SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
Biocryst Pharmaceuticals, Inc.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
09058V103
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(CUSIP Number)
Samuel D. Isaly
OrbiMed Advisors LLC
OrbiMed Capital II LLC
767 Third Avenue
New York, NY 10017
Telephone: (212) 739-6400
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(Name, Address and Telephone Number of
Person Authorized to Receive Notices and
Communications)
Copy to:
Paul S. Schreiber, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telephone: (212) 848-4000
February 17, 2004
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(Date of Event which Requires Filing of this Statement)
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If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f), or 13d-1(g), check the following
box [ ].
Check the following box if a fee is being paid with this Statement [ ].
Page 1 of 147
CUSIP No. 068750V102
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Samuel D. Isaly
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(2) Check the Appropriate Box if a Member of a Group (See Instructions)
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(3) SEC Use Only ---------------------------------------------------------
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(4) Source of Funds (See Instructions) AF
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(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e).
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(6) Citizenship or Place of Organization United States
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------------------- (7) Sole Voting Power
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Number of Shares (8) Shared Voting Power 1,666,667
Beneficially --------------------------------------------
Owned by Each --------------------------------------------
Reporting
Person With (9) Sole Dispositive Power
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(10) Shared Dispositive Power 1,666,667
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person 1,666,667
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(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
_ Instructions)
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(13) Percent of Class Represented by Amount in Row (11) 7.82%
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(14) Type of Reporting Person (See Instructions) IN
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Page 2 of 147
CUSIP No. 068750V102
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
OrbiMed Advisors LLC
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(2) Check the Appropriate Box if a Member of a Group (See Instructions)
_ (a) ---------------------------------------------------------------
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_ (b) ---------------------------------------------------------------
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(3) SEC Use Only
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(4) Source of Funds (See Instructions) AF
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(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e).
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(6) Citizenship or Place of Organization Delaware
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Number of Shares (7) Sole Voting Power
Beneficially --------------------------------------------
Owned by Each --------------------------------------------
Reporting
Person With (8) Shared Voting Power 137,878
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(9) Sole Dispositive Power
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(10) Shared Dispositive Power 137,878
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person 137,878
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(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
_ Instructions)
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(13) Percent of Class Represented by Amount in Row (11) 0.65%
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(14) Type of Reporting Person (See Instructions) IA
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Page 3 of 147
CUSIP No. 068750V102
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
OrbiMed Capital LLC
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(2) Check the Appropriate Box if a Member of a Group (See Instructions)
_ (a) ---------------------------------------------------------------
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_ (b) ---------------------------------------------------------------
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(3) SEC Use Only
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(4) Source of Funds (See Instructions) AF
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(5) Check if Disclosure of Legal Proceedings is Required Pursuant to Item
2(d) or 2(e).
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(6) Citizenship or Place of Organization Delaware
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Number of Shares (7) Sole Voting Power
Beneficially --------------------------------------------
Owned by Each --------------------------------------------
Reporting
Person With (8) Shared Voting Power 1,528,819
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(9) Sole Dispositive Power
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(10) Shared Dispositive Power 1,528,819
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person 1,528,819
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(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
_ Instructions)
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(13) Percent of Class Represented by Amount in Row (11) 7.17%
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(14) Type of Reporting Person (See Instructions) CO
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Page 4 of 147
CUSIP No. 068750V102
Page 5 of 147
Item 1. Security and Issuer.
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The class of equity securities to which this Statement on
Schedule 13D relates is the Common Stock (the "Shares"), of Biocryst
Pharmaceuticals, Inc. (the "Issuer"), with its principal executive offices
located at 2190 Parkway Lake Drive, Birmingham, Alabama, 35244.
Item 2. Identity and Background.
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(a) This statement is being filed by Samuel D. Isaly, an
individual ("Isaly"), and by OrbiMed Advisors LLC and OrbiMed Capital II LLC,
limited liability companies organized under the laws of Delaware.
(b)-(c) OrbiMed Advisors LLC is a registered investment adviser
under the Investment Advisers Act of 1940, as amended that acts as investment
adviser or general partner to certain clients which hold Shares of the Issuer,
as more particularly described in Item 6 below. OrbiMed Advisors LLC has its
principal offices at 767 Third Avenue, 30th Floor, New York, NY 10017.
OrbiMed Capital II LLC is a registered investment advisor under
the Investment Advisers Act of 1940, as amended that acts as investment adviser
or general partner to certain limited partnerships as more particularly
described in Item 6 below. OrbiMed Capital II LLC has its principal offices at
767 Third Avenue, 30th Floor, New York, NY 10017.
Isaly, a natural person, owns a controlling interest in OrbiMed
Advisors LLC and OrbiMed Capital II LLC.
The directors and executive officers of OrbiMed Advisors LLC and
OrbiMed Capital II LLC are set forth on Schedules I and II, attached hereto.
Schedules I and II set forth the following information with respect to each such
person:
(i) name;
(ii) business address (or residence address where indicated);
(iii) present principal occupation or employment and the name,
principal business and address of any corporation or other
organization in which such employment is conducted; and
(iv) citizenship.
(d)-(e) During the last five years, neither the Reporting
Persons nor any Person named in Schedules I through IV have been (i) convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors)
or (ii) a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Page 6 of 147
(f) Isaly is a citizen of the United States.
Item 3. Source and Amount of Funds or Other Consideration.
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On February 17, 2004, pursuant to the authority of OrbiMed
Advisors LLC and OrbiMed Capital II LLC under their respective investment
advisory contracts and limited partnership or limited liability company
agreements with or relating to Caduceus Private Investments II, LP, Caduceus
Private Investments II (QP), LP and UBS Juniper Crossover Fund, L.L.C. as more
particularly referred to in Item 6 below caused these clients to purchase, in
the aggregate, 1,666,667 Shares of Biocryst Pharmaceuticals, Inc. (the "February
2004 Purchase of Shares"), and as a result of their common control and mutual
affiliation, the Reporting Persons were the beneficial owners of approximately
7.82% of the outstanding Shares of the Issuer.
None of the Reporting Persons have acquired or disposed of any
additional Shares of the Issuer since the February 2004 Purchase of Shares.
Item 4. Purpose of Transaction.
----------------------
As described more fully in Item 3 above, this statement relates
to the acquisition of Shares by the Reporting Persons. The Shares acquired by
the Reporting Persons have been acquired for the purpose of making an investment
in the Issuer and not with the present intention of acquiring control of the
Issuer's business on behalf of their respective advisory clients.
The Reporting Persons have been granted the right to nominate a
representative to the Board of Directors (the "Board") of the Issuer, and expect
exercised that right in the future by the nomination of a representative to the
Board.
The Reporting Persons from time to time intend to review their
investment in the Issuer on the basis of various factors, including the Issuer's
business, financial condition, results of operations and prospects, general
economic and industry conditions, the securities markets in general and those
for the Issuer's Shares in particular, as well as other developments and other
investment opportunities. Based upon such review, the Reporting Persons will
take such actions in the future as the Reporting Persons may deem appropriate in
light of the circumstances existing from time to time. If the Reporting Persons
believe that further investment in the Issuer is attractive, whether because of
the market price of the Issuer's Shares or otherwise, they may acquire shares of
common stock or other securities of the Issuer either in the open market or in
privately negotiated transactions. Similarly, depending on market and other
factors, the Reporting Persons may determine to dispose of some or all of the
Shares currently owned by the Reporting Persons or otherwise acquired by the
Reporting Persons either in the open market or in privately negotiated
transactions.
Except as set forth above, the Reporting Persons have not
formulated any plans or proposals which relate to or would result in: (a) the
acquisition by any person of additional securities of the Issuer or the
disposition of securities of the Issuer, (b) an extraordinary corporate
transaction involving the Issuer or any of its subsidiaries, (c) a sale or
transfer of a material amount of the assets of the Issuer or any of its
subsidiaries, (d) any change in the present board of directors or management of
the Issuer, (e) any material change in the Issuer's capitalization or
Page 7 of 147
dividend policy, (f) any other material change in the Issuer's business or
corporate structure, (g) any change in the Issuer's charter or bylaws or other
or instrument corresponding thereto or other action which may impede the
acquisition of control of the Issuer by any person, (h) causing a class of the
Issuer's securities to be deregistered or delisted, (i) a class of equity
securities of the Issuer becoming eligible for termination of registration or
(j) any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
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(a)-(b) As of this date of this filing, Samuel D. Isaly, OrbiMed
Advisors LLC and OrbiMed Capital II LLC may be deemed directly or indirectly,
including by reason of their mutual affiliation, to be the beneficial owners of
1,666,667 Shares. Based upon information contained in the most recent available
filing by the Issuer with the SEC, such Shares constitute approximately 7.82% of
the issued and outstanding Shares. As described above in Item 2, Isaly owns,
pursuant to the terms of the limited liability company agreement of each of
OrbiMed Advisors LLC and OrbiMed Capital II LLC, a controlling interest in the
outstanding limited liability company interests of such entity. As a result,
Samuel D. Isaly, OrbiMed Advisors LLC and OrbiMed Capital II LLC share power to
direct the vote and to direct the disposition of 1,666,667 Shares.
(c) Except as disclosed in Item 3, the Reporting Persons have
not effected any transaction in the Shares during the past 60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
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Respect to Securities of the Issuer.
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In addition to the relationships between the Reporting Persons
described in Item 5, OrbiMed Capital II LLC is the general partner of Caduceus
Private Investments II, LP ("Caduceus II") and Caduceus Private Investments II
(QP), LP ("Caduceus II (QP)"), private equity funds, pursuant to the terms of
the limited partnership agreement of each. OrbiMed Advisors LLC, through a joint
venture with UBS Fund Advisor, L.L.C. entitled UBS Juniper Management, LLC, acts
as investment manager of Juniper, a registered investment company, pursuant to
the terms of the UBS Juniper Crossover Fund, L.L.C. investment advisory
agreement. Pursuant to these agreements and relationships, OrbiMed Advisors LLC
and OrbiMed Capital II LLC have discretionary investment management authority
with respect to the assets of Caduceus II, Caduceus II (QP) and Juniper. Such
authority includes the power to vote and otherwise dispose of securities
purchased by Caduceus II, Caduceus II (QP) and Juniper, including the total
1,666,667 Shares of the Issuer held by Caduceus II, Caduceus II (QP) and
Juniper. As noted above under Item 4, the Reporting Persons, as a group, have
their representative on the Board of the Issuer and accordingly the Reporting
Persons may have the ability to effect and influence control of the Issuer.
Other than the agreements and the relationships mentioned above,
to the best knowledge of the Reporting Persons, there are no contracts,
arrangements, understandings or
Page 8 of 147
relationships (legal or otherwise) among the persons named in Item 2 and between
such persons and any persons with respect to any securities of the Issuer,
including, but not limited to, transfer or voting of any of the Shares, finder's
fees, joint ventures, loan or option arrangements, puts or calls, guarantees of
profits, division of profits or loss, or the giving of withholding of proxies.
Page 9 of 147
Item 7. Material to Be Filed as Exhibits.
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Exhibit Description
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A. Amended and Restated Limited Partnership Agreement of Caduceus Private
Investments II, LP
B. Amended and Restated Limited Partnership Agreement of Caduceus Private
Investments II (QP), LP
C. Investment Advisory Agreement between UBS Juniper Management, L.L.C.
and UBS Juniper Crossover Fund, L.L.C.
D. Joint Filing Agreement among Samuel D. Isaly, OrbiMed Advisors LLC and
OrbiMed Capital II LLC.
Page 10 of 147
Signature
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this Statement is true,
complete and correct.
February __, 2004 SAMUEL D. ISALY
By: /s/ Samuel D. Isaly
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Name: Samuel D. Isaly
ORBIMED ADVISORS LLC
By: /s/ Samuel D. Isaly
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Name: Samuel D. Isaly
Title: Managing Member
ORBIMED CAPITAL II LLC
By: /s/ Samuel D. Isaly
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Name: Samuel D. Isaly
Title: Managing Member
Page 11 of 147
Schedule I
The name and present principal occupation of each of the
executive officers and directors of OrbiMed Advisors LLC are set forth below.
Unless otherwise noted, each of these persons are United States citizens and
have as their business address 767 Third Avenue, New York, NY 10017.
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Name Position with Reporting Person Principal Occupation
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Samuel D. Isaly Managing Partner Partner
OrbiMed Advisors LLC
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Michael Sheffery Partner Partner
OrbiMed Advisors LLC
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Carl L. Gordon Partner Partner
OrbiMed Advisors LLC
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Sven Borho Partner Partner
German and Swedish Citizen OrbiMed Advisors LLC
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Eric A. Bittelman Chief Financial Officer Chief Financial Officer
OrbiMed Advisors LLC
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Page 12 of 147
Schedule II
The name and present principal occupation of each of the executive
officers and directors of OrbiMed Capital II LLC are set forth below. Unless
otherwise noted, each of these persons are United States citizens and have as
their business address 767 Third Avenue, New York, NY 10017.
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Name Position with Reporting Person Principal Occupation
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Samuel D. Isaly Managing Partner Partner
OrbiMed Capital II LLC
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Michael Sheffery Partner Partner
OrbiMed Capital II LLC
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Carl L. Gordon Partner Partner
OrbiMed Capital II LLC
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Sven Borho Partner Partner
German and Swedish Citizen OrbiMed Capital II LLC
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Eric A. Bittelman Chief Financial Officer Chief Financial Officer
OrbiMed Capital II LLC
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Page 13 of 147
EXHIBIT INDEX
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Exhibit Description Page No.
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A. Limited Partnership Agreement of Caduceus Private A-1
Investments II, LP.
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B. Limited Partnership Agreement of Caduceus Private B-1
Investments II (QP), LP.
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C. Investment Advisory Agreement between UBS Juniper C-1
Management, LLC and UBS Juniper Crossover Fund, LLC.
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D. Joint Filing Agreement among Samuel D. Isaly, OrbiMed D-1
Advisors LLC and OrbiMed Capital, LLC.
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Page 14 of 147
A-1
THE PARTNERSHIP INTERESTS EVIDENCED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY STATE OR
FOREIGN JURISDICTION AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH
APPLICABLE FEDERAL, STATE OR FOREIGN SECURITIES LAWS. IN ADDITION, TRANSFER OR
OTHER DISPOSITION OF THE PARTNERSHIP INTERESTS IS RESTRICTED AS PROVIDED IN THIS
AGREEMENT.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
CADUCEUS PRIVATE INVESTMENTS II, LP
Originally dated as of December 20, 2002
Amended and Restated as of September 19, 2003
Page 1 of 147
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions.......................................................1
ARTICLE II
GENERAL PROVISIONS
SECTION 2.01 Name..............................................................8
2.02 Office; Registered Agent ............................................8
2.03 Purposes of the Partnership..........................................8
2.04 Liability of the Partners Generally..................................9
2.05 Fiscal Year .........................................................9
2.06 Admission of Partners................................................9
2.07 Additional Partners .................................................9
2.08 Number of Partners .................................................10
2.09 Competing Funds.....................................................10
2.10 Management Limited Partner .........................................11
ARTICLE III
MANAGEMENT, ADMINISTRATION AND OPERATIONS OF THE PARTNERSHIP
SECTION 3.01 Management Generally.............................................11
3.02 Authority of the General Partner....................................13
3.03 Other Authority.....................................................14
3.04 Expenses ...........................................................15
3.05 Restriction on Borrowings ..........................................16
3.06 Certain Contributions by the General Partner........................16
3.07 Transactions with Affiliates........................................17
3.08 Other Activities; Conflicts of Interest.............................17
3.09 Books and Records; Accounting Method ...............................18
3.10 Confidentiality ....................................................18
3.11 Partnership Tax Returns.............................................19
3.12 Annual Meeting .....................................................19
3.13 Reliance by Third Parties...........................................19
3.14 ERISA...............................................................20
ARTICLE IV.
INVESTMENTS AND OPPORTUNITIES
SECTION 4.01 Investment Generally.............................................20
4.02 Co-Investments .....................................................21
4.03 Suitability of Investments .........................................22
4.04 Structuring of Investments; Parallel Investments ...................22
Page 2 of 147
4.05 Direct Investments .................................................23
4.06 Exclusion from Investments .........................................26
4.07 Tax Undertaking with Respect to Investments ........................26
ARTICLE V
CAPITAL COMMITMENTS AND CAPITAL CONTRIBUTIONS
SECTION 5.01 Capital Contributions............................................27
5.02 Drawdown Procedures.................................................27
5.03 Management Fee......................................................30
5.04 Loans to Fund Drawdowns ............................................30
5.05 Default by Partners ................................................31
5.06 Excuse Procedure....................................................33
5.07 Temporary Investment of Funds.......................................34
ARTICLE VI
DISTRIBUTIONS; CAPITAL ACCOUNTS; ALLOCATIONS
SECTION 6.01 Distributions Generally..........................................34
6.02 Proceeds of Partnership Investments ................................34
6.03 Other General Principles of Distribution ...........................37
6.04 [Intentionally omitted] ............................................39
6.05 Special Expense Distributions ......................................39
6.06 Loans and Withdrawal of Contributions...............................39
6.07 Capital Accounts....................................................39
6.08 Adjustments to Capital Accounts.....................................39
6.09 Allocations of Income, Gain, Loss, Deduction and Credit ............40
6.10 Tax Allocations.....................................................41
6.11 Reinvestment of Proceeds............................................41
ARTICLE VII
REPORTS TO PARTNERS
SECTION 7.01 Reports..........................................................42
7.02 Audit ..............................................................42
ARTICLE VIII
EXCULPATION AND INDEMNIFICATION
SECTION 8.01 Exculpation and Indemnification..................................43
8.02 Exclusive Jurisdiction .............................................45
ARTICLE IX
DURATION AND DISSOLUTION OF THE PARTNERSHIP
SECTION 9.01 Duration.........................................................45
9.02 Dissolution ........................................................45
9.03 Liquidation of Partnership .........................................46
9.04 Distribution Upon Dissolution of the Partnership ...................46
9.05 Withdrawal, Death or Incompetency of a Partner .....................47
ARTICLE X
TRANSFERABILITY OF GENERAL PARTNERS' INTEREST
SECTION 10.01 Transferability of General Partners' Interest...................47
10.02 Advisers Act.......................................................47
ARTICLE XI
TRANSFERABILITY OF A PARTNER'S INTEREST
SECTION 11.01 Restrictions on Transfer........................................48
11.02 Expenses of Transfer: Indemnification..............................48
11.03 Recognition of Transfer; Substituted Partners......................48
11.04 Transfers During a Fiscal Year ....................................49
11.05 No Secondary Market ...............................................49
ARTICLE XII
MISCELLANEOUS
SECTION 12.01 Amendments to the Partnership Agreement ........................49
12.02 Approvals..........................................................50
12.03 Investment Representation..........................................50
12.04 Successors; Counterparts; Entire Agreement.........................51
12.05 Choice of Law......................................................51
12.06 Notices ...........................................................51
12.07 Headings ..........................................................51
12.08 Agreement Binding Upon Successors and Assigns .....................51
12.09 Counterparts ......................................................51
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
CADUCEUS PRIVATE INVESTMENTS II, LP
WHEREAS, the undersigned have previously agreed to form and did form,
a limited partnership pursuant to the provisions of the Delaware Revised Uniform
Limited Partnership Act pursuant to the terms and provisions of a Limited
Partnership Agreement dated as of December 20, 2002 (herein called the "Original
Agreement"); and
WHEREAS, the General Partner and the Required Partners hereby desire
to amend and restate the Original Agreement as of the date hereof as set forth
herein.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Capitalized terms used herein without
definition have the following meanings:
"Additional GP Cash Contribution" means the amount of any Capital
Contribution that the General Partner has made in cash pursuant to Section 5.02,
reduced by the portion of such Capital Contribution that the General Partner was
required to satisfy in cash as set forth in the definition of "Capital
Commitment."
"Advisers Act" means the Investment Advisers Act of 1940, as amended
from time to time.
"Advisory Committee" means the advisory committee of the Partnership
described in Section 3.01(c).
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this Amended and Restated Limited Partnership
Agreement, as amended from time to time.
"Base Reduction Date" means the date that is the earlier of (i) the
Full Investment Date
and (ii) the date on which any Competing Fund organized in accordance with
Section 2.09 makes its first investment in a portfolio company.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close.
"Capital Account" has the meaning set forth in Section 6.07.
"Capital Commitment" means, with respect to any Limited Partner at
any time, the amount specified as such Limited Partner's capital commitment at
the time such Limited Partner was admitted to the Partnership (as adjusted
pursuant to Sections 2.07 and 5.05), which amount shall be set forth on the
books and records of the Partnership; provided that unless otherwise permitted
by the General Partner the minimum Capital Commitment shall be $5 million per
Limited Partner. With respect to the General Partner, Capital Commitment means
3% of the aggregate Capital Commitments of the Limited Partners subject to the
Management Fee. The General Partner's Capital Commitment when drawn shall be
satisfied in the form of cash or, to the extent such Capital Commitment of the
General Partner exceeds 1% of the aggregate Capital Commitments subject to the
Management Fee, such Capital Commitment may be satisfied as provided for in
Section 5.02 by use of the Credit Amount.
"Capital Contribution" means any cash contribution or other payment
made by such Partner pursuant to Article V or a Parallel Capital Contribution,
it being understood that a Partner's Capital Contribution (including with
respect to Expenses) may not exceed a Partner's Capital Commitment.
"Carried Interest" has the meaning set forth in Section 6.02(a)(4).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Co-Investment" means any investment outside the Partnership pursuant
to Section 4.02.
"Commitment Percentage" means, with respect to any Partner at any
time, the percentage derived by (i) dividing such Partner's Capital Commitment
at such time by the aggregate amount of all Partner's Capital Commitments
(except as otherwise provided herein) at such time and (ii) multiplying such
quotient by 100.
"Credit Amount" means, at any time, the aggregate amount that has
accrued at or prior to such time as follows: (i) for each of the three 12-month
periods following the initial Drawdown Date (which date has not yet occurred as
of the date this Agreement has been amended and restated), an amount equal to
one-half of one percent (0.5%) of the aggregate Capital Commitments subject to
the Management Fee (or, from and after the Base Reduction Date, of the aggregate
invested capital of Limited Partners subject to the Management Fee), and (ii)
for each of the two immediately succeeding 12-month periods following the
aforementioned 36- month period, an amount equal to one-quarter of one percent
(0.25%) of the aggregate Capital Commitments subject to the Management Fee (or,
from and after the Base Reduction Date, of the aggregate invested capital of
Limited Partners subject to the Management Fee), it being understood that the
foregoing shall be calculated and determined pro rata quarterly in advance.
"Default" means, except as otherwise provided in Section 4.05(e), the
failure of a Partner to make all or a portion of its required Capital
Contribution on the applicable Drawdown Date or, in the case of any ERISA
Partner or Early Funding Partner, on the date such ERISA Partner or Early
Funding Partner is required to make such Capital Contribution pursuant to
Section 5.04(a).
"Defaulting Partner" means, at any time, each Partner who, at or prior
to such time, has committed a Default that has become an Event of Default.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership
Act, as amended from time to time.
"Direct Investment" has the meaning set forth in Section 4.05(a).
"Distribution Date" means, with respect to any distribution pursuant
to Article VI or Article IX, the date of such distribution.
"Drawdown" means a drawdown by the Partnership of cash contributions
from one or more Partners pursuant to a Drawdown Notice.
"Drawdown Amount" means the aggregate cash contributions and other
payments to be made on any date by the Partners pursuant to Article V.
"Drawdown Date" has the meaning set forth in Section 5.02(b).
"Drawdown Notice" has the meaning set forth in Section 5.02(a).
"Early Funding Partner" means any Limited Partner that, on or prior to
the date hereof, advises the General Partner in writing that it desires not to
receive any loan pursuant to Section 5.04(a).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Partner" means any Limited Partner that is a "benefit plan
investor" within the meaning of the U.S. Department of Labor "plan asset"
regulations, 29 CFR 2510.3-101(f)(2).
"Event of Default" means, except as otherwise provided in Section
4.05(e), any Default that shall not have been (i) cured by the Partner who
committed such Default within ten Business Days after the occurrence of such
Default or (ii) waived by the General Partner on such terms as determined by the
General Partner in its discretion (unless the Partner who committed such Default
is the General Partner or an Affiliate of the General Partner, in which case the
General Partner shall not waive such Default) before such Default has otherwise
become an Event of Default pursuant to clause (i) hereof.
"Expense" means any Partnership Expense or Parallel Investment Expense
or other applicable expense described in this Agreement.
"Excused Partner" means, with respect to any Investment, any Partner
who is excused pursuant to Section 5.06 from making all or a portion of its
Capital Contribution that would otherwise be required in respect of such
Investment.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day; provided that (i) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (ii) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate quoted to JP
Morgan Chase & Co. on such day on such transactions.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"Final Closing Date" means the earlier of (i) the date on which
subscriptions for the maximum Offering Amount of Partnership Interests and
partnership interests in the QP Fund are accepted by the General Partner and
(ii) September 20, 2003.
"Follow-on Investment" means any further Partnership Investment or
Parallel Investment in securities of any Person in which a Partnership
Investment or Parallel Investment has previously been made.
"Full Investment Date" means the earliest to occur of (i) the fifth
anniversary of the Final Closing Date, (ii) the day on which the Remaining
Capital Commitments are reduced to zero or cancelled pursuant to this Agreement
and (iii) the day on which the "Full Investment Date" occurs under the QP Fund
Agreement; provided that the Full Investment Date may be extended beyond (i),
(ii) and (iii) with the written consent of the Required Partners.
"General Partner" means, at any time, OrbiMed Capital II LLC, a
Delaware limited liability company, or any other Person who, at such time,
serves as the general partner of the Partnership, in its capacity as general
partner of the Partnership.
"Indemnified Person" means the General Partner, the Management
Company, any Affiliate of the General Partner or the Management Company, and any
director, officer, stockholder, partner, member, employee, agent (including any
placement agent retained by the General Partner in connection with the offering
of Partnership Interests and partnership interests in the QP Fund) or
representative of the General Partner, the Management Company or such Affiliate,
including without limitation any officers of the Partnership, and any members of
the Advisory Committee.
"Initial Closing Date" means December 20, 2002.
"Investment" means any Partnership Investment or Parallel Investment.
"Investment Company Act" means the Investment Company Act of 1940, as
amended
from time to time.
"Investment Percentage" of any Partner means, with respect to any
Investment, the percentage derived by (i) dividing the Capital Contributions
made by such Partner in respect of such Investment by the aggregate Capital
Contributions made by all Partners (except as otherwise provided herein) in
respect of such Investment and (ii) multiplying such quotient by 100.
"Key Person Event" means at any time prior to the Full Investment Date
any two of Samuel D. Isaly, Michael B. Sheffery, Carl Gordon or Sven Borho
ceasing to be actively involved in the affairs of the Partnership and the QP
Fund through the General Partner or OrbiMed Advisors LLC and its Affiliates as a
group.
"Limited Partners" means the Partners other than the General Partner,
each in its capacity as a limited partner of the Partnership. For purposes of
the Delaware Act, the Limited Partners shall constitute a single class or group
of limited partners.
"Management Company" means the Person engaged pursuant to Section
3.01(b) to monitor the Partnership Investments and provide administrative and
financial services to the Partnership.
"Management Fee" has the meaning set forth in Section 3.01(b).
"Non-U.S. Investor" means a Limited Partner that is not a U.S. person
for U.S. federal income tax purposes.
"Offering Amount" means a minimum amount of $50 million and a maximum
amount of $300 million of subscribed Partnership Interests and partnership
interests in the QP Fund from qualified investors and accepted by the General
Partner; provided that the General Partner may increase the maximum amount of
subscriptions hereunder and in the QP Fund to an amount determined in the sole
discretion of the General Partner.
"Offering Memorandum" means the Offering Memorandum relating to
Partnership Interests and partnership interests in the QP Fund, as supplemented
or amended to the date hereof (it being understood and agreed that the Offering
Memorandum is hereby deemed supplemented and amended by the terms of this
Agreement, and in the event of any inconsistencies between the Offering
Memorandum and the terms of this Agreement, the terms of this Agreement shall
control).
"Organizational Expenses" means all reasonable expenses of organizing
the Partnership and the General Partner and all reasonable expenses incurred by
the Partnership or the General Partner in connection with (i) the marketing and
private placement of the Partnership Interests in the Partnership, (ii) the
registration, qualification or exemption of the Partnership under any applicable
federal, state or foreign laws and (iii) the preparation of this Agreement;
provided that in no event shall Organizational Expenses exceed $500,000.
"Out-of-Pocket Expenses" means out-of-pocket expenses incurred by the
Partnership, any Partnership Investment Vehicle or Parallel Investment Vehicle
or the General Partner (other than Professional Expenses), including without
limitation printing costs, travel expenses and brokerage and custodial fees and
expenses.
"Parallel Capital Contribution" means, with respect to any Partner,
cash contribution or other payment in respect of any Parallel Investment or
Parallel Investment Expense made by such Partner pursuant to Article V.
"Parallel Investment" means an investment or series of investments in
or with respect to any entity's securities or assets, other than through the
Partnership, that is contemplated by this Agreement (other than any
Co-Investment) and that is, in the sole judgment of the General Partner, at the
time the opportunity arises to make such investment or series of investments, an
appropriate investment outside the Partnership for one or more Partners;
provided that such entity is not a partnership or a limited liability company
(other than a partnership or limited liability company that is solely a vehicle
for investing in securities that are eligible to be acquired outside the
Partnership by any Partner as a Parallel Investment).
"Parallel Investment Expenses" means (i) all unreimbursed Professional
Expenses and Out-of-Pocket Expenses incurred in connection with identifying,
evaluating, structuring, negotiating, obtaining regulatory approval for,
monitoring and preparing exit strategies for Parallel Investments; (ii) all
unreimbursed Professional Expenses and Out-of-Pocket Expenses incurred in
connection with the acquisition, holding, refinancing, pledging, sale or
proposed refinancing, pledging or sale of all or any portion of any Parallel
Investment; (iii) all expenses with respect to the formation, operation or
administration of any Parallel Investment Vehicle (or, in the absence of any
Parallel Investment Vehicle, any expenses comparable to the foregoing) and (iv)
all investment fees pursuant to any Parallel Investment terms that correspond to
Section 5.03.
"Parallel Investment Ownership Interest" means, at any time and with
respect to any Partner that is a Participating Partner with respect to any
Parallel Investment, (i) in the case of a Parallel Investment owned directly by
such Partner at such time, such Partner's ownership interest in such Parallel
Investment, and (ii) in the case of a Parallel Investment owned indirectly by
such Partner at such time through a Parallel Investment Vehicle, such Partner's
ownership interest in such Parallel Investment Vehicle. 6
"Parallel Investment Vehicle" means any entity formed for the purpose
of making any Parallel Investment in accordance with Section 4.04.
"Participating Partner" means, with respect to any Investment, any
Partner who has made a Capital Contribution in respect of such Investment.
"Partners" means the General Partner and each Limited Partner admitted
in accordance with Section 2.06 and any additional Limited Partners admitted in
accordance with Section 2.07.
"Partnership" means Caduceus Private Investments II, LP, the Delaware
limited
partnership governed by this Agreement.
"Partnership Expenses" has the meaning set forth in Section 3.04(a).
"Partnership Interests" means the partnership interests in the
Partnership.
"Partnership Investment" means an investment or series of investments
by the Partnership in or with respect to any entity's securities or assets that
is, in the sole judgment of the General Partner at the time the opportunity
arises to make such investment or series of investments, an appropriate
investment for the Partnership; provided that such entity is not a partnership
or limited liability company (other than a partnership or limited liability
company that is solely a vehicle for investing in securities that are eligible
to be acquired by the Partnership as a Partnership Investment). Each Direct
Investment shall be deemed to be a Partnership Investment for all purposes of
this Agreement.
"Partnership Investment Expense" means any expenses incurred in
connection with consummating investment transactions that are attributable to a
specific investment.
"Partnership Investment Vehicle" means any entity wholly owned by the
Partnership formed for the purpose of making any Partnership Investment in
accordance with Section 4.01.
"Partnership Investment Vehicle Expenses" means all expenses with
respect to the formation, operation or administration of any Partnership
Investment Vehicle.
"Person" means any individual, company, corporation, trust, limited
liability company, partnership, or other entity.
"Prime Rate" means the rate of interest publicly announced by JP
Morgan Chase & Co. in New York City from time to time as its prime rate.
"Proceeds" means, with respect to any Investment, any cash and
non-cash proceeds received from any sale, exchange, extinguishments,
cancellation, termination, lapse, transfer or other disposition of securities or
other assets constituting all or any portion of such Investment (except, in the
discretion of the General Partner, any securities that are received pursuant to
a recapitalization or reorganization of any entity in which an Investment has
been made) and any dividends, interest or other income received in connection
with such Investment (x) less any Expenses incurred in connection with the
receipt of such proceeds or income and (y) plus the amount of any withholding or
other tax imposed with respect to any Participating Partner's participation in
such Investment.
"Professional Expenses" means the expenses incurred by the
Partnership, any Partnership Investment Vehicle or Parallel Investment Vehicle
or the General Partner in respect of the fees and expenses of auditors,
attorneys, tax advisors and consultants (but excluding consulting fees paid to
the General Partner or its Affiliates for services intended to be covered by the
Management Fee or activities of the General Partner required to be performed
pursuant to its obligations hereunder).
"Proposed Partnership Investment" means any Partnership Investment
that the Partnership has committed to make.
"Proposed Parallel Investment" means any Parallel Investment that the
General Partner or any Parallel Investment Vehicle has committed to make or
cause to be made.
"QP Conduit" means one of two special purpose vehicles set up to
invest directly in the QP Fund.
"QP Fund" means Caduceus Private Investments II (QP), LP, a Delaware
limited partnership formed to make investments in parallel with the Partnership
and whose investors shall be "qualified purchasers" (as defined in the
Investment Company Act) in compliance with Section 3(c)(7) of the Investment
Company Act.
"QP Fund Agreement" means the Limited Partnership Agreement of the QP
Fund, as amended from time to time.
"QP Fund Investment" means a "Partnership Investment" as defined in
the QP Fund Agreement.
"QP Partner" means a limited partner in the QP Fund (other than the QP
Conduits) and an indirect investor in the QP Fund holding interests in a QP
Conduit.
"Remaining Capital Commitment" means, with respect to any Partner at
any time, the excess, if any, of (i) such Partner's Capital Commitment at such
time over (ii) such Partner's aggregate Capital Contributions made prior to such
time.
"Remaining Commitment Percentage" means, with respect to any Partner
at any time, the percentage derived by (i) dividing such Partner's Remaining
Capital Commitment at such time by the aggregate amount of all Partner's
Remaining Capital Commitments (except as otherwise provided herein) at such time
and (ii) multiplying such quotient by 100.
"Required Partners" means at any time Limited Partners and QP Partners
(other than Limited Partners who are the General Partner, the Management
Company, their Affiliates or respective employees, and Defaulting Partners and
defaulting QP Partners) having at least a majority of, collectively and not
voting as separate classes, the aggregate amount of all Partners' Capital
Commitments and QP Partners' capital commitments (other than Capital Commitments
or capital commitments, as the case may be, of the General Partner, the
Management Company, such Affiliates and employees, Defaulting Partners or
defaulting QP Partners).
"Scientific Advisory Board" means the scientific advisory board
described in Section 3.01(d).
"Special Allocation" has the meaning set forth in Section 6.09(d).
"Special Distributions" has the meaning set forth in Section 6.02(e).
"Special Expense Distribution" has the meaning set forth in Section
6.05.
"Special Limited Partner" means any Limited Partner (or group of
Limited Partners that are, in the reasonable determination of the General
Partner, Affiliates of one another) (i) whose Capital Commitment to the
Partnership is in the amount of $10 million or more or (ii) who in the judgment
of the General Partner is capable of providing unique business opportunities to
particular portfolio companies.
"Special Tax Distribution" has the meaning set forth in Section
6.02(c).
"Substituted Partner" has the meaning set forth in Section 11.02.
"Transfer" has the meaning set forth in Section 10.01.
"Tax-Exempt Investor" means a Limited Partner that is a U.S. person
for U.S. federal income tax purposes and that is generally exempt from U.S.
federal income tax.
"Triggering Event" means with respect to any Person, the criminal
conviction or admission by consent (including a plea of no contest or consent to
an injunction or order prohibiting future violations of the securities laws by
the Securities and Exchange Commission or other regulatory body) of such Person
to a violation of the federal securities laws or applicable state law, or of any
rule or regulation promulgated thereunder, or of any criminal statute involving
a material breach of fiduciary duty; or the commission by such Person of an
action, or the omission by such Person to take an action, if such commission or
omission constitutes bad faith, gross negligence, willful misconduct, fraud or
willful or reckless disregard for such Person's duties to the Partnership or the
Limited Partners; or a material and ongoing breach of this Agreement by such
Person.
"Unused Credit Amount" means, at any time, the Credit Amount at such
time, reduced by the sum of (i) the aggregate amount of such Credit Amount that
has theretofore been applied, under Section 5.02, to satisfy the obligation of
the General Partner to make Capital Contributions and (ii) without duplication
of the foregoing, the aggregate amount of Credit Amount with respect to which
Special Distributions have been made to the General Partner under Section
6.02(e).
"U.S. Investor" means a Limited Partner that is a U.S. person for U.S.
federal income tax purposes.
ARTICLE II
GENERAL PROVISIONS
SECTION 2.01. Name. The name of the Partnership is Caduceus Private
Investments II, LP.
SECTION 2.02. Office; Registered Agent. (a) The Partnership has and
shall maintain a registered office in Delaware at, and the name and address of
the Partnership's registered agent in Delaware is, The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Delaware, USA. (b) The business address of the
General Partner shall be OrbiMed Capital II LLC, 767 Third Avenue, 30th Floor,
New York, New York, 10017, USA, or such other place as the General Partner shall
specify by notice to all the Partners.
SECTION 2.03. Purposes of the Partnership. (a) The purposes of the
Partnership are (i) to identify potential Partnership Investments, (ii) to
acquire, hold and dispose of Partnership Investments, (iii) pending utilization
or disbursement of funds, to invest such funds in accordance with the terms of
this Agreement and (iv) to do everything necessary or desirable for the
accomplishment of the above purposes or the furtherance of any of the powers
herein set forth and to do every other act and thing incident thereto or
connected therewith.
(b) The Partnership shall make Investments only in health care and
health-care related businesses with a particular focus on entities engaged in
drug discovery and development, medical devices and medical diagnostics, and
technology to facilitate the foregoing; provided that the Partnership may hold
cash in money market funds and other short-term cash investments and may engage
in hedging techniques using derivatives with respect to foreign currency risk,
interest rate risk, and hedging gains with respect to Investments.
(c) The Partnership, and the General Partner on behalf of the
Partnership, may enter into and perform a subscription agreement with each
Limited Partner and any agreements to induce any Person to purchase interests in
the Partnership and any documents contemplated thereby or related thereto and
any amendments thereto, without any further act, vote or approval of any Person,
including any Partner, notwithstanding any other provision of this Agreement.
The General Partner is hereby authorized to enter into the documents described
in the preceding sentence on behalf of the Partnership, but such authorization
shall not be deemed a restriction on the power of the General Partner to enter
into other documents on behalf of the Partnership.
SECTION 2.04. Liability of the Limited Partners Generally. Except as
otherwise provided in this Agreement or the Delaware Act, no Limited Partner (or
former Limited Partner) shall be obligated to make any contribution of capital
to the Partnership or have any liability for the debts and obligations of the
Partnership.
SECTION 2.05. Fiscal Year. The fiscal year of the Partnership for
financial statements and United States federal income tax purposes shall end on
December 31st (or such other date as may be required by law).
SECTION 2.06. Admission of Limited Partners. On the Initial Closing
Date, each Person whose subscription for a Partnership Interest in the
Partnership has been accepted by the General Partner shall, upon execution and
delivery of a counterpart of this Agreement, become a Limited Partner and shall
be shown as such on the books and records of the Partnership.
SECTION 2.07. Additional Limited Partners. (a) At any time during the
period
commencing on the Initial Closing Date and ending on the Final Closing Date, the
General Partner may at its discretion cause the Partnership to admit additional
Limited Partners or allow any Limited Partner to increase its original Capital
Commitment. Upon the execution and delivery of a counterpart of this Agreement,
each such additional Limited Partner shall become a Limited Partner of the
Partnership and shall be shown as such on the books and records of the
Partnership. Neither the admission of any additional Limited Partner to the
Partnership nor the increase in the original Capital Commitment of any existing
Limited Partner pursuant to this Section 2.07 shall require the approval of any
Limited Partners existing immediately prior to such admission or increase.
(b) Additional Limited Partners admitted to the Partnership on any
Closing Date other than the Initial Closing Date (and to the extent of any
increase in their Capital Commitments on any such Closing Date, Limited Partners
so increasing their Capital Commitments) shall make Capital Contributions for
their pro rata share (on a combined basis with all Partners and QP Partners) of
the Capital Contributions previously made by Partners for any Partnership
Investments still held by the Partnership and the capital contributions
previously made by the QP Partners for QP Fund Investments still held by the QP
Fund at the time of their admission and for drawn but uninvested Capital
Contributions and Partnership Expenses and Management Fees and analogous amounts
under the QP Fund Agreement plus interest at the Prime Rate on such amounts from
the date of each such contribution (or the initial Drawdown Date, in the case of
Management Fees) to the date of the subsequent closing, and will share in any
subsequent distributions and allocations of items of income, gain, loss or
expense of the Partnership that are attributable to any such Investment. Amounts
so contributed may result in dilution to existing Partners with respect to
Partnership Investments made prior to such contribution (and a portion of such
contribution shall be paid to the Management Company in the case of Management
Fees) or be applied to purchase QP Fund Investments such that the Partnership,
on the one hand, and the QP Fund, on the other hand, will each hold a share of
such investments, pro rata in the same proportion that the aggregate Capital
Commitments bear to the aggregate capital commitments of the QP Fund. The
purchase by the Partnership of such QP Fund Investments from the QP Fund shall
be made at the QP Fund's cost in such QP Fund Investments plus an interest
component on such amount equal to the Prime Rate. The interest component
provided for above shall not be treated as income of the Partnership and shall
be allocated to the existing Partners outside the Partnership by the General
Partner.
