AGREEMENT OF LIMITED PARTNERSHIP
OF
COBALT LIFE SCIENCES OPPORTUNITIES FUND I, LP
A Delaware Limited Partnership
FIRST DRAFT — FOR DISCUSSION PURPOSES ONLY
May 31, 2026
Prepared by:
Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022
Matter No.: 1004-00002
CONFIDENTIAL: This document is a confidential draft, subject to revision, and does not constitute an offer of securities. This draft is being circulated for discussion purposes only among the parties and their advisors. No person may rely on the contents hereof. The terms set forth herein are subject to change and do not create any legally binding obligations. Distribution of this document is strictly limited to authorized recipients and their professional advisors.
TABLE OF CONTENTS
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ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Agreement of Limited Partnership (this "Agreement"), the following terms shall have the meanings set forth below. Capitalized terms used but not defined in a particular provision of this Agreement shall have the meanings ascribed to them in this Section 1.1.
"Affiliate" means, with respect to any Person, (a) any other Person directly or indirectly controlling, controlled by, or under common control with such Person, (b) any officer, director, general partner, managing member, or trustee of such Person, and (c) any Person of which such Person is an officer, director, general partner, managing member, or trustee. For purposes of this definition, "control" (including the correlative terms "controlling," "controlled by," and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. Notwithstanding the foregoing, no Limited Partner shall be deemed an Affiliate of the Partnership, the General Partner, or any other Limited Partner solely by reason of its status as a Limited Partner.
"Aggregate Commitments" means the total Capital Commitments of all Partners, including the General Partner's Capital Commitment (the "GP Commitment"), accepted by the General Partner at or prior to the Final Close.
"Agreement" means this Agreement of Limited Partnership, as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms hereof.
"Alternative Investment Vehicle" or "AIV" means any entity formed or designated by the General Partner pursuant to Article XX to facilitate one or more Portfolio Investments for tax, legal, regulatory, or other reasons, as more particularly described in Section 20.1.
"blocker Entity" means Cobalt Life Sciences Opportunities Fund I (Blocker), Inc., a Delaware C-Corporation to be formed if needed by the General Partner in its discretion in order to provide a taxable blocker structure for certain tax-exempt or non-U.S. investors, as more particularly described in Section 20.3.
"Business Day" means any day other than a Saturday, a Sunday, or a day on which commercial banks in New York, New York or Wilmington, Delaware are authorized or required by law or executive order to close.
"Capital Account" means, with respect to each Partner, the capital account established and maintained for such Partner in accordance with Treasury Regulation § 1.704-1(b)(2)(iv) and Section 5.1 of this Agreement.
"Capital Commitment" means, with respect to each Partner, the total amount of capital that such Partner has committed to contribute to the Partnership as set forth in such Partner's Subscription Agreement (or, in the case of the General Partner, as set forth in Section 3.1), as the same may be reduced in accordance with the terms of this Agreement.
"Capital Contribution" means, with respect to each Partner, the aggregate amount of cash actually contributed (or deemed contributed) by such Partner to the Partnership pursuant to this Agreement.
"Carried Interest" means the portion of Net Profits distributable to the General Partner (or its designees) pursuant to Sections 6.2(c) and 6.2(d) of this Agreement, representing twenty percent (20%) of Net Profits distributed above the Preferred Return, as more particularly described in Article VI.
"Carry Escrow" means the escrow arrangement described in Section 6.4, pursuant to which thirty percent (30%) of Carried Interest distributions otherwise payable to the General Partner (or its designees) shall be deposited and held in the Carry Escrow Account until released in accordance with the terms of this Agreement.
"Carry Escrow Account" has the meaning set forth in Section 6.4.
"Certificate of Limited Partnership" means the Certificate of Limited Partnership of the Partnership filed with the Secretary of State of the State of Delaware, as the same may be amended or restated from time to time.
"Clawback Obligation" means the obligation of the General Partner (and the Key Persons and Alan Whitford, jointly and severally, to the extent of their respective shares of Carried Interest received, net of taxes) to return to the Fund any excess Carried Interest distributions, as more particularly described in Section 6.5.
"Closing" means the First Close, any subsequent closing, or the Final Close, as the context requires, at which Capital Commitments are accepted by the General Partner and Limited Partners are admitted to the Partnership.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. References to any section of the Code shall include any successor provision thereto.
"Concentration Limit" means fifteen percent (15%) of Aggregate Commitments, as more particularly described in Section 8.3. At the Target Fund Size of $750,000,000, the Concentration Limit equals $112,500,000.
"Covered Person" has the meaning set forth in Section 16.1.
"Default" means the failure by a Limited Partner to fund all or any portion of a capital call within the time period specified in the applicable capital call notice and the default notice delivered pursuant to Section 4.3.
"Defaulting Limited Partner" means a Limited Partner that has committed a Default.
"DRULPA" means the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §§ 17-101 et seq., as amended from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder.
