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APPENDIX A
AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP
OF
LEASE EQUITY APPRECIATION FUND II, L.P.
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TABLE OF CONTENTS
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I.
DEFINITIONS..............................................................................
1
1.1
Defined
Terms..................................................................
1
II.
FORMATION OF
PARTNERSHIP.................................................................
11
2.1
Formation of
Partnership.......................................................
11
III.
NAME.....................................................................................
11
3.1
Name...........................................................................
11
IV.
PLACES OF
BUSINESS.......................................................................
11
4.1
Principal Place of
Business....................................................
11
4.2
Other Places of
Business.......................................................
11
V.
NAMES AND ADDRESSES OF
PARTNERS..........................................................
11
5.1
Names and Addresses of
Partners................................................
11
VI.
PURPOSES AND
OBJECTIVES..................................................................
12
6.1
Purposes.......................................................................
12
6.2
Investment
Objectives..........................................................
12
VII.
TERM.....................................................................................
12
7.1
Term...........................................................................
12
VIII. PARTNERS
AND
CAPITAL.....................................................................
12
8.1
General
Partner................................................................
12
8.2
Original Limited
Partner.......................................................
12
8.3
Limited
Partners...............................................................
12
8.4
Partnership
Capital............................................................
14
8.5
Capital
Accounts...............................................................
14
8.6
Additional Capital
Contributions...............................................
15
8.7
Loans by
Partners..............................................................
16
8.8 No
Right to Return of
Capital..................................................
16
IX.
POWERS, RIGHTS AND DUTIES OF GENERAL
PARTNER.............................................
16
9.1
Extent of Powers and
Duties....................................................
16
9.2
Limitations on the Exercise of Powers of General
Partner.......................
19
9.3
Limitation on Liability of General Partner and its Affiliates;
Indemnification.
22
9.4
Compensation of General Partner and its
Affiliates.............................
23
9.5
Other Interests of the General Partner and its
Affiliates......................
25
X.
POWERS AND LIABILITIES OF LIMITED
PARTNERS...............................................
26
10.1 Absence of
Control Over Partnership
Business...................................
26
10.2
Limited
Liability..............................................................
26
XI.
DISTRIBUTIONS AND
ALLOCATIONS............................................................
27
11.1
Distribution of Distributable
Cash.............................................
27
11.2
Allocations of Income and
Loss.................................................
27
11.3
Distributions and Allocations Among the Limited
Partners.......................
29
11.4 Tax
Allocations: Code Section 704(c);
Revaluations.............................
30
11.5 Return of
Uninvested Capital
Contribution......................................
30
11.6 No
Distributions in
Kind.......................................................
30
11.7
Partnership Entitled to
Withhold...............................................
31
XII.
WITHDRAWAL OF GENERAL
PARTNER............................................................
31
12.1 Voluntary
Withdrawal...........................................................
31
12.2
Involuntary
Withdrawal.........................................................
31
12.3
Consequences of
Withdrawal.....................................................
32
12.4 Liability
of Withdrawn General
Partner.........................................
32
12.5 Notice of
Withdrawal; Admission of Substitute General Partner; Dissolution
if
No Substitute General Partner
Approved.........................................
32
XIII. TRANSFER
OF
UNITS........................................................................
33
13.1 Withdrawal
of a Limited
Partner................................................
33
13.2
Assignment.....................................................................
33
13.3
Substitution...................................................................
34
13.4 Status of
an Assigning Limited
Partner.........................................
35
13.5 Limited
Right of Presentment for Redemption of
Units...........................
35
XIV.
DISSOLUTION AND
WINDING-UP...............................................................
36
14.1 Events
Causing
Dissolution.....................................................
36
14.2 Winding Up
of the Partnership; Capital Contribution by the General Partner
Upon
Dissolution....................................................................
37
14.3
Application of Liquidation Proceeds Upon
Dissolution...........................
38
14.4 No
Recourse Against Other
Partners.............................................
38
XV.
FISCAL
MATTERS...........................................................................
38
15.1 Title to
Property and Bank
Accounts............................................
38
15.2
Maintenance of and Access to Basic Partnership
Documents.......................
38
15.3 Financial
Books and
Accounting.................................................
40
15.4 Fiscal
Year....................................................................
40
15.5
Reports........................................................................
40
15.6 Tax
Returns and Tax
Information................................................
42
15.7 Accounting
Decisions...........................................................
42
15.8 Federal
Tax
Elections..........................................................
42
15.9 Tax
Matters
Partner............................................................
42
XVI.
MEETINGS AND VOTING RIGHTS OF THE LIMITED
PARTNERS.......................................
43
16.1 Meetings
of the Limited
Partners...............................................
43
16.2 Voting
Rights of the Limited
Partners..........................................
44
16.3
Limitations on Action by the Limited
Partners..................................
45
XVII.
AMENDMENTS...............................................................................
45
17.1 Amendments
by the General
Partner..............................................
45
XVIII. POWER OF
ATTORNEY........................................................................
46
18.1
Appointment of
Attorney-in-Fact................................................
46
18.2 Amendments
to Agreement and Certificate of Limited
Partnership.................
46
18.3 Power
Coupled With an
Interest.................................................
46
XIX.
GENERAL
PROVISIONS.......................................................................
47
19.1 Notices,
Approvals and
Consents................................................
47
19.2 Further
Assurances.............................................................
47
19.3
Captions.......................................................................
47
19.4 Binding
Effect.................................................................
47
19.5
Severability...................................................................
48
19.6
Integration....................................................................
48
19.7 Applicable
Law.................................................................
48
19.8
Counterparts...................................................................
48
19.9
Creditors......................................................................
48
19.10 Successors and
Assigns.........................................................
48
19.11 Waiver of Action
for Partition.................................................
48
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AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
LEASE EQUITY APPRECIATION FUND II, L.P.
This Amended and Restated Agreement of
Limited Partnership is made and entered
into by and among LEAF FINANCIAL
CORPORATION, a corporation organized and
existing under the laws of the State of
Delaware, as the General Partner,
Miles Herman, as the "Original Limited
Partner," and such other persons who
may be admitted from time to time as
Limited Partners.
ARTICLE I - DEFINITIONS
1.1 DEFINED TERMS
Defined terms used in this Agreement shall
have the meanings specified below.
Certain additional defined terms are set
forth elsewhere in this Agreement.
Unless the context otherwise requires, the
singular shall include the plural and
the masculine gender shall include the
feminine and neuter, and vice versa, and
"Article" and "Section" references are
references to the Articles and Sections
of this Agreement.
(a)
"ACCOUNTANTS" means any firm of independent certified public
accountants that is engaged from time to time by the General
Partner on behalf of the Partnership.
(b)
"ACQUISITION EXPENSES" means expenses (other than
Acquisition Fees) incurred and paid to any Person which are
attributable to the selection and acquisition of
Investments, whether or not acquired, including, but not
limited to, legal fees and expenses, travel and
communication expenses, costs of credit reports, appraisals
and reference materials used to evaluate transactions, non-
refundable option payments on Investments not acquired,
accounting fees and expenses, insurance costs and
miscellaneous other expenses, however designated.
(c)
"ACQUISITION FEES" means all fees and commissions paid by
any party in connection with the initial purchase or funding
of any Investment, including fees payable to finders and
brokers which are not Affiliates of the General Partner.
Also, included in the computation of such fees or
commissions shall be any commission, selection fee,
financing fee, non-recurring management fee, or any fee of a
similar nature, however designated.
(d) "ADJUSTED
CAPITAL ACCOUNT DEFICIT" means with respect to any
Capital Account as of the end of any taxable year, the
amount by which the balance in such Capital Account is less
than zero. For this purpose, a Partner's Capital Account
balance shall be:
(i)
reduced for any items described in Treas. Reg.
Section 1.704- 1(b)(2)(ii)(d)(4),(5), and (6);
(ii) increased
for any amount such Partner is
unconditionally obligated to contribute to the
Partnership no later than the end of the taxable
year in which his or her Units, or the General
Partner's Partnership Interest, are liquidated (as
defined in Treas. Reg. Section 1.704-
1(b)(2)(ii)(g)) or, if later, within 90 days after
such liquidation; and
(iii) increased for
any amount such Partner is treated as
being obligated to contribute to the Partnership
pursuant to the penultimate sentences of Treas.
