreement from time to time by the General
Partner, without the Consent of the Limited Partners, to: (i) add to the
representations, duties or obligations of the General Partner or surrender
any right or power granted to the General Partner herein; (ii) cure any
70
ambiguity, correct or supplement any provision herein that may be
inconsistent with any other provision herein or make any other provision
with respect to matters or questions arising under this Agreement that
shall not be inconsistent with the provisions of this Agreement; (iii)
change the name of the Partnership; and (iv) delete or add any provision of
this Agreement required to be deleted or added by the staff of the
Commission or other federal agency or by a state securities commissioner or
other governmental official, which deletion or addition is deemed by such
Commission, agency or official to be for the benefit or protection of, or
not adverse to, the Limited Partners; provided that no amendment shall be
adopted pursuant to this Section 13.2(b) unless the adoption thereof (A) is
for the benefit of or not adverse to the interests of the Limited Partners,
(B) is consistent with Section 11.3, (C) does not affect the distribution
of Cash From Operations, Cash From Sales, Liquidation Proceeds or the
allocation of Profits and Losses for tax purposes among the Limited
Partners, and (D) does not affect the limited liability of the Limited
Partners or the status of the Partnership as a partnership for federal
income tax purposes.
(c) If this Agreement shall be amended as a result of adding or
substituting a Limited Partner, the amendment to this Agreement need only
be signed by one General Partner. If this Agreement or the Certificate
shall be amended to reflect the designation of an additional General
Partner, such amendment shall be signed by at least one General Partner and
by such additional General Partner. If this Agreement or the Certificate
shall be amended to reflect the Withdrawal of a General Partner when the
business of the Partnership is being continued, such amendment shall be
signed by at least one General Partner other than the withdrawing General
Partner; provided that, in each such case, such signature shall have been
authorized by all General Partners other than the withdrawing General
Partner.
(d) In making any amendments, there shall be prepared and filed by
the General Partner for recording such documents and certificates as shall
be required to be prepared and filed under the Delaware Act and under the
laws of any other jurisdictions under which the Partnership is then formed
or qualified.
(e) Any provision to the contrary herein notwithstanding, the
General Partner may, without the consent of a Majority Interest, make any
technical changes to the provisions of this Agreement to conform the
allocations set forth in Article Four to the requirements of regulations
under Code ▇▇.▇▇. 704(b) and 704(c). Any amendment made by the General
Partner in accordance with this Section 13.2(e) shall be made pursuant to
appropriate advice of counsel, and shall be deemed to have been made
pursuant to the fiduciary obligations of the General Partner to the
Partnership and the Limited Partners.
SECTION 13.3 Ownership By Limited Partners of General Partner or Its
----------------------------------------------------------------
Affiliates.
----------
Except as to the holding of any Class A Units by the General
Partner and its Affiliates for their own accounts, as permitted by Section 3.4,
no Limited Partner shall at any time, either directly or indirectly, own any
stock or other interest in any General Partner or in any Affiliate of any
General Partner if such ownership by itself or in conjunction with the stock or
71
other interest owned by other Limited Partners would, in the Opinion of Counsel,
jeopardize the classification of the Partnership as a partnership for federal
income tax purposes. Each Limited Partner shall promptly supply any information
requested by the General Partner in order to establish compliance by the Limited
Partner with the provisions of this Section 13.3.
SECTION 13.4 Notices.
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All Notices under this Agreement shall be in writing and shall
be given to the Partners entitled thereto by personal service or by certified or
registered mail, return receipt requested, to the Limited Partners, at their
respective addresses on file with the General Partner and, to the General
Partner, at the principal place of business of the Partnership as set forth in
this Agreement or as changed by Notice given pursuant hereto. The date of
personal delivery or the date of mailing thereof, as the case may be, shall be
deemed the date of receipt of Notice.
SECTION 13.5 Binding Provisions.
------------------
The covenants and agreements contained herein shall be binding
upon, and inure to the benefit of, the heirs, executors, administrators,
personal representatives, successors and permitted assigns of the respective
parties hereto.
SECTION 13.6 Applicable Law.
