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EXHIBIT 10 q
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ADVANTA PARTNERS LP
__________________________
Dated as of October 1, 1996
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TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS................................................... 1
1.01 Defined Terms........................................................ 1
ARTICLE II - CONTINUATION OF THE PARTNERSHIP.............................. 9
2.01. Formation and duration of the Partnership........................... 9
2.02. Name of the Partnership............................................. 9
2.03. Activity of the Partnership......................................... 9
2.04. Offices of the Partnership.......................................... 10
2.05. Title to Partnership Property....................................... 11
2.06. Representations and Warranties...................................... 11
ARTICLE III - INITIAL CAPITAL AND CONTRIBUTED
CAPITAL..................................................... 16
3.01. Initial Capital; Contributed Capital; Initial
Contribution; Admission of Additional Partners.................... 16
3.02. Failure of the Class A Limited Partner
to Make Additional Contributions or
Advances or to Maintain its Commitment............................ 18
3.03. Contributions by the General Partner................................ 18
ARTICLE IV - CAPITAL ACCOUNT AND PROFITS OR LOSSES........................ 18
4.01. Capital Accounts.................................................... 18
4.02. Allocation of Partners' Profits and Losses.......................... 19
4.03. Allocations with Respect to Transferred Interests................... 21
4.04. Minimum Allocations to the General Partners......................... 21
4.05. Allocations with Respect to Certain Carried Interests............... 21
ARTICLE V - VALUATIONS.................................................... 22
5.01. Valuation of Portfolio Investments Owned
by the Partnership................................................ 22
ARTICLE VI - DISTRIBUTIONS................................................ 24
6.01. Distributions....................................................... 24
6.02. Taxes Withheld...................................................... 28
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ARTICLE VII - ADDITIONAL CAPITAL CONTRIBUTIONS BY
SPECIAL LIMITED PARTNERS................................... 29
7.01 Opportunity to Participate........................................... 29
7.02 Procedures relating to Additional Capital
Contributions by Special Limited Partners.......................... 29
ARTICLE VIII - MANAGEMENT.................................................. 31
8.01. Authority of the Board of Directors.................................. 31
8.02. Certain Compensation Matters......................................... 33
8.03. Services of the General Partner and Board
of Directors....................................................... 34
8.04. Compensation and Dealings with Partnership........................... 34
8.05. No Loans to Partners, Etc............................................ 34
8.06. Liability of the General Partner, Board
of Directors Members and Others.................................... 35
8.07. Limitations on the Limited Partners.................................. 38
ARTICLE IX - RECORDS AND BANK ACCOUNTS..................................... 38
9.01. Books and Records.................................................... 38
9.02. Accounting Basis and Fiscal Year..................................... 38
9.03. Financial Reports.................................................... 38
9.04. Bank Accounts........................................................ 39
ARTICLE X - ASSIGNABILITY AND PURCHASE OF INTERESTS........................ 40
10.01. Substitution and Assignment of a
Partner's Interest................................................. 40
10.02. Admission of Additional Partners.................................... 40
10.03. Withdrawal of Partners.............................................. 40
ARTICLE XI - DISSOLUTION AND TERMINATION................................... 41
11.01. Event of Dissolution................................................ 41
11.02. Liquidation......................................................... 41
ARTICLE XII - PURCHASE RIGHT OF ADVANTA.................................... 43
12.01. Advanta's Purchase Right............................................ 43
ARTICLE XIII- GENERAL PROVISIONS........................................... 44
13.01. Power of Attorney................................................... 44
13.02. Indulgences, Etc.................................................... 44
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13.03. Controlling Law...................................................... 44
13.04. Notices.............................................................. 45
13.05. Schedules............................................................ 46
13.06. Binding Nature of Agreement.......................................... 46
13.07. Execution in Counterparts............................................ 46
13.08. Provisions Separable................................................. 46
13.09. Entire Agreement; Amendment.......................................... 47
13.10. Section Headings..................................................... 47
13.11. Gender, Etc. ........................................................ 47
13.12. Number of Days....................................................... 47
13.13. Interpretation....................................................... 47
Exhibit A - Investment Amounts of Special Limited Partners
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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ADVANTA PARTNERS LP
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (the "Agreement")
made as of October 1, 1996, by and among Advanta GP Corp., a Delaware
corporation ("Advanta GP"), as General Partner, Advanta Investment Corp., a
Delaware corporation ("Advanta"), as a Class A Limited Partner, Messrs. Mitchell
L. Hollin, Michael Najjar and Gary H. Neems as Class B Limited Partners, and
Robert Hall, Robert Rock and James Stern as Special Limited Partners.
W I T N E S S E T H
The parties hereto are partners of a limited partnership known as
Advanta Partners LP (the "Partnership") and wish to amend and restate the
Partnership's Agreement of Limited Partnership dated as of May 6, 1994, as
previously amended by Amendment No. 1, Amendment No. 2 and Amendment No. 3
thereto dated as of May 9, 1995, January 30, 1996, and May 21, 1996
respectively, to reflect the acquisition by the Partnership of the interests in
the Partnership held by AP Capital, Inc. and Anthony P. Brenner and to reflect
certain other changes to such Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties hereto agree that the Partnership's Agreement of Limited Partnership, as
amended, is hereby amended and restated to read in its entirety as follows:
ARTICLE I
DEFINITIONS
1.01. Defined Terms. Unless the context otherwise requires, each
capitalized term used in this Agreement shall have the meaning given to that
term either in this Section or elsewhere in this Agreement where that term is
defined. A definition shall be equally applicable to both the single and plural
form.
"Accounting Firm" means Arthur Andersen LLP, which is to be
responsible for auditing the financial statements of the
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Partnership, or such other independent public accounting firm chosen by the
Board of Directors.
"Accounting Period" means the period during which Profits or
Losses are to be calculated under this Agreement, which will normally be a
period of one year commencing January 1, but may be of shorter duration should
the context require a shorter period.
"Act" means the Pennsylvania Revised Uniform Limited Partnership
Act, as amended.
"Acting Member" shall have the meaning given to such term within
Section 8.06.
"Advanta" means Advanta Investment Corp., the Class A Limited
Partner.
"Advances" shall have the meaning given to such term within
Section 3.01(d).
"Affiliate" means, when used with respect to any specified
Person, any other Person that, either directly or indirectly through one or
more intermediaries, Controls, is Controlled By or is Under Common Control With
such specified Person.
"Agreement" means this Agreement of Limited Partnership, as it
may be amended from time to time.
"Allocation and Vesting Agreement" shall have the meaning set
forth in Section 6.01(a)(i)(E) hereof.
"AP101 Distribution" shall mean a distribution by Advanta
Partners 101 LP pursuant to Section 6.1(a)(i)(D) of the Advanta Partners 101 LP
partnership agreement to the Partnership and Advanta 101 GP.
"Appraised Value" shall have the meaning given to such term
within Section 12.01. The appraisers selected to provide the Appraised Value
shall not have any ongoing economic relationships with Advanta or its
Affiliates.
"Asset Value" means, with respect to any Partnership Asset, the
asset's Adjusted Basis for federal income tax purposes, except that the Asset
Values of all Partnership Assets shall be adjusted to equal their respective
fair market
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values (as determined by the Board of Directors in the manner provided in
Section 5.01), in accordance with this Agreement and the rules set forth in
Treasury Regulations Section 1.704-1(b)(2)(iv)(f), except as otherwise
provided herein, as of: (a) the date of the acquisition of any additional
Partnership Interest by any new or existing Partner in exchange for more than a
de minimis Capital Contribution; (b) the date of the distribution of more than a
de minimis amount of Partnership Assets (other than money) to a Partner; or (c)
the date of the termination of the Partnership under Section 708(b)(i)(B) of
the Code. Subsequent to any such adjustment of the Asset Value of any
Partnership Asset, the Asset Value shall thereafter be adjusted for the
Depreciation taken into account with respect to such Partnership Asset for
purposes of computing Profit and Loss, and the Capital Accounts shall be
adjusted in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g).
"Bankruptcy" means with respect to any Person, such Person has become
insolvent or that a petition shall have been filed by or against such Person as
a "debtor" and the adjudication of such Person as bankrupt under the provisions
of the bankruptcy laws of the United States of America shall have commenced, or
that such Person shall have made an assignment for the benefit of its creditors
generally or a receiver shall have been appointed for substantially all of the
property and assets of such Person.
"Board of Directors" means the board of directors of the General
Partner, as provided for in Section 8.01 hereof.
"Business Plan" means the written business plan of the Partnership and
as adopted and modified from time to time by the Board of Directors.
"Capital Account" of a Partner means the individual Capital Account
established and maintained in accordance with Section 4.01 hereof.
"Carried Interest" shall have the meaning given to such term in Section
6.01(a) hereof.
"Class A Limited Partner" means Advanta Investment Corp.
"Class A Limited Partner's Investment" means the sum of the Class A
Limited Partner's Contribution and Advances
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made with respect to, allocated to, or directly or indirectly used in
connection with, a particular Portfolio Investment.
"Class B Limited Partners" means Messrs. Hollin, Najjar and Neems (but
in no event shall be deemed to refer to any other Person who had previously
been a Class B Limited Partner prior to the date of this Agreement).
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" shall have the meaning given to such term in Section
3.01(c) hereof.
"Contributed Capital" means capital contributions made by a Partner to
the Partnership and not repaid to such Partner, including such Partner's
Initial Capital, but excluding any Advances.
"Contribution" means Contributed Capital of the Class A Limited Partner.
"Control" (including "Controlled By" and "Under Common Control With")
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Defended Person" shall have the meaning given to such term within
Section 8.06.
"Depreciation" means, for each fiscal year, an amount equal to the
depreciation, amortization and other cost recovery deductions allowable with
respect to an asset for such period, except that if the Asset Value of an asset
differs from its Adjusted Basis at the beginning of such year, Depreciation
shall be an amount which bears the same ratio to such beginning Asset Value as
the federal income tax depreciation, amortization or other cost recovery
deduction for such year or other period bears to such beginning adjusted tax
basis. If the amount of any depreciation, amortization or cost recovery
deduction for such year is zero, Depreciation shall be determined by reference
to beginning Asset Value, using any reasonable method selected by the General
Partner.
"Dissolution" of a Partner which is not a natural Person means that
such Partner has terminated its existence,
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whether partnership or corporate, wound up its affairs and dissolved.
"Effective Date" means June 1, 1994.
"GEII" means Great Expectations International, Inc., a Delaware
corporation.
"General Partner" means a Person who is a general partner of the
Partnership and shall include Advanta GP and any other Person who may hereafter
be admitted to the Partnership as a General Partner pursuant to the provisions
of the Agreement.
"Hollin" means Mitchell L. Hollin.
"Hurdle Rate" means an 8% cumulative return, compounded annually, on
the Class A Limited Partner's Investment calculated with respect to a Portfolio
Investment.
"Incompetency" of an individual means that such individual shall have
been judged incompetent or insane by decree of a court of appropriate
jurisdiction.
"Initial Capital" shall have the meaning given to such term in Section
3.01(a) hereof.
"Initial Partners" means the parties hereto on the Effective Date.
"Initial Term" means the initial term of the Partnership commencing on
the Effective Date and ending on the ten-year anniversary of the Effective
Date, or such shorter term as provided for in the Agreement.
