SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION OR DECLARATION
under
The Public Utility Holding Company Act of 1935
THE SOUTHERN COMPANY
64 Perimeter Center East
Atlanta, Georgia 30346
THE SOUTHERN DEVELOPMENT AND INVESTMENT GROUP, INC.
64 Perimeter Center East
Atlanta, Georgia 30346
(Name of company or companies filing this statement
and addresses of principal executive offices)
THE SOUTHERN COMPANY
(Name of top registered holding company parent
of each applicant or declarant)
Tommy Chisholm, Secretary
The Southern Company
64 Perimeter Center East
Atlanta, Georgia 30346
(Name and address of agent for service)
The Commission is requested to mail signed copies of all
orders, notices and communications to:
W. L. Westbrook John D. McLanahan, Esq.
Financial Vice President Troutman Sanders
The Southern Company 600 Peachtree Street, N.E.
64 Perimeter Center East Suite 5200
Atlanta, Georgia 30346 Atlanta, Georgia 30308-2216
<PAGE>
INFORMATION REQUIRED
Item 1. Description of Proposed Transactions.
1.1 Background. The Southern Development and Investment
Group, Inc. ("Development") is a wholly-owned non-utility
subsidiary company of The Southern Company ("Southern"), a
registered holding company under the Public Utility Holding
Company Act of 1935, as amended (the "Act"). Southern, through
five operating electric utility subsidiaries, Alabama Power
Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company, and Savannah Electric and Power Company
(collectively, the "Operating Companies"), provides retail and
wholesale electric service throughout most of Georgia and Alabama
and in parts of Florida and Mississippi. By order dated January
25, 1995 (Holding Company Act Release No. 26221), the Commission
authorized Development to engage in the preliminary investigation
and study of new business ventures involving the application or
use of various new technologies and related facilities.
Development now proposes to invest up to $5 million from
time to time through December 31, 2002 to acquire an interest as
a limited partner ("Limited Partner") in EnviroTech Investment
Fund I Limited Partnership, a Delaware limited partnership (the
"Partnership"). The sole general partner of the Partnership (the
"General Partner") will be Advent International Limited
Partnership, a Delaware limited partnership of which Advent
International Corporation ("AIC") is the general partner. AIC is
a leading venture capital investment firm having a staff of more
<PAGE>
than 50 professionals and over $1 billion in capital under
management. AIC has had extensive experience managing other
technology oriented investments in the energy and environmental
sectors. The interest to be acquired by Development will
represent not more than 9.9% of the interests of all Limited
Partners of the Partnership.
Southern proposes to provide the funds needed by Development
in order to acquire the interests in the Partnership. Such funds
will be advanced to Development as cash capital contributions as
and when contributions by the Limited Partners are called by the
General Partner in accordance with the terms of the Partnership
Agreement. Southern will obtain such funds from sales of common
stock, as authorized in Holding Company Act Release Nos. 25979
and 26098, dated January 25 and August 5, 1994, respectively,
from borrowings and/or commercial paper sales, as authorized in
Holding Company Act Release No. 26004, dated March 15, 1994, and
from internally generated funds, chiefly dividends from
subsidiaries.
1.2 Investment Objectives of the Partnership. The
Partnership is being formed to invest in companies (each a
"Portfolio Company") commercializing electrotechnologies and
renewable energy technologies that promote environmental and
economic responsibility. These investments will support the
electric utility industry's efforts under the "Climate
Challenge," a cornerstone in the Administration's Climate Change
-2-
<PAGE>
Action Plan.1 The "Climate Challenge" is intended to
demonstrate that voluntary efforts can, cost effectively, achieve
both economic and environmental gains.
Specifically, a key objective of the Partnership is to make
investments that will contribute to the reduction, avoidance or
sequestering of greenhouse gas emissions; help utilities and
their customers handle waste by-products more effectively or
produce or manufacture goods or services more cost effectively;
improve the efficiency of the production, storage, transmission,
and delivery of energy; and provide investors with attractive
opportunities relating to the evolving utility business climate
which meet the above objectives.
In selecting suitable investments, the Partnership will
focus on the following technology sectors, among others:
alternate and renewable energy technologies, including
photovoltaic, biomass, and wind power technologies; environmental
and waste treatment technologies and services, including
electrotechnologies used in waste and water treatment and waste
management, waste reduction and recycling/recovery; energy
efficiency technologies, processes and services, including
1See Section 1602(d), Title XVI - Energy Policy Act of 1992,
which provides that the Secretary of Energy shall, in her annual
least-cost energy strategy, identify Federal priorities,
including policies that implement more efficient use of fossil
fuels, increase energy efficiency, encourage new technologies
that generate lower levels of greenhouse gases, promote the use
or renewable energy resources, and encourage investment in energy
efficiency equipment and technologies, among others.
-3-
<PAGE>
heating, ventilation and air conditioning equipment, induction
heating technologies, high efficiency lighting technologies,
energy storage, and motor efficiency technologies;
electrotechnologies used in the reduction of medical waste,
including plasma, pyrolysis and microwave processing;
technologies and processes promoting alternative energy for
transportation, including electric-powered vehicles and related
components, such as fuel cells; and other technologies related to
improving the generation, transmission and delivery of
electricity, including automated meter reading, distribution
transformers, thyristor technologies, active noise cancellation,
energy storage systems and interactive energy management systems.
The Partnership will invest in companies at all stages of
development to diversify the portfolio while achieving the best
match of environmental and economic results. There will be a
minimum of investment in start-up companies, with most
investments being in early and late expansion-stage development
opportunities.
The Partnership will provide its utility investors with a
range of non-financial benefits in addition to generating an
attractive financial return on investment. Among other non-
financial benefits, the Limited Partners will be provided an
estimate of the potential energy savings and potential reduction
of CO2 emissions associated with each portfolio investment in a
format that would allow them to report these items in accordance
with Section 1605(b) of the Energy Policy Act of 1992. Further,
-4-
<PAGE>
whenever appropriate, AIC will facilitate interactions between
Limited Partners and the Partnership's Portfolio Companies.
Finally, through their involvement in the Partnership, Limited
Partners will have the opportunity to gain experience and
participate in new emerging markets and business sectors relevant
to their industry.
The formation of the Partnership is being coordinated by the
Edison Electric Institute ("EEI"), a non-profit industry-wide
membership organization comprised of electric utility companies
throughout the United States. The Limited Partners will be EEI
member companies and their affiliates, subsidiaries, parent
holding companies or qualified pension or profit-sharing plans
sponsored by such companies. The targeted size of the
Partnership's investment pool is $75 million to $100 million,
with a minimum commitment of $25 million necessary for the
initial closing.
1.3 Terms of the Partnership Agreement. The term of the
Partnership shall be for 10 years from the date of the
Partnership Agreement, subject to extension for up to two years
upon agreement of the General Partner and Limited Partners
holding 66-2/3% of the combined capital contributions of all
Limited Partners. (Partnership Agreement, Section 6.1). The
Partnership Agreement provides that, not later than the date of
becoming a Limited Partner of the Partnership, each Limited
Partner shall contribute to the capital of the Partnership up to
10% of the capital commitment of such Limited Partner. The
-5-
<PAGE>
balance of each Limited Partner's capital commitment shall be due
from time to time through the seventh anniversary of the final
closing (i.e., not later than January 31, 2002, as such date may
be extended) in installments of not less than 5% nor more than
25% thereof, as determined by the General Partner. (Partnership
Agreement, Section 3.1).
Subject to certain limitations set forth in the Partnership
Agreement, the management, operation, and implementation of
policy of the Partnership will be vested exclusively in the
General Partner. (Partnership Agreement, Section 2.1(a)). Among
other powers, the General Partner shall have discretion to invest
the Partnership's funds in accordance with investment guidelines
set forth in the charter (Appendix B to the Partnership
Agreement). The investment guidelines set forth criteria on
approved types of technologies, size of investment, and portfolio
diversification. In addition, the investment guidelines require
consideration of non-financial public policy criteria, including
assessments of the likelihood of reducing greenhouse gas and
other emissions, of reducing costs and increasing efficiencies to
customers of products incorporating selected technologies, and of
enabling electric utilities to remain competitive in existing
markets. The investment guidelines may be amended or modified
only upon the affirmative vote of Limited Partners representing
at least 75% of the commitments of all Limited Partners.
(Partnership Agreement, Section 1.5(b)).
-6-
<PAGE>
Among other limitations on investment activities, the
General Partner may not cause or permit the Partnership to invest
more than 7.5% of the Partnership's total capital commitments in
any single Portfolio Company; invest more than 5% of the total
capital commitments in securities of Portfolio Companies that are
readily tradeable on established securities markets; or invest in
hostile takeover transactions or in highly leveraged buy-outs.
(Partnership Agreement, Section 2.1(c)). In addition, certain
limitations on the investment authority of the General Partner
would apply following a "substantial change in management" of the
General Partner. (Partnership Agreement, Section 2.1(b)).
An advisory board comprised of the Limited Partners and EEI
shall meet semi-annually with the General Partner to review
general matters of investment policy, but will have no authority
to bind the Partnership or take part in its management.
(Partnership Agreement, Section 1.7).
Under the terms of the Partnership Agreement, in
consideration of its services to the Partnership, the General
Partner will be paid an annual management fee equal to 2-1/2% of
the total amount of the capital commitments of the partners
through the first 6 years, thereafter declining by 1/4 of 1% on
each anniversary to 1.5% commencing on the 9th anniversary date.
(Partnership Agreement, Section 2.3). In addition, the General
Partner shall be entitled to reimbursement for all reasonable
expenses incurred in the organization of the Partnership up to
-7-
<PAGE>
$195,000, and for other third party expenses incurred on behalf
of the Partnership.
The Limited Partners shall have no authority to remove the
General Partner. However, the General Partner shall be deemed
removed (unless waived by the affirmative vote of Limited
Partners representing at least 75% of the total capital
contributions of all Limited Partners) following the occurrence
of certain specified events, including a final determination by a
court of competent jurisdiction that the General Partner is
guilty of any gross negligence, willful malfeasance, fraud,
material breach of its fiduciary duty to the Partnership or the
Limited Partners or bad faith, or any "substantial change in the
management" of the General Partner. (Partnership Agreement,
Section 6.3(e)). Following any resignation or removal of the
General Partner, the Limited Partners may agree to continue the
Partnership by selecting a substitute General Partner.
(Partnership Agreement, Section 6.3(c)).
All Partnership income and losses (including income and
losses deemed to have been realized when securities are
distributed in kind) will generally be allocated 80% to and among
the Limited Partners and 20% to the General Partner (Partnership
Agreement, Section 3.3). One hundred percent (100%) of all cash
distributions to the partners shall be made first to the Limited
Partners until such time as the Limited Partners shall have
received aggregate distributions equal to the aggregate of their
respective capital contributions, and thereafter 20% to the
-8-
<PAGE>
General Partner and 80% to the Limited Partners. (Partnership
Agreement, Section 3.4). Distributions in kind of the securities
of Portfolio Companies that are listed on or otherwise traded in
a recognized over-the-counter or unlisted securities market may
be made at the option of the General Partner. (Partnership
Agreement, Section 3.5). Unless Development obtains approval
from this Commission to retain such Portfolio Company securities,
Development undertakes that it will in good faith attempt to sell
such Portfolio Company securities upon its receipt of the same,
and in any event will sell such Portfolio Company securities
within one year from the date of its receipt thereof.
1.4 Other Matters. Development will file on an annual
basis within 180 days of the end of each calendar year a report
pursuant to Rule 24 of the Commission's Rules and Regulations
which describes the nature of each of the Partnership's
investments, the cost thereof and the valuation thereof as
established pursuant to Section 8.3 of the Partnership Agreement.
Such report will also detail the receipt of and disposition by
Development of any Portfolio Company securities during the period
covered by such report.
-9-
<PAGE>
Item 2. Fees, Commissions and Expenses.
No fees, commission or expenses have been paid or will be
paid or incurred in connection with the proposed transactions,
other than the Commission filing fee of $2,000 and legal expenses
estimated not to exceed $10,000.
Item 3. Applicable Statutory Provisions.
The making of cash capital contributions by Southern to
Development is subject to Section 12(b) of the Act and Rule 45
thereunder.
Development believes that the transaction proposed herein is
exempted from the requirements of Section 9(a) of the Act
pursuant to Section 9(c)(3) thereof, in that (i) Development is
proposing to acquire securities in the "ordinary course of the
business" of a registered holding company and its subsidiaries,
and (ii) such investment will not be detrimental to the public
interest or the interest of investors and consumers. Further, as
a result of the proposed transaction, the Partnership will not be
or become an "affiliate" of Development within the meaning of
Section 2(a)(11) of the Act.
The proposed investment in the Partnership is in the
"ordinary course of business" of Southern and its subsidiaries in
that it will contribute to the development, application, and
commercialization of technologies that will help to reduce
greenhouse gas emissions, promote new and more efficient uses for
electricity, and promote the development and use of alternative
-10-
<PAGE>
fuels. These are reasonable objectives, if not responsibilities,
of all electric utilities. Further, successful investments by
the Partnership would indirectly benefit all utilities, without
regard to location, as well as utility consumers, by making
generally available in the marketplace technologies and equipment
that could lower electricity production costs and increase
efficiency in energy consumption, which, among other benefits,
would enable electric utilities to compete more effectively with
other energy suppliers for customers in existing markets.
In the alternative, should the Commission determine that the
transaction proposed herein is not exempt from Section 9(a) by
reason of Section 9(c)(3), then Development believes that the
standards of Section 10 of the Act, as applied to the proposed
investment in the Partnership, will nevertheless be satisfied,
and therefore requests an order approving the proposed
transaction under Section 10. In this connection, there is no
basis for the Commission to make any adverse determination under
Section 10(b). Moreover, for the reasons stated above, the
activities of the Partnership, viewed in terms of its defined
objectives and investment criteria, are "reasonably incidental,
or economically necessary and appropriate to the operations of" a
registered electric utility holding company system. (See The
Southern Company, Holding Company Act Release No. 26211, dated
December 30, 1994.) Hence, the proposed acquisition will not be
detrimental to the carrying out of the provisions of Section 11
within the contemplation of Section 10(c)(1).
-11-
<PAGE>
Item 4. Regulatory Approval.
The transaction proposed herein is not subject to the
jurisdiction of any State commission or of any federal commission
other than the Securities and Exchange Commission.
Item 5. Procedure.
Development requests that the Commission's order be issued
as soon as the rules allow, and that there be no thirty-day
waiting period between the issuance of the Commission's order and
the date on which it is to become effective. Development hereby
waives a recommended decision by a hearing officer or other
responsible officer of the Commission and hereby consents that
the Division of Investment Management may assist in the
preparation of the Commission's decision and/or order in this
matter unless such Division opposes the matters covered hereby.
Item 6. Exhibits and Financial Statements.
(a) Exhibits.
A EnviroTech Investment Fund I Limited Partnership-
Partnership Agreement.
B - None.
C - None.
D - None.
E - None.
F - Opinion of counsel. (To be filed by amendment).
G - Form of notice.
-12-
<PAGE>
(b) Financial Statements.
None.
Item 7. Information as to Environmental Effects.
(a) In light of the nature of the proposed transactions, as
described in Item 1 hereof, the Commission's action in this
matter will not constitute any 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.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned company has duly caused this
statement to be signed on its behalf by the undersigned thereunto
duly authorized.
Dated: January 27, 1995
THE SOUTHERN COMPANY
By:/s/Tommy Chisholm
Tommy Chisholm, Secretary
THE SOUTHERN DEVELOPMENT AND INVESTMENT
GROUP, INC.