Reg. Sections 1.704-2(g)(1) and 1.704-2(i)(5)
(relating to minimum gain).
(e) "ADJUSTED
CAPITAL CONTRIBUTION" means, as to any Limited
Partner, as determined from time to time, the Limited
Partner's Capital Contribution reduced, but not below zero,
by all distributions previously made to the Limited Partner
by the Partnership which are deemed to reduce the Limited
Partner's Capital Contribution under Section 11.3(d)(ii),
and by all payments previously made to the Limited Partner
in Redemption of a portion or all of the Limited Partner's
Units under Section 13.5.
(f)
"ADMINISTRATOR"
means the official or agency administering
the securities laws of a state or other political
subdivision of the United States.
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(g)
"AFFILIATE" means, with respect to any Person:
(i) any
other Person directly or indirectly
controlling, controlled by or under common control
with such Person;
(ii) any
officer, director or partner of such Person;
(iii) any other Person
owning or controlling 10% or more
of the outstanding voting securities of such
Person; and
(iv) if such
Person is an officer, director or partner,
any other Person for which such Person acts in such
capacity.
(h)
"AFFILIATED LIMITED PARTNER" means the General Partner and
any officer, director, employee or other Affiliate of the
General Partner, the Dealer-Manager, the Selling Dealers and
any registered representative or principal of a Selling
Dealer, registered investment advisors and their clients and
investors who buy units through the officers and directors
of the General Partner, to the extent they purchase Units
under Section 8.3(c) and are admitted as a Limited Partner
at a Closing.
(i)
"AFFILIATED PROGRAM" means any Program formed by the General
Partner or any Affiliate of the General Partner or in which
the General Partner or any of its Affiliates has an
interest.
(j)
"AGREEMENT" means this Amended and Restated Agreement of
Limited Partnership, as it may hereafter be amended,
supplemented or restated from time to time.
(k) "ASSIGNEE"
means any Person to whom any Unit or Partnership
Interest has been Assigned, in whole or in part, in a manner
permitted by Section 13.2.
(l)
"ASSIGNMENT" means, with respect to any Unit or Partnership
Interest or any part thereof, the sale, assignment,
transfer, gift or other disposition of such Unit or
Partnership Interest, whether voluntarily or by operation of
law, except that in the case of a bona fide pledge or other
hypothecation, no Assignment shall be deemed to have
occurred unless and until the secured party has exercised
his right
of foreclosure with respect thereto.
(m) "BOOK
VALUE" means, with respect to any Partnership
property, the Partnership's adjusted basis for federal
income tax purposes, adjusted from time to time to reflect
the adjustments required or permitted by Treas. Reg. Section
1.704-1(b)(2)(iv)(d)-(g).
(n) "CAPITAL
ACCOUNT" means the capital account maintained for
each Partner under Section 8.5.
(o) "CAPITAL
CONTRIBUTIONS" means:
(i) as
to the General Partner, its initial $1,000
contribution to the capital of the Partnership plus
any additional amounts as may be contributed to the
capital of the Partnership by the General Partner;
and
(ii) as to any
Limited Partner, the gross amount of
investment in the Partnership actually paid by such
Limited Partner, i.e. either the Gross Unit Price
or the Net Unit Price, without deduction for Front-
End Fees (whether payable by the Partnership or
not), but excluding funds reinvested under Section
9.1(b)(xxvii).
(p) "CASH
FLOW" means the Partnership's Gross Revenue, without
deduction for depreciation, but after deducting cash funds
used to pay all other expenses, debt payments, capital
improvements and replacements (other than cash funds
withdrawn from Reserves).
(q) "CLOSING"
means the admission of Limited Partners to the
Partnership in accordance with Section 8.3.
(r) "CLOSING
DATE" means any date on which any Limited Partner
is admitted to the Partnership, and includes the Initial
Closing Date, any subsequent Closing Date and the Final
Closing Date.
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(s) "CODE"
means the Internal Revenue Code of 1986, as amended,
or corresponding provisions of subsequent laws.
(t)
"COMMISSION" means the Securities and Exchange Commission.
(u) "CONSENT"
means:
(i)
consent given by vote at a meeting called and held
in accordance with the provisions of Section 16.1;
or
(ii) the
written consent without a meeting of any Person
to do the act or thing for which the consent is
solicited; or
(iii) the act of
granting such consent;
as the context may require.
(v)
"CONTROLLING PERSON" means, with respect to the General
Partner or any
Affiliate of the General Partner, any of its
chairmen, directors, presidents, or other executive or
senior officers, any holder of a 5% or greater equity
interest in the General Partner or any such Affiliate, or
any Person having the power to direct or cause the direction
of the General Partner or any such Affiliate, whether
through the ownership of voting securities, by contract or
otherwise.
(w) "COUNSEL"
and "COUNSEL TO THE PARTNERSHIP" means any law
firm that may be engaged from time to time by the General
Partner on behalf of the Partnership.
(x)
"CUMULATIVE RETURN" means, as to any Limited Partner, an
amount equal to an 8% annual (0.66667% monthly) cumulative
return on the Limited Partner's Adjusted Capital
Contribution (without reduction for any distribution made or
to be made to the Limited Partner on the date of
calculation) calculated from a date not later than the last
day of the calendar quarter in which the Capital
Contribution of the Limited Partner as to which the
Cumulative Return is being calculated was made.
(y)
"DEALER-MANAGER" means:
(i)
Anthem Securities, Inc., an Affiliate of the
General
Partner, the broker/dealer which will
manage the offering and sale of the Units in all
states other than Minnesota and New Hampshire; and
(ii) Bryan
Funding, Inc., the broker/dealer which will
manage the offering and sale of the Units in
Minnesota and New Hampshire.
(z)
"DEALER-MANAGER AGREEMENT" means the agreement entered into
between the General Partner and the Dealer-Manager,
substantially in the form thereof filed as an exhibit to the
Registration Statement.
(aa)
"DEALER-MANAGER FEE" means, in the aggregate, fees payable
to the Dealer-Manager in an amount equal to 3% of the Gross
Unit Price per Unit sold.
(bb)
"DELAWARE ACT" means the Delaware Revised Uniform Limited
Partnership Act, as amended, and any successor thereto.
(cc)
"DISTRIBUTABLE CASH" means Cash Flow plus any amounts
released from Reserves by the General Partner, less amounts
allocated to Reserves by the General Partner.
(dd)
"DUE DILIGENCE EXPENSES" means fees and expenses actually
incurred for bona fide due diligence efforts expended in
connection with the Offering, not to exceed .5% of the Gross
Unit Price per Unit sold.
(ee)
"EFFECTIVE DATE" means the date the Registration Statement
is declared effective by the Commission.
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(ff)
"EQUIPMENT" means any new, used or reconditioned equipment
and related property acquired by the Partnership, or in
which the Partnership has acquired a direct or indirect
interest, and shall also be deemed to include such equipment
and related property or other tangible and intangible
personal property which at any time is subject to, or the
collateral for, a Lease or a Secured Loan.
(gg)
"ESCROW ACCOUNT" means an interest-bearing account
established and maintained by the Partnership, the General
Partner and the Dealer-Manager with the Escrow Agent in
accordance with the terms of the Escrow Agreement for the
purpose of holding, pending the distribution thereof in
accordance with the terms of this Agreement, any
Subscription Monies received from Persons who are to be
admitted as Limited Partners on the Initial Closing Date.
(hh)
"ESCROW AGENT" means Commerce Bank, NA, or another United
States banking institution with at least $50 million in
assets, which shall be selected by the General Partner to
serve in such capacity pursuant to the Escrow Agreement.
(ii)
"ESCROW AGREEMENT" means the Escrow Agreement between the
Partnership and the Escrow Agent, filed as an exhibit to the
Registration Statement, as amended and supplemented from
time to time as permitted by the terms thereof.
(jj)
"FINAL CLOSING DATE" means the last Closing Date on which
any Limited Partner (other than a Substitute Limited
Partner) shall be admitted to the Partnership, which shall
be as soon as practicable following the Termination Date.
(kk)
"FINANCING TRANSACTION" means:
(i) any
extension of credit or loan which is secured by
a security interest in Equipment or other tangible
or intangible personal property; any Lease of such
property or any Secured Loan;
(ii) any notes
issued in connection with a
securitization of equipment leases, lease
receivables or Secured Loans; or
(iii) any transaction
in which Equipment, equipment
leases or Secured Loans are sold to a Person for
purposes of securitization and with customary
retained rights or interests.
