RAND CAPITAL CORP
LIMITED PARTNERSHIP AGREEMENT
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>3
<FILENAME>lpagreement.htm
<DESCRIPTION>LIMITED PARTNERSHIP AGREEMENT
<TEXT>
<html>

<head>
<meta name="GENERATOR" content="Microsoft FrontPage 5.0">
<meta name="ProgId" content="FrontPage.Editor.Document">
<title>Limited Partnership Agreement</title>
</head>

<body>

<p align="right"><b>Exhibit 10.3</b></p>

<b><hr>
<p align="center">RAND CAPITAL SBIC, L.P.</p>
<p ALIGN="CENTER"></p>
</b>
<p ALIGN="CENTER">&nbsp;</p>
<p ALIGN="CENTER">Dated as of January 16, 2002</p>
<hr>
<p ALIGN="CENTER">&nbsp;</p>
<b>
<p ALIGN="CENTER">RAND CAPITAL SBIC, L.P.</p>
<p ALIGN="CENTER"></p>
<u>
<p ALIGN="CENTER">Table of Contents</p>
</u></b>
<table border="0" cellspacing="1" width="100%" id="AutoNumber1">
  <tr>
    <td width="86%" colspan="2">&nbsp;</td>
    <td width="14%" align="right"><u>Page</u></td>
  </tr>
  <tr>
    <td width="86%" colspan="2">ARTICLE 1&nbsp; GENERAL PROVISIONS</td>
    <td width="14%" align="right">
    <p align="right">1</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 1.01</td>
    <td width="70%">Definitions</td>
    <td width="14%" align="right">
    <p align="right">1</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 1.02</td>
    <td width="70%">Name</td>
    <td width="14%" align="right">
    <p align="right">6</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 1.03</td>
    <td width="70%">Principal Office; Registered Office; and Qualification</td>
    <td width="14%" align="right">7</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 1.04</td>
    <td width="70%">Commencement and Duration</td>
    <td width="14%" align="right">7</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 1.05</td>
    <td width="70%">Admission of Partners</td>
    <td width="14%" align="right">7</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 1.06</td>
    <td width="70%">Representations of Partners</td>
    <td width="14%" align="right">8</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 1.07</td>
    <td width="70%">Notices with Respect to Representations by Private Limited
    Partners</td>
    <td width="14%" align="right">10</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 1.08</td>
    <td width="70%">Liability of Partners</td>
    <td width="14%" align="right">10</td>
  </tr>
  <tr>
    <td width="86%" colspan="2">ARTICLE 2&nbsp; PURPOSE AND POWERS</td>
    <td width="14%" align="right">11</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 2.01</td>
    <td width="70%">Purpose and Powers</td>
    <td width="14%" align="right">11</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 2.02</td>
    <td width="70%">Restrictions on Powers</td>
    <td width="14%" align="right">11</td>
  </tr>
  <tr>
    <td width="86%" colspan="2">ARTICLE 3&nbsp; MANAGEMENT&nbsp;&nbsp;&nbsp;&nbsp;
    </td>
    <td width="14%" align="right">11</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 3.01</td>
    <td width="70%">Authority of General Partner</td>
    <td width="14%" align="right">11</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 3.02</td>
    <td width="70%">Authority of the Private Limited Partners</td>
    <td width="14%" align="right">12</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 3.03</td>
    <td width="70%">No Investment Adviser/Manager</td>
    <td width="14%" align="right">12</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 3.04</td>
    <td width="70%">Restrictions on Other Activities of the General Partner and
    its Affiliates</td>
    <td width="14%" align="right">12</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 3.05</td>
    <td width="70%">Management Compensation</td>
    <td width="14%" align="right">13</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 3.06</td>
    <td width="70%">Payment of Management Compensation</td>
    <td width="14%" align="right">13</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 3.07</td>
    <td width="70%">Partnership Expenses</td>
    <td width="14%" align="right">14</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 3.08</td>
    <td width="70%">Valuation of Assets</td>
    <td width="14%" align="right">15</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 3.09</td>
    <td width="70%">Standard of Care</td>
    <td width="14%" align="right">16</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 3.10</td>
    <td width="70%">Indemnification</td>
    <td width="14%" align="right">16</td>
  </tr>
  <tr>
    <td width="86%" colspan="2">ARTICLE 4&nbsp; SMALL BUSINESS INVESTMENT
    COMPANY MATTERS</td>
    <td width="14%" align="right">19</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 4.01</td>
    <td width="70%">SBIC Act</td>
    <td width="14%" align="right">19</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 4.02</td>
    <td width="70%">Consent or Approval of, and Notice to, SBA</td>
    <td width="14%" align="right">19</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 4.03</td>
    <td width="70%">Provisions Required by the SBIC Act for Issuers of
    Debentures</td>
    <td width="14%" align="right">19</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 4.04</td>
    <td width="70%">Effective Date of Incorporated SBIC Act Provisions</td>
    <td width="14%" align="right">20</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 4.05</td>
    <td width="70%">SBA as Third Party Beneficiary</td>
    <td width="14%" align="right">20</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 4.06</td>
    <td width="70%">Interest of the General Partner After Withdrawal</td>
    <td width="14%" align="right">20</td>
  </tr>
  <tr>
    <td width="86%" colspan="2">ARTICLE 5&nbsp; PARTNERS' CAPITAL CONTRIBUTIONS</td>
    <td width="14%" align="right">21</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.01</td>
    <td width="70%">Capital Commitments</td>
    <td width="14%" align="right">21</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.02</td>
    <td width="70%">Capital Contributions by the Private Limited Partners</td>
    <td width="14%" align="right">21</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.03</td>
    <td width="70%">Capital Contributions by the General Partner</td>
    <td width="14%" align="right">21</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.04</td>
    <td width="70%">No Additional Private Limited Partners</td>
    <td width="14%" align="right">22</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.05</td>
    <td width="70%">Conditions to the Commitments of the General Partner and the
    Private Limited Partners</td>
    <td width="14%" align="right">22</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.06</td>
    <td width="70%">Termination of the Obligation to Contribute Capital</td>
    <td width="14%" align="right">22</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.07</td>
    <td width="70%">Notice and Opinion of Counsel</td>
    <td width="14%" align="right">23</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.08</td>
    <td width="70%">Cure, Termination of Capital Contributions and Withdrawal</td>
    <td width="14%" align="right">23</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.09</td>
    <td width="70%">Failure to Make Required Capital Contributions</td>
    <td width="14%" align="right">23</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.10</td>
    <td width="70%">Notice and Consent of SBA with respect to Capital
    Contribution Defaults</td>
    <td width="14%" align="right">24</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.11</td>
    <td width="70%">Interest on Overdue Contributions</td>
    <td width="14%" align="right">25</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.12</td>
    <td width="70%">Termination of a Private Limited Partner's Right to Make
    Further Capital Contributions</td>
    <td width="14%" align="right">25</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.13</td>
    <td width="70%">Forfeiture of a Private Limited Partner's Interest in the
    Partnership</td>
    <td width="14%" align="right">25</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.14</td>
    <td width="70%">Withholding and Application of a Private Limited Partner's
    Distributions</td>
    <td width="14%" align="right">26</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 5.15</td>
    <td width="70%">Required Sale of a Private Limited Partner's Interest in the
    Partnership</td>
    <td width="14%" align="right">26</td>
  </tr>
  <tr>
    <td width="86%" colspan="2">ARTICLE 6&nbsp; ADJUSTMENT OF CAPITAL ACCOUNTS</td>
    <td width="14%" align="right">28</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 6.01</td>
    <td width="70%">Establishment of Capital Accounts</td>
    <td width="14%" align="right">28</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 6.02</td>
    <td width="70%">Time of Adjustment of Capital Accounts</td>
    <td width="14%" align="right">28</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 6.03</td>
    <td width="70%">Adjustments to Capital Accounts</td>
    <td width="14%" align="right">29</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 6.04</td>
    <td width="70%">Tax Matters</td>
    <td width="14%" align="right">30</td>
  </tr>
  <tr>
    <td width="86%" colspan="2">ARTICLE 7&nbsp; DISTRIBUTIONS</td>
    <td width="14%" align="right">31</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 7.01</td>
    <td width="70%">Distributions to Partners</td>
    <td width="14%" align="right">31</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 7.02</td>
    <td width="70%">Distributions of Noncash Assets in Kind</td>
    <td width="14%" align="right">32</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 7.03</td>
    <td width="70%">Distributions Violative of the Act Prohibited</td>
    <td width="14%" align="right">32</td>
  </tr>
  <tr>
    <td width="86%" colspan="2">ARTICLE 8&nbsp; DISSOLUTION, LIQUIDATION,
    WINDING UP AND WITHDRAWAL</td>
    <td width="14%" align="right">32</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 8.01</td>
    <td width="70%">Dissolution</td>
    <td width="14%" align="right">32</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 8.02</td>
    <td width="70%">Winding Up</td>
    <td width="14%" align="right">33</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 8.03</td>
    <td width="70%">Withdrawal of the General Partner</td>
    <td width="14%" align="right">34</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 8.04</td>
    <td width="70%">Continuation of the Partnership After the Withdrawal of the
    General Partner</td>
    <td width="14%" align="right">34</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 8.05</td>
    <td width="70%">Withdrawals of Capital</td>
    <td width="14%" align="right">35</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 8.06</td>
    <td width="70%">Withdrawal by ERISA Regulated Pension Plans</td>
    <td width="14%" align="right">35</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 8.07</td>
    <td width="70%">Withdrawal by Government Plans complying with State and
    Local Law</td>
    <td width="14%" align="right">35</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 8.08</td>
    <td width="70%">Withdrawal by Government Plans Complying with ERISA</td>
    <td width="14%" align="right">35</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 8.09</td>
    <td width="70%">Withdrawal by Tax Exempt Private Limited Partners</td>
    <td width="14%" align="right">36</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 8.10</td>
    <td width="70%">Withdrawal by Registered Investment Companies</td>
    <td width="14%" align="right">36</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 8.11</td>
    <td width="70%">Distributions on Withdrawal</td>
    <td width="14%" align="right">36</td>
  </tr>
  <tr>
    <td width="86%" colspan="2">ARTICLE 9&nbsp; ACCOUNTS, REPORTS AND AUDITORS</td>
    <td width="14%" align="right">37</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 9.01</td>
    <td width="70%">Books of Account</td>
    <td width="14%" align="right">37</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 9.02</td>
    <td width="70%">Audit and Report</td>
    <td width="14%" align="right">37</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 9.03</td>
    <td width="70%">Fiscal Year</td>
    <td width="14%" align="right">38</td>
  </tr>
  <tr>
    <td width="86%" colspan="2">ARTICLE 10&nbsp; MISCELLANEOUS</td>
    <td width="14%" align="right">39</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 10.01</td>
    <td width="70%">Assignability</td>
    <td width="14%" align="right">39</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 10.02</td>
    <td width="70%">Binding Agreement</td>
    <td width="14%" align="right">40</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 10.03</td>
    <td width="70%">Gender</td>
    <td width="14%" align="right">40</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 10.04</td>
    <td width="70%">Notices</td>
    <td width="14%" align="right">40</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 10.05</td>
    <td width="70%">Consents and Approvals</td>
    <td width="14%" align="right">41</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 10.06</td>
    <td width="70%">Counterparts</td>
    <td width="14%" align="right">41</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 10.07</td>
    <td width="70%">Amendments</td>
    <td width="14%" align="right">41</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 10.08</td>
    <td width="70%">Power of Attorney</td>
    <td width="14%" align="right">42</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 10.09</td>
    <td width="70%">Applicable Law</td>
    <td width="14%" align="right">43</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 10.10</td>
    <td width="70%">Severability</td>
    <td width="14%" align="right">43</td>
  </tr>
  <tr>
    <td width="16%">&nbsp;&nbsp;&nbsp;&nbsp; Section 10.11</td>
    <td width="70%">Entire Agreement</td>
    <td width="14%" align="right">43</td>
  </tr>
</table>
<p>&nbsp;</p>
<b>
<p ALIGN="CENTER">RAND CAPITAL SBIC, L.P.</p>
</b>
                <p>AGREEMENT OF LIMITED PARTNERSHIP dated and effective as of
                January 16, 2002, among Rand Capital Management, LLC, a Delaware
                limited liability company in its capacity as a general partner
                of the Partnership) and the private limited partners, as amended
                from time to time.</p>
        <p>The parties, in consideration of their mutual agreements stated in
        this Agreement, agree to become partners and to form a limited
        partnership under the Act. The purpose of the Partnership is to operate
        as a small business investment company under the SBIC Act, licensed by
        SBA for the period and upon the terms and conditions stated in this
        Agreement. The parties further agree as follows:</p>
<u><b>
<p ALIGN="CENTER">ARTICLE 1<br>
General Provisions</p>
        </b></u>
        <p>Section 1.01 <u>Definitions</u>.</p>
<p>For the purposes of this Agreement, the following terms have the following
meanings:</p>
          <b>
          <p>&quot;Act&quot; means the Delaware Revised Uniform Limited Partnership Act.</p>
          <p>&quot;Affiliate&quot; has the meaning stated in the SBIC Act.</p>
          <p>&quot;Agreement&quot; means this agreement of limited partnership, as amended
          from time to time. References to this Agreement will be deemed to
          include all provisions incorporated in this Agreement by reference.</p>
          <p>&quot;Assets&quot; means common and preferred stock (including warrants,
          rights and other options relating to such stock), notes, bonds,
          debentures, trust receipts and other obligations, instruments or
          evidences of indebtedness, and other properties or interests commonly
          regarded as securities, and in addition, interests in real property,
          whether improved or unimproved, and interests in personal property of
          all kinds (tangible or intangible), choses in action, and cash, bank
          deposits and so-called &quot;money market instruments&quot;.</p>
          <p>&quot;Assets Under Management&quot; means, as of any specified date, the
          value of all Assets owned by the Partnership (the value to be
          determined as provided in this Agreement), including contributions
          requested and due from Partners and uncalled amounts of Commitments
          that are included in the Partnership's regulatory capital (as such
          term is used in the SBIC Act), less the amount of any liabilities of
          the Partnership, determined in accordance with generally accepted
          accounting principles, consistently applied.</p>
          <p>&quot;Associate&quot; has the meaning stated in the SBIC Act.</p>
          </b>
          <p>&quot;Capital Account&quot; means the account of each Partner that reflects
          its interest in the Partnership determined in accordance with Section
          6.03.</p>
          <b>
          <p ALIGN="JUSTIFY">&quot;Capital Contribution&quot;</b> means a contribution of
          capital to the Partnership by a Partner.</p>
          <b>
          <p>&quot;Certificate of Limited Partnership&quot; means the certificate of
          limited partnership with respect to the Partnership filed for record
          in the office of the Secretary of State of the State of Delaware.&nbsp;</p>
          </b>
          <p>&quot;Closing Capital Account&quot; means, with respect to any fiscal period,
          the Opening Capital Account of each Partner for the fiscal period
          after allocations have been made to the Capital Account in accordance
          with Section 6.03.</p>
          <b>
          <p>&quot;Code&quot; means the Internal Revenue Code of 1986, as amended, and the
          regulations thereunder and interpretations thereof promulgated by the
          Internal Revenue Service, as in effect from time to time.</p>
          <p>&quot;Commitments&quot; means the capital contributions to the Partnership
          that the Partners have made or are obligated to make to the
          Partnership. The amounts and terms of the Commitments of the General
          Partner and the Private Limited Partners will be as stated in this
          Agreement.</p>
          <p>&quot;Control Person&quot; has the meaning stated in the SBIC Act.</p>
          <p>&quot;Debentures&quot; has the meaning stated in the SBIC Act.</p>
          <p>&quot;Designated Party&quot; means any of the General Partner, any Investment
          Adviser/ Manager, and any partner, member, manager, stockholder,
          director, officer, employee or Affiliate of the General Partner and
          any Investment Adviser/ Manager.</p>
          <p>&quot;ERISA&quot; means the Employee Retirement Income Security Act of 1974,
          as amended, and the regulations thereunder and interpretations thereof
          promulgated by the Department of Labor, as in effect from time to
          time.</p>
          </b>
          <p>&quot;Exchange Act&quot; means the Securities Exchange Act of 1934, as
          amended, and the regulations thereunder and interpretations thereof
          promulgated by the Securities and Exchange Commission, as in effect
          from time to time.</p>
          <b>
          <p>&quot;General Partner&quot; means the general partner or general partners of
          the Partnership, as set forth in this Agreement.</p>
          <p>&quot;Indemnifiable Costs&quot; means all costs, expenses, damages, claims,
          liabilities, fines and judgments (including the reasonable cost of the
          defense, and any sums which may be paid with the consent of the
          Partnership in settlement), incurred in connection with or arising
          from a claim, action, suit, proceeding or investigation, by or before
          any court or administrative or legislative body or authority.</p>
          <p ALIGN="JUSTIFY">&quot;Investment&quot;</b> means the securities acquired by
          the Partnership in any other corporation, partnership, limited
          liability company, or any or business or concern in which the
          Partnership becomes an investor in accordance with the provisions of
          this Agreement, including capital stock, partnership interests, bonds,
          notes, debentures, warrants, trust receipts, futures and other
          obligations and instruments or evidences of indebtedness, as well as
          rights and options to purchase, sell or invest in the foregoing.