By:/s/Tommy Chisholm
Tommy Chisholm, Vice President and
Secretary
-13-
<PAGE>
<PAGE>
ENVIROTECH INVESTMENT FUND I LIMITED PARTNERSHIP
LIMITED PARTNERSHIP AGREEMENT
Agreement Dated as of August 1, 1994
<PAGE>
TABLE OF CONTENTS
Page Number
Article I - General Provisions
Section 1.1 Definitions 1
Section 1.2 Partnership Name 5
Section 1.3 Fiscal Year 5
Section 1.4 Nature and Liability of Partners 5
Section 1.5 Purposes of Partnership; Investment of Funds 5
Section 1.6 Powers of Partnership 6
Section 1.7 Advisory Board 6
Article II - Management of Partnership
Section 2.1 General 7
Section 2.2 Services of General Partner 8
Section 2.3 Compensation of General Partner 9
Section 2.4 Restrictions 11
Section 2.5 Conflict of Interest Transactions 12
Section 2.6 Reliance by Third Parties 13
Section 2.7 Dedication of Resources 13
Section 2.8 Partner's Transactions 13
Section 2.9 Exculpation of Liability 13
Section 2.10 Indemnification 14
Section 2.11 Coordination with Other Managed Funds 15
Article III - Capital Accounts; Distributions; Profits and
Losses
Section 3.1 Capital Contributions 16
Section 3.2 Capital Accounts 18
Section 3.3 Allocation of Net Income, Net Losses and other
Partnership Items 18
Section 3.4 Distributions to Partners 20
Section 3.5 Distributions In Kind 21
Section 3.6 Re-allocation of Carried Interest 22
Article IV - Withdrawal of Profits, Gains or Capital
Section 4.1 Withdrawal by Limited Partners 24
Section 4.2 Legal Representatives 26
Section 4.3 Liquidating Share 26
Section 4.4 Cessation of Participation 27
<PAGE>
Article V - Transfer of Partnership Interests
Section 5.1 Assignability of Interests 27
Section 5.2 Substituted Limited Partners 28
Section 5.3 Obligation of Assignee 28
Section 5.4 Prohibition Against Public Trading 28
Article VI - Duration and Liquidation of Partnership
Section 6.1 Duration 29
Section 6.2 Withdrawal of Limited Partner 29
Section 6.3 Termination of the Partnership; Withdrawal and
Removal of General Partner 29
Section 6.4 Liquidation 31
Section 6.5 Distribution Upon Liquidation 32
Section 6.6 Deficit Restoration by General Partner 32
Article VII - Reports to Partners
Section 7.1 Independent Auditors 33
Section 7.2 Reports 33
Section 7.3 Inspection 34
Section 7.4 Tax Returns 34
Article VIII - Valuation
Section 8.1 Valuation of Partnership Net Worth 34
Section 8.2 Valuation Date 35
Section 8.3 Valuing Securities and Other Assets 35
Section 8.4 Disputes 36
Article IX - Miscellaneous
Section 9.1 Admission of Partners 36
Section 9.2 Disputed Matters 37
Section 9.3 General 37
Section 9.4 Notices 37
Section 9.5 Execution of Certificate of Limited Partnership
and Other Documents 38
Section 9.6 Force Majeure 38
Section 9.7 Amendments 38
Section 9.8 Headings 39
Section 9.9 Power of Attorney 39
Section 9.10 Effect of Securities Laws 39
<PAGE>
ENVIROTECH INVESTMENT FUND I LIMITED PARTNERSHIP
LIMITED PARTNERSHIP AGREEMENT
BY THIS LIMITED PARTNERSHIP AGREEMENT made and entered into as
of August 1, 1994, among Advent International Limited
Partnership, a Delaware limited partnership, as general partner,
and the persons listed as limited partners in Appendix A hereto,
as limited partners, each having the respective address set
forth in Appendix A hereto, hereby form a limited partnership
pursuant to the laws of the State of Delaware.
ARTICLE I - GENERAL PROVISIONS
SECTION 1.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise
requires:
(a) Agreement. "Agreement" means this Limited Partnership Agreement
as it may be amended from time to time.
(b) AIC Affiliate. "AIC Affiliate" means:
(i) AIC, and all officers and employee-directors of AIC;
(ii) any spouse or minor child of an AIC Affiliate described in
subparagraph (i) above; and
(iii) any partnership of which any AIC Affiliate described in
subparagraph (i) above is itself a general partner (or
directly or indirectly exercises the duties of the general
partner, whether pursuant to a management agreement or
otherwise) and any corporation of which an AIC Affiliate
described in subparagraph (i) and/or (ii), the Partnership
or any AIC Affiliates in the aggregate own, directly or
indirectly, more than twenty percent (20%) of the voting
securities or would own more than twenty percent (20%) of
the voting securities if all options, warrants and other
rights to acquire voting securities (including convertible
securities) issued by such corporation were exercised by the
Partnership and all AIC Affiliates having such options,
warrants and rights.
(c) Capital Account. "Capital Account" means, as to any Partner,
the capital account maintained on the books of the Partnership
for such Partner, as required by Section 3.2.
(d) Capital Commitment. "Capital Commitment" means, as to any
Partner, the total amount of money paid or agreed to be paid to
the Partnership by such Partner as set forth in Appendix A.
<PAGE>
(e) Capital Contribution. "Capital Contribution" means, as to any
Partner, the amount of money actually contributed to the
Partnership by such Partner.
(f) Certificate of Limited Partnership. "Certificate of Limited
Partnership" means the certificate of limited partnership for
the Partnership and all amendments thereto required under the
laws of the State of Delaware to be filed in the appropriate
public offices within the State of Delaware to perfect or
maintain the Partnership as a limited partnership under the laws
of the State of Delaware and/or to effect the admission,
withdrawal or substitution of any Partner of the Partnership.
(g) Code. "Code" means the U.S. Internal Revenue Code of 1986, as
amended.
(h) ERISA. "ERISA" means the U.S. Employee Retirement Income
Security Act of 1974, as amended.
(i) Final Closing Date . "Final Closing Date" means such date before
January 31, 1995 as the General Partner decides or such later
date as the Advisory Board shall select by a vote of a majority
of its members after which no further subscriptions for
interests in the Partnership will be accepted.
(j) General Partner. "General Partner" means Advent International
Limited Partnership, a Delaware limited partnership of which
Advent International Corporation ("AIC") is the general partner,
or any person substituted for or who succeeds Advent
International Limited Partnership as such General Partner
pursuant to this Agreement.
(k) Industrial Investment Team. "Industrial Investment Team" means
that body of persons designated by the General Partner to make
recommendations with respect to prospective Investments to the
Partnership in accordance with the provisions of Section 2.7.
(l) Investment. "Investment" in any Person means the acquisition of
any Security issued by such Person, whether from such Person or
from another Person, the guaranty of, or otherwise becoming
liable for, any obligation of any Person, the providing of
financing of any other nature to any Person, or any combination
of the foregoing.
(m) Limited Partner. "Limited Partner" means any person who is or
becomes a Limited Partner of the Partnership as provided herein.
(n) Net Income, Net Gain, Net Losses and Net Loss.
(i) "Net Income" means, with respect to any fiscal year of the
Partnership, or portion thereof, the net income of the
Partnership determined in accordance with same principles
employed in determining the Partnership's taxable income for
U.S. Federal income tax purposes.
<PAGE>
(ii) "Net Gain" means, with respect to any fiscal year of the
Partnership, or portion thereof, the net income of the
Partnership determined in accordance with same principles
employed in determining the Partnership's taxable income for
U.S. Federal income tax purposes, taking into account the full
amount of any gains or losses and all items of expense
attributable to the sale or exchange of Securities or other
assets, but not taking into account (x) any income, loss or
deduction attributable to Non-Portfolio Investments; (y) the
Management Fee described in Section 2.3(a) hereof; and (z) any
deduction (whether by way of amortization or otherwise) to which
the Partnership may be entitled by reason of the expenses and
costs described in Section 2.3(b) that are not directly related
to particular Portfolio Investments or proposed Portfolio
Investments.
(iii) "Net Losses" means with respect to any fiscal year of the
Partnership, or portion thereof, the net loss of the Partnership
determined in accordance with same principles employed in
determining the Partnership's taxable income for U.S. Federal
income tax purposes.
(iv) "Net Loss" means with respect to any fiscal year of the
Partnership, or portion thereof, the net loss of the Partnership
determined in accordance with same principles employed in
determining the Partnership's taxable income for U.S. Federal
income tax purposes, taking into account the full amount of any
gains or losses and all items of expense attributable to the
sale or exchange of Securities or other assets, but not taking
into account (x) any income, loss or deduction attributable to
Non-Portfolio Investments; (y) the Management Fee described in
Section 2.3(a) hereof; and (z) any deduction (whether by way of
amortization or otherwise) to which the Partnership may be
entitled by reason of the expenses and costs described in
Section 2.3(b) that are not directly related to particular
Portfolio Investments or proposed Portfolio Investments.
(v) The following rules shall apply in determining Net Income,
Net Gain, Net Losses and Net Loss:
(A) Gain or loss on the sale or exchange of Partnership
property shall be included in the determination of Net Income, Net Gain,
Net Losses and Net Loss when recognized in accordance with the
U.S. Internal Revenue Code of 1986, as amended from time to time
(the "Code") and when deemed recognized pursuant to the
provisions of Sections 3.5(b)(iii) and 6.5(e) hereof.
(B) For purposes of computing Net Income, Net Gain, Net
Losses and Net Loss, taxable income shall include every item requiring
separate computation under Section 702(a) of the Code, plus
income that is exempt from U.S. Federal income tax and less
expenses and losses that are not deductible for U.S. Federal
income tax purposes.
(o) Non-Portfolio Investments. "Non-Portfolio Investments" means
investments in high-quality, short-term, low investment risk
Securities (e.g., bank certificates of deposit, United States
Government Securities with maturities of less than one year, and
other cash equivalent
<PAGE>
Securities with the highest investment grade rating of Standard & Poor's
Ratings Group or Moody's Investors Service), by the Partnership of funds
prior to such funds being invested in Securities or other investments in
businesses as contemplated in Section 1.5.
(p) Opinion of Counsel. "Opinion of Counsel" means an opinion in
writing signed by legal counsel either chosen by the General
Partner or, if chosen by a Limited Partner, reasonably
satisfactory to the General Partner.
(q) Original Closing Date. "Original Closing Date" means the first
date on which an investor becomes a Limited Partner of the
Partnership provided that the aggregate Capital Commitment on
such date shall be at least ten million dollars ($10,000,000).
(r) Partner. "Partner" means the General Partner or a Limited
Partner.
(s) Partnership. "Partnership" means EnviroTech Investment Fund I
Limited Partnership, a Delaware limited partnership.
(t) Partnership Distributions. "Partnership Distributions" means
any payment to the Partners pursuant to Section 3.4.
(u) Person. "Person" shall include a corporation, association,
joint venture, partnership, trust or individual.
(v) Portfolio Company. "Portfolio Company" means any Person in
which the Partnership is permitted to make an Investment
pursuant to Section 1.5 hereof and in which the Partnership has
an outstanding Investment.
(w) Portfolio Investments. "Portfolio Investments" means any
Securities or other Investments acquired or made by the
Partnership other than Non-Portfolio Investments.
(x) Related Party Transaction. "Related Party Transaction" means
(i) any transfer by the Partnership to, or any acquisition by
the Partnership from, any AIC Affiliate of any or all
Investments, or any portion thereof, held by the transferor, or
(ii) any payments by the Partnership to an AIC Affiliate in
connection with any of the foregoing transactions.
(y) Securities. "Securities" means securities of every kind or
description.
(z) Short-Term Investments. "Short-Term Investments" means
short-term equity and equity related positions, underwritings,
bridge financing, acquisitions of Securities through the
exercise of warrants or options, Investments that result from
restructurings or refinancings and which are syndicated to third
parties, and other Investments which at the time of investment
are intended to be, and are, outstanding for less than eighteen
(18) months from the date of investment.
<PAGE>
(aa) Voting Control. "Voting Control" means the right to elect a
majority of the directors of a corporation, the right to
designate a majority of the general partners of a partnership,
or the right to receive fifty percent (50%) or more of the
profits of a partnership.
SECTION 1.2 Partnership Name. The Partnership shall do business under
the name and style of "EnviroTech Investment Fund I Limited
Partnership."
SECTION 1.3 Fiscal Year. Except as otherwise provided by the Code, the
fiscal year of the Partnership shall be the calendar year, or
such other fiscal year as the General Partner shall designate;
provided that once a fiscal year is chosen, unless required by a
change in applicable law or regulations, the General Partner
shall not change the Partnership's fiscal year without the prior
approval of a majority of the members of the Advisory Board.
SECTION 1.4 Nature and Liability of Partners.
(a) The General Partner shall have such liability for the repayment,
satisfaction and discharge of the debts, liabilities and
obligations of the Partnership as is provided by applicable law
for a general partner of a limited partnership. The Limited
Partners shall be liable to the Partnership for the repayment,
satisfaction and discharge of its debts, liabilities and
obligations only (i) to the extent of the unpaid amount, if any,
of their Capital Commitments and (ii) as provided in the
Delaware Revised Uniform Limited Partnership Act
(b) The Partners hereby agree among themselves to share in
accordance with the terms of this Agreement all losses,
liabilities or expenses suffered or incurred by virtue of the
operation of the Partnership, provided that the Limited Partners
shall share such losses, liabilities and expenses only to the
extent provided in Section 1.4(a) hereof with respect to their
liability for Partnership losses, liabilities and expenses. The
General Partner agrees to assume and be liable for all such
losses, liabilities and expenses not covered by the Limited
Partners' share of such losses, liabilities and expenses.
SECTION 1.5 Purposes of Partnership; Investment of Funds.
(a) The purposes of the Partnership are to provide risk capital for,
and to make or enter into arrangements to acquire Investments in
the Securities of, privately held and publicly listed companies,
including businesses in the development stage, with a primary
emphasis on investments in energy, renewable resources and
related technologies as outlined in the charter set forth in
Appendix B attached hereto (the "Charter").
(b) Investments shall only be made if, in the good faith judgment of
the General Partner, they comply with the investment objectives
set forth in the Charter and shall be made or acquired for the
account of the Partnership on the basis of and pursuant to the
terms of this Agreement; provided, however, that the Charter may
be amended or modified, and any provision relating to the types
of Investments may be waived either generally or with respect to
a particular transaction, from time to time with the prior
affirmative vote of Limited Partners representing at least
seventy-five percent (75%) of the combined Capital Contributions
of all of the Limited
<PAGE>
Partners. Pending investments in Portfolio Investments or Short Term
Investments or cash distributions to Partners, all of the Partnership's
cash shall be invested in Non-Portfolio Investments.
SECTION 1.6 Powers of Partnership. In furtherance of the purposes of
the Partnership set forth in Section 1.5, the Partnership shall have
the following powers:
(a) Subject to the limitations set forth in Section 2.1(c), to
purchase or otherwise acquire, hold, and sell or otherwise
dispose of Securities, without regard to whether such Securities
are publicly traded, readily marketable or otherwise restricted
as to transfer or resale;
(b) Subject to the limitations set forth in Section 2.4(c), to
possess, transfer, mortgage, pledge or otherwise deal in, and to
exercise all rights, powers, privileges and other incidents of
ownership or possession with respect to, Securities held or
owned by the Partnership, and to carry Securities in the name of
a nominee or nominees;
(c) Subject to the limitations set forth in Section 2.4(c), to
guarantee the obligations of others and to sell, pledge or
otherwise dispose of bonds or other obligations of the
Partnership for its purposes;
(d) To have and maintain an office within the Commonwealth of
Massachusetts and, in connection therewith, to rent or acquire
office space, engage personnel and do such other acts and things
as may be necessary or advisable in connection with the
maintenance of such office, and on behalf of and in the name of
the Partnership to pay and incur reasonable expenses and
obligations for legal, accounting, investment advisory,
consultative and custodial services, and other reasonable
expenses including, without limitation, taxes, travel,
insurance, rent, supplies, interest, salaries and wages of
employees, and all other reasonable costs and expenses incident
to the operation of the Partnership;
(e) To form and own one or more corporations, trusts or limited
partnerships controlled by the Partnership for purposes of
making Investments in accordance with the Charter, provided that
no entity so formed may do directly or indirectly what the
Partnership is prohibited by this Agreement from doing; and
(f) To enter into, make and perform all such contracts, agreements
and other undertakings as may be necessary, advisable or
incidental to the carrying out of the foregoing objectives and
purposes.
