<PAGE> 1
As filed with the Securities and Exchange Commission on January 3, 1997
Investment Company Act File No. 811-_________
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM N-2
(CHECK APPROPRIATE BOX OR BOXES)
[ ] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No._______________
[ ] Post-Effective Amendment No.______________
and/or
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
----------------------
TROON PARTNERS, L.P.
(Exact name of Registrant as specified in Charter)
Oppenheimer Tower
One World Financial Center
33rd Floor
200 Liberty Street
New York, New York 10281
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code: (212) 667-4225
----------------------
MITCHELL A. TANZMAN
Managing Director
Oppenheimer & Co., Inc.
Oppenheimer Tower
One World Financial Center
33rd Floor
200 Liberty Street
New York, New York 10281
(Name and address of agent for service)
Copy to:
KENNETH S. GERSTEIN, ESQ.
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
It is proposed that this filing will become effective (check appropriate box)
[ ] when declared effective pursuant to section 8 (c)
The following boxes should only be included and completed if the registrant is
a registered closed-end management investment company or business development
company which makes periodic repurchase offers under Rule 23c-3 under the
Investment Company Act and is making this filing in accordance with Rule 486
under the Securities Act.
<PAGE> 2
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a)
If appropriate, check the following box:
[ ] this [post-effective] amendment designates a new effective
date for a previously filed [post- effective amendment] [registration
statement].
----------------------
This Registration Statement has been filed by Registrant pursuant to Section
8(b) of the Investment Company Act of 1940, as amended. However, partnership
interests in the Registrant are not being registered under the Securities Act
of 1933, as amended (the "1933 Act"), since such interests will be issued
solely in private placement transactions which do not involve any "public
offering" within the meaning of Section 4(2) of the 1933 Act. Investments in
Registrant may only be made by individuals or entities which are "accredited
investors" within the meaning of Regulation D under the 1933 Act. This
Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any partnership interests in Registrant.
2
<PAGE> 3
FORM N-2
TROON PARTNERS, L.P.
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
<TABLE>
<CAPTION>
PART A
ITEM NUMBER CAPTION PROSPECTUS CAPTION
- ----------- ------- ------------------
<S> <C> <C>
1. Outside Front Cover Outside Front Cover of Confidential Memorandum
2. Inside Front and Outside Back Cover Outside Front Cover of Confidential Memorandum
Page
3. Fee Table and Synopsis Summary of Terms; Fees and Expenses; Capital
Accounts and Allocations - Incentive Allocation
4. Financial Highlights Not Applicable
5. Plan of Distribution Not Applicable
6. Selling Shareholders Not Applicable
7. Use of Proceeds Not Applicable
8. General Description of the Summary of Terms; The Partnership; Investment
Registrant Program; Types of Investments and Related Risk
Factors; Additional Risk Factors
9. Management Summary of Terms; The Partnership; Individual
General Partners; The Manager, Opco and MAMC;
Brokerage; Fees and Expenses; Capital Accounts and
Allocations - Incentive Allocation; Additional
Information and Summary of Limited Partnership
Agreement - Custodian
</TABLE>
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<TABLE>
<CAPTION>
PART A
ITEM NUMBER CAPTION PROSPECTUS CAPTION
- ----------- ------- ------------------
<S> <C> <C>
10. Capital Stock, Long-Term Debt, and Summary of Terms; Voting; Capital Accounts and
Other Securities Allocations; Subscription for Interests;
Redemptions, Repurchases of Interests and
Transfers; Tax Aspects; Additional Information and
Summary of Limited Partnership Agreement
11. Defaults and Arrears on Senior Not Applicable
Securities
12. Legal Proceedings Not Applicable
13. Table of Contents of the Statement Not Applicable
of Additional Information
</TABLE>
<TABLE>
<CAPTION>
PART B
ITEM NUMBER CAPTION PROSPECTUS CAPTION
- ----------- ------- ------------------
<S> <C> <C>
14. Cover Page Not Applicable
15. Table of Contents Not Applicable
16. General Information and History Not Applicable
17. Investment Objective and Policies Summary of Terms; Investment Program; Types of
Investments and Related Risk Factors; Additional
Risk Factors; Brokerage
18. Management Summary of Terms; Individual General Partners
19. Control Persons and Principal The Manager, Opco and MAMC
Holders of Securities
</TABLE>
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<TABLE>
<CAPTION>
PART B
ITEM NUMBER CAPTION PROSPECTUS CAPTION
- ----------- ------- -------------------
<S> <C> <C>
20. Investment Advisory and Other Summary of Terms; The Manager, Opco and MAMC; Fees
Services and Expenses; Capital Accounts and Allocations -
Incentive Allocations; Additional Information and
Summary of Limited Partnership Agreement
21. Brokerage Allocation and Other Conflicts of Interest; Brokerage
Practices
22. Tax Status Summary of Terms; Tax Aspects
23. Financial Statements Because Registrant has no assets, financial
statements are omitted.
</TABLE>
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Copy Number:
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----------------------------
TROON PARTNERS, L.P.
----------------------------
CONFIDENTIAL MEMORANDUM
JANUARY 1997
----------------------------
TROON MANAGEMENT, L.L.C.
INVESTMENT ADVISER
GENERAL PARTNER
----------------------------
OPPENHEIMER TOWER
ONE WORLD FINANCIAL CENTER, 33RD FLOOR
200 LIBERTY STREET
NEW YORK, NEW YORK 10281
(212) 667-4225
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY UPON THEIR OWN
EXAMINATION OF TROON PARTNERS, L.P. AND THE TERMS OF THE OFFERING, INCLUDING
THE MERITS AND RISKS INVOLVED. THE LIMITED PARTNERSHIP INTERESTS OF TROON
PARTNERS, L.P. HAVE NOT BEEN FILED WITH OR APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER FEDERAL OR STATE GOVERNMENTAL
AGENCY OR REGULATORY AUTHORITY OR ANY NATIONAL SECURITIES EXCHANGE. NO AGENCY,
AUTHORITY OR EXCHANGE HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
CONFIDENTIAL MEMORANDUM OR THE MERITS OF AN INVESTMENT IN THE LIMITED
PARTNERSHIP INTERESTS OF TROON PARTNERS, L.P. OFFERED HEREBY. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 7
TO ALL INVESTORS
THE LIMITED PARTNERSHIP INTERESTS OF TROON PARTNERS, L.P. WHICH ARE DESCRIBED
IN THIS CONFIDENTIAL MEMORANDUM HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY OF THE
STATES OF THE UNITED STATES. THE OFFERING CONTEMPLATED BY THIS CONFIDENTIAL
MEMORANDUM WILL BE MADE IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, FOR OFFERS AND SALES OF
SECURITIES WHICH DO NOT INVOLVE ANY PUBLIC OFFERING, AND ANALOGOUS EXEMPTIONS
UNDER STATE SECURITIES LAWS.
