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2014 04 14 Consent 302 Investment Policy Change COMMISSION AGENDA Informational Consent X ITEM 302 Public Hearings g Regular April 14, 2014 KS SB Regular Meeting City Manager Department REQUEST: The City Manager and Finance and Administrative Services Department requests that the City Commission consider modifications to the pension investment policy to include a Middle Market Debt Investment of up to 5% of the total City of Winter Springs Employee Retirement System Funds. SYNOPSIS: The City's Pension Fund Investment Advisor,the Bogdahn Group, has recommended and the Board of Trustees has unanimously voted to bring before the Commission a proposal to rebalance the City's Pension Funds to add a Floating Rate Security Investment Option: Middle Market Debt, and to allocate up to 5%of the Winter Springs Pension Portfolio to this investment opportunity. CONSIDERATIONS: In the current environment of constrained bank lending resulting from the recent financial crisis, there is increasing demand for capital particularly for middle market (companies with revenues of $75 to $400 million)private debt. It is considered by some investors as a fixed income asset that has higher yields than corporate bonds and by others as an alternative investment with lower volatility than private equity. By its nature, middle market debt can provide returns that are not highly correlated with other asset classes. Middle-market debt transactions are small in size ($5 million to $25 million), privately structured and closely held. Though there are risks inherent in any private and illiquid market, historical returns have been high, with the top-quartile middle-market debt funds ranging from 12%to18%. The unique characteristics of middle-market debt makes the asset class an attractive addition to diversified portfolios. On February 27th 2014, The Bogdahn Group made a recommendation to allocate a portion of the portfolio in middle market debt for the following reasons. Consent 302 PAGE 1 OF 4-April 14,2014 • Diversification — Due to the expansion of the US Economy/rising interest rates, bond portfolio returns have the potential to be extremely volatile reducing the potential to meet portfolio goals. • Income/Returns Enhancement— The inclusion of Middle Market Debt whose rates are not directly linked to U.S. yield curve have the potential to provide higher current income and return enhancement. • Middle Market Debt has Lower Default & Higher Recovery Rates — Structurally, the middle market provides enhanced downside protection as middle market loans have lower historical default rates and higher capital recovery rates. In-order to facilitate the recommendation to invest in middle market debt the Winter Springs General Employees' Retirement System Investment Policy Statement must be modified. Currently the Winter Spring Pension Investment Policy states: Commingled Funds/Mutual Funds &Exchange Traded Funds: Investments made by the Board may include commingled funds. For purposes of this policy such funds may include,mutual funds, commingled funds, and exchange-trade funds. The purposed new language would read: Commingled Funds/Mutual Funds &Exchange Traded Funds: Investments made by the Board may include commingled funds. For purposes of this policy such funds may include, but not limited to,mutual funds, commingled funds,and exchange-trade funds. The inclusion of the words "but not limited to"will allow the Winter Springs Pension Plan to invest in middle market debt. Additionally: The following Language will be added in order to determine the success of the post implementation returns. *Benchmark and allocation targets will default to "Board Market Fixed Income"if these portfolios are not funded. Targets and ranges above are based on market value of total Plan assets. If the Commission approves this rebalancing, the following chart will reflect the new distribution of funds. Recommended Recommended Benchmark Index Target Policy Change Russell 300 or Domestic Broad Cap Growth Equity 50% 45%-55% Domestic Board Market Benchmark Equivalent Foreign Equity 15% 10%-20% MSCI -ACWIex US Barclays Int. Broad Market Fixed Income 10% 10%-30% Aggregate TIPS 5% 0%-10% Barclay TIPS Real Estate 10% 0%-10% NFI-ODCE Property Citigroup World Gov. Global Bonds 5% 0%-10% Bond Alternatives* 5% 0%-10% TBD Total 100% Consent 302 PAGE 2 OF 4-April 14,2014 *Benchmark and allocation targets will default to"Board Market Fixed Income"if these portfolios are not funded.Targets and ranges above are based on market value of total Plan assets. After much discussion the Board of Trustees requested The Bogdahn Group to seek out investment manager specializing in middle market debt that also embody the investment philosophy of the Winter Springs Pension Fund. After an onsite visit and interviewing potential managers, Crescent Direct Lending Levered Fund, L.P. emerged as the most suitable investment manager. Overview of Investment: Crescent Direct Lending Levered Fund, L.P. Geographic Focus: US focus. The partnership's equity capital invested in non-US investments will not exceed 20%of aggregate capital commitments. Fund Target Size: $150,000,000 Objective: seek high current income while focusing on preservation of capital. The partnership intends to invest primarily in senior secured loans of private U.S. lower middle market companies. Duration of Loans: Fives on average Barrowers Profile: Companies that have gross revenues of between $75 and $400 million and EBITDA of up to $25 million. Performance: Invested approximately $225 million of senior secured loan commitments in the HPC Fund generating a realized, unlevered gross IRR of approximately 9.8% between January 2005 and March 31, 2013. 100% of the HPC Fund's senior secured loan investments have been realized, with cash realization to date in excess of all invested capital. Since inception in 2005, 100% of all senior secured loan investments made by the HPC Fund have generated positive IRRs. FISCAL IMPACT: The increased diversification and exposure to Middle Market Debt will potentially increase the portfolio's yield, consequently decreasing the City's required funding requirements to the employee pension plan. COMMUNICATION EFFORTS: This Agenda Item has been electronically forwarded to the Mayor and City Commission, City Manager, City Attorney/Staff, and is available on the City's Website, LaserFiche, and the City's Server. Additionally, portions of this Agenda Item are typed verbatim on the respective Meeting Agenda which has also been electronically forwarded to the individuals noted above, and which is also available on the City's Website, LaserFiche, and the City's Server; has been sent to applicable City Staff, Media/Press Representatives who have requested Agendas/Agenda Item information, Homeowner's Associations/Representatives on file with the City, and all individuals who have requested such information. This information has also been posted outside City Hall, posted inside City Hall with additional copies available for the General Public, and posted at five (5) different locations around the Consent 302 PAGE 3 OF 4-April 14,2014 City. Furthermore, this information is also available to any individual requestors. City Staff is always willing to discuss this Agenda Item or any Agenda Item with any interested individuals. RECOMMENDATION: City Manager and Finance and Administrative Services Department recommend the Commission approve: the addition of the Middle Market Debt to invest on behalf of the City of Winter Springs General Employees' Retirement System and to modify the current Investment policy as describe here-in,permit up to 5%of the pension fund to be invested with Crescent Direct Lending Levered Fund, L.P. and to allow the City Manager and City Attorney to coordinate and execute any and all documents needed to facilitate these transactions. ATTACHMENTS: Crescent Contract and Disclosures Pension Policies Consent 302 PAGE 4 OF 4-April 14,2014 CONFIDENTIAL CCG144 PRIVATE PLACEMENT MEMORANDUM COPY # CONFIDENTIAL Crescent Direct Lending Levered Fund, L.P. $150,000,000 Limited Partnership Interests The direct lending group ( "Crescent Direct Lending ") of Crescent Capital Group LP ( "Crescent Capital ") is organizing Crescent Direct Lending Levered Fund, L.P., a Delaware limited partnership (the "Partnership "), which seeks to generate high current income while focusing on preservation of capital, through investment on a leveraged basis primarily in senior secured loans of private U.S. lower- middle- market companies, in many cases controlled by private equity investment firms. Crescent Direct Lending Levered, LLC is the general partner of the Partnership (the "General Partner "). The General Partner is a wholly -owned subsidiary of Crescent Capital. Crescent Capital is the successor business organization to the Leveraged Finance Group of The TCW Group Inc. ( "TCW "), and, through sub - advisory and other arrangements with TCW, manages approximately $13.0 billion in assets as of September 30, 2013. Crescent Capital is a registered investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act "), and acts as investment manager to the Partnership (the "Investment Manager "). Crescent Direct Lending was formed in June 2012 and includes the former investment principals of HighPoint Capital Management, LLC ( "HighPoint Capital "), which joined Crescent Capital at that time to launch the direct lending business. Prior to joining Crescent Capital, HighPoint Capital was a leading lender to private lower - middle- market companies since 2005. Crescent Direct Lending's track record included herein includes the track record of the investment principals while at HighPoint Capital. The Partnership is offering limited partnership interests ( "Interests ") to investors who meet certain eligibility criteria, including qualifying as an "accredited investor" as defined under Regulation D under the U.S. Securities Act of 1933, as amended ( "Securities Act "), and as a "qualified purchaser" under the U.S. Investment Company Act of 1940, as amended ( "Investment Company Act "). The Partnership is intended for qualified taxable investors, including institutions and individuals, as well as charitable trusts, foundations, endowments, pension plans and other tax - exempt organizations that are not averse to recognizing unrelated business taxable income ( "UBTI ). The Partnership is not designed for investment by non -U.S. investors. The General Partner presently intends to operate the Partnership so that the Partnership will qualify for an exception from certain requirements of the Employee Retirement Income Security Act of 1974, as amended ( "ERISA ") and Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code "). No person has been authorized to provide any information or representations not contained in this Confidential Offering Memorandum, as amended or supplemented (the "Offering Memorandum "). October 2013 17838634.12.BUSINESS CONFIDENTIAL NOTICES CCG144 AN INVESTMENT IN THE PARTNERSHIP INVOLVES SIGNIFICANT RISKS. SEE SECTION X "RISK FACTORS." AN INVESTMENT IN THE PARTNERSHIP IS SUITABLE ONLY FOR SOPHISTICATED INVESTORS AND REQUIRES THE FINANCIAL ABILITY AND WILLINGNESS TO ACCEPT THE RISKS INHERENT IN AN INVESTMENT IN THE PARTNERSHIP. NO ASSURANCE CAN BE GIVEN THAT THE PARTNERSHIP'S INVESTMENT OBJECTIVES WILL BE ACHIEVED. THIS OFFERING MEMORANDUM AND THE INFORMATION CONTAINED HEREIN IS CONFIDENTIAL AND PROPRIETARY TO THE GENERAL PARTNER AND IS BEING PROVIDED TO INVESTORS IN CONFIDENCE IN CONNECTION WITH THEIR CONSIDERATION OF AN INVESTMENT IN INTERESTS OF THE PARTNERSHIP, ON THE UNDERSTANDING THAT THEY WILL OBSERVE AND COMPLY WITH THE TERMS AND CONDITIONS SET FORTH IN THIS PARAGRAPH AND THE PARAGRAPHS BELOW, FOR THE SOLE PURPOSE OF EVALUATING THE INVESTMENT DESCRIBED HEREIN. THIS OFFERING MEMORANDUM AND ITS CONTENTS MAY NOT BE REPRODUCED, PROVIDED OR DISCLOSED TO OTHERS, WITHOUT WRITTEN AUTHORIZATION OF THE GENERAL PARTNER, AND SHALL BE RETURNED TO THE GENERAL PARTNER UPON REQUEST. THE INTERESTS WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS AND WILL BE OFFERED AND SOLD FOR INVESTMENT ONLY TO QUALIFYING RECIPIENTS OF THIS OFFERING MEMORANDUM PURSUANT TO THE EXEMPTION FROM REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY REGULATION D AND IN COMPLIANCE WITH APPLICABLE STATE OR OTHER SECURITIES LAWS. THE INTERESTS ARE NOT SUBJECT TO THE U.S. FEDERAL AND STATE REGULATORY REQUIREMENTS TO WHICH MUTUAL FUNDS ARE SUBJECT. THE INTERESTS HAVE NOT BEEN RECOMMENDED BY ANY REGULATORY AUTHORITY OF ANY COUNTRY OR JURISDICTION, NOR HAVE THEY BEEN APPROVED OR DISAPPROVED BY ANY REGULATORY AUTHORITY OF ANY COUNTRY OR JURISDICTION, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THESE OFFERING MATERIALS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE PARTNERSHIP AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. AN INVESTOR SHOULD NOT SUBSCRIBE FOR THE INTERESTS UNLESS SATISFIED THAT IT AND ITS REPRESENTATIVE HAVE ASKED FOR AND RECEIVED ALL INFORMATION THAT WOULD ENABLE THEM TO EVALUATE THE MERITS AND RISKS OF THE PROPOSED INVESTMENT. THESE INTERESTS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED BY THE GENERAL PARTNER AND UNDER THE SECURITIES ACT, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. 17838634.12.BUSINESS CONFIDENTIAL CCG144 WHILE THE PARTNERSHIP MAY TRADE COMMODITY INTERESTS (COMMODITY FUTURES CONTRACTS, COMMODITY OPTIONS CONTRACTS AND /OR SWAPS), INCLUDING SECURITY FUTURES PRODUCTS, THE INVESTMENT MANAGER IS EXEMPT FROM REGISTRATION WITH THE COMMODITY FUTURES TRADING COMMISSION ( "CFTC ") AS A COMMODITY POOL OPERATOR ( "CPO ") PURSUANT TO CFTC RULE 4.13(A)(3) WITH REGARD TO THE PARTNERSHIP. THEREFORE, UNLIKE A REGISTERED CPO, THE INVESTMENT MANAGER IS NOT REQUIRED TO DELIVER A CFTC DISCLOSURE DOCUMENT TO PROSPECTIVE INVESTORS, NOR IS IT REQUIRED TO PROVIDE INVESTORS WITH CERTIFIED ANNUAL REPORTS THAT SATISFY THE REQUIREMENTS OF CFTC RULES APPLICABLE TO REGISTERED CPOS. THE INVESTMENT MANAGER QUALIFIES FOR THE EXEMPTION UNDER CFTC RULE 4.13(A)(3) WITH RESPECT TO THE PARTNERSHIP ON THE BASIS THAT, AT ALL TIMES, INTERESTS IN THE PARTNERSHIP: (1) ARE EXEMPT FROM REGISTRATION UNDER U.S. SECURITIES ACT OF 1933; (2) ARE NOT MARKETED TO THE PUBLIC IN THE UNITED STATES; (3) ARE OFFERED ONLY TO ACCREDITED INVESTORS, KNOWLEDGEABLE EMPLOYEES, AND "QUALIFIED ELIGIBLE PERSONS" AS DEFINED IN CFTC RULE 4.7; AND (4) THE PARTNERSHIP MEETS ONE OR THE OTHER OF THE FOLLOWING TESTS WITH RESPECT TO ITS COMMODITY INTEREST POSITIONS, INCLUDING POSITIONS IN SECURITY FUTURES PRODUCTS, WHETHER ENTERED INTO FOR BONA FIDE HEDGING PURPOSES OR OTHERWISE: (A) THE AGGREGATE INITIAL MARGIN, PREMIUMS, AND REQUIRED MINIMUM SECURITY DEPOSIT FOR RETAIL FOREX TRANSACTIONS, DETERMINED AT THE TIME THE MOST RECENT POSITION WAS ESTABLISHED, WILL NOT EXCEED 5 PERCENT OF THE LIQUIDATION VALUE OF THE PARTNERSHIP'S PORTFOLIO, AFTER TAKING INTO ACCOUNT UNREALIZED PROFITS AND UNREALIZED LOSSES ON ANY SUCH POSITIONS IT HAS ENTERED INTO; OR (B) THE AGGREGATE NET NOTIONAL VALUE OF SUCH POSITIONS, DETERMINED AT THE TIME THE MOST RECENT POSITION WAS ESTABLISHED, DOES NOT EXCEED 100 PERCENT OF THE LIQUIDATION VALUE OF THE PARTNERSHIP'S PORTFOLIO, AFTER TAKING INTO ACCOUNT UNREALIZED PROFITS AND UNREALIZED LOSSES ON ANY SUCH POSITIONS IT HAS ENTERED INTO. THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE INTERESTS DESCRIBED HEREIN IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH JURISDICTION OR TO SUCH PERSON. NO REPRESENTATIONS OR WARRANTIES OF ANY KIND ARE INTENDED OR SHOULD BE INFERRED WITH RESPECT TO THE ECONOMIC RETURN OR TAX CONSEQUENCES FROM AN INVESTMENT IN THE PARTNERSHIP. NO ASSURANCE CAN BE GIVEN THAT EXISTING LAWS WILL NOT BE CHANGED OR INTERPRETED ADVERSELY. INVESTORS ARE NOT TO CONSTRUE THIS OFFERING MEMORANDUM AS LEGAL, BUSINESS, INVESTMENT, TAX OR OTHER ADVICE. EACH INVESTOR SHOULD CONSULT ITS OWN COUNSEL AND ACCOUNTANT FOR ADVICE CONCERNING THE VARIOUS LEGAL, TAX, ERISA AND ECONOMIC CONSIDERATIONS RELATING TO ITS INVESTMENT. PLEASE NOTE THAT LEVELS AND BASES OF TAXATION CAN CHANGE. AN INVESTMENT WILL BE DENOMINATED IN UNITED STATES DOLLARS(S) AND THEREFORE, WILL BE SUBJECT TO ANY FLUCTUATION IN THE RATE OF EXCHANGE BETWEEN UNITED STATES DOLLARS(S) AND THE CURRENCY OF AN INVESTOR'S JURISDICTION AND CURRENCY IN WHICH INVESTMENTS ARE MADE. SUCH FLUCTUATIONS MAY HAVE AN ADVERSE EFFECT ON THE VALUE, PRICE OR INCOME OF AN INVESTOR'S INVESTMENT. 17838634.12.BUSINESS CONFIDENTIAL CCG144 NO PERSON OTHER THAN THE GENERAL PARTNER HAS BEEN AUTHORIZED TO MAKE REPRESENTATIONS, OR GIVE ANY INFORMATION, WITH RESPECT TO THE INTERESTS, EXCEPT THE INFORMATION CONTAINED HEREIN, AND ANY INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN OR OTHERWISE SUPPLIED BY THE GENERAL PARTNER IN WRITING MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE PARTNERSHIP OR ANY OF ITS PARTNERS. THE PARTNERSHIP SHALL MAKE AVAILABLE TO EACH INVESTOR OR ITS REPRESENTATIVE, DURING THIS OFFERING AND PRIOR TO THE SALE OF ANY INTERESTS, THE OPPORTUNITY TO ASK QUESTIONS OF AND RECEIVE ANSWERS FROM REPRESENTATIVES OF THE GENERAL PARTNER CONCERNING ANY ASPECT OF THE PARTNERSHIP AND ITS PROPOSED BUSINESS AND TO OBTAIN ANY ADDITIONAL RELATED INFORMATION TO THE EXTENT THE PARTNERSHIP POSSESSES SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE. WHENEVER THE MASCULINE OR FEMININE GENDER IS USED IN THIS OFFERING MEMORANDUM, IT SHALL EQUALLY, WHERE THE CONTEXT PERMITS, INCLUDE THE OTHER, AS WELL AS INCLUDE ENTITIES. THIS OFFERING MEMORANDUM CONTAINS STATEMENTS THAT ARE NOT PURELY HISTORICAL IN NATURE, BUT ARE "FORWARD- LOOKING STATEMENTS." THESE INCLUDE, AMONG OTHER THINGS, PROJECTIONS, HYPOTHETICAL PERFORMANCE ANALYSES, FUTURE PERFORMANCE TARGETS AND SPECIFIC INVESTMENT STRATEGIES. THESE FORWARD - LOOKING STATEMENTS ARE BASED UPON CERTAIN ASSUMPTIONS AND INVOLVE SIGNIFICANT ELEMENTS OF SUBJECTIVE JUDGMENT AND ANALYSIS. NO REPRESENTATION IS MADE THAT ANY RETURNS INDICATED WILL BE ACHIEVED OR THAT ALL ASSUMPTIONS HAVE BEEN CONSIDERED OR STATED. ACTUAL EVENTS MAY DIFFER MATERIALLY FROM THOSE ASSUMED. ALL FORWARD - LOOKING STATEMENTS INCLUDED ARE BASED ON INFORMATION AVAILABLE ON THE DATE HEREOF AND NEITHER THE PARTNERSHIP NOR THE GENERAL PARTNER OR THEIR RESPECTIVE AFFILIATES ASSUMES ANY DUTY TO UPDATE ANY FORWARD - LOOKING STATEMENT. ANY PRIOR INVESTMENT RESULTS AND RETURNS ( "PAST PERFORMANCE INFORMATION") IN THIS OFFERING MEMORANDUM ARE PROVIDED FOR ILLUSTRATIVE PURPOSES ONLY AND ARE NOT INDICATIVE OF THE PARTNERSHIP'S POTENTIAL INVESTMENT RESULTS. PLEASE SEE THE FOOTNOTES TO THE PAST PERFORMANCE INFORMATION FOR AN EXPLANATION OF HOW RATES OF RETURN AND PRIOR PERFORMANCE ARE CALCULATED FOR PURPOSES OF THIS OFFERING MEMORANDUM. THERE CAN BE NO ASSURANCE THAT THESE OR COMPARABLE INVESTMENT RESULTS OR RETURNS WILL BE ACHIEVED BY THE PARTNERSHIP, THAT THE PARTNERSHIP WILL BE ABLE TO AVOID LOSSES OR THAT THE PARTNERSHIP WILL BE ABLE TO MAKE INVESTMENTS SIMILAR TO THE EXISTING AND HISTORICAL INVESTMENTS SHOWN IN THE PAST PERFORMANCE INFORMATION DUE TO, AMONG OTHER THINGS, ECONOMIC CONDITIONS AND THE AVAILABILITY OF INVESTMENT OPPORTUNITIES. TO HELP THE GOVERNMENT FIGHT THE FUNDING OF TERRORISM AND MONEY LAUNDERING ACTIVITIES, FEDERAL LAW REQUIRES ALL FINANCIAL INSTITUTIONS TO OBTAIN, VERIFY AND RECORD INFORMATION THAT IDENTIFIES EACH PERSON WHO MAKES A CAPITAL COMMITMENT. 17838634.12.BUSINESS CONFIDENTIAL CCG144 WHAT THIS MEANS FOR YOU: WHEN YOU MAKE A CAPITAL COMMITMENT, WE WILL ASK FOR YOUR NAME, ADDRESS AND OTHER INFORMATION THAT WILL ALLOW US TO IDENTIFY YOU. WE MAY ALSO ASK TO SEE OTHER IDENTIFYING DOCUMENTS. RELIANCE ON U.S. FEDERAL TAX ADVICE IN THIS OFFERING MEMORANDUM CIRCULAR 230 NOTICE. THE FOLLOWING NOTICE IS BASED ON U.S. TREASURY REGULATIONS GOVERNING PRACTICE BEFORE THE U.S. INTERNAL REVENUE SERVICE: (1) ANY U.S. FEDERAL TAX ADVICE CONTAINED IN THIS OFFERING MEMORANDUM IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY ANY PERSON FOR THE PURPOSE OF AVOIDING U.S. FEDERAL TAX PENALTIES; (2) ANY SUCH ADVICE IS WRITTEN TO SUPPORT THE PROMOTION OF THE PARTNERSHIP AND MARKETING OF THE INTERESTS AS DESCRIBED HEREIN; AND (3) EACH POTENTIAL INVESTOR SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR. 17838634.12.BUSINESS CONFIDENTIAL CCG144 TABLE OF CONTENTS Page I. EXECUTIVE SUMMARY .............................................................................. ..............................1 II. MARKET OPPORTUNITY ............................................................................ ............................... 3 III. INVESTMENT CONSIDERATIONS ............................................................ ............................... 5 IV. SUMMARY DATA SHEET ........................................................................... ............................... 7 V. INVESTMENT PERFORMANCE ................................................................. ............................... 8 VI. THE PARTNERSHIP ...................................................................................... .............................11 VII. MANAGEMENT ............................................................................................. .............................20 VIII. SUMMARY TERM SHEET ........................................................................... .............................23 IX. CERTAIN CONFLICTS OF INTEREST ........................................................ .............................31 X. RISK FACTORS ............................................................................................. .............................34 XI. PROFESSIONAL ADVISERS ........................................................................ .............................45 XII. ERISA AND CERTAIN OTHER CONSIDERATIONS ................................ .............................46 XIII. TAX CONSIDERATIONS .............................................................................. .............................48 XIV. ANTI -MONEY LAUNDERING CONSIDERATIONS ................................. .............................54 APPENDIX A -- CERTAIN ADDITONAL OFFERING NOTICES ......................... ............................A -1 17838634.12.BUSINESS CONFIDENTIAL EXECUTIVE SUMMARY CCG144 The direct lending group ( "Crescent Direct Lending ") of Crescent Capital Group LP ( "Crescent Capital ") is organizing Crescent Direct Lending Levered Fund, L.P. (the "Partnership "), which seeks to generate high current income while focusing on preservation of capital through investing on a leveraged basis primarily in senior secured loans of private U.S. lower - middle- market companies, in many cases controlled by private equity investment firms. Crescent Direct Lending believes that investments in senior secured loans of lower - middle- market companies offers investors the opportunity for superior risk - adjusted returns in comparison to broadly- syndicated senior secured loans of larger companies due to a number of factors including the significantly underserved nature and reduced senior debt capital available to lower - middle- market companies. The Partnership is seeking capital commitments of $150 million. Crescent Direct Lending defines lower - middle- market companies as companies with up to $25 million of EBITDA, a segment of the middle- market which Crescent Direct Lending believes offers attractive risk adjusted returns versus the overall middle- market (Standard & Poor's defines the middle - market as companies with $50 million or less of EBITDA). The Partnership's senior secured loans will include first lien, unitranche and second lien loans, which are referred to collectively as "senior loans." The Partnership may also invest to a more limited extent in other debt and equity securities of lower - middle- market companies. The companies in which the Partnership invests will typically be highly leveraged, and, in most cases, will not be rated by national rating agencies. If such companies were rated, Crescent Direct Lending believes that they would typically be rated below investment grade. Crescent Direct Lending's business model is focused primarily on the direct origination of loans to lower - middle- market companies through its extensive network of relationships with private equity investment firms, other lenders, financial advisors and other sourcing relationships. Crescent Direct Lending expects that the Partnership's investments will generally range from $5 million to $25 million, although the size of any particular investment may be larger or smaller. Consistent with Crescent Direct Lending's focus on credit quality and capital preservation, the Partnership places a strong emphasis on credit quality in selecting investments, including maintaining a high level of investment and credit discipline. Crescent Direct Lending believes the Partnership will also benefit from Crescent Capital's scale, relationships, extensive market reach, market intelligence and industry expertise, which provides the Partnership with distinct competitive advantages. Crescent Capital manages approximately $13 billion of assets and commitments across a number of credit strategies including bank loans, high yield bonds, mezzanine securities, distressed debt and structured finance. The Partnership's investment activities will be managed by the Crescent Direct Lending group of Crescent Capital (collectively, the "Investment Manager "). The Investment Manager is a leading lender to middle- market companies and a manager of below investment -grade credit assets with approximately $13.0 billion of assets under management and 60 investment professionals as of September 30, 2013. Crescent Capital is led by its co- founders, Mark Attanasio and Jean-Marc Chapus, who together with certain principals of Crescent Direct Lending will comprise the Investment Committee for the Partnership. The Partnership will seek to utilize leverage in order to enhance the returns on its investments. Under normal market conditions, the Partnership intends to target approximately 1:1 leverage (equal to approximately 50% of each investment). To access this leverage, the Partnership intends to enter into one or more Senior Credit Facilities to be arranged with potential lenders. It is anticipated that such facilities will bear interest at floating rates at to be determined spreads over LIBOR. Crescent Direct Lending, and its predecessor firm, HighPoint Capital Management, LLC ( "HighPoint Capital "), has been a leading lender to private U.S. lower - middle- market companies since -1- 17838634.12.BUSINESS CONFIDENTIAL CCG144 2005. Crescent Direct Lending's team is comprised of experienced lending professionals, led by John Bowman and Scott Carpenter, co- founders of HighPoint Capital, along with experienced senior lending principals including Jonathan Cignetti, Jake Garmey and Michael Rogers (collectively the "Senior Investment Professionals "). The team has extensive experience in leveraged lending and investing, having participated in these markets for an average of over 20 years. Since 2005, the Senior Investment Professionals of Crescent Direct Lending managed a senior secured lower - middle- market loan fund ( "HPC Fund ") while at their prior firm HighPoint Capital. The HPC Fund invested approximately $225 million in senior secured loan commitments through a combination of committed equity capital and leverage under senior credit facilities. During the life of the HPC Fund from January 2005 through March 31, 2013, the HPC Fund generated a realized gross unlevered IRR (as defined herein) of 9.8% or almost 2x the S &P LCD Leveraged Loan Index for that period,' with 100% of loans realized and all investments generating positive IRRs.2 Because those HPC Fund investments made by the Senior Investment Professionals utilized substantially greater leverage than that proposed by the Partnership, historical performance data included herein has been presented on a gross unlevered basis (see Section V "Investment Performance "). In June 2012, the Senior Investment Professionals of HighPoint Capital joined Crescent Capital to form Crescent Direct Lending, focused on making investments primarily in senior secured loans to non - public, private equity - controlled, U.S. lower - middle- market companies. ' Source: S &P Capital IQ, LCD's Leveraged Lending Review — IQ13 2 Past performance does not guarantee future results. For further information on the performance results as well as explanatory footnotes, please see Section V "Investment Performance." -2- 17838634.12.BUSINESS CONFIDENTIAL II. MARKET OPPORTUNITY CCG144 Crescent Direct Lending intends to originate and invest on a leveraged basis primarily in senior secured loans (including first lien, unitranche and second lien loans) of private U.S. lower - middle - market companies. Crescent Direct Lending believes the environment for investing in lower - middle- market companies is attractive for several reasons, including: Reduced Availability of Senior Debt Capital. Crescent Direct Lending believes there is reduced availability of senior debt capital for lower - middle - market companies as a result of (1) the significant recent credit and economic downturn which has resulted in dislocations in the market for credit providers to lower - middle- market companies including finance companies, hedge funds, managers of CLOs, as well as certain BDCs, many of which have had difficulty in accessing debt and equity financing, (2) the increased regulatory environment affecting banking institutions, including the adoption of the Dodd - Frank Financial Reform Act, and (3) the introduction of new international capital and liquidity requirements under the Basel III Accords. Attractive Relative Value Proposition. Crescent Direct Lending believes that directly originated lower - middle- market loans have historically experienced a yield premium over broadly syndicated loans, while maintaining the strong preservation of capital characteristics of senior secured loans. This is largely due to the reduced access to, and availability of credit for, private U.S. lower - middle- market borrowers, thereby creating attractive risk -return opportunities for lenders. As a result, Crescent Direct Lending believes that the debt of such borrowers typically carries higher interest rates and offers greater up -front fees in comparison to broadly syndicated loans associated with larger borrowers. Conservative Capital Structures and Improved Covenant Packages. Crescent Direct Lending believes that senior and total leverage levels in lower - middle- market merger and acquisition transactions are significantly less than for broadly syndicated or large corporate leveraged loans. For example, from 2007 — Q3 2013 Standard & Poor's reported that issuers with less than $50 million of EBITDA had average senior debt /EBITDA and average total debt/EBITDA multiples of 3.5x and 4.5x, respectively. This compared favorably with average 2007 — Q3 2013 senior debt/EBITDA and total debt /EBITDA multiples of 3.7x and 5.1x, for large leveraged loan corporate issuers (issuers with $50 million or more of EBITDA).' In addition, Crescent Direct Lending believes that lower - middle- market companies typically have less complex capital structures and stronger covenant packages than larger borrowers, which should be helpful in maintaining capital preservation for the Partnership's investors. Significant Refinancing Requirements. Approximately $436 billion in U.S. leveraged loans are scheduled to mature between 2013 and 2018,4 much of which Crescent Direct Lending believes is associated with a large number of middle- market leveraged mergers and acquisitions completed from 2005 to 2008. In many cases, it is expected that this debt will need to be refinanced by borrowers. Many of these loans were held in debt securitizations completed between 2006 and 2008, with reinvestment periods ranging from three to six years,' and therefore Crescent Direct Lending believes many of these vehicles are unlikely to be able to offer refinancing options to existing portfolio borrowers when their credit facilities mature. Crescent Direct Lending believes the loss of lending capacity in the lower - middle- market combined with the need for borrowers to refinance existing indebtedness over the next several years will create significant lending opportunities for the Partnership. ' Source: S &P Capital IQ, LCD's Leveraged Lending Review — 3QI3 4 Source: JPMorgan North America High Yield and Leveraged Loan Research, June 2013 5 Source: Standard & Poors RatingsDirect August 9, 2012 -3- 17838634.12.BUSINESS CONFIDENTIAL CCG144 Significant Amount of Uninvested Private Equity Capital. As of December 31, 2012, there was approximately $328 billion of private equity capital available and un- invested in the United State S. 6 Crescent Direct Lending expects the large amount of unfunded buyout commitments will drive a larger volume of leveraged buyouts (and demand for senior secured debt financing) over the next several years. Specialized Lending Requirements. Based on its experience, Crescent Direct Lending believes lending to lower - middle- market companies generally requires a greater dedication of a lender's time and resources as compared to lending to larger companies. Lower - middle- market companies generally do not have publicly- traded equity or debt securities, and public information about such businesses is typically limited, which causes lenders to lower- middle- market companies to more actively monitor their investments. Crescent Direct Lending believes that these factors have caused many large financial institutions with high cost structures to focus their lending activities on larger companies. As a result, Crescent Direct Lending believes lower - middle- market companies historically have been significantly underserved by the lending community. 6 Source: Pitchbook Private Equity Fundraising and Capital Overhang Report 2H 2013 -4- 17838634.12.BUSINESS CONFIDENTIAL III. INVESTMENT CONSIDERATIONS CCG144 Experienced Lower - Middle - Market Investment Team. Crescent Direct Lending has a dedicated team of investment professionals with senior professionals averaging over 20 years of leveraged lending and investment experience. Prior to joining Crescent Capital, the Senior Investment Professionals of Crescent Direct Lending operated Highpoint Capital, a leading lender to private lower - middle- market companies since 2005. The Partnership's investment team will also have access to the substantial experience and expertise of Crescent Capital's firm -wide investment professionals. Crescent Capital has 20 years of below- investment grade credit investment history, with extensive expertise originating, structuring and managing loans and debt securities through multiple market cycles. Crescent Capital's team of investment professionals are proven and experienced, with extensive capabilities in leveraged credit investing, having participated in these markets for the predominant portion of their careers. Strong Investment Performance in Lower - Middle - Market Investing. During the life of the HPC Fund from January 2005 through March 31, 2013, the HPC Fund generated a realized gross unlevered IRR (as defined herein) of 9.8% investing in senior secured loans of lower - middle - market companies.' This performance was almost 2x the performance of S &P's LCD Leveraged Loan Index for the comparable period (approximately 5.4% through March 31, 2013).8 In addition, 100% of the senior secured loan investments made by the Senior Investment Professionals through the HPC Fund have been realized and all have generated positive IM. Significant Sourcing and Origination Capabilities. Crescent Direct Lending has an extensive network of relationships with private equity investment firms, other lenders, financial advisors, and other sourcing relationships. Since 2005, the Senior Investment Professionals of Crescent Direct Lending have reviewed over 4,000 potential financing transactions in the lower - middle- market, or an average of over 500 potential transaction referrals per year since inception. Crescent Direct Lending believes its strong investment performance to date has been the direct result of its strong origination and sourcing capabilities, combined with the experienced credit underwriting and portfolio management capabilities of its Senior Investment Professionals. Strong Credit and Portfolio Monitoring Processes. Crescent Direct Lending believes that a highly selective credit underwriting approach to investing, combined with its longstanding portfolio monitoring processes, has resulted in very low portfolio loan loss rates for its investments. 100% of Crescent Direct Lending's senior loan investments in the HPC Fund have been realized and all had positive IRRs with cumulative loan charge -offs of only 1.4% since 2005, or approximately 0.20% annually. See Section V "Investment Performance." Crescent Direct Lending believes that its strong historical credit track record is consistent with the Partnership's primary goal of strong capital preservation for its investors. Significant Resources of Crescent Capital Group Platform. Through Crescent Capital, the Partnership will have access to the significant resources and capabilities of Crescent Capital Group LP, which as of September 30, 2013 managed approximately $13.0 billion of investments and commitments, and had 60 investment professionals. Crescent Direct Lending believes the Partnership will benefit from Crescent Capital's investment professionals' industry expertise as well as its dedicated credit trading professionals' knowledge of market pricing and trends. The Partnership will also benefit from access to Crescent Capital's credit research team, consisting of investment professionals from disciplines encompassing investment banking, high yield and equity research, accounting and corporate and bankruptcy law. The Partnership will further benefit from Crescent Capital's market presence and its due ' Past performance does not guarantee future results. For further information on the performance results as well as explanatory footnotes, please see Section V "Investment Performance." 8 Source: S &P Capital IQ, LCD's Leveraged Lending Review — IQ13 -5- 17838634.12.BUSINESS CONFIDENTIAL CCG144 diligence, credit analysis, origination and transaction execution experience and capabilities built up through two decades of investing. -6- 17838634.12.BUSINESS CONFIDENTIAL IV. SUMMARY DATA SHEET CCG144 The information below is qualified in its entirety by the more detailed information appearing elsewhere in this Offering Memorandum and in the governing documents of the Partnership. Investors are encouraged to read the entire Offering Memorandum and the governing documents of the Partnership, copies of which will be provided upon request. The final and definitive terms of the Partnership will be set forth in its governing documents, which shall govern in the event of any conflict with this Offering Memorandum. The Partnership: Crescent Direct Lending Levered Fund, L.P., a Delaware limited partnership and any parallel or feeder funds formed to accommodate specific investors. General Partner: Crescent Direct Lending Levered, LLC, a Delaware limited liability company. Investment Manager: Crescent Capital Group LP, a Delaware limited partnership and SEC registered investment adviser. Target Offering Size: $150 million. Partnership Objective: The Partnership will seek high current income while focusing on preservation of capital. The Partnership intends to invest primarily in senior secured loans (including first lien, unitranche and second lien loans) of private U.S. lower - middle- market companies, in many cases controlled by private equity investment firms. The Partnership may also invest, to a limited extent, in other debt and equity securities of lower - middle- market companies. Term of Partnership: Five years from the final closing date, which may be extended by the General Partner for up to two additional one -year periods. Investment Period: Thirty months from the final closing date, which will be the date that is 12 months after the initial closing date. Minimum Commitment: $2 million, unless waived by the General Partner. Management Fee: 1.35% per annum of aggregate invested equity capital. Leverage: The Partnership intends to utilize leverage to enhance returns on its investments. Under normal market conditions, the Partnership intends to target approximately 1:1 leverage to purchase its investments, or approximately 50% of each investment. The Partnership may also borrow for the purpose of paying expenses and providing short-term interim financing to consummate the purchase of investments prior to the receipt of capital contributions. The Partnership is restricted from borrowing, in the aggregate, more than 150% of aggregate capital commitments at the time of drawdown. Allocation of Profits: In general, 90% to the Partners and 10% to the General Partner in respect of its carried interest, after a 7% preferred return to the Partners and after the allocation of a catch -up amount to the General Partner. Geographic Focus: U.S. - focused. The Partnership's equity capital invested in non -U.S. investments will not exceed 20% of the aggregate capital commitments. -7- 17838634.12.BUSINESS CONFIDENTIAL V. INVESTMENT PERFORMANCE CCG144 The Senior Investment Professionals of Crescent Direct Lending managed the HPC Fund while at their prior firm HighPoint Capital. The HPC Fund was an investment vehicle formed by the Senior Investment Professionals together with a small group of equity investors that focused on making senior secured loan investments consisting of approximately $225 million of senior secured loan commitments funded through a combination of committed equity capital and leverage provided under warehouse loan facilities. All of the investments held by the HPC Fund were fully realized by March 31, 2013. The HPC Fund was different than the Partnership in a number of material respects including (1) the HPC Fund was a more - highly leveraged vehicle than the Partnership, which resulted in returns that would generally be higher than those in a fund with lower leverage (assuming minimal losses); (ii) the HPC Fund did not have an asset -based management fee but rather paid employee salaries and other management costs pursuant to yearly budgets; and (iii) the HPC Fund was managed by the Senior Investment Professionals with certain limited involvement of its equity investors and was managed without the benefit of Crescent Capital. Because the HPC Fund utilized substantially greater leverage than proposed by the Partnership, the historical investment performance included herein is presented on an unlevered gross IRR basis. Summary investment performance highlights of the HPC Fund managed by the Senior Investment Professionals of Crescent Direct Lending include: The Senior Investment Professionals successfully invested approximately $225 million of senior secured loan commitments in the HPC Fund generating a realized, unlevered gross IRR (as defined herein) of approximately 9.8% between January 2005 and March 31, 2013.9 100% of the HPC Fund's senior secured loan investments have been realized, with cash realizations to date in excess of all invested capital. • Since inception in 2005, 100% of all senior secured loan investments made by the HPC Fund have generated positive IRRs. To illustrate a levered gross and net IRR for the HPC Fund had it been operating under the Partnership's target leverage ratio of 1:1, and proposed management fees, carried interest and hurdle rate contemplated for the Partnership, Crescent Direct Lending has calculated a pro forma levered gross IRR and a net IRR for the HPC Fund as a whole. Assuming the target leverage and proposed fee structure for the Partnership, and the other assumptions described in footnote 10 below, the pro forma levered gross IRR for the HPC Fund would be approximately 15.6% and the pro forma levered net IRR for the HPC Fund would be approximately 12.6 %.'0 9 Past performance does not guarantee future results. For further information on the performance results, please see the footnotes to "Investment Performance" on the following page. 'o The pro forma levered gross IRR calculation and levered net IRR calculation is based on utilizing the target leverage of 1:1 leverage assuming a 1.35% management fee, and a 10% carried interest with a hurdle rate of 7.0 %, all consistent with the terms of the Partnership, a cost of leverage consistent with the blended cost of leverage under the HPC Fund's credit facilities utilized at that time, and $350,000 of organizational expenses and administrative expenses of $75,000 annually (which is consistent with the organizational and administrative annual expense costs of the HPC Fund). There can be no assurance that the organizational expenses and other annual expenses or that the cost of leverage of the Partnership will be similar to that of the HPC Fund, and any significant increase in said costs would result in a significant decrease in the pro forma net IRR performance results set forth above. This pro forma calculation is based upon the foregoing assumptions and does not reflect actual historical performance results. There can be no assurance that the Partnership will achieve these pro forma results. -8- 17838634.12.BUSINESS CONFIDENTIAL The table below summarizes the investment performanc e presented below are calculated on an unlevered basis due to substantially greater leverage than proposed by the Partnership. ($$ Millions) Date Date Amount Investment Invested Realized Invested Realized Investments CCG144 of the HPC Fund. The gross IRRS the fact that the HPC Fund utilized Equity Equity Return Gross Value at 3/31/13 Multiple IRR11 Realized Unrealized Total Vertex Fasteners 08/04/05 08/29/08 $ 2.5 $ 3.1 $ $ 3.1 1.26x 9.2% Hamer 09/01/05 09/19/11 12.7 15.5 15.5 1.22x 8.6% Antaya Technologies 09/22/05 03/01/07 2.8 3.2 3.2 1.13x 11.0% Action Legal /IVIZE /AMFS 01/03/06 12/17/10 13.1 15.0 15.0 1.15x 4.8% National Display 04/21/06 05/03/10 16.6 20.5 20.5 1.23x 10.7% Solidscape 06/08/06 03/31/08 7.0 8.0 8.0 1.14x 13.0% Wearwell 06/29/06 09/26/07 5.4 6.3 6.3 1.18x 16.7% Double E Company 09/18/06 05/07/10 5.6 7.4 7.4 1.32x 9.8% JSI Store Fixtures 09/22/06 12/28/07 7.5 8.6 8.6 1.15x 14.7% Gateway EnviroServices 12/28/06 08/19/09 4.0 4.8 4.8 1.20x 8.9% MilesTek Corporation 01/23/07 01/20/12 3.3 4.3 4.3 1.34x 9.5% Winchester Electronics 04/16/07 07/25/12 7.5 10.0 10.0 1.33x 7.5% Belt Power 08/10/07 08/14/09 6.1 7.1 7.1 1.17x 9.9% Utrecht Art Supplies 08/30/07 10/31/11 8.5 11.4 11.4 1.34x 8.7% Titan Fitness 12/31/07 06/30/11 4.0 5.5 5.5 1.36x 11.0% Fairchild 01/24/08 11/17/11 7.5 9.5 9.5 1.27x 9.8% Insource 01/29/08 07/30/12 12.0 17.0 17.0 1.42x 11.0% Connect -Air 03/06/08 11/15/11 8.5 10.9 10.9 1.28x 10.9% The Outsource Group 03/31/08 01/21/11 13.6 17.1 17.1 1.26x 10.6% MooreCo 04/30/08 09/30/10 8.4 9.5 9.5 1.13x 7.1% Precision Manufacturing Group 06/05/08 11/22/11 9.0 12.2 12.2 1.35x 11.9% Copernicus Group 10/08/08 02/09/11 8.3 10.3 10.3 1.25x 13.3% Thorne 06/23/10 02/01/12 12.0 13.7 13.7 1.14x 10.2% Lazer Spot 09/01/10 05/25/12 12.3 14.1 14.1 1.15x 10.2% Mallet 09/29/10 03/31/13 8.3 10.0 10.0 1.20x 10.5% Total Investments 12 $ 206.1 $254.8 $ - $ 254.8 1.24x 9.8% Gross Unlevered IRR on All Loans 9.8% " Past performance does not guarantee future performance. All historical references to Crescent Direct Lending's team and track record prior to June 2012 are based on Crescent Direct Lending team Senior Investment Professionals while at their previous investment firm, HighPoint Capital Management, LLC, from January 2005 -May 2012. The Senior Investments Professionals have made several investments during the period June through September 2013 for separate accounts and other funds since joining Crescent Direct Lending. However, the historical performance information shown above only includes investments made by the HPC Fund and does not include any investments made for other accounts by the Senior Investment Professionals after they joined Crescent Direct Lending because such investments have a limited performance history. 12 "Total Investments" excludes approximately $4.9 million of equity co- investments made in portfolio companies to which HighPoint Capital had made senior secured loan commitments. -9- 17838634.12.BUSINESS CONFIDENTIAL VL THE PARTNERSHIP Overview CCG144 The Partnership is being established to invest primarily in senior secured loans of private U.S. lower - middle- market companies, in many cases controlled by private equity investment firms. The Senior Investment Professionals of Crescent Direct Lending will oversee the Partnership's investment activities. The Senior Investment Professionals of Crescent Direct Lending average over 20 years of leveraged lending and investing experience, having participated in these markets for most of their careers. The Partnership will also benefit from the substantial firm -wide resources and investment experience of the professionals of Crescent Capital, including participation by certain senior members of Crescent Capital, together with certain Senior Investment Professionals of Crescent Direct Lending, on the Partnership's Investment Committee (see Section VII "Management "). Crescent Direct Lending believes that investments in senior secured loans of lower- middle- market companies offer investors the opportunity for superior risk - adjusted returns in comparison to broadly- syndicated senior secured loans of larger companies due to a number of factors including the significantly underserved nature and reduced capital availability of senior debt capital to lower- middle- market companies. History Crescent Capital Corporation, a predecessor of Crescent Capital, was founded in 1991 and leveraged the knowledge, experience and relationships gained by Jean-Marc Chapus and Mark L. Attanasio during their employment together at Drexel Burnham Lambert, Incorporated dating back to 1986. Crescent Capital Corporation was formed with the objective of creating an investment management firm specializing in below- investment grade debt securities. In 1992, shortly after Crescent Capital Corporation's formation, Crescent Mezzanine began its mezzanine investment efforts. In 1995, the Crescent Capital Corporation team joined The TCW Group, Inc. ('TCW), an asset manager with approximately $117 billion of assets under management as of December 31, 2011, to operate as the core of TCW's Leveraged Finance Group. As part of TCW's Leveraged Finance Group, the Crescent Capital team significantly broadened its credit investment strategies and assets under management to include bank loans, high yield, mezzanine debt and distressed debt securities. Commencing January 1, 2011, under the leadership of Messrs. Attanasio and Chapus, the Crescent Capital team returned to independence pursuant to a mutually agreed upon spin -off from TCW, whereby Crescent Capital became an employee -owned asset management firm and an SEC registered investment advisor subject to the Advisers Act, while continuing to manage, under various arrangements, assets of the prior funds and other assets that were previously managed while part of TCW's Leveraged Finance Group. With approximately $13 billion in assets under management, the Crescent Capital team has more than 20 years of investment experience in the credit markets with specialized expertise in bank loans, high yield, mezzanine debt and distressed debt securities in middle- market companies. As a result, Crescent Capital's investment professionals have extensive experience managing below- investment grade debt securities across multiple strategies and over numerous market cycles. The Partnership will seek to utilize leverage in order to enhance the returns on its investments. Under normal market conditions, the Partnership intends to target approximately 1:1 leverage (equal to approximately 50% of each investment). To access this leverage, the Partnership intends to enter into one -11- 17838634.12.BUSINESS CONFIDENTIAL CCG144 or more Senior Credit Facilities to be arranged with potential lenders. It is anticipated that such facilities will bear interest at floating rates at to be determined spreads over LIBOR. Crescent Direct Lending was formed in June 2012 and includes the former investment principals of HighPoint Capital, which joined Crescent Capital at that time to launch Crescent Capital's direct lending business with a focus on making investments in senior secured loans to non - public, private equity - controlled, U.S. lower - middle- market companies. Crescent Direct Lending's team is comprised of experienced lending professionals, led by the Senior Investment Professionals. The team has extensive experience in leveraged lending and investing, having participated in these markets for an average of over 20 years. Prior to joining Crescent Capital, HighPoint Capital was a leading lender to private lower - middle- market companies since 2005. Since 2005, Crescent Direct Lending, including the activities of the Senior Investment Professionals at HighPoint Capital, invested approximately $225 million in senior secured loan commitments. Investment Strategy Crescent Direct Lending intends to follow its traditional approach of investing, which is based upon fundamental credit research and extensive risk analysis. This approach reflects the view that the cornerstone of successful investing is fundamental credit analysis. The Partnership will pursue an investment strategy targeting companies primarily in the lower - middle- market. Crescent Direct Lending believes that the lower - middle- market is particularly attractive as a result of the lack of available lending sources to smaller companies. Crescent Direct Lending also believes many financing providers have chosen to focus on large corporate clients and managing capital markets transactions rather than lending to lower - middle- market businesses. Further, many financial institutions and traditional lenders are faced with constrained balance sheets and are requiring existing borrowers to reduce leverage. Crescent Direct Lending also believes hedge funds and collateralized debt obligation /collateralized loan obligation managers are less likely to pursue investment opportunities in the Partnership's target market as a result of reduced liquidity for new investments. Crescent Direct Lending's investment philosophy emphasizes capital preservation through experienced credit selection and risk mitigation. Crescent Direct Lending expects the Partnership's targeted portfolio to provide downside protection through conservative cash flow and asset coverage requirements, priority in the capital structure and information requirements. Crescent Direct Lending expects to target investments generally in companies that it believes have the following characteristics: • EBITDA of up to $25 million; • leading market positions and sustainable competitive advantages; • operating in industries with barriers to entry; • operating in industries with positive underlying fundamentals; • cash flows that are dependable and predictable; • management teams with demonstrated track records and economic incentives; and • domiciled primarily in the United States. The Partnership will seek to create a diversified portfolio of investments across various industries as a method to manage risk and capitalize on specific sector trends. Crescent Direct Lending and Crescent Capital have significant experience investing in industries such as business services, manufacturing, -12- 17838634.12.BUSINESS CONFIDENTIAL CCG144 industrials, consumer - related products, and generally have not invested in companies engaged primarily in the real estate or energy industries. The Partnership's objective is to focus on originated transactions where the Partnership will act as the lead or largest investor in transactions, as well as participate with other lenders, generally investing between $5 million and $25 million per transaction. Crescent Direct Lending expects the average investment holding period to be between three and five years, depending upon portfolio company objectives and conditions in the capital markets. The Partnership generally will utilize leverage both for investment purposes and to pay expenses and provide short-term interim financing to consummate the purchase of investments prior to the receipt of capital contributions. Under normal market conditions, the Partnership intends to target approximately 1:1 leverage (equal to approximately 50% of each investment). However, the Partnership may utilize greater or less leverage, depending on market conditions, including short-term borrowings related to purchases of investments prior to the receipt of capital call proceeds. The Partnership may not borrow, in the aggregate, more than 150% of total capital commitments. We expect to utilize leverage from Senior Credit Facilities to be arranged with one or more senior lenders. Such facilities may be increased or decreased over time with the addition of new lenders. It is anticipated that such credit facilities will bear interest on a floating rate basis at to be determined spreads over LIBOR. Such facilities would also contain certain customary affirmative and negative covenants and events of default typical of such facilities. Assets of the Partnership, including the Partnership's rights under the Partnership Agreement to make capital calls in respect of unfunded commitments, may be pledged to secure such indebtedness as more fully described in the Partnership Agreement. Transaction Sourcing Crescent Direct Lending's approach to originating investments includes an active coverage effort in which senior investment professionals maintain constant contact with deal sources, including equity sponsors, placement agents, investment banks, management groups, investment funds, portfolio companies and other financial institutions. Since 2005, the investment professionals of Crescent Direct Lending reviewed over 4,000 potential transaction opportunities, or on average, over 500 opportunities per year. In addition, the Partnership's investment team expects to generate additional potential investment opportunities through Crescent Capital, which over the past 20 years has developed a network of contacts and relationships that may lead to additional transaction sourcing opportunities. These origination relationships provide access not only to potential investment opportunities but also to market intelligence on trends across the credit markets. Crescent Direct Lending and Crescent Capital believe they have built a reputation as a thoughtful and disciplined provider of capital to middle- market companies and a preferred financing source for private equity sponsors and management teams. Crescent Capital further believes that its continuous presence in the market as an investor has reinforced its reputation as a partner that can help attract other financing providers and validate investment opportunities to the broader investment community. Crescent Capital does not manage private equity investment funds and, therefore, does not have any conflicts associated with managing both debt and equity funds. Crescent Direct Lending and Crescent Capital believe these factors give them a competitive advantage in sourcing investment opportunities, which will be put to use for the Partnership's benefit. In addition to financial sponsors, Crescent Direct Lending, Crescent Capital and its affiliates have developed a network of other deal sources, including: management teams and entrepreneurs; -13- 17838634.12.BUSINESS CONFIDENTIAL CCG144 • portfolio companies of private equity firms; • other investment firms that have similar strategies to Crescent Capital and are seeking co- investors; • placement agents and investment banks representing financial sponsors and issuers; • corporate operating advisers and other financial advisers; and • consultants, attorneys and other service providers to middle market and lower- middle- market companies and financial sponsors. Crescent Direct Lending and Crescent Capital believe that their broad networks of deal origination contacts will afford the Partnership with a continuous source of investment opportunities. Investment Structuring Crescent Direct Lending believes that each investment has unique characteristics that must be considered, understood and analyzed. Crescent Direct Lending structures investment terms based on its views on the business, credit profile, the outlook for the industry in which a potential portfolio company operates, the competitive landscape, the products or services which the company sells and the management team and ownership of the company, among other factors. Crescent Direct Lending will rely upon the analysis conducted and information gathered through its investment process and its prior investment experience to evaluate the appropriate structure for the Partnership's investments. The Partnership intends to invest primarily in senior secured debt of lower - middle- market companies, and the mix of first lien secured, second lien secured, and senior unitranche debt may change over time given Crescent Direct Lending's views on, among other things, the economic and credit environment. The Partnership's investments will typically carry a high level of cash pay interest and may incorporate other return - enhancing mechanisms such as commitment fees, original issue discounts, and early redemption premiums. To a lesser extent, the Partnership's investments may also incorporate PIK interest and some forms of equity participation. Crescent Direct Lending expects that a typical debt investment in which the Partnership invests will have a term at origination of between three and six years. Characteristics of Investments Secured Loans Secured loans, including senior secured loans, unitranche loans and second lien loans, will have liens on the assets of the borrower that will serve as collateral in support of the repayment of such loans. Senior Secured Loans. Senior secured loans will be structured with first- priority liens on the assets of the borrower that will serve as collateral in support of the repayment of such loans. Senior secured loans may provide for moderate loan amortization in the early years of the loan, with the majority of the amortization deferred until loan maturity. Under market conditions as of the date of this Offering Memorandum, Crescent Direct Lending expects that the interest rate on senior secured loans will range between 5% and 7% over applicable LIBOR.13 Unitranche Loans. Unitranche loans will be structured as senior secured loans, including first priority liens on an issuer's assets as discussed above. Unitranche loans typically provide for moderate loan amortization in the initial years of the facility, with the majority of the principal co- payment deferred " There can be no assurance that the Partnership will be able to achieve such rates on its investments. -14- 17838634.12.BUSINESS CONFIDENTIAL CCG144 until loan maturity. Since unitranche loans generally allow the borrower to make a large, lump sum payment of principal at the end of the loan term, there is a risk of loss if the borrower is unable to pay the lump sum or refinance the amount owed at maturity. In some cases, the Partnership will be the sole lender, or the Partnership together with its affiliates will be the sole lender, of unitranche loans, which can provide the Partnership with more influence interacting with a borrower in terms of monitoring and, if necessary, remediation in the event of underperformance. Under market conditions as of the date of this Offering Memorandum, Crescent Direct Lending expects that the interest rate on unitranche loans will range between 7% and 11% over applicable LIBOR.13 Second Lien Loans. Second lien loans will be structured as junior, secured loans, including second priority liens on an issuer's assets. These loans typically provide for moderate loan amortization in the initial years of the loan, with the majority of the amortization deferred until loan maturity. Under market conditions as of the date of this Offering Memorandum, Crescent Direct Lending expects that the interest rate on second lien loans will generally range between 8% and 11% over applicable LIBOR. 