Consensus One Venture Capital Limited Partnership Deed


4. CONTRIBUTION ARREARS AND OTHER DEFAULT

4.1 Delinquent contributions 
4.2 Other default 
4.3 Consequences of default 
4.4 Appropriateness of remedies 

4.1 Delinquent contributions

(a) If a Limited Partner breaches an obligation or otherwise fails to pay a Capital Contribution when due under clause 3 (Capitalisation of the Partnership), the Limited Partner:

(i) is a Defaulting Limited Partner until:

A. the Limited Partner pays to the Partnership the amounts referred to in sub-paragraph (ii);

B. if the General Partner gives notice under paragraph (d) to the Limited Partner, the Limited Partner pays to the Partnership all other amounts required to be paid under the notice; and

C. if the General Partner gives notice under paragraph (d) to the Limited Partner and the Limited Partner has not paid the amounts referred to in sub-paragraphs (A) and (B) to the Partnership within 10 Business Days after the notice is given, the conclusion of any action taken by the General Partner in accordance with the notice; and

(ii) must immediately pay to the Partnership:

A. all or that part (as relevant) of the Capital Contribution that the Defaulting Limited Partner has not paid under clause 3 (Capitalisation of the Partnership); and

B. as a Capital Contribution, an amount equal to the lesser of the rate specified in clause 11 of schedule A compounding daily and the maximum rate permitted by applicable law of the amount of the Capital Contribution that the Defaulting Limited Partner has not paid under clause 3 from the date on which it was due under clause 3 (Capitalisation of the Partnership) to the date on which the amounts payable under sub-paragraph (A) and this sub-paragraph (B) are paid to the Partnership.

(b) The part of the total of the Capital Contribution by a Defaulting Limited Partner under paragraph (a)(ii) which exceeds the amount under paragraph (a)(ii)(A) must, despite any other provision of this deed, be allocated to each Capital Account of a Limited Partner.

(c) The proportion of the amount allocated under paragraph (b) to the Capital Account of a Limited Partner must be equal to the proportion of the Capital Commitment of the Limited Partner as at immediately before the Capital Contribution referred to in paragraph (b) to the total of the Capital Commitments of the Limited Partners as at immediately before the Capital Contribution.

(d) The General Partner may give notice to a Defaulting Limited Partner which:

(i) requires payment to the Partnership, within 10 Business Days after the notice is given, of the total of:

A. the amounts referred to in paragraph (a)(ii);

B. an amount which, in the reasonable opinion of the General Partner, would compensate the Partnership for any losses suffered by the Partnership as a result of the failure by the Defaulting Limited Partner to pay the Capital Contribution when due under clause 3 (Capitalisation of the Partnership); and

C. the Outgoings, including legal fees, paid or incurred by the General Partner or the Partnership in relation to the collection or attempted collection of any of the amounts under sub-paragraphs (A) and (B); and

(ii) states that failure to pay an amount due under sub-paragraph (i) within that period may result in the General Partner taking action under clause 4.3(a).

4.2 Other default

(a) If, in the reasonable opinion of the General Partner, there is a Disposal in respect of an interest in the Partnership Interest of a Limited Partner in breach by the Limited Partner of this deed or a Limited Partner breaches a material obligation under this deed other than a failure to pay all or part of a Capital Contribution when due under clause 3 (Capitalisation of the Partnership):

(i) the Limited Partner is a Defaulting Limited Partner until:

A. the Limited Partner remedies the breach; and

B. if the General Partner gives notice under paragraph (a)(ii) to the Limited Partner, and the Limited Partner has not remedied the breach within 10 Business Days after the notice is given, the conclusion of any action taken by the General Partner in accordance with the notice; and

(ii) the General Partner may give notice of the breach to the Defaulting Limited Partner stating that unless the breach is remedied within 10 Business Days after the notice is given, the General Partner may take action under clause 4.3(a).

(b) If:

(i) a Limited Partner is prohibited by an applicable law from being a limited partner of the Partnership;

(ii) an Insolvency Event occurs in respect of a Limited Partner; or

(iii) in the reasonable opinion of the General Partner, the Limited Partner breaches clause 2.3(a)(ii) or 2.4(b)(ii),
then:

(iv) the Limited Partner is a Defaulting Limited Partner; and

(v) the General Partner may, without prior notice, take action under clause 4.3(a).