SECTION 1.7 Advisory Board.
(a) There shall be an Advisory Board for the Limited Partners which
shall initially consist of the ten (10) individuals listed on
Appendix C attached hereto. Limited Partners representing a
majority of the combined Capital Contributions of all Limited
Partners may at any time vote to increase the number of the
Advisory Board members and may elect persons to fill such new
seats on the Advisory Board. A representative of Edison
Electric Institute shall serve as a standing member of the
Advisory Board. Each member of the Advisory Board shall serve
until (i) he
<PAGE>
or she resigns (by giving the General Partner and
other members of the Advisory Board sixty (60) days prior
written notice) or (ii) he or she is removed pursuant to this
Section 1.7(a). Any member of the Advisory Board may be
removed, with or without cause, by Limited Partners representing
a majority of the combined Capital Contributions of all Limited
Partners. A successor to any member of the Advisory Board who
has resigned or been removed shall be appointed by the Limited
Partners representing a majority of the combined Capital
Contributions of all Limited Partners within sixty (60) days of
such resignation or removal. The failure of any Limited Partner
to disapprove a nominee within thirty (30) days after first
being given the opportunity to approve such nominee shall be
deemed to constitute such Limited Partner's approval of such
nominee. Unless otherwise specified herein, the Advisory Board
may act by a majority vote of the members participating in the
Advisory Board meeting. Meetings of the Advisory Board may be
held by means of a conference telephone call. In addition to
approving actions at a meeting, the Advisory Board may act by
the written consent of the number of members required to approve
the action to be taken pursuant to this Agreement.
(b) The General Partner will meet with the Advisory Board (i) on a
semi-annual basis and (ii) upon reasonable notice, at any other
time when a majority of the Advisory Board deems such a meeting
necessary and will review with the Advisory Board general
matters of investment policy of the Partnership, matters
concerning transactions with the Partnership in which the
General Partner or an AIC Affiliate may have an interest and
other matters concerning the Partnership's affairs. No member
of the Advisory Board shall (x) take part in the management of
the Partnership, or (y) have any authority to bind the General
Partner or, except as specifically provided herein, to act for
or on behalf of the Partnership. With the prior consent of a
majority of the members of the Advisory Board, compliance by the
Partnership or the General Partner with the restrictions on
Related Party Transactions in Section 2.5 may be waived, either
generally or in any particular instance and either retroactively
or prospectively.
ARTICLE II - MANAGEMENT OF PARTNERSHIP
SECTION 2.1 General.
(a) The management, operation and implementation of policy of the
Partnership shall be, and hereby are, vested in the General
Partner who shall manage the Partnership's affairs. Except as
otherwise expressly provided herein, the General Partner shall
have the power to exercise the powers, rights and authority
granted to the General Partner hereunder on behalf and in the
name of the Partnership. The General Partner agrees that,
during the term of this Agreement, it shall devote such time to
the Partnership as is necessary for its proper operation.
(b) Notwithstanding the foregoing, in the event that there is a
"substantial change in the management of AIC" or a "substantial
change in the composition of the Industrial Investment Team,"
the General Partner shall within seven (7) days of the
occurrence of such event notify the Advisory Board. After a
substantial change in the management of AIC or a substantial
change in the composition of the Industrial Investment Team, the
General Partner shall not have the authority to cause the
Partnership to make investments in Persons not already Portfolio
Companies, unless seventy-five percent (75%) of the members of
the Advisory Board approve the new
<PAGE>
management of AIC or the new
composition of the Industrial Investment Team, as the case may
be; provided, however, that the General Partner shall not be
prohibited from making any Investment in a new Portfolio Company
if the Partnership has committed to make such Investment prior
to such substantial change in management or the Industrial
Investment Team. There shall be deemed to be a substantial
change in the management of AIC if at any point in time both of
the following conditions shall exist: (i) Peter A. Brooke is no
longer participating actively in the management of AIC, and (ii)
at least two of the following members of AIC's management,
Thomas R. Armstrong, Douglas R. Brown, Henry H. Haight, Clinton
P. Harris and Thomas H. Lauer, are no longer actively involved
in the management of AIC. Individuals may be substituted for
the listed members of AIC's management with the consent of the
Advisory Board (and such substitution shall not constitute a
"substantial change in the management of AIC"), provided: (a)
that condition (i) does not exist and (b) they are appointed by
Peter A. Brooke. There shall be deemed a substantial change in
the composition of the Industrial Investment Team if at any
point in time at least three of the initial members of the
Industrial Investment Team are no longer actively participating
as members of the Industrial Investment Team and AIC has not
replaced them with qualified substitutes reasonably acceptable
to the Advisory Board.
(c) The General Partner shall not cause or permit the Partnership to:
(i) invest more than seven and one-half percent (7.5%) of the
Partnership's total Capital Commitments in a single Portfolio
Company without the prior approval of a majority of the members
of the Advisory Board;
(ii) invest in the aggregate more than five percent (5%) of the
Partnership's total Capital Commitments in Portfolio Investments
that constitute Securities which, at the time the Securities are
acquired, are readily tradable on an established securities
market (but excluding (A) any Security which, as part of the
Partnership's plan of investment, will cease to be so tradable
promptly after the Security is acquired or (B) any Securities
in public companies received upon exchange of Portfolio
Investments then held by the Partnership from initial public
offerings);
(iii) invest in any company which is not already a Portfolio
Company, but is already a "portfolio company" with respect to another
"Managed Fund" (as defined in Section 2.11) without the prior
approval of a majority of the members of the Advisory Board; or
(iv) invest in hostile takeover transactions or in "highly
leveraged" buy outs.
SECTION 2.2 Services of General Partner. The General Partner shall (i)
provide investment advice to, and make investment decisions for,
the Partnership and shall bear the cost of securing information
and investment advice with respect to prospective Investments
(other than unreimbursed costs of outside accountants and
attorneys in connection therewith), (ii) maintain the books and
records of the Partnership, (iii) provide routine and necessary
bookkeeping and record keeping services and retain custody of
Partnership Securities, and (iv) provide office space, office
and executive staff and office supplies and equipment for the
use of the Partnership. The
<PAGE>
General Partner shall be permitted
to contract on behalf of the Partnership all or part of the
foregoing services, without the consent of the Advisory Board or
the Limited Partners, to any corporation or other entity (A)
which then owns, directly or indirectly, Voting Control of the
General Partner, or (B) of which the General Partner then owns
directly or indirectly Voting Control, or (C) of which a
corporation described in (A) then owns directly or indirectly
Voting Control, or (D) which is an entity controlled by,
controlling or under common control with the General Partner,
or, with the consent of a majority of the members of the
Advisory Board, any corporation or other entity not specified in
(A)-(D) above; provided, however, that (x) any such cost shall
be the responsibility of the General Partner and not of the
Partnership and (y) in all cases, investment decisions shall be
made by the General Partner. No such assignment of services
shall relieve the General Partner of its obligations, duties and
liabilities under this Agreement.
SECTION 2.3 Compensation of General Partner.
(a) Management Fee. In consideration of the services to be provided
to the Partnership by the General Partner, the General Partner
shall be paid an annual management fee (the "Management Fee") by
the Partnership, payable in advance in equal quarterly
installments on the Original Closing Date and the first day of
each calendar quarter beginning thereafter. During the period
beginning on the Original Closing Date up to (but not including)
the sixth anniversary of the Original Closing Date, the
Management Fee for each calendar quarter shall equal one-fourth
(1/4) of two and one-half percent (2.5%) of the sum of all
Capital Commitments determined for each installment as of the
date on which such installment is payable. Commencing on the
sixth anniversary of the Final Closing Date, the Management Fee
for each calendar quarter shall be equal to one-quarter (1/4) of
the Applicable Percentage (as set forth below) of the sum of all
Capital Commitments determined for each installment as of the
date on which such installment is payable. The Applicable
Percentage shall be determined according to the following
schedule:
Applicable Percentage Period in Effect
2.25% For the period commencing on the sixth anniversary of the
Original Closing Date, up to but not including the seventh
anniversary of the Original Closing Date
2.00% For the period commencing on the seventh anniversary of
the Original Closing Date, up to but not including the
eighth anniversary of the Original Closing Date
1.75% For the period commencing on the eighth anniversary of
the Original Closing Date up to but not including the
ninth anniversary of the Original Closing Date
1.50% For the period commencing on the ninth anniversary of
the Original Closing Date until dissolution of the
Partnership
The Management Fee shall be pro rated for any period less than a
calendar quarter and for adjustments in the Applicable
Percentage (if the anniversary date of the Original Closing Date
occurs other than on the first day of a calendar quarter) and
any additional Capital Commitments of Limited Partners admitted
pursuant to Section 9.1. The Management Fee also shall be
reduced by an amount equal to one-half (1/2) of any fee (net of
direct expenses) for assisting with the acquisition, disposition
or reorganization of a Portfolio Company which the General
Partner or an AIC
<PAGE>
Affiliate receives with respect to the
Partnership's Investment in such Portfolio Company; provided
that any underwriting fee or similar fee received by the General
Partner or an AIC Affiliate on account of the provision of the
Partnership's capital shall reduce the Management Fee by the
full amount of such underwriting or similar fee. In addition,
the Management Fee shall be reduced by the full amount of any
"break-up" fee (net of direct expenses) relating to a Portfolio
Company (or proposed Portfolio Company) which the General
Partner or an AIC Affiliate receives with respect to a proposed
Investment by the Partnership in such Portfolio Company. Such
fees received by the General Partner or an AIC Affiliate shall
be credited against the payment of future Management Fees if
such reduction exceeds the Management Fees then payable.
(b) Expenses not Covered by the Management Fee.
(i) In addition to the payment of the Management Fee, the General
Partner shall be reimbursed by the Partnership for all fair and
reasonable expenditures made on behalf of the Partnership,
including:
(A) all reasonable travel, legal, accounting, other third
party professional and out-of-pocket expenses incurred in the
organization of the Partnership up to a maximum amount of one
hundred ninety five thousand dollars ($195,000), all such
reasonable expenses made on behalf of the Partnership in
preparing any amendment to this Agreement, and
(B) all reasonable third party expenses incurred for any
other legal, audit or reporting services for the Partnership.
(ii) To the extent not borne by a Portfolio Company, the
Partnership shall bear all third party costs and expenses incurred in
connection with the purchase, retention and sale of Investments
(whether or not consummated), including, without limitation,
loan fees, private placement fees, sales commissions, finder's
fees, personal property taxes on Investments, brokerage fees,
auditing fees, underwriting commissions and discounts,
investment banker fees, insurance costs, and all other expenses
that are directly related to particular Investments or proposed
Investments, whether or not actually consummated. The
General Partner shall not be entitled to be reimbursed for the
following operating expenses relating to the Partnership's
investment activities: salaries and fringe benefits of any
personnel of the General Partner and any professional,
administrative, clerical, bookkeeping and secretarial personnel
employed by the Partnership (other than outside attorneys and
accountants); rent, administrative and other overhead charges
and costs of any office maintained by the General Partner;
travel and entertainment expenses; cost of statistical services,
publications and periodicals; expenses of reports to Limited
Partners (other than legal, accounting and appraisal expenses);
the costs of fidelity bonds and other insurance (to the extent
not directly related to the purchase, retention or sale of
Investments by the Partnership); and other ordinary and usual
expenses incurred in connection with the making and monitoring
of the Partnership's Investments.
<PAGE>
(iii) If there is a change in relevant statute, regulation or other
official pronouncement affecting the reporting requirements set
forth in Section 7.2(c) of the Partnership Agreement, which
change causes the General Partner to incur extraordinary expense
in order to comply with such reporting requirements, the General
Partner may request approval of the Advisory Board for
reimbursement from Partnership funds for such extraordinary
expense, which approval shall not be unreasonably withheld.
SECTION 2.4 Restrictions. Subject to Section 2.5, the Partners shall
be restricted in their activities as follows:
(a) No Services by Limited Partners. The Limited Partners shall not
participate in the management or control of the Partnership and
shall not hold themselves out as general partners or take any
action on behalf of the Partnership or in any way commit the
Partnership to any agreement or contract and shall have no right
to do any of the foregoing.
(b) Partnership Credit. No Partner shall lend or use the funds or
credit of the Partnership or employ the Partnership's name for
any purpose whatsoever, except that the General Partner may do
so for the purposes of the Partnership to the extent allowed
under this Agreement.
(c) Limitation on Borrowing and Pledging.
(i) The General Partner shall manage the Partnership so as to
avoid the necessity for borrowing money and shall in all events comply
with Section 2.4(e).
(ii) The Partnership may guarantee the obligations of Portfolio
Companies, provided that the aggregate of the amount guaranteed
plus all Investments in such Portfolio Company shall at no time
exceed the limitation on Investment with respect to such
Portfolio Company as set forth in Section 2.1(c).
(iii) Nothing in this Section 2.4(c) shall be construed to
prohibit any AIC Affiliate that is a corporation from engaging in the
conduct prohibited herein; provided that any such conduct
involving the Partnership does not directly or indirectly
violate the prohibitions on the Partnership's borrowing money or
guaranteeing obligations of Portfolio Companies as set forth in
this Section 2.4(c).
(d) Reinvestment of Capital. The General Partner shall not, without
Advisory Board consent, reinvest the proceeds from the
realization of Portfolio Investments, except to the extent
necessary for the aggregate amount invested in Portfolio
Investments to equal the aggregate amount of all Capital
Contributions. Income or gain from Short-Term Investments or
Non-Portfolio Investments will not be reinvested, but capital
from Short-Term Investments or Non-Portfolio Investments may be
reinvested by the General Partner in any Investment permitted by
this Agreement.
(e) Unrelated Business Taxable Income. The General Partner shall
use its best efforts to prevent the Partnership from having
unrelated business taxable income ("UBTI") within the
<PAGE>
meaning of
Code Section 512. The General Partner shall promptly notify
each tax-exempt Limited Partner whenever it appears likely that
any such Limited Partner will incur UBTI on account of any
Investment of the Partnership. If the activities of the
Partnership do give rise to UBTI with respect to any Limited
Partner, the General Partner shall cause the Partnership's
accountants to determine such Limited Partner's allocable share
of such UBTI and the amount of tax that would be paid by such
Limited Partner if such UBTI from the Partnership were the only
UBTI of such Limited Partner and shall notify such Limited
Partner of such amount within one hundred and twenty (120) days
after the end of the Partnership's taxable year.
(f) Other Managed Funds. Prior to the earlier of (i) the fifth
anniversary of the Original Closing Date or (ii) the date on
which two-thirds (2/3) of the aggregate Capital Commitment of
the Partnership has been committed for Portfolio Investments,
the General Partner will advise the Advisory Board of any pooled
or dedicated investment fund that AIC or any AIC Affiliate
proposes to manage if such fund has investment objectives
substantially similar to the objectives outlined in the Charter.
In addition, prior to the earlier of (i) the fifth anniversary
of the Original Closing Date, or (ii) the date on which
two-thirds (2/3) of the aggregate Capital Commitment of the
Partnership has been committed for Portfolio Investments,
neither AIC nor any AIC Affiliate will, without the consent
(such consent not to be unreasonably withheld) of the Advisory
Board, manage any new pooled or dedicated investment fund whose
investment objectives are substantially similar to the
objectives outlined in the Charter; provided, however, that the
foregoing restriction shall not apply to the management of any
investment fund currently in existence, the formation and
management of the Energy Transition Fund Limited Partnership,
and the formation and management of one new dedicated investment
fund whose investment objectives are substantially similar to
the objectives outlined in the Charter; provided further, that
the total committed capital of the Energy Transition Fund
Limited Partnership and any such one new dedicated investment
fund shall not together exceed Fifty Million Dollars
($50,000,000).
(g) Additional Restrictions. The Partnership shall not make short
sales of Securities not owned by the Partnership, nor shall the
Partnership at any time own the voting securities of an
investment company required to be registered under the United
States Investment Company Act of 1940.