THIS CONFIDENTIAL MEMORANDUM SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF LIMITED
PARTNERSHIP INTERESTS IN TROON PARTNERS, L.P. IN ANY JURISDICTION IN WHICH SUCH
OFFER, SOLICITATION OR SALE IS NOT AUTHORIZED OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OR SALE. NO PERSON HAS BEEN
AUTHORIZED TO MAKE ANY REPRESENTATIONS CONCERNING TROON PARTNERS, L.P. THAT ARE
INCONSISTENT WITH THOSE CONTAINED IN THIS CONFIDENTIAL MEMORANDUM. PROSPECTIVE
INVESTORS SHOULD NOT RELY ON ANY INFORMATION NOT CONTAINED IN THIS CONFIDENTIAL
MEMORANDUM OR THE EXHIBITS HERETO.
THIS CONFIDENTIAL MEMORANDUM IS INTENDED SOLELY FOR THE USE OF THE PERSON TO
WHOM IT HAS BEEN DELIVERED FOR THE PURPOSE OF EVALUATING A POSSIBLE INVESTMENT
BY THE RECIPIENT IN THE LIMITED PARTNERSHIP INTERESTS DESCRIBED HEREIN, AND IS
NOT TO BE REPRODUCED OR DISTRIBUTED TO ANY OTHER PERSONS (OTHER THAN
PROFESSIONAL ADVISERS OF THE PROSPECTIVE INVESTOR RECEIVING THIS DOCUMENT).
PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS CONFIDENTIAL
MEMORANDUM AS LEGAL, TAX OR FINANCIAL ADVICE. EACH PROSPECTIVE INVESTOR SHOULD
CONSULT HIS OWN PROFESSIONAL ADVISERS AS TO THE LEGAL, TAX, FINANCIAL OR OTHER
MATTERS RELEVANT TO THE SUITABILITY OF AN INVESTMENT IN TROON PARTNERS, L.P.
FOR SUCH INVESTOR.
THESE SECURITIES ARE SUBJECT TO SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
LIMITED PARTNERSHIP AGREEMENT OF TROON PARTNERS, L.P., THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR UP TO TWO (2)
YEARS FROM THE DATE THAT A REPURCHASE REQUEST HAS BEEN MADE BY AN INVESTOR.
FOR GEORGIA RESIDENTS ONLY
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE
SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT
TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
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<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SUMMARY OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
THE PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT PROGRAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
TYPES OF INVESTMENTS AND RELATED RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ADDITIONAL RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
INDIVIDUAL GENERAL PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
THE MANAGER, OPCO AND MAMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
CONFLICTS OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
CAPITAL ACCOUNTS AND ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SUBSCRIPTION FOR INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
REDEMPTIONS, REPURCHASES OF INTERESTS AND TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
TAX ASPECTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ADDITIONAL INFORMATION AND SUMMARY OF LIMITED PARTNERSHIP AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 52
APPENDIX - PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
</TABLE>
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SUMMARY OF TERMS
The following summary is qualified entirely by the detailed
information appearing elsewhere in this Confidential
Memorandum and by the terms and conditions of the limited
partnership agreement of Troon Partners, L.P. (the
"Partnership Agreement"), each of which should be read
carefully and retained by any prospective investor.
The Partnership Troon Partners, L.P. (the "Partnership") is a
newly organized Delaware limited partnership,
registered under the Investment Company Act of
1940 (the "1940 Act") as a closed-end, non-
diversified, management investment company.
The Partnership is a specialized investment
vehicle that may be referred to as a registered
private investment partnership. The Partnership
is similar to an unregistered private investment
partnership in that (i) the Partnership's
portfolio may be more actively managed than most
other investment companies, (ii) limited
partnership interests in the Partnership will be
sold in large minimum denominations in private
placements solely to high net worth individual and
institutional investors, and thus will be
restricted as to transfer, and (iii) the capital
accounts of Limited Partners in the Partnership
will be subject to both asset-based charges and
performance-based allocations in connection with
the Partnership's activities. Unlike a private
investment partnership but like other registered
investment companies, however, the Partnership has
registered under the 1940 Act to be able to offer
its interests without limiting the number of
investors that can participate in its investment
program.
Investment Program The Partnership's investment objective is to seek
long-term capital appreciation. The Partnership
will pursue this objective by investing
principally in publicly traded common stocks and
other equity securities of U.S. companies. In
seeking capital appreciation, the Partnership may
also invest in equity securities of foreign
issuers and in bonds and other fixed-income
securities of U.S. issuers. The Manager (defined
below) seeks to maximize the Partnership's ability
to generate long-term capital gain by pursuing
investments in securities from a long-term
perspective. (See "TYPES OF INVESTMENTS AND
RELATED RISK FACTORS - Equity Securities,"
"- Bonds and Other Fixed-Income Securities" and
"- Foreign Securities.")
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<PAGE> 10
The philosophy of the Manager contemplates
disciplined, fundamental, research-oriented value
investing. The Manager will invest the
Partnership's assets in the equity securities of
issuers that it believes are substantially
undervalued based upon its assessment of the value
of their assets or their earnings growth
potential, or both. The Manager may also invest
in bonds and other fixed-income securities when
such securities offer opportunities for capital
appreciation.
In managing the investment portfolio of the
Partnership, the Manager will attempt to be alert
and flexible in seeking both to maximize the
Partnership's opportunities and to conserve its
capital, and may invest all or a substantial
portion of the Partnership's assets in
fixed-income securities and hold cash and cash
equivalents for temporary defensive purposes.
The Partnership may use various investment
strategies to hedge a portion of its investment
portfolio against certain risks or to pursue its
investment objective. In this regard, the
Partnership may utilize leverage, sell securities
short, and purchase and sell options on securities
and stock indices, subject to certain limitations
described elsewhere in this Confidential
Memorandum. The use of these investment
techniques and instruments will be an integral
part of the Partnership's investment program, and
involves certain risks. (See "TYPES OF
INVESTMENTS AND RELATED RISK FACTORS.")
