EXHIBIT 99-A(2)
HATTERAS MULTI-STRATEGY TEI INSTITUTIONAL FUND, L.P.
Agreement of Limited Partnership
Dated as of November 29, 2006
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS.................................................... 1
ARTICLE II ORGANIZATION; ADMISSION OF PARTNERS; DIRECTORS................ 6
SECTION 2.1 Formation of Limited Partnership......................... 6
SECTION 2.2 Name..................................................... 7
SECTION 2.3 Principal and Registered Office.......................... 7
SECTION 2.4 Duration................................................. 7
SECTION 2.5 Business of the Partnership.............................. 7
SECTION 2.6 General Partner.......................................... 8
SECTION 2.7 Limited Partners......................................... 8
SECTION 2.8 Organizational Limited Partner........................... 8
SECTION 2.9 Both General and Limited Partner......................... 8
SECTION 2.10 Limited Liability........................................ 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............................................. 16
SECTION 3.8 Indemnification.......................................... 17
SECTION 3.9 Fees, Expenses and Reimbursement......................... 19
ARTICLE IV TERMINATION OF STATUS OF GENERAL PARTNER; REMOVAL OF GENERAL
PARTNER; TRANSFERS AND REPURCHASES............................ 21
SECTION 4.1 Termination of Status of General Partner................. 21
SECTION 4.2 Removal of General Partner............................... 21
SECTION 4.3 Transfer of Interest of General Partner.................. 21
SECTION 4.4 Transfer of Interests of Limited Partners................ 22
SECTION 4.5 Repurchase of Interests.................................. 23
TABLE OF CONTENTS
(continued)
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ARTICLE V CAPITAL........................................................ 27
SECTION 5.1 Contributions to Capital................................. 27
SECTION 5.2 Rights of Partners to Capital............................ 28
SECTION 5.3 Capital Accounts......................................... 28
SECTION 5.4 Allocation of Net Profit and Loss........................ 29
SECTION 5.5 Allocation of Certain Withholding Taxes and Other
Expenditures............................................. 29
SECTION 5.6 Performance Incentive.................................... 29
SECTION 5.7 Reserves................................................. 30
SECTION 5.8 Allocation to Avoid Capital Account Deficits............. 30
SECTION 5.9 Allocations Prior to Closing Date........................ 31
SECTION 5.10 Tax Allocations.......................................... 31
SECTION 5.11 Distributions............................................ 32
ARTICLE VI DISSOLUTION AND LIQUIDATION................................... 32
SECTION 6.1 Dissolution.............................................. 32
SECTION 6.2 Liquidation of Assets.................................... 33
ARTICLE VII ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS................. 34
SECTION 7.1 Accounting and Reports................................... 34
SECTION 7.2 Determinations by General Partner........................ 35
SECTION 7.3 Valuation of Assets...................................... 35
ARTICLE VIII MISCELLANEOUS PROVISIONS.................................... 36
SECTION 8.1 Amendment of Partnership Agreement....................... 36
SECTION 8.2 Special Power of Attorney................................ 37
SECTION 8.3 Notices.................................................. 39
SECTION 8.4 Agreement Binding Upon Successors and Assigns............ 39
SECTION 8.5 Choice of Law; Arbitration............................... 39
SECTION 8.6 Not for Benefit of Creditors............................. 40
SECTION 8.7 Consents................................................. 40
SECTION 8.8 Merger and Consolidation................................. 40
SECTION 8.9 Pronouns................................................. 41
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TABLE OF CONTENTS
(continued)
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SECTION 8.10 Confidentiality.......................................... 41
SECTION 8.11 Certification of Non-Foreign Status...................... 42
SECTION 8.12 Severability............................................. 42
SECTION 8.13 Entire Agreement......................................... 42
SECTION 8.14 Discretion............................................... 42
SECTION 8.15 Conflicts................................................ 43
SECTION 8.16 Counterparts............................................. 43
SECTION 8.17 Headings................................................. 43
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HATTERAS MULTI-STRATEGY TEI INSTITUTIONAL FUND, L.P.
AGREEMENT OF LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP of HATTERAS MULTI-STRATEGY TEI
INSTITUTIONAL FUND, L.P. (the "Partnership") dated as of November 29, 2006 by
and among HATTERAS INVESTMENT MANAGEMENT LLC, as General Partner, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, as the Organizational Limited Partner and those Persons who execute
this Agreement and whose names are reflected on the books and records of the
Partnership as Limited Partners.
ARTICLE I
DEFINITIONS
For purposes of this Agreement:
"1933 Act" means the Securities Act of 1933 and the rules, regulations and
orders under the 1933 Act, as amended from time to time, or any successor law.
"1940 Act" means the Investment Company Act of 1940 and the rules,
regulations and orders under the 1940 Act, as amended from time to time, or any
successor law.
"Advisers Act" means the Investment Advisers Act of 1940 and the rules,
regulations and orders under the Advisers Act, as amended from time to time, or
any successor law.
"Advisor" means any Person designated to manage a portion of the assets of
the Partnership and/or the Master Partnership, either directly or through the
investment by the Partnership in an Advisor Fund.
"Advisor Account" means an account directly managed by an Advisor for the
Partnership or the Master Partnership.
"Advisor Fund" means an investment company, a general or limited
partnership, a limited liability company or other pooled investment vehicle in
which the Partnership or the Master Partnership has invested and that is advised
by an Advisor; whether or not, in each case, the entity is registered under the
1940 Act, and includes the Master Partnership and Advisor Funds that may be
formed by the Partnership.
"Affiliate" means affiliated person as that term is defined in the 1940
Act.
"Agreement" means this Agreement of Limited Partnership, as amended and/or
restated from time to time..
"Board of Directors" means the board of the Directors who have been
delegated the authority described in this Agreement.
"Business Day" means any day when the New York Stock Exchange is open for
business.
"Capital Account" means, with respect to each Partner, the capital account
established and maintained on behalf of the Partner in accordance with Section
5.3 of this Agreement.
"Capital Contribution" means the contribution, if any, made, or to be made,
as the context requires, to the capital of the Partnership, after giving effect
to any applicable placement agent fees, by a Partner or former Partner, as the
case may be.
"Certificate" means the Certificate of Limited Partnership of the
Partnership as filed with the office of the Secretary of State of the State of
Delaware on July 20, 2006 and any amendments to the Certificate and/or
restatements of the Certificate as filed with the office of the Secretary of
State of the State of Delaware pursuant to this Agreement.
"Closing Date" means the first date on or as of which a Limited Partner
other than the Organizational Limited Partner is admitted to the Partnership.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor law.
"Commodity Exchange Act" means the Commodity Exchange Act and the rules,
regulations and orders under the Commodity Exchange Act, as amended from time to
time, or any successor law.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
as amended from time to time, or any successor law.
"Directors" means those natural Persons designated as "Directors" in
accordance with this Agreement who are delegated the authority provided for in
this Agreement and includes ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as the initial Director, or any
other natural Persons who, from time to time after the date of this Agreement,
become Directors in accordance with the terms and conditions of this Agreement.
"Fiscal Period" means the period commencing on the Closing Date, and
thereafter each period commencing on the day immediately following the last day
of the immediately preceding Fiscal Period, and ending in each case at the close
of business on the first to occur of the following dates:
(1) the last day of any calendar quarter, including the last day of
the calendar year;
(2) the day preceding the date as of which a contribution to the
capital of the Partnership is made by any Partner in accordance with
Section 5.1 of this Agreement;
(3) the day on which the Partnership repurchases the Interest or
portion of the Interest of any Partner in accordance with Section 4.5 of
this Agreement;
(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
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Transfer of the Interest or portion of the Interest results in no change of
beneficial ownership of the Interest or portion of the Interest);
(5) the day as of which any amount is credited to or debited against
the Capital Account of any Partner, other than an amount that is credited
to or debited against the Capital Accounts of all Partners in accordance
with their respective Investment Percentages; or
(6) December 31, or any other date that is the last day of the taxable
year of the Partnership.
"Fiscal Year" means the period commencing on the Closing Date and ending on
March 31, 2007, and thereafter each period commencing on April 1 of each year
and ending on March 31 of that year (or on the date of a final distribution made
in accordance with Section 6.2 of this Agreement), unless the Directors
designate another fiscal year for the Partnership. The taxable year of the
Partnership will end on December 31 of each year, or on any other date
designated by the General Partner that is a permitted taxable year-end for tax
purposes.
"Form N-2" means the Partnership's Registration Statement on Form N-2 filed
with the Securities and Exchange Commission, as amended from time to time.
"General Partner" means Hatteras Investment Management LLC, a limited
liability company formed under the laws of the State of Delaware, and any other
Person or Persons admitted to the Partnership as a general partner of the
Partnership, collectively, in their capacities as general partners of the
Partnership, and "General Partner" means any of the General Partners. When the
term General Partner is used in this Agreement and the Partnership has more than
one General Partner, the term "General Partner" will refer to each General
Partner.
"Hurdle Rate" means, with respect to the Incentive Period, that rate
determined from time to time by the Directors and approved in the manner
contemplated by the 1940 Act, such rate initially to be the yield-to-maturity of
the 90-day U.S. Treasury ▇▇▇▇ as reported by the Wall Street Journal for the
last business day of the preceding calendar year of the Partnership. Hurdle
Rates will not be cumulative and will be recalculated with respect to each
Incentive Period. The Hurdle Rate for a given Incentive Period will be adjusted
with respect to any contributions, transfers, distributions, withdrawals and
repurchases applicable to a Limited Partner's Capital Account for that Incentive
Period, or portion thereof.
"Hurdle Rate Amount" means, with respect to each Limited Partner, an amount
equal to the balance of the Limited Partner's Capital Account as of the first
day of the applicable Incentive Period, multiplied by the Hurdle Rate.