"Interest in the Partnership" or "Partnership Interest" means the
interest in the Partnership which each Partner receives in return for such
Partner's Contributed Capital, and in the case of the Class A Limited Partner,
also for making Advances.
"Investment" means, (i) with respect to the Partnership, the total
amount paid or contributed by the Partnership to, or with respect to the
securities of, any entity in which a Portfolio Investment has been or is
hereafter made; (ii) with respect to the Special Limited Partners, means the
aggregate capital contribution and purchase price paid for their Partnership
Interests pursuant to the provisions of Section 7.02
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and (iii) with respect to the Class A Limited Partner, the Class A Limited
Partner's Investment.
"Investment Notice" has the meaning set forth in Section 7.02(a).
"Limited Partner" shall mean a Person who is a limited partner of the
Partnership and shall include the Class A Limited Partner, the Class B Limited
Partners, the Special Limited Partners and any other Person who may hereafter
be admitted to the Partnership as a limited partner pursuant to the provisions
of the Agreement.
"Najjar" means Michael Najjar.
"Neems" means Gary H. Neems.
"Non-Portfolio Income" means income from temporary investments such as
short-term government securities, certificates of deposit, bank deposits and
commercial paper in which Partnership funds are invested until invested in a
manner intended to achieve the purposes of the Partnership, reduced by any
related expenses of maintaining such short-term investments.
"Outside Director" means a member of the Board of Directors who is not
an Affiliate of any Partner.
"Partner" means a Person who is a General Partner and/or Limited
Partner in the Partnership.
"Partnership Assets" means all assets and property, whether tangible or
intangible and whether real, personal or mixed, at any time owned by the
Partnership.
"Person" means any individual, corporation, partnership, joint venture,
association, trust or other organization or any government, or any agency or
political subdivision of any government.
"Portfolio Investments" means investments of the Partnership other than
temporary investments of the type referred to in the definition of
Non-Portfolio Income.
"Profits or Losses" means, for each Accounting Period, an amount equal
to the Partnership's taxable income or loss for such Accounting Period,
determined by the Accounting Firm at the close of the relevant Accounting
Period, including,
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without limitation, each item of Partnership income, gain, loss or deduction,
taking into account the following adjustments and any other adjustments
necessary in order to comply with Treasury Regulations Section 1.704-1(b)(2)
(iv) including the rules for revaluations of Partnership Assets:
(a) all income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profit or Loss
shall be added to such taxable income or loss;
(b) any expenditure of the Partnership described in Section
705(a)(2) (B) of the Code or treated as an expenditure described in such Code
Section and not otherwise taken into account in computing Profit or Loss shall
be subtracted from such taxable income or loss;
(c) gain or loss resulting from any disposition of Partnership
Assets with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Asset Value of the Partnership
Assets disposed of, notwithstanding that the adjusted income tax basis of such
Partnership Assets differs from its Asset Value;
(d) in lieu of the depreciation, amortization or other cost
recovery deductions taken into account in computing taxable income or loss,
there shall be taken into account the deduction for such items computed in
accordance with the definition of Depreciation;
(e) in the event the Asset Value of any Partnership Asset is
adjusted pursuant to the definition of Asset Value set forth in this Section
1.01 or any other provision of this Agreement, the amount of such adjustment
shall be taken into account as income or loss from the disposition of such asset
for purposes of computing Profits or Losses; and
(f) any items of income specially allocated under Paragraph
4.02(b) shall be excluded from Profits or Losses.
"Restricted Investments" means Portfolio Investments of the Partnership
subject to a restriction impairing the free marketability thereof or
transferability under any applicable securities laws.
"Securities" has the meaning given to such term in Section 2.03.
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"Shared Portfolio Investment Percentage" means, with respect to the
Special Limited Partners and the Class A Limited Partner, the percentage
determined by dividing the Investment of the respective Partner in the Shared
Portfolio Investment by the aggregate of the Investments of all of the Special
Limited Partners and the Class A Limited Partner's Investment with respect to
the Shared Portfolio Investment, as these amounts may be determined from time
to time.
"Shared Portfolio Investment" means a Portfolio Investment with respect
to which any of the Special Limited Partners have made additional capital
contributions pursuant to Article VII hereof.
"Shortfall" means any unpaid Hurdle Rate and/or loss of the Class A
Limited Partner's Investment experienced by the Class A Limited Partner with
respect to the liquidation of any Portfolio Investment other tan GEII.
"Special Limited Partners" means Robert Hall, Robert Rock and James
Stern and any other Persons who may join in this Agreement from time to time as
Special Limited Partners pursuant to the provisions of Section 3.01(g).
"Specified Amount" has the meaning given to such term in Section
6.01(a)(iv).
"Term" means the term of the Partnership.
"Unrealized Loss" means, as of any date, for each Portfolio Investment
where the Class A Limited Partner's unreturned Contribution in a Portfolio
Investment other than GEII exceeds the Value of the Partnership's unliquidated
investment in such Portfolio Investment, the amount of such excess of
unreturned Contribution over such Value.
"Value" means the value of a Portfolio Investment determined in
accordance with Section 5.01 hereof.
"Withholding Tax Act" shall have the meaning given to such term within
Section 6.02.
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ARTICLE II
CONTINUATION OF THE PARTNERSHIP
2.01. Formation and Continuation of the Partnership. The parties hereto
hereby continue the Partnership as a limited partnership under the Act. This
agreement shall continue until the tenth anniversary of the Effective Date
unless extended or earlier terminated in accordance with the terms hereof. The
General Partner shall cause to be filed on behalf of the Partnership such
partnership, and such assumed or fictitious name, certificate or certificates as
may be required by law. At least three (3) months prior to the fifth
anniversary of the Effective Date, the end of the Initial Term and any extended
Term, the board of directors of the Class A Limited Partner will make decisions
concerning the continuation of the Class A Limited Partner's financial
commitment to the Partnership and shall promptly provide the General Partner
with a written notification of such decision. Based upon such decisions and
subject to the acceptance of such decisions by the General Partner, the General
Partner and the Class A Limited Partner will amend the Agreement (if the
decisions of the board of directors of the Class A Limited Partner call for an
amendment to the Agreement) to extend the Term and to expand, contract or leave
unchanged the size and terms of the Commitment, as applicable. Notwithstanding
the foregoing, the Class A Limited Partner can elect to dissolve the Partnership
at any time, upon providing the General Partner with at least thirty (30) days
prior written notification of such election.
2.02. Name of the Partnership. The name of the Partnership shall be
Advanta Partners LP or such other name as may hereafter be selected by the
General Partner.
2.03. Activity of the Partnership.
(a) The Partnership is formed for the purpose of making
investments with the objective of seeking capital appreciation. The Partnership
will concentrate on opportunities primarily in financial services and
secondarily in information/database services. Portfolio Investment situations
will include equity and equity-related investments in a range of growth capital
and restructuring financings, leveraged and unleveraged acquisitions, including
management LBO's, and special situations. The Partnership will not acquire an
equity interest in a business in which the Partnership would, upon such
acquisition, own 100% of the equity of such business nor enter
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into strategic joint ventures without the prior approval of a majority of the
Board of Directors. If the Partnership proposes to make a Portfolio Investment
which would be considered of a type which is part of the Class A Limited
Partner's core business except for certain characteristics which would make
such investments unsuitable for the Class A Limited Partner, such Portfolio
Investments will be made and liquidated by the Partnership only with the prior
approval of a majority of the Board of Directors. The Partnership's Portfolio
Investments will be made consistent with the Partnership's Business Plan. It is
expected that the Partnership will play a proactive role in its Portfolio
Investments, seeking to add value to such Portfolio Investments. Nothing
contained in the Agreement and nothing in Advanta Corp.'s relationship with
the Partnership shall restrict Advanta Corp. from doing whatever transactions,
and making whatever investments, it chooses.
(b) Subject to the principles and limitations set forth in
subsection (a) above, the Partnership may invest in both marketable and
non-marketable securities, including without limitation, common and preferred
stock, debentures, bonds, royalties, promissory notes, evidences of
indebtedness, warrants, options, subscription rights of and other participating
interests in corporations, partnerships, joint ventures, trusts,
proprietorships, other business entities, governments and governmental
agencies, and puts, calls, options and other rights or obligations to
purchase, sell or subscribe for any of the foregoing and any other similar
instruments and documents whether now known or hereafter devised which are or
may hereafter be known or referred to as securities (all such items
being hereinafter collectively referred to as "Securities"), and may deal in
such ways as is customary and in the ordinary course of business of an
investment partnership, and in connection therewith, with the prior approval of
a majority of the Board of Directors, as to the amount and extent, to borrow
funds not exceeding in principal amount at any one time outstanding 10% of
total Contributed Capital. The Partnership may arrange for managerial and
other support for Persons in which it invests. Subject to the restrictions and
provisions contained in Section 8.01, the Partnership shall engage in the
activities set forth in this Section 2.03 and no others, except as shall be
incidental or related thereto or which may be necessary or desirable in
connection therewith.
2.04. Offices of the Partnership. The principal office of the
Partnership shall be initially located at Five Horsham Business Center, 300
Welsh Road, Horsham, Pennsylvania 19044. A
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secondary office satisfactory to the Class A Limited Partner, will be
established in New York City. The Board of Directors may establish such other
offices of the Partnership in one or more places as it may from time to time
determine.
2.05. Title to Partnership Property. All property owned by the
Partnership, whether real or personal, tangible or intangible, shall be and
shall be deemed to be owned by the Partnership as an entity, and no Partner,
individually, shall have any ownership of any such property. The Partnership
may hold any of its assets in its own name or in the name of one or more
nominees, which nominee may be such individuals, corporations, partnerships,
trusts or other Persons as the General Partner shall determine.
2.06. Representations and Warranties.
(a) The General Partner represents and warrants to the
other parties hereto as follows:
(1) The General Partner is a corporation duly organized
and validly existing under the Delaware General Corporation Law, and has all
requisite power and authority to perform its obligations under and carry on the
business contemplated by this Agreement.
(2) Neither the execution and delivery of this
Agreement nor the performance by such General Partner of any of the
transactions or obligations contemplated hereunder will result in any violation
of any of the terms or provisions of (i) the articles of incorporation or
bylaws of such General Partner, (ii) (whether or not with notice or the passage
of time or otherwise) any material agreement to which such General Partner or
any Affiliate of such General Partner is a party or by which it is otherwise
bound, or (iii) any currently existing law, rule, license, regulation,
judgment, order, ruling or decree governing or affecting the operation of the
Partnership or such General Partner. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission, other governmental authority or
instrumentality, or any securities or commodities exchange or self-regulatory
organization is or was required prior to the execution of this Agreement by or
with respect to such General Partner or the Partnership in connection with the
execution and delivery of this Agreement or the performance of the transactions
contemplated hereby.
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(3) All necessary action on the part of such General Partner duly to
approve the execution, delivery and performance of this Agreement by it has
been taken and this Agreement has been duly executed and delivered by it and
constitutes a legal, valid and binding obligation of such General Partner,
enforceable against it in accordance with its terms.
(4) Such General Partner agrees to use reasonable efforts to cause
the Partnership to be classified for federal income tax purposes as a
partnership rather than as an association taxable as a corporation during the
life of the Partnership, but in no event shall it have any liability or
obligation if it is not so classified as a result of future changes in laws or
regulations or changes in interpretation of existing laws or regulations. Any
costs or expenses relating to or arising from the use of such efforts shall be
borne by the Partnership.
