Exhibit 3(ii)
DIVERSIFIED FUTURES FUND L.P.
Second Amended and Restated
Agreement of Limited Partnership
Dated as of
October 1, 2004
TABLE OF CONTENTS
Page
ARTICLE I Continuation of Partnership.................................................................1
ARTICLE II Name........................................................................................2
ARTICLE III Definitions.................................................................................2
ARTICLE IV Purpose.....................................................................................5
ARTICLE V Names and Addresses of Partners.............................................................6
ARTICLE VI Principal Place of Business.................................................................6
ARTICLE VII Capital Contributions.......................................................................6
A. Offer of Units of Limited Partnership Interest..................................................6
B. Initial Paid-In Capital.........................................................................6
C. Subscription Agreement..........................................................................7
D. Escrow Arrangements.............................................................................7
E. Effect of the Sale of at least 50,000 Limited Partnership Units.................................7
F. Paid-In Capital if at least 50,000 Limited Partnership Units Are Sold...........................7
G. Effect of the Sale of Less than 50,000 Limited Partnership Units................................7
H. General Partner's Contribution if at least 50,000 Limited Partnership Units Are Sold............8
I. Optional Purchase of Limited Partnership Units .................................................8
ARTICLE VIII Distributions and Allocations...............................................................8
A. Capital Accounts................................................................................8
B. Monthly Allocations.............................................................................8
C. Allocation of Profit and Loss For United States Federal Income Tax Purposes.....................9
D. Allocation of Distributions....................................................................11
E. Admissions of Partners; Transfers..............................................................11
F. No Personal Liability of General Partner for Return of Capital or Profits......................11
G. Liability for State and Local Tax..............................................................11
ARTICLE IX REDEMPTIONS................................................................................11
A. Redemption of Partnership Units................................................................11
B. General Partner May Not Redeem.................................................................14
ARTICLE X Management and Operation of Partnership Business...........................................14
A. Management of Partnership Business.............................................................14
B. Authority of General Partner...................................................................14
C. Obligations of General Partner.................................................................16
D. General Prohibitions...........................................................................17
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E. Liability of the General Partner...............................................................18
F. Indemnification................................................................................18
G. Expenses.......................................................................................20
H. Compensation to the General Partner............................................................21
I. Other Business of Partners.....................................................................21
J. Tax Matters Partner............................................................................21
K. Voluntary Withdrawal of the General Partner....................................................21
L. Authorization of Registration Statement........................................................22
ARTICLE XI Status of Limited Partners.................................................................22
A. No Management or Control; Limited Liability....................................................22
B. Rights, Duties, etc............................................................................22
ARTICLE XII Books of Account and Reports...............................................................23
A. Books of Account...............................................................................23
B. Annual Reports and Monthly Statements..........................................................24
C. Tax Information................................................................................24
D. Calculation of Net Asset Value.................................................................24
E. Other Reports..................................................................................24
F. Maintenance of Records.........................................................................24
G. Certificates of Limited Partnership............................................................24
ARTICLE XIII Fiscal Year................................................................................25
ARTICLE XIV Transfers of Partnership Interests.........................................................25
A. General Prohibition............................................................................25
B. Transfer of General Partnership Interest.......................................................25
C. Transfer of Limited Partnership Interest.......................................................26
ARTICLE XV Amendment of Limited Partnership Agreement and Meetings....................................29
A. Amendments to the Agreement....................................................................29
B. Meetings of the Partnership....................................................................31
C. Action Without a Meeting.......................................................................31
ARTICLE XVI Term.......................................................................................31
ARTICLE XVII Termination and Dissolution................................................................31
A. Events Requiring Termination and Dissolution...................................................31
B. Distributions on Termination and Dissolution...................................................33
C. Certificate of Cancellation....................................................................33
ARTICLE XVIII Power of Attorney..........................................................................33
A. Power of Attorney Executed Concurrently........................................................33
B. Effect of Power of Attorney....................................................................34
C. Limitation on Power of Attorney................................................................34
ARTICLE XIX Limitations on Liability; Litigation.......................................................35
A. Limitation on Liability........................................................................35
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B. Litigation.....................................................................................35
ARTICLE XX Miscellaneous..............................................................................35
A. Notices........................................................................................35
B. Headings.......................................................................................36
C. English Usage..................................................................................36
D. Counterparts...................................................................................36
E. Binding Nature of Agreement....................................................................36
F. Governing Law..................................................................................36
G. Creditors......................................................................................36
H. Severability...................................................................................36
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SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
DIVERSIFIED FUTURES FUND L.P.
This Second Amended and Restated Agreement of Limited Partnership of
DIVERSIFIED FUTURES FUND L.P. (the "Partnership"), made and entered into as of
the 1st day of October, 2004 by and among PREFERRED INVESTMENT SOLUTIONS CORP.
(formerly known as Kenmar Advisory Corp.), a Connecticut corporation, as
General Partner of the Partnership, and those persons who execute a
counterpart to this Agreement and are hereafter admitted to the Partnership as
limited partners in accordance with the provisions hereof and whose names and
addresses shall upon such admission be added to the books and records of the
Partnership.
W I T N E S S E T H:
WHEREAS, certain of the parties (or their predecessors) hereto formed
a limited partnership in accordance with the Delaware Revised Uniform Limited
Partnership Act (6 Del. C. ss. 17-101 et seq.) (the "Act") on May 25, 1988, as
amended on July 12, 1988 and as amended and restated on July 14, 1988 pursuant
to an Amended and Restated Agreement of Limited Partnership (the "Amended
Agreement");
WHEREAS, the parties hereto desire to amend certain provisions of the
Amended Agreement and to amend and restate in its entirety the terms and
provisions of the Amended Agreement, including those provisions relating to
the governance of the Partnership and the parties' respective rights and
duties hereunder.
NOW, THEREFORE, it is mutually agreed that:
ARTICLE I
CONTINUATION OF PARTNERSHIP
The Parties hereto do hereby continue the Partnership under the
provisions of the Act. The former general partner executed and filed a
Certificate of Limited Partnership in accordance with the provisions of the
Act. The Parties hereto shall execute all such instruments and shall execute,
file, record and/or publish such amendments, and other documents and do any
and all other acts and things as may be appropriate to comply with the
requirements for the formation of a limited partnership under the laws of the
State of Delaware. The General Partner may take such further actions as it
deems necessary or advisable to permit the Partnership to conduct business as
a united partnership in any jurisdiction.
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ARTICLE II
NAME
The business of the Partnership shall be conducted under the firm
name of Diversified Futures Fund L.P. or such other name, to the extent
permitted by the Act, as the General Partner shall hereafter designate in
writing to the Limited Partners.
ARTICLE III
DEFINITIONS
For purposes of this Agreement, unless the context otherwise
requires, the following terms shall have the following respective meanings:
"Affiliate of the General Partner" means: (i) any Person directly or
indirectly owning, controlling or holding with power to vote 10% or more of
the outstanding voting securities of the General Partner; (ii) any Person 10%
or more of whose outstanding voting securities are directly or indirectly
owned, controlled or held with power to vote, by the General Partner; (iii)
any Person, directly or indirectly, controlling, controlled by, or under
common control of the General Partner; (iv) any officer, director or partner
of the General Partner; or (v) if such Person is an officer, director or
partner of the General Partner, any Person for which such Person acts in any
such capacity.
"Agreement" means this Second Amended and Restated Agreement of
Limited Partnership, as the same may at any time or from time to time be
further amended.
"Capital Contribution" shall be the amount contributed and agreed to
be contributed by any of the Partners in accordance with Article VII hereof.
"Capital Gain" means, for each Fiscal Year of the Partnership, the
net gain resulting from each disposition of Partnership assets during such
Fiscal Year with respect to which gain or loss is recognized for federal
income tax purposes. Any gain or loss required to be recognized by the
Partnership for federal income tax purposes for such Fiscal Year pursuant to
Section 1256 (or any successor provision) of the Code shall be included in the
computation of the Capital Gain for such Fiscal Year.
"Capital Loss" means, for each Fiscal Year of the Partnership, the
net loss resulting from each disposition of Partnership assets during such
Fiscal Year with respect to which gain or loss is recognized for federal
income tax purposes. Any gain or loss required to be recognized by the
Partnership for federal income tax purposes for such Fiscal Year pursuant to
Section 1256 (or any successor provision) of the Code shall be included in the
computation of the Capital Loss for such Fiscal Year.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership as filed in the State of Delaware on May 25,
1988, as the same may at any time or from time to time be amended.
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"Code" means the Internal Revenue Code of 1986.
"Commodities Positions" means positions in commodity futures
contracts, commodity forward contracts, options on commodity futures contracts
and traded commodities, and cash commodity transactions, or any other futures
contract or option thereon approved for trading for U.S. persons.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fiscal Year" shall have the meaning set forth in Article XIII
hereof.
"General Partner" means Preferred Investment Solutions Corp.
(formerly known as Kenmar Advisory Corp.), and any other entity acting in its
capacity as a general partner of the Partnership, and any substitute therefor
as provided herein, or any successor thereto by merger or operation of law.
"Initial Limited Partner" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
"Limited Partner" means any person or entity who becomes a limited
partner of the Partnership and who is listed as such on the books and records
of the Partnership, and may include the General Partner with respect to Units
purchased by it.
"Losses" means, for each Fiscal Year of the Partnership, losses of
the Partnership as determined for federal income tax purposes, and each item
of income, gain, loss or deduction entering into the computation thereof,
except that any gain or loss taken into account in determining the Capital
Gain or the Capital Loss of the Partnership for such Fiscal Year shall not
enter into such computations.
"NASAA Guidelines" means the North American Securities Administrators
Association, Inc. "Guidelines For Registration of Commodity Pool Programs", as
then currently in force and in effect.
"Net Asset Value" means the total assets including, but not limited
to, all cash and cash equivalents (valued at cost plus accrued interest and
amortization of original issue discount) less total liabilities, of the
Partnership, each determined on the basis of generally accepted accounting
principles in the United States, consistently applied under the accrual method
of accounting ("GAAP"), including, but not limited to, the extent specifically
set forth below:
(a) Net Asset Value shall include any unrealized profit or loss
on open Commodities Positions.
(b) All open commodity futures contracts and options traded on
a United States exchange are calculated at their then current market
value, which shall be based upon the settlement price for that
particular commodity futures contract and option traded on a United
States exchange on the date with respect to which Net Asset Value is
being determined; provided, that if a commodity futures contract or
option traded on a United States exchange could not be liquidated on
such day, due to the operation of daily limits or other rules of the
exchange upon
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which that position is traded or otherwise, the settlement price on
the first subsequent day on which the position could be liquidated
shall be the basis for determining the market value of such position
for such day. The liquidating value of a commodity forward contract
or a commodity futures or option contract not traded on a United
States exchange shall mean its liquidating value as determined by
the General Partner on a basis consistently applied. In determining
the Net Asset Value of the Partnership's option positions, the
market value of the open options sold by the Partnership shall be
subtracted from the market value of the open option positions
purchased by the Partnership. Each "leg" of complex options
positions such as "conversions" and "spreads" shall be evaluated
separately in determining Net Assets. The General Partner may in its
discretion value any assets of the Partnership pursuant to such
other principles as it may deem fair and equitable.
(c) Interest earned on the Partnership's commodity brokerage
account shall be accrued at least monthly; and
(d) The amount of any distribution made pursuant to Article
VIII hereof shall be a liability of the Partnership from the day
when the distribution is declared until it is paid.
"Net Asset Value per Unit" means the Net Asset Value divided by the
number of Units outstanding on the date of calculation.
