EXHIBIT 99.(a)(2)
HATTERAS MULTI-STRATEGY INSTITUTIONAL FUND, L.P.
Agreement of Limited Partnership
Dated as of November 29, 2006
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS.................................................... 1
ARTICLE II ORGANIZATION; ADMISSION OF PARTNERS; DIRECTORS................ 6
SECTION 2.1 Formation of Limited Partnership......................... 6
SECTION 2.2 Name..................................................... 7
SECTION 2.3 Principal and Registered Office.......................... 7
SECTION 2.4 Duration................................................. 7
SECTION 2.5 Business of the Partnership.............................. 7
SECTION 2.6 General Partner.......................................... 8
SECTION 2.7 Limited Partners......................................... 8
SECTION 2.8 Organizational Limited Partner........................... 8
SECTION 2.9 Both General and Limited Partner......................... 8
SECTION 2.10 Limited Liability........................................ 8
SECTION 2.11 Directors................................................ 9
ARTICLE III MANAGEMENT; ADVICE AND MANAGEMENT............................ 10
SECTION 3.1 Management and Control................................... 10
SECTION 3.2 Powers Reserved by the General Partner................... 11
SECTION 3.3 Actions by Directors..................................... 12
SECTION 3.4 Meetings of Partners..................................... 13
SECTION 3.5 Custody of Assets of the Partnership..................... 14
SECTION 3.6 Other Activities......................................... 14
SECTION 3.7 Duty of Care............................................. 15
SECTION 3.8 Indemnification.......................................... 15
SECTION 3.9 Fees, Expenses and Reimbursement......................... 17
ARTICLE IV TERMINATION OF STATUS OF GENERAL PARTNER; REMOVAL OF GENERAL
PARTNER; TRANSFERS AND REPURCHASES............................ 20
SECTION 4.1 Termination of Status of General Partner................. 20
SECTION 4.2 Removal of General Partner............................... 20
SECTION 4.3 Transfer of Interest of General Partner.................. 20
SECTION 4.4 Transfer of Interests of Limited Partners................ 20
SECTION 4.5 Repurchase of Interests.................................. 21
TABLE OF CONTENTS
(continued)
PAGE
----
ARTICLE V CAPITAL........................................................ 25
SECTION 5.1 Contributions to Capital................................. 25
SECTION 5.2 Rights of Partners to Capital............................ 26
SECTION 5.3 Capital Accounts......................................... 26
SECTION 5.4 Allocation of Net Profit and Loss........................ 27
SECTION 5.5 Allocation of Certain Withholding Taxes and Other
Expenditures............................................. 27
SECTION 5.6 Performance Incentive.................................... 28
SECTION 5.7 Reserves................................................. 28
SECTION 5.8 Allocation to Avoid Capital Account Deficits............. 29
SECTION 5.9 Allocations Prior to Closing Date........................ 29
SECTION 5.10 Tax Allocations.......................................... 29
SECTION 5.11 Distributions............................................ 30
ARTICLE VI DISSOLUTION AND LIQUIDATION................................... 30
SECTION 6.1 Dissolution.............................................. 30
SECTION 6.2 Liquidation of Assets.................................... 31
ARTICLE VII ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS................. 32
SECTION 7.1 Accounting and Reports................................... 32
SECTION 7.2 Determinations by General Partner........................ 33
SECTION 7.3 Valuation of Assets...................................... 33
ARTICLE VIII MISCELLANEOUS PROVISIONS.................................... 34
SECTION 8.1 Amendment of Partnership Agreement....................... 34
SECTION 8.2 Special Power of Attorney................................ 35
SECTION 8.3 Notices.................................................. 36
SECTION 8.4 Agreement Binding Upon Successors and Assigns............ 36
SECTION 8.5 Choice of Law; Arbitration............................... 36
SECTION 8.6 Not for Benefit of Creditors............................. 37
SECTION 8.7 Consents................................................. 38
SECTION 8.8 Merger and Consolidation................................. 38
SECTION 8.9 Pronouns................................................. 38
-ii-
TABLE OF CONTENTS
(continued)
PAGE
----
SECTION 8.10 Confidentiality.......................................... 38
SECTION 8.11 Certification of Non-Foreign Status...................... 39
SECTION 8.12 Severability............................................. 39
SECTION 8.13 Entire Agreement......................................... 39
SECTION 8.14 Discretion............................................... 40
SECTION 8.15 Conflicts................................................ 40
SECTION 8.16 Counterparts............................................. 40
SECTION 8.17 Headings................................................. 40
-iii-
HATTERAS MULTI-STRATEGY INSTITUTIONAL FUND, L.P.
AGREEMENT OF LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP of HATTERAS MULTI-STRATEGY
INSTITUTIONAL FUND, L.P. (the "Partnership") dated as of November 29, 2006
by and among HATTERAS INVESTMENT MANAGEMENT LLC, as General Partner, ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, as the Organizational Limited Partner and those Persons who
execute this Agreement and whose names are reflected on the books and
records of the Partnership as Limited Partners.
ARTICLE I
DEFINITIONS
For purposes of this Agreement:
"1933 Act" means the Securities Act of 1933 and the rules, regulations
and orders under the 1933 Act, as amended from time to time, or any
successor law.
"1940 Act" means the Investment Company Act of 1940 and the rules,
regulations and orders under the 1940 Act, as amended from time to time, or
any successor law.
"Advisers Act" means the Investment Advisers Act of 1940 and the
rules, regulations and orders under the Advisers Act, as amended from time
to time, or any successor law.
"Advisor" means any Person designated to manage a portion of the
assets of the Partnership and/or the Master Partnership, either directly or
through the investment by the Partnership in an Advisor Fund.
"Advisor Account" means an account directly managed by an Advisor for
the Partnership or the Master Partnership.
"Advisor Fund" means an investment company, a general or limited
partnership, a limited liability company or other pooled investment vehicle
in which the Partnership or the Master Partnership has invested and that is
advised by an Advisor; whether or not, in each case, the entity is
registered under the 1940 Act, and includes the Master Partnership and
Advisor Funds that may be formed by the Partnership.
"Affiliate" means affiliated person as that term is defined in the
1940 Act.
"Agreement" means this Agreement of Limited Partnership, as amended
and/or restated from time to time.
"Board of Directors" means the board of the Directors who have been
delegated the authority described in this Agreement.
"Business Day" means any day when the New York Stock Exchange is open
for business.
"Capital Account" means, with respect to each Partner, the capital
account established and maintained on behalf of the Partner in accordance
with Section 5.3 of this Agreement.
"Capital Contribution" means the contribution, if any, made, or to be
made, as the context requires, to the capital of the Partnership, after
giving effect to any applicable placement agent fees, by a Partner or
former Partner, as the case may be.
"Certificate" means the Certificate of Limited Partnership of the
Partnership as filed with the office of the Secretary of State of the State
of Delaware on July 20, 2006 and any amendments to the Certificate and/or
restatements of the Certificate as filed with the office of the Secretary
of State of the State of Delaware pursuant to this Agreement.
"Closing Date" means the first date on or as of which a Limited
Partner other than the Organizational Limited Partner is admitted to the
Partnership.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor law.
"Commodity Exchange Act" means the Commodity Exchange Act and the
rules, regulations and orders under the Commodity Exchange Act, as amended
from time to time, or any successor law.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership
Act, as amended from time to time, or any successor law.
"Directors" means those natural Persons designated as "Directors" in
accordance with this Agreement who are delegated the authority provided for
in this Agreement and includes ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as the initial Director, or
any other natural Persons who, from time to time after the date of this
Agreement, become Directors in accordance with the terms and conditions of
this Agreement.
"Fiscal Period" means the period commencing on the Closing Date, and
thereafter each period commencing on the day immediately following the last
day of the immediately preceding Fiscal Period, and ending in each case at
the close of business on the first to occur of the following dates:
(1) the last day of any calendar quarter, including the last day
of the calendar year;
(2) the day preceding the date as of which a contribution to the
capital of the Partnership is made by any Partner in accordance with
Section 5.1 of this Agreement;
(3) the day on which the Partnership repurchases the Interest or
portion of the Interest of any Partner in accordance with Section 4.5
of this Agreement;
2
(4) the day as of which the Partnership admits a substituted
Partner to whom or which an Interest or portion of an Interest of a
Partner has been Transferred (unless the Transfer of the Interest or
portion of the Interest results in no change of beneficial ownership
of the Interest or portion of the Interest);
(5) the day as of which any amount is credited to or debited
against the Capital Account of any Partner, other than an amount that
is credited to or debited against the Capital Accounts of all Partners
in accordance with their respective Investment Percentages; or
(6) December 31, or any other date that is the last day of the
taxable year of the Partnership.
"Fiscal Year" means the period commencing on the Closing Date and
ending on March 31, 2007, and thereafter each period commencing on April 1
of each year and ending on March 31 of that year (or on the date of a final
distribution made in accordance with Section 6.2 of this Agreement), unless
the Directors designate another fiscal year for the Partnership. The
taxable year of the Partnership will end on December 31 of each year, or on
any other date designated by the General Partner that is a permitted
taxable year-end for tax purposes.
"Form N-2" means the Partnership's Registration Statement on Form N-2
filed with the Securities and Exchange Commission, as amended from time to
time.
"General Partner" means Hatteras Investment Management LLC, a limited
liability company formed under the laws of the State of Delaware, and any
other Person or Persons admitted to the Partnership as a general partner of
the Partnership, collectively, in their capacities as general partners of
the Partnership, and "General Partner" means any of the General Partners.
When the term General Partner is used in this Agreement and the Partnership
has more than one General Partner, the term "General Partner" will refer to
each General Partner.
"Hurdle Rate" means, with respect to the Incentive Period, that rate
determined from time to time by the Directors and approved in the manner
contemplated by the 1940 Act; such rate initially to be the
yield-to-maturity of the 90 day U.S. Treasury ▇▇▇▇ as reported by the Wall
Street Journal for the last business day of the preceding calendar year of
the Partnership. Hurdle Rates will not be cumulative and will be
recalculated with respect to each Incentive Period. The Hurdle Rate for a
given Incentive Period will be adjusted with respect to any contributions,
transfers, distributions, withdrawals and repurchases applicable to a
Limited Partner's Capital Account for that Incentive Period, or portion
thereof.
"Hurdle Rate Amount" means, with respect to each Limited Partner, an
amount equal to the balance of the Limited Partner's Capital Account as of
the first day of the applicable Incentive Period, multiplied by the Hurdle
Rate.
"Incentive Period" means, with respect to a Partner's Interest, a
single Sub-Period or multiple consecutive Sub-Periods. Both the Incentive
Period and the last Sub-Period within the Incentive Period will terminate
at the close of business on the earliest occurrence of: (1) the last day of
the calendar year; (2) the date immediately prior to the effective date of
a full Transfer of Interests; or (3) the date on which the Partnership
dissolves.
3
"Independent Directors" mean those Directors who are not "interested
persons" of the Partnership as that term is defined in the 1940 Act.
"Interest" means the entire partnership interest in the Partnership at
any particular time of a Partner or other Person to whom or which an
Interest or portion of an Interest has been Transferred in accordance with
Section 4.3 or 4.4 of this Agreement, including the rights and obligations
of the Partner or other Person under this Agreement and the Delaware Act.
"Investment Percentage" means a percentage established for each
Partner on the Partnership's books as of the first day of each Fiscal
Period. The Investment Percentage of a Partner for a Fiscal Period will be
determined by dividing the balance of the Partner's Capital Account as of
the commencement of the Fiscal Period by the sum of the Capital Accounts of
all of the Partners as of the commencement of the Fiscal Period. The sum of
the Investment Percentages of all Partners for each Fiscal Period will
equal 100%.
"Limited Partner" means any Person admitted to the Partnership as a
Limited Partner of the Partnership (including any Person who or that is a
General Partner when acting in the Person's capacity as a Limited Partner)
until the Partnership repurchases the entire Interest of the Person as a
Limited Partner in accordance with Section 4.5 of this Agreement, or a
substituted Limited Partner or Partners are admitted with respect to the
Person's entire Interest as a Limited Partner in accordance with Section
4.4 of this Agreement, in the Person's capacity as a Limited Partner of the
Partnership. For purposes of the Delaware Act, the Limited Partners will
constitute a single class or group.
"Loss Carryforward Amount" means, with respect to any Incentive
Period, and to the extent not subsequently offset by allocations of profits
or otherwise reduced, as described in this paragraph, the excess of: (1) a
Limited Partner's allocable share of Net Losses calculated in accordance
with Section 5.4 of this Agreement (excluding amounts previously allocated
to repurchased or distributed portions of the Capital Account during the
Incentive Period) over (2) the Partner's allocable share of Net Profits
calculated in accordance with Section 5.4 of this Agreement (excluding
amounts previously allocated to repurchased or distributed portions of the
Capital Account during the Incentive Period), in each case for the current
and any prior Incentive Periods. If at the end of any subsequent Incentive
Period, profits allocated to a Limited Partner's Capital Account exceed the
losses allocated during that period (excluding profits and losses
previously taken into account for this purpose by reason of a partial
repurchase or distribution during that period), any Loss Carryforward
Amount for such Partner will be reduced (but not below zero) by the amount
of the excess. In addition, if any Limited Partner participates in a
repurchase or receives a distribution after a Loss Carryforward Amount has
been established for the Limited Partner, the Limited Partner's Loss
Carryforward Amount will be reduced on a proportionate basis by the amount
by which the repurchase or distribution bears to the Limited Partner's
total Capital Account. No transferee may succeed to any portion of the Loss
Carryforward Amount applicable to the Transferring Limited Partner unless
the Transfer of the Interest or portion of the Interest results in no
change in beneficial ownership in the Interest or portion of the Interest.
The Loss Carryforward Amount for a given Incentive Period will be adjusted
with respect to any contributions, transfers, distributions, withdrawals
and repurchases applicable to the Limited Partner's Capital Account for
that Incentive Period, or portion thereof.
4
"Master Partnership" means Hatteras Master Fund, L.P., a limited
partnership organized under the laws of the State of Delaware and any
partnership continuing the business of the Master Partnership after its
dissolution.
"Memorandum" means the Partnership's Confidential Memorandum, as
included in the Form N-2, as amended or supplemented from time to time.
"Net Assets" means the total value of all assets of the Partnership,
less an amount equal to all accrued debts, liabilities and obligations of
the Partnership, calculated before giving effect to any repurchases of
Interests.