(b) The Class A Limited Partner represents and warrants to the other
parties hereto as follows:
(1) Such Limited Partner is a corporation duly organized and validly
existing under the Delaware General Corporation Law and has all requisite power
and authority to perform its obligations under this Agreement.
(2) Neither the execution and delivery of this Agreement nor the
performance by such Limited Partner of any of the transactions or obligations
contemplated hereunder will result in any violation of any of the terms or
provisions of (i) the certificate of incorporation or bylaws of such Limited
Partner, (ii) (whether or not with notice or the passage of time or otherwise)
any material agreement to which such Limited Partner or any Affiliate of such
Limited Partner is a party or by which it is otherwise bound, or (iii) any
currently existing law, rule, license, regulation, judgment, order, ruling or
decree governing or affecting the operation of the Partnership or such Limited
Partner. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission,
other governmental authority or instrumentality, or any securities or
commodities exchange or self-regulatory organization is or was required prior to
the execution of this Agreement by or with respect to such Limited Partner or
the Partnership in connection with the execution and delivery of this Agreement
or the performance of the transactions contemplated hereby.
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(3) All necessary action on the part of such Limited Partner
duly to approve the execution, delivery and performance of this Agreement by it
has been taken and this Agreement has been duly executed and delivered by it and
constitutes a legal, valid and binding obligation of such Limited Partner,
enforceable against it in accordance with its terms.
(c) Each Class B Limited Partner and Special Limited Partner
represents and warrants to the other parties hereto as follows:
(1) Neither the execution and delivery of this Agreement nor
the performance by such Limited Partner of any of the transactions or
obligations contemplated hereunder will result in any violation of any of the
terms or provisions of (i) (whether or not with notice or the passage of time
or otherwise) any material agreement to which such Limited Partner or any
Affiliate of such Limited Partner is a party or by which it is otherwise bound,
or (ii) any currently existing law, rule, license, regulation, judgment, order,
ruling or decree governing or affecting the operation of the Partnership or
such Limited Partner. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission, other governmental authority or instrumentality, or any securities
or commodities exchange or self-regulatory organization is or was required prior
to the execution of this Agreement by or with respect to such Limited Partner
or the Partnership in connection with the execution and delivery of this
Agreement or the performance of the transactions contemplated hereby.
(2) This Agreement has been duly executed and delivered by such
Limited Partner and constitutes a legal, valid and binding obligation of such
Limited Partner, enforceable against such Limited Partner in accordance with
its terms.
(d) Each Limited Partner represents and warrants to the other parties
hereto as follows:
(1) The Limited Partner has acquired or will acquire such
Limited Partner's Interest in the Partnership for such Limited Partner's own
account as principal for investment and not with a view to the resale or other
disposition of all or any part thereof or any interest therein.
(2) If an individual, the Limited Partner: (i) is at least 18
years of age; (ii) has adequate means of
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providing for the Limited Partner's current needs and personal contingencies;
(iii) has no need for liquidity in the Limited Partner's investment in Interest
in the Partnership; and (iv) all of the Limited Partner's investments in and
commitments to non-liquid investments are, and after the purchase of the
Interest in the Partnership will be, reasonable in relation to the Limited
Partner's net worth and current needs and shall not cause the Limited Partner's
overall commitments to such investments to become disproportionate or excessive.
(3) The Limited Partner is able to bear the economic risk of losing the
Limited Partner's entire investment in the Interest in the Partnership.
(4) The Limited Partner understands that the Interests in the
Partnership have not been registered under the Securities Act of 1933, as
amended (the "Act") or the securities laws of any state, and are being offered
and sold in reliance upon an exemption to such registration and are subject to
substantial restrictions on transfer.
(5) The Limited Partner understands that no public or private market
for the Interests in the Partnership is likely to develop and that since the
Interests in the Partnership have not been registered under the Act, the
Limited Partner cannot and the Limited Partner agrees and understands that the
Limited Partner will not sell or otherwise transfer and dispose of any of the
Interest in the Partnership unless a registration statement with respect to
such transfer or disposition is in effect under the Act and any other
applicable state or federal securities laws or such transfer or disposition is
exempt from registration under the Act or is otherwise in compliance with other
relevant state or federal securities laws or unless the General Partner or the
Partnership approve such a sale or transfer (which approval may be withheld).
The Limited Partner further understands that: (A) the Partnership has no
obligation or intention to register the Interest in the Partnership for resale
under any federal or state securities laws or to take any action (including the
filing of reports or the publication of information required by Rule 144 under
the Act) that would make available any exemption from the registration
requirements of such laws; and (B) the Limited Partner therefore may have to be
precluded from selling or otherwise transferring or disposing of any of the
Interest in the Partnership for an indefinite period of time or at any
particular time and may therefore have to bear the economic risk of an
investment in the Interest in the Partnership for an indefinite period of time.
The Limited
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Partner further acknowledges that the Interest in the Partnership may not be
sold without the express written consent of the General Partner and compliance
with all relevant provisions of the Partnership Agreement, plus all applicable
filing fees. The Limited Partner also acknowledges that the Limited Partner
will be responsible for compliance with all conditions on transfer imposed by
any blue sky or state securities law administrator and will hold the
Partnership and the General Partner harmless from any breach thereof.
(6) The Limited Partner understands that no federal or state
agency has approved or disapproved of the Interest in the Partnership, passed
upon or endorsed the merits of the offering thereof, or made any finding or
determination as to the fairness of the Interest in the Partnership for
investment.
(7) If the Limited Partner is a corporation, partnership, trust
or other entity, it is authorized and qualified to become a limited partner in,
and authorized to make its capital contribution to the Partnership and it has
not been formed for the purpose of acquiring Interest in the Partnership.
(8) The Limited Partner has such knowledge and experience in
financial and business matters that the Limited Partner is capable of
evaluating the merits and risks of the Limited Partner's investment in the
Partnership and of making an informed investment decision, and the Limited
Partner has obtained, in the judgment of the Limited Partner, sufficient
information from the Partnership to evaluate the merits and risks of such
investment.
(9) The Limited Partner understands that the Interest in the
Partnership is being offered and sold in reliance on specific exemptions from
the registration requirements of federal and state securities laws and that the
General Partner and the Partnership are relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments, and understandings
set forth herein in order to determine the applicability of such exemptions.
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ARTICLE III
INITIAL CAPITAL AND CONTRIBUTED CAPITAL
3.01. Initial Capital; Contributed Capital; Initial
Contribution; Admission of Additional Partners.
(a) Each Initial Partner made an initial capital
contribution to the Partnership in the amount of $100. Such amount is such
Partner's "Initial Capital".
(b) Prior to the date of this Agreement, each Initial
Partner has paid to the Partnership in cash such Partner's Initial Capital.
(c) In addition to the Class A Limited Partner's Initial
Capital, the Class A Limited Partner agrees to make available to the
Partnership during the Initial Term an aggregate of $100 million in
Contributions (the "Commitment") for Portfolio Investments. The Class A Limited
Partner has, prior to the date of this Agreement, already contributed a portion
of such amount. Following authorization by the Board of Directors of a
Portfolio Investment consistent with the limitations set forth in Section
8.01(b), the Class A Limited Partner will provide the funds it has been called
upon by the Partnership's Board of Directors to provide as the Limited
Partner's Contribution for such Portfolio Investment, in accordance with the
timetable established by the Board of Directors.
(d) In addition to the Class A Limited Partner's
Commitment, upon request made from time to time by the General Partner, the
Class A Limited Partner agrees to periodically advance the cash necessary
("Advances") to fund the operating budget of the Partnership during the Initial
Term. The Class A Limited Partner's Initial Capital constitutes an Advance. The
initial operating budget of the Partnership has been accepted by the Class A
Limited Partner. Operating budgets thereafter will be established by the Board
of Directors after receiving recommendations with respect thereto from the
General Partner. The Class A Limited Partner's Advances will be allocated among
Portfolio Investments as follows:
(i) Following the end of each fiscal year in which
one or more Portfolio Investments are consummated, the amount of accumulated
(i.e., not yet allocated because no Portfolio Investments were made in such
fiscal year or not yet
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allocated as hereinafter provided) Advances as of the close of such fiscal
year, plus the Hurdle Rate with respect thereto, will be allocated in full to
such Portfolio Investments pro rata in accordance with the dollar amount of the
Class A Limited Partner's Contributions to such consummated Portfolio
Investments. For purposes of applying the Hurdle Rate to Advances, all Advances
made in a calendar year will be deemed to have been made on July 1 of such
year, except that all Advances made during 1994 will be deemed to have been
made on September 15, 1994.
(ii) If the amount of Advances and associated Hurdle Rate
allocated to a particular Portfolio Investment under Section 3.01(d)(i) above
would be greater than 20% of the amount of the Class A Limited Partner's
Contributions (minus the associated Hurdle Rate) to such Portfolio Investment,
such excess will not be allocated to such Portfolio Investment but will be
carried forward, increased by the Hurdle Rate, to be allocated, pursuant to
Section 3.01(d)(i), at the end of the succeeding year or years.
(e) Other than the Hurdle Rate payable to the Class A Limited Partner,
no interest shall accrue on any Contributed Capital and no Partner shall have
the right to withdraw or to be repaid any Contributed Capital except as and to
the extent specifically provided elsewhere in this Agreement.
(f) Each time the Class A Limited Partner makes a Contribution or an
Advance, 1.01% of each such Contribution and Advance shall be credited to
Advanta GP. Such amounts credited to Advanta GP shall carry a Hurdle Rate,
shall, if Contributions, be credited against the Class A Limited Partner's
Commitment, and shall, if Advances, be allocated to Portfolio Investments in
the same proportions as the Class A Limited Partner's Advances. Such amounts
shall also be deemed to be included in the Class A Limited Partner's
Investment, and shall be combined with all other components of the Class A
Limited Partner's Investment for purposes of distributions pursuant to
Subsections 6.01(a)(i)(A) through (D) and for purposes of computing the Class A
Limited Partner's Shared Portfolio Investment Percentage.
(g) From time to time the Board of Directors may admit to the
Partnership Outside Directors as Special Limited Partners. Such admission will
be effected by an agreement signed by the Special Limited Partners to be
admitted by which they agree to be bound by this Agreement as Special Limited
Partners, provided that such agreement is accepted by the Partnership.
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Concurrent with such admission to the Partnership, each Special Limited Partner
shall pay such Special Limited Partner's Initial Capital. Effective as of such
admission, Exhibit A to the Partnership Agreement shall be appropriately
modified by the General Partner to reflect such admission and the Investment
Amounts of the Special Limited Partners so admitted.
3.02. Failure of the Class A Limited Partner to Make Additional
Contributions or Advances or to Maintain its Commitment. At any time upon
thirty (30) days' prior written notice to the General Partner, the Class A
Limited Partner may reduce its Commitment to any level, including zero. If the
Board of Directors calls upon the Class A Limited Partner to make Contributions
and/or Advances as contemplated by the Agreement and the Class A Limited
Partner refuses or fails to do so (even if prior notice of a reduction of the
Commitment had not been given), or if the Class A Limited Partner reduces its
Commitment to any extent, such failure or reduction shall not constitute a
breach by the Class A Limited Partner of its obligation hereunder, but the
Board of Directors shall independently have the right to dissolve the
Partnership under Article XI, at any time, upon providing the Partners with at
least thirty (30) days prior written notification of such election.
