AGREEMENT
OF LIMITED PARTNERSHIP
THIS AGREEMENT of limited partnership ("Agreement") is dated as of November 12,
1999 among Alliance Venture Management, LLC, a California limited liability
company ("General Partner"), Alliance Semiconductor Corporation, a Delaware
corporation ("Alliance") and the limited partners ("Limited Partners") listed in
Schedule I attached hereto (General Partner and the Limited Partners being
herein collectively called the "Partners"). Capitalized terms not otherwise
defined shall have the meanings ascribed to such terms in Section 2.1.
THE PARTIES AGREE AS FOLLOWS:
1. GENERAL PROVISIONS
1.1 FORMATION
The Partners hereby agree to form a limited partnership ("Partnership")
pursuant to and in accordance with the California Revised Uniform Limited
Partnership Act ("California Partnership Act").
1.2 NAME
The name of the Partnership will be "Alliance Ventures II, L.P." or such
other name or names as the General Partner may from time to time
designate.
1.3 PURPOSE
The Partnership is organized for the object and purpose of making venture
capital investments in private companies, managing and supervising such
investments and engaging in such activities incidental or ancillary
thereto as the General Partner deems necessary or advisable, provided,
however, that the Partnership shall not engage in any activity that for
United States income tax purposes would constitute a United States trade
or business.
1.4 PLACE OF BUSINESS
The Partnership will maintain an office and principal place of business in
Santa Clara, California or at such other place or places as the General
Partner may from time to time designate.
2. DEFINITIONS; DETERMINATIONS; CAPITAL CONTRIBUTIONS;
CAPITAL ACCOUNTS
2.1 DEFINITIONS
For purposes of this Agreement the following capitalized terms shall have
the meanings set forth below:
2.1.1ADDITIONAL LIMITED PARTNERS has the meaning set forth in Section 6.5.
2.1.2ALLIANCE FUND means any of Alliance Ventures I, L.P., Alliance
Ventures II, L.P. and each private venture capital equity fund
hereafter sponsored by the General Partner, and the ALLIANCE FUNDS
means all of such funds, collectively.
2.1.3APPLICABLE LAW means ERISA or any federal or state law applicable to
public pension plans or any regulation, case law or administrative
ruling relating thereto.
2.1.4BASIS of any security means the basis of such security as determined
in accordance with the Code less the amount of any write-down
pursuant to Section 2.1.39.3 of the definition of Realized Investment
Loss (as the case may be) and as further adjusted to reflect the
effects of any transaction described in Section 2.2.1.
2.1.5CALIFORNIA PARTNERSHIP ACT has the meaning set forth in Section 1.1.
2.1.6CAPITAL ACCOUNT has the meaning set forth in Section 2.4.
2.1.7CAPITAL CALL NOTICE has the meaning set forth in Section 2.3.1.
2.1.8CAPITAL CONTRIBUTION of any Partner means the amount received by the
Partnership from such Partner pursuant to its Commitment.
2.1.9CARRIED INTEREST means the General Partner's 15% interest in the
Partnership's Net Profits from Portfolio Investments and Net Loss
from Portfolio Investments allocated to the General Partner pursuant
to Sections 2.4.3.2 and 2.4.4.2.
2.1.10 CODE means the Internal Revenue Code of 1986, as in effect on the
date hereof and, at the discretion of the General Partner, including
any such amendment thereto which does not change the economic terms
hereof.
2.1.11 COMMITMENT with respect to each Partner means the aggregate amount
of cash agreed to be contributed as capital to the Partnership by
such Partner as specified in Schedule I attached hereto as the same
may be modified from time to time under the terms of this Agreement.
2.1.12 CURRENT INCOME means all interest and dividend income (including
original issue discount and payment of in-kind income) from
investments (other than Short-Term Investments).
2.1.13 DEFAULTING PARTNER has the meaning set forth in Section
6.10.
2.1.14 EFFECTIVE DATE means November 12, 1999.
2.1.15 ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
2.1.16 EXCESS LOSSES has the meaning given such term in Section
2.4.5.
2.1.17 FAIR VALUE CAPITAL ACCOUNTS means the Partners' Capital Accounts
computed in accordance with Section 2.3, but treating each security
owned by the Partnership as if, on the date as of which such
computation is being made, such security had been sold at its "value"
(determined in accordance with Section 9) and any resulting gain or
loss had been allocated to the Partners' Capital Accounts in
accordance with Section 2.4.
2.1.18 INDEMNIFYING PARTNER has the meaning set forth in Section
6.7.
2.1.19 LIMITED PARTNERS means the Persons listed in Schedule I hereto in
their capacity as limited partners of the Partnership (including each
Person admitted to the Partnership in accordance with Section 6.5)
and each Additional Limited Partner who is admitted to the
Partnership as a substitute limited partner pursuant to Section 6.2,
so long as each such Person continues to be a limited partner of the
Partnership hereunder.
2.1.20 MANAGEMENT AGENT means Alliance Venture Management, LLC or any
other party (which may be the General Partner or a partner or
affiliate thereof) selected by the General Partner to act as agent of
the Partnership with respect to managing the affairs of the
Partnership.
2.1.21 MANAGEMENT FEE has the meaning set forth in Section 4.2.
2.1.22 NMS means the National Association of Securities Dealers
Automated Quotation System, National Market System.
2.1.23 NET LOSS FROM PORTFOLIO INVESTMENTS for any period means the excess
of (x) the sum of all the Partnership's Realized Investment Loss and
Partnership Expenses Allocable to Portfolio Investments for such
period over (y) the sum of all of the Partnership's Current Income
plus Realized Investment Gain for such period.
2.1.24 NET PROFITS FROM PORTFOLIO INVESTMENTS for any period means the
excess of (x) the sum of all of the Partnership's Current Income plus
Realized Investment Gain for such period over (y) the sum of all the
Partnership's Realized Investment Loss and Partnership Expenses
Allocable to Portfolio Investments for such period.
2.1.25 OPINION OF LIMITED PARTNER'S COUNSEL means a written opinion of any
counsel selected by a Limited Partner which counsel and opinion shall
be reasonably acceptable in form and substance to the General Partner
in its sole discretion.
2.1.26 OPINION OF THE PARTNERSHIP'S COUNSEL means an opinion of counsel
selected by the General Partner and reasonably acceptable (by reason
of experience in the area of law involved) to the Limited Partner
affected by such opinion or, if more than one Limited Partner is
affected by such opinion, Limited Partner(s) holding one-third of the
Limited Partner Interests so affected.
2.1.27 ORGANIZATIONAL EXPENSES means the reasonable expenses (including,
without limitation, travel, printing, legal and accounting fees and
expenses) incurred in connection with the organization and funding of
the Partnership and the General Partner.
2.1.28 PARTNER INTEREST means a Partner's total ownership and interest in
the Partnership based upon such Partner's aggregate Capital
Contributions relative to the Capital Contributions of all Partners.
2.1.29 PARTNERSHIP EXPENSES means Partnership Expenses Allocable
to Portfolio Investments and Partnership Expenses Not Allocable
to Portfolio Investments.
2.1.30 PARTNERSHIP EXPENSES ALLOCABLE TO PORTFOLIO INVESTMENTS means all
costs and expenses directly relating to any Portfolio Investment (to
the extent not borne or reimbursed by a Portfolio Company) ,
including, but not limited to:
2.1.30.1 all costs and expenses attributable to acquiring, holding,
monitoring and disposing of the Partnership's investments
(including, but not limited to, registration expenses and
brokerage, finders', custodial and other fees);
2.1.30.2 legal, accounting, auditing and other fees and expenses
directly relating to specific Portfolio Investments (including,
but not limited to, expenses associated with negotiating,
consummating, monitoring and disposing of the Partnership's
investments); and
2.1.30.3 extraordinary expenses of the Partnership directly relating
to specific Portfolio Investments (including, but not limited
to, litigation and indemnification costs and expenses, judgments
and settlements), but not including the Management Fee,
Organizational Expenses and those expenses described in Section
4.1 as payable by the Management Agent.