"Net Profit" or "Net Loss" means the amount by which the Net Assets as
of the close of business on the last day of a Fiscal Period exceed (in the
case of Net Profit) or are less than (in the case of Net Loss) the Net
Assets as of the commencement of the same Fiscal Period (or, with respect
to the initial Fiscal Period of the Partnership, at the close of business
on the Closing Date), the amount of any Net Profit or Net Loss to be
adjusted to exclude any items to be allocated among the Capital Accounts of
the Partners on a basis that is not in accordance with the Investment
Percentages of all Partners as of the commencement of the Fiscal Period in
accordance with Section 5.8 of this Agreement.
"Offering Materials" means the Memorandum and subscription materials
provided to prospective Limited Partners in connection with an investment
to be made in the Partnership.
"Organizational Limited Partner" means ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
"Partners" means the General Partner(s) and the Limited Partners,
collectively, and "Partner" means any General Partner or Limited Partner.
"Partnership" means Hatteras Multi-Strategy Institutional Fund, L.P.
and any partnership continuing the business of the Partnership after
dissolution as provided in this Agreement.
"Partnership Return", with respect to each Incentive Period applicable
to a Limited Partner, is determined by dividing: (a) the excess of the
Limited Partner's allocable share of Net Profits calculated in accordance
with Section 5.4 of this Agreement (including amounts previously allocated
to repurchased or distributed portions of the Limited Partner's Capital
Account during the Incentive Period), over the Limited Partner's allocable
share of Net Losses calculated in accordance with Section 5.4 of this
Agreement (including amounts previously allocated to repurchased or
distributed portions of the Limited Partner's Capital Account during the
Incentive Period) by (b) the Limited Partner's Capital Account balance as
of the opening of business of the first day of that Incentive Period. The
Partnership Return, for a given Incentive Period, will be adjusted with
respect to any contributions, transfers, distributions, withdrawals and
repurchases applicable to the Limited Partner's Capital Account for that
Incentive Period, or portion thereof.
"Performance Incentive" means, with respect to each Limited Partner,
10% of the amount, determined as of the close of each Incentive Period, if
any, of (1) the Limited Partner's allocable share of Net Profits calculated
in accordance with Section 5.4 of this Agreement (excluding amounts
previously allocated to repurchased or distributed portions of the Limited
5
Partner's Capital Account during the Incentive Period), in excess of the
Limited Partner's allocable share of Net Losses calculated in accordance
with Section 5.4 of this Agreement (excluding amounts previously allocated
to repurchased or distributed portions of the Limited Partner's Capital
Account during that Incentive Period), above (2) the greater of (a) the
Limited Partner's Hurdle Rate Amount for a given Incentive Period or (b)
the Limited Partner's Loss Carryforward Amount, if any, for a given
Incentive Period. The Performance Incentive for a given Incentive Period
will be adjusted with respect to any contributions, transfers,
distributions, withdrawals and repurchases applicable to the Limited
Partner's Capital Account for that Incentive Period, or portion thereof.
"Person" means any individual, entity, corporation, partnership,
limited liability company, joint stock company, trust, estate, joint
venture, or unincorporated organization.
"Securities" means securities (including, without limitation,
equities, debt obligations, options, and other "securities" as that term is
defined in Section 2(a)(36) of the ▇▇▇▇ ▇▇▇) and any contracts for forward
or future delivery of any security, debt obligation, currency or commodity,
all manner of derivative instruments and any contracts based on any index
or group of securities, debt obligations, currencies or commodities, and
any options on those contracts.
"Sub-Period" means, with respect to a Partner's Interest in the
Partnership, the initial period that begins upon the Partnership's
commencement of investment operations (or, with respect to subsequent
contributions, at the time of those contributions) and ends at the close of
business on the earliest occurrence of: (1) the last day of the Fiscal
Year, (2) the date immediately prior to the effective date of additional
purchases of Interests; (3) the date immediately prior to the effective
date of partial Transfers of Interests; or (4) the date on which the
Partnership dissolves. Each Sub-Period is followed by a subsequent
Sub-Period, with respect to a Partner's then existing Interest in the
Partnership; provided that the Partner continues to hold an Interest in the
Partnership, the General Partner continues to serve as the general partner
of the Partnership, and the Partnership is in existence. Each Sub-Period
will reflect each Partner's appropriate Interest in the Partnership during
the Sub-Period.
"Transfer" means the assignment, transfer, sale or other disposition
of all or any portion of an Interest, including any right to receive any
allocations and distributions attributable to an Interest. Verbs, adverbs
or adjectives such as "Transfer," "Transferred" and "Transferring" have
correlative meanings.
"Valuation Date" means any date upon which the net asset value of the
Interests are valued for purposes of a repurchase, as determined by the
Board of Directors.
ARTICLE II
ORGANIZATION; ADMISSION OF PARTNERS; DIRECTORS
SECTION 2.1 Formation of Limited Partnership. (a) The Partnership is formed
as a limited partnership pursuant to the Certificate and this Agreement. The
Partners agree that their rights, duties and liabilities will be as provided in
the Delaware Act, except as otherwise provided in this Agreement. The General
Partner will cause the Certificate to be executed and filed in accordance with
the Delaware Act and will cause to be executed and filed with applicable
governmental authorities any other
6
instruments, documents and certificates that the General Partner concludes may
from time to time be required by the laws of the United States of America, the
State of Delaware or any other jurisdiction in which the General Partner
determines that the Partnership should do business, or any political subdivision
or agency of any such jurisdiction, or that the General Partner determines is
necessary or appropriate to effectuate, implement and continue the valid
existence and business of the Partnership.
(b) The Partnership is formed for the object and purpose of (and the
nature of the business to be conducted by the Partnership is) engaging in
any lawful activity for which limited partnerships may be formed under the
Delaware Act and engaging in any and all activities necessary or incidental
to the foregoing.
SECTION 2.2 Name. The name of the Partnership is "Hatteras Multi-Strategy
Institutional Fund, L.P." or any other name that the General Partner may adopt
after the date of this Agreement upon (a) causing an appropriate amendment to
this Agreement to be executed and to the Certificate to be filed in accordance
with the Delaware Act and (b) sending notice of the amendment to each Limited
Partner.
SECTION 2.3 Principal and Registered Office. The Partnership will have its
principal office at the principal office of the General Partner or at any other
place designated from time to time by the General Partner. The Partnership's
registered agent in the State of Delaware shall be The Corporation Trust
Company, and the Partnership's registered office in the State of Delaware at
Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ unless
the General Partner designates a different registered agent or office from time
to time in accordance with the Delaware Act.
SECTION 2.4 Duration. The term of the Partnership will commence on the
filing of the Certificate and will continue until the Partnership is dissolved
and wound up and the Certificate is canceled in accordance with Section 6.1 of
this Agreement.
SECTION 2.5 Business of the Partnership. (a) The business of the
Partnership is to purchase, sell, invest and trade in Securities and engage in
any financial or derivative transactions relating to Securities. Portions of the
Partnership's assets (which may constitute, in the aggregate, all of the
Partnership's assets) may be invested in Advisor Funds or Advisor Accounts that
invest and trade in Securities or in separate managed accounts through which the
Partnership may invest and trade in Securities, some or all of which may be
advised by one or more Advisors. The Partnership may invest some or all of its
assets directly or indirectly in the Master Partnership. The Partnership may
execute, deliver and perform all contracts, agreements and other undertakings
and engage in all activities and transactions as the General Partner, the
Directors or the Investment Manager may deem necessary or advisable to carry out
its objective or business.
(b) The Partnership will operate as a closed-end, management
investment company in accordance with the 1940 Act and subject to any
fundamental policies and investment restrictions described in the Form N-2.
(c) The Partnership may designate from time to time persons to act as
signatories for the Partnership, including, without limitation, persons
authorized to execute and deliver any filings with the U.S. Securities and
Exchange Commission (the "SEC") or applicable federal or state regulatory
authorities or self-regulatory organizations.
7
SECTION 2.6 General Partner. (a) Hatteras Investment Management LLC shall
be admitted to the Partnership as the General Partner upon its execution of this
Agreement. The General Partner may admit to the Partnership as an additional
General Partner any Person who agrees in writing to be bound by all of the terms
of this Agreement as a General Partner. The General Partner may admit to the
Partnership as a substituted General Partner any Person to which it has
Transferred its Interest as the General Partner in accordance with Section 4.3
of this Agreement. Any substituted General Partner will be admitted to the
Partnership upon the Transferring General Partner's consenting to such admission
and is authorized to, and will, continue the business of the Partnership without
dissolution. The name and mailing address of the General Partner and the Capital
Contribution of the General Partner will be reflected on the books and records
of the Partnership. If at any time the Partnership has more than one General
Partner, unless otherwise provided in this Agreement, any action allowed to be
taken, or required to be taken, by the General Partners may be taken only with
the unanimous approval of all of the General Partners.
(b) Each General Partner will serve for the duration of the term of
the Partnership, unless the General Partner ceases to be a General Partner
in accordance with Section 4.1 of this Agreement.
SECTION 2.7 Limited Partners. (a) The General Partner may, at any time and
without advance notice to or consent from any other Partner, admit to the
Partnership any Person who agrees to be bound by all of the terms of this
Agreement as an additional Limited Partner. The General Partner may in its
absolute discretion reject subscriptions for Interests (or portions of
Interests) and/or may suspend subscriptions. The admission of any Person as an
additional Limited Partner will be effective upon the General Partner's
acceptance on behalf of the Partnership of such Person's subscription for
Interests and the execution and delivery by, or on behalf of, the additional
Limited Partner of this Agreement or an instrument that constitutes the
execution and delivery of this Agreement. The General Partner will cause the
books and records of the Partnership to reflect the name and the required
contribution to the capital of the Partnership of the additional Limited
Partner.
(b) Subject to Section 2.10 of this Agreement, when the entire Capital
Contribution attributable to an Interest for which a Partner has subscribed
is paid for, that Interest will be deemed to be validly issued and fully
paid and non-assessable.
SECTION 2.8 Organizational Limited Partner. Upon the admission to the
Partnership of any Limited Partner, the Organizational Limited Partner shall
withdraw from the Partnership as the Organizational Limited Partner and shall be
entitled to the return of his Capital Contribution, if any, without interest or
deduction, and shall cease to be a Limited Partner of the Partnership.
SECTION 2.9 Both General and Limited Partner. A Partner may be
simultaneously a General Partner and a Limited Partner, in which event the
Partner's rights and obligations in each capacity will be determined separately
in accordance with the terms and provisions of this Agreement and as provided in
the Delaware Act.
SECTION 2.10 Limited Liability. Except for payment obligations under this
Agreement, including Capital Contribution obligations, and as provided under
applicable law, a Limited Partner will not be liable for the Partnership's
obligations in any amount in excess of the Limited Partner's Capital Account
balance, plus the Limited Partner's share of undistributed profits and assets.
Subject to
8
applicable law, a Limited Partner may be obligated to return to the Partnership
certain amounts distributed to the Limited Partner.
SECTION 2.11 Directors. (a) The number of Directors at the date of this
Agreement is fixed at not more than fourteen (14) Directors and no fewer than
two (2). After the Closing Date, the number of Directors will be fixed from time
to time by the Directors then in office, which number may be greater, or lesser,
than fourteen (14), but no fewer than the minimum number of directors permitted
to corporations organized under the laws of the State of Delaware, except that
no reduction in the number of Directors will serve to effect the removal of any
Director. Each Partner approves the delegation by the General Partner to the
Directors, in accordance with Section 3.1 of this Agreement, of certain of the
General Partner's rights and powers.
(b) The term of office of each Director shall be from the time of such
Director's election and qualification until his or her successor shall have
been elected and shall have qualified, or until his or her status as a
Director is terminated sooner in accordance with Section 2.11(d) of this
Agreement. Except to the extent the 1940 Act requires election by Limited
Partners, if any vacancy in the position of a Director occurs, including by
reason of an increase in the number of Directors as contemplated by Section
2.11(a) of this Agreement, the remaining Directors may appoint an
individual to serve in that capacity in accordance with the provisions of
the 1940 Act. An Independent Director will be replaced by another
Independent Director selected and nominated by the remaining Independent
Directors, or in a manner otherwise permissible under the 1940 Act.
(c) If no Director remains, the General Partner will promptly call a
meeting of the Partners, to be held within 60 days after the date on which
the last Director ceased to act in that capacity, for the purpose of
determining whether to continue the business of the Partnership and, if the
business is to be continued, approving the appointment of the requisite
number of Directors. If the Partners determine at the meeting not to
continue the business of the Partnership, or if the approval of the
appointment of the requisite number of Directors is not approved within 60
days after the date on which the last Director ceased to act in that
capacity, then the Partnership will be dissolved in accordance with Section
6.1 of this Agreement and the assets of the Partnership will be liquidated
and distributed in accordance with Section 6.2 of this Agreement.
(d) The status of a Director will terminate (1) if the Director dies;
(2) if the Director resigns as a Director; or (3) if the Director is
removed in accordance with Section 2.11(e) of this Agreement.
(e) Any Director may be removed with or without cause by a vote of a
majority of the other Directors or by the vote or written consent of
Limited Partners holding not less than two-thirds of the total number of
votes eligible to be cast by all Limited Partners.
(f) The Directors may establish and maintain committees of the Board
of Directors, and the Directors may grant to such committees the authority
to, among other things: value the assets of the Partnership; select and
nominate the Independent Directors of the Partnership; recommend to the
Board of Directors the compensation to be paid to the Independent
Directors;
9
and recommend to the Board of Directors the firm of certified public
accountants that will conduct the Partnership's audits.
(g) The Directors may establish or designate committees of the Board
of Directors or the Partnership, whose members may include the Directors
and/or other Persons who are not Directors, to provide advice and other
services to the Partnership, which committees may include (but are not
limited to) a committee that will value the assets of the Partnership.
(h) The Independent Directors will receive compensation for their
services as Independent Directors, as determined by the Board of Directors.
ARTICLE III
MANAGEMENT; ADVICE AND MANAGEMENT
SECTION 3.1 Management and Control. (a) The General Partner delegates to
the Directors those rights and powers of the General Partner necessary for the
Directors to manage and control the business affairs of the Partnership and to
carry out their oversight obligations with respect to the Partnership required
under the 1940 Act, state law, and any other applicable laws or regulations.