(c) No additional Limited Partner or Substituted Partner shall be
admitted to the Partnership, and no existing Limited Partner shall be allowed to
increase its original Capital Commitment, unless the admission of such Limited
Partner or the increase of such Capital Commitment (i) would not, in the
judgment of the General Partner, jeopardize the status of the Partnership as a
partnership for United States federal income tax purposes, cause a dissolution
of the Partnership under the Delaware Act or for United States federal income
tax purposes, cause the Partnership's assets to be deemed to be "plan assets"
for purposes of ERISA, cause the Partnership to be deemed to be an "investment
company" for purposes of the Investment Company Act, cause the General Partner
to be in violation of the Advisers Act, or cause the Partnership or any of its
affiliates to be in violation of the Securities Act of 1933, as amended, and
(ii) would not, in the judgment of the General Partner, violate, or cause the
Partnership to violate, any other applicable law or regulation.
(d) Each Partner understands and agrees that the QP Fund Agreement
will contain a provision analogous to this Section 2.07 enabling the QP Fund to
admit additional QP Partners and to permit existing QP Partners to increase
their capital commitments to the QP Fund, in each case on or prior to the Final
Closing Date.
SECTION 2.08. Number of Partners; Tax Treatment. The Partnership will
have no more than 100 beneficial owners, in compliance with the exemption from
registration as an "investment company" provided by Section 3(c)(1) of the
Investment Company Act. It is the intention of the Partners that the Partnership
be treated as a partnership for U.S. federal, state and local income tax
purposes. Notwithstanding anything to the contrary in this Agreement, neither
the General Partner nor any Limited Partner shall take any action inconsistent
with such treatment, including the filing of any election to treat the
Partnership as a corporation for U.S. federal, state or local income tax
purposes
SECTION 2.09. Competing Funds. Without the consent of the Required
Partners, neither the General Partner nor its Affiliates shall close any other
pooled investment fund (other than the QP Fund or a Parallel Investment Vehicle
or funds existing or demonstrably contemplated on the date hereof) which has as
its primary investment objective privately negotiated equity investments that
are substantially similar to the types of investments to be made by the
Partnership (any such fund being referred to hereinafter as a "Competing Fund"),
until the earlier of (i) the time at which at least 70% of the aggregate Capital
Commitments and the capital commitments of the QP Fund have been committed to or
invested in, called for contribution for investment in, or reserved by the
General Partner for Follow-on Investments with respect to, Investments, or
follow-on investments with respect to investments by the QP Fund, and/or paid or
reserved for payment of past or accrued Management Fees and Partnership Expenses
(or analogous amounts with respect to the QP Fund) and (ii) the Full Investment
Date. Until the Full Investment Date, a Competing Fund permitted by the
preceding sentence shall co-invest alongside the Partnership (and the QP Fund
and any Parallel Investment Vehicle) only on the same terms and conditions in
all material respects; provided that such Competing Fund shall not co-invest in
respect of a Follow-On Investment unless (x) such Competing Fund shall have
previously co-invested in respect of the initial Investment that gave rise to
such Follow-On Investment or (y) the Partnership has insufficient remaining
capital to complete such Follow-On Investment.
SECTION 2.10. Management Limited Partner. CPI Capital Services Inc.
(the "Management Limited Partner"), in its capacity as Limited Partner of the
Partnership, shall be vested with and shall, under the general supervision of
the General Partner and with the General Partner's written consent with respect
to each action or decision, have the right to act or cause the taking or
refraining from the taking of any action, including by proposing, approving,
consenting or disapproving, by voting or otherwise, with respect to the
following matters:
(1) the sale, exchange, lease, mortgage, assignment, pledge or
other transfer of, or granting of a security interest in, any
asset or assets of the Partnership;
(2) the incurrence, renewal, refinancing or payment or other
discharge of
indebtedness by the Partnership;
(3) the making of other determinations in connection with or
concerning investments of the Partnership, including investments
in property, whether real, personal or mixed.
Notwithstanding the foregoing rights of the Management Limited Partner, nothing
in this Section 2.10 shall be construed to limit in any way the authority of the
General Partner to act alone in taking any action or making any decision on
behalf of the Partnership or to require the participation, approval or consent
of the Management Limited Partner with respect to any such decision.
ARTICLE III
MANAGEMENT, ADMINISTRATION AND OPERATIONS OF THE PARTNERSHIP
SECTION 3.01. (a) Management Generally. The management and control of
the Partnership shall be vested exclusively in the General Partner, provided
that certain administrative duties may be delegated by the General Partner as
provided in paragraph (b) to this Section 3.01 and as provided in paragraphs (c)
and (d) to this Section 3.01. The Limited Partners shall have no part in the
management or control of the Partnership, shall exercise no influence over the
management or policies of the Partnership and shall have no authority or right
to act on behalf of or bind the Partnership in connection with any matter;
provided that the General Partner shall consult with the Advisory Committee on
certain matters from time to time as provided herein.
(b) Administrative Services. The Partnership may retain the services
of one or more entities to render various administrative services to the
Partnership and may pay reasonable and customary compensation for such services
as follows. The Partnership may retain an Affiliate of the General Partner to
provide such administrative services. The General Partner shall engage OrbiMed
Advisors LLC, a Delaware limited liability company and an Affiliate of the
General Partner, as its Management Company to manage the business of the
Partnership and provide the foregoing administrative services for a per annum
fee equal to:
(i) during the first 36 months following the initial Drawdown Date
(the "36- Month Mark"), (A) on or prior to the Base Reduction
Date, 1.5% of the aggregate Capital Commitments of all Limited
Partners that are not Affiliates or employees of the General
Partner (the "Non-GP Affiliate Limited Partners") on the first
day of the relevant fiscal quarter and (B) after the Base
Reduction Date, 1.0% of the aggregate remaining invested
capital (as reduced by the cost basis of all Investments that
have been sold or otherwise disposed of by the Partnership
(other than those reinvested as permitted by Section 6.11(a))
of all Non-GP Affiliate Limited Partners on the first day of
the relevant fiscal quarter;
(ii) during the 24-month period immediately succeeding the 36-Month
Mark (the "Succeeding 24-Month Mark"), (A) if the Base
Reduction Date has not occurred, on or prior to the Base
Reduction Date, 1.75% of the aggregate
Capital Commitments of all Non-GP Affiliate Limited Partners on
the first day of the relevant fiscal quarter and (B) after the
Base Reduction Date, 1.25% of the aggregate remaining invested
capital (as reduced by the cost basis of all Investments that
have been sold or otherwise disposed of by the Partnership
(other than those reinvested as permitted by Section 6.11(a))
of all Non-GP Affiliate Limited Partners on the first day of
the relevant fiscal quarter; and
(iii) thereafter (A) if the Base Reduction Date has not occurred, on
or prior to the Base Reduction Date, 2% of the aggregate
Capital Commitments of all Non- GP Affiliate Limited Partners
on the first day of the relevant fiscal quarter, and (B) after
the Base Reduction Date, 1.5% of the aggregate remaining
invested capital (as reduced by the cost basis of all
Investments that have been sold or otherwise disposed of by the
Partnership (other than those reinvested as permitted by
Section 6.11(a)) of all Non-GP Affiliate Limited Partners on
the first day of the relevant fiscal quarter;
to be paid by the Partnership quarterly, in advance (the "Management Fee"). All
cash director's fees, breakup fees, commitment fees, monitoring fees and success
fees received by the General Partner or the Management Company from portfolio
companies constituting Investments (or, with respect to breakup fees, companies
constituting prospective Investments), and travel expenses of the Management
Company incurred with respect to monitoring Investments, shall be offset against
the Management Fee accruing after such receipt for incurrence (appropriately pro
rated between the Partnership and the QP Fund in proportion to their respective
investment percentages in the applicable portfolio company); provided that (x)
in no event shall the Management Fee be reduced below zero and (y) no offset of
the Management Fee shall be made with respect to reimbursements paid to the
General Partner, the Management Company, or their respective Affiliates or
employees for out-of-pocket expenses incurred on behalf or with respect to
portfolio companies. The Management Company will be responsible for monitoring
Investments and funding all ordinary administrative and overhead expenses of the
Partnership and its staff. Non-cash fees received by the General Partner or the
Management Company from portfolio companies constituting Investments shall be
allocated and assigned by the General Partner to the Partnership and the QP Fund
and any other affiliated investment vehicle in proportion to such entity's
investment in such portfolio company.
(c) Advisory Committee. The Partnership's Advisory Committee, which
will also serve as the advisory committee for the QP Fund, will consist of no
less than three and no more than seven representatives of the Limited Partners
and limited partners of the QP Fund, to be appointed by the General Partner. The
Advisory Committee will advise the General Partner on certain matters related to
the Partnership and will have final approval on issues involving any actual or
potential conflicts of interest between the General Partner, the Management
Company and the Partnership. In addition the Advisory Committee will
periodically receive from the Management Company proposed valuations of fund
investments and may request to review such valuations and to take the actions
provided for in Section 6.03(b). Notwithstanding anything to the contrary
contained in this Agreement, a member of the Advisory Committee shall not
constitute a general partner of the Partnership. Notwithstanding anything to the
contrary
contained in this Agreement, none of the actions taken by the Advisory
Committee, any member of the Advisory Committee or the Limited Partners
hereunder shall constitute participation in the control of the business of the
Partnership within the meaning of the Delaware Act. Actions of the Advisory
Committee shall be on the basis of majority voting, with each member of the
Advisory Committee having one vote. The Partners acknowledge that each member of
the Advisory Committee represents the applicable Limited Partner appointing such
member and may act in the best interests of such Limited Partner.
(d) Scientific Advisory Board. The General Partner shall consult from
time to time with the Scientific Advisory Board, which will also serve as the
scientific advisory board for the QP Fund, made up of individuals experienced in
the areas in which the Partnership intends to concentrate its investments. The
General Partner shall decide upon the size and selection process for the
Scientific Advisory Board members. Members of the Scientific Advisory Board
shall be consulted individually from time to time on areas within their
scientific expertise and shall meet periodically as a group, when necessary, to
discuss areas of potential interest to the Partnership. Fees of the Scientific
Advisory Board shall be paid by the Management Company out of the Management
Fee. At any time, the General Partner may remove such Scientific Advisory Board
members from their position(s) on the Scientific Advisory Board.
SECTION 3.02. Authority of the General Partner. The General Partner
shall have the power on behalf and in the name of the Partnership to carry out
any and all of the objectives and purposes of the Partnership and to perform all
acts which it may, in its discretion, deem necessary, desirable or convenient,
including without limitation, the power to:
(a) identify investment opportunities for the Partnership;
(b) acquire, hold, manage, own, sell, transfer, convey, assign,
exchange, pledge or otherwise dispose of any investment made or held by the
Partnership;
(c) open, maintain and close accounts with banks, brokerage firms or
other financial institutions, deposit and withdraw funds in the name of the
Partnership and draw checks or other orders for the payment of moneys;
(d) enter into, and take any action under, any contract, agreement or
other instrument as the General Partner shall determine to be necessary or
desirable to further the purposes of the Partnership, including, without
limitation, granting or refraining from granting any waivers, consents and
approvals with respect to any of the foregoing and any matters incident thereto
and entering into side-letters and agreements with certain Limited Partners;
(e) bring and defend actions and proceedings at law or in equity and
before any governmental, administrative or other regulatory agency, body or
commission;
(f) employ, on behalf and at the expense of the Partnership, and
dismiss from such employment any and all attorneys, accountants, consultants,
appraisers or custodians of the assets of the Partnership or other agents or
employees (who may
be designated as officers with titles), on such terms and for such compensation
as the General Partner may determine, whether or not such Person may be, or also
be otherwise employed by, any Affiliate of the General Partner;
(g) make all elections, investigations, evaluations and decisions,
including the voting of securities held by the Partnership, binding the
Partnership thereby, that may in the judgment of the General Partner be
necessary or desirable for the acquisition, management or disposition of
investments by the Partnership;
(h) enter into and perform any agency cross transaction in which any
Affiliate of the General Partner acts as broker for both the Partnership and a
party on the other side of the transaction or any agency transaction in which
the Partnership is a principal and in which any Affiliate of the General Partner
acts as broker for a party on the other side of the transaction (it being
understood that the General Partner shall disclose any such transaction and its
terms to the Advisory Committee);
(i) incur expenses and other obligations on behalf of the Partnership
in accordance with this Agreement, and, to the extent that funds of the
Partnership are available for such purpose, pay all such expenses and
obligations;
(j) contribute funds to the Partnership in accordance with Section
3.06;
(k) establish reserves in accordance with Sections 5.02(a), 6.03(d)
and 9.04(b) for contingencies and for any other Partnership purpose;
(l) in its discretion, form Partnership Investment Vehicles and permit
Partners to make Parallel Investments outside the Partnership and Direct
Investments; and
(m) act for and on behalf of the Partnership in all matters incidental
to the foregoing.
SECTION 3.03. Other Authority. The General Partner agrees to use its
best efforts (subject to the exceptions noted below) to operate the Partnership
in such a way that (i) the Partnership will not be deemed to be an "investment
company" for purposes of the Investment Company Act, (ii) none of the
Partnership's assets will be deemed to be "plan assets" for purposes of ERISA,
(iii) the Partnership will not generate any "unrelated business taxable income"
as defined in Section 512(a)(1) of the Code (provided that it is understood that
any offsets against the Management Fee and any fees received by the Partnership
attributable to services performed by the General Partner or the Management
Company for portfolio companies may give rise to "unrelated business taxable
income"), (iv) Limited Partners will not, as a consequence of an investment in
the Partnership, be treated as engaged in a trade or business in the United
States or realize any income that is treated as effectively connected with the
conduct of a trade or business in the United States, within the meaning of
Section 864(c) or Section 897(a) of the Code (provided that it is understood
that any offsets against the Management Fee and any fees received by the
Partnership attributable to services performed by the General Partner or the
Management Company for portfolio companies may give rise to such "effectively
connected income"), and (v) the General Partner will be in compliance with the
Advisers Act. Subject to the foregoing and to Section 3.14, the General Partner
is hereby authorized to take any action (including making structural, operating
or other changes in the Partnership, making structural or other changes in any
Investment, amending this Agreement in any manner that would otherwise require
only the approval of the Required Partners pursuant to Section 12.01(a),
canceling in whole or in part the Remaining Capital Commitment of any Partner,
requiring the sale in whole or in part of any Partner's interest in the
Partnership or any Parallel Investment Ownership interest of such Partner, or
dissolving the Partnership) it has determined in good faith to be necessary in
order for (a) the Partnership not to be in violation of the Investment Company
Act or any other material law, regulation or guideline applicable to the
Partnership, (b) the Partnership's assets not to be deemed "plan assets" for
purposes of ERISA, (c) except as set forth in the immediately preceding
sentence, the Partnership will not generate any "unrelated business taxable
income," as defined in Section 512(a)(1) of the Code, (d) except as set forth in
the immediately preceding sentence, Non-U.S. Investors will not, as a
consequence of an investment in the Partnership, be treated as engaged in a
trade or business in the United States or realize any income that is treated as
effectively connected with the conduct of a trade or business in the United
States, within the meaning of Section 864(c) of the Code, and (e) the General
Partner not to be in violation of the Advisers Act or any other material law,
regulation or guideline applicable to the General Partner or any other material
law, regulation or guideline applicable to the Partnership, any of its
Affiliates or any Partner. Prior to taking any action pursuant to this Section
3.03 or, if such prior notice is not reasonably practicable, after taking such
action, the General Partner shall provide notice thereof to any Partner affected
by such action, but such action shall not require the approval of any Partner.
The General Partner shall use commercially reasonable efforts to effect any
action pursuant to this Section 3.03 on a pro rata basis with respect to
similarly situated Limited Partners.
SECTION 3.04. Expenses. (a) Subject to Sections 3.06 and 5.03, the
Partnership shall be responsible for and shall pay all Partnership Expenses. All
Partnership Expenses shall be paid out of funds of the Partnership determined by
the General Partner to be available for such purpose. The aggregate expenses of
the Partnership and the QP Fund shall generally be pro rated by the General
Partner in its reasonable discretion and in accordance with each entity's
aggregate capital commitments. As used herein, the term "Partnership Expenses"
means all expenses or obligations of the Partnership or otherwise incurred by
the General Partner in connection with this Agreement (other than the obligation
of the Partnership to make or pay for any Partnership Investments), including
without limitation:
(i) all Organizational Expenses and ongoing administrative expenses
of the Partnership, certain of which the Partnership intends to
amortize over a period of 60 months;
(ii) all ongoing Professional Expenses for services rendered to or
in connection with the Partnership or in connection with this
Agreement;
(iii) all unreimbursed Out-of-Pocket Expenses incurred in connection
with Partnership activities;
(iv) all unreimbursed Professional Expenses and Out-of-Pocket
Expenses (including Partnership Investment Vehicle Expenses)
incurred in connection with the acquisition, holding,
refinancing, pledging, sale or proposed refinancing, pledging
or sale of all or any portion of any Investment and costs and
expenses of researching, conducting due diligence on and
otherwise maintaining the Investments (including travel
expenses, provided that travel expenses incurred in connection
with monitoring investments shall reduce the Management Fee)
and costs and expenses associated with the retention of
consulting specialists by the General Partner to assist it in
the analysis, purchase and sale of Investments;
(v) all expenses incurred in connection with any litigation or
other proceeding involving the Partnership (including the cost
of any investigation and preparation) and the amount of any
judgment or settlement paid in connection therewith;
(vi) all expenses for indemnity or contribution payable by the
Partnership to any Person, whether payable under Article VIII
or otherwise and whether payable in connection with any
litigation involving the Partnership or otherwise;
(vii) all unreimbursed expenses incurred in connection with the
collection of amounts due to the Partnership from any Person;
(viii) all expenses incurred in respect of any taxes imposed on the
Partnership or in connection with tax proceedings that are
characterized as Partnership Expenses pursuant to Section 3.11;
(ix) all expenses incurred in connection with the preparation of
amendments to this Agreement;
(x) all Partnership Investment Expenses;
(xi) the Management Fee; and
(xii) all expenses incurred in connection with the dissolution and
liquidation of the Partnership.
Notwithstanding the foregoing, the Participating Partners in respect of any
Partnership Investment for which a Partnership Investment Vehicle is formed
shall be responsible for and shall pay all Partnership Investment Vehicle
Expenses with respect to such Partnership Investment Vehicle to the extent of
their respective Capital Commitments, and the other Partners shall be deemed to
have a Capital Commitment equal to zero for purposes of funding such Partnership
Investment Vehicle Expenses.
(b) The Participating Partners in respect of any Parallel Investment
shall be responsible for and shall pay all Parallel Investment Expenses related
to such Parallel Investment to the extent of their respective Capital
Commitments, and the other Partners shall be deemed to have a Capital Commitment
equal to zero for purposes of funding such Parallel Investment Expenses. If the
General Partner determines, in its discretion, that any Expense relates to both
a Partnership Investment and one or more Parallel Investments, the General
Partner shall allocate such Expense among the Partnership and the applicable
Parallel Investment Vehicles (or, in the case of a Parallel Investment without a
Parallel Investment Vehicle, the Participating Partner or Participating Partners
in respect of such Parallel Investment), pro rata in proportion to the aggregate
Capital Contributions made with respect to such Partnership Investment and each
such Parallel Investment.
The General Partner and the Limited Partners acknowledge and agree
that to the extent permitted by law (i) no Parallel Investment Expense shall be
incurred for the benefit of or borne by the Partnership, (ii) no Parallel
Investment Expense shall constitute or be deemed to be a Partnership Expense for
any purpose and (iii) no creditor whose claims arise in connection with any
Parallel Investment shall have any recourse or claim against the Partnership or
any Partnership Investment or be entitled reasonably to rely on the existence of
the Partnership or any Partnership Investment in extending credit with respect
to such Parallel Investment. Without limiting the generality of the foregoing,
to the extent permitted by law (x) no Parallel Investment Expense shall be set
forth on the books and records of the Partnership or, except as otherwise
required by law, listed on the tax returns to be filed by the Partnership and
(y) the Partnership shall not use any of its funds to pay or otherwise satisfy
any Parallel Investment Expense.
SECTION 3.05. Restriction on Borrowings. The Partnership shall not (i)
incur any indebtedness for borrowed money, (ii) guarantee the obligations of any
Person or (iii) otherwise become contingently liable with respect to any
indebtedness of any Person.
SECTION 3.06. Certain Contributions by the General Partner. The
General Partner may, in its discretion, pay any Partnership Expense (or portion
thereof) that the General Partner is otherwise entitled to require the Partners
to fund pursuant to this Agreement, and such payment shall be treated as a cash
contribution by the General Partner and credited to its Capital Account pursuant
to Section 6.08(a). If the General Partner makes cash contributions to the
Partnership pursuant to this Section 3.06, the General Partner shall have the
option to require the Partners to fund, in accordance with Section 5.02(b), a
Special Expense Distribution to the General Partner on any subsequent Drawdown
Date on which the Partners are required to make Capital Contributions in respect
of Investments.
SECTION 3.07. Transactions with Affiliates. In addition to
transactions specifically contemplated by this Agreement, the General Partner,
when acting in its capacity as General Partner of the Partnership, is hereby
authorized to purchase property or obtain services from, to sell property or
provide services to, or otherwise to deal with the General Partner (acting in a
capacity other than its capacity as General Partner of the Partnership), any
Affiliate of the General Partner, any Partner, any Person in which a Partnership
Investment has been, or is proposed to be, made, or any Affiliate of any of the
foregoing Persons; provided that, in connection with any such dealing (other
than those specifically contemplated by the immediately
succeeding sentence of this Section 3.07) between the Partnership and the
General Partner (acting in a capacity other than its capacity as General Partner
of the Partnership), any Affiliate of the General Partner, or any Partner, such
dealing shall be on terms no less favorable to the Partnership than the terms
that would be obtained on an arm's-length basis and the General Partner shall
disclose the arrangements of such dealing to the Advisory Committee. In
connection with any services performed by any Affiliate of the General Partner
for the Partnership, such Affiliate shall be entitled to be compensated by the
Partnership for such services, and the amount of such compensation shall be
determined by the General Partner in its discretion; provided that (x) such
compensation at any time shall not exceed the amount such Affiliate would
customarily receive from third parties as compensation at such time for the
performance of similar services and (y) such services shall not be rendered for
additional compensation if already covered by the Management Fee or if such
services are of a type of activity required to be performed by the General
Partner pursuant to its obligations hereunder. Each Partner acknowledges and
agrees that the purchase or sale of property, the performance of such services,
the borrowing of such funds, other dealings, or the receipt of such compensation
may give rise to conflicts of interest between the Partnership and the Partners,
on the one hand, and the General Partner or such Affiliate, on the other hand.
SECTION 3.08. Other Activities, Conflicts of Interest. (a) Each
Partner (1) represents and warrants that such Partner has carefully reviewed and
understood the information contained in the Offering Memorandum and (2)
acknowledges and agrees that the General Partner or any of its Affiliates may
engage in any of the activities of the type or character described in the
Offering Memorandum under the caption "Certain Risk Factors and Conflicts of
Interest", or elsewhere therein, whether or not such activities have or could
have an effect on the Partnership's affairs or on any Investment. Without
limiting the generality of any of the foregoing, each Partner acknowledges and
agrees that:
(i) the General Partner, any of its Affiliates and any officer or
employee of any such Person shall be required to devote only such time to the
affairs of the Partnership as the General Partner determines in its discretion
may be necessary to manage and operate the Partnership, and any such Person, to
the extent not otherwise directed by the General Partner (but subject to Section
4.03), shall be free to serve any other Person or enterprise in any capacity
that it may deem appropriate in its discretion; and
(ii) Affiliates of the General Partner shall have the right to perform
consulting services for, and to receive compensation from, any Person in which
an Investment has been, or is proposed to be, made; provided that such services
shall not be rendered for additional compensation if already covered by the
Management Fee or if such services are of a type of activity required to be
performed by the General Partner pursuant to its obligations hereunder. In
addition, such Affiliates shall have the right to purchase property (including
securities) from, to sell property or lend funds to, or otherwise to deal with,
any Person in which an Investment has been, or is proposed to be, made.
Employees of the General Partner and its Affiliates may also receive cash and
equity compensation in connection with serving as directors of portfolio
companies. Each Partner further acknowledges and agrees that the performance of
such services, the purchase or sale of such property, the lending of such funds,
other dealings, or the receipt of such fees may give rise to conflicts of
interest between the Partnership and the Partners, on the one hand, and
Affiliates of the General Partner, on the other hand, and that any such fees or
other
compensation will not be shared with the Partnership or any Partner.
(b) Unless otherwise expressly provided herein, whenever a conflict of
interest exists or arises between the General Partner, any of its Affiliates, or
a Limited Partner, on the one hand, and the Partnership or, in the case of the
General Partner or its Affiliates, any Limited Partner, on the other hand, the
General Partner shall, promptly after becoming aware of such conflict of
interest, disclose such conflict of interest to the Advisory Committee, together
with information reasonably necessary to enable the Advisory Committee to
evaluate such conflict of interest, and the Advisory Committee shall resolve
such conflict of interest in its reasonable discretion after consultation with
the General Partner.
SECTION 3.09. Books and Records; Accounting Method. (a) The General
Partner shall keep or cause to be kept at the address of the General Partner (or
at such other place as the General Partner shall advise the other Partners) full
and accurate books and records of the Partnership. Subject to Sections 3.10(a)
and 3.10(b), such books and records shall be available, upon five Business Days'
notice to the General Partner, for inspection and copying at reasonable times
during business hours by each Limited Partner or its duly authorized agents or
representatives for a purpose reasonably related to such Limited Partner's
interest in the Partnership. Each Limited Partner agrees that such books and
records contain confidential information relating to the Partnership and its
affairs.
(b) The Partnership's books of account shall be kept on the same basis
followed by the Partnership for United States federal income tax purposes.
SECTION 3.10. Confidentiality. (a) Each Partner, other than the
General Partner, agrees to keep confidential, and not to disclose to any Person,
any matter relating to the Partnership and its affairs, including the identities
of the other Partners and the beneficial owners of the related Partnership
Interests and any matter related to any Investment (other than disclosure to
such Partner's employees, agents, advisors, or representatives responsible for
matters relating to the Partnership and who need to know such information in
order to perform such responsibilities (each such Person being hereinafter
referred to as an "Authorized Representative") or the other Limited Partners);
provided that such Partner or any of its Authorized Representatives may make
such disclosure to the extent that (i) the information being disclosed is
otherwise generally available to the public, (ii) such disclosure is requested
by any governmental body, agency, official or authority having jurisdiction over
such Partner or (iii) such disclosure, in the written opinion of legal counsel
of such Partner or Authorized Representative, is otherwise required by law.
Prior to making any disclosure described in clause (iii) of this Section
3.10(a), each Partner shall notify the General Partner of such disclosure and
deliver to the General Partner a copy of the opinion referred to in such clause
(iii). Prior to any disclosure to any Authorized Representative, each Limited
Partner shall advise such Authorized Representative of the obligations set forth
in this Section 3.10(a) and obtain the agreement of such Person to be bound by
the terms of such obligations. Notwithstanding any other provision of this
Agreement, any Partner (and each of its employees, representatives or other
agents) may disclose to any and all persons, without limitation of any kind, the
tax treatment and tax structure of the Partnership and any Partnership
Investment or Parallel Investment, provided that the foregoing does not
constitute an authorization to disclose information identifying the Partnership,
the Partners, or
any parties to Partnership Investments or Parallel Investments or (except to the
extent relating to such tax structure or tax treatment) any nonpublic commercial
or financial information.
(b) The General Partner may, to the maximum extent permitted by
applicable law, keep confidential from any Limited Partner any information
(including information requested by such Limited Partner pursuant to Section
3.09) the disclosure of which (i) the Partnership, any Partnership Investment
Vehicle or Parallel Investment Vehicle or the General Partner is required to
keep confidential by law or by the terms of any agreement entered into in good
faith in connection with any proposed Investment or (ii) the General Partner
reasonably believes may have an adverse effect on (x) the ability to consummate
any proposed Investment or any transaction directly or indirectly related to, or
giving rise to, such Investment, (y) the Partnership or any Partnership
Investment Vehicle or Parallel Investment Vehicle or (z) any entity in which an
Investment has been, or is proposed to be, made. If information is withheld from
any Limited Partner pursuant to this Section 3.10(b), the General Partner shall
provide such information to such Limited Partner after the circumstances
described in the preceding sentence are no longer continuing.
SECTION 3.11. Partnership Tax Returns. (a) The General Partner shall
cause to be prepared and timely filed all tax returns required to be filed for
the Partnership. The General Partner may, in its discretion, make, or refrain
from making, any income or other tax elections for the Partnership that it deems
necessary or advisable, including an election pursuant to Section 754 of the
Code.
(b) The General Partner is hereby designated as the Partnership's "Tax
Matters Partner" under Section 6231(a)(7) of the Code. The General Partner is
specifically directed and authorized to take whatever steps the General Partner,
in its discretion, deems necessary or desirable to perfect such designation,
including filing any forms or documents with the Internal Revenue Service and
taking such other action as may from time to time be required under Treasury
regulations. Any Limited Partner shall have the right to participate in any
administrative proceedings relating to the determination of Partnership items at
the Partnership level. Expenses of such administrative proceedings undertaken by
the Tax Matters Partner shall be Partnership Expenses. Each Limited Partner who
elects to participate in such proceedings shall be responsible for any expenses
incurred by such Limited Partner in connection with such participation. The cost
of any resulting audits or adjustments of a Partner's tax return shall be borne
solely by the affected Partner.
(c) The General Partner shall, at the sole cost and expense of the
affected Limited Partner, use commercially reasonable efforts to (i) provide
each Limited Partner with such assistance as such Limited Partner may reasonably
request in connection with any tax filing requirements arising in any
jurisdiction other than the Limited Partner's jurisdiction of residence for tax
purposes and relating to income derived by the Limited Partner from the
Partnership, any Parallel Investment or any Parallel Investment Vehicle and (ii)
assist the Limited Partners in obtaining any tax refunds or other tax benefits
from any such jurisdiction, arising in connection with any Partnership
Investment or Parallel Investment.
SECTION 3.12. Annual Meeting. The General Partner shall call a meeting
of the
Partners on an annual basis by giving notice of such meeting to each Partner not
less than 30 days prior to such meeting. Such notice shall specify the time and
place of such meeting.
SECTION 3.13. Reliance by Third Parties. Persons dealing with the
Partnership are entitled to rely conclusively upon the power and authority of
the General Partner as herein set forth.
SECTION 3.14. ERISA. The General Partner agrees to use its best
efforts to operate the Partnership in such a way that none of the Partnership's
assets would be deemed to be "plan assets" for purposes of ERISA by causing the
Partnership to qualify as a "venture capital operating company" for purposes of
ERISA. If, despite such efforts, the General Partner becomes aware or is
notified that the Partnership's assets may be deemed to be such plan assets, and
reputable counsel to the General Partner issues a legal opinion to the General
Partner confirming that the foregoing is reasonably likely, then the General
Partner may take any action authorized under Section 3.03, including without
limitation canceling in whole or in part the ERISA Partners' respective
Remaining Capital Commitments or requiring the sale in whole or in part of the
ERISA Partners respective Partnership Interests in the Partnership, without the
approval of any ERISA Partner; provided that such cancellation, sale or other
action shall be imposed on all ERISA Partners pro rata in accordance with their
respective Commitment Percentages (calculated without giving effect to the
Capital Commitment of any Partner that is not an ERISA Partner).
ARTICLE IV
INVESTMENTS AND INVESTMENT OPPORTUNITIES
SECTION 4.01. Investments Generally. The assets of the Partnership
shall, to the extent not required for the payment of expenses or otherwise
necessary for the conduct of the Partnership's business (as determined by the
General Partner in its discretion), and subject to Sections 2.03(b), 3.03 and
5.07, be invested in such Partnership Investments as the General Partner shall
determine in its discretion. In the discretion of the General Partner,
Partnership Investments shall be made either directly by the Partnership or
indirectly through one or more Partnership Investment Vehicles, or shall be made
as Direct Investments; provided, that at the time any Investment is made the
General Partner may not, without the consent of the Required Partners, (i)
allocate more than 15% of the aggregate Capital Commitments in any one
Partnership Investment, (ii) allocate more than 25% of the aggregate Capital
Commitments in non-United States entities, or (iii) allocate more than 33% (or
up to 50% with the consent of the Advisory Committee) of the aggregate Capital
Commitments in publicly traded securities; provided, however, that the General
Partner may exceed the foregoing percentages without the consent of the Required
Partners for a period of one year from the date of such Investment in the event
the General Partner intends to syndicate such Investment in order to comply with
the foregoing percentages following such syndication so long as in no event
shall any Investment be allocated more than 25% of the aggregate Capital
Commitments (including any amounts intended for syndication), and any such
deviation from the foregoing 15% limitation with respect to the aggregate
Capital Commitments shall be with respect to no more than one Investment at a
time.
Subject to and in accordance with Section 4.04, the General Partner
may, in its discretion, permit certain Partners (other than an ERISA Partner) to
make Parallel Capital Contributions outside the Partnership in such Parallel
Investments as the General Partner shall determine in its discretion. In the
discretion of the General Partner, Parallel Investments shall be made either
directly by the Participating Partners in respect of such Parallel Investments
or indirectly through one or more Parallel Investment Vehicles.
Notwithstanding the foregoing, the Partnership shall not make any
Investment in connection with a tender offer for outstanding securities of any
Person that is the subject, directly or indirectly, of such Investment if the
Board of Directors (or other analogous body) of such Person recommends in such
Person's Tender Offer Solicitation/Recommendation Statement on Schedule 14D-9,
as amended or supplemented, that security holders not tender securities pursuant
to such offer. It is further understood that the Partnership will not make
Investments of a type or character inconsistent with the investments described
in the Offering Memorandum.
SECTION 4.02. Co-Investments. If, in connection with one or more
proposed Investments arising from a single investment opportunity and subject to
Section 4.03, the General Partner determines, in its discretion, that there are
additional securities available for investment by the Eligible Partners (as
hereinafter defined) outside the Partnership and other than through Parallel
Investments, the General Partner may, in its discretion, offer such Eligible
Partners an opportunity to make a Co-Investment in such additional securities
(the "Excess Amount"). Such securities may be offered to Eligible Partners by
the issuer of such securities or a third party. Each Eligible Partner will be
offered an opportunity to make a Co-Investment in such securities in an amount
equal to the product of (i) such Eligible Partner's Commitment Percentage
(calculated without giving effect to the Capital Commitment of any Partner who
is not an Eligible Partner) times (ii) the Excess Amount. If any Eligible
Partner declines to invest in all or any portion of its share of the Excess
Amount, such uncommitted amount will first be offered to any other Eligible
Partner who has agreed to invest in its share of the Excess Amount and
concurrently advised the General Partner of its willingness to make a
Co-Investment in excess of such share, and the General Partner shall allocate
such uncommitted amount among all such other Eligible Partners on a basis the
General Partner determines in its discretion is, under the circumstances,
equitable and practicable. Notwithstanding the foregoing, the General Partner
shall be free to offer any uncommitted amount (in addition to any securities not
offered to Eligible Partners) to the other Partners (including the General
Partner), or to any other Person, which may include any Affiliates of the
General Partner, funds advised by the General Partner or its Affiliates, or any
director, officer, employee or agent of the General Partner or any of its
Affiliates. For the avoidance of doubt, the General Partner shall not receive
any Carried Interest in respect of Co-Investments made by Eligible Partners.
The term "Eligible Partner" means, with respect to any proposed
Co-Investment, all Special Limited Partners except (i) any Defaulting Partner
and (ii) any Partner who is an Excused Partner with respect to any related
Investment. Any Co-Investment shall be in the same securities and at the same
cost as are applicable to any one or more of the related Investments; provided
that:
(a) such Co-Investment shall be subject to (A) the payment of a
ratable portion of any
expenses incurred by the General Partner or any of its Affiliates in connection
with the making of such Co-Investment and (B) arrangements that would restrict
the voting and transfer of the subject securities (provided that if voting or
transfer restrictions are imposed, such arrangements would not permit the
Partnership (in the case of any Partnership Investment in the same securities)
or any Participating Partner (in the case of any Parallel Investment in the same
securities) to sell all or any portion of such investment unless the Eligible
Partners are given an opportunity to sell on a pro rata basis their
Co-Investment on terms no less favorable than those applicable to the
Partnership or such Participating Partner, as the case may be);
(b) the General Partner and any Eligible Partner may agree to
structure such Co- Investment so as (A) to utilize an investment vehicle
(through which the General Partner (or, at the discretion of the General
Partner, an Affiliate of the General Partner) and such Eligible Partner would
make their investments) or (B) to offer to such Eligible Partner the opportunity
to make a Co-Investment in securities which are different from those securities
offered to other Eligible Partners, in each case only to the extent necessary in
order for neither the General Partner nor any of its Affiliates to be a
"fiduciary" within the meaning of ERISA or an "investment adviser" within the
meaning of the Advisers Act of any Eligible Partner in connection with such
Co-Investment; and
(c) in the case of any Eligible Partner who is subject to Part 4 of
Subtitle B of Title I of ERISA, such Eligible Partner will not be permitted to
participate in such Co-Investment unless such Eligible Partner acknowledges in
writing that neither the General Partner nor any of its Affiliates is a
"fiduciary" within the meaning of ERISA of such Eligible Partner in connection
with such Co-Investment.
Any amounts invested by any Partner pursuant to this Section 4.02 shall not be
accounted for as Capital Contributions and shall in no way affect the Capital
Account or Remaining Capital Commitment of any Partner hereunder.
SECTION 4.03. Suitability of Investments. The General Partner shall
determine in good faith whether any investment offered or available to the
Partnership is an appropriate investment for the Partnership to make (or to
permit the Partners to make) as one or more Investments and, if so, the
aggregate size of such Investment or Investments (which may be less than the
total amount offered to the Partnership).
SECTION 4.04. Structuring of Investments; Parallel Investments. (a) In
structuring any investment opportunity, the General Partner may, in its
discretion but solely to comply with regulatory requirements or tax laws
(including without limitation possible tax efficiencies available to certain
Limited Partners) after such consultation with Partners as the General Partner,
in its discretion, deems appropriate, structure such investment opportunity (i)
as one or more Partnership Investments or (ii) in part as one or more
Partnership Investments and in part as one or more Parallel Investments. In
addition, the General Partner may permit different groups of Partners to make
Capital Contributions with respect to different Investments arising from a
single investment opportunity; provided that (i) no ERISA Partner shall be
permitted or required to make a Capital Contribution with respect to any
Parallel Investment and (ii) no other Partner who advises the General Partner
that it desires not to participate in a Parallel Investment shall be required to
make a Capital Contribution with respect to such Parallel Investment. The
General Partner shall use reasonable efforts to ensure that Participating
Partners invest pro rata based on
their relative Capital Commitments in such Parallel Investments.
(b) If any single investment opportunity is structured as more than
one Investment and the General Partner permits different groups of Partners to
make Capital Contributions with respect to different Investments arising from
such investment opportunity:
(i) the securities comprising any Investment arising from such
investment opportunity shall be the same as the securities comprising
each other Investment arising from such investment opportunity;
(ii) subject to Section 5.02(b), it is understood that each
Partner shall be required, with respect to one or more Investments
arising from such investment opportunity, to make an aggregate Capital
Contribution equal to the product of (x) such Partner's Remaining
Commitment Percentage times (y) the aggregate amount of all
Investments arising from such investment opportunity;
(iii) any Partner that makes an aggregate Capital Contribution in
accordance with clause (ii) of this Section 4.04(b) with respect to
one or more Investments arising from such investment opportunity shall
be deemed to have a Remaining Capital Commitment equal to zero for
purposes of all other Investments to be made by the Partnership
arising from such investment opportunity; and
(iv) other than upon dissolution of the Partnership, securities
comprising all or any portion of any Investment arising from such
investment opportunity shall not be directly or indirectly sold,
exchanged, transferred or otherwise disposed of, or Proceeds in
respect thereof distributed, unless securities comprising all or an
equivalent portion, as the case may be, of each other Investment
arising from such investment opportunity are directly or indirectly
disposed of, or Proceeds in respect thereof distributed, at or about
the same time, for equivalent consideration and otherwise on
substantially similar terms. For purposes of this Section 4.04(b), the
securities comprising any Investment shall be the securities issued by
the ultimate Person in which the Investment has been made, without
regard to the securities, if any, issued by any Partnership Investment
Vehicle or Parallel Investment Vehicle.
(c) The General Partner and the Partners acknowledge and agree that
each Parallel Investment constitutes an Investment (but not a Partnership
Investment) for purposes of certain provisions of this Agreement. Without
limiting the generality of the foregoing, it is understood that the terms of
each Parallel Investment applicable to the acquisition, management and
disposition of such Parallel Investment shall be set forth in an agreement or
agreements between the General Partner and the Participating Partners in respect
of such Parallel Investment, and shall be substantially similar to those
contained in this Agreement with respect to Partnership Investments (including,
mutatis mutandis, the provisions of Section 5.03 with respect to investment fees
and the provisions of Article VI with respect to the determination of the amount
that the General Partner is entitled to receive, as a share of income, profit or
gain or otherwise, from any Participating Partner in respect of such Parallel
Investment based upon the performance of such Parallel Investment). The terms of
the agreement or agreements referred to in the
immediately preceding sentence shall apply only to the particular Parallel
Investment or Parallel Investments covered by such agreement or agreements.
