THE SECURITIES EVIDENCED BY THIS PARTNERSHIP AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE 1933 ACT COVERING SUCH SECURITIES OR THE GENERAL PARTNER RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO
THE GENERAL PARTNER, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE 1933 ACT.
THE INTERESTS IN THE PARTNERSHIP OF THE CLASS B LIMITED PARTNERS ARE SUBJECT TO
AN OPTION SET FORTH IN AN AGREEMENT BETWEEN THE PARTNERSHIP AND EACH CLASS B
LIMITED PARTNER, OR THE PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT
THE PRINCIPAL OFFICE OF THIS PARTNERSHIP. ANY TRANSFER OR ATTEMPTED TRANSFER OF
ANY UNITS SUBJECT TO SUCH OPTION IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN
CONSENT OF THE ISSUER OF THESE UNITS.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
ADOBE INCENTIVE PARTNERS, L. P.
AUGUST 13, 1998
TABLE OF CONTENTS
ARTICLE 1
CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Accounting Period. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Adjusted Asset Value . . . . . . . . . . . . . . . . . . . . . 1
1.3 Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Capital Account . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Capital Contribution . . . . . . . . . . . . . . . . . . . . . 2
1.6 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Deemed Gain or Deemed Loss . . . . . . . . . . . . . . . . . . 2
1.8 Excluded Investment . . . . . . . . . . . . . . . . . . . . . 3
1.9 Majority in Interest of the Class A Limited Partners . . . . . 3
1.10 Marketable; Marketable Securities; Marketability . . . . . . . 3
1.11 Nonmarketable Securities . . . . . . . . . . . . . . . . . . . 3
1.12 Profit or Loss . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.14 Securities Act . . . . . . . . . . . . . . . . . . . . . . . . 4
1.15 Short Term Income. . . . . . . . . . . . . . . . . . . . . . . 4
1.16 Treasury Regulations . . . . . . . . . . . . . . . . . . . . . 4
1.17 Units. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.18 AVI Marketable . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2
NAME, PURPOSE AND OFFICES OF PARTNERSHIP . . . . . . . . . . . . . . . . . . 4
2.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Principal Office . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 3
TERM OF PARTNERSHIP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Events Affecting a Limited Partner of the Partnership. . . . . 5
3.3 Events Affecting the General Partner of the Partnership. . . . 5
ARTICLE 4
NAME AND ADMISSION OF PARTNERS . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Name, Address and Units. . . . . . . . . . . . . . . . . . . . 5
4.2 Admission of Additional Partners . . . . . . . . . . . . . . . 6
i
TABLE OF CONTENTS
(CONTINUED)
ARTICLE 5
CAPITAL ACCOUNTS AND CAPITAL CONTRIBUTIONS . . . . . . . . . . . . . . . . . 6
5.1 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . 6
5.2 Initial Capital Contributions. . . . . . . . . . . . . . . . . 6
5.3 Capital Contributions of the General Partner . . . . . . . . . 7
5.4 Additional Capital Contributions . . . . . . . . . . . . . . . 7
ARTICLE 6
PARTNERSHIP ALLOCATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Allocation of Profit or Loss . . . . . . . . . . . . . . . . . 7
6.2 Other Allocations . . . . . . . . . . . . . . . . . . . . . . 8
6.3 Income Tax Allocations . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 7
PARTNERSHIP EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 8
WITHDRAWALS BY AND DISTRIBUTIONS TO THE PARTNERS. . . . . . . . . . . . . . 10
8.1 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.2 Withdrawals by the Partners . . . . . . . . . . . . . . . . . 10
8.3 Partners' Obligation to Repay or Restore. . . . . . . . . . . 10
8.4 Cash Distributions. . . . . . . . . . . . . . . . . . . . . . 10
8.5 In Kind Distributions . . . . . . . . . . . . . . . . . . . . 10
8.6 Withdrawal of Class B Limited Partners. . . . . . . . . . . . 11
ARTICLE 9
MANAGEMENT DUTIES & RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . 12
9.1 Management. . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.2 No Control by the Limited Partners; No Withdrawal . . . . . . 12
9.3 Class A Limited Partner Approval Rights . . . . . . . . . . . 12
9.4 Investment Opportunities. . . . . . . . . . . . . . . . . . . 13
9.5 Compliance with Partnership Agreement; Detrimental Acts . . . 13
ii
TABLE OF CONTENTS
(CONTINUED)
ARTICLE 10
INVESTMENT REPRESENTATION AND TRANSFER
OF PARTNERSHIP INTERESTS. . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.1 Investment Representation of the Limited Partners . . . . . . 14
10.2 Qualifications of the Limited Partner . . . . . . . . . . . . 14
10.3 Transfer by the General Partner . . . . . . . . . . . . . . . 14
10.4 Tansfer by a Limited Partner. . . . . . . . . . . . . . . . . 14
10.5 Requirements for Transfer . . . . . . . . . . . . . . . . . . 14
10.6 Substitution as a Limited Partner . . . . . . . . . . . . . . 15
10.7 Expenses of Transfer. . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 11
DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP. . . . . . . . . . . . . . . 15
11.1 Early Termination of the Partnership. . . . . . . . . . . . . 15
11.2 Winding Up Procedures . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 12
FINANCIAL ACCOUNTING,
REPORTS, MEETINGS AND VOTING. . . . . . . . . . . . . . . . . . . . . . . . 17
12.1 Financial Accounting; Fiscal Year . . . . . . . . . . . . . . 17
12.2 Supervision; Inspection of Books . . . . . . . . . . . . . . 17
12.3 Partnership Reports; Financial Statements of the Partnership. 17
12.4 Tax Returns and Tax Information . . . . . . . . . . . . . . . 17
12.5 Tax Matters Partner . . . . . . . . . . . . . . . . . . . . 18
12.6 Special Meetings . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 13
VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
13.1 Valuation . . . . . . . . . . . . . . . . . . . . . . . . . 18
iii
TABLE OF CONTENTS
(CONTINUED)
ARTICLE 14
OTHER PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 19
14.2 Limitation of Liability of the Limited Partners . . . . . . 20
14.3 Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.4 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 20
14.5 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . 20
14.6 Execution and Filing of Documents . . . . . . . . . . . . . . 21
14.7 Other Instruments and Acts . . . . . . . . . . . . . . . . . 21
14.8 Binding Agreement . . . . . . . . . . . . . . . . . . . . . . 21
14.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.10 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 21
14.12 Titles; Subtitles . . . . . . . . . . . . . . . . . . . . . . 21
14.13 Partnership Name . . . . . . . . . . . . . . . . . . . . . . 22
iv
ADOBE INCENTIVE PARTNERS, L. P.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
THIS AGREEMENT is made and entered into as of the 13th day of August,
1998, by ADOBE SYSTEMS INCORPORATED, a Delaware corporation ("Adobe") who in its
capacity as the sole general partner and sole Class A Limited Partner is
empowered to enter into this amended and restated agreement and who hereby
amends and restates the April 8, 1998 Amended and Restated Limited Partnership
Agreement (the "Prior Agreement") of ADOBE INCENTIVE PARTNERS , L. P. (the
"Partnership"), to reflect changes in the ownership of the Partnership and
related matters, pursuant to the provisions of the California Revised Limited
Partnership Act (the "Act"), as set forth below. This Agreement shall be
effective for Securities acquired by the Partnership on or after August 13,
1998. The treatment of Securities acquired by the Partnership before August 13,
1998 shall be governed by the Prior Agreement (except that ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇▇▇ ceased to be a Limited Partner as of August 11, 1998 and
became entitled to receive the Securities described on Schedule 1 hereto when
such Securities can be distributed under applicable legal and contractual
restrictions; Adobe agreed to repurchase all unvested shares owned by such
parties).