(ll)
RESERVED
(mm)
"FISCAL PERIOD" means any interim accounting period
established by the General Partner within a Fiscal Year.
(nn)
"FISCAL QUARTER" means, for each Fiscal Year, the 3-
calendar-month period which commences on the first day of
such Fiscal Year and each additional 3-calendar-month period
commencing on the first day of the first month following the
end of the preceding such period within such Fiscal Year (or
such shorter
period ending on the last day of a Fiscal
Year).
(oo)
"FISCAL YEAR" means the Partnership's annual accounting
period established pursuant to Section 15.4.
(pp)
"FRONT-END FEES" means fees and expenses paid by any Person
for any services rendered during the Partnership's
organizational and offering or acquisition phases, including
Sales Commissions, Dealer-Manager Fees, Organization and
Offering Expense Allowances, Acquisition Fees and
Acquisition Expenses (other than any Acquisition Fees or
Acquisition Expenses paid by a manufacturer of equipment to
any of its employees unless such Persons are Affiliates of
the General Partner) and all other similar fees however
designated.
(qq)
"FULL-PAYOUT LEASE" means any lease pursuant to which the
aggregate noncancellable rental payments due during the
initial term of such lease, on a net present value basis,
are at least sufficient to permit the Partnership to recover
the Purchase Price of the Equipment subject to such lease.
(rr)
"GENERAL PARTNER" means LEAF Financial Corporation, and its
successors or permitted assigns, as general partner of the
Partnership.
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(ss)
"GROSS ASSET VALUE" means, with respect to any asset of the
Partnership, the asset's adjusted tax basis, except that:
(i) the
initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall
be the gross fair market value of such asset at the
time of such contribution;
(ii) the Gross
Asset Values of all Partnership assets
shall be adjusted to equal their respective gross
fair market values at the time specified in Treas.
Reg. Section 1.704- 1(b)(2)(iv)(f)(5) if the
Partnership so elects;
(iii) the Gross Asset
Value of any Partnership asset
distributed to any Partner shall be the gross fair
market value of such asset on the date of
distribution;
(iv) to the
extent not otherwise reflected in the
Partners' Capital Accounts, the Gross Asset Values
of Partnership assets shall be increased (or
decreased) to appropriately reflect any adjustments
to the adjusted basis of such assets pursuant to
Code Section 734(b) or Code Section 743(b); and
(v) if
on the date of contribution of an asset or a
revaluation of an asset in accordance with clauses
(ii) through (iv), above, the adjusted tax basis of
such asset differs from its fair market value, the
Gross Asset Value of such asset shall thereafter be
adjusted by reference to the depreciation method
described in Treas. Reg. Section 1.704-
1(b)(2)(iv)(g)(3).
(tt)
"GROSS OFFERING PROCEEDS" means the gross amount of Capital
Contributions, before deduction of Front-End Fees, of all
Limited Partners admitted to the Partnership.
(uu)
"GROSS REVENUE" means gross cash receipts of the Partnership
from whatever source, excluding Capital Contributions.
(vv)
"GROSS UNIT PRICE" means $100.
(ww) "INCOME" or "LOSS"
means, for any Fiscal Year, the
Partnership's taxable income or loss for such Fiscal Year,
determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Code Section
703(a)(1) shall be included in taxable income or loss), with
the following adjustments:
(i) any
income of the Partnership that is exempt from
federal income tax and not otherwise taken into
account in computing Income or Losses shall be
applied to increase such taxable income or reduce
such loss;
(ii) any
expenditure of the Partnership described in
Code Section 705(a)(2)(B), or treated as such
pursuant to Treas. Reg. Section 1.704-
1(b)(2)(iv)(i) and not otherwise taken into account
in computing Income and Loss, shall be applied to
reduce such taxable income or increase such loss;
(iii) gain or loss
resulting from a taxable disposition
of any asset of the Partnership shall be computed
by reference to the Gross Asset Value of such asset
and the special depreciation calculations described
in Treas. Reg. Section 1.704- 1(b)(2)(iv)(g),
notwithstanding that the adjusted tax basis of such
asset may differ from its Gross Asset Value;
(iv) in lieu of
the depreciation, amortization, and
other cost recovery deductions taken into account
in computing such taxable income or loss for such
Fiscal Year, there shall be taken into account
depreciation, amortization or other cost recovery
determined pursuant to the method described in
Treas. Reg. Section 1.704-1(b)(2)(iv)(g)(3); and
(v) any
items which are specially allocated pursuant to
Section 11.2(f) shall not be taken into account in
computing Income or Loss.
(xx)
"INDEBTEDNESS" means, with respect to any Person as of any
date, all obligations of such Person (other than capital,
surplus, deferred income taxes and, to the extent not
constituting obligations, other deferred credits
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and reserves) that could be classified as liabilities
(exclusive of accrued expenses and trade accounts payable
incurred in respect of property purchased in the ordinary
course of business which are not overdue or which are being
contested in good faith by appropriate proceedings and are
not so required to be classified on such balance sheet as
debt) on a balance sheet prepared in accordance with
generally accepted accounting principles as of such date.
(yy)
"INDEPENDENT EXPERT" means a Person with no material current
or prior business or personal relationship with the General
Partner or its Affiliates, who is engaged to a substantial
extent in the business of rendering appraisals and who is
qualified to perform the work.
(zz)
"INITIAL CLOSING DATE" means the first Closing Date for the
Partnership on which Limited Partners with Units equal to,
or greater than, the Minimum Offering are admitted to the
Partnership.
(aaa)
"INVESTMENT IN EQUIPMENT" means the aggregate amount of
Capital Contributions actually paid or allocated to the
purchase, manufacture or renovation of Equipment acquired by
the Partnership, together with other cash payments such as
interest, taxes and Reserves allocable thereto (to the
extent that Reserves do not exceed 3% of Capital
Contributions),
but excluding Front-End Fees.
(bbb)
"INVESTMENT COMMITTEE" means a committee of the board of
directors of the General Partner to establish credit review
policies and procedures, supervise the efforts of the
General Partner's credit department, approve significant
transactions and transactions which differ from the
standards and procedures the Investment Committee has
established and, pursuant to Section 9.5, to resolve
conflicts in allocating Investments among Programs.
(ccc)
"INVESTMENTS" means the Partnership's portfolio, from time
to time, of Equipment, Leases and Secured Loans.
(ddd)
"IRA" means an Individual Retirement Account.
(eee)
"IRS" means the Internal Revenue Service or any successor
agency thereto.
(fff)
"LEASE" means any Full-Payout Lease, any Operating Lease and
any residual value interest therein.
(ggg)
"LENDER" means any Person that lends cash or cash
equivalents to the Partnership, including any Person that
acquires by purchase, assignment or otherwise an interest in
the future amounts payable under any Lease or Secured Loan
and in the related Equipment or other assets or in payments
due under any Financing Transaction, and any property
securing any such transaction.
(hhh)
"LESSEE" means a lessee under a Lease.
(iii)
"LIMITED PARTNER" means any Person who is the owner of at
least one Unit and who has been admitted to the Partnership
as a Limited Partner or an Affiliated Limited Partner and
any Person who becomes a Substitute Limited Partner, in
accordance with this Agreement, in such Person's capacity as
a Limited Partner of the Partnership.
(jjj)
"LIQUIDATION PERIOD" means the period commencing on the
first day following the end of the Reinvestment Period and
continuing for the period deemed necessary by the General
Partner for orderly termination of the Partnership's
operations and affairs, and for liquidation or disposition
of the Partnership's Investments.
(kkk)
"MAJORITY" or "MAJORITY INTEREST" means Limited Partners
owning more than 50% of the aggregate outstanding Units.
(lll)
"MANAGEMENT FEES" means, for any month, the following fees
one or all of which may be payable to the General Partner,
in an amount equal to the lesser of the maximum fees set
forth below in (i) through (iv) below, compared with, in
each case, the fees which are reasonable, competitive, and
would customarily be paid to non-affiliated third-parties
rendering similar services in the same geographic location
and for similar types of investments. The maximum permitted
Management Fees for (i) through (iv) are as follows:
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(i) an
amount equal to 0.08335% (1% annually) of Gross
Revenues on Operating Leases managed by third-
parties under the General Partner's supervision;
(ii) an amount
equal to 0.33333% (4% annually) of Gross
Revenues on Operating Leases managed by the General
Partner or its Affiliates;
(iii) an amount equal
to 0.16667% (2% annually) of Gross
Revenues on Full-Payout Leases which contain Net
Lease Provisions; and/or
(iv) an amount
equal to 0.16667% (2% annually) of Gross
Revenues on Secured Loans.