(d) Notwithstanding anything in this Agreement to the contrary,
including the provisions of Section 4.04(c), the General Partner and the
Partners acknowledge and agree that to the extent permitted by law (i) each
Parallel Investment shall be made for the sole benefit and use of the
Participating Partners in respect of such Parallel Investment (and not made for
the benefit or use of the Partnership), (ii) no Parallel Investment shall
constitute or be deemed to be an asset of the Partnership for any purpose and
(iii) no creditor of the Partnership shall have any recourse or claim against
any Parallel Investment or be entitled reasonably to rely on the existence of
any Parallel investment in extending credit to the Partnership. Without limiting
the generality of the foregoing, to the extent permitted by law (x) no Parallel
Investment shall be set forth on the books and records of the Partnership or,
except as otherwise required by law, listed on the tax returns to be filed by
the Partnership and (y) the Partnership shall not use any of its funds to
acquire or otherwise make any Parallel Investment.
(e) Each Limited Partner does hereby constitute and appoint the
General Partner as its true and lawful representative and attorney-in-fact, in
its name, place and stead to make, execute and sign any agreement or instrument
that is necessary or desirable in connection with establishing the terms of or
otherwise structuring any Parallel Investment in which such Limited Partner
elects to participate in accordance with this Section 4.04, including without
limitation any agreement or instrument required for the formation of any
Parallel Investment Vehicle; provided that in no event shall the power of
attorney granted hereby be exercised so as to adversely modify or affect the
limited liability of such Limited Partner. The power of attorney granted hereby
is coupled with an interest and shall (i) survive and not be affected by the
subsequent death, incapacity, disability, dissolution, termination or bankruptcy
of the Limited Partner granting the same or the transfer of all or any portion
of such Limited Partner's interest in the Partnership, and (ii) extend to such
Limited Partner's successors, assigns and legal representatives.
SECTION 4.05. Direct Investments. (a) Generally. It is understood that
the General Partner may, in its discretion after such consultation with Partners
as the General Partner in its discretion deems appropriate, structure any
Investment as a direct acquisition by one or more Partners (other than (i) ERISA
Partners and (ii) other Partners who advise the General Partner that they desire
not to participate in such direct acquisition) of the securities comprising such
Investment outside the Partnership, but treat such investment as a Partnership
Investment, and not as a Parallel Investment, for all purposes of this
Agreement. Each such Investment so treated is hereinafter referred to as a
"Direct Investment". Without limiting the generality of the foregoing, each
Direct Investment shall be reflected as a Partnership Investment on the books
and records of the Partnership. Capital Contributions in respect of such Direct
Investment shall be reflected in the Capital Account of each Participating
Partner and Proceeds and items of income and gain. Loss, deduction and credit
attributable to such Direct Investment shall be subject to the distribution and
allocation provisions of Article VI.
(b) Appointment of the General Partner. Each Partner hereby appoints
the General Partner as its agent to act as such Partner's exclusive investment
manager with respect to each
Direct Investment, and authorizes the General Partner to make all determinations
and to take all actions that the General Partner determines in its discretion
are necessary or desirable with respect to the acquisition, holding, management,
ownership, sale, transfer, conveyance, assignment, exchange, pledge, or other
disposition of any Direct Investment, in each case in accordance with and
subject to the terms set forth in this Agreement.
(c) Registration and Possession of Securities. If the securities
comprising any Direct Investment are registered securities (including any
uncertificated securities), such securities shall be registered in the name of
the respective Participating Partners with respect to such Direct Investment. If
the securities comprising such Direct Investment are certificated securities,
the General Partner or the Partnership shall hold, or the General Partner shall
designate another Person acting as custodian to hold, all certificates
representing such securities for the account of such Participating Partners.
(d) Restrictions on Transfer of Direct Investments. Except as effected
by the General Partner as investment manager pursuant to this Section 4.05, no
Participating Partner with respect to any Direct Investment may, directly or
indirectly, Transfer all or any portion of its interest in any Direct Investment
to any Person without the prior written consent of the General Partner (which
may, in the General Partner's discretion, be granted on such terms as the
General Partner determines or withheld). If the General Partner consents to any
Transfer, such Participating Partner shall be free to make such Transfer within
120 days after notice of such consent. The General Partner shall be authorized
pursuant to this Section 4.05(d) to consent to the Transfer of any Participating
Partner's interest in any Direct Investment to any Person, including without
limitation the General Partner or any of its Affiliates.
The foregoing provisions of this Section 4.05(d) shall not apply to
any Transfer which shall occur by operation of law or pursuant to Section 5.05.
(e) Payments with Respect to Direct Investments. Each Partner hereby
authorizes the General Partner to open and maintain an account (a "Direct
Investment Account") in the name of such Partner to receive any and all payments
or other distributions made in respect of the securities comprising any Direct
Investment with respect to which such Partner is a Participating Partner. It is
understood that such payments or other distributions shall include, without
limitation, all Proceeds in connection with such Direct Investment and any
securities that are issued pursuant to a recapitalization or reorganization of
any Person in which such Direct Investment has been made. In furtherance of the
foregoing, each Partner agrees that:
(i) The General Partner shall be entitled to exercise any and all
rights in connection with any Direct Investment Account, including
without limitation the right to specify when and to whom payments are
to be made out of such Direct Investment Account. Each Partner shall
be entitled to receive distributions in accordance with, and subject
to the provisions of Article VI in respect of any payment or other
distribution made in respect of the securities comprising any Direct
Investment with respect to which such Partner is a Participating
Partner.
(ii) Each Partner who is a Participating Partner with respect to
any Direct Investment shall advise each Person who proposes to make
any payment or other
distribution with respect to the securities comprising such Direct
Investment of the provisions of this Section 4.05(e) and instruct such
Person to make such payment or other distribution to the applicable
Direct Investment Account. If, notwithstanding the provisions of this
clause (ii), any Person makes any payment or other distribution with
respect to the securities comprising such Direct Investment directly
to such Partner, such Partner and the General Partner shall notify
each other to such effect and such Partner shall forthwith pay over or
otherwise transfer to such Direct Investment Account such payment or
other distribution.
(iii) If any Partner fails to make all or any portion of a
payment or transfer required under this Section 4.05(e), such failure
shall be treated as a Default under this Agreement and, if such
failure shall not have been cured by such Partner within ten Business
Days or waived by the General Partner in its discretion (unless such
Partner is an Affiliate of the General Partner, in which case the
General Partner shall not waive such failure), such failure shall be
treated as an Event of Default and the provisions of Section 5.05
shall apply; provided that notwithstanding Section 5.05, the General
Partner may not require other Partners to pay or contribute funds to
the Partnership to cover the amount in default.
(iv) The obligation of each Partner to make any payment or
transfer required by this Section 4.05(e)(ii) and (iii) shall in no
way affect the Remaining Capital Commitment of any Partner hereunder
and such payment shall not constitute a Capital Contribution for
purposes of this Agreement. The rights and remedies referred to in
Section 5.05 shall be in addition to, and not in limitation of, any
other rights available to the General Partner or the Partnership under
this Agreement or at law or in equity.
(f) Proxy. To the fullest extent permitted by applicable law, each
Partner (other than any ERISA Partner) hereby irrevocably appoints and
constitutes each of the Partnership, the General Partner and each officer of the
General Partner, for the duration of this Agreement, as such Partner's true and
lawful attorney, agent, and proxy for and in such Partner's name, place, and
stead with the exclusive right to vote all securities comprising any Direct
Investment with respect to which such Partner is a Participating Partner at any
annual or special meeting of holders of such securities, or any adjournment
thereof, and on any other occasion in respect of which the consent of such
Partner may be given or shall be requested by the Person that has issued such
securities or any other Person, whether at a meeting or pursuant to the
execution of a written consent or otherwise, for all purposes in connection with
any matter whatsoever. To the fullest extent permitted by applicable law, each
Partner (other than any ERISA Partner) agrees that it will not, so long as any
securities comprising any Direct Investment with respect to which such Partner
is a Participating Partner shall be subject to this Agreement, vote or attempt
to vote such securities, appoint any Person other than the Partnership, the
General Partner or any officer of the General Partner as its attorney, agent, or
proxy with respect to such securities, or take any other action, in each case,
if any thereof would be inconsistent with the appointment of the Partnership,
the General Partner and such officer as such Partner's true and lawful attorney,
agent, and proxy, or the exercise of any such Person of the powers granted to
such Person hereunder.
(g) Power of Attorney. Each Limited Partner (other than any ERISA
Partner) does hereby constitute and appoint the General Partner as its true and
lawful representative and attorney-in-fact, in its name, place, and stead to
make, execute, sign, and file any and all agreements and other documents
necessary or desirable to take or cause to be taken any action with respect to
Direct Investments contemplated by this Agreement; provided that in no event
shall the power of attorney granted hereby be exercised so as to adversely
modify or affect the limited liability of such Limited Partner. The power of
attorney granted pursuant to this Section 4.05(g) is coupled with an interest
and shall (i) survive and not be affected by the subsequent death, incapacity,
disability, dissolution, termination, or bankruptcy of such Limited Partner or
the transfer of all or any portion of such Limited Partner's interest in the
Direct Investments, and (ii) extend to such Limited Partner's successors,
assigns, and legal representatives.
(h) Cooperation on Litigation Matters. If any action, claim, suit,
investigation, or proceeding (in each case. an "Action") related to, arising out
of, or in connection with any Direct Investment shall be brought, and any
Partner that is a Participating Partner with respect to such Direct Investment
or the General Partner, as the case may be, has knowledge of such Action, such
Person shall promptly notify the other party to such effect. The General Partner
shall, to the extent permitted by applicable law, assume the defense of any
Action with counsel reasonably satisfactory to such Partner and such Partner
agrees to cooperate fully, as and to the extent reasonably requested by the
General Partner, in connection with such Action; provided that if the General
Partner fails to assume the defense of any Action in a timely manner, or
withdraws from such defense, or if such Partner determines in its reasonable
judgment that having common counsel would present such counsel with a conflict
of interest or that there are defenses available to it that are not available to
the General Partner, then such Partner shall have the right to employ separate
counsel to represent or defend it in any such Action.
SECTION 4.06. Exclusion from Investments. The General Partner may, in
good faith, cause a Partner to be excluded from all future Investments if the
General Partner determines, in good faith based on the opinion of reputable
counsel, that participation by such Partner in such Investments (i) may result
in a violation of the Investment Company Act, the Advisers Act or any other
material law, regulation or guideline applicable to the General Partner, the
Partnership, any Affiliate of the Partnership or any Partner, (ii) may cause the
Partnership's assets to be deemed "plan assets" for purposes of ERISA or (iii)
may have a material adverse effect on the Partnership or, in the case of a
Parallel Investment, any applicable Parallel Investment Vehicle) or the General
Partner. After taking any action pursuant to this Section 4.06, the General
Partner shall provide notice thereof to the affected Partner, but such action
shall not require the approval of any Partner. The General Partner shall use
commercially reasonable efforts to ensure that such exclusion or other action is
imposed on all similarly situated Partners pro rata in accordance with their
respective Commitment Percentages (calculated without giving effect to the
Capital Commitment of any Partner that is not so similarly situated)
SECTION 4.07. Tax Undertakings with Respect to Investments. (a) The
General Partner agrees to use commercially reasonable efforts (i) to minimize
any adverse tax consequences to any U.S. Investor from Investments in equity
securities in any entity that is, for U.S. federal income tax purposes, a
"controlled foreign corporation" or a "passive foreign investment company" (a
"PFIC") and (ii) to prevent any Investment from constituting an investment in
equity securities of a "foreign personal holding company" for U.S. federal
income tax purposes. In this regard, the General Partner shall use commercially
reasonable efforts to ensure that no Investment constitutes an investment in
equity securities of a PFIC unless the PFIC has agreed to provide the General
Partner with sufficient information to make a "qualified electing fund"
election.
(b) The General Partner shall use commercially reasonable efforts to
structure Investments in entities organized outside the United States, or in
entities with significant operations outside the United States, in such a manner
that Limited Partners will not be subject to tax, and will not be required to
file any tax return, in the relevant jurisdiction or jurisdictions, as a
consequence of the Limited Partner's investment in the Partnership, the relevant
Parallel Investment or the relevant Parallel Investment Vehicle, as the case may
be, in respect of income that is not derived from the Partnership (or the
relevant Parallel Investment or Parallel Investment Vehicle, as the case may
be).
ARTICLE V
CAPITAL COMMITMENTS AND CAPITAL CONTRIBUTIONS
SECTION 5.01. Capital Contributions. (a) Each Partner hereby agrees to
make Capital Contributions from time to time as hereinafter set forth; provided
that, except as otherwise provided in Section 5.02(d), the applicable Drawdown
Notices are delivered to the Partners prior to the Full Investment Date.
Notwithstanding anything contained in this Agreement, no Partner (except any
Defaulting Partner as provided in Section 5.05(e)(y)) shall be required to make
any Capital Contribution if, at the time such Capital Contribution is to be
made, such Capital Contribution exceeds such Partner's then Remaining Capital
Commitment.
(b) The General Partner may in its discretion, cancel the Remaining
Capital Commitments of all Partners (and the Full Investment Date shall be
deemed to have occurred) at any time if:
(i) the aggregate Remaining Capital Commitments of all Partners
and remaining capital commitments of QP Partners at such time is less
than 15% of the aggregate Capital Commitments of all Partners and the
aggregate capital commitments of all QP Partners, or
(ii) the General Partner determines in good faith based on the
opinion of reputable counsel that changes in any applicable law or
regulation make such cancellation necessary.
(c) Notwithstanding anything to the contrary contained herein, the
power of the General Partner to make Investments and to require Capital
Contributions from the Partners in respect of such Investments may be suspended
by written notice to the General Partner, and the Full Investment Date shall be
deemed to have occurred, upon (i) the vote or written consent of the Required
Partners or (ii) the occurrence of a Key Person Event; provided that (x) the
foregoing suspension shall not limit the General Partner's right to require
further Capital Contributions with respect to (1) Partnership Expenses and
Management Fees, (2) completing Investments that are subject to binding
agreements or commitments on the part of the Partnership, and/or (3) subject to
the limitations provided in this Agreement, Follow-on Investments; and (y) the
Required Partners may reinstate such right of the General Partner to make
Investments and require Capital Contributions in respect of such Investments in
the event they reasonably believe that the General Partner has cured the
circumstances giving rise to such suspension or that the Key Person Event is not
material to the Partnership, and the Full Investment Date shall be extended
accordingly.
SECTION 5.02. Drawdown Procedures. (a) Generally. Each Limited Partner
shall make Capital Contributions in such amounts and at such times as the
General Partner shall specify in notices ("Drawdown Notices") delivered from
time to time to such Partner. All Partnership Capital Contributions (other than
Partnership Capital Contributions with respect to Direct Investments) shall be
paid to the Partnership in immediately available funds in United States dollars
by 11:00 A.M. (New York City time) on the date specified in the applicable
Drawdown Notice. All Parallel Capital Contributions (and all Partnership Capital
Contributions with respect to Direct Investments) shall be paid to the Person
and the account and at the time specified in the applicable Drawdown Notice (it
being understood that payment of Parallel Capital Contributions shall not
constitute cash contributions to the Partnership and shall not be paid to any
account of the Partnership). Partnership Capital Contributions may include
amounts that the General Partner determines in its discretion are necessary or
desirable to establish reserves in respect of Partnership Expenses and amounts
necessary to make Special Distributions. The General Partner shall make Capital
Contributions in such amounts as hereinafter set forth and at the same times and
in the same manner as the Limited Partners who are required to make related
Capital Contributions: provided that (i) the General Partner shall be relieved
of its obligation to make Capital Contributions in cash (with respect to amounts
called in excess of that amount which must be satisfied by a Capital
Contribution in cash as set forth in the definition of "Capital Commitment" in
Section 1.01) to the extent of the Unused Credit Amount on the date on which the
Capital Contribution is payable and (ii) if any single investment opportunity is
structured as more than one Investment (e.g., a Partnership Investment and a
Parallel Investment), the General Partner shall make its entire Capital
Contribution (based on the aggregate amount invested in all such Investments) to
only one of such Investments (i.e., to either the Partnership Investment or the
Parallel Investment, but not to both) and, if such Capital Contribution is so
made, the General Partner shall not be obligated to make any Capital
Contribution to any other such Investments arising from such investment
opportunity.
(b) Regular Drawdowns. Except as otherwise provided in Section
5.02(c), each Drawdown Notice shall specify:
(i) the Drawdown Amount;
(ii) the required Capital Contribution to be made by such Partner;
(iii) the date (the "Drawdown Date") on which such Capital
Contribution is due (which shall be a Business Day at least ten Business Days
from and including the date of delivery of the Drawdown Notice); and
(iv) the Person and the account to which such Capital Contribution
should be paid.
Subject to Sections 4.01, 4.04(b)(iii), 4.06 and 5.02(a), in
connection with any Drawdown, except as provided below, each Partner (including
the General Partner) shall be required to make a Capital Contribution equal to
the product of (x) such Partner's Remaining Commitment Percentage times (y) the
Drawdown Amount specified in the applicable Drawdown Notice; provided that the
General Partner may in its discretion determine that with respect to any
Follow-on Investment only Participating Partners with respect to the investment
or investments giving rise to the Follow-on Investment shall be required to make
a Capital Contribution. Subject to the last sentence of the first paragraph of
Section 3.04(b), in connection with any such Drawdown to be applied to pay
Expenses or to make a Special Expense Distribution, each Partner (including the
General Partner) shall be required to make a Capital Contribution equal to the
product of (x) such Partner's Commitment Percentage times (y) the Drawdown
Amount specified in the applicable Drawdown Notice. Notwithstanding the
immediately preceding sentence;
(A) subject to clause (B) below, in connection with any Expense (or
the portion of any Special Expense Distribution related to such
Expense) directly and solely attributable to one or more Investments
(including without limitation the investment fee referred to in
Section 5.03 or the corresponding terms of any Parallel Investment),
only those Partners who are Participating Partners with respect to
such Investments shall be required to make Capital Contributions in
respect of such Expense (or such related portion), calculated on the
basis of such Partners' respective Investment Percentage with respect
to such Investments; and
(B) the General Partner may calculate the Capital Contributions to be
made by the Partners in respect of any Expense (or the portion of any
Special Expense Distribution related to such Expense) on a basis other
than Commitment Percentages and/or Investment Percentages and/or
require certain (but not all) Partners to make Capital Contributions
in respect of such Expense (or such related portion) if the General
Partner determines in its discretion that such allocation is clearly
more equitable (e.g., in the event any Partner benefits
disproportionately in respect of, or has requested an accommodation
that gives rise to, such Expense).
(c) Special Drawdowns. If in connection with the making of any
Investment or the payment of any Expense in respect of which a Drawdown Notice
has been delivered, the General Partner shall determine, in its discretion, that
it is necessary or desirable to increase the required Capital Contribution to be
made by any Partner in connection therewith (it being understood that generally
any such increase would be borne pro rata by all of the Partners, except in
unusual circumstances such as a Default or an Expense allocated in accordance
with the immediately preceding sentence), the General Partner shall deliver an
additional Drawdown Notice to such Partner amending the original Drawdown Notice
and specifying:
(i) the amount of any increase in the Drawdown Amount;
(ii) the amount of the increase in the required Capital Contribution
to be made by such Partner;
(iii) the Drawdown Date with respect to the amount of the increase in
the required Capital Contribution if different from the Drawdown Date
specified in the
original Drawdown Notice; and
(iv) the reason for such increase.
The Drawdown Date with respect to the amount of the increase in the
required Capital Contribution shall be the later of (i) the Drawdown Date
specified in the original Drawdown Notice and (ii) five Business Days from and
including the date of delivery of the additional Drawdown Notice.
Any increase in the required Capital Contribution of any Partner
pursuant to Section 5.05 or 5.06 shall be calculated in the manner set forth
therein. Any increase in the required Capital Contribution of each Partner
(including the General Partner) due to an increase in the Drawdown Amount
specified in the original Drawdown Notice shall be calculated in accordance with
Section 5.02(b) (after giving effect to Sections 5.05 and 5.06, if applicable)
with respect to the amount of the increase in the Drawdown Amount.
(d) Drawdowns After the Full Investment Date. After the Full
Investment Date, all Partners will be released from any further obligation with
respect to their Remaining Capital Commitments (the "Unfunded Commitments"),
except to the extent necessary to: (i) cover Partnership Expenses, including but
not limited to Management Fees; (ii) complete Investments by the Partnership in
respect of transactions agreed to by the Partnership prior to the Full
Investment Date; and (iii) make Follow-On Investments in companies that are
portfolio companies on the Full Investment Date in an aggregate amount of up to
10% of the aggregate Capital Commitments for a period of three years after the
Full Investment Date (or up to one additional year after such three-year period
if approved by the Advisory Committee) (it being understood that in no event
shall any Partner's obligation with respect to the foregoing exceed such
Partner's Remaining Capital Commitment).
SECTION 5.03. Management Fee. In consideration for its services
rendered under Section 3.01(b), the Partnership shall pay to the Management
Company on January 1, April 1, July 1 and October 1 of each year, the Management
Fee. The Management Fee shall be included in the initial Drawdown Amount for
each Partnership year and shall be paid as set forth in Section 3.01(b). The
General Partner and its Affiliates and employees shall not be obligated to pay
any portion of the Management Fee (it being understood that the other Partners
shall not be required to pay such waived Management Fee on behalf of the
foregoing Persons exempted from payment of the Management Fee). The Management
Company may retain one or more placement agents to assist in the placement of
Interests in the Partnership. The Management Company will pay (i) the fees of
any such placement agents and any marketing costs in connection therewith and
(ii) the expenses of the Scientific Advisory Board.
SECTION 5.04. Loans to Fund Drawdowns. (a) If the General Partner
shall determine, in its discretion, that funds are necessary to make an
Investment or to pay an Expense prior to the time all or a portion of such funds
are otherwise made available by the Partner in accordance with this Article V,
subject to compliance with applicable law or regulation the General Partner or
any of its Affiliates may, acting as agent for (and without any further consent
or other action by) any Partner required to make a Capital Contribution with
respect to such Investment or
Expense, make such Capital Contribution on behalf of such Partner and the amount
so paid shall constitute a loan to such Partner: provided that (i) the General
Partner shall have delivered the applicable Drawdown Notice or Notices in
respect of such Investment or Expense and (ii) the General Partner shall use
reasonable efforts to notify the Partners at least five Business Days (and
shall, in any event, notify the Partners at least four Business Days) prior to
such loan date of its intention to make such loan in order to give such Partners
the opportunity, in their discretion, to make their required Capital
Contributions at least one Business Day prior to such loan date in lieu of
receiving such loan; and provided further that each ERISA Partner and each Early
Funding Partner shall be required to make its required Capital Contribution at
least one Business Day prior to such loan date in lieu of receiving such loan.
The notice referred to above may constitute part of a Drawdown Notice.
(b) Each Partner promises to pay the principal amount of any loan made
by the General Partner or any of its Affiliates to such Partner pursuant to
Section 5.04(a), together with interest at a rate per annum equal to the lesser
of (i) the Prime Rate plus 2% and (ii) the maximum rate permitted under the laws
of the State of Delaware, on the Drawdown Date applicable to the Capital
Contribution in respect of which such loan was made. Each Partner shall make any
payment required pursuant to this Section 5.04(b) in immediately available funds
in United States dollars. The General Partner shall deliver a notice to such
Partner, specifying the amount payable by such Partner pursuant to this Section
5.04(b), at least five Business Days before such Drawdown Date; provided that
the failure to deliver such notice shall not affect such Partner's obligations
under this Section 5.04(b).
The obligation of each Partner to make any payment required by this
Section 5.04(b) shall in no way affect the Remaining Capital Commitment of any
Partner hereunder and such payment shall not constitute a Capital Contribution
for purposes of this Agreement.
(c) As security for its obligations under Section 5.04(b) each Partner
(other than any ERISA Partner or Early Funding Partner) hereby grants to the
General Partner and its assigns, to the extent permitted by applicable law, a
security interest in (i) such Partner's interest as a Partner in the
Partnership, including the rights and obligations of such Partner as provided in
this Agreement and the Delaware Act and (ii) any Parallel Investment Ownership
Interest of such Partner, including the rights and obligations of such Partner
as provided by the terms of the applicable Parallel Investment. If an Event of
Default relating to such obligations shall have occurred and be continuing, the
General Partner and its assigns may exercise all the rights of a secured party
under applicable law. Upon the General Partner's request, each Partner will, to
the extent permitted by applicable law, give, execute, file and record any
notice, financing statement, continuation statement or other instrument,
document or agreement that the General Partner determines, in its discretion, is
necessary or desirable (x) to create, perfect, continue or validate the security
interest granted hereunder or (y) to exercise or enforce the rights of the
General Partner and its assigns hereunder with respect to such security
interest.
SECTION 5.05. Default by Partners. (a) Each Partner agrees that
payment of its required Capital Contributions and amounts required pursuant to
Section 4.05(e) when due is of the essence, that any Default by any Partner
would cause injury to the Partnership and to the other Partners and that the
amount of damages caused by any such injury would be extremely
difficult to calculate. Accordingly, each Partner agrees that, unless expressly
waived in writing by the General Partner, upon any Event of Default by a
Partner:
(i) the Capital Account of such Partner shall be reduced by an amount
equal to 50% of the amount of such Partner's Capital Account on the date of such
Event of Default (and the amount of such reduction shall be credited to the
Capital Accounts of the other Partners in accordance with Section 6.08(e)), and
(ii) such Partner shall not have allocated to its Capital Account or
receive any distributions with respect to any income, profit or gain arising
after such Event of Default that relates to any Partnership Investments for
which such Partner made Capital Contributions prior to such Event of Default
(and the other Partners shall receive such distributions in accordance with
Section 6.02(b) and any such income, profit or gain shall be credited to the
Capital Accounts of the other Partners in accordance with Section 6.08(e)).
Notwithstanding any Event of Default, the General Partner may, in its
discretion, compromise such Partner's obligation to make Capital Contributions
or to pay certain other amounts pursuant to this Agreement on such terms as the
General Partner determines in its discretion (unless such Partner is the General
Partner or an Affiliate of the General Partner, in which case the General
Partner shall not compromise such obligation).
Within three Business Days of the occurrence of any Default, the
General Partner shall notify the Partner who has committed such Default of the
occurrence of such Default. Upon the occurrence of any Event of Default, the
General Partner may notify all Partners of the occurrence of such Event of
Default.
(b) Upon the occurrence of any Event of Default in connection with any
Drawdown to be applied to make an Investment, the General Partner shall, subject
to Section 5.01(a), use reasonable efforts to obtain agreements from other
Partners to increase their required Capital Contributions so as to fund the
amount that is in default and, if such agreement is obtained from any such
Partner, deliver an additional Drawdown Notice in accordance with Section
5.02(c) to such Partner, setting forth the increased amount of such Partner's
required Capital Contribution. Notwithstanding the foregoing, if the General
Partner determines in its discretion that time constraints or other factors make
the procedure set forth above impracticable or if the General Partner obtains
agreements for only a portion of the amount that is in default, the General
Partner may, in its discretion, take any or all of the following actions with
respect to the amount that remains to be funded:
(i) subject to Section 5.01(a) increase the required Capital
Contributions of the Partners;
(ii) obtain the agreement of any other Person (which may, in the
discretion of the General Partner, include any existing Partner) to
make an investment outside the Partnership; and
(iii) after the other Partners have been offered such opportunity,
increase its own
Capital Contribution.
(c) Upon the occurrence of any Event of Default in connection with a
Drawdown to be applied to pay Expenses, the General Partner may, in its
discretion and subject to Section 5.01(a) increase the required Capital
Contributions of Partners with respect to the amount that remains to be funded.
(d) If the General Partner elects to take the action specified in
Section 5.05(b)(i) or Section 5.05(c) with respect to any portion of the amount
that is in default in respect of the applicable Investment or Expense, as the
case may be, the General Partner shall deliver an additional Drawdown Notice in
accordance with Section 5.02(c) to the Partners who are required to make Capital
Contributions in respect of such Investment or Expense (other than (i) any
Defaulting Partner with respect to the Investment or Expense, as the case may
be, in respect of which the Event of Default arose and (ii) any Excused Partner
with respect to such Investment, if applicable), and the required Capital
Contribution of each such Partner shall be increased by an amount calculated
(without giving effect to any Partner who is not such a Partner) with respect to
the amount that remains to be funded in accordance with Section 5.02(b).
(e) Subject to Sections 5.05(b) and 5.05(c), the General Partner may
take either or both of the following actions in respect of the Remaining Capital
Commitment of any Defaulting Partner:
(x) seek commitments of capital from additional investors (which
may in the discretion of the General Partner include existing
Partners) up to the amount of the Defaulting Partner's Remaining
Capital Commitment. If any such commitment is received from any
existing Partner, such Partner's Capital Commitment and Remaining
Capital Commitment shall be increased accordingly. If any such
commitment is received from an investor that is not an existing
Partner, such investor shall, after executing such instruments and
delivering such opinions and other documents as are in form and
substance satisfactory to the General Partner, be admitted to the
Partnership as a Substituted Partner and shown as such on the books
and records of the Partnership and shall be deemed to have a Capital
Commitment and a Remaining Capital Commitment equal to the commitment
for which such investor has subscribed. After the appropriate
adjustment of the Capital Commitment and the Remaining Capital
Commitment of the Partner or admission of the Substituted Partner, the
Capital Commitment and Remaining Capital Commitment if the Defaulting
Partner shall be decreased accordingly, and
(y) reduce or cancel the Remaining Capital Commitment of the
Defaulting Partner on such terms as the General Partner determines in
its discretion (which may include leaving such Defaulting Partner
obligated to make Capital Contributions with respect to Partnership
Expenses).
(f) The rights and remedies referred to in this Section 5.05 shall be
in addition to and not in limitation of, any other rights available to the
General Partner or the Partnership under this Agreement or at law or in equity.
Except as otherwise provided in Section 5.01(a), an Event of Default by any
Partner in respect of any Capital Contribution shall not relieve any other
Partner
of its obligation to make Capital Contributions. In addition, unless the
Remaining Capital Commitment of any Defaulting Partner is decreased to zero
pursuant to Section 5.05(e), an Event of Default by such Partner shall not
relieve such Defaulting Partner of its obligation to make Capital Contributions
subsequent to such Event of Default.
SECTION 5.06. Excuse Procedure. (a) Any Partner shall be excused from
making all or a portion of any required Capital Contribution with respect to any
Investment if not later than five Business Days (or such later time as the
General Partner shall in its discretion determine) after the date of delivery of
the applicable Drawdown Notice or such later date on which the General Partner
provides information in accordance with the second paragraph of this Section
5.06(a), the General Partner shall have received a written opinion (in form and
substance reasonably satisfactory to it) of counsel (satisfactory to it) to the
effect that it is reasonably likely that the making of such Investment by such
Partner (without regard to whether such Investment is made as a Partnership
Investment or as a Parallel Investment) would result in a violation of any law
or regulation of the United States or any State thereof (other than any State
legal investment statute or regulation) or of any foreign country (other than
any such foreign law or regulation that violates, or the compliance with which
by Persons subject to the jurisdiction of the United States would violate any
law or regulation of the United States), in any such case applicable to such
Partner with respect to such Investment.
Such opinion shall also indicate whether (and, if so, at what reduced
amount) such Partner could make a smaller Capital Contribution in respect of
such Investment that is not reasonably likely to result in such a violation. For
purposes of ascertaining whether a Partner may be excused from making a Capital
Contribution pursuant to this Section 5.06(a), but subject to Section 3.10(b),
the General Partner shall, as promptly as reasonably practicable, provide such
information about the proposed Investment as such Partner shall, within three
Business Days after the date of delivery of the applicable Drawdown Notice,
reasonably request.
(b) A Partner shall be excused and shall not be permitted to make all
or a portion of any required Capital Contribution with respect to any Investment
if the General Partner, in its discretion, determines that such Capital
Contribution or portion thereof, taken by itself or together with other Capital
Contributions of such Partner or any other Partners, (i) may result in a
violation of the Investment Company Act, the Advisers Act, the Bank Holding
Company Act or any other material law, regulation or guideline applicable to the
General Partner, the Partnership, any Affiliate of the Partnership or such
Partner, (ii) may cause the Partnership's assets to be deemed "plan assets" for
purposes of ERISA, (iii) may have a material adverse effect on (x) the ability
to consummate such proposed Investment or any transaction directly or indirectly
related to, or giving rise to, such proposed Investment, (y) the Partnership,
(or, in the case of a Partnership Investment, any applicable Partnership
investment Vehicle or, in the case of a Parallel Investment, any applicable
Parallel Investment Vehicle) or the General Partner or (z) any Person that is,
directly or indirectly, the subject of such proposed Investment, or (iv) may
otherwise result in a significant delay, extraordinary expense, or material
adverse effect on the Partnership, the other Limited Partners, any Partnership
Investment or any future Partnership Investment.
To the fullest extent permitted by law, the General Partner shall not
be liable to any
Partner or the Partnership for any failure to permit or require a Partner to be
excused from making all or a portion of any required Capital Contribution
pursuant to this Section 5.06(b).
(c) Any Capital Contribution as to which a Partner is excused shall
not reduce such Partner's Remaining Capital Commitment or otherwise affect such
Partner's obligation to make other Capital Contributions.
(d) If any Partner is excused or excluded from making all or a portion
of any required Capital Contribution pursuant to this Section 5.06, the General
Partner shall, subject to Section 5.01(a) use reasonable efforts to obtain
agreements from other Partners to increase their required Capital Contributions
so as to fund the amount that is excused and, if such agreement is obtained from
any such Partner, deliver an additional Drawdown Notice in accordance with
Section 5.02(c) to such Partner, setting forth the increased amount of such
Partner's required Capital Contribution.
Notwithstanding the foregoing, if the General Partner determines in
its discretion that time constraints or other factors make the procedure set
forth above impracticable or if the General Partner obtains agreements for only
a portion of the amount that is excused, the General Partner may, in its
discretion, take any or all of the following actions with respect to the amount
that remains to be funded:
(i) subject to Section 5.01(a), increase the required Capital
Contributions of Partners,
(ii) obtain the agreement of any other Person (which may, in the
discretion of the General Partner, include any existing Partner) to
make an investment outside the Partnership, and
(iii) after the other Partners have been offered such
opportunity, increase its own Capital Contribution.
(e) If the General Partner elects to take the action specified in
Section 5.06(d)(i) with respect to any portion of the amount that is excused,
the General Partner shall deliver an additional Drawdown Notice in accordance
with Section 5.02(c) to each Partner who is not an Excused Partner in respect of
the applicable Investment, and the required Capital Contribution of each such
Partner shall be increased by an amount calculated (without giving effect to any
Excused Partner in respect of the applicable Investment) with respect to the
amount that remains to be funded in accordance with Section 5.02(b).
(f) Any Excused Partner shall not have allocated to its Capital
Account or receive any distributions with respect to any income, profit or gain
arising with respect to any Partnership Investments for which such Partner was
excused (and the other Partners shall receive such distributions in accordance
with Section 6.02(b) and any such income, profit or gain shall be credited to
the Capital Accounts of the other Partners.
SECTION 5.07. Temporary Investment of Funds. Subject to a
determination by the
General Partner in its discretion as to the amount of cash required in
connection with the conduct of the Partnership's business, the General Partner
shall invest in short-term money market or other comparable investments all cash
held by the Partnership, including all amounts being held by the Partnership for
future investment in Partnership Investments, payment of Partnership Expenses or
distribution to the Partners.
ARTICLE VI
DISTRIBUTIONS; CAPITAL ACCOUNTS; ALLOCATIONS
SECTION 6.01. Distributions Generally. Subject to the provisions of
Sections 5.05 and 5.06 and Article IX, distributions to the Partners shall be
made in accordance with this Article VI.
SECTION 6.02. Proceeds of Partnership Investments. (a) Generally.
Except as otherwise provided and as set forth in Section 6.11, any Proceeds
realized by the Partnership or any Parallel Investment Vehicle on any date in
respect of any Investment shall be distributed as follows:
(1) First, 100% to the Partners (including the General Partner) in
such amounts and in such proportions (i) so that all Partners (including the
General Partner) shall have cumulatively received distributions under this
Section 6.02(a)(1) in proportion to their respective Commitment Percentages and
(ii) until each Limited Partner has cumulatively received distributions under
this Section 6.02(a)(1) equal to the aggregate Capital Contributions made by
such Limited Partner, provided that (x) the General Partner shall not be
entitled to distributions under this Section 6.02(a)(1) to the extent such
distributions would exceed the sum of the General Partner's Capital
Contributions (less any distributions under Section 6.02(e)) plus any Special
Allocations previously made to the General Partner pursuant to Section 6.09(d),
and (y) if any Special Allocations are made to the General Partner after all
Limited Partners have cumulatively received distributions under this Section
6.02(a)(1) equal to their aggregate Capital Contributions, then the General
Partner shall receive 100% of distributions under this Section 6.02(a)(1) until
the General Partner has received cumulative distributions under this Section
6.02(a)(1) equal to the amount described in the foregoing clause (x);
(2) Second, 100% to the Partners (including the General Partner) pro
rata in accordance with their Commitment Percentages until each Limited Partner
has received an amount under this Section 6.02(a)(2) equal to a preferred return
on the aggregate unreturned Capital Contributions made by such Limited Partner
at a rate of 6% per annum, compounded annually, from the date the applicable
Capital Contribution was made (the amount resulting from application of such
interest factor, the "Preferred Return");
(3) Third, 100% to the General Partner until the General Partner has
received an amount under this Section 6.02(a)(3)equal to 25% of the cumulative
amount distributed pursuant to Section 6.02(a)(2); and
(4) Thereafter, 80% pro rata to the Partners (including the General
Partner) in accordance with their Commitment Percentages and 20% to the General
Partner (such 20% portion
distributed to the General Partner, together with the amount distributed
pursuant to Section 6.02(a)(3), being referred to as the "Carried Interest"),
provided that the General Partner may, in its sole discretion, waive the
applicability of the Carried Interest with respect to certain Partners (e.g.,
Partners that are employees, agents or Affiliates of the General Partner).
(b) Certain Adjustments. Notwithstanding the distribution provisions
set forth in Section 6.02(a):
(i) if, pursuant to Section 3.06 the General Partner has made
cash contributions to the Partnership, the amount of Proceeds
distributed to any Participating Partner pursuant to Section 6.02(a)
shall be reduced by such Participating Partner's Commitment Percentage
of the applicable Partnership Expenses (adjusted in accordance with
Section 5.02), net of any amounts previously deducted from
distributions to such Participating Partner with respect to such cash
contributions,
(ii) if any withholding or other tax is imposed with respect to
any Participating Partner's participation in a Partnership investment,
the amount of Proceeds distributed to such Participating Partner
pursuant to Section 6.02(a) shall be reduced by the amount of such
withholding or other tax,
(iii) if any Partner has committed a Default that has become an
Event of Default, any Proceeds in respect of any Partnership
Investment that would have been distributed to such Partner pursuant
to Section 6.02(a) but for the operation of Section 5.05(a)(ii) shall
be distributed to all the other Partners who are Participating
Partners with respect to such Partnership Investment (other than any
other Defaulting Partner) pro rata in accordance with their respective
Capital Commitments with respect to such Partnership Investment
(calculated without giving effect to the Capital Commitment of any
Defaulting Partner), and
(iv) if any Partner has been excused from an Investment, any
Proceeds in respect of any Partnership Investment that would have been
distributed to such Excused Partner pursuant to Section 6.02(a) but
for the operation of Section 5.06(f) shall be distributed to all the
other Partners who are Participating Partners with respect to such
Partnership Investment (other than any other Excused Partner) pro rata
in accordance with their respective Capital Commitments with respect
to such Partnership Investment (calculated without giving effect to
the Capital Commitment of any Excused Partner), and, for the avoidance
of doubt, once such excused Partner has received distributions under
Section 6.02(a)(1) in an amount equal to its Capital Contributions it
shall receive no further distributions under Section 6.02(a)(1) until
all Partners have received distributions in amounts equal to their
respective Capital Contributions.
Notwithstanding the foregoing, the adjustments contained in the foregoing
clauses (ii) and (iii) shall be deemed to have been distributed to the
applicable Partner for purposes of calculating distributions made pursuant to
Section 6.02(a).
(c) Special Tax Distributions. Notwithstanding the distribution
provisions set forth in
Section 6.02(a), if, for any taxable year of the Partnership, any Partner has an
Excess Tax Liability, each Partner shall receive a distribution ("Special Tax
Distribution") in proportion to such Partner's Commitment Percentage. The amount
of any Special Tax Distribution shall be computed by reference to the Excess Tax
Liability of the Partner with the greatest Excess Tax Liability, and the amount
of Proceeds thereafter distributable to any Participating Partner pursuant to
Section 6.02(a) shall be reduced by such Participating Partner's Special Tax
Distribution, net of any amounts previously deducted with respect to such
Special Tax Distribution from the proceeds distributable to such Participating
Partner; provided, however, that no Special Tax Distribution shall be made to
the extent it would require the General Partner to call any portion of the
Limited Partners' Capital Commitments to fund such Special Tax Distribution.