"Incentive Period" means, with respect to a Partner's Interest, a single
Sub-Period or multiple consecutive Sub-Periods. Both the Incentive Period and
the last Sub-Period within the Incentive Period will terminate at the close of
business on the earliest occurrence of: (1) the last day of the calendar year;
(2) the date immediately prior to the effective date of a full Transfer of
Interests; or (3) the date on which the Partnership dissolves.
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"Independent Directors" mean those Directors who are not "interested
persons" of the Partnership as that term is defined in the 1940 Act.
"Interest" means the entire partnership interest in the Partnership at any
particular time of a Partner or other Person to whom or which an Interest or
portion of an Interest has been Transferred in accordance with Section 4.3 or
4.4 of this Agreement, including the rights and obligations of the Partner or
other Person under this Agreement and the Delaware Act.
"Investment Percentage" means a percentage established for each Partner on
the Partnership's books as of the first day of each Fiscal Period. The
Investment Percentage of a Partner for a Fiscal Period will be determined by
dividing the balance of the Partner's Capital Account as of the commencement of
the Fiscal Period by the sum of the Capital Accounts of all of the Partners as
of the commencement of the Fiscal Period. The sum of the Investment Percentages
of all Partners for each Fiscal Period will equal 100%.
"Limited Partner" means any Person admitted to the Partnership as a Limited
Partner of the Partnership (including any Person who or that is a General
Partner when acting in the Person's capacity as a Limited Partner) until the
Partnership repurchases the entire Interest of the Person as a Limited Partner
in accordance with Section 4.5 of this Agreement, or a substituted Limited
Partner or Partners are admitted with respect to the Person's entire Interest as
a Limited Partner in accordance with Section 4.4 of this Agreement, in the
Person's capacity as a Limited Partner of the Partnership. For purposes of the
Delaware Act, the Limited Partners will constitute a single class or group.
"Loss Carryforward Amount" means, with respect to any Incentive Period, and
to the extent not subsequently offset by allocations of profits or otherwise
reduced, as described in this paragraph, the excess of: (1) a Limited Partner's
allocable share of Net Losses calculated in accordance with Section 5.4 of this
Agreement (excluding amounts previously allocated to repurchased or distributed
portions of the Capital Account during the Incentive Period) over (2) the
Partner's allocable share of Net Profits calculated in accordance with Section
5.4 of this Agreement (excluding amounts previously allocated to repurchased or
distributed portions of the Capital Account during the Incentive Period), in
each case for the current and any prior Incentive Periods. If at the end of any
subsequent Incentive Period, profits allocated to a Limited Partner's Capital
Account exceed the losses allocated during that period (excluding profits and
losses previously taken into account for this purpose by reason of a partial
repurchase or distribution during that period), any Loss Carryforward Amount for
such Partner will be reduced (but not below zero) by the amount of the excess.
In addition, if any Limited Partner participates in a repurchase or receives a
distribution after a Loss Carryforward Amount has been established for the
Limited Partner, the Limited Partner's Loss Carryforward Amount will be reduced
on a proportionate basis by the amount by which the repurchase or distribution
bears to the Limited Partner's total Capital Account. No transferee may succeed
to any portion of the Loss Carryforward Amount applicable to the Transferring
Limited Partner unless the Transfer of the Interest or portion of the Interest
results in no change in beneficial ownership in the Interest or portion of the
Interest. The Loss Carryforward Amount for a given Incentive Period will be
adjusted with respect to any contributions, transfers, distributions,
withdrawals and repurchases applicable to the Limited Partner's Capital Account
for that Incentive Period, or portion thereof.
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"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 TEI Institutional Fund, L.P.
and any partnership continuing the business of the Partnership after dissolution
as provided in this Agreement.
"Partnership Return", with respect to each Incentive Period applicable to a
Limited Partner, is determined by dividing: (a) the excess of the Limited
Partner's allocable share of Net Profits calculated in accordance with Section
5.4 of this Agreement (including amounts previously allocated to repurchased or
distributed portions of the Limited Partner's Capital Account during the
Incentive Period), over the Limited Partner's allocable share of Net Losses
calculated in accordance with Section 5.4 of this Agreement (including amounts
previously allocated to repurchased or distributed portions of the Limited
Partner's Capital Account during the Incentive Period) by (b) the Limited
Partner's Capital Account balance as of the opening of business of the first day
of that Incentive Period. The Partnership Return, for a given Incentive Period,
will be adjusted with respect to any contributions, transfers, distributions,
withdrawals and repurchases applicable to the Limited Partner's Capital Account
for that Incentive Period, or portion thereof.
"Performance Incentive" means, with respect to each Limited Partner, 10% of
the amount, determined as of the close of each Incentive Period, if any, of (1)
the Limited Partner's allocable share of Net Profits calculated in accordance
with Section 5.4 of this Agreement
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(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.
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
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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
TEI Institutional Fund, L.P." or any other name that the General Partner may
adopt after the date of this Agreement upon (a) causing an appropriate amendment
to this Agreement to be executed and to the Certificate to be filed in
accordance with the Delaware Act and (b) sending notice of the amendment to each
Limited Partner.
Section 2.3 Principal and Registered Office. The Partnership will have its
principal office at the principal office of the General Partner or at any other
place designated from time to time by the General Partner. The Partnership's
registered agent in the State of Delaware shall be The Corporation Trust
Company, and the Partnership's registered office in the State of Delaware at
Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ unless
the General Partner designates a different registered agent or office from time
to time in accordance with the Delaware Act.
Section 2.4 Duration. The term of the Partnership will commence on the
filing of the Certificate and will continue until the Partnership is dissolved
and wound up and the Certificate is canceled in accordance with Section 6.1 of
this Agreement.
Section 2.5 Business of the Partnership. (a) The business of the
Partnership is to purchase, sell, invest and trade in Securities and engage in
any financial or derivative transactions relating to Securities. Portions of the
Partnership's assets (which may constitute, in the aggregate, all of the
Partnership's assets) may be invested in Advisor Funds or Advisor Accounts that
invest and trade in Securities or in separate managed accounts through which the
Partnership may invest and trade in Securities, some or all of which may be
advised by one or more Advisors. The Partnership may invest some or all of its
assets directly or indirectly in the Master Partnership. The Partnership may
execute, deliver and perform all contracts, agreements and other undertakings
and engage in all activities and transactions as the General Partner, the
Directors or the Investment Manager may deem necessary or advisable to carry out
its objective or business.
(b) The Partnership will operate as a closed-end, management investment
company in accordance with the 1940 Act and subject to any fundamental
policies and investment restrictions described in the Form N-2.
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(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.
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
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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 his or her successor shall have
been elected and shall have qualified, or until his or her status as a
Director is terminated sooner in accordance with Section 2.11(d) of this
Agreement. Except to the extent the 1940 Act requires election by Limited
Partners, if any vacancy in the position of a Director occurs, including by
reason of an increase in the number of Directors as contemplated by Section
2.11(a) of this Agreement, the remaining Directors may appoint an
individual to serve in that capacity in accordance with the provisions of
the 1940 Act. An Independent Director will be replaced by another
Independent Director selected and nominated by the remaining Independent
Directors, or in a manner otherwise permissible under the 1940 Act.
(c) If no Director remains, the General Partner will promptly call a
meeting of the Partners, to be held within 60 days after the date on which
the last Director ceased to act in that capacity, for the purpose of
determining whether to continue the business of the Partnership and, if the
business is to be continued, approving the appointment of the requisite
number of Directors. If the Partners determine at the meeting not to
continue the business of the Partnership, or if the approval of the
appointment of the requisite number of Directors is not approved within 60
days after the date on which the last Director ceased to act in that
capacity, then the Partnership will be dissolved in accordance with Section
6.1 of this Agreement and the assets of the Partnership will be liquidated
and distributed in accordance with Section 6.2 of this Agreement.
(d) The status of a Director will terminate (1) if the Director dies; (2)
if the Director resigns as a Director; or (3) if the Director is removed in
accordance with Section 2.11(e) of this Agreement.
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(e) Any Director may be removed with or without cause by a vote of a
majority of the other Directors or by the vote or written consent of
Limited Partners holding not less than two-thirds of the total number of
votes eligible to be cast by all Limited Partners.
(f) The Directors may establish and maintain committees of the Board of
Directors, and the Directors may grant to such committees the authority to,
among other things: value the assets of the Partnership; select and
nominate the Independent Directors of the Partnership; recommend to the
Board of Directors the compensation to be paid to the Independent
Directors; and recommend to the Board of Directors the firm of certified
public accountants that will conduct the Partnership's audits.
(g) The Directors may establish or designate committees of the Board of
Directors or the Partnership, whose members may include the Directors
and/or other Persons who are not Directors, to provide advice and other
services to the Partnership, which committees may include (but are not
limited to) a committee that will value the assets of the Partnership.
(h) The Independent Directors will receive compensation for their services
as Independent Directors, as determined by the Board of Directors.
ARTICLE III
MANAGEMENT; ADVICE AND MANAGEMENT
Section 3.1 Management and Control. (a) The General Partner delegates to
the Directors those rights and powers of the General Partner necessary for the
Directors to manage and control the business affairs of the Partnership and to
carry out their oversight obligations with respect to the Partnership required
under the 1940 Act, state law, and any other applicable laws or regulations.
