EXHIBIT INDEX
Exhibits
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99.1 Technology Funding Venture Partners V,
An Aggressive Growth Fund, L.P.
Amended and Restated Limited Partnership Agreement
TECHNOLOGY FUNDING VENTURE PARTNERS V,
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., Xxxxx X. Xxxxx, and Xxxxxxx
X. Xxxxxx as 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 have formed and hereby 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 V, An Aggressive Growth Fund, L.P." If considered necessary in the
opinion of counsel to the Partnership to preserve the limited liability of the
Limited Partners, property acquired and business conducted by the Partnership
shall be in such other name as is necessary to preserve such limited liability.
1.03 Purpose. The Partnership is authorized and empowered to elect to
operate, and to operate, as a business development company under the
Investment Company Act of 1940, as amended. The Partnership's principal
investment objective is to maximize long-term capital appreciation for the
Limited Partners up to and including the final day of the Partnership's
operations prior to dissolution. The Partnership will seek to accomplish this
objective by making venture capital investments in new and developing companies
that the "Managing General Partners," as hereinafter defined, believe offer
significant long-term growth possibilities and by providing those companies
with active management assistance where warranted. The Partnership will also
seek to achieve this objective by investing in established companies that the
Managing General Partners believe offer special opportunities for growth. The
Partnership will also seek to preserve Limited Partner capital through risk
management and active participation with Portfolio Companies. Generation of
current income or tax benefits will not be primary factors in the selection of
investments.
1.04 Place of Business and Office; Registered Agent. The Partnership shall
maintain its principal office at c/o Technology Funding Inc., 0000 Xxxxxxxxxx
Xxxxxxxxx, Xxxxx 000, Xx Xxxxxx Xxxxx, Xxxxxxxxxx 00000. The Partnership shall
maintain a registered office at c/o The Corporation Trust Company, Corporation
Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx, Xxxxxxxx
00000. The "Independent General Partners," as hereinafter defined, may at any
time change the location of the Partnership's offices and may establish
additional offices, if they deem it advisable. Notification of any such change
shall be given to the Limited Partners on or before the date of any such
change. The name and address of the Partnership's registered agent for service
of process on the Partnership in the State of Delaware is The Corporation
Trust Company, Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxx
Xxxxxx Xxxxxx, Xxxxxxxx 00000.
1.05 Term. The operation of the Partnership shall continue in full force and
effect until December 31, 2006, or until dissolution prior thereto pursuant to
the provisions hereof.
1.06 The Partners. The names, addresses, and "Capital Contributions," as
hereinafter defined, of the General Partners and the Limited Partners are set
forth in the books and records of the Partnership, as amended from time to time.
1.07 Title to Partnership Property. All property owned by the Partnership,
whether real or personal, tangible or intangible, shall be owned by the
Partnership as an entity, and no Partner, individually, shall have title to or
any interest in such property.
ARTICLE 2
DEFINITIONS
Unless otherwise provided herein or unless the context otherwise requires,
the terms with initial capital letters in this Agreement are defined as follows:
(a) "Adjusted Capital Contributions" mean the total Limited Partner
Capital Contributions reduced by the cost basis of any Portfolio Company
securities (i) distributed to, or liquidated and the proceeds distributed to,
the Limited Partners, or (ii) written off with no further attempt being made
by the General Partners to aid the Portfolio Company but not reduced by
net operating losses of the Partnership.
(b) "Affiliate" means, when used with reference to a specific Person, an
"affiliated person" of such specified Person as defined in Section 2(a)(3)
of the 1940 Act.
(c) "Agreement" means this Amended and Restated Limited Partnership
Agreement as originally executed and as amended, modified, supplemented, or
restated from time to time.
(d) "Capital Account" means a capital account for a Partner calculated as set
forth in Section 11.03.
(e) "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.
(f) "Cash and Securities Available for Distribution" means all Partnership
cash from whatever sources derived less such reserves as the Individual
General Partners shall deem reasonable for the Partnership's business plus
any securities held by the Partnership that the Individual General Partners
deem available for distribution.