14 Subordinated Loans and Equity Securities To a lesser extent, the Partnership may make investments in subordinated loans or equity securities. Subordinated loans and equity securities will not be secured by any collateral and will be effectively subordinated to the borrower's secured indebtedness (to the extent of the collateral securing such indebtedness). Subordinated Loans. Subordinated loans will be structured as unsecured, subordinated loans that provide for relatively high, fixed interest rates that provide the Partnership with significant current interest income. These loans typically will have interest -only payments (often representing a combination of cash pay and PIK interest) in the early years, with amortization of principal deferred to maturity. Subordinated loans generally allow the borrower to make a large, lump sum payment of principal at the end of the loan term, and there is a risk of loss if the borrower is unable to pay the lump sum or refinance the amount owed at maturity. Subordinated loans are generally more volatile than secured loans and may involve a greater risk of loss of principal. Subordinated loans often include a PIK feature, which effectively operates as negative amortization of loan principal, thereby increasing credit risk exposure over the life of the loan. Under market conditions as of the date of this Offering Memorandum, Crescent Direct Lending expects the interest rate on subordinated loans will generally range between 11% and 18 %. Equity Securities. In connection with some of its debt investments, the Partnership may also invest in preferred or common stock or receive nominally priced warrants or options to buy an equity interest in the portfolio company. As a result, as a portfolio company appreciates in value, the Partnership may achieve additional investment return from this equity interest. Crescent Direct Lending may structure such equity investments and warrants to include provisions protecting the Partnership's rights as a minority- interest holder, as well as a "put," or right to sell such securities back to the issuer, upon the occurrence of specified events. In many cases, Crescent Direct Lending may also seek to obtain registration rights in connection with these equity interests, which may include demand and "piggyback" registration rights. Covenants and Other Structural Rights Crescent Direct Lending will seek to negotiate covenants in connection with debt investments that provide protection for debt holders but allow appropriate flexibility for the portfolio company. Such covenants may include affirmative and negative covenants, default penalties, lien protection and change of control provisions. Crescent Direct Lending will seek to obtain comprehensive information rights including access to management, financial statements and budgets and, in some cases, membership on the board of directors or board of directors' observation rights. Additionally, Crescent Direct Lending will -15- 17838634.12.BUSINESS CONFIDENTIAL CCG144 generally require financial covenants and terms that restrict an issuers use of leverage and limitations on asset sales and capital expenditures. The Partnership expects to hold most of its investments to maturity or repayment, but it may sell some of its investments earlier if a liquidity event occurs, such as a sale, recapitalization or worsening of the credit quality of the portfolio company. Temporary Investments Pending investment in the debt of private companies, the Partnership intends to invest its cash primarily in cash, cash equivalents, U.S. government securities, repurchase agreements and high - quality debt instruments maturing in one year or less from the time of investment. The Partnership expects to maintain cash reserves from time to time for investment opportunities, working capital and distributions. Investment Process The Partnership's investment team has access to multiple research resources, experienced investment professionals, internal information systems and a credit analysis framework and investment process from both Crescent Direct Lending and Crescent Capital. Over the years, Crescent Direct Lending and Crescent Capital have designed their investment process to select only those investments which they believe have the most attractive risk /reward characteristics. The process involves several levels of review and is coordinated in an effort to identify risks in potential investments. The Partnership's investment team will apply its expertise to screen many of the investment opportunities as described below. Depending on the type of the investment and the obligor, Crescent Direct Lending may apply all or some of these levels of review, in its discretion. New investment opportunities will initially be reviewed by a senior investment professional to determine whether additional consideration is warranted. Factors influencing this decision include fundamental business considerations, including borrower industry, borrower financial leverage and quality of management as well as private equity sponsor involvement (if any). In the event of a positive review, potential investments will be further reviewed with senior and junior investment professionals. If the team agrees on the fundamental attractiveness of the investment, the review phase will proceed with preliminary strategic and financial analyses. At this point, Crescent Direct Lending will utilize its credit analysis methodology to outline credit and operating statistics and identify key business characteristics through a dialogue with portfolio company management. Following this analysis, Crescent Direct Lending will develop an initial structure and pricing proposal for the investment and preliminarily inform the Investment Committee of such proposal. After satisfactory preliminary analysis and review, an intensive due diligence phase will begin, including completion of credit analysis, on -site due diligence, visits and meetings with management, reference checks and consultation with third -party experts. The credit analysis is a detailed, bottom -up analysis on the portfolio company that includes an assessment of its market, competition, products, management and the equity sponsor or owner. Detailed financial analysis will also be performed at this stage with a focus on historical financial results. Projected financial information developed by the portfolio company will be analyzed and sensitized by us based upon the portfolio company's historical results and the assessment of the portfolio company's future prospects. The sensitivity analysis will highlight the variability of revenues and earnings, "worst case" debt service coverage and available sources of liquidity. As part of the overall evaluation, comparisons will be made to similar companies to help assess a portfolio company's asset coverage of debt, interest servicing capacity and competitive strength within its industry and market. At the completion of full due diligence, the Investment Committee will complete a checklist to verify that all identified issues have been covered or mitigated. Additionally during this stage, Crescent Direct Lending will typically work with the management of the -16- 17838634.12.BUSINESS CONFIDENTIAL CCG144 portfolio company and its other capital providers to develop the structure of an investment, including negotiating among these parties on how the investment is expected to perform relative to the other forms of capital in its capital structure. Based upon a favorable outcome of the due diligence process, a presentation is made to the Investment Committee for a final decision on investment and will only be funded after approval. Investment Committee Each investment opportunity requires unanimous approval of the investment committee (the "Investment Committee "). Follow -on investments in existing portfolio companies may require the Investment Committee's approval beyond that obtained when the initial investment in the company was made. The purpose of the Investment Committee is to evaluate and approve all of the Partnership's investments. The Investment Committee process is intended to bring the diverse experience and perspectives of the Investment Committee's members to the analysis and consideration of each investment. The Investment Committee serves to provide investment consistency and adherence to the Investment Manager's core investment philosophy and policies. For more information about the Investment Committee and its current members, see Section VII "Management." Monitoring Investments In most cases, the Partnership will not have influence over the board of directors of portfolio companies. In some instances, Crescent Direct Lending's investment professionals may obtain board representation or observation rights in conjunction with the Partnership's investments. Crescent Direct Lending takes an active approach in monitoring all investments, including reviews of financial performance on at least a quarterly basis and regular discussions with management. The monitoring process will begin with structuring terms and conditions which require the timely delivery and access to critical financial and business information on portfolio companies. Specifically, Crescent Direct Lending's monitoring system will consist of the following activities: Weekly: Internal portfolio monitoring discussions will be held, including portfolio company progress updates. Monthly: When available, interim statements will be analyzed by comparing actual results to budget and prior year and reviewed by the originating investment professionals. Discussions will be held with the portfolio company's management team and /or equity sponsor if operating results warrant seeking additional information or a further explanation. Quarterly: Portfolio company updates will be prepared and reviewed with members of the Investment Committee and discussions will be held with the portfolio company's management team and /or equity sponsor. Annually: Portfolio company updates will be prepared and reviewed with members of the Investment Committee and discussions will be held with the portfolio company's management team and /or equity sponsor to discuss strategic plans and corresponding budgeted financials for the next year. As part of its monitoring process, Crescent Direct Lending also tracks developments in the broader marketplace. Crescent Direct Lending and Crescent Capital's investment professionals have a wealth of information on the competitive landscape, industry trends, relative valuation metrics and -17- 17838634.12.BUSINESS CONFIDENTIAL CCG144 analyses that will assist in the execution of the Partnership's investment strategy. In addition, Crescent Direct Lending's extensive communications with brokers and dealers allow its investment professionals to monitor market and industry trends that could affect portfolio investments. Crescent Direct Lending may provide ongoing strategic, financial and operational guidance to some portfolio companies either directly or by recommending its investment professionals or other experienced representatives to participate or observe on the board of directors. Crescent Direct Lending maintains a vast network of strategic and operational advisers to call upon for industry expertise or to supplement existing management teams. Risk Ratings In addition to various risk management and monitoring tools, Crescent Direct Lending uses a risk - rating system to characterize and monitor the credit profile and expected level of returns on each investment in the Partnership's portfolio. This investment rating system uses a five -level numeric rating scale. The following is a description of the conditions associated with each investment rating: Investment Rating 1 will be used for investments in which the company is significantly ahead of plan and the loan is likely to be refinanced early or generate upside returns, if applicable (e.g., warrants). Investment Rating 2 will be used for investments in which the company is on or slightly ahead of plan and the loan continues to be on track for contractual returns only. Investment Rating 3 will be used for investments in which the company is behind plan but is not currently at risk of servicing interest or principal. Investment Rating 4 will be used for investments in which the company is significantly behind plan and some level of risk exists as to the ability to service interest currently. Investment Rating 5 will be used for investments in which the company is significantly behind plan and can no longer service interest with related risk of some impairment of principal value. In the event that Crescent Direct Lending determines that an investment is underperforming, or circumstances suggest that the risk associated with a particular investment has significantly increased, Crescent Direct Lending will increase its monitoring intensity, summarizing current operating results and material impending events and suggesting recommended actions. While the investment rating system identifies the relative risk for each investment, the rating alone does not dictate the scope and /or frequency of any monitoring that will be performed. The frequency of monitoring of an investment will be determined by a number of factors, including, but not limited to, the trends in the financial performance of the portfolio company, the investment structure and the type of collateral securing the investment. Realization of Investments The potential exit scenarios of a portfolio company will play an important role in evaluating investment decisions. As such, Crescent Direct Lending will formulate specific exit strategies at the time of investment. Crescent Direct Lending believes its senior secured debt - orientation will provide for increased potential exit opportunities, including (i) the sale of investments in the private markets, (ii) the refinancing of investments held, often due to maturity or recapitalizations, and (iii) other liquidity events including the sale or merger of the portfolio company. Since the Partnership seeks to maintain a senior secured debt orientation in its investments, the Partnership expects to receive interest income over the course of the investment period, receiving a return on invested capital well in advance of final exit. -18- 17838634.12.BUSINESS CONFIDENTIAL Investment Restrictions CCG144 To preserve the maximum flexibility to take advantage of opportunities, the Partnership is not subject to any specific limits or proportions with respect to the mix of permitted investments or geographical allocations or the investment parameters except as described in the investment limitations set forth below. The Partnership will not: • Purchase the securities of any one issuer if immediately after and as a result of such purchase more than 15% of the aggregate committed capital of the Partnership (excluding leverage) would be invested in the securities of one issuer. • Purchase any publicly- traded or 144A securities if immediately after and as a result of such purchase more than 5% of the aggregate committed capital of the Partnership (excluding leverage) would be invested in such securities. • Purchase any non -U.S. investments if immediately after and as a result of such purchase more than 20% of the aggregate committed capital of the Partnership (excluding leverage) would be invested in such investments. • Purchase equity securities if immediately after and as a result of such purchase more than 15% of the aggregate committed capital of the Partnership (excluding leverage) would be invested in such investments. • Borrow, in the aggregate, more than 150% of total capital commitments at the time of drawdown. Compliance with any investment guidelines, limitations or restrictions in this Offering Memorandum shall be determined at the time of investment purchase (based on the most recent valuations used by Crescent Direct Lending) and not by events subsequent to purchase, including, without limitation, withdrawals, changes in characterization, value or rating of any specific portfolio securities or economic conditions or events generally affecting any securities of the type held by the Partnership. -19- 17838634.12.BUSINESS CONFIDENTIAL CCG144 VII. MANAGEMENT The general partner of the Partnership is Crescent Direct Lending Levered, LLC, a Delaware limited liability company, which is a wholly -owned subsidiary of Crescent Capital Group LP. Crescent Capital Group LP will be the Investment Manager for the Partnership. Crescent Capital Group LP is registered with the SEC under the Advisers Act. The Senior Investment Professionals of Crescent Direct Lending are an experienced team of investment professionals with extensive experience in leveraged lending and investing, having participated in these markets for the predominant portion of their careers. The Senior Investment Professionals of Crescent Direct Lending believe that the broader Crescent Capital leveraged finance platform enhances its presence in the market, increases the Partnership's access to the leveraged finance community and adds extensive investment capabilities. Crescent Capital manages approximately $13.0 billion in assets and has more than 20 years of investment experience in the credit markets with specialized expertise in bank loans, high yield, mezzanine debt and distressed debt securities in middle- market companies. As a result, Crescent Capital has extensive experience managing below - investment grade debt securities across multiple strategies and over numerous market cycles. The General Partner is exclusively responsible for the overall management control and administration of the Partnership. The General Partner has broad power and authority to manage the Partnership, including taking any action the General Partner deems appropriate to further the purposes of the Partnership and that is not prohibited by the Partnership's Amended and Restated Limited Partnership Agreement (the "Limited Partnership Agreement ") or applicable law. Investment decisions will be made by the Investment Committee. The Investment Committee currently consists of Mark Attanasio, Jean-Marc Chapus, John Bowman and Scott Carpenter. All final investment decisions will be made through unanimous consent of the Investment Committee. The Senior Investment Professionals of Crescent Direct Lending will manage the day to day operations of the Partnership. The Senior Investment Professionals of Crescent Direct Lending include John Bowman, Scott Carpenter, Jonathan Cignetti, Jake Garmey and Michael Rogers who possess a broad range of transactional, financial and investment skills. Through its investment professionals, Crescent Direct Lending and the investment professionals of Crescent Capital will continue to pursue the collaborative approach that has resulted in its historical success. There can be no assurance that any particular person will serve on the Investment Committee. Except as otherwise provided in this Offering Memorandum or in the governing documents of the Partnership, the General Partner, in its sole discretion, reserves the right to add or remove Investment Committee or management team members at any time and without notice to the Limited Partners. In addition, the General Partner, in its sole discretion and without notice to the Limited Partners may elect to manage the operation of the Partnership in a manner different from that described above. Management Team John S. Bowman Mr. Bowman is a Managing Director of Crescent Capital focusing on Direct Lending. Prior to joining the team in 2012, Mr. Bowman was the President of HighPoint Capital Management, LLC. Prior to joining HighPoint Capital in 2005, Mr. Bowman was a Managing Director of Leveraged Finance at F1eetBoston Financial from 1998 to 2003, where he was a senior member of Fleet's preliminary -20- 17838634.12.BUSINESS CONFIDENTIAL CCG144 structuring and loan screening committees. Mr. Bowman also had primary leveraged finance responsibility for covering New England middle- market companies, including Fleet's mezzanine loan origination business based in Boston. Prior to joining F1eetBoston, Mr. Bowman was a Senior Vice President in Leveraged Finance with Donaldson, Lufkin & Jenrette Securities Corporation ('DLJ ), and was involved in DLJ's start-up of its Senior Loan business in 1997. Mr. Bowman also worked at Kidder, Peabody, & Co. Incorporated, State Street Bank & Trust Company, Drexel Burnham Lambert Incorporated and Lehman Brothers. Mr. Bowman earned an M.B.A. from Harvard Business School and a B.S. in Business Administration from Northeastern University. Scott E. Carpenter Mr. Carpenter is a Managing Director of Crescent Capital focusing on Direct Lending. Prior to joining the team in 2012, Mr. Carpenter was an Executive Vice President of HighPoint Capital Management, LLC. Prior to joining HighPoint Capital in 2005, Mr. Carpenter was North East Marketing Manager for Bank of America Business Capital and prior thereto, Senior Vice President and Senior Marketing Officer for Fleet Capital. Prior to joining Fleet Capital, he successfully opened and grew the Boston office of PNC Business Credit. Mr. Carpenter was also previously Vice President of Finance for Joan Fabrics, where he managed the company's finance and accounting departments and internal credit function. Mr. Carpenter is a member of numerous local business associations including the Association for Corporate Growth, the Turnaround Management Association and has been a Board member of the Commercial Finance Association and the Upstate New York Turnaround Management Association. Mr. Carpenter holds a B.A. in Economics from Tufts University. Michael L. Rogers Mr. Rogers is a Managing Director of Crescent Capital focusing on Direct Lending. Prior to joining the team in 2012, Mr. Rogers was a Managing Director of HighPoint Capital Management, LLC. Prior to joining HighPoint Capital in 2008, Mr. Rogers was a Senior Vice President at Banc of America Securities, LLC responsible for a portfolio of middle- market clients. Previously, Mr. Rogers was a Managing Director at Fleet Securities where he was co -head of Loan Structuring. In this position he structured and syndicated senior and second lien debt for acquisitions and recapitalizations, with an emphasis on sponsor transactions. During his sixteen year career at Fleet, Mr. Rogers also served in a variety of specialized groups including media and communications lending, asset based lending, leasing, mezzanine financing, and workout. Previously, Mr. Rogers was with Manufacturers Hanover Trust Company, where he completed the credit training program and then provided acquisition financing to middle- market and media companies. Mr. Rogers holds an A.B. in History from the College of the Holy Cross. Jonathan K Cignetti Mr. Cignetti is a Senior Vice President of Crescent Capital focusing on Direct Lending. Prior to joining the team in 2012, Mr. Cignetti was a Director of HighPoint Capital Management, LLC. Prior to joining HighPoint Capital in 2005, Mr. Cignetti was an Associate at Fidelity Research & Management Company, where he covered a diverse portfolio of small capitalization companies making buy /sell recommendations on public bank debt, high yield bonds and equity. Prior to joining Fidelity, Mr. Cignetti was an Associate in the Leveraged Finance Group at F1eetBoston Financial, where he structured and executed second lien, mezzanine, high yield and bridge loans for public and private companies. Mr. Cignetti received a B.S. in Finance from Babson College where he earned magna cum laude distinction. -21- 17838634.12.BUSINESS CONFIDENTIAL Jake Garmey CCG144 Mr. Garmey is a Senior Vice President of Crescent Capital focusing on Direct Lending. Prior to joining the team in 2012, Mr. Garmey was a Managing Director of HighPoint Capital Management, LLC. Prior to joining HighPoint Capital in 2005, Mr. Garmey was a Vice President for MCG Capital Corporation, a leading provider of senior and subordinated debt financing to middle- market companies. Mr. Garmey helped grow MCG's middle- market lending business from a $200 million investment portfolio to $900 million, sourcing, underwriting, and completing more than 30 transactions. Additionally, Mr. Garmey served as MCG's representative on the board for several investments. Prior to MCG, Mr. Garmey was a credit analyst for Lehman Brothers. He received an M.B.A. from the McDonough School of Business at Georgetown University and a B.A. in Economics from Hobart College. Investment Committee Members In addition to Messrs. Bowman and Carpenter (see their bios above), the Investment Committee also includes Mark L. Attanasio and Jean-Marc Chapus (see their bios below). MarkL. Attanasio Co- Founder and Managing Partner of Crescent Capital. Mr. Attanasio is a member of Crescent Capital's Management Committee. Mr. Attanasio is also a Group Managing Director of Trust Company of the West in his capacities with respect to the management of certain other funds sub - advised by Crescent Capital. Mr. Attanasio joined the team in 1991 as Co- Founder and Co -Chief Executive Officer of Crescent Capital Corporation. From 1985 to 1991, Mr. Attanasio was a member of the Investment Banking and Capital Markets Departments of Drexel Burnham Lambert Incorporated. Prior thereto, Mr. Attanasio was an attorney at Debevoise & Plimpton. Mr. Attanasio is the Chairman and Principal Owner of the Milwaukee Brewers Baseball Club and is a member of the Board of Trustees of Heal the Bay, The Los Angeles County Museum of Art (LACMA), The United Way of Milwaukee, The Greater Milwaukee Committee, Harvard- Westlake School and the Advisory Board of Columbia University School of Law. In addition, Mr. Attanasio is a member of the Major League Baseball Finance, Money Management, Labor Policy, Ownership, and Diversity Committees. Mr. Attanasio received his J.D. from Columbia University School of Law and his A.B. from Brown University. Jean Marc Chapus Co- Founder and Managing Partner of Crescent Capital. Mr. Chapus is a member of Crescent Capital's Management Committee. Mr. Chapus is also a Group Managing Director of Trust Company of the West in his capacities with respect to the management of certain other funds sub - advised by Crescent Capital. Mr. Chapus joined the team in 1991 as a Managing Director of Crescent Capital Corporation. From 1986 to 1991, Mr. Chapus was a member of the Investment Banking Department of Drexel Burnham Lambert Incorporated. Prior thereto, Mr. Chapus was a member of the Investment Banking Department of Lehman Brothers Kuhn Loeb Incorporated. Mr. Chapus is a current and former member of the Board of numerous private companies, as well as several non - profit organizations including St. Matthew's Parish School and Harvard University. Mr. Chapus received his M.B.A. and A.B. from Harvard University. -22- 17838634.12.BUSINESS CONFIDENTIAL VIII. SUMMARY TERM SHEET CCG144 The following summary is a brief description of certain information contained in this Offering Memorandum. It is not intended to be complete and is qualified by the more detailed information contained elsewhere in this Offering Memorandum and in the Limited Partnership Agreement, a copy of which accompanies this Offering Memorandum. Definitions of certain capitalized terms used in this Offering Memorandum are contained in Appendix A — "Definitions of Certain Terms." Capitalized terms used in this Offering Memorandum but not defined herein have the meanings assigned to them in the Limited Partnership Agreement. The Partnership: Crescent Direct Lending Levered Fund, L.P., a Delaware limited partnership. In order to accommodate the specific concerns of investors and necessary structuring requirements, the Partnership also will have the flexibility to make all or a portion of its investments through parallel or alternative investment vehicles and, in certain cases, to require Partners to make capital contributions directly to a parallel or alternative investment vehicle. The Partnership will pursue an investment strategy substantially similar to that of Crescent Direct Lending Fund, L.P. (the " Unlevered Fund"), but on a leveraged basis. The Partnership and the Unlevered Fund are expected to invest, to the extent considered appropriate for each fund by the Investment Manager and subject to applicable law, in the same investments on a pro -rata basis based on relative available investment capital; all investment - related expenses for such joint investments are expected to be shared on a similar basis. General Crescent Direct Lending Levered, LLC, a Delaware limited liability company, Partner /Investment will be the Partnership's General Partner and Crescent Capital Group LP, a Manager: Delaware limited partnership and an SEC registered investment adviser, will be its Investment Manager. The General Partner and its affiliates shall make a capital commitment to the Partnership equal to 1% of total capital commitments, up to $1.5 million. Investment Objective: The Partnership will seek high current income while focusing on preservation of capital. The Partnership intends to invest primarily in senior secured loans (including first lien, unitranche and second lien loans) of private U.S. lower - middle- market companies, in many cases controlled by private equity investment firms. The Partnership may also invest, to a limited extent, in other debt and equity securities of lower - middle- market companies. Investment Restrictions: The Partnership's investments will be subject to the following restrictions (among others) measured at the time of investment: (a) investments of equity capital in any single portfolio company will not exceed 15% of committed capital; (b) investments of equity capital in publicly - traded and 144A securities will not, in the aggregate, exceed 5% of committed capital; (c) investments of equity capital in non -U.S. investments will not, in the aggregate, exceed 20% of committed capital; and (d) investments of equity capital in equity securities will -23- 17838634.12.BUSINESS CONFIDENTIAL not, in the aggregate, exceed 15% of committed capital. CCG144 Target Size of The Partnership is targeting aggregate capital commitments of $150 million, but Partnership: the General Partner reserves the right to accept aggregate capital commitments for more or less than this amount. The Partnership may accept commitments until the one year anniversary of the initial closing. Capital Commitments: The General Partner intends to require a minimum commitment of $2 million from each Investor, but reserves the right to accept smaller commitments. Each Investor will make capital contributions to the Partnership from time to time based on its overall commitment upon not less than ten business days prior written notice from the General Partner. Default Provisions: If any Investor fails to provide any portion of its capital commitment (a "Defaulting Investor ") when called by the General Partner, the Defaulting Investor will be subject to the potential loss of all or a portion of its capital account and other customary default provisions. Final Closing Date: The final closing date will be the date that is 12 months after the initial closing date. Investors Participating Investors who invest in the Partnership (or any feeder fund thereto) after the in Subsequent Closings: initial closing date will be required to contribute to the Partnership (a) an amount which, when taken together with all capital contributions made by other Investors (and after the distribution to prior Investors described below), represents such Investor's ratable share (based on the Investors' respective capital commitments) of all capital contributed to the Partnership plus (b) interest at the prime rate plus 2% on the amount described in (a) above from the date on which the other Investors' related contributions were made to the date of such closing. The interest charge will not be deemed a capital contribution and will not reduce the aggregate commitment of an Investor admitted after the initial closing date. The amount of such contributions described in (a) and (b) above will be distributed on a pro -rata basis to the Investors that participated in prior closings and amounts distributed with respect to (a) above may be redrawn by the Partnership. Term: The Partnership's term will be five years from the final closing date, subject to extension by the General Partner for up to two additional one -year periods to allow for an orderly liquidation of the Partnership's investments. The Partnership will be subject to early termination and dissolution under certain circumstances as provided in the Limited Partnership Agreement. Investment Period: Thirty months from the final closing date (the "Investment Period") Reinvestment of During the Investment Period, the General Partner will generally fully reinvest Capital: principal received with respect to investments in portfolio companies. Borrowings: The Partnership will be permitted to borrow both for investment purposes and for the purpose of paying expenses and providing short-term interim financing to consummate the purchase of investments prior to the receipt of capital contributions, provided that all such borrowings, in the aggregate, do not exceed -24- 17838634.12.BUSINESS CONFIDENTIAL CCG144 150% of total capital commitments at the time of drawdown. Under normal market conditions, the Partnership intends to target approximately 1:1 leverage (equal to approximately 50% of each investment). It is anticipated that such leverage will be provided under credit facilities that would contain certain customary affirmative and negative covenants and events of default typical of such facilities. Assets of the Partnership, including the Partnership's rights under the Partnership Agreement to make Capital Calls in respect of Unfunded Commitments, may be pledged to secure such indebtedness as more fully described in the Partnership Agreement. Distributions: Commencing with the Final Closing, the Partnership expects to distribute net interest income to the Limited Partners on a quarterly basis. After the Investment Period, the Partnership expects to distribute net interest income on a quarterly basis and principal periodically as Partnership investments are realized. The General Partner retains ultimate discretion on whether to make distributions and the timing thereof. In general, amounts to be distributed will be divided among the Partners in accordance with their Capital Commitments, and the share of each Limited Partner will then be distributed as follows: (a) First, 100% to such Limited Partner, until it has received distributions pursuant to this paragraph (a) equal to a 7% per annum return, compounded annually, on its unreturned contributed capital (the "Preferred Return "); (b) Second, 100% to such Limited Partner, until it has received distributions pursuant to this paragraph (b) equal to its contributed capital; (c) Third, 100% to the General Partner until the General Partner has received distributions in respect of its carried interest equal to 10% of the sum of (1) the excess of all distributions to such Limited Partner over all amounts distributed to such Limited Partner pursuant to paragraph (b) above and (ii) the aggregate amounts distributed to the General Partner pursuant to this paragraph (c); and (d) Fourth, 90% to such Limited Partner and 10% to the General Partner in respect of its carried interest. The General Partner, the officers and employees of the Investment Manager and associated persons of the Investment Manager will not be subject to a carried interest with respect to their investments in the Partnership. For purposes of the calculations above, to the extent cash proceeds constituting return of capital from the disposition of any investment (or portion thereof) are retained by the Partnership for reinvestment, any such proceeds shall be deemed to have been distributed to the Partners and subsequently recalled as contributions to the Partnership. Amounts of taxes paid or withheld from amounts otherwise distributable to the Limited Partners shall be deemed distributed for purposes of the calculations above. Management Fees: The Partnership will pay the Investment Manager a management fee (the "Management Fee "), which shall be 1.35% per annum of the Partners' aggregate invested equity capital. -25- 17838634.12.BUSINESS CONFIDENTIAL CCG144 The Management Fee with respect to each Limited Partner shall be accrued daily and paid quarterly in arrears, and the expense shall be allocated among the Limited Partners to which it is attributable. The General Partner may, in its sole discretion, reduce the Management Fee with respect to any Limited Partner without notice to the other Limited Partners. The General Partner, the officers and employees of the Investment Manager and associated persons of the Investment Manager will not be charged the Management Fee with respect to their investments in the Partnership. Management Fee The Management Fee will be reduced by 100% of any transaction and other Offset: similar fees received by the General Partner and the Investment Manager from portfolio companies ( "Portfolio Company Fees "). Partnership Expenses: The Partnership will bear all expenses (excluding placement fees) in connection with organizing the Partnership, the General Partner and raising capital up to a maximum of $750,000. To the extent such organizational and offering expenses exceed this amount, they will be borne by the Investment Manager by offset against the Management Fee. Each of the General Partner and the Investment Manager will pay all of its ordinary administrative and overhead expenses including salaries, rent, equipment and administrative expenses incurred by the General Partner and the Investment Manager. The Partnership will pay all other expenses attributable to the activities of the Partnership (and any feeder fund thereof), including: the Management Fee; legal, auditing, consulting and accounting expenses including the overhead costs of personnel providing accounting services; brokerage and custodian fees; interest charges, financing costs and other borrowing expenses; expenses associated with the preparation of the Partnership's financial statements, tax returns and K- Is and the payment of any taxes due from the Partnership; expenses associated with the preparation, printing and distribution of reports to the Partners; the costs associated with Partnership and Advisory Board meetings; out -of- pocket expenses associated with prospective transactions not consummated; all other expenses associated with the acquisition, financing, holding and disposition of Partnership investments, including extraordinary expenses (such as litigation, if any) and any interest and other expenses incurred in respect of Partnership borrowings and hedging costs; and, to the extent permitted by applicable law, any insurance (including for the General Partner and the Investment Manager), indemnity or litigation expense and the amount of any judgments or settlements paid in connection therewith. The General Partner may engage placement agent(s) to assist with the placement of the Partnership's securities. Placement compensation may be paid by the Partnership, but any such amounts will reduce the Management Fees payable to the Investment Manager. Placement compensation includes all fees and expenses of a placement agent required to be paid by the Partnership or any of the General Partner's affiliates for a Partner's subscription of Interests in the Partnership. -26- 17838634.12.BUSINESS CONFIDENTIAL CCG144 Key Executives: If prior to the end of the Investment Period (1) both John Bowman and Scott Carpenter cease to devote substantially all of their business time to the business of the Investment Manager and the strategy pursued by the Partnership, which may include raising and managing other direct lending funds and accounts, or (ii) any two of Mark Attanasio, John Bowman and Scott Carpenter cease to be affiliated with the General Partner (either a "Key Executive Trigger Event "), the Investment Period will be suspended, subject to reinstatement within six months thereafter by a vote by a Majority in Interest appointing a new Key Executive, as provided in the Limited Partnership Agreement. Suspension of The obligation of Investors to make capital contributions for new investments Commitments: may be suspended (a "Suspension of Commitments ") upon (a) a 75% supermajonty vote of Investors, (b) the occurrence of a Key Executive Trigger Event or (c) the occurrence of certain other events as set forth in the Limited Partnership Agreement. LP Advisory Board: An Advisory Board comprised of representatives of the Limited Partners will be appointed by the General Partner and is expected to consist of no less than five and no more than seven members. Matters that must be submitted to the Advisory Board for approval include, among other things: (a) certain potential conflicts of interest and (b) any new portfolio investments (not subject to prior commitment) to be funded after the Investment Period. Allocations of Net In general and subject to allocations to the General Partner with respect to its Profits and Net Losses: carried interest, net profits and net losses of the Partnership will be allocated among the Partners in accordance with their respective capital commitments. Tax Distribution: The Partnership may make distributions to the General Partner in amounts necessary to defray the tax liabilities of its members attributable to their indirect interest in the Partnership through the General Partner to the extent that the distributions to the General Partner are insufficient. General Partner After the final distribution of assets of the Partnership among the Investors, if the Clawback: General Partner has received distributions of carried interest (and subject to the succeeding proviso), then the General Partner will contribute to the Partnership an amount equal to the greater of the following (the "General Partner Clawback"): (a) the amount by which the Investors' total distributions are less than their contributed capital for investment plus the Preferred Return thereon; and (b) the amount by which total distributions to the General Partner on account of its carried interest exceed 10% of the Partnership's net profits over the life of the Partnership; provided, however, that in no event will the General Partner be required to contribute an amount in excess of 100% of the net amount distributed to the General Partner (net of taxes paid or payable) on account of its carried interest. Conflicts of Interest: The Partnership may have conflicts of interest arising out of the overall investment activity of the Senior Investment Professionals and their affiliates. See Section IX "Certain Conflicts oflnterest." Other Direct Lending The General Partner and its affiliates have formed the Unlevered Fund and may -27- 17838634.12.BUSINESS CONFIDENTIAL CCG144 Funds: form additional private investment partnerships, trusts or other funds or manage other accounts with a mandate to make investments primarily in senior secured loans (including first lien, unitranche and second lien loans) of private U.S. lower - middle- market companies, in many cases controlled by private equity investment firms (each, including the Unlevered Fund, a "Direct Lending Fund"). Subject to applicable law, all investment opportunities that are appropriate for the Partnership and one or more Direct Lending Funds shall be allocated among all such funds and accounts on a fair and equitable basis as determined by the Investment Manager. Transferability of An Investor's interest in the Partnership (including responsibility for the related Interests: commitment obligation) may not be sold, transferred or assigned without the prior written consent of the General Partner. No Right to A Limited Partner has no right to withdrawal from the Partnership prior to Withdrawal: termination and dissolution of the Partnership, except in limited circumstances for ERISA or governmental investors as provided in the Limited Partnership Agreement. Exculpation and The Partnership will indemnify the General Partner and its respective members, Indemnification: directors, officers, employees, agents and affiliates and their respective affiliates (each, an "Indemnified Person ") from and against losses, liabilities, costs and expenses (including attorney's fees, judgments and amounts paid in settlement), as incurred, in connection with their activities on behalf of, or their association with, the Partnership to the fullest extent permitted by law, except as otherwise specifically provided in the governing documents of the Partnership. To the extent permitted by law, no Indemnified Person will be liable to the Partnership or any Investor for any act or omission except as otherwise specifically provided in the governing documents of the Partnership. Partners Giveback: The General Partner may require Partners to return distributions made to such Partner for the purpose of meeting such Partner's rp o -rata share of the Partnership's indemnity or certain other obligations in an amount up to, but in no event in excess of, the aggregate amount of distributions actually received by such Partner from the Partnership; provided, that no distribution shall be required to be returned after three years from the date of final liquidation of the assets of the Partnership (unless notice of a pending obligation has been given within such period); and provided further, that no Partner will be required to return more than 25% of the amount of its Commitment. Amendments: All of the Investors must approve any amendment that would change the distribution, allocation and liquidation provisions of the Limited Partnership Agreement (except that the General Partner may unilaterally amend the Limited Partnership Agreement to the extent necessary to comply with any federal, state or local tax law). The Limited Partnership Agreement is subject to further amendment as described therein. Reports: Investors will receive: (a) annual audited financial statements for the Partnership (including a statement of each Investor's closing capital account balance) and -28- 17838634.12.BUSINESS CONFIDENTIAL (b) unaudited quarterly financial reports for the Partnership. Valuations: Portfolio valuation will be conducted at least quarterly. CCG144 Suitability The Partnership is offering Interests to investors who meet certain eligibility criteria, including qualifying as an "accredited investor" as defined under Regulation D under the Securities Act, and as a "qualified purchaser" under the Investment Company Act. Interests may not be a suitable investment for U.S. tax - exempt investors who are averse to recognizing unrelated business taxable income and for non -U.S. investors who wish to avoid having their shares of Partnership income become subject to U.S. income tax on a net income basis. See Section XIII "Tax Considerations." Risk Factors and An investment in the Partnership should be based on an investor's careful Potential Conflicts of analysis of its overall portfolio and its own objectives and needs in the areas of Interest: diversification, liquidity, return and risk management. Investment in the Partnership involves certain risks. See Section X "Risk Factors" and Section IX "Certain Conflicts oflnterest." Tax Considerations: It is intended that for federal income tax purposes the Partnership will be treated as a partnership and not as an association taxable as a corporation. The Partnership will receive at closing an opinion of counsel to this effect. The taxation of partners and partnerships is extremely complex, involving, among other things, significant issues as to the character, timing of realization and sourcing of income, gains and losses. Each prospective investor is urged to consult its own tax advisor as to the tax consequences of an investment in the Partnership. See Section XIII "Tax Considerations." ERISA Considerations: Investment in the Partnership is generally open to sophisticated institutions, including employee benefit plans subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ( "ERISA "), and other plans subject to Section 4975 of the Code. The Partnership may require certain customary representations from investing plans to determine compliance with ERISA and Section 4975 of the Code. The General Partner presently intends to operate the Partnership so that the Partnership will qualify for an exception from certain restrictions under ERISA and Section 4975 of the Code. Under certain circumstances, the General Partner may permit or require the withdrawal of, or the transfer of interests of, investors that are employee benefit plans, or may take certain other actions, to prevent the assets of the Partnership from being considered "plan assets." See Section XII " ERISA and Certain Other Considerations." Legal Counsel: Dechert LLP Independent Auditor: Ernst & Young LLP -29- 17838634.12.BUSINESS CONFIDENTIAL CCG144 Additional Information: Representatives of the General Partner will be available to answer questions regarding the terms and conditions of the offering and to provide additional information that may be requested by prospective Investors. They may be contacted at: John Bowman c/o Crescent Direct Lending Levered, LLC One Post Office Square, 36th Floor Boston, MA 02109 Telephone: (617) 854 -1500 -30- 17838634.12.BUSINESS CONFIDENTIAL CCG144 IX. CERTAIN CONFLICTS OF INTEREST Conflicts of Interest Investors should be aware that there will be situations where the General Partner, the Investment Manager and their respective affiliates may encounter potential conflicts of interest in connection with the Partnership's investment activities. The following discussion details certain potential conflicts of interest that should be carefully considered before making an investment in the Partnership. The Investment Manager and its affiliates are engaged in a broad spectrum of activities, including financial advisory services, principal investments and sponsoring and offering public and private investment funds. In the ordinary course of their businesses, the Investment Manager and its affiliates may engage in activities in which their interests or the interests of their clients may conflict with or be adverse to the interests of the Partnership. In addition, other clients of the Investment Manager may utilize the services of the Investment Manager and its affiliates, for which they will pay customary fees and expenses which will not be shared with the Partnership. In addition to the Partnership, the Investment Manager and its affiliates also manage, advise or sub - advise, and in the future may manage, advise or sub - advise other funds and accounts that may invest in assets eligible for purchase by the Partnership ( "Other Crescent Accounts "). The investment policies, fee arrangements and other circumstances of the Partnership may vary from those of Other Crescent Accounts. When a particular investment would be appropriate for the Partnership as well as one or more Other Crescent Accounts, such investment will be apportioned by the Investment Manager in good faith in a manner it determines to be fair and equitable. Such apportionment may not be strictly pro rata depending on the Investment Manager's good faith determination of all relevant factors, including differing investment objectives, account liquidity, diversification considerations and the terms of the relevant documents. Similar good faith apportionment principles will apply, as necessary, in dispositions of an investment held by the Partnership and one or more Other Crescent Accounts. All of the foregoing procedures could in certain circumstances adversely affect the price paid or received by the Partnership or the size of the position purchased or sold by the Partnership (including prohibiting the Partnership from purchasing a position) or may limit the rights that the Partnership may exercise with respect to an investment. In addition, the Partnership may invest in portfolio companies in which Other Crescent Accounts invest, either concurrently with the Partnership or subsequent or prior to the investment by the Partnership. The General Partner and its affiliates may from time to time incur expenses in connection with investments to be made on behalf of the Partnership and Other Crescent Accounts. The General Partner and its affiliates will attempt to allocate such expenses on a basis they consider to be equitable. Crescent Direct Lending sponsors Crescent Direct Lending Fund, L.P. (the "Unlevered Fund") that has, and may sponsor or manage Other Crescent Accounts in the future that have, a mandate to make investments primarily in senior secured loans (including first lien, unitranche and second lien loans) of private U.S. lower - middle- market companies, in many cases controlled by private equity investment firms (each such Other Crescent Account, a "Direct Lending Fund"). When a particular investment would be appropriate for the Partnership as well as one or more Direct Lending Funds, such investment will be apportioned by the Investment Manager in good faith in a manner it determines to be fair and equitable. The Partnership and each Direct Lending Fund are expected to invest, to the extent considered appropriate for each fund by the Investment Manager and subject to applicable law, in the same investments on a pro - rata basis based on relative available investment capital; all investment - related expenses for such joint investments are expected to be shared on a similar basis. -31- 17838634.12.BUSINESS CONFIDENTIAL CCG144 The Partnership may take different positions in companies in which an Other Crescent Account has invested (i.e., the Partnership may purchase equity or a different class of debt in a company in which an Other Crescent Account holds debt). In such event, the Partnership and such Other Crescent Account may have conflicting interests because they are investing in different classes of securities of the same portfolio company. Notwithstanding the foregoing, as the Partnership may, to a limited extent, invest in subordinated debt securities and related equity securities, there is a potential that the Partnership will compete with certain Other Crescent Accounts for capital and investment opportunities. Pursuant to their governing documents, certain Other Crescent Accounts hold a priority investment right with respect to certain subordinated debt securities. A similar priority investment right in favor of such Other Crescent Accounts is expected to be included in any successor to such Other Crescent Accounts. As a result of the priority investment right, some investment opportunities introduced to the Investment Manager may not be available to the Partnership if any of the certain Other Crescent Accounts subscribes for such investment opportunity. However, Crescent Direct Lending and Crescent Capital do not believe that the priority investment right will have an adverse impact on the Partnership's investment activity. Subordinated securities, including those that are subject to the priority investment right, are expected to be a limited part of the Partnership's investment strategy. Further, the Partnership's primary target investment market consists of companies with a lower EBITDA than the primary focus of the investment strategies for the certain Other Crescent Accounts with the right to priority. The Investment Manager and its affiliates have long -term relationships with a significant number of portfolio companies and their respective senior executives. The Investment Manager and its affiliates also have relationships with numerous investors, including institutional investors and their senior management. The existence and development of these relationships may influence whether or not the Investment Manager undertakes a particular investment on behalf of the Partnership, and if so, the form and level of such investment. The Investment Manager may take the existence and development of such relationships into consideration in its management of the Partnership and its investments. The fact that the General Partner's carried interest is based on the performance of the Partnership may create an incentive for the General Partner to cause the Partnership to make investments that are more speculative than would otherwise be the case in the absence of a carried interest. The personnel of the General Partner are employees of the Investment Manager or its affiliates and their compensation may be tied to the carried interest received by the General Partner. However, this incentive may be tempered somewhat by the fact that losses will reduce the Partnership's performance and thus the General Partner's carried interest. Except to the extent limited by applicable law, the Investment Manager may effect client cross - transactions in which the Investment Manager causes a transaction to be effected between the Partnership and an Other Crescent Account. The Partnership may purchase an investment from or sell an investment to an Other Crescent Account in connection with co- investment opportunities or re- allocation and true -up investments made by the Partnership and such Other Crescent Account, or warehousing or similar arrangements by or between the Partnership and such Other Crescent Account. While the Partnership intends to comply with applicable law as well as Crescent's internal policies with respect to cross - transactions, there can be no assurance that a conflict will not arise with respect to the interests of the Investment Manager, the Partnership and /or the counterparty to such a cross - transaction. The Limited Partners of the Partnership are expected to include U.S. taxable and tax - exempt entities that are not averse to recognizing UBTI. Such investors may have conflicting investment, tax and other interests with respect to their investments in the Partnership. The conflicting interests of individual investors may relate to or arise from, among other things, the nature of investments made by the -32- 17838634.12.BUSINESS CONFIDENTIAL CCG144 Partnership, the structuring of the acquisition of investments and the timing of the disposition of investments. As a consequence, conflicts of interest may arise in connection with decisions made by the General Partner, including with respect to the nature or structuring of investments, that may be more beneficial for one investor than for another investor, especially with respect to an investor's individual tax situation. In selecting and structuring investments appropriate for the Partnership, the General Partner will consider the investment and tax objectives of the Partnership and the Partners as a whole, rather than the investment, tax or other objectives of any investors individually. By acquiring an Interest, each Limited Partner will be deemed to have acknowledged the existence of such actual and potential conflicts of interest and to have waived any claim with respect to any liability arising from the existence of any such conflict of interest. The Partnership, the General Partner and the Investment Manager use the same legal counsel and accountants. See Section XI "Professional Advisers." Such advisers should not be deemed to represent the Limited Partners. Limited Partners should consult their own legal, tax and accounting advisers with respect to their investment in the Partnership. -33- 17838634.12.BUSINESS CONFIDENTIAL CCG144 X. RISK FACTORS An investment in the Partnership involves various risks, including the risk that an investor can lose some or all of its investment. While the Investment Manager strives to attain the investment objective of the Partnership through its research and portfolio management skills, there is no guarantee of successful performance, that the objective can be reached or that a positive return can be achieved. As a general rule, investors can expect that investments with higher return potential will also have higher potential of risk of loss to capital and /or income. In addition, the Partnership's investments may f uctuate in market value from day to day and, therefore, the value of an investment in the Partnership could go down as well as up. The Partnership itself is not a balanced investment program for purposes of an investor's portfolio diversification needs and, therefore, investors should consult with their financial adviser regarding the appropriateness of an investment in the Partnership for their overall investment program. The Partnership may be deemed to be a speculative investment and is not intended as a complete investment program. It is designed only for sophisticated persons who are able to bear the risk of an investment in the Partnership. The securities in each of the asset classes in which the Partnership intends to invest, involve a high degree of financial and other risks. The risks described below are, in certain cases, grouped by asset class, but may be applicable to securities in other asset classes as the case may be. In addition to the information set forth elsewhere in this Offering Memorandum, a prospective purchaser of an Interest should carefully consider the following factors: Risks Associated with Partnership Investments Debt securities are subject to various risks. Debt securities are subject to two primary (but not exclusive) types of risks: credit risk and interest rate risk. These risks can affect a security's price volatility to varying degrees, depending upon the nature of the instrument. In addition, the depth and liquidity of the market for an individual or class of debt security can also affect its price and, hence, the net asset value of the Partnership. Credit Risk refers to the likelihood that an issuer will default in the payment of principal and /or interest on a security. Financial strength and solvency of an issuer are the primary factors influencing credit risk. In addition, lack of or inadequacy of collateral or credit enhancements for a fixed income security may affect its credit risk. Credit risk of a security may change over time, and securities that are rated by ratings agencies are often reviewed and may be subject to downgrade. The Partnership will invest in securities rated below investment grade and unrated securities that, if rated, would likely be rated below investment grade. Debt securities that are rated below investment grade are considered to be speculative and are also commonly known as `junk bonds." These securities are regarded as bonds predominately speculative with respect to the issuer's continuing ability to meet principal and interest payments. Because investment in lower quality securities involves greater investment risk, achievement of the Partnership's investment objectives will be more dependent on the Investment Manager's analysis than would be the case if the Partnership were investing in higher quality debt securities. In addition, lower quality securities may be more susceptible to real or perceived adverse economic and individual corporate developments than would investment grade debt securities. Moreover, the secondary trading market for lower quality securities may be less liquid than the market for investment grade securities. This potential lack of liquidity may make it more difficult for the General Partner to accurately value certain portfolio securities. -34- 17838634.12.BUSINESS CONFIDENTIAL CCG144 Interest Rate Risk refers to the change in value of debt instruments associated with changes in interest rates. Interest rate changes may affect the value of a debt security directly (especially in the case of fixed rate securities) and indirectly (especially in the case of adjustable rate securities). In general, rises in interest rates will negatively impact the value of fixed rate securities and falling interest rates will have a positive effect on value. The degree to which a security's price will change as a result of changes in interest rates is measured by its "duration." Generally, securities with longer maturities have a greater duration and thus are subject to greater price volatility from changes in interest rates. Adjustable rate instruments also react to interest rate changes in a similar manner although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset caps or floors, among other things). Senior Secured Debt, Unitranche Debt and Second Lien Secured Debt. When the Partnership invests in senior secured term debt, unitranche debt and second lien secured debt, it will generally take a security interest in the available assets of these portfolio companies, including equity interests in their subsidiaries. There is a risk that the collateral securing the Partnership's investments may decrease in value over time or lose its entire value, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital. Also, in some circumstances, the Partnership's security interest could be subordinated to claims of other creditors. In addition, any deterioration in a portfolio company's financial condition and prospects, including any inability on its part to raise additional capital, may result in the deterioration in the value of the related collateral. Consequently, the fact that debt is secured does not guarantee that the Partnership will receive principal and interest payments according to the investment terms or at all, or that the Partnership will be able to collect on the investment should the Partnership be forced to enforce its remedies. Private and lower - middle - market companies. Generally, little public information exists about private and lower - middle- market companies, and the Partnership will rely on the ability of Crescent Direct Lending and Crescent Capital to obtain adequate information to evaluate the potential returns from investing in these companies. If Crescent Direct Lending and Crescent Capital are unable to uncover all material information about these companies, Crescent Direct Lending and Crescent Capital may not make a fully informed investment decision, and the Partnership may lose money on its investments. Lower - middle- market companies may have limited financial resources and may be unable to meet their obligations under their loans and debt securities that the Partnership holds, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of realizing any guarantees obtained in connection with the investment. In addition, such companies typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors' actions and market conditions, as well as general economic downturns. Additionally, lower - middle- market companies are more likely to depend on the management talents and efforts of a small group of persons. Therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on one or more of the portfolio companies in which the Partnership invests and, in turn, on the Partnership. Lower - middle- market companies also may be parties to litigation and may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence. In addition, the investment professionals and the Investment Manager may, in the ordinary course of business, be named as defendants in litigation arising from the Partnership's investments in portfolio companies. Risks Associated with Private Debt Securities. The private debt investments intended to be made by the Partnership are below- investment grade securities. Thus many of the risk characteristics of private debt securities purchased by the Partnership will be similar to those described above. Portfolio company issuers of private debt securities purchased by the Partnership may face intense competition (including competition from companies with greater resources and capabilities), changing business and economic -35- 17838634.12.BUSINESS CONFIDENTIAL CCG144 conditions or other developments which may adversely affect their performance. The success of portfolio companies will be dependent on their management and there can be no assurance that their performance will meet the Partnership's expectations. As the Partnership generally will hold a non - controlling interest in portfolio companies, it may have to rely solely on contractual covenants (which may not be available) to protect its position in such portfolio companies. In addition, if the private debt securities are subordinated to senior indebtedness, the ability of the Partnership to influence a company's affairs, especially during periods of financial distress or following insolvency, is likely to be substantially less than that of senior creditors. There can be no assurance that a portfolio company will generate sufficient cash necessary to service its debt obligations, and, in any such case, the Partnership may suffer a partial or total loss of invested capital. The Partnership's investments may be subject to early withdrawal features, refinancing options, pre - payment options or similar provisions which, in each case, could result in the issuer repaying the principal on an obligation held by the Partnership earlier than expected. This may happen when there is a decline in interest rates. Early repayments of the Partnership's investments may have a material adverse effect on the Partnership's investment objectives and the rate of return on invested capital. In addition, depending on fluctuations of the equity markets, warrants and other equity securities, purchased alongside the private debt securities, may become worthless. Debt securities are also subject to other creditor risks, including (a) the possible invalidation of an investment transaction as a "fraudulent conveyance" under relevant creditors' rights laws, (b) so- called "lender liability" claims by the issuer of the obligations and (c) environmental liabilities that may arise with respect to collateral securing the obligations. In addition, in connection with investments in loans there exists the possibility of material misrepresentations or omissions on the part of the borrower. Such inaccuracy or incompleteness may adversely affect the valuation of the collateral underlying the loans or may adversely affect the ability of the Partnership to perfect or effectuate a lien on any collateral securing the loan. The Partnership cannot guarantee the accuracy and completeness of representations made by borrowers. Private Debt Terms. A private debt investment may have a contractual return that is not paid entirely in cash, but rather partially or wholly in -kind or as an accreting liquidation preference, thus lengthening the time before cash is received, and increasing the Partnership's risk exposure to the portfolio company. While Crescent Direct Lending intends to achieve the Partnership's targeted returns for a given investment, including private debt, other factors, such as overall economic conditions, the competitive environment and the availability of potential purchasers of the securities, may shorten or lengthen the Partnership's holding period and some investments may take several additional years from the initial investment date to achieve a realization. In some cases, the Partnership may be prohibited by contract from selling certain securities for a period of time. If the Partnership is required to liquidate all or a portion of its portfolio positions quickly, then the Partnership may realize significantly less than the value at which the Partnership previously recorded those investments. Unregistered Securities. Private debt investments are typically unregistered securities. Unregistered securities generally may be resold only in a privately negotiated transaction with a limited number of purchasers, in a public offering registered under the Securities Act or under Rules 144 or 144A under the Act. Considerable delay could be encountered in either event. These difficulties and delays could result in the Partnership's inability to realize a favorable price upon disposition of the securities, and in some cases might make disposition of such securities at the time desired by the Partnership impossible. In those instances where the Partnership determines to have unregistered securities held by it registered prior to sale and the Partnership does not have a contractual commitment from the issuer or seller to pay the costs of such registration, the gross proceeds from the sale of the securities would be reduced by the registration costs and underwriting discounts in the event of a public offering. -36- 17838634.12.BUSINESS CONFIDENTIAL CCG144 Lender Liability Considerations and Equitable Subordination. In recent years, a number of judicial decisions in the United States have upheld the right of borrowers to sue lending institutions on the basis of various evolving legal theories (collectively termed "lender liability "). Generally, lender liability is founded upon the premise that an institutional lender has violated a duty (whether implied or contractual) of good faith and fair dealing owed to the obligor or has assumed a degree of control over the obligor that creates a fiduciary duty owed to the obligor or its other creditors or shareholders. Because of the nature of the loans, the Partnership could be subject to allegations of lender liability made against it as part of a group of lenders and may be liable for pro rata liabilities of the agent or lead lender. In addition, under common law principles that in some cases form the basis for lender liability claims, if a lending institution (1) intentionally takes an action that results in the undercapitalization of an obligor to the detriment of other creditors of such obligor, (ii) engages in other inequitable conduct to the detriment of such other creditors, (iii) engages in fraud with respect to, or makes misrepresentations to, such other creditors or (iv) uses its influence as a stockholder to dominate or control an obligor to the detriment of other creditors of such obligor, a court may elect to subordinate the claim of the offending lending institution to the claims of the disadvantaged creditor or creditors, a remedy called "equitable subordination." Because of the nature of certain of the loans, the Partnership could be subject to claims from creditors of an obligor that loans issued by such obligor should be equitably subordinated. For investments in which the Partnership is part of a syndicated lending group, the Partnership will not be the agent or lead lender. It is, accordingly, possible that lender liability or equitable subordination claims affecting the loans could arise from the actions of the agent or lead lender or other lenders in the lending group without direct involvement of the Partnership. Other Risks of Investment Strategies of the Partnership Use of Leverage. The Partnership may borrow money for investment purposes ( "leverage "). The Partnership currently intends to target approximately 1:1 leverage when making its investments. However, depending on market conditions, the Partnership could utilize greater or less leverage in making its investments. Leverage will magnify the volatility of the Partnership's investment portfolio and involves substantial risks. The use of leverage will increase investment returns if the leveraged portfolio investment earns a greater return than the Partnership pays for the use of borrowed funds. The use of leverage will also amplify any losses experienced by the Partnership if the cost of investments, including the cost of the leverage, ultimately exceeds the realizable value of the investments. The extent to which the Partnership uses leverage may have important consequences to the Limited Partners, including, but not limited to, the following: (1) greater fluctuations in the net assets of the Partnership, (ii) use of cash flow for debt service, rather than for additional investments, distributions, or other purposes, (iii) to the extent that Partnership revenues are required to meet principal payments, the Partners may be allocated income (and therefore tax liability) in excess of cash available by distribution, (iv) to the extent that the Partnership's revenues are insufficient to service its debt obligations, Partners may be required to contribute capital to service such debt obligations and (v) in certain circumstances, the Partnership may be required to prematurely harvest investments to service its debt obligations. There can also be no assurance that the Partnership will have sufficient cash flow to meet its debt service obligations. As a result, the Partnership's exposure to losses may be increased due to the illiquidity of its investments generally. Covenants and financial tests set forth in the agreements governing such leverage may limit the ability of the Partnership to make new investments or distribute its cash