Rights and powers delegated to the Directors include, without limitation, the
authority as Directors to oversee and to establish policies regarding the
management, conduct and operation of the Partnership's business, and to do all
things necessary and proper as Directors to carry out the objective and business
of the Partnership, including, without limitation, the power to engage an
investment manager to provide advice and management and to remove such an
investment manager, as well as to exercise any other rights and powers expressly
given to the Directors under this Agreement. The Partners intend that, to the
fullest extent permitted by law, and except to the extent otherwise expressly
provided in this Agreement, (1) each Director is vested with the same powers and
authority on behalf of the Partnership as are customarily vested in each
director of a Delaware corporation and (2) each Independent Director is vested
with the same powers and authority on behalf of the Partnership as are
customarily vested in each director who is not an "interested person" (as that
term is defined in the ▇▇▇▇ ▇▇▇) of a closed-end, management investment company
registered under the 1940 Act that is organized as a Delaware corporation.
During any period in which the Partnership has no Directors, the General Partner
will manage and control the Partnership. Each Director will be the agent of the
Partnership but will not, for any purpose, be a General Partner. Notwithstanding
the delegation described in this Section 3.1(a), the General Partner will not
cease to be the General Partner and will continue to be liable as such and in no
event will a Director be considered a General Partner by agreement, estoppel or
otherwise as a result of the performance of his or her duties under this
Agreement or otherwise. The General Partner retains those rights, powers and
duties that have
10
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;
11
(3) to engage and terminate attorneys, accountants (subject to the
provisions of the ▇▇▇▇ ▇▇▇) and other professional advisers and consultants
as the General Partner deems necessary or advisable in connection with the
affairs of the Partnership or as may be directed by the Directors;
(4) to act as tax matters Partner in accordance with Section 3.1(c) of
this Agreement, and to assist in the preparation and filing of any required
tax or information returns to be made by the Partnership;
(5) as directed by the Directors, to commence, defend and conclude any
action, suit, investigation or other proceeding that pertains to the
Partnership or any assets of the Partnership;
(6) as directed by the Directors, to arrange for the purchase of any
insurance covering the potential liabilities of the Partnership or relating
to the performance of the Directors, the General Partner, any investment
manager engaged pursuant to Section 3.1(a) of this Agreement or any of
their principals, Partners, directors, officers, members, employees and
agents;
(7) to execute, deliver and perform any contracts, agreements and
other undertakings, and to engage in activities and transactions that are
necessary or appropriate for the conduct of the business of the Partnership
and to bind the Partnership by those contracts, agreements, and other
undertakings, provided that any persons approved as officers of the
Partnership pursuant to Section 3.3(c) of this Agreement, as directed by
the Directors, may execute and deliver contracts and agreements on behalf
of the Partnership and bind the Partnership to those contracts and
agreements;
(8) to make determinations regarding subscriptions for and/or the
Transfer of Interests, including, without limitation, determinations
regarding the suspension of subscriptions, and to execute, deliver and
perform subscription agreements, placement agency agreements relating to
the placement of Interests, administration agreements appointing an
administrator to perform various administrative action on behalf of the
Partnership, escrow agreements and custodial agreements without the consent
of or notice to any other Person, notwithstanding any other provision of
this Agreement;
(9) to make determinations regarding appropriate reserves to be
created for the contingent, conditional or unmatured liabilities of the
Partnership;
(10) as provided in Section 7.2 of this Agreement, to make
determinations regarding adjustments to the computation of Net Profit or
Net Loss and allocations among the Partners under Article V of this
Agreement;
(11) to manage or oversee the general administrative and operational
aspects of the Partnership; and
(12) as directed by the Directors, to establish additional classes of
Limited Partners, General Partners, or Interests having separate rights,
powers, or duties with respect to specified property or obligations of the
Partnership or profits or losses
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associated with specified property or obligations of the Partnership, and
having separate business purposes or investment objectives as the Directors
may determine, consistent with the 1940 Act and the Delaware Act, so long
as the assets and liabilities of one class is limited to the assets and
liabilities of such class.
Section 3.3 Actions by Directors. (a) Unless provided otherwise in this
Agreement, the Directors will act only: (1) by the affirmative vote of a
majority of the Directors (which majority will include any requisite number of
Independent Directors required by the ▇▇▇▇ ▇▇▇) present at a meeting duly called
at which a quorum of the Directors is present either in person or, to the extent
consistent with the provisions of the 1940 Act, by conference telephone or other
communications equipment by means of which all Persons participating in the
meeting can hear each other; or (2) by unanimous written 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
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constitute a quorum at any meeting of Partners. In the absence of a quorum, a
meeting may be adjourned to the time or times as determined by the General
Partner and communicated to the Directors in the manner described above in this
Section 3.4(a). Except as otherwise required by any provision of this Agreement
or of the 1940 Act, (1) those candidates receiving a plurality of the votes cast
at any meeting of Partners called pursuant to Section 2.11(c) of this Agreement
or elected pursuant to the requirement of Section 2.11(b) will be elected as
Directors and (2) all other actions of the Partners taken at a meeting will
require the affirmative vote of Partners holding a majority of the total number
of votes eligible to be cast by those Partners who are present in person or by
proxy at the meeting.
(b) Each Partner will be entitled to cast at any meeting of Partners or
pursuant to written consent a number of votes equivalent to the Partner's
Investment Percentage as of the record date for the meeting or the date of
the written consent. The General Partner will establish a record date not
less than 10 nor more than 60 days prior to the date of any meeting of
Partners 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
14
custodian(s), as may be engaged from time to time, pursuant to Section
17(f) of the 1940 Act and the rules thereunder, and no person shall be
authorized or permitted to have access to such securities except in
accordance with Section 17(f) of the 1940 Act and the rules thereunder, and
consistent with the terms of the Partnership's agreement with the relevant
Partnership custodian.
Section 3.6 Other Activities. (a) Neither the General Partner nor its
principals, Partners, directors, officers, members, employees and beneficial
owners nor the Directors will be required to devote full time to the affairs of
the Partnership, but each will devote such time as each may reasonably be
required to perform its obligations under this Agreement and under the ▇▇▇▇ ▇▇▇.
(b) The Directors, any Partner, and any Affiliate of any Partner may engage
in or possess an interest in other business ventures or commercial dealings
of every kind and description, independently or with others, including, but
not limited to, acquisition and disposition of Securities, provision of
investment advisory or brokerage services, serving as directors, officers,
employees, advisors or agents of other companies, Partners of any
Partnership, members of any limited liability company, or trustees of any
trust, or entering into 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.
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Section 3.7 Duty of Care. (a) The Directors and the General Partner,
including any officer, director, Partner, member, principal, employee or agent
of any of them, will not be liable to the Partnership or to any of its Partners
for any loss or damage occasioned by any act or omission in the performance of
the Person's services under this Agreement, in the absence of a final judicial
decision on the merits from which no further right to appeal may be taken that
the loss is due to an act or omission of the Person constituting willful
misfeasance, bad faith, gross negligence or reckless disregard of the Person's
duties under this Agreement.
(b) No Director who has been designated an "audit committee financial
expert" (for purposes of Section 407 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 or
any successor provision thereto, and any rules issued thereunder by the
SEC) in the Partnership's Form N-2 or other reports required to be filed
with the SEC shall be subject to any greater duty of care in discharging
such Director's duties and responsibilities by virtue of such designation
than is any Director who has not been so designated.
(c) Limited Partners not in breach of any obligation under this Agreement
or under any agreement pursuant to which the Limited Partner subscribed for
Interests will be liable to the Partnership, any Partner or third parties
only as required by this Agreement or applicable law.
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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.
17
(c) As to the disposition of any action, suit, investigation or other
proceeding (whether by a compromise payment, pursuant to a consent decree
or otherwise) without an adjudication or a decision on the merits by a
court, or by any other body before which the proceeding has been brought,
that an indemnitee is liable to the Partnership or its Partners by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard
of the duties involved in the conduct of the indemnitee's office,
indemnification will be provided in accordance with Section 3.8(a) of this
Agreement if (1) approved as in the best interests of the Partnership by a
majority of the Independent Directors (excluding any Director who is either
seeking indemnification under this Agreement or is or has been a party to
any other action, suit, investigation or proceeding involving claims
similar to those involved in the action, suit, investigation or proceeding
giving rise to a claim for indemnification under this Agreement) upon a
determination, based upon a review of readily available facts (as opposed
to a full trial-type inquiry), that the indemnitee acted in good faith and
in the reasonable belief that the actions 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.
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(f) The rights of indemnification provided in this Section 3.8 will not be
exclusive of or affect any other rights to which any Person may be entitled
by contract or otherwise under law. Nothing contained in this Section 3.8
will affect the power of the Partnership to purchase and maintain liability
insurance on behalf of any General Partner, any Director, the Investment
Manager or other Person.
(g) The General Partner may enter into agreements indemnifying Persons
providing services to the Partnership to the same, lesser or greater extent
as set out in this Section 3.8.
Section 3.9 Fees, Expenses and Reimbursement.
(a) So long as the Partnership invests all of its investable assets in the
Master Partnership, the Partnership will not directly pay a management fee;
however, the Fund's Partners bear an indirect share of the Master
Partnership's management fee through the Partnership's investment in the
Master Partnership. The amount of the Partnership's share of the Management
Fee will be charged pro rata to the Capital Account of each Limited Partner
based on the value of the Capital Account of each Limited Partner as of the
end of business of the first Business Day of each fiscal quarter, after
adjustment for any subscriptions effective on that date and before giving
effect to any repurchase of interests in the Partnership or portions of
interests in the Partnership effective as of that date. The Partnership's
share will be due and payable in advance within five Business Days after
the beginning of each fiscal quarter.
(b) The Partnership will compensate each Independent Director for his or
her services rendered in connection with the Partnership as may be agreed
to by the Independent Directors and the General Partner, and as described
in the Memorandum. In addition, the Partnership will reimburse the
Directors for reasonable out-of-pocket expenses incurred by them in
performing their duties with respect to the Partnership.