2.1.31 PARTNERSHIP EXPENSES NOT ALLOCABLE TO PORTFOLIO INVESTMENTS means
all costs and expenses relating to the Partnership's activities and
business other than Partnership Expenses Allocable to Portfolio
Investments, including, but not limited to:
2.1.31.1 legal, accounting, auditing and other fees and expenses
(including, but not limited to, expenses associated with the
preparation of Partnership financial statements, tax returns and
forms K-1);
2.1.31.2 extraordinary expenses of the Partnership not directly
relating to specific Portfolio Investments (including, but not
limited to, litigation and indemnification costs and expenses,
judgments and settlements); and
2.1.31.3 the Management Fee, but not including Organizational
Expenses and those expenses described in Section 4.1 as payable
by the Management Agent.
2.1.32 PAYOUT with respect to each Limited Partner (other than a
Defaulting Partner) means the time when such Limited Partner has
received cumulative distributions from the Partnership (regardless of
the source or character thereof) in an amount equal to its aggregate
Capital Contributions. If a distribution of cash or securities causes
the Partnership to reach and exceed Payout, the portion of the amount
distributed which was necessary to reach Payout will be deemed to
have been distributed before Payout, and any remaining amount will be
deemed to have been distributed after Payout.
2.1.33 PERSON means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
2.1.34 PORTFOLIO COMPANY means any company in which the Partnership has an
investment (excluding for such purposes Holdback Securities or a
Short-Term Investment).
2.1.35 PORTFOLIO COMPANY FEES means:
2.1.35.1 all compensation (whether in cash or securities) directly or
indirectly received by the General Partner, any of its managers,
any employee or agent of the General Partner, the Management
Agent or any affiliate, principal, employee or agent of the
Management Agent (but excluding any amount received by a manager
of the General Partner) acting, directly or indirectly, on
behalf of the Partnership from any Portfolio Company, whether as
director fees, management fees, consultant fees or investment
banking fees; and
2.1.35.2 all breakup fees, litigation proceeds or commitment fees
received by the General Partner or any of its managers from
transactions not consummated by the Partnership (in each case,
net of all amounts necessary to reimburse the General Partner,
each of its managers, the Management Agent and any employee or
agent of the Management Agent for all costs and expenses
incurred by any of them in connection with consummated or
unconsummated transactions or in connection with generating any
such fees and not previously reimbursed),
but not including any amount received by the General Partner, any of
its managers, members, employees or agents from Portfolio Companies
as reimbursement for out-of-pocket expenses directly related to such
Portfolio Companies.
2.1.36 PORTFOLIO INVESTMENTS means any investments held by the Partnership
other than Short-Term Investments.
2.1.37 PRIME RATE means, on any date, a variable rate per annum equal to
the rate of interest published, from time to time by the Wall Street
Journal as the "prime rate" at large U.S. money center banks.
2.1.38 REALIZED INVESTMENT GAIN means:
2.1.38.1 the excess, if any, of the proceeds from the sale,
redemption or other disposition of any Portfolio Investments
over the Basis of such Portfolio Investments; and
2.1.38.2 the excess, if any, of the value (as determined pursuant to
Section 8) of any Portfolio Investments distributed to the
Partners over the Basis of such Portfolio Investments.
2.1.39 REALIZED INVESTMENT LOSS means:
2.1.39.1 the deficiency, if any, of the proceeds from the sale,
redemption or other disposition of Portfolio Investments as
compared to the Basis of such Portfolio Investments;
2.1.39.2 the deficiency, if any, of the value (as determined pursuant
to Section 9) of any Portfolio Investments distributed to the
Partners as compared to the Basis of such Portfolio Investments;
and
2.1.39.3 the amount, as determined by the General Partner, by which
Portfolio Investments have permanently declined in value as
compared to the Basis of such Portfolio Investments.
2.1.40 SECURITIES ACT means the Securities Act of 1933, as amended.
2.1.41 SHORT-TERM INVESTMENT INCOME means the income earned on Short-Term
Investments, including any gains and net of any losses from
dispositions of Short-Term Investments and also net of any costs and
expenses directly attributable thereto.
2.1.42 SHORT-TERM INVESTMENTS means commercial paper, governmental
obligations, money market instruments, certificates of deposit and
other similar obligations and securities, in each case having a
maturity of one year or less at the time of purchase by the
Partnership.
2.1.43 TAX DISTRIBUTIONS means distributions made to the General Partner
with respect to a fiscal year equal to the amount by which the
General Partner's cumulative estimated tax liabilities for the fiscal
year and all prior fiscal years exceeds the aggregate amount of
distributions made to the General Partner:
2.1.43.1 with respect to all prior fiscal years; and
2.1.43.2 with respect to the current fiscal year under Section
3.2.1.
For this purpose, the General Partner's cumulative estimated tax
liabilities means the product of the aggregate amount by which the
Net Profits from Portfolio Investments included in the Carried
Interest exceeds the Net Losses from Portfolio Investments included
in the Carried Interest, times the highest marginal federal, state
and local tax rates applicable to any of the General Partner's
members and former members.
2.1.44 TAX EXEMPT PARTNER means any Limited Partner which is exempt from
income taxation under ss.501(a) of the Code.
2.1.45 UBTI means unrelated business taxable income as defined in ss.512
and ss.514 of the Code.
2.2 DETERMINATIONS
2.2.1An "exchange of securities" will be treated as a sale if under
generally accepted accounting principles the Partnership realizes
gain or loss on such exchange, in which case the Basis of the
securities received in the exchange will be adjusted to take
cognizance of the gain or loss from such exchange.
2.2.2Any determination to be made based upon a specified proportion of the
"Limited Partner Interests" shall be based upon the Limited Partners'
Capital Contributions (less amounts returned pursuant to Section
2.3.2), excluding, for purposes of any Applicable Section (as such
term is defined in Section 6.9 below) and any vote, approval or
consent to the removal of the General Partner or any successor
thereto and the appointment of any general partner of the Partnership
under applicable law for which an election was made under Section
6.9, that portion of each Limited Partner's Capital Account which
represents each such Limited Partner's Excess Interest (as such term
is defined in Section 6.9); provided that for purposes of this
Section 2.2.2 and except as set forth in Section 12.1, interests held
by a Defaulting Partner shall be disregarded.
2.3 CAPITAL CONTRIBUTION COMMITMENT
2.3.1Each Partner agrees to make cash contributions (pro rata based upon
the Partners' respective Commitments) to the capital of the
Partnership in the aggregate amount equal to its Commitment by
contributing installments in cash as follows: 50% of its Commitment
on the Effective Date and thereafter, upon at least 30 days notice
("Capital Call Notice"). Each Capital Contribution will be made by
delivery of a check made payable to the Partnership or by means of a
wire transfer of funds to an account designated by the General
Partner.
2.3.2The General Partner may cause the Partnership to return to the
Partners all or any portion of any Capital Contribution to the
Partnership which is not invested in a Portfolio Company or used to
pay Partnership Expenses (including Management Fees) or
Organizational Expenses. Each such return of Capital Contributions
shall be made pro rata among all Partners in the same proportion as
the Partners made such Capital Contributions and, so long as such
Capital Contributions are returned to the Partners on or before the
120th day following the date such Capital Contributions were due (as
set forth in the Capital Call Notice pursuant to which such Capital
Contributions were made by the Partners to the Partnership), such
returned Capital Contributions may be called again by the General
Partner according to the provisions of this Section 2.3 as if such
returned Capital Contributions had not been previously called.
