Exhibit 10.18
SKYSCRAPER VENTURES, L.P.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
Amended and Restated as of May 5, 2000
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
Definitions........................................................ 1
ARTICLE II
General Provisions...................................................... 6
2.1 Formation of Limited Partnership................................... 6
2.2 Filing of Certificates............................................. 6
2.3 Name of Partnership................................................ 6
2.4 Principal Place of Business of General Partner; Agent for Process.. 7
2.5 Term of Partnership................................................ 7
2.6 Admission of Limited Partners...................................... 7
2.7 Purposes........................................................... 8
2.8 Partners' Names and Addresses...................................... 8
2.9 Title to Partnership Property...................................... 8
ARTICLE III
Capital Contributions................................................... 9
3.1 Definition......................................................... 9
3.2 Capital Commitments................................................ 9
3.3 Timing of Capital Contributions.................................... 9
3.4 Interest and Return of Capital Contributions....................... 9
3.5 Limitations on Additional Capital Contributions Due to ERISA....... 10
3.6 Default by Limited Partners........................................ 10
ARTICLE IV
Allocation of Net Income and Net Losses................................. 12
4.1 Definition of Net Income and Net Losses............................ 12
4.2 Allocation of Net Income and Net Losses............................ 12
4.3 Substantial Economic Effect........................................ 13
4.4 Other Allocation Provisions........................................ 13
4.5 Withholding........................................................ 13
4.6 No Interest on Capital Accounts.................................... 14
ARTICLE V
Distributions........................................................... 14
5.1 General............................................................ 14
5.2 Tax Distributions.................................................. 14
5.3 Discretionary Distributions........................................ 15
5.4 Reinvestment....................................................... 15
5.5 Distributions Upon Liquidation..................................... 16
5.6 Giveback Obligation................................................ 16
i
Page
----
ARTICLE VI
Management.............................................................. 17
6.1 Management of Partnership.......................................... 17
6.2 Authority of General Partner....................................... 17
6.3 Limitation on Authority of General Partner......................... 18
6.4 Partnership Contracts.............................................. 18
6.5 Expenses........................................................... 19
6.6 Management Fee..................................................... 19
6.7 Other Activities and Competition................................... 20
6.8 Liability of General Partner....................................... 20
6.9 Services to Portfolio Companies.................................... 20
6.10 Indemnification of General Partner................................. 21
6.11 Investment Opportunities........................................... 21
6.12 Investments Involving Affiliates................................... 22
6.13 Advisory Board..................................................... 23
6.14 ERISA Matters...................................................... 23
6.15 Unrelated Business Taxable Income.................................. 24
ARTICLE VII
Rights and Obligations of Limited Partners.............................. 24
7.1 Limitations on Limited Partners.................................... 24
7.2 Diversification.................................................... 24
7.3 Co-Investment Rights............................................... 24
7.4 Removal of General Partner......................................... 24
7.5 Deficit Capital Accounts at Liquidation............................ 25
ARTICLE VIII
Assignability of Interest; Withdrawal................................... 25
8.1 Assignment of General Partner's Interest........................... 25
8.2 Assignment of Limited Partner's Interest........................... 26
8.3 Substitute Limited Partner......................................... 26
8.4 Effective Date..................................................... 27
8.5 Amendment of Agreement............................................. 27
8.6 Withdrawal by Limited Partner...................................... 27
8.7 Annual Meeting..................................................... 28
ARTICLE IX
Investments............................................................. 29
9.1 Liquid Investments................................................. 29
9.2 Investment Intent of Limited Partners.............................. 29
ii
ARTICLE X
Dissolution and Termination.............................. 29
10.1 Extension of Partnership Term...................... 29
10.2 Events of Dissolution.............................. 29
10.3 Distributions Upon Liquidation..................... 30
10.4 Election to Carry on Activities.................... 31
ARTICLE XI
Books, Records and Bank Accounts......................... 31
11.1 Books and Records.................................. 31
11.2 Accounting Basis and Accounting Year; Fiscal Year.. 31
11.3 Reports; Annual Certificate........................ 31
11.4 Valuation of Partnership Assets.................... 32
11.5 Depository Accounts................................ 33
11.6 Tax Elections...................................... 33
ARTICLE XII
Amendments............................................... 33
12.1 Amendments With Consent of the Partners............ 33
12.2 Amendments Without Consent of the Partners......... 33
ARTICLE XIII
Miscellaneous............................................ 34
13.1 Notices............................................ 34
13.2 Voting; Consents................................... 34
13.3 Successors and Assigns............................. 34
13.4 Partner Duties..................................... 35
13.5 ERISA Representations and Warranties............... 35
13.6 Partition.......................................... 35
13.7 No Waiver.......................................... 35
13.8 Captions........................................... 35
13.9 Counterparts....................................... 35
13.10 Governing Law...................................... 36
13.11 Gender and Number.................................. 36
13.12 No Third Party Beneficiaries....................... 36
13.13 Severability....................................... 36
13.14 Entire Agreement................................... 36
iii
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
SKYSCRAPER VENTURES, L.P.
-------------------------
WHEREAS, Skyscraper Management, L.L.C., a Delaware limited liability
company (the "General Partner"), as general partner, and certain of the Limited
Partners (as defined below), as limited partners, entered into a Limited
Partnership Agreement, dated as of February 10, 2000 (the "Partnership
Agreement");
WHEREAS, the parties hereto desire to amend and restate the Partnership
Agreement to provide for certain changes to the terms and conditions set forth
in the Partnership Agreement; and
WHEREAS, the parties hereto desire that the Partnership (as defined below)
be governed by the Delaware Revised Uniform Limited Partnership Act, as amended
from time to time (the "Act"), for the purposes and upon the terms and
conditions herein set forth.
NOW, THEREFORE, the General Partner and the persons listed on Schedule 1
hereto as Limited Partners hereby amend and restate the Partnership Agreement of
the Partnership to read as follows:
THIS AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT is made and entered
into as of May 5, 2000, by and among, the General Partner and the persons listed
on Schedule 1 hereto as limited partners, as they may change from time to time
in accordance with the terms hereof (collectively, the "Limited Partners").
ARTICLE I
Definitions
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "Accountants" means KPMG Peat Marwick or such other certified public
accountants of national standing as may be selected by the General Partner from
time to time.
1.2 "Act" is defined in the recital hereof.
1.3 "Adjusted Capital Contributions" means, with respect to each Partner,
such Partner's Capital Contributions reduced by any distributions previously
made to that Partner pursuant to Section 5.3.
1.4 "Advisory Board" is defined in Section 6.12 hereof.
1.5 "Affiliate" means, with respect to a specified Person, (i) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person, or (ii)
any officer, director, general partner or managing member of the specified
Person or any Person directly or indirectly controlling, controlled by, or under
common control with such officer, director, general partner or managing member;
provided, that in no event shall any specified Person be deemed to be an
Affiliate solely by reason of any of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ acting as a director or
otherwise in a fiduciary capacity with respect to such specified Person.
1.6 "Agreement" means this Agreement of Limited Partnership, as amended
from time to time in accordance with the terms hereof.
1.7 "Annual Meeting" is defined in Section 8.8 hereof.
1.8 "Bankruptcy" means, in the case of a Partner, when (a) such Partner
shall (i) become insolvent or generally fail to pay, or admit in writing its
inability to pay, its debts generally as they become due, (ii) commence a case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, (iii) make a general assignment for the benefit of its
creditors, (iv) consent to or acquiesce in the appointment of a receiver,
trustee, sequestrator or other custodian for itself or any substantial part of
its property, (v) consent to or acquiesce in the relief sought in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or (vi) take any action in furtherance of any of the
aforesaid purposes; or (b) a court of competent jurisdiction shall enter an
order, decree or order for relief in respect of such Partner in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, appointing without the consent of such Partner a receiver,
trustee, sequestrator or other custodian for such Partner or any substantial
part of its property, or approving commencement of an involuntary case filed
against such Partner under any applicable law now or hereafter in effect seeking
the winding up or liquidation of its affairs, and such order, decree or order
for relief shall not be vacated or set aside or stayed within sixty (60) days
from the date of entry thereof.
1.9 "Bridge Financing" means any investment by the Partnership in debt
securities issued by companies of the kind and nature described in Section 2.7
that is intended at the time of such investment by the Partnership to be repaid
or otherwise disposed of within twelve (12) months of such investment.
1.10 "Capital Account" means, with respect to each Partner, the account
established and maintained for the Partner on the books of the Partnership. Each
Partner's Capital Account will initially equal the cash contributed by such
Partner to the Partnership, and throughout the term of the Partnership will be
(i) increased by the amount of (A) income and gains allocated to such Partner
pursuant to Article IV, and (B) any cash subsequently contributed by such
Partner to the Partnership, and (ii) decreased by the amount of (A) losses and
deductions allocated to such Partner pursuant to Article IV, and (B) the amount
of distributions in cash and the value of distributions of property (net of
liabilities secured by the property that the Partner is considered to assume or
take subject to) distributed to such Partner.
1.11 "Capital Commitment" is defined in Section 3.2 hereof.
2
1.12 "Capital Contribution" is defined in Section 3.1 hereof.
1.13 "Capital Deficiency" is defined in Section 5.6 hereof.
1.14 "Carried Interest Distributions" is defined in Section 5.6 hereof.
1.15 "Certificate" means the Certificate of Limited Partnership of
Skyscraper Ventures, L.P. (f/k/a Big Shoulders interTech Fund, L.P.) filed in
the Office of the Secretary of State of Delaware, as amended from time to time.
1.16 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
1.17 "Co-Investment" is defined in Section 7.3 hereof.
1.18 "Commitment Period" means the period commencing with the First Closing
and ending on the fourth anniversary of the date of the Final Closing.
1.19 "Default Interest" in defined in Section 3.6(d) hereof.
1.20 "Default Notice" is defined in Section 3.6(a) hereof.
1.21 "Defaulting Limited Partner" is defined in Section 3.6(a) hereof.
1.22 "Delinquent Payment" is defined in Section 3.6(a) hereof.
1.23 "Designated Securities" is defined in Section 8.6(c) hereof.
1.24 "Dissolution Date" is defined in Section 2.5 hereof.
1.25 "Diversification Limit" is defined in Section 7.2 hereof.
1.26 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder and judicial rulings and
interpretations thereof.
1.27 "ERISA Partner" means any Limited Partner which (i) is an employee
benefit plan subject to Title I of ERISA or a plan subject to Section 4975 of
the Code, or (ii) is a nominee for, or is using or holding the plan assets of,
or is a trust established pursuant to, one or more such employee benefit plans
or other plans.
1.28 "Estimated Value of the Fund" is defined in Section 11.4 hereof.
1.29 "Fee Amount" is defined in Section 2.6(c) hereof.
1.30 "Final Closing" means the last date on which additional Limited
Partners are admitted pursuant to Section 2.6 hereof.
3
1.31 "First Closing" is defined in Section 2.6(a) hereof.
1.32 "GAAP" is defined in Section 11.2 hereof.
1.33 "General Partner" means Skyscraper Management, L.L.C. (f/k/a Big
Shoulders Management, L.L.C.), and any successor elected pursuant to Section 7.3
hereof.
1.34 "Identified" means an investment in a Security for which a letter of
intent, term sheet, memorandum of understanding or similar instrument has been
entered into by or on behalf of the Partnership.
1.35 "Initial Limited Partner" means a person who is admitted to the
Partnership to facilitate the filing of the Certificate and the formation of the
Partnership prior to the First Closing.
1.36 "Interest" means, when used in reference to an interest in the
Partnership, the entire ownership interest of a Partner in the Partnership at
any particular time, including without limitation his or its interest in the
capital, profits, losses and distributions of the Partnership and any rights,
powers or obligations associated with such interest.
1.37 "Interest Amount" is defined in Section 2.6(b) hereof.
1.38 "Limited Partner" means any Person who is a limited partner of the
Partnership at the time of reference thereto, in such Person's capacity as a
limited partner of the Partnership.
1.39 "Liquid Investments" is defined in Section 9.1 hereof.