"Escrow Agent" means Ridgeway National Bank, N.A., acting in its capacity as escrow agent under the Carry Escrow arrangements described in Section 6.4.
"Excluded Co-Investment" means an investment opportunity offered by the General Partner to one or more Limited Partners or third parties outside of the Fund as a co-investment alongside the Fund, as more particularly described in Section 8.6.
"Extension Period" means each of the one-year extension periods described in Section 2.6.
"Final Close" means the final Closing at which Capital Commitments are accepted by the General Partner, which shall occur no later than eighteen (18) months after the First Close (target: May 15, 2027), or such later date as the General Partner may determine.
"First Close" means the initial Closing at which Capital Commitments are accepted by the General Partner, which is targeted to occur on or about November 15, 2026, at which the minimum Aggregate Commitments shall be not less than $250,000,000.
"Fund" means Cobalt Life Sciences Opportunities Fund I, LP, the partnership formed pursuant to this Agreement.
"Fund Expenses" means all costs and expenses incurred in connection with the operations of the Partnership (other than Organizational Expenses), including, without limitation, audit fees, tax preparation and advisory fees, legal fees, fund administration fees, D&O and E&O insurance premiums, regulatory filing fees, LPAC meeting expenses, custodian and banking fees, broken-deal expenses (subject to the limitations set forth in Section 7.5), and such other expenses as are described in Section 7.4.
"Fund Term" means the period commencing on the date of the First Close and ending on the tenth (10th) anniversary of the Final Close, as may be extended pursuant to the Extension Periods described in Section 2.6.
"General Partner" means Cobalt Life Sciences GP I, LLC, a Delaware limited liability company, or any successor general partner admitted to the Partnership in accordance with the terms of this Agreement.
"GP Catch-Up" has the meaning set forth in Section 6.2(c).
"GP Commitment" means the Capital Commitment of the General Partner, which shall be not less than two percent (2%) of Aggregate Commitments. At the Target Fund Size of $750,000,000, the GP Commitment equals $15,000,000.
"Hard Cap" means $1,000,000,000, the maximum amount of Aggregate Commitments that the General Partner may accept without LPAC consent.
"Invested Capital" means, as of any date of determination, the aggregate amount of Capital Contributions that have been actually invested in Portfolio Investments, net of (a) write-offs and write-downs of such Portfolio Investments, and (b) realized proceeds from such Portfolio Investments that have been returned to Partners.
"Investment Company Act" means the Investment Company Act of 1940, as amended from time to time.
"Investment Period" means the five (5)-year period commencing on the date of the First Close and ending on the fifth (5th) anniversary thereof, subject to suspension or termination pursuant to Article X.
"Key Person" means each of Dr. Marcus Yeung and Priya Dasgupta.
"Key Person Event" has the meaning set forth in Section 10.2.
"Limited Partner" means each Person admitted to the Partnership as a limited partner pursuant to this Agreement and the applicable Subscription Agreement, and any Person admitted as a substituted limited partner in accordance with Article XI, in each case for so long as such Person holds a Partnership Interest.
"Limited Partner Advisory Committee" or "LPAC" means the advisory committee of Limited Partners established and maintained pursuant to Article XIV.
"Management Company" means Cobalt Life Sciences Management I, LLC, a Delaware limited liability company, to which certain management and administrative functions of the General Partner may be delegated pursuant to Section 9.2.
"Management Fee" means the management fee payable by the Partnership to the Management Company as described in Section 7.1.
"MFN Side Letter" means a most favored nation side letter entered into between the General Partner and a qualifying Limited Partner, as described in Section 18.2, entitling such Limited Partner to elect to receive certain provisions granted to other Limited Partners in their respective side letters.
"Net Losses" means, for any fiscal year or other period, the excess, if any, of the Partnership's items of loss and deduction over its items of income and gain for such period, as determined in accordance with U.S. GAAP and the accounting methods and conventions used by the Partnership for federal income tax purposes, with the adjustments required by Treasury Regulation § 1.704-1(b)(2)(iv).
"Net Profits" means, for any fiscal year or other period, the excess, if any, of the Partnership's items of income and gain over its items of loss and deduction for such period, as determined in accordance with U.S. GAAP and the accounting methods and conventions used by the Partnership for federal income tax purposes, with the adjustments required by Treasury Regulation § 1.704-1(b)(2)(iv).
"Organizational Expenses" means all costs and expenses incurred in connection with the formation and organization of the Partnership, the General Partner, the Management Company, and related entities, including, without limitation, legal fees, SEC and state filing fees, initial accounting and tax setup costs, and printing costs, subject to the cap set forth in Section 7.3.
"Parallel Fund" means any parallel investment vehicle formed alongside the Fund by the General Partner pursuant to Section 20.2.
"Partner" means the General Partner or any Limited Partner, as the context requires.
"Partnership" means Cobalt Life Sciences Opportunities Fund I, LP, the limited partnership governed by this Agreement.