2.4 CAPITAL ACCOUNTS
A capital account ("Capital Account") will be established for each Partner
on the books of the Partnership and will be adjusted as follows:
2.4.1CAPITAL CONTRIBUTIONS
A Partner's Capital Contribution will be credited to its Capital
Account when received by the Partnership;
2.4.2SHORT-TERM INVESTMENT INCOME
Except as otherwise provided in 2.4.5 below, Short-Term Investment
Income earned in each quarterly period will be credited to, and
Short-Term Investment Loss for each quarterly period shall be debited
against, the Capital Accounts of the Partners pro rata according to
their respective Partner Interests;
2.4.3NET PROFITS FROM PORTFOLIO INVESTMENTS
Except as otherwise provided in 2.4.5 below, for any period in which
the Partnership has Net Profits from Portfolio Investments, such Net
Profits from Portfolio Investments shall be credited:
2.4.3.1 85% to the Capital Accounts of the Partners pro rata
according to their respective Partner Interests; and
2.4.3.2 15% to the Capital Account of the General Partner;
2.4.4NET LOSS FROM PORTFOLIO INVESTMENTS
Except as otherwise provided in 2.4.5 below, for any period in which
the Partnership has Net Loss from Portfolio Investments, such Net
Loss from Portfolio Investments shall be debited:
2.4.4.1 85% against the Capital Accounts of all Partners pro
rata according to their respective Partner Interests; and
2.4.4.2 15% against the Capital Account of the General
Partner;
2.4.5SPECIAL GENERAL PARTNER ALLOCATIONS
Notwithstanding anything in this Section 2.4, if at any time the
General Partner's Capital Account is reduced to zero, 100% of Net
Loss from Portfolio Investments, Organizational Expenses and
Partnership Expenses Not Allocable to Portfolio Investments ("Excess
Losses") will be debited against the Capital Accounts of the Limited
Partners pro rata according to their respective Partner Interests.
With respect to each quarterly period thereafter 100% of Short-Term
Investment Income and Net Profits from Portfolio Investments will be
credited to the Capital Accounts of the Limited Partners in
proportion to their respective Partner Interests, until the Excess
Losses have been recouped (i.e., an amount has been allocated 100% to
the Limited Partners equal to the amount of the Excess Losses), at
which time the allocations of Short-Term Investment Income and Net
Profits from Portfolio Investments set forth in 2.4.2 and 2.4.3
above, respectively, will be reinstated;
2.4.6PARTNERSHIP EXPENSES NOT ALLOCABLE TO PORTFOLIO INVESTMENTS
Partnership Expenses Not Allocable to Portfolio Investments will be
debited against the Capital Accounts of Partners pro rata according
to their respective Partner Interests. If Limited Partners are
admitted subsequent to the formation of the Partnership pursuant to
Section 6.5, the allocation of Organization Expenses and Partnership
Expenses Not Allocable to Portfolio Investments will be adjusted as
if the subsequently admitted Limited Partners had been admitted at
the time of formation, except that the amount of interest described
in Section 6.5 will be credited to and, upon payment thereof to the
Management Agent, debited from the Capital Accounts of such
Additional Limited Partners;
2.4.7ORGANIZATIONAL EXPENSES
Organizational expenses will be debited against the Capital
Account of Alliance;
2.4.8DISTRIBUTIONS DEBITED AGAINST CAPITAL ACCOUNT Any amount distributed
to a Partner will be debited against such Partner's Capital Account.
The General Partner normally will adjust the Partnership's Capital
Accounts at the end of each quarterly period, but may adjust them
more often if a new Partner is admitted to the Partnership or
circumstances otherwise make it advisable in the General Partner's
judgment;
2.4.9DISTRIBUTIONS IN KIND
If any securities are to be distributed in kind to the Partners as
provided in Section 3, such securities will first be written up or
down to their value (as determined pursuant to Section 8 as of the
date of such distribution), thus creating Realized Investment Gain or
Realized Investment Loss (if any) , which shall be allocated in
accordance with Section 2.4 to the Capital Accounts of the Partners,
and upon the distribution of such securities to such Limited
Partners, the value of such securities shall be debited, in
accordance with Section 2.4, to the Capital Accounts of the Partners.
3. DISTRIBUTIONS
3.1 DISTRIBUTION POLICY
The General Partner may in its sole discretion make distributions of cash
or securities at any time and from time to time; provided, however, that
no securities will be distributed in kind to the Partners until the
earlier to occur of:
3.1.1such time as such securities may be sold by or for the account of any
Partner pursuant to Rule 144 promulgated under the Securities Act, or
any successor rule; or
3.1.2the final distribution of the assets of the Partnership to the
Partners pursuant to Section 7.4.
3.2 CASH DISTRIBUTION
At any time when Payout is not achieved, all distributions of cash shall
be made to the Partners pro rata according to their Partner Interests,
except that the General Partner shall also be entitled to receive Tax
Distributions. At any time when Payout is achieved, all distributions of
cash shall be made to the Partners in the following priority:
3.2.1First, 100% of each distribution shall be made to the General Partner
until the General Partner has received distributions pursuant to this
Section 3.2.1, or as Tax Distributions, in aggregate amount equal to
15% of Net Profits from Portfolio Investments for the period from the
Effective Date to the date of such distribution; and
3.2.2Second, after the required distribution pursuant to 3.2.1 above, each
distribution will be made to all Partners pro rata according to their
respective Capital Accounts;
provided that the amount distributed to the General Partner (other than
Tax Distributions) shall in no event cause the General Partner's Capital
Account to be reduced below zero and that any amount which is not
distributed to the General Partner because of this provision shall be
distributed to the Limited Partners pro rata according to their respective
Partner Interests.
3.3 DISTRIBUTIONS IN KIND
3.3.1Subject to the terms of Sections 3.3.2 and 7.4, all distributions of
securities shall be made as follows:
3.3.1.1 First, such securities will be distributed to the Partners
pro rata according to their Partner Interests until an amount of
such securities has been distributed to the Partners as has an
aggregate value, as determined pursuant to Section 8, equal to
the Partnership's Basis (as determined in accordance with the
Code and as adjusted to reflect the effects of any transaction
described in 2.2.2.1) in the total amount of such property to be
distributed to the Partners pursuant to this Section 3.3.1.1 and
3.3.1.2 below, plus all Management Fees paid by the Partnership
(to the extent not previously reimbursed);
3.3.1.2 Second, such securities will be distributed to Alliance until
an amount of such securities has been distributed to Alliance as
has an aggregate value equal to the Organizational Expenses paid
by Alliance (to the extent not previously reimbursed); and
3.3.1.3 Third, such securities will be distributed 85% to the
Partners pro rata according to their Partner Interests and,
subject to 3.3.2 below, and 15% to the General Partner.
3.3.2At any time when Payout is not achieved, unless otherwise agreed by
the General Partner, the Partnership shall not deliver to the General
Partner, but rather will hold for the benefit of the General Partner
and as security for the obligations of the General Partner pursuant
to Section 7.3.3, all property otherwise to be distributed pursuant
to 3.3.1.2 above ("Holdback Securities"); provided that at such time
as Payout is achieved, the Partnership will immediately deliver all
Holdback Securities to the General Partner. Notwithstanding the
foregoing, for all purposes of this Agreement, such Holdback
Securities will be deemed to have been distributed to the General
Partner. Accordingly, e.g., the Capital Account of the General
Partner will be reduced by the value of the Holdback Securities upon
such distribution, such Holdback Securities will be the property of
the General Partner and not of the Partnership, and there will be no
adjustment to any Capital Account of any Partner on account of any
change in the value of Holdback Securities subsequent to such
distribution (unless and to the extent all or any portion of such
Holdback Securities are contributed to the Partnership pursuant to
Section 7.3.3). At the election of the General Partner, the
Partnership will sell or exchange all or any portion of the Holdback
Securities as requested by the General Partner; provided that such
sale or exchange is with an unaffiliated third party and that the
proceeds of such sale or exchange (net of any expenses of such sale,
if the proceeds thereof are in cash) will be delivered to and held by
the Partnership until Payout is achieved; and provided, further, that
such proceeds will be paid to the General Partner promptly after
Payout is achieved.
