CINERGY CORP, U-1, 1996-05-24

CINERGY CORP
U-1, 1996-05-24
ELECTRIC & OTHER SERVICES COMBINED

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File No. 70-____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________________
FORM U-1 APPLICATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________
Cinergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45202
(Name of company filing this statement and address of
principal executive offices)
Cinergy Corp.
(Name of top registered holding company parent)

William L. Sheafer
Treasurer
Cinergy Corp.
(address above)
(Name and address of agent of service)
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application to:

Cheryl M. Foley
Vice President, General Counsel and Corporate Secretary
Cinergy Corp.
(address above)
Item 1. Description of Proposed Transactions
A. Requested Authorization
Cinergy Corp. ("Cinergy"), a registered holding company under the
Public Utility Holding Company Act of 1935 ("Act"), proposes to invest a
total of $10 million from time to time through December 31, 2002 to acquire
up to a 20% limited partnership interest in Nth Power Technologies Fund I,
L.P. ("Fund" or "Partnership"), a California limited partnership formed to
invest in energy technology companies.

B. The Fund: Investments in Energy Technology Companies

The goal of the Fund is both to create competitive advantages for its
investing partners by identifying and investing in companies in the process
of developing and commercializing energy technologies and to generate
superior investment returns. The strategic benefits are anticipated to
stem largely from the fact that Fund investors will have access to the
portfolio companies and exposure to their technologies before others. As
competition takes root in the energy industry, and utility companies strive
to retain existing and attract new customers, the ability not merely to
provide low-cost service but also to master technologies to differentiate
products and services from competitors will become increasingly important.
Accordingly, Cinergy believes that both its customers and shareholders will
benefit from the proposed investment in the Fund.
Generally, the Fund will invest in privately-held companies within any
of three stages of development: emerging rapid growth companies (recently-
formed companies with sales ranging up to $10 million), established growth
companies (sales revenues in $10-100 million range with established record
of profitability) and division spin-offs (i.e., often by large well-
established corporations). In most cases, these companies will have
progressed beyond the proof-of-concept or "seed" funding stage and will be
on the threshold of introducing commercial products. Without the consent of
a committee composed of three to five representatives of the limited
partners (see note 2), no more than 10% of the Fund's committed capital
will be invested in any one company.
The following summarizes the broad investment categories expected to
yield the great majority of portfolio companies. The Fund management will
focus on companies within these categories whose management has a
demonstrated record of successfully building companies.
1. Generation and Storage
Most of the opportunities in this investment category are expected to
arise in connection with distributed applications (rather than central
generation and storage), inasmuch as the potential markets are large and
the strategic implications for the utility industry are significant.
Opportunities may arise in connection with, for example, fuel conversion
technologies, fuel cells and eventually semiconductor generators.
Opportunities may also arise in kinetic, thermal and electrochemical
storage technologies.
2. Power Quality
Opportunities are anticipated in connection with a wide range of
products, ranging from substation-level storage and voltage improvement
products to end-use load protection devices.
3. Communications, Control and Information Technologies
Opportunities under this caption may emerge on a number of fronts. For
example, information technologies may be incorporated in a broad range of
energy-efficient end-use products facilitating customer choices while
optimizing energy use, such as integrated residential automation, security,
and energy management hardware and software. Additional opportunities may
arise in connection with sensors and control algorithms;
telecommunications, including fiber optic services; and related specialized
software. Products of internal utility interest may include artificial
intelligence-based monitoring and control systems, automated billing
systems, and sophisticated productivity tools.
4. End-Use Products
Opportunities may arise in advanced lighting and lighting controls,
mechanical drives, drying processes, industrial furnaces, materials
processing, environmental controls, refrigeration, HVAC, and advanced
domestic applications. Opportunities may also emerge in storage
technologies and other component parts with respect to the
commercialization of electric, hybrid and natural gas vehicles.
5. Transmission and Distribution
Most opportunities in this category are expected to involve
technologies to minimize power losses or reduce operational costs.
Opportunities may also arise in connection with power switching
technologies; distribution automation; superconductivity; specialized
metering technology; and noise and EMF abatement and other environmental
concerns.
C. Terms of Limited Partnership Agreement
Pursuant to the terms of the limited partnership agreement filed
herewith as exhibit B ("Agreement"), Cinergy proposes to acquire up to a
20% limited partner interest in the Fund by investing a total of $10
million from time to time through December 31, 2002. The sole general
partner will be Nth Power Technologies Partners, L.P., a California limited
partnership whose sole general partner in turn is Nth Power Technologies,
Inc., a California corporation (collectively, "Nth Power")./1/ Nth Power's
management has experience in energy technology finance and development,
including in the case of the principals an average of 20 years' experience
in the energy, telecommunications and related industries. The remaining
limited partnership interests are being offered to one or more accredited
investors. Given the Fund's objectives, the balance of the limited
partnership interests are expected to be purchased principally by other
utility companies or similar entities involved in the energy industry.
The aggregate amount of capital to be invested in the Fund by all
investors is anticipated not to be less than $50 million (in which case
Cinergy will have a 20% limited partnership interest) nor to exceed $75
million (in which case Cinergy will have a 13% limited partnership
interest). An initial closing is scheduled to take place on or around June
15, 1996, with Cinergy's participation contingent upon receipt of the
authorization requested herein.
The Partnership's term will be limited to 10 years from the later of
the initial closing and the last date (generally, not to exceed in either
case one year from the date of initial closing) on which a limited partner
is admitted to the Partnership or increases its capital commitment,
provided that the general partner may extend the term for up to two
additional two-year periods under certain circumstances (Section 2.1).
Each limited partner will be obligated to contribute an amount in cash
equal to 5% of its commitment at the initial closing, with periodic
drawdowns of the balance of the commitment as needed, provided that (1)
drawdowns will not exceed 35% of the commitment in any calendar year and
(2) the final drawdown will occur not later than 5 years after the later of
the initial closing and the last date on which a limited partner is
admitted to the Partnership or increases its capital commitment (Sections
4.2, 3.2). The general partner will contribute an aggregate amount equal
to 1% of the Partnership capital (Section 4.3).
Profits and losses with respect to investment securities of the
Partnership will be allocated 80% to all limited partners on the basis of
committed capital and 20% to the general partner, provided that any losses
generally will not reduce the general partner's capital account to less
than 1% of aggregate capital accounts (Article V). Distributions of cash
representing net short-term investment income of the Partnership will be
made within 90 days after the end of each calendar year during the term of
the Partnership and allocated in proportion to committed capital (Section
7.6). Distributions in cash (other than cash representing net short-term
investment income of the Partnership) or in securities of portfolio
companies that are covered by an effective registration statement or traded
on a national securities exchange or over-the-counter will be made at the
discretion of the general partner. Any such cash distributions will be
allocated 80% to the limited partners on the basis of committed capital and
20% to the general partner to the extent of net profits and, thereafter,
99% to the limited partners and 1% to the general partner. Any such
distributions of securities of portfolio companies will be allocated 80% to
the limited partners on the basis of committed capital and 20% to the
general partner. (Sections 7.4, 7.5) With respect to such potential
distributions to it of securities of portfolio companies, Cinergy
anticipates that in each case it may then be entitled to retain such
securities pursuant to a rule proposed by the Commission for adoption in
June 1995 (see Rel. No. 35-26313 (proposed Rule 58)) inasmuch as, subject
to the other conditions specified in the proposed rule, the portfolio
companies are likely to constitute energy-related companies within the
meaning thereof. To the extent that this proves otherwise, unless it
obtains Commission approval to retain such securities, Cinergy will
undertake to sell such securities as soon as practicable.

Through the seventh anniversary of the initial closing date, the
Partnership will pay the general partner, quarterly in advance and
potentially subject to adjustment for changes in the consumer price index-
urban consumers, an annual management fee equal to 2.5% of the aggregate
committed capital; thereafter, the fee will be determined based on an
annual budget procedure, provided that the fee shall not be less than 70%
of the initial formula fee (Section 6.1). The general partner will be
responsible for payment, from the management fee, of all normal operating
expenses incurred in connection with the management of the Partnership,
including salaries, wages, clerical and other expenses of employees of the
Partnership and expenses relating to investigating and evaluating
investment opportunities and managing investments of the Partnership. The
foregoing notwithstanding, the Partnership will be responsible for, among
other things, all legal, accounting and consulting fees with respect to the
Partnership, costs relating to the purchase and sale of Partnership
securities, Partnership taxes, costs of annual meetings, and fees and
expenses incurred in organizing the Partnership (Section 6.2). Both the
annual management fee and the Partnership expenses are payable from the
limited partners' committed capital.
Under the Agreement and applicable California law, the general partner
has the sole and exclusive right to manage, control and conduct the affairs
of the Partnership, subject to certain limited approval rights of the
limited partners (Sections 8.1, 8.3, 11.8). Such limited voting rights are
customary for limited partners in venture capital funds and in the
aggregate are less than those potentially available to limited partners
consistent with applicable California law. Specifically, under the
Agreement, the approval of the limited partners is required only in the
following circumstances:

The vote of a majority in interest of the limited partners is
required (i) if capital commitments will exceed $75 million (Section 3.2),
(ii) for capital drawdowns that occur after the first anniversary of the
later of the initial closing date and the last date on which a limited
partner is admitted or increases its commitment (Section 4.2), (iii) to
approve the general partner's management fee if the term of the Partnership
is extended beyond 10 years (Section 6.1), (iv) to extend the term of the
Partnership for up to two additional two-year periods (Section 10.1), (v)
to elect a successor tax matters partner (Section 11.6), and (vi) to
terminate the Partnership if the principals fail to devote substantially
all of their business time to the Partnership and other specified entities
(Section 14.9).

The vote of two-thirds in interest of the limited partners is required
(i) to admit an additional general partner (Section 3.2), (ii) to admit
additional limited partners after the first anniversary of the initial
closing date (Section 3.2), (iii) for the distribution of non-marketable
securities (Section 7.5), (iv) for the Partnership to borrow (Section 8.6),
and (v) for the Partnership to exercise its right of first refusal upon
certain proposed transfers by limited partners (Section 9.4).

The vote of 75% in interest of the limited partners is required to
terminate the Partnership in certain events (Section 14.9).

The vote of all limited partners is required to extend the term of the
Partnership except as described in A(iv) above (Section 2.1).

Finally, under California law, the limited partners also have the
right to vote on certain matters relating to the merger of the Partnership
with one or more other entities./2/
Limited partners are entitled to inspect the books and records of the
Partnership upon reasonable advance notice and during normal business hours
(Section 11.2). The general partner will be required to furnish the
limited partners with annual and quarterly reports concerning the
Partnership, which reports shall include financial statements of the
Partnership (audited in the case of the annual reports) together with
relevant information concerning Partnership investments (Sections 11.3 and
11.4).
D. Statement Pursuant to Rule 54.
Under Rule 54, in determining whether to approve the issue or sale of
a security by a registered holding company for purposes other than the
acquisition of an exempt wholesale generator ("EWG") or a foreign utility
company ("FUCO"), or other transactions by such registered holding company
or its subsidiaries other than with respect to EWGs and FUCOs, the
Commission shall not consider the effect of the capitalization or earnings
of any subsidiary which is an EWG or a FUCO if the conditions in Rule
53(a), (b) and (c) are satisfied. As set forth below, all applicable
conditions of Rule 53(a) are and, upon consummation of the proposed
transactions, will be satisfied, and none of the conditions specified in
Rule 53(b) exists or, as a result thereof, will exist.
Rule 53(a)(1): At March 31, 1996, Cinergy had invested, directly or
indirectly, an aggregate of approximately $11 million in EWGs and FUCOs
(inclusive of indirect investments through Special Purpose
Subsidiaries)./3/ The average of the consolidated retained earnings of
Cinergy reported on Form 10-K or Form 10-Q, as applicable, for the four
consecutive quarters ended March 31, 1996 is $946 million. Accordingly,
based on Cinergy's "consolidated retained earnings" at March 31, 1996, the
current Rule 53 aggregate investment limitation is approximately $462
million (i.e., 50% of "consolidated retained earnings" - $473 million -
minus "aggregate investment" at March 31, 1996 - $11 million).
Rule 53(a)(2): Cinergy maintains books and records enabling it to
identify investments in and earnings from each EWG and FUCO in which it
directly or indirectly holds an interest. At present, Cinergy does not
hold any interest in a domestic EWG; Rule 53(a)(2)(i) is therefore
inapplicable.
In accordance with Rule 53(a)(2)(ii), the books and records and
financial statements of each foreign EWG and FUCO which is a "majorityowned
subsidiary company" of Cinergy are kept in conformity with and prepared
according to U.S. generally accepted accounting principles ("GAAP").
Cinergy will provide the Commission access to such books and records and
financial statements, or copies thereof, in English, as the Commission may
request.
In accordance with Rule 53(a)(2)(iii), for each foreign EWG and FUCO
in which Cinergy directly or indirectly owns 50% or less of the voting
securities, Cinergy will proceed in good faith, to the extent reasonable
under the circumstances, to cause each such entity's books and records to
be kept in conformity with, and the financial statements of each such
entity to be prepared according to, GAAP. If such books and records are
maintained, or such financial statements are prepared, according to a
comprehensive body of accounting principles other than GAAP, Cinergy will,
upon request of the Commission, describe and quantify each material
variation from GAAP in the accounting principles, practices and methods
used to maintain such books and records and each material variation from
GAAP in the balance sheet line items and net income reported in such
financial statements, as the case may be. In addition, Cinergy will
proceed in good faith, to the extent reasonable under the circumstances, to
cause access by the Commission to such books and records and financial
statements, or copies thereof, in English, as the Commission may request,
and in any event will make available to the Commission any such books and
records that are available to Cinergy.
Rule 53(a)(3): No more than 2% of the employees of Cinergy's
operating utility subsidiaries will, at any one time, directly or
indirectly, render services to EWGs and FUCOs. Based on current staffing
levels of Cinergy's domestic operating utility subsidiaries (such companies
currently employ, in the aggregate, approximately 5736 salaried and hourly
employees), no more than 115 of the employees of these companies, in the
aggregate, on a full-time equivalent basis, will be utilized at any one
time in rendering services, directly or indirectly, to EWGs and FUCOs.
Employees of PSI Energy, Inc., an Indiana utility subsidiary of Cinergy,
have rendered services to certain Cinergy system foreign utility interests
pursuant to the Commission's order in PSI Resources, Inc., et al., Rel. No.
35-25674, 52 SEC Docket 2533, 2534-35 (Nov. 13, 1992).

Rule 53(a)(4): Cinergy will simultaneously submit a copy of this
Declaration and of any Rule 24 certificate hereunder, as well as a copy of
Cinergy's Form U5S and Exhibits H and I thereto, to each public utility
commission having jurisdiction over the retail rates of any Cinergy utility
subsidiary.

Rule 53(b): The provisions of Rule 53(a) are not made inapplicable to
the authorization herein requested by reason of the provisions of Rule
53(b).

Rule 53(b)(1): Neither Cinergy nor any subsidiary thereof is the
subject of any pending bankruptcy or similar proceeding.
Rule 53(b)(2): Cinergy's average consolidated retained earnings for
the four quarters ended March 31, 1996 are $946 million, versus $920
million for the four quarters ended March 31, 1995, a difference of
approximately $26 million (representing an increase of 3%).
Rule 53(b)(3): For the twelve months ended March 31, 1996, Cinergy
did not report operating losses attributable to its direct and indirect
investments in EWGs and FUCOs aggregating in excess of 5% of consolidated
retained earnings.
Item 2. Fees, Commissions and Expenses.
In addition to the Partnership-related fees and expenses described
above in Item 1.C, the fees, commissions and expenses to be incurred,
directly or indirectly, by Cinergy or any associate company thereof in
connection with the proposed transactions are estimated as follows:
U-1 filing fee $2,000

Fees of Cinergy Services, Inc. $5,000
Fees of outside counsel $10,000
TOTAL $17,000
Item 3. Applicable Statutory Provisions.
Section 9(c)(3) is applicable to the proposed transaction thereby
exempting the proposed transaction from Section 9(a) of the Act. Rule 54
is also applicable.
With respect to Section 9(c)(3), in the first place, Cinergy is
proposing to acquire its limited partnership interest in the Fund in the
"ordinary course of [its] business" and such investment will not be
detrimental to the public interest or the interest of investors or
consumers. As discussed in Item 1, by investing through the Fund in energy
technology companies, Cinergy seeks not merely to realize a favorable
return but also to gain competitive advantages in its core business through
access to the portfolio companies and exposure to their technologies before
others. These technologies may enable Cinergy to enhance the variety and
quality of energy products and services it provides to existing customers
and better position it to attract new customers. More generally,
successful investments by the Partnership may ultimately benefit all
utilities and their customers, by fostering the development and
commercialization of energy technologies. As previously noted, the
contemplated portfolio companies likely would constitute energy-related
companies within the meaning of proposed Rule 58.

Section 9(c)(3) is applicable for the further reason that, by virtue
of the proposed acquisition, Cinergy will not have any right or power to
control or otherwise direct the management or affairs of the Partnership.
Cinergy will not acquire any "voting security" within the meaning of
Section 2(a)(17) of the Act and, accordingly, the Partnership will not be
an "affiliate" or "subsidiary company" of Cinergy within the meaning of the
Act. Specifically, as a limited partner, Cinergy will not be entitled to
take part in the control, management or investment decisions of the
Partnership (or, through the Partnership, in the control or management of
any company in which the Partnership invests), which are vested exclusively
in the general partner. Rather, Cinergy will be entitled only to receive
notices and other information from the general partner, to inspect the
Partnership's books and records, and to vote on a limited number of matters
that could fundamentally change the structure and purposes of the
Partnership and its relationship with the general partner. Such limited
voting rights are customary for limited partners in a venture capital fund
and in the aggregate are less than those potentially available to limited
partners consistent with applicable California law. Moreover, as stated in
Item 1, Cinergy will not consent to serve on the Fund Committee and
therefore will have less voting rights than those of the other limited
partners, who will be eligible to serve on that committee and potentially
to vote on the matters within the committee's purview. Finally, because
its capital commitment to and corresponding limited partnership interest in
the Fund will be relatively small, and actions of the Fund's limited
partners require the assent of at least a majority in interest thereof (and
often a supermajority vote of the limited partners), Cinergy will have no
practical ability - assuming it were so disposed - unilaterally to direct
the action of the Fund's limited partners with respect to those isolated
matters over which the limited partners exercise voting rights.