ARTICLE 1
CERTAIN DEFINITIONS
1.1 ACCOUNTING PERIOD. An Accounting Period shall be (i) the Fiscal
Year if there are no changes in the Partners' respective interests in the
Profits or Losses of the Partnership during such period except on the first day
thereof, or (ii) any other period beginning on the first day of the Fiscal Year,
or any other day during the Fiscal Year upon which occurs a change in such
respective interests, and ending on the last day of the Fiscal Year, or on the
day preceding an earlier day upon which any change in such respective interest
shall occur.
1.2 ADJUSTED ASSET VALUE. The Adjusted Asset Value with respect to
any asset shall be the asset's adjusted basis for federal income tax purposes,
except as follows:
(a) The initial Adjusted Asset Value of any asset contributed
by a Partner to the Partnership shall be the lesser of (i) the gross fair market
value of such asset or (ii) the asset's adjusted basis for federal income tax
purposes at the time of contribution, as determined by the contributing Partner
and the General Partner.
(b) In the discretion of the General Partner, the Adjusted Asset
Values of all Partnership assets may be adjusted to equal their respective gross
fair market values, as determined by the General Partner, and the resulting
unrealized profit or loss allocated to the Capital Accounts of the Partners
pursuant to Article 6, as of the following times: (i) the acquisition of an
additional interest in the Partnership by any new or existing Partner in
exchange for more than a DE MINIMIS capital contribution, and (ii) the
distribution by the Partnership to a Partner of more than a DE MINIMIS amount of
Partnership
1
assets, unless all Partners receive simultaneous distributions of
either undivided interests in the distributed property or identical Partnership
assets in proportion to their interests in Partnership distributions as provided
in paragraphs 8.4 and 8.5.
(c) The Adjusted Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined by
the General Partner, and the resulting unrealized profit or loss allocated to
the Capital Accounts of the Partners pursuant to Article 6, as of the following
times: (i) the termination of the Partnership for federal income tax purposes
pursuant to Code Section 708(b)(l)(B); and (ii) the termination of the
Partnership either by expiration of the Partnership's term or the occurrence of
an event described in paragraph 11.1.
1.3 AFFILIATE. An Affiliate of any person shall mean any person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by or is under common control with, the person specified.
1.4 CAPITAL ACCOUNT. The Capital Account of each Partner shall
consist of its original capital contribution (in kind contributions shall be
credited at their Adjusted Asset Value), (i) increased by any additional capital
contributions, its share of income or gain that is allocated to it pursuant to
this Agreement, any Capital Account shift in favor of such Partner, and (ii)
decreased by the amount of any distributions to or withdrawals by it, its share
of expense or loss that is allocated to it pursuant to this Agreement, the
amount of any Capital Account shift away from the Capital Account of such
Partner. The foregoing provision and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulation Section 1.704 l(b)(2)(iv), and shall, except as otherwise
expressly provided herein, be interpreted and applied in a manner consistent
with such Regulations. In the event the General Partner shall determine that it
is prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto, are computed in order to comply with such Regulations, the
General Partner may make such modification, provided that it is not likely to
have more than an insignificant effect on the total amounts distributable to any
Partner pursuant to Article VIII and Article XI.
1.5 CAPITAL CONTRIBUTION. A Partner's Capital Contribution shall mean
the amount that such Partner has contributed to the capital of the Partnership
as set forth opposite such Partner's name on Exhibit A hereto, as from time to
time amended.
1.6 CODE. The Code is the Internal Revenue Code of 1986, as amended
from time to time (or any corresponding provisions of succeeding law).
1.7 DEEMED GAIN OR DEEMED LOSS. The Deemed Gain from any in kind
distribution of Securities shall be equal to the excess, if any, of the fair
market value of the Securities distributed (valued as of the date of
distribution in accordance with paragraph 13.1), over the aggregate Adjusted
Asset Value of the Securities distributed. The Deemed Loss from any in kind
distribution of Securities shall be equal to the excess, if any, of the
aggregate Adjusted Asset Value of the Securities distributed over the fair
market value of the Securities distributed (valued as of the date of
distribution in accordance with paragraph 13.1).
2
1.8 EXCLUDED INVESTMENT. Excluded Investment means a Security of the
Partnership that one or more Partners does not share in because (i) he or she is
an officer, director or five percent or greater shareholder of the issuer of the
Security or (ii) the Investment Committee of the Board of Directors of Adobe
otherwise determines that it is inappropriate for such Partner to participate in
the investment because of the Partner's involvement with the issuer of the
Security. An Excluded Investment shall be designated as such at the time of its
acquisition.
1.9 MAJORITY IN INTEREST OF THE CLASS A LIMITED PARTNERS. Majority in
Interest of the Class A Limited Partners means one or more Class A Limited
Partners who own in the aggregate a majority of the Class A Units.
1.10 MARKETABLE; MARKETABLE SECURITIES; MARKETABILITY. These terms
shall refer to Securities that are (a) traded on a national securities exchange
or over the counter or (b) currently the subject of an effective Securities Act
registration statement. Notwithstanding the foregoing, a Security shall not be
deemed to be a Marketable Security if, in the good faith judgment of the General
Partner, the market on which such Security trades is not adequate to permit an
orderly sale of all shares of such Security held by the Partnership within a
reasonable time period or if the Securities cannot be sold because of lock-up
restrictions or other contractual restrictions on transfer.
1.11 NONMARKETABLE SECURITIES. Nonmarketable Securities are all
Securities other than Marketable Securities.
1.12 PROFIT OR LOSS. Profit or Loss shall be an amount computed
separately for each Security for each Accounting Period as of the last day
thereof that is equal to the Partnership's taxable income or loss for each
Security for such Accounting Period, determined in accordance with Section
703(a) of the Code (for this purpose, all items of income, gain, loss, or
deduction required to be stated separately pursuant to Code Section 703(a)(l)
shall be included in taxable income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profit or Loss
pursuant to this paragraph shall be added to such taxable income or loss;
(b) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Treasury Regulation Section 1.704 l(b)(2)(iv)(i) and not otherwise
taken into account in computing Profit or Loss pursuant to this paragraph shall
be subtracted from such taxable income or loss;
(c) Gain or loss resulting from any disposition of a
Partnership asset with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Adjusted Asset Value
of the asset disposed of rather than its adjusted tax basis;
(d) The difference between the gross fair market value of all
Partnership assets and their respective Adjusted Asset Values shall be added to
such taxable income or loss in the circumstances described in paragraph 1.2;
3
(e) Items which are specially allocated pursuant to paragraph
6.3 hereof shall not be taken into account in computing Profit or Loss;
(f) Short Term Income shall not be taken into account in
computing Profit or Loss; and
(g) Any unrecognized gain or loss respecting a Security held by
Adobe Ventures L.P., a California limited partnership ("AVI"), or Adobe Ventures
II, L.P., a California limited partnership ("AVII"), that is treated as deemed
gain or loss under the limited partnership agreements of AVI or AVII shall be
added to the Partnership's taxable income or loss.