"Partnership Interest" means the interest of a Partner in the Partnership, including such Partner's right to distributions, allocations, information, and voting (if any) as set forth in this Agreement.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof, or any other entity.
"Placement Agent" means sagebrush Capital Partners LLC, engaged by the General Partner to assist in the marketing and placement of Partnership Interests.
"Placement Fee" means the fee payable to the Placement Agent in an amount equal to one and one-half percent (1.50%) of Capital Commitments sourced by the Placement Agent from third-party investors.
"Portfolio Company" means any entity in which the Fund holds a Portfolio Investment.
"Portfolio Investment" means any equity or equity-related investment made by the Partnership (or through an AIV or Parallel Fund) in a Portfolio Company.
"Preferred Return" means a cumulative, compounded annual internal rate of return of eight percent (8%) on each Partner's Capital Contributions, calculated from the dates on which such Capital Contributions are funded to the dates on which distributions are made, as more particularly described in Section 6.2(b).
"Recycling" means the reinvestment by the Partnership of realized proceeds from Portfolio Investments during the Investment Period, as more particularly described in Section 8.4, such that the aggregate amount invested does not exceed one hundred fifteen percent (115%) of Aggregate Commitments.
"Securities Act" means the Securities Act of 1933, as amended from time to time.
"Subscription Agreement" means the subscription agreement and investor questionnaire executed by each Limited Partner in the form attached hereto as Exhibit A, pursuant to which such Limited Partner subscribes for a Partnership Interest and makes certain representations and warranties.
"Target Fund Size" means $750,000,000.
"Transaction Fees" means any break-up fees, topping fees, director fees, consulting fees, monitoring fees, advisory fees, or similar fees received by the General Partner, the Management Company, or any of their respective Affiliates from or with respect to Portfolio Companies or prospective Portfolio Companies.
"Treasury Regulations" means the regulations promulgated under the Code by the United States Department of the Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
"VCOC" means a venture capital operating company, as defined in Department of Labor Regulation § 2510.3-101(d).
Section 1.2 — Rules of Construction
(a) The headings and captions of Articles, Sections, and Schedules contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
(b) Unless the context otherwise requires, words importing the singular number shall include the plural and vice versa, and words importing the masculine gender shall include the feminine and neuter genders and vice versa.
(c) The words "hereof," "herein," "hereunder," and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
(d) References to any statute or regulation shall be deemed to refer to such statute or regulation as amended from time to time, and to any rules or regulations promulgated thereunder.
(e) All references to the DRULPA shall mean the Delaware Revised Uniform Limited Partnership Act as in effect on the date hereof, unless otherwise specified.
(f) The terms "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation."
(g) All references to "dollars" or "$" shall mean United States dollars.
(h) All references to any agreement or document shall be deemed to refer to such agreement or document as amended, supplemented, restated, or otherwise modified from time to time in accordance with its terms.
(i) The Schedules and Exhibits attached hereto are incorporated herein by reference and shall be deemed a part of this Agreement.
ARTICLE II — ORGANIZATION
Section 2.1 — Formation
The Partnership has been formed as a limited partnership under and pursuant to the provisions of the DRULPA by the filing of a Certificate of Limited Partnership with the office of the Secretary of State of the State of Delaware. The name of the Partnership is "Cobalt Life Sciences Opportunities Fund I, LP." The General Partner is hereby authorized to execute, deliver, file, and record any amendments to the Certificate of Limited Partnership and such other certificates, documents, instruments, and publications as may be required or appropriate under the DRULPA or under the laws of any other jurisdiction in which the Partnership may conduct business or own property. The registered agent of the Partnership for service of process in the State of Delaware is Hollowell Technologies, located at 1209 Orange Street, Wilmington, Delaware 19801, or such other registered agent as the General Partner may designate from time to time in accordance with applicable law.
Section 2.2 — Name
The business of the Partnership shall be conducted under the name "Cobalt Life Sciences Opportunities Fund I, LP" or such other name or names as the General Partner may from time to time determine; provided that any such change of name shall be reflected in an amendment to the Certificate of Limited Partnership filed with the Secretary of State of the State of Delaware and written notice thereof shall be given to each Limited Partner promptly following such change.
Section 2.3 — Registered Office and Agent
The registered office of the Partnership in the State of Delaware is located at 1209 Orange Street, Wilmington, Delaware 19801. The registered agent of the Partnership at such address is Hollowell Technologies. The General Partner may change the registered office and registered agent of the Partnership from time to time in accordance with applicable law by filing the appropriate documents with the Secretary of State of the State of Delaware and providing notice to the Limited Partners.
Section 2.4 — Principal Office
The principal office of the Partnership shall be located at 3400 Sand Hill Road, Suite 220, Menlo Park, California 94025, which is the principal office of Cobalt Ventures LP, the parent organization of the General Partner. The General Partner may change the location of the principal office from time to time upon written notice to the Limited Partners.