The Fund itself is similar in certain respects to the EnviroTech
Partnership with respect to which a number of other registered holding
companies have made investments (see, e.g., Rel. Nos. 35-262490, Feb. 28,
1995 (Southern Company); 35-26225, Feb. 1, 1995 (Allegheny Power System,
Inc.)).
Item 4. Regulatory Approval.
No state or federal regulatory agency other than the Commission under
the Act has jurisdiction over the proposed transactions.
Item 5. Procedure.
Cinergy requests that the Commission issue and publish not later than
June 7, 1996 the requisite notice under Rule 23 with respect to the filing
of this Application. Cinergy further requests that such notice specify a
date not later than July 2, 1996 as the date after which the Commission may
issue an order granting this Application.
Cinergy waives a recommended decision by a hearing officer or other
responsible officer of the Commission; consents that the Staff of the
Division of Investment Management may assist in the preparation of the
Commission's order; and requests that there be no waiting period between
the issuance of the Commission's order and its effectiveness.

Item 6. Exhibits and Financial Statements.

(a) Exhibits:

A Not applicable

B Draft of Nth Power Technologies Fund I, L.P. Limited
Partnership Agreement

C Not applicable

D Not applicable

E Not applicable

F Preliminary opinion of counsel

G Form of Federal Register notice

(b) Financial Statements:

FS-1 Cinergy Consolidated Financial Statements, dated March
31, 1996.
FS-2 Cinergy Financial Statements, dated March 31, 1996.
FS-3 Cinergy Consolidated Financial Data Schedule (included
in electronic submission only).
FS-4 Cinergy Financial Data Schedule (included in electronic
submission only).
Item 7. Information as to Environmental Effects.
(a)The Commission's action in this matter will not constitute major
federal action significantly affecting the quality of the human
environment.
(b)No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed transactions.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the undersigned company has
duly caused this Application to be signed on its behalf by the undersigned
thereunto duly authorized.

Dated: May 24, 1996

Cinergy Corp.

By:/s/ William L. Sheafer
Treasurer

<PAGE>
ENDNOTES

/1/ Cinergy does not propose to acquire a limited partnership or equity
interest or otherwise to acquire securities of or to invest in Nth Power.

/2/ The approval of a majority of the Partnership's "Fund Committee"
(composed of three to five representatives of the limited partners) is
required to approve, inter alia, any investment inconsistent with the
Partnership's business plan (Section 8.6) and any investment of more than
10% of the Partnership's capital in any one company or in public securities
(Section 8.6). For the duration of its investment in the Partnership,
Cinergy will decline to be represented on or otherwise to participate in
the Fund Committee.

/3/ As of May 14, 1996, Cinergy had indirectly invested an additional $372
million in Midlands Electricity plc ("Midlands"), one of 12 regional
electric companies in the United Kingdom, headquartered in Birmingham,
England, in connection with a pending cash offer for the acquisition of
Midlands by a joint venture entity controlled equally by Cinergy and
General Public Utilities Corporation. As of said date, the joint venture
entity owned or had agreed to acquire 114.9 million shares of Midlands,
representing approximately 29% of the issued share capital of Midlands.
For further information with respect to this transaction, reference is made
to Cinergy's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996 in Commission File No. 1-11377.

EXHIBIT F
May 24, 1996

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Dear Sirs:

I am Associate General Counsel of Cinergy Corp. ("Cinergy"), a
registered holding company under the Public Utility Holding Company Act of
1935 (the "Act"), and am furnishing this opinion as an exhibit to Cinergy's
Form U-1 Application of even date herewith (the "U-1"), pursuant to which
Cinergy proposes to invest a total of $10 million from time to time through
December 31, 2002 to acquire up to a 20% limited partnership interest in
Nth Power Technologies Fund I, L.P. ("Fund"), a California limited
partnership formed to invest in energy technology companies.

In connection with this opinion, I have reviewed or caused to be
reviewed the U-1 and such other documents and records as I deemed necessary
or appropriate in order to give this opinion. In the event that the
proposed transactions are consummated in accordance with the Commission's
order or orders under the Act to be issued with respect thereto and
otherwise in accordance with the U-1 (including as it may be amended):

(a) All state laws applicable to Cinergy's participation in the
proposed transactions will have been complied with.

(b) Cinergy will legally acquire the limited partnership interest in
the Fund to be acquired by it.

(c) The consummation of the proposed transactions will not violate
the legal rights of the holders of any securities issued by Cinergy or any
associate company thereof.

I am a member of the Ohio Bar and accordingly do not express an
opinion as to the laws of any other state. I hereby consent to the filing
of this opinion as an exhibit to the U-1.

Very truly yours,

/s/ Jerome A. Vennemann
Associate General Counsel

EXHIBIT G
PROPOSED FORM OF NOTICE

Cinergy Corp. 70-

Notice of Proposal to Make Limited Partnership Investment in Energy
Technology Fund

Cinergy Corp., a registered holding company located at 139 East Fourth
Street, Cincinnati, Ohio 45202 ("Cinergy"), has filed an application under
Section 9(c)(3) of the Act and Rule 54 thereunder.

Cinergy proposes to invest a total of $10 million from time to time
through December 31, 2002 to acquire up to a 20% limited partnership
interest in Nth Power Technologies Fund I, L.P. ("Fund" or "Partnership"),
a California limited partnership formed to invest in energy technology
companies. The sole general partner of the Fund will be Nth Power
Technologies Partners, L.P., a California limited partnership whose sole
general partner in turn is Nth Power Technologies, Inc., a California
corporation (collectively, "Nth Power"). Nth Power's management has
experience in energy technology finance and development. Cinergy does not
propose to acquire a limited partnership or equity interest or otherwise to
acquire securities of or to invest in Nth Power. The remaining limited
partnership interests are being offered to one or more accredited
investors. Given the Fund's objectives, the balance of the limited partner
interests are expected to be purchased principally by other utility
companies or similar entities involved in the energy industry.
The aggregate amount of capital to be invested in the Fund by all
investors is anticipated not to be less than $50 million (in which case
Cinergy will have a 20% limited partnership interest) nor to exceed $75
million (in which case Cinergy will have a 13% limited partnership
interest). An initial closing is scheduled to take place on or around June
15, 1996, with Cinergy's participation contingent upon receipt of
Commission authorization under the Act.

As provided under the terms of the limited partnership agreement
governing the Partnership ("Agreement"), the Partnership's term will be
limited to 10 years from the later of the initial closing and the last date
(generally, not to exceed in either case one year from the date of initial
closing) on which a limited partner is admitted to the Partnership or
increases its capital commitment, provided that the general partner may
extend the term for up to two additional two-year periods under certain
circumstances. Each limited partner will be obligated to contribute an
amount in cash equal to 5% of its commitment at the initial closing, with
periodic drawdowns of the balance of the commitment as needed, provided
that drawdowns will not exceed 35% of the commitment in any calendar year
and the final drawdown will occur not later than 5 years after the later of
the initial closing and the last date on which a limited partner is
admitted to the Partnership or increases its capital commitment. The
general partner will contribute an aggregate amount equal to 1% of the
Partnership capital.

Profits and losses with respect to investment securities of the
Partnership will be allocated 80% to all limited partners on the basis of
committed capital and 20% to the general partner, provided that any losses
generally will not reduce the general partner's capital account to less
than 1% of aggregate capital accounts. Distributions of cash representing
net short-term investment income of the Partnership will be made within 90
days after the end of each calendar year during the term of the Partnership
and allocated in proportion to committed capital. Distributions in cash
(other than cash representing net short-term investment income of the
Partnership) or in securities of portfolio companies that are covered by an
effective registration statement or traded on a national securities
exchange or over-the-counter will be made at the discretion of the general
partner. Any such cash distributions will be allocated 80% to the limited
partners on the basis of committed capital and 20% to the general partner
to the extent of net profits and, thereafter, 99% to the limited partners
and 1% to the general partner. Any distributions of securities of
portfolio companies will be allocated 80% to the limited partners on the
basis of committed capital and 20% to the general partner. With respect to
such potential distributions to it of securities of portfolio companies,
Cinergy anticipates that in each case it may then be entitled to retain
such securities pursuant to a rule proposed by the Commission for adoption
in June 1995 (see Rel. No. 35-26313) inasmuch as, subject to the other
conditions specified in the proposed rule, the portfolio companies are
likely to constitute energy-related companies within the meaning thereof.
To the extent that this proves otherwise, unless it obtains Commission
approval to retain such securities, Cinergy will undertake to sell such
securities as soon as practicable.
Through the seventh anniversary of the initial closing date, the
Partnership will pay the general partner, quarterly in advance and
potentially subject to adjustment for changes in the consumer price index-
urban consumers, an annual management fee equal to 2.5% of the aggregate
committed capital; thereafter, the fee will be determined based on an
annual budget procedure, provided that the fee shall not be less than 70%
of the initial formula fee. The general partner will be responsible
for payment, from the management fee, of all normal operating expenses
incurred in connection with the management of the Partnership. The
foregoing notwithstanding, the Partnership will be responsible for, among
other things, all legal, accounting and consulting fees with respect to the
Partnership, costs relating to the purchase and sale of Partnership
securities, Partnership taxes, costs of annual meetings, and fees and
expenses incurred in organizing the Partnership. Both the annual
management fee and the Partnership expenses are payable from the limited
partners' committed capital.

Under the Agreement and applicable California law, the general partner
has the sole and exclusive right to manage, control and conduct the affairs
of the Partnership, subject to certain limited approval rights of the
limited partners. In general, such rights would entitle Cinergy to vote
only on matters that could fundamentally change the structure and purposes
of the Partnership and its relationship with the general partner. Cinergy
represents that such limited voting rights are customary for limited
partners in venture capital funds and collectively are less than those
potentially available to limited partners consistent with applicable
California law. Cinergy further notes, among other things, that since it
will not consent to serve on the Fund committee referred to above, it will
therefore have less voting rights than those of the other limited partners.

Limited partners are also entitled to inspect the books and records of
the Partnership, and the general partner will be required to furnish the
limited partners with certain periodic reports (including financial
statements) concerning the Partnership.

For the Commission, by the Division of Investment Management, pursuant
to delegated authority.

DRAFT EXHIBIT B

Nth POWER TECHNOLOGIES FUND I, L.P.

LIMITED PARTNERSHIP AGREEMENT
Nth POWER TECHNOLOGIES FUND I, L.P.

LIMITED PARTNERSHIP AGREEMENT

This Agreement is made and entered into as of the ____ day of June 1996,
by and among Nth Power Technologies Partners, L.P., a California limited
partnership (the "General Partner"), and each of the persons listed as
limited partners on the Schedule of Partners attached hereto as Exhibit A
(the "Limited Partners"), who hereby form Nth Power Technologies Fund I, L.P.
(the "Partnership"), pursuant to the provisions of the California Uniform
Partnership Act (the "Act"), as follows:

Article I

Name, Purpose And Offices
Of Partnership

1.1 Name. The name of the Partnership is Nth Power Technologies Fund
I, L.P. The affairs of the Partnership shall be conducted under the
Partnership name.

1.2 Purpose. The primary purpose of the Partnership is to make
capital investments, principally by investing in equity or equity-oriented
securities of privately held corporations that create products or provide
services that offer significant strategic benefits to the electric utility
industry. The general purposes of the Partnership are to: buy, sell,
hold, and otherwise invest in securities of every kind and nature and
rights and options with respect thereto, including, but not limited to,
stock, notes, bonds, debentures, partnership interests, interests in
limited liability companies and evidence of indebtedness; exercise all
rights, powers, privileges, and other incidents of ownership or possession
with respect to securities held or owned by the Partnership; enter into,
make, and perform all contracts and other undertakings; and engage in all
activities and transactions as may be necessary, advisable, or desirable to
carry out the foregoing.

1.3 Principal Office. The principal office of the Partnership shall
be located at 50 California Street, 32nd Floor, San Francisco, California
94111, or at such other place or places as the General Partner may from
time to time designate by written notice to the Limited Partners.

1.4 Registered Agent And Office. The name of the registered agent
for service of process of the Partnership and the address of the
Partnership's registered office in the State of California shall be Maurice
E.P. Gunderson, Nth Power Technologies, Inc., 50 California Street, 32nd
Floor, San Francisco, California, 94111, or such other agent or office in
the State of California as the General Partner may from time to time
designate.

Article II

Term Of Partnership

2.1 Term. The term of the Partnership shall commence upon the later
of the date first above written or the date of the filing of the
Certificate of Limited Partnership of the Partnership with the office of
the Secretary of State of the State of California (which date shall be
hereinafter referred to as the "Formation Date"). The term of the
Partnership shall continue until the tenth anniversary of the later of
(i) the Formation Date or (ii) the last date on which a Limited Partner is
admitted to the Partnership (or increases its Capital Commitment) pursuant
to paragraph 3.2(b)(i), unless extended by a Notice of Extension or by
unanimous agreement of the Partners or sooner dissolved upon the occurrence
of an Event of Early Termination.

2.2 Events Affecting A Partner Of The General Partner. The death,
bankruptcy, withdrawal, insanity, incompetency, temporary or permanent
incapacity, expulsion or removal of any partner of the General Partner
shall not dissolve the Partnership.

2.3 Events Affecting A Limited Partner. The death, temporary or
permanent incapacity, insanity, incompetency, bankruptcy, liquidation,
dissolution, reorganization, merger, sale of all or substantially all of
the stock or assets of, or other change in the ownership or nature of a
Limited Partner shall not dissolve the Partnership.

2.4 Events Affecting The General Partner. Except in the case of an
Event of Early Termination, the bankruptcy, liquidation, dissolution,
reorganization, merger, sale of all or substantially all the stock or
assets of, or other change in the ownership or nature of the General
Partner shall not dissolve the Partnership, and upon the happening of any
such event, the affairs of the Partnership shall be continued automatically
by a successor entity formed by the continuing general partners of the
General Partner, including any newly admitted general partner, or by the
remaining general partner(s) of the Partnership, if any.

Article III

Name And Admission Of Partners

3.1 Name And Address. The name and address of the General Partner
and each Limited Partner (hereinafter the General Partner and the Limited
Partners shall be referred to collectively as the "Partners" and
individually as a "Partner"), the amount of such Partner's Capital
Commitment to the Partnership and such Partner's Partnership Percentage are
set forth on Exhibit A hereto. The General Partner shall cause Exhibit A
to be amended from time to time to reflect the admission of any new
Partner, the withdrawal or substitution of any Partner, the transfer of
interests among Partners, receipt by the Partnership of notice of any
change of address of a Partner, or a change in the Capital Commitment or
Partnership Percentage of any Partner. An amended Exhibit A shall
supersede any prior Exhibit A and become a part of this Agreement. A copy
of the most recent amended Exhibit A shall be kept on file at the principal
office of the Partnership.

3.2 Admission Of Additional Partners.

(a) An additional person may be admitted as a General Partner to
the Partnership only with the consent of the General Partner and Two-Thirds
in Interest of the Limited Partners prior to an Event of Early Termination.

(b) (i) An additional person may be admitted as a Limited
Partner (or an existing Limited Partner may increase its Capital
Commitment) with the consent of the General Partner until the first
anniversary of the Formation Date; provided, however, that unless the
General Partner provides the Limited Partners with advance written notice,
the General Partner shall not admit an additional person to the Partnership
or allow a Limited Partner to increase its Capital Commitment to the
Partnership if such admission or increase would cause the total Capital
Commitments of the Limited Partners to exceed sixty million dollars
($60,000,000).

(ii) Subsequent to the first anniversary of the Formation
Date, an additional person may be admitted as a Limited Partner (or an
existing Limited Partner may increase its Capital Commitment) with the
consent of the General Partner and Two-Thirds in Interest of the Limited
Partners.

(iii) Each such additional Limited Partner (or Limited
Partner increasing its Capital Commitment) shall not be admitted as a
Limited Partner (or be allowed to increase its Capital Commitment) until it
contributes to the Partnership the sum of (A) its pro rata share of all
previous capital contributions to the Partnership made by the Partners and
(B) an interest component on its pro rata share of all previous capital
contributions at the prime rate charged by the Partnership's primary
banking facility for the periods from the Partners' previous capital
contributions to the date such additional person is admitted as a Limited
Partner (or increases its Capital Commitment) with such interest rate
adjusted on the first business day of ________. Each person admitted as an
additional Limited Partner (or increasing its Capital Commitment) shall not
be entitled to share in the income or gain of the Partnership with respect
to its new or increased Capital Commitment attributable to the period prior
to such admission as a Limited Partner (or increase in Capital Commitment).

(iv) The interest component paid by a Limited Partner
pursuant to clause (iii) above (A) shall not be included in determining
such Limited Partner's Capital Commitment or Partnership Percentage and
shall not be included in determining the amount of capital contributed to
the Partnership, and (B) shall be distributed to the Partners (excluding
Partners admitted to the Partnership on the date such interest component is
due) pro rata based on all previous capital contributions as adjusted to
reflect the dates on which such previous capital contributions were made.

(v) Each additional person admitted as a Partner shall
execute and deliver to the Partnership a counterpart of this Agreement or
otherwise become bound by the terms of this Agreement.

Article IV

Capital Accounts, Capital Contributions,
And Noncontributing Partners

4.1 Capital Accounts. An individual Capital Account shall be
maintained for each Partner.

4.2 Capital Contributions Of The Limited Partners.

(a) Upon the date hereof, each Limited Partner shall contribute
cash to the Partnership in the amount set forth opposite its name under the
heading "Initial Capital Contributions" on Exhibit A, which amount shall be
equal to five percent (5%) of such Partner's Capital Commitment.