1.40 "Majority-in-Interest of the Nondefaulting Limited Partners" means
Nondefaulting Limited Partners whose aggregate Participation Percentages exceed
50% of all Nondefaulting Limited Partners' Participation Percentages.
1.41 "Make-Up Amount" is defined in Section 2.6(b) hereof.
1.42 "Management Expenses" is defined in Section 6.5(b) hereof.
1.43 "Management Fee" means the annual management fee payable by the
Partnership to the General Partner pursuant to Section 6.6 hereof.
1.44 "Management Fee Multiplier" means, for the period beginning on the
sixth anniversary of the Final Closing and ending on the seventh anniversary of
the Final Closing, ninety percent (90%), and for each annual period ending on
each succeeding anniversary until the Dissolution Date, the applicable
percentage in effect for the prior annual period, less ten percent (10%).
1.45 "Net Cash Flow" means, with respect to any applicable period, the
gross receipts
4
of the Partnership (other than Short-Term Investment Income), including cash
proceeds received by the Partnership from the sale or exchange of Securities or
the fair market value of distributions of Securities in-kind, less (i)
Partnership Expenses actually paid during such period, (ii) payment of, or
provision for, all debts and obligations to be satisfied as the result of, or in
connection with, such sale or exchange, (iii) payment of all costs and expenses
incurred in connection with the receipt or collection of such proceeds, and (iv)
the setting aside of any reserves from such proceeds.
1.46 "Net Income" and "Net Losses" are defined in Section 4.1 hereof.
1.47 "Nondefaulting Limited Partner" is defined in Section 3.7(a) hereof.
1.48 "Organizational Expenses" is defined in Section 6.2(a) hereof.
1.49 "Participation Percentage" means, with respect to any Partner at any
time, the ratio of (i) the sum of the aggregate Capital Contributions made by
such Partner to (ii) the sum of the aggregate Capital Contributions made by all
Partners.
1.50 "Partner" means the General Partner or any Limited Partner.
1.51 "Partnership" means the limited partnership formed pursuant to the
Certificate and this Agreement.
1.52 "Partnership Expenses" is defined in Section 6.5(a) hereof.
1.53 "Person" means any individual, corporation, partnership, limited
liability company, trust or other entity.
1.54 "Plan Asset Regulations" means the regulations concerning the
definition of "Plan Assets" under ERISA adopted by the U.S. Department of Labor
and codified in 29 C.F.R. 2510.3-101.
1.55 "Portfolio Company" means an issuer of Securities in which the
Partnership has an interest or owns Securities.
1.56 "Prime Rate" means the prime rate of interest announced from time to
time by The Northern Trust Company or its successor.
1.57 "Regulated Limited Partner" is defined in Section 8.6(b) hereof.
1.58 "Security" and "Securities" are defined in Section 2.7 hereof.
1.59 "Short-Term Investment Income" means, with respect to any applicable
period, the gross receipts of the Partnership from cash equivalents and short-
term investments, including without limitation, income earned on Liquid
Investments and Bridge Financings, less Partnership Expenses actually paid
during such period.
5
1.60 "Subsequent Closing" is defined in Section 2.6(a) hereof.
1.61 "Substitute Limited Partner" means a Person admitted pursuant to
Section 8.3 hereof as the successor to all of the rights of a Limited Partner
with respect to all or any part of such Limited Partner's interest in the
Partnership.
1.62 "Target Investment" means an investment which, if made by the
Partnership, would be made in a start-up or early-stage company located in
Illinois, would require an initial investment of $3,500,000 or less, would not
violate the Diversification Limit, would not cause the assets of the Partnership
to be treated as "plan assets" under ERISA, would not require a capital
investment in excess of the remaining Capital Commitments of the Partners and
would be in the best interests of the Partnership as determined by the General
Partner in its reasonable discretion.
1.63 "Total Cost" means, with respect to any Security, the difference
between (A) the sum of (i) the total purchase price paid for such Security or
the capital invested in such Security by the Partnership and (ii) all out-of-
pocket costs and expenses incurred by the Partnership in connection with the
purchase of such Security, and (B) any realized losses with respect to such
Security.
1.64 "Two-Thirds-in-Interest of the Nondefaulting Limited Partners" means
Nondefaulting Limited Partners whose aggregate Participation Percentages are
equal to or exceed 66 2/3% of all of the Nondefaulting Limited Partners'
Participation Percentages.
1.65 "UBTI" means "unrelated business taxable income" as defined in
Sections 511 through 514 of the Code.
1.66 "VCOC" means a "venture capital operating company" as defined in
Section 2510.3-101(d) of the Plan Asset Regulations.
ARTICLE II
General Provisions
2.1 Formation of Limited Partnership. The parties to this Agreement hereby
form a limited partnership under and pursuant to the Act and the rights and
liabilities of the Partners shall be as provided in the Act, except as herein
otherwise expressly provided.
2.2 Filing of Certificates. The General Partner shall file the Certificate
and all such certificates, notices, statements or other instruments required by
law for the formation and operation of a Delaware limited partnership.
2.3 Name of Partnership. The name of the Partnership shall be "Skyscraper
Ventures, L.P."
6
2.4 Principal Place of Business of General Partner; Agent for Process. The
principal place of business of the General Partner shall be ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other place as the General
Partner shall determine. The agent to accept service of process for the
Partnership shall be The Corporation Trust Company and its registered office in
Delaware is located at Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
2.5 Term of Partnership. The term of the Partnership shall commence on the
date the Certificate is filed in the office of the Secretary of State of
Delaware in accordance with the Act, and shall continue until the date, which is
ten (10) years from the date of the last Subsequent Closing (or the date of the
First Closing if there is no Subsequent Closing) ("Dissolution Date"), unless
extended pursuant to Section 10.1 hereof, or sooner dissolved as provided in
Section 10.2 hereof or by operation of law.
2.6 Admission of Limited Partners.
(a) The Partnership shall commence operations at the date that Limited
Partners other than the Initial Limited Partner are first admitted to the
Partnership (the "First Closing"). The General Partner may admit additional
Limited Partners at one or more subsequent closings (the "Subsequent Closings"),
each of which shall occur no later than that date which is nine (9) months after
the date of the First Closing (the "Offering Period"). No additional Limited
Partners shall thereafter be admitted to the Partnership, except Persons who
shall be admitted as Substitute Limited Partners pursuant to Section 8.3 hereof.
(b) Subject to the provisions of this Agreement, during the Offering
Period, the General Partner is authorized, but not obligated, to offer
additional Interests and admit other Persons to the Partnership as additional
Limited Partners; provided, that in no event shall the General Partner accept
subscriptions for Interests in excess of $125,000,000, in the aggregate. In the
event that an additional Limited Partner is admitted to the Partnership at a
Subsequent Closing, such additional Limited Partner shall contribute to the
Partnership an amount equal to its pro rata portion (based upon the ratio of its
Capital Commitment to the aggregate amount of all Partners' Capital Commitments,
including its own) of an amount equal to (i) all Capital Contributions made as
of the date of admission less the sum of (a) all distributions made to the
Limited Partners under Section 5.3 hereof and (b) all Management Fees paid prior
to the date of admission (the amount described in this clause (i) being herein
called the "Make-Up Amount"), plus (ii) interest on the Make-Up Amount accruing
from the First Closing or Subsequent Closing, as the case may be, at a rate
equal to the Prime Rate (the amount described in this clause (ii) being herein
called the "Interest Amount"). The Make-Up Amount contributed by such additional
Limited Partner may (i) be distributed among the other Partners, pro rata, based
upon their Participation Percentages immediately prior to the admission of such
additional Limited Partner, or (ii) may be retained by the Partnership and
offset against future Capital Contributions required of such Partners until the
ratio of each additional Limited Partner's Capital Contributions to its Capital
Commitment is the same as such ratio for all other Partners. If distributed,
each Partner's pro rata portion of the distribution of the Make-Up Amount shall
reduce such Partner's total Capital Contribution to date and increase its
unfunded Capital Commitment to date. The Interest Amount shall not be deemed to
be a Capital Contribution by
7
the additional Limited Partner and shall be paid directly to the Partners pro
rata, based upon their Participation Percentages immediately prior to the
admission of such additional Limited Partner. The Fee Amount (contributed by
payment to the General Partner pursuant to Section 2.6(c) below) and the Make-Up
Amount shall be deemed contributed to the Partnership as of the date of
admission of such additional Limited Partner. An additional Limited Partner
shall not be deemed to have made Capital Contributions on account of payment of
the Interest Amount to the existing Limited Partners, but each Limited Partner
shall be deemed to have a received a return as of the admission date for such
additional Limited Partner equal to the portion of the Interest Amount received
by such Limited Partner.
(c) In addition to the Make-Up Amount payable to the Partnership, an
additional Limited Partner shall pay directly to the General Partner as a
contribution to the capital of the Partnership an amount equal to (i) the
Management Fee that would have been paid to date assuming the additional Limited
Partner had been admitted at the First Closing, minus the Management Fee that
actually had been paid to date (the "Fee Amount"), plus (ii) interest accrued on
the Fee Amount from the date of the First Closing through the date of admission
at a rate equal to the Prime Rate. Any accrued interest payable on the Fee
Amount shall not be deemed to be a Capital Contribution by such additional
Limited Partner.
2.7 Purposes. The Partnership is organized for the purpose of generating
significant returns for its Partners by purchasing, holding, selling and
investing in equity securities, other securities having equity-like
characteristics or debt securities issued by start-up and early-stage companies
or other entities (referred to herein as a "Security" or "Securities"), and
engaging in such other activities incidental or ancillary thereto as the General
Partner deems necessary or advisable, including, but not limited to, investing
in Liquid Investments for the purpose set forth in Section 9.1, making Bridge
Financings, and managing and supervising investments in Securities and Bridge
Financings. It is understood and agreed that in furtherance of its objectives,
the Partnership generally will invest in start-up and early-stage companies
located in Chicago and throughout Illinois and generally will make initial
investments of between $250,000 and $3,500,000 in each particular Security, but
may from time to time make investments in companies located outside of Illinois
or make larger or smaller investments as determined by the General Partner in
its sole discretion. The primary industries in which the Partnership will invest
are information technology, software services, business-to-business and
business-to-consumer e-commerce and interactive marketing services.
2.8 Partners' Names and Addresses. The names and addresses of the Partners
are set forth on Schedule 1 hereto. Any Limited Partner may change its address
upon written notice to the General Partner and the General Partner may change
its address upon written notice to all Limited Partners.
2.9 Title to Partnership Property. All property owned by the Partnership
shall be deemed to be owned by the Partnership as an entity, and no Partner,
individually, shall have any ownership interest in any such property. Title to
Partnership property may be held in street name or another sort of nominee
arrangement if the General Partner determines that such arrangement is in the
Partnership's best interest.
8
ARTICLE III
Capital Contributions
3.1 Definition. The "Capital Contribution" of each Partner shall mean the
total amount of cash contributed to the Partnership by such Partner.
3.2 Capital Commitments. Each Partner hereby commits to make
contributions to the capital of the Partnership in the total amount set forth
opposite its name on Schedule 1 hereto under the heading "Capital Commitments"
(the "Capital Commitments"). The minimum Capital Commitment of each Partner
which is a corporation or other entity shall be $1,000,000 and the minimum
Capital Commitment of each Partner which is an individual shall be $500,000;
provided, however, that the General Partner may, in either case, accept
subscriptions for lesser amounts, in its sole discretion. The General Partner
hereby commits to contribute an amount equal to at least 1% of the aggregate
amount of all Partners' Capital Commitments. The General Partner may commit to
contribute additional amounts as a Limited Partner in its discretion.