"Offering Period" means, with respect to the initial offering of
Units, the period commencing with the dates of the Prospectus and terminating
no later than the ninetieth (90th) day following such date, unless the General
Partner, in its sole discretion, elects to extend the offering period for up
to an additional ninety (90) days.
"Organization and Offering Expenses" shall have the meaning set forth
in Subparagraph G(1) of Article X of this Agreement.
"Partners" means the General Partner and all Limited Partners where
no distinction is required by the context in which the term is used.
"Partnership Interest" means the interest of each Partner in the
profits, losses, distributions, capital and assets of the Partnership.
"Limited Partnership Interest" means a Partnership Interest of a Limited
Partner and "General Partnership Interest" means a Partnership Interest of the
General Partner. Partnership Interests are represented by Units.
"Person" means any natural person, partnership, corporation,
association or other legal entity.
"Profits" means, for each Fiscal Year of the Partnership, profits of
the Partnership as determined for Federal income tax purposes, and each item
of income, gain, loss or deduction entering into the computation thereof,
except that any gain or loss taken into account in determining the Capital
Gain or the Capital Loss of the Partnership for such Fiscal Year shall not
enter into such computations.
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"Prospectus" means the final prospectus and disclosure document of
the Partnership, constituting a part of the Registration Statement, as filed
with the Securities and Exchange Commission and declared effective thereby, as
the same may at any time and from time to time be amended or supplemented
after the effective date of the Registration Statement.
"Pyramiding" means the use of unrealized profits on existing
Commodities. Positions to provide margins for additional Commodities Positions
of the same or a related commodity.
"Redemption Date" means the date upon which Units held by Limited
Partners may be redeemed in accordance with the provisions of Paragraph A of
Article IX hereof.
"Registration Statement" means the registration statement on Form
S-l, as amended, filed by the Partnership with the Securities and Exchange
Commission pursuant to which the Partnership registered Units of Limited
Partnership Interest, as the same may at any time and from time to time be
further amended or supplemented.
"Subscription Agreement" means the agreement included as an exhibit
to the Prospectus pursuant to which subscribers may subscribe for the purchase
of Units of Limited Partnership Interest.
"Trading Manager" means any entity acting in its capacity as a
commodity trading advisor to the Partnership, and any substitute therefor as
provided herein.
"Unit" means the Partnership Interest of a Partner. The Capital
Contribution of the General Partner and/or its Affiliates shall be represented
by "General Partnership Units" and a Limited Partner's Capital Contribution
shall be represented by "Limited Partnership Units." When used herein without
qualification the term "Units" means both Limited Partnership Units and
General Partnership Units. Units need not be evidenced by certificates.
"Unitholder" means holder of Units.
ARTICLE IV
PURPOSE
The business and purpose of the Partnership is primarily to trade,
buy, sell, spread or otherwise acquire, hold or dispose of commodity futures
contracts on U.S. exchanges and foreign currency forward contracts world-wide.
In addition, from time to time the Partnership also may engage in transactions
in futures contracts on foreign exchanges, forward contracts on other than
foreign currencies, U.S. and foreign exchange-traded commodity options and
other commodity interests. The primary objective of the Partnership's business
is the appreciation of its assets through speculative trading.
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ARTICLE V
NAMES AND ADDRESSES OF PARTNERS
The General Partner of the Partnership is Preferred Investment
Solutions Corp. (formerly known as Kenmar Advisory Corp.), a Connecticut
corporation, having its principal office for the transaction of business at
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, which was admitted to the
Partnership as a general partner of the Partnership immediately prior to the
former general partner of the Partnership ceasing to be a general partner of
the Partnership. The names and addresses (until changed in accordance with
Paragraph A of Article XXI hereof) of the Limited Partners shall be as set
forth in the books and records of the Partnership.
ARTICLE VI
PRINCIPAL PLACE OF BUSINESS
The principal place of business of the Partnership at which
Partnership records will be kept shall be at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The General Partner may from time to time change the
principal place of business of the Partnership and, in such event, the General
Partner shall notify the Limited Partners in writing within ten days after the
effective date of such change. The General Partner may establish additional
places of business for the Partnership when and where required by the business
of the Partnership. The address of the registered office of the Partnership in
the State of Delaware shall be c/o RL&F Service Corp., Tenth Floor, One ▇▇▇▇▇▇
Square, 10th and ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
The name and address of the registered agent for service of process on the
Partnership in the State of Delaware shall be RL&F Service Corp., ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ and King Streets, Wilmington, New Castle County,
Delaware 19801, or such other agent as may be designated from time to time by
the General Partner.
ARTICLE VII
CAPITAL CONTRIBUTIONS
A. Offer of Units of Limited Partnership Interest. The Partnership
may, in the discretion of the General Partner, offer on a continuous basis,
Units in the Partnership from time to time following the Offering Period, on
such terms and conditions as the General Partner shall determine. No
fractional Units shall be issued. The offering shall be made pursuant to and
on the terms and conditions set forth in the Prospectus. The General Partner
shall make such arrangements for the sale of the Units as it deems
appropriate.
B. Initial Paid-In Capital. The Initial Limited Partner shall
contribute $1,000 to the capital of the Partnership and shall be allocated ten
(10) Limited Partnership Units for such contribution and the General Partner
shall contribute $1,000 to the capital of the Partnership and shall be
allocated ten (10) General Partnership Units for such contribution. At the
conclusion of the Offering Period, the Initial Limited Partner shall withdraw
as a Limited Partner and his
6
$1,000 capital contribution will be returned to him, without interest, and he
will have no further rights or obligations as a Limited Partner.
C. Subscription Agreement. Each Limited Partner who purchases any
Limited Partnership Units offered pursuant to the Prospectus shall contribute
to the capital of the Partnership such amount as he shall state in the
Subscription Agreement which he shall execute (as required therein),
acknowledge and, together with the Power of Attorney set forth therein,
deliver to the General Partner as a counterpart to this Agreement, which
amount shall be an even multiple of $100 but not less than fifty (50) Limited
Partnership Units, except for Individual Retirement Account ("▇▇▇")
subscribers, where the minimum subscription shall be not less than twenty (20)
Limited Partnership Units. All subscription amounts shall be paid by check,
subject to prompt collection, in cash, or in such other form as may be
acceptable to the General Partner, at the time of the execution and delivery
of such Subscription Agreement. All subscriptions are subject to acceptance by
the General Partner.
D. Escrow Arrangements. All proceeds from the sale of Limited
Partnership Units offered pursuant to the Prospectus shall be deposited in an
interest bearing escrow account at Bankers Trust Company, in New York, N.Y.
until the conclusion of the Offering Period. In the event 50,000 or more of
the Limited Partnership Units offered pursuant to the Prospectus are sold
during the Offering Period, all interest earned on the proceeds of the
subscriptions during the Offering Period will be distributed to the purchasers
of Limited Partnership Units on a pro rata basis (taking into account time and
amount of deposit) no later than fifteen (15) business days after the
conclusion of the Offering Period (or as soon thereafter as practicable if
payment cannot be made in such time period).
E. Effect of the Sale of at least 50,000 Limited Partnership Units.
In the event at least 50,000 Limited Partnership Units are sold, the General
Partner will admit all accepted subscribers into the Partnership as Limited
Partners, by causing such Limited Partners to execute this Agreement, pursuant
to the Power of Attorney set forth in the Subscription Agreement, and by
making an entry on the books and records of the Partnership reflecting that
such subscribers have been admitted as Limited Partners, as soon as
practicable after the termination of the Offering Period. Accepted subscribers
will be deemed Limited Partners at such time as such admission is reflected on
the books and records of the Partnership.
F. Paid-In Capital if at least 50,000 Limited Partnership Units Are
Sold. In the event that 50,000 or more of the Limited Partnership Units
offered pursuant to the Prospectus are sold during the Offering Period, the
Partnership shall have paid-in capital of not less than $5,100,000 (including
the General Partner's contribution for the purchase of Units as provided in
Paragraphs B and H of this Article VII), after giving effect to the Initial
Limited Partner's withdrawal as provided in Paragraph B of this Article VII.
G. Effect of the Sale of Less than 50,000 Limited Partnership Units.
In the event that at least 50,000 Limited Partnership Units offered pursuant
to the Prospectus are not sold during the Offering Period, all proceeds of the
sale of Limited Partnership Units, together with any interest earned thereon,
will be returned to the subscribers on a pro rata basis (taking into account
the amount and time of deposit), no later than fifteen (15) business days
after the conclusion of the Offering Period (or as soon thereafter as
practicable if payment cannot be made
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in such time period), and the Partnership shall be dissolved and the General
Partner shall cancel the Certificate of Limited Partnership.
H. General Partner's Contribution if at least 50,000 Limited
Partnership Units Are Sold. In the event that 50,000 or more of the Limited
Partnership Units offered pursuant to the Prospectus are sold during the
Offering Period, the General Partner and/or its Affiliates shall contribute,
and maintain, in cash to the capital of the Partnership an amount, which, when
added to the total contributions to the Partnership by all Partners, will be
not less than 1% of such total contributions, but in no event shall such
contribution be less than $100,000. The General Partner and/or its Affiliate
will receive General Partnership Units in proportion to its contribution. The
General Partner and/or its Affiliate shall, with respect to any Limited
Partnership Unit or Units owned by them, enjoy all of the rights and
privileges and be subject to all of the obligations and duties of a Limited
Partner, in addition to rights and privileges the General Partner has as a
General Partner.
I. Optional Purchase of Limited Partnership Units . The General
Partner and/or its Affiliates and (subject to approval by the General Partner)
any commodity broker, any Trading Manager and their respective principals,
stockholders, directors, officers, employees and affiliates may purchase any
number of Limited Partnership Units during or following the Offering Period,
and will be treated as Limited Partners with respect to such Units.
Notwithstanding anything to the contrary in this Agreement, the interest of
the General Partner and/or its Affiliates (without regard to any limited
partnership interest in the Partnership of the General Partner and/or its
Affiliates) in each material item of Partnership income, gain, loss or
deduction shall be equal to at least 1% of each such item at all times during
the term of this Agreement.
ARTICLE VIII
DISTRIBUTIONS AND ALLOCATIONS
A. Capital Accounts. A capital account shall be established for each
Partner on the books of the Partnership (such account is sometimes hereinafter
referred to as a "book capital account"). The initial balance of each
Partner's book capital account shall be the amount of his initial capital
contribution to the Partnership.
B. Monthly Allocations. As of the close of business (as determined by
the General Partner) on the last day of each calendar month during each Fiscal
Year of the Partnership, the following determinations and allocations shall be
made:
(1) The Partnership's Net Asset Value shall be determined;
(2) Any increase or decrease in Net Asset Value as compared to
the next previous determination of Net Asset Value shall then be
credited or charged to the book capital accounts of the Partners in
the ratio that the balance of each Partner's account bears to the
balance of all Partners' book capital accounts; and
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(3) The amount of any distribution to a Partner, any amount
paid to a Partner upon redemption of Units and any amount paid to
the General Partner upon withdrawal of its interest in the
Partnership shall then be charged to that Partner's book capital
account.
C. Allocation of Profit and Loss For United States Federal Income Tax
Purposes. As of the end of each Fiscal Year of the Partnership, the
Partnership's realized profit and loss shall be allocated among the Partners
pursuant to the following subparagraphs for federal income tax purposes. Such
allocations of profit and loss shall be pro rata from Capital Gain or Loss and
Profits and Losses.
(1) Items of ordinary income (such as interest and credits in
lieu of interest) and expense (such as management fees, incentive
fees, brokerage fees, and costs in connection with the organization
and offering of Units in the Partnership including legal,
accounting, auditing, preparing and printing Prospectuses, mailing
costs and filing fees, and extraordinary expenses) shall be
allocated pro rata among the Partners based on their respective book
capital accounts as of the end of each month in which the items of
ordinary income and expense accrued.
