UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
{ X } ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-32125
Redwood Equipment Leasing Income Fund L.P.
(Exact Name of Registrant as Specified in its Charter)
Delaware 52-1650971
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
225 East Redwood Street, Baltimore, Maryland 21202
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (410) 727-4083
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None
Securities registered pursuant to section 12(g) of the Act:
Assignee Units of Limited Partnership Interests
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
As of December 31, 1997, there were 401,180 Units of Assignee Limited
Partnership Interests held by non-affiliates of the Registrant. Because there is
not an established public trading market for the Units, the aggregate market
value of the Units held by non-affiliates of the Registrant cannot be
calculated.
Documents Incorporated by Reference
The Annual Report for 1997 is incorporated by reference.
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
<TABLE>
<CAPTION>
INDEX
Page(s)
Part I.
<S> <C>
Item 1. Business 3-4
Item 2. Properties 4
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security Holders 4
Part II.
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 5
Item 6. Selected Financial Data 5
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-7
Item 8. Financial Statements and Supplementary Data 7
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 8
Part III.
Item 10. Directors and Executive Officers of the Registrant 8
Item 11. Executive Compensation 9
Item 12. Security Ownership of Certain Beneficial Owners
and Management 9
Item 13. Certain Relationships and Related Transactions 9
Part IV.
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 9
Signatures 10
</TABLE>
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<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
PART I
Item 1. Business
Redwood Equipment Leasing Income Fund L. P. (the "Partnership") is a
Delaware limited partnership formed in October 1989. The Partnership acquired a
portfolio of equipment (the "Equipment") for lease to third parties. At the end
of each lease, the Partnership expects to either sell the Equipment or re-lease
the Equipment to the same or different lessees.
The General Partner of the Partnership is Redwood Leasing, Inc., a Maryland
corporation.
First Union Commercial Corporation, successor to Signet Leasing and
Financial Corporation ("Signet") was the management agent and was entitled to an
equipment and lease management fee equal to 1.5% of gross lease rental payments
as well as a fee for services provided in acquiring and disposing of leased
assets through February 1998. Beginning in March 1998, Chesapeake Industrial
Leasing Co., Inc. ("Chesapeake") became the management agent and is entitled to
an equipment and management fee of $50 per month per lease schedule plus a $500
start up fee. The Partnership presently has approximately $2,086,000 (original
cost) of equipment under leases, representing six different lessee companies as
detailed below.
A minimum of 80,000 units of assignee limited partnership interests (the
"Units") and an increased maximum of 3,000,000 Units were registered under the
Securities and Exchange Act of 1933, as amended. Throughout 1990, investors
holding 401,180 Units, or $10,029,500 of gross offering proceeds, were
recognized on the books of the Partnership.
The offering proceeds, net of offering related fees, were invested in a
money market account, pending disbursement for additional equipment lease
acquisitions, working capital requirements or return of capital to investors.
The principal investment objectives of the Partnership are:
o to acquire a diversified portfolio of Equipment; o to generate quarterly
distributions of cash to the investors; o to reinvest undistributed cash in
addition Equipment; and o to realize residual values upon the ultimate sale
of the Equipment.
The General Partner will make all decisions regarding the acquisition,
financing, refinancing, leasing, re-leasing and sales of Equipment based, in
part, upon the recommendations and advice of Signet or Chesapeake. Potential
Equipment investments will be evaluated primarily on the basis of:
o the extent to which the investment satisfies the Partnership's
investment objectives, with special emphasis on the economic return to
the Partnership,
o the creditworthiness of the lessee
o the type of Equipment to be purchased and leased.
In 1997, four lease schedules from two lessees expired and another lessee
purchased a portion of its equipment prior to the end of its lease. The
Partnership sold the equipment from two lease schedules for $88,500 to a lessee
and recorded a net gain from the sale of leased equipment of $29,556. In the
other transactions, the Partnership sold the equipment under lease for $253,883
and recorded a net gain from the sale of leased equipment of $17,885. The
proceeds from these sales were received in January 1998.
In 1997, the Partnership ended the Investment Period and began the
Liquidation Phase (period during which the Partnership's existing lease
portfolio matures). The Partnership made a liquidating distribution (net of
reserves of approximately $136,000) totaling $2,431,636 in March 1997. Future
quarterly distributions will be dependent on funds generated from operations,
principal payments and proceeds from lease sales.
-3-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Item 1. Business (continued)
At December 31, 1997 the Partnership has equipment subject to the leases
summarized below:
<TABLE>
<CAPTION>
Remaining
Original 1998 Lease Lease Term
Lessee Company Equipment Cost Payments (Months) Equipment Type
<S> <C> <C> <C>
Bennett Mineral Company, Inc. $ 96,868 $ 21,665 17 Automatic baler
Coca-Cola Bottling Co. 613,453 105,051 18 Tractors, trailers
Consolidated and forklifts
Cordula, Inc. 125,000 35,100 29 Restaurant equipment
EA Engineering Science 620,750 112,974* 5-20 Computer equipment
and Technology, Inc. and office furniture
Heilig-Meyers Company 557,904 96,289 7-12 Forklifts
Mangione Enterprises 72,276 17,669 16 Golf course
maintenance
equipment
------------- -------------
$2,086,251 $ 388,748
======== ========
</TABLE>
* Annual lease payments reflect the amount due for 1998. This amount will
be reduced as each of the three lease schedules terminate.
Item 2. Properties
None.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to the security holders for a vote during
the last quarter of the fiscal year covered by this report.
-4-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
An established public trading market for the Units does not exist and the
Partnership does not anticipate that a public market will develop. Transfer of
Units by an investor may be accommodated under certain terms and conditions. The
Partnership Agreement imposes certain limitations on the transfer of Units and
may restrict, delay or prohibit a transfer primarily if:
o the transfer of Units would result in 50% or more of all Units having
been transferred by assignment or other within a 12-month period
o the transfer of Units would cause the Partnership to be treated as a
"publicly traded partnership" under Section 7704 and 469K of the
Internal Revenue Code
o the transfer of Units would cause the Partnership to terminate for
federal income tax purposes
An investor desiring to sell his Units will be required to comply with the
minimum purchase and retention requirements and investor suitability standards
imposed by applicable federal or state securities laws and the minimum purchase
and retention requirements imposed by the Partnership. The Partnership will
require that such standards by met before the General Partner consents to any
transfer of Units.
In addition, a transfer will not be registered if, immediately thereafter,
any transferor not transferring all of his Units, or any transferee, would hold
fewer than 200 Units (80 if IRA) or any transferor or transferee would hold a
number of Units that is not evenly divisible by four.
As of December 31, 1997, there were 378 holders of assignee units of
limited partnership interests of the registrant, owning an aggregate of 401,220
units.
The Partnership made cash distributions totaling $3,244,116 in 1997,
$818,816 in 1996, 1995 and 1994, and $1,023,521 in 1993.
Item 6. Selected Financial Data
Revenues and net earnings information below is for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Direct finance lease revenue $ 122,354 $ 183,177 $ 213,254 $ 226,904 $ 283,797
Interest income 37,756 133,270 149,421 120,975 93,849
Net gain from sale of leased
equipment and marketable
securities 47,441 36,091 155,569 21,725 131,009
Net earnings 104,185 246,844 404,589 237,604 274,824
Net earnings per Unit .26 .60 .99 .58 .67
Total assets 1,270,331 4,447,393 4,998,916 5,422,827 6,002,579
Partners' capital 1,235,769 4,375,700 4,947,672 5,361,899 5,943,111
Cash distributions paid per unit 8.00 2.00 2.00 2.00 2.50
</TABLE>
The above selected financial data should be read in conjunction with the
financial statements and accompanying notes incorporated by reference in this
report.
-5-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
At December 31, 1997, the Partnership had a working capital position that
included cash and cash equivalents of $258,532 and accounts payable and accrued
expenses of $16,765. The Partnership invests its cash balances in a money market
account. The Partnership is reserving $136,130 as working capital reserves, but
has the discretion to increase or decrease reserves as deemed necessary. The
working capital reserves are sufficient to satisfy the Partnership's liquidity
requirements.
Cash and cash equivalents decreased $2,513,939 during 1997. This decrease
represented the combined effect of $38,005 provided by operating activities,
$603,672 received in principal payments on direct finance leases, $88,500
received for termination of direct finance leases, and $3,244,116 distributed to
partners.
During 1996, funds generated from operations and principal received on
direct finance leases totaled $280,629 and $710,824, respectively. The sale of
leased equipment generated cash proceeds of $99,137. Distributions to partners
totaled $818,816.
During 1995, funds generated from operations and principal received on
direct finance leases totaled $262,101 and $692,800, respectively. The sale of
leased equipment generated cash proceeds of $263,334. Acquisition of direct
finance leases during the year utilized $543,914 and distributions to partners
totaled $818,816.
The Partnership makes quarterly distributions from funds generated from
operations, principal payments on direct finance leases and proceeds from lease
terminations and equipment sales. During 1997 the Partnership made annual
distributions totaling $3,244,116. During 1996 and 1995 the Partnership made
annual distributions totaling $818,816, an annualized rate of 8% on invested
capital.
During 1997, the Partnership made no equipment lease acquisitions. As noted
in prior reports, the Partnership has entered the Liquidation Phase during which
the remaining funds (net of reserves) were distributed to investors. In February
1998, the Partnership distributed $122,401, representing a return of capital of
$.30 per Unit. Future quarterly distributions will be dependent on funds
generated from operations, principal payments and proceeds from lease sales.
Results of Operations
Direct finance lease revenue in 1997 was 33% lower than in 1996, which was
14% lower than in 1995. These decreases in direct finance lease revenue were the
result of scheduled lease terminations and an expected decline in the portion of
lease payment recognized as revenue (versus return of principal) for existing
leases.
Interest income in 1997 was 72% lower than in 1996, due primarily to lower
cash balances after the return of capital distribution made in March 1997.
Interest income in 1996 was 11% lower than in 1995, due primarily to lower
interest rates in 1996.
During the first quarter of 1997, the Partnership learned that one of its
lessees was in default under the terms of its lease. However, pursuant to the
Security Agreement and Assignment of Lease, all rental payments due from this
lessee have been guaranteed by the lease originator. The guarantee obligations
have been honored by the lease originator and accordingly, the Partnership has
timely received all rental payments due under the lease. In 1997, four lease
schedules from two lessees expired and another lessee purchased a portion of its
equipment prior to the end of its lease. The Partnership sold the equipment from
two lease schedules for $88,500 to a lessee and recorded a net gain from the
sale of leased equipment of $29,556. In the other transactions, the Partnership
sold the equipment under lease for $253,883 and recorded a net gain from the
sale of leased equipment of $17,885. The proceeds from these sales were received
in January 1998. The Partnership currently has $22,556 in reserves which is
deemed sufficient for any future potential losses.
-6-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations (continued)
During 1996, the Partnership recognized a $6,575 gain from the sale of
leased equipment resulting from the sale of equipment on one of the EA
Engineering lease schedules. The Partnership also recorded as a net gain $29,516
from the sale of equipment originally leased to Financial News Network ("FNN").
Pursuant to the Partnership's rights as a Class 2 Equipment Lessor under the
Chapter 11 Plan of Reorganization for FNN, the Partnership had received a share
in a contingent revenue stream. This is the final settlement of its claims
against FNN, and (because the Partnership had previously written off all
receivables relating to the FNN transaction) the full amount received in 1996
was recorded as a net gain.
During 1995, the Partnership recognized a net gain of $155,569 on the sale
of leased equipment. Four of the Partnership's lease schedules with EA
Engineering expired in 1995. The Partnership sold all of the equipment under
these lease schedules to EA Engineering and recorded a gain on the sales in 1995
of $38,035. The Partnership also recorded as a net gain $117,534 from the sale
of equipment originally leased to FNN. Pursuant to the Partnership's rights as a
Class 2 Equipment Lessor under the Chapter 11 Plan of Reorganization for FNN,
the Partnership had received a share in a contingent revenue stream. In 1995,
the Partnership received $117,534 in settlement of its claims against FNN, and
(because the Partnership had previously written off all receivables relating to
the FNN transaction) recorded the full amount received as a net gain in 1995.
Finally, in 1995 the Partnership sold the medical equipment leased to American
Health Services for $43,572 less than the original recorded residual value for
the equipment; however, because the Partnership had in prior years recorded
reserves against the residual value of this equipment, the Partnership reduced
its existing reserves for the residual value loss accordingly and no additional
gain or loss was recorded on this sale.
Total expenses decreased by $2,328 during 1997 as compared to 1996 due to
reductions in professional fees and amortization costs. Total expenses during
1996 decreased by $7,961 as compared to 1995 due to reductions in administrative
expenses, management fees and amortization costs.
Year 2000
Management has initiated an enterprise-wide program to prepare the
Partnership's computer systems and applications for the year 2000. The
Partnership expects to incur internal staff costs as well as consulting and
other expenses related to infrastructure and facilities enhancements necessary
to prepare the systems for the year 2000. A significant proportion of these
costs are not likely to be incremental costs to the Partnership, but rather will
represent the redeployment of existing information technology resources.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements and Financial Statement Schedules:
Page(s)
Annual Report
Independent Auditors' Report 2
Balance Sheets 3
Statements of Operations 4
Statements of Partners' Capital 5
Statements of Cash Flows 6
Notes to Financial Statements 7-11
All financial statement schedules are omitted because they are not
applicable, or not required, or because the required information is included in
the financial statements or notes thereto.
-7-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partner of the Partnership is Redwood Leasing, Inc. The
Partnership's principal executive offices are located at 225 East Redwood
Street, Baltimore, Maryland 21202, telephone (410) 727-4083. The General Partner
had primary responsibility for the structure of the Offering and the
Partnership. The General Partner is responsible for overseeing the performance
of those who contract with the Partnership, as well as making decisions with
respect to the financing, sale and liquidation of the Partnership's assets. It
also provides all reports to and communications with Investors and others, all
distributions and allocations to Investors, the administration of the
Partnership's business and all filings with the Securities and Exchange
Commission and other federal or state regulatory authorities. The Partnership
Agreement provides for the removal of a General Partner and the election of
Successor or Additional General Partner by Investors holding a majority in
interest of the Units.
The directors and principal officers of the General Partner are as follows:
John M. Prugh, age 49, has been a Director and President of the General
Partner since 1989, and of Alex. Brown Realty, Inc. and Armata Financial Corp.
since 1984. Mr. Prugh graduated from Gettysburg College in 1970, and was
designated a Certified Property Manager by the Institute of Real Estate
Management in 1979. He has worked in property management for H. G. Smithy Co.,
in Washington, D.C., and Dreyfuss Bros., Inc. in Bethesda, Maryland. Since 1977,
Mr. Prugh has been involved in managing, administering, developing and selling
real estate investment projects sponsored by Alex. Brown Realty, Inc. and its
subsidiaries.
Peter E. Bancroft, age 45, has been a Director and Vice President of the
General Partner since 1989 and Senior Vice President of Alex. Brown Realty, Inc.
and Armata Financial Corp. since 1983. Mr. Bancroft graduated from Amherst
College in 1974, attended the University of Edinburgh, and received a J.D.
degree from the University of Virginia School of Law in 1979. Prior to joining
Alex. Brown Realty, Inc. in 1983, Mr. Bancroft held legal positions with
Venable, Baetjer and Howard and T. Rowe Price Associates, Inc.
Terry F. Hall, age 51, has been the Secretary of the General Partner and a
Vice President and Secretary of, and Legal Counsel for, Alex. Brown Realty, Inc.
since 1989. Mr. Hall graduated from the University of Nebraska- Lincoln in 1968,
and received a J.D. degree from the University of Pennsylvania Law School in
1973. Prior to joining Alex. Brown Realty, Inc. in 1986, Mr. Hall was a Partner
at the law firm of Venable, Baetjer and Howard from 1981 to 1986 and an
associate at the same firm from 1973 to 1981.
Timothy M. Gisriel, age 41, has been the Treasurer of the General Partner
and of Alex. Brown Realty, Inc. and Armata Financial Corp. since 1990. He was
the Controller of Alex. Brown Realty, Inc. and Armata Financial Corp. from 1984
through 1990. Mr. Gisriel graduated from Loyola College in 1978 and received a
Masters of Business Administration degree from the Robert G. Merrick School of
Business, University of Baltimore in 1993. Prior to joining Alex. Brown Realty,
Inc. in 1984, Mr. Gisriel was an audit supervisor in the Baltimore office of
Coopers & Lybrand. He is a Maryland Certified Public Accountant.
There is no family relationship among the officers and directors of the
General Partner.
-8-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Item 11. Executive Compensation
The officers and directors of the General Partner received no compensation
from the Partnership.
The General Partner is entitled to receive a share of cash distributions
and a share of profits and losses as described in the Limited Partnership
Agreement, Article IV. (See Note 6, "Partners' Capital" in Item 8. Financial
Statements, herein.)
For a discussion of compensation and fees to which the General Partner is
entitled, see Item 13, Certain Relationships and Related Transactions, herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
No person is known to the Partnership to own beneficially more than 5% of
the outstanding assignee units of limited partnership interest of the
Partnership.
The Assignor Limited Partner, Redwood Leasing Holding Company, Inc., an
affiliate of the General Partner, holds 40 Units representing a beneficial
interest in limited partnership interests in the Partnership. The Units held by
the Assignor Limited Partner have all rights attributable to such Units under
the Limited Partnership Agreement except that these Units of assignee limited
partnership interests are nonvoting.
The General Partner has a 2% interest in the Partnership as the General
Partner, but holds no Units.
At December 31, 1997, MNC Leasing, a division of MNC Credit Corp held
18,724 Units (an approximate 4.7% investment in the Partnership).
There are no arrangements, known to the Partnership, the operation of which
may, at a subsequent date, result in a change of control of the registrant.
Item 13. Certain Relationships and Related Transactions
The General Partner and its affiliates have and are permitted to engage in
transactions with the Partnership. For a summary of fees paid during 1997, 1996
and 1995 to the General Partner and its affiliates, see Note 3, "Related Party
Transactions", in Item 8, Financial Statements, herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements: See Index to Financial Statement and
Supplementary Data in Item 8 on page 7, herein.
2. Financial Statement Schedules: None.
3. Exhibits:
(3, 4)Limited Partnership Agreement on pages 1 through 43 of
Exhibit A to the Partnership's Registration Statement on
Form S-1 (File No. 33-32125) incorporated herein by
reference.
(13) Annual Report for 1997.
(b) Reports on Form 8-K: None.
-9-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
REDWOOD EQUIPMENT LEASING
INCOME FUND L.P.
DATE: 3/25/98 BY: /s/ John M. Prugh
John M. Prugh
President and Director
Redwood Leasing, Inc.
General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed by the following in the capacities and on the dates
indicated.
DATE: 3/25/98 BY: /s/ John M. Prugh
John M. Prugh
President and Director
Redwood Leasing, Inc.
General Partner
DATE: 3/25/98 BY: /s/ Peter E. Bancroft
Peter E. Bancroft
Vice President and Director
Redwood Leasing, Inc.
General Partner
DATE: 3/25/98 BY: /s/ Terry F. Hall
Terry F. Hall
Secretary
Redwood Leasing, Inc.
General Partner
DATE: 3/25/98 BY: /s/ Timothy M. Gisriel
Timothy M. Gisriel
Treasurer
Redwood Leasing, Inc.
General Partner
-10-
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
1997 ANNUAL REPORT
March 15, 1998
Dear Investor:
This annual report for Redwood Equipment Leasing Income Fund L.P.
contains financial results for the years ended December 31, 1997, 1996 and 1995.
The Partnership began revenue producing operations as of April 1, 1990. To date,
the Partnership has acquired equipment subject to leases totaling $11,964,830.
CASH DISTRIBUTIONS
The Partnership made a cash distribution on February 9, 1998 to
Unitholders of $.30 per Unit, representing a 5% annualized distribution rate on
original capital. Distributions during 1997 totaled $8.00 per Unit, representing
a 32% distribution rate on original capital. Since inception, the Partnership
has made total distributions of $9,624,938 to Unitholders, representing 95.96%
of gross offering proceeds.
OPERATIONS
During 1997, direct finance lease revenue declined approximately 33% as
compared to 1996. This decrease resulted from scheduled lease terminations and
an expected decline in the portion of the lease payment recognized as revenue
(versus a return of principal) for existing leases. The Partnership recognized a
net gain of $47,441 on the sale of leased equipment during the year.
ACQUISITIONS
During 1997, the Partnership made no equipment lease acquisitions. The
Partnership was not able to identify new lease transactions which it deemed
acceptable from a risk and credit standpoint.
OUTLOOK
The Partnership was organized in October 1989 with an expected
Investment Period of five to seven years during which the Partnership has been
committed to investment in new equipment leases. Offering proceeds of
$10,029,500 were raised and the Partnership began operations on April 1, 1990.
The Partnership reached the end of the Investment Period in 1997, entered the
Liquidation Phase (period during which the Partnership's existing lease
portfolio matures), and is now distributing the remaining funds (net of reserves
of approximately $136,000) to investors. Future quarterly dividends will be
dependent on funds generated from operations, principal payments and proceeds
from lease sales.
Very truly yours,
/s/ John M. Prugh
John M. Prugh, President
Redwood Leasing, Inc.
