EXHIBIT INDEX
Exhibits
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99.1 Technology Funding Venture Partners IV,
An Aggressive Growth Fund, L.P.
Amended and Restated Limited Partnership Agreement
TECHNOLOGY FUNDING VENTURE PARTNERS IV,
AN AGGRESSIVE GROWTH FUND, L.P.
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
This AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT is entered into by
Technology Funding Inc., Technology Funding Ltd., Xxxxxx X. Xxxxxxx
XX and Xxxx X. Xxxxxxxxx (collectively, the "General Partners"), and each
of those Persons who has been and shall hereafter be admitted as Limited
Partners.
The Partners hereby agree as follows:
ARTICLE 1
THE PARTNERSHIP
1.01 Formation. The Partners hereby form and continue a limited partnership
(the "Partnership") pursuant to the provisions of Title 6, Chapter 17 of the
Delaware Code, Sections 17-101 et seq, as amended from time to time, known as
the Delaware Revised Uniform Limited Partnership Act ("DRULPA"). Except as
expressly provided herein to the contrary, the rights and obligations of the
Partners and the administration and termination of the Partnership shall be
governed by DRULPA.
1.02 Name. The name of the Partnership is "Technology Funding Venture
Partners IV, An Aggressive Growth Fund, L.P." If considered necessary in the
opinion of counsel to the Partnership to preserve the limited liability of
the Limited Partners, property acquired and business conducted by the
Partnership shall be in such other name as is necessary to preserve such
limited liability.
1.03 Purpose. The Partnership is authorized and empowered to elect to
operate, and to operate, as a business development company under the
Investment Company Act of 1940, as amended. The Partnership's principal
investment objective is to maximize long-term capital appreciation for the
Limited Partners up to and including the final day of the Partnership's
operations prior to dissolution. The Partnership will seek to accomplish this
objective by making venture capital investments in new and developing
companies that the "Managing General Partners," as hereinafter defined,
believe offer significant long-term growth possibilities and by providing
those companies with active management assistance where warranted. The
Partnership will also seek to achieve this objective by investing in
established companies that the Managing General Partners believe offer
special opportunities for growth. The Partnership will also seek to preserve
Limited Partner capital through risk management and active participation with
Portfolio Companies. Generation of current income or tax benefits will not be
primary factors in the selection of investments.
1.04 Place of Business and Office; Registered Agent. The Partnership shall
maintain its principal office at c/o Technology Funding Inc., 0000 Xxxxxxxxxx
Xxxxxxxxx, Xxxxx 000, Xx Xxxxxx Xxxxx, Xxxxxxxxxx 00000. The Partnership shall
maintain a registered office at c/o The Corporation Trust Company, Corporation
Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx, Xxxxxxxx
00000. The "Management Committee," as hereinafter defined, may at any time
change the location of the Partnership's offices and may establish additional
offices, if it deems it advisable. Notification of any such change shall be
given to the Limited Partners on or before the date of any such change. The
name and address of the Partnership's registered agent for service of process
on the Partnership in the State of Delaware is The Corporation Trust Company,
Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx,
Xxxxxxxx 00000.
1.05 Term. The operation of the Partnership shall continue in full force and
effect until December 31, 2006, or until dissolution prior thereto pursuant to
the provisions hereof.
1.06 The Partners. The names, addresses, and "Capital Contributions," as
hereinafter defined, of the General Partners and the Limited Partners are set
forth in the books and records of the Partnership, as amended from time to time.
1.07 Title to Partnership Property. All property owned by the Partnership,
whether real or personal, tangible or intangible, shall be owned by the
Partnership as an entity, and no Partner, individually, shall have title to
or any interest in such property.
ARTICLE 2
DEFINITIONS
Unless otherwise provided herein or unless the context otherwise requires,
the terms with initial capital letters in this Agreement are defined as follows:
(a) "Affiliate" means, when used with reference to a specific Person, an
"affiliated person" of such specified Person as defined in Section 2(a)(3) of
the 1940 Act.
(b) "Agreement" means this Amended and Restated Limited Partnership Agreement
as originally executed and as amended, modified, supplemented, or restated from
time to time.
(c) "Capital Account" means a capital account for a Partner calculated as set
forth in Section 11.03.
(d) "Capital Contribution" means the total amount of cash that each Partner
has contributed to the capital of the Partnership in consideration for such
Partner's Partnership Interest, without reduction for selling, organizational,
or other expenses, less any amounts returned pursuant to Section 7.05.
(e) "Cash and Securities Available For Distribution" means all Partnership
cash from whatever sources derived less such reserves as the Management
Committee shall deem reasonable for the Partnership's business and plus any
securities held by the Partnership that the Management Committee deems
available for distribution.
(f) "Closing Date" means the fifth business day after the Partnership has
terminated the offering of Units.
(g) "Commencement Date" means the first date on which subscriptions from
additional Limited Partners for at least 15,000 Units are accepted by the
Partnership.
(h) "Consent" or "consent" means either (i) the approval given by vote at a
meeting called and held pursuant to this Agreement or (ii) the written
approval required or permitted to be given pursuant to this Agreement,
or (iii) the act of granting such an approval, as the context requires.
(i) "Conversion" means that point in time when the amount of cash plus the
value of all securities distributed (valued at the time of distribution) to
the Limited Partners equals the aggregate Capital Contributions of all
Limited Partners.
(j) "Dealer-Manager" means Technology Funding Securities Corporation, a
wholly-owned subsidiary of Technology Funding Inc. and a broker-dealer
registered with the National Association of Securities Dealers, Inc. ("NASD").
(k) "DRULPA" means Title 6, Chapter 17 of the Delaware Code, Sections 17-101
et seq., as amended from time to time, known as the Delaware Revised Uniform
Limited Partnership Act.
(l) "General Partners" means the Managing General Partners and the Individual
General Partners in their capacities as general partners of the Partnership.
(m) "General Partner Overhead" means those customary and routine expenses
incurred by the Managing General Partners (excluding all Organizational and
Offering Expenses) in performing their obligations to the Partnership,
including: (i) rent or depreciation, utilities, property taxes, and the cost
of capital equipment unless acquired primarily for the benefit of the
Partnership; and (ii) expenses of a general and administrative nature that
are customarily incurred by the General Partners for their own accounts and
are not attributable to the Partnership.
(n) "Incapacity" shall mean, as to any Person, the entry of an order for
relief in a bankruptcy proceeding ("bankruptcy"), entry of an order of
incompetence, or the death, dissolution, or any other event that would cause
such Person to cease to be a General Partner under DRULPA, as the case may
be, of such Person.
(o) "Independent" shall mean any individual who is not an "interested Person"
of the Partnership, as defined in the 1940 Act.
(p) "Independent General Partners" shall mean Xxxxxx X. Xxxxxxx XX, Xxxx X.
Xxxxxxxxx, and/or any other individual who becomes a successor or additional
Independent General Partner of the Partnership as provided herein, in such
individual's capacity as an Independent General Partner of the Partnership.
(q) "Individual General Partners" shall mean the Independent General Partners
and/or any other individual who becomes a successor or additional Individual
General Partner of the Partnership as provided herein, in such individual's
capacity as an Individual General Partner of the Partnership.
(r) "IRC" means the Internal Revenue Code of 1986, as amended.
(s) "Limited Partner" means any Person, including a Substituted Limited
Partner, who is a limited partner shown on the books and records of the
Partnership at the time of reference thereto, in such Person's capacity as
a limited partner of the Partnership.
(t) "Majority in Interest of the Limited Partners" means Limited Partners who
in the aggregate own, at the time of the determination, more than 50% of the
Units owned by all Limited Partners.
(u) "Management Committee" means a committee of the Partnership acting as the
governing body of the Partnership as set forth in Article 3.
(v) "Managing General Partners" means Technology Funding Inc. and
Technology Funding Ltd. and/or any other Person who becomes Managing General
Partner of the Partnership as provided herein, in such Person's capacity as a
Managing General Partner of the Partnership.
(w) "Net Loss" means for any Taxable Period the aggregate sum, if negative,
of all items of Partnership income, gain, deduction, and loss including
tax-exempt income and nondeductible expenses (except sales commissions).
Such term shall not include any items of income, gain, loss or deduction
allocated pursuant to Sections 8.04 and 8.07.
(x) "Net Profit" means for any Taxable Period the aggregate sum, if positive,
of all items of Partnership income, gain, deduction, and loss including tax-
exempt income and nondeductible expenses (except sales commissions). Such term
shall not include any items of income, gain, loss or deduction allocated
pursuant to Sections 8.04 and 8.07.
(y) "Offering Period" means that period commencing with the effective date
of the Prospectus when the Partnership begins offering Units and ending when
such offering is terminated.
(z) "Operational Costs" means all expenses of the Partnership except
Organizational and Offering Expenses or General Partner Overhead, including
but not limited to: (i) the costs of operations (e.g., documentation,
securities filings, other direct costs of selecting, negotiating, monitoring,
and liquidating Portfolio Company investments (including consultants,
attorneys, accountants, appraisers, due diligence expenses, industry trade
shows and conferences, travel, and investment banking fees and commissions or
preparation of status reports)); (ii) partnership accounting (e.g.,
maintenance of Partnership books and records, audit fees, preparation of
regulatory and tax reports, and costs of computer equipment or services used
by the Partnership); (iii) investor communications (e.g., design, production,
and mailing of all reports and communications to Limited Partners, including
those required by regulatory agencies); (iv) investor documentation; (v) legal
and tax services; and (vi) any other related operational or administrative
expenses necessary for the operation of the Partnership.
(aa) "Organizational and Offering Expenses" means those organizational and
syndication expenses incurred in connection with the formation of the
Partnership and in qualifying and marketing Units under applicable federal
and state laws, and any other expenses actually incurred and directly related
to the offering and sale of Units, including but not limited to:
(i) accounting and legal fees incurred in connection therewith; (ii)
registration fees and Blue Sky filing fees; (iii) the cost of preparing,
printing, amending, and supplementing the Prospectus; (iv) the costs of
qualifying and printing sales materials used in connection with the issuance
of Units; (v) due diligence fees and charges paid to unaffiliated
broker-dealers, whether directly or through the Dealer-Manager, not to
exceed 0.5% of total Limited Partner Capital Contributions; and (vi) salaries
earned and reasonable and necessary expenses incurred by the partners and
officers of the Managing General Partners or the Partnership for organizational
or syndication activities performed prior to the Commencement Date.
(bb) "Partners" means the General Partners and the Limited Partners,
collectively.
(cc) "Partnership" is defined in Section 1.01.
(dd) "Partnership Interest" means all of the interests of a Partner in the
Partnership, including, without limitation, the Partner's: (i) right to a
distributive share of profits and losses; (ii) right to a distributive share
of the assets of the Partnership; and (iii) right, if a General Partner, to
participate in the management of the Partnership.
(ee) "Person" shall mean any individual, partnership, corporation,
unincorporated organization or association, trust, or other entity.
(ff) "Portfolio Company" means any Person in which the Partnership makes an
investment, other than a Short-Term Investment.
(gg) "Prospectus" means that prospectus dated November 14, 1988 offering
Units in the Partnership, as supplemented and amended.
(hh) "Short-Term Investment" means commercial paper, government obligations,
money market instruments, certificates of deposit, or other similar obligations
and securities, or the liquid securities of issuers which exclusively invest in
such securities, in each case where the maturity or average maturity, as the
case may be, is one year or less at the time of purchase by the Partnership.
(ii) "Substituted Limited Partner" means a Person admitted as a Limited
Partner to the Partner-ship pursuant to Section 13.03 in place of and with all
of the rights of the Limited Partner who has transferred or assigned such
Limited Partner's Partnership Interest to such Person, and who is shown as a
Limited Partner on the books and records of the Partnership.
(jj) "Taxable Period" means each calendar year.
(kk) "TFI" means Technology Funding Inc., a California corporation.
(ll) "TFL" means Technology Funding Ltd., a California limited partnership.
(mm) "Unit" means the Partnership Interest held by a Limited Partner
representing a Capital Contribution, net of any sales commission paid
thereon, equal to $90.
(nn) "Unit Months" means the number of half months a Unit would be
outstanding if it were held from the date the original holder of such Unit
was deemed admitted into the Partnership pursuant to Section 11.02 until the
Closing Date.
(oo) "1940 Act" means the Investment Company Act of 1940 and all rules and
regulations promulgated thereunder, as amended by the Small Business Incentive
Act of 1980, and as further amended from time to time.
ARTICLE 3
MANAGEMENT
3.01 Management Committee. The governing body of the Partnership shall be the
Management Committee, which shall consist of such number of Individual General
Partners as is fixed pursuant to Section 3.02 and a single representative from
Technology Funding Ltd.
3.02 Individual General Partners. The number of Individual General Partners
shall initially be two and shall be fixed from time to time by the Management
Committee as then constituted; provided, however, that the number of
Individual General Partners shall in no event be less than two or more than
nine (except prior to the initial public offering of Units). A majority of the
members of the Management Committee shall at all times be Independent General
Partners. If at any time the number of Independent General Partners
is less than a majority, within 90 days thereafter, action shall be taken
pursuant to Section 3.03 to restore the number of Independent General Partners
to a majority.
3.03 Approval and Election of General Partners. The General Partners shall
hold office until their successors are approved and elected at the first
tri-annual meeting of Partners pursuant to Section 14.04, unless they are
sooner removed pursuant to Section 12.03 or sooner withdraw pursuant to
Section 12.01 or 12.02, as the case may be. The General Partners shall
thereafter be approved and elected to hold office for a term of one year from
their approval and election or until their successors are approved and elected,
unless they are sooner removed pursuant to Section 12.03 or sooner withdraw
pursuant to Section 12.01 or 12.02, as the case may be. General Partners xxx
succeed themselves in office. If at any time the number of Independent General
Partners is less than a majority of the members of the Management Committee,
the Management Committee shall, within 90 days, designate one or more successor
Independent General Partners so as to restore the number of Independent General
Partners to a majority. Subject to the foregoing requirement, the Management
Committee may also designate successor Management Committee members to fill
vacancies created by the retirement or withdrawal of a Management Committee
member pursuant to Section 12.01 or 12.02 or by the removal of a member by the
Management Committee pursuant to Section 12.03. The Management Committee may
also designate Individual General Partners to fill any vacancies created by an
increase in the number of Individual General Partners pursuant to Section 3.02.
