Exhibit (a)(1)
HATTERAS MULTI-STRATEGY FUND I, L.P.
Amended and Restated Agreement of Limited Partnership
Dated as of March 31, 2005
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS......................................................1
ARTICLE II ORGANIZATION; ADMISSION OF PARTNERS; DIRECTORS...................7
SECTION 2.1 Formation of Limited Partnership...........................7
SECTION 2.2 Name.......................................................7
SECTION 2.3 Principal and Registered Office............................7
SECTION 2.4 Duration...................................................7
SECTION 2.5 Business of the Partnership................................7
SECTION 2.6 General Partner............................................8
SECTION 2.7 Limited Partners...........................................8
SECTION 2.8 Organizational Limited Partner.............................8
SECTION 2.9 Both General and Limited Partner...........................9
SECTION 2.10 Limited Liability..........................................9
SECTION 2.11 Directors..................................................9
ARTICLE III MANAGEMENT; ADVICE AND MANAGEMENT................................10
SECTION 3.1 Management and Control.....................................10
SECTION 3.2 Powers Reserved by the General Partner.....................11
SECTION 3.3 Actions by Directors.......................................13
SECTION 3.4 Meetings of Partners.......................................13
SECTION 3.5 Custody of Assets of the Partnership.......................14
SECTION 3.6 Other Activities...........................................15
SECTION 3.7 Duty of Care...............................................15
SECTION 3.8 Indemnification............................................16
SECTION 3.9 Fees, Expenses and Reimbursement...........................18
ARTICLE IV TERMINATION OF STATUS OF GENERAL PARTNER;
REMOVAL OF GENERAL PARTNER; TRANSFERS AND REPURCHASES ...........20
SECTION 4.1 Termination of Status of General Partner...................20
SECTION 4.2 Removal of General Partner.................................20
SECTION 4.3 Transfer of Interest of General Partner....................21
SECTION 4.4 Transfer of Interests of Limited Partners..................21
SECTION 4.5 Repurchase of Interests....................................22
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TABLE OF CONTENTS
(continued)
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ARTICLE V CAPITAL.........................................................26
SECTION 5.1 Contributions to Capital..................................26
SECTION 5.2 Rights of Partners to Capital.............................27
SECTION 5.3 Capital Accounts..........................................27
SECTION 5.4 Allocation of Net Profit and Loss.........................28
SECTION 5.5 Allocation of Certain Withholding Taxes and
Other Expenditures .......................................28
SECTION 5.6 Performance Incentive.....................................28
SECTION 5.7 Reserves..................................................29
SECTION 5.8 Allocation to Avoid Capital Account Deficits..............29
SECTION 5.9 Allocations Prior to Closing Date.........................30
SECTION 5.10 Tax Allocations...........................................30
SECTION 5.11 Distributions.............................................31
ARTICLE VI DISSOLUTION AND LIQUIDATION.....................................31
SECTION 6.1 Dissolution...............................................31
SECTION 6.2 Liquidation of Assets.....................................32
ARTICLE VII ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS....................33
SECTION 7.1 Accounting and Reports....................................33
SECTION 7.2 Determinations by General Partner.........................34
SECTION 7.3 Valuation of Assets.......................................34
ARTICLE VIII MISCELLANEOUS PROVISIONS........................................34
SECTION 8.1 Amendment of Partnership Agreement........................34
SECTION 8.2 Special Power of Attorney.................................36
SECTION 8.3 Notices...................................................37
SECTION 8.4 Agreement Binding Upon Successors and Assigns.............37
SECTION 8.5 Choice of Law; Arbitration................................37
SECTION 8.6 Not for Benefit of Creditors..............................38
SECTION 8.7 Consents..................................................38
SECTION 8.8 Merger and Consolidation..................................39
SECTION 8.9 Pronouns..................................................39
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TABLE OF CONTENTS
(continued)
PAGE
SECTION 8.10 Confidentiality...........................................39
SECTION 8.11 Certification of Non-Foreign Status.......................40
SECTION 8.12 Severability..............................................40
SECTION 8.13 Entire Agreement..........................................40
SECTION 8.14 Discretion................................................40
SECTION 8.15 Conflicts.................................................41
SECTION 8.16 Counterparts..............................................41
SECTION 8.17 Headings..................................................41
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HATTERAS MULTI-STRATEGY FUND I, L.P.
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
-----------------------------------------------------
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of HATTERAS
MULTI-STRATEGY FUND I, L.P. (the "PARTNERSHIP") dated as of March 31, 2005 by
and among HATTERAS INVESTMENT MANAGEMENT LLC, as General Partner, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, as the Organizational Limited Partner and those Persons who execute
this Agreement and whose names are reflected on the books and records of the
Partnership as Limited Partners.
WHEREAS, the General Partner and the Organizational Limited Partner
were parties to the Agreement of Limited Partnership of the Partnership dated as
of December 16, 2004 (the "Original Partnership Agreement");
WHEREAS, the Original Partnership Agreement is hereby amended and
restated in its entirety as set forth herein.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement:
"1933 ACT" means the Securities Act of 1933 and the rules, regulations
and orders under the 1933 Act, as amended from time to time, or any successor
law.
"1940 ACT" means the Investment Company Act of 1940 and the rules,
regulations and orders under the 1940 Act, as amended from time to time, or any
successor law.
"ADVISERS ACT" means the Investment Advisers Act of 1940 and the
rules, regulations and orders under the Advisers Act, as amended from time to
time, or any successor law.
"ADVISOR" means any Person designated to manage a portion of the assets
of the Partnership and/or Master Partnership, either directly or through the
investment by the Partnership in an Advisor Fund.
"ADVISOR ACCOUNT" means an account directly managed by an Advisor for
the Partnership or the Master Partnership.
"ADVISOR FUND" means an investment company, a general or limited
partnership, a limited liability company or other pooled investment vehicle in
which the Partnership or the Master Partnership has invested and that is advised
by an Advisor; whether or not, in each case, the entity is registered under the
1940 Act, and includes the Master Partnership and Advisor Funds that may be
formed by the Partnership.
"AFFILIATE" means affiliated person as that term is defined in the 1940
Act.
"AGREEMENT" means this Amended and Restated Agreement of Limited
Partnership.
"BOARD OF DIRECTORS" means the board of the Directors who have been
delegated the authority described in this Agreement.
"BUSINESS DAY" means any day when the New York Stock Exchange is open
for business.
"CAPITAL ACCOUNT" means, with respect to each Partner, the capital
account established and maintained on behalf of the Partner in accordance with
SECTION 5.3 of this Agreement.
"CAPITAL CONTRIBUTION" means the contribution, if any, made, or to be
made, as the context requires, to the capital of the Partnership, after giving
effect to any applicable placement agent fees, by a Partner or former Partner,
as the case may be.
"CERTIFICATE" means the Certificate of Limited Partnership of the
Partnership as filed with the office of the Secretary of State of the State of
Delaware on November 23, 2004 and any amendments to the Certificate and/or
restatements of the Certificate as filed with the office of the Secretary of
State of the State of Delaware pursuant to this Agreement.
"CLOSING DATE" means the first date on or as of which a Limited Partner
other than the Organizational Limited Partner is admitted to the Partnership.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor law.
"COMMODITY EXCHANGE ACT" means the Commodity Exchange Act and the
rules, regulations and orders under the Commodity Exchange Act, as amended from
time to time, or any successor law.
"DELAWARE ACT" means the Delaware Revised Uniform Limited Partnership
Act, as amended from time to time, or any successor law.
"DIRECTORS" means those natural Persons designated as "Directors" in
accordance with this Agreement who are delegated the authority provided for in
this Agreement and includes ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as the initial Director, or any
other natural Persons who, from time to time after the date of this Agreement,
become Directors in accordance with the terms and conditions of this Agreement.
"FISCAL PERIOD" means the period commencing on the Closing Date, and
thereafter each period commencing on the day immediately following the last day
of the immediately preceding Fiscal Period, and ending in each case at the close
of business on the first to occur of the following dates:
(1) the last day of any calendar quarter, including the last
day of the calendar year;
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(2) the day preceding the date as of which a contribution to
the capital of the Partnership is made by any Partner in accordance
with SECTION 5.1 of this Agreement;
(3) the day on which the Partnership repurchases the Interest
or portion of the Interest of any Partner in accordance with SECTION
4.5 of this Agreement;
(4) the day as of which the Partnership admits a substituted
Partner to whom or which an Interest or portion of an Interest of a
Partner has been Transferred (unless the Transfer of the Interest or
portion of the Interest results in no change of beneficial ownership of
the Interest or portion of the Interest);
(5) the day as of which any amount is credited to or debited
against the Capital Account of any Partner, other than an amount that
is credited to or debited against the Capital Accounts of all Partners
in accordance with their respective Investment Percentages; or
(6) December 31, or any other date that is the last day of the
taxable year of the Partnership.
"FISCAL YEAR" means the period commencing on the Closing Date and
ending on March 31, 2005, and thereafter each period commencing on April 1 of
each year and ending on March 31 of that year (or on the date of a final
distribution made in accordance with SECTION 6.2 of this Agreement), unless the
Directors designate another fiscal year for the Partnership. The taxable year of
the Partnership will end on December 31 of each year, or on any other date
designated by the General Partner that is a permitted taxable year-end for tax
purposes.
"FORM N-2" means the Partnership's Registration Statement on Form N-2
filed with the Securities and Exchange Commission, as amended from time to time.
"GENERAL PARTNER" means Hatteras Investment Management LLC, a limited
liability company formed under the laws of the State of Delaware, and any other
Person or Persons admitted to the Partnership as a general partner of the
Partnership, collectively, in their capacities as general partners of the
Partnership, and "General Partner" means any of the General Partners. When the
term General Partner is used in this Agreement and the Partnership has more than
one General Partner, the term "General Partner" will refer to each General
Partner.
"HURDLE RATE" means, with respect to the Incentive Period, that rate
determined from time to time by the Directors and approved in the manner
contemplated by the 1940 Act; such rate initially to be the yield-to-maturity of
the 90 day U.S. Treasury ▇▇▇▇ as reported by the Wall Street Journal for the
last business day of the preceding calendar year of the Partnership. Hurdle
Rates will not be cumulative and will be recalculated with respect to each
Incentive Period. The Hurdle Rate for a given Incentive Period will be adjusted
with respect to any contributions, transfers, distributions, withdrawals and
repurchases applicable to the Limited Partner's Capital Account for that
Incentive Period, or portion thereof.
"HURDLE RATE AMOUNT" means, with respect to each Limited Partner, an
amount equal to the balance of the Limited Partner's Capital Account as of the
first day of the applicable Incentive Period, multiplied by the Hurdle Rate.
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"INCENTIVE PERIOD" means, with respect to a Partner's Interest, a
single Sub-Period or multiple consecutive Sub-Periods. Both the Incentive Period
and the last Sub-Period within the Incentive Period terminate at the close of
business on the earliest occurrence of: (1) the last day of the Fiscal Year; (2)
the date immediately prior to the effective date of a full Transfer of
Interests; or (3) the date on which the Partnership dissolves.
"INDEPENDENT DIRECTORS" mean those Directors who are not "interested
persons" of the Partnership as that term is defined in the 1940 Act.
"INTEREST" means the entire partnership interest in the Partnership at
any particular time of a Partner or other Person to whom or which an Interest or
portion of an Interest has been Transferred in accordance with SECTION 4.3 or
4.4 of this Agreement, including the rights and obligations of the Partner or
other Person under this Agreement and the Delaware Act.
"INVESTMENT PERCENTAGE" means a percentage established for each
Partner on the Partnership's books as of the first day of each Fiscal Period.
The Investment Percentage of a Partner for a Fiscal Period will be determined by
dividing the balance of the Partner's Capital Account as of the commencement of
the Fiscal Period by the sum of the Capital Accounts of all of the Partners as
of the commencement of the Fiscal Period. The sum of the Investment Percentages
of all Partners for each Fiscal Period will equal 100%.
"LIMITED PARTNER" means any Person admitted to the Partnership as a
Limited Partner of the Partnership (including any Person who or that is a
General Partner when acting in the Person's capacity as a Limited Partner) until
the Partnership repurchases the entire Interest of the Person as a Limited
Partner in accordance with SECTION 4.5 of this Agreement, or a substituted
Limited Partner or Partners are admitted with respect to the Person's entire
Interest as a Limited Partner in accordance with SECTION 4.4 of this Agreement,
in the Person's capacity as a Limited Partner of the Partnership. For purposes
of the Delaware Act, the Limited Partners will constitute a single class or
group.
"LOSS CARRYFORWARD AMOUNT" means, with respect to any Incentive Period,
and to the extent not subsequently offset by allocations of profits or otherwise
reduced, as described in this paragraph, the excess of: (1) a Limited Partner's
allocable share of Net Losses calculated in accordance with Section 5.4 of this
Agreement (excluding amounts previously allocated to repurchased or distributed
portions of the Capital Account during the Incentive Period) over (2) the
Partner's allocable share of Net Profits calculated in accordance with Section
5.4 of this Agreement (excluding amounts previously allocated to repurchased or
distributed portions of the Capital Account during the Incentive Period), in
each case for the current and any prior Incentive Periods. If at the end of any
subsequent Incentive Period, profits allocated to a Limited Partner's Capital
Account exceed the losses allocated during that period (excluding profits and
losses previously taken into account for this purpose by reason of a partial
repurchase or distribution during that period), any Loss Carryforward Amount for
such Partner will be reduced (but not below zero) by the amount of the excess.
In addition, if any Limited Partner participates in a repurchase or receives a
distribution after a Loss Carryforward Amount has been established for the
Limited Partner, the Limited Partner's Loss Carryforward Amount will be reduced
on a proportionate basis by the amount by which the repurchase or distribution
bears to the Limited Partner's total Capital Account. No transferee may succeed
to any portion of the Loss
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Carryforward Amount applicable to the Transferring Limited Partner unless the
Transfer of the Interest or portion of the Interest results in no change in
beneficial ownership in the Interest or portion of the Interest. The Loss
Carryforward Amount for a given Incentive Period will be adjusted with respect
to any contributions, transfers, distributions, withdrawals and repurchases
applicable to the Limited Partner's Capital Account for that Incentive Period,
or portion thereof.
"MASTER PARTNERSHIP" means Hatteras Master Fund, L.P., a limited
partnership organized under the laws of the State of Delaware and any
partnership continuing the business of the Master Partnership after its
dissolution.
"MEMORANDUM" means the Partnership's Confidential Memorandum, as
included in the Form N-2, as amended or supplemented from time to time.
"NET ASSETS" means the total value of all assets of the Partnership,
less an amount equal to all accrued debts, liabilities and obligations of the
Partnership, calculated before giving effect to any repurchases of Interests.