General Partner
-1-
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Redwood Equipment Leasing Income Fund L.P.:
We have audited the accompanying balance sheets of Redwood Equipment Leasing
Income Fund L.P. (the "Partnership") as of December 31, 1997 and 1996 and the
related statements of operations, partners' capital and cash flows for each of
the years in the three-year period ended December 31, 1997. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Redwood Equipment Leasing
Income Fund L.P. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Baltimore, Maryland
January 23, 1998
-2-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Balance Sheets
<TABLE>
<CAPTION>
December 31,
1997 1996
Assets
<S> <C> <C>
Cash and cash equivalents $ 258,532 $2,772,471
Lease payments receivable 289,845 33,098
Deposit -- 10,000
Investment in direct finance leases, net (Note 4) 721,954 1,631,824
Total assets $1,270,331 $4,447,393
Liabilities and Partners' Capital
Accounts payable and accrued expenses $ 16,765 $ 18,656
Amounts due to affiliates 9,859 12,403
Advance rentals 7,938 40,634
Total liabilities 34,562 71,693
Partners' Capital (Note 6)
General Partner (118,752) (85,305)
Assignor Limited Partner:
Assignment of limited partnership interests - $25 stated
value per unit, 401,180 units outstanding 1,354,060 4,460,235
Limited partnership interests - $25 stated value per
unit, 40 units outstanding 261 570
Special Limited Partners 200 200
Total partners' capital 1,235,769 4,375,700
Total liabilities and partners' capital $1,270,331 $4,447,393
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Statements of Operations
For the years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
Revenues
<S> <C> <C> <C>
Direct finance lease revenue $122,354 $183,177 $213,254
Interest income 37,756 133,270 149,421
Net gain from sale of leased equipment (Note 4) 47,441 36,091 155,569
207,551 352,538 518,244
Expenses
Administrative expenses including
amounts to related party 62,990 62,348 65,552
Management fees to advisor (Note 3) 14,950 13,034 16,754
Professional fees 14,170 16,450 16,208
Amortization of acquisition and
organization costs 11,256 13,862 15,141
103,366 105,694 113,655
Net earnings $104,185 $246,844 $404,589
Net earnings per unit of assignee
limited partnership interest - basic (Note 6) $ 0.26 $ 0.60 $ 0.99
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Statements of Partners' Capital
For the years ended December 31,
<TABLE>
<CAPTION>
Assignor Limited Partner
Assignment
of Limited Limited Special
Partnership Partnership Limited General
Interests Interests Partners Partner Total
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $ 5,426,614 $ 667 $ 200 $ (65,582) $ 5,361,899
Net earnings 396,458 39 8,092 404,589
Distributions to partners (802,360) (80) (16,376) (818,816)
Balance at December 31, 1995 5,020,712 626 200 (73,866) 4,947,672
Net earnings 241,883 24 4,937 246,844
Distributions to partners (802,360) (80) (16,376) (818,816)
Balance at December 31, 1996 4,460,235 570 200 (85,305) 4,375,700
Net earnings 103,133 10 1,042 104,185
Distributions to partners (3,209,308) (319) (34,489) (3,244,116)
Balance at December 31, 1997 $ 1,354,060 $ 261 $ 200 $ (118,752) $ 1,235,769
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Statements of Cash Flows
For the years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
Cash flows from operating activities
<S> <C> <C> <C>
Net earnings $ 104,185 $ 246,844 $ 404,589
Adjustments to reconcile net earnings to net
cash provided by operating activities
Amortization of acquisition and
organization costs 11,256 13,862 15,141
Net gain from sale of leased equipment (47,441) (36,091) (155,569)
Changes in assets and liabilities
(Increase) decrease in lease payments receivable (2,864) 35,565 7,624
Decrease in deposit 10,000 -- --
Increase (decrease) in accounts payable and
accrued expenses (1,891) 1,843 (7,161)
Increase (decrease) in amounts due to affiliates (2,544) (3,507) 2,769
Increase (decrease) in advance rentals (32,696) 22,113 (5,292)
Net cash provided by operating activities 38,005 280,629 262,101
Cash flows from investing activities
Acquisition of direct finance leases -- -- (543,914)
Principal received on direct finance leases 603,672 710,824 692,800
Termination of direct finance leases 88,500 99,137 263,334
Net cash provided by (used in) investing activities 692,172 809,961 412,220
Cash flows from financing activities-
distributions to partners (3,244,116) (818,816) (818,816)
Net increase (decrease) in cash and cash equivalents (2,513,939) 271,774 (144,495)
Cash and cash equivalents
Beginning of period 2,772,471 2,500,697 2,645,192
End of period $ 258,532 $2,772,471 $2,500,697
</TABLE>
See accompanying notes to financial statements
-6-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Notes to Financial Statements
December 31, 1997
(1) Organization
Redwood Equipment Leasing Income Fund L.P. (the "Partnership") is a
Delaware limited partnership formed in October 1989 to engage in the
business of owning and leasing equipment. The Partnership offered
assignee units of limited partnership interests (the "Units") to
investors (the "Investors"). The General Partner is Redwood Leasing,
Inc., a Maryland corporation and an affiliate of Armata Financial Corp.
("Armata"), the Partnership's selling agent. The assignor limited partner
is Redwood Leasing Holding Company, Inc., an affiliate of the General
Partner. The special limited partners are Maryland National Leasing
Services Corporation ("MNLSC") and Realty Associates Limited Partnership,
another affiliate of the General Partner. The Partnership's management
agent is First Union Commercial Corporation, successor to Signet Leasing
and Financial Corporation ("Signet").
(2) Summary of Significant Accounting Policies
The accompanying financial statements have been prepared on the accrual
basis of accounting. The Partnership reports its operating results for
income tax purposes on the accrual basis. No provision for income tax is
made because any liability for income taxes is that of the individual
partners and not that of the Partnership.
Costs associated with the marketing of the Units to the public were
offset against the related partners' capital. Costs associated with the
organization of the Partnership were capitalized and were amortized on a
straight-line basis over a period of five years, ending in 1995.
The Partnership considers all short-term investments with original
maturities of three months or less as cash equivalents. Cash and cash
equivalents consist entirely of cash, money market accounts and other
liquid short term investments and are stated at cost, which approximates
market value at December 31, 1997 and 1996.
For direct finance leases, the excess rental receivables, including
estimated residual values, over the cost of the equipment are deferred
and credited to earnings on a contractual basis that approximates a level
yield on the net investment over the base lease terms. The Partnership
records the estimated residual value of leased equipment at the inception
of a lease, based upon management's evaluation of the market value of
such equipment at the expiration of the base lease term. The Partnership
and Signet review the fair value of the receivable and residual value
components of all current leases and make appropriate adjustments where
deemed necessary.
Acquisition costs incurred in obtaining the leases are capitalized and
amortized over the lease terms.
-7-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Notes to Financial Statements (continued)
(2) Summary of Significant Accounting Policies (continued)
Management of the Partnership has made a number of estimates and
assumptions relating to the reporting of assets, liabilities, revenues
and expenses to prepare these financial statements in conformity with
generally accepted accounting principals. Actual results could differ
from those estimates.
The fair value of financial instruments is determined by reference to
various market data and other valuation considerations. The fair value of
financial instruments approximate their recorded value.
(3) Related Party Transactions
The General Partner earned an asset management fee of $19,250 in 1997 and
$24,564 in 1996 and 1995 and received or was due reimbursement of $29,710
$28,154, and $37,508 for certain costs incurred relating to
administrative services for the Partnership for the years ended December
31, 1997, 1996 and 1995, respectively.
As the management agent, Signet is entitled to an equipment and lease
management fee equal to 1.5% of gross lease rental payments as well as a
fee for services provided in acquiring and disposing of leased assets.
For the years ended December 31, 1997, 1996 and 1995, Signet earned
$14,950, $13,034, and $16,754 in equipment lease and management fees,
respectively. In addition, Signet earned $8,159 in lease acquisition fees
during 1995.
Commencing in 1994, the Partnership also began acquiring lease
transactions from Chesapeake Industrial Leasing Co., Inc. (Chesapeake).
Under the terms of the Partnership's agreement, Chesapeake earned $2,669
during 1995 for providing new leases to the Partnership.
(4) Leases
Investment in direct finance leases with initial terms ranging from 34 to
82 months, at December 31, 1997 and 1996, includes the following:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Lease payments receivable $ 541,715 $ 1,259,277
Estimated residual values 262,916 542,237
Acquisition fees, net 7,260 18,516
Unearned income (67,381) (165,650)
Reserve for residual value loss (22,556) (22,556)
$ 721,954 $ 1,631,824
</TABLE>
-8-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Notes to Financial Statements (continued)
(4) Leases (continued)
In 1995, the Partnership acquired three new investments in equipment
under direct finance leases, including acquisition fees, two from Signet
for $416,245 and one from Chesapeake for $127,669. The terms of the
leases range from 36 to 56 months with total monthly payments of $10,519
due in advance. The equipment under lease consists of computer equipment,
office furniture and restaurant equipment.
In 1997, four lease schedules from two lessees expired and another lessee
purchased a portion of its equipment prior to the end of its lease. The
Partnership sold the equipment from two lease schedules for $88,500 to a
lessee and recorded a net gain from the sale of leased equipment of
$29,556. In the other transactions, the Partnership sold the equipment
under lease for $253,883 and recorded a net gain from the sale of leased
equipment of $17,885. The proceeds from these sales were received in
January 1998.
During 1996, one lease expired and another lessee purchased a portion of
its equipment prior to the end of its lease. The Partnership received
$69,621 and recorded a gain of $6,575 from these transactions.
During 1995, five lease schedules from two lessees expired. In the first
transaction, the Partnership sold the equipment to a lessee for $30,000
and used $43,752 of its existing reserves. No additional gain or loss was
recorded on this sale. In the remaining transactions, the Partnership
sold the equipment from four lease schedules to the lessee for $148,800
and recorded a gain of $38,035. Sale proceeds of $33,000 from the final
transaction was received by the Partnership during the first quarter of
1996.
In May 1996 and June 1995, pursuant to the Chapter 11 Plan of
Reorganization for Financial News Network (FNN), the Partnership received
and recorded $29,516 and $117,534, respectively, as a net gain from sale
of leased equipment from Data Broadcasting Corporation (successor to FNN)
as final settlement of the Partnership's Class 2 claim against FNN. The
Partnership had written off all receivables relating to this transaction
in 1990.
Revenues from lessees which individually provided more than 10% of the
revenues accounted for approximately 85% of the direct finance lease
revenues for the year ended December 31, 1997 (four lessees). At December
31, 1997, amounts from these lessees comprised of 84% of the investment
in direct finance lease balance and 100% of the lease payments receivable
balance.
All current leases in the Partnership's portfolio are classified as
direct finance leases.
-9-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Notes to Financial Statements (continued)
(4) Leases (continued)
Lease payments for future years are as follows:
1998 $ 388,748
1999 138,342
2000 14,625
Total $ 541,715
(5) Earnings for Federal Income Tax Purposes
The Partnership's earnings for federal income tax purposes for each of
the years in the three-year period ended December 31, 1997 differ from
the net earnings for financial reporting purposes due to differences in
accounting for leases, the use of accelerated depreciation for tax
purposes and the timing of investment loss deductions. A reconciliation
of net earnings for financial reporting purposes to earnings for income
tax purposes is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net earnings for financial reporting purposes $ 104,185 $ 246,844 $ 404,589
Excess lease revenue in converting direct finance
leases to operating leases 532,363 658,494 657,890
Excess lease revenue (losses) from lease
terminations 136,070 37,811 (14,928)
Tax depreciation on direct finance leases
converted to operating leases (274,108) (515,724) (852,146)
Acquisition fee amortization relating to direct
finance leases converted to operating leases -- -- (374)
Advance rentals (5,292) 21,868 (5,291)
Reserve for investment loss not currently
deductible for tax purposes -- -- (2,530)
Earnings for income tax purposes $ 493,218 $ 449,293 $ 187,210
</TABLE>
(6) Partners' Capital
The Partnership Agreement provides, among other provisions, for the
following:
(a) The Partnership consists of the General Partner, the assignee limited
partners, the assignor limited partner and special limited partners.
-10-
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
Notes to Financial Statements (continued)
(6) Partners' Capital (continued)
(b) Distributions to the Partners relating to operations of the
Partnership are based on distributable cash, as defined in the
Partnership Agreement. Assignee limited partners received 98% of net
cash flow and the General Partner received 2%. Beginning in 1997 the
Partnership entered into the liquidation phase at which time the
assignee limited partners receive 99% of net cash flow and
liquidating proceeds and the General Partner receives 1%. Net
earnings per Unit disclosed on the Statements of Operations is based
upon 401,180 Units.
(c) Net proceeds of sale or financing of the leases will be distributed
as follows:
o 99% to assignee limited partners and 1% to the General Partner
until each assignee limited partner has recovered his original
capital contribution in full and received a cumulative, compounded
daily annual return of 12% of his adjusted capital balance to the
extent that such return has not been provided from distributable
cash and net disposition proceeds.
o To the General Partner until the General Partner has received an
amount equal to its original capital contribution.
o Any remainder will be distributed 90% to the assignee limited
partners, 1% to the General Partner and 9% to the special limited
partners.
(d) The assignee limited partners may elect to become substitute limited
partners, as defined in the Partnership Agreement. Assignee limited
partners who elect to become substitute limited partners will receive
one limited partnership interest for each Unit they convert and will
not be able to reexchange their limited partnership interest for
Units.
(e) Restrictions exist regarding transferability or disposition of
partnership interests.
(7) Distributions to Investors
Distributions of cash to investors during 1997 totaled $3,244,116 of
which 98.9% was allocated to assignee limited partnership unitholders.
During 1996 and 1995 distributions of cash totaled $818,816 in each year,
of which 98% was allocated to assignee limited partnership unit holders.
These distributions were derived from net cash provided by operating
activities, principal payments on direct finance leases and certain other
investing activities.
(8) Subsequent Event (unaudited)
In February 1998 the Partnership made a cash distribution totaling
$122,401 of which 99% was allocated to assignee limited partners. This
distribution was derived from net cash provided by operating activities
plus cash available from certain investing activities. Holders of
assignee limited partnership interests received cash distributions of
$.30 per $25 Unit.
-11-
<PAGE>
Directors and Executive Officers
Redwood Leasing, Inc.
General Partner
John M. Prugh
President and Director
Peter E. Bancroft
Vice President and Director
Terry F. Hall
Secretary
Timothy M. Gisriel
Treasurer
Form 10-K
A copy of the Partnership's Annual
Report on Form 10-K for 1997 as filed
with the Securities and Exchange Com
mission is available to partners without
charge on request by writing to:
Investor Relations
Redwood Leasing, Inc.
225 East Redwood Street
Baltimore, Maryland 21202
Auditors
KPMG Peat Marwick LLP
111 South Calvert Street
Baltimore, Maryland 21202
Legal Counsel
Piper & Marbury
1100 Charles Center South
36 South Charles Street
Baltimore, Maryland 21201
Further Information
<TABLE>
<CAPTION>
<S> <C>
Please submit changes in name, address, For further information or questions
investment representative and distribution regarding your investment, please call
instructions to Investor Relations at the Denise Shaduk, Investment Coordinator,
at the above address at (410) 727-4083.
</TABLE>
-12-
EXHIBIT A
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Preliminary Statement ................................................................. A-3
Article I - Defined Terms ......................................................... A-3
Article II- Name; Purpose; Term and Certificate ................................. A-9
Section 2.1 Name; Continuation .............................................. A-9
Section 2.2 Place of Registered Office ..................................... A-9
Section 2.3 Purpose .......................................................... A-10
Section 2.4 Term ............................................................. A-10
Section 2.5 Recording of Certificate ........................................ A-10
Article III - Partners; Capital ................................................... A-10
Section 3.1 General Partner; Assignor Limited Partner; ABR Special Limited Partner.. A-10
Section 3.2 Investors ........................................................A-10
Section 3.3 MNC Special Limited Partner ................................... A-11
Section 3.4 Partnership Capital ............................................ A-12
Section 3.5 Liability of Partners and Investors ........................... A-12
Article IV - Allocations, Distributions and Applicable Rules ................ A-12
Section 4.1 Allocation of Profit or Loss .................................. A-12
Section 4.2 Distribution of Net Disposition Proceeds ..................... A-14
Section 4.3 Distribution of Distributable Cash ........................... A-14
Section 4.4 Liquidation or Dissolution .................................... A-15
Section 4.5 General and Special Rules ..................................... A-15
Article V - Rights, Powers and Duties of the General Part ................ .A-17
Section 5.1 Management and Control of the Partnership; Tax Matters Partner ....... A-17
Section 5.2 Authority of General Partner ................................. A-18
Section 5.3 Authority of Investors ....................................... A-21
Section 5.4 Restrictions on Authority .................................... A-21
Section 5.5 Authority of Partners and Affiliated Persons to Deal with Partnership. A-23
Section 5.6 Duties and Obligations of the General Partner .............. A-24
Section 5.7 Compensation of General Partner ............................ A-26
Section 5.8 Other Businesses of Partners ................................. A-26
Liability of General Partner and Affiliates to Limited Partners or
Section 5.9 Investors ................................................ A-26
Section 5.10 Indemnification .............................................. A-26
Article VI - Transferability of a General Partner's Interest ................ A-27
Removal, Voluntary Retirement or Withdrawal of a General Partner;
Section 6.1 Transfer of Interests .................................... A-27
Section 6.2 Election and Admission of Successor or Additional General Partners . A-27
Section 6.3 Events of Withdrawal of a General Partner .............................. A-28
Section 6.4 Liability of a Withdrawn General Partner ............................. A-28
Section 6.5 Valuation of Partnership Interest of General Partner ................... A-28
Article VIII - Assignment of Assignee Units to Investors; Transferability of Limited
Partner Interests and Units .............................................. A-29
Section 7.1 Assignment of the Assignee Units to Investors ................... A-29
Section 7.2 Transferability of Units .................................... A-30
Death, Bankruptcy or Adjudication of Incompetence of an Investor or a
Section 7.3 Limited Partner ......................................... A-31
A-1
<PAGE>
Section 7.4 Effective Date ...................................................... A-31
Section 7.5 Substitute Limited Partners ...................................... A-31
Section 7.6 Retirement or Withdrawal of an Investor ........................ A-31
Article VIII - Dissolution, Liquidation and Termination of the Partnership ............ A-32
Section 8.1 Events Causing Dissolution .................................... A-32
Section 8.2 Liquidation .................................................. A-32
Section 8.3 Capital Contribution Upon Dissolution ...................... A-33
Article IX - Certain Payments to the General Partner and Affiliates ............. A-33
Reimbursement of Certain Costs and Expenses of the General Partner and
Section 9.1 their Affiliates ......................................... A-33
Section 9.2 Fees and Other Payments .................................... A-34
Article X - Books and Records; Bank Accounts; Reports ......................... A-35
Books and Records .............................................................. A-35
Bank Accounts .................................................................. A-35
Reports ........................................................................ A-36
Federal Tax Elections ......................................................... A-37
Article XI - Meetings of Investors ... ....................................... A-38
Calling Meetings ............................................................... A-38
Notice; Procedure ............................................................. A-38
Right to Vote ................................................................. A-38
Proxies; Rules ................................................................ A-38
Article XII - General Provisions .............................................. A-39
Section 12.1 Appointment of General Partner as Attorney-in-Fact ............. A-39
Waiver of Partition ........................................................... A-39
Notification .................................................................. A-39
Word Meanings .................................................................. A-39
Binding Provisions ............................................................ A-39
Applicable Law ................................................................. A-39
Counterparts .................................................................. A-40
Section Separability of Provisions ............................................. A-40
Section Paragraph Titles ...................................................... A-40
Section Entire Agreement ...................................................... A-40
Section 12.11 Amendments .................................................... A-40
Signatures ........................................................................ A-42
Schedule A ........................................................................ A-43
</TABLE>
A-2
<PAGE>
REDWOOD EQUIPMENT LEASING INCOME FUND L.P.
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as
of October 19, 1989, is by and among Redwood Leasing, Inc., a
Maryland corporation, as General Partner, Redwood Leasing
Holding Company, Inc., a Maryland corporation, as the Assignor
Limited Partner, Maryland National Leasing Services
Corporation, a Maryland corporation, as the MNC Special
Limited Partner and Realty Associates 1988 Limited
Partnership, a Maryland limited partnership, as the ABR
Special Limited Partner.
Preliminary Statement
Redwood Equipment Leasing Income Fund L.P. (the
"Partnership") was formed by the General Partner, the Assignor
Limited Partner, the MNC Special Limited Partner and the ABR
Special Limited Partner as a Delaware limited partnership upon
the recording of a certificate of limited partnership with the
Secretary of State of the State of Delaware on October l9,
1989 and the execution of an Agreement of Limited Partnership
on November l7, 1989, effective as of even date herewith.
The parties hereto desire to amend and restate in its
entirety the Agreement of Limited Partnership.
NOW, THEREFORE, in consideration of the mutual promises
made herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE I
DEFINED TERMS
The defined terms used in this Agreement shall, unless
the context otherwise expressly requires, have the meanings
specified in this Article I.
"ABR Special Limited Partner" means Realty Associates
1988 Limited Partnership, a Maryland limited partnership and
an Affiliate of the General Partner.
"Accountants" means such firm of independent certified
public accountants as shall be engaged from time to time by
the General Partner on behalf of the Partnership.
