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EXHIBIT 10.5
RSA VENTURES I, L.P.
(A Delaware Limited Partnership)
LIMITED PARTNERSHIP AGREEMENT
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
RSA VENTURES I, L.P. AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND
RISKS INVOLVED. THE LIMITED PARTNERSHIP INTERESTS REPRESENTED BY THIS LIMITED
PARTNERSHIP AGREEMENT HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE LIMITED PARTNERSHIP INTERESTS REPRESENTED BY THIS LIMITED PARTNERSHIP
AGREEMENT ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION
OR EXEMPTION THEREFROM, AND, IN GENERAL, WITH THE APPROVAL OF THE GENERAL
PARTNER. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE RISKS
OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
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RSA VENTURES I, L.P.
Limited Partnership Agreement
Table of Contents
Page
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1. Firm Name; Registered Office and Agent......................................................................1
2. Principal Purpose; Powers...................................................................................1
(a) Principal Purpose....................................................................................1
(b) Powers...............................................................................................1
3. General Partner.............................................................................................2
(a) Name; Address; Subscription..........................................................................2
(b) Control..............................................................................................2
(c) Management Agreement.................................................................................2
(d) Fees and Commissions.................................................................................2
(e) Salaries.............................................................................................3
(f) Preserving Limited Liability of Limited Partners ....................................................3
(g) Standard of Care.....................................................................................4
(h) Guaranties...........................................................................................4
(i) Leverage ............................................................................................4
(j) Conduct of Business .................................................................................5
(k) Letter Agreement.....................................................................................8
(l) Co-investments ......................................................................................8
(m) Investment Limitations...............................................................................9
(n) Investments in New Portfolio Companies..............................................................10
(o) Classification as Partnership.......................................................................10
4. Limited Partners...........................................................................................11
(a) Names; Addresses; Subscriptions.....................................................................11
(b) Limited Liability...................................................................................11
(c) Fiduciary Duty......................................................................................11
5. Advisory Committee.........................................................................................11
(a) Members.............................................................................................11
(b) Meetings............................................................................................12
(c) Functions...........................................................................................12
(d) Rules and Procedures................................................................................12
(e) Standard of Care....................................................................................12
6. Capital of the Partnership; Admission of Limited Partners..................................................13
(a) Capital Contributions...............................................................................13
(b) Defaults on Contributions...........................................................................13
(c) Permissive Additional Admissions....................................................................16
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(d) Consensual Additional Admissions....................................................................17
(e) Amendment and Effective Date........................................................................17
(f) Certain Limitations ................................................................................18
7. Accounts...................................................................................................18
(a) Contributions Accounts..............................................................................18
(b) Capital Accounts....................................................................................18
(c) Distributions in Kind...............................................................................19
8. Allocations................................................................................................19
(a) Allocations Generally...............................................................................19
(b) Loss Allocation Limitations.........................................................................20
(c) Certain Definitions.................................................................................21
(d) Tax Regulatory Provisions...........................................................................22
(e) Changes in Partners' Interests......................................................................23
(f) Tax Allocations ....................................................................................24
(g) Tax Withholding.....................................................................................24
(h) Adjustments to Allocations..........................................................................25
9. Distributions..............................................................................................26
(a) Tax Distributions...................................................................................26
(b) Discretionary Distributions - in General............................................................28
(c) Apportionment of Discretionary Distributions........................................................28
(d) Distributions in Kind...............................................................................31
(e) Limitations on Distributions........................................................................31
10. Valuation of Partnership Assets............................................................................33
(a) Valuations by General Partner.......................................................................33
(b) Fair Market Value...................................................................................33
(c) Freely Tradeable Securities.........................................................................34
(d) Disputed Valuations.................................................................................34
11. Term of Partnership; Dissolution...........................................................................35
(a) Term of Partnership.................................................................................35
(b) Dissolution.........................................................................................35
12. Liquidation of Partnership Interests.......................................................................35
(a) General Provisions..................................................................................35
(b) Liquidation Distributions...........................................................................35
(c) Expenses of Liquidators.............................................................................36
(d) Standard of Care....................................................................................37
(e) General Partner's Return Obligation.................................................................37
(f) Post-Dissolution Investments .......................................................................38
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13. Limitation on Assignability of Interests of Limited Partners...............................................38
14. Limitation on Assignability of Interest of General Partner.................................................42
15. Withdrawal of Partnership..................................................................................42
16. Indemnification............................................................................................42
17. Fiscal Year; Records and Reports; Accounting Method; Offering Expenses; Principal Office...................44
(a) Fiscal Year.........................................................................................44
(b) Partnership Records.................................................................................44
(c) Annual Financial Statements.........................................................................45
(d) Quarterly Financial Statements......................................................................45
(e) Independent Public Accountants......................................................................46
(f) Offering Expenses ..................................................................................46
(g) Principal Office....................................................................................46
(h) Section 1045 Elections..............................................................................46
(i) Annual Meeting. ....................................................................................47
18. Amendment..................................................................................................48
19. ERISA Withdrawal...........................................................................................51
20. Foreign Controlled Partner Withdrawal......................................................................54
21. Foundation Limited Partners................................................................................54
(a) Private Foundations Compliance Provisions...........................................................54
(b) Foundation Limited Partner Withdrawal...............................................................56
22. General Provisions.........................................................................................57
(a) Notices.............................................................................................57
(b) Power of Attorney...................................................................................57
(c) Additional Documents................................................................................59
(d) Binding on Successors...............................................................................59
(e) Counterparts........................................................................................59
(f) Action by the Limited Partners .....................................................................59
(g) Voting..............................................................................................61
(h) Applicable Law......................................................................................61
(i) Securities Act Matters .............................................................................62
(j) Tax Matters Partner ................................................................................62
(k) Contract Construction...............................................................................62
(l) Schedules ..........................................................................................62
23. Definitions................................................................................................62
Subscriptions of Partners....................................Schedule A
Management Agreement.........................................Schedule B
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Letter Agreement.............................................Schedule C
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LIMITED PARTNERSHIP AGREEMENT (the "Agreement"), dated as of this 10th
day of April, 2001, by and among RSA Partners I, L.P., a Delaware limited
partnership, as general partner (such general partner being referred to herein
as the "General Partner"); and those persons and entities listed in Schedule A
hereto, as limited partners (such limited partners, and any additional limited
partners admitted to the Partnership after the date of this Agreement, being
referred to herein as the "Limited Partners"). The General Partner and Limited
Partners are sometimes referred to herein collectively as the "Partners".
The Partners agree to carry on a limited partnership (the
"Partnership") subject to the terms of this Agreement in accordance with the
provisions of the Delaware Revised Uniform Limited Partnership Act, as amended
(the "Delaware Act").
1. Firm Name; Registered Office and Agent. The name of the Partnership
is RSA Ventures I, L.P. The initial address of the Partnership's registered
office in Delaware is Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ of New Castle, and its initial registered agent at such address for
service of process is The Corporation Trust Company.
2. Principal Purpose; Powers.
(a) Principal Purpose. The principal purpose of the
Partnership is to achieve a superior rate of return on its capital for its
Partners by making venture capital investments, generally in the form of equity
or equity-related securities, primarily in privately-held, information
technology and service companies in various stages of development, and otherwise
to engage in any lawful activity for which limited partnerships may be organized
under the laws of the State of Delaware.
(b) Powers. Subject to all of the terms and provisions hereof,
the Partnership shall have all the powers available to it as a limited
partnership under the laws of the State of Delaware.
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3. General Partner.
(a) Name; Address; Subscription. The name and address of
the General Partner and its Subscription (as defined in Paragraph 6(a)) are set
forth in Schedule A. Schedule A shall be amended from time to time to reflect
any increase in the Subscription of the General Partner and any reduction or
termination of the obligation of the General Partner to contribute additional
capital to the Partnership.
(b) Control. The management, policies and control of the
affairs of the Partnership shall be vested exclusively in the General Partner.
The Partnership's advisory committee (the "Advisory Committee") established
pursuant to Paragraph 5 and the Limited Partners may, to the extent expressly
provided in this Agreement, possess or exercise any of the powers, or have or
act in any of the capacities, permitted under Section 17-303(b) of the Delaware
Act.
(c) Management Agreement. The Partnership entered into a
Management Agreement dated as of the date first above written, with RSA
Ventures, Inc., a Delaware corporation which is the sole general partner of the
General Partner (the "Management Company"), in the form attached hereto as
Schedule B (as amended from time to time, the "Management Agreement").
(d) Fees and Commissions. The General Partner shall be
permitted to receive fees, commissions or other compensation from persons or
entities other than the Partnership; provided, however, that so long as the
management fee is payable to the Management Company pursuant to the Management
Agreement (the "Management Fee"), any directors' fees, consulting fees or other
remuneration (whether in cash or otherwise) received by or on behalf of the
General Partner for services rendered to a Partnership Portfolio Company (as
defined in Paragraph 3(m) herein) shall, subject to the following sentence, be
received by it on behalf of the Management Company, be remitted to the
Management Company and be applied to reduce the Management Fee payable to the
Management Company on a dollar-for-dollar basis as set forth in the Management
Agreement. If the General Partner receives any such remuneration described in
the
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preceding sentence paid by any Partnership Portfolio Company in which the
Partnership and any Successor Fund (as defined below) hold an investment, the
General Partner shall determine that portion of such amount to be remitted to
the Management Company and to be applied to reduce the Management Fee, based on
the relative amount invested in such Partnership Portfolio Company by the
Partnership and all Successor Funds. Any future venture capital fund organized
or controlled directly or indirectly by RSA Security Inc., a Delaware
corporation which is the ultimate parent company of the Management Company
("RSA"), is referred to herein as a "Successor Fund."
(e) Salaries. While the Management Agreement is in
effect, the General Partner shall not receive fees, commissions or other
compensation from the Partnership and the partners of the General Partner shall
not receive salaries from the Partnership. If the Management Agreement is
terminated:
(i) the General Partner shall assume and
perform the services theretofore performed by the
Management Company under the Management Agreement and
shall be entitled to receive fees from the
Partnership therefor; provided, however, that except
as otherwise approved by at least 75% in interest of
the Limited Partners, such fees shall not exceed the
amount that would have been payable to the Management
Company under the Management Agreement had it not
been terminated; and
(ii) the individual partners of the General
Partner shall be entitled to receive salaries from
the Partnership, provided that such salaries shall be
paid by the General Partner.
(f) Preserving Limited Liability of Limited Partners. The
General Partner has filed with the appropriate public authorities the
certificate of limited partnership of the Partnership and shall file with such
authorities any amendments thereto and take all such other
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action as may be required to preserve the limited liability of the Limited
Partners in any jurisdiction in which the Partnership shall conduct its affairs.
(g) Standard of Care. It is recognized that decisions
concerning investments or potential investments involve exercise of judgment and
the risk of loss. The General Partner, the Management Company, RSA and their
respective partners, directors, officers, employees, agents, stockholders and
affiliates shall not incur any liability to the Partnership or any other Partner
for any loss suffered by the Partnership or any other Partner which arises out
of any such investment or any other action or inaction on the part of the
General Partner, the Management Company, RSA or any of their respective
partners, directors, officers, employees, agents, stockholders and affiliates,
provided that in any such case (i) the General Partner, the Management Company,
RSA or such partner, director, officer, employee, agent, stockholder or
affiliate thereof acted in good faith and in a manner such person or entity
reasonably believed to be in or not opposed to the best interests of the
Partnership and (ii) such course of conduct did not constitute gross negligence,
willful misconduct or fraud on the part of the such person or entity. The
General Partner, the Management Company, RSA and their respective partners,
directors, officers, employees, stockholders, agents and affiliates shall be
fully protected and justified with respect to any action or omission taken or
suffered by any of them in good faith if such action or omission is taken or
suffered in reliance upon and in accordance with the opinion or advice as to
matters of law of legal counsel or as to matters of accounting of accountants
retained by the General Partner or the Management Company with reasonable care.
(h) Guaranties. Except as may otherwise be approved by
the Advisory Committee, in no event shall the sum of the Partnership's aggregate
(i) net payments pursuant to all guaranties and other agreements in the nature
of a guaranty with respect to the indebtedness of any other person, including
without limitation any Partnership Portfolio Company, and (ii) contingent
liabilities pursuant to all such outstanding guaranties and agreements exceed at
any time 10% of the aggregate Subscriptions of all Partners.
(i) Leverage. The Partnership shall not borrow money.
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(j) Conduct of Business. Notwithstanding anything to the
contrary in this Agreement, the General Partner shall conduct the affairs of the
Partnership in accordance with the following requirements:
(i) The General Partner shall use its
reasonable commercial efforts to conduct the affairs
of the Partnership in a manner that does not cause
any Limited Partner or partner of any Limited Partner
exempt from income taxation pursuant to Section 501
of the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder (such Act,
together with such rules and regulations, being
referred to in this Agreement as the "Code") to have
any "unrelated business taxable income", including
without limitation any "unrelated debt-financed
income" (as those terms are defined in Sections 512
and 514 of the Code), or gross income directly
attributable to a "trade or business" (within the
meaning of Sections 512 and 513 of the Code).
(ii) The General Partner shall use its best
efforts to conduct the affairs of the Partnership in
such a way that the assets of the Partnership will
not be deemed to constitute "plan assets" of any
ERISA Partner (as such term is defined in Paragraph
19) within the meaning of the Plan Asset Regulations
of the Department of Labor, 29 CFR 2510.3-101 (the
"Plan Asset Regulations"). Without limiting the
generality of the foregoing sentence, the General
Partner shall, beginning on the date on which the
Partnership first makes "an investment that is not a
short-term investment of funds pending long-term
commitment" (the "Initial Investment Date"), cause
the Partnership at all times to qualify as a "venture
capital operating company" within the meaning of the
Plan Asset Regulations.
(iii) The General Partner shall use its
reasonable commercial efforts to avoid (A) making
investments in any corporation that is a
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United States Real Property Holding Corporation
within the meaning of Section 897(c)(2) of the Code
and (B) the imposition of United States federal
income tax pursuant to Section 897(a) of the Code on
the share attributable to any Foreign Limited Partner
(as defined below) of the gain on the disposition of
a Partnership Portfolio Company's stock or securities
or the disposition by the Partnership of any United
States Real Property Interest as defined in Section
897(c) of the Code or on the gain realized by any
Foreign Limited Partner on the disposition of all or
any part of its direct or indirect interest in the
Partnership, if and to the extent any such tax would
be imposed solely as a result of the activities or
investments of the Partnership. In the case of any
transfer by a Foreign Controlled Partner (as defined
in Paragraph 20) of its interest in the Partnership,
the General Partner, at the written request of such
Foreign Controlled Partner, shall use its reasonable
commercial efforts to provide a statement pursuant to
Treasury Regulation Section 1.1445-11T(d)(2); in the
case of any disposition of Investment Securities (as
defined in Paragraph 3(n)) by the Partnership which
may give rise to a United States federal income tax
pursuant to Section 897(a) of the Code, the General
Partner, at the written request of any Foreign
Controlled Partner, shall use its reasonable
commercial efforts to obtain from the relevant
Partnership Portfolio Company a statement described
in Treasury Regulation Section 1.897-2(h) pursuant to
Treasury Regulation Section 1.1445-5(b)(4)(iii). For
purposes of this Agreement, the term "Foreign Limited
Partner" shall mean either (x) any Limited Partner
which is a "nonresident alien" within the meaning of
Section 7701(b)(1)(B) of the Code, a foreign
corporation or partnership within the meaning of
Section 7701(a)(5) of the Code, or a foreign trust or
estate within the meaning of Section 7701(a)(31) of
the Code, or (y) a partner or other
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beneficial owner of a Limited Partner which would be
a Foreign Limited Partner under clause (x) of this
sentence if it were a Limited Partner.
(iv) The General Partner shall use its best
efforts to conduct the affairs of the Partnership so
that neither the Partnership nor any Limited Partner
engages in any non-exempt "prohibited transaction"
within the meaning of Section 406 of ERISA (as
defined in Paragraph 6(b)) or Section 4975(c) of the
Code as a result of any activity of the Partnership.
(v) The General Partner shall use its
reasonable commercial efforts to conduct the affairs
of the Partnership so that no Foreign Limited Partner
shall be deemed to be engaged in a "trade or
business" within the United States for purposes of
Section 872(a)(2), 875, 882 or 884(d)(1) of the Code
solely by virtue of the activities or investments of
the Partnership.
(vi) If any Limited Partner that is a
"private foundation" (as defined in Section 509(a) of
the Code) or a "charitable remainder unitrust" (as
defined in Section 664(d)(2) of the Code)
(collectively, a "Foundation Limited Partner")
provides the General Partner with a list designating
(A) the "disqualified persons" (as defined in Section
4946 of the Code) (the "Disqualified Persons") with
respect to such Foundation Limited Partner, and (B)
the other investment funds in which such Foundation
Limited Partner has invested (the "Designated
Investments"), the General Partner shall use its
reasonable commercial efforts to conduct the affairs
of the Partnership so that such Foundation Limited
Partner (or any affiliate of such Foundation Limited
Partner), solely as a result of its participation in
the Partnership, will not be subject to or incur a
liability for any excise tax under Section 4941 or
Sections 4943 through 4945 of the Code. The General
Partner may rely on the accuracy and completeness of
such list
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until it is provided with any successor thereto by
such Foundation Limited Partner. More particularly,
if and to the extent that a relevant Disqualified
Person or Designated Investment with respect to a
Foundation Limited Partner is not set forth on the
list provided to the General Partner by such
Foundation Limited Partner on a timely basis, or if
no such list is provided to the General Partner by
such Foundation Limited Partner on a timely basis,
then the General Partner shall have no obligation
(but shall retain all rights) with respect to such
Foundation Limited Partner and such Foundation
Limited Partner shall have no rights pursuant to the
special provisions applicable to Foundation Limited
Partners generally in this Paragraph 3(j)(vi) or in
Paragraphs 6(b), 9(e)(iv), 12(b)(iii) or 21. In
determining whether the information to be provided on
such a list has been provided on a timely basis, the
General Partner in selecting investments for the
Partnership shall be entitled to rely on the
information (or lack thereof) that has been provided
by a Foundation Limited Partner at least 10 days in
advance of the date of any investment in a
Partnership Portfolio Company.