Risk Factors The Partnership's investment program is
speculative and entails substantial risks. There
can be no assurance that the Partnership's
investment objective will be achieved. In
particular, the Partnership's use of leverage,
short selling and derivative transactions and
limited diversification can, in certain
circumstances, result in significant losses to the
Partnership. (See "TYPES OF INVESTMENTS AND
RELATED RISK FACTORS - Leverage," "- Short Sales,"
"- Special Investment Instruments and Techniques"
and "- Limited Diversification.") Investments in
illiquid securities and foreign securities by the
Partnership will also involve certain risks.
As a non-diversified investment company, there are
no percentage limitations on the portion of the
Partnership's assets that may be invested in the
securities of any one issuer. The Partnership
intends generally to invest no more than 15% of
the value of its total assets in the securities of
any one issuer. However, while seeking desirable
investments the Partnership
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may temporarily exceed this limitation. As a
result, its investment portfolio may be subject to
greater risk and volatility than if investments
had been made in the securities of a broader range
of issuers.
Investments in foreign securities are affected by
risk factors generally not thought to be present
in the U.S., including, among other things,
increased political, regulatory, contractual and
economic risk and exposure to currency
fluctuations. Certain other types of securities,
such as derivatives, also are affected by
particular risks as described herein.
The Incentive Allocation (defined below) that may
be debited to the capital account of each Limited
Partner and credited to the capital account of the
Manager may create an incentive for the Manager to
cause the Partnership to make investments that are
riskier or more speculative than would be the case
in the absence of the Incentive Allocation. In
addition, because such allocation is calculated on
a basis that includes unrealized appreciation of
the Partnership's assets, such allocation may be
greater than if such allocation was based solely
on realized gains.
There are special tax risks associated with an
investment in the Partnership. (See "SUMMARY OF
TERMS - Taxation.")
The Partnership and the Manager are newly formed
entities and have no operating histories upon
which investors can evaluate the performance of
the Partnership. The principal members of the
Manager, however, together have substantial
experience in managing separately managed client
accounts and private investment partnerships that
have investment programs that are similar to the
Partnership's investment program.
Limited Partner interests in the Partnership will
not be traded on any securities exchange or other
market and are subject to substantial restrictions
on transfer. Although the Partnership may offer
to repurchase such interests from time to time, a
Limited Partner may not be able to liquidate its
interest in the Partnership for up to two years.
(See "SUMMARY OF TERMS - Transfer Restrictions"
and "- Withdrawals and Repurchases of Interests by
the Partnership.")
Limited Partners will be required each year to pay
applicable Federal and state income taxes on their
share of the Partnership's taxable income.
Because the Partnership does not intend to make
periodic distributions of its net income or gains,
if any, to
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<PAGE> 12
the Limited Partners, the payment of any such
taxes by a Limited Partner will have to be made
from other sources.
Management Investment advice will be provided to the
Partnership by one of its General Partners, Troon
Management, L.L.C. (the "Manager"), which is also
responsible for the Partnership's day-to-day
management. The Manager is a joint venture
between Oppenheimer & Co., Inc. ("Opco") and Mark
Asset Management Corporation ("MAMC"). Investment
professionals employed by MAMC will manage the
Partnership's investment portfolio on behalf of
the Manager under Opco's supervision.
Opco (directly or through affiliates) provides
investment advisory services to registered
investment companies, private investment
partnerships and individual accounts on a non-
pooled basis. MAMC provides investment advisory
services on a pooled and non-pooled basis to
pension and profit sharing plans, to individual
accounts, and to trusts, estates and charitable
organizations. Morris Mark is the President,
Treasurer, principal shareholder and a director of
MAMC. Morris Mark also is the general partner and
investment manager of a private investment fund.
Ultimate responsibility over the affairs of the
Partnership is vested in the Partnership's five
individual general partners (the "Individual
General Partners"). (See "INDIVIDUAL GENERAL
PARTNERS.")
Placement Agent Opco acts as placement agent for the Partnership,
without special compensation from the Partnership,
and will bear its own costs associated with its
activities as placement agent. Opco, as managing
member of the Manager and in its capacity as
placement agent for the Partnership, intends to
compensate its account executives for their
ongoing servicing of clients with whom they have
placed interests in the Partnership, and such
compensation will be based upon a formula that
takes into account the amount of client assets
being serviced as well as the investment results
attributable to such clients' assets in the
Partnership. (See "CONFLICTS OF INTEREST -
Opco.")
Conflicts of Interest Certain conflicts of interest may arise from the
following: (i) Opco (directly or through
affiliates) and MAMC (directly or through
affiliates) each engages in investment management
activities for its own account and the accounts of
others in which
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<PAGE> 13
the Partnership has no interest and may have
actual or potential conflicts of interest with
respect to investments made by the Manager on
behalf of the Partnership; (ii) MAMC and its
affiliates manage accounts (in which the
Partnership has no interest) of certain other
persons in accordance with an investment program
that is substantially similar to the Partnership's
investment program, but (a) such accounts may
commit a larger percentage of their respective
assets to an investment opportunity than the
Manager will commit of the Partnership's assets
and (b) there may be circumstances under which
MAMC and its affiliates will consider
participation by such accounts in investment
opportunities in which the Manager does not intend
to invest on behalf of the Partnership; (iii)
situations may occur where the Partnership could
be disadvantaged because of the investment
activities conducted by MAMC and its affiliates
for the other accounts they manage; (iv) the
Partnership may enter into certain transactions
with one or more accounts that are managed by MAMC
or its affiliates, but only in accordance with the
1940 Act; (v) MAMC and/or its affiliates may in
the future provide investment advisory services
from time to time to private investment
partnerships or other entities or accounts that
are managed by Opco or its affiliates; and (vi)
MAMC and/or its affiliates may receive research,
products and/or services in connection with the
brokerage services that Opco and/or its affiliates
may provide from time to time (a) to one or more
entities managed by MAMC or its affiliates or (b)
to the Partnership. Future activities of Opco
and/or MAMC (including the principals, partners,
directors, officers and employees of the foregoing
or of their respective affiliates) may give rise
to additional conflicts of interest. (See
"CONFLICTS OF INTEREST.")
Fees and Expenses Opco provides certain management and
administrative services to the Partnership,
including, among other things, providing office
space and other support services to the
Partnership. In consideration for such services,
the Partnership will pay Opco a monthly management
fee of 0.08333% (1% on an annualized basis) of the
Partnership's net assets for the month, excluding
assets attributable to the Manager's capital
account (the "Opco Fee"). The Opco Fee will be
paid to Opco out of the Partnership's assets, and
debited against Limited Partners' capital
accounts. A portion of the Opco Fee will be paid
by Opco to MAMC.
