EGL Ventures IV, LP Private Placement Memorandum

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EGL Ventures IV, LP Private Placement Memorandum Confidential Private Placement Memorandum EGL Ventures IV, L.P. $100,000,000 of Limited Partnership Interests This Confidential Private Placement Memorandum (the “Memorandum”) is confidential and proprietary to EGL Ventures IV, L.P., and is being provided to the Offeree, in confidence, on the understanding that the Offeree will observe and comply with the terms and conditions set forth herein. The Offeree’s acceptance and retention of this Memorandum shall constitute an agreement to be bound by such terms and conditions. If any of such terms are not acceptable, the Offeree should promptly return this Memorandum to the General Partner. This Memorandum and the information contained herein are for the exclusive use of the Offeree and others involved in the Offeree’s investment decision for the sole purpose of evaluating the private placement described herein, may not be photocopied, reproduced, provided or disclosed to others, or used for any other purpose, and upon request must be returned to the General Partner. page ii EGL Ventures IV — Private Placement Memorandum EGL Ventures IV, L.P. (the “Partnership” or the “Fund”) is a Delaware limited partnership, organized for the purpose of making information technology, telecommunications, and healthcare investments in the Southeastern United States. EGL Ventures IV GP, LLC, a Delaware limited liability company, will serve as the sole general partner (the “General Partner”) of the Partnership. In making an investment decision, investors must rely on their own examination of the person or entity creating the securities and the terms of the offering, including the merits and risks involved. These securities have not been recommended by any Federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a criminal offense. Interests in the Fund have not been registered under the Securities Act of 1933, as amended (the “Act”), or the securities laws of any state or foreign jurisdiction. They are subject to restrictions on transfer and resale and may not be transferred or resold except as permitted under the act, and the applicable state securities laws, pursuant to registration or exemption therefrom. Investors should be aware that they will be required to bear the financial risks of this investment for an indefinite period of time. The interests are being offered only to persons whom the General Partner believes to be accredited investors under the Act. This Memorandum does not constitute an offer to sell or solicitation of an offer to buy interests in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction. EGL Ventures IV, L.P. Placement Agent: 3495 Piedmont Road Ariane Capital Partners LLC Building 10, Suite 412 501 Candace Lane, Suite 100 Atlanta, Georgia 30305 Villanova, Penn. 19085 (404) 949-8300 (610) 525-0749 www.eglventures.com www.arianepartners.com EGL Ventures Confidential EGL Ventures IV — Private Placement Memorandum page iii EGL Ventures IV, L.P. Private Placement Memorandum Table of Contents Section I. Executive Summary.........................................................................1 Section II. History & Environment....................................................................6 Section III. The EGL Advantage......................................................................14 Section IV. People............................................................................................22 Section V. Performance ..................................................................................31 Section VI. Portfolio.........................................................................................34 Section VII. Process...........................................................................................39 Section VIII. Terms of the Offering ....................................................................48 Appendix A. Risk Factors ...................................................................................59 Appendix B. Legal and Other Considerations ....................................................65 Appendix C. Suitability Standards......................................................................69 Appendix D. Methodology..................................................................................71 Additional Information.............................................................................................72 EGL Ventures Confidential page iv EGL Ventures IV — Private Placement Memorandum Prospective investors should read carefully this Memorandum and all supplemental disclosure materials delivered by the Fund before they make a commitment to purchase interests in the Fund. In particular, prospective investors’ attention is drawn to the information under the headings “Risk Factors” and “Legal and Other Considerations.” Prospective investors should also ask the Principals questions about the Fund and request any additional information regarding the Fund that they deem relevant or material before making an investment. Investors will be required to make representations about the matters described in this paragraph in their subscription agreement. There will not be any public market for the Interests. The limited partnership agreement of the Fund places restrictions on the transfer of interests, and Federal and state securities and other laws also restrict transfers of interests. Prospective investors should not construe the contents of this Memorandum as legal, investment, tax or other advice. Each prospective investor must rely upon its own representatives, including its own legal counsel and accountants, as to the legal, economic, tax and related aspects of the investment described herein. EGL Ventures Confidential EGL Ventures IV — Private Placement Memorandum page 1 Section I. Executive Summary EGL is an established venture capital and private equity firm in Atlanta, with a strong track record dating back to 1988. Our principals have invested over $100 million during that time. We plan to continue our successful strategy of investing in information technology, telecommunications, and healthcare companies in the Southeast United States. We believe that we offer an exceptional investment opportunity to institutional and individual investors, and we are seeking $100 million in private capital commitments for EGL Ventures IV. The fund will be managed by three industry veterans: Dr. David Ellis, Stephen Fleming, and Salvatore Massaro. David and Sal have worked together for fifteen years. Stephen has eight years of experience as a successful venture capital general partner, and joined EGL in the last year. Southeastern Focus EGL has been investing in the Southeast for fifteen years. We have built an enviable network of entrepreneurs, investors, and service providers, and are one of the most well-known and respected venture capital firms in the region. The Southeastern United States had a $1.5 trillion economy in 2001. If the region were ranked as a separate country, it would rank fifth in the world—behind the U.S., Japan, Germany, and the U.K., but ahead of France, China, Italy, Canada, Spain, Mexico, and India. Low taxes, a low cost of living, and a wealth of human capital has enabled the Southeast to emerge as a leading region for high technology, high-growth companies. The Southeast’s technology leadership is anchored by the region’s higher education system that includes fourteen of the nation’s top fifty universities, four top-twenty MBA programs and four of the nation’s top twenty engineering schools. This foundation has supported a track record of successful growth companies and technology-based startups dating back to the founding of Scientific-Atlanta in the late 1950s. One of the resources available to these growth companies is the Southeast’s pool of human capital. More Fortune 500 corporations are headquartered in the Southeast than anywhere outside of New York City; over 75% of the Fortune 1000 have operations in Atlanta alone. Experienced executives and managers can be recruited for all levels, from entry-level to CEO. In addition, the Southeast attracts some of the nation’s brightest scientists and engineers to its network of strong research universities and Federal installations. EGL Ventures Confidential page 2 EGL Ventures IV — Private Placement Memorandum All the pieces are in place to build attractive growth companies: technical innovation, experienced entrepreneurs, and all the required service industries—legal, banking, accounting, etc. However, there is not enough local capital in the region to serve the number of prospects available. Money will follow opportunity, and out-of-region investors are pursuing deals in the Southeast. From 2001 to 2003, for example, over 70% of the investors in venture-backed companies came from outside the region. The EGL Advantage All three of us have substantial operational experience, including senior management “CXO” roles in technology businesses and leadership roles in some of the world’s largest corporations. We plan to stick with our strengths—technology-oriented growth companies that have a unique or proprietary advantage. Specifically, we intend to maintain our focus on information technology, telecommunications, and healthcare. We believe we are able to identify, nurture, and harvest strong technology companies with superior management that
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