(k) Letter Agreement. Each of the Applicable Persons (as
defined below) shall execute and deliver to the Limited Partners a letter
agreement in the form attached hereto as Schedule C (as amended from time to
time, the "Letter Agreement"). "Applicable Persons" shall mean each of the
officers, directors and investment committee members of the Management Company,
each of the non-retired limited partners of the General Partner and RSA.
(l) Co-investments. The Partnership shall not knowingly
make an initial investment in any Investment Securities issued by a
privately-held company in which any Applicable Person has a preexisting
investment, except with the consent of the Advisory Committee. Securities
intended to achieve the Partnership's investment objective are sometimes
referred to herein as "Investment Securities."
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(m) Investment Limitations. Without the consent of the
Advisory Committee, the Partnership shall not invest in partnerships or other
entities whose principal objective, at the time the investment is made, is
stated to be the making of investments in other companies or private equity
funds, and whose controlling persons are entitled to a disproportionate share of
the profits of such entity relative to such persons' capital contributions to
such entity. Without the consent of the Advisory Committee, the Partnership
shall also not invest in, or invest in order to finance a tender offer for, a
publicly-held company if such investment or tender offer is actively opposed by
the board of directors of such company. In addition, without approval of the
Advisory Committee, the amount that may be invested by the Partnership, for the
purpose of achieving its investment objective, in all
(i) Investment Securities that, at the time
such investments are made, are either listed on a
national securities exchange or carried on the Nasdaq
system, except for investments made in issuers in
which the Partnership holds an interest which was
acquired prior to the time such issuer was listed on
a national securities exchange or carried on the
Nasdaq system, as the case may be, may not, at the
time any such investment is made, exceed in the
aggregate 5% of the aggregate Subscriptions of all
Partners;
(ii) Investment Securities issued by any one
Partnership Portfolio Company (including any direct
or indirect parent or subsidiary thereof) (net of the
proceeds to the Partnership resulting from any
redemptions, repayments, sales and any other
dispositions (collectively, "Dispositions"), if any,
with respect to such Investment Securities) may not,
at the time any such investment is made, exceed in
the aggregate (A) 10% of the aggregate Subscriptions
of all Partners less (B) the sum of the Partnership's
aggregate net payments pursuant to all guaranties and
agreements (of the type referred to in Paragraph
3(h)) with respect to such
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Partnership Portfolio Company (including any such
direct or indirect parent or subsidiary thereof) and
the Partnership's aggregate contingent liabilities
pursuant to all such outstanding guaranties and
agreements with respect to such Partnership Portfolio
Company (including any such direct or indirect parent
or subsidiary thereof); or
(iii) Investment Securities of Partnership
Portfolio Companies may not exceed in the aggregate
110% of the aggregate Subscriptions of all Partners.
For purposes of this Paragraph 3(m), the amount invested by the
Partnership shall be the price paid by the Partnership to acquire the security,
and for purposes of subparagraph (ii) above, the value of each distribution to
the Partners in kind (determined at the time of the distribution and in the
manner provided in Paragraph 10) of a security referred to in or contemplated by
such subparagraph shall be deemed to be proceeds to the Partnership of a
Disposition of such security. An entity in which the Partnership has an
investment in Investment Securities is sometimes referred to herein as a
"Partnership Portfolio Company."
(n) Investments in New Portfolio Companies. From and
after December 31, 2006, the Partnership shall not invest in Investment
Securities issued by any entity that was not a Partnership Portfolio Company (or
a successor to or direct or indirect parent or subsidiary of a Partnership
Portfolio Company) on December 31, 2006, except as otherwise approved by the
Advisory Committee.
(o) Classification as Partnership. The General Partner
agrees that it (i) will not cause or permit the Partnership to elect (A) to be
excluded from the provisions of Subchapter K of the Code or (B) to be treated as
a corporation for United States federal income tax purposes; (ii) will cause the
Partnership to make any election reasonably necessary or appropriate in order to
ensure the treatment of the Partnership as a partnership for United States
federal income tax purposes; (iii) will cause the Partnership to file any
required tax returns in a manner consistent with its treatment as a partnership
for United States federal income tax purposes; and (iv) has not
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taken, and will use reasonable efforts not to take, any action that would be
inconsistent with the treatment of the Partnership as a partnership for such
purposes.
4. Limited Partners.
(a) Names; Addresses; Subscriptions. The names and
business or residence addresses of the Limited Partners and their respective
Subscriptions are set forth in Schedule A. Schedule A shall be amended from time
to time to reflect any increase in the Subscription of any Limited Partner, the
withdrawal of any Limited Partner, the admission of any additional Limited
Partner, the transfer of all or any part of the interest of any Limited Partner
and any reduction or termination of the obligation of any Limited Partner to
contribute additional capital to the Partnership.
(b) Limited Liability. The liability of each of the
Limited Partners to the Partnership under the Delaware Act shall be limited to
(i) any unpaid capital contributions which he agreed to make to the Partnership,
to the extent provided in Section 17-502(b) of the Delaware Act; (ii) the amount
of any distribution which he is required to return to the Partnership pursuant
to the Delaware Act; and (iii) any amount which he is required to pay to the
Partnership pursuant to Paragraph 8(g) or 9(a) of this Agreement. None of the
Limited Partners, in their respective capacities as such, shall take any part in
the control of the affairs of the Partnership, conduct any affairs of the
Partnership, or have any power to sign for or to bind the Partnership.
(c) Fiduciary Duty. The Limited Partners acknowledge and agree
that the individual officers and directors of RSA who are not Applicable Persons
have no fiduciary or other duties to the Partnership or the Partners.
5. Advisory Committee.
(a) Members. The Partnership shall have an Advisory
Committee which shall consist of at least three members chosen by the General
Partner from among persons associated with the Limited Partners; provided that a
majority of such members shall be persons who are unaffiliated with RSA or the
General Partner. The members of the Advisory Committee may select a Chairman
from among their membership. Any member of the Advisory Committee may
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be removed at any time, with or without cause, by the General Partner with the
approval of either a majority of the other members or at least 75% in interest
of the Limited Partners.
(b) Meetings. The Advisory Committee shall meet in
person, by telephone conference call or by written consent not less frequently
than on a quarterly basis.
(c) Functions. The functions of the Advisory Committee
shall be (i) to resolve any questions relating to a potential conflict of
interest between the Partnership and any Applicable Person that are presented to
it by the General Partner; (ii) to resolve any additional questions relating to
a potential conflict of interest between the Partnership and any other person or
entity that are presented to the Advisory Committee by the General Partner;
(iii) except as otherwise provided by this Agreement, to approve or disapprove
the following matters which have been authorized or established by the General
Partner: (A) all valuations of Investment Securities owned by the Partnership,
(B) certain distributions to the Partners, as provided in Paragraphs 9, 19 and
21, (C) certain guaranties by the Partnership provided in Paragraph 3(h), and
(D) certain investments by the Partnership, as provided in Paragraphs 3(l), (m)
and (n); and (iv) such other functions as are provided for in this Agreement.
All approvals, disapprovals and other actions taken by the Advisory Committee
shall be authorized by a majority of the Advisory Committee members then holding
office.
(d) Rules and Procedures. The Advisory Committee shall
have the authority to adopt rules and procedures, not inconsistent with this
Agreement, relating to the conduct of its affairs.
(e) Standard of Care. The members of the Advisory
Committee shall exercise their best judgment in carrying out their functions for
the Partnership. The members of the Advisory Committee shall not be liable to
any Partner or the Partnership for honest mistakes of judgment or for losses due
to such mistakes. Each member of the Advisory Committee shall be fully protected
and justified with respect to any action or omission taken or suffered by him in
good faith if such action or omission is taken or suffered in reliance upon and
in accordance with
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the opinion or advice as to matters of law of legal counsel, or as to matters of
accounting of accountants, selected by him with reasonable care.
6. Capital of the Partnership; Admission of Limited Partners.
(a) Capital Contributions. Each of the Partners shall
contribute to the capital of the Partnership on the date of this Agreement, an
amount equal to 10% of the total amount set forth opposite his or its name under
the column marked "Subscription" in Schedule A (the "Subscription"); provided,
however that if participation in the Partnership by "benefit plan investors" is
"significant" (as those terms are defined in the Plan Asset Regulations), then
the initial contribution by ERISA Partners shall be deferred until the Initial
Investment Date. In addition, each of the Partners shall, from time to time when
called by the General Partner, contribute to the capital of the Partnership the
additional amounts necessary to increase the aggregate amount of its
contributions to the Partnership to an amount equal to, but not in excess of,
its Subscription. Not less than 10 days' prior written notice shall be given to
each Limited Partner by the General Partner as to the date for each additional
capital contribution. Such notice shall be given by personal delivery or
telecopy. The amount of capital required to be contributed by each Partner on
each occasion of a capital contribution shall be computed by the General Partner
so that each Partner contributes that portion of the aggregate capital
contribution to be made by all Partners at such time which such Partner's
Subscription bears to the total Subscriptions of all Partners. All capital
contributions shall be made in cash in United States dollars. Notwithstanding
anything to the contrary contained in this Agreement, the General Partner may at
any time, by written notice to the Partners, reduce or terminate all outstanding
commitments of the Partners to make further capital contributions to the
Partnership and, upon the giving of such notice, the obligation of the Partners
to contribute additional capital to the Partnership shall be reduced or
terminated, as the case may be, in which instance Schedule A shall be amended to
reflect such occurrence.
(b) Defaults on Contributions. If a Partner does not make
a capital contribution required by Paragraph 6(a) when due, notice of default
shall be given to him by the
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19
General Partner by certified or registered mail. If the full amount of such
contribution is not received by the Partnership within 10 days after the mailing
of such notice, as liquidated and agreed damages to the non-defaulting Partners
for such default (it being agreed that it would be difficult to fix the actual
damages to such Partners), each of such defaulting Partner's Contributions
Account and Capital Account established pursuant to Paragraph 7 shall be reduced
by an amount equal to 75% of each such account, each of which 75% amount shall
thereupon become unrestricted funds of the Partnership and shall be allocated,
in the case of the Contributions Account amount, pro rata to and among the
respective Contributions Accounts of the non-defaulting Partners in such
proportion as the Contributions Account of each such non-defaulting Partner then
bears to the sum of the Contributions Accounts of all non-defaulting Partners,
and, in the case of the Capital Account amount, pro rata to and among the
respective Capital Accounts of the non-defaulting Partners in such proportion as
the Capital Account of each such non-defaulting Partner then bears to the sum of
the Capital Accounts of all non-defaulting Partners.
The application of the aforesaid liquidated damages provisions with
respect to any defaulting Partner shall not relieve such Partner of his
obligation to make any subsequent required capital contribution when due or
relieve such Partner from the application of the aforesaid liquidated damages
provisions as to any such subsequent required capital contribution if he
defaults with respect thereto. Except as provided below, a Partner may not make
less than the full amount of any required capital contribution. Notwithstanding
the foregoing, if, at any time before a capital contribution required by
Paragraph 6(a) becomes due, a Limited Partner shall obtain and deliver to the
Partnership an opinion of counsel (which counsel shall be reasonably acceptable
to the General Partner) to the effect that (A) the payment by such Limited
Partner of any portion of any remaining capital contributions required by
Paragraph 6(a) will be unlawful or that there is a material likelihood that such
payment will be unlawful, (B) in the case of a Limited Partner who is an ERISA
Partner, by reason of the payment of such portion, there is a material
likelihood that as a result of a change in law occurring after the date of such
ERISA
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20
Partner's admission to the Partnership, such ERISA Partner (or any employee
benefit plan subject to ERISA that is an investor, directly or indirectly, in
such ERISA Partner) or the Partnership would be in material violation of the
Employee Retirement Income Security Act of 1974, as amended, and the rules and
regulations thereunder (such Act, together with such rules and regulations,
being referred to in this Agreement as "ERISA"), (C) in the case of a Limited
Partner who is a Foreign Controlled Partner, it has been determined, in
accordance with the provisions of Paragraph 20, that, solely as a result of the
Partnership's activities, any portion of such Foreign Controlled Partner's
income, gain or loss derived from the Partnership is effectively connected with
the conduct of a trade or business within the United States for purposes of
Sections 871, 872(a), 875, 882 or 884(d) of the Code, (D) in the case of a
Limited Partner who is a Foundation Limited Partner, it has been determined, in
accordance with the provisions of Paragraph 21, that such payment would result
in (i) such Foundation Limited Partner being subject to excise taxes imposed by
Subchapter A of Chapter 42 of the Code (other than Sections 4940 and 4942
thereof) or (ii) a material breach of the fiduciary duties of its trustees under
any Federal or state law applicable to private foundations or any rule or
regulation adopted thereunder by any agency, commission or authority having
jurisdiction, or (E) in the case of a Limited Partner that is a Bank Limited
Partner (as defined in Paragraph 22(f)), by reason of the payment of such
portion, there is a material likelihood that such Bank Limited Partner would be
in material violation of the Federal Banking Laws (as defined in Paragraph
22(f)), then (a) such Limited Partner shall have no further right or obligation
to pay such portion, (b) such Limited Partner's Subscription shall be reduced by
an amount equal to such portion and Schedule A shall be amended to reflect such
occurrence, and (c) such Limited Partner shall not, by reason of his failure to
pay such portion, be deemed or treated as a defaulting Partner for purposes of
this Paragraph 6(b). Anything to the contrary herein notwithstanding, each
Deemed ERISA Partner (as such term is defined in Paragraph 19) shall be treated
as if it were an ERISA Partner and deemed to have complied with the requirements
of the immediately preceding sentence if it shall obtain and deliver to the
Partnership an opinion of such counsel to the effect that if it were
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21
subject to, or chose to comply with, ERISA (whether or not such is the case),
then the payment by it of any portion of the remaining capital contributions
required by Paragraph 6(a) would result in the situation set forth in clause (A)
or (B) above.
Additionally, if a Partner has defaulted under this Paragraph 6(b) on a
capital contribution to the Partnership required in Paragraph 6(a), such Partner
shall lose its right to vote upon or take any other action on any matter with
respect to which such Partner would otherwise be entitled to vote or take action
under this Agreement until such time as such Partner has cured such default.
Each Partner agrees that the aforesaid liquidated damages provisions
constitute reasonable compensation to the Partnership and its non-defaulting
Partners for the additional risks and damages sustained by them when and if any
Partner shall default on an obligation to pay any capital contribution when due.
(c) Permissive Additional Admissions. Subject to the
provisions of this Agreement, the General Partner is authorized, but not
obligated, to accept additional subscriptions from the Partners, and to select
and admit additional Limited Partners to the Partnership after the date of this
Agreement. Any such additional subscriptions shall be accepted and any such
additional Limited Partners shall be admitted to the Partnership only if:
(i) such Partner or additional Limited
Partner contributes on the date of his additional
subscription or admission the same percentage of his
additional or initial subscription, as the case may
be, as the percentage which each other Partner has
been required to contribute of his subscription on or
prior to such date;
(ii) the aggregate subscriptions to the
Partnership, including such additional subscriptions
of Partners and the initial subscriptions of such
additional Limited Partners, but excluding the
initial subscription and any additional subscriptions
of the General Partner to the extent that the
aggregate subscription of the General Partner does
not exceed 0.5% of the aggregate subscriptions of all
Partners, do not exceed $200 million; and
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22
(iii) such additional subscription is
accepted and such additional Limited Partner is
admitted to the Partnership pursuant to this
Paragraph 6(c) not later than 180 days after the date
of this Agreement. Promptly following the admission
of any additional Limited Partners, the General
Partner may, at its sole discretion, distribute to
the Partners (including any newly-admitted Limited
Partners), a portion of the initial capital
contribution made by each such additional Limited
Partner pursuant to clause (i) above, which
distribution shall be allocated among the Partners in
proportion to their respective Contributions
Accounts, shall restore on a dollar-for-dollar basis
the obligation of each such Partner to make further
capital contributions to the Partnership pursuant to
such Partner's Subscription, and shall reduce on a
dollar-for-dollar basis the Contributions Accounts
and Capital Account of each Partner receiving such
distribution, so that after such distribution all
Partners (including any newly-admitted Limited
Partners) shall have made net capital contributions
to the Partnership pro rata to their respective
Subscriptions.
(d) Consensual Additional Admissions. After 180 days from
the date of this Agreement, the General Partner, with the consent of at least
75% in interest of the Limited Partners, is authorized to accept additional
subscriptions from the Partners, and to select and admit additional Limited
Partners to the Partnership. The terms of such acceptance or admission shall be
fixed by the General Partner at the time of acceptance or admission, as the case
may be, with the consent of at least 75% in interest of the Limited Partners.
