\n 10.16. Tax Matters Partner…………………………….. 35
\n 10.17. ERISA Matters………………………………….. 36
\n 10.18. Unrelated Business Taxable Income………………… 37
\n 10.19. Public Plan Partner Withdrawals………………….. 38
\n 10.20. Foundation Partner Withdrawals…………………… 38
\n 10.21. Foreign Partners……………………………….. 39
\n 10.22. Taxation as Partnership…………………………. 39
\n 10.23. Side Letters…………………………………… 39
\n 10.24. Deliveries of Opinions………………………….. 40<\/p>\nArticle XI MISCELLANEOUS TAX COMPLIANCE PROVISIONS……………….. 40<\/p>\n
11.1. Substantial Economic Effect……………………… 40
\n 11.2. Other Allocations………………………………. 40
\n 11.3. Income Tax Allocations………………………….. 41
\n 11.4. Withholding……………………………………. 42
\n 11.5. Section 1045…………………………………… 42<\/p>\n
EXHIBIT A Partners’ Capital Commitments; Partnership Percentages<\/p>\n
EXHIBIT B Side Letters
\n<\/c><\/s><\/caption>\n<\/table>\n
iii.<\/p>\n
E*Trade eCommerce Fund II, L.P.
\n A Delaware limited partnership<\/p>\n
LIMITED PARTNERSHIP AGREEMENT<\/p>\n
E*Trade Ventures II, LLC, a Delaware limited liability company (the
\n“General Partner”), as general partner, and each of the individuals,
\n—————-
\ncorporations and other entities whose names are set forth under the heading
\n“Limited Partners” on Exhibit A attached hereto, as limited partners (the
\n“Limited Partners” and, together with the General Partner, the “Partners”),
\n—————– ——–
\nhereby enter into this Limited Partnership Agreement effective as of June 16,
\n2000;<\/p>\n
The Partners, in consideration of their mutual covenants contained
\nherein, agree to carry on a limited partnership pursuant to the terms of this
\nAgreement and the Delaware Revised Uniform Limited Partnership Act (the
\n“Delaware Act”).<\/p>\n
Article I
\n NAME, PURPOSE AND
\n PRINCIPAL OFFICE OF PARTNERSHIP; DEFINITIONS<\/p>\n
1.1. Partnership Name. The name of the Partnership is “E*Trade
\n —————-
\neCommerce Fund II, L.P.” The affairs of the Partnership shall be conducted under
\nsuch name or such other name as the General Partner may, in its discretion,
\ndetermine. The General Partner will provide prompt written notice to the Limited
\nPartners of any change in the name of the Partnership. E*Trade Group, Inc.
\nhereby grants the Partnership, at no cost, the right to use the “E*Trade” name
\nfor the term of the Partnership.<\/p>\n
1.2. Partnership Purpose; Powers.
\n ————————— <\/p>\n
(a) Purpose. The purpose of the Partnership is to (i) seek
\n ——-
\ncapital appreciation through the acquisition, holding, sale, distribution or
\nother disposition of investments in Portfolio Companies and (ii) engage in any
\nother lawful activities determined by the General Partner to be necessary or
\nadvisable in connection with the foregoing.<\/p>\n
(b) Powers. Subject to all of the terms and provisions hereof,
\n ——
\nthe Partnership shall have all powers necessary, suitable or convenient for the
\naccomplishment of the purposes of the Partnership, including, without
\nlimitation, the following:<\/p>\n
(1) to purchase, sell, invest and dispose of Securities of
\n every kind, including, without limitation, capital stock, limited
\n partnership interests, bonds, notes, debentures, securities convertible
\n into other securities, trust receipts and other obligations, instruments or
\n evidences of indebtedness, as well as in rights, warrants and options to
\n purchase securities;<\/p>\n
(2) to make and perform all contracts and engage in all
\n activities and transactions necessary or advisable to carry out the
\n purposes of the Partnership, including, without limitation, the purchase,
\n sale, transfer, pledge and exercise of all rights, privileges and incidents
\n of ownership or possession with respect to any Partnership asset or
\n liability; and to guarantee or become a surety for the debts of others; and<\/p>\n
(3) otherwise to have all the powers available to it as a
\n limited partnership under the Delaware Act.<\/p>\n
1.3. Registered Office and Agent. The initial address of the
\n —————————
\nPartnership’s registered office in Delaware is Corporation Trust Center, 1209
\nOrange Street, Wilmington, Delaware 19801, and its initial agent at such address
\nfor service of process is The Corporation Trust Company. The General Partner
\nshall provide prompt written notice to the Limited Partners of any change of the
\nPartnership’s registered offices.<\/p>\n
1.4. Principal Office. The principal office of the Partnership shall
\n —————-
\ninitially be located at 4500 Bohannon Drive, Menlo Park, California 94025. The
\nGeneral Partner may change the location of the principal office of the
\nPartnership at any time upon prompt written notice to the Limited Partners
\nindicating the new location of such principal office.<\/p>\n
1.5. Definitions. As used in this Agreement, the following terms
\n ———–
\nshall have the following meanings:<\/p>\n
Adjusted Capital Balance. As of any date, the balance of the General
\n ————————
\nPartner’s Capital Account as of such date computed without regard to any such
\nbalance created as a result of any interest as a Limited Partner held by the
\nGeneral Partner.<\/p>\n
Affiliate. With respect to any Partner, any person controlling,
\n ———
\ncontrolled by, or under direct or indirect common control by such Partner.<\/p>\n
After-Tax Distribution Amount shall have the meaning set forth in
\n —————————–
\nParagraph 8.2.<\/p>\n
Agreement. This Amended and Restated Limited Partnership Agreement of
\n ———
\nE*Trade eCommerce Fund II, L.P., a Delaware limited partnership, as it may be
\namended in accordance with the terms hereof.<\/p>\n
Bankruptcy. A person or entity shall be deemed bankrupt if such
\n ———-
\nperson:<\/p>\n
(1) makes an assignment for the benefit of creditors;<\/p>\n
(2) files a voluntary petition in bankruptcy;<\/p>\n
(3) is adjudicated as bankrupt or insolvent or has entered
\n against such person an order for relief in any bankruptcy or insolvency
\n proceeding;<\/p>\n
(4) files a petition or answer seeking for himself or itself
\n any reorganization, arrangement, composition, readjustment, liquidation,
\n dissolution or similar relief under any statute, law or regulation;<\/p>\n
2.<\/p>\n
(5) files an answer or other pleading admitting or failing
\n to contest the material allegations of a petition filed against him or it
\n in any proceeding of this nature; or<\/p>\n
(6) seeks, consents to or acquiesces in the appointment of a
\n trustee, receiver or liquidator or of all or any substantial part of his or
\n its properties.<\/p>\n
BHC Partner shall have the meaning set forth in Paragraph 7.5(c).
\n ———– <\/p>\n
Book Value. The Book Value with respect to any asset shall be the
\n ———-
\nasset’s adjusted basis for federal income tax purposes, except as follows:<\/p>\n
(1) The initial Book Value of any property other than money
\n contributed by a Partner to the Partnership shall be the fair market value
\n of such asset at the time of contribution, as determined by the
\n contributing Partner and the Partnership.<\/p>\n
(2) In the discretion of the General Partner, the Book
\n Values of all Partnership assets may be adjusted to equal their respective
\n fair market values, as determined by the General Partner consistent with
\n the principles of Paragraph 9.2, and the amount of such adjustment shall be
\n treated as Capital Transaction Gain or Loss and allocated to the Capital
\n Accounts of the Partners pursuant to Paragraph 4.3, as of the following
\n times: (A) the acquisition of an additional interest in the Partnership by
\n any new or existing Partner (other than pursuant to Paragraph 7.6(b)) in
\n exchange for more than a de minimis Capital Contribution; and (B) the
\n distribution by the Partnership to a Partner of more than a de minimis
\n amount of Partnership assets in connection with an adjustment of such
\n Partner’s Partnership Percentage.<\/p>\n
(3) The Book Values of all Partnership assets shall be
\n adjusted to equal their respective fair market values, as determined by the
\n General Partner consistent with the principles of Paragraph 9.2, and the
\n amount of such adjustment shall be treated as Capital Transaction Gain or
\n Loss and allocated to the Capital Accounts of the Partners pursuant to
\n Paragraph 4.3, as of the following times: (A) the date the Partnership is
\n liquidated within the meaning of Treasury Regulation Section 1.704-
\n 1(b)(2)(ii)(g); and (B) the termination of the Partnership pursuant to the
\n provisions of this Agreement.<\/p>\n
(4) The Book Values of Partnership assets shall be increased
\n or decreased to the extent required under Treasury Regulation Section
\n 1.704-1(b)(2)(iv)(m) in the event that the adjusted tax basis of
\n Partnership assets is adjusted pursuant to Code Section 732, 734 or 743.<\/p>\n
(5) The Book Value of a Partnership asset shall be adjusted
\n by the depreciation, amortization or other cost recovery deductions, if
\n any, taken into account by the Partnership with respect to such asset in
\n computing Net Income or Loss.<\/p>\n
Capital Commitment shall have the meaning set forth in Paragraph 3.1.
\n —————— <\/p>\n
Capital Transaction Gain or Loss. An amount computed for any relevant
\n ——————————–
\nperiod, as of the last day thereof, that is equal to the total of (i) the
\naggregate amount recognized on the <\/p>\n
3.<\/p>\n
Sale or Exchange of Securities or other assets held by the Partnership during
\nsuch period less the sum of (A) the Book Value of such Securities or other
\nassets as of the date of such Sale or Exchange, plus (B) the Partnership’s
\nexpenses associated with the Sale or Exchange of such Securities or other
\nassets; (ii) the Partnership’s distributive share of income, gain, loss,
\ndeduction or credit (or item thereof) derived from its interest in partnerships,
\nlimited liability companies and other pass-through entities to the extent such
\namounts would be Capital Transaction Gain or Loss if realized directly by the
\nPartnership; (iii) dividend income of the Partnership during such period with
\nrespect to Securities of Portfolio Companies, whether derived from actual or
\nconstructive distributions of cash or property; (iv) interest (and original
\nissue discount) income of the Partnership during such period from Securities of
\nPortfolio Companies; (v) the aggregate adjustment to the Book Value of
\nPartnership assets during such period computed under subparagraphs (2), (3) and
\n(4) of the definition “Book Value”; and (vi) any other amount specifically
\ndesignated as Capital Transaction Gain or Loss in this Agreement, including
\n(without limitation) such amounts so designated pursuant to Paragraph 6.4(f).<\/p>\n
Capital Contributions means a Partner’s capital contributions
\n ———————
\ntheretofore made to the Partnership at any point in time. For purposes of
\nParagraph 6.4(b), the General Partner’s Capital Contributions shall include
\nsolely its Capital Contributions made with respect to its interest as General
\nPartner.<\/p>\n
Certificate of Limited Partnership. The Certificate of Limited
\n ———————————-
\nPartnership of E*Trade eCommerce Fund II, L.P., a Delaware limited partnership,
\nfiled with the Secretary of State of Delaware, as it may be amended in
\naccordance with the terms hereof.<\/p>\n
Code. The Internal Revenue Code of 1986, as amended from time to time
\n —-
\n(and any corresponding provisions of succeeding law).<\/p>\n
Defaulting Partner shall have the meaning set forth in Paragraph
\n ——————
\n3.5(a).<\/p>\n
Delaware Act means the Delaware Revised Uniform Limited Partnership
\n ————
\nAct.<\/p>\n
DOL Regulations shall have the meaning set forth in Paragraph 3.2.<\/p>\n
Drawdown shall have the meaning set forth in Paragraph 3.2.
\n ——– <\/p>\n
Drawdown Date shall have the meaning set forth in Paragraph 3.2.
\n ————- <\/p>\n
Drawdown Notice shall have the meaning set forth in Paragraph 3.2.
\n ————— <\/p>\n
E*Trade. E*Trade Group, Inc. a Delaware corporation.
\n ——- <\/p>\n
ERISA. The Employment Retirement Income Security Act of 1974, as
\n —–
\namended from time to time.<\/p>\n
ERISA Partner. An “employee benefit plan” (or an entity deemed to
\n ————-
\nhold “plan assets” of any “employee benefit plan”) within the meaning, and
\nsubject to the provisions, of ERISA.<\/p>\n
4.<\/p>\n
Excess Distribution Amount shall have the meaning set forth in
\n ————————–
\nParagraph 8.2.<\/p>\n
Excess Negative Balance shall have the meaning set forth in Paragraph
\n ———————–
\n11.2(e).<\/p>\n
Fair Value Capital Accounts means the Partners’ Capital Accounts
\n —————————
\ncomputed in accordance with Article IV, but treating each security and each
\nother asset owned by the Partnership as if, on the date as of which such
\ncomputation is being made, such security or other asset had been sold at its
\nfair market value (determined in accordance with Paragraph 9.2) and any
\nresulting Capital Transaction Gain or Loss had been allocated to the Partners’
\nCapital Accounts in accordance with Article IV.<\/p>\n
Fair Value Test means that, with respect to each Limited Partner and
\n —————
\nany proposed Partnership distribution, the sum of (i) the amount of the
\ncumulative distributions which such Limited Partner has received from the
\nPartnership, plus (ii) the amount of such Limited Partner’s Fair Value Capital
\nAccount, in each case after giving effect to the proposed distribution, is equal
\nto at least one hundred percent (100%) of such Limited Partner’s Capital
\nContributions.<\/p>\n
Final Closing Date shall have the meaning set forth in Paragraph
\n ——————
\n7.6(b).<\/p>\n
Fiscal Quarter. The Fiscal Quarters of the Partnership shall begin on
\n ————–
\nJanuary l, April 1, July 1, and October 1, and end on March 31, June 30,
\nSeptember 30, and December 31, respectively, except that the Partnership’s first
\nFiscal Quarter shall begin on the date of this Agreement and end on the next
\nregular quarter end.<\/p>\n
Fiscal Year. The Partnership’s first Fiscal Year shall begin on the
\n ———–
\ndate of this Agreement and end on December 31, 2000. Thereafter, the
\nPartnership’s Fiscal Year shall commence on January 1 of each year and end on
\nDecember 31 of such year or, if earlier, the date the Partnership terminated
\nduring such year. The General Partner at any time may, in its discretion, elect
\na different Fiscal Year. The General Partner shall provide prompt written
\nnotice to the Limited Partners of any such election to change the Fiscal Year.<\/p>\n
Follow-On Investment. An investment in the Securities of any existing
\n ——————–
\nPortfolio Company in which the Partnership has previously made an investment.<\/p>\n
Foreign Entity shall have the meaning set forth in Paragraph 7.2(i).
\n ————– <\/p>\n
Foreign Partner shall have the meaning set forth in Paragraph 10.21.
\n ————— <\/p>\n
Foundation Partner shall have the meaning set forth in Paragraph
\n ——————
\n10.20.<\/p>\n
General Partner. E*Trade Ventures II, LLC.
\n ————— <\/p>\n
General Partner Distributions shall have the meaning set forth in
\n —————————–
\nParagraph 8.2(d).<\/p>\n
Holding Company Act. The Bank Holding Company Act of 1956, as
\n ——————-
\namended.<\/p>\n
5.<\/p>\n
Insulated Limited Partner shall have the meaning set forth in
\n ————————-
\nParagraph 7.5(b).<\/p>\n
Interim Period. If a Partnership interest is transferred, the General
\n ————–
\nPartner converts to a Limited Partner, the Partnership Percentage of any Partner
\nchanges, a Partner withdraws or a new Partner is admitted to the Partnership
\nother than on the first day of any Fiscal Year, if the General Partner shall so
\nelect, the date of such event or election shall commence an Interim Period. An
\nInterim Period shall end on the last day of the Fiscal Year in which the Interim
\nPeriod began or on the day immediately preceding the beginning of a new Interim
\nPeriod, whichever is earlier.<\/p>\n
Investment Period. The period beginning as of the date of this
\n —————–
\nAgreement and ending December 31, 2005.<\/p>\n
Limited Liability Entity Opinion shall have the meaning set forth in
\n ——————————–
\nParagraph 7.2(i).<\/p>\n
Limited Partners. Each of the persons listed under the heading
\n —————-
\n“Limited Partners” on Exhibit A attached hereto and each other person duly
\nadmitted to the Partnership as a limited partner subsequent to the date hereof.<\/p>\n
Majority in Interest of the Limited Partners. Limited Partners having
\n ——————————————–
\nCapital Contributions the sum of which is at least a majority of the aggregate
\nCapital Contributions of the Limited Partners. For purposes of Paragraph
\n2.2(c), interests held by the General Partner, E*Trade and their Affiliates as
\nLimited Partners shall be non-voting interests and such parties shall be treated
\nas not having made any Capital Contributions as Limited Partners.<\/p>\n
Management Fee shall have the meaning set forth in Paragraph 5.1.