Section 2.5 — Purpose
The purpose of the Partnership is to make, hold, monitor, manage, and dispose of equity and equity-related investments primarily in clinical-stage therapeutics companies (Phase II clinical trials and later), medical device companies with U.S. Food and Drug Administration 510(k) clearance or Pre-Market Approval (PMA) pathways, and platform biotechnology companies engaged in gene editing, synthetic biology, AI-enabled drug discovery, and related fields, and to engage in all activities incidental, ancillary, or related thereto. The Partnership's sector focus, geographic parameters, and investment sizing guidelines are as follows:
(a) Sector Focus. The Partnership shall focus on (i) clinical-stage therapeutics companies that have achieved at least Phase II clinical trial status, (ii) medical device companies pursuing FDA 510(k) clearance or PMA pathways, and (iii) platform biotechnology companies operating in the fields of gene editing, synthetic biology, AI-enabled drug discovery, and related disciplines.
(b) Geography. The Partnership shall invest primarily in portfolio companies based in North America. Up to twenty-five percent (25%) of Aggregate Commitments may be deployed in Western Europe and Israel.
(c) Check Size. The Partnership anticipates initial investment sizes ranging from $30,000,000 to $100,000,000 per Portfolio Investment, with additional capital reserved for follow-on investments in existing Portfolio Companies.
The Partnership shall not engage in any business or activity that is inconsistent with or not reasonably related to the foregoing purpose or that would cause the Partnership to be classified other than as a partnership for U.S. federal income tax purposes.
Section 2.6 — Term
The Partnership shall continue in existence until the tenth (10th) anniversary of the Final Close (the "Fund Term"), unless the Partnership is earlier dissolved in accordance with Article XIX. Based on the target Final Close date of May 15, 2027, the Fund Term is anticipated to expire on May 15, 2037. The Fund Term may be extended as follows:
(a) First Extension Period. The General Partner may, in its sole discretion and without the consent of the LPAC or any Limited Partner, extend the Fund Term for one (1) additional year (through May 15, 2038) upon written notice to the Limited Partners delivered at least ninety (90) days prior to the scheduled expiration of the Fund Term.
(b) Second Extension Period. With the prior written consent of the LPAC, the General Partner may extend the Fund Term for one (1) additional year beyond the First Extension Period (through May 15, 2039) upon written notice to the Limited Partners delivered at least ninety (90) days prior to the scheduled expiration of the First Extension Period.
For the avoidance of doubt, the maximum duration of the Fund Term, including both Extension Periods, shall not exceed twelve (12) years from the date of the Final Close. The provisions relating to dissolution and winding up of the Partnership upon the expiration of the Fund Term are set forth in Article XIX.
Section 2.7 — Fiscal Year
The fiscal year of the Partnership shall be the calendar year, commencing January 1 and ending December 31 of each year; provided that the first fiscal year of the Partnership shall commence on the date of the First Close and end on December 31 of the calendar year in which the First Close occurs, and the final fiscal year of the Partnership shall end on the date on which the Partnership is finally wound up and dissolved.
Section 2.8 — Partnership Tax Status
The Partnership shall be treated as a partnership for U.S. federal income tax purposes. Neither the General Partner nor any Partner shall take any action or make any election that would cause the Partnership to be classified as a corporation or an association taxable as a corporation for U.S. federal income tax purposes. The General Partner shall not file an election to be classified as a corporation under Treasury Regulation § 301.7701-3. Each Partner agrees to file all tax returns and reports consistent with the treatment of the Partnership as a partnership for U.S. federal income tax purposes.
ARTICLE III — PARTNERS; CAPITAL COMMITMENTS; CLOSINGS
Section 3.1 — General Partner
(a) Identity. Cobalt Life Sciences GP I, LLC, a Delaware limited liability company, shall serve as the General Partner of the Partnership. The Managing Members of the General Partner are Dr. Marcus Yeung and Priya Dasgupta.
(b) GP Commitment. The General Partner shall make a Capital Commitment to the Partnership in an amount equal to not less than two percent (2%) of Aggregate Commitments (the "GP Commitment"). At the Target Fund Size of $750,000,000, the GP Commitment shall be $15,000,000. The GP Commitment shall be funded pro rata with capital calls issued to the Limited Partners and shall be subject to the same terms and conditions as Capital Contributions made by the Limited Partners, except as expressly set forth herein.
(c) Funding of GP Commitment. The General Partner may fund its GP Commitment with a combination of cash and, subject to the prior approval of the LPAC, promissory notes; provided that any promissory notes shall bear interest at a rate no less than the applicable federal rate, shall be full recourse to the General Partner and its Managing Members, and shall have a maturity date no later than the end of the Investment Period.
(d) GP Interest. The General Partner shall hold a general partner interest in the Partnership and shall have such rights and obligations as are set forth in this Agreement and as are provided under the DRULPA.