(c) The Partnership will bear all expenses incurred in connection with its
business. Expenses to be borne by the Partnership include, but are not
limited to, the following:
(1) The Partnership's pro rata share of the management fee, and other
fees and expenses, of the Master Partnership;
(2) all investment-related expenses, including, but not limited to,
fees paid and expenses reimbursed, directly or indirectly, to Advisors
(including management fees, performance or incentive fees or
allocations and redemption or withdrawal fees, however titled or
structured), all costs and expenses directly related to portfolio
transactions and positions for the Partnership's account, such as
direct and indirect expenses associated with the Partnership's
investments, including its investments in Advisor Funds (whether or
not consummated), and enforcing the Partnership's rights in respect of
such investments, transfer taxes and premiums, taxes withheld on
non-U.S. dividends, costs and fees for data and software (including
software providers and dedicated software employed by the Partnership
and designed to assist an investment manager to keep track of the
19
investments in the Advisor Funds and Advisor Accounts), research
expenses, professional fees (including, without limitation, the fees
and expenses of consultants, attorneys and experts) and, if
applicable, in connection with the Partnership's temporary or cash
management investments, brokerage commissions, interest and commitment
fees on loans and debit balances, borrowing charges on Securities sold
short, dividends on Securities sold but not yet purchased and margin
fees;
(3) costs associated with the registration of the Partnership,
including the costs of compliance with any applicable U.S. federal and
state laws;
(4) an investor servicing fee to be paid to the investor servicing
agent, if any;
(5) any non-investment-related interest expense;
(6) attorneys' fees and disbursements associated with preparing and
updating any Offering Materials and with reviewing subscription
materials in connection with qualifying prospective investors or
prospective holders of Transferred Interests;
(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;
20
(15) the Fund's proportionate share of the fees and expenses of the
Master Partnership and the fees and expenses of the Advisor Funds and
Advisor Accounts (borne indirectly by the Fund through its investment
in the Master Partnership);
(16) any other expenses as may be approved from time to time by the
Directors, other than those required to be borne by an investment
manager or the General Partner; and
(17) the organizational and offering expenses of the Partnership which
will initially be borne by Hatteras Investment Partners, LLC or an
affiliate thereof and will be expensed by the Partnership upon
commencement of operations. The Partnership will account for these
expenditures, through monthly expense allocations (or at such other
frequency or times as the Board of Directors may direct) to Limited
Partners' Capital Accounts, for a period not to exceed the first sixty
months after the Closing Date. The amount of each such expense
allocation to the Limited Partners' Capital Accounts will be
determined by the Directors and Hatteras Investment Partners, LLC and
will equal an amount sufficient to reimburse the Investment Manager or
affiliate thereof within a sixty-month period.
(d) The General Partner will be entitled to reimbursement from the
Partnership for any of the above expenses that it pays on behalf of the
Partnership, other than as provided in Section 3.9(c)(14) above.
ARTICLE IV
TERMINATION OF STATUS OF GENERAL PARTNER;
REMOVAL OF GENERAL PARTNER; TRANSFERS AND REPURCHASES
Section 4.1 Termination of Status of General Partner. A General Partner
will cease to be a general partner of the Partnership if the General Partner (a)
is dissolved or otherwise terminates its existence; (b) voluntarily withdraws as
General Partner (which it may do at any time in its sole discretion); (c) is
removed; (d) Transfers its entire Interest as General Partner as permitted under
Section 4.3 of this Agreement and the Person to which the Interest is
Transferred is admitted as a substituted General Partner under Section 2.6(a) of
this Agreement; or (e) otherwise ceases to be a General Partner under the
Delaware Act.
Section 4.2 Removal of General Partner. Any General Partner may be removed
by the vote or written consent of Partners holding not less than 80% of the
total number of votes eligible to be cast by all Partners.
Section 4.3 Transfer of Interest of General Partner. A General Partner may
not Transfer all or any portion of its Interest as the General Partner except to
Persons who have agreed to be bound by all of the terms of this Agreement and
applicable law. If a General Partner Transfers its entire Interest as General
Partner, it will not cease to be a General Partner unless and until the
transferee is admitted to the Partnership as a substituted General Partner
pursuant to Section
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2.6(a) of this Agreement. In executing this Agreement, each Partner is deemed to
have consented to any Transfer contemplated by this Section 4.3.
Section 4.4 Transfer of Interests of Limited Partners. (a) Any Interest or
portion of any Interest held by a Limited Partner may be Transferred only (1) by
operation of law pursuant to the death, bankruptcy, insolvency, adjudicated
incompetence, or dissolution of the Limited Partner; or (2) under certain
limited instances set out in this Agreement, with the written consent of the
General Partner (which may be withheld in the General Partner's sole and
absolute discretion). Unless the Partnership consults with legal counsel to the
Partnership and counsel confirms that the Transfer will not cause the
Partnership to be treated as a "publicly traded partnership" taxable as a
corporation, however, the General Partner may not consent to a Transfer unless
the following conditions are met: (i) the Transferring Limited Partner has been
a Limited Partner for at least six months; (ii) the proposed Transfer is to be
made on the effective date of an offer by the Partnership to repurchase
Interests; and (iii) the Transfer is (A) one in which the tax basis of the
Interest in the hands of the transferee is determined, in whole or in part, by
reference to its tax basis in the hands of the Transferring Limited Partner
(e.g., certain Transfers to affiliates, gifts and contributions to family
entities), (B) to members of the Transferring Limited Partner's immediate family
(siblings, spouse, parents and children), or (C) a distribution from a qualified
retirement plan or an individual retirement account. In addition, the General
Partner may not consent to a Transfer unless the Person to whom or which an
Interest or portion of an Interest is Transferred (or each of the Person's
equity owners if the Person is a "private investment company" as defined in Rule
205-3(d)(3) under the Advisers Act, an investment company registered under the
1940 Act, or a business development company as defined under the Advisers Act)
is a Person 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
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Interest or portion of an Interest, the Partnership may require the Limited
Partner requesting the Transfer to obtain, at the Limited Partner's expense, an
opinion of counsel selected by the General Partner as to such matters as the
General Partner may reasonably request. If a Limited Partner Transfers its
entire Interest as a Limited Partner, it will not cease to be a Limited Partner
unless and until the transferee is admitted to the Partnership as a substituted
Limited Partner in accordance with this Section 4.4(a).
(b) Each Limited Partner will indemnify and hold harmless the Partnership,
the General Partner, the Directors, each other Limited Partner and any
Affiliate of the Partnership, the General Partner (including, without
limitation, Hatteras Investment Partners, LLC), the Director and each of
the other Limited Partners against all losses, claims, damages,
liabilities, costs and expenses (including legal or other expenses incurred
in investigating or defending against any losses, claims, damages,
liabilities, costs and expenses or any judgments, fines and amounts paid in
settlement), joint or several, to which these Persons may become subject by
reason of or arising from (1) any Transfer made by the Limited Partner in
violation of this Section 4.4(b) and (2) any misrepresentation by the
Transferring Limited Partner or substituted Limited Partner in connection
with the Transfer. A Limited Partner Transferring an Interest may be
charged reasonable expenses, including attorneys' and accountants' fees,
incurred by the Partnership in connection with the Transfer.
Section 4.5 Repurchase of Interests. (a) Except as otherwise provided in
this Agreement, no Partner or other Person holding an Interest or portion of an
Interest will have the right to withdraw or tender an Interest or portion of an
Interest to the Partnership for repurchase. The Directors may, from time to
time, in their complete and exclusive discretion and on terms and conditions as
they may determine, cause the Partnership to repurchase Interests or portions of
Interests in accordance with written tenders. The Partnership will not offer,
however, to repurchase Interests or portions of Interests 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;
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(7) existing conditions of the securities markets and the economy
generally, as well as political, national or international
developments or current affairs;
(8) the anticipated tax consequences to the Partnership of any
proposed repurchases of Interests or portions of Interests; and
(9) the recommendations of the General Partner.
The Directors will cause the Partnership to repurchase Interests or portions of
Interests in accordance with written tenders only on terms fair to the
Partnership and to all Partners and Persons holding Interests or portions of
Interests acquired from Partners.
(b) Upon the commencement of an offer to repurchase Interests, the
Partnership will send an advance notification of the offer (the "Notice")
to the Partners via their financial intermediaries. The Notice will
specify, among other things:
(1) the percentage of Interests that the Partnership is offering to
repurchase;
(2) the date on which a Partner's repurchase request is due;
(3) the Valuation Date (as defined in Section 4.5(d) below) applicable
to the repurchase offer;
(4) the date the proceeds from their Interest sales shall be due to
the Partners; and
(5) the value of the Interests as of the date of the Notice.
(c) Each repurchase offer will be limited to the repurchase of
approximately 5% of the Interests (but in no event to exceed the repurchase
of more than 20% of the Interests per quarter). A Partner who has been a
Partner for less than 12 consecutive months prior to the Valuation Date of
such repurchase offer, may participate in such offer subject to a penalty
of up to 5% of the amount requested to be repurchased (to be netted against
withdrawal proceeds). The minimum value of a repurchase is $50,000, subject
to the discretion of the General Partner to allow otherwise. A Partner
whose Interest, or a portion thereof, is repurchased by the Partnership
will not be entitled to a return of any placement fee that was charged in
connection with the Partner's purchase of the Interest.
(d) Interests are expected to be repurchased at their net asset value
determined as of approximately June 30, September 30, December 31 and March
31, as applicable (each such date, a "Valuation Date"). Partners tendering
Interests for repurchase shall provide written notice of their intent to so
tender by the date specified in the Notice, which date shall be
approximately 65 days prior to the date of repurchase by the Partnership.