\n ————– <\/p>\n
Marketable Securities. Securities that are (i) actively traded on a
\n ———————
\nnational securities exchange or through the National Association of Securities
\nDealers, Inc. Automated Quotation System and the aggregate total of all such
\nSecurities then held by the Partnership would, if distributed in kind to the
\nLimited Partners, be freely transferable pursuant to SEC Rule 144 (without
\nregard to any volume limitations thereunder), an effective registration under
\nthe Securities Act or an exemption therefrom, (ii) direct obligations of, or
\nobligations guaranteed as to principal and interest by, the United States, or
\n(iii) certificates of deposit maturing within one (1) year or less issued by an
\ninstitution insured by the Federal Deposit Insurance Corporation, or similar
\nsecurities.<\/p>\n
Media Company. An entity that, directly or indirectly, owns, controls
\n ————-
\nor operates or has an attributable interest in (i) a U.S. broadcast radio or
\ntelevision station or a U.S. cable television system, (ii) a “daily newspaper”
\n(as such term is defined in Section 73.3555 of the Federal Communication
\nCommission’s (“FCC”) rules and regulations), (iii) any U.S. communications
\n —
\nfacility operated pursuant to a license granted by the FCC and subject to the
\nprovisions of Section 310(b) of the Communications Act of 1934, as amended, or
\n(iv) any other business that is subject to FCC regulations under which the
\nownership of the Partnership in such entity may be attributed to a Limited
\nPartner or under which the ownership of a Limited Partner in another business
\nmay be subject to limitation or restriction as a result of the ownership of the
\nPartnership in such entity.<\/p>\n
6.<\/p>\n
Net Capital Gain. With respect to a Partner, the aggregate amount of
\n —————-
\nnet taxable income and net taxable gain allocated to such Partner for federal
\nincome tax purposes under this Agreement to the extent such allocations of
\ntaxable income and gain are effected as a result of the allocation to the
\nCapital Account of such Partner under this Agreement of corresponding items of
\nCapital Transaction Gain (net of items of Capital Transaction Loss). In
\ncalculating Net Capital Gain for any year, capital losses of the Partnership in
\nprior years shall be deemed to be carried over and to offset Net Capital Gain in
\nlater years.<\/p>\n
Net Income and Net Loss. Except as otherwise specifically provided in
\n ———————–
\nthis Agreement, the net book income or loss of the Partnership for any relevant
\nperiod computed without taking into account items comprising Capital Transaction
\nGain or Loss. The net book income or loss of the Partnership shall be computed
\nin accordance with Federal income tax principles, as adjusted pursuant to the
\nfollowing provisions, under the method of accounting elected by the Partnership
\nfor federal income tax purposes. The net book income or loss of the Partnership
\nshall be computed, inter alia, by:<\/p>\n
(1) including as income or deductions, as appropriate, any
\n tax-exempt income and related expenses that are neither properly included
\n in the computation of taxable income nor capitalized for federal income tax
\n purposes;<\/p>\n
(2) including as a deduction when paid or incurred
\n (depending on the Partnership’s method of accounting) any amounts utilized
\n to organize the Partnership or to promote the sale of (or to sell) an
\n interest in the Partnership, except that amounts for which an election is
\n properly made by the Partnership under Section 709(b) of the Code shall be
\n accounted for as provided therein;<\/p>\n
(3) including as a deduction any losses incurred by the
\n Partnership in connection with the sale or exchange of property
\n notwithstanding that such losses may be disallowed to the Partnership for
\n federal income tax purposes under the related party rules of Code Section
\n 267(a)(1) or 707(b); and<\/p>\n
(4) calculating the gain or loss on disposition of
\n Partnership assets and the depreciation, amortization or other cost
\n recovery deductions, if any, with respect to Partnership assets by
\n reference to their Book Value rather than their adjusted tax basis.<\/p>\n
Nonmarketable Securities. All Securities other than Marketable
\n ————————
\nSecurities.<\/p>\n
Non-Voting Interests shall have the meaning set forth in Paragraph
\n ——————–
\n7.5(c).<\/p>\n
One-Third in Interest of the Limited Partners. Limited Partners
\n ———————————————
\nhaving Capital Contributions the sum of which is at least one third of the
\naggregate Capital Contributions of the Limited Partners. For this purpose, the
\ninterests held by the General Partner, E*Trade and their Affiliates as Limited
\nPartners shall be non-voting interests and such parties shall be treated as not
\nhaving made any Capital Contributions as Limited Partners.<\/p>\n
Operating Expenses shall have the meaning set forth in Paragraph 4.6.
\n —————— <\/p>\n
7.<\/p>\n
Original Partners. Each of the persons listed as of the date hereof
\n —————–
\nas Limited Partners on Exhibit A attached hereto, and any transferee of all or
\nany portion of such Limited Partner’s interest in the Partnership.<\/p>\n
Parallel Funds shall have the meaning prescribed in Paragraph 7.8(b).
\n ————– <\/p>\n
Partners. The General Partner and the Limited Partners.
\n ——– <\/p>\n
Partnership. E*Trade eCommerce Fund II, L.P., the partnership formed
\n ———–
\npursuant to this Agreement.<\/p>\n
Partnership Percentage. The Partnership Percentage for each Partner
\n ———————-
\nshall be determined by dividing the amount of each Partner’s Capital
\nContributions by the sum of the Capital Contributions of all of the Partners.
\nThe sum of the Partners’ Partnership Percentages shall be one hundred percent
\n(100%). The aggregate Partnership Percentage of the Limited Partners as a group
\nshall be the sum of the Partnership Percentages of each of the Limited Partners
\nas limited partners.<\/p>\n
Payout means the time when each Limited Partner has received
\n ——
\ncumulative distributions from the Partnership in an amount equal to its Capital
\nCommitment, as adjusted pursuant to any provision of this Agreement (less any
\nportion thereof which such Limited Partner has failed to pay the Partnership
\nwhen due or subsequently pursuant to Paragraph 3.5). In the event a
\ndistribution of cash or Securities causes the Partnership to reach and exceed
\nPayout, the portion of the amount distributed which was necessary to reach
\nPayout will be deemed to have been distributed before Payout, and any remaining
\namount will be deemed to have been distributed after Payout.<\/p>\n
Portfolio Company. Any company in which the Partnership makes an
\n —————–
\ninvestment.<\/p>\n
Principals shall have the meaning set forth in Paragraph 7.8.
\n ———- <\/p>\n
Public Plan Partner shall have the meaning set forth in Paragraph
\n ——————-
\n10.19.<\/p>\n
Reallocated Loss shall have the meaning set forth in Paragraph 4.4.
\n —————- <\/p>\n
Sale or Exchange. A sale, exchange, liquidation or similar
\n —————-
\ntransaction, event, or condition with respect to any assets (except realizations
\nof purchase discounts on commercial paper, certificates of deposit, or other
\nmoney-market instruments) of the Partnership of the type that would cause any
\nrealized gain or loss to be recognized for income tax purposes under the Code
\n(as determined without giving effect to the related party rules of Code Sections
\n267(a)(1) and 707(b)).<\/p>\n
Securities. Securities of every kind and nature and rights and
\n ———-
\noptions with respect thereto, including stock, notes, bonds, debentures,
\nevidences of indebtedness and other business interests of every type, including
\ninterests in partnerships, joint ventures, proprietorships and other business
\nentities.<\/p>\n
Securities Act. The Securities Act of 1933, as amended.
\n ————– <\/p>\n
8.<\/p>\n
Shortfall Amount shall have the meaning set forth in Paragraph 3.5(d).
\n —————- <\/p>\n
Tax Distribution shall have the meaning set forth in Paragraph 6.3.
\n —————- <\/p>\n
Tax-Exempt Limited Partner shall have the meaning set forth in
\n ————————–
\nParagraph 10.18.<\/p>\n
Termination Date shall have the meaning set forth in Paragraph 2.3.
\n —————- <\/p>\n
TMP shall have the meaning set forth in Paragraph 10.16.
\n — <\/p>\n
Total Committed Capital shall have the meaning set forth in Paragraph
\n ———————–
\n3.1.<\/p>\n
Total General Partner Net Gain or Loss shall have the meaning set
\n ————————————–
\nforth in Paragraph 8.2(c).<\/p>\n
Treasury Regulations. The Income Tax Regulations promulgated under
\n ——————–
\nthe Code, as such Regulations may be amended from time to time (including
\ncorresponding provisions of succeeding Regulations).<\/p>\n
Two-Thirds in Interest of the Limited Partners. Limited Partners
\n ———————————————-
\nhaving Capital Contributions the sum of which is at least sixty-six and two-
\nthirds percent (66-2\/3%) of the aggregate Capital Contributions of the Partners.
\nFor purposes of Paragraphs 2.2(a), 2.2(b), 2.2(d), 2.3, 7.7(a), 8.1(a) and
\n10.16, interests held by the General Partner, E*Trade and their Affiliates as
\nLimited Partners shall be non-voting interests and such parties shall be treated
\nas not having made any Capital Contributions as Limited Partners.<\/p>\n
Two-Thirds Invested shall have the meaning set forth in Paragraph
\n ——————-
\n7.8(b).<\/p>\n
Zero Balance Amount means, with respect to any Partner and at any
\n ——————-
\ntime, the amount of such Partner’s Capital Commitment which such Partner has not
\npaid to the Partnership in cash on or before such time, and in addition, solely
\nwith respect to the General Partner: the aggregate amount of distributions
\nreceived by the General Partner from the Partnership, but only to the extent
\nthat such distributions exceed the aggregate amount of distributions the General
\nPartner would have received if it had made its Capital Contribution as a Limited
\nPartner and did not hold an interest as a General Partner.<\/p>\n
Article II
\n TERM AND TERMINATION OF THE PARTNERSHIP<\/p>\n
2.1. Term of Partnership. The Partnership shall continue until the
\n ——————-
\ntenth (10th) anniversary of the Final Closing Date unless sooner terminated as
\nprovided in Paragraph 2.2 or by operation of law or extended as provided in
\nParagraph 2.3.<\/p>\n
2.2. Termination. The Partnership shall terminate prior to the
\n ———–
\ntenth (10th) anniversary of the Final Closing Date:<\/p>\n
9.<\/p>\n
(a) Ninety (90) days after the Bankruptcy or dissolution of the
\nGeneral Partner unless within thirty (30) days after such event Two-Thirds in
\nInterest of the Limited Partners consent in writing to a continuation of the
\nPartnership and the appointment of a successor general partner;<\/p>\n
(b) One hundred twenty (120) days after the commencement of any
\nproceeding against the General Partner seeking reorganization, arrangement,
\ncomposition, readjustment, liquidation, dissolution or similar relief under any
\nstatute, law or regulation, if the proceeding has not been dismissed, or if
\nwithin ninety (90) days after the appointment without its consent or
\nacquiescence of a trustee, receiver or liquidator of the General Partner or of
\nall or any substantial part of his properties, the appointment is not vacated or
\nstayed, or within ninety (90) days after the expiration of any such stay, the
\nappointment is not vacated, unless Two-Thirds in Interest of the Limited
\nPartners consent in writing to a continuation of the Partnership and the
\nappointment of a successor general partner;<\/p>\n
(c) Ninety (90) days after either Christos M. Cotsakos or Thomas
\nA. Bevilacqua ceases to be actively involved in the management of the
\nPartnership for any reason unless within such period a Majority in Interest of
\nthe Limited Partners elect to continue the Partnership, with such additional
\npersonnel being involved in the management of the Partnership as shall be
\nacceptable to the General Partner and a Majority in Interest of the Limited
\nPartners;<\/p>\n
(d) Upon the vote of Two-Thirds in Interest of the Limited
\nPartners after a final determination of a court of competent jurisdiction that
\nthe General Partner intentionally or willfully breached any material provision
\nof this Agreement or that the General Partner was grossly negligent in the
\nperformance of its duties hereunder; or<\/p>\n
(e) Upon the consent of the General Partner and One-Third in
\nInterest of the Limited Partners.<\/p>\n
2.3. Extension of Term. The term of the Partnership may be extended
\n —————–
\nfor up to one (1) year after the tenth (10th) anniversary of the Final Closing
\nDate in the discretion of the General Partner. The General Partner shall deliver
\nwritten notice of any such extension to the Limited Partners. The term of the
\nPartnership may be extended thereafter only with the consent of the General
\nPartner and Two-Thirds in Interest of the Limited Partners. Any such extension
\nshall be subject to the earlier termination of the Partnership as provided in
\nParagraph 2.2. The last day of the term of the Partnership, as such may be
\nextended as provided herein, is referred to herein as the “Termination Date.”
\n —————- <\/p>\n
2.4. Events Affecting a Member of the General Partner. The death,
\n ————————————————
\ntemporary or permanent incapacity, insanity, incompetency, Bankruptcy,
\nexpulsion, retirement, withdrawal or removal of any member of the General
\nPartner or the admission of additional members to the General Partner shall not
\ndissolve the Partnership.<\/p>\n
2.5. Events Affecting a Limited Partner of the Partnership. The death,
\n —————————————————–
\ntemporary or permanent incapacity, insanity, incompetency, Bankruptcy,
\nliquidation, dissolution, reorganization, merger, sale of substantially all the
\nstock or assets of, or other change in the ownership or nature of a Limited
\nPartner shall not terminate the Partnership.<\/p>\n
10.<\/p>\n
Article III
\n CAPITAL CONTRIBUTIONS<\/p>\n
3.1. Capital Commitment of the Limited Partners. Set forth opposite
\n ——————————————
\nthe name of each Limited Partner listed on Exhibit A attached hereto is such
\nLimited Partner’s capital commitment to the Partnership. (The capital commitment
\nof each Partner (as it may be subsequently adjusted pursuant to the terms
\nhereof) is referred to herein as the Partner’s “Capital Commitment” and the
\n ——————
\ntotal Capital Commitments of the Partners shall be referred to herein as the
\n“Total Committed Capital.”) Each Limited Partner’s Capital Commitment represents
\n ———————–
\nthe aggregate amount of capital that such Limited Partner has agreed to
\ncontribute to the Partnership in accordance with the terms hereof. No Limited
\nPartner shall be obligated to contribute capital to the Partnership in an
\naggregate amount in excess of its Capital Commitment. If the Partnership is
\nrequired to qualify as a “venture capital operating company” in order to avoid
\ntreatment of the Partnership assets as “plan assets” (within the meaning of the
\nDOL Regulations) of any Limited Partner that is an ERISA Partner, the Capital
\nContribution of any ERISA Partner shall be made pursuant to the terms of an
\nescrow agreement in form mutually satisfactory to the General Partner and such
\nERISA Partner.<\/p>\n
3.2. Capital Contributions by the Limited Partners
\n ———————————————<\/p>\n
(a) The Limited Partners shall make their Capital Contributions
\nto the Partnership, payable by wire transfer or check, in installments (each
\nsuch payment being referred to as a “Drawdown”). Such Capital Contributions
\n ——–
\nshall be made upon no less than fourteen (14) days’ prior written notice from
\nthe General Partner (a “Drawdown Notice”), in such amounts as may be determined
\n —————
\nin the sole discretion of the General Partner and at such time, subject to the
\nfourteen (14) day notice period, as the General Partner shall specify in the
\nDrawdown Notice (the “Drawdown Date”). All Drawdowns shall be in U.S. dollars.