to Partners. Such covenants or financial tests may be based on the market value of the leveraged assets, which may fluctuate and, therefore, at any time, the Partnership may not be able to satisfy requirements of covenants or financial tests. In addition, because it can be expected to generate debt financed income, the use of leverage is expected to cause a substantial portion of the income or gain from the leveraged investments of the Fund to constitute unrelated business taxable income ( "UBTT') to the extent recognized by otherwise U.S. tax - exempt investors through a pass- through entity, such as the Partnership. -37- 17838634.12.BUSINESS CONFIDENTIAL CCG144 Subordinated Debt. The Partnership may, to a limited extent, invest in subordinated debt investments. The Partnership's subordinated debt investments will generally be subordinated to senior debt and will generally be unsecured. This may result in a heightened level of risk and volatility, which could lead to the loss of the entire investment. These investments may involve additional risks that could adversely affect investment returns. To the extent interest payments associated with such debt are deferred, such debt may be subject to greater fluctuations in valuations, and could subject the Partnership to non -cash income. Since the Partnership will not receive any principal repayments prior to the maturity of some of the subordinated debt investments, such investments will have greater risk than amortizing loans. Equity Risk. The Partnership may, to a limited extent, acquire equity securities or options or rights to acquire equity securities in connection with its debt investments. Equity risk is the risk that stocks and other equity securities generally fluctuate more than bonds and can decline in value over short or extended periods. The value of stocks and other equity securities will be affected as a result of changes in a company's financial condition and in overall market and economic conditions. Assignments and Participations. The Partnership may, to a limited extent, acquire interests in loans either directly (by way of direct lending or assignment) or indirectly (by way of participation). The direct lender has all the rights and obligations and is a contracting party under the loan agreement. The purchaser of an assignment typically succeeds to all the rights and obligations of the assigning institution and becomes a contracting party under the loan agreement with respect to the loan; however, its rights can be more restricted than those of the assigning institution. Participations in a portion of a loan typically result in a contractual relationship only with the institution participating out the interest and not with the obligor. The Partnership would, in such a case, have the right to receive payments of principal and interest to which it is entitled only from the institution selling the participation, and not directly from the obligor, and only upon receipt by such institution of such payments from the obligor. As the owner of a participation, the Partnership generally will have no right to enforce compliance by the obligor with the terms of the loan agreement or to vote on amendments to the loan agreement, nor any rights of set -off against the obligor, and the Partnership may not directly benefit from collateral supporting the loan in which it has purchased the participation. In addition, in the event of the insolvency of the selling institution under the laws of the United States and the states thereof, the Partnership may be treated as a general creditor of such selling institution, and may not have any exclusive or senior claim with respect to the selling institution's interest in, or the collateral with respect to, the applicable loan. Consequently, the Partnership will assume the credit risk of both the obligor and the institution selling the participation to the Partnership. As a result, concentrations of participations from any one selling institution subject the Partnership to an additional degree of risk with respect to defaults by such selling institution. Foreign and Emerging Markets Investing Risk and Currency Exchange Risk. The Partnership may, to a limited extent, invest in non -U.S. investments. Investments in foreign securities may involve greater risks than investing in domestic securities because the Partnership's performance may depend on factors other than the performance of a particular company including, but not limited to, political, economic, social, legal, currency inflation, taxation and custodial risks. As compared to U.S. companies, foreign issuers generally disclose less financial and other information publicly, any such information may be less reliable and foreign issuers generally are subject to less stringent and less uniform accounting, auditing and financial reporting standards. Foreign countries typically impose less thorough regulations on brokers, dealers, stock exchanges, corporate insiders and domestic markets. The markets in some foreign countries may be less liquid and subject to greater price volatility than U.S. markets. There can be no assurance that political, economic, social and other developments in foreign countries will not have a material adverse effect on the Partnership and its investments. Investment in foreign securities involves higher costs than investment in U.S. securities, including higher transaction and custody costs as well as the imposition of additional taxes by foreign governments and restrictions on repatriation. In addition, -38- 17838634.12.BUSINESS CONFIDENTIAL CCG144 security trading practices abroad may offer less protection to investors such as the Partnership. Settlement of transactions in some foreign markets may be delayed or may be less frequent than in the U.S. which could affect the liquidity of the Partnership's portfolio. Furthermore, foreign investments may be denominated in currencies other than the U.S. dollar, and hence the value of such investments will depend in part on the relative strength of the U.S. dollar. The Partnership may be affected favorably or unfavorably by currency control regulations or changes in the exchange rate between foreign currencies and the U.S. dollar. Foreign currency fluctuations could result in losses on investments in securities of foreign issuers. This might occur, for example, if the value of the acquired foreign securities declines and the debt incurred to purchase the securities is repaid by the Partnership from assets not otherwise available for foreign investment. Such a circumstance could be compounded if, as the result of foreign currency fluctuations, the amount in dollars required to repay indebtedness denominated in a foreign currency exceeds the amount in dollars actually borrowed to make the investment. The Partnership is not obligated to engage in any currency hedging operations, and there can be no assurance as to the success of any hedging operations that the Partnership may implement. Hedging Transactions. The Partnership may utilize instruments such as forward contracts, currency options and other hedging strategies to seek to hedge against fluctuations in the relative values of its portfolio positions as a result of changes in currency exchange rates. The success of hedging transactions will be subject to the ability of Crescent Direct Lending to predict correctly movements in and the direction of currencies. Unanticipated changes in currency exchange rates may negatively impact the overall performance of the Partnership. It is not possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non -U.S. currencies because the value of those securities is likely to fluctuate as a result of independent factors not related to currency fluctuations. Distressed Securities. The Partnership will not invest in distressed securities, but may continue to hold (or under certain circumstances add to) a fixed income security of a company that subsequently declares bankruptcy or otherwise engages in a bankruptcy -type reorganization. Certain of these companies may be in transition, out of favor, financially leveraged or troubled, or potentially troubled, and may be or have recently been involved in major strategic actions, restructurings, bankruptcy, reorganization or liquidation. These characteristics of these companies can cause their securities to be particularly risky, although they also may offer the potential for high returns. These companies' securities may be considered speculative, and the ability of the companies to pay their debts on schedule could be affected by adverse interest rate movements, changes in the general economic climate, economic factors affecting a particular industry or specific developments within the companies. Insolvency Considerations. Various laws enacted for the protection of creditors may apply to the Partnership's investments. The information in this and the following paragraph is applicable with respect to U.S. obligors. If a court in a lawsuit brought by an unpaid creditor or representative of creditors of an obligor (such as a trustee in bankruptcy) under a loan were to find that the obligor did not receive fair consideration or reasonably equivalent value for incurring the indebtedness constituting the loan and, after giving effect to such indebtedness, the obligor (1) was insolvent, (ii) was engaged in a business for which the remaining assets of such obligor constituted unreasonably small capital or (iii) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature, such court could determine to invalidate, in whole or in part, such indebtedness as a fraudulent conveyance, to subordinate such indebtedness to existing and /or future creditors of the obligor or to recover amounts previously paid by the obligor in satisfaction of such indebtedness. There can be no assurance as to what standard a court would apply in order to determine whether the obligor was "insolvent" after giving effect to the incurrence of the indebtedness constituting the loan or that, regardless of the method of valuation, a court would not determine that the obligor was "insolvent" upon giving effect to such incurrence. In addition, in the event of the insolvency of an obligor of a loan, payments made on such loan could be subject to avoidance as a "preference" if made within a certain period of time (which may be as long as one year) -39- 17838634.12.BUSINESS CONFIDENTIAL CCG144 before insolvency. In general, if payments on an obligation are avoidable, whether as fraudulent conveyances or preferences, such payments can be recaptured from the initial recipient (such as the Partnership). The loans of obligors not organized or incorporated in the United States will be subject to laws enacted in their home countries for the protection of creditors, which may differ from the U.S. laws described above and may be less favorable to creditors than such U.S. laws. Participation on Creditors' Committees and Boards of Directors. Crescent Direct Lending and Crescent Capital and its affiliates, on behalf of the Partnership or of other funds or accounts they manage, may participate on committees formed by creditors to negotiate with the management of financially troubled companies that may or may not be in bankruptcy. Crescent Direct Lending may also seek to negotiate directly with debtors with respect to restructuring issues. In the situation where a representative of Crescent Direct Lending or Crescent Capital chooses to join a creditors' committee, the representative would likely be only one of many participants, each of whom would be interested in obtaining an outcome that is in its individual best interest. There can be no assurance that the representative would be successful in obtaining results most favorable to it in such proceedings, although the representative may incur significant legal fees and other expenses in attempting to do so. As a result of participation by the representative on such committees, the representative may be deemed to have duties to other creditors represented by the committees, which might thereby expose the Partnership to liability to such other creditors who disagree with the representative's actions. It is possible that Crescent Direct Lending or Crescent Capital or its affiliates will be represented on the boards of some of the companies in which the Partnership makes investments. Such representation may have the effect of impairing the ability of Crescent Direct Lending to sell the Partnership's related securities when, and upon the terms, it might otherwise desire, including as a result of applicable securities laws. Investments in Cash or Cash - Equivalent Investments. Crescent Direct Lending may invest a portion of the Partnership's assets in cash or cash - equivalent investments to provide a reserve for anticipated obligations of the Partnership or for other temporary purposes. Although such a practice may assist in the preservation of capital, the assumption of cash positions may also impact overall investment return. Cash investment practices of the Partnership may be expected, therefore, to affect total investment performance of the Partnership. Market Risk General. Various market risks can affect the price or liquidity of an issuer's securities in which the Partnership may invest. There is the possibility that the returns from the types of securities in which the Partnership invests will underperform returns from the various general securities markets or different asset classes. Different types of securities tend to go through cycles of outperformance and underperformance in comparison to the general securities markets. Adverse events occurring with respect to an issuer's performance or financial position can depress the value of the issuer's securities. The liquidity in a market for a particular security will affect its value and may be affected by factors relating to the issuer, as well as the depth of the market for that security. Other market risks that can affect value include a market's current attitudes about types of securities, market reactions to political or economic events, including litigation, and tax and regulatory effects (including lack of adequate regulations for a market or particular type of instrument). Availability of Suitable Investments. The business of investing in securities has from time to time been highly competitive; the identification of attractive investment opportunities is difficult and -40- 17838634.12.BUSINESS CONFIDENTIAL CCG144 involves a high degree of uncertainty. There is the possibility that the specific securities held in the Partnership's investment portfolio will underperform other funds in the same asset class or benchmarks that are representative of the general performance of the asset class because of Crescent Direct Lending's choice of securities. There can be no assurance that the Partnership will be able to invest its capital fully or that suitable investment opportunities will be identified that satisfy the Partnership's rate of return objective. Liquidity Risk. Liquidity risk is the risk that certain securities may be difficult or impossible to sell at the time and price that the Partnership would like to sell. If that happens, the Partnership may have to lower the selling price, sell other securities instead, or forego an investment opportunity, any of which could have a negative effect on the Partnership's performance. General Economic Conditions and Recent Market Events. Recent events in the financial sector have resulted, and may continue to result, in an unusually high degree of volatility and a liquidity crisis in both U.S. and non -U.S. financial markets. In such an environment, significant additional risks for the Partnership and its investors may exist. Those risks include, among others, (i) increased volatility, (ii) decreased market prices, and (iii) the possibility that opportunities for the Partnership to sell its assets in an appropriate market may be impaired or completely unavailable. These additional risks may reduce the performance of the investment or otherwise adversely affect the Partnership's investors. Both U.S. and non -U.S. equity markets have been experiencing increased volatility and turmoil, with issuers that have exposure to the real estate, mortgage and credit markets particularly affected, and it is uncertain whether or for how long these conditions will continue. In addition to the recent unprecedented turbulence in financial markets, the reduced liquidity in credit and fixed income markets may adversely affect many issuers worldwide. These events and possible continuing market turbulence may have an adverse effect on the Partnership, may decrease the likelihood that the Partnership will achieve its investment objectives, may reduce the ability of the Partnership to precisely value its portfolio securities, or reduce the Partnership's liquidity. This has resulted in significant governmental intervention in providing capital to financial institutions and other businesses, in some cases taking control of such institutions. There can be no assurance that this intervention will improve market conditions, that such conditions will not continue to deteriorate, or that further government intervention will or will not occur. In 2011, the financial markets have been impacted by continuing concerns with respect to problems associated with United States and state and local government debt as well as European sovereign debt concerns over downgrading, potential defaults and the impact such developments may have on economic growth, all of which continue to cause uncertainty and volatility in the global financial markets. In August of 2011, S &P lowered its long -term sovereign credit rating on the United States of America to "AA +" from "AAA." The impact of the downgrade of the U.S. long -term sovereign credit rating by S &P is uncertain, but could lead to increased interest rates and volatility in the short-term. It is uncertain how long and to what extent the effects of current liquidity, credit and economic conditions will continue or what other effects they will have on financial markets and the operations of Crescent Direct Lending and Crescent Capital and, in turn, the Partnership. Legal, tax, and regulatory changes, as well as judicial decisions, could adversely affect the regulation of the instruments in which the Partnership invests, or the issuers of such instruments, in ways that are unforeseeable. Among the key regulatory reactions to such events was the passage of the Dodd - Frank Wall Street Reform and Consumer Protection Act ( "Dodd- Frank "), which aims to reform various aspects of the U.S. financial markets. Under Dodd - Frank, there has been and will continue to be extensive rulemaking and regulatory changes that will affect private fund managers, the funds that they manage and the financial industry as a whole. Additionally, under Dodd -Frank, many managers to private funds will -41- 17838634.12.BUSINESS CONFIDENTIAL CCG144 be required to register with the SEC and /or be subject to various new recordkeeping, disclosure and reporting requirements which are expected to add costs to the legal, operational and compliance obligations of the Investment Manager and the Partnership and increase the amount of time and resources that the Investment Manager spends on non - investment related activities, thereby diverting the Investment Manager's time, attention and resources from portfolio management activities. Dodd -Frank will affect a broad range of market participants with whom the Partnership interacts or may interact, including banks, non -bank financial institutions, rating agencies, mortgage brokers, credit unions, insurance companies, and broker - dealers. Regulatory changes that will affect other market participants are likely to change the way in which the Investment Manager conducts business with counterparties. Certain provisions of Dodd - Frank may affect the number and type of participants in the markets in which the Partnership participates. It may take years for Dodd -Frank to be fully implemented and to understand the impact of Dodd -Frank on the financial industry as a whole. As a result, the continued uncertainty may make markets more volatile and result in greater difficulties in executing the investment strategy of the Partnership. Risks of Investing in the Partnership Past Performance Not Necessarily Indicative of Future Results. The past investment performance of the Partnership or the principals or personnel of Crescent Direct Lending and Crescent Capital or entities with which they have been associated may not be indicative of the future results of an investment in the Partnership. Portfolio Management Risk. Crescent Direct Lending's judgments about the attractiveness, value and potential appreciation of particular securities may prove to be incorrect and may not anticipate actual market movements or the impact of economic conditions generally. In fact, no matter how well Crescent Direct Lending evaluates market conditions, the securities Crescent Direct Lending chooses may fail to produce the intended result, and Limited Partners could lose money on their investments in the Partnership. Unspecified Use of Proceeds. The proceeds of this offering are intended to be invested in investments which, as of the date of this Offering Memorandum, have not been selected by Crescent Direct Lending. Purchasers of Interests in the Partnership will not have an opportunity to evaluate for themselves the relevant economic, financial and other information regarding the investments in which the proceeds of this offering will be invested and, accordingly, the Limited Partners will be dependent upon the judgment and ability of Crescent Direct Lending and Crescent Capital in investing and managing the capital of the Partnership. No assurance can be given that the Partnership will be successful in obtaining suitable investments or that, if the investments are made, the investment objective of the Partnership will be achieved in whole or in part. Reliance on the General Partner and Investment Manager. Limited Partners have no right to participate in the management of the Partnership or to make any decisions with respect to the investments to be made by the Partnership. Consequently, Limited Partners must rely on the General Partner, Crescent Direct Lending and Crescent Capital with respect to the management and investment decisions of the Partnership. Lack of Diversification. The Partnership may invest in a limited number of investments and may be concentrated in only a few industries or asset classes. Therefore, the aggregate return of the Partnership may be more adversely affected by the negative performance of a relatively few investments or industries than would a more diversified investment product. Crescent Direct Lending and Crescent Capital intend to monitor issuer performance; however, it is primarily the responsibility of an issuer's management to operate its business on a day -to -day basis and there is no assurance that such management will perform in accordance with the Partnership's expectations. -42- 17838634.12.BUSINESS CONFIDENTIAL CCG144 Interests Are Not Liquid. There will be no public or other market for the Interests and none is expected to develop. In addition, a Limited Partner has no withdrawal rights and the Limited Partnership Agreement imposes substantial restrictions on the transferability of the Interests. Thus, Interests are not a suitable investment for investors requiring liquidity. ERISA Plan Asset Considerations. The General Partner presently intends to operate the Partnership so that the Partnership will qualify for an exception from certain restrictions under ERISA and Section 4975 of the Code, including, for example, the exception for "venture capital operating companies," which could cause the Partnership to forego otherwise desirable investments. In addition, plan investors should review the discussion below under Section XII " ERISA and Certain Other Considerations." Risk Arising from Provision of Managerial Assistance. The General Partner may choose to conduct the affairs and operations of the Partnership so that its assets will not be considered "plan assets" under ERISA, including by either (i) qualifying the Partnership as a VCOC (as defined below) or (ii) concluding that investment in the Partnership by Benefit Plan Investors (as defined below) is less than 25% of the Interests. As the General Partner may determine to qualify the Partnership as a VCOC, the Partnership will be required to obtain management rights with respect to many of its portfolio companies. See below under Section XII " ERISA and Certain Other Considerations." These management rights could include the right to appoint a member of a company's board of directors, although not required, which could expose the Partnership to other legal risks. See below under "Litigation." Determination of Net Asset Value. Subject to applicable law, the General Partner is given broad discretion to establish the value of investments in illiquid securities and other illiquid assets. Tax Obligations Greater than Distributions. As partners in a partnership, the Limited Partners will recognize their allocable shares of taxable income or loss from the Partnership, without regard to the amount of distributions received. Thus, unless the expected distributions of net interest income are sufficient, Limited Partners may have to rely upon resources independent of their Interests to pay their obligations to the federal, state and local tax authorities. Technological Failure. The Partnership's business is highly dependent on the communications and information systems of the Investment Manager. In addition, certain of these systems are provided to the Investment Manager by third -party service providers. Any failure or interruption of such systems, including as a result of the termination of an agreement with any such third -party service provider, could cause delays or other problems in the Partnership's activities. This, in turn, could have a material adverse effect on the Partnership's operating results. Indemnification. To the extent permitted by applicable law, the Partnership may be required to indemnify the Investment Manager and its affiliates and their respective members, directors, officers, employees and agents for liabilities incurred in connection with the affairs of the Partnership. Liabilities resulting from such indemnification obligations may be material. The indemnification obligation of the Partnership would be payable from the assets of the Partnership or the recall of distributions previously made to Limited Partners. Litigation. To the extent the Partnership is in a position to exercise any significant influence over a portfolio company, there could be a heightened risk of litigation (e.g., claims that the Partnership is a controlling person and thus is liable for securities law violations of the portfolio company). The expense of defending against claims by third parties and paying any amounts pursuant to settlements or judgments, absent fraud, willful misconduct or gross negligence by the Investment Manager, would be borne by the Partnership and would reduce net assets or could require Limited Partners to return to the -43- 17838634.12.BUSINESS CONFIDENTIAL CCG144 Partnership distributed capital and earnings. The Investment Manager and others are indemnified in connection with such litigation, subject to certain conditions. In connection with the disposition of an investment in a portfolio company, the Partnership may be required to make representations about the business and financial affairs of a portfolio company typical of those made in connection with the sale of any business, or may be responsible for the contents of disclosure documents under applicable securities laws. The Partnership also may be required to indemnify the purchasers of such investments or underwriters, to the extent that any such representations or disclosure documents turn out to be inaccurate. These arrangements may result in contingent liabilities of the Partnership. In addition, in the capacity as a member of the boards of directors of portfolio companies, a representative of the Partnership may become subject to fiduciary or other duties which adversely affect the Partnership. For example, the Partnership may be unable to sell portfolio securities if a representative of the Investment Manager is in possession of inside information relating to the issuer of the portfolio securities. The Partnership also may be limited to the same "window periods" for sales of public securities of a portfolio company as are directors of the portfolio company if a representative of the Investment Manager is on the board of directors of the portfolio company. Certain Investment Company Act Considerations. The Partnership is not registered and does not intend to be registered as an investment company under the Investment Company Act in reliance upon the exemption provided in Section 3(c)(7) of such Act. Section 3(c)(7) provides that an issuer of securities that would otherwise be considered an investment company subject to the Investment Company Act will not be deemed an investment company subject to the Act if such issuer does not propose to engage in a public offering of its beneficial interests, and such beneficial interests are owned exclusively by investors satisfying the criteria of "qualified purchasers," as defined in Section 2(a)(51) of the Investment Company Act. Therefore, the Partnership will not be subject to the requirements imposed by the Investment Company Act on registered investment companies, which include restrictions on transactions between an investment company and its adviser or other affiliates and on borrowing and the use of leverage. In addition, shareholders of a registered investment company may have private rights of action under the Investment Company Act against the company's adviser or other affiliates for (a) breaches of fiduciary duty involving personal misconduct, and (b) breaches of fiduciary duty involving the receipt of compensation or other material payments from the company. These remedies under the Investment Company Act may not be available to investors in the Partnership. The Investment Manager, nevertheless, has fiduciary obligations to deal fairly and honestly in its relationship with the Partnership and the Limited Partners. Certain Securities Act Considerations. Interests offered hereby will not be registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(2) and Regulation D promulgated thereunder. Each Investor generally will be required to represent, among other customary private placement representations, that it is an "accredited investor" under Regulation D and that it is acquiring its Interests for its own account for investment and not for resale or distribution. The Interests will constitute "Restricted Securities" under the Securities Act and as such will be subject to certain restrictions on transferability. No Separate Counsel. Prospective investors should note that the Partnership's legal counsel does not represent Limited Partners, and no independent legal counsel has been retained to represent the Limited Partners. Prospective investors are encouraged to seek the advice of independent legal counsel in evaluating the relative risks of an investment in the Interests. -44- 17838634.12.BUSINESS CONFIDENTIAL XI. PROFESSIONAL ADVISERS CCG144 Dechert LLP ( "Decher(") has acted as legal counsel to the Partnership in connection with the offering of Interests. Dechert also acts as legal counsel to the General Partner, the Investment Manager and their affiliates. Conflicts could arise due to these multiple representations. In connection with the offering and subsequent advice provided to the Partnership, Dechert will not represent Limited Partners of the Partnership, and no independent legal counsel has been retained to represent the Limited Partners of the Partnership. In connection with its representation of the Partnership, the General Partner, the Investment Manager and their respective affiliates, Dechert acts as counsel solely in respect of the specific matters on which it has been consulted, and Dechert's involvement with respect to any particular matter is limited by the actual knowledge of Dechert attorneys who provide substantive attention to that matter. As Partnership's counsel, Dechert is not involved in, and has no discretion with respect to, the Partnership's business, investments, management or operations, such as responsibility for the Partnership's compliance. In preparing this Offering Memorandum, Dechert has relied upon information furnished to it by the Partnership, the General Partner, the Investment Manager and /or their respective affiliates. Ernst & Young LLP, Los Angeles, California, is the Partnership's auditing firm. -45- 17838634.12.BUSINESS CONFIDENTIAL CCG144 XIL ERISA AND CERTAIN OTHER CONSIDERATIONS In General Subject to the limitations applicable to investors generally, Interests may be purchased using assets of various benefit plans, including employee benefit plans ( "ERISA Plans ") subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ( "ERISA "), or retirement plans subject to Section 4975 of the Internal Revenue Code of 1986, as amended ( "Code "), such as plans intended to qualify under Code Section 401(a) (including plans covering only self - employed individuals) and individual retirement accounts (together with ERISA Plans, "Plans "). Code Section 401(k) and other similar participant- directed plans, however, are not permitted to invest in the Partnership. In considering whether a Plan should acquire an Interest, the persons acting on behalf of the Plan should consider in the Plan's particular circumstances whether the investment will be consistent with their responsibilities and any special constraints imposed by the terms of such Plan and applicable federal U.S. state or other law, including ERISA and the Code. Some of the responsibilities and constraints imposed by ERISA and the Code are summarized below. The following is merely a summary of those particular laws, however, and should not be construed as legal advice or as complete in all relevant respects. All investors are urged to consult their legal advisors before investing assets of a Plan in Interests and make their own independent decisions. See "NOTICES — RELIANCE ON U.S. FEDERAL TAX ADVICE IN THIS OFFERING MEMORAND UM. " Certain "Plan Assets" Considerations Under regulations of the U.S. Department of Labor ( "DOL "), as modified by Section 3(42) of ERISA (the "Plan Asset Rule "), an undivided portion of the assets of the Partnership will be deemed to be "plan assets" subject to the fiduciary provisions of ERISA if in general terms more than 25% of the Interests are held by "Benefit Plan Investors" (as defined below), as determined under the Plan Asset Rule, unless the Partnership qualified as a "venture capital operating company" or another exception under the Plan Asset Rule applies. For purposes of this 25% determination, the value of any equity interest held by a person (other than a benefit plan investor) who has discretionary authority or control with respect to the assets of the Partnership or any person who provides investment advice with respect to Partnership assets, or any affiliate of such a person, shall be disregarded. For this purpose, an "affiliate" of a person includes any person controlling, controlled by or under common control with that person, including by reason of having the power to exercise a controlling influence over the management or policies of such person. The term "Benefit Plan Investor" is used as defined in the Plan Asset Rule, and includes (1) an "employee benefit plan" as defined in ERISA and subject to Part 4 of Subtitle B of Title I of ERISA; (ii) any "plan" as defined in and to which Section 4975 of the Code applies (including, without limitation, an individual retirement account); and (iii) any entity whose underlying assets include plan assets by reason of a plan's investment in the entity. An entity whose underlying assets are considered "plan assets" under the 25% test noted above will generally be considered to hold plan assets only to the extent of the percentage of the equity interests in the entity held by Benefit Plan Investors. Benefit Plan Investors also include that portion of any insurance company's general account assets that are considered "plan assets" for purposes of ERISA or Section 4975 of the Code. -46- 17838634.12.BUSINESS CONFIDENTIAL CCG144 In general, an entity such as the Partnership will be treated as a venture capital operating company ( "VCOC ") commencing on the date of its first long -term investment if, on test dates that occur once a year, at least 50% of its assets, valued at cost, are invested in operating companies with respect to which the entity has direct contractual rights substantially to participate in or to influence the conduct of management ( "Venture Capital Investments "). In addition, during each year a VCOC must, in the ordinary course of its business, actually devote substantial resources to the exercise of its management rights with respect to at least one of its Venture Capital Investments. The General Partner presently intends to either (i) limit the sale and transfer of Interests to Benefit Plan Investors to less than 25% or (ii) operate the Partnership as a VCOC. If the General Partner seeks to have the Partnership satisfy the 25% limitation, the General Partner may in the future restrict additional investment by Plan investors or take any other action permitted by the Limited Partnership Agreement as may be necessary to ensure that the 25% limitation discussed above is satisfied. Governmental Plans Governmental plans, as defined in Section 3(32) of ERISA, and certain church and other plans, are not subject to Title I of ERISA or Section 4975 of the Code. However, state laws applicable to such plans may have provisions that impose restrictions on the investments and management of the assets of such plans that are, in some cases, substantively similar to those under ERISA and the Code discussed above. Fiduciaries of such plans, in consultation with their advisers, should consider the impact of their respective state pension laws and regulations on investments in the Partnership, as well as the considerations discussed above, to the extent applicable, including the restriction prohibiting participant - directed plans from investing in the Partnership. The discussion of ERISA considerations contained in this Offering Memorandum is, of necessity, general and limited to regulations and rulings in effect as of the date hereof. Therefore, prospective investors considering an investment in the Partnership should consult with their own counsel and advisers with respect to the ERISA and Code considerations of making any investment in the Partnership (and, particularly in the case of shareholders not subject to ERISA, any additional state or local law considerations that may be applicable). The sale of an Interest in the Partnership to a Plan is in no respect a representation by the Partnership, the General Partner, the Investment Manager, or any of their affiliates that this investment meets all relevant legal requirements with respect to investments by plans generally or any particular plan, or that this investment is appropriate for plans generally or any particular plan. BEFORE MAKING AN INVESTMENT IN THE PARTNERSHIP, ANY PLAN FIDUCIARY SHOULD CONSULT ITS LEGAL ADVISOR CONCERNING THE ERISA, TAX AND OTHER LEGAL CONSIDERATIONS OF SUCH AN INVESTMENT. -47- 17838634.12.BUSINESS CONFIDENTIAL XIIL TAX CONSIDERATIONS General CCG144 The discussion below summarizes certain of the federal income tax aspects of participation in the Partnership. This summary does not purport to deal with all aspects of federal income taxation that may affect investors, particularly in light of their individual circumstances, nor with certain types of investors subject to special treatment under the federal income tax laws. Consequently, each prospective investor is urged to consult its own tax adviser with regard to all of the federal, state, local and foreign income and other tax consequences of participating in the Partnership. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended ( "Code "), existing Treasury regulations promulgated thereunder ( "Regulations ") and judicial decisions, and on current administrative rules, practices and interpretations of law of the Internal Revenue Service (the "Service "). It is possible that changes in the law may be effected by future legislation and that interpretations of the law may be changed or modified by judicial decisions and by the Service in its Regulations, rules and practices. Any such change may or may not be retroactively applied and may or may not affect Limited Partners adversely. No ruling will be requested on any issue in connection with the Partnership or the offering of Interests, including any ruling whether the Partnership will be treated as a partnership for federal income tax purposes rather than an association taxable as a corporation. See "NOTICES — RELIANCE ON U.S. FEDERAL TAX ADVICE IN THIS OFFERING MEMORAND UM. " Classification of the Partnership. Under the current elective regime of the Regulations for the classification of unincorporated domestic entities, such as the Partnership, the Partnership will be classified as a partnership for federal income tax purposes unless it affirmatively elects to be treated as an association that is taxable as a corporation or unless, as the result of its manner of operations, it is classified as a "publicly traded partnership" which is taxable as a corporation. The General Partner intends to cause the Partnership to be treated as a partnership and not a publicly traded partnership for federal income tax purposes. Assuming that the Partnership is so treated, it will not be subject to federal income tax. Instead, each Limited Partner that is subject to U.S. tax will be required to take into account its allocable share of each item of the Partnership's income, gain, loss, deduction or credit, whether or not distributions are received. If as the result of a change in law or the manner of its operation, the Partnership were classified as an association taxable as a corporation for federal income tax purposes, the Partnership's taxable income would be subject to tax at regular corporate rates and would not flow through to the Limited Partners for reporting on their own returns, and distributions by the Partnership to Limited Partners would be taxable to them as a dividend, to the extent of the Partnership's earnings and profits, and would not be deductible by the Partnership. Tax Treatment of Partnership. Entities qualifying under the Code as partnerships are not subject to federal income tax, but are required to submit annual federal information returns identifying all the partners and stating the amount of each partner's distributive share of the partnership's income, gain, loss, deduction or credit for the taxable year. Tax Treatment of Partners. Each Partner in the Partnership must take into account its distributive share of Partnership items of income, gain, loss, deduction or credit in its taxable year in -48- 17838634.12.BUSINESS CONFIDENTIAL CCG144 which or with which the taxable year of the Partnership ends, whether or not cash distributions with respect to such items are made to the Partners. Such Partnership items will have the same character (ordinary or capital, short-term or long -term) in the hands of each Partner as they have in the hands of the Partnership. In the first instance, these Partnership items will be reported on the annual federal information return required of the Partnership. Any adjustments to the Partnership's information return would require corresponding adjustments in the separate federal income tax returns of the Partners. The General Partner furnishes each Limited Partner with the information concerning the Partnership necessary for the preparation of such Limited Partners federal income tax returns. Basis of a Partner's Interest. Assuming contributions are made in cash, a Limited Partner's tax basis in his Partnership interest will include the amount of money such Partner contributes to the Partnership, increased by (1) any additional contributions made by him to the Partnership, (ii) his distributive share of any Partnership income, and (iii) the amount, if any, of his share of Partnership indebtedness; and decreased, but not below zero, principally by (x) distributions from the Partnership to him, (y) the amount of his distributive share of Partnership losses and (z) any reduction in his share of Partnership indebtedness. Distributions. Generally, distributions of cash to a partner are taxable only to the extent they exceed such partner's basis in his partnership interest. The amount of such excess generally would be taxable as capital gain. In the unlikely event that Partnership assets other than cash are distributed in kind to a Partner, generally no gain or loss is recognized upon the distribution and the basis of the property distributed is adjusted by reference to its basis to the Partnership and /or the Partner's basis in its interest in the Partnership, Sale of Interests. Generally, based on the nature of the investments of the Partnership and the nature of a Partner's investment in the Partnership, a Partner will recognize capital gain or loss upon the sale or taxable exchange of an Interest in the Partnership. The amount of such gain or loss will be determined by the difference between the amount realized and the Partner's adjusted tax basis in such Partner's Interest. Partnership Allocations. For federal income tax purposes, a Limited Partner's distributive share of Partnership income, gain, deduction, loss or credit realized for federal income tax purposes generally is determined in accordance with the Limited Partnership Agreement. Under Code Section 704, however, the allocation of such items pursuant to the Limited Partnership Agreement must have "substantial economic effect" or otherwise be determined in accordance with the Limited Partners' interests in the Partnership (based upon all facts and circumstances) to be recognized for federal income tax purposes. The General Partner intends to comply with such requirements, although there can be no assurance that the Partnership will not be audited and adjustments will not be made. Characterization of the Partnership's Activities. The Partnership expects that its investment strategy of originating loans to private U.S. lower - middle- market companies will constitute a lending business for federal income tax purposes. Accordingly, the Partnership intends to report on its annual tax returns its activities as business activities and the income and expenses attributable thereto as derived from or incurred in the conduct of a business. The Partnership does not believe that its activities will result in its treatment as a dealer in loans or securities. Nature of the Partnership's Income Generally. Through its origination of loans, the Partnership invests in various securities for its own account and not as a dealer with a view to resale. As such, the securities should constitute capital assets in the hands of the Partnership. Income generated from holding these securities and from the temporary investment of the Partnership's assets will generally be in the nature of interest and dividends. -49- 17838634.12.BUSINESS CONFIDENTIAL CCG144 While the Partnership generally does not expect to trade the loans it acquires, it may on occasion. The gains and losses realized by the Partnership on the sale or exchange of securities that it acquires should be capital gains and losses, long -term or short-term depending on whether the particular capital asset has been held for more than one year. The Partnership may at times also be involved in a variety of transactions that are specifically treated under the Code, including the purchase of bonds at a discount in the market, which may result in a portion of the gain on disposition being recharacterized as ordinary income, and such as hedging transactions and tax straddles, for example. which may affect the Partnership's holding period for an investment, the characterization of gain or loss as ordinary or capital and, if capital, as long -term or short-term, and the timing of the realization of gains or losses on the actual or deemed sale of the investment. These rules, in some cases, could affect tax consequences with respect to property owned by a Limited Partner outside the Partnership. Non -Cash income. The Partnership, and thus the Limited Partners, can expect to recognize taxable income that is not accompanied by a cash receipt. For example: The Partnership may acquire debt obligations that are being or were issued for an amount less than their face amount or that include provisions for the payment of interest in -kind. Such debt obligations are issued, or considered as issued for tax purposes, with original issue discount which is required to be reported as interest income by the Partnership annually over the term of the obligation, even though no cash with respect thereto is received by the Partnership. The Partnership may participate in restructurings, workouts and other transactions in which the Partnership may receive securities or other property in exchange for securities held by the Partnership. To the extent these transactions do not qualify as non - taxable reorganizations under the Code or are otherwise subject to tax, the Partners may be required to recognize income without the receipt of cash with respect to such income. Limitation on Deductibility of Certain Expenses. As the result of its loan origination activities, the Partnership believes that it will be deemed to be engaged in the business of a lender to lower- middle- market companies. As such, normal limitations on the deductibility of investment expenses of an individual Partner (including management fees) should not apply to the share of expenses incurred by the Partnership, since such expenses should be deemed incurred in the active conduct of a business. Limitations on Deduction of Losses. In general, the deduction of partnership losses by a limited partner is subject to numerous limitations. A Partner's share of Partnership losses and deductions in any taxable year generally may be deducted only to the extent of its tax basis in its Partnership Interest at the end of such year, or, in the case of individuals and certain closely -held corporations, if less, the amount he is considered "at risk" (that is, generally, to the extent of the Partner's investment of cash and property and borrowed amounts for which the Partner is personally liable or which are secured by personal assets other than its Partnership Interest). Additionally, the Code limits the deductibility of losses incurred by a taxpayer in a "passive activity." Because the Partnership will be treated as if it were engaged in the business as an originator of loans, to the extent any Limited Partner recognizes losses as the result of its investment in the Partnership, the deductibility of such losses may be subject to such limitations. A Limited Partner will not be allowed to deduct currently its share of any expenses incurred in connection with the organization of the Partnership. Organization expenses must be capitalized and may be amortized for tax purposes over 15 years. In addition, a Limited Partner will not be allowed to deduct currently or amortize its share of any expenses incurred in connection with the offering of Interests. Any such expenses must be capitalized. -50- 17838634.12.BUSINESS CONFIDENTIAL CCG144 The foregoing is a summary of some of the more relevant Code provisions that may limit a Limited Partner's tax deductions for losses and expenses with respect to the Partnership and does not purport to be a comprehensive analysis or a complete list of all such Code provisions. Each prospective Limited Partner should consult its tax advisor to determine the extent to which the deduction of its distributive share of the Partnership's losses and expenses may be limited. Foreign Taxes Paid. The income that the Partnership may receive from investments in securities issued by foreign corporations may be subject to foreign taxes. The Partnership will take account of tax consequences to its investors when making investments and generally will attempt to assure that any tax obligation will be satisfied by withholding at the source and that Partnership income will not otherwise be subject to tax at the level of the Partnership. Under the Code, a Partner may claim a tax deduction for its share of foreign taxes paid by the Partnership (or withheld from amounts distributable to the Partnership) or may make an election to credit such foreign taxes against its U.S. tax liability. However, the foreign tax credit mechanism is subject to various restrictions and limitations that may impair the ability of a U.S. taxpayer to fully benefit from its share of foreign taxes paid. Each potential investor is urged to consult with its own tax advisor as to whether such investor should claim a credit for any foreign taxes that may arise from an investment in the Partnership. Tax Exempt Investors. Generally, entities, such as employee trusts, that are otherwise exempt from federal income taxation are subject to tax on their unrelated business taxable income ( "UBTT'). UBTI is net income from a trade or business regularly carried on by the exempt entity and not substantially related to such entity's exempt purpose. However, interest, dividends and capital gains are specifically excluded from the computation of UBTI, except to the extent that such income is derived from property the acquisition of which is financed with debt and that, thus, constitutes "debt -financed property." If a tax - exempt investor's acquisition of an Interest in the Partnership is debt financed, or the Partnership incurs debt (which it intends to do for investment purposes) that is allocated to the acquisition of a portfolio investment, all or a portion of the income or gain attributed to the "debt financed property" would be included in UBTI, regardless of whether such income or gain would otherwise be excluded as interest, dividends or capital gains. In addition, fee income actually received or deemed to be received by the Partnership or the Partners (including any fee income that might be deemed to be received because, although paid to the General Partner, Investment Manager or their respective affiliates, such income results in a reduction in the Management Fee) may be treated as UBTI. While the issue is not free from doubt, the Partnership intends to take the position that Partners do not receive any such fee income by reason of any reduction in the Management Fee. The potential for having a substantial portion of income derived from an investment in the Partnership characterized as UBTI may have a significant effect on any investment by a tax - exempt investor in the Partnership and may make investment in the Partnership unsuitable for some tax - exempt entities. Each prospective tax - exempt investor is urged to consult its own tax adviser with regard to all of the UBTI consequences of participating in the Partnership. Foreign Investors. For purposes of this Offering Memorandum, a `foreign investor" means an investor that, for United States federal income tax purposes, is a foreign corporation, nonresident alien individual, a foreign estate or trust, or a foreign partnership, one or more members of which is a foreign corporation, nonresident alien individual or a foreign estate or trust. With respect to foreign investors who are nonresident alien individuals, the following discussion assumes that such individuals are not present in the United States for 183 or more days during any particular taxable year. -51- 17838634.12.BUSINESS CONFIDENTIAL CCG144 A foreign investor that is engaged in a trade or business in the United States is subject to United States federal income taxes generally on the same basis as a United States resident on its United States and foreign source income to the extent, in either case, such income is deemed to be effectively connected with the conduct of a trade or business in the United States ( "Effectively Connected Income "). If the foreign investor's business activities are conducted through a partnership such as the Partnership, among other things, the foreign investor would be subject to United States income tax and related withholding taxes (possibly including "branch profits taxes ") on its distributive share of the partnership income, and would be required to file U.S. income tax returns. All Partners will be required to furnish appropriate documentation certifying as to their U.S. or non -U.S. tax status, together with such additional tax information as the General Partner may from time to time request. Failure to furnish requested tax documentation or other information may subject a Partner to withholding taxes and mandatory withdrawal of such Partner's interest in the Partnership. Because the loan origination activities of the Partnership are expected to constitute engaging in a trade or business in the United States and such activities will be attributed to any foreign investor in the Partnership with the resulting U.S. tax return filing obligations and withholding tax implications summarized herein, an investment in Interests may not be suitable for a foreign investor. Any foreign investor should consult with its own tax advisor before subscribing for Interests. Partnership Level Audits. Limited Partners are required to treat partnership items on their tax return consistent with the treatment of the items on the Partnership's tax return or notify the Service of any inconsistent position. It is possible that the federal information tax returns the Partnership is required to file with the Service will be audited. Such an audit would generally be conducted at the partnership level in a single proceeding rather than in separate proceedings with each Partner. In any partnership level audit, the Partnership will be represented by the General Partner as "tax matters partner," who would have the authority, among other things, to extend the applicable statute of limitations and enter into an administrative settlement with the Service with regard to all Partnership items. The Partnership would bear the cost of any such audit. Any such settlement would not be binding upon any Limited Partner who timely objects thereto. Under certain circumstances, Limited Partners may have the right (at their own expense) to participate in litigation initiated by the General Partner and to initiate litigation with the Service. Reportable Transactions. Persons who participate in or act as material advisors with respect to certain "reportable transactions" must disclose required information concerning the transaction to the IRS. In addition, material advisors must maintain lists that identify such reportable transactions and their participants. Significant penalties apply to taxpayers who fail to disclose a reportable transaction. Although the Partnership is not intended to be a vehicle to shelter U.S. federal income tax, and the new regulations provide a number of relevant exceptions, there can be no assurance that the Partnership and its Limited Partners and material advisors will not be subject to these disclosure and list maintenance requirements. Tax Elections. The Partnership may make various elections for federal income tax purposes which could result in certain items of income, gain, loss, deduction and credit being treated differently for tax and accounting purposes. The Code generally permits a partnership to elect to adjust the basis of its property on the sale or exchange of a partnership interest, the death of a partner and on the distribution of property to a partner (a "754 election "), except in certain circumstances in which such adjustments are mandatory. Such adjustments generally are mandatory in the case of a transfer of a partnership interest with respect to which there is substantial built -in loss, or a distribution of partnership property which results in a -52- 17838634.12.BUSINESS CONFIDENTIAL CCG144 substantial basis reduction. A substantial built -in loss exists if a partnership's adjusted basis in its assets exceeds the fair market value of such assets by more than $250,000. A substantial basis reduction results if a downward adjustment of more than $250,000 would be made to the basis of partnership assets if a 754 election were in effect. The general effect of such an election or mandatory adjustment is that transferees of partnership interests are treated as though they had acquired a direct interest in partnership assets. Any such election, once made, may not be revoked without the IRS's consent. Because of the tax accounting complexities inherent in making this election to adjust the basis of Partnership property, the General Partner may decide not to do so in circumstances in which such adjustments are not required. The absence of this election and of the power to compel the making of such election may, in some circumstances, result in a reduction in value of an Interest to a potential transferee. Tax Withholding. In the event the General Partner is required to withhold and pay over taxes to a relevant governmental authority, the Limited Partnership Agreement authorizes the General Partner to deduct from amounts distributable to each Limited Partner all amounts, including taxes, interest and penalties, that the Partnership or the General Partner is required to withhold or pay under applicable law. In addition, if such taxes, interest and penalties exceed the amount distributable, the Limited Partnership Agreement requires the Limited Partner to promptly pay over to the General Partner an amount of cash equal to such excess. As the result of recent law and regulations directed to the identification of U.S. persons who invest in the United States through foreign entities, the Partnership requires investors to agree to provide such additional tax and identifying information as the General Partner may from time to time request. Failure to provide requested information may subject an investor to liability for any resulting U.S. withholding taxes, information reporting and mandatory redemption of the investor's Interest. State and Local Taxes. In addition to the federal income tax consequences described above, prospective investors should consider potential state and local tax consequences of an investment in the Partnership. State and local laws often differ from federal income tax laws with respect to the treatment of specific items of income, gain, loss, deduction and credit, and the state and local tax implications of an investment in the Partnership are beyond the scope of this Offering Memorandum. Each investor should consult its own tax adviser concerning (a) the state and local tax implications of an investment in the Partnership, (b) the impact of the recent changes to the Code on these state and local tax implications, and (c) the extent, if any, to which an investment in the Partnership could cause such investor to be subject to taxation in states in which it is not otherwise doing business. Change of Law. Recent changes in U.S. federal tax law, including the American Taxpayer Relief Act of 2012, will increase tax rates to which many individual investors in the Partnership will be subject. Based upon continuing budgetary concerns and political considerations in the U.S., it is likely that there will be changes in the federal income tax laws in addition to those already adopted. While impossible to predict the timing or nature of these changes, any such changes may further negatively impact the potential return on an investment in the Partnership. -53- 17838634.12.BUSINESS CONFIDENTIAL XIV. ANTI -MONEY LAUNDERING CONSIDERATIONS USA Patriot Act; Anti -Money Laundering CCG144 In order to comply with applicable laws, rules and regulations aimed at the prevention of money - laundering (including, without limitation, the USA Patriot Act), the General Partner will require verification of identity from all prospective Limited Partners. The General Partner reserves the right to request such information as is necessary to verify the identity of all prospective Limited Partners. In the event of a delay or failure by the prospective Limited Partners to produce any information required for verification purposes, the General Partner may refuse to accept the subscription and, if so, any funds received will be returned without interest to the account from which the monies were originally debited. Suspicious activity may also be reported by the General Partner to the appropriate governmental authorities. The General Partner will take such steps as it determines are necessary to comply with applicable law, regulations, orders, directives or special measures. Governmental authorities are continuing to consider appropriate measures to implement and at this point it is unclear what steps the General Partners may be required to take; however, these steps may include prohibiting a Limited Partner from making further contributions of capital to the Partnership, depositing distributions to which a Limited Partner would otherwise be entitled to in an escrow account or causing the withdrawal of a Limited Partner from the Partnership. -54- 17838634.12.BUSINESS CONFIDENTIAL APPENDIX A CERTAIN ADDITONAL OFFERING NOTICES NOTICE TO FLORIDA OFFEREES CCG144 FOR FLORIDA RESIDENTS: THE INTERESTS REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061 OF THE FLORIDA SECURITIES. IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING A PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER. NOTICE TO GEORGIA RESIDENTS THE INTERESTS HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (14) OF CODE SECTION 10 -5 -11 OF THE "GEORGIA UNIFORM SECURITIES ACT OF 2008," AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT. NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421 -B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421 -B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. A -1 17838634.12.BUSINESS PART 211 OF FORM ADV: BROCHURE SUPPLEMENT CRESCENT CAPITAL GROUP LP DIRECT LENDING STRATEGY March 31, 2013 Crescent Capital Group LP 11100 Santa Monica Blvd., Suite 2000 Los Angeles, CA 90025 (310) 235 -5900 This brochure supplement provides information that supplements the Crescent Capital Group LP ( "Crescent') brochure. You should have received a copy of that brochure. Please contact Crescent Compliance via email at comp liancekcrescentcap. com if you did not receive Crescent's brochure or if you have any questions about the contents of this supplement. PART 2B OF FORM ADV: BROCHURE SUPPLEMENT Crescent Capital Group LP 11100 Santa Monica Blvd., Suite 2000 Los Angeles, CA 90025 (310) 235 -5900 March 31, 2013 This brochure supplement provides information about John S. Bowman that supplements the Crescent Capital Group LP ( "Crescent') brochure. You should have received a copy of that brochure. Please contact Crescent Compliance via email at compliance(&crescentcap. com if you did not receive Crescent's brochure or if you have any questions about the contents of this supplement. ITEM 2: EDUCATIONAL BACKGROUND AND BUSINESS EXPERIENCE Name: John S. Bowman Title: Managing Director Year of Birth: 1959 Formal Education: Northeastern University, B.A. Harvard Business School, M.B.A. Mr. Bowman joined the team in 2012 as a Managing Director. From 2005 to 2012 he was a President at HighPoint Capital focusing on direct lending. From 1998 -2003, he worked F1eetBoston Financial, Inc. as a Managing Director of Leveraged Finance and from 1994 -1998, he was a Senior Vice President in Leveraged Finance at Donaldson, Lufkin & Jenrette Securities Corporation. In addition, Mr. Bowman worked at Kidder, Peabody & Co, State Street Bank & Trust Company and Drexel Burnham Lambert. ITEM 3: DISCIPLINARY INFORMATION There is no disciplinary history to report. ITEM 4: OTHER BUSINESS ACTIVITIES Not applicable. ITEM 5: ADDITIONAL COMPENSATION Not applicable. ITEM 6: SUPERVISION Mr. Bowman is subject to Crescent's written compliance and supervisory procedures and the related ongoing compliance monitoring and testing. Such procedures address, among other things, the provision of investment advice. Crescent's co- founders and Managing Partners, Jean -Marc Chapus and Mark Attanasio maintain ultimate responsibility for the adviser's operations. Messrs. Chapus and Attanasio conduct oversight of the firm's investment management activities. Each of these individuals may be reached at (310) 235 -5900. PART 2B OF FORM ADV: BROCHURE SUPPLEMENT Crescent Capital Group LP 11100 Santa Monica Blvd., Suite 2000 Los Angeles, CA 90025 (310) 235 -5900 March 31, 2013 This brochure supplement provides information about Scott E. Carpenter that supplements the Crescent Capital Group LP ( "Crescent') brochure. You should have received a copy of that brochure. Please contact Crescent Compliance via email at compliance(&crescentcap. com if you did not receive Crescent's brochure or if you have any questions about the contents of this supplement. ITEM 2: EDUCATIONAL BACKGROUND AND BUSINESS EXPERIENCE Name: Scott E. Carpenter Title: Managing Director Year of Birth: 1960 Formal Education: Tufts University, B.A. Mr. Carpenter joined the team in 2012 as a Managing Director. From 2005 to 2012 he was an Executive Vice President at HighPoint Capital focusing on direct lending. From 2000 -2004, he was North East Marketing Manager for Bank of America Business Capital and from 1996 -1998, he was Senior Vice President and Senior Marketing Officer for Fleet Capital. Prior to joining Fleet Capital, he worked at PNC Business Credit and Joan Fabrics. ITEM 3: DISCIPLINARY INFORMATION There is no disciplinary history to report. ITEM 4: OTHER BUSINESS ACTIVITIES Not applicable. ITEM 5: ADDITIONAL COMPENSATION Not applicable. ITEM 6: SUPERVISION Mr. Carpenter is subject to Crescent's written compliance and supervisory procedures and the related ongoing compliance monitoring and testing. Such procedures address, among other things, the provision of investment advice. Crescent's co- founders and Managing Partners, Jean -Marc Chapus and Mark Attanasio maintain ultimate responsibility for the adviser's operations. Messrs. Chapus and Attanasio conduct oversight of the firm's investment management activities. Each of these individuals may be reached at (310) 235 -5900. PART 2B OF FORM ADV: BROCHURE SUPPLEMENT Crescent Capital Group LP 11100 Santa Monica Blvd., Suite 2000 Los Angeles, CA 90025 (310) 235 -5900 March 31, 2013 This brochure supplement provides information about Michael L. Rogers that supplements the Crescent Capital Group LP ( "Crescent') brochure. You should have received a copy of that brochure. Please contact Crescent Compliance via email at compliance(&crescentcap. com if you did not receive Crescent's brochure or if you have any questions about the contents of this supplement. ITEM 2: EDUCATIONAL BACKGROUND AND BUSINESS EXPERIENCE Name: Michael L. Rogers Title: Managing Director Year of Birth: 1960 Formal Education: College of the Holy Cross, A.B. Mr. Rogers joined the team in 2012 as a Managing Director. From 2008 to 2012 he was a Senior Vice President at HighPoint Capital focusing on direct lending. From 2004 -2008, he was a Senior Vice President at Banc of America Securities, LLC responsible for a portfolio of middle market clients. From 1997 - 2004, Mr. Rogers was a Managing Director of Fleet Securities and from 1988 -1997, he served in multiple lending and management roles at Fleet Bank. Prior to that, he worked at Manufacturers Hanover Trust Company. ITEM 3: DISCIPLINARY INFORMATION There is no disciplinary history to report. ITEM 4: OTHER BUSINESS ACTIVITIES Not applicable. ITEM 5: ADDITIONAL COMPENSATION Not applicable. ITEM 6: SUPERVISION Mr. Rogers is subject to Crescent's written compliance and supervisory procedures and the related ongoing compliance monitoring and testing. Such procedures address, among other things, the provision of investment advice. Crescent's co- founders and Managing Partners, Jean -Marc Chapus and Mark Attanasio maintain ultimate responsibility for the adviser's operations. Messrs. Chapus and Attanasio conduct oversight of the firm's investment management activities. Each of these individuals may be reached at (310) 235 -5900. PART 2B OF FORM ADV: BROCHURE SUPPLEMENT Crescent Capital Group LP 11100 Santa Monica Blvd., Suite 2000 Los Angeles, CA 90025 (310) 235 -5900 March 31, 2013 This brochure supplement provides information about Jonathan K. Cignetti that supplements the Crescent Capital Group LP ( "Crescent') brochure. You should have received a copy of that brochure. Please contact Crescent Compliance via email at compliance(cr�crescentcap com if you did not receive Crescent's brochure or if you have any questions about the contents of this supplement. ITEM 2: EDUCATIONAL BACKGROUND AND BUSINESS EXPERIENCE Name: Jonathan K. Cignetti Title: Senior Vice President Year of Birth: 1975 Formal Education: Babson College, B.S. Mr. Cignetti joined the team in 2012 as a Senior Vice President. From 2005 to 2012 he was a Director at HighPoint Capital focusing on direct lending. Prior to that, he was an Associate at Fidelity Research and Management Company. From 2000 -2004, he was an Associate of Leveraged Finance at F1eetBoston Financial. ITEM 3: DISCIPLINARY INFORMATION There is no disciplinary history to report. ITEM 4: OTHER BUSINESS ACTIVITIES Not applicable. ITEM 5: ADDITIONAL COMPENSATION Not applicable. ITEM 6: SUPERVISION Mr. Cignetti is subject to Crescent's written compliance and supervisory procedures and the related ongoing compliance monitoring and testing. Such procedures address, among other things, the provision of investment advice. Crescent's co- founders and Managing Partners, Jean -Marc Chapus and Mark Attanasio maintain ultimate responsibility for the adviser's operations. Messrs. Chapus and Attanasio conduct oversight of the firm's investment management activities. Each of these individuals may be reached at (310) 235 -5900. PART 2B OF FORM ADV: BROCHURE SUPPLEMENT Crescent Capital Group LP 11100 Santa Monica Blvd., Suite 2000 Los Angeles, CA 90025 (310) 235 -5900 March 31, 2013 This brochure supplement provides information about Jake Garmey that supplements the Crescent Capital Group LP ( "Crescent') brochure. You should have received a copy of that brochure. Please contact Crescent Compliance via email at compliance(&crescentcap. com if you did not receive Crescent's brochure or if you have any questions about the contents of this supplement. ITEM 2: EDUCATIONAL BACKGROUND AND BUSINESS EXPERIENCE Name: Jake Garmey Title: Senior Vice President Year of Birth: 1971 Formal Education: Hobart College, B.A. Georgetown University, M.B.A. Mr. Garmey joined the team in 2012 as a Senior Vice President. From 2005 to 2012 he was a Managing Director at HighPoint Capital focusing on direct lending. From 1998 -2005, he was a Vice President at MCG Captial Corporation focusing on senior and mezzanine lending. Prior to that, he worked at Lehman Brothers. ITEM 3: DISCIPLINARY INFORMATION There is no disciplinary history to report. ITEM 4: OTHER BUSINESS ACTIVITIES Not applicable. ITEM 5: ADDITIONAL COMPENSATION Not applicable. ITEM 6: SUPERVISION Mr. Garmey is subject to Crescent's written compliance and supervisory procedures and the related ongoing compliance monitoring and testing. Such procedures address, among other things, the provision of investment advice. Crescent's co- founders and Managing Partners, Jean -Marc Chapus and Mark Attanasio maintain ultimate responsibility for the adviser's operations. Messrs. Chapus and Attanasio conduct oversight of the firm's investment management activities. Each of these individuals may be reached at (310) 235 -5900. CONFIDENTIAL CRESCENT DIRECT LENDING LEVERED FUND, L.P. A Delaware Limited Partnership AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT 2013 17862032.10 CCG144 CONFIDENTIAL TABLE OF CONTENTS CCG144 SECTION 1. DEFINED TERMS ........................................................... ............................... 