--------------
This Agreement shall be governed and construed and enforced in
accordance with the laws of the State of Delaware without regard to principles
of conflict of laws; provided, however, that causes of action for violations of
federal or state securities laws shall not be governed by this Section 13.6.
SECTION 13.7 Counterparts.
------------
This Agreement may be executed in several counterparts, all of
which together shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties have not executed the same counterpart,
except that no counterpart shall be binding unless executed by the General
Partner.
SECTION 13.8 Separability of Provisions.
--------------------------
Each provision of this Agreement shall be considered separable
and if, for any reason, any provision or provisions hereof are determined to be
invalid and contrary to any existing or future law, such invalidity shall not
impair the operation of or affect those portions of this Agreement that are
valid.
72
SECTION 13.9 Captions.
--------
Article and Section titles and any table of contents are for
convenience of reference only and shall not control or alter the meaning of this
Agreement as set forth in the text.
SECTION 13.10 Partnership Property; No Partition.
----------------------------------
No Partner or successor in interest to any Partner may have any
property of the Partnership partitioned or, except as provided by applicable
law, file a complaint or institute any proceeding at law or in equity to have
the property partitioned, and each Partner, for itself, its successors,
representatives and permitted assigns, hereby waives any right to proceed under
any applicable law or otherwise to partition any Partnership property. Any
creditor of a Partner shall have recourse only against such Partner's interest
in the Partnership, but such creditor shall not have any recourse against the
property of the Partnership.
SECTION 13.11 No Benefit to Third Parties.
---------------------------
The provisions of this Agreement shall not be construed for the
benefit of or enforceable by a Person not a party hereto, including without
limitation limited to any creditor of any Partner or any of their Affiliates.
73
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first above written.
GENERAL PARTNER:
CAI Equipment Leasing V Corp.
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
CLASS B LIMITED PARTNER:
Capital Associates International, Inc.
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Title: Vice President
WITHDRAWING ORIGINAL LIMITED PARTNER:
/s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
CLASS A LIMITED PARTNERS:
By: CAI Equipment Leasing V Corp.
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
As Attorney-in-Fact for such Class A
Limited Partners
74
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
CAPITAL PREFERRED YIELD FUND - IV, L.P.
TABLE OF CONTENTS
ARTICLE ONE
DEFINITIONS................................................................. 1
ARTICLE TWO
CONTINUATION, NAME, PLACE OF BUSINESS, PURPOSE AND TERM..................... 16
SECTION 2.1 Continuation of Partnership............................... 16
SECTION 2.2 Name, Principal Office and Name and
Address of Registered Agent for Service
of Process................................................ 16
SECTION 2.3 Purpose................................................... 16
SECTION 2.4 Term...................................................... 16
ARTICLE THREE
PARTNERS AND CAPITAL........................................................ 17
SECTION 3.1 General Partner........................................... 17
SECTION 3.2 Original Limited Partner.................................. 17
SECTION 3.3 Class B Limited Partner................................... 17
SECTION 3.4 Class A Limited Partners.................................. 17
SECTION 3.5 Partnership Capital....................................... 19
SECTION 3.6 Capital Accounts.......................................... 19
SECTION 3.7 Loans By Partners......................................... 20
SECTION 3.8 Return of Capital......................................... 20
SECTION 3.9 Liability of Limited Partners............................. 21
SECTION 3.10 Investment in Equipment................................... 21
ARTICLE FOUR
DISTRIBUTIONS AND ALLOCATIONS............................................... 21
SECTION 4.1 Distributions............................................. 21
SECTION 4.2 Allocations of Profits and Losses......................... 24
SECTION 4.3 Special Allocations....................................... 27
SECTION 4.4 Tax Allocations........................................... 29
SECTION 4.5 Curative Allocations; Uniformity of
Units..................................................... 30
SECTION 4.6 Changes in Units or Partnership
Interests................................................. 31
i
ARTICLE FIVE
RIGHTS, OBLIGATIONS AND POWERS OF GENERAL PARTNER........................... 31
SECTION 5.1 Multiple General Partners................................. 31
SECTION 5.2 Management of Partnership................................. 33