\n ————-
\nNo Limited Partner shall have the right to make partial payments of a required
\nCapital Contribution. Each Drawdown Notice shall be given to each Limited
\nPartner of the Partnership. The additional capital required of the respective
\nLimited Partners upon any Drawdown shall be based on the relative amounts of the
\nunpaid balances of their respective Capital Commitments.<\/p>\n
(b) After the expiration of the Investment Period, the General
\nPartner shall not be authorized to call (and the Partners shall not be obligated
\nto make) any Capital Contributions to fund investments which the Partnership is
\nnot contractually obligated to make at such time other than for:<\/p>\n
(1) Investments reasonably expected to close within ninety
\n (90) days after the expiration of the Investment Period;<\/p>\n
(2) Investments as to which, prior to the expiration of the
\n Investment Period, the Partnership and the prospective company or entity in
\n which such investment is to be made have a letter of intent or a definitive
\n agreement setting forth the material terms and conditions of such
\n investment;<\/p>\n
11.<\/p>\n
(3) Investments in partnerships, limited liability companies
\n and other pass-through entities pursuant to capital commitments made during
\n the Investment Period; or<\/p>\n
(4) Follow-On Investments (including Follow-On Investments
\n with respect to investments in which the initial investment by the
\n Partnership is made pursuant to clause (1), (2) or (3) of this Paragraph
\n 3.2(b)).<\/p>\n
3.3. Capital Commitment of the General Partner. The General Partner’s
\n —————————————–
\nCapital Commitment shall be an aggregate amount of one million dollars
\n($1,000,000).<\/p>\n
3.4. Capital Contributions of the General Partner. On any date on
\n ——————————————–
\nwhich a Limited Partner makes a contribution to the capital of the Partnership,
\nthe General Partner shall contribute to the Partnership such amount as may be
\nnecessary to cause the percentage of the General Partner’s Capital Commitment
\nactually contributed to the Partnership to be the same as the percentage of the
\nCapital Commitments of the Limited Partners actually contributed to the
\nPartnership as of such date. Such contribution may be made, at the General
\nPartner’s discretion, in the form of a promissory note.<\/p>\n
3.5. Defaulting Partners
\n ——————-<\/p>\n
(a) If a Partner fails to pay any amount which it is required to
\npay to the Partnership on or before the date when such amount is due and
\npayable, such Partner shall be deemed to be in default hereunder (a “Defaulting
\n ———-
\nPartner”), and written notice of default shall be given to such Limited Partner
\n——-
\nby the General Partner by certified or registered mail. The Partnership shall be
\nentitled to enforce the obligations of each Partner to make the contributions to
\ncapital required in this Agreement and shall have all remedies available at law
\nor in equity in the event any such contribution is not so made. In the event of
\nany legal proceedings relating to a default by a Defaulting Partner, such
\nDefaulting Partner shall pay all costs and expenses incurred by the Partnership,
\nincluding attorneys’ fees, if the Partnership shall prevail. Further, such
\nDefaulting Partner shall be obligated to pay the Partnership interest with
\nrespect to the amount of any Capital Contribution not made when required by this
\nArticle, with such interest commencing on the Drawdown Date for such
\ncontribution and ending on the date such contribution is made to the
\nPartnership. Such interest shall be calculated on the basis of the then current
\nreference rate announced by Wells Fargo Bank, N.A., or by any other U.S.
\ncommercial bank with capital in excess of five hundred million dollars
\n($500,000,000) selected by the General Partner, plus five percent (5%) per
\nannum, but not in excess of the amount allowable by law.<\/p>\n
(b) In addition to the remedies provided under Paragraph 3.5(a),
\nif the Defaulting Partner does not cure a default in the payment of a required
\ncontribution within ten (10) business days of the receipt of the notice
\nspecified in Paragraph 3.5(a), the General Partner (in its sole discretion) may,
\nas liquidated and agreed current damages to the non-defaulting Partners for such
\ndefault (it being agreed that it would be difficult to fix the actual damages to
\nsuch Partners), cause and treat the Defaulting Partner’s Capital Account to be
\nreduced by an amount equal to fifty percent (50%), which amount shall thereupon
\nbecome unrestricted assets of the Partnership and shall be allocated pro rata to
\nand among the respective Capital Accounts of the non-defaulting Partners in such
\nproportion as the Capital Account of each such non-<\/p>\n
12.<\/p>\n
defaulting Partner then bears to the sum of the Capital Accounts of all non-
\ndefaulting Partners. The Defaulting Partner’s remaining fifty percent (50%)
\ninterest in its Capital Account shall automatically be converted into a general
\nunsecured obligation of the Partnership, which obligation shall not bear any
\ninterest and shall be due six (6) months after the Termination Date of the
\nPartnership. Upon the expiration of the ten (10) day period after the mailing of
\nthe notice of default and the election by the General Partner to exercise its
\nremedy under this subparagraph (b), a Defaulting Partner shall automatically
\ncease to be a Partner under this Agreement and shall have no further interest,
\nright or claim in or against the Partnership, including any right or obligation
\nto make subsequent Capital Contributions when called.<\/p>\n
(c) Notwithstanding the foregoing, if, at any time before a
\nCapital Contribution required by Paragraph 3.2 becomes due, (i) a Partner
\nobtains and delivers to the Partnership an opinion of counsel (which opinion
\nshall be reasonably acceptable to the General Partner) to the effect that the
\npayment by such Partner of any portion of any remaining Capital Contributions
\nrequired by this Agreement will be unlawful or that there is a material
\nlikelihood that such payment will be unlawful or (ii) in the case of a Limited
\nPartner that is an ERISA Partner, a Public Plan Partner or a Foundation Partner,
\nsuch Partner obtains and delivers to the Partnership an opinion of counsel
\n(which opinion shall be reasonably acceptable to the General Partner) to the
\neffect set forth in Paragraph 10.17 or 10.20, as the case may be), then (A) such
\nPartner shall have no further right or obligation to pay the pertinent portion
\nof such Capital Contribution (depending on whether the Partner is withdrawing
\nfrom or simply reducing its interest in the Partnership), (B) such Partner’s
\nCapital Commitment specified on Exhibit A shall be reduced by an amount equal to
\nsuch Capital Contribution, and (C) such Partner shall not, by reason of his or
\nher failure to make such Capital Contribution, be deemed or treated as a
\nDefaulting Partner for purposes of this Paragraph 3.5.<\/p>\n
(d) The General Partner may seek to fund the amount of any
\nCapital Contribution that a Defaulting Partner has failed to contribute or that
\nis not contributed pursuant to Paragraph 3.5(c) (the “Shortfall Amount”) as
\n —————-
\nfollows:<\/p>\n
(1) The General Partner may in its discretion determine to
\n increase the amount of the Capital Contributions required from each Partner
\n to fund such Shortfall Amount ratably in accordance with the Partners’
\n relative unpaid Capital Commitments (not to exceed any Partner’s remaining
\n Capital Commitment).<\/p>\n
(2) Alternatively, the General Partner may offer the
\n Partners who have made Capital Contributions the opportunity to make
\n additional Capital Contributions to fund such Shortfall Amount. If any such
\n Partner declines to invest in all or any portion of its share of the
\n Shortfall Amount, such uncommitted amount will be offered to any other
\n Partner who has invested its share of the Shortfall Amount and concurrently
\n advised the General Partner of its willingness to make a Capital
\n Contribution in excess of such share, and the General Partner shall
\n allocate such uncommitted amount among all such other Partner on a basis
\n the General Partner determines in its discretion is, under the
\n circumstances, equitable and practicable.<\/p>\n
(3) To the extent any Shortfall Amount has not been fully
\n funded by the Partners, the General Partner may seek to fund the remaining
\n Shortfall <\/p>\n
13.<\/p>\n
Amount by offering Limited Partner interests to any other person on
\n substantially the same economic terms and conditions as are provided to the
\n Partners.<\/p>\n
Article IV
\n CAPITAL ACCOUNTS AND ALLOCATIONS<\/p>\n
4.1. Capital Accounts. A Capital Account shall be maintained on the
\n —————-
\nPartnership’s books for each Partner. In the event any interest in the
\nPartnership is transferred in accordance with the terms of this Agreement, the
\ntransferee shall succeed to the Capital Account of the transferor to the extent
\nit relates to the transferred interest.<\/p>\n
4.2. Adjustments to Capital Accounts
\n ——————————-<\/p>\n
(a) The Capital Account of each Partner shall be increased by:
\n ——— <\/p>\n
(1) the amount of money and the fair market value of any
\n property other than money contributed to the Partnership by such Partner
\n (in the case of a contribution of property, net of any liabilities secured
\n by such property that the Partnership is considered to assume or hold
\n subject to for purposes of Section 752 of the Code),<\/p>\n
(2) such Partner’s share of Capital Transaction Gain and Net
\n Income (or items thereof) allocated to its Capital Account pursuant to this
\n Agreement, and<\/p>\n
(3) any other amounts required by Treasury Regulation
\n Section 1.704-1(b), provided the General Partner determines that such
\n increase is consistent with the economic arrangement among the Partners as
\n expressed in this Agreement.<\/p>\n
(b) The Capital Account of each Partner shall be decreased by:
\n ——— <\/p>\n
(1) the amount of money and the fair market value of any
\n property other than money distributed by the Partnership (determined
\n pursuant to Paragraph 9.2 hereof as of the date of distribution) to such
\n Partner pursuant to the provisions of this Agreement (net of any
\n liabilities secured by such property that such Partner is considered to
\n assume or hold subject to for purposes of Section 752 of the Code),<\/p>\n
(2) such Partner’s share of Capital Transaction Loss and Net
\n Loss (or items thereof) allocated to its Capital Account pursuant to this
\n Agreement, and<\/p>\n
(3) any other amounts required by Treasury Regulation
\n Section 1.704-1(b), provided the General Partner determines that such
\n decrease is consistent with the economic arrangement among the Partners as
\n expressed in this Agreement.<\/p>\n
14.<\/p>\n
4.3. Allocation of Capital Transaction Gain or Loss
\n ———————————————-<\/p>\n
(a) Allocation of Capital Transaction Gain. Capital Transaction
\n ————————————–
\nGain of the Partnership for each Fiscal Year or Interim Period shall be
\nallocated as follows:<\/p>\n
(1) Twenty-five percent (25%) of the Partnership’s Capital
\n Transaction Gain shall be allocated to the General Partner.<\/p>\n
(2) The remaining seventy-five percent (75%) of the
\n Partnership’s Capital Transaction Gain shall be allocated to all Partners
\n as a group.<\/p>\n
(3) Notwithstanding the foregoing, if one or more Limited
\n Partners have been allocated a Reallocated Loss pursuant to Paragraph 4.5,
\n then Partnership Capital Transaction Gain that would otherwise be allocated
\n entirely to the General Partner pursuant to Paragraph 4.3(a)(1) shall
\n instead be allocated first to the Limited Partners (in proportion to the
\n amount of Reallocated Loss previously allocated to them) until the Limited
\n Partners have been allocated an aggregate amount of Capital Transaction
\n Gain equal to the previously allocated Reallocated Loss that has not been
\n restored by prior allocations pursuant to this subparagraph and then any
\n such remaining Capital Transaction Gain shall be allocated to the General
\n Partner.<\/p>\n
(b) Allocation of Capital Transaction Loss. Capital Transaction
\n ————————————–
\nLoss of the Partnership for each Fiscal Year or Interim Period shall be
\nallocated as follows:<\/p>\n
(1) Twenty-five percent (25%) of the Partnership’s Capital
\n Transaction Loss shall be allocated to the General Partner.<\/p>\n
(2) The remaining seventy-five percent (75%) of such Capital
\n Transaction Loss shall be allocated to all Partners as a group.<\/p>\n
4.4. Allocation of Net Income or Loss. Net Income or Loss of the
\n ——————————–
\nPartnership for each Fiscal Year or Interim Period shall be allocated to all
\nPartners as a group.<\/p>\n
4.5. Reallocation of Losses. If for any Fiscal Year or Interim Period
\n ———————-
\nafter the Partnership’s Capital Transaction Gain or Loss and Net Income or Loss
\nhas been allocated pursuant to Paragraphs 4.3 and 4.4 the closing Adjusted
\nCapital Balance of the General Partner has been reduced to less than zero by
\nmore than the amount necessary to properly reflect the General Partner’s
\nobligation to recontribute amounts to the Partnership pursuant to Paragraph 8.2
\nupon termination of the Partnership, then an amount of Capital Transaction Loss
\nand, to the extent necessary, Net Loss (the “Reallocated Loss”) for such Fiscal
\n —————-
\nYear or Interim Period shall be reallocated from the General Partner to the
\nLimited Partners as a group so that the General Partner’s closing Adjusted
\nCapital Balance is not reduced below zero by more than the amount necessary to
\nproperly reflect the General Partner’s obligation to recontribute amounts to the
\nPartnership pursuant to Paragraph 8.2 upon termination of the Partnership. A
\nReallocated Loss may be restored only from future Capital Transaction Gain.<\/p>\n
4.6. Allocation Among Partners as a Group. Except as otherwise
\n ————————————
\nspecifically provided in this Agreement, all Capital Transaction Gain or Loss
\nand Net Income and Loss (and<\/p>\n
15.<\/p>\n
items thereof) allocated to the Partners (or a group of Partners) as a group for
\nany period shall be allocated among such Partners in proportion to their
\nrespective Partnership Percentages as of the end of such period. In making such
\nallocations, any changes in Partnership Percentages as a result of changes in
\nthe Capital Commitments of the Partners, any exclusion of any Partners from
\nparticular investments, any contributions of Partners to fund any Shortfall
\nAmount and similar matters shall be taken into account.<\/p>\n
4.7. Special Allocation Among Late-Entering Limited Partners of
\n ———————————————————-
\nOrganization and Operating Expenses. The following items of Net Income or Loss
\n———————————–
\nare collectively referred to herein as “Operating Expenses”:<\/p>\n
(a) The Management Fee and other payments and reimbursements of
\nexpenses paid pursuant to Article V other than amounts capitalized as part of
\nthe cost of Securities or other assets for federal income tax purposes; and<\/p>\n
(b) All expenditures of the Partnership classified for federal
\nincome tax purposes as organization or syndication expenses.<\/p>\n
Notwithstanding Paragraph 4.6, if additional Limited Partners are
\nadmitted to the Partnership pursuant to Paragraph 7.6(b) hereof during a
\nparticular period, the Operating Expenses for such period allocable to the
\nLimited Partners shall be allocated among the Original Partners and the Limited
\nPartners admitted pursuant to Paragraph 7.6(b) hereof so that, to the extent
\npossible, the cumulative amount of Operating Expenses allocated to each Limited
\nPartner is proportionate to such Limited Partner’s Partnership Percentage as
\ncompared to the Partnership Percentages of the Limited Partners as a group
\n(taking into account the additional Limited Partners admitted pursuant to
\nParagraph 7.6(b)).<\/p>\n
4.8. Allocations and Distributions Attributable to Removed General
\n ————————————————————-
\nPartner. Notwithstanding the foregoing sections of this Article IV, if the
\n——-
\ninitial General Partner ceases to be the General Partner and a successor General
\nPartner is appointed pursuant to Paragraph 2.2, such initial General Partner
\nshall continue to receive the allocations and distributions otherwise
\nattributable to the General Partner pursuant to this Article IV, Article VI and
\nArticle VIII both in its capacity as a General Partner and in its capacity as a
\nLimited Partner; provided, however, that on or after the date a successor
\nGeneral Partner is appointed pursuant to Paragraph 2.2, such allocations and
\ndistributions attributable to the initial General Partner in its capacity as a
\nGeneral Partner shall be calculated only with respect to investments that were
\nmade or as to which the Partnership was committed to invest or had reserved
\ncapital to invest at such time. Notwithstanding the foregoing if the General
\nPartner is removed as a result of committing an act of fraud or willful
\nmisconduct against the interest of the Limited Partners, the General Partner’s
\nrights to further allocations pursuant to Paragraphs 4.3(a)(1) and 4.3(b)(1)
\nshall cease upon such removal. The General Partner shall nevertheless continue
\nto be subject to any obligations to the Partnership pursuant to Paragraph 8.2.<\/p>\n
16.<\/p>\n
Article V
\n MANAGEMENT FEE; EXPENSES<\/p>\n
5.1. Entitlement to Management Fee. As compensation for its services
\n —————————–
\nrendered in managing the Partnership, the General Partner shall be entitled to
\nrecover a fee calculated as prescribed in this Article V (the “Management Fee”).