(mmm)
"MAXIMUM OFFERING" means receipt and acceptance by the
Partnership of subscriptions for 600,000 Units on or before
the Final Closing Date.
(nnn)
"MINIMUM OFFERING" means receipt and acceptance by the
Partnership of subscriptions for not less than 20,000 Units,
excluding the 10 Units subscribed for by the Original
Limited Partner and any Units subscribed for by the General
Partner or its officers, directors, employees or other
Affiliates.
(ooo)
"NASD" means the National Association of Securities Dealers,
Inc.
(ppp)
RESERVED
(qqq) "NET
LEASE PROVISIONS" means contractual arrangements under
which the lessee assumes responsibility for, and bears the
cost of, insurance, taxes, maintenance, repair and operation
of the leased asset and where the non-cancellable rental
payments under the lease are absolutely net to the lessor.
Notwithstanding, a lease may be deemed to contain net lease
provisions even if some minor costs or responsibilities
remain with the lessor or if the lessor retains the option
to require and pay for a higher standard of care or a
greater level of maintenance or insurance, than would be
imposed on the lessee under the terms of the lease.
(rrr) "NET
OFFERING PROCEEDS" means the Gross Offering Proceeds
minus the Dealer-Manager Fees, Sales Commissions, Due
Diligence Expenses and the Organization and Offering Expense
Allowance payable by the Partnership.
(sss) "NET
UNIT PRICE" means the Gross Unit Price less an amount
equal to 7% of the Gross Unit Price (equivalent to the Sales
Commission) for each Unit or fraction thereof purchased by
an Affiliated Limited Partner.
(ttt) "NET
WORTH" means, for any Person subscribing for Units, the
excess of total assets over total liabilities as determined
by generally accepted accounting principles, but excluding
home, home furnishings and automobiles. Provided, however,
that with respect to the General Partner, "Net Worth" means
the excess of total assets over total liabilities as
determined by generally accepted accounting principles,
except that if any of the assets have been depreciated, then
the amount of depreciation relative to any particular asset
may be added to the depreciated cost of the asset to compute
the total asset. The amount of depreciation may be added
only to the extent that the amount resulting after adding
depreciation does not exceed the fair market value of the
asset.
(uuu)
"NOTICE" means a writing containing the information required
by this Agreement to be communicated to any Person,
personally delivered to such Person or sent by registered,
certified or regular mail, postage prepaid to such Person at
the last known address of such Person, or sent by telefax
and receipt is confirmed by telephone during normal business
hours.
(vvv)
"OFFERING" means the offering of Units pursuant to the
Prospectus.
(www)
"OFFERING PERIOD" means the period from the Effective Date
to the Termination Date.
(xxx)
"OPERATING LEASE" means a lease pursuant to which the
aggregate noncancellable rental payments during the original
term of such lease, on a net present value basis, are not
sufficient to recover the Purchase Price of the Equipment
leased thereby.
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(yyy)
"OPERATIONS" means all operations and activities of the
Partnership except Sales.
(zzz)
"ORGANIZATION AND OFFERING EXPENSE ALLOWANCE" means an
amount equal to 3.5% of the Gross Offering Proceeds.
(aaaa)
"ORGANIZATION AND OFFERING EXPENSES" means:
(i) all
costs and expenses incurred in connection with,
and in preparing the Partnership for, qualification
under federal and state securities laws and the
securities laws of any other jurisdiction in which
Units may be offered or sold and subsequently
offering and distributing the Units to the public
(except for Sales Commissions and Dealer-Manager
Fees) including, without limitation:
(A) printing
costs;
(B)
registration and filing fees;
(C)
attorneys', accountants' and other
professional fees;
(D) Due
Diligence Expenses; and
(ii)
the direct
costs of salaries to and expenses
(including costs of travel) of officers and
directors of the General Partner or any Affiliate
of the General Partner while engaged in organizing
the Partnership and registering, offering and
selling the Units.
(bbbb)
"PARTICIPANT LIST" means a list, in alphabetical order by
name, setting forth the name, address and business or home
telephone number of, and number of Units held by, each
Limited Partner. The list shall be printed on white paper in
a readily readable type size (in no event smaller than 10-
point type) and shall be updated at least quarterly to
reflect any changes in the information contained therein.
(cccc) "PARTNER"
means the General Partner (including any
Substitute General Partner) and any Limited Partner
or Affiliated Limited Partner (including the Original Limited
Partner and any Substitute Limited Partner).
(dddd) "PARTNER
NONRECOURSE DEBT" means any Partnership nonrecourse
liability for which any Partner bears the economic risk of
loss within the meaning of Treas. Reg. Section 1.704-
2(b)(4).
(eeee) "PARTNER
NONRECOURSE DEBT MINIMUM GAIN" has the meaning
specified in Treas. Reg. Section 1.704-2(i)(3), and such
additional amount as shall be treated as Partner Nonrecourse
Minimum Gain pursuant to Treas. Reg. Section 1.704-
2(j)(1)(iii).
(ffff) "PARTNER
NONRECOURSE DEDUCTIONS" consist of those deductions
and in those amounts specified in Treas. Reg. Sections
1.704-2(i)(2) and (j).
(gggg)
"PARTNERSHIP" means Lease Equity Appreciation Fund II, L.P.
(hhhh)
"PARTNERSHIP INTEREST" means the Units owned by a Limited
Partner or the percentage interest in the Partnership held
by the General Partner.
(iiii)
"PARTNERSHIP LOAN" means any loan made to the Partnership
by the General Partner or any Affiliate of the General
Partner in accordance with Section 9.2(c).
(jjjj)
"PARTNERSHIP MINIMUM GAIN" has the meaning specified in
Treas. Reg. Sections 1.704-2(b)(2) and (d) and such
additional amount as shall be treated as Partnership Minimum
Gain pursuant to Treas. Reg. Section 1.704- 2(j)(1)(iii).
(kkkk)
"PARTNERSHIP NONRECOURSE DEDUCTIONS" consist of those
deductions and in those amounts specified in Treas. Reg.
Sections 1.704-2(c) and (j).
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(llll) "PAYOUT"
means the time when the aggregate amount of cash
distributions (from whatever sources) to a Limited Partner
equals the amount of the Limited Partner's Capital
Contribution plus the Cumulative Return compounded daily (in
this case only) from the last Closing Date.
(mmmm) "PERSON"
means any natural person, partnership, trust,
corporation, association or other legal entity.
(nnnn) "PROGRAM"
means a limited or general partnership, joint
venture, unincorporated association or similar
unincorporated organization formed and operated for the
primary purpose of investment in, and the operation of, or
gain from, an interest in equipment, equipment leases or
related instruments.
(oooo)
"PROSPECTUS" means the prospectus included as part of the
Registration Statement, as supplemented or amended.
(pppp) "PURCHASE
PRICE" means, with respect to any Investment, the
price paid by, or on behalf of, the Partnership for or in
connection with the purchase, acquisition or funding of the
Investment, including the amount of the related Acquisition
Fees, Acquisition Expenses, and all liens and encumbrances
on the Investment, but excluding "points" and prepaid
interest. "Purchase Price" also includes, with respect to
options to acquire an Investment, the sum of the exercise
price and the price paid to acquire the option.
(qqqq)
"QUALIFIED PLAN" means a pension, profit-sharing or stock
bonus plan, including Keogh Plans, meeting the requirements
of Sections 401 et seq. of the Code, and its related trust.
(rrrr)
"QUALIFIED SUBSCRIPTION ACCOUNT" means the interest-bearing
account established and maintained by the Partnership for
the purpose of holding Subscription Monies received
subsequent to the Initial Closing Date.
(ssss)
"REDEMPTION" means the purchase of Units from Limited
Partners by the Partnership under Section 13.5.
(tttt)
"REGISTRATION STATEMENT" means the Registration Statement on
Form S-1 filed with the Commission under the Securities Act
in the form in which the Registration Statement is declared
to be effective for the offer and sale of the Partnership's
Units.