4. MANAGEMENT AGENT, MANAGEMENT FEE
AND ORGANIZATIONAL EXPENSES
4.1 MANAGEMENT AGENT
The General Partner may cause the Partnership to appoint a Management
Agent to manage the affairs of the Partnership. The General Partner shall
have the duty to manage the affairs of the Partnership during any period
when there is no Management Agent, and shall be entitled to receive the
Management Fee payable with respect to any period during which it so
manages (as well as the amounts described in 4.2.5 and 4.2.6 below) . The
appointment of the Management Agent shall not in any way relieve the
General Partner of its responsibilities and authority vested pursuant to
Section 5.1. The General Partner or the Management Agent shall pay:
4.1.1all ordinary overhead and administrative expenses of the Partnership
(including salaries and related benefits, rent, travel, entertainment
and equipment expenses but excluding any Partnership Expenses and any
Organizational Expenses reimbursable under Section 4.3) incurred by
the General Partner, the Management Agent or any of their respective
managers, members, agents, employees or stockholders (to the extent
not borne or reimbursed by a Portfolio Company) in connection with:
4.1.1.1 identifying and investigating investment
opportunities for the Partnership
4.1.1.2 monitoring the Partnership's investments; and
4.1.1.3 providing Portfolio Company reports and information
to the Limited Partners; and
4.1.2Organizational Expenses to the extent not reimbursed under Section
4.3.
4.2 MANAGEMENT FEE
4.2.1GENERAL
Subject to Section 4.1, during each consecutive twelve-month or
lesser period from and after the Effective Date (each such
twelve-month period, a "Management Fee Year"), the Partnership will
pay the Management Agent in advance, commencing with a payment on the
Effective Date for the period from the Effective Date up to and
including December 31, 1999, and thereafter on a quarterly basis on
January 1, April 1, July 1 and October 1 of each year until final
distribution of the Partnership's assets pursuant to Section 7.4
below (or as otherwise provided in Section 4.2.5 below), a fee as
calculated below ("Management Fee"), as compensation for managing the
affairs of the Partnership.
4.2.2CALCULATION OF MANAGEMENT FEE
The Management Fee shall be 1.00% of the aggregate Commitments per
year for the term of the Agreement, calculated in each year including
the Commitments of any Limited Partners admitted pursuant to Section
6.5 as if made on the Effective Date. In addition, if in connection
with admission of any Additional Limited Partner, any portion of the
Management Fee is paid later than as specified in Section 4.2.1
above, the Management Fee will be adjusted to include, in respect of
any such delayed amount, interest, from the date as of which such
delayed amount was specified for payment through the date of actual
payment thereof, at a rate equal to the Prime Rate plus two
percentage points per annum.
4.2.3PARTIAL YEAR
The Management Fee in any partial year will be pro-rated on a daily
basis according to the actual number of days in such period.
4.2.4PORTFOLIO COMPANY FEES
Portfolio Company Fees received by the General Partner, any of its
general partners, any employee or agent of the General Partner, the
Management Agent or any affiliate, principal, employee or agent of
the Management Agent (but not by any amounts received by a manager of
the General Partner), shall be deducted from the management fees paid
by the Alliance Funds; provided that, with respect to Portfolio
Company Fees comprised of stock or rights convertible into or
exercisable or exchangeable for stock, so long as the recipient
thereof executes and delivers to the General Partner an agreement to
hold such property or the proceeds thereof for the benefit of the
Management Agent, such property will not be deemed to be received,
for purposes of the foregoing, and therefore will not be deducted,
until such time as, and only to the extent that, the recipient
thereof realizes cash proceeds with respect to such property, whether
upon the sale or other transfer of such property or as distributions
with respect thereto; and provided, further, that any such Portfolio
Company Fees held as of the ninth anniversary of the Effective Date
and not previously deemed received pursuant to this sentence will be
deemed to have been received as of such date.
4.2.5EARLY TERMINATION
In the event of an early termination of the Partnership pursuant to
Section 7.2, the Management Fee (computed pursuant to Section 4.2.2
above) will be payable to the Management Agent through the date six
months after the final distribution in connection therewith.
4.2.6ORGANIZATIONAL EXPENSES
Alliance will pay the organizational expenses and set-up expenses of
the Alliance Funds. The Alliance Funds will pay expenses directly
related to the consummation of an investment whether or not
consummated, the legal, custodial, and accounting expenses, and
certain other related expenses of the Alliance Funds. The General
Partner will pay expenses incurred in connection with investigating
investment opportunities and monitoring investments, and will provide
for normal operating overhead, including without limitation salaries,
office space, and travel expenses for all personnel of the General
Manager.
4.2.7NO LIABILITY TO PARTNERSHIP OR PARTNERS
Neither the Management Agent nor any shareholder, partner, director,
officer, manager, member, employee, agent or affiliate of the
Management Agent (nor any of their respective shareholders, partners,
directors, officers, managers, members, employees, agents or
affiliates) shall be liable to any Partner or to the Partnership for
any action taken, or omitted to be taken, as the Management Agent, or
on behalf of the Management Agent, with respect to the Partnership or
for any action taken, or omitted to be taken, by the Management
Agent, or any shareholder, partner, director, officer, manager,
member, employee, agent or affiliate of the Management Agent (or any
of their respective shareholders, partners, directors, officers,
managers, members, employees, agents or affiliates), so long as such
person:
4.2.7.1 acted in good faith
4.2.7.2 acted in a manner reasonably believed to be in the
best interests of the Partnership; and
4.2.7.3 was neither grossly negligent nor engaged in willful
malfeasance.
5. GENERAL PARTNER
5.1 MANAGEMENT AUTHORITY
5.1.1The management of the Partnership will be vested exclusively in the
General Partner, and the General Partner will have full control over
the business and affairs of the Partnership. The General Partner will
have the power on behalf and in the name of the Partnership to carry
out any and all of the objects and purposes of the Partnership and to
perform all acts and enter into and perform all contracts and other
undertakings which, in its sole discretion, it deems necessary or
advisable or incidental thereto, including the power to acquire or
dispose of any security (including marketable securities).
5.1.2All matters concerning:
5.1.2.1 the allocation of Short-Term Investment Income, Current
Income, Realized Investment Gain, Realized Investment Loss,
Partnership Expenses, Partnership Expenses Allocable to
Portfolio Investments, Partnership Expenses Not Allocable to
Portfolio Investments, Organizational Expenses, Carried Interest
and the distribution of net proceeds and the return of capital
among the Partners, including the taxes thereon;
5.1.2.2 accounting procedures and determinations, estimates
of the amount of Management Fees payable by any Defaulting
Partner or Regulated Partner; and
5.1.2.3 other determinations not specifically and expressly
provided for by the terms of this Agreement,
shall be determined by the General Partner in accordance with its
reasonable interpretation of the provisions of this Agreement, whose
determination shall be final and conclusive as to all the Partners.
5.2 LIMITATION ON INVESTMENTs
The General Partner will not invest (including guarantees of a Portfolio
Company's or its subsidiary's obligations) more than 20% of the
Partnership's aggregate Commitments in any one Portfolio Company without
the prior written consent of Limited Partners holding 80% of the Limited
Partner Interests.
5.3 UBTI
The General Partner shall use its reasonable efforts to ensure that it
does not knowingly engage in a transaction which will cause any Tax Exempt
Partner to recognize UBTI as a result of its investment in the
Partnership.
