Exhibit (a)(1)
HATTERAS MULTI-STRATEGY FUND II, L.P.
Amended and Restated Agreement of Limited Partnership
Dated as of November 23, 2004
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.............................................................................. 1
ARTICLE II ORGANIZATION; ADMISSION OF PARTNERS; DIRECTORS........................................... 6
SECTION 2.1 Formation of Limited Partnership..................................................... 6
SECTION 2.2 Name................................................................................. 6
SECTION 2.3 Principal and Registered Office...................................................... 6
SECTION 2.4 Duration............................................................................. 6
SECTION 2.5 Business of the Partnership.......................................................... 6
SECTION 2.6 General Partner...................................................................... 7
SECTION 2.7 Limited Partners..................................................................... 7
SECTION 2.8 Organizational Limited Partner....................................................... 8
SECTION 2.9 Both General and Limited Partner..................................................... 8
SECTION 2.10 Limited Liability.................................................................... 8
SECTION 2.11 Directors............................................................................ 8
ARTICLE III MANAGEMENT; ADVICE AND MANAGEMENT........................................................ 9
SECTION 3.1 Management and Control............................................................... 9
SECTION 3.2 Powers Reserved by the General Partner............................................... 10
SECTION 3.3 Actions by Directors................................................................. 12
SECTION 3.4 Meetings of Partners................................................................. 12
SECTION 3.5 Advice and Management................................................................ 13
SECTION 3.6 Custody of Assets of the Partnership................................................. 15
SECTION 3.7 Brokerage............................................................................ 16
SECTION 3.8 Other Activities..................................................................... 16
SECTION 3.9 Duty of Care......................................................................... 17
SECTION 3.10 Indemnification...................................................................... 17
SECTION 3.11 Fees, Expenses and Reimbursement..................................................... 19
ARTICLE IV TERMINATION OF STATUS OF GENERAL PARTNER; REMOVAL OF GENERAL PARTNER;
TRANSFERS AND REPURCHASES................................................................ 23
SECTION 4.1 Termination of Status of General Partner............................................. 23
SECTION 4.2 Removal of General Partner........................................................... 23
SECTION 4.3 Transfer of Interest of General Partner.............................................. 23
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TABLE OF CONTENTS
(continued)
PAGE
SECTION 4.4 Transfer of Interests of Limited Partners............................................ 23
SECTION 4.5 Repurchase of Interests.............................................................. 25
ARTICLE V CAPITAL.................................................................................. 28
SECTION 5.1 Contributions to Capital............................................................. 28
SECTION 5.2 Rights of Partners to Capital........................................................ 29
SECTION 5.3 Capital Accounts..................................................................... 30
SECTION 5.4 Allocation of Net Profit and Loss.................................................... 30
SECTION 5.5 Allocation of Certain Withholding Taxes and Other Expenditures....................... 30
SECTION 5.6 Reserves............................................................................. 31
SECTION 5.7 Allocation to Avoid Capital Account Deficits......................................... 31
SECTION 5.8 Allocations Prior to Closing Date.................................................... 32
SECTION 5.9 Tax Allocations...................................................................... 32
SECTION 5.10 Distributions........................................................................ 33
ARTICLE VI DISSOLUTION AND LIQUIDATION.............................................................. 33
SECTION 6.1 Dissolution.......................................................................... 33
SECTION 6.2 Liquidation of Assets................................................................ 35
ARTICLE VII ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS............................................. 35
SECTION 7.1 Accounting and Reports............................................................... 35
SECTION 7.2 Determinations by General Partner.................................................... 36
SECTION 7.3 Valuation of Assets.................................................................. 36
ARTICLE VIII MISCELLANEOUS PROVISIONS................................................................. 37
SECTION 8.1 Amendment of Partnership Agreement................................................... 37
SECTION 8.2 Special Power of Attorney............................................................ 38
SECTION 8.3 Notices.............................................................................. 39
SECTION 8.4 Agreement Binding Upon Successors and Assigns........................................ 39
SECTION 8.5 Choice of Law; Arbitration........................................................... 40
SECTION 8.6 Not for Benefit of Creditors......................................................... 41
SECTION 8.7 Consents............................................................................. 41
SECTION 8.8 Merger and Consolidation............................................................. 41
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TABLE OF CONTENTS
(continued)
PAGE
SECTION 8.9 Pronouns............................................................................. 41
SECTION 8.10 Confidentiality...................................................................... 41
SECTION 8.11 Certification of Non-Foreign Status.................................................. 42
SECTION 8.12 Severability......................................................................... 42
SECTION 8.13 Entire Agreement..................................................................... 43
SECTION 8.14 Discretion........................................................................... 43
SECTION 8.15 Conflicts............................................................................ 43
SECTION 8.16 Counterparts......................................................................... 43
SECTION 8.17 Headings............................................................................. 43
EXHIBIT A: ASSET ALLOCATION RANGES FOR ASSET CLASSES
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HATTERAS MULTI-STRATEGY FUND II, L.P.
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of HATTERAS
MULTI-STRATEGY FUND II, L.P. (the "Partnership") dated as of November 23, 2004
by and among HATTERAS INVESTMENT MANAGEMENT LLC, as General Partner, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, as the Organizational Limited Partner and those Persons who execute
this Agreement and whose names are reflected on the books and records of the
Partnership as Limited Partners.
WHEREAS, the General Partner and the Organizational Limited Partner were
parties to the Agreement of Limited Partnership of Hatteras Multi-Strategy Fund,
L.P., dated as of October 29, 2004 (the "Original Partnership Agreement");
WHEREAS, the Partnership desires to change the name of the Partnership to
"Hatteras Multi-Strategy Fund II, L.P."; and
WHEREAS, the Original Partnership Agreement is hereby amended and restated
in its entirety as set forth herein.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement:
"1933 Act" means the Securities Act of 1933 and the rules, regulations and
orders under the 1933 Act, as amended from time to time, or any successor law.
"1940 Act" means the Investment Company Act of 1940 and the rules,
regulations and orders under the 1940 Act, as amended from time to time, or any
successor law.
"Advice and Management" means those services provided to the Partnership
by the Investment Manager under Section 3.5(c) of this Agreement.
"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 by the Investment Manager to manage
a portion of the assets of the 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.
"Asset Allocation Ranges" bears the meaning set forth in Section 3.5(b).
"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 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 October 29, 2004, as amended on November 23, 2004 and any amendments
to the Certificate and/or restatements of the Certificate as filed with the
office of the Secretary of State of the State of Delaware pursuant to this
Agreement.
"Closing Date" means the first date on or as of which a Limited Partner
other than the Organizational Limited Partner is admitted to the Partnership.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor law.
"Commodity Exchange Act" means the Commodity Exchange Act and the rules,
regulations and orders under the Commodity Exchange Act, as amended from time to
time, or any successor law.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
as amended from time to time, or any successor law.
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"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
immediately of the 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 quarter;
(2) the day preceding the date as of which a contribution to the
capital of the Partnership is made by any Partner in accordance with
Section 5.1 of this Agreement;
(3) the day on which the Partnership repurchases the Interest or
portion of the Interest of any Partner in accordance with Section 4.5 of
this Agreement;
(4) the day as of which the Partnership admits a substituted Partner
to whom or which an Interest or portion of an Interest of a Partner has
been Transferred (unless the Transfer of the Interest or portion of the
Interest results in no change of beneficial ownership of the Interest or
portion of the Interest);
(5) the day as of which any amount is credited to or debited against
the Capital Account of any Partner, other than an amount that is credited
to or debited against the Capital Accounts of all Partners in accordance
with their respective Investment Percentages; or
(6) December 31, or any other date that is the last day of the
taxable year of the Partnership.
"Fiscal Year" means the period commencing on the Closing Date and ending
on March 31, 2005, and thereafter each period commencing on April 1 of each year
and ending on March 31 of that year (or on the date of a final distribution made
in accordance with Section 6.2 of this Agreement), unless the Directors
designate another fiscal year for the Partnership. The taxable year of the
Partnership will end on December 31 of each year, or on any other date
designated by the General Partner that is a permitted taxable year-end for tax
purposes.
"Form N-2" means the Partnership's Registration Statement on Form N-2
filed with the Securities and Exchange Commission, as amended from time to time.
"General Partner" means Hatteras Investment Management LLC, a limited
liability company formed under the laws of the State of Delaware, and any other
Person or Persons admitted to the Partnership as a general partner of the
Partnership, collectively, in their capacities as general partners of the
Partnership, and "General Partner" means any of the General Partners.
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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.
"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 Advisory Agreement" has the meaning set out in Section 3.5(a)
of this Agreement.
"Investment Manager" means Hatteras Investment Partners LLC, a limited
liability company formed under the laws of the State of Delaware, and any other
Person or Persons subsequently engaged to provide investment management services
to the Partnership in a similar capacity.
"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.
"Management Fee" means the fee paid by the Master Partnership to the
Investment Manager, borne indirectly by the Partners through the Partnership's
investment in the Partnership, as provided in Section 3.11(b) and (c).