(b) Subsequent to its Initial Capital Contribution, each Limited
Partner shall make additional contributions to the Partnership's capital
(up to its respective Capital Commitment) in cash. The amount of each such
additional capital contribution shall be made to the Partnership upon
thirty (30) days' advance written notice by the General Partner with
respect to each contribution; provided, however, that (i) no Limited
Partner shall be required to contribute more than thirty-five percent (35%)
of its Capital Commitment in any calendar year, (ii) except with respect to
contributions used to fund Partnership expenses and follow-on investments
in existing portfolio companies, the final contribution will occur not
later than the fifth anniversary of the later of (A) the Formation Date, or
(B) the last date on which a Limited Partner is admitted to the Partnership
(or increases its Capital Commitment) pursuant to paragraph 3.2(b)(i)
except with the written consent of a Majority in Interest of the Limited
Partners, and (iii) capital shall only be called in anticipation of
reasonable investment requirements of the Partnership or to provide funds
for the payment of Partnership expenses. Contributions pursuant to this
paragraph 4.2(b) shall be made by all the Limited Partners in proportion to
Partnership Percentages.

4.3 Capital Contributions Of The General Partner. The General
Partner shall make contributions to the capital of the Partnership in an
amount equal to one percent (1%) of the total amount contributed by the
Limited Partners and the General Partner on each date on which any Limited
Partner makes a contribution. The General Partner's contributions shall,
at its option, be in the form of cash or in the form of a full-recourse
promissory note substantially in the form attached hereto as Exhibit B.

4.4 Acquisition Of An Additional Interest By The General Partner. In
the event that the General Partner (a) acquires a Limited Partner's
interest pursuant to the terms of this Agreement or (b) contributes to the
capital of the Partnership an amount greater than one percent (1%) of the
total amount contributed by the Partners, (A) the General Partner shall
have two (2) Partnership Percentages and two (2) Capital Account balances
for purposes of making Partnership allocations (including any reallocation
of Contingent Losses pursuant to paragraph 5.2) as if such additional
interest were held by a separate entity that is a Limited Partner, although
for all other purposes the General Partner shall have only one (1) Capital
Account, and (B) upon the admission of additional Limited Partners, the
General Partner's Capital Commitment as a Limited Partner shall
automatically be converted to a Capital Commitment as a General Partner as
necessary to maintain a one percent (1%) interest as General Partner.

4.5 Noncontributing Partners.

(a) The Partnership shall be entitled to enforce the obligations
of each Limited Partner to make the contributions to capital set forth on
Exhibit A, and the Partnership shall have all remedies available at law or
in equity in the event any such contribution is not so made. If any legal
proceedings relating to the failure of a Limited Partner to make such a
contribution are commenced, such Limited Partner shall pay all costs and
expenses incurred by the Partnership, including attorneys' fees, in
connection with such proceedings but such payments shall not be treated as
capital contributions to the Partnership.

(b) Additionally, should any Limited Partner fail to make any of
the contributions required of it under this Agreement, such Limited Partner
(the "Optionor"), shall be in default and the other Limited Partners (the
"Optionees") and the General Partner shall have the right and option to
acquire the Partnership interest of the Optionor as follows:

(i) The General Partner shall notify the Optionor within
ten (10) days of the default. If the default continues for twenty (20) or
more days after notice of the default, the General Partner shall notify the
Optionees of the default within twenty (20) days of the expiration of the
aforesaid twenty (20) day notice period. Such notice shall advise each
Optionee of the portion and the price of the Optionor's interest available
to it. The portion available to each Optionee shall be that portion of the
Optionor's interest that bears the same ratio to the Optionor's entire
interest as each Optionee's Partnership Percentage bears to the aggregate
Partnership Percentages of all Optionees. The aggregate price for the
Optionor's interest shall be the lesser of (A) the amount of the Optionor's
Capital Account calculated as of the due date of the additional
contribution and adjusted to reflect the allocation of the appropriate
proportion of the Partnership's accrued income and expenses and
unrecognized gains and losses as of the due date of such defaulted
contribution, or (B) the aggregate amount of the Optionor's capital
contributions actually made to the Partnership less any distributions
(valued at their fair market value on the date of distribution) on or prior
to the due date of such default in contribution. The price for each
Optionee shall be prorated according to the portion of the Optionor's
interest purchased by each such Optionee. The option granted hereunder
shall be exercisable at any time within thirty (30) days of the date of the
notice from the General Partner to the Optionees by delivery to the
Optionor in care of the General Partner of a notice of exercise of option
together with a nonrecourse promissory note for the purchase price and a
security agreement in accordance with subparagraph (v) below, which notice
and documents the General Partner shall forward to the Optionor.

(ii) Should any Optionee not exercise its option within said
fifty (50) day period provided in subparagraph (i), the General Partner
shall immediately notify the other Optionees who have elected to exercise
their option, which Optionees shall have the right and option ratably among
them to acquire the portion of the Optionor's interest not so acquired (the
"Remaining Portion") within thirty (30) days of the date of the notice
specified in this subparagraph (ii) on the same terms as provided in
subparagraph (i).

(iii) The amount of the Remaining Portion not acquired by the
Optionees pursuant to subparagraph (ii) may be acquired by the General
Partner within thirty (30) days of the expiration of the thirty (30) day
period specified in subparagraph (ii) on the same terms as set forth in
subparagraph (i).

(iv) The amount of the Remaining Portion not acquired by the
Optionees and the General Partner pursuant to subparagraphs (ii) or (iii)
may, if the General Partner deems it in the best interest of the
Partnership, be sold by the General Partner to any other investor on terms
not more favorable to such parties than those applicable to the Optionees'
option, and any such purchaser shall become a Limited Partner to the extent
of the interest purchased hereunder. Any consideration received by the
Partnership for the Optionor's interest in excess of the price payable to
the Optionor therefor shall be retained by the Partnership and allocated
among the Partners' Capital Accounts (excluding the defaulting Partner) in
accordance with their Partnership Percentages as determined prior to the
defaulted contribution.

(v) The price due from each of the General Partner and the
Optionees shall be payable by a noninterest-bearing, nonrecourse promissory
note (in such form as the General Partner shall designate) due one hundred
eighty (180) days after the final dissolution of the Partnership. Each
such note shall be secured by the portion of the Optionor's Partnership
interest so purchased by its maker pursuant to a security agreement in a
form designated by the General Partner and shall be enforceable by the
Optionor only against such security.

(vi) Upon exercise of any option hereunder, each Optionee
(and, if applicable, the General Partner and any third party purchaser
pursuant to subparagraph (iv)) shall be obligated (A) to contribute to the
Partnership that portion of the additional capital then due from the
Optionor equal to the percentage of the Optionor's interest purchased by
such person and (B) to pay the same percentage of any further contributions
otherwise due from such Optionor. Each person who purchases a portion of
the Optionor's Partnership interest shall be deemed to have acquired such
portion as of the due date of the additional capital contribution with
respect to which the Optionor defaulted, and any distributions made after
the due date on account of the Optionor's interest shall be distributed
among such purchasers (and, unless the entire interest was purchased, the
Optionor) in accordance with their ultimate respective interests in the
Optionor's interest. Distributions otherwise allocable to the Optionor
under the preceding sentence shall first be used to offset any defaulted
contribution of the Optionor still due to the Partnership. Upon completion
of any transaction hereunder, the General Partner shall cause Exhibit A to
be amended to reflect all necessary changes resulting therefrom including,
without limitation, adjustment of Partnership Percentages.

(c) Notwithstanding any other provision of this Agreement, if at
any time before a date on which any unpaid capital contribution is payable
hereunder, any ERISA Partner shall obtain and deliver to the General
Partner an opinion of independent legal counsel reasonably acceptable to
the General Partner to the effect that, as a result of applicable statutes,
regulations, case law, administrative interpretations, or similar
authority, the payment by such ERISA Partner of such unpaid capital
contribution would result, or there is a material likelihood that such
payment would result, in a material violation of ERISA or any comparable
state statute or in the fiduciaries of such ERISA Partner being deemed
under ERISA or any comparable state statute to have delegated investment
discretion over plan assets (as determined by or under ERISA or any
comparable state statute) to any person or entity that is not an
"investment manager" (as determined by or under ERISA or any comparable
state statute), then such ERISA Partner shall be released from any further
obligation to make further capital contributions under paragraph 4.2, and
thereafter for purposes of this Agreement such ERISA Partner's obligation
to make capital contributions to the Partnership shall be deemed to be
equal to the total capital contributions theretofore made by such Partner
to the Partnership. The General Partner shall cause Exhibit A to be
amended to reflect all necessary changes resulting from this
subparagraph (c) including, without limitation, adjustments to such ERISA
Partner's Capital Commitment and Partnership Percentage.

Article V

Partnership Allocations

5.1 Allocation Of Profit And Loss. Except as hereinafter provided in
this Article V:

(a) Profit of the Partnership for each Accounting Period shall
be allocated as follows:

(i) Twenty percent (20%) of the Partnership's Profit shall
be allocated to the Capital Accounts of all of the Partners to the extent
that such accounts were previously allocated a Contingent Loss that has not
been restored by previous allocations pursuant to this paragraph or
paragraph 7.5(c). Such Profit shall be allocated to a Partner's Capital
Account on the basis of the proportion that the unrestored Contingent
Losses contained in such Partner's Capital Account bear to the aggregate
unrestored Contingent Losses contained in all of the Partners' Capital
Accounts. Any balance of said twenty percent (20%) of the Partnership's
Profit shall be allocated to the Capital Account of the General Partner.

(ii) Eighty percent (80%) of the Partnership's Profit shall
be allocated to the Capital Accounts of all of the Partners in proportion
to their respective Partnership Percentages.

(b) Loss of the Partnership for each Accounting Period shall be
allocated as follows:

(i) Twenty percent (20%) of the Partnership's Loss shall be
allocated to the Capital Account of the General Partner.

(ii) Eighty percent (80%) of the Partnership's Loss shall be
allocated to the Capital Accounts of all of the Partners in proportion to
their respective Partnership Percentages.

(c) Money Market Income received by the Partnership during an
Accounting Period and expenses borne by the Partnership pursuant to
subparagraphs 6.2(b) through 6.2(e) during such Accounting Period (other
than (i) expenses properly allocated and charged to purchases, sales or
exchanges of securities and (ii) expenses specially allocated pursuant to
paragraph 5.3(c)) shall be allocated among the Capital Accounts of all of
the Partners in proportion to their respective Partnership Percentages.

5.2 Reallocation Of Contingent Losses. If, for any Accounting
Period, after the allocations provided in this Article V have been made,
the balance of the Adjusted Capital Account Balance of the General Partner
has been reduced to less than one percent (1%) of the sum of the balances
of the Capital Accounts of all Partners with positive balances, an amount
(the "Contingent Loss") shall be reallocated from the General Partner's
Capital Account to all of the Partners' Capital Accounts (in proportion to
each Partner's respective Partnership Percentage) so that the General
Partner's Adjusted Capital Account Balance is equal to one percent (1%) of
the sum of the balances of the Capital Accounts of all Partners with
positive balances. Solely for purposes of this paragraph 5.2, the General
Partner's Capital Account shall not be deemed to include any amounts
attributable to any Limited Partner's interest held by the General Partner
and shall be deemed to include (i) any promissory note contributed to the
Partnership by the General Partner and not otherwise included in the
General Partner's Capital Account and (ii) any outstanding obligations of
the General Partner to contribute capital to the Partnership pursuant to
paragraph 7.5(b)(i).

5.3 Other Allocations. Notwithstanding the foregoing, the
allocations provided in this Article V shall be subject to the following
exceptions:

(a) (i) Any loss or expense otherwise allocable to a Limited
Partner that exceeds the balance in such Limited Partner's Capital Account
shall instead be allocated first to all Partners who have positive balances
in their Capital Accounts in proportion to such positive balances, and when
all Partners' Capital Accounts have been reduced to zero (0), then to the
General Partner.

(ii) In the event any Limited Partner unexpectedly receives
any adjustments, allocations, or distributions described in Treasury
Regulation Section 1.704-1(b)(2)(ii)(d)(4) through (d)(6), that causes the
balance in such Partner's Capital Account to be reduced below zero (0),
items of Partnership income and gain shall be specially allocated to such
Limited Partner in an amount and manner sufficient to eliminate the deficit
balance in its Capital Account created by such adjustments, allocations, or
distributions as quickly as possible.

(iii) For purposes of this subparagraph (a), the balance in a
Partner's Capital Account shall take into account the adjustments provided
in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4) through (d)(6).

(iv) Any special allocations of items of profit, income,
gain, loss or expense pursuant to this subparagraph (a) shall be taken into
account in computing subsequent allocations, so that the net amount of any
items so allocated and the profit, gain, loss, income, expense, and all
other items allocated to each Partner shall, to the extent possible, be
equal to the net amount that would have been allocated to each such Partner
if such special allocations pursuant to this subparagraph (a) had not
occurred.

(b) To the extent the Partnership has taxable interest income or
expense with respect to any promissory note (excluding any note contributed
by the General Partner pursuant to paragraph 4.3) between any Partner and
the Partnership as holder and maker or maker and holder pursuant to Section
483, Sections 1271 through 1288, or Section 7872 of the Code, such interest
income or expense shall be specially allocated to the Partner to whom such
promissory note relates, and such Partner's Capital Account adjusted if
appropriate.

(c) In the event that additional persons are admitted to the
Partnership as Limited Partners subsequent to the Formation Date (or
existing Limited Partners increase their Capital Commitments),
organizational costs, fees (including the incremental management fee
described in paragraph 6.1(c)), and expenses of the Partnership that are
allocated to the Partners on or after the effective date of such admission
(or increase) shall be allocated first to such Partners to the extent
necessary to cause such persons to be treated with respect to such items as
if they had been Partners (or had such increased Capital Commitments) from
the Formation Date.

(d) Except for the allocations provided for in paragraph
5.3(a)(ii), the interest of the General Partner in each material item of
Partnership income, gain, loss, deduction, or credit shall equal at least
one percent (1%) of each such item at all times during the existence of the
Partnership. For purposes of the preceding sentence, in determining the
General Partner's interest in such items, any interest treated as a limited
partnership interest for purposes of determining allocations which is owned
by the General Partner or partners of the General Partner shall be taken
into account.

5.4 Income Tax Allocations.

(a) Except as otherwise provided in this paragraph or as
otherwise required by the Code and the rules and Treasury Regulations
promulgated thereunder, a Partner's distributive share of Partnership
income, gain, loss, deduction, or credit for income tax purposes shall be
the same as is entered in the Partner's Capital Account pursuant to this
Agreement.

(b) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, income, gain, loss and deduction with respect to
any asset contributed to the capital of the Partnership shall, solely for
tax purposes, be allocated among the Partners so as to take account of any
variation between the adjusted basis of such property to the Partnership
for federal income tax purposes and its initial Adjusted Asset Value.

(c) In the event the Adjusted Asset Value of any Partnership
asset is adjusted pursuant to the terms of this Agreement, subsequent
allocations of income, gain, loss and deduction with respect to such asset
shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Adjusted Asset Value in the
same manner as under Code Section 704(c) and the Treasury Regulations
thereunder.

Article VI

Management Fee; Partnership Expenses

6.1 Management Fee.

(a) Nth Power Technologies, Inc., a California corporation,
shall act as administrative management agent for the Partnership (the
"Management Agent"), and shall be compensated in advance and on a quarterly
basis for services rendered during the term of the Partnership by the
payment by the Partnership on the first day of each calendar quarter (or
portion thereof) of a management fee. The Management Agent shall provide
administrative services to the Partnership and the General Partner and
shall be responsible for the expenses described in paragraph 6.2(a).
Notwithstanding the foregoing, the appointment of the Management Agent
shall not in any way relieve the General Partner of its responsibilities,
duties or authority as the general partner of the Partnership.

(b) (i) Through the seventh (7th) anniversary of the Formation
Date, the management fee for each calendar quarter shall be an amount equal
to five-eighths of one percent (.625%) of the aggregate Capital Commitments
of all Partners as of the first day of each such quarter: the management
fee will be adjusted on January 1st of each year for increases or decreases
in the consumer price index--urban consumers occurring during the previous
twelve (12) month period, provided however, that the cumulative compounded
adjustment for changes in the consumer price index shall in no event exceed
thirty percent (30%).

(ii) After the seventh (7th) anniversary of the Formation
Date and through the scheduled termination date of the Partnership as set
forth in paragraph 2.1, the management fee shall be determined based on an
annual budget prepared by the General Partner and the Management Agent and
approved by the Fund Committee, which approval shall not be reasonably
withheld, provided, however, that in no event shall the management fee
payable pursuant to this clause (ii) be less than seventy percent (70%) of
the fee that would have been payable had the provisions of clause (i)
continued to apply (without considering the application of subparagraph
(e)).

(iii) In the event that the term of the Partnership is
extended pursuant to paragraph 10.1, the management fee during the
extension period shall be determined based on an annual budget prepared by
the General Partner and the Management Agent and approved by a Majority of
Interest of the Limited Partners, which approval shall not be unreasonably
withheld.

(iv) The management fee for the Partnership's first and last
quarters shall be proportionately reduced based upon the ratio the number
of days in each such period bears to ninety (90).

(c) In addition to the foregoing, in the event that additional
persons are admitted to the Partnership as Limited Partners (or existing
Partners increase their Capital Commitments) subsequent to the Formation
Date, the Management Agent shall be entitled to receive an additional
management fee payment at the time of such admission (or increase) equal to
the incremental amount of management fee that would have been paid to the
Management Agent from the Formation Date through such admission (or
increase) had such person been a Partner (or had such increased Capital
Commitment) from the Formation Date.

(d) The amount of management fee otherwise due for any quarter
shall be reduced by any compensation received, in the preceding quarter, by
the General Partner, the Principals, or any general partner of the General
Partner from any entity in which the Partnership has an interest for
services typically performed by venture capital fund managers but not
including interim services normally provided by employees or third party
consultants of operating companies; provided, however, that (i) if other
investment funds managed by the General Partner, the Principals, general
partners of the General Partner or their Affiliates also hold an interest
in such an entity, the management fee hereunder shall be reduced only by
the Partnership's allocable portion, based on the cost basis of each
investment fund's interest, of such compensation and (ii) the Principals,
general partners and employees of the General Partner who serve as
directors for any entity in which the Partnership has an interest will be
permitted to participate in standard stock incentive programs designed for
the board members of such entity without causing an offset to the
management fee otherwise due and payable to the Management Agent. In the
event that the fees referred to in the first sentence of this subparagraph
6.1(c) exceed the management fee otherwise payable by the Partnership in
the subsequent calendar quarter, the amount of any such excess shall be
deducted from the management fee otherwise payable by the Partnership in
future calendar quarters.