"NET PROFIT" or "NET LOSS" means the amount by which the Net Assets as
of the close of business on the last day of a Fiscal Period exceed (in the case
of Net Profit) or are less than (in the case of Net Loss) the Net Assets as of
the commencement of the same Fiscal Period (or, with respect to the initial
Fiscal Period of the Partnership, at the close of business on the Closing Date),
the amount of any Net Profit or Net Loss to be adjusted to exclude any items to
be allocated among the Capital Accounts of the Partners on a basis that is not
in accordance with the Investment Percentages of all Partners as of the
commencement of the Fiscal Period in accordance with SECTION 5.8 of this
Agreement.
"OFFERING MATERIALS" means the Memorandum and subscription materials
provided to prospective Limited Partners in connection with an investment to be
made in the Partnership.
"ORGANIZATIONAL LIMITED PARTNER" means ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
"PARTNERS" means the General Partner(s) and the Limited Partners,
collectively, and "PARTNER" means any General Partner or Limited Partner.
"PARTNERSHIP" means Hatteras Multi-Strategy Fund I, L.P. and any
partnership continuing the business of the Partnership after dissolution as
provided in this Agreement.
"PARTNERSHIP RETURN", with respect to each Incentive Period applicable
to a Limited Partner, is determined by dividing: (a) the excess of the Limited
Partner's allocable share of Net Profits calculated in accordance with Section
5.4 of this Agreement (including amounts previously allocated to repurchased or
distributed portions of the Limited Partner's Capital Account during the
Incentive Period), over the Limited Partner's allocable share of Net Losses
calculated in accordance with Section 5.4 of this Agreement (including amounts
previously allocated to repurchased or distributed portions of the Limited
Partner's Capital Account during the Incentive Period) by (b) the Limited
Partner's Capital Account balance as of the opening of business of the first day
of that Incentive Period. The Partnership Return, for a given Incentive Period,
will be adjusted with respect to any contributions, transfers, distributions,
5
withdrawals and repurchases applicable to the Limited Partner's Capital Account
for that Incentive Period, or portion thereof.
"PERFORMANCE INCENTIVE" means, with respect to each Limited Partner,
10% of the amount, determined as of the close of each Incentive Period, if any,
of (1) the Limited Partner's allocable share of Net Profits calculated in
accordance with Section 5.4 of this Agreement (excluding amounts previously
allocated to repurchased or distributed portions of the Limited Partner's
Capital Account during the Incentive Period), in excess of the Limited Partner's
allocable share of Net Losses calculated in accordance with Section 5.4 of this
Agreement (excluding amounts previously allocated to repurchased or distributed
portions of the Limited Partner's Capital Account during that Incentive Period),
above (2) the greater of (a) the Limited Partner's Hurdle Rate Amount for a
given Incentive Period or (b) the Limited Partner's Loss Carryforward Amount, if
any, for a given Incentive Period. The Performance Incentive for a given
Incentive Period will be adjusted with respect to any contributions, transfers,
distributions, withdrawals and repurchases applicable to the Limited Partner's
Capital Account for that Incentive Period, or portion thereof.
"PERSON" means any individual, entity, corporation, partnership,
limited liability company, joint stock company, trust, estate, joint venture, or
unincorporated organization.
"SECURITIES" means securities (including, without limitation,
equities, debt obligations, options, and other "securities" as that term is
defined in Section 2(a)(36) of the ▇▇▇▇ ▇▇▇) and any contracts for forward or
future delivery of any security, debt obligation, currency or commodity, all
manner of derivative instruments and any contracts based on any index or group
of securities, debt obligations, currencies or commodities, and any options on
those contracts.
"SUB-PERIOD" means, with respect to a Partner's Interest in the
Partnership, the initial period that begins upon the Partnership's commencement
of investment operations (or, with respect to subsequent contributions, at the
time of those contributions) and ends at the close of business on the earliest
occurrence of: (1) the last day of the Fiscal Year, (2) the date immediately
prior to the effective date of additional purchases of Interests; (3) the date
immediately prior to the effective date of partial Transfers of Interests; or
(4) the date on which the Partnership dissolves. Each Sub-Period is followed by
a subsequent Sub-Period, with respect to a Partner's then existing Interest in
the Partnership; provided that the Partner continues to hold an Interest in the
Partnership, the General Partner continues to serve as the general partner of
the Partnership, and the Partnership is in existence. Each Sub-Period will
reflect each Partner's appropriate Interest in the Partnership during the
Sub-Period.
"TRANSFER" means the assignment, transfer, sale or other disposition of
all or any portion of an Interest, including any right to receive any
allocations and distributions attributable to an Interest. Verbs, adverbs or
adjectives such as "Transfer," "Transferred" and "Transferring" have correlative
meanings.
"VALUATION DATE" means any date upon which the net asset value of the
Interests are valued for purposes of a repurchase, as determined by the Board of
Directors.
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ARTICLE II
ORGANIZATION; ADMISSION OF PARTNERS; DIRECTORS
SECTION 2.1 FORMATION OF LIMITED PARTNERSHIP. (a) The Partnership is
formed as a limited partnership pursuant to the Certificate and this Agreement.
The Partners agree that their rights, duties and liabilities will be as provided
in the Delaware Act, except as otherwise provided in this Agreement. The General
Partner will cause the Certificate to be executed and filed in accordance with
the Delaware Act and will cause to be executed and filed with applicable
governmental authorities any other instruments, documents and certificates that
the General Partner concludes may from time to time be required by the laws of
the United States of America, the State of Delaware or any other jurisdiction in
which the General Partner determines that the Partnership should do business, or
any political subdivision or agency of any such jurisdiction, or that the
General Partner determines is necessary or appropriate to effectuate, implement
and continue the valid existence and business of the Partnership.
(b) The Partnership is formed for the object and purpose of (and
the nature of the business to be conducted by the Partnership is)
engaging in any lawful activity for which limited partnerships may be
formed under the Delaware Act and engaging in any and all activities
necessary or incidental to the foregoing.
SECTION 2.2 NAME. The name of the Partnership is "Hatteras
Multi-Strategy Fund I, L.P." or any other name that the General Partner may
adopt after the date of this Agreement upon (a) causing an appropriate amendment
to this Agreement to be executed and to the Certificate to be filed in
accordance with the Delaware Act and (b) sending notice of the amendment to each
Limited Partner.
SECTION 2.3 PRINCIPAL AND REGISTERED OFFICE. The Partnership will have
its principal office at the principal office of the General Partner or at any
other place designated from time to time by the General Partner. The
Partnership's registered agent in the State of Delaware shall be The Corporation
Trust Company, and the Partnership's registered office in the State of Delaware
at Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
unless the General Partner designates a different registered agent or office
from time to time in accordance with the Delaware Act.
SECTION 2.4 DURATION. The term of the Partnership will commence on the
filing of the Certificate and will continue until the Partnership is dissolved
and wound up and the Certificate is canceled in accordance with SECTION 6.1 of
this Agreement.
SECTION 2.5 BUSINESS OF THE PARTNERSHIP. (a) The business of the
Partnership is to purchase, sell, invest and trade in Securities and engage in
any financial or derivative transactions relating to Securities. Portions of the
Partnership's assets (which may constitute, in the aggregate, all of the
Partnership's assets) may be invested in Advisor Funds or Advisor Accounts that
invest and trade in Securities or in separate managed accounts through which the
Partnership may invest and trade in Securities, some or all of which may be
advised by one or more Advisors. The Partnership may invest some or all of its
assets directly or indirectly in the Master Partnership. The Partnership may
execute, deliver and perform all contracts, agreements and other undertakings
and engage in all activities and transactions as the General Partner, the
Directors or the Investment Manager may deem necessary or advisable to carry out
its objective or business.
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(b) The Partnership will operate as a closed-end, management
investment company in accordance with the 1940 Act and subject to any
fundamental policies and investment restrictions described in the Form
N-2.
(c) The Partnership may designate from time to time persons to
act as signatories for the Partnership, including, without limitation,
persons authorized to execute and deliver any filings with the U.S.
Securities and Exchange Commission (the "SEC") or applicable federal or
state regulatory authorities or self-regulatory organizations.
SECTION 2.6 GENERAL PARTNER. (a) Hatteras Investment Management LLC
shall be admitted to the Partnership as the General Partner upon its execution
of this Agreement. The General Partner may admit to the Partnership as an
additional General Partner any Person who agrees in writing to be bound by all
of the terms of this Agreement as a General Partner. The General Partner may
admit to the Partnership as a substituted General Partner any Person to which it
has Transferred its Interest as the General Partner in accordance with SECTION
4.3 of this Agreement. Any substituted General Partner will be admitted to the
Partnership upon the Transferring General Partner's consenting to such admission
and is authorized to, and will, continue the business of the Partnership without
dissolution. The name and mailing address of the General Partner and the Capital
Contribution of the General Partner will be reflected on the books and records
of the Partnership. If at any time the Partnership has more than one General
Partner, unless otherwise provided in this Agreement, any action allowed to be
taken, or required to be taken, by the General Partners may be taken only with
the unanimous approval of all of the General Partners.
(b) Each General Partner will serve for the duration of the term
of the Partnership, unless the General Partner ceases to be a General
Partner in accordance with SECTION 4.1 of this Agreement.
SECTION 2.7 LIMITED PARTNERS. (a) The General Partner may, at any time
and without advance notice to or consent from any other Partner, admit to the
Partnership any Person who agrees to be bound by all of the terms of this
Agreement as an additional Limited Partner. The General Partner may in its
absolute discretion reject subscriptions for Interests (or portions of
Interests) and/or may suspend subscriptions. The admission of any Person as an
additional Limited Partner will be effective upon the General Partner's
acceptance on behalf of the Partnership of such Person's subscription for
Interests and the execution and delivery by, or on behalf of, the additional
Limited Partner of this Agreement or an instrument that constitutes the
execution and delivery of this Agreement. The General Partner will cause the
books and records of the Partnership to reflect the name and the required
contribution to the capital of the Partnership of the additional Limited
Partner.
(b) Subject to SECTION 2.10 of this Agreement, when the entire
Capital Contribution attributable to an Interest for which a Partner
has subscribed is paid for, that Interest will be deemed to be validly
issued and fully paid and non-assessable.
SECTION 2.8 ORGANIZATIONAL LIMITED PARTNER. Upon the admission to the
Partnership of any Limited Partner, the Organizational Limited Partner shall
withdraw from the Partnership as the Organizational Limited Partner and shall be
entitled to the return of his Capital Contribution, if any, without interest or
deduction, and shall cease to be a Limited Partner of the Partnership.
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SECTION 2.9 BOTH GENERAL AND LIMITED PARTNER. A Partner may be
simultaneously a General Partner and a Limited Partner, in which event the
Partner's rights and obligations in each capacity will be determined separately
in accordance with the terms and provisions of this Agreement and as provided in
the Delaware Act.
SECTION 2.10 LIMITED LIABILITY. Except for payment obligations under
this Agreement, including Capital Contribution obligations, and as provided
under applicable law, a Limited Partner will not be liable for the Partnership's
obligations in any amount in excess of the Limited Partner's Capital Account
balance, plus the Limited Partner's share of undistributed profits and assets.
Subject to applicable law, a Limited Partner may be obligated to return to the
Partnership certain amounts distributed to the Limited Partner.
SECTION 2.11 DIRECTORS. (a) The number of Directors at the date of this
Agreement is fixed at not more than fourteen (14) Directors and no fewer than
two (2). After the Closing Date, the number of Directors will be fixed from time
to time by the Directors then in office, which number may be greater, or lesser,
than fourteen (14), but no fewer than the minimum number of directors permitted
to corporations organized under the laws of the State of Delaware, except that
no reduction in the number of Directors will serve to effect the removal of any
Director. Each Partner approves the delegation by the General Partner to the
Directors, in accordance with SECTION 3.1 of this Agreement, of certain of the
General Partner's rights and powers.
(b) The term of office of each Director shall be from the time of
such Director's election and qualification until the election of
Directors three years following such Director's election and until his
or her successor shall have been elected and shall have qualified, or
until his or her status as a Director is terminated sooner in
accordance with SECTION 2.11(D) of this Agreement. Except to the extent
the 1940 Act requires election by Limited Partners, if any vacancy in
the position of a Director occurs, including by reason of an increase
in the number of Directors as contemplated by SECTION 2.11(A) of this
Agreement, the remaining Directors may appoint an individual to serve
in that capacity in accordance with the provisions of the 1940 Act.
Independent Directors will at all times constitute at least a majority
(or more if required by the ▇▇▇▇ ▇▇▇) of the Directors then serving. An
Independent Director will be replaced by another Independent Director
selected and nominated by the remaining Independent Directors, or in a
manner otherwise permissible under the 1940 Act.
(c) If no Director remains, the General Partner will promptly
call a meeting of the Partners, to be held within 60 days after the
date on which the last Director ceased to act in that capacity, for the
purpose of determining whether to continue the business of the
Partnership and, if the business is to be continued, approving the
appointment of the requisite number of Directors. If the Partners
determine at the meeting not to continue the business of the
Partnership, or if the approval of the appointment of the requisite
number of Directors is not approved within 60 days after the date on
which the last Director ceased to act in that capacity, then the
Partnership will be dissolved in accordance with SECTION 6.1 of this
Agreement and the assets of the Partnership will be liquidated and
distributed in accordance with SECTION 6.2 of this Agreement.
9
(d) The status of a Director will terminate (1) if the Director
dies; (2) if the Director resigns as a Director; or (3) if the Director
is removed in accordance with SECTION 2.11(E) of this Agreement.
(e) Any Director may be removed with or without cause by a vote
of a majority of the Limited Partners or by written consent of Limited
Partners holding not less than two-thirds of the total number of votes
eligible to be cast by all Limited Partners.
(f) The Directors may establish and maintain committees of the
Board of Directors, and the Directors may grant to such committees the
authority to, among other things: value the assets of the Partnership;
select and nominate the Independent Directors of the Partnership;
recommend to the Board of Directors the compensation to be paid to the
Independent Directors; and recommend to the Board of Directors the firm
of certified public accountants that will conduct the Partnership's
audits.
(g) The Directors may establish or designate committees of the
Board of Directors or the Partnership, whose members may include the
Directors and/or other Persons who are not Directors, to provide advice
and other services to the Partnership, which committees may include
(but are not limited to) a committee that will value the assets of the
Partnership.
(h) The Independent Directors will receive compensation for their
services as Independent Directors, as determined by the Board of
Directors.