1 SECTION 2. GENERAL PROVISIONS ............................................. ............................... 15 2.1 Formation ................................................................................ .............................15 2.2 Name and Place of Business ................................................. ............................... 15 2.3 Address of Partners ............................................................... ............................... 16 2.4 Purpose .................................................................................... .............................16 2.5 Powers ..................................................................................... .............................16 2.6 Term ...................................................................................... ............................... 16 2.7 Fiscal Year ............................................................................ ............................... 16 2.8 Registered Agent ................................................................... ............................... 16 SECTION3. CAPITAL ........................................................................ ............................... 16 3.1 Commitment and Contributions of General Partner ............. ............................... 16 3.2 Commitments and Contributions of Limited Partners .......... ............................... 17 3.3 Partners Excused from Making Capital Contributions ......... ............................... 18 3.4 Defaulting Partners ............................................................... ............................... 20 3.5 Additional Limited Partners .................................................. ............................... 22 3.6 No Additional Capital Contributions .................................... ............................... 22 3.7 Withdrawal of Capital ........................................................... ............................... 22 3.8 Capital Accounts ................................................................... ............................... 23 3.9 Suspension of Investment Period .......................................... ............................... 23 SECTION 4. DISTRIBUTIONS AND ALLOCATIONS .................... ............................... 24 4.1 Distributions ............................................................................ .............................24 4.2 Allocations ............................................................................ ............................... 26 SECTION 5. GENERAL PARTNER ................................................... ............................... 27 5.1 Management ............................................................................ .............................27 5.2 Management and the Investment Management Agreement .. ............................... 29 5.3 Investment Committee .......................................................... ............................... 29 5.4 ERISA Fiduciary ................................................................... ............................... 29 5.5 Specific Authorization .......................................................... ............................... 30 SECTION 6. INVESTMENTS ............................................................. ............................... 30 6.1 Generally ................................................................................. .............................30 6.2 Investment Restrictions ......................................................... ............................... 30 17862032.10 CONFIDENTIAL TABLE OF CONTENTS (continued) CCG144 6.3 Related Investment Funds ..................................................... ............................... 31 SECTION 7. EXPENSES AND FEES ................................................. ............................... 36 7.1 Expenses of the Partnership .................................................. ............................... 36 7.2 Management Fee ................................................................... ............................... 36 SECTION 8. CERTAIN CONFLICTS OF INTEREST ...................... ............................... 38 8.1 Investments of Other Crescent Accounts .............................. ............................... 38 8.2 Allocation of Deal Flow ........................................................ ............................... 38 8.3 Transactions with Affiliates .................................................. ............................... 38 8.4 Other Direct Lending Funds and Accounts .......................... ............................... 39 8.5 Other Potential Conflicts of Interest ..................................... ............................... 39 8.6 Other Business Endeavors .................................................... ............................... 40 SECTION 9. LIMITED PARTNERS ................................................... ............................... 40 9.1 Identity, Number and Contributions ..................................... ............................... 40 9.2 No Management Power or Liability ..................................... ............................... 40 9.3 No Approval Required for Liquidation ................................. ............................... 40 9.4 List of Limited Partners ........................................................ ............................... 40 9.5 Limitations ............................................................................ ............................... 40 9.6 Meetings .................................................................................. .............................41 9.7 Action Without a Meeting .................................................... ............................... 41 9.8 Procedures ............................................................................... .............................41 9.9 Disclosures .............................................................................. .............................41 9.10 Media Enterprise ................................................................... ............................... 41 9.11 BHC Partners ........................................................................ ............................... 43 9.12 ERISA Partners and Public Plan Partners ............................. ............................... 43 9.13 Subscription Facility ............................................................. ............................... 46 SECTION 10. TRANSFERS AND WITHDRAWALS BY PARTNERS ............................ 47 10.1 Transfer by a Limited Partner ............................................... ............................... 47 10.2 Withdrawal by a Limited Partner .......................................... ............................... 50 10.3 Removal of a Limited Partner ............................................... ............................... 50 10.4 Status of Assignees ............................................................... ............................... 50 10.5 No Transfer by General Partner ............................................ ............................... 51 11 CONFIDENTIAL TABLE OF CONTENTS (continued) SECTION 11. POWER OF ATTORNEY 11.1 Appointment of General Partner as Attorney for Limited Partners........ 11.2 Nature of Special Power .......................................... ............................... SECTION 12. BOOKS, RECORDS AND REPORTS ............. ............................... 12.1 Books ....................................................................... ............................... 12.2 Reports ..................................................................... ............................... 12.3 Accounting and Tax Decisions ................................ ............................... 12.4 Certain Tax Matters ................................................. ............................... SECTION 13. INDEMNIFICATION; RETURN OF DISTRIBUTIONS ............... 13.1 General Partner's Liability; Indemnification ........... ............................... 13.2 Giveback of Certain Distributions ........................... ............................... SECTION 14. AMENDMENTS ............................................... ............................... 14.1 Amendments ............................................................ ............................... SECTION 15. DISSOLUTION AND TERMINATION OF THE PARTNERSHIP ..... 15.1 Dissolution Generally .............................................. ............................... 15.2 Continuation of Partnership ..................................... ............................... 15.3 Events Causing Dissolution ..................................... ............................... 15.4 Winding Up of Partnership ...................................... ............................... 15.5 Liquidation Statement .............................................. ............................... 15.6 No Deficit Make -Up Upon Dissolution ................... ............................... 15.7 General Partner's Liability Upon Liquidation ......... ............................... SECTION 16. ADVISORY BOARD ........................................ ............................... 16.1 Role of Advisory Board ........................................... ............................... 16.2 Number and Qualifications ...................................... ............................... 16.3 Period of Service ...................................................... ............................... 16.4 Meetings; Voting ..................................................... ............................... 16.5 Expenses .................................................................. ............................... 16.6 Advisory Board Liability; Indemnification ............. ............................... SECTION 17. RESIGNATION, REMOVAL, REPLACEMENT OF THE GENERAL PARTNER ...................................... ............................... 17.1 No Voluntary Withdrawal ........................................ ............................... 17.2 Removal or Cessation of the General Partner .......... ............................... iii CCG144 .. 51 .. 51 .. 52 .. 52 .. 52 .. 52 .. 53 .. 53 .. 54 .. 54 .. 56 .. 58 .. 58 .. 60 .. 60 .. 60 .. 60 .. 60 .. 62 .. 62 .. 62 .. 63 .. 63 .. 63 .. 63 .. 63 .. 64 .. 64 ......... 65 ......... 65 ......... 65 CONFIDENTIAL TABLE OF CONTENTS (continued) CCG144 17.3 Admission of a Successor General Partner ........................... ............................... 67 17.4 Liabilities and Rights of a Replaced General Partner ........... ............................... 67 SECTION 18. MISCELLANEOUS PROVISIONS ............................... ............................... 67 18.1 Entire Agreement .................................................................. ............................... 67 18.2 Crescent Name and Mark ...................................................... ............................... 68 18.3 Severability ........................................................................... ............................... 68 18.4 Counterparts; Binding upon Partners and Assignees ............ ............................... 68 18.5 Survival of Rights ................................................................. ............................... 68 18.6 Survival of Obligations ......................................................... ............................... 68 18.7 No Third Party Beneficiaries ................................................ ............................... 69 18.8 Notices .................................................................................. ............................... 69 18.9 Consents ................................................................................ ............................... 69 18.10 Governing Law ..................................................................... ............................... 69 18.11 Submission to Jurisdiction; Venue; Waiver of Jury Trial ..... ............................... 70 18.12 Remedies for Breach of this Agreement ............................... ............................... 70 18.13 Construction of Agreement ................................................... ............................... 71 18.14 Counsel ................................................................................... .............................71 18.15 Confidentiality ...................................................................... ............................... 72 18.16 Side Letters ........................................................................... ............................... 74 18.17 No Political Contributions .................................................... ............................... 74 18.18 Compliance with Laws; Disclosure ...................................... ............................... 74 18.19 Determinations of the Partners .............................................. ............................... 74 18.20 Compliance with Anti -Money Laundering Requirements .... ............................... 75 lv CONFIDENTIAL CCG144 CRESCENT DIRECT LENDING LEVERED FUND, L.P. AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT THIS AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT dated as of , 2013 is entered into among CRESCENT DIRECT LENDING LEVERED, LLC, a Delaware limited liability company, as General Partner and those Persons who have executed this Agreement, and are listed on the Schedule of Partners, as Limited Partners. Upon the terms and subject to the conditions described below, the parties agree as follows: SECTION 1. DEFINED TERMS The terms set forth below shall have the indicated meanings (applicable to both the singular and plural). "Accounting Period" means a three -month period commencing on the first day of the Fiscal Year or on the first day of the fourth, seventh or tenth calendar month of the Fiscal Year, as the case may be, or any period of shorter duration commencing upon the day following the last day of the preceding Accounting Period and terminating upon the earlier of (a) the last day of the current Accounting Period or (b) the day preceding the effective date of the withdrawal or replacement of the General Partner, any change in the relative Interests of the Limited Partners, or any other similar transaction or event, as determined by the General Partner in its sole and absolute discretion; provided, however, that the first Accounting Period shall commence on the Initial Closing Date. "Action" shall have the meaning assigned to it in Section 13.1(c). "Additional Limited Partner" means any Person admitted as a Limited Partner pursuant to Section 3.5 after the Initial Closing Date. "Advisers Act" means the Investment Advisers Act of 1940, as amended from time to time. "Advisory Board" means the Advisory Board established to advise the Partnership and a Parallel Partnership. "Advisory Board Indemnitee" shall have the meaning assigned to it in Section 16.6(c). "Affiliate" means, when used with reference to a specified Person, any Person that directly or indirectly controls or is controlled by or is under common control with the specified Person; provided that Related Investment Funds and Portfolio Companies shall not be deemed "Affiliates" of the General Partner, the Investment Manager or the Partnership. 17862032.10 1 CONFIDENTIAL CCG144 "Affiliated Partners" means (i) Crescent Capital Group LP and its successors, (ii) employees, officers or directors of any of the foregoing or any Affiliate of the Partnership that is owned or controlled by Crescent Capital Group LP ( "control" for this purpose shall have the meaning ascribed to such term in the definition of "Affiliate "), (iii) members of the immediate family of any Person described in the preceding clause (ii), and (iv) any partnership, limited liability company, corporation or trust if at the time of its formation its beneficial owners are substantially comprised of the foregoing Persons, each in its capacity as a Limited Partner. "Agreement" means this Amended and Restated Limited Partnership Agreement, as originally executed and as amended from time to time, as the context requires. "Alternative Investment Vehicle" shall have the meaning assigned to it in Section 6.3 (c)(i). "Assets" means any cash, Securities, Portfolio Investments or any other property, rights to property or assets the Partnership owns at the time of determination. "Assignee" means a Person that has acquired an Interest (including, without limitation, a Person that has acquired an Interest by means of a Transfer permitted by Section 10. 1), but that has not been admitted as a Limited Partner. "Attribution Rules" means the ownership attribution rules of the FCC, including, but not limited to, 47 C.F.R. §§ 21.912, Note 1; 22.942; 24.709; 24.720, 26.101(b), and (c); 73.3555, Note 2(g); 76.501, Note 2(g); 76.503, Note 2; and 76.504, Note 1; Attribution Reconsideration Order, 58 Radio Regulation 2d 604 (1985); Further Attribution Reconsideration Order, 1 FCC Rcd 802 (1986); and Report and Order, MM Docket Nos. 94 -150, 92 -51, 87 -154 (released Aug. 6, 1999); and Report and Order, C5 Docket Nos. 98 -82, 96 -85 (released Oct. 20, 1999), all as the same may be amended or supplemented from time to time. "Base Rate" means, on any date, a variable rate per annum equal to the rate of interest published from time to time by The Wall Street Journal as the "prime rate" at large U.S. money center banks. "BHC" means (i) a bank holding company, as defined in Section 2(a) of the BHC Act, or (ii) a foreign bank subject to the BHC Act under the International Banking Act of 1978, as amended, or (iii) any nonbank subsidiary (as defined in the BHC Act) (other than an insurance company that is predominately engaged in underwriting life, accident and health or property and casualty insurance or providing and issuing annuities) of either of the foregoing. "BHC Act" means the Bank Holding Company Act of 1956, as amended (together with any substitute or successor statute, and any related regulations). "BHC Partner" means, subject to Section 9.11, any Limited Partner that is a BHC and which notifies the General Partner that it is a BHC Partner (i) in the space provided therefore in such Limited Partner's Subscription Agreement, (ii) in a written notice submitted to the General Partner, if such Limited Partner was not a BHC at the time it became a Limited Partner, or (iii) in a written notice submitted to the General Partner for any BHC that previously elected not to be a BHC Partner pursuant to Section 9.11. 2 CONFIDENTIAL CCG144 "Broken Deal Expenses" means the costs and expenses of lawyers, accountants, consultants and other third -party professionals and the unreimbursed amount of any commitment or other financing fees and expenses, if any, incurred in connection with proposed Portfolio Investments which the Partnership ultimately does not make. "Business Day" means any day other than a Saturday, Sunday or any other day on which banks in the State of New York are required by law to be closed. All references to Business Day herein shall be based on the time in the State of Massachusetts. "Capital Account" shall have the meaning assigned to it in Section 3.8(a). "Capital Call" shall have the meaning assigned to it in Section 3.2(d). "Capital Commitment" means, when referring to a dollar amount, an amount committed by a Partner or prospective Limited Partner for investment in the Partnership pursuant to a Subscription Agreement. Each Partner's Capital Commitment is set forth on a Schedule of Partners, and the General Partner is authorized to modify the Schedule of Partners as necessary to reflect any changes in the Capital Commitments of the Partners. "Capital Contribution" means a contribution to the capital of the Partnership in cash by all Partners or any class of Partners or any one Partner (or in either case by the predecessor holders of the Interest of such Partners or Partner). The General Partner shall classify each Capital Contribution as either an Investment Contribution or an Expense Contribution. "Carried Interest" means the General Partner's interest or the Special Limited Partner's interest in distributions under Sections 4.1(b)(iii) and (iv)(B) and the corresponding allocations of Profits and Losses hereunder. "Certificate" means the Certificate of Limited Partnership of the Partnership executed by the General Partner, and any and all amendments thereto and restatements thereof, filed on behalf of the Partnership with the Secretary of State. "Close of Business" means 5:00 p.m., local time, in Boston, Massachusetts. "Co- Investment Fund" shall have the meaning assigned to it in Section 6.3(d)(i). "Co- Investors" shall have the meaning assigned to it in Section 6.3(d)(ii). "Code" means the Internal Revenue Code of 1986, as amended (or any corresponding provision of succeeding laws). "Communications Act" means the Communications Act of 1934, as amended from time to time, or any successor statute thereto. "Contributed Capital" means the aggregate Capital Contributions invested in Portfolio Investments. 3 CONFIDENTIAL CCG144 "Covered Person" means each of the General Partner, the Investment Manager, the Affiliates of the General Partner or the Investment Manager (excluding the Partnership), and the officers, directors, employees, partners, stockholders, members and agents of any of the foregoing. "Default" shall have the meaning specified in Section 3.4(a). "Defaulted Amount" shall have the meaning specified in Section 3.4(b). "Defaulted Capital Commitment" shall have the meaning specified in Section 3.4(c). "Defaulting Partner" shall have the meaning specified in Section 3.4(a). "Delaware Act" means the Delaware Revised Uniform Limited Partnership Act (6 Del. C. Sections 17 -101, et seq.), as amended from time to time and any successor thereto. "Disposition" or "Disposed Of' means the sale, exchange or other disposition by the Partnership of all or any portion of a Portfolio Investment for cash, which in the case of a promissory note shall include collection of the remaining principal and interest at, prior to, or after maturity, or, in the sole discretion of the General Partner, a distribution in kind to the Partners of all or any portion of a Portfolio Investment as permitted by this Agreement. The General Partner will determine, in its sole and absolute discretion, whether and to what extent a Disposition has occurred as a result of the receipt of property other than cash upon such sale, exchange or other disposition. A Disposition will be deemed to include a Portfolio Investment becoming worthless within the meaning of Section 165(g) of the Code. "Disposition Proceeds" means all cash and, in the sole discretion of the General Partner, non -cash proceeds received by the Partnership from any Disposition of any Portfolio Investment (net of any expenses or taxes imposed on the Partnership in connection with such receipt), including any principal payments on debt instruments acquired by the Partnership. "DOL" shall mean the U.S. Department of Labor, or any governmental agency that succeeds to the powers and functions thereof. " ERISA" means the Employee Retirement Income Security Act of 1974, the related provisions of the Code, and the respective rules and regulations promulgated thereunder, in each case as amended from time to time, and judicial rulings and interpretations thereof. " ERISA Partner" shall mean a Limited Partner that (a) (i) is a "benefit plan investor" (as such term is defined in the Plan Asset Regulations), and (ii) so indicates on its Subscription Agreement or otherwise in a writing acknowledged by the General Partner on or before the closing at which such Limited Partner is admitted to the Partnership or (b) is designated by the General Partner in writing on or before the closing at which such Limited Partner is admitted to the Partnership as an ERISA Partner. "Excess Offset Fees" has the meaning set forth in Section 7.2(d) 11 CONFIDENTIAL CCG144 "Excess Offset Fees Opt -Out Partner" means a Limited Partner who has elected in such Limited Partner's Subscription Agreement not to receive any Excess Offset Fees that may become payable pursuant to Section 7.2(d). "Excess Organizational Expenses" shall mean the amount of Organizational Expenses (other than Placement Fees) in excess of $750,000, which excess amount shall be deemed to have been incurred by the Partnership for purposes of Section 7.2(b) ratably over the first 36 months following the Initial Closing. "Excused Partner" shall have the meaning assigned to it in Section 3.3(a). "Expense Contribution" means the aggregate amount of all Capital Contributions by the Partners on or after the date hereof that do not constitute Investment Contributions. "Fair Market Value" shall mean (a) with respect to Securities (other than Marketable Securities) that are traded in the interdealer market, external pricing sources, to the extent available, including broker /dealer quotes or pricing services, as determined in good faith by the General Partner, (b) with respect to Marketable Securities (i) that are primarily traded on a securities exchange, the closing sale price on the principal securities exchange on which they are traded on the date of determination or, if no sales occurred on such date, the mean between the closing "bid" and "asked" prices on such date and (ii) the principal market for which is or is deemed to be the over - the - counter market, the closing sales price on the date of determination as published by NASDAQ or any similar organization, or if such price is not so published on any such date, the mean between their closing "bid" and "asked" prices, if available, on such date, which prices may be obtained from any reputable pricing service, broker or dealer and (c) with respect to all other Securities or other assets of or interests in the Partnership, other than cash, the fair value determined by the General Partner in good faith considering all factors, information and data deemed to be pertinent, including unusual or limited trading volume, prices obtained by private Transfers of Securities of the applicable Portfolio Company by other holders of such Securities, prices obtained from purchasers in placements of such Securities or the Securities of similar issuers, estimates of liquidation value, changes in the prospects of such Portfolio Company, liquidity of such Securities and variations in value due to the size of a block of Securities or other restrictions on such Securities. "Fair Value Capital Account" balance, as of any date, means with respect to any Limited Partner (or any Assignee of an Interest of a Limited Partner) the amount such Limited Partner or Assignee would receive if as of such date (i) all Portfolio Investments and other Assets of the Partnership are sold at their Fair Market Value (as of the most recent valuation date); (ii) the Profit or Loss resulting from such sale is allocated among the Capital Accounts of all Partners as provided herein; and (iii) the Partnership is dissolved and wound up, all liabilities are satisfied and all remaining Assets are distributed to the Partners in accordance with Section 15.4. All good faith determinations by the General Partner of Fair Value Capital Account balances shall be binding and conclusive for all purposes of this Agreement (including on the parties to this Agreement and those Persons who are beneficially interested in such Parties). "FCC" means the Federal Communications Commission. 5 CONFIDENTIAL CCG144 "FCC Rules" means the Communications Act, the Attribution Rules and the rules, regulations and policies of the FCC, as they may be amended from time to time. "Final Closing Date" shall mean the date which is twelve months after the Initial Closing Date. "Fiscal Quarter" means (i) a three -month period ending on March 31, June 30, September 30 or December 31 of a Fiscal Year that ends on December 31, and (ii) such other corresponding three -month periods of any Fiscal Year that ends other than on December 31. "Fiscal Year" means the Partnership's fiscal year as it may be determined pursuant to Section 2.7 of this Agreement. "Fitch" means Fitch, Inc., and its successors. "GAAP" means the generally accepted accounting principles in the United States. "General Partner" means Crescent Direct Lending Levered, LLC, a Delaware limited liability company, and any additional or successor general partner of the Partnership admitted in accordance with this Agreement or the Delaware Act, each in its capacity as general partner of the Partnership. "GP Affiliates" shall have the meaning specified in Section 3.1. "GP Promissory Note" means a promissory note issued to the General Partner in respect of its Carried Interest on existing and committed Portfolio Investments as of the date of removal of the General Partner as set forth in Section 17.2(c). A GP Promissory Note shall not bear interest, and shall require payments to the General Partner at the time of disposition of each such existing or committed Portfolio Investment in an amount calculated by reference to the cost basis of the relevant Portfolio Investment over the aggregate cost basis of all of such unrealized Portfolio Investments. "Initial Closing" shall mean the initial closing in which at least one Limited Partner who is not an Affiliate of the General Partner has acquired an Interest pursuant to Section 3.2(b). "Initial Closing Date" means , 2013. "Initial Limited Partner" means Crescent Capital Group LP. "Initial Limited Partnership Agreement" shall have the meaning assigned to it in Section 2.1. "Interest" means (i) with respect to a Partner, the entire ownership interest of such Partner in the Partnership at any time, including without limitation, such Partner's right to share in Profit or Loss or similar items of, and to receive distributions from, the Partnership, any and all rights to vote and the rights to any and all benefits to which such Partner is entitled as provided in the Agreement or the Delaware Act, together with the Capital Commitment and other obligations of such Partner to comply with all of the terms and provisions of this 31 CONFIDENTIAL CCG144 Agreement, and (ii) with respect to an Assignee, the interest in the Partnership that its assignor or transferor effectively Transferred to such Assignee in accordance with this Agreement. "Invested Capital" of each Limited Partner as of any date means the Investment Contributions of such Limited Partner up to and including such date, reduced by such Limited Partner's share of the original cost basis (excluding Investment Leverage) of all Portfolio Investments that have been Disposed Of by the Partnership prior to such date. "Investment Committee" shall have the meaning assigned to it in Section 5.3. "Investment Company Act" means the Investment Company Act of 1940, as amended. "Investment Contribution" means Capital Contributions that are used to make a Portfolio Investment or to pay any Partnership Operating Expenses incurred directly in connection with the making, maintaining or disposing of a Portfolio Investment. "Investment Giveback Amount" shall have the meaning assigned to it in Section 13.2(b). "Investment Leverage" means amounts borrowed for investment purposes. "Investment Management Agreement" means the Investment Management Agreement between the Partnership and the Investment Manager. "Investment Manager" means Crescent Capital Group LP, so long as it is the Investment Manager under the Investment Management Agreement and any successor thereto appointed by the General Partner. "Investment Percentage Interest" of a Partner in a Portfolio Investment shall mean the ratio of (i) such Partner's Capital Contributions with respect to such Portfolio Investment to (ii) the total Capital Contributions of all Partners with respect to such Portfolio Investment, as determined by the General Partner in its sole discretion. "Investment Period" means the thirty -month period commencing the day after the Final Closing Date unless sooner terminated as provided in Section 3.9. "Investment Preferred Return" means, as of any date of determination and calculated separately for each Limited Partner, an amount equal to 7% per annum of the excess (if any) of (A) the sum of the aggregate Capital Contributions of such Partner as of such date, less (B) all distributions made on or prior to such date to such Partner pursuant to Section 4.1(b)(ii). Notwithstanding the foregoing, no Investment Preferred Return will accrue with respect to any Capital Contribution made in anticipation of a Portfolio Investment which is not made, so long as such Capital Contribution is returned to the Partners within 90 days after the date it was received by the Partnership. "Key Executive" means (i) each of Mark L. Attanasio, John Bowman and Scott Carpenter and (ii) each additional person who is employed by the Investment Manager or any of its Affiliates and is approved as being a Key Executive by a Majority in Interest. 7 CONFIDENTIAL CCG144 "Key Executive Trigger Event" means if, prior to the end of the Investment Period, (i) both John Bowman and Scott Carpenter cease to devote substantially all of their business time to the business of the Investment Manager and the strategy pursued by the Partnership, which may include raising and managing other direct lending funds and accounts established in accordance with Section 8.4, or (ii) any two of Mark Attanasio, John Bowman and Scott Carpenter cease to be affiliated with the General Partner. "Liabilities" shall have the meaning assigned to it in Section 13.1(c). "Limited Partner" means any Person that has been admitted to the Partnership as a limited partner of the Partnership and is listed as such on the Schedule of Partners (including an Additional Limited Partner or a Substitute Limited Partner) at the time of reference thereto, in such Person's capacity as a limited partner of the Partnership. For purposes of the Delaware Act, all Limited Partners shall constitute a single class or group of limited partners of the Partnership. "Liquidating Trustee" shall have the meaning assigned to it in Section 15.4(a). "Majority (or other specified percentage) in Interest" means, as of any date of determination, Limited Partners (other than Affiliated Partners, Defaulting Partners and the non- voting Interests of BHC Partners) holding Interests representing more than 50% (or equal to or greater than the specified percentage) of the Capital Commitments of the Limited Partners (other than Affiliated Partners, Defaulting Partners and the non - voting Interests of BHC Partners). "Malfeasance" means, with respect to any Person, a judicial determination that an act or omission of such Person concerning the activities of the Partnership results in or constitutes (i) fraud, willful misconduct or gross negligence, (ii) a willful and material breach of fiduciary duty owed by such Person to the Partnership, or (iii) a willful and material breach of the terms of this Agreement, in each case with such determination being made in a final non - appealable order of a court of competent jurisdiction. "Management Fee" means the management fee payable to the Investment Manager as provided in Section 7.2. "Marketable Securities" means Securities that (i) are traded on a securities exchange, reported through the National Association of Securities Dealers Automated Quotation System or comparable foreign established over - the - counter trading system or otherwise traded over - the - counter, and (ii) may be sold by the holder (x) without registration under the Securities Act either in reliance on Rule 144 or Rule 145(d) of the Securities and Exchange Commission under the Securities Act or any other comparable exemption from such registration requirements, or (y) pursuant to a registration statement declared effective under the Securities Act within 30 days prior to, on or immediately after the applicable date of valuation of such Securities. "Material Adverse Effect" shall mean (a) a material violation of a statute, rule, regulation or governmental administrative policy of a U.S. federal or state or non -U.S. governmental authority or stock exchange regulatory organization applicable to a Partner that is reasonably likely to have a material adverse effect on a Portfolio Company or any Affiliate thereof or on the Partnership, any Related Investment Fund or Other Crescent Account, the General Partner, the Investment Manager or any of their respective Affiliates or on any Partner CONFIDENTIAL CCG144 or any Affiliate of any such Partner or, with respect to an ERISA Partner, on the sponsor of such ERISA Partner or any of such sponsor's Affiliates, (b) an occurrence, without the General Partner's consent, that is reasonably likely to subject a Portfolio Company or any Affiliate thereof or the Partnership, the General Partner, the Investment Manager or any of their respective Affiliates or any Partner or any Affiliate of any such Partner or, with respect to an ERISA Partner, the sponsor of such ERISA Partner or any of such sponsor's Affiliates, to any material non -tax regulatory requirement to which it would not otherwise be subject, or that is reasonably likely to materially increase any such regulatory requirement beyond what it would otherwise have been or (c) an occurrence that is reasonably likely to result in a "prohibited transaction" under ERISA. "Media Enterprise" means any Person that, directly or indirectly, owns, controls or operates a broadcast radio or television station, a cable television system, a "daily newspaper" (as such term is defined in Section 73.3555 of the FCC's rules and regulations, as may be amended from time to time), a multipoint multichannel distribution system licensed by the FCC, a commercial mobile radio service licensed by the FCC, any other communications facility operated pursuant to a license granted by the FCC which is subject to the provisions of Section 310(b) of the Communications Act or to the Attribution Rules, or any other business that is subject to the FCC Rules under which the ownership of the Partnership in such entity may be attributed to a Limited Partner or under which the ownership of a Limited Partner in another business may be subject to or restricted as a result of the ownership of the Partnership in such entity. " Moody's" means Moody's Investors Service, Inc., and its successors. "Non- Defaulting Partners" shall have the meaning specified in Section 3.4(b). "Non- Insulated Limited Partner" shall have the meaning set forth in Section 9.10(d). "Non -Plan Party" shall have the meaning assigned to it in Section 9.12(b). "Offset Fees" means fees (including, without limitation, directors fees, commitment fees, break -up fees or monitoring fees) received by the General Partner, the Investment Manager or any of their Affiliates in connection with a current or prospective Portfolio Investment. "Ordinary Operating Expenses" means ordinary overhead and operating administrative expenses (including salaries, rent and routine equipment expenses) incurred by the Investment Manager and the General Partner in connection with the investigation and identification of investment opportunities for the Partnership and negotiating, consummating, monitoring and Disposing Of the Partnership's Portfolio Investments. Ordinary Operating Expenses shall not include reasonable costs incurred by the Investment Manager and the General Partner with respect to activities of the Partnership that are not otherwise specified as Partnership Operating Expenses. "Organizational Expenses" means all out -of- pocket expenses incurred by the General Partner or any of its Affiliates in connection with the organization of the Partnership (and any Parallel Partnerships) and the General Partner and the offering of Interests to the Limited Partners and others (including, without limitation, Placement Fees, fees and disbursements of 9 CONFIDENTIAL CCG144 attorneys, accountants and other professionals, travel, printing, postage and other fees and expenses). "Other Crescent Accounts" means other funds and accounts managed by the General Partner, the Investment Manager and their Affiliates, other than Related Investment Funds. "Other Giveback Amount" shall have the meaning assigned to it in Section 13.2(c). "Parallel Partnership" means each parallel fund that may be formed by the General Partner that is identified in writing to the Limited Partners as a "Parallel Partnership" and is operated as a parallel entity with the Partnership as described in Section 6.3(b). "Partner" means the General Partner or any Limited Partner. "Partnership" means Crescent Direct Lending Levered Fund, L.P., a Delaware limited partnership. "Partnership Expenses" means the expenses of the organization and operation of the Partnership, including the Partnership Operating Expenses and Organizational Expenses. "Partnership Operating Expenses" means all costs and expenses relating to the Partnership's activities, investments and business (to the extent not borne or reimbursed by a Portfolio Company), including, without limitation: (i) legal, accounting, tax, audit, custodial, consulting and other professional fees (including expenses associated with maintaining the Partnership's financial books and records, calculating net asset value and preparing the Partnership's financial statements and other reports, tax returns and forms K -1 and delivery thereof to the Limited Partners); (ii) banking, brokerage, broken -deal, registration, qualification, finders, depositary and similar fees or commissions; (iii) transfer, capital and other taxes, duties and costs incurred in acquiring, holding, selling or otherwise disposing Assets; (iv) costs, expenses and liabilities of the Partnership (including, without limitation, premiums for insurance protecting the Partnership, the General Partner, the Advisory Board, any of their respective Affiliates, and any of their respective members, officers, employees and agents and including the allocable share of the Partnership's premium for insurance of a shared policy with Other Crescent Accounts); (v) interest charges, financing costs and other borrowing expenses (including with respect to a Subscription Facility); (vi) legal, custodial and accounting expenses; (vii) auditing expenses; (viii) appraisal expenses; expenses related to organizing and maintaining companies through or in which portfolio investments will be made; (ix) costs and expenses that are classified as extraordinary expenses under generally accepted accounting principles; taxes or other governmental charges payable by the Partnership; (x) costs of litigation and disputes and any judgments or settlements paid in connection with litigation or disputes involving the Partnership, a Portfolio Company or a person entitled to indemnification from the Partnership; (xi) costs of reporting to the Partners; (xii) costs of Partner meetings; (xiii) costs incurred in valuing securities; (xiv) costs of winding up and liquidating the Partnership; and expenses incurred in connection with a Partner that Defaults; (xv) out -of- pocket expenses of transactions not consummated; (xvi) all other expenses associated with the acquisition, financing, holding and disposition of Partnership investments (including with respect to a Subscription Facility), to the extent not borne by a Portfolio Company; (xvii) expenses of the Advisory Board as provided in 10 CONFIDENTIAL CCG144 Section 16.5; and (xviii) all out -of- pocket fees and expenses incurred by the Partnership, the General Partner, the Investment Committee of the General Partner or the Investment Committee's respective members, Investment Managers, officers and employees relating to investment and disposition opportunities for the Partnership whether or not consummated (including legal, accounting, auditing, consulting and other fees and expenses, financing commitment fees, real estate title and appraisal costs and printing), but excluding (A) Organizational Expenses and (B) Ordinary Operating Expenses. "Percentage Interest" with respect to a Partner means a fraction, expressed as a percentage, having as its numerator the Capital Commitment of such Partner and as its denominator the Total Commitments. "Permitted Investments" means (i) those investments described in the Private Placement Memorandum and (ii) those investments reasonably consistent with the investments described in the Private Placement Memorandum, as determined by the General Partner in its sole and absolute discretion. Permitted Investments shall also include Temporary Investments. "Person" means an individual, partnership, corporation, limited liability company, unincorporated organization, trust, joint venture, governmental agency, or other entity, whether domestic or foreign. "Placement Fees" means the fees and any interest on any deferred fees charged by any placement agent designated by the General Partner or the Partnership and other similar fees in connection with the marketing and sale of Interests. "Plan Asset Regulations" means the U.S. Department of Labor plan asset regulations, 29 C.F.R. § 2510.3 -101, as modified by Section 3(42) of ERISA. "Portfolio Company" means any corporation or other business entity which is an issuer of Securities (other than Temporary Investments) held by the Partnership. "Portfolio Investment" means any investment made by the Partnership other than Temporary Investments. "Private Placement Memorandum" means the Confidential Private Placement Memorandum dated February 2013, as the same may be supplemented or amended from time to time. ,,Profits" or "Losses" mean for each Accounting Period, an amount equal to the Partnership's taxable income or tax loss for the year or other period, determined in accordance with Section 703(a) of the Code (including all items of income, gain, loss or deduction required to be stated separately under Section 703(a)(1) of the Code), with the following adjustments: (a) any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Profit or Loss will be added to taxable income or tax loss; 11 CONFIDENTIAL CCG144 (b) any expenditures of the Partnership described in Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) expenditures under Treasury Regulations Section 1.704- 1(b)(2)(iv)(i), and not otherwise taken into account in computing Profit or Loss, will be subtracted from taxable income or tax loss; (c) gain or loss resulting from any Disposition of Partnership Assets will be computed by reference to the Book Basis of the property, notwithstanding that the adjusted tax basis of the property differs from its Book Basis; (d) in lieu of depreciation, amortization and other cost recovery deductions taken into account in computing taxable income or tax loss, there will be taken into account depreciation for the taxable year or other period as determined in accordance with Treasury Regulations Section 1.704- 1(b)(2)(iv)(g); and (f) any increase or decrease to Capital Accounts as a result of any adjustment to the book value of Partnership Assets pursuant to Treasury Regulations Section 1.704- 1(b)(2)(iv)o or (g) shall constitute an item of Profit or Loss as appropriate. For purposes of this definition, "Book Basis" means, with respect to any asset of the Partnership, the adjusted basis of such asset for federal income tax purposes; provided, however, (a) if any asset is contributed to the Partnership, the initial Book Basis of such asset shall equal its fair market value on the date of contribution, and (b) if the Capital Accounts of the Partners are adjusted pursuant to Treasury Regulations Section 1.704 -1(b) to reflect the fair market value of any asset of the Partnership, the Book Basis of such asset shall be adjusted to equal its respective fair market value as of the time of such adjustment and shall thereafter be adjusted in accordance with the Treasury Regulations. "Public Plan Partner" shall mean a Limited Partner that (a) (i) is a governmental plan or a church plan within the meaning of sections 3(32) and 3(33), respectively, of ERISA and (ii) so indicates on its Subscription Agreement or otherwise in a writing acknowledged by the General Partner on or before the closing at which such Limited Partner is admitted to the Partnership or (b) is designated by the General Partner in writing on or before the closing at which such Limited Partner is admitted to the Partnership as a Public Plan Partner. "Related Investment Funds" shall mean all Parallel Partnerships, Alternative Investment Funds and Co- Investment Funds established by the General Partner or any of its Affiliates pursuant to this Agreement or the governing document of the relevant Parallel Partnership, Alternative Investment Fund or Co- Investment Fund, as the context requires. "Removal Event" means (i) the General Partner's Malfeasance or (ii) the final non - appealable criminal conviction of the General Partner of a felony concerning the activities of the Partnership which has a material adverse effect on the Partnership. "S &P" means Standard & Poor's, Inc. "Schedule of Partners" shall mean the Schedule of Partners maintained by the General Partner, which schedule shall include the names, addresses, and Capital Commitments of each Partner. 12 CONFIDENTIAL CCG144 "Secretary of State" means the Secretary of State of the State of Delaware. "Securities" means any of one or more of the following: (a) capital stock (both common and preferred); partnership interests (both limited and general); limited liability company interests; notes; bonds; debentures; other obligations, instruments or evidences of indebtedness (whether convertible or otherwise), in each case whether or not such obligations, instruments or evidence of indebtedness would constitute a "security" within the meaning of any federal or state law; and other securities, equity interests or financial instruments of whatever kind of any Person, whether readily marketable or not; (b) any rights to acquire any of the Securities described in clause (a) above (including, without limitation, options, warrants, rights or other interests or other Securities convertible into any such Securities); or (c) any Securities received by the Partnership upon conversion of, in exchange for, as proceeds from the disposition of, as interest on or as a stock dividend or other distribution from any of the Securities described in clauses (a) or (b) above. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Special Limited Partner" means the holder of the Special Limited Partner Interest who is admitted to the Partnership as a Limited Partner with respect to such Special Limited Partner Interest. "Special Limited Partner Interest" shall have the meaning assigned to it in Section 17.2(c). "Subscription Agreement" means the binding subscription letter agreement executed by the General Partner and a prospective Limited Partner relating to such prospective Limited Partner's investment in the Partnership. "Subscription Facility" shall have the meaning assigned to it in Section 9.13(a). "Substitute Limited Partner" means an Assignee of all or a portion of an Interest that becomes a Limited Partner and succeeds, to the extent of the Interest assigned, to the rights and powers and becomes subject to the restrictions and liabilities of the assignor Limited Partner. "Suspension Notice" means a written notice to the General Partner given pursuant to Section 3.9 stating that thereafter the General Partner shall not issue Capital Calls for the purpose of making any new investments. "Suspension Period" shall have the meaning assigned to it in Section 3.9. "Temporary Investments" shall mean investments that are one or more of the following obligations or securities: (a) U.S. Government Securities; (b) money market funds; 13 CONFIDENTIAL CCG144 (c) certificates of deposit of, banker's acceptances issued by or money market accounts in any depository institution or trust company, in each case so long as the deposits offered by such depository institution or trust company are rated and have a rating of at least "F -1" if rated by Fitch, "P -1" if rated by Moody's or "A -1" if rated by S &P or any two of the foregoing (or, in the case of the principal depository institution in a holding company system whose deposits are not so rated, the long -term debt obligations of such holding company are rated and such rating is at least "A +" if rated by Fitch, "Al" if rated by Moody's or "A +" if rated by S &P or any two of the foregoing); (d) commercial paper issued by any depository institution or trust company, so long as the commercial paper of such issuer is rated and has at the time of such investment a short-term rating of at least "F -1" if rated by Fitch, "P -1" if rated by Moody's or "A -1" if rated by S &P or any two of the foregoing on its commercial paper; and (e) securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States of America or any state thereof or of the laws of Canada, the obligations of which are rated and that have a credit rating of at least "F -1" if rated by Fitch, "P -1" if rated by Moody's or "A -1" if rated by S &P or any two of the foregoing either at the time of such investment or the making of a contractual commitment providing for such investment; provided, that: (i) in no event shall Temporary Investments include any obligations that provide for the payment of interest alone; (ii) except in the case of U.S. Government Securities, Temporary Investments shall mature within 185 days of acquisition by the Partnership; (iii) if any of Fitch, S &P or Moody's changes its rating system, then any ratings included in this definition shall be deemed to be an equivalent rating in a successor rating category of Fitch, S &P or Moody's, as the case may be; and (iv) if any of Fitch, S &P or Moody's is not in the business of rating securities, then any ratings included in this definition shall be deemed to be an equivalent rating from another rating agency. "Temporary Investment Income" means income derived from Temporary Investments. "Third Party Co- Investor" shall have the meaning assigned to it in Section 6.3(d)(i). "Total Commitments" means, as of any date, the total Capital Commitments of the Partners. "Transfer" means any sale, exchange, transfer, gift, encumbrance, assignment, pledge, mortgage, hypothecation or other disposition, whether voluntary or involuntary. "Treasury Regulations" means the final, temporary or proposed Treasury Regulations promulgated under the Code, as such Treasury Regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Unfunded Commitment" means, with respect to any Partner as of any date, the excess, if any, of (a) the amount of such Partner's Capital Commitment, over (b) such Partner's aggregate Capital Contributions previously made less the sum of (i) the total distributions received by such Partner prior to the 30 -month anniversary of the Final Closing Date that the 14 CONFIDENTIAL CCG144 General Partner reasonably deems to be Investment Contributions, (ii) the amount refunded to such Partner pursuant to clause (A) of Section 3.5, and (iii) any amounts drawn but not invested within 90 days of receipt by the Partnership and returned to Partners; provided that the Unfunded Commitment of an Affiliated Partner shall be computed as though such Partner has made Capital Contributions on the same basis as the Limited Partners who are not Affiliated Partners in order to fund the payment of Management Fees. "U.S. Government Securities" means securities that are direct obligations of, and obligations the timely payment of principal and interest on which is fully guaranteed by, the United States of America or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America. "VCOC Opinion" means an opinion of the Partnership's counsel that the Partnership's first investment in a Portfolio Company should constitute, considered in light of the available authorities, a VCOC. "VCOC" means a "venture capital operating company" as such term is defined in the Plan Asset Regulations. SECTION 2. GENERAL PROVISIONS 2.1 Formation. The General Partner and the Initial Limited Partner formed the Partnership pursuant to and in accordance with (i) the Delaware Act and (ii) the Agreement of Limited Partnership of the Partnership, dated as of January 30, 2013 (the "Initial Limited Partnership Agreement "). On January 30, 2013, the General Partner and the Initial Limited Partner were admitted to the Partnership as general partner and limited partner, respectively, without making any contribution to the capital of the Partnership. This Agreement amends and restates the Initial Limited Partnership Agreement. Upon acceptance by the General Partner of a Subscription Agreement for each Limited Partner and the execution of this Amended and Restated Limited Partnership Agreement by the General Partner as the attorney -in -fact for the Limited Partners, such Persons are admitted to the Partnership as limited partners of the Partnership, effective as of the date of such execution. Immediately after the admission of the first of such Persons as a limited partner of the Partnership, the Initial Limited Partner shall be deemed, without any further action, to have withdrawn from the Partnership as a limited partner of the Partnership. 2.2 Name and Place of Business. The name of the Partnership shall be Crescent Direct Lending Levered Fund, L.P., or such other name or names as in may be selected by the General Partner from time to time with written notice given to the Limited Partners of such change. The principal place of business of the Partnership shall be c/o Crescent Direct Lending Levered, LLC, One Post Office Square, 36th Floor, Boston, MA 02109, unless changed by the General Partner with written notice given to the Limited Partners of such change. The Partnership may also maintain such other offices at such other places as the General Partner may deem advisable. 15 CONFIDENTIAL CCG144 2.3 Address of Partners. The addresses of the Limited Partners shall be those set forth in the Partnership records maintained by the General Partner. The address of the General Partner is the same as that set forth in Section 2.2 above. A Limited Partner may change its address by written notice to the General Partner, and the General Partner may change its address by written notice to the Limited Partners. 2.4 Purpose. The purpose of the Partnership and business to be carried on by it, subject to the limitations contained elsewhere in this Agreement, are: (a) To generate high current income while preserving capital by investing primarily in senior secured loans (including first lien, unitranche and second lien loans) of private U.S. lower middle- market companies as described in the Private Placement Memorandum and, to a limited extent, in other debt and equity securities of lower - middle- market companies and in other Permitted Investments; and (b) To enter into and perform any contracts and agreements, and carry on any activities, necessary for, or incidental to, the accomplishment of the foregoing purpose, including, without limitation, entering into swap and hedging transactions. 2.5 Powers. The Partnership shall have the power to do any and all acts necessary, appropriate, proper, advisable, incidental or convenient to or for the furtherance of the purposes and business described herein for the protection and benefit of the Partnership, and shall have, without limitation, any and all of the powers that may be exercised on behalf of the Partnership by the General Partner pursuant to Section 5. 2.6 Term. The term of the Partnership commenced on the date the Certificate was filed in the Office of the Secretary of State and shall continue in full force and effect for five years after the Final Closing Date, unless the Partnership is dissolved earlier or (if the Partnership is not dissolved earlier) the term is extended for up to two successive one -year periods upon the determination by the General Partner. 2.7 Fiscal Year. The Fiscal Year of the Partnership for financial reporting and tax purposes shall be the calendar year, except that the Partnership's first Fiscal Year shall commence on the Initial Closing Date and end on December 31, 2013, unless another period is otherwise required by the Code. 2.8 Registered Agent. Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808, is hereby designated as the registered office of the Partnership and as the agent upon whom process issued by authority of or under any law of the State of Delaware may be served. SECTION 3. CAPITAL 3.1 Commitment and Contributions of General Partner. The capital commitment of the General Partner together with any Affiliated Partners and /or any affiliated entities which are under common control with the General Partner (the "GP Affiliates ") shall be at least one 16 CONFIDENTIAL CCG144 percent (1 %) of the total capital commitments of all Partners in the Partnership and all partners in a Parallel Partnership (but in no case are such General Partner and GP Affiliates aggregate capital commitments required to exceed $1.5 million). The General Partner, the Affiliated Partners and /or the GP Affiliates shall contribute capital to the Partnership and any Parallel Partnership to the extent of their respective Capital Commitments at the same time and in the same manner as contributions are made by the Limited Partners pursuant to Section 3.2. Capital Contributions of the General Partner, the Affiliated Partners and the GP Affiliates shall be made in cash. 3.2 Commitments and Contributions of Limited Partners. (a) The Capital Commitment of each Limited Partner shall be reflected in the Subscription Agreement of such Limited Partner that is accepted by the General Partner. (b) The General Partner may hold an Initial Closing of the Partnership upon the acceptance of subscriptions from Limited Partners. The General Partner may admit Additional Limited Partners and /or accept increased Capital Commitments from existing Limited Partners, on the same terms as applied at the Initial Closing (subject to Section 3.5), at one or more additional closings held not later than 12 months after the Initial Closing Date. An Additional Limited Partner shall be admitted to the Partnership as a limited partner of the Partnership upon the acceptance by the General Partner of a Subscription Agreement for such Person and the execution of a counterpart of this Agreement by or on behalf of such Person. (c) All Capital Contributions shall be in cash. The obligation of a Partner to satisfy its Capital Commitment shall be without interest (other than in the case of Default as provided in Section 3.4). (d) Capital Contributions in respect of (but not to exceed) the Partners' Unfunded Commitments shall be due, upon not less than 10 Business Days' prior written notice, at such times and in such amounts as shall be specified in one or more capital calls (a "Capital Call ") issued by the General Partner. In general, Capital Calls shall be made by the Partners pro rata in accordance with their respective Unfunded Commitments; provided, Capital Calls to fund the payment of Management Fees shall be made to the Partners (exclusive of the Affiliated Partners) in accordance with their respective Unfunded Commitments. Capital Calls may be made by the General Partner in accordance herewith to permit the Partnership to make a Portfolio Investment or to pay the Partnership's obligations and other liabilities (including amounts outstanding together with interest thereon and other amounts due and owing under a Subscription Facility), or to establish adequate reserves therefor. (e) In the case of Capital Contributions to be used to make a Portfolio Investment, the relevant Capital Call shall give such description of such Portfolio Investment as the General Partner shall determine is appropriate, including a general description of the business to be invested in and the Securities expected to be acquired (unless the General Partner determines in its sole discretion that such disclosure to a Limited Partner would be contrary to the best interests of the Partnership or detrimental to the prospective Portfolio Company or its Affiliates). In addition, such Capital Call shall specify, to the knowledge of the General Partner as of the date thereof, the amount of the required Capital Contributions that will be used by the 17 CONFIDENTIAL CCG144 Partnership to make Portfolio Investments or pay Organizational Expenses, Partnership Operating Expenses or Management Fees or repay indebtedness. (f) In the event that the General Partner has chosen initially to operate the Partnership as a VCOC, until such time as the General Partner has delivered to the ERISA Limited Partners (and insurance companies whose Capital Contributions may include plan assets), a VCOC Opinion, Capital Contributions by ERISA Limited Partners, other than Capital Contributions solely to pay Management Fees, Organizational Expenses or Partnership Expenses, shall be made to an escrow or other account (which may be an account of the respective Limited Partners) reasonably designated by the General Partner. Funds contributed to such an account shall be transferred from the account to the Partnership on the date of the first Portfolio Investment upon delivery by the General Partner of a VCOC Opinion. As an alternative, prior to delivery of the VCOC Opinion, ERISA Limited Partners may make direct payments to the General Partner of their proportionate share of Management Fees, Organizational Expenses or Partnership Expenses required to be funded by the Partners, but, for purposes of calculating each such Partner's Unfunded Commitment and for purposes of calculating gains, losses, distributions, Capital Contributions and sharing ratios, all amounts so paid shall be treated as having been paid into the Partnership as a Capital Contribution by each Partner. (g) Following the Close of Business at the end of the Investment Period, the General Partner shall not issue Capital Calls except for the purpose of making Portfolio Investments authorized pursuant to Section 6.1(d) or to pay Partnership Expenses and /or Management Fees or to repay indebtedness (including amounts outstanding together with interest thereon and other amounts due and owing under a Subscription Facility). 