Rights and powers delegated to the Directors include, without limitation, the
authority as Directors to oversee and to establish policies regarding the
management, conduct and operation of the Partnership's business, and to do all
things necessary and proper as Directors to carry out the objective and business
of the Partnership, including, without limitation, the power to engage an
investment manager to provide advice and management and to remove such an
investment manager, as well as to exercise any other rights and powers expressly
given to the Directors under this Agreement. The Partners intend that, to the
fullest extent permitted by law, and except to the extent otherwise expressly
provided in this Agreement, (1) each Director is vested with the same powers and
authority on behalf of the Partnership as are customarily vested in each
director of a Delaware corporation and (2) each Independent Director is vested
with the same powers and authority on behalf of the Partnership as are
customarily vested in each director who is not an "interested person" (as that
term is defined in the ▇▇▇▇ ▇▇▇) of a closed-end, management investment company
registered under the 1940 Act that is organized as a Delaware corporation.
During any period in which the Partnership has no Directors, the General Partner
will manage and control the Partnership. Each Director will be the agent of the
Partnership but will not, for any purpose, be a General Partner. Notwithstanding
the delegation described in this Section 3.1(a), the General Partner will not
cease to be the General Partner and will continue to be liable as such and in no
event will a Director be considered a General Partner by agreement, estoppel or
otherwise as a result of the performance of his or her duties under this
Agreement or otherwise. The General Partner retains those rights, powers and
duties that have not been delegated under this Agreement. Any Director may be
admitted to the Partnership in accordance with Section 2.7 of this Agreement and
make Capital Contributions and own an Interest, in which case the Director will
also become a Limited Partner.
(b) The Partnership will file a tax return as a Partnership for U.S.
federal income tax purposes. All decisions for the Partnership relating to
tax matters including, without limitation, whether to make any tax
elections (including the election under Section 754 of the Code), the
positions to be made on the Partnership's tax returns and the settlement or
further contest or litigation of any audit matters raised by the Internal
Revenue Service or any other taxing authority, will be made by the
Directors. All actions (other than ministerial actions) taken by the
10
tax matters Partner, as designated in Section 3.1(c) below, will be subject
to the approval of the Directors.
(c) The General Partner will be the designated tax matters Partner for
purposes of the Code. Each Partner agrees not to treat, on his, her or its
personal income tax return or in any claim for a refund, any item of
income, gain, loss, deduction or credit in a manner inconsistent with the
treatment of the item by the Partnership. The tax matters Partner will have
the exclusive authority and discretion to make any elections required or
permitted to be made by the Partnership under any provisions of the Code or
any other revenue laws.
(d) No Limited Partner will have any right to participate in or take
any part in the management or control of the Partnership's business, and no
Limited Partner will have any right, power or authority to act for or bind
the Partnership. Limited Partners will have the right to vote on any
matters only as provided in this Agreement or on any matters that require
the approval of the holders of voting securities under the 1940 Act and
will have no right to exercise any other vote granted to Limited Partners
under the Delaware Act, any such rights being vested in the Directors (or
the General Partner if there are no Directors) and may be exercised without
requiring the approval of the Limited Partners.
SECTION 3.2 Powers Reserved by the General Partner. Notwithstanding
anything in this Agreement to the contrary, the General Partner retains all
rights, duties and powers to manage the affairs of the Partnership that may not
be delegated under Delaware law, and that are not otherwise delegated by the
General Partner to the Directors or assumed by any investment manager engaged
pursuant to Section 3.1(a) of this Agreement or any other Person under the terms
of any agreement between the Partnership and such investment manager or any
other Person. Specifically, and without limitation, the General Partner will
retain full power and authority on behalf of and in the name of the Partnership:
(1) to issue to any Partner an instrument certifying that the
Partner is the owner of an Interest;
(2) to call and conduct meetings of Partners at the Partnership's
principal office or elsewhere as it may determine, and to assist the
Directors in calling and conducting meetings of the Directors;
(3) to engage and terminate attorneys, accountants (subject to
the provisions of the ▇▇▇▇ ▇▇▇) and other professional advisers and
consultants as the General Partner deems necessary or advisable in
connection with the affairs of the Partnership or as may be directed
by the Directors;
(4) to act as tax matters Partner in accordance with Section
3.1(c) of this Agreement, and to assist in the preparation and filing
of any required tax or information returns to be made by the
Partnership;
(5) as directed by the Directors, to commence, defend and
conclude any action, suit, investigation or other proceeding that
pertains to the Partnership or any assets of the Partnership;
11
(6) as directed by the Directors, to arrange for the purchase of
any insurance covering the potential liabilities of the Partnership or
relating to the performance of the Directors, the General Partner, any
investment manager engaged pursuant to Section 3.1(a) of this
Agreement or any of their principals, Partners, directors, officers,
members, employees and agents;
(7) to execute, deliver and perform any contracts, agreements and
other undertakings, and to engage in activities and transactions that
are necessary or appropriate for the conduct of the business of the
Partnership and to bind the Partnership by those contracts,
agreements, and other undertakings, provided that any persons approved
as officers of the Partnership pursuant to Section 3.3(c) of this
Agreement, as directed by the Directors, may execute and deliver
contracts and agreements on behalf of the Partnership and bind the
Partnership to those contracts and agreements;
(8) to make determinations regarding subscriptions for and/or the
Transfer of Interests, including, without limitation, determinations
regarding the suspension of subscriptions, and to execute, deliver and
perform subscription agreements, placement agency agreements relating
to the placement of Interests, administration agreements appointing an
administrator to perform various administrative action on behalf of
the Partnership, escrow agreements and custodial agreements without
the consent of or notice to any other Person, notwithstanding any
other provision of this Agreement;
(9) to make determinations regarding appropriate reserves to be
created for the contingent, conditional or unmatured liabilities of
the Partnership;
(10) as provided in Section 7.2 of this Agreement, to make
determinations regarding adjustments to the computation of Net Profit
or Net Loss and allocations among the Partners under Article V of this
Agreement;
(11) to manage or oversee the general administrative and
operational aspects of the Partnership; and
(12) as directed by the Directors, to establish additional
classes of Limited Partners, General Partners, or Interests having
separate rights, powers, or duties with respect to specified property
or obligations of the Partnership or profits or losses associated with
specified property or obligations of the Partnership, and having
separate business purposes or investment objectives as the Directors
may determine, consistent with the 1940 Act and the Delaware Act, so
long as the assets and liabilities of one class is limited to the
assets and liabilities of such class.
SECTION 3.3 Actions by Directors. (a) Unless provided otherwise in this
Agreement, the Directors will act only: (1) by the affirmative vote of a
majority of the Directors (which majority will include any requisite number of
Independent Directors required by the ▇▇▇▇ ▇▇▇) present at a meeting duly called
at which a quorum of the Directors is present either in person or, to the extent
consistent with the provisions of the 1940 Act, by conference telephone or other
communications equipment by means of which all Persons participating in the
meeting can hear each other; or (2) by unanimous written
12
consent of all of the Directors without a meeting, if permissible under the 1940
Act. A majority of the Directors then in office will constitute a quorum at any
meeting of Directors.
(b) The Directors may designate from time to time a Director or any
person approved as an officer of the Partnership pursuant to Section 3.3(c)
of this Agreement or the General Partner who will preside at all meetings.
Meetings of the Directors may be called by the General Partner, the
Chairman of the Board of Directors, or any two Directors, and may be held
on any date and at any time and place determined by the Directors. Each
Director will be entitled to receive written notice of the date, time and
place of a meeting within a reasonable time in advance of the meeting.
Notice need not be given to any Director who attends a meeting without
objecting to the lack of notice or who executes a written waiver of notice
with respect to the meeting.
(c) The Directors may appoint from time to time agents and employees
of the Partnership who will have the same powers and duties on behalf of
the Partnership as are customarily vested in officers of a corporation
incorporated under Delaware law, or such other powers and duties as may be
designated by the Directors, in their sole discretion, and designate them
as officers or agents of the Partnership by resolution of the Directors
specifying their titles or functions.
SECTION 3.4 Meetings of Partners. (a) Actions requiring the vote of the
Partners may be taken at any duly constituted meeting of the Partners at which a
quorum is present or by means of a written consent. Meetings of the Partners may
be called by the General Partner, by the affirmative vote of a majority of
Directors then in office, or by Partners holding at least a majority of the
total number of votes eligible to be cast by all Partners, and may be held at
any time, date and place determined by the General Partner in the case of
meetings called by the General Partner or the Partners and at any time, date and
place determined by the Directors in the case of meetings called by the
Directors. In each case, the General Partner will provide notice of the meeting,
stating the date, time and place of the meeting and the record date for the
meeting, to each Partner entitled to vote at the meeting within a reasonable
time prior to the meeting. Failure to receive notice of a meeting on the part of
any Partner will not affect the validity of any act or proceeding of the
meeting, so long as a quorum is present at the meeting. Except as otherwise
required by applicable law, only matters set out in the notice of a meeting may
be voted on by the Partners at the meeting. The presence in person or by proxy
of Partners holding a majority of the total number of votes eligible to be cast
by all Partners as of the record date will constitute a quorum at any meeting of
Partners. In the absence of a quorum, a meeting may be adjourned to the time or
times as determined by the General Partner and communicated to the Directors in
the manner described above in this Section 3.4(a). Except as otherwise required
by any provision of this Agreement or of the 1940 Act, (1) those candidates
receiving a plurality of the votes cast at any meeting of Partners called
pursuant to Section 2.11(c) of this Agreement or elected pursuant to the
requirement of Section 2.11(b) will be elected as Directors and (2) all other
actions of the Partners taken at a meeting will require the affirmative vote of
Partners holding a majority of the total number of votes eligible to be cast by
those Partners who are present in person or by proxy at the meeting.
(b) Each Partner will be entitled to cast at any meeting of Partners
or pursuant to written consent a number of votes equivalent to the
Partner's Investment Percentage as of the record date for the meeting or
the date of the written consent. The General Partner will establish a
record date not less than 10 nor more than 60 days prior to the date of any
meeting of Partners
13
or mailing (including by electronic transmission) to the Partners of any
written consent, to determine eligibility to vote at the meeting and the
number of votes that each Partner will be entitled to cast at the meeting,
and will maintain for each record date a list setting out the name of each
Partner and the number of votes that each Partner will be entitled to cast
at the meeting.
(c) A Partner may vote at any meeting of Partners by a properly
executed proxy transmitted to the Partnership at any time at or before the
time of the meeting by telegram, telecopier or other means of electronic
communication or other readable reproduction as contemplated by the
provisions relating to proxies applicable to corporations incorporated
under the laws of Delaware now or in the future in effect. A proxy may be
suspended or revoked, as the case may be, by the Partner executing the
proxy by a later writing delivered to the Partnership at any time prior to
exercise of the proxy or if the Partner executing the proxy is present at
the meeting and votes in person. Any action of the Partners that is
permitted to be taken at a meeting of the Partners may be taken without a
meeting if consents in writing, setting out the action to be taken, are
signed by Partners holding a majority of the total number of votes eligible
to be cast or any greater percentage as may be required under this
Agreement to approve the action.
SECTION 3.5 Custody of Assets of the Partnership. (a) Notwithstanding
anything to the contrary in this Agreement, the General Partner will not have
any authority to hold or have possession or custody of any funds, Securities or
other property of the Partnership. The physical possession of all funds,
Securities or other property of the Partnership will at all times be held,
controlled and administered by one or more custodians retained by the
Partnership. The General Partner will have no responsibility, other than that
associated with the oversight and supervision of custodians retained by the
Partnership, with respect to the collection of income or the physical
acquisition or safekeeping of the funds, Securities or other property of the
Partnership, all duties of collection, physical acquisition or safekeeping being
the sole obligation of such custodians.
(b) With respect to any Advisor Fund securities held by the
Partnership as of the date on which the Partnership becomes registered with
the SEC as an investment company under the 1940 Act, and during any period
of time in which the Partnership remains so registered, such securities
shall be under the control of one or more of the Partnership's
custodian(s), as may be engaged from time to time, pursuant to Section
17(f) of the 1940 Act and the rules thereunder, and no person shall be
authorized or permitted to have access to such securities except in
accordance with Section 17(f) of the 1940 Act and the rules thereunder, and
consistent with the terms of the Partnership's agreement with the relevant
Partnership custodian.
SECTION 3.6 Other Activities. (a) Neither the General Partner nor its
principals, Partners, directors, officers, members, employees and beneficial
owners nor the Directors will be required to devote full time to the affairs of
the Partnership, but each will devote such time as each may reasonably be
required to perform its obligations under this Agreement and under the ▇▇▇▇ ▇▇▇.
(b) The Directors, any Partner, and any Affiliate of any Partner may
engage in or possess an interest in other business ventures or commercial
dealings of every kind and description, independently or with others,
including, but not limited to, acquisition and disposition of Securities,
provision of investment advisory or brokerage services, serving as
directors, officers, employees, advisors or agents of other companies,
Partners of any Partnership, members of any limited liability company, or
trustees of any trust, or entering into
14
any other commercial arrangements. No Partner will have any rights in or to
such activities of any other Partner, the Directors or any Affiliate of any
Partner or any profits derived from these activities.
(c) The General Partner and its principals, Partners, directors,
officers, members, employees and beneficial owners and the Directors, from
time to time may acquire, possess, manage, hypothecate and dispose of
Securities or other investment assets, and engage in any other investment
transaction for any account over which they exercise discretionary
authority, including their own accounts, the accounts of their families,
the account of any entity in which they have a beneficial interest or the
accounts of others for whom or which they may provide investment advisory
or other services.
(d) To the extent that at law or in equity the Directors or the
General Partner have duties (including fiduciary duties) and liabilities
relating to those duties to the Partnership or to any other Partner or
other Person bound by this Agreement, any such Person acting under this
Agreement will not be liable to the Partnership or to any other Partner or
other Person bound by this Agreement for its good faith reliance on the
provisions of this Agreement. The provisions of this Agreement, to the
extent that they restrict the duties and liabilities of the General Partner
or the Directors otherwise existing at law or in equity, are agreed by the
Partners to replace the other duties and liabilities of the General Partner
or the Directors.