In the event that no Individual General Partner remains, the Managing General
Partners shall continue the business of the Partnership without dissolution and
shall perform all duties of an Individual General Partner under this Agreement
and shall, within 90 days, call a special meeting of Limited Partners for the
purpose of approving and electing Individual General Partners. Each Limited
Partner hereby consents to the admission of any successor Individual General
Partner pursuant to this Section 3.03, and no further consent shall be
required. Any successor Individual General Partner designated by the
Management Committee shall hold office until the next tri-annual meeting of
Partners or until his or her successor has been approved and elected, unless he
or she is sooner removed pursuant to Section 12.03 or withdraws pursuant to
Section 12.01.
3.04 Management Committee Powers. Subject to the terms hereof, including but
not limited to Section 3.05, the Management Committee shall have full,
exclusive, and complete discretion in the management and control of the
affairs of the Partnership, shall make all decisions affecting Partnership
affairs and shall have all of the rights and powers of a general partner of a
limited partnership under DRULPA and otherwise as provided by law. The members
of the Management Committee shall provide overall guidance and supervision with
respect to the operations of the Partnership, shall have all of the
responsibilities, obligations, and fiduciary duties imposed by the 1940 Act
upon directors of a business development company in corporate form, and shall
monitor the activities of Persons in which the Partnership has invested. Except
as otherwise expressly provided in this Agreement, the Management Committee is
hereby granted the right, power, and authority to do on behalf of the
Partnership all things which, in its sole judgment, are necessary or
appropriate to manage the Partnership's affairs and fulfill the purposes of the
Partnership, including, by way of illustration and not by way of limitation,
the power and authority from time to time to do the following:
(a) subject to Section 3.13, invest the funds of the Partnership in such
investments as are consistent with the Partnership's purpose, provided that
such investments do not cause the Partnership to fail to comply with Section
55 of the 1940 Act;
(b) incur all expenses permitted by this Agreement;
(c) to the extent that funds are available, cause to be paid all expenses,
debts, and obligations of the Partnership;
(d) employ and dismiss from employment such agents, employees, managers,
accountants, attorneys, consultants, and other Persons necessary or
appropriate to carry out the business and affairs of the Partnership, whether
or not any such Persons so employed are Affiliates of any General Partner, and
to pay such compensation to such Persons as is competitive with the
compensation paid to unaffiliated Persons in the area for similar services,
subject to the restrictions set forth in Section 3.10;
(e) subject to the indemnification provisions in this Agreement, pay, extend,
renew, modify, adjust, submit to arbitration, prosecute, defend, or settle,
upon such terms it deems sufficient, any obligation, suit, liability, cause of
action, or claim, including tax audits, either in favor of or against the
Partnership;
(f) enter into any sales, agency, or dealer agreements, and escrow agreements,
with respect to the sale of Units to Limited Partners and provide for the
distribution of such Units by the Partnership through one or more
broker-dealers (which may be Affiliates of the General Partners) or otherwise;
(g) borrow money and issue multiple classes of senior indebtedness or a single
class of limited partner interests senior to the Units to the extent permitted
by the 1940 Act and repay, in whole or in part, any such borrowings or
indebtedness and repurchase or retire, in whole or in part, any such interests
senior to the Units; and in connection with such loans or senior instruments to
mortgage, pledge, assign, or otherwise encumber any or all properties or assets
owned by the Partnership, including any income therefrom, to secure such
borrowings or provide repayment thereof. The Management Committee, on behalf of
the Partnership, may also approve Portfolio Company borrowings in any amount it
deems appropriate or grant Partnership guarantees of Portfolio Company
borrowings so long as the aggregate guarantees outstanding at any time do not
exceed $3,000,000;
(h) establish and maintain accounts with financial institutions, including
federal or state banks, brokerage firms, trust companies, savings and loan
institutions, or money market funds;
(i) make temporary investments of Partnership capital in Short-term
Investments pending final disposition or cash distributions to the Partners;
(j) to the extent permitted by the 1940 Act, invest up to 20% of the
Partnership's aggregate Capital Contributions in unaffiliated venture capital
funds;
(k) to the extent permitted by the 1940 Act, form or cause to be formed one or
more small business investment companies under the Small Business Investment
Company Act of 1958, as amended;
(l) establish valuation principles and periodically apply such principles to
the Partnership's venture capital investment portfolio;
(m) establish and maintain a profit-sharing plan for the Individual General
Partners to the extent permitted by the 1940 Act but only if payments made
under the plan serve to reduce payments otherwise payable to the Managing
General Partners;
(n) to the extent permitted by the 1940 Act, designate and appoint one or more
agents for the Partnership who shall have such authority as may be conferred
upon them by the Management Committee and who may perform any of the
duties of, and exercise any of the powers and authority conferred upon, the
Management Committee hereunder including, but not limited to, designation of
one or more agents as authorized signatories on any bank accounts maintained by
the Partnership;
(o) prosecute, protect, defend, or cause to be protected and defended, or
abandon, any patents, patent rights, copyrights, trade names, trademarks, and
service marks, and any applications with respect thereto, that may be held by
the Partnership;
(p) take all reasonable and necessary actions to protect the secrecy of and
the proprietary rights with respect to any know-how, trade secrets, secret
processes, or other proprietary information and to prosecute and defend all
rights of the Partnership in connection therewith;
(q) subject to the other provisions of this Agreement, to enter into, make,
and perform such contracts, agreements, and other undertakings, and to do such
other acts, as it may deem necessary or advisable for, or as may be incidental
to, the conduct of the business contemplated by this Section 3.04, including,
without in any manner limiting the generality of the foregoing, contracts,
agreements, undertakings, and transactions with any Partner or with any other
Person, firm, or corporation having any business, financial, or other
relationship with any Partner or Partners, provided, however, such
transactions with such Persons and entities (i) shall only be entered into to
the extent permitted under the 1940 Act and (ii) shall be on terms no less
favorable to the Partnership than are generally afforded to unrelated third
parties in comparable transactions;
(r) purchase, rent, or lease equipment for Partnership purposes;
(s) purchase and maintain, at the Partnership's expense, liability and other
insurance to protect the Partnership's assets from third party claims; provided
that, in its judgment, such insurance is available and reasonably priced; and
cause the Partnership to purchase or bear the cost of any insurance covering
the potential liabilities of the Partners, or employees or partners of the
Partnership or General Partners as well as the potential liabilities of any
Person serving at the request of the Managing General Partners as a director
of a Portfolio Company; provided, however, that the Managing General Partners,
shall be required to bear, out of their separate assets, the portion of the
premiums for any such insurance coverages beyond those for matters against
which the Partnership is permitted to indemnify the General Partners under
Article 10;
(t) cause to be paid any and all taxes, charges, and assessments that may be
levied, assessed, or imposed upon any of the assets of the Partnership, unless
the same are contested by the Management Committee;
(u) make any election on behalf of the Partnership that is or may be permitted
under the IRC and supervise the preparation and filing of all tax and
information returns that the Partnership may be required to file;
(v) take any action that may be necessary or appropriate for the continuation
of the Partnership's valid existence as a limited partnership under the laws of
the State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Limited Partners or to enable
the Partnership to conduct the business in which it is engaged; and
(w) perform all normal business functions, and otherwise operate and manage
the business and affairs of the Partnership, in accordance with and as
limited by this Agreement.
3.05 Managing General Partners. The Managing General Partners are hereby
granted the exclusive power and authority from time to time to do the following:
(a) subject to the supervision of the Management Committee, manage and control
the venture capital investments of the Partnership, including, but not limited
to, the power to make all decisions regarding the Partnership's venture capital
investment portfolio and, among other things, to find, evaluate, structure,
monitor, sell, and liquidate, upon dissolution or otherwise, such investments,
to provide, or arrange for the provision of, managerial assistance to Portfolio
Companies and in connection therewith to enter into, execute, amend,
supplement, acknowledge, and deliver any and all contracts, agreements, or
other instruments for the performance of such functions, including the
investment and reinvestment of all or part of the Partnership's assets,
execution of portfolio transactions, and any or all administrative functions;
(b) subject to the supervision of the Management Committee, manage and control
the investments of the Partnership in unaffiliated venture capital funds,
including, but not limited to, the power to make all decisions regarding such
investments, and, among other things, to find, evaluate, structure, monitor,
sell, and liquidate, upon dissolution or otherwise, such investments; and
(c) admit additional Limited Partners to the Partnership in accordance with
Section 7.02; admit an assignee of a Limited Partner's Partnership Interest to
be a Substituted Limited Partner in the Partnership, pursuant to and subject to
the terms of Section 13.03, without the consent of any Limited Partner.
The grant of exclusive power and authority to the Managing General Partners
under this Section 3.05 in no way limits the rights, powers, or authority of
the Management Committee under this Agreement, DRULPA, or as otherwise provided
by law.
3.06 Tax Matters Partner; Tax Elections. TFI shall perform all duties imposed
on a general partner by Sections 6221 through 6233 of the IRC as "tax matters
partner" of the Partnership, including, but not limited to, the following: (i)
the power to conduct all audits and other administrative proceedings with
respect to Partnership tax items; (ii) the power to extend the statute of
limitations for all Partners with respect to Partnership tax items; (iii) the
power to file a petition with an appropriate federal court for review of a
final Partnership administrative adjustment; and (iv) the power to enter into
a settlement with the Internal Revenue Service on behalf of, and binding upon,
those Limited Partners having less than a 1% interest in the profits of the
Partnership unless a Limited Partner notifies the Internal Revenue Service
and TFI that TFI may not act on such Limited Partner's behalf.
The Managing General Partners may cause the Partnership to make all elections
required or permitted to be made by the Partnership under the IRC and not
otherwise expressly provided for in this Agreement, in the manner that the
Managing General Partners believe will be most advantageous to individual
taxpayers who: (i) are married and filing joint federal income tax returns;
(ii) are not "dealers" for federal income tax purposes; (iii) are not subject
to alternative minimum tax; and (iv) have income at least part of which,
without giving effect to any additional tax on preference items, is subject
to the maximum federal income tax rate in effect at the time of the election.
3.07 Appointment of Auditors. Subject to the approval of (i) a Majority in
Interest of the Limited Partners (which approval is subject to Section 14.02)
and (ii) a majority of the Independent General Partners, the Management
Committee, in the name and on behalf of the Partnership, is authorized to
appoint independent certified public accountants for the Partnership.
3.08 Good Faith. The Management Committee shall not cause the Partnership to
consent to or join in any waiver, amendment, or modification of the terms of
any partnership agreement, limited partnership agreement, management
agreement, or investment contract to which it is a party unless, in the good
faith judgment of the Management Committee and the Individual General
Partners, such waiver, amendment, or modification would be in the best
interests of the Partnership.
3.09 Restrictions on the General Partners' Authority. The General Partners
shall not have authority to do any of the following:
(a) act in contravention of this Agreement or of the 1940 Act;
(b) possess Partnership property or assign the rights of the Partnership in
specific property for other than a Partnership purpose;
(c) admit any other Person as a general partner of the Partnership without the
unanimous approval of the Partners except as otherwise provided herein; this
provision shall not restrict the right of a Majority in Interest of the Limited
Partners to approve and elect a successor General Partner pursuant to Section
12.05;
(d) commingle or permit the commingling of the funds of the Partnership with
the funds of any other Person except as otherwise provided herein;
(e) permit any Person who makes a nonrecourse loan to the Partnership to
acquire, at the time and as a result of making the loan, any direct or indirect
interest in the profits, capital, or property of the Partnership other than as
a secured creditor;
(f) without the consent of a Majority in Interest of the Limited Partners,
subject to paragraph 14.02,
(i) elect to dissolve the Partnership or
(ii) sell or otherwise dispose of at any one time all or substantially all
of the assets of the Partnership; or
(g) invest in a company in which any General Partner has an equity interest
other than through another partnership that it manages.
3.10 Contracts with Affiliates of the General Partners. The Management
Committee may, on behalf of the Partnership, enter into contracts for goods
or services with any Affiliate of a General Partner (other than the officers,
directors, or partners of the General Partners), provided that the charges for
such goods or services are the lower of (i) actual cost or (ii) those charged
by unaffiliated Persons in the area for similar goods and services. Any such
contract shall be subject to termination by a majority of the Independent
General Partners following 60 days' prior notice thereof. Notwithstanding
the above, the Partnership has contracted with Technology Funding Securities
Corporation, a wholly-owned subsidiary of TFI, to sell the Units, and will pay
such company a sales commission of 10% of the aggregate purchase price of all
Units sold, and the Partnership has contracted with Technology Administrative
Management, a division of TFL, for computer services. Goods and services may be
purchased from Affiliates of a General Partner only pursuant to a written
contract.
3.11 Obligations of the General Partners. The General Partners shall devote
such time and effort to the Partnership business as, in their judgment, may
be necessary or appropriate to manage the affairs of the Partnership. The
General Partners are under a duty and obligation to conduct the affairs of
the Partnership in the best interests of the Partnership, including the
safekeeping and the use of all Partnership funds and assets (whether or not
in the immediate possession or control of the General Partners) and the
use thereof for the benefit of the Partnership. Neither the General Partners
nor any of their Affiliates shall enter into any transaction with the
Partnership that will significantly benefit the General Partners or such
Affiliates in their independent capacities unless the transaction is expressly
permitted hereunder and under the 1940 Act or any exemptive order issued by the
Securities and Exchange Commission thereunder, or is entered into principally
for the benefit of the Partnership in the ordinary course of Partnership
business.
3.12 Other Business of Partners. Any Partner and any Affiliate of any Partner
may engage in or possess any interest in other business ventures of any kind,
nature or description, independently or with others, whether such ventures are
competitive with the Partnership or otherwise. Neither the Partnership nor any
Partners shall have any rights or obligations by virtue of this Agreement or
the partnership relationship created hereby in or to such independent ventures
or the income or profits or losses derived therefrom, and the pursuit of such
ventures, even if competitive with the business of the Partnership, shall not
be deemed wrongful or improper. Neither the General Partners nor any Affiliate
of the General Partners shall be obligated to present any particular investment
opportunity to the Partnership, except with respect to opportunities that are
suitable for the Partnership, which must first be made available to the
Partnership before any of the General Partners invest, and the General
Partners and their Affiliates shall each have the right to take for their own
account (individually or as a trustee, partner, or fiduciary) or to recommend
to others any such particular investment opportunity. The Managing General
Partners hereby consent and agree promptly to furnish the Individual General
Partners, upon request, with information on a confidential basis as to any
venture capital investments made by them, or any of their Affiliates, for their
own account or for others.