"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 private placement memorandum, as
included in the Form N-2, as amended or supplemented from time to time.
4
"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 5.7 of this
Agreement.
"Offering Materials" means the Memorandum and subscription materials
provided to prospective Limited Partners in connection with an investment to be
made in the Partnership.
"Organizational Limited Partner" means ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
"Partners" means the General Partner(s) and the Limited Partners,
collectively, and "Partner" means any General Partner or Limited Partner.
"Partnership" means Hatteras Multi-Strategy Fund II, L.P. and any
partnership continuing the business of this Partnership after dissolution as
provided in this Agreement.
"Person" means any individual, entity, corporation, partnership, limited
liability company, joint stock company, trusts, estate, joint venture, or
unincorporated organization.
"Placement Agent" means any Person retained by the Partnership or the
General Partner to assist in the placement of Interests, which Persons will be
designated by the General Partner, subject to approval by the Directors.
"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.
"Transfer" means the assignment, transfer, sale or other disposition of
all or any portion of an Interest, including any right to receive any
allocations and distributions attributable to an Interest. Verbs, adverbs or
adjectives such as "Transfer," "Transferred" and "Transferring" have correlative
meanings.
"Valuation Date" means any date upon which the net asset value of the
Interests are valued for purposes of a repurchase, as determined by the Board of
Directors.
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ARTICLE II
ORGANIZATION; ADMISSION OF PARTNERS; DIRECTORS
SECTION 2.1 Formation of Limited Partnership. (a) The Partnership is
formed as a limited partnership pursuant to the Certificate and this Agreement.
The Partners agree that their rights, duties and liabilities will be as provided
in the Delaware Act, except as otherwise provided in this Agreement. The General
Partner will cause the Certificate to be executed and filed in accordance with
the Delaware Act and will cause to be executed and filed with applicable
governmental authorities any other instruments, documents and certificates that
the General Partner concludes may from time to time be required by the laws of
the United States of America, the State of Delaware or any other jurisdiction in
which the General Partner determines that the Partnership should do business, or
any political subdivision or agency of any such jurisdiction, or that the
General Partner determines is necessary or appropriate to effectuate, implement
and continue the valid existence and business of the Partnership.
(b) The Partnership is formed for the object and purpose of (and the
nature of the business to be conducted by the Partnership is) engaging in any
lawful activity for which limited partnerships may be formed under the Delaware
Act and engaging in any and all activities necessary or incidental to the
foregoing.
SECTION 2.2 Name. The name of the Partnership is "Hatteras Multi-Strategy
Fund II, 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 in the Master Partnership. The Partnership may execute, deliver and
perform all contracts, agreements and other
6
undertakings and engage in all activities and transactions as the General
Partner, the Directors or the Investment Manager may deem necessary or advisable
to carry out its objective or business.
(b) The Partnership will operate as a closed-end, management investment
company in accordance with the 1940 Act and subject to any fundamental policies
and investment restrictions described in the Form N-2.
(c) The Partnership may designate from time to time persons to act as
signatories for the Partnership, including, without limitation, persons
authorized to execute and deliver any filings with the Securities and Exchange
Commission 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.
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SECTION 2.8 Organizational Limited Partner. Upon the admission to the
Partnership of any Limited Partner, the Organizational Limited Partner shall
withdraw from the Partnership as the Organizational Limited Partner and shall be
entitled to the return of his Capital Contribution, if any, without interest or
deduction, and shall cease to be a limited partner of the Partnership.
SECTION 2.9 Both General and Limited Partner. A Partner may be
simultaneously a General Partner and a Limited Partner, in which event the
Partner's rights and obligations in each capacity will be determined separately
in accordance with the terms and provisions of this Agreement and as provided in
the Delaware Act.
SECTION 2.10 Limited Liability. Except for payment obligations under this
Agreement, including Capital Contribution obligations, and as provided under
applicable law, a Limited Partner will not be liable for the Partnership's
obligations in any amount in excess of the Limited Partner's Capital Account
balance, plus the Limited Partner's share of undistributed profits and assets.
Subject to applicable law, a Limited Partner may be obligated to return to the
Partnership certain amounts distributed to the Limited Partner.
SECTION 2.11 Directors. (a) The number of Directors at the date of this
Agreement is fixed at not more than fourteen (14) Directors and no fewer than
two (2). After the Closing Date, the number of Directors will be fixed from time
to time by the Directors then in office, which number may be greater, or lesser,
than fourteen (14), but no fewer than the minimum number of directors permitted
to corporations organized under the laws of the State of Delaware, except that
no reduction in the number of Directors will serve to effect the removal of any
Director. Each Partner approves the delegation by the General Partner to the
Directors, in accordance with Section 3.1 of this Agreement, of certain of the
General Partner's rights and powers.
(b) The term of office of each Director shall be from the time of such
Director's election and qualification until the election of Directors three
years following such Director's election and until his or her successor shall
have been elected and shall have qualified, or until his or her status as a
Director is terminated sooner in accordance with Section 2.11(d) of this
Agreement. Except to the extent the 1940 Act requires election by Limited
Partners, if any vacancy in the position of a Director occurs, including by
reason of an increase in the number of Directors as contemplated by Section
2.11(a) of this Agreement, the remaining Directors may appoint an individual to
serve in that capacity in accordance with the provisions of the 1940 Act.
Independent Directors will at all times constitute at least a majority (or more
if required by the ▇▇▇▇ ▇▇▇) of the Directors then serving. An Independent
Director will be replaced by another Independent Director selected and nominated
by the remaining Independent Directors, or in a manner otherwise permissible
under the 1940 Act.
(c) If no Director remains, the General Partner will promptly call a
meeting of the Partners, to be held within 60 days after the date on which the
last Director ceased to act in that capacity, for the purpose of determining
whether to continue the business of the Partnership and, if the business is to
be continued, approving the appointment of the requisite number of Directors. If
the Partners determine at the meeting not to continue the business of the
Partnership, or if the approval of the appointment of the requisite number of
Directors is not approved within 60 days after the date on which the last
Director ceased to act in that capacity, then the Partnership will be dissolved
in accordance with Section 6.1 of this Agreement and the
8
assets of the Partnership will be liquidated and distributed in accordance with
Section 6.2 of this Agreement.
(d) The status of a Director will terminate (1) if the Director dies; (2)
if the Director resigns as a Director; or (3) if the Director is removed in
accordance with Section 2.11(e) of this Agreement.
(e) Any Director may be removed with or without cause by a vote of a
majority of the Limited Partners or by written consent of Limited Partners
holding not less than two-thirds of the total number of votes eligible to be
cast by all Limited Partners.
(f) The Directors may establish and maintain committees of the Board of
Directors, and the Directors may grant to such committees the authority to,
among other things: value the assets of the Partnership; select and nominate the
Independent Directors of the Partnership; recommend to the Board of Directors
the compensation to be paid to the Independent Directors; and recommend to the
Board of Directors the firm of certified public accountants that will conduct
the Partnership's audits.
(g) The Directors may establish or designate committees of the Board of
Directors or the Partnership, whose members may include the Directors and/or
other Persons who are not Directors, to provide advice and other services to the
Partnership, which committees may include (but are not limited to) a committee
that will value the assets of the Partnership.
(h) The Independent Directors will receive compensation for their services
as Independent Directors, as determined by the Board of Directors.
ARTICLE III
MANAGEMENT; ADVICE AND MANAGEMENT
SECTION 3.1 Management and Control. (a) The General Partner delegates to
the Directors those rights and powers of the General Partner necessary for the
Directors to manage and control the business affairs of the Partnership and to
carry out their oversight obligations with respect to the Partnership required
under the 1940 Act, state law, and any other applicable laws or regulations.
Rights and powers delegated to the Directors include, without limitation, the
authority as Directors to oversee and to establish policies regarding the
management, conduct and operation of the Partnership's business, and to do all
things necessary and proper as Directors to carry out the objective and business
of the Partnership, including, without limitation, the power to engage the
Investment Manager to provide Advice and Management and to remove the 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
9
General Partner will manage and control the Partnership. Each Director will be
the agent of the Partnership but will not, for any purpose, be a General
Partner. Notwithstanding the delegation described in this Section 3.1(a), the
General Partner will not cease to be the General Partner and will continue to be
liable as such and in no event will a Director be considered a General Partner
by agreement, estoppel or otherwise as a result of the performance of his or her
duties under this Agreement or otherwise. The General Partner retains those
rights, powers and duties that have not been delegated under this Agreement. Any
Director may be admitted to the Partnership in accordance with Section 2.7 of
this Agreement and make Capital Contributions and own an Interest, in which case
the Director will also become a Limited Partner.