SECTION 3.7 Duty of Care. (a) The Directors and the General Partner,
including any officer, director, Partner, member, principal, employee or agent
of any of them, will not be liable to the Partnership or to any of its Partners
for any loss or damage occasioned by any act or omission in the performance of
the Person's services under this Agreement, in the absence of a final judicial
decision on the merits from which no further right to appeal may be taken that
the loss is due to an act or omission of the Person constituting willful
misfeasance, bad faith, gross negligence or reckless disregard of the Person's
duties under this Agreement.
(b) No Director who has been designated an "audit committee financial
expert" (for purposes of Section 407 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 or
any successor provision thereto, and any rules issued thereunder by the
SEC) in the Partnership's Form N-2 or other reports required to be filed
with the SEC shall be subject to any greater duty of care in discharging
such Director's duties and responsibilities by virtue of such designation
than is any Director who has not been so designated.
(c) Limited Partners not in breach of any obligation under this
Agreement or under any agreement pursuant to which the Limited Partner
subscribed for Interests will be liable to the Partnership, any Partner or
third parties only as required by this Agreement or applicable law.
SECTION 3.8 Indemnification. (a) To the fullest extent permitted by law,
the Partnership will, subject to Section 3.8(c) of this Agreement, indemnify
each General Partner (including for this purpose each officer, director, member,
Partner, principal, employee or agent of, or any Person who controls, is
controlled by or is under common control with, a General Partner (including,
without limitation, Hatteras Investment Partners, LLC) or Partner of a General
Partner, and their executors, heirs, assigns, successors or other legal
representatives) and each Director (and his executors, heirs, assigns,
successors or other legal representatives) (each such Person being referred to
as an "indemnitee") against all losses,
15
claims, damages, liabilities, costs and expenses arising by reason of being or
having been a General Partner or Director of the Partnership, or the past or
present performance of services to the Partnership by the indemnitee, except to
the extent that the loss, claim, damage, liability, cost or expense has been
finally determined in a judicial decision on the merits from which no further
right to appeal may be taken in any such action, suit, investigation or other
proceeding to have been incurred or suffered by the indemnitee by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of the indemnitee's office. These losses, claims,
damages, liabilities, costs and expenses include, but are not limited to,
amounts paid in satisfaction of judgments, in compromise, or as fines or
penalties, and counsel fees and expenses incurred in connection with the defense
or disposition of any action, suit, investigation or other proceeding, whether
civil or criminal, before any judicial, arbitral, administrative or legislative
body, in which the indemnitee may be or may have been involved as a party or
otherwise, or with which such indemnitee may be or may have been threatened,
while in office or thereafter. The rights of indemnification provided under this
Section 3.8 are not to be construed so as to provide for indemnification of an
indemnitee for any liability (including liability under U.S. Federal securities
laws which, under certain circumstances, impose liability even on Persons that
act in good faith) to the extent (but only to the extent) that indemnification
would be in violation of applicable law, but will be construed so as to
effectuate the applicable provisions of this Section 3.8.
(b) Expenses, including counsel fees and expenses, incurred by any
indemnitee (but excluding amounts paid in satisfaction of judgments, in
compromise, or as fines or penalties) may be paid from time to time by the
Partnership in advance of the final disposition of any action, suit,
investigation or other proceeding upon receipt of an undertaking by or on
behalf of the indemnitee to repay to the Partnership amounts paid if a
determination is made that indemnification of the expenses is not
authorized under Section 3.8(a) of this Agreement, so long as (1) the
indemnitee provides security for the undertaking, (2) the Partnership is
insured by or on behalf of the indemnitee against losses arising by reason
of the indemnitee's failure to fulfill his, her or its undertaking, or (3)
a majority of the Independent Directors (excluding any Director who is
either seeking advancement of expenses under this Agreement or is or has
been a party to any other action, suit, investigation or other proceeding
involving claims similar to those involved in the action, suit,
investigation or proceeding giving rise to a claim for advancement of
expenses under this Agreement) or independent legal counsel in a written
opinion determines, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that reason exists to believe that
the indemnitee ultimately will be entitled to indemnification.
(c) As to the disposition of any action, suit, investigation or other
proceeding (whether by a compromise payment, pursuant to a consent decree
or otherwise) without an adjudication or a decision on the merits by a
court, or by any other body before which the proceeding has been brought,
that an indemnitee is liable to the Partnership or its Partners by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard
of the duties involved in the conduct of the indemnitee's office,
indemnification will be provided in accordance with Section 3.8(a) of this
Agreement if (1) approved as in the best interests of the Partnership by a
majority of the Independent Directors (excluding any Director who is either
seeking indemnification under this Agreement or is or has been a party to
any other action, suit, investigation or proceeding involving claims
similar to those involved in the action, suit, investigation or proceeding
giving rise to a claim for indemnification under this Agreement) upon a
determination, based upon a review of readily available facts (as opposed
to a full trial-type inquiry), that the indemnitee acted in good faith and
in the reasonable belief that the actions
16
were in the best interests of the Partnership and that the indemnitee is
not liable to the Partnership or its Partners by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of the indemnitee's office, or (2) the
Directors secure a written opinion of independent legal counsel, based upon
a review of readily available facts (as opposed to a full trial-type
inquiry), to the effect that indemnification would not protect the
indemnitee against any liability to the Partnership or its Partners to
which the indemnitee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of the indemnitee's office.
(d) Any indemnification or advancement of expenses made in accordance
with this Section 3.8 will not prevent the recovery from any indemnitee of
any amount if the indemnitee subsequently is determined in a final judicial
decision on the merits in any action, suit, investigation or proceeding
involving the liability or expense that gave rise to the indemnification or
advancement of expenses to be liable to the Partnership or its Partners by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of the indemnitee's office.
In any suit brought by an indemnitee to enforce a right to indemnification
under this Section 3.8, it will be a defense that the indemnitee has not
met the applicable standard of conduct described in this Section 3.8. In
any suit in the name of the Partnership to recover any indemnification or
advancement of expenses made in accordance with this Section 3.8, the
Partnership will be entitled to recover the expenses upon a final
adjudication from which no further right of appeal may be taken. In any
suit brought to enforce a right to indemnification or to recover any
indemnification or advancement of expenses made in accordance with this
Section 3.8, the burden of proving that the indemnitee is not entitled to
be indemnified, or to any indemnification or advancement of expenses, under
this Section 3.8 will be on the Partnership (or any Partner acting
derivatively or otherwise on behalf of the Partnership or its Partners).
(e) An indemnitee may not satisfy any right of indemnification or
advancement of expenses granted in this Section 3.8 or to which he, she or
it may otherwise be entitled except out of the assets of the Partnership,
and no Partner will be personally liable with respect to any such claim for
indemnification or advancement of expenses.
(f) The rights of indemnification provided in this Section 3.8 will
not be exclusive of or affect any other rights to which any Person may be
entitled by contract or otherwise under law. Nothing contained in this
Section 3.8 will affect the power of the Partnership to purchase and
maintain liability insurance on behalf of any General Partner, any
Director, the Investment Manager or other Person.
(g) The General Partner may enter into agreements indemnifying Persons
providing services to the Partnership to the same, lesser or greater extent
as set out in this Section 3.8.
SECTION 3.9 Fees, Expenses and Reimbursement
(a) So long as the Partnership invests all of its investable assets in
the Master Partnership, the Partnership will not directly pay a management
fee; however, the Fund's Partners bear an indirect share of the Master
Partnership's management fee through the Partnership's investment in the
Master Partnership. The amount of the Partnership's share of the
17
Management Fee will be charged pro rata to the Capital Account of each
Limited Partner based on the value of the Capital Account of each Limited
Partner as of the end of business of the first Business Day of each fiscal
quarter, after adjustment for any subscriptions effective on that date and
before giving effect to any repurchase of interests in the Partnership or
portions of interests in the Partnership effective as of that date. The
Partnership's share will be due and payable in advance within five Business
Days after the beginning of each fiscal quarter.
(b) The Partnership will compensate each Independent Director for his
or her services rendered in connection with the Partnership as may be
agreed to by the Independent Directors and the General Partner, and as
described in the Memorandum. In addition, the Partnership will reimburse
the Directors for reasonable out-of-pocket expenses incurred by them in
performing their duties with respect to the Partnership.
(c) The Partnership will bear all expenses incurred in connection with
its business. Expenses to be borne by the Partnership include, but are not
limited to, the following:
(1) The Partnership's pro rata share of the management fee, and
other fees and expenses, of the Master Partnership;
(2) all investment-related expenses, including, but not limited
to, fees paid and expenses reimbursed, directly or indirectly, to
Advisors (including management fees, performance or incentive fees or
allocations and redemption or withdrawal fees, however titled or
structured), all costs and expenses directly related to portfolio
transactions and positions for the Partnership's account, such as
direct and indirect expenses associated with the Partnership's
investments, including its investments in Advisor Funds (whether or
not consummated), and enforcing the Partnership's rights in respect of
such investments, transfer taxes and premiums, taxes withheld on
non-U.S. dividends, costs and fees for data and software (including
software providers and dedicated software employed by the Partnership
and designed to assist an investment manager to keep track of the
investments in the Advisor Funds and Advisor Accounts), research
expenses, professional fees (including, without limitation, the fees
and expenses of consultants, attorneys and experts) and, if
applicable, in connection with the Partnership's temporary or cash
management investments, brokerage commissions, interest and commitment
fees on loans and debit balances, borrowing charges on Securities sold
short, dividends on Securities sold but not yet purchased and margin
fees;
(3) costs associated with the registration of the Partnership,
including the costs of compliance with any applicable U.S. federal and
state laws;
(4) an investor servicing fee to be paid to the investor
servicing agent, if any;
(5) any non-investment-related interest expense;
(6) attorneys' fees and disbursements associated with preparing
and updating any Offering Materials and with reviewing subscription
materials in connection with qualifying prospective investors or
prospective holders of Transferred Interests;
18
(7) fees and disbursements of any accountants engaged by the
Partnership, and expenses related to the annual audit of the
Partnership and compliance with any applicable U.S. Federal or state
laws;
(8) fees paid and out-of-pocket expenses reimbursed to the
Partnership's administrator;
(9) recordkeeping, accounting, escrow, and custody fees and
expenses;
(10) the costs of an errors and omissions/directors' and
officers' liability insurance policy and a fidelity bond;
(11) the costs of preparing and mailing reports and other
communications, including proxy, tender offer correspondence or
similar materials, to Limited Partners;
(12) fees of Independent Directors and travel expenses of
Directors relating to meetings of the Board of Directors and
committees thereof, and costs and expenses of holding meetings of the
Board of Directors and meetings of the Partners;
(13) all costs and charges for equipment or services used in
preparing or communicating information regarding the Partnership's
transactions or the valuation of its assets between the General
Partner and any custodian, administrator or other agent engaged by the
Partnership;
(14) any extraordinary expenses, including indemnification
expenses as provided for in Section 3.8 of this Agreement;
(15) the Fund's proportionate share of the fees and expenses of
the Master Partnership and the fees and expenses of the Advisor Funds
and Advisor Accounts (borne indirectly by the Fund through its
investment in the Master Partnership);
(16) any other expenses as may be approved from time to time by
the Directors, other than those required to be borne by an investment
manager or the General Partner; and
(17) the organizational and offering expenses of the Partnership
which will initially be borne by Hatteras Investment Partners LLC or
an affiliate thereof and will be expensed by the Partnership upon
commencement of operations. The Partnership will account for these
expenditures, through monthly expense allocations (or at such other
frequency or times as the Board of Directors may direct) to Limited
Partners' Capital Accounts, for a period not to exceed the first sixty
months after the Closing Date. The amount of each such expense
allocation to the Limited Partners' Capital Accounts will be
determined by the Directors and Hatteras Investment Partners LLC and
will equal an amount sufficient to reimburse the Investment Manager or
affiliate thereof within a sixty-month period.
19
(d) The General Partner will be entitled to reimbursement from the
Partnership for any of the above expenses that it pays on behalf of the
Partnership, other than as provided in Section 3.9(c)(14) above.
ARTICLE IV
TERMINATION OF STATUS OF GENERAL PARTNER;
REMOVAL OF GENERAL PARTNER; TRANSFERS AND REPURCHASES
SECTION 4.1 Termination of Status of General Partner. A General Partner
will cease to be a general partner of the Partnership if the General Partner (a)
is dissolved or otherwise terminates its existence; (b) voluntarily withdraws as
General Partner (which it may do at any time in its sole discretion); (c) is
removed; (d) Transfers its entire Interest as General Partner as permitted under
Section 4.3 of this Agreement and the Person to which the Interest is
Transferred is admitted as a substituted General Partner under Section 2.6(a) of
this Agreement; or (e) otherwise ceases to be a General Partner under the
Delaware Act.
SECTION 4.2 Removal of General Partner. Any General Partner may be removed
by the vote or written consent of Partners holding not less than 80% of the
total number of votes eligible to be cast by all Partners.
SECTION 4.3 Transfer of Interest of General Partner. A General Partner may
not Transfer all or any portion of its Interest as the General Partner except to
Persons who have agreed to be bound by all of the terms of this Agreement and
applicable law. If a General Partner Transfers its entire Interest as General
Partner, it will not cease to be a General Partner unless and until the
transferee is admitted to the Partnership as a substituted General Partner
pursuant to Section 2.6(a) of this Agreement. In executing this Agreement, each
Partner is deemed to have consented to any Transfer contemplated by this Section
4.3.
SECTION 4.4 Transfer of Interests of Limited Partners. (a) Any Interest or
portion of any Interest held by a Limited Partner may be Transferred only (1) by
operation of law pursuant to the death, bankruptcy, insolvency, adjudicated
incompetence, or dissolution of the Limited Partner; or (2) under certain
limited instances set out in this Agreement, with the written consent of the
General Partner (which may be withheld in the General Partner's sole and
absolute discretion). Unless the Partnership consults with legal counsel to the
Partnership and counsel confirms that the Transfer will not cause the
Partnership to be treated as a "publicly traded partnership" taxable as a
corporation, however, the General Partner may not consent to a Transfer unless
the following conditions are met: (i) the Transferring Limited Partner has been
a Limited Partner for at least six months; (ii) the proposed Transfer is to be
made on the effective date of an offer by the Partnership to repurchase
Interests; and (iii) the Transfer is (A) one in which the tax basis of the
Interest in the hands of the transferee is determined, in whole or in part, by
reference to its tax basis in the hands of the Transferring Limited Partner
(e.g., certain Transfers to affiliates, gifts and contributions to family
entities), (B) to members of the Transferring Limited Partner's immediate family
(siblings, spouse, parents and children), or (C) a distribution from a qualified
retirement plan or an individual retirement account. In addition, the General
Partner may not consent to a Transfer unless the Person to whom or which an
Interest or portion of an Interest is Transferred (or each of the Person's
equity owners if the Person is a "private investment company" as defined in Rule
205-3(d)(3) under the Advisers Act, an investment company registered under the
1940 Act, or a business development company as defined under the Advisers Act)
is a Person
20
whom or which the General Partner believes is an "accredited investor" as
defined in Regulation D under the 1933 Act and meets the requirements of
paragraph (d)(1) of Rule 205-3 under the Advisers Act or successor provision of
any of those rules, or is otherwise exempt from the requirements of those rules.