1.13 SECURITIES. Securities shall mean securities of every kind and
nature and rights and options with respect thereto, including stock, notes,
bonds, debentures, evidences of indebtedness and other business interests of
every type, including partnerships, joint ventures, proprietorships, limited
liability companies and other business entities. Each Security held by AVI and
AVII shall be treated as a separate Security of the Partnership.
1.14 SECURITIES ACT. Securities Act is the Securities Act of 1933, as
amended.
1.15 SHORT TERM INCOME. Short Term Income shall mean gross income
realized by the Partnership from investments of funds pending their investment
or distribution, including amounts earned from investments in commercial paper,
securities of the United States government, certificates of deposit and cash
deposits in banks and other financial institutions.
1.16 TREASURY REGULATIONS. Treasury Regulations shall mean the Income
Tax Regulations promulgated under the Code, as such Regulations may be amended
from time to time (including corresponding provisions of succeeding
Regulations).
1.17 UNITS. Units means the ownership interests in the Partnership
designated as Class A Units and Class B Units and such other classes of units as
may from time to time be issued with the consent of the General Partner and a
Majority in Interest of the Class A Limited Partners.
1.18 AVI MARKETABLE SECURITIES. AVI Marketable Securities means the
Securities of AVI designated as AVI Marketable Securities on Exhibit A-l hereto.
ARTICLE 2
NAME, PURPOSE AND OFFICES OF PARTNERSHIP
2.1 NAME. The name of the Partnership is ADOBE INCENTIVE PARTNERS,
L. P. The affairs of the Partnership shall be conducted under the Partnership
name.
2.2 PURPOSE. The primary purpose of the Partnership is to (i) invest
in, and receive and hold capital contributions of, Securities of private
companies (either directly or indirectly through AVI) which either (a) operate
or are expected to operate in any industry related to the business operations of
Adobe, including companies which possess or may possess technologies, sales and
services capabilities,
4
operations or content related to any Adobe product, or (b) have been
identified by Adobe as candidates for a strategic relationship with Adobe and
(ii) invest as a limited partner in AVII and any successor Adobe Ventures
investment fund. The general purposes of the Partnership are to buy, sell,
hold, and otherwise invest in securities of such companies of every kind and
nature and rights and options with respect thereto, including, without
limitation, stock, notes, bonds, debentures, partnership interests, interests
in limited liability companies and evidences of indebtedness; to exercise all
rights, powers, privileges, and other incidents of ownership or possession
with respect to Securities held or owned by the Partnership; to enter into,
make, and perform all contracts and other undertakings; and to engage in all
activities and transactions as may be necessary, advisable, or desirable to
carry out the foregoing.
2.3 PRINCIPAL OFFICE. The principal office of the Partnership shall
be at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or such other place or
places in California as the General Partner may from time to time designate.
ARTICLE 3
TERM OF PARTNERSHIP
3.1 TERM. The term of the Partnership commenced upon March 17, 1997
(the "Formation Date") and shall continue until the fifteenth anniversary of the
Formation Date unless extended by consent of the General Partner and a Majority
in Interest of the Class A Limited Partners or sooner dissolved as provided in
paragraph 11.1 below.
3.2 EVENTS AFFECTING A LIMITED PARTNER OF THE PARTNERSHIP. The death,
temporary or permanent incapacity, insanity, incompetency, bankruptcy,
liquidation, dissolution, reorganization, merger, sale of all or substantially
all the equity interests or assets of, or other change in the ownership or
nature of a Limited Partner shall not dissolve the Partnership.
3.3 EVENTS AFFECTING THE GENERAL PARTNER OF THE PARTNERSHIP. Except
as specifically provided in paragraph 11.1, the bankruptcy, liquidation,
dissolution, reorganization, merger, sale of all or substantially all the equity
interests or assets of, or other change in the ownership or nature of the
General Partner shall not dissolve the Partnership.
ARTICLE 4
NAME AND ADMISSION OF PARTNERS
4.1 NAME, ADDRESS AND UNITS. The name and address of the General
Partner and each Limited Partner (hereinafter the General Partner and Limited
Partners shall be referred to collectively as the "Partners" and individually as
a "Partner") and the amount of such Partner's Capital Contribution (and a
description of such Capital Contribution if other than cash) to and number of
Units in the Partnership are set forth on Exhibit A hereto. The Partnership
shall initially have two classes of limited partnership interests which are
designated Class A Units and Class B Units and shall have the rights,
preferences and privileges set forth in this Agreement. Each Limited Partner
owning Class A Units is sometimes referred to herein as a Class A Limited
Partner and each Limited Partner owning Class B Units is sometimes
5
referred to herein as a Class B Limited Partner. The Class A Limited
Partners and Class B Limited Partners are collectively referred to as the
Limited Partners. The ownership of the Class A Units and Class B Units is
set forth on Exhibit A hereto. The General Partner shall cause Exhibit A to
be amended from time to time to reflect the admission of any new Partner, the
withdrawal or substitution of any Partner, receipt by the Partnership of
notice of any change of address of a Partner, or the change in any Partner's
Capital Contribution or Units. An amended Exhibit A shall supersede any
prior Exhibit A and become a part of this Agreement. A copy of the most
recent amended Exhibit A shall be kept on file at the principal office of the
Partnership. Exhibit A to the Prior Agreement shall govern the treatment of
Securities acquired prior to August 13, 1998.
4.2 ADMISSION OF ADDITIONAL PARTNERS.
(a) Except as provided in paragraph 10.6, an additional person
may be admitted as a Partner only with the consent of, and on such terms as are
approved by, the General Partner and a Majority in Interest of the Class A
Limited Partners. At the time an additional person is admitted as a Limited
Partner, the General Partner shall determine whether such person shall
participate in investments made prior to the date of admission. Limited Partners
who were admitted to the Partnership on the effective date of this Agreement
shall not participate in investments made prior to August 13, 1998.
(b) Each additional person admitted as a Partner shall execute
and deliver to the Partnership a counterpart of this Agreement or otherwise
become bound by the terms of this Agreement.
ARTICLE 5
CAPITAL ACCOUNTS AND CAPITAL CONTRIBUTIONS
5.1 CAPITAL ACCOUNTS. An individual Capital Account shall be
maintained for each Partner and shall be divided into subaccounts for each
Security owned by the Partnership. Whenever an additional Capital Contribution
of the Class A Limited Partner to the Partnership is invested in Securities,
there shall be a deemed Capital Account shift from the Class A Limited Partner
in favor of the Class B Limited Partners. The total amount of Capital Account
shift shall be the product of the "Shift Percentage" times the amount of the
Capital Contributions of the Class A Limited Partner so invested (with in kind
contributions valued at their Adjusted Asset Value as of the date of
contribution) times a fraction, the numerator of which is the number of Class B
Units then outstanding and the denominator of which is the total number of Class
A Units and Class B Units outstanding. The Shift Percentage shall be ten
percent (10%) unless the General Partner determines another percentage is more
appropriate.
5.2 INITIAL CAPITAL CONTRIBUTIONS. The initial Capital Contributions
of the Partners is set forth on Exhibit A. Securities contributed by the Class A
Limited Partner are shown at their agreed fair market values on Exhibit A. No
Capital Contribution shall be required of any Class B Limited Partner.