(g) "Closing Date" means the day on which the Partnership terminates its
offering of Units.
(h) "Commencement Date" means the first date on which subscriptions from
additional Limited Partners for at least 15,000 Units are accepted by the
Partnership.
(i) "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.
(j) "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.
(k) "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").
(l) "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.
(m) "General Partners" means the Managing General Partners and the
Individual General Partners in their capacities as general partners of the
Partnership.
(n) "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.
(o) "Incapacity" shall mean, as to any Person, the entry of an order for
relief in a bankruptcy proceeding ("bankruptcy"), the entry of an order of
incompetence, or the death, of such Person, or the occurrence of any other
event that would cause such Person to cease to be a General Partner under
DRULPA, as the case may be.
(p) "Independent" shall mean any individual who is not an "interested
Person" of the Partnership, as defined in the 1940 Act.
(q) "Independent General Partners" shall mean Xxxxx X. Xxxxx, Xxxxxxx X.
Xxxxxx 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.
(r) "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.
(s) "IRC" means the Internal Revenue Code of 1986, as amended.
(t) "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.
(u) "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.
(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 expenses 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 May 24, 1990 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 Partnership 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 Partnership Governance. The Partnership shall be governed by two or more
Individual General Partners as such number is fixed pursuant to Section 3.02
and Technology Funding Ltd. as to one vote. All matters, except as provided in
Sections 3.04 and 3.05, shall be determined by a majority combined vote of
Individual General Partners and Technology Funding Ltd.
3.02 Individual General Partners. The number of Individual General Partners
shall initially be two and shall be fixed from time to time by the Independent
General Partners; provided, however, that the number of Individual General
Partners shall in no event be less than two or more than nine (except prior to
the initial public offering of Units). A majority of the voting General
Partners shall at all times be Independent General Partners. If at any time
the number of Independent General Partners is less than a majority of voting
General Partners, within 90 days thereafter, action shall be taken pursuant to
Section 3.03 to restore the number of Independent General Partners to a
majority.
3.03 Approval and Election of General Partners. The General Partners shall
hold office until their successors are approved and elected at the first
tri-annual meeting of Partners pursuant to Section 14.04, unless they are
sooner removed pursuant to Section 12.03 or sooner withdraw pursuant to
Section 12.01 or 12.02, as the case may be. The General Partners shall
thereafter be approved and elected to hold office for a term of three years
from their approval and election or until their successors are approved and
elected, unless they are sooner removed pursuant to Section 12.03 or sooner
withdraw pursuant to Section 12.01 or 12.02, as the case may be. General
Partners xxx succeed themselves in office. If at any time the number of
remaining General Partners is less than a majority of the General Partners,
the remaining Independent General Partners 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 Individual General Partners may also designate
successor Individual General Partners to fill vacancies created by the
retirement or withdrawal of an Individual General Partners pursuant to
Section 12.01 or 12.02 or by the removal of an Individual General Partner
pursuant to Section 12.03. The Individual General Partners 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 remaining Individual General Partners shall hold office
until the next tri-annual meeting of Partners or until his or her successor
has been approved and elected, unless he or she is sooner removed pursuant
to Section 12.03 or withdraws pursuant to Section 12.01.
3.04 Management Powers. Subject to the terms hereof, including but not
limited to Section 3.05, the Individual General Partners 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 provide overall guidance and supervision with respect to
the operations of the Partnership, shall perform the same functions and have
the same duties and responsibilities 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. The Independent General
Partners shall have all of the responsibilities, obligations, and fiduciary
duties imposed by the 1940 Act upon disinterested directors of a business
development company in corporate form. Except as otherwise expressly provided
in this Agreement, the Individual General Partners are hereby granted the
right, power, and authority to direct the Managing General Partners to do on
behalf of the Partnership all things which, in their 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 direct the
Managing General Partners 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 (but not in an aggregate amount in excess of
5% of Limited Partner Capital Contributions) 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 securities 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 Individual General Partners may direct the
Managing General Partners, on behalf of the Partnership, to approve
Portfolio Company borrowings in any amount it deems appropriate or to
cause the Partnership to guarantee 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 10% 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 Managing General Partners and who may perform any of the
duties of, and exercise any of the powers and authority conferred upon,
the Managing General Partners 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 Individual General Partners;
(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, on behalf of
the Partnership, are hereby granted the exclusive power and authority from time
to time to do the following:
(a) subject to the supervision of the Individual General Partners, 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, approve or guarantee Portfolio Company
borrowings up to the limit set by Section 3.04(g) above, 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 Individual General Partners, 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) without the consent of any Limited Partners, (i) admit additional Limited
Partners to the Partnership in accordance with Section 7.02 and (ii) 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.