(e) In the event that the General Partner [or the Management
Agent] forms a subsequent investment fund with at least forty million
dollars ($40,000,000) in committed capital and receives a management fee
from such fund prior to the seventh (7th) anniversary of the Formation
Date, the management fee payable pursuant to paragraph 6.1(b)(i) shall be
reduced by twenty percent (20%) of the amount otherwise payable thereunder.

6.2 Expenses.

(a) From the management fee, the Management Agent shall bear all
normal operating expenses incurred in connection with the management of the
Partnership, except for those expenses borne directly by the Partnership
set forth in the immediately following subparagraphs. Such normal
operating expenses to be borne by the Management Agent shall include,
without limitation, expenditures on account of: salaries, wages, clerical,
and other expenses relating to and incurred by the employees of the
Partnership, the General Partner and the general partners of the General
Partner; rentals payable for space used by the Partnership, the General
Partner and the Management Agent; computers and other office equipment;
bookkeeping services and preparing and distributing reports to the
Partners; travel and entertainment; and investigating and evaluating
investment opportunities in, and managing investments of, the Partnership.

(b) The Partnership shall bear all costs and expenses incurred
in the holding and purchase, sale or exchange of securities (whether or not
ultimately consummated), including, but not by way of limitation, third
party fees, interest on borrowed money, real property or personal property
taxes on investments, brokerage fees, taxes applicable to the Partnership
on account of its operations, fees incurred in connection with the
maintenance of bank or custodian accounts, and all expenses incurred in
connection with the registration of the Partnership's securities under
applicable securities laws or regulations. The Partnership shall also bear
expenses incurred by the General Partner in serving as the tax matters
partner, the cost of liability and other insurance premiums for insurance
in which the Partnership is the named beneficiary, expenses related to any
escrow established pursuant to paragraph 7.5, costs associated with
Partnership meetings and the Partnership's Fund Committee, the management
fee paid to the Management Agent, all legal, accounting and consulting
fees, all costs and expenses arising out of the Partnership's
indemnification obligation pursuant to this Agreement, and all expenses
that are not normal operating expenses.

(c) The Partnership shall bear all organizational fees and
expenses incurred by or on behalf of the General Partner in connection with
the syndication, formation and organization of the Partnership and the
General Partner, up to a maximum of one hundred fifty thousand dollars
($150,000), including legal and accounting fees, printing costs, travel and
communication costs and consulting or similar fees incurred in connection
with such organization and formation.

(d) The Partnership shall bear all fees and expenses relating to
any insurance policies or surety protection that the General Partner, in
its sole discretion, may deem appropriate to purchase.

(e) The Partnership shall bear all liquidation costs, fees, and
expenses incurred by the General Partner (or its designee) in connection
with the liquidation of the Partnership at the end of the Partnership's
term, specifically including but not limited to legal and accounting fees
and expenses.

Article VII

Withdrawals By And Distributions To The Partners

7.1 Interest. Except as specifically provided for herein, no
interest shall be paid to any Partner on account of its interest in the
capital of or on account of its investment in the Partnership.

7.2 Withdrawals By The Partners. No Partner may withdraw any amount
from its Capital Account unless such withdrawal is made pursuant to this
Article VII or Article XIII.

7.3 Partners' Obligation To Repay Or Restore. Except as required by
law or the terms of this Agreement, no Partner shall be obligated at any
time to repay or restore to the Partnership all or any part of any
distribution made to it from the Partnership in accordance with the terms
of this Article VII or Article X.

7.4 Cash Distributions. Cash proceeds from the disposition of long-term
investments and ordinary income, other than Money Market Income, shall
be distributed at such times and in such amounts as determined in the sole
discretion of the General Partner. It is the intent of the General Partner
to distribute proceeds from the disposition of long-term investments and
portfolio income as soon as reasonably practicable; provided, however, that
no such distribution shall be made unless the General Partner determines,
in its sole discretion, that the distribution is consistent with the cash
needs of the Partnership, including the maintenance of reasonable reserves;
and, provided further, in no event shall the Partnership invest more than
sixty million dollars ($60,000,000) in long-term investments. Any
distribution under this paragraph 7.4 shall be allocated among the Partners
(i) first in proportion to the amount of net recognized capital gains and
ordinary income, other than Money Market Income, previously allocated to
each Partner and not distributed and (ii) thereafter in proportion to
Partnership Percentages; provided, however, that unless (A) there are no
unrestored Contingent Losses allocated to the Limited Partners' Capital
Accounts, (B) after a distribution the value of the Partnership portfolio
will equal or exceed one hundred twenty percent (120%) of the cost basis of
the portfolio, and (C) distributions will have been made to the Limited
Partners in an amount at least equal to the Limited Partners' prior capital
contributions (with in kind distributions valued at their fair market value
at the time of their distributions), the General Partner's portion of the
distribution described in the foregoing clause (i), in excess of that
portion that is based on the General Partner's Partnership Percentage,
shall be retained by the Partnership and distributed to the General Partner
only upon the satisfaction of conditions (A) and (B) or, subject to
paragraph 10.4, upon liquidation of the Partnership.

7.5 Discretionary In Kind Distributions.

(a) At the discretion of the General Partner, distributions of
Marketable Securities may be made in kind to the Partners as follows:

(i) In kind distributions of securities whose fair market
value exceeds their Adjusted Asset Value shall be distributed (A) twenty
percent (20%) to the General Partner, and (B) eighty percent (80%) to all
of the Partners in proportion to their Partnership Percentages, provided
that there are at the date of such distribution no Contingent Losses in the
Limited Partners' Capital Accounts that have not previously been restored
or are not restored by adjustments to such distribution as provided in
clause (ii) and, provided further, that unless, after the distribution,
(X) the value of the Partnership portfolio will equal or exceed one hundred
twenty percent (120%) of the cost basis of the portfolio, and
(Y) distributions will have been made to the Limited Partners in an amount
at least equal to the Limited Partners' prior capital contributions (with
in kind distributions valued at their fair market value at the time of the
distributions), the General Partner's portion of the distribution described
in the foregoing clause (A) shall be placed in escrow pursuant to the terms
of paragraph 7.5(e).

(ii) If there are Contingent Losses in the Limited
Partners' Capital Accounts that have not been previously restored, in kind
distributions described in clause (A) of subsection (i) shall be
distributed in accordance with Partnership Percentages until allocations
made pursuant to paragraph 7.5(c) have restored such Contingent Losses.

(iii) In kind distributions of securities whose fair market
value is less than their Adjusted Asset Value shall be distributed to all
of the Partners in proportion to Partnership Percentages.

(b) In order to maintain its proportionate share of Partnership
capital, the General Partner receiving a distribution in kind pursuant to
subparagraph (a)(i)(A) of this paragraph (including a distribution which is
placed in escrow), (i) shall be obligated to contribute to the capital of
the Partnership in cash concurrently with such distribution an amount equal
to the tax basis of the securities distributed to the General Partner in
such distribution, which obligation shall be secured by the securities to
be distributed in kind to the General Partner and shall be due upon
liquidation of the Partnership; or (ii) may contribute to the capital of
the Partnership in cash concurrently with such distribution an amount equal
to the amount described in the foregoing clause (i) [; or (iii) may decline
distribution of a portion of such securities, the fair market value of
which is equal to the amount of cash described in the foregoing clause (i).
The amount of cash or securities described in clauses (ii) and (iii) above
shall thereafter be distributed to all Partners in proportion to their
Partnership Percentages.]

(c) Immediately prior to any distribution in kind, the
difference between the fair market value and the Adjusted Asset Value of
any securities distributed shall be allocated to the Capital Accounts of
the Partners as a Profit or Loss pursuant to Article V.

(d) Securities distributed in kind shall be subject to such
conditions and restrictions as the General Partner determines are legally
required or appropriate. Whenever classes of securities are distributed in
kind, each Partner shall receive its ratable portion of each class of
securities distributed in kind; provided, however, that in the event any
Limited Partner would receive an amount of any security that would cause
such Limited Partner to own or control in excess of the amount of such
security that it may lawfully own or control or may own or control without
tax penalty, then, upon receipt of notice to such effect from a Limited
Partner, the General Partner shall vary the method of distribution, in an
equitable manner, so as to avoid such excessive ownership or control.

(e) (i) In the event that the General Partner's portion of a
distribution is required to be placed in escrow pursuant to paragraph
7.5(a)(i), the securities distributed to the General Partner shall be
deposited with an escrow agent, which may include, without limitation, the
General Partner acting as escrow agent. The escrow agent shall hold the
securities pursuant to an escrow agreement that reflects the terms of this
subparagraph (e). The General Partner hereby grants to the Partnership a
security interest in all securities distributed by the Partnership to the
escrow agent. Assets held by the escrow agent shall be managed at the
direction of the General Partner. The General Partner and its partners
shall be liable for all taxes and other charges levied upon the assets held
by the escrow agent or any income or distributions thereon. The General
Partner shall have the benefit, and bear the risk, of all distributions of
income, dividends, cash, or other property on or relating to the assets
held in escrow or any other change in the character of any of the assets
therein. All distributions on assets held in escrow shall also be held by
the escrow agent.

(ii) The escrow agreement shall provide that the funds,
securities and other assets held in escrow shall be distributed by the
escrow agent upon request by the General Partner as follows:

(A) In the event that conditions (X) and (Y) of
paragraph 7.5(a)(i) are satisfied, all or a portion of the assets held in
escrow may be distributed to the General Partner;

(B) In the event the Return Value (as defined in
paragraph 10.4) of the assets held in escrow exceed twenty percent (20%) of
the excess of (1) the sum of (x) previous capital contributions to the
Partnership plus (y) Capital Commitments to the Partnership that have not
yet been contributed, over (2) previous distributions to the Partners that
were allocated among the Partners in accordance with Partnership
Percentages, said excess amount held in escrow may be distributed to the
General Partner.

(C) As of the first day of March of each year (and
upon termination of the Partnership), the escrow agreement shall provide
that the General Partner shall have the right to cause the escrow agent to
distribute cash to the General Partner in an amount equal to the product of
forty percent (40%) (with such percentage to be adjusted in good faith by
the General Partner to reflect changes in federal or California income tax
rates on long-term capital gains occurring after the date of this
Agreement) and the taxable income accruing to the General Partner in
respect of the assets held in escrow during the prior calendar year;

(D) Upon final liquidation of the Partnership, the
assets held by the escrow agent shall be contributed by the escrow agent to
the Partnership in satisfaction of and to the extent of the General
Partner's obligations pursuant to subparagraph 10.4(b), if any, and
distributed in accordance therewith. The balance, if any, shall be
distributed to the General Partner; and

[(E) Except as provided in paragraph (e)(ii)(C), if
assets held in escrow are to be distributed to the General Partner, a pro
rata portion of each asset held in escrow (determined by reference to the
Return Value of such assets) shall be distributed.]

(f) Non-Marketable Securities may be distributed only with the
prior written consent of the General Partner and Two-Thirds in Interest of
the Limited Partner.

7.6 Mandatory Distributions.

(a) Within ninety (90) days after the end of each calendar year
during the Partnership term, each Partner shall be paid in cash, to the
extent of cash reasonably available to the Partnership, an amount equal to
the excess, if any, of Money Market Income over Partnership expenses
allocated to it for such calendar year pursuant to paragraph 5.1(c).

(b) Within ninety (90) days after the end of each calendar year
during the Partnership term, each Partner shall be paid in cash an amount
representing a tax distribution equal to the product of (A) the taxable
income included in such Partner's allocation of Profit during such calendar
year and (B) forty percent (40%) (with such percentage to be adjusted in
good faith by the General Partner to reflect changes in federal or
California income tax rates on long-term capital gains occurring after the
date of this Agreement); provided, however, that cash distributions made
during the calendar year in which such Profit is recognized (other than
distributions made pursuant to this paragraph) shall reduce the
distributions otherwise required by this paragraph 7.6(b).

7.7 Withholding Obligations.

(a) The Partnership shall make payments with respect to any
Partner in amounts required to discharge any legal obligation of the
Partnership to withhold or make payments to any governmental authority with
respect to any federal, state or local tax liability, including penalties
and interest, of such Partner arising as a result of such Partner's
interest in the Partnership ("Tax Payments"). The amount of any such Tax
Payments shall be deemed to be a loan by the Partnership to such Partner.
The amount of such loan, plus interest at an annual rate equal to the prime
rate then being charged by the Partnership's primary bank plus (i) two (2)
percentage points from the date of any such Tax Payment and (ii) any costs
of collection incurred by the Partnership (including legal fees), shall be
repaid to the Partnership on demand or, at the election of the General
Partner, by offset to distributions otherwise allocable to the debtor
Partner.

(b) If and to the extent the Partnership is required to make any
Tax Payments with respect to any distribution in kind to a Partner pursuant
to paragraph 7.5 or otherwise, at the option of the General Partner, either
(i) such Partner's proportionate share of such distribution shall be
reduced by securities equal in value to the amount of such Tax Payments, or
(ii) such Partner shall pay to the Partnership prior to such distribution
an amount of cash equal to such Tax Payments. The securities described in
clause (i) may, in the discretion of the General Partner, either (A) be
distributed to the Partners in accordance with this paragraph or (B) be
sold by the Partnership to generate the cash necessary to satisfy such Tax
Payments. If the securities are sold, then for purposes of income tax
allocations only under this Agreement, any gain or loss on such sale or
exchange shall be allocated to the Partner to whom the Tax Payments relate.

Article VIII

Management Duties And Restrictions

8.1 Management. The General Partner shall have the sole and
exclusive right to manage, control, and conduct the affairs of the
Partnership and to do any and all acts on behalf of the Partnership,
including exercise of rights to elect to adjust the tax basis of
Partnership assets and to revoke such elections and to make such other tax
elections as the General Partner shall deem appropriate. If the General
Partner elects to adjust the tax basis of Partnership assets upon request
of one (1) or more of the Limited Partners, the incremental accounting
costs incurred by the Partnership as a result of such election shall be
charged to the requesting Limited Partner or Partners.

8.2 Time Commitment. For so long as any natural person remains (a) a
general partner of the General Partner or (b) an officer of the general
partner of the General Partner, the General Partner shall use its best
efforts to cause each such person to devote substantially all of his or her
business time to the Partnership, the Subsequent Funds, entities whose
securities are held or were held by any of the foregoing and entities in
which such person serves as a director on the Formation Date or on the date
such person is admitted as a general partner of the General Partner or
becomes an officer of the general partner of the General Partner.

8.3 No Control By The Limited Partners; No Withdrawal. The Limited
Partners shall take no part in the control or management of the affairs of
the Partnership nor shall the Limited Partners have any authority to act
for or on behalf of the Partnership except as is specifically permitted by
this Agreement. Except as specifically set forth in this Agreement, the
Limited Partners shall have no right to withdraw from the Partnership.

8.4 Subsequent Funds. The General Partner or the Principals (for so
long as such individuals serve as officers of the general partner of the
General Partner) may not form a new venture capital fund until the earlier
of (i) such time that at least two-thirds (2/3) of the Partnership's
aggregate Capital Commitments have been invested, expenses, committed for
investment in portfolio companies or reserved for expenses or (ii) five (5)
years after the Formation Date. A subsequent fund formed in accordance
with this paragraph shall be referred to herein as a "Subsequent Fund." In
the event that a Subsequent Fund has been formed, the General Partner will
allocate subsequent investment opportunities between the Partnership and
such Subsequent Fund in such a manner as it reasonably determines to
reflect the investment objectives and remaining term of each entity. Each
of the Limited Partners hereby consents and agrees to the formation of
Subsequent Funds and further consents and agrees that neither the
Partnership nor any of its Partners shall have any rights in or to such
Subsequent Funds, or any profits derived therefrom.

8.5 Compliance With Partnership Agreement; Detrimental Acts. No
Partner, Principal nor any general partner of the General Partner shall
enter into any agreement the result of which would be for another person,
firm, or corporation to become directly interested in the Partnership other
than as provided for in this Agreement and no Partner, Principal nor any
partner of the General Partner shall do any act in contravention of this
Agreement, or that would be detrimental to the best interests of the
Partnership, or that would make it impossible to carry on the affairs of
the Partnership.

8.6 Investment Opportunities And Restrictions.

(a) Each of the Limited Partners hereby agrees that (i) the
General Partner may provide, but is under no obligation to provide, co-
investment opportunities to one (1) or more of the Limited Partners when
the General Partner believes that it is appropriate and in the best
interest of the Partnership; (ii) the General Partner may offer the right
to participate in investment opportunities of the Partnership to other
private investors, groups, partnerships, or corporations whenever the
General Partner, in its sole discretion, determines, and (iii) the General
Partner, its partners and the Principals may, in the General Partner's sole
discretion and subject to the approval of the Fund Committee, invest in
parallel with the Partnership; provided, however, that such co-investments
will be on terms and conditions substantially identical (exclusive of
amount) to those governing the Partnership's investments.

(b) The General Partner and its general partner and their
Affiliates will not engage in any transaction that might reasonably be
viewed by an independent observer as trading against or in any way contrary
to the best interests of the Partnership and its portfolio companies.

(c) Unless approved by the Fund Committee, (i) not more than ten
percent (10%) of the Partnership's Committed Capital shall be invested in
any single portfolio company, (ii) the Partnership shall not invest in any
entity in which the General Partner, a Principal or Limited Partner (or an
Affiliate of any of the foregoing) has previously invested or otherwise has
a material direct or indirect economic interest, provided, however, that
this restriction will not prevent follow-on investments in existing
portfolio companies of the Partnership, and (iii) the General Partner shall
not cause the Partnership to make any investment that is inconsistent with
the Partnership's Business Plan dated ___________.

(d) The General Partner shall not borrow money or otherwise
incur indebtedness (including guarantees of loans to portfolio companies)
on behalf of the Partnership, including by acquiring property subject to
indebtedness, except (i) with the approval of Two-Thirds in Interest of the
Limited Partners, or (ii) on a short-term basis in anticipation of the
receipt of Additional Capital Contributions in an aggregate principal
amount at any one time not in excess of an amount equal to ten (10%) of the
aggregate Capital Commitments of all Partners.