Partners tendering their Interests may not have all such Interests accepted
for repurchase by the Partnership. The Partnership may elect to repurchase
less than the full amount a Partner requests to be repurchased. If a
repurchase offer is oversubscribed, the Partnership will repurchase only a
pro rata portion of the amount tendered by each Partner.
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(e) The Directors may under certain circumstances elect to postpone,
suspend or terminate an offer to repurchase Interests.
(f) A Limited Partner tendering a portion of its Interests for repurchase
will be required to maintain a minimum capital account balance of
$1,000,000. The Partnership may reduce the portion of Interests to be
purchased from a Limited Partner to maintain the required minimum balance.
Such minimum balance requirement may be waived by the General Partner in
its sole discretion, subject to applicable federal securities laws.
Additionally, the General Partner may, in its discretion, cause the
Partnership to repurchase a Limited Partner's entire Interest if the
Limited Partner's Capital Account balance in the Partnership, as a result
of repurchase or Transfer requests by the Limited Partner, is less than
$1,000,000 or such other minimum amount established by the General Partner
from time to time in its sole discretion.
(g) Except as provided in Section 4.5(h) of this Agreement, a General
Partner may tender its Interest or portion of an Interest under Section
4.5(a) of this Agreement only if and to the extent that (1) the repurchase
would not cause the value of the Capital Account of the General Partner to
be less than the value required to be maintained under Section 5.1(b) of
this Agreement and (2) in the view of legal counsel to the Partnership, the
repurchase would not jeopardize the classification of the Partnership as a
partnership for U.S. federal income tax purposes.
(h) If a General Partner ceases to serve in that capacity under Section 4.1
of this Agreement (other than pursuant to Section 4.1(d)) and the business
of the Partnership is continued in accordance with Section 6.1(a)(2)(B) of
this Agreement, the former General Partner (or its trustee or other legal
representative) may, by written notice to the Directors within 60 days of
the action resulting in the continuation of the Partnership under Section
6.1(a)(2)(B), tender to the Partnership all or any portion of its Interest.
Within 30 days after the receipt of notice, the Directors will cause the
Interest or portion of an Interest to be repurchased by the Partnership for
cash in an amount equal to the balance of the former General Partner's
Capital Account or applicable portion of the Capital Account. If the former
General Partner does not tender to the Partnership all of its Interest as
permitted by this Section 4.5(h), the Interest will automatically convert
to and will be treated in all respects as the Interest of a Limited
Partner. If the General Partner ceases to serve in this capacity under
Section 4.1 of this Agreement (other than pursuant to Section 4.1(d)) and
the Partnership is not continued under Section 6.1(a)(2)(B) of this
Agreement, the liquidation and distribution provisions of Article VI of
this Agreement will apply to the General Partner's Interest.
(i) The General Partner may cause the Partnership to repurchase an Interest
or portion of an Interest of a Limited Partner or any Person acquiring an
Interest from or through a Limited Partner, on terms fair to the
Partnership and to the Limited Partner or Person acquiring an Interest from
or through such Limited Partner, in the event that the General Partner, in
its sole discretion, determines or has reason to believe that:
(1) the Interest or portion of an Interest has been Transferred in
violation of Section 4.4 of this Agreement, or the Interest or portion
of an Interest has vested
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in any Person other than by operation of law as the result of the
death, dissolution, bankruptcy, insolvency or adjudicated incompetence
of the Limited Partner;
(2) ownership of the Interest or portion of an Interest by a Partner
or other Person is likely to (A) cause the Partnership to be in
violation of, or (B) (x) require registration of any Interest or
portion of any Interest under, or (y) subject the Partnership to
additional registration or regulation under, the securities,
commodities or other laws of the United States or any other relevant
jurisdiction;
(3) continued ownership of the Interest or portion of an Interest may
be harmful or injurious to the business or reputation of the
Partnership, the Directors, the General Partner or any of their
Affiliates, or may subject the Partnership or any of the Partners to
an undue risk of adverse tax or other fiscal or regulatory
consequences;
(4) any of the representations and warranties made by a Partner or
other Person in connection with the acquisition of the Interest or
portion of an Interest was not true when made or has ceased to be
true;
(5) with respect to a Limited Partner subject to special regulatory or
compliance requirements, such as those imposed by ERISA, the Bank
Holding Company Act or certain Federal Communication Commission
regulations (collectively, "Special Laws or Regulations"), such
Limited Partner will likely be subject to additional regulatory or
compliance requirements under these Special Laws or Regulations by
virtue of continuing to hold an Interest or portion of an Interest; or
(6) it would be in the best interests of the Partnership, as
determined by the General Partner or the Directors, for the
Partnership to repurchase the Interest or portion of an Interest.
(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
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as of the date of repurchase, equal to the amount to be repurchased. All
repurchases of Interests or portions of Interest will be subject to any and
all conditions as the Directors may impose in their sole discretion. The
General Partner may, in its discretion, cause the Partnership to repurchase
a Limited Partner's entire Interest, if the Limited Partner's Capital
Account balance in the Partnership, as a result of repurchase or Transfer
requests by the Limited Partner, is less than a minimum amount that may be
established by the General Partner from time to time in its sole
discretion. Subject to the procedures of this Section 4.5(j), the amount
due to any Partner whose Interest or portion of an Interest is repurchased
will be equal to the value of the Partner's Capital Account or portion of
such Capital Account, as of the applicable Valuation Date, after giving
effect to all allocations to be made to the Partner's Capital Account as of
that date. If a Limited Partner's entire Interest is repurchased, that
Limited Partner will cease to be a Limited Partner.
ARTICLE V
CAPITAL
Section 5.1 Contributions to Capital. (a) The minimum initial Capital
Contribution of each Limited Partner will be $1,000,000 or such other amount as
the General Partner determines from time to time. The amount of the initial
Capital Contribution of each Partner will be recorded by the Partnership upon
acceptance as a contribution to the capital of the Partnership. Each Limited
Partner's entire initial Capital Contribution will be paid to the Partnership
immediately prior to the Partnership's acceptance of the Limited Partner's
subscription for Interests, unless otherwise agreed by the Partnership and such
Limited Partner.
(b) The Limited Partners may make additional Capital Contributions
effective as of those times and in amounts as the General Partner may
permit, but no Limited Partner will be obligated to make any additional
Capital Contribution except to the extent provided in Sections 5.5 and 5.7
of this Agreement. Each additional Capital Contribution made by a Limited
Partner (other than a contribution made pursuant to Section 5.5 or Section
5.7 of this Agreement) will be in the minimum amount of $100,000 or such
other amount as the General Partner determines from time to time.
(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
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determined by the General Partner to reimburse the Partnership for any
costs incurred by the Partnership by reason of accepting the Securities,
and any charge will be due and payable by the contributing Partner in full
at the time the Capital Contribution to which the charges relate is due.
The value of contributed Securities will be determined in accordance with
Section 7.3 of this Agreement as of the date of contribution.
(e) An Advisor may make Capital Contributions and own Interests in the
Partnership and, in so doing, will become a Limited Partner with respect to
the contributions.
(f) The minimum initial and additional contributions set out in paragraphs
(a) and (b) of this Section 5.1 may be increased or reduced by the General
Partner from time to time. Reductions may be applied to all investors,
individual investors or to classes of investors, in each case in the sole
discretion of the General Partner.
Section 5.2 Rights of Partners to Capital. No Partner will be entitled to
interest on the Partner's Capital Contribution, nor will any Partner be entitled
to the return of any capital of the Partnership except (a) upon the repurchase
by the Partnership of all or a portion of the Partner's Interest in accordance
with Section 4.5 of this Agreement, (b) in accordance with the provisions of
Section 5.7(b) of this Agreement or (c) upon the liquidation of the
Partnership's assets in accordance with Section 6.2 of this Agreement. Except as
specified in the Delaware Act, or with respect to distributions or similar
disbursements made in error, no Partner will be liable for the return of any
such amounts. To the fullest extent permitted by applicable law, no Partner will
have the right to require partition of the Partnership's property or to compel
any sale or appraisal of the Partnership's assets.
Section 5.3 Capital Accounts. (a) The Partnership will maintain a separate
Capital Account for each Partner.
(b) Each Partner's Capital Account will have an initial balance equal to
the amount of cash and the value of any Securities (determined in
accordance with Section 7.3 of this Agreement) constituting the Partner's
initial Capital Contribution.
(c) Each Partner's Capital Account will be increased by the sum of (1) the
amount of cash and the value of any Securities (determined in accordance
with Section 7.3 of this 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.
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(f) Subject to Section 5.7(b) of this Agreement, no Partner will be
required to pay to the Partnership or any other Partner any deficit in such
Partner's Capital Account upon dissolution of the Partnership or otherwise.
Section 5.4 Allocation of Net Profit and Loss. Subject to Sections 5.6 and
5.8 of this Agreement, as of the last day of each Fiscal Period, any Net Profit
or Net Loss for the Fiscal Period will be allocated among and credited to or
debited against the Capital Accounts of the Partners in accordance with their
respective Investment Percentages for the Fiscal Period.
Section 5.5 Allocation of Certain Withholding Taxes and Other Expenditures.
(a) If the Partnership incurs a withholding tax or other tax obligation with
respect to the share of Partnership income allocable to any Partner, then the
General Partner, without limitation of any other rights of the Partnership or
the General Partner, will cause the amount of the obligation to be debited
against the Capital Account of the Partner when the Partnership pays the
obligation, and any amounts then or in the future distributable to the Partner
will be reduced by the amount of the taxes. If the amount of the taxes is
greater than any distributable amounts, then the Partner and any successor to
the Partner's Interest or portion of an Interest will pay to the Partnership as
a Capital Contribution, upon demand by the General Partner, the amount of the
excess. A General Partner will not be obligated to apply for or obtain a
reduction of or exemption from withholding tax on behalf of any Partner that may
be eligible for the reduction or exemption, except that, in the event that the
General Partner determines that a Partner is eligible for a refund of any
withholding tax, the General Partner may, at the request and expense of the
Partner, assist the Partner in applying for such refund.