          Except where the context requires otherwise, any reference to an
          &quot;Investment&quot; shall refer to all securities acquired by the Partnership
          with respect to a portfolio company in a single or a series of related
          transactions.</p>
          <p>&quot;Investment Advisers Act&quot; means the Investment Advisers Act of
          1940, as amended, and the regulations thereunder and interpretations
          thereof promulgated by the Securities and Exchange Commission, as in
          effect from time to time.</p>
          <b>
          <p>&quot;Investment Company Act&quot; means the Investment Company Act of 1940,
          as amended, and the regulations thereunder and interpretations thereof
          promulgated by the Securities and Exchange Commission, as in effect
          from time to time.</p>
          <p>&quot;Investment Adviser/Manager&quot; has the meaning stated in the SBIC
          Act.</p>
          <p>&quot;Leverage&quot; has the meaning stated in the SBIC Act.</p>
          </b>
          <p>&quot;<b>Management Compensation&quot; means the amounts payable by the
          Partnership to the General Partner or Investment Adviser/Manager, as
          provided in Section 3.05.</p>
          </b>
          <p>&quot;Net Losses&quot; means, with respect to any fiscal period, the excess,
          if any, of:</p>
                  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) all expenses and losses incurred during the fiscal
                  period by the Partnership from all sources over</p>
                  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) the aggregate revenue, income and gains realized
                  during the fiscal period by the Partnership from all sources.</p>
            <p>For purposes of determining Net Losses:</p>
            <dir>
            <dir>
            <dir>
                    <p>(A) items will be taken into account to the extent that
                    (1) they are includable as items of income, credit, loss or
                    deduction for Federal income tax purposes (including items
                    described in Section 705(a)(2)(B) of the Code, or treated as
                    so described in Treasury Regulation &sect; 1.704-1(b)(2)(iv)(i))
                    or, (2) in the case of items of income, they constitute
                    income that is exempt from Federal income tax; and</p>
                    <p>(B) if any Noncash Asset is distributed in kind, it will
                    be deemed sold at the value established at the most recent
                    valuation of the Noncash Asset under this Agreement (or such
                    other valuation date as is required under the SBIC Act) and
                    any unrealized appreciation or depreciation with respect to
                    the Noncash Asset will be deemed realized and included in
                    the determination of Net Losses.</p>
                  </dir>
                </dir>
              </dir>
            <p>&quot;Net Profits&quot; means, with respect to any fiscal period, the
            excess, if any, of:</p>
            <dir>
              <dir>
                <dir>
                  <p>(i) the aggregate revenue, income and gains realized during
                  the fiscal period by the Partnership from all sources over</p>
                  <p>(ii) all expenses and losses incurred during the fiscal
                  period by the Partnership from all sources.</p>
                </dir>
              </dir>
            </dir>
            <p>For purposes of determining Net Profits:</p>
            <dir>
              <dir>
                <dir>
                  <dir>
                    <p>(A) items will be taken into account to the extent that
                    (1) they are includable as items of income, credit, loss or
                    deduction for Federal income tax purposes (including items
                    described in Section 705(a)(2)(B) of the Code, or treated as
                    so described in Treasury Regulation &sect; 1.704-1(b)(2)(iv)(i))
                    or, (2) in the case of items of income, constitute income
                    that is exempt from Federal income tax; and</p>
                    <p>(B) if any Noncash Asset is distributed in kind, it will
                    be deemed sold at the value established at the most recent
                    valuation of the Noncash Asset under this Agreement (or such
                    other valuation date as is required under the SBIC Act) and
                    any unrealized appreciation or depreciation with respect to
                    the Noncash Asset will be deemed realized and included in
                    the determination of Net Profits.</p>
                  </dir>
                </dir>
              </dir>
            </dir>
          </dir>
          <p>&quot;Noncash Asset&quot; means any Asset of the Partnership other than cash.</p>
          <p>&quot;Opening Capital Account,&quot; with respect to any fiscal period,
          means:</p>
          <dir>
            <dir>
              <dir>
                <dir>
                  <p>(i) with respect to any Partner admitted during the fiscal
                  period, the Partner's initial capital contribution (or in the
                  case of any Partner admitted as a transferee of all or part of
                  the interest in the Partnership of another Partner, with
                  respect to such transferred interest in the Partnership, that
                  portion of the transferor's initial capital contribution
                  transferred to the transferee); and</p>
                  <p>(ii) with respect to any Partner admitted during any prior
                  fiscal period (other than a Partner who has withdrawn as of
                  the last day of the preceding fiscal period), the Partner's
                  Closing Capital Account for the preceding fiscal period (or in
                  the case of any Partner admitted as a transferee of all or
                  part of the interest in the Partnership of another Partner,
                  with respect to such transferred interest in the Partnership,
                  that portion of the transferor's Closing Capital Account
                  transferred to the transferee).</p>
                </dir>
              </dir>
            </dir>
          </dir>
          <p>&quot;Optionor&quot; shall have the meaning set forth in Section 5.15.</p>
          <p>&quot;Optionees&quot; shall have the meaning set forth in Section 5.15.</p>
          <p>&quot;Optioned Partnership Interest&quot; shall have the meaning set forth in
          Section 5.15.</p>
          <p>&quot;Option Price&quot; shall have the meaning set forth in Section 5.15.</p>
          <b><font FACE="Arial" SIZE="3">
          <p>&quot;</font>Organization Expenses&quot;</b> shall mean all organizational
          and syndication costs, fees, and expenses incurred by or on behalf of
          the General Partner in connection with the formation, organization,
          marketing and licensing of the Partnership and the formation and
          organization of the General Partner, which include, without
          limitation, all interest expense, accounting and legal fees, any fees
          associated with placing interests in the Partnership, all costs
          incurred in connection with making, registering and selling
          Partnership investments, including but not limited to, travel,
          meeting, printing, telephone, office and support staff costs, and the
          cost of meetings held in connection therewith (including reimbursement
          of the General Partner and the members, officers and employees of the
          General Partner for such expenses).</p>
          <p>&quot;Outstanding Leverage&quot; means the total amount of outstanding
          securities (including, but not limited to, Debentures) issued by the
          Partnership that qualify as Leverage and have not been redeemed or
          repaid as provided in the SBIC Act.</p>
          <p>&quot;Parent Fund&quot; means Rand Capital Corporation, a New York
          corporation and Business Development Company as defined under &sect;
          2(a)(48) of the Investment Company Act of 1940.</p>
          <b>
          <p>&quot;Partners&quot; means the General Partner and the Private Limited
          Partners.</p>
          <p>&quot;Partnership&quot; means the limited partnership established by this
          Agreement.</p>
          <p ALIGN="JUSTIFY">&quot;Percentage Interest&quot;</b> means the percentage
          determined for each Partner by dividing (i) the aggregate Capital
          Contributions credited to such Partner's Capital Account as provided
          in <u>Section&nbsp;6.03</u> below at the time of any relevant calculation,
          by (ii) the aggregate Capital Contributions credited to the Capital
          Accounts of all the Partners at such time. The sum of the respective
          Percentage Interests shall at all times equal one hundred percent
          (100%).</p>
          <b>
          <p>&quot;Private Limited Partners&quot; means any limited partners of the
          Partnership.</p>
          <p ALIGN="JUSTIFY">&quot;Regulatory Capital&quot; </b>has the meaning stated in
          the SBIC Act.</p>
          <p>&quot;Remaining Portion&quot; shall have the meaning set forth in Section
          5.15.</p>
          <b>
          <p ALIGN="JUSTIFY">&quot;SBA&quot; </b>means the United States Small Business
          Administration.</p>
          <b>
          <p>&quot;SBA Agreements&quot; has the meaning stated in Section 10.11.</p>
          <p>&quot;SBIC&quot; means a small business investment company licensed under the
          SBIC Act.</p>
          <p>&quot;SBIC Act&quot; means the Small Business Investment Act of 1958, as
          amended, and the rules and regulations thereunder and interpretations
          thereof promulgated by SBA, as in effect from time to time.</p>
          </b>
          <p>&quot;SEC&quot; means the Securities and Exchange Commission.</p>
          <p>&quot;Securities Act&quot; means the Securities Act of 1933, as amended, and
          the regulations thereunder and interpretations thereof promulgated by
          the SEC, as in effect from time to time.</p>
          <p>&quot;Special Private Limited Partner&quot; has the meaning stated in Section
          4.06 and Section 8.03(c).</p>
        </dir>
        <p>Section 1.02 <u>Name</u>.</p>
        <dir>
          <p>(a) The name of the Partnership will be &quot;Rand Capital SBIC, L.P.&quot;</p>
          <p>(b) Subject to the prior approval of SBA, the General Partner has
          the power at any time to:</p>
          <dir>
            <dir>
              <p>(i) change the name of the Partnership; and</p>
              <p>(ii) qualify the Partnership to do business under any name when
              the Partnership's name is unavailable for use, or may not be used,
              in a particular jurisdiction.</p>
            </dir>
          </dir>
          <p>(c) The General Partner will give prompt notice of any action taken
          under this Section to each Partner and SBA.</p>
        </dir>
      </dir>
    </dir>
  </dir>
</dir>
<p>Section 1.03 <u>Principal Office; Registered Office;
and Qualification</u>.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (a) The principal office of the Partnership will be at 2200 Rand
          Building, Buffalo, NY 14203, or such other place as may from time to
          time be designated by the General Partner, subject to the approval of
          SBA.</p>
          <p>&nbsp;&nbsp;&nbsp; (b) The registered office of the Partnership in the State of
          Delaware will be located at 1209 Orange Street, Wilmington, Delaware,
          19801. The name of the registered agent for the Partnership will be
          the Corporation Trust Center. The General Partner may from time to
          time change the registered agent and registered office of the
          Partnership.</p>
          <p>&nbsp;&nbsp;&nbsp; (c) The General Partner will qualify the Partnership to do business
          in each jurisdiction where the activities of the Partnership make such
          qualification necessary.</p>
          <p>&nbsp;&nbsp;&nbsp; (d) The General Partner will give prompt notice of any action taken
          under this Section to each Partner and SBA.</p>
        <p>Section 1.04 <u>Commencement and Duration</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) The Partnership will commence upon the filing for record of the
          Certificate of Limited Partnership in the office of the Secretary of
          State of the State of Delaware.</p>
          <p>&nbsp;&nbsp;&nbsp; (b) The Partnership will be dissolved and wound up at the time and
          in the manner provided for in Article 8.</p>
        <p>Section 1.05 <u>
        Admission of Partners</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) No person may be admitted as a General Partner or a Private
          Limited Partner without subscribing and delivering to the Partnership
          a counterpart of this Agreement, or other written instrument, which
          sets forth:</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) the name and address of the Partner,</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) the Commitment of the Partner, and</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) the agreement of the Partner to be bound by the terms of
              this Agreement.</p>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>Without the prior approval of SBA, no person may be admitted
          as:</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) <b>a General Partner, or</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) <b>a Private Limited Partner with an ownership interest of
              ten percent (10%) or more of the Partnership's capital</b>.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (c) The General Partner will compile, and amend from time to time
          as necessary,</p>
          <p>&nbsp;&nbsp;&nbsp; Schedule A attached to this Agreement, which will list:</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) the name and address of the General and each Private
              Limited Partner, and</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) the Commitment of the General Partner and each Private
              Limited Partner to the Partnership<i>.</p>
          </i>
          <p>&nbsp;&nbsp;&nbsp; (d) The addition to the Partnership at any time of one or more
          Partners will not be a cause for dissolution of the Partnership, and
          all the Partners will continue to be subject to the provisions of this
          Agreement in all respects.</p>
        <p>Section 1.06 <u>Representations of Partners</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) This Agreement is made with the General Partner in reliance
          upon the General Partner's representation to the Partnership and SBA,
          that:</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) <b>it is duly organized, validly existing and in good
              standing under the laws of the State of Delaware, and is qualified
              to do business under the laws of each state where such
              qualification is required to carry on the business of the
              Partnership;</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) <b>it has full power and authority to execute and deliver
              this Agreement and to act as General Partner under this Agreement;</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) <b>this Agreement has been authorized by all necessary
              actions by it, has been duly executed and delivered by it, and is
              a legal, valid and binding obligation of it, enforceable according
              to its terms; and</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iv) <b>the execution and delivery of this Agreement and the
              performance of its obligations under this Agreement will not
              conflict with, or result in any violation of, or default under,
              any provision of any governing instrument applicable to it, or any