(e) The General Partner will use its best efforts to operate the
Partnership in a manner that will not subject the income of any Partner, or
any partner of any Partner, subject to Section 511 of the Code to taxation
of such income as unrelated business taxable income, including unrelated
debt financed income, as defined in Sections 512 and 514 of the Code. The
General Partner shall not cause the Partnership to invest in any operating
partnership or other entity the operations of which would subject the
income of any Partner, or any partner of any Partner, subject to Section
511 of the Code to taxation of such income as unrelated business taxable
income, including unrelated debt financed income, as defined in Sections
512 and 514 of the Code.

(f) The General Partner will use its reasonable best efforts to
conduct the affairs of the Partnership so as to avoid having the
Partnership, or any Partner or partner thereof, treated as engaged in a
trade or business within the United States for purposes of Sections 871,
875, 882, 884 and 1446 of the Code.

(g) The General Partner shall not cause the Partnership to
invest in any other investment fund (excluding investments in money market
or similar funds) in which the manager thereof receives, as compensation, a
portion of the profits of such fund.

(i) Except with the prior approval of the Fund Committee, the
General Partner shall use its best efforts to ensure that not more than ten
percent (10%) of the Partnership's Capital Commitments shall be invested in
securities that are publicly traded when acquired by the Partnership
(excluding securities received in exchange for other securities that were
not publicly traded when acquired by the Partnership).

8.7 Business Opportunities. Consistent with the General Partner's
approach of adding value to the portfolio companies of the Partnership, the
General Partner will use reasonable efforts to identify and to refer, at
its discretion, any indirect business opportunities relating to portfolio
companies to one or more of the Limited Partners.

Article IX

Investment Representation And
Transfer Of Partnership Interests

9.1 Investment Representation Of The Limited Partners. This
Agreement is made with each of the Limited Partners in reliance upon each
Limited Partner's representation to the Partnership, which by executing
this Agreement each Limited Partner hereby confirms, that its interest in
the Partnership is to be acquired for investment, and not with a view to
the sale or distribution of any part thereof, and that it has no present
intention of selling, granting participation in, or otherwise distributing
the same, and each Limited Partner understands that its interest in the
Partnership has not been registered under the Securities Act and that any
transfer or other disposition of the interest may not be made without
registration under the Securities Act or pursuant to an applicable
exemption therefrom. Each Limited Partner further represents that it does
not have any contract, undertaking, agreement, or arrangement with any
person to sell, transfer, or grant participations to such person, or to any
third person, with respect to its interest in the Partnership.

9.2 Qualifications Of The Limited Partners. Each Limited Partner
represents that it is an "accredited investor" within the meaning of that
term as defined in Regulation D promulgated under the Securities Act.

9.3 Transfer By Limited Partner.

(a) No Limited Partner shall sell, assign, pledge, mortgage, or
otherwise dispose of or transfer its interest in the Partnership without
the prior written consent of the General Partner. Notwithstanding the
foregoing, after delivery of the opinion of counsel hereinafter required by
this Article IX, a Limited Partner may sell, assign, pledge, mortgage, or
otherwise dispose of or transfer its interest in the Partnership without
such consent (i) to any corporation directly or indirectly holding eighty
percent (80%) or more of the shares of the Limited Partner or any
corporation of which eighty percent (80%) or more of the shares are held
directly or indirectly by such corporation, including any corporation of
which the Limited Partner holds, directly or indirectly, eighty percent
(80%) or more of the shares; or (ii) pursuant to a merger, plan of
reorganization, sale or pledge of, or other general encumbrance on all or
substantially all of the Limited Partner's stock or assets; (iii) as may be
required by any law or regulation; or (iv) to a successor trust or trustee
of any Limited Partner that is an "employee benefit plan" within the
meaning of, and subject to the provisions of, ERISA.

(b) In addition to other restrictions on transfer contained
herein, a Limited Partner that is not a United States person, as defined in
the Securities Act, shall in no event transfer its Partnership interest to
a United States person for a period of one (1) year after the acquisition
of such interest.

(c) Notwithstanding anything in this Agreement to the contrary,
no interest in the Partnership may be subdivided for assignment or transfer
into interests smaller than an interest the aggregate initial offering
price of which would have been less than twenty-thousand dollars ($20,000).

9.4 Right Of First Refusal. If at any time a Limited Partner wishes
to transfer its Partnership interest, in whole or in part (and such
transfer is not permitted by, or consented to by the General Partner
pursuant to the other provisions of this Article IX), such Limited Partner
shall send a written notice to the General Partner and the other Limited
Partners indicating its desire to transfer all or part of its Partnership
interest, the price at which it proposes to make such transfer, and the
identity, if known, of the proposed transferee or transferees. At any time
within thirty (30) days after the sending of such notice, the General
Partner, with the consent of Two-Thirds in Interest of the Limited
Partners, may cause the Partnership to agree to purchase such interest at
the price stated in such notice, or, subject to such procedures as the
General Partner may determine, the other Limited Partners may agree to
purchase such interest at such price. If the Partnership or the Limited
Partners do not agree to purchase such interest at such price, the General
Partner may purchase it at such price not sooner than thirty (30) but
within sixty (60) days after the sending of the notice. If the entire
interest being offered by such Limited Partner is not so purchased, then
the Limited Partner may, within ninety (90) days of the original notice to
the Partners and subject to the general requirements of transfers
hereinafter set forth, sell any portion of such interest not so purchased
to any institution, of quality and standing comparable to the other Limited
Partners and approved by the General Partner, on terms that are
economically no more favorable to such buyer than were stated in such
Limited Partner's initial notice to the other Partners.

9.5 Requirements For Transfer. Notwithstanding the foregoing, unless
consented to by the General Partner, the transfer or other disposition of
the interest of a Limited Partner shall not be permitted if such transfer
or disposition would:

(i) result in the Partnership's assets being considered, in the
opinion of counsel for the Partnership, as "plan assets" within the meaning
of ERISA or any regulations proposed or promulgated thereunder;

(ii) result in the termination of the Partnership's tax year
under Section 708(b)(1)(B) of the Code;

(iii) result in violation of the Securities Act or any comparable
state law;

(iv) require the Partnership to register as an investment company
under the Investment Company Act of 1940, as amended;

(v) require the Partnership, the Principals, the General
Partner, or any partner of the General Partner to register as an investment
adviser under the Investment Advisers Act of 1940, as amended;

(vi) result in a termination of the Partnership's status as a
partnership for tax purposes;

(vii) result in a violation of any law, rule, or regulation by the
Limited Partner, the Partnership, the Principals, the General Partner, or
any partner of the General Partner; or

(viii) result in the Partnership being considered a publicly traded
partnership under Section 7704 of the Code.

Prior to effecting any transfer of Limited Partner interests the
General Partner shall have received an opinion satisfactory to it, or shall
have waived the requirement of such an opinion, covering the substance of
(i) through (viii). Such legal opinion shall be provided to the General
Partner by the transferring Limited Partner or the proposed transferee, and
any costs associated therewith, as well as all costs incurred by the
Partnership in connection with the transfer, shall be borne by the
transferring Limited Partner or the proposed transferee.

9.6 Substitution As A Limited Partner. A transferee of a Limited
Partner's interest pursuant to this Article IX shall become a substituted
Limited Partner only with the consent of the General Partner, which consent
may be withheld for any reason or for no reason, and only if such
transferee (a) elects to become a substituted Limited Partner by delivering
a notice of such election to the Partnership and (b) executes, acknowledges
and delivers to the Partnership such other instruments as the General
Partner may deem necessary or advisable to effect the admission of such
transferee as a substituted Limited Partner, including, without limitation,
the written acceptance and adoption by such transferee of the provisions of
this Agreement.

9.7 Transfer Of General Partnership Interest. The General Partner
may not sell, assign, pledge, mortgage, or otherwise dispose of its
Partnership interest without the prior written consent of Two-Thirds in
Interest of the Limited Partners.

Article X

Dissolution And Liquidation Of The Partnership

10.1 Extension Of Partnership Term. On the tenth anniversary of the
later of (i) the Formation Date or (ii) the last date on which a Limited
Partner is admitted to the Partnership (or increases its Capital
Commitment) pursuant to paragraph 3.2(b)(i), the General Partner may, if it
determines in its sole discretion that such extensions are in the best
interest of the Partnership, extend the Partnership term for not more than
two (2) successive two (2) year periods by delivery of notice to the
Limited Partners (a "Notice of Extension"). During said two (2) year
extension periods, the General Partner shall use its best efforts to
convert the Partnership's Nonmarketable Securities into Marketable
Securities or cash. The General Partner shall not purchase the securities
of any new portfolio company during such period; provided, however, that
the General Partner may (a) purchase additional securities of an existing
portfolio company if it deems such a purchase to be in the best interest of
the Partnership and (b) exchange the securities of an existing portfolio
company for other securities. The management fee payable to the Management
Agent during any extension period shall be as determined by the General
Partner and approved by the Fund Committee, which approval shall not be
unreasonably withheld.

10.2 Liquidation After An Event Of Early Termination. In the event of
liquidation of the Partnership after an Event of Early Termination, a
Majority in Interest of the Limited Partners shall elect one (1) or more
liquidators to manage the liquidation of the Partnership.

10.3 Winding Up Procedures.

(a) Promptly upon final dissolution of the Partnership, the
affairs of the Partnership shall be wound up and the Partnership
liquidated. The closing Capital Accounts of all the Partners shall be
computed as of the date of final dissolution as if the date of final
dissolution were the last day of an Accounting Period in accordance with
Article V, and then adjusted in the following manner:

(i) All assets and liabilities of the Partnership shall be
valued as of the date of final dissolution. For purposes of this
paragraph, the amount of any obligation of the General Partner to the
Partnership shall be deemed an asset of the Partnership.

(ii) The Partnership's assets as of the date of final
dissolution shall be deemed to have been sold at their fair market values
and the resulting Profit or Loss shall be allocated to the Partners'
Capital Accounts in accordance with the provisions of Article V.

(iii) With respect to any obligations on the part of the
General Partner pursuant to any promissory notes contributed to the
Partnership under paragraph 4.3 or to contribute capital pursuant to
paragraph 7.5(b)(i) that are outstanding at the time of the Partnership's
final dissolution, the General Partner may elect to satisfy such
obligations either (A) in cash or in securities previously received by the
General Partner from the Partnership (with such securities valued pursuant
to paragraph 12.1 and 12.2(e) at the time they are transferred to the
Partnership) within ninety (90) days after the partnership's dissolution,
(B) by reducing the General Partner's closing Capital Account, but not
below zero, or (C) by a combination of the foregoing.

The result for each Partner shall be its closing Capital Account. The
amount of each Partner's closing Capital Account divided by the sum of the
closing Capital Accounts for all of the Partners as of such date shall be
such Partner's "Final Partnership Percentage."

(b) Distributions in liquidation may be made in cash or in kind
or partly in cash and partly in kind. The General Partner or the
liquidator shall use its best judgment as to the most advantageous time for
the Partnership to sell investments or to make distributions in kind. All
cash and each security distributed in kind after the date of final
dissolution of the Partnership shall be distributed ratably in accordance
with the General Partner and the Limited Partners' Final Partnership
Percentages, unless such distribution would result in a violation of a law
or regulation applicable to a Limited Partner or a tax penalty to such
Limited Partner, in which event, upon receipt by the General Partner of
notice to such effect, such Limited Partner may designate a different
entity to receive the distribution, or designate, subject to the approval
of the General Partner, an alternative distribution procedure (provided
such alternative distribution procedure does not prejudice any of the other
Partners). Each security so distributed shall be subject to reasonable
conditions and restrictions necessary or advisable in order to preserve the
value of such security or for legal reasons.

10.4 Payments In Liquidation.

(a) The assets of the Partnership shall be distributed in
liquidation of the Partnership in the following order:

(i) to the creditors of the Partnership, other than
Partners, in the order of priority established by law, either by payment or
by establishment of reserves;

(ii) to the Partners, in repayment of any loans made to, or
other debts owed by, the Partnership to such Partners;

(iii) to the General Partner and the Limited Partners in
respect of the positive balances in their Capital Accounts in compliance
with Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2).

(b) (i) If, upon liquidation of the Partnership, it is
determined that distributions made to the General Partner with respect to
its twenty percent (20%) interest in Partnership Profit or Loss have
exceeded twenty percent (20%) of the aggregate distributions of cumulative
net Profit of the Partnership over its entire term (with distributions in
kind valued at the time of distribution and reduced to the extent the
General Partner has previously made or is obligated to make a contribution
pursuant to paragraph 7.5(b)), the General Partner shall promptly return
such part or all of the distributions made to it with respect to its twenty
percent (20%) interest, excluding distributions made pursuant to paragraph
7.6(b) (and other distributions to the extent said distributions reduce
distributions under paragraph 7.6(b)), to the extent of such excess.
Returns made by the General Partner pursuant to this paragraph 10.4(b)
shall be distributed promptly to all Partners in accordance with their
Final Partnership Percentages.

(ii) Any return obligation pursuant to clause (b)(i) shall
be satisfied first out of any assets held in escrow pursuant to paragraph
7.5(e), and the balance of such return obligation, if any, may be
satisfied, at the election of the General Partner, in cash or by the return
of securities previously distributed to the General Partner. To the extent
assets held in escrow are used to satisfy the return obligation, unless
otherwise agreed to by the General Partner and a Majority in Interest of
the Limited Partners, a pro rata portion of each such asset (calculated by
reference to the Return Value of such assets as defined below) shall be
returned to the Partnership. Upon the return of any assets other than cash
to the Partnership, such assets shall be valued at their Return Value for
purposes of determining when the General Partner has satisfied its return
obligation pursuant to clause (b)(i). In the case of assets held in escrow
pursuant to paragraph 7.5(e) prior to transfer to the Partnership, the
Return Value shall be equal to the greater of the fair market value
(determined pursuant to paragraph 12.1) of such assets determined (1) on
the dates such assets were distributed by the Partnership, and (2) on the
date such assets are transferred to the Partnership. In the case of assets
transferred to the Partnership directly from the General Partner, the
Return Value shall be equal to the fair market value (determined pursuant
to paragraph 12.1) of such assets on the date returned to the Partnership.

Article XI

Financial Accounting,
Reports, Meetings And Voting

11.1 Financial Accounting; Fiscal Year. The books and records of the
Partnership shall be kept in accordance with the provisions of this
Agreement and otherwise in accordance with generally accepted accounting
principles consistently applied, and shall be audited at the end of each
fiscal year by a nationally recognized independent certified public
accounting firm selected by the General Partner. The Partnership's fiscal
year shall be the calendar year.

11.2 Supervision; Inspection Of Books. Proper and complete books of
account of the business of the Partnership, copies of the Partnership's
federal, state and local tax returns for each fiscal year, the schedule of
partners set forth in Exhibit A, this Agreement and the Partnership's
Certificate of Limited Partnership shall be kept under the supervision of
the General Partner at the principal office of the Partnership. Such books
and records shall be open to inspection by the Limited Partners, or their
accredited representatives, at any reasonable time during normal business
hours after reasonable advance notice.

11.3 Quarterly Reports. Beginning with the first full calendar
quarter of Partnership operations, the General Partner shall transmit to
the Limited Partners within thirty (30) days after the close of each of the
first three (3) calendar quarters of each year, unaudited financial
statements (including each Partner's Capital Account as adjusted for its
allocable share of unrealized gains and losses), a summary of acquisitions
and dispositions of investments made by the Partnership during that
quarter, and a list of investments then held, together with a valuation of
such investments.

11.4 Annual Report; Financial Statements Of The Partnership. The
General Partner shall transmit to the Limited Partners within seventy-five
(75) days after the close of the Partnership's fiscal year audited
financial statements of the Partnership prepared in accordance with the
terms of this Agreement and otherwise in accordance with generally accepted
accounting principles, including an income statement for the year then
ended and balance sheet as of the end of such year, a statement of changes
in the Partners' Capital Accounts (as adjusted for unrealized gains and
losses), and a list of investments then held. The financial statements
shall be accompanied by a report from the General Partner to the Limited
Partners, which shall include a status report on investments then held, a
summary of acquisitions and dispositions of investments made by the
Partnership during the preceding quarter, a valuation of each such
investment, and a brief statement on the affairs of the Partnership during
the fiscal year then ended.

11.5 Tax Returns And Information. The General Partner shall cause the
Partnership's tax return and IRS Form 1065, Schedule K-1, to be prepared
and delivered to the Limited Partners within seventy-five (75) days after
the close of the Partnership's fiscal year. The Partnership shall upon the
request of any Limited Partner promptly furnish to such Limited Partner any
information such Limited Partner may require or reasonably request in order
to withhold tax or to file tax returns and reports or to furnish tax
information to any of its partners.

11.6 Tax Matters Partner. The General Partner shall be the
Partnership's tax matters partner under the Code and under any comparable
provision of state law. The General Partner shall have the right to resign
as tax matters partner by giving thirty (30) days' written notice to each
Partner. Upon such resignation a successor tax matters partner shall be
elected by a Majority in Interest of the Limited Partners. The tax matters
partner shall employ experienced tax counsel to represent the Partnership
in connection with any audit or investigation of the Partnership by the
Internal Revenue Service and in connection with all subsequent
administrative and judicial proceedings arising out of such audit. If the
tax matters partner is required by law or regulation to incur fees and
expenses in connection with tax matters not affecting all the Partners,
then the tax matters partner may, in its sole discretion, seek
reimbursement from those Partners on whose behalf such fees and expenses
were incurred. The tax matters partner shall keep the Partners informed of
all administrative and judicial proceedings, as required by Section 6223(g)
of the Code, and shall furnish to each Partner, if such Partner so requests
in writing, a copy of each notice or other communication received by the
tax matters partner from the Internal Revenue Service, except such notices
or communications as are sent directly to such requesting Partner by the
Internal Revenue Service. The relationship of the tax matters partner to
the Limited Partners is that of a fiduciary, and the tax matters partner
has fiduciary obligations to perform its duties as tax matters partner in
such manner as will serve the best interest of the Partnership and all of
the Partnership's Partners. To the fullest extent permitted by law, the
Partnership agrees to indemnify the tax matters partner and its agents and
save and hold them harmless, from and in respect to all (i) fees, costs and
expenses in connection with or resulting from any claim, action, or demand
against the tax matters partner, the General Partner or the Partnership
that arise out of or in any way relate to the tax matters partner's status
as tax matters partner for the Partnership, and (ii) all such claims,
actions, and demands and any losses or damages therefrom, including amounts
paid in settlement or compromise or any such claim, action, or demand;
provided that this indemnity shall not extend to conduct by the tax matters
partner adjudged (i) not to have been undertaken in good faith to promote
the best interest of the Partnership or (ii) to have constituted
recklessness or intentional wrongdoing by the tax matters partner.