5.4 PERMITTED CO-INVESTMENTS BY CERTAIN LIMITED PARTNERS, THE GENERAL
PARTNER AND RELATED PARTIES; DIRECTOR SHARES
5.4.1The General Partner will not purchase securities in Portfolio
Companies. Nothing in this Agreement will restrict the General
Partner from permitting certain Limited Partners (and not necessarily
all Limited Partners), managers and members of the General Partner
and employees and stockholders of the Management Agent (collectively,
the "Co-investors" and each individually a "Co-investor") to invest
in Portfolio Companies; provided that:
5.4.1.1 in the case of each such investment by one or more
Co-investors in a Portfolio Company (a "Co-investment"), each of
the Co-investors purchases, contemporaneously with the purchase
by the Partnership, securities issued by such Portfolio Company
which are of the same class as purchased by the Partnership (and
if the Partnership purchases more than one class of securities
issued by such Portfolio Company, each of such Co-investors
purchases an amount of each such class in the same proportions
as purchased at such time by the Partnership) at a price and on
other terms which are the same as, or less favorable to the
Co-investors than, the price and terms at or on which the
Partnership is then purchasing securities of such Portfolio
Company; provided that in no event will a Co-investor be
obligated, solely on account of having made a Co-investment in a
Portfolio Company, to purchase additional securities of such
Portfolio Company, whether or not the Partnership subsequently
does so; and
5.4.1.2 the aggregate amounts invested by any managers and members of
the General Partner in any Portfolio Company will not exceed 10%
of the aggregate amount invested by the Partnership in such
Portfolio Company at such time.
5.4.2Subject to Section 5.4.1 above, nothing in this Agreement will
restrict managers, members, employees and agents of the General
Partner and the Management Agent from acquiring shares of stock of
Portfolio Companies, or rights convertible into or exercisable or
exchangeable for any such stock, in connection with serving on the
boards of directors of, or in similar capacities for, such companies.
In no event will the receipt by any manager of the General Partner of
stock of Portfolio Companies, or rights convertible into or
exercisable or exchangeable for any such stock, be deemed to be
Portfolio Company Fees.
5.5 NO TRANSFER OF GENERAL PARTNERSHIP INTEREST; NO WITHDRAWAL OR LOANS The
General Partner will not sell, assign, pledge, mortgage or otherwise
dispose of its General Partner interest in the Partnership and will not
borrow or withdraw any amount from the Partnership.
5.6 NO LIABILITY TO LIMITED PARTNERS
Neither the General Partner nor any manager, member, employee, agent or
affiliate of the General Partner (nor any of their respective
shareholders, partners, directors, officers, employees, agents or
affiliates) shall be liable to any Partner or to the Partnership for any
action taken, or omitted to be taken, as the General Partner, or on behalf
of the General Partner, with respect to the Partnership or for any action
taken, or omitted to be taken, by the General Partner, or any manager,
member, employee, agent or affiliate of the General Partner (or any of
their respective shareholders, partners, directors, officers, employees,
agents or affiliates), so long as such person:
5.6.1acted in good faith;
5.6.2acted in a manner reasonably believed to be in the best
interests of the Partnership; and
5.6.3was neither grossly negligent nor engaged in willful malfeasance.
5.7 INDEMNIFICATION OF GENERAL PARTNER AND OTHERS
The Partnership will indemnify the General Partner, each of its managers
and members and their respective partners, employees, agents and
affiliates, including without limitation the Management Agent and the
partners, stockholders and employees of the Management Agent, against any
losses, liabilities, damages or expenses (including amounts paid for
reasonable attorneys fees, judgments and settlements in connection with
any threatened, pending or completed action, suit or proceeding but
excluding the amounts described in Section 4.1 as payable by the General
Partner or the Management Agent) to which any of such persons may become
subject in connection with the Partnership or in connection with any
involvement with a Portfolio Company (including serving as an officer,
director, consultant or employee of any Portfolio Company) directly or
indirectly on behalf of the Partnership but, in each case, only to the
extent that such person:
5.7.1acted in good faith
5.7.2acted in what such person believed to be in the best interests
of the Partnership or the Portfolio Company (as the case may
be); and
5.7.3was neither grossly negligent nor engaged in willful malfeasance.
The Partnership may, in the sole judgment of the General Partner, pay the
expenses of any Person indemnifiable under this Section 5.7 in advance of
the final disposition of any proceeding, so long as:
5.7.4the General Partner has a good faith belief such expenses are
indemnifiable; and
5.7.5the General Partner receives a written agreement by such Person to
repay the full amount advanced if there is a final determination that
such Person did not satisfy the standards set forth in Sections 5.7.1
through 5.7.3 immediately above or that such Person is not otherwise
entitled to indemnification as provided herein.
5.8 FORMATION OF NEW FUND OR BUSINESS ENDEAVOR
No Limited Partner will, on account of entering into this Agreement or on
account of its status as a Limited Partner of the Partnership, have any
interest in the business endeavors of the other Partners other than its
interest in the Partnership, and no Partner is, on account of entering
into this Agreement or on account of its status as a Partner of the
Partnership, restricted from entering into any future business activity,
including with any other Partner; provided that the General Partner may
not hereafter close the formation of a fund to invest primarily in equity
securities until the time at which at least 75% of the Partners' aggregate
Commitments have been invested, committed, reserved for follow-on
investment, otherwise allocated for investment or used, or reserved to be
used, to pay Partnership Expenses, Management Fees or Organizational
Expenses.
5.9 INTEREST AS A LIMITED PARTNER
To the extent that the General Partner acquires the interest of a
Defaulting Partner or a Regulated Partner or any other Limited Partner,
the General Partner will be deemed to be a Limited Partner with respect to
such interest for all purposes of this Agreement.
6. LIMITED PARTNERS
6.1 LIMITED LIABILITY
The Limited Partners will not be personally liable for any obligations of
the Partnership and will have no obligation to make contributions to the
Partnership in excess of their respective Commitments specified in
Schedule I attached hereto, except to the extent set forth in the
California Partnership Act; provided that a Limited Partner shall be
required to return the portion of any distribution made to it in error
(i.e., a distribution inconsistent with the terms of this Agreement). The
Limited Partners will take no part in the control, direction or operation
of the affairs of the Partnership and will have no power to bind the
Partnership.
6.2 TRANSFER OF LIMITED PARTNERSHIP INTEREST
A Limited Partner may not sell, assign, transfer, pledge, mortgage or
otherwise dispose of all or any of its interest in the Partnership
(including any transfer or assignment of all or any part of its interest
to a person who becomes an assignee of a beneficial interest in the
Partnership even though not becoming a substitute Limited Partner) unless
the General Partner has consented to such transfer or assignment in
writing. For purposes of this Section 6.2, a change in any trustee or
fiduciary of a Limited Partner will not be deemed to be an assignment or
transfer of a limited partnership interest pursuant to this Agreement,
provided any such replacement trustee or fiduciary is also a fiduciary as
defined under applicable state law and provided that income and loss
allocable to the Limited Partner of the Partnership will continue to be
included in the same filings under the same employee identification number
with the Internal Revenue Service. Accordingly, such a change in a trustee
or fiduciary may be made without the prior written consent of the General
Partner, provided that the Limited Partner agrees to provide prompt
written notice of such change to the General Partner. The voting rights of
any Limited Partner's interest shall automatically terminate upon any
transfer of such interest to a trust, heir, beneficiary, guardian or
conservator or upon any other transfer if the transferor no longer retains
control over such voting rights and the General Partner has not consented
pursuant to Section 6.2(b) to such transferee becoming a substitute
Limited Partner. No consent of any other Limited Partner will be required
as a condition precedent to any such transfer or substitution. As a
condition to any transfer of a Limited Partnership interest (including a
transfer not requiring the consent of the General Partner), the transferor
and the transferee shall provide such legal opinions and documentation as
the General Partner shall reasonably request; provided that if the
transfer is to be made from a Limited Partner to a co-trustee or trustee
as contemplated above, an officer's certificate in form reasonably
satisfactory to the General Partner shall be delivered by the Limited
Partner to the General Partner in lieu of such legal opinions and other
documentation.