SECTION 5.3 Authority of General Partner.............................. 34
SECTION 5.4 Authority of General Partner and Its
Affiliates to Deal With Partnership....................... 38
SECTION 5.5 Limitations and Restrictions on Exercise
of Powers of General Partner.............................. 40
SECTION 5.6 Duties and Obligations of General
Partner................................................... 45
SECTION 5.7 Other Activities.......................................... 46
SECTION 5.8 Limitation on Liability of General
Partner and Affiliates; Indemnification................... 47
SECTION 5.9 Tax Status of Partnership................................. 48
ARTICLE SIX
CHANGES IN GENERAL PARTNER.................................................. 49
SECTION 6.1 Certain Withdrawals of General Partner.................... 49
SECTION 6.2 Admission of Additional or Successor
General Partner........................................... 49
SECTION 6.3 Consent of Class A Limited Partners to
Admission of Additional or Successor
General Partner........................................... 50
SECTION 6.4 Effect of Voluntary Withdrawal of
General Partner or Removal of General
Partner by Class A Limited Partners....................... 50
ARTICLE SEVEN
ASSIGNMENT OF PARTNERSHIP INTERESTS OF LIMITED PARTNERS..................... 52
SECTION 7.1 Assignment................................................ 52
SECTION 7.2 Withdrawal of Limited Partners............................ 52
SECTION 7.3 Assignment of Partnership Interests....................... 53
SECTION 7.4 Distributions............................................. 53
SECTION 7.5 Restrictions on Assignment................................ 53
SECTION 7.6 Redemption of Partnership Units........................... 54
ii
ARTICLE EIGHT
ADMISSION OF LIMITED PARTNERS AND SUBSTITUTED
LIMITED PARTNERS........................................................ 55
SECTION 8.1 Admission of Limited Partners............................. 55
SECTION 8.2 Admission of Substituted Limited
Partners.................................................. 56
ARTICLE NINE
DISSOLUTION AND LIQUIDATION OF PARTNERSHIP.................................. 57
SECTION 9.1 Events Causing Dissolution................................ 57
SECTION 9.2 Continuation of Business of Partnership
After Dissolution......................................... 58
SECTION 9.3 Liquidation............................................... 59
SECTION 9.4 Cancellation of Certificate of Limited
Partnership............................................... 60
SECTION 9.5 Reasonable Time for Winding Up............................ 60
SECTION 9.6 Return of Capital......................................... 60
SECTION 9.7 No Capital Account Restoration............................ 61
ARTICLE TEN
BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS....................... 61
SECTION 10.1 Books and Records......................................... 61
SECTION 10.2 Accounting Method......................................... 62
SECTION 10.3 Bank Accounts............................................. 62
SECTION 10.4 Reports................................................... 62
SECTION 10.5 Designation, Duties and Expenses of Tax
Matters Partner........................................... 64
SECTION 10.6 Authority of Tax Matters Partner.......................... 65
ARTICLE ELEVEN
MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS.............................. 66
SECTION 11.1 Meetings.................................................. 66
SECTION 11.2 Voting Rights of Limited Partners......................... 67
SECTION 11.3 Management of the Partnership............................. 68
SECTION 11.4 Other Activities.......................................... 68
iii
ARTICLE TWELVE
NON-FOREIGN STATUS.......................................................... 68
SECTION 12.1 Certification of Non-Foreign Status....................... 68
SECTION 12.2 Withholding on Certain Amounts
Attributable to Interests of Non-
Resident Alien Partners................................... 69
ARTICLE THIRTEEN
MISCELLANEOUS PROVISIONS.................................................... 69
SECTION 13.1 Appointment of General Partner As
Attorney-In-Fact.......................................... 69
SECTION 13.2 Signatures; Amendments.................................... 70
SECTION 13.3 Ownership By Limited Partners of General
Partner or Its Affiliates................................. 71
SECTION 13.4 Notices................................................... 72
SECTION 13.5 Binding Provisions........................................ 72
SECTION 13.6 Applicable Law............................................ 72
SECTION 13.7 Counterparts.............................................. 72
SECTION 13.8 Separability of Provisions................................ 72
SECTION 13.9 Captions.................................................. 73
SECTION 13.10 Partnership Property; No Partition........................ 73
SECTION 13.11 No Benefit to Third Parties............................... 73
iv