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<PAGE> 14
The Partnership will bear all expenses incurred in
the business of the Partnership, including, but
not limited to, the following: all costs and
expenses related to portfolio transactions and
positions for the Partnership's account; legal
fees; accounting fees; costs of insurance;
organizational and registration expenses; certain
offering costs; expenses of meetings of General
Partners and/or Limited Partners (collectively,
the "Partners"); and the fee paid to PFPC Inc. for
providing certain administration, accounting and
investor services to the Partnership. (See "FEES
AND EXPENSES.")
Allocation of Profit
and Loss The net profits or net losses of the Partnership
(including, without limitation, net realized gain
or loss and the net change in unrealized
appreciation or depreciation of securities
positions) will be credited to or debited against
the capital accounts of the Partners at the end of
each fiscal period in accordance with their
respective partnership percentages for such
period. Each Partner's partnership percentage
will be determined by dividing as of the start of
a fiscal period the balance of such Partner's
capital account by the sum of the balances of the
capital accounts of all Partners of the
Partnership. (See "CAPITAL ACCOUNTS AND
ALLOCATIONS - Allocation of Net Profits and Net
Losses.")
Incentive Allocation At the end of the twelve month period following
the admission of a Limited Partner to the
Partnership, and generally at the end of each
fiscal year thereafter, an incentive allocation of
20% of the net profits, if any, that have been
credited to the capital account of such Limited
Partner during such period (an "Incentive
Allocation") will be debited from such capital
account and credited to the capital account of the
Manager. The Incentive Allocation will be charged
to a Limited Partner only to the extent that
cumulative net profits with respect to such
Limited Partner through the close of any period
exceeds the highest level of cumulative net
profits with respect to such Limited Partner
through the close of any prior period. The
Incentive Allocation will be adjusted for
repurchases of interests by the Partnership. (See
"CAPITAL ACCOUNTS AND ALLOCATIONS - Incentive
Allocation.")
Subscription for Interests Both initial and additional subscriptions for
interests by eligible investors may be accepted at
such times as the Manager may determine, subject
to the receipt of cleared funds on or before the
acceptance date set by the Manager. The
Partnership reserves the right to reject any
subscription for interests in the
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<PAGE> 15
Partnership. The minimum initial investment in the
Partnership is $150,000 and the minimum additional
investment in the Partnership is $25,000. The
Partnership may, in its discretion, suspend
subscriptions for interests at any time. Interests
may not be purchased by nonresident aliens,
foreign corporations, foreign partnerships,
foreign trusts or foreign estates, all as defined
in the Internal Revenue Code of 1986, as amended
(the "Code"). In addition, because the
Partnership may generate "unrelated business
taxable income" ("UBTI"), charitable remainder
trusts may not want to purchase interests in the
Partnership because such trusts will not be exempt
from Federal income tax under Section 664(c) of
the Code for any year in which it has UBTI.
Initial Closing Date The initial closing date for subscriptions of
interests in the Partnership is February 21, 1997.
The Manager, in its sole discretion, may postpone
the closing date for up to 30 days.
Transfer Restrictions Limited Partner interests in the Partnership may
be transferred only (i) by operation of law
pursuant to the death, bankruptcy, insolvency or
dissolution of a Limited Partner or (ii) with the
written consent of the Manager (which may be
withheld in its sole and absolute discretion and
is expected to be granted, if at all, only under
extenuating circumstances) in connection with a
transfer to an entity that does not result in a
change of beneficial ownership. The foregoing
permitted transferees will not be allowed to
become substituted Limited Partners without the
consent of the Manager, which may be withheld in
its sole and absolute discretion. (See
"REDEMPTIONS, REPURCHASES OF INTERESTS AND
TRANSFERS - Transfers of Interests.")
Withdrawals and Repurchases
of Interests by the
Partnership No Partner in the Partnership will have the right
to require the Partnership to redeem such
Partner's interest. The Partnership may from time
to time offer to repurchase interests pursuant to
written tenders by Partners. Such repurchases
will be made at such times and on such terms as
may be determined by the Individual General
Partners, in their complete and exclusive
discretion. In determining whether the
Partnership should repurchase interests or
portions thereof from Partners pursuant to written
tenders, the Individual General Partners will
consider the recommendation of the Manager.
Beginning in 1998, the Manager expects that
generally it will recommend to the Individual
General Partners that the Partnership offer to
repurchase interests from Partners once in each
year, effective
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at the end of the year, and also intends to
recommend the making of an offer to repurchase
interests effective as of March 31, 1998. The
Individual General Partners will also consider the
following factors, among others, in making such
determination: (i) whether any Partners have
requested to tender interests or portions thereof
to the Partnership; (ii) the liquidity of the
Partnership's assets; (iii) the investment plans
and working capital requirements of the
Partnership; (iv) the relative economies of scale
with respect to the size of the Partnership;
(v) the history of the Partnership in repurchasing
interests or portions thereof; (vi) the economic
condition of the securities markets; and (vii) the
anticipated tax consequences of any proposed
repurchases of interests or portions thereof.
(See "REDEMPTIONS, REPURCHASES OF INTERESTS AND
TRANSFERS - No Right of Redemption" and "-
Repurchases of Interests.")
The Partnership Agreement provides that the
Partnership shall be dissolved if any Limited
Partner that has submitted a written request, in
accordance with the terms of the Partnership
Agreement, to tender its entire interest for
repurchase by the Partnership has not been
permitted to do so for a period of two years.
Summary of Taxation Counsel to the Partnership has rendered an opinion
that the Partnership will be treated as a
partnership and not as an association taxable as a
corporation for Federal income tax purposes.
Counsel to the Partnership has also rendered its
opinion that, under a "facts and circumstances"
test set forth in regulations adopted by the U.S.
Treasury Department, the Partnership will not be
treated as a "publicly traded partnership" taxable
as a corporation. Accordingly, the Partnership
should not be subject to Federal income tax, and
each Limited Partner will be required to report on
their own annual tax return such Limited Partner's
distributive share of the Partnership's taxable
income or loss.
If it were determined that the Partnership should
be treated as an association or a publicly traded
partnership taxable as a corporation (as a result
of a successful challenge to the opinions rendered
by counsel to the Partnership or otherwise), the
taxable income of the Partnership would be subject
to corporate income tax and any distributions of
profits from the Partnership would be treated as
dividends.