3.3 Partners Excused from Making Capital Contributions. (a) Conditions to Excuse. A Limited Partner will be excused from making a Capital Contribution to the Partnership in respect of a particular Portfolio Investment (any such Limited Partner, an "Excused Partner"), in the event that either: (i) such Limited Partner (A) reasonably determines that the making of such Portfolio Investment as described in the relevant Capital Call (and such Limited Partner's making a Capital Contribution in respect of such Portfolio Investment) is reasonably likely to have a Material Adverse Effect on such Limited Partner and (B) notifies the General Partner in writing no later than five Business Days after delivery of the relevant Capital Call (or such later date as the General Partner may determine in its sole discretion) of its intention to avail itself of the provisions of this Section 3.3, delivers to the General Partner an opinion of counsel, which counsel and opinion shall be reasonably satisfactory to the General Partner, to the effect of clause (i)(A) of this Section 3.3(a) as it relates to the determination by such Limited Partner, and provides the General Partner with such other information concerning the circumstances giving rise to the excuse as the General Partner may reasonably request; or (ii) the General Partner (A) elects in its sole discretion to excuse such Limited Partner based on a reasonable determination that such Limited Partner's making a Capital Contribution in respect of such Portfolio Investment is reasonably likely to have a In CONFIDENTIAL CCG144 Material Adverse Effect, or the participation of such Limited Partner in such Portfolio Investment would prevent the Partnership from being able to consummate such Portfolio Investment or would otherwise result in a material increase in the risk or difficulty to the Partnership of consummating such Portfolio Investment or impose any material filing, tax, regulatory or other burden to which the Partnership, the Investment Manager, a Portfolio Company or any other Partner or any of their respective Affiliates would not otherwise be subject and (B) advises such Limited Partner in writing, no later than five Business Days after delivery of the relevant Capital Call, of its intention to invoke the provisions of this Section 3.3 (a). The affected Limited Partner shall use its commercially reasonable efforts to alleviate the circumstances described in clause (i) or (ii) of this Section 3.3(a) and if, as a result of such efforts, such circumstances are alleviated, as determined in the good faith judgment of the General Partner, including through a reduction of such Limited Partner's Capital Contribution, the provisions of this Section 3.3 shall not apply or shall apply only to the affected portion of such Capital Contribution (which may be all), as the case may be. Each Limited Partner agrees that its rights under this Section 3.3(a) will be exercised on a Portfolio Investment -by- Portfolio Investment basis and in good faith, and will not be exercised based on a judgment as to prospective investment results or for the purpose of improving the investment results of such Limited Partner relative to other Partners. For the avoidance of doubt, an Excused Partner shall not receive any distributions, and shall not be entitled to receive any reports or information, in respect of the Portfolio Investment from which it is excused under this Section 3.3(a). The General Partner may waive all or any portion of the conditions applicable to Limited Partners set forth in this Section 3.3(a). (b) Effect of Excuse. If any Limited Partner is excused from a Portfolio Investment pursuant to Section 3.3(a) (or if a Partner is excused from a Portfolio Investment pursuant to corresponding provisions in the governing documents of an Alternative Investment Vehicle or a Parallel Partnership that is a party to a Subscription Facility), the General Partner may elect in its sole discretion to make the investment without the participation of such Excused Partner or not to make the investment. If the General Partner elects to make the investment, the General Partner may (i) increase the Capital Contributions with respect to such Portfolio Investment from the other Partners in proportion to, but not in excess of, their Unfunded Commitments to the extent necessary to fund the excused amount, as contemplated by Section 3.2(d), and /or (ii) offer to such other Partners, as the General Partner shall determine in its sole discretion, the opportunity to co- invest (other than in their capacity as Partners) in such Portfolio Investment up to an aggregate amount equal to the excused amount. The operation of this Section 3.3(b) shall not limit the obligation of any Excused Partner to contribute to the Partnership the full amount of its Unfunded Commitment in respect of all subsequent Portfolio Investments and all Organizational Expenses and Partnership Operating Expenses. The General Partner shall make such adjustments as it shall deem to be appropriate to the operation of this Section 3.3(b) to take into account the capital commitments to the Parallel Partnerships in the event of an excuse. (c) Sale of Interest. If at any time the General Partner determines, after consultation with the affected Limited Partner and counsel to the General Partner, that there is a reasonable likelihood that the continuing participation in the Partnership by such Limited Partner 19 CONFIDENTIAL CCG144 would have a Material Adverse Effect (other than on such Limited Partner), such Limited Partner will, upon the written request of the General Partner, use commercially reasonable efforts to dispose of such Limited Partner's entire Interest in the Partnership (or such portion of its Interest as the General Partner shall determine is sufficient to prevent or remedy such Material Adverse Effect) to any Person at a price reasonably acceptable to such Limited Partner, in a transaction that complies with Section 10 (in which case the General Partner shall use commercially reasonable efforts to work with such Limited Partner to facilitate the transaction). The General Partner shall make such revisions to the Schedule of Partners as may be necessary or appropriate to reflect the changes in Partners and Capital Commitments contemplated by this Section 3.3(c). 3.4 Defaulting Partners. (a) General. If any Limited Partner (other than an Excused Partner with respect to a Portfolio Investment) fails to make, in a timely manner, all or any portion of any Capital Contribution or any other amount required to be funded by such Limited Partner hereunder, and such failure continues for five Business Days after receipt of written notice thereof from the General Partner, or any Limited Partner purports to Transfer all or any part of its Interest in the Partnership other than in accordance with this Agreement (a "Default "), then such Limited Partner may be designated by the General Partner in its sole discretion as in Default under this Agreement (a "Defaulting Partner") and shall thereafter be subject to the provisions of this Section 3.4. The General Partner may, in its sole discretion, choose not to designate any Limited Partner as a Defaulting Partner and may agree to waive or permit the cure of any Default by a Partner, subject to such conditions as the General Partner and the Defaulting Partner may agree upon. (b) Funding of Defaulted Amount. With respect to any amount (other than the Management Fee) that is in Default (the "Defaulted Amount ") (or if a Partner is in default pursuant to corresponding provisions in the governing documents of an Alternative Investment Vehicle or a Parallel Partnership that is a party to a Subscription Facility), the General Partner may in its sole discretion (i) increase the Capital Contributions of the Partners that have funded the amount specified in the Drawdown Notice that is the subject of the Default (the "Non - Defaulting Partners ") in proportion to their respective Unfunded Commitments, but not in excess of their Unfunded Commitments to the extent necessary to fund the Defaulted Amount, and /or (ii) if the Defaulted Amount was to be used to fund a Portfolio Investment, offer to the Non - Defaulting Partners, subject to such timing and other conditions as the General Partner may impose, the opportunity to co- invest (other than in their capacity as Partner) in such Portfolio Investment an aggregate amount equal to the Defaulted Amount. (c) Defaulted Capital Commitment. With respect to the Unfunded Commitment of any Defaulting Partner (the "Defaulted Capital Commitment "), the General Partner may elect to (i) admit to the Partnership a Substitute Limited Partner to assume all or a portion of the balance of such Defaulted Capital Commitment on such terms and upon the delivery of such documents as the General Partner shall determine in its sole discretion to be appropriate, and /or (ii) offer to the Non - Defaulting Partners, subject to such timing and other conditions as the General Partner may impose, the opportunity to increase their Unfunded Commitments pro rata in accordance with their Capital Commitments (with the right to increase proportionately their respective shares in the event that one or more Non - Defaulting Partners 20 CONFIDENTIAL CCG144 declines such offer), up to an amount equal in the aggregate to the Defaulted Capital Commitment. The General Partner shall make such revisions to the Schedule of Partners as may be necessary to reflect the change in Partners and Capital Commitments contemplated by this Section 3.4(c). The General Partner shall make such adjustments as it shall deem to be appropriate to the operation of this Section 3.4 to take into account the capital commitments to the Parallel Partnerships in the event of a Default. (d) Forfeiture and Application of Forfeited Amounts. The General Partner may in its sole discretion take any or all of the following actions with respect to a Defaulting Partner: (i) reduce amounts otherwise distributable to such Defaulting Partner on or after the date of such Default by 75% and withhold the remaining 25% of such amounts until the dissolution of the Partnership and (ii) require such Defaulting Partner to remain fully liable for payment of up to its pro rata share of Management Fees, Partnership Expenses and amounts outstanding together with interest thereon and other amounts due and owing under a Subscription Facility as if the Default had not occurred. The General Partner may apply amounts otherwise distributable to such Defaulting Partner in satisfaction of all amounts payable by such Defaulting Partner. In addition, such Defaulting Partner shall have no further right to make Investment Contributions to participate in any Portfolio Investment and shall be treated for purposes of Sections 3.2 and 3.5 as no longer a Partner. The General Partner may charge such Defaulting Partner Interest on the Defaulted Amount and any other amounts not timely paid at a rate per annum equal to the Base Rate plus 5% from the date such amounts were due and payable through the date that full payment of such amounts is actually made or, if such amounts are not paid, through the end of the Term, and to the extent not paid such interest charge may be deducted from amounts otherwise distributable to such Defaulting Partner. Amounts forfeited and not otherwise applied to the payment of the expenses specified in clause (ii) of the first sentence of this Section 3.4(d) or in Section 3.4(e), plus any interest thereon, shall be distributed to the Non - Defaulting Partners in proportion to their Capital Commitments, provided that no Non - Defaulting Partner shall receive a distribution in respect of a Portfolio Investment with respect to which such Partner is an Excused Partner. The General Partner shall make such adjustments, including adjustments to the Capital Accounts of the Partners (including such Defaulting Partner), as it determines to be appropriate to give effect to the provisions of this Section 3.4. (e) Other Remedies; Payment of Expenses. The General Partner shall have the right to pursue all remedies at law or in equity available to it with respect to the Default of a Defaulting Partner. No course of dealing between the General Partner and any Defaulting Partner and no delay in exercising any right, power or remedy conferred in this Section 3.4 or now or hereafter existing at law or in equity or otherwise shall operate as a waiver or otherwise prejudice any such right, power or remedy. In addition to the foregoing, the General Partner may in its sole discretion institute a lawsuit against any Defaulting Partner for specific performance of its obligation to make Capital Contributions and any other payments to be made by a Limited Partner pursuant to this Agreement and to collect any overdue amounts hereunder. Notwithstanding any other provision of this Agreement, each Limited Partner agrees, in the event of a Default by such Partner, to pay on demand all costs and expenses (including attorneys' fees and any borrowing costs) incurred by or on behalf of the Partnership in connection with the enforcement of this Agreement against such Partner sustained as a result of such Default and that any such payment shall not constitute a Capital Contribution to the Partnership. 21 CONFIDENTIAL CCG144 (f) Consents. Whenever the vote, consent or decision of a Limited Partner is required or permitted pursuant to this Agreement or under the Delaware Act, a Defaulting Partner shall not be entitled to participate in such vote or consent, or to make such decision, and such vote, consent or decision shall be tabulated or made as if such Defaulting Partner were not a Partner. (g) Acknowledgement. Each Limited Partner hereby acknowledges that it has been admitted to the Partnership in reliance upon its agreements under this Section 3.4 (as well as the other provisions of this Agreement), that the General Partner and the Partnership may have no adequate remedy at law for a breach of this Agreement and that damages resulting from such breach may be impossible to ascertain as of the date of the closing at which such Limited Partner is admitted to the Partnership or as of the date of such breach. 3.5 Additional Limited Partners. In the event a Limited Partner is admitted to the Partnership after the Initial Closing Date, such Additional Limited Partner shall, at the time of its admission to the Partnership, pay to the Partnership: (A) as a Capital Contribution, an amount equal to the aggregate Capital Contributions that would have been due to the Partnership from such Additional Limited Partner pursuant to Section 3.2(d) if such Additional Limited Partner had been admitted at the Initial Closing; plus (B) as a late admission charge (and not as a Capital Contribution), interest on the amount contributed pursuant to the preceding clause (A) at the Base Rate plus 2% from the dates that the amounts comprising the Capital Contribution would have been contributed to the Partnership by the Additional Limited Partner if it had been admitted at the Initial Closing. Proceeds received from Additional Limited Partners as described in this Section 3.5 shall be distributed to the Limited Partners who were in the Partnership immediately prior to the addition of such Additional Limited Partners. The amount received by the Partnership from each Additional Limited Partner as a late admission charge pursuant to clause (B) of the preceding sentence shall be distributed to all Partners (excluding such Additional Limited Partner and any other Additional Limited Partner admitted at the same time) pro rata in accordance with their respective Capital Contributions; and the amount received by the Partnership from each Additional Limited Partner as a Capital Contribution pursuant to clause (A) of the preceding sentence shall, at the option of the General Partner, be distributed to all Partners (excluding such Additional Limited Partner and any other Additional Limited Partner admitted at the same time) pro rata in accordance with their respective Capital Contributions as a return of a portion of their Capital Contributions. In the case of an existing Limited Partner that increases its Capital Commitment after the Initial Closing Date, such Limited Partner shall be subject to the provisions of this Section 3.5 with respect to the amount of such increase as if newly admitted to the Partnership. 3.6 No Additional Capital Contributions. Except as provided in Sections 3.2 and 13.2 and the Delaware Act, the Interests of the Limited Partners are nonassessable, and a Limited Partner shall not make or be required to make additional Capital Contributions to the Partnership in excess of its Capital Commitment. 3.7 Withdrawal of Capital. Except as provided in Section 9.12, no Partner shall have any right to withdraw from the Partnership or make a demand for withdrawal of any of its Capital Contribution. 22 CONFIDENTIAL 3.8 Capital Accounts. CCG144 (a) A capital account ( "Capital Account ") shall be established for each Partner and shall equal the Capital Contribution of the Partner, as adjusted for distributions and allocations of Profits and Losses and any other items of income, gain, loss and deductions of the Partnership, which shall be made in accordance with the provisions of this Agreement. (b) Each Partner recognizes and intends that for federal and state income tax purposes, the Partnership will be classified as a partnership, and the Partners will not make any election or take any other deliberate action that would cause the relationship of the Partners under this Agreement to be excluded from the application of all or any part of Subchapter K of Chapter 1 of Subtitle A of the Code, from any successor provisions to Subchapter K of the Code or from similar provisions of state law or the law of any foreign jurisdiction. (c) A Person who is substituted as a Partner pursuant to this Agreement shall be deemed to have made the Capital Contributions attributable to the Interest it is acquiring and shall succeed to the Capital Account of its transferor to the extent of the Interest it is acquiring. 3.9 Suspension of Investment Period. (a) The Investment Period will be suspended if (i) 75% in Interest vote to issue a Suspension Notice to the General Partner; (ii) upon a Key Executive Trigger Event, provided that within a period of six months after a suspension resulting from a Key Executive Trigger Event (the "Suspension Period "), upon a vote by a Majority in Interest naming a new Key Executive and to reinstate the Investment Period, the suspension will be lifted, or if no such reinstatement occurs, the suspension shall become permanent and the Investment Period shall thereby be terminated as of the Close of Business on the last day of the Suspension Period; and (iii) upon removal of the General Partner pursuant to Section 17. Upon the occurrence of a Key Executive Trigger Event, the General Partner shall give prompt written notice of the event to the Limited Partners or, in the absence of such notice, any Limited Partner may so advise the Advisory Board which shall, upon verification of the facts, in turn issue a Suspension Notice to the General Partner. (b) Notwithstanding a suspension of the Investment Period pursuant to clause (i) or (ii) of Section 3.9(a), the General Partner shall be permitted to issue Capital Calls pursuant to Section 3.2(d) for the purpose of enabling the Partnership to: (w) make follow -on investments in existing Portfolio Companies, (x) make investments pursuant to written proposals or commitments to prospective Portfolio Companies that are outstanding as of the date of receipt of notice of a Key Executive Trigger Event, (y) pay Partnership Expenses and /or Management Fees or (z) repay amounts outstanding together with interest thereon and other amounts due and owing under a Subscription Facility. 23 CONFIDENTIAL SECTION 4. DISTRIBUTIONS AND ALLOCATIONS 4.1 Distributions. CCG144 (a) General. The General Partner, in its sole and absolute discretion, may retain and reinvest, apply to the payment of Partnership Expenses or indebtedness or distribute to the Partners interest, dividends or other income, gains and capital (including repayments of principal) received by the Partnership from any source whatsoever, including, without limitation, in respect of Portfolio Investments or Temporary Investments (but not Capital Contributions); provided, however, that, subject to Section 4.1(h) and Section 6.l(b), after the Final Closing Date the General Partner shall distribute interest income from Portfolio Investments on a quarterly basis, and after the end of the Investment Period the General Partner shall distribute Disposition Proceeds as soon as reasonably practicable following receipt, as determined in good faith by the General Partner. (b) Distributions Attributable to Portfolio Investments. Each distribution that the General Partner is required or has determined to make pursuant to Section 4.1(a) shall be apportioned among the Partners in accordance with their Investment Percentage Interests in the Portfolio Investment from which the amount distributable is derived. The amounts so apportioned to the General Partner and each Affiliated Partner shall be distributed to the General Partner and the Affiliated Partners, respectively, and the amount so apportioned to each Limited Partner who is not an Affiliated Partner pursuant to the preceding sentence shall then be divided between such Limited Partner, on the one hand, and the General Partner, on the other hand, in the following order of priority: (i) First, 100% to such Limited Partner, until such Limited Partner has received aggregate distributions pursuant to this Section 4.1(b)(i) in an amount or value equal to its Investment Preferred Return; (ii) Second, 100% to such Limited Partner until the aggregate amount distributed to such Limited Partner pursuant to this clause (ii) equals the aggregate Capital Contributions made by such Limited Partner; (iii) Third, 100% to the General Partner until the amount distributed to the General Partner under this Section 4.1(b)(iii) equals 10% of the sum of (A) the amount previously distributed to such Limited Partner under Section 4.1(b)(i) and (B) the amount distributed to the General Partner with respect to such Limited Partner under this Section 4.1(b)(iii); and (iv) Fourth, (A) 90% to such Limited Partner and (B) 10% to the General Partner. (c) Temporary Investment Income. Except as otherwise provided herein, Temporary Investment Income shall be distributed to the Partners in proportion to their Capital Commitments, at such times and in such amounts as the General Partner determines to be appropriate. 24 CONFIDENTIAL (d) Distributions in Kind. CCG144 (i) The General Partner shall use commercially reasonable efforts to distribute only cash during the life of the Partnership and upon final distribution. The foregoing undertaking shall not require the General Partner to liquidate any Portfolio Investment if in its reasonable judgment such liquidation will not be in the best interests of the Partnership; provided, however, that a Partner shall be entitled to request that the portion of any Portfolio Investment that would be distributed to such Partner in kind be liquidated, in which event, the General Partner shall liquidate such portion as soon as reasonably practicable at such price and on such terms as the General Partner shall determine in good faith to be then achievable. Prior to the winding up and dissolution of the Partnership in accordance with Section 15, all in -kind distributions shall be of Marketable Securities. In the event of an in -kind distribution, Profit or Loss with respect to the Securities distributed shall be allocated among the Partners as if there had been a Disposition of such Securities at their Fair Market Value, as of a date established by the General Partner for this purpose, and the distributed Securities (taken at such Fair Market Value) were treated as gross proceeds and distributed in accordance with Section 4.1(b). For avoidance of doubt, in the event of an in -kind distribution, the Capital Accounts of the Partners shall be adjusted with respect to the Securities distributed in accordance with the definition of Profits and Losses. (ii) In the event of an in -kind distribution, the General Partner shall, to the greatest extent practicable, distribute (x) the same class and series of a Security to all Partners, and (y) if cash and Securities are to be distributed simultaneously, distribute cash and such Securities to the Partners in the same proportion. To the extent feasible, Securities shall be apportioned among the parties receiving the distribution in proportion to their respective interests in the proposed distribution, except to the extent that a disproportionate distribution is necessary to avoid the distribution of fractional interests. (e) Distributions to Record Holders of Interests. Any distribution by the Partnership pursuant to the terms of this Section 4.1 or Section 15 to the Person shown on the Partnership's records as a Partner or to its legal representatives, or to the assignee of the right to receive such distributions as provided herein, shall, to the fullest extent permitted by law, discharge the Partnership and the General Partner of all liability to any other Person who may be interested in such distribution by reason of any other assignment or transfer of such Partner's Interest for any reason (including an assignment or transfer thereof by reason of death, incompetence, bankruptcy or liquidation of such Partner). (f) Legal Restrictions on Distributions. Notwithstanding any provision to the contrary contained in this Agreement, the Partnership, and the General Partner on behalf of the Partnership, shall not make a distribution to any Partner on account of its Interest if such distribution would violate Sections 17 -607 and 17 -804 of the Delaware Act or other applicable law. (g) Tax Distributions. Notwithstanding anything in this Section 4.1 to the contrary (except Sections 4.1(e) and (f)), the General Partner can cause the Partnership to make minimum periodic distributions to the General Partner each Fiscal Year in respect of its Carried Interest sufficient to enable the General Partner (and its direct and indirect owners) to pay the 25 CONFIDENTIAL CCG144 anticipated taxes with respect to the allocations of taxable income and net capital gains (net of prior losses) allocated to the General Partner in respect of its Carried Interest for such Fiscal Year. For the purposes of the preceding sentence, all calculations of anticipated taxes shall assume the highest combined applicable marginal federal, state and local tax rates then in effect for the type of income or gain so allocated for an individual resident in Boston, Massachusetts. Amounts distributed pursuant to this Section 4.1(g) shall be derived from each of the Partners separately in conformity with the determinations made under Section 4.1(b) and shall be taken into account in making subsequent Carried Interest distributions to the General Partner with respect to such Partner pursuant to Section 4.1(b). (h) Reserves. Notwithstanding anything to the contrary in this Section 4. 1, the General Partner may, in its sole discretion, set aside from cash receipts otherwise available for distribution reasonable reserves for current and anticipated expenses, liabilities, obligations or commitments of the Partnership, whether fixed or contingent. 4.2 Allocations. (a) Allocations to Capital Accounts. Except as otherwise provided herein, Profits and Losses (and each item of income, gain, loss or deduction) of the Partnership shall be allocated among the Capital Accounts of the Partners with respect to each Accounting Period, as of the end of such Accounting Period, in a manner that as closely as possible gives economic effect to the provisions of Section 4.1 and Section 15.4(d) and the other relevant provisions of this Agreement. For avoidance of doubt, the Management Fee expense of the Partnership shall be allocated among the Partners to which it is attributable. (b) Allocations for Income Tax Purposes. Each item of income, gain, loss or deduction recognized by the Partnership shall be allocated among the Partners for U.S. federal, state and local income tax purposes in the same manner that each such item is allocated to the Partners' Capital Accounts or as otherwise provided herein, provided that the General Partner may adjust such allocations as long as such adjusted allocations have substantial economic effect or are in accordance with the interests of the Partners in the Partnership, in each case within the meaning of the Code and the Treasury Regulations. Tax credits and tax credit recapture shall be allocated in accordance with the Partners' interests in the Partnership as provided in Treasury Regulations section 1.704- 1(b)(4)(ii). All matters concerning allocations for U.S. federal, state and local and non-U.S. income tax purposes, including accounting procedures, not expressly provided for by the terms of this Agreement shall be determined by the General Partner in its sole discretion. (c) Time of Allocations. The General Partner shall use its best efforts to determine and allocate all items of income, gain, loss, deduction and credit hereunder with respect to each Accounting Period of the Partnership within 60 days after the end of each Accounting Period other than any Accounting Period ending on the last day of the Fiscal Year and within 90 days after the end of each Fiscal Year. 26 CONFIDENTIAL SECTION 5. GENERAL PARTNER 5.1 Management. CCG144 (a) The General Partner shall have full responsibility for and charge of the overall management, control and administration of the Partnership in all respects; provided, that the General Partner shall cause the Partnership to enter into the Investment Management Agreement with the Investment Manager and, to the extent provided therein, shall thereby delegate certain responsibilities of the General Partner to the Investment Manager in accordance with the Investment Management Agreement. (b) The General Partner shall have all specific rights and powers required or appropriate to manage the Partnership, including the power and authority to do the following: (i) to acquire, hold, manage, vote, own and Dispose Of Securities and any other assets held by the Partnership, and to make Portfolio Investments, in each case as provided in Section 6.1(a); (ii) develop suitable overall investment strategies and standards for the Partnership; (iii) review, select, analyze, structure, negotiate and close investment transactions, and enter into, execute, deliver and consummate all agreements, instruments and other documents without any further act, vote or approval of any Partner, and do all other acts the General Partner deems advisable in connection with the Permitted Investments; (iv) monitor, supervise and direct the investments of the Partnership and dispose of them in such manner and at such times as the General Partner deems most advantageous to the Limited Partners and the Partnership; (v) administer the overall operation of the Partnership; (vi) initiate, participate in and settle judicial, arbitration, administrative or similar proceedings to protect the Assets, enforce the Partnership's rights or otherwise defend the interests of the Partnership (including serving on creditors' committees); (vii) act as the tax matters partner for the Partnership in accordance with Section 12.4; (viii) admit Additional Limited Partners as contemplated by Section 3.5 and /or Substitute Limited Partners as contemplated by Section 10.1; (ix) perform the following services: (A) set up, books of account, records and payment procedures, including individual accounts of the Partners; 27 CONFIDENTIAL CCG144 (B) provide bookkeeping and other related services for the Partnership; (C) collect, manage and disburse the Capital Contributions of the Partners for the purposes set forth in this Agreement; (D) provide management, financial and business planning services to the Partnership; (E) collect receipts and make payments and expenditures in accordance with this Agreement; and (F) make, or cause to be made, periodic reports relating to operating results, Asset valuations and Limited Partner account balances, as required by this Agreement; (x) employ from time to time Persons to render services to the Partnership (including services set forth in Section 5.1(a)(ix)), including but not limited to, the Investment Manager, attorneys, accountants, bookkeepers, investment brokers or finders, investment bankers, independent certified public accountants, appraisers, business advisors and printers (including attorneys and accountants who may also act as attorneys and accountants for the General Partner or any of its Affiliates); (xi) hold property in the name of any one or more nominees whether incorporated or unincorporated and whether domestic or foreign, and appoint custodial agents or trustees to hold investments within or without the United States; (xii) subject to Section 6.2(a)(v), to obtain financing, borrow money, incur indebtedness, issue guarantees and to pledge or otherwise grant a security interest in Assets of the Partnership in connection therewith, including on a joint and several basis with any Alternative Investment Vehicles and any Parallel Partnerships that are parties to a Subscription Facility; (xiii) enter into forward and futures contracts (relating to securities, currencies or other assets), and to hedge Portfolio Investments and commitments thereto (but not for speculative purposes); (xiv) subject to Section 8, to enter into and perform any agency cross transaction in which any Affiliate of the General Partner or the Investment Manager acts as a broker for both the Partnership and a party on the other side of the transaction and any agency transaction in which the Partnership is a principal and in which any Affiliate of the General Partner or the Investment Manager acts as broker for the party on the other side of the transaction; (xv) take whatever steps are required by governmental authorities having jurisdiction over the Partnership or its Assets; CONFIDENTIAL CCG144 (xvi) possess and exercise all of the rights and powers provided by law to a general partner in a limited partnership; (xvii) take whatever action is necessary to designate any Person of its choice as a replacement or successor agent for the service of process pursuant to Section 2.8; and (xviii) do any other acts that the General Partner deems advisable to further the purposes of the Partnership and that are not prohibited by this Agreement or applicable law. (c) Plan Assets. (i) The General Partner may choose to operate the Partnership such that the Partnership is deemed to hold "plan assets" subject to ERISA or Section 4975 of the Code under the Plan Assets Regulation. (ii) Alternatively, the General Partner may choose to operate the Partnership with the intent that the Partnership qualifies for an applicable exception so as not to be subject to ERISA or Section 4975 of the Code. 5.2 Management and the Investment Management Agreement. The General Partner shall cause the Partnership to enter into and perform its obligations under the Investment Management Agreement. The Investment Manager shall have the rights and responsibilities set forth in the Investment Management Agreement and the rights set forth in this Agreement including, without limitation, (i) the right to receive the Management Fee in accordance with Section 7.2, to be exculpated, indemnified and receive expense advances in accordance with Section 13.1 and to be reimbursed for Partnership Operating Expenses incurred in accordance with Section 7.1(c), and (ii) the responsibility to provide services to the Partnership and to bear all Ordinary Operating Expenses in accordance with the Investment Management Agreement. 5.3 Investment Committee. The General Partner and the Investment Manager shall make all significant investment decisions through an investment committee ( "Investment Committee ") comprised of certain officers of the Investment Manager designated by the General Partner. As of the Initial Closing, the members of the Investment Committee are Mark L. Attanasio, John Bowman, Scott Carpenter and Jean -Marc Chapus. 5.4 ERISA Fiduciary. To the extent that the assets of the Partnership are deemed to include "plan assets" subject to ERISA as contemplated by Section 5.1(c)(i), the General Partner acknowledges that is a fiduciary with respect to employee benefit plans that are (or are considered for purposes of ERISA to be) Limited Partners. 29 CONFIDENTIAL CCG144 5.5 Specific Authorization. The Partnership, and the General Partner on behalf of the Partnership, may enter into and perform the Subscription Agreements and any other agreements or documents contemplated hereunder or thereby, or related thereto and any amendments thereto, without any further act, vote or approval of any Person, including any Partner, notwithstanding any other provision of this Agreement. The General Partner is hereby authorized to enter into the agreements and documents described in the preceding sentence on behalf of the Partnership, but such authorization shall not be deemed a restriction on the power of the General Partner to enter into other agreements or documents on behalf of the Partnership. SECTION 6. INVESTMENTS 6.1 Generally. (a) The General Partner shall cause the Partnership to invest in Portfolio Investments and other Permitted Investments, and may borrow to fund such investments, subject to the investment restrictions set forth in Section 6.2. (b) The Partners' Unfunded Commitments are increased (pursuant to the definition of "Unfunded Commitment" set forth in this Agreement) by amounts distributed to the Partners during the Investment Period that the General Partner reasonably deems to be a return of Investment Contributions. Such amounts shall be subject to Capital Calls pursuant to Section 3.2 and reinvestment in accordance herewith; and the General Partner, in its discretion, may retain such amounts treating them as distributed and recalled for investment purposes, upon notice to the Limited Partners. (c) To the extent commercially reasonable, the General Partner shall cause the Partnership to invest cash held by the Partnership in Temporary Investments pending investment in Portfolio Investments, distribution or payment of Partnership Expenses or repayment of indebtedness. (d) Both following the termination of the Investment Period and during a Suspension Period pursuant to Section 3.9, no new Portfolio Investments will be made by the Partnership, other than (i) follow -on investments in existing Portfolio Companies, (ii) investments with respect to which a written proposal or commitment to invest has been submitted to a prospective Portfolio Company prior to the Suspension Period or the termination of the Investment Period, as applicable, (iii) investments with respect to which a transaction was contemplated by the terms of Securities held by the Partnership prior to the Suspension Period or the termination of the Investment Period; provided that such Portfolio Investments shall not in the aggregate exceed 20% of the aggregate Capital Commitments. 6.2 Investment Restrictions. (a) The Partnership will be subject to the following investment restrictions: (i) The Partnership shall not make a Portfolio Investment in any current or prospective Portfolio Company if, at the time such Portfolio Investment is made, the 30 CONFIDENTIAL CCG144 Investment Contributions invested in such Portfolio Investment, together with all existing Investment Contributions invested in Portfolio Investments in the same Portfolio Company, will represent more than 15% of Total Commitments. (ii) The Partnership shall not invest Investment Contributions in an amount equal to more than 5% of the Total Commitments in publicly- traded and 144A securities. (iii) The Partnership shall not invest Investment Contributions in an amount equal to more than 20% of the Total Commitments in investments in Securities of issuers organized in countries other than the United States. (iv) The Partnership shall not invest in any blind pool investment vehicles that charge management fees or carried interests. (v) The Partnership shall not invest Investment Contributions in an amount equal to more than 15% of the Total Commitments in Securities which are equity securities. (b) The Partnership may borrow for the following purposes and subject to the following restrictions: (i) for investment purposes; and (ii) (x) on a temporary basis for the purpose of acquiring a Portfolio Investment pending receipt of Capital Contributions from the Partners pursuant to a Capital Call where the indebtedness is intended to be repaid from the proceeds received by the Partnership in respect of such Capital Call, and (y) to pay Partnership Expenses; and (iii) in no event shall the aggregate Partnership indebtedness exceed 150% of Total Commitments at the time of drawdown. With respect to borrowing by the Partnership, Assets of the Partnership, including the Partnership's rights under the Subscription Agreements and hereunder to make, receive and enforce Capital Calls in respect of Unfunded Commitments, may be pledged to secure such indebtedness, including as set forth more fully in Section 9.13. (c) Compliance with the investment restrictions set forth in this Agreement shall be determined at the time of purchase of a Portfolio Investment. The value of any Portfolio Investment for purposes of such determination shall be equal to the actual cost of such Portfolio Investment. 6.3 Related Investment Funds. (a) General. Notwithstanding any other provision of this Agreement, at any time the General Partner or any of its Affiliates may establish one or more Related Investment Funds as provided in this Section 6.3. 31 CONFIDENTIAL (b) Parallel Partnerships. CCG144 (i) Formation of Parallel Partnerships to Accommodate Investor Considerations. Prior to the Final Closing Date, the General Partner or an Affiliate thereof may, to accommodate legal, tax, regulatory or other considerations of certain investors, form one or more pooled investment vehicles having substantially the same terms as the Partnership (each a "Parallel Partnership ") to co- invest with the Partnership, except that the terms of each Parallel Partnership may differ from those of the Partnership to the extent required by such legal, tax, regulatory or other considerations. In addition, the General Partner may, at any time, to accommodate legal, tax, regulatory or other considerations, require one or more Limited Partners to be admitted as limited partners or other similar investors to one or more Parallel Partnerships, and in connection therewith and in consideration for the cancellation of all or a portion of their Interest in the Partnership, such Limited Partners will receive an equivalent interest in such Parallel Partnerships. In furtherance of the foregoing, each such Limited Partner will have a capital commitment, unfunded commitment and capital account in the Parallel Partnership equivalent to the applicable portion of such Limited Partner's Capital Commitment, Unfunded Commitment and Capital Account in the Partnership and such Limited Partners will cease to be limited partners of the Partnership with respect to such portion. Each Parallel Partnership will be controlled by the General Partner or an Affiliate thereof and will be managed by the Investment Manager or an Affiliate thereof. Subject to the legal, tax, regulatory or other considerations referred to above, the Parallel Partnerships will co- invest with the Partnership in each Portfolio Company in proportion to the respective unfunded commitments of the Parallel Partnerships and the Partnership immediately prior to such investment. All references in this Section 6.3(b) to the limited partners of a Parallel Partnership shall be deemed to include all investors in a Parallel Partnership formed as a vehicle other than a limited partnership. (ii) Parallel Investment Conditions. Each investment by a Parallel Partnership shall, subject to legal, tax, regulatory or other considerations, be on substantially the same terms as and on economic terms that are no more favorable to such Parallel Partnership than those received by the Partnership. With respect to each investment in which Parallel Partnerships participate (or propose to participate) with the Partnership, any investment expenses or any indemnification obligations related to such investment shall be borne by, and any Fee Income shall be allocated among, the Partnership and such Parallel Partnerships in proportion to the capital committed by each to such investment, provided that each Parallel Partnership shall bear its share of the Partnership's Organizational Expenses and Partnership Operating Expenses in proportion to the respective capital commitments of the Partnership and the Parallel Partnerships, subject to such adjustment as the General Partner deems fair and equitable to the Partnership and the Parallel Partnerships. Unless the Advisory Board otherwise consents, the Partnership and the Parallel Partnerships shall sell their respective interests in a Portfolio Company at the same time and on the same terms, in proportion to their respective ownership interests therein. (iii) Mechanics of Formation of Parallel Partnerships. Notwithstanding any other provision of this Agreement to the contrary, in the event that the General Partner or an Affiliate thereof forms one or more Parallel Partnerships, the General Partner shall have full authority, without the consent of any Person, including any other Partner, to amend this Agreement as may be necessary or appropriate in the good faith judgment of the 32 CONFIDENTIAL CCG144 General Partner to facilitate the formation and operation of such Parallel Partnerships and the investments contemplated by this Section 6.3(b), and to interpret in good faith any provision of this Agreement, whether or not so amended, to give effect to the intent of the provisions of this Section 6.3(b). The limited partnership agreement and /or other organizational documents of any Parallel Partnership formed by the General Partner pursuant to the second sentence of Section 6.3(b)(i) and any other documents reflecting the admission of the Limited Partners to such Parallel Partnership and the withdrawal of such Limited Partners from the Partnership will be executed on behalf of the Limited Partners by the General Partner pursuant to the power of attorney granted by each of the Limited Partners pursuant to Section 11. (iv) Certain Adjustments. If one or more Parallel Partnerships are formed, notwithstanding any other provision of this Agreement (A) Partnership Operating Expenses shall include only the Partnership's pro rata share of any costs, expenses or liabilities that are incurred by or arise out of the activities of the Partnership (determined based on the relative capital commitments to the Partnership and the Parallel Partnerships, unless the General Partner determines in its sole discretion that a different share is appropriate in the case of a particular cost, expense or liability), (B) Organizational Expenses shall include only the Partnership's share of any costs or expenses in connection with the formation and organization of, and sale of Interests in, the Partnership and any Parallel Partnership (determined based on the relative capital commitments to the Partnership and the Parallel Partnerships), (C) the limitation set forth in the definition of "Excess Organizational Expenses" shall be deemed reduced to an amount equal to the Partnership's pro rata share of such limitation (determined based on the relative capital commitments to the Partnership and the Parallel Partnerships), (D) the General Partner may only be removed pursuant to Section 17.2 upon the election of limited partners (other than Affiliated Partners and defaulting partners) in the Partnership and the Parallel Partnerships with 662/3% of the capital commitments of such limited partners (in the case of the occurrence of a Removal Event) or 85% of the capital commitments in any other case and the compliance with the other requirements of such Section, (E) the Investment Period may only be resumed pursuant to Section 3.9(a) upon the election of limited partners (other than Affiliated partners and defaulting partners) in the Partnership and the Parallel Partnerships with 662/3% of the capital commitments of such limited partners and, in each case, the compliance with the requirements of such Section, and (F) the General Partner shall make such other adjustments as it shall deem to be appropriate to the operation of this Agreement, including adjustments to the limitations set forth in Section 6.2 to take into account the capital commitments to the Parallel Partnerships and adjustments to the co- investment percentages in the event of default or excuse. (c) Alternative Investment Vehicles. (i) Formation of Alternative Investment Vehicles for Particular Investments. Notwithstanding any other provision of this Agreement to the contrary, if at any time the General Partner determines that for legal, tax, regulatory or other considerations certain or all of the Partners should participate in a potential or existing Portfolio Investment through one or more alternative investment structures, the General Partner may affect the making of all or any portion of such investment outside of the Partnership (1) in the case of a potential Portfolio Investment, by requiring certain or all Partners, subject in all cases to Section 3.3, to be admitted as limited partners or other similar investors and to make capital contributions with respect to such potential portfolio investment directly to a limited partnership or other similar vehicle 33 CONFIDENTIAL CCG144 (each, an "Alternative Investment Vehicle ") or (2) in the case of an existing Portfolio Investment, by Transferring the Portfolio Investment to an Alternative Investment Vehicle and (3) in either case, by creating such Alternative Investment Vehicle and distributing interests therein to certain or all the Partners as limited partners or other similar investors therein. In addition, the General Partner shall also have the right, subject to Section 3.3, to direct that capital contributions of certain or all Partners with respect to a potential Portfolio Investment be made through an Alternative Investment Vehicle if, in the determination of the General Partner, the consummation of the potential Portfolio Investment would be prohibited or unduly burdensome for the Partnership because of legal or regulatory constraints but would be permissible or less burdensome if an Alternative Investment Vehicle were utilized. Each Alternative Investment Vehicle will be controlled by the General Partner or an Affiliate thereof, will be managed by the Investment Manager or an Affiliate thereof, and will be governed by organizational documents containing provisions substantially similar in all material respects to those of the Partnership, with such differences as may be required by the legal, tax, regulatory or other considerations referred to above, provided that the Limited Partners investing therein shall not be generally liable for the obligations of such Alternative Investment Vehicle. All references in this Section 6.3(c) to the limited partners of an Alternative Investment Vehicle shall be deemed to include all investors in an Alternative Investment Vehicle formed as a vehicle other than a limited partnership. (ii) Alternative Investment Conditions. Each Partner admitted to and investing in an Alternative Investment Vehicle shall be obligated to make capital contributions to such Alternative Investment Vehicle in a manner similar to that provided by Section 3.2, and each such Partner's Unfunded Commitment shall be reduced by the amount of such contributions to the same extent as if such contributions were made to the Partnership as Capital Contributions. With respect to each investment in which an Alternative Investment Vehicle participates with the Partnership, any investment expenses or indemnification obligations related to such investment shall be borne by the Partnership, such Alternative Investment Vehicle and any other related investment fund in proportion to the capital committed by each to such investment. Any management fee funded by a Partner with respect to an Alternative Investment Vehicle shall reduce such Partner's share of the Management Fee funded by such Partner, and payable to the Investment Manager by the Partnership, by a corresponding amount. The investment results of an Alternative Investment Vehicle will be aggregated with the investment results of the Partnership for purposes of determining distributions by the Partnership and such Alternative Investment Vehicle unless the General Partner in its sole discretion elects otherwise based on its determination that such aggregation increases the risk of any adverse tax consequences or imposes legal or regulatory constraints or creates contractual or business risks that would be undesirable for the Partnership or the Partners. (iii) Mechanics of Formation of Alternative Investment Vehicles. In the event that the General Partner or an Affiliate thereof forms one or more Alternative Investment Vehicles, the General Partner shall have full authority, without the consent of any Person, including any Partner, to amend this Agreement as may be necessary or appropriate in the good faith judgment of the General Partner to facilitate the formation and operation of such Alternative Investment Vehicle and the investments contemplated by this Section 6.3(c), and to interpret in good faith any provision of this Agreement, whether or not so amended, to give effect to the intent of the provisions of this Section 6.3(c). The General Partner shall make all 34 CONFIDENTIAL CCG144 appropriate adjustments as may be necessary or otherwise appropriate to give effect to the intent of this Section 6.3(c). The limited partnership agreement and /or other organizational or Transfer documents of any Alternative Investment Vehicle and any other documents reflecting the admission of the Limited Partners to such Alternative Investment Vehicle will be executed on behalf of the Limited Partners investing therein by the General Partner pursuant to the power of attorney granted by each of the Limited Partners pursuant to Section 11. (d) Co- Investment Funds. (i) Co- Investment by Limited Partners and Third Party Co- Investors. At any time, the General Partner or an Affiliate thereof may in its sole discretion provide any Person (including any Limited Partner) (a "Third Party Co- Investor ") with the opportunity to co- invest (other than in their capacity as Partners, if applicable, and no such co- investment shall be considered a Capital Contribution for purposes of this Agreement) with the Partnership in the Securities of, or provide financing to, Portfolio Companies. Any such co- investment may, if the General Partner so requires, be made through one or more investment partnerships or other vehicles (each a "Co- Investment Fund ") formed to facilitate such co- investment. Each Co- Investment Fund will be controlled by the General Partner or an Affiliate thereof and may be managed by the Investment Manager or an Affiliate thereof. Any such offer may be made to such Persons in such proportions as the General Partner shall determine in its sole discretion, and the General Partner may allocate such portion of an investment opportunity to a Co- Investment Fund as the General Partner determines in its sole discretion to be appropriate. Participation by a Third Party Co- Investor in a co- investment opportunity, whether directly or through a Co- Investment Fund, shall be entirely the responsibility and investment decision of such Third Party Co- Investor, and none of the Partnership, the General Partner, the Investment Manager or any of their respective Affiliates shall assume any risk, responsibility or expense, or be deemed to have provided any investment advice, in connection therewith. (ii) Co- Investment Conditions. The terms of investment on which a Co- Investment Fund or other co- investors contemplated by Section 6.3(d)(i) (collectively, "Co- Investors") acquire Securities of, or provide financing to, a Portfolio Company shall, subject to legal, tax, regulatory or other considerations, be no more favorable to such Co- Investors than those received by the Partnership, it being understood that the terms of the Co- Investment Fund may be determined in the sole discretion of the General Partner and may be more or less favorable to Co- Investors than the terms of this Agreement. With respect to each investment in which Co- Investors co- invest (or propose to co- invest) with the Partnership, any investment expenses or indemnification obligations related to such investments shall be borne by the Partnership and such Co- Investors in proportion to the capital committed by each to such investment. Unless the Advisory Board otherwise consents, the General Partner shall not permit any Co- Investment Fund to voluntarily dispose of any such investment in a Portfolio Company before the Partnership disposes of its investment in such Portfolio Company. If any such investment by a Co- Investment Fund in a Portfolio Company and the Partnership's investment in such Portfolio Investment are disposed of at substantially the same time, such Co- Investment Fund shall dispose of no more than its pro rata share of the Partnership's and its investments in such Portfolio Company and on terms no more favorable to such Co- Investment Fund than those received by the Partnership. The General Partner shall cause the Co- Investment Fund to dispose of any such investment in a Portfolio Company on a pro rata basis with the Partnership and at 35 CONFIDENTIAL CCG144 substantially the same time that the Partnership disposes of its investment in such Portfolio Company, unless the Co- Investment Fund desires, for legal, tax, regulatory or other reasons, to hold some or all of such investment until a later date and the General Partner has determined that it would not be contrary to the best interests of the Partnership for the Co- Investment Fund to do so. (iii) Mechanics of Formation of Co- Investment Funds. Notwithstanding any other provision of this Agreement, in the event that the General Partner or an Affiliate thereof forms one or more Co- Investment Funds, the General Partner shall have full authority, without the consent of any Person, including any other Partner, to amend this Agreement as may be necessary or appropriate in the good faith judgment of the General Partner to facilitate the formation and operation of such Related Investment Funds and the investments contemplated by this Section 6.3(d), and to interpret in good faith any provision of this Agreement, whether or not so amended, to give effect to the intent of the provisions of this Section 6.3(d). SECTION 7. EXPENSES AND FEES 7.1 Expenses of the Partnership. (a) In accordance with the Investment Management Agreement, the Investment Manager shall bear all Ordinary Operating Expenses. (b) The Partnership shall bear or reimburse the General Partner for all Organizational Expenses; provided that to the extent Parallel Partnerships are established pursuant to Section 6.3(b), the amount of Organizational Expenses shall be allocated among or between the Partnership and the Parallel Partnership(s) as provided in Section 6.3(b)(iv). (c) The Partnership shall bear and pay or reimburse the General Partner and the Investment Manager for their payment of all Partnership Operating Expenses. (d) Anything in this Agreement to the contrary notwithstanding, no Affiliated Partners shall have any obligation to pay any portion of the Management Fee or to bear any Management Fee expense. 7.2 Management Fee. (a) The Partnership shall pay to the Investment Manager in accordance with the Investment Management Agreement a management fee (the "Management Fee ") which shall be the sum of amounts calculated with respect to the Invested Capital of each Limited Partner (other than Affiliated Partners) at an annual rate of 1.35 %. The Management Fee with respect to each Limited Partner shall be accrued daily and paid quarterly in arrears, and the expense shall be allocated among the Limited Partners to which it is attributable. (b) Each installment of the Management Fee calculated with respect to each Limited Partner shall be reduced, but not below zero, by: 36 CONFIDENTIAL CCG144 (i) First, an amount equal to such Limited Partner's pro rata share (based on Capital Commitments of the Partners) of any Placement Fees paid or due and payable by the Partnership since the preceding Payment Date, (ii) Next, an amount equal to such Limited Partner's pro rata share (based on Capital Commitments of the Partners) of any Excess Organizational Expenses incurred by the Partnership since the preceding Payment Date, and (iii) Finally, an amount equal to such Limited Partner's pro rata share (based on Capital Commitments of the Partners) of all Offset Fees (reduced by the direct, unreimbursed out -of- pocket expenses incurred by the General Partner or the Investment Manager in connection with earning such Offset Fees and Broken Deal Expenses reimbursed to the Partnership pursuant to Section 7.2(c)) received since the preceding Payment Date. To the extent that the Management Fee with respect to any Limited Partner is not reduced as of any given Payment Date by the amounts referred to in the preceding sentence (or any portion thereof determined with respect to a previous Payment Date and carried over to the current Payment Date pursuant to this sentence) because the Management Fee with respect to such Limited Partner has been reduced to zero, the excess shall be carried over to the next succeeding Payment Date (and, if necessary, to one or more subsequent Payment Dates) and applied as a reduction of the Management Fee with respect to such Limited Partner, but not below zero, for such succeeding Payment Date (or a subsequent Payment Date). (c) Offset Fees received by the General Partner or Investment Manager (reduced by the direct, unreimbursed out -of- pocket expenses incurred by the General Partner or the Investment Manager in connection with earning such Offset Fees) shall, to the extent thereof, be applied to reimburse the Partnership for any unreimbursed Broken Deal Expenses and, any amount exceeding such expenses shall be applied as an offset to Management Fees as provided in Section 7.2(b)(iii). (d) To the extent Offset Fees are received that are available for offset against Management Fees and are in excess of the Management Fee payable in respect of the remainder of the term of the Partnership (the "Excess Offset Fees "), the amount set forth in the next sentence shall be paid by the Investment Manager to the Limited Partners, other than the Excess Offset Fees Opt -Out Partners, upon the liquidation of the Partnership as of the date the Partnership's Assets are to be applied as provided in Section 15.4. The amount payable to the Limited Partners is the amount that would have been distributed under Section 15 to such Limited Partners as an additional liquidating distribution if the Excess Offset Fees, less the amount of federal and state income taxes payable in respect of such Excess Offset Fees (calculated using the highest combined applicable marginal federal state and local tax rates then in effect for an individual resident in Boston, Massachusetts) had constituted income of the Partnership realized on the date the distribution is to be made. 37 CONFIDENTIAL SECTION 8. CERTAIN CONFLICTS OF INTEREST CCG144 8.1 Investments of Other Crescent Accounts. The General Partner, the Investment Manager and any of their Affiliates, and any client of, or co- investor with, the General Partner, the Investment Manager or any of their Affiliates, may acquire, hold and dispose of (in addition to acquiring, holding or disposing of through the General Partner or the Partnership) (i) Securities of any Portfolio Company or of any other Person in which an investment by the Partnership may or may not be suitable and may or may not be authorized pursuant to the terms of this Agreement, (ii) Securities of a Person in which the General Partner, the Investment Manager or any of their Affiliates holds an investment on the date of the Initial Closing (or, in the case of any Person that becomes an Affiliate of the General Partner or the Investment Manager after the date of the Initial Closing, on the date on which such Person becomes such an Affiliate), (iii) Securities of a Person formed to refinance or to facilitate a Portfolio Investment with respect to any Person referred to in the foregoing clause (ii), and (iv) Securities acquired, held or disposed of by Other Crescent Accounts. 8.2 Allocation of Deal Flow. The General Partner shall allocate investment opportunities among the Partnership and the Other Crescent Accounts, as applicable, as the General Partner determines in its good faith and on a basis that it reasonably believes is fair and equitable and complies with applicable law (including ERISA, if applicable). Certain investment opportunities may be appropriate for some or all of the Partnership and Other Crescent Accounts. The Other Crescent Accounts are not obligated to share any investment opportunity with the Partnership. The Partnership may (i) invest in an opportunity that has been declined by an Other Crescent Account and (ii) take a position in a company in which an Other Crescent Account has invested and such position may be different, similar or the same as the position taken by the Other Crescent Account. 8.3 Transactions with Affiliates. (i) The Partnership may enter into (A) contracts and transactions with any of the General Partner and its Affiliates authorized or contemplated by this Agreement and (B) any such contracts or transactions not authorized or contemplated by this Agreement, (ii) the General Partner and its Affiliates may enter into (A) contracts and transactions with the Partnership and with any Portfolio Company authorized or contemplated by this Agreement and (B) any such contracts or transactions not authorized or contemplated by this Agreement, provided, in each case referred to in clause (i)(B) or clause (ii)(B) above, that the Advisory Board has consented to such contract or transaction and (iii) to the extent permitted by applicable law (including ERISA, if applicable), the Investment Manager or any Affiliate thereof, when acting on behalf of the Partnership, is hereby authorized to enter into and perform any agency cross transaction in which the Investment Manager or such Affiliate acts as broker for both the Partnership and a party on the other side of the transaction. The Partnership shall not sell any Security to or purchase any Security from the General Partner, an Other Crescent Account or their respective Affiliates, or sell any Security in a transaction in which the General Partner or one of its Affiliates is acting as "broker," as such term is used in section 206(3) of the Advisers Act, for another Person in connection with the sale or purchase of a Security for the account of the Partnership, without the consent of the Advisory Board. Notwithstanding the foregoing, the consent of the Advisory Board shall not be required under this Section 8.3 with CONFIDENTIAL CCG144 respect to any payments of or arrangements with respect to Offset Fees. Notwithstanding the foregoing, the Partnership may purchase a Portfolio Company from or sell a Portfolio Company to Other Crescent Accounts without the approval of the Advisory Board in connection with co- investment opportunities or reallocation and true -up investments made by the Partnership and such Other Crescent Account, or warehousing or similar arrangements by or between the Partnership and such Other Crescent Accounts (it being understood that the Partnership will not pay to an Other Crescent Account or any Affiliate of the General Partner or the Investment Manager any syndication or other extraordinary fee in connection therewith). 8.4 Other Direct Lending Funds and Accounts. The General Partner, the Investment Manager and their Affiliates may from time to time form or manage Other Crescent Accounts with mandates similar or identical to the investment objective and strategies of the Partnership. All investment opportunities that are appropriate for the Partnership and such other funds and accounts shall be allocated among all such funds and accounts, including the Partnership, on the basis provided in Section 8.2. 