Section 3.2 — Admission of Limited Partners
(a) Admission. Each Limited Partner shall be admitted to the Partnership upon (i) execution and delivery by such Limited Partner of a Subscription Agreement and investor questionnaire in the form attached hereto as Exhibit A, (ii) acceptance of such Limited Partner's Capital Commitment by the General Partner in its sole discretion, and (iii) contribution of capital by such Limited Partner at the applicable Closing.
(b) Minimum Commitment. The minimum individual Capital Commitment for each Limited Partner shall be $10,000,000; provided that the General Partner may, in its sole discretion, waive or reduce such minimum commitment for any Limited Partner.
(c) Representations and Warranties. Each Limited Partner shall make the representations and warranties set forth in the Subscription Agreement, including, without limitation, representations regarding its status as a "qualified purchaser" within the meaning of Section 2(a)(51) of the Investment Company Act, its status as an "accredited investor" within the meaning of Rule 501 of Regulation D under the Securities Act, and such other representations as the General Partner may require.
Section 3.3 — Closings
(a) First Close. The General Partner shall conduct the initial Closing of the Partnership (the "First Close") on or about November 15, 2026, or such other date as the General Partner may determine. The minimum Aggregate Commitments at the First Close shall be not less than $250,000,000. The Investment Period shall commence on the date of the First Close.
(b) Subsequent Closes. Following the First Close, the General Partner may hold one or more additional Closings at which additional Limited Partners may be admitted and additional Capital Commitments may be accepted.
(c) Final Close. The Final Close shall occur no later than eighteen (18) months after the date of the First Close (target: May 15, 2027), or such later date as the General Partner may determine in its discretion; provided that the General Partner shall not extend the Final Close deadline beyond twenty-four (24) months after the date of the First Close without the consent of Limited Partners holding a majority of Capital Commitments then accepted.
(d) Interest Equalization. Each Limited Partner admitted at a Closing subsequent to the First Close shall contribute to the Partnership its pro rata share of all capital calls previously made by the Partnership from the date of the First Close through the date of such subsequent Closing, plus interest thereon at the Preferred Return rate (eight percent (8%) per annum, compounded annually) from the date of each such prior capital call to the date of such subsequent Closing contribution (the "Equalization Interest"). The Equalization Interest shall not constitute a Capital Contribution but shall be distributed to the Limited Partners admitted at prior Closings as an adjustment to equalize economic participation among all Partners.
Section 3.4 — Target Fund Size and Hard Cap
(a) Target Fund Size. The Target Fund Size of the Partnership is $750,000,000 in Aggregate Commitments.
(b) Hard Cap. The General Partner shall not accept Aggregate Commitments in excess of $1,000,000,000 (the "Hard Cap") without the prior written consent of the LPAC.
(c) Discretion. The General Partner shall have full discretion to accept or reject Capital Commitments from prospective Limited Partners and to determine the final size of the Fund within the parameters set forth in this Section 3.4.
Section 3.5 — Schedule of Partners
The General Partner shall maintain, or cause Halcyon Fund Services, Inc. (the Partnership's fund administrator) to maintain, a schedule (the "Schedule of Partners"), attached hereto as Schedule A, setting forth the name, address, Capital Commitment, Capital Contributions, date of admission, and percentage interest of each Partner. The Schedule of Partners shall be updated following each Closing, each capital call, and each distribution, and shall be made available to any Partner upon request.
ARTICLE IV — CAPITAL CONTRIBUTIONS AND CAPITAL CALLS
Section 4.1 — Capital Calls
(a) Authority. The General Partner may, from time to time, issue capital calls (also referred to as "drawdowns") requiring each Partner to contribute a portion of its unfunded Capital Commitment to the Partnership. Capital calls shall be made pro rata based on each Partner's unfunded Capital Commitment relative to the aggregate unfunded Capital Commitments of all Partners, unless otherwise specified in this Agreement or the applicable side letter.
(b) Notice. Capital calls shall be made by written notice (in the form attached hereto as Exhibit B) delivered to each Partner not less than ten (10) Business Days prior to the required funding date (the "Funding Date"). Each capital call notice shall specify (i) the aggregate amount of the capital call, (ii) each Partner's pro rata share of the capital call, (iii) the purpose of the capital call (e.g., Portfolio Investment, Fund Expenses, Management Fee, Organizational Expenses, or satisfaction of other Partnership obligations), (iv) the Funding Date, and (v) wire transfer instructions for payment to the Partnership's account at Ridgeway National Bank, N.A.
(c) Purpose. Capital calls may be made for any purpose related to the Partnership's business, including, without limitation, funding Portfolio Investments, paying Fund Expenses, paying Management Fees, paying Organizational Expenses, and satisfying any other obligations of the Partnership.
Section 4.2 — Limitations on Capital Calls
(a) Post-Investment Period. Following the expiration of the Investment Period (or the earlier termination or suspension thereof pursuant to Article X), the General Partner shall not issue capital calls for the purpose of making new Portfolio Investments, except for:
(i) follow-on investments in existing Portfolio Companies to the extent such follow-on investments were committed or approved during the Investment Period;
(ii) payment of Fund Expenses, Management Fees, and other operating costs of the Partnership; and
(iii) satisfaction of obligations of the Partnership existing at the time of expiration of the Investment Period.