3.3 Timing of Capital Contributions.
(a) Subject to Section 6.14, as and when at any time the General
Partner determines that capital is required to invest in Securities, provide
working capital, establish reasonable reserves or pay expenses, costs, losses or
liabilities of the Partnership, including without limitation, payment of the
Management Fee, the Partners shall contribute cash to the capital of the
Partnership. All Capital Contributions shall be made within ten (10) days after
notice from the General Partner of the amounts to be contributed by each Partner
and of the general purposes to which such contributions will be applied. The
amount of cash required to be contributed by each Partner shall be equal to the
total amount of Capital Contributions called for by the General Partner,
multiplied by a fraction, the numerator of which shall be the amount of such
Partner's Capital Commitment and the denominator of which shall be the aggregate
amount of all Partners' Capital Commitments. Without limitation upon the terms
and provisions hereof, nothing in this Agreement shall operate to increase any
Partner's Capital Commitment, and no Partner shall have any obligation to
contribute any amounts in excess of such Partner's aggregate Capital Commitment
to the Partnership.
(b) Any portion of a Partner's Capital Commitment which has not been
called for by the General Partner by the end of the Commitment Period or is not
required for Identified investments in Securities as of the end of the
Commitment Period shall be released from further commitment to the Partnership;
provided, however, the General Partner may at any time request Capital
Contributions from the Partners to (i) pay expenses or costs, losses or
liabilities of the Partnership, including without limitation, payment of the
Management Fee, (ii) fund reasonable reserves established by the General Partner
to facilitate any additional investments by the Partnership in Securities held
by the Partnership as of the end of the Commitment Period, and (iii) complete
Identified investments in Securities as of the end of the Commitment Period.
3.4 Interest and Return of Capital Contribution. No Partner shall be
entitled to interest on any Capital Contribution and no Partner shall have the
right to withdraw or to demand
9
the return of all or any part of its Capital Contribution, except as
specifically provided in this Agreement.
3.5 Limitations on Additional Capital Contributions Due to ERISA.
Notwithstanding Section 3.2, if at any time before any Capital Contribution to
the Partnership required by Section 3.3 is due, (i) a Limited Partner shall
obtain and deliver to the General Partner an opinion of counsel reasonably
satisfactory to the General Partner that such Limited Partner is subject to
ERISA and the assets of the Partnership may be deemed to constitute "plan
assets" under ERISA or (ii) the certificate required by Section 6.1(b) is not
provided when due, then at such Limited Partner's request, it shall have no
further obligation to make any additional contribution, the Capital Commitment
of such Limited Partner shall be reduced to an amount equal to its Capital
Contribution, and such Limited Partner shall not, by reason of its failure to
make such additional contribution, be deemed a Defaulting Limited Partner
pursuant to Section 3.6 hereof; provided, that the General Partner subsequently
may (but shall not be obligated to) accept additional Capital Contributions from
such Limited Partner upon receipt of an opinion of counsel reasonably
satisfactory to the General Partner that the legal conditions described in this
Section 3.5 no longer exist.
3.6 Default by Limited Partners.
(a) In the event any Limited Partner fails for any reason to make a
Capital Contribution when due pursuant to Section 3.3 hereof, and fails to make
such contribution within ten (10) days after receiving written notice from the
General Partner that such payment (a "Delinquent Payment") is overdue (a
"Defaulting Limited Partner"), the General Partner may give written notice of
the default (the "Default Notice") to each Limited Partner who has not defaulted
in such Capital Contribution (a "Nondefaulting Limited Partner"), and any
Nondefaulting Limited Partner shall have the right, within ten (10) days from
the expiration of such 10-day period, to fund all or part of the amount of the
Delinquent Payment. Each Nondefaulting Limited Partner shall have the right to
fund its pro rata share (based on the proportion of its Capital Commitment to
the aggregate of all Capital Commitments of all Nondefaulting Limited Partners)
of the Delinquent Payment (each, a "Contributing Partner"). If less than all of
the Delinquent Payment is funded by the Contributing Partners on a pro rata
basis, then the General Partner may offer to and select any Person (which may be
the General Partner or an Affiliate thereof) to contribute the balance of the
Delinquent Payment. Each Contributing Partner or other Person contributing a
portion of the Delinquent Payment agrees to assume the obligations of the
Defaulting Limited Partner to contribute to the Partnership any remaining
portion of the Defaulting Partner's Capital Commitment as and when due pursuant
to Section 3.3 hereof. If all of the Delinquent Payment is funded, the
Defaulting Limited Partner shall no longer be required to make any contributions
to the Partnership on account of its Capital Commitment.
(b) In the event and each time that a Partner becomes a Defaulting
Limited Partner and one or more Contributing Partners elect to make a Defaulting
Limited Partners's Capital Contribution that is otherwise due and constitutes a
Delinquent Payment pursuant to Section 3.6(a), the Participation Percentages of
each of the of the Contributing Partners and the Defaulting Limited Partner
shall be recalculated in accordance with the Capital Contributions
10
made by the Contributing Partners or any Person on account of a Delinquent
Payment. In addition, Schedule 1 hereto will be revised to reflect any reduction
in the Defaulting Limited Partner's Capital Commitment and any increase in the
Capital Commitment of the Contributing Partners on account of their pro rata
assumption of the Defaulting Partner's Capital Commitment.
(c) In addition, and without limitation upon any other rights or
remedies of the Partnership, the General Partner may offer to the Nondefaulting
Limited Partners, by delivery of a Default Notice, the opportunity to purchase
the Defaulting Partner's Interest in the Partnership; provided, that no sale
shall be consummated pursuant to this Section 3.6 if it would result in a non-
exempt prohibited transaction under ERISA or the Code. Within ten (10) days of
receipt of such notice (the "Election Period"), any Nondefaulting Partner may,
by delivery of written notice to the Defaulting Partner and the General Partner,
elect to purchase all, but not less than all, of the Defaulting Partner's
Interest in the Partnership at a price (the "Purchase Price") equal to the
Adjusted Capital Contributions of the Defaulting Partner as of the date of the
Default Notice. If more than one Partner desires to purchase the Defaulting
Partner's Interest, each such Partner (a "purchaser") shall have the right to
purchase its pro-rata portion of such Interest, based upon the purchasers'
relative Participation Percentages immediately prior to such purchase. The
closing of the purchase and sale of the Defaulting Partner's Interest shall take
place on a date designated by the purchasers not later than thirty (30) days
following the date of the Default Notice. At the closing, the Defaulting Partner
shall execute and deliver to the purchasers assignments of interest, bills of
sale, instruments of conveyance, and such other instruments as such purchasers
may reasonably require to convey title to all of the Defaulting Partner's right,
title and interest in and to the Partnership, free and clear of liens, claims
and encumbrances. In the event the Defaulting Partner refuses or fails to
execute and deliver any of the foregoing, the purchasers (or their respective
designees) are hereby irrevocably appointed attorneys-in-fact to execute and
deliver on behalf of the Defaulting Partner any such documents or instruments.
At any closing under this paragraph, the Purchase Price for the Defaulting
Partner's Interest shall be paid entirely in cash at the closing, by delivery of
a cashier's or certified check or by wire transfer. In addition, to the extent
that any monies are owed from a Defaulting Partner to the Partnership, such
amounts may be offset against the Purchase Price payable to the Defaulting
Partner hereunder, provided that the purchasers of the Defaulting Partner's
Interest shall agree to assume the obligations of the Defaulting Partner to
contribute to the Partnership any portion of the Defaulting Partner's required
Capital Contribution together with Default Interest (as defined in Section
3.3(d)) thereon and to pay to the Partnership any Capital Contributions when
called for by the General Partner in accordance with Sections 3.3 or 5.4.
(d) In addition and without limitation upon any other rights or
remedies of the Partnership, the General Partner may commence legal proceedings
against the Defaulting Limited Partner to collect the unpaid balance of the
Delinquent Payment plus interest accrued at a rate equal to four (4) percentage
points per annum over the Prime Rate ("Default Interest"), from time to time
(but not in excess of the highest rate per annum permitted by law), from the
date the Delinquent Payment was due, plus expenses of collection, including
attorneys' fees.
(e) During any period in which the Delinquent Payment remains
outstanding, the Defaulting Limited Partner shall have no right to receive
distributions from the Partnership,
11
and such distributions shall be applied towards satisfaction of such Delinquent
Payment. Allocations of Net Income or Net Losses to a Defaulting Limited Partner
shall be made in accordance with Section 4.2 hereof. Notwithstanding the
provisions of this Section 3.6, the General Partner may, but shall not be
obligated to, permit a default to be cured by a Defaulting Limited Partner on
such terms and conditions as it deems appropriate in its sole discretion.
ARTICLE IV
Allocation of Net Income and Net Losses
4.1 Definition of Net Income and Net Losses. "Net Income" shall mean the
excess of income and gain over expenses of the Partnership for Federal income
tax purposes and "Net Losses" shall mean the excess of expenses and losses over
income and gain of the Partnership for Federal income tax purposes, after taking
into account all income, gain, expenses and losses incurred in connection with
the Partnership's investments in Securities, including, but not limited to,
gains and losses from the sale or other disposition of Securities. Net Income
and Net Losses shall be determined in accordance with the method of accounting
used by the Partnership for federal income tax reporting purposes, consistently
applied.
4.2 Allocation of Net Income and Net Losses. Except as provided in Section
704 of the Code and regulations promulgated thereunder, Net Income and Net
Losses and each item of income, gain, loss and deduction entering into the
computation thereof, for each fiscal year of the Partnership shall be allocated
to the Partners as follows:
(a) Net Income received from Liquid Investments shall be allocated to
the Partners in accordance with each Partner's Participation Percentage.
(b) All other Net Income and all Net Losses shall be allocated to the
Partners as follows:
(1) Net Income, and a pro rata percentage of each item of gross income
or deduction (capital and/or ordinary) entering into the computation
thereof, shall be allocated in the following order of priority:
(A) First, to the Partners, until an amount equal to the excess
of (i) all Net Losses previously allocated to each Partner
pursuant to Section 4.2(b)(2)(B) over (ii) the total amount of
Net Income previously allocated to the Partners pursuant to this
Section 4.2(b)(1)(A) has been allocated in proportion to each
Partner's share of such excess of (i) over (ii); and
(B) Second (i) 80% to the Partners in accordance with each
Partner's Participation Percentage and (ii) 20% to the General
Partner.
(2) Net Losses, and a pro rata percentage of each item of gross income
or deduction (capital and/or ordinary) entering into the computation
thereof, shall be allocated in the following order of priority:
12
(A) First, 80% to the Partners in accordance with each Partner's
Participation Percentage and 20% to the General Partner, until an
amount to the excess of (i) all Net Profits previously allocated
to each Partner pursuant to Section 4.2(b)(1)(B) over (ii) the
total amount of Net Losses previously allocated to the Partners
pursuant to this Section 4.2(b)(2)(A), has been allocated among
the Partners in proportion to each Partner's share of such excess
of (i) over (ii); and
(B) Second, any additional Net Losses shall be allocated among
the Partners in proportion to their Capital Contributions.
4.3 Substantial Economic Effect. It is the intent of the Partners that the
tax allocations of the Partnership will meet the requirements for "substantial
economic effect" of Section 704 of the Code, and the regulations promulgated
thereunder. The tax allocations set forth in this Article IV shall be
interpreted consistently with the foregoing intent, and the tax allocations
shall be amended, if necessary, in order to accomplish this purpose.
4.4 Other Allocation Provisions
(a) For the purpose of adjusting the Capital Accounts of the Partners,
and determining Net Income and Net Losses, if any property is distributed in
kind to any Partner, the difference between its fair market value (as determined
in the reasonable judgement of the General Partner or a liquidator, as the case
may be) and its book value at the time of distribution shall be treated as gain
or loss recognized by the Partnership and allocated pursuant to the provisions
of Section 4.2.
(b) Except to the extent otherwise required by the Code and
regulations, if an Interest in the Partnership or part thereof is transferred in
any fiscal year, the items of income, gain, loss, deduction and credit allocable
to the Interest in the Partnership for such fiscal year shall be apportioned
between the transferor and the transferee in proportion to the number of days in
such fiscal year the Interest in the Partnership is held by each of them, except
that, if they agree between themselves and so notify the General Partner within
thirty days after the transfer, then at their option, (i) all items or (ii)
extraordinary items, including capital gains and losses, may be allocated to the
Person who held the Interest in the Partnership on the date such items were
realized or incurred by the Partnership.