(e) Amendment and Effective Date. Each Partner who is to
make an additional subscription to the Partnership and each person who is to be
admitted as an additional Limited Partner after the date of this Agreement shall
execute, together with the General Partner, an amendment to this Agreement
providing for such additional subscription or admission. The right and
obligation of a Partner to make an additional subscription and the admission of
an additional Limited Partner to the Partnership shall be effective upon the
date specified therefor in the amendment to this Agreement providing for such
additional subscription or admission.
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23
(f) Certain Limitations. Notwithstanding anything to the
contrary contained in this Paragraph 6, no additional subscription to the
Partnership may be accepted from any Partner and no person or entity may be
admitted to the Partnership as an additional Limited Partner if, by reason of
such acceptance or admission, (A) the Partnership would be deemed a "publicly
traded partnership" within the meaning of Section 7704(b) of the Code, (B) the
Partnership, the General Partner or the Management Company would be subject to
additional regulation or restriction (including, without limitation, regulation
or restriction under the Investment Advisers Act of 1940, as amended (the
"Advisers Act") or the Investment Company Act of 1940, as amended (the
"Investment Company Act")), (C) the Partnership would be in violation of
applicable law, or (D) the Partnership would be deemed terminated pursuant to
Section 708 of the Code (unless the General Partner, after consultation with the
Partnership's tax advisors, concludes that such termination would not have a
material adverse effect (including the cost of compliance) on the Partnership or
any Partner).
7. Accounts.
(a) Contributions Accounts. There shall be established on
the books of the Partnership a capital contributions account ("Contributions
Account") for each Partner which shall consist of such Partner's initial capital
contribution to the Partnership made pursuant to Paragraph 6, (i) increased by
(A) any additional capital contributions by such Partner to the Partnership made
pursuant to Paragraph 6 and (B) any amounts from time to time credited to the
Contributions Account of such Partner pursuant to Paragraph 6(b), and (ii)
decreased by (A) any amounts from time to time charged to the Contributions
Account of such Partner pursuant to Paragraph 6(b) and (B) any amounts from time
to time distributed to such Partner pursuant to the last sentence of Paragraph
6(c).
(b) Capital Accounts. There shall also be established on
the books of the Partnership a capital account ("Capital Account") for each
Partner which shall consist of such Partner's initial capital contribution to
the Partnership made pursuant to Paragraph 6, (i) increased by (A) any
additional capital contributions by such Partner to the Partnership made
- ▇▇ -
▇▇
▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇, (▇) any amounts from time to time credited to the
Capital Account of such Partner pursuant to Paragraph 6(b), and (C) any amounts
from time to time credited to the Capital Account of such Partner pursuant to
Paragraph 8, and (ii) decreased by (A) any distributions to such Partner
(including but not limited to any distributions pursuant to the last sentence of
Paragraph 6(c)), (B) any amounts from time to time charged to the Capital
Account of such Partner pursuant to Paragraph 6(b) and (C) any amounts from time
to time charged to the Capital Account of such Partner pursuant to Paragraph 8.
(c) Distributions in Kind. For purposes of maintaining
and determining Capital Accounts, all property distributed in kind by the
Partnership to a Partner, including but not limited to distributions made
pursuant to Paragraphs 9, 12, 19, 20 and 21, shall be charged to that Partner's
Capital Account at the fair market value of such property on the date of
distribution as determined in accordance with Paragraph 10 and Paragraph 9(d).
8. Allocations.
(a) Allocations Generally. Except as otherwise provided
in this Paragraph 8, as of the end of each calendar year of the Partnership, the
adjusted net realized gain or loss for such year shall be allocated 80% to and
among the Partners' Capital Accounts in proportion to the balances in their
respective Contributions Accounts at the end of such year and 20% to the General
Partner's Capital Account, provided that,
(i) if the sum of (A) the cumulative net
realized loss immediately prior to such year and (B)
all net losses deemed to have been realized during
such year on distributions in kind pursuant to
Paragraph 9(d), is equal to or exceeds the sum of (Y)
the cumulative net realized gain immediately prior to
such year and (Z) all net gains deemed to have been
realized during such year on distributions in kind
pursuant to Paragraph 9(d), then any adjusted net
realized gain (to the extent of such excess, if any)
or any adjusted net realized loss shall be allocated
to and among the Partners' Capital Accounts in
proportion to the balances in their
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25
respective Contributions Accounts at the end of such
year and the balance of such adjusted net realized
gain (if any) shall be allocated 80% to and among the
Partners' Capital Accounts in proportion to the
balances in their respective Contributions Accounts
at the end of such year and 20% to the General
Partner's Capital Account, and provided further that,
(ii) if the sum of (A) the cumulative net
realized gain immediately prior to such year and (B)
all net gains deemed to have been realized during
such year on distributions in kind pursuant to
Paragraph 9(d), is greater than the sum of (Y) the
cumulative net realized loss immediately prior to
such year and (Z) all net losses deemed to have been
realized during such year on distributions in kind
pursuant to Paragraph 9(d), then any adjusted net
realized loss (to the extent of such excess) shall be
allocated 80% to and among the Partners' Capital
Accounts in proportion to the balances in their
respective Contributions Accounts at the end of such
year and 20% to the General Partner's Capital
Account, and the balance of such adjusted net
realized loss (if any) shall be allocated to and
among the Partners' Capital Accounts in proportion to
the balances in their respective Contributions
Accounts at the end of such year.
Except as provided in Paragraph 8(b), (d), (e) or (h), any net gain or
loss deemed to have been realized on a distribution in kind pursuant to
Paragraph 9(d) shall, at the time such distribution is made, be allocated to and
among the Partners' Capital Accounts on the same basis as an equivalent amount
of adjusted net realized gain or loss would be allocated for a hypothetical
calendar year ending immediately prior to such distribution.
(b) Loss Allocation Limitations. Subject to the
provisions of Paragraph 8(d), if the Capital Account of any Limited Partner
would be reduced below zero as a result of the allocation to it of an adjusted
net realized loss or a net loss deemed to have been realized on a
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26
distribution in kind pursuant to Paragraph 9(d) (collectively, a "Loss"), then
such Loss shall first be allocated under Paragraph 8(a) until such Limited
Partner's Capital Account is reduced to zero; the remaining portion of such Loss
shall be allocated to the remaining Partners in accordance with Paragraph 8(a)
until the Capital Account of each remaining Limited Partner is reduced to zero;
and any remaining portion of such Loss shall be allocated to the General
Partner. If there have been special allocations of Loss under this Paragraph
8(b), then adjusted net realized gain and gain deemed to have been realized on a
distribution in kind pursuant to Paragraph 9(d) (together, a "Gain"), shall
first be allocated among the Partners in reverse order to the extent necessary
to reverse such special allocations.
(c) Certain Definitions. "Net realized gain or loss" for
a calendar year means the sum of the Partnership's (A) net gain or loss from
sale or exchange of capital assets, (B) income, gain, loss or expense (including
Offering Expenses (as defined below) of the Partnership during such calendar
year, but only that portion allocable to such year for tax accounting purposes
pursuant to Paragraph 17(f)) not included in (A), including any income which is
exempt from Federal income tax and including all expenses properly chargeable to
the Partnership for such year (whether deductible or non-deductible and whether
described in Section 705(a)(2)(B) of the Code, treated as so described pursuant
to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), or otherwise), and (C) net
gain or loss deemed to have been realized on a distribution in kind pursuant to
Paragraph 9(d). Except as provided in clause (C) above, unrealized gain or loss
shall not be taken into account for these purposes. "Adjusted net realized gain
or loss" for a calendar year means the net realized gain or loss for such year
excluding any net gain or loss deemed to have been realized on a distribution in
kind pursuant to Paragraph 9(d). "Cumulative net realized gain" means the sum of
all net realized gains from the inception of the Partnership through the end of
the most recently completed calendar year (except as otherwise expressly
provided in this Agreement), and "cumulative net realized loss" means the sum of
all net realized losses from the inception of the Partnership through the end of
the most recently completed calendar year (except as otherwise expressly
provided in this Agreement).
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27
For purposes of this Agreement, "Offering Expenses" shall mean collectively, any
fees, costs and expenses, including without limitation legal, accounting and
certain consulting fees, as well as out-of-pocket expenses, but excluding any
placement or broker fees or expenses (collectively, "Offering Expenses"),
incurred directly by the Partnership or reimbursed or reimbursable by the
Partnership to the Management Company or the General Partner in connection with
the organization of the Partnership or the offer and sale of interests in the
Partnership to the Limited Partners.
(d) Tax Regulatory Provisions. The following provisions
of this Paragraph 8(d) are included in order to comply with Federal income tax
laws and regulations. In determining whether an allocation for a calendar year
would cause any Limited Partner's Capital Account to become negative or would
add to the deficit in such Limited Partner's existing negative Capital Account
for purposes of the limitation contained in Paragraph 8(b) above, the following
allocations and distributions shall be taken into account in determining such
Limited Partner's Capital Account balance:
(i) allocations of loss and deduction that,
as of the end of such year, reasonably are expected
to be made to such Limited Partner pursuant to
Section 704(e)(2) of the Code (relating to
allocations to a donee of a partnership interest),
Section 706(d) of the Code (relating to allocations
required in the case of a shift in a partner's
interest in a partnership during a taxable year) and
Treasury Regulation Section 1.751-1(b)(2)(ii)
(relating to shifts in partners' interests in the
inventory and unrealized receivables of a
partnership, as those terms are defined in Section
751 of the Code, attributable to distributions from a
partnership); and
(ii) distributions that, as of the end of
such year, reasonably are expected to be made to such
Limited Partner to the extent they exceed offsetting
increases to such Limited Partner's Capital Account
that
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28
reasonably are expected to occur during (or prior to)
the calendar year in which such distributions
reasonably are expected to be made.
If any Limited Partner receives an allocation or distribution described
in the preceding sentence which is not reasonably expected to occur, but which
causes or increases a negative balance in such Limited Partner's Capital
Account, such Limited Partner shall be allocated items of Partnership income and
gain in an amount and manner sufficient to eliminate such negative balance as
quickly as possible. If any special allocation is made pursuant to the preceding
sentence, subsequent allocations of loss, expenses or deductions shall be made
to such Limited Partner so as to reverse the effect of such special allocation;
provided, however, that no allocation of loss, expenses or deductions shall be
made pursuant to this sentence which would cause such Limited Partner's Capital
Account to become negative. The General Partner shall determine, in consultation
with the Partnership's independent public accountants, whether any allocations
or distributions described in this Paragraph 8(d) reasonably are expected to be
made and the amount of any such allocations or distributions, and its
determination shall be binding on all Partners. The provisions of this Paragraph
8(d) are intended to constitute a "qualified income offset" as defined in
Treasury Regulation Section 1.704-1(b)(2)(ii)(d), and shall be so interpreted.
All allocations with respect to any calendar year pursuant to Paragraph 8(b) and
any offsetting allocations pursuant to this Paragraph 8(d) shall be made on an
interim basis, subject to adjustment when tax allocations are made pursuant to
Paragraph 8(f) at the end of the fiscal year.
(e) Changes in Partners' Interests. Notwithstanding the
foregoing and subject to Paragraph 8(h), with respect to any calendar year
during which any Partner's interest in the Partnership changes by reason of the
admission of a Partner, the withdrawal of a Partner, non-pro-rata contributions
of capital to the Partnership, or any other event described in Section 706(d)(1)
of the Code and any regulations issued thereunder, allocations of Gain or Loss
made pursuant to this Paragraph 8 shall be adjusted appropriately to take into
account the varying interests of the Partners in the Partnership during such
year. The General Partner shall consult
- 23 -
29
with the Partnership's accountants or other advisers and shall select the method
of making such adjustments, which method shall be used consistently thereafter.
(f) Tax Allocations. (i) For Federal, state and local income
tax purposes, Partnership income, gain, loss, deduction or
credit (or any item thereof) for each fiscal year shall be
allocated to and among the Partners in order to reflect the
allocation of adjusted net realized gain or loss pursuant to
the provisions of this Paragraph 8 for such fiscal year,
taking into account any variation between the adjusted tax
basis and book value of Partnership property in accordance
with the principles of Section 704(c) of the Code.
(ii) If any Partners are treated for Federal income tax
purposes as realizing ordinary income because of receiving
interests in the Partnership (whether under Section 83 of the
Code or under any similar provision of any law, rule or
regulation) and the Partnership is entitled to any offsetting
deduction (net of any income realized by the Partnership as a
result of such receipt), the Partnership's net deduction will
be allocated to and among the Capital Accounts of such
Partners in such manner as to offset, as nearly as possible,
the ordinary income realized by such Partners.
(g) Tax Withholding. If the Partnership incurs a tax
withholding obligation with respect to the share of Partnership income or gains
allocated to any Partner: (i) any amount which is (A) actually withheld from a
distribution that otherwise would have been made to such Partner and (B) paid
over to the Internal Revenue Service or other taxing authority in satisfaction
of such withholding obligation shall be treated under this Agreement for all
purposes as if such amount had been distributed to such Partner; and (ii) to the
extent that any amount paid over to the Internal Revenue Service or other taxing
authority by the Partnership in satisfaction of such withholding obligation
exceeds the amount, if any, actually withheld from a distribution that otherwise
would have been made to such Partner, such excess shall be treated as an
interest-free advance to such Partner. Amounts treated as advanced to any
Partner pursuant to this
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30
Paragraph 8(g) shall be repaid by such Partner to the Partnership, within 10
days after the General Partner gives notice to such Partner making demand
therefor, which notice shall be given promptly after such advance is made. The
Partnership shall collect any unpaid amounts from any Partnership distributions
to such Partner (including distributions described in Paragraph 9(a)) that
otherwise would be made to such Partner and any unpaid amounts that exceed
anticipated distributions to such Partner shall be subtracted from such
Partner's Capital Account.
(h) Adjustments to Allocations. If any additional
subscriptions to the Partnership are accepted or any additional Limited Partners
are admitted to the Partnership pursuant to Paragraph 6(c) or (d), the General
Partner shall adjust the allocations of Gain or Loss otherwise provided for in
this Paragraph 8 as necessary so that, after such adjustments have been made,
each Partner (including any Partners admitted after the formation of the
Partnership and any Partners whose subscriptions have been increased after the
formation of the Partnership) shall have been allocated Partnership expenses
equal in amount to the aggregate amount of Partnership expenses (including
Offering Expenses and the Management Fee payable pursuant to the Management
Agreement) such Partner would have been allocated if it had been admitted to the
Partnership on the date of this Agreement with a subscription equal to that set
forth in Schedule A after such schedule has been amended to reflect such
Partner's admission or the increase in its subscription; provided, however, that
allocations pursuant to this Paragraph 8(h) shall be limited to those permitted
by Section 706 of the Code.
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31
9. Distributions.
(a) Tax Distributions. During each fiscal year, or within
90 days thereafter, the Partnership shall distribute in cash (inclusive of any
cash distributions made during such year pursuant to Paragraph 9(b) or (c)) to
each Partner an amount equal to the aggregate United States Federal and state
income tax liability attributable to items of income, gain, loss or deduction
allocated to such Partner by the Partnership with respect to such year
("Hypothetical Tax Liability"), as determined in accordance with this Paragraph
9(a). Hypothetical Tax Liability shall be determined as if each Partner were a
natural person resident in The Commonwealth of Massachusetts as follows:
(i) The Hypothetical Tax Liability of each
Partner shall be computed based upon the items of
income, gain, loss, deduction or credit allocated to
such Partner by the Partnership with respect to the
fiscal year, without taking into account any other
items of income, gain, loss, deduction or credit,
and, except as provided in Paragraph 9(a)(ii),
without taking into account the standard deduction or
any loss carryovers or exemptions; provided that, if
the General Partner determines, after consulting with
accountants to the Partnership, that the actual tax
liability of one or more Partners resulting from
participation in the Partnership is reasonably likely
to exceed the Hypothetical Tax Liability as so
computed as a result of (A) the phaseout of, or
limitation on, the deductibility of expenses
allocated to Partners, whether under Section 67 or
Section 68 of the Code or otherwise, (B) the
application of the alternative minimum tax or similar
taxes, or (C) for any other reason, then, at the
election of the General Partner, appropriate
adjustments shall be made in computing the
Hypothetical Tax Liability of all Partners on an
equivalent basis so as to insure that the Partners
will receive distributions sufficient to satisfy the
actual tax liability attributable to their
participation in the Partnership;
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32
(ii) Hypothetical Tax Liability generally
shall be computed as if all allocations to such
Partner of Partnership capital losses for prior
fiscal years (to the extent not offset, to the
maximum extent permitted under applicable law,
against allocations to such Partner of Partnership
capital gains for such prior fiscal years) had been
carried forward by such Partner and applied to
reduce, to the maximum extent permitted under
applicable law, such Partner's tax liability with
respect to Partnership capital gains allocated to
such Partner in such fiscal year; and
(iii) Hypothetical Tax Liability generally
shall be determined using the highest marginal rates
of Federal and state income tax applicable to
individuals for such fiscal year, or, if all or any
portion of the Hypothetical Tax Liability is
attributable to the alternative minimum tax, using
such tax rates adjusted appropriately to reflect the
highest rates applicable under the alternative
minimum tax.