(b) The Partnership will file a tax return as a Partnership for U.S.
federal income tax purposes. All decisions for the Partnership relating to tax
matters including, without limitation, whether to make any tax elections
(including the election under Section 754 of the Code), the positions to be made
on the Partnership's tax returns and the settlement or further contest or
litigation of any audit matters raised by the Internal Revenue Service or any
other taxing authority, will be made by the Directors. All actions (other than
ministerial actions) taken by the 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 the Investment Manager or any
other Person under the terms of any agreement between the Partnership and the
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;
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(2) to call and conduct meetings of Partners at the Partnership's
principal office or elsewhere as it may determine, and to assist the
Directors in calling and conducting meetings of the Directors;
(3) to engage and terminate attorneys, accountants (subject to the
provisions of the ▇▇▇▇ ▇▇▇) and other professional advisers and
consultants as the General Partner deems necessary or advisable in
connection with the affairs of the Partnership or as may be directed by
the Directors;
(4) to act as tax matters Partner in accordance with Section 3.1(c)
of this Agreement, and to assist in the preparation and filing of any
required tax or information returns to be made by the Partnership;
(5) as directed by the Directors, to commence, defend and conclude
any action, suit, investigation or other proceeding that pertains to the
Partnership or any assets of the Partnership;
(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, the
Investment Manager 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 the officers of the Partnership, 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
11
(12) as directed by the Directors, to establish additional classes
of Limited Partners, General Partners, or Interests having separate
rights, powers, or duties with respect to specified property or
obligations of the Partnership or profits or losses associated with
specified property or obligations of the Partnership, and having separate
business purposes or investment objectives as the Directors may determine,
consistent with the 1940 Act and the Delaware Act, so long as the assets
and liabilities of one class is limited to the assets and liabilities of
such class.
SECTION 3.3 Actions by Directors. (a) Unless provided otherwise in this
Agreement, the Directors will act only: (1) by the affirmative vote of a
majority of the Directors (which majority will include any requisite number of
Independent Directors required by the ▇▇▇▇ ▇▇▇) present at a meeting duly called
at which a quorum of the Directors is present either in person or, to the extent
consistent with the provisions of the 1940 Act, by conference telephone or other
communications equipment by means of which all Persons participating in the
meeting can hear each other; or (2) by unanimous written 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 an officer
of the Partnership 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
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voted on by the Partners at the meeting. The presence in person or by proxy of
Partners holding a majority of the total number of votes eligible to be cast by
all Partners as of the record date will constitute a quorum at any meeting of
Partners. In the absence of a quorum, a meeting may be adjourned to the time or
times as determined by the General Partner and communicated to the Directors in
the manner described above in this Section 3.4(a). Except as otherwise required
by any provision of this Agreement or of the 1940 Act, (1) those candidates
receiving a plurality of the votes cast at any meeting of Partners called
pursuant to Section 2.11(c) of this Agreement or elected pursuant to the
requirement of Section 2.11(b) will be elected as Directors and (2) all other
actions of the Partners taken at a meeting will require the affirmative vote of
Partners holding a majority of the total number of votes eligible to be cast by
those Partners who are present in person or by proxy at the meeting.
(b) Each Partner will be entitled to cast at any meeting of Partners or
pursuant to written consent a number of votes equivalent to the Partner's
Investment Percentage as of the record date for the meeting or the date of the
written consent. The General Partner will establish a record date not less than
10 nor more than 60 days prior to the date of any meeting of Partners 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 Advice and Management. (a) The Directors will, among their
powers, have the authority to cause the Partnership to engage the Investment
Manager to provide Advice and Management to the Partnership under their
direction, subject to the initial approval of any such engagement prior to the
Closing Date by the Directors as required under the 1940 Act (including the vote
of a majority of the Independent Directors at a meeting called for such purpose)
and by the Organizational Limited Partner. As directed by the Directors, the
Partnership and the General Partner, on behalf of the Partnership, among its
powers described in Section 3.2 of this Agreement, will have the authority to
execute, deliver and monitor the performance of any contract or agreement to
provide Advice and Management to the Partnership (each, an "Investment Advisory
Agreement"). Any such Investment Advisory Agreement will require that the
Investment Manager acknowledge its obligations under this Agreement.
(b) The assets of the Partnership shall be invested directly, or
indirectly through an investment in the Master Partnership or otherwise, in
accordance with the "Asset Allocation
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Ranges" set forth in Exhibit A to this Agreement. The Directors may, in their
sole and absolute discretion, change or modify such Asset Allocation Ranges from
time to time, provided that (i) the Directors shall have no authority to change
such Asset Allocation Ranges prior to the first anniversary of the Closing Date
or, in any event, provide for a greater than 25% allocation, at the time of
investment, to investments in which the Partnership does not have the right to
redeem its investment on at least a quarterly basis after a lock-up period not
to exceed one year after the date of investment (e.g., private equity, real
estate, energy, etc., or a partnership or limited liability company in which an
investor only has the right to receive proceeds from its investment upon the
sale of an underlying investment or portfolio company) unless the approval of
Limited Partners that collectively beneficially own sixty percent (60%) of the
Interests is obtained and (ii) in the event that, after such first anniversary,
the Directors so modify or change such Asset Allocation Ranges, the Partnership
shall provide each Limited Partner with ninety (90) days' prior written notice
of such change and the new Asset Allocation Ranges adopted by the Directors,
which shall be put into effect not sooner than the first day of the first Fiscal
Period following the expiration of ninety (90) days following the date on which
such notice was given.
(c) So long as the Investment Manager has been and continues to be
authorized to provide Advice and Management pursuant to an Investment Advisory
Agreement, it will have, subject to any policies and restrictions described in
the Memorandum or adopted from time to time by the Directors and communicated in
writing to the Investment Manager (in each case, as more fully described in such
Investment Advisory Agreement), full discretion and authority on behalf of and
in the name of the Partnership (1) to manage the assets and liabilities of the
Partnership, (2) to identify and evaluate Advisors, Advisor Funds and Advisor
Accounts and to determine the assets of the Partnership to be committed to each
Advisor, Advisor Fund and Advisor Account from time to time, in each case
subject to the terms and conditions of the governing documents of each Advisor,
Advisor Fund and Advisor Account, and (3) to invest directly the assets of the
Partnership in investments pending allocation or reallocation of the assets in
Advisor Funds or Advisor Accounts or to ensure the availability of cash as
required by the Partnership in the ordinary course of its business. In
furtherance of, and subject to the provisions of this Section 3.5(c), the
Investment Manager, except as otherwise provided in the applicable Investment
Advisory Agreement (and at all times subject to the provisions of the 1940 Act),
will have full discretion and authority on behalf of and in the name of the
Partnership:
(1) to purchase, sell, exchange, trade and otherwise deal in and
with Securities and other property of the Partnership, including, without
limitation, interests in Advisor Funds and Advisor Accounts, and to loan
Securities of the Partnership;
(2) to do any and all acts and exercise all rights with respect to
the Partnership's interest as an investor in any Person, including,
without limitation, the voting of limited partnership interests or shares
of Advisor Funds or relating to Advisor Accounts;
(3) to enter into subscription or other agreements relating to
investments in Advisor Funds, including, without limitation, agreements
irrevocably to forego the Partnership's right to vote its limited
partnership (or similar) interests or shares of Advisor Funds;
14
(4) to negotiate the terms of and enter into agreements with
Advisors and Advisor Funds that provide for, among other things, the
payment of management fees, reimbursement of expenses and allocations of
profits to Advisors and the indemnification by the Partnership of Advisors
and Advisor Funds to the same or different extent as provided for with
respect to the Investment Manager, and to amend, modify, terminate or
grant waivers in respect of those agreements;
(5) to open, maintain and close accounts with brokers and dealers,
to make all decisions relating to the manner, method and timing of
Securities and other investment transactions, to select and place orders
with brokers, dealers or other financial intermediaries for the execution,
clearance or settlement of any transactions on behalf of the Partnership
on those terms that the Investment Manager considers appropriate, to grant
limited discretionary authorization to brokers, dealers or other financial
intermediaries with respect to price, time and other terms of investment
and trading transactions, and to delegate any such authority to an
Advisor;
(6) to borrow from banks or other financial institutions and to
pledge the assets of the Partnership as collateral for those borrowings,
to trade on margin, to exercise or refrain from exercising all rights
regarding the Partnership's investments, and to instruct custodians
regarding the settlement of transactions, the disbursement of payments to
Partnership with respect to repurchases of Interests or portions of
Interests and the payment of Partnership expenses, including those
relating to the organization and registration of the Partnership;
(7) to engage the services of Persons, including Affiliates of the
Investment Manager, to assist the Investment Manager in providing, or to
provide under the Investment Manager's control and supervision, Advice and
Management to the Partnership at the expense of the Investment Manager and
to amend, modify or terminate or grant waivers in respect of these
services; and
(8) subject to applicable law, to take all such other actions that
the Investment Manager considers necessary or advisable in furtherance of
its duties and powers under the applicable Investment Advisory Agreement.
(d) The Investment Manager, to the extent of its powers set out in this
Agreement or otherwise vested in it by action of the Directors not inconsistent
with this Agreement, is an agent of the Partnership, and the actions of the
Investment Manager taken or refrained from being taken in accordance with such
powers will bind the Partnership.