8.5 Other Potential Conflicts of Interest. (a) While the General Partner and the Investment Manager intend to avoid situations involving conflicts of interest, each Limited Partner acknowledges that there may be situations in which the interests of the Partnership, in a Portfolio Company or otherwise, may conflict with the interests of any Related Investment Fund, any Other Crescent Account, the General Partner, the Investment Manager or their respective Affiliates. Each Limited Partner acknowledges that the General Partner, the Investment Manager and their respective Affiliates are engaged in a broad spectrum of activities, including providing investment management services, financial advisory services and brokerage services and engaging in principal investing activities and the business of sponsoring and managing public and private investment funds and in the ordinary course of their business, subject to ERISA (if applicable), may engage in activities in which their interests or the interests of their clients or customers may conflict with the interests of the Partnership or a Portfolio Company. Each Limited Partner agrees, subject to ERISA (if applicable), that the activities of any Related Investment Fund, any Other Crescent Account, the General Partner, the Investment Manager and their respective Affiliates authorized or contemplated by this Section 8.5 or in any other provision of this Agreement may be engaged in by such Related Investment Fund, such Other Crescent Account, the General Partner, the Investment Manager or any such Affiliate, as the case may be, and will not, in any case or in the aggregate, be deemed a breach of this Agreement or any other agreement contemplated herein or any duty that might be owed by any such Person to the Partnership or to any Partner at law or in equity or otherwise. (b) On any matter involving a conflict of interest not provided for in this Section 8 or elsewhere in this Agreement, each of the General Partner and the Investment Manager will be guided by its good faith judgment as to the best interests of the Partnership and shall take such actions as are determined by the General Partner or the Investment Manager, as the case may be, after giving consideration to issues that may arise under ERISA (if applicable), to be necessary or appropriate to ameliorate such conflicts of interest. If the General Partner or the Investment Manager consults with the Advisory Board with respect to a matter giving rise to a conflict of interest, and if the Advisory Board waives such conflict of interest or the General 39 CONFIDENTIAL CCG144 Partner or the Investment Manager acts in a manner, or pursuant to standards or procedures, approved by the Advisory Board with respect to such conflict of interest, then, subject to ERISA (if applicable), none of the Related Investment Funds, the Other Crescent Accounts, the General Partner, the Investment Manager or any of their respective Affiliates shall have any liability to the Partnership or any Partner for such actions in respect of such matter taken in good faith by them, including actions in the pursuit of their own interests, and such actions shall not constitute a breach of this Agreement or any other agreement contemplated herein or of any duty or obligation of such Person at law or in equity or otherwise. 8.6 Other Business Endeavors. Each Partner's interest in the business endeavors of the other Partners is limited to its Interest in the Partnership, and no Partner's existing or future business activities are restricted. SECTION 9. LIMITED PARTNERS 9.1 Identity, Number and Contributions. The names and addresses of the Limited Partners, the Interest owned by each and the Capital Contributions and Capital Commitments of each will be set forth in the Partnership's records maintained by the General Partner. 9.2 No Management Power or Liability. The Limited Partners as such shall have no right or power to, and shall not, take part in the management of or transact any business for the Partnership, including but not limited to any acts or decisions relating to investment activities of the Partnership, and shall have no power to sign for or bind the Partnership. Except as otherwise required by law or pursuant to Section 13.2, no Limited Partner, in its capacity as such, shall be personally liable for any debts, liabilities, obligations or losses of the Partnership in excess of its Capital Commitment. To the fullest extent permitted by law, no Limited Partner shall have any fiduciary duty, or any other duty or liability (except as expressly provided herein) to the Partnership or any Partner. 9.3 No Approval Required for Liquidation. The approval of the Limited Partners shall not be required to approve the disposition or sale of all or a substantial portion of the Assets, it being understood that the General Partner may in the ordinary course of business dispose of all or a substantial portion of the Permitted Investments. 9.4 List of Limited Partners. Subject to the written request of any Limited Partner that its identity remain confidential (subject to the requirements of applicable law), a list of the names and addresses of all Limited Partners shall be made available to any Limited Partner or its representative for inspection and, at the Limited Partner's cost, copying upon written request and at reasonable times for any purpose reasonably related to such Limited Partner's Interest. 9.5 Limitations. No Limited Partner shall have the right or power to (a) cause the dissolution of the Partnership, except as set forth in this Agreement; or (b) demand or receive property other than cash in return for its Capital Contribution. Except as otherwise provided herein, no Limited Partner shall have priority over any other Limited Partner either as to the return of its Capital Contribution or as to net income, net loss or distribution. Other than upon M CONFIDENTIAL CCG144 dissolution of the Partnership as provided by this Agreement, there has been no time agreed upon when the Capital Contribution of each Limited Partner may be returned. 9.6 Meetings. (a) Meetings of Partners shall be held at the principal place of business of the Partnership, or at any place stated in a notice of meeting. (b) Meetings shall be held only when called by either the General Partner or by a Majority in Interest of the Limited Partners. 9.7 Action Without a Meeting. Any action, vote consent or approval that may be taken at a meeting of the Limited Partners may be taken without a meeting if a consent in writing setting forth the action to be taken is signed by Limited Partners owning not less than the minimum percentage in Interest of the Limited Partners that would be necessary to authorize or take such action at a meeting at which all the Limited Partners were present and voted and notice of the action taken is provided to each Limited Partner. 9.8 Procedures. A Limited Partner shall be entitled to cast votes: (a) at a meeting, in person, by written proxy or by a signed writing directing the manner in which the vote is to be cast, which writing must be received by the General Partner on or prior to the commencement of the meeting, or (b) without a meeting, by a signed writing directing the manner in which the vote is to be cast, which writing must be received by the General Partner on or prior to the time and date on which the votes are to be counted. Only the votes of Limited Partners of record on the notice date, whether at a meeting or otherwise, shall be counted. The laws of the State of Delaware pertaining to the validity and use of corporate (or partnership, if applicable) proxies shall govern the validity and use of proxies given by Limited Partners. 9.9 Disclosures. Each Limited Partner shall furnish to the Partnership upon request any information with respect to such Limited Partner reasonably determined by the General Partner to be necessary or convenient for the formation, operation, dissolution, or liquidation of the Partnership. 9.10 Media Enterprise. (a) For so long as, and only during periods from time to time in which, the Partnership shall directly or indirectly hold (or otherwise be attributed with) an ownership or other interest in a Media Enterprise that is "attributed" to the Partnership under the FCC Rules relating to the particular FCC service in which the Media Enterprise operates, neither any Limited Partner (other than an Affiliated Partner), including any officer, director or employee of such Limited Partner, nor any other Person who holds an interest in such Limited Partner or has a relationship with such Limited Partner which, in either case, is "attributed" to such person under the FCC Rules relating to the particular type of FCC service(s) in which the Media Enterprise operates shall do any of the following: (i) act as an employee of the Partnership if such Limited Partner's or Limited Partner Affiliate's functions, directly or indirectly, relate to such Media Enterprise; 41 CONFIDENTIAL CCG144 (ii) serve, in any material capacity, as an independent contractor or agent of the Partnership with respect to such Media Enterprise; (iii) communicate with the Media Enterprise or with the General Partner on matters pertaining to the day -to -day operations of such Media Enterprise; (iv) vote to admit any additional General Partner to the Partnership unless such addition is subject to the veto of the General Partner; (v) vote to replace the General Partner pursuant to Section 17.2(a), unless the General Partner is being replaced under such Section as a result of (A) the General Partner being deemed bankrupt (pursuant to the criteria set forth in Section 9.10(b)(i)) or (B) a final determination being made as described in Section 9.10(b)(ii); (vi) vote to amend or modify this section of the Agreement; (vii) perform any services for the Partnership materially relating to such Media Enterprise, with the exception of making loans to, or acting as a surety for, such Media Enterprise or the Partnership; or (viii) become actively involved in the management or operation of such Media Enterprise. (b) For purposes of Section 9.10(a)(v), (i) the "bankruptcy" of the General Partner shall be deemed to have occurred upon the occurrence of any of the following: (1) the filing of an application by the General Partner for, or a consent to, the appointment of a trustee of its assets; (2) the filing by the General Partner of a voluntary petition in bankruptcy or the filing of a pleading in any court of record admitting in writing its inability to pay its debts as they come due; (3) the making by the General Partner of a general assignment for the benefit of creditors; (4) the filing by the General Partner of an answer admitting the material allegations of, or its consenting to, or defaulting in answering, a bankruptcy petition filed against it in any bankruptcy proceeding; or (5) the expiration of 60 days following the entry or an order, judgment or decree by any court of competent jurisdiction adjudicating the General Partner a bankrupt or appointing a trustee of its assets and (ii) the final determination referred to in clause (B) thereof shall be a final determination by a court of competent jurisdiction or other independent party that the General Partner has been grossly negligent or has engaged in fraud or willful and wanton misconduct in its capacity as a General Partner or has engaged in criminal conduct constituting a felony. (c) The General Partner shall provide to any Limited Partner upon request such relevant non - confidential information concerning any investments in Media Enterprises as the requesting Limited Partner determines is reasonably necessary to ensure compliance by such Limited Partner and its Affiliates with the FCC Rules and the reporting obligations imposed on the Limited Partners thereunder. (d) A Limited Partner may, upon 5 days prior written notice to the General Partner, elect to be excluded from the limitations set forth in Section 9.10(a) and shall thereafter be denominated a "Non- Insulated Limited Partner ", and the General Partner shall accept and 42 CONFIDENTIAL CCG144 recognize such election, provided that the electing Limited Partner has supplied to the General Partner a statement in form and content reasonably satisfactory to the General Partner that, based upon information provided to the electing Limited Partner by the General Partner pursuant to this Section 9.10 and other information within such Limited Partner's control, such election by the Limited Partner will not result in a violation of the FCC Rules by the electing Limited Partner, the Partnership or the Media Enterprise in which the Partnership has made an investment. Notwithstanding the foregoing, a Limited Partner may not become a Non - Insulated Limited Partner if the General Partner determines, upon the advice of communications counsel, that the change in status of such Limited Partner to that of a Non - Insulated Limited Partner would result in a violation of any FCC Rules. 9.11 BHC Partners. Notwithstanding any other provision of this Agreement, all BHC Partners shall be subject to the limitations on voting set forth in this Section 9.11. If at any time a BHC Partner holds an Interest in the Partnership that would otherwise represent 5% or more of the total voting Interests in the Partnership, such BHC Partner may not vote any portion of its Interest in the Partnership representing in excess of 4.99% of the Interests in the Partnership entitled to vote. Whenever the vote, consent or decision of a Limited Partner is required or permitted pursuant to this Agreement, a BHC Partner shall not be entitled to participate in such vote or consent, or to make such decision, with respect to the portion of such BHC Partner's Interest in excess of 4.99% of the Interests in the Partnership entitled to vote, and such vote, consent or decision shall be tabulated or made as if such BHC Partner were not a Partner with respect to such BHC Partner's Interest in excess of 4.99% of the Interests in the Partnership entitled to vote (and such excess Interest shall be treated as not outstanding for purposes of tabulating the vote, including in determining whether a vote of a Majority in Interest or other percentage in Interest has been obtained). Each BHC Partner hereby further irrevocably waives its corresponding right to vote for a successor general partner under the Delaware Act with respect to any non - voting Interest, which waiver shall be binding upon such BHC Partner and any Person that succeeds to its Interest. In the event that two or more BHC Partners are affiliated, the limitations of this Section 9.11 shall apply to the aggregate Interests in the Partnership held by such BHC Partners and each such BHC Partner shall be entitled to vote its pro rata portion of 4.99% of the Interests in the Partnership entitled to vote. Except as provided in this Section 9.11, any Interest of a BHC Partner held as a non - voting Interest shall be identical in all respects to the Interests of the other Limited Partners. Any such Interest held as a non- voting Interest shall remain a non - voting Interest in the event that the BHC Partner holding such Interest ceases to be a BHC Partner and shall continue as a non - voting Interest with respect to any Assignee or other transferee of such Interest. Notwithstanding the foregoing, any BHC Partner may elect in writing upon its admission to the Partnership for this Section 9.11 not to apply to its Interest in the Partnership. Any such election by a BHC Partner may be rescinded at any time by written notice to the General Partner, provided that any such rescission shall be irrevocable. 9.12 ERISA Partners and Public Plan Partners. (a) If an ERISA Partner or a Public Plan Partner delivers to the General Partner an opinion of counsel, which counsel and opinion are reasonably satisfactory to the General Partner, that as a result of a change in the statute or regulation applicable to such ERISA Partner or Public Plan Partner that authorizes or governs such ERISA Partner's or Public Plan 43 CONFIDENTIAL CCG144 Partner's investment in the Partnership and in other investment vehicles like the Partnership, investing in the Partnership would be illegal for such ERISA Partner or Public Plan Partner, such Limited Partner may, with the consent of the General Partner, accelerate the payment of its Unfunded Commitment so as to avail itself of any "grandfather" provisions that may be applicable under such statute, regulation or interpretation thereof. If an ERISA Partner or Public Plan Partner is unable pursuant to this Section 9.12(a) to prevent the investment by such ERISA Partner or Public Plan Partner in the Partnership from being considered illegal, within 30 days after delivery of the opinion referred to in the first sentence of this Section 9.12(a) or the General Partner having notified such Limited Partner of the determination described in the first sentence of Section 9.12(b), then at the written election of such Limited Partner delivered to the General Partner within 30 days of delivery of such opinion or notification, such Limited Partner may withdraw from the Partnership. Any such Limited Partner so electing to withdraw from the Partnership may, at the written election of such Limited Partner, receive in connection therewith a special distribution in respect of such Limited Partner's Interest in the Partnership in the form of an interest bearing promissory note of the Partnership as provided in clause (D) of Section 9.12(b). Such note shall have a principal amount equal to the Fair Value Capital Account of such Limited Partner's Interest in the Partnership as of the date of withdrawal (as mutually agreed by the General Partner and such Limited Partner) and shall mature on the date of the final distribution by the Partnership to the Partners in accordance with Section 15.4, provided that such note shall be prepaid (in full satisfaction thereof) at such times, and in such amounts, as distributions would have been made to such Limited Partner had such Limited Partner not withdrawn from the Partnership. All costs and expenses incurred in connection with actions taken by or with respect to a Limited Partner under this Section 9.12(a) shall be paid by such Limited Partner. (b) If the General Partner determines that there is a reasonable likelihood that investment in the Partnership would become illegal for an ERISA Partner or Public Plan Partner, such ERISA Partner or Public Plan Partner will, upon the written request and with the reasonable cooperation of the General Partner, use commercially reasonable efforts to dispose of its entire Interest in the Partnership (or such portion of its Interest that the General Partner determines in its sole discretion is sufficient to prevent investment in the Partnership by such ERISA Partner or Public Plan Partner from being considered illegal) to a third Person and, where applicable, a third Person who is neither an ERISA Partner nor a Public Plan Partner (a "Non -Plan Party "), at a price reasonably acceptable to such ERISA Partner or Public Plan Partner, in a transaction that complies with Section 10. If an ERISA Partner or Public Plan Partner has not disposed of its entire Interest in the Partnership (or such portion of its Interest that the General Partner determines in its sole discretion is sufficient to prevent the investment in the Partnership by such ERISA Partner or Public Plan Partner from being considered illegal) within 30 days of the General Partner having notified such ERISA Partner or Public Plan Partner of the General Partner's determination described in the first sentence of this Section 9.13(b), then, notwithstanding anything to the contrary herein, the General Partner shall have the right, but not the obligation, upon five Business Days' prior written notice, to do any or all of the following to prevent such investment in the Partnership by such ERISA Partner or Public Plan Partner from being considered illegal: .. CONFIDENTIAL CCG144 (A) prohibit the ERISA Partner or Public Plan Partner from making a Capital Contribution with respect to any and all future Portfolio Investments and reduce its Unfunded Commitment to any amount greater than or equal to zero; (B) offer to each Non - Defaulting Partner, or if determined by the General Partner in its sole discretion to be appropriate, to each Non - Defaulting Partner other than ERISA Partners or Public Plan Partners (but including Substitute Limited Partners), the opportunity to purchase a portion of the ERISA Partner's or Public Plan Partner's Interest in the Partnership based upon the Fair Value Capital Account thereof, including all or such portion of the ERISA Partner's or Public Plan Partner's Unfunded Commitment (calculated prior to giving effect to paragraph (A) above of this Section 9.12(b)), in each case as the General Partner shall determine, provided that, without the consent of the General Partner, no Limited Partner shall be entitled to purchase a percentage of such Interest that would result (i) in such Partner's Capital Commitment (or the excess of its Capital Commitment over its Unfunded Commitment) being equal to or greater than 10% of the aggregate Capital Commitments of all Partners (or the excess of the aggregate Capital Commitments of all the Partners over the aggregate Unfunded Commitments of all the Partners), or (ii) in such Partner's Capital Contribution in respect of any Portfolio Investment being greater than the largest amount (rounded to the nearest one hundred dollars) that, in the judgment of the General Partner, such Partner could contribute or invest without having a Material Adverse Effect; (C) offer to any third Person and, where applicable, a third Person who is a Non -Plan Party, the opportunity to purchase, or purchase itself, based on the Fair Value Capital Account thereof, all or any portion of the ERISA Partner's or Public Plan Partner's Interest in the Partnership that remains after giving effect to the transactions contemplated by paragraph (B) above of this Section 9.12(b); (D) cause the Partnership to make a special distribution to the ERISA Partner or Public Plan Partner of cash, cash equivalents, Securities, a promissory note (the terms of which shall be mutually agreeable to the General Partner and such Partner) or any combination of the foregoing, as determined by the General Partner in its sole discretion, in an amount (or having a Fair Market Value) based upon the Fair Value Capital Account of such ERISA Partner's or Public Plan Partner's Interest in the Partnership, in which case such ERISA Partner's or Public Plan Partner's right to receive future distributions pursuant to Sections 4 and 15 shall be appropriately adjusted in good faith by the General Partner; or (E) dissolve the Partnership and distribute the Partnership's Assets in accordance with Section 15. In determining the appropriate action to take under this Section 9.12(b), the General Partner shall take into consideration the effect of such action on all of the Partners, including those Partners that have not caused the General Partner to consider any of the foregoing actions. (c) Documentation. Subject to the requirements of Section 10, the details and documentation relating to any transaction or transactions effected pursuant to this Section 9.12 shall be as determined by the General Partner in its sole discretion and shall not require the consent of the Advisory Board or of any of the Limited Partners. Upon the closing of any '. CONFIDENTIAL CCG144 transaction or transactions effected pursuant to this Section 9.12, the General Partner (i) may admit each purchaser that is not already a Partner or Substitute Limited Partner immediately prior to the time of such purchase to the Partnership as a Substitute Limited Partner on such terms and upon the delivery of such documents as the General Partner shall determine to be appropriate and (ii) shall make such additional adjustments to the Capital Accounts, Capital Commitments, Sharing Percentages, Unfunded Commitments and Capital Contributions of such ERISA Partner or Public Plan Partner and of all Partners and Substitute Limited Partners who have purchased Interests pursuant to this Section 9.12 as the General Partner shall determine to be appropriate to give effect to and reflect such transactions. The General Partner may, without the consent of any Person, including any other Partner, revise the Schedule of Partners as may be necessary or appropriate to reflect the changes in Partners and Capital Commitments made pursuant to this Section 9.12. 9.13 Subscription Facility. (a) In connection with any financings, borrowings, indebtedness, or guarantees of the Partnership, its Alternative Investment Vehicles permitted hereunder and any Parallel Partnerships that are party to a Subscription Facility, the General Partner shall be authorized to directly or indirectly collateralize such financings, borrowings, indebtedness or guaranty, and pledge, mortgage, assign, transfer and /or grant security interests to the lender of such indebtedness or guaranty in (i) the Unfunded Commitments; (ii) the General Partner's and the Partnership's right to initiate Capital Calls and collect on the Unfunded Commitments of the Partners hereunder; (iii) the Capital Contributions made to the Partnership; (iv) the General Partner's and the Partnership's rights to enforce the funding of Capital Contributions hereunder and under the Subscription Agreements; and (v) a Partnership collateral account into which the payment by the Partners of their Unfunded Commitments are to be made (any financing, borrowing, indebtedness or guaranty so secured, a "Subscription Facility "). The foregoing collateral pledge may be made directly by the Partnership to the lender of the Subscription Facility or indirectly to such lender by first pledging such collateral to a subsidiary or affiliate of the Partnership, which subsidiary or affiliate then on pledges such rights ultimately to the lender under the Subscription Facility. To the extent that the Partnership or any of its affiliates or subsidiaries has outstanding obligations under a Subscription Facility, and with the knowledge that the Subscription Facility lender is relying on each of the following agreements and undertakings of the Partners in this Section 9.13 in connection with the extension of credit to the Partnership, each Partner shall be obligated to fund any remaining portion of its Unfunded Commitment when due pursuant to this Agreement (whether called by the General Partner or directly by the lender under the Subscription Facility) without defense, counterclaim or offset of any kind, including any defense arising under Section 365(c) of the U.S. Bankruptcy Code, if applicable, provided that such agreement to fund shall not act as a waiver by such Partner of its right to assert independently any claim that the Partner may have against any other Partner or the Partnership. In the event that, as a result of any such pledge, mortgage, assignment, transfer or grant of a security interest, a Partner makes a payment directly to the Partnership account as requested by a lender under a Subscription Facility, such payment shall be deemed to be a Capital Contribution of such Partner to the Partnership in all respects. (b) Each Partner hereby (i) acknowledges that the Partnership has informed such Partner that the Partnership may enter into a Subscription Facility and grant the related M CONFIDENTIAL CCG144 lender the right to initiate Capital Calls in the name of the General Partner or the Partnership when an event of default under such Subscription Facility exists, which each Partner shall fund, to the Partnership, consistent with the terms hereof and its obligations hereunder; (ii) acknowledges that for so long as the Subscription Facility is in place, except with the prior consent of the lender or as provided in a side letter with a Limited Partner executed by the General Partner on behalf of the Partnership in connection with such Limited Partner's subscription for an Interest in the Partnership (copies of which will be provided to the lender), the Partnership has agreed not to amend, modify, cancel, terminate, reduce, suspend or waive any of such Partner's obligations under such Partner's Subscription Agreement or this Partnership Agreement in a manner that could be materially adverse to the rights of the lender contemplated by this subparagraph (b); and (iii) agrees, if requested by the General Partner, to provide to the General Partner: (A) to the extent publically available, as soon as reasonably available after the end of such Partner's fiscal year, a copy of such Partner's annual report, if available, or such Partner's balance sheet as of the end of such fiscal year and the related statements of operations for such fiscal year prepared or reviewed by independent public accountants in connection with such Partner's annual reporting requirements; (B) from time to time, a certificate confirming the remaining amount of such Partner's Unfunded Commitment; and (C) such other consents and documents as may be reasonably requested by the General Partner to acknowledge the same. SECTION 10. TRANSFERS AND WITHDRAWALS BY PARTNERS 10.1 Transfer by a Limited Partner. (a) The prior written consent of the General Partner shall be required as a condition of any Transfer of all or any portion of a Limited Partner's Interest in the Partnership, which consent may be withheld in the General Partner's sole discretion; provided that such consent shall not be unreasonably withheld if the Transfer is to (x) an Affiliate of the Limited Partner or (y) another Partner that is not a Defaulting Partner. No Limited Partner shall Transfer all or any portion of its Interest unless all of the following conditions are satisfied (except as may be waived by the General Partner): (i) The assignor has delivered to the General Partner an opinion of counsel to the Limited Partner (which counsel and opinion are reasonably acceptable to the General Partner) that such Transfer is in full compliance with all requirements of the Securities Act and all applicable state securities or blue sky laws (including any investor suitability standards) and, without limiting the foregoing, would be exempt from the registration and prospectus delivery requirements of the Securities Act and the registration or qualification requirements of all applicable state securities or blue sky laws; (ii) The assignor has demonstrated to the reasonable satisfaction of the General Partner that (A) the transferee of the proposed Transfer is a "qualified purchaser" as defined in Section 2(a)(51) of the Investment Company Act and (B) such Transfer would not adversely affect the Partnership's exclusion from the status of being an "investment company" 47 CONFIDENTIAL CCG144 within the meaning of the Investment Company Act by reason of Section 3(c)(7) of the Investment Company Act; (iii) The assignor has demonstrated to the reasonable satisfaction of the General Partner that such Transfer, when added to the total of all other Transfers of Interests in the Partnership within the preceding 12 months, would not result in the Partnership being considered to have terminated within the meaning of Section 708 of the Code; (iv) The assignor has demonstrated to the reasonable satisfaction of the General Partner that (A) the number of partners in the Partnership (as determined by reference to Section 7704 of the Code) will not, as a result of such Transfer, increase to more than 100 persons for purposes of Section 7704 of the Code, and (B) such Transfer will not result in the Partnership being treated as a publicly traded partnership within the meaning of Section 7704 of the Code; (v) The assignor has demonstrated to the reasonable satisfaction of the General Partner that such assignment or transfer will not cause the Assets of the Partnership to be "plan assets" for purposes of ERISA or Section 4975 of the Code (to the extent that the General Partner chooses to operate the Partnership in accordance with Section 5.1(c)(i) or constitute or give rise to a prohibited transaction under ERISA or Section 4975 of the Code; (vi) In connection with such Transfer: (A) the transferor and transferee shall execute and acknowledge an instrument of transfer in form and substance reasonably satisfactory to the General Partner; (B) the transferee shall assume in writing all obligations of the transferor associated with the transferred Interest and agree to be bound by all the terms and conditions of this Agreement; and (C) the transferor and transferee shall be jointly and severally responsible for all obligations of the transferee under this Agreement and the Delaware Act, including the obligations to make Capital Contributions and return distributions (including distributions received by the predecessor holder of the Interest), and deliver to the General Partner a written undertaking, in a form provided by the General Partner, to confirm such joint and several liability; (vii) The assignor shall pay or reimburse the Partnership for all expenses and costs of such Transfer, including legal and accounting fees and expenses; (viii) The assignor has demonstrated to the reasonable satisfaction of the General Partner that (A) such Transfer will not violate any law, regulation or other governmental rule, including ERISA (if applicable), applicable to such Transfer, and (B) such Transfer will not violate any of the terms of this Agreement; and (ix) The General Partner shall have determined in good faith that such Transfer will not (A) subject the Partnership, the General Partner or any of its Affiliates or any officer, director or employee of the General Partner or any of its Affiliates to additional regulatory requirements the compliance with which would subject the Partnership or such other Person to material expense or burden (unless such affected Person consents to such Transfer), and (B) will not give any Partner a reasonable basis for withdrawing from the Partnership in accordance with this Agreement. CONFIDENTIAL CCG144 (b) Provided the foregoing conditions are met, the Assignee may become a Substitute Limited Partner in accordance with this Section 10 with respect to the portion of the Interest in the Partnership which has been the subject of a Transfer if and only if: (i) The requirements of Section 10.4(a) for General Partner consent have been satisfied; (ii) The assignor and assignee execute, acknowledge and deliver such agreements and instruments as the General Partner deems necessary, appropriate or desirable to effect such substitution, including the written acceptance and adoption by the Assignee of the provisions of this Agreement and the execution, acknowledgment and delivery to the General Partner of a power of attorney, the substance of which shall be consistent with Section 11; and (iii) The Substitute Limited Partner pays or reimburses the Partnership for all expenses and costs of such substitution, including legal and accounting fees and expenses and filing fees of the Partnership. (c) An Assignee, legal representative or successor in interest of a Limited Partner shall be subject to all of the restrictions upon a Limited Partner provided in this Agreement. (d) An Assignee or Substitute Limited Partner that desires to make a further Transfer shall be subject to all of the provisions of this Section 10.1 to the same extent and in the same manner as a Limited Partner making the initial Transfer. (e) Notwithstanding anything to the contrary in this Agreement, the General Partner may elect to treat an Assignee that has not become a Substitute Limited Partner as a Limited Partner in the place of the assignor should it deem that such treatment is in the best interests of the Partnership. (f) Any Transfer or attempted Transfer in contravention of this Section 10. 1, to the fullest extent permitted by law (A) shall be null and void as against the Partnership and the other Partners, and (B) shall not be recognized or permitted by, or reflected in, the books and records of the Partnership. In the event of any Transfer or attempted Transfer in violation of this Section 10. 1, without limiting any other rights of the Partnership, the General Partner shall have the right, in its sole and absolute discretion, to treat the transferring Limited Partner (or its successor(s) in interest) as a Defaulting Partner for purposes of, and subject to, Section 3.4. (g) Except as otherwise specifically provided in this Agreement or with the consent of the General Partner, all economic attributes of a transferor Limited Partner's Interest (such as the Limited Partner's Capital Commitment, Capital Contribution and Capital Account balance) shall carry over to a transferee in proportion to the percentage of the Interest so transferred. .. CONFIDENTIAL CCG144 10.2 Withdrawal by a Limited Partner. Except as provided in Section 9.12 or pursuant to the Transfer of a Limited Partner's entire Interest to one or more Partners or Substitute Limited Partners pursuant to this Section 10, a Limited Partner shall not withdraw all or any portion of its Interest in the Partnership or otherwise cease to be a Limited Partner without the consent of the General Partner, which consent may be withheld in the General Partner's sole and absolute discretion. 10.3 Removal of a Limited Partner. Except to the extent that a Limited Partner may be required to withdraw as provided in Sections 3.4 or 9.12, a Limited Partner shall not be removed from the Partnership without its consent. 10.4 Status of Assignees. (a) Notwithstanding any provision of this Agreement to the contrary, an Assignee shall not be admitted to the Partnership as a Substitute Limited Partner without the consent of the General Partner, which consent may be withheld in the General Partner's sole and absolute discretion. (b) Notwithstanding any provision of this Agreement to the contrary: (i) all rights and privileges associated with an Assignee interest in the Partnership shall be derived solely from the Interest of which such rights and privileges were previously a component part; and (ii) no Assignee shall hold, by virtue of such Assignee's Interest, any rights and privileges that were not specifically transferred to such Assignee by the prior holder of such Interest. (c) An Assignee that holds an Interest shall be entitled to receive the allocations attributable to such Interest pursuant to Section 4.2, to receive the distributions attributable to such Interest pursuant to Sections 4.1 and 15.4, and to Transfer such Interest in accordance with the terms of this Section 10. Notwithstanding the foregoing, the Partnership and the Partners shall incur no liability to the Assignee for allocations and distributions made in good faith to a transferor until a valid written instrument of assignment has been received by the Partnership and recorded on its books and the effective date of the assignment has passed. (d) An Assignee that holds an Interest in the Partnership shall be responsible for any unpaid Capital Commitment and obligation to return distributions or make other payments to the Partnership associated with such Interest; provided, however, that the transferor of such Interest, if a Partner, also shall continue to be responsible for the satisfaction of such Capital Commitment and other obligations until such time as a Substitute Limited Partner is admitted in respect of such Interest and, after such admission, shall be jointly and severally responsible with such Substitute Limited Partner as provided in Section 10.1(a)(vi). To the extent otherwise applicable to the Interest in the Partnership that has been transferred to an Assignee, the Assignee shall, to the fullest extent permitted by law, be subject to, and bound by, all of the terms and provisions of this Agreement that inure to the benefit of the Partnership or other Partners (including, without limitation, the provisions of this Agreement concerning penalties for breach of this Agreement, Transfers of Interests, return of distributions, confidentiality of Partnership information, and resolution of disputes). The foregoing provisions of this Section 10.4 shall apply to any Assignee that becomes bound by this Agreement pursuant to Section 18.5 without regard to whether such Assignee has executed a written instrument of 50 CONFIDENTIAL CCG144 assignment as described in Section 10. 1 (a)(vi)(A) or an assumption of obligations as described in Section 10.1(a)(vi). (e) Solely to the extent necessary to give effect to the Assignee rights and obligations set forth in Section 10.4(c) and (d), an Assignee shall be treated as a Partner for purposes of this Agreement. (f) An Assignee shall, to the fullest extent permitted by law, not, solely by virtue of its status as such, hold any non - economic rights in respect of the Partnership. Without limiting the preceding sentence, an Assignee's Interest in the Partnership shall not entitle such Assignee to participate in the management of the Partnership, vote on any Partnership matters or bind the Partnership under agreements with third parties. An Assignee shall not hold itself out as a Partner in any forum or for any purpose; provided, however, that, to the extent necessary to maintain consistency with the Partnership's income tax returns, reports, and other filings, an Assignee shall take the position that it is a Partner solely for income tax purposes. 10.5 No Transfer by General Partner. The Interest of the General Partner shall not be directly or indirectly transferred or assigned, except that this provision shall not preclude a transfer of the Interest of the General Partner to another Affiliate of the Investment Manager. SECTION 11. POWER OF ATTORNEY 11.1 Appointment of General Partner as Attorney for Limited Partners. Each Limited Partner, by becoming a Limited Partner makes, constitutes and appoints the General Partner its true and lawful attorney -in -fact, in its name, place and stead, with, subject to ERISA (if applicable), full power to do any of the following: (a) Execute on its behalf all amendments to this Agreement made and otherwise approved in accordance with this Agreement; (b) Prepare, execute on its behalf, verify, file and record amendments to this Agreement or to the books and records of the Partnership reflecting a change of the name or location of the principal place of business of the Partnership, a change of the name or address of any Limited Partner, the addition of Limited Partners, the disposal by a Limited Partner of its Interest in any manner, a Person becoming or ceasing to be a General Partner or Substitute Limited Partner of the Partnership, the exercise by any Person of any right or rights hereunder, the correction of typographical or similar errors, any distributions that may constitute a return of capital, any amendments made in accordance with this Agreement, and any amendment and restatement of this Agreement reflecting such amendments; (c) Prepare, execute on its behalf and record the Certificate and all amendments that the General Partner may deem advisable in accordance with this Agreement, including amendments to reflect the changes identified in clause (b) above; (d) Prepare, execute on its behalf, file and record any other agreements, certificates, instruments and other documents required to continue the Partnership, to admit 51 CONFIDENTIAL CCG144 Substitute Limited Partners, to liquidate and dissolve the Partnership in accordance with Section 15, to comply with applicable law, and to carry out the purposes of clauses (a) and (b) above, to the extent consistent with this Agreement; (e) prepare and execute on its behalf the limited partnership agreement and /or other organizational documents of any Alternative Investment Vehicle or any Parallel Partnership; and (f) Take any further action that the General Partner shall consider advisable in connection with the exercise of the authority granted in this Section 11.1. 11.2 Nature of Special Power. The power of attorney granted under this Section 11 is a special power of attorney coupled with an interest, is irrevocable and may be exercised by the General Partner with a single signature of such attorney -in -fact acting as attorney -in -fact for all Partners or Limited Partners executing such agreement, certificate, instrument or document. The power of attorney shall survive and not be affected by the Incapacity of a Limited Partner and shall survive and not be affected by the delivery of any assignment by a Limited Partner of the whole or a portion of its Interest, except where the assignment is of such Limited Partner's entire Interest and the Assignee thereof with the consent of the General Partner is admitted as a Substitute Limited Partner; provided, however, the power of attorney shall survive the delivery of such assignment for the sole purpose of enabling any such attorney -in -fact to effect such substitution. This power of attorney does not supersede any part of this Agreement, nor is it to be used to deprive any Limited Partner of its rights hereunder. It is intended only to facilitate the execution of documents and the carrying out of other procedural or ministerial functions. SECTION 12. BOOKS, RECORDS AND REPORTS 12.1 Books. The General Partner shall maintain books and records required by law for the Partnership and all Limited Partners, subject to Section 18.15, shall have the right to inspect, examine and copy such books and records at reasonable times and upon reasonable notice for any purpose reasonably related to such Limited Partners' Interests in the Partnership. 12.2 Reports. (a) The General Partner shall cause to be prepared and distributed to the Partners: (i) Within 90 days after the end of each Fiscal Year, or as soon thereafter as is reasonably practicable, (A) such information as is necessary to complete the Partners' United States federal and state income tax or information returns, including a copy of the Partnership's United States federal, state and local income tax or information returns for the year and (B) annual financial statements audited in accordance with GAAP; and (ii) Within 60 days after the end of each of the first three full Fiscal Quarters of each Fiscal Year (commencing with the Fiscal Quarter ending , 2013) or as soon thereafter as is reasonably practicable, a financial report containing statements of 52 CONFIDENTIAL CCG144 operations and cash flows, changes in Partners' capital for the period then ended and a balance sheet as of the last day of such Fiscal Quarter. In each case, delivery to the Partners shall be subject to delays in the event of the late receipt by the Partnership of any necessary financial statements from any Portfolio Company or failure of third parties to provide information necessary to prepare such materials. (b) Notwithstanding the above time periods, unless determined otherwise by the General Partner, the first audit of the Partnership's financial statements shall cover the period commencing with the Initial Closing Date and ending December 31, 2013. (c) The General Partner may cause the reports to be distributed to the Partners to be prepared in accordance with the accrual method of accounting. Further, the General Partner may cause to be prepared (i) such reports or other information as may be necessary with respect to any Limited Partner's qualification for the benefit of any income tax treaty or provision of law reducing or eliminating any withholding or other tax or governmental charge with respect to any Assets and (ii) such other reports and financial statements of the Partnership as the General Partner deems appropriate for determining the Profits and Losses of the Partnership and /or otherwise informing the Partners about the operations of the Partnership. (d) If and for so long as the General Partner chooses to operate the Partnership as a VCOC, the General Partner shall deliver to each ERISA Limited Partner a certificate within 90 days after the end of each "annual valuation period" (as defined in the Plan Asset Regulations) of the Partnership, stating that the Partnership should have qualified as a VCOC under the Plan Asset Regulations for the relevant "valuation period" as provided in such regulations. 12.3 Accounting and Tax Decisions. All decisions as to accounting and tax matters shall be made by the General Partner. The General Partner shall use its best efforts not to cause the Partnership to be treated other than as a partnership for United States federal income tax purposes. 12.4 Certain Tax Matters. (a) The General Partner is hereby designated the "tax matters partner" for purposes of Section 6231(a) of the Code (and regulations thereunder). (b) The General Partner is hereby authorized to withhold out of any distributions that would otherwise be made to any Limited Partner an amount equal to the amount of U.S. federal, state or local income or other tax or amounts due that the General Partner determines the Partnership or the General Partner is required to withhold or to pay to a taxing authority with respect to or on behalf of such Limited Partner, and to file all necessary reports relating to such withholding or payment as may be required by law. Any amounts so withheld or paid shall be deemed actually distributed to such Limited Partner for all purposes of this Agreement. If at any time (x) the amount required to be withheld or paid by the Partnership or the General Partner with respect to or on behalf of any such Limited Partner shall exceed (y) the amounts that are then available for distribution to such Limited Partner, the General Partner shall notify such Limited Partner of the amount of such excess, and such Limited Partner (whether or 53 CONFIDENTIAL CCG144 not it is then a Limited Partner) shall promptly pay over to the General Partner cash equal to such amount. Any payment by a Partner under this Section 12.4 shall not be treated as a Capital Contribution to the Partnership nor shall it be taken into account in computing such Partner's right to distributions under this Agreement. Each Limited Partner shall, to the fullest extent permitted by law, indemnify the Partnership and the General Partner and hold each of them harmless from any liability with respect to any taxes, penalties or interest required to be withheld or paid to any taxing authority by the Partnership or the General Partner for or on behalf of such Limited Partner or with respect to such Limited Partner. (c) No election under Section 754 of the Code shall be made by the Partnership or by the General Partner in respect of the Partnership. (d) The General Partner shall make an election to have Section 743(e) of the Code apply to the Partnership so that the Partnership will be treated as an "electing investment partnership" for purposes of the Code. (e) In the event that any interest in a Partner that is a partnership (or that is treated as a partnership for federal income tax purposes) is owned directly or indirectly by a tax exempt or foreign person or entity, such Partner will promptly notify the Partnership in writing of such tax exempt or foreign person or entity's proportionate share of such Partner's items of income and gain (determined as a percentage pursuant to Section 168(h)(6)(C) of the Code) and of any change in such proportionate share. (f) The General Partner shall use reasonable efforts to ensure that each "eligible" Partner is a "Notice Partner," as such term is defined in Section 6231(a)(8) of the Code. SECTION 13. INDEMNIFICATION; RETURN OF DISTRIBUTIONS 13.1 General Partner's Liability; Indemnification. (a) To the fullest extent permitted by law, including ERISA (if applicable), no Covered Person will be liable to the Partnership or to any Partner for any losses sustained or liabilities incurred as a result of any act or omission taken or suffered by any such Covered Person if the conduct of such Covered Person did not constitute Malfeasance. (b) Neither the General Partner nor the Investment Manager will be liable to the Partnership or any other Partner for any action taken by any other Partner, nor will the General Partner nor the Investment Manager (in the absence of Malfeasance by the General Partner or the Investment Manager, as the case may be) be liable to the Partnership or any other Partner for any action of any agent of the General Partner, the Investment Manager, or the Partnership which has been selected in good faith by the General Partner or the Investment Manager with reasonable care. (c) The Partnership shall indemnify and hold harmless each Covered Person, to the fullest extent permitted by law, including ERISA (if applicable), from and against any and 54 CONFIDENTIAL CCG144 all losses, claims, demands, costs, damages, liabilities, reasonable expenses of any nature (including costs of investigation and attorneys' fees and disbursements), judgments, fines, settlements and other amounts, of any nature whatever, known or unknown, liquidated or unliquidated (collectively, "Liabilities ") arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative (collectively, "Actions "), in which the Covered Person may be involved, or threatened to be involved as a party or otherwise, relating to the performance or nonperformance of any act concerning the activities of the Partnership, including acting as a director or the equivalent of a Portfolio Company or serving on a creditors' committee during the period of time in which the Partnership holds an interest therein, or the performance by such Covered Person of any of the General Partner's responsibilities hereunder or the Investment Manager's responsibilities under the Investment Management Agreement, unless the Covered Person's conduct constituted Malfeasance; provided that the indemnification provided to Covered Persons hereunder shall not extend to disputes solely among the General Partner, the Investment Manager and their Affiliates and their members and employees. The termination of an action, suit or proceeding by judgment, order, settlement or upon a plea of nolo contenders or its equivalent will not, in and of itself, create a presumption or otherwise constitute evidence that the Covered Person's conduct constituted Malfeasance. Neither the General Partner, the Investment Manager nor any Affiliates of the General Partner or Investment Manager as Covered Persons shall be entitled to receive any further advancement of expenses for an indemnifiable claim from and after the date on which a court of competent jurisdiction has entered a judgment which states that such Covered Person's conduct constituted Malfeasance. For avoidance of doubt, if such judgment of a court of competent jurisdiction is overturned and is no longer in place on appeal, such Covered Persons shall be entitled to indemnification and payment of expenses pursuant to this Section 13.1 including those that were not paid pending any appeal of a judgment which states that such Covered Persons' conduct constituted Malfeasance. (d) Expenses incurred by a Covered Person in defending any Action subject to this Section 13.1 will be advanced by the Partnership prior to any judgment or settlement of such Action entered by any court of competent jurisdiction which includes a finding that such Covered Person's conduct constituted Malfeasance, but only if the Partnership has received a written commitment by or on behalf of the Covered Person to repay such advances to the extent that, and at such time as, its conduct has been determined, to constitute Malfeasance. Notwithstanding the foregoing, the General Partner agrees that it will not be entitled to advances pursuant to this Section 13.1(d) with respect to any action against the General Partner in which a Majority in Interest of the Limited Partners are named plaintiffs. (e) Each Covered Person will use commercially reasonable efforts to pursue any insurance, contribution or indemnity claims it may have against third parties with respect to the expenses incurred in defending any Action subject to this Section 13. 1, provided that no such claims, nor any efforts or obligation hereunder, will delay the availability of the advances provided in Section 13.1(d). Each Covered Person, other than the General Partner and the Investment Manager, will obtain the written consent of the General Partner prior to entering into any compromise or settlement which would result in an obligation of the Partnership to indemnify such Covered Person. If the Covered Person is the General Partner, the Investment Manager or an Affiliate of the General Partner or the Investment Manager, notice of any proposed compromise or settlement which would result in an obligation of the Partnership to 55 CONFIDENTIAL CCG144 indemnify such Covered Person will be given to each Limited Partner at least 20 Business Days prior to the Covered Person's entering into such compromise or settlement, but only to the extent such compromise or settlement permits such disclosure (and the Covered Person will endeavor to have the proposed compromise or settlement permit such disclosure). (f) The provisions of this Section 13.1 are for the benefit of the Covered Persons and will not be deemed to create any rights for the benefit of any other Person. (g) To the extent that, at law or in equity, the General Partner has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to another Partner, the General Partner acting under this Agreement will not be liable to the Partnership or to any such other Partner for its good faith reliance on the provisions of this Agreement, except as may otherwise be required by ERISA (if applicable). (h) The General Partner and the Investment Manager may consult with legal counsel and accountants and any act or omission suffered or taken by the General Partner or the Investment Manager on behalf of the Partnership or in furtherance of the interests of the Partnership in good faith in reliance upon and in accordance with the advice of such counsel or accountants will be full justification for any such act or omission, and the General Partner and the Investment Manager will be fully protected in so acting or omitting to act so long as such counsel or accountants were selected with reasonable care, except as may otherwise be required by ERISA (if applicable). (i) Notwithstanding any provision in this Agreement to the contrary and to the fullest extent permitted by law, including ERISA (if applicable), in no event shall a Limited Partner, the Investment Manager, a member of the Investment Committee or a member of the Advisory Board be considered a general partner of the Partnership by agreement, estoppel, as a result of the performance of its duties, or otherwise. Notwithstanding any provision in this Agreement to the contrary and to the fullest extent permitted by law, the Limited Partners, the Investment Manager, the members of the Investment Committee and the members of the Advisory Board shall not be deemed to be participating in the control of the business of the Partnership within the meaning of the Delaware Act as a result of any actions taken by a Limited Partner, the Investment Manager, the Investment Committee or a member thereof or the Advisory Board or a member thereof hereunder. 13.2 Giveback of Certain Distributions. (a) Subject to the provisions of this Section 13.2, each Partner (including any former Partner) may be required to return distributions made to such Partner or former Partner for the purpose of meeting such Partner's share of the Partnership's indemnity obligations under Section 13.1 or to satisfy any other Partnership obligations, as determined pursuant to Section 13.2(b) and (c), in an amount up to, but in no event in excess of, the lesser of (i) the aggregate amount of distributions actually received by such Partner from the Partnership and (ii) 25% of such Partner's Commitment. The General Partner will endeavor to notify each Limited Partner promptly upon becoming aware of any claim or other matter which would require the return of distributions pursuant to this Section, provided that a good faith failure to so notify any Limited Partner shall not relieve such Limited Partner of its obligations under this Section 13.2. 56 CONFIDENTIAL CCG144 (b) Subject to the provisions of this Section 13.2, if an obligation to return distributions is related to, or arises out of, the acquisition, holding or disposition of a Portfolio Investment (the amount of such obligation, an "Investment Giveback Amount "): (i) each Partner (including any former Partner) having an interest in such Portfolio Investment shall be obligated to contribute an amount equal to the product of (I) the percentage that the aggregate proceeds (Disposition Proceeds, income receipts and other amounts) received as distributions by such Partner with respect to such Portfolio Investment that are in excess of Investment Contributions of such Partner with respect thereto, represents of the aggregate proceeds (in excess of Investment Contributions with respect thereto) received as distributions by all Partners with respect to such Portfolio Investment and (II) the lesser of (X) the aggregate proceeds generated by such Portfolio Investment and (Y) such Investment Giveback Amount; (ii) to the extent that such Investment Giveback Amount exceeds the amount given back in (i) above, each Partner (including any former Partner) having an interest in such Portfolio Investment shall be obligated to contribute an additional amount equal to the product of (I) the percentage that distributions to such Partner representing a return of its Investment Contributions represents of the aggregate distributions to all Partners representing a return of Investment Contributions with respect to such Portfolio Investment and (II) the amount of such excess, up to the aggregate amount of Investment Contributions with respect to such Portfolio Investment; and (iii) to the extent that such Investment Giveback Amount exceeds the amounts given back in (i) and (ii) above, each Partner (including any former Partner) shall be obligated to contribute an amount equal to the product of (I) the percentage that its aggregate distributions received represent of aggregate distributions received by all Partners and (11) the amount of such excess, up to the aggregate amount of distributions received by all Partners. (c) Subject to the provisions of this Section 13.2, if an obligation is unrelated to the acquisition, holding or disposition of a Portfolio Investment (the amount of such obligation, an "Other Giveback Amount "), each Partner (or former Partner) shall be obligated to contribute a pro rata portion of the Other Giveback Amount equal to the percentage that such Partner's aggregate distributions received represents of the aggregate distributions received by all Partners. (d) The obligations of each Partner under this Section 13.2 will survive any dissolution or termination of the Partnership, but will not extend beyond the third anniversary of the final distributions in liquidation of the Partnership (unless notice of a pending obligation has been given within such period). (e) Promptly after receipt by the Partnership of a notice of any claim or the commencement of any Action the result of which may be an Investment Giveback Amount or Other Giveback Amount hereunder, the Partnership will, if a claim in respect thereof is to be made against one or more Partners under Section 13.2(b) or (c), notify such Partners in writing of such claim or the commencement of such Action; provided, however, that the failure to notify 57 CONFIDENTIAL CCG144 any Partner will not relieve any such Partner from any obligation or liability it may have to the Partnership hereunder or otherwise. (f) Upon any determination (at any time and from time to time) by the General Partner that obligations have been incurred that result in an Investment Giveback Amount or Other Giveback Amount hereunder, the General Partner will promptly provide written notification thereof to each Partner. Such notification will include a reasonable description of the nature of such obligations, the amount of the required contribution or payment by each Partner and the date by which contribution or payment by the Partners must be made. Prior to the contribution or payment deadline, each Partner will deliver to the General Partner or the Person or Persons specified by the General Partner the amount of the required contribution or payment. (g) If a Partner makes a contribution or payment pursuant to this Section 13.2 with respect to a distribution previously received by the Partner (or predecessor to the Partner), (a) the contribution will not be treated as a Capital Contribution for purposes of Section 3.1 or Section 3.2, and (b) the distribution will be treated as if it had not been made for purposes of thereafter applying this Section 13.2 and Section 4.1 and Section 15.4, as determined by the General Partner. (h) For purposes of this Section 13.2, an Assignee that has not become a Substitute Limited Partner will nevertheless be treated as a Limited Partner for the purpose of this Section 13.2. (i) Nothing in this Section 13.2 or elsewhere in this Agreement will relieve any Partner of any other obligation which it may have under the Delaware Act or any other provision of applicable law. If, notwithstanding the terms of this Agreement, it is determined under applicable law that any Partner has received a distribution which is required to be returned to or for the account of the Partnership or Partnership creditors, then the obligation under applicable law of any Partner to return all or any part of a distribution made to such Partner shall be the obligation of such Partner and not of any other Partner. In addition to the foregoing, a Partner that receives a distribution (i) in violation of this Agreement or (ii) that is required to be returned to the Partnership under applicable law shall return such distribution within 30 days after demand therefor by the General Partner. SECTION 14. AMENDMENTS 14.1 Amendments. (a) A Majority in Interest of the Limited Partners (excluding any Interest held by the General Partner) may, with the concurrence of the General Partner, vote to amend this Agreement in all respects; provided that without the unanimous approval of each Partner affected thereby, such amendment may not: (i) increase the Capital Commitment of a Partner; or CONFIDENTIAL CCG144 (ii) amend the provisions of Section 4 to alter the amount or timing of distributions or the allocations of Profits and Losses; or (iii) amend Section 3.2 or 13.2; or (iv) amend this Agreement in a manner that materially and adversely affects the rights of a Limited Partner in a manner that discriminates against that Limited Partner vis -a -vis other Limited Partners; or (v) modify this Section 14.1. (b) Notwithstanding the foregoing provisions of this Section 14, the General Partner may amend this Agreement, without the consent of the Limited Partners, (i) to reflect changes made in the name of the Partnership; (ii) to make changes to ensure that the Partnership will not be treated as an association taxable as a corporation for federal income tax purposes; (iii) to prevent the Partnership or the General Partner from in any manner being deemed an "investment company" subject to the provisions of the Investment Company Act; (iv) in connection with qualifying the Partnership to achieve limited liability under the laws of any state; (v) to prevent any material and adverse effect to the Partnership, the General Partner or any Limited Partner arising from the application of legal restrictions to any Limited Partner or the Partnership, subject to the requirement that the Limited Partners not be materially and adversely affected; (vi) to make a change that is necessary or desirable to cure any ambiguity or inconsistency and to make changes that will not be inconsistent with this Agreement, to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency, in both cases, subject to the requirement that the Limited Partners not be materially and adversely affected; (vii) to make any changes that, in the reasonable opinion of the General Partner, will have no material adverse effect on the Limited Partners or on the Partnership; and (viii) to make any other changes similar to the foregoing, subject to the requirement that the Limited Partners not be materially and adversely affected. Prior to entering into any amendment pursuant to this paragraph, the General Partner shall notify the Limited Partners in writing of the material terms of such amendment. In addition, the General Partner may reflect in the Schedule of Partners and in its records changes made in the composition of the Limited Partners and their respective Capital Contributions, Capital Commitments and Interests in accordance with the provisions of this Agreement without the consent of the Limited Partners. (c) Notwithstanding any other provision of this Agreement to the contrary, no amendment that alters the definitions of "BHC" or `BHC Partner" or the provisions of Section 9.11, or that would adversely affect BHC Partners relative to other Limited Partners shall be permitted without the consent of majority of the Capital Commitments of the BHC Partners. (d) Notwithstanding any other provision of this Agreement to the contrary, no amendment that alters the definitions of "ERISA ", or " ERISA Partner ", or the provisions of Section 9.12 (to the extent it is applicable to an ERISA Partner) that would adversely affect the ERISA Partners relative to other Limited Partners shall be permitted without the consent of majority of the Capital Commitments of the ERISA Partners. 59 CONFIDENTIAL CCG144 (e) Notwithstanding any other provision of this Agreement to the contrary, no amendment that alters the definitions of "Public Plan Partner ", or the provisions of Section 9.12 (to the extent it is applicable to a Public Plan Partner) that would adversely affect the Public Plan Partners relative to other Limited Partners shall be permitted without the consent of majority of the Capital Commitments of the Public Plan Partners. SECTION 15. DISSOLUTION AND TERMINATION OF THE PARTNERSHIP 15.1 Dissolution Generally. Except as provided in this Agreement or as permitted by law, no Partner shall have the right to cause dissolution of the Partnership before the expiration of its term. 15.2 Continuation of Partnership. The Partnership shall not be dissolved solely by the Incapacity of any Limited Partner as such, the assignment by any Limited Partner of its Interest or the admission of a new or substituted General Partner or Limited Partner. 