-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RviZbJJDdu/T8Z/EnsU1eToTPJIa93qPeS6wVlTQ2/wbepCcHpkB2UhInmSRqejW reWRYW7pHPaiRAi7T8jqxA== 0000950116-06-000490.txt : 20060210 0000950116-06-000490.hdr.sgml : 20060210 20060210153220 ACCESSION NUMBER: 0000950116-06-000490 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20060210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Commonwealth Income & Growth Fund VI CENTRAL INDEX KEY: 0001351901 IRS NUMBER: 204115433 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-131736 FILM NUMBER: 06598272 BUSINESS ADDRESS: STREET 1: 400 CLEVELAND STREET STREET 2: 7TH FLOOR CITY: CLEARWATER STATE: FL ZIP: 33755 BUSINESS PHONE: 1-877-654-1500 MAIL ADDRESS: STREET 1: 400 CLEVELAND STREET STREET 2: 7TH FLOOR CITY: CLEARWATER STATE: FL ZIP: 33755 S-1 1 s-1.txt S-1.TXT AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 2006 REGISTRATION NO. 333-______ ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------- COMMONWEALTH INCOME & GROWTH FUND VI (Exact name of registrant as specified in governing instruments) PENNSYLVANIA 7394 20-4115433 (State or other jurisdiction (Primary Standard (I.R.S. Employer of incorporation or Industrial Classification Identification organization) Code Number) Number) Oaklands Corporate Center, 470 John Young Way, Suite 300 Exton, PA 19341 (800) 249-3700 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) KIMBERLY A. SPRINGSTEEN, PRESIDENT Commonwealth Capital Securities Corp. 400 Cleveland Street, 7th Floor Clearwater, FL 33755 (877) 654-1500 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: Michael B. Pollack, Esq. Reed Smith LLP 2500 One Liberty Place Philadelphia, PA 19103 ---------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] __________ If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] __________ If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] __________ If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ] CALCULATION OF REGISTRATION FEE
Title Of Each Class Of Amount To Be Proposed Maximum Proposed Maximum Amount Of Securities To Be Registered Registered Offering Price Per Unit Aggregate Offering Registration Fee - ------------------------------------------------------------------------------------------------------------ Limited Partnership Units 2,500,000 $ 20.00 $ 50,000,000 $ 5,350.00 ============================================================================================================
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ================================================================================ SUBJECT TO COMPLETION. PROSPECTUS DATED FEBRUARY __, 2006. COMMONWEALTH INCOME & GROWTH FUND VI [GRAPHIC APPEARS HERE] ------------------------------------------------ 2,500,000 UNITS OF LIMITED PARTNERSHIP INTERESTS (57,500 UNITS - MINIMUM REQUIREMENT) We, together with selected securities brokers, will sell the units on a best efforts basis, and will close the offering no later than the second anniversary of the effective date of the registration statement of which this prospectus is a part. MINIMUM NUMBER OF UNITS: 57,500 OFFERING SIZE (MINIMUM): $ 1,150,000 MAXIMUM NUMBER OF UNITS: 2,500,000 (MAXIMUM): $ 50,000,000 PRICE PER UNIT: $ 20.00 NET PROCEEDS (PER UNIT): $ 18.40
THIS OFFERING INVOLVES SIGNIFICANT RISKS, INCLUDING: o THERE WILL BE NO PUBLIC MARKET FOR THE UNITS AND YOU MAY BE UNABLE TO SELL OR TRANSFER YOUR UNITS AT A TIME AND PRICE OF YOUR CHOOSING. o ALL OR A PORTION OF CASH DISTRIBUTIONS WILL BE A RETURN OF CAPITAL, SO YOU WILL NOT RECEIVE A LUMP SUM OF RETURNED CAPITAL AT LIQUIDATION IN THE SAME AMOUNT OF YOUR INITIAL INVESTMENT. o OUR ASSETS MAY DEPRECIATE IN VALUE AND HAVE LIMITED RESIDUAL VALUE. o YOU WILL HAVE LIMITED VOTING RIGHTS AND PARTICIPATION IN MANAGEMENT. o WE PAY SIGNIFICANT FEES TO OUR GENERAL PARTNER. o OUR GENERAL PARTNER WILL HAVE CONFLICTS OF INTEREST. o WE WILL USE LEVERAGE TO ACQUIRE EQUIPMENT. o NONE OF OUR GENERAL PARTNER'S FIVE PRIOR PUBLIC FUNDS HAS GONE FULL CYCLE TO LIQUIDITY, SO OUR GENERAL PARTNER HAS NO TRACK RECORD OF PROVIDING INCOME OR LIQUIDITY TO PUBLIC FUND INVESTORS. o THERE ARE MATERIAL TAX RISKS ASSOCIATED WITH THIS OFFERING. THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE THESE SECURITIES ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT. SEE "RISK FACTORS", BEGINNING ON PAGE 11. Selling Proceeds to the Price to Public Commissions(1) Partnership(2) --------------- -------------- --------------- Per Share $ 20 $ 1.60 $ 18.40 Total Minimum $ 1,150,000 $ 92,000 $ 1,058,000 Total Maximum $ 50,000,000 $ 4,000,000 $ 46,000,000 (1) The price to the public and the selling commissions will be reduced by volume discounts in the case of a purchase in excess of $250,000 by a single investor. However, the proceeds to the partnership will not be reduced by such discounts. See "Plan of Distribution" for a complete description of the amount and terms of such commissions. (2) Before deducting an organization fee equal to three percent of the limited partners' capital contributions up to $25,000,000 and two percent of the limited partners' capital contributions thereafter to be paid by the partnership to the general partner ($34,500 if 57,500 units are sold and $2,500,000 if 2,500,000 units are sold), and a dealer manager fee of two percent of capital contributions, ($23,000 if 57,500 units are sold and $1,000,000 if 2,500,000 units are sold), out of which the dealer manager will pay offering and marketing expenses and due diligence reimbursements. The general partner will pay all organizational and offering expenses other than underwriting commission. Commissions will be paid to the dealer manager only after the minimum escrow amount has been reached. The escrow agent will retain proceeds until the minimum escrow requirement has been met. If the minimum amount has not been reached during offering period, the proceeds will be promptly returned to investors with interest and without deduction. Approximately 87.5% of the offering proceeds will be invested in information technology equipment. NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. THEY HAVE NOT MADE, NOR WILL THEY MAKE, ANY DETERMINATION AS TO WHETHER ANYONE SHOULD BUY THESE SECURITIES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE USE OF FORECASTS IN THIS OFFERING IS PROHIBITED. ANY REPRESENTATIONS TO THE CONTRARY AND ANY PREDICTIONS, WRITTEN OR ORAL, AS TO THE AMOUNT OR CERTAINTY OF ANY PRESENT OR FUTURE CASH BENEFIT OR TAX CONSEQUENCE WHICH MAY FLOW FROM AN INVESTMENT IN THIS PROGRAM IS NOT PERMITTED. COMMONWEALTH CAPITAL SECURITIES CORP. 400 CLEVELAND STREET, SEVENTH FLOOR CLEARWATER, FLORIDA 33755 1-877-654-1500 INVESTOR SUITABILITY STANDARDS Units are suitable only as a long-term investment for persons of adequate financial means. Please see the net worth and income tests set forth below to determine if an investment in units is suitable for you. The suitability standards imposed by us will also apply to transferees of an investor's units. For fiduciary accounts, theses standards shall be met by the account or by the beneficiary, or by the donor or grantor who supplies the funds to purchase units if the donor or grantor is the beneficiary. The Dealer Manager must make every reasonable effort to determine that the purchase of Units is a suitable investment for you based on information you provide to your broker. We and/or the dealer manager will maintain records for at least six years of the information used to determine suitability. Except with respect to qualified plans and Tax Exempt Entities, units will be sold only to an investor who represents that he has either: o a net worth (exclusive of home, home furnishings and automobiles) of at least $45,000 AND an annual gross income of at least $45,000, OR o a net worth (exclusive of home, home furnishings and automobiles) of at least $150,000, or that he is purchasing in a fiduciary capacity for a person who meets such conditions. If the investor is a qualified plan or an IRA, such investor must represent: o that the IRA owner or the participant in the self-directed qualified plan satisfies the foregoing standards, or o if other than a self-directed qualified plan, that the qualified plan satisfies the foregoing suitability standards. Although the general partner believes that units may represent suitable investments for individuals, qualified plans, tax exempt entities, and many different types of entities, due to tax rules of particular application to certain types of entities, units may not be suitable investments for such entities. See "United States Federal Income Tax Considerations -- Investment by Tax Exempt Entities." Prospective investors should consult their tax advisors with respect to the tax consequences of an investment in units as it may affect their particular tax situations. Certain state securities commissions have established suitability standards or minimum investment amounts for the offer and sale of securities, which are different than those set forth above. Units will be sold only to investors in these states who meet the suitability standards set forth below (net worth in all cases excludes home, home furnishings and automobiles): CALIFORNIA, IOWA, MASSACHUSETTS, MICHIGAN, MISSOURI, NEW JERSEY, NORTH CAROLINA AND PENNSYLVANIA - Net worth of at least $225,000 or current annual income of at least $60,000 and a net worth of at least $60,000. Missouri, Michigan and Pennsylvania investors must have a net worth of at least ten times their investment in CIGF6. MAINE - Net worth of at least $200,000 or current annual income of at least $50,000 and a net worth of at least $50,000. OHIO - Minimum annual income of $70,000 and a minimum net worth of $70,000; or a minimum net worth of $250,000. Also, in no event shall the aggregate purchase price of units in CIGF6 and its affiliated funds exceed 10% of an investor's net worth. NEBRASKA - In no event shall the aggregate purchase price of units exceed 10% of net worth. The minimum initial investment amount for Nebraska residents is $5,000 for individuals and $1,000 for IRA/Keogh plans. MINNESOTA - Minimum investment amount for IRAs or qualified plans (but not Tax Exempt Entities) is $2,000; for individuals the minimum investment amount is $2,500. TABLE OF CONTENTS
PAGE ---- PROSPECTUS SUMMARY................................................................................................6 Our Company....................................................................................................6 General Partner................................................................................................6 Risk Factors...................................................................................................6 The Offering...................................................................................................7 Estimated Use Of Proceeds......................................................................................8 Compensating our general partner and its affiliates............................................................9 We May Borrow Funds............................................................................................9 Distributions Are Expected To Be Made Quarterly................................................................9 Distributions May Be Automatically Reinvested in Additional Units During the Offering Period..................10 Units May Not Be Sold On The Public Market....................................................................10 Units May Be Redeemed.........................................................................................10 Prior Equipment Leasing Programs..............................................................................10 The Partnership Will Terminate................................................................................10 The Cost Of The Equipment Will Be Depreciated.................................................................11 RISK FACTORS.....................................................................................................11 There will be no public market for the units, and you may be unable to sell or transfer your units at a time and price of your choosing.................................................................11 During the life of Commonwealth Income & Growth Fund VI, all or a portion of the distributions you receive will be a return of capital, rather than income, so you will not receive a lump sum of returned capital at liquidation in the same amount of your initial investment...............................11 Information technology equipment we purchase may depreciate in value and/or become obsolete or lose value as new technology is developed, which can reduce the value of your units and your ultimate cash return........................................................................................11 You will not be able to participate in management decisions which may affect the return on your investment.............................................................................................12 We pay significant fees to the general partner and affiliates, which reduce cash available for distributions...............................................................................................12 CIGF6 will face conflicts of interest arising out of its relationships with the general partner and its affiliates, which could adversely affect our performance and your returns...........................12 Our use of leverage to finance equipment acquisitions could adversely affect our cash flow....................13 None of our general partner's four prior public funds has gone full cycle to liquidity, so our general partner has no track record of providing income or liquidity to public fund investors...........13 The loss of certain key personnel upon whom we depend for our management could adversely affect our success and your investment return...............................................................13 The assets that CIGF6 will acquire will not be diversified by equipment type, which may adversely affect the performance of CIGF6.............................................................................13 The size of our offering may prevent geographic, industry or other diversification of lessees, which may adversely affect the performance of CIGF6.........................................................13 If we are unable to arrange promptly for the releasing or sale of the equipment when a lessee defaults or when equipment is returned by a lessee, our revenue will be reduced.............................13 The general partner has made a limited contribution to Commonwealth Income & Growth Fund VI, causing you and the other limited partners to collectively bear substantially greater risk than the general partner.............................................................................................14 Your legal rights of action against the general partner are limited...........................................14 CIGF6 was formed on May 19, 2003 and has a limited operating history upon which you can evaluate your investment in units...........................................................................14 You may be liable for partnership obligations if you take an active part in the control of the business of CIGF6...........................................................................................14 You may be obligated to return distributions from CIGF6 in certain circumstances..............................15 The business of leasing and investing in equipment is subject to many risks which could impact your returns................................................................................................15 We intend to invest primarily in equipment subject to operating leases, and therefore may not recover our investment in the equipment.....................................................................15
- 2 - We have not yet identified any of our investments in equipment, which prevents you from evaluating, or having any input into our portfolio of equipment leases......................................15 Any delay in acquiring equipment will diminish our returns....................................................15 Our inability to repay non-recourse debt could cause a loss of our investment in financed equipment...........16 In leasing the equipment to lessees, we may be exposed to liability for damages resulting from their actions or inaction, independent of contract terms, which can reduce cash available for distributions...............................................................................................16 The equipment leasing industry is highly competitive, and our inability to compete effectively in this market will reduce your returns and the value of your units.........................................16 CIGF6's ability to lease, release or sell its equipment, and therefore returns to investors, may be affected by actions taken or not taken by, or the business prospects of, IBM, over which we will have no control.............................................................................................16 Our ability to release or sell the equipment at the end of the lease term, and therefore returns to investors, could be adversely affected by the actions of the equipment manufacturer or others hired to perform services on the equipment..................................................................16 Our Sponsor, Commonwealth Capital Corp., depends upon the profitability of affiliated prior programs in order to be in a position to repay a $1,000,000 promissory note to our general partner, thereby putting our general partner's capitalization at risk if the prior programs become unprofitable................................................................................................16 TAX RISKS.....................................................................................................17 A ruling from the IRS has not been obtained, and the general partner does not presently intend to apply for a ruling, with respect to the tax considerations associated with an investment in units, and a successful challenge of our interpretations by the IRS could cause the actual tax consequences to you to differ from those stated in this prospectus..........................................17 Any adjustment to a tax return of CIGF6 as a result of an audit by the IRS may result in adjustment to your tax return..............................................................................17 Your tax liabilities may exceed cash distributions or cash proceeds from the sale or other disposition of equipment or units...........................................................................17 The IRS may challenge our partnership status which, if successful, could significantly reduce cash available for distributions............................................................................18 The IRS may challenge certain partnership allocations, which could cause you to recognize additional taxable income...................................................................................18 The IRS may consider CIGF6 to be a secured lender with respect to certain equipment, which could increase your tax liabilities.........................................................................18 You may incur state tax and foreign tax liabilities...........................................................18 Tax benefits associated with an investment in units could be lost and/or substantial tax liabilities incurred by reason of changes in the tax laws...............................................................19 Investment in CIGF6 by a tax exempt entity, including a qualified employee pension or profit sharing trust or an individual retirement account, will result in the receipt of UBTI.......................19 Investment in CIGF6 by certain benefit plans may impose additional burdens on CIGF6...........................19 MANAGEMENT.......................................................................................................19 RESPONSIBILITIES OF THE GENERAL PARTNER..........................................................................22 INVESTMENT OBJECTIVES AND POLICIES...............................................................................24 Principal Investment Policies.................................................................................24 Information technology equipment..............................................................................25 Other Equipment Restrictions..................................................................................26 Diversification...............................................................................................26 Description of Leases.........................................................................................26 Borrowing Policies............................................................................................27 Refinancing Policies..........................................................................................28 Liquidation Policies..........................................................................................28 Management of Equipment.......................................................................................28 Competition...................................................................................................29 Preliminary Investments.......................................................................................29 Reserves......................................................................................................29 General Restrictions..........................................................................................30 COMPENSATION TO THE GENERAL PARTNER AND AFFILIATES...............................................................31 CONFLICTS OF INTEREST............................................................................................34 Competition for General Partner's Time........................................................................35 Competition with Affiliates...................................................................................35 Acquisitions..................................................................................................35
- 3 - Receipt Of Compensation by the General Partner and its Affiliates.............................................35 Lack of Independent Investigation by Underwriter..............................................................36 Loans from the General Partner................................................................................36 Non-Arms-Length Agreements....................................................................................36 Joint Ventures with Affiliates of the General Partner.........................................................36 Off-Balance Sheet Arrangements................................................................................37 Organization of General Partner...............................................................................37 PRIOR OFFERINGS BY AFFILIATES....................................................................................37 TRANSFERABILITY OF UNITS.........................................................................................39 General Limitations...........................................................................................39 Redemption Provision..........................................................................................39 Exempt Transfers..............................................................................................40 Additional Restrictions on Transfer...........................................................................41 DISTRIBUTIONS AND ALLOCATIONS....................................................................................41 Between the General Partner and the Limited Partners..........................................................41 Income and Return of Capital..................................................................................42 Distribution Reinvestment.....................................................................................43 Allocation of Profits and Losses and Distributions of Cash Among the Limited Partners.........................43 UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS..................................................................44 Classification as a Partnership...............................................................................45 Certain Principles of Partnership Taxation....................................................................46 Allocation of Partnership Income, Gains, Losses, Deductions and Credits.......................................47 Limitations on Utilization of Partnership Losses..............................................................49 Cash Distributions............................................................................................51 Distribution Reinvestment.....................................................................................51 Fees and Reimbursements to the General Partner and Affiliates.................................................52 Ownership of Equipment........................................................................................52 Cost Recovery and Depreciation................................................................................53 Interest Deduction Limitations................................................................................53 Sale of Equipment.............................................................................................54 Disposition of Units..........................................................................................54 Termination of the Partnership for Tax Purposes...............................................................55 No Section 754 Election.......................................................................................56 Investment by Tax Exempt Entities.............................................................................56 Investment by Nonresident Alien Individuals and Foreign Corporations..........................................57 Alternative Minimum Tax.......................................................................................57 Partnership Tax Returns and Tax Information...................................................................58 IRS Audit of the Partnership..................................................................................58 Tax Shelter Registrations.....................................................................................58 Interest and Penalties........................................................................................59 Foreign Tax Considerations....................................................................................59 Partnership Anti-Abuse Rules..................................................................................60 Future Federal Income Tax Changes.............................................................................60 State Taxes...................................................................................................60 ERISA CONSIDERATIONS.............................................................................................61 Fiduciaries Under ERISA.......................................................................................61 Prohibited Transactions Under ERISA and the Code..............................................................62 "Plan Assets".................................................................................................62 Other ERISA Considerations....................................................................................63 MANAGEMENT'S DISCUSSION OF CERTAIN FINANCIAL DATA................................................................64 PARTNERSHIP AGREEMENT SUMMARY....................................................................................64 The Units.....................................................................................................65 Non-assessability of Units....................................................................................65 Liability of Limited Partners.................................................................................65 Allocations and Distributions.................................................................................65 Responsibilities of the General Partner.......................................................................65 Records and Reports...........................................................................................65 Meetings of the Partners......................................................................................66 Voting Rights of Limited Partners.............................................................................66 Roll-Ups and Conversions......................................................................................66 Power of Attorney.............................................................................................67
- 4 - Partnership Term..............................................................................................68 PLAN OF DISTRIBUTION.............................................................................................68 General.......................................................................................................68 Offering of Units.............................................................................................69 Escrow Arrangements and Funding...............................................................................70 Subscription for Units........................................................................................70 Subscribers' Representations and Warranties...................................................................71 Special Limit on Ownership of Units by Benefit Plans..........................................................71 Sales Material................................................................................................71 REPORTS TO LIMITED PARTNERS......................................................................................72 LEGAL MATTERS....................................................................................................72 EXPERTS .........................................................................................................73 WHERE YOU CAN FIND ADDITIONAL INFORMATION........................................................................73 APPENDIX I......................................................................................................A-1 APPENDIX II.....................................................................................................B-1 FINANCIAL STATEMENT INDEX.......................................................................................F-1
- 5 - PROSPECTUS SUMMARY THE FOLLOWING IS A SUMMARY WHICH HIGHLIGHTS THE MATERIAL INFORMATION CONTAINED IN THIS PROSPECTUS. IT MAY NOT INCLUDE ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THIS OFFERING FULLY, YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE RISK FACTORS AND THE FINANCIAL STATEMENTS. OUR COMPANY Commonwealth Income & Growth Fund VI is a Pennsylvania limited partnership that will own and lease information technology equipment. Our office is located at Oaklands Corporate Center, 470 John Young Way, Suite 300, Exton, Pennsylvania 19341. Our phone number is 1-800-249-3700. We refer to Commonwealth Income & Growth Fund VI as "CIGF6" in this prospectus. Our business strategy is as follows: o We will use a substantial portion of the proceeds of the offering to acquire information technology and other similar equipment, which will be leased to U.S. corporations and other institutions. o We will make distributions to investors after the general partner has determined that there is sufficient cash flow from lease payments to make distributions. Sufficient cash flow will be available for distributions if income for a distribution period exceeds both expenses for that period and any existing lease acquisition commitments for that period. o We will also use excess cash flow, sale proceeds and the proceeds of debt financing to purchase additional equipment from time to time throughout our operational phase. We expect that most of the equipment will be placed on operating leases (short term leases under which we will normally receive total rental payments in an amount less than the purchase price of the equipment). o At the end of initial operating leases, we will either re-lease or sell equipment. Substantially all of the equipment will be manufactured by, or compatible with equipment manufactured by IBM. See "Risk Factors" and "Investment Objectives and Policies." o We intend to purchase only equipment which will be leased at the same time we acquire the equipment. o We intend to dispose of all our assets approximately 10 years after the termination of this offering and distribute any available proceeds of the sale of assets to our investors. GENERAL PARTNER Our general partner is Commonwealth Income & Growth Fund, Inc., located at Oaklands Corporate Center, 470 John Young Way, Suite 300, Exton, Pennsylvania 19341 (telephone number is 1-800-249-3700). The general partner is responsible for managing our affairs on a day-to-day basis. The general partner is also responsible for identifying and making investments on our behalf. Our general partner is owned by Commonwealth of Delaware, Inc., which is owned by Commonwealth Capital Corp., which we may refer to as "Com Cap Corp." Affiliates, who are individuals or entities considered to be in control of, controlled by, or under common control with a specified person or entity, of our general partner have sponsored several prior equipment leasing programs. Kimberly A. Springsteen and George S. Springsteen, acting through the general partner, make our investment decisions. See "Conflicts of Interest," "Management" and "Table II -- Prior Performance Tables." RISK FACTORS AN INVESTMENT IN CIGF6 HAS MANY RISKS. THE "RISK FACTORS" SECTION OF THIS PROSPECTUS CONTAINS A DETAILED DISCUSSION OF THE MOST IMPORTANT RISKS. PLEASE REFER TO THE "RISK FACTORS" SECTION FOR A MORE DETAILED DISCUSSION OF THE RISKS SUMMARIZED BELOW: o We pay significant fees to the general partner and affiliates, which reduce cash available for distributions. o There is currently no public trading market for the units, and it is unlikely that one will develop. An investment in units will be highly illiquid and it may be difficult for you to sell your units at the time and for the price you desire. o You will not have the opportunity to participate in management decisions or evaluate the terms of the investments made by CIGF6. - 6 - o The general partner and its affiliates are or will be engaged in other activities that will result in potential conflicts of interest with the services that the general partner and affiliates will provide to us. o We may purchase computer equipment that may depreciate in value and/or become obsolete over time. o We will concentrate on acquiring information technology equipment and other similar capital equipment and will not diversify the assets in which we invest beyond those classes of equipment. o During the life of CIGF6, a portion of the distributions you receive will be a return of capital, rather than income. o The loss of certain key personnel upon whom we depend for our management could adversely affect our success and your investment return. Certain of our investments may be financed with non-recourse debt. In connection with such borrowing, we will likely grant security interests in the financed property, which would put us at risk of losing that asset if we are unable to pay that debt. THE OFFERING Offering Size (maximum).............. $50,000,000 (minimum).............. $ 1,150,000 Minimum Investments*................. Individuals - $2,500 IRA, Keogh and other qualified plans - $1,000 Suitability Standards................ Net worth of at least $45,000 and annual gross income of at least $45,000; OR Net worth of at least $150,000 (For this purpose, net worth excludes home, furnishings and personal automobiles). Suitability standards may vary from state to state. Please See the "Investor Suitability Standards" section on page 1. Unit Price........................... $20.00 Escrow............................... Proceeds will be placed in an escrow account until the minimum amount of $1,150,000 in units has been purchased by investors, at which time we will hold our first escrow closing and admit limited partners. No commissions will be paid until the minimum amount is reached. If the minimum amount has not been reached during the offering period, offering proceeds will be promptly returned to investors. Holding Period of Units.............. Units cannot be transferred without consent of the general partner, which may be withheld in order to limit the number of transfers to satisfy certain tax requirements. Beginning 30 months after the completion of this offering, the general partner may, in its discretion, redeem a limited number of units upon request. Other transfer restrictions may apply. Our General Partner ................. Commonwealth Income & Growth Fund Inc. will administer our day-to-day operations and select our information technology equipment investments. Estimated Proceeds................... If the maximum number of units are sold: 87.5% - to acquire equipment 12.5% - for commissions, fees and expenses If the minimum number of units are sold: 87.0% - to acquire equipment 13.0% - for commissions, fees and expenses * We may waive the minimum investment amount for investors in Commonwealth Income & Growth Fund IV ("CIGF4") or investors in Commonwelth Income & Growth Fund V ("CIGF5"), two prior programs also sponsored by the general partner, who wish to reinvest their CIGF4 or CIGF5 distributions in CIGF6 units. CIGF4 or CIGF5 investors who wish to take advantage of this opportunity should contact their broker or the general - 7 - partner. The laws of your state may prohibit an investment in CIGF6 of less than a minimum amount (see "Investor Suitability Standards") and/or may aggregate all of your CIGF4, CIGF5 and CIGF6 holdings in determining whether you meet applicable suitability standards. The general partner has absolute discretion in granting any waiver of the minimum investment amount. ESTIMATED USE OF PROCEEDS The following table explains the estimated use of proceeds of the offering of units. Except as otherwise disclosed in this prospectus, we will not engage in transactions with the general partner or any of its affiliates and all items of compensation are disclosed in the table below or under the caption "Compensation of General Partner and Affiliates."
Minimum Proceeds Maximum Proceeds (57,500 Units) (2,5000,000 units) -------------------------- -------------------------- Amount Percent Amount Percent ------------ ----------- ------------ ----------- Gross Offering Proceeds $ 1,150,000 100.0% $ 50,000,000 100.00% Selling Commissions (1) 92,000 8.0% 4,000,000 8.00% Dealer Manager Fee 23,000 2.0% 1,000,000 2.00% Organizational and Offering Expenses (2) 34,500 3.0% 1,250,000 2.50% ------------ ----------- ------------ ----------- Total Offering Expenses 149,500 13.0% 6,250,000 12.50% Net Proceeds to Partnership Available for Investment 1,000,500 87.0% 43,750,000 87.50% Equipment Acquisition Fees (3) 39,100 3.4% 1,750,000 3.50% Investment in Equipment (4) 961,400 83.6% 42,000,000 84.00%
(1) The amount of the underwriting commissions (which include the selling commissions and dealer manager fees) will range between four percent and eight percent of capital contributions based upon the quantity of units sold to a single investor. Gross proceeds of the offering are calculated as if all units are sold at $20.00 per unit and do not take into account any reduction in selling commissions. See "Plan of Distribution" for a description of commission discounts available for certain large volume purchases of units and for purchases by certain employees of the general partner, dealer manager, participating brokers and their affiliates. The units are being offered to the public through Commonwealth Capital Securities Corp., which will receive selling commissions of up to eight percent on all sales of units, and will act as dealer manager for which it will receive a dealer manager fee of one percent on all sales of units. The dealer manager is an affiliate of the general partner. Other broker dealers may be engaged as participating brokers to sell units and re-allowed selling commissions of up to eight percent with respect to units, which they sell. In addition, all or a portion of the dealer manager fee may be re-allowed to certain participating brokers for expenses incurred by them in selling the units, including reimbursement for bona fide expenses incurred in connection with due diligence activities. See "Plan of Distribution" for a more complete description of this fee. (2) Consists of estimated legal, accounting and printing expenses; registration and filing fees; miscellaneous expenses related to the organization and formation of the partnership; and other costs incurred in connection with the preparation, printing and distribution of this prospectus and related sales literature. See "Plan of Distribution." The general partner will be paid an organizational fee equal to three percent of capital contributions up to $25,000,000, and two percent of capital contributions in excess of $25,000,000, out of which it will pay all organizational and offering expenses. (3) An equipment acquisition fee of four percent of the purchase price of equipment we purchase will be payable by us to the general partner. These acquisition fees do not include acquisition fees payable with respect to the purchase of equipment with the proceeds of leverage or with undistributed proceeds from the sales of equipment. Certain expenses associated with the selection and acquisition of equipment for CIGF6 (such as legal and accounting fees and expenses, travel and communication expenses, brokerage fees and inspection fees and expenses) will be paid to third parties out of this four percent fee. The amounts of such expenses are not ascertainable at this time. The general partner will also be paid a debt placement fee of one percent of amounts borrowed to the extent leverage is used to acquire equipment. CIGF6 may not incur any indebtedness to acquire equipment until the net proceeds of the offering are fully invested, or committed to investment, in equipment. (4) Represents CIGF6's expected cash investment from capital contributions in equipment, excluding acquisition fees. This does not include equipment acquired with leverage or with undistributed proceeds from the sale of equipment. Because CIGF6's leases are expected to be on a "triple-net" basis, it is anticipated that no - 8 - permanent reserve for maintenance and repairs will be established from the offering proceeds. However, the general partner, in its sole discretion, may retain a portion of the offering proceeds, cash flow or net disposition proceeds available to CIGF6 for maintenance, repairs and for any other currently unanticipated working capital needs. In addition, the general partner and Com Cap Corp. have agreed that the general partner or Com Cap Corp. will lend or contribute to CIGF6 an amount up to 1.01% of the net offering proceeds, if needed, to meet CIGF6's expenses. The maximum front-end fees (which include fees and expenses incurred by any person in connection with the organization of CIGF6 and acquisition of equipment during the initial organization and acquisition phase) that could be paid during the first fiscal year of operations without deduction of expenses are $8,678,570 (assuming the maximum number of units are sold and the maximum amount of leverage is incurred excluding fees earned with retained proceeds). COMPENSATING OUR GENERAL PARTNER AND ITS AFFILIATES Our general partner and its affiliates, including Commonwealth Capital Securities Corp., will receive substantial fees and compensation from the offering of units and from our operations regardless of profitability and, in some cases, prior to any distributions to you. Outlined below are the most significant items of compensation. o We will pay Commonwealth Capital Securities Corp., as the dealer manager, an underwriting commission of up to 10.0% of the capital contributions received in this offering, but only if a minimum $1,150,000 in units are sold. A portion of this commission may be re-allowed by the dealer manager to other participating brokers. o As compensation for organizing CIGF6, we will pay the general partner an organizational fee equal to 3% of the first $25,000,000 of capital contributions and 2% of capital contributions in excess of $25,000,000. o As compensation for the negotiation of equipment acquisitions and related leases, we will pay the general partner an equipment acquisition fee of 4% of the purchase price of each item of equipment purchased. o When equipment is sold, we will pay the general partner equipment liquidation fees equal to the lesser of 50% of the competitive sale commission or 3% of the sale price of the equipment, with payment subordinated to the receipt by the limited partners of a return of their capital contributions plus a 10% cumulative return. The general partner will also receive one percent of cash available for distribution until the limited partners have received distributions equal to their capital contributions plus the 10% cumulative return and thereafter, the general partner will receive 10% of cash available for distribution. Other fees will be paid to the general partner or its affiliates in connection with the reimbursement of expenses (up to $40,000), debt placements with a term over twelve months (up to 1% of such debt), and equipment management (up to 5% of lease revenues). See "Compensation to the General Partner and Affiliates." WE MAY BORROW FUNDS We may borrow a portion of the cost of the equipment which we purchase. Our total amount of indebtedness will be limited to 30% of the total cost of the equipment in the portfolio, at the time of purchase. We may not borrow to acquire equipment unless, at the time of any such leveraged acquisition, the net proceeds of the offering received to date are fully invested, or committed to investment, in equipment. There are no borrowing limits for any particular item of equipment. All of our borrowings will be non-recourse to us, which means that upon any default, a lender may seek payment only by foreclosing on the item of equipment that is the subject of the loan, and may not recover any of our other assets. Up to one percent of the amount of such indebtedness may be payable to the general partner as a debt placement fee. DISTRIBUTIONS ARE EXPECTED TO BE MADE QUARTERLY Distributions are expected to be made quarterly. There can be no assurance, however, as to the amount of any distributions. Distributions will not be made until the minimum number of units are sold. If an escrow closing occurs other than at the end of a quarter, you will receive a pro-rated distribution for the period between the closing and the end of that quarter. In addition, if you purchase a minimum of 250 units ($5,000), you will have the option to choose, for an annual fee of $25.00, to receive distributions on a monthly basis. If you elect to receive monthly distributions, they will be paid in arrears, meaning that you will receive approximately one third of a quarterly distribution each month after the declaration of a quarterly distribution, and not in anticipation of a future distribution. In the future, the general partner, in its sole discretion, may elect to terminate the monthly distribution option, and pay distributions to you on a quarterly basis. In such event, the fees charged for monthly distributions will also terminate. See "Distributions and Allocations." - 9 - DISTRIBUTIONS MAY BE AUTOMATICALLY REINVESTED IN ADDITIONAL UNITS DURING THE OFFERING PERIOD You may purchase additional units, if desired, by automatically reinvesting all or a portion of your cash distributions in units during the offering period. You may elect to reinvest your distributions by marking section 6 of your subscription agreement accordingly. Your election to reinvest distributions is entirely voluntary, and you may terminate automatic reinvestment at any time by notifying us in writing. Your share of CIGF6's taxable income is still taxable to you, even if you choose to reinvest your distributions. See "Distributions and Allocations -- Distribution Reinvestment" UNITS MAY NOT BE SOLD ON THE PUBLIC MARKET You cannot sell your units on the public market. The general partner expects that no market will develop. The units will be transferable only with the general partner's approval. The general partner intends to permit transfers and redemptions of units of up to two percent of the total outstanding interests in Commonwealth Income & Growth Fund VI in any one year, subject to certain exceptions. In deciding whether a transfer will be allowed, the general partner will consider whether the transfer will have an adverse affect on our federal tax status as a partnership. See "Transferability of Units." UNITS MAY BE REDEEMED After a 30-month period immediately following the termination of the offering, we may redeem units that may be tendered each year, up to two percent of the outstanding units, subject to the general partner's approval. Requests for redemption are completely voluntary. The purchase price for outstanding units will be equal to 105% of your "adjusted capital contributions," which is the amount you paid for the units, net of the offering fees and expenses attributable to the units, less the amount of cash distributions you have received relating to such units in excess of the cumulative return. The offering fees and expenses attributable to the units will be added back over time for purposes of determining the redemption price. The adjusted capital contribution amount will be further reduced, in determining the redemption price, by the offering fees and expenses attributable to the units for sale, which offering fees and expenses will be amortized over ten years after the termination of the offering. One quarter of these expenses will be amortized in each thirty-month period following the termination of the offering. Therefore, for example, one-fourth of the amount such fees and expenses will be added back to the adjusted capital contribution amount used to determine the redemption price after the expiration of the first thirty-month period from the date of the termination of the offering. The redemption price formula will not be calculated at the fair market value of a unit. See "Transferability of Units" PRIOR EQUIPMENT LEASING PROGRAMS Our general partner has previously sponsored five public and two private equipment leasing programs with structures, management and investment objectives similar to those of CIGF6. Commonwealth Income & Growth Fund I completed its offering on May 11, 1995 with $12,634,153 raised from investors. Commonwealth Income & Growth Fund II completed its offering on May 12, 1997 after raising $9,235,185 from investors. Commonwealth Income & Growth Fund III completed its offering on July 25, 2000, with $3,085,801 raised from investors. All of the net offering proceeds of these prior funds were fully utilized for the purchase of information technology equipment. Commonwealth Income & Growth Fund IV began its offering on October 19, 2001, was fully subscribed for the full offering amount of $15,000,000 as of September 30, 2003. Commowealth Income & Growth Private Fund I began its offering on January 13, 2004 and was fully subscribed with the full offering amount of $20,000,000 on September 14, 2005. Commonwealth Income & Growth Private Fund II began its offering on September 26, 2005 and has raised $3,357,000 of the $20,000,000 offering amount through December 31, 2005. Commonwealth Income & Growth Fund V began its offering on February 7, 2005 and has raised $19,608,910 of the $25,000,000 offering amount through December 31, 2005. The net offering proceeds of these prior funds available for investment in equipment were fully utilized for the purchase of information technology equipment. See "Prior Offerings By Affiliates" and "Table II - Prior Performance Tables." THE PARTNERSHIP WILL TERMINATE In approximately the ninth year after the completion of this offering, the general partner intends to begin liquidation of CIGF6 in an orderly fashion, unless it terminates earlier upon sale of all of the equipment. The term of our existence may be extended if the general partner believes that it would enable us to dispose of assets on terms more favorable than those it would otherwise be able to obtain. CIGF6 will not continue beyond December 31, 2016. See "Partnership Agreement Summary." - 10 - THE COST OF THE EQUIPMENT WILL BE DEPRECIATED The equipment will be eligible for different methods and periods of depreciation depending on the type of equipment. See "United States Federal Income Tax Considerations." RISK FACTORS AN INVESTMENT IN OUR PARTNERSHIP INVOLVES VARIOUS RISKS, WHICH ARE DESCRIBED BELOW. YOU SHOULD CONSIDER THE FOLLOWING RISK FACTORS TOGETHER WITH ALL OF THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS BEFORE MAKING A DECISION TO INVEST IN OUR UNITS. THERE WILL BE NO PUBLIC MARKET FOR THE UNITS, AND YOU MAY BE UNABLE TO SELL OR TRANSFER YOUR UNITS AT A TIME AND PRICE OF YOUR CHOOSING. There exists no public market for the units, and the general partner does not expect a public market for units to develop. The units cannot be pledged or transferred without the consent of the general partner. The units should be purchased as a long-term investment only. The general partner intends to limit the number of transfers to no more than that number permitted by one of the safe harbors available under the tax laws and regulations to prevent CIGF6 from being taxed as a corporation. Generally, these safe harbors require that all nonexempt transfers and redemptions of units in any calendar year not exceed two percent of the outstanding interests in the capital or profits of CIGF6. The general partner has sole discretion in deciding whether we will redeem units in the future. Consequently, you may not be able to liquidate your investment in the event of an emergency. You must be prepared to hold your units for the life of CIGF6. CIGF6's life cycle will last approximately 10 to 12 years, and any extension of this period will require an amendment to the partnership agreement, which must be approved by a majority of the limited partners. You may be able to resell your units, if at all, only at a discount to the offering price, which may be significant, and the redemption or sale price may be less than the price you originally paid for your units. See "Transferability of Units - Redemption Provision." DURING THE LIFE OF COMMONWEALTH INCOME & GROWTH FUND VI, ALL OR A PORTION OF THE DISTRIBUTIONS YOU RECEIVE WILL BE A RETURN OF CAPITAL, RATHER THAN INCOME, SO YOU WILL NOT RECEIVE A LUMP SUM OF RETURNED CAPITAL AT LIQUIDATION IN THE SAME AMOUNT OF YOUR INITIAL INVESTMENT. As equipment values decrease over the term of our existence, a portion of each distribution will be considered a return of capital, rather than income. As your capital in the units is reduced over the life of your investment, you will not receive a lump sum distribution upon liquidation that equals the purchase price you paid for units, as you might if you purchased a bond. Also, payments made upon liquidation will be taxable to the extent they are not a return of capital. As you receive distributions throughout the life of your investment, you will not know at the time of the distribution what portion of the distribution represents a return of capital and what portion represents income. You will have to wait until you receive your annual Schedule K-1 statement to determine the amounts of capital and income received for tax purposes. For purposes of determining whether you have received the preferred return of 10%, we first treat all distributions as income and then we treat payments made upon liquidation of equipment as returns of capital, although each distribution will be partially a return of capital for all other purposes. Therefore, you will not know which portion of the distributions will constitute a return of capital for preferred return and fee subordination purposes until the liquidation phase has begun. INFORMATION TECHNOLOGY EQUIPMENT WE PURCHASE MAY DEPRECIATE IN VALUE AND/OR BECOME OBSOLETE OR LOSE VALUE AS NEW TECHNOLOGY IS DEVELOPED, WHICH CAN REDUCE THE VALUE OF YOUR UNITS AND YOUR ULTIMATE CASH RETURN. Residual value is the amount realized upon the sale or release of equipment when the original lease has expired. The residual value of our equipment may decline if technological advancements make it obsolete or change market preferences. The residual value depends on, among other factors, the condition of the equipment, the cost of comparable new equipment, the technological obsolescence of the equipment and supply and demand for the equipment. - 11 - In either of these events, the equipment we purchased may have little or no residual value. This will result in insufficient assets for us to distribute cash in a total amount equal to the invested capital of the limited partners over the term of our existence. Also, such an occurrence may reduce the value of the units. Although currently we expect CIGF6 to acquire predominantly new equipment, CIGF6 may purchase used equipment. There is no limitation on the amount of used equipment which CIGF6 may acquire. The acquisitions of used equipment may increase the risk that such equipment will become obsolete so that it will have little or no residual value. YOU WILL NOT BE ABLE TO PARTICIPATE IN MANAGEMENT DECISIONS WHICH MAY AFFECT THE RETURN ON YOUR INVESTMENT. You will have limited voting rights on matters affecting our business. CIGF6's management may make decisions which you believe will diminish your returns, and you will have little opportunity to influence or take part in such decisions. For any matter submitted to a vote of the limited partners, the affirmative vote of the holders of at least a majority of the outstanding units is required for approval. See "Partnership Agreement Summary -- Voting Rights of Limited Partners." WE PAY SIGNIFICANT FEES TO THE GENERAL PARTNER AND AFFILIATES, WHICH REDUCE CASH AVAILABLE FOR DISTRIBUTIONS. The general partner and its affiliates, including Commonwealth Capital Securities Corp., will receive substantial fees. Some fees will be paid without regard to the amount of distributions paid or the success or profitability of CIGF6's operations and investments. For example, an increase in portfolio turnover or the amount of leverage used to purchase equipment may increase the fees we pay to the general partner. Such compensation and fees were established by the general partner and are not based on arm's-length negotiations. See "Compensation to the General Partner and Affiliates." CIGF6 WILL FACE CONFLICTS OF INTEREST ARISING OUT OF ITS RELATIONSHIPS WITH THE GENERAL PARTNER AND ITS AFFILIATES, WHICH COULD ADVERSELY AFFECT OUR PERFORMANCE AND YOUR RETURNS. SEE "CONFLICTS OF INTEREST." o The general partner and its affiliates have sponsored other investor programs, which will be in potential competition with CIGF6, and will compete for the time and attention of management. The general partner and its affiliates may also form additional investor programs, which may be competitive with CIGF6. o If one or more investor programs and CIGF6 are in a position to acquire the same equipment, conflicts may arise as to which of the programs acquire the available items of equipment. o Com Cap Corp. and the general partner or other affiliates of the general partner may acquire equipment for CIGF6 under certain circumstances. Interest will be paid on loans or advances (in the form of deposits with manufacturers or vendors of equipment or otherwise) from the general partner or its affiliates from their own funds at a rate equal to that which would be charged by third party financing institutions on comparable loans for the same purpose in the same geographic area, but in no event in excess of the general partner's or affiliate's own cost of funds. o Partnership transactions involving the acquisition, lease and/or sale of equipment will result in compensation to the general partner and its affiliates. Because the amount and timing of such fees depends, in part, on the debt structure of equipment acquisitions and the timing of such transactions, the general partner and its affiliates may be subject to conflicts of interest to the extent the acquisition, retention, re-lease or sale of equipment and the terms and conditions thereof may be less advantageous to CIGF6 and more advantageous to the general partner. For example, shorter lease terms will lead to a higher rate of equipment turnover throughout the life of the fund, which will generate additional acquisition fees for the general partner. This may influence the general partner's negotiation of lease terms and renewal periods. o Since Commonwealth Capital Securities Corp. is an affiliate of the general partner, CIGF6 will not be subject to an independent investigation of the type normally performed by an underwriting firm in connection with the public offering of securities. o Any agreements and arrangements relating to compensation between CIGF6 and the general partner or any of its affiliates will not be the result of arm's-length negotiations and the performance thereof by the general partner and its affiliates will not be supervised or enforced at arm's-length. o CIGF6 may enter into joint ownership or joint venture agreements for the acquisition and leasing of equipment with other persons, including persons controlled by the general partner. Should any such joint - 12 - ventures be done, the general partner may face conflicts of interest as it may control and owe fiduciary duties to both CIGF6 and, through such affiliates, the affiliated co-venturer. OUR USE OF LEVERAGE TO FINANCE EQUIPMENT ACQUISITIONS COULD ADVERSELY AFFECT OUR CASH FLOW. After the net proceeds of the offering received at the time of a purchase are fully invested, or committed to investment in equipment, we may incur debt in an amount of up to 30% of the total cost of the equipment in the portfolio at the time of purchase. There is no limit on the amount of debt which may be incurred in connection with the acquisition of any single item of equipment. If we are unable to make our debt payments as required, a lender could foreclose on the equipment securing its debt. This could cause us to lose part or all of our investment which in turn could cause the value of the units and distributions to you to be reduced. We generally borrow on a non-recourse basis to limit our exposure on any item of equipment to the amount of equity invested in that item. NONE OF OUR GENERAL PARTNER'S FOUR PRIOR PUBLIC FUNDS HAS GONE FULL CYCLE TO LIQUIDITY, SO OUR GENERAL PARTNER HAS NO TRACK RECORD OF PROVIDING INCOME OR LIQUIDITY TO PUBLIC FUND INVESTORS. The general partner intends to maintain the value of our portfolio at a relatively constant level, while distributing partnership income or loss, together with returned capital, to you throughout the life of the fund. Therefore, we do not expect that capital appreciation will provide any meaningful return on your units throughout our lifecycle. While some capital appreciation may in fact occur when the fund is liquidated and the proceeds are distributed to you, you may also experience a capital loss. The total amounts of income and capital appreciation, if any, you receive will not be determinable until we liquidate our portfolio. Because none of the prior public funds sponsored by our sponsor has completed its lifecycle and been liquidated, the general partner has no track record upon which you can rely in assessing the general partner's ability to ultimately provide income or a positive return on your investment. THE LOSS OF CERTAIN KEY PERSONNEL UPON WHOM WE DEPEND FOR OUR MANAGEMENT COULD ADVERSELY AFFECT OUR SUCCESS AND YOUR INVESTMENT RETURN. Our success, to a large extent, will depend on the quality of our management, particularly as it relates to equipment acquisition, releasing and disposition. The general partner is dependent on its key personnel. The loss of any key personnel could therefore have a detrimental effect on CIGF6's ability to continue to effectively manage its portfolio, and the expense of replacing key personnel could reduce cash available for distributions. See "Management," and "Investment Objectives and Policies." THE ASSETS THAT CIGF6 WILL ACQUIRE WILL NOT BE DIVERSIFIED BY EQUIPMENT TYPE, WHICH MAY ADVERSELY AFFECT THE PERFORMANCE OF CIGF6. Adverse developments in the market for information technology equipment will have a more significant adverse consequence to CIGF6 than if it had acquired a portfolio that included a greater variety of asset classes. The general partner currently expects that a substantial portion of our equipment will be compatible with equipment manufactured by IBM. Thus, adverse developments in the business or prospects of IBM may have a significantly greater impact on CIGF6 than if equipment compatible with that made by a more diverse group of manufacturers were acquired. THE SIZE OF OUR OFFERING MAY PREVENT GEOGRAPHIC, INDUSTRY OR OTHER DIVERSIFICATION OF LESSEES, WHICH MAY ADVERSELY AFFECT THE PERFORMANCE OF CIGF6. To the extent that this offering results in the sale of significantly less than the maximum number of units offered, the ability to diversify our portfolio across geographic areas, industries and types of lessees will be reduced, and a default by any lessee would have a more significant adverse effect than if greater diversification had been achieved. IF WE ARE UNABLE TO ARRANGE PROMPTLY FOR THE RELEASING OR SALE OF THE EQUIPMENT WHEN A LESSEE DEFAULTS OR WHEN EQUIPMENT IS RETURNED BY A LESSEE, OUR REVENUE WILL BE REDUCED. While the creditworthiness of potential lessees will be reviewed, lease defaults may occur. A default may cause us to lose anticipated revenues and limit our ability to recover our investment in the equipment. The general partner has not established minimum standards for lessees to whom it will lease equipment and there is no investment restriction prohibiting CIGF6 from doing business with any lessees. - 13 - The default by a lessee under a lease may cause equipment to be returned to us at a time when the general partner or its agents may be unable to arrange promptly for the releasing or sale of the equipment. If any indebtedness is secured by the returned equipment, its return will hinder our ability to make scheduled debt payments with respect to such equipment. In such case, the lender may foreclose on and acquire ownership of the returned equipment. In addition, lessees of equipment encountering financial difficulties may voluntarily or involuntarily become subject to the provisions of the Bankruptcy Code which could delay or prevent us from taking the equipment back upon default. Even if a bankrupt lessee elects to accept and continue its lease with us, we may be forced to renegotiate such lease at lower rates, which could cause us to lose anticipated revenues. See "Investment Objectives and Policies -- Description of Leases." THE GENERAL PARTNER HAS MADE A LIMITED CONTRIBUTION TO COMMONWEALTH INCOME & GROWTH FUND VI, CAUSING YOU AND THE OTHER LIMITED PARTNERS TO COLLECTIVELY BEAR SUBSTANTIALLY GREATER RISK THAN THE GENERAL PARTNER. We have received $1,000 from the general partner as a capital contribution for its interest in CIGF6. Therefore, contributions by you and other limited partners and the economic risks borne by you and the other limited partners, collectively, will be substantially greater, in proportion to the interests owned and benefits received by you, than the contribution by the General Partner, in proportion to the interest owned and benefits received by the General Partner. Approximately 12.5% (assuming the maximum amount of units are raised) to 13% of the proceeds from the sale of the units will be used to pay organization and offering fees and expenses to the General Partner. See "Prospectus Summary -- Estimated Use of Proceeds." YOUR LEGAL RIGHTS OF ACTION AGAINST THE GENERAL PARTNER ARE LIMITED. Generally, our general partner and its affiliates will not be personally liable for the return of any of your capital contributions, it being expressly stated in the partnership agreement that any such return shall be made solely from partnership assets. The general partner and its affiliates shall have no liability to the partnership or to any partner for any loss suffered by the partnership which arises out of any action or inaction by the general partner of its affiliates if they, in good faith, determined that their course of conduct was reasonable and in our best interest and such course of conduct did not constitute negligence or misconduct of our general partner or its affiliates. CIGF6 WAS FORMED ON JANUARY 6, 2006 AND HAS A LIMITED OPERATING HISTORY UPON WHICH YOU CAN EVALUATE YOUR INVESTMENT IN UNITS. Our operations may not ultimately be successful and we may be unable to meet our stated investment objectives. Specifically, sufficient cash may ultimately not be available for distribution to investors. Our general partner has previously sponsored four public equipment leasing programs with investment objectives similar to CIGF6, whose financial and operating results are set forth in Table II. The general partner has also sponsored several privately held equipment leasing programs. Results for these prior public and private programs have in some cases been lower than originally anticipated. See "Prior Offerings by Affiliates" below for a more complete description of these prior programs. YOU MAY BE LIABLE FOR PARTNERSHIP OBLIGATIONS IF YOU TAKE AN ACTIVE PART IN THE CONTROL OF THE BUSINESS OF CIGF6. In general, limited partners in a partnership are not liable for partnership obligations unless they take an active part in the control of the business of the partnership. Our partnership agreement provides certain rights to the limited partners to remove and replace the general partner, to amend the partnership agreement, to approve or disapprove the sale or other disposition at one time of all CIGF6's property, to dissolve CIGF6 and to take certain other actions. While Pennsylvania law would not impose liability for these activities, there is uncertainty as to which state's partnership laws may be applicable to partnerships that are organized under the laws of one state and that own property and have partners residing in other states. Thus it is conceivable that the existence or the exercise of these rights under certain circumstances could possibly cause you to be deemed to be liable as a general partner under the laws of states other than Pennsylvania. If you were judged to be liable as a general partner, you would be personally liable for all partnership obligations. - 14 - YOU MAY BE OBLIGATED TO RETURN DISTRIBUTIONS FROM CIGF6 IN CERTAIN CIRCUMSTANCES. You will be obligated to return any distributions from CIGF6 to the extent that, after giving effect to the distribution, all liabilities of the partnership (other than non-recourse liabilities and liabilities to limited partners on account of their interests in the partnership) exceed the fair value of its assets (including, as to assets serving as security for non-recourse liabilities, that portion of the fair value of our assets which exceeds the amount of such non-recourse liabilities). See "Partnership Agreement Summary -- Liability of Limited Partners." THE BUSINESS OF LEASING AND INVESTING IN EQUIPMENT IS SUBJECT TO MANY RISKS WHICH COULD IMPACT YOUR RETURNS. THE RISKS OF INVESTING IN EQUIPMENT INCLUDE THE FOLLOWING: o The unavailability of satisfactory equipment may cause a delay in investing our offering proceeds, or reduce the amount of equipment we acquire, or both, each of which can diminish our revenues and funds available for distribution. o The increasing rate at which equipment of the type in which CIGF6 intends to invest becomes obsolete, thereby reducing the residual value of our portfolio and your units. o The potential inability of CIGF6 to lease equipment coming off lease or following a default by the lessee will reduce cash flows and cash available for distribution. o Defaults by lessees cause us added expense to collect payment or foreclose on the equipment, and reduce our cash flows. We also may not be able to release returned equipment on terms as favorable as the original lease, causing our revenues to be less than originally anticipated. WE INTEND TO INVEST PRIMARILY IN EQUIPMENT SUBJECT TO OPERATING LEASES, AND THEREFORE MAY NOT RECOVER OUR INVESTMENT IN THE EQUIPMENT. Operating leases typically will have terms of 12 to 36 months and provide that we will receive total payments from the lessee in an amount that is less than our purchase price of the equipment. In order to recover our purchase price on termination of an operating lease, we must: o obtain a satisfactory renewal from the original lessee; o lease the equipment to a new lessee or other user; or o sell the equipment for a price which, when combined with previous lease payments, equals or exceeds the purchase price. We may not successfully accomplish any of these alternatives and, as a result, we may not realize anticipated revenues and may fail to recover our investment in the equipment. Shorter-term operating leases may increase these risks. See "Investment Objectives and Policies." WE HAVE NOT YET IDENTIFIED ALL OF OUR INVESTMENTS IN EQUIPMENT, WHICH PREVENTS YOU FROM EVALUATING, OR HAVING ANY INPUT INTO OUR PORTFOLIO OF EQUIPMENT LEASES. We have not identified all of the equipment for acquisition by CIGF6. Until equipment is identified in supplements to this prospectus or in quarterly and/or annual investor reports, you will have no information about any equipment to be purchased by us and you must rely solely upon the judgment and ability of the general partner with respect to the selection and evaluation of equipment. Except for the investment objectives and policies described in this prospectus, you will have no opportunity to evaluate the terms of transactions or other economic or financial data concerning our investments. ANY DELAY IN ACQUIRING EQUIPMENT WILL DIMINISH OUR RETURNS. Due to competition with other lessors, we may experience difficulty in obtaining and leasing appropriate equipment. Our ability to acquire and lease equipment may also be adversely affected by interest rates, the availability of capital or increases in corporate liquidity, since prospective lessees may prefer to raise capital, incur debt or use internally-generated cash to purchase equipment rather than enter the leasing market. - 15 - Delays in acquiring equipment will delay or reduce the anticipated benefits to you from the acquisition of units. OUR INABILITY TO REPAY NON-RECOURSE DEBT COULD CAUSE A LOSS OF OUR INVESTMENT IN FINANCED EQUIPMENT. Borrowing increases the risks of investment in CIGF6 because, in the case of non-recourse debt, if debt service payments are not made when due, we may sustain a loss of our investment in the equipment which secures that debt and the limited partners may experience adverse tax consequences. Borrowing can also lead to increased losses or the imposition of restrictions on our ability to borrow further amounts. See "United States Federal Income Tax Considerations -- Allocation of Partnership Income, Gains, Losses, Deductions and Credits." Money market fluctuations have affected the availability and cost of loans that may finance the purchase of equipment. The general partner will be unable to predict the nature of the money market at times when we may seek financing and any future tightening of credit controls will make obtaining financing more difficult and more costly. In such event, we may be forced to purchase equipment using only or mostly the cash proceeds from this offering, with little or no borrowings. This would make it more difficult for us to achieve the desired diversification of equipment and would prevent us from spreading the risk of unproductive investments over a greater number of items of equipment. In addition, future credit restrictions may adversely affect the ability for us to sell or refinance equipment and may affect the terms of equipment sales. IN LEASING THE EQUIPMENT TO LESSEES, WE MAY BE EXPOSED TO LIABILITY FOR DAMAGES RESULTING FROM THEIR ACTIONS OR INACTION, INDEPENDENT OF CONTRACT TERMS, WHICH CAN REDUCE CASH AVAILABLE FOR DISTRIBUTIONS. Lessees' use of the equipment may cause damages to third parties or their property for which CIGF6, as owner of the equipment, may be held liable, whether or not CIGF6 caused the damage. Although we will use our best efforts to minimize the possibility and exposure of such tort liability, CIGF6's assets may not always be protected against such claims. THE EQUIPMENT LEASING INDUSTRY IS HIGHLY COMPETITIVE, AND OUR INABILITY TO COMPETE EFFECTIVELY IN THIS MARKET WILL REDUCE YOUR RETURNS AND THE VALUE OF YOUR UNITS. CIGF6's competitors include independent leasing companies, affiliates of banks and insurance companies and other partnerships. Many of these entities may have larger equipment inventories, greater financial resources and more experience in the industry than CIGF6 or the general partner. See "Investment Objectives and Policies -- Competition." CIGF6'S ABILITY TO LEASE, RELEASE OR SELL ITS EQUIPMENT, AND THEREFORE RETURNS TO INVESTORS, MAY BE AFFECTED BY ACTIONS TAKEN OR NOT TAKEN BY, OR THE BUSINESS PROSPECTS OF, IBM, OVER WHICH WE WILL HAVE NO CONTROL. The general partner currently expects that a substantial portion of CIGF6's equipment will be manufactured by IBM or will be compatible with equipment manufactured by IBM, making the success of CIGF6 dependent in part on the success of IBM. OUR ABILITY TO RELEASE OR SELL THE EQUIPMENT AT THE END OF THE LEASE TERM, AND THEREFORE RETURNS TO INVESTORS, COULD BE ADVERSELY AFFECTED BY THE ACTIONS OF THE EQUIPMENT MANUFACTURER OR OTHERS HIRED TO PERFORM SERVICES ON THE EQUIPMENT. The failure of an equipment manufacturer to honor its product warranties or to provide necessary parts and servicing, the decline of the manufacturer's reputation in the industry, the discontinuance of the manufacture of such equipment or the termination of the manufacturer's business may also hinder our ability to release or sell the equipment. We may enter into contracts with manufacturers or others in which such parties may perform certain services related to equipment, including refurbishing and storing equipment and performing related services. Our ability to meet our investment objectives would be partially dependent on the satisfactory performance of these functions by such parties. See "Investment Objectives and Policies -- Information technology equipment." OUR SPONSOR, COMMONWEALTH CAPITAL CORP., DEPENDS UPON THE PROFITABILITY OF AFFILIATED PRIOR PROGRAMS IN ORDER TO BE IN A POSITION TO REPAY A $1,000,000 PROMISSORY NOTE TO OUR GENERAL PARTNER, THEREBY PUTTING OUR GENERAL PARTNER'S CAPITALIZATION AT RISK IF THE PRIOR PROGRAMS BECOME UNPROFITABLE. - 16 - Our general partner is required by law and by our partnership agreement to maintain a minimum net worth of at least $1,000,000. Commonwealth Capital Corp. has provided capital to the general partner by means of a noninterest-bearing demand note in the amount of $1,000,000, so that the Company will at all times have a net worth (which includes the net equity of the general partner and the demand note receivable from Commonwealth Capital Corp.) of at least $1,000,000. The collectibility of the note is dependent upon the profitability of the prior programs, as well as CIGF6. Failure to maintain a sufficient net worth could cause us to treated as an association taxable as a corporation for federal income tax purposes, which would reduce funds available for distribution. TAX RISKS In view of the complexity of the tax aspects of investing in a partnership that may invest in many different types of equipment, and particularly in view of the fact that the tax situation of each investor will not be the same, you are urged to consult your tax advisor with specific reference to your own tax situation prior to making an investment in CIGF6. CIGF6 is not intended to be a "tax shelter" and you should not expect a tax benefit from substantial tax deductions or losses from CIGF6. The general partner anticipates, however, that CIGF6 may distribute cash periodically to you, a portion of which may not be taxable to you upon receipt. Trustees and other fiduciaries of individual retirement accounts, qualified pension, profit sharing or stock bonus plans, and other tax exempt entities should be aware that an investment in units will result in unrelated business taxable income, known as UBTI. See "United States Federal Income Tax Considerations -- Investment by Tax Exempt Entities" and "ERISA Considerations" below. Together with your tax advisor, you should carefully consider all of the tax aspects of an investment in CIGF6, including, specifically, the risks discussed below. A RULING FROM THE IRS HAS NOT BEEN OBTAINED, AND THE GENERAL PARTNER DOES NOT PRESENTLY INTEND TO APPLY FOR A RULING, WITH RESPECT TO THE TAX CONSIDERATIONS ASSOCIATED WITH AN INVESTMENT IN UNITS, AND A SUCCESSFUL CHALLENGE OF OUR INTERPRETATIONS BY THE IRS COULD CAUSE THE ACTUAL TAX CONSEQUENCES TO YOU TO DIFFER FROM THOSE STATED IN THIS PROSPECTUS. Availability of the tax treatment described in this prospectus may be challenged by the IRS upon audit of the tax return of either CIGF6 or a partner. It should be noted that the determination of items of partnership income, gain, loss, deduction and credit will be made at the partnership level rather than in separate proceedings with the limited partners, and limited partners generally will be required to report partnership items consistent with CIGF6's tax returns. For any year in which CIGF6 has income in excess of deductions, each limited partner will be required to report his share of such income on his federal and state tax returns and will be responsible for the payment of taxes thereon. Such taxes may be greater than cash distributions received by the limited partner from CIGF6 in one or more taxable years. The primary tax benefits associated with an investment in units are the "tax-deferred" distributions (that is, distributions which are not subject to current taxation), which may be available as a result of cost recovery or depreciation deductions. The availability of tax-deferred distributions may be reduced by the alternative minimum tax. The IRS may successfully challenge the amount or timing of the depreciation deductions claimed by CIGF6, with the result that the depreciation deductions of CIGF6 may be reduced and partnership income may be increased (or loss may be decreased) for a taxable year. The tax considerations associated with an investment in CIGF6 could be affected by a number of different factors, which are described in detail under the caption "United States Federal Income Tax Considerations." ANY ADJUSTMENT TO A TAX RETURN OF CIGF6 AS A RESULT OF AN AUDIT BY THE IRS MAY RESULT IN ADJUSTMENT TO YOUR TAX RETURN. Any such adjustment may result in an examination of other items in your returns unrelated to the partnership, or an examination of prior years' tax returns. You could incur substantial legal and accounting costs in contesting any challenge by the IRS, regardless of the outcome. YOUR TAX LIABILITIES MAY EXCEED CASH DISTRIBUTIONS OR CASH PROCEEDS FROM THE SALE OR OTHER DISPOSITION OF EQUIPMENT OR UNITS. Because we will incur loans to finance the purchase of some of its equipment, it is possible that your tax liability for a given year will exceed your cash distributions for that year because of the need to pay down the principal on such loans. A sale or other disposition of equipment or of your interest in CIGF6 may result in a tax - 17 - liability to you in excess of any cash proceeds you receive. To the extent your federal tax liabilities exceed cash proceeds, such excess would be a nondeductible cost to you. THE IRS MAY CHALLENGE OUR PARTNERSHIP STATUS WHICH, IF SUCCESSFUL, COULD SIGNIFICANTLY REDUCE CASH AVAILABLE FOR DISTRIBUTIONS. Treasury Regulations generally allow newly formed unincorporated entities (such as CIGF6) to choose whether to be taxed as a partnership or a corporation for federal income tax purposes. However, Section 7704 of the Code treats certain partnerships, the interests of which are deemed to be "publicly traded," as corporations. While the general partner will use its best efforts to limit the type and number of transfers of units to those which will allow CIGF6 to satisfy at least one of the safe harbors under Treasury Regulation Section 1.7704-1, we may not in fact satisfy one of these safe harbors. Certain transfers of units could occur which would cause CIGF6 to fall outside these safe harbors. While the failure to meet a safe harbor will not create a presumption that a partnership is publicly-traded, if the amount and type of trading in the units were to fall outside the safe harbors, the IRS may claim that CIGF6 was a "publicly-traded partnership" taxable as a corporation. See "Transferability of Units" and "United States Federal Income Tax Considerations -- Classification as a Partnership." If the IRS were successful in characterizing CIGF6 as a "publicly traded" partnership taxable as a corporation, then CIGF6 would be subject to tax on its net income (without deductions for cash distributions to limited partners), you would be subject to tax on the distributions irrespective of your tax basis in your units, and such distributions would be re-characterized as portfolio income to you. THE IRS MAY CHALLENGE CERTAIN PARTNERSHIP ALLOCATIONS, WHICH COULD CAUSE YOU TO RECOGNIZE ADDITIONAL TAXABLE INCOME. If the allocations of partnership net profits and net losses to the limited partners made pursuant to the partnership agreement were successfully challenged by the IRS, you may be required to recognize additional taxable income without any corresponding increase in distributions of cash from CIGF6. You may not be able currently to deduct partnership net losses as a result of limitations on the current utilization of passive activity losses. In addition, any portfolio income generated by CIGF6 may not be netted against partnership tax losses. See "United States Federal Income Tax Considerations -- Limitations on Utilization of Partnership Losses -- Passive Activity Losses Limitations." Finally, in the event that interests in CIGF6 are deemed to be "publicly traded," otherwise passive income will be treated as portfolio income which may not be netted against partnership tax losses or other passive losses, deductions, or credits of the limited partner. THE IRS MAY CONSIDER CIGF6 TO BE A SECURED LENDER WITH RESPECT TO CERTAIN EQUIPMENT, WHICH COULD INCREASE YOUR TAX LIABILITIES. CIGF6 intends to structure each lease transaction so that the lease will be treated as a lease rather than as a financing arrangement for tax purposes. If, however, the IRS were successful in challenging the status of a lease by treating the lessee as the owner of the equipment and CIGF6 as a secured creditor, among other items, CIGF6 would not be entitled to cost recovery or depreciation deductions with respect to that item of equipment. The unavailability of such cost recovery or deductions will cause your tax liabilities to increase. See "United States Federal Income Tax Considerations -- Ownership of Equipment -- Tax Treatment of Leases." YOU MAY INCUR STATE TAX AND FOREIGN TAX LIABILITIES. You may be required to file tax returns and pay state or local taxes, such as income, franchise or personal property taxes, as a result of an investment in CIGF6. We do not plan to finance, and our prior programs have not financed, equipment outside of the United States. When we sell equipment, we may sell it outside of the United States, and any sale of equipment into a country other than the United States may subject you to sales or other taxes in such country. See "United States Federal Income Tax Considerations -- State Taxes", and "United States Federal Income Tax Considerations -- Foreign Tax Considerations." - 18 - TAX BENEFITS ASSOCIATED WITH AN INVESTMENT IN UNITS COULD BE LOST AND/OR SUBSTANTIAL TAX LIABILITIES INCURRED BY REASON OF CHANGES IN THE TAX LAWS. There is presently pending before Congress legislation that could affect the tax benefits available to investments in these units. This legislation would codify the "economic substance" doctrine and apply sanctions to "noneconomic transactions" that the IRS could attempt to apply to the partnership and/or investors. Also the recently enacted Gulf Opportunity Zone Act of 2005 contains provisions that cound affect the tax benefits available to investments in these units if they are made by taxpayers in affected areas. Tax reform proposals may lead to legislative proposals that may affect many areas of the tax law, including the tax benefits available to investment in these units. Furthermore, changes in the interpretation of applicable tax laws may be made by administrative or judicial action which could adversely affect the tax consequences of an investment in units. Administrative or judicial changes may or may not be retroactive with respect to transactions entered into prior to the date on which they occur. INVESTMENT IN CIGF6 BY A TAX EXEMPT ENTITY, INCLUDING A QUALIFIED EMPLOYEE PENSION OR PROFIT SHARING TRUST OR AN INDIVIDUAL RETIREMENT ACCOUNT, WILL RESULT IN THE RECEIPT OF UBTI. If a tax exempt entity realizes Unrelated Business Taxable Income, or UBTI, from all sources in excess of $1,000 per year net of deductions attributable to such UBTI, it will incur federal income tax liability with respect to such UBTI. Furthermore, if a tax exempt entity has at least $1,000 of gross income that is included in the calculation of UBTI for any year, the tax exempt entity will be obligated to file a tax return for such year. See "United States Federal Income Tax Considerations -- Investment by Tax Exempt Entities." Investment in CIGF6 by a tax exempt entity, such as a Charitable Remainder Trust, may result in the receipt of UBTI. If a charitable remainder trust realizes UBTI, it may be disqualified for tax incentives. Please consult your tax professional for details. INVESTMENT IN CIGF6 BY CERTAIN BENEFIT PLANS MAY IMPOSE ADDITIONAL BURDENS ON CIGF6. To avoid classification of a pro rata portion of CIGF6's underlying assets as "plan assets" of investors which are "benefit plan investors," CIGF6 intends to restrict the ownership of units by "benefit plan investors" to less than 25% of the total value of outstanding units at all times. See "ERISA Considerations -- 'Plan Assets.'" Neither the general partner nor CIGF6 shall have any liability or responsibility to any tax exempt limited partner or any other limited partner for any tax, penalty or other sanction or costs or damages arising as a result of there being a prohibited