SECTION 3.6 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
15
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 U.S. Securities
and Exchange Commission as an investment company under the 1940 Act, and during
any period of time in which the Partnership remains so registered, such
securities shall be under the control of one or more of the Partnership's
custodian(s), as may be engaged from time to time, pursuant to Section 7(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 3.7 Brokerage. The Investment Manager shall, subject to policies
adopted by the Partnership and to the provisions of applicable law, engage
Advisors who may, in the course of selecting brokers, dealers and other
financial intermediaries for the execution, clearance and settlement of
transactions for the Partnership under Sections 3.5(c)(5) and (6) of this
Agreement, agree to commissions, fees and other charges on behalf of the
Partnership as the Advisor deems reasonable in the circumstances, taking into
account all such factors as it deems relevant, including the reliability of the
broker, financial responsibility of the broker, strength of the broker, ability
of the broker to efficiently execute transactions, the broker's facilities, and
the broker's provision or payment of the costs of research and other services
that are of benefit to the Partnership, the Investment Manager and other clients
of and accounts managed by the Investment Manager, even if the cost of these
services does not represent the lowest cost available. The Investment Manager
will be under no obligation to combine or arrange orders so as to obtain reduced
charges unless otherwise required under the U.S. Federal securities laws. The
Investment Manager, subject to procedures adopted by the Directors, may use
Affiliates of the Investment Manager and the General Partner as brokers to
effect the Partnership's Securities transactions and the Partnership may pay
commissions to these brokers in amounts as are permissible under applicable law.
SECTION 3.8 Other Activities. (a) None of the General Partner, the
Investment Manager nor their respective 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 1940 Act.
(b) The Investment Manager, 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 Investment
Manager, the Directors or any Affiliate of any Partner or any profits derived
from these activities.
16
(c) The General Partner, the Investment Manager and their 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, the Investment
Manager or the General Partner has 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, the Investment
Manager 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,
the Investment Manager or the Directors.
SECTION 3.9 Duty of Care. (a) The Directors, the Investment Manager 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 Commission)
in the Partnership's registration statement or other reports required to be
filed with the Commission shall be subject to any greater duty of care in
discharging such Director's duties and responsibilities by virtue of such
designation than is any Director who has not been so designated.
(c) Limited Partners not in breach of any obligation under this Agreement
or under any agreement pursuant to which the Limited Partner subscribed for
Interests will be liable to the Partnership, any Partner or third parties only
as required by this Agreement or applicable law.
SECTION 3.10 Indemnification. (a) To the fullest extent permitted by law,
the Partnership will, subject to Section 3.10(c) of this Agreement, indemnify
each General Partner and Investment Manager (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 or Investment Manager or Partner of a General Partner or Investment
Manager, 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
17
General Partner, Investment Manager 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 3.10 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 3.10.
(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
3.10(a) of this Agreement, so long as (1) the indemnitee provides security for
the undertaking, (2) the Partnership is insured by or on behalf of the
indemnitee against losses arising by reason of the indemnitee's failure to
fulfill his, her or its undertaking, or (3) a majority of the Independent
Directors (excluding any Director who is either seeking advancement of expenses
under this Agreement or is or has been a party to any other action, suit,
investigation or other proceeding involving claims similar to those involved in
the action, suit, investigation or proceeding giving rise to a claim for
advancement of expenses under this Agreement) or independent legal counsel in a
written opinion determines, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that reason exists to believe that the
indemnitee ultimately will be entitled to indemnification.
(c) As to the disposition of any action, suit, investigation or other
proceeding (whether by a compromise payment, pursuant to a consent decree or
otherwise) without an adjudication or a decision on the merits by a court, or by
any other body before which the proceeding has been brought, that an indemnitee
is liable to the Partnership or its Partners by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of the indemnitee's office, indemnification will be provided in
accordance with Section 3.10(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-
18
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 3.10 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 3.10, it
will be a defense that the indemnitee has not met the applicable standard of
conduct described in this Section 3.10. In any suit in the name of the
Partnership to recover any indemnification or advancement of expenses made in
accordance with this Section 3.10, 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 3.10, the burden of proving that the indemnitee is not entitled to
be indemnified, or to any indemnification or advancement of expenses, under this
Section 3.10 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 3.10 or to which he, she or it
may otherwise be entitled except out of the assets of the Partnership, and no
Partner will be personally liable with respect to any such claim for
indemnification or advancement of expenses.
(f) The rights of indemnification provided in this Section 3.10 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 3.10 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 3.10.
SECTION 3.11 Fees, Expenses and Reimbursement. (a) In consideration for
the advisory and other services provided by the Investment Manager to the Master
Partnership pursuant to the Investment Advisory Agreement, the Master
Partnership will pay the Investment Manager a management fee (the "Management
Fee") equal to 1.00% (on an annualized basis) of the Master Partnership's net
assets determined as of the first Business Day of each fiscal quarter.
19
Net assets means the total value of all assets of the Master Partnership, less
an amount equal to all accrued debts, liabilities and obligations of the Master
Partnership. In the case of a partial quarter, the Management Fee will be based
on the number of months during the quarter in which the Investment Manager
invested Master Partnership assets. The Management Fee will be paid to the
Investment Manager out of the capital account of each limited partner of the
Master Partnership pro rata after adjustment for any subscriptions effective on
that date and before giving effect to any repurchase of interests in the Master
Partnership or portions of interests in the Master Partnership effective as of
that date, and will decrease the net profits or increase the net losses of the
Master Partnership that are credited to or debited against the capital accounts
of its limited partners. The Management Fee will be due and payable in advance
within five Business Days after the beginning of each fiscal quarter.
(b) So long as the Partnership invests all of its investable assets in the
Master Partnership, the Partnership will not directly pay a management fee to
the Investment Manager; however, the Fund's Partners bear an indirect share of
the 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.
Subject to applicable law, the Investment Manager is authorized, but not
required, to waive or reduce the Partnership's share of the Management Fee
calculated with respect to, and deductible or deducted from, the Capital
Accounts of Limited Partners.
(c) 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 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.
(d) The Partnership may compensate selected placement agents that
introduce Limited Partners to the Partnership, generally at an annual rate of
0.10% of the initial investment amount and any additional investment amount of
each such Limited Partner and the amount of such compensation will be set forth
in the subscription documents of each such Limited Partner. Various entities and
persons will serve as non-exclusive placement agents for the Partnership
pursuant to solicitor's agreements and placement agency agreements with the
Partnership. The General Partner may terminate any such agreements upon 30 days'
prior written notice. With the approval of the General Partner, a placement
agent may delegate any of its duties, functions or powers as placement agent to
unaffiliated parties to act as sub-placement agents for the Partnership. The
compensation payable to placement agents pursuant to placement agency agreements
are subject to reduction over time to the extent required by applicable
regulations or the requirements of the National Association of Securities
Dealers, Inc. Such compensation may be charged once upon contribution or may be
charged on an on-going basis to the applicable Limited Partner and may be
waived, reduced or rebated for certain Limited Partners in the General Partner's
sole discretion. Any compensation paid in accordance with this Section
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3.11(d) will not constitute a Capital Contribution made by the Partner to the
Partnership nor part of the assets of the Partnership.
(e) The Partnership will compensate the Investment Manager for investor
services pursuant to an investor servicing agreement between the Partnership and
the Investment Manager at an annual rate of 0.40% of the net asset value of the
Interests beneficially owned by customers of the Investment Manager or any
service provider who has entered into a service provider agreement with the
Investment Manager (prorated for shorter periods) as of the first Business Day
of each fiscal quarter (the "Servicing Fee"). A pro rata portion of the
Servicing Fee will be charged to each Limited Partner who subscribes at a time
other than at the beginning of a fiscal quarter. The Investment Manager may pay
a portion of any such compensation to selected service providers that hold
Interests for their customers pursuant to investor servicing agreements between
the Investment Manager and any such service providers. The Investment Manager
may vary, reduce or waive the Servicing Fee in its sole discretion for certain
Limited Partners, including Limited Partners who invest substantial amounts in
the Partnership.