For purposes of this Section 6.02(c), the following terms have the following
meanings:
"Effective Tax Rate" means the effective rate of tax on the Partner's
taxable income from the Partnership, which shall be determined by the General
Partner in its reasonable discretion; provided that in no event shall the
Effective Tax Rate be less than the highest effective tax rate for an individual
New York City resident for income with the character generated by the
Partnership.
"Excess Tax Liability" means, for any taxable year of the Partnership,
the excess of (i) the product of (x) the sum of the amount of any income, profit
or gain allocated to the applicable Partner pursuant to Section 6.09 (other than
Section 6.09(d)) for such year, (but minus cumulative net losses previously
allocated to such Partner) times (y) the Effective Tax Rate over (ii) the amount
of Proceeds distributed or paid to such Partner pursuant to Section 6.02(a) or
the corresponding terms of any Parallel Investment for such year.
(d) Clawback; Maintenance of Escrow Account. If, after all Partnership
Investments have been disposed of and after giving effect to all distributions
made in accordance with this Section 6.02 in respect of such Partnership
Investments, the aggregate amount of such distributions and payments with
respect to any Partner who is not a Defaulting Partner is less than the sum of
(A) the aggregate amount of all Capital Contributions made by such Partner, (B)
the aggregate amount of the Preferred Return on such Capital Contributions and
(C) the aggregate amount of the distributions under Section 6.02(a)(4) to which
such Partner is entitled, then the General Partner shall contribute to the
Partnership for distribution to such Partner an amount equal to the lesser of
(x) the aggregate amount of the deficiency and (y) the amount of Proceeds
previously distributed or paid to the General Partner with respect to its
Carried Interest pursuant to Sections 6.02(a)(3) and 6.02(a)(4) net of amounts
paid or accrued and payable in respect of taxes with respect to such Carried
Interest. The foregoing contribution shall be adjusted to take into account the
net tax benefit, if any, to the General Partner and its direct or indirect
members in making such contribution. OrbiMed Advisors LLC, an Affiliate of the
General Partner, shall guarantee the foregoing obligation of the General
Partner. In addition, an amount equal to 25% of all distributions of Carried
Interest to the General Partner shall be held in an escrow account for the
contingent benefit of the Partnership in order to secure the amounts (if any)
payable by the General Partner to the Partnership pursuant to this Section
6.02(d) (the "Escrow Account"). Following the Full Investment Date amounts held
in the Escrow Account
shall equal the lesser of (i) 25% of all distributions of Carried Interest to
the General Partner and (ii) the aggregate Capital Contributions of the Limited
Partners less all distributions made to the Limited Partners (provided that such
amount shall not be reduced below zero) (the "Minimum Escrow Balance"). Amounts
in excess of the Minimum Escrow Balance shall be released to the General
Partner. For purposes of this Section 6.02(d), distributions pursuant to Section
9.04(a) shall be treated as made pursuant to Sections 6.02(a)(3) and 6.02(a)(4)
to the extent they would have been so made if this Agreement did not contain the
last sentence of Section 9.04(a).
(e) Special Distributions to General Partner with respect to
Overfunded Capital Commitments of the General Partner. If at any time the
General Partner has made any Additional GP Cash Contribution, the General
Partner shall thereafter be entitled to receive distributions ("Special
Distributions") equal, in the aggregate, to the aggregate amount of Additional
GP Cash Contributions, provided that the amount of any Special Distribution
shall not exceed the Unused Credit Amount at the time of such distribution.
Special Distributions shall be made out of (i) Capital Contributions made by
Limited Partners or (ii) notwithstanding the distribution provisions set forth
in Section 6.02(a), Proceeds that would otherwise have been distributed under
this Article VI to Limited Partners.
(f) Adjustments to Reflect Partners Bearing Management Fee.
Notwithstanding anything to the contrary contained in this Section 6.02, the
General Partner shall make equitable adjustments to the distribution provisions
set forth herein in order to take into account whether or not particular
Partners are responsible for payment of the Management Fee as provided for in
Section 3.01(b). The General Partner agrees to provide the Limited Partners with
a written calculation of any adjustment pursuant to this Section 6.02(f).
SECTION 6.03. Other General Principles of Distribution. (a)
Distributions of Cash. Subject to Section 6.11 and the remaining provisions of
this Section 6.03, cash Proceeds shall be distributed to the Partners in United
States dollars as promptly as practicable after receipt thereof.
(b) Distributions in Kind. Any securities or other property
constituting all or any portion of a Partnership Investment may be distributed
in kind at such time and in such amounts as the General Partner shall in its
discretion determine, and any such distribution shall be made to the
Participating Partners in respect of such Partnership Investment in accordance
with the amounts that would have been distributed in respect thereof had such
property been disposed of by the Partnership immediately prior to such
distribution at fair market value; provided that the General Partner shall only
distribute in kind property consisting of securities which are freely
transferable by the Participating Partners (it being understood that securities
saleable pursuant to Rule 144 of the Securities Act of 1933, as amended, shall
be deemed freely transferable) and for which market quotations are readily
available. The General Partner may, in its discretion, make in kind
distributions to a Participating Partner so requesting notwithstanding cash
distributions in respect of such Investment to the other Participating Partners.
In any distribution of property in kind (other than a distribution in kind
pursuant to the immediately preceding sentence), the General Partner shall not
discriminate among the Partners but shall in any such distribution (i)
distribute to the applicable Partners property of the same type, and (ii) if
cash and property in kind are to be distributed simultaneously in respect of any
Partnership Investment, distribute cash and property
in kind in the same proportion to each such Partner. For purposes of allocations
pursuant to Section 6.09, property to be distributed in kind shall be valued by
the General Partner in good faith based on the most recent closing sales price
thereof at the close of business on the day of distribution if such property is
a security quoted on a national securities exchange or over-the-counter market;
provided that the General Partner shall not be required to distribute in kind
any security subject to a "lock-up" or other transfer restriction until such
transfer restriction has lapsed. In the event a question arises as to the
valuation methodology for a particular security the General Partner shall
consult with the Advisory Committee as an advisory resource with respect to such
valuation. If the Advisory Committee objects in writing (which objection must be
made within 15 business days of any notice of such valuation), and the General
Partner and the Advisory Committee are unable to agree upon a mutually
acceptable valuation within 30 days after such objection is made, the General
Partner shall (at the Partnership's expense) cause a nationally recognized
investment banking firm mutually acceptable to the General Partner and the
Advisory Committee to make a valuation, and such firm's determination of such
valuation shall be binding on all parties. Pending such determination, the
General Partner will hold back in the Partnership any amounts of non-marketable
securities distributable to the General Partner that may be required to be
returned depending upon the outcome of such valuation procedure.
If a Partner (i) is prohibited by applicable law or regulation from
holding directly the property to be distributed in kind or (ii) makes a written
request to the General Partner, the General Partner shall, in lieu of making
such distribution in kind to such Partner and to the extent permitted by
applicable law, use its reasonable best efforts to arrange for the sale of all
or a portion of such property as directed by such Partner on terms the General
Partner deems reasonable and, upon such sale, the General Partner shall promptly
distribute to such Partner the net proceeds of such sale; provided that such
Partner shall be deemed to have received such property otherwise distributed in
kind at the same time and at the same valuation as other Partners receiving such
distribution notwithstanding a subsequent decline in value of such property
prior to the distribution of the foregoing proceeds. The General Partner shall
be entitled to receive (i) reasonable compensation and reimbursement for
expenses out of the proceeds of such sale and (ii) a 20% carried interest in
respect of the excess (if any) of the proceeds of such sale over the value of
the property at the time of the deemed distribution thereof.
In no event shall the General Partner be liable with respect to any
decline in value after the date of distribution with respect to securities
distributed in kind.
(c) Withholding of Certain Amounts. Notwithstanding anything else
contained in this Agreement, the General Partner may withhold in its discretion,
from any distribution of cash or property in kind to any Partner pursuant to
this Agreement, the following amounts:
(i) any amounts due from such Partner to the Partnership or the
General Partner pursuant to this Agreement to the extent not otherwise
paid; and
(ii) any amounts required (x) for the payment of any taxes that
the General Partner determines in good faith are attributable to such
Partner or (y) to pay or reimburse the General Partner for any
advances made by the General Partner for such purpose.
Any amounts withheld pursuant to this Section 6.03(c) shall be applied
by the General Partner to
discharge the obligation in respect of which such amounts were
withheld. All amounts distributable to any Partner that are withheld pursuant to
this Section 6.03(c) shall be treated as amounts distributed to such Partner.
(d) Amounts Held in Reserve. In addition to the rights set forth in
Section 6.03(c), the General Partner shall have the power, in its discretion, to
withhold amounts otherwise distributable to the Partners in order to maintain
the Partnership in a sound financial and cash position and to make such
provision as the General Partner in its discretion deems necessary or advisable
for any and all liabilities and obligations, contingent or otherwise, of the
Partnership (other than the obligation of the Partnership to make or pay for
Partnership Investments).
(e) Delaware Act. Notwithstanding anything in this Agreement to the
contrary, neither the Partnership nor the General Partner shall make any
distributions except to the extent permitted under the Delaware Act and other
applicable law.
SECTION 6.04. [Intentionally omitted.]
SECTION 6.05. Special Expense Distributions. If, pursuant to Section
3.06, the General Partner has made cash contributions to the Partnership in
respect of any Partnership Expenses, then, on any subsequent Drawdown Date on
which the General Partner requires the Partners to make Capital Contributions in
respect of such Partnership Expenses, the General Partner shall receive a
distribution ("Special Expense Distribution") in an amount equal to the amount
of such cash contributions made pursuant to Section 3.06. Each Special Expense
Distribution shall be funded by the Partners in accordance with Section 5.02(b).
SECTION 6.06. Loans and Withdrawal of Contributions. No Partner shall
be permitted to borrow, or to make an early withdrawal of, any portion of the
Capital Contributions made by it.
SECTION 6.07. Capital Accounts. There shall be established for each
Partner, on the books and records of the Partnership, an account (a "Capital
Account"), which shall initially be zero and which shall be adjusted as set
forth in Section 6.08. Except to the extent inconsistent with this Agreement,
the Capital Accounts shall be maintained consistently with the Treasury
Regulations issued under Code Section 704(b).
SECTION 6.08. Adjustments to Capital Accounts. The Capital Accounts of
the Partners shall be adjusted as follows:
(a) Cash Contributions. The amount of cash contributed to the
Partnership by any Partner (including pursuant to Article V) shall be credited
to the Capital Account of such Partner.
(b) Income, Profit or Gain. The amount of any income, profit or gain
allocated to any Partner in respect of Partnership Investments shall be credited
to the Capital Account of such Partner.
(c) Expense, Deduction or Loss. The amount of any expense (other than
any expense that should properly be included in the basis of any Partnership
asset), deduction or loss allocated to
any Partner in respect of Partnership Investments or Partnership Expenses shall
be debited against the Capital Account of such Partner.
(d) Distributions. The amount of cash (or the fair market value of
other property as determined by the General Partner pursuant to Section 6.03(b))
distributed by the Partnership to any Partner shall be debited against the
Capital Account of such Partner.
(e) Adjustments upon Event of Default. Upon any Event of Default by
any Partner:
(i) An amount equal to 50% of the amount of such Partner's
Capital Account on the date of such Event of Default shall be:
(x) debited against such Partner's Capital Account; and
(y) credited to the Capital Accounts of all the other
Partners (other than any other Defaulting Partner) pro rata in accordance with
their respective Commitment Percentages (calculated without giving effect to the
Capital Commitment of any Defaulting Partner) at such time.
The amount to be debited or credited shall be allocated within any Partner's
Capital Account in a manner the General Partner determines in its discretion is
equitable.
(ii) Any income, profit or gain with respect to any Partnership
Investment that would have been allocated to the Capital Account of such Partner
but for the operation of Section 5.05(a)(ii) shall be credited to the Capital
Accounts of all the other Partners who are Participating Partners with respect
to such Partnership Investment (other than any other Defaulting Partner) pro
rata in accordance with their respective Capital Commitments with respect to
such Partnership Investment (calculated without giving effect to the Capital
Commitment of any Defaulting Partner).
SECTION 6.09. Allocations of Income, Gain, Loss, Deduction and Credit.
At the end of each year and at such other times as the General Partner
determines, items of income, gain, loss, deduction and credit of the Partnership
shall be allocated as follows:
(a) Allocation of Partnership Expenses. Subject to Section 3.04, any
Partnership Expense shall be allocated among all the Partners pro rata in
accordance with their respective Commitment Percentages. Notwithstanding the
foregoing,
(i) subject to clause (ii) below, any Partnership Expense
directly and solely attributable to one or more Partnership Investments
(including without limitation the Management Fee referred to in Section 5.03)
shall be allocated only to those Partners who are Participating Partners with
respect to such Investments, pro rata in accordance with such Partners'
respective Investment Percentages with respect to such Investments;
(ii) the General Partner may allocate any Partnership Expense and
the Management Fee on a basis other than Commitment Percentages and/or
Investment Percentages and/or among certain (but not all) Partners if the
General Partner determines in its discretion that
such allocation is clearly more equitable; and
(iii) the General Partner may allocate the Management Fee among
the Limited Partners as provided for in Section 3.01(b).
(b) Investment Income Allocable to Certain Partners. Any gains
realized or other income earned in respect of any short-term investment of funds
made available by any Partner as a Partnership Capital Contribution (pending
application of such funds to make the applicable Partnership Investment or to
pay the applicable Partnership Expense) shall be allocated to such Partner.
(c) [Intentionally omitted.]
(d) Special Allocations to General Partner. Gross items of capital
gain realized with respect to Investments that would, but for this section
6.09(d), have been allocated to the non-GP Affiliate Limited Partners shall
instead be allocated to the General Partner on a cumulative basis up to the
aggregate Credit Amount (the "Special Allocation").
(e) Other. All other allocations of income, profit, gain, loss,
deduction and credit shall be allocated among the Partners in a manner such that
if (i) the Partnership were dissolved, its affairs wound up and its assets
distributed to the Partners pursuant to Section 9.04 and (ii) any Parallel
Investments and Parallel Investment Vehicles were disposed of and distributed in
accordance with the terms of such Parallel Investments, immediately after making
such allocation, such distributions would, as nearly as possible, be equal to
the distributions that would be made pursuant to Section 6.02. For purposes of
making allocations pursuant to this Section 6.09(e) prior to the dissolution of
the Partnership and the disposition of such Parallel Investments and Parallel
Investment Vehicles, the assets held by the Partnership and any Parallel
Investments shall be deemed to have a value equal to their tax basis (or book
value if different under the Code Section 704 rules).
SECTION 6.10. Tax Allocations. For federal, state and local income tax
purposes, each item of income, gain, loss, deduction and credit of the
Partnership shall be allocated among the Partners as nearly as possible in the
same manner as the corresponding item of income, expense, gain or loss is
allocated pursuant to the other provisions of this Article VI. It is intended
that the Capital Accounts will be maintained at all times in accordance with
Section 704 of the Code and applicable Treasury regulations thereunder, and that
the provisions hereof relating to the Capital Accounts be interpreted in a
manner consistent therewith. The General Partner shall be authorized to make
appropriate amendments to the allocations of items pursuant to this Article VI
if necessary in order to (i) comply with Section 704 of the Code or applicable
Treasury regulations thereunder; provided that no such change shall have an
adverse effect upon the amount distributable to any Partner hereunder or (ii)
satisfy the economic relationship among the Partners.
A Partner shall not be allocated items of loss or deduction to the
extent such an allocation would cause or increase a deficit Capital Account
balance for such Partner as of the close of any taxable year. In determining the
Capital Account balance of a Partner for this purpose,
adjustments, allocations and distributions described in Treas. Reg. Section
1.704-1(b)(2)(ii)(d)(4) through (6) shall be taken into account. Any items of
loss and deduction not allocated to a Partner under this paragraph shall be
allocated first, to the remaining Partners with positive Capital Account
balances (as adjusted in accordance with the preceding sentence) in proportion
to, and to the extent of, such positive Capital Account balances and thereafter,
as provided in applicable Treasury regulations. Notwithstanding anything else
contained in this Article VI, if any Partner has a deficit Capital Account for
any fiscal period as a result of any adjustment, allocation or distribution of
the type described in Treas. Reg. Section 1.704-l(b)(2)(ii)(d)(4) through (6)
then the Partnership's income and gain will be specially allocated to such
Partner in an amount and manner sufficient to eliminate such deficit as quickly
as possible. Any special allocation of items of income or gain pursuant to this
paragraph shall be taken into account in computing subsequent allocations
pursuant to this Article VI so that the cumulative net amount of all items
allocated to each Partner shall, to the extent possible, be equal to the amount
that would have been allocated to such Partner if there had never been any
allocation pursuant to this paragraph.
SECTION 6.11 Reinvestment of Proceeds. (a) With respect to Proceeds
realized by the Partnership on any date prior to the Full Investment Date in
respect of any Partnership Investment disposed of within one year of such
investment the General Partner may (i) retain for reinvestment any such Proceeds
in an amount up to the cost basis of the original investment or (ii) distribute
such amounts as Remaining Capital Commitments subject to future Drawdowns at a
later date.
(b) The General Partner may, in its sole discretion, defer any
Distributions pursuant to Section 6.02 with respect to any lock-up or other
contractual restriction on transfer or such later time as the General Partner
may determine in connection with an initial public offering being consummated by
the portfolio company, the subject of which is the Partnership Investment.
ARTICLE VII
REPORTS TO PARTNERS
SECTION 7.01. Reports. (a) The books of account and records of the
Partnership shall be audited as of the end of each fiscal year by the
Partnership's independent public accountants. The Partnership's independent
public accountants shall be a nationally recognized independent public
accounting firm selected from time to time by the General Partner in its
discretion. All reports provided to the Partners pursuant to this Section 7.01
shall be prepared on the same basis as that followed by the Partnership for
purposes of filing the Partnership's United States federal income tax returns.
(b) Not later than 45 days after the end of each fiscal quarter (other
than the final fiscal quarter in any year) the General Partner shall prepare or
cause to be prepared, and shall mail or electronically transmit to each Partner,
a quarterly update on the Partnership's activities.
(c) As soon as practicable after the General Partner has received
final information from portfolio companies after the end of each fiscal year the
General Partner shall prepare or cause to be prepared, and shall mail to each
Partner:
(i) an audited balance sheet of the Partnership as of the end of
such fiscal year;
(ii) an audited income statement of the Partnership for such
fiscal year;
(iii) a statement of the Partnership's capital for such fiscal
year;
(iv) a management report with respect to each Investment with
respect to which such Partner is a Participating Partner; and
(v) a valuation of each Investment with respect to which such
Partner is Participating Partner, determined in good faith by the
General Partner, which shall be based on, in the case of (A)
privately-held companies until such time as there is a liquidity event
in the form of an acquisition, merger, or significant asset sale, and
(B) publicly-held companies subject to a "lock up" agreement or other
contractual restrictions on transfer, the cost of such Investment or
such lesser value as determined by the General Partner in good faith
in its reasonable business judgment; provided, that, to the fullest
extent permitted by applicable law the General Partner shall not be
liable to the Partnership or the Partners with respect to the accuracy
of such valuation. The General Partner shall use reasonable efforts to
follow industry standard valuation guidelines after consultation with
the Advisory Committee.
(d) After the end of each fiscal year, the General Partner shall use
commercially reasonable efforts to cause to be prepared and transmitted within
120 days of the end of such fiscal year, but in any event as promptly as
possible, a United States federal income tax form K-l for each Partner, a copy
of the Partnership's return filed for United States federal income tax purposes
and a report setting forth in sufficient detail such transactions effected by
the Partnership during such fiscal year as shall enable each Partner to prepare
its United States federal income tax return, if any the General Partner shall
mail such materials to (i) each Partner and (ii) each former Partner (or its
successors, assigns, heirs or personal representatives) who may require such
information in preparing its United States federal income tax return.
SECTION 7.02. Audit. If at any time during the term of the Partnership
either (i) three members of the Advisory Committee or (ii) the Required
Partners, in either case after consultation with the General Partner, desire
that an audit or other review of the Partnership, the QP Fund, any Parallel
Investment Vehicles and/or Direct Investments and their activities be conducted
by an independent accounting firm other than the Partnership's regular auditors,
then by written notice to the General Partner such parties shall have the
one-time right to require such audit or review to be conducted at the expense of
the Partnership.
ARTICLE VIII
EXCULPATION AND INDEMNIFICATION
SECTION 8.01. Exculpation and Indemnification. (a) No Indemnified
Person shall be liable to the Partnership or to the Partners for any losses,
claims, damages or liabilities arising from, related to or in connection with
this Agreement or the Partnership's business or affairs
(including any act or omission by any Indemnified Person and any activity of the
type or character disclosed in the Offering Memorandum under the captions
"Potential Conflicts of Interest", "Risk Factors", or elsewhere therein (such
disclosure being incorporated herein by reference), except for any losses,
claims, damages or liabilities determined by final judgment of a court of
competent jurisdiction to have been primarily attributable to such Indemnified
Person's fraud, gross negligence, willful misconduct, bad faith or willful
breach of this Agreement.
(b) To the extent that, at law or in equity, any Indemnified Person
has duties (including fiduciary duties) and liabilities relating thereto to the
Partnership or to any Partner, the General Partner and any other Indemnified
Person acting in connection with the Partnership's affairs shall not be liable
to the Partnership or to any Partner for its good faith reliance on the
provisions of this Agreement. The provisions of this Agreement, to the extent
that they restrict the duties and liabilities of any Indemnified Person
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Indemnified Person.
(c) Notwithstanding any provisions of law or in equity to the
contrary, to the fullest extent permitted by applicable law, whenever in this
Agreement the General Partner is permitted or required to make a decision (i) in
its "discretion," or under a grant of similar authority or latitude, the General
Partner shall be entitled to consider only such interests and factors as it
desires and, provided that it acts in good faith, shall have no duty or
obligation to give any consideration to any interest of or factors affecting the
Partnership or any Partner or (ii) in its "good faith," or under another express
standard, the General Partner shall act under such express standard and shall
not be subject to any other or different standards imposed by this Agreement, or
any other agreement contemplated herein.
(d) The Partnership shall, to the fullest extent permitted by
applicable law, indemnify and hold harmless each Indemnified Person against any
losses, claims, damages or liabilities to which such Indemnified Person may
become subject in connection with any matter arising from, related to or in
connection with this Agreement or such of the Partnership's business or affairs
as are related to or in connection with this Agreement, except for such losses,
claims damages or liabilities that are determined by the judgment of a court of
competent jurisdiction to have been primarily attributable to (x) other than any
member of the Advisory Committee in such Person's capacity as a member thereof,
such Indemnified Person's fraud, gross negligence, willful misconduct, bad faith
or willful breach of this Agreement or (y) in the case of a member of the
Advisory Committee in such Person's capacity as a member thereof, such
Indemnified Person's bad faith; provided that if the foregoing judgment of a
court of competent jurisdiction is subsequently reversed on appeal or otherwise,
then the Indemnified Party's right to the indemnification provided hereunder
shall be reinstated. If any Indemnified Person becomes involved in any capacity
in any action, proceeding or investigation in connection with any matter arising
from related to, or in connection with, this Agreement or such of the
Partnership's business or affairs as are related to or in connection with this
Agreement, whether or not pending or threatened and whether or not any
Indemnified Person is a party thereto, the Partnership will periodically
reimburse such Indemnified Person for its legal and other expenses (including
the cost of any investigation and preparation) incurred in connection therewith;
provided that (x) the Partnership shall not advance amounts with respect to
legal fees and expenses in the event such Indemnified Person is the subject of
an action brought by Limited Partners holding a majority of
the Capital Commitments and (y) such Indemnified Person shall promptly repay to
the Partnership the amount of any such reimbursed expenses paid to it to the
extent that it shall ultimately be determined that such Indemnified Person is
not entitled to be indemnified by the Partnership in connection with such
action, proceeding or investigation as provided in the exception contained in
the immediately preceding sentence. If for any reason (other than the gross
negligence or willful misconduct of such Indemnified Person) the foregoing
indemnification is unavailable to such Indemnified Person, or insufficient to
hold it harmless, then the Partnership shall contribute to the amount paid or
payable by such Indemnified Person as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative benefits
received by the Partnership on the one hand and such Indemnified Person on the
other hand or, if such allocation is not permitted by applicable law, to reflect
not only the relative benefits referred to above but also any other relevant
equitable considerations. Notwithstanding the provisions of this Section
8.01(d), no Indemnified Person shall be entitled to indemnification with respect
to any matter which constitutes an Internal Dispute (as defined in the
immediately succeeding sentence). For purposes of this Section 8.01(d),
"Internal Dispute" means any proceeding in which both: (i) one or more officers,
directors, managers or employees of the General Partner or the Partnership are
suing one or more other officers, directors, managers or employees of the
General Partner or the Partnership; and (ii) neither the Partnership, nor the
General Partner, nor any Limited Partner, nor any issuer with respect to a
Partnership Investment nor any Affiliate or associate of any of the foregoing is
a plaintiff, defendant, or other participant in such proceeding.
(e) Each Partner covenants for itself and its successors, assigns,
heirs and personal representatives that such Partner will, at any time prior to
or after dissolution of the Partnership on demand, whether before or after such
Partner's withdrawal from the Partnership (within the meaning of the Delaware
Act), pay to the Partnership or the General Partner any amount which the
Partnership or the General Partner, as the case may be, pays in respect of taxes
(including without limitation withholding taxes, interest, penalties and any
additions to tax) imposed upon income of or distributions to such Partner.
(f) Notwithstanding anything else contained in this Agreement, the
reimbursement, indemnity and contribution obligations of the Partnership under
Section 8.01 (d) and any comparable indemnities under Parallel Investment
Vehicles or agreements relating to Direct Investments shall:
(i) be in addition to any liability that the Partnership and any
such Parallel Investment Vehicle and Direct Investment may otherwise
have;
(ii) extend upon the same terms and conditions to the directors,
officers. stockholders, partners, employees, agents and
representatives of each Indemnified Person;
(iii) be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of each Indemnified Person
and any such Persons; and
(iv) at any time be limited to (A) the assets of the Partnership
and applicable
Parallel Investment Vehicles and Direct Investments at such time and
the amount of the Partners' aggregate Remaining Capital Commitments at
such time or, (B) following dissolution of the Partnership with
respect to any Limited Partner, the lesser of (x) the aggregate amount
of distributions received by such Limited Partner and (y) an amount
equal to 30% of such Limited Partner's Capital Commitment.
(g) The foregoing provisions of this Section 8.01 shall survive for a
period of two years (other than Section 8.01(e), which shall survive for a
period of five years) from the date of dissolution of the Partnership; provided
that if at the end of such period, there are any actions, proceedings or
investigations then pending, the General Partner shall so notify the Partners at
such time (which notice shall include a brief description of each such action,
proceeding or investigation and of the liabilities asserted therein) and the
foregoing provisions of this Section 8.01 shall survive with respect to each
such action, proceeding or investigation set forth in such notice (or any
related action, proceeding or investigation based upon the same or a similar
claim) until such date that such action, proceeding or investigation is
ultimately resolved; and provided further that the provisions of this Section
8.01 shall not affect the obligations of the Limited Partners under Section
17-607 of the Delaware Act.
(h) The Partners acknowledge and agree that the terms of each Parallel
Investment shall include provisions applicable to such Parallel Investment
substantially identical to the provisions of this Section 8.01 and Section 8.02;
provided that the limitations set forth in Section 8.01(f)(iv)(B) shall be
applied in the aggregate with any comparable limitations of the applicable
Partner's liability with respect to indemnities under Parallel Investment
Vehicles or agreements relating to Direct Investments.
SECTION 8.02. Exclusive Jurisdiction. To the fullest extent permitted
by applicable law, each Partner hereby agrees that any claim, action, or
proceeding by any Partner seeking any relief whatsoever against any Indemnified
Person based on, arising out of, or in connection with, this Agreement or the
Partnership's affairs shall be brought only in the Court of Chancery sitting in
the State of Delaware, or if no such court has jurisdiction over the applicable
claim, the appropriate Federal court located in such location, and not in any
other State or Federal court in the United States of America or any court in any
other country. Each Partner acknowledges that, in the event of any breach of
this provision, the Indemnified Persons have no adequate remedy at law and shall
be entitled to injunctive relief to enforce the terms of this Section 8.02.
ARTICLE IX
DURATION AND DISSOLUTION OF THE PARTNERSHIP
SECTION 9.01. Duration. The term of the Partnership shall continue
until the tenth anniversary of the Final Closing Date, unless the Partnership is
sooner dissolved pursuant to Section 9.02; provided, however, that, unless the
Partnership is sooner dissolved pursuant to Section 9.02, (i) the General
Partner may in its sole discretion extend the term of the Partnership for up to
two additional one-year periods and (ii) thereafter the General Partner may,
with the consent of Limited Partners and QP Partners representing 66 2/3% of,
collectively, the aggregate Capital Commitments of all Limited Partners and the
aggregate capital commitments of all QP
Partners (other than Defaulting Partners and defaulting QP Partners), at their
option extend the term of the Partnership for two additional one year periods.
Notwithstanding the expiration of the term of the Partnership, the Partnership
shall continue in existence as a separate legal entity until cancellation of the
certificate of limited partnership in accordance with the Delaware Act.
SECTION 9.02. Dissolution. Subject to the Delaware Act, the
Partnership shall be dissolved and its affairs shall be wound up upon the
earliest of:
(a) the expiration of the term of the Partnership provided in Section
9.01;
(b) the vote or written consent of the Required Partners;
(c) the affirmative vote of the Required Partners to remove the
General Partner as a result of the occurrence of a Triggering Event with respect
to the General Partner or the Management Company unless at the time there is at
least one other General Partner (with respect to which there shall have been no
such vote) that is hereby authorized to, and does carry on the business of the
Partnership; provided that the Partnership shall not be dissolved and shall not
be required to be wound up by reason of the occurrence of such vote if, within
90 days after such vote, the Required Partners agree in writing to continue the
business of the Partnership and to the appointment, effective as of the date of
such removal, of one or more additional general partners if necessary or
desired;
(d) a decision made by the General Partner to dissolve the Partnership
because the General Partner has determined in good faith that (i) changes in any
applicable law or regulation would have a material adverse effect on the
continuation of the Partnership or (ii) such action is necessary or desirable in
order for the Partnership not to be in material violation of the Investment
Company Act or ERISA, for the General Partner not to be in material violation of
the Advisers Act;
(e) an event of withdrawal of the General Partner (within the meaning
of the Delaware Act) unless (i) at the time there is at least one remaining
General Partner and such General Partner shall agree to continue the business of
the Partnership as General Partner or (ii) if within 90 days after the event of
withdrawal, the Required Partners agree in writing to continue the business of
the Partnership and to the appointment, effective as of the date of the event of
withdrawal, of a new General Partner;
(f) any time at which (i) all Partnership Investments have been
disposed of and (ii) the aggregate Remaining Capital Commitments of all Partners
is zero;
(g) at any time at which there are no limited partners of the
Partnership, unless the business of the Partnership is continued in accordance
with the Delaware Act; and
(h) the entry of a decree of judicial dissolution under Section 17-802
of the Delaware Act. The General Partner shall notify the Limited Partners
promptly following its knowledge of the occurrence of a Key Person Event or a
Triggering Event with respect to any of Samuel D. Isaly, Michael B. Sheffery,
Carl Gordon or Sven Borho, the General Partner or the Management Company.
SECTION 9.03. Liquidation of Partnership. Upon dissolution, the
Partnership's business shall be liquidated in an orderly manner. The General
Partner shall be the liquidator to wind up the affairs of the Partnership
pursuant to this Agreement. If there shall be no General Partner, the Partners,
upon the approval of the Required Partners, may approve one or more liquidators
to act as the liquidator in carrying out such liquidation. In performing its
duties, the liquidator is authorized to sell, distribute, exchange or otherwise
dispose of the assets of the Partnership in accordance with the Delaware Act and
in any reasonable manner that the liquidator shall determine to be in the best
interest of the Partners.
SECTION 9.04. Distribution Upon Dissolution of the Partnership. (a)
Upon dissolution of the Partnership, the liquidator winding up the affairs of
the Partnership shall determine in good faith which assets of the Partnership
shall be sold and which assets of the Partnership shall be retained for
distribution in kind to the Partners. Assets to be distributed in kind shall be
valued by the liquidator in good faith. Subject to the Delaware Act, after all
liabilities of the Partnership have been satisfied or duly provided for, the
remaining assets of the Partnership shall be distributed to the Partners in
accordance with their respective Capital Account balances.
(b) In the discretion of the liquidator, and subject to the Delaware
Act, liabilities of the Partnership may be provided for pursuant to this Section
9.04 in any manner, including:
(i) distribution of the assets of the Partnership to a trust
established for the benefit of the Partners for purposes of
liquidating such Partnership assets, collecting amounts owed to the
Partnership, and paying any liabilities or obligations of the
Partnership or the General Partner arising out of, or in connection
with, this Agreement or the Partnership's affairs; or
(ii) withholding of distributions to the Partners to provide a
reserve for the payment of future Partnership Expenses and other
liabilities of the Partnership contingent or otherwise; provided that
such withheld amounts shall be distributed to the Partners as soon as
the liquidator determines, in its discretion, that it is no longer
necessary to retain such amounts.
The assets of any trust established in connection with clause (i) above shall be
distributed to the Partners from time to time, in the discretion of the
liquidator, in the same proportions as the amount distributed to such trust by
the Partnership would otherwise have been distributed to the Partners pursuant
to this Agreement.
SECTION 9.05. Withdrawal, Death or Incompetency of a Limited Partner.
Except as otherwise provided in Article XI, a Limited Partner may not withdraw
from the Partnership prior to its termination. Upon the death or incompetency of
an individual Limited Partner, such Limited Partner's executor, administrator,
guardian, conservator or other legal representative may exercise all of such
Limited Partner's rights for the purpose of settling such Limited Partner's
estate or administering such Limited Partner's property, except that the General
Partner may reduce or cancel such Limited Partner's obligation to make future
Capital Contributions on such terms as the General Partner determines in its
discretion. Except as expressly provided in this Agreement, no other event
affecting a Limited Partner (including bankruptcy or insolvency) shall, in and
of itself, affect its obligations under this Agreement or cause the dissolution
of the Partnership.
ARTICLE X
TRANSFERABILITY OF GENERAL PARTNER'S INTEREST
SECTION 10.01. Transferability of General Partner's Interest. The
General Partner may not sell, exchange, transfer, assign, pledge, hypothecate or
otherwise dispose of all or any portion of its interest in the Partnership (any
such sale, exchange, transfer, assignment, pledge, hypothecation or other
disposition being herein collectively called "Transfers") to any Person other
than an Affiliate controlled, directly or indirectly, by the current direct or
indirect members of the General Partner. If the General Partner so determines in
good faith, and to the extent permitted by the preceding sentence, the General
Partner may admit any Person to whom the General Partner proposes to make such a
Transfer as an additional, or, if the General Partner transfers all of its
interest, a substitute General Partner of the Partnership, and such transferee
shall be deemed admitted to the Partnership as General Partner of the
Partnership immediately prior to such Transfer and shall continue the business
of the Partnership without dissolution. Except as otherwise provided in this
Section 10.01, the General Partner may not withdraw or be removed from the
Partnership prior to its dissolution.
SECTION 10.02. Advisers Act. Notwithstanding the foregoing provisions
of this Article X, the General Partner shall not assign any of its rights or
duties hereunder except with such approval of the Partners as is required under
the Advisers Act.
ARTICLE XI
TRANSFERABILITY OF A LIMITED PARTNER'S INTEREST
SECTION 11.01. Restrictions on Transfer and Withdrawals. (a) No direct
or indirect Transfer of all or any part of a Limited Partner's interest in the
Partnership may be made without the prior written consent of the General Partner
(which may, in the General Partner's sole discretion, be granted on such terms
as the General Partner determines or withheld). If the General Partner consents
to any direct or indirect Transfer, such Limited Partner shall be free to make
such Transfer within 120 days after notice of such consent. The General Partner
shall be authorized pursuant to this Section 11.01 to consent to the direct or
indirect Transfer of a Limited Partner's interest in the Partnership to any
Person, including without limitation the General Partner or any of its
Affiliates. In addition, a Limited Partner may not withdraw any of its Interest
in the Partnership except in limited circumstances when required or permitted by
the General Partner in its discretion to comply with applicable law or otherwise
to ensure that no adverse tax, regulatory or other consequences to the
Partnership, the General Partner or any of the Limited Partners will arise from
the continued investment by such Limited Partner.
(b) The foregoing provisions of this Section 11.01 shall not apply to
any direct or indirect Transfer which shall occur by operation of law.
SECTION 11.02. Expenses of Transfer: Indemnification. All expenses,
including attorneys' fees and expenses, incurred by the General Partner or the
Partnership in connection
with any direct or indirect Transfer shall be borne by the transferring Limited
Partner or such Limited Partner's transferee (any such transferee, when admitted
as a limited partner of the Partnership and shown as such on the books and
records of the Partnership, being hereinafter called a "Substituted Partner").
In addition the transferring Limited Partner or such transferee shall indemnify
the Partnership and the General Partner in a manner satisfactory to the General
Partner against any losses, claims, damages or liabilities to which the
Partnership, the General Partner or any Affiliate of the General Partner may
become subject arising out of or based upon any false representation or warranty
made by or breach or failure to comply with any covenant or agreement of, such
transferring Limited Partner or such transferee in connection with such
Transfer.
SECTION 11.03. Recognition of Transfer; Substituted Partners. (a) The
Partnership shall not (subject to Section 9.05) recognize for any purpose any
purported direct or indirect Transfer of all or any part of a Limited Partner's
Interest in the Partnership and no purchaser, assignee, transferee or other
recipient of all or any part of such interest shall become a Substituted Partner
hereunder unless:
(i) the provisions of Section 11.01 and, in the case of a
Substituted Partner, Section 11.03(b) shall have been complied with;
(ii) the General Partner shall have been furnished with the
documents effecting such Transfer, in form reasonably satisfactory to
the General Partner executed and acknowledged by both the seller,
assignor or transferor and the purchaser, assignee, transferee or
other recipient;
(iii) such purchaser, assignee, transferee or other recipient
shall have represented that such Transfer was made in accordance with
all applicable laws and regulations;
(iv) all necessary governmental consents shall have been obtained
in respect of such Transfer;
(v) all necessary instruments reflecting such admission shall
have been filed in each jurisdiction in which such filing is necessary
in order to qualify the Partnership to conduct business or to preserve
the limited liability of the Limited Partners; and
(vi) the General Partner shall have determined that such Transfer
will not result in the Partnership being treated as publicly traded
partnership as defined in Section 7704(b) of the Code.
(b) Each Substituted Partner, as a condition to its admission as a
Limited Partner, shall execute and acknowledge such instruments (including a
counterpart of this Agreement), in form and substance satisfactory to the
General Partner, as the General Partner reasonably deems necessary or desirable
to effectuate such admission and to confirm the agreement of such Substituted
Partner to be bound by all the terms and provisions of this Agreement with
respect to the interest in the Partnership acquired by such Substituted Partner.
A Substituted Partner shall be deemed admitted to the Partnership upon its
execution of a counterpart signature page to this Agreement. The admission of a
Substituted Partner shall not require the approval of any Limited
Partner. As promptly as practicable after the admission of a Substituted
Partner, the books and records of the Partnership shall be changed to reflect
such admission.
SECTION 11.04. Transfers During a Fiscal Year. If any direct or
indirect Transfer (other than a pledge or hypothecation) of a Limited Partner's
interest in the Partnership shall occur at any time other than the end of the
Partnership's fiscal year, the distributive shares of the various items of
Partnership income, gain, loss, and expense as computed for tax purposes and the
related cash distributions shall be allocated between the transferor and the
transferee on a basis consistent with applicable requirements under Section 706
of the Code; provided that no allocation agreed to between the transferor and
the transferee shall be effective unless (i) the transferor and the transferee
shall have given the Partnership written notice, prior to the effective date of
such Transfer, stating their agreement that such allocation shall be made on a
certain basis consistent with the applicable requirements under Section 706 of
the Code, (ii) the General Partner shall have consented to such allocation and
(iii) the transferor and the transferee shall have agreed to reimburse the
General Partner for any incremental accounting fees and other expenses incurred
by the General Partner in making such allocation.
SECTION 11.05. No Secondary Market. In no event shall the Partnership
participate in the establishment of a secondary market or the substantial
equivalent thereof as defined in Treasury Regulations Section 1.7704-1(c), or in
the inclusion of its interests on such a market or on an established securities
market as defined in Treasury Regulations Section 1.7704-1(b), nor shall the
Partnership recognize any transfers made on any of the foregoing markets by
admitting the purported transferee as a Limited Partner or otherwise recognizing
the rights or such transferee.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Amendments to the Partnership Agreement. (a) Except as
otherwise provided in Section 12.01(b), this Agreement may be amended by the
General Partner with the approval of the Required Partners; provided that no
amendment of this Agreement shall:
(i) without the approval of all the Limited Partners (other than
any Defaulting Partners), amend Section 5.03, Article VIII, Section
9.01 or this Section 12.01 (a);
(ii) without the approval of the affected Limited Partner, (w)
adversely modify or affect the limited liability of such Limited
Partner, (x) change the interest of such Limited Partner in any
existing Investment (other than as provided in this Agreement), (y)
change the Capital Commitment of such Limited Partner (other than as
provided in this Agreement) or (z) change the method of distributions
or allocations made under Article VI to such Limited Partner;
(iii) without the approval of all ERISA Partners, amend Sections
3.05 or 3.14 or, with respect to ERISA-related provisions, 5.06(b); or
(iv) without the approval of, collectively, Partners having
Capital Commitments and QP Partners having capital commitments
representing the percentage of the collective Capital Commitments and
QP Fund capital commitments specified in any provision of this
Agreement required for any action or approval of the Partners and QP
Partners, amend such provision.