3.03. Contribution by the General Partner. On any date on which,
pursuant to this Article III, Limited Partners each make payments of
Contributed Capital, the General Partner shall have contributed cash, in the
aggregate, equal to 1.01% of the aggregate cash Contributed Capital paid by the
Limited Partners as of each such date. Amounts credited under Section 3.01(f)
shall be deemed to meet, in part, the requirements of this Section 3.03.
ARTICLE IV
CAPITAL ACCOUNTS AND PROFITS OR LOSSES
4.01. Capital Accounts.
(a) A separate capital account (the "Capital Account") shall be
established and maintained for each Partner. The Capital Account of each
Partner shall be credited with the amount of such Partner's Contributed
Capital, all Profits allocated to such Partner pursuant to Article IV, and any
items of income or gain which are specially allocated pursuant to
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Section 4.02(b); and shall be debited with the sum of (i) all Losses and
deductions of the Partnership allocated to such Partner pursuant to Article IV
and (ii) all cash and the Asset Value of any property (net of liabilities
assumed by such Partner and the liabilities to which such property is subject)
distributed by the Partnership to such Partner. To the extent not provided for
in the preceding sentence, the Capital Accounts of the Partners shall be
adjusted in accordance with the rules of Treasury Regulation Section
1.704-1(b)(2)(iv), as the same may be amended or revised. Any references in any
Section of this Agreement to the Capital Account of a Partner shall be deemed
to refer to such Capital Account as the same may be credited or debited from
time to time as set forth above. In the event of any transfer of any Interest
in the Partnership in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the extent
it relates to the transferred interest.
(b) Except as otherwise specified in Section 11.02(h), no
Partner shall be required to pay to the Partnership or to any other Partner the
amount of any negative balance which may exist from time to time in such
Partner's Capital Account.
4.02. Allocation of Partners' Profits or Losses.
(a) Except as provided in Sections 4.03 and 4.04, the Profits
or Losses of the Partnership for any applicable Accounting Period shall be
allocated among the Partners in the following order and priority:
(i) first, an amount of the gross income of the
Partnership shall be allocated to Partners receiving distributions on account
of the Hurdle Rate pursuant to Section 6.01(a)(i)(B); and
(ii) second, Profits and all Losses shall be allocated
among the Partners so as to produce, as nearly as possible, Capital Account
balances for the Partners (taking into account all prior allocations and
distributions, including any allocations under clause (i)) which would equal
the amount to which the Partners would be entitled as a liquidating
distribution from the Partnership pursuant to Section 11.02(b) and as if the
net proceeds available for distribution were an amount equal to the aggregate
positive balance in the Partners' Capital Accounts computed after taking into
account all allocations of Profit and Loss (or items thereof) for the fiscal
period, including those pursuant to this Section 4.02; provided,
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however, that if the allocation of all or any portion of the Partnership Losses
(or items thereof) causes the Capital Account(s) of a Partner or Partners to
exceed the amount that they are obligated to restore, or are deemed obligated
to restore pursuant to Treasury Regulation Section 1.704-2(g) or (i), the
excess, if any, shall be allocated to those Partners, if any, having positive
remaining Capital Account balances, in proportion to their relative percentage
interests, to the extent of any such positive balances, and thereafter in
accordance with the Partners' respective economic risk of loss with respect to
any indebtedness to which the remaining Loss or deductions are attributable.
(b) Allocations of Partnership Profit or Loss (or items
thereof) shall be made consistent with the requirements of Treasury Regulation
Section 1.704-2(e), including, without limitation, those provisions relating to
allocations of income and deductions attributable to non-recourse debt and
partner non-recourse debt. Allocations that would conform to those required by
a "minimum gain chargeback" (as defined in Treasury Regulation Section
1.704-2(f)) in addition to the requirements of Treasury Regulation Section
1.704-1(b) (2) (ii) (d), relating to a "qualified income offset," and Treasury
Regulation Section 1.704-2(i) (4), relating to the chargeback on account of a
decrease in minimum gain attributable to partner non-recourse debt, shall be
made in a manner, at a time, and in the amounts consistent with those
provisions.
(c) Except as provided otherwise in this Agreement, for
income tax purposes, all items of Partnership income, gain, loss or deduction,
and any other allocations not otherwise provided for shall be allocated among
the General Partner and the Limited Partners, as a class, in the same
proportions they share Profits or Losses, as the case may be, for the relevant
Accounting Period.
(d) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, items of income, gains, loss and deduction with respect
to any property contributed to the capital of the Partnership, shall, solely
for federal income tax purposes, be allocated among the Partners so as to take
into account any variation between the adjusted basis of such property to the
Partnership for federal income tax purposes and its Asset Value. In the event
the Asset Value of any Partnership asset is adjusted pursuant to this
Agreement, subsequent allocations of income, gain, loss and deduction with
respect to such asset shall take into account any variation between the
Adjusted Basis of
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such asset and its Asset Value in the same manner as under Section 704(c) of
the Code and applicable Treasury Regulations, including under Section 704(b) of
the Code. Allocations pursuant to this Section 4.02(d) are solely for purposes
of federal, state and local taxes and shall not affect or be taken into account
in computing Capital Accounts, Profits, Losses and other items or distributions
pursuant to this Agreement.
4.03. Allocations With Respect to Transferred Interests.
If Partnership Interests are transferred in accordance with this
Agreement, there shall be allocated to the transferor Partner and the
transferee Partner during the fiscal year of transfer the product of: (i) the
Partnership's Profits or Losses allocable to such Partnership Interest for such
fiscal year; and (ii) a fraction, the numerator of which is the number of days
such Partner held such Partnership Interest during such fiscal year and the
denominator of which is the total number of days in such fiscal year; provided,
however, that the Board of Directors may, in its sole discretion (subject to
the provisions of Sections 706(d) of the Code), allocate such Profits or Losses
by closing the books of the Partnership immediately after the transfer of such
Partnership Interest, and provided further, in the case of the sale or other
disposition of a Portfolio Investment, Profits or Losses from such sale or
other disposition shall be allocated as of the date of such sale or other
disposition and distributions of the net proceeds from such sale or other
disposition shall be made to the parties who were Partners on the date of such
sale or other disposition as if no transfer had been made and all Partners'
Capital Accounts shall be adjusted accordingly.
4.04. Minimum Allocations to the General Partner. Except as provided
in Section 4.02(d), any of the provisions of this Agreement to the contrary
notwithstanding, the General Partner shall be allocated, pro rata in accordance
with their respective Contributed Capital, at least 1% of each material item of
Partnership income, gain, loss, deduction and credit.
4.05. Allocations with Respect to Certain Interests. Allocations of
Profits or Losses of the Partnership (or items thereof) with respect to vested
percentages in the Carried Interest (as determined under Section 6.01(a)(i)(E)
hereof) in a Portfolio Investment or the vested Percentages of a Shared
Portfolio Investment shall be made as though the Partnership assets consisted
only of the Portfolio Investments acquired by the Partnership during the period
of time of the particular Class
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B Limited Partner's employment by the Partnership, or the Shared Portfolio
Investments with respect to which the particular Special Limited Partner has an
interest. In making the determinations required by this Section 4.05, the Board
of Directors shall apply the principles set forth in Section 6.01(a)(i)(E).
ARTICLE V
VALUATIONS
5.01. Valuation of Portfolio Investments Owned by the Partnership.
A value determined pursuant to this Section shall be referred to
as a "Value". The Value of Portfolio Investments owned by the Partnership and
other determinations of Value required under this Agreement shall be determined
by the General Partner in accordance with the principles set forth below,
subject to approval by the Board of Directors based on the consistent
application of said principles and such other guidelines as the General Partner
and the Board of Directors may approve from time to time:
(a) Subject to the specific standards set forth below, the Value
of Portfolio Investments shall be their estimated fair value and shall be
determined from time to time as required by Article VI hereof or at such other
time and for such other purposes as may be deemed necessary or appropriate in
the reasonably exercised sole discretion of the Board of Directors. In
determining the value of the Interest of any Partner in the Partnership or in
any accounting among the Partners or any of them, no value shall be placed on
the goodwill or name of the Partnership, and no tax reserves shall be set up
for unrealized gains or profits.
(b) If traded on one or more securities exchanges, the Value of
a share or other unit of such Security shall be deemed to be the average of the
closing prices for such Security for the last ten days in which the Security
traded (or if there shall have been no sale, the average of the closing bid and
ask prices) on the principal exchange on which such Security is traded).
(c) If actively traded over-the-counter, the Value of a share or
other unit of such Security shall be deemed
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to be the average of the closing sale prices for such Security for the last ten
days for which such sale prices are available as reported by Nasdaq, if the
Securities are included in the Nasdaq National Market, otherwise as reported by
the National Quotation Bureau.
(d) If there is no active public market, the Value of
Securities shall be the estimated fair value thereof, as determined in good
faith by the Board of Directors, taking into consideration the cost of such
Securities, developments concerning the issuer of such Securities subsequent to
the acquisition of such Securities, the financial data and projections of such
issuer provided to the Partnership and such other factor or factors as the
Board of Directors may deem relevant; provided, however, that the Value of such
Securities shall, in any event, be based upon the price at which the issuer
thereof has issued securities of the same class as the Securities being valued
(or securities convertible into or exchangeable for such Securities) in a
substantial placement in which at least 50% of the securities sold were
purchased by investors unaffiliated with the Partners, unless (i) the issuer of
the Securities has been self-financing for the preceding two fiscal years or
(ii) there is strong and convincing evidence to support a different value.
(e) The Value of publicly traded Securities shall reflect,
where appropriate, a discount to reflect a lack of depth or liquidity in the
relevant market.
(f) With respect to Securities which are Restricted
Investments, the Value of such Securities shall be discounted by an amount
which, in the good faith judgment of the Board of Directors, reflects the
effect of the restrictions on transfer on the Value of such Securities,
including, without limitation, the remaining period of time, under applicable
federal and state securities laws, that such restrictions on transfer will
continue and the nature and extent of any available registration rights.
(g) The Value of Portfolio Investments other than cash and
Securities shall be the estimated fair value thereof as determined in good
faith by the Board of Directors.
(h) For purposes of this Agreement, Securities or other
properties distributed to the Partners shall be valued in accordance with this
Article V, as of the date of distribution.
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(i) Notwithstanding the foregoing, if the Board of Directors
and the General Partner believe there is strong and convincing evidence to fix
the Value of a Security at an amount other than the amount called for by the
foregoing provisions, the Board of Directors and the General Partner may fix
the Value at such other amount.
(j) Notwithstanding the foregoing, in calculating Value for
purposes of calculating and determining the existence and extent of an
Unrealized Loss, such Value shall not reflect, with respect to any Securities,
any discount of the types described in Subparagraphs 5.01(e) and (f) above.