(f) The Partnership will bear all expenses incurred in connection with its
business other than those specifically required to be borne by the Investment
Manager under this Agreement or an Investment Advisory Agreement. Expenses to be
borne by the Partnership include, but are not limited to, the following:
(1) all investment-related expenses, including, but not limited to,
fees paid and expenses reimbursed, directly or indirectly, to Advisors
(including management fees, performance or incentive fees or allocations
and redemption or withdrawal fees, however titled or structured), all
costs and expenses directly related to portfolio transactions and
positions for the Partnership's account, such as direct and indirect
expenses associated with the Partnership's investments, including its
investments in Advisor Funds (whether or not consummated), and enforcing
the Partnership's rights in respect of such investments, transfer taxes
and premiums, taxes withheld on non-U.S. dividends, costs and fees for
data and software (including software providers and dedicated software
employed by the Partnership and designed to assist the Investment Manager
to keep track of the investments in the Advisor Funds and Advisor
Accounts), research expenses, professional fees (including, without
limitation, the fees and expenses of consultants, attorneys and experts)
and, if applicable, in connection with the Partnership's temporary or cash
management investments, brokerage commissions, interest and commitment
fees on loans and debit balances, borrowing charges on Securities sold
short, dividends on Securities sold but not yet purchased and margin fees;
(2) costs associated with the registration of the Partnership,
including the costs of compliance with any applicable U.S. federal and
state laws;
(3) any non-investment-related interest expense;
(4) 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;
21
(5) 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;
(6) fees paid and out-of-pocket expenses reimbursed to the
Partnership's administrator;
(7) recordkeeping, accounting, escrow, and custody fees and
expenses;
(8) the costs of an errors and omissions/directors' and officers'
liability insurance policy and a fidelity bond;
(9) the costs of preparing and mailing reports and other
communications, including proxy, tender offer correspondence or similar
materials, to Limited Partners;
(10) the Management Fee;
(11) 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;
(12) 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 among the Investment Manager
and any custodian, administrator or other agent engaged by the
Partnership;
(13) any extraordinary expenses, including indemnification expenses
as provided for in Section 3.10 of this Agreement;
(14) the Fund's proportionate share of the operating compensation,
certain administrative and overhead costs and expenses of the Investment
Manager, the fees and out-of-pocket expenses of the Investment Manager;
(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 the Investment Manager
or the General Partner; and
(17) the organizational and offering expenses of the Partnership
which will initially be borne by the Investment Manager 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
22
the Directors and the Investment Manager and will equal an amount
sufficient to reimburse the Investment Manager or affiliate thereof within
a sixty-month period.
(g) Each of the Investment Manager and 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
3.11(e)(15) above.
ARTICLE IV
TERMINATION OF STATUS OF GENERAL PARTNER;
REMOVAL OF GENERAL PARTNER; TRANSFERS AND REPURCHASES
SECTION 4.1 Termination of Status of General Partner. A General Partner
will cease to be a general partner of the Partnership if the General Partner (a)
is dissolved or otherwise terminates its existence; (b) voluntarily withdraws as
General Partner (which it may do at any time in its sole discretion); (c) is
removed; (d) Transfers its entire Interest as General Partner as permitted under
Section 4.3 of this Agreement and the Person to which the Interest is
Transferred is admitted as a substituted General Partner under Section 2.6(a) of
this Agreement; or (e) otherwise ceases to be a General Partner under the
Delaware Act.
SECTION 4.2 Removal of General Partner. Any General Partner may be removed
by the vote or written consent of Partners holding not less than 80% of the
total number of votes eligible to be cast by all Partners.
SECTION 4.3 Transfer of Interest of General Partner. A General Partner may
not Transfer all or any portion of its Interest as the General Partner except to
Persons who have agreed to be bound by all of the terms of this Agreement and
applicable law. If a General Partner Transfers its entire Interest as General
Partner, it will not cease to be a General Partner unless and until the
transferee is admitted to the Partnership as a substituted General Partner
pursuant to Section 2.6(a) of this Agreement. In executing this Agreement, each
Partner is deemed to have consented to any Transfer contemplated by this Section
4.3.
SECTION 4.4 Transfer of Interests of Limited Partners. (a) Any Interest or
portion of any Interest held by a Limited Partner may be Transferred only (1) by
operation of law pursuant to the death, bankruptcy, insolvency, adjudicated
incompetence, or dissolution of the Limited Partner; or (2) under certain
limited instances set out in this Agreement, with the written consent of the
General Partner (which may be withheld in the General Partner's sole and
absolute discretion). Unless the Partnership consults with legal counsel to the
Partnership and counsel confirms that the Transfer will not cause the
Partnership to be treated as a "publicly traded partnership" taxable as a
corporation, however, the General Partner may not consent to a Transfer unless
the following conditions are met: (i) the Transferring Limited Partner has been
a Limited Partner for at least six months; (ii) the proposed Transfer is to be
made on the effective date of an offer by the Partnership to repurchase
Interests; and (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,
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the General Partner may not consent to a Transfer unless the Person to whom or
which an Interest or portion of an Interest is Transferred (or each of the
Person's equity owners if the Person is a "private investment company" as
defined in Rule 205-3(d)(3) under the Advisers Act, an investment company
registered under the 1940 Act, or a business development company as defined
under the Advisers Act) is a Person whom or which the General Partner believes
is an "accredited investor" as defined in Regulation D under the 1933 Act and
meets the requirements of paragraph (d)(1) of Rule 205-3 under the Advisers Act
or successor provision of any of those rules, or is otherwise exempt from the
requirements of those rules. In the event that other investor eligibility
requirements are established by the Partnership, the Person to whom or which an
Interest or portion of an Interest is Transferred must satisfy these other
requirements. If any transferee does not meet the investor eligibility
requirements described in this Section 4.4(a), the General Partner may not
consent to the Transfer. In addition, no Limited Partner will be permitted to
Transfer his, her or its Interest or portion of an Interest unless after the
Transfer the balance of the Capital Account of the transferee, and of the
Limited Partner Transferring less than such Partner's entire Interest, is at
least equal to the amount of the Limited Partner's initial Capital Contribution.
Any permitted transferee will be entitled to the allocations and distributions
allocable to the Interest or portion of an Interest so acquired and to Transfer
the Interest or portion of an Interest in accordance with the terms of this
Agreement, but will not be entitled to the other rights of a Limited Partner
unless and until the transferee becomes a substituted Limited Partner. If a
Limited Partner Transfers an Interest or portion of an Interest with the
approval of the General Partner, the General Partner will promptly take all
necessary actions so that each transferee or successor to whom or to which the
Interest or portion of an Interest is Transferred is admitted to the Partnership
as a Limited Partner. The admission of any transferee as a substituted Limited
Partner will be effective upon the execution and delivery by, or on behalf of,
the substituted Limited Partner of this Agreement or an instrument that
constitutes the execution and delivery of this Agreement. Each Limited Partner
and transferee agrees to pay all expenses, including attorneys' and accountants'
fees, incurred by the Partnership in connection with any Transfer. In connection
with any request to Transfer an Interest or portion of an Interest, the
Partnership may require the Limited Partner requesting the Transfer to obtain,
at the Limited Partner's expense, an opinion of counsel selected by the General
Partner as to such matters as the General Partner may reasonably request. If a
Limited Partner Transfers its entire Interest as a Limited Partner, it will not
cease to be a Limited Partner unless and until the transferee is admitted to the
Partnership as a substituted Limited Partner in accordance with this Section
4.4(a).
(b) Each Limited Partner will indemnify and hold harmless the Partnership,
the General Partner, the Investment Manager, the Directors, each other Limited
Partner and any Affiliate of the Partnership, the General Partner, the
Investment Manager, 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 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.
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SECTION 4.5 Repurchase of Interests. (a) Except as otherwise provided in
this Agreement, no Partner or other Person holding an Interest or portion of an
Interest will have the right to withdraw or tender an Interest or portion of an
Interest to the Partnership for repurchase. The Directors may, from time to
time, in their complete and exclusive discretion and on terms and conditions as
they may determine, cause the Partnership to repurchase Interests or portions of
Interests in accordance with written tenders. The Partnership will not offer,
however, to repurchase Interests or portions of Interests on more than four
occasions during any one Fiscal Year, unless the Partnership has been advised by
its legal counsel that more frequent offers would not cause any adverse tax
consequences to the Partnership or the Partners. In determining whether to cause
the Partnership to repurchase Interests or portions of Interests, pursuant to
written tenders, the Directors will consider the following factors, among
others:
(1) whether any Partners have requested to tender Interests or
portions of Interests;
(2) the liquidity of the Partnership's assets (including fees and
costs associated with withdrawing from Advisor Funds);
(3) the investment plans and working capital and reserve
requirements of the Partnership;
(4) the relative economies of scale with respect to the size of the
Partnership;
(5) the history of the Partnership in repurchasing Interests or
portions of Interests;
(6) the availability of information as to the value of the
Partnership's interests in the Advisor Funds and Advisor Accounts;
(7) existing conditions of the securities markets and the economy
generally, as well as political, national or international developments or
current affairs;
(8) the anticipated tax consequences to the Partnership of any
proposed repurchases of Interests or portions of Interests; and
(9) the recommendations of the General Partner and/or the Investment
Manager.
The Directors will cause the Partnership to repurchase Interests or portions of
Interests in accordance with written tenders only on terms fair to the
Partnership and to all Partners and Persons holding Interests or portions of
Interests acquired from Partners.
(b) Upon the commencement of an offer to repurchase Interests, the
Partnership will send an advance notification of the offer (the "Notice") to the
Partners via their financial intermediaries. The Notice will specify, among
other things:
(1) the percentage of Interests that the Partnership is offering to
repurchase;
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(2) the date on which a Partner's repurchase request is due;
(3) the Valuation Date (as defined in Section 4.5(d) below)
applicable to the repurchase offer;
(4) the date the proceeds from their Interest sales shall be due to
the Partners; and
(5) the value of the Interests as of the date of the Notice.