4.3 Consequences of default

(a) If:

(i) the General Partner gives notice to a Defaulting Limited Partner under clause 4.1(d) and the Defaulting Limited Partner has not paid to the Partnership the amounts stated in the notice within 10 Business Days after the notice is given;

(ii) the General Partner gives notice to a Defaulting Limited Partner under clause 4.2(a)(ii) and the Defaulting Limited Partner has not remedied the breach specified in the notice within 10 Business Days after the notice is given; or

(iii) a Limited Partner is a Defaulting Limited Partner under clause 4.2(b), 

the General Partner may take any one or more of the following actions (if sub-paragraph (i) or (ii) applies to the Defaulting Limited Partner) or the action under sub-paragraph (v) (if only sub-paragraph (iii) applies to the Defaulting Limited Partner):

(iv) (legal proceedings) commence legal proceedings on behalf of the Partnership against the Defaulting Limited Partner to collect all or part of the amounts stated in the notice under clause 4.1(d) or remedy or seek relief or damages in respect of the breach referred to in the notice under clause 4.2(a)(ii);

(v) (Transfer of Partnership Interest) require the Transfer of all or a proportion of the Partnership Interest of the Defaulting Limited Partner under paragraph (d), in which case:

A. the amount paid by the person for the Transfer will on receipt by the General Partner or the Partnership be applied in the following order of priority:

I. first, in paying on behalf of the Defaulting Limited Partner any Capital Contribution of the Defaulting Limited Partner that has become due under clause 3 (Capitalisation of the Partnership) and remains unpaid;

II. second, in paying on behalf of the Defaulting Limited Partner a Capital Contribution by the Defaulting Limited Partner of an amount which, in the reasonable opinion of the General Partner, equals the losses incurred by the Partnership (to the extent the losses exceed those for which the Partnership would be compensated on payment under sub-paragraph (I), (III), (IV) or (V)) as a result of:

(1) a failure by the Defaulting Limited Partner to pay a Capital Contribution when due under clause 3 (Capitalisation of the Partnership);

(2) a breach by the Defaulting Limited Partner of any other provision of this deed;

(3) the Limited Partner being prohibited by an applicable law from being a limited partner of the Partnership; or

(4) the occurrence of an Insolvency Event in respect of the Limited Partner;

III. third, in paying on behalf of the Defaulting Limited Partner a Capital Contribution by the Defaulting Limited Partner of an amount equal to the Outgoings (including legal fees) paid or incurred by the General Partner or the Partnership in relation to any of the matters referred to in sub-paragraphs (II)(1) to (4), including in relation to the sale;

IV. fourth, in paying on behalf of the Defaulting Limited Partner a Capital Contribution by the Defaulting Limited Partner of any amount which remains payable by the Defaulting Limited Partner under clause 4.1(a)(ii)(B); 

V. fifth, in paying on behalf of the Defaulting Limited Partner a Capital Contribution by the Defaulting Limited Partner of the amount specified in clause 12 of schedule A; and

VI. sixth, in payment of the balance (if any) to the Defaulting Limited Partner; and

B. if the proceeds of the sale are insufficient to pay the amounts under sub-paragraphs (A)(I) to (V), the Defaulting Limited Partner remains liable to pay those amounts to the extent of the insufficiency;

(vi) (decrease Capital Account and Capital Commitment) determine that after the end of the 10 Business Days referred to in clause 4.1(d)(i) or 4.2(a)(ii) (as relevant):

A. some or all of the Capital Contributions by the Defaulting Limited Partner that have become due under clause 3 (Capitalisation of the Partnership) and remain unpaid, cease to be due to the Partnership;

B. the Capital Account of the Defaulting Limited Partner at the Close of Business on the date on which the General Partner applies this sub-paragraph (vi) to the Defaulting Limited Partner is decreased by the total of the following amounts:

I. an amount which would, in the reasonable opinion of the General Partner, compensate the Partnership for any losses incurred by the Partnership (to the extent the losses exceed those for which the Partnership would be compensated on application of sub-paragraph (II), (III) and (IV)) as a result of a failure by the Defaulting Limited Partner to pay a Capital Contribution when due under clause 3 (Capitalisation of the Partnership) or a breach by the Defaulting Limited Partner of any other provision of this deed;