transaction or as a result of partnership assets being deemed plan assets of a tax exempt limited partner under the Code or ERISA or other applicable law. MANAGEMENT The Commonwealth organization (our General Partner, its parent companies and affiliates) is a full-integrated high technology investment and management firm which has been investing in high technology equipment assets and providing acquisition, development, financing, portfolio management, leasing and disposition services since 1978, through several general partner entities. The General Partner developed for the first public and subsequent funds is Commonwealth Income & Growth Fund Inc., a Pennsylvania corporation. The General Partner was incorporated in 1993. The General Partner's office is located at 470 John Young Way, Suite 300, Exton, PA 19341 and its telephone number is 1-800-249-3700. Since its organization in 1993, Commonwealth has been active in several areas within the equipment leasing industry, including: (a) financing leveraged and single investor lease transactions and (b) organization and managing several lease transactions for a number of public & equipment leasing programs. Since its inception, Commonwealth and affiliates have acquired and managed for its private and public equipment leasing programs lease transactions involving aggregate equipment costs in excess of $450 million. The officers and directors of the General Partner and their positions with the parent and its affiliates are as follows: NAME POSITION - ----------------------- ----------------------------------------------------- George S. Springsteen Chairman of the Board, Treasurer and Chief Executive Officer of CCC, CCSC, and CIGF Inc. - 19 - Kimberly A. Springsteen Director, Secretary, President & Chief Operations Officers of CCC, CCSC and CIGF Inc. Chief Compliance Officer of CCSC. Henry J. Abbott Director, Senior Vice President & Portfolio Manager of CCC, CCSC and CIGF Inc. Lynn A. Franceschina Controller, Senior Vice President of CCC, CCSC and CIGF Inc. Katrina M. Mason Due Diligence Officer, Senior Vice President of CCC, CCSC and CIGF Inc. Jay M. Dugan Chief Technology Officer, Senior Vice President of CCC, CCSC and CIGF Inc. Donald Bachmayer Accounting & Audit Manager, Vice President of CCC, CCSC and CIGF Inc. Mark Hershenson Broker Services Manager, Vice President of CCC, CCSC and CIGF Inc. James Pruett Assistant Vice President and Compliance Officer of CCC Donnamarie D. Abbott Assistant Vice President of CCC GEORGE S. SPRINGSTEEN, age 70, is a founding stockholder, and has been Chairman of the Board and Chief Executive Officer of the parent leasing company, Commonwealth Capital Corp. since 1978. In addition, Mr. Springsteen serves as Chairman of the Board and Chief Executive Officer and registered principal of the broker/dealer, Commonwealth Capital Securities Corp. and the General Partner, Commonwealth Income & Growth Fund Inc. He oversees numerous equipment investment portfolios and is responsible for business development. Mr. Springsteen and his wife, Kim, are the sole shareholders of the parent company and its affiliates. Mr. Springsteen oversees the Portfolio Advisory Committee, the Audit Committee, the Disaster Recovery Committee and the Facilities Committee. Before starting Commonwealth, Mr. Springsteen managed a portfolio of $120 million at Granite Computer Corp., bought their portfolio and founded his own firm. Mr. Springsteen attended the University of Delaware and holds his NASD Series 22, 63 and 39 licenses. Mr. Springsteen is a member of the Equipment Leasing Association and a founding member of the Computer Dealers Leasing Association prior to, as well as a member of the Investment Program Association. KIMBERLY A. SPRINGSTEEN, age 46, joined Commonwealth in 1997, as a founding registered principal and Chief Compliance Officer of its broker/dealer, Commonwealth Capital Securities Corp. and serves as Director and Secretary, President and Chief Operating Officer of the parent and its affiliates. Ms. Springsteen is responsible for oversight of daily operations, due diligence and business development. Ms. Springsteen also oversees the Portfolio Advisory Committee, the Audit Committee, the Disaster Recovery Committee and the Facilities Committee. Ms. Springsteen has developed and presented numerous motivational, informational and sales training workshops over the past 25 years. Prior to Commonwealth, Ms. Springsteen served as Senior Vice President & Marketing Manager in the Alternative Investments Department of Wheat First/Butcher & Singer, a broker/dealer headquartered in Richmond, Virginia, where she raised over $450,000,000 of capital in the real estate, equipment leasing, tax credit and energy-related industries. Ms. Springsteen holds her NASD Series 7, 63 and 39 licenses and is a member of the Equipment Leasing Association, the Financial Planners Association and serves on the Board of Trustees for the Investment Program Association. Ms. Springsteen is the wife of George Springsteen and is co-shareholder of the parent company and its affiliates. HENRY J. ABBOTT, age 55, joined Commonwealth in 1998, as a Portfolio Manager. Mr. Abbott serves as a Director, Senior Vice President and Portfolio Manager of the parent and its affiliates. Mr. Abbott is a registered principal of the broker/dealer. Mr. Abbott is responsible for lease acquisitions, equipment dispositions and portfolio review. Additionally, Mr. Abbott is also responsible for oversight of residual valuation, due diligence, equipment inspections, negotiating renewal and purchase options and remarketing off lease equipment. Mr. Abbott serves as senior member on the Portfolio Advisory Committee, the Audit Committee, the Disaster Recovery Committee and the Facilities Committee. Prior to Commonwealth, Mr. Abbott has been active in the commercial lending industry, working primarily on asset-backed transactions for more than 30 years. Mr. Abbott attended St. John's University and holds his NASD Series 7, 63 and 24 licenses. Mr. Abbott was a founding partner of Westwood Capital LLC in New York, a Senior Vice President for IBJ Schroeder Leasing Corporation and has managed a group specializing in the provision of operating lease finance programs in the high technology sector. Mr. Abbott brings extensive knowledge and experience in leasing and has managed over $1.5 billion of secured transactions. Mr. Abbott is a member of the Equipment Leasing Association and the Investment Program Association. - 20 - LYNN FRANCESCHINA, age 33, joined Commonwealth in 2001 and serves as Senior Vice President and Controller of the parent and its affiliates. Ms. Franceschina is responsible for the oversight of all accounting, cash management, financial reporting and audit and tax preparation functions. During the period of March 2004 to October 2004, Ms. Franceschina was employed with Wilmington Trust Corp., where she played a part in the development of policies and procedures related to the Sarbanes Oxley Act and its documentation. Prior to Commonwealth, in 1994 until 1999, Ms. Franceschina served as a Senior Accountant with Duquesne University, and from 1999 to 2000, a Senior Financial Analyst for Environ Products. Ms. Franceschina attended Robert Morris University and holds a Bachelor of Science in Accounting. Ms. Franceschina serves on the Portfolio Advisory Committee, the Audit Committee and the Disaster Recovery Committee, as well as a member of the Equipment Leasing Association, the Investment Program Association and the Institute of Management Accountants. KATRINA MASON, age 33, joined Commonwealth in 2002 and serves as Senior Vice President, Broker/Dealer Relations Manager and Due Diligence Manager of the parent company and its affiliates. Ms. Mason is a registered principal of the broker/dealer. Ms. Mason is responsible for managing due diligence and broker/dealer development, as well as coordination of the national sales and marketing effort, syndication and product development. Ms. Mason serves on the Disaster Recovery Committee and the Website Committee. Prior to Commonwealth, Ms. Mason worked at ICON Securities, an equipment leasing sponsor, from 1997 to 2002 and served as President from 2001 to 2002. Prior to that, Ms. Mason served as a Regional Marketing Director of Textainer Capital, an equipment-leasing sponsor. Ms. Mason attended the University of California at Santa Barbara and holds a Bachelor of Arts and also attended University of San Francisco and holds an MBA. Ms Mason holds her NASD Series 7, 22, 63 & 24 licenses. Ms. Mason is a member of the Equipment Leasing Association, the Financial Planners Association and the Investment Program Association. JAY DUGAN, age 58, joined Commonwealth in 2002 and serves as Senior Vice President and Chief Technology Officer of the parent and its affiliates. Mr. Dugan is responsible for the information technology vision, security and operation and ongoing development, including network configurations, protection of corporate assets and maximizing security and efficiency of information flow. Prior to Commonwealth, Mr. Dugan founded First Securities USA, an NASD member firm, in 1988 and operated that firm through 1998. From 1999 until 2002, Mr. Dugan was an independent due diligence consultant until he came to Commonwealth to develop that area of the firm. Mr. Dugan attended St. Petersburg College and holds an AS Degree in Computer Networking Technology. Mr. Dugan is a Microsoft Certified Systems Engineer, Microsoft Certified Database Administrator and Comp-Tia Certified Computer Technician. Mr. Dugan is a senior member of the Disaster Recovery Committee, as well as oversight member of the Website Committee. DONALD A. BACHMAYER, age 41, joined Commonwealth in 2004 and serves as Vice President and Accounting Manager of the General Partner, CCC and certain of its subsidiaries where he has been employed since 2004. Mr. Bachmayer is responsible for financial reporting and analysis, cash management and tax compliance. He is a member of the Portfolio Advisory Committee. Prior to joining Commonwealth, from 2002 to 2004, Mr. Bachmayer served as Accounting Supervisor for LEAF Financial, an equipment-leasing sponsor, where his responsibilities included cash management, commission and syndication reporting. From 1997 to 2001, Mr. Bachmayer was a senior accountant/auditor with Fishbein & Company, P.C., certified public accountants, with responsibilities including audit, financial reporting, cash management, commission and syndication reporting, and tax preparation. Mr. Bachmayer attended LaSalle University and holds a Bachelor of Science in Accounting. MARK HERSHENSON, age 40, joined Commonwealth in 2002 and serves as Vice President and Broker Services Manager of the parent and its affiliates. Mr. Hershenson is responsible for management of all custodial relationships, broker services in the areas of product education and production goals, wholesaler scheduling/support and internal sales staff. Prior to Commonwealth, Mr. Hershenson served as part of a financial planning practice at American United Life from 1999 through 2002. He has written a book for the Florida Insurance Commissioner on how to sell insurance products. Additionally, in 1991 through 1998, Mr. Hershenson served as sales trainer at MetLife for over 100 registered representatives. Mr. Hershenson attended Stonehill College and holds a Bachelor's in Psychology, with a concentration in Marketing/Organizational Behaviorism and Master's level coursework in Financial Planning though American College. Mr. Hershenson holds his NASD Series 6, 7 and 63 licenses. Mr. Hershenson is a member of the Equipment Leasing Association and the Investment Program Association. JAMES PRUETT, age 40, joined Commonwealth in 2002 and serves as Assistant Vice President and Compliance Officer of the parent and its affiliates. Mr. Pruett is responsible for management of regulatory policies and procedures, assisting in compliance internal audit, associate regulatory filings, broker/dealer registrations, state and broker/dealer financial regulatory reporting requirements. Mr. Pruett assists in the management of shareholder records and updates. Mr. Pruett is a member of the Website Committee. Mr. Pruett holds his NASD Series 22 and 63 licenses. Prior to joining Commonwealth, Mr. Pruett served as Managing Editor/Associate Publisher for Caliber - 21 - Entertainment, a publishing and entertainment licensing company. Mr. Pruett's responsibilities included oversight of production of publishing library, as well as serving as Editor-in-Chief for all publications and additionally served as Media Relations Liaison. Mr. Pruett is a member of the Equipment Leasing Association and the Investment Program Association. DONNAMARIE D. ABBOTT, age 46, joined Commonwealth in 2001 and serves as Assistant Vice President and Investor Services Manager of the parent and its affiliates. Ms. Abbott is responsible for management of daily operations in Investor Services, from pre-formation stage through issuance of investors' final distribution, communication, audited financial report, including fund masters, blue sky coordination, subscription processing, distributions, transfers of interest, redemptions, reporting and tax reporting. Ms. Abbott is a member of the Office Development Committee, the Website Committee and the Disaster Recovery Committee. Ms. Abbott holds her NASD Series 22 and 63 licenses. Prior to joining Commonwealth, Ms. Abbott served as a Pennsylvania licensed realtor. Ms. Abbott is a member of the Equipment Leasing Association and a member of the Investment Program Association. The directors and officers of the Manager are required to spend only such time on CIGF6's affairs as is necessary for the proper conduct of CIGF6's business. Under certain circumstances, such directors and officers are entitled to indemnification from CIGF6. See "Conflicts of Interest" and "Responsibilities of the Manager." COMMITTEES OF OUR BOARD OF DIRECTORS Our board may establish such committees, as the board believes appropriate. Audit Committee. Our board has designated members for the audit committee. Once the committee is functioning, they will make recommendations concerning the engagement of an independent registered public accouting firm, review the plans and results of the audit engagement with the independent registered public accounting firm, consider the range of audit and non-audit fees and consult with the independent registered public accounting firm regarding the adequacy of our internal accounting controls. Executive Committee. Our board may establish an executive committee, which would exercise the powers of the Board in the management of the business affairs of our company, except for those which require action by all directors under our articles of incorporation or by-laws. Management & Disclosure Committee. Our board may establish a management disclosure committee to assist in reviewing our disclosures, controls and procedures. The committee may include directors and officers of our parent and affiliates. RESPONSIBILITIES OF THE GENERAL PARTNER The general partner is accountable to CIGF6 as a fiduciary and, consequently, must exercise good faith and integrity in handling partnership affairs. Certain provisions of the partnership agreement may relieve the general partner and its affiliates from an aspect of their state common law fiduciary duties to act solely in the partnership's best interest by permitting the allocation of investment opportunities among other programs sponsored by Com Cap Corp. These duties are specifically limited by the provisions of our limited partnership agreement, and the limitation is not generally applicable to all limited partnerships. General partners are held to a duty of good faith in conducting partnership affairs. Since the general partner and certain programs it has sponsored will acquire and lease equipment in the same manner as CIGF6, the general partner may be deemed to have a conflict of interest with CIGF6. This conflict arises because the partnership agreement states that, if two or more investor programs are in a position to acquire the same equipment, the general partner will decide which program or entity will purchase the equipment. The general partner generally affords priority to the program that has had funds available to purchase equipment for the longest period of time. If two or more investor programs are in a position to enter into leases with the same lessee or to sell equipment to the same purchaser, the general partner will generally give priority to the equipment which has been available for lease or sale for the longest period of time. The general partner may also allocate equipment to other programs based on the cash/borrowing available, the equipment type, the term of the lease, and the percentage that each lessee represents to the total assets of the funds or programs. This allocation of equipment may relieve the general partner and its affiliates from an aspect of their fiduciary duty to CIGF6 that would otherwise require them to secure investment opportunities to the partnership without regard to the interest of other entities. - 22 - Without modifying the general partner's fiduciary duties, the general partner might not be able to serve as the general partner for CIGF6 and other investor programs acquiring and leasing equipment at the same time. This modification may operate as a detriment to limited partners because there may be business opportunities that will not be made available to CIGF6 that otherwise would have been made available if the general partner was not also the general partner of other programs. The partnership agreement provides that the general partner will not be liable to CIGF6 or to any limited partner for any loss or damage caused by the general partner's actions or omissions, if made in good faith in connection with CIGF6. An act or omission giving rise to a loss will be considered made in good faith if the general partner has determined such course of conduct to be in the best interest of CIGF6. The partnership agreement also provides that CIGF6 will indemnify and hold harmless the general partner, its affiliates and its successors and assigns against any liability, loss or damage incurred by reason of any act or omission performed or omitted in good faith in connection with the activities of CIGF6 or in dealing with third parties on behalf of CIGF6 (including reasonable costs and reasonable attorneys' fees). If such act or omission constitutes fraud, negligence, or breach of fiduciary duty, this indemnification will not be available. If such liability, loss, or damage arose out of any act or omission on the part of the general partner, the general partner must have acted in the good faith belief that such course of conduct was in the best interest of CIGF6 in order to be indemnified, and any such indemnification shall be recoverable only from the assets of CIGF6 and not from the holders of units. A successful claim for indemnification could deplete the assets of CIGF6. Based upon the present state of the law, a limited partner may institute legal action on behalf of himself and all other limited partners (a class action) to recover damages for a breach by the general partner of its fiduciary duty, or on behalf of CIGF6 (a partnership derivative action) to recover damages from third parties. In addition, (i) investors may bring partnership class actions in federal courts to enforce their rights under the federal and state securities laws. Investors who have suffered losses in connection with the purchase or sale of their units may be able to recover such losses from the general partner where the losses result from a violation by the general partner of the antifraud provisions of federal or state securities laws. The fiduciary duty owed by a general partner to its partners is similar in many respects to the fiduciary duty owed by the directors of a corporation to its shareholders and is subject to the same rule commonly referred to as the "business judgment rule." Directors are not liable for mistakes in the good faith exercise of honest business judgment or for losses incurred in the good faith performance of their duties when performed with such care as an ordinarily prudent person would use. Accordingly, the general partner may not be held liable for mistakes made or losses incurred in the good faith exercise of reasonable business judgment. If indemnification provisions purport to include indemnification for liabilities under the Securities Act of 1933, CIGF6 has been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is contrary to public policy and is therefore unenforceable. CIGF6 will not indemnify the general partner and its successors and assigns against liabilities arising under the Securities Act of 1933 unless the indemnified party is successful in defending such action and such indemnification is specifically approved by a court of law which has been advised as to the current position of the Securities and Exchange Commission regarding indemnification for violations of securities law. CIGF6 will not pay for any insurance covering the liability of the general partner or its successors or assigns for any act or omission whether or not indemnification is permitted by the partnership agreement. - 23 - INVESTMENT OBJECTIVES AND POLICIES PRINCIPAL INVESTMENT POLICIES We intend to use a substantial portion of the proceeds of this offering, retained proceeds and debt (not to exceed 30% of the total cost of the equipment owned by CIGF6) to purchase IBM and IBM-compatible information technology equipment. We intend to acquire equipment which is leased to U.S. corporations through operating leases. We retain the flexibility to enter into "full payout net leases" (in which the non-cancelable rental payments due are at least sufficient to recover the purchase price of the equipment) and "conditional sales contracts" but have not and do not anticipate doing so. See "-- Description of Leases," below. Our principal investment objectives are to: o provide cash distributions to limited partners through the acquisition, lease and sale of information technology equipment; o preserve and protect limited partners' capital; o use a portion of cash flow and sales proceeds, refinancing or other sale of equipment to purchase additional equipment; and o refinance, sell or otherwise dispose of equipment in a manner that will maximize the proceeds to CIGF6 and subsequent overall return to investors. o beginning in approximately year 9 of the partnership, distribute sale proceeds to investors. Sale of equipment will occur in an oderly fashion as leases expire. Distributions will fluxuate during this time. CIGF6 will not originate any leases. We will purchase new leases (already newly in place) from other leasing companies. The leasing companies we purchase leases from originate leases in bulk from major corporations and sell off part of their portfolios, much like a bank selling a mortgage to another bank, for fees. Commonwealth forms a strategic partnership with other leasing companies, to assist in maximizing lease performance on the back-end of the lease. This strategic partnership provides "threshold revenue sharing," which is negotiated on an individual basis, if certain performance criteria are realized. The equipment that will be in our portfolio cannot be determined, as there is no way of anticipating what equipment will be available on reasonable terms throughout CIGF6's life. The general partner may vary our portfolio and invest a substantial portion of the net proceeds of this offering in a single category of information technology and other similar equipment with certain restrictions. See "--Information Technology Equipment" and "-- Other Equipment Restrictions," below. As of the date of this prospectus, CIGF6 has entered into several commitments for the acquisition, financing, or leasing to third parties of equipment. CIGF6 will attempt to obtain additional contractual commitments for the purchase of equipment as soon as practicable. Limited partners will not have any right to vote on or otherwise approve or disapprove any particular investment to be made by CIGF6. It is not possible to determine the date when the net offering proceeds (capital contributions less commissions and other organizational fees and expenses) will be fully invested in equipment by CIGF6 or the terms of any purchases of equipment. If all of the net proceeds of this offering are not invested by CIGF6 in equipment or committed to such investment or otherwise utilized for proper partnership purposes prior to the expiration of 12 months from the completion of this offering, the net proceeds not invested or committed will thereupon be promptly returned, with interest at the rate earned by CIGF6. Although it is currently anticipated that CIGF6 will acquire new equipment, CIGF6 may also purchase used equipment. Equipment purchases will be made through lease brokers who charge CIGF6 a fee over their cost of the equipment as compensation. The general partner anticipates that CIGF6's equipment will be leased under operating leases or that an operating lease will be entered into with a third party when CIGF6 acquires an item of equipment. See "-- Description of Leases" below. - 24 - CIGF6 may also engage in sale/leaseback transactions, in which CIGF6 would purchase equipment from companies that would then immediately lease the equipment from CIGF6. CIGF6 may enter into arrangements with one or more manufacturers so CIGF6 can purchase equipment from such manufacturers which has previously been leased directly by the manufacturer to third parties under vendor leasing programs. The manufacturers of equipment will provide maintenance, remarketing and other services for the equipment subject to such agreements. The general partner can change the investment objectives of CIGF6 if it determines that such a change is in the best interest of the limited partners and so long as such a change is consistent with Sections 10.2 and 10.3 of the partnership agreement. For example, the general partner may decide to invest in different equipment types, such as medical equipment, if the general partner believes that will be the most profitable and efficient use of CIGF6's assets. Changing economic conditions, such as a significant trend toward computer equipment purchases, rather than leasing, may make it necessary or desirable for the general partner to adjust our investment objectives. However, the general partner cannot change CIGF6's primary objective of acquiring, leasing and selling equipment without the consent of holders of more than fifty percent of the units. The general partner will notify the limited partners if it makes such a determination to change CIGF6's investment objectives. For more details on the general partner's rights and duties, please read our Restated Limited Partnership attached to this prospectus as Appendix II. INFORMATION TECHNOLOGY EQUIPMENT The information technology equipment that we plan to acquire consists of devices used to convey information into and out of a central processing unit, or mainframe, of a computer system. Examples are tape drives, disk drives, tape controllers, disk controllers, printers, terminals and related control units, all of which are related to the process of storing, retrieving, and processing information by computer. These devices are also often referred to as "peripheral equipment." There are over twenty different types of information technology equipment that we anticipate purchasing on behalf of CIGF6. CIGF6 acquires primarily IBM manufactured or IBM-compatible equipment. The general partner believes that dealing in IBM-compatible equipment is particularly advantageous because of the large IBM customer base, IBM's policy of supporting IBM users with software and maintenance services and the large amount of IBM and IBM-compatible equipment in the marketplace. If, in the general partner's opinion, IBM's competitors begin to offer these advantages and the general partner determines that non-IBM compatible equipment is comparable in quality, the general partner may increase its purchases of computer equipment which is not IBM-compatible if such purchases are in the best economic interest of CIGF6. See "Risk Factors - CIGF6's ability to release or sell its equipment, and therefore returns to investors, may be affected by actions taken or not taken by, or by the business prospects of IBM, over which we will have no control." Computer technology has developed rapidly in recent years and is expected to continue to do so. Technological advances have permitted reductions in the cost of computer processing capacity, permitting applications unavailable a few years ago. Much of the older IBM and IBM-compatible information technology equipment has not been retired from service, because software is generally interchangeable between older and newer equipment, and older equipment is capable of performing many of the same functions as newer equipment. In the future, the rate or nature of equipment development may cause equipment to become obsolete more rapidly. The general partner believes that values of most peripheral equipment have been affected less dramatically by changes in technology than have the values of central processing units. An equipment user who upgrades to a more advanced central processor generally can continue to use his existing peripheral equipment. CIGF6 does not intend to invest in central processing units, or mainframe computers. Peripheral equipment is a term used to describe equipment that is part of a computer system, but not the computer itself. Generally this type of equipment will have a longer useful life. This allows for re-marketability of equipment, if it is returned before its economic or announcement cycle is depleted. Today, there are over 20 different types of peripheral categories leased and many manufacturers within those categories. Added features to these categories can increase value and diversification, as well. Peripheral equipment, however, is subject to declines in value as new, improved models are developed and become available. Technological advances and other factors have at times caused dramatic reduction in the market prices of certain older models of IBM and IBM-compatible information technology equipment. - 25 - OTHER EQUIPMENT RESTRICTIONS The general partner is also authorized to invest in telecommunication or medical technology equipment. CIGF6 may not invest in any additional types of equipment unless: o the total purchase price of all equipment purchased by CIGF6 which is not information technology, telecommunication or medical technology equipment represents 25% or less of the total cost of all of the assets of CIGF6 at that time; and o the general partner determines that such purchase is in the best economic interest of CIGF6 at the time of the purchase. There can be no assurance that any equipment investments can be found which meet this standard, and there can be no assurance that investments of this type will be made by CIGF6. DIVERSIFICATION Diversification is desirable to minimize the effects of changes in specific industries, local economic conditions or similar risks. CIGF6's diversification will depend in part upon the financing which can be assumed by CIGF6 or borrowed from third parties on satisfactory terms. CIGF6's business strategy is to acquire information technology equipment leases, that are entered into primarily with investment grade domestic lessees. Our strategy for diversification is through equipment type, lessees, lease maturities, industries of lessees, and geographic location. Our leases are typically 12 to 36 months in length and are triple-net in structure. Diversification will also depend on the availability of various types of equipment. Since the needs of potential lessees are unknown at this time, there can be no assurance given with respect to the maximum percentages of proceeds which will be invested in any single item or group of items of equipment or in equipment under lease to a single lessee, except as explained below and under "Other Equipment Restrictions" above. See also "Risk Factors -- The assets that CIGF6 will acquire will not be diversified by equipment type, which may adversely affect the performance of CIGF6" and "-- The size of our offering may prevent geographic, industry or other diversification of lessees, which may adversely affect the performance of CIGF6." During the operational stage of CIGF6, we may not at any one point in time lease more than 25% of the equipment to a single person or affiliated group of persons. DESCRIPTION OF LEASES We will purchase only equipment which will be subject to a lease. The general partner intends to lease most of the equipment to third parties subject to operating leases. Operating leases are relatively short-term (12 to 36 month) leases under which the rental payments during the original term of the lease are not sufficient to recover the purchase price of the equipment. The terms of the leases will depend upon a variety of factors, including: o the desirability of each type of lease from both an investment and a tax point of view; o the relative demand among lessees for operating leases, as opposed to financing or other types of leases not offered by us; o the type and use of equipment and its anticipated residual value; o the business of the lessee and its credit rating; o the availability and cost of financing; o regulatory considerations; o the accounting treatment of the lease sought by the lessee or the partnership; and o competitive factors. Based on current sales prices for equipment and the past experience of the general partner in disposing of equipment at the end of lease terms, the general partner believes that CIGF6 will be able to release or dispose of its equipment leased under operating leases after their initial terms. Historically, the general partner has found that approximately 80% of lessees elect to purchase or re-lease the equipment after the initial lease term, approximately 15% of lessees elect to run the leases on a month-to-month basis for a period of time before terminating, and approximately 5% of lessees terminate upon several months prior notice. - 26 - We intend to enter into "triple net leases" which typically provide that the lessee will bear the risk of physical loss of the equipment, pay taxes relating to the lease or use of the equipment and maintain the equipment. The lessee will also: o indemnify CIGF6 against any liability suffered by CIGF6 as the result of any act or omission of the lessee or its agents; o maintain casualty insurance in an amount equal to the greater of the full value of the equipment or a specified amount described in the lease; and o maintain liability insurance naming CIGF6 as an additional insured with a minimum coverage which the general partner believes is appropriate. We may also purchase "umbrella" insurance policies to cover excess liability. The general partner has not established standards for lessees to which it will lease equipment and there is no investment restriction prohibiting CIGF6 from doing business with any lessees. The general partner will perform a credit analysis (including a review of the financial statements, credit history and public debt record) of all potential lessees to determine the lessee's ability to make payments under the lease. The terms and conditions of our leases will be determined by negotiation and may impose substantial obligations on CIGF6. If we were to assume maintenance or service obligations, we would enter into separate maintenance or service agreements with manufacturers or certified maintenance organizations to provide such services. Such agreements will generally require annual or more frequent adjustments of service fees. We do not presently anticipate entering into any leases which require us to perform maintenance duties. BORROWING POLICIES We may incur debt in an amount of up to 30% of the total cost of the equipment in the portfolio at the time of purchase. However, we may not borrow to acquire equipment unless, at the time of any such borrowing, the net proceeds of the offering received to date are fully invested, or committed to investment, in equipment. Debt, for purposes of this prospectus, means debt incurred with respect to acquiring or investing in equipment, or refinancing non-term debt, but not debt incurred with respect to refinancing existing partnership term debt. We will incur only non-recourse debt, which will be secured by equipment and lease income. This debt will permit us to increase the amount of our depreciable assets, and should increase both our lease revenues and our federal income tax deductions above those levels which would be achieved without borrowing. There is no limit on the amount of debt which may be incurred in connection with the acquisition of any single item of equipment. Any debt incurred will be fully amortized over the term of the initial lease for the equipment securing the debt. The amount borrowed by CIGF6 will depend on a number of factors, including: o the types of equipment acquired by CIGF6; o the creditworthiness of the lessee; o the availability of suitable financing; and o prevailing interest rates. CIGF6 intends to be flexible in the degree of leverage it employs, within the permissible limit. CIGF6 will purchase some items of equipment without debt. If CIGF6 purchases an item of equipment without debt and then suitable financing becomes available, it may then obtain the financing, secure the financing with the equipment purchased previously and invest any proceeds from financing in additional items of equipment. CIGF6 will attempt to borrow funds, to the fullest extent possible, at interest rates fixed at the time of borrowing. Any debt incurred by CIGF6 must be non-recourse. Non-recourse debt means that the lender providing the funds can look for security only to the equipment pledged as security for the loan, including the proceeds derived from leasing or selling the equipment. Neither CIGF6 nor any partner (including the general partner) would be liable for repayment of any non-recourse debt. To the extent CIGF6 borrows on a non-recourse basis, the limited partners' tax basis in their units will increase, although there may not be a corresponding increase in the partners' "At-Risk" amount. See "United States Federal Income Tax Considerations -- Limitations on Utilization of Partnership Losses." The general partner and its affiliates may make loans to CIGF6 on a short-term basis in an amount of 1.01% of net offering proceeds, if necessary. If the general partner or any of its affiliates does so, the general partner or affiliate may not charge interest at a rate greater than the interest rate charged by unrelated lenders on comparable loans. CIGF6 will not pay interest on a loan at an annual rate greater than three percent over the "prime - 27 - rate" published in The Wall Street Journal. All payments of principal and interest on any financing provided by the general partner or any of its affiliates shall be due and payable by CIGF6 within 12 months after the date of the loan. See "Compensation to the General Partner and Affiliates." If the general partner or any of its affiliates purchases equipment in its own name and with its own funds in order to facilitate ultimate purchase by CIGF6, the general partner or any such affiliate will be entitled to receive interest on the funds. See "Conflicts of Interest-- Acquisitions." REFINANCING POLICIES CIGF6 may refinance its debt, subject to borrowing restrictions. The general partner will take into consideration factors such as the amount of appreciation in value to be realized, the possible risks of continued ownership and the anticipated advantages, as compared to selling such equipment. CIGF6 may retain an item of equipment, through refinancing, to generate additional funds for reinvestment in additional equipment or for distribution to the limited partners. A refinancing will not be taxable to a limited partner unless it exceeds the tax basis of the limited partner's units (after any increase of the tax basis as a result of CIGF6's incurring any additional non-recourse debt). See "United States Federal Income Tax Considerations -- Limitations on Utilization of Partnership Losses -- Tax Basis." LIQUIDATION POLICIES CIGF6 will begin to dispose of its equipment approximately nine years after the completion of this offering. The general partner may begin to dispose of all its equipment at such time as the general partner believes will allow for an orderly, business-like disposition of all of the equipment prior to the termination of CIGF6 on December 31, 2018. However, the general partner may, at any time, decide to dispose of all its equipment and dissolve CIGF6 upon the approval of limited partners holding a majority in interest of units. Particular items of equipment may be sold at any time if, in the judgment of the general partner, it is in the best interest of CIGF6 to do so. The determination of whether particular items of partnership equipment should be sold will be made by the general partner after consideration of all relevant factors (including prevailing economic conditions, lessee demand, the general partner's views of current and future market conditions, the cash requirements of CIGF6, potential capital appreciation, cash flow and federal income tax considerations), with a view toward achieving the principal investment objectives of CIGF6. As partial payment for equipment sold, CIGF6 may receive purchase money obligations secured by liens on such equipment. The General Partner will also receive an equipment liquidation fee with respect to each item of equipment sold, in an amount of up to 3% of the sales price of the equipment. See "Compensation to the General Partner and Affiliates -- Equipment Liquidation Fee." MANAGEMENT OF EQUIPMENT Equipment management services for CIGF6's equipment will be provided by the general partner and its affiliates, consisting of one or more of the following: o collection of income from the equipment; o negotiation and review of leases and sales agreements; o releasing and leasing-related services; o payment of operating expenses; o periodic physical inspections and market surveys; o servicing indebtedness secured by equipment; o general supervision of lessees to assure that they are properly utilizing and operating equipment; and o providing related services with respect to equipment, supervising, monitoring and reviewing services performed by others in respect to equipment and preparing monthly equipment operating statements and related reports. Certain of these services may be provided initially by lease brokers as part of their agreement to sell the equipment to CIGF6. See "Compensation of General Partner and Affiliates -- Equipment Management Fee." - 28 - COMPETITION The equipment leasing industry is highly competitive. We will compete with leasing companies, equipment manufacturers and their affiliated financing companies and entities similar to CIGF6 (including other programs sponsored by the general partner), some of which will have greater financial resources and more experience in the equipment leasing business than the general partner. Other leasing companies and equipment manufacturers or their affiliated financing companies may be in a position to offer equipment to prospective lessees on financial terms which are more favorable than those which CIGF6 can offer. As a result of these advantages, we may be unable to lease our equipment on terms as favorable as some of our competitors can offer. The information technology equipment industry is also extremely competitive. Competitive factors include pricing, technological innovation and methods of financing. Manufacturer-lessors could maintain advantages through policies which combine service and hardware with payment accomplished through a single monthly charge. The dominant firm in the computer marketplace is International Business Machines Corporation. Its subsidiary, IBM Credit Corporation, is the dominant force in the leasing of IBM equipment. Because of IBM's substantial resources and dominant position, changes with respect to computer systems, pricing, marketing practices, technological innovation and the availability of new and attractive financing plans could occur at almost any time. Significant action in any of these areas by IBM or IBM Credit Corporation might materially adversely affect our business. See "Risk Factors - CIGF6's ability to lease, release or sell its equipment, and therefore returns to investors, may be affected by actions taken or not taken by, or the business prospects of, IBM, over which we will have no control." PRELIMINARY INVESTMENTS CIGF6 does not now own, and has made no commitment to purchase, any equipment. The general partner or its affiliates may purchase equipment prior to the completion of this offering, which equipment and the related leases, if any, to which it is subject could be sold and assigned to CIG6 after it commences its business operations. No such purchase shall commence until the minimum offering level has been reached. See "Conflicts of Interest - Acquisitions." It is not possible to determine the date when the net offering proceeds, less working capital reserves, if any, will be fully invested in equipment by CIGF6, or the terms of any purchases of equipment. CIGF6 will invest the net offering proceeds prior to the acquisition of equipment in short-term, highly liquid investments where there is appropriate safety of principal, such as United States Treasury Bills. If all of the net proceeds of this offering are not invested by CIGF6 in equipment or committed to such investment or otherwise utilized for proper partnership purposes prior to the expiration of 12 months from the completion of this offering, the net proceeds not so invested, committed, or set aside as working capital reserves will thereupon be promptly returned to the limited partners with a proportionate share of interest at the rate earned by CIGF6 on the investment of such proceeds, based upon their respective number of units and time of purchase. For such purpose, funds will be deemed to be committed to investment and will not be returned to the limited partners to the extent written agreements in principle, commitment letters, letter of intent or understanding, option agreements, or any similar contracts or understandings exist, whether or not any such investment is ultimately consummated. Funds will also be deemed to be committed to the extent: o any funds may have been reserved to make contingent payments in connection with any equipment already acquired, whether or not any such payments are ultimately made; o as a condition of obtaining financing, CIGF6 is required to maintain funds as a compensating balance; or o the general partner decides that an addition to the working capital reserve is necessary in connection with any equipment. In the event any such uninvested funds are distributed to the limited partners, such distribution will be treated as a return of capital. See "United States Federal Income Tax Considerations - Cash Distributions." - 29 - RESERVES Because CIGF6's leases are expected to be on a "triple-net" basis, no permanent reserve for maintenance and repairs will be established from the offering proceeds. However, the general partner may retain a portion of the offering proceeds, cash flow and net disposition proceeds for maintenance, repairs and working capital. There are no limitations on the amount of offering proceeds, cash flow and net disposition proceeds that may be retained as reserves. Since no reserve will be established initially, if available cash flow of CIGF6 is insufficient to cover CIGF6's operating expenses and liabilities, it may be necessary for CIGF6 to obtain additional funds by refinancing its equipment or borrowing. In addition, the General Partner and Com Cap Corp. have committed to lend or contribute to CIGF6 an amount up to 1.01% of the net offering proceeds, if needed, to meet CIGF6'S expenses. GENERAL RESTRICTIONS Under the partnership agreement, CIGF6 is not permitted to: o invest in junior trust deeds unless received in connection with the sale of an item of equipment in an amount which does not exceed 30% of value of the assets of CIGF6 on the date of investment; o invest in or underwrite the securities of other issuers; o acquire any equipment for units; o issue senior securities (except that the issuance to lenders of notes in connection with the financing or refinancing of equipment or CIGF6's business shall not be senior securities); o make loans to any person, including the general partner or any of its affiliates; o sell or lease any equipment to, lease any equipment from, or enter into any sale-leaseback transactions with, the general partner or any of its affiliates; o give the general partner or any of its affiliates an exclusive right or employment to sell CIGF6's equipment; or o engage in any type of reciprocal business arrangement which would circumvent these prohibitions against dealing with affiliates. However, we may invest in joint venture arrangements with other equipment programs formed by the general partner or its affiliates, if those investments or arrangements meet certain conditions, See "Conflicts of Interest - Joint Ventures with Affiliates of the General Partner." The general partner has also agreed to use its best efforts to assure that CIGF6 shall not be deemed an "investment company" as such term is defined in the Investment Company Act of 1940. The general partner and its affiliates may engage in other activities, whether or not competitive with CIGF6. The partnership agreement also indicates that neither the general partner nor any of its affiliates may receive any rebate or "give up" in connection with CIGF6's activities. See "Conflicts of Interest," "Compensation to the General Partner and Affiliates," and "Management." CIGF6 may invest in general partnerships or joint ventures with persons other than equipment programs formed by the general partner or its affiliates, which partnerships or joint ventures own specific equipment, if: o CIGF6 has or acquires a controlling interest in ventures or partnerships; o the non-controlling interest is owned by a non-affiliate; and o there are no duplicate fees. - 30 - COMPENSATION TO THE GENERAL PARTNER AND AFFILIATES The following table summarizes the types, estimated amounts and recipients of compensation to be paid by CIGF6 directly or indirectly to the general partner and its affiliates in connection with this offering and our operation. These payments will result from non-arm's-length bargaining. See "Conflicts of Interest." Unless disclosed in this prospectus, CIGF6 will not engage in transactions with the general partner or any of its affiliates. As described below, the maximum front-end fees (which include fees and expenses incurred by any person in connection with the organization of CIGF6 and acquisition of equipment during the initial organization and acquisition phase) that could be paid during the first fiscal year of operations without deduction of expenses are $48,678,570 (assuming the maximum number of units are sold and the maximum amount of leverage is incurred excluding fees earned with retained proceeds). Fees and expenses set forth in the table below will not be reclassified to avoid any applicable caps on such fees and expenses.
Estimated Estimated Amount Assuming Amount Assuming Minimum of Maximum of Entity Receiving 57,500 Units 2,500,000 Units Compensation Type of Compensation Are Sold Are Sold - -------------------- -------------------------------------------------------- --------------- ---------------- OFFERING AND ORGANIZATION STAGE Commonwealth Capital UNDERWRITING COMMISSIONS. CIGF6 will pay to the dealer $115,000 $5,000,000 Securities Corp. manager an amount of up to ten percent of capital contributions as underwriting commissions after and only if the required $1,150,000 minimum subscription amount is sold. The dealer manager will reallow to participating broker-dealers out of underwriting commissions a selling commission of eight percent of the capital contributions from units sold by such participating brokers. Some or all of the remaining two percent (the dealer manager fee) may be reallowed to participating broker-dealers for due diligence expense reimbursements. The actual amount of the underwriting commissions may vary due to the volume discounts available to investors purchasing certain quantities of units. See "Plan of Distribution." The General Partner ORGANIZATIONAL FEE. An organization fee equal to three $34,500 $1,250,000 percent of the first $25,000,000 of limited partners' capital contributions and two percent of the limited partners' capital contribution in excess of $25,000,000, as compensation for the organization of CIGF6. It is anticipated that the organizational and offering expenses, which include legal, accounting and printing expenses, various registration and filing fees, miscellaneous expenses related to the organization and formation of CIGF6, other costs of registration, and costs incurred in connection with the preparation, printing and distribution of this prospectus and related sales literature will be approximately $300,000. The general partner will pay all organizational and offering expenses, other than underwriting commissions.
- 31 - OPERATIONAL AND SALE OR LIQUIDATION STAGES The General Partner REIMBURSEMENT OF EXPENSES. The general partner and its $30,000 $400,000 and its Affiliates affiliates are entitled, under Section 5.2 of the partnership agreement, to reimbursement by CIGF6 for the cost of goods, supplies or services obtained and used by the general partner in connection with the administration and operation of CIGF6 from third parties unaffiliated with the general partner. The amounts set forth on this table are approximations of reimbursable expenses for the first year of CIGF6's operation and do not include expenses incurred in the offering of units. The General Partner EQUIPMENT ACQUISITION FEE. An equipment acquisition fee $57,171 $2,500,000 of four percent of the purchase price of each item of assuming we assuming we equipment purchased as compensation for the negotiation invest the full invest the full of the acquisition of the equipment and the lease. The amount of amount of fee will be paid upon closing of the offering with proceeds proceeds respect to the equipment to be purchased by CIGF6 with available for available for the net proceeds of the offering available for investment, and investment, and investment in equipment except for fees on the leveraged use a maximum use a maximum portion of the purchase price which are paid when the of 30% leverage of 30% leverage equipment is purchased. If CIGF6 does not purchase in the first in the first equipment with all the net proceeds of the offering, the year of year of general partner will return a pro rata portion of the operations. operations. fee to CIGF6. If CIGF6 acquires equipment in an amount exceeding the net proceeds of the offering available for investment in equipment, the fee will be paid when such equipment is acquired. The amount of such fees will depend on the total value of equipment purchased and will be affected by the amount of leverage used, proceeds from equipment sold, interest rates and lease rates at the time of acquisition. For example, the amount of fees will increase as we increase equipment turnover in our portfolio or increase the amount of leverage we use. The General Partner DEBT PLACEMENT FEE. As compensation for arranging term Not Not debt to finance the acquisition of equipment by CIGF6, a determinable at determinable at fee equal to one percent of such indebtedness; provided, this time this time however, that such fee shall be reduced to the extent CIGF6 incurs such fees to third parties unaffiliated with the general partner or the lender, with respect to such indebtedness. No such fee will be paid with respect to borrowings from the general partner or its affiliates. CIGF6 intends to initially acquire leases on an all cash basis with the proceeds of this offering, but may borrow funds after the offering proceeds have been invested. The amount we borrow, and therefore the amount of the fee, will depend upon interest rates at the time of a loan, and the amount of leverage we determine is appropriate at the time. Fees will increase as the amount of leverage we use increases, and as turnover in the portfolio increases and additional equipment is purchased using leverage.
- 32 - The General Partner EQUIPMENT MANAGEMENT FEE. A monthly fee equal to the Not Not lesser of (a) the fees which would be charged by an determinable at determinable at independent third party in the same geographic market this time this time for similar services and equipment or (b) the sum of (i) two percent of gross lease revenues attributable to equipment subject to full payout net leases which contain net lease provisions and (ii) five percent of the gross lease revenues attributable to equipment subject to operating leases. Our general partner, based on its experience in the equipment leasing industry and current dealings with others in the industry, will use its business judgement to determine if a given fee is competitive, reasonable and customary. The amount of the fee will depend upon the amount of equipment we manage, which in turn will depend upon the amount we raise in this offering. Reductions in market rates for similar services would also reduce the amount of this fee we will receive. The General Partner EQUIPMENT LIQUIDATION FEE. With respect to each item of Not Not equipment sold by the general partner, a fee equal to determinable at determinable at the lesser of (i) 50% of the competitive equipment sale this time this time commission or (ii) three percent of the sales price of the equipment. The payment of this fee is subordinated to the receipt by the limited partners of (i) a return of their capital contributions and a 10% per annum cumulative return, compounded daily, on adjusted capital contributions and (ii) the net disposition proceeds from such sale in accordance with the partnership agreement. Our general partner, based on its experience in the equipment leasing industry and current dealings with others in the industry, uses its business judgement to determine if a given sales commission is competitive, reasonable and customary. Such fee will be reduced to the extent any liquidation or resale fees are paid to unaffiliated parties. The amount of such fees will depend upon the sale price of equipment sold. Sale prices will vary depending upon the type, age and condition of equipment sold. The shorter the terms of our leases, the more often we may sell equipment, which will increase liquidation fees we receive. INTEREST IN THE PARTNERSHIP The General Partner PARTNERSHIP INTEREST. The general partner will have a Not Not present and continuing one percent carried interest in determinable at determinable at CIGF6's items of income, gain, loss, deduction, credit, this time this time and tax preference. The value of this partnership interest will depend upon the performance of our business and the value of our assets. The General Partner DISTRIBUTIONS. The general partner will receive a Not Not promotional interest of one percent of cash available determinable at determinable at for distribution until the limited partners have this time this time received distributions of cash available for distribution equal to their capital contributions plus the 10% cumulative return and thereafter, the general partner will receive 10% of cash available for distribution. The amounts available for distribution will depend upon the performance of our business and the amount of future lease revenues.
- 33 - CONFLICTS OF INTEREST CIGF6 will face conflicts of interest arising out of its relationships with the general partner and its affiliates. These relationships are depicted in the chart below:
Organizational Chart: Commonwealth Capital Corp. | Commonwealth of Delaware, Inc. Commonwealth Garden State Commonwealth Commonwealth Private Income & Facilities Income & Growth Capital Securities Growth Funds, Inc. Funding, Inc.** Funds, Inc. Corp.* (Private Funds GP) | | Commonwealth Commonwealth Income & Growth Income Trust VIII Fund I | | Commonwealth Commonwealth Income Trust X Income & Growth | Fund II Commonwealth | Private Fund IV Commonwealth | Income & Growth Commonwealth Fund III Private Fund V | | Commonwealth Commonwealth Income & Growth Private Fund VI Fund IV | Commonwealth Income & Growth Fund V | Commonwealth Income & Growth Fund VI | Commonwealth Income & Growth Private Fund I | Commonwealth Income & Growth Private Fund II
* CCSC became the Dealer Manager of the Commonwealth Funds beginning with CIGF III. ** Garden State Facilities will e dissolving after its remaining tax benefits expire in approximately one to three years. - 34 - The same individuals that control and manage our general partner also control and manage Com Cap Corp. (see "Management") and therefore the conflicts discussed below apply to both the general partner and Com Cap Corp., unless otherwise specified. References to the general partner "and its affiliates" include Com Cap Corp. Nothing below shall relieve the general partner and its affiliates from their general fiduciary obligations to CIGF6 as set forth under "Responsibilities of the General Partner." These conflicts include the following: COMPETITION FOR GENERAL PARTNER'S TIME The general partner and its affiliates have sponsored other investor programs, which will be in potential competition with CIGF6. Although these programs have acquired all of the equipment which they will acquire with the proceeds of offerings to investors, each program may reinvest undistributed cash in additional equipment. The general partner and its affiliates may also form additional investor programs, which may be competitive with CIGF6. Certain senior executives of the general partner and its affiliates also serve as officers and directors of the other programs and are required to apportion their time among these programs. CIGF6 will, therefore, be in competition with the other programs for the attention and management time of the general partner and its affiliates. The general partner and its affiliates will devote the time to our affairs as they, within their sole discretion, exercised in good faith, determine to be necessary for our benefit and that of the limited partners. The officers and directors of the general partner are not required to devote all or substantially all of their time to the affairs of CIGF6. See "Management." COMPETITION WITH AFFILIATES If one or more investor programs and CIGF6 are in a position to acquire the same equipment, conflicts may arise as to which of the programs acquire the available items of equipment. In addition, in order to promote diversification of equipment and lessees when two or more investor programs are in a position to acquire the same equipment, the general partner may acquire equipment in joint ventures with affiliated investor programs. If one or more investor programs and CIGF6 are in a position to enter into leases with the same lessee or to sell equipment to the same purchaser conflicts may arise as to which program shall lease or sell its equipment. ACQUISITIONS Com Cap Corp. and the general partner or other affiliates of the general partner may acquire equipment for CIGF6 provided that (i) CIGF6 has insufficient funds at the time the equipment is acquired, (ii) the acquisition is in the best interest of CIGF6 and (iii) no benefit to the general partner or its affiliates arises from the acquisition except for compensation paid to Com Cap Corp., the general partner or such other affiliate as disclosed in this prospectus. Com Cap Corp., the general partner or their affiliates will not hold equipment for more than 60 days prior to transfer to CIGF6. If sufficient funds become available to CIGF6 within such 60 day period, the equipment may be resold to CIGF6 for a price not in excess of the sum of the cost of the equipment and any accountable expense relating to the selection and acquisition of equipment, or "acquisition expenses" payable to third parties which are incurred and interest on the purchase price from the date of purchase to the date of transfer to CIGF6. Except as described above, there will be no sales of equipment to or from any affiliate of Com Cap Corp. CIGF6 may also find it necessary to make advances to manufacturers or vendors with funds borrowed from the general partner for acquisitions. CIGF6 will not borrow money from the general partner or any of its affiliates for a term in excess of twelve months. Interest will be paid on loans or advances (in the form of deposits with manufacturers or vendors of equipment or otherwise) from the general partner or its affiliates from their own funds at a rate equal to that which would be charged by third party financing institutions on comparable loans for the same purpose in the same geographic area, but in no event in excess of the general partner's or affiliate's own cost of funds. If the general partner or its affiliates borrow money and loan or advance it on a short-term basis to or on behalf of CIGF6, the general partner or such affiliates shall receive no greater interest rate and financing charges from CIGF6 than that which unrelated lenders charge on comparable loans. See "Investment Objectives and Policies." RECEIPT OF COMPENSATION BY THE GENERAL PARTNER AND ITS AFFILIATES Partnership transactions involving the acquisition, lease and/or sale of equipment will result in compensation to the general partner and its affiliates. The general partner has absolute discretion with all decisions related to such transactions. Because the amount and timing of such fees depends, in part, on the debt structure of equipment acquisitions and the timing of such transactions, the general partner and its affiliates may be subject to - 35 - conflicts of interest to the extent the acquisition, retention or release of equipment and the terms and conditions thereof may be less advantageous to CIGF6 and more advantageous to the general partner. LACK OF INDEPENDENT INVESTIGATION BY UNDERWRITER Since Commonwealth Capital Securities Corp. is an affiliate of the general partner, CIGF6 will not be subject to an independent investigation of the type normally performed by an underwriting firm in connection with the public offering of securities. LOANS FROM THE GENERAL PARTNER The general partner and its affiliates may make loans to CIGF6 on a short-term basis in an amount of 1.01% of net offering proceeds, if necessary. The payment of interest by us on any such loans may cause a conflict of interest to the general partner, as such loans would be an additional source of income for the general partner. However, if the general partner or any of its affiliates does make such a loan, the general partner or affiliate may not charge interest at a rate greater than the interest rate charged by unrelated lenders on comparable loans. CIGF6 will not pay interest on a loan at an annual rate greater than three percent over the "prime rate" published in The Wall Street Journal. All payments of principal and interest on any financing provided by the general partner or any of its affiliates shall be due and payable by CIGF6 within 12 months after the date of the loan. See "Compensation to the General Partner and Affiliates." NON-ARMS-LENGTH AGREEMENTS Any agreements and arrangements relating to compensation between CIGF6 and the general partner or any of its affiliates will not be the result of arms-length negotiations and the performance thereof by the general partner and its affiliates will not be supervised or enforced at arms-length. However, the general partner believes that such compensation and fees are comparable to those which would be charged by an unaffiliated entity or entities for similar services. The general partner, based on its experience in the industry and current dealing with others in the industry, uses its business judgment to determine if a given fee or sales commission is competitive, reasonable and customary. See "Compensation to the General Partner and Affiliates." JOINT VENTURES WITH AFFILIATES OF THE GENERAL PARTNER CIGF6 may enter into joint ownership or joint venture agreements for the acquisition and leasing of equipment with other persons, including joint ventures controlled by the general partner. Should any such joint ventures be done, the general partner may face conflicts of interest as it may control and owe fiduciary duties to both CIGF6 and, through such affiliates, the affiliated co-venturer. CIGF6 may invest in joint venture arrangements with other equipment leasing programs formed by the general partner or its affiliates if such action is in the best interest of all programs and if all the following conditions are met: o all the programs have substantially similar investment objectives; o there are no duplicate fees; o the sponsor compensation is substantially similar in each program; o CIGF6 has a right of first refusal to buy another program's interest in a joint venture if the other program wishes to sell equipment held in the joint venture; o the investment of each program is on substantially the same terms and conditions; and o the joint venture is formed either for the purpose of effecting appropriate diversification for the programs or for the purpose of relieving the general partner or its affiliates from a commitment entered into pursuant to Section 9.5.3 of the partnership agreement. See "Risk Factors - CIGF6 will face conflicts of interest arising out of its relationships with the general partner and its affiliates, which could adversely affect our performance and your returns." For example, because of the differing financial positions of the co-venturing programs, it may be in the best interest of one program to sell the jointly-held equipment at a time when it is in the best interest of the other program to hold such equipment. There is a potential risk of impasse in joint venture decisions since neither program may control and while one program may wish to purchase equipment from its co-joint venturer, it may not have sufficient resources to do so. Nevertheless, such joint ventures are restricted to circumstances where the co-venturer's investment objectives are similar to CIGF6's, CIGF6's investment is on substantially the same terms as the co-venturer and the compensation to be received by the general partner and its affiliates from each co-venturer is substantially the same. - 36 - OFF-BALANCE SHEET ARRANGEMENTS The general partner and its affiliates do not, and CIGF6 will not engage in any off-balance sheet arrangements. ORGANIZATION OF GENERAL PARTNER CIGF6 will do business with the general partner and its affiliates, Com Cap Corp., Commonwealth Capital Securities Corp., and Commonwealth of Delaware, Inc. The general partner is owned by Commonwealth of Delaware, Inc., which is owned by Com Cap Corp. Persons investing in CIGF6 will not have an interest in these corporations solely as a result of their investment in CIGF6. PRIOR OFFERINGS BY AFFILIATES Our general partner has previously sponsored five public equipment leasing programs, Commonwealth Income & Growth Fund I (Fund I), Commonwealth Income & Growth Fund II (Fund II), Commonwealth Income & Growth Fund III (Fund III) , Commonwealth Income & Growth Fund IV (Fund IV), and Commonwealth Income & Growth Fund V, whose securities are registered under the Securities Act of 1933 and which have investment objectives substantially similar to CIGF6. Our general partner has also recently sponsored two private funds for accredited investors only, Commonwealth Income & Growth Private Fund I (Private Fund I) and Commonwealth Income & Growth Private Fund II (Private Fund II), which have similar investment objectives to ours and the prior public funds. Similar to our current offering, the overall goal of each prior fund has been to return all of an investor's capital, plus a 10% return. When we refer to "anticipated distributions" below, we mean a stream of distributions that would provide an annual distribution rate of 10% of an investor's initial contribution to a fund. Cash distributions were made in the early years of each fund, during which time one percent of this 10% return on invested funds had been distributed to the general partner, and the remaining 99% had been distributed to investors. One or more lump-sum distributions, representing a return of capital, are expected to be made during each fund's liquidation period when equipment is sold. At such time, only if the investors have received full return of their investment plus a 10% return, remaining funds will be distributed 10% to the general partner and 90% to investors. You will receive a Schedule K-1 each year that details the amounts of income and return of capital to you for income tax purposes. While we consider all distributions to be income to you for our internal performance measurement purposes until the liquidation phase of the Company, each distribution will in fact be, in whole or in part, a return of capital for all other purposes. This means that amounts we record as income in our records do not necessarily represent amounts that you will receive in excess of your initial investment, but will be all or partially a return of your initial investment. To date, investors in four of the prior funds have received their anticipated annual distributions of 10% per year. Fund I investors did not receive 10% for the prior three years of the operational phase, due to an extraordinary event, as described below. Fund II's distributions have averaged 6% in the last two years of the operational phase in an attempt to preserve capital. Further, due to the nature of the equipment financing business and generally accepted accounting principles, each prior fund has shown a net loss on its financial statements each year. The net losses recorded by the prior funds have been incurred largely due to non-cash depreciation charges related to the prior funds' significant capital expenditures. However, lease revenues are sufficient to make distributions to investors as anticipated, as well as pay fees to the general partner and invest additional cash in new equipment. We expect CIGF6 to operate in the same manner, and thus to show a net loss for accounting purposes, while generating sufficient revenue to make distributions, pay fees and purchase additional equipment. We expect, based on the past experience of our general partner, to be able to acquire income-producing equipment within 90 days of receiving offering proceeds. Therefore, it is likely that the initial distributions to you will be partially income, as well as partially a return of capital. - 37 - Fund I terminated its offering of units on May 11, 1995 with $12,634,153 raised from 713 investors. Eighty-four percent of the total interests offered in Fund I were sold. On December 8, 1995, Fund I's net offering proceeds were fully utilized for the purchase of information technology equipment. All of the equipment was new when acquired. From Fund I's inception, through the end of 1998, investors in Fund I received 100% of their anticipated returns. These returns were reduced by 50% for years 1999 and 2000 due to litigation with one significant lessee. This lessee failed to properly return leased equipment to Fund I at the end of its lease term. Therefore, Fund I was unable to resell such equipment and reinvest the proceeds in new equipment. The General Partner deemed it advisable to reduce distributions during 1999, 2000, and 2001, and suspend distributions in 2002, 2003, and 2004 pending the outcome of the litigation and due to the reduced cash flow resulting from the delay in the return of the equipment, and the resulting delay in reinvestment of funds. On August 3, 2005, Commonwealth lost its longstanding legal efforts in the United States Court of Appeals for the Third Circuit. Due to the outcome of the litigation, the General Partner felt it was in the best interest of Fund I to start the liquidation process and run out naturally all remaining leases in the portfolio, making distributions when possible, after expenses have been satisfied. Fund I began liquidation on July 1, 2005. Fund II terminated its offering of units on May 12, 1997 with $9,235,185 raised from investors. Sixty-two percent of all interests offered in Fund II were sold. As of June 30, 1997, Fund II's net offering proceeds were fully utilized for the purchase of information technology equipment. All of the equipment was new when acquired. Investors have received an average of 92.5% of anticipated distributions since inception. The level of anticipated distributions was less than 100% due to significant litigation with one lessee that adversely affected Fund II's cash flow. The litigation was resolved in 2003 in Fund II's favor. Fund II began liquidation effective April 1, 2005. Fund III terminated its offering of units on July 25, 2000 with $3,085,801 raised from investors. Twenty-one percent of all interests offered in Fund III were sold. As of July 30, 2000, Fund III's net offering proceeds were fully utilized for the purchase of information technology equipment. All of the equipment was new when acquired. Investors in Fund III have received 100% of anticipated distributions each year since inception Fund IV terminated its offering of units on September 20, 2003 with approximately $14,998,000 raised from investors. One hundred percent of all interests offered in Fund IV were sold. Fund IV's net offering proceeds were fully utilized for the purchase of information technology equipment by December 31, 2003. All of the equipment acquired was new when acquired. Investors in Fund IV have received 100% of anticipated distributions since inception. Please refer to Table IV of the prior performance tables for more specific details on operating results for these prior programs. Additional updates to the prior performance tables will be filed by amendment when they become available. Fund V was organized in the Commonwealth of Pennsylvania on May 19, 2003. Fund V reached the minimum amount in escrow and commenced operations on March 14, 2005. The offering period has not yet ended. See the prior performance tables attached as "Table II" for further information concerning these prior public programs. Private Fund I began its offering on January 13, 2004. As of September 14, 2005, Private Fund I had raised $20,000,000 from investors, representing the sale of 100% of the interests offered. As of December 31 2005, 71% of Private Fund I's net offering proceeds were utilized for the purchase of information technology equipment, all of which was new when acquired. Investors in Private Fund I have received 100% of anticipated distributions since inception. Private Fund II began its offering on September 26, 2005 and is in the initial stages of its offering. As of December 31, 2005, Private Fund II made its first distributions at a rate of 10%, on an annualized basis. The information presented in this section of the prospectus concerning our prior programs, as well as the information and data included in the attached Appendices and Tables for our prior programs, represents our experience in the prior programs and is not audited. IF YOU PURCHASE UNITS IN THE PARTNERSHIP, YOU WILL NOT HAVE ANY OWNERSHIP INTEREST IN ANY OTHER PROGRAM. AS A RESULT OF YOUR PURCHASE, YOU SHOULD NOT ASSUME THAT YOU WILL EXPERIENCE RETURNS, IF ANY, COMPARABLE TO THOSE EXPERIENCED BY INVESTORS IN OUR PRIOR PROGRAMS. - 38 - The following is a summary of equipment acquired between January 1, 2000 and June 30, 2005 by prior public programs which were sponsored by the general partner: SUMMARY OF EQUIPMENT ACQUIRED BETWEEN JANUARY 1, 2000 AND JUNE 30, 2005(1)
Quantity of Cost of Lease Schedules Equipment Program Name Acquired Acquired -------------------------------------------- --------------- ------------ Commonwealth Income & Growth Fund I 20 $ 977,051 Commonwealth Income & Growth Fund II 28 $ 3,280,783 Commonwealth Income & Growth Fund III 15 $ 665,382 Commonwealth Income & Growth Fund IV 141 $ 14,391,188 Commonwealth Income & Growth Fund V 5 $ 1,232,301 Comonwealth Income & Growth Private Fund I 38 $ 9,327,242 Commonwealth Income & Growth Private Fund II