(b) Except as otherwise provided for in this Agreement and unless
prohibited by the 1940 Act, any expenditures payable by the Partnership, to
the extent determined by the General Partner to have been paid or withheld
on behalf of, or by reason of particular circumstances applicable to, one
or more but fewer than all of the Partners, will be charged to only those
Partners on whose behalf the payments are made or whose particular
circumstances gave rise to such payments. The charges will be debited from
the Capital Accounts of the Partners as of the close of the Fiscal Period
during which the items were paid or accrued by the Partnership.
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.
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(b) Within 30 days after the close of each Incentive Period with respect to
each Limited Partner, the General Partner may withdraw up to 100% of the
Performance Incentive (computed on the basis of unaudited data) that was
credited to the Capital Account of the General Partner, and debited from
the Limited Partner's Capital Account with respect to the Incentive Period.
The Partnership may pay the General Partner the undrawn balance, if any, of
the Performance Incentive (subject to audit adjustments) within 30 days
after the completion of the audit of the Partnership's accounts pursuant to
Section 7.1 of this Agreement.
Section 5.7 Reserves. (a) The General Partner may cause appropriate
reserves to be created, accrued and charged by the Partnership against Net
Assets and proportionately against the Capital Accounts of the Partners for
contingent liabilities, if any, as of the date any contingent liability becomes
known to the General Partner, the reserves to be in the amounts that the General
Partner in its sole discretion deems necessary or appropriate. The General
Partner may increase or reduce any reserves from time to time by amounts as it
in its sole discretion deems necessary or appropriate. The amount of any
reserve, or any increase or decrease in a reserve, will be proportionately
charged or credited to the Capital Accounts of those Persons who or that are
Partners at the time the reserve is created, or increased or decreased, except
that if any individual reserve item, adjusted by any increase in the item,
exceeds the lesser of $500,000 or 1% of the aggregate value of the Capital
Accounts of all of those Partners, then the amount of the reserve, increase or
decrease may instead, at the discretion of the General Partner, be charged or
credited to those Persons who or that were Partners at the time, as determined
by the General Partner in its sole discretion, of the act or omission giving
rise to the contingent liability for which the reserve was established,
increased or decreased in proportion to their Capital Accounts.
(b) If any amount is required by Section 5.7(a) of this Agreement to be
charged or credited to a Person who or that is no longer a Partner, the
amount will be paid by or to the party, in cash, with interest from the
date on which the General Partner determines that the charge or credit is
required. In the case of a charge, the former Partner will be obligated to
pay as a Capital Contribution the amount of the charge, plus interest as
provided in this Section 5.7(b), to the Partnership on demand, except that
(1) in no event will a former Partner be obligated to make a payment
exceeding the amount of the Partner's Capital Account at the time to which
the charge relates and (2) no demand will be made after the expiration of
three years from the date on which the Person ceased to be a Partner. To
the extent that a former Partner fails to pay to the Partnership, in full,
any amount required to be charged to the former Partner under Section
5.7(a) of this Agreement, the deficiency will be charged proportionately to
the Capital Accounts of the 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
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will instead be allocated to the Capital Account of the General Partner in
amounts necessary to offset all previous debits attributable to the Limited
Partner, made in accordance with this Section 5.8, that have not been recovered.
Section 5.9 Allocations Prior to Closing Date. Any net cash profits or any
net cash losses realized by the Partnership from the purchase or sale of
Securities during the period ending on the day prior to the Closing Date will be
allocated to the Capital Account of the General Partner. No unrealized item of
profit or loss will be allocated under this Section 5.9 to the Capital Account
of any Partner.
Section 5.10 Tax Allocations. For each taxable year of the Partnership,
items of income, deduction, gain, loss or credit will be allocated for income
tax purposes among the Partners in a manner so as to reflect equitably amounts
credited or debited to each Partner's Capital Account for the current and prior
taxable years (or relevant portions of those years). Allocations under this
Section 5.10 will be made in accordance with the principles of Sections 704(b)
and 704(c) of the Code, and in conformity with Treasury Regulations promulgated
under these Sections, or the successor provisions to such Sections and
Regulations. Notwithstanding anything to the contrary in this Agreement, the
Partnership will allocate to the Partners those gains or income necessary to
satisfy the "qualified income offset" requirement of Treasury Regulations
Section 1.704-1(b)(2)(ii)(d). If the Partnership realizes net capital gains for
U.S. federal income tax purposes for any taxable year during or as of the end of
which one or more Positive Basis Partners (as defined in this Section 5.10)
withdraw from the Partnership under Article IV or VI of this Agreement, the
General Partner may elect to allocate net gains as follows: (a) to allocate net
gains among Positive Basis Partners, in proportion to the Positive Basis (as
defined in this Section 5.10) of each Positive Basis Partner, until either the
full amount of the net gains has been so allocated or the Positive Basis of each
Positive Basis Partner has been eliminated, and (b) to allocate any net gains
not so allocated to Positive Basis Partners to the other Partners in a manner
that reflects equitably the amounts credited to the Partners' Capital Accounts.
If the Partnership realizes capital losses for U.S. federal income tax purposes
for any Fiscal Year during or as of the end of which one or more Negative Basis
Partners (as defined in this Section 5.10) withdraw from the Partnership under
Article IV or VI of this Agreement, the General Partner may elect to allocate
net losses as follows: (i) to allocate net losses among Negative Basis Partners,
in proportion to the Negative Basis (as defined in this Section 5.10) of each
Negative Basis Partner, until either the full amount of net losses will have
been so allocated or the Negative Basis of each Negative Basis Partner has been
eliminated, and (ii) to allocate any net losses not so allocated to Negative
Basis Partners, to the other Partners in a manner that reflects equitably the
amounts credited to the Partners' Capital Accounts. As used in this Section
5.10, the term "Positive Basis" means, with respect to any Partner and as of any
time of calculation, the amount by which the total of the Partners' Capital
Accounts as of that time exceeds the Partner's "adjusted tax basis," for U.S.
federal income tax purposes, in the Partner's Interest in the Partnership as of
that time (determined without regard to any adjustments made to the "adjusted
tax basis" by reason of any Transfer or assignment of the Interest, including by
reason of death). As used in this Section 5.10, the 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
31
(determined without regard to any adjustments made to the "adjusted tax basis"
by reason of any Transfer or assignment of the Interest, including by reason of
death, and without regard to such Partner's share of the liabilities of the
Partnership under section 752 of the Code) exceeds the Partner's Capital Account
as of such time. As used in this Section 5.10, the term "Negative Basis Partner"
means any Partner who or that withdraws from the Partnership and who or that has
a Negative Basis as of the effective date of the Partner's withdrawal.
Section 5.11 Distributions. (a) The General Partner may cause the
Partnership to make distributions in cash or in kind at any time to all of the
Partners on a proportionate basis in accordance with the Partners' Investment
Percentages.
(b) The General Partner may withhold taxes from any distribution to any
Partner to the extent required by the Code or any other applicable law. For
purposes of this Agreement, any taxes so withheld by the Partnership with
respect to any amount distributed by the Partnership to any Partner will be
deemed to be a distribution or payment to the Partner, reducing the amount
otherwise distributable to the Partner under this Agreement and reducing
the Capital Account of the Partner. Neither the General Partner nor the
Directors will be obligated to apply for or obtain a reduction of or
exemption from withholding tax on behalf of any Partner that may be
eligible for reduction or exemption. To the extent that a Partner claims to
be entitled to a reduced rate of, or exemption from, a withholding tax
pursuant to an applicable income tax treaty, or otherwise, the Partner will
furnish the Partnership with any information and forms that the Partner may
be required to complete if necessary to comply with any and all laws and
regulations governing the obligations of withholding tax agents. Each
Partner represents and warrants that any information and forms furnished by
the Partner will be true and accurate and agrees to indemnify the
Partnership and each of the Partners from any and all losses, claims,
damages, liabilities costs and expenses resulting from the filing of
inaccurate or incomplete information or forms relating to the withholding
taxes (including legal or other expenses incurred in investigating or
defending against any such losses, claims, damages, liabilities, costs and
expenses).
(c) Notwithstanding any provision to the contrary contained in this
Agreement, the Partnership and the General Partner on behalf of the
Partnership will not repurchase any Interest or portion of an Interest or
make a distribution to any Partner on account of the Partner's Interest or
portion of an Interest, if such repurchase or distribution would violate
the Delaware Act or other applicable law.
ARTICLE VI
DISSOLUTION AND LIQUIDATION
Section 6.1 Dissolution. (a) The Partnership will be dissolved if at any
time it has no Limited Partners or upon the occurrence of any of the following
events:
(1) upon the affirmative vote to dissolve the Partnership by both (A)
a majority of the Directors (including the vote of a majority of the
Independent Directors) and (B) Partners holding at least two-thirds of
the total number of votes eligible to be cast by all Partners;
32
(2) upon either of: (A) an election by the General Partner to dissolve
the Partnership or (B) a General Partner's ceasing to be a General
Partner in accordance with Section 4.1 of this Agreement (other than
in conjunction with a Transfer of the Interest of a General Partner in
accordance with Section 4.3 of this Agreement to a Person who or that
is admitted as a substituted General Partner under Section 2.6(a) of
this Agreement), unless, as to the event described in clause (B) of
this Section 6.1(a)(2), (i) the Partnership has at least one other
General Partner who or that is authorized to and does carry on the
business of the Partnership, or (ii) both the Directors and Partners
holding not less than two-thirds of the total number of votes eligible
to be cast by all Partners elect within 60 days after the event to
continue the business of the Partnership and a Person to be admitted
to the Partnership, effective as of the date of the event, as an
additional General Partner who has agreed to make the contributions to
the capital of the Partnership required to be made under Section
5.1(c) of this Agreement;
(3) upon the failure of Partners to approve successor Directors at a
meeting called by the General Partner in accordance with Section
2.11(c) of this Agreement when no Director remains to continue the
business of the Partnership; or
(4) as otherwise required by operation of law.
