IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY
INTEREST THEREIN OR TO RECEIVE ANY CONSIDERATION THEREFOR WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
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., Xxxx Xxxxxxx X'Xxxxx, M.D.,
Xxxxxx X. Xxxxxxx XX, and Xxxxxx X. Xxxxx, (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 Xxxxxxx
xx xxx Xxxxxx, Xxx 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 commence on the
"Commencement Date," as hereinafter defined, and shall continue in full force
and effect until December 3l, 2001, or until dissolution prior thereto
pursuant to the provisions hereof; provided, however, that if the Partnership
has not received and accepted subscriptions from additional Limited Partners
aggregating at least 15,000 Units by one year and five business days from the
date on which the offering of Units is commenced, the Partnership shall be
terminated, all obligations of the Partnership shall be discharged solely by
the Managing General Partners, and any amounts paid by the Limited Partners
shall be returned to them with interest earned and received thereon.
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 0000 Xxx.
(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 Xxxx Xxxxxxx X'Xxxxx, M.D.,
Xxxxxx X. Xxxxxxx XX, and Xxxxxx X. Xxxxx 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 representative
from each Managing General Partner, who will act on behalf of such
Managing General Partner.
3.02 Individual General Partners. The number of Individual General Partners
shall initially be three and shall be fixed from time to time thereafter by
the Management Committee as then constituted; provided, however, that the
number of Individual General Partners shall in no event be less than three or
more than nine (except prior to the initial public offering of Units). A
majority of the General Partners and 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
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 may
succeed themselves in office. If at any time the number of Independent
General Partners is less than a majority of the General Partners or 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
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 perform
all duties imposed on the directors of business development companies by the
1940 Act, 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 shah 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 $10,000 annually in quarterly installments beginning on the
Commencement Date;
(b) the sum of $1,000 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
$1,000 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 $500 and provided further that the total amount paid in
any one year for attendance at committee meetings does not exceed $3,000;
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 therefor
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. Income 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 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 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
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 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 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 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 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 Marco
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 December 31, 2000 at San Mateo, California.
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/ XXXX XXXXXXX O'XXXXX
Xxxx Xxxxxxx X'Xxxxx, M.D.
/s/ XXXXXX X. XXXXXXX XX
Xxxxxx X. Xxxxxxx XX
/s/ XXXXXX X. XXXXX
Xxxxxx X. Xxxxx
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