(1) This table does not include prior programs sponsored by the general partner and its affiliates that ceased purchasing equipment prior to January 1, 2000. We will provide you, upon request and without fee, the most recent Form 10-K annual report filed with the SEC by any of the prior public programs listed above and, for a reasonable fee to cover our expenses, any exhibits to each such Form 10-K that you may request. TRANSFERABILITY OF UNITS GENERAL LIMITATIONS Units cannot be transferred or assigned without the consent of the general partner, which consent shall not be unreasonably withheld. Our limited partnership agreement provides that the general partner shall have reasonable cause to withhold such consent if the transfer is not an exempt transfer as discussed below. The general partner intends to monitor transfers of units in an effort to ensure that all transfers will be within certain safe harbors promulgated by the IRS to furnish guidance regarding publicly traded partnerships. These safe harbors limit the number of transfers that can occur in any one year. The general partner intends to cause CIGF6 to comply with the safe harbor that permits nonexempt transfers and redemptions of units of up to two percent of the total outstanding interests in CIGF6's capital or profits in any one year. In deciding whether a proposed transfer can be made, the general partner will consider whether the transfer will have an adverse affect on CIGF6's federal tax status as a partnership. The general partner may charge a transaction fee, not to exceed $100, to cover the administrative cost of transfers of fewer than 125 units to a single transferee, or transfers that leave the transferor with fewer than 125 units, in its discretion. REDEMPTION PROVISION Upon the conclusion of the 30 month period following the termination of the offering, CIGF6 may, at the sole discretion of the general partner, repurchase a number of the outstanding units. After such 30 month period, on a semi-annual basis, the general partner, at its discretion, may establish an amount for redemption, generally not more than two percent of the outstanding units per year, subject to the general partner's good faith determination that such redemptions will not: o cause CIGF6 to be taxed as a corporation under Section 7704 of the Code; or o impair the capital or operations of CIGF6. CIGF6 may redeem units in excess of the two percent limitation if, in the good faith judgment of the general partner, the conditions above would remain satisfied. The redemption price for units will be 105% of the selling limited partner's "adjusted capital contributions" attributable to the units for sale, net of the offering fees and expenses attributable to the units for sale. A limited partner's adjusted capital contributions are his or her initial capital - 39 - contributions, reduced by the amount of all distributions received by that limited partner attributable to the units for sale to the extent those distributions exceeded any unpaid cumulative return. The adjusted capital contribution amount will be further reduced, in determining the redemption price, by the offering fees and expenses attributable to the units for sale, which offering fees and expenses will be amortized over ten years after the termination of the offering. One quarter of these expenses will be amortized in each thirty-month period following the termination of the offering. Therefore, for example, one-fourth of the amount such fees and expenses will be added back to the adjusted capital contribution amount used to determine the redemption price after the expiration of the first thirty-month period from the date of the termination of the offering. All requests for redemption must be made in writing and must be on file as of the record date for such redemption. The general partner will maintain a master list of requests for redemption with priority being given to units owned by estates, followed by IRAs and "qualified plans," which are trusts established pursuant to the terms of a pension, profit sharing or stock bonus plan, including Keogh Plans, meeting the requirements of Section 401 of the Internal Revenue Code. All other requests will be considered in the order received. Where redemption requests exceed funds available for redemption, there will be no pro-rata allocation of funds available among requesting limited partners. Redemption requests made by or on behalf of limited partners who are not affiliated with the general partner or its affiliates will be given priority over those made by limited partners who are affiliated with the general partner or its affiliates. All redemption requests will remain in effect until and unless canceled, in writing, by the requesting limited partner(s). The general partner has complete discretion in deciding whether to establish an amount for redemption, based upon the amount of operating revenue available to fund redemptions. Therefore, there can be no assurance that any units for which redemption is requested will ever be redeemed. We will accept redemption requests beginning 30 months following the termination of the offering. There will be no limitations on the period of time that a redemption request may be pending prior to its being granted. Limited partners will not be required to hold their interest in CIGF6 for any specified period prior to their making a redemption request. Substituted limited partners may also make redemption requests, and their units will retain their transferor's adjusted capital contribution amount. The making of a request for a redemption is completely voluntary. Limited partners will receive notification concerning the action of CIGF6 on this request. The general partner may withhold consent to the transfer of units for which redemption has been requested during the pendency of the request. In order to make a redemption request, limited partners will be required to advise the general partner in writing of such request. Upon receipt of such notification, CIGF6 will provide detailed forms and instructions to complete the request. The redemption price is based on a percentage of the selling limited partner's adjusted capital contributions and is, therefore, arbitrary and not calculated with reference to the fair market value of a unit. For tax consequences relating to the redemption of units, see "United States Federal Income Tax Considerations -- Disposition of Units." EXEMPT TRANSFERS The following seven categories of transfers are exempt transfers for purposes of calculating the volume limitations imposed by the IRS and will generally be permitted by the general partner: o transfers in which the basis of the unit in the hands of the transferee is determined, in whole or in part, by reference to its basis in the hands of the transferor (for example, units acquired by corporations in certain reorganizations, contributions to capital, gifts of units, units contributed to another partnership, and non-liquidating as well as liquidating distributions by a parent partnership to its partners of interests in a sub-partnership); o transfers at death; o transfers between members of a family (which include brothers and sisters, spouses, ancestors, and lineal descendants); o transfers resulting from the issuance of units by CIGF6 in exchange for cash, property, or services; o transfers resulting from distributions from a retirement plan qualified under Section 401(a) of the Code or an individual retirement plan; - 40 - o any transfer by a limited partner in one or more transactions during any 30-day period of units representing in total more than two percent (2%) of the total outstanding interests in capital or profits of CIGF6; and o transfers by one or more partners representing in the aggregate fifty percent (50%) or more of the total interests in partnership capital or profits in one transaction or a series of related transactions. ADDITIONAL RESTRICTIONS ON TRANSFER Limited partners who wish to transfer their units to a new beneficial owner will be required to pay CIGF6 up to $50 for each transfer to cover CIGF6's cost of processing the transfer application and will take such other actions and execute such other documents as may be reasonably requested by the general partner. There will be no charge for re-registration of a certificate in the event of a marriage, divorce, death, or transfer to a trust so long as the transfer is not a result of a sale of the units. In addition, the following restrictions will apply to each transfer: (i) our general partner may prohibit any acquisition or transfer if it would cause 25% or more of the outstanding units to be owned by Benefit Plans; and (ii) no transfer will be permitted unless the transferee obtains such governmental approvals as may reasonably be required by the general partner, including without limitation, the written consents of the Pennsylvania Securities Commissioner and of any other state securities agency or commission having jurisdiction over the transfer. Further, a limited partner may transfer or assign part or all of his units if, and only if: (a) the assignor and the assignee execute, acknowledge and deliver to CIGF6 such instruments of transfer and assignment and other documents as may be required by the general partner; (b) either (i) at least 125 units are assigned to each assignee and at least 125 units are retained by the assignor or (ii) the Units being assigned are all the units of the assignor (except that the general partner, in its discretion, may waive this requirement for transfers by gift, inheritance or family dissolution or transfers to affiliates of the assignor). DISTRIBUTIONS AND ALLOCATIONS BETWEEN THE GENERAL PARTNER AND THE LIMITED PARTNERS Cash distributions, if any, will be made quarterly. The first distribution is expected to be made at the end of the first full quarter after the first escrow closing date, which will take place when the minimum offering amount of units has been purchased by investors. Thereafter, any distributions will be made as of December 31, March 31, June 30, and September 30 of each year. Cash distributions will be made after the payment of expenses of CIGF6, including the payment of fees to the general partner. CIGF6 will make distributions of CIGF6's cash available for distribution that the general partner, in its sole and absolute discretion, determines is available for distribution. Such distributions will be payable quarterly, or monthly by the election of the limited partners for an annual fee of $25.00. A limited partner who purchases a minimum of 250 units ($5,000) may elect to receive monthly distributions, paid in arrears, by written notice to the general partner upon subscription, or, thereafter, upon at least 30 days' prior written notice to the general partner, with any such election made following subscription to be effective as of the beginning of the following calendar quarter. Without an election, limited partners will receive distributions quarterly. In any quarter, limited partners may terminate their election to receive distributions monthly rather than quarterly by written notice to CIGF6, which termination will be effective as of the beginning of the following calendar quarter. The general partner, in its sole discretion, will have the option in the future to make quarterly distributions to all limited partners. In such event, annual fees for monthly distributions will terminate. Distributions of cash available for distribution are expected to commence no later than the end of the first full calendar quarter following receipt of the minimum subscription amount. At that time, each limited partner will receive a distribution of cash available for distribution for the calendar quarter and each limited partner who has elected to receive distributions monthly will receive one-third of such amount. The remaining two-thirds of such amount will be held in an interest-bearing monthly distribution account separate from other partnership funds, and will be paid, without interest, in approximately equal installments in each of the next two months to those limited partners who have chosen to receive distributions monthly. Interest earned, if any, will be returned to the partnership. Limited partners who choose the monthly distribution option will be charged a minimum annual administrative fee of $25.00, designed to cover the additional postage and handling associated with the more frequent distributions. The annual administrative fee will be reduced by any interest earned on the monthly distribution account and will be deducted equally from each monthly distribution. In the event that the interest - 41 - earned on the monthly distribution account exceeds the annual administrative fee, such excess interest will be available to CIGF6 for partnership purposes. It is anticipated that the fee will be calculated in January of each year, although the general partner may change the amount of the fee during the year by written notice to each limited partner who properly has chosen to receive monthly distributions, with such notice to be given at least 30 days prior to the beginning of the calendar quarter that includes the first month to which the new fee will apply. Distributions will be made 99% to the limited partners and one percent to the general partner until each limited partner has received an amount equal to his capital contributions plus the cumulative return. The cumulative return is an amount equal to a return at a rate of 10% per annum, compounded daily, on the adjusted capital contribution (defined in the next paragraph), for all outstanding units, which amount begins accruing when the limited partner is admitted as a partner in CIGF6. Once the adjusted capital contributions of all outstanding units have been reduced to zero, cash distributions will be made 90% to the limited partners and 10% to the general partner. Distributions made in connection with the liquidation of CIGF6 or a partner's units will be made in accordance with the partner's positive capital account balance as determined under the partnership agreement and Treasury Regulations. The cumulative return is calculated on the limited partners' adjusted capital contributions for their units. The adjusted capital contributions will initially be equal to the amount paid by the limited partners for their units. If distributions at any time exceed the cumulative return, the adjusted capital contributions will be reduced by the excess, decreasing the base on which the cumulative return is calculated. For example (without taking into account the effect of compounding), on a $100 investment, a $12 distribution in year one would result in a $2 reduction in adjusted capital contribution, leaving a $98 base on which the 10% return would be calculated in year two. The $2 reduction consists of $2 in distributions in excess of that required to satisfy the cumulative return requirement for year one. If the proceeds resulting from the sale of any equipment are reinvested in equipment, sufficient cash will be distributed to the partners to pay the additional federal income tax resulting from such sale for a partner in a 35% federal income tax bracket or, if different, the maximum federal income tax rate in effect for individuals for that taxable year. The general partner will be allocated net profits equal to its cash distributions (but not less than one percent of net profits) and the balance will be allocated to the limited partners. Net profits arising from transactions in connection with the termination or liquidation of CIGF6 will be allocated in the following order: o first, to each partner in an amount equal to the negative amount, if any, of his capital account; o second, an amount equal to the excess of the proceeds from the liquidation or termination which would be distributed to the partners as operating distributions over the total capital accounts of all the partners (after adjusting those capital accounts to give effect to allocations of operating profits and as if all other cash available for distribution has been distributed), to the partners in proportion to their respective shares of such excess, and o third, with respect to any remaining net profits, to the partners in the same proportions as if the distributions were operating distributions. Net losses, if any, will generally be allocated 99% to the limited partners and one percent to the general partner, except to the extent that any such losses are required to be allocated in a different manner under applicable federal income tax law. Net profits and net losses will be computed without taking into account, in each taxable year of CIGF6, any items of income, gain, loss or deduction required to be specially allocated pursuant to Section 704(b) of the Code and the Treasury Regulations promulgated thereunder. No limited partner will be required to contribute cash to the capital of CIGF6 in order to restore a closing capital account deficit, and the general partner has only a limited deficit restoration obligation under the partnership agreement. - 42 - INCOME AND RETURN OF CAPITAL As equipment values decrease over the term of our existence, a portion of each distribution will be considered a return of capital, rather than income. Therefore, the dollar amount of each distribution should not be considered as necessarily being all income to you. As your capital in the units is reduced for tax purposes over the life of your investment, you will not receive a lump sum distribution upon liquidation that equals the purchase price you paid for units, as you might expect if you had purchased a bond. Also, payments made upon liquidation will be taxable to the extent they are not a return of capital. As you receive distributions throughout the life of your investment, you will not know at the time of the distribution what portion of the distribution represents a return of capital and what portion represents income. The Schedule K-1 statement you receive from us each year will specify the amounts of capital and income you received throughout the prior year. DISTRIBUTION REINVESTMENT You may elect to have your distributions in CIGF6 reinvested in additional units during the offering period, rather than receiving your distributions in cash. To make this election, mark the item in section 6 of the attached subscription agreement, which reads "You wish Distributions of the Partnership to be reinvested in additional Units during the Offering Period." When the offering period is complete, you will receive all subsequent distributions in cash. All units purchased for you through distribution reinvestment will be newly issued units purchased directly from CIGF6. The number of units to be purchased for you through a reinvestment purchase will depend upon the amount of the dividends being reinvested. The purchase price of all units purchased through reinvestment will be $20.00 per unit. All distributions paid on units acquired through reinvestment will also be reinvested in additional units. The distributions paid on such units will continue to be reinvested unless you elect to have them paid in cash by changing your investment option. All units that you purchase through the reinvestment of distributions are recorded in your name on our books. The reinvestment of distributions does not relieve you of any income tax which may be payable on your share of CIGF6's taxable income. Please see "United States Federal Income Tax Considerations -- Distribution Reinvestment" for further information about the taxability of reinvested distributions. Investors in Commonwealth Income & Growth Fund IV and Commonwealth Income & Growth Fund V, prior programs also sponsored by the general partner, may reinvest their Fund IV and Fund V distributions in CIGF6 units, subject to the discretion of the general partner and any applicable state law regarding minimum investment amounts (see "Suitability Standards" and "Prospectus Summary - - The Offering"). Fund IV and Fund V investors who wish to take advantage of this opportunity should contact their broker or the general partner. ALLOCATION OF PROFITS AND LOSSES AND DISTRIBUTIONS OF CASH AMONG THE LIMITED PARTNERS Except during the offering period, and with respect to net profits and losses, during periods when units are redeemed,, cash available for distribution, net profits and net losses allocable to the limited partners will be distributed to them solely with reference to the number of units owned by each as of the record date for each such distribution. During the offering period, cash available for distribution, will be distributed to the limited partners with reference to both (i) the number of units owned by each as of each record date and (ii) the number of days since the previous record date (or, in the case of the first record date, the commencement of the offering period) that the limited partner has owned the units. During the offering period and in the event units are redeemed other than on December 31 of a taxable year, net profits and net losses shall be allocated among the limited partners in proportion to the number of units each holds from time to time during the year in accordance with Code Section 706, using such permissible conventions as the general partner may select. Limited partners will start sharing in net profits, net losses, and cash distributions on the date following the date the capital contributions are received. If some limited partners are admitted to CIGF6 after others, those limited partners admitted later may receive a smaller portion of each item of CIGF6's net profits and net losses than the limited partners who were admitted earlier. Nevertheless, those limited partners still will be obligated to make the same capital contributions to CIGF6 for their interests as the limited partners who were admitted previously. In addition, where a limited partner transfers units during a taxable year, the limited partner may be allocated net profits for a period for which such limited partner will not receive a corresponding cash distribution. - 43 - Net profits and net loss shall be computed for each taxable year or shorter period with the following adjustments: o any income of CIGF6 that is exempt from federal income tax and not otherwise taken into account in computing net profits and net loss shall be added to such taxable income or shall reduce taxable loss; o any expenditure of CIGF6 described in Treasury Regulation Section 1.704-1(b)(2)(iv)(I) and not otherwise taken into account in computing net profits and net loss shall be subtracted from such income or loss; o items of income, gain, loss and deduction specially allocated pursuant to Section 7.3 of the partnership agreement shall not be included in the computation of net profits and net loss; and o if equipment is reflected on the books of CIGF6 at a book value that differs from the adjusted tax basis of the equipment in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(d) or (f), depreciation, amortization and gain or loss with respect to such equipment shall be determined by reference to such book value in a manner consistent with Treasury Regulation Section 1.704-1(b)(2)(iv)(g). The terms "net profits" or "net losses" shall include CIGF6's distributive share of the profit or loss of any partnership or joint venture in which it is a partner or joint venturer. UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following is a summary of the material federal income tax considerations concerning an investment in CIGF6. In this section, when we refer to "the Code" we mean the Internal Revenue Code of 1986, as amended and in effect at the time. This summary is not exhaustive of all possible tax considerations and is not tax advice. Moreover, this summary does not deal with all aspects that might be relevant to you, as a particular prospective limited partner in light of your personal circumstances; nor does it deal with particular types of limited partners that are subject to special treatment under the Code, such as insurance companies, financial institutions and broker-dealers. The Code provisions governing the federal income tax treatment of limited partnerships are highly technical and complex. The following discussion is based on current law, and we assume no duty to inform you regarding changes in the tax law. We urge you to consult your tax advisor with specific reference to your own tax situation prior to making an investment in CIGF6. Subject to the qualifications and assumptions set forth herein, and certain representations of the general partner, our counsel, Reed Smith LLP, has opined that CIGF6 will be classified as a partnership for federal income tax purposes. Neither the general partner, CIGF6, nor counsel can guarantee that any federal income tax advantages described in this summary will be available. An opinion of counsel represents only such counsel's best legal judgment, and has no binding effect or official status of any kind, so that no assurance can be given that the opinions of counsel would be sustained by a court, if contested, or that legislative or administrative changes or court decisions may not be forthcoming which would require modifications of the statements and conclusions expressed herein. Counsel's opinion is not binding on the IRS, and neither we nor counsel have requested a ruling from the IRS on any of the tax matters discussed in this prospectus. Except for the opinions specifically addressed herein, counsel has not opined as to the probable outcome on the merits of any issue discussed below. Final disallowance of all or any portion of CIGF6's federal income tax advantages would of course adversely affect an investment in CIGF6. Counsel will not prepare or review CIGF6's income tax information returns, which will be prepared by management and independent accountants for CIGF6. CIGF6 will make a number of decisions on such tax matters as the expensing or capitalizing of particular items, the proper period over which capital costs may be depreciated or amortized and many other similar matters. Such matters are handled by CIGF6 often with the advice of independent accountants retained by CIGF6 and are usually not reviewed with counsel. - 44 - The following discussion is not intended as a substitute for careful tax planning by prospective investors. The income tax consequences of an investment in a partnership such as CIGF6 are often uncertain and complex and will not be the same for all investors. Details of significance to a particular taxpayer may not be present in this discussion, as it is impractical to set forth in a discussion of acceptable length all aspects of federal income tax law that may be relevant to an investment in CIGF6. The discussion below considers the federal income tax considerations associated with an investment in CIGF6 by individuals who are citizens of the United States or resident aliens and is not intended to deal with matters which may be relevant to other investors, such as corporations, partnerships or trusts. The discussion, however, does describe some, but not all, of the material federal income tax considerations associated with an investment in CIGF6 by non-resident alien and foreign corporations and Keogh plans and pension and profit-sharing plans qualifying under Section 401(a) of the Code (collectively, qualified plans) and individual retirement accounts described in Section 408 of the Code. A corporate investor should be aware that the tax consequences of its investment in CIGF6 will differ in several material respects from those applicable to individuals. CLASSIFICATION AS A PARTNERSHIP Counsel has opined that CIGF6 will be classified as a partnership, and not as an association taxable as a corporation, for federal income tax purposes. This opinion is based upon: (i) existing federal income tax law; (ii) continuing compliance with the conditions set forth below; and (iii) certain representations by the general partner set forth below. Section 301.7701-2 of the Treasury Regulations (known as the "Check-the-Box" rules) provides that certain unincorporated entities, which have more than one owner may generally elect to be treated as a partnership or a corporation for federal income tax purposes. In the absence of a specific election, any such entities, which are formed under United States law (i.e., domestic entities), through default, are treated as partnerships for federal income tax purposes. In this case, the general partner has represented that CIGF6 will file any tax or informational returns, if any (including Department of the Treasury/Internal Revenue Service Form 8832), which may be required in order for CIGF6 to be treated as a partnership for federal income tax purposes. Consequently, subject to the discussion below, CIGF6 will qualify as a partnership for federal income tax purposes. Counsel's opinion takes into account Section 7704 of the Code, which provides, with certain exceptions which are not relevant to this discussion, that "publicly traded partnerships" are taxable as corporations. Section 7704(b) of the Code defines the term "publicly traded partnership" to mean any partnership if: (i) interests in the partnership are traded on an established securities market, or (ii) interests in the partnership are readily tradable on a secondary market (or the substantial equivalent thereof). Section 3017704-1 of the Treasury Regulations and the legislative history of Code Section 7704 provides that a secondary market for interests in a partnership or the substantial equivalent thereof exists if investors are readily able to buy, sell or exchange their partnership interests in a manner that is comparable, economically, to trading on established securities markets. A secondary market is generally indicated by the existence of a person standing ready to make a market in the interests. The substantial equivalent of a secondary market will be deemed to exist if (i) interests in the partnership are regularly quoted by any person, such as a broker or dealer, making a market in the interests; (ii) any person regularly makes available to the public (including customers and subscribers) bid or offer quotes with respect to interests in the partnership and stands ready to effect buy or sell transactions at the quoted prices for itself or on behalf of others; (iii) if the holders of interests in the partnership have a readily available, regular, and ongoing opportunity to sell or exchange their interests through a public means of obtaining or providing information of offers to buy, sell, or exchange interests, or (iv) prospective buyers and sellers have the opportunity to buy, sell, or exchange interests in the partnership in a time frame that a market-maker would provide and prospective buyers have similar opportunities to acquire such interests. The legislative history of Section 7704 also indicates that a regular plan of redemptions or repurchases by a partnership may constitute public trading where holders of interests have readily available, regular, and ongoing opportunities to dispose of their interests. The partnership agreement provides that no transfer or assignment of any unit will be recognized or otherwise given effect (including recognizing any right of the transferee, such as the right of the transferee to receive directly or indirectly Partnership distributions or to acquire an interest in the capital or profits of the Partnership) for any purpose to the extent it is determined by the general partner to be effectuated through an established securities market or a secondary market (or the substantial equivalent thereof), within the meaning of Section 7704 of the Code and the Treasury Regulations applicable with respect thereto, so as to adversely affect the tax status of the - 45 - partnership as a partnership rather than as an association taxable as a corporation." The general partner will also prohibit any transfer or assignment of units which, in the general partner's good faith judgment, will cause CIGF6 to fall outside of the safe harbors of Treasury Regulation Section 1.7704-1(e), discussed below. See "Risk Factors - There will be no public market for the units, and you may be unable to sell or transfer your units at a time and price of your choosing." Under Treasury Regulation Section 1.7704-1(e), (f), (g), (h) or (j), certain types of limited, non-public transfers will be disregarded in determining whether a partnership is publicly traded (unless transferred on an established securities market). The general partner anticipates permitting seven categories of these Exempt Transfers. See "Transferability of Units --Exempt Transfers." In addition to providing for the Exempt Transfers, Treasury Regulation 1.7704-1 states that partnership interests will not be deemed "readily tradable on a secondary market (or the substantial equivalent thereof)" if any one of several other safe harbors provided for in such Treasury Regulation is satisfied. One of these is the "two percent safe harbor." It provides that a secondary market or its equivalent will not exist if the sum of the interests in partnership capital or profits attributable to those partnership interests that are sold, redeemed, or otherwise disposed of during the partnership's taxable year does not exceed two percent of the total interests in partnership capital or profits. The seven categories of exempt transfers, among other items, do not count towards the two percent ceiling. In determining whether CIGF6 satisfies the two percent safe harbor, redemption of units pursuant to Article 12 of the partnership agreement will be counted. The seven categories of exempt transfers listed on pages 39-40 are not counted toward the two percent safe harbor ceiling because they are considered to be situations not involving trading on a secondary market, even though they may permit trading of more than two percent of the partnership's interests. One of the protected categories of "private transfers" is for "block transfers." Under Treasury Regulations Section 1.7704-1(e)(2), block transfers are defined as transfers of 2% or more of the total interests in partnership capital or profits within a 30 day period by a single transferor or certain related transferors. There is an additional "private transfer" safe harbor for transfers of partnership interests representing 50% or more of partnership interests in capital and profits in one transaction or a series of related transactions. (But, note that the partnership agreement prohibits a transfer of units if it would cause a termination of the partnership for tax purposes. "Federal Income Tax Considerations - Termination of the Partnership for Tax Purposes.") Presumably, the IRS created these additional safe harbors because the transactions involved are transfers of large blocks of partnership interests that are not consistent with public trading transfers. While the general partner will use its good faith judgment to prohibit the type and number of transfers of units to those which will allow CIGF6 to remain within the two percent safe harbor, the general partner does not warrant that CIGF6 will satisfy this safe harbor during each of its taxable years. It is conceivable that transfers of units could occur which would cause CIGF6 to fall outside the safe harbor. In this regard, Treasury Regulation Section 1.7704-1(c)(3) states that failure to meet any of the safe harbors will not create a presumption that a secondary market or its equivalent exists for partnership interests. No assurances can be offered, however, that, if the amount and type of trading in the units were to fall outside the safe harbor, the IRS would not claim publicly traded partnership status with respect to CIGF6. If, for any reason, CIGF6 were treated for federal income tax purposes as a corporation, CIGF6's income, deductions, gains, losses and credits would be reflected only on its income tax return rather than being passed through to limited partners, and CIGF6 would be required to pay income tax at corporate tax rates on its net taxable income. Any amounts available (after corporate taxes) for distribution to the limited partners would be treated as dividends to the extent of current or accumulated earnings and profits. In addition, distributions from CIGF6 would be classified as portfolio income rather than passive activity income and thus would not be eligible to be offset by passive activity losses attributable to CIGF6 or other activities giving rise to passive losses. See "United States Federal Income Tax Considerations -- Limitations on Utilization of Partnership Losses -- Passive Activity Losses Limitations." CERTAIN PRINCIPLES OF PARTNERSHIP TAXATION A partnership is not subject to federal income tax, but is required to file a partnership information tax return each year. Each limited partner will be required to take into account, in computing the limited partner's income tax liability, the limited partner's distributive share (as determined by the partnership agreement and reported on Schedule K-1 to Form 1065) of all items of net profits, losses, credit and tax preference of CIGF6 for any taxable year of CIGF6 ending within or with the taxable year of the limited partner without regard to whether the limited partner has received or will receive any cash distributions from CIGF6. Thus, a limited partner may be subject to tax if CIGF6 has net income even though no corresponding cash distribution is made. To the extent a limited - 46 - partner's tax liability attributable to his investment in CIGF6 exceeds his cash distributions from CIGF6 in any year, such partner will be required to pay the excess tax liabilities from other sources. Any cash received by a limited partner from CIGF6 in his capacity as a partner generally will not cause recognition of taxable income (or tax loss) for federal income tax purposes. Instead, such distributions generally will reduce the limited partner's basis in his units (but not below zero). However, cash distributions (and certain distributions of marketable securities, as defined by the Code) in excess of a limited partner's adjusted basis in his units will result in the recognition of taxable income to the extent of any such excess. Any taxable income recognized upon such distributions will generally be characterized as capital gain income and will be long-term or short-term depending upon the limited partner's holding period for his units. With respect to a partner subject to the " at risk" rules, if the partner's share of partnership losses or distributions reduces his "at risk" amount to zero, subsequent distributions of cash or other property to him will cause him generally to recapture as ordinary income an amount equal to the partnership losses previously deducted by him to the extent of such distributions. The gain realized on a non-pro rata distribution to a limited partner may be taxed to the limited partner as ordinary income to the extent attributable to the limited partner's share of depreciation recapture, other "unrealized receivables" and inventory that has substantially appreciated in value. See "Cost Recovery and Depreciation - Recapture of Cost Recovery Deductions" and "Disposition of Units" below. No loss will be recognized by a limited partner upon distributions, other than a loss recognized upon a distribution in liquidation of his partnership interest. A limited partner's distributive share of any taxable income generated by CIGF6 will not be deemed to be "net earnings from self employment." Accordingly, such income will not be subject to the tax imposed on self-employed persons by Section 1401 through 1403 of the Code, commonly referred to as "social security taxes." Prospective investors who receive social security benefits should be aware that, although income generated by CIGF6 will not be deemed to be "net earnings from self employment," such income will be included in a limited partners' "modified adjusted gross income" under Section 86 of the Code for purposes of determining whether a limited partner's social security benefits, if any, are subject to taxation. TIMING OF INCOME RECOGNITION. CIGF6's tax returns will be prepared using the accrual method of accounting. Under the accrual method, CIGF6 will recognize as income items such as rentals and interest as and when earned by CIGF6, whether or not they are received. In certain circumstances, where a lease provides for varying rental payments, increasing (or decreasing) in the later years of the lease, known as "step rentals," the Code generally requires the lessor to take the rentals into income as if the rent accrued at a constant level rate, with certain exceptions. This provision also applies to "sale-leaseback" transactions, in which property is leased to the person from whom it was purchased. An additional consequence of a "step rental" lease would be a conversion of a portion of CIGF6's rental income (passive) from such lease to interest income (portfolio). If step rentals are provided for in a lease, the Manager anticipates that the lease will fall within one of the exceptions to such treatment and, therefore, CIGF6 should recognize such income as it is earned under the lease rather than at a constant level rate as otherwise required under the Code ALLOCATION OF PARTNERSHIP INCOME, GAINS, LOSSES, DEDUCTIONS AND CREDITS IN GENERAL. Cash distributions, if any, will be made quarterly, 99% to the limited partners and one percent to the general partner until each limited partner has received an amount equal to his capital contribution plus the 10% cumulative compounded return; thereafter, cash distributions will be made 90% to the limited partners and 10% to the general partner. Distributions in redemption of a partner's units pursuant to Article 12 of the partnership agreement (see "Transferability of Units - Redemption Provision") will be equal to 105% of the selling partner's adjusted capital contribution at the time of the redemption, subject to reduction for some or all of the offering fees and expenses attributable to the units. Distributions made in connection with the liquidation of CIGF6 or a partner's units will be made in accordance with the partner's positive capital account balance as determined under the partnership agreement and Treasury Regulations. Generally, the general partner will be allocated net profits equal to its cash distributions (but not less than one percent of net profits) and the balance will be allocated to the limited partners. Net profits arising from transactions in connection with the termination or liquidation of CIGF6 will be allocated in the following order: (i) first, to each partner in an amount equal to the negative amount, if any, of his capital account; (ii) second, an amount equal to the excess of the proceeds which would be distributed to the partners based on the operating distributions to the partners over the aggregate capital accounts of all the partners, to the partners in proportion to their respective shares of such excess, and (iii) third, with respect to any remaining net profits, to the partners in the same proportions as if the distributions were operating distributions. Net losses, if any, will be allocated 99% to the limited partners and one percent to the general partner. - 47 - The above allocations, however, are subject to several special allocations designed in part to prevent a partner's capital account (particularly a limited partner's capital account) from going below zero and to allow the partner's capital account accurately to reflect the above-described sharing ratios. Although a partnership may make a special allocation of certain partnership items, or overall profit and loss, in a manner disproportionate to the partners' respective capital contributions, such an allocation will be recognized for federal income tax purposes only if it has "substantial economic effect." A special allocation generally will be considered to have such effect if it actually affects the dollar amount of the partners' share of total partnership income or loss independently of tax consequences. SUBSTANTIAL ECONOMIC EFFECT. Under Treasury Regulations, an allocation will be respected by the IRS only if it meets any one of the following: (i) the allocation has "substantial economic effect"; (ii) the allocation is in accordance with the partners' interests in the partnership; or, (iii) the allocation is deemed to be in accordance with the partners' interests in the partnership. Any allocation which fails to satisfy at least one of these three tests will be reallocated in accordance with the partners' interests in the partnership as defined in the Treasury Regulations. The Treasury Regulations set forth a two-part analysis to determine whether an allocation has "substantial economic effect." First, the allocation must have "economic effect." In other words, the allocation must be consistent with the underlying economic arrangement of the partners. If there is an economic benefit or burden that corresponds to the allocation, the partner receiving such an allocation should benefit from the economic benefit or bear the economic burden. Normally, economic effect will be present only if the partners' capital accounts are determined and maintained as required by the Treasury Regulations. Liquidation proceeds must be distributed in accordance with the partners' positive capital account balances (after certain adjustments). Additionally, if partners are not required to restore any deficit capital account balance, no loss or deduction may be allocated to a partner if such allocation would create a deficit balance in such partner's capital account in excess of the amount such partner is obligated to restore to the partnership or is treated as required to restore to the partnership, and the partnership agreement must contain a "qualified income offset," requiring that if a partner who unexpectedly receives an adjustment, allocation, or distribution described in subparagraphs (4), (5) or (6) of Treasury Regulation Section 1.704-1(b)(2)(ii)(d) which creates or increases a deficit in such partner's capital account, such partner will be allocated items of net profits and gain (consisting of a pro rata portion of each item of partnership income, including gross income, and gain for such year) in an amount and manner sufficient to eliminate such deficit balance as quickly as possible. Second, the economic effect must be "substantial." Substantiality is present if there is a reasonable possibility that the allocation will substantially affect the dollar amounts to be received by a partner independent of his tax consequences. If a shifting of tax attributes results in little or no change to the partner's capital accounts, or if the shift is merely transitory, they will not be recognized. Thus, if the allocation causes a shift in tax consequences that is disproportionately large in relation to the shift in economic consequence, there is a presumption that the economic effect of the allocation is not substantial and such allocation will be disregarded (and the partnership items will therefore be apportioned according to the partners' respective interests). The Treasury Regulations contain several exceptions and qualifications. For example, if a partnership allocation fails the above "economic effect" test, it may still be recognized if it meets the "economic effect equivalence" test. An allocation will be viewed as having economic effect if the agreement among the partners would in all cases produce the same results as the requirements outlined above. Further, there are also several exceptions, which come into play where the partner does not have an absolute obligation to restore a negative capital account. Pursuant to the partnership agreement, net profits, net losses and cash distributions allocated to a partner will be reflected by appropriate adjustments to the partner's capital account. Furthermore, the partnership agreement contains provisions, which would in all cases produce distributions of liquidation proceeds on dissolution on the basis of the relative amounts of the partners' capital accounts to the extent of the balances of such capital accounts. The tax allocations, however, are predicated on the assumption that the management fees payable to the general partner will be treated as deductible guaranteed payments, rather than as partnership distributions. See "United States Federal Income Tax Considerations -- Fees and Reimbursements to the General Partner and Affiliates." RETROACTIVE ALLOCATIONS. Under Section 706(d) of the Code, "retroactive allocations," i.e., allocations of items to partners before they became partners, are prohibited. Section 706(d) of the Code and the Treasury Regulations thereunder accomplish this prohibition by providing that if there is a change in any partner's interest in - 48 - any taxable year of the partnership, each partner's distributive share of a partnership's tax items is to be determined by use of any method prescribed by the Secretary of the Treasury in Treasury Regulations which take into account the varying interests of the partners in the partnership during such taxable year. The partnership agreement provides that income or loss allocable to the limited partners will, to the extent partners are admitted under the offering during the course of the taxable year other than on January 1 or are redeemed other than on December 31, be allocated among the limited partners in proportion to the number of units each holds from time to time during the course of the year, in accordance with Code Section 706, using any convention permitted by law selected by the general partner. Thus, if some limited partners are admitted to CIGF6 after others, those limited partners admitted later may receive a smaller portion of each item of CIGF6's net profits and net losses than the limited partners who were admitted earlier. Nevertheless, those limited partners still will be obligated to make the same capital contributions to CIGF6 for their interests as the limited partners who were admitted previously. In addition, where a limited partner transfers units during a taxable year, the limited partner may be allocated net profits for a period for which such limited partner will not receive a corresponding cash distribution. CONCLUSION. Based on the Treasury Regulations, the legislative history and existing case law, counsel has opined that the allocations contained in the partnership agreement of CIGF6's net profits and net losses should be respected for federal income tax purposes. LIMITATIONS ON UTILIZATION OF PARTNERSHIP LOSSES TAX BASIS. A limited partner may not deduct losses in excess of his "tax basis" in his units, but may carry forward such excess losses to such time, if ever, as his basis is sufficient to absorb them. A limited partner's tax basis in his units also determines the tax consequences of his distributions, as well as the amount of the gain or loss he may realize upon any sale of his units. "United States Federal Income Tax Considerations -- Disposition of Units." Initially, the tax basis of a limited partner's units will be equal to the amount of cash contributed by the limited partner to CIGF6 or the amount paid to a transferor limited partner, plus the limited partner's share of CIGF6's non-recourse liabilities, if any. A limited partner's initial tax basis will then be (i) increased by his allocable share of any net profits for each year, contributions made to CIGF6 by the limited partner, and any increase in his share of non-recourse liabilities, and (ii) reduced by his allocable share of any net losses, the amount of any distributions made to him during the year, and any reduction in his share of non-recourse liabilities. The IRS has ruled that a partner acquiring multiple interests in a partnership in separate transactions at different prices must maintain an aggregate adjusted tax basis in a single partnership interest consisting of the partner's combined interests. Possible adverse tax consequences could result from the application of this ruling upon a sale of some but not all of a limited partner's units. See "United States Federal Income Tax Considerations - Disposition of Units." AMOUNTS AT RISK. The Code limits the deductions that an individual or a closely held "C" corporation may claim from an activity to the aggregate amount with respect to which such taxpayer is "at risk" for such activity as of the close of the taxable year. Except as otherwise provided below, a limited partner will be considered to be "at risk" with respect to the amount of money and the adjusted basis of other property the limited partner contributes to CIGF6. A limited partner will be at risk with respect to amounts borrowed by CIGF6 only to the extent that the limited partner is personally liable for their repayment or the net fair market value of the limited partner's personal assets (other than units) that secure the indebtedness. A limited partner will not be considered at risk with respect to any amounts that are protected against loss through non-recourse financing, guarantees, stop loss agreements or similar arrangements. Because the limited partners will not be personally liable for partnership indebtedness, any such indebtedness will not augment the limited partners' amounts at risk. A limited partner's amount at risk will be reduced by (i) net losses which are allowed as a deduction to the limited partner under the at-risk rules and (ii) cash distributions received by a limited partner with respect to the limited partner's units, and increased by that limited partner's distributive share of net profits. Investors should note that net losses that may be allowable as a deduction under the at-risk rules may be disallowed currently under the passive activity loss limitations. See "United States Federal Income Tax Considerations -- Limitations on Utilization of Partnership Losses -- Passive Activity Losses Limitations." If a limited partner's at risk amount is reduced below zero (due to a cash distribution to a limited partner), the limited partner must recognize income to the extent of the deficit at risk amount. Losses of CIGF6 that have - 49 - been disallowed as a deduction in any year because of the at-risk rules will be allowable, subject to other limitations, as a deduction to the limited partner in subsequent years to the extent that the limited partner's amount at-risk has been increased. It is not anticipated that, on an aggregate basis, CIGF6 will incur losses. However, the Code will allow CIGF6 to aggregate its equipment leasing activities only with respect to equipment placed in service during the same taxable year. Therefore, the "at risk" rules will be applied to the net taxable income or loss resulting from leasing equipment which was placed in service during the same taxable year. This could result in a partner's deduction for losses with respect to certain items of equipment being limited by the "at risk" rules, even though he must recognize income with respect to other items of equipment. Counsel has given its opinion that the sum of the amounts for which a limited partner will be considered "at-risk," for purposes of Section 465 of the Code, in any taxable year with respect to equipment placed in service in that taxable year and in each prior year (treating all equipment placed in service in the same year as a single activity separate from the activities represented by equipment placed in service in other years) will be equal to (i) the capital contributions (as such term is defined in the partnership agreement) of such limited partner (provided that funds for such capital contributions are not from borrowed amounts other than amounts: (A) for which the limited partner is personally liable for repayment, or (B) for which property other than units is pledged as security for such borrowed amounts, but only to the extent of the fair market value of such pledged property and provided further that such capital contributions are invested in the equipment or otherwise expended in connection with CIGF6's organization or leasing activities (or are subject to the rights of our creditors for amounts incurred by it with respect to same)), less: (ii) the sum determined on a cumulative basis of (A) the total net losses with respect to such equipment which have been allowed as deductions to the limited partner under the at risk rules and (B) cash distributions received by the limited partner, plus (iii) the limited partner's distributive share, determined on a cumulative basis, of total net profits with respect to such equipment of CIGF6. PASSIVE ACTIVITY LOSSES LIMITATIONS. The Code prohibits an individual, estate, trust, closely-held "C" corporation, or personal service corporation from using losses and credits from a business activity in which the taxpayer does not materially participate, or a rental activity, to offset other income, including salary and active business income as well as portfolio income (such as dividends, interest and royalties, whether derived from property held directly or through a pass-through entity such as a partnership). Interest income derived by CIGF6 from the interim investment of offering proceeds or reserves (and any income derived by CIGF6 from leases treated as loans for federal income tax purposes) will be treated as portfolio income and, thus, will not be offset for those purposes by partnership deductions such as depreciation or cost recovery deductions. Losses from a passive activity that are not allowed currently will be carried forward indefinitely, and are allowed in subsequent years against passive activity income or in full upon complete disposition of the taxpayer's interest in that passive activity to an unrelated party in a fully taxable transaction. Losses from CIGF6 and other passive activities may not be used to offset income from a publicly traded partnership and income from a publicly traded partnership is treated as investment income. Limited partners, therefore, will be unable to use losses from CIGF6 to offset passive income from publicly traded partnerships that are not taxed as corporations and income from CIGF6 cannot be offset by losses from publicly traded partnerships that are not taxed as corporations. If a limited partner incurs indebtedness in order to acquire or carry units, interest paid by the limited partner on the indebtedness will be subject to the limitations for passive activity losses, except to the extent that the indebtedness relates to "portfolio income," if any, of CIGF6. Interest expense of a limited partner attributable to "portfolio income" may be subject to other limitations on its deductibility. See "United States Federal Income Tax Considerations -- Interest Deduction Limitations." Counsel has opined, based on the above discussion and assuming that all leases entered into by CIGF6 are considered "true leases" for federal income tax purposes, that the net profits, net losses, and credits derived from CIGF6 with respect to its leasing activities will be subject to the passive activity rules. Thus, any income produced by CIGF6 should be income from a passive activity. However, any partnership income attributable to (i) the investment of partnership funds in liquid investments prior to the purchase of equipment, (ii) the investment, in interest-bearing accounts or otherwise, of amounts held by CIGF6 as working capital, security deposits, or in reserve, or (iii) equipment with respect to which CIGF6 is determined not to be the owner for federal income tax purposes will not be passive activity income. - 50 - HOBBY LOSSES. Section 183 of the Code limits deductions attributable to "activities not engaged in for profit." The phrase "activities not engaged in for profit" means any activity other than one that constitutes a trade or business, or one that is engaged in for the production or collection of income or for the management, conservation or maintenance of property held for the production of income. The Treasury Regulations provide that the determination of whether an activity is engaged in for profit is to be made by reference to objective standards, taking into account all of the facts and circumstances in each case. The Treasury Regulations also provide that, although a reasonable expectation of profit is not required, the facts and circumstances must indicate that the taxpayer entered into the activity, or continued the activity, with the objective of making a profit. The Treasury Regulations enumerate a number of nonexclusive factors, which should be taken into account in determining whether an activity is engaged in for profit. The IRS has ruled that this test will be applied at the partnership level. Based upon these Treasury Regulations and the investment goals of CIGF6, we intend to manage CIGF6 so that our activities will constitute an activity engaged in for profit within the meaning of Section 183 of the Code. However, the test of whether an activity is deemed to be engaged in for profit is based on the facts and circumstances applicable from time to time including the motives of the investors, and no assurance can be given that Code Section 183 may not be applied in the future to disallow the deductions. CASH DISTRIBUTIONS Cash distributions made to a limited partner, other than those in exchange for, or redemption of, all or part of his units, reduce a limited partner's adjusted basis in his units and may represent both a return of capital and income. To the extent distributions of cash (including reductions in a limited partner's proportionate share of partnership non-recourse liabilities, if any) reduce a limited partner's adjusted basis in his units to zero, such distributions will be treated as returns of capital which generally do not result in any recognition of gain or loss for federal income tax purposes. To the extent such distributions or reductions in liabilities exceed a limited partner's adjusted basis in his units immediately prior thereto, such limited partner will recognize gain to the extent of such excess. Such gain may be treated as ordinary income to the extent the distribution is deemed to be in exchange for a share of the limited partner's interest in CIGF6's "substantially appreciated" inventory and "unrealized receivables" (which includes depreciation recapture); any excess gain will be treated as capital gain. The gain that a limited partner will recognize as a result of a reduction of liabilities in excess of such limited partner's adjusted tax basis in his units immediately prior thereto will result in a tax liability to the limited partner without any cash distribution. To the extent a limited partner's federal tax liabilities exceed cash distributions, such excess in effect would be a nondeductible cost to such limited partner. It is possible that your tax liability for a given year will exceed your cash distributions for that year. For example, we may borrow money to finance the purchase of some of our equipment. Depending on the amortization schedule for payment of such loans, it is possible in some years, most likely the later years of such loans, that the nondeductible payments of principal which we will have to make will exceed our depreciation deductions. In such years, our taxable income will be greater than the cash flow produced from our leasing activities. Depending on how big this difference is, your tax liability for a year could be greater than your cash distributions for that year. Similarly, because of such borrowings, your tax liabilities arising from a sale or other disposition of units or equipment could exceed the cash proceeds therefrom. DISTRIBUTION REINVESTMENT If you elect to have your distributions reinvested in additional units during the offering period, the amount of such distributions will be includable in your cost basis of units purchased. Schedule K-1, the information return sent by CIGF6 to you and the IRS at the end of the year will show the amount of the distributions paid to you. If you are considering electing to reinvest your distributions, we urge you to consult with your own tax advisors regarding the specific tax consequences (including the federal, state and local tax consequences) that may result from your election and of potential changes in applicable tax laws. The income tax consequences for investors in units who do not reside in the United States may vary from jurisdiction to jurisdiction. If you are a foreign unitholder whose share of taxable income is subject to United States income tax withholding at the current statutory rate (or lower treaty rate), the appropriate amount will be withheld and the balance will be used to purchase additional shares. - 51 - Tax-exempt unitholders, including IRAs, Keogh Plans, 401(k) plans, charitable remainder trusts, etc. generally will not have to pay any taxes on their share of partnership income. FEES AND REIMBURSEMENTS TO THE GENERAL PARTNER AND AFFILIATES GENERAL. There is no assurance that the IRS will not challenge the position of CIGF6 with respect to the amount, character, time of deduction or tax treatment of any of the fees discussed herein or, if challenged, that the position of CIGF6 would be sustained. In any year such fees are incurred, the disallowance of the deductibility of such fees would result in a proportionate increase in the taxable income (or reduction in the loss) of the limited partners with no associated increase in cash distributions with which to pay any resulting increase in tax liabilities. ORGANIZATIONAL AND OFFERING EXPENSES. The general partner will be paid an organizational fee for its services in organizing CIGF6 and preparing the offering. The general partner plans to make a reasonable allocation of such fees between syndication expenses, which must be capitalized, and start-up expenses which may be amortized over a 60-month period. The range of the fee based on the minimum and maximum amounts sold will be between $34,500 and $1,250,000, all of which we estimate to be deductible expenses. In addition, we will incur underwriting commissions of up to 10%. These commissions will be nondeductible syndication expenses, which are charged against the capital accounts of limited partners. EQUIPMENT ACQUISITION AND DEBT PLACEMENT FEES. The cost of acquisition fees will be capitalized to the cost of the equipment. Debt placement fees will be amortized over the term of the borrowings to which they relate. THE EQUIPMENT MANAGEMENT FEE. The equipment management fee should be deductible as an ordinary and necessary business expense under Section 162 of the Code, to the extent that its amount is commercially reasonable. EQUIPMENT LIQUIDATION FEE. Equipment liquidation fees should be treated as a cost of sale of the equipment. OWNERSHIP OF EQUIPMENT TAX TREATMENT OF LEASES. Your depreciation and cost recovery deductions with respect to any item of partnership equipment depends, in part, on the tax classification of the rental agreement under which it leased. These deductions are only available if the rental agreement is a true lease of equipment, meaning CIGF6 retains ownership of it. Depreciation and cost recovery deductions are not available if the transaction is classified as a sale, financing or refinancing arrangement where ownership shifts to a purchaser, the nominal lessee. Whether a partnership is the owner of any particular item of equipment, and whether a lease is a true lease for federal income tax purposes, depends upon both factual and legal considerations. The IRS has published guidelines on the tax treatment of leveraged leases. These guidelines do not purport to be substantive rules of law and are not supposed to be applied in audit contexts, although they have been in a number of instances. Whether any lease will meet the relevant requirements to be characterized as a true lease, and whether CIGF6 will be treated for tax purposes as the owner of each item of equipment acquired by that partnership, would depend on the specific facts in each case. Since these facts cannot now be determined with regard to leases that will be entered into in the future, counsel can render no opinion on this issue. - 52 - COST RECOVERY AND DEPRECIATION COST RECOVERY RULES. The equipment we plan to acquire and lease for CIGF6 generally is classified as 5-year equipment, and may be written off for federal income tax purposes, through cost recovery or depreciation deductions, over its respective recovery period. The amount deductible in each year generally may be calculated using the 200 percent declining-balance depreciation method, switching to the straight-line method at a time that maximizes the deduction, except that recent legislation provides for a "bonus" depreciation of 50% (or 30% if the taxpayer so elects) of the adjusted basis of certain qualified property in the taxable year in which it is placed in service. Property is qualified property for this purpose if, among other things, its original use began with the taxpayer and it is placed in service before January 1, 2005. Additional bonus depreciation of up to 50% may be available for certain property in certain locations ("Gulf Opportunity Zone Propert") under the 2005 Gulf Opportunity Zone Act. A taxpayer may, however, choose to use a straight line method of depreciation for the entire recovery period. In order to elect out of the "bonus" depreciation with respect to property in a class, however, the election must apply to all property in that class placed in service during the taxable year. CIGF6 will allocate all or part of the acquisition fees, which are fees paid to the general partner in connection with the selection and purchase of equipment, to the cost basis of equipment. We cannot assure you that the IRS will agree that cost recovery deductions calculated on a cost basis that includes acquisition fees are properly allowable. The IRS might assert that the acquisition fees are attributable to items other than the equipment, or are not subject to cost recovery at all. If the IRS were successful in making that claim, the cost recovery deductions available to CIGF6 would be reduced accordingly. Because the determination of this issue depends on the magnitude and type of services performed for the acquisition fees, which is presently undeterminable and may vary for each piece of equipment acquired by CIGF6, counsel is unable to render an opinion about whether our cost recovery deductions would be upheld if challenged by the IRS. In some circumstances, a taxpayer will be required to recover the cost of an asset over longer periods of time than described above. These circumstances include the use of equipment predominately outside the United States and the use of equipment by a tax-exempt entity. RECAPTURE OF COST RECOVERY DEDUCTIONS. All of part of the cost recovery, depreciation or amortization deductions of CIGF6 may be recaptured as ordinary income upon a subsequent disposition by CIGF6 of its equipment or other property or, with respect to a partner's share of such deductions, upon the disposition of the partner's units. See "United States Federal Income Tax Considerations - Disposition of Units" below. The cost recovery, depreciation or amortization deductions of CIGF6 will be recaptured to the extent of any gain on disposition. This recapture amount will be recognized in full as ordinary income in the year of sale even if CIGF6 has made an installment sale of the equipment. See "United States Federal Income Tax Considerations - Sale of Equipment." If CIGF6 has not made a basis adjustment election under Section 754, a purchaser of units also may be required to recapture amounts attributable to cost recovery or depreciation when CIGF6 disposes of equipment subject to recapture or when the purchaser subsequently sells his units. INTEREST DEDUCTION LIMITATIONS The Code restricts the ability of non-corporate taxpayers to deduct interest on funds borrowed to acquire or carry investment assets. Such taxpayers may deduct "investment interest" only to the extent of the "net investment income" of the taxpayer for the taxable year. Any interest disallowed under this provision in one year may be carried forward indefinitely and claimed at such time as the taxpayer has sufficient investment income. Interest expense that is allocable to a passive activity is subject to the passive loss limitations, and is not subject to the investment interest limitations. The general partner anticipates that CIGF6 will be deemed a passive activity with respect to the income, gains, losses, deductions and credits passed through to the limited partners and, therefore, will not figure in a limited partner's investment interest limitations calculation. Because CIGF6 will enter into net leases, any interest expense that might be paid by CIGF6 might be considered to be investment interest expense and, as such, would be subject to the limitations described herein. Because the amount of any limited partner's investment interest that would be subject to disallowance in any year will depend upon the other investment income and expenses of that limited partner, the extent, if any, of such disallowance will depend upon that limited partner's particular tax situation. - 53 - Additionally, the IRS might argue that all or some portion of any interest incurred in connection with the acquisition or maintenance of a unit in CIGF6 is investment interest. As noted above, however, it is anticipated that any interest in CIGF6 as a limited partner will be deemed a passive activity (unless modified by Treasury Regulations or legislation). To the extent the investment in a unit is treated as a passive activity, any interest incurred in acquiring or maintaining such an interest would not be subject to Section 163(d) but instead would be subject to the passive activity limitations. The Code denies any deduction for interest paid by a taxpayer on indebtedness incurred or continued for purchasing or carrying tax exempt obligations. Denied interest may not be deducted in any year. The prescribed purpose generally will be deemed to exist with respect to indebtedness incurred to finance a "portfolio investment" including a limited partnership interest. In the case of a limited partner owning tax exempt obligations, the IRS may take the position, that with respect to a limited partner who borrows funds to purchase units, the interest paid by the limited partner on such loan should be viewed as incurred on loans which enable him to continue carrying his tax exempt obligations. If this position were upheld, the limited partner would not be allowed to deduct such interest. SALE OF EQUIPMENT Because of the different individual tax rates for capital gains and ordinary income, the tax code provides various rules classifying income as ordinary income or capital gains, and for distinguishing between long-term and short-term gains and losses. The distinction between ordinary income and capital gains is relevant for other purposes as well. For example, there are limits on the amount of capital losses that an individual may offset against ordinary income. Upon a sale or other disposition of equipment, CIGF6 will realize gain or loss equal to the difference between the basis of the equipment at the time of disposition and the price received for it upon dispositions. Any foreclosure of a security interest in equipment would be considered a taxable disposition and CIGF6 would realize gain if the face amount of the debt being discharged were greater than the tax basis of the equipment, even though CIGF6 would receive no cash. In the case of a disposition of equipment at a gain, the income would first be ordinary income to the extent of recapture, as discussed below, and only the excess, if any, would be capital gain. Because the equipment is tangible personal property, upon its disposition, all of the depreciation and cost recovery deductions taken by CIGF6 will be subject to recapture to the extent of any realized gain. Recapture means that the depreciation, previously deducted, is reversed by recognizing the depreciated amounts as ordinary income, in the year of the sale. Recapture cannot be avoided by holding the equipment for any specified period of time. If a partnership were to sell property on an installment basis, all depreciation recapture income is recognized at the time of sale, even though the payments are received in later taxable years. Certain gains and losses are grouped together to determine their tax treatment. The gains on the sale or exchange of some assets including equipment used in a trade or business and held for more than one year are added to the gains from some compulsory or involuntary conversions; if these gains exceed the losses from such sales, exchanges, and conversions, the excess gains will be taxed as capital gains (subject to a special recapture rule described below). If the losses exceed the gains, however, the excess losses will be treated as ordinary losses. Under a special recapture provision, any net gain under this aggregation rule will be treated as ordinary income rather than capital gains if the taxpayer has non-recaptured net losses, which are net losses under this aggregation rule from the five preceding taxable years which have not yet been offset against net gains in those years. DISPOSITION OF UNITS IN GENERAL. A partner who sells or otherwise disposes of his units, including redemptions of a limited partner's units pursuant to Article 12 of the partnership agreement, will realize taxable gain or loss measured by the difference between the selling or redemption price and the adjusted tax basis of his units. See "United States Federal Income Tax Considerations -- Limitations on Utilization of Partnership Losses -- Tax Basis." Gain or loss, in general, will be taxed as short-term or long-term capital gain or loss, depending on the period the units have been held (provided the partner is not a dealer in the units). However, gain attributable to the partner's share of "substantially appreciated inventory items" and "unrealized receivables" of CIGF6, as those terms are defined in the Code, will be taxed as ordinary income. Unrealized receivables include any cost recovery, depreciation and amortization deductions of CIGF6 that would have been recaptured upon a hypothetical sale of the equipment. - 54 - The requirement that recapture amounts be recognized in full in the year of sale even if the sale qualifies as an installment sale, may apply to an installment sale of units. See "United States Federal Income Tax Considerations - -- Cost Recovery and Depreciation -- Recapture of Cost Recovery Deductions." In determining the amount realized upon the sale or exchange of units, a limited partner must include, among other things, his allocable share of partnership indebtedness included in his basis in such units. See "United States Federal Income Tax Considerations -- Limitations on Utilization of Partnership Losses -- Tax Basis." A partner's gain on the sale or exchange of units should be treated as income from the activity of leasing the equipment. As a result, suspended losses, if any, from prior years could offset the gain realized on the sale or exchange of units. See "United States Federal Income Tax Considerations -- Limitation on Utilization of Partnership Losses -- Passive Activity Losses Limitations." A partner who sells or otherwise disposes of his units must also report his share of the taxable income or loss of CIGF6 for the portion of the taxable year of CIGF6 during which he owned his units. GIFT OF UNITS. Since the tax consequences of any gift or transfer will depend upon the particular circumstances and upon the individuals or organizations involved in the transaction, before making any gift of units, a limited partner should consult his tax advisor as to the consequences of such a gift and as to the basis of the units in the hands of his successor. DEATH OF PARTNER. If a limited partner dies, the fair market value of his units at death (or, if elected, at the alternate valuation date) will be subject to federal estate taxation. Under present law, the death of a limited partner does not result in a sale or exchange giving rise to a federal income tax. It is not clear what the tax consequences are if the decedent's proportionate share of CIGF6's liabilities exceeds the adjusted basis of his units at death. In this event, some gain may be recognized to the decedent or his estate upon the distribution of the units to the extent of such excess. The cost or other basis of the units inherited from the decedent generally is "stepped up" or "stepped down" to its fair market value for federal income tax purposes. NOTICE OF TRANSFER. The Code requires that a limited partner who transfers an interest in a partnership, whether by sale, gift or otherwise, must notify CIGF6 of such transfer within 30 days of the transfer or, if earlier, by January 15 of the calendar year following the calendar year in which transfer occurs. In addition, the Code requires a partnership to file a separate information return with the partnership's federal information return, for the tax year in which the transfer occurs whenever there is a transfer of a partnership interest involving a sale or exchange where there are inventory items or unrealized receivables as defined by the Code. A limited partner who fails to inform the partnership of a transfer of the limited partner's units in accordance with the rules described in this paragraph is liable for a penalty of $50 per unreported transfer with an annual maximum penalty of $100,000. Each such return must contain the following: (a) the names, addresses and taxpayer identification numbers of the transferee and transferor involved in the exchange and (b) the date of the sale or exchange. Once notified, the Code requires a partnership to provide the transferee and the transferor with a copy of the completed information return reporting transfers, and to include the name, address and telephone number of the partnership required to make the return. TERMINATION OF THE PARTNERSHIP FOR TAX PURPOSES The Code provides that if 50% or more of the capital and profits interests in a partnership is sold or exchanged within a single twelve-month period, the partnership will terminate for tax purposes. The partnership agreement prohibits the transfer of any unit if such transfer would result in the termination of CIGF6 for federal income tax purposes. However, involuntary transfers (such as transfers by death, dissolution, etc.) could possibly result in termination of CIGF6 for federal income tax purposes. If CIGF6 should terminate for tax purposes, the terminated partnership ("Old Par") will be treated (i) as having transferred all of its assets subject to liabilities to a new partnership ("New Par") in exchange for partnership interests therein, and then (ii) as having distributed such partnership interests in New Par to the partners of Old Par in liquidation of Old Par. Gain could be recognized to the extent that (i) the amount of the reduction, if any, in a limited partner's share of partnership liabilities as a result of the partnership termination exceeds (ii) such limited partner's adjusted tax basis of his units. - 55 - In addition, upon a partnership termination, the partnership's taxable year would terminate. If the limited partner's taxable year were other than the calendar year, the inclusion of more than one year of partnership income in a single taxable year of the limited partner could result. Because the new partnership would be treated as a separate entity for federal income tax purposes, the tax elections of the prior partnership would not generally remain valid. Thus, new federal income tax elections would generally be required to be made. In addition, depreciation periods for assets held by the partnership will restart. NO SECTION 754 ELECTION Due to the burdensome and costly record keeping requirements that a Section 754 Election entails, it is unlikely that the general partner will exercise its discretion in favor of making this election to adjust the basis of partnership property in the case of transfers of units. If the general partner does not make a Code Section 754 Election, a subsequent limited partner's share of gain or loss upon the sale of CIGF6 assets will be determined by taking into account CIGF6's tax basis in the assets and without reference to the cost associated with acquiring the units. Thus, the absence of a Code Section 754 Election may reduce the marketability of units and the price a purchaser would be willing to pay. Nor does CIGF6 anticipate being required to make adjustments for "substantial basis reductions" under changes to Code Section 734 and Section 743, as amended by the 2004 American Jobs Creation Act, P.L. 108-357, enacted October 22, 2004 ("2004 JOBS Act"). INVESTMENT BY TAX EXEMPT ENTITIES The income earned by a tax exempt entity, including a qualified employee pension or profit sharing trust or an individual retirement account, is generally exempt from taxation. However, gross Unrelated Business Taxable Income, or UBTI, of a tax exempt entity is subject to tax to the extent that, when combined with all other gross UBTI of the tax exempt entity for a taxable year, it exceeds all deductions attributable to the UBTI plus $1,000 during the taxable year. Such UBTI will be taxable at ordinary income rates and may be subject to the alternative minimum tax. See "United States Federal Income Tax Considerations -- Alternative Minimum Tax." The leasing of tangible personal property is treated for purposes of the Code as an unrelated trade or business. See Revenue Rulings 78-144, 1978-1 C.B. 168, 69-278, 1969-1 C.B. 148, and 60-206, 1960-1 C.B. 201. The IRS has ruled that a partner's distributive share of income or gain from a partnership engaged in the leasing of tangible personal property is treated in the same manner as if such income or gain were realized directly by the partner. Therefore, a tax exempt entity that invests in CIGF6 will be subject to the tax on UBTI for any taxable year of the tax exempt entity to the extent CIGF6 generates income from the leasing of the equipment and the total of the tax exempt entity's share of that income for the taxable year plus its UBTI from all other sources for the taxable year exceeds the sum of all deductions attributable to the UBTI plus $1,000. Although CIGF6's portfolio income (e.g., interest income from the investment of partnership cash balances) generally will not produce UBTI for a tax exempt entity that invests in CIGF6, a portion of such tax exempt entity's portfolio income from CIGF6 will constitute UBTI pursuant to the "debt-financed property" rules if the tax exempt entity finances its acquisition of units with debt or to the extent that debt of the partnership is considered to be attributable to the assets producing such portfolio income. Furthermore, social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans that are exempt from taxation under paragraphs (7), (9), (17), and (20), respectively, of Code section 501(c) are subject to different UBTI rules, which generally will require them to characterize all income from CIGF6 as UBTI. Except to the extent of gain or loss from the sale, exchange, or other disposition of acquisition indebtedness property and except to the extent the equipment constitutes inventory or property held primarily for sale to customers in the ordinary course of a trade or business, gains from the sale or exchange of the equipment generally will be excludable from the scope of UBTI. However, any gain on the disposition of equipment that is characterized as ordinary income as a result of the recapture of cost recovery or depreciation deductions will constitute UBTI for tax exempt entities. If the gross income taken into account in computing UBTI exceeds $1,000, the tax exempt entity is obligated to file a tax return for such year on IRS Form 990-T. Neither CIGF6 nor the general partner expects to undertake the preparation or filing of IRS Form 990-T for any tax exempt entity in connection with an investment by such tax exempt entity in the units. Generally, IRS Form 990-T must be filed with the IRS by May 15 of the year following the year to which it relates. - 56 - Penalties may be imposed by the IRS for failing to file this tax return when required, and, if tax is due, additional penalties and interest may be imposed if the tax is not paid. - -------------------------------------------------------------------------------- PLEASE REVIEW "ERISA CONSIDERATIONS" AND GET ADVICE FROM A QUALIFIED TAX ADVISOR FOR POTENTIAL REALIZATION OF UNRELATED BUSINESS TAXABLE INCOME (UBTI). - -------------------------------------------------------------------------------- INVESTMENT BY NONRESIDENT ALIEN INDIVIDUALS AND FOREIGN CORPORATIONS Nonresident alien individuals and foreign corporations that become limited partners will, like CIGF6, be deemed to be engaged in the conduct of a trade business within the United States. Under the Code, nonresident aliens individuals and foreign corporations, respectively, will be subject to United States income tax on their allocable shares of any partnership taxable income. Nonresident alien individuals and closely held foreign corporations that acquire units will also be subject to the same limitations on the deduction of partnership losses that apply to domestic limited partners. See "United States Federal Income Tax Considerations -- Certain Principles of Partnership Taxation," and "-- Limitations on Utilization of Partnership Losses." Foreign corporations may also be subject to the branch profits tax. Such tax is equal to 30% of a foreign corporation's earnings and profits effectively connected with a United States business that are withdrawn (or deemed withdrawn) from investment in the United States. This tax is payable in addition to the regular United States corporate tax. In certain circumstances, the imposition of the branch profits tax may be overridden by the nondiscrimination provisions of applicable United States tax treaties or subject to a lower rate of tax. CIGF6 will be required to withhold from distributions to each foreign limited partner an amount equal to a percentage of CIGF6's taxable income that is allocable to the limited partner. The Code provides that the amount of tax to be withheld is the "applicable percentage" of the taxable income of CIGF6 allocable to foreign limited partners. The applicable percentage is equal to the highest appropriate tax rate, currently 35% for individual and corporate foreign limited partners. Such withheld amounts will be credited against the limited partners' federal income tax liabilities for the taxable year in which withheld, and any excess will be refundable. Foreign limited partners may be entitled to tax credits for United States taxes in their countries of residence, and should consult with their local and United States tax advisors with regard to the tax consequences of an investment in units. ALTERNATIVE MINIMUM TAX This discussion only addresses the alternative minimum tax as it applies to non-corporate taxpayers (and to shareholders of an S corporation). The first step in determining a taxpayer's alternative minimum tax liability, if any, is calculation of the taxpayer's alternative minimum taxable income. Alternative minimum taxable income is computed by adjusting the taxpayer's taxable income in accordance with the rules set forth in Sections 55, 56 and 58 of the Code, and by increasing the resulting amount by the taxpayer's items of tax preference described in Code Section 57. Alternative minimum taxable income is then reduced by a specified exemption amount and by the taxpayer's alternative minimum tax foreign tax credit for the taxable year. The exemption amounts are $58,000 for married couples filing joint returns, $40,250 for single individuals, and $29,000 for married persons filing separate returns and estates and trusts. The exemption is phased out above certain alternative minimum taxable income levels: $150,000 for married taxpayers filing joint returns, $112,500 for single taxpayers, and $75,000 for married taxpayers filing separate returns and estates and trusts. The alternative minimum tax rate is 26% on the amount of the taxpayer's alternative minimum taxable income, which does not exceed $175,000 (after taking into account the exemption amount) and 28% on the amount exceeding $175,000. A taxpayer is only required to pay an alternative minimum tax liability to the extent that the amount of that liability exceeds the liability, which the taxpayer would otherwise have for the regular federal income tax. One of the adjustments to taxable income established by Code Section 56 relates to the amount of cost recovery deduction claimed on personal property. To derive a taxpayer's alternative minimum taxable income, the taxpayer's taxable income must be adjusted by an amount equal to the difference between (i) the amount of cost recovery deductions claimed by the taxpayer with respect to personal property and (ii) the amount which would have been allowable over the asset depreciation range class life of the property using the 150% declining balance method, converting to straight-line when necessary to maximize the remaining deductions. - 57 - The adjustment results in a basis in the depreciated property for alternative minimum tax purposes, which may differ from its basis for regular tax purposes. Thus, upon disposition of the property, the taxpayer will generally recognize less gain (or a greater loss) for alternative minimum tax purposes than for regular tax purposes. Items of tax preference include other items which are not anticipated to be generated by CIGF6, but may apply in the case of certain limited partners due to their particular facts and circumstances unrelated to CIGF6. PARTNERSHIP TAX RETURNS AND TAX INFORMATION The general partner will file CIGF6's tax returns using the accrual method of accounting and will adopt the calendar year as CIGF6's taxable year. See "United States Federal Income Tax Considerations -- Certain Principles of Partnership Taxation." CIGF6 will provide tax information to the limited partners within 75 days after the close of each taxable year. If a limited partner is required to file its tax return on or before March 15, it may be necessary for the limited partner to obtain an extension to file if the tax information referred to above is not distributed until the end of the 75-day period. Limited partners will be required to file their returns consistent with the information provided on CIGF6's informational return or notify the IRS of any inconsistency. A failure to notify the IRS of an inconsistent position allows the IRS automatically to assess and collect the tax, if any, attributable to the inconsistent treatment. Limited partners may also receive from us a copy of Form 8886, used to disclose "Reportable Transactions" to IRS, and they should consult with their own tax advisor as to the reporting on their own returns of that form and the information it contains. Failure of the member to report this information may result in a penalty to the member. IRS AUDIT OF THE PARTNERSHIP The tax return filed by CIGF6 may be audited by the IRS. Adjustments, if any, from such audit may result in an audit of the limited partners' own returns. Any such audit of the limited partners' tax returns could result in adjustments of non-partnership as well as partnership items of income, gain, loss, deduction and tax preference. Audit proceedings are conducted at the partnership level and, if the IRS initiates an administrative proceeding or makes a "final adjustment" at the partnership level, it must notify each partner of the beginning and completion of the partnership administrative proceedings. Notice need not be given, however, to a partner who has less than a one percent interest in a partnership which has more than 100 partners, although a group of such partners having at least a five percent interest in partnership profits in the aggregate may designate a member of the group to receive notice. Because CIGF6 will have more than 100 limited partners, the IRS will not notify individual limited partners of an audit of CIGF6. The general partner is the "tax matters partner" who will normally have the authority to negotiate with the IRS with respect to any partnership tax matter; the general partner will also have the right to initiate judicial proceedings. A limited partner will thus be unable to control either an audit of CIGF6 or any subsequent litigation. If, in such event, the general partner does not go to court, any limited partner entitled to receive notice of the proceedings may bring an action to challenge any proposed audit findings by the IRS. A special statute of limitations exists in connection with the IRS's right to audit matters at the partnership level. TAX SHELTER REGISTRATIONS Previously "tax shelters" were required to be registered with the IRS. Now "reportable transactions" must be reported to the IRS under the 2004 JOBS Act by a "material advisor." Currently there are six categories of "reportable transactions." CIGF6 or another advisor may be considered a "material advisor" and, if so, and even though CIGF6 may be a projected income investment, it will nonetheless be required to maintain a list identifying each person who acquired a unit and including information required by the IRS regulations. This list must be made available to the IRS upon its request. As stated above, you may be required to report the "reportable transaction" on your tax return and may be penalized if you fail to do so. WE ARE REQUIRED BY IRS REGULATIONS TO INCLUDE THE FOLLOWING STATEMENT IN THIS MEMORANDUM: "ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS INVESTMENT OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR APPROVED BY THE INTERNAL REVENUE SERVICE." - 58 - INTEREST AND PENALTIES With certain exceptions, a penalty will be assessed for each month or fraction thereof (up to a maximum of five months) that a partnership return is filed either late or incomplete. The monthly penalty is equal to $50 multiplied by the number of partners in the partnership during the year for which the return is due. With certain exceptions, a penalty will be assessed if CIGF6 fails to furnish to the limited partners a correct Schedule K-1 to the federal income tax return for CIGF6 on or before the prescribed due date (including any extension thereof). The penalty is equal to $50 multiplied by the number of partners not furnished a correct Schedule K-1 on or before the prescribed due date (including any extension thereof), with a maximum penalty of $100,000 per calendar year. The Code establishes a penalty equal to 20% (40% in certain gross valuation misstatements) on underpayment of tax attributable to substantial valuation over-statements. This penalty applies only if (i) the value or adjusted basis of any property as claimed on an income tax return exceeds 200% of the correctly determined amount of its value or adjusted basis and (ii) the underpayment of tax attributable to the substantial overvaluation exceeds $5,000 ($10,000 in the case of a corporation other than an S corporation or personal holding company). All or any part of the penalty may be waived by the IRS upon the taxpayer's showing that a reasonable basis existed for the valuation claimed on the return and that the claim was made in good faith. If CIGF6 were to overstate the value of equipment, a limited partner might be liable for this penalty. There is a 20% penalty on the amount of an underpayment of tax attributable to a taxpayer's negligent disregard of applicable rules and regulations or to the "substantial understatement" of a tax liability. A substantial understatement is defined as an under-statement for the taxable year that exceeds the greater of 10% of the required tax or $5,000 ($10,000 for corporations other than personal holding companies and S corporations). The penalty can be avoided either by disclosing the questionable item on the return or by showing that there was "substantial authority" for taking the position on the return. If a questionable item is related to a tax shelter, the understatement penalty can only be avoided by showing that the taxpayer reasonably believed that the treatment of the item was "more likely than not" the proper treatment. Based upon the representations of the general partner, counsel believes CIGF6 will not be characterized as a "tax shelter" for these purposes. It should also be noted that the general partner will not cause CIGF6 to claim a deduction unless the general partner believes, based upon the advice of its accountants or counsel, that substantial authority exists to support the deduction. As stated above, you may be required to report the "reportable transaction" on your tax return and may be penalized if you fail to do so. All interest payable with respect to a deficiency is compounded daily. Interest rates are re-determined quarterly and are based on the federal short-term interest rate (the average rate of interest on Treasury obligations maturing in less than three years) for the first month of the preceding quarter plus three percent. FOREIGN TAX CONSIDERATIONS As noted above, CIGF6 may acquire equipment which is operated outside the United States. As a consequence, limited partners may be required to file returns and pay taxes in foreign jurisdictions with respect to the foreign source income of CIGF6. The income taxed by the foreign jurisdiction would in such a case be calculated according to the tax laws of the foreign jurisdiction, which may or may not correspond with applicable United States standards. Limited partners who have foreign tax liabilities as a result of CIGF6 may be entitled to a foreign tax credit or to a deduction for foreign taxes paid which can be utilized to reduce their United States tax liabilities or taxable income, respectively. The calculation of the foreign tax credit is quite complex and no assurance can be given that a credit will be available in the amount of any foreign tax paid. In particular, prospective limited partners should be aware that United States law does not generally allow a foreign tax credit greater than the taxpayer's United States federal income tax liability with respect to the foreign source income of the taxpayer calculated separately for certain types of income including shipping income and passive rental income. In the event CIGF6 earns these types of income, a limited partner must compute separately the foreign tax credit for each type of income. The foreign source income of a taxpayer is calculated according to United States rather than the foreign jurisdiction's tax law. It is possible that a foreign country might impose a tax - 59 - in an amount greater than the allowable foreign credit under United States law. In such a case, limited partners would be subject to a higher effective rate of taxation than if no foreign tax had been imposed. To the extent