II. an amount equal to the Outgoings, including legal fees, paid or incurred by the General Partner or the Partnership in relation to a failure by the Defaulting Limited Partner to pay a Capital Contribution when due under clause 3 (Capitalisation of the Partnership) or a breach by the Defaulting Limited Partner of any other provision of this deed, including in relation to the decrease of the Capital Account of the Defaulting Limited Partner under paragraph (b);

III. an amount equal to the amount which remains payable by the Defaulting Limited Partner under clause 4.1(a)(ii)(B); and

IV. the amount specified in clause 12 of schedule A; and

C. the Capital Commitment of the Defaulting Limited Partner as at the Close of Business on the date on which the General Partner applies this sub-paragraph (vi) to the Defaulting Limited Partner is decreased to the amount which equals the total amount of the Participating Capital Contributions in respect of the Defaulting Limited Partner as at the Close of Business divided by the Paid-Up Proportion as at the Close of Business; and

(vii) (cancel future participation) determine that after the end of the 10 Business Days referred to in clause 4.1(d)(i) or 4.2(a)(ii) (as relevant):

A. the Defaulting Limited Partner is not permitted to pay any further Capital Contribution;

B. all of the Capital Contributions by the Defaulting Limited Partner that have become due under clause 3 (Capitalisation of the Partnership) and remain unpaid, cease to be due to the Partnership;

C. the Capital Account of the Defaulting Limited Partner at the Close of Business on the date on which the General Partner applies this sub-paragraph (vii) to the Defaulting Limited Partner is decreased by the total of the following amounts:

I. an amount which would, in the reasonable opinion of the General Partner, compensate the Partnership for any losses incurred by the Partnership (to the extent the losses exceed those for which the Partnership would be compensated on application of sub-paragraph (II), (III) and (IV)) as a result of a failure by the Defaulting Limited Partner to pay a Capital Contribution when due under clause 3 (Capitalisation of the Partnership) or a breach by the Defaulting Limited Partner of any other provision of this deed;

II. an amount equal to the Outgoings, including legal fees, paid or incurred by the General Partner or the Partnership in relation to a failure by the Defaulting Limited Partner to pay a Capital Contribution when due under clause 3 (Capitalisation of the Partnership) or a breach by the Defaulting Limited Partner of any other provision of this deed, including in relation to the decrease of the Capital Account of the Defaulting Limited Partner under paragraph (b);

III. an amount equal to the amount which remains payable by the Defaulting Limited Partner under clause 4.1(a)(ii)(B); and

IV. the amount specified in clause 12 of schedule A; and

D. if the General Partner determines an increase in the Paid-Up Proportion under clause 3.6(a):

I. the General Partner is not required to give notice to the Defaulting Limited Partner under clause 3.6(c); and

II. the Capital Commitment of the Defaulting Limited Partner as at the Close of Business on each date specified in a notice under clause 3.6(c) is decreased to the amount which equals the total amount of the Participating Capital Contributions in respect of the Defaulting Limited Partner as at the Close of Business divided by the Paid-Up Proportion as at the Close of Business.

(b) A proportion of any amount by which:

(i) the amount received by the Partnership under paragraph (a)(iv) or (v) exceeds the total of the Capital Contributions by the Defaulting Limited Partner which the Defaulting Limited Partner has failed to pay under clause 3 (Capitalisation of the Partnership) must be allocated to each Capital Account of a Limited Partner as at immediately before the receipt; or

(ii) the Capital Account of the Defaulting Limited Partner is decreased under paragraph (a)(vi)(B) or (vii)(C) must be allocated to each Capital Account of a Limited Partner (other than the Defaulting Limited Partner) as at immediately after the decrease of the Capital Commitment of the Defaulting Limited Partner under paragraph (a)(vi)(C) or (vii)(D)(II) respectively.

(c) The proportion of the amount allocated under:

(i) sub-paragraph (b)(i) to the Capital Account of a Limited Partner must be equal to the proportion of the Capital Commitment of the Limited Partner as at immediately before the receipt referred to in sub-paragraph (b)(i) to the total of the Capital Commitments of the Limited Partners as at immediately before the receipt; or

(ii) sub-paragraph (b)(ii) to the Capital Account of a Limited Partner (other than the Defaulting Limited Partner) must be equal to the proportion of the Capital Commitment of the Limited Partner as at immediately after the decrease of the Capital Commitment of the Defaulting Limited Partner under paragraph (a)(vi)(C) or (vii)(D)(II) respectively to the total of the Capital Commitments of the Limited Partners (other than the Defaulting Limited Partner) as at immediately after the decrease.