\nThe Management Fee shall not be considered a distribution of profits or a return
\nof capital for the purpose of any provision of this Agreement, but shall be
\nconsidered an expense of the Partnership, and shall be deducted from Partnership
\nNet Income or added to Partnership Net Loss in determining the Net Income or Net
\nLoss of the Partnership pursuant to Article IV hereof.<\/p>\n
5.2. Payment of Management Fee. The Management Fee shall be at an
\n ————————-
\nannual rate of one and three-quarters percent (1.75%) of the Total Committed
\nCapital of the Partnership through the end of the Investment Period. After the
\nend of the Investment Period, the Management Fee shall be at an annual rate of
\none and three-quarters percent (1.75%) of the total cost of the Portfolio
\nSecurities held by the Partnership, with the cost of the Portfolio Securities
\nbeing redetermined for this purpose on January 1 and July 1 of each Fiscal Year
\nafter the end of the Investment Period. The Management Fee shall commence to
\naccrue on the date of this Agreement. Payment of the Management Fee shall be
\nmade semi-annually as follows: (i) with respect to the first, short semi-annual
\nperiod of the Partnership ending June 30, 2000, at any time on or prior to June
\n30, 2000, in an amount equal to the percentage of the annual Management Fee as
\nreflects the number of days from the date of this Agreement through June 30,
\n2000, divided by three hundred sixty-five (365) days, and (ii) thereafter semi-
\nannually in advance on the first day of each semi-annual period (commencing in
\nJanuary and July of each year)of the Partnership (or thereafter) in an amount
\nequal to fifty percent (50%) of the annualized Management Fee. Additional
\nManagement Fees resulting from an increase in the Total Committed Capital shall
\nbe payable promptly after the acceptance of additional Capital Commitments (with
\nsuch payment being prorated to reflect the remaining term of the then current
\nfiscal period). The Management Fee shall be reduced by the amount of any
\ntransaction fees (but not including director options or director fees) received
\nby the General Partner or its members or Affiliates (net of associated expenses)
\nfrom Portfolio Companies. Such reduction shall be made in each installment of
\nthe Management Fee until the entire net amount of the transaction fees have
\noffset the Management Fees.<\/p>\n
5.3. Payment of Expenses.
\n ——————- <\/p>\n
(a) Except as set forth in Paragraph 5.3(b) hereof, the General
\nPartner agrees to incur on behalf of the Partnership and to otherwise assume all
\nexpenses attributable to the management and administration of the investment
\nactivities of the Partnership. Such expenses include (but are not limited to)
\nconsulting fees, compensation and expenses of the employees of the General
\nPartner, including any salaries of members of the General Partner in their
\ncapacity as employees of the General Partner, expenses for administrative,
\nbookkeeping, clerical and related support services, insurance, office space and
\nfacilities, utilities, telephone and travel insofar as they relate to the
\ninvestment activities of the Partnership.<\/p>\n
(b) The Partnership shall pay, or reimburse the General Partner
\n(or E*Trade if and to the extent it incurs expenses on behalf of the
\nPartnership) for all expenses of<\/p>\n
17.<\/p>\n
the Partnership (or incurred by the General Partner or E*Trade for or on behalf
\nof the Partnership) which (i) relate to the management and administration of the
\nPartnership itself as a going concern (as opposed to operating expenses incurred
\nin connection with the Partnership’s investment activities), or (ii) are
\nincurred in the purchase, holding, sale, exchange or other disposition of
\ninvestments. Such expenses include (without limitation) organizational and
\noffering expenses of the Partnership (including fees and commissions) up to an
\naggregate of five hundred thousand dollars ($500,000), less any expenses of
\norganizing any Parallel Funds; any taxes which may be assessed against the
\nPartnership; commissions or brokerage fees or similar charges incurred in
\nconnection with the purchase and sale of securities (including any merger or
\ntransaction fees payable to third parties); interest expense and financing
\ncharges for borrowed money; all expenses relating to litigation and threatened
\nlitigation involving the Partnership; normal investment banking, legal,
\ncustodial, registration, auditing and accounting services provided to the
\nPartnership; and any other expenses associated with the acquisition, holding or
\ndisposition of investments. The Partnership also shall pay or reimburse the
\nGeneral Partner (or E*Trade) for all payments to third parties related to the
\ninvestment activities of the Partnership in developing, negotiating and
\nstructuring prospective or potential investments with respect to which the
\nPartnership enters into a purchase agreement, letter of intent or memorandum of
\nunderstanding, but that are not ultimately made.<\/p>\n
5.4. No Salaries to General Partner. The General Partner and its
\n ——————————-
\nmembers shall receive no salaries from the Partnership. This paragraph shall not
\nrestrict the payment of salaries by the General Partner.<\/p>\n
Article VI
\n WITHDRAWALS BY AND DISTRIBUTIONS TO THE PARTNERS<\/p>\n
6.1. Interest. No interest shall be paid to any Partner on account of
\n ——–
\nits interest in the capital of, or on account of its investment in, the
\nPartnership.<\/p>\n
6.2. Withdrawals by the Partners. No Partner may withdraw any amount
\n —————————
\nfrom its Capital Account except as specifically provided in this Agreement.<\/p>\n
6.3. Mandatory Cash Distributions. Within ninety (90) days after the
\n —————————-
\nend of each Fiscal Year, the of Partnership shall distribute to each Partner
\ncash in an amount equal to the aggregate federal and state income tax liability
\nsuch Partner would have incurred as a result of such Partner’s ownership of an
\ninterest in the Partnership, calculated: (i) as if allocations from the
\nPartnership of any Net Capital Gain and any Net Loss were, for such Fiscal Year,
\nthe sole source of taxable income and loss for such Partner; (ii) as if such
\nPartner were an individual taxable at the combined maximum marginal rate
\nprovided with respect to such Net Capital Gain and Net Loss (taking into account
\nthe character of the items of Net Capital Gain and Net Loss for tax purposes)
\nunder applicable federal and state income tax laws applicable to individuals
\nresiding in California; and (iii) taking into account the deductibility of state
\ntaxes in the calculation of federal income taxes (a “Tax Distribution”). Any Tax
\n —————-
\nDistributions to a Partner shall reduce the amounts otherwise distributable to
\nthe Partner pursuant to Paragraph 6.4.<\/p>\n
18.<\/p>\n
6.4. Additional Distributions. The General Partner (i) shall
\n ————————
\ndistribute any proceeds from the Sale or Exchange of Securities of Portfolio
\nCompanies as soon as practicable following such Sale or Exchange, subject to the
\nretention of such amounts as are necessary to pay Partnership expenses and
\nobligations (including the Management Fee) and\/or for permitted reinvestments to
\nthe extent provided in Paragraph 7.2(c) and (ii) may in its discretion make
\ndistributions of Securities of Portfolio Companies. All distributions under this
\nParagraph 6.4 shall be made as follows:<\/p>\n
(a) At any time prior to achievement of Payout if the Fair Value
\nTest is not satisfied, all such distributions will be made to the Partners as a
\ngroup in proportion to their respective Partnership Percentages.<\/p>\n
(b) At any time prior to achievement of Payout if the Fair Value
\nTest is satisfied, all such distributions will be made, in the General Partner’s
\nsole discretion, either (1) to the Partners as a group in proportion to their
\nrespective Partnership Percentages, or (2)(i) first, to the General Partner
\nuntil the General Partner has received distributions pursuant to this Paragraph
\n6.4(b)(2)(i) and Tax Distributions pursuant to Paragraph 6.3 equal to a maximum
\nof twenty-five percent (25%) of the total amount distributed and being
\ndistributed to all Partners pursuant to Paragraphs 6.3 and 6.4(a) and this
\nParagraph 6.4(b), and (ii) the remainder of such distributions will be made to
\nthe Partners as a group in proportion to their respective Partnership
\nPercentages; provided, however, that the amount distributable to the General
\n —————–
\nPartner pursuant to Paragraph 6.4(b)(2)(i) will in no event exceed either (x)
\nthe cumulative amount of the Capital Transaction Gain net of Capital Transaction
\nLoss allocated to the General Partner under Paragraphs 4.3(a)(1) and 4.3(b)(1)
\nor (y) an amount which would cause the General Partner’s Fair Value Capital
\nAccount to be reduced below the amount of the General Partner’s Capital
\nContributions or would further reduce an existing balance of such Fair Value
\nCapital Account that is already less than the General Partner’s Capital
\nContributions; provided, further that the General Partner will not cause or
\n —————–
\npermit the Partnership to make any distribution to the General Partner pursuant
\nto Paragraph 6.4(b)(2)(i) unless the Partnership has made (and\/or provided
\nthrough reserves for) distributions to each Partner, with respect to the Fiscal
\nYear in which any proposed distribution under Paragraph 6.4(b)(2)(i) otherwise
\nwould occur, in aggregate amounts equal to the Tax Distribution to which each
\nPartner would be entitled pursuant to Paragraph 6.3 with respect to such Fiscal
\nYear if such Fiscal Year ended on the date of the proposed distribution.<\/p>\n
(c) After Payout has been achieved, all such distributions will
\nbe made to the Partners in proportion to the positive balances in their
\nrespective Capital Accounts after such Capital Accounts have been adjusted to
\nreflect all Capital Transaction Gain or Loss (including Capital Transaction Gain
\nor Loss arising in connection with the distribution and Sale or Exchange of
\nSecurities) through the date of the distribution.<\/p>\n
(d) Each class of Securities to be distributed in kind shall be
\ndistributed to the Partners pro rata in proportion to their respective shares of
\nthe proposed distribution, except to the extent that a disproportionate
\ndistribution of Securities is necessary in order to avoid distributing
\nfractional shares. For purposes of the preceding sentence, each lot of stock or
\nother Securities having a separately identifiable tax basis or holding period
\nwill be treated as a separate class of Securities. Notwithstanding anything
\ncontained in this Agreement: (i) no distribution (other than a Tax Distribution)
\nwill be made to any Partner if, and to the extent that,<\/p>\n
19.<\/p>\n
such distribution would (x) cause such Partner’s Capital Account to be negative
\nby an amount which exceeds such Partner’s Zero Balance Amount or (y) further
\nreduce a balance in such Partner’s Capital Account that is already negative by
\nan amount which exceeds such Partner’s Zero Balance Amount; and (ii) no
\ndistribution will be made unless all liabilities of the Partnership to persons
\nother than Partners have been satisfied or, in the good faith judgment of the
\nGeneral Partner, there remains property of the Partnership sufficient to satisfy
\nsuch liabilities.<\/p>\n
(e) Except upon liquidation of the Partnership or with the
\napproval of the General Partner and a Majority in Interest of the Limited
\nPartners, no distribution shall be made other than in cash or Marketable
\nSecurities.<\/p>\n
(f) Immediately prior to any distribution in kind of Securities
\n(or other Partnership assets) pursuant to any provision of this Agreement
\n(including pursuant to Article VIII), the difference between the fair market
\nvalue and the Book Value of any Securities (or other Partnership assets)
\ndistributed shall be allocated to the Partners as Capital Transaction Gain or
\nLoss pursuant to Article IV.<\/p>\n
(g) Securities distributed in kind pursuant to this Paragraph 6.4
\nshall be subject to such conditions and restrictions as the General Partner
\ndetermines are legally required.<\/p>\n
(h) For purposes of this Agreement, all distributions of
\nSecurities shall be deemed to have been made on the date on which the
\nPartnership commences the distribution of the Securities to the Limited
\nPartners, provided that the delivery of the Securities is promptly completed.<\/p>\n
Article VII
\n MANAGEMENT, DUTIES AND RESTRICTIONS<\/p>\n
7.1. Management by General Partner. The General Partner shall have the
\n —————————–
\nsole and exclusive right and power to manage, control, and conduct the affairs
\nof the Partnership and to perform any and all acts on behalf of the Partnership
\nthat the General Partner deems necessary, advisable or incidental to carry out
\nany or all of the objects and purposes of the Partnership.<\/p>\n
7.2. Indebtedness; Restrictions; Reinvestments
\n —————————————–<\/p>\n
(a) The Partnership may borrow money and guarantee the
\nobligations of, and supply letters of credit on behalf of, Portfolio Companies;
\nprovided that at no time shall the Partnership guarantee, directly or
\nindirectly, obligations of a General Partner or a Limited Partner; and further
\nprovided that the Partnership shall provide a guaranty to a Portfolio Company
\nonly if each member of the General Partner with an interest in that Portfolio
\nCompany provides a guaranty on the same terms and in an amount proportional to
\nthe investment of such member as compared to the Partnership. While outstanding,
\nany guarantee of the obligations of any Portfolio Company shall be considered an
\ninvestment in such Portfolio Company for purposes of Paragraph 7.2(b).
\nAdditionally, except with the approval of a Majority in Interest of the Limited
\nPartners, the Partnership shall not at any point in time be the guarantor (or
\nthe obligor on <\/p>\n
20.<\/p>\n
any letter of credit) of then-current liabilities that, in the aggregate, amount
\nto more than thirty percent (30%) of the Total Committed Capital of the
\nPartnership.<\/p>\n
(b) Except with the approval of a Majority in Interest of the
\nLimited Partners, the Partnership shall not invest more than twenty-five percent
\n(25%) of the aggregate amount of the Total Committed Capital (i) in the
\nSecurities of any one issuer or its affiliates, (ii) in any other investment
\npool or partnership, or (iii) in Securities purchased by the Partnership in the
\nover-the-counter market or that are listed on a securities exchange (with the
\ntwenty-five percent (25%) test being applied separately with respect to each of
\nthe foregoing three categories of investments). The limitations set forth in
\nthis Paragraph 7.2(b) shall not apply to any funds of the Partnership which are
\ninvested in investments described in Paragraph 7.2(e).<\/p>\n
(c) The Partnership shall not reinvest any proceeds realized on
\nthe Sale or Exchange of Securities of Portfolio Companies in Securities of other
\nPortfolio Companies except for Follow-On Investments. In no event shall the
\nPartnership make cumulative investments in Securities of Portfolio Companies in
\nexcess of the Total Committed Capital.<\/p>\n
(d) No Partner shall be permitted to borrow money from the
\nPartnership.<\/p>\n
(e) Pending use of funds to make investments in Securities of
\nPortfolio Companies, to make distributions or to pay expenses or obligations
\nof the Partnership in accordance with the terms hereof, the funds of the
\nPartnership shall be invested by the General Partner only in (i) securities
\nissued by, or backed by the full faith and credit of, the United States
\ngovernment, (ii) certificates of deposit issued by commercial banks with
\ncapital in excess of five hundred million dollars ($500,000,000), (iii)
\ncommercial paper rated A-1 or P-1, or (iv) shares in investment companies
\ngenerally known as “money market funds” which have assets in excess of two
\n ——————
\nhundred fifty million dollars ($250,000,000).<\/p>\n
(f) The Partnership shall not invest in (i) any Securities the
\npurchase of which is opposed by the issuer’s board of directors; or (ii) options
\ncontracts or futures contracts, or any other security, the value of which is
\nbased upon, or derived from, any underlying index, reference rate, other
\nsecurity, commodity or other asset; provided, however, that this restriction
\nshall not be deemed to prohibit the General Partner from (A) hedging Portfolio
\nCompany investments so long as such transactions are reasonably related to the
\namount and type of Securities being hedged and are not undertaken for
\nindependent investment purposes, (B) hedging the currency risk of foreign
\nPortfolio Company investments, (C) investing in any Security the value of which
\nis based upon, or derived from, any Security already held by the Partnership,
\nand (D) investing in traditional options, warrants and other rights to acquire
\nSecurities that would otherwise be permitted Portfolio Company investments under
\nthe terms of this Agreement.<\/p>\n
(g) The Partnership shall not invest in real estate, oil or gas
\ninvestments, commodities or in securities bearing unlimited liability.<\/p>\n
(h) The Partnership shall not engage in uncovered short sales.<\/p>\n
21.<\/p>\n
(i) The Partnership shall not make any investment in an issuer
\nwhich is organized in any jurisdiction outside the United States and Canada
\n(each such issuer being a “Foreign Entity”), unless the Partnership has
\n ————–
\nreceived, prior to or at the closing of any such investment, a Limited Liability
\nEntity Opinion with respect to the issuer’s form of entity. A “Limited Liability
\n —————–
\nEntity Opinion” shall be an opinion of counsel, licensed or otherwise authorized
\n————–
\nto practice in the jurisdiction in which a particular Foreign Entity is
\norganized, which opinion may be relied upon by the Partnership and does not
\ncontain more than reasonable carve-outs by opining counsel, stating (i) that the
\nPartnership shall not be obligated beyond its committed investment in such
\nForeign Entity for any debt, obligation or liability of an entity of the form of
\nthe particular issuer, solely by reason of the Partnership being an investor in
\nsuch an entity; and (ii) that no Limited Partner of the Partnership shall be
\nobligated for any debt, obligation or liability of an entity of the form of the
\nparticular issuer, solely by reason of the Partnership being an investor in such
\nan entity. Once the Partnership has received such an opinion for investments in
\na particular form of entity in a particular jurisdiction, such opinion shall
\nsatisfy the requirements of this paragraph for all investments in other Foreign
\nEntities of the same form as that which is the subject of the opinion. The
\nPartnership shall not invest an aggregate of more than thirty percent (30%) of
\nthe Total Committed Capital in Securities of Foreign Entities.<\/p>\n
(j) Notwithstanding Paragraph 7.2(b)(ii), the Partnership shall
\nnot make any investment in any other investment pool or partnership if a
\nmanagement fee and\/or “carried interest” is payable with respect to such
\ninvestment unless the General Partner waives its Management Fee and\/or “carry”
\nwith respect to such investment.<\/p>\n
7.3. Investment Representation of the Limited Partners. This
\n ————————————————-
\nAgreement is made with each Limited Partner in reliance upon such Limited
\nPartner’s representation to the Partnership, which by executing this Agreement
\nthe Limited Partner hereby confirms, that such Partner’s interest in the
\nPartnership is being acquired for investment, and not with a view to the sale or
\ndistribution of any part thereof, and that such Partner has no present intention
\nof selling, granting participation in, or otherwise distributing the same. Each
\nLimited Partner further represents that such Limited Partner does not have any
\ncontract, undertaking, agreement, or arrangement with any person to sell or
\ntransfer to any third person such Limited Partner’s interest in the Partnership.<\/p>\n
7.4. Accredited Investor Representation. Each Limited Partner
\n ———————————-
\nrepresents that such Partner has such knowledge and experience in financial and
\nbusiness matters as to be capable of evaluating the merits and risks of an
\ninvestment in the Partnership and that such Partner is an accredited investor,
\nas that term is defined in Regulation D promulgated by the Securities and
\nExchange Commission.<\/p>\n
7.5. No Control by the Limited Partners; Rights of the Limited
\n ———————————————————
\nPartners.