SECTION 2.5 Conflict of Interest Transactions.
(a) The Partnership shall not engage in any Related Party
Transaction. Notwithstanding the foregoing provision of this
Section 2.5, the Partnership may purchase Securities from an AIC
Affiliate, if (i) such AIC Affiliate has acquired the Securities
within ninety (90) days prior to the sale to the Partnership
with the intent of transferring such Securities to the
Partnership (which intent has been expressed in writing to the
Partnership prior to the acquisition by the AIC Affiliate of
such Securities) and the price paid by the Partnership for such
Securities is no greater than the price paid by the AIC
Affiliate, or (ii) such AIC Affiliate is a Portfolio Company,
the Securities of which are being purchased by the Partnership.
(b) Nothing in this Section 2.5 shall be construed to prohibit the
General Partner or an AIC Affiliate from charging an
arm's-length fee to a Portfolio Company or to a Limited Partner
<PAGE>
for specific services requested by such party including, but not
limited to, assistance with technology transfers or mergers and
acquisitions, providing full-time or part-time management or
operating personnel, providing investment banking services with
respect to specific transactions, and developing business plans
and other presentations. Nor shall this Section 2.5 be
construed to prohibit the General Partner or an AIC Affiliate
from receiving a fee from a Portfolio Company in connection with
the acquisition, disposition or reorganization of a Portfolio
Company. Subject to reductions in the Management Fee pursuant
to Section 2.3(a), for certain fees, if any, all such fees paid
to the General Partner for such services shall be the sole
property of the General Partner. The amount of any such fees
paid to the General Partner shall be reported to the Limited
Partners annually and any fees paid to the General Partner for
assistance with the acquisition, disposition or reorganization
of a Portfolio Company also shall be reported in writing to the
Advisory Board.
SECTION 2.6 Reliance by Third Parties. Notwithstanding any other
provision of this Article II, any third party dealing with the Partnership
may rely conclusively upon the authority, power and right of the
General Partner acting under this Agreement. This Section shall
not be deemed to limit the liabilities and obligations of the
General Partner as set forth in this Agreement.
SECTION 2.7 Dedication of Resources. The General Partner shall
dedicate appropriate resources to the Partnership in accordance with the
General Partner's fiduciary duty to the Partnership, including,
without limitation, causing members of AIC's Industrial
Investment Team designated by the General Partner from time to
time, to be actively engaged in the formulation of investment
recommendations with respect to prospective Investments in
businesses which are engaged in activities in the product and
market areas described in the Charter. The initial members of
the Industrial Investment Team designated by the General Partner
shall be Dennis R. Costello, Lawrence W. McKenna, Steven M.
Tadler, John B. Singer and George S. Reichenbach.
SECTION 2.8 Partner's Transactions. Nothing in this Agreement shall be
construed to prohibit any Partner from buying or selling
Securities for its own account, including Securities of the same
issuers as those held by the Partnership; provided, however,
that the General Partner will use all reasonable efforts to
ensure that partners or officers (including, where appropriate,
employee-directors) of itself or any AIC Affiliate will not hold
for their own account interests in any Portfolio Company except
as provided for, and under the terms of, the AIC co-investment
policy set forth in Appendix D, attached hereto, as such policy
may be amended from time-to-time, with the consent of the
Advisory Board.
SECTION 2.9 Exculpation of Liability. Neither the General Partner, its
agents (including agents of the General Partner or agents of the
Partnership who serve at the request of the Partnership as
either directors, officers or trustees of another organization
in which the Partnership has any interest as a security holder,
creditor or otherwise) nor officers, directors or employees of
the General Partner or the general partner of the General
Partner, or their respective heirs, executors, administrators,
successors or assigns (the "Relevant Party") shall be liable to
the Partnership or the Limited Partners by reason of any act
performed by the Relevant Party if such act was performed by the
Relevant Party: (i) in good faith; (ii) in the reasonable
belief that it was acting in the best interests of the
Partnership; and (iii) in a manner believed by the Relevant
Party to be within the scope of the rights, powers, authorities
and discretions conferred on the Relevant
<PAGE>
Party by or pursuant
to this Agreement, the consent of the Limited Partners or by
law. The Relevant Party shall not be exculpated under the
preceding sentence, however, if it was guilty of gross
negligence, willful malfeasance or fraud, including without
limitation a material breach of its fiduciary duty to the
Partnership or the Limited Partners with respect to such act or
omission, or if such act or omission caused any of the Limited
Partners to be liable in excess of its Capital Commitment for
the liabilities of the Partnership.
SECTION 2.10 Indemnification.
(a) The Partnership, out of Partnership assets and not out of the
separate assets of any Partner, shall indemnify any Relevant
Party to the extent described below, against all liabilities,
losses and expenses, including, but not limited to, amounts paid
in satisfaction of judgments, in compromise settlements (to the
extent provided for in Section 2.10(c)), and fines, penalties
and counsel fees, reasonably incurred in connection with the
defense or disposition of any action, suit or other proceeding,
whether civil or criminal, before any court or administrative or
legislative body, in which the Relevant Party may be or may have
been involved as a party or otherwise or with which it or they
may be or may have been threatened, while in office or
thereafter by reason of (A) being or having been a Relevant
Party, or acting on behalf of the Partnership, or serving or
having served at the request of the Partnership as such
director, officer or trustee of another organization, and (B)
any acts performed (or allegedly performed ) in such capacity
that were performed:
(i) in good faith;
(ii) in the reasonable belief that the Relevant Party was acting
in the best interests of the Partnership and the Limited Partners;
(iii) in a manner that was believed by the Relevant Party to be
within the scope of the rights, powers, authorities or discretions
conferred on it by or pursuant to this Agreement, by the consent
of the Limited Partners or by law; and
(iv) with respect to any criminal proceeding, in a manner
believed by the Relevant Party to be lawful.
The Relevant Party shall not be entitled to indemnification
under the preceding sentence, however, if such action is finally
adjudicated in any such action, suit or other proceeding, or
otherwise by a court of competent jurisdiction, to have been
grossly negligent, willfully malfeasant or fraudulent, including
without limitation a material breach by the Relevant Party of
its fiduciary duty to the Partnership or the Limited Partners,
or to have caused any of the Limited Partners to be liable in
excess of their Capital Commitments for the liabilities of the
Partnership.
(b) Expenses, including counsel fees, so incurred by the Relevant
Party may be paid by the Partnership in advance of the final
disposition of any such action, suit or proceeding on the
condition that the amounts so paid shall be repaid to the
Partnership if it is ultimately determined that indemnification
of such expenses is not authorized under this Section 2.10. The
General
<PAGE>
Partner may, if it deems appropriate, require any person
for whom such expenses are paid in advance of final disposition
to deliver adequate security to the Partnership for his
obligation to repay such indemnification.
(c) As to any matter disposed of by a compromise payment, pursuant
to a consent decree or otherwise, no such indemnification,
either for said payment or for any other expenses, shall be
provided unless there has been obtained an opinion in writing of
independent legal counsel to the effect that based on a
recitation of relevant facts that have been represented by the
Relevant Party to be true and complete, the Relevant Party would
be entitled to indemnification under the standards set forth in
(a) above.
(d) The right of indemnification hereby provided shall not be
exclusive of or affect any other rights of indemnification to
which the Relevant Party may be entitled to from parties other
than the Partnership or the Limited Partners (in such Persons'
capacities as Limited Partners). In addition, the Relevant Party
shall use all reasonable efforts to obtain indemnification from
any source other than the Partnership from which it or they may
be entitled thereto, including without limitation, director and
officer indemnity insurance and corporate or other
indemnification provisions of entities in which the Partnership
shall have made Investments, before seeking indemnification from
the Partnership. The right of indemnification provided by this
Section 2.10 shall not be construed to increase the liability of
the Limited Partners as set forth in Section 1.4.
SECTION 2.11 Coordination with Other Managed Funds.
(a) The General Partner shall ensure that no other investment fund,
whether in corporate or partnership form, that is advised or
managed by AIC or an AIC Affiliate (a "Managed Fund") shall make
an Investment in the Securities of any entity (excluding any
Investment in an entity in which such Managed Fund has
previously invested (a "Follow-on Investment")) if such
Investment is within the Partnership's Charter, unless the
Partnership has been offered the opportunity to make an
Investment or Follow-On Investment (if the Partnership has
already made an initial Investment), as the case may be, in the
same entity, on the same terms and conditions, equal to at least
its Proportionate Share (as defined below) of the total combined
Investment (based on investment cost) in such entity by the
Partnership and any other Managed Funds. For the purposes of
this Section 2.11, the term "Proportionate Share" with respect
to a proposed Investment in a potential or current Portfolio
Company means a fraction, the numerator of which is the total
Capital Commitments of the Partners and the denominator of which
is the total Capital Commitments of the Partners plus the total
amount of money paid or agreed to be paid to all other Managed
Funds making any such Investment by all of their investors.
(b) Notwithstanding the provisions of Section 2.11(a), the
Partnership shall:
(i) not be entitled to make Investments in an amount which is
equal to its Proportionate Share in the Securities of (A) any entity
brought to the attention of AIC by any investor in another
Managed Fund to the extent that such investor makes a
disproportionate Investment in such entity, (B) any entity that,
acting on its own initiative, requests that any Investment by
the Partnership be limited or prohibited, (C) any entity located
outside
<PAGE>
the United States, if a majority of the Advisory Board
believes that additional investments in international businesses
are not appropriate or (D) any entity in an international
venture capital market which in the opinion of the General
Partner is not consistent with the Charter or does not meet the
investment standards of the Partnership; and
(ii) have the right, prior to the right of other Managed Funds,
to make an Investment in the Securities of any entity in such
amount as is in the best interest of the Partnership and the
Limited Partners (subject only to the limitations set forth in
this Agreement), which Investment may be more than its
Proportionate Share of such Securities, if such entity (i) was
first brought to the attention of AIC by any Limited Partner, or
(ii) acting on its own initiative, requests that all other
Managed Funds be limited or prohibited.
ARTICLE III - CAPITAL ACCOUNTS; DISTRIBUTIONS; PROFITS AND LOSSES
SECTION 3.1 Capital Contributions.
(a) Capital Contributions. On or prior to the date of becoming a
Limited Partner of the Partnership, each Limited Partner will
have contributed or will contribute to the capital of the
Partnership cash in the amount of ten percent (10%) of its
Capital Commitment or such lesser percentage as shall be
determined by the General Partner (which percentage shall be the
same for all Limited Partners). The balance of the Limited
Partners' Capital Commitments shall be due and payable in cash
installments at such times and in such amounts as the General
Partner shall determine in its reasonable discretion; provided,
however, that each such installment shall be in an amount
determined by the General Partner (which shall not be less than
five percent (5%) or greater than twenty-five percent (25%)
(which percentage shall be the same for each Limited Partner) of
each Limited Partner's Capital Commitment) and shall be payable
on not less than fifteen (15) days prior written notice from
the General Partner to the Limited Partners. No capital calls
for new Portfolio Investments will be made after the seventh
anniversary of the Final Closing Date. Notwithstanding any
provision hereof to the contrary, capital calls may be made
after the seventh anniversary of the Final Closing Date for the
purpose of making Follow-On Investments and as the General
Partner may deem necessary to satisfy existing or anticipated
expenses of the Partnership.
(b) If after written notification from the General Partner, a
Limited Partner does not make any payment required pursuant to
Section 3.1(a) (a "Defaulting Limited Partner"), a second
request for payment shall be made to such Defaulting Limited
Partner by the means set forth in Section 9.4. Until fifteen
(15) days after the mailing of such second notice, the
Defaulting Limited Partner may make a transfer of its
Partnership interest, subject, however, to the applicable
provisions of Article V below (including the requirement that
such transfer shall not be made without the prior written
consent of the General Partner) and subject to the further
condition that the transferee shall pay all amounts then due to
be paid by the transferor Limited Partner and shall agree to pay
any unpaid portion of the transferor Limited Partner's Capital
Commitment not yet due. If the full amount of the payment then
due is not received by the Partnership within fifteen (15) days
after the mailing of such second notice by the Defaulting
Limited Partner, the
<PAGE>
Partnership, by the General Partner, may
take any of the following actions, which are in addition to and
not in limitation of any other right or remedy which the
Partnership may have:
(i) The Partnership may commence legal proceedings against the
Defaulting Limited Partner to collect the due and unpaid amount
plus the expenses of collection, including attorneys' fees.
(ii) Upon notice to the Defaulting Limited Partner, a designee of
the General Partner may assume the entire unpaid balance of the
Capital Commitments of the Defaulting Limited Partner and
succeed to a fraction of the interest of the Defaulting Limited
Partner of which the unpaid balance of its Capital Commitment is
the numerator and the total Capital Commitment of the Defaulting
Limited Partner is the denominator, and become a substitute
Limited Partner to the extent of such interest, provided that
such designee may not be the General Partner or an AIC Affiliate
without the consent of the Limited Partners representing more
than fifty percent (50%) of the Capital Contributions of the
Limited Partners. Further, any designee who assumes the unpaid
balance of the Capital Commitment of the Defaulting Limited
Partner pursuant to this Section 3.1(b)(ii) may, with the
consent of the General Partner, deliver to the Partnership an
additional amount equal to the lesser of (i) the Defaulting
Limited Partners' Capital Contribution, or (ii) the value of
such Defaulting Limited Partner's interest in the Partnership at
the time of such notice, as determined in good faith by the
General Partner. The additional amount so delivered (less such
an amount, which shall not exceed five percent (5%) of such
additional amount, as the General Partner may deem appropriate
to cover the costs incurred in connection with the default of
the Limited Partner) shall be tendered to the Defaulting Limited
Partner in cash. On the date of such tender such Defaulting
Limited Partner shall cease to be a Limited Partner or have any
further right in the Partnership, and the designee delivering
such additional amount shall become a Limited Partner pursuant
to Section 5.2 to the extent of the whole interest of the
Defaulting Limited Partner.
(iii) Upon notice to the Defaulting Limited Partner, the
Partnership may elect to cancel the interest of the Defaulting Limited
Partner in the Partnership, at which time the interest of such
Defaulting Limited Partner shall revert and inure to the benefit
of the Partnership.
In the event a Defaulting Limited Partner's interest reverts to
the Partnership pursuant to (iii) above, for purposes of this
Agreement (including, without limitation, the calculation of the
Management Fee) the aggregate Capital Commitments of the Limited
Partners shall be reduced by the unpaid Capital Commitment of
the Defaulting Limited Partner effective upon the date such
Defaulting Limited Partner's interest reverts to the
Partnership. In addition, the General Partner shall inform the
Advisory Board regarding the default prior to the delivery of
the second notice to the Defaulting Limited Partner. The
General Partner shall consult with the Advisory Board prior to
instituting the remedy described in (iii) above. If so
recommended by the Advisory Board, the Limited Partners
representing a majority of the combined Capital Contributions
may modify the remedy described in (iii) above.
<PAGE>
(c) Notwithstanding (a) and (b) above, if (i) any Limited Partner
shall, on or before the date on which it would be required to
pay an installment pursuant to (a) above, deliver to the General
Partner an Opinion of Counsel pursuant to Section 4.1 regarding
the Investment to be acquired using such Capital Contribution,
then such Limited Partner shall not be deemed to be a Defaulting
Limited Partner under this Section 3.1 as a result of its
failure to make such additional Capital Contribution to the
extent the amount not paid was to be used to acquire the
Conflicting Interest (as defined in Section 4.1) covered by such
Opinion of Counsel, and such Defaulting Limited Partner shall be
released from any further obligation under this Section 3.1 to
pay such amount of installment, and the provisions of Section
3.1(b) shall be inapplicable to such Partner with respect to
such amount. Thereafter for purposes of this Agreement
(including, without limitation, the calculation of the
Management Fee) such Partner's Capital Commitment shall be
deemed to be reduced by the amount of the Capital Commitment
such Partner is relieved from paying pursuant to this Section
3.1(c). After notice by a Limited Partner that it desires to
take advantage of the foregoing provisions of this Section
3.1(c), the General Partner shall notify such Limited Partner
regarding the extent to which its Capital Contribution would be
used to acquire the Conflicting Interest.