that all income taxes paid to a foreign country on a certain type of income exceed the amount of foreign tax credit allowable in any year for such type of income, the excess foreign tax credits generally may be carried back two years or forward five years to offset United States income taxes on that certain type of foreign source income in those tax years. If CIGF6 were to suffer an overall foreign loss in one year and incur foreign taxes in a subsequent year, the amount of foreign tax credit allowable in that subsequent taxable year could be reduced on account of the prior foreign loss, regardless of whether the loss resulted in a United States tax benefit to the limited partners. Each limited partner should consult his own tax advisor regarding the applicability of foreign taxes to his own situation. Prior to CIGF6 entering into an arrangement which contemplates the use of equipment outside the United States, the general partner will consult with its counsel and with special counsel located in the foreign jurisdiction concerning the possibility of structuring the transaction in a manner which will enable the limited partners to avoid being required to file income tax returns in the foreign jurisdiction. The general partner has discretion to cause CIGF6 to enter into any such arrangement. PARTNERSHIP ANTI-ABUSE RULES Treasury Regulations known as the "Anti-Abuse Rules" have recently been promulgated which purportedly grant authority to the IRS to re-characterize certain transactions to the extent that it is determined that the utilization of partnerships is inconsistent with the intent of the federal partnership tax rules. Under these Anti-Abuse Rules, the IRS may, under certain circumstances, (i) recast transactions which attempt to use the partnership form of ownership, or (ii) otherwise treat the partnership as an aggregation of its partners rather than a distinct separate entity, as appropriate in order to carry out the purposes of the partnership tax rules. The Anti-Abuse Rules also provide that the authority to re-characterize transactions is limited to circumstances under which the tax characterization by the taxpayer is not, based on all facts and circumstances, clearly contemplated under the Code or the applicable Treasury Regulations. These Anti-Abuse Rules are intended to impact only a small number of transactions, which improperly utilize partnership tax rules. It is therefore not anticipated that CIGF6 and/or the transactions contemplated herein will be affected by the promulgation or administration of these Anti-Abuse Rules. In light of the broad language incorporated in these Regulations, however, no assurance can be given that the IRS will not attempt to utilize the Anti-Abuse Rules to alter, in whole or part, the tax consequences described herein with regard to an investment in CIGF6. FUTURE FEDERAL INCOME TAX CHANGES Neither the general partner nor counsel can predict what further legislation, if any, may be proposed by members of Congress, by the current administration, or by any subsequent administration, nor can either predict which proposals, if any, might ultimately be enacted. Neither the general partner nor counsel can predict what changes may be made to existing Treasury Regulations, or what revisions may occur in the IRS' ruling policy. Consequently, no assurance can be given that the income tax consequences of an investment in CIGF6 will continue to be as described herein. Any changes adopted into law may have retroactive effect. STATE TAXES In addition to the federal income tax considerations described above, prospective investors should consider applicable state and local taxes, which may be imposed by various jurisdictions. A limited partner's distributive share of the income or loss of CIGF6 generally will be required to be included in determining the limited partner's reportable income for state or local tax purposes in the jurisdiction in which the limited partner is a resident. Moreover, Pennsylvania and a number of other states in which CIGF6 may do business generally impose state income tax on a nonresident and foreign limited partner's distributive share of partnership income which is derived from such states. Pennsylvania and a number of other states have adopted a withholding tax procedure in order to facilitate the collection of taxes from nonresident and foreign limited partners on partnership income derived from such states. Any amounts withheld would be deemed distributed to the nonresident or foreign limited partner and would, therefore, reduce the amount of cash actually received by the nonresident or foreign limited partner as a result of such distribution. Nonresidents may be allowed a credit for the amount so withheld against income tax imposed by their state of residency. CIGF6 cannot, at present, estimate the percentage of its future income that will be from states, which have adopted such withholding tax procedures and it cannot, therefore, estimate the required withholding tax, if any. - 60 - In addition, while CIGF6 intends to apply to the applicable taxing authority of such states for a waiver (or a partial waiver), if any, of such withholding requirements, no assurance can be given that such waiver will ultimately be granted. - -------------------------------------------------------------------------------- PLEASE BE ADVISED THAT YOU MAY BE SUBJECT TO RULES DETERMINING YOUR STATE INCOME TAX THAT ARE LESS FAVORABLE THAN FEDERAL INCOME TAX LAWS. YOU ARE STRONGLY URGED TO CONSULT YOUR OWN TAX ADVISORS WITH SPECIFIC REFERENCE TO YOUR OWN TAX SITUATION. - -------------------------------------------------------------------------------- ERISA CONSIDERATIONS The following is a summary of the material non-tax considerations associated with an investment in CIGF6 by a qualified plan, Keogh Plan or an IRA (a "benefit plan"). This summary is based on provisions of ERISA and the Code, as amended through the date of this prospectus, and relevant regulations and opinions issued by the Department of Labor. No assurance can be given that legislative or administrative changes or court decisions may not be forthcoming which would significantly modify the statements expressed herein. Any changes may or may not apply to transactions entered into prior to the date of their enactment. FIDUCIARIES UNDER ERISA A fiduciary of a pension, profit sharing or other employee benefit plan subject to Title I of ERISA should consider whether an investment in the units is consistent with his fiduciary responsibilities under ERISA. In particular, the fiduciary requirements under Part 4 of Title I of ERISA require the discharge of duties solely in the interest of, and for the exclusive purpose of providing benefits to, the ERISA Plan's participants and beneficiaries. A fiduciary is required to perform the fiduciary's duties with the skill, prudence, and diligence of a prudent man acting in like capacity, to diversify investments so as to minimize the risk of large losses unless it is clearly prudent not to do so, and to act in accordance with the ERISA Plan's governing documents, provided that the documents are consistent with ERISA. Fiduciaries with respect to an ERISA Plan include any persons who have any power of control, management, or disposition over the funds or other property of the ERISA Plan. An investment professional who knows or ought to know that his or her advice will serve as one of the primary bases for the ERISA Plan's investment decisions may be a fiduciary of the ERISA Plan, as may any other person with special knowledge or influence with respect to a ERISA Plan's investment or administrative activities. While the beneficial "owner" or "account holder" of an IRA is treated as a fiduciary of the IRA under the Code, IRAs generally are not subject to ERISA's fiduciary duty rules. Also, certain qualified plans of sole proprietors or partnerships in which at all times (before and after the investment) the only participant(s) is/are the sole proprietor and his or her spouse or the partners and their spouses, and certain qualified plans of corporations in which at all times (before and after the investment) the only participant(s) is/are an individual or/and his or her spouse who own(s) 100% of the corporation's stock, are generally not subject to ERISA's fiduciary standards, although they are subject to the Code's prohibited transaction rules explained below. A person subject to ERISA's fiduciary rules with respect to an ERISA Plan should consider those rules in the context of the particular circumstances of the ERISA Plan before authorizing an investment of a portion of the ERISA Plan's assets in units. Fiduciaries of an ERISA Plan that permits a participant to exercise independent control over the investments of his individual account in accordance with Section 404(c) of ERISA (a "self-directed investment" arrangement) will not be liable for any investment loss or for any breach of the prudence or diversification obligations that results from the participant's exercise of such control, and the participant is not deemed to be a fiduciary subject to the general ERISA fiduciary obligations described above merely by virtue of his exercise of such control. The fiduciary of an IRA or a qualified retirement plan not subject to Title I of ERISA because it is a governmental or church plan or because it does not cover common law employees should consider that such an IRA - 61 - or non-ERISA Plan may only make investments that are authorized by the appropriate governing documents and under applicable state law. PROHIBITED TRANSACTIONS UNDER ERISA AND THE CODE Any fiduciary of an ERISA Plan or a person making an investment decision for a non-ERISA Plan or an IRA should consider the prohibited transactions provisions of Section 4975 of the Code and Section 406 of ERISA when making their investment decisions. These rules prohibit such plans from engaging in certain transactions involving "plan assets" with parties that are "disqualified persons" described in Section 4975(e)(2) of the Code or "parties in interest" described in Section 3(14) of ERISA, each of which are referred to as "disqualified persons." "Prohibited transactions" include, but are not limited to, any direct or indirect transfer or use of a qualified lan's or IRA's assets to or for the benefit of a disqualified person, any act by a fiduciary that involves the use of a qualified plan's assets in the fiduciary's individual interest or for the fiduciary's own account, and any receipt by a fiduciary of consideration for his or her own personal account from any party dealing with a qualified plan. Under ERISA, a disqualified person that engaged in a prohibited transaction will be made to disgorge any profits made in connection with the transaction and will be required to compensate any ERISA Plan that was a party to the prohibited transaction for any losses sustained by the ERISA Plan. Section 4975 of the Code imposes excise taxes on a disqualified person that engages in a prohibited transaction with an ERISA Plan or a non-ERISA Plan or an IRA subject to Section 4975 of the Code. If the disqualified person who engages in the transaction is the individual on behalf of whom the IRA is maintained (or his beneficiary), the IRA may lose its tax exempt status and the assets will be deemed to be distributed to such individual in a taxable transaction. In order to avoid the occurrence of a prohibited transaction under Section 4975 of the Code and/or Section 406 of ERISA, units may not be purchased by an ERISA Plan, an IRA, or a non-ERISA plan subject to Section 4975 of the Code, as to which the general partner or any of its affiliates have investment discretion with respect to the assets used to purchase the units, or with respect to which they have regularly given individualized investment advice that serves as the primary basis for the investment decisions made with respect to such assets. Additionally, fiduciaries of, and other disqualified persons with respect to, an ERISA Plan, an IRA, and a non-ERISA Plan subject to Section 4975 of the Code, should be alert to the potential for prohibited transactions to occur in the context of a particular plan's or IRA's decision to purchase units. Neither the general partner nor CIGF6 shall have any liability or responsibility to any benefit plan that is a limited partner or any other limited partner, including any limited partner that is a tax exempt entity, for any tax, penalty or other sanction or costs or damages arising as a result of there being a prohibited transaction or as a result of partnership assets being deemed plan assets of the limited partner under the Code or ERISA or other applicable law. "PLAN ASSETS" If CIGF6's assets were determined under ERISA or the Code to be "plan assets": o the prudence standards and other provisions of Part 4 of Title I of ERISA would be applicable to any transactions involving CIGF6's assets; o persons who exercise any authority or control over CIGF6's assets, or who provide investment advice to CIGF6, would (for purposes of the fiduciary responsibility provisions of ERISA) be fiduciaries of each ERISA Plan that acquires the unit, and transactions involving CIGF6's assets undertaken at their direction or pursuant to their advice might violate their fiduciary responsibilities under ERISA, especially with regard to conflicts of interest, o a fiduciary exercising his investment discretion over the assets of an ERISA Plan to cause it to acquire or hold the unit could be liable under Part 4 of Title I of ERISA for transactions entered into by CIGF6 that do not conform to ERISA standards of prudence and fiduciary responsibility, and o certain transactions that CIGF6 might enter into in the ordinary course of its business and operations might constitute "prohibited transactions" under ERISA and the Code. An ERISA plan's fiduciaries might, under certain circumstances, be subject to liability for actions taken by the general partner or its affiliates, and certain of the transactions described in this prospectus in which CIGF6 might engage, including certain transactions with affiliates, may constitute prohibited transactions under the Code and - 62 - ERISA with respect to such ERISA plan, even if their acquisition of units did not originally constitute a prohibited transaction. Under the Department of Labor regulations governing the determination of what constitutes the assets of an ERISA plan in the context of investment securities such as units, an undivided interest in the underlying assets of a collective investment entity such as CIGF6 will be treated as "plan assets" of Benefit Plan Investors (as that term is defined under ERISA) if (i) the securities are not publicly offered, (ii) 25% or more by value of any class of equity securities of the entity is owned by Benefit Plan Investors, (iii) the interests of the Benefit Plan Investors are "equity interests," and (iv) the entity is not an "operating company." In order for securities to be treated as "publicly offered," they have to be either (a) part of a class of securities registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934 or (b) sold as part of an offering registered under the Securities Act of 1933, and must also meet certain other requirements, including a requirement that they be "freely transferable." Units will be sold as part of an offering registered under the Securities Act of 1933. However, in counsel's view, CIGF6 is not an "operating company" and the restrictions on transferability of units (see "Transferability of Units") prevent the units from being "freely transferable" for purposes of the DOL's regulations. Consequently, in order to ensure that the assets of CIGF6 will not constitute "plan assets" of limited partners which are ERISA plans, the general partner will take such steps as are necessary to ensure that ownership of units by Benefit Plan Investors is at all times less than 25% of the total value of outstanding units. In calculating this limit, the general partner shall, as provided in the DOL's regulations, disregard the value of any units held by a person (other than a Benefit Plan Investor) who has discretionary authority or control with respect to the assets of CIGF6, or any person who provides investment advice for a fee (direct or indirect) with respect to the assets of CIGF6, or any affiliate of any such a person. See "Investor Suitability Standards." However, neither the general partner nor CIGF6 shall have any liability or responsibility to any tax exempt entity limited partner or any other limited partner for any tax, penalty or other sanction or costs or damages arising as a result of partnership assets being deemed plan assets of a tax exempt entity limited partner under the Code or ERISA or other applicable law. OTHER ERISA CONSIDERATIONS In addition to the above considerations in connection with the "plan assets" issue, a decision to cause a Benefit Plan to acquire units should involve considerations, among other factors, of whether: o the investment is in accordance with the documents and instruments governing the Benefit Plan, o the purchase is prudent in light of the diversification of assets requirement and the potential difficulties that may exist in liquidating units, o the investment will provide sufficient cash distributions in light of the Benefit Plan's required benefit payments or other distributions, o the evaluation of the investment has properly taken into account the potential costs of determining and paying any amounts of federal income tax that may be owed on UBTI derived from CIGF6, o in the case of an ERISA Plan, the investment, unless the investment is made in accordance with a self-directed individual arrangement under Section 404(c) of ERISA and regulations promulgated there under, is made solely in the interests of the ERISA Plan's participants, and o the fair market value of units will be sufficiently ascertainable, and with sufficient frequency, to enable the Benefit Plan to value its assets in accordance with the rules and policies applicable to the Benefit Plan. Prospective ERISA Plan investors should note that, with respect to the diversification of assets requirement, the legislative history of ERISA and a DOL advisory opinion indicate that the determination of whether the assets of an ERISA Plan that has invested in an entity such as CIGF6 are sufficiently diversified may be made by looking through the ERISA Plan's interest in the entity to the underlying portfolio of assets owned by the entity. The fiduciaries of each benefit plan proposing to invest in CIGF6 may be required to make certain representations, including, but not limited to, a representation that they have been informed of and understand CIFG6's investment objectives, policies, and strategies, and that the decision to invest assets in CIFG6 is consistent with the provisions of ERISA that require diversification of plan assets and impose other fiduciary responsibilities. - 63 - Additionally, each benefit plan will be required to represent that to the best of its knowledge neither CIGF6 nor any of its affiliates is a party in interest or disqualified person, as defined in Section 3(14) of ERISA and Section 4975(e)(2) of the Code, with respect to such benefit plan. MANAGEMENT'S DISCUSSION OF CERTAIN FINANCIAL DATA We have no operating history. The following discussion includes forward looking statements. Forward looking statements, which are based on certain assumptions, describe our future plans, strategies and expectations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievement to be materially different from the results of operations or plan expressed or implied by these forward looking statements. Accordingly, this information should not be regarded as representations that the results or condition described in these statements or objectives and plans will be achieved. We intend to acquire various types of information technology and similar equipment, and to lease such equipment predominantly under operating leases. CIGF6 may also lease equipment under full payment net leases or enter into conditional sales contracts with respect to equipment. CIGF6 anticipates that it will use a substantial portion of the proceeds of this offering, excess cash flow, debt financing and net disposition proceeds received by CIGF6 prior to its liquidation phase to purchase information technology or other similar capital equipment manufactured by, or compatible with, equipment manufactured by IBM. See "Investment Objectives and Policies -- Information technology equipment," "Investment Objectives and Policies -- Description of Leases" and "Risk Factors -- CIGF6's ability to lease, re-lease or sell its equipment, and therefore returns to investors, may be affected by actions taken or not taken by, or the business or prospects of, IBM, over which we will have no control," "-- Our use of leverage to finance equipment acquisitions could adversely affect our cash flow," "-- The business of leasing and investing in equipment is subject to many risks which could impact your returns" and "-- We have not yet identified any of our investments in equipment, which prevents you from evaluating, or having any input into our portfolio of equipment leases." CIGF6's operating revenues will initially be generated primarily from leasing, and otherwise entering into contracts for the use of equipment. Operating revenues will be utilized to pay partnership expenses and provide cash distributions to limited partners. See "Investment Objectives and Policies -- Description of Leases." The general partner anticipates that CIGF6 will commence liquidation of all of its assets beginning in the ninth year of program operations, subject to the general partner's discretion to extend the liquidation process if in the general partner's discretion such extension will enable CIGF6 to dispose of its assets on more favorable terms. In no event will CIGF6 continue after December 31, 2018. See "Investment Objectives and Policies -- Liquidation Policies." Because CIGF6's leases will be on a "triple-net" (or equivalent) basis, it is anticipated that no permanent reserve for maintenance and repairs will be established from the offering proceeds. However, the general partner is authorized to establish reserves in the future if and to the extent it deems necessary for maintenance, repairs and working capital. In addition, the general partner and Com Cap Corp. have agreed that the general partner or Com Cap Corp. will lend or contribute to CIGF6 an amount equal to 1.01% of net offering proceeds, if needed, to meet CIGF6's expenses. If the general partner or any of its affiliates makes such a short-term loan to CIGF6, the general partner or affiliate may not charge interest at a rate greater than the interest rate charged by unrelated lenders on comparable loans for the same purpose in the same locality. In no event will CIGF6 be required to pay interest on any such loan at an annual rate greater than three percent over the "prime rate" from time to time announced by Chase Bank, Philadelphia, Pennsylvania. All payments of principal and interest on any financing provided by the general partner or any of its affiliates shall be due and payable by CIGF6 within 12 months after the date of the loan. See "Compensation to the General Partner and Affiliates." If available cash flow or net disposition proceeds are insufficient to cover CIGF6's expenses and liabilities, CIGF6 will obtain additional funds by disposing of or refinancing equipment or by borrowing within its permissible limits. PARTNERSHIP AGREEMENT SUMMARY The rights and obligations of the partners in CIGF6 will be governed by the partnership agreement, which is attached in its entirety as Appendix II hereto. The following statements, and other statements in this prospectus concerning the partnership agreement and related matters, are merely an outline, in no way modify or amend the partnership agreement and are qualified in all respects and in each case by the language of the partnership agreement. All material aspects of the partnership agreement are included in this summary. - 64 - THE UNITS A maximum of 2,500,000 units are authorized for issuance and sale in the offering. Subscribers who are accepted as limited partners by the general partner on or before the initial closing will be admitted to CIGF6 as limited partners on the day of the initial closing. Thereafter, subscribers who are accepted as limited partners by the general partner will be admitted into CIGF6 as limited partners on or before the last day of the calendar month following the date such acceptance occurs. Transferees of units will be recognized as substituted limited partners on or before the first day of the calendar month following the calendar month in which the general partner receives a completed transfer application and approves the transferee as a substituted limited partner. CIGF6's records shall be amended to reflect the substitution of limited partners at least once in each calendar quarter. NON-ASSESSABILITY OF UNITS The units are non-assessable. When a unit has been paid for in full, the holder of the unit has no obligation to make additional contributions to CIGF6's capital. LIABILITY OF LIMITED PARTNERS Limited partners are not personally liable for the obligations of CIGF6, but their investments are subject to the risks of CIGF6's business and the claims of its creditors. A limited partner, under certain circumstances, may be liable to return any distributions from CIGF6 to the extent that, after giving effect to the distribution, all liabilities of CIGF6 (other than non-recourse liabilities and liabilities to partners on account of their interests in CIGF6) exceed the fair value of CIGF6's assets, including assets serving as security for non-recourse liabilities. In accordance with the Pennsylvania Revised Limited Partnership Act, as amended, a limited partner may be required to return to the partnership amounts previously distributed to such limited partner for a two year period after the distribution to the extent that the distribution includes a return of the partner's contribution to the partnership, but only if the distribution is made in violation of the partnership agreement or the provisions of the Pennsylvania Revised Uniform Limited Partnership Act. Also, a limited partner who participates in the control of the business of the partnership may be liable to persons who transact business with the partnership reasonably believing, based upon the conduct of the limited partner, that the limited partner is a general partner of the partnership. ALLOCATIONS AND DISTRIBUTIONS The provisions of the partnership agreement governing the allocation of tax items and the apportionment of cash distributions are summarized under the caption "Allocations and Distributions." RESPONSIBILITIES OF THE GENERAL PARTNER The general partner has the exclusive responsibility for the management and control of all aspects of the business of CIGF6. In the course of its management, the general partner may, in its absolute discretion, cause CIGF6 to purchase, own, lease, sell and/or make future commitments to purchase, lease and/or sell the equipment and interests therein when and upon such terms as it determines to be in the best interests of CIGF6 as it deems necessary for the efficient operation of CIGF6, except that limited partners holding more than 50% of the outstanding units held by all limited partners, referred to as a majority in interest, must approve the sale of substantially all of the assets of CIGF6, except when such sales occur in the orderly liquidation and winding up of the business of CIGF6. A majority in interest of the limited partners may, at any time, remove the general partner. Upon the removal of the general partner, CIGF6 will be dissolved and liquidated unless, within 60 days of such removal, a majority in interest of the limited partners elect a successor general partner to continue CIGF6. RECORDS AND REPORTS The general partner will keep at CIGF6's principal place of business adequate books of account and records of CIGF6. You will have the right, upon reasonable notice and within normal working hours, and at your expense, to inspect and copy true and full information regarding the state of the business and financial condition of CIGF6, federal, state and local tax returns of CIGF6, a list of the partners and other information regarding the affairs of CIGF6 as you may reasonably request. You will also receive an annual account statement setting forth a current estimated value of your investment in CIGF6. See "Reports to Limited Partners" for a description of the reports and financial statements, which the general partner will provide to you during the term of CIGF6. - 65 - MEETINGS OF THE PARTNERS The general partner may call a meeting of the limited partners at any time, or call for a vote, without a meeting, of the limited partners on matters on which they are entitled to vote. The general partner is required to call such a meeting, or for such a vote, on the written request of limited partners holding 10% or more of the total units held by all limited partners. Any vote of a limited partner may be made in person or by proxy. We are not required to hold annual or other regular meetings of the partners. VOTING RIGHTS OF LIMITED PARTNERS Your voting rights are set forth in the partnership agreement. By a vote of limited partners holding more than one-half of the outstanding units, the limited partners may vote to: o approve or disapprove a sale of all or substantially all of the assets of CIGF6; o dissolve CIGF6; o remove or approve the withdrawal of the general partner; o prior to the removal, withdrawal or dissolution of the general partner, elect a successor general partner; and o amend the partnership agreement except that without the consent of the partner adversely affected, no amendment may be made which: o converts a limited partner into a general partner; o modifies the limited liability of a limited partner; o alters the interest of the general partner or limited partner in net profits, net losses or distributions from CIGF6 or of the general partner in its compensation; or o affects the status of CIGF6 as a partnership for federal income tax purposes. Also, without prior consent of limited partners owning at least 66 2/3% of the units, CIGF6 may not amend the provisions in the partnership agreement relating to allocations, distributions or fees to the general partner. With respect to any units owned by the general partner or its affiliates, the general partner and its affiliates may not vote or consent on matters submitted to the limited partners regarding removal of the general partner or any transaction between CIGF6 and the general partner or its affiliates. In determining the required percentage in interest of units necessary to approve a matter on which the general partner and its affiliates may not vote or consent, any units owned by the general partner or its affiliates shall not be included. ROLL-UPS AND CONVERSIONS We will not enter into any roll-up without the approval of the general partners and the holders of at least 66-2/3% of all outstanding units. A roll-up is defined in the partnership agreement to mean any transaction involving the acquisition, merger, conversion, or consolidation, either directly or indirectly, of CIGF6 and the issuance of securities of a roll-up entity. A roll-up does not include: a transaction involving securities if the securities have been listed for at least twelve months on a national securities exchange, including the NASDAQ Stock Market or a transaction involving the conversion to corporate, trust or association form of only CIGF6 if, as a consequence of the transaction, there will be no significant adverse change in the limited partners' voting rights, the term of existence of CIGF6, compensation of the general partner or its affiliates, or CIGF6's investment objectives. Limited partners who do not consent to an approved roll-up shall be given the option of (i) accepting the securities of the roll-up entity offered in the proposed roll-up; or (ii) receiving cash in an amount equal to the non-consenting limited partner's pro rata share of the appraised value of the net assets of CIGF6. - 66 - In the event a roll-up is proposed, an appraisal of the net assets of CIGF6 shall be performed by a competent independent expert engaged for the benefit of CIGF6 and the limited partners. Such appraisal shall be made on the basis of an orderly liquidation of the assets of CIGF6 over a 12-month period as of a date immediately prior to the announcement of the proposed roll-up. If the appraisal will be included in a prospectus used to offer the securities of a roll-up entity, the appraisal shall be filed with the Securities and Exchange Commission and the states as an exhibit to the registration statement for the offering. CIGF6 shall not reimburse the sponsor of a proposed roll-up for the costs of an unsuccessful proxy contest in the event the roll-up is not approved by the limited partners. By the vote of a majority in interest of the limited partners CIGF6 is permitted to engage in a conversion of CIGF6 into another form of business entity which does not result in a significant adverse change in: o the voting rights of the limited partners, o the termination date of CIGF6 (currently, December 31, 2018, unless terminated earlier in accordance with the partnership agreement), o the compensation payable to the general partner or its affiliates, or o the ability to meet CIGF6's investment objectives without materially impairing the rights of the limited partners. The general partner will make the determination as to whether or not any such conversion will result in a significant adverse change in any of the provisions listed in the preceding paragraph based on various factors relevant at the time of the proposed conversion, including an analysis of the historic and projected operations of CIGF6; the tax consequences (from the standpoint of the limited partners) of the conversion and of an investment in a limited partnership as compared to an investment in the type of business entity into which CIGF6 would be converted; and the performance of the equipment industry in general, and of the information technologys segment of the industry in particular. In general, the general partner would consider any material limitation on the voting rights of the limited partners or any substantial increase in the compensation payable to the general partner or its affiliates to be a significant adverse change in the listed provisions. POWER OF ATTORNEY Pursuant to the terms of the partnership agreement, each purchaser of a unit and each transferee of a unit appoints the general partner, acting alone, as the purchaser's or transferee's attorney-in-fact to make, execute, file, and/or record: o documents relating to CIGF6 and its business operations requested by or appropriate under the laws of any appropriate jurisdiction; o instruments with respect to any amendment; o instruments or papers required to continue the business of CIGF6 pursuant to the partnership agreement; o instruments relating to the admission of any partner to CIGF6; o a master list in accordance with Section 6112 of the Code (or any successor provision), relating to CIGF6's tax shelter registration (see "Income Tax Considerations - Partnership Tax Returns and Tax Information"); and o all other instruments deemed necessary or advisable to carry out the provisions of the partnership agreement. The power of attorney is irrevocable, will survive the death, incompetency, dissolution, disability, incapacity, bankruptcy, or termination of the granting purchaser or transferee, and will extend to such person's heirs, successors, and assigns. The general partner will be designated as the "Tax Matters Partner" who shall have authority to make certain elections on behalf of CIGF6 and the limited partners, including extending the statute of limitations for - 67 - assessment of tax deficiencies against the limited partners with respect to partnership items, and to enter into a settlement agreement with the IRS. See "United States Federal Income Tax Considerations -- IRS Audit of the Partnership." PARTNERSHIP TERM The term of CIGF6 will expire on December 31, 2018, though CIGF6 may be terminated and dissolved earlier after any of the following events: o The vote or written consent of a majority in interest of the limited partners; o The dissolution of CIGF6 by judicial decree; o The expiration of 60 days following the removal, withdrawal, involuntary dissolution, or bankruptcy (or, in the case of an individual, the death or appointment of a conservator for the person or any of the assets) of the last remaining general partner of CIGF6, (or a majority in interest of the limited partners if the terminating event is the removal, bankruptcy, or involuntary dissolution of the last remaining general partner) vote to continue CIGF6 and a successor general partner is elected; o The determination by the general partner that it is necessary to commence the liquidation of the equipment in order for the liquidation of all the equipment to be completed in an orderly and business like fashion prior to December 31, 2018; or o The sale of disposition of all CIGF6's equipment. PLAN OF DISTRIBUTION GENERAL The units are offered through Commonwealth Capital Securities Corp., Inc. as dealer manager. The dealer manager may offer the units through other broker-dealers who are members of the National Association of Securities Dealers, Inc. The units are being offered on a "best efforts" basis, which means that the dealer manager and the other broker-dealers are not obligated to purchase any units and are only required to use their best efforts to sell units to investors. The offering of the units is intended to be in compliance with Rule 2810 of the Rules of Conduct of the National Association of Securities Dealers, Inc. The maximum underwriting compensation payable under this offering will not exceed 10% of the gross offering proceeds, plus an additional 0.5% for any additional bona fide due diligence expenses of the dealer manager or any selected dealer. Total compensation of up to 10.5% of the gross offering proceeds is expected to be allocated to the following items: As a Percentage of Amount in Gross Offering Item of Compensation Dollars(1) Proceeds - ----------------------------------- ------------ ------------------ Retail Commissions $ 4,000,000 8.0% Dealer Manager Fee 1,000,000 2.0% Due Diligence Reimbursements 250,,000 0.5% ------------ ------------------ Total $ 5,250,000 10.5% ============ ================== (1) Assumes the maximum gross offering proceeds of $50,000,000. - 68 - The 2% Dealer Manager Fee, above, is used by the Dealer Manager to pay all other costs and expenses associated with the sale, distribution and marketing of the units, as detailed below: As a Percentage of Amount in Gross Offering Item of Compensation Dollars(1) Proceeds - ----------------------------------- ------------ ------------------ Retail Sales Incentives $ 23,000 0.046% Wholesale Commissions 430,000 0.860% Wholesale Salaries 340,000 0.680% Wholesale Expense Reimbursements 90,000 0.180% Wholesale Sales Incentives 80,000 0.160% Other (travel and seminar expenses) 17,000 0.034% Legal Expenses(2) 20,000 0.040% ------------ ------------------ Total $ 1,000,000 2.000% ============ ================== (1) Assumes the maximum gross offering proceeds of $50,000,000. (2) Represents legal expenses of Commonwealth Capital Securities Corp. incurred in connection with the review and approval of underwriting terms and conditions by the National Association of Securities Dealers. Additional organization and offering expenses will be paid directly by CIGF6. See "Prospectus Summary - Estimated Use of Proceeds." CIGF6 will pay to the dealer manager an aggregate amount of up to eight percent of capital contributions as underwriting commissions after and only if the required $1,150,000 minimum subscription amount is sold. The dealer manager will pay other participating broker-dealers out of underwriting commissions, a selling commission of up to eight percent of the capital contributions from units sold by such Participating Brokers. In addition, all or a portion of the dealer manager fee may be reallowed to certain Participating Brokers for expenses incurred by them in selling the units, including reimbursement for bona fide expenses incurred in connection with due diligence activities. The amount of the selling commissions will be determined based upon the quantity of units sold to a single investor. The selling commission and purchase price for all units purchased by an investor will be reduced in accordance with the following schedule: Purchase Price Selling Individual Transaction Size Per Unit Commission --------------------------- -------------- ---------- $ 1,000 to $250,000 $ 20.00 8% $250,020 to $350,000 $ 19.80 7% $350,020 to $500,000 $ 19.60 6% $500,020 to $750,000 $ 19.40 5% $750,020 to $1,000,000 $ 19.20 4% $1,000,020 and over $ 19.00 3% The underwriting agreement, under which the dealer manager will offer the units, which is terminable without penalty by any party on 60 days' notice, contains cross-indemnity clauses with respect to certain liabilities between the general partner and the dealer manager, including liabilities under the Securities Act and liabilities arising out of misleading or untrue statements attributable to either party in this prospectus or other materials sent to investors in connection with this offering, and breaches of the underwriting agreement. The dealer manager and Participating Brokers participating in the offering may be deemed to be "underwriters" as that term is defined in the Securities Act. OFFERING OF UNITS Provided the general partner does not terminate the offering of units earlier, the offering may continue until the full 2,500,000 units are sold, or until the second anniversary of the effectiveness of our registration statement, of which this prospectus is a part. See "Plan of Distribution -- Escrow Arrangements and Funding." - 69 - The general partner and its affiliates will not be prohibited from purchasing units, although it is not their present intention to make such purchases. Any units purchased by the general partner or its affiliates would be purchased for their own account and for investment and not for resale. No units purchased by the general partner and its affiliates may be counted for purposes of obtaining the minimum subscription amount. If the general partner or its affiliates purchase any units, the voting rights of the general partner with respect to the units will be as described in the last paragraph of "Summary of the Partnership Agreement -- Voting Rights of Limited Partners". Any purchase of units in connection with this offering must be accompanied by tender of the sum of $20 per unit (subject to the quantity discounts referred to above), which is the full purchase price of a unit; provided, however, that the dealer manager or Participating Brokers may waive the selling commission with respect to the purchase of units by employees of the dealer manager, Participating Brokers, the general partner and its affiliates, so long as those employees are purchasing units for their own accounts. If such fees are so waived, such employees will tender no less than $18.40, for the purchase of each unit. - -------------------------------------------------------------------------------- YOUR SUBSCRIPTION MUST BE ACCEPTED BY THE GENERAL PARTNER. ONCE ACCEPTED, THIS WILL CONSTITUTE THE INVESTOR'S AGREEMENT TO THE TERMS OF THE AGREEMENT AND THE AUTHORITY OF THE GENERAL PARTNER. - -------------------------------------------------------------------------------- ESCROW ARRANGEMENTS AND FUNDING All funds received by the general partner, the dealer manager or the Participating Broker will be held in the escrow account at J.P.Morgan Trust Company, until an "escrow closing," at which time funds collected from multiple investors will be transferred to CIGF6 and units will be issued. While held in escrow, subscriptions will either be held in cash or be invested in United States short-term government securities or interest bearing bank accounts, a J.P.Morgan money market account, or a similar account, for the benefit of the investors. Any interest earned on the subscriptions while in escrow will be distributed, net of any tax withholding required by law, directly to the investors promptly following the funding, allocated in accordance with the amount of subscriptions held for each investor and the length of time such subscriptions were held. The offering may be terminated, in the general partner's discretion, at any time after the minimum subscription amount has been received and accepted by the general partner on behalf of CIGF6. The general partner also has the discretion to terminate the offering prior to receiving the minimum subscription amount. In such event, CIGF6 would be dissolved and subscriptions held in escrow, together with any interest actually earned thereon net of any tax withholding required by law would be returned to the subscribers. It is anticipated that the offering of units will terminate no later than INSERT DATE HERE, 2008. Subscriptions will be released from the escrow account and returned to the subscribers together with any interest actually earned thereon, net of any tax withholding required by law, in the event the minimum subscription amount has not been received by the second anniversary of the commencement of this offering. Subscribers will be admitted to CIGF6 and receive units at one or more closings. Limited partners will be admitted not later than 15 days after the release from the escrow account to CIGF6 of the subscriber's funds. Additional closings will be held from time to time during the offering period as subscriptions are accepted by the general partner, but no less often than monthly. Subsequent subscriptions will be accepted or rejected by the general partner within 30 days of their receipt. Funds received from rejected subscriptions will be returned to the subscribers immediately upon rejection of their subscription. The final closing will be held shortly after the termination of the offering period or, if earlier, upon the sale of all the units. After the initial closing, limited partners will be admitted to CIGF6 no later than the last day of the calendar month following the date their Subscriptions are accepted by the general partner. Each subscriber to CIGF6 will be paid his share of interest earned on subscription amounts following the transfer of his subscription to CIGF6, net of any tax withholding required by law. These interest payments will be paid by CIGF6. SUBSCRIPTION FOR UNITS If you satisfy the qualifications described under "Investor Suitability Standards" and desire to purchase units, you must: (a) Review the subscription agreement attached as Appendix I to this prospectus to insure that you are aware of the representations and warranties you will be deemed to have made by subscribing for units; and - 70 - (b) Deliver to the dealer manager a check made payable to "J.P.Morgan Trust Company, Escrow Agent FBO Commonwealth Income & Growth Fund VI," in the amount of $20.00, or such other amount as set forth in the table above, for each unit that you are seeking to purchase. Investments must be made in $20.00 increments. The dealer manager will not complete a sale of units until at least five business days after the date you receive a final prospectus and shall send you a confirmation of your purchase. Prospective investors that are not natural persons may be required to deliver evidence of their authority to subscribe for units, or opinions of counsel as to their authority to subscribe for units and the binding effect of their subscriptions. Investors who submit subscriptions will not be permitted to terminate or withdraw their subscriptions without the prior consent of the general partner. No sales will be made to discretionary accounts without the prior specific written approval of the transaction by the customer. The general partner has the right to reject your subscription for any reason whatsoever, including your failure to satisfy the suitability standards described under "Investor Suitability Standards." SUBSCRIBERS' REPRESENTATIONS AND WARRANTIES If you decide to purchase units, you must execute or authorize the execution of a subscription agreement to be submitted to the general partner. In the States of Florida, Iowa, Maine, Michigan, Minnesota, Missouri, Nebraska, North Carolina, Oregon and Tennessee and Texas, you are required to personally sign the subscription agreement. You will make certain representations and warranties to the general partner in your subscription agreement or by paying for your units, including that you: o have received this prospectus, including the form of partnership agreement attached hereto as Appendix II; o meet the applicable requirements as to investor suitability; o are subscribing for units in your own account or for the account or benefit of a family member or members or in a fiduciary capacity for the account of another person; o accept and adopt the provisions of the partnership agreement; and o authorize the general partner, as your attorney-in-fact, to execute the partnership agreement and such other documents as may be required to carry out the business of CIGF6. You are also instructed that you should not rely upon any information not specifically set forth in this prospectus or any supplements thereto in making a decision to invest in CIGF6 and the general partner, the dealer manager and CIGF6 accept no responsibility for information provided to an investor that is not clearly marked as being prepared and authorized by them for use with the public. Also, an investment in CIGF6 involves certain risks including the matters set forth under the captions "Risk Factors," "Conflicts of Interest," "Management" and "Income Tax Considerations" in this prospectus. SPECIAL LIMIT ON OWNERSHIP OF UNITS BY BENEFIT PLANS To avoid classification of a pro rata portion of CIGF6's underlying assets as "plan assets" of investors which are benefit plans, CIGF6 intends to restrict the ownership of units by benefit plans to less than 25% of the total value of outstanding units at all times. See "ERISA Considerations -- 'Plan Assets.'" Benefits Plans include qualified plans, tax exempt entities and certain other entities included in the definition of benefit plans in this prospectus. SALES MATERIAL Sales material may be used in connection with the offering only when accompanied or preceded by the delivery of this prospectus. Only sales material which indicates that it is distributed by the general partner may be distributed to prospective investors. Material regarding an investment in CIGF6 may include a question and answer sales booklet, a brochure, a speech for public seminars, an invitation to attend public seminars, slide and video presentations, prospecting letters, mailing cards, fact sheets and tombstone advertisements; all of which would provide information regarding the general partner and CIGF6. In certain jurisdictions, such sales material will not - 71 - be available. Use of any materials will be conditioned on the provision of such materials to the SEC and the filing with, and if required, clearance by, other appropriate state regulatory authorities. Such clearance does not mean, however, that the agency allowing use of the sales literature has passed on the merits of this offering or the accuracy of the material contained in such literature. Other than as described herein, CIGF6 has not authorized the use of sales material. Although the information contained in such sales material does not conflict with any of the information contained in this prospectus, such material does not purport to be complete and should not be considered as part of this prospectus or the registration statement of which this prospectus is a part, or as incorporated in this prospectus or the registration statement by reference, or as forming the basis of the offering. The offering is made only by this prospectus. REPORTS TO LIMITED PARTNERS The general partner will deliver to each limited partner, within 120 days after the end of each year, a balance sheet of CIGF6 dated as of December 31 of such year, together with statements of income, partners' equity, and the cash flow position of CIGF6 for such year, prepared on an accrual basis in accordance with generally accepted accounting principles and accompanied by an auditor's report from CIGF6's independent certified public accountants. A reconciliation of the financial statements with respect to information furnished to you for income tax purposes will be included in the Notes to Financial Statements of our audited financial statements included in our annual report on Form 10-K. The general partner will within such period also furnish (i) a report of the activities of CIGF6 for the year, which will include for each item of equipment acquired by CIGF6 which individually represents at least 10% of the total investment in equipment, (ii) certain information relevant to the value or utilization of the equipment, (iii) a report on distributions to the limited partners during the year and their source, (iv) if any equipment is sold during that year a report of the sale price, purchase price and lease revenues from such equipment, and (v) a report on any costs incurred by the general partner and its affiliates in performing administrative services which are reimbursed by CIGF6 during the year. Within 60 days after the end of each calendar quarter, the general partner will also furnish a report of all services rendered and all fees received by the general partners and its affiliates from CIGF6, an unaudited balance sheet, a statement of income, a statement of changes in financial position and a report on the activities of CIGF6. The unaduited balance sheet, statement of income and statement of changes in financial position, each of which will be included in our Form 10-Q filed with the Securities and Exchange Commission, will be prepared on an accrual basis in accordance with accounting principals generally accepted in the United States. The general partner, at the time it furnishes you CIGF6's annual report, it will furnish you, through your participating broker, with an account statement that sets forth the following: o an estimated per-unit value of the units; o the source of the information used to determine such per-unit values; and o the method by which the per-unit value was determined. Until the net proceeds of the offering of units are fully invested, the general partner will furnish to the limited partners, within 60 days after the end of each calendar quarter, a report of equipment acquisitions during the quarter, including the type and manufacturer of each item of equipment, the purchase price of the equipment, and any other material terms of purchase, a statement of the total amount of cash expended by CIGF6 to acquire the equipment (including an itemization of all commissions, fees, and expenses and the name of each payee), and a statement of the amount of net proceeds in CIGF6 which remain unexpended or uncommitted at the end of the quarter. The general partner will also furnish to all limited partners within 75 days after the end of the year other information regarding CIGF6 necessary for the preparation of their tax returns. LEGAL MATTERS In connection with the units offered hereby Reed Smith LLP, Philadelphia, Pennsylvania, counsel to the dealer manager, the general partner and CIGF6, has passed upon legal matters for CIGF6 and the general partner - 72 - regarding the valid issuance of the units, and the United States federal income tax consequences of an investment in the units. EXPERTS The consolidated financial statements of Com Cap Corp. as of February 28, 2005 and February 29, 2004 and for the years then ended, the balance sheet of the general partner as of February 28, 2005 and the balance sheet of CIGF6 as of January 31, 2006, respectively, appearing in this prospectus and registration statement, have been audited by Asher & Company, Ltd., independent registered public accounting firm, as set forth in their reports thereon appearing elsewhere herein and in the registration statement, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. WHERE YOU CAN FIND ADDITIONAL INFORMATION We will provide, at no cost, upon the request of an interested investor, a copy of the most recent annual report on Form 10-K, filed with the Securities and Exchange Commission for Fund I, Fund II, Fund III, and Fund IV or the most recent quarterly report on Form 10-Q for CIGFV. You can request Form 10-Ks or 10-Qs for Fund I, Fund II, Fund III, Fund IV and Fund V by calling 1-800-249-3700 and asking to speak to an investor relations representative. You may also make your request in writing to: Chief Compliance Officer, Commonwealth Capital Securities Corp., 400 Cleveland Street, Seventh Floor, Clearwater, Florida 33755. This prospectus does not contain all the information set forth in the registration statement and the exhibits relating thereto, which the general partner has filed with the Securities and Exchange Commission, Washington, D.C., under the Securities Act of 1933, as amended, and to which reference is hereby made. You may read and copy any materials we file with the SEC at the SEC Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. Further information on the operation of the Public Reference Room is available by contacting the SEC at 1-800-SEC-0330. The Commission also maintains a website that contains reports, proxy statements, registration statements and other information regarding registrants that file electronically at http://www.sec.gov. - 73 - APPENDIX I SUBSCRIPTION AGREEMENT
COMMONWEALTH CAPITAL SECURITIES CORP. COMMONWEALTH INCOME & GROWTH FUND VI 400 Cleveland St., 7th Floor, Clearwater, FL 33755 $50,000,000 maximum; $1,150,000 minimum: Units - $20 per unit SUBSCRIPTION AGREEMENT, SIGNATURE PAGE AND POWER OF ATTORNEY UNITS PURCHASED_____________________________________________ [ ] INITIAL OR [ ] ADDITIONAL INVESTMENT $_______________________ PLEASE MAKE CHECKS PAYABLE TO: (Total capital contribution must be in increments of $20.) J.P. MORGAN, ESCROW AGENT (CIGF VI) NAV purchase: Are you an employee of a selected agent? [ ] Yes [ ] No Subscription Questions: 877-654-1500 FAX: 727-942-0406 How do you wish to receive distributions? [ ] Quarterly [ ] Monthly (No dividend reinvestment available with monthly distributions.) ($5,000 minimum investment required for monthly distributions.) LEGAL ACCOUNT TITLE/RESIDENCE: Mr. Mrs. Ms.___________________________________________________ Social Security No.: ____ - ____ - _____Date of Birth: ____________ CO-SUBSCRIBER: Mr. Mrs. Ms.___________________________________________________ Social Security No.: ____ - ____ - _____Date of Birth:_____________ Street Address:_________________________________________________________________ PO Box (if applicable)__________________________________________________________ City, State, Zip Code: _____________________________________________________________________________________________________________ Home Telephone No.(_________) ______________________________________________ E-mail address_________________________________________ PLEASE INDICATE CITIZENSHIP STATUS: (PLEASE REVIEW "INVESTOR SUITABILITY STANDARDS" IN THE PROSPECTUS) [ ] U.S. Citizen (attach IRS W-9 form) [ ] Resident Alien [ ] Non-Resident Alien (Attach IRS Form W8) IF CORPORATION OR PARTNERSHIP: [ ] U.S. [ ] Foreign (Attach IRS Form W8) NON-CUSTODIAL OWNERSHIP | CUSTODIAL OWNERSHIP [ ] Individual Ownership (one signature required) | [ ] Traditional IRA (custodian signature required) [ ] Transfer on Death | [ ] Roth IRA (custodian signature required) [ ] Joint Tenants with Right of Survivorship | [ ] Pension or Profit-Sharing Plan (trustee signature(s) required) (all parties must sign) | [ ] KEOGH (trustee signature required) [ ] Community Property (all parties must sign) | [ ] Simplified Employee Pension/Trust (trustee signature required) [ ] Tenants in Common (all parties must sign) | Name of custodian or other administrator: [ ] Corporate Ownership (authorized signature required | and copy of corporate resolution required) | --------------------------------------------------------- [ ] Partnership Ownership (authorized signature required) | [ ] Other (Please specify) __________________________________ [ ] Uniform Gift to Minors Act (custodian signature required) | State of ____________ a Custodian for _________________ | Name of Custodian or Trustee_________________________________ [ ] Trust (specify type) ______________________________ | Mailing Address: Under agreement date (required) _______________ | (Please include a copy of the trust) | ------------------------------------------------------------- | SPECIAL PAYMENT INSTRUCTIONS: | ------------------------------------------------------------- | Payment to individual or entity as designated below. | Custodian Information: Investors must complete this section if they want cash | distributions made to anyone other than the records holder. | Tax ID No.: ____- ___________________________________________ Please check if: | Custodial Account: __________________________________________ | Custodian Telephone (___) _____-_____________________________ [ ] You wish distributions of the partnership to be | reinvested in additional Units during the Offering Period | (available with quarterly distribution option only.) | X ___________________________________________________________ | Custodian Signature (Medallion Signature Required) Date [ ] You wish distributions to be sent to the Payee at this | address: | NOTICE TO ALL INVESTORS: Payee Name:__________________________________________________ | (a) THE PURCHASE OF UNITS FOR AN IRA OR KEOGH PLAN DOES NOT IN For Account of:______________________________________________ | ITSELF CREATE THE PLAN. Street Address:______________________________________________ | (b) Section 1446 of the Internal Revenue Code provides that a City, State, Zip:____________________________________________ | partnership must pay a withholding tax to the Internal Revenue Phone Number: (_____) _______________________________________ | Service with respect to a partner's allocable share of such Account Number: _____________________________________________ | partnership's effectively connected taxable income if the | partner is a foreign person, and the Partnership Agreement | authorizes the Partnership to withhold any required amounts | from distribution otherwise payable to any foreign person. SIGNATURE: I certify that 1) I have received the Prospectus relating to Commonwealth Income & Growth Fund VI ("the Prospectus"), and the Operating Agreement, 2) I agree to the provisions in the Subscription Agreement, 3) by executing this Subscription Agreement, I am entering into an Operating Agreement and agreeing to invest money, 4) the information set forth in this Subscription Agreement, Signature Page and Power of Attorney is true and correct, and 5) I declare under penalty of perjury that I have entered my correct taxpayer identification or social security number on this form and and 6) I acknowledge that this investment is not liquid. By executing this Subscription Agreement, I am not waiving any rights I may have under the Securities Act of 1933, as amended. - -|X___________________________________________________-|X___________________________________________________________________________ Subscriber's Signature Date Co-Subscriber's Signature or Authorized Representative Date
PLEASE READ CAREFULLY this Subscription Agreement and the Terms and Conditions before completing this document. TO SUBSCRIBE FOR UNITS, please complete and sign the Signature Page and deliver the Subscription Agreement to your Financial Consultant. ALL ITEMS ON THIS AGREEMENT MUST BE COMPLETED in order for your subscription to be processed, including any additional information necessary to complete Item 6(c) of the section entitled "Terms and Conditions." Each person or entity named as a registered owner on the Subscription Agreement (the "Subscriber") desires to become a Limited Partner (a "Limited Partner") of Commonwealth Income & Growth Fund VI, (the "Partnership") and to purchase units of a limited partnership interest (the "Units") of the Partnership in accordance with the terms and conditions of the final Prospectus pursuant to which the Partnership will offer Units to the public including any amendments and supplements thereto (the "Prospectus"), and of the Partnership's Restated Agreement of Limited Partnership (the "Partnership Agreement"), attached as Exhibit 1 to the Prospectus. BY EXECUTING THIS AGREEMENT, A SUBSCRIBER DOES NOT WAIVE ANY RIGHTS HE MAY HAVE UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 or any State Securities or Blue Sky law. In connection herewith, the Subscriber represents, warrants, and agrees as follows: 1 SUBSCRIPTION. The Subscriber agrees to purchase the number of Units set forth in the space provided on the Signature Page of this Subscription Agreement and delivers herewith the full amount required to purchase such Units. 2 ACCEPTANCE. The Subscriber hereby acknowledges and agrees that the General Partner of the Company may in its sole and absolute discretion accept or reject the Subscriber's subscription, in whole or in part, and that, if rejected, the amount of the Subscriber's subscription which is rejected will be promptly returned to the Subscriber, without interest. The General Partner may not complete the sale of a Unit to a Subscriber until at least five business days after the date the Subscriber received the Prospectus. 3 NO REVOCATION. The Subscriber hereby irrevocably acknowledges and agrees that he will not be entitled to revoke or withdraw his subscription, EXCEPT DURING THE FIVE BUSINESS DAYS FOLLOWING THE SUBSCRIBER'S RECEIPT OF THE PROSPECTUS. 4 ADOPTION OF PARTNERSHIP AGREEMENT. The Subscriber hereby accepts, adopts and agrees to be bound by each and every provision contained in the Operating Agreement and agrees to become a Limited Partner thereunder. 5 POWER OF ATTORNEY. The Subscriber hereby makes, constitutes and appoints the General Partner with full power of substitution and ratification, its true and lawful attorney-in-fact for the purposes and in the manner provided in the Partnership Agreement. 6 REPRESENTATION AND WARRANTIES. The Subscriber (which, for this purpose, includes any Financial Consultant and Branch Manager executing this Subscription Agreement on behalf of the Subscriber) represents and warrants to the Partnership, the affiliates, agents and representatives of the Manager or the General Partner, and any broker-dealer involved in the offering of Units for sale that: Investor: Please initial here ________________ a) The Subscriber has received the Prospectus; ________________ b) The Subscriber has received the Partnership Agreement; ________________ c) The Subscriber meets the minimum financial suitability standards set forth in the Prospectus under "Investor Suitability Standards," as well as any additional minimum financial suitability standards required by state securities authorities which are applicable to the Subscriber; ________________ d) The Subscriber is subscribing for Units in his own account or for the account or benefit of a family member or members or in a fiduciary capacity for the account of another person; and ________________ e) The Subscriber has received no representations or warranties from the Partnership, the General Partner, or any affiliates, agents or representatives of the Partnership or the General Partner other than those contained in the Prospectus. The Partnership reserves the right to assert these representations as a defense in any subsequent litigation in which one or more of the representations is in issue; provided, however, that the representations contained in Paragraph 6(e) shall not be binding on any Subscriber resident in ARIZONA, MAINE, MINNESOTA, MISSOURI, NEBRASKA, PENNSYLVANIA, TENNESSEE OR TEXAS. SUBSCRIBERS IN ALABAMA, ARIZONA, MICHIGAN, MISSOURI, NEBRASKA, NORTH CAROLINA AND TEXAS ARE REQUIRED TO SIGN OR INITIAL EACH REPRESENTATION CONTAINED IN PARAGRAPH 6 ABOVE. - ------------------------------------------------------------------------------------------------------------------------------------ BROKER DATA: Investor(s) and that I have informed the investor(s) of Financial Consultant(s) Name: the lack of liquidity and marketability of the _____________________________________________ investments and confirm that the investor(s) signatures Branch Address:______________________________ appears above. (Signatures of both representatives _____________________________________________ required if joint account.)The USA Patriot Act, Section Branch Phone:_________________Fax:___________ 326, Customer Identification Programs, requires Broker/Dealer Name: broker/dealers to obtain, verify and record information _____________________________________________ that identifies each person who opens an account. AT THE TIME OF THE SUBSCRIPTION, I VERIFIED ONE OF THE BY SELLING FINANCIAL CONSULTANT: In compliance with Rules FOLLOWING PIECES OF INFORMATION: (PLEASE CIRCLE ONE) 2310 and 2810 of the NASD's Conduct Rules, I represent DRIVER'S LICENSE GOVERNMENT-ISSUED ID that I have reasonable grounds to believe, based on information from the investor(s) concerning investment -|X_____________________________________________ objectives, other investments, financial situation and Financial Consultant(s) Signature Date needs, and any other information known by me, that investment in the Partnership is suitable for such -|X_____________________________________________ Branch Manager's Signature Date - ------------------------------------------------------------------------------------------------------------------------------------ This Subscription Agreement, Signature Page and Power of CCSC Receipt Date:_____________________________________ Attorney will not be an effective agreement until it is accepted by the General Partner of Commonwealth Income & Date into Escrow: _____________________________________ Growth Fund VI, LP. Closing Number: _______________________________________ Agreed to and accepted by: _______________________________________________________ General Partner Date [GRAPHIC OMITTED: COMMONWEALTH SEAL]
APPENDIX II PARTNERSHIP AGREEMENT COMMONWEALTH INCOME & GROWTH FUND VI RESTATED LIMITED PARTNERSHIP AGREEMENT January 6, 2006 TABLE OF CONTENTS PAGE ---- INTRODUCTION...................................................................1 ARTICLE 1 Definitions.....................................................1 ARTICLE 2 Organization....................................................8 2.1 Continuation.........................................................8 2.2 Name.................................................................8 2.3 Place of Business....................................................8 2.4 Registered Office and Registered Agent...............................8 2.5 Business.............................................................8 2.6 Term.................................................................8 ARTICLE 3 Capital Contributions and Status of Partners....................9 3.1 General Partner......................................................9 3.2 Limited Partners.....................................................9 3.3 Capital Contribution of Limited Partners.............................9 3.4 Registration.........................................................9 3.5 Withdrawal of Capital Contributions.................................10 3.6 Admission of Limited Partner........................................10 3.7 Continuation of Limited Partner Status..............................10 3.8 Limited Liability of Limited Partners...............................10 ARTICLE 4 Partners' Capital..............................................10 4.1 Capital Accounts....................................................10 4.2 Withdrawal and Return of Capital....................................11 4.3 Interest on Capital.................................................11 ARTICLE 5 Partnership Expenses...........................................11 5.1 Organization Expenses...............................................11 5.2 Other Expenses......................................................11 5.3 Excluded Expenses...................................................12 ARTICLE 6 Compensation of the General Partner............................12 6.1 Organizational Fee..................................................12 6.2 Equipment Management Fee............................................12 6.3 Equipment Acquisition Fee...........................................13 6.4 Equipment Liquidation Fee...........................................13 6.5 Debt Placement Fee..................................................13 6.6 Limitations on Fees.................................................13 ARTICLE 7 Allocation of Net Profits, Net Losses and Other Items..........13 7.1 Net Profits.........................................................13 i 7.2 Net Losses..........................................................14 7.3 Required Allocations................................................14 7.4 Syndication Expenses................................................15 7.5 Recharacterization of Fees..........................................15 7.6 Recapture...........................................................16 7.7 Allocations Among Limited Partners..................................16 7.8 Other Allocations...................................................16 ARTICLE 8 Distributions..................................................16 8.1 Cash Distributions..................................................16 8.2 Allocation of Distributions to Limited Partners.....................18 8.3 Amounts Withheld....................................................18 8.4 Return of Offering Proceeds.........................................18 ARTICLE 9 Rights, Powers, and Duties of General Partner..................18 9.1 Rights and Powers...................................................18 9.2 Reliance on Certificate of General Partner..........................20 9.3 Independent Activities..............................................20 9.4 Duties..............................................................21 9.5 Restrictions on Authority...........................................21 9.6 General Partner's Net Worth.........................................24 ARTICLE 10 Rights of Limited Partners.....................................24 10.1 No Limited Partner in Control.......................................24 10.2 Voting Rights.......................................................25 10.3 Conversions and Roll-Ups............................................25 10.4 Meetings............................................................26 10.5 Certain Amendments..................................................26 ARTICLE 11 Transfer of Units..............................................27 11.1 Assignment..........................................................27 11.2 Substituted Limited Partners........................................27 11.3 Transfer Fee........................................................28 11.4 General.............................................................28 ARTICLE 12 Redemption.....................................................28 ARTICLE 13 General Partner's Interest.....................................29 13.1 Voluntary Withdrawal or Assignment..................................29 13.2 Removal.............................................................29 ARTICLE 14 Dissolution, Continuation and Termination......................29 14.1 Dissolution.........................................................29 14.2 Continuation........................................................30 14.3 Purchase of Interest of General Partner.............................30 14.4 Liquidation.........................................................31 ARTICLE 15 Accounting and Fiscal Matters..................................32 ii 15.1 Partnership Records.................................................32 15.2 Accounting; Fiscal Year.............................................32 15.3 Reports.............................................................32 15.4 Bank Accounts.......................................................34 15.5 Partnership Returns.................................................34 ARTICLE 16 Power of Attorney..............................................34 16.1 Power of Attorney...................................................34 ARTICLE 17 Liability and Indemnification of General Partner...............35 17.1 Exclusion of Liability for Return of Capital Contributions..........35 17.2 Limitation on Liability of General Partner; Indemnification.........35 ARTICLE 18 Tax Exempt Limited Partners....................................36 18.1 Tax Exempt Limited Partners.........................................36 ARTICLE 19 Miscellaneous..................................................36 19.1 Notices.............................................................36 19.2 Parties in Interest.................................................36 19.3 Section Captions....................................................36 19.4 Severability........................................................36 19.5 Right to Rely on General Partner....................................37 19.6 Pennsylvania Law....................................................37 19.7 Exclusive Jurisdiction..............................................37 19.8 Counterpart Execution...............................................37 19.9 Gender..............................................................37 19.10 Integrated Agreement................................................37 iii COMMONWEALTH INCOME & GROWTH FUND VI RESTATED LIMITED PARTNERSHIP AGREEMENT THIS RESTATED LIMITED PARTNERSHIP AGREEMENT, dated as of January 6, 2006, is entered into by and among Commonwealth Income & Growth Fund, Inc., a Pennsylvania corporation (the "General Partner"), Kimberly A. Springsteen (the "Initial Limited Partner"), and the persons who on or after the execution of this Agreement are admitted as limited partners of the Partnership. INTRODUCTION On January 6, 2006, the General Partner and the Initial Limited Partner formed Commonwealth Income & Growth Fund VI as a Pennsylvania limited partnership (the "Partnership") by the filing of a certificate of limited partnership in the Office of the Department of State of the Commonwealth of Pennsylvania. The parties desire to effect the withdrawal of the Initial Limited Partner, and the admission of the purchasers of the Partnership's Units as limited partners of the Partnership and to restate the agreement of the Partners to read in its entirety as set forth below. To accomplish this, the parties agree that (i) the persons whose subscriptions for Units have been accepted by the General Partner and who are reflected in the records of the Partnership as purchasing Units on or after the date hereof are admitted as limited partners of the Partnership; (ii) the Initial Limited Partner withdraws as a limited partner of the Partnership and is released from all her obligations as such to the Partnership, and the Partnership shall promptly return the Initial Limited Partner's capital contribution, effective upon the date of the Initial Closing, as defined below, and (iii) the agreement of the Partners is hereby restated to read in its entirety as set forth below. ARTICLE 1 DEFINITIONS The following terms used in this Agreement shall have the meanings set forth below. "Acquisition Expenses" means expenses relating to the prospective selection and acquisition of or investment in Equipment, whether or not actually acquired, including, but not limited to, legal fees and expenses, travel and communication expenses, costs of appraisals, accounting fees and expenses and miscellaneous expenses. "Acquisition Fees" means the total of all fees and commissions paid by any party in connection with the initial purchase of Equipment acquired by the Partnership. Included in the computation of such fees or commissions shall be the Equipment Acquisition Fee, any commission, selection fee, construction supervision fee, financing fee, non-recurring management fee or any fee of a similar nature, however designated. "Act" means the Pennsylvania Revised Uniform Limited Partnership Act. "Adjusted Basis" means the basis, as defined in Section 1011 of the Code, for determining gain or loss for federal income tax purposes from the sale, transfer, or other disposition of property. "Adjusted Capital Contribution" means, with respect to a Limited Partner, the Capital Contributions of the Limited Partner reduced to not less than zero by any cash distribution received by the Limited Partner pursuant to Sections 4.2, 8.1 or 8.4, to the extent such distributions exceed any unpaid Cumulative Return as of the date such distribution was made. "Affiliate" means, when used with reference to a specified Person, (i) any Person that directly or indirectly through one or more intermediaries controls or is controlled by or is under common control 1 with the specified Person, (ii) any Person that is a director or an executive officer of, partner in, or serves in a similar capacity to, the specified Person, or any Person of which the specified Person is an executive officer or partner or with respect to which the specified Person serves in a similar capacity, (iii) any Person owning or controlling 10% or more of the outstanding voting securities of such specified Person, or (iv) if such Person is an officer, director or partner, any entity for which such Person acts in such capacity. "Agreement" means this Restated Limited Partnership Agreement, as amended from time to time. "Average Daily Units" means for any period an amount equal to the sum of the outstanding Limited Partners' Units as of the close of business on each day in the period, divided by the number of days in the period. "Bankrupt" or "Bankruptcy" means, when used with reference to a specified Person, (a) if such Person (i) files any application or petition in any tribunal for the appointment of a trustee or receiver, or (ii) commences any proceeding under any bankruptcy or reorganization statute, or under any provision of the United States Bankruptcy Code, or under any insolvency law, or under any dissolution or liquidation law whether now or hereafter in effect, or (b) if any petition or application of the type described in subsection (a) above is commenced against such Person and is not dismissed within 60 days of filing, or an order is entered appointing a trustee or receiver for such Person, or an order for relief is issued in any bankruptcy. "Capital Account" means the separate account established for each Partner pursuant to Section 4.1. "Capital Contributions" means, in the case of the General Partner, the total amount of money contributed to the Partnership by the General Partner, and, in the case of the Limited Partners, the total amount of money contributed to the Partnership by a Limited Partner for each Unit, or where the context requires, the total Capital Contributions of all the Partners. "Carried Interest" means an interest taken in the Partnership, other than the General Partner's promotional interest, for which full consideration has neither been paid nor is to be paid. "Cash Available for Distribution" means Cash Flow plus Net Disposition Proceeds plus cash funds available for distribution from Partnership reserves, less such amounts as the General Partner, in accordance with this Agreement, causes the Partnership to reinvest in Equipment or interests therein, and less such amounts as the General Partner, in its sole discretion, determines should be set aside for the restoration or enhancement of Partnership reserves. "Cash Flow" for any fiscal period means the sum of (i) cash receipts from operations, including, but not limited to, rents or other revenues arising from the leasing or operation of the Equipment and interest, if any, earned on funds on deposit for the Partnership, but not including Net Disposition Proceeds, minus (ii) all cash expenses and costs incurred and paid in connection with the ownership, lease, management, use and/or operation of the Equipment, including, but not limited to, fees for handling and storage; all interest expenses paid and all repayments of principal regarding borrowed funds; maintenance; repair costs; insurance premiums; accounting and legal fees and expenses; debt collection expenses; charges, assessments or levies imposed upon or against the Equipment; ad valorem, gross receipts and other property taxes levied against the Equipment; and all costs of repurchasing Units in accordance with this Agreement; but not including depreciation or amortization of fees or capital expenditures, or provisions for future expenditures, including, without limitation, Organizational and Offering Expenses. "Certificate" means the certificate of limited partnership filed by the Partnership in the Office of the Department of State of the Commonwealth of Pennsylvania as may be amended from time to time. 2 "Closing Date" means the date, as designated by the General Partner, as of which the Units shall cease being offered to the public pursuant to the Offering, and shall be no later than the second anniversary of the Effective Date. "Code" means the Internal Revenue Code of 1986, as amended, and as may be amended from time to time by future federal tax statutes. Any reference this Agreement to a particular provision of the Code shall mean, where appropriate, the corresponding provision of any successor statute. "Competitive Equipment Sale Commission" means that brokerage fee paid for services rendered in connection with the purchase or sale of Equipment which is reasonable, customary, and competitive in light of the size, type, and location of the Equipment. "Conditional Sales Contract" means an agreement to sell Equipment to a buyer in which the seller reserves title to, and retains a security interest in, the Equipment until the Purchase Price of the Equipment is paid. "Controlling Person" means any person, whatever his or her title, performing functions for the General Partner or its Affiliates similar to those of chairman or member of the Board of Directors or executive management (such as the president, vice president or senior vice president, corporate secretary or treasurer), senior management (such as the vice president of an operating division who reports directly to executive management), or any person holding a five percent or more equity interest in the General Partner or its Affiliates or having the power to direct or cause the direction of the General Partner or its Affiliates, whether through the ownership of voting securities, by contract, or otherwise. "Cumulative Return" means the amount equal to a return at a rate of 10% per annum, compounded daily, on the Adjusted Capital Contribution of a Limited Partner, which amount shall begin accruing when the Limited Partner is admitted as a Limited Partner in the Partnership. "Debt Placement Fee" means the fee payable to the General Partner in accordance with Section 6.5 of this Agreement. "Distribution Fee" means for any year until changed by the General Partner in accordance with the following sentence, an amount not to exceed $25.00. The General Partner may change the amount of the Distribution Fee only by written notice to each Limited Partner who properly has elected to receive monthly distributions at least 30 days prior to the beginning of the calendar quarter that includes the first month to which the new Distribution Fee will apply. The Distribution Fee is designed to cover the additional postage and handling associated with the more frequent monthly distributions; the payment of which shall be subtracted equally from the distribution check of any Limited Partner receiving distributions of net cash flow on a monthly basis. "Effective Date" means the date on which the Partnership's registration statement on Form S-1 with respect to the Units, as filed with the Securities and Exchange Commission, becomes effective under the Securities Act of 1933, as amended. "Equipment" means each item of and all of the computer peripheral and other similar capital equipment purchased, owned, operated, and/or leased by the Partnership or in which the Partnership has acquired a direct or indirect interest, as more fully described in this Agreement, together with all appliances, parts, instruments, accessories, furnishings, or other equipment included therein and all substitutions, renewals, or replacements of, and all additions, improvements, and accessions to, any and all thereof. 3 "Equipment Acquisition Fee" means the fee payable to the General Partner in accordance with Section 6.3 of this Agreement. "Equipment Liquidation Fee" means the fee payable to the General Partner in accordance with Section 6.4 of this Agreement. "Equipment Management Fee" means the fee payable to the General Partner in accordance with Section 6.2 of this Agreement. "Equipment Management" means personnel and services necessary to the leasing activities of the Partnership, including but not limited to, leasing and re-leasing of Equipment, arranging for necessary maintenance and repair of the Equipment, collecting revenues, paying operating expenses, determining that the equipment is used in accordance with all operative contractual arrangements and providing clerical and bookkeeping services necessary to the operation of Equipment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Escrow Account" means the account at J.P.Morgan Chase Bank, New York, New York where Subscriptions will be held until they aggregate the Minimum Subscription Amount of $1,150,000. "Final Closing" means the last time at which subscribers for Units are admitted as Limited Partners. "Front-End Fees" means fees and expenses paid by any Person to any Person during the Partnership's organizational and acquisition phase including all Organizational and Offering Expenses (including the Organizational Fee, Acquisition Fees, Acquisition Expenses, Debt Placement Fees, Leasing Fees, and other similar fees and expenses); provided, however, any costs or expenses incurred by the General Partner or its Affiliates (not including the Partnership) which are not reimbursed by the Partnership, shall not be included as Front-End Fees. "Full Payout Net Lease" means an initial Net Lease of the Equipment under which the non-cancelable rental payments due (and which can be calculated at the commencement of the Net Lease) during the initial noncancellable fixed term (not including any renewal or extension period) of the lease or other contract for the use of the Equipment are at least sufficient to recover the Purchase Price of the Equipment. "Funding Date" means the date on which Capital Contributions are released to the Partnership from the Escrow Account. "General Partner" means Commonwealth Income & Growth Fund, Inc. and any additional, substitute or successor general partner of the Partnership. "Gross Lease Revenues" means Partnership gross receipts from leasing of the Equipment, except that, to the extent the Partnership has leased the Equipment from an unaffiliated party, it shall mean such receipts less any lease expense. "Independent Expert" means a Person with no current material or prior business or personal relationship with the General Partner who is engaged to a substantial extent in the business of rendering opinions regarding the value of assets of the type held by the Partnership and who is qualified to perform such work. "Initial Closing" means the first time subscribers for Units are admitted as Limited Partners. 