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ERISA Plans and Other
Tax-Exempt Entities Investors subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"),
and other tax-exempt entities (each a "tax-exempt"
entity) may purchase interests in the Partnership
with the approval of the Manager. The Partnership
may utilize leverage in connection with its
trading activities. Therefore, a tax-exempt
Limited Partner may incur income tax liability
with respect to its share of the net profits from
such leveraged transactions to the extent they are
treated as giving rise to "unrelated business
taxable income." The Partnership will provide to
tax-exempt Limited Partners such accounting
information as such Partners require to report
their "unrelated business taxable income" for
income tax purposes.
Investment in the Partnership by tax-exempt
entities requires special consideration. Trustees
or administrators of such entities are urged to
carefully review the matters discussed in this
Confidential Memorandum.
Term The Partnership will continue its operations
through the earlier of December 31, 2021 or the
date the Partnership is otherwise terminated under
the terms of the Partnership Agreement.
Reports to Partners The Partnership will furnish to Partners as soon
as practicable after the end of each taxable year
such information as is necessary for such Partners
to complete Federal and state income tax or
information returns, along with any other tax
information required by law. The Partnership will
also send to Partners a semi-annual and an audited
annual report generally within 60 days after the
close of the period for which it is being made, or
as otherwise required by the 1940 Act. Quarterly
reports from the Manager regarding the
Partnership's operations during each quarter will
also be sent to Partners.
Fiscal Year The twelve month period ending December 31. The
first fiscal year of the Partnership will commence
on the date of the initial closing and will end on
December 31, 1997.
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THE PARTNERSHIP
Troon Partners, L.P. (the "Partnership") is registered under the
Investment Company Act of 1940 (the "1940 Act") as a non-diversified,
closed-end management investment company. The Partnership was organized as a
limited partnership under the laws of Delaware on December 12, 1996, and has no
operating history. The Partnership's principal office is located at
Oppenheimer Tower, One World Financial Center, 33rd Floor, 200 Liberty Street,
New York, New York 10281, and its telephone number is (212) 667-4225.
Investment advisory services are provided to the Partnership by one of the
Partnership's General Partners, Troon Management, L.L.C. (the "Manager"), which
is also responsible for the day-to-day management of the Partnership.
Ultimate responsibility over the affairs of the Partnership is vested in five
individual General Partners (the "Individual General Partners").
STRUCTURE
The Partnership is a specialized investment vehicle that combines many
of the features of a private investment partnership with those of a closed-end
investment company. Private investment partnerships are unregistered,
commingled asset pools that are often aggressively managed and offered in large
minimum denominations (often over $1 million) through private placements to a
limited number of high net worth individual and institutional investors. The
general partners of these partnerships are typically compensated through
asset-based fees and performance-based allocations. Closed-end investment
companies are 1940 Act registered pools typically organized as corporations or
business trusts that are usually managed more conservatively than most private
investment partnerships, are usually subject to relatively modest minimum
investment requirements (often less than $2,000) and publicly offered to a
broad range of investors. The advisers to these companies are typically
compensated through asset-based (but not performance-based) fees.
The Partnership is similar to private investment partnerships in that
its investment portfolio may be actively managed and limited partnership
interests in the Partnership will be sold in comparatively large minimum
denominations ($150,000) in private placements solely to high net worth
individual and institutional investors, whose capital accounts will be subject
to both asset-based fees and performance-based allocations. However, the
Partnership, like other closed-end investment companies, has registered under
the 1940 Act to be able to offer its interests without limiting the number of
investors that can participate in its investment program. This structure was
established by the Manager to permit a larger number of investors that have a
higher tolerance for investment risk to participate in an aggressive investment
program without making the more substantial minimum capital commitment that is
usually required by private investment partnerships.
<PAGE> 19
INVESTMENT PROGRAM
The Partnership's investment objective is to seek long-term capital
appreciation. The Partnership will pursue this objective by investing
principally in publicly traded common stocks and other equity securities of
U.S. companies. The Manager will invest the Partnership's assets in the equity
securities of issuers that it believes are substantially undervalued based upon
its assessment of the value of their assets or their earnings growth potential,
or both. In seeking capital appreciation, the Partnership may also invest in
equity securities of foreign issuers and in bonds and other fixed-income
securities of U.S. issuers.
In determining whether a company's assets are undervalued, the Manager
calculates the value at which it believes the company's individual businesses
and other assets could be sold in the private market place. The Manager
generally seeks to invest in companies whose securities can be purchased at a
substantial discount from the per share value of the companies as indicated by
the underlying values of their assets. In determining whether a company has
earnings growth potential, the Manager attempts to measure the company's
long-term cash flow and earnings outlook by analyzing the quality of the
company's management, business franchise and operating and financial
characteristics. The Manager will seek to invest the Partnership's assets in
securities which it believes are substantially undervalued and thus offer the
potential for significant capital appreciation over the long-term. By pursuing
investments in securities from a long-term perspective, the Manager seeks to
maximize the Partnership's ability to generate long-term capital gains.
The Manager's investment philosophy contemplates disciplined,
fundamental, research-oriented value investing. As part of the Partnership's
investment process, the personnel of the Manager will not only regularly visit
companies, interview management and attend industry conferences and seminars,
but will also search for major trends in either the economy or in the structure
of various industries. The Manager will review publicly available information
to assess the potential effects on particular companies of significant
corporate transactions, such as liquidations, reorganizations,
recapitalizations and mergers, or new management or management policies. In
addition, the Manager will analyze demographic changes, business cycles, new
products and new data, and such information may cause the Manager to update,
change or even reverse, its outlook with respect to a particular company.
The Manager will supplement its fundamental analysis of potential
portfolio companies with an evaluation of key political and financial market
variables, nationally and internationally, in attempting to assess the level
and future direction of the financial markets generally. In analyzing and
identifying particular investment opportunities and the markets generally, the
Manager may rely on the expertise of other market professionals, such as
analysts, brokers, economists and industry specialists.
The Manager will attempt to be alert and flexible in seeking both to
maximize the Partnership's opportunities and to conserve its capital, and may
invest all or a substantial portion of the Partnership's assets in fixed-income
securities and hold cash and cash equivalents for temporary
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<PAGE> 20
defensive investment purposes. However, under normal market conditions, the
Partnership will invest at least 65% of the value of its total assets in equity
securities.