3.13 Prohibited Transactions. Except to the extent expressly permitted by this
Agreement and except as permitted by the 1940 Act or any exemptive order issued
by the Securities and Exchange Commission thereunder:
(a) the Partnership shall not lend money or other property to a General
Partner or any General Partner Affiliate;
(b) the Partnership shall not sell or purchase any security or any other
property to or from a General Partner or any General Partner Affiliate, or
effect any transaction in which a General Partner is a joint or a joint or
several participant;
(c) the Partnership shall not make short sales of securities, purchase or sell
commodities or commodity contracts, participate on a joint or a joint and
several basis in any trading account in securities, or purchase any securities
on margin, except such short-term credits as are necessary for clearance of
transactions;
(d) expenses of the Partnership shall not be billed except directly to the
Partnership (but shall be paid pursuant to the terms of this Agreement), and no
reimbursement shall be made therefor to the General Partners or any General
Partner Affiliate except as permitted under Section 4.01;
(e) the Partnership shall not enter into any transaction described in Section
57(a) or 57(d) of the 1940 Act in which any Person described in Section 57(b)
or 57(e), respectively, of the 1940 Act shall act as a principal;
(f) the General Partners shall not, acting as agent or broker, accept from any
source any compensation, other than pursuant to Article 4, for the purchase or
sale of any property to or for the Partnership or any Person controlled by the
Partnership, or for effecting any such transaction;
(g) the Partnership shall not issue any of its securities for services or for
property other than cash or securities; the Partnership shall not sell any
Units at a price below the current net asset value of such Unit; and
(h) except as provided in Section 7.06, the Partnership shall not purchase any
securities issued by it.
ARTICLE 4
COMPENSATION
4.01 Compensation. Over and above their distributive share of Partnership
profits, losses, and distributions detailed in Articles 8 and 9, the Managing
General Partners shall also receive the following amounts from the Partnership:
(a) Reimbursement for Organizational and Offering Expenses. The Partnership
shall reimburse the Managing General Partners for Organizational and Offering
Expenses incurred by the Managing General Partners and their Affiliates, up to
a maximum of 5% of the total Limited Partner Capital Contributions. The
Managing General Partners shall pay or shall reimburse the Partnership for all
Organizational and Offering Expenses in excess of 5% of the total Limited
Partner Capital Contributions.
(b) Management Fee. The Partnership shall pay the Managing General Partners a
Management Fee for supervising the operation, management, and progress of all
Portfolio Companies as well as for administering the day-to-day affairs of the
Partnership equal to:
(i) for the first year (four quarters) of Partnership operations after the
Commencement Date, 6% of the total Limited Partner Capital Contributions;
(ii) for the second year, 4% of the total Limited Partner Capital
Contributions;
(iii) for the third, fourth, and fifth years, 2% of the total Limited
Partner Capital Contributions; and
(iv) for the first quarter of the sixth year and each quarter thereafter,
1/4% of the fair value of the Partnership assets at the end of the preceding
quarter, as determined by the Management Committee.
A full 6% Management Fee shall be payable on the Commencement Date and as
each additional Limited Partner is admitted. To the extent such payment is
determined to be a payment in advance prohibited by regulation, the advance
portion of the payment will be deferred as necessary to avoid such
determination.
The Management Fees for subsequent years shall be payable monthly in arrears,
beginning with the month in which the first anniversary of the Commencement
Date occurs. To the extent Partnership cash reserves are insufficient to pay
the entire Management Fee when due, the unpaid fee shall be carried forward
and paid when cash reserves are sufficient to allow the payment.
(c) Reimbursement of Operational Costs. The Partnership shall reimburse the
Managing General Partners or their Affiliates for Operational Costs incurred by
the Managing General Partners or their Affiliates in connection with the
business of the Partnership, including without limitation expenses related to
the selection of Portfolio Companies or to proposed investments, even if the
proposed investments ultimately are not undertaken by the Partnership. The
Management Fee compensates the Managing General Partners solely for General
Partner Overhead and is in addition to the reimbursement of actual Operational
Costs.
The Managing General Partners will pay all General Partner Overhead and
Organizational and Offering Expenses (exclusive of amounts due to the
Dealer-Manager under Section 4.03 and subject to the Partnership's
reimbursement of such expenses pursuant to 4.01(a) above).
4.02 Individual General Partner. As compensation for services rendered to the
Partnership, the Partnership will pay each Individual General Partner:
(a) The sum of $14,000 annually in quarterly installments beginning on the
Commencement Date;
(b) the sum of $1,500 for each meeting of the Management Committee attended
by such Individual General Partner to an annual limit of $7,000;
(c) if a committee is appointed by the Management Committee, the sum of
$1,500 for each such committee meeting attended; provided, however, that, if
such committee meeting is held on the same day as a meeting of the Management
Committee, the sum paid for attendance at such committee meeting shall be
$1,000; and
(d) all out-of-pocket expenses relating to attendance at the meetings,
committee or otherwise, of the Management Committee.
Neither the Managing General Partners nor any of their Affiliates shall
receive any compensation from the Partnership under this Section 4.02. The
amount of compensation payable to the Individual General Partners shall be
reviewed annually by the Management Committee and, with the approval of a
Majority in Interest of the Limited Partners, may be increased or decreased
by the Management Committee to provide for such compensation as the
Management Committee may deem reasonable under the circumstances. Payment
of compensation to an Individual General Partner hereunder shall not be
deemed a distribution for purposes of Article 9 nor shall such payment affect
such Person's right to receive any distribution to which he or she may
otherwise be entitled as a Limited Partner. Compensation paid to Individual
General Partners for consulting services must be approved by the Management
Committee, including a majority of the Independent General Partners.
4.03 Commissions. The Partnership shall pay the Dealer-Manager a sales
commission of up to 10% of the aggregate purchase price of all Units sold, as
compensation for its services as the Dealer-Manager. The Partnership shall
also reimburse the Dealer-Manager for any broker-dealer due diligence costs
and other broker-dealer expenses incurred in connection with the offering
that the Dealer-Manager pays to unaffiliated broker-dealers, provided,
however, that the total amount of such reimbursements shall not exceed .5% of
Limited Partner Capital Contributions, and all such amounts shall be deemed
Organizational and Offering Expenses subject to the 5% limit set forth in
Section 4.01(a).
ARTICLE 5
LIMITED PARTNERS
5.01 Limited Liability. The Limited Partners shall not be personally liable
for any of the debts or losses of the Partnership beyond the amount of total
Limited Partner Capital Contributions to the Partnership and the share of
assets and undistributed profits of the Partnership allocable to the Limited
Partners, except as otherwise provided by applicable law and herein.
5.02 No Management Responsibility. No Limited Partner shall participate in
the management or control of the business of or transact any business for the
Partnership but may exercise the rights and powers of a Limited Partner under
this Agreement. All management responsibility is vested in the Management
Committee. The Limited Partners hereby consent to the taking of any action by
the Management Committee and the Managing General Partners contemplated under
Article 3.
5.03 No Authority to Act. No Limited Partner shall have the power to
represent, act for, sign for, or to bind the Partnership. All authority to
act on behalf of the Partnership is vested in the Management Committee. The
Limited Partners consent to the exercise by the General Partners of the
powers conferred on them by law and this Agreement.
5.04 Rights of Limited Partners. The Limited Partners shall have the following
rights:
(a) the right to approve and elect or disapprove and remove General Partners;
(b) the right to approve or disapprove proposed changes in the nature of the
Partnership's business so as to cause the Partnership to cease to be, or to
withdraw its election as, a business development company under the 1940 Act;
(c) the right to approve or disapprove any proposed investment advisory
contract or management agreement or to disapprove and terminate any such
existing contracts; provided, however, that such contracts are also approved
by a majority of the Independent General Partners;
(d) the right to approve and ratify or disapprove and reject the appointment
of the independent accountants of the Partnership; provided, however, that
such appointment is approved by the Management Committee, including a majority
of the Independent General Partners;
(e) the right to approve or disapprove the appointment of successor Managing
General Partners;
(f) the right to propose and approve an amendment to this Agreement; provided,
however, that no such amendment shall conflict with the 1940 Act; and
(g) the right to approve any other material matters related to the business of
the Partnership that the 1940 Act requires to be approved by the Limited
Partners so long as the Partnership is a business development company subject
to the provisions of the 1940 Act; provided, however, that, prior to the
exercise of any such right of approval, the Management Committee amends this
Agreement to reflect such additional voting right.
Each of the foregoing matters shall be approved or disapproved, as the case
may be, upon the vote or consent of a Majority in Interest of the Limited
Partners, and any vote of the Limited Partners mandated by the 1940 Act shall
not be limited by the requirement to obtain an opinion of counsel pursuant to
Articles 6.01 or 14.02.
5.05 No Consent Required. Notwithstanding the foregoing, no vote, approval, or
other consent shall be required of the Limited Partners to amend this Agreement
in any of the following respects: (i) to reflect any change in the amount or
character of the Capital Contribution of any Limited Partner; (ii) to admit an
additional Limited Partner or a Substituted Limited Partner or withdraw a
Limited Partner in accordance with the terms of this Agreement; or (iii) to
correct any false or erroneous statement, or to make a change in any statement
in order that such statement shall accurately represent the agreement among
the Partners in this Agreement; provided that no such correction or change as
described in this Section 5.05(iii) shall in any manner adversely affect the
Partnership Interests of any Limited Partner.
ARTICLE 6
AMENDMENTS
6.01 Proposal of Amendments. Except as otherwise specified in this Agreement,
any amendment to this Agreement may be proposed by the General Partners or by
Limited Partners who, in aggregate, own not less than 10% of the Units owned
by all Limited Partners. The Partners proposing such amendment shall submit
to the Managing General Partners: (i) the text of such amendment; (ii) a
statement of the purpose of such amendment; and (iii) an opinion of counsel
obtained by the Partners proposing such amendment to the effect that such
amendment is permitted by DRULPA and the laws of any other jurisdiction where
the Partnership is qualified to do business, will not impair the limited
liability of the Limited Partners, and will not adversely affect the
classification of the Partnership as a partnership for federal income tax
purposes. The Managing General Partners shall, within 20 days after receipt
of any proposal under this Section 6.01, give notification to all Partners
of such proposed amendment, of such statement of purpose, and of such opinion
of counsel, together, in the case of an amendment proposed by Limited
Partners, with the views, if any, of the Management Committee and the
Managing General Partners with respect to such proposed amendment. All
proposed amendments shall be submitted to the Limited Partners for a
vote no less than 10 days nor more than 60 days after the date of mailing of
such notice and will be adopted if approved by a Majority in Interest of the
Limited Partners. For purposes of obtaining a written vote, the Managing
General Partners may require receipt of written responses within a specified
time.
6.02 Amendments to be Adopted Solely by the Managing General Partners. The
Managing General Partners may, without the consent of any Limited Partner,
amend any provision of this Agreement, and execute whatever documents may be
required in connection therewith, to reflect:
(a) subject to authorization by the Management Committee, a change in the name
or the location of the principal place of business of the Partnership;
(b) the admission of Substituted Limited Partners, additional Limited
Partners, or successor General Partners in accordance with this Agreement;
(c) a change that is necessary to qualify the Partnership as a limited
partnership under the laws of any state or that is necessary and advisable
in the opinion of the Managing General Partners to assure that the Partnership
will not be treated as an association taxable as a corporation or as a
publicly traded partnership for federal income tax purposes;
(d) a change that is necessary and advisable in the opinion of the Managing
General Partners to prevent the assets of the Partnership from being
classified as plan assets under the Employee Retirement Income Security Act
of 1974, as amended; and
(e) any other amendments similar to the foregoing.
6.03 Amendments not Allowable. Unless approved by a majority of the
Partnership Interests affected thereby, no amendment to this Agreement shall
be permitted if, in the opinion of counsel to the Partnership (unless such
counsel is disapproved by such majority), the effect of such amendment would
be to:
(a) increase the duties or liabilities of any Partner;
(b) change the interest of any Partner hereto in the assets, profits, or
losses of the Partnership, except as otherwise provided herein; or
(c) in any way adversely affect the federal income tax status of the
Partnership.
ARTICLE 7
CAPITAL CONTRIBUTIONS
7.01 Capital Contributions of Partners. The Partners shall make the following
contributions to the capital of the Partnership:
(a) Managing General Partners. The Managing General Partners shall contribute
an aggregate amount equal to .1% of the total Capital Contributions made by all
Limited Partners, payable on the Commencement Date and as subsequent Capital
Contributions are made by the Limited Partners.
(b) Individual General Partners. Each Individual General Partner shall make a
Capital Contribution of $2,000 in cash at the time of such Individual General
Partner's admission to the Partnership, for which that Individual General
Partner shall receive an interest in the Partnership equivalent to twenty
Units, which shall be treated for all allocation purposes under Article 8 and
distribution purposes under Article 9 as Units held by a Limited Partner.
(c) Limited Partners. The Limited Partners shall make Capital Contributions,
payable upon subscription, in the amounts set forth opposite their respective
names in the books and records of the Partnership, as amended from time to time.
No Partner, General or Limited, shall be required to lend any funds to the
Partnership or to make any Capital Contribution to the Partnership except as
set forth in this Section 7.01.
7.02 Admission of Additional Limited Partners and Withdrawal of Initial
Limited Partner. The Managing General Partners are authorized to admit to
the Partnership, as additional Limited Partners, such Persons as they deem
advisable; provided that no additional Limited Partners may be admitted until
subscriptions for at least 15,000 Units have been received and accepted by the
Partnership. The manner of the offering of Units, the terms and conditions
under which subscriptions for such Units will be accepted, and the manner of
and conditions to the sale of Units to subscribers therefore and the admission
of such subscribers as additional Limited Partners will be as provided in the
Prospectus in all material respects and subject to any provisions hereof.