4 "Investment in Equipment" means the amount of Capital Contributions actually paid or allocated to the purchase of or investment in Equipment by the Partnership including working capital reserves (except that working capital reserves in excess of three percent of Capital Contributions shall not be included) and other cash payments such as interest and taxes, but excluding Front-End Fees. "IRA" means an Individual Retirement Account as described in Section 408 of the Code. "Leasing Fees" means the total of all fees and commissions paid by any party in connection with the initial lease of Equipment acquired by the Partnership. "Limited Partner" means a Person who acquires Units and who is admitted to the Partnership as a limited partner in accordance with the terms of this Agreement. "Majority in Interest" means, with respect to the Partnership, Limited Partners holding more than 50% of the outstanding Units held by all Limited Partners at the Record Date for any vote or consent of the Limited Partners. "Minimum Subscription Amount" means an aggregate of $1,150,000 in subscriptions from Limited Partners. "Monthly Distribution Account" means an account established by the Partnership for the benefit of those Limited Partners who elect to receive monthly distributions of Cash Available for Distribution, into which account the amounts specified in 8.1.2(b) shall be deposited. "Net Disposition Proceeds" means the net proceeds realized by the Partnership from the refinancing, sale or other disposition of Equipment, including insurance proceeds or lessee indemnity payments arising from the loss or destruction of Equipment, less such amounts as are used to satisfy Partnership liabilities. "Net Lease" means a lease or other contract under which the owner provides equipment to a lessee or other operator in return for a payment, and the lessee assumes all obligations and pays for the operation, repair, maintenance, taxes and insuring of the equipment, so that the non-cancelable rental payments under the lease are absolutely net to the lessor. "Net Profits" or "Net Losses" shall be computed in accordance with Section 703(a) of the Code (including all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code) for each taxable year of the Partnership or shorter period prior or subsequent to an interim closing of the Partnership's books 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 Net Profits and Net Loss pursuant to this definition shall be added to such taxable income or shall reduce such taxable loss; (ii) any expenditure of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Net Profits and Net Losses pursuant to this definition shall be subtracted from such taxable income or loss; (iii) items of income, gain, loss and deduction specially allocated pursuant to Section 7.3 of this Agreement shall not be included in the computation of Net Profits or Net Loss; and if property is reflected on the books of the Partnership at a book value that differs from the adjusted tax basis of the property in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(d) or (f), depreciation, amortization, and gain or loss with respect to such property shall be determined by reference to such book value in a manner consistent with Treasury Regulation Section 1.704-1(b)(2)(iv)(g). The terms "Net Profit" or "Net Losses" shall include the Partnership's distributive share of the profit or loss of any partnership or joint venture in which it is a partner or joint venturer. 5 "Net Worth" means the excess of total assets over total liabilities as determined by generally accepted accounting principles, except that if any of such assets have been depreciated, then the amount of depreciation relative to any particular asset may be added to the depreciated cost of such asset to compute total assets. The amount of depreciation may be added only to the extent that the amount resulting after adding such depreciation does not exceed the fair market value of such asset. "Offering" means the initial public offering of the Units in the Partnership, as described in the Prospectus. "Offering Period" means the period commencing the Effective Date and ending the last day of the calendar month in which the Closing Date occurs. "Operating Lease" means a lease or other contractual arrangement under which an unaffiliated party agrees to pay the Partnership, directly or indirectly, for the use of the Equipment, and which is not a Full Payout Net Lease. "Organizational and Offering Expenses" means the expenses incurred in connection with the organization of the Partnership and in preparation of the offering for registration and subsequent offer and distribution of units to the public, including Underwriting Commissions, listing fees and advertising expenses except advertising expenses related to the leasing of the Program's equipment. "Organizational Fee" means the fee payable to the General Partner in accordance with Section 6.1 of this Agreement. "Participating Broker" means a member of the National Association of Securities Dealers, Inc. who will be engaged to sell Units. "Partners" means any one or more of the General Partner and the Limited Partners who are holders of a program interest. "Partnership" means Commonwealth Income & Growth Fund VI, a Pennsylvania limited partnership. "Partnership Interest" means the ownership interest of a Partner in the Partnership, as represented by his Capital Account, including all rights of such Partner under this Agreement. "Person" means an individual, partnership, joint venture, corporation, trust, estate or other legal entity. "Program" means a limited or general partnership, joint venture, unincorporated association or similar organization, other than a corporation, formed and operated for the primary purpose of investment in and the operation of or gain from an interest in Equipment. "Prospectus" means the Partnership's prospectus contained in the Registration Statement filed with the Securities and Exchange Commission ("Commission") for the registration of the Units under the Securities Act of 1933, as amended (the "1933 Act"), at effectiveness of such Registration Statement except that (A) if the Partnership files a post-effective amendment to the Registration Statement, then the term "Prospectus" shall, from and after the effectiveness of such post-effective amendment, refer to the amended prospectus then on file with the Commission and (B) if the Partnership files a form of prospectus or prospectus supplement pursuant to Rule 424(b) of the regulations of the Commission under the 1933 Act, then the term "Prospectus" shall refer to the prospectus as so filed or supplemented from and after the date of such filing. 6 "Purchase Price" means, with respect to any Equipment, an amount equal to the sum of (i) the invoice cost of such Equipment or any other such amount paid to the seller, (ii) any closing, delivery and installation charges associated therewith not included in such invoice cost and paid by or on behalf of the Partnership, (iii) the cost of any capitalized modifications or upgrades paid by or on behalf of the Partnership in connection with its purchase of the Equipment, and (iv) the amount of the Equipment Acquisition Fee and any other Acquisition Fees, but excluding points and prepaid interest. "Qualified Plan" means a trust established pursuant to the terms of a pension, profit sharing or stock bonus plan, including Keogh Plans, meeting the requirements of Section 401 and following of the Code. "Record Date" means, (a) for purposes of a meeting of, or actions by, the Limited Partners pursuant to Article 10 of this Agreement, the close of business on the business day preceding the date on which the written notice referred to in that Article is given, and (b) for purposes of Article 12 of this Agreement, the close of business on December 31 and June 30 of each year. "Retiring General Partner" means a general partner of the Partnership who or which has been removed or withdrawn as such or is Bankrupt, which has been involuntarily dissolved, or who has died or had a conservator appointed for the person or any of the property of such general partner. "Roll-Up" means a transaction involving the acquisition, merger, conversion, or consolidation, either directly or indirectly, of the Partnership and the issuance of securities of a Roll-Up Entity. Such term does not include: (i) a transaction involving securities if the securities have been listed for at least twelve months on a national securities exchange or traded through the NASD Automated Quotation National Market System; or (ii) a transaction involving the conversion to corporate, trust or association form of only the Partnership if, as a consequence of the transaction, there will be no significant adverse change in any of the following: (a) the Limited Partners' voting rights; (b) the term of existence of the Partnership; (c) compensation of the General Partner or its Affiliates; or (d) the Partnership's investment objectives. "Roll-Up Entity" means the partnership, corporation, trust or other entity that would be created or would survive after the successful completion of a proposed Roll-Up transaction. "Sponsor" means any Person directly or indirectly instrumental in organizing, wholly or in part, a Program or any Person who will manage or participate in the management of a Program, and any Affiliate of any such Person. Sponsor does not include a Person whose only relation with the Program is that of an independent equipment manager and whose only compensation is as such. Sponsor does not include wholly independent third parties such as attorneys, accountants, and underwriters whose only compensation is for professional services rendered in connection with the offering of Program interests. The word "Sponsor" may be used interchangeable to refer to the General Partner and its affiliates (other than the affiliated prior programs sponsored by the General Partner). "Substituted Limited Partner" means any Person admitted to the Partnership as a Limited Partner pursuant to the provisions of Section 11.2 of this Agreement. "Syndication Expenses" means all expenditures classified as syndication expenses pursuant to Treasury Regulations Section 1.709-2(b). Syndication Expenses shall be taken into account under this Agreement at the time they would be taken into account under the Partnership's method of accounting if they were deductible expenses. "Term Debt" means debt of the Partnership with a term in excess of twelve months, incurred with respect to acquiring or investing in Equipment, or refinancing non-Term Debt, but not debt incurred with respect to refinancing existing Partnership Term Debt. 7 "Terminating Event" means the first to occur of the withdrawal, removal, retirement, resignation, expulsion, Bankruptcy, involuntary dissolution, death, insanity or appointment of a conservator for the person or any of the assets of the last remaining general partner of the Partnership. "Treasury Regulations" means the income tax regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of successor regulations). "Underwriting Commissions" mean selling commissions and dealer-manager fees paid to broker-dealers by the Partnership in connection with the offer and sale of Units. "Unit" means a limited partnership interest in the Partnership. ARTICLE 2 ORGANIZATION 2.1. CONTINUATION. The Partners hereby continue the Partnership as a limited partnership under the Act. 2.2 NAME. The name of the Partnership shall continue to be "Commonwealth Income & Growth Fund VI" or such other name as may be selected by the General Partner, who shall give notice of any such other name to the Limited Partners. 2.3 PLACE OF BUSINESS. The principal place of business of the Partnership shall be Oaklands Corporate Center, 470 John Young Way, Suite 300, Exton, Pennsylvania 19341, or at another location selected by the General Partner, who shall give notice of any such other location to the Limited Partners. The Partnership may have such additional offices or places of business as the General Partner may determine. 2.4 REGISTERED OFFICE AND REGISTERED AGENT. The Partnership's registered office in the Commonwealth of Pennsylvania and its registered agent at such other office shall be determined by the General Partner. 2.5 BUSINESS. The principal business and purpose of the Partnership is to purchase, acquire, own, lease, re-lease, maintain, improve, manage, pledge, finance, convey, assign, dispose and sell Equipment pursuant to such arrangements as the General Partner in its sole discretion may enter into on behalf of the Partnership. The purpose and business of the Partnership includes the realization and distribution of cash from sales or other dispositions of Equipment. The Partnership is authorized to take any and all actions necessary, appropriate, advisable, incidental to, convenient for or related to this purpose or for the protection and benefit of the Partnership, unless expressly prohibited by this Agreement. 2.6 TERM. The Partnership shall exist for a term ending December 31, 2018, at which time it shall be dissolved, unless previously dissolved in accordance with this Agreement. 8 ARTICLE 3 CAPITAL CONTRIBUTIONS AND STATUS OF PARTNERS 3.1 GENERAL PARTNER. The General Partner has contributed $1,000 to the capital of the Partnership. Except as provided in this Section and Section 14.4.3, the General Partner shall have no obligation to make any Capital Contribution or to loan or otherwise provide funds to the Partnership or any partnership, joint venture or other entity in which the Partnership has an interest, even if the failure to do so would or could result in a default by the Partnership, foreclosure upon the properties of the Partnership or any such partnership, joint venture or other entity, or any other consequence adverse to the Partnership or any such partnership, joint venture or other entity. 3.2 LIMITED PARTNERS. Limited Partners shall be those persons whose subscriptions for Units have been accepted by the General Partner and who are reflected in the records of the Partnership as purchasing Units from the Partnership and Substituted Limited Partners where a transfer of Units is made pursuant to Article 11. The Partnership intends to offer and sell not less than $1,150,000 nor more than $50,000,000 worth of Units of limited partnership interests and to admit as Limited Partners the persons who contribute cash to the capital of the Partnership as the purchase price for the Units. 3.3 CAPITAL CONTRIBUTION OF LIMITED PARTNERS. 3.3.1 Each Limited Partner shall make a capital contribution of $20.00, (or the subscription price of $20.00 less the volume discount stated in the Prospectus), as the purchase price for each Unit which he purchases from the Partnership. The Capital Contributions of the Limited Partners shall be made in cash. Except as required by the Act, each Unit shall be fully paid and non-assessable, no assessments for payments by the Limited Partners will be made by the General Partner, and no plans calling for any installment payments, warrants, options or other staged or deferred payments shall be allowed. 3.3.2 Any portion of the net proceeds from sales of the Units which is not invested or committed for Investment in Equipment or for any Partnership purposes or reserved for necessary operating expenses within 12 months from the Final Closing shall be distributed to the Limited Partners by the Partnership as a return of capital, without reduction for the General Partner's Organizational Fee or for any Equipment Acquisition Fee which would have been payable to the General Partner if such proceeds had been invested. Funds will be deemed to have been committed to investment and will not be returned to the Limited Partners to the extent written agreements in principle, commitment letters, letters of intent or understanding or any similar contracts or understandings have, at any time before the end of such 12-month period, been executed, provided that such investments are consummated. Should any such investment not be consummated, the funds attributable thereto shall be distributed to the Limited Partners in a timely manner. 3.4 REGISTRATION. Upon the admission of a person as a Limited Partner or Substituted Limited Partner, such Person shall be registered on the records of the Partnership as a Limited Partner, together with his address, the number of Units he owns, and his transferor's Capital Contribution. Each person registered as a holder of record of Units shall continue to be the holder of record of such Units until notification of the transfer of any such Units is given in accordance with the terms of this Agreement. A holder of record shall be entitled to all distributions and all allocations of Net Profits and Net Losses with respect to Units registered in his name and to all other rights of a Limited Partner until his rights in such Units have been transferred and the General Partner has been notified as required herein. The Partnership shall not be affected by any notice or knowledge of transfer of any interest in any Unit, except as expressly provided in Article 11. The payment to the holder of record of any distribution with respect to such Units shall discharge the Partnership of its obligations in respect thereto. 9 3.5 WITHDRAWAL OF CAPITAL CONTRIBUTIONS. Except as otherwise provided in this Agreement, no Partner shall have the right to withdraw or reduce his Capital Contribution. No Partner shall have the right to bring an action for partition against the Partnership or to demand or receive property other than cash in return for his capital contribution. No Limited Partner shall have priority over any other Limited Partner, either as to the return of his Capital Contribution or as to Net Profits, Net Losses or distributions. 3.6 ADMISSION OF LIMITED PARTNER. The Initial Closing shall take place not later than 15 days after the release from the Escrow Account of the subscribers' funds to the Partnership. Thereafter, subscribers shall be admitted as Limited Partners not later than the last day of the calendar month following the date their subscriptions are accepted by the Partnership, and in accordance with Article 11. The General Partner shall determine whether subscriptions received after the Initial Closing will be accepted or rejected within 30 days of their receipt by the Partnership and, if a subscription is rejected, the subscription funds will be immediately returned to the subscriber without interest. 3.7 CONTINUATION OF LIMITED PARTNER STATUS. Once admitted as a Limited Partner, a Person shall, except as otherwise provided in the Agreement, continue to be a Limited Partner for all purposes of this Agreement and the Certificate of Limited Partnership, as amended from time to time, until a Substituted Limited Partner is admitted in place of such person pursuant to the provisions of Article 11. 3.8 LIMITED LIABILITY OF LIMITED PARTNERS. No Limited Partner, in his capacity as such, shall be liable for the debts, liabilities, contracts or any other obligations of the Partnership or any partnership, joint venture or other entity in which the Partnership has an interest. No Limited Partner shall be obligated to make any Capital Contribution or to loan or otherwise provide funds to the Partnership; provided, however, in accordance with the Act, Limited Partners will be obligated to return any distribution from the Partnership to the extent that, after giving effect to the distribution, all liabilities of the Partnership (other than nonrecourse liabilities and liabilities to Limited Partners on account of their interests in the Partnership) exceed the fair value of its assets (including, as to assets serving as security for nonrecourse liabilities, that portion of the fair value of such assets which exceeds the amount of such nonrecourse liabilities). ARTICLE 4 PARTNERS' CAPITAL 4.1 CAPITAL ACCOUNTS. A separate Capital Account shall be established and maintained for each Partner. The Capital Account of each Partner shall be credited with such Partner's Capital Contribution, plus all Net Profits and items of income and gain of the Partnership allocated to such Partner pursuant to Article 7, and shall be debited with the sum of (a) all Net Losses and items of loss or deduction of the Partnership allocated to such Partner pursuant to Article 7, and (b) all cash and the fair market value of any property (net of liabilities of the Partnership assumed by such Partner and the liabilities to which such property is subject) distributed by the Partnership to such Partner pursuant to Article 8. The computation of the amount of the Capital Account of a Partner shall be determined in all events solely in accordance with the rules set forth in Treasury Regulation Section 1.704-1(b)(2)(iv). Any references in this Agreement to the Capital Account of a Partner shall be deemed to refer to such Capital Account as the same may be credited or debited from time to time as set forth above in this Section 4.1. 4.2 WITHDRAWAL AND RETURN OF CAPITAL. No Limited Partner shall withdraw any of his capital without the consent of the General Partner and Limited Partners holding a Majority in Interest of the Units, except upon dissolution or liquidation of the Partnership or as provided in Article 12. Under circumstances requiring a return of any Capital Contribution or constituting a withdrawal of a Limited 10 Partner, no Limited Partner shall have the right to receive property other than cash, except as may be specifically provided in this Agreement. 4.3 INTEREST ON CAPITAL. No interest shall be paid on any Capital Contribution made to the Partnership. ARTICLE 5 PARTNERSHIP EXPENSES 5.1 ORGANIZATION EXPENSES. The General Partner shall bear and pay all Organizational and Offering Expenses other than Underwriting Commissions. 5.2 OTHER EXPENSES. All expenses of the Partnership, other than the expenses required to be paid by the General Partner pursuant to Section 5.1, shall be billed (to the extent practicable) directly to and paid by the Partnership. Subject to Section 5.1, the General Partner and its Affiliates shall be reimbursed for the actual cost of goods and materials used for or by the Partnership and obtained from entities unaffiliated with the General Partner. Subject to (and only in accordance with) the foregoing, the Partnership shall pay (or reimburse the General Partner and its Affiliates for) the lower of the actual cost or the amount the Partnership would have to pay independent third parties for such services in the same geographic area of all expenses related to the administration and operation of the Partnership, including without limitation: 5.2.1 all costs of personnel involved in the business of the Partnership; 5.2.2 all taxes and assessments on Equipment and other taxes applicable to the Partnership; 5.2.3 legal, appraisal, audit, accounting and other professional fees; 5.2.4 printing and other expenses incurred in connection with the transfer, registration and recording of documents evidencing ownership of Units or in connection with the business of the Partnership; 5.2.5 fees and expenses paid to independent contractors, mortgage bankers, equipment brokers, servicers, leasing agents, consultants, equipment lease brokers, insurance brokers and other agents; 5.2.6 expenses paid to nonaffiliated parties in connection with the disposition, replacement, alteration, maintenance and repair, leasing, re-leasing, storage and operation of Equipment (including the costs and expenses for foreclosures, insurance premiums, equipment lease brokerage and leasing commissions and of maintenance of Equipment); 5.2.7 subject to Section 9.4.4, expenses in connection with the acquisition of Equipment other than Equipment acquired through the proceeds of the offering of the Units; 5.2.8 expenses of revising, amending, converting, modifying or terminating the Partnership or this Agreement; 5.2.9 the cost of preparation and dissemination of the informational material and documentation relating to potential sale, leasing, re-leasing, financing or other disposition of Equipment; 11 5.2.10 costs incurred in connection with any litigation in which the Partnership is involved or proceedings conducted by any regulatory agency, including legal and accounting fees incurred in connection therewith; 5.2.11 costs of any accounting, statistical or bookkeeping equipment necessary for the maintenance of the books and records of the Partnership; 5.2.12 costs of investor communications and regulatory reports, including without limitation initiation, review and approval of reports and communications to Limited Partners or regulatory agencies; expenses in connection with distributions made by the Partnership to, and communications, bookkeeping and clerical work necessary in maintaining relations with, Limited Partners, including the costs of design, production, printing and mailing of reports, conducting elections in any circumstance requiring a vote of the Limited Partners, holding meetings with Limited Partners, and preparing and mailing reports required to be furnished to Limited Partners for tax reporting or other purposes or reports which the General Partner deems to be in the best interests of the Partnership; 5.2.13 expenses of professionals employed by the Partnership in connection with any of the foregoing, including attorneys, accountants, and appraisers; and 5.2.14 such other related administrative expenses as are necessary to the prudent operation of the Partnership. 5.3 EXCLUDED EXPENSES. No reimbursement shall be permitted for services for which the General Partner is entitled to compensation by way of a separate fee. Excluded from the allowable reimbursement shall be (i) rent or depreciation, utilities, capital equipment, other administrative items; and (ii) salaries, fringe benefits, travel expenses and other administrative items incurred or allocated to any Controlling Person of the General Partner. ARTICLE 6 COMPENSATION OF THE GENERAL PARTNER 6.1 ORGANIZATIONAL FEE. For the services and activities of the General Partner performed and to be performed by the General Partner in connection with the organization of the Partnership, the General Partner will be paid an Organizational Fee equal to three percent of the first $25,000,000 of Limited Partners' Capital Contributions plus two percent of the Limited Partners' Capital Contributions in excess of $25,000,000. The Organizational Fee will accrue and be paid as Limited Partners are admitted to the Partnership. 6.2 EQUIPMENT MANAGEMENT FEE. For the services and activities performed and to be performed by the General Partner and its Affiliates in connection with Equipment Management, the General Partner shall receive a monthly fee equal to the lesser of (a) the fees which would be charged by an independent third party in the same geographic market for similar services and equipment or (b) the sum of (i) two percent of Gross Lease Revenues attributable to Equipment subject to Full Payout Net Leases which contain net lease provisions and (ii) five percent of the Gross Lease Revenues attributable to Equipment subject to Operating Leases. The Equipment Management Fee shall accrue as funds are received by the Partnership and shall be paid to the General Partner on conclusion of each calendar month, except such Equipment Management Fee may be accrued as a debt of the Partnership payable, without interest, out of future available cash if the Partnership does not generate sufficient cash from operations to pay the Equipment Management Fee currently, or if the General Partner determines that such action is in the best interest of the Partnership. Fees or expenses to nonaffiliated parties for such services and activities shall be paid by the General Partner from its Equipment Management Fee. 12 6.3 EQUIPMENT ACQUISITION FEE. For the services and activities performed and to be performed by the General Partner in connection with the acquisition and lease of Equipment, the General Partner shall receive an Equipment Acquisition Fee of four percent of the Purchase Price of each item of Equipment purchased. The Equipment Acquisition Fee will be paid from the net proceeds of the Offering which are available to be used to purchase Equipment when such proceeds are received by the Partnership. To the extent that the Partnership acquires Equipment at an aggregate Purchase Price exceeding the net proceeds of the Offering available to be used to purchase Equipment, the Equipment Acquisition fee will be paid with respect to that Equipment as the Equipment is acquired. 6.4 EQUIPMENT LIQUIDATION FEE. For the services and activities to be performed by the General Partner in connection with the disposition of the Partnership's Equipment (other than by a Conditional Sales Contract), the General Partner shall receive an Equipment Liquidation Fee equal to the lesser of (a) 50% of the Competitive Equipment Sale Commission or (b) three percent of the sales price of such Equipment. The payment of the Equipment Liquidation Fee shall be made as proceeds of the sale are received and is subordinated to the receipt by the Limited Partners of a return of their Capital Contributions plus the Cumulative Return. Such fee will be reduced to the extent any liquidation or resale fees are paid to unaffiliated parties. 6.5 DEBT PLACEMENT FEE. For the services rendered or to be rendered by the General Partner's arrangement of Term Debt to finance the acquisition of Equipment by the Partnership, the General Partner shall receive a Debt Placement Fee equal to one percent of such indebtedness. Such fee shall be paid when the proceeds of the Term Debt are received by the Partnership and shall be reduced to the extent the Partnership incurs such fees to third parties unaffiliated with the General Partner or the lender with respect to such indebtedness, and no such fee will be paid with respect to borrowings from the General Partner or its Affiliates. 6.6 LIMITATIONS ON FEES. The Partnership shall commit a substantial portion of Capital Contributions toward Investment in Equipment. The remaining Capital Contributions may be used to pay Front-End Fees. The Partnership will commit a percentage of Capital Contributions to Investment in Equipment which is equal to the greater of (i) 80% of Capital Contributions reduced by .0625% for each one percent of indebtedness encumbering Equipment or (ii) 75% of Capital Contributions. To calculate the percent of indebtedness encumbering Equipment, divide the amount of indebtedness by the Purchase Price (excluding Front-End Fees) and multiply the quotient by .0625% to determine the percentage to be deducted from 80%. For example, if the percentage of indebtedness were 30%, the percentage to be deducted from 80% is 1.875% (30 x .0625) and the percentage to be committed to Investment in Equipment is 78.125% (80-1.875). ARTICLE 7 ALLOCATION OF NET PROFITS, NET LOSSES AND OTHER ITEMS 7.1 NET PROFITS. 7.1.1 Net Profits for each fiscal year of the Partnership (other than Net Profits arising from transactions in connection with the termination or liquidation of the Partnership) shall be allocated as follows: (a) to the General Partner, the greater of (i) one percent of such Net Profits or (ii) Net Profits equal to the excess, if any, of (A) all distributions to the General Partner pursuant to Section 8.1.1 with respect to such fiscal year and all prior fiscal years over (B) the 13 total Net Profits allocated to the General Partner pursuant to this Section 7.1.1(a) for all such prior fiscal years; and (b) any balance to the Limited Partners. 7.1.2 Net Profits arising from transactions in connection with the termination or liquidation of the Partnership shall be allocated in the following order of priority: (a) Net Profits shall be allocated to each Partner in an amount equal to the negative amount, if any, of his Capital Account. If the Net Profits available to be so allocated is less than the sum of all Partners' negative Capital Accounts, then such Net Profits shall be allocated to the Partners in proportion to the respective amounts of their negative Capital Accounts. (b) An amount of Net Profits equal to the excess of (A) the proceeds from such transaction that would be distributed to the Partners pursuant to Section 8.1.1 (without regard to Section 8.1.3) over (B) the aggregate Capital Accounts (as adjusted to reflect the allocation of Net Profit pursuant to Sections 7.1.1 and 7.1.2(a) and assuming that Cash Available for Distribution other than such proceeds had already been distributed) of all Partners shall be allocated among such Partners in proportion to their respective shares of such excess. (c) Any remaining Net Profits shall be allocated in the same proportions that cash distributions equal to such remaining Net Profits would be distributed pursuant to Section 8.1 (without regard to Section 8.1.3). 7.2 NET LOSSES. Net Losses for each fiscal year of the Partnership shall be allocated 99% to the Limited Partners and one percent to the General Partner. 7.3 REQUIRED ALLOCATIONS. Notwithstanding Sections 7.1 and 7.2: 7.3.1 Except as otherwise provided in Treasury Regulation Section 1.704-2(f), notwithstanding any other prevision of this Article 7, if there is a net decrease in "partnership minimum gain" (as defined in Treasury Regulation Sections 1.704-2(b)(2) and 1.704-2(d)) during a Partnership taxable year, then each Partner shall be specially allocated, before any other allocation is made of Partnership items for such taxable year, items of income and gain for such taxable year (and, if necessary, subsequent years) in an amount equal to such Partner's share of the net decrease in partnership minimum gain, determined in accordance with Treasury Regulation Section 1.704-2(g). The items to be so allocated shall be determined in accordance with Treasury Regulation Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 7.3.1 is intended to comply and shall be interpreted consistently with the "minimum gain chargeback" requirement of Treasury Regulation Section 1.704-(2)(f); 7.3.2 No loss or deduction shall be allocated to a Partner if such allocation would create a deficit balance in such Partner's Capital Account in excess of the amount such Partner is obligated to restore to the Partnership or is treated as being obligated to restore to the Partnership under Treasury Regulations Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) or 1.740-2(i)(5). Any losses or deductions that cannot be allocated to a Partner because of the foregoing limitation shall be allocated among the Partners in accordance with their relative ownership of Units, subject to the limitations of this Section 7.3.2. 7.3.3 Any Partner who unexpectedly receives with respect to the Partnership: (a) an adjustment pursuant to Treasury Regulation 1.704-1(b)(2)(iv)(k); (b) an allocation of loss or deduction pursuant to Sections 704(e)(2) or 706(d) of the Code or pursuant to Treasury Regulation Section 1.751- 1(b)(2)(ii); or 14 (c) a distribution in excess of an offsetting increase to such Partner's Capital Account reasonably expected to occur during (or prior to) the Partnership taxable year in which such distribution occurs, will be allocated, as quickly as possible, items of income and gain in an amount and manner sufficient to eliminate any resulting deficit balance in his Capital Account in excess of the amount such Partner is obligated to restore to the Partnership or is treated as being obligated to restore to the Partnership under Treasury Regulations Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) or 1.740-2(i)(5) in accordance with the "qualified income offset" provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d); 7.3.4 Loss, deductions, and expenditures attributable to nonrecourse debt for which a Partner bears the economic risk of loss shall be determined and allocated to the Partner who bears such economic risk of loss in accordance with Treasury Regulation Section 1.704-2, and if there is a decrease in "partner nonrecourse debt minimum gain" (as defined in Treasury Regulation Section 1.704-2(i)(3)), any Partner with a share of that partner nonrecourse debt minimum gain shall be allocated items of income and gain in accordance with the chargeback provisions of Treasury Regulations Section 1.704-2(i)(4); 7.3.5 For purposes of this Section 7.3, a Partner's Capital Account deficit balance shall be determined by excluding from such Partner's Capital Account any amount such Partner is obligated to restore to the Partnership or treated as obligated to restore to the Partnership under Treasury Regulations Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(l) or 1.704-2(i)(5), and by adjusting such Partner's Capital Account balance for items described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6); and 7.3.6 If property is reflected on the books of the Partnership at a book value that differs from the adjusted tax basis of the property in accordance with Treasury Regulations Section 1.704- 1(b)(2)(iv)(d) or (f), depreciation, amortization, and gain or loss as determined for federal income tax purposes shall be allocated so as to take into account such difference between book value and adjusted tax basis in accordance with the principles of Code Section 704(c). The General Partner shall have the authority to elect the method to be used by the Partnership for allocating items required by Section 704(c) of the Code and such election shall be binding on the Limited Partners. 7.4 SYNDICATION EXPENSES. Syndication Expenses attributable to the Underwriting Commissions paid on the Partnership's sale of any Unit shall be specially allocated to the Limited Partner who owns the Units, and all other Syndication Expenses shall be allocated to the Limited Partners who are admitted to the Partnership from time to time so that, to the extent possible, the cumulative Syndication Expenses (other than Underwriting Commissions) allocated with respect to each Unit at any time is the same. If the General Partner determines that such result is not likely to be achieved through future allocations of Syndication Expenses, the General Partner may allocate a portion of Net Profits or Net Losses to achieve the same effect on the Capital Accounts of the Limited Partners. 7.5 RECHARACTERIZATION OF FEES. Any fees paid to the General Partner or any of its Affiliates which are disallowed as deductible expenses by the Internal Revenue Service shall constitute special allocations of gross income to the General Partner for income tax purposes. 7.6 RECAPTURE. If the Partnership recognizes gain on the sale, exchange or other disposition of any property, any portion of such gain which is treated as ordinary income pursuant to Code Section 1245 shall be divided between the General Partner and the Limited Partners in proportion to the aggregate deductions for cost recovery and depreciation previously allocated to them and not yet recaptured and shall be allocated among the Limited Partners in the same proportions as the gain from such disposition is allocated among them. 15 7.7 ALLOCATIONS AMONG LIMITED PARTNERS. Except as otherwise provided in this Agreement, Net Profits and Net Losses allocated to the Limited Partners for any fiscal year shall generally be divided among them in proportion to their Units for such fiscal year. In the event that additional Limited Partners are admitted to the partnership pursuant to Article 3.6 hereof on dates during the taxable year other than January 1, or units of a Limited Partner are redeemed pursuant to Article 12 hereof on dates during the taxable year other than December 31, Net Profits and Net Losses allocated to the Limited Partners for such year shall be allocated among them in proportion to the number of Units each holds from time to time during such year in accordance with Code Section 706, using any convention permitted by law and selected by the General Partner. If an interest of a Partner in the Partnership is transferred in accordance with Section 11 of this Agreement, the General Partner, in its sole discretion, may allocate such items of Net Profits, Net Loss, and credit by closing the books of the Partnership immediately after the transfer of the interest or by using any other convention permitted under Code Section 706 and selected by the General Partner. All such allocations shall be made without regard to the date, amount or recipient of any distributions which may have been made with respect to such transferred interest. 7.8 OTHER ALLOCATIONS. Any allocations not otherwise provided for shall be divided among the Partners in the same proportions as they share Net Profits or Net Losses, as the case may be, for the period. ARTICLE 8 DISTRIBUTIONS 8.1 CASH DISTRIBUTIONS. For purposes of this Article Eight, the following terms should have the meanings set forth below: (a) "Limited Partner" means each Limited Partner of the Partnership, as defined in Article 1, and includes all the Monthly Limited Partners and all the Quarterly Limited Partners. (b) "Monthly Limited Partner" means any Limited Partner who makes a Capital Contribution of $5,000 or more and who, for the quarter in question, has elected (either (i) by written notice to the General Partner upon subscription or (ii) thereafter, upon ten days' prior written notice to the General Partner, effective as of the beginning of the following quarter), to receive monthly distributions of cash available for distribution. (c) "Quarterly Limited Partner" means any Limited Partner other than a Monthly Limited Partner. 8.1.1 Except as otherwise provided in this Section 8.1, Cash Available for Distribution shall be distributed as follows: (a) The General Partner, within thirty (30) days following the close of each fiscal quarter or as soon thereafter as practicable, shall determine in its sole and absolute discretion, the amount of Cash Available for Distribution. (b) 99% to the Limited Partners and one percent to the General Partner (which one percent may be considered a Carried Interest) until (i) each Limited Partner has received an amount equal to the excess, if any, of (A) the Cumulative Return from the inception of the Partnership to the date of the distribution, over (B) the sum of all prior distributions under this Section 8.1.1(b)(i), and (ii) each Limited Partner's Adjusted Capital Contribution has been reduced to zero; and 16 (c) thereafter, 90% to the Limited Partners and a promotional interest of ten percent to the General Partner. 8.1.2 Cash Available for Distribution (a) Cash Available for Distribution to the Limited Partners on a quarterly basis shall be allocated between the Monthly Limited Partners, as a group, and the Quarterly Limited Partners, as a group, in proportion to the number of Units owned by each such group of Limited Partners. (b) The portion of Cash Available for Distribution allocable to the Quarterly Limited Partners shall be distributed to the Quarterly Limited Partners and one-third (1/3) of the portion allocable to the Monthly Limited Partners shall be distributed to the Monthly Limited Partners, with all such distributions to be made within thirty (30) days following the close of each fiscal quarter or as soon thereafter as practicable. The remaining two-thirds (2/3) of the Cash Available for Distribution to the Monthly Limited Partners shall be deposited in the Monthly Distribution Account. One-half (1/2) of the amount so deposited shall be distributed to the Monthly Limited Partners within seventy (70) days following the close of such immediately preceding fiscal quarter, or as soon thereafter as practicable, and the remainder of the Cash Available for Distribution so deposited shall be distributed within one hundred (100) days following the close of such immediately preceding fiscal quarter, or as soon thereafter as practicable. Notwithstanding the foregoing, each distribution pursuant to this Article Eight that is payable to the Monthly Limited Partners first shall be reduced by an amount equal to the Distribution Fee, less any interest earned on the Monthly Distribution Account. For purposes of determining the Adjusted Capital Account of a Monthly Limited Partner and the Cumulative Return with respect to such Monthly Limited Partner, the amount distributed to such Monthly Limited Partner shall be deemed to be the full amount to be distributed to such Partner pursuant to this Article 8.1.2(b), unreduced by any portion of the Distribution Fee, and such full amount shall be deemed to have been distributed to such Partner when the first one-third (1/3) portion thereof is distributed to such Partner pursuant to the first sentence of this Article 8.1.2(b). 8.1.3 Notwithstanding Section 8.1.1, amounts distributed in connection with the liquidation of the Partnership or a Partner's interest (within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)) shall be distributed in accordance with the Partner's positive Capital Account as adjusted for all operations and transactions preceding such distribution. 8.1.4 Notwithstanding Section 8.1.1, if the proceeds resulting from the sale of any Equipment are reinvested in Equipment, sufficient cash will be distributed to the Partners to pay the additional federal income tax resulting from such sale for a Partner in a 35% federal income tax bracket or, if different, the maximum federal income tax rate in effect for individuals for such taxable year. 8.2 ALLOCATION OF DISTRIBUTIONS TO LIMITED PARTNERS. Distributions to the Limited Partners with respect to any period other than during the Offering Period shall be allocated pro rata among the Limited Partners who are Limited Partners on the Record Date for purposes of such distributions. Distributions to the Limited Partners during the Offering Period shall be allocated among the Limited Partners in proportion to their Average Daily Units for the period with respect to which the distribution is made. 8.3 AMOUNTS WITHHELD. Any amounts withheld pursuant to Section 9.1.16 shall be treated as amounts distributed to the Partners for all purposes under this Agreement. Amounts treated as distributed to a Partner pursuant to this Section 8.3 shall reduce the amounts otherwise distributed to such Partner pursuant to this Agreement. 17 8.4 RETURN OF OFFERING PROCEEDS. If all of the net proceeds of the Offering are not invested by the Partnership in Equipment or committed to such investment or otherwise utilized for proper Partnership purposes prior to the expiration of 12 months from the Closing Date, the net proceeds not so invested, committed, or set aside as working capital reserves will thereupon be promptly returned, with a proportionate share of interest at the rate earned by the Partnership on the investment of such proceeds, to the Limited Partners based upon their respective numbers of Units and time of purchase, without reduction for the General Partner's Organizational Fee or for any Equipment Acquisition Fee which would have been payable to the General Partner if such proceeds had been invested. For such purpose, funds will be deemed to be committed to investment and will not be returned to the Limited Partners to the extent written agreements in principle, commitment letters, letters of intent or understanding, option agreements, or any similar contracts or understandings exist, whether or not any such investment is ultimately consummated. Funds will also be deemed to be committed to the extent: (i) any funds may have been reserved to make contingent payments in connection with any Equipment already acquired, whether or not any such payments are ultimately made; (ii) as a condition to obtaining financing the Partnership is required to maintain funds s a compensating balance; or (iii) the General Partner decides that an addition to the working capital reserve is necessary in connection with any Equipment. ARTICLE 9 RIGHTS, POWERS, AND DUTIES OF GENERAL PARTNER 9.1 RIGHTS AND POWERS. Except as otherwise specifically provided in this Agreement, the General Partner shall exercise complete and exclusive control over the management of the Partnership business and affairs. In addition to any other rights and powers which the General Partner may possess under this Agreement and the Act, the General Partner shall, except to the extent otherwise provided in this Agreement, have all rights and powers required or appropriate to its management of the Partnership and the Partnership's business, which byway of illustration but not by way of limitation, include the following rights and powers which may be exercised on behalf of, and, subject to Article 5, at the expense of, the Partnership: 9.1.1 to acquire, purchase, hold, sell, exchange or otherwise transfer Equipment; to lease Equipment to third parties; to make loans to manufacturers of Equipment with respect to and secured by Equipment leased directly by the manufacturer to third parties; and to enter into agreements with others with respect to such activities, which agreements may contain such provisions as the General Partner in its sole and absolute discretion shall approve; 9.1.2 to invest Partnership funds in commercial paper, government securities, certificates of deposit, time deposits, bankers acceptances, money market certificates or accounts, or other short-term investments (such as money market funds) which the General Partner deems appropriate; 9.1.3 subject to Section 17.2.3, to purchase liability, casualty and other insurance which the General Partner deems appropriate for the protection of the Equipment or for any purpose convenient or beneficial to the Partnership, provided that the General Partner will not provide insurance services to the Partnership; 9.1.4 to delegate all or any of its duties under this Agreement, and in furtherance of any such delegation to appoint, employ or contract with any persons, which persons may, under the supervision of the General Partner, administer or assist in the day-to-day operations of the Partnership; act as consultants, accountants, correspondents, attorneys, brokers, escrow agents or in any other capacity deemed by the General Partner necessary or desirable; and perform such other acts or services for the Partnership as the General Partner in its sole and absolute discretion may approve; 18 9.1.5 to designate and appoint one or more agents for the Partnership who shall have authority as may be conferred on them by the General Partner, and who may perform any of the duties, and exercise any of the powers and authority, conferred on the General Partner under this Agreement, including, but not limited to, designation of one or more agents as authorized signatories on any bank accounts maintained by the Partnership; 9.1.6 to act in its own name as nominee for the Partnership and to place title to Partnership assets in its own name or the names of others as nominees or trustees for any purpose convenient or beneficial to the Partnership; 9.1.7 to collect all amounts due to the Partnership, and otherwise to enforce all rights of the Partnership including rights under any lease of its assets, and to retain counsel and institute suits or proceedings, in the name and on behalf of the Partnership; 9.1.8 to establish and maintain one or more bank accounts for the Partnership in such bank or banks as the General Partner may, from time to time, designate as depositaries of the funds of the Partnership; 9.1.9 to make or revoke any elections permitted under the Code; 9.1.10 to determine the appropriate accounting method or methods to be used by the Partnership; 9.1.11 to offer and sell Units of the Partnership to the public directly or through Commonwealth Capital Securities Corp. or any licensed Affiliate of the General Partner; to employ personnel, agents and dealers for such purpose; and, in connection therewith, to cause the Partnership to indemnify Commonwealth Capital Securities Corp. to the extent permitted under federal and state securities laws; 9.1.12 to admit the purchasers of the Units as Limited Partners of the Partnership, to amend this Agreement and the Certificate to reflect the addition or substitution of Limited Partners and the reduction of Capital Accounts on the return of capital to Partners; 9.1.13 to borrow money for Partnership purposes (other with respect to Equipment purchased with initial offering proceeds before the net offering proceeds are fully invested, or committed to investment, in Equipment) and as security therefor to mortgage, pledge, hypothecate or encumber or otherwise place liens upon all or part of the Equipment and other property of the Partnership, to pledge or encumber the assets of the Partnership to secure any remarketing rights of vendors or suppliers of Equipment; 9.1.14 to prepay in whole or in part, refinance, increase, modify, consolidate, extend or increase any lien or encumbrance affecting any Equipment; 9.1.15 to require in all Partnership obligations that the General Partner shall not have any personal liability thereon but that the person or entity contracting with the Partnership is to look solely to the Partnership and its assets for satisfaction; provided, however, that the inclusion of such provisions shall not materially affect the cost of the service or material being supplied; 9.1.16 to withhold income taxes as required or permitted by any federal, state or local taxing authority, and otherwise to comply with and take actions necessary or appropriate as a result of provisions of the Code or any state or other tax law requiring or permitting withholding; 19 9.1.17 to deal with, or otherwise engage in business with, any person who has dealt with or engaged in business with or may in the future deal with or engage in business with the General Partner or its Affiliates; provided that no such dealing or engaging in business may involve any arrangement which would circumvent any of the provisions of this Agreement, including the restrictions against dealing with the General Partner or its Affiliates; 9.1.18 to commence the dissolution and liquidation of the Partnership in its eleventh year of existence in order to terminate the Partnership by December 31, 2018; and 9.1.19 to prohibit Qualified Plans from acquiring, individually or in the aggregate, more than 25% of the Units. 9.2 RELIANCE ON CERTIFICATE OF GENERAL PARTNER. Any person dealing with the Partnership or the General Partner may rely on a certificate signed by the General Partner as authority with respect to (a) the identity of any General Partner or Limited Partner; (b) the existence or nonexistence of any fact or facts which constitute a condition precedent to acts by the General Partner or in any other manner are germane to the affairs of the Partnership; (c) the persons who are authorized to execute and deliver any instrument or document of the Partnership; or (d) any act or failure to act by the Partnership or as to any other matter involving the Partnership or any Partner. 9.3 INDEPENDENT ACTIVITIES. The General Partner and its Affiliates and each Limited Partner may, notwithstanding the existence of this Agreement, engage in whatever activities they choose, whether competitive with the Partnership or otherwise, without having or incurring any obligation to offer any interest in such activities to the Partnership or any party hereto. The General Partner and its Affiliates shall not be obligated to present to the Partnership any particular investment opportunity which comes to their attention if the General Partner, in good faith, determines that such opportunity is not an appropriate investment for the Partnership at that time or if the opportunity is not presented to the Partnership because it has been presented to other partnerships sponsored by the General Partner that may have priority based on criteria established by the General Partner. Subject to the foregoing, neither this Agreement nor any activity undertaken pursuant hereto shall prevent the General Partner or its Affiliates from engaging in any activity, or require the General Partner or its Affiliates to permit the Partnership or any Limited Partner to participate therein. The General Partner may organize and participate as a general partner in partnerships which may engage in activities similar to the activity engaged in by this Partnership and which may use the name "Commonwealth Income & Growth Fund" or variations of such name. The General Partner retains the rights to such name and its variations. The General Partner will give priority to the Limited Partners when the interests of the Limited Partners conflict with the interests of the General Partner. If one or more programs affiliated with the General Partner and the Partnership are in a position to acquire the same Equipment, the General Partner will determine which program will purchase the Equipment based upon the objectives of each and the suitability of the acquisition in light of those objectives. The General Partner will generally afford priority to the program or entity that has had funds available to purchase Equipment for the longest period of time. In addition, in order to promote diversification of Equipment and lessees, when two or more programs are in a position to acquire the same Equipment, the General Partner may acquire Equipment in joint ventures with affiliated investor programs. If one or more investor programs affiliated with the General Partner and the Partnership are in a position to enter into leases with the same lessee or to sell Equipment to the same purchaser, the General Partner will generally afford priority to the Equipment which has been available for lease or sale for the longest period of time. 20 9.4 DUTIES. 9.4.1 The General Partner shall manage and control the Partnership, its business and affairs. The General Partner shall devote such time to the business of the Partnership as in its discretion it determines is necessary for the efficient carrying on of the business. 9.4.2 The General Partner shall be the tax matters partner of the Partnership as defined under the Code, and as such tax matters partner, shall be subject to Section 17.2 of this Agreement. 9.4.3 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. The General Partner shall not employ, or permit another to employ, such funds or assets in any manner except for the exclusive benefit of the Partnership. The Limited Partners may not contract away the fiduciary duty owed to them by the General Partner under the common law. 9.4.4 The General Partner shall commit toward Investment in Equipment at least that portion of the Limited Partners' Capital Contributions for their Units required by Section 6.6 hereof. If the total amount of Front-End Fees must be reduced in order to enable the Partnership to commit such Capital Contributions to Investment in Equipment, the General Partner shall, and shall cause its Affiliates or other persons to, reimburse the Partnership for such amount of Front-End Fees and any Acquisition Fees, Debt Placement Fees and Acquisition Expenses paid in connection with the reinvestment of the Partnership's funds received by them as is necessary to enable the Partnership to meet such requirement within 30 days after the need for reimbursement arises. 9.4.5 The General Partner shall maintain reserves in such amount and for such times and purposes as it deems appropriate. 9.5 RESTRICTIONS ON AUTHORITY. Notwithstanding any other provisions of this Agreement: 9.5.1 The General Partner shall not have the authority to do any act in contravention of this Agreement or the Act; possess Partnership property, or assign rights in specific Partnership property, for other than a Partnership purpose; admit a person as a General Partner or a Limited Partner, except as provided in this Agreement; knowingly perform any act that would subject any Limited Partner to liability as a general partner in any jurisdiction; alter the purpose or character of the Partnership as set forth in Section 2.5; or confess a judgment against the Partnership. 9.5.2 Except pursuant to Section 10.2, the General Partner shall not sell all or substantially all of the assets of the Partnership in a single sale, except in the winding up and liquidation of the business of the Partnership or in a final liquidating sale of Equipment remaining after the disposition in the ordinary course of business of substantially all of the Partnership's other Equipment. 9.5.3 The Partnership shall not purchase or lease Equipment from the Sponsor or its Affiliates, including Equipment in which the General Partner or its Affiliates have an interest, except that the General Partner shall be permitted to make acquisitions of Equipment in its own name (and assume loans in connection therewith) and hold title thereto on an interim basis (not in excess of 60 days) for the purpose of facilitating the acquisition of such Equipment or the borrowing of money or obtaining of financing, or any other purpose related to the business of the Partnership provided that (a) such acquisitions are in the best interest of the Partnership; (b) such Equipment is purchased by the Partnership for a price no greater than the sum of the actual cost of such Equipment, accountable Acquisition Expenses payable to third parties, interest on the Purchase Price (at a rate no greater than that charged by unrelated lenders on comparable loans) from the date of purchase to the date of transfer to the Partnership 21 and compensation permitted in accordance with Article 6 of this Agreement; (c) there is no difference in interest terms of the loans secured by the Equipment at the time acquired by the General Partner and the time acquired by the Partnership; and (d) no benefit arises out of such acquisitions to the General Partner except for the compensation permitted under this Agreement. During interim purchases by the General Partner, all profits and losses shall accrue to the Partnership. 9.5.4 The Partnership shall not invest in junior trust deeds unless received in connection with the sale of an item of Equipment in an aggregate amount which does not exceed 30% of value of the assets of the Partnership on the date of the investment. 9.5.5 The Partnership shall not sell or lease Equipment to the General Partner or its Affiliates. 9.5.6 The Partnership shall not make loans to any Person, including without limitation, the General Partner or its Affiliates (except to the extent a Conditional Sales Contract constitutes a loan). 9.5.7 The Partnership shall not acquire Equipment from an Equipment Program in which the General Partner or its Affiliates have an interest. 9.5.8 The Partnership shall not acquire Equipment in exchange for Units. 9.5.9 The Partnership shall not give the General Partner or its Affiliates an exclusive right to sell or exclusive employment to sell Equipment for the Partnership. 9.5.10 The Partnership shall not pay, directly or indirectly, a commission or fee (except as specifically described under this Agreement) to the General Partner or its Affiliates in connection with the reinvestment or distribution of Cash Available for Distribution or of the proceeds of the resale, exchange, or refinancing of the Partnership's Equipment. 9.5.11 No rebates or give-ups may be received by the General Partner or its Affiliates, nor may the General Partner or its Affiliates participate in any reciprocal business arrangements which would circumvent any of the provisions of this Agreement, including the restrictions against dealing with the General Partner or its Affiliates. 9.5.12 The General Partner and its Affiliates shall not directly or indirectly pay or award any commissions or other compensation to any person engaged by a potential Limited Partner for investment advice as an inducement to such adviser to advise the purchase of Units. This Section 9.5.12, however, shall not prohibit the payment of Underwriting Commissions to the Dealer Manager or other properly licensed person for selling Units. 9.5.13 The funds of the Partnership shall not be commingled with the funds of any other Person. This prohibition shall not apply to investments meeting the requirements of Section 9.5.14. 9.5.14 Except to the extent that a permitted investment in the entities referred to in this Section 9.5.14 constitutes "securities" within the meaning of the Securities Act of 1933, as amended, the Partnership will not invest in securities, including equipment limited partnerships, general partnerships or joint ventures, except that (a) the Partnership may invest in general partnerships or joint ventures with persons other than equipment Programs formed by the General Partner or its Affiliates, which partnerships or joint ventures own specific equipment; provided that (i) the Partnership has or acquires a controlling interest in such ventures or partnerships; (ii) the non-controlling interest is owned by a non-Affiliate, and (iii) there are no duplicate fees; and (b) the Partnership may invest in joint venture arrangements with other equipment Programs formed by the General Partner or its Affiliates if such 22 action is in the best interests of all Programs and if all the following conditions are met: (i) all the Programs have substantially identical investment objectives; (ii) there are no duplicate fees; (iii) the sponsor compensation is substantially identical in each Program; (iv) the Partnership has a right of first refusal to buy another Program's interest in a joint venture if the other Program wishes to sell equipment held in the joint venture; (v) the investment of each Program is on substantially the same terms and conditions; and (vi) the joint venture is formed either for the purpose of effecting appropriate diversification for the Programs or for the purpose of relieving the General Partner or its Affiliates from a commitment entered into pursuant to Section 9.5.3. 9.5.15 Neither the General Partner nor its Affiliates shall lend money to the Partnership if interest rates and other financing charges and fees in connection with such loan are in excess of the lesser of their cost of funds or the amount which would be charged by unrelated lending institutions on comparable loans for the same purpose or if such loan contains any prepayment charge or prepayment penalty. Neither the General Partner nor its Affiliates shall provide financing for the Partnership unless such financing has a term of not more than 12 months or carries an interest rate in excess of three percent over the prime rate of JPMorgan Chase Bank, Philadelphia, PA. 9.5.16 Other than as specifically described in Section 5.2 and Article 6 of this Agreement and the section "Compensation of the General Partner" in the Prospectus at the time it was declared effective by the Securities and Exchange Commission, the General Partner shall not enter into any agreement, contract or arrangement on behalf of the Partnership providing for compensation to the General Partner or its Affiliates for performing services for, or selling or leasing goods or materials to, the Partnership. 9.5.17 All services or goods for which the General Partner or its Affiliates are to receive compensation (other than pursuant to this Agreement) shall be embodied in a written contract which precisely describes the subject matter thereof and all compensation to be paid, which contract may only be modified by a vote of a Majority in Interest of the Limited Partners and which contract shall contain a clause allowing termination by either party without penalty on 60 days' prior written notice. 9.5.18 In connection with the borrowing of money, recourse for the payment of which is limited solely to property of the Partnership and which shall be amortized fully over the initial lease term, no lender shall be granted or acquire, at any time as a result of making such a loan, any direct or indirect interest in the profits, capital or property of the Partnership other than as a secured creditor. 9.5.19 Partnership funds shall not be invested in any financial institution or entity affiliated with the General Partner and shall not be used in a compensating balance arrangement for the benefit of any entity other than the Partnership. 9.5.20 Without the consent of the General Partner and a Majority in Interest of the Limited Partners, the Partnership shall not convert to another form of business entity if the conversion results in a significant adverse change in (a) the voting rights of the Limited Partners, (b) the termination date of the Partnership, (c) the compensation payable to the General Partner or its Affiliates or (d) the ability to meet the Partnership's objectives without materially impairing the rights of Limited Partners. 9.5.21 The Partnership shall not make distributions 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 and the distribution of cash in accordance with this Agreement. 9.5.22 The Partnership shall not incur debt in excess of 30% of the expected aggregate cost of the Equipment to be owned or subject to a Conditional Sales Contract, and the Partnership may not incur 23 indebtedness on Equipment unless, at the time of any such leveraged acquisition, the net proceeds of the Offering received to date are fully invested, or committed to investment, in equipment.. 9.5.23 The Partnership shall not purchase Equipment unless such Equipment is subject to a lease or a Conditional Sales Contract or for which a lease or a Conditional Sales Contract will be entered into when the Partnership acquires the Equipment. 9.5.24 The Partnership's leases and other contracts will each contain a statement that the Partnership has been organized as a limited partnership under the Act. 9.5.25 Without the consent of the General Partner and a Majority in Interest of the Limited Partners, the Partnership will not change its principal purpose of acquiring, leasing and selling Equipment. 9.5.26 The Partnership shall not issue equity securities senior to the Units. 9.6 GENERAL PARTNER'S NET WORTH. The General Partner agrees, represents and warrants that it will at all times have a net worth, exclusive of home, auto and home furnishings, in an amount (i) sufficient in the opinion of counsel to the Partnership to enable the Partnership either to avoid having the corporate characteristic of limited liability for federal income tax purposes or to avoid being treated as an association taxable as a corporation for federal income tax purposes, and (ii) at least the greater of $50,000 or at least five percent of the gross amount of all direct participation programs sold by the General Partner within the prior 12 months plus five percent of the amount of the Capital Contributions received in the Offering, up to $1,000,000. ARTICLE 10 RIGHTS OF LIMITED PARTNERS 10.1 NO LIMITED PARTNER IN CONTROL. No Limited Partner, as such, shall participate in the management or control of the Partnership's business, nor shall any Limited Partner, as such, have the power to act for or bind the General Partner or the Partnership. 10.2 VOTING RIGHTS. The Limited Partners by a vote of a Majority in Interest of the Limited Partners may, without the necessity for concurrence by the General Partner (a) approve or disapprove a sale of all or substantially all of the assets of the Partnership, except as otherwise permitted or required under Section 14.1 or 14.4 of this Agreement; (b) dissolve the Partnership; (c) subject to Section 10.5, amend this Agreement except that amendment of Articles 6, 7 and 8 shall require the affirmative vote of Limited Partners owning at least 66-2/3% of the Units owned by all Limited Partners; (d) remove or approve the withdrawal of the General Partner; or (e) prior to the effective date of a removal, withdrawal or dissolution of the General Partner, elect an additional, replacement or successor General Partner to be admitted prior to such effective date. With respect to any Units owned by the General Partner or its Affiliates, the General Partner and its Affiliates may not vote or consent on matters submitted to the Limited Partners regarding removal of the General Partner or any transaction between the Partnership and the General Partner or its Affiliates. In determining the required percentage in interest of Units necessary to approve a matter on which the General Partner and its Affiliates may not vote or consent, any Units owned by the General Partner or its Affiliates shall not be included. 10.3 CONVERSIONS AND ROLL-UPS. 10.3.1 Consent Required. Without the approval of the General Partner and the holders of at least 66-2/3% of all outstanding Units, the Partnership shall not enter into any Roll-Up. Limited Partners 24 who do not consent to an approved Roll-Up shall be given the option of (i) accepting the securities of the Roll-Up Entity offered in the proposed Roll-Up; or (ii) receiving cash in an amount equal to the non-consenting Limited Partner's pro rata share of the appraised value of the net assets of the Partnership. The Partnership shall not reimburse the sponsor of a proposed Roll-Up for the costs of an unsuccessful proxy contest in the event that the Roll-Up is not approved by the Limited Partners as required by the first sentence of this Section 10.3.1. 10.3.2 Appraisal. The "appraised value of the net assets of the Partnership" as used in Section 10.3.1 shall be established by means of an appraisal of the net assets of the Partnership by a competent Independent Expert, engaged for the benefit of the Partnership and the Limited Partners, with no current material or prior business or personal relationship with the General Partner or its Affiliates. Such Independent Expert must be engaged to a substantial extent in the business of rendering opinions regarding the value of assets of the type held by the Partnership, and must be qualified to perform such work. The appraisal shall be based on an evaluation of all relevant information and shall indicate the value of the Partnership's assets, assuming an orderly liquidation of such assets over a twelve-month period, as of a date immediately prior to the date of the proposed Roll-Up. A summary of the independent appraisal, including all material assumptions underlying the appraisal, shall be included in a report to the Limited Partners in connection with a proposed Roll-Up and shall be appraised on a consistent basis. If the appraisal will be included in a prospectus used to offer the securities of a Roll-Up Entity, the appraisal shall be filed with the Securities and Exchange Commission and the states as an exhibit to the registration statement for the offering and accordingly, in that event, the issuer would be subject to liability for violations of Section 11 of the Securities Act of 1933 and comparable provisions under state laws for any material misrepresentations or material omissions in the appraisal. 10.3.3 Prohibited Roll-Ups. The Partnership shall not participate in any proposed Roll-Up: (a) which would result in the Limited Partner's having voting rights and rights to hold meetings which are less than those rights provided for under Section 10.2; (b) which includes provisions which would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of the Roll-Up Entity (except to the minimum extent necessary to preserve the tax status of the Roll-Up Entity); (c) which would limit the ability of a Limited Partner to exercise the voting rights of its securities of the Roll-Up Entity on the basis of the number of Units held by that Limited Partner, and (d) in which the Limited Partners' rights of access to the records of the Roll-Up Entity will be less than those rights provided for under Section 15.1 hereof. 10.3.4 With the consent of a Majority in Interest of the Limited Partners, the Partnership is permitted to convert into another form of business entity which does not result in a significant adverse change in (a) the voting rights of the Limited Partners, (b) the termination date of the Partnership (currently, December 31, 2018, unless terminated earlier in accordance with this Agreement), (c) the compensation payable to the General Partner or its Affiliates (provided however that any increase in the compensation payable to the General Partner and its Affiliates requires the approval of 66-2/3% of all outstanding Units), or (d) the ability to meet the Partnership's investment objectives without materially impairing the rights of the Limited Partners. The General Partner will make the determination as to whether or not any such conversion will result in a significant adverse change in any of the provisions listed in Section 10.3.1 based on various factors relevant at the time of the proposed conversion, including an analysis of the historic and projected operations of the Partnership; the tax consequences (from the standpoint of the Limited Partners) of the conversion and of an investment in a limited partnership as compared to an investment in the type of business entity into which the Partnership would be converted; and the performance of the equipment industry in general, and of the computer peripherals segment of the industry in particular. In general, the General Partner would consider any material limitation on the voting rights of the Limited Partners or any substantial increase in the compensation payable to the General Partner or its Affiliates to be a significant adverse change in the listed provisions. 25 10.4 MEETINGS. 10.4.1 Meetings of the Limited Partners to vote upon any matters as to which the Limited Partners are authorized to take action under this Agreement, as the same may be amended from time to time, may be called at any time by the General Partner or by one or more Limited Partners holding more than 10% of the then outstanding Units, by delivering written notice, either in person or by registered mail stating the purpose of the meeting, to the General Partner. Promptly, but in any event within 10 days following receipt of such request, the General Partner shall cause a written notice, either in person or by certified mail, to be delivered to the Limited Partners entitled to vote at such meeting. The meeting will be held at the time and place specified in the request, or if none, at a time and place convenient to the Limited Partners, such meeting to be held not less than 15 days nor more than 60 days after the mailing of the notice of the meeting. Included with the notice of a meeting shall be a detailed statement of the action proposed, including a verbatim statement of the wording of any resolution proposed for adoption by the Limited Partners and of any proposed amendment to this Agreement. All expenses of the meeting and notification shall be borne by the Partnership. 10.4.2 A Limited Partner shall be entitled to vote (a) at a meeting, in person or by a proxy in writing or by a signed writing directing the manner in which he desires that his vote be cast, which writing must be received by the General Partner prior to such meeting, or (b) without a meeting, by a signed writing directing the manner in which he desires that his vote be cast, which writing must be received by the General Partner prior to the date on which the votes of Limited Partners are to be counted. Only the votes of persons who were Limited Partners on the record date, whether at a meeting or otherwise, shall be counted. 10.5 CERTAIN AMENDMENTS. 10.5.1 In addition to any amendments otherwise authorized herein, this Agreement may be amended from time to time by the General Partner, without the consent of any of the Limited Partners (a) to add to the representations, duties or obligations of the General Partner or surrender any right or power granted to the General Partner herein, for the benefit of the Limited Partners; (b) to cure any ambiguity or inconsistency, to correct or supplement any provision that may be inconsistent with any other provisions hereof, or to make any other provision with respect to matters under this Agreement not inconsistent with the intent of this Agreement; (c) to delete or add any provisions required to be so deleted or added by, or to meet the requirements of, applicable law (including the Code, ERISA and the regulations thereunder); and (d) to delete or add any provisions required to be so deleted or added by the staff of the Securities and Exchange Commission or by state securities commissioner or similar official, which addition or deletion is deemed by such person, commissioner or official to be for the benefit or protection of the Limited Partners. 10.5.2 Notwithstanding anything to the contrary contained in this Agreement, this Agreement may not be amended without the consent of each Limited Partner to be affected adversely by an amendment that (a) converts a Limited Partner into a General Partner; (b) modifies the limited liability of a Limited Partner; (c) alters the interest of the General Partner or Limited Partners in Net Profits, Net Losses, or distributions from the Partnership; or (d) adversely affects the status of the Partnership as a partnership for federal income tax purposes. 10.5.3 Each Limited Partner shall be notified of any amendment to this Agreement within 30 days of the effective date of the amendment by means of first class mail, postage prepaid, to the address of the Limited Partner on the books of the Partnership. 26 ARTICLE 11 TRANSFER OF UNITS 11.1 ASSIGNMENT. 11.1.1 No Limited Partner may transfer or assign his Units or any interest therein except as permitted in this Article 11. Any act in violation of this Article 11 shall be null and void and shall not be recognized by the Partnership. 11.1.2 Without in any way limiting the restrictions on transfer and assignment set forth in Article 11.4, with the prior written consent of the General Partner, a Limited Partner may transfer or assign part or all of his Units if, and only if: (a) the assignor and the assignee execute, acknowledge and deliver to the Partnership such instruments of transfer and assignment and other documents as may be required by the General Partner; (b) the assignee agrees in writing not to assign such Units other than in accordance with this Article 11; (c) such assignment complies with any applicable state and federal securities laws; (d) assignor obtains an opinion of counsel that such assignment will not result in the termination of the Partnership for federal income tax purposes and will not result in the Partnership being classified as a publicly traded partnership or an association taxable as a corporation for federal income tax purposes. 11.1.3 Without in any way limiting the restrictions on transfer and assignment set forth in Article 11.4, an assignee, if he does not become a Substituted Limited Partner pursuant to Section 11.2, shall have no rights of a Limited Partner as a result of the assignment, but shall only be entitled to receive the distributions under Article 8 and Sections 3.3.2 and 14.4 to which the assignor would otherwise be entitled. 11.2 SUBSTITUTED LIMITED PARTNERS. Without in any way limiting the restrictions on transfer and assignment set forth in Article 11.4, no assignee of Units shall have the right to become a Substituted Limited Partner in place of his assignor unless all of the following conditions are first satisfied: (a) the written instrument of assignment (or another writing) sets forth the intention of the assignor that the assignee succeed to the assignor's interest as a Substituted Limited Partner in his place; (b) the assignor and assignee execute, acknowledge and deliver such instruments as the General Partner may deem necessary or desirable to effect such substitution, including the written acceptance and adoption by the assignee of this Agreement; and (c) the written consent of the General Partner to such substitution is obtained, the granting of which shall not be unreasonably withheld. The Partnership's records shall be amended to reflect the substitution of Limited Partners at least once in each calendar quarter. Upon satisfying the above conditions, Substituted Limited Partners shall be granted the same rights as if they are Limited Partners, except as prohibited by applicable law, including, but not limited to, all rights granted by NASAA's Statement of Policy regarding Equipment Programs and by this Agreement. 11.3 TRANSFER FEE. On any assignment of Units, any substitution of an assignee as a Limited Partner or any redemption of Units, the Partnership may charge a transfer fee to cover reasonable out-of-pocket expenses in connection with the substitution. 11.4 GENERAL. No transfer or assignment or redemption of any Units shall be made if it would result in the Partnership being treated as an association taxable as a corporation for tax purposes or as a publicly traded partnership. In addition, no transfer or assignment of any Unit will be recognized or otherwise given effect (including recognizing any right of the transferee, such as the right of the transferee to receive directly or indirectly Partnership distributions or to acquire an interest in the capital or profits of the Partnership) for any purpose to the extent that it is determined by the General Partner to be effectuated through an established securities market or a secondary market (or the substantial equivalent thereof) 27 within the meaning of Section 7704 of the Code and the applicable Treasury Regulations thereunder so as to adversely affect the tax status of the Partnership as a partnership rather than as an association taxable as a corporation. The General Partner, in its sole discretion, may impose any restrictions on transfers or assignments of Units as it deems appropriate to give effect to the preceding two sentences including prohibitions of any transfers or assignments of Units which fall outside the safe harbors described in Section 1.7704-1 of the Treasury Regulations. A Limited Partner must obtain the consent of the General Partner to any transfer or assignment, and any transfer or assignment made without such consent will not be recognized or given effect (including recognizing any right of the transferee, such as the right of the transferee to receive directly or indirectly Partnership distributions or to acquire an interest in the capital or profits of the Partnership), which consent shall not be unreasonably withheld. For these purposes, the good faith belief of the General Partner that such transfer or assignment is not described in Treasury Regulation Sections 1.7704-1(e)(1)(i) - (vi) or 1.7704-1(e)(1)(ix) shall constitute reasonable cause to withhold such consent. In connection therewith, the General Partner shall be permitted to amend this Agreement without the consent of the Limited Partners. Assignments and substitutions shall be effective on the first day of the month following the month in which there has been full compliance with the requirements of this Article 11. For the purposes of this Article 11, a pledge of Units shall be deemed to be an assignment of such Units. ARTICLE 12 REDEMPTION Upon the conclusion of the 30-month period following the termination of the Offering, the Partnership may, at the sole discretion of the General Partner, repurchase a number of the then outstanding Units. On a semi-annual basis, the General Partner will establish an amount for redemption, generally not to exceed two percent of the outstanding Units per year, subject to the General Partner's sole discretion and its good faith determination that such redemptions will not (a) cause the Partnership to be taxed as a corporation under Section 7704 of the Code or (b) impair the capital or operations of the Partnership. At the sole discretion of the General Partner, the Partnership may redeem Units in excess of the two percent limitation. The redemption price for Units will be 105% of the selling Limited Partner's Adjusted Capital Contributions attributable to the Units for sale, net of the offering fees and expenses attributable to the Units for sale. Such offering fees and expenses will be amortized over ten years after the termination of the Offering. One quarter of these expenses will be amortized in each 30-month period following the termination of the Offering. Following the determination of the annual redemption amount, redemptions will occur on a semi-annual basis and all requests for redemption, which must be made in writing, must be on file as of the Record Date established for purposes of determining eligibility for such redemption. The General Partner will maintain a master list of requests for redemption with priority being given to Units owned by estates, followed by IRAs and Qualified Plans. All other Limited Partners will be treated on a first come, first served basis. Redemption requests made by or on behalf of Limited Partners who are not affiliated with the General Partner or its affiliates will be given priority over those made by Limited Partners who are affiliated with the General Partner or its Affiliates. All redemption requests will remain in effect until and unless canceled, in writing, by the requesting Limited Partner(s). The making of a request for redemption by a Limited Partner is completely voluntary. ARTICLE 13 GENERAL PARTNER'S INTEREST 13.1 VOLUNTARY WITHDRAWAL OR ASSIGNMENT. The General Partner shall not voluntarily withdraw, retire or resign as general partner of the Partnership, or assign, transfer or otherwise dispose of all or any part of its general partnership interest unless: 13.1.1 the Limited Partners consent by a Majority in Interest; 28 13.1.2 in the case of withdrawal, retirement or resignation, it gives at least 60 days' notice thereof and if there would be no remaining General Partner, nominates a successor General Partner satisfactory to a Majority in Interest of the Limited Partners, who becomes a General Partner prior to such withdrawal, retirement or resignation; and 13.1.3 the Partnership receives an opinion of its counsel to the effect that such withdrawal, retirement, resignation, assignment, transfer or other disposition would not subject the Partnership to federal income taxation as an association taxable as a corporation and would not cause a termination of the Partnership for federal income tax purposes. 13.2 REMOVAL. Subject to Section 14.3, after the Final Closing the General Partner may be removed, and shall cease to be General Partner of the Partnership, on the vote of the Majority in Interest of the Limited Partners. ARTICLE 14 DISSOLUTION, CONTINUATION AND TERMINATION 14.1 DISSOLUTION. The Partnership shall be dissolved on the occurrence of any of the following events: 14.1.1 The vote or written consent of a Majority in Interest of the Limited Partners determines that the Partnership should be dissolved; 14.1.2 The dissolution of the Partnership by judicial decree; 14.1.3 The expiration of 60 days following a Terminating Event, unless a Majority in Interest of the Limited Partners, elect to continue the Partnership in accordance with Section 14.2.2 and elect a successor general partner; or 14.1.4 The determination by the General Partner that it is necessary to commence the liquidation of the Equipment in order for the liquidation of all the Equipment to be completed in an orderly and business-like fashion prior to December 31, 2018. 14.2 CONTINUATION. 14.2.1 On the occurrence of the removal, withdrawal, retirement, resignation, expulsion, involuntary dissolution, or Bankruptcy (or, in the case of an individual, the death, insanity or appointment of a conservator for the person or any of his assets) of one or more, but less than all, of the General Partners, then the remaining General Partners shall have the right to, and shall, continue the business of the Partnership. 