              agreement or other instrument to which it is a party or by which
              it or any of its properties are bound, or any provision of law,
              statute, rule or regulation, or any ruling, writ, order,
              injunction or decree of any court, administrative agency or
              governmental body applicable to it.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>This Agreement is made with each Private Limited Partner in
          reliance upon each Private Limited Partner's representation to the
          General Partner, the Partnership and SBA, that:</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) <b>it has full power and authority to execute and deliver
              this Agreement and to act as a Private Limited Partner under this
              Agreement; this Agreement has been authorized by all necessary
              actions by it; this Agreement has been duly executed and delivered
              by it; and this Agreement is a legal, valid and binding obligation
              of it, enforceable against it according to its terms;</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) <b>the execution and delivery of this Agreement and the
              performance of its obligations under this Agreement do not require
              the consent of any third party not previously obtained, and will
              not conflict with, or result in any violation of, or default
              under, any provision of any governing instrument applicable to it,
              or any agreement or other instrument to which it is a party or by
              which it or any of its properties are bound, or any provision of
              law, statute, rule or regulation, or any ruling, writ, order,
              injunction or decree of any court, administrative agency or
              governmental body applicable to it;</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) <b>if the Private Limited Partner is a bank (as the term
              is used in the SBIC Act, at 15 U.S.C. &sect; 682(b)), the total amount
              of such Private Limited Partner's investments in SBICs, including
              such Private Limited Partner's interest in the Partnership, does
              not exceed five percent (5%) of such Private Limited Partner's
              capital and surplus;&nbsp;</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iv) unless otherwise disclosed to the Partnership in writing,
              the Partner is a citizen or resident of the United States, an
              entity organized under the laws of the United States or a state
              within the United States or an entity engaged in a trade or
              business within the United States; and </p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (v) unless otherwise disclosed to the Partnership in writing,
              the Partner is not subject to Title I of ERISA. </p>
              <p>&nbsp;&nbsp;&nbsp; (c) Each Partner who has disclosed to the Partnership in writing
          that it is not a person described in Section 1.06(b)(iv), agrees to
          provide the Partnership with any information or documentation
          necessary to permit the Partnership to fulfill any tax withholding or
          other obligation relating to the Partner, including but not limited to
          any documentation necessary to establish the Partner's eligibility for
          benefits under any applicable tax treaty.</p>
          <p>&nbsp;&nbsp;&nbsp; (d) With respect to actions under this Agreement that require the
          approval of the Private Limited Partners, the Parent Fund shall
          exercise its rights in a manner that produces the same result that
          would be produced if (i)&nbsp;the Parent Fund were not a Partner and
          (ii)&nbsp;each limited partner of the Parent Fund were a Private Limited
          Partner that had made aggregate Capital Contributions equal to the
          product of (x) the aggregate Capital Contributions of the Parent Fund
          and (y)&nbsp;a fraction, the numerator of which equals the aggregate
          capital contributions made by such limited partner to the Parent Fund
          and the denominator of which equals the aggregate capital
          contributions made by all of the partners of the Parent Fund to the
          Parent Fund.</p>
        <p>Section 1.07 <u>Notices With Respect to
        Representations by Private Limited Partners</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>If any representation made by a Private Limited Partner in
          Section 1.06(b)(i), (ii) or (iii) ceases to be true, then the Private
          Limited Partner will promptly provide the Partnership with a correct
          separate written representation as provided in each such Section.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>The Partnership will give SBA prompt notice of any corrected
          representation received from any Private Limited Partner under Section
          1.07(a).</p>
        </b>
        <p>Section 1.08 <u>Liability of Partners</u></p>
          <p>&nbsp;&nbsp;&nbsp; (a) Losses, liabilities and expenses incurred by the Partnership
          during any fiscal year will be allocated among the Partners in
          accordance with the procedures for allocating Net Losses as provided
          in Section 6.03.</p>
          <p>&nbsp;&nbsp;&nbsp; (b) The General Partner has the liability for the liabilities of
          the Partnership provided for in the Act and the SBIC Act. The General
          Partner will not:</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) be obligated to restore by way of capital contribution or
              otherwise any deficits in the respective Capital Accounts of the
              Private Limited Partners should such deficits occur, or</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) have any greater obligation with respect to any
              Outstanding Leverage than is required by the SBIC Act or by SBA.</p>
          <p>&nbsp;&nbsp;&nbsp; (c) Except as otherwise required under the Act and the SBIC Act, no
          Private Limited Partner will be liable for any loss, liability or
          expense whatsoever of the Partnership. Notwithstanding the preceding
          sentence, a Private Limited Partner will remain liable for any portion
          of such Private Limited Partner's Commitment not paid to the
          Partnership.</p>
          <p>&nbsp;&nbsp;&nbsp; (d) If a Private Limited Partner is required to return to the
          Partnership, for the benefit of creditors of the Partnership, amounts
          previously distributed to the Private Limited Partner, the obligation
          of the Private Limited Partner to return any such amount to the
          Partnership will be the obligation of the Private Limited Partner and
          not the obligation of the General Partner. No Private Limited Partner
          will be liable under this Agreement for the obligations under this
          Agreement of any other Partner.</p>
          <p>&nbsp;&nbsp;&nbsp; (e) <b>Nothing in this Agreement limits any liability of any
          Partner under any agreement between the Partner and SBA.</p>
<u>
<p ALIGN="CENTER">ARTICLE 2 <br>
<br>
<a NAME="_Toc535845544">Purpose and Powers</a></p>
        </u></b>
        <p>Section 2.01 <u>Purpose and Powers</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>The Partnership is organized solely for the purpose of
          operating as a small business investment company under the SBIC Act
          and conducting the activities described under Title III of the SBIC
          Act. The Partnership has the powers and responsibilities, and is
          subject to the limitations, provided in the SBIC Act. The operations
          of the Partnership and the actions taken by the Partnership and the
          Partners will be conducted and taken in compliance with the SBIC Act.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>Subject to Section 2.01(a), the Partnership may make,
          manage, own and supervise investments of every kind and character in
          conducting its business as a small business investment company.</p>
              <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)&nbsp;&nbsp;&nbsp; Subject to the provisions of the SBIC Act, the
              Partnership has all powers necessary, suitable or convenient for
              the accomplishment of the purposes set forth in Section 2.01(a)
              and Section 2.01(b), alone or with others, as principal or agent,
              including without limitation, </b>to engage in any lawful act or
              activity for which limited partnerships may be organized under the
              Act. </p>
        <p>Section 2.02 <u>Restrictions on Powers</u>.&nbsp;</p>
    <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp; Notwithstanding any provision of
    Section 2.01(b), the Partnership will not (i)&nbsp;make investments precluded
    under 13 C.F.R. &sect; 107.720, including but not limited to foreign investments
    described therein, (ii)&nbsp;without the prior approval of the SBA, make any
    investment that exceeds the diversification limitation that is described in
    13&nbsp;C.F.R. &sect; 107.740 or (iii) make investments precluded under 13 C.F.R.
    <font FACE="Century Schoolbook">&sect;&nbsp;</font>107.530.</p>
<u><b>
<p ALIGN="CENTER">ARTICLE 3<br>
<br>
<a NAME="_Toc535845547">Management</a></p>
</b></u>
        <p>Section 3.01 <u>Authority of General Partner</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>The management and operation of the Partnership and the
          formulation of investment policy is vested exclusively in the General
          Partner.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>The act of the General Partner in carrying on the business
          of the Partnership will bind the Partnership.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (c) <b>In the case of any General Partner other than a natural
          person, at any time that the Partnership is licensed as an SBIC, the
          General Partner will not allow any person to serve as a general
          partner, director, officer or manager of the General Partner, unless
          such person has been approved by SBA</b>.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (d) <b>So long as the General Partner remains the general partner
          of the Partnership:</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) <b>it will comply with the requirements of the SBIC Act,
              including, without limitation, 13 C.F.R. &sect; 107.160(a) and (b)</b>
              <b>as in effect from time to time; and</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) <b>in the case of any General Partner other than a natural
              person, except as set forth in Section 3.01(d)(iii), it will
              devote all of its activities to the conduct of the business of the
              Partnership and will not engage actively in any other business,
              unless its engagement is related to and in furtherance of the
              affairs of the Partnership.</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) <b>The General Partner may, however:</p>
                </b>
                <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (A) act as the general partner or Investment Adviser/Manager
                for one or more other SBICs, and</p>
                <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (B) receive, hold, manage and sell Assets received by it from
                the Partnership (or other SBIC for which it acts as general
                partner or Investment Adviser/Manager), or through the exercise
                or exchange of Assets received by it from the Partnership (or
                other SBIC for which it acts as general partner or Investment
                Adviser/Manager).</p>
        <p>Section 3.02 <u>Authority of the Private
        Limited Partners</u>.</p>
    <p>&nbsp;&nbsp;&nbsp; The Private Limited Partners will take no part in the control of the
    business of the Partnership, and the Private Limited Partners will not have
    any authority to act for or on behalf of the Partnership except as is
    specifically permitted by this Agreement.</p>
        <p>Section 3.03 <u>No Investment Adviser/Manager</u>.&nbsp;</p>
    <p>&nbsp;&nbsp;&nbsp; The General Partner may not delegate any part of its authority to an
    Investment Adviser/Manager.</p>
        <p>Section 3.04 <u>Restrictions on Other
        Activities of the General Partner and its Affiliates</u>.</p>
    <p>&nbsp;&nbsp;&nbsp; Except as provided in the SBIC Act and as otherwise specifically provided
    in this Agreement, no provision of this Agreement will be construed to
    preclude any (i) Partner, or (ii) Affiliate, general partner, member,
    manager or stockholder of any Partner, from engaging in any activity
    whatsoever or from receiving compensation therefor or profit from any such
    activity. Such activities may include, without limitation, (A) receiving
    compensation from issuers of securities for investment banking services, (B)
    managing investments, (C)&nbsp;participating in investments, brokerage or
    consulting arrangements or (D)&nbsp;acting as an adviser to or participant in any
    corporation, partnership, limited liability company, trust or other business
    person.</p>
        <p>Section 3.05 <u>Management Compensation</u>.</p>
          <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp; During the five year period commencing on the date
          hereof, Management Compensation with respect to each year during such
          period commencing on the same day and month as the date hereof will be
          7.5% of the Partnership's Regulatory Capital.</p>
          <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;&nbsp; During the period commencing on the first day
          following the fifth anniversary hereof, Management Compensation with
          respect to each year during such period commencing on the same day and
          month as the date hereof will be<b> </b>2.5%<b> </b>of the
          Partnership's Combined Capital. </p>
          <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp; (c)&nbsp;&nbsp;&nbsp; The Management Compensation shall not be modified
          in any respect except (i)&nbsp;upon the approval of the Parent Fund and
          (ii)&nbsp;with the prior written approval of SBA.</p>
          <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp; (d)&nbsp;&nbsp;&nbsp; If the Partnership fails to pay any Management
          Compensation provided herein, due to the SBIC Act or otherwise, the
          unpaid amount shall continue to be due and payable or shall become due
          and payable at the earliest date on which the payment of such amount
          or any portion thereof could be made<i> </i>without violation of the
          SBIC Act. Until paid, the unpaid amount shall accrue interest that
          shall be compounded on a monthly basis at the highest prime rate
          reported in <u>The&nbsp;Wall&nbsp;Street Journal</u>, from time to time, during
          the period of non-payment.</p>
          <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp; (e)&nbsp;&nbsp;&nbsp; Management Compensation otherwise payable for any
          quarterly period will be reduced by 100% of all fees described in 13
          C.F.R. &sect;&sect; 107.860 and 107.900. </p>
          <b>
          <p>&nbsp;&nbsp;
        </b>&nbsp;(f)
          <b>
          &nbsp;&nbsp; The Partnership will not pay any Management Compensation with
          respect to any fiscal year in excess of the amount of Management
          Compensation approved by SBA.&nbsp;</b></p>
          <p>Section 3.06 <u>Payment of Management
        Compensation</u>.</p>
        <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp; (a) The Management Compensation will be paid by the
        Partnership to the General Partner. </p>
        <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp; (b) Management Compensation will be paid in advance
        in four quarterly installments on the first business day of each quarter
        of each year commencing on the same day and month as the date hereof.