(d) The aggregate of all Capital Contributions of the Partners shall
be, and are hereby agreed to be, available to the Partnership to
carry out the purposes and objectives of the Partnership as set
forth in Section 1.5.
SECTION 3.2 Capital Accounts. There shall be established for each
Partner as of the date of this Agreement a Capital Account equal to the
amount of such Partner's initial Capital Contribution. Each
Partner's Capital Account shall be adjusted from time to time as
of the date of any of the following events by adding thereto (i)
any additional Capital Contributions made by such Partner and
(ii) any Net Income allocated to such Partner, and deducting
therefrom (x) any Net Losses allocated to such Partner, (y) any
distributions made to such Partner and (z) any Partnership
expenses allocated to such Partner, including, without
limitation, any placement fees, finder's fees or similar fees
allocated to such Partner which may be payable to others in
connection with the investment by a Limited Partner in the
Partnership.
SECTION 3.3 Allocation of Net Income, Net Losses and other Partnership
Items. As of the end of each fiscal year of the Partnership (or
more frequently as determined by the General Partner) and upon
dissolution of the Partnership pursuant to Article VI, the
Capital Account of each Partner shall be credited or charged, as
the case may be, with the Net Income or Net Losses of the
Partnership, and other Partnership items, as follows and in the
following order of priority (all allocations to the Limited
Partners as a class shall, to the extent possible, be made to
each Limited Partner in accordance with the ratio which such
Limited Partner's Capital Contributions bears to the aggregate
Capital Contributions of all Limited Partners):
(a) Allocation of Net Losses.
(i) First, in the event Net Income shall have been allocated to
the General Partner pursuant to Section 3.3(b)(iii)(A) hereof for
prior fiscal years, Net Losses for any fiscal year in an amount
which when aggregated with Net Losses allocated to the
<PAGE>
Partnership pursuant to this Section 3.3(a)(i) for all prior
fiscal years does not exceed the aggregate amount of Net Income
allocated to the Partners pursuant to Section 3.3(b)(iii) hereof
for all fiscal years shall be allocated as follows:
(A) to the General Partner in an amount that causes the
General Partner to have been allocated aggregate Net Income pursuant to
Section 3.4(b)(iii)(A) when reduced by aggregate Net Losses
allocated pursuant to this Section 3.4(a)(i)(A) equal to twenty
percent (20%) of the excess of (A) the aggregate Net Gain
realized by the Partnership for each prior and current fiscal
year, over (B) the aggregate Net Loss realized by the
Partnership for each prior and current fiscal year; and
(B) the remainder one-hundred percent (100%) to the Limited
Partners.
(ii) Second, Net Losses for any fiscal year shall be allocated
ninety-nine percent (99%) to the Limited Partners and one
percent (1%) to the General Partner until the Capital Accounts
of all Limited Partners shall be equal to zero.
(iii) Third, any remaining Net Losses for any fiscal year shall
be allocated one hundred percent (100%) to the General Partner.
(b) Allocation of Net Income.
(i) First, in the event and to the extent that, Net Losses shall
have been allocated one hundred percent (100%) to the General
Partner pursuant to Section 3.3(a)(iii) hereof for prior fiscal
years, Net Income shall be allocated one hundred percent (100%)
to the General Partner until the aggregate amount of Net Income
allocated to the General Partner pursuant to this Section
3.3(b)(i) for all fiscal years shall equal the aggregate amount
of Net Losses allocated to the General Partner pursuant to
Section 3.3(a)(iii) hereof for all fiscal years.
(ii) Second, in the event, and to the extent that, Net Losses
shall have been allocated ninety-nine percent (99%) to the Limited
Partners and one percent (1%) to the General Partner pursuant to
Section 3.3(a)(ii) hereof for prior fiscal years, Net Income
shall be allocated ninety-nine percent (99%) to the Limited
Partners and one percent (1%) to the General Partner until the
aggregate amount of Net Income allocated to the Limited Partners
pursuant to this Section 3.3(b)(ii) for all fiscal years shall
equal the aggregate amount of Net Losses allocated to the
Limited Partners pursuant to Section 3.3(a)(ii) hereof for all
fiscal years.
(iii) Third, any remaining Net Income shall be allocated as
follows:
(A) to the General Partner in an amount equal to twenty
percent (20%) of the excess of (A) the aggregate Net Gain realized by
the Partnership for each
<PAGE>
prior and current fiscal year, over (B)
the aggregate Net Loss realized by the Partnership for each
prior and current fiscal year; and
(B) the remainder one-hundred percent (100%) to the Limited
Partners.
SECTION 3.4 Distributions to Partners.
(a) Distributions of Non-Portfolio Income. The Partnership will
distribute cash proceeds attributable to Investments (other than
proceeds attributable to the realization of Portfolio
Investments or proceeds attributable to Short-Term Investments
or Non-Portfolio Investments which are to be reinvested in
accordance with Section 2.4(d)) after payment of all Partnership
expenses not directly attributable to the realization of
Portfolio Investments for each fiscal year to the Partners in
accordance with Section 3.4(c) annually within three (3) months
of the end of such fiscal year; provided that any amount which
in the opinion of the General Partner cannot conveniently or
equitably be distributed within such time may be carried forward
and distributed in the ensuing fiscal year.
(b) Other Distributions. Subject to the other provisions of this
Agreement, the General Partner shall distribute to the Partners
in accordance with Section 3.4(c) all amounts attributable to
the realization of a Portfolio Investment as promptly as is
practicable after such realization occurs.
(c) Priority of Distributions. Partnership Distributions described
in Section 3.4(a) shall be distributed 100% to the Limited
Partners. Partnership Distributions described in Section 3.4(b)
shall be distributed to and among the Partners in the following
order of priority:
(i) First, one-hundred percent (100%) to the Limited Partners
until the aggregate amount of Partnership Distributions described in
Section 3.4(b) distributed to the Limited Partners equals the
aggregate Capital Contributions made by them; provided, however,
that for purposes of this subsection (c), prior to the seventh
anniversary of the Final Closing Date, the Limited Partners
shall be deemed to have made Capital Contributions equal to the
full amount of their Capital Commitments;
(ii) Second, to the General Partner until the aggregate amount of
Partnership Distributions described in Section 3.4(b)
distributed to the General Partner equals twenty percent (20%)
of the excess of (A) the aggregate Net Gain realized by the
Partnership for each prior and current fiscal year, over (B) the
aggregate Net Loss realized by the Partnership for each prior
and current fiscal year (which Net Gain or Net Loss for the
current fiscal year shall be computed as if such year ended on
the date of such distribution); and
(iii) Thereafter, one-hundred percent (100%) to the Limited
Partners.
The General Partner, in its discretion, may make Partnership
Distributions to itself in any fiscal year (beginning with the
second fiscal year) prior to making Partnership Distributions in
accordance with the priorities set forth in (i) above in an
amount equal to (or less than) the excess of:
<PAGE>
(A) the maximum combined U.S. federal and the Commonwealth
of Massachusetts income tax payable by the General Partner
(assuming for this purpose that the General Partner is an
individual resident in Massachusetts) on account of the income
that was allocated to the General Partner for U.S. federal
income tax purposes in the immediately preceding fiscal year of
the Partnership, over
(B) any amounts distributed (after the application of the
following sentence) to the General Partner pursuant to (ii) above in such
immediately preceding fiscal year.
Any amounts distributed to the General Partner pursuant to the
immediately preceding sentence shall be treated as an advance
from the Partnership to the General Partner and shall offset the
Partnership Distributions to be made to the General Partner
pursuant to (ii) above until such advance is repaid in full.
Any amounts not so repaid upon the liquidation of the
Partnership shall be contributed to the Partnership in cash by
the General Partner to be distributed in accordance with the
provisions of (i) and/or (ii) above.
(d) Return of Partnership Distributions by the General Partner. If
the Limited Partners make Capital Contributions after the date
on which one or more Partnership Distributions are made in
accordance with Section 3.4(c)(ii), future Partnership
Distributions shall be made by first applying the priority set
forth in Section 3.4(c)(i). If upon the liquidation of the
Partnership it is determined that the General Partner was
distributed in the aggregate more than twenty percent (20%) of
the amount by which (A) the aggregate Net Gain realized by the
Partnership exceeded (B) the aggregate Net Loss realized by the
Partnership, the General Partner shall be required to contribute
to the Partnership, in cash, an amount equal to the amount of
such excess, which cash shall then be distributed to the
Partners in accordance with the priorities set forth in Section
3.4(c)(i).
(e) Delinquent Capital Contributions. No part of any distribution
shall be paid pursuant to this Section 3.4 to any Limited
Partner from which there is due and owing to the Partnership, at
the time of such distribution, any amount required to be paid to
the Partnership pursuant to the provisions of Section 3.1. Any
such distribution shall be paid to such Limited Partner or a
designee or transferee when all such amounts have been paid in
full.
(f) Compliance with Code Section 704(b). The allocation and
distribution provisions contained in this Agreement are intended
to comply with Code Section 704(b) and the Treasury Regulations
promulgated thereunder (including satisfying the "alternate test
for economic effect") and should be interpreted and applied in a
manner consistent therewith.
SECTION 3.5 Distributions In Kind.
(a) Where any Portfolio Investments are listed, quoted or dealt in
on a recognized stock exchange or are otherwise capable of being
sold or purchased in a recognized over-the-counter or unlisted
securities market in a manner which, in the General Partner's
opinion, provides
<PAGE>
a suitable market for the sale by the Partners
of such Portfolio Investments, the General Partner may (but is
not obliged to) distribute the same in kind, provided that in no
event shall a distribution in kind be made to a Limited Partner
who is prohibited by applicable law or regulation from directly
holding or selling such security to be distributed. Any such
distribution shall be made among the Partners in accordance with
the provisions of Section 3.4 as if an amount of cash equal to
the fair market value of such Portfolio Investments were being
distributed, and the Capital Accounts of the Partners shall be
adjusted to reflect the disposition of such Portfolio
Investments at their fair market value on the date of
distribution. Any Portfolio Investments which are not listed,
quoted or dealt in on a recognized stock exchange or which are
not otherwise capable of being sold or purchased in a recognized
over-the-counter or unlisted securities market in the above
manner may (at the discretion of the General Partner) be
distributed among the Partners in accordance with the provisions
of Section 3.4 but only on the dissolution, liquidation or
termination of the Partnership.
(b) Whenever more than one type of Portfolio Investment is being
distributed in kind in a single distribution or whenever more
than one class of Portfolio Investment in a Portfolio Company
(or a portion of a class of such Portfolio Investment having a
tax basis per share or unit different from other portions of
such class) are distributed in kind by the Partnership, each
Partner shall receive its ratable portion of each type, class or
portion of such class of Portfolio Investment distributed in
kind, provided that the General Partner shall have the power to
make such arrangements as it deems appropriate in the case of
Portfolio Investments becoming distributable in fractions,
whether by the distribution of balancing amounts in cash or
otherwise and to make arrangements to pay the Management Fee and
Partnership expenses from the proceeds of the realization of
Portfolio Investments. Further, in the event that any taxes,
duties or other expenses become payable by the Partnership
because of the distribution of Portfolio Investments in kind to
a particular Partner, the General Partner may, where it deems
appropriate, specifically charge such amounts to the Capital
Account of such Partner.
(c) In the event the Partnership distributes a Portfolio Investment
in kind, any Limited Partner may elect to have the General
Partner, or an affiliate, manage and dispose of the distributed
Portfolio Investment of such Limited Partner, so that the
Limited Partner will receive cash within a reasonable period of
time. The General Partner or its affiliate shall be entitled to
receive from each electing Limited Partner an annual management
fee equal to two and one-half percent (2.5%) of the acquisition
cost of such distributed Portfolio Investment or such other fee
as shall be agreed upon between them.
SECTION 3.6 Re-allocation of Carried Interest.
(a) If at any time:
(i) the General Partner is removed pursuant to Section
6.3(e)(iii); or
(ii) the General Partner resigns as general partner of the
Partnership, or withdraws or retires from the Partnership, or
voluntarily terminates its existence under the circumstances
permitted in this Agreement (other than in connection with a
transfer to a new
<PAGE>
General Partner as permitted in Section 5.1(b)
or a dissolution of the Partnership other than pursuant to
Section 6.3(d));
then the following provisions with respect to Section 3.4(c)
shall apply with regard to such former General Partner:
(i) The Partnership interest of the former General Partner shall
be transformed to that of a special limited partner, which shall be
entitled to receive Partnership Distributions as described in
this Section 3.6 but which shall not otherwise participate in
the management of the Partnership or in the calculation of any
approvals or consents of the Limited Partners required by this
Agreement.
(ii) The former General Partner's right to receive allocations
and Partnership Distributions with respect to any Limited Partner
interest it may hold shall not be affected.
(iii) In addition, the former General Partner shall be entitled to
receive a portion of the "carried interest" payable to the
General Partner pursuant to Section 3.4(c)(ii) (which "carried
interest" shall be equal to the General Partner's right to
receive Partnership Contributions pursuant to Section
3.4(c)(ii)), which when added to the amounts of the carried
interest previously received by the former General Partner
equals:
(A) the aggregate amount of carried interest paid to the
former General Partner or any new General Partner, times
(B) a fraction, the numerator of which is the aggregate
acquisition cost of all Portfolio Investments acquired prior to the date on
which the General Partner became a special limited partner, and
the denominator of which is the aggregate acquisition cost of
all Portfolio Investments acquired prior to the date of the
Partnership Distribution with respect to which the carried
interest is being calculated, times
(C) a percentage, which on the first anniversary of the
Final Closing Date shall equal twenty-five percent (25%) and which
shall be increased by an additional twenty-five percent (25%) on
each succeeding anniversary of the Final Closing Date (so that
on and after the fourth anniversary the percentage shall equal
one hundred percent (100%)).
(iv) The former General Partner's right to retain any Partnership
Distributions made to it prior to the date of such removal or
other event shall not be affected.
(b) If at any time:
(i) the General Partner is removed pursuant to Section 6.3(e)(i)
or (ii), or
<PAGE>
(ii) the General Partner resigns as general partner of the
Partnership, or withdraws or retires from the Partnership or
voluntarily terminates its existence in each case in breach of
this Agreement, or
(iii) the Partnership Interest of the General Partner is disposed
of in breach of this Agreement,
then the following provisions with respect to Section 3.4(c)
shall apply:
(i) The former General Partner shall not be entitled to receive
Partnership Distributions subsequent to the date of such removal
or other event.
(ii) The former General Partner's right to retain any Partnership
Distributions made to it prior to the date of such removal or
other event shall not be affected.
(iii) The former General Partner's rights to receive allocations
and Partnership Distributions with respect to any Limited Partner
interest it may hold shall not be affected.
ARTICLE IV - WITHDRAWAL OF PROFITS, GAINS OR CAPITAL
SECTION SECTION 4.1 Withdrawal by Limited Partners.
(a) Notwithstanding any provision contained herein to the contrary,
if a Limited Partner delivers to the General Partner an Opinion
of Counsel to the effect that it is more likely than not that an
Investment (a "Conflicting Interest") by the Partnership would
cause such Limited Partner (the "Conflicted Partner") to violate
any law, regulation, license, permit or decree or order of a
court of competent jurisdiction (including any provisions of
ERISA) or that, if such Partner is a tax-exempt organization, it
is more likely than not that such Limited Partner would lose its
tax-exempt status, then the following provisions shall apply:
(i) the General Partner shall use its best efforts, consistent
with standards of commercial reasonableness and its fiduciary duty to
the other Limited Partners, to cause the Investment to cease to
constitute a Conflicting Interest with respect to such
Conflicted Partner;
(ii) if the General Partner cannot pursuant to (i) above cause
the Investment to cease to constitute a Conflicting Interest with
respect to the Conflicted Partner, the Conflicted Partner shall
offer to assign all its interest in the Conflicting Interest
(including the relevant portion of the Conflicting Partner's
Capital Account and all allocations and distributions
attributable to the Conflicting Interest) to the other Limited
Partners (the "Non-Conflicted Partners"), pro rata based on
their relative Capital Commitments, at a price and on such terms
as are specified by the Conflicted Partner in a written notice
given by the Conflicted Partner to the Non-Conflicted Partners.