(uuuu)
"REINVESTMENT PERIOD" means the period beginning with the
Initial Closing Date and ending five years after the Final
Closing Date.
(vvvv)
"REINVESTMENT PERIOD CASH DISTRIBUTIONS" means, with respect
to any Limited Partner, all distributions made to the
Limited Partner by the Partnership during the Reinvestment
Period up to the Cumulative Return.
(wwww)
"RE-LEASING FEE" means, with respect to any Equipment, a fee
payable to the General Partner for providing re-leasing
services to the Partnership, not to exceed the lesser of:
(i) the
competitive rate for comparable services for
similar equipment; or
(ii) 2% of
gross rental revenues derived from the re-
lease of the Equipment after the time that the re-
lease of the Equipment has been consummated as a
result of the efforts of the General Partner or its
Affiliates.
(xxxx)
"RESERVES" means reserves established and maintained by the
Partnership for working capital and contingent liabilities.
(yyyy) "ROLL-UP"
means any transaction involving the acquisition,
merger, conversion or consolidation, either directly or
indirectly, of the Partnership with, and the issuance of
securities of, a Roll-Up Entity. The term does not include:
(i)
a transaction
involving securities of the
Partnership if they have been listed on a national
securities exchange or traded through the NASDAQ
Stock Market (National Market System) for at least
12 months; or
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(ii) a
transaction involving only the conversion of the
Partnership to corporate, trust or association form
if, as a consequence of the transaction, there will
be no significant adverse change in:
(A) Limited
Partners' voting rights;
(B) the term
of existence of the Partnership;
(C) the
compensation of the General Partner or
its Affiliates from the Partnership;
(D) the
Partnership's investment objectives;
or
(E) the income
taxation of the Partnership or
the Limited Partners.
(zzzz) "ROLL-UP
ENTITY" means any partnership, corporation, trust,
or other entity that is created by, or surviving after, the
successful completion of a proposed Roll-Up transaction.
(aaaaa) "SALE" means
the sale, exchange, involuntary conversion,
foreclosure, condemnation, taking, casualty (other than a
casualty followed by refurbishing or replacement), or other
disposition of an Investment.
(bbbbb) "SALES
COMMISSIONS" means, with respect to any Unit, an
amount equal to 7% of the Gross Unit Price per Unit sold.
(ccccc) "SECURED LOAN"
means a loan or other extension of credit
provided by the Partnership to a third-party end user to
finance the end user's purchase of Equipment, with that
Equipment being used as collateral for the repayment of the
loan.
(ddddd) "SECURITIES
ACT" means the Securities Act of 1933, as
amended.
(eeeee) "SELLING
DEALER" means each member firm of the NASD which
has been selected by the Partnership or the Dealer-Manager
to offer and sell Units and has entered into a Selling
Dealer Agreement.
(fffff) "SELLING
DEALER AGREEMENT" means each of the agreements
entered into between the Partnership or the Dealer-Manager
and any Seller Dealer with respect to the offer and sale of
Units.
(ggggg) "SUBORDINATED
REMARKETING FEE" means, with respect to any
Investment, a fee in the amount equal to the lesser of:
(i) 3%
of the contract sales price applicable to the
Investment; or
(ii) one-half
of a brokerage fee that is reasonable,
customary and competitive in light of the size,
type and location of the Investment.
(hhhhh) "SUBSCRIPTION
AGREEMENT" means the subscription agreement
substantially in the form filed as an exhibit to the
Prospectus.
(iiiii) "SUBSCRIPTION
MONIES" means the funds subscribed by Limited
Partners for the purchase of Units.
(jjjjj) "SUBSTITUTE
GENERAL PARTNER" means any Assignee of or
successor to the General Partner admitted to the Partnership
in accordance with Section 12.5.
(kkkkk) "SUBSTITUTE
LIMITED PARTNER" means any Assignee of Units who
is admitted to the Partnership as a Limited Partner under
Section 13.3.
(lllll) "TERMINATION
DATE" means the earliest of:
(i) the
date on which the Maximum Offering has been
sold;
(ii) two years
following the Effective Date (subject to
the renewal, requalification or consent of each
Administrator requiring the renewal,
requalification or consent with respect to the
extension of the
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<PAGE>
Offering Period beyond one year following the
Effective Date in the Administrator's
jurisdiction); or
(iii) the date
determined by the General Partner.
(mmmmm) "TREASURY
REGULATION" or "Treas. Reg." means final or
temporary regulations issued by the United States Treasury
Department pursuant to the Code.
(nnnnn) "UNIT" means a
unit of Limited Partner interest in the
Partnership held by any Limited Partner, including rights to
profits, losses, income, gain, credits, deductions, cash
distributions, returns of capital, voting rights and other
attributes of the Units all as provided by, and subject to
the terms and provisions of, this Agreement.
(ooooo) "UNPAID
CUMULATIVE RETURN" means, as to any Limited Partner,
the amount of the Limited Partner's Cumulative Return
calculated through the date as of which the Unpaid
Cumulative Return is being calculated, reduced (but not
below zero) by the aggregate distributions previously made
to the Limited Partner by the Partnership which are deemed
to be a reduction of the Limited Partner's Unpaid Cumulative
Return under Section 11.3(d)(i).
ARTICLE II - FORMATION OF PARTNERSHIP
2.1 FORMATION OF PARTNERSHIP
The General Partner and the Original
Limited Partner have previously formed
the Partnership as a limited partnership
under the Delaware Act. The General
Partner and the Original Limited Partner
hereby amend and restate in its
entirety the original Agreement of Limited
Partnership of the Partnership and
agree that this Amended and Restated
Agreement of Limited Partnership shall
govern the rights and liabilities of the
Partners, except as otherwise herein
expressly provided.
ARTICLE III - NAME
3.1 NAME
The business of the Partnership shall be
conducted under the name "Lease
Equity Appreciation Fund II, L.P." or such
other name as the General Partner
shall hereafter designate in writing to the
Limited Partners.
ARTICLE IV - PLACES OF BUSINESS
4.1 PRINCIPAL PLACE OF
BUSINESS
The principal office and place of business
of the Partnership shall be 110 S.
Poplar Street, Suite 101, Wilmington,
Delaware 19801. The General Partner may
from time to time change the principal
place of business and, in such event,
the General Partner shall notify the
Limited Partners of such change in
writing no later than 60 days following the
effective date of such change.
4.2 OTHER PLACES OF BUSINESS
The Partnership may maintain such other
offices and places of business within
or outside the State of Delaware as the
General Partner deems advisable.
ARTICLE V - NAMES AND ADDRESSES OF PARTNERS
5.1 NAMES AND ADDRESSES OF
PARTNERS
The name and address of the General Partner
shall be as set forth in Section
19.1, and the names and addresses of the
Limited Partners shall be as set
forth in their respective Subscription
Agreements, as the same may be
supplemented or amended from time to time.
Any Partner may change his, her or
its respective place of business or
residence, as the case may be, by giving
Notice of such change to the Partnership
(and, in the case of the General
Partner, by also giving Notice thereof to
all of the Limited Partners), which
Notice shall become effective upon receipt
by the Partnership.
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ARTICLE VI - PURPOSES AND OBJECTIVES
6.1 PURPOSES
The purpose and business of the Partnership
is to:
(a) acquire,
invest in, purchase, own, hold, lease, re-lease,
finance, refinance, loan, borrow, manage, maintain, operate,
improve, upgrade, modify, exchange, assign, encumber, create
or receive security interests in, pledge, sell, transfer or
otherwise dispose of, and in all respects otherwise deal in
or with, Equipment and Leases of all kinds; and
(b) engage in
any and all businesses and to do any and all
things permitted to a limited partnership under the Delaware
Act.
6.2 INVESTMENT OBJECTIVES
The investment objectives of the
Partnership in conducting its business shall
be to:
(a) preserve,
protect and return the Capital Contributions of
the Partners;
(b) generate
regular distributions sufficient to provide the
Cumulative Return to the Partners;
(c)
during the
Reinvestment Period, distribute the Cumulative
Return and then reinvest the excess Distributable Cash in
additional Investments; and
(d) provide
distributions to Partners after the Reinvestment
Period until the sale of all Investments.