Notwithstanding the foregoing, such distribution may be reduced or not made with
respect to any fiscal year if and to the extent authorized by the General
Partner in its sole discretion. To assist Partners in paying estimated tax, in
the sole discretion of the General Partner, amounts may be paid to them during a
fiscal year as advances (and not as distributions) with respect to such year by
using estimates of Hypothetical Tax Liability based upon results of the
Partnership's operations for the year to date. To the extent that such advances
during a fiscal year are equal to or less than the Hypothetical Tax Liability
determined after the close of such year, they shall, at the time the tax
distribution is or would be made to the Partners with respect to such year, be
deemed to have been repaid to the Partnership and thereupon received by the
Partners as a tax distribution with respect to such year. To the extent that
such advances to any Partner during a fiscal year exceed its Hypothetical Tax
Liability determined after the close of such year, they shall be repaid to the
Partnership within 10 days after the General Partner gives notice to such
Partner making demand therefor, which notice shall be given promptly after the
amount of such
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33
excess advances has been determined. Amounts distributed within 90 days after
the end of a fiscal year may, at the option and sole discretion of the General
Partner, be deemed to have been made during such year rather than during the
fiscal year in which the distribution is actually made, solely to the extent
necessary to satisfy the requirements of this Paragraph 9(a) and solely for such
purpose.
(b) Discretionary Distributions - in General. Subject to
Paragraph 9(c) below, the Partnership may, at the discretion of the General
Partner, distribute to the Partners at any time additional amounts in cash or in
kind; provided, however, that approval of the Advisory Committee shall be
required for distributions made other than in cash or "freely tradeable"
securities (as defined in Paragraph 10(c)), unless such distributions are
liquidating distributions made pursuant to Paragraph 12 or distributions to
withdrawing ERISA Partners, Foreign Controlled Partners or Foundation Limited
Partners made pursuant to Paragraphs 19, 20 and 21.
(c) Apportionment of Discretionary Distributions. If at
any time the Limited Partners as a group have not recovered through
distributions an amount equal to the sum of their Contributions Accounts, each
distribution (or portion thereof), other than distributions made pursuant to
Paragraph 9(a), 12, 19, 20 or 21, shall be made to and among the Partners in
accordance with the following:
(i) if, after such distribution (or portion
thereof) would be made in accordance with this clause
(i), the sum of the Capital Accounts of the Limited
Partners would equal or exceed 120% of (A) the sum of
the Contributions Accounts of the Limited Partners
less (B) the aggregate distributions to the Limited
Partners (the "120% Test"), then, (Y) in the case of
a cash distribution, an amount equal to the aggregate
Unreturned Capital Contributions (as defined below)
of all Partners (or the entire amount of such cash if
such amount is less than such Unreturned Capital
Contributions) shall be distributed to and among the
Partners in proportion to their respective Unreturned
Capital Contributions at the time such
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34
distribution is made and the balance of such
distribution (or portion thereof), if any, shall be
made 80% to and among the Partners in proportion to
their respective Contributions Accounts at the time
such distribution is made and 20% to the General
Partner, and (Z) in the case of a distribution in
kind, an amount equal to the aggregate Unreturned
Capital Contributions of all Partners (or the entire
amount thereof if the fair market value (determined
in accordance with Paragraph 10) of the property
being distributed is less than such Unreturned
Capital Contributions) shall be distributed to and
among the Partners in proportion to their respective
Unreturned Capital Contributions at the time such
distribution is made and the balance of such
distribution (or portion thereof), if any, shall be
made 80% to and among the Partners in proportion to
their respective Contributions Accounts at the time
such distribution is made and 20% to the General
Partner, and
(ii) otherwise, such distribution (or
portion thereof) shall be made to and among the
Partners in proportion to their respective
Contributions Accounts at the time such distribution
is made.
After and so long as the Limited Partners as a group have recovered through
distributions an amount equal to the sum of their Contributions Accounts, each
distribution (or portion thereof) pursuant to this Paragraph 9(c) shall be made
to and among the Partners in proportion to their respective Capital Accounts at
the time such distribution is made. Solely for purposes of the immediately
preceding sentence and clause (i) of the first sentence of this Paragraph 9(c),
the Capital Accounts of the Partners or the Limited Partners, as the case may
be, shall mean their Capital Accounts computed in accordance with Paragraph 7,
but treating each Investment Security owned by the Partnership as if, on the
date as of which a computation pursuant to such immediately preceding sentence
or such clause (i) of such first sentence is being made, such Investment
Security had been sold at its fair market value (determined in accordance with
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35
Paragraph 10) and any resulting adjusted net realized gain or loss had been
allocated to the Partners' Capital Accounts in accordance with Paragraph 8.
"Unreturned Capital Contribution" means, with respect to any Partner and at any
time, an amount which, if distributed to such Partner at such time, would cause
the aggregate amount of distributions made by the Partnership to such Partner
(and such Partner's predecessors in interest) from the inception of the
Partnership through such time to equal but not exceed that portion of such
Partner's capital contributions that, at or prior to the time of determination,
has been used by the Partnership (A) to acquire any Investment Securities that,
as of such time, are Disposed Investments (as defined below) or (B) to pay any
expenses properly borne by the Partnership, including Offering Expenses and
other operating expenses, but only to the extent that such expenses are
attributable to Investment Securities that, as of such time, are Disposed
Investments. The aggregate amount of the Partnership's expenses from inception
through any date of determination that have been paid with the Partners' capital
contributions, shall be apportioned among all Investment Securities (and shall
be deemed to be attributable to such Investment Securities) in proportion to the
relative cost of the Investment Securities then held by the Partnership. In no
event shall the Limited Partners' aggregate Unreturned Capital Contributions
exceed the aggregate balances in their Contributions Accounts at such time
reduced (but not below zero) by the aggregate distributions previously
distributed to them by the Partnership. "Disposed Investments" means, as of the
date of determination, all Investment Securities that have been sold,
distributed to the Partners, written off as worthless securities, or otherwise
disposed of, in whole or in part, to the extent so distributed or disposed of at
or prior to the date of determination; provided, however, that any exchange of
any securities of a Partnership Portfolio Company for securities or other
property (other than cash or cash equivalents) shall not constitute a
disposition of the original securities. Notwithstanding anything to the contrary
set forth in this Paragraph 9(c), the General Partner, in its discretion, may
make in accordance with clause (ii) of the first sentence of this Paragraph 9(c)
all or any portion of any distribution which is permitted to be made pursuant to
clause (i) of such sentence.
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(d) Distributions in Kind. Any distribution in kind shall
be deemed to have been sold by the Partnership at its fair market value as of
the date of distribution, and any net gain or loss deemed to have been realized
by the Partnership shall be included in net realized gain or loss for purposes
of Paragraph 8(c). The valuation of distributions in kind shall be made in the
manner provided in Paragraph 10, except that in the case of distributions of
"freely tradeable" securities, the valuation thereof shall be determined by
taking an average of the prices therefor (as determined in accordance with
Paragraph 10) for the five trading days including and immediately preceding the
date of distribution, and for the relevant provisions of this Agreement, the
fair market value as of the date of distribution shall mean such average price.
To the extent feasible, a distribution in kind of any asset shall be distributed
among the Partners in proportion to their respective shares of the proposed
distribution. For purposes of the preceding sentence, each lot of stock or other
securities having a separately identifiable tax basis or holding period shall be
treated as a separate asset.
(e) Limitations on Distributions. Anything in this
Paragraph 9 to the contrary notwithstanding, (i) no distribution shall be made
to any Partner if and to the extent that such distribution would not be
permitted to be made to such Partner under Section 17-607(a) of the Delaware
Act, (ii) if an ERISA Partner or Deemed ERISA Partner notifies the Partnership
in writing that the receipt by such ERISA Partner or Deemed ERISA Partner of
securities in such distribution would create a material likelihood of a material
violation of ERISA by such ERISA Partner or Deemed ERISA Partner, then the
Partnership shall use all reasonable efforts to arrange for the sale of such
securities on behalf of and for the account of such ERISA Partner or Deemed
ERISA Partner, as the case may be, and if such sale cannot be arranged after all
reasonable efforts by the Partnership, then the Partnership shall use all
reasonable efforts to distribute instead to such ERISA Partner or Deemed ERISA
Partner an amount of cash and/or securities of substantially equal value that
will not create such a material likelihood of a material violation of ERISA (an
"Alternative ERISA Distribution"), provided that such Alternative ERISA
Distribution shall not be made unless it has been approved in advance by the
Advisory
- ▇▇ -
▇▇
▇▇▇▇▇▇▇▇▇, (▇▇▇) if a Bank Limited Partner (as such term is defined in Paragraph
22(f)) notifies the Partnership in writing that the receipt by such Bank Limited
Partner of securities in such distribution would create a material likelihood of
a material violation of Federal Banking Laws (as such term is defined in
Paragraph 22(f)) by such Bank Limited Partner, then the Partnership shall use
all reasonable efforts to arrange for the sale of such securities on behalf of
and for the account of such Bank Limited Partner, and if such sale cannot be
arranged after all reasonable efforts by the Partnership, then the Partnership
shall use all reasonable efforts to distribute instead to such Bank Limited
Partner an amount of cash and/or securities of substantially equal value that
will not create such a material likelihood of a material violation of the
Federal Banking Laws (an "Alternative Bank Distribution"), provided that such
Alternative Bank Distribution shall not be made unless it has been approved in
advance by the Advisory Committee, and (iv) if a Foundation Limited Partner is
to receive securities in a distribution in excess of such Foundation Limited
Partner's pro rata share of such distribution and such Foundation Limited
Partner notifies the Partnership in writing that the receipt by such Foundation
Limited Partner of such securities would result in the imposition of excise
taxes upon such Foundation Limited Partner pursuant to Section 4943 of the Code,
then the Partnership shall use all reasonable efforts to arrange for the sale of
such securities which such Foundation Limited Partner is unable to receive
without triggering such excise taxes (the "Excess Securities") on behalf of and
for the account of such Foundation Limited Partner, and if such sale cannot be
arranged after all reasonable efforts by the Partnership, then the Partnership
shall use all reasonable efforts to distribute to such Foundation Limited
Partner, instead of the Excess Securities, an amount of cash and/or securities
of substantially equal value that will not result in the imposition of such
excise taxes (an "Alternative Foundation Limited Partner Distribution"),
provided that such Alternative Foundation Limited Partner Distribution shall not
be made unless it has been approved in advance by the Advisory Committee. Any
distribution that is not made to a Partner pursuant to clause (i) of the
preceding sentence shall be deferred and thereafter made to such
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38
Partner at the time or times and to the extent that such distribution may be
made without violating the provisions of such clause (i).
10. Valuation of Partnership Assets.
(a) Valuations by General Partner. Whenever valuation of
Partnership assets is required by this Agreement, the General Partner shall
determine the fair market value thereof in good faith, subject to approval by
the Advisory Committee of valuations of Investment Securities owned by the
Partnership.
(b) Fair Market Value. In general, but subject to the
requirements of Paragraph 10(a) and Paragraph 9(d), for the purpose of
determining the fair market value of any security owned by the Partnership which
is freely tradeable, the "last reported" trade price or sale price of such
security on any trading day shall be deemed to be: (i) for securities traded
primarily on the New York Stock Exchange, the American Stock Exchange or Nasdaq,
the last reported trade price or sale price, as the case may be, as of 4:00
p.m., New York time, on that day; and (ii) for securities listed or traded on
other exchanges, markets and systems, the market price as of the end of the
"regular hours" trading period that is generally accepted as such for such
exchange, market or system. Notwithstanding the foregoing, if after the date of
this Agreement, the benchmark times generally accepted in the securities
industry for determining the market price of a stock as of a given trading day
shall change from those set forth above, the fair market value shall be
determined as of such other generally accepted benchmark times. The
determination of the fair market value of all other assets of the Partnership
shall be based upon all relevant factors, including, without limitation, such of
the following factors as may be relevant: current financial position and current
and historical operating results of the issuer; sales prices of recent public or
private transactions in the same or similar securities, including transactions
on any securities exchange on which such securities are listed or in the
over-the-counter market; general level of interest rates; recent trading volume
of the security; restrictions on transfer, including the Partnership's right, if
any, to require registration of its securities by the issuer under the
securities laws; significant recent events affecting the issuer, including
pending mergers, acquisitions and
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39
sales of securities; the price paid by the Partnership to acquire the asset; the
percentage of the issuer's outstanding securities that is owned by the
Partnership; and all other factors affecting value. In making any such
determination of the fair market value of the assets of the Partnership, no
allowance of any kind shall be made for good will or the name of the
Partnership, the Partnership's office records, files and statistical data, or
any other intangible assets of the Partnership.
(c) Freely Tradeable Securities. For purposes of this
Agreement a security shall be deemed to be "freely tradeable" if (i) the
Partnership's entire holding of such security can be immediately sold by the
Partnership to the general public without the necessity of any Federal, state or
local government consent, approval or filing (other than any notice filings of
the type required pursuant to Rule 144(h) under the Securities Act of 1933, as
amended (the "Securities Act")) or any consent, approval or release of any other
person, and (ii) such security is either listed on a national securities
exchange or carried on Nasdaq and market quotations are readily available
therefor. Notwithstanding the foregoing, in the case of a distribution of
securities to the Partners, a security shall be deemed to be "freely tradeable"
if the entire portion of such distribution made to the Limited Partners can be
immediately sold by them under the terms provided for in clause (i) of the
preceding sentence and the condition provided for in clause (ii) of the
preceding sentence is satisfied, assuming for purposes of this sentence that no
Limited Partner is an affiliate of the issuer of such security.
(d) Disputed Valuations. If the General Partner
determines a valuation for Investment Securities held by the Partnership which
is not approved by the Advisory Committee, and if the Advisory Committee does
not, within 60 days following the submission by the General Partner of its
initial valuation, approve any subsequent valuation submitted by the General
Partner, such valuation shall be determined by an independent chartered
financial analyst selected by the General Partner and approved by the Advisory
Committee, whose determination shall be binding upon all Partners.
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11. Term of Partnership; Dissolution.
(a) Term of Partnership. The Partnership shall continue
until December 31, 2011, unless sooner dissolved as provided in Paragraph 11(b)
by operation of law.
(b) Dissolution. The Partnership shall be dissolved in the
event of the occurrence with respect to the General Partner of any of the events
stated in Section 17-402(a)(4), (5) or (8) of the Delaware Act.
12. Liquidation of Partnership Interests.
(a) General Provisions. At dissolution, the Partnership
shall be liquidated in an orderly manner. The General Partner shall be the
liquidator to wind up the affairs of the Partnership pursuant to this Agreement,
provided that if there shall be no General Partner, the Advisory Committee may
appoint one or more liquidators to act as the liquidators in carrying out such
liquidation. Any such liquidator, other than the General Partner, shall be a
"liquidating trustee" within the meaning of Section 17-101(9) of the Delaware
Act.
(b) Liquidation Distributions. The liquidators shall pay
or provide for the Partnership's liabilities and obligations to creditors
including Partners who are creditors. Any gain or loss incurred in connection
with the liquidation of the Partnership shall be allocated to and among the
Partners in the manner provided in Paragraph 8 and the remaining assets shall
then be distributed among the Partners in cash or in kind in proportion to the
positive balances in their respective Capital Accounts (after allocating in the
manner provided in Paragraph 8 any net gain or loss deemed to have been realized
in connection with a distribution in kind), provided that the liquidators shall
not need the approval of the Advisory Committee in connection therewith and
provided that, (i) if an ERISA Partner or Deemed ERISA Partner notifies the
Partnership in writing that the receipt by such ERISA Partner or Deemed ERISA
Partner of a distribution in kind pursuant to this sentence would create a
material likelihood of a material violation of ERISA by such ERISA Partner or
Deemed ERISA Partner, then the Partnership shall use all reasonable efforts to
arrange for the sale of the securities otherwise to be distributed to such ERISA
Partner or Deemed ERISA Partner on behalf of and for the account of such ERISA
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41
Partner or Deemed ERISA Partner, as the case may be, and if such sale for the
account of such ERISA Partner or Deemed ERISA Partner cannot be arranged after
all reasonable efforts by the Partnership, then the Partnership shall instead
use all reasonable efforts to make an Alternative ERISA Distribution to such
ERISA Partner or Deemed ERISA Partner, (ii) if a Bank Limited Partner notifies
the Partnership in writing that the receipt by such Bank Limited Partner of a
distribution in kind pursuant to this sentence would create a material
likelihood of a material violation of Federal Banking Laws by such Bank Limited
Partner, then the Partnership shall use all reasonable efforts to arrange for
the sale of the securities otherwise to be distributed to such Bank Limited
Partner on behalf of and for the account of such Bank Limited Partner, and if
such sale for the account of such Bank Limited Partner cannot be arranged after
all reasonable efforts by the Partnership, then the Partnership shall instead
use all reasonable efforts to make an Alternative Bank Distribution to such Bank
Limited Partner, and (iii) if a Foundation Limited Partner is to receive a
distribution of securities of any Partnership Portfolio Company pursuant to this
sentence in an amount which is in excess of such Foundation Limited Partner's
pro rata interest in liquidating distributions and such Foundation Limited
Partner notifies the Partnership in writing that receipt by such Foundation
Limited Partner of such securities would result in the imposition of excise
taxes upon such Foundation Limited Partner pursuant to Section 4943 of the Code,
then the Partnership shall use all reasonable efforts to arrange for the sale of
the Excess Securities on behalf of and for the account of such Foundation
Limited Partner and, if such sale cannot be arranged after all reasonable
efforts by the Partnership, then the Partnership shall instead use all
reasonable efforts to make an Alternative Foundation Limited Partner
Distribution to such Foundation Limited Partner. In performing their duties, the
liquidators are authorized to sell, exchange or otherwise dispose of the assets
of the Partnership in such reasonable manner as the liquidators shall determine
to be in the best interest of the Partners.