6
5.3 CAPITAL CONTRIBUTIONS OF THE GENERAL PARTNER. The General Partner
shall contribute capital to the Partnership in cash in an amount equal to the
greater of: (i) one percent (1%) of the amount contributed by the Limited
Partners and the General Partner on each date on which a Limited Partner makes a
contribution or (ii) the amount of Partnership expenses required to be borne by
the General Partner under paragraph 7.1.
5.4 ADDITIONAL CAPITAL CONTRIBUTIONS. A Partner may make additional
Capital Contributions only with the consent of the General Partner and a
Majority in Interest of the Class A Limited Partners. No Partner shall be
required to make any additional Capital Contributions to the Partnership except
as provided in paragraph 5.3.
ARTICLE 6
PARTNERSHIP ALLOCATIONS
6.1 ALLOCATION OF PROFIT OR LOSS. Except as hereinafter provided in
this Article 6:
(a) Profit of the Partnership for each Security for each
Accounting Period shall be separately allocated among the Partners as follows:
(i) First, to the General Partner to and to the extent
of Loss allocations respecting such Security previously made to it pursuant to
paragraph 6.1(b)(iv);
(ii) Second, to the Class A Limited Partner and General
Partner pro rata in proportion to and to the extent of Loss allocation
respecting such Security previously allocated to them pursuant to paragraph 6.
l(b)(iii);
(iii) Third, to the Class B Limited Partners and General
Partner pro rata in proportion to and to the extent of Loss allocations
respecting such Security previously made to them pursuant to paragraph 6.
l(b)(ii); and
(iv) Then, 99% to the Limited Partners (pro rata among
them in accordance with their respective number of Units) and 1% to the General
Partner.
(b) Loss of the Partnership for each Accounting Period shall be
allocated as follows:
(i) First, to the Partners pro rata in proportion to and
to the extent of income allocations previously made to them pursuant to
paragraph 6. l(a)(iv);
(ii) Second, 99% to the Class B Limited Partners (pro
rata among them in accordance with their respective number of Units) until their
Capital Accounts are reduced to zero and 1% to the General Partner;
(iii) Then, 1% to the General Partner and 99% to the Class
A Limited Partner until their Capital Accounts are reduced to zero; and
7
(iv) Then, to the General Partner.
(c) Short Term Income shall be allocated to the Partners (other
than the Class B Limited Partners) pro rata in proportion to their respective
Capital Contributions.
(d) Notwithstanding the foregoing, Profit and Loss from each
AVI Marketable Security shall be allocated exclusively to the Class A Limited
Partner.
6.2 OTHER ALLOCATIONS. Notwithstanding the foregoing, the allocations
provided in this Article 6 shall be subject to the following exceptions:
(a) (i) Any loss or expense otherwise allocable to a Limited
Partner that exceeds the balance in such Limited Partner's Capital Account
subaccount for a Security shall instead be allocated first to all Partners who
have positive balances in their Capital Accounts subaccounts for such Security
in proportion to such positive balances, and when all Partners' Capital Accounts
subaccounts for such Security have been reduced to zero (0), then to the General
Partner.
(ii) In the event the Limited Partner unexpectedly
receives any adjustments, allocations, or distributions described in Treasury
Regulation Section 1.704 l(b)(2)(ii)(d)(4) through (d)(6), that causes the
balance in such Partner's Capital Account to be reduced below zero (0), items of
Partnership income and gain shall be specially allocated to such Limited Partner
in an amount and manner sufficient to eliminate the deficit balance in its
Capital Account created by such adjustments, allocations, or distributions as
quickly as possible.
(iii) For purposes of this subparagraph (a), the balance
in a Partner's Capital Account shall take into account the adjustments provided
in Treasury Regulation Section 1.704 l(b)(2)(ii)(d)(4)through (d)(6).
(iv) Any special allocations of items of profit, income,
gain, loss or expense pursuant to this subparagraph (a) shall be taken into
account in computing subsequent allocations, so that the net amount of any items
so allocated and the profit, gain, loss, income, expense, and all other items
allocated to each Partner shall, to the extent possible, be equal to the net
amount that would have been allocated to each such Partner if such special
allocations pursuant to this subparagraph (a) had not occurred.
(b) To the extent the Partnership has taxable interest income
or expense with respect to any promissory note between any Partner and the
Partnership as holder and maker or maker and holder pursuant to Section 483,
Sections 1271 through 1288, or Section 7872 of the Code, such interest income or
expense shall be specially allocated to the Partner to whom such promissory note
relates, and such Partner's Capital Account adjusted if appropriate.
8
(c) No Partner shall be allocated Profit or Loss of a Security
(i) which is designated an Excluded Investment with respect to that Partner or
(ii) which was acquired by the Partnership prior to such Partner's admission to
the Partnership, unless otherwise agreed by the Partnership and such Partner at
the time of such Partner's admission.
6.3 INCOME TAX ALLOCATIONS.
(a) Except as otherwise provided in this paragraph or as
otherwise required by the Code and the rules and Treasury Regulations
promulgated thereunder, a Partner's distributive share of Partnership income,
gain, loss, deduction, or credit for income tax purposes shall be the same as is
entered in the Partner's Capital Account pursuant to this Agreement.
(b) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, income, gain, loss and deduction with respect to any
asset contributed to the capital of the Partnership shall, solely for tax
purposes, be allocated among the Partners so as to take account of any variation
between the adjusted basis of such property to the Partnership for federal
income tax purposes and its initial Adjusted Asset Value.
(c) In the event the Adjusted Asset Value of any Partnership
asset is adjusted pursuant to the terms of this Agreement, subsequent
allocations of income, gain, loss and deduction with respect to such asset shall
take account of any variation between the adjusted basis of such asset for
federal income tax purposes and its Adjusted Asset Value in the same manner as
under Code Section 704(c) and the Treasury Regulations thereunder.
ARTICLE 7
PARTNERSHIP EXPENSES
7.1 EXPENSES. The General Partner shall bear (i) all normal operating
expenses incurred in the investigation of investment opportunities and the
monitoring and management of investments; (ii) all costs and expenses incurred
in the holding, purchase, sale or exchange of Securities (whether or not
ultimately consummated), including, but not by way of limitation, private
placement fees, finder's fees, interest, taxes, brokerage fees, legal fees,
audit and accounting fees, consulting fees, and all expenses incurred in
connection with the registration of the Partnership's Securities under
applicable securities laws or regulations; (iii) all expenses incurred by the
General Partner in serving as the tax matters partner, the cost of liability and
other insurance premiums, all out-of-pocket expenses of preparing and
distributing reports to Partners, all legal and accounting fees relating to the
Partnership and its activities, all costs and expenses arising out of the
Partnership's indemnification obligation pursuant to this Agreement and all
other operating expenses of the Partnership; (iv) all organizational and
syndication costs, fees, and expenses incurred by or on behalf of the General
Partner or the Partnership in connection with the formation and organization of
the Partnership, including legal and accounting fees and expenses incident
thereto with respect to the formation and organization of the Partnership; and
(v) all liquidation costs, fees, and expenses incurred by the General Partner
(or its designee) or the Partnership in connection with the liquidation of the
Partnership at the end of the Partnership's term, specifically including but not
limited to legal and accounting fees and expenses.
9
ARTICLE 8
WITHDRAWALS BY AND DISTRIBUTIONS TO THE PARTNERS
8.1 INTEREST. No interest shall be paid to any-Partner on account of
its interest in the capital of or on account of its investment in the
Partnership.