(2) Capital Gain or Capital Loss from the Partnership's trading
activities for each Fiscal Year of the Partnership shall be
allocated as follows:
(a) For the purpose of allocating the Partnership's
Capital Gain and Capital Loss among the Partners, there shall
be established a tax capital account with respect to each
outstanding Unit. The initial balance of each tax capital
account shall be the amount paid by the Partner to the
Partnership for the Unit. Tax capital accounts shall be
adjusted as of the end of each Fiscal Year as follows:
(i) Each tax capital account shall be increased by
the amount of income (Profits or Capital Gain) which shall
have been allocated to the Partner who shall hold the Unit
pursuant to Paragraph C(1) above and Subparagraph (c)
below;
(ii) Each tax capital account shall be decreased by
the amount of expense or loss (Losses or Capital Losses)
which shall have been allocated to the Partner who shall
hold the Unit pursuant to Paragraph C(1) above and
Subparagraph (e) below and by the amount of any
distribution which shall have been received by the Partner
with respect to the Unit (other than on redemption of
Units); and
(iii) When a Unit shall be redeemed, the tax capital
account with respect to such Unit shall be eliminated on
the Redemption Date.
(b) Capital Gain shall be allocated first to each Partner
who has redeemed one or more of his Units during the Fiscal
Year up to the excess, if any, of the amount received upon
redemption of the Units over the tax capital account
attributable to the redeemed Unit.
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(c) Capital Gain remaining after the allocation thereof
pursuant to Subparagraph (b) above shall be allocated next
among all Partners whose book capital accounts shall be in
excess of their Units' tax capital accounts (after the
adjustments in Subparagraph (b) above) in the ratio that each
such Partner's excess shall bear to all such Partners'
excesses. In the event that Capital Gain to be allocated
pursuant to this Subparagraph (c) shall be greater than the
excess of all such Partners' book capital accounts over all
such Partners' tax capital accounts, the excess Capital Gain
shall be allocated among all Partners in the ratio that each
Partner's book capital account shall bear to all Partners' book
capital accounts.
(d) Capital Loss shall be allocated first to each Partner
who shall have redeemed one or more of his Units during the
Fiscal Year up to the excess, if any, of the tax capital
account attributable to the redeemed Units over the amount
which shall have been received upon redemption of the Unit.
(e) Capital Loss remaining after the allocation thereof
pursuant to Subparagraph (d) above shall be allocated next
among all Partners whose Units' tax capital accounts shall be
in excess of their book capital. accounts (after the
adjustments in Subparagraph (d) above) in the ratio that each
such Partner's excess shall bear to all such Partners'
excesses. In the event that Capital Loss to be allocated
pursuant to this Subparagraph (e) shall be greater than the
excess of all such tax capital accounts over all such Partners'
book capital accounts, the excess loss shall be allocated among
all Partners in the ratio that each Partner's book capital
account shall bear to all Partners' book capital accounts.
(3) The tax allocations prescribed by this Paragraph C shall be
made to each holder of a Unit whether or not the holder is a
substituted Limited Partner. In the event that a Unit shall have
been transferred pursuant to Paragraph C of Article XIV hereof, the
allocations pie scribed by this Paragraph C shall be made with
respect to such Unit without regard to the assignment, except that
in the year of assignment the allocations prescribed by this
Paragraph C shall be divided between the assignor and the assignee
based on the number of months each shall have held the assigned
Unit. For purposes of this Paragraph C, tax allocations shall he
made to the General Partner's Units of General Partnership Interest
on a Unit-equivalent basis.
(4) The allocation of income and loss (and items thereof) for
federal income tax purposes set forth in this Paragraph C shall be
intended to allocate taxable income and loss among Partners
generally in the ratio and to the extent that net profit and net
loss shall be allocated to such Partners under Paragraph B of this
Article VIII so as to eliminate, to the extent possible, any
disparity between a Partner's book capital account and his tax
capital account. consistent with the principles set forth in Section
704(c)(2) of the Code.
(5) Notwithstanding the foregoing subparagraphs of this
Paragraph E of Article VIII, if any allocation would produce a
deficit in the tax capital account of any
10
Unit, the portion of such allocation that would create such a
deficit shall instead be allocated to the tax capital account of the
General Partnership Units.
D. Allocation of Distributions. The General Partner shall have sole
discretion in determining the amount and frequency of distributions, other
than redemptions, which the Partnership shall make with respect to the Units;
provided, however, that no Partner shall receive a distribution to the extent
that, after giving effect to the distribution, all liabilities of the
Partnership, other than liabilities to the Partners on account of their
Partnership interests, exceed the fair market value of the Partnership assets.
The aggregate distributions made in a Fiscal Year (other than distributions on
termination, which shall be allocated in the manner described in Paragraph B
of Article XVII) shall be allocated among the holders of record of Units in
the ratio in which the number of Units held of record by each of them bears to
the number of Units held of record by all of the Partners as of the record
date of such distribution, provided, however that any distribution made in
respect of a Unit shall not exceed the tax capital account for such Unit.
E. Admissions of Partners; Transfers. For purposes of this Article
VIII, Partners shall be deemed admitted (and a tax and book capital account
shall be established in respect of the Units acquired by such Partner) as of
the first day of the calendar month following the calendar month in which such
Partner's subscription is accepted, or the transfer of Units to such Partner
is recognized, except that persons accepted as subscribers to the Partnership
pursuant to Paragraph E of Article VII shall be deemed admitted on the date
determined pursuant to such Paragraph E. Any Partner to whom a Unit has been
transferred shall succeed to the tax and book capital accounts attributable to
the Unit transferred.
F. No Personal Liability of General Partner for Return of Capital or
Profits. Subject to the provisions of Paragraph E of Article X of this
Agreement, the General Partner shall not be personally liable for the return
or repayment of all or any portion of the capital or profits of any Limited
Partner, it being expressly agreed that any such return of capital or profits
made pursuant to this Agreement shall be made solely from the assets of the
Partnership without any rights of contribution from the General Partner.
G. Liability for State and Local Tax. In the event that the
Partnership shall be separately subject to state or local taxation by any
jurisdiction or taxing authority, and in the event that such tax is payable by
the Partnership or by the General Partner, each Partner shall be liable for
and shall reimburse the Partnership or the General Partner, as appropriate,
for any income taxes due and payable or paid to such jurisdiction within ten
(10) days from the General Partner's request thereof, in an amount equal to
the ratio which the number of Units of record held by each such Partner bears
to the number of Units of record held by all of the Partners as of the last
day of the period for which such tax has been assessed.
ARTICLE IX
REDEMPTIONS
A. Redemption of Partnership Units. The Partners recognize that the
profitability of the Partnership depends upon long term and uninterrupted
investment of capital. It is agreed, therefore, that Partnership profits and
gains may be automatically reinvested, and that
11
distributions, if any, of capital and profits to the Partners will be on a
limited basis. Nevertheless, the Partners contemplate the possibility that one
or more of the Limited Partners may elect to realize and withdraw any profits,
or may desire to withdraw capital, through the redemption of Units prior to
the dissolution of the Partnership. In that regard and subject to the
provisions of Subparagraph B(9) of Article X:
(1) Subject to the conditions set forth in this Article IX,
each Limited Partner (or any assignee thereof) shall have the right
to redeem one or more whole Units that he or it owns as of the close
of business on the last day of a fiscal quarter (the "Redemption
Date"), commencing with the end of the first full fiscal quarter of
Partnership trading activity. Redemptions of Units by a Limited
Partner (other than an ▇▇▇) at or prior to the end of the first
Redemption Date will be assessed a redemption penalty equal to 4% of
the Net Asset Value of a Unit on that Redemption Date. Redemptions
by a Limited Partner (other than an ▇▇▇) at or prior to the end of
the second Redemption Date will be assessed a redemption penalty
equal to 3% of the Net Asset Value of a Unit on that Redemption
Date. Redemptions by a Limited Partner (other than an ▇▇▇) at or
prior to the end of the third Redemption Date will be assessed a
redemption penalty equal to 2% of the Net Asset Value of a Unit on
that Redemption Date. All redemption penalties shall be payable to
the General Partner. The redemption penalties will not be charged if
the Limited Partner simultaneously invests the redemption proceeds
in another futures fund sponsored by the General Partner and/or its
Affiliates. Units will be redeemed on a "first in, first out" basis,
unless otherwise requested by the redeeming Limited Partner. Units
will be valued for purposes of redemption as of the close of
business on a Redemption Date next succeeding the earliest date on
which the General Partner shall have been in receipt of the required
notice for at least ten (10) days. If a Partner (or assignee
thereof) is permitted to redeem any or all of his or its Units as of
a date other than a Redemption Date, such adjustments in the
determination and allocation among the Partners of Capital Gain,
Capital Loss, Profits, Losses and items of income or deduction for
tax and accounting purposes shall be made as are necessary
appropriately to reflect and give effect to the redemption.
(2) The value of a Unit for purposes of redemption shall be the
book capital account balance of such Unit at the close of business
on the Redemption Date, less (a) any amount owing by such Limited
Partner (and his assignee, if any) to the Partnership pursuant to
Subparagraph F(8) of Article X of this Agreement, (b) any redemption
penalty as provided for in Subparagraph (1) of this Section A and
(c) such Unit's pro rata portion of unamortized organization and
offering expenses (which, during the first, second and third
permissible Redemption Dates, will be paid out of the applicable
redemption penalty). If redemption of a Unit shall be requested by
an assignee, all amounts which shall be owed to the Partnership
under Subparagraph F(8) of Article X hereof by the Partner of
record, as well as all amounts which shall be owed by all assignees
of such Units shall be deducted from the Net Asset Value of such
Units upon redemption.
(3) The effective date of redemption shall be the Redemption
Date. Payment of the value of the redeemed Units generally shall be
made within ten (10) days following the Redemption Date; provided,
that all liabilities, contingent or otherwise, of the
12
Partnership, except any liability to Partners on account of their
capital contributions, have been paid or there remains property of
the Partnership sufficient to pay them; and provided further, that
under extraordinary circumstances, including, but not limited to,
the inability to liquidate Commodity Positions as of such Redemption
Date, or default or delay in payments due the Partnership from
commodity brokers, banks or other persons, the Partnership may in
turn delay payment to Limited Partners requesting redemption of
Units of the proportionate part of the value of redeemed Units
represented by the sums which are the subject of such default or
delay, in which event payment for redemption of such Units will be
made to Limited Partners as soon thereafter as is practicable. A
Limited Partner may revoke his or its notice of intent to redeem on
or prior to the Redemption Date by written instructions to the
General Partner. If a Limited Partner revokes his notice of intent
to redeem and thereafter wishes to redeem, such Limited Partner will
be required to submit written notice thereof in accordance with
Subparagraph A(2) of this Article IX and will be redeemed on the
first Redemption Date to occur after the General Partner shall have
been in receipt of such written notice for at least ten (10) days.
(4) A Limited Partner wishing to redeem Units must provide the
General Partner with written notice of its or his intent to redeem,
which notice shall specify the name and address of the redeeming
Limited Partner and the amount of Limited Partnership Units sought
to be redeemed. The notice of redemption shall be in the form
annexed to the Prospectus or in any other form acceptable to the
General Partner and shall be mailed or delivered to the principal
office of the General Partner. Such notice must include
representations and warranties that the redeeming Limited Partner is
the lawful and beneficial owner of the Units to be redeemed and that
such Units are not subject to any pledge or otherwise encumbered in
any fashion in certain circumstances, the Partnership may require
additional documents, such as, but not limited to, trust
instruments, death certificates, appointments as executor or
administrator or certificates of corporate authority. No redemption
of less than a whole Limited Partnership Unit will be permitted
except that fractional Units may be redeemed if a Limited Partner
shall be redeeming his entire interest in the Partnership. Limited
Partners requesting redemption shall be notified in writing within
ten (10) days following the Redemption Date whether or not their
Units will be redeemed, unless payment for the redeeming Units is
made within that ten (10) day period, in which case the notice of
acceptance of the redemption shall not be required.