        The amount to be paid in each such quarterly installment initially shall
        be determined in accordance with Section 3.05, based upon (i) the
        amounts of Regulatory Capital the Partnership reasonably expects to have
        during such fiscal quarter and (ii) during the period starting on the
        fifth anniversary hereof, the amounts of Leverage, if any, the
        Partnership reasonably expects to have outstanding during such fiscal
        quarter; <u>provided</u>, <u>however,</u> that such amount shall be
        subject to adjustment in accordance with Section 3.06(c). With respect
        to partial quarters (such as the final quarter of the Partnership),
        Management Compensation shall be pro rated based on the number of days
        in such quarters.</p>
        <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp; (c) Within thirty (30) days after (i) the end of each
        quarter of each year commencing on the same day and month as the date
        hereof, and (ii)&nbsp;the date of the Partnership's dissolution, appropriate
        adjustment (by way of payment or refund) will be made so that Management
        Compensation paid with respect to such quarter then ended or the period
        from the end of the last quarter to the date set forth in clause (ii) or
        (iii) will be equal to Management Compensation that would have resulted
        had it been calculated on a daily basis under Section&nbsp;3.05(a) or
        Section&nbsp;3.05(b) for such period.</p>
        <p>Section 3.07 <u>Partnership Expenses</u>.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (a) The General Partner will pay:</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) the compensation of all professional and other employees of
              the Partnership or the General Partner who provide services to the
              Partnership;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) except as provided in Section 3.07(b), the cost of
              providing support and general services to the Partnership,
              including, without limitation:</p>
                  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (A) office expenses,</p>
                  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (B) travel,</p>
                  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (C) business development,</p>
                  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (D) office and equipment rental,</p>
                  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (E) bookkeeping, and</p>
                  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (F) the development, investigation and monitoring of
                  investments; and</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) all other expenses of the Partnership not authorized to
              be paid by the Partnership under Section 3.07(b).</p>
          <p>&nbsp;&nbsp;&nbsp; (b) The Partnership will pay the following Partnership expenses:</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) all interest and expenses payable by the Partnership on any
              indebtedness incurred by the Partnership;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) all amounts payable to SBA under the SBIC Act, and all
              amounts payable in connection with any Leverage commitment and any
              Outstanding Leverage;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) taxes payable by the Partnership to Federal, state, local
              and other governmental agencies;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iv) Management Compensation;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (v) expenses incurred in the actual or proposed acquisition or
              disposition of Assets, including without limitation, accounting
              fees, brokerage fees, legal fees, transfer taxes and costs related
              to the registration or qualification for sale of Assets;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (vi) legal, insurance (including any insurance as contemplated
              in Section&nbsp;3.10(m)), accounting and auditing expenses;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (vii) all expenses incurred by the Partnership in connection
              with commitments for or issuance of Leverage;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (viii) fees or dues in connection with the membership of the
              Partnership in any trade association for small business investment
              companies or related enterprises; and</p>
              <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ix) Organization Expenses up to but not
              exceeding $300,000.</p>
              <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp; (c) <b>All Partnership expenses paid by the Partnership will be
          made against appropriate supporting documentation. The payment by the
          Partnership of Partnership expenses will be due and payable as billed.</p>
        </b>
        <p>Section 3.08 <u>Valuation of Assets</u>.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>The Partnership will adopt written guidelines for
          determining the value of its Assets. Assets held by the Partnership
          will be valued by the General Partner in a manner consistent with the
          Partnership's written guidelines and the SBIC Act. The Valuation
          Guidelines attached to this Agreement as Exhibit I are the
          Partnership's written guidelines for valuation.&nbsp;</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>To the extent that the SBIC Act requires any Asset held by
          the Partnership to be valued other than as provided in this Agreement,
          the General Partner will value the Asset in such manner as it
          determines to be consistent with the SBIC Act.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (c) <b>Assets held by the Partnership will be valued at least
          annually (or more often, as SBA may require), and will be valued at
          least semi-annually (or more often, as SBA may require) at any time
          that the Partnership has Outstanding Leverage.&nbsp;</p>
        </b>
        <p>Section 3.09 <u>Standard of Care</u>.</p>
        <b>
          <p>&nbsp;&nbsp;&nbsp; (a) No Designated Party will be liable to the Partnership or any
          Partner for any action taken or omitted to be taken by it or any other
          Partner or other person in good faith and in a manner it reasonably
          believed to be in or not opposed to the best interests of the
          Partnership, and, with respect to any criminal action or proceeding,
          had no reasonable cause to believe its conduct was unlawful.</p>
          <p>&nbsp;&nbsp;&nbsp; (b) Neither any Private Limited Partner, nor any member of any
          Partnership committee or board who is not an Affiliate of the General
          Partner, will be liable to the Partnership or any Partner as the
          result of any decision made in good faith by the Private Limited
          Partner or member, in its capacity as such.</p>
          <p>&nbsp;&nbsp;&nbsp; (c) Any Designated Party, any Private Limited Partner and any
          member of a Partnership committee or board, may consult with
          independent legal counsel selected by it and will be fully protected,
          and will incur no liability to the Partnership or any Partner, in
          acting or refraining to act in good faith in reliance upon the opinion
          or advice of such counsel.</p>
          <p>&nbsp;&nbsp;&nbsp; (d) This Section does not constitute a modification, limitation or
          waiver of Section 314(b) of the SBIC Act, or a waiver by SBA of any of
          its rights under Section 314(b).&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (e) In addition to the standards of care stated in this Section,
          this Agreement may also provide for additional (but not alternative)
          standards of care that must also be met.</p>
        </b>
        <p>Section 3.10 <u>Indemnification</u>.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>The Partnership will indemnify and hold harmless, but only
          to the extent of Assets Under Management (less any Outstanding
          Leverage not included as a liability in the computation of Assets
          Under Management), any Designated Party, from any and all
          Indemnifiable Costs which may be incurred by or asserted against such
          person or entity, by reason of any action taken or omitted to be taken
          on behalf of the Partnership and in furtherance of its interests.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>The Partnership will indemnify and hold harmless, but only
          to the extent of Assets Under Management (less any Outstanding
          Leverage not included as a liability in the computation of Assets
          Under Management), the Private Limited Partners, and members of any
          Partnership committee or board who are not Affiliates of the General
          Partner or any Investment Adviser/Manager from any and all
          Indemnifiable Costs which may be incurred by or asserted against such
          person or entity, by any third party on account of any matter or
          transaction of the Partnership, which matter or transaction occurred
          during the time that such person has been a Private Limited Partner or
          member of any Partnership committee or board.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (c) <b>The Partnership has power, in the discretion of the General
          Partner, to agree to indemnify on the same terms and conditions
          applicable to persons indemnified under Section 3.10(b), any person
          who is or was serving, under a prior written request from the
          Partnership, as a consultant to, agent for or representative of the
          Partnership as a director, manager, officer, employee, agent of or
          consultant to another corporation, partnership, limited liability
          company, joint venture, trust or other enterprise, against any
          liability asserted against such person and incurred by the person in
          any such capacity, or arising out of the person's status as such.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (d) <b>No person may be entitled to claim any indemnity or
          reimbursement under Section 3.10(a), (b) or (c) in respect of any
          Indemnifiable Cost that may be incurred by such person which results
          from the failure of such person to act in accordance with the
          provisions of this Agreement and the applicable standard of care
          stated in Section 3.09. The termination of any action, suit or
          proceeding by judgment, order, settlement, conviction, or upon a plea
          of nolo contendere or its equivalent, will not, of itself, preclude a
          determination that such person acted in accordance with the applicable
          standard of care stated in Section 3.09.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (e) <b>To the extent that a person claiming indemnification under
          Section&nbsp;3.10(a), (b) or (c) has been successful on the merits in
          defense of any action, suit or proceeding referred to in Section
          3.10(a), (b) or (c) or in defense of any claim, issue or matter in any
          such action, suit or proceeding, such person must be indemnified with
          respect to such matter as provided in such Section. Except as provided
          in the foregoing sentence and as provided in Section 3.10(h) with
          respect to advance payments, any indemnification under this Section
          3.10 will be paid only upon determination that the person to be
          indemnified has met the applicable standard of conduct stated in
          Section 3.09(a) or Section 3.09(b), as applicable.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (f) <b>A determination that a person to be indemnified under this
          Section has met the applicable standard stated in Section 3.09(a) or
          Section 3.09(b) may be made by (i) the General Partner, with respect
          to the indemnification of any person other than a person claiming
          indemnification under Section 3.10(a), (ii) a committee of the
          Partnership whose members are not affiliated with the General Partner
          or any Investment Adviser/Manager with respect to indemnification of
          any person indemnified under Section 3.10(a) or (iii) at the election
          of the General Partner, independent legal counsel selected by the
          General Partner, with respect to the indemnification of any person
          indemnified under this Section, in a written opinion.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (g) <b>In making any determination with respect to indemnification
          under subsection (f) above, the General Partner, a committee of the
          Partnership whose members are not affiliated with the General Partner
          or any Investment Adviser/Manager or independent legal counsel, as the
          case may be, is authorized to make the determination on the basis of
          its evaluation of the records of the General Partner, the Partnership
          or any Investment Adviser/Manager to the Partnership and of the
          statements of the party seeking indemnification with respect to the
          matter in question and is not required to perform any independent
          investigation in connection with any determination. Any party making
          any such determination is authorized, however, in its sole discretion,
          to take such other actions (including engaging counsel) as it deems
          advisable in making the determination.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (h) <b>Expenses incurred by any person in respect of any
          Indemnifiable Cost may be paid by the Partnership before the final
          disposition of any such claim or action upon receipt of an undertaking
          by or on behalf of such person to repay such amount unless it is
          ultimately determined as provided in Section 3.10(e) or (f) that the
          person is entitled to be indemnified by the Partnership as authorized
          in this Section 3.10.</b> </p>
          <p>&nbsp;&nbsp;&nbsp; (i) <b>The rights provided by this Section 3.10 will inure to the
          benefit of the heirs, executors, administrators, successors, and
          assigns of each person eligible for indemnification under this
          Agreement.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (j) <b>The rights to indemnification provided in this Section 3.10
          are the exclusive rights of all Partners to indemnification by the
          Partnership. No Partner may have any other rights to indemnification
          from the Partnership or enter into, or make any claim under, any other
          agreement with the Partnership (whether direct or indirect) providing
          for indemnification.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (k) <b>The Partnership may not enter into any agreement with any
          person (including, without limitation, any Investment Adviser/Manager,
          Partner or any person that is an employee, officer, director, partner
          or shareholder, or an Affiliate, Associate or Control Person of any
          Partner) providing for indemnification of any such person (i) except
          as provided for under this Section 3.10, and (ii)&nbsp;unless such
          agreement provides for a determination with respect to the
          indemnification as provided under Section 3.10(f).</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (1) <b>The provisions of this Section 3.10 do not apply to
          indemnification of any person that is not at the expense (whether in
          whole or in part) of the Partnership.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (m) The Partnership may purchase and maintain insurance on its own
          behalf, or on behalf of any person or entity, with respect to
          liabilities of the types described in this Section 3.10. The
          Partnership may purchase such insurance regardless of whether the
          person is acting in a capacity described in this Section 3.10 or
          whether the Partnership would have the power to indemnify the person
          against such liability under the provisions of this Section.</p>
<u><b>
<p ALIGN="CENTER">ARTICLE 4</p>
<p ALIGN="CENTER">Small Business Investment Company Matters</p>
</b></u>
<p>&nbsp;</p>
<p>Section 4.01 <u>SBIC Act</u>.</p>
<b>
    <p>&nbsp;
        </b>&nbsp; (a)<b>&nbsp;&nbsp;&nbsp; The provisions of this Agreement must be interpreted to the fullest
    extent possible in a manner consistent with the SBIC Act. If any provision
    of this Agreement conflicts with any provision of the SBIC Act (including,
    without limitation, any conflict with respect to the rights of SBA or the
    respective Partners under this Agreement), the provisions of the SBIC Act
    will control.</p>
        </b>
    <p>Section 4.02 <u>Consent or Approval of, and
        Notice to, SBA</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>The requirements of the prior consent or approval of, and
          notice to, SBA in this Agreement will be in effect at any time that
          the Partnership is licensed as an SBIC or has Outstanding Leverage.
          These requirements will not be in effect if the Partnership is not
          licensed as an SBIC and does not have any Outstanding Leverage.&nbsp;</b></p>
          <p><b>&nbsp;&nbsp;&nbsp; </b>(b) <b>Except as provided in the SBIC Act,&nbsp;a consent or approval
          required to be given by SBA under this Agreement will be deemed given
          and effective for purposes of this Agreement only if the consent or
          approval is:</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) <b>given by SBA in writing, and</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) <b>delivered by SBA to the party requesting the consent or
              approval in the manner provided for notices to such party under
              Section 10.04.</p>
        </b>
        <p>Section 4.03 <u>Provisions Required by the
        SBIC Act for Issuers of Debentures</u>.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>The provisions of 13 C.F.R. &sect; 107.1810(i) are incorporated
          by reference in this Agreement as if fully stated in this Agreement.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>The Partnership and the Partners consent to the exercise by
          SBA of all of the rights of SBA under 13 C.F.R. &sect; 107.1810(i), and
          agree to take all actions that SBA may require in accordance with 13 C.F.R.
          &sect; 107.1810(i).</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (c) <b>This Section will be in effect at any time that the
          Partnership has outstanding Debentures, and will not be in effect at
          any time that the Partnership does not have outstanding Debentures.
          </p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (d) <b>Nothing in this Section may be construed to limit the
          ability or authority of SBA to exercise its regulatory authority over
          the Partnership as a licensed small business investment company under
          the SBIC Act.</p>
        </b>
        <p>Section 4.04 <u>Effective Date of
        Incorporated SBIC Act Provisions</u>.&nbsp;</p>
        <b>
          <p>&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp; Any section of this Agreement which relates to Debentures
          issued by the Partnership and incorporates or refers to the SBIC Act
          or any provision of the SBIC Act (including, without limitation, 13
          C.F.R. &sect;&sect; 107.1810(i), 107.1820, and 107.1830 - 107.1850)) will, with
          respect to each Debenture, be deemed to refer to the SBIC Act or such
          SBIC Act provision as in effect on the date on which the Debenture was
          purchased from the Partnership.</p>
          <p>&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;&nbsp; Section 4.04(a) will not be construed to apply to:</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) <b>the provisions of the SBIC Act which relate to the
              regulatory authority of SBA under the SBIC Act over the
              Partnership as a licensed small business investment company; or</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) <b>the rights of SBA under any other agreement between the
              Partnership and SBA.</p>
          <p>&nbsp;&nbsp;&nbsp; (c) The parties acknowledge that references in this Agreement to
          the provisions of the SBIC Act relating to SBA's regulatory authority
          refer to the provisions as in effect from time to time.</p>
        </b>
        <p>Section 4.05 <u>SBA as Third Party
        Beneficiary</u>.</p>
      <b>
    <p>&nbsp;&nbsp;&nbsp; SBA will be deemed an express third party beneficiary of the provisions
    of this Agreement to the extent of the rights of SBA under this Agreement
    and under the Act. SBA will be entitled to enforce the provisions
    (including, without limitation, the obligations of each Partner to make
    capital contributions to the Partnership) for its benefit, as if SBA were a
    party to this Agreement.</p>
        </b>
        <p>Section 4.06 <u>Interest of the General
        Partner After Withdrawal</u>.</p>
    <p>&nbsp;&nbsp;&nbsp; If the General Partner withdraws as a general partner of the Partnership
    by notice from SBA as provided in the SBIC Act or otherwise, then the entire
    interest of the General Partner in the Partnership will be converted into an
    interest as a Special Private Limited Partner on the terms provided in
    Section 8.03(c).</p>
<u><b>
<p ALIGN="CENTER">ARTICLE 5<br>
<br>
Partners' Capital Contributions</p>
        </b></u>
        <p>Section 5.01 <u>Capital Commitments</u>.&nbsp;</p>
    <p>&nbsp;&nbsp;&nbsp; The Private Limited Partners and the General Partner commit to make
    capital contributions to the Partnership in the amounts set forth by their
    respective names on the signature pages of this Agreement (and its
    counterparts) executed by each such Partner<i>.</p>
        </i>
        <p>Section 5.02 <u>Capital Contributions by the
        Private Limited Partners</u>.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>All capital contributions to the Partnership by Private
          Limited Partners must be in cash, except as provided in this Agreement
          and approved by SBA.</b></p>
          <p><b>&nbsp;&nbsp;&nbsp; </b>(b) The Private Limited Partners will contribute to the capital of
          the Partnership in cash the aggregate amount that is set forth
          opposite their respective names on Schedule A payable in such
          installments, as specified by the General Partner in its sole
          discretion, from time to time, upon not less than ten (10) business
          days' prior notice; provided that the time requirement for such notice
          may be waived by a Limited Partner.</p>
        <p>Section 5.03 <u>Capital Contributions by the
        General Partner</u>.</p>
        <b>
          <p>&nbsp;&nbsp;&nbsp; (a) All capital contributions to the Partnership by the General
          Partner must be in cash, except as provided in this Agreement and
          approved by SBA.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) The General Partner must pay its Commitment in installments at
          the same times and in the same percentage amounts as the Private
          Limited Partners.</p>
          <p>&nbsp;&nbsp;&nbsp; (c) If the Commitment of the General Partner is increased as a
          result of an increase in the Commitment of the Private Limited
          Partners or the admission of any Additional Private Limited Partner,
          the amount of the increased Commitment will be payable by the General
          Partner in installments, the first of which will be due upon the
          effectiveness of the increased Commitment and each subsequent
          installment will be due at the same times and in the same percentage
          amounts as the Private Limited Partners.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (d) When the partnership is liquidated, the General Partner will
          contribute to the Partnership within the time period provided in
          Treasury Regulation &sect;&nbsp;1.704-(1)(b)(2)(ii)(b)(3) an amount equal to any
          deficit balance in its Capital Account after giving effect to its
          contribution of its Commitment as provided in Section 5.03(a) and
          (b).&nbsp;</p>
        <p>Section 5.04&nbsp;&nbsp;&nbsp;&nbsp; <u>No Additional Private Limited
        Partners</u>.</p>
    <p>&nbsp;&nbsp;&nbsp; No Private Limited Partners other than the Parent Fund may be admitted to
    the Partnership. </p>
        <p>Section 5.05 <u>Conditions to the Commitments
        of the General Partner and the Private Limited Partners</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>Notwithstanding any provision in this Agreement to the
          contrary, on the earlier of (i) the completion of the liquidation of
          the Partnership or (ii) one year from the commencement of the
          liquidation, the General Partner and the Private Limited Partners will