6.2.1Notwithstanding anything to the contrary contained in this Section
6.2 or Section 6.10, a transferee or assignee will not become a
substitute Limited Partner without the consent of the General
Partner, in its sole discretion, and without executing and delivering
to the General Partner a copy of this Agreement or amendment hereto
in form and substance satisfactory to the General Partner in its sole
discretion. Any substitute Limited Partner admitted to the
Partnership with the consent of the General Partner will succeed to
all rights and be subject to all the obligations of the transferring
or assigning Limited Partner with respect to the interest to which
such Limited Partner was substituted.
6.2.2The transferor and transferee of any Limited Partner's interest shall
be jointly and severally obligated to reimburse the General Partner
and the Partnership for all reasonable expenses (including reasonable
attorneys' fees and expenses) of any transfer or proposed transfer of
a Limited Partner's interest, whether or not consummated.
6.2.3The transferee of any Limited Partner interest shall be treated as
having made all of the Capital Contributions made by, and received
all of the distributions received by, the transferor of such
interest.
6.2.4Anything in this Agreement to the contrary notwithstanding, no
Partnership interest shall be subdivided for sale or assignment
(including any assignment of a profits and loss interest) if such
subdivision results in the creation of any Partnership interest (or
interest in the Partnership's profits and losses) which would have
had an initial offering price smaller than the minimum amount
prescribed in Internal Revenue Service rules or Treasury regulations
setting forth a private-placement safe harbor under the publicly
traded partnership provisions of the Code.
6.3 NO WITHDRAWAL
Subject to the provisions of Sections 6.2, and 6.10, no Limited Partner
may withdraw as a Partner of the Partnership, nor may a Limited Partner be
required to withdraw, nor may a Limited Partner borrow or withdraw any
portion of its Capital Account from the Partnership.
6.4 NO TERMINATION
The substitution, death, insanity, dissolution (whether voluntary or
involuntary) or bankruptcy of a Limited Partner will not affect the
existence of the Partnership, and the Partnership will continue for the
term of this Agreement until its existence is terminated as provided
herein.
6.5 SUBSEQUENT LIMITED PARTNERS
The General Partner may accept additional Limited Partners ("Additional
Limited Partners") up to and including the three month anniversary of the
Effective Date; provided that the aggregate Commitments do not at any time
exceed $25,000,000. Each Additional Limited Partner will be treated as
having been a party to this Agreement as of the date hereof for all
purposes (including allocation of Management Fees, Organizational
Expenses, income, profits and loss); provided that each such Additional
Limited Partner shall contribute to the Partnership, on the date of its
admission to the Partnership, an amount of its Commitment equal to its
portion of all Capital Contributions made by the other Partners to the
Partnership prior to such admission date, plus interest from the date of
such earlier Capital Contributions to the date of such Additional Limited
Partner's admission to the Partnership at a rate equal to the greater of:
6.5.110% per annum: or
6.5.2the Prime Rate plus two percentage points per annum.
For purposes of this Section 6.5, a Limited Partner that increases its
Commitment shall be treated as an Additional Limited Partner with respect
to the amount by which its Commitment increased. Upon the admittance of an
Additional Limited Partner or the increase in a Limited Partner's
Commitment, the General Partner may modify Schedule I attached hereto to
reflect such admittance or increase.
6.6 NO ERISA ENTITIES
Investment in the Alliance Funds is not open to institutions, pension
plans and other funds subject to ERISA.
6.7 INDEMNIFICATION AND REIMBURSEMENT FOR PAYMENTS ON BEHALF OF A PARTNER
6.7.1If the Partnership is obligated to pay any amount to a governmental
agency or to any other person (or otherwise makes a payment) because
of a Partner's status or otherwise specifically attributable to a
Partner (including, without limitation, federal withholding taxes
with respect to foreign partners, state personal property taxes,
state unincorporated business taxes, etc.), then such Partner
("Indemnifying Partner") shall indemnify the Partnership in full for
the entire amount paid (including, without limitation, any interest,
penalties and expenses associated with such payment). At the option
of the General Partner, the amount to be indemnified may be charged
against the Capital Account of the Indemnifying Partner and, at the
option of the General Partner, either:
6.7.1.1 promptly upon notification of an obligation to indemnify the
Partnership, the Indemnifying Partner shall make a cash payment
to the Partnership equal to the full amount to be indemnified
(and the amount paid shall be added to the Indemnifying
Partner's Capital Account but shall not be deemed a Capital
Contribution hereunder); or
6.7.1.2 the Partnership shall reduce subsequent distributions which
would otherwise be made to the Indemnifying Partner until the
Partnership has recovered the amount to be indemnified (provided
that the amount of such reduction shall be deemed to have been
distributed for all purposes of this Agreement, but such deemed
distribution shall not further reduce the Indemnifying Partner's
Capital Account).
6.7.2A Partner's obligation to make contributions to the Partnership under
this Section 6.7 shall survive the termination, dissolution,
liquidation and winding up of the Partnership and, for purposes of
this Section 6.7, the Partnership shall be treated as continuing in
existence. The Partnership may pursue and enforce all rights and
remedies it may have against each Partner under this Section 6.7,
including instituting a lawsuit to collect such contribution with
interest calculated at a rate equal to the Prime Rate plus six
percentage points per annum (but not in excess of the highest rate
per annum permitted by law).
6.8 SECTION 754 ELECTION
Upon the written request of Limited Partners holding a majority of the
Limited Partner Interests, the General Partner may, in the General
Partner's sole discretion, make an election provided for in ss.754 of the
Code, if then permitted by applicable law.
6.9 BANK HOLDING COMPANY ACT OF 1956
With respect to any matter requiring the vote, approval or consent of
Limited Partners under this Agreement, each of the Limited Partners
subject to the provisions of the Bank Holding Company Act of 1956, as
amended, may irrevocably elect in writing to the General Partner to
terminate their rights hereunder or under applicable law (to the extent
waivable) to vote, approve or consent to:
6.9.1counsel for Partnership (as contemplated in the definition of
"Opinion of the Partnership's Counsel") and any and all of the
matters referred to in Sections 6.8, 7.2, 8.3 and 12.1 ("Applicable
Sections") of the Agreement; and
6.9.2the removal of the General Partner or any successor thereto and the
appointment of any general partner of the Partnership under
applicable law, with respect to such Limited Partner's interest (or
any transferee thereof) in the Partnership in excess of five percent
(an "Excess Interest").
Upon the receipt by the General Partner of such irrevocable written
election, each such Limited Partner so electing may not (with respect to
their Excess Interest) vote on, approve of or consent to its rights under
applicable law on the matters contained in the Applicable Sections
referred to in such election and such election will be binding upon any
successor to such Excess Interest or any portion thereof.
6.10 LIMITED PARTNER'S DEFAULT ON COMMITMENT
If any Limited Partner (a "Defaulting Partner") fails to make full payment
of any portion of its Commitment when due and such failure is not cured
within ten business days after receipt by such Limited Partner of written
notice from the General Partner with respect to such failure to pay, the
General Partner may in its discretion undertake any one or more of the
following steps:
6.10.1 The General Partner may assist the Defaulting Partner in finding a
buyer for the Defaulting Partner's Partnership interest, provided
that the General Partner will have no obligation to contact any
particular Limited Partner or other person with regard to such sale.
6.10.2 The Partnership may pursue and enforce all rights and remedies the
Partnership may have against such Defaulting Partner with respect
thereto, including a lawsuit to collect the overdue portion of the
Commitment and any other amounts due the Partnership or General
Partner hereunder, with interest at a rate equal to the Prime Rate
plus six percentage points (but not in excess of the highest rate per
annum permitted by law).