(c) Each repurchase offer will be limited to the repurchase of
approximately 5% of the Interests (but in no event to exceed the repurchase of
more than 20% of the Interests per quarter). A Partner may participate in a
repurchase offer only if it has been a Partner for 12 consecutive months prior
to such offer. The General Partner may, in its sole discretion, permit
repurchases that do not comply with the requirements set forth in this Section
4.5(c) (other than the requirement that the Partnership will not repurchase more
than 20% of the Interests per quarter); provided that such non-conforming
repurchases may be subject to a penalty of up to 5% of the amount requested to
be repurchased (to be netted against withdrawal proceeds). The minimum value of
a repurchase is $50,000, subject to the discretion of the General Partner to
allow otherwise.
(d) Interests are expected to be repurchased at their net asset value
determined as of approximately June 30, September 30, December 31 and March 31,
as applicable (each such date, a "Valuation Date"). Partners tendering Interests
for repurchase shall provide written notice of their intent to so tender by the
date specified in the Notice, which date shall be approximately 65 days (but in
no event less than 60 days) prior to the date of repurchase by the Partnership.
Partners tendering their Interests may not have all such Interests accepted for
repurchase by the Partnership. The Partnership may elect to repurchase less than
the full amount a Partner requests to be repurchased. If a repurchase offer is
oversubscribed, the Partnership will repurchase only a pro rata portion of the
amount tendered by each Partner.
(e) The Directors may under certain circumstances elect to postpone,
suspend or terminate an offer to repurchase Interests.
(f) A Limited Partner tendering a portion of its Interests for repurchase
will be required to maintain a minimum capital account balance of $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(i) of this
26
Agreement and (2) in the view of legal counsel to the Partnership, the
repurchase would not jeopardize the classification of the Partnership as a
Partnership for U.S. federal income tax purposes.
(h) If a General Partner ceases to serve in that capacity under Section
4.1 of this Agreement (other than pursuant to Section 4.1(i)) and the business
of the Partnership is continued in accordance with Section 6.1(a)(2)(B) of this
Agreement, the former General Partner (or its trustee or other legal
representative) may, by written notice to the Directors within 60 days of the
action resulting in the continuation of the Partnership under Section
6.1(a)(2)(B), tender to the Partnership all or any portion of its Interest.
Within 30 days after the receipt of notice, the Directors will cause the
Interest or portion of an Interest to be repurchased by the Partnership for cash
in an amount equal to the balance of the former General Partner's Capital
Account or applicable portion of the Capital Account. If the former General
Partner does not tender to the Partnership all of its Interest as permitted by
this Section 4.5(h), the Interest will automatically convert to and will be
treated in all respects as the Interest of a Limited Partner. If the General
Partner ceases to serve in this capacity under Section 4.1 of this Agreement
(other than pursuant to Section 4.1(i)) and the Partnership is not continued
under Section 6.1(a)(2)(B) of this Agreement, the liquidation and distribution
provisions of Article VI of this Agreement will apply to the General Partner's
Interest.
(i) The General Partner may cause the Partnership to repurchase an
Interest or portion of an Interest of a Limited Partner or any Person acquiring
an Interest from or through a Limited Partner, on terms fair to the Partnership
and to the Limited Partner or Person acquiring an Interest from or through such
Limited Partner, in the event that the General Partner, in its sole discretion,
determines or has reason to believe that:
(1) the Interest or portion of an Interest has been Transferred in
violation of Section 4.4 of this Agreement, or the Interest or portion of
an Interest has vested in any Person other than by operation of law as the
result of the death, dissolution, bankruptcy, insolvency or adjudicated
incompetence of the Limited Partner;
(2) ownership of the Interest or portion of an Interest by a Partner
or other Person is likely to (A) cause the Partnership to be in violation
of, or (B) (x) require registration of any Interest or portion of any
Interest under, or (y) subject the Partnership to additional registration
or regulation under, the securities, commodities or other laws of the
United States or any other relevant jurisdiction;
(3) continued ownership of the Interest or portion of an Interest
may be harmful or injurious to the business or reputation of the
Partnership, the Directors, the General Partner or the Investment Manager
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;
27
(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 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
28
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 $25,000 or such other amount as the
General Partner determines from time to time.
(c) A General Partner may make additional Capital Contributions effective
as of those times and in such amounts as it determines, and will be required to
make additional Capital Contributions from time to time to the extent necessary
to maintain the balance of its Capital Account at an amount, if any, necessary
to ensure that the Partnership will be treated as a Partnership for U.S. federal
income tax purposes. Except as provided in this Section 5.1 or in the Delaware
Act, no General Partner will be required or obligated to make any additional
contributions to the capital of the Partnership.
(d) Subject to the provisions of the 1940 Act, and except as otherwise
permitted by the General Partner, (1) initial and any additional Capital
Contributions by any Partner will be payable in cash or in Securities that the
General Partner, in its absolute discretion, causes the Partnership to accept,
and (2) initial and any additional Capital Contributions in cash will be payable
in readily available funds at the date of the proposed acceptance of the
contribution. The Partnership will charge each Partner making a Capital
Contribution in Securities to the capital of the Partnership an amount as may be
determined by the General Partner to reimburse the Partnership for any costs
incurred by the Partnership by reason of accepting the Securities, and any
charge will be due and payable by the contributing Partner in full at the time
the Capital Contribution to which the charges relate is due. The value of
contributed Securities will be determined in accordance with Section 7.3 of this
Agreement as of the date of contribution.
(e) An Advisor may make Capital Contributions and own Interests in the
Partnership and, in so doing, will become a Limited Partner with respect to the
contributions.
(f) The minimum initial and additional contributions set out in paragraphs
(a) and (b) of this Section 5.1 may be increased or reduced by the General
Partner from time to time. Reductions may be applied to all investors,
individual investors or to classes of investors, in each case in the sole
discretion of the General Partner.
SECTION 5.2 Rights of Partners to Capital. No Partner will be entitled to
interest on the Partner's Capital Contribution, nor will any Partner be entitled
to the return of any capital of the Partnership except (a) upon the repurchase
by the Partnership of all or a portion of the Partner's Interest in accordance
with Section 4.5 of this Agreement, (b) in accordance with the provisions of
Section 5.7(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
29
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 5.7 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, 5.10 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 5.7 of this Agreement.
(e) In the event all or a portion of the Interest of a Partner is
Transferred in accordance with the terms of this Agreement, the transferee will
succeed to the Capital Account of the transferor to the extent of the
Transferred Interest or portion of an Interest.
(f) Subject to Section 5.7(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 Section 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
30
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 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 5.7 Allocation to Avoid Capital Account Deficits. To the extent
that any debits under Sections 5.4 through 5.6 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 5.6 of this Agreement to the
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Capital Account of any Limited Partner previously affected by the application of
this Section 5.7 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 5.7, that have not been
recovered.
SECTION 5.8 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 5.8 to the Capital Account
of any Partner.
SECTION 5.9 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 5.9)
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 5.9) 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 5.9) 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 5.9) 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 5.9,
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 5.9, 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 5.9, the term "Negative Basis" means, with respect to any
Partner and as of any time of calculation, the
32
amount by which the Partner's "adjusted tax basis," for U.S. federal income tax
purposes, in the Partner's Interest in the Partnership as of that time
(determined without regard to any adjustments made to the "adjusted tax basis"
by reason of any Transfer or assignment of the Interest, including by reason of
death, and without regard to such Partner's share of the liabilities of the
Partnership under section 752 of the Code) exceeds the Partner's Capital Account
as of such time. As used in this Section 5.9, 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 5.10 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;
33
(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.
34
SECTION 6.2 Liquidation of Assets. (a) Upon the dissolution of the
Partnership as provided in Section 6.1 of this Agreement, the General Partner
will promptly liquidate the business and administrative affairs of the
Partnership, except that if the General Partner is unable to perform this
function, a liquidator elected by Partners holding a majority of the total
number of votes eligible to be cast by all Partners and whose fees and expenses
will be paid by the Partnership will promptly liquidate the business and
administrative affairs of the Partnership. Net Profit and Net Loss during the
period of liquidation will be allocated in accordance with Article V of this
Agreement. Subject to the Delaware Act, the proceeds from liquidation (after
establishment of appropriate reserves for all claims and obligations, including
all contingent, conditional or unmatured claims and obligations in an amount
that the General Partner or liquidator deems appropriate in its sole discretion
as applicable) will be distributed in the following manner:
(1) the debts of the Partnership, other than debts, liabilities or
obligations to Limited Partners, and the expenses of liquidation
(including legal and accounting fees and expenses incurred in connection
with the liquidation), up to and including the date on which distribution
of the Partnership's assets to the Partners has been completed, will first
be paid on a proportionate basis;
(2) any debts, liabilities or obligations owing to the Limited
Partners will be paid next in their order of seniority and on a
proportionate basis; and
(3) the Partners are paid next on a proportionate basis the positive
balances of their Capital Accounts after giving effect to all allocations
to be made to the Partners' Capital Accounts for the Fiscal Period ending
on the date of the distributions under this Section 6.2(a)(3).