(c) Expenses of Liquidators. The expenses incurred by the liquidators
in connection with winding up the Partnership, all other losses or liabilities
of the Partnership incurred in accordance with the terms of this Agreement and
reasonable compensation for the
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services of the liquidators (which, if the liquidator is the General Partner,
shall be paid only if the Management Agreement is no longer in effect and the
General Partner is not receiving fees pursuant to Paragraph 3(e)(i)), shall be
borne by the Partnership. Subject to the terms of the Management Agreement and
provided such Management Agreement shall not have been terminated, the
Management Fee payable to the Management Company shall be continued until the
liquidation is completed to permit the Management Company to assist in the
liquidation. The liquidators shall make final liquidating distributions from the
Partnership before the later of (i) the end of the Partnership's taxable year in
which the date of the liquidation of the Partnership occurs, or (ii) 90 days
after the date of the liquidation of the Partnership. For this purpose, (x) the
date of the liquidation of the Partnership shall mean the date on which the
Partnership has ceased to be a going concern; and (y) the Partnership shall not
be deemed to have ceased to be a going concern until it has sold, distributed or
otherwise disposed of all of its investments in Partnership Portfolio Companies.
(d) Standard of Care. No liquidator or any of its affiliates shall
incur liability to the Partnership or to any Partner for any loss suffered by
the Partnership or any Partner which arises out of any action or inaction on the
part of such liquidator or any of its affiliates, provided that in any such case
(i) such liquidator's or such affiliate's course of conduct was in good faith
and reasonably believed by such liquidator or such affiliate to be in or not
opposed to the best interests of the Partnership and (ii) such course of conduct
did not constitute fraud, gross negligence or willful misconduct on the part of
such liquidator or such affiliate.
(e) General Partner's Return Obligation. The General Partner shall not
be personally liable for the return of capital contributions of any Partners,
and no Partner shall be obligated to restore to the Partnership the amount of
any negative Capital Account, except that the General Partner shall upon
completion of liquidation of the Partnership be liable for the payment to the
Partnership in cash for the sole benefit of the Limited Partners of the amount
(if any) by which the General Partner's Capital Account is less than zero. Any
such payment shall be made before the later of (x) the end of the Partnership's
taxable year in which the date of the
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liquidation of the Partnership occurs, or (y) 90 days after the date of the
liquidation of the Partnership. For this purpose (i) the date of the liquidation
of the Partnership shall be the date on which the Partnership has ceased to be a
going concern; and (ii) the Partnership shall not be deemed to have ceased to be
a going concern until it has sold, distributed or otherwise disposed of all of
its investments in Partnership Portfolio Companies. Amounts returned by the
General Partner to the Partnership shall be distributed to the Limited Partners
in accordance with the positive balances in their respective Capital Accounts.
Notwithstanding anything in this Agreement or under applicable law to the
contrary, the liability of each partner of the General Partner to the
Partnership and the Limited Partners under this Paragraph 12(e) shall be limited
to an amount equal to such partner's proportionate share (based on such
partner's pro rata share of distributions made by the General Partner to its
partners) of the amounts, if any, required to be repaid to the Partnership by
the General Partner pursuant to this Paragraph 12(e).
(f) Post-Dissolution Investments. Anything to the contrary in this
Paragraph 12 notwithstanding, the liquidators may, subject to Paragraph 3, at
any time or times after dissolution, make additional investments on behalf of
the Partnership in entities which were Partnership Portfolio Companies at the
date of dissolution (including any direct or indirect parents or subsidiaries
and any successors to such entities), if the liquidators believe that such
additional investments are in the best interests of the Partners.
13. Limitation on Assignability of Interests of Limited Partners. The prior
written consent of the General Partner, in its sole and absolute discretion,
shall be required for the assignment, pledge, mortgage, hypothecation, sale or
other disposition or encumbrance (a "Transfer") by any Limited Partner of all or
any part of its interest in the Partnership to any person or entity other than
(i) an affiliate of such Limited Partner, including any partner of such Limited
Partner, provided such Transfer does not result in an increase in the total
number of Limited Partners and that such Transfer is not made to an entity with
more than one beneficial owner which was formed for the primary purpose of
holding such interest, (ii) in the case of a limited partnership interest in the
Partnership which is held in trust or by a nominee of a trust,
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(A) a successor trustee to the trustee of such trust or (B) the trustee of a
trust which is a successor of such trust, or (iii) in the case of a Limited
Partner which is an employee benefit plan, a successor fiduciary to the
fiduciary of such employee benefit plan. Additionally, any Transfer shall be
made only upon receipt by the Partnership of a written opinion of counsel for
the Partnership or of other counsel reasonably satisfactory to the Partnership
(which opinion shall be obtained at the expense of the transferor) that such
Transfer will not result in (A) the Partnership, the General Partner or the
Management Company being subjected to any additional regulatory requirements or
restrictions (including those of the Investment Company Act and the Advisers
Act), (B) a violation of applicable law or regulation or this Agreement, (C) the
Partnership becoming taxable as a corporation, (D) the Partnership being deemed
terminated pursuant to Section 708 of the Code, or (E) the Partnership becoming
a "publicly traded partnership" within the meaning of Section 7704(b) of the
Code, provided, however, that the requirement for such written opinion of
counsel may be waived on a case-by-case basis by the General Partner in its sole
and absolute discretion, and provided further that a written opinion of counsel
shall not be required in the case of a proposed Transfer referred to in clause
(ii)(A) or (iii) of this paragraph. Notwithstanding the foregoing, a Transfer
may be made without the Partnership having received an opinion to the effect
described in clause (D) of the preceding sentence if the General Partner, after
consultation with the Partnership's tax advisors, concludes that such
termination would not have a material adverse effect (including cost of
compliance) on the Partnership or any Partner.
Except in accordance with the provisions of this Paragraph 13, each Limited
Partner agrees with all other Partners that it will not make any Transfer of all
or any part of its interest in the Partnership. Without the aforesaid consent of
the General Partner (except as to those transferees listed in clauses (i), (ii)
and (iii) of the preceding paragraph) and the aforesaid written opinion of
counsel (except if the need for such opinion of counsel is not required or has
been waived by the General Partner and except in the case of a transferee listed
in clause (ii)(A) or (iii) of the preceding paragraph), no transferee of a
Partnership interest shall be admitted as a substituted Limited Partner. Any
transferee of a Partnership interest transferred in accordance with the
provisions of this Paragraph 13 (other than a transferee listed in clause
(ii)(A) or (iii) of the preceding paragraph) shall be admitted as a substituted
Limited Partner upon the date specified therefor in an amendment to this
Agreement providing for such admission, which amendment shall be executed by the
General Partner, the transferor of the Partnership interest transferred in
accordance with the provisions of this Paragraph 13 and the transferee of such
interest. Any transferee of a Partnership interest transferred in accordance
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with the provisions of this Paragraph 13 that is listed in clause (ii)(A) or
(iii) of the preceding paragraph shall be admitted as a substituted Limited
Partner upon the receipt by the Partnership of written notice of the Transfer,
which notice shall include the name, address and tax identification number of
such transferee and shall be executed by the transferor Limited Partner and such
transferee, provided that if such notice shall specify that the Transfer is to
become effective at a later date, such transferee shall be admitted as a
substituted Limited Partner upon the effective date of the Transfer, and the
General Partner may unilaterally amend this Agreement to reflect the Transfer
and the admission of such transferee. Upon admission to the Partnership, a
transferee shall succeed to the rights and liabilities of the transferor Partner
and the Contributions Account and Capital Account of the transferor shall become
the Contributions Account and Capital Account of the transferee.
Each Partner, by its execution of this Agreement, agrees and consents to
the admission of any substituted Limited Partner pursuant to the terms of this
Paragraph 13. Any transferee of a Partnership interest shall execute such other
documents as the General Partner may reasonably request to effectuate such
Transfer (including but not limited to information as to whether such transferee
is an ERISA Partner, Deemed ERISA Partner, Bank Limited Partner, Foreign
Controlled Partner or Foundation Limited Partner) and shall, by its admission as
a substituted Limited Partner, be subject to all of the terms of this Agreement
and be deemed to have executed a power-of-attorney as provided in Paragraph 22.
Any attempted Transfer of a Limited Partner's interest without compliance with
this Agreement shall be void. In the event of any Transfer which shall result in
multiple ownership of any Limited Partner's interest in the
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Partnership, the General Partner may require one or more trustees or nominees to
be designated as representing a portion of or the entire interest transferred
for the purpose of receiving all notices which may be given, and all payments
which may be made, under this Agreement and for the purpose of exercising all
rights which the transferor as a Limited Partner has pursuant to the provisions
of this Agreement. Every Transfer shall be subject to all of the terms,
conditions, restrictions and obligations of this Agreement.
The General Partner (i) shall not cause or permit any offering of
Partnership interests to be registered under the Securities Act, (ii) shall not
cause or permit interests in the Partnership to become "traded on an established
securities market," and (iii) shall withhold its consent to, and shall not
recognize, any Transfer of a "partnership interest" (or portion thereof) in the
Partnership (Y) that, to the General Partner's knowledge after reasonable
inquiry, would otherwise be accomplished by a trade on a "secondary market or
the substantial equivalent thereof," in each case within the meaning of Section
7704 of the Code and any regulations promulgated thereunder that are in effect
at the time of the proposed Transfer, or (Z) if and to the extent that such
Transfer, if made, would cause the Partnership to fail to satisfy a "safe
harbor" which it satisfied immediately prior to such Transfer, unless the
General Partner determines that such Transfer would not otherwise cause the
Partnership to be treated as a publicly traded partnership under Section 7704 of
the Code; for the purpose of the preceding clause, a "safe harbor" shall mean
(1) the safe harbor for "transfers not involving trading" pursuant to Treasury
Regulation Section 1.7704-1(e); (2) the safe harbor for "private placements" set
forth in Treasury Regulation Section 1.7704-1(h); or (3) the "lack of actual
trading" safe harbor set forth in Treasury Regulation Section 1.7704-1(j).
The transferor and transferee shall provide the General Partner, in
connection with any proposed Transfer, with written representations to the
effect that: (i) the proposed Transfer will not be effected on or through (A) a
United States national, regional or local securities exchange, (B) a foreign
securities exchange or (C) an interdealer quotation system that regularly
disseminates firm buy or sell quotations by identified brokers or dealers
(including, without
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limitation, the Nasdaq National Market or Small-Cap Market); and (ii) such
person is not, and its proposed Transfer or acquisition (as the case may be)
will not be made by, through or on behalf of, (D) a person, such as a broker or
a dealer, making a market in interests in the Partnership, or (E) a person who
makes available to the public bid or offer quotes with respect to interests in
the Partnership. Each transferor and transferee shall provide such additional
written representations as the General Partner reasonably may request. The
General Partner and counsel to the Partnership shall be permitted to rely upon
any representations made by each transferor and each transferee pursuant to this
Paragraph 13, and on written representations from other Partners made prior to
or contemporaneously with any Transfer in connection therewith. The General
Partner, in its sole discretion, may waive its right to obtain any
representations otherwise required by this Paragraph 13.
Notwithstanding anything to the contrary contained in this Paragraph
13, no Transfer of a Limited Partner's interest may be made to any person or
entity if, by reason of such Transfer, any of the assets of the Partnership
would be deemed under ERISA to constitute "plan assets" of any ERISA Partner.
14. Limitation on Assignability of Interest of General Partner. The General
Partner shall not assign, pledge, mortgage, hypothecate, sell or otherwise
dispose of or encumber all or any part of its General Partnership interest. Any
attempted transfer of the General Partner's interest shall be void.
15. Withdrawal of Partnership. Except as otherwise provided in Paragraphs
19, 20 and 21, no Partner shall have the right to withdraw its capital or
profits from the Partnership.
16. Indemnification. The General Partner, the Tax Matters Partner (as
defined in Paragraph 22(j)), the Management Company, RSA, each member of the
investment committee of the Management Company, each partner, stockholder,
director, officer, employee, agent, representative or controlling person of the
General Partner, the Management Company or RSA, each member of a Partnership
committee or board (including, without limitation, members of the Advisory
Committee), each Limited Partner with which a member of the Advisory Committee
is
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associated, and each liquidator for the Partnership (herein referred to
collectively as "Indemnified Parties" and singly as an "Indemnified Party")
shall be indemnified by the Partnership (to the extent such party is not
indemnified by any other organization) against any loss, judgment, liability,
expense and/or amount paid in settlement of any claim incurred by or imposed
upon him in connection with any action, suit or proceeding (including any
proceeding before any administrative or legislative body or agency), to which he
may be made a party or otherwise involved or with which he shall be threatened,
by reason of his being the General Partner, the Tax Matters Partner, the
Management Company, RSA, a member of the investment committee of the Management
Company, a partner, stockholder, director, officer, employee, agent,
representative or controlling person of the General Partner, the Management
Company or RSA, a member of a Partnership committee or board, a Limited Partner
with which a member of the Advisory Committee is associated, a liquidator for
the Partnership, or a director, officer, employee, agent, representative or
controlling person of any organization in which the Partnership owns or owned an
interest or of which the Partnership is or was a creditor, which organization he
serves or has served as a director, officer, employee, agent, representative or
controlling person at the request of the Partnership (whether or not he
continues to be the General Partner, the Tax Matters Partner, the Management
Company, RSA, a member of the investment committee of the Management Company, a
partner, stockholder, director, officer, employee, agent, representative or
controlling person of the General Partner, the Management Company or RSA,
committee or board member, a Limited Partner with which a member of the Advisory
Committee is associated, liquidator, or director, officer, employee, agent,
representative or controlling person of such organization at the time such
action, suit or proceeding is brought or threatened), provided that the action,
suit or proceeding related directly or indirectly to the affairs of the
Partnership, and provided that the Indemnified Party (or, in the case of a
Limited Partner with which a current or former member of the Advisory Committee
is or was associated, such member of the Advisory Committee) acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Partnership, and except to the extent any such
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loss, judgment, liability, expense and/or amount paid in settlement of any claim
was the result of fraud, willful misconduct or gross negligence on the part of
the Indemnified Party (or, in the case of a Limited Partner with which a current
or former member of the Advisory Committee is or was associated, on the part of
such member of the Advisory Committee). The foregoing right of indemnification
shall be in addition to any rights to which the Indemnified Party may otherwise
be entitled and shall inure to the benefit of the executors, administrators,
personal representatives, successors or assigns of each such Indemnified Party.
The Partnership may pay the expenses incurred by the Indemnified Party in
defending any action, suit or proceeding in advance of the final disposition
thereof, upon receipt of an undertaking by such Indemnified Party to repay such
payment if he shall be determined not to be entitled to indemnification therefor
as provided herein.
17. Fiscal Year; Records and Reports; Accounting Method; Offering Expenses;
Principal Office.
(a) Fiscal Year. Except as may otherwise be required by the Code, the
fiscal year and the taxable year of the Partnership shall each be the calendar
year.
(b) Partnership Records. At all times the General Partner shall cause
to be kept proper and complete books of account, in which shall be entered fully
and accurately the transactions of the Partnership. Such books of account,
together with an executed copy of this Agreement and the Certificate of Limited
Partnership, shall at all times be maintained at the principal office of the
Partnership, and shall be open to inspection by the Partners or their duly
authorized representatives. At any time while the Partnership continues and
until its affairs have been wound up (but only during reasonable business
hours), each Partner (or the designee thereof) may fully examine and audit the
Partnership's books, records, accounts and assets, including bank balances, and
may make, or cause to be made, any examination or audit at such Partner's
expense. Each of the Limited Partners (or the designee thereof) may, during
normal business hours, examine, or request that the General Partner furnish,
such information as is reasonably necessary or appropriate to enable the
requesting Partner (or the designee thereof) to
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review the results of operations, or to evaluate the status of the investments,
of the Partnership. Notwithstanding the foregoing, the General Partner shall
have the right to keep confidential from the Limited Partners certain
information, to the extent permitted under Section 17-305(b) of the Delaware
Act, except to the extent such information is required by any ERISA Partner or
Deemed ERISA Partner to determine its compliance with the provisions of ERISA,
provided that such ERISA Partner or Deemed ERISA Partner agrees in writing to
keep such information confidential except as otherwise required by law.
(c) Annual Financial Statements. The General Partner shall transmit to
each Partner within 90 days or as soon thereafter as practicable after the close
of each fiscal year the financial statements of the Partnership for such fiscal
year. Such financial statements shall include statements of assets and
liabilities, net assets represented by Partners' capital, operations, changes in
net assets, cash flows and changes in each Partner's capital, and shall be
audited by a nationally recognized firm of independent public accountants. The
General Partner shall also transmit to each Partner within 90 days or as soon
thereafter as practicable after the close of each fiscal year a report
indicating such Partner's share of all items of income, gain, loss or deduction
of the Partnership for such year for Federal income tax purposes and such
additional information with respect to the Partnership as he may reasonably
request to enable him to complete any tax return or report he is required to
file or otherwise to comply with applicable law, provided that, in the case of
such additional information, the Partnership is able to obtain such information
without unreasonable effort or expense. For information purposes, the General
Partner shall transmit to each Partner within 90 days or as soon thereafter as
practicable after the close of each fiscal year, (i) a list of the Partnership's
investments, valued at fair market value as determined in accordance with
Paragraph 10, as of the end of such fiscal year, and (ii) a brief narrative
report as to status and operations of the Partnership and its Partnership
Portfolio Companies as of the end of such fiscal year.