In the event that other investor eligibility requirements are established by the
Partnership, the Person to whom or which an Interest or portion of an Interest
is Transferred must satisfy these other requirements. If any transferee does not
meet the investor eligibility requirements described in this Section 4.4(a), the
General Partner may not consent to the Transfer. In addition, no Limited Partner
will be permitted to Transfer his, her or its Interest or portion of an Interest
unless after the Transfer the balance of the Capital Account of the transferee,
and of the Limited Partner Transferring less than such Partner's entire
Interest, is at least equal to the amount of the Limited Partner's initial
Capital Contribution. Any permitted transferee will be entitled to the
allocations and distributions allocable to the Interest or portion of an
Interest so acquired and to Transfer the Interest or portion of an Interest in
accordance with the terms of this Agreement, but will not be entitled to the
other rights of a Limited Partner unless and until the transferee becomes a
substituted Limited Partner. If a Limited Partner Transfers an Interest or
portion of an Interest with the approval of the General Partner, the General
Partner will promptly take all necessary actions so that each transferee or
successor to whom or to which the Interest or portion of an Interest is
Transferred is admitted to the Partnership as a Limited Partner. The admission
of any transferee as a substituted Limited Partner will be effective upon the
execution and delivery by, or on behalf of, the substituted Limited Partner of
this Agreement or an instrument that constitutes the execution and delivery of
this Agreement. Each Limited Partner and transferee agrees to pay all expenses,
including attorneys' and accountants' fees, incurred by the Partnership in
connection with any Transfer. In connection with any request to Transfer an
Interest or portion of an Interest, the Partnership may require the Limited
Partner requesting the Transfer to obtain, at the Limited Partner's expense, an
opinion of counsel selected by the General Partner as to such matters as the
General Partner may reasonably request. If a Limited Partner Transfers its
entire Interest as a Limited Partner, it will not cease to be a Limited Partner
unless and until the transferee is admitted to the Partnership as a substituted
Limited Partner in accordance with this Section 4.4(a).
(b) Each Limited Partner will indemnify and hold harmless the
Partnership, the General Partner, the Directors, each other Limited Partner
and any Affiliate of the Partnership, the General Partner (including,
without limitation, Hatteras Investment Partners, LLC), the Director and
each of the other Limited Partners against all losses, claims, damages,
liabilities, costs and expenses (including legal or other expenses incurred
in investigating or defending against any losses, claims, damages,
liabilities, costs and expenses or any judgments, fines and amounts paid in
settlement), joint or several, to which these Persons may become subject by
reason of or arising from (1) any Transfer made by the Limited Partner in
violation of this Section 4.4(b) and (2) any misrepresentation by the
Transferring Limited Partner or substituted Limited Partner in connection
with the Transfer. A Limited Partner Transferring an Interest may be
charged reasonable expenses, including attorneys' and accountants' fees,
incurred by the Partnership in connection with the Transfer.
SECTION 4.5 Repurchase of Interests. (a) Except as otherwise provided in
this Agreement, no Partner or other Person holding an Interest or portion of an
Interest will have the right to withdraw or tender an Interest or portion of an
Interest to the Partnership for repurchase. The Directors may, from time to
time, in their complete and exclusive discretion and on terms and conditions as
they may determine, cause the Partnership to repurchase Interests or portions of
Interests in accordance with written tenders. The Partnership will not offer,
however, to repurchase Interests or portions of Interests
21
on more than four occasions during any one Fiscal Year, unless the Partnership
has been advised by its legal counsel that more frequent offers would not cause
any adverse tax consequences to the Partnership or the Partners. In determining
whether to cause the Partnership to repurchase Interests or portions of
Interests, pursuant to written tenders, the Directors will consider the
following factors, among others:
(1) whether any Partners have requested to tender Interests or
portions of Interests;
(2) the liquidity of the Partnership's assets (including fees and
costs associated with withdrawing from Advisor Funds);
(3) the investment plans and working capital and reserve
requirements of the Partnership;
(4) the relative economies of scale with respect to the size of
the Partnership;
(5) the history of the Partnership in repurchasing Interests or
portions of Interests;
(6) the availability of information as to the value of the
Partnership's interests in the Advisor Funds and Advisor Accounts;
(7) existing conditions of the securities markets and the economy
generally, as well as political, national or international
developments or current affairs;
(8) the anticipated tax consequences to the Partnership of any
proposed repurchases of Interests or portions of Interests; and
(9) the recommendations of the General Partner.
The Directors will cause the Partnership to repurchase Interests or
portions of Interests in accordance with written tenders only on terms fair
to the Partnership and to all Partners and Persons holding Interests or
portions of Interests acquired from Partners.
(b) Upon the commencement of an offer to repurchase Interests, the
Partnership will send an advance notification of the offer (the "Notice")
to the Partners via their financial intermediaries. The Notice will
specify, among other things:
(1) the percentage of Interests that the Partnership is offering
to repurchase;
(2) the date on which a Partner's repurchase request is due;
(3) the Valuation Date (as defined in Section 4.5(d) below)
applicable to the repurchase offer;
(4) the date the proceeds from their Interest sales shall be due
to the Partners; and
(5) the value of the Interests as of the date of the Notice.
22
(c) Each repurchase offer will be limited to the repurchase of
approximately 5% of the Interests (but in no event to exceed the repurchase
of more than 20% of the Interests per quarter). A Partner who has been a
Partner for less than 12 consecutive months prior to the Valuation Date of
such repurchase offer, may participate in such offer subject to a penalty
of up to 5% of the amount requested to be repurchased (to be netted against
withdrawal proceeds). The minimum value of a repurchase is $50,000, subject
to the discretion of the General Partner to allow otherwise. A Partner
whose Interest, or a portion thereof, is repurchased by the Partnership
will not be entitled to a return of any placement fee that was charged in
connection with the Partner's purchase of the Interest.
(d) Interests are expected to be repurchased at their net asset value
determined as of approximately June 30, September 30, December 31 and March
31, as applicable (each such date, a "Valuation Date"). Partners tendering
Interests for repurchase shall provide written notice of their intent to so
tender by the date specified in the Notice, which date shall be
approximately 65 days prior to the date of repurchase by the Partnership.
Partners tendering their Interests may not have all such Interests accepted
for repurchase by the Partnership. The Partnership may elect to repurchase
less than the full amount a Partner requests to be repurchased. If a
repurchase offer is oversubscribed, the Partnership will repurchase only a
pro rata portion of the amount tendered by each Partner.
(e) The Directors may under certain circumstances elect to postpone,
suspend or terminate an offer to repurchase Interests.
(f) A Limited Partner tendering a portion of its Interests for
repurchase will be required to maintain a minimum capital account balance
of $1,000,000. The Partnership may reduce the portion of Interests to be
purchased from a Limited Partner to maintain the required minimum balance.
Such minimum balance requirement may be waived by the General Partner in
its sole discretion, subject to applicable federal securities laws.
Additionally, the General Partner may, in its discretion, cause the
Partnership to repurchase a Limited Partner's entire Interest if the
Limited Partner's Capital Account balance in the Partnership, as a result
of repurchase or Transfer requests by the Limited Partner, is less than
$1,000,000 or such other minimum amount established by the General Partner
from time to time in its sole discretion.
(g) Except as provided in Section 4.5(h) of this Agreement, a General
Partner may tender its Interest or portion of an Interest under Section
4.5(a) of this Agreement only if and to the extent that (1) the repurchase
would not cause the value of the Capital Account of the General Partner to
be less than the value required to be maintained under Section 5.1(b) of
this Agreement and (2) in the view of legal counsel to the Partnership, the
repurchase would not jeopardize the classification of the Partnership as a
partnership for U.S. federal income tax purposes.
(h) If a General Partner ceases to serve in that capacity under
Section 4.1 of this Agreement (other than pursuant to Section 4.1(d)) and
the business of the Partnership is continued in accordance with Section
6.1(a)(2)(B) of this Agreement, the former General Partner (or its trustee
or other legal representative) may, by written notice to the Directors
within 60 days of the action resulting in the continuation of the
Partnership under Section 6.1(a)(2)(B), tender to the Partnership all or
any portion of its Interest. Within 30 days after the receipt of notice,
the
23
Directors will cause the Interest or portion of an Interest to be
repurchased by the Partnership for cash in an amount equal to the balance
of the former General Partner's Capital Account or applicable portion of
the Capital Account. If the former General Partner does not tender to the
Partnership all of its Interest as permitted by this Section 4.5(h), the
Interest will automatically convert to and will be treated in all respects
as the Interest of a Limited Partner. If the General Partner ceases to
serve in this capacity under Section 4.1 of this Agreement (other than
pursuant to Section 4.1(d)) and the Partnership is not continued under
Section 6.1(a)(2)(B) of this Agreement, the liquidation and distribution
provisions of Article VI of this Agreement will apply to the General
Partner's Interest.
(i) The General Partner may cause the Partnership to repurchase an
Interest or portion of an Interest of a Limited Partner or any Person
acquiring an Interest from or through a Limited Partner, on terms fair to
the Partnership and to the Limited Partner or Person acquiring an Interest
from or through such Limited Partner, in the event that the General
Partner, in its sole discretion, determines or has reason to believe that:
(1) the Interest or portion of an Interest has been Transferred
in violation of Section 4.4 of this Agreement, or the Interest or
portion of an Interest has vested in any Person other than by
operation of law as the result of the death, dissolution, bankruptcy,
insolvency or adjudicated incompetence of the Limited Partner;
(2) ownership of the Interest or portion of an Interest by a
Partner or other Person is likely to (A) cause the Partnership to be
in violation of, or (B) (x) require registration of any Interest or
portion of any Interest under, or (y) subject the Partnership to
additional registration or regulation under, the securities,
commodities or other laws of the United States or any other relevant
jurisdiction;
(3) continued ownership of the Interest or portion of an Interest
may be harmful or injurious to the business or reputation of the
Partnership, the Directors, the General Partner or any of their
Affiliates, or may subject the Partnership or any of the Partners to
an undue risk of adverse tax or other fiscal or regulatory
consequences;
(4) any of the representations and warranties made by a Partner
or other Person in connection with the acquisition of the Interest or
portion of an Interest was not true when made or has ceased to be
true;
(5) with respect to a Limited Partner subject to special
regulatory or compliance requirements, such as those imposed by ERISA,
the Bank Holding Company Act or certain Federal Communication
Commission regulations (collectively, "Special Laws or Regulations"),
such Limited Partner will likely be subject to additional regulatory
or compliance requirements under these Special Laws or Regulations by
virtue of continuing to hold an Interest or portion of an Interest; or
(6) it would be in the best interests of the Partnership, as
determined by the General Partner or the Directors, for the
Partnership to repurchase the Interest or portion of an Interest.
24
(j) Payments for accepted repurchases of Interests of less than 90% of
a Partner's Capital Account generally will be paid approximately 90 days
after the Valuation Date (after adjusting for fees, expenses, reserves or
other allocations or repurchase) and will be subject to adjustment within
45 days after completion of the annual audit of the Partnership for the
applicable Fiscal Year. Such annual audit may be delayed in the event that
information necessary to complete the annual audit is not received on a
timely basis from the Master Partnership or the Advisors. Payments for
accepted repurchases of interests for 90% or more of a Partner's Capital
Account may be paid in two installments. Payment of an amount equal to at
least 90% of the interests repurchased (after adjusting for fees, expenses,
reserves or other allocations or repurchase) generally will be made
approximately 90 days after the Valuation Date. Final settlement of
payments in connection with the repurchased Interests generally will be
made within 45 days after completion of the annual audit of the Partnership
for the applicable Fiscal Year. Payments in connection with repurchased
interests may be delayed if such information is delayed. Notwithstanding
anything to the contrary in this Section 4.5(j), the Directors, in their
discretion, may cause the Partnership to pay all or any portion of the
repurchase price in Securities (or any combination of Securities and cash)
having a value, determined as of the date of repurchase, equal to the
amount to be repurchased. All repurchases of Interests or portions of
Interest will be subject to any and all conditions as the Directors may
impose in their sole discretion. The General Partner may, in its
discretion, cause the Partnership to repurchase a Limited Partner's entire
Interest, if the Limited Partner's Capital Account balance in the
Partnership, as a result of repurchase or Transfer requests by the Limited
Partner, is less than a minimum amount that may be established by the
General Partner from time to time in its sole discretion. Subject to the
procedures of this Section 4.5(j), the amount due to any Partner whose
Interest or portion of an Interest is repurchased will be equal to the
value of the Partner's Capital Account or portion of such Capital Account,
as of the applicable Valuation Date, after giving effect to all allocations
to be made to the Partner's Capital Account as of that date. If a Limited
Partner's entire Interest is repurchased, that Limited Partner will cease
to be a Limited Partner.
ARTICLE V
CAPITAL
SECTION 5.1 Contributions to Capital. (a) The minimum initial Capital
Contribution of each Limited Partner will be $1,000,000 or such other amount as
the General Partner determines from time to time. The amount of the initial
Capital Contribution of each Partner will be recorded by the Partnership upon
acceptance as a contribution to the capital of the Partnership. Each Limited
Partner's entire initial Capital Contribution will be paid to the Partnership
immediately prior to the Partnership's acceptance of the Limited Partner's
subscription for Interests, unless otherwise agreed by the Partnership and such
Limited Partner.
(b) The Limited Partners may make additional Capital Contributions
effective as of those times and in amounts as the General Partner may
permit, but no Limited Partner will be obligated to make any additional
Capital Contribution except to the extent provided in Sections 5.5 and 5.7
of this Agreement. Each additional Capital Contribution made by a Limited
Partner (other than a contribution made pursuant to Section 5.5 or Section
5.7 of this Agreement) will be in the minimum amount of $100,000 or such
other amount as the General Partner determines from time to time.