          be obligated to contribute any amount of their respective Commitments
          not previously contributed to the Partnership, if and to the extent
          that the other Assets of the Partnership have not been sufficient to
          permit at that time the redemption of all Outstanding Leverage, the
          payment of all amounts due with respect to the Outstanding Leverage as
          provided in the SBIC Act, and the payment of all other amounts owed by
          the Partnership to SBA.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>The provisions of this Section do not apply to the
          Commitment of any Private Limited Partner whose obligation to make
          capital contributions has been terminated or who has withdrawn from
          the Partnership, with the consent of SBA, under a provision of this
          Article 5 or Article 8 or any agreement, release, settlement or action
          under any provision of this Agreement. No Private Limited Partner or
          General Partner has any right to delay, reduce or offset any
          obligation to contribute capital to the Partnership called under this
          Section by reason of any counterclaim or right to offset by the
          Partner or the Partnership against SBA.</p>
        </b>
        <p>Section 5.06 <u>Termination of the Obligation
        to Contribute Capital</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>Any Private Limited Partner may elect to terminate its
          obligation in whole or in part to make a capital contribution required
          under this Agreement, or upon demand by the General Partner, will no
          longer be entitled to make such capital contribution, if the Private
          Limited Partner or the General Partner obtains an opinion of counsel
          as provided under Section 5.07 to the effect that making such
          contribution would require the Private Limited Partner to withdraw
          from the Partnership under Section 8.06 through Section 8.10.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>Upon receipt by the General Partner of a notice and opinion
          as provided under Section 5.07, unless cured within the period
          provided under Section 5.08, the Commitment of the Private Limited
          Partner delivering the opinion will be deemed to be reduced by the
          amount of such unfunded capital contribution and this Agreement will
          be deemed amended to reflect a corresponding reduction of aggregate
          Commitments to the Partnership.</p>
        </b>
        <p>Section 5.07 <u>Notice and Opinion of Counsel</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>A copy of any opinion of counsel issued as described in
          Section 5.06 or Section 8.06 through Section 8.10 must be sent by the
          General Partner to SBA, together with (i) the written notice of the
          election of the Private Limited Partner or (ii) the written demand of
          the General Partner, to which the opinion relates.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>An opinion rendered to the Partnership as provided in
          Section 5.06 or Section 8.06 through Section 8.10 will be deemed
          sufficient for the purposes of those Sections only if the General
          Partner and SBA each approve (i) the counsel rendering the opinion,
          and (ii) the form and substance of the opinion.</p>
        </b>
        <p>Section 5.08 <u>Cure, Termination of Capital
        Contributions and Withdrawal</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>Unless within ninety (90) days after the giving of written
          notice and opinion of counsel, as provided in Section 5.07, the
          Private Limited Partner or the Partnership eliminates the necessity
          for termination of the obligation of the Private Limited Partner to
          make further capital contributions or for the withdrawal of the
          Private Limited Partner from the Partnership in whole or in part to
          the reasonable satisfaction of the Private Limited Partner and the
          General Partner, the Private Limited Partner will withdraw from the
          Partnership in whole or in part to the extent required, effective as
          of the end of the ninety (90) day period.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>Subject to the provisions of Section 5.10, in its discretion
          the General Partner may waive all or any part of the ninety (90) day
          cure period and cause such termination of capital contributions or
          withdrawal to be effective at an earlier date as stated in the
          waiver.&nbsp;</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (c) <b>Any distributions made to a Private Limited Partner with
          respect to such Partner's withdrawal under this Section will be
          subject to and made as provided in Section 8.11.</p>
        </b>
        <p>Section 5.09 <u>Failure to Make Required
        Capital Contributions</u>.&nbsp;</p>
      <b>
    <p>&nbsp;&nbsp;&nbsp; The Partnership is entitled to enforce the obligations of each Partner to
    make the contributions to capital specified in this Agreement. The
    Partnership has all rights and remedies available at law or equity if any
    such contribution is not so made.&nbsp;</p>
        </b>
        <p>&nbsp;&nbsp; Section 5.10 <u>Notice and Consent of SBA
        with respect to Capital Contribution Defaults</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>The Partnership must give SBA prompt written notice of any
          failure by a Private Limited Partner to make any capital contribution
          to the Partnership required under this Agreement when due, which
          failure continues beyond any applicable grace period specified in this
          Agreement.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>Unless SBA has given its prior consent or the provisions of
          subsection (c) of this Section have become applicable, the Partnership
          will not (i) take any action (including entering into any agreement
          (whether oral or written), release or settlement with any Partner)
          which defers, reduces, or terminates the obligations of the Partner to
          make contributions to the capital of the Partnership, or (ii) commence
          any legal proceeding or arbitration, which seeks any such deferral,
          reduction or termination of such obligation. Without the consent of
          SBA (including SBA's deemed consent under subsection (c) of this
          Section) no such agreement, release, settlement or action taken will
          be effective with respect to the Partnership or any Partner.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (c) <b>If the Partnership has given SBA thirty (30) days prior
          written notice of any proposed legal proceeding, arbitration or other
          action described under subsection (b) of this Section with respect to
          any default by a Private Limited Partner in making any capital
          contribution to the Partnership, and the Partnership has not received
          written notice from SBA that it objects to the proposed action within
          the thirty (30) day period, then SBA will be deemed to have consented
          to the proposed Partnership action.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (d) <b>Any notice given by the Partnership to SBA under this
          Section must:</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) <b>be given by separate copies directed to each of the
              Investment Division and the Office of the General Counsel of SBA;</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) <b>explicitly state in its caption or first sentence that
              the notice is being given with respect to a specified default by a
              Private Limited Partner in making a capital contribution to the
              Partnership and a proposed legal proceeding, arbitration,
              agreement, release, settlement or other action with respect to
              that default; and</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) <b>state the nature of the default, the identity of the
              defaulting Private Limited Partner, and the nature and terms of
              the proposed legal proceeding, arbitration, agreement, release,
              settlement or other action with respect to that default.</p>
        </b>
        <p>Section 5.11 <u>Interest on Overdue
        Contributions</u>.</p>
    <p>&nbsp;&nbsp;&nbsp; In the event that any Private Limited Partner fails to make a
    contribution required under this Agreement within ten (10) days after the
    date such contribution is due, then the General Partner may, in its sole
    discretion, elect to charge such Private Limited Partner interest at an
    annual rate equal to the then current prime rate published in <u>The Wall
    Street Journal</u> dated the business day preceding the tenth day after such
    contribution is due, plus two percent (2%) per annum on the amount due from
    the date such amount became due until the earlier of (i) the date on which
    such payment is received by the Partnership from such Private Limited
    Partner or (ii) the date of any notice given to such Private Limited Partner
    by the General Partner pursuant to Section 5.12 or Section 5.13 or (iii) the
    date on which such payment is received by the Partnership under Section 5.14
    or Section 5.15. Any distributions to which such Private Limited Partner is
    entitled shall be reduced by the amount of such interest, and such interest
    shall be deemed to be income to the Partnership.</p>
        <p>Section 5.12 <u>Termination of a Private
        Limited Partner's Right to Make Further Capital Contributions</u>.</p>
    <p>&nbsp;&nbsp;&nbsp; In the event that any Private Limited Partner (other than the Parent
    Fund) fails to make a contribution required under this Agreement within ten
    (10) days after the date such contribution is due, the General Partner may,
    in its sole discretion (but only with the consent of SBA given as provided
    in Section 5. 10), elect to declare, by notice to such Private Limited
    Partner, that:</p>
          <p>&nbsp;&nbsp;&nbsp; (a) Such Private Limited Partner's Commitment shall be deemed to be
          reduced to the amount of any contributions of capital timely made
          pursuant to this Agreement; and</p>
          <p>&nbsp;&nbsp;&nbsp; (b) Upon such notice (i) such Private Limited Partner shall have no
          right to make any capital contribution thereafter (including the
          contribution as to which the default occurred and any contribution
          otherwise required to be made thereafter pursuant to the terms of this
          Agreement) and (ii) this Agreement shall be deemed amended to reflect
          such reduced Commitment.</p>
        <p>Section 5.13 <u>Forfeiture of a Private
        Limited Partner's Interest in the Partnership</u>.&nbsp;</p>
        <p>&nbsp;&nbsp;&nbsp; In the event that any Private Limited Partner (other than the Parent
    Fund) fails to make a contribution required under this Agreement within ten
    (10) days after notice by the General Partner to such Private Limited
    Partner that it has failed to make its contribution on the date such
    contribution was due, the General Partner may in its sole discretion (but
    only with the consent of SBA given as provided in Section 5. 10) elect to
    declare, by notice of forfeiture to such Private Limited Partner, that one
    hundred percent (100%) of the interest of such Private Limited Partner in
    the Partnership (including amounts in its Capital Account as well as any
    interest in future profits, losses or distributions of the Partnership) is
    forfeited, effective as of the date of such Private Limited Partner's
    failure to make such required contribution. As of the date such notice of
    forfeiture is given (i) the Private Limited Partner shall cease to be a
    Partner with respect to such forfeited interest; <u>provided</u>, <u>however</u>,
    that such forfeited Private Limited Partner shall cease to have any
    liability for the payment of the forfeited percentage of any capital
    contributions due at such time or in the future and (ii) the forfeited
    percentage of such Private Limited Partner's Capital Account shall be held
    by the Partnership and reallocated among the Capital Accounts of the
    Partners pro rata in proportion to their respective Percentage Interests
    (other than such forfeited Private Limited Partner) to be apportioned among
    such Private Limited Partners in accordance with their respective aggregate
    capital contributions.</p>
        <p>Section 5.14 <u>Withholding and Application
        of a Private Limited Partner's Distributions</u>.</p>
    <p>&nbsp;&nbsp;&nbsp; No part of any distribution shall be paid to any Private Limited Partner
    (other than the Parent Fund) from which there is then due and owing to the
    Partnership, at the time of such distribution, any amount required to be
    paid to the Partnership. At the election of the General Partner, which it
    may make in its sole discretion, the Partnership may either (i) apply all or
    part of any such withheld distribution in satisfaction of the amount then
    due to the Partnership from such Private Limited Partner or (ii) withhold
    such distribution until all amounts then due are paid to the Partnership by
    such Private Limited Partner. Upon payment of all amounts due to the
    Partnership (by application of withheld distributions or otherwise), the
    General Partner shall distribute any unapplied balance of any such withheld
    distribution to such Private Limited Partner. No interest shall be payable
    on the amount of any distribution withheld by the Partnership pursuant to
    this Section.</p>
        <p>Section 5.15 <u>Required Sale of a Private
        Limited Partner's Interest in the Partnership</u>.&nbsp;</p>
    <p>&nbsp;&nbsp;&nbsp; In the event that any Private Limited Partner (other than the Parent
    Fund) fails to make a contribution required under the Agreement within
    ten(10) days after notice by the General Partner to such Private Limited
    Partner that it has failed to make its contribution on the date such
    contribution was due, unless the General Partner has acted pursuant to
    Section 5.12 or Section 5.13, the General Partner may, in its sole
    discretion, (but only with the consent of SBA given as provided in Section
    5.10) elect to declare by notice of default to such Private Limited Partner
    that such Private Limited Partner is in default. If the General Partner so
    elects to declare such Private Limited Partner in default (such Private
    Limited Partner being hereinafter referred to as the &quot;Optionor&quot;), then the
    other Private Limited Partners of the Partnership which are not in default
    (the &quot;Optionees&quot;) and the General Partner shall have the right and option to
    acquire one hundred percent (100%) of the Partnership interest, which shall
    include one hundred percent (100%) of the Capital Account (the &quot;Optioned
    Partnership Interest&quot;) of the Optionor on the following terms:</p>
          <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a) The General Partner shall give the Partners notice promptly
          after declaration of any such default. Such notice shall advise each
          Optionee of the portion of the Optioned Partnership Interest available
          to it and the price therefor. The portion available to each Optionee
          shall be that portion of the Optioned Partnership Interest that bears
          the same ratio to the Optioned Partnership Interest as each Optionee's
          capital contributions to the Partnership bears to the aggregate
          capital contributions to the Partnership, exclusive of the capital
          contributions to the Partnership of the Optionor. The aggregate price
          for the Optioned Partnership Interest shall be the assumption of the
          unpaid Commitment obligation (both that portion then due and amounts
          due in the future) of the Optionor (the &quot;Option Price&quot;). The Option
          Price for each Optionee shall be prorated according to the portion of
          the Optioned Partnership Interest purchased by each such Optionee so
          that the percentage of the unpaid Commitment assumed by each Optionee
          is the same as the percentage of the Optioned Partnership Interest
          purchased by such Optionee. The option granted hereunder shall be
          exercisable by each Optionee in whole only at any time within ten (10)
          days of the date of the notice from the General Partner by the
          delivery to the General Partner of (i) a notice of exercise of option,
          and (ii) the capital contribution due in accordance with Section 5.15
          (e)(i). The General Partner shall forward the above notices of
          exercise of option received to the Optionor.</p>
          <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b) Should any Optionee not exercise its option within the period
          provided in subsection (a), the General Partner, within ten (10) days
          of the end of such period, shall notify the other Optionees who have
          previously exercised their options in full, which Optionees shall have
          the right and option ratably among them to acquire the portion of the
          Optioned Partnership Interest not so acquired (the &quot;Remaining
          Portion&quot;) within ten (10) days of the date of the notice specified in
          this subsection on the same terms as provided in Section 5.15(a).</p>
          <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (c) The amount of the Remaining Portion not acquired by the
          Optionees pursuant to Section 5.15(b) may be acquired by the General
          Partner within ten (10) days of the expiration of the period specified
          in subsection (b) on the same terms as set forth in Section 5.15(a).</p>
          <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (d) The amount of the Remaining Portion not acquired by the
          Optionees and the General Partner pursuant to Section 5.15(c) may, if
          the General Partner deems it in the best interest of the Partnership,
          be sold to any other persons on terms not more favorable to such
          purchaser than the Optionees' option (and the General Partner may
          admit any such third party purchaser as a Private Limited Partner,
          subject to the approval of SBA, if required under the SBIC Act). Any
          consideration received by the Partnership for such amount of the
          Optionor's interest in the Partnership in excess of the Option Price
          therefor shall be retained by the Partnership and allocated among the
          Partners' Capital Accounts in proportion to the respective Partners'
          capital contributions.</p>
          <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (e) Upon exercise of any option hereunder, such Optionee (or the
          General Partner, if it has exercised its rights pursuant to Section
          5.15(c)) shall be deemed to have assumed the portion of the Optionor's
          unpaid Commitment that constitutes the Option Price for the portion of
          the Optioned Partnership Interest purchased by such Optionee, and
          shall be obligated (i) to contribute to the Partnership the portion of
          the capital contribution then due from the Optionor equal to the
          percentage of the Optioned Partnership Interest purchased by such
          Optionee and (ii) to pay the same percentage of any further
          contributions which would have otherwise been due from such Optionor.</p>
          <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (f) Upon the purchase by the General Partner of any portion of the
          Optioned Partnership Interest in the Partnership pursuant to Section
          5.15(c), the General Partner shall also become a Private Limited
          Partner to the extent of such interest.</p>
          <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (g) Upon the purchase of any portion of any Optioned Partnership
          Interest by an Optionee, the General Partner or other person pursuant
          to this Section, the Optionor shall have no further rights or
          obligations under this Agreement with respect to such portion.</p>
          <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (h) Upon the purchase of any portion of the Optioned Partnership
          Interest, for purposes of computing such purchaser's aggregate capital
          contributions, such purchaser shall be deemed to have aggregate
          capital contributions (or the aggregate capital contributions of any
          Optionee, shall be increased by an amount) equal to the percentage of
          the defaulting Private Limited Partner's aggregate capital
          contribution which the purchased portion of the Optioned Partnership
          Interest represents of the defaulting Private Limited Partner's entire
          Partnership interest, and the aggregate capital contributions of such
          defaulting Private Limited Partner shall be reduced by a corresponding
          amount.</p>
<u><b>
<p ALIGN="CENTER">ARTICLE 6<br>
<br>
Adjustment of Capital Accounts</p>
        </b></u>
        <p>Section 6.01 <u>Establishment of Capital
        Accounts</u>.</p>
      <b>
    <p>&nbsp;&nbsp;&nbsp; There will be established on the books of the Partnership an Opening
    Capital Account for each Partner in accordance with the definitions and
    methods of allocation prescribed in this Agreement. </p>
        </b>
        <p>Section 6.02 <u>Time of Adjustment of Capital
        Accounts</u>.</p>
      <b>
    <p>&nbsp;&nbsp;&nbsp; Allocations will be made to the Opening Capital Account of each Partner
    in accordance with Section 6.03, as of the following dates:</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) the close of each fiscal year of the Partnership;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) the day before the date of the admission of an Additional
              Private Limited Partner or increase in any Private Limited
              Partner's Commitment;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) the day before the dissolution of the Partnership;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iv) the date of a distribution; and</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (v) such other dates as this Agreement may provide.</p>
        </b>
        <p>Section 6.03 <u>Adjustments to Capital
        Accounts</u>.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>As of the times stated in Section 6.02, allocations will be
          made to the Opening Capital Accounts of the Partners to arrive at each
          Partner's Closing Capital Account for the period in the following
          order and amounts:</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) <b>The amount of any capital contributions paid by each
              Partner during such period will be credited to the Partner's
              Opening Capital Account (other than capital contributions referred
              to in clause (i) of the definition of &quot;Opening Capital Account&quot; in</b>
              <b>Article 1); provided, however, that any such capital
              contribution will be credited to the Partner's Opening Capital
              Account on the later of the date the capital contribution was due
              or the date on which the capital contribution was actually
              received by the Partnership;</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) <b>The amount of any distributions made to each Partner
              during the period will be debited against the Partner's Opening
              Capital Account;</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) <b>Net Profits will be credited and Net Losses will be
              debited to the Opening Capital Accounts of the Partners in
              proportion to their respective Percentage Interests. </p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>Notwithstanding the provisions of Section 6.03(a)(iii):</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) <b>at such time as the Capital Account of the General
              Partner or any Private Limited Partner is reduced to an amount
              equal to the aggregate capital contributions of such Partner (less
              all distributions to such Partner), the balance of all Net Losses
              will be allocated:</p>
                  </b>
                  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (A) <b>first, to the remaining Capital Accounts of the
                  General Partner and Private Limited Partners which have not
                  been reduced to zero (to be apportioned among them in
                  accordance with their respective positive Capital Accounts);
                  and</p>
                  </b>
                  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (B) <b>second, after the Capital Accounts of all Private
                  Limited Partners have been reduced to zero, then the balance
                  to the General Partner.