(d) Quarterly Financial Statements. The General Partner shall furnish
to each Partner within 45 days or as soon thereafter as practicable after the
end of each of the first three
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quarters of each fiscal year of the Partnership, (i) an unaudited list of the
Partnership's investments as of the end of such quarter, (ii) unaudited
statements of assets and liabilities of the Partnership and net assets
represented by Partners' capital as of the end of such quarter and (iii)
unaudited statements of operations and changes in each Partner's capital for the
period from the beginning of such fiscal year through the quarter then ended.
(e) Independent Public Accountants. The Partnership's independent
public accountants shall be such nationally recognized independent public
accounting firm in the United States that is selected from time to time by the
General Partner.
(f) Offering Expenses. All Offering Expenses of the Partnership shall
be amortized over a 60-month period for tax purposes.
(g) Principal Office. The principal office of the Partnership shall be
located at the address for the General Partner, as provided in Schedule A. The
General Partner may change the location of the principal office of the
Partnership at any time, upon written notice to the Limited Partners indicating
the new location of such principal office.
(h) Section 1045 Elections. Each Limited Partner agrees, with respect
to its limited partnership interest, that it will not require the Partnership to
elect, and that the Partnership shall not be required to elect, the application
of Section 1045 of the Code (dealing with rollovers of "qualified small business
stock" as defined in Section 1202 of the Code) or corresponding provisions of
any state income tax law for sales of such stock. Each Limited Partner further
agrees that, without the prior written consent of the General Partner, it will
not make any such election referred to in the previous sentence with respect to
its limited partnership interest if such election would impose on the
Partnership any obligation, including, but not limited to, any obligation
associated with furnishing information or making filings, reports or returns. In
addition, each Limited Partner agrees that the Partnership shall not be required
to comply with any tax reporting or accounting requirements (including those
relating to the adjustment of the tax basis of any asset of the Partnership or
the interest in the Partnership of any Partners) that may be imposed under
Section 1045 of the Code, and shall not be required to
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provide any information required in order for a Limited Partner to comply with
or elect the application of Section 1045 of the Code, in each case, with respect
to rollovers of qualified small business stock by the Partnership or by or on
behalf of any Partner.
(i) Annual Meeting. The General Partner shall cause the Partnership to
hold, at such time and place as the General Partner shall determine, an annual
meeting of its Partners to provide the Partners with an opportunity to discuss
the Partnership's investment activities and Partnership Portfolio Companies.
18. Amendment. Except as otherwise provided in this Agreement, the terms
and provisions of this Agreement may be waived, modified or amended only with
the written consent of the General Partner and at least 75% in interest of the
Limited Partners. No amendment shall, however, (i) increase the Subscription of
any Partner under this Agreement without the written consent of such Partner,
(ii) dilute the relative interest of any Partner in the allocation of profits or
capital of the Partnership or the allocation of distributions of profits or
capital without the written consent of such Partner (except such dilution as may
result from additional subscriptions from the Partners or the admission of new
Limited Partners pursuant to the terms of this Agreement), (iii) alter or waive
the terms of Paragraph 3(j)(i) without the written consent of a majority in
interest of the Limited Partners exempt from income taxation pursuant to Section
501 of the Code, (iv) alter or waive the terms of (A) Paragraph 3(j)(ii), (B)
Paragraph 3(j)(iv), (C) Paragraph 6(f)(i), (D) the ERISA-related provisions of
Paragraph 9(b), (E) Paragraph 9(e)(ii), (F) Paragraph 12(b)(i), (G) the
ERISA-related provisions of Paragraph 13, (H) the last sentence of Paragraph
17(b), (I) Paragraph 19 (other than the second and third sentences thereof) or
(J) the ERISA-related provisions of Paragraph 6(b) without the written consent
of a majority in interest of the ERISA Partners and Deemed ERISA Partners taken
together (no Partner being counted for this purpose as both an ERISA Partner and
a Deemed ERISA Partner), (v) alter or waive the terms of (A) the fourth sentence
of the second paragraph of Paragraph 6(b) or (B) the third sentence of Paragraph
19 without the written consent of each Deemed ERISA Partner affected thereby,
(vi) alter or waive the terms of (A) Paragraph 9(e)(iii), (B) Paragraph
12(b)(ii) or (C) the
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second and third paragraphs of Paragraph 22(f) without the written consent of a
majority in interest of the Bank Limited Partners, (vii) alter or waive the
terms of Paragraphs 3(j)(iii), 3(j)(v), 3(j)(vii) or 20 without the written
consent of a majority in interest of the Foreign Controlled Partners, (viii)
alter or waive the terms of (A) Paragraph 3(j)(vi), (B) Paragraph 9(e)(iv), (C)
Paragraph 12(b)(iii) or (D) Paragraph 21 without the written consent of a
majority in interest of the Foundation Limited Partners or (ix) alter or waive
the terms of (A) the last sentence of the second paragraph of Paragraph 6(b) or
(B) this Paragraph 18 without the written consent of each Partner. The General
Partner shall promptly furnish copies of any amendments to this Agreement to all
Partners.
19. ERISA Withdrawal. Notwithstanding any provision in this Agreement to
the contrary, and in addition to the right of a Limited Partner pursuant to
Paragraph 6(b) not to pay a portion of such Partner's capital contributions
under certain circumstances, any Limited Partner which is (a) an "employee
benefit plan" within the meaning of Section 3(3) of ERISA, and subject to the
provisions of Part 4 of Title I of ERISA, (b) a plan as defined in Section
4975(e)(1) of the Code, to which the provisions of Section 4975 are applicable
or (c) any other entity, any of the assets of which constitute "plan assets" of
a plan described in (a) or (b) above, within the meaning of the Plan Asset
Regulations (each such Limited Partner being referred to herein as an "ERISA
Partner") may elect, upon written notice of such election to the General
Partner, to withdraw from the Partnership, or upon written demand by the General
Partner shall withdraw from the Partnership, at the time and in the manner
hereinafter provided, if either such ERISA Partner or the General Partner shall
obtain and deliver to the other an opinion of counsel (which counsel shall be
reasonably acceptable to both such ERISA Partner and the General Partner) to the
effect that there is a material likelihood that (i) such ERISA Partner (or any
employee benefit plan subject to ERISA that is an investor, directly or
indirectly, in such ERISA Partner) or the Partnership, as a result of a change
in law occurring after the date of such ERISA Partner's admission to the
Partnership, would be in material violation of ERISA if such ERISA Partner were
to continue as a Limited Partner of the Partnership, or (ii) all or any portion
of the assets of
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the Partnership would constitute "plan assets" of such ERISA Partner for the
purposes of ERISA, and would be subject to the provisions of ERISA to
substantially the same extent as if owned directly by the ERISA Partner. For the
purposes of this Agreement, a "Deemed ERISA Partner" shall mean each Limited
Partner that is a "governmental plan" within the meaning of Section 3(32) of
ERISA. In the case of a Deemed ERISA Partner, such Deemed ERISA Partner shall be
treated as if it were an ERISA Partner and the requirements of the first
sentence of this Paragraph 19 shall be deemed to have been complied with if the
aforesaid opinion of counsel is to the effect that (x) if such Deemed ERISA
Partner were subject to, or chose to comply with, ERISA (whether or not such is
the case), then the situation set forth in clause (i) or (ii) above would occur
or (y) such Deemed ERISA Partner would be in material violation of applicable
state law if such Deemed ERISA Partner were to continue as a Limited Partner of
the Partnership. In the event of the issuance and delivery of such opinion of
counsel, the General Partner shall promptly provide to each Partner a copy
thereof, together with a copy of the written notice of the election of such
ERISA Partner to withdraw or the written demand of the General Partner for
withdrawal, as the case may be. Such ERISA Partner and the General Partner shall
each have, in its sole discretion, a period of 90 days following receipt of such
counsel's opinion to attempt to eliminate the necessity for such withdrawal to
the reasonable satisfaction of such ERISA Partner and the General Partner,
whether by correction of the condition giving rise to the necessity of such
ERISA Partner's withdrawal, by amendment of this Agreement, by effectuation of a
transfer of such ERISA Partner's interest in the Partnership to a substituted
Limited Partner at a fair and reasonable price (provided the General Partner and
such ERISA Partner consent to such transfer) or otherwise. If such cause for
withdrawal is not cured within such 90-day period, then such ERISA Partner shall
withdraw from the Partnership as of the date following the expiration of such
90-day period (or, if such ERISA Partner and the General Partner elect in
writing not to attempt so to cure, as of the date following the later of such
elections) which is the last day of the fiscal quarter of the Partnership during
which such 90-day period expires or during which such ERISA Partner and the
General Partner so elect not to attempt a cure, as the case may be (such
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date being herein referred to as the "ERISA Withdrawal Date"). If such ERISA
Partner or the General Partner determines not to attempt a cure, it shall give
written notice thereof to the other party promptly after making such
determination. Effective upon the ERISA Withdrawal Date, such ERISA Partner
shall cease to be a Partner of the Partnership for all purposes and, except for
its right to receive payment for its Partnership interest as hereinafter
provided, shall no longer be entitled to the rights of a Partner under this
Agreement, including without limitation the right to receive allocations
pursuant to Paragraph 8, the right to receive distributions during the term of
the Partnership pursuant to Paragraph 9 and upon liquidation of the Partnership
pursuant to Paragraph 12 and the right to vote on Partnership matters as
provided in this Agreement.
Following the ERISA Withdrawal Date, the General Partner shall use its
reasonable commercial efforts, subject to its primary responsibility to the
Partnership and its remaining Partners to maximize the returns on such Partners'
investments in the Partnership, to distribute to such ERISA Partner as promptly
as practicable following the expiration of the aforesaid 90-day period or the
election of such ERISA Partner and the General Partner not to attempt a cure, in
full payment and satisfaction of such ERISA Partner's interest in the
Partnership, an amount equal to the amount which such ERISA Partner would have
been entitled to receive pursuant to Paragraph 12 if the Partnership had been
liquidated on and as of the ERISA Withdrawal Date. No approval of the Advisory
Committee or of the Partners shall be required prior to the making of such
distribution. For purposes of determining the amount of the distribution to be
made to such ERISA Partner, and the value of each of the Partnership's assets,
the Partnership's annual or quarterly financial statements prepared in
accordance with Paragraph 17 for the period ending on the ERISA Withdrawal Date
shall be deemed to be conclusive, subject to the provisions of Paragraphs 9(d)
and 10(d). Such distribution to the withdrawing ERISA Partner shall be payable
in cash, cash equivalents, securities of Partnership Portfolio Companies and/or
other assets, with each such separate group of cash, cash equivalents,
securities of Partnership Portfolio Companies and/or other assets (determined in
a manner consistent with the last sentence of Paragraph 9(d)) being distributed
to the withdrawing ERISA Partner on a basis that is pro rata to such ERISA
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Partner's interest in the Partnership to the extent practicable, unless
otherwise required by law or contract; provided, however, that if the
withdrawing ERISA Partner notifies the Partnership in writing that the receipt
by such ERISA Partner of the securities of any Partnership Portfolio Company
would create a material likelihood of a material violation of ERISA by such
ERISA Partner, then the Partnership shall use all reasonable efforts to arrange
for the sale of such securities on behalf of and for the account of such ERISA
Partner and, if unable to arrange for such sale after all reasonable efforts,
shall instead use all reasonable efforts to make an Alternative ERISA
Distribution to such ERISA Partner which has been approved by the Advisory
Committee.
Upon the withdrawal of any ERISA Partner from the Partnership pursuant to
this Paragraph 19, the Partners (including the withdrawing ERISA Partner) shall
enter into an amendment to this Agreement reflecting such withdrawal and
amending such provisions of this Agreement, including without limitation the
provisions regarding allocations pursuant to Paragraph 8 and distributions
during the term of the Partnership and upon its liquidation pursuant to
Paragraphs 9 and 12, respectively, as may be appropriate, so that the intent,
spirit, operation and effect of such allocation, distribution and other
provisions shall, to the maximum extent possible, be preserved after taking into
account the withdrawal of such ERISA Partner.
20. Foreign Controlled Partner Withdrawal. Notwithstanding any provision in
this Agreement to the contrary, and in addition to the right of a Limited
Partner pursuant to Paragraph 6(b) not to pay a portion of such Partner's
capital contributions under certain circumstances, any Limited Partner which is:
(a) a Foreign Limited Partner or (b) a United States partnership of which, on
the date of such partnership's admission to the Partnership as a Limited
Partner, more than 50% of the profits, interest and capital was held by one or
more Foreign Limited Partners (such Limited Partner described in (a) or (b)
being referred to herein as a "Foreign Controlled Partner") may elect, upon
written notice of such election to the General Partner, to withdraw from the
Partnership at the time and in the manner hereinafter provided, if such Foreign
Controlled Partner shall obtain and deliver to the General Partner an opinion of
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counsel (which counsel shall be reasonably acceptable to the General Partner) or
a determination by the Commissioner of Internal Revenue (as evidenced by the
issuance of a revenue agent's report) to the effect that solely as a result of
the Partnership's activities, any portion of such Foreign Controlled Partner's
income, gain or loss derived from the Partnership is effectively connected with
the conduct of a trade or business for purposes of Sections 871, 872(a), 875,
882 or 884(d) of the Code. In the event of the issuance and delivery of such
opinion of counsel or report, the General Partner shall promptly provide to each
Partner a copy thereof, together with a copy of the written notice of the
election of such Foreign Controlled Partner to withdraw. The General Partner
shall have, in its sole discretion, a period of 45 days following receipt of
such opinion or report to attempt to eliminate the necessity for such withdrawal
to the reasonable satisfaction of such Foreign Controlled Partner and the
General Partner, whether by correction of the condition giving rise to the
necessity of such Foreign Controlled Partner's withdrawal, by amendment of this
Agreement, by effectuation of a transfer of such Foreign Controlled Partner's
interest in the Partnership to a substituted Limited Partner at a fair and
reasonable price (provided such Foreign Controlled Partner consents to such
transfer) or otherwise. If such cause for withdrawal is not cured within such
45-day period, then such Foreign Controlled Partner shall be permitted to
withdraw from the Partnership as of the date following the expiration of such
45-day period (or, if the General Partner elects in writing not to attempt so to
cure, as of the date following such election) which is the last day of the
fiscal quarter of the Partnership during which such 45-day period expires or
during which the General Partner so elects not to attempt a cure, as the case
may be (such date being herein referred to as the "Foreign Controlled Partner
Withdrawal Date"). If the General Partner determines not to attempt a cure, it
shall give written notice thereof to the Foreign Controlled Partner promptly
after making such determination. Effective upon the Foreign Controlled Partner
Withdrawal Date, such Foreign Controlled Partner shall cease to be a Partner of
the Partnership for all purposes and, except for its right to receive payment
for its Partnership interest as hereinafter provided, shall no longer be
entitled to the rights of a Partner under this Agreement, including without
limitation the right to receive
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allocations pursuant to Paragraph 8, the right to receive distributions during
the term of the Partnership pursuant to Paragraph 9 and upon liquidation of the
Partnership pursuant to Paragraph 12 and the right to vote on Partnership
matters as provided in this Agreement.
Following the Foreign Controlled Partner Withdrawal Date, the General
Partner shall use its reasonable commercial efforts, subject to its primary
responsibility to the Partnership and its remaining Partners to maximize the
returns on such Partners' investments in the Partnership, to distribute to such
Foreign Controlled Partner, within 180 days of the earlier of the expiration of
the aforesaid 45-day period or the election of the General Partner not to
attempt a cure, in full payment and satisfaction of such Foreign Controlled
Partner's interest in the Partnership, an amount equal to the amount which such
Foreign Controlled Partner would have been entitled to receive pursuant to
Paragraph 12 if the Partnership had been liquidated on and as of the Foreign
Controlled Partner Withdrawal Date. No approval of the Advisory Committee or of
the Partners shall be required prior to the making of such distribution. For
purposes of determining the amount of the distribution to be made to such
Foreign Controlled Partner, and the value of each of the Partnership's assets,
the Partnership's annual or quarterly financial statements prepared in
accordance with Paragraph 17 for the period ending on the Foreign Controlled
Partner Withdrawal Date shall be deemed to be conclusive, subject to the
provisions of Paragraphs 9(d) and 10(d). Such distribution to the withdrawing
Foreign Controlled Partner shall be payable in cash, cash equivalents,
securities of Partnership Portfolio Companies and/or other assets, with each
such separate group of cash, cash equivalents, securities of Partnership
Portfolio Companies and/or other assets (determined in a manner consistent with
the last sentence of Paragraph 9(d)) being distributed to the withdrawing
Foreign Controlled Partner on a basis that is pro rata to such Foreign
Controlled Partner's interest in the Partnership to the extent practicable,
unless otherwise required by law or contract. Upon the withdrawal of any Foreign
Controlled Partner from the Partnership pursuant to this Paragraph 20, the
Partners (including the withdrawing Foreign Controlled Partner) shall enter into
an amendment to this Agreement reflecting such withdrawal and amending such
provisions of this Agreement, including without limitation the provisions
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regarding allocations pursuant to Paragraph 8 and distributions during the term
of the Partnership and upon its liquidation pursuant to Paragraphs 9 and 12,
respectively, as may be appropriate, so that the intent, spirit, operation and
effect of such allocation, distribution and other provisions shall, to the
maximum extent possible, be preserved after taking into account the withdrawal
of such Foreign Controlled Partner.