"Acquisition Expenses" means expenses of the Partnership,
including, but not limited to, legal fees and expenses, travel
and communications expenses, costs of appraisals, accounting
fees and expenses, and miscellaneous expenses related to
selection and acquisition of Equipment, whether or not
acquired.
"Acquisition Fees" means the total of all fees and
commissions paid by any party on behalf of the Partnership in
connection with the selection or purchase of any Equipment by
the Partnership, including, without limitation, Equipment
purchased through a reinvestment of the proceeds of Sale of
its Equipment or any funds generated from its operations
pursuant to Section 5.2B. Included in the computation of such
fees or commissions shall be any commission, selection fee,
financing fee, non-recurring management fee or any fee of a
similar nature, however designated.
"Act" means the Delaware Revised Uniform Limited Partnership Act (6
DEL.C.ss. 17-101 et. seq.) as amended or modified from time to time. "Additional
General Partner" means any Person who is admitted as an Additional
General Partner of the Partnership,under the provisions of Article VI,
after the date of this Agreement.
"Additional Equipment" means all Equipment acquired by
the Partnership, other than the Specified Equipment.
"Adjusted Capital Balance" of a Partner or an Investor
means the Capital Contribution of the Partner or the Assignor
Limited Partner made on behalf of an Investor, less all prior
distributions of
A-3
<PAGE>
Distributable Cash and Net Disposition Proceeds made to the
Partner or Investor and the predecessor holders of such Units,
other than distributions made in satisfaction of such
Partner's or Investor's Cumulative Return at the time of
reference thereto.
"Affiliate" means (i) any Person directly or indirectly
controlling, controlled by or under common control with
another Person (ii) any Person owning or controlling 10% or
more of the outstanding voting securities of such other Person
(iii) any officer, director or partner of such Person, and
(iv) if such other Person is an officer, director or partner,
any company for which such Person acts in any such capacity.
"Agreement" means this Amended and Restated Agreement of
Limited Partnership as originally executed and as amended from
time to time, as the context requires. Words such as "herein",
"hereafter," "hereof," "hereto," "hereby"and "hereunder," when
used with reference to this Agreement, refer to this Agreement
as a whole unless the context otherwise requires.
"Assigned Limited Partnership Interest" means a
Partnership Interest which is credited to the Assignor Limited
Partner on the books and records of the Partnership in respect
of a purchase of one Unit by an Investor. Each Assigned
Limited Partnership Interest represents a contribution to the
capital of the Partnership equal to $25, regardless of any
reduction in Selling Commissions.
"Assignee Units" means the ownership interests of an
Investor in the Partnership at any particular time, including
the right of such Investor to any and all benefits to which an
Investor may be entitled as provided in this Agreement. The
ownership interests of the Investors in the Partnership are
sometimes referred to herein as "Units".
"Assignor Limited Partner" means Redwood Leasing Holding
Company, Inc. which will (i) own any Assigned Limited
Partnership Interests issued pursuant to Sections 3.2 and 7.1
hereof, and (ii) transfer and assign to those Persons who
acquire Units all of its rights and interest in Assigned
Limited Partnership Interests in accordance with Sections 3.2
and 7.1 hereof.
"Capital Account" means (i) the separate account
maintained and adjusted on the books and records of the
Partnership for each Partner and (ii) the separate subaccount
of the Capital Account of the Assignor Limited Partner
maintained and adjusted for each Investor. Each Partner's and
Inves- tor's Capital Account is credited with his Capital
Contributions and his distributive share of Profit (or item
thereof). Each Partner's or Investor's Capital Account is
debited with the cash and the fair market value of any
property distributed to him (net of liabilities assumed by
such Partner or Investor and liabilities to which such
distributed property is subject), and his distributive share
of Loss (and deduction (or item thereof)). Each Partner's and
Investor's Capital Account shall also be adjusted pursuant to
Section 4.5 hereof and as required by the Income Tax
Regulations promulgated under Section 704 of the Code. Any
questions concerning a Partner's or Investor's Capital Account
shall be resolved by the General Partner in its reasonably
exercised discretion, applying principles consistent with this
Agreement and the regulations promulgated under Section 704 of
the Code in order to assure that all allocations herein will
have substantial economic effect or will otherwise be
respected for income tax purposes. For purposes of this
Agreement, a Partner or Investor who has more than one
Partnership Interest or Unit, as the case may be, shall have a
single Capital Account that reflects all of his Partnership
Interests and Units, regardless of the class of Interests
owned (e.g., general or limited) and regardless of the time or
manner in which the Partnership Interests and Units were
acquired.
"Capital Contribution" means the total amount of cash and
the fair market value of any other assets contributed to the
Partnership by a Partner (net of liabilities assumed by the
Partnership and liabilities to which any such contributed
assets are subject) and, with respect to an Investor, the
Capital Contribution of the Assignor Limited Partner made on
behalf of such Investor (without regard to any reduction of
Selling Commissions) reduced by the amount of any uninvested
funds returned to the Investor or Partner pursuant to Section
5.6F. Any reference in this Agreement to the Capital
Contribution of a then-Partner or Investor shall include a
Capital Contribution previously made by any prior Partner or
Investor with respect to the Interest or Unit of such
then-Partner or then-Investor, except to the extent that all
or a portion of the Interest or Unit of any prior Partner or
A-4
<PAGE>
Investor shall have been terminated and the portion so
terminated not transferred to a successor Partner or
Investor.
"Certificate" means the Certificate of Limited
Partnership establishing the Partnership, as filed with the
office of the Secretary of State of the State of Delaware on
October l9, 1989, as it may be amended from time to time in
accordance with the terms of this Agreement and the Act.
"Code"means the Internal Revenue Code of l986, as
amended (or any corresponding provision of succeeding law).
"Competitive Equipment Sales Commission" means the
brokerage fee which would be paid to unaffiliated persons 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.
"Controlling Person" of the General Partner or Affiliate
thereof means any person who (a) performs functions for the
General Partner or Affiliate similar to those of (i) a
Chairman or member of the Board of Directors, (ii) executive
management, such as a President, or a Vice- President,
Secretary or Treasurer, or (iii) senior management; or (b)
holds a 5% or more equity interest in the General Partner or
Affiliate, or has the power to direct or cause the direction
of the General Partner, or Affiliate, whether through the
ownership of voting securities, by contract or otherwise.
"Cumulative Return" means an amount equal to a 12%
cumulative annual return, compounded daily, on an Investor's
Adjusted Capital Balance, less any Distributable Cash and any
Net Disposition Proceeds distributed to such Investor in
respect of the Cumulative Return pursuant to Sections
4.2A(i), 4.3A(i) and 4.3D. Calculation of the Cumulative
Return shall commence as of the earlier of (i) the final
closing for the sale of Units or (ii) March 31, 1990.
"Distributable Cash" means, with respect to any fiscal
period, the excess, if any, of (i) all cash funds derived
from the operations of the Partnership during such period,
including the yield from the Interim Investments and excess
cash reserves deemed distributable by the General Partner
pursuant to Section 5.6G hereof but excluding receipts from
the sale, exchange or other disposition of Equipment
(including insurance proceeds or lease indemnity payments
arising from the loss or destruction of Equipment), Warrants
and Warrant Stock, or other Partnership property, over (ii)
all cash disbursed in the operations of the Partnership
during such period, including cash used to pay, or establish
reasonable reserves for, operating expenses, fees (including
Equipment and Lease Management Fees and Equipment Re-leasing
Fees), commissions, debt service and loan repayments,
contingencies and anticipated obligations, except to the
extent any such payment is made out of reserves set aside for
such purpose. Distributable Cash shall not include amounts
distributed or to be distributed under Section 4.2 hereof.
"Due Diligence Expense Reimbursement Fee" means the fee
equal to 1.0% of the Gross Proceeds of the Offering allowed
to the Selling Agent, which may be reallowed to Soliciting
Dealers, for advisory services, due diligence activities and
the reimbursement of expenses.
"Entity" means any general partnership, limited
partnership, corporation, joint venture, trust, estate,
business trust, cooperative, association or other legal form
of organization.
"Equipment" means any equipment and related tangible
personal property and any interest therein, whether held
directly or indirectly through a nominee, trust or otherwise.
"Equipment and Lease Management Fee" means the fee
payable to the Manager in accordance with the terms of the
Management Agreement and Section 9.2A(vi) hereof for its
services in managing the leasing, financing and refinancing
of the Equipment.
"Equipment Re-Leasing Fee" means the fee payable to the
Manager in accordance with the terms of the Management
Agreement and Section 9.2A(vii) hereof for its services in
releasing Equipment to a Person other than the original
lessee or its Affiliates.
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"Escrow Agent" means Mercantile-Safe Deposit & Trust
Company, or such other escrow agent chosen by the General
Partner to hold funds from Persons who have subscribed to
become Investors pending the assignment of Assignee Units to
them.
"Front-End Fees" means fees and expenses paid by any
Person for any services rendered during the organization or
acquisition phase of the Partnership, including the Offering
and Organization Expense Fee, the Due Diligence Expense
Reimbursement Fee, the Selling Commissions, the Acquisition
Expenses, the Acquisition Fees, the Leasing Fees and any other
similar fees. Notwithstanding the foregoing, Front-End Fees
shall not include any Acquisition Fees or Acquisition Expenses
paid by a manufacturer of Equipment to any of its employees
unless such Persons are Affiliates of the Manager or the
General Partner.
"Full Payout Lease" means a lease of Equipment under
which the non-cancellable rental payments during the initial
term of the lease, on a net present value basis, are at least
sufficient to recover the contract purchase price paid by the
Partnership in connection with the purchase of the Equipment
plus all Acquisition Fees applicable thereto.
"General Partner" means Redwood Leasing, Inc. and any other Person
designated as a General Partner in the Schedule and any Person who becomes a
Successor or Additional General Partner as provided herein, in each such
Person's capacity as a General Partner of the Partnership.
"Gross Proceeds of the Offering" means the aggregate of
the proceeds from the sale of Units in the Offering, which
amount is equal to the total of all Capital Contributions of
the Investors.
"Interest" or "Partnership Interest" means the entire
ownership interest (which may be segmented into and/or
expressed as a percentage of various rights and/or
liabilities) of a Partner in the Partnership at any particular
time, including the right of such Partner to any and all
benefits to which a Partner may be entitled as provided in the
Agreement and in the Act, together with the obligations of
such Partner to comply with all the terms and provisions of
this Agreement and of the Act.
"Interim Investments" means the short-term investments
made with the Net Proceeds of the Offering until such Net
Proceeds of the Offering are disbursed for acquisition of
Equipment.
"Investment in Equipment" means the amount of Capital
Contributions actually paid or allocated to the purchase,
manufacture or renovation of Equipment (including the purchase
of equipment, working capital reserves allocable thereto
(except that working capital reserves in excess of 3% shall
not be included), and other cash payments such as interest and
taxes) but excluding Front-End Fees.
"Investor" means (i) any Person who holds an Assignee
Unit and is reflected as an Investor on the books and records
of the Partnership, (ii) any Investor who has been admitted to
the Partnership as a Substitute Limited Partner pursuant to
Section 7.5 hereof and (iii) except where otherwise
specifically provided to the contrary, the MNC Special Limited
Partner. The term "Investor" shall not include the ABR Special
Limited Partner.
"Leasing Fees" means the total of all fees and
commissions paid by any Person in connection with the initial
lease of Equipment.
"Limited Partner" means any Person who is designated as a
Limited Partner on the books and records of the Partnership at
the time of reference thereto, in each such Person's capacity
as a Limited Partner of the Partnership.
"Limited Partnership Interest" means the ownership
interest of the Assignor Limited Partner and all other Limited
Partners in the Partnership.
"Limited Partnership Interest Percentage" in respect of
any Investor means the percentage obtained by converting to a
percentage the fraction having the number of Assignee Units
owned by such Investor as its numerator and having the number
of Assignee Units owned by all Investors at the time of
reference thereto as its denominator.
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"Majority Vote of the Investors" shall mean the
affirmative vote of Investors owning more than 50% of the
outstanding Units or the consent of Investors owning more
than 50% of the outstanding Units, as the case may be.
"Manager" means MNC Leasing, a division of MNC Credit
Corp, which is an indirect subsidiary of MNC Financial, Inc.,
a Maryland corporation, or any successor employed by the
Partnership to manage the leasing, financing, refinancing,
re-leasing and selling of the Equipment in accordance with
Section 5.2A(xix).
"Management Agreement"means the agreement between the
Manager and the Partnership under which the Manager shall
manage the leasing, financing, refinancing, re-leasing and
selling of the Equipment.
"Minimum Gain" means with respect to each non-recourse
liability of the Partnership and subject to certain
adjustments pursuant to Income Tax Reg.
ss.1.704-lT(b)(4)(iv)(c), the amount of gain (of whatever
character), if any, that would be realized by the
Partnership, if the Partnership disposed of (in a taxable
transaction) any of the assets subject to such liability in
full satisfaction of the liability. For this purpose, only
the portion of the assets' adjusted basis allocated to
non-recourse liabilities of the Partnership shall be taken
into account.
"Minimum Offering Amount" means the amount of $2,000,000 in Gross Proceeds
of the Offering.
"MNC Special Limited Partner" means Maryland National Leasing Services
Corporation, an Affiliate of the Manager.
"Net Disposition Proceeds" means the cash proceeds
realized by the Partnership from the sale, exchange or other
disposition of Equipment (including insurance proceeds or
lease indemnity payments arising from the loss or destruction
of Equipment) or other Partnership property, including
Warrants and Warrant Stock, less all related Partnership
liabilities and expenses relating to the transaction,
including but not limited to, fees or commissions paid to any
unaffiliated Persons and, subject to Sections 5.2A(viii) and
9.2A(viii), fees or commissions paid to the Manager or its
Affiliates.
"Net Lease" means a lease under which the lessee assumes
responsibility for, and bears the cost of, all expenses of
operation of the Equipment (including insurance, repairs,
maintenance and service costs and sales, use, property or
similar taxes associated with the Equipment) and bears the
risk of physical loss of the Equipment.
"Net Lease Provisions" means contractual arrangements
under which the lessee assumes responsibility for, and bears
the cost of, insurance, taxes, maintenance, repair and
operation of the leased asset and where the non-cancellable
rental payments under the lease are absolutely net to the
lessor.
"Net Proceeds of the Offering" means the Gross Proceeds of the Offering
less the Selling Commis- sions, the Due Diligence Expense Reimbursement Fee, and
the Offering and Organization Expense Fee.
"Notification" means a writing, containing the
information required by this Agreement to be communicated to
any Person, sent or delivered to such Person in accordance
with the provisions of Section 12.3 of this Agreement.
"Offering" means the offering and sale of Units for a
minimum of $2,000,000 and a maximum of $25,000,000 (which may
be increased at the discretion of the General Partner to
$75,000,000), as more fully described in the Prospectus.
"Offering and Organization Expense Fee" means the
non-accountable fee paid to the General Partner equal to
5.65% of the Gross Proceeds of the Offering, payable in
accordance with Section 9.2A(ii) hereof, for services
rendered and costs incurred in connection with the
organization of the Partnership and the offering of Units.
"Operating Lease" means a lease of Equipment under which
the non-cancellable rental payments during the initial term
of the lease, on a net present value basis, are not
sufficient to recover the
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contract purchase price paid by the Partnership in connection
with the purchase of the Equipment plus all Acquisition Fees
applicable thereto.
"Partner" means any General Partner or Limited Partner.
"Partnership" means the limited partnership formed in
accordance with this Agreement by the parties hereto, as said
limited partnership may from time to time be constituted.
"Payout" means the date on which each Investor has
received from distributions of Distributable Cash and Net
Disposition Proceeds a return of his Adjusted Capital Balance
and payment of his Cumulative Return.
"Person" means any individual or Entity.
"Profit" or "Loss" means, for each fiscal year or other
period, an amount equal to the Partner- ship's taxable income
or loss for such year or period, with the following
adjustments: (i) any income of the Partnership that is exempt
from federal income tax shall be added to such taxable income
or loss; (ii) any income or deduction which is separately
allocated pursuant to Article IV shall be excluded from such
taxable income or loss; and (iii) any expenditures of the
Partnership described in Section 705(a)p(2)(B) of the Code, or
treated as Section 705(a)(2)(B) of the Code expenditures
pursuant to Income Tax Reg. ss.1.704-1(b)(2)(iv)(i) other than
syndication expenses described in Section 4.5L, shall be
subtracted from such taxable income or loss. Except as
otherwise provided herein, each item of income, gain, loss,
deduction, preference or recapture entering into the
computation of Profit or Loss hereunder shall be allocated to
each Partner in the same proportion as Profit and Loss are
allocated.
"Profit from Operations" or "Loss from Operations" means
Profit or Loss of the Partnership, as applicable, from any
source other than a Sale.
"Prospectus" means the Partnership's Prospectus contained
in the Registration Statement filed on Form S-1 with the
Securities and Exchange Commission for the registration of the
Units under the Securities Act of 1933, in the final form in
which it is filed with the Securities and Exchange Commission
and as thereafter supplemented pursuant to Rule 424 under the
Securities Act of 1933. Any reference herein to "date of the
Prospectus" shall be deemed to refer to the date of the
Prospectus in the form filed pursuant to Rule 424(b) of the
Securities Act of 1933.
"Sale" means any sales or exchanges or other dispositions
of Equipment, condemnations, recoveries of damage awards and
insurance proceeds (other than business or rental interruption
insurance proceeds).
"Schedule" means Schedule A annexed hereto as amended
from time to time and as so amended at the time of reference
thereto.
"Selling Agent" means Alex. Brown Realty Securities,
Inc., an Affiliate of the General Partner, which will offer the
Units on a best efforts basis pursuant to the Selling Agent
Agreement.
"Selling Agent Agreement" means that certain agreement to be entered into
by the Partnership Alex. Brown Realty Securities, Inc., and the General Partner,
pursuant to which Alex. Brown Realty Securities, Inc. will offer and sell the
Units on a best efforts basis.
"Selling Commissions" means the maximum total (or any
portion thereof) of 7% of the Gross Proceeds of the Offering
paid to the Selling Agent or Soliciting Dealers for their
efforts in offering the Units. The 7% maximum Selling
Commissions will be reduced for volume purchases and purchases
by the MMC Special Limited Partner and certain Affiliates of
the Manager as specified in the Prospectus.
"Specified Equipment" means the Equipment described in
the Prospectus and in a schedule to be affixed to this
Agreement by amendment or any Equipment purchased in
substitution of such Equipment.
"Sponsor" means any Person directly or indirectly
instrumental in organizing, wholly or in part, the Partnership
or who will manage or participate in the management of the
Partnership, and any
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Affiliate of such Person, but does not include (a) any Person
whose only relationship with the Partnership or the General
Partner is that of an independent property manager if such
person's only compensation from the Partnership is in the
form of fees for the performance of property management
services, or (b) wholly-independent third parties such as
attorneys, accountants and broker-dealers whose only
compensation from the Partnership is for professional
services rendered in connection with the Offering or the
operations of the Partnership. Sponsors of the Partnership
include the General Partner and the Manager.
"Subordinated Disposition Fee" means the fee payable to
the Manager upon the Sale of any item of Equipment in an
amount equal to the lesser of one-half of the Competitive
Equipment Sales Commission, or 3% of the contract sales price
received by the Partnership in connection with the Sale of
the Equipment.
"Substitute Limited Partner" means any Investor who has
elected to convert from an Investor to a Limited Partner
pursuant to Section 7.5 of this Agreement.
"Successor General Partner" means any Person who is
admitted as a Successor General Partner to the Partnership
under the provisions of Article VI after the date of this
Agreement.
"Tax Matters Partner" means the General Partner
designated in Section 5.1C as the tax matters partner, as
defined in Section 6231(a)(7) of the Code.
"Termination Date of the Offering" means the date upon
which the Offering terminates, which, if not extended at the
election of the General Partner, will be on or before the
date one (1) year from the date of the Prospectus.
"Unit" means (i) an Assignee Unit representing the
assignment by the Assignor Limited Partner of one Assigned
Limited Partnership Interest, (ii) the Partnership Interest
attributable to one Unit of any Investor who has become a
Substitute Limited Partner pursuant to Section 7.5 hereof and
(iii) the Partnership Interest attributable to one Unit
purchased by the MNC Special Limited Partner pursuant to
Section 3.3 hereof.
"Warrants" means an option, warrant or right to acquire,
by purchase, conversion or exchange, an equity security of a
lessee of Equipment, obtained by the Partnership in
connection with the execution of a lease of Equipment to such
lessee.
"Warrant Stock" means the shares of common stock, preferred
stock or other equity security of a lessee of the Partnership
upon exercise, conversion or exchange of a Warrant.
"Working Capital Reserves" means the portion of the
Gross Proceeds of the Offering set aside as working capital
reserves pursuant to Section 5.6G.
ARTICLE II
NAME; PURPOSE; TERM AND CERTIFICATE
Section 2.1 Name; Continuation
T'he Partners hereby agree to continue the limited
partnership known as "Redwood Equipment Leasing Income Fund
L.P." Such name shall be used at all times in connection with
the Partnership's business and affairs; provided, however,
that the Partnership may use trade names in its business
operations. The Partnership shall be governed by the Act.
Section 2.2 Place of Registered Office
The address of the registered office in the State of
Delaware of the Partnership is Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware 19801; the name of the
registered agent for service of process on the Partnership in
the State of Delaware at that address is The Corporation
Trust Company. The Partnership's principal place of business
is 225 East Redwood Street, 4th Floor, Baltimore, Maryland
21202 or such other place(s) as the General Partner may
hereafter determine.