On matters of Partnership governance, only Technology Funding Ltd. will have a
vote although Technology Funding Inc. remains a Managing General Partner with
such other rights, powers and duties as set forth in this Section 3.05.
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 Individual General Partners 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 Individual General
Partners, in the name and on behalf of the Partnership, are authorized to
appoint independent certified public accountants for the Partnership.
3.08 Good Faith. The Individual General Partners 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 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) except as otherwise provided herein, admit any other Person as a general
partner of the Partnership without the unanimous approval of the Partners;
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 non recourse 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; or
(f) without the consent of a Majority in Interest of the Limited Partners,
subject to paragraph 14.02,
(i) except as permitted by applicable law, 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.
(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 the General Partners or Their Affiliates. The Individual
General Partners may direct the Managing General Partners, on behalf of the
Partnership, to enter into contracts for goods or services necessary to the
prudent operation of the Partnership with any General Partner or any Affiliate
of a General Partner (other than the officers, directors, or partners of the
General Partners), provided that (1) the charges for such goods or services are
the lower of (i) actual cost or (ii) 90% of those charged by unaffiliated
Persons in the area for similar goods and services, (2) the Person providing
the goods or rendering the services has previously been engaged in the business
of rendering such services or selling or leasing such goods to entities other
than the Partnership as an ordinary and ongoing business for a period of at
least three years, and (3) the fees and other terms of the contract are fully
disclosed in the Prospectus. 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. No General
Partner shall be required to devote full time to Partnership business. 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; provided,
however, that neither a General Partner nor an Affiliate of a General Partner
(other than another program for which the General Partner or any Affiliate of a
General Partner is acting as a general partner) may enter into a venture
competitive with the business of the Partnership unless such venture would not
have a material adverse effect on the business of the Partnership. 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 so long as such pursuit
would not have a material adverse effect on the business of the Partnership.
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; 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.
3.14 Rebates, Kickbacks and Reciprocal Arrangements. No rebates or give-ups
may be received by the General Partners or their Affiliates nor may the General
Partners or their Affiliates participate in any reciprocal business
arrangements that would circumvent the restrictions against dealing with
General Partners or Affiliates set forth in this Agreement.
ARTICLE 4
COMPENSATION OF THE GENERAL PARTNERS AND THEIR AFFILIATES
4.01 Compensation. Over and above their distributive share of Partnership
profits, losses, and distributions detailed in Articles 8 and 9, the Managing
General Partners shall also receive the following amounts from the Partnership:
(a) Reimbursement for Organizational and Offering Expenses. The Partnership
shall reimburse the Managing General Partners for Organizational and Offering
Expenses incurred by the Managing General Partners and their Affiliates, up to
a maximum of 5% of the total Limited Partner Capital Contributions. The
Managing General Partners shall pay or shall reimburse the Partnership for
all Organizational and Offering Expenses in excess of 5% of the total Limited
Partner Capital Contributions.
(b) Management Fee. The Partnership shall pay the Managing General Partners
a Management Fee for supervising the operation, management, and progress of
all Portfolio Companies, administering the day-to-day affairs of the
Partnership and evaluating, selecting and negotiating Portfolio Company
financings 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 Adjusted
Capital Contributions;
(iii) for the third, fourth, and fifth years, 2% per year of the total
Limited Partner Adjusted Capital Contributions; and
(iv) for the sixth year and thereafter, 1% per year of the total Limited
Partner Adjusted Capital Contributions.