The Partnership may use various investment strategies to hedge a
portion of its investment portfolio against certain risks or to pursue its
investment objective. In this regard, the Partnership may utilize leverage,
sell securities short, and purchase and sell options on securities and stock
indices, subject to certain limitations. (See "TYPES OF INVESTMENTS AND
RELATED RISK FACTORS - Leverage," "- Short Sales," "- Special Investment
Instruments and Techniques.") The use of these investment techniques and
instruments will be an integral part of the Partnership's investment program,
and involves certain risks. The Partnership will comply with applicable
regulatory requirements, including the asset coverage requirements under the
1940 Act, in connection with the use of these strategies.
Additional information about the types of investments that will be
made by the Partnership, its investment practices and related risk factors is
provided below. Except as otherwise indicated, the Partnership's investment
policies and restrictions are not fundamental and may be changed without a vote
of Limited Partners (together with the General Partners, the "Partners"). (See
"TYPES OF INVESTMENTS AND RELATED RISK FACTORS - Fundamental Investment
Policies.")
THE PARTNERSHIP'S INVESTMENT PROGRAM IS SPECULATIVE AND ENTAILS
SUBSTANTIAL RISKS. THERE CAN BE NO ASSURANCE THAT THE PARTNERSHIP'S INVESTMENT
OBJECTIVE WILL BE ACHIEVED. IN PARTICULAR, THE PARTNERSHIP'S USE OF LEVERAGE,
SHORT SELLING AND DERIVATIVE TRANSACTIONS, AND ITS LIMITED DIVERSIFICATION CAN,
IN CERTAIN CIRCUMSTANCES, RESULT IN SIGNIFICANT LOSSES TO THE PARTNERSHIP.
TYPES OF INVESTMENTS AND RELATED RISK FACTORS
EQUITY SECURITIES
The Partnership's investment portfolio may include long and short
positions in common stocks, preferred stocks and convertible securities of U.S.
and foreign companies. The Partnership may also invest in depositary receipts
relating to foreign securities. (See "TYPES OF INVESTMENTS AND RELATED RISK
FACTORS - Foreign Securities.") The value of the Partnership's equity
securities varies in response to many factors, including, but not limited to,
the activities and financial condition of individual companies, the business
market in which individual companies compete and general market and economic
conditions.
The Partnership's investments in equity securities of U.S. companies
will include securities that are listed on U.S. securities exchanges as well as
unlisted securities that are traded over-the-counter. Equity securities of
companies traded over-the-counter may not be traded in the volumes typically
found on a national securities exchange. Consequently, the Partnership may be
required to dispose of such securities over a longer (and potentially less
favorable) period of time than is required to dispose of the securities of
larger companies.
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<PAGE> 21
COMMON STOCKS. Common stocks are shares of a corporation or other
entity that entitle the holder to a pro rata share of the profits, if any, of
the entity without preference over any other shareholder or claim of
shareholders, after making required payments to holders of such entity's
preferred stock and other senior equity. Common stock usually carries with it
the right to vote and frequently an exclusive right to do so.
PREFERRED STOCKS. Preferred stock generally has a preference as to
dividends and upon liquidation over an issuer's common stock, but ranks junior
to debt securities in an issuer's capital structure. Preferred stock generally
pays dividends in cash (or additional shares of preferred stock) at a defined
rate, but unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by the issuer's board of directors.
Dividends on preferred stock may be cumulative, meaning that, in the event the
issuer fails to make one or more dividend payments on the preferred stock, no
dividends may be paid on the issuer's common stock until all unpaid preferred
stock dividends have been paid. Preferred stock may also be subject to
optional or mandatory redemption provisions.
CONVERTIBLE SECURITIES. Convertible securities are bonds, debentures,
notes, preferred stocks or other securities that may be converted into or
exchanged for a specified amount of common stock of the same or different
issuer within a particular period of time at a specified price or formula. A
convertible security entitles the holder to receive interest that is generally
paid or accrued on debt or a dividend that is paid or accrued on preferred
stock until the convertible security matures or is redeemed, converted or
exchanged. Convertible securities have unique investment characteristics, in
that they generally (1) have higher yields than common stocks, but lower yields
than comparable non-convertible securities, (2) are less subject to fluctuation
in value than the underlying common stock due to their fixed-income
characteristics and (3) provide the potential for capital appreciation if the
market price of the underlying common stock increases.
The value of a convertible security is a function of its "investment
value" (determined by its yield in comparison with the yields of other
securities of comparable maturity and quality that do not have a conversion
privilege) and its "conversion value" (the security's worth, at market value,
if converted into the underlying common stock). The investment value of a
convertible security is influenced by changes in interest rates, with
investment value declining as interest rates increase and increasing as
interest rates decline. The credit standing of the issuer and other factors
may also have an effect on the convertible security's investment value. The
conversion value of a convertible security is determined by the market price of
the underlying common stock. If the conversion value is low relative to the
investment value, the price of the convertible security is governed principally
by its investment value. Generally, the conversion value decreases as the
convertible security approaches maturity. To the extent the market price of
the underlying common stock approaches or exceeds the conversion price, the
price of the convertible security will be increasingly influenced by its
conversion value. A convertible security generally will sell at a premium over
its conversion value by the extent to which investors place value on the right
to acquire the underlying common stock while holding a fixed-income security.
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<PAGE> 22
A convertible security may be subject to redemption at the option of
the issuer at a price established in the convertible security's governing
instrument. If a convertible security held by the Partnership is called for
redemption, the Partnership will be required to permit the issuer to redeem the
security, convert it into the underlying common stock or sell it to a third
party. Any of these actions could have an adverse effect on the Partnership's
ability to achieve its investment objective.
BONDS AND OTHER FIXED-INCOME SECURITIES
GENERALLY. The Partnership may invest in bonds and other fixed-income
securities issued by U.S. issuers. The Manager will invest in these securities
when they offer opportunities for capital appreciation and may also invest in
these securities for temporary defensive purposes and to maintain liquidity.
(See "TYPES OF INVESTMENTS AND RELATED RISK FACTORS - Temporary Investments.")
Fixed-income securities include, among other securities: bonds, notes and
debentures issued by corporations; debt securities issued or guaranteed by the
U.S. Government or one of its agencies or instrumentalities ("U.S. Government
Securities"); municipal securities; and mortgage-backed and asset-backed
securities. These securities may pay fixed, variable or floating rates of
interest, and may include zero coupon obligations. Fixed-income securities are
subject to the risk of the issuer's inability to meet principal and interest
payments on its obligations (i.e., credit risk) and are subject to price
volatility due to such factors as interest rate sensitivity, market perception
of the creditworthiness of the issuer and general market liquidity (i.e.,
market risk).