6.10.3 The General Partner may offer the Defaulting Partner's interest to
the Partners (other than any Defaulting Partners) pro rata in
accordance with their Commitments on the terms set forth below. If
any Partner does not elect to purchase the entire interest offered to
it, the remaining interest allocable to the Partners will be
re-offered pro rata to the Partners who have purchased the entire
interest offered to them until either all of such interest is
acquired or no Partner wishes to make a further investment. At the
closing of such purchase (on a date and at a place designated by the
General Partner), each purchasing Partner shall:
6.10.3.1 deliver a non-interest bearing, non-recourse (except to the
extent of the Partnership interest purchased and the proceeds
therefrom) ten-year promissory note (in a form approved by the
General Partner) payable to the Defaulting Partner in an amount
equal to the portion of the Defaulting Partner's Capital Account
being purchased by such Partner; and
6.10.3.2 assume the portion of the Defaulting Partner's obligation to
make both defaulted and further Capital Contributions pursuant
to its Commitment which is equal to the portion of the
Defaulting Partner's interest being purchased by such Partner.
The General Partner will handle the mechanics of making the
offers set forth herein and will in its discretion impose
reasonable time limits for acceptance.
6.10.4 If the entire Defaulting Partner's interest is not purchased in the
manner set forth in Section 6.10.3 above, the General Partner in its
sole discretion may offer the remaining interest either:
6.10.4.1 to a third party or parties on the same terms as originally
offered to the Partners pursuant to Section 6.10.3 above (in
which case such third party or parties will, as a condition of
purchasing such interest, become a party to this Agreement); or
6.10.4.2 to the Partners in the manner provided in Section 6.10.3
above, but with no requirement to assume the Defaulting
Partner's obligation to make further capital contributions
pursuant to its Commitment, in which case the Defaulting
Partner's Commitment shall be deemed reduced (effective on the
date of the default) to the amount actually paid in and the
aggregate Commitments of the Partnership shall be reduced by the
amount of such Defaulting Partner's remaining contributions to
be made pursuant to its Commitment.
6.10.5 In addition to, or instead of, the other remedies and undertakings
available to the General Partner pursuant to this Section 6.10, the
General Partner may, in its sole discretion, reduce (effective on the
date of the default, after giving effect to the ten day cure period)
any portion of such Defaulting Partner's Commitment (which has not
been assumed by another Partner) to the amount of the Capital
Contributions (which have not been purchased by another Partner) made
by such Defaulting Partner (net of distributions pursuant to Section
3.2.2) and the aggregate Commitments of the Partnership shall be
commensurately reduced.
6.10.6 Notwithstanding anything contained herein to the contrary, from and
after any date on which a Defaulting Partner's Commitment is reduced
pursuant to Section 6.10.5 above:
6.10.6.1 such Defaulting Partner will have no right to receive any
distributions, except for distributions made upon the
Partnership's liquidation;
6.10.6.2 such Defaulting Partner's Capital Account will not be
credited with any Net Profits from Portfolio Investments or
Short-Term Investment Income which shall instead be allocated to
the Partners (other that any Defaulting Partners) in accordance
with Sections 2.4.2 or 2.4.3, as appropriate (and as adjusted to
treat the Defaulting Partner's Capital Contribution as equal to
zero);
6.10.6.3 until such Defaulting Partner's Capital Account is
reduced to zero:
6.10.6.3.1 such Defaulting Partner's Capital Account shall
continue to be debited in accordance with Section 2.4.4 for
such Defaulting Partner's share of Net Loss from Portfolio
Investments, Partnership Expenses Not Allocable to
Portfolio Investments and Organizational Expenses as if
there had been no reduction in such Defaulting Partner's
Commitment or Capital Contributions; and
6.10.6.3.2 the Management Fee payable by the Partners shall be
calculated as if there had been no reduction in such
Defaulting Partner's Commitment; and
6.10.6.4 once such Defaulting Partner's Capital Account is
reduced to zero:
6.10.6.4.1 such Defaulting Partner's Commitment shall be
reduced to zero for all purposes of the Agreement,
including the calculation of the Partnership's
aggregate Commitments and determination of the
Management Fee: and
6.10.6.4.2 such Defaulting Partner shall be liable each quarter
to the General Partner or Management Agent for an amount
equal to its portion of the Management Fee for such quarter
as if there had been no reduction in such Defaulting
Partner's Commitment.
6.10.7 No consent of any Limited Partner shall be required as a condition
precedent to any transfer, assignment or other disposition of a
Defaulting Partner's interest pursuant to this Section 6.10.
7. DURATION AND TERMINATION
7.1 DURATION
The Partnership will terminate on the tenth anniversary of the Effective
Date, except that, with the consent of Limited Partners holding a majority
of the Limited Partner Interests, the term of the Partnership may be
extended by the General Partner for additional one-year periods (but not
for more than a total of two additional years).
7.2 EARLY TERMINATION
Limited Partners holding 80% of the Limited Partner Interests may
terminate the Partnership at any time.
7.3 TERMINATION AND LIQUIDATION OF PARTNERSHIP INTEREST Upon termination, the
Partnership will be liquidated in an orderly manner. The General Partner
will be the liquidator to wind up the affairs of the Partnership pursuant
to this Agreement.
7.4 FINAL ALLOCATION AND DISTRIBUTION
Upon termination of the Partnership (whether or not an early termination),
the General Partner will make a final allocation of all kinds of income,
loss and expense in accordance with Section 2 hereof and the Partnership's
liabilities and obligations to its creditors shall be paid or adequately
provided for prior to any distributions to the Partners. After payment or
provision for payment of all debts of the Partnership, the remaining
assets, if any, will be distributed among the Partners in accordance with
the respective Capital Account balances (after giving effect to Section
2.4).
8. VALUATION OF PARTNERSHIP ASSETS
8.1 NORMAL VALUATION
For purposes of this Agreement, the value of any security as of any date
(or in the event such date is a holiday or other day which is not a
business day, as of the next preceding business day) will be determined as
follows:
8.1.1a security which is listed on a recognized securities exchange or the
NMS will be valued at its last sales price or, if no sale occurred on
such date, at the last "bid" price thereon;
8.1.2a security which is traded over-the-counter (other than on the NMS)
will be valued at the most recent "bid" price; and
8.1.3all other securities will be valued on such date by the General
Partner at fair market value in such manner as it may reasonably
determine.
8.2 RESTRICTIONS ON TRANSFER OR BLOCKAGE
Any security which is held under a representation that it has been
acquired for investment and not with a view to public sale or
distribution, or which is held subject to any other restriction, or where
the size of the Partnership's holdings compared to the trading volume
would affect its marketability, will be valued at such discount from the
value determined under Section 8.1 above as the General Partner deems
necessary to reflect properly the marketability of such security.
8.3 OBJECTION TO VALUATION
Prior to acting upon its final valuation of any security pursuant to
Sections 8.1.3 or 8.2, the General Partner shall provide the Limited
Partners with notice of the General Partner's valuation of such security.
If within 15 days after delivery of such notice Limited Partners holding a
majority of the Limited Partner Interests deliver written notice to the
General Partner objecting to the valuation of such security, then the
General Partner will (at the Partnership's expense) cause an independent
securities expert mutually acceptable to the General Partner and Limited
Partners holding a majority of the Limited Partner Interests to review
such valuation, and such expert's determination will be binding on the
parties.
8.4 WRITE-DOWN TO VALUE
Any securities which have permanently declined in value as determined by
the General Partner will be written down to their value pursuant to the
provisions of this Section 8 as of the date of such determination.