ARTICLE III
MANAGEMENT; ADVICE AND MANAGEMENT
SECTION 3.1 MANAGEMENT AND CONTROL. (a) The General Partner delegates
to the Directors those rights and powers of the General Partner necessary for
the Directors to manage and control the business affairs of the Partnership and
to carry out their oversight obligations with respect to the Partnership
required under the 1940 Act, state law, and any other applicable laws or
regulations. Rights and powers delegated to the Directors include, without
limitation, the authority as Directors to oversee and to establish policies
regarding the management, conduct and operation of the Partnership's business,
and to do all things necessary and proper as Directors to carry out the
objective and business of the Partnership, including, without limitation, the
power to engage an investment manager to provide advice and management and to
remove such an investment manager, as well as to exercise any other rights and
powers expressly given to the Directors under this Agreement. The Partners
intend that, to the fullest extent permitted by law, and except to the extent
otherwise expressly provided in this Agreement, (1) each Director is vested with
the same powers and authority on behalf of the Partnership as are customarily
vested in each director of a Delaware corporation and (2) each Independent
Director is vested with the same powers and authority on behalf of the
Partnership as are customarily vested in each director who is not an "interested
person" (as that term is defined in the ▇▇▇▇ ▇▇▇) of a closed-end, management
investment company registered under the 1940 Act that is organized as a Delaware
corporation. During any period in which the Partnership has no Directors, the
General Partner will manage and control the Partnership. Each Director will be
the agent of the Partnership but will not, for any purpose, be a General
Partner. Notwithstanding the delegation described in this SECTION 3.1(A), the
General Partner will not cease to be the General Partner and will continue to be
liable as such and in no event will a Director be considered a General Partner
by agreement, estoppel or otherwise as a result
10
of the performance of his or her duties under this Agreement or otherwise. The
General Partner retains those rights, powers and duties that have not been
delegated under this Agreement. Any Director may be admitted to the Partnership
in accordance with SECTION 2.7 of this Agreement and make Capital Contributions
and own an Interest, in which case the Director will also become a Limited
Partner.
(b) The Partnership will file a tax return as a Partnership for
U.S. federal income tax purposes. All decisions for the Partnership
relating to tax matters including, without limitation, whether to make
any tax elections (including the election under Section 754 of the
Code), the positions to be made on the Partnership's tax returns and
the settlement or further contest or litigation of any audit matters
raised by the Internal Revenue Service or any other taxing authority,
will be made by the Directors. All actions (other than ministerial
actions) taken by the tax matters Partner, as designated in SECTION
3.1(C) below, will be subject to the approval of the Directors.
(c) The General Partner will be the designated tax matters
Partner for purposes of the Code. Each Partner agrees not to treat, on
his, her or its personal income tax return or in any claim for a
refund, any item of income, gain, loss, deduction or credit in a manner
inconsistent with the treatment of the item by the Partnership. The tax
matters Partner will have the exclusive authority and discretion to
make any elections required or permitted to be made by the Partnership
under any provisions of the Code or any other revenue laws.
(d) No Limited Partner will have any right to participate in or
take any part in the management or control of the Partnership's
business, and no Limited Partner will have any right, power or
authority to act for or bind the Partnership. Limited Partners will
have the right to vote on any matters only as provided in this
Agreement or on any matters that require the approval of the holders of
voting securities under the 1940 Act and will have no right to exercise
any other vote granted to Limited Partners under the Delaware Act, any
such rights being vested in the Directors (or the General Partner if
there are no Directors) and may be exercised without requiring the
approval of the Limited Partners.
SECTION 3.2 POWERS RESERVED BY THE GENERAL PARTNER. Notwithstanding
anything in this Agreement to the contrary, the General Partner retains all
rights, duties and powers to manage the affairs of the Partnership that may not
be delegated under Delaware law, and that are not otherwise delegated by the
General Partner to the Directors or assumed by any investment manager engaged
pursuant to Section 3.1(a) of this Agreement or any other Person under the terms
of any agreement between the Partnership and such investment manager or any
other Person. Specifically, and without limitation, the General Partner will
retain full power and authority on behalf of and in the name of the Partnership:
(1) to issue to any Partner an instrument certifying that the
Partner is the owner of an Interest;
(2) to call and conduct meetings of Partners at the Partnership's
principal office or elsewhere as it may determine, and to assist the
Directors in calling and conducting meetings of the Directors;
(3) to engage and terminate attorneys, accountants (subject to
the provisions of the ▇▇▇▇ ▇▇▇) and other professional advisers and
consultants as the General Partner
11
deems necessary or advisable in connection with the affairs of the
Partnership or as may be directed by the Directors;
(4) to act as tax matters Partner in accordance with SECTION
3.1(C) of this Agreement, and to assist in the preparation and filing
of any required tax or information returns to be made by the
Partnership;
(5) as directed by the Directors, to commence, defend and
conclude any action, suit, investigation or other proceeding that
pertains to the Partnership or any assets of the Partnership;
(6) as directed by the Directors, to arrange for the purchase of
any insurance covering the potential liabilities of the Partnership or
relating to the performance of the Directors, the General Partner, any
investment manager engaged pursuant to Section 3.1(a) of this Agreement
or any of their principals, Partners, directors, officers, members,
employees and agents;
(7) to execute, deliver and perform any contracts, agreements and
other undertakings, and to engage in activities and transactions that
are necessary or appropriate for the conduct of the business of the
Partnership and to bind the Partnership by those contracts, agreements,
and other undertakings, provided that any persons approved as officers
of the Partnership pursuant to Section 3.3(c)(7) of this Agreement, as
directed by the Directors, may execute and deliver contracts and
agreements on behalf of the Partnership and bind the Partnership to
those contracts and agreements;
(8) to make determinations regarding subscriptions for and/or the
Transfer of Interests, including, without limitation, determinations
regarding the suspension of subscriptions, and to execute, deliver and
perform subscription agreements, placement agency agreements relating
to the placement of Interests, administration agreements appointing an
administrator to perform various administrative action on behalf of the
Partnership, escrow agreements and custodial agreements without the
consent of or notice to any other Person, notwithstanding any other
provision of this Agreement;
(9) to make determinations regarding appropriate reserves to be
created for the contingent, conditional or unmatured liabilities of the
Partnership;
(10) as provided in SECTION 7.2 of this Agreement, to make
determinations regarding adjustments to the computation of Net Profit
or Net Loss and allocations among the Partners under ARTICLE V of this
Agreement;
(11) to manage or oversee the general administrative and
operational aspects of the Partnership; and
(12) as directed by the Directors, to establish additional
classes of Limited Partners, General Partners, or Interests having
separate rights, powers, or duties with respect to specified property
or obligations of the Partnership or profits or losses associated with
specified property or obligations of the Partnership, and having
separate business purposes or investment objectives as the Directors
may determine, consistent
12
with the 1940 Act and the Delaware Act, so long as the assets and
liabilities of one class is limited to the assets and liabilities of
such class.
SECTION 3.3 ACTIONS BY DIRECTORS. (a) Unless provided otherwise in this
Agreement, the Directors will act only: (1) by the affirmative vote of a
majority of the Directors (which majority will include any requisite number of
Independent Directors required by the ▇▇▇▇ ▇▇▇) present at a meeting duly called
at which a quorum of the Directors is present either in person or, to the extent
consistent with the provisions of the 1940 Act, by conference telephone or other
communications equipment by means of which all Persons participating in the
meeting can hear each other; or (2) by unanimous written consent of all of the
Directors without a meeting, if permissible under the 1940 Act. A majority of
the Directors then in office will constitute a quorum at any meeting of
Directors.
(b) The Directors may designate from time to time a Director or
any person approved as an officer of the Partnership pursuant to
Section 3.3(c) of this Agreement or the General Partner who will
preside at all meetings. Meetings of the Directors may be called by the
General Partner, the Chairman of the Board of Directors, or any two
Directors, and may be held on any date and at any time and place
determined by the Directors. Each Director will be entitled to receive
written notice of the date, time and place of a meeting within a
reasonable time in advance of the meeting. Notice need not be given to
any Director who attends a meeting without objecting to the lack of
notice or who executes a written waiver of notice with respect to the
meeting.
(c) The Directors may appoint from time to time agents and
employees of the Partnership who will have the same powers and duties
on behalf of the Partnership as are customarily vested in officers of a
corporation incorporated under Delaware law, or such other powers and
duties as may be designated by the Directors, in their sole discretion,
and designate them as officers or agents of the Partnership by
resolution of the Directors specifying their titles or functions.
SECTION 3.4 MEETINGS OF PARTNERS. (a) Actions requiring the vote of the
Partners may be taken at any duly constituted meeting of the Partners at which a
quorum is present or by means of a written consent. Meetings of the Partners may
be called by the General Partner, by the affirmative vote of a majority of
Directors then in office, or by Partners holding at least a majority of the
total number of votes eligible to be cast by all Partners, and may be held at
any time, date and place determined by the General Partner in the case of
meetings called by the General Partner or the Partners and at any time, date and
place determined by the Directors in the case of meetings called by the
Directors. In each case, the General Partner will provide notice of the meeting,
stating the date, time and place of the meeting and the record date for the
meeting, to each Partner entitled to vote at the meeting within a reasonable
time prior to the meeting. Failure to receive notice of a meeting on the part of
any Partner will not affect the validity of any act or proceeding of the
meeting, so long as a quorum is present at the meeting. Except as otherwise
required by applicable law, only matters set out in the notice of a meeting may
be voted on by the Partners at the meeting. The presence in person or by proxy
of Partners holding a majority of the total number of votes eligible to be cast
by all Partners as of the record date will constitute a quorum at any meeting of
Partners. In the absence of a quorum, a meeting may be adjourned to the time or
times as determined by the General Partner and communicated to the Directors in
the manner described above in this SECTION 3.4(A). Except as otherwise required
by any provision of this Agreement or of the 1940 Act, (1) those candidates
receiving a plurality of the votes cast at any meeting
13
of Partners called pursuant to SECTION 2.11(C) of this Agreement or elected
pursuant to the requirement of SECTION 2.11(B) will be elected as Directors and
(2) all other actions of the Partners taken at a meeting will require the
affirmative vote of Partners holding a majority of the total number of votes
eligible to be cast by those Partners who are present in person or by proxy at
the meeting.
(b) Each Partner will be entitled to cast at any meeting of
Partners or pursuant to written consent a number of votes equivalent to
the Partner's Investment Percentage as of the record date for the
meeting or the date of the written consent. The General Partner will
establish a record date not less than 10 nor more than 60 days prior to
the date of any meeting of Partners or mailing (including by electronic
transmission) to the Partners of any written consent, to determine
eligibility to vote at the meeting and the number of votes that each
Partner will be entitled to cast at the meeting, and will maintain for
each record date a list setting out the name of each Partner and the
number of votes that each Partner will be entitled to cast at the
meeting.
(c) A Partner may vote at any meeting of Partners by a properly
executed proxy transmitted to the Partnership at any time at or before
the time of the meeting by telegram, telecopier or other means of
electronic communication or other readable reproduction as contemplated
by the provisions relating to proxies applicable to corporations
incorporated under the laws of Delaware now or in the future in effect.
A proxy may be suspended or revoked, as the case may be, by the Partner
executing the proxy by a later writing delivered to the Partnership at
any time prior to exercise of the proxy or if the Partner executing the
proxy is present at the meeting and votes in person. Any action of the
Partners that is permitted to be taken at a meeting of the Partners may
be taken without a meeting if consents in writing, setting out the
action to be taken, are signed by Partners holding a majority of the
total number of votes eligible to be cast or any greater percentage as
may be required under this Agreement to approve the action.
SECTION 3.5 CUSTODY OF ASSETS OF THE PARTNERSHIP. (a) Notwithstanding
anything to the contrary in this Agreement, the General Partner will not have
any authority to hold or have possession or custody of any funds, Securities or
other property of the Partnership. The physical possession of all funds,
Securities or other property of the Partnership will at all times be held,
controlled and administered by one or more custodians retained by the
Partnership. The General Partner will have no responsibility, other than that
associated with the oversight and supervision of custodians retained by the
Partnership, with respect to the collection of income or the physical
acquisition or safekeeping of the funds, Securities or other property of the
Partnership, all duties of collection, physical acquisition or safekeeping being
the sole obligation of such custodians.
(b) With respect to any Advisor Fund securities held by the
Partnership as of the date on which the Partnership becomes registered
with the SEC as an investment company under the 1940 Act, and during
any period of time in which the Partnership remains so registered, such
securities shall be under the control of one or more of the
Partnership's custodian(s), as may be engaged from time to time,
pursuant to Section 17(f) of the 1940 Act and the rules thereunder, and
no person shall be authorized or permitted to have access to such
securities except in accordance with Section 17(f) of the 1940 Act and
the rules thereunder, and consistent with the terms of the
Partnership's agreement with the relevant Partnership custodian.
SECTION 3.6 OTHER ACTIVITIES. (a) Neither the General Partner nor its
principals, Partners, directors, officers, members, employees and beneficial
owners nor the Directors will be required to
14
devote full time to the affairs of the Partnership, but each will devote such
time as each may reasonably be required to perform its obligations under this
Agreement and under the ▇▇▇▇ ▇▇▇.
(b) The Directors, any Partner, and any Affiliate of any Partner
may engage in or possess an interest in other business ventures or
commercial dealings of every kind and description, independently or
with others, including, but not limited to, acquisition and disposition
of Securities, provision of investment advisory or brokerage services,
serving as directors, officers, employees, advisors or agents of other
companies, Partners of any Partnership, members of any limited
liability company, or trustees of any trust, or entering into any other
commercial arrangements. No Partner will have any rights in or to such
activities of any other Partner, the Directors or any Affiliate of any
Partner or any profits derived from these activities.
(c) The General Partner and its principals, Partners, directors,
officers, members, employees and beneficial owners and the Directors,
from time to time may acquire, possess, manage, hypothecate and dispose
of Securities or other investment assets, and engage in any other
investment transaction for any account over which they exercise
discretionary authority, including their own accounts, the accounts of
their families, the account of any entity in which they have a
beneficial interest or the accounts of others for whom or which they
may provide investment advisory or other services.
(d) To the extent that at law or in equity the Directors or the
General Partner have duties (including fiduciary duties) and
liabilities relating to those duties to the Partnership or to any other
Partner or other Person bound by this Agreement, any such Person acting
under this Agreement will not be liable to the Partnership or to any
other Partner or other Person bound by this Agreement for its good
faith reliance on the provisions of this Agreement. The provisions of
this Agreement, to the extent that they restrict the duties and
liabilities of the General Partner or the Directors otherwise existing
at law or in equity, are agreed by the Partners to replace the other
duties and liabilities of the General Partner or the Directors.