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 Independent General Partners. As compensation for services rendered to
the Partnership, the Partnership will pay each Independent General Partner:
(a) the sum of $14,000 annually in quarterly installments beginning on the
Commencement Date;
(b) the sum of $1,500 for each meeting of the Individual General Partners
attended by such Independent General Partner to an annual limit of $8,000;
(c) if a committee is appointed by the Individual General Partners, the sum
of $1,500 for each such committee meeting attended; provided, however, that
if such committee meeting is held on the same day as a meeting of the
Individual General Partners the sum paid for attendance at such committee
meeting shall be $1,000; and
(d) all out-of-pocket expenses relating to attendance at the meetings,
committee or otherwise, of the Individual General Partners.
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 Independent General Partners shall be reviewed
annually by the Individual General Partners and, may be increased with the
approval of a Majority in Interest of the Limited Partners, or decreased by the
Individual General Partners to provide for such compensation as the Individual
General Partners may deem reasonable under the circumstances. Payment of
compensation to an Independent 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 Independent General
Partners for consulting services must be approved by the Individual General
Partners, 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
pay (or reimburse the Dealer-Manager for any broker-dealer due diligence
expenses that the Dealer-Manager pays to) unaffiliated broker-dealers,
provided, however, that the total amount of such reimbursements shall not
exceed 0.5% 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 General
Partners. The Limited Partners hereby consent to the taking of any action by
the Managing General Partners and the direction of the Managing General
Partners by the Individual 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 General Partners, subject to the
supervision of and direction by the Individual General Partners. 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 Individual General Partners,
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 General Partners amend 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 reasonably
satisfactory to the Partnership 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 Partnership will pay for
any such opinion of counsel as long as the Partners seeking the opinion of
counsel request and receive from the Partnership a statement that the
counsel they have selected is satisfactory. 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
Individual General Partners 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 15 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 Individual General Partners, 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) any change(s) necessary to qualify the Partnership as a limited
partnership under the laws of any state or 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) any change(s) 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;
(e) any change(s) required to comply with the Investment Company Act;
(f) any change(s) to replace one or both Managing General Partners with an
entity or entities affiliated with, allocated to or that succeed in interest
to one or both Managing General Partners; and
(g) 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 OF PARTNERS
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 Individual General
Partners determine, in their sole discretion, that the Partnership has
received Capital Contributions in excess of the Partnership's needs, the
Individual General Partners may cause the Partnership to 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 Individual
General Partners, there remains property of the Partnership sufficient to pay
them and (ii) the Individual General Partners cause this Agreement to be
amended, if necessary, to reflect a reduction in Capital Contributions. In
the event that the Individual General Partners elect to cause the Partnership
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. Such
distribution shall also include each Limited Partners' pro rata portion of
sales commissions and Organizational and Offering Expenses attributable to
such returned funds (other than the portion of sales commissions that has
been paid or remains owing to broker-dealers other than the Dealer-Manager).
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, 8.07 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.
Anything in this agreement to the contrary notwithstanding, no allocation of
Net Profit shall exceed the maximum amount permitted under the Investment
Advisers Act of 1940.
8.02 Losses. Except as provided in Section 8.03 and 8.09, 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);
(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 Allocations of Offering Period Income. Xxxxxx earned during the Offering
Period on Short-Term Investments shall be allocated monthly 99% to the Limited
Partners and 1% to the General Partners.
8.05 Allocations Among Limited Partners. Any allocations to the Limited
Partners pursuant to Article 8 shall be made among the Limited Partners as
follows:
(a) with respect to any Net Profit or Net Loss allocated to the Limited
Partners as a group other than under Section 8.01(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 8.01 (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, as well as 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.
8.09 General Partners' One Percent Interest. In no event shall the interests
(including Limited Partner interests) of all the General Partners, taken
together, in each material item of Partnership income, gain, loss, deduction
or credit be less than 1% of each such item.