\n——–<\/p>\n
(a) The Limited Partners shall take no part in the control or
\nmanagement of the affairs of the Partnership nor shall a Limited Partner have
\nany authority to act for or on behalf of the Partnership except as is
\nspecifically permitted by this Agreement and as is specifically required by the
\nDelaware Act.<\/p>\n
22.<\/p>\n
(b) In addition to any other restrictions applicable to Limited
\nPartners set forth in this Agreement and notwithstanding any other provisions
\nthereof, for so long as the Partnership has an investment in a Media Company,
\nany Limited Partner that elects in writing to be insulated from the “multiple
\nownership attribution” rules and policies of the FCC (an “Insulated Limited
\nPartner”) shall not (and if such Limited Partner is not an individual, each
\nofficer, director, partner or equivalent non-corporate official of such Limited
\nPartner acting on behalf of or as a representative of such Limited Partner in
\nits capacity as a Limited Partner of the Partnership shall not):<\/p>\n
(1) act as an employee of the Partnership if his or her
\n functions, directly or indirectly, relate to the media business of the
\n Partnership or any Media Company in which the Partnership has an
\n investment;<\/p>\n
(2) serve, in any material capacity, as an independent
\n contractor or agent with respect to the media business of the Partnership
\n or any Media Company in which the Partnership has an investment;<\/p>\n
(3) communicate on matters pertaining to the day-to-day
\n media operations of the Partnership or a Media Company with (i) an officer,
\n director, partner, agent, representative or employee of such Media Company,
\n or (ii) the General Partner;<\/p>\n
(4) perform any services for the Partnership materially
\n relating to the media activities of the Partnership or any Media Company in
\n which the Partnership has an investment, except that any Limited Partner
\n may make loans to, or act as a surety for, the Partnership or any such
\n Media Company;<\/p>\n
(5) vote on the admission of any new General Partner to the
\n Partnership unless such admission is approved by the General Partner;<\/p>\n
(6) become actively involved in the management or operation
\n of the Partnership’s media businesses; or<\/p>\n
(7) vote for the removal of the General Partner except where
\n the General Partner is subject to Bankruptcy proceedings, is adjudicated
\n incompetent by a court of competent jurisdiction, or is removed for any
\n cause which is determined by an independent party to constitute criminal
\n conduct other such extraordinary conduct with respect to which a prudent
\n investor would require the right to remove the General Partner.<\/p>\n
(c) Any interest in the Partnership held by a Limited Partner
\nthat is subject to the Holding Company Act (each, a “BHC Partner”), that is
\ndetermined at the time of admission of that BHC Partner to be in excess of four
\nand ninety-nine one hundredth percent (4.99%) of the interests of the Limited
\nPartners, excluding for purposes of calculating this percentage portions of any
\nother interests that are non-voting interests pursuant to this Paragraph 7.5(b)
\nor any other paragraph of this Agreement (collectively the “Non-Voting
\nInterests”), shall be a Non-Voting Interest (whether or not subsequently
\ntransferred in whole or in part to any other person) except as provided in the
\nfollowing sentence. Upon the admission of any additional Limited Partner to or a
\nwithdrawal of any Limited Partner from the Partnership, a recalculation <\/p>\n
23.<\/p>\n
of the interests in the Partnership held by all BHC Partners shall be made, and
\nonly that portion of the total interest in the Partnership held by each BHC
\nPartner that is determined as of the date of such admission or withdrawal to be
\nin excess of four and ninety-nine one hundredth percent (4.99%) of the interests
\nof the Limited Partners, excluding Non-Voting Interests as of such date, shall
\nbe a Non-Voting Interest. Non-Voting Interests shall not be counted as interests
\nof Limited Partners for purposes of determining under this Agreement whether any
\nvote required has been approved by the requisite percentage in interest of the
\nLimited Partners; provided, that such Non-Voting Interest shall be permitted to
\nvote on any proposal to continue the business of the Partnership but not on the
\nselection of a liquidator pursuant to Paragraph 8.1(a) or a successor general
\npartner. Each BHC Partner hereby further irrevocably waives its corresponding
\nright to vote for a successor general partner under Section 17-801 of the
\nDelaware Act with respect to any Non-Voting Interest, which waiver shall be
\nbinding upon such BHC Partner and any entity which succeeds to its interest.
\nExcept as provided in this Paragraph 7.5(b), a limited partnership interest
\nwhich is held as a Non-Voting Interest shall be identical in all regards to all
\nother interests held by Limited Partners.<\/p>\n
7.6. Admission of Additional Partners.
\n ——————————–<\/p>\n
(a) Subject to Paragraph 7.7 and subparagraph (b) below, no
\nadditional person may be admitted to the Partnership, either as a limited or
\ngeneral partner, without the prior written consent of both the General Partner
\nand Two-Thirds in Interest of the Limited Partners.<\/p>\n
(b) During the period ending six (6) months after the date of
\nthis Agreement (the “Final Closing Date”), the General Partner may admit persons
\n ——————
\nas additional Limited Partners without the consent of any of the then Limited
\nPartners, provided that the Total Committed Capital of the Partnership shall not
\nexceed three hundred million dollars ($300,000,000). Following the admission of
\nany such subsequently admitted Limited Partners pursuant to this Paragraph
\n7.6(b), such Limited Partners shall be deemed for all purposes of this Agreement
\n(unless expressly provided to the contrary herein) to have been admitted as of
\nthe original date of this Agreement. Any Limited Partner admitted pursuant to
\nthis Paragraph 7.6(b) shall, upon admission, contribute to the Partnership the
\nsame portion of such Limited Partner’s Capital Commitment as the previously
\nadmitted Limited Partners have contributed with respect to their Capital
\nCommitments. Upon the admission of any additional Limited Partners to the
\nPartnership pursuant to this Paragraph 7.6(b), the assets of the Partnership
\nshall not be revalued except in the discretion of the General Partner.<\/p>\n
(c) In addition to the Capital Contribution required under
\nParagraph 7.6(b), each Limited Partner admitted as an additional Limited Partner
\npursuant to Paragraph 7.6(b) shall be required to pay to the Partnership
\ninterest at the Wells Fargo Bank, N.A. “prime rate” (in effect at the time the
\nadditional Limited Partner interest was acquired) based on the amount of the
\nCapital Contribution payable under Paragraph 7.6(b) and the time period(s) from
\nthe existing Limited Partners’ prior Capital Contributions to the Partnership to
\nthe date that the Capital Contribution under Paragraph 7.6(b) is made. Such
\ninterest shall accompany the Capital Contribution payable under Paragraph 7.6(b)
\nand shall be immediately distributed pro rata to and among all existing Partners
\n(based on their respective Partnership Percentages immediately prior to the
\nissuance of such additional Limited Partner interests). The payment of such
\ninterest<\/p>\n
24.<\/p>\n
to the Partnership shall not be considered a Capital Contribution and shall not
\nbe considered an item of Capital Transaction Gain or Loss or Net Income or Loss
\nallocable pursuant to Article IV; furthermore, the distribution to the existing
\nPartners shall not result in a reduction in their Capital Accounts.<\/p>\n
7.7. Assignment or Transfer of Partnership Interests
\n ———————————————–<\/p>\n
(a) The General Partner shall not sell, assign, pledge, mortgage
\nor otherwise dispose of or transfer its interest in the Partnership without the
\nprior written consent of Two-Thirds in Interest of the Limited Partners.<\/p>\n
(b) No Limited Partner shall sell, assign, pledge, mortgage, or
\notherwise dispose of or transfer its interest in the Partnership without the
\nprior written consent of the General Partner. Notwithstanding the foregoing, a
\nLimited Partner may sell, assign, pledge, mortgage, or otherwise dispose of or
\ntransfer its interest in the Partnership without such consent (i) to any
\naffiliate of the Limited Partner; or (ii) as may be required by any law or
\nregulation; provided, however, that in the case of any permitted transfer, the
\nGeneral Partner receives at least ten (10) days’ prior written notice of such
\ntransfer; and provided further that no transferee of a Limited Partner’s
\ninterest may be admitted to the Partnership as a substitute Limited Partner
\nwithout the consent of the General Partner.<\/p>\n
(c) Notwithstanding any other provision of this Agreement, no
\ntransfer or other disposition of the interest of a Limited Partner shall be
\npermitted until the General Partner shall have received, or waived receipt of,
\nan opinion of counsel to the Partnership reasonably satisfactory to it that the
\neffect of such transfer or disposition would not:<\/p>\n
(1) result in a violation of the Securities Act;<\/p>\n
(2) require the Partnership to register as an investment
\n company under the Investment Company Act of 1940, as amended;<\/p>\n
(3) require the Partnership, the General Partner or any
\n partner of the General Partner to register as an investment adviser under
\n the Investment Advisers Act of 1940, as amended;<\/p>\n
(4) result in a termination of the Partnership for tax
\n purposes if the General Partner determines that such termination would
\n result in a material adverse tax consequence to any of the Partners;<\/p>\n
(5) increase the number of Limited Partners;<\/p>\n
(6) result in the assets of the Partnership being deemed to
\n be “plan assets” (within the meaning of the DOL Regulations) of any ERISA
\n Partner; or<\/p>\n
(7) cause the Partnership to be characterized as a “publicly
\n traded partnership” taxable as a corporation (within the meaning set forth
\n in Sections 512 and 7704(b) of the Code) or materially increase the risk
\n that the Partnership will be so characterized.<\/p>\n
25.<\/p>\n
All costs associated with such opinion shall be borne by the
\ntransferring Limited Partner.<\/p>\n
7.8. Investment Opportunities; Conflicts of Interest
\n ———————————————–<\/p>\n
(a) Christos M. Cotsakos and Thomas A. Bevilacqua (the
\n“Principals”) are the current principal members of the General Partner. Subject
\n ———-
\nto Paragraph 7.8(b), the Principals may serve as the general partners, sponsors,
\nprincipals of the general partners or investment advisers of other venture
\nfunds. The Principals shall be free to conduct any and all such activities. The
\nPrincipals are employed by E*Trade and shall devote significant and substantial
\ntime and effort to E*Trade, although it is intended that (so long as is
\nnecessary or advisable) substantially all of Mr. Bevilacqua’s time and effort
\nand approximately twenty percent (20%) of Mr. Cotsakos’ time and effort will
\npertain to the management of the General Partner’s activities.<\/p>\n
(b) So long as the Partnership is less than Two-Thirds Invested,
\nneither of the Principals may, directly or indirectly, organize or act as a
\ngeneral partner or managing member of any other entity that is a private equity
\nfund. For purposes of this Agreement, the Partnership shall be deemed to be
\n“Two-Thirds Invested” when at least sixty-six and two-thirds percent (66-2\/3%)
\n ——————-
\nof the Partners’ Capital Commitments (other than any Capital Commitments that
\nhave been terminated) have been invested by the Partnership in Portfolio
\nCompanies, reserved for investments in such Portfolio Companies based upon the
\nGeneral Partner’s good faith estimate of the anticipated capital requirements of
\neach Portfolio Company, or paid or reserved for the payment of reasonably
\nanticipated partnership liabilities and obligations, including payment of the
\nManagement Fee. Notwithstanding the foregoing, the Principals may continue to
\nserve as principals with respect to E*Trade eCommerce Fund, L.P. (the “First
\nFund”) and may form one or more funds to invest on a side-by-side basis with the
\nPartnership (“Parallel Funds”). Any such Parallel Funds shall invest on a pari
\n ————–
\npassu basis in each investment made by the Partnership with the portion of the
\ninvestment made by the Partnership and any Parallel Fund(s) being based on the
\nrelative amounts of their committed capital. In addition, the First Fund will
\ncoinvest with the Partnership on a pari passu basis until the First Fund is
\nfully invested. In order to facilitate coinvestment by the Partnership, any
\nParallel Fund(s) and the First Fund, the Partnership may acquire Securities for
\nthe purpose of transferring such Securities to a Parallel Fund or the First Fund
\nat cost (plus an interest charge if the General Partner deems appropriate).<\/p>\n
(c) Subject to Paragraph 5.2, the General Partner and the members
\nof the General Partner shall be permitted to receive fees (director’s,
\nconsulting, break-up, financial advisory or other), commissions and other
\ncompensation (in whatever form, including stock and options) from entities other
\nthan the Partnership, including Portfolio Companies.<\/p>\n
(d) Except as expressly provided otherwise in this Agreement, the
\nPartners and the members and affiliates of the General Partner may engage in,
\ninvest in or possess an interest in, business activities of every kind and
\ndescription, independently or with others.<\/p>\n
26.<\/p>\n
(e) The Limited Partners hereby agree that E*Trade and the
\nPrincipals may have investment opportunities that are not made available to the
\nPartnership, although the intention of the Principals and E*Trade is to refer
\nall investment opportunities to the Partnership, the Parallel Funds and the
\nFirst Fund so long as such opportunities are within the investment criteria
\nestablished by the General Partner. In addition, the General Partner may offer
\nthe right to participate in investment opportunities of the Partnership to other
\nprivate investors, groups, partnerships, or corporations. No Limited Partner
\nshall be required to make any investment opportunity available to the
\nPartnership.<\/p>\n
(f) The General Partner may enter, on behalf of the Partnership,
\ninto contracts, agreements, undertakings and transactions with any Partners, or
\nwith any person, firm or corporation having any business, financial or other
\nrelationship with any Partner, provided that such transactions with such persons
\nand entities are on terms no less favorable to the Partnership than are
\ngenerally afforded to unrelated third parties in comparable transactions.<\/p>\n
Article VIII
\n DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP<\/p>\n
8.1. Liquidation Procedures. Upon termination of the Partnership in
\n ———————-
\naccordance with Article II:<\/p>\n
(a) The affairs of the Partnership shall be wound up and the
\nPartnership shall be dissolved. The General Partner shall serve as the
\nliquidator; provided that in the event of a termination of the Partnership
\npursuant to Paragraph 2.2(a),(b), or (d) another person or entity may be
\ndesignated by Two-Thirds in Interest of the Limited Partners to serve as
\nliquidator.<\/p>\n
(b) Distributions in dissolution may be made in cash or in kind
\nor partly in cash and partly in kind. Each Security (and each class of