Before any Person is admitted to the Partnership as a Limited Partner, such
Person or such Person's attorney-in-fact shall execute a counterpart of this
Agreement and thereby agree in writing to be bound by all of the provisions
hereof as a Limited Partner. Upon the admission of additional Limited
Partners pursuant to this Section 7.02, the Initial Limited Partner shall
withdraw from the Partnership and shall be entitled to receive forthwith the
return of such Limited Partner's Capital Contribution, without interest or
reduction.
7.03 Interest on Capital Contributions. No Partner shall have the right to
be paid interest on any Capital Contribution or on such Partner's Capital
Account, except as specifically provided in this Agreement.
7.04 Withdrawal and Return of Capital. No Partner shall have the right to
withdraw or to demand the return of any or all of that Partner's Capital
Contribution except as specifically provided in this Agreement.
7.05 Excess Capital Contributions. To the extent the Management Committee
determines, in its sole discretion, that the Partnership has received Capital
Contributions in excess of the Partnership's needs, the Management Committee
may return said excess Capital Contributions to the Partners, provided that
at the time of such partial returns (i) all liabilities of the Partnership
to Persons other than Partners have been paid or, in the good faith
determination of the Management Committee, there remains property of the
Partnership sufficient to pay them and (ii) the Management Committee causes
this Agreement to be amended, if necessary, to reflect a reduction in Capital
Contributions. In the event that the Management Committee elects to make a
partial return of Capital Contributions to Limited Partners, such
distribution shall be made pro rata to all of the Limited Partners based
upon the number of Units held by each Limited Partner. Each Partner, by
becoming such, consents to such pro rata distribution theretofore or thereafter
duly authorized and made in accordance with this Section 7.05. Without the
consent of all Partners, no Partner shall have the right to receive property
other than cash in return for such Partner's Capital Contribution. Any Capital
Contributions not committed for investment within three years after the Closing
Date (except for reserves and necessary operating capital) shall be deemed to
be in excess of the Partnership's needs.
7.06 Redemption of Units. The Partnership may redeem or repurchase Units to
the extent permitted by the 1940 Act.
ARTICLE 8
PROFIT AND LOSS
8.01 Profits. Except as provided in Sections 8.03 and 8.08, Net Profit of the
Partnership shall be allocated, for Partnership tax and accounting purposes, in
the following order and priority:
(a) first, to those Partners with deficit Capital Account balances in
proportion to such deficits until such deficits have been eliminated;
(b) second, to the Partners as necessary to offset Net Loss previously
allocated to such Partners pursuant to Section 8.02(b) and sales commissions
charged to their Capital Accounts until each Partner has been allocated
cumulative Net Profit pursuant to this Section 8.01(b) equal to the
cumulative Net Loss previously allocated to such Partner pursuant to Section
8.02(b) and its share of sales commissions not already offset pursuant to
this Section 8.01(b) or Section 8.01(a); and
(c) third,
(i) 75% to the Limited Partners to be allocated pursuant to Section
8.05(a);
(ii) 5% to the Limited Partners to be allocated pursuant to Section
8.05(b); and
(iii) 20% to the Managing General Partners.
In no event shall the Managing General Partners be allocated less than 1% of
the Net Profit of the Partnership.
8.02 Losses. Except as provided in Section 8.03, Net Loss of the Partnership
shall be allocated, for Partnership tax and accounting purposes, in the
following order and priority:
(a) first, to the Partners as necessary to offset Net Profit previously
allocated to such Partners pursuant to Section 8.01(c) until each Partner has
been allocated cumulative Net Loss pursuant to this Section 8.02(a) plus loss
from unaffiliated venture capital funds pursuant to Section 8.07, equal to the
cumulative Net Profit previously allocated to such Partner pursuant to Section
8.01(c) and not already offset by this Section 8.02(a); and
(b) second, 99% to the Limited Partners and 1% to the Managing General
Partners.
8.03 Allocation of Losses in Excess of Capital Account. The amount of any
Net Loss in excess of any then positive balance in the Capital Account of a
Limited Partner, which would be allocable to a Limited Partner but for this
Section 8.03, shall be allocated to the Managing General Partners.
Thereafter, Net Profit otherwise allocable to that Limited Partner pursuant
to Section 8.01 first shall be allocated to the Managing General Partners
until an amount of Net Profit equal to such amount of Net Loss previously
allocated pursuant to this Section 8.03 has been allocated to the Managing
General Partners.
8.04 Allocation of Offering Period Income. Xxxxxx earned during the Offering
Period on Short-Term Investments shall be allocated monthly 99% to the Limited
Partners and 1% to the General Partners.
8.05 Allocations Among Limited Partners. Any allocations to the Limited
Partners pursuant to Article 8 shall be made among the Limited Partners as
follows:
(a) with respect to any Net Profit or Net Loss allocated to the Limited
Partners as a group other than under Section 8.0l(c)(ii), such allocation
shall be made to the extent possible under the IRC, first to equalize the
capital account balance per Unit of each Limited Partner (except to the
extent any such disparity is attributable to amounts allocated under
Section 8.05(b)), and then in the proportion that the number of Units held
by each Limited Partner bears to the total number of Units held by all the
Limited Partners; and
(b) with respect to any Net Profit allocated to the Limited Partners
pursuant to Section 8.0l(c)(ii) or income on Short-Term Investments earned
during the Offering Period allocated to the Limited Partners pursuant to
Section 8.04, such allocation shall be made in the proportion that the number
of Units held by each Limited Partner multiplied by the number of Unit Months
for those Units represents of the sum of the amounts resulting from each of
those multiplications.
8.06 Allocations Among General Partners. All allocations to the Managing
General Partners pursuant to this Article 8 shall be allocated 10% to TFI and
90% to TFL. Allocations of compensation, fees, or reimbursements paid to the
Managing General Partners shall be determined by the Managing General
Partners, in their discretion.
8.07 Unaffiliated Venture Fund Investments. Notwithstanding any other
provision to the contrary, if the Partnership invests in an unaffiliated
venture capital fund whose general partners benefit from a special allocation
of gain from such fund, every item of deduction or loss attributable to
investments of the Partnership in that unaffiliated venture capital fund
shall be allocated in accordance with Sections 8.02 and 8.05. Items of
income or gain attributable to investments in unaffiliated venture capital
funds generally shall be allocated 99% to the Limited Partners (and among
them in accordance with the principles of Section 8.05 so that 5% of such
items of income or gain are allocated in accordance with Section 8.05(b))
and 1% to the Managing General Partners; provided, however, that if any item
of loss or deduction attributable to investments in unaffiliated venture
capital funds has been allocated in accordance with Section 8.02(a), items of
income or gain from such investments first shall be allocated as necessary to
offset such previously allocated items of loss or deduction.
8.08 Qualified Income Offset. In the event any Partner other than the Managing
General Partners unexpectedly receives an adjustment, allocation, or
distribution that results in a deficit balance in such Partner's Capital
Account, there shall be allocated to such Partner items of Partnership income
and gain in an amount and manner sufficient to eliminate such deficit balance
as quickly as possible.
ARTICLE 9
DISTRIBUTIONS
9.01 Distributions Generally. Except as provided in Section 9.02, Cash and
Securities Available for Distribution shall be distributed 99% to the Limited
Partners and 1% to the General Partners until Conversion. After Conversion,
Cash and Securities Available for Distribution shall be distributed in
proportion to the Partners' Capital Account balances. Securities distributed
in kind to Partners shall be treated as if sold at the value determined
under Section 9.04, and the gain or loss shall be allocated in accordance
with Article 8. Distributions to the Partners shall be made only to the extent
they are not prohibited by any applicable restrictions set forth in the 1940
Act. On liquidation, distributions shall be made in accordance with the
provisions of Article 15.
9.02 Tax Distribution. Notwithstanding Section 9.01 and to the extent there
are funds available, if Net Profit is allocated to the Partners under Article
8 for any Taxable Period, the Management Committee shall endeavor, within
ninety (90) days following the close of the Taxable Period for which the Net
Profit is so allocated, to make a distribution out of Cash and Securities
Available for Distribution to all Partners (including the General Partners)
that, when added to all other distributions made to such Partners during such
Taxable Period (exclusive of distributions under this Section 9.02 for
previous Taxable Periods), will be in an amount sufficient to meet the
federal and state tax liability of each Partner, calculated for purposes of
this Section 9.02 as if it were equal to the Net Profit allocated for the
Taxable Period times the sum of the maximum federal tax rate for
individuals plus the maximum California tax rate for individuals.
9.03 Distributions Among Partners. Except for distributions attributable to
income on Short-Term Investments earned during the Offering Period, which
shall be made not less than quarterly in the amount and order that such
income was allocated pursuant to Sections 8.04 and 8.05(b), distributions
made to the Partners as a group pursuant to Section 9.01 shall be made among
such Partners in the proportion their respective Capital Accounts represent
of the total of all Capital Accounts of the group.
9.04 Valuation. The value of securities distributed in kind to the Partners
that cannot be valued on the basis of either (i) available market quotations
or (ii) third party transactions involving actual transactions or actual firm
offers by investors who are not Affiliates of the Partnership shall be valued
by an appraisal made in accordance with the appraisal procedure described in
Section 12.03(b); provided, however, that such appraisal need be made in
connection with securities distributed in kind to the Partners upon the
dissolution of the Partnership only if the Managing General Partners conclude
that the value of the securities distributed in kind to the Partners upon such
dissolution exceeds 10% of the Capital Contributions of all Partners.
ARTICLE 10
PARTNERS' RESPONSIBILITIES AMONG THEMSELVES
10.01 Indemnification of the General Partners by the Partnership. Neither the
General Partners nor any of their Affiliates shall be liable, responsible, or
accountable in damages or otherwise to the Partnership or any Partner for any
loss or damage incurred by reason of any act performed by or omission of the
General Partners or such Affiliates in good faith in the furtherance of the
interests of the Partnership and within the scope of the authority granted to
the General Partners by this Agreement or by the Limited Partners, provided
that such acts of the General Partners or such Affiliates did not constitute
willful misfeasance, reckless disregard, bad faith, negligence, misconduct, or
any other breach of fiduciary duty (as described herein) with respect to such
acts or omissions. The Partnership, out of its assets and, subject to Section
10.02, not out of the assets of the General Partners, shall, to the full extent
permitted by law, indemnify and hold harmless any General Partner and any
General Partner Affiliate who was or is a party or is threatened to be made
a party to any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative (including any
action by or in the right of the Partnership), by reason of any acts or
omissions or alleged acts or omissions arising out of such Person's
activities as a General Partner or as an Affiliate of a General Partner, if
such activities were performed in good faith in furtherance of the interests
of the Partnership and were within the scope of the authority conferred to
the General Partners by this Agreement or by the Limited Partners against
losses, damages, or expenses for which such Person has not otherwise been
reimbursed (including attorneys' fees, judgments, fines, and amounts paid
in settlement) actually and reasonably incurred by such Person in connection
with such action, suit, or proceeding, so long as such acts of such Person
did not constitute willful misfeasance, reckless disregard, bad faith,
negligence, misconduct, or any other breach of fiduciary duty (as described
herein) with respect to such acts or omissions and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such
Person's conduct was unlawful, and provided that the satisfaction of any
indemnification and any holding harmless shall be from and limited to
Partnership assets and no Limited Partner shall have any personal liability
on account thereof.
Notwithstanding the above, the General Partners and their Affiliates 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 (i) there has been a successful
adjudication on the merits of each count involving alleged securities law
violations as to the particular indemnitee and the court approves
indemnification of the litigation costs, or (ii) such claims have been
dismissed with prejudice on the merits by a court of competent jurisdiction
as to the particular indemnitee and the court approves indemnification of the
litigation costs, or (iii) 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
addition, absent a court determination that a General Partner or any of its
Affiliates seeking indemnification was not liable on the merits or guilty of
disabling conduct within the meaning of Section 17(h) of the Investment
Company Act, the decision by the Partnership to indemnify a General Partner
or any such Affiliate must be based upon the reasonable determination of
independent counsel or the nonparty Independent General Partners, after
review of the facts, that such disabling conduct did not occur.
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, and any other applicable regulatory authority with
respect to the issue of indemnification for securities law violations before
seeking court approval for indemnification.
Advances from Partnership funds to a General Partner or a General Partner
Affiliate for legal expenses and other costs incurred as a result of legal
action initiated against the General Partner or a General Partner Affiliate is
permissible if and only if the following conditions are satisfied: (i) the
legal action relates to the performance of duties or services by the General
Partner or a General Partner Affiliate on behalf of the Partnership; (ii) the
legal action is initiated by a third party who is not a holder of a Partnership
Interest; (iii) any advances are accompanied by a written undertaking by, or on
behalf of, the recipient to repay that amount of the advances which exceeds the
amount to which it is ultimately determined that he is entitled to receive from
the Partnership by reason of indemnification and (iv) either (a) the indemnitee
provides a surety bond or other security for its undertaking, or (b) the
Partnership is insured against losses arising by reason of any lawful advances,
or (c) a majority of a quorum of the Independent General Partners or an
independent legal counsel in a written opinion determines that the indemnitee
will be found entitled to indemnification.
The Partnership may purchase liability insurance that insures the indemnified
parties against any liabilities as to which such parties are permitted to be
indemnified pursuant to the provisions of this Section 10.01. However, the
Partnership may not incur the cost of that portion of liability insurance
which insures the indemnified parties for any liability as to which the
indemnified parties are prohibited from being indemnified under this Section
10.01.
10.02 Indemnification of the Individual General Partners by the Managing
General Partners. To the extent that an Individual General Partner has a
valid claim for indemnification from the Partnership pursuant to Section
10.01 and has pursued such claim against the Partnership, but such claim has
not been satisfied, the Managing General Partners, in their separate
capacities, jointly and severally, shall satisfy such claim.
10.03 Partnership Loans. The General Partners or any Affiliate of any
General Partner may lend funds to the Partnership for such period of time as
the Management Committee may determine, and with interest payable quarterly
in an amount equal to the lesser of (i) the interest rate at which the
General Partners or such General Partner Affiliate could then borrow such
amount or (ii) the maximum amount of interest then permitted under any
applicable usury laws; provided, however, that if the Partnership is able to
obtain comparable financing from an unrelated lending institution, the amount
of interest and similar charges or fees paid to the General Partners or such
Affiliate would not exceed those charged by such unrelated lending institution
on comparable loans for the same purpose. Any such amounts shall be repaid to
the General Partners or any General Partner Affiliate before any distributions
may be made pursuant to Article 9. In no event shall a loan made to the
Partnership by any Person be deemed to be a part of any Partnership
Interest that that Person may hold, nor shall the General Partners or their
Affiliates provide the Partnership with permanent financing.