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Notification of any change in the location of the principal
office shall be given to the Partners and Investors on or
before the date of any such change.
Section 2.3 Purpose
The purpose of the Partnership is to engage in the
business of acquiring, owning, leasing and selling a
diversified portfolio of Equipment including but not limited to
aircraft, construction and manufacturing equipment, high
technology and testing equipment, production and material
handling equipment, transportation equipment, medical and
biotechnology equipment, laboratory and testing equipment,
telecommunications and computer equipment, restaurant equipment
and furniture and fixtures and otherwise deal with the
Equipment and Partnership property including Warrants and
Warrant Stock owned or acquired in connection therewith. The
Partnership may own Equipment directly or indirectly through
joint ventures or general partnerships, subject to the
provisions contained herein. The Partnership may do any and all
things necessary, convenient or incidental to the achievement
of the foregoing.
Section 2.4 Term
The Partnership shall continue until December 31, 2019,
unless the Partnership is sooner dissolved in accordance with
the provisions of this Agreement.
Section 2.5 Recording of Certificate
The General Partner shall take all necessary action to
maintain the Partnership in good standing as a limited
partnership under the Act, including, without limitation, the
filing of the Certificate and such amendments and further
certificates as may be necessary under the Act and as may be
deemed necessary or advisable by the General Partner to qualify
the Partnership to do business in other states. The General
Partner shall not be required to send a copy of the
Partnership's filed Certificate to each Partner and Investor.
ARTICLE III
PARTNERS; CAPITAL
Section 3.1 General Partner; Assignor Limited Partner; ABR Special Limited
Partner A. The name, address and Capital Contribution of the General Partner,
the Assignor Limited
Partner and the ABR Special Limited Partner are set forth on
the Schedule. Upon the dissolution and termination of the
Partnership, on or before the later of the last day of the
fiscal year in which the dissolution of the Partnership occurs
or ninety (90) days after the date of dissolution of the
Partnership, the General Partner shall make a Capital
Contribution to the Partnership in an amount equal to the
lesser of (i) the deficit balance, if any, in its Capital
Account or (ii) the excess of 1.01% of the Capital
Contributions of the Investors and Limited Partners (excluding
capital contributions of the Assignor Limited Partner on behalf
of Investors) over the Capital Contributions previously
contributed by the General Partner attributable to its interest
as General Partner.
B. The General Partner and its Affiliates may also be
Investors or Limited Partners to the extent that they
separately purchase or become transferees of Units and, to such
extent, shall be treated as Investors or Limited Partners,
subject to the limitations contained in this Agreement.
Any purchases of Units by the General Partner or its
Affiliates in connection with the initial public offering of
Units shall not be counted in determining whether the minimum
number of Units necessary for the Minimum Offering Amount has
been achieved.
Section 3.2 Investors
A. The General Partner is authorized to accept orders for
Units pursuant to the Offering. All orders for Units shall be
held in trust and deposited in an escrow account with the
Escrow Agent. Orders for Units shall be accepted or rejected by
the General Partner within thirty (30) days after their receipt
by the Escrow Agent.
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B. Upon the receipt by the Escrow Agent of orders for an
amount equal to the Minimum Offering Amount, the Escrow
Agent shall release the funds in the escrow account to the
Assignor Limited Partner which shall immediately transmit
such funds to the Partnership. Subsequent orders for Units
that are accepted by the General Partner shall be released
from the escrow account and transmitted to the Partnership
or returned to subscribers in accordance with the
Prospectus. Upon release of an Investor's funds from the
escrow account to the Partnership, an Assigned Limited
Partnership Interest shall be credited to the Assignor
Limited Partner on the books and records of the Partnership
in respect of such Unit and the Assignor Limited Partner
shall assign all of its rights with respect to such Assigned
Limited Partnership Interest to the Investor to the extent
permitted by, and in accordance with, the Agreement and
applicable law. The Assignor Limited Partner hereby agrees
to exercise any and all rights with respect to such Assigned
Limited Partnership Interest as directed by the Investor.
C. Any interest earned on moneys paid by Investors
during the period such moneys are held in escrow by the
Escrow Agent shall be paid to the Partnership following the
release of orders and shall be distributed in accordance
with Section 4.5A hereof. Persons whose orders for Units are
rejected by the General Partner shall be returned their
moneys within ten (10) days after such rejection.
D. No order for Units sold as part of the Offering shall
be accepted after the Termination Date of the Offering. If
the General Partner does not accept orders totalling an
amount equal to the Minimum Offering Amount on or before the
Termination Date of the Offering, the Escrow Agent shall
promptly return all moneys deposited by subscribers together
with any interest earned on such moneys.
E. For purposes of this Agreement, an Investor who
acquires Units in the Offering shall be recognized as an
Investor with respect to such Units on the date that such
Investor's funds are released from the escrow account to the
Partnership.
Section 3.3 MNC Special Limited Partner
A. On each date that Investors subscribing for and
purchasing Units are recognized as such on the books of the
Partnership in accordance with Section 3.2B, the MNC Special
Limited Partner shall purchase that number of Units
necessary to maintain an investment in the Partnership equal
to 4.9% of all outstanding Units, subject to a maximum
purchase obligation of $2,500,000 (i.e., 107,526 Units). The
purchase of such Units by the MNC Special Limited Partner
shall be on the same basis as Units purchased by other
Investors, provided that an amount equal to the Selling
Commissions payable with respect to such Units shall be
returned to the MNC Special Limited Partner.
B. Upon the dissolution and termination of the
Partnership (or the Interest of the MNC Special Limited
Partner), on or before the later of the last day of the
fiscal year in which the dissolution of the Partnership (or
the liquidation of such Interest) occurs or ninety (90) days
after the dissolution of the Partnership (or the liquidation
of such Interest), the MNC Special Limited Partner shall
make a Capital Contribution to the Partnership in an amount
equal to the least of (i) the deficit balance, if any, in
its Capital Account, (ii) the aggregate amount of
distributions of Net Disposition Proceeds and Distributable
Cash that it has received or (iii) the excess, if any of the
Investors' aggregate Capital Contributions (other than the
Capital Contributions of the MNC Special Limited Partner)
over the amount of Net Disposition Proceeds and
Distributable Cash distributed or to be distributed to the
Investors (other than the MNC Special Limited Partner),
provided that in no event shall the amount to be returned
exceed the investment in the Partnership made by the MNC
Special Limited Partner pursuant to Section 3.3A.
C. Affiliates of the Manager may also be Investors or
Limited Partners to the extent that they separately purchase
or become transferees of Units and, to such extent, shall be
treated as Investors or Limited Partners, subject to the
limitations contained in this Agreement. Any purchases of
Units by the officers and directors of the Manager and MNC
Credit Corporation in connection with the initial public
offering of Units shall be made net of Selling Commissions.
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Section 3.4 Partnership Capital
A. Each Partner's and Investor's Capital Contribution
shall be paid in cash on or prior to the date of such Partner's
admission to the Partnership or the date of the recognition of
the Investor on the books and records of the Partnership.
B. Except to the extent of any interest income earned on
an Investor's Capital Contribution while it is held in escrow,
and later distributed to such Investor pursuant to Section
4.5A, no Partner or Investor shall be paid interest on any
Capital Contribution.
C. Except as otherwise provided in this Agreement, no
Partner or Investor shall have the right to withdraw, or
receive any return of, his Capital Contribution prior to
December 31, 2019.
D. Under circumstances requiring a return of any Capital
Contribution, no Partner shall have the right to demand or
receive property other than cash.
Section 3.5 Liability of Partners and Investors
A. Except as provided in Section 17-607 of the Act, or in
Section 3.3 with respect to the MNC Special Limited Partner,
the Limited Partners and Investors shall be liable only to pay
their Capital Contributions and no Limited Partner or Investor
will be personally liable for the debts, liabilities,
contracts, or other obligations of the Partnership.
B. Except as set forth in Section 3.5A, no Limited Partner
or Investor shall be required to lend any funds to the
Partnership or, after his Capital Contribution has been fully
paid, to make any further capital contribution to the
Partnership, nor, except as set forth in Section 3.3, shall any
Limited Partner or Investor be liable for or have any
obligation to restore any negative balance in his Capital
Account.
C. Subject to the provisions of Sections 3.1 and 5.9 of
this Agreement, the General Partner shall not have any personal
liability for the repayment of the Capital Contribution or the
Cumulative Return of any Limited Partner or Investor or be
required to repay to the Partnership all or any portion of any
negative balance of the Capital Accounts of the Limited
Partners or the Investors.
ARTICLE IV
ALLOCATIONS, DISTRIBUTIONS AND APPLICABLE RULES
Section 4.1 Allocation of Profit or Loss
A. Profit (including any Profit from any deemed Sale
pursuant to Section 4.5) shall be allocated in the following
order of priority:
(i) First, Profit shall be allocated to the Partners
and Investors in proportion to, and to the extent of, any
Loss allocated to the Partners and Investors pursuant to
Section 4.1B(ii), 4.1B(iii) and 4.1B(iv) for all prior
fiscal years, in reverse order and priority to the order
and priority specified under Section 4.1B(ii), 4.1B(iii)
and 4.1B(iv) to offset such prior allocations of Loss. To
the extent that any allocations of Loss are offset
pursuant to this Section 4.1A(i), such allocations of Loss
shall be disregarded for purposes of computing subsequent
allocations pursuant to this Section 4.1.
(ii) Second, Profit not allocated pursuant to Section
4.1A(i) shall be allocated (a) in the case of Profit from
Operations, 98% to the Investors and 2% to the General
Partner and (b) in the case of Profit from a Sale, 99% to
the Investors and 1% to the General Partner, until the
Capital Account of each Investor is equal to the sum of
his Adjusted Capital Balance plus his unpaid Cumulative
Return, if any.
(iii) Third, Profit not allocated pursuant to Section
4.1A (i) and Section 4.1A (ii) shall be allocated to the
General Partner until the Capital Account of the General
Partner is equal to its Adjusted Capital Balance.
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(iv) Fourth, any remaining Profit shall be
allocated 90% to the Investors (including the MNC
Special Limited Partner), 5% to the MNC Special Limited
Partner, 1% to the General Partner and 4% to the ABR
Special Limited Partner. B. Loss (including any Loss
from any deemed Sale pursuant to Section 4.5) shall be
allocated in
the following order of priority:
(i) First, Loss shall be allocated to the Partners
and Investors in proportion to, and to the extent of,
any Profit allocated to the Partners and Investors
pursuant to Section 4.1A(ii), 4.1A(iii) and 4.lA(iv) for
all prior fiscal years, in reverse order and priority to
the order and priority specified under Section 4.1A(ii),
4.lA(iii) and 4.1A(iv), to offset such prior allocations
of Profit. To the extent that any allocations of Profit
are offset pursuant to this Section 4.1B(i), such
allocations of Profit shall be disregarded for purposes
of computing subsequent allocations pursuant to this
Section 4.1.
(ii) Second, any Loss not allocated pursuant to
Section 4.1B(i) shall be allocated 99% to the MNC
Special Limited Partner and 1% to the General Partner
until the aggregate Loss allocated to the MNC Special
Limited Partner under this Section 4.1B(ii) for such
fiscal year and all prior fiscal years is equal to the
aggregate Capital Contributions of the MNC Special
Limited Partner made pursuant to Section 3.3A (reduced
by any prior or contemporaneous allocations of
syndication expenses to the Special Limited Partner
under Section 4.5L).
(iii) Third, if one or more Partners or Investors
has a positive Capital Account, any Loss not allocated
pursuant to Sections 4.lB(i) and 4.lB(ii) shall be
allocated to such Investors or Partners, in proportion
to their positive Capital Accounts, until all such
positive Capital Accounts have zero balances.
(iv) Fourth, any remaining Loss shall be allocated
99% to the Investors and 1% to the General Partner.
C. For each fiscal year, all Profit and Loss from
Operations allocated pursuant to Section 4.1 to the
Investors shall be allocated among the Persons that are
recognized as Investors during such year by determining the
Profit and Loss from Operations attributable to each month
during such year and by allocating the amount of such Profit
and Loss from Operations among Persons who are recognized as
Investors on the books of the Partnership on the first
business day of such month. The Profit or Loss from
Operations attributable to each month of the fiscal year
shall be determined in the discretion of the General Partner
either (i) by dividing the Profit or Loss from Operations
for such year by the number of days in such year, and then
multiplying such per diem amount by the number of days in
each month or (ii) by an interim closing of the books of the
Partnership on a monthly basis.
D. All Profit or Loss from a Sale (including all
"recapture income" attributable to an installment Sale, as
defined in Section 453(i) of the Code) allocated pursuant to
Section 4.1 hereof with respect to any Unit which is
transferred during a taxable year of the Partnership shall
be allocated to the Persons recognized (in accordance with
Section 7.4 hereof) as Investors as of the first business
day of the month that includes the date on which the Sale
occurs; provided, however, that all such Profit or Loss
which is attributable to an installment or other deferred
Sale (other than recapture income) shall be allocated to the
Persons recognized as Investors as of the first business day
of the month that includes the date on which the deferred
Net Disposition Proceeds from such Sale are received by the
Partnership, and the allocable cash basis items with respect
thereto shall be allocated as required under Section 706(d)
of the Code and the Income Tax Regulations thereunder.
E. Notwithstanding Sections 4.1C and 4.1D, the
Partnership shall adopt the daily proration method of
allocating Profit and Loss (whether from operations or from
Sales) among persons who become Investors pursuant to a
closing of the sale of the Units on or before the
Termination Date of the Offering. Accordingly, each Investor
shall begin to be allocated Profit, and Loss on the date he
is recognized on the books of the Partnership.
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Section 4.2 Distribution of Net Disposition Proceeds
A. Upon a Sale that does not constitute a Sale of all or
substantially all of the Equipment, Net Disposition Proceeds
which are not reinvested in Additional Equipment pursuant to
Section 5.2B shall be distributed, credited and applied in
the following order of priority:
(i) First, 99% to the Investors and 1% to the
General Partner until each Investor has received an
amount equal to his unpaid Cumulative Return, if any,
and then his Adjusted Capital Balance.
(ii) Second, to the General Partner, an amount
equal to its Adjusted Capital Balance. (iii) Third,
any Net Disposition Proceeds remaining after
payment of the Subordinated
Disposition Fee shall be distributed 90% to the
Investors (including the MNC Special Limited Partner),
5% to the MNC Special Limited Partner, 1% to the General
Partner and 4% to the ABR Special Limited Partner. B.
Upon the Sale of all or substantially all of the
Equipment, Net Disposition Proceeds shall be
allocated to the Partners and Investors, in proportion to
their positive Capital Accounts, after the allocation of
Profit and Loss pursuant to Sections 4.1A and 4.1B, until all
such Capital Accounts have been reduced to zero.
C. All Net Disposition Proceeds distributable with
respect to any Unit which is transferred during a taxable
year of the Partnership shall be distributed to the Persons
recognized (in accordance with Section 7.4 hereof) as
Investors as of the first business day of the month that
includes the date on which the Sale occurs; provided,
however, that all Net Disposition Proceeds received by the
Partnership as a result of an installment or other deferred
Sale shall be distributed to the Persons recognized (in
accordance with Section 7.4 hereof) as Investors as of the
first business day of the month that includes the date on
which the deferred Net Disposition Proceeds are received by
the Partnership.
Section 4.3 Distribution of Distributable Cash
A. Distributable Cash, if any, for each year, or portion
thereof, which is not reinvested in Additional Equipment
pursuant to Section 5.2B shall be distributed, credited and
applied in the following order of priority:
(i) First, 98% to the Investors and 2% to the General
Partner until each Investor has received an amount equal to
his unpaid Cumulative Return, if any, and then his Adjusted
Capital Balance.
(ii) Second, to the General Partner, an amount equal to
its Adjusted Capital Balance. (iii) Third, any
Distributable Cash remaining after payment of the
Subordinated Disposition Fee
shall be distributed 90% to the Investors (including the MNC
Special Limited Partner), 5% to the MNC Special Limited
Partner, 1% to the General Partner and 4% to the ABR Special
Limited Partner.
To the extent practicable, the General Partner will endeavor
to make distributions of Distributable Cash on a quarterly
basis.
B. All Distributable Cash distributable to the Investors
pursuant to Section 4.3A, if any, attributable to each month
of a fiscal quarter shall be distributed among the Persons
recognized as Investors on the books of the Partnership on
the first business day of such month during the fiscal
quarter. The Distributable Cash attributable to each month of
the fiscal quarter shall be determined in the discretion of
the General Partner either (i) by dividing the amount of
Distributable Cash for such quarter by the number of days in
the quarter, and then multiplying such per diem amount by the
number of days in each month or (ii) by an interim closing of
the books of the Partnership on a monthly basis.
C. Notwithstanding Section 4.3B, Distributable Cash
distributable to the Investors pursuant to Section 4.3A for
any fiscal quarter before the Termination Date of the
Offering shall be distributed among the Persons who become
Investors during such quarter pursuant to a closing of the
sale of
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Units on or before the Termination Date of the Offering in
accordance with the number of days each Investor is
recognized as such during the fiscal quarter. The
Distributable Cash attributable to each day of the fiscal
quarter shall be determined by dividing the amount of
Distributable Cash for such quarter by the number of days in
such quarter.
D. Notwithstanding the provisions of Section 4.3A, the
General Partner is hereby authorized to make distributions
of Distributable Cash to some or all of the Investors after
the Termination Date of the Offering in order to equalize
the Cumulative Return outstanding on all Units.
Section 4.4 Liquidation or Dissolution
A. If the Partnership is liquidated or dissolved, the
net proceeds from such liquidation, as provided in Article
VIII, shall be distributed first to creditors, including
Partners who are creditors, to the extent otherwise
permitted by law (whether by payment or by establishment of
reserves), other than liabilities for distributions to
Partners and Investors, and any remaining net proceeds shall
be distributed in proportion to the Capital Accounts of the
Partners and Investors, determined after the allocations in
Sections 4.lA, 4.lB and 4.5.
B. All distributions under this Section 4.4 shall be
made by the end of the taxable year of liquidation of the
Partnership or, within ninety (90) days of the date of
liquidation, whichever is later.
Section 4.5 General and Special Rules
A. The timing and amount of all distributions shall be
determined by the General Partner. Notwithstanding any other
provision of this Agreement, the General Partner shall have
authority to make the following distributions to certain of
the Investors: First, if the Partnership has realized a
savings on Selling Commissions payable by the Partnership
with respect to the purchase of Units by an Investor (as
more fully set forth in the Prospectus), the General Partner
shall make a distribution to such Investor equal to the
amount of such savings realized by the Partnership. Second,
if any interest is earned on an Investor's Capital
Contribution while it is held in escrow pending recognition
as an Investor under Article VII, such interest shall be
paid by the Partnership to such Investor and Profit
attributable to such interest shall be allocated in the same
manner.
B. Subject to all of the special rules of this Section
4.5, if any property or assets of the Partnership are
distributed to the Partners in kind, such property or assets
first shall be valued on the basis of the fair market value
thereof to determine the Profit or Loss that would have
resulted if such property or assets had been sold, and then
such Profit or Loss shall be allocated as provided in
Section 4.1A and Section 4.1B, and shall be properly
credited or charged to the Capital Accounts in accordance
with Income Tax Reg. ss.1.704-1(b)(2)(iv)(e) or any
successor provision thereto. Any Partner entitled to any
interest in such property or assets shall receive such
interest as a tenant-in-common with all other Partners so
entitled. The fair market value of such property or assets
shall be determined by an independent appraiser who shall be
selected by the General Partner. This Section 4.5B governs
income tax consequences only and shall not be read or
construed as authorizing the distribution in kind of
property or assets of the Partnership.
C. Notwithstanding Section 4.1 hereof, if an allocation
of Loss (or item thereof) to an Investor or a Partner would
cause or increase a deficit balance in his or its Capital
Account in excess of: (i) in the case of an Investor or a
Partner other than the MNC Special Limited Partner and the
General Partner, his proportionate share of Minimum Gain (as
defined in Income Tax Regulation ss.1.704- 1T(b)(4)(iv)(f)
and (h)(5)), (ii) in the case of the MNC Special Limited
Partner, the sum of the amount it is obligated to restore to
the Partnership pursuant to Section 3.3B hereof and its
proportionate share of Minimum Gain (as defined in Income
Tax Regulation ss.1.704-lT(b)(4)(iv)(f) and (h)(5)) or (iii)
in the case of the General Partner, the sum of the amount
which it is obligated to restore to the Partnership pursuant
to Section 3.1 hereof and its proportionate share of Minimum
Gain (as defined in Income Tax Regulation
ss.1.704-lT(b)(4)(iv)(f) and (h)(5)) (in each case, such
excess being referred to hereafter as the "Excess Deficit
Balance"), then the allocation shall not be made to such
Investor or Partner. Instead, such Loss (or deduction or
item thereof) shall be allocated first to the Partners and
Investors having positive Capital Accounts, in proportion to
such positive Capital Accounts until all
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such positive Capital Accounts have been reduced to zero, and
any additional Loss (or deduction or item thereof) shall be
allocated to the General Partner. For purposes of making the
determination set forth above, each Investor's and each
Partner's Capital Account balance shall be reduced by
reasonably expected allocations or adjustments of loss (or item
thereof) including Loss from a Sale under Income Tax Regulation
ss.ss.1.704-1(b)(2)(ii)(d)(4) and (5), and by reasonably
expected distributions to the extent not offset by reasonably
expected Capital Account increases ("Account Reduction Items").