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 material 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 material 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 (1) 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 (2) 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 (3) 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: (1) 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; (2) the
legal action is initiated by a third party who is not a holder of a Partnership
Interest; and (3) 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 (4) 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 Individual General Partners 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 Individual General
Partners 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 listed on the
books and records of the Partnership as a Limited Partner during the first 15
days of a month and the 16th day of the month if the Limited Partner was listed
on the books and records of the Partnership as a Limited Partner 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 Individual General Partners or
the Managing General Partners. All such information may be obtained by the
Limited Partner's compliance with such procedures as the Individual General
Partners 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 Individual
General Partners 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 will be held in confidence and will not be used
for commercial purposes; however, the Partnership acknowledges that the
information may be used for purposes reasonably related to a Limited Partner's
interest as a Limited Partner, including litigation involving the Partnership.
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 Individual General Partners
(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, statement
of operations, a statement of partners' equity, and a statement of cash
flows. 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 Individual General Partners shall
designate and admit a successor Individual General Partner who shall hold
such office until the next tri-annual meeting of Partners or until such
Partner's successor has been approved and elected; and
(c) the withdrawing Individual General Partner shall cooperate fully with the
successor Individual General Partner so that the responsibilities of the
withdrawing Individual General Partner may be transferred to the
successor Individual General Partner with as little disruption of the
Partnership's business and affairs as practicable.
12.02 Withdrawal or Retirement by the Managing General Partners. Subject to
Section 12.05, the Managing General Partners may voluntarily resign or withdraw
from the Partnership, but only upon compliance with all of the following
procedures:
(a) the Managing General Partners shall, at least 60 days prior to such
withdrawal, give notification to all Partners that they propose to withdraw
and that there be substituted in their place a Person or Persons designated
and described in such notification;
(b) enclosed with the notification shall be a certificate, duly executed by or
on behalf of each such proposed successor Managing General Partner, to the
effect that: (i) it is experienced in performing (or employs sufficient
personnel who are experienced in performing) functions that a Managing
General Partner is required to perform under this Agreement; (ii) it has a
net worth of at least 10% of the Capital Contributions of the Partners and
will also meet the net worth requirements of any statute, Treasury
Regulations, the Internal Revenue Service, or the courts applicable to a
general partner of a limited partnership in order to ensure that the
Partnership will not fail to be classified for federal income tax purposes as
a partnership rather than as an association taxable as a corporation; and
(iii) it is willing to become a Managing General Partner under this
Agreement and will assume all duties and responsibilities thereunder,
without receiving any compensation for services from the Partnership in
excess of that payable under this Agreement to the withdrawing Managing
General Partners and without receiving any participation in the
withdrawing Managing General Partners' Partnership Interest other than
that agreed upon by the withdrawing Managing General Partners and the
successor Managing General Partner;
(c) if the Managing General Partners resign or withdraw, there shall be on
file at the principal office of the Partnership, prior to such withdrawal,
audited financial statements of each proposed successor Managing General
Partner, as of a date not earlier than twelve months prior to the date of the
notification required by this Section 12.02, certified by a nationally or
regionally recognized firm of independent certified public accountants,
together with a certificate, duly executed on behalf of each proposed
successor Managing General Partner by its principal financial officer, to
the effect that no material adverse change in its financial condition has
occurred since the date of such audited financial statements that has
caused its net worth, excluding the purchase price of its Partnership
Interest, to be reduced to less than the amount under Section 12.02(b).
Such audited financial statements and certificates shall be available for
examination by any Limited Partner during normal business hours for a
purpose reasonably related to such Limited Partner's interest as a limited
partner;
(d) subject to Section 14.02, a Majority in Interest of the Limited
Partners has consented to the appointment of any successor Managing
General Partner; and
(e) the withdrawing Managing General Partners shall cooperate fully with
each successor Managing General Partner so that the responsibilities of the
withdrawing Managing General Partners may be transferred to each
successor Managing General Partner with as little disruption of the
Partnership's business and affairs as practicable.