15.3 Events Causing Dissolution. The Partnership shall be dissolved and its affairs wound up and its Portfolio Investments and other Assets distributed in the manner and order provided for in this Section 15 upon the occurrence of any of the following events: (a) The term of the Partnership expires without an extension pursuant to Section 2.6 hereof, (b) The General Partner determines that a dissolution should be effected; (c) An event of withdrawal of the General Partner (within the meaning of the Delaware Act) unless (i) at the time of the occurrence of such event there is at least one remaining general partner of the Partnership and all remaining general partners are hereby authorized to and shall agree to continue the business of the Partnership without dissolution, or (ii) within 90 days after the occurrence of such event, 662/3% in Interest agree in writing or vote to continue the business of the Partnership without dissolution and to the appointment, effective as of the date of such event, if required, of one or more additional general partners of the Partnership; (d) A court of competent jurisdiction decrees dissolution as provided in Section 17 -802 of the Delaware Act; or (e) At any time there are no limited partners of the Partnership unless the business of the Partnership is continued in accordance with the Delaware Act. 15.4 Winding Up of Partnership. (a) Upon dissolution of the Partnership, the General Partner or, if the General Partner has ceased to serve as such, a liquidating trustee (the "Liquidating Trustee ") appointed by 662/3% in Interest, shall promptly wind up the affairs of the Partnership in accordance with the provisions of this Section 15.4. In furtherance thereof, the General Partner or the Liquidating •1 CONFIDENTIAL CCG144 Trustee shall: (i) have all of the administrative and management rights and powers of the General Partner; (ii) have the power to bind the Partnership under Section 5.1 in the same manner as the General Partner; (iii) be reimbursed for its reasonable out -of- pocket expenses on behalf of the Partnership; and (iv) in the case of the Liquidating Trustee, receive reasonable compensation as approved by 662/3% in Interest. Following dissolution, the General Partner or Liquidating Trustee shall sell or otherwise dispose of Assets determined by the General Partner or Liquidating Trustee, as applicable, to be unsuitable for distribution to the Partners, but shall engage in no other business activities except as may be necessary, in the reasonable discretion of the General Partner or the Liquidating Trustee, to preserve the value of the Partnership's Assets during the period of winding up and liquidation. In any event, the General Partner or the Liquidating Trustee shall use its reasonable best efforts to prevent the period of winding up and liquidation of the Partnership from extending beyond the date which is two years from the Partnership's date of dissolution. (b) Distributions to the Partners in liquidation may be made in cash or in kind, or partly in cash and partly in kind, as determined by the General Partner or Liquidating Trustee; provided, that (i) the General Partner or the Liquidating Trustee shall use its best efforts to make distributions in cash, and (ii) any distribution partly in cash and partly in kind shall be pro rata among the Partners. Distributions in kind shall be valued at Fair Market Value as determined by the General Partner or Liquidating Trustee in accordance with the definition of such term provided in this Agreement and shall be subject to such conditions and restrictions as may be necessary or advisable in the reasonable discretion of the General Partner or Liquidating Trustee to preserve the value of the property so distributed or to comply with applicable law. (c) The Profits and Losses of the Partnership during the period of winding up and liquidation shall be allocated among the Partners in accordance with the provisions of this Agreement. (d) The Assets of the Partnership (including, without limitation, proceeds from the Disposition of any assets during the period of winding up and liquidation) shall be applied as follows: (i) First, to the satisfaction (whether by payment or the making of reasonable provision for payment) of any indebtedness or liabilities of the Partnership, to parties other than Partners, in the order of priority required by law, including to any reserves which the General Partner or Liquidating Trustee reasonably deems necessary for contingent, conditional or unmatured liabilities or obligations of the Partnership (which reserves when they become unnecessary shall be distributed in accordance with the provisions of clause (iii) below); (ii) Next, to repay any indebtedness of the Partnership, to the Partners, in the order of priority required by law; and (iii) Next, to the Partners in accordance with Section 4.1. It is intended that the distributions required by clause (iii) of this Section 15.4(d) will result in the Partners receiving aggregate distributions equal to the amount of distributions that would have been received if the liquidating distribution were made in accordance with their positive Capital 61 CONFIDENTIAL CCG144 Accounts. However, if the balances in the Capital Accounts do not result in such intention being satisfied, items of income, gain, loss, deduction and credit will be reallocated among the Partners so as to cause the balances in the Capital Accounts to be in the amounts necessary so that such result is achieved. (e) In the event the Partnership is "liquidated" within the meaning of Treasury Regulations Section 1.704- 1(b)(2)(ii)(g), the distributions pursuant to this Section 15 shall be made, to the extent practicable, within the time period required by Treasury Regulations Section 1.704- 1(b)(2)(ii)(b)(2). Where necessary and desirable to comply with the preceding sentence, distributions may be made to a trust established for the benefit of the Partners for the purposes of liquidating Assets, collecting amounts owed to the Partnership and paying any contingent, conditional or unmatured liabilities or obligations of the Partnership or of the General Partner arising out of or in connection with the Partnership. The General Partner shall distribute the assets of any such trust to the Partners from time to time in the same proportions as the amount distributed to the trust by the Partnership would otherwise have been distributed to the Partners pursuant to this Agreement. 15.5 Liquidation Statement. Each of the Partners shall be furnished with a statement prepared by the General Partner or Liquidating Trustee, which shall set forth the Assets and liabilities of the Partnership as of the date of complete liquidation. Upon compliance by the Partnership with the foregoing distribution plan, the Limited Partners shall cease to be such, and the General Partner, as the sole remaining Partner of the Partnership, may execute, acknowledge and cause to be filed a Certificate of Cancellation of the Partnership or other appropriate documents evidencing its dissolution, winding up and termination. 15.6 No Deficit Make -Up Upon Dissolution. Subject to Sections 13.2 and 15.7, no Partner shall have any obligation to contribute to the Partnership any deficit in the Partner's Capital Account. The General Partner will not be personally liable for the return of all or any part of the contributions of the Limited Partners to the Partnership, and any such return shall be made solely from the Assets. 15.7 General Partner's Liability Upon Liquidation. Subject to Section 13.2 (including adjustments for any subsequent givebacks in a manner consistent with Section 13.2(h)), if upon liquidation of the Partnership, after giving effect to all distributions and payments made pursuant to Sections 4.1 and 15.4, but before giving effect to this Section 15.7, with respect to any Limited Partner other than a Defaulting Partner or an Affiliated Partner, either (a) the General Partner has received distributions pursuant to Sections 4.1 and 15.4 attributable to such Limited Partner that exceed 10% of the excess of (i) investment proceeds apportioned to such Limited Partner pursuant to the first sentence of Section 4.1(b) over (ii) the Capital Contributions of such Limited Partner, or (b) the distributions received by such Limited Partner pursuant to Sections 4.1 and 15.4 are not equal to the sum of such Limited Partner's Capital Contributions and Investment Preferred Return, 62 CONFIDENTIAL CCG144 then the General Partner shall pay to the Partnership the lesser of: (A) the greater of the amount of the excess of such distributions over such 10% described in clause (a) and the amount of the shortfall described in clause (b), and (B) the amount of distributions received by the General Partner pursuant to Sections 4.1 and 15.4 attributable to such Limited Partner, net of taxes paid or payable thereon determined at the rates specified in Section 4.1(g), and the Partnership shall, subject to Section 17 -804 of the Delaware Act and other applicable law, distribute such amount to such Limited Partner. Payments pursuant to this Section 15.7 shall be made by or on behalf of the General Partner either in cash or, at the election of the General Partner, by the return of Securities previously distributed to the General Partner by the Partnership valued at their Fair Market Value at the time returned to the Partnership, provided that such Securities shall be Marketable Securities in the hands of a Limited Partner (assuming such Limited Partner has no other interest in the Portfolio Company to which such Marketable Securities relate). SECTION 16. ADVISORY BOARD 16.1 Role of Advisory Board. In addition to other matters set forth in this Agreement that require approval of the Advisory Board, the Advisory Board will review such matters regarding conflicts of interest and valuations as the General Partner shall request. 16.2 Number and Qualifications. The Advisory Board shall consist of not less than five nor more than seven members, who shall be appointed by the General Partner and the Investment Manager. Each member of the Advisory Board shall be a Limited Partner or the duly authorized representative of a Limited Partner who is not a Defaulting Partner or an Affiliated Partner. 16.3 Period of Service. Members of the Advisory Board shall serve until his or her successor shall have been duly appointed, unless he or she shall resign, die or be removed. Any member may tender his or her resignation at any time. 16.4 Meetings; Voting. (a) Meetings of the Advisory Board may be called at any time by any member or by the General Partner. All meetings of the Advisory Board shall be held at such date(s), in such place(s), and at such time(s) as shall have been established by the Advisory Board. Notice of all meetings shall be given or mailed to each member not less than 5 days before the date of such meeting. Notice of any meeting may be waived in writing, either before or after the meeting, and shall be deemed to be waived by any member in attendance. (b) Members of the Advisory Board may vote and participate in meetings in person, by proxy or delegate, by written consent or by means of conference telephone or similar communications equipment. The Advisory Board may adopt such by -laws for the conduct of 63 CONFIDENTIAL CCG144 their meetings as they may deem proper; provided that such by -laws may not be inconsistent with this Agreement. (c) Unless otherwise provided in this Agreement, all matters to come before the Advisory Board shall be determined by majority vote. Action may be taken by the Advisory Board by written consent based upon the same vote that would be required to authorize such action at a meeting held in person. (d) If only one of John Bowman and Scott Carpenter (or any other Person approved as a replacement for such individual by the Majority in Interest of the Limited Partners) is devoting substantial business time to the management of the affairs of the Partnership (provided, however, that Mr. Bowman, Mr. Carpenter or any of their replacements appointed as set forth above may manage Other Crescent Accounts including as provided in Section 8.4), the General Partner shall give notice to the Advisory Board as soon as practicable after such an occurrence. 16.5 Expenses. The Partnership shall reimburse members of the Advisory Board for their reasonable expenses actually incurred in attending one meeting of the Advisory Board per year. Members (or their employers) shall bear the expense of their attendance at all other meetings. 16.6 Advisory Board Liability; Indemnification. (a) To the fullest extent permitted by law, including ERISA (if applicable), neither the members of the Advisory Board nor their Affiliates, nor the officers, directors, employees, partners, stockholders, members or agents of any of the foregoing, will be liable to the Partnership or to any Partner for any losses sustained or liabilities incurred as a result of any act or omission taken or suffered by such Person in his or her service on the Advisory Board if the conduct of such Person did not constitute fraud or willful misconduct. (b) The members of the Advisory Board will not be liable to the Partnership or any other Partner for any action taken by any other Partner, nor will the members of the Advisory Board (in the absence of fraud and willful misconduct by the members of the Advisory Board) be liable to the Partnership or any other Partner for any action of any employee or agent of a member of the Advisory Board which has been selected in good faith by the member of the Advisory Board with reasonable care. (c) The Partnership shall indemnify and hold harmless the members of the Advisory Board and their Affiliates and all officers, directors, employees, partners, stockholders, members and agents of any of the foregoing (each, an "Advisory Board Indemnitee "), to the fullest extent permitted by law, including ERISA (if applicable), from and against any and all Liabilities arising from any and all Actions, in which the Advisory Board Indemnitee may be involved, or threatened to be involved as a party or otherwise, relating to the performance or nonperformance of the Advisory Board's responsibilities hereunder, unless the Advisory Board Indemnitee's conduct constituted fraud or willful misconduct. The termination of an Action by judgment, order, settlement or upon a plea of nolo contenders or its equivalent will not, in and of .� CONFIDENTIAL CCG144 itself, create a presumption or otherwise constitute evidence that the Advisory Board Indemnitee's conduct constituted fraud or willful misconduct. (d) Expenses incurred by an Advisory Board Indemnitee in defending any Action subject to this Section 16.6 will be advanced by the Partnership prior to any judgment or settlement of such Action entered by any court of competent jurisdiction which includes a finding that such Advisory Board Indemnitee's conduct constituted fraud or willful misconduct, but only if the Partnership has received a written commitment by or on behalf of the Advisory Board Indemnitee to repay such advances to the extent that, and at such time as, its conduct has been determined, to constitute fraud or willful misconduct. SECTION 17. RESIGNATION, REMOVAL, REPLACEMENT OF THE GENERAL PARTNER 17.1 No Voluntary Withdrawal. The General Partner shall not have the right to retire or withdraw voluntarily as General Partner, except that the General Partner may substitute in its stead as General Partner another Affiliate of the Investment Manager as provided in Section 10.5. 17.2 Removal or Cessation of the General Partner. (a) The General Partner may be removed as general partner of the Partnership without its consent only (i) by reason of the occurrence of a Removal Event, if 662/3% in Interest vote in writing for such removal or (ii) in all other cases, if 85% in Interest vote in writing for such removal. Immediately prior to the effective date of any such removal, a successor General Partner must be appointed and admitted and is hereby authorized to and shall continue the business of the Partnership without dissolution upon the vote of 662/3% in Interest or such greater percentage required by law. (b) The General Partner shall cease to be the General Partner of the Partnership if the General Partner is dissolved, or if an order for relief against the General Partner is entered under Chapter 7 of the United States federal bankruptcy law, or if: (i) the General Partner makes a general assignment for the benefit of creditors; (ii) the General Partner files a voluntary petition under the federal bankruptcy law; (iii) the General Partner files a petition or answer seeking for the General Partner any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law, or regulation; (iv) the General Partner files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the General Partner in any proceeding of this nature; (v) the General Partner seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of the General Partner or of all or any substantial part of the General Partner's properties; (vi) 60 days after the commencement of any proceeding against the General Partner seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation, the proceeding has not been dismissed; or (vii) within 60 days after the appointment without the General Partner's consent or acquiescence of a trustee, receiver, or liquidator of the General Partner or of all or any substantial part of the " CONFIDENTIAL CCG144 General Partner's properties, the appointment is not vacated or stayed, or within 60 days after the expiration of any such stay, the appointment is not vacated. Within 90 days after the effective date of the General Partner's cessation of service as General Partner, a successor General Partner may be appointed and admitted, effective immediately prior to such cessation, and is hereby authorized to and shall continue the business of the Partnership without dissolution with the written consent of 662/3% in Interest. (c) If the Limited Partners remove the General Partner in accordance with Section 17.2(a), notice of removal specifying the successor General Partner and the effective date of removal and replacement by the successor general partner shall be served on the General Partner either by certified or by registered mail, return receipt requested, or by personal service. (d) If the General Partner (x) is removed pursuant to Section 17.2(a)(i), the General Partner shall be issued a GP Promissory Note by the Partnership in the amount that would have been distributed to the General Partner if the Partnership had been dissolved and its Assets sold (in an orderly manner at their then fair market value as such value is determined by a nationally recognized independent appraiser or investment bank at the expense of the Partnership) and all Profits and Losses (if any), after taking into account all unpaid fees and other outstanding liabilities of the Partnership, had been allocated and all sale proceeds distributed as required by this Agreement to the Partners upon liquidation of the Partnership, or (y) if the General Partner otherwise ceases to serve as the General Partner for any reason (including removal pursuant to Section 17.2(a)(ii)), then it shall, at its option, (i) have the right to convert its Interest in the Partnership into a special Limited Partner's Interest (also a "Special Limited Partner Interest ") (which Special Limited Partner Interest shall have the same economic attributes as the General Partner's Interest prior to such removal or cessation, including, without limitation, the Carried Interest with respect to then existing and committed Portfolio Investments, which Carried Interest shall be paid to the Special Limited Partner as and when each such Portfolio Investment is Disposed Of), or (ii) to be paid in cash by the Partnership an amount calculated as described in clause (x) above, such amount to paid by the earlier of (a) the one year anniversary of the date on which the General Partner ceased to serve as the General Partner and (b) the termination of the Partnership. If the General Partner's Interest is liquidated in accordance with clause (y)(ii) of the immediately preceding sentence, the Capital Account of each Partner shall be adjusted as though the Profits and Losses described therein had been allocated, and thereafter all Profits and Losses shall be determined on the basis of the value of the Assets used to establish the value of the General Partner's Interest. If the General Partner's Interest in the Partnership is converted into a Special Limited Partner Interest, all references to "General Partner" in Sections 8.1(b)(iii) and (iv)(B) shall be deemed to be references to the Special Limited Partner in its capacity as the holder of the Special Limited Partner Interest. In all events, at its election, the replaced General Partner (or Special Limited Partner) shall be excused from participating in any further Portfolio Investments and making any further Capital Contributions to the Partnership, with the effect provided in Section 3.3(b). (e) If the General Partner is removed as or ceases to be the General Partner in accordance with Section 17.2(a) or 17.2(b), any successor General Partner appointed by the Limited Partners to replace a General Partner pursuant to this Section 17 shall, beginning on the date of its admission to the Partnership, have the same rights and obligations under this Agreement as the replaced General Partner would have had subsequent to such date if the .. CONFIDENTIAL CCG144 replaced General Partner had continued to act as General Partner, and the Investment Management Agreement shall automatically terminate in accordance with its terms, the Partnership shall pay to the Investment Manager all Management Fees and expenses then due thereunder, and the successor General Partner shall have the right to cause the Partnership to enter into a new management agreement with a Person selected by it containing such terms and conditions as are approved by the successor General Partner; provided, that the successor investment manager and management agreement are approved by a Majority in Interest of the Limited Partners. (f) Following the removal of the General Partner in accordance herewith, the replaced General Partner and their Affiliates shall continue to be entitled to indemnification hereunder pursuant to, and in accordance with the standards of, Section 13.1. 17.3 Admission of a Successor General Partner. (a) The admission of a successor General Partner pursuant to Section 17.2 shall be effective only if and after the following conditions are satisfied: (i) the admission of such successor General Partner shall not adversely affect the treatment for United States federal income tax purposes of the Partnership; and (ii) any Person designated as a successor General Partner pursuant to Section 17.2 shall have become a party to, and adopted all of the terms and conditions of, this Agreement. (b) Amendments of this Agreement and of the Certificate which reflect the replacement of the General Partner by a successor General Partner shall be executed by the successor General Partner. (c) The designation of such Person as a successor General Partner shall occur, and for all purposes shall be deemed to have occurred, prior to the effective date of the removal of the General Partner. 17.4 Liabilities and Rights of a Replaced General Partner. Any General Partner which shall be replaced as General Partner shall, to the fullest extent permitted by law, and in such capacity, be free of any obligation or liability arising from and after such time. Such replacement shall not affect any rights, obligations or liabilities of such General Partner which shall arise prior to the effective date of such replacement and the rights and liabilities of the General Partner under Section 17.2(d). SECTION 18. MISCELLANEOUS PROVISIONS 18.1 Entire Agreement. Subject to Section 18.16, this Agreement (together with the representations and warranties of each Limited Partner set forth in any Subscription Agreement executed by such Limited Partner in connection with its admission to the Partnership) contains 67 CONFIDENTIAL CCG144 the entire understanding among the Partners and supersedes any prior written or oral agreement between them respecting the Partnership. Subject to Section 18.16, there are no representations, agreements, arrangements, or understandings, oral or written, among the Partners relating to the Partnership which are not fully expressed in this Agreement (or such Subscription Agreement). 18.2 Crescent Name and Mark. Notwithstanding any provision of this Agreement to the contrary, the Partners acknowledge that: (i) the "Crescent" name and mark are the property of the General Partner or its Affiliates; (ii) the Partnership's authority to use such name and mark may be withdrawn by the General Partner or its Affiliates without compensation to the Partnership if the General Partner is removed as such or ceases to serve in this capacity; (iii) no Partner other than the General Partner shall, by virtue of its ownership of an Interest in the Partnership, hold any right, title or interest in or to such name and mark; and (iv) following the dissolution and liquidation of the Partnership, all right, title and interest in and to such name and mark shall be held solely by the General Partner or its Affiliates. 18.3 Severability. In the event any provision of this Agreement is determined to be invalid or unenforceable, such provision shall be deemed severed from the remainder of this Agreement and replaced with a valid and enforceable provision as similar in intent as reasonably possible to the provision so severed, and shall not cause the invalidity or unenforceability of the remainder of this Agreement. 18.4 Counterparts; Binding upon Partners and Assignees. This Agreement may be executed in any number of counterparts and, when so executed, all of such counterparts shall constitute a single instrument binding upon all parties notwithstanding the fact that all parties are not signatory to the original or to the same counterpart. In addition, to the maximum extent permitted by applicable law, a Person shall become bound in accordance with the terms of this Agreement as an Assignee or Partner if such Person (or a representative authorized by such Person orally, in writing or by other action such as payment for an Interest in the Partnership) executes any other writing evidencing the intent of such Person to become a Partner or Assignee or if such Person or representative complies with the conditions for becoming a Partner or Assignee as set forth in this Agreement or any other writing and requests (orally, in writing or by other action such as payment for an Interest in the Partnership or acceptance of distributions from the Partnership) that the records of the Partnership reflect such admission or assignment. 18.5 Survival of Rights. Except as otherwise specifically set forth in this Agreement, the provisions of this Agreement shall inure to the benefit of and be binding upon each Partner and Assignee and such Partner's or Assignee's heirs, devises, legatees, personal representatives, successors, and assigns. 18.6 Survival of Obligations. The following obligations of the Partners shall survive the dissolution and termination of the Partnership: Section 18.15; (a) The obligation to return certain distributions as set forth in Section 13.2; (b) The indemnity for withholding taxes set forth in Section 12.4; (c) The obligation to maintain the confidentiality of information pursuant to .: CONFIDENTIAL CCG144 (d) The obligation to return certain indemnification payments as set forth in Section 13.1(d); and (e) Any obligation arising from a breach of this Agreement. 18.7 No Third Party Beneficiaries. Except as otherwise provided in Sections 5.2 and 13. 1, and with respect to a lender under a Subscription Facility in accordance with Section 9.13, the provisions of this Agreement are not intended to be for the benefit of or enforceable by any third party. Without limiting the foregoing, no third party shall, except as permitted by law and this Agreement, have any right to (i) enforce or demand enforcement of a Partner's Capital Commitment, obligation to return distributions, or obligation to make other payments to the Partnership as set forth in this Agreement or (ii) demand that the Partnership issue any Capital Call. 18.8 Notices. Each notice given under or relating to this Agreement shall be in writing and shall be delivered (a) in person, by registered or certified mail or by private courier or (b) by facsimile, e -mail or other electronic means, with such confirmation as the General Partner deems appropriate under the circumstances. All notices to any Limited Partner shall be delivered to such Limited Partner at its last known address as set forth in the records of the Fund. All notices to the General Partner shall be delivered to the General Partner at One Post Office Square, 36th Floor, Boston, MA 02109, Attention: John Bowman, with a copy to Dechert LLP, 1095 Avenue of the Americas, New York, New York 10036, Attention: Carl deBrito. Any Limited Partner may designate a new address for notices by giving written notice to that effect to the General Partner. The General Partner may designate a new address for notices by giving written notice to that effect to each of the Limited Partners. Unless otherwise specifically provided in this Agreement, a notice given in accordance with the foregoing clause (a) shall be deemed to have been effectively given three Business Days after such notice is mailed by registered or certified mail, return receipt requested, and one Business Day after such notice is sent by Federal Express or other one -day service provider, to the proper address, or at the time delivered when delivered in person or by private courier. Any notice to the General Partner or to a Limited Partner by facsimile, e -mail or other electronic means shall be deemed to have been effectively given when sent and confirmed in such manner as the General Partner deems appropriate under the circumstances. 18.9 Consents. Subject to the provisions of Section 18.5, all consents, agreements, elections, and approvals provided for or permitted by this Agreement or applicable law shall be in writing and signed copies thereof shall be retained with the books of the Partnership. No consent of all or a portion of the Limited Partners shall be effective until the General Partner has received notice thereof. 18.10 Governing Law. All questions with respect to the interpretation of this Agreement and the rights and liabilities of the Partners shall be governed by the laws of the State of Delaware as they are applied to contracts entered into and wholly performed upon in Delaware by residents of Delaware. To the extent permitted by the Delaware Act and other applicable law, the provisions of this Agreement governing the rights and obligations of the Partners shall supersede any contrary provisions of the Delaware Act or other applicable law. .• CONFIDENTIAL CCG144 18.11 Submission to Jurisdiction; Venue; Waiver of Jury Trial. Unless the General Partner otherwise agrees in writing, any legal action or proceeding with respect to this Agreement may be brought in the courts of the State of Delaware, and, by execution and delivery of this Agreement, each Partner hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the non - exclusive jurisdiction of the aforesaid courts. Each Partner hereby further irrevocably waives any claim that any such courts lack personal jurisdiction over it, and agrees not to plead or claim, in any legal action proceeding with respect to this Agreement in any of the aforementioned courts, that such courts lack personal jurisdiction over it. To the fullest extent permitted by applicable law, including ERISA (if applicable), any legal action or proceeding with respect to this Agreement by any Limited Partner seeking any relief whatsoever against the General Partner shall be brought only in the Chancery Court of the State of Delaware (or other appropriate state court in the State of Delaware), and not in any other court in the United States of America, or any court in any other country. Each Partner hereby irrevocably waives any objection that it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement brought in the aforesaid courts and hereby further irrevocably, to the extent permitted by applicable law, waives its rights to plead or claim and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. UNLESS THE GENERAL PARTNER OTHERWISE AGREES IN WRITING, EACH PARTNER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, INCLUDING ERISA (IF APPLICABLE), ANY RIGHT THAT SUCH PARTY MAY HAVE TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF THIS AGREEMENT. 18.12 Remedies for Breach of this Agreement. (a) Except as otherwise specifically provided in this Agreement, the remedies set forth in this Agreement are cumulative and shall not exclude any other remedies to which a Person may be lawfully entitled. (b) Without limiting the rights and remedies otherwise available to the Partnership or any Partner, each Partner hereby: (i) acknowledges that the remedy at law for damages resulting from its default under Section 3.2 (and 3.4) or 18.15 is inadequate; and (ii) consents to the institution of an action for specific performance of its obligations in the event of such a default. (c) Each Partner hereby acknowledges that certain provisions of this Agreement (including, without limitation, Sections 3.4 and 10.1) provide for specified penalties in the event of a breach of this Agreement by a Partner. Each Partner hereby agrees that the penalty provisions of this Agreement are fair and reasonable and, in light of the difficulty of determining actual damages, represent a prior agreement among the Partners as to appropriate liquidated damages. (d) In determining what action, if any, shall be taken against a Limited Partner in connection with such Limited Partner's breach of this Agreement, the General Partner shall seek to obtain the best result (as determined by the General Partner in its sole and absolute 70 CONFIDENTIAL CCG144 discretion) for the Partnership and the other Partners. Each Limited Partner hereby specifically agrees that, in the event such Limited Partner violates the terms of this Agreement, such Limited Partner shall not be entitled to claim that the Partnership or any of the other Partners are precluded, on the basis of any fiduciary duty arising in respect of such Limited Partner's status as a Limited Partner, from seeking any of the penalties or other remedies permitted under this Agreement or applicable law. (e) No failure or delay by any party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, any actual waiver shall be contained in a writing signed by the party against whom enforcement of such waiver is sought. 18.13 Construction of Agreement. The section headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. Unless the context clearly requires to the contrary, all references in this Agreement to designated "Sections" are to the designated Sections and other subdivisions of this Agreement. Except where the context clearly requires to the contrary: (i) instances of gender or entity - specific usage (e.g., "his" "her" "its" "person" or "individual" ) shall not be interpreted to preclude the application of any provision of this Agreement to any individual or entity; (ii) the word "or" shall not be applied in its exclusive sense; (iii) "including" shall mean "including, without limitation;" (iv) accounting terms not defined have the meaning assigned to them in accordance with GAAP; (v) words in the singular include the plural and words in the plural include the singular; and (vi) provisions apply to successive events and transactions. References to laws, regulations and other governmental rules shall mean such laws, regulations and rules as in effect at the time of determination (taking into account any amendments thereto effective at such time without regard to whether such amendments were enacted or adopted after the effective date of this Agreement) and shall include all successor laws, regulations and rules thereto. References to "$" or "dollars" shall mean the lawful currency of the United States. References to "Federal" or "federal" shall be to laws, agencies or other attributes of the United States (and not to any State or locality thereof). The meaning of the terms "domestic" and "foreign" shall be determined by reference to the United States. References to "days" shall mean calendar days. All dates and times specified in this Agreement are of the essence and shall be strictly enforced. 18.14 Counsel. Each Limited Partner hereby acknowledges and agrees that Dechert LLP and any other law firm retained by the General Partner in connection with the organization of the Partnership, the offering of Interests in the Partnership, the management and operation of the Partnership, or any dispute between the General Partner and any Limited Partner, is acting as counsel to the General Partner and as such does not represent or owe any duty to such Limited Partner or to the Limited Partners as a group in connection with such retention. Each Limited Partner further acknowledges that, in the absence of an explicit written agreement to such effect between Dechert LLP and the Limited Partner, Dechert LLP shall owe no direct duties to such Limited Partner. In the event that any dispute or controversy arises between any Limited Partner and the Partnership, or between any Limited Partner and the General Partner and /or any of its affiliates that Dechert LLP represents, then each Limited Partner agrees that Dechert LLP may represent the Partnership or such General Partner and /or its Affiliates in any such dispute or controversy to the extent permitted by the New York Lawyer's Code of Professional 71 CONFIDENTIAL CCG144 Responsibility or similar rules in any other jurisdiction, and each Limited Partner hereby consents to such representation. 18.15 Confidentiality. (a) General. Each Limited Partner shall keep, and shall cause the member of the Advisory Board that is the representative of such Limited Partner to keep, confidential and shall not disclose without the prior written consent of the General Partner any information with respect to the Partnership, any Related Investment Fund, any Portfolio Company or any Affiliate of any Portfolio Company, provided that a Limited Partner may disclose any such information (i) as has become generally available to the public other than as a result of the breach of this Section 18.15 by such Limited Partner or any agent or Affiliate of such Limited Partner, (ii) as may be required to be included in any report, statement or testimony required to be submitted to any municipal, state or national regulatory body having jurisdiction over such Limited Partner, (iii) as may be required in response to any summons or subpoena or in connection with any litigation, (iv) to the extent necessary to comply with any law, order, regulation or ruling applicable to such Limited Partner, (v) to its employees and professional advisors (including such Limited Partner's auditors and counsel and, for an ERISA Partner, such Persons as are necessary for the proper administration of the ERISA plan), so long as such Persons are advised of the confidentiality obligations contained herein and (vi) as may be required in connection with an audit by any taxing authority. The foregoing shall not limit the disclosure of the tax treatment or tax structure of the Partnership (or any transactions undertaken by the Partnership). As used in this Section 18.15, the term "tax treatment" refers to the purported or claimed U.S. federal income tax treatment and the term "tax structure" refers to any fact that may be relevant to understanding the purported or claimed U.S. federal income tax treatment, provided that, for the avoidance of doubt, (A) except to the extent otherwise established in published guidance by the U.S. Internal Revenue Service, tax treatment and tax structure shall not include the name of or contact information for, or any other similar identifying information regarding the Partnership, any Parallel Partnership or any of their investments (including the names of any employees or affiliates thereof) and (B) nothing in this Section 18.15 shall limit the ability of a Limited Partner to make any disclosure to such Limited Partner's tax advisors or to the U.S. Internal Revenue Service. (b) Fund of Funds Limited Partners. Notwithstanding the provisions of this Section 18.15, the General Partner agrees that each Limited Partner that is a "fund of funds" may disclose the following information to its investors: (i) the name of the Partnership, (ii) the amount of such Limited Partner's Capital Commitment to the Partnership, the amount of aggregate Capital Commitments of the Partnership and such Limited Partner's share of the Capital Commitments of the Partnership, (iii) the net asset value of such Limited Partner's Interest in the Partnership at the end of the fiscal quarter and (iv) the total amount of distributions that such Limited Partner has received from the Partnership and the amount of such Limited Partner's Capital Contributions, provided, that such investors are bound by a confidentiality provision substantially similar to the confidentiality provision contained in this Section 18.15 and the information contained in clauses (i) through (iv) above is required to be delivered by the Limited Partner to its investors pursuant to the governing documents of the Limited Partner or by applicable law, provided, further that such Limited Partner shall notify its investors that the disclosed information is confidential and that in connection with any disclosure of information 72 CONFIDENTIAL CCG144 by such fund of funds concerning the valuation of its Interest in the Partnership or any performance data regarding the Partnership, such Limited Partner shall provide a representation to its investors to the effect that such data (A) does not necessarily accurately reflect the current or expected future performance of the Partnership or the fair value of its Interest in the Partnership, (B) should not be used to compare returns among multiple private equity funds and (C) has not been calculated, reviewed, verified or in any way sanctioned or approved by the General Partner or the Investment Manager. For the avoidance of doubt, neither the Partnership nor the General Partner shall be required to provide any information to such Limited Partner that it is not otherwise required to provide to the Limited Partners pursuant to this Agreement or by applicable law. (c) Public Plan Partners. Notwithstanding the restrictions on disclosure set forth in Section 18.15(a), a Public Plan Partner that is subject to public disclosure laws, statutes, regulations or policies shall be permitted to disclose any information regarding the Partnership of the kind referred to in Section 18.15(b), and in addition shall be permitted to disclose any other information of the kind that such Limited Partner has identified to the General Partner in writing as information that such Limited Partner is required to disclose, or otherwise routinely discloses, but, to the extent otherwise permitted by law, only if and to the extent that the General Partner has previously consented in writing to the disclosure of such other information. In the event that any such Public Plan Partner is required to disclose information in addition to, or that differs from, that which is permitted to be disclosed or that the General Partner agreed, pursuant to the preceding sentence, may be disclosed, the provisions of Section 18.15(b) shall apply. In connection with any disclosure of information concerning the valuation of such Public Plan Partner's Interest in the Partnership or any performance data regarding the Partnership, such Public Plan Partner shall provide a representation to the effect that such data (i) does not necessarily accurately reflect the current or expected future performance of the Partnership or the fair value of its Interest in the Partnership, (ii) should not be used to compare returns among multiple private equity funds and (iii) has not been calculated, reviewed, verified or in any way sanctioned or approved by the General Partner or the Investment Manager. (d) Required Disclosures. In the event that a Limited Partner (or anyone to whom such Limited Partner has transmitted such information) becomes legally required (or reasonably determines that it is legally required) to disclose any such information, such Limited Partner shall, to the extent permitted by applicable law, promptly notify the General Partner in writing of such requirement prior to any such disclosure (other than disclosures to the (i) U.S. Securities and Exchange Commission in connection with Advisers Act audits and (ii) DOL in connection with ERISA- related fiduciary responsibility audits, in each case promptly after notice of the commencement of such audits) so that the General Partner, the Investment Manager and /or the Partnership may seek a protective order or other appropriate remedy. In the event that such protective order or other remedy is not obtained (unless such information is required to be disclosed pursuant to (ii), (iii) or (iv) of Section 18.15(a)), or such Limited Partner becomes subject to a request under section 552(a) of Title 5, United States Code (commonly known as the "Freedom of Information Act ") or any similar federal, state, county or municipal public disclosure law, whether foreign or domestic, with respect to which such Limited Partner is unable to prevail in protecting such confidential information, such Limited Partner agrees to return to the General Partner all confidential information such Limited Partner has received from the Partnership or the General Partner, including without limitation any confidential information 73 CONFIDENTIAL CCG144 related to Portfolio Companies and their activities, provided that such Limited Partner shall be permitted to retain confidential information to the extent necessary in order to comply with any law, order, regulation or ruling applicable to such Limited Partner. (e) General Partner Non - Disclosure. Notwithstanding any other provision of this Agreement, the General Partner shall have the right to keep confidential from Limited Partners for such period of time as the General Partner determines is reasonable (i) any information that the General Partner reasonably believes to be in the nature of trade secrets and (ii) any other information (A) the disclosure of which the General Partner believes is not in the best interest of the Partnership or could damage the Partnership or its investments or (B) subject to Section 18.18, that the Partnership, the General Partner, the Investment Manager or any of their Affiliates, or the officers, employees or directors of any of the foregoing, is required by law or by agreement with a third Person to keep confidential. 18.16 Side Letters. Notwithstanding any other provision of this Agreement or any Subscription Agreement, in addition to this Agreement and the Subscription Agreements, the Limited Partners hereby acknowledge and agree that the General Partner, on its own behalf or on behalf of the Partnership, may enter into a side letter to or other written agreement with any Limited Partner (and any limited partner of a Parallel Partnership) without the consent of any Person, including any other Limited Partner, that has the effect of establishing rights under, or altering or supplementing the terms of this Agreement and /or of the Subscription Agreement with respect to such Limited Partner. The Limited Partners hereby further agree that the terms of any such side letter to or other agreement with a Limited Partner (or a limited partner of a Parallel Partnership) shall govern with respect to that Limited Partner notwithstanding the provisions of this Agreement or any of the Subscription Agreements of the other Limited Partners. 18.17 No Political Contributions. No money or property of the Partnership shall be paid, used or offered (a) to aid any political party, committee or organization, or any other entity organized for political purposes, or (b) to aid any candidate for political office, or in connection with any election (including any referendum or proposed constitutional amendment) or for any political purpose whatever, or (c) for lobbying in connection with legislation or regulations. 18.18 Compliance with Laws; Disclosure. The General Partner may disclose information concerning the Partnership or the Limited Partners to the extent necessary to comply with applicable laws, including ERISA (if applicable), and regulations or policies, including any anti -money laundering or anti - terrorist laws or regulations or policies related thereto. Each Limited Partner hereby agrees to provide the General Partner, promptly upon request, all information that the General Partner reasonably deems necessary to enable the Partnership and the General Partner to comply with applicable laws, including ERISA (if applicable), and regulations or policies. 18.19 Determinations of the Partners. To the fullest extent permitted by law, including ERISA (if applicable), and notwithstanding any other provision of this Agreement or in any other agreement contemplated herein or applicable provisions of law or equity or otherwise, whenever in this Agreement a Partner is permitted or required to make a decision (a) in its "sole discretion" or "discretion" or under a grant of similar authority or latitude, such 74 CONFIDENTIAL CCG144 Partner shall be entitled to consider only such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Partnership or any other Person, or (b) in its "good faith" or under another express standard, such Partner shall act under such express standard and shall not be subject to any other or different standard. If any questions should arise with respect to the operation of the Partnership that are not specifically provided for in this Agreement or the Delaware Act, or with respect to the interpretation of this Agreement, the General Partner is hereby authorized to make a final determination with respect to any such question and to interpret this Agreement in good faith, and its determination and interpretation so made shall be final and binding on all parties. Notwithstanding any other provision of this Agreement, including the preceding provisions of this Section 18.19, the Partners shall comply with the implied contractual covenant of good faith and fair dealing. 18.20 Compliance with Anti -Money Laundering Requirements. Notwithstanding any other provision of this Agreement to the contrary, the General Partner, in its own name and on behalf of the Partnership, shall be authorized without the consent of any Person, including any Limited Partner, to take such action as are contemplated by the Subscription Agreements as it determines to be necessary or advisable to comply with any anti -money laundering or anti- terrorist laws, rules, regulations, directives or special measures. 75 CONFIDENTIAL CCG144 IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as of the date first written above. GENERAL PARTNER: CRESCENT DIRECT LENDING LEVERED, LLC By: Crescent Capital Group LP, its member IM Name: Title: LIMITED PARTNERS: Those Persons listed as Limited Partners on the Schedule of Partners By: CRESCENT DIRECT LENDING LEVERED, LLC, as attorney -in -fact By: Crescent Capital Group LP, its member 0 Name: Title: INITIAL LIMITED PARTNER (confirming its withdrawal): CRESCENT CAPITAL GROUP LP IM Name: Title: 76 CRESCENT CRESCENT CAPITAL GROUP LP FORM ADV PART 2A FIRM BROCHURE March 31, 2013 11100 Santa Monica Blvd., Suite 2000 Los Angeles, CA 90025 (310) 235 -5900 This Brochure provides information about the qualifications and business practices of Crescent Capital Group LP (including its relying advisers: TCW /Crescent Mezzanine Management III, LLC; TCW /Crescent Mezzanine Management IV, LLC; TCW /Crescent Mezzanine Management V, LLC; Crescent Credit Europe LLP; Crescent SBIC Management, LLC, collectively "Crescent ", "we" or "us "). If you have any questions about the contents of this Brochure, please contact us at (310) 235 -5900. The information in this Brochure has not been approved or verified by the United States Securities and Exchange Commission (the "SEC ") or by any state securities authority. Crescent may refer to itself as a "registered investment adviser." Registration with the SEC or with any state securities authority does not imply a certain level of skill or training. Additional information about us also is available on the SEC's website at www.adviserinfo.sec.gov. ITEM 2 MATERIAL CHANGES This Item 2 discusses only material changes made to this Form ADV Part 2A ( "Brochure ") since March 30, 2012, when Crescent Capital Group LP filed its most recent annual updating amendment to the Brochure. Persons previously receiving that Brochure, should consider the following: ITEM 10 - OTHER FINANCIAL INDUSTRY ACTIVITIES AND AFFILIATIONS Sepulveda Distributors LLC, a wholly -owned subsidiary of Crescent is registered with the SEC as a broker - dealer ( "Crescent Distributors "), and intends to complete its registration with the Financial Industry Regulatory Authority in 2013. Crescent Distributors will function as a "limited purpose" broker - dealer limited to offering the Funds sponsored by Crescent, and will not be engaged in broad distribution of securities, taking custody of customer assets or securities, or other customary functions of a broker - dealer. ITEM 3 TABLE OF CONTENTS ITEM1 COVER PAGE ................................................................................................................................... ..............................1 ITEM 2 MATERIAL CHANGES .................................................................................. ..............................2 ITEM 3 TABLE OF CONTENTS ................................................................................ ............................... 3 ITEM 4 ADVISORY BUSINESS ................................................................................. ............................... 5 ITEM 5 FEES AND COMPENSATION ...................................................................... ............................... 6 ITEM 6 PERFORMANCE -BASED FEES AND SIDE -BY -SIDE MANAGEMENT ..... ................7 ITEM 7 TYPES OF CLIENTS ....................................................................................... ..............................8 ITEM 8 METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS.................................................................................................................................................. ..............................8 ITEM 9 DISCIPLINARY INFORMATION ................................................................. .............................14 ITEM 10 OTHER FINANCIAL INDUSTRY ACTIVITIES AND AFFILIATIONS......................................................................................................................... .............................15 ITEM I I CODE OF ETHICS, PARTICIPATION OR INTEREST IN CLIENT TRANSACTIONS AND PERSONAL TRADING ....................................................... .............................16 ITEM 12 BROKERAGE PRACTICES ......................................................................... .............................18 ITEM 13 REVIEW OF ACCOUNTS ............................................................................ .............................19 ITEM 14 CLIENT REFERRALS AND OTHER COMPENSATION ......................... .............................19 ITEM15 CUSTODY ................................................................................................................. .............................19 ITEM 16 INVESTMENT DISCRETION ...................................................................... .............................19 ITEM 17 VOTING CLIENT SECURITIES .................................................................. .............................20 ITEM 18 FINANCIAL INFORMATION ..................................................................... .............................21 3 This Brochure may be provided to current or prospective investors in a private investment fund advised by Crescent (a "Fund "), together with the Fund's private placement memorandum, organizational documents and other related documents (collectively, the "Fund Documents "), prior to, or in connection with, an investor's consideration or execution of an investment in a Fund. This Brochure may subsequently be provided in the discretion of Crescent or, annually, at the request of an investor in a Fund. Investors and other recipients should be aware that while this Brochure may include information about a Fund, it is not a complete discussion of the features, risks or conflicts associated with the Fund. Each Fund's Fund Documents contain more complete information about the Fund, and the Fund Documents may be provided to current and eligible prospective investors only by Crescent or other authorized parties. The Brochure may also be provided to current or prospective investors in separately managed accounts. This Brochure should not be deemed to be a general solicitation and does not constitute an offer to sell or a solicitation of an offer to buy any type of interest in any entity advised by Crescent. This Brochure does not constitute, in any jurisdiction, a recommendation, inducement, invitation, offer, or solicitation for you to purchase or acquire any securities or assets, and no legal relationship is be created by this Brochure. This Brochure is not an offer of, or agreement to provide, advisory services directly to any recipient. Rather, this Brochure is designed solely to provide information about Crescent for the purpose of compliance with certain obligations under the Investment Advisers Act of 1940 ( "Adviser's Act ") and, as such, responds to relevant regulatory requirements under the Advisers Act, which may differ from the information provided in Fund Documents. To the extent that there is any conflict between discussions herein and similar or related discussions in any Fund Documents, the Fund Documents shall govern. No offer or solicitation in the Funds advised by Crescent will be made before the delivery of the Fund Documents. Potential investors should read carefully Fund's informational documents and legal agreements and to consult with their tax, legal and financial advisors before making a decision with respect to an investment managed by Crescent. 4 ITEM 4 ADVISORY BUSINESS Crescent Capital Corporation, a predecessor to the business of Crescent, was formed in 1991 as an asset management firm specializing in below- investment grade debt investments. In 1995, the principals and portfolio managers of Crescent Capital Corporation (including Mark L. Attanasio and Jean-Marc Chapus) joined and became the leveraged finance group of The TCW Group, Inc. ( "TCW "). Crescent, a Delaware limited partnership, was organized in May 2010 to be an independent, employee -owned asset management firm. Crescent was formed to transition the management of TCW's leveraged finance group and the asset management business of the group from TCW to Crescent. As a result of the transition, the team at Crescent, through sub - advisory, co- advisory and other arrangements with TCW Asset Management Company ( "TAMCO "), and TCW Investment Management Company ( "TIMCO "), continues to manage assets managed by TCW's leveraged finance group. TAMCO and TIMCO are wholly owned subsidiaries of TCW. For information regarding the direct owners, indirect owners, and executive officers of TAMCO and TIMCO, please see their respective Form ADV Part IA. Our general partner is Crescent Capital GP LLC ( "CCGP "). Jean-Marc Chapus and Mark L. Attanasio are limited partners of Crescent, and are the principal owners of both. Crescent offers investment advisory services primarily to institutional investors through private investments funds including structured vehicles (each, a "Fund" and collectively, the "Funds ") and separately managed accounts (the Funds and separately managed accounts are collectively referred to herein as the "Clients "). The Funds include closed -end and open -end limited partnerships, collateralized loan obligations ( "CLOs "), collateralized debt obligations ( "CDOs "), and other investment vehicles. Our investment advice to our Clients focuses on investment and credit management activities in one or more below- investment grade corporate debt strategies, including bank loans, public and private high -yield bonds, European alternative credit, and direct lending (collectively referred to as "Capital Markets "), mezzanine debt (which often includes minority - equity interests, collectively referred to as "Mezzanine Debt ") and middle- market distressed and special situations debt securities (referred to as "Special Situations" and collectively with Capital Markets and Mezzanine Debt, our "strategies "). Below - investment grade debt refers to debt rated or that would be likely to be rated, below BBB /Baa by one of the major rating agencies. Crescent manages assets for and markets primarily to "qualified purchasers" (as defined in the Investment Company Act of 1940 ( "Investment Company Act ")) and "accredited investors" (as defined in Regulation D under the Securities Act of 1933 ( "Securities Act ")). Investment guidelines and constraints for each Fund managed by Crescent are based upon the investment objectives and limitations of those Funds as stated in their Fund Documents. Crescent does not tailor its investment management to the individualized needs of any Fund investor. Separately managed accounts may be reasonably tailored to our investors' needs. Crescent and the managed account investor will work to determine appropriate investment objectives, policies and restrictions, including restrictions on investing in certain securities or types of securities, for each managed account. The terms negotiated between the investor and Crescent (with respect to this and other terms including Management Fees (as defined below)) will typically be memorialized in a written investment advisory agreement (each, an "Investment Management Agreement "). Certain Clients enter into arrangements with Crescent whereby Crescent provides investment or portfolio advice to Clients but Crescent does not exercise investment discretion. Crescent may or may not execute trades for non - discretionary clients at the client's direction. Crescent's fee in such non - discretionary arrangements is generally lower than its fee for providing investment advisory services where it has full discretion. As of December 31, 2012, we manage $9,849,374,085 of Client assets on a discretionary basis and $ 685,892,099 on a non - discretionary basis. ITEM 5 FEES AND COMPENSATION We are typically compensated for our services through the payment of base management fees that are expressed as a number of basis points of assets under management ( "Management Fees "). hl some situations we are also entitled to performance allocations (see Item 6, below). Management Fees for Funds are typically set at the Fund's first closing as set forth in the Fund Documents, and as such are generally non - negotiable. These fees are typically charged quarterly in advance and may be deducted directly from the Funds' assets. To the extent that fees are assessed or paid in advance by investors and their investment is terminated, Crescent would promptly credit any unearned portions of the fee in accordance with the Fund Documents. Management Fees for separately managed accounts may be negotiable. These fees are typically charged quarterly in arrears, and investors are typically billed for fees incurred. Crescent may also receive fixed -fee compensation for non - discretionary services which are generally lower than its fee for providing investment advisory services where it has full discretion. Compensation arrangements set forth in sub - advisory, co- advisory, and other arrangements between Crescent and TAMCO and TIMCO, each an SEC - registered investment adviser, (as discussed below in Item 10) have been privately negotiated, and are a percentage of the compensation received by TAMCO and TIMCO for the Clients for which Crescent provides sub - advisory services. Other Fees and Expenses Associated with Advised Accounts or Funds. Crescent's Clients and investors may bear certain other fees, expenses and costs (in addition to the Management Fees, payable to Crescent) which are incidental or related to the maintenance of a Client account or the buying, selling and holding of investments. These fees may include, but are not limited to: (1) custodial charges; (2) credit support fees; (3) brokerage fees; (4) fees for administrative services provided by third parties and/or affiliated entities; (5) commissions and other related transaction costs and expenses, such as deal fees, origination fees and deferred sales charges; (6) governmental charges, taxes and duties; (7) transfer fees, registration fees and other expenses associated with buying, selling or holding investments, such as wire transfer and electronic fund fees; (8) withholding taxes payable and required to be withheld by issuers or their agents; (9) legal fees incurred in connection with the discharge of it investment management responsibilities, (10) travel and entertainment expenses, (11) expenses incurred with respect to investor communication and conferences, (12) audit fees, (13) insurance expenses, and (14) fees associated with investments in pooled investment vehicles (the "Other Expenses "). Other Expenses are memorialized for Funds in the Fund Documents, and for separately managed accounts in the applicable Investment Management Agreement. For additional information about brokerage and other transaction costs, please refer to the section entitled "Brokerage Practices ". 11 ITEM 6 PERFORMANCE -BASED FEES AND SIDE -BY -SIDE MANAGEMENT From certain Clients, Crescent receives both Management Fees and a performance allocation while others may pay only Management Fees. This may result in us having a conflict of interest, in that we might have an incentive to favor Clients from whom we receive a performance allocation. We have adopted a Code of Ethics and policies and procedures, described in Item 11, below, designed to address this and other potential conflicts of interest. The fact that a performance allocation is paid to Crescent may create an incentive for us to make investments that are riskier or more speculative than would be the case in the absence of such allocation. Also, since the performance allocations paid by certain Clients may be based on realized and unrealized appreciation of assets, the performance allocation credited to Crescent may be greater than if such allocation were based solely on realized appreciation. Any performance -based compensation will be paid in accordance with Section 205(3) of the Advisers Act, or Rule 205 -3 thereunder. The nature and amount of compensation paid to Crescent by a Client or an investor may differ from that paid by other Clients or investors, even those investing in similar, competing or conflicting investments. Crescent faces a potential conflict of interest when (1) the actions taken on behalf of one Client or investor may impact other similar or different Clients or investors (e.g., because such Clients or investors have the same or similar investment strategies or otherwise compete for investment opportunities, have potentially conflicting investment strategies or investments, or have differing ability to engage in short sales and economically similar transactions) and (2) Crescent and its personnel have differential interests in such Client or investor accounts (i.e., expose Crescent or its related persons, including an affiliate of Crescent in its capacity as the general partner of a Fund, to differing potential for gain or loss through differential ownership interests or compensation structures, such as performance -based allocations) because Crescent may have an incentive to favor certain Clients or investors over others that may be less lucrative. Such conflicts may present particular concern when, for example, Crescent places or allocates the results of securities transactions that Crescent believes could more likely result in favorable performance, engages in cross trades or executes potentially conflicting or competing investments. Performance -based arrangements may also create an incentive for Crescent to recommend investments that are more risky or speculative than those that would be recommended under a different arrangement. Additionally, under a performance -based allocation structure, Crescent may benefit when capital gains are recognized and, because it determines when an investment is sold, Crescent controls the timing of the recognition of such capital gains. Crescent or its affiliates, or their respective principals or personnel, may also own a portion of Clients managed by Crescent. This may create a similar performance -based incentive to that mentioned above. To mitigate these conflicts, Crescent's policies and procedures seek to provide that investment decisions are made in accordance with the fiduciary duties owed to Clients and investors, without consideration of Crescent's (or Crescent's personnel's) other interests. 