4.5 Withholding.
(a) The Partnership shall comply with withholding requirements under
Federal, state and local law and shall remit amounts withheld to and file
required forms with the applicable jurisdictions. To the extent the Partnership
is required to withhold (including for the Illinois replacement tax) and pay
over any amounts to any authority with respect to distributions or allocations
to any Partner, the amount withheld shall be treated as a distribution in the
amount of the withholding to that Partner. In the event of any claimed over-
withholding, the Partners shall be limited to an action against the applicable
jurisdiction. If the amount withheld was not
13
withheld from actual distributions, the Partnership may, at its option, (i)
require the Partner to reimburse the Partnership for such withholding, or (ii)
reduce any subsequent distributions by the amount of such withholding. Each
Partner agrees to furnish the Partnership with any representations and forms as
shall reasonably be requested by the Partnership to assist it in determining the
extent of, and in fulfilling, its withholding obligations.
(b) To the extent the Partnership has withheld any amounts with
respect to any Partner, if distributions to the Partner are not reduced by the
amounts withheld in the year of withholding or the first 90 days of the next
succeeding year and if the Partner has not reimbursed the Partnership for such
withholding no later than 90 days following the year of withholding, the
Partnership shall make distributions to all Partners pursuant to, at the
election of the General Partner, Sections 5.2 or 5.3 in an amount sufficient to
enable the Partnership to reduce distributions to the Partner with respect to
which the Partnership has withheld any amounts by the amount withheld. For
purpose of the preceding sentence, any amounts withheld within the first 90 days
of a taxable year shall be deemed withheld in the preceding year.
4.6 No Interest on Capital Accounts. No Partner shall receive interest on
the amount credited to such Partner's Capital Account.
ARTICLE V
Distributions
5.1 General. Except as otherwise expressly set forth herein, all
distributions of cash and of property other than cash shall be made in such
manner, at such time and in such amounts as are determined in the sole
discretion of the General Partner; provided, that no distribution will be made
in kind if it would result in a non-exempt prohibited transaction under ERISA or
the Code. Distributions of Net Cash Flow shall be accounted for and made
separately with respect to each Security. In the event that the General Partner
elects, in its sole discretion, to reinvest any Net Cash Flow received by the
Partnership, the Capital Commitments of the Partners shall be reduced by an
amount equal to the total amount of proceeds which are so reinvested. The amount
of each Partner's Capital Commitment shall be reduced by its proportionate share
(based upon the ratio which such Partner's Capital Commitment bears to the total
Capital Commitments of all Partners) of the total amount of proceeds which are
so reinvested. Any amount of Net Cash Flow that otherwise would be distributable
to the Partners but is retained and reinvested by the Partnership shall be
treated as a distribution of such amount to the Partners and a recontribution of
capital by the Partners to the Partnership.
5.2 Tax Distributions. At the discretion of the General Partner, each
Partner may be paid in cash within ninety (90) days after the end of each fiscal
year during the term of the Partnership an amount equal to the excess if any of
(a) the aggregate state and Federal income tax liability such Partner would have
incurred as a result of such Partner's ownership of an interest in the
Partnership for all prior fiscal years (treated as if there were one taxable
period), calculated as if (i) such Partner were subject to the highest marginal
Federal and Illinois income tax rates for such years applicable to any
individual, and (ii) allocations from the Partnership were the sole source of
income and loss for such Partner, over (b) all prior cash distributions
14
made pursuant to this Section 5.2, Section 5.3 or Section 5.5 (a "Tax
Distribution"). Tax Distributions shall be treated as advance distributions of
amounts otherwise distributable to such Partners, and shall not alter or
increase the total amounts to be distributed to the Partners over the life of
the Partnership. If, at the time of liquidation of the Partnership, as a result
of this Section 5.2, any Partner has received distributions over the life of the
Partnership in excess of the amount that such Partner would have otherwise
received under Section 5.3 or 5.5, then such Partner shall promptly contribute
such excess amount to the Partnership to be distributed in accordance with
Section 5.5.
5.3 Discretionary Distributions.
(a) Distributions of Short-Term Investment Income shall be made to the
Partners in accordance with each Partner's Participation Percentage.
(b) As and when at any time the General Partner determines to
distribute Net Cash Flow with respect to any particular Security, any and all
distributions of such Net Cash Flow for any period shall be made to the Partners
as follows:
(i) First, 100% to the Partners in accordance with each Partner's
Participation Percentage, until the Partners have received cumulative
distributions pursuant to this Section 5.3(b)(i) equal to the sum of
(A) any Capital Contributions used to pay any Organizational Expenses
or any Partnership Expenses, (B) the aggregate amount of permanent
write-downs, if any, by the General Partner with respect to any
Securities held by the Partnership as of the end of such period, as
determined in the sole discretion of the General Partner, and (C) the
Total Cost of the Security which is currently being sold or exchanged;
and
(ii) Thereafter, (A) 80% to the Partners in accordance with each
Partner's Participation Percentage and (B) 20% to the General Partner.
5.4 Reinvestment. During the Commitment Period, any net proceeds received
by the Partnership from any Security (including funds returned to the
Partnership in connection with the refinancing of any Security or a Bridge
Financing) shall be distributed to the Partners in accordance with the
provisions of Section 5.3 hereof, subject to any reasonable reserves which the
General Partner may establish; provided, however, that (i) the General Partner
may, in its sole discretion, recall such proceeds distributed to the Partners
for the purpose of reinvestment for the same purposes, during the same periods,
and subject to the same limitations as are set forth in Section 3.2, but solely
to the extent such distributions represent a return of Capital Contributions to
the Partners for purposes of this Section 5.4 and (ii) in no event shall the
General Partner recall, in the aggregate, proceeds in excess of an amount equal
to the total Capital Commitments of the Partners. If and when the General
Partner makes a distribution which includes any amounts which may be recalled
for reinvestment pursuant to this Section 5.4, the General Partner shall notify,
from time to time, each Limited Partner as to the aggregate amount which has
been distributed to such Limited Partner which may be recalled for investment.
Net proceeds shall be considered a return of Capital Contributions to the extent
of
15
the Capital Contributions that were applied to the acquisition of the particular
Security from which such proceeds are derived, and shall be considered to be
distributed to Partners prior to the distribution of profits from such Security.
Notwithstanding anything herein to the contrary, in no event shall the aggregate
amount of unreturned Capital Contributions made by the Partners pursuant to
Section 3.3 and capital recontributed under this Section 5.4 exceed the total
Capital Commitments of the Partners. After the Commitment Period, any net
proceeds received by the Partnership from any Security will be distributed to
the Partners in accordance with the provisions of Sections 5.3 and 5.5 hereof,
subject to the payment of any Partnership expenses and any reasonable reserves
which the General Partner may establish.
5.5 Distributions Upon Liquidation.
(a) To effect the dissolution and liquidation of the Partnership
pursuant to Section 10.2 hereof, the General Partner, in accordance with the
provisions of Section 5.5(b) below, shall distribute all assets of the
Partnership to the Partners in cash or in kind. Distribution of assets in kind
shall be made in accordance with their fair market value as determined pursuant
to Section 11.4 hereof.
(b) The net proceeds resulting from the liquidation of the Partnership
pursuant to a dissolution of the Partnership shall be distributed and applied in
the following order of priority:
(i) to the payment of the expenses of liquidation and the debts
and liabilities of the Partnership;
(ii) to the setting up of any reserves that the General Partner
determines are reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Partnership (which shall be distributed
in accordance with (iii) below if and when the General Partner determines
in its sole discretion that such reserves are no longer required); and
(iii) to and among the Partners in accordance with Section 5.3.
5.6 Giveback Obligation. If the aggregate distributions made to the
General Partner under Section 5.3(b)(ii)(B) (collectively, the "Carried Interest
Distributions") over the term of the Partnership through liquidation exceed
twenty percent (20%) of the cumulative amounts distributed to the Partners
pursuant to Section 5.3(b)(ii) during its term, then the General Partner shall
pay or contribute to the Partnership an amount equal to such excess Carried
Interest Distributions, net of the difference, if any, between (x) the General
Partner's Federal, state, and local income tax liability on the excess Carried
Interest Distributions determined as if the General Partner and its beneficial
owner did not engage in any activities other than ownership and management of
the Partnership and (y) any Federal, state, and local tax benefit the General
Partner actually receives as a result of making such payment or contribution.
16
ARTICLE VI
Management
6.1 Management of Partnership.
(a) The management and control of the activities and affairs of the
Partnership shall be vested solely in the General Partner.
(b) The General Partner shall use its best efforts to manage the
activities and affairs of the Partnership so that the assets of the Partnership
will not be considered "plan assets" within the meaning of the Plan Asset
Regulations. If participation in the Partnership by ERISA Partners is
"significant" within the meaning of the Plan Asset Regulations, then the General
Partner shall provide to each ERISA Partner, on an annual basis, written
confirmation certifying as to the Partnership's status as a VCOC within thirty
(30) days following the expiration of the Partnership's most recent "annual
valuation period" within the meaning of the Plan Asset Regulations.
6.2 Authority of General Partner. Subject to the terms and provisions of
this Agreement, the General Partner shall have exclusive management and control
of the affairs of the Partnership and shall have the power and authority to do
all things necessary or proper to carry out the purposes of the Partnership.
Without limiting the generality of the authority of the General Partner, and
subject to the terms and provisions of this Agreement, the General Partner shall
have full power and authority, at the expense of the Partnership:
(a) to pay or reimburse parties (including the General Partner and any
of its Affiliates) for all expenses relating to the organization and formation
of the Partnership and the placement of Limited Partner interests in the
Partnership, including attorneys' and accountants' fees, printing, telephone and
telex, consulting services, postage, secretarial expenses, travel, entertainment
and other out-of-pocket expenses (collectively, "Organizational Expenses"), up
to $350,000, in the aggregate;
(b) to pay or reimburse parties (including the General Partner and its
Affiliates) for all Partnership Expenses;
(c) to pay the reasonable costs and expenses of meetings of the
Partners, including the Annual Meeting;
(d) to engage such agents, attorneys, accountants, custodians and
financial advisors and other agents and consultants as are necessary or
advisable for the affairs of the Partnership;
(e) to receive, buy, acquire, invest in, sell, exchange, trade and
otherwise deal with Securities, Bridge Financings or other property of the
Partnership;
17
(f) to open, conduct and close cash accounts with brokers on behalf of
the Partnership and to pay the customary fees and charges applicable to
transactions in all such accounts;
(g) to open, maintain and close bank, money market, custodial and
other types of accounts for the Partnership and to draw checks and other orders
for the payment of money;
(h) to file, on behalf of the Partnership, all required local, state
and federal tax returns and other documents relating to the Partnership and to
act as "tax matters partner" for the Partnership;
(i) to cause the Partnership to purchase or bear the reasonable cost
of any insurance covering the potential liabilities of the Partnership, the
General Partner and its members and employees, as well as the potential
liabilities of any person serving at the request of the General Partner as a
director of a corporation or an official of another entity in which the
Partnership has an investment;
(j) to commence or defend litigation that pertains to the Partnership,
one or more Partners or Partnership property;
(k) to enter into, make and perform such contracts, agreements and
other undertakings, and to do such other acts as are necessary or advisable for,
or as may be incidental to, the conduct of the business of the Partnership,
including, without in any manner limiting the generality of the foregoing,
contracts, agreements, undertakings and transactions with any Partner or with
any other person, firm or corporation having any business, financial or other
relationship with any Partner;
(l) to file amendments to the Certificate; and
(m) to admit as Limited Partners additional Persons in accordance with
the provisions of this Agreement.
6.3 Limitation on Authority of General Partner. The General Partner,
without the prior written consent or ratification of all Partners, shall have no
authority to:
(a) do any act which would contravene this Agreement; or
(b) admit a Person as a General Partner of the Partnership.