10.04 Partners Look Solely to Partnership Assets. Neither the General
Partners nor any of their Affiliates shall have any personal liability to
any Limited Partner for the repayment of any amounts outstanding in the
Capital Account of a Limited Partner including, but not limited to, Capital
Contributions. Any such payment shall be solely from the assets of the
Partnership. The General Partners shall not be liable to any Limited Partner
by reason of any change in the federal income tax laws as they apply to the
Partnership and the Limited Partners, whether such change occurs through
legislative, judicial, or administrative action, so long as the General
Partners have acted in good faith and in a manner reasonably believed to be
in the best interests of the Limited Partners. Neither the General Partners
nor any of their Affiliates shall have any personal liability to repay to the
Partnership any portion or all of any negative amount of the General Partner's
Capital Account except as otherwise provided in Section 15.03.
ARTICLE 11
ACCOUNTING, RECORDS, AND REPORTS
11.01 Method of Accounting. The Partnership's books and records shall be kept
on an accrual basis in accordance with generally accepted accounting
principles; however, for purposes of tax reporting, the Management Committee
may choose either the cash or accrual method with the filing of the
Partnership's first tax return.
11.02 Fiscal Year. The fiscal year of the Partnership shall be the calendar
year. The admission of an additional Limited Partner shall be deemed to have
been on the first day of the month if the Limited Partner was admitted to the
Partnership during the first 15 days of a month and the 16th day of the month
if the Limited Partner was admitted to the Partnership after the 15th day of a
month.
11.03 Capital Accounts. An individual Capital Account shall be maintained
for each Partner. The initial balance of each such Capital Account shall be
zero and shall be increased by: (i) the amount of any cash and the fair market
value of any property (net of liabilities) contributed to the Partnership by
such Partner (valued as of the time of such contribution) and (ii) any Net
Profit of the Partnership for a Taxable Period (or specially allocated items of
income or gain) allocated to the Partner pursuant to Article 8 (as of the
end of such Taxable Period) including gains deemed realized upon the
distribution of securities under Section 9.01. A Partner's Capital Account
shall be decreased by: (i) the amount of any cash distributed to such Partner;
(ii) the fair market value of any securities or other property (net of
liabilities) distributed to such Partner (valued as of the time of
distribution); (iii) the Net Loss of the Partnership for a Taxable Period (or
specially allocated items of deduction or loss) allocated to the Partner
pursuant to Article 8 (as of the end of such Taxable Period) including losses
deemed realized upon the distribution of securities under Section 9.01, such
decrease occurring as of the time of the distribution; and (iv) the Partner's
distributive share of Partnership expenditures described in IRC Section
705(a)(2)(B) that are not included in the definition of Net Loss. For
purposes of allocating Net Profit under Section 8.01(a), Capital Accounts
shall not be reduced by distributions under Section 9.02.
11.04 Maintenance of Information. The Partnership will maintain, or cause to
be maintained, such books and records as are required under Section 31 of the
1940 Act and as shall enable it to be reasonably responsive to requests for
information pursuant to Section 11.05.
11.05 Access to Information. Each Limited Partner may obtain from the
Partnership upon reasonable written demand to the Managing General Partners,
the following: (i) true and full information regarding the status of the
business and financial condition of the Partnership, which shall be deemed
satisfied if the Managing General Partners provide a copy of the financial
statements of the Partnership for the last five fiscal years, to the extent
available; (ii) promptly after becoming available, a copy of the Partnership's
federal, state, and local income tax returns for each of the last five fiscal
years; (iii) a current list of the name and last known business, residence, or
mailing address of each Partner; (iv) a copy of this Agreement and the
certificate of limited partnership, and all amendments to and restatements of
either, together with executed copies of any power of attorney pursuant to
which this Agreement and the certificate of limited partnership, and
all amendments to and restatements of either, have been executed; (v) true and
full information regarding the amount of cash and a description and statement
of the value of any other property or services contributed by each Partner and
which each Partner has agreed to contribute in the future, and the date on
which each became a Partner; and (vi) such other information as is just and
reasonable in the reasonable discretion of the Management Committee or the
Managing General Partners. All such information may be obtained by the Limited
Partner's compliance with such procedures as the Management Committee or the
Managing General Partners, from time to time, shall reasonably establish,
including without limitation with respect to payment of copying, mailing, and
other administrative costs occasioned hereby. The Management Committee or the
Managing General Partners may condition the provision of information on the
signing by the requesting party of a form acknowledging that the information
provided is a trade secret of the Partnership, will be held in confidence, and
will not be used for commercial purposes.
11.06 Banking. The Managing General Partners shall open and thereafter
maintain separate accounts in the name of the Partnership in which there shall
be deposited all of the funds of the Partnership. No other funds shall be
deposited in the accounts. The funds in said accounts shall be used solely for
the business of the Partnership, including, without limitation, such
investments as authorized in Sections 3.04(i) and 3.05.
11.07 Audit. At the expense of the Partnership, an annual audit of the
Partnership's books of account shall be made by a firm of independent certified
public accountants selected by the Management Committee (including a majority
of the Independent General Partners) and approved by a Majority in Interest of
the Limited Partners. In the determination of the profits or losses of the
Partnership to be reflected by its books and records, such certified public
accountants shall be governed by the provisions of this Agreement and the 1940
Act. In any circumstances where no provision under the IRC and regulations
thereunder may be applicable to the determination of any item, the accountants
shall act in their discretion in such manner as may, most consistently with
prior practices, properly reflect that item. If required by any governmental
agency or by principles of accounting, the accountants may cause adjustments
to be made to the statements of the Partnership for reporting purposes. The
annual certified financial report of the Partnership shall include a balance
sheet, an income statement, a statement of partners' equity, and a statement
of changes in financial position. The report also shall disclose the amount
of any reimbursement made by the Partnership to the General Partners or their
Affiliates. Copies of the annual certified financial report of the accountants
for each year shall be transmitted to all Partners within 120 days after the
end of that year. Such copies shall be accompanied by a statement of the risks
involved in investments in the Partnership to the extent required under Section
64(b)(1) of the 1940 Act.
11.08 Status Reports. Within 75 days after the end of each of the first three
quarters of the Partnership's fiscal year, the Managing General Partners shall
have prepared and distributed to the Partners, at the expense of the
Partnership, a quarterly report containing the same financial information
contained in the Partnership's Quarterly Report on Form 10-Q filed by the
Partnership with the Securities and Exchange Commission under the Securities
Exchange Act of 1934. Within 120 days after the end of each fiscal year, the
General Partners shall have prepared and distributed to the Partners, at the
expense of the Partnership, an annual report containing a summary of the
year's activity and the financial information set forth in Section 11.07.
11.09 Tax Returns. The Managing General Partners shall use their best
efforts to cause the Partnership to file all tax and information returns
required of the Partnership in a timely manner. The Managing General
Partners will cause to be delivered within 75 days after the end of each year
to each Person who was a Partner at any time during such year a statement
setting forth all information relating to the Partnership's operations for such
fiscal year as is reasonably required to complete federal and state income tax
or information returns.
ARTICLE 12
TRANSFERABILITY OF A GENERAL PARTNER'S PARTNERSHIP INTEREST
12.01 Withdrawal or Retirement by an Individual General Partner. Subject to
Section 12.05, an Individual General Partner may voluntarily resign or withdraw
from the Partnership, but only upon compliance with all of the following
procedures:
(a) the Individual General Partner shall give notification to the Managing
General Partners that he or she proposes to withdraw;
(b) subject to Section 3.02, the remaining members of the Management
Committee shall designate a successor Individual General Partner who shall hold
such office until the next tri-annual meeting of Partners or until such
Partner's successor has been approved and elected; and
(c) the withdrawing Individual General Partner shall cooperate fully with the
successor Individual General Partner so that the responsibilities of the
withdrawing Individual General Partner may be transferred to the successor
Individual General Partner with as little disruption of the Partnership's
business and affairs as practicable.
12.02 Withdrawal or Retirement by the Managing General Partners. Subject to
Section 12.05, the Managing General Partners may voluntarily resign or withdraw
from the Partnership, but only upon compliance with all of the following
procedures:
(a) the Managing General Partners shall, at least 60 days prior to such
withdrawal, give notification to all Partners that they propose to withdraw and
that there be substituted in their place a Person or Persons designated and
described in such notification;
(b) enclosed with the notification shall be a certificate, duly executed by or
on behalf of each such proposed successor Managing General Partner, to the
effect that: (i) it is experienced in performing (or employs sufficient
personnel who are experienced in performing) functions that a Managing General
Partner is required to perform under this Agreement; (ii) it has a net worth of
at least 10% of the Capital Contributions of the Partners and will also meet
the net worth requirements of any statute, Treasury Regulations, the Internal
Revenue Service, or the courts applicable to a general partner of a limited
partnership in order to ensure that the Partnership will not fail to be
classified for federal income tax purposes as a partnership rather than as
an association taxable as a corporation; and (iii) it is willing to become a
Managing General Partner under this Agreement and will assume all duties and
responsibilities thereunder, without receiving any compensation for services
from the Partnership in excess of that payable under this Agreement to the
withdrawing Managing General Partners and without receiving any participation
in the withdrawing Managing General Partners' Partnership Interest other than
that agreed upon by the withdrawing Managing General Partners and the
successor Managing General Partner;
(c) if the Managing General Partners resign or withdraw, there shall be on
file at the principal office of the Partnership, prior to such withdrawal,
audited financial statements of each proposed successor Managing General
Partner, as of a date not earlier than twelve months prior to the date of
the notification required by this Section 12.02, certified by a nationally
or regionally recognized firm of independent certified public accountants,
together with a certificate, duly executed on behalf of each proposed
successor Managing General Partner by its principal financial officer, to
the effect that no material adverse change in its financial condition has
occurred since the date of such audited financial statements that has caused
its net worth, excluding the purchase price of its Partnership Interest, to
be reduced to less than the amount under Section 12.02(b). Such audited
financial statements and certificates shall be available for examination by
any Limited Partner during normal business hours for a purpose reasonably
related to such Limited Partner's interest as a limited partner;
(d) subject to Section 14.02, a Majority in Interest of the Limited
Partners has consented to the appointment of any successor Managing General
Partner; and
(e) the withdrawing Managing General Partners shall cooperate fully with each
successor Managing General Partner so that the responsibilities of the
withdrawing Managing General Partners may be transferred to each successor
Managing General Partner with as little disruption of the Partnership's
business and affairs as practicable.
12.03 Removal of a General Partner; Designation of a Successor General Partner.
(a) Any of the Individual General Partners may be removed either: (i) for
cause by the action of at least two-thirds of the remaining members of the
Management Committee, including a majority of the remaining Independent General
Partners; (ii) subject to Section 14.02, by failure to be approved and
re-elected by the Limited Partners pursuant to Section 14.04; or (iii)
subject to Section 14.02, with the consent of a Majority in Interest of the
Limited Partners. The Managing General Partners may be removed either: (i)
by a majority of the Independent General Partners; (ii) subject to Section
4.02, by failure to be approved and re-elected by the Limited Partners
pursuant to Section 14.04; or (iii) subject to Section 14.02, with the
consent of a Majority in Interest of the Limited Partners. The removal of
a General Partner shall in no way derogate from any rights or powers of such
General Partner, or the exercise thereof, or the validity of any actions
taken pursuant thereto, prior to the date of such removal.
(b) Subject to the receipt of an exemptive order issued by the Securities and
Exchange Commission under the 1940 Act, in the event of the removal of the
Managing General Partners and continuation of the Partnership in accordance
with this Agreement, the venture capital investments held by the Partnership in
accordance with this Agreement, at the time of removal shall be appraised by
two independent appraisers, one jointly selected by the Managing General
Partners and one by the Independent General Partners. In the event that such
two appraisers are unable to agree on the value of the Partnership's venture
capital investment portfolio, they shall jointly appoint a third independent
appraiser whose determination shall be final and binding. The cost of the
appraisal conducted by the appraiser selected by the Managing General
Partners shall be borne jointly and severally by the Managing General
Partners, and the cost of the appraisal conducted by the appraiser selected
by the Independent General Partners shall be borne by the Partnership. The
cost of the appraisal conducted by a third appraiser shall be borne equally
by the Partnership and, jointly and severally, by the Managing General
Partners. All unrealized capital gains and losses of the Partnership shall
be deemed realized at that time solely for purposes of making a final
allocation to the Managing General Partners. With respect to their
Partnership Interests pursuant to Article 8, the Managing General Partners
shall receive a final allocation of Net Profit or Net Loss equal to the Net
Profit or Net Loss that they would have been allocated pursuant to Sections
8.01 and 8.02, respectively, if all unrealized capital gains and losses of
the Partnership were deemed realized, an allocation of Net Profit or Net
Loss was made at such time, and such time were deemed to be the end of a
Taxable Period. If the Capital Accounts of the Managing General Partners
have a positive balance after such allocation, the Partnership shall
deliver a promissory note of the Partnership to the Managing General Partners,
the principal amount of which shall be equal to the amount, if any, by which
the positive amount of the Managing General Partners' Capital Accounts exceeds
the amount of their Capital Contributions and which bears interest at a rate
per annum equal to the lesser of the maximum amount permitted by Delaware law
or 100% of the prime rate in effect at Bank of America N.T. & S.A. at the time
of removal, with interest payable annually and principal payable, if at all,
only from 20% of any available cash before any distributions thereof are made
to the Partners pursuant to Article 9. If the Capital Accounts of the Managing
General Partners have a negative balance after such allocation, the Managing
General Partners shall contribute cash to the capital of the Partnership in an
amount equal to the negative balance in their Capital Accounts. The Partnership
Interests of the Managing General Partners shall convert to those of Limited
Partners, and the Managing General Partners shall continue to receive, as
Limited Partners, only those allocations of the Net Profits and Net Losses
pursuant to Sections 8.01 and 8.02 and related distributions.