8.2 WITHDRAWALS BY THE PARTNERS. No Partner may withdraw any amount
from its Capital Account unless such withdrawal is made pursuant to this Article
8, Article 11 or, in the case of the Class B Limited Partners, the Restricted
Units Agreement between such Partner and the Partnership.
8.3 PARTNERS' OBLIGATION TO REPAY OR RESTORE. Except as required by
law or the terms of this Agreement, no Partner shall be obligated at any time to
repay or restore to the Partnership all or any part of any distribution made to
it from the Partnership in accordance with the terms of this Article 8.
8.4 CASH DISTRIBUTIONS. Subject to the following mandatory
distribution provisions, the General Partner may, but shall not be obligated to,
distribute cash as it may from time to time deem advisable.
(a) TAX DISTRIBUTIONS. Within 90 days following the end of
each fiscal year, the General Partner shall distribute to each Partner cash in
an amount equal to 50% of the Partnership's taxable income allocated to such
Partner for such year. The General Partner shall have the discretion to adjust
the rate of distribution provided for in this paragraph 8.4(a) to reflect any
increases made to the rates of taxation of ordinary income or capital gains, or
both, under the Code or California law.
(b) DISTRIBUTIONS OF DISTRIBUTABLE CASH. The Partnership shall
distribute cash in excess of $200,000 arising from the disposition of portfolio
company investments as soon as reasonably practicable. Such cash distributions
shall be made one percent (1%) to the General Partner and ninety-nine percent
(99%) to the Limited Partners as follows (provided, no Partner shall receive
distributions from the disposition of a Security which is an Excluded Investment
with respect to such Partner):
(i) first, to the extent of the Limited Partners'
unreturned capital investment respecting the Security disposed of, among the
Limited Partners in proportion to their respective unreturned capital investment
respecting such Security (unreturned capital investment shall take account of
any Capital Account shifts under paragraph 5.1); and
(ii) then, to the extent of previously undistributed
Profit respecting such Security, among the Partners in proportion to the
allocation of such Profit pursuant to Article 6.
8.5 IN KIND DISTRIBUTIONS. The General Partner may, but shall not be
obligated to (except as provided in subparagraph 8.5(a) and paragraph 8.6
below), distribute Securities as it may from time to time deem advisable,
PROVIDED, HOWEVER, that except with the consent of a Majority in Interest of the
Class A Limited Partners, the General Partner shall not distribute Securities
which are not Marketable Securities, other than distributions pursuant to the
dissolution and winding up of the Partnership.
10
(a) TIMING.
(i) Marketable Securities acquired by the Partnership in
exchange for the transfer of Nonmarketable Securities shall be distributed
within 90 days of the date on which such Securities become Marketable
Securities.
(ii) Nonmarketable Securities which become Marketable
Securities as a result of a public offering or otherwise shall be distributed
within 90 days after the date on which such Securities become Marketable
Securities.
(b) APPORTIONMENT.
(i) Distributions of Securities shall be made among the
Partners in accordance with paragraph 8.4(b).
(c) Immediately prior to any distribution in kind, the Deemed
Gain or Deemed Loss of any Securities distributed shall be allocated to the
Capital Accounts of the Partners as a Profit or Loss pursuant to Article 6.
(d) Securities distributed in kind shall be subject to such
conditions and restrictions as the General Partner determines are legally or
contractually required. Whenever classes of Securities are distributed in kind,
each Partner shall receive its ratable portion of each class of Securities
distributed in kind.
8.6 WITHDRAWAL OF CLASS B LIMITED PARTNERS.
(a) DEFINITIONS.
(i) WITHDRAWAL. For purposes of this Agreement, a Class
B Limited Partner shall be deemed to have withdrawn from the Partnership (a
"Withdrawal") if such Class B Limited Partner dies, retires, withdraws or
becomes bankrupt, incompetent, insane or permanently incapacitated.
(ii) BANKRUPT. A person shall be deemed bankrupt if (i)
any proceeding is commenced against such person for any relief under bankruptcy
or insolvency laws, or laws relating to the relief of debtors, reorganizations,
arrangements, compositions, or extensions and is not dismissed within ninety
(90) days after such proceedings have been commenced, or (ii) if such person
commences any proceeding for relief under bankruptcy or insolvency laws or law
relating to the relief of debtors, reorganizations, arrangements, compositions,
or extensions.
(iii) INCOMPETENT. A person shall be deemed incompetent
if such person shall be adjudged incompetent by a decree of a court of competent
jurisdiction or if a conservator is appointed for such person.
11
(iv) INSANE. A person shall be deemed insane if such
person shall be adjudged insane by a decree of a court of competent
jurisdiction.
(v) PERMANENTLY INCAPACITATED. A person shall be deemed
permanently incapacitated whenever such person is determined by competent
medical authority selected by the General Partner to be permanently incapable of
carrying out his functions as a Class B Limited Partner hereunder.
(vi) FORMER PARTNER. Any Class B Limited Partner who
withdraws from the Partnership, or the estate or legal representative of any
such Member shall be deemed a "Former Partner" on the date of such withdrawal.
(b) EFFECT OF WITHDRAWAL OF A CLASS B LIMITED PARTNER. In the
event of the Withdrawal of a Class B Limited Partner, the interest of such
Former Partner in the Partnership shall terminate and the Former Partner, or his
or her personal representative, shall be entitled only to the payments and
distributions provided for in such Former Partner's Restricted Units Agreement,
all on the terms and conditions set forth in such agreement. Any reduction in
the Units of a Class B Limited Partner caused by his or her Withdrawal shall
increase, pro tanto, the Class A Units of the Class A Limited Partner.
ARTICLE 9
MANAGEMENT DUTIES AND RESTRICTIONS
9.1 MANAGEMENT. Except as otherwise provided in this Agreement, the
General Partner shall have the sole and exclusive right to manage, control, and
conduct the affairs of the Partnership and to do any and all acts on behalf of
the Partnership.
9.2 NO CONTROL BY THE LIMITED PARTNERS; NO WITHDRAWAL. The Limited
Partners shall take no part in the control or management of the affairs of the
Partnership nor shall the Limited Partners have any authority to act for or on
behalf of the Partnership or to vote on any matter relative to the Partnership
and its affairs except as is specifically permitted by this Agreement. Except
as specifically set forth in this Agreement or in the Restricted Units
Agreements between the Partnership and each Class B Limited Partner, no Limited
Partner shall withdraw or be required to withdraw from the Partnership.
9.3 CLASS A LIMITED PARTNER APPROVAL RIGHTS. Notwithstanding
paragraph 9.2, the prior written approval of a Majority in Interest of the Class
A Limited Partners shall be required for the General Partner or the Partnership
to carry out any of the following activities:
(a) Elect or admit a new General Partner;
(b) Dissolve, wind up or liquidate the Partnership, other than
in accordance with the terms of this Agreement;
(c) Amend this Agreement, except as otherwise provided herein;
12
(d) Invest in or acquire Securities of any one company in an
amount in excess of $3,000,000;
(e) Acquire more than fifty percent (50%) of the outstanding
voting Securities of any one company;
(f) Borrow funds, or pledge, encumber or hypothecate any assets
of the Partnership as security for a loan;
(g) Commence or defend any litigation pertaining to the
Partnership or its assets, prosecute, settle or compromise claims against third
parties, settle or compromise claims against the Partnership, other than with
respect to any litigation pertaining to the obligations of the Limited Partners
under this Agreement, and
(h) Make or revoke any election pursuant to the Code, including
an election pursuant to Section 754 of the Code, or any comparable federal or
state law regarding taxation.