ARTICLE VII - TERM
7.1 TERM
The term of the Partnership began with the
filing of the Certificate of
Limited Partnership with the Secretary of
State of the State of Delaware on
March 30, 2004 and will end at midnight on
December 31, 2029, unless sooner
dissolved or terminated as provided in
Article XIV of this Agreement.
ARTICLE VIII - PARTNERS AND CAPITAL
8.1 GENERAL PARTNER
The General Partner has contributed $1,000,
in cash, as its Capital
Contribution to the Partnership. The
General Partner shall use its best
efforts to maintain, at all times from and
after the date of this Agreement
through and including the Termination Date,
a net worth that is at least
sufficient to satisfy the Net Worth
requirements for a general partner under
policies adopted by Administrators.
8.2 ORIGINAL LIMITED PARTNER
The Original Limited Partner has made a
capital contribution of $1.00 to the
Partnership. By execution hereof, the
Original Limited Partner agrees to
withdraw as Original Limited Partner, and
the parties hereto agree to return
the capital contribution of $1.00 and to
retire the original 10 Units on the
Initial Closing Date and admission of
additional Limited Partners.
8.3 LIMITED PARTNERS
(a) From and
after the Initial Closing Date, there shall be one
class of Limited Partners.. The General Partner is hereby
authorized to obtain capital for the Partnership through the
offer and sale of up to 600,000 Units to the Limited
Partners.
(b) Any Person
desiring to become a Limited Partner shall
execute and deliver to the General Partner a Subscription
Agreement and such other documents as the General Partner
shall reasonably request. These documents shall be in form
and substance reasonably satisfactory to the General
Partner. Among other
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<PAGE>
things, each Person shall, subject to acceptance of his
subscription by the General Partner, agree to be bound by
all terms and provisions of this Agreement. Units will be
sold only to Persons:
(i) who
represent that they have either:
(A) an annual
gross income of at least $45,000
and a Net Worth of at least $45,000; or
(B) a Net
Worth of at least $150,000; or
(ii) who
satisfy the suitability standards applicable in
the state or other jurisdiction of their residence
or domicile, if more stringent than the standards
described in clause (i) above.
(c) At the
time of subscribing each Limited Partner (other than an
Affiliated Limited Partner) shall make a Capital Contribution,
in cash, in an amount equal to the Gross Unit Price for each
Unit purchased. At the time of subscribing each Affiliated
Limited Partner shall make a Capital Contribution, in cash, in
an amount equal to the Net Unit Price for each Unit purchased.
Each Limited Partner (except Ohio Residents) may elect on his
Subscription Agreement to have his Partnership distributions
reinvested in additional Units during the Offering Period, on
the same terms as the purchase of the Limited Partner's
original Units, other than the minimum required number of
Units, to the extent that Units are available for purchase. In
particular, the purchase price of these additional Units shall
be the same price the Limited Partner paid for his original
Units, either the Gross Unit Price or the Net Unit Price.
(d) Limited
Partners must purchase a minimum of 25 Units, other
than IRAs or Qualified Plans which may purchase a minimum of
10 Units, unless a
different minimum number of Units is
required by the Administrator of the Limited Partner's state
or other jurisdiction of residence. Limited Partners may
subscribe for additional Units at the Gross Unit Price or
Net Unit Price, whichever shall be applicable.
(e) The
General Partner and any Affiliate of the General Partner
shall have the right to subscribe for Units for its own
account for investment purposes only; provided that the
aggregate number of Units purchased by the General Partner
and its Affiliates collectively shall not exceed 10% of all
Units sold.
(f) No
subscribers shall be admitted to the Partnership unless
and until the Minimum Offering shall be achieved. Upon the
determination by the General Partner that the Minimum
Offering has been achieved, the General Partner shall set
the Initial Closing Date. Following the Initial Closing
Date, weekly Closings will be held. The General Partner
shall notify each subscriber whose subscription has been
accepted by the General Partner as promptly as practical of
such subscriber's admission as a Limited Partner.
(g)
Subscriptions for Units shall promptly be accepted or
rejected by the General Partner after their receipt by the
Partnership (but in any event not later than 30 days
thereafter) and a confirmation of acceptance sent by the
General Partner. The General Partner shall have the
unconditional right to refuse to admit any subscriber as a
Limited Partner. Each subscriber has the right to cancel his
or her subscription before it has been accepted by the
General Partner
by providing written notice to the General
Partner, signed by each subscriber, of their intent to
cancel, in a form satisfactory to the General Partner. The
Partnership may not complete a sale of Units to any Limited
Partner until at least five business days after the date the
Limited Partner received a final Prospectus.
(h) Each
Person whose subscription is accepted by the General
Partner shall be admitted to the Partnership as a Limited
Partner, and shall for all purposes of this Agreement become
and be treated as a Limited Partner, not later than 15 days
after the Initial Closing Date or, thereafter, the last day
of the calendar month following the date the subscription
was accepted by the Partnership.
(i) The amount
of the Capital Contribution made by each Limited
Partner shall be set forth on the Partnership's books and
records, which shall be supplemented or amended from time to
time promptly following each Closing Date to reflect the
name, address and Capital Contribution of each Limited
Partner admitted to the Partnership as a result of such
Closing; provided that any failure so to attend to such
books and records following any Closing Date shall not in
any way affect the admission of any Limited Partner to the
Partnership for all purposes of this Agreement if such
Limited Partner was admitted to the Partnership at such
Closing.
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<PAGE>
(j) The
General Partner shall establish the Escrow Account and
the Qualified Subscription Account. From the date hereof to,
but not including, the Initial Closing Date, all
Subscription Monies shall be deposited in the Escrow
Account. From and after the Initial Closing Date, all
Subscription Monies shall be held by the Partnership in the
Qualified Subscription Account until the release thereof on
the applicable Closing Date.
(k) On the
Initial Closing Date or any subsequent Closing Date,
all Subscription Monies then held in the Escrow Account or
any Qualified Subscription Account, as the case may be, with
respect to Units purchased by any Person admitted to the
Partnership as a result of such Closing, together with any
interest earned thereon, shall be released to the
Partnership. The Partnership shall pay such interest to the
Limited Partners, as their interests may appear, promptly
after such Closing Date. Subscription Monies deposited by
any Person whose subscription is rejected by the General
Partner shall be immediately returned to that Person,
together with any interest earned thereon and without
deduction for any Front-End Fees. In no event shall any
Subscription Monies be held in the Escrow Account or a
Qualified Subscription Account beyond the Termination Date
before either being released to the Partnership upon a
Closing or, if the Minimum Offering has not been achieved,
returned to the subscriber.
(l)
Notwithstanding anything to the contrary set forth in this
Agreement, Subscription Monies of Persons who are residents
of Iowa and Pennsylvania shall be held in a separate Escrow
Account by the Escrow Agent. Subscriptions of Iowa and
Pennsylvania residents shall not be used in computing the
Minimum Offering. At such time as 30,000 Units have been
sold and subscriptions therefor accepted by the Partnership,
the Subscription Monies of Iowa and Pennsylvania residents
whose subscriptions have been accepted by the Partnership
shall be released from the Escrow Account to the Partnership
and such Iowa and Pennsylvania residents shall be admitted
to
the Partnership as Limited Partners.
8.4 PARTNERSHIP CAPITAL
(a) No Partner
shall be paid interest on any Capital
Contribution, except for interest earned on Subscription
Monies as provided in Section 8.3(k).
(b) In
addition to the redemption of the Original Limited
Partner's Units as provided in Section 8.2, the Partnership
may Redeem Units presented by Limited Partners for
Redemption pursuant to Section 13.5 in the General Partner's
sole and absolute discretion. The Partnership shall not
Redeem or repurchase any Unit except as set forth in the
preceding sentence. No Partner shall have the right to
withdraw or receive any return of such Partner's Capital
Contribution, except as specifically provided in this
Agreement, and no Capital Contribution may be returned to
any Partner in the form of property other than cash.
(c) Except as
otherwise specifically provided in this Agreement,
no Limited Partner shall have priority over any other
Limited Partner as to:
(i) the
return of such Limited Partner's Capital
Contribution or Capital Account;
(ii) such
Limited Partner's share of Income and Losses;
or
(iii) such Limited
Partner's share of Distributable Cash.
(d) Neither
the General Partner nor any Affiliate of the General
Partner shall have any personal liability for the repayment
of the Capital Contribution of any Limited Partner except to
the extent specifically provided in this Agreement.