(b) Notwithstanding the provisions of this Section 6.2, upon dissolution
of the Partnership, subject to the Delaware Act and the priorities set out in
Section 6.2(a) of this Agreement, the General Partner or liquidator may
distribute ratably in kind any assets of the Partnership. If any in-kind
distribution is to be made under this Section 6.2(b), (1) the assets distributed
in kind will be valued in accordance with Section 7.3 of this Agreement as of
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
35
discretion is in the best interests of the Partnership. The Partnership's
accounts will be maintained in U.S. currency.
(b) As soon as practicable after the end of each taxable year of the
Partnership, the Partnership will furnish to Partners information regarding the
operation of the Partnership and the Partners' Interests as is necessary for
Partners to complete U.S. Federal and state income tax or information returns
and any other tax information required by U.S. Federal or state law. To the
extent such information may be delayed due to delayed reporting by Advisors with
whom the Partnership invests (through the Master Partnership), the Partners may
be required to file extensions of the filing dates for their income tax returns
at the Federal, state and local levels.
(c) Except as otherwise required by the 1940 Act, or as may otherwise be
permissible under other applicable law, the Partnership will furnish to each
Limited Partner a semiannual report and an annual report containing the
information required by the 1940 Act as soon as practicable. The Partnership
will cause financial statements contained in each annual report furnished under
this Section 7.1 to be accompanied by a certificate of independent public
accountants based upon an audit performed in accordance with generally accepted
accounting principles. The Partnership may furnish to each Partner any other
periodic reports the General Partner deems necessary or appropriate in its
discretion.
(d) The General Partner will notify the Directors of any change in the
holders of interests of the General Partner within a reasonable time after the
change.
SECTION 7.2 Determinations by General Partner. (a) All matters concerning
the determination and allocation among the Partners of the amounts to be
determined and allocated pursuant to Article V of this Agreement, including any
taxes on those amounts and accounting procedures applicable with respect to
those amounts, will be determined by the General Partner unless specifically and
expressly otherwise provided for by the provisions of this Agreement or as
required by law. Any such determinations and allocations will be final and
binding on all of the Partners.
(b) The General Partner may make any adjustments to the computation of Net
Profit and/or Net Loss, or any components (withholding any items of income,
gain, loss or deduction) constituting Net Profit and/or Net Loss as the General
Partner deems appropriate to reflect fairly 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
36
accounting records. Any items of income earned but not received, expenses
incurred but not yet paid, liabilities fixed or contingent, and any other
prepaid expenses to the extent not otherwise reflected in the books of account,
and the value of options or commitments to purchase or sell Securities or
commodities pursuant to agreements entered into prior to the valuation date
will, however, be taken into account in determining the value of the
Partnership's assets.
(b) Subject to the provisions of the 1940 Act, the value of Securities and
other assets of the Partnership and the net asset value of the Partnership as a
whole determined pursuant to this Section 7.3 will be conclusive and binding on
all of the Partners and all Persons claiming through or under them.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.1 Amendment of Partnership Agreement. (a) Except as otherwise
provided in this Section 8.1, this Agreement may be amended, in whole or in
part, with the approval of a majority of the Directors (including the vote of a
majority of the Independent Directors, but only if such vote is required by the
1940 Act), except that any amendment also must be approved by a majority (as
defined in the ▇▇▇▇ ▇▇▇) of the outstanding voting securities of the Partnership
if such vote is required by the ▇▇▇▇ ▇▇▇.
(b) Any amendment that would:
(1) increase the obligation of a Partner to make any Capital
Contribution,
(2) reduce the Capital Account of a Partner other than in accordance
with Article V of this Agreement, or
(3) modify the events causing the dissolution of the Partnership,
may be made only if (A) the written consent of each Partner adversely affected
by the proposed action is obtained prior to the effectiveness of the action or
(B) the amendment does not become effective until (i) each Limited Partner has
received written notice of the amendment and (ii) any Limited Partner objecting
to the amendment has been afforded a reasonable opportunity (under procedures
prescribed by the General Partner in its sole discretion) to tender the
Partner's entire Interest for repurchase by the Partnership. Notwithstanding the
preceding sentence or the 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 3.10 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;
37
(2) amend this Agreement (other than with respect to the matters
described in Section 8.1(b) of this Agreement) to change the name of the
Partnership in accordance with Section 2.2 hereof or to effect compliance
with any applicable law or regulation, including, but not limited to, to
satisfy the requirements of applicable U.S. banking law or regulation, or
to cure any ambiguity or to correct or supplement any provision of this
Agreement that may be inconsistent with any other provision of this
Agreement, so long as the action does not adversely affect the rights of
any Partner in any material respect; and
(3) amend this Agreement to make any changes necessary or desirable,
based on advice of legal counsel to the Partnership, to assure the
Partnership's continuing eligibility to be classified for U.S. federal
income tax purposes as a Partnership that is not treated as a corporation
for tax purposes under the Code; subject, however, to the limitation that
any material amendment to this Agreement under Section 8.1(c)(2) or (3) of
this Agreement will be valid only if approved by a majority of the
Directors (including the vote of a majority of the Independent Directors,
if required by the 1940 Act).
(d) The General Partner will give prior written notice of any proposed
amendment to this Agreement (other than any amendment of the type contemplated
by Section 8.1(c)(1) of this Agreement) to each Partner, which notice sets out
(1) the text of the proposed amendment or (2) a summary of the amendment and a
statement that the text of the amendment will be furnished to any Partner upon
request.
SECTION 8.2 Special Power of Attorney. (a) Each Partner irrevocably makes,
constitutes and appoints the General Partner and each of the Directors, acting
severally, and any liquidator of the Partnership's assets appointed pursuant to
Section 6.2 of this Agreement with full power of substitution, the true and
lawful representatives and attorneys-in-fact of, and in the name, place and
stead of, the Partner, with the power from time to time to make, execute, sign,
acknowledge, swear to, verify, deliver, record, file and/or publish:
(1) any amendment to this Agreement;
(2) any amendment to the Certificate, including, without limitation,
any such amendment required to reflect any amendments to this Agreement,
and including, 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
38
respect to the Partnership without the Partner's consent. Each Partner agrees
that if an amendment to the Certificate or this Agreement or any action by or
with respect to the Partnership is taken in the manner contemplated by this
Agreement, notwithstanding any objection that the Partner may assert with
respect to the action, the attorneys-in-fact appointed under this Agreement are
authorized and empowered, with full power of substitution, to exercise the
authority granted in this Section 8.2 in any manner that may be necessary or
appropriate to permit the amendment to be made or action lawfully taken or
omitted. Each Partner is fully aware that each Partner will rely on the
effectiveness of this special power of attorney with a view to the orderly
administration of the affairs of the Partnership.
(c) The power of attorney contemplated by this Section 8.2 is a special
power of attorney and is coupled with an interest in favor of the General
Partner and each of the Directors, acting severally, and any liquidator of the
Partnership's assets appointed under Section 6.2 of this Agreement, and as such
the power of attorney:
(1) will be irrevocable and continue in full force and effect
notwithstanding the subsequent death or incapacity of any Person granting
the power of attorney, regardless of whether the Partnership, the General
Partner, the Directors or any liquidator has had notice of the death or
incapacity; and
(2) will survive the delivery of a Transfer by a Partner of the
whole or any portion of the Partner's Interest, except that, when the
transferee of an Interest or portion of an Interest has been approved by
the General Partner for admission to the Partnership as a substituted
Partner, the power of attorney given by the transferor will survive the
delivery of the assignment for the sole purpose of enabling the General
Partner, the Directors or any liquidator to execute, acknowledge and file
any instrument necessary to effect the substitution.
SECTION 8.3 Notices. Notices that may or are required to be provided under
this Agreement will be made to a Partner by hand delivery, regular mail
(registered or certified mail return receipt requested in the case of notice to
the General Partner), commercial courier service, telecopier, or electronic mail
(with a confirmation copy by registered or certified mail in the case of notices
to the General Partner by telecopier or electronic mail), and will be addressed
to the Partner at his, her or its address as set out in the books and records of
the Partnership (or to any other address as may be 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
39
attempted Transfer or delegation of those rights and obligations that is not
made in accordance with the terms of this Agreement will be void.
SECTION 8.5 Choice of Law; Arbitration. (a) Notwithstanding the location
at which this Agreement is executed by any of the Partners, the Partners
expressly agree that all the terms and provisions of this Agreement are governed
by and will be construed under the laws of the State of Delaware, including the
Delaware Act, without regard to the conflict of law principles of the State of
Delaware.