9. BOOKS OF ACCOUNTS; MEETINGS
9.1 BOOKS
The Partnership will maintain complete and accurate books of account of
the Partnership's affairs at the Partnership's principal office, which
books will be open to inspection by any Partner (or its authorized
representative) at any time during ordinary business hours.
9.2 FISCAL YEAR
The fiscal year of the Partnership will be the calendar year, unless
otherwise determined by the General Partner.
9.3 REPORTS
The General Partner will furnish the Limited Partners:
9.3.1within 45 days after the end of each fiscal quarter, unaudited
financial statements for such quarter and a report disclosing in
summary form the status of all Portfolio Companies, and
9.3.2within 90 days after the end of each fiscal year, unaudited financial
statements for such year, valuations of the Partnership's investments
as of the end of such year (including a statement of each Partner's
closing Capital Account and Fair Value Capital Account balances), and
the Partnership's tax return and the Limited Partners' respective
forms K-1 for such year.
9.4 TAX ALLOCATION
9.4.1The income, gains, losses, deductions and credits of the Partnership
will be allocated for federal, state and local income tax purposes
among the Partners so as to reflect as nearly as possible the
allocation of such income, gains, losses, deductions and credits
among the Partners for computing their Capital Accounts.
Notwithstanding the preceding sentence, if the basis for federal
income tax purposes of any property held by the Partnership differs
from the basis of such property on the Partnership's books, any gain
or loss arising from such property shall be allocated among the
Partners so as to take into account the difference between the tax
basis and the book basis of such property in any manner authorized by
the Treasury Regulations under Section 704(c) of the Code and
selected by the General Partner.
9.4.2If any Partner is treated for income tax purposes as realizing
ordinary income because of receipt of its Partnership interest
(whether under ss.83 of the Code or any similar provisions of any
law, rule or regulation or any other applicable law, rule, regulation
or doctrine) and the Partnership is entitled to any offsetting
deduction, the Partnership's deduction will be allocated among the
Partners in such manner as to, as nearly an possible, offset such
ordinary income realized by such Partner.
9.4.3Notwithstanding any other provision of this Agreement, if a Partner
unexpectedly receives an adjustment, allocation or distribution
described in Treasury Regulation ss.1.704-1(b)(2)(ii)(d)(4), (5) or
(6) which gives rise to a negative capital account (or which would
give rise to a negative capital account when added to expected
adjustments, allocations or distributions of the same type), such
Partner will be allocated items of income and gain in an amount and
manner sufficient to eliminate such deficit balance as quickly as
possible; provided that the Partnership's subsequent income, gains,
losses, deductions and credits will be allocated among the Partners
so as to achieve as nearly as possible the results that would have
been achieved if this Section 9.4.3 had not been in this Agreement,
except that no such allocation shall be made which would violate the
provisions or purposes of Treasury Regulation ss.1.704-1(b).
9.5 ANNUAL MEETING
Commencing in 1998, the General Partner will hold an annual general
informational meeting for the Limited Partners. The General Partner will
give all Limited Partners at least 30 days notice of each annual meeting.
9.6 TAX MATTERS PARTNER
The General Partner is designated the "Tax Matters Partner" (as defined in
Code ss.6231).
10. CERTIFICATE OF LIMITED PARTNERSHIP; POWER OF ATTORNEY
10.1 CERTIFICATE OF PARTNERSHIP
A certificate of Limited Partnership within the meaning of the California
Partnership Act ("Certificate") will be prepared following the execution
and delivery of this Agreement. The General Partner will cause the
Certificate to be filed and recorded in the office of the Secretary of
State of the State of California and, to the extent required by local law,
in the appropriate place in each state in which the Partnership may
hereafter establish a place of business, but the Partnership will not be
obligated to provide the Limited Partners with a copy of any amendment to
or restatement of the Certificate. The General Partner will also cause to
be filed, recorded and published such statements, notices, certificates or
other instruments required by any provision of any applicable law which
governs the formation of the Partnership or the conduct of its business
from time to time.
10.2 POWER OF ATTORNEY
Each of the undersigned does hereby constitute and appoint ▇.▇. ▇▇▇▇▇▇▇▇▇
(so long as ▇▇. ▇▇▇▇▇▇▇▇▇ is a member of the General Partner), and each
person who hereafter becomes a manager of the General Partner with full
power to act without the others, as its true and lawful representative and
attorney-in-fact, in its name, place and stead, to make, execute, sign,
acknowledge and deliver or file:
10.2.1 the Certificate;
10.2.2 any amendment to or cancellation of the Certificate
10.2.3 all instruments, documents and certificates which may from time to
time be required by any law to effectuate, implement and continue the
valid and subsisting existence of the Partnership
10.2.4 all instruments, documents and certificates which may be
required to effectuate the dissolution and termination of the
Partnership; and
10.2.5 in the case of a Defaulting Partner any bills of sale or other
appropriate transfer documents necessary to effectuate transfers of
such Defaulting Partner's interest pursuant to Section 6.10 above.
The powers of attorney granted herein will be deemed to be coupled with an
interest, will be irrevocable and will survive the death, incompetence,
disability or dissolution of a Limited Partner. Without limiting the
foregoing, the powers of attorney granted herein will not be deemed to
constitute a written consent of any Limited Partner for purposes of
Section 12.1.
11. RELATIONSHIP BETWEEN THE ALLINACE FUNDS AND THE PARTNERSHIP
11.1 The General Partner presently intends that the guidelines set forth in
this Section 11 generally will control Co-investments and other dealings
between any other Alliance Fund and the Partnership.
11.2 The Partnership will not purchase from or sell to another Alliance Fund,
except with the prior approval of Limited Partners holding a majority of
Limited Partner Interests.
11.3 The General Partner will decide whether the Partnership will invest in a
company which meets the investment criteria of the Partnership and another
Alliance Fund (as determined by the General Partner in good faith) but in
which neither the Partnership nor such other Alliance Fund has previously
invested. The extent to which the Partnership participates in an
investment in such company (relative to the amount, if any, to be invested
by another Alliance Fund) will be determined also by the General Partner
in its sole discretion.
11.4 The Partnership will invest in a company in which an Alliance Fund has
previously invested only upon approval of the General Partner.
12. MISCELLANEOUS
12.1 AMENDMENTS
This Agreement may be amended by the General Partner in any manner that
does not adversely affect the rights of any Limited Partner and the
General Partner shall furnish notice of any such amendment to the Limited
Partners. This Agreement may also be amended by action taken by both:
12.1.1 the General Partner; and
12.1.2 the Limited Partners owning a majority in interest of the
Capital Accounts of all the Limited Partners at the time of the
amendment,
provided that such amendment does not discriminate among the Limited
Partners.
12.2 NOTICES
All notices provided for under this Agreement shall be in writing and
shall be sufficient if sent by first-class mail to the address set forth
in the schedule in the files of the Partnership as of the date of such
notice for the party to whom such notice is to be given.
12.3 BINDING EFFECT OF AGREEMENT
This Agreement, including Section 10.2 hereof, shall be binding on the
successors, assigns and the legal representatives of each of the Partners.
12.4 COUNTERPARTS
This Agreement may be executed in more than one counterpart with the same
effect as if the Partners executing the several counterparts had all
executed one document.
12.5 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of California, without regard to the principles of
conflicts of law thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
as of the date first above written.
GENERAL PARTNER: LIMITED PARTNER:
Alliance Venture Management, LLC Alliance Semiconductor Corporation
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇▇ By: /s/ N.▇▇▇▇▇▇▇ ▇▇▇▇▇
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signature of authorized signature of authorized
representative representative
▇.▇. ▇▇▇▇▇▇▇▇▇ N. ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------- -------------------------------
printed name printed name
President President and CEO
--------------------------------- -------------------------------
title title
SCHEDULE I
LIMITED PARTNERS
Limited Partner Capital Contribution Commitment
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Alliance Semiconductor Corporation $15,000,000.00