25
(c) A General Partner may make additional Capital Contributions
effective as of those times and in such amounts as it determines, and will
be required to make additional Capital Contributions from time to time to
the extent necessary to maintain the balance of its Capital Account at an
amount, if any, necessary to ensure that the Partnership will be treated as
a Partnership for U.S. federal income tax purposes. Except as provided in
this Section 5.1 or in the Delaware Act, no General Partner will be
required or obligated to make any additional contributions to the capital
of the Partnership.
(d) Subject to the provisions of the 1940 Act, and except as otherwise
permitted by the General Partner, (1) initial and any additional Capital
Contributions by any Partner will be payable in cash or in Securities that
the General Partner, in its absolute discretion, causes the Partnership to
accept, and (2) initial and any additional Capital Contributions in cash
will be payable in readily available funds at the date of the proposed
acceptance of the contribution. The Partnership will charge each Partner
making a Capital Contribution in Securities to the capital of the
Partnership an amount as may be determined by the General Partner to
reimburse the Partnership for any costs incurred by the Partnership by
reason of accepting the Securities, and any charge will be due and payable
by the contributing Partner in full at the time the Capital Contribution to
which the charges relate is due. The value of contributed Securities will
be determined in accordance with Section 7.3 of this Agreement as of the
date of contribution.
(e) An Advisor may make Capital Contributions and own Interests in the
Partnership and, in so doing, will become a Limited Partner with respect to
the contributions.
(f) The minimum initial and additional contributions set out in
paragraphs (a) and (b) of this Section 5.1 may be increased or reduced by
the General Partner from time to time. Reductions may be applied to all
investors, individual investors or to classes of investors, in each case in
the sole discretion of the General Partner.
SECTION 5.2 Rights of Partners to Capital. No Partner will be entitled to
interest on the Partner's Capital Contribution, nor will any Partner be entitled
to the return of any capital of the Partnership except (a) upon the repurchase
by the Partnership of all or a portion of the Partner's Interest in accordance
with Section 4.5 of this Agreement, (b) in accordance with the provisions of
Section 5.7(b) of this Agreement or (c) upon the liquidation of the
Partnership's assets in accordance with Section 6.2 of this Agreement. Except as
specified in the Delaware Act, or with respect to distributions or similar
disbursements made in error, no Partner will be liable for the return of any
such amounts. To the fullest extent permitted by applicable law, no Partner will
have the right to require partition of the Partnership's property or to compel
any sale or appraisal of the Partnership's assets.
SECTION 5.3 Capital Accounts. (a) The Partnership will maintain a separate
Capital Account for each Partner.
(b) Each Partner's Capital Account will have an initial balance equal
to the amount of cash and the value of any Securities (determined in
accordance with Section 7.3 of this Agreement) constituting the Partner's
initial Capital Contribution.
(c) Each Partner's Capital Account will be increased by the sum of (1)
the amount of cash and the value of any Securities (determined in
accordance with Section 7.3 of this
26
Agreement) constituting additional Capital Contributions by the Partner
permitted under Section 5.1 of this Agreement, plus (2) any amount credited
to the Partner's Capital Account under Sections 5.4 through 5.8 of this
Agreement.
(d) Each Partner's Capital Account will be reduced by the sum of (1)
the amount of any repurchase of the Interest or portion of the Interest of
the Partner or distributions to the Partner under Section 4.5, 5.11 or 6.2
of this Agreement that are not reinvested, plus (2) any amounts debited
against the Partner's Capital Account under Sections 5.4 through 5.8 of
this Agreement.
(e) In the event all or a portion of the Interest of a Partner is
Transferred in accordance with the terms of this Agreement, the transferee
will succeed to the Capital Account of the transferor to the extent of the
Transferred Interest or portion of an Interest.
(f) Subject to Section 5.7 of this Agreement, no Partner will be
required to pay to the Partnership or any other Partner any deficit in such
Partner's Capital Account upon dissolution of the Partnership or otherwise.
SECTION 5.4 Allocation of Net Profit and Loss. Subject to Sections 5.6 and
5.8 of this Agreement, as of the last day of each Fiscal Period, any Net Profit
or Net Loss for the Fiscal Period will be allocated among and credited to or
debited against the Capital Accounts of the Partners in accordance with their
respective Investment Percentages for the Fiscal Period.
SECTION 5.5 Allocation of Certain Withholding Taxes and Other Expenditures.
(a) If the Partnership incurs a withholding tax or other tax obligation with
respect to the share of Partnership income allocable to any Partner, then the
General Partner, without limitation of any other rights of the Partnership or
the General Partner, will cause the amount of the obligation to be debited
against the Capital Account of the Partner when the Partnership pays the
obligation, and any amounts then or in the future distributable to the Partner
will be reduced by the amount of the taxes. If the amount of the taxes is
greater than any distributable amounts, then the Partner and any successor to
the Partner's Interest or portion of an Interest will pay to the Partnership as
a Capital Contribution, upon demand by the General Partner, the amount of the
excess. A General Partner will not be obligated to apply for or obtain a
reduction of or exemption from withholding tax on behalf of any Partner that may
be eligible for the reduction or exemption, except that, in the event that the
General Partner determines that a Partner is eligible for a refund of any
withholding tax, the General Partner may, at the request and expense of the
Partner, assist the Partner in applying for such refund.
(b) Except as otherwise provided for in this Agreement and unless
prohibited by the 1940 Act, any expenditures payable by the Partnership, to
the extent determined by the General Partner to have been paid or withheld
on behalf of, or by reason of particular circumstances applicable to, one
or more but fewer than all of the Partners, will be charged to only those
Partners on whose behalf the payments are made or whose particular
circumstances gave rise to such payments. The charges will be debited from
the Capital Accounts of the Partners as of the close of the Fiscal Period
during which the items were paid or accrued by the Partnership.
27
SECTION 5.6 Performance Incentive.
(a) So long as the General Partner continues to serve in that
capacity, and for each Limited Partner for which the Partnership Return
earned by the Limited Partner for the applicable Incentive Period exceeds
the greater of the Hurdle Rate for that Incentive Period or (2) the Loss
Carryforward Amount, if any, the Performance Incentive will be debited
against the Capital Account of that Limited Partner as of the last day of
the Incentive Period, and the amount so debited will be credited
simultaneously to the Capital Account of the General Partner, or, subject
to compliance with the 1940 Act and the Advisers Act, to the Capital
Accounts of the Partners as have been designated in any written notice
delivered by the General Partner to the Partnership within 90 days after
the close of the Incentive Period.
(b) Within 30 days after the close of each Incentive Period with
respect to each Limited Partner, the General Partner may withdraw up to
100% of the Performance Incentive (computed on the basis of unaudited data)
that was credited to the Capital Account of the General Partner, and
debited from the Limited Partner's Capital Account with respect to the
Incentive Period. The Partnership may pay the General Partner the undrawn
balance, if any, of the Performance Incentive (subject to audit
adjustments) within 30 days after the completion of the audit of the
Partnership's accounts pursuant to Section 7.1 of this Agreement.
SECTION 5.7 Reserves. (a) The General Partner may cause appropriate
reserves to be created, accrued and charged by the Partnership against Net
Assets and proportionately against the Capital Accounts of the Partners for
contingent liabilities, if any, as of the date any contingent liability becomes
known to the General Partner, the reserves to be in the amounts that the General
Partner in its sole discretion deems necessary or appropriate. The General
Partner may increase or reduce any reserves from time to time by amounts as it
in its sole discretion deems necessary or appropriate. The amount of any
reserve, or any increase or decrease in a reserve, will be proportionately
charged or credited to the Capital Accounts of those Persons who or that are
Partners at the time the reserve is created, or increased or decreased, except
that if any individual reserve item, adjusted by any increase in the item,
exceeds the lesser of $500,000 or 1% of the aggregate value of the Capital
Accounts of all of those Partners, then the amount of the reserve, increase or
decrease may instead, at the discretion of the General Partner, be charged or
credited to those Persons who or that were Partners at the time, as determined
by the General Partner in its sole discretion, of the act or omission giving
rise to the contingent liability for which the reserve was established,
increased or decreased in proportion to their Capital Accounts.
(b) If any amount is required by Section 5.7(a) of this Agreement to
be charged or credited to a Person who or that is no longer a Partner, the
amount will be paid by or to the party, in cash, with interest from the
date on which the General Partner determines that the charge or credit is
required. In the case of a charge, the former Partner will be obligated to
pay as a Capital Contribution the amount of the charge, plus interest as
provided in this Section 5.7(b), to the Partnership on demand, except that
(1) in no event will a former Partner be obligated to make a payment
exceeding the amount of the Partner's Capital Account at the time to which
the charge relates and (2) no demand will be made after the expiration of
three years from the date on which the Person ceased to be a Partner. To
the extent that a former Partner fails to pay to the Partnership, in full,
any amount required to be charged to the former Partner under Section
5.7(a) of this Agreement, the deficiency will be charged proportionately to
the Capital Accounts of the
28
Partners at the time of the act or omission giving rise to the charge to
the extent feasible, and otherwise proportionately to the Capital Accounts
of the current Partners.
SECTION 5.8 Allocation to Avoid Capital Account Deficits. To the extent
that any debits under Sections 5.4 through 5.7 of this Agreement would reduce
the balance of the Capital Account of any Limited Partner below zero, that
portion of any such debits will be allocated instead to the Capital Account of
the General Partner. Any credits in any subsequent Fiscal Period that otherwise
would be allocable under Sections 5.4 through 5.7 of this Agreement to the
Capital Account of any Limited Partner previously affected by the application of
this Section 5.8 will instead be allocated to the Capital Account of the General
Partner in amounts necessary to offset all previous debits attributable to the
Limited Partner, made in accordance with this Section 5.8, that have not been
recovered.
SECTION 5.9 Allocations Prior to Closing Date. Any net cash profits or any
net cash losses realized by the Partnership from the purchase or sale of
Securities during the period ending on the day prior to the Closing Date will be
allocated to the Capital Account of the General Partner. No unrealized item of
profit or loss will be allocated under this Section 5.9 to the Capital Account
of any Partner.
SECTION 5.10 Tax Allocations. For each taxable year of the Partnership,
items of income, deduction, gain, loss or credit will be allocated for income
tax purposes among the Partners in a manner so as to reflect equitably amounts
credited or debited to each Partner's Capital Account for the current and prior
taxable years (or relevant portions of those years). Allocations under this
Section 5.10 will be made in accordance with the principles of Sections 704(b)
and 704(c) of the Code, and in conformity with Treasury Regulations promulgated
under these Sections, or the successor provisions to such Sections and
Regulations. Notwithstanding anything to the contrary in this Agreement, the
Partnership will allocate to the Partners those gains or income necessary to
satisfy the "qualified income offset" requirement of Treasury Regulations
Section 1.704-1(b)(2)(ii)(d). If the Partnership realizes net capital gains for
U.S. federal income tax purposes for any taxable year during or as of the end of
which one or more Positive Basis Partners (as defined in this Section 5.10)
withdraw from the Partnership under Article IV or VI of this Agreement, the
General Partner may elect to allocate net gains as follows: (a) to allocate net
gains among Positive Basis Partners, in proportion to the Positive Basis (as
defined in this Section 5.10) of each Positive Basis Partner, until either the
full amount of the net gains has been so allocated or the Positive Basis of each
Positive Basis Partner has been eliminated, and (b) to allocate any net gains
not so allocated to Positive Basis Partners to the other Partners in a manner
that reflects equitably the amounts credited to the Partners' Capital Accounts.
If the Partnership realizes capital losses for U.S. federal income tax purposes
for any Fiscal Year during or as of the end of which one or more Negative Basis
Partners (as defined in this Section 5.10) withdraw from the Partnership under
Article IV or VI of this Agreement, the General Partner may elect to allocate
net losses as follows: (i) to allocate net losses among Negative Basis Partners,
in proportion to the Negative Basis (as defined in this Section 5.10) of each
Negative Basis Partner, until either the full amount of net losses will have
been so allocated or the Negative Basis of each Negative Basis Partner has been
eliminated, and (ii) to allocate any net losses not so allocated to Negative
Basis Partners, to the other Partners in a manner that reflects equitably the
amounts credited to the Partners' Capital Accounts. As used in this Section
5.10, the term "Positive Basis" means, with respect to any Partner and as of any
time of calculation, the amount by which the total of the Partners' Capital
Accounts as of that time exceeds the Partner's "adjusted tax basis," for U.S.
federal income tax purposes, in the Partner's Interest in the Partnership as of
that time (determined without regard to any adjustments made to the "adjusted
tax basis" by reason of any Transfer or assignment of the Interest, including by
reason of death). As used in this Section 5.10, the
29
term "Positive Basis Partner" means any Partner who or that withdraws from the
Partnership and who or that has a Positive Basis as of the effective date of the
Partner's withdrawal. As used in this Section 5.10, the term "Negative Basis"
means, with respect to any Partner and as of any time of calculation, the amount
by which the Partner's "adjusted tax basis," for U.S. federal income tax
purposes, in the Partner's Interest in the Partnership as of that time
(determined without regard to any adjustments made to the "adjusted tax basis"
by reason of any Transfer or assignment of the Interest, including by reason of
death, and without regard to such Partner's share of the liabilities of the
Partnership under section 752 of the Code) exceeds the Partner's Capital Account
as of such time. As used in this Section 5.10, the term "Negative Basis Partner"
means any Partner who or that withdraws from the Partnership and who or that has
a Negative Basis as of the effective date of the Partner's withdrawal.
SECTION 5.11 Distributions. (a) The General Partner may cause the
Partnership to make distributions in cash or in kind at any time to all of the
Partners on a proportionate basis in accordance with the Partners' Investment
Percentages.
(b) The General Partner may withhold taxes from any distribution to
any Partner to the extent required by the Code or any other applicable law.