If pre-emptive rights are to apply to a sale of the Partnership Interest of a Defaulting Limited Partner, example 1 in attachment F may be adopted in place of paragraph (d).

The pre-emptive rights provisions in example 1 in attachment F:

provide an overriding discretion of the General Partner to limit the participation of other Limited Partners in the purchase of any of the Partnership Interest of the Defaulting Limited Partner if the General Partner considers that the participation may put the Partnership or Limited Partners at risk as provided in example 1; and

would not apply to the sale of any of the Partnership Interest of the Defaulting Limited Partner as a result of the operation of clause 4.3(a)(iii).

(d) If a Limited Partner is a Defaulting Limited Partner under paragraph (a), the General Partner may, subject to paragraph (e), Transfer all or a proportion of the Partnership Interest of the Defaulting Limited Partner to any person (including a Limited Partner) on terms which the General Partner may determine in its absolute discretion.

(e) If the General Partner seeks to take action under paragraph (a)(v):

(i) the General Partner must not permit the Transfer of any of the Partnership Interest of the Defaulting Limited Partner to another person unless:

A. (Deed of Accession) the Defaulting Limited Partner (whether personally or by the General Partner as attorney of the Defaulting Limited Partner) and the person execute a Deed of Accession which is delivered to the General Partner, and the General Partner notifies the person that the General Partner accepts the Deed of Accession; and

B. (information and documents) the person has provided any information and executes and delivers any documents to the General Partner or any person specified by the General Partner, which the General Partner reasonably considers to be necessary or desirable to procure amendment of the Register:

I. if the person is a Limited Partner, to record the Limited Partner with a limit of liability equal to the Capital Commitment of the Limited Partner which includes the Capital Commitment of the Defaulting Limited Partner which is comprised in the Transfer of any of the Partnership Interest of the Defaulting Limited Partner to the Limited Partner; or

II. if the person is not a Limited Partner, to record the person as a Limited Partner with a limit of liability equal to the Capital Commitment of the Defaulting Limited Partner which is comprised in the Transfer of any of the Partnership Interest of the Defaulting Limited Partner to the person;

(ii) the Defaulting Limited Partner must within 2 Business Days after being requested to do so by the General Partner, provide any information and execute and deliver any documents to the General Partner or any person specified by the General Partner, which the General Partner reasonably considers to be necessary or desirable, and the General Partner must use all reasonable endeavours, to procure amendment of the Register:

A. to remove the Defaulting Limited Partner as a Limited Partner (if all of the Partnership Interest of the Defaulting Limited Partner is being Transferred) or record the Defaulting Limited Partner with a limit of liability equal to the Capital Commitment of the Limited Partner which excludes the Capital Commitment of the Defaulting Limited Partner which is comprised in the Partnership Interest of the Defaulting Limited Partner being Transferred (if not all of the Partnership Interest of the Defaulting Limited Partner is being Transferred);

B. if the person to whom a proportion of the Partnership Interest of the Defaulting Limited Partner is being Transferred is a Limited Partner, to record the Limited Partner with a limit of liability equal to the Capital Commitment of the Limited Partner which includes the Capital Commitment of the Defaulting Limited Partner which is comprised in the Transfer of any of the Partnership Interest of the Defaulting Limited Partner to the Limited Partner; and

C. if the person to whom a proportion of the Partnership Interest of the Defaulting Limited Partner is being Transferred is not a Limited Partner, to record the person as a Limited Partner with a limit of liability equal to the Capital Commitment of the Defaulting Limited Partner which is comprised in the Transfer of any of the Partnership Interest of the Defaulting Limited Partner to the person;

(iii) for the avoidance of doubt, the person may be an Affiliate of the General Partner;

(iv) the person may, if it is not a Limited Partner, enforce the provisions of this deed against each other current or former Partner from the time the person becomes a Limited Partner; and

(v) each other current or former Partner may, if the person is not a Limited Partner, enforce the provisions of this deed against the person as from the time the person becomes a Limited Partner.