6.4 Partnership Contracts. All contracts undertaken by the Partnership
shall be executed by the General Partner and in such contracts the Partnership
shall be identified as a limited partnership. The Partners shall promptly
execute (with acknowledgment, if required) at the request of the General
Partner, any and all instruments necessary or appropriate to ratify or confirm
the authority of the General Partner hereunder.
18
6.5 Expenses. The Partnership shall bear all Organizational Expenses up to
$350,000 in the aggregate; the General Partner shall pay all Organizational
Expenses in excess of $350,000 and any placement agent or brokers fees incurred
in connection with the sale of Interests in the Partnership. The Partnership
shall also bear all costs and expenses incurred in the Partnership activities or
associated with investigating, evaluating, negotiating, monitoring and disposing
of investments in Securities by the Partnership, including without limitation,
the Management Fee, expenses incurred in connection with proposed investments
which are not consummated, expenses relating to the portfolio of Securities
(such as brokerage, registration of securities, finder's and other fees),
premiums for insurance protecting the Partnership, the General Partner and their
respective members, principals, employees and agents from liabilities to third
parties in connection with Partnership affairs, legal and all outside accounting
expenses, consulting expenses, auditing expenses, other out-of-pocket expenses
related to investments in Securities and any extraordinary expenses of the
Partnership (such as litigation expenses) (collectively, "Partnership
Expenses").
(a) The General Partner shall bear all normal operating expenses
incurred in connection with the management of the Partnership. Such normal
operating expenses to be borne by the General Partner shall consist of
expenditures on account of salaries, wages and other expenses of the General
Partner's members and employees, rent payable for space used by the General
Partner, telephone and other communication costs unrelated to the investment
activities of the Partnership, office equipment or services, maintenance of the
books and records of the Partnership, preparation of reports to the Limited
Partners and other administrative expenses of the Partnership (collectively,
"Management Expenses").
6.6 Management Fee.
The Partnership shall pay to the General Partner in cash during the term of the
Partnership, as payment for services rendered as General Partner, an annual
asset management fee (the "Management Fee") as follows:
(i) for the period beginning on the date of the First Closing and
ending on the sixth anniversary of the Final Closing, an amount equal to
two percent (2%) of the total Capital Commitments of the Partners; and
(ii) thereafter, an amount equal to the product of (x) the total
Management Fee paid during the sixth year of the Partnership and (y) the
Management Fee Multiplier in effect at such time.
The Management Fee shall be paid on the first day of each calendar quarter in
advance for such quarter. If and to the extent that any member or employee of
the General Partner receives any transaction fees, closing fees, break-up fees,
monitoring fees, directors' fees or other similar fees in connection with
investments in Securities or is reimbursed for any expenses by any Portfolio
Company in connection with investments in Securities, the Management Fee payable
hereunder shall be reduced, dollar-for-dollar, by the amount of such fees or
reimbursements, as the case may be.
19
(a) The Management Fee payable to the General Partner shall not be
considered a distribution of profits or return of capital to the General Partner
for the purpose of any provision of this Agreement, but shall be considered a
deduction from Partnership income or an increase in Partnership losses in
determining Net Income or Net Losses, or items of income or expense, pursuant to
Article IV hereof.
6.7 Other Activities and Competition.
(a) The General Partner and the members, officers and employees
thereof shall devote such time and effort to the activities of the Partnership
as the General Partner deems necessary or appropriate to manage responsibly the
affairs of the Partnership.
(b) Subject to Section 6.7(a) and except as specifically provided in
this Agreement, it is understood and agreed that: (i) the General Partner shall
not be required to manage the Partnership as its sole and exclusive function,
and the General Partner, its Affiliates and the respective agents, officers,
directors and employees thereof may engage in or possess any interests in
business ventures and may engage in other activities of every kind and
description independently or with others in addition to those relating to the
Partnership, including the rendering of advice or services of any kind to other
investors and the making or management of other investments or other investment
partnerships, whether or not any such activities may conflict with any interest
of the Partnership or any of the Partners or be competitive with the business of
the Partnership; (ii) neither the General Partner nor any of its Affiliates
shall have any obligation or responsibility to refer any such investments or
other activities to the Partnership or any Partner; and (iii) the General
Partner, its Affiliates and any agent, officer, director or employee thereof may
act as a director of any corporation, trustee of any trust, partner of any
partnership or administrative officer of any business entity, and may receive
compensation for service as a director, employee, advisor, consultant or manager
with respect to, and participate in profits derived from, investments in or of
any such corporation, trust, partnership or other business entity. Each Limited
Partner authorizes, consents to and approves of such present and future
activities by such Persons; and neither the Partnership nor any Partner shall
have any right by virtue of this Agreement or the partnership relationship
created hereby in or to other ventures or activities of the General Partner or
its Affiliates or of their respective agents, officers, directors or employees
or to the income or proceeds derived therefrom.
6.8 Liability of General Partner. The General Partner will not be liable to
any Limited Partner or the Partnership for any act or omission taken or omitted
as General Partner with respect to the Partnership which is not in violation of
the provisions of this Agreement, or for any act or omission taken or omitted by
any member, shareholder, director, officer, affiliate, employee or agent of the
General Partner, except in the case of the General Partner's (or such other
person's) own willful, wanton or intentional misconduct, malfeasance or gross
negligence.
6.9 Services to Portfolio Companies. The General Partner or its Affiliates
may provide to the Partnership or its Portfolio Companies various services from
time to time, including, but not limited to, marketing and public relations
services, strategic e-commerce consulting services, and investment, financial
and legal services, and may charge the Partnership or its Portfolio Companies
therefor, provided that the General Partner and its Affiliates can
20
provide such services at no greater cost than would be the case if unaffiliated
third parties were to provide such services, as determined by the General
Partner in its sole discretion.
6.10 Indemnification of General Partner. The Partnership shall indemnify
the General Partner and its Affiliates, as well as each of their respective
directors, officers, partners, members, shareholders, employees and agents
(each, an "Indemnified Party"), to the fullest extent permitted by law, from and
against any loss, cost, expense (including attorneys' fees), damage, judgment
and/or liability suffered or sustained by them in connection with any action,
suit or proceeding (including any proceeding before any administrative or
legislative body or agency) to which such Indemnified Party may be made a party
or otherwise involved by reason of any acts, omissions or alleged acts or
omissions arising out of their activities on behalf of the Partnership;
provided, however, that an Indemnified Party shall not be so indemnified with
respect to any matter as to which such Indemnified Party shall not have acted in
good faith in what the Indemnified Party reasonably believed was consistent with
the duties of such Indemnified Party as set forth herein. An Indemnified Party
shall be entitled to indemnification pursuant to this Section 6.10, only to the
extent that such Indemnified Party does not have the right to and in fact does
not recover amounts with respect to the claim upon which the demand for
indemnification is based from third parties whether due to indemnification by
such third parties, insurance or otherwise, provided, that the amount an
Indemnified Party is entitled to recover from the Partnership pursuant to
indemnification hereunder shall include all expenses, including reasonable
attorneys' fees, of collecting such amounts from such third parties. The right
of indemnification granted by this Section 6.10 shall be in addition to any
rights to which an Indemnified Party may otherwise be entitled and shall inure
to the benefit of the successors, assigns, executors or administrators of such
Indemnified Party. The Partnership shall pay the expenses incurred by an
Indemnified Party in defending an action, suit or proceeding in advance of the
final disposition of such action, suit or proceeding, upon receipt of an
undertaking by or on behalf of such Indemnified Party to repay such amount if
there shall be an adjudication or determination that it is not entitled to
indemnification as provided herein. The right of indemnity or reimbursement
granted in this Section 6.10 may not be satisfied except out of the assets of
the Partnership, and no Partner shall be personally liable with respect to any
such claim for indemnity or reimbursement in excess of its Capital Commitment.
6.11 Investment Opportunities. The Partners expressly acknowledge and agree
that the General Partner shall not be required to cause the Partnership to
invest in any specific Target Investment and that the General Partner and its
Affiliates may allocate Target Investments at any time to one or more Affiliates
of the General Partner rather than to the Partnership. In such event, the
General Partner shall deliver written notice to the Advisory Board at least ten
(10) days prior to the consummation of a Target Investment by an Affiliate of
the General Partner other than the Partnership; provided, however, that in no
event shall the General Partner be required to obtain the approval or consent of
any of the Limited Partners or the Advisory Board prior to consummating such
investment. Notwithstanding the foregoing to the contrary, the General Partner
shall not be required to deliver such prior written notice with respect to (i)
any follow-on investment relating to any existing investments made by the
General Partner or any of its Affiliates prior to the date of this Agreement,
(ii) any investments which are the subject of a contract or letter of intent
that is in existence as of the date of this Agreement and any follow-on
21
PAGE>
investments thereto, or (iii) any investment in publicly traded securities
which represent less than five percent (5%) of the total outstanding capital
stock of such issuer.
6.12 Investments Involving Affiliates. The Partners expressly acknowledge
that it is possible that the Partnership may invest in issuers of Securities in
which the General Partner or its Affiliates has or may obtain a direct or
indirect interest. With respect to such investments, the following policies
shall apply:
(a) Without the prior written approval of the Advisory Board, the
General Partner shall not cause the Partnership to invest in issuers of
Securities in which the General Partner or any of its Affiliates has an interest
at the time of such investment.
(b) The General Partner may cause or permit (i) any Affiliate of the
General Partner (other than the Partnership) to invest in Portfolio Companies or
(ii) any entity in which an Affiliate of the General Partner (other than the
Partnership) holds twenty-five percent (25%) or more of the outstanding equity
interests to invest in or acquire fifty percent (50%) or more of the outstanding
equity interests of a Portfolio Company. In either event, the General Partner
shall deliver written notice to the Advisory Board at least ten (10) days prior
to the consummation of such investment; provided, however, that in no event
shall the General Partner be required to obtain the approval or consent of any
of the Limited Partners or the Advisory Board prior to the consummation of such
investment.
(c) The General Partner may cause the Partnership to invest jointly
with Affiliates of the General Partner in issuers of Securities in which none of
the Partnership, the General Partner or any Affiliates of the General Partner
has an interest at the time of such investment; provided, that such joint
investments shall be made on a pari passu basis and on substantially similar
economic terms. In the event that the terms of any such joint investment are not
on a pari passu basis and substantially similar economic terms, such joint
investment shall be approved in writing by the Advisory Board; provided, that no
approval shall be required for any such joint investment made by the Partnership
on the same terms and conditions as any unaffiliated third party participating
in such joint investment. The amounts to be invested by the Partnership and any
Affiliates of the General Partner with respect to such joint investments shall
be determined by the General Partner in its sole discretion.
(d) In considering whether to approve or disapprove any request by the
General Partner for any investment requiring the approval of the Advisory Board
under this Section 6.12, the Advisory Board shall address, without limitation,
any relative valuation issues that may arise as a result of such investments. In
connection therewith, the Partners acknowledge that the terms of any such
investment may not have been determined through arms'-length negotiations and
that, in connection with any such investments, neither the General Partner nor
the Advisory Board shall be required to obtain fairness opinions, appraisals,
independent consultant reports or the consent of the Limited Partners in
recommending (in the case of the General Partner) or in approving (in the case
of the Advisory Board) any such investment. However, any request for approval of
any such investment by the Advisory Board shall be submitted by the General
Partner in a writing which shall set forth in reasonable detail (i) the General
Partner's reasons for desiring that the Partnership make such investment, (ii)
the
22
General Partner's relative valuation analysis with respect to such investment,
and (iii) the benefits which the General Partner or its Affiliates are likely to
receive as a result of such investment other than by virtue of their Interests
in the Partnership.