ARTICLE VI
DISTRIBUTIONS
6.01 Distributions.
(a) The General partner shall be obligated to distribute to the
Partners all dividends, interest, principal repayments or other distributions
received from a Portfolio Investment, and all proceeds realized by the
Partnership from the sale or disposition (whether for cash or for securities,
including any exercise of Advanta's purchase option under Section 12.01) of any
Portfolio Investment, subject to Sections 6.01(a) (vii) and 6.01(f) hereof.
Distributions may be in cash or in kind; provided, however, that all Partners
shall receive proceeds of any particular distribution in the same form,
whether in cash or in kind. Except as otherwise provided in this Agreement, all
distributions in accordance with this Section 6.01(a) shall be made in the
following order and priority:
(i) All distributions, including liquidating distributions,
shall be made to the Partners as follows:
(A) first, to the Class A Limited Partner to return the
Class A Limited Partner's Investment in such Portfolio Investment, subject to
Section 6.01(a) (iii) below; provided, however, that if the Portfolio Investment
is a Shared Portfolio Investment, the distributions pursuant to this clause (A)
shall be made to the Class A Limited Partner and the Special Limited Partners,
in proportion to their respective Shared Portfolio Investment Percentage, to
return to them their respective Investment in the Shared Portfolio Investment,
to the extent of their Investment in the Shared Portfolio Investment;
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(B) second, to the Class A Limited Partner to pay the
Hurdle Rate attributable to such Portfolio Investment; provided however, that
if the Portfolio Investment is a Shared Portfolio Investment, the distributions
pursuant to this clause (B) shall be made to the Class A Limited Partner and
the Special Limited Partners to pay their respective Hurdle Rates with respect
to the Shared Portfolio Investment, pro rata in accordance with the amount of
their Hurdle Rate that is unpaid at the date of distribution;
(C) third, to the Class A Limited Partner to pay the
amount of any of the Class A Limited Partner's Shortfalls;
(D) fourth, to the Class A Limited Partner to pay the
amount of any Unrealized Loss not previously distributed to the Class A Limited
Partner;
(E) With the remainder divided 80% to the Class A
Limited Partner and the Special Limited Partners as a class, 5% to Advanta GP,
and 15% (the "Carried Interest") to the Class A Limited Partner and the Class B
Limited Partners, as a class. The Carried Interest shall vest in the Class B
Limited Partners, and shall be allocated among the Class B Limited Partners, in
accordance with an Allocation and Vesting Agreement dated as of May 9, 1995, as
such Agreement may be amended from time to time (the "Allocation and Vesting
Agreement"). The portion of the Carried Interest not allocated to the Class B
Limited Partners under the Allocation and Vesting Agreement shall be allocated
solely to the Class A Limited Partner. The distributions to the Class A
Limited Partner and the Special Limited Partners, as a class, shall be
allocated among them based on their respective Shared Portfolio Investment
Percentages. If the Portfolio Investment is not a Shared Portfolio Investment,
the Shared Portfolio Investment Percentage of the Special Limited Partners
shall be 0%.
(F) Distributions made to the Special Limited Partners,
as a class, shall be allocated among them in the same percentage as their
Shared Portfolio Investment Percentage bears to the Aggregate Shared Portfolio
Investment Percentages of all of the Special Limited Partners in the class.
(ii) If the Class A Limited Partner has an Unrealized Loss with
respect to more than one Class A Limited Partner's Investment, payments of
Unrealized Loss shall be allocated between or among such Class A Limited
Partner's
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Investments pro rata in accordance with the respective dollar amounts of such
Class A Limited Partner's Investments.
(iii) Distribution to the Class A Limited Partner of Unrealized
Loss shall be deemed to be a return of the Class A Limited Partner's Investment
in the Portfolio Investment to which such distribution relates and accordingly,
the amount of the Class A Limited Partner's Investment upon which the Hurdle
Rate is paid will be correspondingly adjusted downward.
(iv) If at the time of a distribution with respect to a
Portfolio Investment pursuant to Section 6.01(a)(i), some or all of the amount
that would otherwise have been distributed on account of the Carried Interest
is not so distributed because of the distribution to the Class A Limited
Partner of Unrealized Loss, the reduction in the amount of such distributions
on account of Carried Interest by reason of distribution of Unrealized Loss
(such reduction is referred to herein as the "Specified Amount") shall be
maintained in the Partnership's records for each Class B Limited Partner, and
shall be paid to such Class B Limited Partner, together with interest thereon
at the Hurdle Rate, from the subsequent disposition by the Partnership of each
Portfolio Investment with respect to which an Unrealized Loss was distributed
to the Class A Limited Partner; provided, however, that no such payment shall
be made until and unless the amount of the Class A Limited Partner's Investment
and associated Hurdle Rate has been paid and provided, further, that payment of
such Specified Amount and the Hurdle Rate thereon shall be made only from
amounts representing the 15% distribution to be made pursuant to Section
6.01(a)(i)(E) above. The Specified Amount to be distributed shall be up to 15%
of the amount, if any, by which the Unrealized Loss distributed to the Class A
Limited Partner with respect to such Portfolio Investment exceeds the actual
realized loss for such Portfolio Investment.
(v) In the event of a partial liquidation or partial sale of a
Portfolio Investment, the Portfolio Investment which is liquidated or sold, or
in respect of which a distribution of liquidation or sale proceeds is made,
shall be treated as having been comprised from inception as two portfolio
Investments: one being the Portfolio Investment then being liquidated or sold
and the other being a Portfolio Investment in respect of which no liquidation,
sale or distribution is then being made. The Class A Limited Partner's
Investment, and the Special Limited Partners' Investment if the Portfolio
Investment
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is a Shared Portfolio Investment, and related Hurdle Rate will be appropriately
allocated between the two Portfolio Investments.
(vi) A leveraged recapitalization of a Portfolio Investment
shall be deemed to be, to the extent of a distribution of the leverage
proceeds, a dividend distribution from the applicable Portfolio Investment.
(vii) All cash proceeds received by the Partnership in respect
of a Portfolio Investment shall be distributed in accordance with this Section
6.01, unless retention thereof by the Partnership is determined by the Board of
Directors, in the exercise of their reasonable discretion, to be necessary or
reasonable to provide for expenses, whether or not accrued, obligations or
contingencies in respect of such Portfolio Investment.
(b) The Board of Directors may direct the General Partner to cause the
Partnership to make distributions to the Partners (other than distributions
required to be made pursuant to subsection (a) hereof), at such times and
intervals as the Board of Directors may deem appropriate.
(c) The amount of Investments returned to the Class A Limited Partner
pursuant to Section 6.01(a), less the portion of such Investments attributable
to Advances and Hurdle Rates, will, to such extent, restore the Class A Limited
Partner's Commitment; provided, however, that the Class A Limited Partner's
Commitment will become zero at the end of the Initial Term unless such
Commitment is extended pursuant to the terms of the Agreement.
(d) If Advanta requests the Partnership to undertake a Portfolio
Investment which Partnership would not undertake at its own initiation and the
Partnership determines in its discretion to do so, and on liquidation of such
Portfolio Investment the Class A Limited Partner fails to recoup its Investment
and receive the Hurdle Rate, such Shortfall shall not be treated as having
occurred for purposes of calculating the Class A Limited Partner Unrealized
Loss on the liquidation of subsequent Portfolio Investments. Additionally, the
Class A Limited Partner's Contribution to such Portfolio Investment under such
circumstances shall not be treated as part of the Class A Limited Partner's
Commitment.
(e) Notwithstanding the foregoing provisions of Section 6.01(a)(i)(E),
with respect to distributions to be made
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to Partners of distributions from Advanta Partners 101 LP to the Partnership,
each amount, if any, to be distributed to the Partners pursuant to Section
6.01(a)(i)(E) shall be calculated as follows: after calculating the amount
distributable to each Partner pursuant to the terms of Section 6.01(a)(i)(E),
an amount of the AP101 Distribution shall be reallocated from the Class A
Limited Partner and Advanta GP to the Class B Limited Partners so that the
share of the Class B Limited Partners in the AP101 Distribution shall be
calculated as if no portion of the AP101 Distribution were allocable to Advanta
101 GP.
(f) The Partners hereby agree that if, pursuant to a
request of the Class A Limited Partner under this Section 6.01(f) (which
request may be made by the Class A Limited Partner in its sole discretion), the
capital stock and/or the assets of GEII is distributed to the Class A Limited
Partner (and/or its Affiliates), there will be distributed to Hollin and Neems,
if they are then Class B Limited Partners on account of their Carried Interest
in GEII, in full satisfaction and discharge thereof, $1,471,800 to Hollin and
$480,000 to Neems in such form and kind as is determined by the Class A Limited
Partner as would be tax effective from the standpoint of the Class A Limited
Partner (and its Affiliates), without jeopardizing the tax results to the Class
B Limited Partners. In the event of any inconsistency between this paragraph
and any other provision of the Agreement, the provisions of this paragraph
shall control and take precedence.
6.02. Taxes Withheld.
(a) Unless treated as a "Tax Payment Loan" (as hereinafter
defined), any amount paid by the Partnership for or with respect to any Partner
on account of any withholding tax or other tax payable with respect to the
income, profits or distributions of the Partnership pursuant to the Code,
Treasury regulations, or any state or local statute, regulation or ordinance
requiring such payment (a "Withholding Tax Act") shall be treated as a
distribution to such Partner for all purposes of this Agreement, consistent
with the character or source of the income, profits or cash which gave rise to
the payment or withholding obligation. To the extent that the amount required
to be remitted by the Partnership under the Withholding Tax Act exceeds the
amount then otherwise distributable to such Partner, the excess shall
constitute a loan from the Partnership to such Partner (a "Tax Payment Loan")
which shall be payable upon demand and shall bear interest, from the date that
the Partnership makes the payment to the relevant taxing authority, at the
highest
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"Prime Rate" as published as such from time to time in The Wall Street Journal,
or its successor as a nationally recognized daily financial newspaper, plus 2
percentage points, compounded monthly. So long as any Tax Payment Loan or the
interest thereon remains unpaid, the Partnership shall offset future
distributions due to such Partner under this Agreement by applying the amount
of any such distribution first to the payment of any unpaid interest on all Tax
Payment Loans of such Partner and then to the repayment of the principal of all
Tax Payment Loans of such Partner.
(b) The General Partner shall have the authority to take all
actions necessary to enable the Partnership to comply with the provisions of
any Withholding Tax Act applicable to the Partnership and to carry out the
provisions of this Section. Nothing in this Section shall create any obligation
of the General Partner to advance funds to the Partnership or to borrow funds
from third parties in order to make any payments on account of any liability of
the Partnership under a Withholding Tax Act.
ARTICLE VII
ADDITIONAL CAPITAL CONTRIBUTIONS
BY SPECIAL LIMITED PARTNERS
7.01 Opportunity to Participate. With respect to the Partnership's
investment in each of RMH Teleservices, Inc., Sky Alland Research, Inc. and
Harmonic Systems Incorporated, each Special Limited Partner has made additional
capital contributions in the amount set forth opposite such Partner's name on
Exhibit A hereto. With respect to the first seven Portfolio Investments made by
the Partnership after the date hereof, each Special Limited Partner who is, at
the time of such investment, an Outside Director, shall make additional capital
contributions to the Partnership and shall acquire a share of the Partnership's
distributions, profits and losses arising from such Portfolio Investment,
subject to the terms set forth in this Agreement. The Special Limited Partners
shall also have the right to make follow-on investments in Portfolio
Investments as set forth in Section 7.02(b).