(5) The General Partner may, in the case of extraordinary
hardship (e.g., the death. divorce, impending insolvency, medical
emergency or loss of employment by the Limited Partner) and where it
finds that earlier payment will in no respect jeopardize the
interests of other Limited Partners, permit redemption upon fewer
than ten (10) days' prior written notice and payment. In addition,
the General Partner may suspend temporarily any redemption if the
effect of such redemption, either alone or in conjunction with other
redemptions, would be to impair the Partnership's ability to operate
in pursuit of its objectives.
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(6) Except as discussed above, all requests for redemption in
proper form will be honored and the Partnership's positions will be
liquidated to the extent necessary to discharge its liabilities on
the date of redemption.
B. General Partner May Not Redeem. Notwithstanding any provision in
this Agreement to the contrary, the General Partner shall not have the right
to transfer or redeem any General Partnership Units owned by it so long as it
acts as the General Partner of the Partnership, except for Units of General
Partnership Interest held by the General Partner and/or its Affiliates
constituting more than a 1% interest in the Profits and Losses of the
Partnership.
ARTICLE X
MANAGEMENT AND OPERATION OF PARTNERSHIP BUSINESS
A. Management of Partnership Business. The Partnership shall be
managed by the General Partner and the conduct of the Partnership's business
shall be controlled and conducted solely by the General Partner in accordance
with this Agreement.
B. Authority of General Partner. In addition to and not in limitation
of any rights and powers conferred by law or other provisions of this
Agreement, and except as limited, restricted or prohibited by the express
provisions of this Agreement, the General Partner shall have and may exercise,
on behalf of the Partnership, all powers and rights necessary, proper,
convenient or advisable to effectuate and carry out the purposes, business and
objectives of the Partnership and shall, except as provided in this Agreement
or the Act, have and possess the same rights and powers as any general partner
in a partnership without limited partners formed under the laws of the State
of Delaware. Such powers shall include, without limitation, the following:
(1) To enter into, execute, deliver and maintain contracts,
agreements and any or all other documents and instruments, and to do
and perform all such things, as may be in furtherance of Partnership
purposes or necessary or appropriate to the offer and sale of the
Units and the conduct of Partnership activities, including, but not
limited to, contracts with third parties for:
(a) commodity brokerage services, as well as specialized
administrative services, on behalf of the Partnership (which
services may be performed by an Affiliate or Affiliates of the
General Partner); and
(b) commodity trading advisory services relating to the
purchase and sale of all Commodities Positions on behalf of the
Partnership, which services may not be per-formed by the
General Partner or an Affiliate of the General Partner;
provided, however, that to the extent that any agreement for
any advisory services is entered into after the date of the
Prospectus, any compensation paid to any such advisor,
including management and incentive fees, pursuant to any such
agreement (if different from the compensation arrangement set
forth in the Prospectus) will not exceed any limitations then
currently imposed by the NASAA Guidelines; and provided
further, that to the extent any new advisor is to
14
be retained to replace an existing advisor which has sustained
losses on behalf of the Partnership, the General Partner will
give reasonable prior notice thereof to each Limited Partner
in the manner prescribed in Paragraph A of Article XXI.
(2) To establish, maintain, deposit into, sign checks and/or
otherwise draw upon accounts on behalf of the Partnership with
appropriate banking and savings institutions, and execute and/or
accept any instrument or agreement incidental to the Partnership's
business and in furtherance of its purposes, any such instrument or
agreement so executed or accepted by the General Partner in the
General Partner's name shall be deemed executed and accepted on
behalf of the Partnership by the General Partner;
(3) To deposit, withdraw, pay, retain and distribute the
Partnership's funds in any manner consistent with the provisions of
this Agreement;
(4) To supervise the preparation and filing of the Registration
Statement, Prospectus, and supplements and amendments thereto;
(5) To pay or authorize the payment of distributions to the
Partners and expenses of the Partnership;
(6) To invest or direct the investment of funds of the
Partnership not then delegated to a commodity trading advisor;
(7) To make any elections on behalf of the Partnership under
the Code, as amended, or any other applicable federal or state tax
law as the General Partner shall determine to be in the best
interests of the Partnership;
(8) In the sole discretion of the General Partner, mandatorily
to (i) redeem any Limited Partnership Units if the General Partner
determines that the continued participation of such Limited Partner
in the Partnership might cause the Partnership or any Partner to
violate any law, or if any litigation is commenced or threatened
against the Partnership or any Partner arising out of, or relating
to, the participation of such Limited Partner in the Partnership, or
(ii) prohibit any transactions contemplated hereunder which may
constitute prohibited transactions under ERISA and the Code, as
amended. In the case of mandatory redemptions, the Redemption Date
shall be the close of business on the date written notice of intent
to redeem is sent by the General Partner to a Limited Partner. A
notice may be revoked prior to the payment date by written notice
from the General Partner to the Limited Partner; and
(9) In the sole discretion of the General Partner, to admit an
Affiliate or Affiliates of the General Partner as additional General
Partners. Notwithstanding the foregoing, the General Partner may not
admit an Affiliate or Affiliates of the General Partner as
additional General Partner if it has received notice, pursuant to
Subparagraph B(4) of Article XI hereof, of its removal as a general
partner.
(10) Refuse to recognize any attempted transfer or assignment
of a Unit in accordance with the provisions of Article XIV.
15
C. Obligations of General Partner. In addition to the obligations
expressly provided by the Act or this Agreement, the General Partner shall:
(1) Devote such of its time to the business and affairs of the
Partnership as it shall, in its discretion exercised in good faith,
determine to be necessary to conduct the business and affairs of the
Partnership for the benefit of the Partnership and the Limited
Partners;
(2) Execute, file, record and/or publish all certificates,
statements and other documents and do any and all other things as
may be appropriate for the formation, qualification and operation of
the Partnership and for the conduct of its business in all
appropriate jurisdictions;
(3) Retain independent public accountants to audit the accounts
of the Partnership;
(4) Employ attorneys to represent the Partnership;
(5) Use its best efforts to maintain the status of the
Partnership as a "limited partnership" for state law purposes, and
as a "partnership" for federal income tax purposes;
(6) Monitor the trading policies of the Partnership, as set
forth in the Prospectus, and the activities of the Partnership's
commodity trading advisors in carrying out those policies;
(7) Review, not less often than annually, the brokerage fees
charged to, and the services rendered by, comparable commodity pools
by futures commission merchants to determine whether the fees paid
by, and the services rendered to, the Partnership for futures
brokerage are the best price and services available under the
circumstances, and if not, renegotiate the brokerage fee structure
to attempt to obtain such rates and services for the Partnership;
(8) Have fiduciary responsibility for the safekeeping and use
of all funds and assets of the Partnership, whether or not in the
General Partner's immediate possession or control, and the General
Partner will not employ or permit others to employ such funds or
assets (including any interest earned thereon) in any manner except
for the benefit of the Partnership including, among other things,
the utilization of Partnership funds and assets as compensating
balances for the benefit of the General Partner;
(9) Agree that, at all times after the Offering Period, if more
than 50,000 Limited Partnership Units are sold, and so long as it
remains General Partner of the Partnership, it shall have a minimum
"net worth" (as defined below) of, and not take any affirmative
action to reduce its "net worth" below, $1 million, or such higher
amount as may be required under the NASAA Guidelines as they may be
amended from time to time. The NASAA Guidelines define "net worth"
as the excess of total assets over total liabilities as determined
by GAAP;
16
(10) Admit substituted Limited Partners in accordance with this
Agreement; and
(11) Maintain a current list of the names and last known
addresses of, and number of Units owned by, each Partner and the
other Partnership documents described in Paragraph F of Article XII
at the Partnership's principal office, which documents shall be made
available thereat at reasonable times during ordinary business hours
for inspection by any Limited Partner or his representative for any
purpose reasonably related to the Limited Partner's interest as a
limited partner in the Partnership. Upon request, for any purpose
reasonably related to the Limited Partner's interest as a limited
partner in the Partnership, either in person or by mail, the General
Partner will furnish a copy of such list to a Limited Partner or his
representative upon payment of the cost of reproduction and mailing;
provided, however, that the Limited Partner requesting such list
shall give written assurance that the list will not, in any event,
be used for commercial purposes. The following provision: Subject to
applicable law, a Limited Partner shall give the General Partner at
least ten (10) business days' prior written notice for any
inspection and copying permitted pursuant to this paragraph (11) by
the Limited Partner or his authorized attorney or agent.
D. General Prohibitions. The Partnership shall not:
(1) Borrow money from or loan money to any Partner or other
person, except that the foregoing is not intended to prohibit (i)
the deposit of margin with respect to the initiation and maintenance
of the Partnership's Commodities Positions, or (ii) obtaining lines
of credit for the trading of forward contracts; provided, however,
that the Partnership is prohibited from incurring any indebtedness
on a non-recourse basis;
(2) Commingle its assets with those of any other person, except
to the extent permitted under the Commodity Exchange Act, as
amended, and the regulations promulgated thereunder;
(3) Directly or indirectly pay or award any finder's fees,
commissions or other compensation to any persons engaged by a
potential limited partner for investment advice as an inducement to
such advisor to advise the potential limited partner to purchase
Limited Partnership Units in the Partnership;
(4) Engage in Pyramiding of its Commodities Positions provided,
however, that the Advisor may take into account the Partnership's
open trade equity on existing positions in determining generally
whether to acquire additional Commodities Positions on behalf of the
Partnership;
(5) Permit rebates or give-ups to be received by the General
Partner or any Affiliate of the General Partner, or permit the
General Partner or any Affiliate of the General Partner to engage in
any reciprocal business arrangements which would circumvent the
foregoing prohibition;
17
(6) Permit any Trading Manager to share in any portion of
brokerage fees related to commodity brokerage services paid by the
Partnership with respect to its commodity trading activities;
(7) Enter into any contract with the General Partner or an
Affiliate of the General Partner (except for selling agreements for
the sale of Units) (a) which has a term of more than one year and
which does not provide that it may be cancelled by the Partnership
without penalty on sixty (60) days, prior written notice or (b) for
the provision of goods and services, except at rates and terms at
least as favorable as those which may be obtained from third parties
in arm's-length negotiations;
(8) Purchase, sell or trade in securities or options on
securities (other than securities in which "customer" funds may be
invested under the Commodity Exchange Act, as amended), which shall
not include futures contracts or options on futures contracts on
securities and securities indices that are approved by the Commodity
Futures Trading Commission ("CFTC") for trading on commodity
exchanges and other commodity options;
(9) Permit churning of its commodity trading account(s) for the
purpose of generating excess brokerage commissions;
(10) Enter into any exclusive brokerage contract.
E. Liability of the General Partner. The General Partner shall have
no liability to the Partnership or to any Partner for any loss suffered by the
Partnership which arises out of any action or inaction of the General Partner
if the General Partner, in good faith, determined that such course of conduct
was in the best interest of the Partnership and such course of conduct did not
constitute negligence or misconduct of the General Partner.