14.2.2 On the occurrence of a Terminating Event, the last remaining General Partner shall promptly send written notice of such event to all the Limited Partners, who (subject to Sections 14.2.3 and 14.3) (a) may elect, by a vote of the Majority in Interest within 60 days thereafter, to reconstitute the Partnership and continue its business in accordance with this Agreement by selecting one or more new General Partners who agree in writing to be bound by this Agreement, and all Limited Partners, as such, shall be bound by such action, or (b) may continue the business of the Partnership pursuant to Section 8571 of the Act. 14.2.3 The rights to continue the business of the Partnership provided in this Section 14.2 shall be subject to receipt by the Partnership of an opinion of counsel to the Partnership that such continuation 29 would not result in the Partnership's being classified for federal income tax purposes as an association taxable as a corporation and would not result in the termination of the Partnership for federal income tax purposes. 14.3 PURCHASE OF INTEREST OF GENERAL PARTNER. On any continuation of the business of the Partnership under Section 14.2.1 or Section 14.2.2, or any removal of the General Partner under Section 13.2, the following shall apply: 14.3.1 The General Partner who withdraws (voluntary termination) or is removed (involuntary termination) shall be paid the then present fair market value of its interest, determined in the manner described in this Section 14.3. If the termination is voluntary pursuant to Section 13.1, the terminated General Partner shall receive a non-interest bearing unsecured promissory note payable, if at all, from distributions the terminated General Partner would have received under this Agreement if it had not voluntarily terminated. If the termination is involuntary pursuant to Section 13.2, such amount shall be paid in no less than five equal annual installments, the first of which shall be paid one year from the date of such termination. The unpaid portion of such amount shall bear simple interest at the rate of 10% per annum from the date of such termination, such interest to accrue and be paid annually in addition to each such annual installment. In any event, the method of payment must protect the solvency and liquidity of the Partnership. 14.3.2 The fair market value of a terminated General Partner's Partnership interest shall be determined by agreement between the terminated General Partner and the Partnership, which agreement shall require a vote of the Majority in Interest of the Limited Partners. If the terminated General Partner and the Partnership cannot agree on the fair market value of such partnership interest within 45 days of the continuation, the fair market value thereof shall be determined 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. 14.4 LIQUIDATION. 14.4.1 On any dissolution of the Partnership, absent any continuation under Section 14.2, the General Partner, or a court-appointed liquidator if there is no General Partner, shall take full account of the Partnership's assets and liabilities. The assets shall be liquidated as promptly as is consistent with obtaining the fair market value thereof, and the proceeds therefrom, to the extent sufficient therefor, shall be applied in the following order: (a) to the payment of all debts and liabilities of the Partnership to creditors; (b) to the establishment, for such period as the liquidator deems reasonably necessary, of such reserves as the liquidator deems reasonably necessary to provide for contingent and unforeseen liabilities or obligations of the Partnership; and (c) to the Partners in accordance with Section 8.1.3, such distributions to the Partners to be made no later than the later of (i) the end of the taxable year during which shall liquidation occurs or (ii) 90 days after the date of such liquidation. 14.4.2 The debts and liabilities of the Partnership shall not include liabilities or obligations of the Partnership to Partners for distributions or on account of their contributions or in respect to profits (or other compensation by way of income) or capital. 14.4.3 Notwithstanding anything to the contrary that may be expressed or implied in this Agreement, upon the dissolution or termination of the Partnership, the General Partner, in all events by the end of the Partnership's taxable year in which the General Partner's interest is liquidated or, if later, within 90 days of the date of such liquidation, will contribute to the Partnership an amount of cash equal to the lesser of (a) the deficit balance of the General Partner's Capital Account or (b) the excess of 1.01% of the total Capital Contributions of the Limited Partners over the capital previously contributed by the 30 General Partner and such cash shall be distributed to the Limited Partners in the ratio of the then credit balances in their Capital Accounts. 14.4.4 Any capital contribution by the General Partner pursuant to Section 14.4.3 and any liquidating distribution pursuant to Section 14.4.1 shall be made no later than the later of (a) the end of the taxable year during which such liquidation occurs or (b) 90 days after the date of such liquidation. ARTICLE 15 ACCOUNTING AND FISCAL MATTERS 15.1 PARTNERSHIP RECORDS. The records of the Partnership shall be maintained at the principal office of the Partnership. Every Limited Partner or his duly authorized representative shall at any reasonable time have access to the records of the Partnership and may inspect and copy any of them. An alphabetical list of the names, addresses, and business telephone numbers of the Limited Partners of the Partnership along with the number of Units held by each of them (the "Limited Partner List") shall be maintained as a part of the books and records of the Partnership and shall be available for inspection by any Limited Partner or its designated agent at the home office of the Partnership upon the request of the Limited Partner. The Limited Partner List shall be updated at least quarterly to reflect changes in the information contained therein. A copy of the Limited Partner List shall be mailed to any Limited Partner requesting the Limited Partner List within ten days of the request. The copy of the Limited Partner List shall be printed in alphabetical order, on white paper, and in a readily readable type size (in no event smaller than 10-point type). A reasonable charge for copy work may be charged by the Partnership. The purposes for which a Limited Partner may request a copy of the Limited Partner List include, without limitation, matters relating to Limited Partners' voting rights under the Partnership Agreement, and the exercise of the Limited Partners' rights under federal proxy laws. If the General Partner neglects or refuses to exhibit, produce, or mail a copy of the Limited Partner List as requested, the General Partner shall be liable to any Limited Partner requesting the list for the costs, including attorneys' fees, incurred by that Limited Partner for compelling the production of the Limited Partner List, and for actual damages suffered by any Limited Partner by reason of such refusal or neglect. It shall be a defense that the actual purpose and reason for the requests for inspection or for a copy of the Limited Partner List is to secure such list of Limited Partners or other information for the purpose of selling such list or copies thereof, or of using the same for a commercial purpose other than in the interest of the applicant as a Limited Partner relative to the affairs of the Partnership. The General Partner may require the Limited Partner requesting the Limited Partner List to represent that the list is not requested for a commercial purpose unrelated to the Limited Partner's interest in the Partnership. The remedies provided hereunder to the Limited Partners requesting copies of the Limited Partner List are in addition to, and shall not in any way limit, other remedies available to the Limited Partners under federal law, or the laws of any state. 15.2 ACCOUNTING; FISCAL YEAR. The Partnership's books and records shall be kept on the accrual method of accounting. The fiscal year of the Partnership shall be the calendar year. 15.3 REPORTS. 15.3.1 The General Partner will deliver to each Limited Partner, within 120 days after the end of each year, a balance sheet of the Partnership dated as of December 31 of such year, together with statements of income, Partners' equity, and the changes in financial position of the Partnership for such year, prepared in accordance with generally accepted accounting principles and accompanied by an auditor's report containing an opinion of the Partnership's independent certified public accountants, as well as an unaudited Cash Flow statement containing a breakdown of distributions to Limited Partners for the year, separately identifying distributions from (a) Cash Flow from operations during the year, (b) Cash Flow from operations during a prior period which had been held as reserves, (c) proceeds from 31 disposition of Equipment and investments and (d) reserves from gross proceeds of the Offering originally obtained from the Limited Partners. The General Partner will within such period also furnish a report of the activities of the Partnership for the year, which will include (a) for each item of Equipment acquired by the Partnership which individually represents at least 10% of the total investment in Equipment, a status report as part of the annual report, (which status report shall indicate: (i) condition of Equipment, (ii) how Equipment is being utilized as of the end of year (leased, operated, held for lease, repair, or sale), (iii) remaining term of leases, (iv) projected use of Equipment for next year (renew lease, lease, retire, or sell), and (v) such other information relevant to the value or utilization of the equipment as the General Partner deems appropriate including the method used or basis for valuation), (b) a report on distributions to the Limited Partners during the year and their source, (c) a report on any costs incurred by the General Partner and its Affiliates in performing administrative services which are reimbursed by the Partnership during the year which will be verified by independent public accountants in accordance with generally accepted accounting principles (the cost of such verification to be so reimbursable only to the extent that such reimbursement, when added to the reimbursement for services, does not exceed the competitive rate for such services, excluding the cost of the verification), (d) for each item of Equipment sold by the Partnership in such year, such Equipment's original purchase price, sale price and aggregate lease revenues and (e) where forecasts have been provided to Limited Partners, a table comparing the forecasts previously provided with the actual results during the period covered by the report. The annual report will contain a breakdown of the costs reimbursed to the sponsor. 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 the Partnership in accordance with this Partnership Agreement. The special report shall at a minimum provide: (i) a review of the time records of individual employees, the costs of whose services were reimbursed; and (ii) a review of the specific nature of the work performed by each such employee. 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 program-by-program 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 in this subsection. Within 60 days after the end of each calendar quarter, the General Partner will also furnish a report of all services rendered and all fees received by the General Partner and its Affiliates from the Partnership, an unaudited balance sheet, a statement of income, a statement of changes in financial position and a report on the activities of the Partnership, as well as an unaudited Cash Flow statement. 15.3.2 Until the net proceeds of the Offering are fully invested, the General Partner will furnish to the Limited Partners, within 60 days after the end of each calendar quarter, a report of Equipment acquisitions during the quarter, including the type and manufacturer of each item of Equipment, the purchase price of the Equipment, and any other material terms of purchase, a statement of the total amount of cash expended by the Partnership to acquire the Equipment (including an itemization of all commissions, fees, and expenses and the name of each payee), and a statement of the amount of net proceeds of the Offering which remain unexpended or uncommitted at the end of the quarter. 15.3.3 The General Partner will also furnish to all Limited Partners within 75 days after the end of the year other information regarding the Partnership to aid them in the preparation of their tax returns. 15.3.4 Within 120 days after the end of the first full fiscal year for which Form 10-K under the Securities Exchange Act of 1934 is filed with the Securities and Exchange Commission, the General Partner shall send the financial statements required by Form 10-K to the Limited Partners. 15.3.5 Until the net proceeds from sales of the Units have been fully invested or otherwise used for Partnership purposes or been set aside as reserves or been returned to the Limited Partners under 32 Section 3.3.2, the reports under Sections 15.3.1 and 15.3.3 shall include a report of material equipment acquisitions made during the periods covered by such reports which have not previously been reported. 15.3.6 The information required to be provided in the various reports pursuant to this Section 15.3 may be sent earlier than or separately from any of the other information required pursuant to this Section 15.3, and the information required to be contained in any of the reports pursuant to this Section 15.3 may be contained in more than one report. 15.3.7 If the Securities and Exchange Commission or the North American Securities Administrators Association, Inc. promulgates rules which allow a reduction in reporting requirements, the Partnership may cease preparing and filing certain of the aforementioned reports in compliance with such rules if the General Partner determines such action to be in the best interests of the Partnership. 15.3.8 On request of the official or agency administering the securities law of a state in which the Partnership has sold Units, the General Partner shall submit to such official or agency any information such official or agency may require, including, but not limited to, any report or statement required to be distributed to Limited Partners pursuant to this Section 15.3. 15.4 BANK ACCOUNTS. The bank accounts of the Partnership shall be maintained in such banking institutions as the General Partner may determine, and withdrawals shall be made only in the regular course of Partnership business on such signatures as the General Partner may determine. 15.5 PARTNERSHIP RETURNS. For each tax year, the General Partner shall, within the time prescribed by law (including extensions), file on behalf of the Partnership the annual information return required for federal, state and local income tax purposes. ARTICLE 16 POWER OF ATTORNEY 16.1 POWER OF ATTORNEY. 16.1.1 Pursuant to the terms of this Agreement, each purchaser of a Unit and each transferee of a Unit appoints the General Partner, acting alone, as the purchaser's or transferee's attorney-in-fact to make, execute, file, and/or record (a) documents relating to the Partnership and its business operations requested by or appropriate under the laws of any appropriate jurisdiction; (b) instruments with respect to any amendment of this Agreement or the Certificate; (c) instruments or papers required to continue the business of the Partnership pursuant to this Agreement; (d) instruments relating to the admission of any Partner to the Partnership; (e) a master list in accordance with Section 6112 of the Code (or any successor provision), relating to the Partnership's tax shelter registration; and (f) all other instruments deemed necessary or advisable to carry out the Partnership's business or the provisions of this Agreement. The power of attorney is irrevocable, will survive the death, incompetency, dissolution, disability, incapacity, bankruptcy, or termination of the granting purchaser or transferee, and will extend to such person's heirs, successors, and assigns. Each Limited Partner authorizes such attorney-in-fact to take any further action which such attorney-in-fact shall consider necessary or advisable in connection with any of the foregoing, hereby giving such attorney-in-fact power and authority to do and perform each and every act or thing whatsoever requisite or advisable to be done in and about the foregoing as fully as such Limited Partner might or could if personally present, hereby ratifying and confirming all that such attorney-in-fact shall lawfully do or cause to be done by virtue hereof. 16.1.2 The power of attorney granted in this Section 16.1, (a) is a special power of attorney coupled with an interest and is irrevocable; (b) may be exercised by the attorney-in-fact by listing all of 33 the Limited Partners executing any document with the signature of the attorney-in-fact acting as attorney-in-fact for all of them; and (c) shall survive the delivery of an assignment by a Limited Partner of the whole or a portion of his interest in the Partnership, except that where the assignee is admitted as a substituted Limited Partner, the power of attorney shall survive the delivery of such assignment for the sole purpose of enabling such attorney-in-fact to execute, acknowledge and file any document necessary to effect such substitution. ARTICLE 17 LIABILITY AND INDEMNIFICATION OF GENERAL PARTNER 17.1 EXCLUSION OF LIABILITY FOR RETURN OF CAPITAL CONTRIBUTIONS. Subject to the General Partner's compliance with the standards set forth in Section 17.2.1, the General Partner shall not be personally liable for the return of any of the Capital Contributions of the Limited Partners, it being expressly understood that any such return shall be made solely from Partnership assets. 17.2 LIMITATION ON LIABILITY OF GENERAL PARTNER; INDEMNIFICATION. 17.2.1 The General Partner and its Affiliates who were acting on behalf of or performing services for the Partnership and acting within the scope of the General Partner's authority as set forth in this Agreement (an "Indemnitee") shall have no liability to the Partnership or to any Partner for any loss suffered by the Partnership which arises out of any action or inaction of any Indemnitee if the General Partner, in good faith, determined that such course of conduct was reasonable and in the best interest of the Partnership and such course of conduct did not constitute negligence or misconduct of the General Partner or its Affiliates. The Indemnitees shall be indemnified by the Partnership against any losses, judgments, liabilities and expenses sustained by them in connection with the Partnership, provided that the same were not the result of negligence or misconduct on the part of the Indemnitee, and provided further that for such indemnification to be made, the General Partner must have made a good faith determination that the course of conduct involved was reasonable and in the best interest of the Partnership. Such indemnification or agreement to hold harmless is recoverable only out of the assets of the Partnership and not from the Limited Partners. 17.2.2 Notwithstanding anything to the contrary stated in Section 17.2.1, the Indemnitee and any person acting as a broker-dealer shall not be indemnified for any losses, liabilities or expenses arising from or out of an alleged violation of federal or state securities laws unless (a) there has been a successful adjudication on the merits of each count involving alleged securities laws violations as to the particular Indemnitee and the court approved the indemnification of litigation costs, or (b) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular Indemnitee and the court approved the indemnification of litigation costs or (c) a court of competent jurisdiction approves a settlement of the claims against a particular Indemnitee and finds that indemnification of the settlement and related costs should be made. In any claim for indemnification for federal or state securities law violations, the party seeking indemnification shall place before the court the position of the Securities and Exchange Commission, the Massachusetts Securities Division, the Pennsylvania Securities Commission, the Texas Securities Board and other applicable state securities commissions with respect to the issue of indemnification for securities law violations. 17.2.3 The Partnership shall not incur the cost of that portion of any insurance which insures the Indemnitee for any liability as to which the Indemnitee is prohibited from being indemnified under this Section 17.2; however, nothing contained in this Agreement shall preclude the Partnership from purchasing and paying for such types of insurance, including extended coverage liability and casualty and workers' compensation, as would be customary for any person owning comparable assets and engaged in 34 a similar business, or from naming the Indemnitee as additional insured parties thereunder, provided that such addition does not add to the premiums payable by the Partnership. 17.2.4 The provision of advances from Partnership funds to the Indemnitee for legal expenses and other costs incurred as a result of any legal action initiated against the General Partner by a Limited Partner of the Partnership is prohibited. The provision of advances from Partnership funds to the Indemnitee for legal expenses and other costs incurred as a result of a legal action is permissible if the following three conditions are satisfied: (a) the legal action relates to the performance of duties or services by the Indemnitee on behalf of the Partnership; and (b) the legal action is initiated by a third party who is not a Limited Partner of the Partnership; and (c) the Indemnitee undertakes to repay the advanced funds to the Partnership with interest at the rate of 10% per year in cases in which they would not be entitled to indemnification under Section 17.2.1 and such undertaking is secured by a full recourse note from the recipient of the advance. ARTICLE 18 TAX EXEMPT LIMITED PARTNERS 18.1 TAX EXEMPT LIMITED PARTNERS. If any individual retirement accounts, pension, profit sharing or other tax-qualified retirement plans or other entities exempt from federal income taxation under the Code (collectively, "Tax Exempt Limited Partners") become Limited Partners of the Partnership, neither the General Partner nor the Partnership shall have any liability or responsibility to any Tax Exempt Limited Partner or any other Limited Partner for any tax, penalty or other sanction or costs or damages arising as a result of there being a prohibited transaction or as a result of Partnership assets being deemed plan assets of a Tax Exempt Limited Partner under the Code or ERISA or other applicable law. ARTICLE 19 MISCELLANEOUS 19.1 NOTICES. Any notice, payment, demand, offer or communication required or permitted to be given by any provision of this Agreement shall be deemed to have been delivered and given for all purposes (a) if delivered personally to the party or to an officer of the party to whom it is directed or (b) whether or not it is actually received, if sent by registered or certified or regular mail, postage and charges prepaid, addressed as follows: if to the General Partner, at its business address set forth in Section 2.3 or to such other address as the General Partner may specify by written notice to the Limited Partners; and if to a Limited Partner, at such Limited Partner's address set forth on his Subscription Agreement or to such other address as such Limited Partner may specify by written notice to the General Partner; and if to the Partnership, at the address set forth in Section 2.3 or to such other address as the Partnership may specify by written notice to the Partners. Any such notice shall be deemed to be given as of the date so delivered personally, or as of the date on which the same was deposited in a regular receptacle for the deposit of the United States mail, addressed and sent as aforesaid. 19.2 PARTIES IN INTEREST. Subject to Article 11, this Agreement shall bind and benefit the successors and assigns of the respective parties hereto. 19.3 SECTION CAPTIONS. Section and other captions in this Agreement are for reference purposes only and are not intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof. 19.4 SEVERABILITY. Every provision of this Agreement is intended to be severable. If any term or provision hereof is illegal or invalid for any reason, such illegality or invalidity shall not affect the validity of the remainder of this Agreement. 35 19.5 RIGHT TO RELY ON GENERAL PARTNER. No person dealing with the General Partner shall be required to determine its authority to make any commitment or undertaking on behalf of the Partnership, or to determine any fact or circumstance bearing upon the existence of its authority. In addition, no purchaser of Partnership property shall be required to determine the sole and exclusive authority of the General Partner to sign and deliver on behalf of the Partnership any instrument of transfer, or to see to the application or distribution of revenues or proceeds paid or credited in connection therewith, unless such purchasers have received written notice from the Partnership affecting the same. 19.6 PENNSYLVANIA LAW. This Agreement is made under, and shall be construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania applicable to agreements made and to be performed solely therein, without giving effect to principles of conflicts of laws. 19.7 EXCLUSIVE JURISDICTION. Any disputes arising out of or related to this Agreement shall be subject to the exclusive jurisdiction of the Court of Common Pleas of Pennsylvania in the County of Delaware or the Federal District Court for the Eastern District of Pennsylvania. 19.8 COUNTERPART EXECUTION. This Agreement may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All counterparts shall be construed together and shall constitute one Agreement. 19.9 GENDER. Whenever necessary or appropriate in order to construe this Agreement, the masculine gender shall include the feminine or neuter and vice versa, and the singular shall include the plural and the plural, the singular. 19.10 INTEGRATED AGREEMENT. This Agreement constitutes the entire understanding and agreement among the parties hereto with respect to the subject matter hereof, and there are no agreements, understandings, restrictions, representations or warranties among the parties other than those set forth herein. 36 IN WITNESS WHEREOF, the parties have executed, or have caused their duly authorized officer to execute, this Agreement on the date first written above. GENERAL PARTNER: COMMONWEALTH INCOME & GROWTH FUND, INC. By: /s/ George S. Springsteen ------------------------------------ George S. Springsteen, Chief Executive Officer INITIAL LIMITED PARTNER: /s/ Kimberly A. Springsteen ------------------------------------ Kimberly A. Springsteen 37 TABLE I FINANCIAL STATEMENTS FINANCIAL STATEMENT INDEX Commonwealth Income & Growth Fund VI Report of Independent Registered Public Accounting Firm.................................F-2 Balance Sheet at January 31, 2006.......................................................F-3 Notes to Financial Statement............................................................F-4 Commonwealth Income & Growth Fund, Inc. Report of Independent Registered Public Accounting Firm.................................F-5 Balance Sheet at February 28, 2005 .....................................................F-6 Notes to Financial Statement............................................................F-7 Balance Sheet at December 31, 2005 (unaudited)..........................................F-10 Notes to Financial Statement (unaudited)................................................F-11 Commonwealth Capital Corp. Report of Independent Registered Public Accounting Firm.................................F-14 Consolidated Balance Sheets at February 28, 2005 and February 29, 2004..................F-15 Consolidated Statements of Operations and Retained Earnings for the Years Ended February 28, 2005 and February 29, 2004.........................................F-16 Consolidated Statements of Cash Flows for the Years ended February 28, 2005 and February 29, 2004.................................................................F-17 Notes to Consolidated Financial Statements..............................................F-18 Consolidated Balance Sheet at December 31, 2005 (unaudited).............................F-25 Consolidated Statement of Operations and Retained Earnings for the period ended December 31, 2005 (unaudited).........................................................F-26 Consolidated Statement of Cash Flows for the period ended December 31, 2005 (unaudited)...........................................................................F-27 Notes to Consolidated Financial Statements (unaudited)..................................F-28
Report of Independent Registered Public Accounting Firm BOARD OF DIRECTORS COMMONWEALTH INCOME & GROWTH FUND VI EXTON, PENNSYLVANIA We have audited the accompanying balance sheet of COMMONWEALTH INCOME & GROWTH FUND VI as of January 31, 2006. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statement referred to above present fairly, in all material respects, the financial position of the COMMONWEALTH INCOME & GROWTH FUND VI as of January 31, 2006 in conformity with accounting principles generally accepted in the United States of America. /s/ ASHER & COMPANY, Ltd. Philadelphia, Pennsylvania February 1, 2006 F - 2 COMMONWEALTH INCOME & GROWTH FUND VI BALANCE SHEET JANUARY 31, 2006 ASSETS ASSETS Cash $ 1,000 -------- TOTAL ASSETS $ 1,000 ======== PARTNERS' CAPITAL PARTNERS' CAPITAL General Partner 1,000 Limited Partner 500 -------- 1,500 Less receivable from Limited Partner (500) -------- Total Partners' Capital 1,000 -------- TOTAL PARTNERS' CAPITAL $ 1,000 ======== The accompanying notes are an integral part of this financial statement. F - 3 COMMONWEALTH INCOME & GROWTH FUND VI NOTES TO FINANCIAL STATEMENT JANUARY 31, 2006 NOTE A - NATURE OF BUSINESS Overview Commonwealth Income & Growth Fund VI (the "Partnership") is a limited partnership, which was organized in January 2006 in the Commonwealth of Pennsylvania. The Partnership has not yet commenced operations. The Partnership was organized to acquire, own, lease and sell income-producing equipment. The General Partner's initial contribution consists of a $1,000 cash contribution from Commonwealth Income & Growth Fund, Inc., a wholly owned subsidiary of Commonwealth of Delaware, Inc., which in turn is a wholly owned subsidiary of Commonwealth Capital Corp. The General Partner may, in its sole discretion, purchase units of limited partnership interest (the "Units"). Additionally, on January 6, 2006, the Registrant sold a limited partnership interest to the President of Commonwealth Capital Securities Corp., the initial limited partner of the Partnership, for $500. The Registrant determined the issuance of such interest to be exempt from registration under the Securities Act of 1933, as amended, by virtue of the provisions of Section 4(2) thereof exempting transactions by an issuer not involving any public offering. The Partnership plans to offer for sale, through a public offering from 57,500 to 2,500,000 Units at a cash purchase price of $20 per Unit. NOTE B - RELATED PARTY TRANSACTIONS The Partnership will pay for organizational and offering expenses in connection with the issuance and distribution of Units. The General Partner, Commonwealth Capital Securities Corp., also a wholly owned subsidiary of Commonwealth of Delaware, Inc., and their respective affiliates will receive substantial fees and compensation in connection with the offering of Units and management of the Partnership's assets. F-4 Report of Independent Registered Public Accounting Firm STOCKHOLDER COMMONWEALTH INCOME & GROWTH FUND, INC. EXTON, PENNSYLVANIA We have audited the accompanying balance sheet of COMMONWEALTH INCOME & GROWTH FUND, INC. as of February 28, 2005. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statement referred to above presents fairly, in all material respects, the financial position of the COMMONWEALTH INCOME & GROWTH FUND, INC. as of February 28, 2005 in conformity with accounting principles generally accepted in the United States of America. /s/ ASHER & COMPANY, Ltd. Philadelphia, Pennsylvania September 26, 2005 F-5 COMMONWEALTH INCOME & GROWTH FUND, INC. BALANCE SHEET FEBRUARY 28, 2005 ASSETS ASSETS Cash $ 34,748 Receivables from Income Funds 394,692 Other receivables 18,360 Investment in Income Funds 2,892 --------------- TOTAL ASSETS $ 450,692 =============== LIABILITIES AND STOCKHOLDER'S EQUITY LIABILITIES Due to Parent $ 450,181 --------------- Total liabilities 450,181 STOCKHOLDER'S EQUITY Common stock; no par value, 1,000 shares authorized, 100 shares issued and outstanding 1,000 Additional paid-in capital 1,023,100 Retained earnings (23,589) --------------- 1,000,511 Less note receivable (1,000,000) --------------- Total Stockholder's equity 511 --------------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 450,692 =============== The accompanying notes are an integral part of this financial statement. F-6 COMMONWEALTH INCOME & GROWTH FUND, INC. NOTES TO FINANCIAL STATEMENT FEBRUARY 28, 2005 NOTE A - NATURE OF BUSINESS Overview Commonwealth Income & Growth Fund, Inc. (the "Company") is a wholly-owned subsidiary of Commonwealth of Delaware, Inc. ("CDI"), which is a wholly-owned subsidiary of Commonwealth Capital Corp. ("CCC"). The Company, through its wholly-owned subsidiaries, primarily leases various types of information technology equipment and related equipment to U.S. corporations and institutions. The Company is the sole General Partner of Commonwealth Income & Growth Fund I, Commonwealth Income & Growth Fund II, Commonwealth Income & Growth Fund III, Commonwealth Income & Growth Fund IV, and Commonwealth Income & Growth Fund VI, all Pennsylvania limited partnerships, and Commonwealth Income & Growth Private Fund I, a Pennsylvania limited liability corporation (the "Income Funds"). Concentration of risk CCC has provided additional capital by means of a noninterest-bearing demand note in the amount of $1,000,000, so that the Company will at all times have a net worth (which includes the net equity of the Company and the demand note receivable from CCC) of at least $1,000,000. The note receivable is reflected on the accompanying balance sheet as a reduction of the Company's equity and the collectibility is dependent upon the profitability of the Partnerships. In order to meet the net worth requirement of $1,000,000, CCC has provided additional capital in the amount of $23,000 through a capital contribution. The Company and CCC are dependent on the compensation they receive from the Income Funds. This compensation may be reduced due to the financial performance of each Income Fund. If the financial performance of the Income Funds deteriorates and the distributions to the limited partners are reduced, there is no assurance that the Company or CCC would be able to continue to collect fees for services provided. In the event that CCC was unable to collect fees for services provided, it would be uncertain if CCC could fulfill its financial commitments to the Company. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. F-7 COMMONWEALTH INCOME & GROWTH FUND, INC. NOTES TO FINANCIAL STATEMENT FEBRUARY 28, 2005 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Cash The Company maintains its cash balances in a financial institution. At times, the balance may exceed federally insured limits. The Company mitigates this risk by depositing funds with a major financial institution. The Company has not experienced any losses in such accounts, and believes it is not exposed to any significant credit risk. Receivables from Income Funds Receivables are stated at estimated collectible amounts. The Company provides for probable uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts based on its assessment of the current status of the funds. The amounts due to the Company are for fees earned. Income taxes The Company's operations are included in the consolidated Federal income tax return of CCC. No provision for income taxes has been recorded. Deferred income taxes are provided as necessary for temporary differences between the financial and tax basis of investment in Income Funds. The Company has not recognized a deferred tax liability for the difference between the bases in financial reporting and tax reporting of its holdings in the Investment Funds because it does not expect the basis difference to become subject to tax at the Parent level. Deferred income tax assets are also recognized for net operating losses that are available to offset future income taxes. A valuation allowance is provided as necessary to reduce the deferred income tax assets to the amount that is more likely than not to be realized. Recent Accounting Pronouncements On December 24, 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities" (FIN 46R or the Interpretation), which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and, accordingly, whether it should consolidate the entity. FIN 46R requires us to review our degree of involvement in an entity to determine if we should consolidate the entity or make disclosures about our level of involvement in the entity. This Interpretation is effective for non-public entities immediately for variable interest entities (VIE) or potential variable interest entities created after December 31, 2003, and by the beginning of the first annual period beginning after December 15, 2004, to all other entities. We have determined that one Income Fund in which we are a partner, was created after December 31, 2003 and meets the definition of a VIE; however, that Income Fund does not meet the criteria for consolidation. We are evaluating the impact that adoption of FIN 46R will have on our financial statements with respect to Income Funds we are partners in which were created prior to December 31, 2003. In June 2005, the FASB issued Emerging Issues Task Force Issue No. 04-5 (EITF 04-5), Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights, which provides new guidance on how general partners in a limited partnership should determine whether they control a limited partnership. EITF 04-5 is effective for fiscal periods beginning after December 15, 2005. The Company is currently evaluating the effect, if any, that implementation on the new guidance will have on the Company's financial position and results of operations. NOTE C - INVESTMENT IN INCOME FUNDS The Company contributed $1,000 in cash to each of the Income Funds for its 1% interests and accounts for these interests by the equity method. Under the equity method, the Company records its proportionate share of the Partnership's undistributed earnings or losses. The Company has decreased its receivable from income funds in the amount of approximately $30,000 for the fiscal year ended February 28, 2005 as an adjustment due to the loss in excess of its equity method investments in certain income funds. F-8 COMMONWEALTH INCOME & GROWTH FUND, INC. NOTES TO FINANCIAL STATEMENT FEBRUARY 28, 2005 NOTE C - INVESTMENT IN INCOME FUNDS (CONTINUED) Financial information of the Income Funds as of December 31, 2004 is as follows: Total assets $ 25,462,336 Nonrecourse debt 5,232,545 Other liabilities 2,182,402 Partners' capital 18,045,389 Net loss (2,182,158) NOTE D - RELATED PARTY TRANSACTIONS The Company and its affiliates receive substantial fees and compensation in connection with the offering of investment units and the management of the Income Funds' assets. The Company incurs general and administrative expenses payable to CCC equal to fees earned from the Investment Funds. F-9 COMMONWEALTH INCOME & GROWTH FUND, INC. BALANCE SHEET DECEMBER 31, 2005 (UNAUDITED) ASSETS ASSETS Cash $ 83,494 Receivables from Income Funds 178,080 Other receivables 59,333 Investment in Income Funds -- ------------ TOTAL ASSETS $ 320,907 ============ LIABILITIES AND STOCKHOLDER'S EQUITY LIABILITIES Due to Parent 320,472 ------------ Total liabilities 320,472 STOCKHOLDER'S EQUITY Common stock; no par value, 1,000 shares authorized, 100 shares issued and outstanding 1,000 Additional paid-in capital 1,061,100 Retained earnings (61,665) ------------ 1,000,435 Less note receivable (1,000,000) ------------ Total Stockholder's equity 435 ------------ TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 320,907 ============ F-10 COMMONWEALTH INCOME & GROWTH FUND, INC. NOTES TO FINANCIAL STATEMENT DECEMBER 31, 2005 (unaudited) NOTE A - NATURE OF BUSINESS Overview Commonwealth Income & Growth Fund, Inc. (the "Company") is a wholly-owned subsidiary of Commonwealth of Delaware, Inc. ("CDI"), which is a wholly-owned subsidiary of Commonwealth Capital Corp. ("CCC"). The Company, through its wholly-owned subsidiaries, primarily leases various types of computer peripheral equipment and related equipment to U.S. corporations and institutions. The Company is the sole General Partner of Commonwealth Income & Growth Fund I, Commonwealth Income & Growth Fund II, Commonwealth Income & Growth Fund III, Commonwealth Income & Growth Fund IV, and Commonwealth Income & Growth Fund V, and Commonwealth Income & Growth Fund VI all Pennsylvania limited partnerships, and Commonwealth Income & Growth Private Fund I, and Commonwealth Income & Growth Private Fund II, Pennsylvania limited liability corporations (the "Income Funds"). During the period ended December 31, 2005 (unaudited), two income funds entered liquidation, but no funds were fully liquidated. Concentration of risk CCC has provided additional capital by means of a noninterest-bearing demand note in the amount of $1,000,000, so that the Company will at all times have a net worth (which includes the net equity of the Company and the demand note receivable from CCC) of at least $1,000,000. The note receivable is reflected on the accompanying balance sheet as a reduction of the Company's equity and the collectibility is dependent upon the profitability of the Partnerships. In order to meet the net worth requirement of $1,000,000, CCC has provided additional capital in the amount of $61,000 through capital contributions. The Company and CCC are dependent on the compensation they receive from the Income Funds. This compensation may be reduced due to the financial performance of each Income Fund. If the financial performance of the Income Funds deteriorates and the distributions to the limited partners are reduced, there is no assurance that the Company or CCC would be able to continue to collect fees for services provided. In the event that CCC was unable to collect fees for services provided, it would be uncertain if CCC could fulfill its financial commitments to the Company. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. F-11 COMMONWEALTH INCOME & GROWTH FUND, INC. NOTES TO FINANCIAL STATEMENT DECEMBER 31, 2005 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Cash The Company maintains its cash balances in a financial institution. At times, the balance may exceed federally insured limits. The Company mitigates this risk by depositing funds with major financial institution. The Company has not experienced any losses in such accounts, and believes it is not exposed to any significant credit risk. Receivables from Income Funds Receivables are stated at estimated collectible amounts. The Company provides for probable uncollectible amounts through a charge to earnings and a credit to an allowance for doubtful accounts based on its assessment of the current status of the funds. The amounts due to the Company are for fees earned. Income taxes The Company's operations are included in the consolidated Federal income tax return of CCC. No provision for income taxes has been recorded. Deferred income taxes are provided as necessary for temporary differences between the financial and tax basis of investment in Income Funds. The Company has not recognized a deferred tax liability for the difference between the bases in financial reporting and tax reporting of its holdings in the Investment Funds because it does not expect the basis difference to become subject to tax at the Parent level. Deferred income tax assets are also recognized for net operating losses that are available to offset future income taxes. A valuation allowance is provided as necessary to reduce the deferred income tax assets to the amount that is more likely than not to be realized. Recent Accounting Pronouncements On December 24, 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities" (FIN 46R or the Interpretation), which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and, accordingly, whether it should consolidate the entity. FIN 46R requires us to review our degree of involvement in an entity to determine if we should consolidate the entity or make disclosures about our level of involvement in the entity. This Interpretation is effective for non-public entities immediately for variable interest entities (VIE) or potential variable interest entities created after December 31, 2003, and by the beginning of the first annual period beginning after December 15, 2004, to all other entities. We have determined that the Income Funds we are partners in meet the definition of VIEs; however, they do not meet the criteria for consolidation. Information relevant to the Income Funds is presented in Note C to this financial statement. In June 2005, the FASB issued Emerging Issues Task Force Issue No. 04-5 (EITF 04-5), Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights, which provides new guidance on how general partners in a limited partnership should determine whether they control a limited partnership. EITF 04-5 is effective for fiscal periods beginning after December 15, 2005. The Company is currently evaluating the effect, if any, that implementation on the new guidance will have on the Company's financial position and results of operations. NOTE C - INVESTMENT IN INCOME FUNDS The Company contributed $1,000 in cash to each of the Income Funds for its 1% interests and accounts for these interests by the equity method. Under the equity method, the Company records its proportionate share of the Partnership's undistributed earnings or losses. The Company has decreased its receivable from income funds in the amount of approximately $65,000 for the period ended December 31, 2005 as an adjustment due to the loss in excess of its equity method investments in certain income funds. F-12 COMMONWEALTH INCOME & GROWTH FUND, INC. NOTES TO FINANCIAL STATEMENT DECEMBER 31, 2005 NOTE C - INVESTMENT IN INCOME FUNDS (CONTINUED) Financial information of the Income Funds as of December 31, 2005 is as follows: Total assets $ 45,687,985 Nonrecourse debt 5,669,566 Other liabilities 1,570,249 Partners' capital 38,448,170 Net loss (3,201,951) NOTE D - RELATED PARTY TRANSACTIONS The Company and its affiliates receive substantial fees and compensation in connection with the offering of investment units and the management of the Income Funds' assets. The Company incurs general and administrative expenses payable to CCC equal to fees earned from the Investment Funds. F-13 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM STOCKHOLDER COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES EXTON, PENNSYLVANIA We have audited the accompanying consolidated balance sheets of COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES as of February 28, 2005 and February 29, 2004 and the related consolidated statements of operations and retained earnings and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America.) Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES as of February 28, 2005 and February 29, 2004 and the consolidated results of their operations and their consolidated cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ ASHER & COMPANY, Ltd. Philadelphia, Pennsylvania MAY 25, 2005 F-14 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS FEBRUARY 28, 2005 AND FEBRUARY 29, 2004 ASSETS
FEBRUARY 28, FEBRUARY 29, 2005 2004 ------------- ------------- ASSETS Cash and cash equivalents $ 170,623 $ 79,491 Receivables from Income Funds 985,892 1,148,429 Other receivables, net of allowance for doubtful 80,149 81,402 accounts of $15,000 and $0 at February 28, 2005 and February 29, 2004, respectively Investment in Income Funds 6,654 33,599 Office furniture and equipment, net of accumulated depreciation of $152,508 and $227,538 at February 28, 2005 and February 29, 2004, respectively 78,094 41,541 Deferred offering costs 221,676 156,368 Other assets 31,164 7,814 ----------- ----------- TOTAL ASSETS $ 1,574,252 $ 1,548,644 =========== =========== LIABILITIES AND STOCKHOLDER'S EQUITY LIABILITIES Accounts payable and accrued expenses $ 379,160 $ 402,251 Due to Income Funds 575,906 736,884 ----------- ----------- Total liabilities 955,066 1,139,135 STOCKHOLDER'S EQUITY Common stock; par value $1;1,000 shares authorized; 10 shares issued and outstanding 10 10 Retained earnings 619,176 409,499 ----------- ----------- Total Stockholder's equity 619,186 409,509 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,574,252 $ 1,548,644 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements F-15 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS YEARS ENDED FEBRUARY 28, 2005 AND FEBRUARY 29, 2004
YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 29, 2005 2004 ------------ ------------ INCOME Fee income from Income Funds $ 2,505,415 $ 1,800,858 Commission income 1,484,700 928,763 Loss in investment in Income Funds (27,503) (15,430) Interest and miscellaneous 74,329 156,953 ----------- ----------- 4,036,941 2,871,144 EXPENSES Personnel 1,587,531 1,344,168 General and administrative 857,144 577,662 Selling 1,351,196 836,726 Interest 23 - Bad debt 15,000 - Depreciation 16,370 16,540 ----------- ----------- 3,827,264 2,775,096 ----------- ----------- Net Income 209,677 96,048 Retained earnings, beginning 409,499 313,451 ----------- ----------- Retained earnings, ending $ 619,176 $ 409,499 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements F-16 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED FEBRUARY 28, 2005 AND FEBRUARY 29, 2004
YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 29, 2005 2004 ------------ ------------ OPERATING ACTIVITIES Net income $ 209,677 $ 96,048 Adjustments to reconcile net income to net cash provided by operating activities: Loss in investment in Income Funds 27,503 15,430 Depreciation 16,370 16,540 Charges to expense for deferred offering costs 32,159 133,000 Bad debt expense 15,000 - Changes in: Receivables from Income Funds 133,768 (549,856) Other receivable (13,747) (41,768) Deferred offering costs (97,467) (138,879) Other assets (23,350) 2,207 Accounts payable and accrued expenses (23,091) 204,767 Due to Income Funds (160,978) 265,018 --------- --------- Net cash provided by operating activities 115,844 2,507 INVESTING ACTIVITIES Distributions from Income Funds 28,211 - Capital expenditures (52,923) (18,106) --------- --------- Net cash utilized by investing activities (24,712) (18,106) --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 91,132 (15,599) Cash and cash equivalents, beginning of period 79,491 95,090 --------- --------- Cash and cash equivalents, end of period $ 170,623 $ 79,491 ========= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest during the year $ - $ - ========= =========
The accompanying notes are an integral part of these consolidated financial statements F-17 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED FEBRUARY 28, 2005 AND FEBRUARY 29, 2004 NOTE A - NATURE OF BUSINESS Overview Commonwealth Capital Corp. through its wholly owned subsidiary, Commonwealth of Delaware, Inc. ("CDI") primarily leases various types of computer peripheral equipment and related equipment to U.S. corporations and institutions. Certain wholly-owned subsidiaries of CDI were formed for the purpose of functioning as general partners/managing trustees which own a 1% interest in limited partnerships/trusts (the "Income Funds") which were organized to acquire, own and act as lessor with respect to certain computer equipment. CDI's subsidiaries include Commonwealth Capital Trustee VIII, Inc., Commonwealth Capital Trustee IX, Inc., Commonwealth Capital Trustee X, Inc., Commonwealth Capital Private Fund, III, Inc. Commonwealth Income & Growth Fund, Inc., Commonwealth Capital Private Fund IV, Inc., Commonwealth Capital Private Fund V, Inc., and Commonwealth Capital Private Fund VI, Inc. (collectively the "General Partner Subsidiaries"), Commonwealth Capital Securities Corp., and Commonwealth Capital Delaware Trustee, Inc. During the years ended February 28, 2005 and February 29, 2004, respectively, two Income Funds were liquidated. Concentration of risk Commonwealth Capital Corp. and subsidiaries (the "Company") is dependent on the compensation it receives from the Income Funds. This compensation may be reduced due to the financial performance of each Income Fund. There are certain Income Funds that have deferred the payment of fees to the Company, because distributions to the limited partners were reduced because of the Income Funds' financial performance. If the financial performance of the Income Funds deteriorates and the distributions to the limited partners are reduced, there is no assurance that the Company would be able to continue to collect fees for services provided. During the year ended February 28, 2005, the Company forgave $30,496 of fees and $88,065 of reimbursable expenses due from an Income Fund. During the year ended February 29, 2004, the Company forgave $8,505 of fees and $139,651 of reimbursable expenses due from an Income Fund. Commission income is earned by Commonwealth Capital Securities Corp., which sells units of its affiliated partnership through broker-dealer firms to their respective customers throughout the United States. F-18 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED FEBRUARY 28, 2005 AND FEBRUARY 29, 2004 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation and basis of presentation The accompanying consolidated financial statements include the accounts of Commonwealth Capital Corp., CDI, and CDI's subsidiaries (the "Company"). All significant intercompany transaction and balances have been eliminated. The Company's balance sheets are presented on an unclassified basis in accordance with the leasing industry practice. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents The Company considers all highly liquid investments purchased with maturity of three months or less to be cash equivalents. Cash equivalents have been invested in a money market fund investing directly in U.S. Treasury obligations. Cash at February 28, 2005 and February 29, 2004, was held in the custody of two financial institutions. The balance, at times, may exceed federally insured limits. The Company mitigates this risk by depositing funds with major financial institutions. The Company has not experienced any losses in such accounts, and believes it is not exposed to any significant credit risk. Office furniture and equipment Office furniture and equipment are stated at cost. Depreciation is provided using declining balance and straight-line methods over the estimated useful lives of the assets (ranging from 5 to 7 years). F-19 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED FEBRUARY 28, 2005 AND FEBRUARY 29, 2004 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Deferred offering costs Deferred offering costs represent amounts incurred by the Company for the organization of related "Income Funds." These costs are charged to expense based on the ratio of cash proceeds raised in the current year from the sale of Limited Partnership Units and the total units offered. Deferred offering costs charged to expense for the years ended February 28, 2005 and February 29, 2004 were approximately $32,000 and $133,000, respectively, and are included in general and administrative expenses. Revenue recognition The Company recognizes fees as earned in accordance with the various Limited Partnership and Trust Agreements. The Company recognizes commission income and brokerage fee expense on an accrual basis based on the trade date of the underlying customer transactions. Interest income on minimum lease payment receivable is recognized as earned. Income taxes Deferred income taxes are provided as necessary for temporary differences between the financial and tax bases of investment in Income Funds and office furniture and equipment. The tax basis of investment in Income Funds differs from financial reporting due to temporary differences associated with ownership of general partnership interests in the various Income Funds. Also, for income tax reporting, the cost of property and equipment is being recovered using the methods and lives prescribed by the Internal Revenue Code. Deferred income tax assets are also recognized for net operating losses that are available to offset future income taxes. A valuation allowance is provided as necessary to reduce the deferred income tax assets to the amount that is more likely than not to be realized. Recent Accounting Pronouncements On December 24, 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities" (FIN 46R or the Interpretation), which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and, accordingly, whether it should consolidate the entity. FIN 46R requires us to review our degree of involvement in an entity to determine if we should consolidate the entity or make disclosures about our level of involvement in the entity. This Interpretation is effective for non-public entities immediately for variable interest entities (VIE) or potential variable interest entities created after December 31, 2003, and by the beginning of the first annual period beginning after December 15, 2004, to all other entities. We have determined that one Income Fund in which we are a partner, was created after December 31, 2003 and meets the definition of a VIE; however, that Income Fund does not meet the criteria for consolidation. We are evaluating the impact that adoption of FIN 46R will have on our financial statements with respect to Income Funds we are partners in which were created prior to December 31, 2003. In June 2005, the FASB issued Emerging Issues Task Force Issue No. 04-5 (EITF 04-5), Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights, which provides new guidance on how general partners in a limited partnership should determine whether they control a limited partnership. EITF 04-5 is effective for fiscal periods beginning after December 15, 2005. The Company is currently evaluating the effect, if any, that implementation on the new guidance will have on the Company's financial position and results of operations. F-20 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED FEBRUARY 28, 2005 AND FEBRUARY 29, 2004 NOTE C - INVESTMENT IN INCOME FUNDS AND CONCENTRATION Investment in Income Funds The Company contributed $1,000 in cash to each of the Income Funds for its 1% interests, and accounts for these interests by the equity method. Under the equity method, the Company records its proportionate share of the Partnership's undistributed earnings or losses. The Company has decreased its Receivables from Income Funds in the amount of approximately $30,000 for the fiscal year ended February 28, 2005 as an adjustment due to losses in excess of its equity method investments in certain Income Funds. Loss in investment in Income Funds includes changes in net assets for funds in liquidation of $1,625 and $2,207 for the years ended February 28, 2005 and February 29, 2004, respectively. Financial information of the Income Funds as of December 31, is as follows: 2004 2003 ----------- ----------- Total assets $27,259,000 $20,044,000 Non-recourse debt 5,500,000 3,218,000 Other liabilities 2,907,000 4,242,000 Partners' capital 19,172,000 13,204,000 Net loss (2,750,000) (1,543,000) The Company has guaranteed the performance of certain non-monetary obligations of the General Partner Subsidiaries to the respective Income Funds, primarily the responsibility for management of the Income Funds. In addition, the Company is responsible for certain capital funding requirements of the General Partner Subsidiaries, which it satisfies through non-interest-bearing demand notes. Such notes total approximately $2,105,000 and $2,505,000 as February 28, 2005 and February 29, 2004, respectively, and have been eliminated in consolidation. F-21 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED FEBRUARY 28, 2005 AND FEBRUARY 29, 2004 NOTE C - INVESTMENT IN INCOME FUNDS AND CONCENTRATION (CONTINUED) Fee income earned by the Company from the Income Funds consists of: (1) equipment acquisition fees (3% - 4% as defined of the purchase price of all equipment purchased by the Income Fund(s), (2) debt placement fees (1% of the cost of equipment financed by the Income Funds), (3) sales fees (3% of the gross proceeds of equipment sold by the Income Funds), and (4) equipment management fees (3% - 5% as defined of the gross operating lease revenues of the Income Funds). Ongoing acquisition fees and equipment management fees may be increased as an indirect result of Company loans. Concentration Approximately 95% of fee income for the year ended February 28, 2005 was from three Income Funds. Approximately 92% of fee income for the year ended February 29, 2004, was from two Income Funds. 2005 2004 ---- ---- Fund A 6% 20% Fund B 26 72 Fund C 63 -- --- --- Total 95% 92% === === NOTE D - LEASE COMMITMENTS The Company leases an automobile, certain office equipment and office space under cancelable operating leases expiring in various dates through 2009. Rent expense under all operating leases was approximately $185,000 and $143,000 for years ended February 28, 2005 and February 29, 2004, respectively. Future minimum lease payments under non-cancelable operating leases as of February 28, 2005 are as follows: Year Ending February 28, Amount ------------------------ -------- 2006 $265,040 2007 243,426 2008 158,432 2009 2,334 -------- $669,232 ======== F-22 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED FEBRUARY 28, 2005 AND FEBRUARY 29, 2004 NOTE E - PROFIT SHARING PLAN The Company has a profit sharing plan which covers substantially all of its employees. Contributions to the Plan may be made at the discretion of management. No contributions to the Plan were made or accrued for the years ended February 28, 2005 and February 29, 2004. NOTE F - INCOME TAXES The Company and it subsidiaries file a consolidated federal income tax return. The provision for income taxes for the years ended February 28, 2005 and February 29, 2004 is zero, and includes tax benefits of approximately $35,000 and $23,000, respectively, for the use of net operating loss carry forwards. At February 28, 2005, the Company has Federal net operating loss carry forwards of approximately $387,000, which expire through 2021. Also, at February 28, 2005, the Company has Pennsylvania net operating loss carry forwards of approximately $5,342,000, which expire through 2015. Deferred income taxes result primarily from temporary differences in the bases of certain assets for financial and income tax reporting purposes, and net operating losses. The components of the Company's net deferred tax asset (liability) consisted of the following as of February 28, 2005 and February 29, 2004: 2005 2004 ---------- ---------- Deferred tax assets: Net operating loss carry forwards $ 419,000 $ 507,000 Less valuation allowance (374,000) (440,000) --------- --------- Deferred tax assets 45,000 67,000 Deferred tax liabilities: Investments in Income Fund (33,000) (56,000) Office furniture and equipment (12,000) (11,000) --------- --------- Deferred tax liabilities (45,000) (67,000) --------- --------- Net deferred tax assets (liabilities) $ - $ - ========= ========= F-23 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED FEBRUARY 28, 2005 AND FEBRUARY 29, 2004 NOTE F - INCOME TAXES (CONTINUED) The valuation allowance was decreased by $66,000 and $23,000, respectively, for the years ended February 28, 2005 and February 29, 2004. F-24 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2005 (UNAUDITED) ASSETS ASSETS Cash and cash equivalents $ 218,158 Receivables from Income Funds 937,607 Other receivables, net of allowance for doubtful accounts of $30,000 at December 31, 2005 25,567 Investment in Income Funds 1,849 Office furniture and equipment, net of accumulated depreciation of $245,746 at December 31, 2005 77,600 Deferred offering costs 64,123 Other assets 42,789 ------------ TOTAL ASSETS $ 1,367,693 ============ LIABILITIES AND STOCKHOLDER'S EQUITY LIABILITIES Accounts payable and accrued expenses $ 115,789 Due to Income Funds 378,384 ------------ Total liabilities 494,173 STOCKHOLDER'S EQUITY Common stock; par value $1; 1,000 shares authorized; 10 shares issued and outstanding 10 Retained earnings 873,510 ------------ Total Stockholder's equity 873,520 ------------ TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,367,693 ============ F-25 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS TEN MONTHS ENDED DECEMBER 31, 2005 (UNAUDITED) INCOME Fee income from Income Funds $ 3,340,617 Commission income 2,830,053 Loss in investment in Income Funds (32,996) Interest and miscellaneous 9,587 ------------ 6,147,261 EXPENSES Personnel 1,749,053 General and administrative 1,284,730 Selling 2,825,936 Bad Debt 15,000 Depreciation 18,208 ------------ 5,892,927 ------------ Net Income 254,334 Retained earnings, beginning 619,176 ------------ Retained earnings, ending $ 873,510 ============ F-26 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS TEN MONTHS ENDED DECEMBER 31, 2005 (UNAUDITED) OPERATING ACTIVITIES Net income $ 254,334 Adjustments to reconcile net income to net cash provided by operating activities: Loss in investment in Income Funds 32,996 Depreciation 18,208 Charges to expense for deferred offering costs 164,898 Changes in: Receivables from Income Funds (25,613) Other receivable 54,582 Deferred offering costs (7,345) Other assets (11,625) Accounts payable and accrued expenses (263,371) Due to Income Funds (197,522) ------------ Net cash provided by operating activities 19,542 INVESTING ACTIVITIES Distributions from Income Funds 45,707 Capital expenditures (17,714) ------------ Net cash provided by investing activities 27,993 ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 47,535 Cash and cash equivalents, beginning of period 170,623 ------------ Cash and cash equivalents, end of period $ 218,158 ============ F-27 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2005 (UNAUDITED) NOTE A - NATURE OF BUSINESS Overview Commonwealth Capital Corp. through its wholly owned subsidiary, Commonwealth of Delaware, Inc. ("CDI") primarily leases various types of computer peripheral equipment and related equipment to U.S. corporations and institutions. Certain wholly-owned subsidiaries of CDI were formed for the purpose of functioning as general partners/managing trustees which own a 1% interest in limited partnerships/trusts (the "Income Funds") which were organized to acquire, own and act as lessor with respect to certain computer equipment. CDI's subsidiaries include Commonwealth Capital Trustee VIII, Inc., Commonwealth Capital Trustee IX, Inc., Commonwealth Capital Trustee X, Inc., Commonwealth Capital Private Fund, III, Inc. Commonwealth Income & Growth Fund, Inc., Commonwealth Capital Private Fund IV, Inc., Commonwealth Capital Private Fund V, Inc., and Commonwealth Capital Private Fund VI, Inc. (collectively the "General Partner Subsidiaries"), Commonwealth Capital Securities Corp., and Commonwealth Capital Delaware Trustee, Inc. During the period ended December 31, 2005 (unaudited), two Income Funds entered liquidation and no income funds were fully liquidated. Concentration of risk Commonwealth Capital Corp. and subsidiaries (the "Company") is dependent on the compensation it receives from the Income Funds. This compensation may be reduced due to the financial performance of each Income Fund. There are certain Income Funds that have deferred the payment of fees to the Company, because distributions to the limited partners were reduced because of the Income Funds' financial performance. If the financial performance of the Income Funds deteriorates and the distributions to the limited partners are reduced, there is no assurance that the Company would be able to continue to collect fees for services provided. During the period ended December 31, 2005 (unaudited), the Company forgave $314,727 of fees and $104,376 of reimbursable expenses due from Income Funds. Commission income is earned by Commonwealth Capital Securities Corp., which sells units of its affiliated partnership through broker-dealer firms to their respective customers throughout the United States. F-28 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2005 (UNAUDITED) NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation and basis of presentation The accompanying consolidated financial statements include the accounts of Commonwealth Capital Corp., CDI, and CDI's subsidiaries (the "Company"). All significant intercompany transaction and balances have been eliminated. The Company's balance sheets are presented on an unclassified basis in accordance with the leasing industry practice. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents The Company considers all highly liquid investments purchased with maturity of three months or less to be cash equivalents. Cash equivalents have been invested in a money market fund investing directly in U.S. Treasury obligations. Cash at December 31, 2005, was held in the custody of two financial institutions. The balance, at times, may exceed federally insured limits. The Company mitigates this risk by depositing funds with major financial institutions. The Company has not experienced any losses in such accounts, and believes it is not exposed to any significant credit risk. Office furniture and equipment Office furniture and equipment are stated at cost. Depreciation is provided using declining balance and straight-line methods over the estimated useful lives of the assets (ranging from 5 to 7 years). F-29 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2005 (UNAUDITED) NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Deferred offering costs Deferred offering costs represent amounts incurred by the Company for the organization of related "Income Funds." These costs are charged to expense based on the ratio of cash proceeds raised in the current year from the sale of Limited Partnership Units and the total units offered. Deferred offering costs charged to expense for the period ended December 31, 2005 (unaudited) were approximately $165,000 and are included in general and administrative expenses. Revenue recognition The Company recognizes fees as earned in accordance with the various Limited Partnership and Trust Agreements. The Company recognizes commission income and brokerage fee expense on an accrual basis based on the trade date of the underlying customer transactions. Interest income on minimum lease payment receivable is recognized as earned. Income taxes Deferred income taxes are provided as necessary for temporary differences between the financial and tax bases of investment in Income Funds and office furniture and equipment. The tax basis of investment in Income Funds differs from financial reporting due to temporary differences associated with ownership of general partnership interests in the various Income Funds. Also, for income tax reporting, the cost of property and equipment is being recovered using the methods and lives prescribed by the Internal Revenue Code. Deferred income tax assets are also recognized for net operating losses that are available to offset future income taxes. A valuation allowance is provided as necessary to reduce the deferred income tax assets to the amount that is more likely than not to be realized. Recent Accounting Pronouncements On December 24, 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities" (FIN 46R or the Interpretation), which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and, accordingly, whether it should consolidate the entity. FIN 46R requires us to review our degree of involvement in an entity to determine if we should consolidate the entity or make disclosures about our level of involvement in the entity. This Interpretation is effective for non-public entities immediately for variable interest entities (VIE) or potential variable interest entities created after December 31, 2003, and by the beginning of the first annual period beginning after December 15, 2004, to all other entities. We have determined that the Income Funds we are partners in meet the definition of VIEs; however, they do not meet the criteria for consolidation. Information relevant to the Income Funds is presented in Note C to these financial statements. In June 2005, the FASB issued Emerging Issues Task Force Issue No. 04-5 (EITF 04-5), Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights, which provides new guidance on how general partners in a limited partnership should determine whether they control a limited partnership. EITF 04-5 is effective for fiscal periods beginning after December 15, 2005. The Company is currently evaluating the effect, if any, that implementation on the new guidance will have on the Company's financial position and results of operations. F-30 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2005 (UNAUDITED) NOTE C - INVESTMENT IN INCOME FUNDS AND CONCENTRATION Investment in Income Funds The Company contributed $1,000 in cash to each of the Income Funds for its 1% interests, and accounts for these interests by the equity method. Under the equity method, the Company records its proportionate share of the Partnership's undistributed earnings or losses. The Company has decreased its Receivables from Income Funds in the amount of approximately $75,000 for the period ended December 31, 2005 (unaudited) as an adjustment due to losses in excess of its equity method investments in certain Income Funds. Loss in investment in Income Funds includes changes in net assets for funds in liquidation of $7,092 for the period ended December 31, 2005 (unaudited). Financial information of the Income Funds as of December 31 is as follows: 2005 ------------ Total assets $ 46,505,615 Non-recourse debt 5,949,628 Other liabilities 2,173,503 Partners' capital 38,480,070 Net loss (3,397,036) The Company has guaranteed the performance of certain non-monetary obligations of the General Partner Subsidiaries to the respective Income Funds, primarily the responsibility for management of the Income Funds. In addition, the Company is responsible for certain capital funding requirements of the General Partner Subsidiaries, which it satisfies through non-interest-bearing demand notes. Such notes total approximately $2,105,000 for the period ended December 31, 2005 (unaudited) and has been eliminated in consolidation. F-31 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2005 (UNAUDITED) NOTE C - INVESTMENT IN INCOME FUNDS AND CONCENTRATION (CONTINUED) Fee income earned by the Company from the Income Funds consists of: (1) equipment acquisition fees (3% - 4% as defined of the purchase price of all equipment purchased by the Income Fund(s), (2) debt placement fees (1% of the cost of equipment financed by the Income Funds), (3) sales fees (3% of the gross proceeds of equipment sold by the Income Funds), and (4) equipment management fees (3% - 5% as defined of the gross operating lease revenues of the Income Funds). Ongoing acquisition fees and equipment management fees may be increased as an indirect result of Company loans. Concentration Approximately 93% of fee income for the period ended December 31, 2005 (unaudited) was from four income funds. 12/31/05 ------------ Fund B 13% Fund C 28% Fund D 44% Fund E 8% ------------ Total 93% ============ NOTE D - LEASE COMMITMENTS The Company leases an automobile, certain office equipment and office space under cancelable operating leases expiring in various dates through 2009. Rent expense under all operating leases was approximately $306,000 for the period ended December 31, 2005 (unaudited). Future minimum lease payments under non-cancelable operating leases as of December 31, 2005 are as follows: Period Ending February 28, Amount -------------------------- ------------ 2006 $ 59,798 2007 303,459 2008 233,985 2009 2,334 ------------ $ 599,576 ============ F-32 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2005 (UNAUDITED) NOTE E - PROFIT SHARING PLAN The Company has a profit sharing plan which covers substantially all of its employees. Contributions to the Plan may be made at the discretion of management. No contributions to the Plan were made or accrued for the period ended December 31, 2005 (unaudited). F-33 COMMONWEALTH CAPITAL CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2005 (UNAUDITED) NOTE F - INCOME TAXES The Company and it subsidiaries file a consolidated federal income tax return. The provision for income taxes for the period ended December 31, 2005 is zero, and includes tax benefits of approximately $135,000 for the use of net operating loss carry forwards. At February 28, 2005, the Company has Federal net operating loss carry forwards of approximately $407,000, which expire through 2022. Also, at February 28, 2005, the Company has Pennsylvania net operating loss carry forwards of approximately $5,759,000, which expire through 2016. Deferred income taxes result primarily from temporary differences in the bases of certain assets for financial and income tax reporting purposes, and net operating losses. The components of the Company's net deferred tax asset (liability) consisted of the following as of December 31, 2005: 2005 --------- Deferred tax assets: Net operating loss carry forwards $ 294,000 Less valuation allowance (280,000) --------- Deferred tax assets 14,000 Deferred tax liabilities: Investments in Income Fund (1,000) Office furniture and equipment (13,000) --------- Deferred tax liabilities (14,000) --------- Net deferred tax assets (liabilities) $ - ========= The valuation allowance was decreased by $94,000 for the period ended December 31, 2005. F-34 TABLES II PRIOR PERFORMANCE TABLES COMMONWEALTH CAPITAL CORP. EXPERIENCE IN RAISING AND INVESTING FUNDS AS OF DECEMBER 31, 2005 (TABLE 1)
COMMONWEALTH COMMONWEALTH COMMONWEALTH COMMONWEALTH COMMONWEALTH INCOME & GROWTH INCOME & GROWTH INCOME & GROWTH INCOME & GROWTH INCOME & GROWTH FUND V FUND IV FUND III FUND II FUND I --------------- --------------- --------------- --------------- --------------- OFFERING INFORMATION: Amount offered (maximum) $ 25,000,000 $ 15,000,000 $ 15,000,000 $ 15,000,000 $ 15,000,000 Dollar Amount Sold 19,703,204 15,000,000 3,023,569 9,235,185 12,623,682 (1) Dealer/Manager Expenses 1,773,288 1,350,000 272,121 831,167 1,136,131 (2) Offering/Organizational Expenses 591,096 450,000 90,707 277,056 378,710 --------------- --------------- --------------- --------------- --------------- NET PROCEEDS AVAILABLE 17,338,820 13,200,000 2,660,741 8,126,962 11,108,841 TOTAL EQUIPMENT PURCHASES: Equipment purchased with cash 4,645,505 9,761,797 2,832,316 2,848,188 14,455,357 Equipment financed 834,786 2,882,425 1,920,833 8,711,253 13,195,684 Rent paid to original lessor in lieu of cash - 60,226 70,360 56,706 344,326 Obligation incurred in connection to leased equipment - - - 502,721 1,421,857 --------------- --------------- --------------- --------------- --------------- TOTAL EQUIPMENT PURCHASES 5,480,291 12,704,448 4,823,509 12,118,868 29,417,224 % of Equipment financed as of December 2005 15.2% 22.7% 39.8% 71.9% 44.9% Initial Acquisition Fees (%) (3) 3.4% 3.4% 3.4% 3.4% 3.4% Date Offering Commenced 2/7/2005 10/19/2001 01/27/98 05/12/95 12/17/93 Date Offering Completed N/A 9/22/2003 07/27/00 05/12/97 05/11/95 Average Initial Term of Leases (in months) 31 31 33 33 32 Months from closing to invest 90% N/A N/A 2 36 5
(1) Dealer/Manager expenses include commissions to brokers, due diligence and out-of-pocket expenses. (2) Offering/Organizational expenses consist of legal fees, blue sky filings, accounting fees, printing charges for prospectus books and the guarantee fee. (3) Fees were paid to the General Partner/Management Trustee at fund closing. Prior performance is not indicative of future performance TABLE II COMPENSATION TO GENERAL PARTNERS AND AFFILIATES The following table sets forth certain information concerning all the compensation earned by the General Partner and its Affiliates four public equipment leasing programs sponsored by the General Partner and Affiliates which closed in the most recent three years. Amounts are from two sources: (1) proceeds from the offering and (2) gross revenues. Amounts for operations are cumulative. COMMONWEALTH CAPITAL CORP. COMPENSATION TO GENERAL PARTNERS AND AFFILIATES AS OF DECEMBER 31, 2005 (TABLE II)
COMMONWEALTH COMMONWEALTH COMMONWEALTH COMMONWEALTH COMMONWEALTH INCOME & GROWTH INCOME & GROWTH INCOME & GROWTH INCOME & GROWTH INCOME & GROWTH FUND V FUND IV FUND III FUND II FUND I --------------- --------------- --------------- --------------- --------------- DATE OFFERING COMMENCED 2/7/2005 10/19/2001 07/25/97 05/12/95 12/17/93 Dollar amount raised 19,703,204 $ 15,000,000 $ 3,023,569 $ 9,235,185 $ 12,623,682 AMOUNT PAID FROM THE PROCEEDS OF OFFERING, REINVESTMENT AND/OR DEBT: Initial Acquisition Fee 702,716 510,000 102,801 310,694 426,473 Organizational Fee 227,998 450,000 31,747 114,469 140,869 Cash generated (used) from operations before deducting payments to the General Partner and Affiliates (578,505) 179,998 1,887,964 5,824,392 10,465,036 AMOUNT PAID TO THE GENERAL PARTNER AND AFFILIATES FROM OPERATIONS: - Equipment Management Fee 19,072 553,964 251,214 1,060,870 1,360,435 Acquisition Fee 15,801 632,326 193,925 445,300 714,962 Finance Fee 569 35,552 20,196 83,401 125,043 Dollar amount of equipment sales and refinancing before deducting payments to the General Partner and Affiliates - 118,180 275,888 1,936,130 3,031,571 Amount paid to the General Partner and Affiliates from equipment sales and refinancing - 3,545 8,277 58,084 90,946
PRIOR PERFORMANCE IS NOT INDICATIVE OF FUTURE PERFORMANCE. COMMONWEALTH INCOME & GROWTH FUND I OPERATING RESULTS OF PRIOR PROGRAMS (Table III) For the Years Ended December 31, 2001, 2002, 2003,2004 & 2005
2001 2002 2003 2004 2005 ----------- ----------- ----------- ----------- ----------- (unaudited) COMPUTATION OF NET INCOME (LOSS) Months of Operations 12 12 12 12 12 Gross Revenues $ 954,340 $ 442,734 $ 383,353 334,529 89,732 Less: Operating Expenses 221,147 290,736 195,617 40,501 80,761 Equipment Management Fee 38,232 20,289 16,598 2,302 - Depreciation and Amortization 413,480 304,452 262,726 235,738 119,577 Interest expense 11,121 39,803 22,999 5,817 784 Uncollectible accounts receivable 99,831 24,565 - 174,000 75,493 Loss on sale of computer equipment - - - 12,651 - Net Income (Loss) - GAAP Basis 170,529 (237,111) (114,587) (136,480) (186,883) - - Federal Taxable Income 28,423 (416,702) (34,167) (63,011) N/A Cash Distributions - GAAP Basis (315,490) - - - (31,557) COMPUTATION OF CASH FLOWS NET INCOME (LOSS) - - Net (Loss) 170,529 (237,111) (114,587) (136,480) (186,883) ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES: - - Depreciation and Amortization 413,480 304,452 262,726 235,738 119,577 Loss (gain) on sale of equipment (185,549) (17,628) (51,374) 12,651 (9,003) Other Non-Cash Activities Included in the Determination of Net Income (Loss)* (111,180) (273,464) (267,354) (142,151) (3,719) Net Change in Operating Assets and Liabilities (30,522) 221,488 106,379 58,090 (195,324) Net Cash Provided by (Used in) Operating Activities 256,758 (2,263) (64,210) 27,848 (275,352) Capital Expenditures (199,304) (25,000) (5,000) - - Net proceeds from sale of equipment 229,719 23,816 70,381 16,989 29,621 Accounts Payable - CCC - - - - - Payment of Equipment Payable - - - - - Equipment Acquisition Fees Paid to the General Partner (29,737) (9,145) (200) - - Net Cash Provided by (Used in) Investing Activities 678 (10,329) 65,181 16,989 29,621 Partners' Contributions - - - - 264,546 Offering Costs - - - - - Advance to Commonwealth Capital Corp. - - - - - Proceeds from short-term note payable - 13,984 - - - Distributions to Partners (315,490) - - - (31,557) Debt placement fee (5,441) (2,036) - - - Net Cash (Used in) Financing Activities (320,931) 11,948 - - 232,989 Net Increase (Decrease) in Cash (63,495) (644) 971 44,837 (12,742) Cash at Beginning of Year - 1,082 438 1,409 46,246 Cash at End of Year 1,082 438 1,409 46,246 33,504 INVESTMENT DATA PER $ 1,000 INVESTMENT - - Net Income (Loss) - GAAP Basis 14 (19) (9) (11) (15) Federal Taxable Income to Investors 2 (33) (3) (5) N/A Cash Distributions to Investors - GAAP Basis (25) - - - (3) Return of Capital to Investors - GAAP Basis 25 - - - 3
* The significant component of Other Non-Cash Activities Included in the Determination of Net Income was direct payments by lessees to banks, which occurs when equipment is financed. The increase over the periods presented was caused primarily by the acquisition of more financed equipment. Prior Performance is not indicative of future performance COMMONWEALTH INCOME & GROWTH FUND II OPERATING RESULTS OF PRIOR PROGRAMS (Table III) For the Years Ended December 31, 2001, 2002, 2003, 2004 & 2005
2001 2002 2003 2004 2005 ----------- ----------- ----------- ----------- ----------- COMPUTATION OF NET INCOME (LOSS) Months of Operations 12 12 12 12 12 Gross Revenues $ 3,319,026 $ 2,714,461 $ 1,957,580 $ 742,311 $ 96,543 Less: Operating Expenses 360,293 571,038 608,439 398,197 170,355 Equipment Management Fee 151,046 135,579 75,934 36,016 3,831 Depreciation and Amortization 2,270,229 1,703,838 1,054,953 769,916 305,353 Interest expense 105,496 156,380 88,625 26,255 4,768 Uncollectible accounts receivable 9,200 398,868 - - - Loss on sale of computer equipment - - - 53,725 - Net Income (Loss) - GAAP Basis 422,762 (251,242) 129,629 (541,798) (387,764) - - Federal Taxable Income (536,884) (537,280) (816,144) (623,126) N/A Cash Distributions - GAAP Basis (685,429) (519,480) (577,200) (403,819) (46,187) COMPUTATION OF CASH FLOWS NET INCOME (LOSS) - - Net (Loss) 422,762 (251,242) 129,629 (541,798) (387,764) ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: - Depreciation and Amortization 2,270,229 1,703,838 1,054,953 769,916 305,353 Amortization of unearned lease income - - (10,945) - - Loss / (gain) on sale of equipment (295,135) (828) (439,124) 53,725 (23,032) Other Non-Cash Activities Included in the Determination of Net Income (Loss)* (1,252,115) (1,149,810) (995,568) (574,117) (30,842) Net Change in Operating Assets and Liabilities 3,241 178,356 322,837 189,746 (81,345) Net Cash Provided by Operating Activities 1,148,982 480,314 61,782 (102,528) (217,630) Capital Expenditures (677,233) (97,107) (15,000) (4,049) - Net proceeds from sale of equipment 408,634 134,335 422,533 244,072 79,012 Equipment Acquisition Fees Paid to the General Partner (105,760) (24,029) (600) (846) - Net Cash Provided by (Used in) Investing Activities (374,359) 13,199 406,933 239,177 79,012 Partners' Contributions (10,577) (4,164) - - 299,156 Offering Costs - - - - - Accounts Receivable - CCC (315,404) 8,000 112,882 230,667 3,317 Distributions to Partners (692,269) (519,480) (577,200) (403,819) (161,099) Debt placement fee (19,667) (5,036) - (171) - Proceeds from refinancing notes payable - 46,103 - - - Net Cash (Used in) Financing Activities (1,037,917) (474,577) (464,318) (173,323) 141,374 Net Increase (Decrease) in Cash (263,294) 18,936 4,397 (36,674) 2,756 Cash at Beginning of Year - 14,425 33,361 37,758 1,085 Cash at End of Year (263,294) 33,361 37,758 1,085 3,842 INVESTMENT DATA PER $ 1,000 INVESTMENT - - Net Income (Loss) - GAAP Basis 46 (27) 14 (59) (42) Federal Taxable Income to Investors (58) (58) (89) (68) N/A Cash Distributions to Investors - GAAP Basis (74) (56) (63) (44) (5) Return of Capital to Investors - GAAP Basis 74 56 63 44 5
* The significant component of Other Non-Cash Activities Included in the Determination of Net Income was direct payments by lessees to banks, which occurs when equipment is financed. The increase over the periods presented was caused primarily by the acquisition of more financed equipment. Prior Performance is not indicative of future performance COMMONWEALTH INCOME & GROWTH FUND III OPERATING RESULTS OF PRIOR PROGRAMS (Table III) For the Years Ended December 31, 2001, 2002, 2003, 2004 & 2005
2001 2002 2003 2004 2005 ----------- ----------- ----------- ----------- ----------- COMPUTATION OF NET INCOME (LOSS) Months of Operations 12 12 12 12 12 Gross Revenues $ 1,110,481 $ 789,063 $ 408,364 $ 190,858 $ 85,200 Less: Operating Expenses 233,577 265,918 153,142 45,841 $ 54,132 Equipment Management Fee 55,126 39,218 19,571 7,564 4,184 Depreciation and Amortization 992,477 723,513 379,854 228,697 75,125 Interest expense 44,900 22,247 12,020 3,897 2,428 Uncollectible accounts receivable - 30,011 - - - Loss on sale of computer equipment 55,028 - - - 9,804 Net (Loss) - GAAP Basis (270,627) (291,844) (156,223) (95,141) (60,473) - - Federal Taxable Income (108,877) (514,206) (480,336) (208,946) N/A Cash Distributions - GAAP Basis (317,497) (317,498) (317,500) (317,498) (143,314) COMPUTATION OF CASH FLOWS NET (LOSS) - - - Net (loss) (270,627) (291,844) (156,223) (95,141) (60,473) ADJUSTMENTS TO RECONCILE NET (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES: - - - Depreciation and Amortization 992,477 723,513 379,854 228,697 75,125 Loss (gain) on sale of equipment 55,028 (4,343) (16,865) (5,005) 9,804 Other Non-Cash Activities Included in the Determination of Net (Loss)* (591,179) (310,970) (162,331) (88,167) (29,426) Net Change in Operating Assets and Liabilities 210,497 66,659 211,262 228,673 47,357 Net Cash Provided by Operating Activities 396,196 183,015 255,697 269,057 42,387 Capital Expenditures (170,943) (64,989) - (6,104) - Net proceeds from sale of equipment 686 208,484 61,863 13,965 10,850 Equipment Acquisition Fees Paid to the General Partner (12,672) (11,416) - (2,523) - Net Cash Provided by (Used in) Investing Activities (182,929) 132,079 61,863 5,338 10,850 Partners' Contributions - - - 49,116 94,410 Offering Costs paid to affiliate - - - - - Offering Costs paid to the General Partner - - - - - Distributions to Partners (317,497) (317,498) (317,500) (317,498) (143,314) Proceeds from note payable - - - - - Debt placement fee (1,395) (2,204) - (570) - Net Cash Provided by (Used in) Financing Activities (318,892) (319,702) (317,500) (268,952) (48,904) Net Increase (Decrease) in Cash (105,625) (4,608) 60 5,443 4,333 Cash at Beginning of Year - 5,105 497 557 6,000 Cash at End of Year (105,625) 497 557 6,000 10,333 INVESTMENT DATA PER $ 1,000 INVESTMENT - - Net Loss - GAAP Basis (90) (97) (52) (31) (20) Federal Taxable Income to Investors (36) (170) (159) (69) N/A Cash Distributions to Investors - GAAP Basis (105) (105) (105) (105) (47) Return of Capital to Investors - GAAP Basis 105 105 105 105 47