SECTION 3.7 DUTY OF CARE. (a) The Directors and the General Partner,
including any officer, director, Partner, member, principal, employee or agent
of any of them, will not be liable to the Partnership or to any of its Partners
for any loss or damage occasioned by any act or omission in the performance of
the Person's services under this Agreement, in the absence of a final judicial
decision on the merits from which no further right to appeal may be taken that
the loss is due to an act or omission of the Person constituting willful
misfeasance, bad faith, gross negligence or reckless disregard of the Person's
duties under this Agreement.
(b) No Director who has been designated an "audit committee
financial expert" (for purposes of Section 407 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act of 2002 or any successor provision thereto, and any rules issued
thereunder by the SEC) in the Partnership's Form N-2 or other reports
required to be filed with the SEC shall be subject to any greater duty
of care in discharging such Director's duties and responsibilities by
virtue of such designation than is any Director who has not been so
designated.
15
(c) Limited Partners not in breach of any obligation under this
Agreement or under any agreement pursuant to which the Limited Partner
subscribed for Interests will be liable to the Partnership, any Partner
or third parties only as required by this Agreement or applicable law.
SECTION 3.8 INDEMNIFICATION. (a) To the fullest extent permitted by
law, the Partnership will, subject to SECTION 3.8(C) of this Agreement,
indemnify each General Partner (including for this purpose each officer,
director, member, Partner, principal, employee or agent of, or any Person who
controls, is controlled by or is under common control with, a General Partner
(including, without limitation, Hatteras Investment Partners LLC) or Partner of
a General Partner and their executors, heirs, assigns, successors or other legal
representatives) and each Director (and his executors, heirs, assigns,
successors or other legal representatives) (each such Person being referred to
as an "INDEMNITEE") against all losses, claims, damages, liabilities, costs and
expenses arising by reason of being or having been a General Partner or Director
of the Partnership, or the past or present performance of services to the
Partnership by the indemnitee, except to the extent that the loss, claim,
damage, liability, cost or expense has been finally determined in a judicial
decision on the merits from which no further right to appeal may be taken in any
such action, suit, investigation or other proceeding to have been incurred or
suffered by the indemnitee by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of the
indemnitee's office. These losses, claims, damages, liabilities, costs and
expenses include, but are not limited to, amounts paid in satisfaction of
judgments, in compromise, or as fines or penalties, and counsel fees and
expenses incurred in connection with the defense or disposition of any action,
suit, investigation or other proceeding, whether civil or criminal, before any
judicial, arbitral, administrative or legislative body, in which the indemnitee
may be or may have been involved as a party or otherwise, or with which such
indemnitee may be or may have been threatened, while in office or thereafter.
The rights of indemnification provided under this SECTION 3.8 are not to be
construed so as to provide for indemnification of an indemnitee for any
liability (including liability under U.S. Federal securities laws which, under
certain circumstances, impose liability even on Persons that act in good faith)
to the extent (but only to the extent) that indemnification would be in
violation of applicable law, but will be construed so as to effectuate the
applicable provisions of this SECTION 3.8.
(b) Expenses, including counsel fees and expenses, incurred by any
indemnitee (but excluding amounts paid in satisfaction of judgments, in
compromise, or as fines or penalties) may be paid from time to time by the
Partnership in advance of the final disposition of any action, suit,
investigation or other proceeding upon receipt of an undertaking by or on behalf
of the indemnitee to repay to the Partnership amounts paid if a determination is
made that indemnification of the expenses is not authorized under SECTION 3.8(A)
of this Agreement, so long as (1) the indemnitee provides security for the
undertaking, (2) the Partnership is insured by or on behalf of the indemnitee
against losses arising by reason of the indemnitee's failure to fulfill his, her
or its undertaking, or (3) a majority of the Independent Directors (excluding
any Director who is either seeking advancement of expenses under this Agreement
or is or has been a party to any other action, suit, investigation or other
proceeding involving claims similar to those involved in the action, suit,
investigation or proceeding giving rise to a claim for advancement of expenses
under this Agreement) or independent legal counsel in a written opinion
determines, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that reason exists to believe that the indemnitee
ultimately will be entitled to indemnification.
(c) As to the disposition of any action, suit, investigation or other
proceeding (whether by a compromise payment, pursuant to a consent decree or
otherwise) without an
16
adjudication or a decision on the merits by a court, or by any other body before
which the proceeding has been brought, that an indemnitee is liable to the
Partnership or its Partners by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of the
indemnitee's office, indemnification will be provided in accordance with SECTION
3.8(A) of this Agreement if (1) approved as in the best interests of the
Partnership by a majority of the Independent Directors (excluding any Director
who is either seeking indemnification under this Agreement or is or has been a
party to any other action, suit, investigation or proceeding involving claims
similar to those involved in the action, suit, investigation or proceeding
giving rise to a claim for indemnification under this Agreement) upon a
determination, based upon a review of readily available facts (as opposed to a
full trial-type inquiry), that the indemnitee acted in good faith and in the
reasonable belief that the actions were in the best interests of the Partnership
and that the indemnitee is not liable to the Partnership or its Partners by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of the indemnitee's office, or
(2) the Directors secure a written opinion of independent legal counsel, based
upon a review of readily available facts (as opposed to a full trial-type
inquiry), to the effect that indemnification would not protect the indemnitee
against any liability to the Partnership or its Partners to which the indemnitee
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of the
indemnitee's office.
(d) Any indemnification or advancement of expenses made in accordance
with this SECTION 3.8 will not prevent the recovery from any indemnitee of any
amount if the indemnitee subsequently is determined in a final judicial decision
on the merits in any action, suit, investigation or proceeding involving the
liability or expense that gave rise to the indemnification or advancement of
expenses to be liable to the Partnership or its Partners by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of the indemnitee's office. In any suit brought by an
indemnitee to enforce a right to indemnification under this SECTION 3.8, it will
be a defense that the indemnitee has not met the applicable standard of conduct
described in this SECTION 3.8. In any suit in the name of the Partnership to
recover any indemnification or advancement of expenses made in accordance with
this SECTION 3.8, the Partnership will be entitled to recover the expenses upon
a final adjudication from which no further right of appeal may be taken. In any
suit brought to enforce a right to indemnification or to recover any
indemnification or advancement of expenses made in accordance with this SECTION
3.8, the burden of proving that the indemnitee is not entitled to be
indemnified, or to any indemnification or advancement of expenses, under this
SECTION 3.8 will be on the Partnership (or any Partner acting derivatively or
otherwise on behalf of the Partnership or its Partners).
(e) An indemnitee may not satisfy any right of indemnification or
advancement of expenses granted in this SECTION 3.8 or to which he, she or it
may otherwise be entitled except out of the assets of the Partnership, and no
Partner will be personally liable with respect to any such claim for
indemnification or advancement of expenses.
(f) The rights of indemnification provided in this SECTION 3.8 will not
be exclusive of or affect any other rights to which any Person may be entitled
by contract or otherwise under law. Nothing contained in this SECTION 3.8 will
affect the power of the Partnership to purchase
17
and maintain liability insurance on behalf of any General Partner, any Director,
the Investment Manager or other Person.
(g) The General Partner may enter into agreements indemnifying Persons
providing services to the Partnership to the same, lesser or greater extent as
set out in this SECTION 3.8.
SECTION 3.9 FEES, EXPENSES AND REIMBURSEMENT
--------------------------------
(a) So long as the Partnership invests all of its investable assets in
the Master Partnership, the Partnership will not directly pay a management fee;
however, the Fund's Partners bear an indirect share of the Master Partnership's
management fee through the Partnership's investment in the Master Partnership.
The amount of the Partnership's share of the Management Fee will be charged pro
rata to the Capital Account of each Limited Partner based on the value of the
Capital Account of each Limited Partner as of the end of business of the first
Business Day of each fiscal quarter, after adjustment for any subscriptions
effective on that date and before giving effect to any repurchase of interests
in the Partnership or portions of interests in the Partnership effective as of
that date. The Partnership's share will be due and payable in advance within
five Business Days after the beginning of each fiscal quarter.
(b) The Partnership will compensate each Independent Director for his
or her services rendered in connection with the Partnership as may be agreed to
by the Independent Directors and the General Partner, and as described in the
Memorandum. In addition, the Partnership will reimburse the Directors for
reasonable out-of-pocket expenses incurred by them in performing their duties
with respect to the Partnership.
(c) The Partnership will bear all expenses incurred in connection with
its business. Expenses to be borne by the Partnership include, but are not
limited to, the following:
(1) The Partnership's pro rata share of the management fee, and
other fees and expenses, of the Master Partnership;
(2) all investment-related expenses, including, but not limited
to, fees paid and expenses reimbursed, directly or indirectly, to
Advisors (including management fees, performance or incentive fees or
allocations and redemption or withdrawal fees, however titled or
structured), all costs and expenses directly related to portfolio
transactions and positions for the Partnership's account, such as
direct and indirect expenses associated with the Partnership's
investments, including its investments in Advisor Funds (whether or not
consummated), and enforcing the Partnership's rights in respect of such
investments, transfer taxes and premiums, taxes withheld on non-U.S.
dividends, costs and fees for data and software (including software
providers and dedicated software employed by the Partnership and
designed to assist the an investment manager to keep track of the
investments in the Advisor Funds and Advisor Accounts), research
expenses, professional fees (including, without limitation, the fees
and expenses of consultants, attorneys and experts) and, if applicable,
in connection with the Partnership's temporary or cash management
investments, brokerage commissions, interest and commitment fees on
loans and debit balances, borrowing charges on Securities sold short,
dividends on Securities sold but not yet purchased and margin fees;
18
(3) costs associated with the registration of the Partnership,
including the costs of compliance with any applicable U.S. federal and
state laws;
(4) an investor servicing fee to be paid to the investor
servicing agent;
(5) any non-investment-related interest expense;
(6) attorneys' fees and disbursements associated with preparing
and updating any Offering Materials and with reviewing subscription
materials in connection with qualifying prospective investors or
prospective holders of Transferred Interests;
(7) fees and disbursements of any accountants engaged by the
Partnership, and expenses related to the annual audit of the
Partnership and compliance with any applicable U.S. Federal or state
laws;
(8) fees paid and out-of-pocket expenses reimbursed to the
Partnership's administrator;
(9) recordkeeping, accounting, escrow, and custody fees and
expenses;
(10) the costs of an errors and omissions/directors' and
officers' liability insurance policy and a fidelity bond;
(11) the costs of preparing and mailing reports and other
communications, including proxy, tender offer correspondence or similar
materials, to Limited Partners;
(12) fees of Independent Directors and travel expenses of
Directors relating to meetings of the Board of Directors and committees
thereof, and costs and expenses of holding meetings of the Board of
Directors and meetings of the Partners;
(13) all costs and charges for equipment or services used in
preparing or communicating information regarding the Partnership's
transactions or the valuation of its assets between the General Partner
and any custodian, administrator or other agent engaged by the
Partnership;
(14) any extraordinary expenses, including indemnification
expenses as provided for in SECTION 3.8 of this Agreement;
(15) the Fund's proportionate share of the fees and expenses of
the Master Partnership and the fees and expenses of the Advisor Funds
and Advisor Accounts (borne indirectly by the Fund through its
investment in the Master Partnership);
(16) any other expenses as may be approved from time to time by
the Directors, other than those required to be borne by an investment
manager or the General Partner; and
(17) the organizational and offering expenses of the Partnership
which will initially be borne by Hatteras Investment Partners LLC or an
affiliate thereof and will be
19
expensed by the Partnership upon commencement of operations. The
Partnership will account for these expenditures, through monthly
expense allocations (or at such other frequency or times as the Board
of Directors may direct) to Limited Partners' Capital Accounts, for a
period not to exceed the first sixty months after the Closing Date. The
amount of each such expense allocation to the Limited Partners' Capital
Accounts will be determined by the Directors and Hatteras Investment
Partners LLC and will equal an amount sufficient to reimburse the
Investment Manager or affiliate thereof within a sixty-month period.
(d) The General Partner will be entitled to reimbursement from
the Partnership for any of the above expenses that it pays on behalf of
the Partnership, other than as provided in SECTION 3.9(E)(15) above.
ARTICLE IV
TERMINATION OF STATUS OF GENERAL PARTNER;
REMOVAL OF GENERAL PARTNER; TRANSFERS AND REPURCHASES
SECTION 4.1 TERMINATION OF STATUS OF GENERAL PARTNER. A General Partner
will cease to be a general partner of the Partnership if the General Partner (a)
is dissolved or otherwise terminates its existence; (b) voluntarily withdraws as
General Partner (which it may do at any time in its sole discretion); (c) is
removed; (d) Transfers its entire Interest as General Partner as permitted under
SECTION 4.3 of this Agreement and the Person to which the Interest is
Transferred is admitted as a substituted General Partner under SECTION 2.6(A) of
this Agreement; or (e) otherwise ceases to be a General Partner under the
Delaware Act.
SECTION 4.2 REMOVAL OF GENERAL PARTNER. Any General Partner may be
removed by the vote or written consent of Partners holding not less than 80% of
the total number of votes eligible to be cast by all Partners.
SECTION 4.3 TRANSFER OF INTEREST OF GENERAL PARTNER. A General Partner
may not Transfer all or any portion of its Interest as the General Partner
except to Persons who have agreed to be bound by all of the terms of this
Agreement and applicable law. If a General Partner Transfers its entire Interest
as General Partner, it will not cease to be a General Partner unless and until
the transferee is admitted to the Partnership as a substituted General Partner
pursuant to SECTION 2.6(A) of this Agreement. In executing this Agreement, each
Partner is deemed to have consented to any Transfer contemplated by this SECTION
4.3.
SECTION 4.4 TRANSFER OF INTERESTS OF LIMITED PARTNERS. (a) Any Interest
or portion of any Interest held by a Limited Partner may be Transferred only (1)
by operation of law pursuant to the death, bankruptcy, insolvency, adjudicated
incompetence, or dissolution of the Limited Partner; or (2) under certain
limited instances set out in this Agreement, with the written consent of the
General Partner (which may be withheld in the General Partner's sole and
absolute discretion). Unless the Partnership consults with legal counsel to the
Partnership and counsel confirms that the Transfer will not cause the
Partnership to be treated as a "publicly traded partnership" taxable as a
corporation, however, the General Partner may not consent to a Transfer unless
the following conditions are met: (i) the Transferring Limited Partner has been
a Limited Partner for at least six months; (ii) the proposed Transfer is to be
made on the effective date of an offer by the Partnership to repurchase
Interests; and
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(iii) the Transfer is (A) one in which the tax basis of the Interest in the
hands of the transferee is determined, in whole or in part, by reference to its
tax basis in the hands of the Transferring Limited Partner (e.g., certain
Transfers to affiliates, gifts and contributions to family entities), (B) to
members of the Transferring Limited Partner's immediate family (siblings,
spouse, parents and children), or (C) a distribution from a qualified retirement
plan or an individual retirement account. In addition, the General Partner may
not consent to a Transfer unless the Person to whom or which an Interest or
portion of an Interest is Transferred (or each of the Person's equity owners if
the Person is a "private investment company" as defined in Rule 205-3(d)(3)
under the Advisers Act, an investment company registered under the 1940 Act, or
a business development company as defined under the Advisers Act) is a Person
whom or which the General Partner believes is an "accredited investor" as
defined in Regulation D under the 1933 Act and meets the requirements of
paragraph (d)(1) of Rule 205-3 under the Advisers Act or successor provision of
any of those rules, or is otherwise exempt from the requirements of those rules.