The Partnership may invest in both investment grade and non-investment
grade debt securities. Investment grade debt securities are securities that
have received a rating from at least one nationally recognized statistical
rating organization ("NRSRO") in one of the four highest rating categories or,
if not rated by any NRSRO, have been determined by the Manager to be of
comparable quality. Non-investment grade debt securities (typically called
"junk bonds") are securities that have received a rating from a NRSRO of below
investment grade or have been given no rating, and are considered by the NRSRO
to be predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal. Non-investment grade debt securities in the
lowest rating categories may involve a substantial risk of default or may be in
default. Changes in economic conditions or developments regarding the
individual issuer are more likely to cause price volatility and weaken the
capacity of the issuers of non-investment grade debt securities to make
principal and interest payments than is the case for higher grade debt
securities. An economic downturn affecting an issuer of non-investment grade
debt securities may result in an increased incidence of default. In addition,
the market for lower grade debt securities may be thinner and less active than
for higher grade debt securities. The Partnership will not invest more than
20% of its total assets in non-convertible fixed-income securities which have
not received an investment grade rating from at least one NRSRO.
LIMITED DIVERSIFICATION
The Partnership is a "non-diversified" investment company. Thus,
there are no percentage limitations on the portion of the Partnership's assets
that may be invested in the securities of any
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<PAGE> 23
one issuer. To the extent that a relatively high percentage of the
Partnership's assets are invested in the securities of a limited number of
issuers, some of which may be within the same industry, the Partnership's
investment portfolio may be more susceptible to any single economic, political
or regulatory occurrence than the portfolio of a diversified investment
company.
The Partnership intends to invest no more than 15% of the value of its
total assets, in the securities of any one issuer. However, while seeking
desirable investments the Partnership may temporarily exceed this limitation.
The Partnership does not intend to make investments for the purpose of
exercising control or management over a portfolio company.
FOREIGN SECURITIES
Although the Partnership will invest principally in equity securities
of publicly traded U.S. companies, it may invest up to 25% of the value of its
total assets in equity and fixed-income securities of foreign issuers and in
depositary receipts, such as American Depositary Receipts ("ADRs"), that
represent indirect interests in securities of foreign issuers. Foreign
securities in which the Partnership may invest may be listed on foreign
securities exchanges or traded in foreign over-the-counter markets.
Investments in foreign securities are affected by risk factors generally not
thought to be present in the U.S. Such factors include, but are not limited
to, the following: varying custody, brokerage and settlement practices;
difficulty in pricing; less public information about issuers of foreign
securities; less governmental regulation and supervision over the issuance and
trading of securities than in the U.S.; the unavailability of financial
information regarding the foreign issuer or the difficulty of interpreting
financial information prepared under foreign accounting standards; less
liquidity and more volatility in foreign securities markets; the possibility of
expropriation or nationalization; the imposition of withholding and other
taxes; adverse political, social or diplomatic developments; limitations on the
movement of funds or other assets of the Partnership between different
countries; difficulties in invoking legal process abroad and enforcing
contractual obligations; and the difficulty of assessing economic trends in
foreign countries. Moreover, governmental issuers of foreign securities may be
unwilling to repay principal and interest due, and may require that the
conditions for payment be renegotiated. Investment in foreign countries also
involves higher brokerage and custodian expenses than does investment in
domestic securities.
Other risks of investing in foreign securities include changes in
currency exchange rates (in the case of securities that are not denominated in
U.S. dollars) and currency exchange control regulations or other foreign or
U.S. laws or restrictions, or devaluations of foreign currencies. A decline
in the exchange rate would reduce the value of certain of the Partnership's
foreign currency denominated portfolio securities irrespective of the
performance of the underlying investment. In addition, the Partnership may
incur costs in connection with conversion between various currencies. The
foregoing risks may be greater in emerging industrialized and less developed
countries.
The Partnership may enter into forward currency exchange contracts
("forward contracts") for hedging purposes and non-hedging purposes to pursue
its investment objective.
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<PAGE> 24
Forward contracts are transactions involving the Partnership's obligation to
purchase or sell a specific currency at a future date at a specified price.
Forward contracts may be used by the Partnership for hedging purposes to
protect against uncertainty in the level of future foreign currency exchange
rates, such as when the Partnership anticipates purchasing or selling a foreign
security. This technique would allow the Partnership to "lock in" the U.S.
dollar price of the security. Forward contracts may also be used to attempt to
protect the value of the Partnership's existing holdings of foreign securities.
There may be, however, imperfect correlation between the Partnership's foreign
securities holdings and the forward contracts entered into with respect to such
holdings. Forward contracts may also be used for non-hedging purposes to
pursue the Partnership's investment objective, such as when the Manager
anticipates that particular foreign currencies will appreciate or depreciate in
value, even though securities denominated in such currencies are not then held
in the Partnership's investment portfolio.
LEVERAGE
The Partnership may make margin purchases of securities and, in that
regard, borrow money from brokers and banks for investment purposes. This
practice, which is known as "leverage," involves certain risks.
Trading equity securities on margin involves an initial cash
requirement representing at least 50% of the underlying security's value with
respect to transactions in U.S. markets and varying (typically lower)
percentages with respect to transactions in foreign markets. Borrowings to
purchase equity securities typically will be secured by the pledge of such
securities. The financing of securities purchases may also be effected through
reverse repurchase agreements with banks, brokers and other financial
institutions. This involves the transfer by the Partnership of the underlying
security to a counterparty in exchange for cash proceeds based on a percentage
(which can be as high as 95% to 100%) of the value of the debt instrument.
Although leverage will increase investment return if the Partnership
earns a greater return on the investments purchased with borrowed funds than it
pays for the use of such funds, the use of leverage will decrease investment
return if the Partnership fails to earn as much on such investments as it pays
for the use of such funds. The use of leverage will therefore magnify the
volatility of the value of the Partnership's investment portfolio. In the
event that the Partnership's equity or debt instruments decline in value, the
Partnership could be subject to a "margin call" or "collateral call", pursuant
to which the Partnership must either deposit additional collateral with the
lender or suffer mandatory liquidation of the pledged securities to compensate
for the decline in value. In the event of a sudden, precipitous drop in value
of the Partnership's assets, the Partnership might not be able to liquidate
assets quickly enough to pay off its borrowing. Money borrowed for leveraging
will be subject to interest costs that may or may not be recovered by return on
the securities purchased. The Partnership also may be required to maintain
minimum average balances in connection with its borrowings or to pay a
commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest
rate.