F. Indemnification.
(1) The General Partner shall be indemnified by the Partnership
to the full extent permitted by law, against any losses, judgments,
liabilities, expenses and amounts paid in settlement of any claims
sustained by it in connection with the Partnership, provided that
(a) the General Partner has determined, in good faith, that such
course of conduct was in the best interests of the Partnership and
such liability or loss was not the result of negligence. misconduct,
or a breach of this Agreement on the part of the General Partner and
(b) any such indemnification will only be recoverable from the
assets of the Partnership. All rights to indemnification permitted
herein and payment of associated expenses shall not be affected by
the dissolution or other cessation to exist of the General Partner,
or the withdrawal, adjudication of bankruptcy or insolvency of the
General Partner. Any indemnification under this subparagraph (1),
unless ordered by a court, shall be made by the Partnership only as
authorized in the specific case and only upon a determination by
independent legal counsel in a written opinion that indemnification
of the General Partner is proper in the circumstances because it has
met the applicable standard of conduct set forth hereunder.
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(2) Notwithstanding the provisions of Subparagraph (1) above,
the General Partner shall not be indemnified for any losses,
liabilities or expenses arising from or out of an alleged violation
of federal or state securities laws unless (i) there has been a
successful adjudication on the merits of each count involving
alleged securities law violations as to the particular indemnitee
and the court approves the indemnification of such expenses
(including, without limitation, litigation costs) or (ii) such
claims have been dismissed with prejudice on its merits by a court
of competent jurisdiction as to the particular indemnitee and the
court approves the indemnification of such expenses (including,
without limitation, litigation costs) or (iii) a court of competent
jurisdiction approves a settlement of the claims against a
particular indemnitee and finds that indemnification of the
settlement and related costs should be made.
(3) In any claim for indemnification for federal or state
securities law violations, the party seeking indemnification shall
place before the court the position of the Securities and Exchange
Commission, the position of the Massachusetts Securities Division,
the position of the Tennessee Securities Division and the position
of any other applicable state securities. division which requires
disclosure with respect to the issue of indemnification for
securities law violations.
(4) The Partnership shall not incur the cost of that portion of
any insurance which insures any party against any liability the
indemnification of which is herein prohibited.
(5) Expenses incurred in defending a threatened or pending
civil, administrative or criminal action, suit or proceeding against
the General Partner may be paid by the Partner ship in advance of
the final disposition of such action, suit or proceeding, if (i) the
legal action relates to the performance of duties or services by the
General Partner on behalf of the Partnership; and (ii) the legal
action is initiated by a third party who is not a Limited Partner.
and (iii) the General Partner undertakes to repay the advanced funds
to the Partnership in cases in which it is not entitled to
indemnification under this Paragraph F.
(6) The term "General Partner" as used in this Paragraph F and
in the immediately preceding Paragraph E shall only include an
Affiliate of the General Partner, performing services on behalf of
the Partnership, and acting within the scope of the General
Partner's authority as set forth in this Agreement.
(7) The Partnership shall indemnify, to the full extent
permitted by law, to the extent of the Partnership assets, each
Limited Partner (excluding the General Partner to the extent of its
ownership of any Limited Partnership Units) against any claims of
liability asserted against such Limited Partner solely because he is
a limited partner in the Partnership.
(8) In the event the Partnership is made a party to any claim,
dispute, demand or litigation or otherwise incurs any loss,
liability, damage, cost or expense as a result of or in connection
with any Limited Partner's (or assignee's) obligations or
liabilities unrelated to the Partnership business, such Limited
Partner (or assignees cumulatively)
19
shall indemnify, defend, hold harmless, and reimburse the
Partnership for all such loss, liability, damage, cost and expense
incurred, including attorneys' and accountants' fees.
G. Expenses.
(1) The Partnership shall pay all organization and offering
expenses incurred in the creation of the Partnership and sale of
Units, if 50,000 or more Units are sold pursuant to the Prospectus;
and if 50,000 Units are not sold pursuant to the Prospectus, these
expenses shall be borne by the General Partner. The foregoing
expenses may be paid directly by the Partnership and/or the
Partnership may reimburse the General Partner or an affiliate of the
General Partner for advancing payment of such expenses on the
Partnership's behalf. Not-withstanding the foregoing, in no event
will reimbursement by the Partnership of the General Partner or an
affiliate of the General Partner for organization and offering
expenses exceed an amount equal to 5% of the gross proceeds from the
sale of Units. The organizational portion of these expenses will be
amortized in accordance with GAAP, with the balance of such expenses
being charged to Unitholder capital. Organization and offering
expenses shall mean those expenses incurred in connection with the
formation, qualification and registration of the Partnership and the
Units and in offering, distributing and processing the Units under
applicable federal and state law, and any other expenses actually
incurred and directly or indirectly related to the organization of
the Partnership or the offering of the Units, including, but not
limited to, expenses such as: (a) initial and ongoing registration
fees, filing fees, escrow fees and taxes, (b) the costs of
preparing, qualifying, printing (including typesetting), amending,
supplementing, mailing and distributing the Registration Statement,
the Exhibits thereto and the Prospectus, (c) the costs of
qualifying, printing, (including typesetting), amending,
supplementing, mailing and distributing sales materials used in
connection with the offering and issuance of the Units, (d) travel,
telegraph, telephone and other expenses in connection with the
offering and issuance of the Units, (e) accounting, auditing and
legal fees (including disbursements related thereto) incurred in
connection therewith, and (f) any extraordinary expenses (including,
but not limited to, legal claims and liabilities and litigation
costs and any permitted indemnification associated therewith)
related thereto.
(2) All ongoing charges, costs and expenses relating to the
execution of Commodities and other permitted Partnership
transactions shall be billed directly to and shall be paid by the
General Partner and/or an Affiliate of the General Partner. All
ongoing charges, costs and expenses of the Partnership's operation,
including, but not limited to, the expenses associated with (a)
required payments to the Partnership's commodity trading advisors,
(b) preparation of monthly, quarterly, annual and other reports
required by applicable federal and state regulatory authorities, (c)
Partnership meetings and of preparing, printing and mailing of proxy
statements and reports to Unitholders, (d) the payment of any
distributions related to, or redemption of, Units, (e) services of
legal counsel and independent auditors and accountants, (f) postage,
insurance and filing fees, (g) the fixed fee to be paid to the
General Partner and/or its Affiliates consistent with applicable
regulatory guidelines, and (h) extraordinary expenses (including,
but not limited to, legal claims and liabilities and litigation
costs and any indemnification related thereto) shall be billed
directly to and shall be paid by the
20
Partnership. Except for organization and offering expenses set forth
in Subparagraph (1) above, reimbursement to the General Partner or
any Affiliate of the General Partner for indirect expenses incurred
in performing services for the Partnership, such as salaries of
officers and directors, rent and other items generally falling
within the category of the General Partner's "overhead", is
prohibited.
(3) The General Partner or any Affiliate of the General Partner
may be reimbursed for the actual costs of ongoing legal, accounting
and auditing services used for or by the Partnership, as well as
printing expenses and filing fees and extraordinary expenses
incurred for or by the Partnership.
H. Compensation to the General Partner. Except as provided in
Subparagraph G(2)(g) of this Article and Subparagraph A(1) of Article IX, the
General Partner shall not, in its capacity as General Partner, receive any
salary, fees, profits or distributions. The General Partner shall, in its
capacity as a holder of Units, be entitled to receive allocations and
distributions pursuant to thc provisions of Article VIII and Paragraph B of
Article XVII hereof.
I. Other Business of Partners. Except as otherwise specifically
provided herein, any of the Partners, and any shareholder, officer, director,
employee or other person holding a legal or beneficial interest in an entity
which is a Partner, may engage in or possess an interest in other business
ventures of every nature and description, independently or with others, and
the pursuit of such ventures, even if competitive with the business of the
Partnership, shall not be deemed wrongful or improper. The General Partner and
its Affiliates shall not engage in a venture competitive with the Partnership
except where such venture will not have an adverse economic effect on the
business of the Partnership.
J. Tax Matters Partner. The General Partner shall be authorized to
perform all duties imposed by Section 6221 through 6232 of the Code on the
General Partner as "tax matters partner" of the Partnership, including, but
not limited to, the following: (a) the power to conduct all audits and other
administrative proceedings with respect to Partnership tax items; (b) the
power to extend the statute of limitations for all Limited Partners with
respect to Partnership tax items; (c) the power to file a petition with an
appropriate federal court for review of a final Partnership administrative
adjustment; and (d) the power to enter into a settlement with the Internal
Revenue Service on behalf of, and binding upon, those Limited Partners having
less than a 1% interest in the Partnership, unless a Limited Partner shall
have notified the Internal Revenue Service and the General Partner that the
General Partner shall not act on such Partner's behalf. The designation made
in this Article is hereby approved by each Partner as an express condition to
becoming a Partner. Each Partner agrees to take any further action as may be
required by regulation or otherwise to effectuate such designation. Subject to
Paragraph F of this Article X, the Partnership hereby indemnifies, to the full
extent permitted by law, the General Partner from and against any damages or
losses (including attorneys' fees) arising out of or incurred in connection
with any action taken or omitted to be taken by it in carrying out its
responsibilities as tax matters partner, provided such action taken or omitted
to be taken does not constitute fraud, negligence or misconduct.
K. Voluntary Withdrawal of the General Partner. The General Partner
may not withdraw voluntarily as the General Partner of the Partnership except
upon ninety (90) days'
21
prior written notice to all Limited Partners and the prior approval of Limited
Partners holding at least a majority in interest (over 50%) of the outstanding
Units (not including Units of the General Partner). If the withdrawing General
Partner is the last remaining General Partner, Limited Partners holding at
least a majority interest (over 50%) of the outstanding Units (not including
Units held by the General Partner) may vote to elect and appoint, prior to the
withdrawal, a successor General Partner who shall carry on the business of the
Partnership, so that the Partnership continues as a limited partnership under
the Act without dissolution.
L. Authorization of Registration Statement. Each Limited Partner (or
any assignee thereof) hereby agrees that the General Partner is authorized to
execute, deliver and perform the agreements, acts, transactions and matters
contemplated hereby or described in or contemplated by the Registration
Statement on behalf of the Partnership without any further act, approval or
vote of the Limited Partners of the Partnership, notwithstanding any other
provision of this Agreement, the Act or any applicable law, rule or
regulation.
ARTICLE XI
STATUS OF LIMITED PARTNERS
A. No Management or Control; Limited Liability. The Limited Partners
shall not participate in the management or control of the Partnership's
business nor shall they transact any business for the Partnership or have the
power to sign for or bind the Partnership; said powers being vested solely and
exclusively in the General Partner. Except as provided in Paragraph A of
Article) (hereof, and assuming such Limited Partner does not participate in
the control of the business of the Partnership, no Limited Partner shall be
bound by, or be personally liable for, the expenses, liabilities or
obligations of the Partnership in excess of his Capital Contribution plus his
share the Partnership's assets and profits remaining in the Partnership, if
any, and such other amount as he may be liable for pursuant to the Act. Except
as provided in the Act, each Unit owned by Limited Partner shall be fully paid
and no assessment shall be made against any Limited Partner. No salary shall
be paid to any Limited Partner in his capacity as a Limited Partner, nor shall
an Limited Partner have a drawing account or earn interest on his
contribution.
B. Rights, Duties, etc. The Limited Partners shall have the following
rights, powers, privileges, duties and liabilities:
(1) The Limited Partners shall have the right to obtain
information of all things affecting the Partnership, provided that
such is for a purpose reasonably related to the Limited Partner's
interest as a limited partner in the Partnership, including, without
limitation such reports as are set forth in Article XII and such
information as is set forth in Subparagraph C(11) of Article X
hereof.
(2) The Limited Partners shall receive from the Partnership the
share of the distributions provided for in this Agreement in the
manner and at the times provided for in this Agreement.