6.13 Advisory Board.
(a) The General Partner shall cause an advisory board (the "Advisory
Board") of the Partnership to be formed for the purpose of reviewing and
approving those certain matters and determinations with respect to the
management of the Partnership set forth in this Agreement. The Advisory Board
shall consist of at least five (5) members, each of whom shall be appointed by
certain Limited Partners granted the right to appoint a member of the Advisory
Board by the General Partner and at least one (1) of which shall be the
representative of an ERISA Partner. After the initial appointment of the
Advisory Board, members of the Advisory Board shall serve on the Advisory Board
for such periods as may be determined by the Limited Partner which appointed
such member. Unless otherwise expressly provided herein, all decisions and
actions of the Advisory Board shall require the affirmative written vote of a
majority of all of the members, with each member entitled to one vote in all
matters. In lieu of holding a meeting, the members of the Advisory Board may
vote or otherwise take action by a written instrument indicating the unanimous
consent of the members. Each member of the Advisory Board may authorize another
Person or Persons to act and vote on its behalf by proxy. The members of the
Advisory Board may participate in any meeting of the Advisory Board by means of
conference telephone or similar communications equipment, as long as all Persons
participating in the meeting can speak with and hear each other, and
participation by a member of the Advisory Board pursuant to the method described
above shall constitute presence in person at such meeting.
(b) No member of the Advisory Board shall be entitled to receive any
fees or other compensation for serving as a member of the Advisory Board. The
Partnership shall reimburse each member of the Advisory Board for such member's
out-of-pocket expenses incurred in connection with such member's service on the
Advisory Board, including without limitation, all reasonable expenses for
airfare, lodging, meals and other travel expenses incurred in attending meetings
of the Advisory Board.
(c) The Partnership shall defend, indemnify and hold harmless each
member of the Advisory Board, the Partner which appointed such member, the
employer of such member, and all affiliates of such member, Partner or employer
(each, an "Indemnitee") from and against any and all liabilities, demands,
claims, actions or causes of action, losses or expenses (including reasonable
attorneys' fees, expenses and costs of investigation) sustained or incurred by
any such Indemnitee by reason of the fact that such Indemnitee is or was a
member of the Advisory Board, or by reason of action taken or omitted to be
taken by such Indemnitee in any such capacity, provided that such Indemnitee
acted in good faith and in a manner the Indemnitee reasonably believed to be in
or not opposed to the best interests of the Partnership.
6.14 ERISA Matters. The General Partner shall use its best efforts to
operate the Partnership and conduct its business and affairs so that the
Partnership will qualify as a VCOC; provided, that participation in the
Partnership by ERISA Partners is "significant" within the
23
meaning of the Plan Asset Regulations. If participation in the Partnership by
ERISA Partners is significant within the meaning of the Plan Asset Regulations,
the General Partner shall not call for the first Capital Contribution of the
Partners without an opinion of counsel delivered to the Partnership and each
Partner to the effect that concurrent with the contribution of the first Capital
Contributions the Partnership will qualify as a VCOC. The General Partner shall
not call for any Capital Contribution to the Partnership (i) for payment prior
to the first date on which the Partnership makes an investment that is not a
short-term investment of funds, or (ii) for purposes of making any investment
(or paying any expenses) which would cause the Partnership to be deemed to hold
"plan assets" for purposes of the Plan Asset Regulations.
6.15 Unrelated Business Taxable Income. Notwithstanding anything to the
contrary in this Agreement, the General Partner shall use its best efforts to
avoid the Partnership's engaging in any transaction that would cause any Partner
or any direct or indirect partner of any Partner that is exempt from federal
income tax to recognize UBTI as a result of its investment in the Partnership.
ARTICLE VII
Rights and Obligations of Limited Partners
7.1 Limitations on Limited Partners. The Limited Partners shall take no
part in the management or control of the Partnership business, and have no right
or authority to act for the Partnership or to vote on matters other than the
matters set forth in this Agreement or in the Act.
7.2 Diversification. The General Partner shall not, without the prior
consent of the Advisory Board, cause or permit the Partnership to invest in one
or more Securities if, after giving effect to such action, more than fifteen
percent (15%) of the aggregate of all Partners' Capital Commitments of the
Partners would be invested in any single Security or in any group of Securities
issued by a single operating company (the "Diversification Limit").
7.3 Co-Investment Rights. The General Partner may, but shall not be
obligated to, permit one or more (a) Limited Partners (but not necessarily all
Limited Partners) and Affiliates thereof or (b) employees of Portfolio
Companies, to invest in Securities (a "Co-Investment"). The Partners agree that
the General Partner shall have the right to structure Co-Investments in such
manner as it deems appropriate under the circumstances, including the terms of
all agreements relating thereto. Unless otherwise approved by the Advisory
Board, Co-Investments shall be made on a pari passu basis and on economic terms
substantially the same (to the extent practicable) as the terms of the
Partnership's investment in such Securities.
7.4 Removal of General Partner.
(a) The General Partner may be removed as General Partner for Cause
upon the written notice of a Two-Thirds-in-Interest of the Nondefaulting Limited
Partners. Such written notice shall be delivered to the General Partner and
shall state in reasonable detail the cause for removal and the effective date of
such action, which effective date may be immediately upon delivery of the notice
or thereafter; provided, however, the General Partner shall have 120
24
days from receipt of such notice to remedy or otherwise cure such Cause for
removal. "Cause" for the removal of the General Partner shall mean the
commission of any act of gross negligence, fraud, willful, wanton or intentional
misconduct or malfeasance which, in each case, materially and adversely affects
the Partnership.
(b) Subject to the terms of this Section 7.4, the removal of
the General Partner shall not impair any rights of such General Partner
attributable to the period prior to the effective date of such removal. If the
General Partner is removed pursuant to this Section 7.4, and the Partnership is
continued as provided below, the General Partner shall become a Limited Partner
in all respects under the Act as of the date of its removal, and its interest in
the Net Income and Net Losses, and items of income and expense of the
Partnership, shall convert, as of the date of its removal, into a Limited
Partner Interest and the General Partner's share of the most recent Estimated
Value of the Fund shall be treated as its Capital Contribution for purposes of
determining the Limited Partner Interest attributable to the converted interest.
Subject to Section 7.4(d), the General Partner shall be entitled to all of the
rights of the other Limited Partners with respect to its converted interest,
including the right to receive allocations and distributions on the basis of the
Capital Contribution that results from the conversion of its Interest.
(c) Except as otherwise required by law, if the General Partner is
removed pursuant to this Section 7.4, it shall not be liable for any obligations
of the Partnership arising after the effective date of its removal. The
Partnership shall, within fifteen (15) days after the removal of the General
Partner, file an amendment to the Certificate to reflect the removal of the
General Partner as general partner.
(d) In the event of the removal of the General Partner, Two-
Thirds-in-Interest of the Nondefaulting Limited Partners may elect either to (i)
appoint a new General Partner to continue the business of the Partnership in
accordance with the requirements of the Act or (ii) dissolve the Partnership. If
a new General Partner is not elected within ninety (90) days after removal of
the previous General Partner, the Partnership shall be dissolved, wound up and
terminated. The new General Partner shall have such rights to distributions and
allocations of Net Income and Net Losses as may be conveyed to it voluntarily by
any Partner, provided, that there is no dilution to the removed General
Partner's rights to distributions, Net Income or Net Losses.
7.5 Deficit Capital Accounts at Liquidation. No Limited Partner shall have
any obligation upon termination of the Partnership to restore a negative Capital
Account balance.
ARTICLE VIII
Assignability of Interest; Withdrawal
8.1 Assignment of General Partner's Interest. The General Partner shall
not transfer its Interest in the Partnership as General Partner or voluntarily
withdraw as General Partner without the written consent of Two-Thirds-in-
Interest of the Nondefaulting Limited Partners. Notwithstanding the foregoing,
the General Partner or the partners thereof may assign a portion of the right to
receive Partnership distributions to other Persons.
25
8.2 Assignment of Limited Partner's Interest. A Limited Partner may not
sell, transfer, assign, pledge, subdivide for resale or otherwise dispose of all
or any part of its Interest in the Partnership (whether voluntarily,
involuntarily or by operation of law) without the prior written consent of the
General Partner, the granting or denying of which shall be in the General
Partner's absolute discretion. No assignee of a Limited Partner shall become a
Substitute Limited Partner in the place of its assignor except as provided in
Section 8.3 hereof. The Partnership shall have no obligation to recognize,
furnish information or make distributions to any assignee of a Limited Partner
which does not become a Substitute Limited Partner, and such assignee's rights
shall be only against its assignor.
8.3 Substitute Limited Partner. No assignee of the whole or any part of a
Limited Partner Interest shall be substituted as a Limited Partner without the
prior written consent of the General Partner, the granting or denying of which
consent shall be in the General Partner's absolute discretion. As a condition to
the approval or consent of the General Partner to the admission of an assignee
of a Limited Partner as a Substitute Limited Partner, the General Partner:
(a) shall require such assignee to accept and assume, in form
satisfactory to the General Partner, all the terms and provisions of this
Agreement, and
(b) may require such assignee to:
(i) provide an opinion of counsel, in form and substance
reasonably satisfactory to counsel for the Partnership, that assignment of
the Limited Partner Interest and substitution of the assignee as a Limited
Partner does not result in termination of the Partnership for purposes of
Section 708 or any successor or similar provision of the Code;
(ii) provide an opinion of counsel, in form and substance
reasonably satisfactory to counsel for the Partnership, that neither the
offering nor the assignment of the Limited Partner Interest violates any
registration provision of any Federal or state securities or comparable
laws, subjects the Partnership to registration as an investment company
under the Investment Company Act of 1940, as amended, or requires that the
General Partner or the Partnership register as an investment adviser under
the Investment Advisers Act of 1940, as amended;
(iii) provide an opinion of counsel, in form and substance
reasonably satisfactory to counsel for the Partnership, that assignment of
the Limited Partner Interest and substitution of the assignee as a Limited
Partner will not cause the Partnership to be classified as an association
taxable as a corporation or to be treated as a publicly traded partnership
as defined in Sections 7704(b) and 469(k)(2) of the Code;
(iv) execute such other documents or instruments as the General
Partner may reasonably require to effect the admission of such assignee as
a Limited Partner; and
26
(v) pay such reasonable expenses as the Partnership may incur in
connection with such substitution.
8.4 Effective Date. The effective date of a substitution shall be the date
designated by the General Partner in writing to the Substitute Limited Partner,
which shall not be later than the first day of the calendar quarter of the
Partnership next following the date upon which the General Partner has given its
written consent to such substitution.
8.5 Amendment of Agreement. This Agreement shall be amended by the General
Partner, if and when appropriate, to reflect the substitution or addition of
Limited Partners.
8.6 Withdrawal by Limited Partner.
(a) A Limited Partner may not withdraw from the Partnership unless the
General Partner shall have previously consented in writing to such withdrawal,
the granting or denying of which consent shall be in the General Partner's
absolute discretion. A Limited Partner shall be allowed to withdraw as herein
provided only upon written notice requesting such withdrawal.
(b) Notwithstanding Section 8.6(a) above and in addition to the right
of a Limited Partner not to pay a portion of such Limited Partner's Capital
Commitment under certain circumstances pursuant to Section 3.6 above, if any
Limited Partner provides the General Partner with an opinion of counsel
reasonably satisfactory to the General Partner, or the General Partner provides
a Limited Partner with an opinion of counsel reasonably satisfactory to such
Limited Partner, that in such counsel's reasonable opinion, (a) ERISA, the Bank
Holding Company Act of 1956, as amended, or any similar legislation, or any
Federal or state legislation applicable to governmental pension plans, or
regulations thereunder, shall require such Limited Partner (hereinafter
sometimes referred to as a "Regulated Limited Partner") to divest its interest
in the Partnership prior to dissolution of the Partnership, (b) such Limited
Partner's continued investment in the Partnership is contrary to such laws or
regulations, or (c) the assets of the Partnership may be deemed to constitute
"plan assets" within the meaning of the Plan Asset Regulations, the General
Partner shall use reasonable efforts to seek a buyer or buyers (which may be
other Limited Partners) for the remainder of the interest held by such Limited
Partner or shall seek to make such changes in the Partnership or its operation
in accordance with the provisions of this Agreement so as to comply with such
laws or regulations or otherwise eliminate the necessity for such withdrawal;
provided, however, the General Partner shall not make any changes which it
determines not to be in the best interests of the Partnership or a majority in
interest of the Limited Partners, or if the General Partner determines that
changes are not necessary in order to comply with such laws or regulations. If
no buyer is found for all of such Limited Partner's interest in the Partnership
on terms reasonably satisfactory to such Limited Partner and the General Partner
is unable to eliminate the necessity for such withdrawal to the reasonable
satisfaction of such Limited Partner and the General Partner within ninety (90)
days of the date of such opinion, upon request of such Limited Partner, the
General Partner shall consent to the immediate withdrawal of such Limited
Partner from the Partnership pursuant to this Section 8.6.