(b) This Agreement may be amended by the General Partner without the
approval of any Limited Partner to (i) change the name of the Partnership, (ii)
correct typographical errors or to eliminate ambiguities or (iii) to make any
other change that would not, as determined by the General Partner in good faith,
be adverse to any Limited Partner. No such amendment pursuant to clause (iii)
shall be deemed effective until notice and a copy of such amendment (which shall
be provided at least 5 days prior to the effectiveness of such amendment) has
been provided to the Limited Partner.
(c) Notwithstanding the provisions of this Agreement, including
without limitation Sections 12.01(a) and (b), or of any subscription agreement,
it is hereby acknowledged and agreed that the General Partner on its own behalf
or on behalf of the Partnership without the approval of any Limited Partner or
any other Person may enter into a side letter or similar agreement to or with a
Limited Partner which has the effect of establishing rights under, or altering
or supplementing the terms of, this Agreement or of any subscription agreement.
The parties hereto agree that any terms contained in a side letter or similar
agreement to or with a Limited Partner shall govern with respect to such Limited
Partner notwithstanding the provisions of this Agreement or of any subscription
agreement.
SECTION 12.02. Approvals. Each Partner agrees that, except as
otherwise specifically provided herein and to the extent permitted by applicable
law, for purposes of granting the approval of the Partners with respect to any
proposed action of the Partnership, the General Partner or any of its Affiliates
(including any such approval required under the Advisers Act), the written
approval of the Required Partners shall bind the Partnership and each Partner
and shall have the same legal effect as the written approval of each Partner.
The General Partner may request the written approval of the Required Partners to
approve any matter required to be so approved by the Advisers Act.
SECTION 12.03. Investment Representation. Except as otherwise agreed
between the General Partner and any Limited Partner, each Limited Partner, by
executing this Agreement, represents and warrants that it is an "accredited
investor" within the meaning of Rule 501 of Regulation D under the Securities
Act of 1933, as amended, that its interest in the Partnership has been acquired
by it for its own account, or for the account of a commingled pension trust or
other institutional investor previously specified in writing to the Partnership
with respect to whom it has full investment discretion, for investment and not
with a view to resale or distribution thereof and that it is fully aware that in
agreeing to admit it as a Limited Partner, the General Partner and the
Partnership are relying upon the truth and accuracy of this representation and
warranty.
SECTION 12.04. Successors; Counterpart; Entire Agreement. This
Agreement (i) shall be binding as to the executors, administrators, estates,
heirs and legal successors of the Partners, (ii) may be executed in several
counterparts with the same effect as if the parties executing the
several counterparts had all executed one counterpart and (iii) shall constitute
the entire agreement and understanding among all the parties hereto with respect
to the subject matter hereof.
SECTION 12.05. Choice of Law. Notwithstanding the place where this
Agreement may be executed by any of the parties hereto, the parties expressly
agree that all the terms and provisions hereof shall be construed under the laws
of the State of Delaware.
SECTION 12.06. Notices. Each notice relating to this Agreement shall
be in writing and delivered in person or by registered or certified mail, or by
telecopier confirmed electronically and by registered or certified mail. All
notices to the Partnership shall be addressed to its principal office, place of
business and the office of such entities retained by the General Partner to
provide administrative services to the Partnership. All notices addressed to a
Partner shall be addressed to such Partner at the address set forth in the
Schedule attached hereto. Any Partner may designate a new address by notice to
that effect given to the Partnership. Unless otherwise specifically provided in
this Agreement, a notice shall be deemed to have been effectively given when
mailed by registered or certified mail to the proper address or delivered in
person.
SECTION 12.07. Headings. The titles of the Articles and the headings
of the Sections of this Agreement are for convenience of reference only, and are
not to be considered in construing the terms and provisions of this Agreement.
SECTION 12.08. Agreement Binding Upon Successors and Assigns. Except
as herein otherwise specified, this Agreement shall inure to the benefit of and
shall be binding upon the heirs, executors, administrators or other
representatives, successors and assigns of the respective parties hereto.
SECTION 12.09. Counterparts. This Agreement may be executed in
counterparts and all such counterparts, taken together, shall constitute valid
signatures with respect to this Agreement.
[SIGNATURE PAGES TO FOLLOW]
IN WITNESS WHEREOF, the undersigned have hereto set their hands as of
the day and year first above written.
ORBIMED CAPITAL II LLC, as General Partner
By____________________________________
Name:
Title:
LIMITED PARTNER
____________________________________
By__________________________________
Name:
Title:
B-1 Exhibit B
THE PARTNERSHIP INTERESTS EVIDENCED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY STATE OR
FOREIGN JURISDICTION AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH
APPLICABLE FEDERAL, STATE OR FOREIGN SECURITIES LAWS. IN ADDITION, TRANSFER OR
OTHER DISPOSITION OF THE PARTNERSHIP INTERESTS IS RESTRICTED AS PROVIDED IN THIS
AGREEMENT.
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
CADUCEUS PRIVATE INVESTMENTS II (QP), LP
Originally dated as of August 20, 2003
Amended and Restated as of September 19, 2003
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TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions......................................................1
ARTICLE II
GENERAL PROVISIONS
SECTION 2.01 Name..............................................................9
2.02 Office; Registered Agent ............................................9
2.03 Purposes of the Partnership..........................................9
2.04 Liability of the Partners Generally..................................9
2.05 Fiscal Year .........................................................9
2.06 Admission of Partners................................................9
2.07 Additional Partners ................................................10
2.08 Number of Partners .................................................11
2.09 Competing Funds.....................................................11
ARTICLE III
MANAGEMENT, ADMINISTRATION AND OPERATIONS OF THE PARTNERSHIP
SECTION 3.01 Management Generally.............................................11
3.02 Authority of the General Partner....................................13
3.03 Other Authority.....................................................14
3.04 Expenses ...........................................................15
3.05 Restriction on Borrowings ..........................................16
3.06 Certain Contributions by the General Partner........................17
3.07 Transactions with Affiliates........................................17
3.08 Other Activities; Conflicts of Interest.............................17
3.09 Books and Records; Accounting Method ...............................18
3.10 Confidentiality ....................................................18
3.11 Partnership Tax Returns.............................................19
3.12 Annual Meeting .....................................................19
3.13 Reliance by Third Parties...........................................20
3.14 ERISA...............................................................20
3.15 Conduit Partners....................................................20
ARTICLE IV.
INVESTMENTS AND OPPORTUNITIES
SECTION 4.01 Investment Generally.............................................21
4.02 Co-Investments .....................................................22
4.03 Suitability of Investments .........................................22
4.04 Structuring of Investments; Parallel Investments ...................22
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4.05 [Intentionally omitted.] ...........................................23
4.06 Exclusion from Investments .........................................23
4.07 Tax Undertakings with respect to Investments........................24
ARTICLE V
CAPITAL COMMITMENTS AND CAPITAL CONTRIBUTIONS
SECTION 5.01 Capital Contributions............................................24
5.02 Drawdown Procedures.................................................25
5.03 Management Fee......................................................27
5.04 Loans to Fund Drawdowns ............................................27
5.05 Default by Partners ................................................28
5.06 Excuse Procedure....................................................30
5.07 Temporary Investment of Funds.......................................32
ARTICLE VI
DISTRIBUTIONS; CAPITAL ACCOUNTS; ALLOCATIONS
SECTION 6.01 Distributions Generally..........................................32
6.02 Proceeds of Partnership Investments ................................32
6.03 Other General Principles of Distribution ...........................35
6.04 Limitations on Distributions to the General Partner ................36
6.05 Special Expense Distributions ......................................36
6.06 Loans and Withdrawal of Contributions...............................36
6.07 Capital Accounts....................................................36
6.08 Adjustments to Capital Accounts.....................................37
6.09 Allocations of Income, Gain, Loss, Deduction and Credit ............37
6.10 Tax Allocations.....................................................38
6.11 Reinvestment of Proceeds............................................39
ARTICLE VII
REPORTS TO PARTNERS
SECTION 7.01 Reports..........................................................39
7.01 Audit ..............................................................40
ARTICLE VIII
EXCULPATION AND INDEMNIFICATION
SECTION 8.01 Exculpation and Indemnification..................................40
8.02 Exclusive Jurisdiction .............................................42
ARTICLE IX
DURATION AND DISSOLUTION OF THE PARTNERSHIP
SECTION 9.01 Duration.........................................................43
9.02 Dissolution ........................................................43
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9.03 Liquidation of Partnership .........................................44
9.04 Distribution Upon Dissolution of the Partnership ...................44
9.05 Withdrawal, Death or Incompetency of a Partner .....................44
ARTICLE X
TRANSFERABILITY OF GENERAL PARTNERS' INTEREST
SECTION 10.01 Transferability of General Partners' Interest...................45
10.02 Advisers Act.......................................................45
ARTICLE XI
TRANSFERABILITY OF A PARTNER'S INTEREST
SECTION 11.01 Restrictions on Transfer........................................45
11.02 Expenses of Transfer: Indemnification..............................45
11.03 Recognition of Transfer; Substituted Partners......................46
11.04 Transfers During a Fiscal Year ....................................46
11.05 No Secondary Market ...............................................47
ARTICLE XII
MISCELLANEOUS
SECTION 12.01 Amendments to the Partnership Agreement.........................47
12.02 Approvals..........................................................48
12.03 Investment Representation..........................................48
12.04 Successors; Counterparts; Entire Agreement.........................48
12.05 Choice of Law......................................................48
12.06 Notices ...........................................................48
12.07 Headings ..........................................................48
12.08 Agreement Binding Upon Successors and Assigns .....................48
12.09 Counterparts ......................................................49
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AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
CADUCEUS PRIVATE INVESTMENTS II (QP), LP
WHEREAS, OrbiMed Capital II LLC, as general partner, together with
OrbiMed Associates LLC, as the sole limited partner (the "Initial Limited
Partner"), previously formed, as of June 2, 2003, a limited partnership,
pursuant to the provisions of the Delaware Revised Uniform Limited Partnership
Act and pursuant to a limited partnership agreement (the "Initial Limited
Partnership Agreement"); and
WHEREAS, the undersigned amended and restated the Initial Limited
Partnership Agreement as of August 20, 2003 (the "Prior Limited Partnership
Agreement") and desire to further amend and restate such Prior Limited
Partnership Agreement as of the date hereof and to continue such limited
partnership, which shall be open only to "qualified purchasers" in compliance
with Section 3(c)(7) of the Investment Company Act, and be governed by, and
operated pursuant to, the terms and provisions of this Agreement; and
WHEREAS, effective upon the date of the Prior Limited Partnership
Agreement the Initial Limited Partner withdrew as a limited partner in the
Partnership; and
WHEREAS, in order to facilitate investments in the Partnership,
certain investors will hold interests in the Partnership indirectly through
either CPI Biotechnology II Offshore Private Investors L.P., a Cayman Islands
exempted limited partnership (the "Cayman Conduit") or CPI Biotechnology II
Private Investors L.L.C., a Delaware limited liability company (the "Delaware
Conduit"), each of the Cayman Conduit and the Delaware Conduit being a Limited
Partner hereunder;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Capitalized terms used herein without
definition have the following meanings:
"Additional GP Cash Contribution" means the amount of any Capital
Contribution that the General Partner has made in cash pursuant to Section 5.02,
reduced by the portion of such Capital Contribution that the General Partner was
required to satisfy in cash as set forth in the definition of "Capital
Commitment."
"Advisers Act" means the Investment Advisers Act of 1940, as amended
from time to time.
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"Advisory Committee" means the advisory committee of the Partnership
described in Section 3.01(c).
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this Amended and Restated Limited Partnership
Agreement, as amended from time to time.
"Base Fund" means Caduceus Private Investments II, LP, a Delaware
limited partnership previously formed which will make investments in parallel
with the Partnership, the number of beneficial owners of which shall be limited
to 100 in compliance with Section 3(c)(1) of the Investment Company Act.
"Base Fund Agreement" means the Amended and Restated Limited
Partnership Agreement of the Base Fund, as amended from time to time.
"Base Fund Investment" means a "Partnership Investment" as defined in
the Base Fund Agreement.
"Base Fund Partner" means a limited partner in the Base Fund.
"Base Reduction Date" means the date that is the earlier of (i) the
Full Investment Date and (ii) the date on which any Competing Fund organized in
accordance with Section 2.09 makes its first investment in a portfolio company.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close.
"Capital Account" has the meaning set forth in Section 6.07.
"Capital Commitment" means, with respect to any Limited Partner at
any time, the amount specified as such Limited Partner's capital commitment at
the time such Limited Partner was admitted to the Partnership (as adjusted
pursuant to Sections 2.07 and 5.05), which amount shall be set forth on the
books and records of the Partnership; provided that unless otherwise permitted
by the General Partner the minimum Capital Commitment shall be $5 million per
Limited Partner. With respect to the General Partner, Capital Commitment means
3% of the aggregate Capital Commitments of the Limited Partners. The General
Partner's Capital Commitment when drawn shall be satisfied in the form of cash
or, to the extent such Capital Commitment of the General Partner exceeds 1% of
the aggregate Capital Commitments, such Capital Commitment may be satisfied as
provided for in Section 5.02 by use of the Credit Amount.
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"Capital Contribution" means any cash contribution or other payment
made by such Partner pursuant to Article V or a Parallel Capital Contribution,
it being understood that a Partner's Capital Contribution (including with
respect to Expenses) may not exceed a Partner's Capital Commitment.
"Carried Interest" has the meaning set forth in Section 6.02(a)(4).
"Cayman Conduit" has the meaning set forth in the preamble of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Co-Investment" means any investment outside the Partnership pursuant
to Section 4.02.
"Conduit" means each of the Delaware Conduit and the Cayman Conduit
and any other entity (i) formed for the purpose of investing in the Partnership
as a Limited Partner, and (ii) which is designated as such on Schedule B of this
Agreement.
"Conduit Agreement" means, with respect to any Conduit, the limited
partnership agreement or limited liability company agreement or other agreement
or document setting forth the terms of such Conduit.
"Conduit Partner" means, with respect to any Conduit, a limited
partner or member of, or other investor in, such Conduit.
"Commitment Percentage" means, with respect to any Partner at any
time, the percentage derived by (i) dividing such Partner's Capital Commitment
at such time by the aggregate amount of all Partner's Capital Commitments
(except as otherwise provided herein) at such time and (ii) multiplying such
quotient by 100.
"Credit Amount" means, at any time, the aggregate amount that has
accrued at or prior to such time as follows: (i) for each of the three 12-month
periods following the initial Drawdown Date (which date has not yet occurred as
of the date of this Agreement), an amount equal to one half of one percent
(0.5%) of the aggregate Capital Commitments (or, from and after the Base
Reduction Date, of the aggregate invested capital of all Limited Partners), and
(ii) for each of the two immediately succeeding 12-month periods following the
aforementioned 36-month period, an amount equal to one-quarter of one percent
(0.25%) of the aggregate Capital Commitments (or, from and after the Base
Reduction Date, of the aggregate invested capital of all Limited Partners), it
being understood that the foregoing shall be calculated and determined quarterly
in advance.
"Default" means the failure of a Partner to make all or a portion of
its required Capital Contribution on the applicable Drawdown Date or, in the
case of any ERISA Partner or Early Funding Partner, on the date such ERISA
Partner or Early Funding Partner is required to make such Capital Contribution
pursuant to Section 5.04(a).
"Defaulting Partner" means, at any time, each Partner who, at or prior
to such time, has
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committed a Default that has become an Event of Default.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership
Act, as amended from time to time.
"Delaware Conduit" has the meaning set forth in the preamble of this
Agreement.
"Distribution Date" means, with respect to any distribution pursuant
to Article VI or Article IX, the date of such distribution.
"Drawdown" means a drawdown by the Partnership of cash contributions
from one or more Partners pursuant to a Drawdown Notice.
"Drawdown Amount" means the aggregate cash contributions and other
payments to be made on any date by the Partners pursuant to Article V.
"Drawdown Date" has the meaning set forth in Section 5.02(b).
"Drawdown Notice" has the meaning set forth in Section 5.02(a).
"Early Funding Partner" means any Limited Partner that, on or prior to
the date hereof, advises the General Partner in writing that it desires not to
receive any loan pursuant to Section 5.04(a).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Partner" means any Limited Partner that is a "benefit plan
investor" within the meaning of the U.S. Department of Labor "plan asset"
regulations, 29 CFR 2510.3-101(f)(2).
"Event of Default" means any Default that shall not have been (i)
cured by the Partner who committed such Default within ten Business Days after
the occurrence of such Default or (ii) waived by the General Partner on such
terms as determined by the General Partner in its discretion (unless the Partner
who committed such Default is the General Partner or an Affiliate of the General
Partner, in which case the General Partner shall not waive such Default) before
such Default has otherwise become an Event of Default pursuant to clause (i)
hereof.
"Expense" means any Partnership Expense or Parallel Investment Expense
or other applicable expense described in this Agreement.
"Excused Partner" means, with respect to any Investment, any Partner
who is excused pursuant to Section 5.06 from making all or a portion of its
Capital Contribution that would otherwise be required in respect of such
Investment.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward if necessary, to the nearest 1/100th of 1%) equal to the weighted average
of the rates on overnight
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Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers on such day, as published by the Federal Reserve Bank
of New York on the Business Day next succeeding such day; provided that (i) if
such day is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if no such rate is so
published on such next succeeding Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to JP Morgan Chase & Co. on such day on
such transactions.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"Final Closing Date" means the earlier of (i) the date on which
subscriptions for the maximum Offering Amount of Partnership Interests and
partnership interests in the Base Fund are accepted by the General Partner and
(ii) September 20, 2003.
"Follow-on Investment" means any further Partnership Investment or
Parallel Investment in securities of any Person in which a Partnership
Investment or Parallel Investment has previously been made.
"Full Investment Date" means the earliest to occur of (i) the fifth
anniversary of the Final Closing Date, (ii) the day on which the Remaining
Capital Commitments are reduced to zero or cancelled pursuant to this Agreement
and (iii) the day on which the "Full Investment Date" occurs under the Base Fund
Agreement; provided that the Full Investment Date may be extended beyond (i),
(ii) and (iii) with the written consent of the Required Partners.
"General Partner" means, at any time, OrbiMed Capital II LLC, a
Delaware limited liability company, or any other Person who, at such time,
serves as the general partner of the Partnership, in its capacity as general
partner of the Partnership.
"Indemnified Person" means the General Partner, the Management
Company, any Affiliate of the General Partner or the Management Company, and any
director, officer, stockholder, partner, member, employee, agent (including any
placement agent retained by the General Partner in connection with the offering
of Partnership Interests and partnership interests in the Base Fund) or
representative of the General Partner, the Management Company or such Affiliate,
including without limitation any officers of the Partnership and any members of
the Advisory Committee.
"Initial Closing Date" means the date that initial subscriptions of
Partnership Interests are accepted by the General Partner.
"Investment" means any Partnership Investment or Parallel Investment.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time.
"Investment Percentage" of any Partner means, with respect to any
Investment, the percentage derived by (i) dividing the Capital Contributions
made by such Partner in respect of
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such Investment by the aggregate Capital Contributions made by all Partners
(except as otherwise provided herein) in respect of such Investment and (ii)
multiplying such quotient by 100.
"Key Person Event" means at any time prior to the Full Investment Date
any two of Samuel D. Isaly, Michael B. Sheffery, Carl Gordon or Sven Borho
ceasing to be actively involved in the affairs of the Partnership and the Base
Fund through the General Partner or OrbiMed Advisors LLC and its Affiliates as a
group.
"Limited Partners" means the Partners other than the General Partner,
each in its capacity as a limited partner of the Partnership. For purposes of
the Delaware Act, the Limited Partners shall constitute a single class or group
of limited partners.
"Management Company" means the Person engaged pursuant to Section
3.01(b) to monitor the Partnership Investments and provide administrative and
financial services to the Partnership.
"Management Fee" has the meaning set forth in Section 3.01(b).
"Non-U.S. Investor" means (i) a Limited Partner that is not a U.S.
person for U.S. federal income tax purposes or (ii) a Conduit Partner in the
Delaware Conduit that is not a U.S. person for U.S. federal income tax purposes.
"Offering Amount" means a minimum amount of $50 million and a maximum
amount of $300 million of subscribed Partnership Interests and partnership
interests in the Base Fund from qualified investors and accepted by the General
Partner; provided that the General Partner may increase the maximum amount of
subscriptions hereunder and in the Base Fund to an amount determined in the sole
discretion of the General Partner.
"Offering Memorandum" means the Offering Memorandum relating to
Partnership Interests and partnership interests in the Base Fund, as
supplemented or amended to the date hereof (it being understood and agreed that
the Offering Memorandum is hereby deemed supplemented and amended by the terms
of this Agreement, and in the event of any inconsistencies between the Offering
Memorandum and the terms of this Agreement, the terms of this Agreement shall
control).
"Organizational Expenses" means all reasonable expenses of organizing
the Partnership and the General Partner and all reasonable expenses incurred by
the Partnership or the General Partner in connection with (i) the marketing and
private placement of the Partnership Interests in the Partnership, (ii) the
registration, qualification or exemption of the Partnership under any applicable
federal, state or foreign laws and (iii) the preparation of this Agreement;
provided that in no event shall Organizational Expenses exceed $500,000.
"Out-of-Pocket Expenses" means out-of-pocket expenses incurred by the
Partnership, any Partnership Investment Vehicle or Parallel Investment Vehicle
or the General Partner (other than Professional Expenses), including without
limitation printing costs, travel expenses and
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brokerage and custodial fees and expenses.
"Parallel Capital Contribution" means, with respect to any Partner,
cash contribution or other payment in respect of any Parallel Investment or
Parallel Investment Expense made by such Partner pursuant to Article V.
"Parallel Investment" means an investment or series of investments in
or with respect to any entity's securities or assets, other than through the
Partnership, that is contemplated by this Agreement (other than any
Co-Investment) and that is, in the sole judgment of the General Partner, at the
time the opportunity arises to make such investment or series of investments, an
appropriate investment outside the Partnership for one or more Partners;
provided that such entity is not a partnership or a limited liability company
(other than a partnership or limited liability company that is solely a vehicle
for investing in securities that are eligible to be acquired outside the
Partnership by any Partner as a Parallel Investment).
"Parallel Investment Expenses" means (i) all unreimbursed Professional
Expenses and Out-of-Pocket Expenses incurred in connection with identifying,
evaluating, structuring, negotiating, obtaining regulatory approval for,
monitoring and preparing exit strategies for Parallel Investments; (ii) all
unreimbursed Professional Expenses and Out-of-Pocket Expenses incurred in
connection with the acquisition, holding, refinancing, pledging, sale or
proposed refinancing, pledging or sale of all or any portion of any Parallel
Investment; (iii) all expenses with respect to the formation, operation or
administration of any Parallel Investment Vehicle (or, in the absence of any
Parallel Investment Vehicle, any expenses comparable to the foregoing) and (iv)
all investment fees pursuant to any Parallel Investment terms that correspond to
Section 5.03.
"Parallel Investment Ownership Interest" means, at any time and with
respect to any Partner that is a Participating Partner with respect to any
Parallel Investment, (i) in the case of a Parallel Investment owned directly by
such Partner at such time, such Partner's ownership interest in such Parallel
Investment, and (ii) in the case of a Parallel Investment owned indirectly by
such Partner at such time through a Parallel Investment Vehicle, such Partner's
ownership interest in such Parallel Investment Vehicle.
"Parallel Investment Vehicle" means any entity formed for the purpose
of making any Parallel Investment in accordance with Section 4.04.
"Participating Partner" means, with respect to any Investment, any
Partner who has made a Capital Contribution in respect of such Investment.
"Partners" means the General Partner and each Limited Partner admitted
in accordance with Section 2.06 and any additional Limited Partners admitted in
accordance with Section 2.07.
"Partnership" means Caduceus Private Investments II (QP), LP, the
Delaware limited partnership governed by this Agreement.
"Partnership Expenses" has the meaning set forth in Section 3.04(a).
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"Partnership Interests" means the partnership interests in the
Partnership.
"Partnership Investment" means an investment or series of investments
by the Partnership in or with respect to any entity's securities or assets that
is, in the sole judgment of the General Partner at the time the opportunity
arises to make such investment or series of investments, an appropriate
investment for the Partnership; provided that such entity is not a partnership
or limited liability company (other than a partnership or limited liability
company that is solely a vehicle for investing in securities that are eligible
to be acquired by the Partnership as a Partnership Investment).
"Partnership Investment Expense" means any expenses incurred in
connection with consummating investment transactions that are attributable to a
specific investment.
"Partnership Investment Vehicle" means any entity wholly owned by the
Partnership formed for the purpose of making any Partnership Investment in
accordance with Section 4.01.
"Partnership Investment Vehicle Expenses" means all expenses with
respect to the formation, operation or administration of any Partnership
Investment Vehicle.
"Person" means any individual, company, corporation, trust, limited
liability company, partnership, or other entity.
"Prime Rate" means the rate of interest publicly announced by JP
Morgan Chase & Co. in New York City from time to time as its prime rate.
"Proceeds" means, with respect to any Investment, any cash and
non-cash proceeds received from any sale, exchange, extinguishments,
cancellation, termination, lapse, transfer or other disposition of securities or
other assets constituting all or any portion of such Investment (except, in the
discretion of the General Partner, any securities that are received pursuant to
a recapitalization or reorganization of any entity in which an Investment has
been made) and any dividends, interest or other income received in connection
with such Investment (x) less any Expenses incurred in connection with the
receipt of such proceeds or income and (y) plus the amount of any withholding or
other tax imposed with respect to any Participating Partner's participation in
such Investment.
"Professional Expenses" means the expenses incurred by the
Partnership, any Partnership Investment Vehicle or Parallel Investment Vehicle
or the General Partner in respect of the fees and expenses of auditors,
attorneys, tax advisors and consultants (but excluding consulting fees paid to
the General Partner or its Affiliates for services intended to be covered by the
Management Fee or activities of the General Partner required to be performed
pursuant to its obligations hereunder).
"Proposed Partnership Investment" means any Partnership Investment
that the Partnership has committed to make.
"Proposed Parallel Investment" means any Parallel Investment that the
General Partner
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or any Parallel Investment Vehicle has committed to make or cause to be made.
"Remaining Capital Commitment" means, with respect to any Partner at
any time, the excess, if any, of (i) such Partner's Capital Commitment at such
time over (ii) such Partner's aggregate Capital Contributions made prior to such
time.
"Remaining Commitment Percentage" means, with respect to any Partner
at any time, the percentage derived by (i) dividing such Partner's Remaining
Capital Commitment at such time by the aggregate amount of all Partner's
Remaining Capital Commitments (except as otherwise provided herein) at such time
and (ii) multiplying such quotient by 100.
"Required Partners" means at any time Limited Partners and Base Fund
Partners (other than Limited Partners who are the General Partner, the
Management Company, their Affiliates or respective employees, and Defaulting
Partners and defaulting Base Fund Partners) having at least a majority of,
collectively and not voting as separate classes, the aggregate amount of all
Partners' Capital Commitments and Base Fund Partners' capital commitments (other
than Capital Commitments or capital commitments, as the case may be, of the
General Partner, the Management Company, such Affiliates and employees,
Defaulting Partners or defaulting Base Fund Partners).
"Scientific Advisory Board" means the scientific advisory board
described in Section 3.01(d).
"Special Allocation" has the meaning set forth in Section 6.09(d).
"Special Distribution" has the meaning set forth in Section 6.02(e).
"Special Expense Distribution" has the meaning set forth in Section
6.05.
"Special Tax Distribution" has the meaning set forth in Section
6.02(c).
"Substituted Partner" has the meaning set forth in Section 11.02.
"Transfer" has the meaning set forth in Section 10.01.
"Tax-Exempt Investor" means (i) a Limited Partner that is a U.S.
person for U.S. federal income tax purposes and that is generally exempt from
U.S. federal income tax or (ii) a Conduit Partner in the Delaware Conduit that
is a U.S. person for U.S. federal income tax purposes and that is generally
exempt from U.S. federal income tax.
"Triggering Event" means with respect to any Person, the criminal
conviction or admission by consent (including a plea of no contest or consent to
an injunction or order prohibiting future violations of the securities laws by
the Securities and Exchange Commission or other regulatory body) of such Person
to a violation of the federal securities laws or applicable state law, or of any
rule or regulation promulgated thereunder, or of any criminal statute involving
a material breach of fiduciary duty; or the commission by such Person of an
action, or the omission by such Person to take an action, if such commission or
omission constitutes bad
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faith, gross negligence, willful misconduct, fraud or willful or reckless
disregard for such Person's duties to the Partnership or the Limited Partners;
or a material and ongoing breach of this Agreement by such Person.
"Unused Credit Amount" means, at any time, the Credit Amount at such
time, reduced by the sum of (i) the aggregate amount of such Credit Amount that
has theretofore been applied, under Section 5.02, to satisfy the obligation of
the General Partner to make Capital Contributions and (ii) without duplication
of the foregoing, the aggregate amount of Credit Amount with respect to which
Special Distributions have been made to the General Partner under Section
6.02(e).
"U.S. Investor" means (i) a Limited Partner that is a U.S. person for
U.S. federal income tax purposes or (ii) a Conduit Partner in the Delaware
Conduit that is a U.S. person for U.S. federal income tax purposes.
ARTICLE II
GENERAL PROVISIONS
SECTION 2.01. Name. The name of the Partnership is Caduceus Private
Investments II (QP), LP.
SECTION 2.02. Office; Registered Agent. (a) The Partnership has and
shall maintain a registered office in Delaware at, and the name and address of
the Partnership's registered agent in Delaware is, The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Delaware, USA.
(b) The business address of the General Partner shall be OrbiMed
Capital II LLC, 767 Third Avenue, 30th Floor, New York, New York, 10017, USA, or
such other place as the General Partner shall specify by notice to all the
Partners.
SECTION 2.03. Purposes of the Partnership. (a) The purposes of the
Partnership are (i) to identify potential Partnership Investments, (ii) to
acquire, hold and dispose of Partnership Investments, (iii) pending utilization
or disbursement of funds, to invest such funds in accordance with the terms of
this Agreement and (iv) to do everything necessary or desirable for the
accomplishment of the above purposes or the furtherance of any of the powers
herein set forth and to do every other act and thing incident thereto or
connected therewith.
(b) The Partnership shall make Investments only in health care and
health-care related businesses with a particular focus on entities engaged in
drug discovery and development, medical devices and medical diagnostics, and
technology to facilitate the foregoing; provided that the Partnership may hold
cash in money market funds and other short-term cash investments and may engage
in hedging techniques using derivatives with respect to foreign currency risk,
interest rate risk, and hedging gains with respect to Investments.
(c) The Partnership, and the General Partner on behalf of the
Partnership, may enter into and perform a subscription agreement with each
Limited Partner and any agreements to induce
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any Person to purchase interests in the Partnership and any documents
contemplated thereby or related thereto and any amendments thereto, without any
further act, vote or approval of any Person, including any Partner,
notwithstanding any other provision of this Agreement. The General Partner is
hereby authorized to enter into the documents described in the preceding
sentence on behalf of the Partnership, but such authorization shall not be
deemed a restriction on the power of the General Partner to enter into other
documents on behalf of the Partnership.
SECTION 2.04. Liability of the Limited Partners Generally. Except as
otherwise provided in this Agreement or the Delaware Act, no Limited Partner (or
former Limited Partner) shall be obligated to make any contribution of capital
to the Partnership or have any liability for the debts and obligations of the
Partnership.
SECTION 2.05. Fiscal Year. The fiscal year of the Partnership for
financial statements and United States federal income tax purposes shall end on
December 31st (or such other date as may be required by law).
SECTION 2.06. Withdrawal of Initial Limited Partner; Admission of
Limited Partners. The Initial Limited Partner hereby withdraws as a Limited
Partner effective on the date of the Prior Limited Partnership Agreement. On the
Initial Closing Date, each Person whose subscription for a Partnership Interest
in the Partnership has been accepted by the General Partner shall, upon
execution and delivery of a counterpart of this Agreement, become a Limited
Partner and shall be shown as such on the books and records of the Partnership.
SECTION 2.07. Additional Limited Partners. (a) At any time during the
period commencing on the Initial Closing Date and ending on the Final Closing
Date, the General Partner may at its discretion cause the Partnership to admit
additional Limited Partners or allow any Limited Partner to increase its
original Capital Commitment. Upon the execution and delivery of a counterpart of
this Agreement, each such additional Limited Partner shall become a Limited
Partner of the Partnership and shall be shown as such on the books and records
of the Partnership. Neither the admission of any additional Limited Partner to
the Partnership nor the increase in the original Capital Commitment of any
existing Limited Partner pursuant to this Section 2.07 shall require the
approval of any Limited Partners existing immediately prior to such admission or
increase.
(b) Additional Limited Partners admitted to the Partnership on any
Closing Date other than the Initial Closing Date (and to the extent of any
increase in their Capital Commitments on any such Closing Date, Limited Partners
so increasing their Capital Commitments) shall make Capital Contributions for
their pro rata share (on a combined basis with all Partners and Base Fund
Partners) of the Capital Contributions previously made by Partners for any
Partnership Investments still held by the Partnership and the capital
contributions previously made by the Base Fund Partners for Base Fund
Investments still held by the Base Fund at the time of their admission and for
drawn but uninvested Capital Contributions and Partnership Expenses and
Management Fees and analogous amounts under the Base Fund Agreement plus
interest at the Prime Rate on such amounts from the date of each such
contribution (or the initial Drawdown Date, in the case of Management Fees) to
the date of the subsequent closing, and will share in any subsequent
distributions and allocations of items of income, gain, loss or expense of the
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Partnership that are attributable to any such Investment. Amounts so contributed
may result in dilution to existing Partners with respect to Partnership
Investments made prior to such contribution (and a portion of such contribution
shall be paid to the Management Company in the case of Management Fees) or be
applied to purchase Base Fund Investments such that the Partnership, on the one
hand, and the Base Fund, on the other hand, will each hold a share of such
investments, pro rata in the same proportion that the aggregate Capital
Commitments bear to the aggregate capital commitments of the Base Fund. The
purchase by the Partnership of such Base Fund Investments from the Base Fund
shall be made at the Base Fund's cost in such Base Fund Investments plus an
interest component on such amount equal to the Prime Rate. The interest
component provided for above shall not be treated as income of the Partnership
and shall be allocated to the existing Partners outside the Partnership by the
General Partner.
(c) No additional Limited Partner or Substituted Partner shall be
admitted to the Partnership, and no existing Limited Partner shall be allowed to
increase its original Capital Commitment, unless the admission of such Limited
Partner or the increase of such Capital Commitment (i) would not, in the
judgment of the General Partner, jeopardize the status of the Partnership as a
partnership for United States federal income tax purposes, cause a dissolution
of the Partnership under the Delaware Act or for United States federal income
tax purposes, cause the Partnership's assets to be deemed to be "plan assets"
for purposes of ERISA, cause the Partnership to be deemed to be an "investment
company" for purposes of the Investment Company Act, cause the General Partner
to be in violation of the Advisers Act, or cause the Partnership or any of its
affiliates to be in violation of the Securities Act of 1933, as amended, and
(ii) would not, in the judgment of the General Partner, violate, or cause the
Partnership to violate, any other applicable law or regulation.
(d) Each Partner understands and agrees that the Base Fund Agreement
will contain a provision analogous to this Section 2.07 enabling the Base Fund
to admit additional Base Fund Partners and to permit existing Base Fund Partners
to increase their capital commitments to the Base Fund, in each case on or prior
to the Final Closing Date.
SECTION 2.08. Qualified Purchasers; Tax Treatment. The Partnership
shall only be open to "qualified purchasers" within the meaning of the
Investment Company Act. It is the intention of the Partners that the Partnership
be treated as a partnership for U.S. federal, state and local income tax
purposes. Notwithstanding anything to the contrary in this Agreement, neither
the General Partner nor any Limited Partner shall take any action inconsistent
with such treatment, including the filing of any election to treat the
Partnership as a corporation for U.S. federal, state or local income tax
purposes
SECTION 2.09. Competing Funds. Without the consent of the Required
Partners, neither the General Partner nor its Affiliates shall close any other
pooled investment fund (other than the Base Fund or a Parallel Investment
Vehicle or funds existing or demonstrably contemplated on the date hereof) which
has as its primary investment objective privately negotiated equity investments
that are substantially similar to the types of investments to be made by the
Partnership (any such fund being referred to hereinafter as a "Competing Fund"),
until the earlier of (i) the time at which at least 70% of the aggregate Capital
Commitments and the capital commitments of the Base Fund have been committed to
or invested in, called for contribution for investment in, or reserved by the
General Partner for Follow-on Investments
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with respect to, Investments, or follow-on investments with respect to
investments by the Base Fund, and/or paid or reserved for payment of past or
accrued Management Fees and Partnership Expenses (or analogous amounts with
respect to the Base Fund) and (ii) the Full Investment Date. Until the Full
Investment Date, a Competing Fund permitted by the preceding sentence shall
co-invest alongside the Partnership (and the Base Fund and any Parallel
Investment Vehicle) only on the same terms and conditions in all material
respects; provided that such Competing Fund shall not co-invest in respect of a
Follow-On Investment unless (x) such Competing Fund shall have previously
co-invested in respect of the initial Investment that gave rise to such
Follow-On Investment or (y) the Partnership has insufficient remaining capital
to complete such Follow-On Investment.
ARTICLE III
MANAGEMENT, ADMINISTRATION AND OPERATIONS OF THE PARTNERSHIP
SECTION 3.01. (a) Management Generally. The management and control of
the Partnership shall be vested exclusively in the General Partner, provided
that certain administrative duties may be delegated by the General Partner as
provided in paragraph (b) to this Section 3.01 and as provided in paragraphs (c)
and (d) to this Section 3.01. The Limited Partners shall have no part in the
management or control of the Partnership, shall exercise no influence over the
management or policies of the Partnership and shall have no authority or right
to act on behalf of or bind the Partnership in connection with any matter;
provided that the General Partner shall consult with the Advisory Committee on
certain matters from time to time as provided herein.
(b) Administrative Services. The Partnership may retain the services
of one or more entities to render various administrative services to the
Partnership and may pay reasonable and customary compensation for such services
as follows. The Partnership may retain an Affiliate of the General Partner to
provide such administrative services. The General Partner shall engage OrbiMed
Advisors LLC, a Delaware limited liability company and an Affiliate of the
General Partner, as its Management Company to manage the business of the
Partnership and provide the foregoing administrative services for a per annum
fee equal to:
(i) during the first 36 months following the initial Drawdown Date
(the "36- Month Mark"), (A) on or prior to the Base Reduction
Date, 1.5% of the aggregate Capital Commitments of all Limited
Partners on the first day of the relevant fiscal quarter and
(B) after the Base Reduction Date, 1.0% of the aggregate
remaining invested capital (as reduced by the cost basis of all
Investments that have been sold or otherwise disposed of by the
Partnership (other than those reinvested as permitted by
Section 6.11(a)) of all Limited Partners on the first day of
the relevant fiscal quarter;
(ii) during the 24-month period immediately succeeding the 36-Month
Mark (the "Succeeding 24-Month Mark"), (A) if the Base
Reduction Date has not occurred, on or prior to the Base
Reduction Date, 1.75% of the aggregate Capital Commitments of
all Limited Partners on the first day of the relevant
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fiscal quarter and (B) after the Base Reduction Date, 1.25% of
the aggregate remaining invested capital (as reduced by the
cost basis of all Investments that have been sold or otherwise
disposed of by the Partnership (other than those reinvested as
permitted by Section 6.11(a)) of all Limited Partners on the
first day of the relevant fiscal quarter; and
(iii) thereafter (A) if the Base Reduction Date has not occurred, on
or prior to the Base Reduction Date, 2% of the aggregate
Capital Commitments of all Limited Partners on the first day of
the relevant fiscal quarter, and (B) after the Base Reduction
Date, 1.5% of the aggregate remaining invested capital (as
reduced by the cost basis of all Investments that have been
sold or otherwise disposed of by the Partnership (other than
those reinvested as permitted by Section 6.11(a)) of all
Limited Partners on the first day of the relevant fiscal
quarter;
to be paid by the Partnership quarterly, in advance (the "Management Fee"). All
cash director's fees, breakup fees, commitment fees, monitoring fees and success
fees received by the General Partner or the Management Company from portfolio
companies constituting Investments (or, with respect to breakup fees, companies
constituting prospective Investments), and travel expenses of the Management
Company incurred with respect to monitoring Investments, shall be offset against
the Management Fee accruing after such receipt or incurrence (appropriately pro
rated between the Partnership and the Base Fund in proportion to their
respective investment percentages in the applicable portfolio company); provided
that (x) in no event shall the Management Fee be reduced below zero and (y) no
offset of the Management Fee shall be made with respect to reimbursements paid
to the General Partner, the Management Company, or their respective Affiliates
or employees for out-of-pocket expenses incurred on behalf or with respect to
portfolio companies. The Management Company will be responsible for monitoring
Investments and funding all ordinary administrative and overhead expenses of the
Partnership and its staff. Non-cash fees received by the General Partner or the
Management Company from portfolio companies constituting Investments shall be
allocated and assigned by the General Partner to the Partnership and the Base
Fund and any other affiliated investment vehicle in proportion to such entity's
investment in such portfolio company.
(c) Advisory Committee. The Partnership's Advisory Committee, which
will also serve as the advisory committee for the Base Fund, will consist of no
less than three and no more than seven representatives of the Limited Partners
and limited partners of the Base Fund, to be appointed by the General Partner.