(b) Recycling. During the Investment Period, the General Partner may recall and reinvest capital from realized proceeds of Portfolio Investments (the "Recycling"), subject to the limitation that the aggregate amount of capital invested in Portfolio Investments (including recycled capital) shall not exceed one hundred fifteen percent (115%) of Aggregate Commitments. At the Target Fund Size of $750,000,000, the Recycling allowance equals $112,500,000 of additional invested capital beyond Aggregate Commitments. No Recycling shall be permitted after the expiration of the Investment Period.
Section 4.3 — Failure to Fund; Default Provisions
(a) Default Notice. If any Limited Partner fails to fund all or any portion of a capital call on or before the applicable Funding Date, the General Partner shall deliver a written default notice to such Limited Partner (a "Default Notice"), specifying the nature and amount of the deficiency and granting a cure period of five (5) Business Days from receipt of the Default Notice (the "Cure Period"). If such Limited Partner fails to cure the deficiency within the Cure Period, such Limited Partner shall be a "Defaulting Limited Partner" and shall be in "Default" under this Agreement.
(b) Remedies. Upon the occurrence of a Default that is not cured within the Cure Period, the General Partner shall have the right, in its sole discretion, to impose any one or more of the following remedies:
(i) Forfeiture. The Defaulting Limited Partner shall forfeit up to fifty percent (50%) of its Capital Account balance as of the date of the Default. The forfeited amount shall be reallocated among the non-defaulting Partners pro rata based on their respective Capital Commitments.
(ii) Reduction of Commitment. The Defaulting Limited Partner's Capital Commitment and unfunded commitment shall be reduced to zero, and such Defaulting Limited Partner shall have no further obligation to fund capital calls (other than as set forth in clause (vi) below).
(iii) Suspension of Rights. All voting, consent, and approval rights of the Defaulting Limited Partner under this Agreement shall be suspended for so long as the Default remains outstanding.
(iv) Funding by Non-Defaulting Partners. The General Partner may, at its option, offer the non-defaulting Limited Partners the right to fund the defaulting amount on a pro rata basis (based on their respective Capital Commitments), and any such funding shall increase the Capital Contributions and Capital Account of the funding Partners accordingly.
(v) Forced Sale or Assignment. The General Partner may cause the Defaulting Limited Partner's Partnership Interest to be sold, assigned, or otherwise transferred to a third party or to one or more non-defaulting Partners at a price determined by the General Partner in good faith, which may be at a discount of up to fifty percent (50%) of the fair market value of such Partnership Interest.
(vi) Continuing Liability. The Defaulting Limited Partner shall remain liable for its pro rata share of all Fund liabilities accrued prior to the date of the Default, including, without limitation, its share of indemnification obligations under Article XVI.
(c) Interest on Overdue Amounts. Any amount that a Defaulting Limited Partner fails to contribute when due shall bear interest from the applicable Funding Date until paid in full at a rate equal to two percent (2%) per annum above the prime rate as published by Ridgeway National Bank, N.A. on the applicable Funding Date. Such interest shall be for the account of the Partnership and shall not constitute a Capital Contribution of the Defaulting Limited Partner.
(d) Cumulative Remedies. The remedies set forth in this Section 4.3 are cumulative and are in addition to any other rights or remedies available to the General Partner or the Partnership at law or in equity.
Section 4.4 — Return of Capital Contributions
Excess Capital Contributions not applied to Portfolio Investments, Fund Expenses, or other Partnership purposes within twelve (12) months of the date of contribution may be returned by the General Partner to the Partners pro rata based on their respective Capital Contributions. Any Capital Contributions so returned shall be treated as a return of unfunded Capital Commitment and may be recalled by the General Partner in accordance with Section 4.1.
Section 4.5 — No Additional Capital Contributions
No Partner shall be obligated to contribute capital to the Partnership in excess of its Capital Commitment, except as otherwise expressly provided in this Agreement (including, without limitation, with respect to the Clawback Obligation under Section 6.5 and indemnification obligations under Article XVI). No Partner shall be obligated to lend funds to the Partnership or to make any additional capital contribution beyond the amount of its Capital Commitment.
ARTICLE V — ALLOCATIONS
Section 5.1 — Capital Accounts
A separate Capital Account shall be established and maintained for each Partner in accordance with the provisions of Treasury Regulation § 1.704-1(b)(2)(iv). Each Partner's Capital Account shall be (a) increased by (i) the amount of cash contributed by such Partner to the Partnership, (ii) the fair market value of property contributed by such Partner to the Partnership (net of liabilities secured by such property that the Partnership is considered to assume or take subject to), and (iii) allocations of Net Profits and items of income and gain allocated to such Partner, and (b) decreased by (i) the amount of cash distributed to such Partner by the Partnership, (ii) the fair market value of property distributed to such Partner by the Partnership (net of liabilities secured by such property that such Partner is considered to assume or take subject to), and (iii) allocations of Net Losses and items of loss and deduction allocated to such Partner. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulation § 1.704-1(b) and shall be interpreted and applied in a manner consistent with such regulation.