For purposes of calculating reasonably expected Capital Account
increases, the value of the Partner- ship's assets shall be
presumed to be equal to their adjusted basis for federal income
tax purposes.
D. Notwithstanding Section 4.1 hereof, in accordance with
Income Tax Regulation ss.ss.1.704- l(b)(2)(ii)(d),
1.704-IT(b)(4)(iv)(e)(2) and 1.7041T(b)(4)(iv)(h)(4), (i) if,
in any fiscal year of the Partnership, an Account Reduction
Item unexpectedly causes or increases an Investor's or a
Partner's Excess Deficit Balance, or (ii) if there is a net
decrease in Partnership Minimum Gain, including Minimum Gain
attributable to Partner Nonrecourse Debt as defined in Income
Tax Regulation ss.1.704-IT(b)(4)(iv)(h), during a taxable year,
then each Investor or Partner with an Excess Deficit Balance or
a share of Minimum Gain, shall be specially allocated, in order
to eliminate such Excess Deficit Balance or reflect his share
of the reduction in Minimum Gain, Profit and, to the extent
necessary, gross income (as defined in Section 61 of the Code)
in an amount and manner required by Income Tax Regulation
ss.ss.1.7041(b)(2)(ii)(d) and 1.704-IT(b)(4)(iv)(e)(2) and
(h)(4). All nonrecourse deductions attributable to Partner
Nonrecourse debt (determined in accordance with Income Tax
Regulations ss.1.704-IT(b)(4)(iv)(h)(3)) shall be allocated to
the Partner that bears the economic risk of loss for such debt
(within the meaning of Income Tax Regulations
ss.1.704-IT(b)(4)(iv)(k)(1)). Any remaining Profit or Loss,
after adjustment has been made for allocation of income or gain
pursuant to this Section 4.5D, shall be allocated in accordance
with Section 4.1 hereof. The General Partner shall be
authorized to interpret and apply this Section 4.5D so as to
satisfy the requirements of Income Tax Regulation
ss.ss.1.704-1(b)(2)(ii)(d), 1.704 IT(b)(4)(iv)(e) and
1.704-IT(b)(4)(iv)(h) and any successor provisions.
E. Any special allocations of Profit, Loss or gross income
under Section 4.5D shall be taken into account in computing
subsequent allocations of Profit or Loss, so that to the extent
possible, the aggregate amounts of Profit or Loss allocated to
each Partner or Investor will be equal to the aggregate amounts
that would have been allocated to them in the absence of the
unexpected Account Reduction Items or nonrecourse deductions
attributable to Partner Nonrecourse Debt.
F. Notwithstanding anything to the contrary that may be
expressed or implied in this Agreement, if at any time the
allocation provisions of this Article IV do not
result in the allocation to the General Partner of at least 1%
of the Profit or Loss being allocated, the General Partner
shall be allocated 1% thereof.
G. It is the intent of the General Partner that each
Investor's and Partner's distributive share of Profit and Loss
shall be determined and allocated in accordance with this
Article IV to the fullest extent permitted by Sections 704(b)
and 706 of the Code. Therefore, if the Partnership is advised
by the Accountants or the Partnership's legal counsel, that the
allocations provided in Article IV of this Agreement are
unlikely to be respected for federal income tax purposes, the
General Partner has been granted the power in Section 12.11B
hereof to amend the allocation provisions of this Agreement, on
advice of the Accountants or the Partnership's legal counsel,
to the minimum extent necessary to conform to Sections 704(b)
and 706 of the Code the plan of allocations and distributions
of Profit and Loss, Distributable Cash and Net Disposition
Proceeds provided in this Agreement.
H. Notwithstanding any other provision of this Agreement
the General Partner may, after giving ninety (90) days' prior
Notification to the Investors, (i) adopt any other method for
determining, in the event of transfers of Units, the Investors
entitled to distributions of Distributable Cash or Net
Disposition Proceeds that the General Partner, subject to the
review and approval of the Account ants, determines is
reasonable, and (ii) allocate Profit or Loss among the
Investors during the taxable year in any other manner that the
General Partner, determines satisfies the requirements of
Section 706 of the Code, but only to the extent such allocation
of Profit and Loss incorporates the minimum
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changes required to comply with such section and is supported
by an opinion of counsel to the Partnership.
I. Allocations and distributions to Investors as a class
shall be made to each Investor entitled to such allocation or
distribution based upon the ratio of the number of Units owned
by each such Investor to the number of Units owned by all
Investors entitled to such allocation or distribution.
J. If a deduction for any fee paid in accordance with
this Agreement is denied by the Internal Revenue Service on
the basis that such fee was a distribution to a Partner by the
Partnership, the Partner who received such fee shall be
specially allocated an amount of gross income equal to the
amount of the disallowed deduction.
K. For purposes of determining the relative amounts of
Distributable Cash and Net Disposition Proceeds to be
distributed to the Investors and Partners under Sections 4.2
and 4.3 and the amounts to be reinvested in Additional
Equipment under Section 5.2B, all distributions to Investors
during any fiscal year shall be deemed made first from
Distributable Cash and then from Net Disposition Proceeds. Any
Distributable Cash of Net Disposition Proceeds remaining after
such distributions shall be deemed reinvested in Additional
Equipment.
L. Syndication expenses of the Partnership (as defined in
Treasury Regulations Section 1.709- 2(b)) shall be specially
allocated among the Investors (i) in an amount equal to that
actually charged with respect to each Investor's Units and
(ii) with respect to syndication expenses that are not
specifically charged with respect to Units, in proportion to
the respective number of Units owned each Investor.
M. Capital gains and losses realized by the Partnership
in any fiscal year shall be allocated among the Investors and
Partners in the same proportion that Profit or Loss is
allocated to such Persons under Sections 4.1A, 4.1B and the
other provisions of this Section 4.5. Allocations of tax
credits, tax credit recapture, and any items related thereto
shall be allocated to the Investors and 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).
ARTICLE V
RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER
Section 5.1 Management and Control of the Partnership; Tax Matters Partner
A. Subject to the Majority Vote of the Investors when
required by this Agreement, the General Partner shall have the
exclusive right to manage and control the business of the
Partnership.
B. No Limited Partner or Investor (except one who may
also be a General Partner, and then only in his capacity as
General Partner) shall have the right to participate in the
control of the business of the Partnership, or have any
authority or right to act for or bind the Partnership.
C. The General Partner is hereby designated to serve as
the Partnership's Tax Matters Partner and shall have all of
the powers and responsibilities of such position as provided
in Sections 6221 et seq. of the Code. All third party costs
and expenses incurred by the General Partner in performing its
duties as Tax Matters Partner shall be borne by the
Partnership, as shall all expenses incurred by the Partnership
and/or the Tax Matters Partner in connection with any tax
audit or tax-related administrative or judicial proceeding.
Each Partner and Investor shall be responsible for all costs
incurred by such Partner or Investor with respect to any tax
audit or tax-related administrative or judicial proceeding in
connection with such Partner's or Investor's tax returns and
all costs incurred by any such Partner or Investor who
participates in any tax audit or tax-related administrative or
judicial proceeding of or against the Partnership or any
Partner. Each Partner and Investor hereby (i) expressly
authorizes the Tax Matters Partner to enter into any
settlement with the Internal Revenue Service with respect to
any tax matter, tax item, tax issue, tax audit, or judicial
proceeding, which settlement shall be binding on all Partners
and Investors; (ii) waives the right to participate in any
administrative or judicial proceeding in which the tax
treatment of any Partnership item is to be
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determined; and (iii) agrees to execute such consents, waivers
or other documents as the Tax Matters Partner may determine
are necessary to accomplish the provisions of this Section
5.1C. The Tax Matters Partner shall have no liability to any
Partner or Investor or the Partnership, and shall be
indemnified by the Partnership to the full extent provided by
law, for any act or omission performed or omitted by it within
the scope of the authority conferred on it by this Agreement,
except for acts of negligence or for damages arising from any
misrepresentation or breach of any other agreement with the
Partnership. The liability and indemnification of the Tax
Matters Partner shall be determined in the same manner as is
provided in Sections 5.9 and 5.10 hereof.
Section 5.2 Authority of the General Partner
A. Except to the extent otherwise provided herein,
including, without limitation, Sections 5.3A, 5.4 and 5.5, the
General Partner for, and in the name of and on behalf of, the
Partnership is hereby authorized and empowered:
(i) to enter into any kind of activity and to perform
and carry out contracts of any kind necessary to, or in
connection with, or incidental to the accomplishment of
the purposes of the Partnership, so long as said
activities and contracts may be lawfully carried on or
performed by a limited partnership under applicable laws
and regulations;
(ii) to engage Persons, including the Sponsors as
provided in Article IX, to provide services or goods to
the Partnership, upon such terms as the General Partner
deems fair and reasonable and in the best interest of the
Partnership, provided, however, that, as to services or
goods provided by a Sponsor (except for those services for
which compensation is specifically authorized in Sections
9.1 and 9.2 of this Agreement), (a) the compensation for
such services or goods must be comparable and competitive
with the price that would be charged by non-affiliated
persons or entities rendering similar types and quality of
services in the same or comparable geographic locations;
(b) the compensation and other terms of such contracts
shall be fully disclosed to the Investors in the reports
of the Partnership; (c) the Sponsor must have been
previously engaged in the business of providing such
services or goods, independent of the Partnership and as
an ongoing business; and (d) all such transactions shall
be embodied in a written contract that describes the
services or goods to be provided and the compensation to
be paid, which contract may only be modified by the
Majority Vote of the Investors, and which contract shall
permit termination without penalty on sixty (60) days
notice;
(iii) to operate the business of the Partnership in
accordance with the Partnership's objectives and policies
set forth in the Prospectus and to acquire, hold, lease,
sell, trade, exchange or otherwise dispose of all or any
portion of the Partnership's Equipment, the leases related
thereto and other Partnership property, including but not
limited to Warrants and Warrant Stock;
(iv) to maintain and operate the Equipment so as to
comply with the provisions of any lease of, or any
indebtedness secured by, the Equipment;
(v) to cause the Partnership to reinvest all or any
portion of the Partnership's Distributable Cash and Net
Disposition Proceeds in Additional Equipment, subject to
the conditions of Section 5.2B;
(vi) subject to the provisions of Section 5.4A(xvi),
to borrow money from banks or others (including, to the
extent permitted by this Agreement, a Sponsor or any
Affiliates thereof) for any Partnership purpose and, as
security therefor, to encumber the Equipment and the
leases related thereto or other Partnership property or
place title in the name of a nominee for the purpose of
obtaining such financing;
(vii) to repay in whole or in part, refinance,
increase, modify or extend any obligation affecting the
Partnership's Equipment, the leases related thereto or
other Partnership property;
(viii) to engage a sales agent (including a Sponsor)
to sell any Partnership Equipment or assets or portions
thereof upon such terms and conditions as are deemed fair
and reasonable by the General Partner and to be in the
best interest of the Partnership, and to pay reasonable
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compensation for such services; provided, however, that
the total sales commission paid to all persons for the
Sale of any Partnership Equipment or assets, shall not
exceed the Competitive Equipment Sales Commission for
like equipment and, in addition, if a Sponsor provides
substantial services in such regard, to pay the Sponsor
up to the lesser of (a) one-half of the Competitive
Equipment Sales Commission or (b) 3% of the contract
sales price for the Equipment received by the
Partnership, provided, however, that the payment of such
sales commission to the Sponsor shall be subordinated to
distributions of Distributable Cash and Net Disposition
Proceeds to the Investors and Partners until Payout
occurs;
(ix) to recognize transferees of Units as Investors
and to admit Substitute Limited Partners in accordance
with the terms described in the Prospectus and Article
VII of this Agreement;
(x) to invest Working Capital Reserves and, pending
the investment of the Partnership's assets in Equipment,
to invest the Partnership's assets (excluding Working
Capital Reserves), in interest-bearing accounts and
short-term investments, including obligations of
federal, state and local governments and their agencies,
regulated investment companies, commercial paper and
certificates of deposit of federally-insured commercial
banks, savings banks or savings and loan associations;
provided, however, that such investments are short-term,
highly-liquid and provide appropriate safety of
principal;
(xi) to purchase casualty, liability and other
insurance to protect the Partnership's Equipment and its
business and to cause the Partnership to enter into
insurance or reinsurance arrangements with other
Persons, including an Affiliate of a Sponsor, to provide
such insurance; provided, however, that the premiums for
any insurance obtained through an Affiliate of a Sponsor
or pursuant to an insurance or reinsurance arrangement
with an Affiliate of a Sponsor shall not exceed the
lowest quote obtained from two unaffiliated insurance
carriers;
(xii) to exercise any and all Warrants and to
convert or exchange any convertible or exchangeable
Warrants or Warrant Stock;
(xiii) to exercise any and all rights to vote or
give any consent or approval with respect to any
Warrants or Warrant or Stock, including, without
limitation, any vote, consent or approval with respect
to the election of directors, any merger, consolidation,
reorganization, recapitalization, sale of assets,
liquidation or dissolution of any issuer of any Warrants
or Warrant Stock or the amendment, alteration or
modification of the terms thereof;
(xiv) to demand or request registration or
qualification for sale of Warrants or Warrant Stock
under any applicable Federal or state securities laws
and to execute in the name and on behalf of the
Partnership any registration or qualification statement
or application and any underwriting or similar agreement
with respect thereto;
(xv) to purchase and cancel or otherwise retire or
dispose of the Partnership Interests or Units of any
Partner or Investor according to the provisions of this
Agreement;
(xvi) to execute and deliver all documents
necessary or appropriate (a) for the sale of Units,
including the Prospectus and filings under the
Securities Act of 1933 and any other federal and state
laws relating to the sale of securities and (b) to file
state and local tax returns at the Partnership level on
behalf of the Investors and Partners;
(xvii) to require Investors to become Limited
Partners (in which case the General Partner shall have
the power to amend this Agreement without the Majority
Vote of the Investors) and to take such other action
with respect to the manner in which Units are being or
may be transferred or traded as may be necessary or
appropriate to preserve the tax status of the
Partnership as a partnership for federal income tax
purposes and the tax treatment of the Investors as
Partners (but such action shall be taken only to the
minimum extent required by an opinion of Counsel and
only with the Majority Vote of Investors if the changes
would adversely affect the Investors);
(xviii) to take such steps (including amendment of
this Agreement) as the General Partner determines is
advisable or necessary and will not result in any
material adverse effect on the economic position of a
majority in interest of the Investors with respect to
the Partnership in
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order to preserve the tax status of the Partnership as a
partnership for federal income tax purposes and the tax
treatment of the Investors as Partners, including,
without limitation, removing the Units from public
trading markets and imposing restrictions on transfers of
Units or Interests (provided such restrictions on
transfers do not cause the Partnership's assets to be
deemed "plan assets" within the meaning of ERISA) (but
such action shall be taken only to the minimum extent
required by an opinion of Counsel and only with the
Majority Vote of Investors if the changes would adversely
affect the Investors);
(xix) to cause the Partnership to enter into the
Management Agreement with the Manager upon such terms and
conditions as are deemed fair and reasonable by the
General Partner and to be in the best interest of the
Partnership, and to pay reasonable compensation for such
services; provided, however, that if the Manager is a
Sponsor, (a) fees for equipment management shall not
exceed five percent (5%) of the Partnership's gross
rentals (other than rentals consisting of amounts in
respect of taxes and other costs paid or payable by the
lessor for which the lessee is obligated to reimburse the
lessor under such lease) under Operating Leases covering
such Equipment, and two percent (2%) of the Partnership's
gross rentals (other than rentals consisting of amounts
in respect of taxes and other costs paid or payable by
the lessor for which the lessee is obligated to reimburse
the lessor under such lease) under Full Payout Leases
(which contain Net Lease Provisions) covering such
Equipment, in each case to the extent received by the
Partnership during the immediately preceding calendar
month and (b) fees for re-leasing services shall be
limited to two percent (2%) of the Partnership's gross
rentals (other than rentals consisting of amounts in
respect of taxes and other costs paid or payable by the
lessor for which the lessee is obligated to reimburse the
lessor under the lease) from re-leased Equipment to the
extent received by the Partnership during the immediately
preceding calendar month, and (I) shall be payable only
to the extent that the amount of the re-leasing fee does
not exceed the competitive rate for comparable services
for similar equipment and (II) the re-leasing fee shall
not be paid if the Equipment is re-leased to a previous
lessee or an Affiliate of such lessee, or the Manager has
not rendered substantial re-leasing services in
connection with such re-lease;
(xx) to pay or reimburse any reasonable out-of-pocket
expenses incurred by any Affiliate of the General Partner
in connection with any report pursuant to Section 10.3,
provided that no fee shall be paid to any Affiliate in
connection with any such report;
(xxi) upon the Majority Vote of the Investors to the
matters set forth in Sections 5.4A(xvii), 5.4A(xviii) or
5.4A(xix), to take any actions which they deem
appropriate to the extent authorized by the Investors to
facilitate the purposes described in such sections,
including, without limitation, amendments to this
Agreement to change the dates upon which transfers of
Units will be recognized, and the General Partner shall
give prior written notice to the Investors of any such
amendment; and
(xxii) to take such steps as the General Partner
determines are advisable or necessary and will not result
in any material adverse effect on the economic position
of a majority in interest of the Investors with respect
to the Partnership to restructure the Partnership and its
activities to obtain a prohibited transaction exemption
from the Department of Labor or to comply with any
exemption in final plan asset regulations adopted by the
Department of Labor, including, but not limited to,
establishing a fixed percentage of Units permitted to be
held by qualified plans or other tax-exempt investors or
discontinuing sales to such entities after a given date,
in the event that either the assets of the Partnership
constitute "plan assets" for purposes of ERISA or the
transactions contemplated hereunder constitute prohibited
transactions under ERISA or the Code. B. The General
Partner may reinvest in Additional Equipment, as more
fully described in the
Prospectus, all Distributable Cash and Net Disposition
Proceeds in excess of the amount of such funds projected by
the General Partner to be necessary to distribute to the
Investors an amount equal to the federal and state income tax
liability of the Investors resulting from any Sale of
Equipment as estimated by the General Partner, after taking
into account the Profit or Loss otherwise derived from the
Partnership during the taxable year in which the Sale occurs.
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C. Any person dealing with the Partnership or the
General Partner may rely upon a certificate signed by the
General Partner, as to:
(i) the identity of the General Partner or any Limited Partner;
(ii) the existence or non-existence of any fact or
facts that constitute conditions precedent to acts by
the General Partner or in any other manner are germane
to the affairs of the Partnership;
(iii) the Persons who are authorized to execute and deliver any
instrument or document 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.
Section 5.3 Authority of Investors
A. By the Majority Vote of the Investors, the
Investors, without the consent of the General Partner, may:
(i) amend this Agreement; provided that such
amendment (a) shall not in any manner allow the
Investors to take part in the control of the
Partnership's business in a manner which would subject
them to liability as general partners under the Act or
any other applicable law, and
(b) shall not, without the consent of the General
Partner, modify the compensation, allocations or
distributions to which the General Partner or any of
its Affiliates are entitled or affect the duties,
rights or powers of the General Partner or the
indemnification to which the General Partner and its
Affiliates and their officers, directors and employees
are entitled;
(ii) dissolve or terminate the Partnership prior
to the expiration of its term; (iii) remove the
General Partner and, pursuant to Section 6.2,
elect a new General Partner,
provided that, any portion of any fee payable to the
General Partner under this Agreement which is then
accrued and due, but not yet paid, shall be paid to the
General Partner in cash within 30 days of the date of
its removal;
(iv) approve or disapprove of the Sale of all or
substantially all of the Equipment; or (v) approve
or disapprove of a material change in the
Partnership's investment policies
objectives as described in the Prospectus.
B. Any action taken pursuant to Section 5.3A hereof
shall be void ab initio, if prior to or within fifteen (15)
days after such vote either (i) the Partnership shall have
received an opinion of counsel, which counsel is approved by
the Majority Vote of the Investors, that such action may not
be effected without subjecting the Investors to liability as
general partners under the Act or under the laws of such
other jurisdiction in which the Partnership owns properties
or is doing business, or (ii) a court of competent
jurisdiction shall have entered a final judgment to the
foregoing effect. For purposes of this paragraph, counsel
will be deemed approved by the Majority Vote of the
Investors if proposed by the General Partner and
affirmatively approved in writing within forty-five (45)
days; provided, that if the holders of 10% or more of the
outstanding Units proposed counsel for this purpose, such
proposed counsel, and not counsel proposed by the General
Partner shall be submitted for such approval by the
Investors. The existence of such an opinion of counsel or
court judgment with respect to a particular contemplated
Partnership action shall not affect the rights of the
Investors to vote on other future actions or the existence
of such rights. If the opinion of counsel or court judgment
referred to above has not been obtained the vote shall
proceed as scheduled and it shall not be delayed or
postponed for any reason except as otherwise permitted by
the Act.