Notwithstanding the foregoing, if the Capital Accounts of the Managing General
Partners have a positive balance after such allocation and the exemptive order
issued by the Securities and Exchange Commission so permits, the Independent
General Partners may, in lieu of delivering the promissory note, convert the
interests of the removed Managing General Partners into interests of Limited
Partners, with Capital Account balances equal to their positive Capital Account
balances and the same rights to receive allocations and distributions as the
other Limited Partners. In the event that such exemptive order is not granted
in the form applied for by the Partnership, the Managing General Partners shall
not receive a final allocation of Net Profits and Net Losses and their interest
shall convert to that of Limited Partners, and the Managing General Partners
shall continue to receive, as Limited Partners, only those allocations of Net
Profits and Net Losses pursuant to Sections 8.01(c)(i) and (ii) and 8.02(a) and
(b).
(c) Subject to Section 3.02, the remaining members of the Management
Committee may designate one or more Persons to fill any vacancy existing in the
number of Individual General Partners fixed pursuant to Section 3.02 resulting
from removal of an Individual General Partner by the Management Committee
pursuant to Section 12.03(a). Remaining members of the Management Committee
may designate one or more Persons to be successors to the Managing General
Partners removed by the Independent General Partners pursuant to Section
12.03(a), and each Limited Partner hereby consents to the admission of such
successor or successors, no further consent being required. Any such successor
General Partner shall hold office until the next tri-annual meeting of Partners
or until his or her successor has been approved and elected. With the consent
of such number of Limited Partners (but not in any event less than a Majority
in Interest of the Limited Partners) as are then required under DRULPA, and
under the laws of the other jurisdictions in which the Partnership is then
formed or qualified to consent to the admission of a general partner, the
Limited Partners may, subject to the provisions of Sections 3.02, 12.05,
13.01, and 14.02, at any time admit a Person to be successor to a General
Partner concurrently therewith being removed by the Limited Partners pursuant
to Section 12.03(a).
(d) Any removal of a General Partner shall not affect any rights or
liabilities of the removed General Partner that matured prior to such removal.
12.04 Incapacity of a General Partner.
(a) In the event of the Incapacity of a General Partner, the business of the
Partnership shall be continued with the Partnership property by the remaining
General Partners without dissolution. Subject to Section 3.03, the remaining
General Partners shall give notification to the Limited Partners of such event
and shall, within 90 days, call a meeting of General Partners for the purpose
of designating a successor General Partner. Any such successor General Partner
shall hold such office until the next tri-annual meeting of Partners or until
his or her successor has been approved and elected. The General Partners shall
make such amendments to the certificate of limited partnership and to this
Agreement and execute and file for recordation such amendments or other
documents or instruments as are necessary to reflect the termination of the
Partnership Interest of the Incapacitated General Partner, the fact that such
Incapacitated General Partner has ceased to be a General Partner, and the
appointment of such successor General Partner.
(b) In the event of the Incapacity of all General Partners, the Partnership
shall be dissolved. Upon the Incapacity of all General Partners, each General
Partner shall immediately cease to be a General Partner and its Partnership
Interest, as such, shall continue only for the purpose of determining the
amount, if any, that it is entitled to receive upon any dissolution pursuant
to Section 15.01.
(c) Any such termination of a General Partner shall not affect any rights or
liabilities of the Incapacitated General Partner that matured prior to such
Incapacity.
12.05 Admission of a Successor General Partner.
(a) The admission of any successor General Partner pursuant to Sections 12.01,
12.02, or 12.03, as the case may be, shall be effective only if and after the
following conditions are satisfied:
(i) the designation of such Person as successor General Partner shall
occur, and for all purposes shall be deemed to have occurred, prior to the
withdrawal or removal of the withdrawing or removed General Partner, or
transfer of the withdrawing or removed General Partner's Partnership
Interest, pursuant to Sections 12.01, 12.02, or 12.03, as the case may be;
(ii) the Partnership Interests of the Limited Partners shall not be affected
by the admission of such successor General Partner or the transfer of the
General Partner's Partnership Interest; and
(iii) the certificate of limited partnership and this Agreement shall be
amended to reflect the admission of a successor General Partner.
(b) A General Partner shall not have the right to transfer or assign its
Partnership Interest, except that a General Partner may: (i) transfer its
Partnership Interest to a successor General Partner pursuant to Section 12.01
or 12.02; (ii) substitute instead as a successor General Partner any Person
that has, by merger, consolidation, or otherwise, acquired substantially all
of its assets and continued its business and such Person shall be substituted
prior to the occurrence of such event, as a successor General Partner; and
(iii) pledge or grant an interest in its right to receive payments and
distributions under this Agreement (in such event the General Partner shall
continue to be the general partner of the Partnership). Each Limited Partner
hereby consents to the admission of any additional or successor General Partner
pursuant to this Section 12.05(b), and no further consent or approval shall be
required.
(c) Notwithstanding anything to the contrary in this Article 12, a General
Partner's Partnership Interest shall at all times be subject to the
restrictions on transfer set forth in Section 13.01.
12.06 Liability of a Withdrawn or Removed General Partner. Any General
Partner who shall withdraw or be removed from the Partnership, or who shall
sell, transfer, or assign its Partnership Interest, shall remain liable for
obligations and liabilities incurred by it as General Partner prior to the
time such withdrawal, removal, sale, transfer, or assignment shall have become
effective, but it shall be free of any obligation or liability incurred on
account of the activities of the Partnership from and after the time such
withdrawal, removal, sale, transfer, or assignment shall have become effective.
12.07 Consent of Limited Partners to Admission of Successor General Partners.
Subject to Section 14.02, each Limited Partner hereby consents pursuant to
Section 12.02 to the admission of any Person as a successor General Partner
meeting the requirements of Section 12.02 to whose admission as such a
Majority in Interest of the Limited Partners have expressly consented, and no
further express consent or approval shall be required.
12.08 Continuation. In the event of the withdrawal, removal, or retirement of
a General Partner, or the transfer or assignment by a General Partner of its
Partnership Interest, the Partnership shall not be dissolved and the business
of the Partnership shall be continued by the remaining General Partners.
ARTICLE 13
TRANSFERABILITY OF A LIMITED PARTNER'S PARTNERSHIP INTEREST
13.01 Restrictions on Transfers.
(a) Opinion of Counsel. Notwithstanding any other provisions of this Section
13.01, no sale, exchange, transfer, or assignment of a Partnership Interest may
be made unless in the opinion of responsible counsel (who may be counsel for
the Partnership), satisfactory in form and substance to the Managing General
Partners and counsel for the Partnership (which opinion may be waived, in whole
or in part, at the discretion of the Managing General Partners), that:
(i) such sale, exchange, transfer, or assignment, when added to the total of
all other sales, exchanges, transfers, or assignments of Partnership Interests
within the preceding twelve months, would not result in the Partnership's being
considered to have terminated within the meaning of Section 708 of the IRC;
(ii) such sale, exchange, transfer or assignment would not violate any
federal securities laws or any state securities or "Blue Sky" laws (including
any investor suitability standards) applicable to the Partnership or the
Partnership Interest to be sold, exchanged, transferred, or assigned; and
(iii) such sale, exchange, transfer, or assignment would not cause the
Partnership to lose its status as a partnership for federal income tax
purposes or would not cause the Partnership to be a publicly traded
partnership within the meaning of Section 7704 of the IRC; and any such
opinion of counsel is delivered in writing to the Partnership prior to the
date of the sale, exchange, transfer, or assignment.
(b) Minors. In no event shall all or any part of a Partnership Interest be
assigned or transferred to a minor or an incompetent except in trust, pursuant
to the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act, or
by will or intestate succession.
(c) Suitability Standards. Except for transfers or assignments (in trust or
otherwise), whether on death or inter vivos, to or for the benefit of: (i) the
transferor's spouse, parents, children, other descendants, spouses of children,
heirs, or legatees or (ii) a charitable, religious, scientific, literary, or
educational organization, no sale, exchange, transfer, or assignment by a
Limited Partner of all or any part of such Limited Partner's Partnership
Interest may be made to any Person unless such Person (i) meets the suitability
requirements to become an additional Limited Partner in accordance with the
terms of the offering of the Units contained in the Prospectus or (ii) is a
Partner, and no Limited Partner's Partnership Interest or any fraction thereof
may be sold, assigned, or transferred without the consent of the Managing
General Partners.
(d) Fractional Interests. No purported sale, exchange, assignment, or transfer
by a transferor of, or after which the transferor and each transferee would
hold, a Partnership Interest representing less than ten Units or including a
fractional unit will be permitted or recognized for any purpose without the
consent of the Managing General Partners, which consent shall be granted only
for good cause shown.
(e) Documentation. Each Limited Partner agrees, upon request of the Managing
General Partners, to execute such certificates or other documents and perform
such acts as the Managing General Partners deem appropriate after an assignment
of a Partnership Interest by that Limited Partner to preserve the limited
liability of the Limited Partners under the laws of any jurisdiction in which
the Partnership is doing business. For purpose of this Section 13.01(e), any
transfer of a Partnership Interest, whether voluntary or by operation of law,
shall be considered an assignment.
(f) Sale to Market Maker. In no event shall all or any part of a Partnership
Interest be assigned or transferred to a person who makes a market in
securities unless such person shall certify to the Managing General Partners
that it has acquired such Partnership Interest solely for investment purposes
and not for purpose of resale.
(g) Sale Through Market Maker. No purported sale, exchange, transfer, or
assignment of a Partnership Interest will be permitted or recognized for any
purpose unless (i) the transferor shall have represented that such transfer
(a) was effected through a broker-dealer or matching agent whose procedures
with respect to the transfer of Partnership Interests have been approved by the
Managing General Partners as not being incident to a public trading market and
not through any other broker-dealer or matching agent or (b) otherwise was not
effected through a broker-dealer or matching agent which makes a market in
Partnership Interests or that provides a readily available, regular, and
ongoing opportunity to Partnership Interest holders to sell or exchange their
Partnership Interests through a public means of obtaining or providing
information of offers to buy, sell, or exchange Units and (ii) the Managing
General Partners determine that such sale, assignment, or transfer would not,
by itself or together with any other sales, exchanges, transfers, or
assignments, likely result in, as determined by the Managing General Partners
in their sole discretion, the Partnership's being classified as a publicly
traded partnership.
(h) Advance Notice 88-75. No purported sale, exchange, assignment, or transfer
of a Partnership Interest will be permitted or recognized for any purpose if
such sale, exchange, transfer, or assignment would, by itself or together with
any other sales, exchanges, transfers, or assignments, likely result in the
Partnership's failing to satisfy the safe harbors contained in Internal Revenue
Service Advance Notice 88-75 (the "Notice"). Without limiting the foregoing, no
purported sale, exchange, transfer, or assignment of a Partnership Interest
will be recognized if such sale, exchange, transfer, or assignment, together
with all other such dispositions (including repurchases by the Partnership of
its own Partnership Interests) during the same taxable year of the Partnership
would result in both (i) the transfer of more than 5% of the total interests in
Partnership capital or profits (excluding transfers described in clauses (i)
through (vi) of the next succeeding sentence) and (ii)(a) the transfer of more
than 2% of the total interests in Partnership capital or profits (excluding
transfers described in clauses (i) through (vi) of the next succeeding sentence
and sales through a matching service that meets the requirements of the Notice,
part II, section D) or (b) the transfer of more than 10% of the total interests
in Partnership capital or profits (excluding transfers described in clauses (i)
through (vi) of the next succeeding sentence). For purposes of the 5% and the
2% limitations described in the preceding sentence, the following transfers
will be disregarded: (i) transfers in which the basis of the Partnership
Interest in the hands of the transferee is determined, in whole or in part, by
reference to its basis in the hands of the transferor or is determined under
IRC Section 732; (ii) transfers at death; (iii) transfers between members of a
family (as defined in IRC Section 267(c)(4); (iv) the issuance of Partnership
Interests by or on behalf of the Partnership in exchange for cash, property, or
services; (v) distributions from a retirement plan qualified under IRC Section
401(a); and (vi) block transfers. The term "block transfer" means the transfer
by a Partner in one or more transactions during any 30 calendar day period of
Partnership Interests representing in the aggregate more than 5% of the total
interest in Partnership capital or profits.
(i) Void Ab Initio. Any purported assignment of a Partnership Interest that
is not made in compliance with this Agreement is hereby declared to be null and
void and of no force or effect whatsoever.
(j) Expense. Each Limited Partner agrees, prior to the time the Managing
General Partners consent to an assignment of Partnership Interest by that
Limited Partner, to pay all reasonable expenses, including attorneys' fees,
incurred by the Partnership in connection with such assignment.
13.02 Assignees.
(a) Notification Required and Effective Date. The Partnership shall not
recognize for any purpose any purported sale, assignment, or transfer of all
or any fraction of the Partnership Interest of a Limited Partner unless the
provisions of Section 13.01 shall have been complied with and there shall have
been filed with the Partnership a dated notification of such sale, assignment,
or transfer, in form satisfactory to the Managing General Partners, executed
and acknowledged by both the seller, assignor, or transferor and the purchaser,
assignee, or transferee and such notification (i) contains the acceptance by
the purchaser, assignee, or transferee of all of the terms and provisions of
this Agreement and (ii) represents that such sale, assignment, or transfer was
made in accordance with all applicable laws and regulations. Any sale,
assignment, or transfer shall be recognized by the Partnership as effective on
the first day of the fiscal quarter following the fiscal quarter in which such
notification is filed with the Partnership. If a Partner-ship Interest is sold,
assigned, or transferred more than once during a fiscal quarter, the last
purchaser, assignee, or transferee with respect to whom notification is
received shall be recognized by the Partnership.
(b) Voting. Unless and until an assignee of a Partnership Interest becomes a
Substituted Limited Partner, such assignee shall not be entitled to vote or to
give consents with respect to such Partnership Interest.
(c) Assignor Rights. Any Limited Partner who shall assign all of such Limited
Partner's Partnership Interest shall cease to be a Limited Partner and shall
not retain any statutory rights as a Limited Partner.
(d) Written Assignment. Anything herein to the contrary notwithstanding, both
the Partnership and the General Partners shall be entitled to treat the
assignor of a Partnership Interest as the absolute owner thereof in all
respects, and shall incur no liability for distributions made in good faith to
such assignor, until such time as a written assignment that conforms to the
requirements of this Section 13.02 has been received by the Partnership and
accepted by the Managing General Partners.