Section 5.2 — Allocation of Net Profits and Net Losses
(a) General Rule. Except as otherwise provided in this Section 5.2 and subject to the regulatory allocations set forth below, Net Profits and Net Losses shall be allocated among the Partners in a manner that, to the extent possible, causes each Partner's Capital Account balance (after taking into account all contributions, distributions, and other adjustments for such fiscal year) to equal the amount that would be distributed to such Partner if all Partnership assets were sold at their book values, all Partnership liabilities were satisfied, and the remaining proceeds were distributed in accordance with the distribution waterfall set forth in Section 6.2.
(b) Special Allocations. Notwithstanding the foregoing general rule, the following special allocations shall be made in the following order of priority:
(i) Minimum Gain Chargeback. If there is a net decrease in "partnership minimum gain" (as determined under Treasury Regulation § 1.704-2(d)) during any fiscal year, each Partner shall be allocated items of income and gain for such year (and, if necessary, subsequent years) in an amount and manner required by Treasury Regulation § 1.704-2(f).
(ii) Partner Minimum Gain Chargeback. If there is a net decrease in "partner nonrecourse debt minimum gain" (as determined under Treasury Regulation § 1.704-2(i)(3)) attributable to a "partner nonrecourse debt" during any fiscal year, each Partner who has a share of such partner nonrecourse debt minimum gain shall be allocated items of income and gain for such year (and, if necessary, subsequent years) in an amount and manner required by Treasury Regulation § 1.704-2(i)(4).
(iii) Qualified Income Offset. Each Partner who unexpectedly receives an adjustment, allocation, or distribution described in Treasury Regulation § 1.704-1(b)(2)(ii)(d)(4), (5), or (6) that causes or increases a deficit balance in such Partner's Capital Account (in excess of any amount such Partner is obligated to restore) shall be allocated items of income and gain in an amount and manner sufficient to eliminate such excess deficit balance as quickly as possible. This provision is intended to constitute a "qualified income offset" within the meaning of Treasury Regulation § 1.704-1(b)(2)(ii)(d).
(iv) Gross Income Allocation. If any Partner has a deficit Capital Account balance at the end of any fiscal year that is in excess of the sum of (A) the amount such Partner is obligated to restore under Treasury Regulation § 1.704-1(b)(2)(ii)(c) and (B) the amount such Partner is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulation §§ 1.704-2(g)(1) and 1.704-2(i)(5), such Partner shall be allocated items of gross income and gain in the amount of such excess as quickly as possible.
(c) Curative Allocations. The special allocations set forth in subsection (b) above (the "Regulatory Allocations") are intended to comply with certain requirements of the Treasury Regulations. It is the intent of the Partners that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Partnership income, gain, loss, or deduction. Accordingly, the General Partner is hereby authorized to make such offsetting allocations of Partnership income, gain, loss, or deduction as the General Partner determines are appropriate so that, after such offsetting allocations are made, each Partner's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Partner would have had if the Regulatory Allocations had not been made.
Section 5.3 — Tax Allocations; IRC § 704(c)
(a) Except as otherwise provided in this Section 5.3, items of income, gain, loss, deduction, and credit shall be allocated for U.S. federal income tax purposes in the same manner as the corresponding items of Net Profits and Net Losses are allocated among the Partners pursuant to Section 5.2.
(b) In accordance with Section 704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the Partnership (or deemed contributed pursuant to a revaluation of Partnership assets under Treasury Regulation § 1.704-1(b)(2)(iv)(f)) shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted tax basis of such property to the Partnership for federal income tax purposes and its initial book value (or revalued book value, as applicable). The Partnership shall use the "remedial allocation" method described in Treasury Regulation § 1.704-3(d) for purposes of making such allocations.
(c) Allocations pursuant to this Section 5.3 are solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Partner's Capital Account or share of Net Profits, Net Losses, or distributions pursuant to any provision of this Agreement.
Section 5.4 — IRC § 754 Election
The General Partner shall have the discretion, in its sole judgment, to make or revoke an election under Section 754 of the Code (or any corresponding provision of applicable state or local tax law) to adjust the tax basis of Partnership property in connection with transfers of Partnership Interests or distributions of Partnership property. The costs and expenses of any such adjustment shall be borne by the Fund as a Fund Expense.
Section 5.5 — Carried Interest — IRC § 1061 Compliance
(a) The Partners acknowledge that the Carried Interest allocable to the General Partner (and its members and designees) constitutes an "applicable partnership interest" within the meaning of Section 1061 of the Code. Accordingly, any gain allocated or distributed to the General Partner (or its members or designees) with respect to an applicable partnership interest that has been held for less than three (3) years shall be treated as short-term capital gain, regardless of the holding period of the underlying Partnership assets.