The Advisory Committee will advise the General Partner on certain matters
related to the Partnership and will have final approval on issues involving any
actual or potential conflicts of interest between the General Partner, the
Management Company and the Partnership. In addition the Advisory Committee will
periodically receive from the Management Company proposed valuations of fund
investments and may request to review such valuations and to take the actions
provided for in Section 6.03(b). J.P. Morgan Securities Inc., the sponsor of the
Conduits, shall be entitled to appoint a representative to attend meetings of
the Advisory Committee as an observer. Notwithstanding anything to the contrary
contained in this Agreement, a member of the Advisory Committee shall not
constitute a general partner of the Partnership. Notwithstanding anything to the
contrary contained in this Agreement, none of the
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actions taken by the Advisory Committee, any member of the Advisory Committee or
the Limited Partners hereunder shall constitute participation in the control of
the business of the Partnership within the meaning of the Delaware Act. Actions
of the Advisory Committee shall be on the basis of majority voting, with each
member of the Advisory Committee having one vote. The Partners acknowledge that
each member of the Advisory Committee represents the applicable Limited Partner
appointing such member and may act in the best interests of such Limited
Partner.
(d) Scientific Advisory Board. The General Partner shall consult from
time to time with the Scientific Advisory Board, which will also serve as the
scientific advisory board for the Base Fund, made up of individuals experienced
in the areas in which the Partnership intends to concentrate its investments.
The General Partner shall decide upon the size and selection process for the
Scientific Advisory Board members. Members of the Scientific Advisory Board
shall be consulted individually from time to time on areas within their
scientific expertise and shall meet periodically as a group, when necessary, to
discuss areas of potential interest to the Partnership. Fees of the Scientific
Advisory Board shall be paid by the Management Company out of the Management
Fee. At any time, the General Partner may remove such Scientific Advisory Board
members from their position(s) on the Scientific Advisory Board.
SECTION 3.02. Authority of the General Partner. The General Partner
shall have the power on behalf and in the name of the Partnership to carry out
any and all of the objectives and purposes of the Partnership and to perform all
acts which it may, in its discretion, deem necessary, desirable or convenient,
including without limitation, the power to:
(a) identify investment opportunities for the Partnership;
(b) acquire, hold, manage, own, sell, transfer, convey, assign,
exchange, pledge or otherwise dispose of any investment made or
held by the Partnership;
(c) open, maintain and close accounts with banks, brokerage firms
or other financial institutions, deposit and withdraw funds in
the name of the Partnership and draw checks or other orders for
the payment of moneys;
(d) enter into, and take any action under, any contract, agreement
or other instrument as the General Partner shall determine to
be necessary or desirable to further the purposes of the
Partnership, including, without limitation, granting or
refraining from granting any waivers, consents and approvals
with respect to any of the foregoing and any matters incident
thereto and entering into side-letters and agreements with
certain Limited Partners;
(e) bring and defend actions and proceedings at law or in equity
and before any governmental, administrative or other regulatory
agency, body or commission;
(f) employ, on behalf and at the expense of the Partnership, and
dismiss from such employment any and all attorneys,
accountants, consultants, appraisers or custodians of the
assets of the Partnership or other agents or employees (who may
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be designated as officers with titles), on such terms and for
such compensation as the General Partner may determine, whether
or not such Person may be, or also be otherwise employed by,
any Affiliate of the General Partner;
(g) make all elections, investigations, evaluations and decisions,
including the voting of securities held by the Partnership,
binding the Partnership thereby, that may in the judgment of
the General Partner be necessary or desirable for the
acquisition, management or disposition of investments by the
Partnership;
(h) enter into and perform any agency cross transaction in which
any Affiliate of the General Partner acts as broker for both
the Partnership and a party on the other side of the
transaction or any agency transaction in which the Partnership
is a principal and in which any Affiliate of the General
Partner acts as broker for a party on the other side of the
transaction (it being understood that the General Partner shall
disclose any such transaction and its terms to the Advisory
Committee);
(i) incur expenses and other obligations on behalf of the
Partnership in accordance with this Agreement, and, to the
extent that funds of the Partnership are available for such
purpose, pay all such expenses and obligations;
(j) contribute funds to the Partnership in accordance with Section
3.06;
(k) establish reserves in accordance with Sections 5.02(a), 6.03(d)
and 9.04(b) for contingencies and for any other Partnership
purpose;
(l) in its discretion, form Partnership Investment Vehicles and
permit Partners to make Parallel Investments outside the
Partnership; and
(m) act for and on behalf of the Partnership in all matters
incidental to the foregoing.
SECTION 3.03. Other Authority. The General Partner agrees to use its
best efforts (subject to the exceptions noted below) to operate the Partnership
in such a way that (i) the Partnership will not be deemed to be an "investment
company" for purposes of the Investment Company Act, (ii) none of the
Partnership's assets will be deemed to be "plan assets" for purposes of ERISA,
(iii) the Partnership will not generate any "unrelated business taxable income"
as defined in Section 512(a)(1) of the Code (provided that it is understood that
any offsets against the Management Fee and any fees received by the Partnership
attributable to services performed by the General Partner or the Management
Company for portfolio companies may give rise to "unrelated business taxable
income"), (iv) Non-U.S. Investors will not, as a consequence of an investment in
the Partnership, be treated as engaged in a trade or business in the United
States or realize any income that is treated as effectively connected with the
conduct of a trade or business in the United States, within the meaning of
Section 864(c) of the Code (provided that it is understood that any offsets
against the Management Fee and any fees received by the Partnership attributable
to services performed by the General Partner or the Management Company for
portfolio companies may give rise to such "effectively connected
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income"), and (v) the General Partner will be in compliance with the Advisers
Act. Subject to the foregoing and to Section 3.14, the General Partner is hereby
authorized to take any action (including making structural, operating or other
changes in the Partnership, making structural or other changes in any
Investment, amending this Agreement in any manner that would otherwise require
only the approval of the Required Partners pursuant to Section 12.01(a),
canceling in whole or in part the Remaining Capital Commitment of any Partner,
requiring the sale in whole or in part of any Partner's interest in the
Partnership or any Parallel Investment Ownership interest of such Partner, or
dissolving the Partnership) it has determined in good faith to be necessary in
order for (a) the Partnership not to be in violation of the Investment Company
Act or any other material law, regulation or guideline applicable to the
Partnership, (b) the Partnership's assets not to be deemed "plan assets" for
purposes of ERISA, (c) except as set forth in the immediately preceding
sentence, the Partnership will not generate any "unrelated business taxable
income," as defined in Section 512(a)(1) of the Code, (d) except as set forth in
the immediately preceding sentence, Non-U.S. Investors will not, as a
consequence of an investment in the Partnership, be treated as engaged in a
trade or business in the United States or realize any income that is treated as
effectively connected with the conduct of a trade or business in the United
States, within the meaning of Section 864(c) of the Code, and (e) the General
Partner not to be in violation of the Advisers Act or any other material law,
regulation or guideline applicable to the General Partner or any other material
law, regulation or guideline applicable to the Partnership, any of its
Affiliates or any Partner. Prior to taking any action pursuant to this Section
3.03 or, if such prior notice is not reasonably practicable, after taking such
action, the General Partner shall provide notice thereof to any Partner affected
by such action, but such action shall not require the approval of any Partner.
SECTION 3.04. Expenses. (a) Subject to Sections 3.06 and 5.03, the
Partnership shall be responsible for and shall pay all Partnership Expenses. All
Partnership Expenses shall be paid out of funds of the Partnership determined by
the General Partner to be available for such purpose. The aggregate expenses of
the Partnership and the Base Fund shall generally be pro rated by the General
Partner in its reasonable discretion and in accordance with each entity's
aggregate capital commitments. As used herein, the term "Partnership Expenses"
means all expenses or obligations of the Partnership or otherwise incurred by
the General Partner in connection with this Agreement (other than the obligation
of the Partnership to make or pay for any Partnership Investments), including
without limitation:
(i) all Organizational Expenses and ongoing administrative expenses
of the Partnership, certain of which the Partnership intends to
amortize over a period of 60 months;
(ii) all ongoing Professional Expenses for services rendered to or
in connection with the Partnership or in connection with this
Agreement;
(iii) all unreimbursed Out-of-Pocket Expenses incurred in connection
with Partnership activities;
(iv) all unreimbursed Professional Expenses and Out-of-Pocket
Expenses incurred in connection with the acquisition, holding,
refinancing, pledging,
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sale or proposed refinancing, pledging or sale of all or any
portion of any Investment and costs and expenses of
researching, conducting due diligence on and otherwise
maintaining the Investments (including travel expenses,
provided that travel expenses incurred in connection with
monitoring investments shall reduce the Management Fee) and
costs and expenses associated with the retention of consulting
specialists by the General Partner to assist it in the
analysis, purchase and sale of Investments;
(v) all expenses incurred in connection with any litigation or
other proceeding involving the Partnership (including the cost
of any investigation and preparation) and the amount of any
judgment or settlement paid in connection therewith;
(vi) all expenses for indemnity or contribution payable by the
Partnership to any Person, whether payable under Article VIII
or otherwise and whether payable in connection with any
litigation involving the Partnership or otherwise;
(vii) all unreimbursed expenses incurred in connection with the
collection of amounts due to the Partnership from any Person;
(viii) all expenses incurred in respect of any taxes imposed on the
Partnership or in connection with tax proceedings that are
characterized as Partnership Expenses pursuant to Section 3.11;
(ix) all expenses incurred in connection with the preparation of
amendments to this Agreement;
(x) all Partnership Investment Expenses;
(xi) the Management Fee; and
(xii) all expenses incurred in connection with the dissolution and
liquidation of the Partnership.
Notwithstanding the foregoing, the Participating Partners in respect of any
Partnership Investment for which a Partnership Investment Vehicle is formed
shall be responsible for and shall pay all Partnership Investment Vehicle
Expenses with respect to such Partnership Investment Vehicle to the extent of
their respective Capital Commitments, and the other Partners shall be deemed to
have a Capital Commitment equal to zero for purposes of funding such Partnership
Investment Vehicle Expenses.
(b) The Participating Partners in respect of any Parallel Investment
shall be responsible for and shall pay all Parallel Investment Expenses related
to such Parallel Investment to the extent of their respective Capital
Commitments, and the other Partners shall be deemed to have a
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Capital Commitment equal to zero for purposes of funding such Parallel
Investment Expenses. If the General Partner determines, in its discretion, that
any Expense relates to both a Partnership Investment and one or more Parallel
Investments, the General Partner shall allocate such Expense among the
Partnership and the applicable Parallel Investment Vehicles (or, in the case of
a Parallel Investment without a Parallel Investment Vehicle, the Participating
Partner or Participating Partners in respect of such Parallel Investment), pro
rata in proportion to the aggregate Capital Contributions made with respect to
such Partnership Investment and each such Parallel Investment.
The General Partner and the Limited Partners acknowledge and agree
that to the extent permitted by law (i) no Parallel Investment Expense shall be
incurred for the benefit of or borne by the Partnership, (ii) no Parallel
Investment Expense shall constitute or be deemed to be a Partnership Expense for
any purpose and (iii) no creditor whose claims arise in connection with any
Parallel Investment shall have any recourse or claim against the Partnership or
any Partnership Investment or be entitled reasonably to rely on the existence of
the Partnership or any Partnership Investment in extending credit with respect
to such Parallel Investment. Without limiting the generality of the foregoing,
to the extent permitted by law (x) no Parallel Investment Expense shall be set
forth on the books and records of the Partnership or, except as otherwise
required by law, listed on the tax returns to be filed by the Partnership and
(y) the Partnership shall not use any of its funds to pay or otherwise satisfy
any Parallel Investment Expense.
SECTION 3.05. Restriction on Borrowings. The Partnership shall not (i)
incur any indebtedness for borrowed money, (ii) guarantee the obligations of any
Person or (iii) otherwise become contingently liable with respect to any
indebtedness of any Person.
SECTION 3.06. Certain Contributions by the General Partner. The
General Partner may, in its discretion, pay any Partnership Expense (or portion
thereof) that the General Partner is otherwise entitled to require the Partners
to fund pursuant to this Agreement, and such payment shall be treated as a cash
contribution by the General Partner and credited to its Capital Account pursuant
to Section 6.08(a). If the General Partner makes cash contributions to the
Partnership pursuant to this Section 3.06, the General Partner shall have the
option to require the Partners to fund, in accordance with Section 5.02(b), a
Special Expense Distribution to the General Partner on any subsequent Drawdown
Date on which the Partners are required to make Capital Contributions in respect
of Investments.
SECTION 3.07. Transactions with Affiliates. In addition to
transactions specifically contemplated by this Agreement, the General Partner,
when acting in its capacity as General Partner of the Partnership, is hereby
authorized to purchase property or obtain services from, to sell property or
provide services to, or otherwise to deal with the General Partner (acting in a
capacity other than its capacity as General Partner of the Partnership), any
Affiliate of the General Partner, any Partner, any Person in which a Partnership
Investment has been, or is proposed to be, made, or any Affiliate of any of the
foregoing Persons; provided that, in connection with any such dealing (other
than those specifically contemplated by the immediately succeeding sentence of
this Section 3.07) between the Partnership and the General Partner (acting in a
capacity other than its capacity as General Partner of the Partnership), any
Affiliate of the General Partner, or any Partner, such dealing shall be on terms
no less favorable to the Partnership than the terms that would be obtained on an
arm's-length basis and the General
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Partner shall disclose the arrangements of such dealing to the Advisory
Committee. In connection with any services performed by any Affiliate of the
General Partner for the Partnership, such Affiliate shall be entitled to be
compensated by the Partnership for such services, and the amount of such
compensation shall be determined by the General Partner in its discretion;
provided that (x) such compensation at any time shall not exceed the amount such
Affiliate would customarily receive from third parties as compensation at such
time for the performance of similar services and (y) such services shall not be
rendered for additional compensation if already covered by the Management Fee or
if such services are of a type of activity required to be performed by the
General Partner pursuant to its obligations hereunder. Each Partner acknowledges
and agrees that the purchase or sale of property, the performance of such
services, the borrowing of such funds, other dealings, or the receipt of such
compensation may give rise to conflicts of interest between the Partnership and
the Partners, on the one hand, and the General Partner or such Affiliate, on the
other hand.
SECTION 3.08. Other Activities, Conflicts of Interest. (a) Each
Partner (1) represents and warrants that such Partner has carefully reviewed and
understood the information contained in the Offering Memorandum and (2)
acknowledges and agrees that the General Partner or any of its Affiliates may
engage in any of the activities of the type or character described in the
Offering Memorandum under the caption "Certain Risk Factors and Conflicts of
Interest", or elsewhere therein, whether or not such activities have or could
have an effect on the Partnership's affairs or on any Investment. Without
limiting the generality of any of the foregoing, each Partner acknowledges and
agrees that:
(i) the General Partner, any of its Affiliates and any officer or
employee of any such Person shall be required to devote only such time to the
affairs of the Partnership as the General Partner determines in its discretion
may be necessary to manage and operate the Partnership, and any such Person, to
the extent not otherwise directed by the General Partner (but subject to Section
4.03), shall be free to serve any other Person or enterprise in any capacity
that it may deem appropriate in its discretion; and
(ii) Affiliates of the General Partner shall have the right to perform
consulting services for, and to receive compensation from, any Person in which
an Investment has been, or is proposed to be, made; provided that such services
shall not be rendered for additional compensation if already covered by the
Management Fee or if such services are of a type of activity required to be
performed by the General Partner pursuant to its obligations hereunder. In
addition, such Affiliates shall have the right to purchase property (including
securities) from, to sell property or lend funds to, or otherwise to deal with,
any Person in which an Investment has been, or is proposed to be, made.
Employees of the General Partner and its Affiliates may also receive cash and
equity compensation in connection with serving as directors of portfolio
companies. Each Partner further acknowledges and agrees that the performance of
such services, the purchase or sale of such property, the lending of such funds,
other dealings, or the receipt of such fees may give rise to conflicts of
interest between the Partnership and the Partners, on the one hand, and
Affiliates of the General Partner, on the other hand, and that any such fees or
other compensation will not be shared with the Partnership or any Partner.
(b) Unless otherwise expressly provided herein, whenever a conflict of
interest exists or
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arises between the General Partner, any of its Affiliates, or a Limited Partner,
on the one hand, and the Partnership or, in the case of the General Partner or
its Affiliates, any Limited Partner, on the other hand, the General Partner
shall, promptly after becoming aware of such conflict of interest, disclose such
conflict of interest to the Advisory Committee, together with information
reasonably necessary to enable the Advisory Committee to evaluate such conflict
of interest, and the Advisory Committee shall resolve such conflict of interest
in its reasonable discretion after consultation with the General Partner.
SECTION 3.09. Books and Records; Accounting Method. (a) The General
Partner shall keep or cause to be kept at the address of the General Partner (or
at such other place as the General Partner shall advise the other Partners) full
and accurate books and records of the Partnership. Subject to Sections 3.10(a)
and 3.10(b), such books and records shall be available, upon five Business Days'
notice to the General Partner, for inspection and copying at reasonable times
during business hours by each Limited Partner or its duly authorized agents or
representatives for a purpose reasonably related to such Limited Partner's
interest in the Partnership. Each Limited Partner agrees that such books and
records contain confidential information relating to the Partnership and its
affairs.
(b) The Partnership's books of account shall be kept on the same basis
followed by the Partnership for United States federal income tax purposes.
SECTION 3.10. Confidentiality. (a) Each Partner, other than the
General Partner, agrees to keep confidential, and not to disclose to any Person
(other than Conduit Partners), any matter relating to the Partnership and its
affairs, including the identities of the other Partners and the beneficial
owners of the related Partnership Interests and any matter related to any
Investment (other than disclosure to such Partner's employees, agents, advisors,
or representatives responsible for matters relating to the Partnership and who
need to know such information in order to perform such responsibilities (each
such Person being hereinafter referred to as an "Authorized Representative") or
the other Limited Partners); provided that such Partner or any of its Authorized
Representatives may make such disclosure to the extent that (i) the information
being disclosed is otherwise generally available to the public, (ii) such
disclosure is requested by any governmental body, agency, official or authority
having jurisdiction over such Partner or (iii) such disclosure, in the written
opinion of legal counsel of such Partner or Authorized Representative, is
otherwise required by law. Prior to making any disclosure described in clause
(iii) of this Section 3.10(a), each Partner shall notify the General Partner of
such disclosure and deliver to the General Partner a copy of the opinion
referred to in such clause (iii). Prior to any disclosure to any Authorized
Representative, each Limited Partner shall advise such Authorized Representative
of the obligations set forth in this Section 3.10(a) and obtain the agreement of
such Person to be bound by the terms of such obligations. Notwithstanding any
other provision of this Agreement, any Partner (and each of its employees,
representatives or other agents) may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the Partnership
and any Partnership Investment or Parallel Investment, provided that the
foregoing does not constitute an authorization to disclose information
identifying the Partnership, the Partners, or any parties to Partnership
Investments or Parallel Investments or (except to the extent relating to such
tax structure or tax treatment) any nonpublic commercial or financial
information.
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(b) The General Partner may, to the maximum extent permitted by
applicable law, keep confidential from any Limited Partner any information
(including information requested by such Limited Partner pursuant to Section
3.09) the disclosure of which (i) the Partnership, any Partnership Investment
Vehicle or Parallel Investment Vehicle or the General Partner is required to
keep confidential by law or by the terms of any agreement entered into in good
faith in connection with any proposed Investment or (ii) the General Partner
reasonably believes may have an adverse effect on (x) the ability to consummate
any proposed Investment or any transaction directly or indirectly related to, or
giving rise to, such Investment, (y) the Partnership or any Partnership
Investment Vehicle or Parallel Investment Vehicle or (z) any entity in which an
Investment has been, or is proposed to be, made. If information is withheld from
any Limited Partner pursuant to this Section 3.10(b), the General Partner shall
provide such information to such Limited Partner after the circumstances
described in the preceding sentence are no longer continuing.
SECTION 3.11. Partnership Tax Returns. (a) The General Partner shall
cause to be prepared and timely filed all tax returns required to be filed for
the Partnership. The General Partner may, in its discretion, make, or refrain
from making, any income or other tax elections for the Partnership that it deems
necessary or advisable, including an election pursuant to Section 754 of the
Code.
(b) The General Partner is hereby designated as the Partnership's "Tax
Matters Partner" under Section 6231(a)(7) of the Code. The General Partner is
specifically directed and authorized to take whatever steps the General Partner,
in its discretion, deems necessary or desirable to perfect such designation,
including filing any forms or documents with the Internal Revenue Service and
taking such other action as may from time to time be required under Treasury
regulations. Any Limited Partner shall have the right to participate in any
administrative proceedings relating to the determination of Partnership items at
the Partnership level. Expenses of such administrative proceedings undertaken by
the Tax Matters Partner shall be Partnership Expenses. Each Limited Partner who
elects to participate in such proceedings shall be responsible for any expenses
incurred by such Limited Partner in connection with such participation. The cost
of any resulting audits or adjustments of a Partner's tax return shall be borne
solely by the affected Partner.
(c) The General Partner shall, at the sole cost and expense of the
affected Limited Partner or Conduit Partner, use commercially reasonable efforts
to (i) provide each Limited Partner and Conduit Partner with such assistance as
such Limited Partner or Conduit Partner may reasonably request in connection
with any tax filing requirements arising in any jurisdiction other than the
Limited Partner's or Conduit Partner's jurisdiction of residence for tax
purposes and relating to income derived by the Limited Partner or Conduit
Partner from the Partnership, any Parallel Investment or any Parallel Investment
Vehicle and (ii) assist the Limited Partners and Conduit Partners in obtaining
any tax refunds or other tax benefits from any such jurisdiction, arising in
connection with any Partnership Investment or Parallel Investment.
SECTION 3.12. Annual Meeting. The General Partner shall call a meeting
of the Partners on an annual basis by giving notice of such meeting to each
Partner not less than 30 days prior to such meeting. Such notice shall specify
the time and place of such meeting.
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SECTION 3.13. Reliance by Third Parties. Persons dealing with the
Partnership are entitled to rely conclusively upon the power and authority of
the General Partner as herein set forth.
SECTION 3.14. ERISA. The General Partner agrees to use its best
efforts to operate the Partnership in such a way that none of the Partnership's
assets would be deemed to be "plan assets" for purposes of ERISA by causing the
Partnership to qualify as a "venture capital operating company" for purposes of
ERISA. If, despite such efforts, the General Partner becomes aware or is
notified that the Partnership's assets may be deemed to be such plan assets, and
reputable counsel to the General Partner issues a legal opinion to the General
Partner confirming that the foregoing is reasonably likely, then the General
Partner may take any action authorized under Section 3.03, including without
limitation canceling in whole or in part the ERISA Partners' respective
Remaining Capital Commitments or requiring the sale in whole or in part of the
ERISA Partners respective Partnership Interests in the Partnership, without the
approval of any ERISA Partner; provided that such cancellation, sale or other
action shall be imposed on all ERISA Partners pro rata in accordance with their
respective Commitment Percentages (calculated without giving effect to the
Capital Commitment of any Partner that is not an ERISA Partner).
SECTION 3.15. Conduit Partners. (a) Notwithstanding anything in this
Agreement to the contrary, the following provisions shall apply with respect to
Conduits and Conduit Partners.
(b) A transfer by a Conduit Partner of its interest in the Conduit in
accordance with the Conduit Agreement shall not require the consent of the
General Partner under Section 10.02.
(c) The General Partner may require a Conduit to be excluded from
proposed Investments to the extent (but only to the extent) the General Partner
makes a determination that, by virtue of the interest of a Conduit Partner in
such Conduit, the provisions of clause (i), (ii) or (iii) set forth in Section
4.06 apply. It is understood that, under the circumstances described in this
Section 3.15(c), the provisions of Section 4.06 shall apply only to that portion
of the interest in the Partnership held by the relevant Conduit that is
attributable to the relevant Conduit Partner.
(d) A Conduit may elect to be excused from making all or a portion of
any required Capital Contribution with respect to any Investment to the extent
(but only to the extent) that a Conduit Partner of such Conduit elects to be
excused from making its capital contribution to the Conduit for the reasons set
forth in Section 5.06(a); provided that such Conduit Partner delivers an opinion
of counsel to the effect set forth in Section 5.06(a). The General Partner may
exclude a Conduit from making all or a portion of any required Capital
Contribution with respect to any Investment to the extent (but only to the
extent) the General Partner makes a determination that, by virtue of the making
of all or a portion of a capital contribution by a Conduit Partner to such
Conduit in respect of such Investment, the provisions of Section 5.06(b) apply.
It is understood that, under the circumstances described in this Section
3.15(d), the provisions of Section 5.06 shall apply only to that portion of the
interest in the Partnership held
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by the relevant Conduit that is attributable to the relevant Conduit Partner.
(e) In the event a Conduit becomes a defaulting Limited Partner under
Section 5.05 as a result of a default by a Conduit Partner of its obligations
under the Conduit Partnership Agreement of such Conduit, the provisions of
Section 5.05 shall be applied as if such defaulting Conduit Partner, rather than
such Conduit, were the defaulting Limited Partner under Section 5.05. By way of
example and without limiting the foregoing, (i) the provisions of clauses (i)
and (ii) of Section 5.05(a) shall apply only to that portion of the interest in
the Partnership held by such Conduit that is attributable to such defaulting
Conduit Partner (and not apply to the remainder of the interest in the
Partnership held by such Conduit that is attributable to the nondefaulting
Conduit Partners of such Conduit) and (ii) the provisions of Sections 5.05(b)
and 5.05(c) shall be applied so that the General Partner may require each
Limited Partner (including such Conduit and the non-defaulting Conduit Partners
of such Conduit) to fund the shortfall arising from the default by such Conduit
Partner in the manner set forth in Section 5.05(b) or 5.05(c), as the case may
be. The General Partner is hereby authorized to make such allocations and
distributions, deliver such drawdown notices and take all such other actions as
it deems appropriate to implement the foregoing.
(f) For purposes of any provision of this Agreement requiring the vote
or consent of the Limited Partners, including without limitation Sections
5.01(c), 9.01, 9.02(c) and 12.01, a Conduit may cast a divided vote as if it
were two Limited Partners, with one vote reflecting the vote of its Conduit
Partners that vote in favor of or otherwise consent to the proposal being voted
on and with the other vote reflecting the vote of its Conduit Partners that do
not vote in favor of or otherwise do not consent to the proposal being voted on.
ARTICLE IV
INVESTMENTS AND INVESTMENT OPPORTUNITIES
SECTION 4.01. Investments Generally. The assets of the Partnership
shall, to the extent not required for the payment of expenses or otherwise
necessary for the conduct of the Partnership's business (as determined by the
General Partner in its discretion), and subject to Sections 2.03(b), 3.03 and
5.07, be invested in such Partnership Investments as the General Partner shall
determine in its discretion. In the discretion of the General Partner,
Partnership Investments shall be made either directly by the Partnership or
indirectly through one or more Partnership Investment Vehicles; provided, that
at the time any Investment is made the General Partner may not, without the
consent of the Required Partners, (i) allocate more than 15% of the aggregate
Capital Commitments in any one Partnership Investment, (ii) allocate more than
25% of the aggregate Capital Commitments in non-United States entities, or (iii)
allocate more than 33% (or up to 50% with the consent of the Advisory Committee)
of the aggregate Capital Commitments in publicly traded securities; provided,
however, that the General Partner may exceed the foregoing percentages without
the consent of the Required Partners for a period of one year from the date of
such Investment in the event the General Partner intends to syndicate such
Investment in order to comply with the foregoing percentages following such
syndication so long as in no event shall any Investment be allocated more than
25% of the aggregate Capital Commitments (including any amounts intended for
syndication), and any such deviation from
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the foregoing 15% limitation with respect to the aggregate Capital Commitments
shall be with respect to no more than one Investment at a time.
Subject to and in accordance with Section 4.04, the General Partner
may, in its discretion, permit certain Partners (other than an ERISA Partner) to
make Parallel Capital Contributions outside the Partnership in such Parallel
Investments as the General Partner shall determine in its discretion. In the
discretion of the General Partner, Parallel Investments shall be made either
directly by the Participating Partners in respect of such Parallel Investments
or indirectly through one or more Parallel Investment Vehicles.
Notwithstanding the foregoing, the Partnership shall not make any
Investment in connection with a tender offer for outstanding securities of any
Person that is the subject, directly or indirectly, of such Investment if the
Board of Directors (or other analogous body) of such Person recommends in such
Person's Tender Offer Solicitation/Recommendation Statement on Schedule 14D-9,
as amended or supplemented, that security holders not tender securities pursuant
to such offer. It is further understood that the Partnership shall not make
Investments of a type or character inconsistent with the investments described
in the Offering Memorandum.
SECTION 4.02. Co-Investments. The General Partner shall be free to
offer any uncommitted amount with respect to any Investment to the other
Partners (including the General Partner), or to any other Person, which may
include any Affiliates of the General Partner, funds advised by the General
Partner or its Affiliates, or any director, officer, employee or agent of the
General Partner or any of its Affiliates.
SECTION 4.03. Suitability of Investments. The General Partner shall
determine in good faith whether any investment offered to the Partnership is an
appropriate investment for the Partnership to make (or to permit the Partners to
make) as one or more Investments and, if so, the aggregate size of such
Investment or Investments (which may be less than the total amount offered to
the Partnership).
SECTION 4.04. Structuring of Investments; Parallel Investments. (a) In
structuring any investment opportunity, the General Partner may, in its
discretion but solely to comply with regulatory requirements or tax laws
(including without limitation possible tax efficiencies available to certain
Limited Partners) after such consultation with Partners as the General Partner,
in its discretion, deems appropriate, structure such investment opportunity (i)
as one or more Partnership Investments or (ii) in part as one or more
Partnership Investments and in part as one or more Parallel Investments. In
addition, the General Partner may permit different groups of Partners to make
Capital Contributions with respect to different Investments arising from a
single investment opportunity; provided that (i) no ERISA Partner shall be
permitted or required to make a Capital Contribution with respect to any
Parallel Investment and (ii) no other Partner who advises the General Partner
that it desires not to participate in a Parallel Investment shall be required to
make a Capital Contribution with respect to such Parallel Investment. The
General Partner shall use reasonable efforts to ensure that Participating
Partners invest pro rata based on their relative Capital Commitments in such
Parallel Investments.
(b) If any single investment opportunity is structured as more than
one Investment and the General Partner permits different groups of Partners to
make Capital Contributions with
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respect to different Investments arising from such investment opportunity:
(i) the securities comprising any Investment arising from such
investment opportunity shall be the same as the securities comprising
each other Investment arising from such investment opportunity;
(ii) subject to Section 5.02(b), it is understood that each
Partner shall be required, with respect to one or more Investments
arising from such investment opportunity, to make an aggregate Capital
Contribution equal to the product of (x) such Partner's Remaining
Commitment Percentage times (y) the aggregate amount of all
Investments arising from such investment opportunity;
(iii) any Partner that makes an aggregate Capital Contribution in
accordance with clause (ii) of this Section 4.04(b) with respect to
one or more Investments arising from such investment opportunity shall
be deemed to have a Remaining Capital Commitment equal to zero for
purposes of all other Investments to be made by the Partnership
arising from such investment opportunity; and
(iv) other than upon dissolution of the Partnership, securities
comprising all or any portion of any Investment arising from such
investment opportunity shall not be directly or indirectly sold,
exchanged, transferred or otherwise disposed of, or Proceeds in
respect thereof distributed, unless securities comprising all or an
equivalent portion, as the case may be, of each other Investment
arising from such investment opportunity are directly or indirectly
disposed of, or Proceeds in respect thereof distributed, at or about
the same time, for equivalent consideration and otherwise on
substantially similar terms.
For purposes of this Section 4.04(b), the securities comprising any Investment
shall be the securities issued by the ultimate Person in which the Investment
has been made, without regard to the securities, if any, issued by any
Partnership Investment Vehicle or Parallel Investment Vehicle.
(c) The General Partner and the Partners acknowledge and agree that
each Parallel Investment constitutes an Investment (but not a Partnership
Investment) for purposes of certain provisions of this Agreement. Without
limiting the generality of the foregoing, it is understood that the terms of
each Parallel Investment applicable to the acquisition, management and
disposition of such Parallel Investment shall be set forth in an agreement or
agreements between the General Partner and the Participating Partners in respect
of such Parallel Investment, and shall be substantially similar to those
contained in this Agreement with respect to Partnership Investments (including,
mutatis mutandis, the provisions of Section 5.03 with respect to investment fees
and the provisions of Article VI with respect to the determination of the amount
that the General Partner is entitled to receive, as a share of income, profit or
gain or otherwise, from any Participating Partner in respect of such Parallel
Investment based upon the performance of such Parallel Investment). The terms of
the agreement or agreements referred to in the immediately preceding sentence
shall apply only to the particular Parallel Investment or Parallel Investments
covered by such agreement or agreements.
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(d) Notwithstanding anything in this Agreement to the contrary,
including the provisions of Section 4.04(c), the General Partner and the
Partners acknowledge and agree that to the extent permitted by law (i) each
Parallel Investment shall be made for the sole benefit and use of the
Participating Partners in respect of such Parallel Investment (and not made for
the benefit or use of the Partnership), (ii) no Parallel Investment shall
constitute or be deemed to be an asset of the Partnership for any purpose and
(iii) no creditor of the Partnership shall have any recourse or claim against
any Parallel Investment or be entitled reasonably to rely on the existence of
any Parallel investment in extending credit to the Partnership. Without limiting
the generality of the foregoing, to the extent permitted by law (x) no Parallel
Investment shall be set forth on the books and records of the Partnership or,
except as otherwise required by law, listed on the tax returns to be filed by
the Partnership and (y) the Partnership shall not use any of its funds to
acquire or otherwise make any Parallel Investment.
(e) Each Limited Partner does hereby constitute and appoint the
General Partner as its true and lawful representative and attorney-in-fact, in
its name, place and stead to make, execute and sign any agreement or instrument
that is necessary or desirable in connection with establishing the terms of or
otherwise structuring any Parallel Investment in which such Limited Partner
elects to participate in accordance with this Section 4.04, including without
limitation any agreement or instrument required for the formation of any
Parallel Investment Vehicle; provided that in no event shall the power of
attorney granted hereby be exercised so as to adversely modify or affect the
limited liability of such Limited Partner. The power of attorney granted hereby
is coupled with an interest and shall (i) survive and not be affected by the
subsequent death, incapacity, disability, dissolution, termination or bankruptcy
of the Limited Partner granting the same or the transfer of all or any portion
of such Limited Partner's interest in the Partnership, and (ii) extend to such
Limited Partner's successors, assigns and legal representatives.
SECTION 4.05. [Intentionally omitted.]
SECTION 4.06. Exclusion from Investments. The General Partner may, in
good faith, cause a Partner to be excluded from all future Investments if the
General Partner determines, in good faith based on the opinion of reputable
counsel, that participation by such Partner in such Investments (i) may result
in a violation of the Investment Company Act, the Advisers Act or any other
material law, regulation or guideline applicable to the General Partner, the
Partnership, any Affiliate of the Partnership or any Partner, (ii) may cause the
Partnership's assets to be deemed "plan assets" for purposes of ERISA or (iii)
may have a material adverse effect on the Partnership or the General Partner.
After taking any action pursuant to this Section 4.06, the General Partner shall
provide notice thereof to the affected Partner, but such action shall not
require the approval of any Partner. The General Partner shall use commercially
reasonable efforts to ensure that such exclusion or other action is imposed on
all similarly situated Partners pro rata in accordance with their respective
Commitment Percentages (calculated without giving effect to the Capital
Commitment of any Partner that is not so similarly situated).
SECTION 4.07. Tax Undertakings with Respect to Investments. (a) The
General Partner agrees to use commercially reasonable efforts (i) to minimize
any adverse tax consequences to any U.S. Investor from Investments in equity
securities in any entity that is, for U.S. federal
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income tax purposes, a "controlled foreign corporation" or a "passive foreign
investment company" (a "PFIC") and (ii) to prevent any Investment from
constituting an investment in equity securities of a "foreign personal holding
company" for U.S. federal income tax purposes. In this regard, the General
Partner shall use commercially reasonable efforts to ensure that no Investment
constitutes an investment in equity securities of a PFIC unless the PFIC has
agreed to provide the General Partner with sufficient information to make a
"qualified electing fund" election.
(b) The General Partner shall use commercially reasonable efforts to
structure Investments in entities organized outside the United States, or in
entities with significant operations outside the United States, in such a manner
that Limited Partners and Conduit Partners will not be subject to tax, and will
not be required to file any tax return, in the relevant jurisdiction or
jurisdictions, as a consequence of the Limited Partner's or Conduit Partner's
investment in the Partnership, the relevant Conduit, the relevant Parallel
Investment or the relevant Parallel Investment Vehicle, as the case may be, in
respect of income that is not derived from the Partnership (or the relevant
Parallel Investment or Parallel Investment Vehicle, as the case may be).
ARTICLE V
CAPITAL COMMITMENTS AND CAPITAL CONTRIBUTIONS
SECTION 5.01. Capital Contributions. (a) Each Partner hereby agrees to
make Capital Contributions from time to time as hereinafter set forth; provided
that, except as otherwise provided in Section 5.02(d), the applicable Drawdown
Notices are delivered to the Partners prior to the Full Investment Date.
Notwithstanding anything contained in this Agreement, no Partner (except any
Defaulting Partner as provided in Section 5.05(e)(y)) shall be required to make
any Capital Contribution if, at the time such Capital Contribution is to be
made, such Capital Contribution exceeds such Partner's then Remaining Capital
Commitment.
(b) The General Partner may in its discretion, cancel the Remaining
Capital Commitments of all Partners (and the Full Investment Date shall be
deemed to have occurred) at any time if:
(i) the aggregate Remaining Capital Commitments of all Partners
and remaining capital commitments of Base Fund Partners at such time is less
than 15% of the aggregate Capital Commitments of all Partners and the aggregate
capital commitments of all Base Fund Partners, or
(ii) the General Partner determines in good faith based on the
opinion of reputable counsel that changes in any applicable law or regulation
make such cancellation necessary.
(c) Notwithstanding anything to the contrary contained herein, the
power of the General Partner to make Investments and to require Capital
Contributions from the Partners in respect of such Investments may be suspended
by written notice to the General Partner, and the Full Investment Date shall be
deemed to have occurred, upon (i) the vote or written consent of the
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Required Partners or (ii) the occurrence of a Key Person Event; provided that
(x) the foregoing suspension shall not limit the General Partner's right to
require further Capital Contributions with respect to (1) Partnership Expenses
and Management Fees, (2) completing Investments that are subject to binding
agreements or commitments on the part of the Partnership, and/or (3) subject to
the limitations provided in this Agreement, Follow-on Investments; and (y) the
Required Partners may reinstate such right of the General Partner to make
Investments and require Capital Contributions in respect of such Investments in
the event they reasonably believe that the General Partner has cured the
circumstances giving rise to such suspension or that the Key Person Event is not
material to the Partnership, and the Full Investment Date shall be extended
accordingly.
SECTION 5.02. Drawdown Procedures. (a) Generally. Each Limited Partner
shall make Capital Contributions in such amounts and at such times as the
General Partner shall specify in notices ("Drawdown Notices") delivered from
time to time to such Partner. All Partnership Capital Contributions shall be
paid to the Partnership in immediately available funds in United States dollars
by 11:00 A.M. (New York City time) on the date specified in the applicable
Drawdown Notice. All Parallel Capital Contributions shall be paid to the Person
and the account and at the time specified in the applicable Drawdown Notice (it
being understood that payment of Parallel Capital Contributions shall not
constitute cash contributions to the Partnership and shall not be paid to any
account of the Partnership). Partnership Capital Contributions may include
amounts that the General Partner determines in its discretion are necessary or
desirable to establish reserves in respect of Partnership Expenses and amounts
necessary to make Special Distributions. The General Partner shall make Capital
Contributions in such amounts as hereinafter set forth and at the same times and
in the same manner as the Limited Partners who are required to make related
Capital Contributions: provided that (i) the General Partner shall be relieved
of its obligation to make Capital Contributions in cash (with respect to amounts
called in excess of that amount which must be satisfied by a Capital
Contribution in cash as set forth in the definition of "Capital Commitment" in
Section 1.01) to the extent of the Unused Credit Amount on the date on which the
Capital Contribution is payable and (ii) if any single investment opportunity is
structured as more than one Investment (e.g., a Partnership Investment and a
Parallel Investment), the General Partner shall make its entire Capital
Contribution (based on the aggregate amount invested in all such Investments) to
only one of such Investments (i.e., to either the Partnership Investment or the
Parallel Investment, but not to both) and, if such Capital Contribution is so
made, the General Partner shall not be obligated to make any Capital
Contribution to any other such Investments arising from such investment
opportunity.
(b) Regular Drawdowns. Except as otherwise provided in Section
5.02(c), each Drawdown Notice shall specify:
(i) the Drawdown Amount;
(ii) the required Capital Contribution to be made by such
Partner;
(iii) the date (the "Drawdown Date") on which such Capital
Contribution is due (which shall be a Business Day at least ten Business Days
from and including the date of delivery of the Drawdown Notice); and
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(iv) the Person and the account to which such Capital
Contribution should be paid.