                  </b>
</p>
                  <p><b>&nbsp;&nbsp;&nbsp; </b>(ii) <b>If Net Losses are allocated in accordance with the
              foregoing clause (i), any Net Profits that are required to be
              allocated after such special allocation of Net Losses as provided
              in the foregoing clause will be allocated:</p>
                  </b>
                  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (A) <b>first, to the General Partner until the effect of
                  the special allocation of Net Losses under clause (i)(B) is
                  reversed and eliminated; and</p>
                  </b>
                  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (B) <b>second, to the General Partner and Private Limited
                  Partners to whom the allocation of such Net Losses has been
                  made under clause (i)(A) until the effect of such special
                  allocation of Net Losses has been reversed and eliminated.
          </b>
</p>
                  <p><b>&nbsp;&nbsp;&nbsp; </b>(c) <b>To the extent not otherwise accomplished by the provisions
          of Section 6.03(a) and Section 6.03(b), the Opening Capital Accounts
          of the Partners will be adjusted to effect any allocation of any item
          of income, gain, loss, deduction or credit to a Partner required by
          the Code.</b></p>
                  <p>Section 6.04 <u>Tax Matters</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) If at the end of a fiscal year of the Partnership, a Private
          Limited Partner unexpectedly receives an adjustment, allocation, or
          distribution described in clauses (4), (5) and (6) of Treasury
          Regulation &sect;&nbsp;1.704-1(b)(2)(ii) and that adjustment, allocation, or
          distribution reduces that Private Limited Partner's Opening Capital
          Account below zero (0), then the Private Limited Partner will be
          allocated all items of income and gain of the Partnership for that
          year and for all subsequent fiscal years until the deficit balance has
          been eliminated as provided in Treasury Regulation &sect;&nbsp;1.704-1(b)(2)(ii)(d),
          as quickly as possible. If any such unexpected adjustment, allocation
          or distribution creates a deficit balance in the Opening Capital
          Accounts of more than one Private Limited Partner in any fiscal year,
          all items of income and gain of the Partnership for the fiscal year
          and all subsequent fiscal years will be allocated among all such
          Private Limited Partners in proportion to their respective deficit
          balances until such balances have been eliminated. If any allocation
          is made pursuant to this paragraph, subsequent allocations shall be
          made (in a manner consistent with this paragraph) to offset the
          effects of such prior allocation. This provision is intended to
          qualify as a &quot;qualified income offset&quot; within the meaning of Treasury
          Regulation &sect; 1.704-1(b)(2)(ii)(d).&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (b) For Federal, state and local income tax purposes, each item of
          Partnership income, credit, gain or loss will be allocated among the
          Partners as provided in Section 6.03.</p>
          <p>&nbsp;&nbsp;&nbsp; (c) The General Partner has the power to make such allocations and
          to take such actions necessary under the Code or other applicable law
          to effect and to maintain the substantial economic effect of
          allocations made to the Partners under Section 704(b) of the Code. All
          allocations made and other actions taken by the General Partner under
          this paragraph will be consistent to the maximum extent possible with
          the provisions of this Agreement.</p>
          <p>&nbsp;&nbsp;&nbsp; (d) The General Partner is the &quot;tax matters partner,&quot; as the term
          is used in the Code.</p>
          <p>&nbsp;&nbsp;&nbsp; (e) The General Partner is expressly authorized to (i) elect that
          the Partnership be classified as a partnership for federal tax
          purposes, and (ii) to make any election or other action on behalf of
          the Partnership permitted under the Code with respect to the election
          of that tax classification.</p>
          <p>&nbsp;&nbsp;&nbsp; (f) The General Partner must keep the Partners informed of all
          administrative and judicial proceedings with respect to Partnership
          tax returns or the adjustment of Partnership items. Any Partner who
          enters into a settlement agreement with respect to Partnership items
          must promptly give the General Partner notice of the settlement
          agreement and terms that relate to Partnership items.</p>
          <p>&nbsp;&nbsp;&nbsp; (g) Anything contained in this Agreement to the contrary
          notwithstanding, if the Partnership is deemed liquidated within the
          meaning of Treasury Regulation &sect;&nbsp;1.704-1(b)(2)(ii)(g) but has not
          dissolved under Section 8.01(a), then the assets of the Partnership
          will, after provision for payment to creditors, be deemed distributed
          to the Partners in accordance with Treasury Regulation
          &sect;&nbsp;1.704-1(b)(2)(ii)(b)(2) and immediately recontributed to the
          Partnership and the General Partner must make the contributions
          contemplated by Section 5.03(d).</p>
<u><b>
<p ALIGN="CENTER">ARTICLE 7<br>
<br>
<a NAME="_Toc535845586">Distributions</a></p>
        </b></u>
        <p>Section 7.01 <u>Distributions to Partners</u>.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>The Partnership may make distributions of cash and/or
          property, if any, at such times as the SBIC Act permits and as are
          determined under this Agreement.&nbsp;</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>All distributions must be made to the Partners in proportion
          to their respective Percentage Interests. </p>
        </b>
        <p>Section 7.02 <u>Distributions of Noncash
        Assets in Kind</u>.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>Subject to the provisions of the SBIC Act and the provisions
          of this Section, the Partnership at any time may distribute Noncash
          Assets in kind.&nbsp;</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>Any distribution of Noncash Assets will be made <u>pro</u>
          <u>rata</u> among the Partners (based upon the respective amounts
          which each Partner would be entitled to receive if the distribution
          were made in cash) with respect to the distribution of each Noncash
          Asset.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (c) <b>Distributions of Noncash Assets in kind before the
          dissolution of the Partnership will be made only (i) if the Noncash
          Assets are Distributable Securities or (ii) with the prior approval of
          the Parent Fund.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (d) Subject to the SBIC Act, Noncash Assets distributed in kind
          under this Section 7.02 will be subject to such conditions and
          restrictions as are legally required, including, without limitation,
          such conditions and restrictions required to assure compliance by the
          Partners and/or the Partnership with the aggregation rules and volume
          limitations under Rule 144 promulgated under the Securities Act.</p>
        <p>Section 7.03 <u>Distributions Violative of
        the Act Prohibited</u>.&nbsp;</p>
    <p>&nbsp;&nbsp;&nbsp; Notwithstanding anything contained in this Agreement to the contrary, no
    distribution may be made by the Partnership if and to the extent that such
    distribution would violate Section 17-607 of the Act.</p>
<u><b>
<p ALIGN="CENTER">ARTICLE 8<br>
<br>
Dissolution, Liquidation, Winding Up and Withdrawal</p>
        </b></u>
        <p>Section 8.01 <u>Dissolution</u>.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>The Partnership will be dissolved upon the first to occur of
          the following:</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) subject to Section 8.04 of this Agreement, an event of
              withdrawal (as defined in Sections 17-101(3) and 17-402 of the
              Act)&nbsp;of the General Partner;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) <b>the later of:</p>
                    </b>
                    <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (A) <b>ten (10) years from the formation of the
                    Partnership; or</p>
                    </b>
                    <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (B) <b>two years after all Outstanding Leverage has
                    matured; or&nbsp;</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) the determination of the Partners to dissolve and
              terminate the Partnership as provided in Section 8.01(c).</p>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>The Partnership will not dissolve upon the withdrawal,
          dissolution, bankruptcy, death or adjudication of incompetence or
          insanity of any Private Limited Partner.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (c) The Parent Fund<b> may elect to dissolve the Partnership by
          giving notice to each Partner and SBA of the election. Any notice of
          an election to dissolve the Partnership may only be given:</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) <b>on or after the tenth (10<sup>th</sup>) anniversary of
              the date hereof;</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) <b>if all Outstanding Leverage has been repaid or
              redeemed; and</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) <b>if all amounts due the SBA, its agent or trustee have
              been paid.&nbsp;</p>
    <p>&nbsp;&nbsp;&nbsp; Any election to dissolve the Partnership given under this Section 8.01(c)
    will not be effective until the later of: (A) thirty (30) days from the date
    the notice is given to all parties or (B) the effective date of dissolution
    stated in the notice.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (d) The Parent Fund and the General Partner may elect to extend the
          date set forth in Section 8.01(a)(ii)(A) and Section 8.01(c)(i) at any
          time within ninety (90) days prior to such date. Such date can be
          extended by any such election for up to three (3) additional
          successive periods of one (1) year each.</p>
<dir>
  <dir>
    <dir>
      <dir>
        <dir>
          <p>&nbsp;</p>
        </dir>
      </dir>
    </dir>
  </dir>
</dir>
<p>Section 8.02 <u>Winding Up</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) Subject to the SBIC Act and Section 8.03, when the Partnership
          is dissolved, the property and business of the Partnership will be
          liquidated by the General Partner or if there is no General Partner or
          the General Partner is unable to act, a person designated by the
          Parent Fund.</p>
          <p>&nbsp;&nbsp;&nbsp; (b) Within a reasonable period&nbsp;(and subject to the requirements of
          Treasury Regulation &sect;&sect;&nbsp;1.704-1(b)(ii)(g) and 1.704-1(b)(2)(ii)(b)(2))
          after the effective date of dissolution of the Partnership, the
          affairs of the Partnership will be wound up and the Partnership's
          assets will be distributed as follows:</p>
            <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)&nbsp;&nbsp;&nbsp; First, to the payment of the debts and
            liabilities of the Partnership and the expenses of liquidation;</p>
            <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii)&nbsp;&nbsp;&nbsp; Second, to the setting up of any reserves that
            the General Partner may deem reasonably necessary for any contingent
            or unforeseen liabilities or obligations of the Partnership or of
            the Partners arising out of or in connection with the Partnership;
            </p>
            <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii)&nbsp;&nbsp;&nbsp; Third, to the distribution to each of the
            Partners of the amounts in their respective Capital Accounts or, if
            the amount available is less than the aggregate amount of such
            Capital Accounts, then pro rata to the Partners in proportion to the
            amounts in their respective Capital Accounts; and</p>
            <p ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iv)&nbsp;&nbsp;&nbsp; Any balance remaining shall be distributed among
            the Partners, pro rata in proportion their respective Percentage
            Interests.</p>
        <p>Section 8.03 <u>Withdrawal of the General
        Partner</u>.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (a) Except as provided in Section 4.03, the General Partner may not
          withdraw as the general partner of the Partnership without the
          approval of the Parent Fund.</p>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>To the extent required by the SBIC Act, no transfer of the
          interest of the General Partner, or any portion of such interest, will
          be effective without the consent of SBA.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (c) Subject to the limitations set forth in Section 8.03(b),
          Section 10.01(b), Section 10.01(d), or Section 10.01(f), any person
          who acquires the interest of the General Partner, or any portion of
          such interest, in the Partnership, will not be a General Partner but
          will become a special private limited partner (a &quot;Special Private
          Limited Partner&quot;) upon his written acceptance and adoption of all the
          terms and provisions of this Agreement. Such person will acquire no
          more than the interest of the General Partner in the Partnership as it
          existed on the date of the transfer, but will not be entitled to any
          priority given to the Private Limited Partners, their successors and
          assigns, in respect of the interest. No such person will have any
          right to participate in the management of the affairs of the
          Partnership or to vote with the Private Limited Partners, and the
          interest acquired by such person will be disregarded in determining
          whether any action has been taken by any percentage of the limited
          partnership interests.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (d) Upon an event of withdrawal of the General Partner without
          continuation of the Partnership as provided in Section 8.04, the
          affairs of the Partnership will be wound up in accordance with the
          provisions of Section 8.02.</p>
        <p>Section 8.04 <u>Continuation of the
        Partnership After the Withdrawal of the General Partner</u><a NAME="_Toc535845594">.</a></p>
    <p>&nbsp;&nbsp;&nbsp; Upon the occurrence of an event of withdrawal (as defined in the Act) of
    the General Partner, the Partnership will not be dissolved, if, within
    ninety (90) days after the event of withdrawal,<i> </i>the Parent Fund
    agrees in writing to continue the business of the Partnership and to the
    appointment of one or more additional general partners (subject to the
    approval of SBA), effective as of the date of withdrawal of the General
    Partner.</p>
        <p>Section 8.05 <u>Withdrawals of Capital</u>.</p>
    <p>&nbsp;&nbsp;&nbsp; Except as specifically provided in this Agreement, withdrawals by a
    Partner of any amount of its Capital Account are not permitted.&nbsp;</p>
        <p>Section 8.06 <u>Withdrawal by ERISA Regulated
        Pension Plans</u>.&nbsp;</p>
        <p>&nbsp;&nbsp;&nbsp; <b>
        Notwithstanding any other provision of this Agreement, any Private
    Limited Partner that is </b>(x)&nbsp;an &quot;employee benefit plan&quot; within the
    meaning of, and subject to the provisions of, ERISA, or (y)&nbsp;any other
    Person, any of the assets of which constitute &quot;plan assets&quot; of <b>an
    &quot;employee benefit plan&quot; within the meaning of, and subject to the provisions
    of, ERISA, may elect to withdraw from the Partnership in whole or in part,
    or upon demand by the General Partner must withdraw from the Partnership in
    whole or in part, if either such Private Limited Partner or the General
    Partner obtains an opinion of counsel to the effect that, as a result of
    ERISA, (i) the withdrawal of the Private Limited Partner from the
    Partnership to such extent is required to enable the Private Limited Partner
    to avoid a violation of, or breach of the fiduciary duties of any person
    under ERISA (other than a breach of the fiduciary duties of any such person
    based upon the investment strategy or performance of the Partnership) or any
    provision of the Code related to ERISA or (ii) all or any portion of the
    assets of the Partnership (as opposed to the Private Limited Partner's
    partnership interest) constitute assets of the Private Limited Partner for
    purposes of ERISA and are subject to the provisions of ERISA to
    substantially the same extent as if owned directly by the Private Limited
    Partner.</p>
        </b>
        <p>Section 8.07 <u>Withdrawal by Government
        Plans Complying with State and Local Law</u>.&nbsp;</p>
      <b>
    <p>&nbsp;&nbsp;&nbsp; Notwithstanding any other provision of this Agreement, any Private