Dissolution of the Partnership will be effective on the later of the day on
which the event giving rise to the dissolution occurs or, to the extent
permitted by the Delaware Act, the conclusion of any applicable 60-day period
during which the Directors and Partners elect to continue the business of the
Partnership as provided in Section 6.1(a)(2), but the Partnership will not
terminate until the assets of the Partnership have been liquidated in accordance
with Section 6.2 of this Agreement and the Certificate has been canceled.
(b) Except as provided in Section 6.1(a) of this Agreement or in the
Delaware Act, the death, adjudicated incompetence, dissolution,
termination, liquidation, bankruptcy, reorganization, merger, sale of
substantially all of the stock or assets of, or other change in the
ownership or nature of a Partner, the admission to the Partnership of a new
Partner, the withdrawal of a Partner from the Partnership, or the Transfer
by a Partner of the Partner's Interest or a portion of the Interest to a
third party will not cause the Partnership to dissolve.
Section 6.2 Liquidation of Assets. (a) Upon the dissolution of the
Partnership as provided in Section 6.1 of this Agreement, the General Partner
will promptly liquidate the business and administrative affairs of the
Partnership, except that if the General Partner is unable to perform this
function, a liquidator elected by Partners holding a majority of the total
number of votes eligible to be cast by all Partners and whose fees and expenses
will be paid by the Partnership will promptly liquidate the business and
administrative affairs of the Partnership. Net Profit and Net Loss during the
period of liquidation will be allocated in accordance with Article V of this
Agreement. Subject to the Delaware Act, the proceeds from liquidation (after
establishment of appropriate reserves for all claims and obligations, including
all contingent, conditional or unmatured claims and obligations in an amount
that the General Partner or
33
liquidator deems appropriate in its sole discretion as applicable) will be
distributed in the following manner:
(1) the debts of the Partnership, other than debts, liabilities or
obligations to Limited Partners, and the expenses of liquidation
(including legal and accounting fees and expenses incurred in
connection with the liquidation), up to and including the date on
which distribution of the Partnership's assets to the Partners has
been completed, will first be paid on a proportionate basis;
(2) any debts, liabilities or obligations owing to the Limited
Partners will be paid next in their order of seniority and on a
proportionate basis; and
(3) the Partners are paid next on a proportionate basis the positive
balances of their Capital Accounts after giving effect to all
allocations to be made to the Partners' Capital Accounts for the
Fiscal Period ending on the date of the distributions under this
Section 6.2(a)(3).
(b) Notwithstanding the provisions of this Section 6.2, upon dissolution of
the Partnership, subject to the Delaware Act and the priorities set out in
Section 6.2(a) of this Agreement, the General Partner or liquidator may
distribute ratably in kind any assets of the Partnership. If any in-kind
distribution is to be made under this Section 6.2(b), (1) the assets
distributed in kind will be valued in accordance with Section 7.3 of this
Agreement as of the actual date of their distribution and charged as so
valued and distributed against amounts to be paid under Section 6.2(a) of
this Agreement, and (2) any profit or loss attributable to property
distributed in kind will be included in the Net Profit or Net Loss for the
Fiscal Period ending on the date of the distribution. Notwithstanding any
provision of this Agreement to the contrary, the General Partner may compel
a Partner to accept a distribution of any asset in kind from the
Partnership even if the percentage of the asset distributed to the Partner
exceeds a percentage of the asset that is equal to the percentage in which
the Partner shares in distributions from the Partnership.
ARTICLE VII
ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS
Section 7.1 Accounting and Reports. (a) The Partnership will adopt for tax
accounting purposes any accounting method that the General Partner decides in
its sole discretion is in the best interests of the Partnership. The
Partnership's accounts will be maintained in U.S. currency.
(b) As soon as practicable after the end of each taxable year of the
Partnership, the Partnership will furnish to Partners information regarding
the operation of the Partnership and the Partners' Interests as is
necessary for Partners to complete U.S. Federal and state income tax or
information returns and any other tax information required by U.S. Federal
or state law. To the extent such information may be delayed due to delayed
reporting by Advisors with whom the Partnership invests (through the Master
Partnership), the Partners may be required to file extensions of the filing
dates for their income tax returns at the Federal, state and local levels.
34
(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 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.
35
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1 Amendment of Partnership Agreement. (a) Except as otherwise
provided in this Section 8.1, this Agreement may be amended, in whole or in
part, with the approval of a majority of the Directors (including the vote of a
majority of the Independent Directors, but only if such vote is required by the
1940 Act), except that any amendment also must be approved by a majority (as
defined in the ▇▇▇▇ ▇▇▇) of the outstanding voting securities of the Partnership
if such vote is required by the ▇▇▇▇ ▇▇▇.
(b) Any amendment that would:
(1) increase the obligation of a Partner to make any Capital
Contribution,
(2) reduce the Capital Account of a Partner other than in accordance
with Article V of this Agreement, or
(3) modify the events causing the dissolution of the Partnership,
may be made only if (A) the written consent of each Partner adversely affected
by the proposed action is obtained prior to the effectiveness of the action or
(B) the amendment does not become effective until (i) each Limited Partner has
received written notice of the amendment and (ii) any Limited Partner objecting
to the amendment has been afforded a reasonable opportunity (under procedures
prescribed by the General Partner in its sole discretion) to tender the
Partner's entire Interest for repurchase by the Partnership. Notwithstanding the
preceding sentence or the provisions of Subsection 8.1(c), any amendment that
would alter the provisions of Section 8.1 relating to the material amendment of
this Agreement or the provisions of Section 3.8 of this Agreement relating to
indemnification may be made only with the unanimous consent of the Partners and,
to the extent required by the 1940 Act, approval of a majority of the Directors
(and, if so required, a majority of the Independent Directors).
(c) Notwithstanding the provisions of Sections 8.1(a) and 8.1(b) of this
Agreement, the General Partner, at any time without the consent of any
other Partner, may:
(1) restate this Agreement, together with any amendments to this
Agreement that have been duly adopted in accordance with the
provisions of this Agreement to incorporate the amendments in a
single, integrated document;
(2) amend this Agreement (other than with respect to the matters
described in Section 8.1(b) of this Agreement) to change the name of
the Partnership in accordance with Section 2.2 hereof or to effect
compliance with any applicable law or regulation, including, but not
limited to, to satisfy the requirements of applicable U.S. banking law
or regulation, or to cure any ambiguity or to correct or supplement
any provision of this Agreement, so long as the action does not
adversely affect the rights of any Partner in any material respect;
and
(3) amend this Agreement to make any changes necessary or desirable,
based on advice of legal counsel to the Partnership, to assure the
Partnership's continuing
36
eligibility to be classified for U.S. federal income tax purposes as a
Partnership that is not treated as a corporation for tax purposes
under the Code; subject, however, to the limitation that any material
amendment to this Agreement under Section 8.1(c)(2) or (3) of this
Agreement will be valid only if approved by a majority of the
Directors (including the vote of a majority of the Independent
Directors, if required by the 1940 Act).
(d) The General Partner will give prior written notice of any proposed
amendment to this Agreement (other than any amendment of the type
contemplated by Section 8.1(c) of this Agreement) to each Partner, which
notice sets out (1) the text of the proposed amendment or (2) a summary of
the amendment and a statement that the text of the amendment will be
furnished to any Partner upon request.
Section 8.2 Special Power of Attorney. (a) Each Partner irrevocably makes,
constitutes and appoints the General Partner and each of the Directors, acting
severally, and any liquidator of the Partnership's assets appointed pursuant to
Section 6.2 of this Agreement with full power of substitution, the true and
lawful representatives and attorneys-in-fact of, and in the name, place and
stead of, the Partner, with the power from time to time to make, execute, sign,
acknowledge, swear to, verify, deliver, record, file and/or publish:
(1) any amendment to this Agreement;
(2) any amendment to the Certificate, including, without limitation,
any such amendment required to reflect any amendments to this
Agreement, and including, without limitation, an amendment to
effectuate any change in the membership of the Partnership; and
(3) all other such instruments, documents and certificates that, in
the view of legal counsel to the Partnership, from time to time may be
required by the laws of the United States of America, the State of
Delaware or any other jurisdiction in which the General Partner
determines that the Partnership should do business, or any political
subdivision or agency of any such jurisdiction, or that legal counsel
may deem necessary or appropriate to effectuate, implement and
continue the valid existence and business of the Partnership as a
limited partnership under the Delaware Act.
(b) Each Partner is aware that the terms of this Agreement permit certain
amendments to this Agreement to be effected and certain other actions to be
taken or omitted by or with respect to the Partnership without the
Partner's consent. Each Partner agrees that if an amendment to the
Certificate or this Agreement or any action by or with respect to the
Partnership is taken in the manner contemplated by this Agreement,
notwithstanding any objection that the Partner may assert with respect to
the action, the attorneys-in-fact appointed under this Agreement are
authorized and empowered, with full power of substitution, to exercise the
authority granted in this Section 8.2 in any manner that may be necessary
or appropriate to permit the amendment to be made or action lawfully taken
or omitted. Each Partner is fully aware that each Partner will rely on the
effectiveness of
37
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.