Subject to Sections 4.01, 4.04(b)(iii), 4.06 and 5.02(a), in
connection with any Drawdown, except as provided below, each Partner (including
the General Partner) shall be required to make a Capital Contribution equal to
the product of (x) such Partner's Remaining Commitment Percentage times (y) the
Drawdown Amount specified in the applicable Drawdown Notice; provided that the
General Partner may in its discretion determine that with respect to any
Follow-on Investment only Participating Partners with respect to the investment
or investments giving rise to the Follow-on Investment shall be required to make
a Capital Contribution. Subject to the last sentence of the first paragraph of
Section 3.04(b), in connection with any such Drawdown to be applied to pay
Expenses or to make a Special Expense Distribution, each Partner (including the
General Partner) shall be required to make a Capital Contribution equal to the
product of (x) such Partner's Commitment Percentage times (y) the Drawdown
Amount specified in the applicable Drawdown Notice. Notwithstanding the
immediately preceding sentence;
(A) subject to clause (B) below, in connection with any Expense (or
the portion of any Special Expense Distribution related to such
Expense) directly and solely attributable to one or more Investments
(including without limitation the investment fee referred to in
Section 5.03 or the corresponding terms of any Parallel Investment),
only those Partners who are Participating Partners with respect to
such Investments shall be required to make Capital Contributions in
respect of such Expense (or such related portion), calculated on the
basis of such Partners' respective Investment Percentage with respect
to such Investments; and
(B) the General Partner may calculate the Capital Contributions to be
made by the Partners in respect of any Expense (or the portion of any
Special Expense Distribution related to such Expense) on a basis other
than Commitment Percentages and/or Investment Percentages and/or
require certain (but not all) Partners to make Capital Contributions
in respect of such Expense (or such related portion) if the General
Partner determines in its discretion that such allocation is clearly
more equitable (e.g., in the event any Partner benefits
disproportionately in respect of, or has requested an accommodation
that gives rise to, such Expense).
(c) Special Drawdowns. If in connection with the making of any
Investment or the payment of any Expense in respect of which a Drawdown Notice
has been delivered, the General Partner shall determine, in its discretion, that
it is necessary or desirable to increase the required Capital Contribution to be
made by any Partner in connection therewith (it being understood that generally
any such increase would be borne pro rata by all of the Partners, except in
unusual circumstances such as a Default or an Expense allocated in accordance
with the immediately preceding sentence), the General Partner shall deliver an
additional Drawdown Notice to such Partner amending the original Drawdown Notice
and specifying:
(i) the amount of any increase in the Drawdown Amount;
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(ii) the amount of the increase in the required Capital Contribution
to be made by such Partner;
(iii) the Drawdown Date with respect to the amount of the increase in
the required Capital Contribution if different from the Drawdown Date
specified in the original Drawdown Notice; and
(iv) the reason for such increase.
The Drawdown Date with respect to the amount of the increase in the
required Capital Contribution shall be the later of (i) the Drawdown Date
specified in the original Drawdown Notice and (ii) five Business Days from and
including the date of delivery of the additional Drawdown Notice.
Any increase in the required Capital Contribution of any Partner
pursuant to Section 5.05 or 5.06 shall be calculated in the manner set forth
therein.
Any increase in the required Capital Contribution of each Partner
(including the General Partner) due to an increase in the Drawdown Amount
specified in the original Drawdown Notice shall be calculated in accordance with
Section 5.02(b) (after giving effect to Sections 5.05 and 5.06, if applicable)
with respect to the amount of the increase in the Drawdown Amount.
(d) Drawdowns After the Full Investment Date. After the Full
Investment Date, all Partners will be released from any further obligation with
respect to their Remaining Capital Commitments (the "Unfunded Commitments"),
except to the extent necessary to: (i) cover Partnership Expenses, including but
not limited to Management Fees; (ii) complete Investments by the Partnership in
respect of transactions agreed to by the Partnership prior to the Full
Investment Date; and (iii) make Follow-On Investments in companies that are
portfolio companies on the Full Investment Date in an aggregate amount of up to
10% of the aggregate Capital Commitments for a period of three years after the
Full Investment Date (or up to one additional year after such three-year period
if approved by the Advisory Committee) (it being understood that in no event
shall any Partner's obligation with respect to the foregoing exceed such
Partner's Remaining Capital Commitment).
SECTION 5.03. Management Fee. In consideration for its services
rendered under Section 3.01(b), the Partnership shall pay to the Management
Company on January 1, April 1, July 1 and October 1 of each year, the Management
Fee. The Management Fee shall be included in the initial Drawdown Amount for
each Partnership year and shall be paid as set forth in Section 3.01(b). The
General Partner and its Affiliates and employees shall not be obligated to pay
any portion of the Management Fee (it being understood that the other Partners
shall not be required to pay such waived Management Fee on behalf of the
foregoing Persons exempted from payment of the Management Fee). The Management
Company may retain one or more placement agents to assist in the placement of
Interests in the Partnership. The Management Company will pay (i) the fees of
any such placement agents and any marketing costs in connection therewith and
(ii) the expenses of the Scientific Advisory Board.
SECTION 5.04. Loans to Fund Drawdowns. (a) If the General Partner
shall determine, in its discretion, that funds are necessary to make an
Investment or to pay an Expense prior to the
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time all or a portion of such funds are otherwise made available by the Partner
in accordance with this Article V, subject to compliance with applicable law or
regulation the General Partner or any of its Affiliates may, acting as agent for
(and without any further consent or other action by) any Partner required to
make a Capital Contribution with respect to such Investment or Expense, make
such Capital Contribution on behalf of such Partner and the amount so paid shall
constitute a loan to such Partner: provided that (i) the General Partner shall
have delivered the applicable Drawdown Notice or Notices in respect of such
Investment or Expense and (ii) the General Partner shall use reasonable efforts
to notify the Partners at least five Business Days (and shall, in any event,
notify the Partners at least four Business Days) prior to such loan date of its
intention to make such loan in order to give such Partners the opportunity, in
their discretion, to make their required Capital Contributions at least one
Business Day prior to such loan date in lieu of receiving such loan; and
provided further that each ERISA Partner and each Early Funding Partner shall be
required to make its required Capital Contribution at least one Business Day
prior to such loan date in lieu of receiving such loan. The notice referred to
above may constitute part of a Drawdown Notice.
(b) Each Partner promises to pay the principal amount of any loan made
by the General Partner or any of its Affiliates to such Partner pursuant to
Section 5.04(a), together with interest at a rate per annum equal to the lesser
of (i) the Prime Rate plus 2% and (ii) the maximum rate permitted under the laws
of the State of Delaware, on the Drawdown Date applicable to the Capital
Contribution in respect of which such loan was made. Each Partner shall make any
payment required pursuant to this Section 5.04(b) in immediately available funds
in United States dollars. The General Partner shall deliver a notice to such
Partner, specifying the amount payable by such Partner pursuant to this Section
5.04(b), at least five Business Days before such Drawdown Date; provided that
the failure to deliver such notice shall not affect such Partner's obligations
under this Section 5.04(b).
The obligation of each Partner to make any payment required by this
Section 5.04(b) shall in no way affect the Remaining Capital Commitment of any
Partner hereunder and such payment shall not constitute a Capital Contribution
for purposes of this Agreement.
(c) As security for its obligations under Section 5.04(b) each Partner
(other than any ERISA Partner or Early Funding Partner) hereby grants to the
General Partner and its assigns, to the extent permitted by applicable law, a
security interest in (i) such Partner's interest as a Partner in the
Partnership, including the rights and obligations of such Partner as provided in
this Agreement and the Delaware Act and (ii) any Parallel Investment Ownership
Interest of such Partner, including the rights and obligations of such Partner
as provided by the terms of the applicable Parallel Investment. If an Event of
Default relating to such obligations shall have occurred and be continuing, the
General Partner and its assigns may exercise all the rights of a secured party
under applicable law. Upon the General Partner's request, each Partner will, to
the extent permitted by applicable law, give, execute, file and record any
notice, financing statement, continuation statement or other instrument,
document or agreement that the General Partner determines, in its discretion, is
necessary or desirable (x) to create, perfect, continue or validate the security
interest granted hereunder or (y) to exercise or enforce the rights of the
General Partner and its assigns hereunder with respect to such security
interest.
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SECTION 5.05. Default by Partners. (a) Each Partner agrees that
payment of its required Capital Contributions when due is of the essence, that
any Default by any Partner would cause injury to the Partnership and to the
other Partners and that the amount of damages caused by any such injury would be
extremely difficult to calculate. Accordingly, each Partner agrees that, unless
expressly waived in writing by the General Partner, upon any Event of Default by
a Partner:
(i) the Capital Account of such Partner shall be reduced by an amount
equal to 50% of the amount of such Partner's Capital Account on the date of such
Event of Default (and the amount of such reduction shall be credited to the
Capital Accounts of the other Partners in accordance with Section 6.08(e)), and
(ii) such Partner shall not have allocated to its Capital Account or
receive any distributions with respect to any income, profit or gain arising
after such Event of Default that relates to any Partnership Investments for
which such Partner made Capital Contributions prior to such Event of Default
(and the other Partners shall receive such distributions in accordance with
Section 6.02(b) and any such income, profit or gain shall be credited to the
Capital Accounts of the other Partners in accordance with Section 6.08(e)).
Notwithstanding any Event of Default, the General Partner may, in its
discretion, compromise such Partner's obligation to make Capital Contributions
or to pay certain other amounts pursuant to this Agreement on such terms as the
General Partner determines in its discretion (unless such Partner is the General
Partner or an Affiliate of the General Partner, in which case the General
Partner shall not compromise such obligation).
Within three Business Days of the occurrence of any Default, the
General Partner shall notify the Partner who has committed such Default of the
occurrence of such Default. Upon the occurrence of any Event of Default, the
General Partner may notify all Partners of the occurrence of such Event of
Default.
(b) Upon the occurrence of any Event of Default in connection with any
Drawdown to be applied to make an Investment, the General Partner shall, subject
to Section 5.01(a), use reasonable efforts to obtain agreements from other
Partners to increase their required Capital Contributions so as to fund the
amount that is in default and, if such agreement is obtained from any such
Partner, deliver an additional Drawdown Notice in accordance with Section
5.02(c) to such Partner, setting forth the increased amount of such Partner's
required Capital Contribution.
Notwithstanding the foregoing, if the General Partner determines in
its discretion that time constraints or other factors make the procedure set
forth above impracticable or if the General Partner obtains agreements for only
a portion of the amount that is in default, the General Partner may, in its
discretion, take any or all of the following actions with respect to the amount
that remains to be funded:
(i) subject to Section 5.01(a) increase the required Capital
Contributions of the Partners;
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(ii) obtain the agreement of any other Person (which may, in the
discretion of the General Partner, include any existing Partner)
to make an investment outside the Partnership; and
(iii) after the other Partners have been offered such
opportunity, increase its own Capital Contribution.
(c) Upon the occurrence of any Event of Default in connection with a
Drawdown to be applied to pay Expenses, the General Partner may, in its
discretion and subject to Section 5.01(a) increase the required Capital
Contributions of Partners with respect to the amount that remains to be funded.
(d) If the General Partner elects to take the action specified in
Section 5.05(b)(i) or Section 5.05(c) with respect to any portion of the amount
that is in default in respect of the applicable Investment or Expense, as the
case may be, the General Partner shall deliver an additional Drawdown Notice in
accordance with Section 5.02(c) to the Partners who are required to make Capital
Contributions in respect of such Investment or Expense (other than (i) any
Defaulting Partner with respect to the Investment or Expense, as the case may
be, in respect of which the Event of Default arose and (ii) any Excused Partner
with respect to such Investment, if applicable), and the required Capital
Contribution of each such Partner shall be increased by an amount calculated
(without giving effect to any Partner who is not such a Partner) with respect to
the amount that remains to be funded in accordance with Section 5.02(b).
(e) Subject to Sections 5.05(b) and 5.05(c), the General Partner may
take either or both of the following actions in respect of the Remaining Capital
Commitment of any Defaulting Partner:
(x) seek commitments of capital from additional investors (which
may in the discretion of the General Partner include existing
Partners) up to the amount of the Defaulting Partner's Remaining
Capital Commitment. If any such commitment is received from any
existing Partner, such Partner's Capital Commitment and Remaining
Capital Commitment shall be increased accordingly. If any such
commitment is received from an investor that is not an existing
Partner, such investor shall, after executing such instruments and
delivering such opinions and other documents as are in form and
substance satisfactory to the General Partner, be admitted to the
Partnership as a Substituted Partner and shown as such on the books
and records of the Partnership and shall be deemed to have a Capital
Commitment and a Remaining Capital Commitment equal to the commitment
for which such investor has subscribed. After the appropriate
adjustment of the Capital Commitment and the Remaining Capital
Commitment of the Partner or admission of the Substituted Partner, the
Capital Commitment and Remaining Capital Commitment if the Defaulting
Partner shall be decreased accordingly, and
(y) reduce or cancel the Remaining Capital Commitment of the
Defaulting Partner on such terms as the General Partner determines in
its discretion (which may include leaving such Defaulting Partner
obligated to make Capital Contributions with respect to Partnership
Expenses).
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(f) The rights and remedies referred to in this Section 5.05 shall be
in addition to and not in limitation of, any other rights available to the
General Partner or the Partnership under this Agreement or at law or in equity.
Except as otherwise provided in Section 5.01(a), an Event of Default by any
Partner in respect of any Capital Contribution shall not relieve any other
Partner of its obligation to make Capital Contributions. In addition, unless the
Remaining Capital Commitment of any Defaulting Partner is decreased to zero
pursuant to Section 5.05(e), an Event of Default by such Partner shall not
relieve such Defaulting Partner of its obligation to make Capital Contributions
subsequent to such Event of Default.
SECTION 5.06. Excuse Procedure. (a) Any Partner shall be excused from
making all or a portion of any required Capital Contribution with respect to any
Investment if not later than five Business Days (or such later time as the
General Partner shall in its discretion determine) after the date of delivery of
the applicable Drawdown Notice or such later date on which the General Partner
provides information in accordance with the second paragraph of this Section
5.06(a), the General Partner shall have received a written opinion (in form and
substance reasonably satisfactory to it) of counsel (satisfactory to it) to the
effect that it is reasonably likely that the making of such Investment by such
Partner (without regard to whether such Investment is made as a Partnership
Investment or as a Parallel Investment) would result in a violation of any law
or regulation of the United States or any State thereof (other than any State
legal investment statute or regulation) or of any foreign country (other than
any such foreign law or regulation that violates, or the compliance with which
by Persons subject to the jurisdiction of the United States would violate any
law or regulation of the United States), in any such case applicable to such
Partner with respect to such Investment.
Such opinion shall also indicate whether (and, if so, at what reduced
amount) such Partner could make a smaller Capital Contribution in respect of
such Investment that is not reasonably likely to result in such a violation. For
purposes of ascertaining whether a Partner may be excused from making a Capital
Contribution pursuant to this Section 5.06(a), but subject to Section 3.10(b),
the General Partner shall, as promptly as reasonably practicable, provide such
information about the proposed Investment as such Partner shall, within three
Business Days after the date of delivery of the applicable Drawdown Notice,
reasonably request.
(b) A Partner shall be excused and shall not be permitted to make all
or a portion of any required Capital Contribution with respect to any Investment
if the General Partner, in its discretion, determines that such Capital
Contribution or portion thereof, taken by itself or together with other Capital
Contributions of such Partner or any other Partners, (i) may result in a
violation of the Investment Company Act, the Advisers Act, the Bank Holding
Company Act or any other material law, regulation or guideline applicable to the
General Partner, the Partnership, any Affiliate of the Partnership or such
Partner, (ii) may cause the Partnership's assets to be deemed "plan assets" for
purposes of ERISA, (iii) may have a material adverse effect on (x) the ability
to consummate such proposed Investment or any transaction directly or indirectly
related to, or giving rise to, such proposed Investment, (y) the Partnership,
(or, in the case of a Partnership Investment, any applicable Partnership
investment Vehicle or, in the case of a Parallel Investment, any applicable
Parallel Investment Vehicle) or the General Partner or (z) any Person that is,
directly or indirectly, the subject of such proposed Investment, or (iv) may
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otherwise result in a significant delay, extraordinary expense, or material
adverse effect on the Partnership, the other Limited Partners, any Partnership
Investment or any future Partnership Investment.
To the fullest extent permitted by law, the General Partner shall not
be liable to any Partner or the Partnership for any failure to permit or require
a Partner to be excused from making all or a portion of any required Capital
Contribution pursuant to this Section 5.06(b).
(c) Any Capital Contribution as to which a Partner is excused shall
not reduce such Partner's Remaining Capital Commitment or otherwise affect such
Partner's obligation to make other Capital Contributions.
(d) If any Partner is excused or excluded from making all or a portion
of any required Capital Contribution pursuant to this Section 5.06, the General
Partner shall, subject to Section 5.01(a) use reasonable efforts to obtain
agreements from other Partners to increase their required Capital Contributions
so as to fund the amount that is excused and, if such agreement is obtained from
any such Partner, deliver an additional Drawdown Notice in accordance with
Section 5.02(c) to such Partner, setting forth the increased amount of such
Partner's required Capital Contribution.
Notwithstanding the foregoing, if the General Partner determines in
its discretion that time constraints or other factors make the procedure set
forth above impracticable or if the General Partner obtains agreements for only
a portion of the amount that is excused, the General Partner may, in its
discretion, take any or all of the following actions with respect to the amount
that remains to be funded:
(i) subject to Section 5.01(a), increase the required Capital
Contributions of Partners,
(ii) obtain the agreement of any other Person (which may, in the
discretion of the General Partner, include any existing Partner) to
make an investment outside the Partnership, and
(iii) after the other Partners have been offered such
opportunity, increase its own Capital Contribution.
(e) If the General Partner elects to take the action specified in
Section 5.06(d)(i) with respect to any portion of the amount that is excused,
the General Partner shall deliver an additional Drawdown Notice in accordance
with Section 5.02(c) to each Partner who is not an Excused Partner in respect of
the applicable Investment, and the required Capital Contribution of each such
Partner shall be increased by an amount calculated (without giving effect to any
Excused Partner in respect of the applicable Investment) with respect to the
amount that remains to be funded in accordance with Section 5.02(b).
(f) Any Excused Partner shall not have allocated to its Capital
Account or receive any distributions with respect to any income, profit or gain
arising with respect to any Partnership
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Investments for which such Partner was excused (and the other Partners shall
receive such distributions in accordance with Section 6.02(b) and any such
income, profit or gain shall be credited to the Capital Accounts of the other
Partners.
SECTION 5.07. Temporary Investment of Funds. Subject to a
determination by the General Partner in its discretion as to the amount of cash
required in connection with the conduct of the Partnership's business, the
General Partner shall invest in short-term money market or other comparable
investments all cash held by the Partnership, including all amounts being held
by the Partnership for future investment in Partnership Investments, payment of
Partnership Expenses or distribution to the Partners.
ARTICLE VI
DISTRIBUTIONS; CAPITAL ACCOUNTS; ALLOCATIONS
SECTION 6.01. Distributions Generally. Subject to the provisions of
Sections 5.05 and 5.06 and Article IX, distributions to the Partners shall be
made in accordance with this Article VI.
SECTION 6.02. Proceeds of Partnership Investments. (a) Generally.
Except as otherwise provided and as set forth in Section 6.11, any Proceeds
realized by the Partnership or any Parallel Investment Vehicle on any date in
respect of any Investment shall be distributed as follows:
(1) First, 100% to the Partners (including the General Partner) in
such amounts and in such proportions (i) so that all Partners (including the
General Partner) shall have cumulatively received distributions under this
Section 6.02(a)(1) in proportion to their respective Commitment Percentages and
(ii) until each Limited Partner has cumulatively received distributions under
this Section 6.02(a)(1) equal to the aggregate Capital Contributions made by
such Limited Partner, provided that (x) the General Partner shall not be
entitled to distributions under this Section 6.02(a)(1) to the extent such
distributions would exceed the sum of the General Partner's Capital
Contributions (less any distributions under Section 6.02(e)) plus any Special
Allocations previously made to the General Partner pursuant to Section 6.09(d),
and (y) if any Special Allocations are made to the General Partner after all
Limited Partners have cumulatively received distributions under this Section
6.02(a)(1) equal to their aggregate Capital Contributions, then the General
Partner shall receive 100% of distributions under this Section 6.02(a)(1) until
the General Partner has received cumulative distributions under this Section
6.02(a)(1) equal to the amount described in the foregoing clause (x);
(2) Second, 100% to the Partners (including the General Partner) pro
rata in accordance with their Commitment Percentages until each Limited Partner
has received an amount under this Section 6.02(a)(2) equal to a preferred return
on the aggregate unreturned Capital Contributions made by such Limited Partner
at a rate of 6% per annum, compounded annually, from the date the applicable
Capital Contribution was made (the amount resulting from application of such
interest factor, the "Preferred Return");
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(3) Third, 100% to the General Partner until the General Partner has
received an amount under this Section 6.02(a)(3)equal to 25% of the cumulative
amount distributed pursuant to Section 6.02(a)(2); and
(4) Thereafter, 80% pro rata to the Partners (including the General
Partner) in accordance with their Commitment Percentages and 20% to the General
Partner (such 20% portion distributed to the General Partner, together with the
amount distributed pursuant to Section 6.02(a)(3), being referred to as the
"Carried Interest"), provided that the General Partner may, in its sole
discretion, waive the applicability of the Carried Interest with respect to
certain Partners (e.g., Partners that are employees, agents or Affiliates of the
General Partner).
(b) Certain Adjustments. Notwithstanding the distribution provisions
set forth in Section 6.02(a):
(i) if, pursuant to Section 3.06 the General Partner has made
cash contributions to the Partnership, the amount of Proceeds
distributed to any Participating Partner pursuant to Section 6.02(a)
shall be reduced by such Participating Partner's Commitment Percentage
of the applicable Partnership Expenses (adjusted in accordance with
Section 5.02), net of any amounts previously deducted from
distributions to such Participating Partner with respect to such cash
contributions,
(ii) if any withholding or other tax is imposed with respect to
any Participating Partner's participation in a Partnership investment,
the amount of Proceeds distributed to such Participating Partner
pursuant to Section 6.02(a) shall be reduced by the amount of such
withholding or other tax,
(iii) if any Partner has committed a Default that has become an
Event of Default, any Proceeds in respect of any Partnership
Investment that would have been distributed to such Partner pursuant
to Section 6.02(a) but for the operation of Section 5.05(a)(ii) shall
be distributed to all the other Partners who are Participating
Partners with respect to such Partnership Investment (other than any
other Defaulting Partner) pro rata in accordance with their respective
Capital Commitments with respect to such Partnership Investment
(calculated without giving effect to the Capital Commitment of any
Defaulting Partner), and
(iii) if any Partner has been excused from an Investment, any
Proceeds in respect of any Partnership Investment that would have been
distributed to such Excused Partner pursuant to Section 6.02(a) but
for the operation of Section 5.06(f) shall be distributed to all the
other Partners who are Participating Partners with respect to such
Partnership Investment (other than any other Excused Partner) pro rata
in accordance with their respective Capital Commitments with respect
to such Partnership Investment (calculated without giving effect to
the Capital Commitment of any Excused Partner), and, for the avoidance
of doubt, once such excused Partner has received distributions under
Section 6.02(a)(1) in an amount equal to its Capital Contributions it
shall receive no further distributions under Section 6.02(a)(1) until
all Partners have received distributions in amounts equal to their
respective Capital Contributions.
Notwithstanding the foregoing, the adjustments contained in the foregoing
clauses (ii) and (iii) shall be deemed to have been distributed to the
applicable Partner for purposes of calculating
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distributions made pursuant to Section 6.02(a).
(c) Special Tax Distributions. Notwithstanding the distribution
provisions set forth in Section 6.02(a), if, for any taxable year of the
Partnership, any Partner (or, in the case of the Delaware Conduit, any Conduit
Partner) has an Excess Tax Liability, each Partner shall receive a distribution
("Special Tax Distribution") in proportion to such Partner's Commitment
Percentage. The amount of any Special Tax Distribution shall be computed by
reference to the Excess Tax Liability of the Partner with the greatest Excess
Tax Liability, and the amount of Proceeds thereafter distributable to any
Participating Partner pursuant to Section 6.02(a) shall be reduced by such
Participating Partner's Special Tax Distribution, net of any amounts previously
deducted with respect to such Special Tax Distribution from the proceeds
distributable to such Participating Partner; provided, however, that no Special
Tax Distribution shall be made to the extent it would require the General
Partner to call any portion of the Limited Partners' Capital Commitments to fund
such Special Tax Distribution.
For purposes of this Section 6.02(c), the following terms have the following
meanings:
"Effective Tax Rate" means the effective rate of tax on the Partner's
taxable income from the Partnership, which shall be determined by the General
Partner in its reasonable discretion; provided that in no event shall the
Effective Tax Rate be less than the highest effective tax rate for an individual
New York City resident for income with the character generated by the
Partnership.
"Excess Tax Liability" means, for any taxable year of the Partnership,
the excess of (i) the product of (x) the sum of the amount of any income, profit
or gain allocated to the applicable Partner pursuant to Section 6.09 (other than
Section 6.09(d)) for such year, (but minus cumulative net losses previously
allocated to such Partner) times (y) the Effective Tax Rate over (ii) the amount
of Proceeds distributed or paid to such Partner pursuant to Section 6.02(a) or
the corresponding terms of any Parallel Investment for such year.
(d) Clawback; Maintenance of Escrow Account. If, after all Partnership
Investments have been disposed of and after giving effect to all distributions
made in accordance with this Section 6.02 in respect of such Partnership
Investments, the aggregate amount of such distributions and payments with
respect to any Partner who is not a Defaulting Partner is less than the sum of
(A) the aggregate amount of all Capital Contributions made by such Partner, (B)
the aggregate amount of the Preferred Return on such Capital Contributions and
(C) the aggregate amount of the distributions under Section 6.02(a)(4) to which
such Partner is entitled, then the General Partner shall contribute to the
Partnership for distribution to such Partner an amount equal to the lesser of
(x) the aggregate amount of the deficiency and (y) the amount of Proceeds
previously distributed or paid to the General Partner with respect to its
Carried Interest pursuant to Sections 6.02(a)(3) and 6.02(a)(4) net of amounts
paid or accrued and payable in respect of taxes with respect to such Carried
Interest. The foregoing contribution shall be adjusted to take into account the
net tax benefit, if any, to the General Partner and its direct or indirect
members in making such contribution. OrbiMed Advisors LLC, an Affiliate of the
General Partner, shall guarantee the foregoing obligation of the General
Partner. In addition, an amount equal to 25% of all distributions of Carried
Interest to the General Partner shall be held
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in an escrow account for the contingent benefit of the Partnership in order to
secure the amounts (if any) payable by the General Partner to the Partnership
pursuant to this Section 6.02(d) (the "Escrow Account"). Following the Full
Investment Date amounts held in the Escrow Account shall equal the lesser of (i)
25% of all distributions of Carried Interest to the General Partner and (ii) the
aggregate Capital Contributions of the Limited Partners less all distributions
made to the Limited Partners (provided that such amount shall not be reduced
below zero) (the "Minimum Escrow Balance"). Amounts in excess of the Minimum
Escrow Balance shall be released to the General Partner. For purposes of this
Section 6.02(d), distributions pursuant to Section 9.04(a) shall be treated as
made pursuant to Sections 6.02(a)(3) and 6.02(a)(4) to the extent they would
have been so made if this Agreement did not contain the last sentence of Section
9.04(a).
(e) Special Distributions to General Partner with respect to
Overfunded Capital Commitments of the General Partner. If at any time the
General Partner has made any Additional GP Cash Contribution, the General
Partner shall thereafter be entitled to receive distributions ("Special
Distributions") equal, in the aggregate, to the aggregate amount of Additional
GP Cash Contributions, provided that the amount of any Special Distribution
shall not exceed the Unused Credit Amount at the time of such distribution.
Special Distributions shall be made out of (i) Capital Contributions made by
Limited Partners or (ii) notwithstanding the distribution provisions set forth
in Section 6.02(a), Proceeds that would otherwise have been distributed under
this Article VI to Limited Partners.
(f) Adjustments to Reflect Partners Bearing Management Fee.
Notwithstanding anything to the contrary contained in this Section 6.02, the
General Partner shall make equitable adjustments to the distribution provisions
set forth herein in order to take into account whether or not particular
Partners are responsible for payment of the Management Fee.
SECTION 6.03. Other General Principles of Distribution. (a)
Distributions of Cash. Subject to Section 6.11 and the remaining provisions of
this Section 6.03, cash Proceeds shall be distributed to the Partners in United
States dollars as promptly as practicable after receipt thereof.
(b) Distributions in Kind. Any securities or other property
constituting all or any portion of a Partnership Investment may be distributed
in kind at such time and in such amounts as the General Partner shall in its
discretion determine, and any such distribution shall be made to the
Participating Partners in respect of such Partnership Investment in accordance
with the amounts that would have been distributed in respect thereof had such
property been disposed of by the Partnership immediately prior to such
distribution at fair market value; provided that the General Partner shall only
distribute in kind property consisting of securities which are freely
transferable by the Participating Partners (it being understood that securities
saleable pursuant to Rule 144 of the Securities Act of 1933, as amended, shall
be deemed freely transferable) and for which market quotations are readily
available. The General Partner may, in its discretion, make in kind
distributions to a Participating Partner so requesting notwithstanding cash
distributions in respect of such Investment to the other Participating Partners.
In any distribution of property in kind (other than a distribution in kind
pursuant to the immediately preceding sentence), the General Partner shall not
discriminate among the Partners but shall in any such distribution (i)
distribute to the applicable Partners property of the same type, and (ii) if
cash and property in kind are to be distributed simultaneously in respect of any
Partnership Investment, distribute cash and property
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in kind in the same proportion to each such Partner. For purposes of allocations
pursuant to Section 6.09, property to be distributed in kind shall be valued by
the General Partner in good faith based on the most recent closing sales price
thereof at the close of business on the day of distribution if such property is
a security quoted on a national securities exchange or over-the-counter market;
provided that the General Partner shall not be required to distribute in kind
any security subject to a "lock-up" or other transfer restriction until such
transfer restriction has lapsed. In the event a question arises as to the
valuation methodology for a particular security the General Partner shall
consult with the Advisory Committee as an advisory resource with respect to such
valuation. If the Advisory Committee objects in writing (which objection must be
made within 15 business days of any notice of such valuation), and the General
Partner and the Advisory Committee are unable to agree upon a mutually
acceptable valuation within 30 days after such objection is made, the General
Partner shall (at the Partnership's expense) cause a nationally recognized
investment banking firm mutually acceptable to the General Partner and the
Advisory Committee to make a valuation, and such firm's determination of such
valuation shall be binding on all parties. Pending such determination, the
General Partner will hold back in the Partnership any amounts of non-marketable
securities distributable to the General Partner that may be required to be
returned depending upon the outcome of such valuation procedure.
If a Partner (i) is prohibited by applicable law or regulation from
holding directly the property to be distributed in kind or (ii) makes a written
request to the General Partner, the General Partner shall, in lieu of making
such distribution in kind to such Partner and to the extent permitted by
applicable law, use its reasonable best efforts to arrange for the sale of all
or a portion of such property as directed by such Partner on terms the General
Partner deems reasonable and, upon such sale, the General Partner shall promptly
distribute to such Partner the net proceeds of such sale; provided that such
Partner shall be deemed to have received such property otherwise distributed in
kind at the same time and at the same valuation as other Partners receiving such
distribution notwithstanding a subsequent decline in value of such property
prior to the distribution of the foregoing proceeds. The General Partner shall
be entitled to receive (i) reasonable compensation and reimbursement for
expenses out of the proceeds of such sale and (ii) a 20% carried interest in
respect of the excess (if any) of the proceeds of such sale over the value of
the property at the time of the deemed distribution thereof. In no event shall
the General Partner be liable with respect to any decline in value after the
date of distribution with respect to securities distributed in kind.
(c) Withholding of Certain Amounts. Notwithstanding anything else
contained in this Agreement, the General Partner may withhold in its discretion,
from any distribution of cash or property in kind to any Partner pursuant to
this Agreement, the following amounts:
(i) any amounts due from such Partner to the Partnership or the
General Partner pursuant to this Agreement to the extent not otherwise
paid; and
(ii) any amounts required (x) for the payment of any taxes that
the General Partner determines in good faith are attributable to such
Partner or (y) to pay or reimburse the General Partner for any
advances made by the General Partner for such purpose.
Any amounts withheld pursuant to this Section 6.03(c) shall be applied by the
General Partner to
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discharge the obligation in respect of which such amounts were withheld. All
amounts distributable to any Partner that are withheld pursuant to this Section
6.03(c) shall be treated as amounts distributed to such Partner.
(d) Amounts Held in Reserve. In addition to the rights set forth in
Section 6.03(c), the General Partner shall have the power, in its discretion, to
withhold amounts otherwise distributable to the Partners in order to maintain
the Partnership in a sound financial and cash position and to make such
provision as the General Partner in its discretion deems necessary or advisable
for any and all liabilities and obligations, contingent or otherwise, of the
Partnership (other than the obligation of the Partnership to make or pay for
Partnership Investments).
(e) Delaware Act. Notwithstanding anything in this Agreement to the
contrary, neither the Partnership nor the General Partner shall make any
distributions except to the extent permitted under the Delaware Act and other
applicable law.
SECTION 6.04. [Intentionally omitted.]
SECTION 6.05. Special Expense Distributions. If, pursuant to Section
3.06, the General Partner has made cash contributions to the Partnership in
respect of any Partnership Expenses, then, on any subsequent Drawdown Date on
which the General Partner requires the Partners to make Capital Contributions in
respect of such Partnership Expenses, the General Partner shall receive a
distribution ("Special Expense Distribution") in an amount equal to the amount
of such cash contributions made pursuant to Section 3.06. Each Special Expense
Distribution shall be funded by the Partners in accordance with Section 5.02(b).
SECTION 6.06. Loans and Withdrawal of Contributions. No Partner shall
be permitted to borrow, or to make an early withdrawal of, any portion of the
Capital Contributions made by it.
SECTION 6.07. Capital Accounts. There shall be established for each
Partner, on the books and records of the Partnership, an account (a "Capital
Account"), which shall initially be zero and which shall be adjusted as set
forth in Section 6.08. Except to the extent inconsistent with this Agreement,
the Capital Accounts shall be maintained consistently with the Treasury
Regulations issued under Code Section 704(b).
SECTION 6.08. Adjustments to Capital Accounts. The Capital Accounts of
the Partners shall be adjusted as follows:
(a) Cash Contributions. The amount of cash contributed to the
Partnership by any Partner (including pursuant to Article V) shall be credited
to the Capital Account of such Partner.
(b) Income, Profit or Gain. The amount of any income, profit or gain
allocated to any Partner in respect of Partnership Investments shall be credited
to the Capital Account of such Partner.
(c) Expense, Deduction or Loss. The amount of any expense (other than
any expense that should properly be included in the basis of any Partnership
asset), deduction or loss allocated to
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any Partner in respect of Partnership Investments or Partnership Expenses shall
be debited against the Capital Account of such Partner.
(d) Distributions. The amount of cash (or the fair market value of
other property as determined by the General Partner pursuant to Section 6.03(b))
distributed by the Partnership to any Partner shall be debited against the
Capital Account of such Partner.
(e) Adjustments upon Event of Default. Upon any Event of Default by
any Partner:
(i) An amount equal to 50% of the amount of such Partner's
Capital Account on the date of such Event of Default shall be:
(x) debited against such Partner's Capital Account; and
(y) credited to the Capital Accounts of all the other
Partners (other than any other Defaulting Partner) pro rata in accordance with
their respective Commitment Percentages (calculated without giving effect to the
Capital Commitment of any Defaulting Partner) at such time.
The amount to be debited or credited shall be allocated within any Partner's
Capital Account in a manner the General Partner determines in its discretion is
equitable.
(ii) Any income, profit or gain with respect to any Partnership
Investment that would have been allocated to the Capital Account of such Partner
but for the operation of Section 5.05(a)(ii) shall be credited to the Capital
Accounts of all the other Partners who are Participating Partners with respect
to such Partnership Investment (other than any other Defaulting Partner) pro
rata in accordance with their respective Capital Commitments with respect to
such Partnership Investment (calculated without giving effect to the Capital
Commitment of any Defaulting Partner).
SECTION 6.09. Allocations of Income, Gain, Loss, Deduction and Credit.
At the end of each year and at such other times as the General Partner
determines, items of income, gain, loss, deduction and credit of the Partnership
shall be allocated as follows:
(a) Allocation of Partnership Expenses. Subject to Section 3.04, any
Partnership Expense shall be allocated among all the Partners pro rata in
accordance with their respective Commitment Percentages. Notwithstanding the
foregoing,
(i) subject to clause (ii) below, any Partnership Expense
directly and solely attributable to one or more Partnership Investments
(including without limitation the Management Fee referred to in Section 5.03)
shall be allocated only to those Partners who are Participating Partners with
respect to such Investments, pro rata in accordance with such Partners'
respective Investment Percentages with respect to such Investments;
(ii) the General Partner may allocate any Partnership Expense and
the Management Fee on a basis other than Commitment Percentages
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and/or Investment Percentages and/or among certain (but not all) Partners if the
General Partner determines in its discretion that such allocation is clearly
more equitable; and
(iii) the General Partner may allocate the Management Fee among
the Limited Partners as provided for in Section 3.01(b).
(b) Investment Income Allocable to Certain Partners. Any gains
realized or other income earned in respect of any short-term investment of funds
made available by any Partner as a Partnership Capital Contribution (pending
application of such funds to make the applicable Partnership Investment or to
pay the applicable Partnership Expense) shall be allocated to such Partner.
(c) [Intentionally omitted.]
(d) Special Allocations to General Partner. Gross items of capital
gain realized with respect to Investments that would, but for this Section
6.09(d), have been allocated to the Limited Partners shall instead be allocated
to the General Partner on a cumulative basis up to the aggregate Credit Amount
(the "Special Allocation").
(e) Other. All other allocations of income, profit, gain, loss,
deduction and credit shall be allocated among the Partners in a manner such that
if (i) the Partnership were dissolved, its affairs wound up and its assets
distributed to the Partners pursuant to Section 9.04 and (ii) any Parallel
Investments and Parallel Investment Vehicles were disposed of and distributed in
accordance with the terms of such Parallel Investments, immediately after making
such allocation, such distributions would, as nearly as possible, be equal to
the distributions that would be made pursuant to Section 6.02. For purposes of
making allocations pursuant to this Section 6.09(e) prior to the dissolution of
the Partnership and the disposition of such Parallel Investments and Parallel
Investment Vehicles, the assets held by the Partnership and any Parallel
Investments shall be deemed to have a value equal to their tax basis (or book
value if different under the Code Section 704 rules).
SECTION 6.10. Tax Allocations. For federal, state and local income tax
purposes, each item of income, gain, loss, deduction and credit of the
Partnership shall be allocated among the Partners as nearly as possible in the
same manner as the corresponding item of income, expense, gain or loss is
allocated pursuant to the other provisions of this Article VI. It is intended
that the Capital Accounts will be maintained at all times in accordance with
Section 704 of the Code and applicable Treasury regulations thereunder, and that
the provisions hereof relating to the Capital Accounts be interpreted in a
manner consistent therewith. The General Partner shall be authorized to make
appropriate amendments to the allocations of items pursuant to this Article VI
if necessary in order to (i) comply with Section 704 of the Code or applicable
Treasury regulations thereunder; provided that no such change shall have an
adverse effect upon the amount distributable to any Partner hereunder or (ii)
satisfy the economic relationship among the Partners.
A Partner shall not be allocated items of loss or deduction to the
extent such an allocation would cause or increase a deficit Capital Account
balance for such Partner as of the close of any
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taxable year. In determining the Capital Account balance of a Partner for this
purpose, adjustments, allocations and distributions described in Treas. Reg.
Section 1.704-1(b)(2)(ii)(d)(4) through (6) shall be taken into account. Any
items of loss and deduction not allocated to a Partner under this paragraph
shall be allocated first, to the remaining Partners with positive Capital
Account balances (as adjusted in accordance with the preceding sentence) in
proportion to, and to the extent of, such positive Capital Account balances and
thereafter, as provided in applicable Treasury regulations. Notwithstanding
anything else contained in this Article VI, if any Partner has a deficit Capital
Account for any fiscal period as a result of any adjustment, allocation or
distribution of the type described in Treas. Reg. Section
1.704-l(b)(2)(ii)(d)(4) through (6) then the Partnership's income and gain will
be specially allocated to such Partner in an amount and manner sufficient to
eliminate such deficit as quickly as possible. Any special allocation of items
of income or gain pursuant to this paragraph shall be taken into account in
computing subsequent allocations pursuant to this Article VI so that the
cumulative net amount of all items allocated to each Partner shall, to the
extent possible, be equal to the amount that would have been allocated to such
Partner if there had never been any allocation pursuant to this paragraph.
SECTION 6.11 Reinvestment of Proceeds. (a) With respect to Proceeds
realized by the Partnership on any date prior to the Full Investment Date in
respect of any Partnership Investment disposed of within one year of such
investment the General Partner may (i) retain for reinvestment any such Proceeds
in an amount up to the cost basis of the original investment or (ii) distribute
such amounts as Remaining Capital Commitments subject to future Drawdowns at a
later date.
(b) The General Partner may, in its sole discretion, defer any
Distributions pursuant to Section 6.02 with respect to any lock-up or other
contractual restriction on transfer or such later time as the General Partner
may determine in connection with an initial public offering being consummated by
the portfolio company, the subject of which is the Partnership Investment.
ARTICLE VII
REPORTS TO PARTNERS
SECTION 7.01. Reports. (a) The books of account and records of the
Partnership shall be audited as of the end of each fiscal year by the
Partnership's independent public accountants. The Partnership's independent
public accountants shall be a nationally recognized independent public
accounting firm selected from time to time by the General Partner in its
discretion. All reports provided to the Partners pursuant to this Section 7.01
shall be prepared on the same basis as that followed by the Partnership for
purposes of filing the Partnership's United States federal income tax returns.