Section 5.4 Restrictions on Authority
A. The General Partner and its Affiliates shall have no
authority to perform any act in violation of any applicable
laws or regulations thereunder, nor shall the General
Partner as such have any authority:
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(i) to purchase or acquire property other than as
described in the Prospectus; (ii) except as
permitted in this Agreement, to do any act required
to be approved by the
investors under the Act;
(iii) except for reinvestments in Equipment
pursuant to Section 5.2B and investments in short-term
securities pursuant to Section 10.2B, to reinvest any
Distributable Cash or Net Disposition Proceeds;
(iv) except with respect to the Interim Investments
and Warrants and Warrant Stock, to invest in or
underwrite securities of any type or kind for any
purpose, or make investments other than in Equipment and
property related and incidental thereto;
(v) to possess the Partnership's Equipment, the
leases related thereto or other Partnership property or
assign the rights of the Partnership in specific
Equipment, the leases related thereto or other property
for other than a Partnership purpose;
(vi) to sell all or substantially all of the
assets of the Partnership without the prior Majority
Vote of the Investors as provided in this Agreement,
except in the ordinary course of business of
the Partnership or in the orderly winding up of the
business of the Partnership in contemplation
of its liquidation;
(vii) do any act in contravention of this Agreement;
(viii) to do any act that would make it impossible
to carry on the ordinary business of the Partnership;
(ix) to confess a judgment against the Partnership
in connection with any pending or threatened litigation;
(x) to offer Interests or Units in exchange for Equipment;
(xi) to possess any property, or assign the
Partnership's rights in same, for other than the
exclusive use of the Partnership;
(xii) to operate in such a manner as to be
classified as an "investment company" under the meaning
of the Investment Company Act of 1940;
(xiii) except as otherwise provided in Section
5.5C, to purchase or lease Equipment from the
Partnership or sell or lease Equipment to the
Partnership or cause one of its Affiliates to purchase
or lease Equipment from the Partnership or sell or lease
Equipment to the Partnership;
(xiv) to admit a Person as a General Partner,
except as provided in this Agreement; (xv) to admit
a Person as an Investor or Limited Partner, except
as provided in this
Agreement;
(xvi) to create or suffer to exist a total
indebtedness incurred by the Partnership in excess of
50% of the cost of all of the Equipment of the
Partnership; provided, however, that the General Partner
shall have the authority to incur indebtedness with
respect to specific items of Equipment up to but not in
excess of 75% of the purchase price of such items of
Equipment;
(xvii) without the Majority Vote of the Investors,
to cause or facilitate the merger or consolidation of
the Partnership with other partnerships, including, but
not limited to, mergers or consolidations in which the
Investors receive in exchange for their Units interests
in the surviving entity, with the objective of listing
the interests of the surviving entity on a national or
regional securities exchange or NASDAQ;
(xviii) subject to Section 7.2A, without the
Majority Vote of the Investors, to list the Units on a
securities exchange or enable the Units to be traded in
the over-the-counter market, or otherwise facilitate the
establishment of a market for the trading of Units, or
(except as set forth in Section 5.2A(xviii)) to withdraw
the Units from such listing;
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(xix) without the Majority Vote of the Investors, to
materially change the Partnership's investment policies
and objectives as described in the Prospectus;
(xx) to provide or permit a Sponsor or any of its
Affiliates to provide permanent financing to the
Partnership, which for purposes of this Agreement means
any financing with a term in excess of 12 months;
provided, however, that this provision shall not be
construed to limit the ability of a Sponsor or an
Affiliate thereof to provide other financing to the
Partnership if the interest or other financing charges
and fees do not exceed the amounts which would be charged
by unrelated lending institutions for comparable loans
for the same purposes;
(xxi) to make distributions to Investors in kind
except upon dissolution and liquidation, and then only to
a liquidating trust which has been established for the
purpose of the liquidation of the assets of the
Partnership; or
(xxii) to deposit the funds of the Partnership in a
financial institution affiliated with the General Partner
or to deposit funds of the Partnership in a "compensating
balance" or similar arrangement for the benefit of any
entity other than the Partnership. B. The General Partner
shall not take any action which, for federal tax
purposes, shall cause the Partnership to terminate or to
be treated as an association taxable as a corporation.
C. Investments in limited partnership interests of another
limited partnership shall be prohib-
ited; however, nothing herein shall preclude the investment
in general partnerships or ventures which own and operate
specific equipment provided the Partnership acquires a
controlling interest in such other ventures or general
partnerships and the non-controlling interest is owned by a
non-affiliate. In such event, duplicate fees shall not be
permitted. In no event will the Partnership invest more than
10% of the Gross Proceeds of the Offering in joint ventures
with either affiliated or unaffiliated third parties.
Section 5.5 Authority of Partners and Affiliated Persons to
Deal with Partnership
A. The General Partner may, for, in the name of, and on
behalf of, the Partnership, acquire
property from, borrow money from, enter into agreements,
contracts or the like (in addition to those set forth herein)
with, or reimburse for reasonable out-of-pocket expenses
incurred in connection with the preparation of reports by,
any Sponsor in an independent capacity, as distinguished from
such capacity (if any) as a Sponsor, as if such Sponsor were
an independent contractor; provided, however, that any such
agreement shall be subject to the conditions set forth in
Section 5.2A(ii) herein.
B. Neither the General Partner nor any Affiliates thereof
shall have the authority:
(i) to cause the Partnership to invest in any program,
partnership or other venture with a
Sponsor or any Affiliates or any other partnership
previously, currently or subsequently sponsored by a
Sponsor or any Affiliates thereof, unless,
(a) the Partnership and such other partnership have
substantially identical investment objectives;
(b) there are no duplicate fees;
(c) the Sponsor (or Affiliate) compensation is
substantially identical in the Partnership
and such other partnership;
(d) the Partnership has a right of first
refusal to buy if such other partnership desires to
sell equipment held in the joint venture;
(e) the investment of the Partnership and such
other partnership in the joint venture is on
substantially the same terms and conditions;
(f) the joint venture is done either for the
purpose of effecting appropriate diversification for
the Partnership or for the purpose of relieving the
General Partner or an Affiliate from a commitment
entered into for the purpose of facilitating the
purchase of Equipment by the Partnership; and
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(g) the Prospectus discloses the potential risk
of impasse on joint venture decisions since neither
partnership controls and the potential risk that
while one partnership may buy the equipment from the
other joint venturer in the event of a sale, it may
not have the resources to do so;
(h) the investment, when considered in addition
to any other joint venture investments made with
either affiliated or unaffiliated third parties,
does not cause the aggregate amount of such
investments to exceed 10% of the Gross Proceeds of
the Offering. (ii) to receive any compensation, fee
or expense not otherwise permitted to be paid to it
under the terms of this Agreement or the Prospectus;
(iii) to commingle the Partnership's funds with
those of any other Person, except that funds of the
Partnership may be temporarily retained by agents of the
Partnership pursuant to contracts for the rendering of
services to the Partnership by such agents or held in
accounts established and maintained for the purpose of
making the Interim Investments and/or computerized
disbursements;
(iv) to cause the Partnership to lend money or other
assets to a Sponsor or any Affiliates thereof;
(v) to grant to a Sponsor or any Affiliates thereof
an exclusive listing for the Sale of any
assets of the Partnership;
(vi) to receive any rebate or give-up, or to
participate in any reciprocal business arrangement with a
Sponsor or any Affiliates thereof; or
(vii) to cause the Partnership to pay directly or
indirectly, a commission or fee (except as provided under
Sections 5.2A(viii) and 9.2A(v)) to a Sponsor in
connection with the reinvest- ment or distribution of
Distributable Cash or Net Disposition Proceeds. C. The
Partnership may not purchase Equipment in which the
General Partner, the Manager or
any of their Affiliates either has or in the past has had an
interest, except for Equipment acquired on an interim basis
(generally not in excess of six (6) months but in no event
more than one (1) year) by a Sponsor or any Affiliates
thereof for the purpose of facilitating the acquisition by
the Partnership of the Equipment or obtaining financing for
the Partnership. The Partnership may acquire any such
Equipment only if (i) such acquisition is in the best
interests of the Partnership, (ii) such Equipment is
purchased by the Partnership for a price no greater than the
cost of such Equipment to the Sponsor or Affiliate, which is
interpreted to be the reasonable necessary and actual
expenses incurred by the Sponsor or Affiliate in holding
title on a temporary or interim basis, (iii) the interest
terms of the loans secured by such Equipment at the time such
Equipment is acquired by the Partnership are no less
favorable than the interest terms of any loans secured by the
Equipment at the time the Equipment was acquired by the
Sponsor or Affiliate, and (iv) no other benefit arises out of
such transaction to the Sponsor or Affiliate apart from
compensation otherwise permitted by this Agreement. The
Partnership shall neither lease Equipment from nor lease or
sell Equipment to a Sponsor or any Affiliates thereof. There
is no assurance that the Partnership will ultimately purchase
the Specified Equipment.
Section 5.6 Duties and Obligations of the General Partner
A. The General Partner shall take all action that may be
necessary or appropriate (i) for the continuation of the
Partnership's existence as a limited partnership under the
Act (and under the laws of each other jurisdiction in which
such existence is necessary to protect the limited liability
of the Investors and the Limited Partners or to enable the
Partnership to conduct the business in which it is engaged),
and (ii) for the acquisition, maintenance, preservation and
operation of the Equipment in accordance with the Prospectus,
the provisions of this Agreement and applicable laws and
regulations. The General Partner shall devote to the
Partnership such time as may be necessary for the proper
performance of its duties hereunder, but neither the General
Partner nor any of its Affiliates shall be expected to devote
their full time to the performance of such duties. The
General Partner or
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its Affiliates may act as general or managing partners for
other partnerships engaged in businesses similar to that
conducted by the Partnership. Nothing herein shall limit the
General Partner or its Affiliates from engaging in any such
business activities, or any other activities which may be
competitive with the Partnership.
B. The General Partner shall at all times conduct its
affairs, the affairs of all its Affiliates and the affairs
of the Partnership in such a manner that no Limited Partner
or Investor (except a Limited Partner or Investor who is
also a General Partner) will have any personal liability for
Partnership debts except as otherwise set forth herein and
in the Prospectus.
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 to the extent same are not payable by any other
party.
D. The General Partner shall be under a fiduciary duty
to conduct the affairs of the Partnership in the best
interests of the Partnership, including the safekeeping and
use of all Partnership funds and assets, whether or not in
the General Partner's possession or control, and the use
thereof for the benefit of the Partnership. The General
Partner shall not enter into any contract or agreement
relieving them of their common law fiduciary duty. The
General Partner shall at all times act in good faith and
exercise due diligence in all activities relating to the
conduct of the business of the Partnership. The General
Partner shall treat the Investors as a group and shall not
favor the interests of any particular Investor.
E. Neither the General Partner nor any of its
Affiliates shall be obligated to present any particular
investment opportunity to the Partnership, even if such
investment opportunity is of a character which, if presented
to the Partnership, could be made by the Partnership, and
each of them shall have the right to make for its own
account (individually or in a fiduciary or representative
capacity), or to recommend to others, any such particular
investment opportunity.
F. The General Partner shall cause the Partnership to
commit a percentage of the Gross Proceeds of the Offering to
Investment in Equipment which is at least equal to the
greater of: (i) 80% of the Gross Proceeds of the Offering
reduced by 0.0625% for each 1% of indebtedness encumbering
Equipment; or (ii) 75% of the Gross Proceeds of the
Offering. Any proceeds of the Offering which have not been
invested or committed for investment in Equipment within two
years of the effective date of the Prospectus will be
returned to Investors but will be net of Selling
Commissions, Due Diligence Expense Reimbursement Fees and
Offering and Organization Expense Fees attributable thereto
(subject at all times to the Investment in Equipment
requirement set forth in the preceding sentence). For the
purposes of the preceding sentence, funds will be deemed to
have been committed to investment to the extent written
agreements in principle or letters of understanding are
executed and such investments are subsequently consummated.
G. The General Partner shall cause the Partnership to
establish and maintain adequate Working Capital Reserves for
contingencies related to ownership of the Equipment and will
fund Working Capital Reserves from the Gross Proceeds of the
Offering in an amount equal to 1% of the Gross Proceeds of
the Offering. Working Capital Reserves may be used whenever
deemed appropriate by the General Partner to meet the cash
obligations of the Partnership or to exercise Warrants. If
in any fiscal quarter, the General Partner determines in its
sole discretion that the Working Capital Reserves of the
Partnership are in excess of the amount deemed sufficient in
connection with the ownership of the Equipment and that such
Working Capital Reserves may be reduced, the amount of such
reduction may be distributed to the Partners and Investors
as a portion of the Partnership's Distributable Cash. If in
any fiscal quarter, the General Partner determines that the
Working Capital Reserves are insufficient in connection with
the Partnership's operations and that such Working Capital
Reserves shall be increased, the amount of such increase
shall reduce Distributable Cash.
H. Except for payment of the Selling Commissions and the allowance of the
Due Diligence Expense Reimbursement Fee, the General Partner shall not directly
or indirectly pay or award any A-25
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commission or other compensation to any Person engaged by a
potential Investor for investment advice as an inducement to
such advisor to advise the purchase of Units.
I. The General Partner shall, except as otherwise
provided in this Agreement or by the Act, have all the rights
and powers and shall be subject to all the restrictions of a
partner in a partnership without limited partners, including
the fiduciary responsibility for the safekeeping and use of
all funds and assets of the Partnership, whether or not in
its immediate possession or control.
Section 5.7 Compensation of the General Partner
Except as expressly provided in Articles IV and IX
herein, the General Partner shall receive no fees, salaries,
profits, distributions, reimbursement or other compensation
for serving as General Partner.
Section 5.8 Other Businesses of Partners
The Partnership, any Partner, Investor, the Manager, any
shareholder, officer, director, partner or employee thereof,
may engage in or possess an interest in any other business or
venture of every nature and description and shall not have
any rights or obligations, by virtue of this Agreement, in or
to any independent ventures of any nature or description, or
the income or profits derived therefrom, in which any of them
may engage, including, without limitation, the ownership,
operation and management of other equipment.
Section 5.9 Liability of General Partner and Affiliates to
Limited Partners or Investors The General Partner and its
Affiliates performing certain services on behalf of the
Partnership
shall not be liable, responsible, or accountable, in
liabilities, damages or otherwise, to any Investor, Limited
Partner or the Partnership for any loss, judgment, liability,
expense or amount paid in settlement of any claims sustained
which arise out of any act or omission performed or omitted
by them within the scope of the authority conferred on them
by this Agreement, provided that the General Partner
determines, in good faith, that such act or omission was in
the best interests of the Partnership, except for acts of
negligence or misconduct or for damages arising from any
misrepresentation or breach of an agreement with the
Partnership. The Partnership shall not incur the cost of that
portion of any liability insurance which insures the General
Partner or its Affiliates performing certain services on
behalf of the Partnership against any liability as to which
the General Partner or its Affiliates may not be indemnified
under Section 5.10 herein.
Section 5.10 Indemnification
A. The General Partner and its Affiliates performing
certain services on behalf of the Partnership shall be
indemnified to the full extent provided by law for any loss,
judgment, liability, expense or amount paid in settlement of
any claims sustained by them which arise out of any act or
omission performed or omitted by any or all of them within
the scope of the authority conferred on them by this
Agreement, if the General Partner determine, in good faith,
that such act or omission was in the best interests of the
Partnership and that such act or omission did not constitute
negligence or misconduct or breach of any other agreement
with the Partnership, provided that any indemnity under this
Section shall be provided out of and to the extent of
Partnership assets only, and no Investor or Limited Partner
shall have any personal liability on Account thereof.
B. Notwithstanding Section 5.10A, the General Partner and
its Affiliates performing certain services on behalf of the
Partnership and any Person acting as a Broker-Dealer shall
not be indemnified by the Partnership for any liability, loss
or damage incurred by any or all of them in connection with
(i) any claim or settlement arising under federal or state
securities laws unless (a) there has been a successful
adjudication on the merits of each count involving such
securities laws violations as to the particular indemnities
and the court approves indemnification of the litigation
costs, (b) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as to the
particular indemnities and the court approves indemnification
of the litigation costs, or (c) a court of competent
jurisdiction approves a settlement of the claims and funds
that indemnification of the
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settlement and related costs should be made, after being
advised as to the current position of the Securities and
Exchange Commission, the Massachusetts Securities Division,
the California Commissioner of Corporations, the Pennsylvania
Securities Commission, the Tennessee Securities Commission,
the Missouri Securities Division (and such other state
securities administrators as shall be required by such
court), regarding indemnification for violations of
securities law; or (ii) any liability imposed by law,
including liability for negligence or misconduct.
ARTICLE VI
TRANSFERABILITY OF A GENERAL PARTNER'S INTEREST
Section 6.1 Removal, Voluntary Retirement or Withdrawal of a General Partner;
Transfer of Interests
A. A General Partner may be removed in the manner specified in
Section 5.3A herein.
B. No General Partner may voluntarily withdraw or retire from its
position as a General Partner
of the Partnership unless another General Partner (including
any Additional or Successor General Partner admitted pursuant
to Section 6.2) remains, and unless (i) counsel for the
Partnership is of the opinion that such voluntary retirement
or withdrawal from the Partnership will not cause the
Partnership: (a) to be dissolved under the Act; (b) to be
classified other than as a partnership for federal income tax
purposes; or (c) to terminate for federal income tax
purposes; and (ii) the approval of the remaining General
Partners, if any, and the Majority Vote of the Investors to
such voluntary retirement or withdrawal is obtained.
C. If a General Partner voluntarily retires or withdraws
from the Partnership in violation of this Section 6.1, it
shall be and remain liable to the Partnership and the
Partners for damages resulting from its breach of this
Agreement, and, without limitation of remedies, the
Partnership may offset such damages against the amounts
otherwise distributable to such General Partner.
D. No General Partner shall have the right to sell,
exchange, or otherwise dispose of all or any portion of-its
Interest unless the proposed assignee or transferee of all or
a portion of the Interest of such General Partner is admitted
as a Successor or Additional General Partner to the
Partnership pursuant to the provisions of Section 6.2 prior
to any such sale, exchange or other disposition.
E. The voluntary retirement or withdrawal of a General
Partner shall become effective only upon (i) receipt by the
Partnership of the opinions of counsel referred to in Section
6.1(B)(i); (ii) receipt by the Partnership of the approval
and consent referred to in Section 6.1B(ii); and (iii) the
amendment of the Partnership's Certificate to reflect such
withdrawal or retirement and its filing for recordation.
Section 6.2 Election and Admission of Successor or
Additional General Partners
A. A General Partner may at any time designate
additional persons to be Successor or Additional General
Partners, provided that the conditions of Section 6.2B are
satisfied.
B. Except as otherwise expressly provided herein, no
Person shall be admitted as a Successor or Additional General
Partner unless (i) counsel for the Partnership is of the
opinion that the admission of such Successor or Additional
General Partner will not cause the Partnership to be
classified other than as a partnership for federal income tax
purposes or cause the Partnership to terminate for federal
income tax purposes; (ii) the consent of the then remaining
General Partner(s), if any, is obtained; and (iii) the
Majority Vote of the Investors to such admission has been
obtained.
C. The admission of such Successor or Additional General
Partner shall become effective upon (i) receipt by the
Partnership of the opinion referred to in Section 6.2B(i);
(ii) receipt by the Partnership of the consents referred to
in Section 6.2B(ii) and (iii), if applicable; and (iii) the
amendment of the Certificate to reflect the admission of the
Successor or Additional General Partner and its filing for
recordation.
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Section 6.3 Events of Withdrawal of a General Partner
A. In addition to a voluntary withdrawal of a General
Partner pursuant to Section 6.lE, the General Partner shall
be deemed to withdraw (i) if the General Partner assigns all
of its Interest in the Partnership, (ii) if the General
Partner is removed pursuant to Section 5.3A; and (iii) the
filing of a certificate of dissolution, or its equivalent,
for the General Partner or the revocation of its charter. To
the maximum extent permitted by the Act, no other act or
event shall be deemed an event of withdrawal of a General
Partner or serve to convert a General Partner to a Limited
Partner.
B. In the event of the withdrawal of a General Partner
and if a Successor or Additional General Partner has been
admitted to the Partnership in accordance with Section 6.2,
the remaining General Partner or General Partners, including
such Successor or Additional General Partner may elect to
continue the Partnership, and if such election is made,
shall promptly give Notification of such event and shall
make and file such amendments to the Certificate as are
required by the Act to reflect the fact that the withdrawn
General Partner has ceased to be a General Partner of the
Partnership.
C. In the event of the withdrawal of a General Partner
and no Successor or Additional General Partner has been
admitted to the Partnership, or such Successor or Additional
General Partner does not elect to continue the Partnership,
the withdrawn General Partner, or its successors,
representatives or assigns shall promptly give Notification
of such withdrawal to all remaining Partners and Investors.
In such event, the Partnership shall be dissolved unless,
within ninety (90) days after the withdrawal of the General
Partner, the Investors, by the Majority Vote of the
Investors (or such higher percentage vote as may be required
by the Act), agree in writing to continue the business of
the Partnership and to the appointment, effective as of the
date of withdrawal of the sole General Partner, of one or
more Additional General Partners. If the Investors elect to
reconstitute the Partnership and agree to admit an
Additional General Partner, the relationship of the
Investors and of the substitute General Partner in the
Partnership shall be governed by this Agreement.
Section 6.4 Liability of a Withdrawn General Partner
A. Any General Partner who withdraws from the
Partnership shall be, and remain, liable for all obligations
and liabilities incurred by it as General Partner prior to
the time such withdrawal becomes effective. In addition, a
General Partner who voluntarily withdraws in violation of
this Agreement shall be subject to the liability described
in Section 6.1C.