    Limited Partner that is a &quot;government plan&quot; within the meaning of ERISA may
    elect to withdraw from the Partnership in whole or in part, or upon demand
    by the General Partner must withdraw from the Partnership in whole or in
    part, if either such Private Limited Partner or the General Partner obtains
    an opinion of counsel to the effect that as a result of state statutes,
    regulations, case law, administrative interpretations or similar authority
    applicable to the &quot;government plan&quot;, the withdrawal of such Private Limited
    Partner from the Partnership to such extent is required to enable the
    Private Limited Partner or the Partnership to avoid a violation (other than
    a violation based upon the investment performance of the Partnership) of the
    applicable state law.</p>
        </b>
        <p>Section 8.08 <u>Withdrawal by Government
        Plans Complying with ERISA</u>.&nbsp;</p>
      <b>
    <p>&nbsp;&nbsp;&nbsp; Notwithstanding any other provision of this Agreement, any Private
    Limited Partner that is a &quot;government plan&quot; within the meaning of ERISA may
    elect to withdraw from the Partnership in whole or in part, if the
    &quot;government plan&quot; obtains an opinion of counsel to the effect that, as a
    result of ERISA, (i) the withdrawal of the &quot;government plan&quot; from the
    Partnership to such extent would be required if it were an &quot;employee benefit
    plan&quot; within the meaning of, and subject to the provisions of, ERISA, to
    enable the &quot;government plan&quot; to avoid a violation of, or breach of the
    fiduciary duties of any person under ERISA (other than a breach of the
    fiduciary duties of any such person based upon the investment strategy or
    performance of the Partnership) or any provision of the Code related to
    ERISA or (ii)&nbsp;all or any portion of the assets of the Partnership would
    constitute assets of the &quot;government plan&quot; for the purposes of ERISA, if the
    &quot;government plan&quot; were an &quot;employee benefit plan&quot; within the meaning of, and
    subject to the provisions of, ERISA and would be subject to the provisions
    of ERISA to substantially the same extent as if owned directly by the
    &quot;government plan.&quot;</p>
        </b>
        <p>Section 8.09 <u>Withdrawal by Tax Exempt
        Private Limited Partners</u>.&nbsp;</p>
      <b>
    <p>&nbsp;&nbsp;&nbsp; Notwithstanding any other provision of this Agreement, any Private
    Limited Partner that is exempt from taxation under Section 501(a) or
    501(c)(3) of the Code may elect to withdraw from the Partnership in whole or
    in part, if the Private Limited Partner obtains an opinion of counsel to the
    effect that as a result of applicable statutes, regulations, case law,
    administrative interpretations or similar authority, the withdrawal of the
    Private Limited Partner from the Partnership to such extent is required to
    enable the tax exempt Private Limited Partner to avoid loss of its tax
    exempt status under Section 501(a) or 501(c)(3) of the Code.</p>
        </b>
        <p>Section 8.10 <u>Withdrawal by Registered
        Investment Companies</u>.&nbsp;</p>
      <b>
    <p>&nbsp;&nbsp;&nbsp; Notwithstanding any other provision of this Agreement, any Private
    Limited Partner that is an &quot;investment company&quot; subject to registration
    under the Investment Company Act, may elect to withdraw from the Partnership
    in whole or in part, or upon demand by the General Partner must withdraw
    from the Partnership in whole or in part, if either such Private Limited
    Partner or the General Partner obtains an opinion of counsel to the effect
    that, as a result of the Investment Company Act, the withdrawal of the
    Private Limited Partner from the Partnership to such extent is required to
    enable such Private Limited Partner or the Partnership to avoid a violation
    of applicable provisions of the Investment Company Act or the requirement
    that the Partnership register as an investment company under the Investment
    Company Act.</p>
        </b>
        <p>Section 8.11 <u>Distributions on Withdrawal</u>.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>Subject to the provisions of this Section, upon withdrawal
          under any provision of this Agreement, a Private Limited Partner will
          have the rights to distributions provided in the Act with respect to
          distributions to be made to limited partners upon withdrawal from a
          limited partnership.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>The Partnership will not make any distribution to any
          Partner in connection with its withdrawal under any provision of this
          Agreement or the Act, unless the distribution is permitted by the SBIC
          Act and SBA has given its consent to such distribution before the
          distribution is made.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (c) <b>Except in the case of distributions made as permitted under
          subsection (b), the right of any Partner to receive any distribution
          from the Partnership as a result of such Partner's withdrawal,
          including any right any Partner may have as a creditor of the
          Partnership with respect to the amount of any such distribution, is
          subordinate to any amount due to SBA by the Partnership.</b> </p>
<u><b>
<p ALIGN="CENTER">ARTICLE 9<br>
<br>
Accounts, Reports and Auditors</p>
<p ALIGN="left">
        </b></u>Section 9.01 <u>Books of Account</u>.</p>
          <p align="left">&nbsp;&nbsp;&nbsp; (a) <b>The Partnership must maintain books and records in
          accordance with the provisions of the SBIC Act</b> <b>regarding
          financial accounts and reporting and, except as otherwise provided in
          this Agreement, generally accepted accounting principles.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) The books and records of the Partnership must be kept at the
          principal place of business of the Partnership. Each Partner will have
          access, upon reasonable notice and during regular business hours, to
          all books and records of the Partnership for all proper purposes as a
          Partner of the Partnership. Each Partner will have the right to
          receive copies of such books and records, subject to payment of the
          reasonable costs of such copies.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (c) The Partnership will not be required to disclose, however, any
          confidential or proprietary information received by the Partnership in
          connection with its investment operations, except for any disclosure
          to SBA required by the SBIC Act.&nbsp;</p>
        <p>Section 9.02 <u>Audit and Report</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>The financial statements of the Partnership must be audited
          and certified as of the end of each fiscal year by a firm of
          independent certified public accountants selected by the Partnership.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) Within ninety (90) days of the end of each fiscal year, the
          Partnership must prepare and mail to each Partner a report prepared in
          accordance with the provisions of the SBIC Act regarding financial
          reporting, setting forth as at the end of the fiscal year:&nbsp;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) a balance sheet of the Partnership;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) a statement of operations for the year;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) a statement of cash flows;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iv) a statement of changes in partners' capital, and such
              Partner's Closing Capital Account;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (v) a statement of the Assets, valued as provided under this
              Agreement;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (vi) the amount of such Partner's share in the Partnership's
              taxable income or loss for the year, in sufficient detail to
              enable it to prepare its Federal, state and other tax returns;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (vii) any other information the General Partner, after
              consultation with any Private Limited Partner requesting the same,
              deems necessary or appropriate;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (viii) upon request by any Partner, such other information as
              is needed by such Partner in order to enable it to file any of its
              tax returns; and</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ix) such other information as any Partner may reasonably
              request for the purpose of enabling it to comply with any
              reporting or filing requirements imposed by any statute, rule,
              regulation or otherwise by any governmental agency or authority.</p>
    <p>&nbsp;&nbsp;&nbsp; The items set forth in clauses (i), (ii), (iii), (iv), (v) and (vi) of
    this Section 9.02(b) will be certified by the firm of independent certified
    public accountants selected by the Partnership</p>
          <p>&nbsp;&nbsp;&nbsp; (c) Within forty-five (45) days of the end of each of the fiscal
          quarters, the Partnership will prepare and mail to each Partner a
          report of the General Partner prepared in accordance with the
          provisions of the SBIC Act regarding financial reporting setting forth
          the information described in Section 9.02(b)(i) - (iv), identifying
          the securities held by the Partnership and stating the amount of each
          security held and the cost and value thereof as determined under
          Section 3.08.</p>
        <p>Section 9.03 <u>Fiscal Year</u>.</p>
      <b>
    <p>&nbsp;&nbsp;&nbsp; The fiscal year of the Partnership will be a twelve-month year (except
    for the first and last partial years, if any) ending on December 31.&nbsp;</p>
<dir>
  <dir>
    </b>
    <p>&nbsp;</p>
  </dir>
</dir>
<u><b>
<p ALIGN="CENTER">ARTICLE 10<br>
<br>
<a NAME="_Toc535845606">Miscellaneous</a></p>
        </b></u>
        <p>Section 10.01 <a NAME="_Toc535845607"><u>Assignability</u>.</a>&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (a) No Private Limited Partner may assign, pledge or otherwise
          grant a security interest in its or his interest in the Partnership or
          in this Agreement, except with the prior written consent of the
          General Partner (which consent may be withheld in the absolute
          discretion of the General Partner).&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp;&nbsp; (b) <b>No General Partner or Private Limited Partner may transfer
          any interest of ten percent (10%) or more in the capital of the
          Partnership without the prior approval of SBA.&nbsp;</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (c) <b>The General Partner may not assign, pledge or otherwise
          grant a security interest in its interest in the Partnership or in
          this Agreement, except with the prior consent of SBA and the prior
          approval of the Parent Fund.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (d) <b>No transfer of any interest in the Partnership will be
          allowed if such transfer or the actions to be taken in connection with
          that transfer would:</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) <b>result in any violation of the SBIC Act</b>;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) <b>result in a violation of any law, rule or regulation by
              the Partnership</b>;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) <b>cause the termination or dissolution of the
              Partnership;</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iv) <b>cause the Partnership to be classified other than as a
              partnership for Federal income tax purposes;</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (v) result in the transfer of a limited partnership interest
              with a cost of less than $20,000 or cause the Partnership to be
              classified as a &quot;publicly traded partnership&quot; within the meaning
              of Section 469(k)(2) of the Code or for the purposes of Section
              512(c)(2) of the Code;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (vi) result in a violation of the Securities Act;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (vii) require the Partnership to register as an investment
              company under the Investment Company Act;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (viii) require the Partnership, the General Partner or the
              Investment Adviser/Manager to register as an investment adviser
              under the Investment Advisers Act; or</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ix) result in a termination of the Partnership for Federal or
              state income tax purposes.</p>
          <p>&nbsp;&nbsp;&nbsp; (e) If a natural person Private Limited Partner dies or become
          incapacitated, his or her legal representative will, upon execution of
          a counterpart of this Agreement, be substituted as a Private Limited
          Partner, subject to all the terms and conditions of this Agreement.&nbsp;</p>
          <p>&nbsp;&nbsp;&nbsp; (f) Any transferee of any interest in the Partnership by a transfer
          in compliance with this Section will become a substituted Partner
          under this Agreement upon delivery and execution of a counterpart of
          this Agreement, will have the same rights and responsibilities under
          this Agreement as its assignor and will succeed to the Capital Account
          and balances thereof.&nbsp;</p>
          <p>Section 10.02 <u>Binding Agreement</u>.</p>
        <b>
    <p>&nbsp;&nbsp;&nbsp; Subject to the provisions of Section 10.01, this Agreement is binding
    upon, and inures to the benefit of, the heir, successor, assign, executor,
    administrator, committee, guardian, conservator or trustee of any Partner.</p>
    <p>
        </b>Section 10.03 <u>Gender</u>.</p>
    <p>&nbsp;&nbsp;&nbsp; As used in this Agreement, masculine, feminine and neuter pronouns
    include the masculine, feminine and neuter; and the singular includes the
    plural.</p>
        <p>Section 10.04 <u>Notices</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>All notices under this Agreement must be in writing and may
          be given by personal delivery, telex, telegram, private courier
          service or registered or certified mail.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) <b>A notice is deemed to have been given:</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) <b>by personal delivery, telex, telegram, or private
              courier service, as of the day of delivery of the notice to the
              addressee; and</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) <b>by mail, as of the fifth (5th) day after the notice is
              mailed.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (c) <b>Notices must be sent to:</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) <b>the Partnership, at the address of the General Partner
              in the Certificate of Limited Partnership, or such other address
              or addresses as to which the Partners have been given notice;</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) <b>the Private Limited Partners, at the addresses in
              Schedule A attached to this Agreement (as Schedule A may be
              amended from time to time) or such other addresses as to which the
              Partnership has been given notice; and</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) <b>SBA, at the address of the Investment Division of SBA
              and, if so required under any Section of this Agreement, in
              duplicate at the address of the Office of the General Counsel of
              SBA.</p>
        </b>
        <p>Section 10.05 <u>Consents and Approvals</u>.</p>
      <b>
    <p>&nbsp;&nbsp;&nbsp; A consent or approval required to be given by any party under this
    Agreement will be deemed given and effective for purposes of this Agreement
    only if the consent or approval is:</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) <b>given by such party in writing, and</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) <b>delivered by such party to the party requesting the
              consent or approval in the manner provided for notices to such
              party under Section 10.04.</p>
        </b>
        <p>Section 10.06 <u>Counterparts</u>.</p>
    <p>&nbsp;&nbsp;&nbsp; This Agreement and any amendment to this Agreement may be executed in
    more than one counterpart with the same effect as if the parties executed
    one counterpart as of the day and year first above written on this Agreement
    or any such amendment. To be effective, each separate counterpart must be
    executed by the General Partner.</p>
        <p>Section 10.07 <u>Amendments</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) <b>This Agreement may not be amended except by an instrument in
          writing executed by the Parent Fund and the General Partner, and
          approved by SBA.&nbsp;</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (b) In addition to the requirements in Section 10.06 and Section