(b) Not later than 45 days after the end of each fiscal quarter (other
than the final fiscal quarter in any year) the General Partner shall prepare or
cause to be prepared, and shall mail or electronically transmit to each Partner,
a quarterly update on the Partnership's activities.
(c) As soon as practicable after the General Partner has received
final information from
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portfolio companies after the end of each fiscal year the General Partner shall
prepare or cause to be prepared, and shall mail to each Partner:
(i) an audited balance sheet of the Partnership as of the end of
such fiscal year;
(ii) an audited income statement of the Partnership for such
fiscal year;
(iii) a statement of the Partnership's capital for such fiscal
year;
(iv) a management report with respect to each Investment with
respect to which such Partner is a Participating Partner; and
(v) a valuation of each Investment with respect to which such
Partner is Participating Partner, determined in good faith by the
General Partner, which shall be based on, in the case of (A)
privately-held companies until such time as there is a liquidity event
in the form of an acquisition, merger, or significant asset sale, and
(B) publicly-held companies subject to a "lock up" agreement or other
contractual restrictions on transfer, the cost of such Investment or
such lesser value as determined by the General Partner in good faith
in its reasonable business judgment; provided, that, to the fullest
extent permitted by applicable law the General Partner shall not be
liable to the Partnership or the Partners with respect to the accuracy
of such valuation. The General Partner shall use reasonable efforts to
follow industry standard valuation guidelines after consultation with
the Advisory Committee.
(d) After the end of each fiscal year, the General Partner shall use
commercially reasonable efforts to cause to be prepared and transmitted within
120 days of the end of such fiscal year, but in any event as promptly as
possible, a United States federal income tax form K-l for each Partner, a copy
of the Partnership's return filed for United States federal income tax purposes
and a report setting forth in sufficient detail such transactions effected by
the Partnership during such fiscal year as shall enable each Partner to prepare
its United States federal income tax return, if any the General Partner shall
mail such materials to (i) each Partner and (ii) each former Partner (or its
successors, assigns, heirs or personal representatives) who may require such
information in preparing its United States federal income tax return.
SECTION 7.02. Audit. If at any time during the term of the Partnership
either (i) three members of the Advisory Committee or (ii) the Required
Partners, in either case after consultation with the General Partner, desire
that an audit or other review of the Partnership, the QP Fund, any Parallel
Investment Vehicles and/or Direct Investments and their activities be conducted
by an independent accounting firm other than the Partnership's regular auditors,
then by written notice to the General Partner such parties shall have the
one-time right to require such audit or review to be conducted at the expense of
the Partnership.
ARTICLE VIII
EXCULPATION AND INDEMNIFICATION
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SECTION 8.01. Exculpation and Indemnification. (a) No Indemnified
Person shall be liable to the Partnership or to the Partners for any losses,
claims, damages or liabilities arising from, related to or in connection with
this Agreement or the Partnership's business or affairs (including any act or
omission by any Indemnified Person and any activity of the type or character
disclosed in the Offering Memorandum under the captions "Potential Conflicts of
Interest", "Risk Factors", or elsewhere therein (such disclosure being
incorporated herein by reference), except for any losses, claims, damages or
liabilities determined by final judgment of a court of competent jurisdiction to
have been primarily attributable to such Indemnified Person's fraud, gross
negligence, willful misconduct, bad faith or willful breach of this Agreement.
(b) To the extent that, at law or in equity, any Indemnified Person
has duties (including fiduciary duties) and liabilities relating thereto to the
Partnership or to any Partner, the General Partner and any other Indemnified
Person acting in connection with the Partnership's affairs shall not be liable
to the Partnership or to any Partner for its good faith reliance on the
provisions of this Agreement. The provisions of this Agreement, to the extent
that they restrict the duties and liabilities of any Indemnified Person
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Indemnified Person.
(c) Notwithstanding any provisions of law or in equity to the
contrary, to the fullest extent permitted by applicable law, whenever in this
Agreement the General Partner is permitted or required to make a decision (i) in
its "discretion," or under a grant of similar authority or latitude, the General
Partner shall be entitled to consider only such interests and factors as it
desires and, provided that it acts in good faith, shall have no duty or
obligation to give any consideration to any interest of or factors affecting the
Partnership or any Partner or (ii) in its "good faith," or under another express
standard, the General Partner shall act under such express standard and shall
not be subject to any other or different standards imposed by this Agreement, or
any other agreement contemplated herein.
(d) The Partnership shall, to the fullest extent permitted by
applicable law, indemnify and hold harmless each Indemnified Person against any
losses, claims, damages or liabilities to which such Indemnified Person may
become subject in connection with any matter arising from, related to or in
connection with this Agreement or such of the Partnership's business or affairs
as are related to or in connection with this Agreement, except for such losses,
claims damages or liabilities that are determined by the judgment of a court of
competent jurisdiction to have been primarily attributable to (x) other than any
member of the Advisory Committee in such Person's capacity as a member thereof,
such Indemnified Person's fraud, gross negligence, willful misconduct, bad faith
or willful breach of this Agreement or (y) in the case of a member of the
Advisory Committee in such Person's capacity as a member thereof, such
Indemnified Person's bad faith; provided that if the foregoing judgment of a
court of competent jurisdiction is subsequently reversed on appeal or otherwise,
then the Indemnified Party's right to the indemnification provided hereunder
shall be reinstated. If any Indemnified Person becomes involved in any capacity
in any action, proceeding or investigation in connection with any matter arising
from related to, or in connection with, this Agreement or such of the
Partnership's business or affairs as are related to or in connection with this
Agreement, whether or not pending or threatened and whether or not any
Indemnified Person is a party thereto, the Partnership will periodically
reimburse such Indemnified Person for its legal and other expenses (including
the cost of any investigation and preparation) incurred in connection therewith;
provided that (x) the
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Partnership shall not advance amounts with respect to legal fees and expenses in
the event such Indemnified Person is the subject of an action brought by Limited
Partners holding a majority of the Capital Commitments and (y) such Indemnified
Person shall promptly repay to the Partnership the amount of any such reimbursed
expenses paid to it to the extent that it shall ultimately be determined that
such Indemnified Person is not entitled to be indemnified by the Partnership in
connection with such action, proceeding or investigation as provided in the
exception contained in the immediately preceding sentence. If for any reason
(other than the gross negligence or willful misconduct of such Indemnified
Person) the foregoing indemnification is unavailable to such Indemnified Person,
or insufficient to hold it harmless, then the Partnership shall contribute to
the amount paid or payable by such Indemnified Person as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative benefits received by the Partnership on the one hand and such
Indemnified Person on the other hand or, if such allocation is not permitted by
applicable law, to reflect not only the relative benefits referred to above but
also any other relevant equitable considerations. Notwithstanding the provisions
of this Section 8.01(d), no Indemnified Person shall be entitled to
indemnification with respect to any matter which constitutes an Internal Dispute
(as defined in the immediately succeeding sentence). For purposes of this
Section 8.01(d), "Internal Dispute" means any proceeding in which both: (i) one
or more officers, directors, managers or employees of the General Partner or the
Partnership are suing one or more other officers, directors, managers or
employees of the General Partner or the Partnership; and (ii) neither the
Partnership, nor the General Partner, nor any Limited Partner, nor any issuer
with respect to a Partnership Investment nor any Affiliate or associate of any
of the foregoing is a plaintiff, defendant, or other participant in such
proceeding.
(e) Each Partner covenants for itself and its successors, assigns,
heirs and personal representatives that such Partner will, at any time prior to
or after dissolution of the Partnership on demand, whether before or after such
Partner's withdrawal from the Partnership (within the meaning of the Delaware
Act), pay to the Partnership or the General Partner any amount which the
Partnership or the General Partner, as the case may be, pays in respect of taxes
(including without limitation withholding taxes, interest, penalties and any
additions to tax) imposed upon income of or distributions to such Partner.
(f) Notwithstanding anything else contained in this Agreement, the
reimbursement, indemnity and contribution obligations of the Partnership under
Section 8.01 (d) and any comparable indemnities under Parallel Investment
Vehicles or agreements relating to Direct Investments shall:
(i) be in addition to any liability that the Partnership and any
such Parallel Investment Vehicle and Direct Investment may otherwise
have;
(ii) extend upon the same terms and conditions to the directors,
officers. stockholders, partners, employees, agents and
representatives of each Indemnified Person;
(iii) be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of each Indemnified Person
and any such Persons; and
(iv) at any time be limited to (A) the assets of the Partnership
and applicable Parallel Investment Vehicles and Direct Investments at
such time and the amount of the
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Partners' aggregate Remaining Capital Commitments at such time or, (B)
following dissolution of the Partnership with respect to any Limited
Partner, the lesser of (x) the aggregate amount of distributions
received by such Limited Partner and (y) an amount equal to 30% of
such Limited Partner's Capital Commitment.
(g) The foregoing provisions of this Section 8.01 shall survive for a
period of two years (other than Section 8.01(e), which shall survive for a
period of five years) from the date of dissolution of the Partnership; provided
that if at the end of such period, there are any actions, proceedings or
investigations then pending, the General Partner shall so notify the Partners at
such time (which notice shall include a brief description of each such action,
proceeding or investigation and of the liabilities asserted therein) and the
foregoing provisions of this Section 8.01 shall survive with respect to each
such action, proceeding or investigation set forth in such notice (or any
related action, proceeding or investigation based upon the same or a similar
claim) until such date that such action, proceeding or investigation is
ultimately resolved; and provided further that the provisions of this Section
8.01 shall not affect the obligations of the Limited Partners under Section
17-607 of the Delaware Act.
(h) The Partners acknowledge and agree that the terms of each Parallel
Investment shall include provisions applicable to such Parallel Investment
substantially identical to the provisions of this Section 8.01 and Section 8.02;
provided that the limitations set forth in Section 8.01(f)(iv)(B) shall be
applied in the aggregate with any comparable limitations of the applicable
Partner's liability with respect to indemnities under Parallel Investment
Vehicles or agreements relating to Direct Investments.
SECTION 8.02. Exclusive Jurisdiction. To the fullest extent permitted
by applicable law, each Partner hereby agrees that any claim, action, or
proceeding by any Partner seeking any relief whatsoever against any Indemnified
Person based on, arising out of, or in connection with, this Agreement or the
Partnership's affairs shall be brought only in the Court of Chancery sitting in
the State of Delaware, or if no such court has jurisdiction over the applicable
claim, the appropriate Federal court located in such location, and not in any
other State or Federal court in the United States of America or any court in any
other country. Each Partner acknowledges that, in the event of any breach of
this provision, the Indemnified Persons have no adequate remedy at law and shall
be entitled to injunctive relief to enforce the terms of this Section 8.02.
ARTICLE IX
DURATION AND DISSOLUTION OF THE PARTNERSHIP
SECTION 9.01. Duration. The term of the Partnership shall continue
until the tenth anniversary of the Final Closing Date, unless the Partnership is
sooner dissolved pursuant to Section 9.02; provided, however, that, unless the
Partnership is sooner dissolved pursuant to Section 9.02, (i) the General
Partner may in its sole discretion extend the term of the Partnership for up to
two additional one-year periods and (ii) thereafter the General Partner may,
with the consent of Limited Partners and Base Fund Partners representing 66 2/3%
of, collectively, the aggregate Capital Commitments of all Limited Partners and
the aggregate capital commitments of all Base Fund Partners (other than
Defaulting Partners and defaulting Base Fund Partners), at
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their option extend the term of the Partnership for two additional one year
periods. Notwithstanding the expiration of the term of the Partnership, the
Partnership shall continue in existence as a separate legal entity until
cancellation of the certificate of limited partnership in accordance with the
Delaware Act.
SECTION 9.02. Dissolution. Subject to the Delaware Act, the
Partnership shall be dissolved and its affairs shall be wound up upon the
earliest of:
(a) the expiration of the term of the Partnership provided in Section
9.01;
(b) the vote or written consent of the Required Partners;
(c) the affirmative vote of the Required Partners to remove the
General Partner as a result of the occurrence of a Triggering Event with respect
to the General Partner or the Management Company unless at the time there is at
least one other General Partner (with respect to which there shall have been no
such vote) that is hereby authorized to, and does carry on the business of the
Partnership; provided that the Partnership shall not be dissolved and shall not
be required to be wound up by reason of the occurrence of such vote if, within
90 days after such vote, the Required Partners agree in writing to continue the
business of the Partnership and to the appointment, effective as of the date of
such removal, of one or more additional general partners if necessary or
desired;
(d) a decision made by the General Partner to dissolve the Partnership
because the General Partner has determined in good faith that (i) changes in any
applicable law or regulation would have a material adverse effect on the
continuation of the Partnership or (ii) such action is necessary or desirable in
order for the Partnership not to be in material violation of the Investment
Company Act or ERISA, for the General Partner not to be in material violation of
the Advisers Act;
(e) an event of withdrawal of the General Partner (within the meaning
of the Delaware Act) unless (i) at the time there is at least one remaining
General Partner and such General Partner shall agree to continue the business of
the Partnership or (ii) if within 90 days after the event of withdrawal, the
Required Partners agree in writing to continue the business of the Partnership
and to the appointment, effective as of the date of the event of withdrawal, of
a new General Partner;
(f) any time at which (i) all Partnership Investments have been
disposed of and (ii) the aggregate Remaining Capital Commitments of all Partners
is zero;
(g) at any time at which there are no limited partners of the
Partnership, unless the business of the Partnership is continued in accordance
with the Delaware Act; and
(h) the entry of a decree of judicial dissolution under Section 17-802
of the Delaware Act. The General Partner shall notify the Limited Partners
promptly following its knowledge of the occurrence of a Key Person Event or a
Triggering Event with respect to any of Samuel D. Isaly, Michael B. Sheffery,
Carl Gordon or Sven Borho, the General Partner or the Management
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Company.
SECTION 9.03. Liquidation of Partnership. Upon dissolution, the
Partnership's business shall be liquidated in an orderly manner. The General
Partner shall be the liquidator to wind up the affairs of the Partnership
pursuant to this Agreement. If there shall be no General Partner, the Partners,
upon the approval of the Required Partners, may approve one or more liquidators
to act as the liquidator in carrying out such liquidation. In performing its
duties, the liquidator is authorized to sell, distribute, exchange or otherwise
dispose of the assets of the Partnership in accordance with the Delaware Act and
in any reasonable manner that the liquidator shall determine to be in the best
interest of the Partners.
SECTION 9.04. Distribution Upon Dissolution of the Partnership. (a)
Upon dissolution of the Partnership, the liquidator winding up the affairs of
the Partnership shall determine in good faith which assets of the Partnership
shall be sold and which assets of the Partnership shall be retained for
distribution in kind to the Partners. Assets to be distributed in kind shall be
valued by the liquidator in good faith. Subject to the Delaware Act, after all
liabilities of the Partnership have been satisfied or duly provided for, the
remaining assets of the Partnership shall be distributed to the Partners in
accordance with their respective Capital Account balances.
(b) In the discretion of the liquidator, and subject to the Delaware
Act, liabilities of the Partnership may be provided for pursuant to this Section
9.04 in any manner, including:
(i) distribution of the assets of the Partnership to a trust
established for the benefit of the Partners for purposes of
liquidating such Partnership assets, collecting amounts owed to the
Partnership, and paying any liabilities or obligations of the
Partnership or the General Partner arising out of, or in connection
with, this Agreement or the Partnership's affairs; or
(ii) withholding of distributions to the Partners to provide a
reserve for the payment of future Partnership Expenses and other
liabilities of the Partnership contingent or otherwise; provided that
such withheld amounts shall be distributed to the Partners as soon as
the liquidator determines, in its discretion, that it is no longer
necessary to retain such amounts.
The assets of any trust established in connection with clause (i) above shall be
distributed to the Partners from time to time, in the discretion of the
liquidator, in the same proportions as the amount distributed to such trust by
the Partnership would otherwise have been distributed to the Partners pursuant
to this Agreement.
SECTION 9.05. Withdrawal, Death or Incompetency of a Limited Partner.
Except as otherwise provided in Article XI, a Limited Partner may not withdraw
from the Partnership prior to its termination. Upon the death or incompetency of
an individual Limited Partner, such Limited Partner's executor, administrator,
guardian, conservator or other legal representative may exercise all of such
Limited Partner's rights for the purpose of settling such Limited Partner's
estate or administering such Limited Partner's property, except that the General
Partner may reduce or cancel such Limited Partner's obligation to make future
Capital Contributions on such terms as the General Partner determines in its
discretion. Except as expressly provided in this Agreement, no other event
affecting a Limited Partner (including bankruptcy or insolvency)
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shall, in and of itself, affect its obligations under this Agreement or cause
the dissolution of the Partnership.
ARTICLE X
TRANSFERABILITY OF GENERAL PARTNER'S INTEREST
SECTION 10.01. Transferability of General Partner's Interest. The
General Partner may not sell, exchange, transfer, assign, pledge, hypothecate or
otherwise dispose of all or any portion of its interest in the Partnership (any
such sale, exchange, transfer, assignment, pledge, hypothecation or other
disposition being herein collectively called "Transfers") to any Person other
than an Affiliate controlled, directly or indirectly, by the current direct or
indirect members of the General Partner. If the General Partner so determines in
good faith, and to the extent permitted by the preceding sentence, the General
Partner may admit any Person to whom the General Partner proposes to make such a
Transfer as an additional or, if the General Partner transfers all of its
interest, a substitute General Partner of the Partnership, and such transferee
shall be deemed admitted to the Partnership as General Partner of the
Partnership immediately prior to such Transfer and shall continue the business
of the Partnership without dissolution.
Except as otherwise provided in this Section 10.01, the General
Partner may not withdraw or be removed from the Partnership prior to its
dissolution.
SECTION 10.02. Advisers Act. Notwithstanding the foregoing provisions
of this Article X, the General Partner shall not assign any of its rights or
duties hereunder except with such approval of the Partners as is required under
the Advisers Act.
ARTICLE XI
TRANSFERABILITY OF A LIMITED PARTNER'S INTEREST
SECTION 11.01. Restrictions on Transfer and Withdrawals. (a) No direct
or indirect Transfer of all or any part of a Limited Partner's interest in the
Partnership may be made without the prior written consent of the General Partner
(which may, in the General Partner's sole discretion, be granted on such terms
as the General Partner determines or withheld). If the General Partner consents
to any direct or indirect Transfer, such Limited Partner shall be free to make
such Transfer within 120 days after notice of such consent. The General Partner
shall be authorized pursuant to this Section 11.01 to consent to the direct or
indirect Transfer of a Limited Partner's interest in the Partnership to any
Person, including without limitation the General Partner or any of its
Affiliates. In addition, a Limited Partner may not withdraw any of its Interest
in the Partnership except in limited circumstances when required by the General
Partner in its discretion to comply with applicable law or otherwise to ensure
that no adverse tax, regulatory or other consequences to the Partnership, the
General Partner or any of the Limited Partners will arise from the continued
investment by such Limited Partner.
(b) The foregoing provisions of this Section 11.01 shall not apply to
any direct or indirect Transfer which shall occur by operation of law.
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SECTION 11.02. Expenses of Transfer: Indemnification. All expenses,
including attorneys' fees and expenses, incurred by the General Partner or the
Partnership in connection with any direct or indirect Transfer shall be borne by
the transferring Limited Partner or such Limited Partner's transferee (any such
transferee, when admitted as a limited partner of the Partnership and shown as
such on the books and records of the Partnership, being hereinafter called a
"Substituted Partner"). In addition the transferring Limited Partner or such
transferee shall indemnify the Partnership and the General Partner in a manner
satisfactory to the General Partner against any losses, claims, damages or
liabilities to which the Partnership, the General Partner or any Affiliate of
the General Partner may become subject arising out of or based upon any false
representation or warranty made by or breach or failure to comply with any
covenant or agreement of, such transferring Limited Partner or such transferee
in connection with such Transfer.
SECTION 11.03. Recognition of Transfer; Substituted Partners. (a) The
Partnership shall not (subject to Section 9.05) recognize for any purpose any
purported direct or indirect Transfer of all or any part of a Limited Partner's
Interest in the Partnership and no purchaser, assignee, transferee or other
recipient of all or any part of such interest shall become a Substituted Partner
hereunder unless:
(i) the provisions of Section 11.01 and, in the case of a
Substituted Partner, Section 11.03(b) shall have been complied with;
(ii) the General Partner shall have been furnished with the
documents effecting such Transfer, in form reasonably satisfactory to
the General Partner executed and acknowledged by both the seller,
assignor or transferor and the purchaser, assignee, transferee or
other recipient;
(iii) such purchaser, assignee, transferee or other recipient
shall have represented that such Transfer was made in accordance with
all applicable laws and regulations;
(iv) all necessary governmental consents shall have been obtained
in respect of such Transfer;
(v) all necessary instruments reflecting such admission shall
have been filed in each jurisdiction in which such filing is necessary
in order to qualify the Partnership to conduct business or to preserve
the limited liability of the Limited Partners; and
(vi) the General Partner shall have determined that such Transfer
will not result in the Partnership being treated as publicly traded
partnership as defined in Section 7704(b) of the Code.
(b) Each Substituted Partner, as a condition to its admission as a
Limited Partner, shall execute and acknowledge such instruments (including a
counterpart of this Agreement), in form and substance satisfactory to the
General Partner, as the General Partner reasonably deems necessary or desirable
to effectuate such admission and to confirm the agreement of such
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Substituted Partner to be bound by all the terms and provisions of this
Agreement with respect to the interest in the Partnership acquired by such
Substituted Partner. A Substituted Partner shall be deemed admitted to the
Partnership upon its execution of a counterpart signature page to this
Agreement. The admission of a Substituted Partner shall not require the approval
of any Limited Partner. As promptly as practicable after the admission of a
Substituted Partner, the books and records of the Partnership shall be changed
to reflect such admission.
SECTION 11.04. Transfers During a Fiscal Year. If any direct or
indirect Transfer (other than a pledge or hypothecation) of a Limited Partner's
interest in the Partnership shall occur at any time other than the end of the
Partnership's fiscal year, the distributive shares of the various items of
Partnership income, gain, loss, and expense as computed for tax purposes and the
related cash distributions shall be allocated between the transferor and the
transferee on a basis consistent with applicable requirements under Section 706
of the Code; provided that no allocation agreed to between the transferor and
the transferee shall be effective unless (i) the transferor and the transferee
shall have given the Partnership written notice, prior to the effective date of
such Transfer, stating their agreement that such allocation shall be made on a
certain basis consistent with the applicable requirements under Section 706 of
the Code, (ii) the General Partner shall have consented to such allocation and
(iii) the transferor and the transferee shall have agreed to reimburse the
General Partner for any incremental accounting fees and other expenses incurred
by the General Partner in making such allocation.
SECTION 11.05. No Secondary Market. In no event shall the Partnership
participate in the establishment of a secondary market or the substantial
equivalent thereof as defined in Treasury Regulations Section 1.7704-1(c), or in
the inclusion of its interests on such a market or on an established securities
market as defined in Treasury Regulations Section 1.7704-1(b), nor shall the
Partnership recognize any transfers made on any of the foregoing markets by
admitting the purported transferee as a Limited Partner or otherwise recognizing
the rights or such transferee.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Amendments to the Partnership Agreement. (a) Except as
otherwise provided in Section 12.01(b), this Agreement may be amended by the
General Partner with the approval of the Required Partners; provided that no
amendment of this Agreement shall:
(i) without the approval of all the Limited Partners (other than
any Defaulting Partners), amend Section 5.03, Article VIII, Section
9.01 or this Section 12.01 (a);
(ii) without the approval of the affected Limited Partner, (w)
adversely modify or affect the limited liability of such Limited
Partner, (x) change the interest of such Limited Partner in any
existing Investment (other than as provided in this Agreement), (y)
change the Capital Commitment of such Limited Partner (other than as
provided in this Agreement) or (z) change the method of distributions
or allocations made under Article VI to such Limited Partner;
B-59
(iii) without the approval of all ERISA Partners, amend Sections
3.05 or 3.14 or, with respect to ERISA-related provisions, 5.06(b); or
(iv) without the approval of, collectively, Partners having
Capital Commitments and Base Fund Partners having capital commitments
representing the percentage of the collective Capital Commitments and
Base Fund capital commitments specified in any provision of this
Agreement required for any action or approval of the Partners and Base
Fund Partners, amend such provision.
(b) This Agreement may be amended by the General Partner without the
approval of any Limited Partner to (i) change the name of the Partnership, (ii)
correct typographical errors or to eliminate ambiguities or (iii) to make any
other change that would not, as determined by the General Partner in good faith,
be adverse to any Limited Partner. No such amendment pursuant to clause (iii)
shall be deemed effective until notice and a copy of such amendment (which shall
be provided at least 5 days prior to the effectiveness of such amendment) has
been provided to the Limited Partner.
(c) Notwithstanding the provisions of this Agreement, including
without limitation Sections 12.01(a) and (b), or of any subscription agreement,
it is hereby acknowledged and agreed that the General Partner on its own behalf
or on behalf of the Partnership without the approval of any Limited Partner or
any other Person may enter into a side letter or similar agreement to or with a
Limited Partner which has the effect of establishing rights under, or altering
or supplementing the terms of, this Agreement or of any subscription agreement.
The parties hereto agree that any terms contained in a side letter or similar
agreement to or with a Limited Partner shall govern with respect to such Limited
Partner notwithstanding the provisions of this Agreement or of any subscription
agreement.
SECTION 12.02. Approvals. Each Partner agrees that, except as
otherwise specifically provided herein and to the extent permitted by applicable
law, for purposes of granting the approval of the Partners with respect to any
proposed action of the Partnership, the General Partner or any of its Affiliates
(including any such approval required under the Advisers Act), the written
approval of the Required Partners shall bind the Partnership and each Partner
and shall have the same legal effect as the written approval of each Partner.
The General Partner may request the written approval of the Required Partners to
approve any matter required to be so approved by the Advisers Act.
SECTION 12.03. Investment Representation. Except as otherwise agreed
between the General Partner and any Limited Partner, each Limited Partner, by
executing this Agreement, represents and warrants that it is an "accredited
investor" within the meaning of Rule 501 of Regulation D under the Securities
Act of 1933, as amended, that it and each Conduit Partner is a "qualified
purchaser" within the meaning of the Investment Company Act, that its interest
in the Partnership has been acquired by it for its own account, or for the
account of a commingled pension trust or other institutional investor previously
specified in writing to the Partnership with respect to whom it has full
investment discretion, for investment and not with a view to resale or
distribution thereof and that it is fully aware that in agreeing to admit it as
a Limited Partner, the
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General Partner and the Partnership are relying upon the truth and accuracy of
this representation and warranty.
SECTION 12.04. Successors; Counterpart; Entire Agreement. This
Agreement (i) shall be binding as to the executors, administrators, estates,
heirs and legal successors of the Partners, (ii) may be executed in several
counterparts with the same effect as if the parties executing the several
counterparts had all executed one counterpart and (iii) shall constitute the
entire agreement and understanding among all the parties hereto with respect to
the subject matter hereof.
SECTION 12.05. Choice of Law. Notwithstanding the place where this
Agreement may be executed by any of the parties hereto, the parties expressly
agree that all the terms and provisions hereof shall be construed under the laws
of the State of Delaware.
SECTION 12.06. Notices. Each notice relating to this Agreement shall
be in writing and delivered in person or by registered or certified mail, or by
telecopier confirmed electronically and by registered or certified mail. All
notices to the Partnership shall be addressed to its principal office, place of
business and the office of such entities retained by the General Partner to
provide administrative services to the Partnership. All notices addressed to a
Partner shall be addressed to such Partner at the address set forth in the
Schedule attached hereto. Any Partner may designate a new address by notice to
that effect given to the Partnership. Unless otherwise specifically provided in
this Agreement, a notice shall be deemed to have been effectively given when
mailed by registered or certified mail to the proper address or delivered in
person.
SECTION 12.07. Headings. The titles of the Articles and the headings
of the Sections of this Agreement are for convenience of reference only, and are
not to be considered in construing the terms and provisions of this Agreement.
SECTION 12.08. Agreement Binding Upon Successors and Assigns. Except as herein
otherwise specified, this Agreement shall inure to the benefit of and shall be
binding upon the heirs, executors, administrators or other representatives,
successors and assigns of the respective parties hereto.
SECTION 12.09. Counterparts. This Agreement may be executed in
counterparts and all such counterparts, taken together, shall constitute valid
signatures with respect to this Agreement.
[SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the undersigned have hereto set their hands as of the day
and year first above written.
ORBIMED CAPITAL II LLC, as General Partner
By____________________________________
Name:
Title:
LIMITED PARTNER
____________________________________
By__________________________________
Name:
Title:
C-1 Exhibit C
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of October 11, 2000 between PW JUNIPER CROSSOVER
FUND, L.L.C., a Delaware limited liability company (the "Fund"), and PW Juniper
management, l.l.c. (the "Adviser"), a Delaware limited liability company
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended.
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a closed-end management investment company
and desires to retain the Adviser as investment adviser to furnish certain
investment advisory and portfolio management services to the Fund, and the
Adviser is willing to furnish these services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints the Adviser as investment adviser of
the Fund for the period and on the terms set forth in this Agreement. The
Adviser accepts this appointment and agrees to render the services herein set
forth, for the compensation herein described.
2. DUTIES AS INVESTMENT ADVISER.
(a) Subject to the supervision of the Fund's Board of Directors (the
"Board"), the Adviser will have full discretion and authority (i) to manage the
assets and liabilities of the Fund and (ii) to manage the day-to-day business
and affairs of the Fund. In furtherance of and subject to the foregoing, the
Adviser will have full power and authority on behalf of the Fund, among other
matters:
(1) to purchase, sell, exchange, trade and otherwise deal in and with
securities and other property of the Fund and to loan securities of the Fund;
(2) to open, maintain and close accounts with brokers and dealers, to make
all decisions relating to the manner, method and timing of securities and other
investment transactions, to select and place orders with brokers, dealers or
other financial intermediaries for the execution, clearance or settlement of any
transactions on behalf of the Fund on such terms as the Adviser considers
appropriate, and to grant limited discretionary authorization to such persons
with respect to price, time and other terms of investment and trading
transactions, subject to Paragraph 2(b);
(3) to borrow from banks or other financial institutions and to pledge Fund
assets as collateral therefor, to trade on margin, to exercise or refrain from
exercising all rights regarding the Fund's investments, and to instruct
custodians regarding the settlement of transactions, the disbursement of
payments to the Fund's investors (the "Members") with respect to repurchases of
interests in the Fund ("Interests") and the payment of Fund expenses, including
those relating to the organization and registration of the Fund;
(4) to call and conduct meetings of Members at the Fund's principal office
or elsewhere as it may determine and to assist the Board in calling and
conducting meetings of the Board;
(5) to engage and terminate such attorneys, accountants and other
professional advisers and consultants as the Adviser may deem necessary or
advisable in connection with the affairs of the Fund or as may be directed by
the Board;
(6) to engage and terminate the services of persons to assist the Adviser
in providing, or to provide under the Adviser's control and supervision, advice
and management to the Fund at the expense of the Adviser and to terminate such
services;
(7) as directed by the Board, to commence, defend and conclude any action,
suit, investigation or other proceeding that pertains to the Fund or any assets
of the Fund;
(8) if directed by the Board, to arrange for the purchase of (A) one or
more "key man" insurance policies on the life of any principal of a member of
the Adviser, the benefits of which are payable to the Fund, or (B) any insurance
covering the potential liabilities of the Fund or relating to the performance of
the Board or the Adviser, or any of their principals, directors, officers,
members, employees and agents; and
(9) to execute, deliver and perform such contracts, agreements and other
undertakings, and to engage in such activities and transactions as are, in the
opinion of the Adviser, necessary and appropriate for the conduct of the
business of the Fund without the act, vote or approval of any other Members or
person.
(b) The Adviser, in its discretion, may use brokers who provide the Fund
with research, analysis, advice and similar services to execute portfolio
transactions on behalf of the Fund, and the Adviser may pay to those brokers in
return for brokerage and research services a higher commission than may be
charged by other brokers, subject to the Adviser's good faith determination that
such commission is reasonable in terms either of the particular transaction or
of the overall responsibility of the Adviser to the Fund and its other clients
and that the total commissions paid by the Fund will be reasonable in relation
to the benefits to the Fund over the long term. Whenever the Adviser
simultaneously places orders to purchase or sell the same security on behalf of
the Fund and one or more other accounts advised by the Adviser, such orders will
be allocated as to price and amount among all such accounts in a manner believed
to be equitable to each account. The Fund recognizes that in some cases this
procedure may adversely affect the results obtained for the Fund.
(c) The Fund hereby authorizes the Adviser and any entity or person
associated with the Adviser which is a member of a national securities exchange
to effect any transaction on such exchange for the account of the Fund, which
transaction is permitted by Section 11(a) of the Securities Exchange Act of
1934, as amended, and the Fund hereby consents to the retention of compensation
by the Adviser or any person or entity associated with the Adviser.
3. SERVICES NOT EXCLUSIVE. The services furnished by the Adviser hereunder are
not to be deemed exclusive and the Adviser shall be free to furnish similar
services to others. Nothing in this Agreement shall limit or restrict the right
of any director, officer or employee of
the Adviser or its affiliates, who also may be a Director, officer or employee
of the Fund, to engage in any other business or to devote his or her time and
attention in part to the management or other aspects of any other business,
whether of a similar or dissimilar nature.
4. EXPENSES.
(a) During the term of this Agreement, the Fund will bear all expenses
incurred in the business of the Fund other than those not specifically assumed
by the Adviser. Expenses to be borne by the Fund will include, but are not
limited to, the following:
(1) all costs and expenses directly related to portfolio transactions and
positions for the Fund's account, including, but not limited to, brokerage
commissions, research fees, interest and commitment fees on loans and debit
balances, borrowing charges on securities sold short, dividends on securities
sold short but not yet purchased, custodial fees, shareholder servicing fees,
margin fees, transfer taxes and premiums and taxes withheld on foreign
dividends;
(2) all costs and expenses associated with the organization and
registration of the Fund, certain offering costs and the costs of compliance
with any applicable Federal or state laws;
(3) the costs and expenses of holding any meetings of any Members that are
regularly scheduled, permitted or required to be held under the terms of the
Fund's Limited Liability Company Agreement (the "LLC Agreement"), the 1940 Act
or other applicable law;
(4) the fees and disbursements of any attorneys, accountants, auditors and
other consultants and professionals engaged on behalf of the Fund, including all
travel-related expenses and other costs associated with due diligence performed,
in connection with the analysis, purchase and sale of companies whose private
securities may be purchased by the Fund;
(5) the fees of custodians and other persons providing administrative
services to the Fund;
(6) the costs of a fidelity bond and any liability insurance obtained on
behalf of the Fund, the Adviser or its affiliates, or the Directors;
(7) all costs and expenses of preparing, setting in type, printing and
distributing reports and other communications to Members;
(8) all expenses of computing the Fund's net asset value, including any
equipment or services obtained for the purpose of valuing the Fund's investment
portfolio, including appraisal and valuation services provided by third parties;
(9) all charges for equipment or services used for communications between
the Fund and any custodian, or other agent engaged by the Fund; and
(10) such other types of expenses as may be approved from time to time by
the Board.
(b) The payment or assumption by the Adviser of any expenses of the Fund
that the Adviser is not required by this Agreement to pay or assume shall not
obligate the Adviser to pay or assume the same or any similar expense of the
Fund on any subsequent occasion.
5. COMPENSATION. As full compensation for the services provided to the Fund
and the expenses assumed by the Adviser under this Agreement, the Adviser shall
be entitled to be the Special Advisory Member of the Fund pursuant to the terms
of the LLC Agreement and to receive an incentive allocation in accordance with
the terms and conditions of Section 5.8 of the LLC Agreement.
6. LIMITATION OF LIABILITY OF THE ADVISER. The Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund or
any Members in connection with the matters to which this Agreement relates,
except to the extent that such a loss results from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement. Any
person, even though also an officer, director, employee, or agent of the Adviser
or its affiliates, who may be or become an officer, Director, employee or agent
of the Fund, shall be deemed, when rendering services to the Fund or acting with
respect to any business of the Fund, to be rendering such service to or acting
solely for the Fund and not as an officer, director, employee, or agent or one
under the control or direction of the Adviser even though compensated by it.
7. INDEMNIFICATION.
(a) The Fund will indemnify the Adviser and its affiliates, and each of
their members, directors, officers and employees and any of their affiliated
persons, executors, heirs, assigns, successors or other legal representatives
(each an "Indemnified Person") against any and all costs, losses, claims,
damages or liabilities, joint or several, including, without limitation,
reasonable attorneys' fees and disbursements, resulting in any way from the
performance or non-performance of any Indemnified Person's duties in respect of
the Fund, except those resulting from the willful malfeasance, bad faith or
gross negligence of an Indemnified Person or the Indemnified Person's reckless
disregard of such duties and, in the case of criminal proceedings, unless such
Indemnified Person had reasonable cause to believe its actions unlawful
(collectively, "disabling conduct"). Indemnification shall be made following:
(i) a final decision on the merits by a court or other body before whom the
proceeding was brought that the Indemnified Person was not liable by reason of
disabling conduct or (ii) a reasonable determination, based upon a review of the
facts and reached by (A) the vote of a majority of the Directors who are not
parties to the proceeding or (B) legal counsel selected by a vote of a majority
of the Board in a written advice, that the Indemnified Person is entitled to
indemnification hereunder. The Fund shall advance to an Indemnified Person
reasonable attorneys' fees and other costs and expenses incurred in connection
with defense of any action or proceeding arising out of such performance or
non-performance. The Adviser agrees, and each other Indemnified Person will be
required to agree as a condition to any such advance, that if one of the
foregoing parties receives any such advance, the party will reimburse the Fund
for such fees, costs and expenses to the extent that it shall be determined that
the party was not entitled to indemnification under this Paragraph 7. The rights
of indemnification provided hereunder shall
not be exclusive of or affect any other rights to which any person may be
entitled by contract or otherwise under law.
(b) Notwithstanding any of the foregoing, the provisions of this Paragraph
7 shall not be construed so as to relieve the Indemnified Person of, or provide
indemnification with respect to, any liability (including liability under
Federal securities laws, which, under certain circumstances, impose liability
even on persons who act in good faith) to the extent (but only to the extent)
that such liability may not be waived, limited or modified under applicable law
or that such indemnification would be in violation of applicable law, but shall
be construed so as to effectuate the provisions of this Paragraph 7 to the
fullest extent permitted by law.
8. DURATION AND TERMINATION.
(a) This Agreement will become effective upon the date hereof, provided
that this Agreement will not take effect unless it has first been approved (i)
by a vote of a majority of those Directors who are not parties to this Agreement
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by vote of a majority of the
outstanding voting securities of the Fund.
(b) Unless sooner terminated as provided herein, this Agreement shall
continue in effect for two years from the date hereof. Thereafter, if not
terminated, this Agreement shall continue automatically for successive one-year
periods, provided that such continuance is specifically approved at least
annually (i) by a vote of a majority of those Directors who are not parties to
this Agreement or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval, and (ii) by the Board
or by vote of a majority of the outstanding voting securities of the Fund.
(c) Notwithstanding the foregoing, this Agreement may be terminated at any
time, without the payment of any penalty, by vote of the Board or by a vote of a
majority of the Fund's outstanding voting securities on 60 days' written notice
to the Adviser or by the Adviser at any time, without the payment of any
penalty, on 60 days' written notice to the Fund. This Agreement will
automatically terminate in the event of its assignment.
9. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
10. GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of New York, without giving effect to the conflicts of laws
principles thereof, and in accordance with the 1940 Act. To the extent that the
applicable laws of the State of New York conflict with the applicable provisions
of the 1940 Act, the latter shall control.
11. MISCELLANEOUS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors. As used in this Agreement, the terms
"majority of the
outstanding voting securities," "affiliated person," "interested person,"
"assignment," "broker," "investment adviser," "national securities exchange,"
"sell" and "security" shall have the same meaning as such terms have in the 1940
Act, subject to such exemption as may be granted by the Securities and Exchange
Commission by any rule, regulation or order. Where the effect of a requirement
of the 1940 Act reflected in any provision of this contract is relaxed by a
rule, regulation or order of the Securities and Exchange Commission, whether of
special or general application, such provision shall be deemed to incorporate
the effect of such rule, regulation or order.
C-7
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated as of the day and year first above
written.
PW JUNIPER MANAGEMENT, L.L.C.
By:______________________________________
PW JUNIPER CROSSOVER FUND, L.L.C.
By:______________________________________
D-1 Exhibit D
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JOINT FILING AGREEMENT
The undersigned hereby agree that the Statement on Schedule 13D, dated
February 17, 2004, (the "Schedule 13D"), with respect to the Common Stock,
$0.01 par value per share, of Biocryst Pharmaceuticals, Inc. is, and any
amendments thereto executed by each of us shall be, filed on behalf of each of
us pursuant to and in accordance with the provisions of Rule 13d-1(f) under the
Securities and Exchange Act of 1934, as amended, and that this Agreement shall
be included as an Exhibit to the Schedule 13D and each such amendment. Each of
the undersigned agrees to be responsible for the timely filing of the Schedule
13D and any amendments thereto, and for the completeness and accuracy of the
information concerning itself contained therein. This Agreement may be executed
in any number of counterparts, all of which taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
___ day of February, 2004.
SAMUEL D. ISALY ORBIMED ADVISORS LLC
/s/ Samuel D. Isaly /s/ Samuel D. Isaly
--------------------- -------------------------
Name: Samuel D. Isaly
Title: President
ORBIMED CAPITAL II LLC
/s/ Samuel D. Isaly
----------------------
Name: Samuel D. Isaly
Title: President