Each Non-Conflicted Partner may accept all (but not less than
all) of the interest in the Conflicting Interest so offered to
it by
<PAGE>
notifying the General Partner of such acceptance within
five (5) days of receiving the offer notice from the Conflicted
Partner. If any Non-Conflicted Partner does not exercise its
rights to purchase its proportionate share of the Conflicted
Partner's interest in the Conflicting Interest, the other
Non-Conflicted Partners shall have the right to purchase such
remaining portion in accordance with their relative Capital
Commitments or in such other portion as they may mutually agree;
(iii) if the Non-Conflicted Partners fail to purchase all of the
Conflicted Partner's interest in the Conflicting Interest, the
Conflicted Partner may, subject to the provisions of this
Agreement, assign the portion of such interest that is not
purchased by the Non-Conflicted Partners to any third party at a
price and on such terms no more favorable than the price and
terms offered to the Non-Conflicted Partners, which terms shall
attempt to allocate to such third party the Conflicted Partner's
economic interest in the Conflicting Interest, taking into
account the fact that such economic interest is dependent upon
the performance of other Investments; and
(iv) if the Conflicting Interest is not eliminated or the
Conflicted Partner cannot dispose of its entire interest pursuant to the
terms of (i), (ii) and (iii) above, the Non-Conflicted Partners
shall each be entitled to purchase a proportionate share, based
on their relative Capital Commitments, of the Conflicted
Partner's remaining interest in the Conflicting Interest by
delivering to the Conflicted Partner a note in the principal
amount of the Conflicted Partner's Capital Contributions that
are attributable to the portion of the Conflicting Interest
being purchased; provided, however, that the purchase price will
be reduced to the purchasing Partner's proportionate share of
the book value of the Conflicting Interest if the Investment in
question has been written down on the books of the Partnership
in accordance with the terms of this Agreement and the
Partnership's normal accounting practices. Interest shall
accrue on such note at a rate equal to two hundred (200) basis
points over the rate then being paid on U.S. Treasury
obligations having a maturity date of five (5) years and a
principal amount approximately equal to that of such note.
Principal and accrued interest shall be payable on the note only
if and to the extent that the obligor Partner receives
distributions or payments attributable (directly or indirectly)
to the portion of the Conflicting Interest it purchased.
Further, such note shall be nonrecourse to the purchasing
Non-Conflicted Partner and shall be secured only by
distributions or payments attributable (directly or indirectly)
to the portion of the Conflicting Interest it purchased. If a
Non-Conflicted Partner declines to purchase its proportionate
share of the Conflicting Interest on the terms and conditions
set forth in this subparagraph (a) , such portion may be
acquired pro rata (based on their relative Capital Commitments)
by the other Non-Conflicting Partners.
<PAGE>
(b) Except as otherwise provided in this Section 4.1 and in Section
9.10 hereof, no Limited Partner shall be permitted to withdraw
profits, gains or capital from the Partnership without the
approval of the General Partner, which approval may be withheld
if the General Partner does not believe that such withdrawal is
in the best interests of the other Limited Partners (whether
because of the cash position of the Partnership, the
undesirability of liquidating any of the Investments of the
Partnership, or otherwise). The following provisions shall
govern with respect to any withdrawals approved by the General
Partner pursuant to this Section 4.1(b):
(i) No such withdrawal shall be made except as of the last day of
the fiscal year of the Partnership unless another date is
selected by the General Partner;
(ii) Partial withdrawals of profits, gains or capital with
respect to a Limited Partner's Capital Commitment shall not be permitted
and a Limited Partner desiring to withdraw must withdraw its
entire interest relating to its Capital Commitment; and
(iii) The Limited Partner desiring to withdraw must notify the
General Partner in writing at least one hundred twenty (120) days prior
to the close of the fiscal year in which it wishes to effect its
withdrawal.
(c) The General Partner may, to accommodate a request or election
for withdrawal by a Limited Partner, attempt to obtain a
purchaser of the whole or a part of such Limited Partner's
interest.
SECTION 4.2 Legal Representatives. In the event any Limited Partner
shall die or shall be declared incompetent or insane or shall be
adjudicated a bankrupt, or in the event of the winding up or
liquidation of a Limited Partner, the legal representative of
such Limited Partner shall upon written notice to the General
Partner of the happening of any of such event(s) become an
assignee of such Limited Partner's interest, subject to all of
the terms of this Agreement as then in effect. Such legal
representative may not terminate any interest in the Partnership
and withdraw capital, profits or gains except in accordance with
Section 4.1. If the General Partner does not approve withdrawal
of the interest of such legal representative, the General
Partner will use its best efforts, without legal obligation, to
find another Person, suitable to the General Partner, willing to
assume the Partnership interest of such legal representative.
SECTION 4.3 Liquidating Share.
(a) In the event any Limited Partner shall withdraw or be required
to withdraw in accordance with the provisions of Sections 4.1 or
9.10, there shall be distributed to such Limited Partner or its
legal representative within ninety (90) days after the last day
of the fiscal year of the Partnership in which such withdrawal
occurred, an amount equal to the balance of such Limited
Partner's Capital Account as of the end of such fiscal year of
the Partnership or, if withdrawal occurs other than at the end
of a fiscal year, the date of such withdrawal; provided,
however, that except in the case of a dissolution of the
Partnership, the payment to be made pursuant to this Section 4.3
to such Limited Partner shall be subject to reduction in such
amount not in excess of
<PAGE>
five percent (5%) of such payment as the
General Partner may determine to be necessary to cover the costs
of selling Securities or other property in order to effect such
payment.
(b) The Partnership may, in the discretion of the General Partner,
subject to the limitations set forth below, make any
distribution or payment pursuant to this Section 4.3 in cash, in
Securities or in the form of a promissory note of the
Partnership maturing upon the dissolution of the Partnership and
bearing interest at the minimum rate necessary to avoid the
imputation of interest under the Code. However, unless a
Limited Partner withdrawing pursuant to Section 4.1(a) otherwise
elects, no distribution of Securities, or of any interest
therein, shall be made to such Limited Partner if the effect of
such distribution, as set forth in an Opinion of Counsel, would
be to continue the situation or circumstance giving rise to the
necessity for such Limited Partner's withdrawal.
(c) If any payment pursuant to this Section 4.3 is made in whole or
in part by delivery of a promissory note of the Partnership,
such note shall be payable on the same terms as the note
described in Section 4.1(a)(iv).
SECTION 4.4 Cessation of Participation. Subject to Section 4.3(b),
from and after the date of withdrawal of a Limited Partner from the
Partnership under this Article IV, no interest shall be payable
on its interest in the Partnership to the date of payout.
ARTICLE V - TRANSFER OF PARTNERSHIP INTERESTS
SECTION 5.1 Assignability of Interests.
(a) Subject to the provisions of Sections 4.2 and 5.1(c) hereof, the
interest of a Limited Partner shall not be assignable without
the prior written consent of the General Partner. No assignment
shall be binding upon the Partnership until the General Partner
receives an executed copy of such assignment in form and
substance satisfactory to the General Partner. The assignee of
such interest may become a substituted Limited Partner only upon
the terms and conditions of Section 5.2.
(b) The interest of the General Partner shall not be assignable;
provided, however, that such interest may be assigned to a
successor to all or substantially all of the business of the
General Partner or the general partner of the General Partner,
upon (i) the execution by the General Partner of a written
assignment, the execution by the successor of this Agreement and
the written assumption by the successor of the obligations of
the General Partner hereunder, and (ii) the receipt by the
Partnership of an Opinion of Counsel that such assignment and
assumption will not result in the Partnership being classified
as an association or otherwise taxable as a corporation for
United States Federal income tax purposes. In the event of such
assignment, the successor shall become the general partner
hereunder and the predecessor and successor General Partner
shall cause the execution of any necessary papers including,
without limitation, an amendment to the Certificate of Limited
Partnership to record the substitution of the successor as
general partner. The General Partner shall notify the Advisory
Board prior to any such proposed assignment of the
<PAGE>
General Partner's interest and shall notify the Limited Partners within
seven (7) days of any such assignment.
(c) Sections 5.1(a) and 5.2 notwithstanding, a Limited Partner may
assign its interest to and substitute as a Limited Partner in
its place and stead any corporation or other entity (A) which
then owns directly or indirectly Voting Control of the Limited
Partner, or (B) of which the Limited Partner then owns directly
or indirectly Voting Control, or (C) of which a corporation
described in (A) then owns directly or indirectly Voting
Control, or (D) which is an entity controlled by, controlling or
under common control with any assigning Limited Partner or in
the case of assignment by a trustee of an employee benefit plan
(as defined in ERISA) or trust relating thereto, to a successor
fiduciary thereof, or (E) subject to the consent of the General
Partner, which consent shall not be unreasonably withheld, to a
member of the Edison Electric Institute (including, for this
purpose any entity controlling, controlled by or under common
control with such member or any employee benefit plan sponsored
by such member or such affiliate of such member); provided,
however, that such assignment does not increase the number of
persons who beneficially own interests in the Partnership for
purposes of determining whether the partnership is an
"investment company" under the Investment Company Act of 1940,
as amended; and provided further, however, that no such transfer
may be made if the General Partner, based upon an Opinion of
Counsel, shall determine that it might result in a violation of
any law or result in the Partnership being classified as an
association or otherwise taxable as a corporation for United
States Federal income tax purposes.
SECTION 5.2 Substituted Limited Partners. Subject to the provisions of
Sections 5.1(c), no Limited Partner shall have the right to
substitute an assignee as a Limited Partner in its place. The
General Partner shall have the power, in its discretion, to
admit as a substituted Limited Partner any Person acquiring a
partnership interest by assignment from a Limited Partner. The
admission of an assignee as a substituted Limited Partner shall
be conditioned upon the assignee's written assumption of all
obligations of the assigning Limited Partner and execution of
this Agreement as a Limited Partner. Upon acceptance of a
substituted Limited Partner, the General Partner shall forthwith
amend any necessary papers to show the substitution of such
assignee in place of the assigning Limited Partner. The General
Partner's failure or refusal to admit an assignee as a
substituted Limited Partner shall not affect the right of such
assignee to receive the share of profits or other distribution
or compensation to which its assignor would otherwise be
entitled.
SECTION 5.3 Obligation of Assignee. Any assignee, irrespective of
whether such assignee has accepted and adopted in writing the terms and
provisions of this Agreement, shall be deemed by the acceptance
of such assignment to have agreed to be subject to the terms and
provisions of this Agreement in the same manner as its assignor.
SECTION 5.4 Prohibition Against Public Trading. Each Limited Partner
hereby covenants and agrees with the Partnership for the benefit
of the Partnership and all Partners that (a) the Limited Partner
is not currently making a market in the Limited Partner's
Partnership Interest, (b) the Limited Partner will not transfer
its Partnership interest on an established securities market or
a secondary market (or the substantial equivalent thereof)
within the meaning of Code Sections
<PAGE>
469(k)(2) and 7704(b) (and
any Treasury Regulations, revenue rulings, or other official
pronouncement of the Internal Revenue Service of the Treasury
Department that may be promulgated or published thereunder), (c)
the Limited Partner is not currently structured as a
pass-through entity (i.e., a partnership, S corporation or
grantor trust) and will not transfer its Partnership interest to
such an entity, and (d) the Limited Partner will not subdivide
its interest in the Partnership for resale into a Partnership
interest the initial offering price of which would have been
less than $20,000. The General Partner may (but is not required
to) waive any of the above restrictions if, in its reasonable
judgment, such waiver will not cause any adverse consequences to
the Partnership or the Partners.
ARTICLE VI - DURATION AND LIQUIDATION OF PARTNERSHIP
SECTION 6.1 Duration.
(a) Subject to Section 6.3, the Partnership shall continue until ten
(10) years from the date of this Agreement; provided, however,
that with the written consent of the General Partner and Limited
Partners representing at least sixty-six and two-thirds percent
(66 2/3%) of the combined Capital Contributions of all the
Limited Partners;
(i) the Partnership may be extended for such period or periods
not in excess of two (2) years as may be necessary to facilitate the
realization of Investments; or
(ii) the Partnership may be dissolved at any time after its first
full fiscal year.
SECTION 6.2 Withdrawal of Limited Partner. If any Limited Partner
shall withdraw, die, be declared incompetent or insane, or be
adjudicated as bankrupt, or in the event of the winding up or
liquidation of a Limited Partner, such event shall not cause the
dissolution or liquidation of the Partnership, and the
Partnership shall continue until dissolved pursuant to Section
6.1 or Section 6.3.
SECTION 6.3 Termination of the Partnership; Withdrawal and Removal of
General Partner.
(a) Without prior consent by Limited Partners representing
seventy-five percent (75%) of the combined Capital Contributions
of all Limited Partners and subject to appointing a new Person
to act as General Partner of the Partnership who shall be
willing to serve as such and who shall have complied with the
provisions of Section 5.1, the General Partner may not resign
as General Partner of the Partnership or withdraw or retire from
the Partnership or voluntarily terminate its existence;
provided, however, that the General Partner may assign its
interest in the Partnership and withdraw as the general partner
pursuant to Section 5.1(b)..
(b) If the General Partner determines in its reasonable discretion
that, due to a change in applicable laws, rules or regulations,
it is illegal or no longer in the best interests of the Limited
Partners to continue the Partnership, then the Partnership shall
dissolve upon one hundred and eighty (180) days prior written
notice from the General Partner to the Limited Partners, subject
to
<PAGE>
the right of the Limited Partners to continue the Partnership
and elect a new General Partner pursuant to Section 6.3(c) below.
(c) Unless the Limited Partners shall have determined to continue
the Partnership as provided in the second sentence of this
Section 6.3(c), the Partnership shall dissolve on the 180th day
after any of the following events:
(i) the giving of the notice provided for in Section 6.3(b);
(ii) the filing by the General Partner or the Partnership of a
petition under the United States Bankruptcy Code; or
(iii) the running of sixty (60) days after the filing by another
person against the General Partner of a petition under the
United States Bankruptcy Code which petition is not dismissed
within such sixty (60) day period.
If, following the occurrence of any of the events specified in
(i)-(iii) above , Limited Partners representing in excess of
fifty percent (50%) of the combined Capital Contributions of all
Limited Partners determine in a writing executed within such one
hundred and eighty (180) day period to continue the Partnership
and elect a new General Partner, the Partnership shall not
dissolve as provided in the first sentence of this Section
6.3(c) but shall continue in existence as though no such
decision to dissolve or filing had occurred, except that the new
General Partner shall be substituted for the former General
Partner. Any Limited Partner who does not consent to such
continuation shall have the right to withdraw by giving notice
within ninety (90) days after having been notified of the
continuation of the Partnership, and shall be paid in the manner
set forth in Section 4.3 within ninety (90) days after giving
such notice.
(d) The Partnership shall dissolve on the 90th day after the General
Partner resigns as general partner of the Partnership other than
pursuant to Section 5.1(b), or withdraws or retires from the
Partnership, or voluntarily terminates its existence. Provided,
however, that if one hundred percent (100%) of the Limited
Partners determine in writing executed within such ninety (90)
day period to continue the Partnership and elect a new General
Partner, the Partnership shall not dissolve as provided in the
first sentence hereof but shall continue in existence as though
no decision to dissolve or filing had occurred, except that the
new General Partner shall be substituted for the former General
Partner. Provided further, that the new General Partner shall
be willing to serve as such and that the appointment of such
General Partner shall otherwise comply with the provisions of
this Agreement.