12.03 Removal of a General Partner; Designation of a Successor General Partner.
(a) Individual General Partners, 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 with
or without cause; (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 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 removed Managing General Partners shall convert to those of Limited
Partners, and the removed 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. In
the event that such exemptive order is not granted in the form applied for
by the Partnership, the removed 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 removed 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 Individual General Partners 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 Individual General
Partners pursuant to Section 12.03(a). The remaining Individual General
Partners may designate one or more Persons to be successors to the
Managing General Partners removed by the Independent General Partners
pursuant to Section 12.03(a), and each Limited Partner hereby consents to
the admission of such successor or successors, no further consent being
required. Any such successor General Partner shall hold office until the
next tri-annual meeting of Partners or until his or her successor has been
approved and elected. With the consent of such number of Limited
Partners (but not in any event less than a Majority in Interest of the
Limited Partners) as are then required under DRULPA, and under the laws
of the other jurisdictions in which the Partnership is then formed or
qualified to consent to the admission of a general partner, the Limited
Partners may, subject to the provisions of Sections 3.02, 12.05, 13.01, and
14.02, at any time admit a Person to be successor to a General Partner
concurrently therewith being removed by the Limited Partners pursuant to
Section 12.03(a).
(d) Any removal of a General Partner shall not affect any rights or
liabilities of the removed General Partner that matured prior to such removal.
12.04 Incapacity of a General Partner.
(a) In the event of the Incapacity of a General Partner, the business of the
Partnership shall be continued with the Partnership property by the
remaining General Partners without dissolution. Subject to Section 3.03,
the remaining General Partners shall give notification to the Limited
Partners of such event and shall, within 90 days, call a meeting of General
Partners for the purpose of designating a successor General Partner. Any
such successor General Partner shall hold such office until the next tri-
annual meeting of Partners or until his or her successor has been approved
and elected. The General Partners shall make such amendments to the
certificate of limited partnership and to this Agreement and execute and
file for recordation such amendments or other documents or instruments as
are necessary to reflect the termination of the Partnership Interest of the
Incapacitated General Partner, the fact that such Incapacitated General
Partner has ceased to be a General Partner, and the appointment of such
successor General Partner.
(b) In the event of the Incapacity of all General Partners, the
Partnership shall be dissolved. Upon the Incapacity of all General Partners,
each General Partner shall immediately cease to be a General Partner and its
Partnership Interest, as such, shall continue only for the purpose of
determining the amount, if any, that it is entitled to receive upon any
dissolution pursuant to Section 15.01.
(c) Any such termination of a General Partner shall not affect any rights or
liabilities of the Incapacitated General Partner that matured prior to such
Incapacity.
12.05 Admission of a Successor General Partner.
(a) The admission of any successor General Partner pursuant to Sections
12.01, 12.02, or 12.03, as the case may be, shall be effective only if and
after the following conditions are satisfied: (i) the designation of such
Person as successor General Partner shall occur, and for all purposes shall
be deemed to have occurred, prior to the withdrawal or removal of the
withdrawing or removed General Partner, or transfer of the withdrawing
or removed General Partner's Partnership Interest, pursuant to Sections
12.01, 12.02, or 12.03, as the case may be; (ii) the Partnership Interests of
the Limited Partners shall not be affected by the admission of such
successor General Partner or the transfer of the General Partner's
Partnership Interest; and (iii) the certificate of limited partnership and this
Agreement shall be amended to reflect the admission of a successor
General Partner.
(b) A General Partner shall not have the right to transfer or assign its
Partnership Interest, except that a General Partner may: (i) transfer its
Partnership Interest to a successor General Partner pursuant to Section
12.01 or 12.02; (ii) substitute instead as a successor General Partner any
Person that has, by merger, consolidation, or otherwise, acquired
substantially all of its assets and continued its business and such Person
shall be substituted prior to the occurrence of such event, as a successor
General Partner; and (iii) pledge or grant an interest in its right to receive
payments and distributions under this Agreement (in such event the
General Partner shall continue to be the general partner of the
Partnership). Each Limited Partner hereby consents to the admission of
any additional or successor General Partner pursuant to this Section
12.05(b), and no further consent or approval shall be required.