11.7 Annual Meetings. An annual meeting of the Partners shall be held
during each full calendar year of the Partnership's term at such time and
place as the General Partner may designate in a notice to the Limited
Partners delivered at least thirty (30) days in advance of the scheduled
date of each such meeting. The purpose of each such meeting shall be to
present the annual report and to discuss issues and opportunities
associated with the Partnership. The Partners shall bear their own costs
associated with attending such annual meetings.

11.8 Voting. Except as specifically set forth in this Agreement, the
Limited Partners shall have no right to vote on any matter relative to the
Partnership and its affairs.

Article XII

Valuation And Fund Committee

12.1 Valuation. Subject to the specific standards set forth below and
any valuation guidelines adopted by the General Partner and approved by the
Fund Committee, which guidelines shall not be inconsistent with the terms
of this Agreement, the valuation of securities and other assets and
liabilities under this Agreement shall be at fair market value. Except as
may be required under applicable Treasury Regulations, no value shall be
placed on the goodwill or the name of the Partnership in determining the
value of the interest of any Partner or in any accounting among the
Partners.

(a) The following criteria shall be used for determining the
fair market value of securities:

(i) Securities not subject to investment letter or other
similar restrictions on free Marketability:

(A) If traded on one (1) or more securities exchanges
of any country or quoted on the NASDAQ National Market System, the value
shall be deemed to be the securities' closing price as reported in the Wall
Street Journal or another nationally recognized publication or service that
reports such data.

(B) If actively traded over-the-counter in any country
but not quoted on the NASDAQ National Market System, the value shall be
deemed to be the closing bid price of such securities on the valuation date
reflecting an appropriate discount, if any, for the illiquidity of the
Partnership's position.

(C) If there is no active public market, the General
Partner shall make a determination of the fair market value, taking into
consideration the cost basis of the securities, developments concerning the
issuing company subsequent to the acquisition of the securities, any
financial data and projections of the issuing company provided to the
General Partner, and such other factor or factors as the General Partner
may deem relevant.

(ii) Securities subject to investment letter or other
restrictions on free Marketability shall be valued by making an appropriate
adjustment from the value determined under (A), (B), or (C) above to
reflect the effect of the restrictions on transfer.

(b) If the General Partner in good faith determines that,
because of special circumstances, the valuation methods set forth in this
paragraph do not fairly determine the value of a security, the General
Partner shall make such adjustments or use such alternative valuation
method as it deems appropriate.

12.2 Fund Committee.

(a) The Partnership shall have an Fund Committee appointed by
the General Partner and comprised of not fewer than three (3) nor more than
five (5) voting members who shall be representatives of the Limited
Partners. The chair of the Fund Committee shall be designated by the
General Partner. The Fund Committee shall be responsible for:

(i) approving any valuation guidelines adopted by the
General Partner pursuant to paragraph 12.1 and approving, pursuant to the
provisions of paragraph 12.2(e), the General Partner's determination of the
fair market value of the Partnership's assets and liabilities (for this
purpose the Fund Committee may request such information concerning the
Partnership's assets and liabilities as is reasonable);

(ii) reviewing the status of the Partnership's portfolio
companies;

(iii) approving investments as described in paragraph 8.6(a);

(iv) evaluating the Partnership's investments and
dispositions;

(v) providing the Partnership and the General Partner with
such counsel and advice as the General Partner shall reasonably request,
including advice with respect to any potential conflicts of interest
between the General Partner and the Partnership and advice regarding
potential investments and investment opportunities; and

(vi) performing such other functions as may be provided for
herein or as otherwise agreed to by the General Partner and the Fund
Committee.

(b) The Fund Committee shall conduct its affairs in such manner
and by such procedures as a majority of its members deems appropriate;
provided, however, that the Fund Committee shall not schedule meetings more
often than annually unless called more frequently by the General Partner
or, in exceptional circumstances, by a majority of the Fund Committee. All
actions taken by the Fund Committee shall be taken by majority vote.
Notice to Fund Committee members shall be made pursuant to the procedures
set forth in this Agreement for notices to Partners.

(c) The reasonable out-of-pocket expenses incurred by the Fund
Committee shall be an expense to be borne by the Partnership.

(d) The Fund Committee shall take no part in the control or
management of the Partnership's affairs, nor shall the Fund Committee have
any power or authority to act for or on behalf of the Partnership. Members
of the Fund Committee shall be entitled to the benefits of the exculpation
and indemnification provisions of paragraphs 15.3 and 15.4 as provided
therein.

(e) Subject to the provisions of this paragraph 12.2(e), the
General Partner shall have the power at any time to determine, for all
purposes of this Agreement, the fair market value of any of the assets and
liabilities of the Partnership. A statement setting forth in writing in
reasonable detail such fair market value, with necessary explanations
thereof, shall be sent to each member of the Fund Committee when a
determination of such value is necessary pursuant to the terms of this
Agreement, who shall have thirty (30) days after the transmittal of such
notice to approve or disapprove such valuation of specific assets and
liabilities. Approval of such valuation in accordance with valuation
guidelines established under paragraph 12.1 shall not be unreasonably
withheld. If within thirty (30) days of delivery of such statement a
majority of the Fund Committee members fail to notify the General Partner
of their disapproval of any such determination, or if a majority of the
members notify the General Partner of their approval, such valuation shall
be final and conclusive with respect to all of the Partners. If within
thirty (30) days of delivery of such statement a majority of the Fund
Committee members notify the General Partner of their disapproval of any
such determination, the General Partner shall either submit a new
determination in place of the one disapproved or request a meeting with the
Fund Committee to discuss a mutually satisfactory valuation. If within
thirty (30) days of the end of such first-mentioned thirty (30) day period
values satisfactory to the General Partner and the Fund Committee shall not
have been determined, the General Partner shall submit the dispute to
arbitration in San Francisco, California, in accordance with the rules,
then obtaining, of the American Arbitration Association. In such
arbitration, the General Partner and the Fund Committee shall each select
an arbitrator and the two arbitrators so selected shall choose a third
arbitrator to resolve the dispute. The fees and expenses of any arbitrator
retained in accordance with the provisions hereof shall be borne by the
Partnership.

Article XIII

Partners Subject To Special Regulation

13.1 ERISA Partners.

(a) Each Limited Partner that is an "employee benefit plan" or
is an entity that is deemed to hold "plan assets" (the "ERISA Partner"),
each within the meaning of, and subject to the provisions of, ERISA hereby
(i) acknowledges that, for so long as the Partnership is a venture capital
operating company within the meaning of Section 2510.3-101(d) of Title 29
of the Code of Regulations, it is its understanding that neither the
Partnership, the General Partner, nor any of the Affiliates of the General
Partner, are "fiduciaries" of such Limited Partner within the meaning of
ERISA by reason of the Limited Partner investing its assets in, and being a
Limited Partner of, the Partnership; (ii) acknowledges that it has been
informed of and understands the investment objectives and policies of, and
the investment strategies that may be pursued by, the Partnership;
(iii) acknowledges that it is aware of the provisions of Section 404 of
ERISA relating to the requirements for investment and diversification of
the assets of employee benefit plans and trusts subject to ERISA;
(iv) represents that it has given appropriate consideration to the facts
and circumstances relevant to the investment by that ERISA Partner's plan
in the Partnership and has determined that such investment is reasonably
designed, as part of such portfolio, to further the purposes of such plan;
(v) represents that, taking into account the other investments made with
the assets of such plan, and the diversification thereof, such plan's
investment in the Partnership is consistent with the requirements of
Section 404 and other provisions of ERISA; (vi) acknowledges that it
understands that current income will not be a primary objective of the
Partnership; and (vii) represents that, taking into account the other
investments made with the assets of such plan, the investment of assets of
such plan in the Partnership is consistent with the cash flow requirements
and funding objectives of such plan; provided, however, that the
representations in clauses (iv), (v) and (vii) shall apply only to
"employee benefit plan" Limited Partners.

(b) Notwithstanding any provision contained herein to the
contrary, each ERISA Partner may elect to withdraw from the Partnership, or
upon demand by the General Partner shall withdraw from the Partnership, at
the time and in the manner hereinafter provided, if either the ERISA
Partner or the General Partner shall obtain an opinion of counsel (which
counsel shall be reasonably acceptable to both the ERISA Partner and the
General Partner) to the effect that, as a result of applicable statutes,
regulations, case law, administrative interpretations, or similar authority
(i) the continuation of the ERISA Partner as a Limited Partner of the
Partnership or the conduct of the Partnership will result, or there is a
material likelihood the same will result, in a material violation of ERISA,
or (ii) all or any portion of the assets of the Partnership constitute
assets of the ERISA Partner for the purposes of ERISA and are subject to
the provisions of ERISA to substantially the same extent as if owned
directly by the ERISA Partner. In the event of the issuance of such
opinion of counsel, a copy of such opinion shall be given to all the
Partners, together with the written notice of the election of the ERISA
Partner to withdraw or the written demand of the General Partner for
withdrawal, whichever the case may be. Thereupon, unless within one
hundred twenty (120) days after receipt of such written notice and opinion
the General Partner is able to eliminate the necessity for such withdrawal
to the reasonable satisfaction of the ERISA Partner and the General
Partner, whether by correction of the condition giving rise to the
necessity of the Limited Partner's withdrawal, or the amendment of this
Agreement, or otherwise, such Limited Partner shall withdraw its entire
interest in the Partnership, such withdrawal to be effective upon the last
day of the fiscal quarter during which such one hundred twenty (120) day
period expired.

(c) The withdrawing Limited Partner shall be entitled to receive
within one hundred twenty (120) days after the date of such withdrawal an
amount equal to the amount of such Partner's Capital Account, adjusted to
reflect unrealized gains and losses of the Partnership, as of the effective
date of such withdrawal.

(d) Any distribution or payment to a withdrawing Limited Partner
pursuant to this paragraph may, in the sole discretion of the General
Partner, be made in cash, in a pro rata distribution of securities, in the
form of a promissory note, the terms of which shall be mutually agreed upon
by the General Partner and the withdrawing Limited Partner and which shall
provide for partial payments, as if such promissory note represented an
equity interest in the Partnership, at the time of cash distributions to
the Partners, or any combination thereof. In determining the form of
payment to be made to the withdrawing Limited Partner, the General Partner
will use reasonable efforts to make payments in cash to the extent
reasonably available and subject to the ongoing cash requirements of the
Partnership as determined by the General Partner.

Article XIV

Certain Definitions

14.1 Accounting Period. An Accounting Period shall be (i) a calendar
year if there are no changes in the Partners' respective interests in the
Profits or Losses of the Partnership during such calendar year except on
the first day thereof, or (ii) any other period beginning on the first day
of a calendar year, or any other day during a calendar year upon which
occurs a change in such respective interests, and ending on the last day of
a calendar year, or on the day preceding an earlier day upon which any
change in such respective interest shall occur.

14.2 Adjusted Asset Value. The Adjusted Asset Value with respect to
any asset shall be the asset's adjusted basis for federal income tax
purposes, except as follows:

(a) The initial Adjusted Asset Value of any asset contributed by
a Partner to the Partnership shall be the gross fair market value of such
asset at the time of contribution, as determined by the contributing
Partner and the Partnership.

(b) In the discretion of the General Partner, the Adjusted Asset
Values of all Partnership assets may be adjusted to equal their respective
gross fair market values, as determined by the General Partner, and the
resulting unrecognized profit or loss allocated to the Capital Accounts of
the Partners pursuant to Article V, as of the following times: (i) the
acquisition of an additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis capital
contribution; and (ii) the distribution by the Partnership to a Partner of
more than a de minimis amount of Partnership assets, unless all Partners
receive simultaneous distributions of either undivided interests in the
distributed property or identical Partnership assets in proportion to their
interests in Partnership distributions as provided in paragraphs 7.4, 7.5
and 7.6.

(c) The Adjusted Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined
by the General Partner, and the resulting unrecognized profit or loss
allocated to the Capital Accounts of the Partners pursuant to Article V, as
of the following times: (i) the termination of the Partnership for federal
income tax purposes pursuant to Code Section 708(b)(1)(B); and (ii) the
termination of the Partnership either by expiration of the Partnership's
term or the occurrence of an Event of Termination.

14.3 Adjusted Capital Account Balance. With respect to the General
Partner, the balance in the General Partner's Capital Account as of the end
of the relevant Accounting Period, after giving effect to the following
adjustments:

(a) Credit to such Capital Account any amounts which the General
Partner is obligated to restore, including, without limitation, the amount
described in paragraph 10.4(b), or is deemed to be obligated to restore
pursuant to the penultimate sentence of Treasury Regulations Section 1.704-1(b)
(4)(iv)(f); and

(b) Debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)
(ii)(d)(6) of the Treasury Regulations.

14.4 Affiliate. An Affiliate of any person shall mean any person that
directly, or indirectly through one (1) or more intermediaries, controls,
or is controlled by or is under common control with the person specified.

14.5 Capital Account. The Capital Account of each Partner shall
consist of its original capital contribution (i) increased by any
additional capital contributions, its share of income or gain that is
allocated to it pursuant to this Agreement, and the amount of any
Partnership liabilities that are assumed by it or that are secured by any
Partnership property distributed to it, and (ii) decreased by the amount of
any withdrawals by it, its share of expense or loss that is allocated to it
pursuant to this Agreement, and the amount of any of its liabilities that
are assumed by the Partnership or that are secured by any property
contributed by it to the Partnership. The foregoing provision and the
other provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Treasury Regulation Section 1.704-1(b)(2)
(iv), and shall be interpreted and applied in a manner consistent
with such Regulations. In the event the General Partner shall determine
that it is prudent to modify the manner in which the Capital Accounts, or
any debits or credits thereto, are computed in order to comply with such
Regulations, the General Partner may make such modification, provided that
it is not likely to have more than an insignificant effect on the total
amounts distributable to any Partner pursuant to Article VII and Article X.

14.6 Capital Commitment. A Partner's Capital Commitment shall mean
the aggregate amount of capital that such Partner has agreed to contribute
to the Partnership.

14.7 Code. The Code is the Internal Revenue Code of 1986, as amended
(or any corresponding provisions of succeeding law).

14.8 ERISA. ERISA shall mean the Employee Retirement Income Security
Act of 1974, as amended.

14.9 Event Of Early Termination. An Event of Early Termination shall
mean: (a) the withdrawal, bankruptcy, or dissolution and commencement of
winding up of the sole remaining general partner of the Partnership; or
(b) the election by Seventy-Five Percent in Interest of the Limited
Partners to terminate the Partnership in the event that the principal
officers of the general partner of the General Partner (i) fail, in the
aggregate, to devote substantially all of their business time to the
business of the Partnership or the Subsequent Funds, (ii) engage,
individually or collectively, in fraud with respect to the operation of the
Partnership, or (iii) substantially neglect, in the aggregate, their duties
arising under this Agreement to the material detriment of the Partnership;
or (c) the election by a Majority in Interest of the Limited Partners to
terminate the Partnership in the event that both of the Principals fail to
devote substantially all of their business time to the business of the
Partnership, the Subsequent Funds, entities whose securities are held or
were held by the Partnership or the Subsequent Funds and entities in which
a Principal serves as a director on the Formation Date.

14.10 Marketable; Marketable Securities; Marketability. These
terms shall refer to securities that are (a) registered under the
Securities Act, (b) traded on a national securities exchange or over-the-
counter in any country, (c) currently the subject of an effective issuer-
filed Securities Act registration statement or similar registration
statement outside of the United States, or (d) direct obligations of, or
obligations guaranteed as to principal and interest by, the United States,
certificates of deposit maturing within one (1) year or less issued by an
institution insured by the Federal Deposit Insurance Corporation or the
Federal Savings and Loan Insurance Corporation, or similar securities.

14.11 Money Market Income. Money Market Income shall be income
received from commercial paper, certificates of deposit (other than
certificates of deposit placed with banks to secure loans made by the banks
on behalf of the Partnership to potential portfolio companies of the
Partnership), treasury bills, other money market investments with
maturities of less than twelve (12) months and the interest on any
promissory notes contributed by the General Partner pursuant to
paragraph 4.3. Money Market Income shall not include other interest income
or dividends or other non-liquidating corporate distributions which are not
a return of capital for federal income tax purposes.

14.12 Nonmarketable Securities. Nonmarketable Securities are all
securities other than Marketable Securities.

14.13 Partnership Percentage. The Partnership Percentage for each
Partner shall be determined by dividing the amount of each Partner's
Capital Commitment by the sum of the Capital Commitments of all of the
Partners. The sum of the Partners' Partnership Percentages shall be one
hundred percent (100%).

14.14 Percentage In Interest; Majority In Interest. A specified
fraction or percentage in interest of the Partners or of the Limited
Partners shall mean Partners or Limited Partners whose Partnership
Percentages exceed the required fraction or percentage of the Partnership
Percentages of all such Partners or Limited Partners. (If the fraction or
percentage in interest is specified as not including the General Partner,
then the Partnership Percentage assigned any Limited Partner interest held
by the General Partner shall not be considered in making such calculation.)
A Majority in Interest shall mean 50.01% in interest.