\nSecurities, or portion of a class of Securities having a tax basis per share or
\nunit different from other portions of such class) distributed in kind shall be
\ndistributed ratably in accordance with the General Partner’s and the Limited
\nPartners’ Capital Accounts unless such distribution would result or there is a
\nmaterial likelihood that such distribution would result (i) in a violation of a
\nlaw or regulation applicable to a Limited Partner or a tax penalty to a Limited
\nPartner, in which event, upon receipt by the General Partner of notice to such
\neffect, such Limited Partner may designate a different entity to receive the
\ndistribution, or designate, subject to the approval of the General Partner, an
\nalternative distribution procedure or (ii) in a distribution of fractional
\nshares. Each such Security shall be valued at fair market value in accordance
\nwith Paragraph 9.2 as of the date of distribution and shall be subject to
\nreasonable conditions and restrictions necessary or advisable in order to
\npreserve the value of the assets distributed, or for legal reasons.<\/p>\n
(c) The General Partner (or other liquidator) shall in its sole
\ndiscretion determine the most advantageous time for the Partnership to sell
\ninvestments or to make distributions in kind provided that any such sales shall
\nbe made as promptly as is consistent with obtaining the fair value thereof.<\/p>\n
27.<\/p>\n
(d) The proceeds of dissolution shall be applied to payment of
\nliabilities of the Partnership and distributed to the Partners in the following
\norder:<\/p>\n
(1) to the creditors of the Partnership in the order of
\n priority established by law; and<\/p>\n
(2) to the Partners, in respect of the positive balances in
\n their Capital Accounts, after all Capital Transaction Gain or Loss and Net
\n Income or Loss (including amounts arising in connection with a distribution
\n of Securities) has been allocated among the Partners.<\/p>\n
In the discretion of the General Partner, a pro rata portion of the
\ndistributions that would otherwise be made to the Partners pursuant to this
\nParagraph 8.1 may be withheld to provide a reasonable reserve for Partnership
\nliabilities (contingent or otherwise) and to reflect the unrealized portion of
\nany installment obligations owed to the Partnership, provided that such withheld
\namounts (to the extent not used to pay partnership liabilities) shall be
\ndistributed to the Partners as soon as practicable.<\/p>\n
(e) If the General Partner’s Capital Account has a deficit
\nbalance (after giving effect to all contributions, distributions and allocations
\nfor all taxable years, including the year during which such liquidation occurs),
\nthen except as otherwise required pursuant to Paragraph 8.2, the General Partner
\nshall have no obligation at any time to repay or restore to the Partnership all
\nor any part of any distribution made to it from the Partnership or make any
\ncontribution to the capital of the Partnership with respect to such deficit. If
\nany Limited Partner has a deficit balance in his Capital Account (after giving
\neffect to all contributions, distributions and allocations for all taxable
\nyears, including the year during which such liquidation occurs), then other than
\nrequired by law or Paragraph 10.14, such Limited Partner shall have no
\nobligation to repay or restore to the Partnership any distribution made to it
\nfrom the Partnership or make any contribution to the capital of the Partnership
\nwith respect to such deficit, and such deficit shall not be considered a debt
\nowed to the Partnership or to any other person for any purpose whatsoever.<\/p>\n
8.2. Liability of General Partner to Return Excess Distributions. If
\n ———————————————————–
\nafter effecting the distributions provided for in this Article VIII the Excess
\nDistribution Amount is greater than zero, then the General Partner shall
\nforthwith contribute to the capital of the Partnership cash or Marketable
\nSecurities (with any such contributed Marketable Securities being valued
\npursuant to Paragraph 9.2 on the date of contribution) in an amount equal to the
\nlesser of (i) the Excess Distribution Amount, or (ii) the After-Tax Distribution
\nAmount. Such contribution shall be distributed to the Partners to the extent of
\nand in proportion to their positive Capital Account balances.<\/p>\n
For purposes of this Paragraph 8.2:<\/p>\n
(a) The “After-Tax Distribution Amount” shall be equal to the
\n —————————–
\nGeneral Partner Distributions less all federal, state and other jurisdictional
\n(including non-United States taxes) actual marginal tax liabilities that the
\nmembers of the General Partner have incurred by reason of having been members of
\nthe General Partner, but only to the extent attributable to<\/p>\n
28.<\/p>\n
(i) items of taxable income, gain, loss, deduction and credit allocated to the
\nGeneral Partner by the Partnership and (ii) net capital gains realized by the
\nGeneral Partner or by such members (offset by any capital losses realized by the
\nGeneral partner or by such members) upon the sale or exchange of Securities
\ndistributed by the Partnership to the General Partner (with such net capital
\ngains being limited to an amount based on the value as of the distribution date
\nof the Securities distributed). The After-Tax Distribution amount shall be
\nincreased by all federal, state or other jurisdictional tax benefits actually
\nrealized by the General Partner’s members in the year of a contribution required
\nby this Paragraph 8.2 as a result of such contribution.<\/p>\n
(b) The “Excess Distribution Amount” shall equal the lesser of
\n ————————–
\n(i) the amount by which the General Partner Distributions exceed the sum of the
\nTotal General Partner Net Gain or Loss plus the aggregate contributions made to
\nthe Partnership by the General Partner or (ii) the amount of the General Partner
\nDistributions.<\/p>\n
(c) “Total General Partner Net Gain or Loss” shall be calculated
\n ————————————–
\nas follows:<\/p>\n
(1) First, the Partnership’s aggregate Capital Transaction
\n Gain for all accounting periods shall be netted against the Partnership’s
\n aggregate Capital Transaction Loss for all accounting periods and the
\n result shall be multiplied by the sum of (x) twenty-five percent (25%) plus
\n (y) seventy-five percent (75%) of the General Partner’s Partnership
\n Percentage. The resulting product shall be considered a positive number if
\n such aggregate Capital Transaction Gain exceeded aggregate Capital
\n Transaction Loss and a negative number if such aggregate Capital
\n Transaction Loss exceeded aggregate Capital Transaction Gain;<\/p>\n
(2) Second, the Partnership’s aggregate Net Income for all
\n accounting periods shall be netted against the Partnership’s aggregate Net
\n Loss for all accounting periods and the result shall be multiplied by the
\n General Partner’s Partnership Percentage. The result shall be considered a
\n positive number if such aggregate Net Income exceeded such aggregate Net
\n Loss and a negative number if such aggregate Net Loss exceeded such
\n aggregate Net Income;<\/p>\n
(3) Third, the amount computed in clause (2) shall be added
\n to the amount computed in clause (1). If the result of such computation is
\n a positive number it shall be considered Total General Partner Net Gain and
\n if the result of such computation is a negative number it shall be
\n considered Total General Partner Net Loss.<\/p>\n
(d) “General Partner Distributions” shall equal the sum of all
\n —————————–
\ndistributions received by the General Partner pursuant to Article VI and this
\nArticle VIII.<\/p>\n
(e) All in-kind distributions shall be valued as provided in
\nParagraph 9.2 as of the date of the distribution.<\/p>\n
(f) Only allocations and distributions made to the General
\nPartner in its capacity as general partner of the Partnership (including
\nallocations and distributions resulting from the General Partner’s Capital
\nContributions made in such capacity) shall be considered for purposes of the
\nforegoing computations (such distributions shall, however, in no way be
\nconstrued<\/p>\n
29.<\/p>\n
so as to include amounts paid or otherwise received by the General Partner
\npursuant to Article V hereof).<\/p>\n
(g) Each of the members of the General Partner shall be
\nseverally, but not jointly, liable to the Partnership for any unpaid liability
\nof the General Partner determined pursuant to this Paragraph 8.2, based on their
\nrelative distributions received from the General Partner. The General Partner
\nand the Principals represent that the Principals and E*Trade Group, Inc. are
\ncurrently the only members of the General Partner. The Principals hereby agree
\nto obtain the written agreement of any additional members of the General Partner
\nas to the liability to the Partnership described in the preceding sentence. The
\nguaranty by the members of the General Partner shall be enforceable by the
\nLimited Partners directly against such members.<\/p>\n
8.3. Liquidating Trust. In the discretion of the General Partner,
\n —————–
\nany Nonmarketable Securities and other assets that would otherwise be
\ndistributed to the Partners pursuant to this Article VIII may be distributed to
\na trust established for the benefit of the Partners for the purposes of holding
\nand liquidating such Nonmarketable Securities (and any other Partnership
\nassets), collecting amounts owed to the Partnership, and paying any contingent
\nor unforeseen liabilities or obligations of the Partnership. The trustee of such
\ntrust shall be the General Partner or other person appointed by a Two-Thirds in
\nInterest of the Limited Partners. During the term of the trust, any
\nNonmarketable Securities held in the trust shall continue to be held until they
\nbecome Marketable Securities except to the extent otherwise determined by the
\nGeneral Partner. Subject to the foregoing, the net assets of the trust shall be
\ndistributed to the Partners from time to time, in the discretion of the General
\nPartner (or other trustee), in the same proportions as such assets would have
\nbeen distributed if they had continued to be held (and disposed of) by the
\nPartnership. The term of the trust shall be for no more than two years, subject
\nto two one-year extensions with the approval of Two-Thirds in Interest of the
\nLimited Partners.<\/p>\n
Article IX
\n FINANCIAL ACCOUNTING AND REPORTS<\/p>\n
9.1. Financial and Tax Accounting and Reports. The General Partner
\n —————————————-
\nshall cause the Partnership’s tax returns and IRS Form 1065, Schedule K-1’s, to
\nbe prepared and delivered in a timely manner to the Limited Partners. The
\nGeneral Partner shall use its best efforts to cause the Schedule K-1’s for each
\nFiscal Year to be delivered to the Limited Partners within ninety (90) days
\nafter the end of the Fiscal Year. The books and records of the Partnership and
\nthe General Partner shall be kept in accordance with the provisions of this
\nAgreement and otherwise in accordance with generally accepted accounting
\nprinciples consistently applied. The Partnership’s financial statements for each
\nFiscal Year shall be prepared in accordance with such principles consistently
\napplied and shall be audited at the end of each Fiscal Year by an independent
\ncertified public accounting firm of recognized national standing selected by the
\nGeneral Partner. The General Partner shall transmit to each Limited Partner as
\nsoon as practicable after the close of each of the Partnership’s Fiscal Years
\n(but in no event later than ninety (90) days after the end of each Fiscal Year),
\nbeginning with the Fiscal Year ending December 31, 2000, the audited financial
\nstatements of the Partnership accompanied by a report from the General Partner
\nto the Limited Partners, which shall include a status report on investments then
\nheld, a valuation of each such investment, and a brief statement on the affairs
\nof the Partnership<\/p>\n
30.<\/p>\n
during the Fiscal Year then ended. In addition, the General Partner shall,
\nwithin a reasonable time following the completion of the report referred to
\nabove and following reasonable notice to each Partner, hold an annual meeting of
\nthe Partners at which the General Partner shall present the affairs of the
\npartnership and provide the Limited Partners with the opportunity to ask
\nquestions and discuss the Partnership’s affairs.<\/p>\n
9.2. Valuation of Securities and Other Assets Owned by the Partnership.
\n —————————————————————–<\/p>\n
(a) Subject to the specific standards set forth below, the
\nvaluation of Securities and other assets and liabilities under this Agreement
\nshall be at fair market value, as determined by the General Partner in its
\ndiscretion. In determining the value of the interest of any Partner or in any
\naccounting between the Partners, no value shall be placed on the goodwill or the
\nname of the Partnership.<\/p>\n
(b) The following criteria shall be used for determining the fair
\nmarket value of Securities.<\/p>\n
(1) Securities not subject to legal or contractual
\n restrictions on free marketability:<\/p>\n
(A) If traded on one (1) or more securities exchanges
\n or on NASDAQ, the value of each Security shall be deemed to be the
\n average closing price of such Security (as of the end of the regular
\n trading day) for the five (5) trading days immediately preceding the
\n valuation date as reported in the Wall Street Journal or another
\n nationally recognized publication or service that reports such data for
\n the valuation date.<\/p>\n
(B) If actively traded over-the-counter (but not on
\n NASDAQ), the value shall be deemed to be the closing bid price of such
\n Security (as of the end of the regular trading day) for the five (5)
\n trading days immediately preceding the valuation date.<\/p>\n
(C) If there is no active public market, the General
\n Partner shall make a determination of the fair market value on the
\n valuation date, taking into consideration the tax basis of the
\n Securities, developments concerning the issuing company subsequent to
\n the acquisition of the Securities, the pricing of other private
\n placements of Securities by the issuer, the price of the Securities of
\n other companies comparable to the issuer, any financial data and
\n projections of the issuing company provided to the General Partner and
\n such other factor or factors as the General Partner may deem relevant.<\/p>\n
(2) In the case of Securities subject to legal or
\n contractual restrictions on free marketability, appropriate adjustments to
\n the value determined under Paragraph 9.2(b)(1) above shall be made to
\n reflect the effect of the restrictions on transfer.<\/p>\n
(3) If the General Partner in good faith determines that,
\n because of special circumstances, the valuation methods set forth in this
\n paragraph do not<\/p>\n
31.<\/p>\n
fairly determine the value of a Security, the General Partner shall make
\n such adjustments or use such alternative valuation method as it deems
\n appropriate.<\/p>\n
9.3. Supervision; Inspection of Books. Proper and complete books of
\n ——————————–
\naccount of the affairs of the Partnership shall be kept under the supervision of
\nthe General Partner at the principal office of the Partnership. Such books shall
\nbe open to inspection by a Limited Partner, at any reasonable time, upon
\nreasonable notice, during normal business hours. A copy of a current list of
\nPartners, with telephone numbers, shall be provided to any Partner upon request.