In the event that other investor eligibility requirements are established by the
Partnership, the Person to whom or which an Interest or portion of an Interest
is Transferred must satisfy these other requirements. If any transferee does not
meet the investor eligibility requirements described in this SECTION 4.4(A), the
General Partner may not consent to the Transfer. In addition, no Limited Partner
will be permitted to Transfer his, her or its Interest or portion of an Interest
unless after the Transfer the balance of the Capital Account of the transferee,
and of the Limited Partner Transferring less than such Partner's entire
Interest, is at least equal to the amount of the Limited Partner's initial
Capital Contribution. Any permitted transferee will be entitled to the
allocations and distributions allocable to the Interest or portion of an
Interest so acquired and to Transfer the Interest or portion of an Interest in
accordance with the terms of this Agreement, but will not be entitled to the
other rights of a Limited Partner unless and until the transferee becomes a
substituted Limited Partner. If a Limited Partner Transfers an Interest or
portion of an Interest with the approval of the General Partner, the General
Partner will promptly take all necessary actions so that each transferee or
successor to whom or to which the Interest or portion of an Interest is
Transferred is admitted to the Partnership as a Limited Partner. The admission
of any transferee as a substituted Limited Partner will be effective upon the
execution and delivery by, or on behalf of, the substituted Limited Partner of
this Agreement or an instrument that constitutes the execution and delivery of
this Agreement. Each Limited Partner and transferee agrees to pay all expenses,
including attorneys' and accountants' fees, incurred by the Partnership in
connection with any Transfer. In connection with any request to Transfer an
Interest or portion of an Interest, the Partnership may require the Limited
Partner requesting the Transfer to obtain, at the Limited Partner's expense, an
opinion of counsel selected by the General Partner as to such matters as the
General Partner may reasonably request. If a Limited Partner Transfers its
entire Interest as a Limited Partner, it will not cease to be a Limited Partner
unless and until the transferee is admitted to the Partnership as a substituted
Limited Partner in accordance with this SECTION 4.4(A).
(b) Each Limited Partner will indemnify and hold harmless the
Partnership, the General Partner, the Directors, each other Limited
Partner and any Affiliate of the Partnership, the General Partner
(including, without limitation, Hatteras Investment Partners LLC), the
Director and each of the other Limited Partners against all losses,
claims, damages, liabilities, costs and expenses (including legal or
other expenses incurred in investigating or defending against any
losses, claims, damages, liabilities, costs and expenses or any
judgments, fines and amounts paid in settlement), joint or several, to
which these Persons may become subject by reason of or arising from (1)
any Transfer made by the Limited Partner in violation of this SECTION
4.4(B) and (2) any misrepresentation by the Transferring Limited
Partner or substituted Limited Partner in connection with the Transfer.
A Limited Partner Transferring an Interest may
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be charged reasonable expenses, including attorneys' and accountants'
fees, incurred by the Partnership in connection with the Transfer.
SECTION 4.5 REPURCHASE OF INTERESTS. (a) Except as otherwise provided
in this Agreement, no Partner or other Person holding an Interest or portion of
an Interest will have the right to withdraw or tender an Interest or portion of
an Interest to the Partnership for repurchase. The Directors may, from time to
time, in their complete and exclusive discretion and on terms and conditions as
they may determine, cause the Partnership to repurchase Interests or portions of
Interests in accordance with written tenders. The Partnership will not offer,
however, to repurchase Interests or portions of Interests on more than four
occasions during any one Fiscal Year, unless the Partnership has been advised by
its legal counsel that more frequent offers would not cause any adverse tax
consequences to the Partnership or the Partners. In determining whether to cause
the Partnership to repurchase Interests or portions of Interests, pursuant to
written tenders, the Directors will consider the following factors, among
others:
(1) whether any Partners have requested to tender Interests or
portions of Interests;
(2) the liquidity of the Partnership's assets (including fees and
costs associated with withdrawing from Advisor Funds);
(3) the investment plans and working capital and reserve
requirements of the Partnership;
(4) the relative economies of scale with respect to the size of
the Partnership;
(5) the history of the Partnership in repurchasing Interests or
portions of Interests;
(6) the availability of information as to the value of the
Partnership's interests in the Advisor Funds and Advisor Accounts;
(7) existing conditions of the securities markets and the economy
generally, as well as political, national or international developments
or current affairs;
(8) the anticipated tax consequences to the Partnership of any
proposed repurchases of Interests or portions of Interests; and
(9) the recommendations of the General Partner.
The Directors will cause the Partnership to repurchase Interests or portions of
Interests in accordance with written tenders only on terms fair to the
Partnership and to all Partners and Persons holding Interests or portions of
Interests acquired from Partners.
(b) Upon the commencement of an offer to repurchase Interests, the
Partnership will send an advance notification of the offer (the "NOTICE") to the
Partners via their financial intermediaries. The Notice will specify, among
other things:
(1) the percentage of Interests that the Partnership is offering
to repurchase;
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(2) the date on which a Partner's repurchase request is due;
(3) the Valuation Date (as defined in Section 4.5(d) below)
applicable to the repurchase offer;
(4) the date the proceeds from their Interest sales shall be due
to the Partners; and
(5) the value of the Interests as of the date of the Notice.
(c) Each repurchase offer will be limited to the repurchase of
approximately 5% of the Interests (but in no event to exceed the repurchase of
more than 20% of the Interests per quarter). A Partner may participate in a
repurchase offer only if he, she or it has been a Partner for 12 consecutive
months prior to such offer. The General Partner may, in its sole discretion,
permit repurchases that do not comply with the requirements set forth in this
Section 4.5(c) (other than the requirement that the Partnership will not
repurchase more than 20% of the Interests per quarter); provided that such
non-conforming repurchases may be subject to a penalty of up to 5% of the amount
requested to be repurchased (to be netted against withdrawal proceeds). The
minimum value of a repurchase is $50,000, subject to the discretion of the
General Partner to allow otherwise. Partners whose Interest, or a portion
thereof, is repurchased by the Partnership will not be entitled to a return of
any amount of sales charge that was charged pursuant to Section 3.11(d) in
connection with the Partner's purchase of the Interest.
(d) Interests are expected to be repurchased at their net asset value
determined as of approximately June 30, September 30, December 31 and March 31,
as applicable (each such date, a "VALUATION DATE"). Partners tendering Interests
for repurchase shall provide written notice of their intent to so tender by the
date specified in the Notice, which date shall be approximately 65 days (but in
no event less than 60 days) prior to the date of repurchase by the Partnership.
Partners tendering their Interests may not have all such Interests accepted for
repurchase by the Partnership. The Partnership may elect to repurchase less than
the full amount a Partner requests to be repurchased. If a repurchase offer is
oversubscribed, the Partnership will repurchase only a pro rata portion of the
amount tendered by each Partner.
(e) The Directors may under certain circumstances elect to postpone,
suspend or terminate an offer to repurchase Interests.
(f) A Limited Partner tendering a portion of its Interests for
repurchase will be required to maintain a minimum capital account balance of
$100,000. The Partnership may reduce the portion of Interests to be purchased
from a Limited Partner to maintain the required minimum balance. Such minimum
balance requirement may be waived by the General Partner in its sole discretion,
subject to applicable federal securities laws. Additionally, the General Partner
may, in its discretion, cause the Partnership to repurchase a Limited Partner's
entire Interest if the Limited Partner's Capital Account balance in the
Partnership, as a result of repurchase or Transfer requests by the Limited
Partner, is less than $100,000 or such other minimum amount established by the
General Partner from time to time in its sole discretion.
(g) Except as provided in SECTION 4.5(H) of this Agreement, a General
Partner may tender its Interest or portion of an Interest under SECTION 4.5(A)
of this Agreement only if and to
23
the extent that (1) the repurchase would not cause the value of the Capital
Account of the General Partner to be less than the value required to be
maintained under SECTION 5.1(I) of this Agreement and (2) in the view of legal
counsel to the Partnership, the repurchase would not jeopardize the
classification of the Partnership as a partnership for U.S. federal income tax
purposes.
(h) If a General Partner ceases to serve in that capacity under SECTION
4.1 of this Agreement (other than pursuant to SECTION 4.1(I)) and the business
of the Partnership is continued in accordance with SECTION 6.1(A)(2)(B) of this
Agreement, the former General Partner (or its trustee or other legal
representative) may, by written notice to the Directors within 60 days of the
action resulting in the continuation of the Partnership under SECTION
6.1(A)(2)(B), tender to the Partnership all or any portion of its Interest.
Within 30 days after the receipt of notice, the Directors will cause the
Interest or portion of an Interest to be repurchased by the Partnership for cash
in an amount equal to the balance of the former General Partner's Capital
Account or applicable portion of the Capital Account. If the former General
Partner does not tender to the Partnership all of its Interest as permitted by
this SECTION 4.5(H), the Interest will automatically convert to and will be
treated in all respects as the Interest of a Limited Partner. If the General
Partner ceases to serve in this capacity under Section 4.1 of this Agreement
(other than pursuant to SECTION 4.1(I)) and the Partnership is not continued
under SECTION 6.1(A)(2)(B) of this Agreement, the liquidation and distribution
provisions of ARTICLE VI of this Agreement will apply to the General Partner's
Interest.
(i) The General Partner may cause the Partnership to repurchase an
Interest or portion of an Interest of a Limited Partner or any Person acquiring
an Interest from or through a Limited Partner, on terms fair to the Partnership
and to the Limited Partner or Person acquiring an Interest from or through such
Limited Partner, in the event that the General Partner, in its sole discretion,
determines or has reason to believe that:
(1) the Interest or portion of an Interest has been Transferred
in violation of SECTION 4.4 of this Agreement, or the Interest or
portion of an Interest has vested in any Person other than by operation
of law as the result of the death, dissolution, bankruptcy, insolvency
or adjudicated incompetence of the Limited Partner;
(2) ownership of the Interest or portion of an Interest by a
Partner or other Person is likely to (A) cause the Partnership to be in
violation of, or (B) (x) require registration of any Interest or
portion of any Interest under, or (y) subject the Partnership to
additional registration or regulation under, the securities,
commodities or other laws of the United States or any other relevant
jurisdiction;
(3) continued ownership of the Interest or portion of an Interest
may be harmful or injurious to the business or reputation of the
Partnership, the Directors, the General Partner or any of their
Affiliates, or may subject the Partnership or any of the Partners to an
undue risk of adverse tax or other fiscal or regulatory consequences;
(4) any of the representations and warranties made by a Partner
or other Person in connection with the acquisition of the Interest or
portion of an Interest was not true when made or has ceased to be true;
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(5) with respect to a Limited Partner subject to special
regulatory or compliance requirements, such as those imposed by the
Bank Holding Company Act or certain Federal Communication Commission
regulations (collectively, "SPECIAL LAWS OR REGULATIONS"), such Limited
Partner will likely be subject to additional regulatory or compliance
requirements under these Special Laws or Regulations by virtue of
continuing to hold an Interest or portion of an Interest; or
(6) it would be in the best interests of the Partnership, as
determined by the General Partner or the Directors, for the Partnership
to repurchase the Interest or portion of an Interest.
(j) Payments for accepted repurchases of Interests of less than 90% of
a Partner's Capital Account generally will be paid approximately 90 days after
the Valuation Date (after adjusting for fees, expenses, reserves or other
allocations or repurchase) and will be subject to adjustment within 45 days
after completion of the annual audit of the Partnership for the applicable
Fiscal Year. Such annual audit may be delayed in the event that information
necessary to complete the annual audit is not received on a timely basis from
the Master Partnership or the Advisors. Payments for accepted repurchases of
interests for 90% or more of a Partner's Capital Account may be paid in two
installments. Payment of an amount equal to at least 90% of the interests
repurchased (after adjusting for fees, expenses, reserves or other allocations
or repurchase) generally will be made approximately 90 days after the Valuation
Date. Final settlement of payments in connection with the repurchased Interests
generally will be made within 45 days after completion of the annual audit of
the Partnership for the applicable Fiscal Year. Payments in connection with
repurchased interests may be delayed if such information is delayed.
Notwithstanding anything to the contrary in this SECTION 4.5(J), the Directors,
in their discretion, may cause the Partnership to pay all or any portion of the
repurchase price in Securities (or any combination of Securities and cash)
having a value, determined as of the date of repurchase, equal to the amount to
be repurchased. All repurchases of Interests or portions of Interest will be
subject to any and all conditions as the Directors may impose in their sole
discretion. The General Partner may, in its discretion, cause the Partnership to
repurchase a Limited Partner's entire Interest, if the Limited Partner's Capital
Account balance in the Partnership, as a result of repurchase or Transfer
requests by the Limited Partner, is less than a minimum amount that may be
established by the General Partner from time to time in its sole discretion.
Subject to the procedures of this SECTION 4.5(J), the amount due to any Partner
whose Interest or portion of an Interest is repurchased will be equal to the
value of the Partner's Capital Account or portion of such Capital Account, as of
the applicable Valuation Date, after giving effect to all allocations to be made
to the Partner's Capital Account as of that date. If a Limited Partner's entire
Interest is repurchased, that Limited Partner will cease to be a Limited
Partner.
ARTICLE V
CAPITAL
SECTION 5.1 CONTRIBUTIONS TO CAPITAL. (a) The minimum initial Capital
Contribution of each Limited Partner will be $100,000 or such other amount as
the General Partner determines from time to time. The amount of the initial
Capital Contribution of each Partner will be recorded by the Partnership upon
acceptance as a contribution to the capital of the Partnership. Each Limited
Partner's entire initial
25
Capital Contribution will be paid to the Partnership
immediately prior to the Partnership's acceptance of the Limited Partner's
subscription for Interests, unless otherwise agreed by the Partnership and such
Limited Partner.
(b) The Limited Partners may make additional Capital
Contributions effective as of those times and in amounts as the General
Partner may permit, but no Limited Partner will be obligated to make
any additional Capital Contribution except to the extent provided in
SECTIONS 5.5 and 5.7 of this Agreement. Each additional Capital
Contribution made by a Limited Partner (other than a contribution made
pursuant to SECTION 5.5 or SECTION 5.7 of this Agreement) will be in
the minimum amount of $25,000 or such other amount as the General
Partner determines from time to time.