27
(c) In the event a Limited Partner withdraws from the Partnership
pursuant to this Section 8.6, the Partnership shall pay such withdrawing Limited
Partner an amount equal to such Limited Partner's share of the Estimated Value
of the Fund determined pursuant to Section 11.4 hereof as of the date of such
withdrawal. Such amount shall be paid without interest within a reasonable
period of time, and in the case of a withdrawal pursuant to Section 8.6(b)
hereof, within 120 days of the Partnership's receipt of the opinion of counsel
described therein; provided, however, it shall not be paid during a time that
such payment would cause hardship to the Partnership. The General Partner shall
have absolute discretion to make the distribution in respect of the interest of
a withdrawing Limited Partner in cash or in kind; provided, however, that if the
withdrawing Limited Partner notifies the Partnership in writing that the receipt
by such Limited Partner of a distribution of Securities in kind would result in
a material violation of ERISA by, or imposition of excise taxes on, such Limited
Partner, then the General Partner shall sell such Securities and distribute the
proceeds of such sale to such Limited Partner. Any portion of distributions made
to a withdrawing Limited Partner in kind pursuant to this Section 8.6 shall be
made in proportion to such Limited Partner's percentage interest in each
Security then held by the Partnership; provided, however, that the General
Partner may withhold from distribution any Securities the distribution of which
would, in the General Partner's reasonable discretion, cause hardship to the
issuer of such Securities or to the Partnership. If distribution is to be made
in kind and if such distribution cannot be made in full because of restrictions
on the transfer of Securities or for any other reason, such distribution may, at
the option of the Limited Partner, either (i) be distributed in cash, or (ii) be
delayed until an effective transfer and distribution may be made, and such
Securities shall be designated by the General Partner for transfer in respect of
the withdrawing Limited Partner's interest (the "Designated Securities"). Such
Designated Securities may nevertheless be sold by the General Partner, provided
that the General Partner remit the cash proceeds therefrom to the withdrawing
Limited Partner. The withdrawing Limited Partner shall not share in the income
and losses of the Partnership from the date of its withdrawal and shall have no
further interest in the Partnership or its assets, except that it shall receive
income and dividends paid by the issuer with respect to any Designated
Securities and shall be entitled to the appreciation of or suffer the
depreciation of such Designated Securities and shall be specially allocated an
appropriate amount of the Net Income or Net Losses resulting from the sale by
the Partnership of Designated Securities on its behalf. Schedule 1 hereto shall
be revised to reflect such withdrawal and the withdrawing Limited Partner shall
no longer be considered a Limited Partner for purposes of this Agreement.
(d) No distribution shall be made to a withdrawing Limited Partner
unless all liabilities of the Partnership have been paid (including any reserves
to pay contingent liabilities, as determined by the General Partner in its sole
discretion) or unless the Partnership has assets sufficient to pay such
liabilities. No Limited Partner shall have the right to demand or receive
property other than cash in return for its Partnership interest, and no Limited
Partner, upon withdrawal, shall have priority over any other Limited Partner as
to either a return of its Capital Contribution or distribution of its share of
Partnership profits.
8.7 Annual Meeting. Once each year, upon at least thirty (30) days' prior
written notice, the General Partner shall conduct a meeting open to all Partners
("Annual Meeting"). At the Annual Meeting, the General Partner will discuss the
performance of the Partnership, the
28
status of any investment opportunities for the Partnership and performance and
prospects of its portfolio securities or companies.
ARTICLE IX
Investments
9.1 Liquid Investments. To the extent that the Partnership from time to
time has funds which are not invested in private debt or equity investments
pursuant to this Agreement, the Partnership shall invest in highly liquid
investments ("Liquid Investments") providing for appropriate safety of
principal, such as commercial paper bearing the highest rating of a nationally
recognized rating agency, money market mutual funds, securities issued by the
United States Government, any instrumentality thereof, or one of the states of
the United States, or a domestic bank with total assets in excess of
$5,000,000,000, to provide liquid investments from which to meet obligations of
the Partnership and to hold funds pending investment or distribution.
9.2 Investment Intent of Limited Partners. Each Limited Partner by
execution of this Agreement warrants to every other Partner and to the
Partnership that such Limited Partner is acquiring its interest in the
Partnership for purposes of investment only, for its own account (or where
applicable in its fiduciary capacity) and not with the view to resell or to
distribute the same or any part thereof, and that no other person has any
interest in such Partnership interest or in the rights of such Limited Partner
hereunder other than as a shareholder in such Limited Partner in the case of a
corporate Limited Partner, partner in a partnership Limited Partner, in which
case the names of and all requested information concerning all such partners
have been disclosed to the General Partner, or as a participant or beneficiary
of an employee benefit plan, trust or other entity with respect to which such
Limited Partner is acting in a fiduciary capacity.
ARTICLE X
Dissolution and Termination
10.1 Extension of Partnership Term. It is contemplated by the Partners that
the term of the Partnership shall end on the Dissolution Date and that the
Partnership shall be considered to be dissolved on such date without any further
action being required by any of the Partners, unless sooner dissolved pursuant
to Section 10.2 or by operation of law. Notwithstanding the foregoing, the term
of the Partnership may be extended by the General Partner, with the prior
written consent of the Advisory Board, for up to three (3) consecutive times, in
each case for an additional one (1) year period.
10.2 Events of Dissolution.
(a) The Partnership shall be dissolved upon the earlier to occur of
the following events:
29
(i) on a date designated by the General Partner and Two-Thirds-
in-Interest of the Nondefaulting Limited Partners;
(ii) the withdrawal in contravention of this Agreement,
dissolution or Bankruptcy of the General Partner, unless the Limited
Partners shall elect to carry on the business pursuant to Section 10.4
hereof;
(iii) the election by Two-Thirds-in-Interest of the
Nondefaulting Limited Partners in the event that ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ is no
longer employed by the General Partner or an Affiliate of the General
Partner, such election to be made within ninety (90) days after written
notice from the General Partner of such event;
(iv) the election by Two-Thirds-in-Interest of the Nondefaulting
Limited Partners to dissolve the Partnership pursuant to Section 7.4(d)
hereof;
(v) the completion of the sale of all or substantially all of the
assets of the Partnership; or
(vi) the date which is ten (10) years from the date of the Final
Closing (or the date of the First Closing if there is no Subsequent
Closing); provided, however, that the General Partner may, in its sole
discretion, extend the date for dissolution of the Partnership under this
paragraph (iv) for up to three (3) additional one (1) year periods.
(b) Dissolution of the Partnership shall be effective on the date on
which the event occurs giving rise to the dissolution, but the Partnership shall
not terminate until the Certificate shall have been canceled and the assets of
the Partnership shall have been liquidated and distributed as provided herein.
Notwithstanding the dissolution of the Partnership, prior to the termination of
the Partnership, as aforesaid, the business of the Partnership and the affairs
of the Partners, as such, shall continue to be governed by this Agreement. Upon
dissolution, the General Partner, or if the General Partner shall have been
removed pursuant to Section 7.4, then a liquidating agent appointed by Two-
Thirds-in-Interest of the Nondefaulting Limited Partners (the General Partner or
such person so designated as liquidating agent hereinafter referred to as the
"Liquidator"), shall commence to wind up the affairs of the Partnership,
liquidate the assets of the Partnership or distribute such assets in kind (in
each case in its sole discretion), apply and distribute such assets or the
proceeds thereof as contemplated by this Agreement, and cause the cancellation
of the Certificate.
(c) The Liquidator shall have all of the rights and powers with
respect to the assets and liabilities of the Partnership in connection with the
liquidation and termination of the Partnership that the General Partner would
have with respect to the assets and liabilities of the Partnership during the
term of the Partnership, and the Liquidator is hereby expressly authorized and
empowered to execute any and all documents necessary or desirable to effectuate
the liquidation and termination of the Partnership and the transfer of any
assets. The Liquidator shall at all times wind up the affairs of the Partnership
and liquidate the Partnership's assets in a manner in which the Partnership and
its assets will not be deemed to be "plan assets" for purposes of ERISA and the
Plan Asset Regulations.
30
10.3 Distributions Upon Liquidation. Distributions upon liquidation of the
Partnership shall be made pursuant to Section 5.5 hereof.
10.4 Election to Carry on Activities. Notwithstanding the provisions of
Section 7.4, upon the occurrence of an event described in Section 10.2(a)(ii)
hereof, the Limited Partners may, within ninety (90) days of such event, elect
to carry on the activities of the Partnership with one or more substitute
General Partners by the affirmative vote of Limited Partners required by the
Act. If such an election is made, the General Partner shall receive in cash
within ninety (90) days after such election the value of its Interest in the
Partnership as of the date of such election.
ARTICLE XI
Books, Records and Bank Accounts
11.1 Books and Records. The General Partner shall keep accurate books of
account with respect to the operations of the Partnership. Such books shall be
maintained at the principal place of business of the Partnership, or at such
other place as the General Partner shall determine, and all Partners, and their
duly authorized representatives, shall at all reasonable times have access to
such books and the right to make copies thereof.
11.2 Accounting Basis and Accounting Year; Fiscal Year. Such books shall be
kept on the cash, accrual or other basis, as determined by the General Partner
in its sole discretion, in accordance with the accounting methods followed by
the Partnership for Federal income tax purposes and otherwise in accordance with
generally accepted accounting principles ("GAAP") applied in a consistent
manner, reflect all Partnership transactions, be appropriate and adequate for
the Partnership's activities and for the carrying out of all provisions of this
Agreement, and be closed and balanced at the end of each calendar year. The
fiscal year of the Partnership shall be the calendar year.
11.3 Reports; Annual Certificate.
(a) No later than ninety (90) days after the close of each fiscal
year, the General Partner shall cause an audit of the financial statements of
the Partnership as of the end of such year to be made in accordance with GAAP by
the Accountants, and a copy of such financial statements shall be furnished to
each Partner and shall include, as of the end of such year: a statement of the
assets and liabilities of the Partnership; a statement of operations setting
forth the Net Losses or Net Income of the Partnership; and a statement of
changes in the Partnership's net assets. The General Partner shall cause the
Accountants to supply in a timely manner such tax information on Form K-1 and
all other information necessary to enable each Partner to prepare its income tax
return, and the General Partner shall supply such other information as each
Partner may reasonably request for the purpose of enabling it to comply with any
reporting requirements imposed by any governmental agency or authority.
(b) No later than forty-five (45) days after the close of each fiscal
quarter, the General Partner shall prepare and furnish to each Partner a
combined unaudited report which
31
includes for the quarter and year to date a balance sheet, an income statement,
a statement of cash flows prepared in accordance with GAAP, and a transaction
report which describes each significant transaction of the Partnership which has
occurred since the end of the preceding quarter and the remaining Capital
Commitments to be contributed to the Partnership by each of the Partners.
11.4 Valuation of Partnership Assets.
(a) The General Partner shall value the Partnership assets as of the
last day of each calendar quarter and shall, within forty-five (45) days
thereafter, furnish to each Limited Partner a statement showing the cost and
estimated value of each asset, the net worth of the Partnership (the "Estimated
Value of the Fund") and the balance of such Partner's Capital Account and such
Partner's share of the Estimated Value of the Fund as determined pursuant to
Section 11.4(c) below. In addition, the General Partner shall value any
Securities which are to be distributed in kind pursuant to Article V or Section
8.6(c) hereof as of the date of such distribution and shall provide Limited
Partners with a summary statement showing the cost and estimated value of such
Securities.