7 ITEM 7 TYPES OF CLIENTS Crescent primarily provides investment advisory services to private funds, special purpose or single investor funds, separate accounts and structured products. Crescent manages assets for and markets primarily to investors who are "qualified purchasers" (as defined in the Investment Company Act) and "accredited investors" (as defined in Regulation D under the Securities Act Securities Act "). Investors in Clients may be, but are not limited to, institutional investors (including insurance companies and public and private pension funds), trusts, estates, foundations, endowments and other charitable organizations, corporations and high net worth individuals or family offices. Fund investors typically invest in excess of $3 million, and separate accounts are generally in excess of $30 million. Client accounts will be of varying sizes. If a particular account size is too small, it is possible that a Client will be unable to participate in certain investments because of a lack of available investment capital. ITEM 8 METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS Our strategy focuses on Capital Markets, Mezzanine Debt and Special Situations. We typically seek to invest in companies that we believe to possess strong business fundamentals, including companies with leading competitive positions within well - defined markets, sustained profitability, predictable cash flows, talented management and sound managerial controls. In selecting investments, we are credit - focused, seeking first to preserve our invested capital. We analyze investments and attempt to manage risk for our investment strategies by employing a well - developed bottom -up and top -down credit research - focused process. This process includes a disciplined approach to obligor security selection and portfolio construction (including diversification among issuers and industries). We select investments by analyzing information from a variety of sources, which may include financial newspapers and magazines, inspections of corporate activities, research materials prepared by others, corporate rating services, annual reports, prospectuses, filings with the SEC, and company press releases. We may also obtain market information through internal research facilities and third party providers such as Bloomberg LP, Telerate, Dow Jones Capital, Reuters, wire services, and other publicly available sources. We may obtain additional information on issuers through due diligence meetings with issuers' management, court filings (including bankruptcy filings), independently prepared engineering and technical reports, interviews with suppliers, customers and competitors, third party analytical systems such as Salomon Brothers Yield Book, and audited financial reports. Additionally, we may gather information for analysis through discussions with third parties such as tenants, customers, surveyors, engineers, environmental consultants, local brokers, attorneys, investment bankers, published research, discussions with third party investment research professionals, potential co- investors, etc. We may use a variety of analytical methods on the data we collect, including fundamental, technical, and cyclical analyses. We also may analyze securities structures, country risk (including consideration of global trading relationships such as free trade agreements), political risks, monthly L-11 compliance statements, discounted cash flows, and proprietary data and analytical systems developed and maintained in- house. Further, we may perform credit analyses based upon debt payment history, term of debt, price, equity kickers, interest rate, market interest rates, general market conditions, industry conditions, and other similar factors. Once we have identified securities that meet our criteria, we may employ a variety of investment strategies, including long term purchases (securities held at least one year), short term purchases (securities sold within one year), and trading (securities sold within thirty days). For certain Clients, we may engage in transactions to mitigate currency risk and /or use borrowing or leverage. We may also seek to mitigate risk for certain Clients by using short sales and credit derivatives. Any investment includes the risk of loss and there can be no guarantee that a particular level of return will be achieved. While Crescent seeks to mitigate risks so that they are appropriate to the return potential for the strategy, it is usually not possible or desirable to fully mitigate risks. Clients and investors should understand that they could lose some or all of their investment and should be prepared to bear the risk of such potential losses, including through diversification. Our services are not intended to provide a complete investment program for investors. Crescent expects that the assets it manages do not represent all of an investor's assets. Investors are responsible for appropriately diversifying their assets to guard against the risk of loss. In addition, there can be no assurance that Crescent will draw down all or any particular portion of a Client's commitment where, for example, Crescent does not believe that investment opportunities available in the market place are prudent or appropriate for the Client. Generally the risks described below are increased the lower (i.e., the more "junior" or "subordinated ") an investment is in the capital structure of a portfolio company or the more illiquid an investment. This is particularly true for our Mezzanine and Special Situations strategies, which generally invest in lower levels of the capital structure, more levered capital structures, distressed investments or privately negotiated investments. With respect to comparative position in the capital structure, the terms "lower ", "junior" or "subordinated" refer to the priority of the claim in the event of bankruptcy. Specific risks applicable to a particular Client are enumerated in the Fund Documents or the Investment Management Agreements or related documents with respect to each Client. The investments we manage entail the following general risks, some or all of which may be applicable to Clients depending on the asset classes involved and investment guidelines of such Clients: Below- Investment Grade Instruments. The below- investment -grade securities, loans and other assets in which our Clients invest are considered to be speculative, and involve a high degree of financial risk due to the nature of their issuers' and obligors' leveraged capital structures. Such instruments are also commonly known as "junk bonds." These investments may be (i) unsecured and subordinated to substantial amounts of senior debt (all or a significant portion of which may be secured), (ii) may not be protected by financial covenants or limitations on additional debt, (iii) may have limited liquidity and (iv) may not be rated by a credit rating agency. These instruments are regarded as predominately speculative with respect to the issuer's continuing ability to meet principal and interest payments. Because investment in below- investment -grade instruments involves greater investment risk, achievement of the Client's investment objective will be more dependent on our analysis than would be the case if the Client were investing in higher - quality, investment grade instruments. In addition, below- investment -grade instruments in leveraged capital structures may be more susceptible to real or perceived adverse economic and issuer - specific developments than investment -grade instruments. Moreover, the secondary trading market for lower quality instruments is generally more volatile and may be less liquid than the market for investment grade securities. This potential lack of liquidity may make it more difficult to accurately value E7 certain portfolio investments. Crescent intends to monitor portfolio company performance; however, it is primarily the responsibility of a portfolio company's management to operate the portfolio company on a day -to -day basis, and there is no assurance that management will perform in accordance with our or a Client's expectations. Therefore, there can be no assurance that the investments will be able to generate returns for Clients or that the returns will be commensurate with the risks of investing. It is possible that Clients will incur losses up to a complete loss of capital. General Market and Credit Risks of Debt Securities. Debt portfolios are subject to credit and interest rate risks. "Credit risk" refers to the potential that an issuer or obligor will default in the payment of principal and/or interest on an instrument. Financial strength and solvency of an issuer or obligor are the primary factors influencing credit risk. hl addition, lack or inadequacy of collateral or credit enhancement for a debt instrument may affect its credit risk. Credit risk may change over the life of an instrument and securities or loans which are rated by rating agencies are often reviewed and may be subject to downgrade. "Interest rate risk" refers to the risks associated with market changes in interest rates. Interest rate changes may affect the value of a debt instrument indirectly (especially in the case of fixed rate securities) and directly (especially in the case of instruments whose rates are adjustable). In general, rising interest rates will negatively impact the price of a fixed rate debt instrument and falling interest rates will have a positive effect on price. Adjustable rate instruments may also react to interest rate changes in a similar manner although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules. Illiquid and Lone -Term Investments. An investment may have a contractual return that is not paid entirely in cash, but rather partially or wholly in -kind or as an accreting liquidation preference, thus lengthening the time before cash is received and increasing the Client's risk exposure to the portfolio company. While Crescent intends to achieve a targeted return for a given investment over time, other factors such as overall economic conditions, the competitive environment and the availability of potential purchasers or capital for the refinancing of the securities, may shorten or lengthen holding periods and some investments may take longer than initially planned from the initial investment date to achieve a realization. It is anticipated that there will not be a public market for a substantial portion of the securities held by Clients. Therefore if a Client determines or is required to liquidate all or a portion of its portfolio positions quickly, that Client may realize significantly less than the value at which its investments were previously recorded. Price Volatility Risk. The value of a Client's investment portfolio will change as market prices of its investments increase or decrease due to among other things credit risk, interest rate risk or changes in market factors (market risk). Generally, the longer a Client's portfolio duration, the greater the degree of price fluctuation. Also, more concentrated portfolios have greater potential volatility. Below- investment- grade securities are more susceptible to market risk and general economic factors than investment -grade securities, and, thus, typically bear increased price volatility risk. Foreign Investing and Currency Exchange Risk. Foreign investments may involve greater risks than domestic investments because a Client's performance may depend on factors other than the performance of a particular company, including the following: the unpredictability of international trade patterns; the possibility of governmental actions adverse to business generally or to foreign investors in particular; imposition or modification of controls on foreign currency exchange, repatriation of proceeds or foreign investment; the imposition or increase of withholding taxes on income and gains; price volatility; absence of uniform accounting, auditing and financial reporting standards, practices and disclosure requirements and less government supervision and regulation which may result in lower quality information being available and less developed corporate laws regarding fiduciary duties and the 10 protection of investors; governmental influence on the national and local economies; and fluctuations in currency exchange rates. In addition, collateral that is located outside of the United States may be subject to various laws enacted for the protection of creditors, depending on the country and the issuer, which laws may differ substantially from those applicable in the United States. The risks described in this paragraph with respect to foreign investments apply to an even greater extent to investments in emerging markets. Furthermore, foreign investments may be denominated in currencies other than the U.S. dollar, and hence the value of such investments will depend in part on the relative strength of the U.S. dollar. Clients may be affected favorably or unfavorably by currency control regulations or changes in the exchange rate between foreign currencies and the U.S. dollar. Foreign currency fluctuations could result in losses on investments in securities of foreign issuers. This might occur, for example, if the value of the acquired foreign securities declines and any debt incurred to purchase the investments is repaid by the Client from assets not otherwise available for foreign investment. Such a circumstance could be compounded if, as the result of foreign currency fluctuations, the amount in dollars required to repay indebtedness denominated in a foreign currency exceeds the amount in dollars actually borrowed to make the investment. There can be no assurance as to the success of any hedging operations that we may implement. Bridge Investment. Investments may include bridge financing to portfolio companies. While a bridge financing is outstanding, the bridge lender bears the risk of changes in the capital markets. A portfolio company's inability to refinance a bridge loan may result in a Client retaining a long -term investment in a junior security or having its bridge loan converted to equity. Derivatives. Clients may hold or write various derivative instruments, including options, forward contracts, swaps and other derivatives, which may be volatile and speculative. Certain positions may be subject to wide and sudden fluctuations in market value, with a resulting fluctuation in the amount of profits and losses. Use of derivative instruments presents various risks. When derivatives are used for hedging purposes, an imperfect or variable degree of correlation between price movements of the derivative instrument and the underlying investment sought to be hedged may reduce the effectiveness of the hedge or result in a loss. Derivative instruments, especially when traded in large amounts, may not be liquid in all circumstances, so that in volatile markets Clients may not be able to close out a position without incurring a loss. In addition, daily limits on price fluctuations and speculative position limits on exchanges on which Clients may conduct transactions in certain derivative instruments may prevent prompt liquidation of positions, subjecting Clients to potential losses. Derivative instruments that may be purchased or sold by Clients may include instruments not traded on an exchange. Over - the - counter options, unlike exchange- traded options, are two -party contracts with price and other terms negotiated by the buyer and seller. The risk of nonperformance by the obligor on such an instrument may be greater, and the ease with which Clients can dispose of or enter into closing transactions with respect to such an instrument may be less, than in the case of an exchange- traded instrument. In addition, significant disparities may exist between "bid" and "ask" prices for derivative instruments that are not traded on an exchange. Derivative instruments not traded on exchanges are also not subject to the same type of government regulation as exchange- traded instruments, and many of the protections afforded to participants in a regulated environment may not be available in connection with such transactions. Certain legal, tax and market uncertainties present risks when entering into credit derivatives. There is currently little or no case law or litigation characterizing credit derivatives, interpreting their provisions or characterizing their tax treatment. In addition, additional regulations and laws may apply to credit derivatives that have not heretofore been applied. There can be no assurance that future decisions construing similar provisions to those in any credit derivative or other related documents or additional regulations and laws will not have a material adverse effect on Clients. 11 Credit Default Swaps. Certain Clients may enter into credit default swaps, which are a type of derivative instrument. While the International Swaps and Derivatives Association, Inc. (ISDA), has published and supplemented the Credit Derivatives Definitions in order to facilitate transactions and promote uniformity in the credit default swap market, the credit default swap market is expected to change and the Credit Derivatives Definitions and terms applied to credit derivatives are subject to interpretation and further evolution. Past events have shown that the views of market participants may differ as to how the Credit Derivatives Definitions operate or should operate. The Credit Derivatives Definitions are expected to continue to evolve. There can be no assurances that changes to the Credit Derivatives Definitions and other terms applicable to credit derivatives generally will be predictable or favorable to Clients. Amendments or supplements to the Credit Derivatives Definitions that are published by ISDA will only apply to credit default swaps of Clients, if any, if Clients and the swap counterparty agree to amend any such credit default swap to incorporate such amendments or supplements. Markets in different jurisdictions have also already adopted and may continue to adopt different practices with respect to the Credit Derivatives Definitions. Furthermore, the Credit Derivatives Definitions may contain ambiguous provisions that are subject to interpretation and may result in consequences that are adverse to Clients. Counterparty and Custodial Risk. To the extent Clients invests in swaps, "synthetic" or derivative instruments, repurchase agreements, certain types of options or other customized financial instruments or, in certain circumstances, non -U.S. securities, Clients take the risk of non - performance by the other party to the contract. This risk may include the credit risk of the counterparty and the risk of settlement default. This risk may differ materially from those entailed in exchange- traded transactions that generally are supported by guarantees of clearing organizations, daily marking -to- market and settlement, and segregation and minimum capital requirements applicable to intermediaries. Transactions entered directly between two counterparties generally do not benefit from such protections and expose the parties to the risk of counterparty default. Insolvency Considerations. The information in this and the following risk factor ( "Participation on Creditors' Committees and Boards of Directors ") is applicable with respect to U.S. obligors. Because Crescent invests client accounts in loans and debt securities, various laws enacted for the protection of creditors may apply to instruments held by Clients. The loans of obligors not organized or incorporated in the United States will be subject to laws enacted in their home countries for the protection of creditors, which may differ from and be less favorable than the laws described above. If in a lawsuit brought by an unpaid creditor or representative of creditors of an obligor (such as a trustee in bankruptcy) under a loan, a court were to find that the obligor did not receive fair consideration or reasonably equivalent value for incurring the indebtedness constituting the loan and, after giving effect to such indebtedness, the obligor (1) was insolvent, (2) was engaged in a business for which the remaining assets of such obligor constituted unreasonably small capital or (3) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature, then the court could determine to invalidate, in whole or in part, such indebtedness as a fraudulent conveyance, to subordinate such indebtedness to existing and /or future creditors of the obligor, or to recover amounts previously paid by the obligor in satisfaction of such indebtedness. There can be no assurance as to what standard a court would apply in order to determine whether the obligor was "insolvent" after giving effect to the incurrence of the indebtedness constituting the loan or that, regardless of the method of valuation, a court would not determine that the obligor was "insolvent" upon giving effect to such incurrence. In addition, in the event of the insolvency of an obligor of a loan, payments made on such loan could be subject to avoidance as a "preference" if made within a certain period of time (which may be as long as one year) before insolvency. In general, if payments on an obligation are avoidable, whether as fraudulent conveyances or preferences, such payments can be recaptured from the initial recipient (such as Clients). Participation on Creditors' Committees and Boards of Directors. Representatives of Crescent, on behalf of Clients, may participate on committees formed by creditors to negotiate with the management 12 of financially troubled companies that may or may not be in bankruptcy. Crescent may also seek to negotiate directly with debtors with respect to restructuring issues. hl the situation where a representative of Crescent chooses to join a creditors' committee, the representative would likely be only one of many participants, each of whom would be interested in obtaining an outcome that is in its individual best interest. There can be no assurance that the representative would be successful in obtaining results most favorable to our Clients in such proceedings, although the representative may incur significant legal fees and other expenses in attempting to do so. As a result of participation by the representative on such committees, the representative may be deemed to have duties to other creditors represented by the committees, which might thereby expose Clients to liability to such other creditors who disagree with the representative's actions. It is possible that Crescent or its affiliates will be represented on the boards of some of the companies in which Clients make investments. Such representation may have the effect of impairing the ability of Crescent to sell Clients' related investments when, and upon the terms, they might otherwise desire, including as a result of applicable securities laws. If Crescent or any of Crescent's affiliates or employees earns compensation with regard to any such board representation, such compensation will generally be remitted to the relevant Clients. See also Item 11. Availability of Suitable Investments; Competition. The identification of attractive investment opportunities is difficult and highly uncertain. There can be no assurance that we will be able to invest a Client's capital fully or that suitable investment opportunities will be identified. Crescent often seeks to invest in companies with relatively short operating histories and lower revenues or companies that have undergone leveraged buyouts or recapitalizations. The success of Client portfolios will depend on the ability of Crescent to originate, recommend, structure, identify and consummate suitable investments in a highly competitive environment, to improve the operating performance of portfolio companies, and to dispose of investments at a profit. Crescent competes with the public and private debt and equity markets and with other investors, including other asset management firms, mezzanine funds, private equity funds, hedge funds, direct investment firms, business development companies and merchant banks for investment opportunities. Investments in Cash or Cash - Equivalent Investments. Crescent may invest a portion of Clients' assets in cash or cash equivalents when, for example, (1) Clients are initially funded or additional funding occurs and targeted investments have not been identified or purchased, (2) other investments are unattractive, (3) providing a reserve for anticipated obligations of Clients or (4) for other temporary purposes. Although such practices may assist in the preservation of capital, the assumption of cash positions may also reduce potential investment returns especially for Clients who pay Management Fees on cash or cash equivalents. Cash investment practices may be expected, therefore, to affect total investment performance of Clients' portfolios. Use of Leverage. Clients may borrow or otherwise use leverage to increase profit potential while increasing risk of loss and volatility. Leverage may take the form of borrowed money, uncovered short positions, uncovered put options, derivative instruments that are inherently leveraged, and other forms of direct and indirect borrowings. If the interest expense on borrowings were to exceed the net return on the portfolio of securities purchased with borrowed funds, returns will be lower than if the Client were not leveraged. Additionally, the use of leverage, while providing the opportunity for higher returns, also increases volatility and the risk of loss. We may have a conflict of interest in causing a Client to incur leverage or determining to de- lever, because we may earn fees on the leverage and /or have a performance allocation without the associated risk of loss of our invested capital. Litigation. To the extent that a Client is in a position to exercise any significant influence over a portfolio company, there could be a heightened risk of litigation (e.g., claims that the Client is a controlling person and thus liable for securities law violations of the portfolio company). The expense of defending against claims by third parties and paying any amounts pursuant to settlements or judgments, absent fraud, 13 willful misconduct or gross negligence by Crescent, would be borne by relevant Clients or their investors and would reduce net assets or could require investors in Clients to return the Clients' distributed capital and earnings. Crescent and others are indemnified in connection with such litigation, subject to certain conditions. In connection with the disposition of an investment in a portfolio company, Client may be required to make representations about the business and financial affairs of a portfolio company typical of those made in connection with the sale of any business, or may be responsible for the contents of disclosure documents under applicable securities laws. Clients also may be required to indemnify the purchasers of such investments or underwriters, to the extent that any such representations or disclosure documents turn out to be inaccurate. These arrangements may result in contingent liabilities to Clients. In addition, in the capacity as a member of the boards of directors of portfolio companies, a representative of Clients may become subject to fiduciary or other duties which may adversely affect Clients. For example, Clients may be unable to sell portfolio securities if a representative of Crescent is in possession of inside information relating to the issuer of the portfolio securities. Clients also may be limited to the same "window periods" for sales of public securities of a portfolio company as are directors of the portfolio company if a representative of Crescent is on the board of directors of the portfolio company. Business and Regulatory Risks. Legal, tax and regulatory changes in the U.S. and outside the U.S. could occur during the term of Clients' engagement of Crescent that may adversely affect Clients. The regulatory environment for private investment vehicles is evolving, and changes in such regulation may adversely affect the value of investments held by Clients. In addition, the securities and futures markets are subject to comprehensive statutes, regulations and margin requirements. The SEC, other regulators and self - regulatory organizations and exchanges are authorized to take extraordinary actions in the event of market emergencies. Due to the recent events in the markets, regulatory change may be more likely. Legal, tax, and regulatory changes, as well as judicial decisions, could adversely affect the implementation of Clients' investment strategy. The effect of any future regulatory change on Clients could be substantial and adverse. Alternative U.S. or non -U.S. rules or legislation regulating Clients or Crescent may be adopted, and the possible scope of any rules or legislation is unknown. There can be no assurances that Clients or Crescent will not in the future be subject to regulatory review or discipline. The effects of any regulatory changes or developments on Clients may affect the manner in which it is managed and may be substantial and adverse. ITEM 9 DISCIPLINARY INFORMATION Not Applicable. 14 ITEM 10 OTHER FINANCIAL INDUSTRY ACTIVITIES AND AFFILIATIONS Sepulveda Distributors LLC, a wholly -owned subsidiary of Crescent is registered with the SEC as a broker - dealer ( "Crescent Distributors "), and intends to complete its registration with the Financial Industry Regulatory Authority in 2013. Crescent Distributors will function as a "limited purpose" broker - dealer limited to offering the Funds sponsored by Crescent, and will not be engaged in broad distribution of securities, taking custody of customer assets or securities, or other customary functions of a broker - dealer. Officers or employees of Crescent may from time to time be members of the boards of directors of publicly -held companies which may be permitted investments of various investment strategies offered by Crescent. In these cases, Crescent takes steps such as establishing information barriers or placing the security in question on a restricted list, which may limit or preclude the purchase or sale of such securities for Crescent's Clients. As a part of the transition of the TCW leveraged finance group's management and business conducted thereby to Crescent, Crescent entered into various sub - advisory, co- advisory and other arrangements with certain affiliates of TCW, including TAMCO and TIMCO, with respect to various private investment funds and investors, as Clients. Under such arrangements, certain employees of Crescent also serve as dual employees of TAMCO, TIMCO or their affiliates (including Trust Company of the West), for purposes of providing advice to Clients. Additionally, TCW -WLA JV Venture LLC ( "TCW- WLA "), an SEC - registered investment adviser which is a joint venture between TAMCO and Crescent, acts in an advisory role to certain Clients. TCW -WLA is staffed primarily with Crescent personnel. Services provided by Crescent and /or TCW -WLA, and related compensation arrangements are set forth in sub - advisory or sub - delegation and other arrangements between or among TIMCO, TAMCO, Crescent, TCW -WLA. In most cases, Clients serviced by Crescent or TCW -WLA were previously serviced by the relevant Crescent personnel when the Crescent management team was TCW's leveraged finance group and such persons were employed by TAMCO or TIMCO. Crescent receives significant economic benefits from these arrangements and has a substantial economic interest in TCW -WLA. Activities undertaken by Crescent personnel through Crescent or TCW -WLA are subject to Crescent's and TCW -WLA`s compliance policies and procedures in order to mitigate any conflicts that may exist as a result of differential pecuniary interests with respect to these Clients. TAMCO, TIMCO and their affiliates (other than TCW -WLA) are not "related persons" of Crescent Capital Group LP, however they are related persons to certain of the relying advisers. We have also formed an adviser affiliate, Crescent Credit Europe LLP, an English limited liability partnership ( "CCE "), which may provide advice and /or research to us. CCE is authorized to provide advice to Crescent with respect to Client investment from the Financial Services Authority of the United Kingdom. 15 ITEM 11 CODE OF ETHICS, PARTICIPATION OR INTEREST IN CLIENT TRANSACTIONS AND PERSONAL TRADING Crescent has adopted a Code of Ethics (the "Code ") that sets forth the standards of ethical and business conduct expected of our personnel and addresses conflicts that may arise from personal trading by personnel. The Code, among other things, requires compliance with the federal securities laws, reflects the fiduciary responsibilities of Crescent and its advisory personnel, prohibits certain personal securities transactions, requires personnel to periodically report their personal securities transactions and to pre -clear certain securities transactions and addresses prevention of the misuse of material nonpublic information. Pertinent provisions are discussed below. A copy of the Code will be provided to any Client, prospective Client or investor upon request, by calling the telephone number on the front of this brochure. Transaction Restrictions. The Code includes restrictions on investment transactions in which Crescent's officers, directors and certain other persons have a beneficial interest to avoid any actual or potential conflict or abuse of their fiduciary position. The Code permits personnel subject to the Code to invest in securities, but contains several restrictions and procedures designed to eliminate conflicts of interest including: (a) pre - clearance of non - exempt personal investment transactions; (b) quarterly reporting of personal securities transactions and initial and annual reporting of securities holdings; (c) a prohibition against personally acquiring securities in an initial public offering, entering into uncovered short sales and writing uncovered options; (d) a ten day "black out period" prior to or subsequent to a Client transaction during which portfolio managers are prohibited from making certain transactions in securities which are being purchased or sold by a Client of such manager; (e) a prohibition, with respect to certain investment personnel, from profiting in the purchase and sale, or sale and purchase, of the same (or equivalent) securities, within 60 calendar days; (f) a prohibition against acquiring any security which is subject to firm wide or investment group restriction; (g) a prohibition of the purchase of securities offered in a hedge fund, other private placement or limited offering (other than certain affiliated- sponsored offerings) except with prior approval of designated officers; (h) a prohibition of a purchase, without prior disclosure to a designated officer, on behalf of a Client through a private placement of a security of an issuer or its affiliate, if a member of the investment group purchasing the security has a beneficial interest in the issuer or affiliate; Parallel Investments. Crescent may recommend, buy or sell investments in issuers in which it or related persons may also purchase, hold or sell other investments. These investments may be either publicly traded or private placements. The Code establishes various procedures with respect to investment transactions in which Crescent's related persons have a beneficial interest that are designed to reduce the potential for conflicts of interest. Investing In Different Classes Of The Capital Structure In Distressed Entities. Because Crescent has many investment strategies and different portfolio managers operating independently of each other, different managers purchasing and selling securities in the same issuer is not uncommon. Those securities may be of the same class or different classes (and thus different semorities) of the issuer's capital structure. There may also be instances where portfolio managers invest in one class of an issuer for some Clients and in other classes of the same issuer for other Clients. hl the healthy entity situation, those 16 overlaps are not an area of significant concern, because the potential for conflict generally is not substantial, and any strict prohibition would reduce investment opportunities to the detriment of our Clients. This is not the case, however, for a distressed entity where the interests of different Clients may not necessarily be parallel. Crescent has established special procedures that apply when purchasing securities of a distressed entity or when a healthy entity becomes a distressed entity. A portfolio manager must consult Crescent's Management Committee and Chief Compliance Officer: (a) prior to purchasing securities of a distressed entity (whether as an initial holding or subsequent additional instruments) when another Crescent Client owns securities in the same distressed entity, (b) upon becoming aware of a potential conflict between two or more Clients holding different securities in the same distressed entity, or (c) upon deciding to take an active role in a workout or restructuring that could create a conflict. Insider Trading. The Code includes a policy statement on insider trading that provides generally that no officers, directors or employees of Crescent may: (a) buy or sell a security either for themselves or others while in possession of material non - public information about the company, or (b) communicate material non - public information to others who have no official need to know. The policy statement provides guidance about what is material non - public information, lists common examples of situations in which Crescent personnel could obtain that information, and describes Crescent's procedures regarding securities maintained on a "Restricted Securities List" and for establishing information barriers. It also identifies parties to contact with questions in connection with the requirements of the policy statements. Crescent's officers or employees may from time to time be members of the boards of directors of publicly -held companies which may be permitted to make investments in the various investment strategies that we offer. In such cases, Crescent takes the steps described in Item 10, above. Gift and Personal Activity Restrictions. There is a policy governing gifts, payments and preferential treatment that includes an approval process for specific categories of gifts and entertainment provided to Crescent employees or given by Crescent's employees. There is a policy governing employees' activities outside of their employment with Crescent, including outside employment, service as director or in a similar capacity, fiduciary appointments, and participation in public affairs and service as treasurer of clubs, houses of worship, and lodges. Additionally, there is a policy on political activities and contributions, containing general rules governing contributions and solicitation, responsibility of individuals for personal contribution limits, pre - clearance of certain contributions to state and local candidates, and rules for political activities on Crescent's premises or using Crescent resources. Confidentiality and Reporting. There are also confidentiality requirements, and a policy stating that Crescent employees are required to report illegal activity or activities not in compliance with Crescent's formal written policies and procedures, including the Code. The Code provides for exemptive relief from certain of its requirements, upon application to and approval by designated personnel. The federal securities laws impose liabilities under certain circumstances on persons who act in good faith, and therefore nothing in a Client's investment management agreement with Crescent shall in any way constitute a waiver or limitation of any rights which the Client may have under any federal securities laws. Crescent also has policies and procedures regarding interests in Client transactions. 17 ITEM 12 BROKERAGE PRACTICES Crescent seeks to achieve best execution when trading. Other goals include timely, fair and cost effective executions, fairness to Clients, both in priority of order execution and in the allocation of the price obtained in execution of trades, and compliance with Client trading - related mandates and investment restrictions. When appropriate under our discretionary authority and consistent with our duty to seek best execution, we may execute through broker - dealers who provide brokerage and unsolicited research services. In executing fixed income trades, such factors as price (including the applicable dealer spread), size of order, and difficulty of execution are also taken into account. Transactions are not always executed at the lowest available commission or commission equivalent, and we may effect transactions which cause the Client to pay more than another broker - dealer would have charged if we determine that the additional cost is reasonable in relation to the value of the services provided to Crescent. Crescent's trading and brokerage policies prohibit the directing of commissions generated from Clients' brokerage transactions to pay for Client referrals, and also prohibit the making of any recommendation that "credit" be given to particular individual brokers within a brokerage firm. Persons responsible for the selection of brokers - dealers to effect the portfolio securities transactions of a fund shall not consider a broker - dealer's promotion or sale of fund shares or interests when making the selection. However, Crescent may, when consistent with these policies and the duty to seek best execution, execute transactions through broker - dealers who also refer clients or place fund shares. We may also, consistent with these policies and the duty to seek best execution, execute transactions through a related person or a broker - dealer in which one of our clients or our related persons have a financial interest. Occasionally a Client may instruct us to direct a certain amount of trading volume to a specific broker - dealer. Historically, this has been very limited and has not had any significant impact on broker selection. It is our policy to require legal review and review by our compliance department of any such request prior to agreeing to direct transactions. Clients who direct brokerage should understand that, in so doing, they are limiting our ability to choose brokers and dealers on the basis of execution cost and quality, and that directed transactions may be ineligible for inclusion in block trades and may wait behind discretionary trades. This may cost Clients money through increased transaction costs and less favorable prices on executed trades. In an effort to achieve efficiencies in execution and reduce trading costs, Crescent frequently aggregates securities transactions on behalf of a number of Clients at the same time. This is generally referred to as a "block trade ". When we execute block trades, we allocate trades among accounts using procedures that we consider fair and equitable. Participation of an account in the allocation is based on such considerations as investment objectives, guidelines and restrictions, availability of cash, amount of existing holdings (or substitutes) of the security in the accounts, investment horizon and directed brokerage instructions, if applicable. Crescent may execute securities transactions alongside or interspersed between block orders when we believe that such execution will not interfere with our ability to exclude trades for accounts that direct brokerage or that are managed in part for tax considerations from block trades. In some cases, various forms of proportionate allocation are used, and in other cases, alternative allocation processes are used. However, it is recognized that considerations such as lot size, existing or targeted account weightings in particular investments, account size, cash availability, diversification requirements and investment objectives, restrictions and time horizons may result in more particularized allocations. In connection with multi- account purchases or sales, and in other circumstances if practicable, if multiple trades for specific security are made with the same broker in a single day, those securities are allocated to Client accounts based on a weighted average purchase or sale price. 18 ITEM 13 REVIEW OF ACCOUNTS Our Accounts are divided among investment professionals according to the investment strategy of the portfolio. Portfolios are typically monitored and reviewed by the investment personnel who handle the strategy on an ongoing basis. The details of the monitoring vary based on the nature of the investment strategy. Separately, our investment operations, compliance and risk functions perform monitoring and review, including daily transaction reviews, for marketable securities strategies. In addition, investment activities for certain alternative investment strategies are reviewed periodically. Participants in the review may include senior portfolio management personnel from the investment strategy as well as members of risk, legal and compliance teams ITEM 14 CLIENT REFERRALS AND OTHER COMPENSATION Crescent periodically pays third parties a fee or compensation for referral of an investor. The third party is required to provide prospective investors with a current copy of Crescent's written disclosure statement and the solicitor's written disclosure statement and Crescent will obtain a signed and dated acknowledgement from each referred investor of the receipt of such disclosure statements, as required by Rule 206 -4(3) of the Advisers Act. Many of Crescent's investors engage the services of consultants in connection with their investments and investment managers. Compensation paid by Crescent to those consultants would typically be disclosed as indicated by the paragraph above, as required by law. Crescent may also pay from time to time a portion of the cost of conferences, seminars, and other activities Crescent attends that are sponsored by the investors' consultants. ITEM 15 CUSTODY Because Crescent serves as general partner of certain Funds, Crescent is deemed to have "custody" over the Funds within the meaning of Rule 206(4) -2 under the Advisers Act. Each investor in a Fund receives audited financial statements within 120 days following the Fund's fiscal year end. You should review these statements carefully. If you have invested in a Fund and have not received audited financial statements timely, please contact us. Our contact information appears on the cover page of this Brochure. ITEM 16 INVESTMENT DISCRETION Crescent has discretionary trading authority for most Clients for which it is the investment adviser. Our investment decisions and advice with respect to Clients' accounts are subject to the Clients' investment objectives and guidelines, as established by the Clients and set forth in the applicable Fund Documents or Investment Management Agreement. Also see Item 4 for a further description of our authority over Client accounts. 19 ITEM 17 VOTING CLIENT SECURITIES If Crescent has responsibility for voting proxies in connection with its investment advisory duties, or has the responsibility to specify to an agent how to vote the Client's proxies, we exercise such voting responsibilities for our Clients through the corporate proxy voting process. We believe that the right to vote proxies is a significant asset of our Clients' holdings. hl order to provide a basis for making decisions in the voting of proxies for its Clients, Crescent has adopted proxy voting guidelines (the "Guidelines ") and related procedures. Crescent also uses outside proxy voting services (each an "Outside Service ") to help manage the proxy voting process. The Outside Service facilitates our proxy voting according to the Guidelines (or, if applicable, according to guidelines submitted by our Clients) and helps maintain our proxy voting records. All proxy voting and record keeping by Crescent is dependent on the timely provision of proxy ballots by custodians, clients and other third parties. Under specified circumstances described below involving potential conflicts of interest, the Outside Service may also be requested to help decide certain proxy votes. In certain limited circumstances, particularly in the area of structured finance, Crescent may enter into voting agreements or other contractual obligations that govern the voting of shares. In the event of a conflict between any contractual requirements and the Guidelines, Crescent will vote in accordance with its contractual obligations. Proxy Voting Philosophy. The Guidelines provide a basis for making decisions in the voting of proxies for Clients. When voting proxies, Crescent's utmost concern is that all decisions be made in the best interests of the Client, with the goal of maximizing the value of the Client's investments. With this goal in mind, the Guidelines cover various categories of voting decisions and generally specify whether Crescent will vote for or against a particular type of proposal. Crescent's underlying philosophy, however, is that its portfolio managers, who are primarily responsible for evaluating the individual holdings of Crescent's Clients, are best able to determine how best to further Client interests and goals. The portfolio managers may, in their discretion, take into account the recommendations of Crescent management, , and the Outside Service. International Proxy Voting. While Crescent utilizes the Guidelines for both international and domestic portfolios and Clients, there are some significant differences between voting U.S. company proxies and voting non -U.S. company proxies. For U.S. companies, it is relatively easy to vote proxies, as the proxies are automatically received and may be voted by mail or electronically. hl most cases, the officers of a U.S. company soliciting a proxy act as proxies for the company's shareholders. For non -U.S. companies, however, it is typically both difficult and costly to vote proxies. The major difficulties and costs may include: (i) appointing a proxy; (ii) knowing when a meeting is taking place; (iii) obtaining relevant information about proxies, voting procedures for foreign shareholders, and restrictions on trading securities that are subject to proxy votes; (iv) arranging for a proxy to vote; and (v) evaluating the cost of voting. Furthermore, the operational hurdles to voting proxies vary by country. As a result, Crescent considers whether or not to vote an international proxy based on the particular facts and circumstances. However, when Crescent believes that an issue to be voted is likely to affect the economic value of the portfolio securities, that its vote may influence the ultimate outcome of the contest, and that the benefits of voting the proxy exceed the expected costs, Crescent will make every reasonable effort to vote such proxies. Overrides and Conflict Resolution. Individual portfolio managers, in the exercise of their best judgment and discretion, may from time to time override the Guidelines and vote proxies in a manner that they believe will enhance the economic value of clients' assets, keeping in mind the best interests of the beneficial owners. The Guidelines provide procedures for documenting and, as required, approving such overrides. It is unlikely that serious conflicts of interest will arise in the context of Crescent's proxy voting, because Crescent does not engage in investment banking or the managing or advising of public companies. In the event a potential conflict were to arise, the primary means by which Crescent avoids a conflict of interest in the voting of proxies is by casting such votes solely in the interests of its Clients and in the interests of maximizing the value of their portfolio holdings. In this regard, if a potential conflict of interest arises, but the proxy vote to be decided is predetermined under the Guidelines to be cast either in favor or against, then Crescent will follow the Guidelines and vote accordingly. On the other hand, if a potential conflict of interest arises and there is no predetermined vote, or the Guidelines themselves refer such vote to the portfolio manager for decision, or the portfolio manager would like to override a predetermined vote, then the Guidelines provide procedures for determining whether a material conflict of interest exists and, if so, resolving such conflict. Proxy Voting Information. Upon request, Crescent will provide proxy voting records to its Clients. These records state how votes were cast on behalf of Client accounts, whether a particular matter was proposed by the company or a shareholder, and whether or not Crescent voted in line with management recommendations. Crescent is prepared to explain to Clients the rationale for votes cast on behalf of Client accounts. To obtain proxy voting records or a copy of our proxy voting policies and procedures, please contact Crescent's Compliance department. ITEM 18 FINANCIAL INFORMATION Not applicable. 21 CITY OF WINTER SPRINGS (Plan Sponsor) GENERAL EMPLOYEES' RETIREMENT SYSTEM Investment Policy Statement PURPOSE OF INVESTMENT POLICY STATEMENT The Pension Board of Trustees, as named fiduciaries, maintains that an important determinant of future investment returns is the expression and periodic review of the Plan's investment objectives. To that end, the Board has adopted this statement of Investment Policy and directs that it apply to all assets under their control. In fulfilling their fiduciary responsibility, the Board recognizes that the retirement system is an essential vehicle for providing income benefits to retired participants or their beneficiaries. The Board also recognizes that the obligations of the Plan are long -term and that investment policy should be made with a view toward performance and return over a number of years. The general investment objective, then, is to obtain a reasonable total rate of return - defined as interest and dividend income plus realized and unrealized capital gains or losses - commensurate with the Prudent Investor Rule and any other applicable statute. Reasonable consistency of return and protection of assets against the inroads of inflation are paramount. However, the volatility of interest rates and securities markets make it necessary to judge results within the context of several years rather than over short periods of two years or less. The Board will employ professional Investment Management firms to invest the assets of the Plan. Within the parameters allowed in this document, the Investment Managers shall have full discretion, including security selection, sector weightings and investment style. The Board, in performing their investment duties, shall comply with the fiduciary standards set forth in Employee Retirement Income Security Act of 1974 (ERISA) at 29 U.S.C. s. 1104(a) (1) (A) — (C). In case of conflict with other provisions of law authorizing investments, the investment and fiduciary standards set forth in this section shall prevail. II. TARGET ALLOCATIONS DRAFT:.. FEBRUARY. 2914 Page 1 In order to provide for a diversified portfolio, the Board has engaged several Investment Management firms. The manager's are responsible for the assets and allocation of their mandate only and will be provided an addendum to this policy with their specific performance objectives and investment criterea. Asset Class' Target Range Benchmark Index Domestic Broad Cap Equity 50% 45%-55% Russell 3000 / or Domestic Broad Market Benchmark Equivalent Foreign Equity 15% 10%-20% MSCI- EAFEACWIexUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Broad Market Fixed Income 105% 4-510%-30% Barclays Int. Aggregate TIPS* 5% 0%-10% Barclays TIPS Global Bond* 5% 0%-10% Citigroup World Gov. Bond Real Estate* 10% 0%-10% NFI -ODCE Property Alternatives* 5% 0%-10 TBD Ids m i �m r Broad Market Fixed I i this e 2 J re ....... ........ not.. funded..... Targets... and... ranges. ...above...are...bas..ed...on.. market... value.... of. total... Plan... assets.. t� and -Tang The Trustees will monitor the aggregate asset allocation of the portfolio, and will rebalance to the target asset allocation based on market conditions. If at the end of any calendar quarter, the allocation of an asset class falls outside of its allowable range, barring extenuating circumstances such as pending cash flows or allocation levels viewed as temporary, the asset allocation will be rebalanced into the allowable range. To the extent possible, cash contributions into and withdrawals from the portfolio will be executed proportionally based on the most current market values available. The Trustees do not intend to exercise short-term changes to the target allocation. III. INVESTMENT PERFORMANCE OBJECTIVES The following performance measures will be used as objective criteria for evaluating the effectiveness of the Investment Managers. A. Total Portfolio Performance The performance of the Total Portfolio will be measured for rolling three and five year periods. These periods are considered sufficient to accommodate the market cycles experienced with investments. The performance of this portfolio will be compared to the return of a portfolio comprised of 50% Russell 3000 / or Domestic Broad Market Benchmark Equivalent, 15% MSCI EAFE ACWIexUS and 15% Barclays Capital U.S. Intermediate Aggregate Bond Index 5% BoA /ML Global Broad Market, 5% Barclays Capital TIPS Index, and 10% NFI -ODCE Index. Ap.P*cab...le.. benchmarks... and. weights.. will.. ad. ust.as.. funded... per. the...Allocation..Table... 2. On a relative basis, it is expected that the total portfolio performance will rank in the top 40th percentile of the appropriate peer universe over three and five -year time periods. On an absolute basis, it is expected that total return of the combined portfolio will equal or exceed the actuarial earnings assumption (8.0 %), and equal or exceed the Consumer Price Index plus 3% over three to five year periods. B. Equity Performance DRAFT:.. FEBRUARY. 2014 Page 2 The combined equity portion of the portfolio, defined as common stocks and convertible bonds, is expected to perform at a rate at least equal to the 77% Russell 3000 Index, 23% MSCI EAFE Index. Individual components of the equity portfolio will be compared as outlined in Schedule A. All portfolios are expected to rank in the top 40'h percentile of the appropriate peer universe over three and five -year time periods. C. Fixed Income Performance The overall objective of the fixed income portion of the portfolio is to add stability, consistency and safety to the total portfolio. The fixed income portion of the portfolio is expected to perform at a rate at least equal to the Barclays Capital U.S. Intermediate Aggregate Bond Index. All portfolios are expected to rank in the top 40'h percentile of the appropriate peer universe over three and five -year time periods. D. Treasury Inflation Protection Securities (TIPS) The overall objective of the TIPS portfolio, if utilized, is to provide inflation protection while adding stability to the total portfolio. If TIPS are utilized the strategy is expected to approximate the structure and performance of the Barclays Capital U.S Treasury TIPS Index. E. Real Estate Performance The overall objective of the real estate portfolio of the portfolio, if utilized, is to add diversification and another stable income stream to the total fund. The real estate portion of the total fund, defined as core, open ended private real estate, is expected to perform at a rate at least equal to the NFI- ODCE Index and rank in the top 50'h percentile of the appropriate peer universe over three and five- year time periods. Please also see attached addendums for performance objectives. F. Alternatives The overall objective of the alternative portion of the portfolio, if utilized, is to reduce the overall volatility of the portfolio and improve potential absolute returns. This portion of the fund is expected to provide an absolute rate of return and will be benchmarked as outlined in the manager addendum. IV. INVESTMENT GUIDELINES A. Authorized Investments Pursuant to the investment powers of the Board of Trustees set forth in the plan and trust documents; and subject to governing Florida Statutes and the governing local ordinances of the City of Winter Springs, the Board of Trustees sets forth the following investment guidelines and limitations on investments: Equities: a. Traded on a national exchange. b. Not more than 5% of the Plan's assets, at the time of purchase, shall be invested in the common stock, capital stock or convertible stock of any one issuing company, nor shall the aggregate investment in any one issuing company exceed 5% of the outstanding capital stock of the company. DRAFT:.. FEBRUARY. 2014 Page 3 2. Fixed Income: a. All direct investment in fixed income securities shall have a minimum rating of investment grade or higher as determined by at least one major credit rating service. b. The value of bonds issued by any single corporation shall not exceed 3% of the total fund. Money Market: a. The money market fund or STIF provided by the Plan's custodian. b. Government paper backed by full faith & credit of the United States Government. 4. Real Estate: a. Shall be limited to commingled funds. Investments must be independently appraised annually. Commingled fund debt holdings shall be considered independently of Fixed Income, and may include both rated and non rated debt. 5. Alternatives a. Investments not described under any other asset class, may be utilized to reduce the overall volatility of the portfolio and improve potential absolute returns. All alternative investments shall be independently custodied and provide for transparency of investment. Foreign Securities: Limited to fully and easily negotiable securities, or commingled funds with investments in such securities.. Commingled Funds /Mutual Funds & Exchange Traded Funds: Investments made by the Board may include commingled funds. For purposes of this policy such funds may include . ... but ..not ..be.. limited to.,. mutual funds, commingled funds, and exchange - traded funds. a. Such funds may be governed by separate policy which may include investments not expressly permitted in this Investment Policy Statement. In the event of investment by the Plan into a fund the Board will adopt the prospectus or governing policy of that fund as the stated addendum to this Investment Policy Statement. b. The asset classification of the fund will be based upon its investment objective. B. Trading Parameters When feasible and appropriate, all securities shall be competitively bid. Except as otherwise required by law, the most economically advantageous bid shall be selected. Commissions paid for purchase of securities must meet the prevailing best - execution rates. The responsibility of monitoring best price and execution of trades placed by each manager on behalf of the Plan will be governed by the Portfolio Management Agreement between the Plan and the Investment Managers. C. Limitations Investments in corporate common stock and convertible bonds shall not exceed seventy -five percent (75 %) of the Fund assets at market. DRAFT:.. FEBRUARY. 2014 Page 4 2. Foreign securities shall not exceed twenty percent (25 %) of the value at market of the Fund. Alternative investments shall not exceed 15% of the value at market of the Fund D. Absolute Restrictions There will be no investment activity in the following: Any investment prohibited by State or Federal Law. 2. Any investment not specifically allowed as part of this policy. Illiquid investments, as described in Chapter 215.47, Florida Statutes. V. COMMUNICATIONS A. On a monthly basis, the custodian shall supply an accounting statement that will include a summary of all receipts and disbursements and the cost and the market value of all assets. On a quarterly basis, the Investment Managers shall provide a written report affirming compliance with the security restrictions of Section IV above and a summary of common stock diversification and attendant schedules. B. In addition, the Investment Managers shall deliver each quarter a report detailing the Plan's performance, adherence to the investment policy, forecast of the market and economy, portfolio analysis and current assets of the Plan. Written reports shall be delivered to the Board within 30 days of the end of the quarter. A copy of the written report shall be submitted to the person designated by the City, and shall be available for public inspection. The Investment Managers will provide immediate written and telephone notice to the Board of any significant market related or non - market related event, specifically including, but not limited to, any deviation from the standards set forth in Section IV above. C. The Investment Managers will disclose any securities that do not comply with section IV in each quarterly report. D. If the Plan owns investments at the end of a calendar quarter that complied with section IV at the time of purchase, which do not satisfy the applicable investment standard, then such investment shall be disposed of at the earliest economically feasible opportunity in accordance with the prudent man standard of care and no additional investment may be made. However an action plan outlining the disposition strategy shall be provided to the Board immediately. E. The Investment Consutlant shall evaluate and report on a quarterly basis the rate of return and relative performance of the Plan. F. The Board will meet quarterly to review the monitoring service's performance report. The Board will meet with the investment manager and appropriate outside consultants to discuss performance results, economic outlook, investment strategy and tactics and other pertinent matters affecting the Plan on a periodic basis. G. At least annually, the Board shall provide the Investment Managers with projected disbursement needs of the Plan so that the investment portfolio can be structured in such a manner as to provide sufficient liquidity to pay obligations as they come due. To this end the Investment Managers should, to the extent possible, attempt to match investment maturities with known cash needs and anticipated cash -flow requirements. DRAFT:.. FEBRUARY. 2014 Page 5 VI. COMPLIANCE A. It is the direction of the Board that the plan assets are held by a third party custodian, and that all securities purchased by, and all collateral obtained by the plan shall be properly designated as Plan assets. No withdrawal of assets, in whole or in part, shall be made from safekeeping except by an authorized member of the Board or their designee. Securities transactions between a broker - dealer and the custodian involving purchase or sale of securities by transfer of money or securities must be made on a "delivery vs. payment" basis to insure that the custodian will have the security or money in hand at conclusion of the transaction. Provided that all approved vendors transacting repurchase agreements perform as stated in any Master Repurchase Agreement. B. At the direction of the Board operations of the Plan shall be reviewed by independent certified public accountants as part of any financial audit periodically required. Compliance with the Board's internal controls shall be verified. These controls have been designed to prevent losses of assets that might arise from fraud, error, or misrepresentation by third parties or imprudent actions by the Board or employees of the plan sponsor, to the extent possible. C. Each member of the Board shall participate in a continuing education program relating to investments and the Board's responsibilities to the Plan. It is highly suggested that this education process begin during each Trustee's first term. D. With each actuarial valuation, the Board shall determine the total expected annual rate of return for the current year, for each of the next several years and for the long term thereafter. This determination shall be filed promptly with the Department of Management Services, the plan's sponsor and the consulting actuary. E. The proxy votes must be exercised for the exclusive benefit of the participants of the Plan. Each Investment Manager shall provide the Board with a copy of their proxy voting policy for approval. On a regular basis, at least annually, each manager shall report a record of their proxy vote. F. Investments for which there is no generally recognized market or consistent accepted pricing mechanism shall be valued at 50% cost. Assets without a fair market value shall be excluded from determination of annual funding cost. VII. CRITERIA FOR INVESTMENT MANAGER REVIEW The Board wishes to adopt standards by which judgments of the ongoing performance of a portfolio manager may be made. If, at any time, any three of the following is breached, the portfolio manager will be warned of the Board's serious concern for the Fund's continued safety and performance. If any five of these are violated the consultant will recommend a manager search for that mandate. ■ Four (4) consecutive quarters of relative under - performance verses the benchmark. • Three (3) year trailing return below the top 40'h percentile within the appropriate peer group and under performance verses the benchmark. • Five (5) year trailing return below the top 40'h percentile and under performance verses the benchmark. ■ Three (3) year downside volatility greater than the index (greater than 100), as measured by down market capture ratio. ■ Five (5) year downside volatility greater than the index (greater than 100), as measured by down market capture ratio. DRAFT:.. FEBRUARY. 2014 Page 6 • Style consistency or purity drift from the mandate. • Management turnover in portfolio team or senior management. • Investment process change, including varying the index or benchmark. • Failure to adhere to the IPS or other compliance issues. • Investigation of the firm by the Securities and Exchange Commission (SEC). • Significant asset flows into or out of the company. • Merger or sale of firm. • Fee increases outside of the competitive range. • Servicing issues — key personnel stop servicing the account without proper notification. • Failure to attain a 60% vote of confidence by the Board. Nothing in this section shall limit or diminish the Board's right to terminate the manager at any time for any reason. VIII. APPLICABLE CITY ORDINANCES If, at any time, this document is found to be in conflict with the City Ordinances, the Ordinances shall prevail. IX. REVIEW AND AMENDMENTS It is the Board's intention to review this document at least annually subsequent to the actuarial report and to amend this statement to reflect any changes in philosophy, objectives, or guidelines. In this regard, the Investment Manager's interest in consistency in these matters is recognized and will be taken into account when changes are being considered. If, at any time, the Investment Manager feels that the specific objectives defined herein cannot be met, or the guidelines constrict performance, the Board should be notified in writing. By initialing and continuing acceptance of this Investment Policy Statement, the Investment Managers concur with the provisions of this document. City of Winter Springs General Employees' Retirement System Chairperson, Board of Trustees DRAFT:.. FEBRUARY. 2014 Date Page 7