For purposes of this Agreement, any taxes so withheld by the Partnership
with respect to any amount distributed by the Partnership to any Partner
will be deemed to be a distribution or payment to the Partner, reducing the
amount otherwise distributable to the Partner under this Agreement and
reducing the Capital Account of the Partner. Neither the General Partner
nor the Directors will be obligated to apply for or obtain a reduction of
or exemption from withholding tax on behalf of any Partner that may be
eligible for reduction or exemption. To the extent that a Partner claims to
be entitled to a reduced rate of, or exemption from, a withholding tax
pursuant to an applicable income tax treaty, or otherwise, the Partner will
furnish the Partnership with any information and forms that the Partner may
be required to complete if necessary to comply with any and all laws and
regulations governing the obligations of withholding tax agents. Each
Partner represents and warrants that any information and forms furnished by
the Partner will be true and accurate and agrees to indemnify the
Partnership and each of the Partners from any and all losses, claims,
damages, liabilities costs and expenses resulting from the filing of
inaccurate or incomplete information or forms relating to the withholding
taxes (including legal or other expenses incurred in investigating or
defending against any such losses, claims, damages, liabilities, costs and
expenses).
(c) Notwithstanding any provision to the contrary contained in this
Agreement, the Partnership and the General Partner on behalf of the
Partnership will not repurchase any Interest or portion of an Interest or
make a distribution to any Partner on account of the Partner's Interest or
portion of an Interest, if such repurchase or distribution would violate
the Delaware Act or other applicable law.
ARTICLE VI
DISSOLUTION AND LIQUIDATION
SECTION 6.1 Dissolution. (a) The Partnership will be dissolved if at any
time it has no Limited Partners or upon the occurrence of any of the following
events:
(1) upon the affirmative vote to dissolve the Partnership by both
(A) a majority of the Directors (including the vote of a majority of
the Independent Directors)
30
and (B) Partners holding at least two-thirds of the total number of
votes eligible to be cast by all Partners;
(2) upon either of: (A) an election by the General Partner to
dissolve the Partnership or (B) a General Partner's ceasing to be a
General Partner in accordance with Section 4.1 of this Agreement
(other than in conjunction with a Transfer of the Interest of a
General Partner in accordance with Section 4.3 of this Agreement to a
Person who or that is admitted as a substituted General Partner under
Section 2.6(a) of this Agreement), unless, as to the event described
in clause (B) of this Section 6.1(a)(2), (i) the Partnership has at
least one other General Partner who or that is authorized to and does
carry on the business of the Partnership, or (ii) both the Directors
and Partners holding not less than two-thirds of the total number of
votes eligible to be cast by all Partners elect within 60 days after
the event to continue the business of the Partnership and a Person to
be admitted to the Partnership, effective as of the date of the event,
as an additional General Partner who has agreed to make the
contributions to the capital of the Partnership required to be made
under Section 5.1(c) of this Agreement;
(3) upon the failure of Partners to approve successor Directors
at a meeting called by the General Partner in accordance with Section
2.11(c) of this Agreement when no Director remains to continue the
business of the Partnership; or
(4) as otherwise required by operation of law.
Dissolution of the Partnership will be effective on the later of the day on
which the event giving rise to the dissolution occurs or, to the extent
permitted by the Delaware Act, the conclusion of any applicable 60-day
period during which the Directors and Partners elect to continue the
business of the Partnership as provided in Section 6.1(a)(2), but the
Partnership will not terminate until the assets of the Partnership have
been liquidated in accordance with Section 6.2 of this Agreement and the
Certificate has been canceled.
(b) Except as provided in Section 6.1(a) of this Agreement or in the
Delaware Act, the death, adjudicated incompetence, dissolution,
termination, liquidation, bankruptcy, reorganization, merger, sale of
substantially all of the stock or assets of, or other change in the
ownership or nature of a Partner, the admission to the Partnership of a new
Partner, the withdrawal of a Partner from the Partnership, or the Transfer
by a Partner of the Partner's Interest or a portion of the Interest to a
third party will not cause the Partnership to dissolve.
SECTION 6.2 Liquidation of Assets. (a) Upon the dissolution of the
Partnership as provided in Section 6.1 of this Agreement, the General Partner
will promptly liquidate the business and administrative affairs of the
Partnership, except that if the General Partner is unable to perform this
function, a liquidator elected by Partners holding a majority of the total
number of votes eligible to be cast by all Partners and whose fees and expenses
will be paid by the Partnership will promptly liquidate the business and
administrative affairs of the Partnership. Net Profit and Net Loss during the
period of liquidation will be allocated in accordance with Article V of this
Agreement. Subject to the Delaware Act, the proceeds from liquidation (after
establishment of appropriate reserves for all claims and obligations, including
all contingent, conditional or unmatured claims and obligations in an amount
that
31
the General Partner or liquidator deems appropriate in its sole discretion as
applicable) will be distributed in the following manner:
(1) the debts of the Partnership, other than debts, liabilities
or obligations to Limited Partners, and the expenses of liquidation
(including legal and accounting fees and expenses incurred in
connection with the liquidation), up to and including the date on
which distribution of the Partnership's assets to the Partners has
been completed, will first be paid on a proportionate basis;
(2) any debts, liabilities or obligations owing to the Limited
Partners will be paid next in their order of seniority and on a
proportionate basis; and
(3) the Partners are paid next on a proportionate basis the
positive balances of their Capital Accounts after giving effect to all
allocations to be made to the Partners' Capital Accounts for the
Fiscal Period ending on the date of the distributions under this
Section 6.2(a)(3).
(b) Notwithstanding the provisions of this Section 6.2, upon
dissolution of the Partnership, subject to the Delaware Act and the
priorities set out in Section 6.2(a) of this Agreement, the General Partner
or liquidator may distribute ratably in kind any assets of the Partnership.
If any in-kind distribution is to be made under this Section 6.2(b), (1)
the assets distributed in kind will be valued in accordance with Section
7.3 of this Agreement as of the actual date of their distribution and
charged as so valued and distributed against amounts to be paid under
Section 6.2(a) of this Agreement, and (2) any profit or loss attributable
to property distributed in kind will be included in the Net Profit or Net
Loss for the Fiscal Period ending on the date of the distribution.
Notwithstanding any provision of this Agreement to the contrary, the
General Partner may compel a Partner to accept a distribution of any asset
in kind from the Partnership even if the percentage of the asset
distributed to the Partner exceeds a percentage of the asset that is equal
to the percentage in which the Partner shares in distributions from the
Partnership.
ARTICLE VII
ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS
SECTION 7.1 Accounting and Reports. (a) The Partnership will adopt for tax
accounting purposes any accounting method that the General Partner decides in
its sole discretion is in the best interests of the Partnership. The
Partnership's accounts will be maintained in U.S. currency.
(b) As soon as practicable after the end of each taxable year of the
Partnership, the Partnership will furnish to Partners information regarding
the operation of the Partnership and the Partners' Interests as is
necessary for Partners to complete U.S. Federal and state income tax or
information returns and any other tax information required by U.S. Federal
or state law. To the extent such information may be delayed due to delayed
reporting by Advisors with whom the Partnership invests (through the Master
Partnership), the Partners may be required to file extensions of the filing
dates for their income tax returns at the Federal, state and local levels.
(c) Except as otherwise required by the 1940 Act, or as may otherwise
be permissible under other applicable law, the Partnership will furnish to
each Limited Partner a semiannual
32
report and an annual report containing the information required by the 1940
Act as soon as practicable. The Partnership will cause financial statements
contained in each annual report furnished under this Section 7.1 to be
accompanied by a certificate of independent public accountants based upon
an audit performed in accordance with generally accepted accounting
principles. The Partnership may furnish to each Partner any other periodic
reports the General Partner deems necessary or appropriate in its
discretion.
(d) The General Partner will notify the Directors of any change in the
holders of interests of the General Partner within a reasonable time after
the change.
SECTION 7.2 Determinations by General Partner. (a) All matters concerning
the determination and allocation among the Partners of the amounts to be
determined and allocated pursuant to Article V of this Agreement, including any
taxes on those amounts and accounting procedures applicable with respect to
those amounts, will be determined by the General Partner unless specifically and
expressly otherwise provided for by the provisions of this Agreement or as
required by law. Any such determinations and allocations will be final and
binding on all of the Partners.
(b) The General Partner may make any adjustments to the computation of
Net Profit and/or Net Loss, or any components (withholding any items of
income, gain, loss or deduction) constituting Net Profit and/or Net Loss as
the General Partner deems appropriate to reflect fairly and accurately the
financial results of the Partnership and the intended allocation of Net
Profit and/or Net Loss among the Partners.
SECTION 7.3 Valuation of Assets. (a) Except as may be required by the 1940
Act, the Directors will value or cause to have valued any Securities or other
assets and liabilities of the Partnership as of the close of business on the
last day of each Fiscal Period and at such other times as the Directors may
determine, in their discretion, in accordance with valuation procedures as
established from time to time by the Directors. Assets of the Partnership
invested in an Advisor Fund or Advisor Account will be valued in accordance with
the terms and conditions of the agreement or other document governing the
operation of the Advisor Fund or Advisor Account. In determining the value of
the assets of the Partnership, no value will be placed on the goodwill or name
of the Partnership, or the office records, files, statistical data or any
similar intangible assets of the Partnership not normally reflected in the
Partnership's accounting records. Any items of income earned but not received,
expenses incurred but not yet paid, liabilities fixed or contingent, and any
other prepaid expenses to the extent not otherwise reflected in the books of
account, and the value of options or commitments to purchase or sell Securities
or commodities pursuant to agreements entered into prior to the valuation date
will, however, be taken into account in determining the value of the
Partnership's assets.
(b) Subject to the provisions of the 1940 Act, the value of Securities
and other assets of the Partnership and the net asset value of the
Partnership as a whole determined pursuant to this Section 7.3 will be
conclusive and binding on all of the Partners and all Persons claiming
through or under them.
33
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1 Amendment of Partnership Agreement. (a) Except as otherwise
provided in this Section 8.1, this Agreement may be amended, in whole or in
part, with the approval of a majority of the Directors (including the vote of a
majority of the Independent Directors, but only if such vote is required by the
1940 Act), except that any amendment also must be approved by a majority (as
defined in the ▇▇▇▇ ▇▇▇) of the outstanding voting securities of the Partnership
if such vote is required by the ▇▇▇▇ ▇▇▇.
(b) Any amendment that would:
(1) increase the obligation of a Partner to make any Capital
Contribution,
(2) reduce the Capital Account of a Partner other than in
accordance with Article V of this Agreement, or
(3) modify the events causing the dissolution of the Partnership,
may be made only if (A) the written consent of each Partner adversely
affected by the proposed action is obtained prior to the effectiveness of
the action or (B) the amendment does not become effective until (i) each
Limited Partner has received written notice of the amendment and (ii) any
Limited Partner objecting to the amendment has been afforded a reasonable
opportunity (under procedures prescribed by the General Partner in its sole
discretion) to tender the Partner's entire Interest for repurchase by the
Partnership. Notwithstanding the preceding sentence or the provisions of
Subsection 8.1(c), any amendment that would alter the provisions of Section
8.1 relating to the material amendment of this Agreement or the provisions
of Section 3.8 of this Agreement relating to indemnification may be made
only with the unanimous consent of the Partners and, to the extent required
by the 1940 Act, approval of a majority of the Directors (and, if so
required, a majority of the Independent Directors).
(c) Notwithstanding the provisions of Sections 8.1(a) and 8.1(b) of
this Agreement, the General Partner, at any time without the consent of any
other Partner, may:
(1) restate this Agreement, together with any amendments to this
Agreement that have been duly adopted in accordance with the
provisions of this Agreement to incorporate the amendments in a
single, integrated document;
(2) amend this Agreement (other than with respect to the matters
described in Section 8.1(b) of this Agreement) to change the name of
the Partnership in accordance with Section 2.2 hereof or to effect
compliance with any applicable law or regulation, including, but not
limited to, to satisfy the requirements of applicable U.S. banking law
or regulation, or to cure any ambiguity or to correct or supplement
any provision of this Agreement, so long as the action does not
adversely affect the rights of any Partner in any material respect;
and
(3) amend this Agreement to make any changes necessary or
desirable, based on advice of legal counsel to the Partnership, to
assure the Partnership's continuing
34
eligibility to be classified for U.S. federal income tax purposes as a
Partnership that is not treated as a corporation for tax purposes
under the Code; subject, however, to the limitation that any material
amendment to this Agreement under Section 8.1(c)(2) or (3) of this
Agreement will be valid only if approved by a majority of the
Directors (including the vote of a majority of the Independent
Directors, if required by the 1940 Act).
(d) The General Partner will give prior written notice of any proposed
amendment to this Agreement (other than any amendment of the type
contemplated by Section 8.1(c) of this Agreement) to each Partner, which
notice sets out (1) the text of the proposed amendment or (2) a summary of
the amendment and a statement that the text of the amendment will be
furnished to any Partner upon request.
SECTION 8.2 Special Power of Attorney. (a) Each Partner irrevocably makes,
constitutes and appoints the General Partner and each of the Directors, acting
severally, and any liquidator of the Partnership's assets appointed pursuant to
Section 6.2 of this Agreement with full power of substitution, the true and
lawful representatives and attorneys-in-fact of, and in the name, place and
stead of, the Partner, with the power from time to time to make, execute, sign,
acknowledge, swear to, verify, deliver, record, file and/or publish:
(1) any amendment to this Agreement;
(2) any amendment to the Certificate, including, without
limitation, any such amendment required to reflect any amendments to
this Agreement, and including, without limitation, an amendment to
effectuate any change in the membership of the Partnership; and
(3) all other such instruments, documents and certificates that,
in the view of legal counsel to the Partnership, from time to time may
be required by the laws of the United States of America, the State of
Delaware or any other jurisdiction in which the General Partner
determines that the Partnership should do business, or any political
subdivision or agency of any such jurisdiction, or that legal counsel
may deem necessary or appropriate to effectuate, implement and
continue the valid existence and business of the Partnership as a
limited partnership under the Delaware Act.
(b) Each Partner is aware that the terms of this Agreement permit
certain amendments to this Agreement to be effected and certain other
actions to be taken or omitted by or with respect to the Partnership
without the Partner's consent. Each Partner agrees that if an amendment to
the Certificate or this Agreement or any action by or with respect to the
Partnership is taken in the manner contemplated by this Agreement,
notwithstanding any objection that the Partner may assert with respect to
the action, the attorneys-in-fact appointed under this Agreement are
authorized and empowered, with full power of substitution, to exercise the
authority granted in this Section 8.2 in any manner that may be necessary
or appropriate to permit the amendment to be made or action lawfully taken
or omitted. Each Partner is fully aware that each Partner will rely on the
effectiveness of this special power of attorney with a view to the orderly
administration of the affairs of the Partnership.