7.02 Procedures Relating to Additional Capital Contributions by Special
Limited Partners
(a) Prior to making a proposed Portfolio Investment after the
execution of this Agreement, the Partnership
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will notify each of the Special Limited Partners who are, as of such time,
Outside Directors, of such Portfolio Investment and provide information with
respect thereto as the Partnership deems appropriate. Each of the Special
Limited Partners will, within ten days after such notice (the "Investment
Notice") is sent to them by the Partnership, make additional capital
contributions to the Partnership with respect to the first seven of such
Portfolio Investments actually made by the Partnership after the date hereof and
shall do so by sending to the Partnership the Special Limited Partner's check to
the Partnership's order in the amount (the "Investment Amount") set forth
opposite such Special Limited Partner's name on Exhibit A hereto. In the event
a Special Limited Partner fails to timely make any such additional capital
contribution then, at the General Partner's option, such Special Limited Partner
shall lose his opportunity to participate in any future Portfolio Investments of
the Partnership with respect to which any Investment Notice is sent by the
Partnership within twelve months after the date on which the Partnership sent
the Investment Notice to the Special Limited Partners relating to the investment
for which the Special Limited Partner did not timely make the additional capital
contribution, and this shall be the Partnership's sole remedy against the
Special Limited Partner with respect to any such failure.
(b) Each special Limited Partner will have the opportunity to
participate in investments made by the Partnership which are determined by the
General Partner to be follow-on investments with respect to Portfolio
Investments for which such Special Limited Partner has made additional capital
contributions if, and only if, the per-unit price at which the Partnership is
making such follow-on investment is less than the per-unit price at which it
made its initial investment in the securities of the issuer of the Portfolio
Investment; and in such event such Special Limited Partner will have the
opportunity to make additional capital conditions to the Partnership in order
to prevent dilution of his interest in such Portfolio Investment, provided that
such additional capital contributions are made within ten days after a notice
requesting such additional capital contribution is sent by the General Partner
to such Special Limited Partner.
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ARTICLE VIII
MANAGEMENT
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8.01. AUTHORITY OF THE BOARD OF DIRECTORS.
(a) The Partnership shall be governed by the board of directors
of the General Partner, acting in their capacity as the Partnership's Board of
Directors. Such board of directors is referred to in this Agreement as the
Partnership's "Board of Directors." The members of the Board of Directors shall
be free to consult with Advanta GP and with Advanta, and may act in accordance
with directions received from Advanta GP and/or Advanta. The day to day
management and operation of the Partnership will be directed by the General
Partner.
(b) A majority of the members of the Board of Directors then in
office shall be necessary to constitute a quorum for the transaction of
business, and the acts of a majority of the members of the Board of Directors in
office shall be the acts of the Board of Directors. The Board of Directors may
also act by unanimous consent in writing.
(c) The Board of Directors may elect a Chairman of the Board to
preside at meetings of the Board (initially to be Dennis Alter).
(d) Meetings of the Board of Directors shall be held whenever
ordered by the Chairman of the Board, if any, or by a majority of the directors
in office. Written notice stating the place and time of any meeting of the
Board shall be sufficient if given at least one day in advance of the time
fixed for the meeting, and notice may be given to the recipient either
personally or by sending a copy thereof by first class or express mail, postage
prepaid, or by telegram (with messenger service specified), telex or TWX (with
answerback received), or next day courier service, charges prepaid, or by
telecopier, to such recipient's address (or to such recipient's telex, TWX,
telecopier or telephone number) appearing on the books of the Partnership or
supplied by such recipient to the Partnership for the purpose of notice. If the
notice is sent by mail, telegraph or courier service, it shall be deemed to
have been given to the person entitled thereto when deposited in the United
States mail or with a telegraph office or courier service for delivery to that
person, or in the case of telex or TWX, when dispatched; provided, that in any
case where only one day's notice is being given, notice must be given at least
24 hours in advance by
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delivery in person, telephone, telex, TWX, telecopier or similar means of
communication.
(e) Any member of the Board of Directors may participate in any meeting
of the Board of Directors or of any committee (provided such director is
otherwise entitled to participate), be counted for the purpose of determining a
quorum thereof and exercise all rights and privileges to which such member of
the Board of Directors might be entitled were he or she personally in
attendance, including the right to vote, or any other rights attendant to
presence in person at such meeting, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
(f) The Partnership policy with respect to compensation and expense
reimbursement for directors shall be determined by the General Partner.
(g) Except as otherwise expressly provided in this Agreement, all
policy matters and material decisions with respect to any matter set forth
herein or otherwise affecting or arising out of the conduct of the business of
the Partnership shall be made by the Board of Directors. Specifically, but not
by way of limitation, the Board of Directors:
(1) shall determine the Portfolio Investment acquisitions and
dispositions to be made by the Partnership, after receiving recommendations by
the General Partner. A Portfolio Investment will not be made without the
affirmative recommendation of the General Partner. The Class A Limited Partner
shall not be called upon to contribute more than $20 million to any single
Portfolio Investment, or to contribute more than $50 million to Portfolio
Investments in any 12-month period;
(2) has authority to direct the General Partner to execute and
deliver, in the name and on behalf of the Partnership, such documents and
instruments and to take such other action as the Board of Directors may deem
appropriate for the conduct of the Partnership's business;
(3) has authority to direct the General Partner to cause the
Partnership to lend money to one or more Portfolio Investment companies for any
purpose related to the Partnership's Portfolio Investments in such portfolio
companies;
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(4) has authority to direct the General Partner to cause the
Partnership to acquire property, real or personal, as the Board of Directors
may in its sole discretion deem necessary or appropriate for the conduct of the
Partnership's business and to sell, exchange, or otherwise dispose of all or
any part of the Partnership's property;
(5) has authority to direct the General Partner to cause the
Partnership to employ such agents, employees, managers, accountants, attorneys,
investment advisors, consultants and other Persons necessary or appropriate to
carry out the business and affairs of the Partnership and to cause the
Partnership to pay such reasonable fees, expenses, salaries, wages and other
compensation to such Persons as the Board of Directors shall in its sole
discretion determine;
(6) has authority to direct the General Partner to cause the
Partnership to make elections under the Code, as amended, (including, without
limitation, elections under Section 754 or any similar provisions enacted in
lieu thereof, or any corresponding provisions of state tax laws), and in
connection therewith, each of the Partners agrees, upon request of the Board of
Directors or a General Partner, to supply the information necessary to properly
give effect to such elections, and the Partners hereby designate Advanta GP as
the Partnership's "Tax Matters Partner", as such term is used in the Code; and
(7) has authority to delegate particular authority to the
General Partner.
8.02. Certain Compensation Matters. In the event any director's fees or
other fees or remuneration are paid to any of the Class B Limited Partners, or
any of their Affiliates (excluding the Partnership), by any Person in which the
Partnership has a Portfolio Investment, the amount of compensation payable to
the Class B Limited Partners by the Partnership shall be reduced by an amount
equal to the amount of such fees or compensation. In the event the aggregate
credits under this Section 8.02 against compensation payable by the Partnership
to any Class B Limited Partner exceed the aggregate projected amount of
compensation payable by the Partnership to such Class B Limited Partner for the
twelve month period after such credits are determined, such excess shall be
promptly paid to the Partnership by such Class B Limited Partner. Non-cash
remuneration consisting of goods or services paid to a Class B Limited Partner
by any Person in which the Partnership has a
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Portfolio Investment shall be taken into account when received, at fair value
as determined by the Board of Directors.
8.03. Services of the General Partner and Board of Directors. Subject
to any express exceptions set forth in any employment agreement with the
Partnership, during the existence of the Partnership, the General Partner shall
devote its full time and effort to the Partnership business to promote the
interests of the Partnership consistent with the General Partner's fiduciary
duty to the Partnership. Nothing in this Agreement shall be deemed to preclude
any of the General Partner's officers (other than the Class B Limited Partners
to the extent provided by any employment agreement between such parties and the
Partnership), directors or equity owners or any member of the Board of
Directors from engaging in other businesses, and in no event shall any of the
Partners be entitled to any interest in or profits from any such other business
by reason of their being a Partner in the Partnership.
8.04. Compensation and Dealings with Partnership. Except for the
interests granted to the Partners under this Agreement in the Profits or Losses
of and distributions from the Partnership, neither the General Partner nor the
Class A Limited Partner shall receive any compensation for services rendered in
connection with the management or operation of the Partnership or its business.
The Class A Limited Partner may deal with the Partnership in connection with
the management and operation of the Partnership as an independent contractor or
as an agent for others, and may receive from such others or the Partnership
normal profits, compensation, commissions, or other income incident to such
dealings, but only with the prior written consent of the Board of Directors to
such dealings and to the terms and conditions of, and the profits,
compensation, commissions or income to be derived from such dealings. The Class
B Limited Partners may receive compensation for services from the Partnership
in their capacities as employees of the Partnership.
8.05. No Loans to Partners, Etc. The Partnership shall be permitted to
lend funds, securities or other property of the Partnership only with the prior
approval of the Board of Directors. Except for any Tax Payment Loan authorized
under Section 6.02, any Loan to any Partner, any Affiliate of a Partner, or any
director, officer, partner or equity owner of a Partner or Affiliate of a
Partner, other than to a Person in which the Partnership has a Portfolio
Investment must be approved by the Board of Directors and the Class A Limited
Partner.
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8.06 LIABILITY OF THE GENERAL PARTNER, BOARD OF DIRECTORS MEMBERS AND
OTHERS.
(a) The General Partner, the officers, directors and
shareholders of the General Partner, the members of the Board of Directors, the
employees of the Partnership and any person serving at the request of the Board
of Directors or the General Partner on the board of directors of a Person in
which the Partnership has a Portfolio Investment (individually, an "Acting
Member") shall not be liable, responsible or accountable in damages or
otherwise to the Partnership or to any of the Partners for any act or omission
performed or omitted in good faith on behalf of the Partnership and in a manner
reasonably believed to be within the scope of the authority granted to such
Person by this Agreement or by the Board of Directors or the General Partner
and to be in the best interests of the Partnership, except for such person's
own bad faith, gross negligence, recklessness, willful misconduct, fraud or a
material and intentional breach of this Agreement in bad faith.
(b) No Acting Member shall be liable to the Partnership or to
any of the Partners for any tax, or penalty or interest related thereto,
imposed upon the Partnership or any Partner.
(c)(i) The Partnership shall indemnify, hold harmless and
defend each past and present Acting Member and their requisite successors,
heirs and personal representatives, (individually, a "Defended Person"), from
and against any and all loss, claims, damages, liabilities joint and several,
expenses, judgments, fines, settlements and other amounts, including, without
limitation, reasonable attorney's and accountant's fees and disbursements,
arising from any and all claims, demands, actions, suits or proceedings (civil,
criminal, administrative or investigative) in which such Defended Person shall
be involved as a party or otherwise, or be threatened to be made a party, by
reason of any action taken or alleged to have been taken or omitted to have
been taken in connection with or in any way related to the activities or
affairs of the Partnership, if such action or omission:
(A) Was taken or omitted in a manner reasonably
believed by such Defended Person to be within the scope of authority conferred
by law or this Agreement; and
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(B) Was authorized or consented to by the Board of
Directors or the General Partner or was an action taken on behalf of the
General Partner; and
(C) Was taken or omitted in good faith either on behalf
of the Partnership or in furtherance of the interests of the Partnership,
provided that the action or omission of such Defended Person did not constitute
bad faith, gross negligence, recklessness, willful misconduct, fraud or a
material and intentional breach of this Agreement in bad faith.