B. Upon the withdrawal of a General Partner, such
General Partner shall immediately cease to be a General
Partner, and such General Partner's Interest shall be
acquired by the Partnership pursuant to Section 6.5.
C. The personal representatives, heirs, successors or
assigns of any General Partner who withdraws from the
Partnership shall be, and remain, liable for all obligations
and liabilities incurred by the General Partner prior to, or
in connection with, its withdrawal.
Section 6.5 Valuation of Partnership Interest of General Partner
Upon the withdrawal of a General Partner, the
Partnership shall purchase the Partnership Interest of the
withdrawn General Partner. The price of the withdrawn
General Partner's Interest shall be determined by two (2)
independent appraisers, one selected by the withdrawn
General Partner and one selected by the remaining General
Partner, or if none is remaining, by the Investors. If the
two appraisers are unable to agree on the value of the
General Partner's Interest, they shall jointly appoint a
third independent appraiser whose determination shall be
final and binding. The Partnership shall then pay the
withdrawn General Partner the price of its Interest as a
General Partner as so determined. The expense of the
appraisals shall be borne equally by the terminated General
Partner and the Partnership. If the withdrawal is
involuntary, payment shall be made by delivery of a
promissory note bearing interest equal to the lowest rate
permitted under the Code that avoids the imputation of
interest income to the withdrawn General Partner, such note
to have a term of five years and provide for equal annual
installments of principal and interest. If the withdrawal is
voluntary, payment shall be made by delivery of an unsecured
promissory note bearing no interest, with principal payable
only from distributions which the withdrawn General Partner
would have
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received under this Agreement had the General Partner not
withdrawn. Immediately upon receiving the note, the withdrawn
General Partner shall cease to be a Partner of the
Partnership for all purposes, except that the withdrawn
General Partner shall continue to be subject to Section 6.4
hereunder. All amounts received pursuant to this Section 6.5
shall constitute complete and full discharge for all amounts
owing to the withdrawn General Partner on account of its
Interest in the Partnership. Any disputes regarding valuation
or payment pursuant to this Section which are not resolved in
a binding manner by the provisions of this Section shall be
resolved by arbitration in accordance with the then current
rules of the American Arbitration Association. The expense of
arbitration shall be borne equally by the terminated General
Partner and the Partnership.
ARTICLE VII
ASSIGNMENT OF ASSIGNEE UNITS TO INVESTORS;
TRANSFERABILITY OF LIMITED PARTNER INTERESTS AND UNITS
Section 7.1 Assignment of the Assignee Units to Investors
A. Pursuant to Sections 3.2 and 7.1C hereof, the Assignor
Limited Partner shall assign to each Investor Assignee Units
equal to the number of Units purchased by each Investor in
the Offering.
B. Except as provided in Section 7.1A above, the Assignor
Limited Partner may not transfer a Limited Partnership
Interest without the prior written consent of the General
Partner. The Assignor Limited Partner shall have no right to
vote or consent with respect to Units owned by the Assignor
Limited Partner for its own account and such Units shall not
be considered outstanding Units for purposes of determining
whether the Majority Vote of the Investors or the Consent of
the Investors has occurred. The Assignor Limited Partner, by
the execution of this Agreement, acknowledges and agrees that
the Assignor Limited Partner's management will have fiduciary
responsibility for the safekeeping and use of all funds and
assets of the Investors, whether or not in the Assignor
Limited Partner's management's possession or control, and
that the management of the Assignor Limited Partner will not
employ, or permit another to employ such funds or assets in
any manner except for the exclusive benefit of the Investor.
The Assignor Limited Partner agrees not to contract away the
fiduciary duty owed to the Investors by the Assignor Limited
Partner's management under the common law of agency.
C. Except as set forth in Section 7.lF, the Assignor
Limited Partner, by the execution of this Agreement,
irrevocably transfers and assigns to the Investors all of the
Assignor Limited Partner's rights and interest in and to the
Assigned Limited Partnership Interests, as of the time that
payment for such Assigned Limited Partnership Interests is
received by the Partnership and such Assigned Limited
Partnership Interests are credited to the Assignor Limited
Partner on the books and records of the Partnership. The
rights and interest so transferred and assigned shall
include, without limitation, the following
(i) all rights to receive distributions of uninvested Capital
Contributions pursuant to Section 5.6F;
(ii) all rights to receive cash distributions
pursuant to Article IV; (iii) all rights in respect
to allocations of Profit and Loss pursuant to
Article IV; (iv) all other rights in respect of
determinations of allocations and distributions
pursuant to
Article IV;
(v) all rights to consent to the admission of
Successor or Additional General Partners pursuant to
Sections 6.1 and 6.2;
(vi) all rights to receive any proceeds of
liquidation of the Partnership pursuant to Section 8.2;
(vii) all rights to inspect books and records and
to receive reports pursuant to Article X;
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(vii) all voting rights, rights to attend or call
meetings and other such rights; and (ix) all rights
which the Limited Partners have, or may have in the
future, under the Act.
D. The General Partner, by the execution of this
Agreement, irrevocably consents to and acknowledges that (i)
the foregoing transfer and assignment pursuant to Section 7.1
by the Assignor Limited Partner to the Investors of the
Assignor Limited Partner's rights and interest in the
Assigned Limited Partnership Interests is effective, and (ii)
the Investors are intended to be and shall be third party
beneficiaries of all rights and privileges of the Assignor
Limited Partner in respect of the Assigned Limited
Partnership Interests. The General Partner covenants and
agrees that, in accordance with the foregoing transfer and
assignment, all the Assignor Limited Partner's rights and
privileges in respect of Assigned Limited Partnership
Interests may be exercised by the Investors including,
without limitation, those cited in Section 7.l.
E. In accordance with the transfer and assignment
described in Section 7.1, Investors shall have the same
rights that the Limited Partners have under this Agreement
and under the Act.
F. Notwithstanding the assignment of the Assigned
Limited Partnership Interests referred to in this Section
7.1, the Assignor Limited Partner shall retain legal title to
and be and remain a Limited Partner of the Partnership.
Section 7.2 Transferability of Units
A. Units are generally transferable, provided, however,
that a transfer of Units shall be prohibited if one of the
following restrictions applies:
(i) No sale or exchange of any Units shall be made
if the Units sought to be sold or exchanged, when added
to the total of all other Units sold or exchanged within
a period of twelve (12) consecutive months prior
thereto, would, in the opinion of counsel for the
Partnership, result in the Partnership being considered
to have terminated within the meaning of Section
708(b)(1)(B) of the Code. The General Partner shall give
Notification to all Investors in the event that sales or
exchanges should be suspended for this reason. All
deferred sales or exchanges shall be made (in
chronological order to the extent practicable) as of the
first day of the fiscal year beginning after the end of
any such 12-month period, subject to the provisions of
this Article VII.
(ii) No transfer or assignment of any Unit shall be
made if a counsel for the Partnership is of the opinion
that the particular transfer or assignment would be in
violation of any federal or state securities laws
(including any investment suitability standards)
applicable to the Partnership or would cause the
Partnership to be classified other than as a partnership
for federal income tax purposes.
(iii) No transfer or assignment of any Unit shall
be made if in the opinion of counsel to the Partnership
such transfer would cause the Partnership to be treated
as a "publicly traded partnership" under Sections 7704
and 469(k) of the Code. Each Investor agrees not to
transfer, and agrees that the Partnership shall not
recognize for any purpose any transfer on or through a
listing on a securities exchange, over-the-counter
market or secondary market or any transfer to or from a
dealer in securities or partnership interests or other
market maker, or any transfer arranged through or
facilitated by means of an interdealer quotation system,
information system or other facility that may create the
equivalent of a secondary market in partnership
interests, unless counsel to the Partnership is of the
opinion that such transfers will not result in the
partnership becoming taxable as a corporation or a
publicly traded partnership.
(iv) No transfer or assignment of Units shall be
made after which any transferor or transferee would hold
(a) a number of Units not evenly divisible by four, or
(b) less than 200 Units, except for Individual
Retirement Accounts, or (c) less than 80 Units in the
case of Individual Retirement Accounts, provided,
however, that any such transferor or transferee may hold
zero Units.
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(v) No transfer or assignment of any Unit shall be
made if it would result in the assets of the Partnership
being treated as "plan assets" or the transactions
contemplated hereunder to be prohibited transactions
under ERISA or the Code.
(vi) No transfer or assignment of a Unit shall be
made to a foreign person under the Code or a minor or
incompetent (unless such transfer or assignment shall be
made to a legal guardian on such person's behalf). B. In
order to record a trade on its books and records, the
Partnership may require such evidence
of transfer or assignment and authority of the transferor or
assignor (including signature guarantees), evidence of the
transferee's suitability under state securities laws, and
the written acceptance and adoption by the transferee of the
provisions of this Agreement, as the General Partner may
determine. The General Partner may charge a transfer fee
sufficient to cover all reasonable expenses connected with
such transfer (with no profit to any party in the
transaction).
C. In no event shall an Investor be permitted to
transfer a fraction of a Unit.
D. Any attempted transfer or assignment in violation
of the provisions of Section 7.2A shall be
void and shall not bind the Partnership.
Section 7.3 Death, Bankruptcy or Adjudication of
Incompetence of an Investor or a Limited Partner Upon
the death of an Investor or a Limited Partner, his
executor, administrator, or trustee, or, if
he is adjudicated incompetent or insane, his committee,
guardian, or conservator, or, if he becomes bankrupt, the
trustee or receiver of his estate, shall have all the rights
of an Investor or a Limited Partner for the purpose of
settling or managing his estate and shall have whatever
power the deceased or incompetent Investor or Limited
Partner possessed to assign all or any part of his Units or
Interest. The death, dissolution, adjudication of
incompetence, or bankruptcy of an Investor or a Limited
Partner shall not dissolve the Partnership.
Section 7.4 Effective Date
The Partnership shall recognize the transferee of Units
as an Investor on the Partnership's books and records on the
first business day of the next calendar month after the
month in which the Partnership receives all necessary
documentation and consents required to effect the transfer
of Units.
Section 7.5 Substitute Limited Partners
Any Investor may elect to become a Substitute Limited
Partner upon (i) signing a counterpart of this Agreement and
any other instrument or instruments deemed necessary by the
General Partner, including a Power of Attorney in favor of
the General Partner as described in Section 12.1A hereof,
and (ii) paying a fee equal to the actual costs and expenses
incurred by the General Partner for legal and administrative
costs and recording fees. Investors who elect to become
Substitute Limited Partners will receive one Limited
Partnership Interest for each Unit they convert and will not
be able to re-exchange their Limited Partnership Interests
for Units. The Capital Account of the former Investor
attributable to transferred Units shall be credited to the
Capital Account of the Substitute Limited Partner. The
Partnership's Certificate will be amended no less often than
quarterly to reflect the substitution of Limited Partners.
Section 7.6 Retirement or Withdrawal of an Investor
A. No Investor shall have the right to voluntarily
retire or withdraw from the Partnership unless the General
Partner shall have consented to such voluntary retirement or
withdrawal by an Investor. Upon the retirement or withdrawal
of an Investor: (i) the Interest of such retiring or
withdrawing Investor shall thereafter belong to the
Partnership; (ii) such retiring or withdrawing Investor
shall not be entitled to receive distributions with respect
to any periods after the time of such retirement of
withdrawal; and (iii) such retiring or withdrawing Investor
shall not be entitled to receive any amount for the fair
value of his Units as of the date of his retirement or
withdrawal, other than as agreed to by
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the General Partner and the withdrawing Investor. The
General Partner shall not consent to the voluntary
retirement or withdrawal of an Investor if the General
Partner receives an opinion of counsel to the Partnership
that such retirement or withdrawal would cause the
Partnership to be classified other than as a partnership for
federal income tax purposes, or cause the Partnership to
terminate for federal income tax purposes.
B. At any time after the Termination Date of the
Offering, the Partnership may, in its sole discretion, in
response to the request of an Investor, repurchase any or
all of the Units of such Investor upon mutually agreeable
terms, provided that such repurchase does not materially
impair the capital or operation of the Partnership. The
determination to repurchase Units will be made in the sole
discretion of the General Partner. The determination of the
value of the repurchased Units will be based upon, among
other factors, the current fair market value of the
Equipment and the assets of the Partnership, less all
Partnership debts and obligations. The Partnership will not
repurchase Units prior to the Termination Date of the
Offering and is not obligated to repurchase Units at any
time. Units acquired by the General Partner and its
Affiliates or by the Assignor Limited Partner will not be
eligible for repurchase by the Partnership. Units purchased
by the Partnership during any month shall be deemed
cancelled effective as of the first day of the month
following the effective date of such purchase.
ARTICLE VIII
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE PARTNERSHIP
Section 8.1 Events Causing Dissolution
A. The Partnership shall dissolve and its affairs shall
be wound up upon the first to occur of the following events:
(i) the expiration of its term;
(ii) the withdrawal of a General Partner, unless
the Partnership is continued pursuant to Sections 6.3B
or 6.3C;
(iii) the Sale of all or substantially all of the
Partnership's assets and the receipt in cash of the
proceeds thereof, except in instances in which and
proceeds are to be reinvested in accordance with the
provisions of this Agreement;
(iv) the election by the General Partner, with the
Majority Vote of the Investors, to dissolve the
Partnership;
(v) by the Majority Vote of the Investors pursuant
to Section 5.3A to dissolve the Partnership; or
(vi) the happening of any other event causing the
dissolution of the Partnership under applicable law.
B. Dissolution of the Partnership shall be effective
on the day on which the event occurs giving
rise to the dissolution. A certificate of cancellation shall
be filed under the Act upon the dissolution and the
commencement of winding up of the Partnership; provided,
however, that the Partnership shall not terminate until the
assets of the Partnership has been distributed as provided
in Section 8.2. Notwithstanding the dissolution of the
Partnership, prior to the termination of the Partnership,
the business of the Partnership and the affairs of the
Partners, as such, shall continue to be governed by this
Agreement.
Section 8.2 Liquidation
A. As soon as practical after the dissolution of the
Partnership, the General Partner, or if there is no General
Partner, any Limited Partner or the liquidating trustee
under the Act, as the case may be, shall give Notification
to all the Limited Partners and Investors of such fact and
shall prepare a plan as to whether and in what manner the
assets of the Partnership shall be liquidated. By the
Majority Vote of the Investors, the assets of the
Partnership, subject to its liabilities (and the
establishment of
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reserves, if necessary, for such liabilities), may be
transferred to a successor Entity, upon such terms and
conditions as are then agreed upon.
B. Unless the Investors agree to transfer the assets of
the Partnership, subject to its liabilities, to a successor
Entity pursuant to Section 8.2A, upon dissolution of the
Partnership, the General Partner, any Limited Partner or the
liquidating trustee under the Act, as the case may be, shall
liquidate the assets of the Partnership, and apply and
distribute the proceeds thereof in accordance with Section
4.4.
C. Notwithstanding the provisions of Section 8.2B, in
the event the General Partner or any liquidating agent under
the Act, as the case may be, shall determine that an
immediate Sale of all or a portion of the assets of the
Partnership would cause undue loss to the Partners and
Investors, the General Partner or liquidating agent under the
Act, as the case may be, in order to avoid such loss, may,
after having given Notification to all the Investors and
Limited Partners, either defer liquidation of, and withhold
from distribution for a reasonable time, any assets of the
Partnership, or distribute the assets in kind to a
liquidating trust to be held for the benefit of the Investors
and Partners.
Section 8.3 Capital Contribution Upon Dissolution
Subject to the provisions of Section 5.9 of this
Agreement, each Investor and Partner shall look solely to the
assets of the Partnership for all distributions with respect
to the Partnership and his Capital Contribution and shall
have no recourse (upon dissolution or otherwise) against any
Partner or Investor; provided, however, that upon the
dissolution and termination of the Partnership, the General
Partner and the MNC Special Limited Partner will make the
Capital Contributions referred to in Sections 3.lA and 3.3B.
All amounts so contributed by the General Partner and the MNC
Special Limited Partner shall be distributed first to the
Partnership's creditors entitled thereto, and the balance to
the Investors and Partners in proportion to the positive
balances in their Capital Accounts at the time of dissolution
and termination of the Partnership.
ARTICLE IX
CERTAIN PAYMENTS TO THE GENERAL PARTNER AND AFFILIATES
Section 9.1 Reimbursement of Certain Costs and Expenses of the General Partner
and their Affiliates
A. Subject to the provisions of Article V hereof, the
Partnership shall be permitted to reimburse the General
Partner and the Manager for the actual cost to the General
Partner, the Manager or any of their Affiliates of the
Partnership's operating expenses. In determining the actual
cost to the General Partner, the Manager or Affiliates
thereof of goods and materials and administrative services,
actual cost means the actual cost to the General Partner, the
Manager or any of their Affiliates or of goods and materials
used for or by the Partnership and obtained from entities not
affiliated with a General Partner or the Manager, and actual
cost of administrative services, which are necessary to the
prudent operation of the Partnership, means the pro rata cost
of personnel (including an allocation of overhead directly
attributable to such personnel) as if such persons were
employees of the Partnership. The cost for administrative
services to be reimbursed to a General Partner, the Manager
or an Affiliate shall be at the lower of the General
Partner's, the Manager's or Affiliate's actual cost of such
services or the amount the Partnership would be required to
pay to independent parties for comparable administrative
services in the same geographic location. The General Partner
shall use its best efforts to cause all of the Partnership's
expenses to be billed directly to and paid by the Partnership
to the extent practicable.
B. Subject to the foregoing, the Partnership shall pay
all expenses (which expenses shall be billed directly to the
Partnership) of the Partnership which may include but are not
limited to: (a) all costs of personnel (excluding rent or
depreciation, utilities, capital equipment, and other
administrative items) employed full-time or part-time by the
Partnership and involved in the business of the Partnership
and allocated pro rata to their administrative services
performed on behalf of the
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Partnership, including Persons who may also be officers or
employees of the General Partner or its Affiliates (other
than Controlling Persons); (b) all costs of borrowed money,
taxes and assessments on Equipment and other taxes applicable
to the Partnership; (c) legal, audit, accounting, brokerage,
approval and other fees; (d) printing, engraving and other
expenses and taxes incurred in connection with the issuance,
distribution, transfer, registration and recording of
documents evidencing ownership of an Interest or Unit or in
connection with the business of the Partnership; (e) fees and
expenses paid to independent contractors, bankers, brokers,
servicers, leasing agents, equipment lease brokers, and
consultants and other agents (other than Controlling Persons
and other officers of the General Partner or its Affiliates);
(f) expenses in connection with the financing, disposition,
replacement, alteration, repair, sales, leasing, re-leasing,
refinancing and operating of the Equipment (including the
costs and expenses of appraisals, foreclosures, insurance
premiums, brokerage and leasing commissions and of
maintenance of such Equipment); (g) expenses of organizing,
revising, amending, converting, modifying or terminating the
Partnership; (h) the costs of preparation and dissemination
of the informational material and documentation relating to
potential sale, refinancing, leasing or other disposition of
Equipment; (i) expenses in connection with distributions made
by the Partnership to, and communications and bookkeeping and
clerical work necessary in maintaining relations with
Investors, including the costs of printing and mailing to
such persons certificates for Units and reports of meetings
of the Partnership, and of preparation of proxy statements
and solicitations of proxies in connection therewith; (j)
expenses in connection with preparing and mailing reports
required to be furnished to Investors for tax reporting or
other purposes, or which reports the General Partner deems
the furnishing thereof to Investors to be in the best
interests of the Partnership; (k) the costs and expenses
incurred in qualifying the Partnership to do business in any
jurisdiction, including fees and expenses of any resident
agent appointed by the Partnership; (1) the costs incurred in
connection with any litigation or regulatory proceedings in
which the Partnership is involved; and (m) computer services
including the cost of any computer equipment or services used
for or by the Partnership, including establishment and
maintenance of investment records and processing of
accounting records related to the Partnership.
C. Notwithstanding any other provision of this Agreement,
no reimbursement shall be permitted to the General Partner
for services for which the General Partner is entitled to
compensation by way of a separate fee, nor to the Manager,
except as provided under the Management Agreement.
Section 9.2 Fees and Other Payments
A. The Partnership shall cause the following payments and
fees to be paid to the General Partner, the Manager and their
respective Affiliates:
(i) to the Selling Agent, the Selling Commissions
and the Due Diligence Expense Reimbursement Fee.
(ii) to the General Partner or its Affiliates, the
Offering and Organization Expense Fee, of which 2.85%
shall be paid from Gross Proceeds of the Offering as the
Gross Proceeds of the Offering are raised and 2.80% shall
be paid from operating revenue of the Partnership upon
the earlier to occur of (a) the date on which 80% of the
Net Proceeds of the Offering has been invested in
Equipment or (b) December 31, 1990.
(iii) to the General Partner, the Manager or their
Affiliates, in reimbursement of the Acquisition Expenses,
if any, previously paid by such Person on behalf of the
Partnership in connection with the acquisition of
Equipment.
(iv) to the General Partner, an Acquisition Fee in
an amount equal to 0.75% Gross Proceeds of the Offering,
payable as Gross Proceeds of the Offering are raised.