21. Foundation Limited Partners.
(a) Private Foundations Compliance Provisions. To assure compliance
with certain provisions of the Code affecting "private foundations" as described
in Section 509 of the Code, the General Partner shall use its reasonable
commercial efforts to meet the requirements set forth in this Paragraph 21 as
long as such provisions of the Code (or substantially similar provisions) are in
effect. All terms in this Paragraph 21 in quotes shall have the respective
meanings defined in Sections 4943 or 4946 of the Code, unless otherwise
indicated.
(i) The Partnership shall not at any time purchase or otherwise
acquire, directly or indirectly, any stock of any corporation, any
interest in any partnership or any interest in any other
unincorporated entity, if, to the knowledge of the General Partner,
the aggregate direct and indirect holdings of the stock of any such
corporation, profits interest of any such partnership or beneficial
interest in any such other unincorporated entity by any Limited
Partner which is a Foundation Limited Partner and all persons who with
respect to such Foundation Limited Partner are Disqualified Persons,
would immediately thereafter exceed 18% of the "voting stock" of such
corporation, 18% of the "profits interest" in such partnership, or 18%
of the "beneficial interest" in any such other unincorporated entity
(provided, that in all such cases such 18% will be proportionately
increased or decreased if the 20% permitted as of the date of this
Agreement in Section 4943 of the Code is proportionately increased or
decreased). The terms "corporation" and "partnership" refer to the
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characterization of an organization for Federal income tax purposes.
In the case of a proposed investment in a company which is not the
issuer of publicly traded securities, the General Partner shall, in
addition, obtain a representation from such company as to the nature
and extent, to the knowledge of such company, of the direct and
indirect holdings in it by persons who are identified by any
Foundation Limited Partner as Disqualified Persons or Designated
Investments with respect to such Foundation Limited Partner on the
list referred to in Paragraph 3(j)(vi) and furnished to such company.
The General Partner shall be entitled to rely on the response of such
company unless the General Partner has knowledge that such response is
incorrect, and shall deliver copies thereof to each Foundation Limited
Partner.
(ii) No person or entity shall in the future become an additional
or substituted Partner, by transfer of a Partnership interest or
otherwise, if, to the knowledge of the General Partner after inquiry
of the prospective additional or substituted Partner, such person is a
Disqualified Person with respect to a Foundation Limited Partner or
more than 5% of the interests in such entity are owned by Disqualified
Persons with respect to a Foundation Limited Partner, without the
prior written consent of such Foundation Limited Partner.
(iii) As used in this Paragraph 21, (A) the references to direct
or indirect holdings are references to holdings treated as owned under
Section 4943 of the Code, including, without limitation, holdings
treated as owned by reason of ownership by a nominee or ownership of
an interest in another entity, and (B) the references to "knowledge"
are references to actual knowledge or belief of direct or indirect
holdings by Disqualified
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Persons or the Foundation Limited Partners, as the case may be,
without any investigation except as may be provided in (i) and (ii)
above.
(b) Foundation Limited Partner Withdrawal. Notwithstanding any
provision of this Agreement to the contrary, and in addition to the right of a
Limited Partner pursuant to Paragraph 6(b) not to pay a portion of such
Partner's capital contributions under certain circumstances, any Foundation
Limited Partner may elect, upon written notice of such election to the General
Partner, to withdraw from the Partnership, or upon written demand by the General
Partner shall withdraw from the Partnership, at the time and in the manner
hereinafter provided, if either such Foundation Limited Partner or the General
Partner shall obtain and deliver to the other an opinion of counsel (which
counsel shall be reasonably acceptable to both such Foundation Limited Partner
and the General Partner) to the effect that such withdrawal is necessary in
order for such Foundation Limited Partner to avoid (i) excise taxes imposed by
Subchapter A of Chapter 42 of the Code (other than Sections 4940 and 4942
thereof), or (ii) a material breach of the fiduciary duties of its trustees
under any Federal or state law applicable to private foundations or any rule or
regulation adopted thereunder by any agency, commission or authority having
jurisdiction. In the event of the issuance and delivery of the opinion of
counsel referred to in the preceding sentence, the withdrawal of such Foundation
Limited Partner and the disposition of its interest in the Partnership shall
generally be governed by the provisions of Paragraph 19 of this Agreement
(including but not limited to the provisions relating to notices to the Partners
and rights to cure), as if such Foundation Limited Partner were an ERISA
Partner. Notwithstanding the foregoing, if the withdrawing Foundation Limited
Partner would otherwise receive securities of any Partnership Portfolio Company
in connection with its withdrawal in an amount which is in excess of such
Foundation Limited Partner's pro rata interest in the Partnership and the
withdrawing Foundation Limited Partner notifies the Partnership in writing that
receipt of such securities would result in the imposition of excise taxes upon
such Foundation Limited Partner pursuant to Section 4943 of the Code, then the
Partnership shall use all reasonable efforts to arrange for the sale of the
Excess Securities on behalf of and for the
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account of such Foundation Limited Partner and, if unable to arrange for such
sale after all reasonable efforts, the Partnership shall instead use all
reasonable efforts to make an Alternative Foundation Limited Partner
Distribution to such Foundation Limited Partner which has been approved by the
Advisory Committee.
22. General Provisions.
(a) Notices. Except where otherwise specifically provided in this
Agreement, all notices, requests, consents, approvals and statements shall be in
writing and shall be deemed to have been properly given if sent by personal
delivery or if mailed from within the United States by first class U.S. Mail,
postage prepaid, or if sent by telecopy or e-mail (with return receipt),
addressed in each case, if to the Partnership, at RSA Ventures, Inc., ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: Administrator, telecopy: (▇▇▇) ▇▇▇-▇▇▇▇,
[e-mail: ▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇], with a copy to RSA Security Inc., ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: Legal Department, telecopy: (781)
301-5590, [e-mail: ▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇], and if to any Partner, to the address
set forth in Schedule A or in the instrument pursuant to which he became a
Partner or, in each case, to such other address or addresses as the addressee
may have specified by written notice as aforesaid to the other parties.
(b) Power of Attorney. (i) Each of the Partners hereby constitutes and
appoints the General Partner as his attorney to make, execute, sign, acknowledge
and, if necessary, file (A) any required amendment to the Certificate of Limited
Partnership; (B) any amendment to this Agreement that does not require, under
the terms of this Agreement, the approval of all the Partners, provided that
Partners holding the interest in the Partnership specified in this Agreement as
being required for such amendment have signed or otherwise approved such
amendment and all other required signatures and approvals have been obtained;
(C) any other instrument, certificate or document required from time to time to
admit a Partner, to effect his substitution as a Partner, to effect the
substitution of the Partner's assignee as a Partner, or to reflect any action of
the Partners provided for in this Agreement; and (D) any other instrument,
certificate or document as may be required or appropriate under the laws,
regulations
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or procedures of the United States or any state or governmental entity in any
jurisdiction in which the Partnership is conducting or intends to conduct its
affairs, provided all such instruments, certificates and other documents
referred to in clauses (A), (B), (C) and (D) above are in accordance with the
terms of this Agreement as then in effect. Copies of all such instruments,
certificates and other documents shall be sent to all Partners.
(ii) Each of the Partners is aware that the terms of this Agreement
permit certain amendments to the Certificate of Limited Partnership and this
Agreement to be effected and certain other actions to be taken by or with
respect to the Partnership, in each case with the approval or by the vote of
less than all the Partners. If, as and when (A) an amendment of the Certificate
of Limited Partnership or this Agreement is proposed or an action is proposed to
be taken by or with respect to the Partnership which does not require, under the
terms of this Agreement, the approval of all of the Partners, (B) Partners
holding the interest in the Partnership specified in this Agreement as being
required for such amendment or action have approved such amendment or action in
the manner contemplated by this Agreement, (C) the Advisory Committee has
approved such amendment or action in the manner contemplated by this Agreement,
if its approval is required by this Agreement, and (D) a Partner has failed or
refused to approve such amendment or action (hereinafter referred to as a
non-consenting Partner), each non-consenting Partner agrees that the special
attorney specified above, with full power of substitution, is hereby authorized
and empowered to execute, acknowledge, make, swear to, verify, deliver, record,
file and/or publish, for and on behalf of such non-consenting Partner, and in
his name, place and ▇▇▇▇▇, any and all instruments and documents which may be
necessary or appropriate to permit such amendment to be lawfully made or action
lawfully taken. Each Partner is fully aware that he and each other Partner have
executed this special power of attorney, and that each Partner will rely on the
effectiveness of such powers with a view to the orderly administration of the
Partnership's affairs.
(iii) The foregoing grant of authority (A) is a special power of
attorney coupled with an interest in favor of the General Partner and as such
shall be irrevocable and shall survive
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64
the death or incompetence (or, in the case of a Partner that is a corporation,
association, limited liability company, partnership, trust or other entity,
shall survive the merger, dissolution or other termination of the existence) of
the Partner and (B) shall survive the assignment by the Partner of the whole or
any portion of his interest, except that in the case of an assignment of the
Partner's whole interest, this power of attorney shall survive such assignment
for the sole purpose of enabling the General Partner to execute, acknowledge and
file any instrument necessary to effect the substitution of his transferee.
(c) Additional Documents. Each Partner hereby agrees to execute all
certificates, counterparts, amendments, instruments or documents that may be
required by laws of the various states or other jurisdictions in which the
Partnership conducts its affairs, to conform with the laws of such states or
other jurisdictions governing limited partnerships.
(d) Binding on Successors. This Agreement shall be binding upon and it
shall inure to the benefit of the respective heirs, successors, assigns and
legal representatives of the parties hereto.
(e) Counterparts. This Agreement or any amendment hereto may be signed
in any number of counterparts, each of which shall be an original, but all of
which taken together shall constitute one Agreement (or amendment, as the case
may be).
(f) Action by the Limited Partners. Whenever action is required by this
Agreement to be taken by a specified percentage in interest of the Limited
Partners or a designated group of Limited Partners, such action shall be deemed
to be valid if taken upon written vote or written consent by those Limited
Partners whose Contributions Accounts represent at that time the specified
percentage of the Contributions Accounts of all the Limited Partners or such
designated group of Limited Partners, as the case may be; provided that in each
such case, the percentage in interest in the Partnership of any defaulting
Limited Partner under Paragraph 6(b) shall be excluded in determining whether
the requisite percentage in interest of the Limited Partners has been obtained.
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65
Notwithstanding anything to the contrary contained in this Agreement, if a
Limited Partner that is subject to the investments and activities limitations of
Section 4(c)(vi) or (vii) of the Bank Holding Company Act of 1956, as amended,
and Regulation Y promulgated by the Board of Governors of the Federal Reserve
System (12 C.F.R. Part 225) or successor regulation (such a Limited Partner
being sometimes hereinafter referred to as a "Bank Limited Partner" and such Act
and Regulation being sometimes hereinafter referred to collectively as the
"Federal Banking Laws") and its affiliates that are Bank Limited Partners in the
aggregate hold for their own account an amount that is determined initially at
the time of admission to the Partnership of that Bank Limited Partner or any
such affiliates, the admission to the Partnership of additional Limited
Partners, or any other adjustment of the Partners' interests under this
Agreement, to be in excess of 4.99% (or such other percentage as may be
permitted under the Federal Banking Laws) of the interests of the Limited
Partners, excluding for purposes of calculating the percentage portions of any
other interests that are non-voting interests (including any interest of a
defaulting Partner under Paragraph 6(b)) under this Agreement (collectively, a
"Non-Voting Interest"), such amount in excess of 4.99% (or such other percentage
as may be permitted under the Federal Banking Laws) shall be a Non-Voting
Interest (whether or not subsequently transferred in whole or in part to any
other person) and shall not be included in determining whether the requisite
percentage in interest of the Limited Partners has consented to, approved,
adopted, or taken any action hereunder, provided that such Non-Voting Interest
shall be permitted to vote on any proposal to continue the business of the
Partnership, but not on approval of a successor general partner. Upon the
admission of additional Limited Partners, a withdrawal of a Limited Partner from
the Partnership or any other adjustment of the Limited Partners' proportionate
interests, a recalculation of the interests held by all Bank Limited Partners
shall be made, and only that portion of the total interest in the Partnership
held by a Bank Limited Partner and its affiliates that is determined as of the
date of such admission, withdrawal or other adjustment, as applicable, to be in
excess of 4.99% (or such other percentage as may be permitted under the Federal
Banking Laws) of the interests of the Limited Partners, excluding Non-Voting
Interests,
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66
shall be a Non-Voting Interest. Except as provided in this Paragraph 22(f), an
interest which is held as a Non-Voting Interest shall be identical in all
regards to all other interests held by Limited Partners.
Notwithstanding the foregoing, any Bank Limited Partner may elect not to be
governed by the provisions of the immediately preceding paragraph by providing
the General Partner with written notice and an opinion of counsel (which counsel
shall be reasonably acceptable to both the Bank Limited Partner and the General
Partner) to the effect that, as a result of a change in law or regulation
applicable to such Bank Limited Partner or for such other reason as may be
specified in such opinion, such Bank Limited Partner is not prohibited from
acquiring or controlling any or all of its Non-Voting Interest, in which case
only the amount of the interest held by such electing Bank Limited Partner as
may be specified in such opinion to be subject to this Paragraph 22(f) shall
continue to be a Non-Voting Interest. Any such election by a Bank Limited
Partner may be rescinded at any time by providing the General Partner with
written notice and an opinion of counsel (which counsel shall be reasonably
acceptable to both the Bank Limited Partner and the General Partner) to the
effect such Bank Limited Partner is prohibited by law or regulation applicable
to such Bank Limited Partner from acquiring or controlling a specified
percentage of the interests of the Limited Partners.
(g) Voting. Any vote or other action required or permitted to be taken
by this Agreement may be taken by written consent signed by not less than the
requisite percentage in interest of parties required or permitted to take such
vote or other action; provided that in each such case, the percentage in
interest in the Partnership of any defaulting Partner under Paragraph 6(b) and
any Non-Voting Interest that is to be excluded from such vote or other action
pursuant to Paragraph 22(f) shall be excluded in determining whether such
requisite percentage in interest has been obtained.
(h) Applicable Law. Notwithstanding the place where this Agreement may
be executed by any of the parties hereto, the parties expressly agree that all
the terms and provisions hereof shall be construed under the laws of the State
of Delaware and, without limitation thereof,
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that the Delaware Act as now adopted or as may be hereafter amended shall govern
the partnership aspects of this Agreement.
(i) Securities Act Matters. Each Partner understands that in addition
to the restrictions on transfer contained in this Agreement, he must bear the
economic risks of his investment for an indefinite period because the
Partnership interests have not been registered under the Securities Act and,
therefore, may not be sold or otherwise transferred unless they are registered
under the Securities Act or an exemption from such registration is available.
Each Partner agrees with all other Partners that he will not sell or otherwise
transfer his interest in the Partnership unless such interest has been so
registered or in the opinion of counsel for the Partnership, or of other counsel
reasonably satisfactory to the Partnership, such an exemption is available.
(j) Tax Matters Partner. The "tax matters partner" (as defined in
Section 6231 of the Code) of the Partnership shall be the General Partner (the
"Tax Matters Partner").
(k) Contract Construction. Where the context of this Agreement so
requires, use of masculine gender pronouns shall be deemed to mean or include
the feminine or neuter gender, and vice versa. The invalidity or
unenforceability of any one or more provisions of this Agreement shall not
affect the other provisions, and this Agreement shall be construed in all
respects as if any such invalid or unenforceable provisions were omitted.
References in this Agreement to sections of the Code or the Delaware Act shall
be deemed to refer to such sections as they may be amended after the date of
this Agreement.
(l) Schedules. The Schedules attached to this Agreement constitute an
integral part of this Agreement and are incorporated by reference herein.
23. Definitions. The respective Paragraphs or other locations in which
capitalized terms used in this Agreement are defined are set forth below
opposite such terms:
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120% Test 9(c)(i)
adjusted net realized gain or loss 8(c)
Advisers Act 6(f)
Advisory Committee 3(b)
Agreement Preamble
Alternative Bank Distribution 9(e)
Alternative ERISA Distribution 9(e)
Alternative Foundation Limited Partner Distribution 9(e)
Applicable Persons 3(k)
Bank Limited Partner 22(f)
Capital Account 7(b)
Code 3(j)(i)
Contributions Account 7(a)
cumulative net realized gain 8(c)
cumulative net realized loss 8(c)
Deemed ERISA Partner 19
Delaware Act Preamble
Designated Investments 3(j)(vi)
Disposed Investments 9(c)
Dispositions 3(m)(ii)
Disqualified Persons 3(j)(vi)
ERISA 6(b)
ERISA Partner 19
ERISA Withdrawal Date 19
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Excess Securities 9(e)
Federal Banking Laws 22(f)
Foreign Controlled Partner 20
Foreign Controlled Partner Withdrawal Date 20
Foreign Limited Partner 3(j)(iii)
Foundation Limited Partner 3(j)(vi)
Gain 8(b)
General Partner Preamble
Hypothetical Tax Liability 9(a)
Indemnified Party 16
Initial Investment Date 3(j)(ii)
Investment Company Act 6(f)
Investment Securities 3(l)
Letter Agreement 3(k)
Limited Partners Preamble
Loss 8(b)
Management Agreement 3(c)
Management Company 3(c)
Management Fee 3(d)
net realized gain or loss 8(c)
Non-Voting Interest 22(f)
Offering Expenses 8(c)
Partners Preamble
Partnership Preamble
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Partnership Portfolio Company 3(m)
Plan Asset Regulations 3(j)(ii)
RSA 3(d)
Safe Harbor 13
Securities Act 10(c)
Subscription 6(a)
Successor Fund 3(d)
Tax Matters Partner 22(j)
Transfer 13
Unreturned Capital Contribution 9(c)
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
GENERAL PARTNER
RSA PARTNERS I, L.P.