(e) Assignee not Substituted Limited Partner. A Person who is the assignee of
all or any fraction of the Partnership Interest of a Limited Partner, but does
not become a Substituted Limited Partner and desires to make a further
assignment of such Partnership Interest, shall be subject to all the provisions
of this Article 13 to the same extent and in the same manner as any Limited
Partner desiring to make an assignment of such Limited Partner's Partnership
Interest.
13.03 Substituted Limited Partners.
(a) Approval. No Limited Partner shall have the right to substitute a
purchaser, assignee, transferee, donee, heir, legatee, distributee, or other
recipient of all or any fraction of such Limited Partner's Partnership Interest
as a Limited Partner in the transferring Limited Partner's place. Any such
purchaser, assignee, transferee, donee, heir, legatee, distributee, or other
recipient of a Partnership Interest (whether pursuant to a voluntary or
involuntary transfer) shall be admitted to the Partnership as a Substituted
Limited Partner only: (i) with the consent of the Managing General Partners,
which consent shall be granted or withheld in the absolute discretion of the
Managing General Partners; (ii) by satisfying the requirements of Sections
13.01 or 13.02; and (iii) if necessary, upon an amendment to this Agreement
executed by all necessary parties and filed or recorded in the proper records
of each jurisdiction in which such recordation is necessary to qualify the
Partnership to conduct business or to preserve the limited liability of the
Limited Partners. Any such consent by the Managing General Partners may be
evidenced, if necessary, by the execution by the Managing General Partners of
an amendment to this Agreement evidencing the admission of such Person as a
Limited Partner. The admission of a Substituted Limited Partner shall be
recorded on the books and records of the Partnership. The Limited Partners
hereby consent and agree to such admission of a Substituted Limited Partner
by the Managing General Partners. The Managing General Partners agree to
process such amendments not less frequently than quarterly.
(b) Admission. Each Substituted Limited Partner, as a condition to admission
as a Limited Partner, shall execute and acknowledge such instruments, in form
and substance satisfactory to the Managing General Partners, as the Managing
General Partners deem necessary or desirable to effectuate such admission and
to confirm the agreement of the Substituted Limited Partner to be bound by all
the terms and provisions of this Agreement with respect to the Partnership
Interest acquired. All reasonable expenses, including attorneys' fees,
incurred by the Partnership in this connection shall be borne by such
Substituted Limited Partner.
(c) Rights of Assignee. Until an assignee shall have been admitted to the
Partnership as a Substituted Limited Partner pursuant to this Section 13.03,
such assignee shall be entitled to all of the rights of an assignee of a
limited partnership interest under DRULPA.
13.04 Indemnification. Each Limited Partner shall indemnify and hold harmless
the Partnership, the General Partners, and every Limited Partner who was or is
a party to any pending or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, by reason of or arising
from any actual misrepresentation or misstatement of facts or omission to
state facts made (or omitted to be made) by such Limited Partner in connection
with any assignment, transfer, encumbrance, or other disposition of all or any
part of a Partnership Interest, or the admission of a Substituted Limited
Partner to the Partnership, against expenses for which the Partnership or such
other Person has not otherwise been reimbursed (including attorneys' fees,
judgments, fines, and amounts paid in settlement) actually and reasonably
incurred by the Partnership or such other Person in connection with such
action, suit, or proceeding.
13.05 Incapacity of a Limited Partner. If a Limited Partner dies, such Limited
Partner's executor, administrator, or trustee, or, if such Limited Partner is
adjudicated incompetent, such Limited Partner's committee, guardian, or
conservator, or, if such Limited Partner becomes bankrupt, the trustee or
receiver of such Limited Partner's estate, shall have all the rights of a
Limited Partner for the purpose of settling or managing the estate of such
Limited Partner, and such power as the Incapacitated Limited Partner possessed
to assign all or any part of the Incapacitated Limited Partner's Partnership
Interest and to join with such assignee in satisfying conditions precedent to
such assignee's becoming a Substituted Limited Partner. The Incapacity of a
Limited Partner shall not dissolve the Partnership.
13.06 Withholding of Distributions. From the date of the receipt of any
instrument relating to the transfer of a Unit or at any time the Managing
General Partners are in doubt regarding the Person entitled to receive
distributions in respect of a Unit, the Managing General Partners may withhold
any such distributions until the transfer is completed or abandoned or the
dispute is resolved.
13.07 Transferor-Transferee Allocations. If a Unit is transferred in
compliance with the provisions of this Article 13, the income, gains, losses,
deductions, and credits allocable in respect of that Unit shall be allocated to
the days of the taxable year to which they are economically attributable, and
then prorated between the transferor and the transferee on the basis of the
number of days in the Taxable Period that each was the holder of that interest.
ARTICLE 14
CONSENTS, VOTING, AND MEETINGS
14.01 Method of Giving Consent. Any consent required by this Agreement may be
given as follows:
(a) by a written consent pursuant to Section 14.06 given by the consenting
Partner at or prior to the doing of the act or thing for which the consent is
solicited, provided that such consent shall not have been nullified by either
(i) notification to the Managing General Partners by the consenting Partner at
or prior to the time of, or the negative vote by such consenting Partner at,
any meeting held to consider the doing of such act or thing or (ii)
notification to the Managing General Partners prior to the doing of any act
or thing the doing of which is not subject to approval at a meeting; or
(b) by the affirmative vote by the consenting Partner to the doing of the act
or thing for which the consent is solicited at any meeting called and held
pursuant to Sections 14.04 or 14.05 to consider the doing of such act or thing.
14.02 Limitations on Requirements for Consents. Notwithstanding any other
provisions of this Agreement, unless, prior to the exercise by the Limited
Partners of the rights of the Limited Partners: (i) to approve actions of the
General Partners pursuant to Section 3.09; (ii) to vote to remove a General
Partner pursuant to Section 12.03 or to approve the appointment of a successor
General Partner pursuant to Section 12.05; (iii) to approve and elect or
remove General Partners and to approve certain Partnership matters pursuant
to Section 5.04; (iv) to approve and elect to dissolve the Partnership
pursuant to Section 15.01(c); or (v) to amend this Agreement pursuant to
Section 6.03, as the case may be, counsel for the Partnership or counsel
designated by not less than 10% of the Units owned by all Partners shall have
delivered to the Partnership an opinion to the effect that neither the
possession of such right or rights nor the exercise thereof will violate the
provisions of DRULPA or the laws of the other jurisdictions in which the
Partnership is then formed or qualified, will adversely affect the limited
liability of the Limited Partners, or will adversely affect the
classification of the Partnership as a partnership for federal income tax
purposes, then:
(a) notwithstanding the provisions of Section 3.09, the General Partners
shall be prohibited from taking an action, performing an act, or entering
into a transaction, as the case may be;
(b) notwithstanding the provisions of Sections 12.03 and 12.05, the Limited
Partners shall be prohibited from removing a General Partner or from
approving the appointment of a successor General Partner;
(c) notwithstanding the provisions of Section 5.04, the Limited Partners
shall be prohibited from approving and electing or removing General Partners
and approving certain Partnership matters, as the case may be;
(d) notwithstanding the provisions of Section 15.01(c), the Limited Partners
shall be prohibited from electing to dissolve the Partnership; and
(e) notwithstanding the provisions of Section 6.03, the Limited Partners
shall be prohibited from amending this Agreement.
Such counsel may rely as to the law of any jurisdiction, other than a
jurisdiction in which such counsel's principal office is located, on an
opinion of counsel in such other jurisdiction in form and substance
satisfactory to such counsel.
14.03 Action by the Management Committee. The Management Committee shall act
by majority vote at a meeting duly called, or by unanimous written consent
without a meeting, unless the 1940 Act requires that a particular action be
taken only at a meeting. Meetings of the Management Committee may be called
by any two General Partners or members of the Management Committee. Subject
to the requirements of the 1940 Act, the Management Committee by majority
vote may delegate to any one of its number, or a committee thereof, its
authority to approve particular matters or take particular actions on
behalf of the Partnership. A quorum for all meetings of the Management
Committee shall be a majority of the General Partners, including the
representative for each Managing General Partner.
14.04 Tri-Annual Meetings. Action by the General Partners and Limited
Partners may be taken at a meeting of the General Partners and Limited
Partners. The Management Committee shall call tri-annual meetings of Limited
Partners for the purpose of the approval and election of General Partners
and approving the auditors, at which meetings any other matter requiring
the consent of all or any of the Limited Partners pursuant to this Agreement
or the 1940 Act may be acted upon. Notification of such a meeting of
Partners shall be given by the Management Committee at least 30 days before
such meeting. Any such notice shall state briefly the purpose, time, and
place of the meeting. All such meetings shall be held within or outside the
State of Delaware at such reasonable place as the Management Committee shall
designate, and shall be held during normal business hours. Partners may vote
in Person or by proxy at any such meeting. If proxies are solicited for a
specific meeting and a Limited Partner does not return a proxy, that
Limited Partner shall be deemed to have granted to the Management Committee
a proxy solely for those matters noticed for and acted upon at that meeting.
Such proxy shall be voted by a majority of the members of the Management
Committee, including a majority of the Independent General Partners.
14.05 Special Meetings. The dissolution of the Partnership, the removal of
General Partners, and any other matter requiring the consent of all or any
of the Limited Partners pursuant to this Agreement may be considered at a
meeting of the Partners held not less than 20 nor more than 60 days after
notification thereof shall have been given to all Partners. Such
notification (i) may be given by the Management Committee, in its discretion,
at any time and (ii) shall be given by the Managing General Partners within
30 days after receipt by the Managing General Partners of a request for
such a meeting made by Limited Partners who own, in the aggregate, not less
than 10% of the Units owned by all Partners. Any such notification shall state
briefly the purpose, time, and place of the meeting. All such meetings shall be
held within or outside the State of Delaware at such reasonable place as the
Individual General Partners shall designate and during normal business hours.
Partners may vote in Person or by proxy at any such meeting. If proxies are
solicited for a specific meeting and a Limited Partner does not return a proxy,
that Limited Partner shall be deemed to have granted to the Management
Committee a proxy solely for those matters noticed for and acted upon at that
meeting. Such proxy shall be voted by a majority of the members of the
Management Committee, including a majority of the Independent General Partners.
14.06 Action Without a Meeting. Any action that may be taken at a Partnership
meeting may be taken without a meeting if consent in writing setting forth the
action to be taken is signed by the Partners holding not less than the minimum
percentage of Units that would be necessary to authorize or take such action at
a meeting at which all the Partners were present and voted. Each Partner shall
be given notice of the matters to be voted upon in the same manner as described
in Sections 14.04 and 14.05. The date on which votes will be counted shall be
not less than 10 or more than 60 days following mailing of the notice.
14.07 Approval and Election of General Partners. In the approval and election
of Individual General Partners, those candidates receiving the highest number
of votes cast, at a meeting at which a Majority in Interest of the Limited
Partners is present in Person or by proxy, up to the number of Individual
General Partners proposed to be approved and elected, shall be approved and
elected to serve until the next tri-annual meeting or until their successors
are duly approved, elected and qualified; and each Limited Partner shall
have one vote for each Unit owned by such Limited Partner. In the approval
and election of the Managing General Partners, the Two candidates receiving
the highest numbers of votes cast shall be approved And elected pursuant to
the foregoing provision. Any vote for the approval And election of General
Partners shall be subject to the limitations of Section 14.02.
14.08 Record Dates. The Management Committee may set in advance a date for
determining the Limited Partners entitled to notification of and to vote at any
meeting. All record dates shall not be more than 60 days prior to the date of
the meeting to which such record date relates.
14.09 Submissions to Limited Partners. The Managing General Partners shall
give all the Limited Partners notification of any proposal or other matter
required by any provision of this Agreement or by law to be submitted for
the consideration and approval of the Limited Partners. Such notification
shall include any information required by the relevant provision of this
Agreement or by law.
14.10 Limited Partner Consent. Notwithstanding the provisions of this
Agreement relating to the rights of Limited Partners, the Individual General
Partners shall be required to call a meeting of Limited Partners for the
purpose of seeking Limited Partner consent of existing General Partners and
existing independent certified public accountants only once every three years.
In those years in which such meeting is not held and no Limited Partner consent
is sought, Limited Partners shall continue to have the right to approve and
elect existing General Partners and approve existing independent certified
public accountants only by means of a special meeting of the Partners as
described in Section 14.05 or by means of the procedure for action without a
meeting as described in Section 14.06.
ARTICLE 15
DISSOLUTION AND TERMINATION
15.01 Dissolution. The Partnership shall be dissolved upon the occurrence of
any of the following:
(a) the expiration of its term, except to the extent extended pursuant to
Section 1.05;
(b) the Incapacity of all General Partners;
(c) the election to dissolve the Partnership by a Majority in Interest of the
Limited Partners;
(d) the withdrawal, retirement or removal of a General Partner, or the
transfer or assignment by a General Partner of its Partnership Interest
without the designation of a successor General Partner under Section 12.05;
(e) the sale or other disposition at any one time of all or substantially all
of the assets of the Partnership; or
(f) dissolution required by operation of law;
provided that, upon the occurrence of an event described in Section 15.01(b)
or (d), the Partnership shall not dissolve if, within 90 days after such event,
all Partners agree in writing to continue the business of the Partnership and
the appointment, effective as of such date, of a successor General Partner.
Dissolution of the Partnership shall be effective on the day on which the
event occurs giving rise to the dissolution, but the Partnership shall not
terminate until the assets of the Partnership have been distributed as provided
in Section 15.02 and the certificate of limited partnership of the Partnership
has been cancelled.