8.5 CAPITAL ACCOUNTS
(a) A separate
Capital Account shall be established and
maintained for the General Partner and for each Limited
Partner.
(b) The
Capital Account of the General Partner initially shall
be $1,000.
(c) The
Capital Account of each Limited Partner initially shall
be such Limited Partner's Capital Contribution.
(d) The
Capital Account of each Partner shall be increased by:
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(i) the
amount of any additional money contributed by
such Partner to the Partnership;
(ii) the fair
market value of any property contributed
by such Partner to the Partnership (net of
liabilities secured by such contributed property
that the Partnership is considered to assume under
Code Section 752); and
(iii) allocations to
such Partner of Income (or items
thereof), including but not limited to items of
income and gain specially allocated pursuant to
Section 11.2(f).
(e) The
Capital Account of each Partner shall be decreased by:
(i) the
amount of money distributed to or on behalf of
such Partner by the Partnership;
(ii) the fair
market value of any property distributed
to or on behalf
of such Partner by the Partnership
(net of liabilities secured by such distributed
property that such Partner is considered to assume
under Code Section 752); and
(iii) allocations to
such Partner of Partnership Losses
(or items thereof), including but not limited to
items of loss and deduction specially allocated
pursuant to Section 11.2(f).
(f) For
purposes of this Agreement, a General Partner who also
owns Units as a Limited Partner shall have a single Capital
Account that reflects both its General Partner and Limited
Partner interests in the Partnership, regardless of the time
or manner in which such interests were acquired.
(g) If the
Partnership Interest of a General Partner or a Unit
is sold or
otherwise transferred, the Capital Account of the
transferor with respect to the Partnership Interest or the
Unit transferred shall carry over to the transferee in
accordance with Treas. Reg. Section 1.704-1(b)(2)(iv)(l).
However, if the transfer causes a termination of the
Partnership under Code Section 708(b)(1)(B), the Capital
Account that carries over to the transferee shall be
adjusted in accordance with the constructive contribution
and liquidation rules under Treas. Reg. Section 1.708-1.
(h) For any
taxable year in which the Partnership has a Code
Section 754 election in effect, the Capital Accounts shall
be maintained in accordance with Treas. Reg. Section 1.704-
1(b)(2)(iv)(m). The Partnership shall not be required to
make any elections pursuant to Code Section 754.
(i) Upon the
occurrence of the events specified in Treas. Reg.
Section 1.704-1(b)(2)(iv)(f), the Partners' Capital Accounts
shall be adjusted and thereafter maintained to reflect the
revaluation of Partnership assets on the books of the
Partnership in accordance with such Treasury Regulation and
Treas. Reg. Sections 1.704-1(b)(2)(iv)(f) through (h).
(j)
Notwithstanding anything herein to the contrary, the
Partners' Capital Accounts shall at all times be maintained
in the manner required by Treas. Reg. Section 1.704-
1(b)(2)(iv), and any questions or ambiguities arising under
this Agreement shall be resolved by reference to such
Treasury Regulations. Further, such Treasury Regulations
shall govern the maintenance of the Capital Accounts to the
extent this Agreement does not provide for the treatment of
a particular item. In the event Treas. Reg. Section 1.704-
1(b)(2)(iv) does not provide for a particular item, such
Capital Account adjustments shall be made in a manner that
is consistent with the underlying economic arrangement of
the Partners based, wherever practicable, on federal tax
accounting principles.
8.6 ADDITIONAL CAPITAL
CONTRIBUTIONS
(a)
The
General Partner shall not be required to make any
Capital Contribution in addition to its initial $1,000
Capital Contribution except pursuant to and in accordance
with Section 14.2(c)(ii) of this Agreement.
(b) No Limited
Partner shall be required to make any Capital
Contribution in addition to the Capital Contribution
required under Section 8.3(c).
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8.7 LOANS BY PARTNERS
Except as provided in Section 14.2(c)(ii),
no loan by any Partner or any
Affiliate of any Partner to the Partnership
(including, without limitation,
any Partnership Loan) shall constitute a
Capital Contribution to the
Partnership or increase the Capital Account
balance of any Partner, but shall
be treated, for all purposes, as
Indebtedness of the Partnership payable or
collectible only out of the assets of the
Partnership in accordance with the
terms and conditions upon which such loan
was made.
8.8 NO RIGHT TO RETURN OF
CAPITAL
No Partner shall be entitled to demand or
receive any distribution of, or with
respect to, such Partner's Capital
Contribution or Capital Account except as
specifically provided in this
Agreement.
ARTICLE IX - POWERS, RIGHTS AND DUTIES OF GENERAL PARTNER
9.1 EXTENT OF POWERS AND
DUTIES
(a) GENERAL.
Except as expressly limited by the provisions of
this Agreement, the General Partner shall have complete and
exclusive discretion to manage and control the affairs and
business of the Partnership and may employ all powers
necessary, convenient or appropriate to carry out the
purposes, conduct the business and exercise the powers of
the Partnership.
The General Partner shall have fiduciary responsibility for
the safekeeping and use of all funds and assets of the
Partnership, whether or not in the General Partner's
immediate possession or control.
(b) POWERS AND
DUTIES. Pursuant to the authority granted in this
Section 9.1, and subject only to the limitations otherwise
provided in this Agreement, the General Partner's powers and
duties shall include, but not be limited to, the following:
(i) to
acquire, invest in, purchase, own, hold, lease,
re-lease, finance, refinance, borrow, loan, manage,
maintain, operate, improve, upgrade, modify,
exchange, assign, encumber, create and receive
security interests in, pledge, sell, transfer or
otherwise dispose of, and in all respects otherwise
deal in or with, Investments and other tangible or
intangible property (including securities, debt
instruments, contract rights, lease rights, equity
interests and, to the extent permitted by Section
9.1(b)(xviii), joint ventures), and to contract
with others to do the same on behalf of the
Partnership;
(ii) to select
and supervise the activities of any
Equipment management agents for the Partnership;
(iii) to assure the
proper application of revenues of the
Partnership;
(iv) to
maintain proper books of account for the
Partnership and to prepare reports of operations
and tax returns required to be furnished to the
Partners pursuant to this Agreement or to taxing
bodies or other governmental agencies, including
Administrators, in accordance with applicable laws
and regulations;
(v) to
employ the Dealer-Manager to select Selling
Dealers to offer and sell Units;
(vi) to invest
any and all funds held by the
Partnership;
(vii) to designate
depositories of the Partnership's
funds, and establish the terms and conditions of
such deposits and drawings thereon;
(viii) to
enter into Financing Transactions and otherwise
to borrow money or procure extensions of credit for
the Partnership (except that neither the
Partnership nor the General Partner shall borrow
money solely for the purpose of making Reinvestment
Period Cash Distributions which the Partnership
would otherwise be unable to make) and, in
connection therewith, to execute, seal, acknowledge
and deliver agreements, promissory notes,
guarantees and other written documents evidencing
Financing Transactions or constituting obligations
or evidences of Indebtedness and to
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pledge, hypothecate, mortgage, assign, transfer or
convey mortgages or security interests in
Investments or any other assets of the Partnership
as security therefor;
(ix) to hold
all or any portion of the Investments and
other assets of the Partnership in the name of one
or more trustees, nominees, or other entities or
agents of or for the Partnership;
(x) to
acquire and enter into any contract which the
General Partner deems necessary or appropriate for
the protection of the Partnership and (subject to
Sections 9.2(b), 9.2(c) and 9.2(g)) the General
Partner, for the conservation of Partnership
assets, or for any purpose convenient or beneficial
to the Partnership;
(xi) to employ
agents, employees, managers, accountants,
attorneys, consultants and other persons in the
operation and management of the business of the
Partnership including, but not limited to,
Affiliates of the General Partner, supervisory
managing agents, management agents, and lease, loan
or securities brokers, on such terms and for such
compensation as the General Partner shall
determine, provided, however, that, with respect to
services provided by the General Partner or its
Affiliates, compensation for such services shall be
limited as specifically set forth in this
Agreement;
(xii) to cause the
Partnership to make or revoke any of
the elections referred to in Sections 108, 732, 754
and 1017 of the Code or any similar provisions
enacted in lieu thereof;
(xiii) to
select as the accounting year for the
Partnership the calendar year or such fiscal year
as may be approved by the IRS;
(xiv) to determine the
accounting method or methods to be
used by the Partnership (the Partnership intends
initially to use the accrual method of accounting
in maintaining its books and records);
(xv) to require
in all Partnership obligations to any
Person other than a Limited Partner, as such, that