(ii) To the extent that such Defended Person has been
successful on the merits or otherwise in defense of any proceedings referred to
herein, or in defense of any claim, issue or matter therein, or even if the
Defended Person has been unsuccessful in such, but would otherwise be entitled
to indemnity pursuant to the standards set forth in clauses A, B and C above,
the Partnership shall assume liability for all expenses actually and reasonably
incurred by such Defended Person in connection therewith. The Partnership may,
at its option, choose to assume the defense of a Defended Person by counsel
selected by the Partnership with the consent of such Person, which consent
shall not be unreasonably withheld. The termination of a proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere, or
its equivalent, shall not, of itself, create a presumption that such Defended
Person did not act in accordance with the standards set forth above. No
settlement of any matter referred to herein shall be entered into by a Defended
Person without the consent of the Partnership, which consent shall not be
unreasonably withheld. If the Partnership shall reject a settlement proposed by
a Defended Person, then, in addition to any other indemnification for which the
Partnership may be liable hereunder, the Partnership shall be liable, without
limitation or restriction hereunder, to indemnify such Defended Person for the
excess of any of the amount for which such Defended Person is ultimately
liable, by judgment, settlement or otherwise, over the amount of the settlement
rejected by the Partnership. The Partnership shall indemnify a Defended Person
from liability with respect to a claim, issue or matter for which such Defended
Person shall have been adjudged to be liable for misconduct in the performance
of such Defended Person's duty to the Partnership only to the extent that the
court in which such action was brought, or another court of appropriate
jurisdiction, determines upon application that, despite the liability, but in
view of all the circumstances of the case, such Defended Person is fairly and
reasonably entitled to be spared from liability for such expenses which such
court shall deem proper.
(iii) It is the intent of this Section that the Partnership will
indemnify the Defended Persons from and
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against liability to the maximum extent permitted by law, subject to the
provisions hereof. The General Partner, however, shall at no time or for any
reason attempt to require the Limited Partners to directly satisfy all or any
portion of the indemnification obligations of the Partnership to the Defended
Persons pursuant to this Section. Accordingly, the Class A Limited Partner
shall have no obligation to provide indemnification under this Agreement to the
extent of its remaining Commitment or otherwise.
(iv) Costs and expenses incurred in defending or responding to
any pending or threatened action, proceeding or investigation shall be advanced
by the Partnership (to a maximum of $250,000 unless a greater amount is
approved by the Board of Directors) on behalf of the Defended Person who is the
subject thereof in advance of the final disposition of such action, proceeding
or investigation. However, any such Defended Person must agree in writing to
repay such advance if it shall ultimately be determined that the Partnership
shall not indemnify such Defended Person from liability pursuant to this
Section.
(v) The indemnification obligation of the Partnership set forth
in this Section shall terminate as of the date the Partnership's Certificate of
Limited Partnership shall have been cancelled and the assets of the Partnership
shall have been distributed as provided herein.
(d) The provisions of this Section shall not be deemed to be exclusive
of any other rights to which the Defended Person may be entitled under any
agreement, or as a matter of law, or otherwise.
(e) The Board of Directors shall have the power to purchase and
maintain insurance, at the expense of the Partnership, on behalf of the Acting
Members against any liability asserted against or incurred by them in any
capacity covered by the indemnification provisions of this Section, whether or
not the Partnership would have the power to indemnify and defend the Defended
Persons against such liability under the provisions of this Agreement. No such
insurance, however, shall apply to suits by any Limited Partner directly or
derivatively.
(f) The Board of Directors or the General Partner may cause the
execution of any of its power hereunder or perform any duties hereunder either
directly or by or through agents or attorneys, and the Board of Directors or
General Partner, as the case may be, shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed with
due care by it hereunder.
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8.07. Limitations on the Limited Partners. Nothing contained herein
shall be deemed to confer on a Limited Partner a right, in its capacity as a
Limited Partner, to (a) take part in the control of the business or affairs of
the Partnership; (b) have any voice in the management or operation of any
Partnership property; (c) have the authority or power to act as agent for or on
behalf of the Partnership or any other Partner; (d) do any act which would be
binding on the Partnership or any other Partner; or (e) incur any expenditures
on behalf of or with respect to the Partnership.
ARTICLE IX
BOOKS, RECORDS AND BANK ACCOUNTS
9.01. Books and Records. The General Partner shall keep accurate books
of account and records with respect to the operation of the Partnership and
this Agreement. Such books and records shall be maintained at the principal
place of business of the Partnership, or at such other place as the General
Partner, with notice to the Class A Limited Partner, shall determine. The
General Partner hereby agrees to preserve all financial and accounting records
pertaining to the operation of the Partnership and this Agreement during the
term of the Agreement and for six years thereafter, and during such period the
Class A Limited Partner, shall, at its own cost and expense, have the right to
audit such books and records for the purpose of verifying all records in regard
thereto to the fullest extent authorized and permitted by law, but not more
than one audit may be conducted in any twelve month period. The General Partner
shall have the right to preserve all records and accounts in original form or
on microfilm, magnetic tape, or any similar process.
9.02. Accounting Basis and Fiscal Year. The Partnership shall prepare
its financial statements in accordance with generally accepted accounting
principles as from time to time are in effect on a calendar year basis, taking
account of the allocations in Article IV, and shall prepare its income tax
information returns using the accrual method of accounting on a calendar year
basis.
9.03. Financial Reports. Within 60 days after the end of each
quarter, the General Partner shall cause to be prepared and sent to the Class A
Limited Partner an unaudited balance sheet and statement of profit and loss of
the Partnership. Within 90 days after the end of each fiscal year, or as
promptly thereafter as practicable, the General Partner shall cause to be
prepared and sent to (i) each Limited Partner (other than the
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Special Limited Partners) an audited financial report of the Partnership and
(ii) to each Special Limited Partner a copy of any financial statements of any
person in which a Shared Portfolio Investment has been made (and if such person
files reports with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 a copy of any reports so filed), in each case which have
been received by the Partnership within the prior twelve months, a report of the
distributions, profits and losses of the Partnership attributable to the
Portfolio Investments in which such Special Limited Partner elected to make a
capital contribution pursuant to the provisions of this Agreement, and such
other information relating to such Portfolio Investments as the General Partner
shall determine. Such audited financial report shall be audited by the
Accounting Firm. The cost of all such reporting shall be paid by the Partnership
as a Partnership expense. The Special Limited Partners hereby agree that it
would not be reasonable for the Partnership to be required to send to them, or
permit them to have access to, financial statements, reports or other
information relating to any matters other than the Portfolio Investments with
respect to which they made capital contributions.
9.04 BANK ACCOUNTS. The assets of the Partnership shall be held by
one or more custodian banks appointed by the Board of Directors. All funds of
the Partnership shall be deposited in one or more accounts maintained at the
custodian bank(s). All such funds and assets shall be and remain the property of
the Partnership and shall be received, held and disbursed by the General Partner
or its designee for the purposes specified in this Agreement. There shall not be
deposited in any of said accounts any funds other than funds belonging to the
Partnership, and no other funds shall in any way be commingled with such funds.
The General Partner may, subject to any policies adopted by the Board of
Directors, invest such funds in such temporary investments as they may deem
appropriate, including but not limited to banking and savings accounts, U.S.
government obligations, prime grade commercial paper, certificates of deposit,
money market instruments, or similar low risk, high quality income securities.
The General Partner shall not be liable or responsible for any loss resulting
from the failure of any custodian bank so designated.
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ARTICLE X
ASSIGNABILITY AND PURCHASE OF INTERESTS
10.01. Substitution and Assignment of a Partner's Interest.
(a) A Partner may not sell, transfer, assign, pledge or
otherwise dispose of (collectively, "disposition") all or any part of its
Partnership Interest (except by operation of law) except pursuant to an
amendment to the Agreement, signed by the General Partner and the Class A
Limited Partner, setting forth the terms and conditions of any such
disposition; no transferee of a Partnership Interest pursuant to this provision
or any other provision of this Agreement shall become a General Partner or a
substituted Limited Partner under the Act unless approved by the General
Partner and the Board of Directors, which approval may be withheld arbitrarily.
Notwithstanding the foregoing, no transfer of a Limited Partner's interest will
be permitted if it affects the continuity of the Partnership under Section 708
of the Code.
(b) If any transfer of all or any portion of a Partnership
Interest is made pursuant to any provision of this Agreement, the assignor and
assignee shall be jointly and severally liable to the Partnership to pay any
fees and expenses incurred by the Partnership as a result of such transfer,
promptly after demand therefor is made.
10.02. Admission of Additional Partners. Additional Partners may be
admitted to the Partnership only pursuant to, and upon the terms set forth in,
an amendment to the Agreement executed by the General Partner and the Class A
Limited Partner upon authorization to do so by the respective boards of
directors of such Partners.
10.03. Withdrawal of Partners. A Limited Partner (other than a Special
Limited Partner) may withdraw from the Partnership at any time. A General
Partner may withdraw from the Partnership at any time; provided, that such
withdrawal will not be permitted if it affects the continuity of the
Partnership under Section 708 of the Code.
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ARTICLE XI
DISSOLUTION AND TERMINATION
11.01. Event of Dissolution. The Partnership shall be dissolved upon
the earliest of:
(a) a date designated by written agreement of the General
Partner and the Class A Limited Partner or in a notice to dissolve, provided
pursuant to Section 2.01, from the Class A Limited Partner to the General
Partner;
(b) the withdrawal, Bankruptcy or dissolution of a General
Partner unless (i) the remaining General Partner, if any, agrees to continue
the Partnership or (ii) if there is no remaining General Partner, within thirty
(30) days a majority in interest of the remaining Partners agree in writing to
continue the Partnership and admit a new General Partner;
(c) at 12:00 midnight, on the date provided for in Section
2.01, unless extended by agreement of the Partners; and
(d) a date designated in a notice to dissolve by the Board of
Directors provided pursuant to the terms of Section 3.02.
11.02. Liquidation.
(a) Dissolution of the Partnership shall be effective on the
day on which the event occurs giving rise to the dissolution, but the
Partnership shall not terminate until the Partnership's Certificate of Limited
Partnership shall have been canceled and the assets of the Partnership shall
have been distributed as provided herein. Notwithstanding any possible
implication to the contrary, which implication is not intended, and in
accordance with applicable law, dissolution of the Partnership shall not
require the liquidation of any Portfolio Investment to occur at any faster rate
than ordinary prudent business judgment would have required absent the
dissolution, within the limit of the Initial Term.
(b) Upon the dissolution of the Partnership, a full account of
the assets and liabilities of the Partnership shall be taken and the assets and
liabilities of the Partnership shall be liquidated by the General Partner,
subject to Section 11.02(e), in the manner determined by the Board of
Directors, and the proceeds thereof, as and when available, shall be applied as
follows and in the following order of priority:
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(i) to the payment of all debts, taxes, obligations and
liabilities of the Partnership, and the necessary expenses of liquidation
(including, without limitation, any liabilities to Partners); and where a
contingent debt, obligation or liability exists, a reserve shall be set up to
meet it, and, if and when said contingency shall cease to exist, the assets, if
any, remaining in said reserve shall be distributed as provided in this Article
XI; and
(ii) then to the Partners in accordance with Section 6.01(a)(i).