By: RSA Ventures, Inc.,
its general partner
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: President
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RSA VENTURES I, L.P.
Limited Partner Signature Page
The undersigned Limited Partner hereby executes the Limited Partnership
Agreement of RSA Ventures I, L.P., and hereby authorizes this signature page to
be attached to a counterpart of such Agreement executed by the other parties
thereto.
Please type or print exact
name of Limited Partner RSA Investments Inc.
---------------------------------------------
Please sign here By /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
---------------------------------------------
Please type or print exact
name of signer ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
---------------------------------------------
Please type or print
title of signer Title President
---------------------------------------------
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RSA VENTURES I, L.P.
Limited Partner Signature Page
The undersigned Limited Partner hereby executes the Limited Partnership
Agreement of RSA Ventures I, L.P., and hereby authorizes this signature page to
be attached to a counterpart of such Agreement executed by the other parties
thereto.
Please type or print exact
name of Limited Partner ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------------------
Please sign here By /s/▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------------------
Please type or print exact
name of signer ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------------------
Please type or print
title of signer Title
---------------------------------------------
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SCHEDULE A
GENERAL PARTNER SUBSCRIPTION
--------------- ------------
RSA Partners I, L.P. $502,750
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Administrator
[E-mail: ▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇]
LIMITED PARTNERS SUBSCRIPTION
---------------- ------------
RSA Investments Inc. $100,000,000
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Treasurer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
[E-mail: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇]
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ $50,000
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
TOTAL: $100,050,000
----- ============
75
SCHEDULE B
MANAGEMENT AGREEMENT
AGREEMENT dated as of April 10, 2001 by and between RSA Ventures, Inc., a
Delaware corporation (the "Management Company"), and RSA Ventures I, L.P., a
Delaware limited partnership (the "Partnership").
In consideration of the premises and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement:
(a) Capitalized Terms. Capitalized terms used without definition herein
have the respective meanings specified in the Limited Partnership Agreement of
the Partnership dated as of the date hereof (as amended from time to time, the
"Partnership Agreement"); and
(b) "Committed Capital" means the aggregate Subscriptions of all
Partners to the Partnership as set forth on Schedule A to the Partnership
Agreement.
2. Payment of Normal Operating Expenses.
(a) In General. The Management Company agrees to assume and pay all
normal operating expenses attributable to the Partnership on the terms and
conditions herein set forth.
(b) Normal Operating Expenses. Normal operating expenses include all
recurring routine expenses incident to the activities of the Partnership
including, but not limited to, expenses incurred in investigating and evaluating
investment opportunities for the Partnership; compensation and expenses of the
directors, officers, employees and members of the Investment Committee of the
Management Company in their capacities as such; and expenses for travel, office
space and facilities, telephone, maintenance of books and records and general
administrative services.
(c) Other Expenses. Normal operating expenses exclude, without
limitation, any taxes which may be assessed against the Partnership; Offering
Expenses, commissions, brokerage fees, finders' fees, investment banking fees,
registration expenses, filing fees or similar charges incurred in connection
with the purchase or sale of securities (including fees payable to third parties
incurred in connection with any merger), whether or not such purchase or sale is
consummated; other third party costs and expenses directly related to the
purchase, holding or
76
sale of securities; expenses of members of the Partnership's Advisory Committee
in connection with meetings of the Advisory Committee; expenses relating to the
preparation and distribution of annual and quarterly reports to Partners;
expenses incurred in connection with general meetings of Partners; all expenses
relating to actual or threatened litigation or administrative proceedings or
investigations involving the Partnership; fees and expenses relating to
investment banking, legal, custodial, auditing, accounting and appraisal
services provided to the Partnership; premiums for liability insurance obtained
by the Partnership to protect the Partnership, the General Partner, the
Management Company, their respective partners, officers, directors,
stockholders, employees, agents and members of the Investment Committee or the
Partnership's Advisory Committee; fees incurred in connection with the
maintenance of bank accounts; expenses incurred by the Management Company in
serving as "tax matters partner" of the Partnership; all costs and expenses
arising out of or resulting from the Partnership's indemnification obligations
under Paragraph 16 of the Partnership Agreement; and all other nonrecurring or
extraordinary expenses properly chargeable to the activities of the Partnership.
3. Management Company Duties. The Management Company has and will maintain
a staff trained and experienced in the business of locating, analyzing and
investing in equity and equity-related securities of businesses of the type in
which the Partnership intends to make investments. Such staff is and will be
adequate for the performance of the Management Company's duties under this
Agreement. Services to be rendered by the Management Company will include
assistance within the areas of expertise of its staff and, when considered
appropriate by the Management Company, the services of its officers, directors,
employees, members of the Investment Committee and agents as directors,
consultants and advisors for Partnership Portfolio Companies. In addition to the
services of its own staff, the Management Company may, at its sole discretion,
arrange for and coordinate the services of other professionals and consultants.
4. Management Fee; Expense Reimbursement.
(a) Calculation of Fee: In General. The Partnership will pay the
Management Company a management fee (the "Management Fee") for the services to
be provided hereunder at an annual rate equal to 2% of the Partnership's
Committed Capital during the term of the Partnership. Thereafter, the
Partnership will pay the Management Company an annual
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77
Management Fee equal to 1% of the net asset value of the Partnership determined
according to Paragraph 10 of the Partnership Agreement until the liquidation of
the Partnership is completed.
(b) Timing of Adjustments. (i) Any increase in Committed Capital made
after the date of this Agreement will be deemed effective and to have been made
on the date of this Agreement and the portion of the Management Fee attributable
to such additional Committed Capital will be payable by the Partnership on a
basis retroactive to such date. (ii) Any decrease in the Management Fee
resulting from a decrease in the Committed Capital will be effective on the date
of such decrease in Committed Capital.
(c) Reductions. The Management Fee payable in any fiscal year will be
reduced (but not below zero and with any excess carried forward to reduce, to
the maximum extent possible, the Management Fee payable in a subsequent year)
dollar-for-dollar by the amount of any directors' fees, consulting fees or other
remuneration (whether in cash or otherwise) paid or remitted during the prior
fiscal year to the Management Company for services rendered to any Partnership
Portfolio Company. Notwithstanding the foregoing, in the event that any such
fees or other remuneration described in the preceding sentence were paid or
remitted to the Management Company for services rendered to a Partnership
Portfolio Company in which the Partnership and any Successor Fund hold an
investment, the Management Company will determine that portion of such amounts
which are to be remitted to the Management Company and are to be taken into
account in reducing the Management Fee based on the relative amount invested in
such Partnership Portfolio Company by the Partnership and all Successor Funds.
Also notwithstanding the foregoing, any such fees or other remuneration which
are so paid or remitted to the Management Company during the last year in which
this Agreement is in effect will reduce the Management Fee otherwise payable
with respect to such year, and if such reduction results in the Partnership
having made an over-payment of the Management Fee for such year, the amount of
such over-payment will be refunded to the Partnership immediately prior to the
time this Agreement would otherwise terminate. The amount of any fees or other
remuneration which is to be taken into account in reducing the Management Fee in
accordance with this paragraph will be computed for each fiscal year and will be
certified to the Partnership by an officer of the Management Company not later
than the 60th day of the next year.
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78
(d) Payment. The Partnership will pay to the Management Company the
Management Fee quarterly in advance on the first day of January, April, July and
October of each year in an amount equal to 25% of the annual Management Fee. The
first payment of the Management Fee will be due on the date of this Agreement.
However, if the date of this Agreement is not the first day of January, April,
July or October, the Partnership's payment on the date of this Agreement will be
for the pro rata amount due until the beginning of the first succeeding quarter
of the Partnership. In the event of any increase in the Management Fee as a
result of an increase in Committed Capital, the pro rata amount of such
increase, calculated from the effective date thereof (which will be determined
in accordance with Section 4(b)(i)) to the beginning of the first quarter
following such increase in Committed Capital will be paid by the Partnership to
the Management Company on the actual date of such increase in Committed Capital.
A similar adjustment in payment of the Management Fee will be made in the event
of any decrease in the Committed Capital (which decrease in Committed Capital
will be deemed effective in accordance with Section 4(b)(ii)).
(e) Expense Reimbursement. On or promptly after the date of this
Agreement, the Partnership will reimburse the Management Company for all
Offering Expenses incurred directly or indirectly by the Management Company in
connection with the organization of the Partnership or the offer and sale of
interests in the Partnership to Limited Partners; provided that in no event will
the amount of Offering Expenses paid directly by the Partnership or reimbursed
to the Management Company or any other party exceed $450,000 in the aggregate.
All Offering Expenses in excess of this amount will be borne by the Management
Company.
5. Reports. The Management Company agrees to provide any financial
statements or reports to the Partnership as may be reasonably requested by the
Partnership for the preparation of its financial statements or reports.
6. Term. Commencing on the date hereof, services will be performed
hereunder until such time as liquidation of the Partnership is complete.
7. Termination. This Agreement may be terminated without cause and without
penalty at any time on 60 days' prior written notice by either party.
8. Amendment. This Agreement can be modified, waived or amended only by a
writing signed by the Partnership and the Management Company.
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79
9. Governing Law; Severability. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware. If it is
determined by a court of competent jurisdiction that any provision of this
Agreement is invalid under applicable law, such provision will be ineffective
only to the extent of such invalidity, without invalidating the remainder of
this Agreement.
10. Entire Agreement. This Agreement contains the entire agreement among
the parties with respect to the subject matter hereof and supersedes all prior
arrangements or understandings with respect thereto except that the provisions
of Paragraphs 3(g) and 16 of the Partnership Agreement shall inure to the
benefit of, and cover, the Management Company and its stockholders, directors,
officers, employees and agents, as the case may be, subject to the terms
therein. Descriptive headings are for convenience only and will not control or
affect the meaning or construction of any provision of this Agreement. This
Agreement may be executed in any number of counterparts, any one of which need
not contain the signatures of more than one party, but all such counterparts
together will constitute one agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first above written.
RSA VENTURES, INC.
By:
------------------------------
Name:
Title:
RSA VENTURES I, L.P.
By: RSA Partners I, L.P.,
its general partner
By: RSA Ventures, Inc.,
its general partner
By:
--------------------
Name:
Title:
81
SCHEDULE C
LETTER AGREEMENT
April 10, 2001
To each of the Limited Partners of
RSA Ventures I, L.P. listed in
Schedule A to the Limited Partnership
Agreement hereinafter described:
Reference is made to the Limited Partnership Agreement of RSA Ventures I,
L.P. (the "Partnership"), of even date herewith, executed by you as the Limited
Partners (as amended from time to time, the "Partnership Agreement").
Capitalized terms used but not defined herein shall have the respective meanings
given them in the Partnership Agreement. Where the context of this Letter
Agreement so requires, use of masculine gender pronouns shall be deemed to
include the feminine or neuter gender, and vice versa.
In consideration of your subscription for an interest in the Partnership as
a Limited Partner, each of the undersigned severally agrees, as set forth with
respect to him, that so long as he or it is an Applicable Person (as defined
below):
1. While the Management Company is receiving the Management Fee pursuant
to the Management Agreement, 100% of any directors' fees, consulting
fees or other remuneration (whether in cash or otherwise ) received by
or on behalf of the undersigned (but excluding all revenues, fees or
other remuneration received by RSA or any of its subsidiaries from any
Partnership Portfolio Company arising out of any commercial or other
business relationship between RSA and/or any of its subsidiaries and
such Partnership Portfolio Company) from a Partnership Portfolio
Company ("Portfolio Company Fees") for services provided to such
Partnership Portfolio Company will be received as an agent of the
Management Company, the General Partner or the Partnership, as the
case may be, and will be remitted to the Management Company; provided,
however, that if any such Portfolio Company Fees are received by or on
behalf of the undersigned from a Partnership Portfolio Company in
which a Successor Fund also has an investment, then in such case, the
undersigned will be obligated to remit to the Management Company only
that portion of such Portfolio Company Fees as is determined by the
Management Company to be remitted to the Management Company and to
reduce the Management Fee based on the relative amount invested in
such Partnership Portfolio Company by the Partnership and all
Successor Funds. If the General Partner is instead receiving the
equivalent of the Management Fee, such
82
Portfolio Company Fees will be remitted to the General Partner instead
of the Management Company.
2. Each of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. agrees that (a) until the
earliest of (i) such time as an amount equal to 80% of the aggregate
Subscriptions of all Partners of the Partnership has been invested in
Investment Securities, committed to new investments in Investment
Securities, reserved for follow-on investments in Investment
Securities or used or reserved to pay expenses of the Partnership,
including, without limitation, the Management Fee payable to the
Management Company, (ii) the dissolution of the Partnership or (iii)
the termination by the Partnership of its program of investing in new
Partnership Portfolio Companies, he will at all times devote
substantially all of his business time to the affairs of the
Partnership and (b) thereafter, he will devote such amount of time to
the affairs of the Partnership as is reasonably necessary or required
to manage the affairs thereof, including preparing the reports that
the Partnership is required to provide to Limited Partners pursuant to
the Partnership Agreement and monitoring as appropriate the
Partnership's investments.
3. RSA agrees that until the earliest to occur of clauses (i), (ii) and
(iii) of Paragraph 2(a) above, RSA will not organize, manage or
control directly or indirectly any investment partnership whose
principal purpose and operation are substantially similar to those of
the Partnership.
4. If the undersigned learns of an investment opportunity in a
privately-held company which is appropriate for the Partnership (as
set forth in the Partnership Agreement), the undersigned will first
offer the Partnership the ability to invest or co-invest in such
investment opportunity before the undersigned invests or co-invests in
such investment opportunity through his or its account or any account
which he or it controls or in which he or it has a beneficial interest
(unless he or it has no control) and before offering such investment
opportunity to any other third parties; provided that this restriction
will not apply to (i) RSA, in connection with any investment by RSA in
an enterprise which is engaged in RSA's "Primary Business" (as defined
below); (ii) RSA, in connection with the acquisition of 15% or more of
the equity securities of a business enterprise; (iii) any investment
by RSA or ▇▇▇▇ ▇▇▇▇▇▇▇ if the cost of the investment by such entity or
person is less than $1,000,000 per investment or any investment by
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇ or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ if the cost of the investment by such
person is less than $100,000 per investment; or (iv) any investment by
▇▇▇▇▇ ▇▇▇▇ or any account which he controls, unless, in each case,
such entity or person obtains the prior written consent of the
Advisory Committee. For purposes of clarification, the foregoing
restrictions will not apply to the individual investing activities of
any of RSA's executive officers or its other employees or to any of
the members of its Board of Directors unless such individual is an
Applicable Person. For purposes of this Letter Agreement, an
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"Applicable Person" means each officer, director or member of the
Investment Committee of the Management Company, each non-retired
limited partner of the General Partner and RSA. For purposes of this
letter agreement, RSA's "Primary Business" means the development,
marketing and sale of e-security tools, products and/or services.
5. Neither the undersigned nor any account which he or it controls will
invest in a Partnership Portfolio Company or, except for ▇▇▇▇▇ ▇▇▇▇ or
any account which he controls, a prospective Partnership Portfolio
Company in which the Partnership is making an investment, without the
approval of the Advisory Committee, except in the case of RSA pursuant
to clauses (i) or (ii) of Paragraph 4 above.
The terms and provisions of this Letter Agreement may be waived, modified,
amended or terminated only by a writing signed by those of the undersigned with
respect to whom the waiver, modification, amendment or termination relates and
with the written consent of the Management Company and of Limited Partners
constituting at least 75% in interest of all Limited Partners (as such
percentage is determined in accordance with the Partnership Agreement). The
Management Company shall promptly furnish copies of any amendments to this
Letter Agreement to all Limited Partners. This Letter Agreement will also be
deemed to apply in all respects to and be enforceable by any Limited Partner who
is listed after the date hereof in Schedule A to the Partnership Agreement.
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This Letter Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
Very truly yours,
RSA SECURITY INC.
By:
------------------------------------------------
Name:
Title:
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Director, Managing Director and
Member of the Investment Committee of RSA Ventures,
Inc. and Limited Partner of RSA Partners I, L.P.
-----------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., Director and Member of the
Investment Committee of RSA Ventures, Inc. and
Limited Partner of RSA Partners I, L.P.
-----------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Director and Member of the Investment
Committee of RSA Ventures, Inc.
-----------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, Officer of RSA Ventures, Inc. and
Limited Partner of RSA Partners I, L.P.
-----------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇, Officer of RSA Ventures, Inc. and
Limited Partner of RSA Partners I, L.P.
-----------------------------------------------------
▇▇▇▇▇ ▇▇▇▇, Officer of RSA Ventures, Inc. and Limited
Partner of RSA Partners I, L.P.
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-----------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Officer of RSA Ventures, Inc. and
Limited Partner of RSA Partners I, L.P.
-----------------------------------------------------
▇▇▇▇▇ ▇▇▇▇, Member of the Investment Committee of RSA
Ventures, Inc. and Limited Partner of RSA Partners I,
L.P.
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