(3) Except for the Limited Partners' redemption rights set
forth in Paragraphs A and B of Article IX hereof or upon a mandatory
redemption effected by the General
22
Partner pursuant to Subparagraph B(9) of Article X hereof, Limited
Partners shall have the right to demand the return of their capital
account only upon the dissolution and winding up of the Partnership.
In no event shall a Limited Partner be entitled to demand or receive
property other than cash. No Limited Partner shall have priority
over any other Limited Partner either as to the return of capital or
as to profits, losses or distributions. No Limited Partner shall
have the right to bring an action for partition against the
Partnership.
(4) Limited Partners holding at least a majority in interest
(over 50%) of the outstanding Units (not including Units held by the
General Partner) may vote to (a) reconstitute the Partnership as
provided in Subparagraph A(2) of Article XVII, (b) approve the
voluntary withdrawal of the General Partner and elect a successor
General Partner as provided in Paragraph K of Article X, (c) remove
the General Partner on ninety (90) days' prior written notice to the
General Partner, (d) elect and appoint one or more additional
General Partners, or consent to such matters as are set forth in
Subparagraph B(2) of Article XIV, (e) approve a material change in
the trading policies of the Partnership as set forth in the
Prospectus, which change shall not be effective without the prior
written approval of such majority, and (f) approve the termination
of any agreement entered into between the Partnership and the
General Partner or any Affiliate of the General Partner, in the case
of (d) (e) and (f), in each instance on sixty (60) days' prior
written notice.
(5) All Limited Partners may vote to elect a successor General
Partner upon the withdrawal, removal, death, insanity, adjudication
of bankruptcy or insolvency, dissolution or other cessation to exist
as a legal entity of the General Partner as provided in Clause (b)
of Subparagraph A(2) of Article XVII.
Prior to the exercise by the Limited Partners of the rights set forth
in Subparagraphs (4) and (5) of this Paragraph B, in Paragraph A of Article XV
and in Subparagraph A(4) of Article XVII the Partnership will, if practicable,
provide Limited Partners with an opinion of independent legal counsel in each
state where the Partnership may be deemed to be conducting its business
whether or not such exercise would constitute such participation in the
control of the Partnership business as would deny to the Limited Partners
limited liability under the laws of such state.
ARTICLE XII
BOOKS OF ACCOUNT AND REPORTS
A. Books of Account. Proper books of account shall be kept and shall
be audited annually by an independent certified public accounting firm
selected by the General Partner in its sole discretion, and there shall be
entered therein all transactions, matters and things relating to the
Partnership's business as are required by the Commodity Exchange Act, as
amended, and regulations promulgated thereunder, and all other applicable
rules and regulations, and as are usually entered into books of account kept
by persons engaged in a business of like character. The books of account shall
be kept at the principal office of the General Partner and each Limited
Partner (or any duly constituted designee of a Limited Partner) shall have, at
all times
23
during normal business hours, free access to and the right to inspect and copy
the same for any purpose reasonably related to the Limited Partner's interest
as a limited partner in the Partnership. Such books of account shall be kept,
and the Partnership shall report its Profits and Losses on the accrual method
of accounting for tax and financial accounting purposes on a Fiscal Year basis
as described in Article XIII.
B. Annual Reports and Monthly Statements. Each Limited Partner shall
be furnished as of the end of each month and as of the end of each Fiscal Year
with (1) such reports (in such detail) as are required to be given to Limited
Partners by the CFTC and the National Futures Association (the "NFA"), (2) any
other reports (in such detail) required by any other governmental authority
which has jurisdiction over the activities of the Partnership and (3) any
other reports or information which the General Partner, in its discretion,
determines to be necessary or appropriate.
C. Tax Information. Appropriate tax information (adequate to enable
each Limited Partner to complete and file his federal tax return) shall be
delivered to each Limited Partner as soon as practicable following the end of
each Fiscal Year.
D. Calculation of Net Asset Value. Net Asset Value will be calculated
daily. Upon request, the General Partner shall make available to any Limited
Partner the Net Asset Value per Unit. Each Limited Partner shall be notified
of any decline in the Net Asset Value per Unit to less than 50% of the Net
Asset Value per Unit as of the last business day of the preceding month within
seven (7) business days of such occurrence. Included in such notification
shall be a description of the Limited Partners' voting rights as set forth in
Paragraph B of Article XI hereof.
E. Other Reports. The General Partner shall send such other reports
and information, if any, to the Limited Partners as it may deem necessary or
appropriate.
F. Maintenance of Records. The General Partner shall maintain (i) for
a period of at least eight (8) Fiscal Years all books of account required by
Paragraph A of this Article XII; a list of the names and last known addresses
of, and number of Units owned by, all Partners, a copy of the Certificate of
Limited Partnership and all certificates of amendment thereto, together with
executed copies of any powers of attorney pursuant to which any certificate
has been executed; copies of the Partnership's federal, state and local income
tax returns and reports, if any; and a record of the information obtained to
indicate that a Limited Partner meets the investor suitability standards set
forth in the Prospectus, and (ii) for a period of at least six (6) Fiscal
Years copies of any effective written partnership agreements, subscription
agreements and any financial statements of the Partnership.
G. Certificates of Limited Partnership. Except as otherwise provided
in the Delaware Revised Uniform Limited Partnership Act or this Agreement, the
General. Partner shall not be required to mail a copy of any Certificates of
Limited Partnership filed with the Secretary of State of the State of Delaware
to each Limited Partner; however, such certificates shall be maintained at the
principal business office of the Partnership and available for inspection and
copying by the Limited Partners in accordance with Subparagraph C(11) of
Article X hereof.
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ARTICLE XIII
FISCAL YEAR
The Fiscal Year shall begin on the 1st day of January and end on the
31st day of December of each year. The first Fiscal Year of the Partnership
shall commence on the date of filing of the Certificate of Limited Partnership
in the State of Delaware and end on the 31st day of December 1988. The Fiscal
Year in which the Partnership shall terminate shall end on the date of
termination of the Partnership.
ARTICLE XIV
TRANSFERS OF PARTNERSHIP INTERESTS
A. General Prohibition. A Limited Partner may not sell, assign,
transfer or otherwise dispose of, or pledge, hypothecate or in any manner
encumber any or all of his Units or any part of his right, title and interest
in the capital or profits of the Partnership except as permitted in this
Article XIV, and any act in violation of this Paragraph A shall not be binding
upon or recognized by the Partnership (regardless of whether the General
Partner shall have knowledge thereof), unless approved in writing by the
General Partner.
B. Transfer of General Partnership Interest.
(1) Upon the withdrawal, removal, adjudication of bankruptcy or
insolvency, dissolution or other cessation to exist as a legal
entity of the General Partner, the General Partner's Units shall be
purchased by the Partnership for a purchase price equal to the Net
Asset Value thereof. The General Partner will not cease to be a
general partner of the Partnership merely upon the occurrence of its
making an assignment for the benefit of creditors, filing a
voluntary petition in bankruptcy, filing a petition or answer
seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any
statute, law or regulation, filing an answer or other pleading
admitting or failing to contest material allegations of a petition
filed against it in any proceeding of this nature or seeking,
consenting to or acquiescing in the appointment of a trustee,
receiver or liquidator for itself or of all or any substantial part
of its properties. The purchase price of such Units shall be paid by
the Partnership to the General Partner in cash.
(2) To the full extent permitted by law, and on sixty (60)
days' prior written notice to the Limited Partners of their right to
vote thereon, if the transaction is other than with an Affiliated
entity, nothing in this Agreement shall be deemed to prevent the
merger of the General Partner with another corporation or other
entity, the reorganization of the General Partner into or with any
other corporation or other entity, or the transfer of all the
capital stock of the General Partner and the assumption of the
rights, duties and liabilities of the General Partner by, in the
case of a merger, reorganization or consolidation, the surviving
corporation or other entity by operation of law or the transfer by
the General Partner of General Partnership Units to an Affiliate of
the General Partner. Without limiting the foregoing, none of the
transactions referenced in the preceding
25
sentence shall be deemed to be a voluntary withdrawal for the
purposes of Paragraph K of Article X or a withdrawal or an
assignment of General Partnership Units for purposes of
Subparagraphs B(1) and B(3) of this Article.
(3) Upon assignment of all of its General Partnership Interest,
the General Partner shall not cease to be a General Partner of the
Partnership, or to have the power to exercise any rights or powers
as a General Partner, until an additional general partner, who shall
carry on the business of the Partnership, has been admitted as a
general partner of the Partnership.
C. Transfer of Limited Partnership Interest.
(1) The General Partner may, in its sole and absolute
discretion, pursuant to this Article XIV, admit as substituted
Limited Partners permitted assignees of Limited Partners. In that
regard:
(a) A substituted Limited Partner is a person admitted to
the Partnership with all the rights and powers of a Limited
Partner hereunder. If all of the conditions provided in
Subparagraph (2) below are satisfied, the General Partner shall
admit such permitted assignees into the Partnership as Limited
Partners by making an entry on the books and records of the
Partnership reflecting that such permitted assignees have been
admitted as Limited Partners, and such permitted assignees will
be deemed Limited Partners at such time as such admission is
reflected on the books and records of the Partnership.
(b) A permitted assignee is a person to whom a Limited
Partner has assigned his Limited Partnership Interest as
permitted by the General Partner under this Agreement, but who
has not become a substituted Limited Partner. A permitted
assignee shall have no right to vote, to require any
information on or account of the Partnership's transactions or
to inspect the Partnership's books, but shall only be entitled
to receive the share of the profits, or the return of the
Capital Contribution, to which his assignor would otherwise be
entitled as set forth in Subparagraph (4) below. Each Limited
Partner agrees that any permitted assignee may become a
substituted Limited Partner without the further act or consent
of any Limited Partner. An assigning Limited Partner shall
remain liable to the Partnership as provided in the Act,
regardless of whether his assignee becomes a substituted
Limited Partner.
(c) A Limited Partner shall bear all costs (including
attorneys' and accountants' fees) related to any transfer,
assignment, pledge or encumbrance of his Units.
(2) No permitted assignee of the whole or any portion of a
Limited Partner's Limited Partnership Interest shall have the right
to become a substituted Limited Partner in place of his assignor
unless all of the following conditions are satisfied:
26
(a) The written consent of the General Partner to such
substitution shall be obtained, the granting or denial of which
shall be within the sole and absolute discretion of the General
Partner;
(b) A duly executed and acknowledged written instrument of
assignment has been filed with the Partnership setting forth
the intention of the assignor that the permitted assignee
become a substituted Limited Partner in his place;
(c) The permitted assignor and assignee execute and
acknowledge and/or deliver such other instruments as the
General Partner may deem necessary or desirable to effect such
admission, including his execution, acknowledgment and delivery
to the General Partner, as a counterpart to this Agreement, a
Power of Attorney in the form set forth in the Subscription
Agreement.
(d) Upon the request of the General Partner, an opinion of
the Partnership's independent legal counsel is obtained to the
effect that (i) the assignment will not cause the Partnership
to be taxed as a corporation or an association other than a
partnership under the regulations and rulings of the Internal
Revenue Service, and (ii) the assignment does not violate the
Act.
(3) Any person admitted to the Partnership as a Partner shall
be subject to all of the provisions of this Agreement as if an
original signatory hereto.
(4) Subject to the provisions of Subparagraph (5) below,
compliance with the suitability standards imposed by the Partnership
for the purchase of new Units, applicable federal securities and
state "Blue Sky" laws and the rules of any other applicable
governmental authority, a Limited Partner shall have the right to
assign all or any of his Units to any assignee by a written
assignment (on a form acceptable to the General Partner) the terms
of which are not in contravention of any of the provisions of this
Agreement, which assignment has been executed by the assignor and
received by the Partnership and recorded on the books thereof.