* The significant component of Other Non-Cash Activities Included in the Determination of Net Income was direct payments by lessees to banks, which occurs when equipment is financed. The increase over the periods presented was caused primarily by the acquisition of more financed equipment. Prior Performance is not indicative of future performance COMMONWEALTH INCOME & GROWTH FUND IV OPERATING RESULTS OF PRIOR PROGRAMS (Table III) From Program Inception* through December 31, 2005
2002 2003 2004 2005 ------------- ------------- ------------- ------------- COMPUTATION OF NET INCOME (LOSS) Months of Operations 6* 12 12 12 Gross Revenues $ 150,534 $ 1,678,650 4,376,432 4,948,554 Less: Operating Expenses 443,358 1,180,077 946,876 554,443 Organizational costs 38,079 103,146 - - Equipment Management Fee 7,111 81,840 218,274 247,013 Depreciation and Amortization 110,021 1,265,669 3,414,323 3,862,080 Interest expense - 42,366 105,201 107,986 Uncollectible accounts receivable - - - - Loss on sale of computer equipment 5,886 - 32,966 166,542 Net (Loss) - GAAP Basis (453,921) (994,448) (341,208) 10,490 - - Federal Taxable Income (977,925) (3,136,737) (1,504,248) N/A Cash Distributions - GAAP Basis (87,417) (935,899) (1,500,420) (749,451) COMPUTATION OF CASH FLOWS NET (LOSS) - - Net (loss) (453,921) (994,448) (341,208) 10,490 ADJUSTMENTS TO RECONCILE NET (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: - - Depreciation and Amortization 110,021 1,265,669 3,414,323 3,862,080 Loss (gain) on sale of equipment 5,886 (384) 32,966 166,542 Other Non-Cash Activities Included in the Determination of Net Loss** - (427,805) (1,103,890) (1,358,870) Net Change in Operating Assets and Liabilities (50,954) 2,417,706 (1,908,358) (648,374) Net Cash Provided by Operating Activities (388,968) 2,260,738 93,833 2,031,868 Capital Expenditures (2,224,765) (6,401,395) (2,474,404) (568,716) Net proceeds from sale of equipment 100,502 14,063 73,581 248,994 Prepaid Equipment Acquisition Fees Paid to the General Partner (33,905) (143,936) 79,520 6,650 Equipment Acquisition Fees Paid to the General Partner (88,991) (345,835) (160,693) (52,998) Net Cash (Used in) Investing Activities (2,247,159) (6,877,103) (2,481,996) (366,070) Partners' Contributions 3,626,554 11,341,175 - (17,825) Offering Costs paid to affiliate - - - - Offering Costs paid to the General Partner (393,230) (1,403,719) - - Distributions to Partners (87,417) (935,899) (1,500,420) (1,498,302) Accounts Receivable - CCC - (229,801) (23,318) 32,636 Proceeds from note payable - - - - Debt placement fee - (21,878) (13,231) (9,760) Net Cash Provided by Financing Activities 3,145,907 8,749,878 (1,536,969) (1,493,251) Net Increase in Cash 509,780 4,133,513 (3,925,132) 172,547 Cash at Beginning of Year 1,000 510,780 4,644,293 719,161 Cash at End of Year 510,780 4,644,293 719,161 891,708 INVESTMENT DATA PER $ 1,000 INVESTMENT - - Net Loss - GAAP Basis (188) (96) (23) 1 Federal Taxable Income to Investors (406) (304) (100) N/A Cash Distributions to Investors - GAAP Basis (36) (91) (100) (50) Return of Capital to Investors - GAAP Basis 36 91 100 50
* Commencement Date is 07/08/02 ** The significant component of Other Non-Cash Activities Included in the Determination of Net Income was direct payments by lessees to banks, which occurs when equipment is financed. The increase over the periods presented was caused primarily by the acquisition of more financed equipment. Prior Performance is not indicative of future performance COMMONWEALTH INCOME & GROWTH FUND V OPERATING RESULTS OF PRIOR PROGRAMS (Table III) From Program Inception* 2005 ------------- COMPUTATION OF NET INCOME (LOSS) Months of Operations 12 Gross Revenues 422,767 Less: Operating Expenses 799,679 Organizational costs 172,960 Equipment Management Fee 19,072 Depreciation and Amortization 306,182 Interest expense 5,944 Uncollectible accounts receivable - Loss on sale of computer equipment - Net (Loss) - GAAP Basis (881,070) - Federal Taxable Income N/A Cash Distributions - GAAP Basis (702,732) COMPUTATION OF CASH FLOWS NET (LOSS) - Net (loss) (881,070) ADJUSTMENTS TO RECONCILE NET (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: - Depreciation and Amortization 306,182 Loss (gain) on sale of equipment - Other Non-Cash Activities Included in the Determination of Net Loss** (49,630) Net Change in Operating Assets and Liabilities 10,571 Net Cash Provided by Operating Activities (613,947) Capital Expenditures (4,645,505) Net proceeds from sale of equipment - Prepaid Equipment Acquisition Fees Paid to the General Partner (483,504) Equipment Acquisition Fees Paid to the General Partner (219,212) Net Cash (Used in) Investing Activities (5,348,221) Partners' Contributions 19,703,204 Offering Costs paid to affiliate - Offering Costs paid to the General Partner (2,308,723) Distributions to Partners (702,732) Accounts Receivable - CCC - Proceeds from note payable - Debt placement fee (8,348) Net Cash Provided by Financing Activities 16,683,401 Net Increase in Cash 10,721,233 Cash at Beginning of Year 1,067 Cash at End of Year 10,722,300 INVESTMENT DATA PER $ 1,000 INVESTMENT - Net Loss - GAAP Basis (45) Federal Taxable Income to Investors N/A Cash Distributions to Investors - GAAP Basis (36) Return of Capital to Investors - GAAP Basis 36 ** The significant component of Other Non-Cash Activities Included in the Determination of Net Income was direct payments by lessees to banks, which occurs when equipment is financed. The increase over the periods presented was caused primarily by the acquisition of more financed equipment. Prior Performance is not indicative of future performance COMMONWEALTH INCOME & GROWTH FUND I EQUIPMENT SALES (Table V) JANUARY 1, 2001 - DECEMBER 31, 2005
YEAR EQUIPMENT OF MANUFACTURER EQUIPMENT TYPE DESCRIPTION ACQUISITION ------------------------- ---------------------------------------- -------------------- ----------- Aetna Moore #4 IBM (1) 3900 - DW1, (1) 3900 - DW2 Printer 1997 Unum Life Insurance #8 IBM 3900 - DW1 printers Printer 1995 Fingerhut 8 SIEMENS (3) 2240 - 004 Printer 1995 Sprint 59 STK 9490 - M32 Tape Drive 1996 CSC #1 ** SGI (114) Octane/SI, R100000 195MHz/1mb Workstation 1997 Chrysler 39 STK Tape Libraries, Redwd, Timberline Tape Drive 1996 Pitney Bowes 10 IBM 3590 Tape Drive 1998 Cendant 1 SUN Sun 6000 server Server 1998 Chrysler 102 IBM (2) 3745 - 31A, 3746 - 900 Comm Controller 1996 Pitney Bowes 10 * IBM 3590 Tape Drive 1998 CSC 1 SGI (114) Octane/SI, R100000 195MHz/1mb Workstation 1997 Lucent 49 SUN Enterprise 3500 server Server 1998 ADP 13 IBM (3) 3490 - A20, (1) 3490 - B40 Tape Drive 1994 Fingerhut 8 SIEMENS (3) 2240 - 004 Printer 1995 Kaiser 73 CIS ROUTERS CISCO ROUTERS 1999 TCE 15 CISCO SOP SYSTEM PRINTER 2001 ITI 31 DELL 128MB, ECC, SDRAM, 1 DIMM, 100MHz, GX1 Workstation 2002 PITNEY BOWES IBM 3590 TAPE DRIVE 1998 GEM 196 CISCO ROUTERS -6 ROUTER 2001 Kaiser 134 IBM (1) RS/6000 High End Servers 2001 Boeing 6 Sun Sun Blade 1000 Servers, 21" CRT Monitor Small Network Server 2001 HHC 002 HP HP VL400 ,17" CRT Monitors, Tecra 8100 Workstations 2001 Raytheon 125 Compaq 6400 Work Stations 2001 Raytheon 125 HP Proliant ML530 Small Network Server 2001 HHC 002 HP HP VL400 ,17" CRT Monitors, Tecra 8100 Workstations 2001 Raytheon 125 HP LJ5000N Network Printers 2001 KGI 002 Dell (2) PowerEdge 2400 Servers Small Network Server 2002 BCI 006 Vision Business Products BP650-S Network Printers 2001 AOL 33 SUN Sun(E20K and E25K) High End Servers 2001 Raytheon 125 Compaq SP750, P1210 Workstations 2001 GEM 336 IBM Infoprint printers Network Printers 2001 GEM 187 Lexmark OptraW810D Network Printers 2001 Raytheon 125 Compaq P3/700MHZ/12GB/14.1 Workstations 2001 Raytheon 125 Compaq P1210 Workstations 2001 Raytheon 125 HP Laserjet 5000N Printer Network Printers 2001 Raytheon 125 HP P3/700MHZ/12GB/14.1 2001 YEAR ORIGINAL NET NET GAAP FEDERAL OF ACQUISITION BOOK PROCEEDS NET TAXABLE DISPOSAL COST VALUE RECEIVED GAIN/(LOSS) NET GAIN/(LOSS) ----------- ----------- ----------- ----------- ----------- --------------- Aetna Moore #4 2001 $ 460,490 $ - $ 27,160 $ 27,160 $ (29,072) Unum Life Insurance #8 2001 123,614 - 6,548 6,548 6,547 Fingerhut 8 2001 459,592 - 20,370 20,370 20,370 Sprint 59 2001 703,968 - 17,182 17,182 (4,714) CSC #1 ** 2001 466,956 $ 9,825 26,056 16,231 (36,247) Chrysler 39 2001 748,419 - 16,005 16,005 (60,034) Pitney Bowes 10 2001 299,832 - 80,093 80,093 7,559 Cendant 1 2001 274,774 34,347 37,200 2,853 (29,273) Chrysler 102 2002 184,383 - 1,067 1,067 644 Pitney Bowes 10 * 2002 - - 1,392 1,392 1,392 CSC 1 2002 200,000 - 6,530 6,530 (2,874) Lucent 49 2002 49,505 6,188 3,142 (3,046) (3,130) ADP 13 2002 379,682 - 11,685 11,685 11,685 Fingerhut 8 2003 - - 6,000 6,000 2,100 Kaiser 73 2003 38,184 4,773 10,141 5,368 (1,397) TCE 15 2003 9,794 4,693 2,593 (2,100) (3,102) ITI 31 2003 15,790 9,540 3,119 (6,421) (4,009) PITNEY BOWES 2003 - - 50,400 48,888 5,000 GEM 196 2004 22,976 5,744 6,900 949 1,261 Kaiser 134 2004 4,961 930 1,068 105 9 Boeing 6 2004 33,457 7,667 5,476 (2,356) (3,108) HHC 002 2004 5,087 954 1,125 138 (189) Raytheon 125 2004 40,000 13,333 3,130 (11,095) (15,234) Raytheon 125 2004 3,038 1,013 640 (392) (707) HHC 002 2005 30,966 3,429 2,569 (937) N/A Raytheon 125 2005 N/A KGI 002 2005 2,277 427 100 (330) N/A BCI 006 2005 4,647 484 259 (355) N/A AOL 33 2005 70,548 5,879 14,285 7,977 N/A Raytheon 125 2005 31,103 3,174 1,690 (1,534) N/A GEM 336 2005 11,199 700 - (700) N/A GEM 187 2005 3,952 247 525 0 N/A Raytheon 125 2005 4,385 274 605 313 N/A Raytheon 125 2005 4,223 440 2,000 1,500 N/A Raytheon 125 2005 13,324 1,388 3,500 257 N/A Raytheon 125 2005 5,707 238 650 393 N/A $ 4,706,833 $ 115,685 $ 371,203 $ 249,737 $ (136,523)
COMMONWEALTH INCOME & GROWTH FUND II EQUIPMENT SALES (Table V) JANUARY 1, 2001 - DECEMBER 31, 2005
MANUFACTURER EQUIPMENT TYPE ----------------------- ---------------------------------------------------------------------- CSC # 1 SGI (114) Octane/SI, R100000 195MHz/1mb Federated # 10 IBM (32) 3130-02D printers Lucent 4 SUN Sun E6000 server & upgrade AT & T 2 IBM (1) 3900 DW1 / DW2 PCI 001 DELL (4) Optiplex GX110T P3/667 MB/10GB/48XCD Chase #16 SUN (3) Sun 450 servers Aetna 3 STK (2) 9490 - M34 Pitney Bowes 11 IBM 3590 AT & T 9700430 STK 9490 - M34 UFG002 (Eqty Pkg 2) DELL (2) CPi300XT/256MB/10GB/24X/56K AT & T 9700430 STK 9490 - M34 ADP 1 IBM (1) 3490 A20 w/ (4) 3312, (2) 3490 - B40 Great Lakes 3 CISCO Cisco Routers Pitney Bowes 11 * IBM 3590 CSC 1 SGI (114) Octane/SI, R100000 195MHz/1mb Lucent 51 SUN Enterprise 4500 server Equitable 13 SUN Sun 6000 server DPT 008 CISCO 3640 4-slot modular router Chrysler 93 IBM (2) 3745 - 31A, (2) 3746 - 900 AT&T 1000 FORE (1) ASX 1000 Allied Signal 78 HP (20) HP C180 WORKSTATIONS TNC 003 HP PIII 450/128MB, P111 450/64MB/8.4GB/10-1 Lucent MVE STK 9730-001 DDT 005 HP (1) ROLLO 67 Kaiser 91 CISCO (5) CATALYST 5500 GEM 079 LEXMARK 20T2040-OPTRA T612N-20PPM TCE 015 CISCO SOP SYSTEM DEP Trust 6 IBM 4 ESCON DIRECTORS - 9032 DEP Trust 7 IBM 5 ESCON DIRECTORS - 9032 Avon 18 (75%): (8) 3900 - OW1 TCE 002 EPSON EOSIB EKO PAR 008 COMPAQ Armada 110Celeron/700, Armada E500 KSR 35 IBM RS 6000 H-50 KSR 36 IBM RS 6000 H-50 MFB 001 DELL 4 latitude CPXP3-650GT 120MB PLN 001 NEC/COMPAQ/Samsung 3 Armada M700, 3 SyncMaster 17in monitor, 4 Telephones PAR 009 COMPAQ 7 Armada E500, 1 Proliant DL360R, 1 Deskpro EN MT KAI 005 Metrix/NEC 3 MT P3/933 256MB KAI 004 Metrix 1MT P3/933 1287MB PAR 009 COMPAQ 7 Armada E500, 1 Proliant DL360R, 1 Deskpro EN MT EMC 007 COMPAQ/CITRIX Armada E500, Metaframev1.8 GRT 003 DELL 1 Poweredge 4400, 1Poweredge 6400 PFH 001 Clone 2 Clone P650 PITNEY BOWES IBM 3590 VEC 002 Clone 38 Mine Tower P3/550, 38 17in Spectrum Display VEC 004 Clone 1 P3/500 256MB, 15 P3/550 64MB, 16 17in Display KAI 006 Toshiba 9 Toshiba Satelite Pro 4300, 1 metrix MT MFB 015 DELL 9 latitude CPXP3-650GT 120MB MFB 016 DELL 6 latitude CPXP3-650GT 120MB MFB 017 DELL 10 latitude CPXP3-650GT 120MB MFB 020 DELL 1 latitude CPXP3-650GT 120MB MFB 023 DELL 8 latitude CPXP3-650GT 120MB MFB 024 DELL 9 latitude CPXP3-650GT 120MB MFB 025 DELL 8 latitude CPXP3-650GT 120MB MFB 026 DELL 9 latitude CPXP3-650GT 120MB MFB 030 DELL 5 latitude CPXP3-650GT 120MB MFB 031 DELL 12 latitude CPXP3-650GT 120MB MFB 032 DELL 10 latitude CPXP3-650GT 120MB MFB 033 DELL 3 Latitude CPxP3, 1 Demension 4100, 1 HP Deskjet 97 GEM 181 Sun Ultra 10 mdi 440/512MB/20GB, 17in Digital Display PLN 001 NEC/COMPAQ/Samsung 3 Armada M700, 3 SyncMaster 17in monitor, 4 Telephones GEM 314 CISCO 1-Port T1/Frac TDSU/CSU WAN Interface Card PAR 013 COMPAQ (3) Evo N400c P3/850, (2) D500 ScanJet 7450C, LASERJET 1000 Great Lakes 3 CISCO CISCO ROUTERS Pitney Bowes 11 * IBM 3590 CSC 1 SGI (1) DISK DRIVE W/CONTROLLER (2) SERVERS Octane/SI, R100000 195MHz/1mb Lucent 51 SUN ENTERPRISE 4500 SERVER DPT 019 Dell 220-9029 TCE 016 Xerox 8830 Printer, 32MB Hard Drive JCP 36 Cisco WS-C6509 JCP 37 Cisco WS-C6509 CCG 001 IBM Desktops GRT 006 Compaq DL380R Server,GX150 Desktops,19" CRT Monitors,PowerEdge 1400 KGI 10 HP Printers KGI 09 Dell (20) Optiplex GX110 Desktops, (22) 17" CRT Monitors MFB 38 Dell (3) 220-5526 MFB 32 Dell (10) 220-3621 KSR 134 IBM (1) RS6000 Boeing 006 Sun (23) Sun Blade 1000 Servers, (23) 21" CRT Monitors GEM 324 Cisco (20) VOIP Teleohones, (1) Single Port 24-Channel Module MGE 17R Dell 17" CRT Monitors, E500 Laptops, LJ8150N Printers, ML350 Server AOL 021 Sun Sunfire 3800 KAI 001 Dell (1) 220-4668 KAC 001 Dell (1) 220-4668 KAI 002 Dell (2) 220-4668 KAI 003 Dell (1) 220-4590 PAR 008 Compaq Workstations RTX 002 Compaq (1) Armada E500 laptop, (1) Armada M300 laptop, (2) 250MB Zip Drives KAI 006 Toshiba Workstations MFB 23 Dell (1) 220-3621 MFB 24 Dell (3) 220-3621 MFB 25 Dell (3) 220-3621 MFB 26 Dell (1) 220-3621 MFB 31 Dell (1) 220-3621 GEM 324 Cisco (20) VOIP Teleohones, (1) Single Port 24-Channel Module GAC 004 IBM (2)2628-21U AOL 021 Sun Sunfire 3800 PCS 002 Compaq Proliant ML370 Server, (1) APC Smart UPS, (1) 3Com Superstack Switch MFB 038 Dell (3) 220-5526 RTN 001 Compaq (2) Compaq Proliant ML350R Servers, (1) Cisco 2950, (1) Cisco Firewall HHC 004 Dell (14) Dell Latitude Laptops, (31) HP Desktops, (24) 17" CRT Monitors, (5) 19" CRT Monitors, (1) HP Tape CCG 001 IBM Desktops BCI 008 Equus (30) Equus Clone Desktops, (30) NobleView 17" CRT Monitors, (1) Dell Latitude Laptop, GEM 289 HP (3) LJ8150DN Printers MFB 015 Dell (1) 220-3621 AOL 033 E450 MFB 001 Dell Latitude C640 YEAR YEAR EQUIPMENT OF OF DESCRIPTION ACQUISITION DISPOSAL ----------------------- ----------- ----------- CSC # 1 Workstation 1997 2001 Federated # 10 Printer 1997 2001 Lucent 4 Server 1997 2001 AT & T 2 Printer 1997 2001 PCI 001 Workstation 2000 2001 Chase #16 Server 1998 2001 Aetna 3 Drive Timerline 1998 2001 Pitney Bowes 11 Tape Drive 1998 2001 AT & T 9700430 Drive Timerline 1997 2001 UFG002 (Eqty Pkg 2) Workstation 2000 2001 AT & T 9700430 DRIVE TIMERLINE 1997 2001 ADP 1 Drive 1996 2002 Great Lakes 3 Routers 1999 2002 Pitney Bowes 11 * Tape Drive 1998 2002 CSC 1 Workstation 1997 2002 Lucent 51 Server 1998 2002 Equitable 13 Server 1998 2002 DPT 008 Routers 2000 2002 Chrysler 93 Controller 1997 2002 AT&T 1000 Comm. Switch 1999 2002 Allied Signal 78 WORKSTATION 1997 2002 TNC 003 SERVER WORKSTATION 2000 2002 Lucent MVE TAPE LIBRARY 1999 2002 DDT 005 PAPER ROLL SYSTEM 2000 2003 Kaiser 91 ROUTERS 1999 2003 GEM 079 PRINTER 2000 2003 TCE 015 PRINTER 2001 2003 DEP Trust 6 ESCON DIRECTOR 1998 2003 DEP Trust 7 ESCON DIRECTOR 1998 2003 Avon 18 PRINTER 1997 2003 TCE 002 DISPLAY 1999 2003 PAR 008 WORKSTATIONS 2001 2003 KSR 35 WORKSTATIONS 1999 2003 KSR 36 WORKSTATIONS 1999 2003 MFB 001 WORKSTATIONS 2000 2003 PLN 001 WORKSTATIONS 2001 2003 PAR 009 WORKSTATIONS 2001 2003 KAI 005 Server 2000 2003 KAI 004 Server 2000 2003 PAR 009 WORKSTATIONS 2001 2003 EMC 007 WORKSTATIONS 2001 2003 GRT 003 Workstation/Server 2000 2003 PFH 001 WORKSTATIONS 2000 2003 PITNEY BOWES TAPE DRIVE 1998 2003 VEC 002 WORKSTATIONS 2000 2004 VEC 004 WORKSTATIONS 2000 2004 KAI 006 Workstation/Server 2000 2004 MFB 015 WORKSTATIONS 2000 2004 MFB 016 WORKSTATIONS 2000 2004 MFB 017 WORKSTATIONS 2000 2004 MFB 020 WORKSTATIONS 2000 2004 MFB 023 WORKSTATIONS 2000 2004 MFB 024 WORKSTATIONS 2000 2004 MFB 025 WORKSTATIONS 2000 2004 MFB 026 WORKSTATIONS 2000 2004 MFB 030 WORKSTATIONS 2000 2004 MFB 031 WORKSTATIONS 2000 2004 MFB 032 WORKSTATIONS 2000 2004 MFB 033 Workstation/Server/ 2000 2004 Printer GEM 181 WORKSTATIONS 2001 2004 PLN 001 WORKSTATIONS 2001 2004 GEM 314 Comm. Switch 2001 2004 PAR 013 WORKSTATIONS 2003 2004 Great Lakes 3 ROUTERS 1999 2004 Pitney Bowes 11 * TAPE DRIVE 1998 2004 CSC 1 WORKSTATION 1998 2004 Lucent 51 SERVER 1998 2004 DPT 019 Workstations 2001 2004 TCE 016 Network Printers 2001 2004 JCP 36 DATACOM 2002 2004 JCP 37 DATACOM 2002 2004 CCG 001 WORKSTATIONS 2001 2004 GRT 006 Small Network Servers 2001 2004 KGI 10 Network Printers 2001 2004 KGI 09 Workstations 2001 2004 MFB 38 Workstations 2001 2004 MFB 32 Workstations 2001 2004 KSR 134 High End Servers 2001 2004 Boeing 006 Small Network Servers 2001 2004 GEM 324 Telecom 2001 2004 MGE 17R Workstations 2001 2004 AOL 021 High End Servers 2002 2004 KAI 001 Workstations 2001 2005 KAC 001 Workstations 2001 2005 KAI 002 Workstations 2001 2005 KAI 003 Workstations 2001 2005 PAR 008 Workstations 2001 2005 RTX 002 Workstations 2002 2005 KAI 006 Workstations 2001 2005 MFB 23 Workstations 2001 2005 MFB 24 Workstations 2001 2005 MFB 25 Workstations 2001 2005 MFB 26 Workstations 2001 2005 MFB 31 Workstations 2001 2005 GEM 324 Telecom 2001 2005 GAC 004 Workstations 2001 2005 AOL 021 High End Servers 2001 2005 PCS 002 Small Network Servers 2000 2005 MFB 038 Workstations 2001 2005 RTN 001 Small Network Servers 2002 2005 HHC 004 Workstations 2002 2005 CCG 001 Workstations 2001 2005 BCI 008 Worksatations 2002 2005 GEM 289 Network Printers 2001 2005 MFB 015 Workstations 2001 2005 AOL 033 High End Servers 2001 2005 MFB 001 Workstations 2000 2005 ORIGINAL NET NET GAAP FEDERAL ACQUISITION BOOK PROCEEDS NET TAXABLE COST VALUE RECEIVED GAIN/(LOSS) NET GAIN/(LOSS) ------------ ----------- ----------- ----------- --------------- CSC # 1 $ 462,332 $ 9,500 $ 26,057 $ 16,557 $ (70,108) Federated # 10 559,566 34,843 12,969 (21,874) (118,010) Lucent 4 461,207 9,609 3,880 (5,729) (92,051) AT & T 2 477,466 - 104,850 104,850 2,538 PCI 001 4,965 621 505 (115) (3,947) Chase #16 244,584 30,573 10,864 (19,709) (90,883) Aetna 3 194,272 24,284 7,065 (17,219) (73,750) Pitney Bowes 11 886,374 - 216,549 216,549 (210,530) AT & T 9700430 - - 27,540 27,540 14,550 UFG002 (Eqty Pkg 2) 5,427 4,070 1,355 (2,716) (3,161) AT & T 9700430 - - 12,990 12,990 Not on tax return ADP 1 178,673 - 17,019 17,019 17,019 Great Lakes 3 456,358 80,642 67,900 (12,742) (206,685) Pitney Bowes 11 * - - 4,662 4,662 4,662 CSC 1 200,000 - 6,530 6,530 (3,870) Lucent 51 120,701 15,087 7,659 (7,429) (17,446) Equitable 13 418,332 10,625 4,064 (6,560) (93,059) DPT 008 23,717 15,811 4,572 (11,239) (12,379) Chrysler 93 178,454 - 9,700 9,700 420 AT&T 1000 - - 3,751 3,751 (3,369) Allied Signal 78 10,878 - 2,056 2,056 2,056 TNC 003 3,265 1,633 309 (1,324) (1,983) Lucent MVE 19,449 5,267 6,113 846 (2,991) DDT 005 19,416 8,090 2,799 (5,291) (2,303) Kaiser 91 62,538 7,817 14,652 6,835 (4,922) GEM 079 157,500 39,375 49,850 10,475 (15,670) TCE 015 18,189 8,715 4,815 (3,900) (6,536) DEP Trust 6 1,044,784 - 159,800 159,800 25,222 DEP Trust 7 1,175,992 - 150,400 150,400 21,399 Avon 18 1,542,482 - - - - TCE 002 5,813 484 2,099 1,615 (159) PAR 008 64,225 34,789 19,760 (15,029) (25,111) KSR 35 560,621 - - - (58,305) KSR 36 138,149 - - - (14,368) MFB 001 2,899 785 99 (686) (111) PLN 001 4,300 1,971 950 (1,049) (425) PAR 009 29,371 14,685 301 (14,393) (3,541) KAI 005 8,305 2,076 1,270 (844) (1,140) KAI 004 2,236 559 340 (229) (307) PAR 009 - - 6,217 6,030 (1,135) EMC 007 24,402 11,693 6,085 (5,790) (1,000) GRT 003 49,213 11,278 8,000 (3,518) (5,836) PFH 001 3,018 691 600 (109) (66) PITNEY BOWES - - 159,600 154,812 12,591 VEC 002 31,895 6,645 5,890 (931) (5,740) VEC 004 13,398 2,791 2,560 (308) (702) KAI 006 27,233 333 350 7 260.8 MFB 015 27,959 2,838 3,600 582 8,039 MFB 016 18,639 3,032 3,600 388 5,566 MFB 017 31,066 5,053 6,000 647 8,967 MFB 020 3,107 505 600 65 928 MFB 023 24,852 3,472 4,200 518 7,112 MFB 024 31,066 6,472 4,200 (2,482) 8,862 MFB 025 24,852 5,178 3,000 (2,328) 8,476 MFB 026 27,959 5,825 3,600 (2,405) 8,862 MFB 030 15,533 3,236 3,000 (386) 1,156 MFB 031 37,279 7,766 5,850 (2,209) 8,091 MFB 032 31,066 6,472 6,000 (772) 2,697 MFB 033 12,084 2,517 2,700 48 385 GEM 181 2,760 1,150 850 (326) (539) PLN 001 32,951 11,670 4,760 (7,053) (11,661) GEM 314 1,982 743 300 (452) (739) PAR 013 32,151 15,406 9,330 (6,356) (4,993) Great Lakes 3 456,358 4,657 4,915 111 - Pitney Bowes 11 * - - 600 570 - CSC 1 200,000 - 475 461 - Lucent 51 120,701 5,706 7,955 2,010 - DPT 019 10,160 4,657 4,915 111 331 TCE 016 27,391 5,706 7,955 2,010 (2,256) JCP 36 74,072 26,234 41,199 123,905 6,786 JCP 37 120,767 42,771 27,550 (16,599) (26,578) CCG 001 7,670 2,077 1,185 (928) (2,640) GRT 006 23,008 6,231 1,575 (4,704) (9,837) KGI 10 12,433 518 1,500 937 (2,100) KGI 09 1,283 53 125 68 (345) MFB 38 9,985 2,496 1,450 (1,090) (3,527) MFB 32 9,504 2,772 2,355 (488) (2,410) KSR 134 150,255 28,173 32,330 3,187 (23,333) Boeing 006 353,689 81,054 57,890 (24,900) (118,570) GEM 324 4,958 1,240 1,350 70 (1,138) MGE 17R 3,643 2,851 875 57 (951) AOL 021 5,757 1,919 286 (1,642) (2,237) KAI 001 2,422 50 275 216 N/A KAC 001 2,731 57 300 234 N/A KAI 002 9,825 - 687 666 N/A KAI 003 2,604 - 300 291 N/A PAR 008 16,056 2,676 2,285 (459) N/A RTX 002 3,119 975 275 (708) N/A KAI 006 - - 1,935 1,877 N/A MFB 23 - - 175 170 N/A MFB 24 - - 600 582 N/A MFB 25 - - 550 534 N/A MFB 26 - - 600 582 N/A MFB 31 - - 200 194 N/A GEM 324 10,521 1,973 3,000 937 N/A GAC 004 4,741 99 500 386 N/A AOL 021 44,702 13,038 880 (12,202) N/A PCS 002 19,346 - 250 243 N/A MFB 038 - - 865 839 N/A RTN 001 36,696 9,174 7,250 (2,142) N/A HHC 004 57,250 11,056 9,750 (1,598) N/A CCG 001 3,398 425 98 (330) N/A BCI 008 1,518 411 400 (23) N/A GEM 289 11,241 1,171 850 (346) N/A MFB 015 - - 750 728 N/A AOL 033 208,362 13,023 42,189 29,166 N/A MFB 001 8,135 - 800 776 N/A ------------ ----------- ----------- ----------- --------------- $ 12,281,602 $ 749,919 $ 1,489,237 $ 835,532 $ (1,188,478) ------------ ----------- ----------- ----------- ---------------
COMMONWEALTH INCOME & GROWTH FUND III EQUIPMENT SALES (Table V) JANUARY 1, 2001 - DECEMBER 31, 2005
EQUIPMENT MANUFACTURER EQUIPMENT TYPE DESCRIPTION --------------- --------------------------------------------------------------------- --------------------- STK (5) STK 9490 - M34 Timberline Drive Lucent N9JL9804 SUN 30 Ultra30 servers Server (12) Sun workstations, Ultra 30 Model 250 1-248 Lucent N9C0014 SUN MHz Ultrasparc II CPU Workstation Lucent N9JL9804 SUN 30 Ultra30 servers Server Hartford 5 IBM Escon directors Directors Cendant 2 SUN (1) Sun 4000 server Server GEM048 COMPAQ (2) P3550 Server AT&T1004 FORE (1) ASX 1000 Comm. Switch AT&T1005 FORE (1) ASX 1000 Comm. Switch AT&T1006 FORE (1) ASX 1000 Comm. Switch GEM 058 COMPAQ (1) P3 (1)3200 SMART ARRAY (1) V500 SERVERS Kaiser 91 CIS (5) Catalyst 5500 ROUTERS GEM 071 COMPAQ (2) 100745-003 (2) 295636 SERVERS CMGI 12 COMPAQ Amada 110 P3/700 ROUTERS KSR 34 IBM RS 6000 H-50 WORKSTATIONS KSR 35 IBM RS 6000 H-50 WORKSTATIONS GEM 135 Lexmark Optra W810DN, Printer LNX 16 Bay Network Bay Network System Routers GEM 063 COMPAQ 2 Proliant 5500R, 2 NC3131 WORKSTATIONS GEM 135 Lexmark 4 Optra Color 1200N Printer GEM 156 SUN 69 SUN ULTRA 5MDI WORKSTATION TCE 016 XEROX 1 8830 PRINTER PLOTTER PRINTER AOL 21 SUN Sunfire 3800 High End Servers Lennox 16 Bay Networking 5425,5455,5110,5000,5720,5762 Datacom AOL 21 SUN Sunfire 3800 High End Servers VEC 044 Dell (30) Optiplex GX240, (30) E771 17" CRT WORKSTATION GEM 074 Compaq Proliant Servers 100745, Smart Array 4200 Small Network Servers GEM 145 Lexmark 2040 Printers, Paper Trays Network Printers TRI 001 Dell Poweredge 2500 server Small Network Servers YEAR YEAR ORIGINAL NET NET GAAP FEDERAL OF OF ACQUISITION BOOK PROCEEDS NET TAXABLE ACQUISITION DISPOSAL COST VALUE RECEIVED GAIN/(LOSS) NET GAIN/(LOSS) ----------- ----------- ----------- ----------- ----------- ----------- --------------- 1998 2000 407,908 178,461 57,864 (120,596) (196,669) Lucent N9JL9804 1998 2001 $ 445,714 $ 55,714 $ 686 $ (55,028) $ (184,421) Lucent N9C0014 1998 2002 139,596 2,908 861 (2,047) (28,172) Lucent N9JL9804 1998 2002 - - 3,116 3,116 3,116 Hartford 5 1999 2002 641,428 180,375 184,300 3,925 (129,387) Cendant 2 1998 2002 131,470 - 4,123 4,123 (23,223) GEM048 1999 2002 18,755 5,861 3,312 (2,549) (8,278) AT&T1004 1998 2002 15,229 4,759 3,751 (1,008) (2,582) AT&T1005 1998 2002 741 232 172 (60) (137) AT&T1006 1998 2002 35,580 10,005 8,849 (1,156) (4,106) GEM 058 1999 2003 16,739 11,762 1,995 (9,767) (7,038) Kaiser 91 1999 2003 133,956 114,820 35,166 (79,654) (35,285) GEM 071 2000 2003 45,521 35,014 776 (34,238) (22,537) CMGI 12 2001 2003 88,103 9,177 23,038 13,861 (13,614) KSR 34 1999 2003 187,398 - - - (38,976) KSR 35 1999 2003 373,747 - - - (77,740) GEM 135 2000 2003 4,133 947.30 700.00 (282) (971) LNX 16 2000 2003 1,523 253.76 231.00 (30) (394) GEM 063 2000 2004 42,881 - 600.00 570 (8,349) GEM 135 2000 2004 16,532 2,066.36 2,692.80 546 (629) GEM 156 2001 2004 139,961 977.36 4,026.00 2,928 (53,404) TCE 016 2001 2004 20,384 4,246.60 5,920.00 1,496 (2,737) AOL 21 2002 2004 4,711 1,668.72 234.00 (1,446) (1,836) Lennox 16 2001 2005 113,055 - 420.00 407 N/A AOL 21 2002 2005 36,574 10,667.63 720.00 (9,984) N/A VEC 044 2002 2005 24,412 - 6,750.00 (1,590) N/A GEM 074 2000 2005 44,943 - 200.00 194 N/A GEM 145 2000 2005 31,810 - 3,500.00 1,645 TRI 001 2002 2005 11,094 1,848.81 800.00 (1,073) ----------- ----------- ----------- ----------- --------------- $ 2,765,988 $ 453,304 $ 296,937 $ (167,103) $ (640,700) ----------- ----------- ----------- ----------- ---------------
COMMONWEALTH INCOME & GROWTH FUND IV EQUIPMENT SALES (Table V) JANUARY 1, 2001 - DECEMBER 31, 2005
EQUIPMENT MANUFACTURER EQUIPMENT DESCRIPTION TYPE ------------------ --------------------------------------------------------------------- ---------------------- PFS 002 ALLTEL COMMUNICATIONS COMMUNICATIONS PFS 003 DELL (6) OPTIPLEX GX 240, (2) DELL MINITOWER & POWEREDGE Workstations PFS 005 PANISONIC 50ppn CIS Scanner COMMUNICATIONS MDI 001 IBM 8669-2RX, 3542-2RU SERVERS / TAPE MYC 002 DELL (3) POWEREDGE 1650 (2) 2650 SERVERS ANT 35 Atlantic Computing VPN 1/50, VPN 1/250 Datacom ANT 68 Nokia Firewall-Remote Link 50 Telecom ANT 43 Nokia Firewall-1 Remotelink 50 Telecom Walker 1 Dell (1) D500 Workstations EMC 11 Konica Printers Network Printer ANT 64 HP (1) Visualize J5600 Workstation Small Network Printers VEC 27 Dell (10) Optiplex GX150, (10) 15" CRT Monitors Workstations HHC 009 Toshiba (2) Satellite 1730 Workstations HHC 003 Toshiba Toshiba Tecra 8100, 8200, Vectra VL400 ,Viewsonic 15" Flat Panel Workstations EMC 13 Compaq 470022-683 Audio Visual Ant 35 Atlantic Computing VPN 1/50, VPN 1/250 Datacom Ant 43 Nokia Firewall-1 Remotelink 50 Telecom EMC014 HP Workstations Workstations GPC 004 Rorke (1) Rackmount RAID w/Dual Controller Storage BCI 009 Dell (3) Latitude C600 Workstations EMC 016 221-0214 Workstations Ant 60 Mitel (1) Xpress Messenger 200 Upgrade Telecom Ant 66 Infocus 280 Digital Projector, EMP8100i Digital Projector, Smartboard 580 72" Audio Visual Ant 72 Apple PowerStor L200 Tape Drive, 800 Projector, Tektronix TDS 224 Workstations Ant 73 HP C3600 Audio Visual EMC 017 Dell LatitudeC400 C640 , Dimension 8250 Desktops, 802 Router Workstations RTN 003 Qlogic (1) Qlogic Raid Controller, (1) Compaq Proliant DL320 Server Storage GEM 603 NetApp (2) DS-14, (2) 2-Channel Optical Fiber Channel Adapters Datacom ANT 66 Infocus LitePro 280 , EMP8100i , 4'x6' Whiteboard, Smartboard 580 72" Audio Visual WTR 001 Cisco (2) PIX-515E, (2) PIX506E Datacom EMC 18 Dell Latitude C640 Workstations OHR 001 Cisco 7500, 1700, 3600, Catalyst 4000 routers Datacom OHR 004 Compaq DL760 Small Network Servers EMC 15 Konica 7415 Copier, 7165 Copier Network Printers EMC 19 Dell Latitude C640, OfficeJetK80 Workstations VEC 45 FutureWare Workstations Workstations VEC 46 Dell Optiplex GX240 Workstations ACF 21617802 Compaq EVO D500 Workstations ANT 079 Cisco X3500, G5483, 2950 Datacom DPT 021 Dell Dimension 4500 Workstations EMC 013 Compaq Port Replicator, Digital Camera, Camcorder Audio Visual JSC 039 Compaq ML350 Small Network Servers PBO 001 Compaq Proliant ML330 Small Network Servers PFS 004 Boston Business AutoScan Complete System Network Printers PFS 001 Dell 220-7920 Workstations VEC 047 Dell Optiplex GX240 Workstations VEC 048 Dell Optiplex GX260T Workstations ANT 76 IBM 232 Series Small Network Servers ANT 66 Smartboard 580, C3600 Audio Visual EMC 014 HP 1020 fax machine Network Printers EMC 011 Konica 7415 copiers Network Printers HHC 003 Toshiba Tecra 8200, VL400 Workstations ANT 073 Epson Powerlite 800P Projector, 8150DN Printer Audio Visual ANT 073 Packeteer Packet Shaping Software Software VEC 049 Dell Optiplex GX260T Workstations VEC 050 Dell Optiplex GX260T Workstations VEC 051 Dell Precision 340MT Workstations VEC 052 Dell Optiplex GX260T Workstations VEC 053 Dell Optiplex GX260T Workstations CTC 002 Apple iMac G4 Workstations PFS 001 Dell SCSI Controller, UPS Workstations VEC 054 Dell Optiplex GX260T Workstations PAR 019 Exabyte 110L Tape Autoloader Tape PAR 022 Sony Wega Television Audio Visual WTR 002 Sony Vaio C1, AOC LM-720 Workstations
YEAR YEAR ORIGINAL NET NET GAAP FEDERAL OF OF ACQUISITION BOOK PROCEEDS NET TAXABLE ACQUISITION DISPOSAL COST VALUE RECEIVED GAIN/(LOSS) NET GAIN/(LOSS) ----------- ----------- ----------- ----------- ----------- ----------- --------------- PFS 002 2002 2002 $ 54,092 $ 49,584 $ 46,564 $ (3,020) $ (9,692) PFS 003 2002 2002 36,506 34,224 32,371 (1,853) (5,594) PFS 005 2002 2002 23,561 22,579 21,567 (1,012) (2,936) MDI 001 2003 2004 70,356 49,835 48,334 (3,280) 9,403 MYC 002 2003 2004 12,386 8,516 9,151 361 2,339 ANT 35 2002 2004 3,311 1,724 75 (1,652) (1,453) ANT 68 2002 2004 3,000 1,563 70 (1,495) (1,314) ANT 43 2002 2004 6,622 3,104 500 (2,629) (2,578) Walker 1 2002 2004 1,839 1,494 2,025 470 1,127 EMC 11 2003 2004 32,073 18,041 7,525 (10,742) (9,629) ANT 64 2002 2004 10,779 4,716 585 (4,160) (3,826) VEC 27 2003 2004 6,152 3,204 1,750 (1,507) (1,550) HHC 009 2003 2004 1,382 720 300 (429) (438) HHC 003 2003 2004 1,466 764 600 (182) (192) EMC 13 2003 2004 25,733 12,866 5,303 (7,722) (8,437) Ant 35 2002 2005 3,736 1,557 150 (1,411) N/A Ant 43 2002 2005 1,491 621 150 (476) N/A EMC014 2003 2005 8,902 4,451 2,615 (1,914) N/A GPC 004 2003 2005 17,311 232 1,250 980 N/A BCI 009 2003 2005 4,525 2,168 900 (1,295) N/A EMC 016 2003 2005 34,035 11,016 8,800 (2,480) N/A Ant 60 2002 2005 9,410 3,529 3,160 (464) N/A Ant 66 2002 2005 5,970 2,114 1,100 (1,047) N/A Ant 72 2002 2005 3,585 1,229 950 (307) N/A Ant 73 2002 2005 1,710 606 150 (460) N/A EMC 017 2003 2005 55,345 24,213 10,700 (14,048) N/A RTN 003 2003 2005 104,361 47,832 4,900 (43,417) N/A GEM 603 2003 2005 26,520 14,365 8,600 (6,339) N/A ANT 66 2002 2005 1,752 620 650 (290) N/A WTR 001 2003 2005 13,010 5,421 2,550 (2,998) N/A EMC 18 2003 2005 24,565 9,212 6,405 (3,706) N/A OHR 001 2002 2005 254,820 74,323 69,000 (17,893) N/A OHR 004 2002 2005 254,554 84,851 60,000 (32,651) N/A EMC 15 2003 2005 21,607 7,653 6,375 (2,352) N/A EMC 19 2003 2005 11,291 3,999 2,460 (1,787) N/A VEC 45 2005 2005 56,089 12,854 9,650 (5,076) N/A VEC 46 2002 2005 36,756 8,423 8,925 (2,671) N/A ACF 21617802 2004 2005 19,854 13,236 7,123 (6,470) N/A ANT 079 2002 2005 14,673 3,363 3,390 (74) N/A DPT 021 2003 2005 17,706 5,902 3,375 (2,696) N/A EMC 013 2003 2005 1,333 445 256 (196) N/A JSC 039 2002 2005 8,431 2,284 1,700 (669) N/A PBO 001 2003 2005 14,535 4,845 1,575 (3,349) N/A PFS 004 2002 2005 5,100 1,381 2,750 439 N/A PFS 001 2002 2005 34,748 7,963 10,166 (785) N/A VEC 047 2002 2005 25,054 5,741 5,610 (465) N/A VEC 048 2002 2005 33,465 7,669 8,160 (1,194) N/A ANT 76 2002 2005 25,068 6,267 5,100 (1,320) N/A ANT 66 2002 2005 3,443 932 300 (641) N/A EMC 014 2003 2005 2,295 765 300 (474) N/A EMC 011 2003 2005 10,444 3,481 400 (3,093) N/A HHC 003 2003 2005 8,999 3,000 2,500 (575) N/A ANT 073 2002 2005 3,128 652 525 (230) N/A ANT 073 2002 2005 5,162 1,076 600 (794) N/A VEC 049 2002 2005 14,520 3,328 3,825 (90) N/A VEC 050 2002 2005 18,584 4,259 4,000 (555) N/A VEC 051 2002 2005 13,080 2,998 2,400 (722) N/A VEC 052 2002 2005 23,741 5,440 6,875 71 N/A VEC 053 2002 2005 5,773 1,323 1,375 (124) N/A CTC 002 2003 2005 3,393 990 650 (372) N/A PFS 001 2002 2005 2,043 383 669 (69) N/A VEC 054 2003 2005 5,361 1,452 1,500 (123) N/A PAR 019 2003 2005 11,379 2,845 3,970 (19) N/A PAR 022 2003 2005 952 238 475 213 N/A WTR 002 2003 2005 7,345 1,989 1,850 (448) N/A ----------- ----------- ----------- ----------- --------------- $ 1,580,213 $ 628,469 $ 467,579 $ (205,777) $ (34,770) ----------- ----------- ----------- ----------- ---------------
COMMONWEALTH INCOME & GROWTH FUND I SUMMARY OF EQUIPMENT ACQUISTIONS FROM JANUARY 1, 2001 TO DECEMBER 31, 2005 (TABLE VI)
EQUIPMENT YEAR OF MANUFACTURER DESCRIPTION EQUIPMENT TYPE ACQUISITION CASH ------------ ---------------------------------------- -------------------------- ----------- ---------- McCleod COMPAQ SERVER SERVER 2001 $ 3,128 TCE 011 HP VISUALIZE WORKSTATION 2001 2,277 GEM 177 IBM 3 IBM4320-001 INFOPRINT PRINTER 2001 35,570 GEM 183 IBM 3 IBM4320-001 INFOPRINT PRINTER 2001 7,398 GEM 196 CISCO ROUTERS -6 ROUTER 2001 22,976 TCE 015 COMPAQ SOP SYSTEM PRINTER 2001 9,794 KAISER 134 IBM 1 MODEL #7017-S85 P680 R6000 SERVER 2001 4,961 BOEING 6 SUN 10 SUN, 280R SPARCILI SERVER 2001 7,428 23 SUN BLADE 750, SPARC II CAP TECH 2 DELL WORKSTATIONS 2001 10,347 HHC002 VEC023 BCI006 TCE 017 LEXMARK 2 PPM/MCR PRINTER 2001 47,478 3 ENCRYPTION UPGR 1 PL4630 MICO. 1 615 IMAGE SEALER CAP TECH 3 DELL WORKSTATIONS 2001 7,845 MFB32A-B GEM 187 VEC015 VEC30 JOM001 AOL 33 SUN SERVER SERVER 2001 37,064 GEM 336 IBM 3 IBM4320-001 INFOPRINT PRINTER 2001 1,476 Raytheon 125 COMPAQ SERVER SERVER 2002 6,948 ITT 31 DELL WORKSTATION WORKSTATION 2002 2,738 ITT 37 DELL WORKSTATION WORKSTATION 2002 3,064 VEC 021 INTEL WORKSTATION WORKSTATION 2002 1,650 KGI 002 DELL WORKSTATION WORKSTATION 2002 600 GEM 375 COMPAQ SERVER SERVER 2002 10,000 XTS 001 INTEL WORKSTATION WORKSTATION 2003 5,000 $ 227,742 OBLIGATION TOTAL RENT IN LIEU DEBT ASSUMED INCURRED EQUIPMENT COST --------------- --------------- --------------- --------------- McCleod - $ 53,190 - $ 56,318 TCE 011 - 15,427 - 17,704 GEM 177 - - - 35,570 GEM 183 $ 1,565 49,411 - 58,375 GEM 196 - - 22,976 TCE 015 - - - 9,794 KAISER 134 - - - 4,961 BOEING 6 - 46,186 - 53,614 CAP TECH 2 - 65,340 - 75,687 HHC002 VEC023 BCI006 TCE 017 - - - 47,478 CAP TECH 3 - 58,837 - 66,682 MFB32A-B GEM 187 VEC015 VEC30 JOM001 AOL 33 - 246,003 - 283,067 GEM 336 - 9,723 - 11,199 Raytheon 125 - 147,155 - 154,103 ITT 31 - 13,052 - 15,790 ITT 37 - 26,767 - 29,831 VEC 021 - 12,699 - 14,349 KGI 002 - 3,953 - 4,553 GEM 375 - - - 10,000 XTS 001 - - - 5,000 $ 1,565 $ 747,745 $ - $ 977,051
COMMONWEALTH INCOME & GROWTH FUND II SUMMARY OF EQUIPMENT ACQUISTIONS FROM JANUARY 1, 2001 TO DECEMBER 31, 2005 (TABLE VI)
EQUIPMENT YEAR OF MANUFACTURER DESCRIPTION EQUIPMENT TYPE ACQUISITION CASH ------------ ---------------------------------------- -------------------------- ----------- ---------- GEM 177 DELL Workstations Workstation 2001 $ 69,523 TCE 009 NCR 46 LAN ROUTERS ROUTERS 2001 49,106 GEM 185 IBM 15 4320-001INFOPRINT 20PPM PRINTER 2001 9,860 TCE 015 DELL Workstations Workstation 2001 18,189 GEM 254 IBM 15 4320-001INFOPRINT 20PPM PRINTER 2001 41,996 TCE 016 XEROX 1 8830 PRINTER PLOTTER PRINTER 2001 27,391 HP 1 DESIGN JET HARD DRIVE HARD DRIVE KAISER 134 DELL Workstations Workstation 2001 150,255 BOEING 6 SUN 10 SUN, 280R SPARCILI SERVER 2001 78,528 23 SUN BLADE 750, SPARC II CAP TECH 2001 DELL Workstations Workstation 2001 62,080 GEM 324 CISCO 1 24-PORT T-1 ACCESS SERVER SERVER 2001 15,479 GEM 314 DELL Workstations Workstation 2001 1,982 AOL 33 SUN SERVER SERVER 2001 109,466 CAP TECH 3 IBM 15 4320-001INFOPRINT 20PPM PRINTER 2001 43,379 ITT 37 DELL WORKSTATIONS WORKSTATION 2002 2,515 JC Penny 36 NCR ROUTERS ROUTERS 2002 12,414 JC Penny 37 NCR ROUTERS ROUTERS 2002 13,977 AOL 21 SUN 4 F3800-447 W4PCU/4GB SERVER 2002 23,433 4 CPU MEM BD BCI 008 DELL 1 DELL LATITUDE WORKSTATION 2002 5,368 30 EQUIS CLONE DPT 019 DELL DELL LATITUDE C150 1.06GHZ, CELERON WORKSTATION 2002 1,007 HHC 004 DELL DELL 14 LATITUDE C610 P3/GHZ, CELERON WORKSTATION 2002 7,214 HHC 005 DELL 2 P3/1.3GHZ POWER EDGE 2250 SERVER 2002 2,090 PAR 013 NEC NEC MULTISYNC 15MI DISPLAY MONITORS MONITORS 2002 3,555 RTN 001 COMPAQ COMPAQ PROLIANT ML350R SERVER 2002 3,579 RTX 002 COMPAQ COMPAQ ARMADA E500 P3/650 2002 1,081 TAC 001 DELL Workstations Workstation 2002 875 GEM 375 SUN 6 SUN BLADE 2000 MODEL90 SERVER 2002 20,000 XTS 001 INTEL WORKSTATION WORKSTATION 2003 15,000 ABC 21690801 HP (3) Netraid 1M Controller, Surestore DLT8CI 80 GB SERVER/Printer 2004 4,049 $ 793,388 OBLIGATION TOTAL RENT IN LIEU DEBT ASSUMED INCURRED EQUIPMENT COST --------------- --------------- --------------- --------------- GEM 177 - - - $ 69,523 TCE 009 - - - 49,106 GEM 185 - $ 55,631 - 65,491 TCE 015 - - - 18,189 GEM 254 - - - 41,996 TCE 016 - - - 27,391 KAISER 134 - - - 150,255 BOEING 6 - 488,248 - 566,776 CAP TECH 2001 - 392,016 - 454,096 GEM 324 - - - 15,479 GEM 314 - - - 1,982 AOL 33 - 726,560 - 836,026 CAP TECH 3 - 304,226 - 347,605 ITT 37 - 21,971 - 24,486 JC Penny 36 - 61,658 - 74,072 JC Penny 37 - 106,790 - 120,767 AOL 21 - 111,883 - 135,315 BCI 008 - 42,587 - 47,955 DPT 019 - 9,153 - 10,160 HHC 004 - 58,282 - 65,496 HHC 005 - 16,946 - 19,036 PAR 013 - 28,596 - 32,151 RTN 001 - 33,117 - 36,696 RTX 002 - 5,011 - 6,093 TAC 001 - 7,627 - 8,502 GEM 375 - - - 20,000 XTS 001 - - - 15,000 ABC 21690801 17,090 21,139 $ - $ 2,487,395 $ - $ 3,280,783
COMMONWEALTH INCOME & GROWTH FUND III SUMMARY OF EQUIPMENT ACQUISTIONS FROM JANUARY 1, 2001 TO DECEMBER 31, 2005 (TABLE VI)
EQUIPMENT YEAR OF MANUFACTURER DESCRIPTION EQUIPMENT TYPE ACQUISITION CASH ------------- --------------------------------------- -------------------------- ----------- ---------- TCE 009 CISCO 46 ROUTERS ROUTERS 2001 134,394 GEM 156 SUN 69 SUN ULTRA 5MDI WORKSTATION 2001 19,760 TCE 016 XEROX 1 8830 PRINTER PLOTTER PRINTER 2001 20,384 AOL 33 SUN SUN SERVER SERVERS 2001 2,902 TAC 001 COMPAQ COMPAQ PROLIANT DL380R P3/1.13GHZ WORKSTATION 2002 446 TRI 001 DELL 2500 P3/900 WORKSTATION 2002 1,366 VEC 038 DELL OPTIPLEX GX240 P4/1.8GHZ WORKSTATION 2002 6,670 VEC 039 DELL OPTIPLEX GX240 P4/1.8GHZ WORKSTATION 2002 1,395 VEC 040 DELL OPTIPLEX GX240 P4/1.8GHZ WORKSTATION 2002 2,492 VEC 044 DELL OPTIPLEX GX240 P4/1.8GHZ WORKSTATION 2002 3,449 AOL 21 SUN (4) F3800-447 W4PCU/4GB SERVER 2002 19,172 GEM 375 SUN SUN BLADE 2000 MODEL 90 SERVER 2002 30,000 OSI 21839901 Toshiba (4) 2410-S205 8/2.0 40MB WORKSTATION 2004 1,006 TDI 21975601 IBM APC Netshelter VX Base Enc WORKSTATION 2004 1,243 Canon ImageRunner NETWORK PRINTER 2004 3,855 $ 248,534 OBLIGATION TOTAL RENT IN LIEU DEBT ASSUMED INCURRED EQUIPMENT COST --------------- --------------- --------------- --------------- TCE 009 - - - 134,394 GEM 156 - 120,201 - 139,961 TCE 016 - - - 20,384 AOL 33 - 19,261 - 22,163 TAC 001 - 3,891 - 4,337 TRI 001 - 9,728 - 11,094 VEC 038 - 53,934 - 60,604 VEC 039 - 11,503 - 12,899 VEC 040 - 20,716 - 23,207 VEC 044 - 29,101 - 32,549 AOL 21 - 91,541 - 110,713 GEM 375 - - - 30,000 OSI 21839901 6,936 7,942 TDI 21975601 11,624 12,867 - 38,413 42,269 $ - $ 416,848 $ - $ 665,382
COMMONWEALTH INCOME & GROWTH FUND IV SUMMARY OF EQUIPMENT ACQUISTIONS FROM JANUARY 1, 2002 TO DECEMBER 31, 2005 (TABLE VI)
EQUIPMENT MANUFACTURER DESCRIPTION EQUIPMENT TYPE -------------------------- -------------------------------------- ----------------------------------- VEC 045 DELL SERVER SERVER VEC 046 DELL SERVER SERVER PFS 001 ALLTELL COMMUNICATIONS COMMUNICATIONS ANT 035 NOKIA VPN - 1 APPLIANCE/50 ROUTER ANT 043 NOKIA NOKIA REMOTE LINK ROUTER ANT 060 MITEL (1) SX200EL COMMUNICATIONS ANT 064 HP (1) J5600 SERVER ANT 066 INFOCUS 280 DLP TERMINAL ANT 067 NOKIA (1) VPN - 1 MODULE 50 ROUTER ANT 068 NOKIA (1) REMOTE LINK 50 ROUTER ANT 072 APPLE (1) POWERSTOR L200 AUTOLD LV WORKSTATION 8SLT IDSLT 200 ANT 073 PROXIMA LASER JET PRINTER ANT 074 NOKIA IP 120 BASE SYSTEM TAPE DRIVE ANT 076 PAKARD BELL XSERIES 232/20/40 GB TAPE WORKSTATION / SERVER ANT 079 CISCO CON-OS C 295 WORKSTATIONS / ROUTERS ANT 081 DELL 1700 GX400 MINITOWER WORKSTATIONS GEM 532 CISCO ROUTER ROUTER VEC 047 DELL (15) OPTIPLEX 220-9766 SERVER VEC 048 DELL (22) OPTIPLEX GX240 SERVER VEC 049 DELL (15) DELL OPTIPLEX 221-0697 SERVER VEC 050 DELL (20) DELL OPTIPLEX 221-0697 SERVER OHR 001 CISCO CON-OS C 295 ROUTER GEM 533 NOKIA (2) NOKIA IP710 IP TELEPHONE BASE COMMUNICATIONS VEC 051 DELL (5) DELL OPTIPLEX 220-0386 SERVER VEC 052 DELL (25) DELL OPTIPLEX 220-9764 SERVER VEC 053 DELL (5) DELL OPTIPLEX 220-9764 SERVER PFS 004 NOKIA BBCAST AUTO SCAN COMMUNICATIONS CHY 005 VISARA COMMUNICATION CONTROLLERS PRINTERS OHR 004 COMPAQ / CISCO SERVERS / ROUTERS JSC 039 COMPAQ (27) WORKSTATIONS WORKSTATIONS TOTAL YEAR OF RENT DEBT OBLIGATION EQUIPMENT ACQUISITION CASH IN LIEU ASSUMED INCURRED COST ----------- ------------ -------- ----------- ---------- ------------ VEC 045 2002 $ 56,089 - - - $ 56,089 VEC 046 2002 36,756 - - - 36,756 PFS 001 2002 45,803 - - - 45,803 ANT 035 2002 7,047 - - - 7,047 ANT 043 2002 8,112 - - - 8,112 ANT 060 2002 9,410 - - - 9,410 ANT 064 2002 10,779 - - - 10,779 ANT 066 2002 11,165 - - - 11,165 ANT 067 2002 15,532 - - - 15,532 ANT 068 2002 10,253 - - - 10,253 ANT 072 2002 18,636 - - - 18,636 ANT 073 2002 21,166 - - - 21,166 ANT 074 2002 7,156 - - - 7,156 ANT 076 2002 25,068 - - - 25,068 ANT 079 2002 14,673 - - - 14,673 ANT 081 2002 15,527 - - - 15,527 GEM 532 2002 43,277 - - - 43,277 VEC 047 2002 25,054 - - - 25,054 VEC 048 2002 33,465 - - - 33,465 VEC 049 2002 14,520 - - - 14,520 VEC 050 2002 18,584 - - - 18,584 OHR 001 2002 254,820 - - - 254,820 GEM 533 2002 81,388 - - - 81,388 VEC 051 2002 13,080 - - - 13,080 VEC 052 2002 23,741 - - - 23,741 VEC 053 2002 5,773 - - - 5,773 PFS 004 2002 5,100 - - - 5,100 CHY 005 2002 831,622 - - - 831,622 OHR 004 2002 254,554 - - - 254,554 JSC 039 2002 183,385 - - - 183,385
EQUIPMENT MANUFACTURER DESCRIPTION EQUIPMENT TYPE -------------------------- -------------------------------------- ----------------------------------- PFS 006 DELL (8)l 220-9750 Optiplex GX26OD P4 WORKSTATIONS CBC 001 FUJITSU / IBM (6) E Series P4, (6) P2100, (6) WORKSTATIONS Series P3 Win XP Pro, (6) ThinkPad DPT 021 DELL (15) 221-0709 Dimension, (15) E772 WORKSTATIONS EMC 011 IBM / DELL / HP/ COMPAQ (2) 232 SERVER, DESKJET 960CXI, EVO SERVERS / PRINTERS / COMMUNICATIONS N400C P3/850, D500, S720, (4) 7415 DIGITAL MFP, 950EE EMC 013 COMPAQ / HP EVO N400C, D500, S720 WORKSTATIONS / PRINTERS EMC 014 COMPAQ / HP PRINTERS, EVO N180 WORKSTATIONS / PRINTERS EMC 016 COMPAQ / HP / DELL (25) MULISYNC DISPLAY, PRINTERS, EVO PRINTERS / PRINTERS / DISPLAYS N180 EMC 017 DELL / CISCO / HP / COMPAQ IDSL ROUTER, LATITUDE C400, C640, WORKSTATIONS / PRINTERS X200, EVO N1000V GPC 004 HHC 003 TOSHIBA / HP TECRA 8100, VECTRA VL400DT WORKSTATIONS HHC 006 HP / DELL (9) E PC 42 P4, LATTITUDE C610 WORKSTATIONS / SERVERS HHC 009 TOSHIBA SATELITE 1730XCDS WORKSTATIONS MDI 001 IBM 8669-2RX, 3542-2RU SERVERS / TAPE MDI 002 IBM (3) XSERVER 30, (3) THINKPAD WORKSTATIONS / SERVERS MDI 003 IBM NETVISTA A30P, (3) THINKPAD, PSC 2210 WORKSTATIONS / COMMUNICATIONS PRINTER MYC 002 DELL (3) POWEREDGE 1650 (2) 2650 SERVERS PAR 019 EXABYTE 110L PLUS ULTIUM 100 TAPE PAR 021 POLYCOM SONY EVI DO30, VS 4000 COMMUNICATIONS PAR 022 POLYCOM VIEWSTATION FX COMMUNICATIONS PFH 009 MICROSYSTEM (7) CLONE P4, SERVER, DISPLAY WORKSTATIONS VEC 019 CLONE (20) MT P3 WORKSTATIONS VEC 025 DELL (22) OPTIPLEX GX150 WORKSTATIONS VEC 027 DELL (10) OPTIPLEX GX150 WORKSTATIONS VEC 028 DELL (15) OPTIPLEX GX150 WORKSTATIONS VEC 033 DELL (15) OPTIPLEX GX150 WORKSTATIONS VEC 036 DELL (15) OPTIPLEX GX150 WORKSTATIONS VEC 041 DELL (10) OPTIPLEX GX240 WORKSTATIONS WTR 001 CISCO (4) FIREWALL FIREWALL BCI 009 DELL (3) LATTITUDE C600 WORKSTATIONS CTC 002 HP COLOR LASERJET 4600 WORKSTATIONS / PRINTERS DPT 024 COMPAQ WIN2K, (3) DISPLAY, P2/266 SERVERS / COMMUNICATIONS DPT 028 DELL (4) 4550 PF WORKSTATIONS EMC 015 KONICA 7415, 7165 DIGITAL COPIERS DIGITAL PRINT PRESS EMC 018 DELL (5) 221-0441 C640 WORKSTATIONS / PRINTERS EMC 019 DELL (5) 221-0441 C640 WORKSTATIONS GPC 005 COMPAQ (2) Galaxy-1752-B-JOD 55JBOD STORAGE SYSTEM PBO 001 COMPAQ Int 35/70 DTL7000 Wide SCSI tape Drive SERVERS RTN 003 COMPAQ Int 35/70 DTL7000 Wide SCSI tape Drive SERVERS TGG 001 COMPAQ Int 35/70 DTL7000 Wide SCSI tape Drive SERVERS VEC 054 DELL (8) 220-9764 Optiplex GX26OT 17' WORKSTATIONS Displays TOTAL YEAR OF RENT DEBT OBLIGATION EQUIPMENT ACQUISITION CASH IN LIEU ASSUMED INCURRED COST ----------- ------------ -------- ----------- ---------- ------------ PFS 006 2003 88,451 - - - 88,451 88,451 CBC 001 2003 4,500 - $ 45,199 - 49,699 49,699 DPT 021 2003 1,710 - 15,996 - 17,706 17,706 EMC 011 2003 5,160 - 37,356 - 42,516 42,516 EMC 013 2003 2,975 - 24,091 - 27,066 27,066 EMC 014 2003 1,180 - 10,017 - 11,197 11,197 EMC 016 2003 4,270 - 39,765 - 44,035 44,035 EMC 017 2003 5,340 - 55,005 - 60,345 60,345 GPC 004 2003 3,875 - 30,075 - 33,950 33,950 HHC 003 2003 1,335 - 9,130 - 10,465 10,465 HHC 006 2003 2,800 - 23,864 - 26,664 26,664 HHC 009 2003 135 - 1,247 - 1,382 1,382 MDI 001 2003 8,225 - 62,131 - 70,356 70,356 MDI 002 2003 1,775 - 15,970 - 17,745 17,745 MDI 003 2003 1,330 - 14,040 - 15,370 15,370 MYC 002 2003 1,235 - 11,151 - 12,386 12,386 PAR 019 2003 1,000 - 10,379 - 11,379 11,379 PAR 021 2003 1,060 - 10,956 - 12,016 12,016 PAR 022 2003 1,765 - 18,388 - 20,153 20,153 PFH 009 2003 995 - 10,571 - 11,566 11,566 VEC 019 2003 1,330 - 7,217 - 8,547 8,547 VEC 025 2003 1,660 - 9,973 - 11,633 11,633 VEC 027 2003 850 - 5,302 - 6,152 6,152 VEC 028 2003 1,375 - 9,266 - 10,641 10,641 VEC 033 2003 1,220 - 8,666 - 9,886 9,886 VEC 036 2003 875 - 6,397 - 7,272 7,272 VEC 041 2003 815 - 6,496 - 7,311 7,311 WTR 001 2003 1,260 - 11,750 - 13,010 13,010 BCI 009 2003 650 - 3,875 - 4,525 4,525 CTC 002 2003 550 - 5,127 - 5,677 5,677 DPT 024 2003 1,100 - 26,783 - 27,883 27,883 DPT 028 2003 800 - 7,532 - 8,332 8,332 EMC 015 2003 2,400 - 19,607 - 22,007 22,007 EMC 018 2003 2,600 - 24,065 - 26,665 26,665 EMC 019 2003 1,100 - 10,191 - 11,291 11,291 GPC 005 2003 5,200 - 48,074 - 53,274 53,274 PBO 001 2003 1,000 - 13,535 - 14,535 14,535 RTN 003 2003 2,200 - 102,161 - 104,361 104,361 TGG 001 2003 1,300 - 13,393 - 14,693 14,693 VEC 054 2003 650 - 4,711 - 5,361 5,361
EQUIPMENT MANUFACTURER DESCRIPTION EQUIPMENT TYPE -------------------------- -------------------------------------- ----------------------------------- VEC 055 DELL (5) 221-0073 Perrecision 340/P4 WORKSTATIONS VEC 056 DELL (4) 221-1592 Precision 340MT WORKSTATIONS VEC 057 ASI CLONE (10) P416-12 WORKSTATIONS WTR 002 SONY (2) Vaio C1 WORKSTATIONS XTS 001 DELL (8) 221-1592 Precision 340MT WORKSTATIONS OHR 007 COMPAQ WORKSTATIONS WORKSTATIONS PFS 010 CANON / HP Smartups 1500VA, SUPERSTACK 4400 WORKSTATIONS Kellog CANON / HP Smartups 1500VA, SUPERSTACK 4400 WORKSTATIONS GEM 603 NETAPP (27)Fiber Channel Storage WORKSTATIONS TCE 019 Christie Digital WORKSTATIONS WORKSTATIONS HTZ 005 HP (52) Serial Copper PIC Servernet II, SERVERS (10 S86000 PROCESSOR XMS 001 SUN Sun Se9960 Data Consolodation Module DIGITAL STORAGE GEM 599 COMPAQ 4 Proliant DL360R, 4 Int Lights Out WORKSTATIONS Adv Pk CMC 001 NORTEL WORKSTATIONS WORKSTATIONS CMC 002 NORTEL WORKSTATIONS WORKSTATIONS CHY 014 QUANTA (9) Printers w Ethernet Opt PRINTERS KH 008 EMC (140) Univsl Port Card, SP1004, ED CONTROLLERS 140M, SYMMOD-US OHR 008 CISCO/COMPAQ 17510 Mod Acc Router, Proliant DL360, WORKSTATIONS / PRINTERS Laserjet printers BFS 708 COMPAQ ML370R G3 7/2.8 512 MB Server BFS 710 COMPAQ/HP EVO N610C 40GB W2K, Proliant ML310 Workstation 40GB 256MB NGS 01063Q7T3G Sun 23 Sunblade 2000 1.2 GHz, Sun Workstation XVR-1200 graphics CHY 016 Visara Visara Communication Controllers/ Workstation Workstation CHY 017 Visara Visara Communication Controllers/ Workstation Workstation ASC 007 NORTEL Passport 7480 AC Cabinet Package COMMUNICATIONS Walker 001 Dell 221-1592 Precision 340MT Workstation BOA 024 IBM 9406-830-8MGBPZ ISERIES CONF Server DRS 006A Fujitsu Mille GS 2087A-2097A UG Server KLG 052 IBM 176 Netvista M42, P4, 40GB Workstation BFS 711 PANASONIC/HP Tough Book 29, Compaq Proliant BL10E, Workstation/Printer/Server CHY 018 Visara Visara Communication Controllers/ Workstation Workstation Refco 1 HP Proliant DL740 4X 7/2.8 4GB Workstation Refco 2 HP Proliant DL740 4X 7/2.8 4GB Workstation ASC 006 Gateway 5U Server P-4, 3 2U Server Server BOA 024A IBM 9406-830-8MGBPZ ISERIES CONF Server HTZ 007 HP Rack System E33 STORAGE SYSTEM CHY 020 Intermec Easycoder 4420 Printer Printers CHY 019 Intermec Freedom M plus box Printers ASC 008 Nortel 1 Option 81 C Telecommunications TOTAL YEAR OF RENT DEBT OBLIGATION EQUIPMENT ACQUISITION CASH IN LIEU ASSUMED INCURRED COST ----------- ------------ -------- ----------- ---------- ------------ VEC 055 2003 800 - 5,798 - 6,598 6,598 VEC 056 2003 750 - 5,129 - 5,879 5,879 VEC 057 2003 1,100 - 8,979 - 10,079 10,079 WTR 002 2003 700 - 6,645 - 7,345 7,345 XTS 001 2003 22,734 - - - 22,734 22,734 OHR 007 2003 109,753 - - - 109,753 109,753 PFS 010 2003 89,470 - - - 89,470 89,470 Kellog 2003 80,206 - - - 80,206 80,206 GEM 603 2003 26,520 - - - 26,520 26,520 TCE 019 2003 433,190 - - - 433,190 433,190 HTZ 005 2003 779,810 - - - 779,810 779,810 XMS 001 2003 285,000 - - - 285,000 285,000 GEM 599 2003 17,704 - - - 17,704 17,704 CMC 001 2003 23,529 - - - 23,529 23,529 CMC 002 2003 70,106 - - - 70,106 70,106 CHY 014 2003 41,861 - - - 41,861 41,861 KH 008 2003 718,473 - - - 718,473 718,473 OHR 008 2003 28,022 28,022 BFS 708 2003 92,839 $ 12,260 105,099 BFS 710 2003 99,028 2,975 102,003 NGS 01063Q7T3G 2003 50,150 261,567 311,717 CHY 016 2003 37,778 282,025 319,803 CHY 017 2003 7,164 54,541 61,705 ASC 007 2003 724,200 724,200 Walker 001 2003 135,045 135,045 BOA 024 2003 151,420 580,569 731,990 DRS 006A 2003 706 24,806 25,512 KLG 052 2003 16,727 100,774 117,501 - BFS 711 2004 302,639 302,639 CHY 018 2004 126,466 126,466 Refco 1 2004 165,329 165,329 Refco 2 2004 196,949 196,949 ASC 006 2004 418,200 418,200 BOA 024A 2004 8,065 47,538 55,603 HTZ 007 2004 186,855 186,855 CHY 020 2004 4,815 4,815 CHY 019 2004 4,221 4,221 ASC 008 2004 418,200 418,200
EQUIPMENT MANUFACTURER DESCRIPTION EQUIPMENT TYPE -------------------------- -------------------------------------- ----------------------------------- Xerox Sun Sun Fire Servers Servers NOVO IBM 20 Thinkpad T40 Workstation L-3 KONICA 6 7135 Copiers, 9 7115 Copiers, 7 Printers 7022 Copiers, 4 7145 Copiers Allen Chase COMPAQ 18 EVO D500 Workstation Amcol COMPAQ 2 Ploliant DL580R Server Mitsubishi Panasonic 15 Toughbooks T1 7/866 40GB Workstation Matsushita Panasonic 10 Toughbooks T1 7/866 40GB Workstation Dietrich IBM TP R40 Workstation BFS 713 COMPAQ 12 8/2.0 40GB Server BFS 714 COMPAQ 5 EVO N620C SERVERS Server Xerox - A SUN Storedge 3310 SSCI Array Rack STORAGE SYSTEM WW2 Scalar i200w/100 slots, i2000LTO Drive Tape Library Pepsico 0604 Konica 7115 Digi Multi Copier, 7130 Digi Printers Multi Copier Mitsubishi Motors 1 Toshiba Network Printers Principal Financial NexPress 2100 Printer Network Printers Allserve 014 Nortel Passport 7480 Telecommunications Hollinsworth Xerox DocuColor iGen3 Network Printers Sprint #50 STK Tape Drives Tape Xerox L278-005 Sun StorEdge 3310 STORAGE SYSTEM Xerox L278-006 IBM x235 Servers Small Network Servers Xerox L278-012 NetApp F87 STORAGE SYSTEM Xerox L278-013 IBM x345 Server, x225 Servers Small Network Servers Xerox L278-014 Dell Precision 650 Small Network Servers Xerox L278-027 Sun Sunfire V480 Server Midrange Servers Xerox L278-028 Sun SunFire V440 Server Small Network Servers Xerox L278-029 IBM x345 Servers Small Network Servers Xerox L278-030 IBM x345 Servers, Expansion Rack Cabinet Small Network Servers Xerox L278-031 IBM x345 Server Small Network Servers Xerox L278-034 Sun SunFire V480 Server Midrange Servers Xerox L278-036 Sun Sunfire V240 Server Small Network Servers Xerox L278-037 Sun StorEdge 3310 STORAGE SYSTEM AOL 39 Sun Server Midrange Servers Hershey HP Proliant DL380 Servers Small Network Servers UCN 001 HP High End Servers Ratheon 32 HP Proliant DL380 Servers Small Network Servers Ratheon 33 HP DC7100 CPU Midrange Servers Qwest 20 Stratus V Series Server High End Servers JC Penny 111 HP Proliant DL 760 Server Small Network Servers Alcatel 7 Sun SunFire V440, V240, V490 servers Small Network Servers Raytheon 97 HP XW4200 Workstations Raytheon 98 HP XW8200 Workstations Convergys L292 HP RX4640, RX2620, RX1620 Midrange Servers TOTAL YEAR OF RENT DEBT OBLIGATION EQUIPMENT ACQUISITION CASH IN LIEU ASSUMED INCURRED COST ----------- ------------ -------- ----------- ---------- ------------ Xerox 2004 240,622 240,622 NOVO 2004 42,495 278,031 320,526 L-3 2004 37,578 304,771 342,349 Allen Chase 2004 3,749 16,106 19,854 Amcol 2004 3,853 21,102 24,955 Mitsubishi 2004 3,343 30,425 33,768 Matsushita 2004 2,740 19,460 22,200 Dietrich 2004 3,567 28,283 31,850 BFS 713 2004 29,638 29,638 BFS 714 2004 40,177 40,177 Xerox - A 2004 6,499 6,499 WW2 2004 110,871 110,871 Pepsico 0604 2004 10,989 125,001 135,991 Mitsubishi Motors 1 2004 319,979 319,979 Principal Financial 2004 70,163 345,844 416,007 Allserve 014 2004 503,778 503,778 Hollinsworth 2004 66,432 432,127 498,559 Sprint #50 2005 36,073 203,324 239,396 Xerox L278-005 2005 1,298 6,133 7,431 Xerox L278-006 2005 1,412 7,077 8,489 Xerox L278-012 2005 1,640 8,451 10,091 Xerox L278-013 2005 2,112 10,797 12,909 Xerox L278-014 2005 2,088 9,642 11,730 Xerox L278-027 2005 2,556 13,760 16,316 Xerox L278-028 2005 2,520 15,258 17,778 Xerox L278-029 2005 1,769 10,714 12,483 Xerox L278-030 2005 1,832 11,092 12,924 Xerox L278-031 2005 1,213 7,347 8,560 Xerox L278-034 2005 3,517 21,097 24,614 Xerox L278-036 2005 971 5,207 6,179 Xerox L278-037 2005 1,949 12,279 14,229 AOL 39 2005 42,713 232,448 275,161 Hershey 2005 13,482 95,289 108,771 UCN 001 2005 174,351 - 174,351 Ratheon 32 2005 18,860 104,190 123,050 Ratheon 33 2005 8,122 47,630 55,752 Qwest 20 2005 104,128 104,128 JC Penny 111 2005 7,420 31,451 38,871 Alcatel 7 2005 9,350 47,229 56,578 Raytheon 97 2005 50,744 50,744 Raytheon 98 2005 56,824 56,824 Convergys L292 2005 15,638 86,336 101,974 - $ 10,205,161 $ 15,235 $ 4,755,725 $ - $ 14,976,122
COMMONWEALTH INCOME & GROWTH FUND V SUMMARY OF EQUIPMENT ACQUISTIONS FROM APRIL 1, 2005 TO DECEMBER 31, 2005 (TABLE VI)
EQUIPMENT YEAR OF MANUFACTURER DESCRIPTION EQUIPMENT TYPE ACQUISITION CASH ------------ ---------------------------------------- -------------------------- ----------- ----------- Geico L935 HP Small Network Servers (63) Proliant DL380 Servers 2005 620,002 Delphi Toshiba Toshiba Satellite A-60 , Toshiba Tecra M2V, Sony Vaio, Sun SuperMicro 5013CT Servers Workstations 2005 384,075 NBC 005 Avid Media Composer Adrenaline System Workstations 2005 26,898 UGO Networks 2 HP E-800 Servers Small Network Servers 2005 34,427 Latitude D610 , Latitude D410, Optiplex UGO Networks 3 Dell GX280 Desktops Workstations 2005 11,081 Mitsubishi 3 IBM xseries 306, 346 servers Small Network Servers 2005 132,409 Raytheon 88 Sun Sunblade 150 Small Network Servers 2005 4,445 Raytheon 84 Accunet ARX 1000 Switch Telecom 2005 9,559 Raytheon 81 Sun V240 Servers Small Network Servers 2005 7,803 Raytheon 79 Sun V440 Servers Small Network Servers 2005 13,903 Raytheon 73 Sun V240 Servers Small Network Servers 2005 19,340 Raytheon 28 HP DC7100, NC6000 Workstations 2005 23,616 Qwest 20 Stratus V Series Server High End Servers 2005 104,128 Chy 41 HP Proliant DL 145 Servers Small Network Servers 2005 558,191 Mitsubishi 4 IBM HS20 Blade Servers, EX100 P Midrange Servers 2005 121,559 Gernal Atomics 1-2A NetApp Maintenance & Software Storage 2005 146,582 Gernal Atomics 2 NetApp FAS3050, SL500, 9520 FC Disk Array Storage 2005 297,472 Raytheon 99 HP XW8200 Workstations 2005 65,609 Raytheon 100 HP XW8200 Workstations 2005 87,053 Raytheon 101 HP XW4300 Workstations 2005 164,049 Argenbright EMC Clarion CX 500 Storage 2005 593,717 NBC 009 Avid Symphony Digital Editing Systems Workstations 2005 246,579 Mitsubishi 5 Cisco PIX 535, PIX 525, HS20 Bladecenter Datacom 2005 179,242 Grumman 11 McData Short Wave UPM Boards Datacom 2005 331,241 Grumman 12 CipherOptics SG-1001,SG-100 Ethernet Encryptors Datacom 2005 148,574 Grumman 13 CipherOptics SG-1001,SG-100 Ethernet Encryptors Datacom 2005 236,287 Kellogg 236 IBM S51 Thinkcentre Workstations 2005 77,663 $ 4,645,505 OBLIGATION TOTAL RENT IN LIEU DEBT ASSUMED INCURRED EQUIPMENT COST --------------- --------------- --------------- --------------- Geico L935 - 620,002 10,465 Delphi 384,075 NBC 005 26,898 UGO Networks 2 34,427 UGO Networks 3 11,081 Mitsubishi 3 132,409 Raytheon 88 24,408 28,853 Raytheon 84 51,855 61,414 Raytheon 81 33,072 40,875 Raytheon 79 64,658 78,561 Raytheon 73 82,360 101,700 Raytheon 28 122,359 145,974 Qwest 20 104,128 Chy 41 558,191 Mitsubishi 4 121,559 Gernal Atomics 1-2A 146,582 Gernal Atomics 2 297,472 Raytheon 99 65,609 Raytheon 100 87,053 Raytheon 101 164,049 Argenbright 593,717 NBC 009 246,579 Mitsubishi 5 179,242 Grumman 11 331,241 Grumman 12 148,574 Grumman 13 236,287 Kellogg 236 456,076 533,739 $ - $ - $ 834,787 $ 5,480,291
ANY SUPPLEMENTS AND/OR STICKERS WHICH UPDATE THIS PROSPECTUS ARE CONTAINED ON THE INSIDE BACK COVER - -------------------------------------------------------------------------------- SUPPLEMENT FOR ALABAMA, MINNESOTA AND TEXAS INVESTORS Although this partnership uses the word "Growth" in its title, the assets to be acquired by the partnership will not appreciate in value and will in fact lose value rapidly after acquisition. By using the term "Growth," the sponsor of this partnership means that the sponsor will purchase additional equipment with money that otherwise could be distributed to investors as a return on their investment. PENNSYLVANIA INVESTORS Because the minimum closing amount is less than $2,000,000, you are cautioned to carefully evaluate the program's ability to fully accomplish its stated objectives and to inquire as to the current dollar volume of program subscriptions. PLEASE BE ADVISED THAT ANY INFORMATION REPRESENTED THAT IS NOT CONTAINED IN THIS PROSPECTUS HAS NOT BEEN AUTHORIZED BY CIGF6, THE GENERAL PARTNER OR THE DEALER MANAGER. IF ANY MATERIAL CHANGE IN THE PROSPECTUS OCCURS, THIS PROSPECTUS WILL BE APPROPRIATELY AMENDED OR SUPPLEMENTED. THE USE OF FORECASTS IN THIS OFFERING IS ALSO PROHIBITED AND NOT PERMITTED. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. YOU SHOULD CAREFULLY REVIEW AND CONSIDER THIS INFORMATION BEFORE MAKING YOUR INVESTMENT DECISION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE PARTNERSHIP SINCE THE DATE HEREOF. HOWEVER, IF ANY MATERIAL CHANGE OCCURS WHILE THIS PROSPECTUS IS REQUIRED BY LAW TO BE DELIVERED, THIS PROSPECTUS WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY. TABLE OF CONTENTS PAGE NUMBER ----------- Investor Suitability Standards........................ 1 Prospectus Summary.................................... 6 Risk Factors......................................... 11 Management........................................... 19 Responsibilities of the General Partner.............. 22 Investment Objectives and Policies................... 23 Compensation To the General Partner and Affiliates........................... 31 Conflicts Of Interest................................ 34 Prior Offerings By Affiliates........................ 37 Transferability of Units............................. 39 Distributions and Allocations........................ 41 United States Federal Income Tax Considerations............................... 44 ERISA Considerations................................. 61 Management's Discussion of Certain Financial Data................................... 64 Partnership Agreement Summary........................ 64 Plan of Distribution................................. 68 Reports to Limited Partners.......................... 72 Legal Matters........................................ 72 Experts.............................................. 73 Where You Can Find Additional Information.......................... 73 Subscription Agreement........................Appendix I Partnership Agreement........................Appendix II Selected Financial Data..........................Table I Prior Performance Tables........................Table II Supplements............................Inside Back Cover COMMONWEALTH INCOME & GROWTH FUND VI [GRAPHIC APPEARS HERE] COMMONWEALTH CAPITAL SECURITIES CORP. 400 Cleveland Street, Seventh Floor Clearwater, Florida 33755 1-877-654-1500 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Securities and Exchange Commission Registration Fee $ 5,350.00 National Association of Securities Dealers, Inc. Filing Fee $ 5,500.00 Blue Sky fees and expenses $ 17,500.00 Printing Costs $ 25,000.00 Accounting Costs $ 10,000.00 Legal fees and expenses $ 40,000.00 Miscellaneous $ 173,500.00(1) Total $ 276,850.00
- ---------- Except for the SEC Registration Fee and the NASD Filing Fee, the amounts listed above are estimates. 1. Miscellaneous expenses include sales incentives and due diligence reimbursements. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Registrant's Agreement of Limited Partnership contains certain indemnification provisions for the benefit of the General Partner and its officers, directors and employees. Reference is made to "Responsibilities of the General Partner" and "Summary of the Partnership Agreement" in the Prospectus included in this Registration Statement for a summary of such provisions and to the Restated Limited Partnership Agreement which is filed as an exhibit to this Registration Statement. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. On or about January 6, 2006, the Registrant sold a limited partnership interest to Kimberly A. Springsteen, the initial limited partner of the Partnership, for a purchase price of $500.00. The Registrant determined the issuance of such interest to be exempt from registration under the Securities Act of 1933, as amended, by virtue of the provisions of Section 4(2) thereof exempting transactions by an issuer not involving any public offering. II-1 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits 1.1 Form of Dealer Manager Agreement 3.1 Certificate of Limited Partnership 3.2 Restated Limited Partnership Agreement (incorporated herein by reference to Appendix I to the Prospectus) 5.1 Opinion of Reed Smith LLP as to legality of the Units 8.1 Form of Opinion of Reed Smith LLP as to tax matters 10.1 Form of Participating Broker Agreement 10.2 Form of Escrow Agreement 23.1 Consent of Independent Registered Public Accounting Firm 23.3 Consent of Reed Smith LLP (included in Exhibit 5.1 and 8.1) 24.1 Power of Attorney (included on signature page of this Registration Statement) (b) Financial Statements Included in the Prospectus Commonwealth Income & Growth Fund VI Report of Independent Registered Public Accounting Firm Balance Sheet at January 31, 2006 Notes to Financial Statement Commonwealth Income & Growth Fund, Inc. Report of Independent Registered Public Accounting Firm Balance Sheet at February 28, 2005 Notes to Financial Statement Balance Sheet at December 31, 2005 (unaudited) Notes to Financial Statement (unaudited) Commonwealth Capital Corp. Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets at, February 28, 2005 and February 29, 2004 Consolidated Statements of Operations and Retained Earnings for the Years Ended, February 28, 2005 and February 29, 2004 Consolidated Statements of Cash Flows for the Years ended February 28, 2005 and February 29, 2004 Notes to Consolidated Financial Statements Consolidated Balance Sheet at December 31, 2005 (unaudited) Consolidated Statement of Operations and Retained Earnings for the period ended December 31, 2005 (unaudited) Consolidated Statement of Cash Flows for the period ended December 31, 2005 (unaudited) Notes to Financial Statements (unaudited) II-2 ITEM 17. UNDERTAKINGS. The Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That all such post-effective amendments will comply with the applicable forms, rules and regulations of the Commission in effect at the time such post-effective amendments are filed. (3) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (4) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (5) To provide to the Limited Partners the financial statements required by Form 10-K for the first full year of operations of the partnership. (6) To send to each Limited Partner at least on an annual basis a detailed statement of any transactions with the General Partner or its affiliates, and of fees, commissions compensation and other benefits paid, or accrued to the General Partner or its affiliates for the fiscal year completed, showing the amount paid or accrued to each recipient and the services performed. (7) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing II-3 provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Exton, Commonwealth of Pennsylvania, on February 3, 2006. COMMONWEALTH INCOME & GROWTH FUND VI a Pennsylvania Limited Partnership By: COMMONWEALTH INCOME & GROWTH FUND, INC., General Partner By: /s/ Kimberly A. Springsteen ---------------------------------- Kimberly A. Springsteen, President KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kimberly A. Springsteen and George S. Springsteen and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution or resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement, and to file the same, with all exhibits thereto, and other documentation in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date - --------------------------- ----------------------------- ----------------- /s/ George S. Springsteen Chairman of the Board and February 10, 2006 - --------------------------- CEO of Commonwealth George S. Springsteen Income & Growth Fund, Inc. (Principal Executive Officer) /s/ Kimberly A. Springsteen President, Chief February 10, 2006 - --------------------------- Operating Officer and Kimberly A. Springsteen Secretary of Commonwealth Income & Growth Fund, Inc. (Principal Financial Officer and Principal Accounting Officer) EXHIBIT INDEX 1.1 Form of Dealer Manager Agreement 3.1 Certificate of Limited Partnership 3.2 Restated Limited Partnership Agreement (incorporated herein by reference to Appendix I to the Prospectus) 5.1 Opinion of Reed Smith LLP as to legality of the Units 8.1 Form of Opinion of Reed Smith LLP as to tax matters 10.1 Form of Participating Broker Agreement 10.2 Form of Escrow Agreement 23.1 Consent of Independent Registered Public Accounting Firm 23.3 Consent of Reed Smith LLP (included in Exhibit 5.1 and 8.1) 24.1 Power of Attorney (included on signature page of this Registration Statement) EX-1 2 ex1-1.txt EX1-1.TXT DEALER MANAGER AGREEMENT THIS AGREEMENT, dated as of February __, 2006, is made by and between COMMONWEALTH INCOME & GROWTH FUND, INC., a Pennsylvania corporation (the "Company"); and COMMONWEALTH CAPITAL SECURITIES CORP., a Pennsylvania corporation (the "Dealer Manager"). WHEREAS, the company proposes to offer and sell up to an aggregate of 2,500,000 units (the "Units") in COMMONWEALTH INCOME & GROWTH FUND VI, a Pennsylvania limited partnership ("the Limited Partnership") to the public pursuant to a public offering; WHEREAS, the Dealer Manager is registered with the National Association of Securities Dealers, Inc. as a broker dealer, and is presently or, prior to any offers or sales of Units, will be licensed in all fifty states of the United States, the District of Columbia, and the Commonwealth of Puerto Rico as a broker dealer qualified to offer and sell to the public securities of the type represented by the Units; and WHEREAS, the Company desires to retain the Dealer Manager to use its best efforts to sell the Units and to manage the sale by others of the Units, and the Dealer Manager is willing and desires to serve as the Dealer Manager for the Company for the sale of the Units upon the terms and conditions set forth in this Agreement. NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the Company and the Dealer Manager agree as follows: SECTION 1 DEFINITIONS Whenever used in this agreement, the following terms shall have the following specified meanings. 1.1 "NASD" means the National Association of Securities Dealers, Inc. 1.2 "Offering" means the offering of up to 2,500,000 Units of the Limited Partnership to the public pursuant to the terms and conditions of the Registration Statement. 1.3 "Offering Period" means the period commencing on the effective date of the Registration Statement and ending on the earliest of the following: (i) the later of one year after the initial date of the Prospectus or, at the Company's election, two years after the initial date of the Prospectus; or (ii) one year after the initial date of the Prospectus, if subscriptions for fewer than 57,500 Units are received and accepted within such one year period. 1.4 "Participating Brokers" means those broker-dealers engaged by the Dealer Manager to participate in the Offering pursuant to Paragraph 3.2 1.5 "Prospectus" means the final prospectus included in the Registration Statement, pursuant to which the Company will offer Units to the public, as the same may be amended or supplemented from time to time after the effective date of the Registration Statement. 1.6 "Registration Statement" means the registration statement pursuant to which the Company has registered the Units with the SEC as provided in the Securities Act of 1933, as amended, as such registration statement may be amended or supplemented from time to time. 1.7 "SEC" means the Securities and Exchange Commission. 1.8 "Units" means the Units of the Limited Partnership, par value $20.00 per unit, with a purchase price of $20.00 per unit. An aggregate of up to 2,500,000 Units will be offered pursuant to the Registration Statement. 1.9 "State Regulatory Authorities" means the commissions, departments, agencies or other authorities in the fifty states of the United States, the District of Columbia, and the Commonwealth of Puerto Rico which regulate the offer and sale of securities. 1.10 "Company" means Commonwealth Income & Growth Fund, Inc., a Pennsylvania corporation. 1.11 "Dealer Manager" means Commonwealth Capital Securities Corp., a Pennsylvania corporation. SECTION 2 APPOINTMENT Subject to the terms and conditions set forth in this agreement, the Company hereby appoints the Dealer Manager as the dealer manager of the Offering to use its best efforts to sell up to 2,500,000 Units of the Limited Partnership and to manage the sale by others of such Units for the Company's account. The Dealer Manager hereby accepts such appointment. SECTION 3 SALE OF UNITS 3.1 Best Efforts. The Dealer Manager shall use its best efforts during the Offering period to sell or cause to be sold the Units in such quantities and to such persons and in accordance with such terms as are set forth in this Agreement, the Prospectus and the Registration Statement. Notwithstanding anything herein to the contrary, the Dealer Manager shall have no obligation under this Agreement to purchase any of the Units for its own account. 3.2 Association of Other Broker-Dealers. The Company hereby acknowledges and agrees that the Dealer Manager may engage Participating Brokers to participate in the Offering, provided that (i) all Participating Brokers are registered with the NASD and are duly licensed by the State Regulatory Authorities in the jurisdictions in which they will offer and sell Units or exempt from broker-dealer registration with the NASD and the State Regulatory Authorities, and (ii) all such engagements are evidenced by written agreements, the terms and conditions of which substantially conform to the form of Participating Broker Agreement approved by the Company and attached hereto as Exhibit A (the "Participating Broker Agreement"). The Dealer Manager is authorized to reallow so much of the commissions which it receives under Paragraph 4.1 to Participating Brokers as it sees fit. 3.3 Suitability and Minimum Purchase Requirements. (a) The Dealer Manager will use every reasonable effort, to the extent it sells Units to investors, to assure that any such Units are sold only to investors who: (i) meet the investor suitability standards, including the minimum income and net worth standard established by the Company, and minimum purchase requirements set forth in the Registration Statement; (ii) can reasonably benefit from the Company based on each prospective investor's overall investment objectives and portfolio structure; and (iii) are able to bear the economic risk of the investment based on each prospective investor's overall financial situation. (b) The Dealer Manager will make the determinations required to be made by it pursuant to Paragraph 3.3 (a) above based on the information it has obtained from a prospective investor, including, at a minimum, but not limited to, the prospective investor's age, investment objectives, investment experience, income, net worth, financial situation, other investments of the prospective investor, as well as any other pertinent factors deemed by the Dealer Manager to be relevant. (c) The Dealer Manager shall maintain such records evidencing compliance with the determination of the investor suitability standards and minimum purchase requirements set forth in the Registration Statement, as required by Paragraphs 3.3(a) and 3.3(b) above for a period of not less than six years, or for such greater time period as shall comply with all federal, state and other regulatory requirements. (d) In addition to the foregoing, the Dealer Manager shall comply fully with all the applicable provisions of the NASD Conduct Rules and the following provisions: (i) the Dealer Manager shall have reasonable grounds to believe, based upon information provided by the investor concerning his investment objectives, other investments, financial situation and needs, and upon any other information known by the Dealer Manager, that (A) each investor to whom the Dealer Manager sells Units is or will be in a financial position appropriate to enable him to realize to a significant extent the benefits (including tax benefits) of an investment in the Units, (B) each investor to whom the Dealer Manager sells Units has a fair market net worth sufficient to sustain the risks inherent in an investment in the Units (including potential loss and lack of liquidity), and (C) the Units otherwise are or will be a suitable investment for each investor to whom the Dealer Manager sells Units, and the Dealer Manager shall maintain files disclosing the basis upon which the determination of suitability was made; (ii) the Dealer Manager shall not execute any transaction involving the purchase of Units in a discretionary account without prior written approval of the transaction by the investor; (iii) the Dealer Manager shall have reasonable grounds to believe, based upon the information made available to it, that all material facts are adequate and accurately disclosed in the Registration Statement and provide a basis for evaluating the shares; (iv) in making the determination set forth in item (iii) above, the Dealer Manager shall evaluate items of compensation, properties, tax aspects, financial stability and experience of the sponsor, conflicts of interest and risk factors, and any other information deemed pertinent by it; and (v) prior to executing a purchase transaction in the Units, the Dealer Manager shall have informed the prospective investor of all pertinent facts relating to the liquidity and marketability of the Units. (e) The Dealer Manager shall comply with the requirements for determining the suitability of investors who elect to participate in the Dividend Reinvestment Plan (the "Reinvestment Plan") in accordance with the procedure set forth in Paragraph 6 of such Reinvestment Plan in the form of Exhibit A to the Prospectus. 3.4 Sales Literature. The Dealer Manager shall use and distribute in conjunction with the offer and sale of any Units only the Prospectus and such sales literature and advertising as shall have been previously approved in writing by the Company. 3.5 Jurisdictions. The Dealer Manager shall cause Units to be offered and sold only in those jurisdictions specified in writing by the Company for whose account Units are then offered for sale, and such list of jurisdictions shall be updated by the Company as additional states are added. The Company shall specify only such jurisdictions in which the Offering and sale of its Units has been authorized by the appropriate State Regulatory Authorities. No Units shall be offered or sold for the account of the Company in any other states. 3.6 Escrow. All funds received by the Dealer Manager for the sale of Units shall be deposited in an escrow account established by the Company at J.P.Morgan Trust Company (the Escrow Agent), by the close of the first business day following receipt of such funds by the Dealer Manager. Such escrow account shall be denominated "ESCROW ACCOUNT FOR THE BENEFIT OF SUBSCRIBERS FOR UNITS OF COMMONWEALTH INCOME & GROWTH FUND VI" Until such time (if any) as the funds held in escrow are deliverable to the Company pursuant to the Escrow Agreement between the Company and the Escrow Agent, the Dealer Manager shall, and shall cause Participating Brokers to, instruct subscribers to make checks for subscriptions payable to the order of "J.P.MORGAN TRUST COMPANY, ESCROW AGENT," and shall return checks made payable to another party to the Participating Broker or subscriber who submitted the check. Thereafter, checks may be made payable to either the Escrow Agent or the Company. The Dealer Manager may authorize certain Participating Brokers which are "$25,000 broker-dealers" to instruct their customers to make their checks for Units subscribed for payable directly to the Participating Broker. In such case, the Participating Broker will collect the proceeds of the subscribers' checks and issue a check made payable to the order of the Escrow Agent for the aggregate amount of the subscription proceeds. SECTION 4 COMPENSATION 4.1 Commissions. The Company shall pay to the Dealer Manager, as compensation for all services to be rendered by the Dealer Manager pursuant to this Agreement, a commission equal to eight percent (8%) of the selling price of each Unit for which a sale is completed, regardless of whether such Unit is sold by the Dealer Manager or a Participating Broker: provided, however that the Company will pay reduced commissions or may eliminate commissions on certain sales of Units, including the reduction or elimination of commissions in accordance with, and on the terms set forth in, the Prospectus and the paragraphs following this Paragraph 4.1, which reduction or elimination of commissions will not change the net proceeds to the Company. Unitholders who elect to participate in the Reinvestment Plan will be charged commissions on Units purchased for their accounts on the same basis as investors who otherwise purchase Units in the Offering. 4.2 Dealer Manager Fee. The Company shall pay to the Dealer Manager a nonaccountable fee for expenses incurred in selling and marketing the Units, including wholesaling expenses, and for bona fide expenses incurred in connection with due diligence expense reimbursements, which fee shall be equal to two percent (2.0%) of the selling price of each Unit for which a sale is completed, regardless of whether such Unit is sold by the Dealer Manager or a Participating Broker. All due diligence expense reimbursements shall be paid by the Dealer Manager from this fee. 4.3 Completed Sale. (a) A sale of a Unit shall be deemed to be completed under Paragraph 4.1 if and only if (i) the Company has received a properly completed and executed subscription agreement, together with payment of the full purchase price of each purchased Unit, from or, in accordance with Paragraph 3.3(a), on behalf of an investor who satisfies the applicable suitability standards and minimum purchase requirements set forth in the Registration Statement as determined by the Dealer Manager in accordance with the provisions of this Agreement, (ii) the Company has accepted such subscription, and (iii) such investor has been admitted as a Unitholder of the Company. (b) The Dealer Manager hereby acknowledges and agrees that: (i) the Company, in it's sole and absolute discretion, may accept or reject any subscription, in whole or in part, for any reason whatsoever, and no commission will be paid to the Dealer Manager with the respect to that portion of any subscription, which is rejected; (ii) no commission will be paid to the Dealer Manager unless, within one year after the initial date of the Prospectus, subscriptions for an aggregate of at least 57,500 Units have been received and accepted; and (iii) no commission will be paid to the Dealer Manager prior to acceptance by the Company of subscriptions for the minimum number of Units specified in subparagraph (ii) above. 4.4 Payment. The commissions specified in Paragraph 4.1 for the sale of any Unit shall be payable in cash by the Company, as specified in Paragraph 4.1 no later than the end of the calendar month in which the investor subscribing for the Unit is admitted as a Unitholder of the partnership. Investors shall first be admitted as unitholders of the Partnership within 30 days after acceptance by the Company of subscriptions for at least 50 Units. The Company will accept or reject all subscriptions within 30 days after receipt, notwithstanding anything to the contrary contained herein, in the event that the Company pays any commission to the Dealer Manager for sale by a Participating Broker of one or more Units and the subscription is rescinded as to one or more of the Units covered by such subscription, the Company shall decrease the next payment of commissions or other compensation otherwise payable to the Dealer Manager by the Company under this Agreement by an equal amount to the commission rate established in Paragraph 4.1 of this Agreement, multiplied by the number of Units as to which the subscription is rescinded. In the event that no payment of commissions or other compensation is due to the Dealer Manager after such withdrawal occurs, the Dealer Manager shall pay the amount specified in the preceding sentence to the Company within ten (10) days following receipt of notice by the Dealer Manager from the Company stating the amount owed as a result of rescinded subscriptions. 4.5 Sales Incentives. The Dealer Manager also may provide incentive items for registered representatives of the Dealer Manager and the Participating Brokers, which in no event shall exceed an aggregate of $100.00 per annum per participating sales person, and which shall be payable out of the Dealer Manager Fee received by the Dealer Manager. In the event other incentives are provided to registered representatives of the Dealer Manager or the Participating Brokers, they will only be paid in cash and such payments will only be made to the Dealer Manager or the Participating Brokers rather than their registered representatives. Before any such sales incentive program is offered, the Company agrees to obtain prior approval of the terms of such program from the NASD. 4.6 Due Diligence. Out of the gross offering proceeds of the Offering, the Company and the Limited Partnership may, through the Dealer Manager or directly, reimburse Participating Brokers for their bona fide due diligence expenses, in an amount not to exceed $250,000, which represents 0.5% of the gross proceeds of the Offering. 4.7 Maximum Compensation. In no event shall the aggregate underwriting compensation to be paid to the Dealer Manager and the Participating Brokers in connection with the offer and sale of the Units exceed 10% of the gross proceeds of the Offering (not including due diligence expenses of up to one-half percent of the gross proceeds of the Offering). SECTION 5 TERM OF AGREEMENT 5.1 Commencement and Expiration. This Agreement shall commence as of the date first above written and, unless sooner terminated pursuant to Paragraph 5.2 or by operation of law or otherwise, shall expire at the end of the Offering period. 5.2 Termination. Any party may terminate this agreement at any time and for any reason by giving 30 days' prior written notice of intention to terminate to each other party hereto. 5.3 Obligations Surviving Expiration or termination. (a) In addition to any other obligations of the Dealer Manager that survive the expiration or termination of this Agreement, the Dealer Manager, upon the expiration or termination of this Agreement, shall (i) promptly deposit any and all funds in its possession which were received from investors for the sale of Units into the appropriate escrow account specified in Paragraph 3.7 or, if the minimum number of Units have been sold and accepted by the Company, into such other accounts as the Company may designate, and (ii) promptly deliver to the Company all records and documents in its possession which relate to the Offering and are not designated as dealer copies. The Dealer Manager, at its sole expense, may make and retain copies of all such records and documents, but shall keep all such information confidential. The Dealer Manager shall use its best efforts to cooperate with the Company to accomplish an orderly transfer of management of the Offering to a party designated by the Company. (b) In addition to any other obligations of the Company that survive the expiration or termination of this Agreement, the Company, upon expiration or termination of this Agreement, shall pay to the Dealer Manager all commissions to which the Dealer Manager is or becomes entitled under Section 4 at such time or times as such commissions become payable pursuant to paragraph 4.3. SECTION 6 COVENANTS OF THE DEALER MANAGER The Company covenants, warrants and represents, during the full term of this Agreement, that: (a) it will use its best efforts to maintain the effectiveness of the Registration Statement, and will file, or cause to be filed, such amendments to the Registration Statement as may be reasonably necessary for that purpose; (b) It will use its best efforts to (i) prevent the issuance of any order by the SEC, any State Regulatory Authorities or any other regulatory authority which suspends the effectiveness of the Registration Statement, prevents the use of the Prospectus, or otherwise prevents or suspends the Offering, and (ii) obtain the lifting of any such order if issued; (c) It will give the Dealer Manager written notice when the Registration Statement becomes effective and shall deliver to the Dealer Manager a signed copy of the Registration Statement, including its exhibits, and such number of copies of the Registration Statement, without exhibits, and the Prospectus, and any supplements and amendments thereto which are finally approved by the SEC, as the Dealer Manager may reasonably request for sale of the Units, which Prospectus shall not contain any untrue statement of a material fact required to be stated therein or omit any material statement necessary to make the statements therein, in light of the circumstances under which they are made, not misleading; (d) If at any time any event occurs and becomes known to the Company prior to the end of the Offering Period, as a result of which the Registration Statement or Prospectus would include an untrue statement of a material fact, in view of the circumstances under which they were made, omit to state any material fact necessary to make the statements therein not misleading, the Company will effect the preparation of an amended or supplemented Registration Statement or Prospectus which will correct such statement or omission; (e) It will promptly notify the Dealer Manager of any post-effective amendments or supplements to the Registration Statement or Prospectus; (f) It will, during the full term of this Agreement abide by all applicable provisions to its governing instruments, as the same may be amended; and (g) It will use its best efforts to cause, at or prior to the time the Registration Statement becomes effective, the qualification or registration of the Units for offering and sale under the securities laws of such jurisdictions as shall be determined by the Company. SECTION 7 PAYMENT OF COSTS AND EXPENSES 7.1 Dealer Manager. The Dealer Manager shall pay all costs and expenses incident to the performance of its obligations under this Agreement which are not expressly assumed by the Company under Paragraph 8.2 below. 7.2 Company. The Company shall pay all costs and expenses related to: (a) the registration of the Offer and sale of the Units with the SEC, including the cost of preparation, printing, filing and delivery of the Registration Statement and all copies of the Prospectus used in the Offering, and amendments or supplements to such documents; (b) the preparation and printing of the form of subscription agreement to be used in the sale of the Units; (c) the qualification or registration of the Units under state securities or "blue sky" laws of states where the Units are to be offered or sold; (d) the filing of the Registration Statement and any related documents, including any amendments or supplements to such documents, with the NASD; (e) any filing fees, and fees and disbursements to counsel, accountants and escrow agents which are in any way related to any of the above items; and (f) the preparation, printing and filing of all advertising originated by it relating to the sale of Units. SECTION 8 INDEMNIFICATION The Dealer Manager agrees to indemnify, defend and hold harmless the Company from all losses, claims, demands, liabilities and expenses, including reasonable legal and other expenses incurred in defending such claims or liabilities, whether or not resulting in any liability to the Company, which the Company may incur in connection with the offer or sale of any Units, either by the Dealer Manager pursuant to this Agreement or any Participating Broker acting on the Dealer Manager's behalf pursuant to the Participating Broker Agreement which arise out of or are based upon (i) an untrue statement or alleged untrue statement of a material fact, or any omission or alleged omission of a material fact, other than a statement or omission contained in the Prospectus, the Registration Statement, or any state securities filing which was not based on information supplied to the Company by the Dealer Manager or a Participating Broker, or (ii) the breach by the Dealer Manager or any Participating Broker acting on its behalf of any of the terms and conditions of this Agreement or any Participating Broker Agreement, including but not limited to, alleged violations of the Securities Act of 1933, as amended. SECTION 9 MISCELLANEOUS 9.1 Notices. Any notice, approval, request, authorization, direction or other communication under this Agreement shall be given in writing and shall be deemed to be delivered when delivered in person or deposited in the United States mail, properly addressed and stamped with the required postage, registered or certified mail, return receipt requested, to the intended recipient as set forth below. If to the Company: Commonwealth Income & Growth Fund, Inc. 470 John Young Way, Suite 300 Exton, PA 19341 Attention: George Springsteen, Chairman of the Board If to the Dealer Manager: Commonwealth Capital Securities Corp. 470 John Young Way, Suite 300 Exton, PA 19341 Attention: Kimberly Springsteen, President Any party may change its address specified above by giving each other party notice of such change in accordance with this Paragraph 9.1 9.2 Invalid provision. The invalidity or unenforceability of any provision of this agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. 