(f) If the General Partner seeks to take action under paragraph (a)(vi), the Defaulting Limited Partner must within 2 Business Days after being requested to do so by the General Partner, provide any information and execute and deliver any documents to the General Partner or any person specified by the General Partner, which the General Partner reasonably considers to be necessary or desirable, and the General Partner must use all reasonable endeavours, to procure amendment of the Register to record the Defaulting Limited Partner with a limit of liability equal to the amount to which the Capital Commitment of the Defaulting Limited Partner has been decreased under sub-paragraph (a)(vi)(C).

(g) If the General Partner seeks to take action under paragraph (a)(vii), the Defaulting Limited Partner must within 2 Business Days after being requested to do so by the General Partner, provide any information and execute and deliver any documents to the General Partner or any person specified by the General Partner, which the General Partner reasonably considers to be necessary or desirable, and the General Partner must use all reasonable endeavours, to procure amendment of the Register to record the Defaulting Limited Partner with a limit of liability equal to the amount to which the Capital Commitment of the Defaulting Limited Partner has been decreased under sub-paragraph (a)(vii)(D)(II).

(h) The General Partner must give prompt notice to the Limited Partners of any action taken by the General Partner under paragraphs (a)(iv) to (vii).

(i) Any action taken under paragraph (a) by the General Partner in respect of a Defaulting Limited Partner is in addition to and does not limit:

(i) a right of the General Partner to take any other action under paragraph (a) in respect of the Defaulting Limited Partner, or

(ii) any other right or remedy of the General Partner or the Partnership.

4.4 Appropriateness of remedies

(a) Each Limited Partner acknowledges and agrees that:

(i) a failure by a Limited Partner to pay a Capital Contribution when due under clause 3 (Capitalisation of the Partnership), a Disposal in respect of any interest in the Partnership Interest of a Limited Partner in breach by the Limited Partner of this deed, a breach by a Limited Partner of clause 2.3(a)(ii), 2.4(b)(ii) or a material obligation under this deed, a breach of a prohibition by an applicable law of a Limited Partner from being a limited partner of the Partnership or the occurrence of an Insolvency Event in respect of a Limited Partner, may result in the General Partner and the Partnership incurring claims, losses or Outgoings in amounts that may be difficult or impractical to calculate;

(ii) the rights of the General Partner and the Partnership under clause 4.1 (Delinquent contributions), 4.2 (Other default) or 4.3 (Consequences of default) bear a reasonable relationship to the damages which the Partners estimate may be suffered by the General Partner, the Partnership and the other Limited Partners as a result of a failure by a Limited Partner to pay a Capital Contribution when due under clause 3 (Capitalisation of the Partnership), a Disposal in respect of any interest in the Partnership Interest of a Limited Partner in breach by the Limited Partner of this deed, a breach by a Limited Partner of clause 2.3(a)(ii), 2.4(b)(ii) or a material obligation under this deed, a breach of a prohibition by an applicable law of a Limited Partner from being a limited partner of the Partnership or the occurrence of an Insolvency Event in respect of a Limited Partner;

(iii) the exercise of any or all of the rights of the General Partner or the Partnership under clause 4.1 (Delinquent contributions), 4.2 (Other default) or 4.3 (Consequences of default) is not unreasonable under the circumstances existing at the time;

(iv) a failure by the General Partner or the Partnership to exercise a right under clause 4.1 (Delinquent contributions), 4.2 (Other default) or 4.3 (Consequences of default) does not relieve a Defaulting Limited Partner of any:

A. obligation to pay all amounts payable under this clause 4; or

B. any other obligation under this deed; and

(v) the Defaulting Limited Partner and its employees, officers and agents are not entitled to any compensation as a result of the exercise of rights of the General Partner or the Partnership under clause 4.1 (Delinquent contributions), 4.2 (Other default) or 4.3 (Consequences of default).

(b) A waiver by the General Partner of a right under clause 4.1 (Delinquent contributions), 4.2 (Other default) or 4.3 (Consequences of default) in respect of a particular event is not a waiver or limitation of a right to pursue an additional or different right that may be available under this deed, at law or in equity in respect of the event or any other or subsequent event.

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