14.15 Principals. Principals shall mean Nancy C. Floyd and
Maurice E.P. Gunderson.

14.16 Profit Or Loss. Profit or Loss shall be an amount computed
for each Accounting Period as of the last day thereof that is equal to the
Partnership's taxable income or loss for such Accounting Period, determined
in accordance with Section 703(a) of the Code (for this purpose, all items
of income, gain, loss, or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or
loss), with the following adjustments:

(a) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profit or Loss
pursuant to this paragraph shall be added to such taxable income or loss;

(b) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(i) and not
otherwise taken into account in computing Profit or Loss pursuant to this
paragraph shall be subtracted from such taxable income or loss;

(c) Gain or loss resulting from any disposition of a Partnership
asset with respect to which gain or loss is recognized for federal income
tax purposes shall be computed by reference to the Adjusted Asset Value of
the asset disposed of rather than its adjusted tax basis;

(d) The difference between the gross fair market value of all
Partnership assets and their respective Adjusted Asset Values shall be
added to such taxable income or loss in the circumstances described in
paragraph 14.2; and

(e) Items which are specially allocated pursuant to
paragraphs 5.1(c) and 5.3 hereof shall not be taken into account in
computing Profit or Loss.

14.17 Securities Act. Securities Act is the Securities Act of
1933, as amended.

14.18 Treasury Regulations. Treasury Regulations shall mean the
Income Tax Regulations promulgated under the Code, as such Regulations may
be amended from time to time (including corresponding provisions of
succeeding Regulations).

Article XV

Other Provisions

15.1 Governing Law; Consent To Jurisdiction. This Agreement shall be
governed by and construed under the laws of the State of California as
applied to agreements among the residents of such state made and to be
performed entirely within such state. Each of the parties hereto consents
to the personal jurisdiction of, and agrees venue shall be proper in, the
state and federal courts located in the State of California with respect to
any lawsuit arising from, or relating to, this Agreement.

15.2 Limitation Of Liability Of The Limited Partners. Except as
required by law, no Limited Partner shall be bound by, nor be personally
liable for, the expenses, liabilities, or obligations of the Partnership in
excess of its Capital Commitment to the Partnership.

15.3 Exculpation. Neither the General Partner, any member of the Fund
Committee, the Principals nor their respective partners, employees, or
Affiliates shall be liable to any Limited Partner or the Partnership for
honest mistakes of judgment, or for action or inaction, taken in good faith
for a purpose that was reasonably believed to be in the best interest of
the Partnership, or for losses due to such mistakes, action, or inaction,
or to the negligence, dishonesty, or bad faith of any employee, broker, or
other agent of the Partnership, provided that such employee, broker, or
agent was selected, engaged, or retained with reasonable care. The General
Partner may consult with counsel and accountants in respect of Partnership
affairs and be fully protected and justified in any action or inaction that
is taken in accordance with the advice or opinion of such counsel or
accountants, provided that they shall have been selected with reasonable
care. Notwithstanding any of the foregoing to the contrary, the provisions
of this paragraph and the immediately following paragraph shall not be
construed so as to relieve (or attempt to relieve) any person of any
liability by reason of gross negligence or intentional wrongdoing or to the
extent (but only to the extent) that such liability may not be waived,
modified, or limited under applicable law, but shall be construed so as to
effectuate the provisions of such paragraphs to the fullest extent
permitted by law.

15.4 Indemnification. The Partnership agrees to indemnify, out of the
assets of the Partnership only, the General Partner, the Principals each
member of the Fund Committee, and their respective partners, employees and
Affiliates (collectively, the "Indemnified Parties") to the fullest extent
permitted by law and to save and hold them harmless from and in respect of
all (a) reasonable fees, costs, and expenses paid in connection with or
resulting from any claim, action, or demand against an Indemnified Party
that arise out of or in any way relate to the Partnership, its properties,
business, or affairs and (b) such claims, actions, and demands and any
losses or damages resulting from such claims, actions, and demands,
including amounts paid in settlement or compromise (if recommended by
attorneys for the Partnership) of any such claim, action or demand;
provided, however, that this indemnity shall not extend to (i) conduct not
undertaken in good faith to promote the best interest of the Partnership or
the portfolio companies of the Partnership or (ii) conduct which is grossly
negligent or intentionally wrongful. Expenses incurred by any Indemnified
Party in defending a claim or proceeding covered by this paragraph shall be
paid by the Partnership in advance of the final disposition of such claim
or proceeding provided the Indemnified Party undertakes to repay such
amount if it is ultimately determined that such Indemnified Party was not
entitled to be indemnified. The provisions of this paragraph shall remain
in effect as to each Indemnified Party whether or not such Indemnified
Party continues to serve in the capacity that entitled such person to be
indemnified.

15.5 Execution. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one (1) and the same instrument.

15.6 Other Instruments And Acts. The Partners agree to execute any
other instruments or perform any other acts that are or may be necessary to
effectuate and carry on the partnership created by this Agreement.

15.7 Binding Agreement. This Agreement shall be binding upon the
transferees, successors, assigns, and legal representatives of the
Partners.

15.8 Notices. Any notice or other communication that one Partner
desires to give to another Partner shall be in writing, and shall be deemed
effectively given upon personal delivery or three (3) days after deposit in
any United States mail box, by registered or certified mail, postage
prepaid, upon confirmed transmission by facsimile or upon confirmed
delivery by an overnight commercial courier service addressed to the other
Partner at the address shown on Exhibit A or at such other address as a
Partner may designate by fifteen (15) days' advance written notice to the
other Partners.

15.9 Power Of Attorney. By signing this Agreement, each Limited
Partner designates and appoints the General Partner its true and lawful
attorney, in its name, place, and stead to make, execute, sign, and file
the Certificate of Limited Partnership and any amendment thereto and such
other instruments, documents, or certificates that may from time to time be
required of the Partnership by the laws of the United States of America,
the laws of the state of the Partnership's formation, or any other state or
jurisdiction in which the Partnership shall do business in order to qualify
or otherwise enable the Partnership to do business in such states or
jurisdictions. Such attorney is not hereby granted any authority on behalf
of the Limited Partners to amend this Agreement except that as attorney for
each of the Limited Partners, the General Partner shall have the authority
to amend this Agreement and the Certificate of Limited Partnership (and to
execute any amendment to the Agreement or the Certificate of Limited
Partnership on behalf of itself and as attorney-in-fact for each of the
Limited Partners) as may be required to effect:

(a) Admission of additional Partners pursuant to Article III;

(b) Transfers of Limited Partnership interests pursuant to
Article IX;

(d) Extensions of the Partnership term pursuant to Article X; or

(e) Withdrawal of Partners pursuant to Article XIII.

This power of attorney granted by each Limited Partner shall expire as
to such Partner immediately after the amendment of the Partnership's
Exhibit A to reflect the complete withdrawal of such Partner as a Partner
of the Partnership.

15.10 Amendment; Waiver.

(a) Except as provided by the immediately preceding paragraph,
this Agreement may be amended only with the written consent of the General
Partner and Two-Thirds in Interest of the Limited Partners. No term or
condition contained in the Exhibits to this Agreement or in any note or
security agreement entered into pursuant to this Agreement may be waived,
discharged, terminated, or modified without the consent of the General
Partner and Two-Thirds in Interest of the Limited Partners.

(b) Notwithstanding the above and except as provided in
paragraph 14.5:

(i) No amendment of this Agreement may modify the method of
making Partnership allocations, modify the method of determining the
Partnership Percentage or Final Partnership Percentage of any Partner,
modify any provision requiring the consent of all of the Partners or all of
the Limited Partners to a specified action, or modify the restrictions
contained in this subparagraph (b), unless each Partner materially and
adversely affected thereby has expressly consented in writing to such
amendment; and

(ii) No amendment of this Agreement may modify Article XIII
or paragraph 8.6(e) unless each ERISA Partner has expressly consented in
writing to such amendment.

(c) Notwithstanding the above, the Partnership's or General
Partner's (or its partners' or employees') noncompliance with any provision
hereof in any single transaction or event may be waived in writing by Two-
Thirds in Interest of the Limited Partners (not including the General
Partner); provided, however, that no such waiver of noncompliance with any
provision specifically requiring the approval of more than Two-Thirds in
Interest of the Limited Partners shall be effective without the approval of
such larger percentage in Interest of the Limited Partners; provided
further, that no such waiver shall be effective if such noncompliance
directly injures some but not all of the Limited Partners unless the
Limited Partners directly injured waive such noncompliance. No waiver
shall be deemed a waiver of any subsequent event of noncompliance.

15.11 Legal Counsel. Each Partner hereby agrees and acknowledges
that:

(a) Cooley Godward Castro Huddleson & Tatum ("Cooley Godward")
has been retained by the General Partner in connection with the formation
of the Partnership and the offering of Limited Partner interests and in
such capacity has provided legal services to the General Partner and the
Partnership. The General Partner expects to retain Cooley Godward to
provide legal services to the General Partner and the Partnership in
connection with the management and operation of the Partnership.

(b) Cooley Godward is not and will not represent the Limited
Partners in connection with the formation of the Partnership, the offering
of Limited Partner interests, the management and operation of the
Partnership, or any dispute that may arise between the Limited Partners on
the one hand and the General Partner and the Partnership on the other (the
"Partnership Legal Matters").

(c) Each Limited Partner will, if it wishes counsel on a
Partnership Legal Matter, retain its own independent counsel with respect
thereto and, except as otherwise specifically provided by this Agreement,
will pay all fees and expenses of such independent counsel.

(d) Each Limited Partner hereby agrees that Cooley Godward may
represent the General Partner and the Partnership in connection with any
and all Partnership Legal Matters (including any dispute between the
General Partner or the Partnership and one (1) or more Limited Partners)
and waives any present or future conflict of interest with Cooley Godward
regarding Partnership Legal Matters arising by virtue of any representation
or deemed representation of such Limited Partner or the Partnership on
account of Cooley Godward's representation described in paragraph 15.11(a)
above; provided, however, that the Limited Partners are not hereby agreeing
to Cooley Godward's representation of the Partnership in a derivative
action on their behalf against the General Partner.

15.12 Entire Agreement. This Agreement and each subscription
agreement executed by the Limited Partners in connection with an investment
in the Partnership constitute the full,
complete, and final agreement of the Partners and supersede all prior
agreements between the Partners with respect to the Partnership.

15.13 Titles; Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and shall not be considered in the
interpretation of this Agreement.

15.14 Partnership Name. The Partnership shall have the exclusive
right to use the Partnership name as long as the Partnership continues.
Upon termination of the Partnership, the Partnership shall assign whatever
rights it may have in such name to the General Partner. No value shall be
placed upon the name or the goodwill attached to it for the purpose of
determining the value of any Partner's Capital Account or interest in the
Partnership.

In Witness Whereof, the Partners have executed this Agreement as of the
date first written above.

General Partner: Limited Partner:

Nth Power Technologies Partners, L.P.
by its general partner,
Nth Power Technologies, Inc.

By: By:
(signature)

Name:
(print name)

Title:

THE SECURITIES EVIDENCED BY THIS PARTNERSHIP AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS PURSUANT TO
SEC RULE 144 OR THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933
ACT COVERING SUCH SECURITIES OR THE GENERAL PARTNER RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
GENERAL PARTNER, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE 1933 ACT.

SIGNATURE PAGE FOR
LIMITED PARTNERSHIP AGREEMENT
Nth POWER TECHNOLOGIES FUND I, L.P.
__________ __, 1996

Exhibit A

SCHEDULE OF PARTNERS

Initial
Capital Capital
Partnership
Name and Address Commitment Contribution Percentage

General Partner:

Nth Power Technologies Partners, L.P.
c/o Nth Power Technologies, Inc.
50 California Street
32nd Floor
San Francisco, CA 94111

Limited Partners:

Total 100.0000%

Partnership Percentages shown on this Exhibit A are rounded. Actual
Partnership Percentages are determined pursuant to paragraph 14.13 of this
Agreement.

<PAGE>
Exhibit B

$_____________ __________, 1996
San Francisco, California

PROMISSORY NOTE

For value received, Nth Power Technologies Partners, L.P., a California
limited partnership ("Payor"), hereby promises to pay to Nth Power
Technologies Fund I, L.P., a California limited partnership ("Payee") at 50
California Street, 32nd Floor, San Francisco, California, 94111, or at such
other place as Payee may designate, the aggregate principal sum of
____________________ Dollars ($_________) according to the following terms
and conditions:

1. Interest. This Note shall bear interest at the rate of ____
percent (__%) per annum initially which rate shall be adjusted on the 1st
banking day of January and July of each year during the term of this Note
to the prime rate then being charged by Payee's primary banking facility.
Interest shall compound annually.

2. Payment. This Note and all accrued but unpaid interest shall
become due and payable upon the final liquidation of Payee. This Note and
all accrued but unpaid interest may be paid, in whole or in part, at any
time prior to such due date without penalty. All payments by Payor toward
the satisfaction of this Note shall be applied first to the payment of
interest and then to the retirement of the principal. Payments by Payor
toward the satisfaction of this Note may be paid, at the option of Payor,
in either: (a) lawful money of the United States of America and in
immediately available funds; (b) securities received by Payor in any
distribution from Payee, or (c) any combination of the methods of payment
specified in clauses (a) and (b) above. In the event that payment is made
in whole or in part in securities, the amount of such payment shall be
equal to the value of the securities transferred to Payee on the date of
payment valued in accordance with the valuation procedures set forth in
paragraphs 12.1 and 12.2(e) of that certain limited partnership agreement
dated _________, 1995, by and among Payee, Payor and the limited partners
named therein (the "Partnership Agreement"). In addition to the foregoing,
upon dissolution of the Partnership Payor may elect to reduce the amount
outstanding under this Note, in whole or in part, by effecting a
corresponding reduction in Payor's capital account in Payee as provided for
in paragraph 10.3 of the Partnership Agreement.

3. Type of Debt. Payor hereby represents and agrees that the
amounts due under this Note are not consumer debt, and are not incurred
primarily for personal, family or household purposes, but are for business
and commercial purposes only.

4. Waiver. Payor hereby waives presentment, protest and notice of
protest, demand for payment, notice of dishonor and all other notices or
demands in connection with the delivery, acceptance, performance, default
or endorsement of this Note.

5. Costs of Collection. In the event that any payment under this
Note is not made when due, Payee shall be entitled to recover, and Payor
agrees to pay when incurred, all costs and expenses of collection of this
Note, including without limitation, reasonable attorneys' fees.

6. Binding Agreement. This Note shall be binding upon the
undersigned, its successors and assigns, and any subsequent holders of this
Note.

7. Governing Law. This Note shall be governed by, and construed
under the laws of, the State of California as applied to agreements between
California residents entered into and to be performed entirely within
California.

Nth Power Technologies Partners, L.P.
by its general partner,
Nth Power Technologies, Inc.

By:

Name:

Title:

Accepted:

Nth Power Technologies Fund I, L.P.
By: Nth Power Technologies Partners, L.P.
by its general partner,
Nth Power Technologies, Inc.

By:

Name:

Title:
<PAGE>

TABLE OF CONTENTS

Page

Article I Name, Purpose And Offices Of Partnership . . . . . . . . . 1

1.1 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Principal Office. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Registered Agent And Office . . . . . . . . . . . . . . . . . . . 1

Article II Term Of Partnership. . . . . . . . . . . . . . . . . . . . 2

2.1 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Events Affecting A Partner Of The General Partner . . . . . . . . 2
2.3 Events Affecting A Limited Partner. . . . . . . . . . . . . . . . 2
2.4 Events Affecting The General Partner. . . . . . . . . . . . . . . 2

Article III Name And Admission Of Partners . . . . . . . . . . . . . . 2

3.1 Name And Address. . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Admission Of Additional Partners. . . . . . . . . . . . . . . . . 3

Article IV Capital Accounts, Capital Contributions, And Noncontributing
Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

4.1 Capital Accounts. . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Capital Contributions Of The Limited Partners . . . . . . . . . . 4
4.3 Capital Contributions Of The General Partner. . . . . . . . . . . 4
4.4 Acquisition Of An Additional Interest By The General Partner. . . 5
4.5 Noncontributing Partners. . . . . . . . . . . . . . . . . . . . . 5

Article V Partnership Allocations. . . . . . . . . . . . . . . . . . 7

5.1 Allocation Of Profit And Loss . . . . . . . . . . . . . . . . . . 7
5.2 Reallocation Of Contingent Losses . . . . . . . . . . . . . . . . 8
5.3 Other Allocations . . . . . . . . . . . . . . . . . . . . . . . . 8
5.4 Income Tax Allocations. . . . . . . . . . . . . . . . . . . . . . 10

Article VI Management Fee; Partnership Expenses . . . . . . . . . . . 10

6.1 Management Fee. . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Article VII Withdrawals By And Distributions To The Partners . . . . . 13

7.1 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.2 Withdrawals By The Partners . . . . . . . . . . . . . . . . . . . 13
7.3 Partners' Obligation To Repay Or Restore. . . . . . . . . . . . . 13
7.4 Cash Distributions. . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 Discretionary In Kind Distributions . . . . . . . . . . . . . . . 14
7.6 Mandatory Distributions . . . . . . . . . . . . . . . . . . . . . 16
7.7 Withholding Obligations . . . . . . . . . . . . . . . . . . . . . 17

Article VIII Management Duties And Restrictions . . . . . . . . . 17

8.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.2 Time Commitment. . . . . . . . . . . . . . . . . . . . . . . . 18
8.3 No Control By The Limited Partners; No Withdrawal. . . . . . . 18
8.4 Subsequent Funds . . . . . . . . . . . . . . . . . . . . . . . 18
8.5 Compliance With Partnership Agreement; Detrimental Acts. . . . 18
8.6 Investment Opportunities And Restrictions. . . . . . . . . . . 18
8.7 Business Opportunities . . . . . . . . . . . . . . . . . . . . 20

Article IX Investment Representation And Transfer Of Partnership Interests 20

9.1 Investment Representation Of The Limited Partners. . . . . . . 20
9.2 Qualifications Of The Limited Partners . . . . . . . . . . . . 20
9.3 Transfer By Limited Partner. . . . . . . . . . . . . . . . . . 21
9.4 Right Of First Refusal . . . . . . . . . . . . . . . . . . . . 21
9.5 Requirements For Transfer. . . . . . . . . . . . . . . . . . . 22
9.6 Substitution As A Limited Partner. . . . . . . . . . . . . . . 22
9.7 Transfer Of General Partnership Interest . . . . . . . . . . . 23