(b) To the extent such action is consistent with the provisions of the
1940 Act and any other applicable law, except as provided in Section 8.10(b) of
this Agreement, each Partner agrees to submit all controversies arising between
or among Partners or one or more Partners and the Partnership in connection with
the Partnership or its businesses or concerning any transaction, dispute or the
construction, performance or breach of this Agreement or any other agreement
relating to the Partnership, whether entered into prior to, on or subsequent to
the date of this Agreement, to arbitration in accordance with the provisions set
out in this Section 8.5. EACH PARTNER UNDERSTANDS THAT ARBITRATION IS FINAL AND
BINDING ON THE PARTNERS AND THAT THE PARTNERS IN EXECUTING THIS AGREEMENT ARE
WAIVING THEIR RIGHTS TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO JURY
TRIAL.
(c) Controversies will be finally settled by, and only by, arbitration in
accordance with the commercial arbitration rules of the American Arbitration
Association (the "AAA") to the fullest extent permitted by law. The place of
arbitration will be Raleigh, North Carolina. Any arbitration under this Section
8.5 will be conducted before a panel of three arbitrators. The Partner or
Partners initiating arbitration under this Section 8.5 will appoint one
arbitrator in the demand for arbitration. The Partner or Partners against whom
or which arbitration is sought will jointly appoint one arbitrator within 30
Business Days after notice from the AAA of the filing of the demand for
arbitration. The two arbitrators nominated by the Partners will attempt to agree
on a third arbitrator within 30 Business Days of the appointment of the second
arbitrator. If the two arbitrators fail to agree on the third arbitrator within
the 30-day period, then the AAA will appoint the third arbitrator within 30
Business Days following the expiration of the 30-day period. Any award rendered
by the arbitrators will be final and binding on the Partners, and judgment upon
the award may be entered in the supreme court of the state of New York and/or
the U.S. District Court for the Southern District of New York, or any other
court having jurisdiction over the award or having jurisdiction over the
Partners or their assets. The arbitration 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
40
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 3.10 of this Agreement, no rights are granted to non-Partner
creditors under this Agreement.
SECTION 8.7 Consents. Any and all consents, agreements or approvals
provided for or permitted by this Agreement (including minutes of any meeting)
must be in writing and a signed copy of any such consent, agreement or approval
will be filed and kept with the books of the Partnership.
SECTION 8.8 Merger and Consolidation. (a) The Partnership may merge or
consolidate with or into one or more limited partnerships formed under the
Delaware Act or other business entities under an agreement of merger or
consolidation that has been approved in the manner contemplated by the Delaware
Act.
(b) Notwithstanding anything to the contrary in this Agreement, an
agreement of merger or consolidation approved in accordance with the Delaware
Act may, to the extent permitted by the Delaware Act, (1) effect any amendment
to this Agreement, (2) effect the adoption of a new Partnership agreement for
the Partnership if it is the surviving or resulting limited partnership in the
merger or consolidation, or (3) provide that the Partnership agreement of any
other constituent Partnership to the merger or consolidation (including a
limited partnership formed for the purpose of consummating the merger or
consolidation) will be the Partnership agreement of the surviving or resulting
limited partnership.
(c) The Partnership may convert to another Delaware business entity in
accordance with the Delaware Act upon the approval of the Partners representing
a majority (as defined in the ▇▇▇▇ ▇▇▇) of the outstanding voting securities of
the Partnership.
SECTION 8.9 Pronouns. All pronouns used in this Agreement will be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the Person or Persons, firm or entity may require in the context in which
they are used.
SECTION 8.10 Confidentiality. (a) A Limited Partner may obtain from the
General Partner, upon reasonable demand for any purpose reasonably related to
the Limited Partner's Interest in the Partnership, information regarding the
affairs of the Partnership as is just and reasonable under the Delaware Act,
subject to reasonable standards (including standards
41
governing the information and documents to be furnished, at what time and
location and at whose expense) established by the General Partner in its sole
discretion.
(b) Each Limited Partner agrees in executing this Agreement that, except
as required by applicable law or any regulatory body, the Limited Partner will
not divulge, furnish or make accessible to any other Person the name or address
(whether business, residence or mailing) of any Limited Partner (collectively,
"Confidential Information") without the prior written consent of the General
Partner, which consent may be withheld in its sole discretion.
(c) Each Partner recognizes that in the event that this Section 8.10 is
breached by any Partner or any of its principals, Partners, members, directors,
officers, employees or agents or any of the Partner's Affiliates, including any
of the Affiliate's principals, Partners, members, directors, officers, employees
or agents, irreparable injury may result to the non-breaching Partners and the
Partnership. In recognition of that irreparable injury, any non-breaching
Partner may have, in addition to any and all other remedies at law or in equity
to which the non-breaching Partner and the Partnership may be entitled, the
right to obtain equitable relief, including, without limitation, injunctive
relief, to prevent any disclosure of Confidential Information, plus reasonable
attorneys' fees and other litigation expenses incurred in connection with
obtaining the equitable relief. If any non-breaching Partner or the Partnership
("Initiating Non-Breaching Party") determines that any other Partner or any of
that Partner's principals, Partners, members, directors, officers, employees or
agents or any of the Partner's Affiliates, including any of the Affiliates'
principals, Partners, members, directors, officers, employees or agents, should
be enjoined from or required to take any action to prevent the disclosure of
Confidential Information, each of the other non-breaching Partners agrees to
join the non-breaching Initiating Non-Breaching Party in pursuing injunctive
relief in a court of appropriate jurisdiction.
(d) The General Partner will have the right to keep confidential from the
Limited Partners, for any period of time as the General Partner deems reasonable
in its sole discretion, any information that the General Partner reasonably
believes to be in the nature of trade secrets or other information the
disclosure of which the General Partner in good faith believes is not in the
best interest of the Partnership or could damage the Partnership or its business
or that the Partnership is required by law or by agreement with a third party to
keep confidential.
SECTION 8.11 Certification of Non-Foreign Status. Each Limited Partner or
transferee of an Interest or a portion of an Interest from a Limited Partner who
or that is admitted to the Partnership in accordance with this Agreement will
certify, upon admission to the Partnership and at any other time as the General
Partner may request, whether the Limited Partner or transferee is a "United
States Person" within the meaning of the Code on forms to be provided by the
Partnership, and will notify 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, the
General Partner or the Investment Manager
42
not to be enforceable in the manner set out in this Agreement, then the
provision should be enforceable to the maximum extent possible under applicable
law. If any provision of this Agreement is held to be invalid or unenforceable,
the invalidation or unenforceability will not affect the validity or
enforceability of any other provision of this Agreement (or portion of the
provision).
SECTION 8.13 Entire Agreement. This Agreement constitutes the entire
agreement among the Partners pertaining to the subject matter of this Agreement
and supersedes all prior agreements and understandings pertaining to that
subject matter.
Notwithstanding any other provision of this Agreement, including Section
8.1, each Partner, in executing this Agreement, acknowledges and agrees that the
General Partner, on its own behalf or on behalf of the Partnership, without the
approval of the Limited Partners or any other Person, may enter into a written
agreement or agreements with any other Partner, executed contemporaneously with
the admission of the other Partner to the Partnership, affecting or modifying
the terms of, or establishing rights under, this Agreement or any subscription
agreement. Each Partner agrees that any terms contained in any such other
agreement with another Partner will govern with respect to the other Partner
notwithstanding the provisions of this Agreement or any subscription agreement,
and that the Partner will have no rights in respect of those granted in favor of
such other Partner.
SECTION 8.14 Discretion. To the fullest extent permitted by law, whenever
in this Agreement a Person is permitted or required to make a decision (a) in
its "sole discretion" or "discretion" or under a grant of similar authority or
latitude, the Person will be entitled to consider only those interests and
factors as he, she or it desires, including his, her or its own interests, and,
to the fullest extent permitted by law, will have no duty or obligation to give
any consideration to any interest of or factors affecting the Partnership or the
Limited Partners, or (b) in its "good faith" or under another express standard,
then the Person will act under the express standard and will not be subject to
any other or different standards imposed by this Agreement or any other
agreement contemplated by this Agreement or by relevant provisions of law or in
equity or otherwise.
SECTION 8.15 Conflicts. The Partners acknowledge and agree that the
General Partner and its Affiliates may engage in activities in which their
respective interests or the interests of their clients may conflict with the
interests of the Partnership or the Limited Partners, and that the resolution of
such conflicts may not always be resolved by the General Partner or its
Affiliates in favor of the Partnership or the Limited Partners.
SECTION 8.16 Counterparts. This Agreement may be executed in several
counterparts, all of which together will constitute one agreement binding on all
Partners, notwithstanding that all the Partners have not signed the same
counterpart.
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]
43
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:
EachPerson 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.
EXHIBIT A
ASSET ALLOCATION RANGES FOR ASSET CLASSES. The initial "Asset Allocation
Ranges" are intended to be as follows:
RANGE
-------------------------------------
ASSET CLASS MIN. TARGET MAX.
----------- ---- ------ ----
Opportunistic Equity 15% 25% 35%
Enhanced Fixed Income 15% 25% 35%
Absolute Return 10% 20% 30%
Private Equity 5% 10% 15%
Real Estate 5% 10% 15%
Energy/Natural Resources 5% 10% 15%