Notwithstanding anything contained herein to the contrary, in order
to prevent the Partnership from being treated as a "publicly traded
partnership" for federal tax purposes, the General Partner has the
right to refuse to recognize any attempted transfer of a Unit (or
rights therein) which would constitute a transfer in a secondary
market (or the substantial equivalent thereof) as defined under
Section 7704 of the Code and any regulations promulgated thereunder
(or under any similar law or regulation). The General Partner shall
exercise such right by taking any actions as it deems necessary or
appropriate in its reasonable discretion so that such transfers or
assignments of rights are not in fact recognized. The right to
exercise the foregoing restriction shall not be exercised if the
General Partner determines in its reasonable discretion that the
exercise of such restriction would result in the Partnership being
deemed to hold plan assets for purposes of ERISA. The General
Partner shall incur no liability to any investor or prospective
investor for any action or inaction by it in connection with the
foregoing, provided it acted in good faith.
27
(a) Except as specifically provided in clause (b) below,
and Articles VIII and IX hereof, an assignee of a Unit shall be
entitled to receive distributions from the Partnership
attributable to the interest acquired by reason of such
assignment from and after the effective date of the assignment
of such interest to him. The "effective date" of an assignment
of a Limited Partnership Interest as used in this clause (a)
shall be the first day of the next succeeding calendar quarter,
provided the General Partner shall have been in receipt of the
written instrument of assignment for at least thirty (30) days
prior thereto. If the assignee is (i) an ancestor or descendant
of the Limited Partner, (ii) the personal representative or
heir of a deceased Limited Partner, (iii) the trustee of a
trust whose beneficiary is the Limited Partner or another
person to whom a transfer could otherwise be made or (iv) the
shareholders, partners, or beneficiaries of a corporation,
partnership or trust upon its termination or liquidation, then
the "effective date" of an assignment of an interest in the
Partnership shall be the last day of the month in which the
written instrument of assignment is received by the General
Partner.
(b) Anything herein to the contrary notwithstanding, both
the Partnership and the General Partner shall be entitled to
treat the permitted assignor of such interest as the absolute
owner thereof in all respects, and shall incur no liability for
distributions made in good faith to him, until such time as the
written assignment has been received by, and recorded on the
books of, the Partnership.
(5) (a) No assignment or transfer of an interest in the
Partnership may be made which would result in Limited Partners and
permitted assignees of Limited Partners owning, directly or
indirectly, individually or in the aggregate, more than twenty
percent (20%) of the stock of the General Partner or any Affiliate
of the General Partner as defined in Section 1504(a) of the Code,
taking into account the attribution rules set forth in Section 318
of the Code. If any such assignment or transfer would otherwise be
made by bequest, inheritance or operation of law, the Unit
transferred shall be deemed sold by the transferor to the
Partner-ship immediately prior to such transfer in the same manner
as provided in clause (c) (iii) of this Subparagraph (5).
(a) No assignment or transfer of an interest in the
Partnership may be made which would contravene the NASAA
Guidelines, as adopted in any state in which the proposed
transferor and transferee reside.
(b) Anything else to the contrary contained herein
notwithstanding:
(i) In any particular twelve (12) consecutive month
period no assignment or transfer of an interest in the
Partnership (including, but not limited to, any exchange
of Units pursuant to Paragraph B of Article IX hereof) may
be made which would result in increasing the aggregate
total of Units previously assigned and/or transferred in
said period to forty-nine percent (49%) or more of the
outstanding Units. This limitation is hereinafter referred
to as the "forty-nine percent (49%) limitation".
28
(ii) Clause (c) (i) hereof shall not apply to a
transfer by gift, bequest or inheritance, or a transfer to
the Partnership, and, for purposes of the forty-nine
percent (49%) limitation, any such transfer shall not be
treated as such.
(iii) If, after the forty-nine percent (49%)
limitation is reached in any consecutive twelve (12) month
period, a transfer of a Unit would otherwise take place by
operation of law (but not including any transfer referred
to in clause (c) (ii) hereof) and would cause a violation
of the forty-nine percent (49%) limitation, then said
Unit(s) shall be deemed to have been sold by the
transferor to the Partnership in liquidation of said
Unit(s) immediately prior to such transfer for a
liquidation price equal to the Net Asset Value of said
Unit(s) on such date of transfer. The liquidation price
shall be paid within ninety (90) days after the date of
the transfer.
(6) The General Partner, in its sole discretion, may cause the
Partnership to make, refrain from making, or once having made, to
revoke, the election referred to in Section 754 of the Code, and any
similar election provided by state or local law, or any similar
provision enacted in lieu thereof.
(7) Each Limited Partner hereby agrees to indemnify and hold
harmless the Partnership and each Partner against any and all
losses, damages, liabilities or expenses (including. without
limitation, tax liabilities or loss of tax benefits) arising,
directly or indirectly, as d result of any transfer or purported
transfer by such Limited Partner in violation of any provision
contained in this Paragraph C.
ARTICLE XV
AMENDMENT OF LIMITED PARTNERSHIP AGREEMENT AND MEETINGS
A. Amendments to the Agreement.
(1) Amendments to the Agreement may be proposed by the General
Partner or by Limited Partners holding at least ten percent (10%) of
the then outstanding Units. Following such proposal, the General
Partner shall submit to the Limited Partners a verbatim statement of
any proposed amendment, and statements concerning the legality of
such amendment and the effect of such amendment on the limited
liability of the Limited Partners. The General Partner shall include
in any such submission its recommendations as to the proposed
amendment. The amendment shall become effective only upon the
written approval or affirmative vote of Limited Partners holding at
least a majority in interest (over 50%) of the then outstanding
Units (not including Units held by the General Partner), or such
higher percentage as may be required by applicable law, and upon
receipt of an opinion of independent legal counsel as set forth in
Paragraph B of Article XI hereof and to the effect that the
amendment is legal, valid and binding and will not adversely affect
the limitations on liability of the Limited Partners set forth in
Paragraph A of Article IX of this Agreement. Notwithstanding the
foregoing, where any
29
action taken or authorized pursuant to any provision of this
Agreement requires the approval or affirmative vote of Limited
Partners holding a greater interest in Limited Partnership Units
than is required to amend the Agreement under this Paragraph A,
and/or the approval or affirmative vote of the General Partner, an
amendment to such provision(s) shall be effective only upon the
written approval or affirmative vote of the minimum number of
Partners which would be required to take or authorize such action,
or as may otherwise be required by applicable law, and upon receipt
of an opinion of independent legal counsel as set forth above in
this Paragraph A; provided, however, that, except as otherwise
provided below, approval of all Limited Partners shall be required
in the case of amendments which change or alter this Article XV,
extend the term of the Partnership, reduce the capital account of
any Partner or modify the percentage of Profits, Losses or
distributions to which any Partner is entitled. In addition, except
as otherwise provided below, reduction of the capital account of any
assignee or modification of the percentage of Profits, Losses or
distributions to which an assignee is entitled hereunder shall not
be affected by amendment to this Agreement without such assignee's
approval.
(2) Any provision to the contrary contained in Subparagraph (1)
hereof notwithstanding, the General Partner may, without the
approval of the Limited Partners, make such amendments to this
Agreement which (a) are necessary to add to the representations,
duties or obligations of a General Partner or surrender any right or
power granted to a General Partner herein, for the benefit of the
Limited Partners, (b) are necessary to cure any ambiguity, to
correct or supplement any provision herein which may be inconsistent
with any other provision herein, or to make any other provisions
with respect to matters or questions arising under the Agreement
which will not be inconsistent with the provisions of the Agreement
or (c) the General Partner deems advisable or considers necessary to
comply with any applicable law, provided, however, that no amendment
shall be adopted pursuant to this clause (c) unless the adoption
thereof (i) is for the benefit of, or not adverse to, the interests
of the Limited Partners; (ii) is consistent with Paragraph A of
Article X hereof; (iii) except as otherwise provided in Subparagraph
(3) below, does not affect the allocation of Profits and Losses
among the Limited Partners or between the Limited Partners and the
General Partner; or (iv) does not adversely affect the limited
liability of the Limited Partners or the status of the Partnership
as a partnership for federal income tax purposes.
(3) Any provision to the contrary contained in Subparagraphs
(1) and (2) hereof notwith-standing, the General Partner may,
without the approval of the Limited Partners, amend the provisions
of Article VIII of this Agreement relating to the allocations of
Profits, Losses and distributions among the Partners if the
Partnership is advised at any time by the Partner-ship's accountants
or legal counsel that the allocations provided in Article VIII of
this Agreement are unlikely to be respected for federal income tax
purposes, either because of the promulgation of new or revised
Treasury Regulations under Section 704 of the Code or other
developments in the law. The General Partner is empowered to amend
such provisions to the minimum extent necessary in accordance with
the advice of the accountants and counsel to effect the allocations
and distributions provided in this Agreement. New allocations made
by the General Partner in reliance upon the advice of the
accountants or counsel described-above shall be deemed to be made
pursuant to the obligation of the General Partner to the Partnership
and the Limited
30
Partners, and no such new allocation shall give rise to any claim or
cause of action by any Limited Partner.
(4) Upon amendment of this Agreement, the Certificate of
Limited Partnership shall also be amended, if required by the Act,
to reflect such change.
B. Meetings of the Partnership. Meetings of the Partnership may be
called by the General Partner and will be called by it upon the written
request of Limited Partners holding at least ten percent (10%) of the
outstanding Units. Such call for a meeting shall be deemed to have been made
upon the receipt by the General Partner of a written request from the
requisite percentage of Limited Partners. The General Partner shall deposit in
the United States mails, within 15 days after receipt of said request, written
notice to all Partners of the meeting and the purpose of the meeting, which
shall be held on a date, not less than 30 nor more than 60 days after the date
of mailing of said notice, at a reasonable time and place. Any notice of
meeting shall be accompanied by a description of the action to be taken at the
meeting and an opinion of independent counsel as to the effect of such
proposed action on the liability of Limited Partners for the debts of the
Partnership. Partners may vote in person or by proxy at any such meeting.
Notwithstanding any provisions in this Agreement to the contrary, in
the event the Partner-ship is required to comply with Regulation 14A under the
Securities Exchange Act of 1934, the General Partner shall not be required to
conform to the time provisions set forth in the preceding paragraph to the
extent that such provisions are insufficient to enable compliance with such
Regulation.
C. Action Without a Meeting. Any action required or permitted to be
taken by Partners by vote may be taken without a meeting on written consent,
setting forth the actions so taken, signed by the holders of the Units having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which holders of all Units entitled to
vote thereon were present and voted.
ARTICLE XVI
TERM
The term for which the Partnership is to exist shall commence on the
date of the filing of the Certificate of Limited Partnership in the State of
Delaware, and shall terminate on December 31, 2008, unless sooner dissolved
pursuant to the provisions of Article XVII hereof or as otherwise provided by
law.
ARTICLE XVII
TERMINATION AND DISSOLUTION
A. Events Requiring Termination and Dissolution. The Partnership
shall be terminated and dissolved upon the happening of any of the following
events:
(1) The expiration of its term as provided in this Agreement.