(b) In determining the value of Partnership assets, no value shall be
placed on the goodwill or the name of the Partnership, or the office records,
files, statistical data or any similar intangible assets of the Partnership not
normally reflected in the Partnership's accounting records, but there shall be
taken into consideration any related items of income earned but not received,
expenses incurred but not yet paid, liabilities fixed or contingent, prepaid
expenses to the extent not otherwise reflected in the books of account, and the
value of options or commitments to purchase Securities pursuant to agreements
entered into on or prior to such date of valuation. Determinations of value of
Securities made pursuant to this Section 11.4 shall be based on all relevant
factors, including, without limitation, type, marketability, restrictions on
disposition, subsequent purchases of the same or similar Securities by other
investors, pending mergers or acquisitions, and current financial position and
operating results; provided, however, the value of a Security which is listed on
a recognized securities exchange or traded pursuant to the National Association
of Securities Dealers Automated Quotation System shall be valued at its most
recent sale price and the value of a Security which is otherwise traded in the
over-the-counter market shall be valued at its most recent bid price discounted,
in both instances, to reflect any restrictions on transfer. Subject to Section
11.4(d) below, the value of each Partnership asset and the Estimated Value of
the Fund determined by the General Partner pursuant to this Section 11.4 shall
be conclusive and binding on all of the Partners and all parties claiming
through or under them.
(c) Each Partner's share of the Estimated Value of the Fund shall be
the amount such Partner would receive on liquidation of the Partnership under
Section 5.4.
(d) Within sixty (60) days of delivery of the Estimated Value of the
Fund by the General Partner, the Advisory Board may request that the value of
any particular asset of the Partnership and/or the Estimated Value of the Fund
be determined by a qualified, independent appraisal firm selected by the
Advisory Board and reasonably acceptable to the General Partner. In the event
that the Advisory Board and the General Partner cannot agree upon the appraiser,
32
each shall select an appraiser and such appraisers shall jointly select a third
appraiser. The fees and expenses of all of the appraisers shall be borne by the
Partnership.
11.5 Depository Accounts. The General Partner shall be responsible for
causing one or more accounts to be maintained in one or more banks or other
depositories, which accounts shall be used for the payment of expenditures
incurred by the General Partner in connection with the business of the
Partnership, and in which shall be deposited any and all cash receipts. All such
amounts shall be and remain the property of the Partnership, and shall be
received, held and disbursed by the General Partner for the purposes specified
in this Agreement. There shall not be deposited in any of such accounts any
funds other than funds belonging to the Partnership, and no other funds shall in
any way be commingled with such funds.
11.6 Tax Elections.
(a) The General Partner, in its sole discretion, may make or revoke an
election to adjust the basis of the assets of the Partnership for Federal income
tax purposes in accordance with Section 754 of the Code, in the event of a
distribution of Partnership property as described in Section 734 of the Code or
a transfer by any Partner of its interest in the Partnership as described in
Section 743 of the Code.
(b) The General Partner may also, from time to time, make such other
tax elections as it deems necessary or desirable to carry out the business of
the Partnership or the purposes of this Agreement.
ARTICLE XII
Amendments
12.1 Amendments With Consent of the Partners. This Agreement shall be
amended only upon the written agreement of the General Partner and Two-Thirds-
in-Interest of the Nondefaulting Limited Partners; provided, however, that no
amendment shall be made to Section 3.3(c), the second sentence of Section
3.6(c), the first sentence of Section 5.1, Section 3.5, Section 6.1(b), or
Section 8.6 of this Agreement without the prior written agreement of Two-Thirds-
in-Interest of the Nondefaulting Limited Partners that are subject to ERISA.
12.2 Amendments Without Consent of the Partners. In addition to any
amendments otherwise authorized herein, amendments may be made to this Agreement
from time to time by the General Partner, but without the consent of the Limited
Partners, (a) to add to the representations, duties or obligations of the
General Partner or surrender any right or power granted to the General Partner
herein, for the benefit of the Limited Partners; (b) to cure any ambiguity, to
correct or supplement any provisions herein which may be inconsistent with any
other provision herein, or to add other provisions with respect to matters
arising under this Agreement which will not be inconsistent with the provisions
of this Agreement; (c) to delete or add any provision to this Agreement required
to be so deleted or added by any Federal or state agency deemed to be for the
benefit or protection of the Limited Partner; (d) to better assure, in the
opinion of counsel to the Partnership, that the Partnership will continue to be
classified as a
33
pass-through entity for purposes of Federal income taxes; provided, however,
that no amendment shall be adopted pursuant to this section unless the adoption
thereof (i) is for the benefit of or not adverse to the interests of the Limited
Partners; (ii) is consistent with Article IV; and (iii) does not adversely
affecting the limited liability of the Limited Partners or the status of the
Partnership as a pass-through entity for Federal income tax purposes; or (e)
amend Schedule 1 as required in connection with any Partner's Capital Commitment
or the admission of new or additional Limited Partners. Notwithstanding the
foregoing, the Limited Partners hereby specifically consent to the amendment of
this Agreement from time to time in such manner as is determined by counsel for
the Partnership to be necessary or reasonably helpful to ensure that the
allocations of profits, losses and individual items thereof are given effect for
Federal income tax purposes, including any amendments determined by counsel to
be necessary to comply with the treasury regulations promulgated under Section
704 of the Code.
ARTICLE XIII
Miscellaneous
13.1 Notices. Any and all notices, elections or demands permitted or
required to be made under this Agreement shall be in writing, signed by the
Partner giving such notice, election or demand, and shall be delivered
personally, sent by telex or facsimile machine, or sent by registered or
certified mail, return receipt requested, to the Partners at the addresses set
forth in Schedule 1 hereto. The date of personal delivery, the date the telex or
facsimile is sent to the recipient or the date of mailing, as the case may be,
shall be the date of such notice.
13.2 Voting; Consents. Any action requiring the affirmative vote of Limited
Partners under this Agreement, unless otherwise specified herein, may be taken
by vote at a meeting or, in lieu thereof, by written consent of the Non-
Defaulting Limited Partners with the required percentage-in-Interest. Except as
otherwise expressly set forth herein, in the event that the Limited Partners are
required to consent in writing to any action or matter under this Agreement and
a Limited Partner shall fail to deliver such written consent or notice of
refusal to consent to the Partnership or the General Partner within fifteen (15)
Business Days of receipt of a notice requesting such consent, then such Limited
Partner shall be deemed to have consented to such action or matter. Such notice
requesting consent of the Limited Partners shall refer to this Section 13.2 and
state that the failure by a Limited Partner to respond to such request shall be
deemed to be a consent to the action or matter set forth in the notice. For
purposes of this Agreement, in the event and to the extent that the General
Partner holds any Interest as a Limited Partner (other than a converted Interest
pursuant to Section 7.4), such Interest shall be excluded from and not be
permitted to vote on or consent to any action or matter coming before the
Limited Partners for their approval or consent.
13.3 Successors and Assigns. Subject to the restrictions on transfer set
forth herein, this Agreement, and each and every provision hereof, shall be
binding upon and shall inure to the benefit of the Partners, their respective
successors, heirs, successors-in-title and assignees, and each and every
successor-in- interest to any Partner, whether such successor acquires such
interest by way of gift, purchase, foreclosure, or by any other method, shall
hold such interest subject to all of the terms and provisions of this Agreement.
34
13.4 Partner Duties. Pursuant to Section 1101(d) of the Act, the duties of
the Partners to the other Partners and to the Partnership are hereby limited to
those provided expressly in this Agreement, including, but not limited to, the
provisions of Sections 6.7, 6.11, 6.12 and 7.3.
13.5 ERISA Representations and Warranties. Each of the ERISA Partners
represents and warrants for the benefit of the other Partners and the
Partnership that, as of the date of the execution and delivery of this Agreement
and as of the date of admission of such Limited Partner to the Partnership: (i)
such Limited Partner has been informed of and understands the Partnership's
investment objectives, policies and strategies, (ii) such Limited Partner has
considered whether its investment in the Partnership is consistent with the
provisions of ERISA and/or other applicable law and (iii) such Limited Partner
has consulted with its own counsel as to the proposed operation of the
Partnership, and (iv) such Limited Partner has the authority to invest in the
Partnership under applicable law and the governing documents relating to such
Limited Partner.
13.6 Partition. The Partners hereby agree that no Partner or any successor-
in-interest to any Partner shall have the right while this Agreement remains in
effect to have the property of the Partnership partitioned or to file a
complaint or institute any proceeding at law or in equity to have the property
of the Partnership partitioned and each Partner, on behalf of itself, and its
successors, representatives and assigns, hereby waives any such right. It is the
intention of the Partners that during the term of this Agreement the rights of
the Partners and their successors-in-interest, as among themselves, shall be
governed by the terms of this Agreement, and that the right of any Partner or
successor-in-interest to assign, transfer, sell or otherwise dispose of its
interest in the Partnership or any of its assets shall be subject to the
limitations and restrictions of this Agreement.
13.7 No Waiver. The failure of any Partner to insist upon strict
performance of a covenant hereunder or of any obligation hereunder, irrespective
of the length of time for which such failure continues, shall not be a waiver of
such Partner's right to demand strict compliance in the future. No consent or
waiver, express or implied, to or of any breach or default in the performance of
any obligation hereunder shall constitute a consent or waiver to or of any other
breach or default in the performance of the same or any other obligation.
13.8 Captions. Titles or captions of articles or sections contained in this
Agreement are inserted only as a matter of convenience and for reference, and in
no way define, limit, extend or describe the scope of this Agreement or the
intent of any provisions hereof.
13.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all Partners, notwithstanding that all Partners have not
signed the same counterpart. A Limited Partner may evidence his agreement to be
bound hereby by execution of a subscription agreement for Limited Partner
Interests or another appropriate writing without the necessity of executing a
counterpart hereof.
35
13.10 Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and interpreted, construed and enforced
in accordance with the laws of Delaware (regardless of the choice of law
principles of Delaware or of any other jurisdiction).
13.11 Gender and Number. Wherever from the context it appears appropriate,
each term stated in either the singular or the plural shall include the singular
and the plural, and pronouns stated in either the masculine, the feminine or the
neuter gender shall include the masculine, feminine and neuter.
13.12 No Third Party Beneficiaries. This Agreement is for the sole benefit
of the parties hereto, and no third party shall be a beneficiary of the
Partners' obligations hereunder including, without limitation, their obligations
to contribute capital to the Partnership.
13.13 Severability. If it is determined by a court of competent
jurisdiction that any provision of this Agreement is invalid under applicable
law, the remainder of this Agreement, or the application of such provision to
persons or circumstances other than those to which it is held invalid, shall not
be affected thereby.
13.14 Entire Agreement. This Agreement, together with each Limited
Partner's subscription agreement for Limited Partner Interests, contains the
entire agreement among the parties and supersedes all prior arrangements or
understandings with respect thereto.
[remainder of page intentionally left blank;
signature page follows.]
36
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
GENERAL PARTNER:
Skyscraper Management, L.L.C.
By:
---------------------------
Name:
-------------------------
Its:
--------------------------
LIMITED PARTNERS:
TO BE AGREED TO BY EXECUTION OF
COUNTERPART LIMITED PARTNER
SIGNATURE PAGE
SKYSCRAPER VENTURES, L.P.
Counterpart Limited Partner Signature Page
------------------------------------------
The undersigned Limited Partner hereby executes the Amended and Restated
Limited Partnership Agreement of Skyscraper Ventures, L.P. dated as of May 5,
2000, and hereby authorizes this signature page to be attached to a counterpart
of such document executed by the General Partner of Skyscraper Ventures, L.P.
Dated as of , 2000.
--------------
Amount of Total Capital Commitment:
$
-----------------------------------
------------------------------------
(Print Name of Limited Partner)
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
SCHEDULE 1
Schedule of Partners
--------------------
Participation
Name and Address Capital Commitment Percentage
---------------- ------------------ -------------
General Partner:
Skyscraper Management, L.L.C. $140,000 1%
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Limited Partners:
divine interVentures, inc. $9,860,000 70.4%
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Mesirow Partnership Fund I, L.P. $4,000,000 28.6%
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
=========== =====
$14,000,000 100%