(b) The General Partner shall use commercially reasonable efforts to structure Portfolio Investments and distributions in a manner that is consistent with the requirements of Section 1061 of the Code and the regulations promulgated thereunder, including the three-year holding period requirement for long-term capital gain treatment with respect to applicable partnership interests.
(c) The tax analysis underlying this Section 5.5 has been prepared in consultation with Greystone Tax Advisors LLC. The Partnership and the General Partner make no representation or warranty regarding the tax treatment of any Partner's distributive share of Partnership income, gain, loss, or deduction.
ARTICLE VI — DISTRIBUTIONS; WATERFALL
Section 6.1 — Timing of Distributions
(a) Frequency. Distributions of available cash (or, with LPAC consent, distributions in kind) shall be made at such times as the General Partner determines in its sole discretion; provided that the General Partner shall endeavor to make distributions no less frequently than semi-annually, to the extent that distributable cash is available after the establishment of appropriate reserves for Partnership expenses, liabilities, and obligations.
(b) Reserves. The General Partner may establish and maintain such reserves as it deems reasonably necessary or appropriate for anticipated expenses, liabilities, contingencies, and obligations of the Partnership.
(c) Distributions in Kind. Distributions in kind (including distributions of securities of Portfolio Companies) may be made only with the prior consent of the LPAC. Any distributions in kind shall be valued at fair market value as of the date of distribution, determined by the General Partner in good faith in accordance with the valuation policies set forth in Section 15.3.
Section 6.2 — Distribution Waterfall (European / Whole-Fund Waterfall)
All distributable cash (and, if applicable, the fair market value of distributions in kind) shall be distributed to the Partners in the following order of priority:
(a) Return of Capital. First, one hundred percent (100%) to all Partners, pro rata in accordance with their respective Capital Contributions, until each Partner has received cumulative distributions equal to its aggregate Capital Contributions (including Capital Contributions attributable to recycled capital, Capital Contributions applied to Management Fees, and Capital Contributions applied to Organizational Expenses and Fund Expenses).
(b) Preferred Return. Second, one hundred percent (100%) to all Partners, pro rata in accordance with their respective Capital Contributions, until each Partner has received cumulative distributions (including amounts distributed pursuant to clause (a) above) sufficient to generate a cumulative internal rate of return of eight percent (8%) per annum, compounded annually, on all Capital Contributions from the respective dates on which such Capital Contributions were funded to the respective dates on which distributions are made (the "Preferred Return").
(c) GP Catch-Up. Third, one hundred percent (100%) to the General Partner (or its designees) until the General Partner has received cumulative distributions under this clause (c) and clause (d) below equal to twenty percent (20%) of the aggregate of (i) the Preferred Return paid under clause (b) above and (ii) the amounts paid under this clause (c) (i.e., a full 100% catch-up until the General Partner has received an aggregate amount equal to twenty percent (20%) of all cumulative Net Profits distributed to all Partners).
(d) Residual Split. Thereafter, eighty percent (80%) to the Limited Partners, pro rata in accordance with their respective Capital Contributions, and twenty percent (20%) to the General Partner (or its designees) as Carried Interest.
For the avoidance of doubt, the distribution waterfall set forth in this Section 6.2 is a "European" or "whole-fund" waterfall, under which no Carried Interest is distributed to the General Partner until all Partners have received a return of their aggregate Capital Contributions and the Preferred Return thereon.
Section 6.3 — Carried Interest Allocation Among GP Members
The Carried Interest distributable to the General Partner pursuant to Sections 6.2(c) and 6.2(d) shall be allocated among the members of Cobalt Life Sciences GP I, LLC as follows:
The foregoing allocations are set forth in Schedule B attached hereto. The General Partner may, from time to time, reallocate the Carried Interest percentages among the existing or future members of the General Partner in its discretion; provided that no existing Carried Interest participant shall have its proportionate share reduced below such participant's then-current allocation without the prior written consent of such participant.
Section 6.4 — Carry Escrow
(a) Escrow Deposit. Thirty percent (30%) of all Carried Interest distributions that would otherwise be payable to the General Partner (or its designees) pursuant to Sections 6.2(c) and 6.2(d) shall be deposited into an escrow account maintained at Ridgeway National Bank, N.A. (the "Carry Escrow Account"). Such deposits shall be made promptly upon each distribution event.
(b) Maintenance. The Carry Escrow Account shall be maintained until the earlier of (i) the final liquidation and wind-down of the Partnership, or (ii) a determination by the General Partner (confirmed by the Partnership's independent auditor, Whitfield & Pratt LLP) that no Clawback Obligation exists or is reasonably expected to exist.
(c) Interest. All interest, dividends, and other income earned on amounts held in the Carry Escrow Account shall accrue for the benefit of the General Partner (or its designees) and shall be distributed to the General Partner (or its designees) upon release of the escrow.