31
(2) The filing of a certificate of dissolution or revocation of
the charter of a General Partner, or the withdrawal, removal,
adjudication of bankruptcy or insolvency of a General Partner, or
the occurrence of any other event which under the Act causes a
General Partner to cease to be a general partner of the Partnership
unless (a) at the time there is at least one remaining General
Partner and that remaining General Partner carries on the business
of the Partnership or (b) within ninety (90) days of such event all
the remaining Partners agree in writing to continue the business of
the Partnership and to the selection, effective as of the date of
such event, of one or more successor General Partners. Within one
hundred and twenty (120) days of any event referred to in
Subsections (a) or (b) above, in the event action pursuant to
Subsections (a) or (b) above is not taken, Limited Partners holding
a majority interest (over 50%) of the outstanding Units (not
including Units held by the General Partner) may elect to
reconstitute and continue the business of the Partnership by forming
a new limited partnership (the "Reconstituted Partnership") on the
same terms and provisions as set forth in this Agreement. Any such
election must also provide for the election of a general partner to
the Reconstituted Partnership. If such an election is made, all
Limited Partners of the Partnership shall be bound thereby and
continue as limited partners of the Reconstituted Partnership.
(3) The Partnership becomes insolvent or bankrupt, or upon the
reduction of the Net Asset Value per Unit, as of the close of
trading on any business day (after adjustment for distributions),
below fifty percent (50%) of the Net Asset Value per Unit on the
date the Partnership commences trading activities.
(4) The vote of Limited Partners holding more than fifty
percent (50%) of the outstanding Units (which excludes the
partnership interest of the General Partner) to dissolve the
Partnership.
(5) The determination of the General Partner to terminate the
Partnership following a decline in the Partnership's Net Asset Value
to less than $3 million as of the end of any business day.
(6) The determination of the General Partner that the
Partnership's aggregate Net Assets in relation to the operating
expenses of the Partnership make it unreasonable or imprudent to
continue the business of the Partnership.
(7) The occurrence of any event which would make unlawful the
continued existence of the Partnership.
(8) In the event that at least 50,000 Limited Partnership Units
offered pursuant to the Prospectus are not sold during the Offering
Period.
The death, legal disability, bankruptcy, insolvency, dissolution, or
withdrawal of any Limited Partner (as long as such Limited Partner is not the
sole Limited Partner of the Partnership) shall not result in the dissolution
or termination of the Partnership, and such Limited Partner, his estate,
custodian or personal representative shall have no right to withdraw or value
such Limited Partner's Limited Partnership Interest except as provided in
Paragraph A of Article
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IX hereof. Each Limited Partner (and any assignee thereof) expressly agrees
that in the event of his death, he waives on behalf of himself and his estate,
and he directs the legal representative of his estate and any person
interested therein to waive the furnishing of any inventory, accounting or
appraisal of the assets of the Partnership and any right to an audit or
examination of the books of the Partnership, except for such rights as are set
forth in Article XII hereof relating to the Books of Account and reports of
the Partnership.
B. Distributions on Termination and Dissolution. Upon the dissolution
of the Partnership, the General Partner (or in the event the dissolution is
caused by the filing of a certificate of dissolution or the revocation of the
charter of a General Partner or its withdrawal, removal, bankruptcy or
insolvency, such person as the majority in interest of the Limited Partners
may propose and approve) shall act as liquidating trustee and shall take full
charge of the Partnership assets and liabilities. Thereafter, the business and
affairs of the Partnership shall be wound up and all assets shall be
liquidated as promptly as is consistent with obtaining the fair value thereof,
and the proceeds therefrom shall be applied and distributed in the following
order of priority: (1) to the expenses of liquidation and termination and to
creditors, including Partners who are creditors, to the extent otherwise
permitted by law, in satisfaction of liabilities of the Partnership (whether
by payment or by establishment of reserves) other than liabilities for
distributions to Partners, and (2) to the General Partner and each Limited
Partner pro rata in accordance with its or his book capital account balance,
less any amount owing by such Partner to the Partnership, after giving effect
to all adjustments made pursuant to Article VIII and all distributions
thereto-fore made to the Partners pursuant to Article VIII. After the
distribution of all remaining assets of the Partnership, the General Partner
will contribute to the Partnership an amount equal to the lesser of (i) the
deficit balance, if any, in its tax capital account, and (ii) the excess of
1.01% of the total Capital Contributions of the Limited Partners over the
capital previously contributed by the General Partner. Any capital
contributions made by the General Partner pursuant to this paragraph shall be
applied first, to satisfy any amounts then owed by the Partnership to its
creditors, and the balance, if any, shall be distributed to those Partners in
the Partnership whose book capital account balances (immediately following the
distribution of any liquidation proceeds) were positive, in proportion to
their respective positive book capital account balances.
C. Certificate of Cancellation. Following the dissolution and
distribution of the assets of the Partnership, the General Partner shall cause
a certificate of cancellation to be filed in accordance with the Act.
ARTICLE XVIII
POWER OF ATTORNEY
A. Power of Attorney Executed Concurrently. Concurrently with the
written acceptance and adoption of the provisions of this Agreement, each
Limited Partner shall execute and deliver to the General Partner a Power of
Attorney as part of the Subscription Agreement, or in such other form as may
be prescribed by the General Partner. Each Limited Partner, by its execution
and delivery hereof, irrevocably constitutes and appoints the General Partner
as the true and lawful attorney-in-fact and agent for such Limited Partner
with full power and authority
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to act in his name and on his behalf in the execution, acknowledgment, filing
and publishing of Partnership documents, which will include but not be limited
to the following:
(1) Any certificates and other instruments, including but not
limited to a Certificate of Limited Partnership and amendments
thereto and any applications for authority to do business and
amendments thereto, which the General Partner deems appropriate to
qualify or continue the Partnership as a limited partnership in the
jurisdictions in which the Partnership may conduct business, so long
as such qualifications and continuations are in accordance with the
terms of this Agreement or any amendment hereto, or which may be
required to be filed by the Partnership or the Partners under the
laws of any jurisdiction;
(2) Any other instrument which may be required to be filed by
the Partnership under the laws of any state or by any governmental
agency, or which the General Partner deems advisable to file; and
(3) This Agreement and any documents which may be required to
effect an amendment to this Agreement approved under the terms of
the Agreement, and the continuation of the Partnership, the
admission of the signer of the Power of Attorney as a Limited
Partner or of others as additional or substituted Limited Partners,
or the dissolution and termination of the Partnership, provided such
continuation, admission or dissolution and termination is in
accordance with the terms of this Agreement.
B. Effect of Power of Attorney. The Power of Attorney concurrently
granted by each Limited Partner to the General Partner:
(1) Is a special Power of Attorney coupled with an interest, is
irrevocable, and shall survive and not be affected by the death,
disability, dissolution, liquidation, termination or incapacity of
the Limited Partner;
(2) May be exercised by the General Partner for each Limited
Partner by a facsimile signature of one of its officers or by a
single signature of one of its officers acting as attorney-in-fact
for all of them; and
(3) Shall survive the delivery of an assignment by a Limited
Partner of the whole or any portion of his Limited Partnership
Interest; except that where the assignee thereof has been approved
by the General Partner for admission to the Partnership as a
substituted Limited Partner, the Power of Attorney of the assignor
shall survive the delivery of such assignment for the sole purpose
of enabling the General Partner to execute, acknowledge and file any
instrument necessary to effect such substitution.
Each Limited Partner agrees to be bound by any representations made by the
General Partner and by any successor thereto, determined to be acting in good
faith pursuant to such Power of Attorney and not constituting negligence or
misconduct.
C. Limitation on Power of Attorney. The Power of Attorney
concurrently granted by each Limited Partner to the General Partner shall not
authorize the General Partner to act on behalf of Limited Partners in any
situation in which this Agreement requires the approval of
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Limited Partners unless such approval has been obtained as required by this
Agreement. In the event of any conflict between this Agreement and any
instruments filed by the General Partner or any new general partner pursuant
to this Power of Attorney, this Agreement shall control.
ARTICLE XIX
LIMITATIONS ON LIABILITY; LITIGATION
A. Limitation on Liability. Except as provided in Paragraph G of
Article VIII hereof, Subparagraph F(8) of Article X hereof, Paragraph C of
Article XIV hereof and as otherwise provided under Delaware law, no Limited
Partner shall be liable for claims against, or debts of the Partnership in
excess of his Capital Contribution and his share of the Partnership's assets
and undistributed profits, except in the event that the liability is founded
upon misstatements contained in such Limited Partner's Subscription Agreement
delivered in connection with his purchase of Units. In addition, and subject
to the exceptions set forth in the immediately preceding sentence, the
Partnership shall not make a claim against a Limited Partner with respect to
amounts distributed to such Partner or amounts received by such Partner upon
redemption or any exchange of Units unless the Net Assets of the Partnership
(which shall not include any right of contribution from the General Partner
except to the extent previously made by it pursuant to this Agreement) shall
be insufficient to discharge the liabilities of the Partner-ship which shall
have arisen prior to the payment of such amounts.
B. Litigation. The General Partner is hereby authorized to prosecute,
defend, settle or compromise actions or claims at law or in equity at the
Partnership's expense as may be necessary or proper to enforce or protect the
Partnership's interests. The General Partner shall satisfy any judgment,
decree or decision of any court, board or authority having jurisdiction or any
settlement of any suit or claim prior to judgment or final decision thereon,
first, out of any insurance proceeds available therefor, next, out of the
Partnership's assets, and thereafter out of the assets of the General Partner.
ARTICLE XX
MISCELLANEOUS
A. Notices. All notices or communications under this Agreement (other
than requests for redemption of Units, requests for exchange of Units, notices
of assignment, transfer, pledge, or encumbrance of Units, and reports and
notices by the General Partner to the Limited Partners) shall be in writing
and shall be effective upon personal delivery, or if sent by mail, postage
prepaid, or if telegraphed, by prepaid telegram; and addressed, in each such
case, to the address set forth in the books and records of the Partnership or
such other address as he may specify in writing, of the party to whom such
notice is to be given, upon the deposit of such notice in the United States
mail. Requests for redemption or for exchange of Units and notices of
assignment, transfer, pledge, or encumbrance of Units shall be effective upon
timely receipt by the General Partner in writing.
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B. Headings. Article and Paragraph titles or captions contained in
this Agreement are inserted only as a matter of convenience and for reference
and in no way define, limit, extend or describe the scope of this Agreement or
the intent of any provision hereof.
C. English Usage. Whenever the single number is used in this
Agreement and when required by the context, the same shall include the plural,
and the masculine gender shall include the feminine and neuter genders and the
word "persons" shall include individuals, corporations, firms, partnerships,
trusts or other forms of associations.
D. Counterparts. This Agreement may be executed in several
counterparts, and all so executed shall constitute one agreement, binding on
all of the parties hereto, notwithstanding that all the parties are not
signatory to the original or the same counterpart.
E. Binding Nature of Agreement. The terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the heirs,
custodians, executors, estates, administrators, personal representatives,
successors and permitted assigns of the respective Partners. For purposes of
determining the rights of any Partner or assignee hereunder, the Partnership
and the General Partner may rely upon the Partnership records as to who are
Partners and permitted assignees and all Partners and assignees agree that
their rights shall be determined and that they shall be bound thereby.
F. Governing Law. The validity and construction of this Agreement and
all amendments hereto shall be governed by the laws of the State of Delaware.
G. Creditors. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any creditors of the Partnership.
H. Severability. In the event that any provision of this Agreement
shall be declared invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions of this Agreement, it being hereby agreed that such provisions are
severable and that this Agreement shall be construed in all respects as if
such invalid or unenforceable provision were omitted.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their
respective hands as of the day and year first above written.
GENERAL PARTNER:
PREFERRED INVESTMENT SOLUTIONS CORP.
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Secretary
LIMITED PARTNERS:
All Limited Partners hereinbefore, now
and hereafter admitted as limited
partners of the Partnership, pursuant
to powers of attorney now and hereafter
executed in favor of, and granted and
delivered to, the General Partner.
By: Preferred Investment Solutions Corp.
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Attorney-in-Fact
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