35
(c) The power of attorney contemplated by this Section 8.2 is a
special power of attorney and is coupled with an interest in favor of the
General Partner and each of the Directors, acting severally, and any
liquidator of the Partnership's assets appointed under Section 6.2 of this
Agreement, and as such the power of attorney:
(1) will be irrevocable and continue in full force and effect
notwithstanding the subsequent death or incapacity of any Person
granting the power of attorney, regardless of whether the Partnership,
the General Partner, the Directors or any liquidator has had notice of
the death or incapacity; and
(2) will survive the delivery of a Transfer by a Partner of the
whole or any portion of the Partner's Interest, except that, when the
transferee of an Interest or portion of an Interest has been approved
by the General Partner for admission to the Partnership as a
substituted Partner, the power of attorney given by the transferor
will survive the delivery of the assignment for the sole purpose of
enabling the General Partner, the Directors or any liquidator to
execute, acknowledge and file any instrument necessary to effect the
substitution.
SECTION 8.3 Notices. Notices that may or are required to be provided under
this Agreement will be made to a Partner by hand delivery, regular mail
(registered or certified mail return receipt requested in the case of notice to
the General Partner), commercial courier service, telecopier, or electronic mail
(with a confirmation copy by registered or certified mail in the case of notices
to the General Partner by telecopier or electronic mail), and will be addressed
to the Partner at his, her or its address as set out in the books and records of
the Partnership (or to any other address as may be designated by any Partner by
notice addressed to the General Partner in the case of notice given to any
Partner, and to each of the Partners in the case of notice given to the General
Partner). Notices will be deemed to have been provided when delivered by hand,
on the date indicated as the date of receipt on a return receipt or when
received if sent by regular mail, commercial courier service, telecopier or by
electronic mail. A document that is not a notice and that is required to be
provided under this Agreement by any party to another party may be delivered by
any reasonable means.
SECTION 8.4 Agreement Binding Upon Successors and Assigns. This Agreement
will be binding upon and inure to the benefit of the Partners and their
respective heirs, successors, assigns, executors, trustees or other legal
representatives, but the rights and obligations of the Partners may not be
Transferred or delegated except as provided in this Agreement, and any attempted
Transfer or delegation of those rights and obligations that is not made in
accordance with the terms of this Agreement will be void.
SECTION 8.5 Choice of Law; Arbitration. (a) Notwithstanding the location at
which this Agreement is executed by any of the Partners, the Partners expressly
agree that all the terms and provisions of this Agreement are governed by and
will be construed under the laws of the State of Delaware, including the
Delaware Act, without regard to the conflict of law principles of the State of
Delaware.
(b) To the extent such action is consistent with the provisions of the
1940 Act and any other applicable law, except as provided in Section
8.10(b) of this Agreement, each Partner agrees to submit all controversies
arising between or among Partners or one or more Partners and
36
the Partnership in connection with the Partnership or its businesses or
concerning any transaction, dispute or the construction, performance or
breach of this Agreement or any other agreement relating to the
Partnership, whether entered into prior to, on or subsequent to the date of
this Agreement, to arbitration in accordance with the provisions set out in
this Section 8.5. EACH PARTNER UNDERSTANDS THAT ARBITRATION IS FINAL AND
BINDING ON THE PARTNERS AND THAT THE PARTNERS IN EXECUTING THIS AGREEMENT
ARE WAIVING THEIR RIGHTS TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO
JURY TRIAL.
(c) Controversies will be finally settled by, and only by, arbitration
in accordance with the commercial arbitration rules of the American
Arbitration Association (the "AAA") to the fullest extent permitted by law.
The place of arbitration will be Raleigh, North Carolina. Any arbitration
under this Section 8.5 will be conducted before a panel of three
arbitrators. The Partner or Partners initiating arbitration under this
Section 8.5 will appoint one arbitrator in the demand for arbitration. The
Partner or Partners against whom or which arbitration is sought will
jointly appoint one arbitrator within 30 Business Days after notice from
the AAA of the filing of the demand for arbitration. The two arbitrators
nominated by the Partners will attempt to agree on a third arbitrator
within 30 Business Days of the appointment of the second arbitrator. If the
two arbitrators fail to agree on the third arbitrator within the 30-day
period, then the AAA will appoint the third arbitrator within 30 Business
Days following the expiration of the 30-day period. Any award rendered by
the arbitrators will be final and binding on the Partners, and judgment
upon the award may be entered in the supreme court of the state of New York
and/or the U.S. District Court for the Southern District of New York, or
any other court having jurisdiction over the award or having jurisdiction
over the Partners or their assets. The arbitration agreement contained in
this Section 8.5 will not be construed to deprive any court of its
jurisdiction to grant provisional relief (including by injunction or order
of attachment) in aid of arbitration proceedings or enforcement of an
award. In the event of arbitration as provided in this Section 8.5, the
arbitrators will be governed by and will apply the substantive (but not
procedural) law of Delaware, to the exclusion of the principles of the
conflicts of law of Delaware. The arbitration will be conducted in
accordance with the procedures set out in the commercial arbitration rules
of the AAA. If those rules are silent with respect to a particular matter,
the procedure will be as agreed by the Partners, or in the absence of
agreement among or between the Partners, as established by the arbitrators.
Notwithstanding any other provision of this Agreement, this Section 8.5(c)
will be construed to the maximum extent possible to comply with the laws of
the State of Delaware, including the Uniform Arbitration Act (10 Del. C
Section 5701 et seq.) (the "Delaware Arbitration Act"). If, nevertheless,
it is determined by a court of competent jurisdiction that any provision or
wording of this Section 8.5(c), including any rules of the AAA, are invalid
or unenforceable under the Delaware Arbitration Act or other applicable
law, such invalidity will not invalidate all of this Section 8.5(c). In
that case, this Section 8.5(c) will be construed so as to limit any term or
provision so as to make it valid or enforceable within the requirements of
the Delaware Arbitration Act or other applicable law, and, in the event
such term or provision cannot be so limited, this Section 8.5(c) will be
construed to omit such invalid or unenforceable provision.
SECTION 8.6 Not for Benefit of Creditors. The provisions of this Agreement
are intended only for the regulation of relations among past, existing and
future Partners, their assignees and the Partnership. This Agreement is not
intended for the benefit of non-Partner creditors and, except to the
37
extent provided in Section 3.8 of this Agreement, no rights are granted to
non-Partner creditors under this Agreement.
SECTION 8.7 Consents. Any and all consents, agreements or approvals
provided for or permitted by this Agreement (including minutes of any meeting)
must be in writing and a signed copy of any such consent, agreement or approval
will be filed and kept with the books of the Partnership.
SECTION 8.8 Merger and Consolidation. (a) The Partnership may merge or
consolidate with or into one or more limited partnerships formed under the
Delaware Act or other business entities under an agreement of merger or
consolidation that has been approved in the manner contemplated by the Delaware
Act.
(b) Notwithstanding anything to the contrary in this Agreement, an
agreement of merger or consolidation approved in accordance with the
Delaware Act may, to the extent permitted by the Delaware Act, (1) effect
any amendment to this Agreement, (2) effect the adoption of a new
Partnership agreement for the Partnership if it is the surviving or
resulting limited partnership in the merger or consolidation, or (3)
provide that the Partnership agreement of any other constituent Partnership
to the merger or consolidation (including a limited partnership formed for
the purpose of consummating the merger or consolidation) will be the
Partnership agreement of the surviving or resulting limited partnership.
(c) The Partnership may convert to another Delaware business entity in
accordance with the Delaware Act upon the approval of the Partners
representing a majority (as defined in the ▇▇▇▇ ▇▇▇) of the outstanding
voting securities of the Partnership.
SECTION 8.9 Pronouns. All pronouns used in this Agreement will be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of
the Person or Persons, firm or entity may require in the context in which they
are used.
SECTION 8.10 Confidentiality. (a) A Limited Partner may obtain from the
General Partner, upon reasonable demand for any purpose reasonably related to
the Limited Partner's Interest in the Partnership, information regarding the
affairs of the Partnership as is just and reasonable under the Delaware Act,
subject to reasonable standards (including standards governing the information
and documents to be furnished, at what time and location and at whose expense)
established by the General Partner in its sole discretion.
(b) Each Limited Partner agrees in executing this Agreement that,
except as required by applicable law or any regulatory body, the Limited
Partner will not divulge, furnish or make accessible to any other Person
the name or address (whether business, residence or mailing) of any Limited
Partner (collectively, "Confidential Information") without the prior
written consent of the General Partner, which consent may be withheld in
its sole discretion.
(c) Each Partner recognizes that in the event that this Section 8.10
is breached by any Partner or any of its principals, Partners, members,
directors, officers, employees or agents or any of the Partner's
Affiliates, including any of the Affiliate's principals, Partners, members,
directors, officers, employees or agents, irreparable injury may result to
the non-breaching Partners and the Partnership. In recognition of that
irreparable injury, any non-breaching Partner may have, in addition to any
and all other remedies at law or in equity to which the non-
38
breaching Partner and the Partnership may be entitled, the right to obtain
equitable relief, including, without limitation, injunctive relief, to
prevent any disclosure of Confidential Information, plus reasonable
attorneys' fees and other litigation expenses incurred in connection with
obtaining the equitable relief. If any non-breaching Partner or the
Partnership ("Initiating Non-Breaching Party") determines that any other
Partner or any of that Partner's principals, Partners, members, directors,
officers, employees or agents or any of the Partner's Affiliates, including
any of the Affiliates' principals, Partners, members, directors, officers,
employees or agents, should be enjoined from or required to take any action
to prevent the disclosure of Confidential Information, each of the other
non-breaching Partners agrees to join the non-breaching Initiating
Non-Breaching Party in pursuing injunctive relief in a court of appropriate
jurisdiction.
(d) The General Partner will have the right to keep confidential from
the Limited Partners, for any period of time as the General Partner deems
reasonable in its sole discretion, any information that the General Partner
reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the General Partner in good faith
believes is not in the best interest of the Partnership or could damage the
Partnership or its business or that the Partnership is required by law or
by agreement with a third party to keep confidential.
SECTION 8.11 Certification of Non-Foreign Status. Each Limited Partner or
transferee of an Interest or a portion of an Interest from a Limited Partner who
or that is admitted to the Partnership in accordance with this Agreement will
certify, upon admission to the Partnership and at any other time as the General
Partner may request, whether the Limited Partner or transferee is a "United
States Person" within the meaning of the Code on forms to be provided by the
Partnership, and will notify the Partnership within 30 days of any change in the
status of the Limited Partner or transferee. Any Limited Partner or transferee
who or that fails to provide certification when requested to do so by the
General Partner may be treated as a non-United States Person for purposes of
U.S. Federal tax withholding.
SECTION 8.12 Severability. Each Partner agrees that the Partner intends
that, if any provision of this Agreement is determined by a court of competent
jurisdiction or regulatory authority with jurisdiction over the Partnership or
the General Partner not to be enforceable in the manner set out in this
Agreement, then the provision should be enforceable to the maximum extent
possible under applicable law. If any provision of this Agreement is held to be
invalid or unenforceable, the invalidation or unenforceability will not affect
the validity or enforceability of any other provision of this Agreement (or
portion of the provision).
SECTION 8.13 Entire Agreement. This Agreement constitutes the entire
agreement among the Partners pertaining to the subject matter of this Agreement
and supersedes all prior agreements and understandings pertaining to that
subject matter.
Notwithstanding any other provision of this Agreement, including
Section 8.1, each Partner, in executing this Agreement, acknowledges and
agrees that the General Partner, on its own behalf or on behalf of the
Partnership, without the approval of the Limited Partners or any other
Person, may enter into a written agreement or agreements with any other
Partner, executed contemporaneously with the admission of the other Partner
to the Partnership, affecting or modifying the terms of, or establishing
rights under, this Agreement or any subscription agreement. Each Partner
agrees that any terms contained in any such other agreement with
39
another Partner will govern with respect to the other Partner
notwithstanding the provisions of this Agreement or any subscription
agreement, and that the Partner will have no rights in respect of those
granted in favor of such other Partner.
SECTION 8.14 Discretion. To the fullest extent permitted by law, whenever
in this Agreement a Person is permitted or required to make a decision (a) in
its "sole discretion" or "discretion" or under a grant of similar authority or
latitude, the Person will be entitled to consider only those interests and
factors as he, she or it desires, including his, her or its own interests, and,
to the fullest extent permitted by law, will have no duty or obligation to give
any consideration to any interest of or factors affecting the Partnership or the
Limited Partners, or (b) in its "good faith" or under another express standard,
then the Person will act under the express standard and will not be subject to
any other or different standards imposed by this Agreement or any other
agreement contemplated by this Agreement or by relevant provisions of law or in
equity or otherwise.
SECTION 8.15 Conflicts. The Partners acknowledge and agree that the General
Partner and its Affiliates may engage in activities in which their respective
interests or the interests of their clients may conflict with the interests of
the Partnership or the Limited Partners, and that the resolution of such
conflicts may not always be resolved by the General Partner or its Affiliates in
favor of the Partnership or the Limited Partners.
SECTION 8.16 Counterparts. This Agreement may be executed in several
counterparts, all of which together will constitute one agreement binding on all
Partners, notwithstanding that all the Partners have not signed the same
counterpart.
SECTION 8.17 Headings. The headings in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions of this Agreement or otherwise affect their construction or effect.
[Remainder of Page Intentionally Left Blank]
40
IN EXECUTING THIS AGREEMENT, EACH PARTNER ACKNOWLEDGES HAVING READ THIS
AGREEMENT IN ITS ENTIRETY BEFORE SIGNING, INCLUDING THE PRE-DISPUTE ARBITRATION
CLAUSES SET OUT IN SECTION 8.5 AND THE CONFIDENTIALITY CLAUSES SET OUT IN
SECTION 8.10.
The Partners have executed this Agreement as of the day and year first
above written.
GENERAL PARTNER:
HATTERAS INVESTMENT MANAGEMENT LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Member
ORGANIZATIONAL LIMITED PARTNER:
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
LIMITED PARTNERS:
Each Person who or that has signed, or
has had signed on the Person's behalf, a
Limited Partner Signature Page, which
will constitute a counterpart of this
Agreement.