(e) The General Partner shall be deemed removed (unless waived by
the affirmative vote of Limited Partners representing at least
seventy-five percent (75%) of the combined Capital Contributions
of all the Limited Partners) upon thirty (30) days prior written
notice:
(i) when a court of competent jurisdiction makes a final
determination, as to which all rights to appeal have been
exercised or exhausted, that the General Partner is guilty of
any gross negligence, willful malfeasance, fraud, material
breach of its fiduciary
<PAGE>
duty to the Partnership or the Limited
Partners or bad faith in connection with the performance of its
duties hereunder or has committed any material breach of its
obligations hereunder which cannot be remedied or which if it
can be remedied is not remedied by the General Partner within
thirty (30) days after such determination or has caused any of
the Limited Partners to be liable in excess of their Capital
Commitment for the liabilities of the Partnership;
(ii) upon the criminal conviction entered by a court of competent
jurisdiction against the General Partner, AIC or its officers,
by reason of their activities on behalf of the Partnership; or
(iii) upon a "substantial change in management of AIC" or a
"substantial change in the composition of the Industrial
Investment Team" as described in Section 2.1(b) at any time
prior to the sixth anniversary of the Final Closing Date, if,
for a period of one hundred twenty (120) days after such change,
there has not been an approval by a majority of the members of
the Advisory Board to continue to allow the newly managed
General Partner to make new Portfolio Investments on behalf of
the Partnership.
provided that a new General Partner shall have been appointed to
act as a general partner (who shall be willing to serve as such
and whose appointment shall otherwise comply with the provisions
of this Agreement) prior to such removal. Notwithstanding the
foregoing, the General Partner shall not be deemed removed under
the foregoing provisions of this Section 6.4(c) unless and until
it has had at least thirty (30) days' notice of the intent by
any Limited Partner to remove the General Partner pursuant to
this Section 6.4(c).
SECTION 6.4 Liquidation.
(a) Upon dissolution of the Partnership, the Partnership shall be
liquidated subject to the provisions of this Section 6.4. The
General Partner, or if there be no general partner or if the
Partnership is dissolved by the Limited Partners, then a person
selected by Limited Partners representing in excess of fifty
percent (50%) of the combined Capital Contributions of all
Limited Partners, shall act as the liquidator with full power
and authority to:
(i) sell, at such prices and upon such terms as the liquidator in
its sole discretion may deem appropriate, any or all of the
Securities, properties and assets of the Partnership, provided
that such sales shall only be made for cash and shall be
consummated as soon as reasonably practicable (consistent with
the best interests of all the Partners) after the date of
dissolution; and provided further that the liquidator shall not
deal directly or indirectly with the Partnership for its own
account without the approval in writing of all of the Limited
Partners;
(ii) as soon as reasonably practicable after the date of
dissolution, effect distribution of the properties and assets of the
Partnership in the manner set forth in Section 6.5; and
<PAGE>
(iii) control and pay out the reserves established pursuant to
Sections 6.5(b) and (d) and distribute the balance to the
Partners pursuant to Section 6.5(e) as additional assets.
(b) In the event that at the time of the dissolution of the
Partnership, the General Partner has filed a petition under the
United States Bankruptcy Code, or sixty (60) days after the
filing by another person against the General Partner of a
petition under the United States Bankruptcy Code which petition
is not dismissed, or if the General Partner has ceased to carry
on a business because of a voluntary liquidation, then
notwithstanding Section 6.4(a), there shall be a liquidator
appointed by Limited Partners representing in excess of fifty
percent (50%) of the combined Capital Contributions of all the
Limited Partners, which liquidator shall be solely responsible
for the liquidation of the Partnership. The fees (exclusive of
expenses) of any liquidator appointed pursuant to (a) above or
this Section 6.4(b) shall be deducted from any amounts otherwise
payable to the General Partner by the Partnership, and the
General Partner shall be liable to the Partnership for any
excess.
(c) In the event that Limited Partners representing in excess of
fifty percent (50%) of the combined Capital Contributions of all
the Limited Partners so agree in writing, the liquidator will
make all or a specified portion of the liquidating distribution
in kind; absent any such agreement, distributions shall be in
cash.
SECTION 6.5 Distribution Upon Liquidation. On liquidation of the
Partnership, the General Partner or liquidator, as the case may
be, shall make distributions out of the properties and assets of
the Partnership in the following order of priority:
(a) To the payment and discharge of the claims of all creditors of
the Partnership who are not Partners;
(b) To the establishment of such reserves as they may deem necessary
or advisable in order to provide for contingent liabilities of
the Partnership to all persons who are not Partners;
(c) To the payment and discharge pro rata of the claims of all
creditors of the Partnership who are Partners;
(d) To the establishment of such reserves as they may deem necessary
or advisable in order to provide for contingent liabilities to
Partners; and
(e) The balance, if any, to the Partners in accordance with and in
proportion to their positive Capital Account balances (after
treating all Securities or other property other than cash that
the Partnership holds on the date of liquidation as having been
distributed on such date, and after allocating the profit and
loss on such Securities and other property determined in
accordance with Section 3.3).
SECTION 6.6 Deficit Restoration by General Partner. Notwithstanding
any other provision of this Agreement to the contrary, if upon
liquidation of the General Partner's interest in the
<PAGE>
Partnership
(whether or not in connection with the liquidation of the
Partnership), the General Partner has a negative balance in its
Capital Account, the General Partner shall pay to the
Partnership on or before the end of the taxable year in which
such liquidation occurs (or, if later, within ninety (90) days
after the date of such liquidation) an amount in cash equal to
the difference between the General Partner's negative Capital
Account and zero. In determining the amount to be paid by the
General Partner, the Capital Account of the General Partner
shall first be adjusted (i) to account for all Capital Account
adjustments for the fiscal year during which such liquidation
occurs, and (ii) to reflect all allocations that would be
required as prerequisite for any distribution pursuant to
Section 6.5(e). All amounts received by the Partnership
pursuant to this Section 6.6 shall, upon liquidation of the
Partnership, be distributed in accordance with Section 6.5.
ARTICLE VII - REPORTS TO PARTNERS
SECTION 7.1 Independent Auditors. At all times the General Partner
shall keep books of account in which shall be entered fully and
accurately the transactions of the Partnership. The books of
account and records of the Partnership shall be audited as of
the end of each fiscal year by independent certified public
accountants of recognized national standing selected by the
General Partner and shall be kept by the General Partner on an
accrual basis.
SECTION 7.2 Reports.
(a) Annual Financial Statements. Within one hundred twenty (120)
days after the end of each fiscal year and on liquidation of the
Partnership, the General Partner shall prepare, on the basis of
the report of the independent certified public accountants, and
mail to each Partner (and to each former Partner who withdrew
during such fiscal year), together with the report of the
independent certified public accountants, a report stating in
sufficient detail such transactions effected by the Partnership
during such fiscal year as shall enable such Partner to prepare
its respective income tax returns and including:
(i) such Partner's Capital Accounts as of the close of such
fiscal year;
(ii) the sum of all Capital Accounts as of such date;
(iii) statement of assets and liabilities of the Partnership;
(iv) profit and loss statement;
(v) statement of holdings of Securities of the Partnership;
(vi) a description of the nature of each of the Partnership's
Investments, the cost thereof and the valuation thereof established pursuant
to Section 8.3; and
<PAGE>
(vii) such other financial information and documents as the
General Partner deems appropriate, as a Limited Partner may reasonably
request, or as required by this Agreement and any amendments
hereto.
(b) Quarterly Financial Statements. Within sixty (60) days after
the end of each quarter of each fiscal year of the Partnership,
the General Partner shall mail to each Limited Partner unaudited
financial statements of the Partnership for such fiscal quarter.
(c) Non-Financial Information. Beginning ninety (90) days after the
Final Closing Date and continuing through the investment phase
of the Partnership (which shall be a period of time between four
(4) and six (6) years as is determined by the Advisory Board),
the General Partner shall send, on a bi-monthly basis, a written
information statement, the form and content of which shall be
the same as the first such statement, which first statement
shall be subject to the approval of a majority of the members of
the Advisory Board, to each Limited Partner describing generally
the activities of the Partnership and, to the extent they relate
to the Partnership, the activities of the General Partner. In
particular, to the extent such information is not confidential,
such statement should describe generally the types of
technologies which are being advanced by those Persons whom the
General Partner has considered as potential Portfolio Companies
(whether or not such Person ultimately becomes a Portfolio
Company). Also, such statement should disclose information
regarding the potential energy savings and potential reduction
of CO2 emissions related to the Partnership's investments in a
format that would allow the Limited Partners to report such
items in accordance with Section 1605(b) of the Energy Policy
Act of 1992. The frequency and format of such reports may be
changed (either permanently or on a temporary basis) with the
consent of a majority of the members of the Advisory Board.
SECTION 7.3 Inspection. A Limited Partner or its duly authorized
representative shall have the right at reasonable times to
inspect and copy the books and records of the Partnership and to
discuss its affairs with the agents (including any independent
auditors) of the General Partner.
SECTION 7.4 Tax Returns. The General Partner will serve as the "tax
matters partner" of the Partnership and will file all United
States Federal, state or other income tax returns required of
the Partnership. The General Partner will use all reasonable
efforts to cause to be delivered, within ninety (90) days after
the end of each such fiscal year, to each Person who was a
Partner at any time during such fiscal year (a) a Form K-1 and
such other information, if any, with respect to the Partnership
as may be necessary for the preparation of such Partner's United
States Federal income tax return, and (b) such similar returns
as are required to be filed by the Partnership for United States
Federal, state and local income tax purposes. If requested to
do so by any Limited Partner, the General Partner will file an
election pursuant to Section 754 of the Code.
ARTICLE VIII - VALUATION
SECTION 8.1 Valuation of Partnership Net Worth. In determining the net
worth of the Partnership, the value of any Partnership asset,
the Capital Accounts of the Partners, the value of
<PAGE>
any distribution, or in determining value for any other purpose
under this Agreement, the provisions of this Article VIII shall
apply.
SECTION 8.2 Valuation Date. Valuation shall be taken by the General
Partner as of the close of business on (i) the last day of each
fiscal year of the Partnership, (ii) the date the Partnership
dissolves or (iii) the date with respect to which valuation is
to be taken. If such day is not a "Market Day", then valuation
shall be taken on the "Market Day" next preceding such date, as
the case may be. A "Market Day" shall be a day on which the New
York Stock Exchange is open for regular trading. If a valuation
is taken other than in connection with the annual report
described in Section 7.2, the General Partner shall give notice
of such valuation to the Limited Partners promptly after it is
determined.
SECTION 8.3 Valuing Securities and Other Assets. The following
provisions shall apply in valuing interests in the Partnership:
(a) Listed Securities which are not restricted as to saleability or
transferability shall be valued at the closing price as of the
valuation date. If any listed Security was not traded on such
date, then the mean of the closing high bid and low asked prices
as of the close of business on such date shall be used.
(b) Unlisted securities which are readily marketable shall be valued
at the mean of the closing bid and asked prices as of the
valuation date.
(c) Securities, whether listed or unlisted, for which market
quotations are available, but which are restricted as to
saleability or transferability, shall be valued as provided in
(a) and (b) above, less a discount of from ten percent (10%) to
twenty-five percent (25%) of the value thereof as determined in
good faith by the General Partner. In determining the amount of
such discount the General Partner shall give consideration to
the nature and length of such restriction and the relative
volatility of the market price of such Security.
(d) Securities for which market quotations are not readily available
and all other assets of the Partnership shall be valued at a
fair value as reasonably determined in good faith by the General
Partner.
(e) Liabilities shall include, in addition to those recorded on the
books of the Partnership, such other accrued or contingent
liabilities as shall be determined in accordance with generally
accepted accounting principles consistently applied.
(f) In determining the value of the interest of any Partner in the
Partnership, neither the goodwill nor the right to use the firm
name or trade name of the Partnership shall be considered as an
asset of the Partnership. Neither shall any valuation be placed
thereon for the purpose of distribution, nor shall any value be
placed thereon as between the Partners, or between a continuing
Partner and a withdrawing Partner, or between a surviving
Partner and the estate of any deceased Partner.
<PAGE>
SECTION 8.4 Disputes.
(a) If Limited Partners representing in excess of fifty percent
(50%) of the combined Capital Contributions of all of the
Limited Partners dispute the values determined by the General
Partner, they shall give notice thereof to the General Partner
in writing by certified mail within sixty (60) days following
the mailing of the annual report described in Section 7.2, or
the date on which notice is otherwise given of the General
Partner's determination of the fair value. Such dispute shall
be referred to an independent financial analyst of recognized
standing, selected by the General Partner and approved by all
disputing Partners. If the parties are unable to agree on an
independent financial analyst, the General Partner shall select
one financial analyst of recognized national standing and the
disputing Partners shall select another such analyst. If the
two analysts so selected are unable to agree on a fair value,
they shall select a third analyst, who shall determine the fair
value. The General Partner shall upon request supply to any
independent financial analyst selected as provided above all
information in its possession with respect to the asset whose
value is disputed. The Partnership shall pay the cost of the
analyst selected by the General Partner and the disputing
Limited Partners shall pay the cost of the analyst selected by
them. The cost of any third analyst shall be divided equally
between the Partnership on the one hand and the disputing
Limited Partners on the other.
(b) If Limited Partners representing in excess of fifty percent
(50%) of the combined Capital Contributions of all of the
Limited Partners shall have given notice to the General Partner
in writing by certified mail disputing the values determined by
the General Partner within sixty (60) days following the mailing
of the annual report described in Section 7.2, or the date on
which notice is otherwise given of the General Partner's
determination of fair value, then no distributions shall be made
to the Partners until such dispute shall have been resolved in
accordance with the provisions of this Section 8.4.
ARTICLE IX - MISCELLANEOUS
SECTION 9.1 Admission of Partners. No new Partner shall be admitted
to the Partnership except by assignment of the interest of a Partner in
accordance with Article V, by replacement of the General Partner
in accordance with Section 6.3(c) or (d) or in accordance with
this Section 9.1. Additional Limited Partners may be admitted
to the Partnership on or before the 180th day following the
initial Capital Contribution by any Limited Partner, upon the
approval of the General Partner. Admission of any such
additional Limited Partner shall be accomplished when each
Limited Partner so admitted shall (i) sign an amendment to this
Agreement, which shall be accepted by the General Partner, in
which such Limited Partner agrees to become a Limited Partner
upon the terms and conditions of this Agreement, as well as any
other documents required by the General Partner, (ii) make the
initial payment of his Capital Commitment required by Section
3.1, and (iii) pay to the Partnership an amount of interest on
its initial Capital Contribution equal to the weighted average
of interest earned by the Partnership on its uninvested funds
from the date of commencement of this Partnership to the date of
admission of such additional Limited Partner pursuant to this
Section 9.1 as determined by the General Partner. With respect
to any Limited Partner admitted pursuant to this Section 9.1, no
such Limited Partner shall be allocated any income, gain or loss
realized during the period prior to such Limited Partner's
admission to the Partnership. Upon admission of an additional
Limited Partner, the Partnership shall notify each Limited
Partner of the interests of all Partners in the Partnership.
Each said additional Limited Partner shall thereafter be
entitled to and subject to all the rights and liabilities of
Limited Partners hereunder.
SECTION 9.2 Disputed Matters. Except as provided in Section 8.4, any
controversy or dispute arising out of this Agreement,
interpretation of any of the provisions hereof, or the actions
of the Partners hereunder shall be submitted to arbitration
before the American Arbitration Association under the rules then
obtaining of said Association, such arbitration to be held in
Boston, Massachusetts, and judgment upon any award thus obtained
may be entered in any court having jurisdiction thereof. In any
such arbitration each party to the arbitration shall bear its
own expenses, including expenses of attorneys, financial experts
and other witnesses; any arbitration fees and expenses of the
arbitrators shall be divided equally between the disputing
parties.
SECTION 9.3 General. This Agreement: (a) shall be binding on the
legal successors of the Partners permitted by this Agreement; (b)
shall be governed by and construed in accordance with the
Delaware Revised Uniform Limited Partnership Act and otherwise
in accordance with the laws of the Commonwealth of
Massachusetts; (c) may be executed in more than one counterpart
as of the day and year first above written; and (d) contains the
entire Agreement among the Partners relating to the subject
matter hereof. The waiver of any of the provisions, terms or
conditions contained in this Agreement shall not be considered
as a waiver of any of the other provisions, terms or conditions
hereof.