(c) A General Partner may make additional Capital Contributions
effective as of those times and in such amounts as it determines, and
will be required to make additional Capital Contributions from time to
time to the extent necessary to maintain the balance of its Capital
Account at an amount, if any, necessary to ensure that the Partnership
will be treated as a Partnership for U.S. federal income tax purposes.
Except as provided in this SECTION 5.1 or in the Delaware Act, no
General Partner will be required or obligated to make any additional
contributions to the capital of the Partnership.
(d) Subject to the provisions of the 1940 Act, and except as
otherwise permitted by the General Partner, (1) initial and any
additional Capital Contributions by any Partner will be payable in cash
or in Securities that the General Partner, in its absolute discretion,
causes the Partnership to accept, and (2) initial and any additional
Capital Contributions in cash will be payable in readily available
funds at the date of the proposed acceptance of the contribution. The
Partnership will charge each Partner making a Capital Contribution in
Securities to the capital of the Partnership an amount as may be
determined by the General Partner to reimburse the Partnership for any
costs incurred by the Partnership by reason of accepting the
Securities, and any charge will be due and payable by the contributing
Partner in full at the time the Capital Contribution to which the
charges relate is due. The value of contributed Securities will be
determined in accordance with SECTION 7.3 of this Agreement as of the
date of contribution.
(e) An Advisor may make Capital Contributions and own Interests
in the Partnership and, in so doing, will become a Limited Partner with
respect to the contributions.
(f) The minimum initial and additional contributions set out in
paragraphs (a) and (b) of this SECTION 5.1 may be increased or reduced
by the General Partner from time to time. Reductions may be applied to
all investors, individual investors or to classes of investors, in each
case in the sole discretion of the General Partner.
SECTION 5.2 RIGHTS OF PARTNERS TO CAPITAL. No Partner will be entitled
to interest on the Partner's Capital Contribution, nor will any Partner be
entitled to the return of any capital of the Partnership except (a) upon the
repurchase by the Partnership of all or a portion of the Partner's Interest in
accordance with SECTION 4.5 of this Agreement, (b) in accordance with the
provisions of SECTION 5.7 of this Agreement or (c) upon the liquidation of the
Partnership's assets in accordance with SECTION 6.2 of this Agreement. Except as
specified in the Delaware Act, or with respect to distributions or similar
disbursements made in error, no Partner will be liable for the return of any
such amounts. To the fullest
26
extent permitted by applicable law, no Partner will have the right to require
partition of the Partnership's property or to compel any sale or appraisal of
the Partnership's assets.
SECTION 5.3 CAPITAL ACCOUNTS. (a) The Partnership will maintain a
separate Capital Account for each Partner.
(b) Each Partner's Capital Account will have an initial balance
equal to the amount of cash and the value of any Securities (determined
in accordance with SECTION 7.3 of this Agreement) constituting the
Partner's initial Capital Contribution.
(c) Each Partner's Capital Account will be increased by the sum
of (1) the amount of cash and the value of any Securities (determined
in accordance with SECTION 7.3 of this Agreement) constituting
additional Capital Contributions by the Partner permitted under SECTION
5.1 of this Agreement, plus (2) any amount credited to the Partner's
Capital Account under SECTIONS 5.4 through 5.8 of this Agreement.
(d) Each Partner's Capital Account will be reduced by the sum of
(1) the amount of any repurchase of the Interest or portion of the
Interest of the Partner or distributions to the Partner under SECTION
4.5, 5.11 or 6.2 of this Agreement that are not reinvested, plus (2)
any amounts debited against the Partner's Capital Account under
SECTIONS 5.4 through 5.8 of this Agreement.
(e) In the event all or a portion of the Interest of a Partner is
Transferred in accordance with the terms of this Agreement, the
transferee will succeed to the Capital Account of the transferor to the
extent of the Transferred Interest or portion of an Interest.
(f) Subject to SECTION 5.7 of this Agreement, no Partner will be
required to pay to the Partnership or any other Partner any deficit in
such Partner's Capital Account upon dissolution of the Partnership or
otherwise.
SECTION 5.4 ALLOCATION OF NET PROFIT AND LOSS. Subject to Sections 5.6
and 5.8 of this Agreement, as of the last day of each Fiscal Period, any Net
Profit or Net Loss for the Fiscal Period will be allocated among and credited to
or debited against the Capital Accounts of the Partners in accordance with their
respective Investment Percentages for the Fiscal Period.
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SECTION 5.5 ALLOCATION OF CERTAIN WITHHOLDING TAXES AND OTHER
EXPENDITURES. (a) If the Partnership incurs a withholding tax or other tax
obligation with respect to the share of Partnership income allocable to any
Partner, then the General Partner, without limitation of any other rights of the
Partnership or the General Partner, will cause the amount of the obligation to
be debited against the Capital Account of the Partner when the Partnership pays
the obligation, and any amounts then or in the future distributable to the
Partner will be reduced by the amount of the taxes. If the amount of the taxes
is greater than any distributable amounts, then the Partner and any successor to
the Partner's Interest or portion of an Interest will pay to the Partnership as
a Capital Contribution, upon demand by the General Partner, the amount of the
excess. A General Partner will not be obligated to apply for or obtain a
reduction of or exemption from withholding tax on behalf of any Partner that may
be eligible for the reduction or exemption, except that, in the event that the
General Partner determines that a Partner is eligible for a refund of any
withholding tax, the General Partner may, at the request and expense of the
Partner, assist the Partner in applying for such refund.
(b) Except as otherwise provided for in this Agreement and unless
prohibited by the 1940 Act, any expenditures payable by the
Partnership, to the extent determined by the General Partner to have
been paid or withheld on behalf of, or by reason of particular
circumstances applicable to, one or more but fewer than all of the
Partners, will be charged to only those Partners on whose behalf the
payments are made or whose particular circumstances gave rise to such
payments. The charges will be debited from the Capital Accounts of the
Partners as of the close of the Fiscal Period during which the items
were paid or accrued by the Partnership.
SECTION 5.6 PERFORMANCE INCENTIVE.
(a) So long as the General Partner continues to serve in that
capacity, and for each Limited Partner for which the Partnership Return
earned by the Limited Partner for the applicable Incentive Period
exceeds the greater of the Hurdle Rate for that Incentive Period or (2)
the Loss Carryforward Amount, if any, the Performance Incentive will be
debited against the Capital Account of that Limited Partner as of the
last day of the Incentive Period, and the amount so debited will be
credited simultaneously to the Capital Account of the General Partner,
or, subject to compliance with the 1940 Act and the Advisers Act, to
the Capital Accounts of the Partners as have been designated in any
written notice delivered by the General Partner to the Partnership
within 90 days after the close of the Incentive Period.
(b) Within 30 days after the close of each Incentive Period with
respect to each Limited Partner, the General Partner may withdraw up to
100% of the Performance Incentive (computed on the basis of unaudited
data) that was credited to the Capital Account of the General Partner,
and debited from the Limited Partner's Capital Account with respect to
the Incentive Period. The Partnership may pay the General Partner the
undrawn balance, if any, of the Performance Incentive (subject to audit
adjustments) within 30 days after the completion of the audit of the
Partnership's accounts pursuant to Section 7.1 of this Agreement.
(c) The General Partner may rebate all or a portion of the
Performance Incentive to certain employees of the Adviser that qualify
as "knowledgeable employees" under Rule 3c-5 under the 1940 Act.
28
SECTION 5.7 RESERVES. (a) The General Partner may cause appropriate
reserves to be created, accrued and charged by the Partnership against Net
Assets and proportionately against the Capital Accounts of the Partners for
contingent liabilities, if any, as of the date any contingent liability becomes
known to the General Partner, the reserves to be in the amounts that the General
Partner in its sole discretion deems necessary or appropriate. The General
Partner may increase or reduce any reserves from time to time by amounts as it
in its sole discretion deems necessary or appropriate. The amount of any
reserve, or any increase or decrease in a reserve, will be proportionately
charged or credited to the Capital Accounts of those Persons who or that are
Partners at the time the reserve is created, or increased or decreased, except
that if any individual reserve item, adjusted by any increase in the item,
exceeds the lesser of $500,000 or 1% of the aggregate value of the Capital
Accounts of all of those Partners, then the amount of the reserve, increase or
decrease may instead, at the discretion of the General Partner, be charged or
credited to those Persons who or that were Partners at the time, as determined
by the General Partner in its sole discretion, of the act or omission giving
rise to the contingent liability for which the reserve was established,
increased or decreased in proportion to their Capital Accounts.
(b) If any amount is required by SECTION 5.7(A) of this Agreement
to be charged or credited to a Person who or that is no longer a
Partner, the amount will be paid by or to the party, in cash, with
interest from the date on which the General Partner determines that the
charge or credit is required. In the case of a charge, the former
Partner will be obligated to pay as a Capital Contribution the amount
of the charge, plus interest as provided in this SECTION 5.7(B), to the
Partnership on demand, except that (1) in no event will a former
Partner be obligated to make a payment exceeding the amount of the
Partner's Capital Account at the time to which the charge relates and
(2) no demand will be made after the expiration of three years from the
date on which the Person ceased to be a Partner. To the extent that a
former Partner fails to pay to the Partnership, in full, any amount
required to be charged to the former Partner under SECTION 5.7(A) of
this Agreement, the deficiency will be charged proportionately to the
Capital Accounts of the Partners at the time of the act or omission
giving rise to the charge to the extent feasible, and otherwise
proportionately to the Capital Accounts of the current Partners.
SECTION 5.8 ALLOCATION TO AVOID CAPITAL ACCOUNT DEFICITS. To the extent
that any debits under SECTIONS 5.4 through 5.7 of this Agreement would reduce
the balance of the Capital Account of any Limited Partner below zero, that
portion of any such debits will be allocated instead to the Capital Account of
the General Partner. Any credits in any subsequent Fiscal Period that otherwise
would be allocable under SECTIONS 5.4 through 5.7 of this Agreement to the
Capital Account of any Limited Partner previously affected by the application of
this SECTION 5.8 will instead be allocated to the Capital Account of the General
Partner in amounts necessary to offset all previous debits attributable to the
Limited Partner, made in accordance with this SECTION 5.8, that have not been
recovered.
SECTION 5.9 ALLOCATIONS PRIOR TO CLOSING DATE. Any net cash profits or
any net cash losses realized by the Partnership from the purchase or sale of
Securities during the period ending on the day prior to the Closing Date will be
allocated to the Capital Account of the General Partner. No unrealized item of
profit or loss will be allocated under this SECTION 5.9 to the Capital Account
of any Partner.
SECTION 5.10 TAX ALLOCATIONS. For each taxable year of the Partnership,
items of income, deduction, gain, loss or credit will be allocated for income
tax purposes among the Partners in a manner so as to reflect equitably amounts
credited or debited to each Partner's Capital Account for the current
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and prior taxable years (or relevant portions of those years). Allocations under
this Section 5.10 will be made in accordance with the principles of Sections
704(b) and 704(c) of the Code, and in conformity with Treasury Regulations
promulgated under these Sections, or the successor provisions to such Sections
and Regulations. Notwithstanding anything to the contrary in this Agreement, the
Partnership will allocate to the Partners those gains or income necessary to
satisfy the "qualified income offset" requirement of Treasury Regulations
Section 1.704-1(b)(2)(ii)(d). If the Partnership realizes net capital gains for
U.S. federal income tax purposes for any taxable year during or as of the end of
which one or more Positive Basis Partners (as defined in this SECTION 5.10)
withdraw from the Partnership under ARTICLE IV or VI of this Agreement, the
General Partner may elect to allocate net gains as follows: (a) to allocate net
gains among Positive Basis Partners, in proportion to the Positive Basis (as
defined in this SECTION 5.10) of each Positive Basis Partner, until either the
full amount of the net gains has been so allocated or the Positive Basis of each
Positive Basis Partner has been eliminated, and (b) to allocate any net gains
not so allocated to Positive Basis Partners to the other Partners in a manner
that reflects equitably the amounts credited to the Partners' Capital Accounts.
If the Partnership realizes capital losses for U.S. federal income tax purposes
for any Fiscal Year during or as of the end of which one or more Negative Basis
Partners (as defined in this SECTION 5.10) withdraw from the Partnership under
ARTICLE IV or VI of this Agreement, the General Partner may elect to allocate
net losses as follows: (i) to allocate net losses among Negative Basis Partners,
in proportion to the Negative Basis (as defined in this SECTION 5.10) of each
Negative Basis Partner, until either the full amount of net losses will have
been so allocated or the Negative Basis of each Negative Basis Partner has been
eliminated, and (ii) to allocate any net losses not so allocated to Negative
Basis Partners, to the other Partners in a manner that reflects equitably the
amounts credited to the Partners' Capital Accounts. As used in this SECTION
5.10, the term "POSITIVE BASIS" means, with respect to any Partner and as of any
time of calculation, the amount by which the total of the Partners' Capital
Accounts as of that time exceeds the Partner's "adjusted tax basis," for U.S.
federal income tax purposes, in the Partner's Interest in the Partnership as of
that time (determined without regard to any adjustments made to the "adjusted
tax basis" by reason of any Transfer or assignment of the Interest, including by
reason of death). As used in this SECTION 5.10, the term "POSITIVE BASIS
PARTNER" means any Partner who or that withdraws from the Partnership and who or
that has a Positive Basis as of the effective date of the Partner's withdrawal.
As used in this SECTION 5.10, the term "NEGATIVE BASIS" means, with respect to
any Partner and as of any time of calculation, the amount by which the Partner's
"adjusted tax basis," for U.S. federal income tax purposes, in the Partner's
Interest in the Partnership as of that time (determined without regard to any
adjustments made to the "adjusted tax basis" by reason of any Transfer or
assignment of the Interest, including by reason of death, and without regard to
such Partner's share of the liabilities of the Partnership under section 752 of
the Code) exceeds the Partner's Capital Account as of such time. As used in this
SECTION 5.10, the term "NEGATIVE BASIS PARTNER" means any Partner who or that
withdraws from the Partnership and who or that has a Negative Basis as of the
effective date of the Partner's withdrawal.
SECTION 5.11 DISTRIBUTIONS. (a) The General Partner may cause the
Partnership to make distributions in cash or in kind at any time to all of the
Partners on a proportionate basis in accordance with the Partners' Investment
Percentages.