          10.07(a), any amendment that:</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) increases the amount of a Private Limited Partner's
              Commitment requires that Partner's consent;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) may cause a Private Limited Partner to become liable as a
              general partner of the Partnership requires the written consent of
              all Partners;</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) amends this Section requires the consent of all Partners;
              or</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iv) dilutes the relative interest of any Private Limited
              Partner in the profits or capital of the Partnership or in
              allocations or distributions attributable to the ownership of such
              interest requires that Partner's consent;</p>
          <p>&nbsp;&nbsp;&nbsp; (c) Each Private Limited Partner consents to:</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) any amendment of this Agreement or the Certificate of
              Limited Partnership to comply with or conform to any amendments of
              applicable laws governing the Partnership; and</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) any amendment to this Agreement that the General Partner
              reasonably determines is necessary or advisable in connection with
              Partnership's efforts to receive a license to operate as an SBIC;
              provided, however, that such consent with respect to any such
              amendment is contingent on the General Partner having reasonably
              determined that such amendment will not subject any Private
              Limited Partner (or any limited partner of any Private Limited
              Partner) to any material adverse economic consequences, alter or
              waive the right to receive allocations and distributions that
              otherwise would be made to any Private Limited Partner (or any
              limited partner of any Private Limited Partner), or alter or waive
              in any material respect the duties and obligations of the General
              Partner to the Partnership or any Private Limited Partner (or any
              limited partner of any Private Limited Partner).</p>
              <p>&nbsp;&nbsp;&nbsp; (d) <b>The General Partner must distribute to each Private Limited
          Partner and SBA a copy of:</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) <b>any Certificate of Amendment to the Certificate of
              Limited Partnership, and</p>
              </b>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) <b>any amendment to this Agreement.</p>
          </b>
          <p>&nbsp;&nbsp;&nbsp; (e) <b>Copies of any Certificate of Amendment to the Certificate of
          Limited Partnership, and any amendment to this Agreement must be
          distributed in the same manner as provided for notices in Section
          10.04.</p>
        </b>
        <p>Section 10.08 <u>Power of Attorney</u>.</p>
          <p>&nbsp;&nbsp;&nbsp; (a) Each Private Limited Partner appoints the General Partner, and
          each general partner of the General Partner, as its true and lawful
          representative and attorney-in-fact, in its name, place and stead, to
          make, execute, sign and file:</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) any amendments of this Agreement necessary to reflect an
              amendment of this Agreement adopted by the Partners under Section
              10.07; and</p>
              <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) all instruments, documents and certificates which, from
              time to time, may be required by the law of the United States of
              America, the State of Delaware or any other state in which the
              Partnership determines to do business, or any political
              subdivision or agency thereof, to execute, implement and continue
              the valid and subsisting existence of the Partnership and in
              conformance to the provisions of this Agreement.</p>
          <p>&nbsp;&nbsp;&nbsp; (b) The General Partner and its partners, as representatives and
          attorneys-in-fact, do not have any rights, powers or authority to
          amend or modify this Agreement when acting in such capacity, except as
          expressly provided in this Agreement. This power of attorney is
          coupled with an interest and will continue in full force and effect
          notwithstanding the subsequent death or incapacity of such party.</p>
        <p>Section 10.09 <u>Applicable Law</u>.</p>
        <p>&nbsp;&nbsp;&nbsp; <b>
        This Agreement is governed by, and construed in accordance with,
    applicable Federal laws and the laws of the State of Delaware.</p>
        </b>
        <p>Section 10.10 <u>Severability</u>.</p>
      <b>
    <p>&nbsp;&nbsp;&nbsp; If any one or more of the provisions contained in this Agreement, or any
    application of any such provision, is invalid, illegal, or unenforceable in
    any respect, the validity, legality and enforceability of the remaining
    provisions contained in this Agreement and all other applications of any
    such provision will not in any way be affected or impaired.</p>
        </b>
        <p>Section 10.11 <u>Entire Agreement</u>.</p>
      <b>
    <p>&nbsp;&nbsp;&nbsp; This Agreement, and all other written agreements executed by or on behalf
    of the General Partner and/or the Private Limited Partners and executed or
    approved by SBA, up to and including the date of this Agreement (such other
    written agreements, collectively, the &quot;SBA Agreements&quot;), state the entire
    understanding among the parties relating to the subject matter of this
    Agreement and the SBA Agreements. Any and all prior conversations,
    correspondence, memoranda or other writings are merged in, and replaced by
    this Agreement and the SBA Agreements, and are without further effect on
    this Agreement and the SBA Agreements. No promises, covenants,
    representations or warranties of any character or nature other than those
    expressly stated in this Agreement and the SBA Agreements have been made to
    induce any party to enter into this Agreement or any SBA Agreement.</p>
    </b>
    <p>&nbsp;&nbsp;&nbsp; IN WITNESS WHEREOF, the parties to this Agreement have executed this
    Agreement as of the date first written above.</p>
<dir>
  <dir>
    <dir>
      <dir>
        <dir>
          <dir>
            <dir>
              <dir>
                <dir>
                  <dir>
                    <dir>
                      <dir>
                        <b>
                        <p>General Partner:</p>
                        </b>
                        <p>Rand Capital Management, LLC</p>
                        <p>&nbsp;</p>
                        <p>By: <u>&nbsp; /s/ Allen F. Grum, Jr.
                        <br>
                        </u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Name:&nbsp; Allen F.
                        Grum, Jr.<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Title:&nbsp;&nbsp;&nbsp;&nbsp; President</p>
                        <p>Commitment Amount:</p>
                        <p>$50,000</p>
                        <p>&nbsp;</p>
                        <b>
                        <p>Private Limited Partner:</p>
                        </b>
                        <p>Rand Capital Corporation</p>
                        <p>&nbsp;</p>
                        <p>By:<u>&nbsp; /s/ Allen F. Grum, Jr.<br>
                        </u>
                        &nbsp;&nbsp;&nbsp;&nbsp; Name:&nbsp; Allen F. Grum, Jr.<br>
&nbsp;&nbsp;&nbsp;&nbsp; Title:&nbsp;&nbsp;&nbsp;&nbsp; President</p>
                        <p>Commitment Amount:</p>
                        <p>$5,000,000</p>
                        <p>Address of Private Limited Partner:</p>
                        <p>2200 Rand Building<br>
                        Buffalo, NY 14203</p>
                        <p>&nbsp;</p>
                        <p>Federal Tax I.D. Number:<u><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
                        </u></p>
                        <u>
                        <p></p>
                        </u>
                      </dir>
                    </dir>
                  </dir>
                </dir>
              </dir>
            </dir>
          </dir>
        </dir>
      </dir>
    </dir>
  </dir>
</dir>
<u>
<p ALIGN="CENTER">SCHEDULE A</p>
<p ALIGN="CENTER">Partners and Commitments</p>
</u>
<table BORDER="0" CELLSPACING="0" CELLPADDING="7" WIDTH="638" style="border-collapse: collapse" bordercolor="#111111">
  <tr>
    <td WIDTH="50%" VALIGN="TOP" BGCOLOR="#ffffff"><u><b>Partners:</b></u></td>
    <td WIDTH="50%" VALIGN="TOP" BGCOLOR="#ffffff"><u><b>Commitments</b></u></td>
  </tr>
  <tr>
    <td WIDTH="50%" VALIGN="TOP">&nbsp;<p>&nbsp;</td>
    <td WIDTH="50%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="50%" VALIGN="TOP"><u>Private Limited Partner:</u></td>
    <td WIDTH="50%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="50%" VALIGN="TOP">Rand Capital Corporation<br>
    2200 Rand Building<br>
    Buffalo, NY 14203</td>
    <td WIDTH="50%" VALIGN="TOP">$5,000,000</td>
  </tr>
  <tr>
    <td WIDTH="50%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="50%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="50%" VALIGN="TOP"><i><b>&nbsp;<p>&nbsp;</b></i></td>
    <td WIDTH="50%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="50%" VALIGN="TOP"><u>General Partner:</u></td>
    <td WIDTH="50%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="50%" VALIGN="TOP">Rand Capital Management, LLC<br>
    2200 Rand
    Building<br>
    Buffalo, NY 14203</td>
    <td WIDTH="50%" VALIGN="TOP">$50,000</td>
  </tr>
  <tr>
    <td WIDTH="50%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="50%" VALIGN="TOP">&nbsp;</td>
  </tr>
  <tr>
    <td WIDTH="50%" VALIGN="TOP">TOTAL</td>
    <td WIDTH="50%" VALIGN="TOP">$5,050,000 </td>
  </tr>
  <tr>
    <td WIDTH="50%" VALIGN="TOP">&nbsp;</td>
    <td WIDTH="50%" VALIGN="TOP">&nbsp;</td>
  </tr>
</table>
<p>&nbsp;</p>
<u>
<p ALIGN="CENTER">EXHIBIT I</p>
<p ALIGN="CENTER">Valuation Guidelines</u>&nbsp;</p>
<b>
<p>General</p>
</b>
<p ALIGN="JUSTIFY">The General Partner has sole responsibility for determining
the Asset Value of each of the Loans and Investments and of the portfolio in the
aggregate.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">Loans and Investments shall be valued individually and in the
aggregate at least semi-annually - as of the end of the second quarter of the
fiscal year-end and as of the end of the fiscal year. Fiscal year-end valuations
are audited as set forth in SBA's Accounting Standards and Financial Reporting
Requirements for Small Business Investment Companies.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">This Valuation Policy is intended to provide a consistent,
conservative basis for establishing the Asset Value of the portfolio. The Policy
presumes that Loans and Investments are acquired with the intent that they are
to be held until maturity or disposed of in the ordinary course of business.</p>
<p ALIGN="JUSTIFY"></p>
<b>
<p ALIGN="JUSTIFY">Interest-Bearing Securities</p>
</b>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">Loans shall be valued in an amount not greater than cost with
Unrealized Depreciation being recognized when value is impaired. The valuation
of loans and associated interest receivables on interest-bearing securities
should reflect the portfolio concern's current and projected financial condition
and operating results, its payment history and its ability to generate
sufficient cash flow to make payments when due.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">When a valuation relies more heavily on asset versus earnings
approaches, additional criteria should include the seniority of the debt, the
nature of any pledged collateral, the extent to which the security interest is
perfected, the net liquidation value of tangible business assets, and the
personal integrity and overall financial standing of the owners of the business.
In those instances where a loan valuation is based on an analysis of certain
collateralized assets of a business or assets outside the business, the
valuation should, at a minimum, consider the net liquidation value of the
collateral after reasonable selling expenses. Under no circumstances, however,
shall a valuation based on the underlying collateral be considered as
justification for any type of loan appreciation.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">Appropriate unrealized depreciation on past due interest
which is converted into a security (or added to an existing security) should be
recognized when collection is doubtful. Collection is presumed to be in doubt
when one or both of the following conditions occur: (i) interest payments are
more than 120 days past due; or (ii) the small concern is in bankruptcy,
insolvent, or there is substantial doubt about its ability to continue as a
going concern.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">The carrying value of interest bearing securities shall not
be adjusted for changes in interest rates.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">Valuation of convertible debt may be adjusted to reflect the
value of the underlying equity security net of the conversion price.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY"><b>Equity Securities - Private Companies</p>
</b>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">Investment cost is presumed to represent value except as
indicated elsewhere in these guidelines.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">Valuation should be reduced if a company's performance and
potential have significantly deteriorated. If the factors which led to the
reduction in valuation are overcome, the valuation may be restored.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">The anticipated pricing of a Small Concern's future equity
financing should be considered as a basis for recognizing Unrealized
Depreciation, but not for Unrealized Appreciation. If it appears likely that
equity will be sold in the foreseeable future at a price below the Licensee's
current valuation, then that prospective offering price should be weighed in the
valuation process.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">Valuation should be adjusted to a subsequent significant
equity financing that includes a meaningful portion of the financing by a
sophisticated, unrelated new investor. A subsequent significant equity financing
that includes substantially the same group of investors as the prior financing
should generally not be the basis for an adjustment in valuation. A financing at
a lower price by a sophisticated new investor should cause a reduction in value
of the prior securities.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">If substantially all of a significant equity financing is
invested by an investor whose objectives are in large part strategic, or if the
financing is led by such an investor, it is generally presumed that no more than
50% of the increase in investment price compared to the prior significant equity
financing is attributable to an increased valuation of the company.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">Where a company has been self-financing and has had positive
cash flow from operations for at least the past two fiscal years, Asset Value
may be increased based on a very conservative financial measure regarding P/E
ratios or cash flow multiples, or other appropriate financial measures of
similar publicly-traded companies, discounted for illiquidity. Should the chosen
valuation cease to be meaningful, the valuation may be restored to a cost basis,
or if of significant deterioration in performance or potential, to a valuation
below cost to reflect impairment.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">With respect to portfolio companies that are likely to face
bankruptcy or discontinue operations for some other reason, liquidating value
may be employed. This value may be determined by estimating the realizable value
(often through professional appraisals or firm offers to purchase) of all assets
and then subtracting all liabilities and all associated liquidation costs.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">Warrants should be valued at the excess of the value of the
underlying security over the exercise price.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY"><b>Equity Securities - Public Companies</p>
</b>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">Public securities should be valued as follows: (a) For
over-the-counter stocks, take the average of the bid price at the close for the
valuation date and the preceding two days, and (b) for listed stocks, take the
average of the close for the valuation date and the preceding two days.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">The valuation of public securities that are restricted should
be discounted appropriately until the securities may be freely traded. Such
discounts typically range from 10% to 40%, but the discounts can be more or
less, depending upon the resale restrictions under securities laws or
contractual agreements.</p>
<p ALIGN="JUSTIFY"></p>
<p ALIGN="JUSTIFY">When the number of shares held is substantial in relation to
the average daily trading volume, the valuation should be discounted by at least
10%, and generally by more.</p>

</body>

</html>

</TEXT>
</DOCUMENT>