\nThe General Partner shall provide any Limited Partner with information
\nreasonably requested by such Limited Partner for any purpose reasonably related
\nto such Limited Partner’s interest as a partner in the Partnership.<\/p>\n
9.4. Quarterly Reports. Beginning with the first Fiscal Quarter
\n —————–
\ncommencing after the date of this Agreement, the General Partner shall transmit
\nto each Limited Partner within forty-five (45) days after the close of each of
\nthe first three (3) Fiscal Quarters of each Fiscal Year, financial statements of
\nthe Partnership prepared in accordance with the terms of this Agreement and
\notherwise in accordance with generally accepted accounting principles from its
\nbooks without audit and subject to year-end adjustments, a valuation of each of
\nthe Partnership’s investments, a valuation of the Partnership interest of the
\nLimited Partner (based upon the interest of the Limited Partner in the
\nPartnership’s assets), the amount of the Limited Partner’s Capital Account, and
\na list of investments then held with a brief description of each Portfolio
\nCompany.<\/p>\n
9.5. Confidentiality. Each Limited Partner agrees to maintain the
\n —————
\nconfidentiality of the Partnership’s records and affairs, agrees not to provide
\nto any other person copies of any financial statements, tax returns or other
\nrecords or reports provided or made available to such Limited Partner, and
\nagrees not to disclose to any other person any information contained therein
\n(including, without limitation, information respecting Portfolio Companies),
\nwithout the express prior written consent of the General Partner; provided, that
\nany Limited Partner may make disclosure and may provide financial statements,
\ntax returns and other records (i) to its accountants, internal and external
\nauditors, legal counsel, financial advisors and other fiduciaries and
\nrepresentatives as long as it instructs such persons to maintain the
\nconfidentiality thereof and not to disclose to any other person any information
\ncontained therein, (ii) to potential transferees of such Limited Partner’s
\nPartnership interest who agree in writing, for the benefit of the Partnership,
\nto maintain the confidentiality thereof, but only after reasonable advance
\nnotice to the Partnership, (iii) if, and to the extent, required by law,
\nincluding judicial or administrative order (provided, that, to the extent
\npossible, the Partnership is given prior notice to enable it to seek a
\nprotective order or similar relief), (iv) in order to enforce rights under this
\nAgreement, (v) to any regulatory body having jurisdiction over the Limited
\nPartner and such of its advisors as need to or customarily have access to such
\ninformation, and (vi) to any of its equity holders, provided that it shall use
\nall commercially reasonable efforts to cause such persons to observe the
\nprovisions of this Paragraph 9.5.<\/p>\n
32.<\/p>\n
Article X
\n OTHER PROVISIONS<\/p>\n
10.1. Execution and Filing of Documents. The General Partner shall
\n ———————————
\nexecute and file a Certificate of Limited Partnership conforming to the
\nrequirements of the Delaware Act in the office of the Secretary of State for the
\nState of Delaware and shall execute a fictitious business name statement and
\nfile or cause such statement to be filed if required by Delaware law.<\/p>\n
10.2. Other Instruments and Acts. The Partners agree to execute any
\n ————————–
\nother instruments or perform any other acts that are or may be necessary to
\neffectuate and carry on the partnership created by this Agreement.<\/p>\n
10.3. Binding Agreement. This Agreement shall be binding upon the
\n —————–
\ntransferees, successors, assigns, and legal representatives of the Partners.<\/p>\n
10.4. Governing Law. This Agreement shall be governed by and construed
\n ————-
\nunder the laws of the State of Delaware as applied to agreements among Delaware
\nresidents made and to be performed entirely within Delaware.<\/p>\n
10.5. Notices. Any notice or other communication that a Partner desires
\n ——-
\nto give to another Partner shall be in writing, and shall be deemed effectively
\ngiven upon personal delivery or upon deposit in any United States mail box, by
\nregistered or certified mail, postage prepaid, or upon transmission by telegram,
\ntelecopy or electronic mail, addressed to the other Partner at the address of
\nthe Partner shown in the Partnership’s records (or at such other address as a
\nPartner may designate by fifteen (15) days’ advance written notice to the other
\nPartners).<\/p>\n
10.6. Power of Attorney. By signing this Agreement, each Limited Partner
\n —————–
\ndesignates and appoints the General Partner its true and lawful attorney, in its
\nname, place and stead to make, execute, sign, and file such instruments,
\ndocuments, or certificates that may from time to time be required of the
\nPartnership by the laws of the United States of America, the laws of the State
\nof Delaware, or any other state in which the Partnership shall conduct its
\ninvestment activities in order to qualify or otherwise enable the Partnership to
\nconduct its affairs in such jurisdictions; provided, however, that in no event
\nshall the General Partner be deemed to have the authority under this Paragraph
\n10.6 to take any action that would result in any Limited Partner losing the
\nlimitation on liability afforded hereunder. Such attorney is not hereby granted
\nany authority on behalf of the Limited Partner to amend this Agreement except
\nthat as attorney for each Limited Partner, the General Partner shall have the
\nauthority to amend this Agreement and the Certificate of Limited Partnership as
\nmay be required to effect:<\/p>\n
(a) Admissions of additional partners pursuant to Paragraph 7.6
\nor 7.7 above; or<\/p>\n
(b) Transfers of Limited Partnership interests pursuant to
\nParagraph 7.7 above. <\/p>\n
10.7. Amendment. This Agreement (and any exhibits to this Agreement) may
\n ———
\nbe amended only with the written consent of the General Partner and Majority in
\nInterest of the Limited Partners. No amendment shall, however, (i) increase the
\nCapital Commitment of a<\/p>\n
33.<\/p>\n
Limited Partner or modify the allocation of Capital Transaction Gain or Loss or
\nNet Income or Loss or the distributions allocable to any Limited Partner without
\nthe written consent of such Limited Partner, (ii) increase the Management Fee or
\nalter or waive the terms of Paragraph 8.2 without the unanimous consent of the
\nLimited Partners, (iii) alter or waive the terms of this Paragraph 10.7(a), or
\n(iv) alter or waive the terms of Paragraphs 7.5, 10.14, 10.17, 10.18, 10.19,
\n10.20, 10.21, 10.22 or 10.23 without the written consent of each affected
\nLimited Partner. Any proposed amendment that would change the requisite
\npercentage of Limited Partner interests required to take any action shall
\nrequire the approval of such existing requisite percentage. The General Partner
\nshall promptly furnish copies of all amendments to this Agreement and the
\nPartnership’s Certificate of Limited Partnership to all Partners.<\/p>\n
10.8. Effective Date. The Limited Partnership Agreement shall be
\n ————–
\neffective on the date set forth in the first paragraph of this Agreement.<\/p>\n
10.9. Entire Agreement. This Agreement constitutes the entire
\n —————-
\nagreement of the Partners and supersedes all prior agreements between the
\nPartners with respect to the Partnership.<\/p>\n
10.10. Titles; Subtitles. The titles and subtitles used in this
\n —————–
\nAgreement are used for convenience only and shall not be considered in the
\ninterpretation of this Agreement.<\/p>\n
10.11. Partnership Name. The Partnership shall have the exclusive right
\n —————-
\nto use the Partnership name (and any name under which the Partnership shall
\nelect to conduct its affairs) as long as the Partnership continues.<\/p>\n
10.12. Exculpation. Neither the General Partner, nor its members,
\n ———–
\nemployees or affiliates shall be liable to a Limited Partner or the Partnership
\nfor honest mistakes of judgment, or for action or inaction, taken reasonably and
\nin good faith for a purpose that was reasonably believed to be in the best
\ninterests of the Partnership, or for losses due to such mistakes, action, or
\ninaction, or to the negligence or dishonesty of any employee, broker, or other
\nagent of the Partnership or the General Partner, provided that such employee,
\nbroker, or agent was selected, engaged or retained and supervised with
\nreasonable care. This Paragraph 10.12 shall not extend to any action which
\nconstitutes fraud, willful misconduct or gross negligence. The General Partner
\nmay consult with counsel and accountants in respect of Partnership affairs and
\nbe fully protected and justified in any action or inaction that is taken in
\naccordance with the advice or opinion of such counsel or accountants, provided
\nthat they shall have been selected with reasonable care. Notwithstanding any of
\nthe foregoing to the contrary, the provisions of this Paragraph 10.12 and of
\nParagraph 10.13 hereof shall not be construed so as to relieve (or attempt to
\nrelieve) any person of any liability by reason of recklessness or intentional
\nwrongdoing or to the extent (but only to the extent) that such liability may not
\nbe waived, modified or limited under applicable law, but shall be construed so
\nas to effectuate the provisions of this Paragraph 10.12 and of Paragraph 10.13
\nto the fullest extent permitted by law.<\/p>\n
10.13. Indemnification. The Partnership agrees to indemnify, out of the
\n —————
\nassets of the Partnership only, the General Partner, the members of the General
\nPartner and their agents, employees and affiliates (and each such person’s heirs
\nand legal and personal representatives) to the fullest extent permitted by law
\nand to save and hold them harmless from and in respect of all<\/p>\n
34.<\/p>\n
(a) reasonable fees, costs, and expenses paid in connection with or resulting
\nfrom any claims, actions, or demands against the General Partner, the members of
\nthe General Partner, the Partnership, or their agents or affiliates to the
\nextent that they arise out of or in any way relate to the Partnership, its
\nproperties, business, or affairs and (b) such claims, actions, and demands and
\nany losses or damages resulting from such claims, actions, and demands,
\nincluding amounts paid in settlement or compromise (if recommended by attorneys
\nfor the Partnership) of any such claim, action or demand; provided, however,
\nthat this indemnity shall not extend to any action which constitutes fraud,
\nwillful misconduct or gross negligence. Any person receiving an advance with
\nrespect to expenses shall be required to agree to return such advance to the
\nPartnership in the event it is subsequently determined that such person was not
\nentitled to indemnification hereunder. Any indemnified party shall promptly seek
\nrecovery under any other indemnity or any insurance policies by which such
\nindemnified party may be indemnified or covered or from any Portfolio Company in
\nwhich the Partnership has an investment, as the case may be. To the extent the
\nFirst Fund, any Parallel Funds or any Affiliates of the General Partner or its
\nmembers have invested in a Portfolio Company to which an indemnity obligation
\nrelates, such indemnity obligation shall be equitably prorated among all such
\nentities and Affiliates. No payment or advance may be made to any person under
\nthis Paragraph 10.13 to any person who may have a right to any other indemnity
\n(by insurance or otherwise) unless such person shall have agreed, to the extent
\nof any other recovery, to return such payments or advances to the Partnership.<\/p>\n
10.14. Limitation of Liability of the Limited Partners. No Limited
\n ———————————————–
\nPartner shall be bound by, nor be personally liable for, the expenses,
\nliabilities, or obligations of the Partnership in excess of the balance of such
\nPartner’s Capital Commitment to the Partnership.<\/p>\n
10.15. Arbitration. Any controversy or claim arising out of or relating
\n ———–
\nto this Agreement, or the breach hereof, shall be settled by arbitration in San
\nFrancisco, California, in accordance with the rules, then obtaining, of the
\nAmerican Arbitration Association. Any award shall be final, binding and
\nconclusive upon the parties. A judgment upon the award rendered may be entered
\nin any court having jurisdiction thereof.<\/p>\n
10.16. Tax Matters Partner. The General Partner shall be the
\n ——————-
\nPartnership’s Tax Matters Partner (“TMP”). The TMP may be removed by Two-Thirds
\n —
\nin Interest of the Limited Partners. Upon the removal, dissolution or Bankruptcy
\nof the TMP, a successor TMP shall be elected by Two-Thirds in Interest of the
\nLimited Partners. The TMP shall employ experienced tax counsel to represent the
\nPartnership in connection with any audit or investigation of the Partnership by
\nthe Internal Revenue Service (“IRS”) and in connection with all subsequent
\n —
\nadministrative and judicial proceedings arising out of such audit. The fees and
\nexpenses incurred by the TMP in serving as the TMP shall be Partnership expenses
\npursuant to Paragraph 5.2 and shall be paid by the Partnership. Notwithstanding
\nthe foregoing, it shall be the responsibility of the General Partner and of each
\nLimited Partner, at their expense, to employ tax counsel to represent their
\nrespective separate interests. If the TMP is required by law or regulation to
\nincur fees and expenses in connection with tax matters not affecting each of the
\nPartners, then the TMP may, in its sole discretion, seek reimbursement from or
\ncharge such fees and expenses to the Capital Accounts of those Partners on whose
\nbehalf such fees and expenses were incurred. The TMP shall keep the Limited
\nPartners informed of all administrative and judicial proceedings, as required by
\nSection 6223(g) of the Code, and shall furnish a copy of each notice or other
\ncommunication received by the TMP from the IRS to each Limited Partner, except
\nsuch notices or<\/p>\n
35.<\/p>\n
communications as are sent directly to such Partner by the IRS. The relationship
\nof the TMP to the Limited Partners is that of a fiduciary, and the TMP has a
\nfiduciary obligation to perform its duties as TMP in such manner as will serve
\nthe best interests of the Partnership and all of the Partnership’s partners. To
\nthe fullest extent permitted by law, the Partnership agrees to indemnify the TMP
\nand its agents and save and hold them harmless, from and in respect to all (i)
\nreasonable fees, costs and expenses in connection with or resulting from any
\nclaim, action, or demand against the TMP, the General Partner or the Partnership
\nthat arise out of or in any way relate to the TMP’s status as TMP for the
\nPartnership, and (ii) all such claims, actions, and demands and any losses or
\ndamages therefrom, including amounts paid in settlement or compromise of any
\nsuch claim, action, or demand; provided that this indemnity shall not extend to
\nconduct by the TMP determined (i) not to have been undertaken in good faith to
\npromote the best interests of the Partnership or (ii) to have constituted
\nrecklessness, fraud, gross negligence or intentional wrongdoing by the TMP.<\/p>\n
10.17. ERISA Matters.
\n ————- <\/p>\n
(a) The General Partner, on behalf of the Partnership, shall use
\nits reasonable best efforts to ensure that none of the assets of the Partnership
\nshall be deemed to be “plan assets” (within the meaning of the DOL Regulations)
\nof any Limited Partner that is an ERISA Partner.<\/p>\n
(b) In the event that either (i) the General Partner shall
\ndetermine that it has become necessary for any ERISA Partner to withdraw from
\nthe Partnership or (ii) any ERISA Partner shall determine that it is necessary
\nfor it to withdraw from the Partnership, in either case (A) in order to avoid a
\nviolation of, or breach of the fiduciary duties of any person under (other than
\na breach of the fiduciary duties of any such person based upon the investment
\nstrategy or performance of the Partnership) ERISA or the related provisions of
\nthe Code, or (B) because the assets of the Partnership are or will be deemed to
\nbe “plan assets” of such ERISA Partner within the meaning of the DOL Regulations
\nthen the General Partner or such ERISA Partner, as the case may be, shall
\ndeliver to the other a notice to that effect, accompanied by an opinion of
\ncounsel (which opinion shall be reasonably acceptable to such ERISA Partner and
\nthe General Partner), confirming the necessity of such withdrawal and explaining
\nin reasonable detail the reasons therefor. In the case of such notice from the
\nERISA Partner, unless within ninety (90) days after the date on which such
\nnotice was given, the General Partner, using reasonably practicable efforts, is
\nable to eliminate the necessity for such withdrawal to the reasonable
\nsatisfaction of such ERISA Partner and its counsel, whether by correction of the
\ncondition giving rise thereto or amendment of this Agreement or otherwise, such
\nERISA Partner shall be entitled, at its election, upon written notice to the
\nGeneral Partner, to withdraw from the Partnership on the terms set forth in
\nParagraph 10.17(c) below. In the case of such notice from the General Partner,
\nsuch ERISA Partner shall be required to withdraw from the Partnership pursuant
\nto Paragraph 10.17(c) below unless, within 90 days after the date on which
\nnotice was given, the General Partner, using reasonably practicable efforts, or
\nthe ERISA Partner, using reasonably practicable efforts, as appropriate, shall
\neliminate the necessity for such withdrawal to the reasonable satisfaction of
\nthe General Partner and its counsel, whether by correction of the condition
\ngiving rise thereto or an amendment to this Agreement or otherwise. The
\nobligation of the ERISA Partner to make any additional Capital Contributions
\nshall be suspended during the<\/p>\n
36.<\/p>\n
above referenced ninety (90) day period and shall be terminated if such ERISA
\nPartner withdraws pursuant to Paragraph 10.17(c).<\/p>\n
(c) The withdrawing Limited Partner shall be entitled to receive
\nwithin ninety (90) days after the effective date of such withdrawal an amount
\nequal to the excess, if any, of the positive closing Capital Account balance the
\nLimited Partner would have had if such effective date had constituted a date of
\ntermination of the Partnership over the aggregate amount of distributions (with
\nsuch distributions valued at fair market value pursuant to Paragraph 9.2 as of
\nthe date of such distribution) made to such Limited Partner from and after such
\neffective date. The General Partner shall provide the withdrawing Limited
\nPartner with a written explanation of its determination of the Capital Account
\nof such withdrawing Limited Partner as computed pursuant to the preceding
\nsentence within sixty (60) days of the effective date of such withdrawal. The
\nwithdrawing Limited Partner shall thereafter have ten (10) business days from
\nthe date of receipt of such notice to make known any objections to such
\ndetermination. Any such objection made shall indicate briefly the reasons for
\nsuch objection. If within ten (10) business days of the date of receipt of such
\ndetermination, the withdrawing Limited Partner fails to notify the General
\nPartner of any objection to such determination, such determination shall be
\nfinal and conclusive. If within the ten (10) day period the withdrawing Limited
\nPartner notifies the General Partner of its objection to such determination, the
\nGeneral Partner and the withdrawing Limited Partner shall attempt to agree upon
\na mutually acceptable determination. If within ten (10) days of the first-
\nmentioned ten (10) day period a determination satisfactory to the General
\nPartner and the withdrawing Limited Partner shall not have been agreed to, the
\nGeneral Partner shall submit the dispute between the General Partner and the
\nwithdrawing Limited Partner to arbitration in accordance with Paragraph 10.15.
\nThe fees and expenses of any arbitrators retained in accordance with the
\nprovisions hereof shall be borne equally by the Partnership and the withdrawing
\nLimited Partner.<\/p>\n
Any distribution or payment to a withdrawing Limited Partner pursuant
\nto this subparagraph (c) may, in the sole discretion of the General Partner, be
\nmade in cash, in Securities (in which event the withdrawing Limited Partner
\nshall not, without its express written consent, be distributed more than its pro
\nrata interest in any type, class or portion of the Partnership’s Securities, and
\nif such a pro rata distribution would cause in all material likelihood the
\nwithdrawing Limited Partner to be in material violation of ERISA or other
\napplicable law then the withdrawing Limited Partner may notify the General
\nPartner of such fact, and upon receipt of such notice the General Partner shall
\nallow the withdrawing Limited Partner to designate a different entity to receive
\nsuch distribution or designate, subject to the approval of the General Partner,
\nan alternate distribution procedure), in the form of a promissory note, the
\nterms of which shall be mutually agreed upon by the General Partner and the
\nwithdrawing Limited Partner, or any combination thereof.<\/p>\n
10.18. Unrelated Business Taxable Income. The General Partner shall use
\n ———————————
\nits best efforts to conduct the affairs of the Partnership in a manner that does
\nnot cause any Limited Partner that is generally exempt from tax under Section
\n501 of the Code, including any Limited Partner that is a partnership if any
\npartner of such partnership is so exempt (a “Tax-Exempt Limited Partner”), to
\nhave any “unrelated business taxable income” (as that term is defined in Section
\n512 of the Code). In the event the Partnership recognizes any unrelated business
\ntaxable income, the General Partner shall timely provide all necessary
\ninformation to each Tax-Exempt<\/p>\n
37.<\/p>\n
Limited Partner to enable the Tax-Exempt Limited Partner to report such income
\non its tax returns.<\/p>\n
10.19. Public Plan Partner Withdrawals. For purposes of Paragraph
\n ——————————-
\n10.17, a Limited Partner that is an employee benefit plan subject to regulation
\nunder applicable state laws that are similar in purpose and intent to ERISA,
\nincluding any Limited Partner that is a partnership if any partner of such
\npartnership is such a plan (a “Public Plan Partner”) shall be treated as an
\nERISA Partner, and all references in Paragraph 10.17 to ERISA shall be deemed to