(c) Notwithstanding anything to the contrary in this Article 12, a General
Partner's Partnership Interest shall at all times be subject to the
restrictions on transfer set forth in Section 13.01.
12.06 Liability of a Withdrawn or Removed General Partner. Any General
Partner who shall withdraw or be removed from the Partnership, or who shall
sell, transfer, or assign its Partnership Interest, shall remain liable for
obligations and liabilities incurred by it as General Partner prior to the
time such withdrawal, removal, sale, transfer, or assignment shall have become
effective, but it shall be free of any obligation or liability incurred on
account of the activities of the Partnership from and after the time such
withdrawal, removal, sale, transfer, or assignment shall have become effective.
12.07 Consent of Limited Partners to Admission of Successor General Partners.
Subject to Section 14.02, each Limited Partner hereby consents pursuant to
Section 12.02 to the admission of any Person as a successor General Partner
meeting the requirements of Section 12.02 to whose admission as such a Majority
in Interest of the Limited Partners have expressly consented, and no further
express consent or approval shall be required.
12.08 Continuation. In the event of the withdrawal, removal, or retirement
of a General Partner, or the transfer or assignment by a General Partner of its
Partnership Interest, the Partnership shall not be dissolved and the business
of the Partnership shall be continued by the remaining General Partners.
ARTICLE 13
TRANSFERABILITY OF A LIMITED PARTNER'S PARTNERSHIP INTEREST
13.01 Restrictions on Transfer.
(a) Opinion of Counsel. Notwithstanding any other provisions of this Section
13.01, no sale, exchange, transfer, or assignment of a Unit 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 Units 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 and 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 Unit 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 Units 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 Unit 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 Unit 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 Unit will be permitted or recognized for any
purpose unless (1) 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 Units or that provides
a readily available, regular, and ongoing opportunity to Partnership
Unit holders to sell or exchange their Partnership Units through a public
means of obtaining or providing information of offers to buy, sell, or
exchange Units and (2) 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 Unit 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 Unit 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 Units)
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 deter-mined, 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) Sale to General Partner. No purported sale, exchange, assignment, or
transfer of a Partnership Unit may be made to anyone with any direct or
indirect interest in any General Partner or any Affiliate of any General
Partner, without approval of the General Partners.
(j) 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.
(k) 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 Partnership 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 and 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 6.01 or 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 and reasonably satisfactory to the Partnership 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 6.01 or 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. Any opinion provided pursuant to this Section
14.02 shall be paid for by the Partnership.
14.03 Action by the Individual General Partners. The Individual General
Partners 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 of the Individual General
Partners. Meetings of the Individual General Partners may be called by any two
General Partners. Subject to the requirements of the 1940 Act, the Individual
General Partners by majority vote may delegate to any one of its number, or a
committee thereof, its authority to approve particular matters or direct the
Managing General Partners to take particular actions on behalf of the
Partnership. A quorum for all meetings of the Individual General Partners shall
be a majority of the Individual General Partners.
14.04 Tri-Annual Meetings. Action by the General Partners and Limited
Partners may be taken at a meeting of the General Partners and Limited
Partners. The Individual General Partners shall call tri-annual meetings of
Limited Partners for the purpose of the approval and election of General
Partners and approving the auditors, at which meetings any other matter
requiring the consent of all or any of the Limited Partners pursuant to this
Agreement or the 1940 Act may be acted upon. Notification of such a meeting
of Partners shall be given by the Individual General Partners 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 Individual
General Partners 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
Individual General Partners a proxy solely for those matters noticed for and
acted upon at that meeting. Such proxy shall be voted by a majority of the
Individual General Partners, 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 Individual General Partners, in their 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; provided,
however, that, if a meeting is called at the request of certain Limited
Partners, such meeting shall be held at a time and place convenient to those
Limited Partners. 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
Individual General Partners 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 Individual General Partners, including a majority of the
Independent General Partners.