SECTION 9.4 Notices.
(a) To the Partners. Any notice to be given hereunder by the
Partnership to any Partner shall be in writing and signed by the
General Partner. Any such notice shall be conclusively deemed
to have been given if either (i) delivered in person to such
Partner or (ii) if the address to which said notice is to be
sent is outside of the United States, mailed by air mail,
postage prepaid, addressed to such Partner at its address set
forth in Appendix A, or (iii) if the address to which said
notice is to be sent is within the United States, mailed by
registered or certified mail, and addressed as set forth in (ii)
above. Any Partner may change its address for notice by written
notice to the Partnership at the Partnership address given by
the means set forth in Section 9.4(b), and upon receipt by the
Partnership of such notice of change of address for notice, the
new address shall be that Partner's address for notice hereunder.
(b) To the Partnership. Any notice to be given hereunder to the
Partnership shall be in writing and signed by the Partner giving
notice. Any such notice shall be conclusively deemed to have
been given if either (i) delivered in person to the General
Partner, or (ii) mailed by United States registered or certified
mail, postage prepaid, addressed to the Partnership at its
principal office, which shall be 101 Federal Street, Boston,
Massachusetts 02110, or such other address as the General
Partner may from time to time designate by notice to all Limited
Partners. Any notice to the Partnership may be mailed by air
mail to such address if mailed from outside of the United
States, but shall be deemed given only upon receipt.
<PAGE>
SECTION 9.5 Execution of Certificate of Limited Partnership and Other
Documents. The General Partner agrees to prepare, execute and
file a certificate of limited partnership and any amendments
thereto, and all Partners agree to execute such other
instruments, documents and papers as the General Partner deems
necessary or appropriate to carry out the provisions of this
Agreement, and to take such other action as the General Partner
deems appropriate to maintain the Partnership's status as a
Limited Partnership under the laws of the State of Delaware and
its status as a qualified foreign limited partnership under the
laws of the Commonwealth of Massachusetts. The General Partner
shall send copies of such documents to each Partner.
SECTION 9.6 Force Majeure. Whenever any act or thing is required of
the Partnership hereunder within any specified period of time, the
Partnership shall be entitled to such additional period of time
to do such acts or things as shall equal any period of delay
resulting from causes beyond the reasonable control of the
Partnership, including, without limitation, bank holidays,
actions of governmental agencies, the closing of the New York
Stock Exchange at times other than normal closing dates, and
financial crises of a nature materially affecting the purchase
and sale of Securities.
SECTION 9.7 Amendments.
(a) Except as otherwise specifically provided herein, the terms and
provisions of this Agreement may be modified or amended at any
time and from time to time or compliance with any provision
hereof may be waived with the written consent of (1) the General
Partner and (2) Limited Partners representing in excess of
sixty-six and two-thirds percent (66 2/3%) of the combined
Capital Contributions of all Limited Partners insofar as is
consistent with the laws governing this Agreement; provided,
however, that without the specific written consent of each
Partner adversely affected thereby, no such modification or
amendment shall (i) increase or decrease the obligation of a
Limited Partner beyond that set forth in Section 1.4, (ii)
increase or reduce the Capital Account or Capital Commitment of
any Partner or its rights to allocation, distribution and
withdrawal with respect thereto, (iii) amend Section 1.5 to
permit Partnership activities which would subject a Limited
Partner to United States Federal or state taxation which such
Partner would not be subject to in the absence of such activity
or (iv) amend Sections 3.1(c) or 4.1 to limit or diminish the
rights of withdrawing Partners thereunder or (v) amend this
Section 9.7. The immediately preceding proviso may not be
amended without the unanimous consent of all the Partners.
(b) In addition to any amendments otherwise authorized hereby, this
Agreement may be amended from time to time by the General
Partner without the consent of any of the Limited Partners (i)
to cure any ambiguity or correct any printing, stenographic or
clerical errors or omissions; (ii) to admit one or more
additional Limited Partners, or withdraw one or more Limited
Partners, in accordance with the terms of this Agreement; (iii)
to amend Appendix A hereto to provide any necessary information
regarding any Partner, any additional or successor General
Partner or any additional Limited Partner; (iv) to reflect any
change in the amount of the Capital Contributions of any Partner
in accordance with the terms of this Agreement; and (v) to the
extent necessary to cause the provisions of this Agreement to
conform to the requirements of the United States Investment
Advisers Act of 1940 applicable to contracts between investment
advisers
<PAGE>
registered under such Act and their clients, provided
that such amendment does not adversely affect any of the Limited
Partners. The General Partner shall send each Limited Partner a
copy of any amendment adopted pursuant to this Section 9.7(b).
SECTION 9.8 Headings. Article, Section, Paragraph and Subparagraph
headings are for convenience of reference only, are not part of
this Agreement, and shall not be considered in interpreting this
Agreement.
SECTION 9.9 Power of Attorney. Each Limited Partner does hereby
constitute and appoint the General Partner, Peter A. Brooke, and each Vice
President of the general partner of the General Partner, and
each of them, its true and lawful representative, in its name,
place and stead, to make, execute, sign, acknowledge, deliver
and file all such instruments, documents and certificates which
may from time to time be required by the laws of the United
States of America, the State of Delaware, the Commonwealth of
Massachusetts, or any other state or jurisdiction in which the
Partnership shall determine to do business, or any political
subdivision or agency thereof, to effect, implement and continue
the valid and subsisting existence of the Partnership,
including, without limitation, a certificate of limited
partnership and amendments thereto (not inconsistent with this
Agreement) and any other certificates or amendments filed for
the purpose of admitting any of the undersigned as a limited
partner of the Partnership.
SECTION 9.10 Effect of Securities Laws. In the event that, due to acts
of the Limited Partners or the Partnership, or otherwise the
General Partner determines, after consultation with legal
counsel for the Partnership, that the Partnership is or may be
required by the securities laws of the United States to register
either the Partnership or interests in the Partnership with the
United States Securities and Exchange Commission or other
similar agency, or that the General Partner shall be required to
so register in connection with the distribution of limited
partnership interests, then the General Partner shall have the
right, in its discretion and without the necessity of obtaining
the consent of the Limited Partners, to take any of the
following actions:
(a) Dissolve and liquidate the Partnership; or
(b) Require the withdrawal of any Limited Partner whose acts have
caused or may cause the Partnership or interests therein to be
required to be so registered, such withdrawal to be on the terms
set forth in Article IV hereof except that such withdrawal may
be required to be made immediately rather than as of the fiscal
year-end and the determination of the withdrawing Partner's
liquidating share shall be made as of such time.
<PAGE>
IN WITNESS WHEREOF, the General Partner and the Limited
Partners have hereunto set their hands and seals as of the date
first set forth above.
GENERAL PARTNER
ADVENT INTERNATIONAL LIMITED PARTNERSHIP
By: ADVENT INTERNATIONAL CORPORATION
By: __________________________________
LIMITED PARTNERS
SEE SIGNATURE PAGES ATTACHED HERETO
<PAGE>
APPENDIX A
Capital Commitments
General Partner:
Limited Partners:
<PAGE>
APPENDIX B
CHARTER
The EnviroTech Investment Fund I will invest in companies
commercializing electrotechnologies and renewable technologies
that promote environmental and economic responsibility. The
investments will support the electric utility industry's efforts
under the "Climate Challenge," demonstrating that voluntary
efforts can, cost effectively, achieve both economic and
environmental gains.
Investments by the Fund should:
Reduce, avoid or sequester greenhouse gas emissions. (Every
effort will be made to allow the Limited Partners to submit the
results under section 1605(b) of the Energy Policy Act of 1992)
Help utilities and their customers handle more effectively waste
by-products or more cost-effectively produce or manufacture
goods or service
Improve the efficiency of the production, storage, transmission,
and delivery of energy
Provide investors with attractive opportunities relating to the
evolving utility business climate which meet the above objectives
Areas of Focus:
The primary sectors of focus are:
Alternate and renewable energy supplies, including photovoltaic,
biomass technologies, and wind power.
Environmental and waste treatment technologies and services,
including electrotechnologies used in waste and water treatment
and waste management, waste reduction and recycling/recovery.
Energy efficiency technologies, processes and services,
including heating, ventilation and air conditioning equipment,
induction heating technologies, high efficiency lighting
technologies, and motor efficiency technologies, and energy
storage technologies.
Electrotechnologies used in the reduction of medical waste,
including plasma, pyrolysis and microwave possessing.
<PAGE>
Alternative energy for transportation, including vehicles,
components infrastructure, and fuel cells. In addition,
investments may include new approaches to transportation sectors
where electrotechnologies have not been prevalent.
Other technologies related to improving the generation,
transmission and delivery of electricity, including automated
meter reading, distribution transformers, thyristor
technologies, active noise cancellation, energy storage systems
and interactive energy management systems.
Geographic Coverage
The Fund's investments can be both domestic and international,
but investments will be primarily in the United States. The
Limited Partners will have an opportunity to bring local
technology developments to the Fund, and also will have the
opportunity to have technologies demonstrated in their service
territory.
Stage of Development
The Fund will invest in companies at all stages of development
to diversify the portfolio while achieving the best match of
environmental and economic results. There will be a minimum of
investment in start-up companies, with most investments being in
early and late expansion stage development opportunities. The
Fund will not participate in hostile takeovers.
Size of Investment
The Fund will not invest more than 7.5% of its total committed
capital in a single portfolio company, including all follow-on
investments and all forms of investment (e.g., equity, debt,
loan guarantees, etc.).
Diversification
The Fund will diversify the investment portfolio to maximize
coverage among potential technologies. A technology is defined
as the component or part of a process or service that is unique
in its characteristics from other components or parts of a
process or service. Examples include lead acid batteries,
induction charging, plasma processing for medical waste, and
controllers for electric vehicle drive trains.
<PAGE>
APPENDIX C
MEMBERS OF ADVISORY BOARD
<PAGE>
APPENDIX D
CO-INVESTMENT POLICY
OUTLINE OF POLICY FOR EMPLOYEE INVESTMENT IN AI/NETWORK DEALS
1. Principally due to risks of legal action, but also due to
possible 144 and 16b restrictions placed on AI investment
actions as a result of "related party transactions", no
investment will be permitted in public portfolio company
securities subsequent to the IPO. In addition, employees may
not purchase the securities of public portfolio companies within
6 months after AI managed funds and Network affiliate managed
funds have disposed of their last shares in a company.
2. All restrictions apply to the employee and his household.
3. Employees are not to advise any other parties concerning
investment in private or publicly listed portfolio companies of
AI or of the Network.
4. An employee may invest in private portfolio company securities
only if all of the following conditions are met for each such
investment:
the employee is considered (under the law) to be a
"Sophisticated Investor" and the employee is at or above the
level of a Vice President AIC (or its equivalent):
there is no restriction placed by the portfolio company, other
investors in that company, or by legal authorities having
jurisdiction over the transaction on such investments by AI
employees;
the employee agrees to follow on (or not) in future financings
just as AI managed funds decide to follow (or not);
the employee obtains prior approval of the AI Investment
Committee for each such investment;
there is an excess of a deal available beyond the aggregate
total appetite of:
all applicable AI funds
and applicable/interested Network funds
and $10,000 for AIILP, if AIILP in investing
there is no prohibition against such employee investment arising
from the legal agreements governing each AI fund participating
in the deal (e.g., INF has such a restriction):
<PAGE>
there is no advice from AI counsel which causes concern about
such employee investment;
securities purchased by employees will be held by AI as
custodian. The employee will give AI full power of attorney
concerning disposition, voting, conversion, and other matters,
in a manner similar to shares held on behalf of AI managed funds;
the employee acknowledges that neither AI nor any of its funds,
subsidiaries, affiliates, officers, director or employees is
obligated or expected to indemnify or assist in the defense of
any employee named in a legal action as a result of the
employee's ownership of the securities.
[This time period is designed to avoid any difficulties with so
called "short swing" transactions in the U.S. Other time
periods may apply in other markets, depending on similar rules
currently in effect.]
EXHIBIT G
FORM OF NOTICE
The Southern Company, a registered holding company under the
Public Utility Holding Company Act of 1935 (the "Act"), 64
Perimeter Center East, Atlanta, Georgia 30338, and its wholly-
owned non-utility subsidiary company, The Southern Development
and Investment Group, Inc. ("Development"), have filed an
application-declaration designating Sections 9(a), 9(c)(3), 10
and 12(b) of the Act and Rule 45 promulgated thereunder as
applicable to the proposed transactions.
Development requests authority to invest up to $5 million
from time to time through December 31, 2002, to acquire an
interest as a limited partner ("Limited Partner") in the
EnviroTech Investment Fund I Limited Partnership (the
"Partnership"), which is being formed for the purpose of making
venture capital investments in companies commercializing
electrotechnologies and renewable energy technologies that
promote environmental and economic responsibility (each a
"Portfolio Company"). The formation of the Partnership is being
coordinated by the Edison Electric Institute ("EEI"), a non-
profit industry-wide membership organization comprised of
electric utility companies throughout the United States. The
Limited Partners will be EEI member companies and their
affiliates, subsidiaries, or parent companies, or qualified
pension or profit-sharing plans sponsored by such companies.
The term of the Partnership is for 10 years, subject to
extension for up to two years upon agreement of the general
partner and Limited Partners holding 66-2/3rds% of the interests
<PAGE>
of all Limited Partners. Contributions to the Partnership will
be made in installments from time to time through the seventh
anniversary of the final closing of the Partnership.
Subject to certain limitations set forth in the Partnership
Agreement, the management, operation, and implementation of
policy of the Partnership will be vested exclusively in the
general partner, which will be Advent International Limited
Partnership ("General Partner"), whose own general partner is
Advent International Corporation ("AIC"). AIC is a venture
capital investment firm managing investments in the energy and
environmental sectors, among others. Among other powers, the
General Partner shall have discretion to invest the Partnership's
funds in accordance with investment guidelines. The investment
guidelines set forth criteria on approved types of technologies,
size of investment, and portfolio diversification. Among other
limitations on investment activities, the General Partner may not
cause the Partnership to invest: (1) more than 7.5% of the total
capital commitments in any single Portfolio Company; (2) more
than 5% of the total capital commitments in securities of
Portfolio Companies that are readily tradeable on established
securities markets; or (3) in hostile take-over transactions or
in highly leveraged buy-outs.
Under the terms of the Partnership Agreement, in
consideration of its services to the Partnership, the General
Partner will be paid an annual management fee equal to 2 1/2% of
the total amount of the capital commitments of the partners
through the first 6 years, thereafter declining by 1/4 of 1% on
- 2 -
<PAGE>
each anniversary to 1.5% commending on the 9th anniversary date.
In addition, the General Partner shall be entitled to
reimbursement for all reasonable expenses incurred in the
organization of the Partnership up to $195,000, and for other
third party expenses incurred on behalf of the Partnership.
All Partnership income and losses, including income and
losses deemed to have been realized when securities are
distributed in kind, will generally be allocated 80% to and among
the Limited Partners and 20% to the General Partner. 100% of all
cash distributions to the partners shall be made first to the
Limited Partners until such time as the Limited Partners shall
have received aggregate distribution equal to the aggregate of
their respective capital contributions, and thereafter 20% to the
General Partner and 80% to the Limited Partners. Distributions
in kind of the securities of Portfolio Companies that are listed
on, or otherwise traded in, a recognized over-the-counter or
unlisted securities market may be made at the option of the
General Partner. However, Development will attempt in good faith
to divest itself of any such Portfolio Company securities
received as a distribution in kind as soon as practical, but in
no event later than one year from the date of their receipt.
Southern proposes to make cash capital contributions to
Development in an aggregate amount of up to $5 million from time
to time through December 31, 2002, in order to fund Development's
investment in the Partnership.
- 3 -
<PAGE>