9.4 INVESTMENT OPPORTUNITIES.
(a) Each Limited Partner acknowledges that the General Partner
may make venture capital investments other than through the Partnership. Each
Limited Partner hereby consents and agrees to such activities and investments
and further consents and agrees that neither the Partnership nor any of its
Partners shall have, pursuant to this Agreement, any rights in or to such
activities or investments or any profits derived therefrom.
(b) Each Limited Partner hereby agrees that the General Partner
may offer the right to participate in investment opportunities of the
Partnership to other private investors, groups, partnerships, or corporations
whenever the General Partner, in its discretion, so determines.
(c) During the term of this Agreement, each Limited Partner may
engage in any activity whatsoever for its own profit or advantage, whether or
not such activity may be in direct or indirect competition with the Partnership,
subject to any restrictions imposed on such Limited Partner outside this
Agreement.
(d) Any investment by the Partnership shall first be approved
by the Investment Committee of the Board of Directors of Adobe.
9.5 COMPLIANCE WITH PARTNERSHIP AGREEMENT; DETRIMENTAL ACTS. No
Partner shall do any act in contravention of this Agreement or that would be
detrimental to the best interests of this Partnership, or that would make it
impossible to carry on the affairs of the Partnership.
13
ARTICLE 10
INVESTMENT REPRESENTATION AND TRANSFER
OF PARTNERSHIP INTERESTS
10.1 INVESTMENT REPRESENTATION OF THE LIMITED PARTNERS. This Agreement
is made with each Limited Partner in reliance upon the Limited Partner's
representation to the Partnership, which by executing this Agreement the Limited
Partner hereby confirms, that its interest in the Partnership is to be acquired
for investment, and not with a view to the sale or distribution of any part
thereof, and that it has no present intention of selling, granting participation
in, or otherwise distributing the same, and the Limited Partner understands that
its interest in the Partnership has not been registered under the Securities Act
and that any transfer or other disposition of the interest may not be made
without registration under the Securities Act or pursuant to an applicable
exemption therefrom. Each Limited Partner further represents that it does not
have any contract, undertaking, agreement, or arrangement with any person to
sell, transfer, or grant participations to such person, or to any third person,
with respect to its interest in the Partnership.
10.2 QUALIFICATIONS OF THE LIMITED PARTNERS. Each Limited Partner
represents that it is an "accredited investor" within the meaning of that term
as defined in Regulation D promulgated under the Securities Act as set forth
below or elsewhere in Regulation D as amended from time to time:
(a) An individual who has a net worth or joint net worth with
that person's spouse exceeding $l,000,000 at the time of becoming a Limited
Partner; or
(b) An individual who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and who reasonably expects
reaching the same income level in the current year.
The term "net worth" means the excess of total assets over total liabilities.
In computing net worth for the purposes of paragraph 10.2(a) above, the
principal residence of the investor must be valued at cost, including cost of
improvements, or at a recently appraised value by an institutional lender making
a secured loan, net of encumbrances.
10.3 TRANSFER BY THE GENERAL PARTNER. The General Partner may not
sell, assign, pledge, mortgage or otherwise dispose of its interest in the
Partnership or in its capital assets or property without the prior written
approval of a Majority in Interest of the Class A Limited Partners.
10.4 TRANSFER BY A LIMITED PARTNER. No Limited Partner may sell,
assign, pledge, mortgage, or otherwise dispose of or transfer its interest in
the Partnership without the prior written approval of the General Partner.
10.5 REQUIREMENTS FOR TRANSFER. No transfer or other disposition of
the interest of a Limited Partner shall be permitted until the General Partner
is reasonably satisfied that the effect of such transfer or disposition would
not:
14
(a) result in the termination of the Partnership's tax year
under Section 708(b)(l)(B)of the Code;
(b) result in violation of the Securities Act or any comparable
state law;
(c) require the Partnership to register as an investment
company under the Investment Company Act of 1940, as amended;
(d) require the Partnership or the General Partner to register
as an investment adviser under the Investment Advisers Act of 1940, as amended;
(e) result in a termination of the Partnership's status as a
partnership for federal income tax purposes;
(f) result in a violation of any law, rule, or regulation by a
Limited Partner, the Partnership or the General Partner; or
(g) cause the Partnership to be deemed to be a "publicly traded
partnership" as such term is defined in Section 7704(b)of the Code.
10.6 SUBSTITUTION AS A LIMITED PARTNER. A transferee of a Limited
Partner's interest pursuant to this Article 10 shall become a substituted
Limited Partner only with the consent of the General Partner (which consent may
be withheld by the General Partner for any reason or for no reason) and only if
such transferee (a) elects to become a substituted Limited Partner and (b)
executes, acknowledges and delivers to the Partnership such other instruments as
the General Partner may deem necessary or advisable to effect the admission of
such transferee as a substituted Limited Partner, including, without limitation,
the written acceptance and adoption by such transferee of the provisions of this
Agreement.
10.7 EXPENSES OF TRANSFER. Any costs or expenses (including but not
limited to reasonable attorneys fees) incurred by the Partnership in connection
with the transfer of a Partnership interest hereunder shall be borne by the
transferring Partner.
ARTICLE 11
DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP
11.1 EARLY TERMINATION OF THE PARTNERSHIP.
(a) The Partnership shall dissolve, and the affairs of the
Partnership shall be wound up prior to the expiration of its term set forth in
paragraph 3.1 upon the occurrence of any of the following events:
(i) One hundred eighty (180) days after the withdrawal,
bankruptcy, or dissolution of the General Partner of the Partnership, unless
within ninety (90) days of such event, a Majority in Interest of the Class A
Limited Partners elect to continue the business of the Partnership and
15
to the appointment, effective as of the date of such withdrawal, bankruptcy
or dissolution, of a new general partner. In the event that a new general
partner is elected pursuant to the foregoing sentence, the interest of the
General Partner shall be determined in accordance with paragraph 11.1(c)
below;
(ii) Sale or other transfer of substantially all of the
assets of the Partnership; or
(iii) Mutual consent of the General Partner and a Majority
in Interest of the Class A Limited Partners.
(b) In the event that the Partnership is dissolved pursuant to
the provisions of this paragraph, the General Partner (or, if the dissolution
occurs because of an event described in paragraph 11.1(a)(i), a Majority in
Interest of the Class A Limited Partners) shall elect one or more liquidators to
manage the liquidation of the Partnership in the manner described in this
Article 11.
(c) If the Limited Partners elect to continue the Partnership
pursuant to its right under paragraph 11.1(a), the former General Partner's
interest in the Partnership shall become a limited partner interest and such
former General Partner shall have no powers of a General Partner under this
Agreement or the Act. The former General Partner's interest in Short Term
Income shall remain unchanged. The former General Partner's interest in Profit
and Loss shall be limited to those allocations arising from assets acquired by
the Partnership (i) prior to the date on which the former General Partner ceased
to serve as General Partner (the "Cessation Date") or (ii) by use of the
uninvested portion of the General Partner's capital contributions made prior to
the Cessation Date. The former General Partner shall have no obligation to make
additional capital contributions pursuant to Article 4 after the Cessation Date.