\nrefer to such applicable state laws.<\/p>\n
10.20. Foundation Partner Withdrawals.
\n —————————— <\/p>\n
(a) Each Limited Partner that is a private foundation within the
\nmeaning of Section 509 of the Code (a “Foundation Partner”) may elect to
\nwithdraw from the Partnership, or reduce its interest therein, at the times and
\nin the manner hereinafter provided, if the Foundation Partner shall have
\ndelivered to the General Partner (i) an opinion of counsel (which opinion shall
\nbe reasonably acceptable to the General Partner) to the effect that there is a
\nmaterial likelihood that such withdrawal or reduction may be necessary in order
\nfor the Foundation Partner, or any of its “foundation managers” within the
\nmeaning of Section 4946 of the Code, to avoid (x) excise taxes imposed by or
\nunder any of Sections 4941 and 4943 through 4946 of the Code or (y) a material
\nviolation of, or a material breach of the fiduciary duties of its trustees or
\ngoverning board under, any federal or state law applicable to private
\nfoundations or any rule or regulation adopted thereunder by any agency,
\ncommission or authority having jurisdiction, and (ii) a written notice of
\nelection to withdraw or reduce such Foundation Partner’s interest, specifying,
\nin the case of a reduction, the amount of the reduction.<\/p>\n
(b) Unless within sixty (60) days after receipt of the written
\nnotice and opinion specified in subparagraph 10.20(a) the General Partner is
\nable to eliminate the necessity for such withdrawal or reduction to the
\nreasonable satisfaction of the General Partner and the Foundation Partner,
\nwhether by correction of the condition giving rise to the necessity of the
\nFoundation Partner’s withdrawal, by amendment of this Agreement, or otherwise,
\nsuch Foundation Partner shall be entitled to withdraw from the Partnership or
\nreduce its interest, pursuant to and on the terms set forth in Paragraph
\n10.17(c) as if such Foundation Partner were an ERISA Partner, except that,
\nnotwithstanding the provisions of Paragraph 10.17(c) to the contrary, such
\nFoundation Partner shall be allowed to reduce its interest as well as withdraw,
\nand such Foundation Partner’s withdrawal or reduction of interest shall be
\neffective as of the earlier of (i) the last day of the Fiscal Quarter during
\nwhich the election for withdrawal or reduction of interest is made, or (ii) such
\ndate for withdrawal or reduction of interest as may be recommended by counsel in
\nthe opinion referred to above in order to avoid the imposition of any penalties
\nimposed by law (but in no event shall such date be later than the ninetieth
\n(90th) day after the event giving rise to the Foundation Partner’s right to
\nwithdraw). The obligation of the Foundation Partner to make any additional
\nCapital Contributions shall be suspended in whole or in part (depending on
\nwhether the Foundation Partner is reducing its interest or withdrawing) during
\nthe above-referenced sixty (60) day period and shall be terminated or reduced,
\nas the case may be, if such Foundation Partner withdraws or reduces it interest
\nin the Partnership pursuant hereto.<\/p>\n
38.<\/p>\n
10.21. Foreign Partners.
\n —————- <\/p>\n
(a) Notwithstanding anything to the contrary contained herein,
\nthe General Partner, on behalf of the Partnership, shall use its best efforts to
\nconduct the affairs of the Partnership in a manner that, under laws,
\nregulations, administrative interpretations and judicial decisions in effect
\nfrom time to time, does not cause any Limited Partner (or a partner of a Limited
\nPartner) that is not a “United States person” (as that term is defined in
\nSection 7701 of the Code) (such Limited Partner being herein referred to as a
\n“Foreign Partner”) to recognize net income effectively connected with the
\n“conduct of a trade or business within the United States” for purposes of
\nSections 871 and 881 of the Code.<\/p>\n
(b) The General Partner shall provide notice to each Foreign
\nPartner as soon as the General Partner shall become aware of any investment or
\nother activity of the Partnership that is reasonably likely to result in the
\nForeign Partner being deemed to be engaged in the “conduct of a trade or
\nbusiness within the United States” for purposes of Sections 871, 872, 875, 881,
\n882, 884 and 1446 of the Code as a result of the activities or investments of
\nthe Partnership. Unless otherwise advised by the Partnership’s tax advisors, the
\nGeneral Partner shall cause the Partnership to file tax returns and information
\nreturns with the United States Internal Revenue Service and state and local tax
\nauthorities on the basis that the Partnership is not engaged in a trade or
\nbusiness for purposes of Section 875 of the Code.<\/p>\n
(c) Notwithstanding anything to the contrary contained herein,
\nthe Partnership shall not directly acquire any interest in real property located
\nin the United States for purposes of Section 897 of the Code or in a company
\nthat is at the time of such investment a “United States real property holding
\ncorporation” (as that term is defined in Section 897(c) of the Code).<\/p>\n
10.22. Taxation as Partnership. The General Partner, while serving as
\n ———————–
\nsuch, agrees to use its best efforts to avoid taking any action that would cause
\nthe Partnership to be classified as other than a partnership or to be taxable as
\na corporation for federal income tax purposes. In the event the Partnership
\nshould ever be taxable as a corporation, any resulting tax imposed on the
\nPartnership shall be treated as a reduction in Net Income or an increase in Net
\nLoss.<\/p>\n
10.23. Side Letters. The General Partner will make available to the
\n ————
\nPartners any and all agreements, understandings or undertakings (“side
\nletters”), if any, which the Partnership or the General Partner has entered into
\n(or hereafter enters into) with any Partner or proposed Partner with respect to
\nthe Partnership or such Partner’s interest in the Partnership. All current side
\nletters are attached hereto as Exhibit B and any additional side letters shall
\nbe added to Exhibit B. To the extent that a right is granted in any side letter
\nwhich is unrelated to the regulatory or other particular status of the recipient
\nof such side letter, then any other Limited Partner shall be entitled to receive
\nsubstantially such right as granted by the Partnership in such side letter. To
\nthe extent that a right is granted in any side letter which is related to the
\nregulatory or other particular status of the recipient of such side letter, then
\nonly a Limited Partner which has a regulatory or other particular status which
\nis the same or substantially similar to the status of the recipient of such side
\nletter shall be entitled to receive substantially such right as granted by the
\nPartnership in such side letter.<\/p>\n
39.<\/p>\n
10.24. Deliveries of Opinions. In the event that any opinion is required
\n ———————-
\nhereunder from a Limited Partner, the General Partner will reasonably cooperate
\nwith such Limited Partner’s counsel to provide factual information in the
\npossession of the General Partner which information is necessary to allow such
\ncounsel to provide the opinion. Any expense related thereto shall be borne by
\nsuch Limited Partner.<\/p>\n
Article XI
\n MISCELLANEOUS TAX COMPLIANCE PROVISIONS<\/p>\n
11.1. Substantial Economic Effect. The provisions of Article IV and
\n —————————
\nthe other provisions of this Agreement relating to the maintenance of Capital
\nAccounts and procedures upon liquidation of the Partnership are intended to
\ncomply generally with the provisions of Treasury Regulation Section 1.704-1, and
\nshall be interpreted and applied in a manner consistent with such Regulations
\nand, to the extent the subject matter thereof is otherwise not addressed by this
\nAgreement, the provisions of Treasury Regulations Section 1.704-1 are hereby
\nincorporated by reference unless the General Partner shall determine that such
\nincorporation will result in economic consequences inconsistent with the
\neconomic arrangement among the Partners as expressed in this Agreement. In the
\nevent the General Partner shall determine that it is prudent to modify the
\nmanner in which the Capital Accounts, or any debits or credits thereto, are
\ncomputed or allocated or the manner in which distributions and contributions
\nupon liquidation (or otherwise) of the Partnership (or any Partner’s interest
\ntherein) are effected in order to comply with such Regulations and other
\napplicable tax laws, or to assure that the Partnership is treated as a
\npartnership for tax purposes, or to achieve the economic arrangement of the
\nPartners as expressed in this Agreement, then notwithstanding Paragraph 10.7
\nhereof, the General Partner may make such modification, provided that it is not
\nlikely to have more than an insignificant detrimental effect on the tax
\nconsequences and total amounts distributable to any Limited Partner pursuant to
\nArticles VI and VIII as applied without giving effect to such modification. The
\nGeneral Partner shall also (i) make any adjustments that are necessary or
\nappropriate to maintain equality between the Capital Accounts of the Partners
\nand the amount of Partnership capital reflected on the Partnership’s balance
\nsheet, as computed for book purposes pursuant to this Agreement, in accordance
\nwith Regulations Section 1.704-1(b)(2)(iv)(g), and (ii) make any appropriate
\nmodifications in the event unanticipated events (such as the incurrence of
\nnonrecourse indebtedness) might otherwise cause the allocations under this
\nAgreement not to comply with Treasury Regulations Section 1.704, provided in
\neach case that the General Partner determines that such adjustments or
\nmodifications shall not result in economic consequences inconsistent with the
\neconomic arrangement among the Partners as expressed in this Agreement.<\/p>\n
11.2. Other Allocations. Notwithstanding the provisions of Article IV,
\n —————–
\nthe allocations provided therein shall be subject to the following exceptions:<\/p>\n
(a) In the event any Partner’s Capital Account has an Unadjusted
\nExcess Negative Balance (as defined in subparagraph (f)) at the end of any
\nFiscal Year, such Partner will be reallocated items of Capital Transaction Gain
\nand Net Income for such Fiscal Year (and, if necessary, future Fiscal Years) in
\nthe amount necessary to eliminate such Unadjusted Excess Negative Balance as
\nquickly as possible.<\/p>\n
40.<\/p>\n
(b) In the event any Partner unexpectedly receives any
\nadjustments, allocations or distributions described in Treasury Regulations
\nSections 1.704-1(b)(2)(ii)(d)(4) through (d)(6), items of Capital Transaction
\nGain and Net Income shall be specially allocated to such Partner’s Capital
\nAccount in an amount and manner sufficient to eliminate, to the extent required
\nby Treasury Regulations Section 1.704-1(b)(2)(ii)(d), the Excess Negative
\nBalance (as defined in subparagraph (e)) in such Partner’s Capital Account
\ncreated by such adjustments, allocations or distributions as quickly as
\npossible. This subparagraph (b) is intended to and shall in all events be
\ninterpreted so as to constitute a “qualified income offset” within the
\n ———————–
\nmeaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(d).<\/p>\n
(c) A Partner’s Capital Account shall not be allocated any item
\nof Capital Transaction Loss or Net Loss to the extent such allocation would
\ncause such Capital Account to have an Excess Negative Balance (as defined in
\nsubparagraph (e)).<\/p>\n
(d) Any special allocations pursuant to this Paragraph 11.2
\nshall be taken into account as soon as possible in computing subsequent
\nallocations, so that over the term of the Partnership the net amount of any
\nitems so allocated and the profit, gain, loss, income and expense and all other
\nitems allocated to each Partner shall, to the extent possible, be equal to the
\nnet amount that would have been allocated to each such Partner if such original
\nallocations pursuant to this Paragraph 11.2 had not occurred.<\/p>\n
(e) For purposes of this Paragraph 11.2, “Excess Negative
\n —————
\nBalance” shall mean the excess of the negative balance in a Partner’s Capital
\n——-
\nAccount (computed with any adjustments which are required for purposes of
\nTreasury Regulations Section 1.704-1(b)(2)(ii)(d)) over the amount such Partner
\nis obligated to restore to the Partnership (computed under the principles of
\nTreasury Regulations Section 1.704-1(b)(2)(ii)(c)) inclusive of any addition to
\nsuch restoration obligation pursuant to application of the provisions of
\nTreasury Regulations Sections 1.704-2), or any successor provisions thereto.<\/p>\n
(f) For purposes of this Paragraph 11.2 “Unadjusted Excess
\n —————–
\nNegative Balance” shall have the same meaning as Excess Negative Balance, except
\n—————-
\nthat the Unadjusted Excess Negative Balance of a Partner shall be computed
\nwithout effecting the reductions to such Partner’s Capital Account which are
\ndescribed in Treasury Regulations Section 1.704-1(b)(2)(ii)(d).<\/p>\n
11.3. Income Tax Allocations.
\n ———————-<\/p>\n
(a) Except as otherwise provided in this Paragraph 11.3 or as
\notherwise required by the Code and the rules and Treasury Regulations
\npromulgated thereunder, Partnership income, gain, loss, deduction, or credit for
\nincome tax purposes shall be allocated in the same manner the corresponding book
\nitems are allocated pursuant to this Agreement.<\/p>\n
(b) In accordance with Code Section 704(c) and the Treasury
\nRegulations thereunder, income, gain, loss and deduction with respect to any
\nasset contributed to the capital of the Partnership shall, solely for tax
\npurposes, be allocated between the Partners so as to take account of any
\nvariation between the adjusted basis of such property to the Partnership for
\nfederal income tax purposes and its initial Book Value.<\/p>\n
41.<\/p>\n
(c) In the event the Book Value of any Partnership asset is
\nadjusted pursuant to the terms of this Agreement, subsequent allocations of
\nincome, gain, loss and deduction with respect to such asset shall take account
\nof any variation between the adjusted basis of such asset for federal income tax
\npurposes and its Book Value in the same manner as under Code Section 704(c) and
\nthe Treasury Regulations thereunder.<\/p>\n
(d) In the event that the Partnership is required to recognize
\nincome or gain for income tax purposes under Section 684 of the Code (or a
\nsimilar provision of state or local law) in respect of an in-kind distribution
\nto a Limited Partner, then, solely for such income tax purposes, to the maximum
\nextent permitted by applicable law (as determined by the General Partner in its
\nreasonable discretion), the income or gain shall be allocated entirely to such
\nLimited Partner.<\/p>\n
11.4. Withholding. The Partnership shall at all times be entitled to
\n ———–
\nmake payments with respect to any Partner in amounts required to discharge any
\nobligation of the Partnership to withhold or make payments to any governmental
\nauthority with respect to any federal, state, local or other jurisdictional tax
\nliability of such Partner arising as a result of such Partner’s interest in the
\nPartnership. Any such withholding payment shall be charged to the Capital
\nAccount of the Partner subject to such withholding and shall reduce the amounts
\notherwise distributable to such Partner hereunder.<\/p>\n
11.5. Section 1045. Each Limited Partner agrees that the Partnership
\n ————
\nshall not be required to elect the application of Section 1045 of the Code
\n(dealing with rollovers of qualified small business stock) or corresponding
\nprovisions of any state income tax law for sales of qualified small business
\nstock (as defined in Section 1202 of the Code) and that any such election shall
\nbe in the sole discretion of the General Partner. In addition, each Limited
\nPartner agrees that without the consent of the General Partner the Partnership
\nshall not be required to comply with any tax reporting or accounting
\nrequirements (including the adjustment of the tax basis of any assets of the
\nPartner-ship or the interest in the Partnership of any Limited Partner) that may
\nbe imposed under Section 1045 of the Code with respect to rollovers of qualified
\nsmall business stock by the Partnership or by or on behalf of any Limited
\nPartner.<\/p>\n
[Remainder of This Page Intentionally Left Blank]<\/p>\n
42.<\/p>\n
IN WITNESS WHEREOF, the Partners have executed this Agreement as of
\nthe date first above written.<\/p>\n
GENERAL PARTNER: E*TRADE VENTURES II, LLC, a Delaware
\n limited liability company<\/p>\n
By \/s\/ Thomas A. Bevilacqua
\n ————————————-<\/p>\n
Title: Managing Member<\/p>\n
LIMITED PARTNERS: E*TRADE VENTURES II, LLC, a Delaware
\n limited liability company, as their
\n authorized attorney-in-fact<\/p>\n
By \/s\/ Thomas A. Bevilacqua
\n ————————————-<\/p>\n
Title: Managing Member<\/p>\n
The undersigned members of E*Trade Ventures II, LLC, hereby specifically
\nacknowledge their obligation pursuant to Paragraphs 7.8 and 8.2(g) of the
\nAgreement.<\/p>\n
E*TRADE GROUP, INC.<\/p>\n
By \/s\/ Christos M. Cotsakos
\n ————————————-<\/p>\n
Title: Chairman of the Board of
\n Directors and Chief Executive
\n Officer
\n ———————————<\/p>\n
By \/s\/ Thomas A. Bevilacqua
\n ————————————-<\/p>\n
Title: Chief Corporate Development and
\n Strategic Investment Officer
\n ———————————<\/p>\n
\/s\/ Christos M. Cotsakos
\n —————————————-<\/p>\n
Christos M. Cotsakos
\n Chairman of the Board of
\n Directors and Chief Executive
\n Officer<\/p>\n
\/s\/ Thomas A. Bevilacqua
\n —————————————-<\/p>\n
Thomas A. Bevilacqua
\n Chief Corporate Development and
\n Strategic Investment Officer<\/p>\n
43.<\/p>\n
EXHIBIT A<\/p>\n
PARTNERS’ CAPITAL COMMITMENTS;
\n PARTNERSHIP PERCENTAGES<\/p>\n
\n\n Partnership
\n Capital Percentage*
\nName Commitment (Rounded)
\n——————————————————————
\n <\/p>\nGENERAL PARTNER:<\/p>\n
E*Trade Ventures II, LLC $ 1,000,000 0.7%<\/p>\n
LIMITED PARTNERS:<\/p>\n
E*Trade Group, Inc. $ 50,000,000 32.7%<\/p>\n
Other Limited Partners (Aggregate) 102,000,000 66.6%
\n —————————–<\/p>\n
TOTAL $153,000,000 100%
\n<\/c><\/c><\/s><\/caption>\n<\/table>\n
—————-
\n* Actual Percentages are based on the relative amounts of the Partners’
\n Capital Commitments.<\/p>\n
A-1<\/p>\n
EXHIBIT B<\/p>\n
SIDE LETTERS<\/p>\n
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