9.3 No Partnership. Nothing in this Agreement shall be construed or interpreted to constitute the Dealer Manager as in association with or in partnership with the Company, and instead, this Agreement only shall constitute the Dealer Manager as a dealer authorized by the Company to sell and to manage the sale by others of the Units according to the terms set forth in the Registration Statement, the Prospectus or this Agreement. 9.4 No Third Party Beneficiaries. No provision of this Agreement is intended to be for the benefit of any person or entity not a party to this Agreement, and no third party shall be deemed to be a beneficiary of any provision of this Agreement. Further, no third party shall by virtue of any provision of this Agreement have a right of action or an enforceable remedy against either party to this Agreement. 9.5 Survival. Paragraph 5.3 and Section 8 and all Provisions of this Agreement which may reasonably be interpreted or construed as surviving the expiration or termination of this Agreement shall survive the Expiration or termination of this Agreement. 9.6 Entire Agreement. This Agreement constitutes the complete understanding among the parties hereto, and no variation, modification or amendment to this Agreement shall be deemed valid or effective unless and until it is signed by all parties hereto. 9.7 Successors and Assigns. No party shall assign (voluntarily, by operation of law or otherwise) this Agreement or any right, interest or benefit under this Agreement without the prior written consent of each other party. Subject to the foregoing, this Agreement shall be fully binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and assigns. 9.8 Nonwaiver. The failure of any party to insist upon or enforce strict performance by any other party of any provision of this Agreement or to exercise any right under this Agreement shall not be construed as a waiver or relinquishment to any extent of such party's right to assert or rely upon any such provision or right in that or any other instance; rather such provision or right shall be and remain in full force and effect. 9.9 Applicable Law. This Agreement shall be interpreted, construed and enforced in all respects in accordance with the laws of the Commonwealth of Pennsylvania. IN WITNESS WHEREOF, the parties have executed this Dealer Manager Agreement as of the date first above written. Company: Commonwealth Income & Growth Fund, Inc. By: ---------------------------------- George S. Springsteen, Chairman of the Board Dealer Manager: Commonwealth Capital Securities Corp. By: ---------------------------------- Kimberly A. Springsteen, President EX-3 3 ex3-1.txt EXHIBIT 3.1 PENNSYLVANIA DEPARTMENT OF STATE CORPORATION BUREAU - -------------------------------------------------------------------------------- CERTIFICATE OF LIMITED PARTNERSHIP (15 Pa.C.S.ss. 8511) Name: Commonwealth Income & Growth Fund VI Address: 470 John Young Way, Suite 300 Exton, PA 19341 Fee: $125 In compliance with the requirements of 15 Pa.C.S. ss. 8511 (relating to certificate of limited partnership), the undersigned, desiring to form a limited partnership, hereby certifies that: 1. The name of the limited partnership (may contain the word "company", or "limited" or "limited partnership" or any abbreviation): Commonwealth Income & Growth Fund VI 2. The (a) address of the limited partnership's initial registration office in this Commonwealth or (b) name of its commercial registered office provider and the county of venue is: (a) Number and Street City State Zip County ----------------- ---------- --- ------ 470 John Young Way Exton, PA 19341 Chester Suite 300 (b) Name of Commercial Registered Office Provided County --------------------------------------------- ------ c/o: ---------------------------------------------------- 3. The name and business address of each general partner of the partnership is: Name Address ---- ------- Commonwealth Income & 470 John Young Way, Growth Fund, Inc. Ste. 300, Exton, PA 19341 4. Check, and if appropriate complete, one of the following: [ ] The formation of the limited partnership shall be effective upon filing this Certificate of Limited Partnership in the Department of State. [ ] The formation of the limited partnership shall be effective on _______________________________________. 5. The specified effective date, if any is: Upon filing ----------- month date year hour, if any IN TESTIMONY WHEREOF, the undersigned general partner(s) of the limited partnership has (have) executed this Certificate of Limited Partnership this 6th day of January, 2006. /s/ Kimberly A. Springsteen --------------------------- Signature EX-5 4 ex5-1.txt EX5-1.TXT 2500 One Liberty Place 1650 Market Street Philadelphia, PA 19103-7301 215.851.8100 Fax 215.851.1420 February 10, 2006 Commonwealth Income & Growth Fund VI Oaklands Corporate Center 470 John Young Way, Suite 300 Exton, PA 19341 Ladies and Gentlemen: We have acted as counsel to Commonwealth Income & Growth Fund VI, a Pennsylvania limited partnership (the "Partnership"), in connection with the preparation of a Registration Statement on Form S-1 (the "Registration Statement") filed by the Partnership with the Securities and Exchange Commission under the Securities Act of 1933, as amended, relating to the offer and sale by the Partnership of up to 2,500,000 Units of limited partnership interest (the "Units"). In rendering this opinion, we have examined such records, certificates and other documents that we have deemed necessary or appropriate for purposes of this opinion. Our opinion is qualified in all respects by the scope of that document examination. We make no representation as to the sufficiency of our investigation for your purposes. We have assumed and relied, as to questions of fact and mixed questions of law and fact, on the truth, completeness, authenticity and due authorization of all documents and records examined and the genuineness of all signatures. This opinion is limited to the laws of the Commonwealth of Pennsylvania. Based upon and subject to the limitations stated herein, it is our opinion that the Units which are being offered and sold by the Partnership pursuant to the Registration Statement, when sold in the manner and for the consideration contemplated by the Registration Statement, will be legally issued, fully paid and non-assessable. This opinion is given as of the date hereof. We assume no obligation to update or supplement this opinion to reflect any facts or circumstances which may hereafter come to our attention or any changes in laws which may hereafter occur. We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the caption "Legal Matters" in the Prospectus that is a part of the Registration Statement. Very truly yours, /s/ Reed Smith LLP MBP/RGD//SML LONDON o NEW YORK o LOS ANGELES o SAN FRANCISCO o WASHINGTON, D.C. PHILADELPHIA o PITTSBURGH o OAKLAND o PRINCETON FALLS CHURCH o WILMINGTON o NEWARK o MIDLANDS, U.K. CENTURY CITY o RICHMOND o HARRISBURG o LEESBURG o WESTLAKE VILLAGE r e e d s m i t h . c o m EX-8 5 ex8-1.txt EX8-1.TXT 2500 One Liberty Place 1650 Market Street Philadelphia, PA 19103-7301 215.851.8100 Fax 215.851.1420 February __, 2006 Commonwealth Income & Growth Fund VI Oaklands Corporate Center 470 John Young Way, Suite 300 Exton, PA 19341 Ladies and Gentlemen: We have acted as counsel to Commonwealth Income & Growth Fund VI, a Pennsylvania limited partnership (the "Partnership"), in connection with the proposed offering of up to 2,500,000 Units of limited partnership interest in the Partnership (the "Units") and with respect to the preparation of the Partnership's Registration Statement on Form S-1 (the "Registration Statement") as filed with the Securities and Exchange Commission on February __, 2006, and the related prospectus (the "Prospectus"). As counsel, we have been asked to express our opinion concerning certain federal income tax matters relating to the Partnership. In connection with the opinions rendered below, we have examined: (a) the Partnership's Restated Limited Partnership Agreement (the "Partnership Agreement") and Certificate of Limited Partnership; (b) the Articles of Incorporation and By-Laws of Commonwealth Income & Growth Fund, Inc., the General Partner of the Partnership (the "General Partner"); (c) the Registration Statement and the Prospectus; and (d) certain other documents that we deemed necessary to examine in order to issue the opinions set forth below. Unless otherwise defined herein, all capitalized terms will have the same meaning as in the Prospectus. In rendering our opinions, we have assumed that: (a) each of the documents referred to above has been duly authorized, executed, and delivered, is authentic, if an original, or accurate, if a copy, and has not been amended subsequent to our review; (b) each of the parties to the Partnership has or will duly execute, and will comply with the terms and conditions of, the Partnership Agreement; (c) no amendments will be made to the Partnership Agreement or other organizational documents of the Partnership or the General Partner that would affect the Partnership's status as a partnership for federal income tax purposes; and (d) no actions will be taken by the General Partner or the Partnership that would have the effect of altering the facts upon which the opinions set forth below are based. In addition, we have relied on, and have assumed the correctness of the following representations of the General Partner and its authorized representatives: LONDON o NEW YORK o LOS ANGELES o SAN FRANCISCO o WASHINGTON, D.C. PHILADELPHIA o PITTSBURGH o OAKLAND o PRINCETON FALLS CHURCH o WILMINGTON o NEWARK o MIDLANDS, U.K. CENTURY CITY o RICHMOND o HARRISBURG o LEESBURG o WESTLAKE VILLAGE r e e d s m i t h . c o m Commonwealth Income & Growth Fund V Reed Smith February __, 2006 Page 2 1. The Partnership will be operated in accordance with the provisions of the Pennsylvania Revised Uniform Limited Partnership Act and with the Partnership Agreement. 2. The Partnership Agreement will remain in substantially its current form, and will not be further amended in any material respect. 3. The activities and operations of the Partnership will be conducted in the manner described in the Prospectus. 4. The General Partner is not, and will not act as, an agent of the Limited Partners in connection with the investments by the Limited Partners in, or the operation of, the Partnership. 5. The General Partner's net worth, determined on a fair market value basis and excluding the General Partner's interest in the Partnership itself, will equal or exceed $1,000,000 throughout the term of the Partnership. 6. The General Partner will prohibit any transfer of Units which, in the General Partner's good faith judgment, will result in more than 2% of capital or profits in the Partnership being sold or otherwise disposed of in any one taxable year in a manner which would violate the 2% "safe harbor" set forth in Treasury Regulation Section 1.7704-1(j). 7. The General Partner will file any tax or other informational returns (including, without limitation, Department of the Treasury/Internal Revenue Service Form 8832), if any, which may be required in order for the Partnership to be treated as a partnership for federal income tax purposes. We express no opinions except as set forth below and our opinions are based upon the facts as set forth in the Registration Statement and Prospectus. Accordingly, we express no opinion as to tax matters that may arise if, for example, the facts are not as set forth in the Registration Statement and Prospectus, if the Partnership Agreement is not executed and followed according to its terms or if the representations made by the General Partner are not correct. However, after reasonable inquiry, we are not aware of any facts inconsistent with the representations set forth above. In addition to being based on certain representations by the General Partner set forth above, our opinions also are based on the current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury Regulations promulgated thereunder, and rulings, procedures, and other pronouncements published by the IRS. Such laws, regulations, rulings, case law and pronouncements are subject to change at any time, and such change may adversely affect the continuing validity of the opinions set forth below. Subject to the limitations and qualifications described herein, and in support of the discussion in the Prospectus under the caption "United States Federal Income Tax Considerations," we are of the opinion that: 1. The Partnership will be classified as a partnership for federal income tax purposes and not as an association taxable as a corporation. As a result, the Partnership will not be subject Commonwealth Income & Growth Fund V Reed Smith February __, 2006 Page 3 to federal income taxation but will be required to file a partnership information tax return each year. Each Partner will be required to take into account, in computing such Partner's federal income tax liability, his or her distributive share of all items of income, gain, loss, deduction or credit (including items of tax preference) of the Partnership, and will be subject to tax on such income or gain even if the Partnership does not make any cash distributions. A distribution of cash by the Partnership to the Partner will generally not cause recognition of taxable income for federal income tax purposes except to the extent the amount of the distribution exceeds the Partner's adjusted basis in his Partnership units. 2. The income, gain, losses, deductions and credits derived from the Partnership's leasing activities (and each Partner's share thereof) will be subject to the passive activity rules set forth in Section 469 of the Code and the Treasury Regulations issued thereunder. Our opinion does not apply to any Partnership income attributable to: (i) the investment of Partnership funds in liquid or temporary investments prior to the purchase of computer peripheral equipment ("Equipment"), (ii) the investment, in interest-bearing accounts or otherwise, of amounts held by the Partnership as working capital, security deposits, or in reserve, or (iii) Equipment with respect to which the Partnership is determined not to be the owner for federal income tax purposes. The Code prohibits an individual, estate, trust, closely-held "C" corporation, or personal service corporation from using losses which are subject to the passive activity rules of Section 469 of the Code to offset other income, including salary and (except in the case of certain closely held "C" corporations) active business income as well as portfolio income (such as dividends, interest and royalties, whether derived from property held directly or through a pass-through entity such as a partnership). Thus, any such losses of the Partnership will not be able to be offset against interest income derived by the Partnership from the interim investment of offering proceeds, working capital, security deposits, or reserves or against any income derived by the Partnership from leases which are treated as loans for federal income tax purposes, or against salary or other portfolio income of a Partner. Losses from a passive activity that are not allowed currently will be carried forward indefinitely, and are allowed in subsequent years against passive activity income (not including certain self-charged passive activity income or passive income from publicly-traded partnerships) or in full upon complete disposition of the taxpayer's interest in the Partnership to an unrelated party in a fully taxable transaction. 3. The allocations of Net Profits and Net Losses in the Partnership Agreement will be respected for federal income tax purposes. As a result, generally speaking, the General Partner will be allocated for tax purposes net profits equal to its cash distributions (but not less than one percent of net profits), and the balance will be allocated to the limited partners. Net profits arising from transactions in connection with the termination or liquidation of the Partnership will be allocated (i) first, to each partner in an amount equal to the negative amount, if any, of his capital account; (ii) second, an amount equal to the excess of the proceeds which would be distributed to the partners based on the operating distributions over the aggregate capital accounts of all the partners adjusted as if such operating distributions which could be made have been made, to the partners in proportion to their respective shares of such excess; and (iii) third, with respect to any remaining profits, to the parties in the same proportions as operating distributions would be made. Net losses, if any, will be allocated ninety-nine percent to the limited partners and one percent to the general partner. These allocations, however, are Commonwealth Income & Growth Fund V Reed Smith February __, 2006 Page 4 subject to several special allocation rules designed in part to prevent a partner's capital account as specially adjusted from going below zero. 4. The sum of the amounts for which a Limited Partner will be considered "at-risk," for purposes of Section 465 of the Code, in any taxable year with respect to Equipment placed in service in that taxable year and in each prior year (treating all Equipment placed in service in the same year as a single activity separate from the activities represented by Equipment placed in service in other years) will be equal to (i) the Capital Contributions (as such term is defined in the Partnership Agreement) of such Limited Partner (provided that funds for such Capital Contributions are not from borrowed amounts other than amounts: (A) for which the Limited Partner is personally liable for repayment, or (B) for which property other than Units is pledged as security for such borrowed amounts, but only to the extent of the fair market value of such pledged property and provided further that such Capital Contributions are invested in the Equipment or otherwise expended in connection with the Partnership's organization or leasing activities (or are subject to the rights of the Partnership's creditors for amounts incurred by it with respect to same) ), less: (ii) the sum determined on a cumulative basis of (A) the total net losses with respect to such Equipment which have been allowed as deductions to the Limited Partner under the at-risk rules and (B) cash distributions received by the Limited Partner, plus (iii) the Limited Partner's distributive share, determined on a cumulative basis, of total net profits with respect to such Equipment of the Partnership. An individual or a closely held "C" corporation may not claim a deduction from an activity in excess of the amount with respect to which such taxpayer is "at risk" for such activity as of the close of the taxable year. For these purposes, however, equipment placed in service by the Partnership during separate years will be treated as separate activities. It should be noted, moreover, that the opinions expressed herein are subject to the application of certain Treasury Regulations relating to the improper utilization of income tax rules by partnerships (the "Anti-Abuse Rules"). These Regulations purportedly grant authority to the IRS to recharacterize certain transactions to the extent that it is determined that the utilization of a partnership is inconsistent with the intent of the federal income tax rules relating to partnerships. Under these Anti-Abuse Rules, the IRS may, under certain circumstances, (i) recast transactions which attempt to use the partnership form of ownership, or (ii) otherwise treat the partnership as an aggregation of its partners rather than a distinct separate entity, as appropriate in order to carry out the purposes of the partnership tax rules. The Anti-Abuse Rules also provide that the authority to recharacterize transactions is limited to circumstances under which the tax characterization by the taxpayer is not, based on all facts and circumstances, clearly contemplated under the Code or the applicable Treasury Regulations. These Anti-Abuse Rules are intended to impact only a small number of transactions which improperly utilize income tax rules relating to partnerships. Therefore, it is our opinion that the Partnership and/or the transactions contemplated in the Prospectus should not be affected by the administration of these Anti-Abuse Rules. However, no assurance can be given that IRS will not attempt to utilize the Anti-Abuse Rules to alter, in whole or part, the tax consequences described herein with regard to an investment in the Partnership. Commonwealth Income & Growth Fund V Reed Smith February __, 2006 Page 5 We hereby consent to the filing of this opinion letter as an exhibit to the Registration Statement. We also consent to the use of our name in the Prospectus under the captions "United States Federal Income Tax Considerations" and "Legal Matters." In giving this consent, we do not admit that we are in the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. The foregoing opinions are limited to the federal income tax matters addressed herein, and no other opinions are rendered with respect to other federal tax matters or to any issues arising under the tax laws of any state, locality, or foreign country. We undertake no obligation to update the opinions expressed herein after the date of this letter. Very truly yours, Reed Smith LLP MBP/PP/RGD//LNH EX-10 6 ex10-1.txt EX10-1.TXT PARTICIPATING BROKER AGREEMENT COMMONWEALTH INCOME & GROWTH FUND VI LIMITED PARTNERSHIP THIS PARTICIPATING BROKER AGREEMENT (the "Agreement") is made and entered into as of the day indicated on Exhibit A attached hereto and by this reference incorporated herein, between Commonwealth Capital Securities Corp., a Pennsylvania corporation (the "Dealer Manager"), and the Participating Broker (the "Participating Broker") identified in Exhibit A hereto. WHEREAS COMMONWEALTH INCOME & GROWTH FUND VI, is a limited partnership (the "Partnership") duly organized under the Revised Uniform Limited Partnership Act (1986), as amended, as enacted in the Commonwealth of Pennsylvania; and WHEREAS, COMMONWEALTH INCOME & GROWTH FUND, INC., a Pennsylvania corporation is serving as the general partner (the "General Partner") of the Partnership; and WHEREAS, the Partnership proposes to offer and sell up to 2,500,000 Units of limited partnership interest in the Partnership ("Units") to the general public, pursuant to a public offering (the "Offering") of the Units which shall be registered with the Securities and Exchange Commission ("SEC"); and WHEREAS, the Dealer Manager, which has heretofore entered into an agency agreement with the Partnership pursuant to which it has been designated the Dealer Manager to sell and manage the sale by others of the Units pursuant to the terms of such agreement and the Offering (the "Dealer Manager Agreement"), is a corporation incorporated in and presently in good standing in the Commonwealth of Pennsylvania, and is presently registered with the National Association of Securities Dealers, Inc. ("NASD") as a securities broker-dealer qualified to offer and sell to members of the public securities of the type represented by the Units; and WHEREAS, the Participating Broker is an entity, as designated in Exhibit A hereto, organized and presently in good standing in the state or states designated in Exhibit A hereto, presently registered as a broker-dealer with the NASD, and presently licensed by the appropriate regulatory agency of each state in which it will offer and sell the Units as a securities broker-dealer qualified to offer and sell to members of the public securities of the type represented by the Units; and WHEREAS, the Partnership has filed with the SEC a registration statement on Form S-1, including a preliminary or final prospectus, for the registration of the Units under the Securities Act of 1933, as amended (the "Securities Act") (such registration statement, as it may be amended, and the prospectus and exhibits on file with the SEC at the time the registration statement becomes effective, including any post-effective amendments or supplements to such registration statement or prospectus after the effective date of registration, being herein respectively referred to as the "Registration Statement" and the "Prospectus"); and WHEREAS, the offer and sale of the Units shall be made pursuant to the terms and conditions of the Registration Statement and the Prospectus and, further, pursuant to the terms and conditions of all applicable securities laws of all states in which the Units are offered and sold; and 1 WHEREAS, the Dealer Manager desires to retain the Participating Broker to use its best efforts to sell the Units, and the Participating Broker is willing and desires to serve as a broker for the Dealer Manager for the sale of the Units upon the following terms and conditions; NOW THEREFORE, in consideration of the premises and terms and conditions thereof, it is agreed between the Dealer Manager and the Participating Broker as follows. 1. Engagement. (a) Subject to the terms and conditions herein set forth, the Dealer Manager hereby engages the Participating Broker and the Participating Broker hereby agrees and covenants to use its best efforts to sell for the account of the Partnership a portion of the Units described in the Registration Statement, as specified on Exhibit A hereto. The Participating Broker hereby accepts such engagement and covenants, warrants and agrees to sell the Units according to all of the terms and conditions of the Registration Statement, all applicable state and federal laws, including the Securities Act and any and all regulations and rules pertaining thereto, heretofore or hereafter issued by the SEC and the NASD, including but not limited to NASD'S Conduct Rules. (b) The Participating Broker shall use its best efforts, promptly following receipt of written notice from the Dealer Manager of the effective date of the Registration Statement, to sell the Units in such quantities and for the account of such Partnership as shall be agreed between the Participating Broker and Dealer Manager and specified on Exhibit A hereto, and to such persons and according to all such terms as are contained in the Registration Statement and the Prospectus. The Participating Broker shall comply with all requirements set forth in the Registration Statement and Prospectus. The Participating Broker understands and will advise potential investors that all sales of the Units will be for Units of limited partnership interest in COMMONWEALTH INCOME & GROWTH FUND VI. The Participating Broker shall use and distribute, in connection with the offer and sale of the Units, only the Prospectus and such sales materials and advertising as shall conform in all respects to any restrictions of local law and the applicable requirements of the Securities Act and which has been approved in writing by the General Partner or the Dealer Manager. The Participating Broker will make a record of its distribution of each preliminary prospectus, and Participating Broker will, upon the request of the Dealer Manager, promptly forward copies thereof to each person to whom Participating Broker has theretofore distributed a preliminary prospectus. The Dealer Manager reserves the right to establish such additional procedures as it may deem necessary to ensure compliance with the requirements of the Registration Statement, and the Participating Broker shall comply with all such additional procedures to the extent that it has received written notice thereof. (c) The Participating Broker shall be permitted to accept subscriptions for the Units (the "Subscription(s)") by telephone from residents of those states identified on Schedule A attached hereto and made a part hereof provided that (1) the registered representative and branch manager of the Participating Broker execute the subscription agreement attached to the Prospectus (the "Subscription Agreement") on behalf of any investor who subscribes for Units by telephone; and (2) the Participating Broker does not charge any additional fees, including but not limited to, fees relating to the opening of an account with the Participating Broker, to any investor who telephonically or orally subscribes for Units. It is understood and agreed between the Dealer Manager and the Participating Broker that the Dealer Manager may, 2 in its discretion, change, modify, add to or delete from the list of states identified on Schedule A. Any such modification shall be effective three (3) days from the date written notice to the Participating Broker has been mailed by the Dealer Manager. The Participating Broker shall not execute a Subscription Agreement on behalf of any investor who subscribes for Units by telephone unless such investor has specifically authorized the registered representative and the branch manager of the Participating Broker to execute the Subscription Agreement on behalf of such investor and has made or agreed to make full payment for all Units covered by such Subscription Agreement. Notwithstanding anything contained herein to the contrary, the Participating Broker shall have no authority to make representations on behalf of an investor or to initial representations contained in the Subscription Agreement on behalf of an investor. In connection with telephonic or other oral Subscriptions for Units, the Participating Broker represents and warrants as follows: (i) that a Prospectus was delivered to the investor before the investor made a decision to invest; (ii) that the investor meets the suitability requirements set forth in the Prospectus; and (iii) that, in compliance with Rule 2810 of the NASD's Conduct Rules, the Participating Broker has reasonable grounds to believe and does believe that the investment in the Partnership is suitable for the investor, based upon information supplied by the investor to such Participating Broker. (d) Notwithstanding anything to the contrary contained in Section 2 of this Agreement, in the event that the Dealer Manager pays any commission to the Participating Broker for sale of one or more Units, including, but not limited to, those Units sold pursuant to a telephonic or other oral Subscription therefore, where representatives of the Participating Broker execute the Subscription Agreement relating to such Units, and the Subscription is rescinded as to one or more of the Units covered by such Subscription, the Dealer Manager shall decrease the next payment of commission or other compensation otherwise payable to the Participating Broker by the Dealer Manager under this Agreement by an amount equal to the commissions rate established in Section 2 and Exhibit A of this Agreement, multiplied by the number of Units as to which the Subscription is rescinded. In the event that no payment of commissions or other compensation is due to the Participating Broker after such withdrawal occurs, the Participating Broker shall pay the amount specified in the preceding sentence to the Dealer Manager within ten (10) days following mailing of notice to the Participating Broker by the Dealer Manager stating the amount owed as a result of rescinded Subscriptions. (e) All monies received for purchase of any of the Units shall be forwarded by the Participating Broker to the Dealer Manager for delivery to J.P.Morgan Trust Company (the "Escrow Agent") or, if final internal supervisory review is conducted at a different location, to such final review office by the end of such next business day, which in turn will transmit same to the Escrow Agent by the end of the next business day following its receipt thereof, where such monies will be deposited in an escrow account established by the Partnership solely for such Subscriptions ("Escrow Account") until such time (if any) that such monies are deliverable to the Partnership pursuant to the escrow agreement between the Partnership and the Escrow Agent ("Escrow Agreement"), except the Participating Broker shall return any check not made payable to "J.P.Morgan Trust Company, Escrow Agent" directly to the Subscriber who submitted the check. After such time that monies are deliverable to the Partnership, the Participating Broker may accept checks made payable to either the Partnership or the Escrow Agent. Subscriptions will be executed as described in the Registration Statement or as directed by the Dealer Manager. The monies shall be deposited or transmitted by the Participating Broker to the Dealer Manager no later than the close of business of the next business day after receipt of the Subscription documents by the Participating Broker; provided, however, that if the Participating Broker maintains a branch office, the branch office shall transmit the Subscription documents and check 3 to the Participating Broker by the close of business on the first business day following their receipt by the branch office and the Participating Broker shall review the Subscription documents and check to ensure their proper execution and form and, if they are acceptable, transmit the check to the Dealer Manager by the close of business on the first business day after their receipt by the Participating Broker. Pursuant to the terms of the Dealer Manager Agreement, the Dealer Manager will transmit the check or monies to the Escrow Agent by no later than the close of business on the next business day after the check is received from the Participating Broker, unless a final supervisory review is being conducted as set forth above, in which instance the final review office will transmit the same to the Escrow Agent by the end of the next business day following receipt thereof. (f) During the term of this Agreement, the Dealer Manager shall have authority to take such action as it may deem advisable in respect to all matters pertaining to the performance of the Participating Broker under this Agreement. (g) The Units shall be offered and sold by the Participating Broker only where the Units may be legally offered and sold, and only to such persons in such states who shall be legally qualified to purchase the Units. The Dealer Manager shall give the Participating Broker written notice at the time of effectiveness of those states in which the offering and sale of Units may be made, and shall amend such notice thereafter as additional states are added; no Units shall be offered or sold in any other states. (h) The Participating Broker shall have no obligation under this Agreement to purchase any of the Units for its own account. (i) The Participating Broker will use every reasonable effort to assure that Units are sold only to investors who: (1) meet the investor suitability standards, including the minimum income and net worth standard established by the Partnership, and minimum purchase requirements set forth in the Registration Statement; (2) can reasonably benefit from investment in the Partnership based on the prospective investor's overall investment objectives and portfolio structure; (3) is able to bear the economic risk of the investment based on the prospective investor's overall financial situation; and (4) has apparent understanding of: (a) the fundamental risks of the investment; (b) the risk that the prospective investor may lose the entire investment; (c) the lack of liquidity of the Units; (d) the restrictions on transferability of the Units; (e) the background and qualifications of the General Partner; and (f) the tax consequences of an investment in the Units. (j) The Participating Broker will make the determinations required to be made by it pursuant to Section 1(i) based on information it has obtained from a prospective investor, including, at a minimum, but not limited to, the prospective investor's age, investment objectives, investment experience, income, net worth, financial situation, other investments of the prospective investor, as well as any other pertinent factors deemed by the Participating Broker to be relevant. 4 (k) In addition to complying with the provisions of Section 1(i) above, and not in limitation of any other obligations of the Participating Broker to determine suitability imposed by state or federal law, the Participating Broker agrees that it will comply fully with all of the provisions of Rules 2310 and 2810 of the NASD's Conduct Rules, including specifically the following provisions: (1) In recommending to a customer the purchase, sale or exchange of any security, the Participating Broker shall have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts, if any, disclosed by such customer as to his other security holdings and as to his financial situation and needs. (2) Prior to the execution of a transaction recommended to a non-institutional customer, other than transactions with customers where investments are limited to money market mutual funds, the Participating Broker shall make reasonable efforts to obtain information concerning: (a) the customer's financial status; (b) the customer's tax status; (c) the customer's investment objectives; and (d) such other information used or considered to be reasonable by such member or registered representative in making recommendations to the customer. (3) The Participating Broker shall have reasonable grounds to believe and shall believe, based upon information provided by the investor concerning the investor's other investments, financial situation and needs, and upon any other information known by the Participating Broker, that (a) each investor to whom the Participating Broker sells Units is or will be in a financial position appropriate to enable the investor to realize to a significant extent the benefits (including tax benefits) of an investment in the Units, (b) each investor to whom the Participating Broker sells Units has a net worth sufficient to sustain the risks inherent in an investment in the Units (including potential loss and lack of liquidity), and (c) the Units otherwise are or will be suitable investment for each investor to whom it sells Units, and the Participating Broker shall maintain files disclosing the basis upon which the determination of suitability was made; (4) The Participating Broker shall not execute any transaction involving the purchase of Units in a discretionary account without prior written approval of the transaction by the investor; (5) The Participating Broker shall have reasonable grounds to believe and shall believe, based upon the information made available to it, that all material facts are adequately and accurately disclosed in the Registration Statement and provide a basis for evaluating the Units; (6) In making the determination set forth in subparagraph (3) above, the Participating Broker shall evaluate items of compensation, physical properties, tax aspects, 5 financial stability and experience of the sponsor, conflicts of interest and risk factors, appraisals, as well as any other information deemed pertinent by it; (7) If the Participating Broker relies upon the results of any inquiry conducted by another member of the NASD with respect to the obligations set forth in Section 1 (k)(5) or (6) above, the Participating Broker shall have reasonable grounds to believe and shall believe that such inquiry was conducted with due care, that the member or members conducting or directing the inquiry consented to the disclosure of the results of the inquiry and that the person who participated in or conducted the inquiry is not a sponsor or an affiliate of the sponsor of the Partnership; and (8) Prior to executing a purchase transaction in the Units, the Participating Broker shall have informed the prospective investor of all pertinent facts relating to the liquidity and marketability of the Units. (l) The Participating Broker agrees that it will comply with NASD Conduct Rules 2730, 2740 and 2750. (m) The Participating Broker agrees to retain in its files, for a period of at least 6 years, information which will establish that each purchaser of Units falls within the permitted class of investors. (n) The Participating Broker shall not, directly or indirectly, pay or award any finder's fees, commissions or other compensation to any persons engaged by a potential Limited Partner for investment advice as an inducement to such advisor to advise the potential investor to purchase Units in the Partnership. (o) The Participating Broker either (i) shall not purchase Units for its own account or (ii) shall hold for investment any Units purchased for its own account. (p) The Participating Broker hereby confirms that it is familiar with Securities Act Release No. 4968 and Rule 15c2-8 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), relating to the distribution of preliminary and final prospectuses, and confirms that it has and will comply therewith. (q) The Participating Broker represents and warrants that it is (i) an entity, as designated in Exhibit A hereto, organized and presently in good standing in the state or states designated in Exhibit A hereto, (ii) duly registered as a broker-dealer under the provisions of the Exchange Act, and the regulations promulgated there under, (iii) a member in good standing of NASD; (iv) presently licensed by the appropriate regulatory agency of each state in which it will offer and sell the Units as a securities broker-dealer qualified to offer and sell to members of the public securities of the type represented by the Units; and (v) neither Participating Broker nor any of Participating Broker's officers, directors or agents is the subject of any federal or state administrative or judicial proceeding or order which would disqualify it from participating in offerings registered under the Securities Act. 6 2. Compensation of Participating Broker. The Dealer Manager shall pay the Participating Broker, as compensation for all services to be rendered by the Participating Broker hereunder, a commission equal to 8.0% on sales of Units by such Participating Broker, as set forth in Exhibit A hereto, subject to reduction as specified in the Prospectus. The Dealer Manager, in its sole discretion, may reallow to the Participating Broker from its Dealer Manager fee, up to an additional 1.0% on sales of Units by such Participating Broker, based on such factors as the number of Units sold by the Participating Broker, bona fide due diligence expenses incurred by the Participating Broker. Such commission rates shall remain in effect during the term of this Agreement unless otherwise changed by a written agreement between the parties hereto. A sale of Units shall be deemed to be completed only after a Partnership receives a properly completed Subscription Agreement for Units of such Partnership from the Participating Broker evidencing the fact that the investor had received a final Prospectus for a period of not less than five full business days, together with payment of the full purchase price of each purchased Unit of such Partnership from a buyer who satisfies each of the terms and conditions of the Registration Statement and Prospectus, and only after such Subscription Agreement has been accepted in writing by the General Partner of the Partnership. Such compensation shall be payable to the Participating Broker by the Dealer Manager after such acceptance of the subscription agreement; provided, however, that compensation or commissions shall not be paid by the Dealer Manager (i) other than from funds received as compensation or commissions from the Partnership for the sale of Units; (ii) until such time as Subscriptions for a minimum of 57,500 Units of such Partnership ($1,150,000) have been received and approved by the General Partner, and deposited into the Escrow Account provided for in Section 1(e) hereof; (iii) until any and all compensation or commissions payable by such Partnership to the Dealer Manager have been received by the Dealer Manager; and (iv) the commission payable to any broker-dealer or salesman exceeds the amount allowed by any regulatory agency. The Partnership (and the Dealer Manager) may pay reduced commissions or may eliminate commissions on certain sales of Units in accordance with, and on the terms set forth in, the following five paragraphs (including the following table) of this Section 2, which reduction or elimination of commissions will not, however, change the net proceeds to the Partnership. A registered principal or representative of the Dealer Manager or a Participating Broker, when purchasing on its own behalf, may purchase Units net of all or a portion of the 8% selling commission. In connection with purchases of certain minimum numbers of Units, the amount of commissions otherwise payable to the Dealer Manager or a Participating Broker, shall be reduced in accordance with the following schedule: Reallowed Dollar Amount Purchase Price Commissions of Units Purchased Per Unit on Sales/Unit -------------------------- -------------- ------------- $ 1,000 - $ 250,000 $ 20.00 8.0% $ 250,020 - $ 350,000 $ 19.80 7.0% $ 350,020 - $ 500,000 $ 19.60 6.0% $ 500,020 - $ 750,000 $ 19.40 6.0% $ 750,020 - $ 1,000,000 $ 19.20 5.0% $ 1,000,020 or more $ 19.00 4.0% Subscriptions for Units of COMMONWEALTH INCOME & GROWTH FUND VI may not be combined in determining the volume discount to which an investor may be entitled. Any 7 such reduction in commissions will be credited to the purchaser as defined below ("Purchaser"), by reducing the total purchase price otherwise payable by the Purchaser. Subscriptions may be combined for the purpose of determining the volume discounts in the case of Subscriptions made by any Purchaser, provided all such units are purchased through the same Participating Broker or through the Dealer Manager. The volume discount will be prorated among the separate Subscribers considered to be a single Purchaser. Any request to combine more than one Subscription must be made in writing in a form satisfactory to the General Partner and must set forth the basis for such request. Any such request will be subject to verification by the Dealer Manager that all of such Subscriptions were made by a single Purchaser. If a Purchaser does not reduce the per Unit purchase price, the excess purchase price over the discounted purchase price will be returned to the actual separate Subscribers for Units. For purposes of such volume discounts, Purchaser is defined as: (i) an individual, his or her spouse, and their children under the age of 21, who purchase the Units for his or her or their own accounts, and all pension or trust funds established by each such individual; (ii) a corporation, partnership, association, joint-stock company, trust fund, or any organized group of persons, whether incorporated or not (provided that the entities described in this clause (ii) must have been in existence for at least six months before purchasing the Units and must have formed such group for a purpose other than to purchase the Units at a discount); (iii) an employee's trust, pension, profit-sharing, or other employee benefit plan that qualifies under Section 401 of the Internal Revenue Code of 1986, as amended; and (iv) all pension, trust, or other funds are maintained by a given bank. In addition, the General Partner may aggregate and combine separate subscriptions for Units received during the Offering from (i) the Dealer Manager or the same Participating Broker; (ii) investors whose accounts are managed by a single investment adviser registered under the Investment Advisers Act of 1940; (iii) investors over whose accounts a designated bank, insurance company, trust company, or other entity exercises discretionary investment responsibility, or (iv) a single corporation, partnership, trust association, or other organized group of persons, whether incorporated or not, and whether such subscriptions are by or for the benefit of such corporation, partnership, trust association, or group. 3. Association with Other Dealers. It is expressly understood between the Dealer Manager and the Participating Broker that the Dealer Manager may cooperate with other broker-dealers who are registered as broker-dealers with the NASD and duly licensed by the appropriate regulatory agency of each state in which they will offer and sell the Units of the Partnership. Such other participating broker-dealers may be engaged by the Dealer Manager as brokers on terms and conditions identical or similar to this Agreement and shall receive such rates of commission as are agreed to between the Dealer Manager and the respective other participating broker-dealers and as are in accordance with the terms of the Registration Statement. The Participating Broker understands that, to that extent, such other participating broker-dealers shall compete with the Participating Broker in the sale of the Units. If the participating broker-dealers, including the Participating Broker, among themselves, should be deemed to constitute a partnership for Federal income tax purposes, then Participating Broker hereby elects to be excluded from the application of Subchapter K, Chapter 1, Subtitle A of the Internal Revenue Code of 1986 and agrees not to take any position inconsistent with that election. Participating Broker further hereby authorizes the 8 Dealer Manager, in its discretion, to execute and file on behalf of the Participating Broker such evidence of that election as may be required by the Internal Revenue Service. 4. Conditions of the Participating Broker's Obligations. The Participating Broker's obligations hereunder are subject, during the term of this Agreement and the Offering, to: (a) the performance by the Dealer Manager of its obligations hereunder; and (b) the conditions that: (i) the Registration Statement shall become and remain effective, and (ii) no stop order shall have been issued suspending the effectiveness of the Offering. 5. Conditions to the Dealer Manager's Obligations. The obligations of the Dealer Manager hereunder are subject, during the term of this Agreement and the Offering, to the conditions that: (a) at the effective date of the Registration Statement and thereafter during the term of this Agreement while any Units remain unsold, the Registration Statement shall remain in full force and effect authorizing the offer and sale of the Units; (b) no stop order suspending the effectiveness of the Offering or other order restraining the offer or sale of the Units shall have been issued nor proceedings therefore initiated or threatened by any state regulatory agency or the SEC; and (c) the Participating Broker shall have satisfactorily performed all of its obligations hereunder. 6. Covenants of the Dealer Manager. The Dealer Manager covenants, warrants and represents, during the full term of this Agreement, that: (a) It shall use its best efforts to cause the Partnership to maintain the effectiveness of the Registration Statement and to file such applications or amendments to the Registration Statement as may be reasonably necessary for that purpose. (b) It shall advise the Participating Broker whenever and as soon as it receives or learns of any order issued by the SEC, any state regulatory agency or any other regulatory agency which suspends the effectiveness of the Registration Statement or prevents the use of the Prospectus or which otherwise prevents or suspends the offering or sale of the Units, or receives notice of any proceedings regarding any such order. (c) It shall use its best efforts to prevent the issuance of any order described herein at Section 6 (b) hereof and to obtain the lifting of any such order if issued. (d) It shall give the Participating Broker written notice when the Registration Statement becomes effective and shall deliver to the Participating Broker such number of copies of the Prospectus, and any supplements and amendments thereto, which are finally approved by the SEC, as the Participating Broker may reasonably request for sale of the Units. (e) It shall promptly notify the Participating Broker of any post-effective amendments or supplements to the Registration Statement or Prospectus, and shall furnish the Participating Broker with copies of any revised Prospectus and/or supplements and amendments to the Prospectus. 9 (f) To the extent to which the Dealer Manager has knowledge, it shall keep the Participating Broker fully informed of any material development to which either Partnership is a party or which concerns the business and condition of either Partnership. (g) In conjunction with the Partnership on whose behalf Units are being offered, it shall use its best efforts to cause, at or prior to the time the Registration Statement becomes effective, the qualification of the Units for offering and sale under the securities laws of such states as that Partnership shall elect. 7. Payment of Costs and Expenses. The Participating Broker shall pay all costs and expenses incident to the performance of its obligations under this Agreement, including: (a) All expenses incident to the preparation, printing and filing of all advertising originated by it related to the sale of the Units; and (b) All other costs and expenses incurred in connection with its sales efforts related to the sales of the Units, which are not expressly assumed by the Partnership in its Dealer Manager Agreement with the Dealer Manager. 8. Indemnification. (a) The Participating Broker agrees to indemnify, defend and hold harmless the Partnership, the General Partner, the General Partner's affiliates and its officers, directors, employees and agents, including the Dealer Manager, against all losses, claims, demands, liabilities and expenses, joint or several, including reasonable legal and other expenses incurred in defending such claims or liabilities, whether or not resulting in any liability to the Partnership, the General Partner, its affiliates and its officers, directors, employees or agents, which they or any of them may incur arising out of any offer or sale by the Participating Broker, or any person acting on its behalf, of any Units pursuant to this Agreement if such loss, claim, demand, liability, or expense arises out of or is based upon (i) an untrue statement or alleged untrue statement of a material fact, or any omission or alleged omission of a material fact, other than a statement, omission, or alleged omission by the Participating Broker which is also, as the case may be, contained in or omitted from the Prospectus or the Registration Statement, as filed and in effect with the SEC, or in the amendment or supplement thereto and which statement or omission was not based on information supplied to the Partnership or the Dealer Manager by such Participating Broker, or (ii) the breach by the Participating Broker, or any person acting on its behalf, of any of the terms and conditions of this Agreement. This indemnity provision shall survive the termination of this Agreement. (b) In the Dealer Manager Agreement, the General Partner has agreed that it will indemnify and hold harmless the Dealer Manager and Participating Broker against any losses, claims, damages or liabilities, joint or several, to which they may become subject insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) a breach of any covenant or obligation of the General Partner in the Dealer Manager Agreement or any representation or warranty of the General Partner in the Dealer Manager Agreement or in the certificates provided pursuant to Paragraph 6(f) of the Dealer Manager Agreement, or (ii) any untrue statement or alleged untrue statement of a material fact contained in the Prospectus or any omission or alleged omission to state therein a material fact 10 necessary to make the statements therein not misleading; and will reimburse the Dealer Manager and Participating Broker for any legal or other expenses reasonably incurred by it in connection with investigating or defending against such loss, claim, damage, liability or action; provided, however, that it shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Prospectus in reliance upon and in conformity with information supplied with respect to the Dealer Manager or Participating Broker or any other agent which may offer and sell the Units, or their affiliates, in writing, expressly for use therein. This indemnity agreement is in addition to any liability which the General Partner may otherwise have. (c) No indemnifying party shall be liable under Sections 8(a) and 8(b) above unless the party to be indemnified shall have notified such indemnifying party in writing promptly after the summons or other first legal process giving information of the nature of the claim shall have been served upon the party to be indemnified, but failure to notify an indemnifying party of any such claim shall not relieve it from any liabilities which it may have to the indemnified party against whom action is brought other than on account of its indemnity agreement contained in Sections 8(a) and 8(b) above. In the cases of any such claim, if the party to be indemnified notified the indemnifying party of the commencement thereof as aforesaid, the indemnifying party shall be entitled to participate at its own expense in the defense of such claim. If it so elects, in accordance with arrangements satisfactory to any other indemnifying party or parties similarly notified, the indemnifying party has the option to assume the defense of the claim, with counsel who shall be satisfactory to such indemnified party and all other indemnified parties who are defendants in such action; and after notice from the indemnifying party of its election so to assume the defense thereof and the retaining of such counsel by the indemnifying party, the indemnifying party shall not be liable to such indemnified party under Sections 8(a) and 8(b) above for any legal or other expenses, other than for the reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof, including but not limited to any legal expenses the indemnified party will incur if the indemnified party elects, at its option, to retain additional counsel to participate in the defense. No indemnifying party shall be liable to indemnify any person for any settlement of any action effected without the consent of such indemnifying party. (d) In order to provide for just and equitable contribution in circumstances in which the indemnification provided in Sections 8(a), (b) and (c) is for any reason other than the terms thereof held to be unavailable, the parties entitled to indemnification by the terms hereof shall be entitled to contribution for liabilities and expenses (including the reasonable costs of investigation but after deducting any contribution received by such parties from any other person) in such proportion as is appropriate to reflect the relative benefits received by such parties from the offering of the Units. If, however, the allocation provided by the preceding sentence is not permitted by applicable law, then such contribution shall be in such proportion as is appropriate to reflect such relative benefits and also the relative fault of such parties in connection with the misstatement or omissions which result in such losses, claims, damages or liabilities, as well as other equitable considerations. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation or by any other method which does not take into account the equitable considerations referred to above, and that no person guilty of such fraudulent misrepresentation shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Each party who may seek contribution under this Section 8(d) shall, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may 11 be made against another party or parties under this Section 8 (d), give written notice of the commencement of such action, suit or proceeding to the other party or parties from whom such contribution may be sought, but the omission so to notify such contributing party or parties shall not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have otherwise than on account of the Section 8(d). 9. Term of Agreement. This agreement shall become effective at 8:00 a.m. (Eastern Standard Time) of the first full business day following the day on which the Registration Statement becomes effective, or if later, the date on which this Agreement is executed by the Dealer Manager and the Participating Broker. The Participating Broker and the Dealer Manager may each prevent this Agreement from becoming effective, without liability to the other, by written notice before the time this Agreement would otherwise become effective. After this Agreement becomes effective, either party may terminate it at any time for any reason by giving thirty (30) days written notice to the other party; provided, however, that this Agreement shall in any event automatically terminate at the first occurrence of any of the following events: (a) the Registration Statement for offer and sale of the Units shall cease to be effective; (b) the Partnerships shall be terminated; or (c) the Participating Broker's license or registration to act as a broker-dealer shall be revoked or suspended by any federal, self-regulatory or state agency and such revocation or suspension is not cured within ten (10) days from the date of such occurrence. In any event, this Agreement shall be deemed suspended during any period for which such license is revoked or suspended. 10. Notices. All notices and communications hereunder shall be in writing and shall be deemed to have been given and delivered when deposited in the United States mail, postage prepaid, registered or certified mail, to the applicable address set forth below. If sent to the Dealer Manager: Commonwealth Capital Securities Corp. 400 Cleveland Street, 7th Floor Clearwater, FL 33755 Attention: President If sent to the Participating Broker: to the person whose name and address are identified in Exhibit A hereto. 11. Successors. This agreement shall be binding upon and inure to the benefit of the parties hereto, and shall not be assigned or transferred by the Participating Broker by operation of law or otherwise. 12. Miscellaneous (a) This Agreement shall be construed in accordance with the applicable laws of the Commonwealth of Pennsylvania. 12 (b) Exclusive Jurisdiction. Any disputes arising out of or related to this Agreement shall be subject to the exclusive jurisdiction of the Court of Common Pleas of Pennsylvania in the County of Delaware or the Federal District Court for the Eastern District of Pennsylvania. (c) Nothing in this Agreement shall constitute the Participating Broker as in association with or in partnership with the Dealer Manager. Instead, the Participating Broker is an independent contractor, and this Agreement shall only authorize the Participating Broker to sell the Units according to the terms as expressly set forth herein; provided, further, that the Participating Broker shall not in any event have any authority to act except according to the terms expressly set forth herein. The Dealer Manager is under no obligation to the Participating Broker except for the obligations assumed hereby or in any written communication from the Dealer Manager in connection with this offering. Further, the Participating Broker shall have no independent authority to appoint any person or other entity as an agent or sub-agent. (d) This Agreement, including Exhibit A and Schedule A hereto, embodies the entire understanding between the parties to the Agreement, and no variation, modification or amendment to this Agreement shall be deemed valid or effective unless it is in writing and signed by other parties hereto. (e) If any provision of this Agreement shall be deemed void, invalid or ineffective for any reason, the remainder of the Agreement shall remain in full force and effect. (f) This Agreement may be executed in counterpart copies, each of which shall be deemed an original but all of which together shall constitute one and the same instrument comprising this Agreement. (g) All representations, warranties and covenants made by Participating Broker and/or Dealer Manager contained herein or in certificates delivered pursuant hereto, and the indemnity agreements contained herein, shall remain operative and in force and effect regardless of any investigation made by or on behalf of a party hereto, and shall survive the completion of the sale of the Units. 13 IN WITNESS WHEREOF, the parties have executed this Agreement on the date and year indicated on Exhibit A hereto. PARTICIPATING BROKER: DEALER MANAGER: COMMONWEALTH CAPITAL - ----------------------------------- SECURITIES CORP. (NAME OF PARTICIPATING BROKER) BY: _______________________________ BY: _______________________________ PRINT NAME: _______________________ PRINT NAME: _______________________ TITLE: ____________________________ TITLE: ____________________________ WITNESS: __________________________ WITNESS: __________________________ 14 EXHIBIT A TO PARTICIPATING BROKER AGREEMENT OF COMMONWEALTH INCOME & GROWTH FUND VI This Exhibit A is attached to and made a part of that certain Participating Broker Agreement, dated as of the _____ day of ___________, 20___, by and between COMMONWEALTH CAPITAL SECURITIES CORP., as Dealer Manager, and ____________________________, as Participating Broker. 1. Date of Agreement: ____________________________________________________ 2. Identity of Participating Broker: Name: _________________________________________________________________ Firm NASD (CRD) No. ___________________________________________________ Type of Entity: _______________________________________________________ (To be completed by Participating Broker; i.e. Corporation, Partnership, Sole Proprietorship) State Organized In: ___________________________________________________ (To be completed by Participating Broker) Qualified To Do Business and in Good Standing in the Following Jurisdictions (including your state of organization) (Note: Qualification to do business in any jurisdiction is generally a requirement imposed by the secretary of state or other authority of jurisdictions in which you do business, and is not related to your holding a license as a securities broker-dealer in such jurisdictions. Questions concerning this matter should be directed to you or your legal counsel): _______________________________________________________________________ _______________________________________________________________________ (To be completed by Participating Broker) Licensed as Broker-Dealer in the following states: ____________________ _______________________________________________________________________ _______________________________________________________________________ (To be completed by Participating Broker) 15 3. Schedule of Commissions Payable to participating broker (see Section 2 of Agreement): As a Number of Units Percentage Purchased In Sales Price of the Individual Order To Subscriber Sales Price (1) Dollar Amount ---------------- ------------- --------------- -------------- 1 or more $20.00 8.0% $1.60 (1) Subject to reduction as set forth in Section 2 of the Participating Broker Agreement. 4. Name and Address for Notice Purposes (see Paragraph 10 of Agreement): Name: _________________________________________________________________ Title: ________________________________________________________________ Company: ______________________________________________________________ Address: ______________________________________________________________ City, State & Zip Code: _______________________________________________ Telephone Number (including area code): _______________________________ 5. Please complete the following for our records: (a) Please name those individuals who hold the following positions: President: ___________________________________________________ Due Diligence Officer:_________________________________________ Marketing Director: __________________________________________ In-House Editor: ______________________________________________ (b) Does your company hold national or regional conferences? Yes __________ No ___________ If so, when? __________________________________________________ Who is the coordinator? _______________________________________ (c) How many representatives are registered with your broker-dealer? _______________________________________________________________ PLEASE ENCLOSE A CURRENT LIST. ALL INFORMATION WILL BE HELD IN CONFIDENCE. (d) Does your firm publish a newsletter? Yes ________ No __________ (e) Does your firm have regular internal mailings, or bulk package mailings to representatives? Yes ________ No __________ 16 EX-10 7 ex10-2.txt EX10-2,TXT SUBSCRIPTION ESCROW AGREEMENT Subscription Escrow Agreement (the "Escrow Agreement") dated as of the effective date (the "Effective Date") set forth on schedule 1 attached hereto ("Schedule 1") by and among the limited partnership identified on Schedule 1 (the "Issuer"), the corporation identified on Schedule 1 (the "Depositor") and J.P.Morgan Trust Company, National Association, as escrow agent hereunder (the "Escrow Agent"). WHEREAS, the Issuer has filed a registration statement on Form S-1 under the Securities Act of 1933, as amended, with the Securities and Exchange Commission, File No. ____________ (the "Registration Statement"), relating to the subscription for and sale of limited partnership units ("Units") in the Issuer, with a minimum investment required of 125 Units (the "Minimum Subscription Amount"), at a price of $20.00 per Unit; WHEREAS, the Depositor has been named as the underwriter in connection with the proposed offering of the Units in accordance with the terms of a Dealer Manager Agreement dated as of January __, 2006 among the Issuer, its general partner and the Depositor (the "Underwriting Agreement"); and WHEREAS, in compliance with Rule 15c2-4 under the Securities Exchange Act of 1934, as amended ("Rule 15c2-4"), the Issuer and the Depositor propose to establish an escrow fund to be held by the Escrow Agent until the sale of Units terminates; NOW THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth, the parties hereto agree as follows: 1. APPOINTMENT. The Issuer and Depositor hereby appoint the Escrow Agent as their escrow agent for the purposes set forth herein, and the Escrow Agent hereby accepts such appointment under the terms and conditions set forth herein. 2. ESCROW FUND. All funds received by the Depositor and the Issuer in connection with the sale of Units shall be deposited with the Escrow Agent (the "Escrow Deposit"). The Escrow Agent shall hold the Escrow Deposit and, subject to the terms and conditions hereof, shall invest and reinvest the Escrow Deposit and the proceeds thereof (the "Escrow Fund") as directed in Section 3. 3. INVESTMENT OF ESCROW FUND. During the term of this Escrow Agreement, the Escrow Fund shall be invested and reinvested by the Escrow Agent in the investment indicated on Schedule 1 or such other investments as shall be directed in writing by the Issuer and the Depositor, are permissible investments under Rule 15c2-4 and as shall be acceptable to the Escrow Agent. All investment orders involving U.S. Treasury obligations, commercial paper and other direct investments will be executed through JPMorgan Fleming Asset Management (JPMFAM), in the investment management division of JPMorgan Chase. Subject to principles of best execution, transactions are effected on behalf of the Escrow Fund through broker-dealers selected by JPMFAM. In this regard, JPMFAM seeks to attain the best overall result for the Escrow Fund, taking into consideration quality of service and reliability. An agency fee will be assessed in connection with each transaction. Periodic statements will be provided to Issuer and Depositor reflecting transactions executed on behalf of the Escrow Fund. The Issuer and Depositor, upon written request, will receive a statement of transaction details upon completion of any securities transaction in the Escrow Fund without any additional cost. The Escrow Agent shall have the right to liquidate any investments held in order to provide funds necessary to make required payments under this Escrow Agreement. The Escrow Agent shall have no liability for any loss sustained as a result of any investment in an investment indicated on Schedule 1 or any investment made pursuant to the instructions of the parties hereto or as a result of any liquidation of any investment prior to its maturity or for the failure of the parties to give the Escrow Agent instructions to invest or reinvest the Escrow Fund. 4. DISPOSITION AND TERMINATION. The Depositor and the Issuer agree to notify the Escrow Agent in writing of the closing date of the offering (the "Offering Closing Date") and whether or not the Issuer received subscriptions for the Minimum Subscription Amount. Upon receipt of such written notification the following procedure will take place. (i) If the Issuer has received subscriptions for the Minimum Subscription Amount by the Offering Closing Date, the Escrow Fund will be promptly paid to or credited to the account of, or otherwise transferred to the Issuer pursuant to instructions from the Issuer. (ii) If the Issuer has not received subscriptions for the Minimum Subscription Amount, the Escrow Agent shall be provided with a list containing the amount received from each subscriber whose funds have been deposited with the Escrow Agent (with respect to each subscriber the "Subscriber Investment Amount") and the name, address and Taxpayer Identification Number ("TIN") of each subscriber. In addition, the Issuer or Depositor shall calculate the interest earned on each Subscriber Investment Amount as of the Offering Closing Date and provide such information to the Escrow Agent. The aggregate of all Subscriber Investment Amounts and interest thereon shall be equal to the amount of the Escrow Fund on the Offering Closing Date. The Escrow Agent shall distribute to each subscriber the appropriate Subscriber Investment Amount and interest thereon pursuant to joint written instructions of the Issuer and Depositor within 45 days of receipt of the information described in this Section 4(ii). Upon delivery of the Escrow Fund to the Issuer or the subscribers as the case may be, by the Escrow Agent, this Escrow Agreement shall terminate, subject to the provisions of Section 8. 5. ESCROW AGENT. The Escrow Agent undertakes to perform only such duties as are expressly set forth herein and no duties shall be implied. The Escrow Agent shall have no liability under and no duty to inquire as to the provisions of any agreement other than this Escrow Agreement. The Escrow Agent may rely upon and shall not be liable for acting or refraining from acting upon any written notice, instruction or request furnished to it hereunder and believed by it to be genuine and to have been signed or presented by the proper party or parties. The Escrow Agent shall be under no duty to inquire into or investigate the validity, accuracy or content of any such document. The Escrow Agent shall have no duty to solicit any payments which may be due it or the Escrow Fund. The Escrow Agent shall not be liable for any action taken or omitted by it in good faith except to the extent that a court of competent jurisdiction determines that the Escrow Agent's gross negligence or willful misconduct was the primary cause of any loss to the Issuer or Depositor. The Escrow Agent may execute any of its powers and perform any of its duties hereunder directly or through agents or attorneys (and shall be liable only for the careful selection of any such agent or attorney) and may consult with counsel, accountants and other skilled persons to be selected and retained by it. The Escrow Agent shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the advice or opinion of any such counsel, accountants or other skilled persons. In the event that the Escrow Agent shall be uncertain as to its duties or rights hereunder or shall receive instructions, claims or demands from any party hereto which, in its opinion, conflict with any of the provisions of this Escrow Agreement, it shall be entitled to refrain from taking any action and its sole obligation shall be to keep safely all property held in escrow until it shall be directed otherwise in writing by all of the other parties hereto or by a final order or judgment of a court of competent jurisdiction. Anything in this Escrow Agreement to the contrary notwithstanding, in no event shall the Escrow Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Escrow Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. 6. SUCCESSION. The Escrow Agent may resign and be discharged from its duties or obligations hereunder by giving 10 days advance notice in writing of such resignation to the other parties hereto specifying a date when such resignation shall take effect. The Escrow Agent shall have the right to withhold an amount equal to any amount due and owing to the Escrow Agent, plus any costs and expenses the Escrow Agent shall reasonably believe may be incurred by the Escrow Agent in connection with the termination of the Escrow Agreement. Any corporation or association into which the Escrow Agent may be merged or converted or with which it may be consolidated, or any corporation or association to which all or substantially all the escrow business of the Escrow Agent's corporate trust line of business may be transferred, shall be the Escrow Agent under this Escrow Agreement without further act. 7. FEES. The Issuer and Depositor agree jointly and severally to (i) pay the Escrow Agent upon execution of this Agreement and from time to time thereafter reasonable compensation for the services to be rendered hereunder, which unless otherwise agreed in writing shall be as described in Schedule 1 attached hereto, and (ii) pay or reimburse the Escrow Agent upon request for all expenses, disbursements and advances, including reasonable attorney's fees and expenses, incurred or made by it in connection with the preparation, execution, performance, delivery modification and termination of this Agreement. 8. INDEMNITY. The Issuer and the Depositor shall jointly and severally indemnify, defend and save harmless the Escrow Agent and its directors, officers, agents and employees (the "indemnitees") from all loss, liability or expense (including the fees and expenses of in house or outside counsel) arising out of or in connection with (i) the Escrow Agent's execution and performance of this Escrow Agreement, except in the case of any indemnitee to the extent that such loss, liability or expense is due to the gross negligence or willful misconduct of such indemnitee, or (ii) its following any instructions or other directions from the Issuer or the Depositor, except to the extent that its following any such instruction or direction is expressly forbidden by the terms hereof. The parties hereto acknowledge that the foregoing indemnities shall survive the resignation or removal of the Escrow Agent or the termination of this Escrow Agreement. The parties hereby grant the Escrow Agent a lien on, right of set-off against and security interest in the Escrow Fund for the payment of any claim for indemnification, compensation, expenses and amounts due hereunder. 9. TINS. The Purchaser and the Seller each represent that its correct Taxpayer Identification Number ("TIN") assigned by the Internal Revenue Service ("IRS")or any other taxing authority is set forth on the signature page hereof. Upon execution of this Agreement, the Issuer and Depositor shall provide the Escrow Agent with a fully executed W-8 or W-9 ITS form, which shall include the Issuer's and the Depositor's TIN. All interest or other income earned under the Escrow Agreement shall be allocated and/or paid as directed in a joint written direction of the Issuer and the Depositor and reported by the recipient to the Internal Revenue Service or any other taxing authority. Notwithstanding such written directions, Escrow Agent shall report and, as required withhold any taxes as it determines may be required by any law or regulation in effect at the time of the distribution. In the absence of timely direction, all proceeds of the Escrow Fund shall be retained in the Escrow Fund and reinvested from time to time by the Escrow Agent as provided in Section 3. In the event that any earnings remain undistributed at the end of any calendar year, Escrow Agent shall report to the Internal Revenue Service or such other authority such earnings as it deems appropriate or as required by any applicable law or regulation or, to the extent consistent therewith, as directed in writing by the Issuer and the Depositor. In addition, Escrow Agent shall withhold any taxes it deems appropriate and shall remit such taxes to the appropriate authorities. 10. NOTICES. All communications hereunder shall be in writing and shall be deemed to be duly given and received: (i) upon delivery if delivered personally or upon confirmed transmittal if by facsimile; (ii) on the next Business Day (as hereinafter defined) if sent by overnight courier; or (iii) four (4) Business Days after mailing if mailed by prepaid registered mail, return receipt requested, to the appropriate notice address set forth on Schedule 1 or at such other address as any party hereto may have furnished to the other parties in writing by registered mail, return receipt requested. Notwithstanding the above, in the case of communications delivered to the Escrow Agent pursuant to (ii) and (iii) of this Section 10, such communications shall be deemed to have been given on the date received by the Escrow Agent. In the event that the Escrow Agent, in its sole discretion, shall determine that an emergency exists, the Escrow Agent may use such other means of communication as the Escrow Agent deems appropriate. "Business Day" shall mean any day other than a Saturday, Sunday or any other day on which the Escrow Agent located at the notice address set forth on Schedule 1 is authorized or required by law or executive order to remain closed. 11. SECURITY PROCEDURES. In the event funds transfer instructions are given (other than in writing at the time of execution of this Escrow Agreement, as indicated in Schedule 1 attached hereto), whether in writing, by telecopier or otherwise, the Escrow Agent is authorized to seek confirmation of such instructions by telephone call-back to the person or persons designated on schedule 2 hereto ("Schedule 2"), and the Escrow Agent may rely upon the confirmation of anyone purporting to be the person or persons so designated. The persons and telephone numbers for call-backs may be changed only in a writing actually received and acknowledged by the Escrow Agent. If the Escrow Agent is unable to contact any of the authorized representatives identified in Schedule 2, the Escrow Agent is hereby authorized to seek confirmation of such instructions by telephone call-back to any one or more of your executive officers, ("Executive Officers"), which shall include the titles of______________________, as the Escrow Agent may select. Such "Executive Officer" shall deliver to the Escrow Agent a fully executed Incumbency Certificate, and the Escrow Agent may rely upon the confirmation of anyone purporting to be any such officer. The Escrow Agent and the beneficiary's bank in any funds transfer may rely solely upon any account numbers or similar identifying numbers provided by the Purchaser or the Seller to identify (i) the beneficiary, (ii) the beneficiary's bank, or (iii) an intermediary bank. The Escrow Agent may apply any of the escrowed funds for any payment order it executes using any such identifying number, even when its use may result in a person other than the beneficiary being paid, or the transfer of funds to a bank other than the beneficiary's bank or an intermediary bank designated. The parties to this Escrow Agreement acknowledge that these security procedures are commercially reasonable. 12. MISCELLANEOUS. The provisions of this Escrow Agreement may be waived, altered, amended or supplemented, in whole or in part, only by a writing signed by all of the parties hereto. Neither this Escrow Agreement nor any right or interest hereunder may be assigned in whole or in part by any party, except as provided in Section 6, without the prior consent of the other parties. This Escrow Agreement shall be governed by and construed under the laws of the State of New York. Each party hereto irrevocably waives any objection on the grounds of venue, forum non-conveniens or any similar grounds and irrevocably consents to service of process by mail or in any other manner permitted by applicable law and consents to the jurisdiction of the courts located in the State of New York. The parties further hereby waive any right to a trial by jury with respect to any lawsuit or judicial proceeding arising or relating to this Escrow Agreement. No party to this Escrow Agreement is liable to any other party for losses due to, or if it is unable to perform its obligations under the terms of this Escrow Agreement because of, acts of God, fire, floods, strikes, equipment or transmission failure, or other causes reasonably beyond its control. This Escrow Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of the date set forth in Schedule 1. J.P.MORGAN TRUST COMPANY, NATIONAL ASSOCIATION AS ESCROW AGENT By: ___________________________ TAX CERTIFICATION: Taxpayer ID#: _____________________ Customer is a (check one): ___ Corporation ___ Municipality ___ Partnership ___ Non-profit or Charitable Org ___ Individual ___ REMIC ___ Trust ___ Other _________________
Under the penalties of perjury, the undersigned certifies that: (1) the entity is organized under the laws of the United States (2) the number shown above is its correct Taxpayer Identification Number (or it is waiting for a number to be issued to it); and (3) it is not subject to backup withholding because: (a) it is exempt from backup withholding or (b) it has not been notified by the Internal Revenue Service (IRS) that it is subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified it that it is no longer subject to backup withholding. (If the entity is subject to backup withholding, cross out the words after the (3) above.) Investors who do not supply a tax identification number will be subject to backup withholding in accordance with IRS regulations. NOTE: THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING. ISSUER SIGNATURE: __________________________ PRINTED NAME:________________________ TAX CERTIFICATION: Taxpayer ID#: ___________________ Customer is a (check one): ___ Corporation ___ Municipality ___ Partnership ___ Non-profit or Charitable Org ___ Individual ___ REMIC ___ Trust ___ Other _________________
Under the penalties of perjury, the undersigned certifies that: (4) the entity is organized under the laws of the United States (5) the number shown above is its correct Taxpayer Identification Number (or it is waiting for a number to be issued to it); and (6) it is not subject to backup withholding because: (a) it is exempt from backup withholding or (b) it has not been notified by the Internal Revenue Service (IRS) that it is subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified it that it is no longer subject to backup withholding. (If the entity is subject to backup withholding, cross out the words after the (3) above.) Investors who do not supply a tax identification number will be subject to backup withholding in accordance with IRS regulations. NOTE: THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING. DEPOSITOR SIGNATURE: __________________________ PRINTED NAME:________________________ SCHEDULE 1 EFFECTIVE DATE: NAME OF ISSUER: Issuer Notice Address: Issuer TIN: Wiring Instructions: NAME OF DEPOSITOR: Depositor Notice Address: Depositor TIN: Wiring Instructions: ESCROW DEPOSIT: $ INVESTMENT: [specify] [ ] J.P.Morgan Trust Company, National Association Money Market Account; [ ] A trust account with J.P.Morgan Trust Company, National Association; [XX] A money market mutual fund, including without limitation the JPMorgan Funds or any other mutual fund for which the Escrow Agent or any affiliate of the Escrow Agent serves as investment manager, administrator, shareholder servicing agent and/or custodian or subcustodian, notwithstanding that (i) the Escrow Agent or an affiliate of the Escrow Agent receives fees from such funds for services rendered, (ii) the Escrow Agent charges and collects fees for services rendered pursuant to this Escrow Agreement, which fees are separate from the fees received from such funds, and (iii) services performed for such funds and pursuant to this Escrow Agreement may at times duplicate those provided to such funds by the Escrow Agent or its affiliates. Fund: 100% U.S.Treasury Securities Money Market Fund - Premier Shares [ ] Such other investments as Issuer, Depositor and Escrow Agent may from time to time mutually agree upon in a writing executed and delivered by the Issuer and the Depositor and accepted by the Escrow Agent. ESCROW AGENT NOTICE ADDRESS: J.P.Morgan Trust Company, National Association Jo Anne Osborn One Oxford Centre, Suite 1100 301 Grant Street Pittsburgh, PA 15219 Attn: Jo Anne Osborn Fax: 412-456-5565 CHECK DEPOSIT ADDRESS: JPMorgan Chase Bank Attn: Sharon Chut-Khan 15th Floor Four New York Plaza New York, NY 10004 ESCROW AGENT'S COMPENSATION: ANNUAL ADMINISTRATION FEE: $3,000 ACCOUONT ACCEPTANCE & SET-UP $500 - ONE-TIME FEE OUT-OF-POCKET EXPENSES: 6% OF THE AMOUNT OF THE ANNUAL ADMINISTRATION FEE (I.E. $180) MUTUAL FUND TRANSACTION: 15 BASIS POINTS (CALCULATED ON THE AVERAGE PRINCIPAL BALANCE OF THE FUND) SCHEDULE 2 TELEPHONE NUMBER(S) FOR CALL-BACKS AND PERSON(S) DESIGNATED TO CONFIRM FUNDS TRANSFER INSTRUCTIONS If to Issuer: Name Telephone Number ------------------------------ ------------------------------ 1. ______________________________ ______________________________ 2. ______________________________ ______________________________ 3. ______________________________ ______________________________ If to Depositor: Name Telephone Number ------------------------------ ------------------------------ 1. ______________________________ ______________________________ 2. ______________________________ ______________________________ 3. ______________________________ ______________________________ Telephone call-backs shall be made to each Issuer and Depositor if joint instructions are required pursuant to this Escrow Agreement. EX-23 8 ex23-1.txt EXHIBIT 23.1 Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the use in this Registration Statement on Form S-1 of Commonwealth Income & Growth Fund VI of our report dated May 25, 2005 relating to the February 28, 2005 and February 29, 2004 consolidated financial statements of Commonwealth Capital Corp. and Subsidiaries, which appear in the Prospectus, which is a part of this Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus. /s/ASHER & COMPANY, Ltd. Philadelphia, Pennsylvania February 10, 2006 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the use in this Registration Statement on Form S-1 of Commonwealth Income & Growth Fund VI of our report dated September 26, 2005 relating to the February 28, 2005 financial statement of Commonwealth Income & Growth Fund, Inc., which appears in the Prospectus, which is a part of this Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus. /s/ASHER & COMPANY, Ltd. Philadelphia, Pennsylvania February 10, 2006 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the use in this Registration Statement on Form S-1 of Commonwealth Income & Growth Fund VI of our report dated February 1, 2006 relating to the January 31, 2006 financial statement of Commonwealth Income & Growth Fund VI, which appears in the Prospectus, which is a part of this Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus. /s/ASHER & COMPANY, Ltd. Philadelphia, Pennsylvania February 10, 2006 -----END PRIVACY-ENHANCED MESSAGE-----