To the extent reasonably practicable, distributions of amounts allocable to the
former General Partner shall be made in a manner consistent with the foregoing.
11.2 WINDING UP PROCEDURES.
(a) Promptly upon dissolution of the Partnership (unless the
Partnership is continued in accordance with this Agreement or the provisions of
the Act), the affairs of the Partnership shall be wound up and the Partnership
liquidated. The closing Capital Accounts and subaccounts of all the Partners
shall be computed as of the date of dissolution as if the date of dissolution
were the last day of an Accounting Period in accordance with Article 6, and then
adjusted in the following manner:
(i) All assets and liabilities of the Partnership shall
be valued as of the date of dissolution.
(ii) The Partnership's assets as of the date of
dissolution shall be deemed to have been sold at their fair market values and
the resulting Profit or Loss shall be allocated to the Partners' Capital
Accounts in accordance with the provisions of Article 6.
The result for each Partner shall be its closing Capital Account.
(b) Distributions during the winding up period may be made in
cash or in kind or partly in cash and partly in kind. The General Partner or
the liquidator shall use its best judgment as to the most
16
advantageous time for the Partnership to sell Securities or to make
distributions in kind. All cash and each Security distributed in kind after
the date of dissolution of the Partnership shall be distributed ratably in
accordance with the distribution provisions of Article 8. Each Security so
distributed shall be subject to reasonable conditions and restrictions
necessary or advisable in order to preserve the value of such Security or for
legal reasons.
ARTICLE 12
FINANCIAL ACCOUNTING,
REPORTS, MEETINGS AND VOTING
12.1 FINANCIAL ACCOUNTING; FISCAL YEAR. The books and records of the
Partnership shall be kept in accordance with the provisions of this Agreement
and otherwise in accordance with generally accepted accounting principles
consistently applied, and shall be reviewed at the end of each fiscal year by an
independent public accountant of recognized national standing selected by the
General Partner. The Partnership's fiscal year shall be a fifty-two/fifty-three
week period ending on the Friday closest to November 30 of each year (the
"Fiscal Year").
12.2 SUPERVISION; INSPECTION OF BOOKS. Proper and complete books of
account of the Partnership, copies of the Partnership's federal, state and local
tax returns for each fiscal year, the Schedule of Partners set forth in Exhibit
A, this Agreement and the Partnership's Certificate of Limited Partnership shall
be kept under the supervision of the General Partner at the principal office of
the Partnership. Such books and records shall be open to inspection by the
Limited Partner, or their accredited representatives, at any reasonable time
during normal business hours after reasonable advance notice.
12.3 PARTNERSHIP REPORTS; FINANCIAL STATEMENTS OF THE PARTNERSHIP. The
General Partner shall deliver to the Limited Partners the following:
(a) Within 120 days after the close of the Partnership's Fiscal
Year, audited financial statements of the Partnership prepared in accordance
with the terms of this Agreement and otherwise in accordance with generally
accepted accounting principles, including an income statement for the year then
ended and balance sheet as of the end of such year, a statement of changes in
the Partners' Capital Accounts, and a list of investments then held.
(b) Within 60 days after the close of each fiscal quarter,
unaudited financial statements.
(c) Within 10 days after the end of each fiscal quarter, a
report from the General Partner which shall include a status report on cash
reserves, investments then held, a summary of acquisitions and dispositions of
investments made by the Partnership during the preceding period and a valuation
of each such investment.
12.4 TAX RETURNS AND TAX INFORMATION. The Partnership shall use the
method of accounting for tax purposes that is selected by the General Partner
after consultation with the Partnership's independent public accountants. The
General Partner shall cause the Partnership's federal, state and local
17
tax returns and IRS Form 1065, Schedule K 1, to be prepared and delivered to
the Limited Partners within sixty (60) days after the close of the
Partnership's fiscal year. During such period, the General Partner shall
also cause the Partnership to furnish to any Limited Partner any other tax
information reasonably requested by such Limited Partner.
12.5 TAX MATTERS PARTNER. The General Partner shall be the
Partnership's tax matters partner under the Code and under any comparable
provision of state law. The General Partner shall have the right to resign as
tax matters partner by giving thirty (30) days' written notice to each Partner.
Upon such resignation a successor tax matters partner shall be elected by a
Majority In Interest of the Class A Limited Partners. The tax matters partner
shall employ experienced tax counsel to represent the Partnership in connection
with any audit or investigation of the Partnership by the Internal Revenue
Service and in connection with all subsequent administrative and judicial
proceedings arising out of such audit. If the tax matters partner is required
by law or regulation to incur fees and expenses in connection with tax matters
not affecting all the Partners, then the Partnership shall be entitled to
reimbursement from those Partners on whose behalf such fees and expenses were
incurred. The tax matters partner shall keep the Partners informed of all
administrative and judicial proceedings, as required by Section 6223(g)of the
Code, and shall furnish to each Partner, if such Partner so requests in writing,
a copy of each notice or other communication received by the tax matters partner
from the Internal Revenue Service, except such notices or communications as are
sent directly to such requesting Partner by the Internal Revenue Service. The
relationship of the tax matters partner to the Limited Partners is that of a
fiduciary, and the tax matters partner has fiduciary obligations to perform its
duties as tax matters partner in such manner as will serve the best interests of
the Partnership and all of the Partnership's Partners. To the fullest extent
permitted by law, but subject to the limitations and exclusions of paragraph
14.4 below, the Partnership agrees to indemnify the tax matters partner and its
agents and save and hold them harmless, from and in respect to all (i) fees,
costs and expenses in connection with or resulting from any laim, action, or
demand against the tax matters partner, the General Partner or the Partnership
that arise out of or in any way relate to the tax matters partner's status as
tax matters partner for the Partnership, and (ii) all such claims, actions, and
demands and any losses or damages therefrom, including amounts paid in
settlement or compromise of any such claim, action, or demand.
12.6 SPECIAL MEETINGS. Subject to the provisions of the Act, each
Partner may call a special meeting of the Partnership at any reasonable time on
not less than ten (10), nor more than sixty (60), days' written notice.
ARTICLE 13
VALUATION
13.1 VALUATION. Subject to the specific standards set forth below, the
valuation of Securities and other assets and liabilities under this Agreement
shall be at fair market value. Except as may be required under applicable
Treasury Regulations, no value shall be placed on the goodwill or the name of
the Partnership in determining the value of the interest of any Partner or in
any accounting among the Partners.
18
(a) The following criteria shall be used for determining the
fair market value of Securities:
(i) Securities not subject to investment letter or other
similar restrictions on free Marketability:
(1) If traded on one or more securities exchanges
or the Nasdaq National Market, the value shall be deemed to be the Securities'
highest closing price on such exchange(s) on the valuation date.
(2) If actively traded over the counter (other
than on the Nasdaq National Market), the value shall be deemed to be the average
of the closing bid and ask prices of such Securities on the valuation date.
(3) If there is no active public market, the
value shall be the fair market value thereof, as determined by the General
Partner, taking into consideration the purchase price of the Securities,
developments concerning the investee company subsequent to the acquisition of
the Securities, any financial data and projections of the investee company
provided to the General Partner; and such other factor or factors as the General
Partner may deem relevant. If a Majority in Interest of the Class A Limited
Partners objects to the valuation of any Nonmarketable Security within fifteen
(15) days of receipt of the valuation, the fair market value of such Security
shall be determined by an appraiser selected by the senior ranking officer of
the Western Association of Venture Capitalists (or any successor organization)
who is not associated with any of the Partners. The Partnership shall bear the
expense of any such appraisal.