(c) Upon any termination of the Partnership, the name of the
Partnership and its good will shall not be appraised, sold or otherwise
liquidated but shall be and remain the exclusive property of the Advanta GP.
(d) Within 60 days after the termination of the Partnership, and at
such time as the liquidation of the Partnership shall have been completed, the
General Partner shall cause to be prepared and forwarded to each Partner
financial statements of the Partnership, prepared in accordance with Section
9.02 hereof.
(e) The liquidation of the Partnership shall be administered by the
General Partner, unless the event causing the dissolution of the Partnership is
an event set forth in Section 11.01(b), and has occurred with respect to the
General Partner, in which case the liquidation of the Partnership shall be
managed by a liquidator appointed by the Class A Limited Partner.
(f) Except as otherwise provided herein, during the period of
liquidation of the Partnership following its dissolution, the Partners shall
continue to be entitled to their respective interests in the Profits or Losses
of the Partnership as set forth in Article IV.
(g) During the period of its liquidation, the Partnership will
continue to pay and bear those expenses chargeable to the Partnership during
its term.
(h) Notwithstanding any other provision of this Agreement, on
liquidation the General Partner shall contribute to the capital of the
Partnership an amount equal to the lesser of the aggregate deficit balance in
their Capital Accounts, if any, or 1.01% of the capital contributed by the
Limited Partners to the Partnership in excess of the capital contributed
previously by the General Partner.
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(i) Upon and after the dissolution of the Partnership,
Advanta GP and the Class A Limited Partner and any of their affiliates shall be
entitled to form another partnership, which may have the same purposes and the
same name as the Partnership, without any other General Partner or any Limited
Partner having any right in or restriction against such new partnership of any
kind, unless Advanta GP, the Class A Limited Partner and any such affiliates
shall agree to admit such parties as partners in such new partnership.
No later than the completion of the liquidation of the
Partnership as contemplated herein, the General Partner or the liquidator
appointed by the Limited Partners shall cause the cancellation of the
Partnership's Certificate of Limited Partnership.
ARTICLE XII
PURCHASE RIGHT OF ADVANTA
12.01. Advanta's Purchase Right.
(a) At any time, with respect to any Portfolio Investment
other than GEII held by the Partnership for not less than thirty-six (36)
months, Advanta shall have the right to require the Board of Directors to
engage, within thirty days after notice from Advanta, two appraisers, each to
provide an opinion of the fair market value of such Portfolio Investment
(defined as an amount in U.S. Dollars that a ready, willing and able buyer
would pay to a ready, willing and able seller, both assumed to be of equal
competence and experience and acting without coercion or duress in a fair
market). The expense of engaging such appraisers shall be borne by Advanta and
shall not be Advances under this Agreement. The average of such determinations
of fair market value shall be the "Appraised Value" under this Agreement. Upon
written notice within thirty (30) days after receipt of the Appraised Value,
Advanta shall have the right to buy any Portfolio Investment of the Partnership
at such Portfolio Investment's Appraised Value, subject to the following
restrictions:
(1) Advanta must purchase not less than 100% of the
Partnership's interest in the Portfolio Investment; and
(2) where the Partnership's Portfolio Investment
represents less than a majority of the voting control and value of the investee
entity, Advanta must (coincident with the purchase of the Partnership's
Portfolio Investment) purchase from other sources a sufficient additional
interest in the
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investee entity so that, when combined with the Portfolio Interest, Advanta
will have acquired a majority of the voting control and value of the investee
entity.
(b) The closing of a purchase made pursuant to Section 12.01(a)
shall occur within thirty (30) days after the Partnership's receipt of such
notice that Advanta desires to make such purchase, pursuant to such other
precise details as may be determined by the Board of Directors.
ARTICLE XIII
GENERAL PROVISIONS
13.01. Power of Attorney. Each Limited Partner, by the execution of
this Agreement, does hereby irrevocably constitute and appoint the General
Partner its true and lawful agent and attorney in fact, with full power and
authority in its name, to make, execute, acknowledge, deliver, file and record
such documents and instruments as may be necessary or appropriate to establish,
maintain or terminate the legal existence of the Partnership, including, but
not limited to, (a) the Partnership's Certificate of Limited Partnership, (b)
such amendments to the Partnership's Certificate of Limited Partnership, as
amended from time to time, as are required under the Act, (c) all certificates
and other instruments which may be required to effect the dissolution and
termination of the Partnership pursuant to the provisions hereof, (d) such
documents and instruments as are necessary to cancel the Partnership's
Certificate of Limited Partnership and any amendment thereto pursuant to
Article VIII hereof, and (e) all other instruments, documents, certificates and
amendments that may from time to time be required by any federal, state or
local law to effectuate, implement, continue and defend the valid and
subsisting existence of the Partnership or which may otherwise be required by
law.
13.02. Indulgences, Etc. Neither the failure nor any delay on the part
of any party to exercise any right under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right preclude
any other or further exercise of the same or of any other right nor shall any
waiver of any right with respect to any occurrence be construed as a waiver of
such right with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted
such waiver.
13.03. Controlling Law. This Agreement and all questions relating to
its validity, interpretation, performance and
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enforcement (including, without limitation, provisions concerning limitations
of actions), shall be governed by and construed in accordance with the laws of
the State of Pennsylvania (notwithstanding any conflict-of-law doctrines of any
state or other jurisdiction to the contrary), and without the aid of any canon,
custom or rule of law requiring construction against the draftsman.
13.04. Notices.
(a) All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received only when personally
delivered, or on the day specified for delivery when deposited with a courier
service such as Federal Express for delivery to the intended addressee, or two
days following the day when deposited in the United States mails, by registered
or certified mail, postage prepaid, return receipt requested, addressed as set
forth below:
(i) If to Advanta GP:
Advanta GP Corp.
Welsh and McKean Rds.
P.O. Box 844
Spring House, Pennsylvania 19477-0844
Attention: Chief Executive Officer;
with a copy, given in the manner prescribed above, to:
Gene S. Schneyer, Esquire,
Vice President and
General Counsel
c/o Advanta Corp.
Welsh and McKean Rds.
P.O. Box 844
Spring House, Pennsylvania 19477-0844
(ii) If to Class A Limited Partner:
Advanta Investment Corp.
c/o Advanta Corp.
Welsh and McKean Rds.
P.O. Box 844
Spring House, Pennsylvania 19477-0844
Attention: Chief Executive Officer;
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with a copy, given in the manner prescribed above, to:
Gene S. Schneyer, Esquire,
Vice President and
General Counsel
c/o Advanta Corp.
Welsh and McKean Rds.
P.O. Box 844
Spring House, Pennsylvania 19477-0844
(iii) If to any Limited Partner:
To the address shown for such Partner on the
Partnership's books and records
(b) In addition, notice by mail shall be by air mail if
posted outside of the continental United States.
(c) Any party may alter the address to which communications
or copies are to be sent by giving notice of such change of address in
conformity with the provisions of this paragraph for the giving of notice.
13.05. Schedules. Schedules attached hereto are hereby incorporated by
reference into, and made a part of, this Agreement.
13.06. Binding Nature of Agreement. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
successors and permitted assigns, except that none of the parties hereto may
assign or transfer their rights or obligations under this Agreement without the
prior written consent of the General Partner, and any such purported assignment
shall be void.
13.07. Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
13.08 Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that for
any reason any other
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or others of them may be invalid or unenforceable in whole or in part.
13.09. Entire Agreement; Amendment. This Agreement, together with
the Allocation and Vesting Agreement and the several employment agreements of
the various Class B Limited Partners, contains the entire understanding among
the parties hereto with respect to the subject matter hereof, and supersedes
all prior and contemporaneous agreements and understandings, inducements or
conditions, express or implied, oral or written, except as herein contained.
The express terms hereof control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms hereof. This Agreement
may not be modified or amended other than by an agreement in writing, which
agreement in writing shall be binding on all parties hereto (even if such
parties have not consented to such modification or amendment) if such agreement
is executed by the General Partner and the Class A Limited Partner; provided,
however, that if such amendment or modification would have a material adverse
effect on Hollin and/or Neems, then such agreement shall not be binding on such
party who shall be so materially adversely affected without such party's
execution of such agreement. In the event of any inconsistency among this
Agreement, the Allocation and Vesting Agreement and the aforementioned several
employment agreements, the provisions of this Agreement shall prevail over the
provisions of the other agreements and the provisions of the several employment
agreements shall prevail over the Allocation and Vesting Agreement.
13.10. Section Headings. The article, section and subsection headings
in this Agreement are for convenience only; they form no part of this Agreement
and shall not affect its interpretation.
13.11. Gender, Etc. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or
neuter, as the context indicates is appropriate.
13.12. Number of Days. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls on
a Saturday, Sunday or holiday on which federal banks are or may elect to be
closed, then the final day shall be deemed to be the next day which is not a
Saturday, Sunday or such holiday.
13.13. Interpretation. As used herein, (i) "include", "includes" and
"including" are deemed to be followed by "without
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52
limitation" whether or not they are in fact followed by such words or words
of like import, (ii) references to any agreement or other document are to it as
amended and supplemented from time to time, (iii) references to any act,
statute or law are to it as amended and supplemented from time to time, include
any successor provision or any comparable act, statute or law that may be
enacted as its replacement, and include all rules and regulations promulgated
under such act, statute or law, (iv) references to Article, Section or another
subdivision or to an attachment, Exhibit or Schedule are to an Article, Section
or subdivision hereof or an attachment, Exhibit or Schedule hereto, and (v)
"hereof", "herein", "hereunder" and comparable terms refer to the entirety
hereof and not to any particular Article, Section or other subdivision hereof or
attachment hereto.
IN WITNESS WHEREOF, the parties have executed the Agreement of Limited
Partnership as of the date first above written.
ADVANTA GP CORP.
Attest: /s/ By: /s/
---------------------------- -------------------------------
Secretary or Assistant Authorized Officer
Secretary
ADVANTA INVESTMENT CORP.
Attest: /s/ By: /s/
---------------------------- -------------------------------
Secretary or Assistant Authorized Officer
Secretary
/s/ MITCHELL L. HOLLIN
-------------------------------(SEAL)
Mitchell L. Hollin
/s/ MICHAEL NAJJAR
-------------------------------(SEAL)
Michael Najjar
/s/ GARY H. NEEMS
-------------------------------(SEAL)
Gary H. Neems
Special Limited Partners:
/s/ ROBERT HALL
-------------------------------
Robert Hall
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/s/ ROBERT ROCK
-------------------------------
Robert Rock
/s/ JAMES STERN
-------------------------------
James Stern
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SCHEDULE A
Initial
Capital
-------
Advanta GP $100.00
Class A Limited Partner $100.00
Mitchell L. Hollin $100.00
Michael Najjar $100.00
Gary H. Neems $100.00
55
EXHIBIT A
Special Limited Partner Investment Amount
- ----------------------- -----------------
Robert Hall $10,000
Robert Rock $25,000
James Stern $25,000