15.02 Liquidation. On dissolution of the Partnership, a liquidating trustee
(who shall be the Management Committee, if still constituted, and otherwise
shall be a Person proposed and approved by a Majority in Interest of the
Limited Partners) shall cause to be prepared a statement setting forth the
assets and liabilities of the Partnership as of the date of dissolution, and
such statement shall be furnished to all of the Partners. Then, those
Partnership assets that the liquidating trustee determines should be
liquidated shall be liquidated as promptly as possible, but in an orderly
and business-like manner to minimize loss. If the liquidating trustee
determines that an immediate sale of all or part of the Partnership assets
would cause undue loss to the Partners, the liquidating trustee may, in order
to avoid such loss, either defer liquidation and retain the assets for a
reasonable time, or distribute the assets to the Partners in kind. At such
time as the liquidating trustee determines appropriate, the liquidating
trustee shall wind up the affairs of the Partnership and distribute the
proceeds of the Partnership in the following order of priority:
(a) to the payment of the expenses of liquidation and to creditors (including
Partners who are creditors to the extent permitted by law) in satisfaction of
liabilities of the Partnership (whether by payment or the making of reasonable
provision for the payment thereof) other than liabilities for distributions to
Partners, in the order of priority as provided by law;
(b) to the setting up of any reserves that the liquidating trustee may deem
necessary or appropriate for any anticipated obligations or contingencies of
the Partnership or of the liquidating trustee arising out of or in connection
with the operation or business of the Partnership. Such reserves may be paid
over by the liquidating trustee to an escrow agent or trustee proposed and
approved by the liquidating trustee to be disbursed by such escrow agent or
trustee in payment of any of the aforementioned obligations or contingencies
and, if any balance remains at the expiration of such period as the
liquidating trustee shall deem advisable, to be distributed by such escrow
agent or trustee in the manner hereinafter provided;
(c) to the payment of liabilities for distributions to Limited Partners in
order of priority as provided by law;
(d) to the payment of liabilities for distributions to Individual General
Partners in order of priority as provided by law;
(e) to the payment of liabilities for distributions to the Managing General
Partners in order of priority as provided by law; then
(f) to the Limited Partners first, then to the Individual General Partners,
and then to the Managing General Partners in repayment of the amount of their
Capital Accounts.
For purposes of determining the amounts and allocation of such distribution,
all Partnership assets shall be valued by the liquidating trustee at their
then fair market value, and any gains or losses that would arise from their
sale at such valuation or, in the event of distributions to be made in kind,
that would arise assuming such a sale were made, shall be allocated as
specified in Article 8. For the purposes of calculating if and when
Conversion occurs in liquidation, amounts credited to the Partners'
Capital Accounts pursuant to this Section 15.02 shall be deemed to have
been distributed.
15.03 Negative Capital Accounts. At such time during liquidation as all assets
of the Partnership have been sold, all liabilities and expenses have been paid,
all income, gains, losses and deductions have been allocated in accordance with
Article 8, all distributions have been deemed distributed, and all adjustments
to the Capital Accounts have been made, if a Managing General Partner then has
a negative balance in that Managing General Partner's Capital Account, such
Managing General Partner shall by the end of the taxable year of the
liquidation (or, if later, within 90 days after the date of such liquidation)
contribute to the capital of the Partnership an amount equal to the deficit
amount of its Capital Account. Any amount so contributed shall be distributed
as provided for in Section 15.02 to the other Partners. The Partners shall not
be required to make any further contribution to the Partnership on dissolution
except as required by this Section 15.03.
15.04 Termination. The liquidating trustee shall comply with any requirements
of DRULPA or other applicable law pertaining to the winding up of a limited
partnership, at which time the Partnership shall stand terminated.
ARTICLE 16
COVENANTS OF LIMITED PARTNERS
Each Limited Partner covenants, warrants, and agrees with the Partnership and
each of the Partners that:
(a) such Limited Partner shall not transfer, sell, or offer to sell such
Limited Partner's Units without compliance with the conditions and provisions
of this Agreement.
(b) if such Limited Partner assigns all or any part of such Limited Partner's
Units, then until such time as one or more assignees thereof are admitted to
the Partnership as a Substituted Limited Partner with respect to the entire
Partnership Interest so assigned, the matters to which any holder thereof would
covenant and agree if such holder were to execute this Agreement as a Limited
Partner shall be and remain true; and
(c) such Limited Partner shall notify the Managing General Partners
immediately if any representations or warranties made herein or in any
subscription agreement should be or become untrue.
ARTICLE 17
REPRESENTATIONS AND WARRANTIES OF MANAGING GENERAL PARTNERS
The Managing General Partners represent and warrant to the Partnership and each
of the Partners that:
(a) on the Commencement Date, the Limited Partners shall not own, directly (or
directly under the attribution rules of IRC Section 318), individually or in
the aggregate, more than 20% of the stock of a General Partner or any of its
affiliates (within the meaning of IRC Section 1504(a));
(b) after the Commencement Date, no person shall be admitted to the
Partnership as a Substituted Limited Partner if such Person owns directly (or
indirectly under the attribution rules of IRC Section 318) stock of a General
Partner or of any of its affiliates (within the meaning of IRC Section 1504(a))
if the then Limited Partners and such Person then own directly (or indirectly
under the attribution rules of IRC Section 318), individually or in the
aggregate, more than 20% of the stock of a General Partner or of any of its
affiliates (within the meaning of the IRC Section 1504(a));
(c) the Managing General Partners shall not consent to the acquisition by a
Limited Partner of stock in a General Partner or in any of its affiliates
(within the meaning of IRC Section 1504(a) if such acquisition would cause
the then Limited Partners to own directly (or indirectly under the attribution
rules of IRC Section 318), individually or in the aggregate, more than 20% of
the stock of a General Partner or of any such affiliate;
(d) the Managing General Partners and each affiliate of the Managing General
Partners (within the meaning of IRC Section 1504(a) shall not incorporate,
issue, or redeem stock if after such incorporation, issuance, or redemption,
the Limited Partners would then own directly (or indirectly under the
attribution rules of IRC Section 318), individually or in the aggregate, more
than 20% of the stock of the Managing General Partners or of any such
affiliate of the Managing General Partners;
(e) the individual general partners of TFL shall not remove themselves from
personal liability for Partnership obligations unless there remains at least
one individual personally liable for Partnership obligations, or until TFI
and any other corporate general partner have and agree to maintain
throughout the duration of the Partnership a net worth (exclusive of any
interest in any limited partnership) determined with respect to the fair
market value of their then assets not less than an amount equal to the
aggregate of the following amounts for each limited partnership in which
they have an interest: the greater of (i) the lesser of (A) $250,000 or
(B) 15% of the total contributions to such partnership or (ii) 10% of
the total contributions to such partnership;
(f) the Managing General Partners shall not assign all or any part of their
interest in the Partnership if, thereafter, the Managing General Partners'
interest in any item of income, gain, loss, deduction, or such assignment
would be less than 1% or such assignment would cause a termination of the
Partnership within the meaning of IRC Section 708(b); and
(g) the Managing General Partners shall use reasonable care to operate the
Partnership in such a manner that the aggregate deductions to be claimed by
the Partners as their distributive share of Partnership losses for the first
two years of operation will not exceed the aggregate cash capital
contributions of the Partners.
ARTICLE 18
ARBITRATION
In the event a dispute between the parties hereto arises out of, in connection
with, or with respect to this Agreement, or any breach thereof (other than
claims arising under federal and state securities laws), such dispute shall,
on the written request of one party delivered to the other party, be submitted
to and settled by arbitration in the County of San Mateo in accordance with
the rules of the American Arbitration Association then in effect and with the
California Arbitration Act (Sections 1280 through 1294.2 of the California Code
of Civil Procedure), except as herein specifically provided. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The parties hereby submit to the in personam jurisdiction
of the Superior Court of the State of California for the purpose of confirming
any such award and entering judgment thereon. Notwithstanding anything to the
contrary that may now or hereafter be contained in the rules of the American
Arbitration Association, the parties agree as follows:
(a) Within 10 days after receipt of notice of arbitration from the noticing
party, each party shall propose and approve one Person approved by the American
Arbitration Association to hear and determine the dispute. If more than two
parties are involved, they shall together propose and approve two Persons. The
two Persons so chosen shall propose and approve a third impartial arbitrator.
The majority decision of the arbitrators shall be final and conclusive upon
both parties hereto. If either party fails to approve its arbitrator within 10
days after delivery of the notice provided for herein, then the arbitrator
approved by the one party shall act as the sole arbitrator and shall be deemed
to be the single, mutually approved arbitrator to resolve the controversy. In
the event the parties are unable to agree upon a rate of compensation for the
arbitrators, they shall be compensated for their services at a rate to be
determined by the American Arbitration Association;
(b) the parties shall enjoy, but are not to be limited to, the same rights to
discovery as they would in the federal District Court for the Northern District
of California;
(c) the costs of the arbitration including attorneys' fees shall be paid by
the losing party or will be allocated between the parties in such proportions
as the arbitrators decide;
(d) the arbitrators shall, upon the request of either party, issue a written
opinion of their findings of fact and conclusions of law; and
(e) upon receipt by the requesting party of said written opinion, said party
shall have the right within 10 days thereof to file with the arbitrators a
motion to reconsider, and the arbitrators thereupon shall reconsider the issues
raised by said motion and either confirm or change their majority decision,
which shall then be final and conclusive upon both parties hereto. The costs of
such a motion for reconsideration and written opinion of the arbitrators
including attorneys' fees shall be paid by the moving party.
Article 18 shall not apply to residents of the States of Arizona, Michigan,
Oklahoma or Texas unless such residents elect to submit to arbitration
voluntarily.
ARTICLE 19
SPECIAL POWER OF ATTORNEY
19.01 Power of Attorney. Each Limited Partner hereby irrevocably constitutes
and appoints the Managing General Partners, or either of them, as such Limited
Partner's true and lawful agents and attorneys-in-fact, with full power and
authority in such Limited Partner's name, place, and stead, to make, execute,
acknowledge, deliver, file, and record the following documents and instruments
in accordance with the other provisions of this Agreement:
(a) this Agreement and a Certificate of Limited Partnership, a certificate of
doing business under fictitious name, and any other instrument that may be
required to be filed in connection with the formation and operation of the
Partnership under the laws of Delaware or other laws of any other state;
(b) any and all amendments, restatements, cancellations, or modifications of
the instruments described in Section 19.01(a);
(c) any and all instruments related to the admission of any successor general
partner or any Limited Partner; and
(d) all documents and instruments that may be necessary or appropriate to
effect the dissolution and termination of the Partnership, pursuant to the
terms hereof.
19.02 Irrevocability. The foregoing power of attorney is coupled with an
interest and such grant shall be irrevocable. Such power of attorney shall
survive the subsequent Incapacity of any Limited Partner or the transfer of
any or all of such Limited Partner's Units.
19.03 Priority of Agreement. In the event of any conflict between provisions
of this Agreement or any amendment hereto and any documents executed,
acknowledged, sworn to, or filed by the Managing General Partners under this
power of attorney, this Agreement and its amendments shall govern.
19.04 Exercise of Power. This power of attorney may be exercised by a Managing
General Partner either by signing separately as attorney-in-fact for each
Limited Partner or by a single signature of a Managing General Partner acting
as attorney-in-fact for all of them.
ARTICLE 20
MISCELLANEOUS
20.01 Certificate of Limited Partnership. On each subsequent change in the
Partnership specified in DRULPA Section 17-202(c), the General Partners shall
cause to be executed and acknowledged an amended Certificate of Limited
Partnership pursuant to the provisions of DRULPA Section 17-202(a), which
will be duly filed as prescribed by Delaware law.
20.02 Delaware Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by, and construed and interpreted according
to, the laws of Delaware.
20.03 Counterparts. This Agreement may be executed in counterparts, and all
counterparts so executed shall constitute one agreement that shall be binding
on all the parties hereto. Any counterpart of either this Agreement or the
Certificate of Limited Partnership that has attached to it separate signature
pages which altogether contain the signatures of all Partners or their
attorney-in-fact shall for all purposes be deemed a fully executed instrument.
20.04 Binding Upon Successors and Assigns. Subject to and unless otherwise
provided in this Agreement, each and all of the covenants, terms, provisions,
and agreements herein contained shall be binding upon and inure to the benefit
of the successors, successors-in-title, heirs, and assigns of the respective
parties hereto.
20.05 Notices. Any notice, offer, consent, or demand permitted or required to
be made under this Agreement to any party hereto shall be given in writing
signed by the Partner giving such notice either by (i) personal delivery or
(ii) by registered or certified mail, postage prepaid, addressed to that party
at the respective address shown on the Partnership's books and records, or to
such other address as that party shall indicate by proper notice to the
Managing General Partners in the same manner as provided above; provided,
however, that mailings made to all Limited Partners may be made by regular
mail, postage prepaid, addressed as above. All notices shall be deemed
effective upon receipt or five days after the date of mailing in accordance
with the above provisions.
20.06 Severability. If any provision of this Agreement, or the application
thereof, shall for any reason and to any extent be invalid or unenforceable,
the remainder of this Agreement and the application of such provisions to other
Persons or circumstances shall not be affected thereby, but shall be enforced
to the maximum extent possible under applicable law.
20.07 Entire Agreement. This Agreement constitutes the entire understanding
and agreement of the parties hereto with respect to the subject hereof and
supersedes all prior agreements or understandings, written or oral, between the
parties with respect thereto.
20.08 Headings, Etc. The headings in this Agreement are inserted for
convenience of reference only and shall not affect interpretation of this
Agreement. Wherever from the context it appears appropriate, each term stated
in either the singular or the plural shall include the singular and the plural,
and pronouns stated in either the masculine or the neuter genders shall include
the masculine, the feminine and the neuter.
20.09 Legends. If certificates are issued evidencing a Limited Partner's
Units, each such certificate shall bear such legends as may be required by
applicable federal and state laws, or as may be deemed necessary or
appropriate by the Management Committee to reflect restrictions upon transfer
contemplated herein.
EXECUTED as of February 27, 2006, at Santa Fe, New Mexico.
THE MANAGING GENERAL PARTNERS
TECHNOLOGY FUNDING INC. TECHNOLOGY FUNDING LTD.
Managing General Partner Managing General Partner
By:/s/XXXXXXX X. XXXXXX By: /s/XXXXXXX X. XXXXXX
Xxxxxxx X. Xxxxxx, President Xxxxxxx X. Xxxxxx, General Partner
THE INDIVIDUAL GENERAL PARTNERS
/s/ XXXXXX X. XXXXXXX XX
Xxxxxx X. Xxxxxxx XX
/s/ XXXX X. XXXXXXXXX
Xxxx X. Xxxxxxxxx
THE LIMITED PARTNERS
(All Limited Partners now and hereafter admitted
as limited partners of the Partnership pursuant
to powers of attorney now and hereafter
executed in favor of, and delivered to, the
Managing General Partners or either of them)
By: Technology Funding Inc. Attorney-In-Fact
By: /s/ XXXXXXX X. XXXXXX
Xxxxxxx X. Xxxxxx, President