(v) to the Manager, an Acquisition Fee in an amount
equal to 1.5% of the purchase price of any item of
Specified or Additional Equipment (whether from Net
Proceeds of the Offering or from reinvestment of
Distributable Cash and Net Disposition Proceeds), payable
upon the purchase of such Equipment.
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(vi) to the Manager, the Equipment and Lease
Management Fee, in accordance with the terms and
conditions of the Management Agreement and subject to
the limitations of Section 5.2A(xix).
(vii) to the Manager, the Equipment Re-Leasing Fee,
payable in accordance with the terms and conditions of
the Management Agreement and subject to the limitations
of Section 5.2A(xix).
(viii) to the Manager, the Subordinated Disposition
Fee, provided that payment of such fee shall cumulate
and not be payable until Payout occurs.
(ix) to the General Partner, an annual asset
management fee equal to $50,000 for 1990 and increasing
in each year thereafter by the annual increase in the
Consumer Price Index for All Urban Consumers for the
preceding calendar year; provided that the amount of any
such fee to be paid in any calendar year shall not
exceed 3% of the amount of Distributable Cash
distributed to the Investors and Partners for such year
pursuant to Section 4.3. B. Notwithstanding anything
else in this Agreement to the contrary, the cumulative
total of the
fees payable to the General Partner, the Manager and their
Affiliates as described in (i), (ii), (iii), (iv) and (v)
above shall not exceed the limitation on Front-End Fees
provided under Section 5.6F hereof.
C. Notwithstanding any other provisions of this
Agreement, in the event that the Management Agreement is
terminated and the General Partner or any of its Affiliates
performs some or all of the services agreed to be performed
by the Manager under the Management Agreement, the General
Partner or such Affiliate shall be entitled to receive as
compensation for such services (it being agreed and
understood that the provision of such services does not
constitute a part of the duties or obligations of the General
Partner as a general partner of the Partnership) the fees and
compensation which would otherwise be payable to the Manager
hereunder and under the Management Agreement.
ARTICLE X
BOOKS AND RECORDS; BANK ACCOUNTS; REPORTS
Section 10.1 Books and Records
A.Unless otherwise directed by the General Partner, the
books and records of the Partnership shall be maintained by
the General Partner at the Partnership's principal place of
business. In all cases, said books and records shall be
available for examination and copying by any Limited Partner,
Investor or his duly authorized representatives, for any
purpose related to the Limited Partner's or Investor's
interest as a Limited Partner or Investor, at the expense of
such Limited Partner or Investor, at any and all reasonable
times. The Partnership shall keep at its principal place of
business, without limitation, the following records: true and
full information regarding the status of the business and
financial condition of the Partnership; promptly after
becoming available, a copy of the Partnership's federal,
state and local income tax returns for each year; a current
list of the names and last known business, residence or
mailing addresses of and the numbers of Units held by each
Partner and Investor; a copy of this Agreement and the
Certificate and all amendments thereto; and other information
regarding the affairs of the Partnership as is just and
reasonable. The current list of the names and last known
business, residence or mailing addresses of each Partner and
Investor shall be mailed to any Investor upon payment of a
reasonable charge for copy work.
B. The Partnership shall keep its books and records in
accordance with the accounting methods determined by the
General Partner. The fiscal year of the Partnership shall be
the calendar year.
Section 10.2 Bank Accounts
A. The General Partner shall have fiduciary
responsibility for the safekeeping and use of all funds and
assets of the Partnership, whether or not in their immediate
possession or control. The General Partnership shall not
employ, or permit any other Person to employ, such funds in
any manner except for the benefit of the Partnership.
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B. The bank accounts of the Partnership shall be
maintained in such banking institutions as the General
Partner shall determine, and withdrawals shall be made only
in the regular course of Partnership business on the
signature of the General Partner or such other signature or
signatures as the General Partner may determine. All
deposits and other funds may be deposited in interest
bearing or non-interest bearing accounts guaranteed by
federal authorities, invested in short-term United States
Government or municipal obligations, or deposited with a
banking institution selected by the General Partner.
Section 10.3 Reports
A. No later than seventy-five (75) days after the end of
each calendar year, the General Partner will furnish each
Person who was an Investor or Limited Partner at any time
during the fiscal year with all tax information relating to
the Partnership's performance for the preceding calendar
year that is required to be set forth in the Investor's and
Limited Partner's federal and state income tax return.
B. Within sixty (60) days after the end of each of the
first three fiscal quarters of each fiscal year of the
Partnership, the General Partner will furnish to each Person
who was an Investor or Limited Partner at any time during
the fiscal quarter then ended, a report setting forth
information with respect to the progress of the
Partnership's business, which report shall include:
(i) an unaudited balance sheet of the Partnership;
(ii) unaudited condensed statements of income for
the quarter and year-to-date periods then ended;
(iii) an unaudited cash flow statement for the quarter;
(iv) an unaudited statement setting forth the
services rendered to, and fees received from, the
Partnership by any Sponsor; and
(v) other pertinent information concerning the
Partnership and its activities, including any material
developments or events affecting the Partnership or its
Equipment during the quarter. The various reports
required pursuant to this Section 10.3B may be sent
earlier than or sepa-
rately from any of the other reports required pursuant to
this Section 10.3B, and the information required to be
contained in any of the reports may be contained in more
than one report.
C. Within one hundred twenty (120) days after the end of
each fiscal year, the General Partner shall furnish an
annual report to each Person who was a Limited Partner or an
Investor as of the last business day of the fiscal year then
ended. Such annual report will include:
(i) a balance sheet as of the end of the
Partnership's fiscal year, statements of income,
Partners' equity and cash flow, which shall be prepared
in accordance with generally accepted accounting
principles and accompanied by (a) an auditor's report
containing an opinion of an independent certified public
accountant and (b) a reconciliation to information
furnished to Investors for income tax purposes;
(ii) a statement of any transactions with Sponsors,
and any of their respective Affiliates and fees,
commissions, compensation, reimbursements and other
benefits paid or accrued to the Sponsors, and any of
their respective Affiliates for such fiscal year,
showing the amount paid or accrued to each recipient and
the services performed;
(iii) the breakdown of any Partnership costs
reimbursed to a Sponsor; and (iv) a report of the
activities of the Partnership during the fiscal
year.
Within the scope of the annual audit by the Accountants,
the Accountants will verify that the amounts actually
reimbursed were costs incurred in the management of the
Partnership. The methods of verification used by the
Accountants will be in accordance with generally accepted
auditing standards. Within the scope of the annual audit of
the General Partner's financial statements, the independent
certified public accountants must issue a special report on
the allocation of such costs to
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the Partnership in accordance with the Partnership Agreement.
The special report shall at minimum provide:
(1) A review of the time records of individual
employees, the cost of whose services were reimbursed;
and
(2) A review of the specific nature of the work
performed by each such employee. 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
will be itemized by said accountants on a partnership by
partnership basis and may be reimbursed to the General Partner
by the Partnership in accordance with this subparagraph 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.
The annual report shall also set forth distributions to
the Investors for the period covered thereby and shall
separately identify distributions from (a) Distributable Cash
during the period, (b) Distributable Cash during a prior
period which had been held as reserves, (c) Net Disposition
Proceeds, and (d) Working Capital Reserves.
For each item of Equipment acquired by the Partnership
which individually represents at least 10% of the
Partnership's total Investment in Equipment, the annual report
shall include a status report which shall indicate (i) the
condition of the Equipment, (ii) how the Equipment is being
utilized as of the year end (whether leased, operated or held
for lease, repair or sale), (iii) the remaining term of any
lease, (iv) the projected use of the Equipment for the next
year (e.g., renew the 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 and basis for any
valuation.
D. Until the Net Proceeds of the Offering are fully
invested or returned to the Investors and Limited Partners as
set forth in Section 5.6F of this Agreement, the Partnership
shall prepare a report of Equipment acquisitions made by the
Partnership during each quarter. Such report will be
distributed to the Investors and Limited Partners within 60
days following the end of each quarter during which Equipment
acquisitions are made. Such report shall include, by way of
illustration and not of limitation, a statement of the actual
purchase price of Equipment acquired during the quarter, the
terms of the purchase and the applicable lease and a statement
of the total amount of cash expended by the Partnership to
acquire such Equipment (including all commissions, fees and
expenses).
E. The General Partner shall prepare and timely file with
appropriate federal and state regulatory authorities all
reports required to be filed with such entities under
then-applicable laws, rules and regulations. Such reports
shall be prepared on the accounting or reporting basis
required by such regulatory authorities. Upon request, copies
of such reports will be furnished to any Investor or Limited
Partner for any purpose reasonably related to the Investor's
or Limited Partner's interest as an Investor or a Limited
Partner. In the event that any regulatory authority
promulgates rules or amendments thereto that would permit a
reduction in any of the reporting requirements to which the
Partnership is subject under this Agreement at the time of the
execution hereof, the Partnership may cease to prepare and
file any such reports in accordance with such rules or
amendments.
F. The General Partner shall maintain, for a period of at
least six (6) years, a record of the information obtained to
indicate that an Investor has met the suitability standards
set forth in the Prospectus.
Section 10.4 Federal Tax Elections
The Partnership, in the sole discretion of the General
Partner, may make elections for federal tax purposes as
follows:
(i) In case of a transfer of a Unit, the Partnership, in
the sole discretion of the General Partner, may timely elect
pursuant to Section 754 of the Code (or corresponding
provisions of future law) and
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<PAGE>
pursuant to similar provisions of applicable state or local
income tax laws, to adjust the basis of the assets of the
Partnership.
(ii) All other elections required or permitted to be
made by the Partnership under the Code shall be made by the
General Partner in such manner as will, in their its sole
opinion, be most advantageous to a majority of the
Investors.
ARTICLE XI
MEETINGS OF INVESTORS
Section 11.1 Calling Meetings
Meetings of the Investors for any purpose may be called
by the General Partner and shall be called by the General
Partner upon receipt of a request in writing signed by
Investors having in the aggregate more than 10% of the
outstanding Units. Upon receipt of a written request stating
the purpose(s) of the meeting, the General Partner shall
provide all Investors within 10 days after receipt of such
request with notice as described in Section 11.2. The
meeting shall be held at a time and place convenient to the
Investors.
Section 11.2 Notice; Procedure
If a meeting is called at the request of the Investors,
the General Partner shall provide all Investors with notice
of such meeting given either personally or by certified
mail, which notice shall state the purpose thereof, such
meeting to be held on a date not less than fifteen (15) nor
more than sixty (60) days after the receipt by the General
Partner of the request for the meeting. Notice of any other
meeting shall be given either personally or by certified
mail, not 1ess than fifteen (I 5) days nor more than sixty
(60) days before the date of the meeting, to each Investor
at his record mailing address. The notice shall be in
writing, and shall state the place, date, hour, and purpose
of the meeting, and shall indicate that it is being issued
at or by the direction of the Partners or Investors calling
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 the holders of more than 50% of the`
outstanding Units shall constitute a quorum at all meetings
of the Investors; provided, however, that if there is no
quorum present, holders of a majority in interest of the
Investors 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 Investors need be given to any Investor who
attends in person or is present by proxy (except when an
Investor attends a meeting for the express purpose of
objecting at the beginning of the meeting to the transaction
of any business on the ground that the meeting is not
lawfully called or convened), or to any Investor entitled to
notice who, in a writing executed and filed with the records
of the meeting, either before or after the time of the
meeting, waives the notice requirement.
Section 11.3 Right to Vote
For the purpose of determining the Investors entitled
to vote at any meeting of the Partnership, the General
Partner or the Investors requesting the meeting may fix a
date, in advance, as the record date for the determination
of Investors entitled to vote. This date shall be not more
than fifty (50) days nor less than ten (10) days before any
meeting. Units purchased by the General Partner or the
Affiliates will not possess any voting rights.
Section 11.4 Proxies; Rules
Each Investor may authorize any person or persons to
act for him by proxy in all matters in which an Investor is
entitled to participate, whether by waiving notice of any
meeting, or voting or participating at a meeting. Every
proxy must be signed by the Investor or his
attorney-in-fact. No proxy shall be valid after the
expiration of 11 months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be
recoverable at the pleasure of the Investor executing it. At
each
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<PAGE>
meeting of Investors, the General Partner shall appoint
officers and adopt rules as they deem appropriate for the
conduct of the meeting.
ARTICLE XII
GENERAL PROVISIONS
Section 12.1 Appointment of General Partner as Attorney-in-Fact
A. Each Limited Partner and Investor hereunder hereby
irrevocably appoints and empowers the General Partner his
attorney-in-fact to consent to or ratify any act listed in
Subsections 5.4A(i) through (xxii) and Section 6.3C of this
Agreement after the Majority Vote of the Investors thereto has
been obtained, and to execute, acknowledge, swear to and
deliver all agreements and instruments and file all documents
requisite to carrying out the intentions and purposes
contemplated in this Agreement, including, without limitation,
the execution and delivery of this Agreement and all
amendments hereto, the filing of all business certificates and
necessary certificates of limited partnership and amendments
thereto from time to time in accordance with all applicable
laws and any certificates of cancellation.
B. The appointment by all Limited Partners and Investors
of the General Partner as attorney-in-fact shall be deemed to
be a power coupled with an interest, shall not be affected by
the subsequent disability or incapacity of the principal and
shall survive the assignment by any Limited Partners or
Investors of the whole or any part of his Interests or Units
in the Partnership.
C. The power of attorney granted by this Section 12.1
shall be governed by the laws of the State of Delaware.
Section 12.2 Waiver of Partition
Each Partner and Investor, on behalf of himself, his
successors, representatives, heirs and assigns hereby waives
any right of partition or any right to take any other action
which otherwise might be available to him for the purpose of
severing his relationship with the Partnership or his interest
in the assets held by the Partnership from the interest of the
other Partners or Investors.
Section 12.3 Notification
Any Notification, in order to be effective, shall be sent
by registered or certified mail, postage prepaid, if to a
Partner or Investor, to the address of the Partner or Investor
set forth in the books and records of the Partnership, and if
to the Partnership, to the principal place of business of the
Partnership set forth in Section 2.2 (unless Notification of a
change of the principal office is given), the date of registry
thereof or the date of the certification thereof being deemed
the date of receipt of Notification; provided, however, that
any written communication sent to a Partner or Investor or to
the Partnership and actually received by such Person shall
constitute Notification for all purposes of this Agreement.
Section 12.4 Word Meanings
In this Agreement, the singular shall include the plural
and the masculine gender shall include the feminine and neuter
and vice versa, unless the context otherwise requires.
Section 12.5 Binding Provisions
The covenants and agreements contained herein shall be
binding upon, and inure to the benefit of, the heirs, personal
representatives, successors and assigns of the respective
parties hereto.
Section 12.6 Applicable Law
This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware, without
regard to principles of conflict of laws.
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<PAGE>
Section 12.7 Counterparts
This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an
original as against any party whose signature appears
thereon, and all of which shall together constitute one and
the same instrument. This Agreement shall become binding
upon the date hereof. Each Additional or Successor General
Partner shall become a signatory hereof by signing such
number of counterparts of this Agreement and such other
instrument or instruments, and in such manner as the General
Partner shall determine, and by so signing, shall be deemed
to have adopted and to have agreed to be bound by all the
provisions of this Agreement.
Section 12.8 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 or contrary to any
existing or future law, such invalidly shall not impair the
operation of or affect those portions of this Agreement
which are valid.
Section 12.9 Paragraph Titles
Paragraph titles are for descriptive purposes only and
shall not control or alter the meaning of this Agreement as
set forth in the text.
Section 12.10 Entire Agreement
This Agreement and the exhibits and documents referred
to herein constitute the entire understanding and agreement
among the parties hereto with respect to the subject matter
hereof, and supersede all prior and contemporaneous
agreements and understandings, inducements or conditions,
express or implied, oral or written, except as herein
contained. This Agreement may not be modified or amended
other than by an agreement in writing.
Section 12.11 Amendments
A. In addition to the amendments otherwise authorized
herein, amendments may be made to this Agreement from time
to time by the General Partner with the Majority Vote of the
Investors; provided, however, that without the consent of
the Partners or Investors to be adversely affected by the
amendment, except as provided in Section 12.11B, this
Agreement may not be amended so as to (i) convert an
Investor's interest into a General Partner's interest; (ii)
modify the limited liability of an Investor; (iii) alter the
interest of a Partner or Investor in Distributable Cash,
Profit or Loss, or Net Disposition Proceeds; or (iv)
increase the amount of the Capital Contributions required to
be paid by the Investors.
B. In addition to the amendments otherwise authorized
herein, amendments may be made to this Agreement from time
to time by the General Partner, without the consent of any
of the Investors, (i) to add to the duties or obligations of
the General Partner or surrender any right or power granted
to the General Partner herein, for the benefit of the
Investors; (ii) to cure any ambiguity, to correct or
supplement any provision herein which may be inconsistent
with any other provision herein, or to make any other
provisions with respect to matters or questions arising
under this Agreement which will not be inconsistent with the
provisions of this Agreement; (iii) to delete or add any
provision of this Agreement required to be deleted or added
by the Staff of the Securities and Exchange Commission or
other federal agency or by a state securities commissioner
or similar official and deemed by the commission, agency,
commissioner, or official to be for the benefit or
protection of the Investors; (iv) to make such amendments to
this Agreement which, in the opinion of counsel to the
Partnership, are necessary to ensure the continuation of
partnership status for federal income tax purposes;
provided, however, that, in the opinion of counsel to the
Partnership, such amendments do not adversely affect in any
way the rights or interests of any of the Investors; (v) to
take any actions necessary to cause the assets of the
Partnership to come within the exclusion from the definition
of "plan assets" contained in Section 2550.40lb-1 of Title
29 of the Code of Federal Regulations or to cause the
Partnership to comply with any requirement the Department of
Labor may impose as a
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<PAGE>
condition to granting a prohibited transaction exemption; and
(vi) to give effect to any action permitted pursuant to Section
5.2; provided, however, that no amendment shall be adopted
pursuant to this Section 12.2B unless its adoption (1) is not
adverse to the interests of the Investors; (2) is consistent
with Section 5.2; (3) does not affect the distribution of
Distributable Cash or Net Disposition Proceeds or the
allocation of Profit or Loss among the Investors as a class and
the General Partner, except as provided below; and (4) does not
affect the limited liability of the Investors or the status of
the Partnership as a partnership for federal income tax
purposes. In addition to the amendments otherwise authorized
herein, amendments may be made to this Agreement to amend
provisions of Article IV of this Agreement relating to the
allocations of Profit or Loss and to distributions of
Distributable Cash or Net Disposition Proceeds among the
Partners and Investors if the Partnership is advised at any
time by the Partnership's Accountants and counsel that the
allocations provided in Article IV of this Agreement are
unlikely to be respected for federal income tax purposes. The
General Partner is empowered to amend the distribution and
allocation provisions of Article IV pursuant to this Section
12.11B to the minimum extent necessary in accordance with the
advice of the Partnership's Accountants and counsel to effect
the plan of distribution of Distributable Cash and Net
Disposition Proceeds, and, consistent therewith, the
allocations of Profit and Loss provided in this Agreement. New
allocations made by the General Partner in reliance upon the
advice of the Partnership's Accountants and counsel shall be
deemed to be made pursuant to the fiduciary obligation of the
General Partner to the Partnership and the Investors. This
Section 12.11 shall be subject to the provisions of Section 5.9
of this Agreement.
C. If this Agreement is amended as a result of adding or
substituting a Limited Partner or increasing the investment of
a Limited Partner, the amendment shall be signed by the General
Partner and by the Person to be substituted or added, or the
Limited Partner increasing his investment in the Partnership,
and, if a Limited Partner is to be substituted, by the
assigning Limited Partner. If this Agreement is amended to
reflect the designation of an Additional General Partner, the
amendment shall be signed by the other General Partner or
General Partner and by the Additional General Partner. If this
Agreement is amended to reflect the withdrawal of a General
Partner when the business of the Partnership is being
continued, the amendment shall be signed by the withdrawing
General Partner and by the remaining or successor General
Partner or General Partners.
D. In making any amendments, there shall be prepared and
filed for recordation by the General Partner all documents and
certificates required to be prepared and filed under the Act
and under the laws of the other jurisdictions under the laws of
which the Partnership is then formed or qualified.
A-41
<PAGE>
IN WITNESS WHEREOF, parties hereto have executed
this Agreement as of the day of ,1990,
effective as of the date first above written.
GENERAL PARTNER
ATTEST: REDWOOD LEASING, INC.
By: (SEAL)
Name:
Title:
ASSIGNOR LIMITED PARTNER:
ATTEST: REDWOOD LEASING HOLDING COMPANY INC.
By: (SEAL)
Name:
Title:
MNC SPECIAL LIMITED PARTNER:
ATTEST: MARYLAND NATIONAL LEASING
SERVICES CORPORATION
By: (SEAL)
Name:
Title:
ABR SPECIAL LIMITED PARTNER:
ATTEST: REALTY ASSOCIATES 1988 LIMITED PARTNERSHIP
By: (SEAL)
Name:
Title:
A-42
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<NAME> Redwood Equipment Leasing Income Fund
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
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<CURRENT-ASSETS> 548,377
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<TOTAL-ASSETS> 1,270,331
<CURRENT-LIABILITIES> 34,562
<BONDS> 0
0
0
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<TOTAL-LIABILITY-AND-EQUITY> 1,270,331
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<INCOME-PRETAX> 104,185
<INCOME-TAX> 0
<INCOME-CONTINUING> 104,185
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