38
Section 8.3 Notices. Notices that may or are required to be provided under
this Agreement will be made to a Partner by hand delivery, regular mail
(registered or certified mail return receipt requested in the case of notice to
the General Partner), commercial courier service, telecopier, or electronic mail
(with a confirmation copy by registered or certified mail in the case of notices
to the General Partner by telecopier or electronic mail), and will be addressed
to the Partner at his, her or its address as set out in the books and records of
the Partnership (or to any other address as may be designated by any Partner by
notice addressed to the General Partner in the case of notice given to any
Partner, and to each of the Partners in the case of notice given to the General
Partner). Notices will be deemed to have been provided when delivered by hand,
on the date indicated as the date of receipt on a return receipt or when
received if sent by regular mail, commercial courier service, telecopier or by
electronic mail. A document that is not a notice and that is required to be
provided under this Agreement by any party to another party may be delivered by
any reasonable means.
Section 8.4 Agreement Binding Upon Successors and Assigns. This Agreement
will be binding upon and inure to the benefit of the Partners and their
respective heirs, successors, assigns, executors, trustees or other legal
representatives, but the rights and obligations of the Partners may not be
Transferred or delegated except as provided in this Agreement, and any attempted
Transfer or delegation of those rights and obligations that is not made in
accordance with the terms of this Agreement will be void.
Section 8.5 Choice of Law; Arbitration. (a) Notwithstanding the location at
which this Agreement is executed by any of the Partners, the Partners expressly
agree that all the terms and provisions of this Agreement are governed by and
will be construed under the laws of the State of Delaware, including the
Delaware Act, without regard to the conflict of law principles of the State of
Delaware.
(b) To the extent such action is consistent with the provisions of the 1940
Act and any other applicable law, except as provided in Section 8.10(b) of
this Agreement, each Partner agrees to submit all controversies arising
between or among Partners or one or more Partners and 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
39
arbitrators nominated by the Partners will attempt to agree on a third
arbitrator within 30 Business Days of the appointment of the second
arbitrator. If the two arbitrators fail to agree on the third arbitrator
within the 30-day period, then the AAA will appoint the third arbitrator
within 30 Business Days following the expiration of the 30-day period. Any
award rendered by the arbitrators will be final and binding on the
Partners, and judgment upon the award may be entered in the supreme court
of the state of New York and/or the U.S. District Court for the Southern
District of New York, or any other court having jurisdiction over the award
or having jurisdiction over the Partners or their assets. The arbitration
agreement contained in this Section 8.5 will not be construed to deprive
any court of its jurisdiction to grant provisional relief (including by
injunction or order of attachment) in aid of arbitration proceedings or
enforcement of an award. In the event of arbitration as provided in this
Section 8.5, the arbitrators will be governed by and will apply the
substantive (but not procedural) law of Delaware, to the exclusion of the
principles of the conflicts of law of Delaware. The arbitration will be
conducted in accordance with the procedures set out in the commercial
arbitration rules of the AAA. If those rules are silent with respect to a
particular matter, the procedure will be as agreed by the Partners, or in
the absence of agreement among or between the Partners, as established by
the arbitrators. Notwithstanding any other provision of this Agreement,
this Section 8.5(c) will be construed to the maximum extent possible to
comply with the laws of the State of Delaware, including the Uniform
Arbitration Act (10 Del. C Section 5701 et seq.) (the "Delaware Arbitration
Act"). If, nevertheless, it is determined by a court of competent
jurisdiction that any provision or wording of this Section 8.5(c),
including any rules of the AAA, are invalid or unenforceable under the
Delaware Arbitration Act or other applicable law, such invalidity will not
invalidate all of this Section 8.5(c). In that case, this Section 8.5(c)
will be construed so as to limit any term or provision so as to make it
valid or enforceable within the requirements of the Delaware Arbitration
Act or other applicable law, and, in the event such term or provision
cannot be so limited, this Section 8.5(c) will be construed to omit such
invalid or unenforceable provision.
Section 8.6 Not for Benefit of Creditors. The provisions of this Agreement
are intended only for the regulation of relations among past, existing and
future Partners, their assignees and the Partnership. This Agreement is not
intended for the benefit of non-Partner creditors and, except to the 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
40
permitted by the Delaware Act, (1) effect any amendment to this Agreement,
(2) effect the adoption of a new Partnership agreement for the Partnership
if it is the surviving or resulting limited partnership in the merger or
consolidation, or (3) provide that the Partnership agreement of any other
constituent Partnership to the merger or consolidation (including a limited
partnership formed for the purpose of consummating the merger or
consolidation) will be the Partnership agreement of the surviving or
resulting limited partnership.
(c) The Partnership may convert to another Delaware business entity in
accordance with the Delaware Act upon the approval of the Partners
representing a majority (as defined in the ▇▇▇▇ ▇▇▇) of the outstanding
voting securities of the Partnership.
Section 8.9 Pronouns. All pronouns used in this Agreement will be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of
the Person or Persons, firm or entity may require in the context in which they
are used.
Section 8.10 Confidentiality. (a) A Limited Partner may obtain from the
General Partner, upon reasonable demand for any purpose reasonably related to
the Limited Partner's Interest in the Partnership, information regarding the
affairs of the Partnership as is just and reasonable under the Delaware Act,
subject to reasonable standards (including standards governing the information
and documents to be furnished, at what time and location and at whose expense)
established by the General Partner in its sole discretion.
(b) Each Limited Partner agrees in executing this Agreement that, except as
required by applicable law or any regulatory body, the Limited Partner will
not divulge, furnish or make accessible to any other Person the name or
address (whether business, residence or mailing) of any Limited Partner
(collectively, "Confidential Information") without the prior written
consent of the General Partner, which consent may be withheld in its sole
discretion.
(c) Each Partner recognizes that in the event that this Section 8.10 is
breached by any Partner or any of its principals, Partners, members,
directors, officers, employees or agents or any of the Partner's
Affiliates, including any of the Affiliate's principals, Partners, members,
directors, officers, employees or agents, irreparable injury may result to
the non-breaching Partners and the Partnership. In recognition of that
irreparable injury, any non-breaching Partner may have, in addition to any
and all other remedies at law or in equity to which the non-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
41
Initiating Non-Breaching Party in pursuing injunctive relief in a court of
appropriate jurisdiction.
(d) The General Partner will have the right to keep confidential from the
Limited Partners, for any period of time as the General Partner deems
reasonable in its sole discretion, any information that the General Partner
reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the General Partner in good faith
believes is not in the best interest of the Partnership or could damage the
Partnership or its business or that the Partnership is required by law or
by agreement with a third party to keep confidential.
Section 8.11 Certification of Non-Foreign Status. Each Limited Partner or
transferee of an Interest or a portion of an Interest from a Limited Partner who
or that is admitted to the Partnership in accordance with this Agreement will
certify, upon admission to the Partnership and at any other time as the General
Partner may request, whether the Limited Partner or transferee is a "United
States Person" within the meaning of the Code on forms to be provided by the
Partnership, and will notify the Partnership within 30 days of any change in the
status of the Limited Partner or transferee. Any Limited Partner or transferee
who or that fails to provide certification when requested to do so by the
General Partner may be treated as a non-United States Person for purposes of
U.S. Federal tax withholding.
Section 8.12 Severability. Each Partner agrees that the Partner intends
that, if any provision of this Agreement is determined by a court of competent
jurisdiction or regulatory authority with jurisdiction over the Partnership or
the General Partner not to be enforceable in the manner set out in this
Agreement, then the provision should be enforceable to the maximum extent
possible under applicable law. If any provision of this Agreement is held to be
invalid or unenforceable, the invalidation or unenforceability will not affect
the validity or enforceability of any other provision of this Agreement (or
portion of the provision).
Section 8.13 Entire Agreement. This Agreement constitutes the entire
agreement among the Partners pertaining to the subject matter of this Agreement
and supersedes all prior agreements and understandings pertaining to that
subject matter.
Notwithstanding any other provision of this Agreement, including Section
8.1, each Partner, in executing this Agreement, acknowledges and agrees that the
General Partner, on its own behalf or on behalf of the Partnership, without the
approval of the Limited Partners or any other Person, may enter into a written
agreement or agreements with any other Partner, executed contemporaneously with
the admission of the other Partner to the Partnership, affecting or modifying
the terms of, or establishing rights under, this Agreement or any subscription
agreement. Each Partner agrees that any terms contained in any such other
agreement with 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
42
consider only those interests and factors as he, she or it desires, including
his, her or its own interests, and, to the fullest extent permitted by law, will
have no duty or obligation to give any consideration to any interest of or
factors affecting the Partnership or the Limited Partners, or (b) in its "good
faith" or under another express standard, then the Person will act under the
express standard and will not be subject to any other or different standards
imposed by this Agreement or any other agreement contemplated by this Agreement
or by relevant provisions of law or in equity or otherwise.
Section 8.15 Conflicts. The Partners acknowledge and agree that the General
Partner and its Affiliates may engage in activities in which their respective
interests or the interests of their clients may conflict with the interests of
the Partnership or the Limited Partners, and that the resolution of such
conflicts may not always be resolved by the General Partner or its Affiliates in
favor of the Partnership or the Limited Partners.
Section 8.16 Counterparts. This Agreement may be executed in several
counterparts, all of which together will constitute one agreement binding on all
Partners, notwithstanding that all the Partners have not signed the same
counterpart.
Section 8.17 Headings. The headings in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions of this Agreement or otherwise affect their construction or effect.
[Remainder of Page Intentionally Left Blank]
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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.