(ii) Securities subject to investment letter or other
restrictions on free Marketability shall be valued by making an appropriate
adjustment from the value determined under (1), (2), or (3) above to reflect the
effect of the restrictions on transfer.
(iii) The valuation of the Partnership's interest in AVII
shall be based on the valuation of the securities owned by AVII determined in
accordance with AVII's limited partnership agreement.
(b) If the General Partner in good faith determines that,
because of special circumstances, the valuation methods set forth in this
paragraph do not fairly determine the value of a Security, the General Partner
shall make such adjustments or use such alternative valuation method as it deems
appropriate.
ARTICLE 14
OTHER PROVISIONS
14.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among the
residents of such state made and to be performed entirely within such state.
19
14.2 LIMITATION OF LIABILITY OF THE LIMITED PARTNERS. Except as
required by law, no Limited Partner shall be bound by, nor be personally liable
for, the expenses, liabilities, or obligations of the Partnership in excess of
its capital commitment to the Partnership.
14.3 EXCULPATION. Neither the General Partner, nor its members or
Affiliates shall be liable to any Limited Partner or the Partnership for honest
mistakes of judgment, or for action or inaction, taken in good faith for a
purpose that was reasonably believed to be in the best interests of the
Partnership, or for losses due to such mistakes, action, or inaction, or to the
negligence, dishonesty; or bad faith of any employee, broker, or other agent of
the Partnership, provided that such employee, broker, or agent was selected,
engaged, or retained with reasonable care. The General Partner and such persons
may consult with counsel and accountants in respect of Partnership affairs and
be fully protected and justified in any action or inaction that is taken in
accordance with the advice or opinion of such counsel or accountants, provided
that they shall have been selected with reasonable care. Notwithstanding any of
the foregoing to the contrary, the provisions of this paragraph and the
immediately following paragraph shall not be construed so as to relieve (or
attempt to relieve) any person of any liability by reason of fraud, willful
misconduct or gross negligence or to the extent (but only to THE extent) that
such liability may not be waived, modified, or limited under applicable law, but
shall be construed so as to effectuate the provisions of such paragraphs to the
fullest extent permitted by law.
14.4 INDEMNIFICATION. The Partnership agrees to indemnify, out of the
assets of the Partnership only, the General Partner and its members and their
agents (the "Indemnified Parties") to the fullest extent permitted by law and to
save and hold them harmless from and in respect of all (a) reasonable fees,
costs, and expenses, including legal fees, paid in connection with or resulting
from any claim, action, or demand against any Indemnified Party that arises out
of or in any way relate to the Partnership, its properties, business, or affairs
and (b) such claims, actions, and demands and any losses or damages resulting
from such claims, actions, and demands, including amounts paid in settlement or
compromise (if recommended by attorneys for the Partnership) of any such claim,
action or demand; provided, however, that this indemnity shall not extend to
conduct not undertaken in good faith to promote the best interests of the
Partnership or the portfolio companies of the Partnership, nor to any conduct
which constitutes fraud, willful misconduct or gross negligence. Expenses
incurred by any Indemnified Party in defending a claim or proceeding covered by
this paragraph shall be paid by the Partnership in advance of the final
disposition of such claim or proceeding provided the indemnified person
undertakes to repay such amount if it is ultimately determined that such person
was not entitled to be indemnified. The provisions of this paragraph 14.4 shall
remain in effect as to each Indemnified Party whether or not such Indemnified
Party continues to serve in the capacity that entitled such person to be
indemnified.
14.5 ARBITRATION. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, except with respect to the valuation
of Partnership assets, shall be settled by arbitration in San Jose, California
in accordance with the rules, then obtaining, of the American Arbitration
Association, and judgment upon the award rendered may be entered in any court
having jurisdiction thereof.
20
14.6 EXECUTION AND FILING OF DOCUMENTS. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
14.7 OTHER INSTRUMENTS AND ACTS. The Partners agree to execute any
other instruments or perform any other acts that are or may be reasonably
necessary to effectuate and carry on the partnership created by this Agreement.
14.8 BINDING AGREEMENT. This Agreement shall be binding upon the
transferees, successors, assigns, and legal representatives of the Partners.
14.9 NOTICES. Any notice or other communication that one Partner
desires to give to another Partner shall be in writing, and shall be deemed
effectively given upon personal delivery or three (3) days after deposit in any
United States mail box, by registered or certified mail, postage prepaid, upon
confirmed transmission by facsimile, or upon confirmed delivery by overnight
commercial courier service, addressed to the other Partner at the address shown
on Exhibit A or at such other address as a Partner may designate by ten (10)
days' advance written notice to the other Partners; provided, however, that any
notice to a Partner with an address outside the United States shall be deemed
effectively given only upon personal delivery or upon transmission by facsimile
with a confirmation copy sent by air mail, or upon confirmed delivery by
international commercial courier service.
14.10 AMENDMENT. This Agreement may be amended only with the written
consent of the General Partner and a Majority in Interest of the Class A Limited
Partners.
14.11 ENTIRE AGREEMENT. This Agreement constitutes the full, complete,
and final agreement of the Partners and supersedes all prior written or oral
agreements between the Partners with respect to the Partnership.
14.12 TITLES; SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and shall not be considered in the interpretation
of this Agreement.
21
14.13 PARTNERSHIP NAME. The Partnership shall have the exclusive right
to use the Partnership name as long as the Partnership continues. Upon
termination of the Partnership, the Partnership shall assign whatever rights it
may have in such name to the General Partner. No value shall be placed upon the
name or the goodwill attached to it for the purpose of determining the value of
any Partner's Capital Account or interest in the Partnership.
IN WITNESS WHEREOF, the Partners have executed this Agreement as of the
date first written above.
GENERAL PARTNER: CLASS A LIMITED PARTNER:
ADOBE SYSTEMS INCORPORATED ADOBE SYSTEMS INCORPORATED
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------- -------------------------
CLASS B LIMITED PARTNERS:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------- --------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------- --------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇
22
EXHIBIT A
SCHEDULE OF PARTNERS (1)
Name and Address Capital Contribution Class A Units Class B Units
---------------- -------------------- ------------- -------------
GENERAL PARTNER: (2) 0 0
Adobe Systems Incorporated
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
CLASS A LIMITED PARTNER: (3) 800,000 100,000
Adobe Systems Incorporated
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
CLASS B LIMITED PARTNERS:
▇▇▇▇ ▇▇▇▇▇▇▇ (4) $0.00 0 30,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (4) $0.00 0 30,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (4) $0.00 0 10,000
▇▇▇▇ ▇▇▇▇ (4) $0.00 0 10,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ (4) $0.00 0 10,000
▇▇▇▇▇ ▇▇▇▇▇▇ (4) $0.00 0 10,000
Totals 800,000 200,000
---------------------------
(1) This Exhibit A applies to Securities purchased on or after August 13,
1998. See Exhibit A to the Prior Agreement for Securities purchased
before August 13, 1998 (except with respect to any Former Partner).
(2) 1% of total capital contributions (in cash)
(3) cash and securities described on Schedule A-1 to this Exhibit A with an
agreed value as set forth on Schedule A-1
(4) c/o Adobe Systems Incorporated, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