14.06 Action Without a Meeting. Any action that may be taken at a Partnership
meeting may be taken without a meeting if consent in writing setting forth the
action to be taken is signed by the Partners holding not less than the minimum
percentage of Units that would be necessary to authorize or take such action at
a meeting at which all the Partners were present and voted. Each Partner shall
be given notice of the matters to be voted upon in the same manner as described
in Sections 14.04 and 14.05. The date on which votes will be counted shall be
not less than 10 or more than 60 days following mailing of the notice.
14.07 Approval and Election of General Partners. In the approval and election
of Individual General Partners, those candidates receiving the highest number
of votes cast, at a meeting at which a Majority in Interest of the Limited
Partners is present in Person or by proxy, up to the number of Individual
General Partners proposed to be approved and elected, shall be approved and
elected to serve until the next tri-annual meeting or until their successors
are duly approved, elected and qualified; and each Limited Partner shall have
one vote for each Unit owned by such Limited Partner. In the approval and
election of the Managing General Partners, the two candidates receiving the
highest numbers of votes cast shall be approved and elected pursuant to the
foregoing provision. Any vote for the approval and election of General
Partners shall be subject to the limitations of Section 14.02.
14.08 Record Dates. The Individual General Partners 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 Affiliates' Units to be Non-Voting. Any Units purchased by the General
Partners or their Affiliates shall be non-voting, except for a vote pursuant
to the last paragraph of Section 15.01.
14.11 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 his or its entire 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; and
(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 (i) at the time there is a remaining
General Partner who carries on the business of the Partnership, or (ii) within
90 days after such event, all Partners agree in writing to continue the
business of the Partnership and to 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 Individual General Partners, if any remain, 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 otherwise 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 which reasonable provision for payment has been made and
liabilities for distributions to Partners, in the order of priority as provided
by law;
(b) to the payment of liabilities for distributions to Limited Partners in
order of priority as provided by law;
(c) to the payment of liabilities for distributions to Individual General
Partners in order of priority as provided by law;
(d) to the payment of liabilities for distributions to the Managing General
Partners in order of priority as provided by law; then
(e) 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. 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, and, upon the filing of a certificate of
cancellation as required under DRULPA, 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) the individual general partners of TFL shall not remove themselves from
personal liability for Partnership obligations unless there remains at least
one individual personally liable for Partnership obligations, or until TFI
and any other corporate general partner have and agree to maintain
throughout the duration of the Partnership a net worth determined with
respect to the fair market value of their then assets of not less than 10% of
the total capital contributions to the Partnership;
(b) 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).
ARTICLE 18
SPECIAL POWER OF ATTORNEY
18.01 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 18.01(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.
18.02 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.
18.03 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.
18.04 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 19
MISCELLANEOUS
19.01 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.
19.02 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.
19.03 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.
19.04 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.19.05 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 at least 50 Limited Partners
may be made by regular mail, postage prepaid, addressed as above unless they
represent a notice of meeting called by Limited Partners pursuant to Section
6.01 to (1) amend this Agreement, (2) dissolve the Partnership, (3) remove the
General Partner(s) and elect a new general partner, or (4) approve or
disapprove the sale of all or substantially all of the assets of the
Partnership. All notices shall be deemed effective upon receipt or five days
after the date of mailing in accordance with the above provisions.
19.06 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.
19.07 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.
19.08 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.
19.09 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 Individual General Partners to reflect restrictions upon
transfer contemplated herein.
EXECUTED as of February 27, 2006, at Santa Fe, New Mexico.
THE MANAGING GENERAL PARTNERS
TECHNOLOGY FUNDING INC. TECHNOLOGY FUNDING LTD.
Managing General Partner Managing General Partner
By:/s/XXXXXXX X. XXXXXX By: /s/XXXXXXX X. XXXXXX
Xxxxxxx X. Xxxxxx, President Xxxxxxx X. Xxxxxx, General Partner
THE INDIVIDUAL GENERAL PARTNERS
/s/ XXXXX X. XXXXX
Xxxxx X. Xxxxx
/s/ XXXXXXX X. XXXXXX
Xxxxxxx X. Xxxxxx
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