the General Partner shall not have any personal
liability thereon, but that the person or entity
contracting with the Partnership must look solely
to the Partnership and its assets for satisfaction;
(xvi) to invest temporarily
the Gross Offering Proceeds
or Net Offering Proceeds prior to making or
acquiring Investments in short term, highly liquid
investments where there is appropriate safety of
principal;
(xvii) to
execute or sign, individually or jointly, a
check or certificate on behalf of the Partnership;
(xviii) to cause
the Partnership to invest in a joint
venture to own one or more Investments with any one
or more Affiliated Programs if:
(A) doing so
is in the best interest of the
Partnership and the Affiliated Program;
(B) the
Partnership and the Affiliated Program
have substantially identical investment
objectives;
(C) there are
no duplicate fees;
(D)
compensation of the sponsor of the
Affiliated Program is substantially
identical to the compensation of the
General Partner;
(E) the
Partnership has the right of first
refusal to purchase any Investment jointly
owned with the Affiliated Program which
the Affiliated Program wishes to sell;
(F) the
respective investments in the
Investment by the Partnership and the
Affiliated Program are on substantially
the same terms and conditions; and
(G) the joint
venture is entered into either
for the purpose of effecting appropriate
diversification for the Partnership and
the Affiliated Program, or for the purpose
of relieving the General Partner or its
Affiliates from a commitment entered into
pursuant to Section 9.2(b);
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(xix) to pay, extend,
renew, modify, adjust, submit to
arbitration, prosecute, defend or compromise, upon
such terms as it may determine and upon such
evidence as it may deem sufficient, any obligation,
suit, liability, cause of action or claim,
including those relating to federal, state or local
taxation,
either in favor of or against the
Partnership;
(xx) to
establish and maintain Reserves for such
purposes and in such amounts, and to increase or
reduce such amounts, as it deems appropriate from
time to time (but generally not less than 1% of the
Gross Offering Proceeds);
(xxi) subject to
Section 8.3, to do all things necessary
or advisable, in its sole and absolute discretion,
to effect the admission of the Limited Partners,
including, but not limited to, registering the
Units under the Securities Act and effecting the
qualification of, or obtaining exemptions from the
qualification of, the Units for sale with
Administrators, and determining that the purchase
of Units is a suitable and appropriate investment
for each Limited Partner, based on information
provided by each Limited Partner regarding his
financial situation and investment objectives;
(xxii) to
enter into the Dealer-Manager Agreement on
behalf of the Partnership;
(xxiii) to enter
into on behalf of the Partnership, or to
authorize the Dealer-Manager to enter into,
separate Selling Dealer Agreements;
(xxiv) to
enter into the Escrow Agreement on behalf of the
Partnership and provide for such compensation to
the Escrow Agent as the General Partner may deem
reasonable under the circumstances, which
compensation shall be deemed to be and shall
constitute an Organization and Offering Expense
payable by the General Partner;
(xxv) to cause the
Partnership to Redeem, or elect not to
Redeem, Units, in its sole and absolute discretion,
upon request therefor by a Limited Partner as
provided in Section 13.5;
(xxvi) to
cause the Partnership to obtain and pay the
premiums with respect to insurance policies
covering such risks as the General Partner deems
reasonably necessary to protect the interests of
the Partnership; provided that the General Partner,
its Affiliates and their respective employees and
agents may be named as additional insured parties
thereunder only if the cost of premiums payable by
the Partnership is not increased thereby; and
provided further, that the Partnership shall not
incur or assume the cost of any portion of any
insurance which insures any party against any
liability the indemnification of which is
prohibited by Section 9.3(b);
(xxvii) during
the Reinvestment Period, but subject to the
limitations and requirements of Section 11.1(b), to
reinvest all or a substantial portion of the
Partnership's Distributable Cash in additional
Investments;
(xxviii) subject to
Section 9.2(m), to enter into on behalf
of the Partnership arrangements with itself or its
Affiliates to provide
services for the Partnership,
if necessary, in addition to those provided for
under this Agreement or the Origination & Servicing
Agreement, which additional arrangements must meet
the following criteria:
(A) the
compensation, price or fee charged for
providing such services must be comparable
and competitive with the compensation,
price or fee of any other Person who is
rendering comparable services or selling
or leasing comparable
goods and materials
which could reasonably be made available
to the Partnership;
(B) the fees
and other terms of the contract
shall be fully disclosed; and
(C) the
General Partner or its Affiliate
providing the services must be
independently engaged in the business of
providing those services to Persons other
than Affiliates of the General Partner, and
at least 75% of its gross revenue from
providing those services must be derived
from sources other than the General Partner
and its Affiliates.
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(xxix) to
take all such actions and execute all such
documents and other instruments as the General
Partner may deem necessary, convenient or advisable
to accomplish or further the purposes or objectives
of the Partnership or to protect and preserve
Partnership assets.
(c) DELEGATION
OF POWERS. Except as otherwise provided under
this Agreement or by law, the General Partner may, in its
sole and absolute discretion, delegate all or any of its
duties under this Agreement to, and may elect, employ,
contract
or deal with, any Person including, without
limitation, the General Partner or any Affiliate of the
General Partner.
(d) RELIANCE
BY THIRD-PARTIES. No Person dealing with the
Partnership or
its assets, whether as assignee, lessee,
purchaser, borrower, mortgagee, grantee or otherwise, shall
be required to investigate the authority of the General
Partner in selling, assigning, leasing, mortgaging,
conveying or otherwise dealing with any Investments or other
assets or any part thereof, nor shall any such assignee,
lessee, purchaser, mortgagee, grantee or other Person
entering into a contract with the Partnership be required to
inquire as to whether the approval of the Partners for any
such assignment, lease, sale, mortgage, transfer or other
transaction has been first obtained. Any such Person shall
be conclusively protected in relying upon a certificate of
authority or of any other material fact signed by the
General Partner, or in accepting any instrument signed by
the General Partner in the name and on behalf of the
Partnership or the General Partner.
9.2 LIMITATIONS ON THE EXERCISE
OF POWERS OF GENERAL PARTNER
The General Partner shall have no power to
take any action prohibited by this
Agreement or by the Delaware Act.
Furthermore, the General Partner shall be
subject to the following in the
administration of the Partnership's business
and affairs:
(a) INVESTMENT
COMPANY STATUS. The General Partner shall use its
best efforts to assure that the Partnership shall not be
deemed to be an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(b) SALES AND
LEASES OF INVESTMENTS FROM OR TO THE GENERAL
PARTNER AND ITS AFFILIATES. The Partnership shall neither
purchase nor lease Investments from, nor sell or lease
Investments to, the General Partner, any Affiliate of the
General Partner or any Affiliated Program (including any
Investment in which the General Partner or any of its
Affiliates has an interest) except as provided in this
Section
9.2(b). Notwithstanding the foregoing, the
Partnership may purchase Investments from the General
Partner or any of its Affiliates (but not including an
Affiliated Program) if:
(i)
the
General Partner determines that the making of
such Investment is in the best interests of the
Partnership;
(ii) such
Investment is purchased by the Partnership at
a Purchase Price which does not exceed the sum of:
(A) the net
cost to the General Partner or the
Affiliate of acquiring and holding same
(adjusted for any income received, capital
or investment returned and reasonable and
necessary expenses paid or incurred while
holding same); plus
(B) any
compensation to which the General
Partner and any Affiliate of the General
Partner is otherwise entitled pursuant to
this Agreement;
(iii) there is no
difference in the provisions or formula
establishing the interest rate of any Indebtedness
secured by the Investment at the time it is
acquired by the General Partner or such Affiliate
and the time the Investment is acquired by the
Partnership;
(iv) neither
the General Partner nor any Affiliate of
the General Partner realizes any gain, or receives
any other benefit, other than compensation for its
services, if any, permitted by this Agreement, as a
result of the Partnership making such Investment;
and
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(v) at
the time of transfer thereof to the Partnership,
the General Partner or such Affiliate had held such
Investment on an interim basis (generally not
longer than 6 months) for the purposes of:
(A)
facilitating the acquisition of such
Investment by the Partnership;
(B) borrowing
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