Article X Dissolution And Liquidation Of The Partnership. . . . . . 23

10.1 Extension Of Partnership Term. . . . . . . . . . . . . . . . . 23
10.2 Liquidation After An Event Of Early Termination. . . . . . . . 23
10.3 Winding Up Procedures. . . . . . . . . . . . . . . . . . . . . 23
10.4 Payments In Liquidation. . . . . . . . . . . . . . . . . . . . 24

Article XI Financial Accounting, Reports, Meetings And Voting . 26

11.1 Financial Accounting; Fiscal Year. . . . . . . . . . . . . . . 26
11.2 Supervision; Inspection Of Books . . . . . . . . . . . . . . . 26
11.3 Quarterly Reports. . . . . . . . . . . . . . . . . . . . . . . 26
11.4 Annual Report; Financial Statements Of The Partnership . . . . 26
11.5 Tax Returns And Information. . . . . . . . . . . . . . . . . . 26
11.6 Tax Matters Partner. . . . . . . . . . . . . . . . . . . . . . 27
11.7 Annual Meetings. . . . . . . . . . . . . . . . . . . . . . . . 27
11.8 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Article XII Valuation And Fund Committee . . . . . . . . . . . . 28

12.1 Valuation. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.2 Fund Committee . . . . . . . . . . . . . . . . . . . . . . . . 29

Article XIII Partners Subject To Special Regulation . . . . . . . 30

13.1 ERISA Partners . . . . . . . . . . . . . . . . . . . . . . . . 30

Article XIV Certain Definitions. . . . . . . . . . . . . . . . . 32

14.1 Accounting Period. . . . . . . . . . . . . . . . . . . . . . . 32
14.2 Adjusted Asset Value . . . . . . . . . . . . . . . . . . . . . 32
14.3 Adjusted Capital Account Balance . . . . . . . . . . . . . . . 33
14.4 Affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.5 Capital Account. . . . . . . . . . . . . . . . . . . . . . . . 33
14.6 Capital Commitment . . . . . . . . . . . . . . . . . . . . . . 33
14.7 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.8 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.9 Event Of Early Termination . . . . . . . . . . . . . . . . . . 33
14.10 Marketable; Marketable Securities; Marketability. . . . . 34
14.11 Money Market Income . . . . . . . . . . . . . . . . . . . 34
14.12 Nonmarketable Securities. . . . . . . . . . . . . . . . . 34
14.13 Partnership Percentage. . . . . . . . . . . . . . . . . . 34
14.14 Percentage In Interest; Majority In Interest. . . . . . . 34
14.15 Principals. . . . . . . . . . . . . . . . . . . . . . . . 35
14.16 Profit Or Loss. . . . . . . . . . . . . . . . . . . . . . 35
14.17 Securities Act. . . . . . . . . . . . . . . . . . . . . . 35
14.18 Treasury Regulations. . . . . . . . . . . . . . . . . . . 35

Article XV Other Provisions. . . . . . . . . . . . . . . . . . . . . 36

15.1 Governing Law; Consent To Jurisdiction . . . . . . . . . . . . 36
15.2 Limitation Of Liability Of The Limited Partners. . . . . . . . 36
15.3 Exculpation. . . . . . . . . . . . . . . . . . . . . . . . . . 36
15.4 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 36
15.5 Execution. . . . . . . . . . . . . . . . . . . . . . . . . . 37
15.6 Other Instruments And Acts . . . . . . . . . . . . . . . . . . 37
15.7 Binding Agreement. . . . . . . . . . . . . . . . . . . . . . . 37
15.8 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15.9 Power Of Attorney. . . . . . . . . . . . . . . . . . . . . . . 37
15.10 Amendment; Waiver . . . . . . . . . . . . . . . . . . . . 38
15.11 Legal Counsel . . . . . . . . . . . . . . . . . . . . . . 39
15.12 Entire Agreement. . . . . . . . . . . . . . . . . . . . . 39
15.13 Titles; Subtitles . . . . . . . . . . . . . . . . . . . . 39
15.14 Partnership Name. . . . . . . . . . . . . . . . . . . . . 40

INDEX OF DEFINITIONS

Term Paragraph Page

Accounting Period 14.1 29
Accredited Investor 9.2 18
Act -- 1
Additional Capital Contributions 4.2(b) 4
Adjusted Asset Value 14.2 29
Adjusted Capital Account Balance 14.3 30
Affiliate 14.4 30
Capital Account 14.5 30
Capital Commitment 14.6 30
Code 14.7 30
Cooley Godward 15.11 35
Contingent Loss 5.2 8
ERISA 14.8 30
ERISA Partner 13.1 27
Event of Early Termination 14.9 31
Final Partnership Percentage 10.3(a) 22
Formation Date 2.1 2
General Partner -- 1
Indemnified Parties 15.4 33
Initial Capital Contributions 4.2(a) 4
Limited Partners -- 1
Management Agent 6.1(a) 10
Marketable 14.10 31
Marketable Securities 14.10 31
Marketability 14.10 31
Majority in Interest 14.18 32
Money Market Income 14.11 31
Nonmarketable Securities 14.12 31
Notice of Extension 10.1 21
Optionee 4.5(b) 5
Optionor 4.5(b) 5
Partners 3.1 2
Partnership -- 1
Partnership Legal Matters 15.11 35
Partnership Percentage 14.13 31
Principals 14.14 31
Profit or Loss 14.15 32
Remaining Portion 4.5(b)(ii) 6
Return Value 10.4(b)(ii) 24
Securities Act 14.16 32
Subsequent Funds 8.3 16
Tax Payments 7.7(a) 15
Treasury Regulations 14.17 32
Percentage in Interest 14.18 32

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEETS AND STATEMENTS OF INCOME AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000899652
<NAME> CINERGY CORP.
<SUBSIDIARY>
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<NAME> CINERGY CORP. (CONSOLIDATED)
<MULTIPLIER> 1,000

<S> <C> <C>
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<PERIOD-END> MAR-31-1996 MAR-31-1996
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 6,232,079 6,232,079
<OTHER-PROPERTY-AND-INVEST> 0 0
<TOTAL-CURRENT-ASSETS> 585,782 585,262
<TOTAL-DEFERRED-CHARGES> 1,037,369 1,037,369
<OTHER-ASSETS> 185,784 195,784
<TOTAL-ASSETS> 8,041,014 8,050,494
<COMMON> 1,577 1,577
<CAPITAL-SURPLUS-PAID-IN> 1,595,435 1,595,435
<RETAINED-EARNINGS> 992,558 992,038
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,589,570 2,589,050
160,000 160,000
227,885 227,885
<LONG-TERM-DEBT-NET> 2,522,784 2,522,784
<SHORT-TERM-NOTES> 96,300 106,300
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 60,400 60,400
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,384,075 2,384,075
<TOT-CAPITALIZATION-AND-LIAB> 8,041,014 8,050,494
<GROSS-OPERATING-REVENUE> 3,099,749 3,099,749
<INCOME-TAX-EXPENSE> 232,893 232,893
<OTHER-OPERATING-EXPENSES> 2,273,323 2,273,323
<TOTAL-OPERATING-EXPENSES> 2,506,216 2,506,216
<OPERATING-INCOME-LOSS> 593,533 593,533
<OTHER-INCOME-NET> 10,624 10,904
<INCOME-BEFORE-INTEREST-EXPEN> 604,157 604,437
<TOTAL-INTEREST-EXPENSE> 219,479 220,279
<NET-INCOME> 384,678 384,158
28,965 28,965
<EARNINGS-AVAILABLE-FOR-COMM> 355,713 355,193
<COMMON-STOCK-DIVIDENDS> 269,836 269,836
<TOTAL-INTEREST-ON-BONDS> 207,985 207,985
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<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 0 0
<OTHER-PROPERTY-AND-INVEST> 2,606,198 2,606,198
<TOTAL-CURRENT-ASSETS> 4,113 3,593
<TOTAL-DEFERRED-CHARGES> 0 0
<OTHER-ASSETS> 845 10,845
<TOTAL-ASSETS> 2,611,156 2,620,636
<COMMON> 1,577 1,577
<CAPITAL-SURPLUS-PAID-IN> 1,595,435 1,595,435
<RETAINED-EARNINGS> 992,558 992,038
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,589,570 2,589,050
0 0
0 0
<LONG-TERM-DEBT-NET> 0 0
<SHORT-TERM-NOTES> 3,400 13,400
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 0 0
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 18,186 18,186
<TOT-CAPITALIZATION-AND-LIAB> 2,611,156 2,620,636
<GROSS-OPERATING-REVENUE> 0 0
<INCOME-TAX-EXPENSE> 0 0
<OTHER-OPERATING-EXPENSES> 0 0
<TOTAL-OPERATING-EXPENSES> 0 0
<OPERATING-INCOME-LOSS> 0 0
<OTHER-INCOME-NET> 357,049 357,329
<INCOME-BEFORE-INTEREST-EXPEN> 357,049 357,329
<TOTAL-INTEREST-EXPENSE> 1,336 2,136
<NET-INCOME> 355,713 355,193
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 355,713 355,193
<COMMON-STOCK-DIVIDENDS> 269,836 269,836
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 2.27 2.26
<EPS-DILUTED> 2.27 2.26

FINANCIAL STATEMENTS

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

FORM U-1

CINERGY CORP.

CONSOLIDATED

AS OF MARCH 31, 1996

(Unaudited)

Pages 1 through 6
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
TWELVE MONTHS ENDED MARCH 31, 1996

Pro Forma
Actual Adjustments Pro Forma
(in thousands, except per share amounts)
<S> <C> <C> <C>
OPERATING REVENUES
Electric $2,664,953 - $2,664,953
Gas 434,796 - 434,796
3,099,749 - 3,099,749

OPERATING EXPENSES
Fuel used in electric production 722,297 - 722,297
Gas purchased 204,982 - 204,982
Purchased and exchanged power 69,587 - 69,587
Other operation 549,985 - 549,985
Maintenance 181,500 - 181,500
Depreciation 276,498 - 276,498
Amortization of phase-in deferrals 12,491 - 12,491
Post-in-service deferred operating
expenses - net (1,339) - (1,339)
Income taxes 232,893 - 232,893
Taxes other than income taxes 257,322 - 257,322
2,506,216 - 2,506,216

OPERATING INCOME 593,533 - 593,533

OTHER INCOME AND EXPENSES - NET
Allowance for equity funds used during
construction 1,361 - 1,361
Post-in-service carrying costs 961 - 961
Phase-in deferred return 8,496 - 8,496
Income taxes 9,482 280 9,762
Other - net (9,676) - (9,676)
10,624 280 10,904

INCOME BEFORE INTEREST AND OTHER CHARGES 604,157 280 604,437

INTEREST AND OTHER CHARGES
Interest on long-term debt 207,985 - 207,985
Other interest 18,386 800 19,186
Allowance for borrowed funds used
during construction (6,892) - (6,892)
Preferred dividend requirements of
subsidiaries 28,965 - 28,965
248,444 800 249,244

NET INCOME $355,713 ($520) $355,193

AVERAGE COMMON SHARES OUTSTANDING 157,113 157,113

EARNINGS PER COMMON SHARE $2.27 $2.26

DIVIDENDS DECLARED PER COMMON SHARE $1.72
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT MARCH 31, 1996

ASSETS
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
<S> <C> <C> <C>
UTILITY PLANT - ORIGINAL COST
In service
Electric $8,645,996 - $8,645,996
Gas 684,822 - 684,822
Common 184,142 - 184,142
9,514,960 - 9,514,960
Accumulated depreciation 3,417,926 - 3,417,926
6,097,034 - 6,097,034

Construction work in progress 135,045 - 135,045
Total utility plant 6,232,079 - 6,232,079

CURRENT ASSETS
Cash and temporary cash investments 67,562 (520) 67,042
Restricted deposits 1,387 - 1,387
Accounts receivable less accumulated
provision of $10,967 for doubtful accounts 191,775 - 191,775
Materials, supplies and fuel
- at average cost
Fuel for use in electric production 101,280 - 101,280
Gas stored for current use 8,556 - 8,556
Other materials and supplies 89,973 - 89,973
Property taxes applicable to subsequent year 87,617 - 87,617
Prepayments and other 37,632 - 37,632
585,782 (520) 585,262

OTHER ASSETS
Regulatory Assets
Amounts due from customers - income taxes 423,611 423,611
Post-in-service carrying costs and
deferred operating expenses 188,113 - 188,113
Phase-in deferred return and depreciation 99,082 - 99,082
Deferred demand-side management costs 130,137 - 130,137
Deferred merger costs 55,309 - 55,309
Unamortized costs of reacquiring debt 74,532 - 74,532
Other 66,585 - 66,585
Other 185,784 10,000 195,784
1,223,153 10,000 1,233,153

$8,041,014 $9,480 $8,050,494
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT MARCH 31, 1996

CAPITALIZATION AND LIABILITIES
Pro Forma
Actual Adjustments Pro Forma
(dollars in thousands)
<S> <C> <C> <C>
COMMON STOCK EQUITY
Common stock - $.01 par value;
Authorized shares - 600,000,000
Outstanding shares - 157,679,129 $1,577 - 1,577
Paid-in capital 1,595,435 - 1,595,435
Retained earnings 992,558 (520) 992,038
Total common stock equity 2,589,570 (520) 2,589,050

CUMULATIVE PREFERRED STOCK OF SUBSIDIARIES
Not subject to mandatory redemption 227,885 - 227,885
Subject to mandatory redemption 160,000 - 160,000

LONG-TERM DEBT 2,522,784 - 2,522,784
Total capitalization 5,500,239 (520) 5,499,719

CURRENT LIABILITIES
Long-term debt due within one year 60,400 - 60,400
Notes payable 96,300 10,000 106,300
Accounts payable 280,814 - 280,814
Litigation settlement 80,000 - 80,000
Accrued taxes 324,170 - 324,170
Accrued interest 41,807 - 41,807
Other 53,053 - 53,053
936,544 10,000 946,544

OTHER LIABILITIES
Deferred income taxes 1,141,769 - 1,141,769
Unamortized investment tax credits 182,815 - 182,815
Accrued pension and other postretirement
benefit costs 183,272 - 183,272
Other 96,375 - 96,375
1,604,231 - 1,604,231

$8,041,014 $9,480 $8,050,494
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED STATEMENT OF CHANGES IN RETAINED EARNINGS
TWELVE MONTHS ENDED MARCH 31, 1996

Pro Forma
Actual Adjustments Pro Forma
(in thousands)

<S> <C> <C> <C>
BALANCE APRIL 1, 1995 $2,466,894 - $2,466,894

Net income 355,713 (520) 355,193
Issuance of 1,758,652 shares of
common stock - net 42,668 - 42,668
Common stock issuance expenses (45) - (45)
Dividends on common stock (see page 2 (269,836) - (269,836)
for per share amounts)
Other (5,824) - (5,824)

BALANCE MARCH 31, 1996 $2,589,570 ($520) $2,589,050
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.

Pro Forma Consolidated Journal Entries to Give Effect to the
proposed investment in a limited partnership.

<S> <C> <C>
Entry No. 1

Cash $10,000,000
Notes payable $10,000,000

To record record issuance of notes payable.

Entry No. 2

Investment in Nth Power Technologies Fund I, L.P. $10,000,000
Cash $10,000,000

To record the acquisition of a 20% limited partnership interest in Nth Power Technologies
Fund I, L.P.

Entry No. 3

Other interest expense $800,000
Cash $800,000

To record interest expense on $10,000,000 of notes payable at an assumed interest rate of 8%.

Entry No. 4

Cash $280,000
Other income and expenses - income taxes $280,000

To record the reduction of income taxes due to increased other interest expense ($800,000 at
an assumed income tax rate of 35%).
</TABLE>

FINANCIAL STATEMENTS

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.

FORM U-1

CINERGY CORP.

AS OF MARCH 31, 1996

(Unaudited)

Pages 1 through 5
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA STATEMENT OF INCOME
TWELVE MONTHS ENDED MARCH 31, 1996

Pro Forma
Actual Adjustments Pro Forma
(in thousands, except per share amounts)

<S> <C> <C> <C>
OTHER INCOME AND EXPENSES - NET
Equity in earnings of subsidiaries 357,536 - 357,536
Income taxes 981 280 1,261
Other - net (1,468) - (1,468)
357,049 280 357,329

INCOME BEFORE INTEREST AND OTHER CHARGES 357,049 280 357,329

INTEREST 1,336 800 2,136

NET INCOME $355,713 ($520) $355,193

AVERAGE COMMON SHARES OUTSTANDING 157,113 157,113

EARNINGS PER COMMON SHARE $2.27 $2.26

DIVIDENDS DECLARED PER COMMON SHARE $1.72
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA BALANCE SHEET
AT MARCH 31, 1996

Pro Forma
Actual Adjustments Pro Forma
(in thousands)
<S> <C> <C> <C>

ASSETS

CURRENT ASSETS
Cash and temporary cash investments 799 (520) 279
Accounts receivable 47 - 47
Accounts receivable from affiliated
companies 3,267 - 3,267
4,113 (520) 3,593
OTHER ASSETS
Investment in subsidiaries 2,606,198 - 2,606,198
Other 845 10,000 10,845
2,607,043 10,000 2,617,043

$2,611,156 $9,480 $2,620,636

CAPITALIZATION AND LIABILITIES

COMMON STOCK EQUITY
Common stock - $.01 par value;
Authorized shares - 600,000,000
Outstanding shares - 157,679,129 $1,577 - 1,577
Paid-in capital 1,595,435 - 1,595,435
Retained earnings 992,558 (520) 992,038
Total common stock equity 2,589,570 (520) 2,589,050

CURRENT LIABILITIES
Notes payable 3,400 10,000 13,400
Accounts payable 207 - 207
Accounts payable to affiliated companies 18,144 - 18,144
Accrued taxes 86 - 86
Accrued interest 6 - 6
21,843 10,000 31,843

OTHER LIABILITIES
Deferred income taxes (258) - (258)
Other 1 - 1
(257) - (257)

$2,611,156 $9,480 $2,620,636
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA STATEMENT OF CHANGES IN RETAINED EARNINGS
TWELVE MONTHS ENDED MARCH 31, 1996