(b) The General Partner may withhold taxes from any distribution
to any Partner to the extent required by the Code or any other
applicable law. For purposes of this Agreement, any taxes so withheld
by the Partnership with respect to any amount distributed by the
Partnership to any Partner will be deemed to be a distribution or
payment to the Partner, reducing the amount otherwise distributable to
the Partner under this Agreement and reducing the Capital Account of
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the Partner. Neither the General Partner nor the Directors will be
obligated to apply for or obtain a reduction of or exemption from
withholding tax on behalf of any Partner that may be eligible for
reduction or exemption. To the extent that a Partner claims to be
entitled to a reduced rate of, or exemption from, a withholding tax
pursuant to an applicable income tax treaty, or otherwise, the Partner
will furnish the Partnership with any information and forms that the
Partner may be required to complete if necessary to comply with any and
all laws and regulations governing the obligations of withholding tax
agents. Each Partner represents and warrants that any information and
forms furnished by the Partner will be true and accurate and agrees to
indemnify the Partnership and each of the Partners from any and all
losses, claims, damages, liabilities costs and expenses resulting from
the filing of inaccurate or incomplete information or forms relating to
the withholding taxes (including legal or other expenses incurred in
investigating or defending against any such losses, claims, damages,
liabilities, costs and expenses).
(c) Notwithstanding any provision to the contrary contained in
this Agreement, the Partnership and the General Partner on behalf of
the Partnership will not repurchase any Interest or portion of an
Interest or make a distribution to any Partner on account of the
Partner's Interest or portion of an Interest, if such repurchase or
distribution would violate the Delaware Act or other applicable law.
ARTICLE VI
DISSOLUTION AND LIQUIDATION
SECTION 6.1 DISSOLUTION. (a) The Partnership will be dissolved if at
any time it has no Limited Partners or upon the occurrence of any of the
following events:
(1) upon the affirmative vote to dissolve the Partnership by both
(A) a majority of the Directors (including the vote of a majority of
the Independent Directors) and (B) Partners holding at least two-thirds
of the total number of votes eligible to be cast by all Partners;
(2) upon either of: (A) an election by the General Partner to
dissolve the Partnership or (B) a General Partner's ceasing to be a
General Partner in accordance with SECTION 4.1 of this Agreement (other
than in conjunction with a Transfer of the Interest of a General
Partner in accordance with SECTION 4.3 of this Agreement to a Person
who or that is admitted as a substituted General Partner under SECTION
2.6(A) of this Agreement), unless, as to the event described in clause
(B) of this SECTION 6.1(A)(2), (i) the Partnership has at least one
other General Partner who or that is authorized to and does carry on
the business of the Partnership, or (ii) both the Directors and
Partners holding not less than two-thirds of the total number of votes
eligible to be cast by all Partners elect within 60 days after the
event to continue the business of the Partnership and a Person to be
admitted to the Partnership, effective as of the date of the event, as
an additional General Partner who has agreed to make the contributions
to the capital of the Partnership required to be made under SECTION
5.1(C) of this Agreement;
(3) upon the failure of Partners to approve successor Directors
at a meeting called by the General Partner in accordance with SECTION
2.11(C) of this Agreement when no Director remains to continue the
business of the Partnership; or
31
(4) as otherwise required by operation of law.
Dissolution of the Partnership will be effective on the later of the
day on which the event giving rise to the dissolution occurs or, to the extent
permitted by the Delaware Act, the conclusion of any applicable 60-day period
during which the Directors and Partners elect to continue the business of the
Partnership as provided in SECTION 6.1(A)(2), but the Partnership will not
terminate until the assets of the Partnership have been liquidated in accordance
with SECTION 6.2 of this Agreement and the Certificate has been canceled.
(b) Except as provided in SECTION 6.1(A) of this Agreement or in
the Delaware Act, the death, adjudicated incompetence, dissolution,
termination, liquidation, bankruptcy, reorganization, merger, sale of
substantially all of the stock or assets of, or other change in the
ownership or nature of a Partner, the admission to the Partnership of a
new Partner, the withdrawal of a Partner from the Partnership, or the
Transfer by a Partner of the Partner's Interest or a portion of the
Interest to a third party will not cause the Partnership to dissolve.
SECTION 6.2 LIQUIDATION OF ASSETS. (a) Upon the dissolution of the
Partnership as provided in SECTION 6.1 of this Agreement, the General Partner
will promptly liquidate the business and administrative affairs of the
Partnership, except that if the General Partner is unable to perform this
function, a liquidator elected by Partners holding a majority of the total
number of votes eligible to be cast by all Partners and whose fees and expenses
will be paid by the Partnership will promptly liquidate the business and
administrative affairs of the Partnership. Net Profit and Net Loss during the
period of liquidation will be allocated in accordance with ARTICLE V of this
Agreement. Subject to the Delaware Act, the proceeds from liquidation (after
establishment of appropriate reserves for all claims and obligations, including
all contingent, conditional or unmatured claims and obligations in an amount
that the General Partner or liquidator deems appropriate in its sole discretion
as applicable) will be distributed in the following manner:
(1) the debts of the Partnership, other than debts, liabilities
or obligations to Limited Partners, and the expenses of liquidation
(including legal and accounting fees and expenses incurred in
connection with the liquidation), up to and including the date on which
distribution of the Partnership's assets to the Partners has been
completed, will first be paid on a proportionate basis;
(2) any debts, liabilities or obligations owing to the Limited
Partners will be paid next in their order of seniority and on a
proportionate basis; and
(3) the Partners are paid next on a proportionate basis the
positive balances of their Capital Accounts after giving effect to all
allocations to be made to the Partners' Capital Accounts for the Fiscal
Period ending on the date of the distributions under this SECTION
6.2(A)(3).
(b) Notwithstanding the provisions of this SECTION 6.2, upon
dissolution of the Partnership, subject to the Delaware Act and the priorities
set out in SECTION 6.2(A) of this Agreement, the General Partner or liquidator
may distribute ratably in kind any assets of the Partnership. If any in-kind
distribution is to be made under this SECTION 6.2(B), (1) the assets distributed
in kind will be valued in accordance with SECTION 7.3 of this Agreement as of
32
the actual date of their distribution and charged as so valued and distributed
against amounts to be paid under SECTION 6.2(A) of this Agreement, and (2) any
profit or loss attributable to property distributed in kind will be included in
the Net Profit or Net Loss for the Fiscal Period ending on the date of the
distribution. Notwithstanding any provision of this Agreement to the contrary,
the General Partner may compel a Partner to accept a distribution of any asset
in kind from the Partnership even if the percentage of the asset distributed to
the Partner exceeds a percentage of the asset that is equal to the percentage in
which the Partner shares in distributions from the Partnership.
ARTICLE VII
ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS
SECTION 7.1 ACCOUNTING AND REPORTS. (a) The Partnership will adopt for
tax accounting purposes any accounting method that the General Partner decides
in its sole discretion is in the best interests of the Partnership. The
Partnership's accounts will be maintained in U.S. currency.
(b) As soon as practicable after the end of each taxable year of
the Partnership, the Partnership will furnish to Partners information
regarding the operation of the Partnership and the Partners' Interests
as is necessary for Partners to complete U.S. Federal and state income
tax or information returns and any other tax information required by
U.S. Federal or state law. To the extent such information may be
delayed due to delayed reporting by Advisors with whom the Partnership
invests (through the Master Partnership), the Partners may be required
to file extensions of the filing dates for their income tax returns at
the Federal, state and local levels.
(c) Except as otherwise required by the 1940 Act, or as may
otherwise be permissible under other applicable law, the Partnership
will furnish to each Limited Partner a semiannual report and an annual
report containing the information required by the 1940 Act as soon as
practicable. The Partnership will cause financial statements contained
in each annual report furnished under this SECTION 7.1 to be
accompanied by a certificate of independent public accountants based
upon an audit performed in accordance with generally accepted
accounting principles. The Partnership may furnish to each Partner any
other periodic reports the General Partner deems necessary or
appropriate in its discretion.
(d) The General Partner will notify the Directors of any change
in the holders of interests of the General Partner within a reasonable
time after the change.
SECTION 7.2 DETERMINATIONS BY GENERAL PARTNER. (a) All matters
concerning the determination and allocation among the Partners of the amounts to
be determined and allocated pursuant to ARTICLE V of this Agreement, including
any taxes on those amounts and accounting procedures applicable with respect to
those amounts, will be determined by the General Partner unless specifically and
expressly otherwise provided for by the provisions of this Agreement or as
required by law. Any such determinations and allocations will be final and
binding on all of the Partners.
(b) The General Partner may make any adjustments to the
computation of Net Profit and/or Net Loss, or any components
(withholding any items of income, gain, loss or deduction) constituting
Net Profit and/or Net Loss as the General Partner deems appropriate to
reflect fairly
33
and accurately the financial results of the Partnership and the
intended allocation of Net Profit and/or Net Loss among the Partners.
SECTION 7.3 VALUATION OF ASSETS. (a) Except as may be required by the
1940 Act, the Directors will value or cause to have valued any Securities or
other assets and liabilities of the Partnership as of the close of business on
the last day of each Fiscal Period and at such other times as the Directors may
determine, in their discretion, in accordance with valuation procedures as
established from time to time by the Directors. Assets of the Partnership
invested in an Advisor Fund or Advisor Account will be valued in accordance with
the terms and conditions of the agreement or other document governing the
operation of the Advisor Fund or Advisor Account. In determining the value of
the assets of the Partnership, no value will be placed on the goodwill or name
of the Partnership, or the office records, files, statistical data or any
similar intangible assets of the Partnership not normally reflected in the
Partnership's accounting records. Any items of income earned but not received,
expenses incurred but not yet paid, liabilities fixed or contingent, and any
other prepaid expenses to the extent not otherwise reflected in the books of
account, and the value of options or commitments to purchase or sell Securities
or commodities pursuant to agreements entered into prior to the valuation date
will, however, be taken into account in determining the value of the
Partnership's assets.
(b) Subject to the provisions of the 1940 Act, the value of
Securities and other assets of the Partnership and the net asset value
of the Partnership as a whole determined pursuant to this SECTION 7.3
will be conclusive and binding on all of the Partners and all Persons
claiming through or under them.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1 AMENDMENT OF PARTNERSHIP AGREEMENT. (a) Except as otherwise
provided in this SECTION 8.1, this Agreement may be amended, in whole or in
part, with the approval of a majority of the Directors (including the vote of a
majority of the Independent Directors, but only if such vote is required by the
1940 Act), except that any amendment also must be approved by a majority (as
defined in the ▇▇▇▇ ▇▇▇) of the outstanding voting securities of the Partnership
if such vote is required by the ▇▇▇▇ ▇▇▇.
(b) Any amendment that would:
(1) increase the obligation of a Partner to make any Capital
Contribution,
(2) reduce the Capital Account of a Partner other than in
accordance with ARTICLE V of this Agreement, or
(3) modify the events causing the dissolution of the
Partnership,
may be made only if (A) the written consent of each Partner adversely
affected by the proposed action is obtained prior to the effectiveness
of the action or (B) the amendment does not become effective until (i)
each Limited Partner has received written notice of the amendment and
(ii) any Limited Partner objecting to the amendment has been afforded a
reasonable opportunity (under procedures prescribed by the General
Partner in its sole discretion) to tender the Partner's entire Interest
for repurchase by the Partnership. Notwithstanding the preceding
sentence or the
34
provisions of SUBSECTION 8.1(C), any amendment that
would alter the provisions of SECTION 8.1 relating to the material
amendment of this Agreement or the provisions of SECTION 3.8 of this
Agreement relating to indemnification may be made only with the
unanimous consent of the Partners and, to the extent required by the
1940 Act, approval of a majority of the Directors (and, if so required,
a majority of the Independent Directors).
(c) Notwithstanding the provisions of SECTIONS 8.1(A) and 8.1(B)
of this Agreement, the General Partner, at any time without the consent
of any other Partner, may:
(1) restate this Agreement, together with any amendments to
this Agreement that have been duly adopted in accordance with the
provisions of this Agreement to incorporate the amendments in a
single, integrated document;
(2) amend this Agreement (other than with respect to the
matters described in SECTION 8.1(B) of this Agreement) to change
the name of the Partnership in accordance with SECTION 2.2 hereof
or to effect compliance with any applicable law or regulation,
including, but not limited to, to satisfy the requirements of
applicable U.S. banking law or regulation, or to cure any
ambiguity or to correct or supplement any provision of this
Agreement that may be inconsistent with any other provision of
this Agreement, so long as the action does not adversely affect
the rights of any Partner in any material respect; and
(3) amend this Agreement to make any changes necessary or
desirable, based on advice of legal counsel to the Partnership,
to assure the Partnership's continuing eligibility to be
classified for U.S. federal income tax purposes as a Partnership
that is not treated as a corporation for tax purposes under the
Code; subject, however, to the limitation that any material
amendment to this Agreement under SECTION 8.1(c)(2) or (3) of
this Agreement will be valid only if approved by a majority of
the Directors (including the vote of a majority of the
Independent Directors, if required by the 1940 Act).
(d) The General Partner will give prior written notice of any
proposed amendment to this Agreement (other than any amendment of the
type contemplated by SECTION 8.1(C)(1) of this Agreement) to each
Partner, which notice sets out (1) the text of the proposed amendment
or (2) a summary of the amendment and a statement that the text of the
amendment will be furnished to any Partner upon request.
SECTION 8.2 SPECIAL POWER OF ATTORNEY. (a) Each Partner irrevocably
makes, constitutes and appoints the General Partner and each of the Directors,
acting severally, and any liquidator of the Partnership's assets appointed
pursuant to SECTION 6.2 of this Agreement with full power of substitution, the
true and lawful representatives and attorneys-in-fact of, and in the name, place
and stead of, the Partner, with the power from time to time to make, execute,
sign, acknowledge, swear to, verify, deliver, record, file and/or publish:
(1) any amendment to this Agreement;
(2) any amendment to the Certificate, including, without
limitation, any such amendment required to reflect any amendments
to this Agreement, and including,
35
without limitation, an amendment to effectuate any change in
the membership of the Partnership; and
(3) all other such instruments, documents and certificates
that, in the view of legal counsel to the Partnership, from time
to time may be required by the laws of the United States of
America, the State of Delaware or any other jurisdiction in which
the General Partner determines that the Partnership should do
business, or any political subdivision or agency of any such
jurisdiction, or that legal counsel may deem necessary or
appropriate to effectuate, implement and continue the valid
existence and business of the Partnership as a limited
partnership under the Delaware Act.
(b) Each Partner is aware that the terms of this Agreement permit
certain amendments to this Agreement to be effected and certain other
actions to be taken or omitted by or with respect to the Partnership
without the Partner's consent. Each Partner agrees that if an amendment
to the Certificate or this Agreement or any action by or with respect
to the Partnership is taken in the manner contemplated by this
Agreement, notwithstanding any objection that the Partner may assert
with respect to the action, the attorneys-in-fact appointed under this
Agreement are authorized and empowered, with full power of
substitution, to exercise the authority granted in this SECTION 8.2 in
any manner that may be necessary or appropriate to permit the amendment
to be made or action lawfully taken or omitted. Each Partner is fully
aware that each Partner will rely on the effectiveness of this special
power of attorney with a view to the orderly administration of the
affairs of the Partnership.
(c) The power of attorney contemplated by this SECTION 8.2 is a
special power of attorney and is coupled with an interest in favor of
the General Partner and each of the Directors, acting severally, and
any liquidator of the Partnership's assets appointed under SECTION 6.2
of this Agreement, and as such the power of attorney:
(1) will be irrevocable and continue in full force and
effect notwithstanding the subsequent death or incapacity of any
Person granting the power of attorney, regardless of whether the
Partnership, the General Partner, the Directors or any liquidator
has had notice of the death or incapacity; and
(2) will survive the delivery of a Transfer by a Partner of
the whole or any portion of the Partner's Interest, except that,
when the transferee of an Interest or portion of an Interest has
been approved by the General Partner for admission to the
Partnership as a substituted Partner, the power of attorney given
by the transferor will survive the delivery of the assignment for
the sole purpose of enabling the General Partner, the Directors
or any liquidator to execute, acknowledge and file any instrument
necessary to effect the substitution.
SECTION 8.3 NOTICES. Notices that may or are required to be provided
under this Agreement will be made to a Partner by hand delivery, regular mail
(registered or certified mail return receipt requested in the case of notice to
the General Partner), commercial courier service, telecopier, or electronic mail
(with a confirmation copy by registered or certified mail in the case of notices
to the General Partner by telecopier or electronic mail), and will be addressed
to the Partner at his, her or its address as set out in the books and records of
the Partnership (or to any other address as may be
36
designated by any Partner by notice addressed to the General Partner in the case
of notice given to any Partner, and to each of the Partners in the case of
notice given to the General Partner). Notices will be deemed to have been
provided when delivered by hand, on the date indicated as the date of receipt on
a return receipt or when received if sent by regular mail, commercial courier
service, telecopier or by electronic mail. A document that is not a notice and
that is required to be provided under this Agreement by any party to another
party may be delivered by any reasonable means.
SECTION 8.4 AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS. This
Agreement will be binding upon and inure to the benefit of the Partners and
their respective heirs, successors, assigns, executors, trustees or other legal
representatives, but the rights and obligations of the Partners may not be
Transferred or delegated except as provided in this Agreement, and any attempted
Transfer or delegation of those rights and obligations that is not made in
accordance with the terms of this Agreement will be void.
SECTION 8.5 CHOICE OF LAW; ARBITRATION. (a) Notwithstanding the
location at which this Agreement is executed by any of the Partners, the
Partners expressly agree that all the terms and provisions of this Agreement are
governed by and will be construed under the laws of the State of Delaware,
including the Delaware Act, without regard to the conflict of law principles of
the State of Delaware.
(b) To the extent such action is consistent with the provisions
of the 1940 Act and any other applicable law, except as provided in
SECTION 8.10(B) of this Agreement, each Partner agrees to submit all
controversies arising between or among Partners or one or more Partners
and the Partnership in connection with the Partnership or its
businesses or concerning any transaction, dispute or the construction,
performance or breach of this Agreement or any other agreement relating
to the Partnership, whether entered into prior to, on or subsequent to
the date of this Agreement, to arbitration in accordance with the
provisions set out in this SECTION 8.5. EACH PARTNER UNDERSTANDS THAT
ARBITRATION IS FINAL AND BINDING ON THE PARTNERS AND THAT THE PARTNERS
IN EXECUTING THIS AGREEMENT ARE WAIVING THEIR RIGHTS TO SEEK REMEDIES
IN COURT, INCLUDING THE RIGHT TO JURY TRIAL.
(c) Controversies will be finally settled by, and only by,
arbitration in accordance with the commercial arbitration rules of the
American Arbitration Association (the "AAA") to the fullest extent
permitted by law. The place of arbitration will be Raleigh, North
Carolina. Any arbitration under this SECTION 8.5 will be conducted
before a panel of three arbitrators. The Partner or Partners initiating
arbitration under this SECTION 8.5 will appoint one arbitrator in the
demand for arbitration. The Partner or Partners against whom or which
arbitration is sought will jointly appoint one arbitrator within 30
Business Days after notice from the AAA of the filing of the demand for
arbitration. The two arbitrators nominated by the Partners will attempt
to agree on a third arbitrator within 30 Business Days of the
appointment of the second arbitrator. If the two arbitrators fail to
agree on the third arbitrator within the 30-day period, then the AAA
will appoint the third arbitrator within 30 Business Days following the
expiration of the 30-day period. Any award rendered by the arbitrators
will be final and binding on the Partners, and judgment upon the award
may be entered in the supreme court of the state of New York and/or the
U.S. District Court for the Southern District of New York, or any other
court having jurisdiction over the award or having jurisdiction over
the Partners or their assets. The arbitration
37
agreement contained in this SECTION 8.5 will not be construed to
deprive any court of its jurisdiction to grant provisional relief
(including by injunction or order of attachment) in aid of arbitration
proceedings or enforcement of an award. In the event of arbitration as
provided in this SECTION 8.5, the arbitrators will be governed by and
will apply the substantive (but not procedural) law of Delaware, to the
exclusion of the principles of the conflicts of law of Delaware. The
arbitration will be conducted in accordance with the procedures set out
in the commercial arbitration rules of the AAA. If those rules are
silent with respect to a particular matter, the procedure will be as
agreed by the Partners, or in the absence of agreement among or between
the Partners, as established by the arbitrators. Notwithstanding any
other provision of this Agreement, this SECTION 8.5(C) will be
construed to the maximum extent possible to comply with the laws of the
State of Delaware, including the Uniform Arbitration Act (10 Del. C ss.
5701 et seq.) (the "DELAWARE ARBITRATION ACT"). If, nevertheless, it is
determined by a court of competent jurisdiction that any provision or
wording of this SECTION 8.5(C), including any rules of the AAA, are
invalid or unenforceable under the Delaware Arbitration Act or other
applicable law, such invalidity will not invalidate all of this SECTION
8.5(C). In that case, this SECTION 8.5(C) will be construed so as to
limit any term or provision so as to make it valid or enforceable
within the requirements of the Delaware Arbitration Act or other
applicable law, and, in the event such term or provision cannot be so
limited, this SECTION 8.5(C) will be construed to omit such invalid or
unenforceable provision.
SECTION 8.6 NOT FOR BENEFIT OF CREDITORS. The provisions of this
Agreement are intended only for the regulation of relations among past, existing
and future Partners, their assignees and the Partnership. This Agreement is not
intended for the benefit of non-Partner creditors and, except to the extent
provided in SECTION 3.8 of this Agreement, no rights are granted to non-Partner
creditors under this Agreement.
SECTION 8.7 CONSENTS. Any and all consents, agreements or approvals
provided for or permitted by this Agreement (including minutes of any meeting)
must be in writing and a signed copy of any such consent, agreement or approval
will be filed and kept with the books of the Partnership.
SECTION 8.8 MERGER AND CONSOLIDATION. (a) The Partnership may merge or
consolidate with or into one or more limited partnerships formed under the
Delaware Act or other business entities under an agreement of merger or
consolidation that has been approved in the manner contemplated by the Delaware
Act.
(b) Notwithstanding anything to the contrary in this Agreement,
an agreement of merger or consolidation approved in accordance with the
Delaware Act may, to the extent permitted by the Delaware Act, (1)
effect any amendment to this Agreement, (2) effect the adoption of a
new Partnership agreement for the Partnership if it is the surviving or
resulting limited partnership in the merger or consolidation, or (3)
provide that the Partnership agreement of any other constituent
Partnership to the merger or consolidation (including a limited
partnership formed for the purpose of consummating the merger or
consolidation) will be the Partnership agreement of the surviving or
resulting limited partnership.
(c) The Partnership may convert to another Delaware business
entity in accordance with the Delaware Act upon the approval of the
Partners representing a majority (as defined in the ▇▇▇▇ ▇▇▇) of the
outstanding voting securities of the Partnership.
38
SECTION 8.9 PRONOUNS. All pronouns used in this Agreement will be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the Person or Persons, firm or entity may require in the context in
which they are used.
SECTION 8.10 CONFIDENTIALITY. (a) A Limited Partner may obtain from the
General Partner, upon reasonable demand for any purpose reasonably related to
the Limited Partner's Interest in the Partnership, information regarding the
affairs of the Partnership as is just and reasonable under the Delaware Act,
subject to reasonable standards (including standards governing the information
and documents to be furnished, at what time and location and at whose expense)
established by the General Partner in its sole discretion.
(b) Each Limited Partner agrees in executing this Agreement that,
except as required by applicable law or any regulatory body, the
Limited Partner will not divulge, furnish or make accessible to any
other Person the name or address (whether business, residence or
mailing) of any Limited Partner (collectively, "CONFIDENTIAL
INFORMATION") without the prior written consent of the General Partner,
which consent may be withheld in its sole discretion.
(c) Each Partner recognizes that in the event that this SECTION
8.10 is breached by any Partner or any of its principals, Partners,
members, directors, officers, employees or agents or any of the
Partner's Affiliates, including any of the Affiliate's principals,
Partners, members, directors, officers, employees or agents,
irreparable injury may result to the non-breaching Partners and the
Partnership. In recognition of that irreparable injury, any
non-breaching Partner may have, in addition to any and all other
remedies at law or in equity to which the non-breaching Partner and the
Partnership may be entitled, the right to obtain equitable relief,
including, without limitation, injunctive relief, to prevent any
disclosure of Confidential Information, plus reasonable attorneys' fees
and other litigation expenses incurred in connection with obtaining the
equitable relief. If any non-breaching Partner or the Partnership
("INITIATING NON-BREACHING PARTY") determines that any other Partner or
any of that Partner's principals, Partners, members, directors,
officers, employees or agents or any of the Partner's Affiliates,
including any of the Affiliates' principals, Partners, members,
directors, officers, employees or agents, should be enjoined from or
required to take any action to prevent the disclosure of Confidential
Information, each of the other non-breaching Partners agrees to join
the non-breaching Initiating Non-Breaching Party in pursuing injunctive
relief in a court of appropriate jurisdiction.
(d) The General Partner will have the right to keep confidential
from the Limited Partners, for any period of time as the General
Partner deems reasonable in its sole discretion, any information that
the General Partner reasonably believes to be in the nature of trade
secrets or other information the disclosure of which the General
Partner in good faith believes is not in the best interest of the
Partnership or could damage the Partnership or its business or that the
Partnership is required by law or by agreement with a third party to
keep confidential.
SECTION 8.11 CERTIFICATION OF NON-FOREIGN STATUS. Each Limited Partner
or transferee of an Interest or a portion of an Interest from a Limited Partner
who or that is admitted to the Partnership in accordance with this Agreement
will certify, upon admission to the Partnership and at any other time as the
General Partner may request, whether the Limited Partner or transferee is a
"United States Person" within the meaning of the Code on forms to be provided by
the Partnership, and will notify
39
the Partnership within 30 days of any change in the status of the Limited
Partner or transferee. Any Limited Partner or transferee who or that fails to
provide certification when requested to do so by the General Partner may be
treated as a non-United States Person for purposes of U.S. Federal tax
withholding.
SECTION 8.12 SEVERABILITY. Each Partner agrees that the Partner intends
that, if any provision of this Agreement is determined by a court of competent
jurisdiction or regulatory authority with jurisdiction over the Partnership or
the General Partner not to be enforceable in the manner set out in this
Agreement, then the provision should be enforceable to the maximum extent
possible under applicable law. If any provision of this Agreement is held to be
invalid or unenforceable, the invalidation or unenforceability will not affect
the validity or enforceability of any other provision of this Agreement (or
portion of the provision).
SECTION 8.13 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the Partners pertaining to the subject matter of this Agreement
and supersedes all prior agreements and understandings pertaining to that
subject matter.
Notwithstanding any other provision of this Agreement, including
SECTION 8.1, each Partner, in executing this Agreement, acknowledges
and agrees that the General Partner, on its own behalf or on behalf of
the Partnership, without the approval of the Limited Partners or any
other Person, may enter into a written agreement or agreements with any
other Partner, executed contemporaneously with the admission of the
other Partner to the Partnership, affecting or modifying the terms of,
or establishing rights under, this Agreement or any subscription
agreement. Each Partner agrees that any terms contained in any such
other agreement with another Partner will govern with respect to the
other Partner notwithstanding the provisions of this Agreement or any
subscription agreement, and that the Partner will have no rights in
respect of those granted in favor of such other Partner.
SECTION 8.14 DISCRETION. To the fullest extent permitted by law,
whenever in this Agreement a Person is permitted or required to make a decision
(a) in its "sole discretion" or "discretion" or under a grant of similar
authority or latitude, the Person will be entitled to consider only those
interests and factors as he, she or it desires, including his, her or its own
interests, and, to the fullest extent permitted by law, will have no duty or
obligation to give any consideration to any interest of or factors affecting the
Partnership or the Limited Partners, or (b) in its "good faith" or under another
express standard, then the Person will act under the express standard and will
not be subject to any other or different standards imposed by this Agreement or
any other agreement contemplated by this Agreement or by relevant provisions of
law or in equity or otherwise.
SECTION 8.15 CONFLICTS. The Partners acknowledge and agree that the
General Partner and its Affiliates may engage in activities in which their
respective interests or the interests of their clients may conflict with the
interests of the Partnership or the Limited Partners, and that the resolution of
such conflicts may not always be resolved by the General Partner or its
Affiliates in favor of the Partnership or the Limited Partners.
SECTION 8.16 COUNTERPARTS. This Agreement may be executed in several
counterparts, all of which together will constitute one agreement binding on all
Partners, notwithstanding that all the Partners have not signed the same
counterpart.
40
SECTION 8.17 HEADINGS. The headings in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions of this Agreement or otherwise affect their construction or effect.
[Remainder of Page Intentionally Left Blank]
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IN EXECUTING THIS AGREEMENT, EACH PARTNER ACKNOWLEDGES HAVING READ THIS
AGREEMENT IN ITS ENTIRETY BEFORE SIGNING, INCLUDING THE PRE-DISPUTE ARBITRATION
CLAUSES SET OUT IN SECTION 8.5 AND THE CONFIDENTIALITY CLAUSES SET OUT IN
SECTION 8.10.
The Partners have executed this Agreement as of the day and year first
above written.
GENERAL PARTNER:
HATTERAS INVESTMENT MANAGEMENT LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Member
ORGANIZATIONAL LIMITED PARTNER:
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
LIMITED PARTNERS:
Each Person who or that has
signed, or has had signed
on the Person's behalf, a
Limited Partner Signature
Page, which will constitute
a counterpart of this
Agreement.