The 1940 Act requires the Partnership to satisfy an asset coverage
requirement of 300% of its indebtedness, including amounts borrowed, measured
at the time the Partnership incurs the
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<PAGE> 25
indebtedness (the "Asset Coverage Requirement"). This means that the value of
the Partnership's total indebtedness may not exceed one-third the value of its
total assets (including such indebtedness), measured at the time the
Partnership incurs the indebtedness. The staff of the SEC's Division of
Investment Management (the "SEC Staff") takes the position that short sales of
securities, reverse repurchase agreements, use of margin, sales of put and call
options on specific securities or indices, investments in certain other types
of instruments (including certain derivatives such as swap agreements), and the
purchase and sale of securities on a when-issued or forward commitment basis,
may be deemed to constitute indebtedness subject to the Asset Coverage
Requirement.
The SEC Staff has stated, however, that it will not deem portfolio
positions involving such instruments to be subject to the Asset Coverage
Requirement if the Partnership maintains, in conjunction with such positions,
segregated deposits or portfolio securities in amounts sufficient to offset the
liabilities associated with such positions. Generally, in conjunction with
such portfolio positions, the Partnership must either (1) observe the Asset
Coverage Requirement, (2) maintain daily a segregated custodial account in cash
or liquid securities at such a level that the amount deposited in the
segregated account plus any amounts pledged to a broker as collateral will
equal the current value of the position or (3) otherwise cover the portfolio
position with offsetting portfolio securities. Segregation of assets or
covering portfolio positions with offsetting portfolio securities would limit
the Partnership's ability to otherwise invest such assets or dispose of such
securities.
In order to obtain "leveraged" market exposure in certain investments
and to increase the overall return to the Partnership of various investments,
the Partnership may purchase options and other synthetic instruments that do
not constitute "indebtedness" for purposes of the Asset Coverage Requirement.
These instruments may nevertheless involve significant economic leverage and
therefore may, in some cases, involve significant risks of loss.
SHORT SALES
The Partnership may attempt to limit exposure to a possible market
decline in the value of its portfolio securities through short sales of
securities that the Manager believes possess volatility characteristics similar
to those being hedged. In addition, the Partnership may use short sales for
non-hedging purposes to pursue its investment objective. To effect a short
sale, the Partnership will borrow a security from a brokerage firm to make
delivery to the buyer. The Partnership is then obligated to replace the
borrowed security by purchasing it at the market price at the time of
replacement. Until the security is replaced, the Partnership is required to
pay to the brokerage firm any accrued interest or dividend and may be required
to pay a premium.
The Partnership will realize a gain if the borrowed security declines
in price between the date of the short sale and the date on which the
Partnership replaces such security. The Partnership will incur a loss if the
price of the borrowed security increases between those dates. Such loss can
increase rapidly and without effective limit. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any premium
or interest the Partnership may be required to pay in connection with a short
sale. There is a risk that the borrowed securities would
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need to be returned to the brokerage firm on short notice. If such request for
return of securities occurs at a time when other short sellers of the subject
security are receiving similar requests, a "short squeeze" can occur, wherein
the Partnership might be compelled, at the most disadvantageous time, to
replace borrowed securities previously sold short with purchases on the open
market, possibly at prices significantly in excess of the proceeds received
earlier. The successful use of short selling may be adversely affected by
imperfect correlation between movements in the price of the security sold short
and the securities being hedged. Short selling may exaggerate the volatility
of the Partnership's investment portfolio. Short selling may also produce
higher than normal portfolio turnover and may result in increased transaction
costs to the Partnership.
The Partnership may also make short sales against-the-box, in which it
sells short securities it owns or has the right to obtain without payment of
additional consideration. If the Partnership makes a short sale
against-the-box, it will be required to set aside securities equivalent in kind
and amount to the securities sold short (or securities convertible or
exchangeable into such securities) and will be required to hold such securities
while the short sale is outstanding. The Partnership will incur transaction
costs, including interest expenses, in connection with opening, maintaining and
closing short sales against-the-box.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements involve the Partnership's sale of a
security to a bank or securities dealer and the Partnership's simultaneous
agreement to repurchase such security for a fixed price (reflecting a market
rate of interest) on a specific date. These involve a risk that the other
party to a reverse repurchase agreement will be unable or unwilling to complete
the transaction as scheduled, which may result in losses to the Partnership.
Reverse repurchase transactions are a form of leverage which may also increase
the volatility of the Partnership's investment portfolio. The Partnership has
adopted procedures designed to minimize certain of the risks of loss associated
with reverse repurchase transactions.
SPECIAL INVESTMENT INSTRUMENTS AND TECHNIQUES
The Partnership may utilize a variety of special investment
instruments and techniques (described below) to hedge its investment portfolio
against various risks (such as changes in interest rates or other factors that
affect security values) or for non-hedging purposes to pursue the Partnership's
investment objective. These strategies may be executed through derivative
transactions. The instruments the Partnership may use and the particular
manner in which they may be used may change over time as new instruments and
techniques are developed or regulatory changes occur. Certain of the special
investment instruments and techniques that the Partnership may use are
speculative and involve a high degree of risk, particularly in the context of
non-hedging transactions to pursue the Partnership's investment objective.
CALL AND PUT OPTIONS ON INDIVIDUAL SECURITIES. The Partnership may
purchase call and put options in respect of specific securities, and may write
and sell covered or uncovered call and put options for hedging purposes and
non-hedging purposes to pursue its investment objective. A put option gives
the purchaser of the option the right to sell, and obligates the writer to buy,
the
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underlying security at a stated exercise price at any time prior to the
expiration of the option. Similarly, a call option gives the purchaser of the
option the right to buy, and obligates the writer to sell, the underlying
security at a stated exercise price at any time prior to the expiration of the
option.
A covered call option, which is a call option with respect to which
the Partnership owns the underlying security, that is sold by the Partnership
exposes the Partnership during the term of the option to possible loss of
opportunity to realize appreciation in the market price of the underlying
security or to possible continued holding of a security that might otherwise
have been sold to protect against depreciation in the market price of the
security. A covered put option, which is a put option with respect to which
cash or liquid securities have been placed in a segregated account with the
Partnership's custodian to fulfill the obligation undertaken, that is sold by
the Partnership exposes the Partnership during the term of the option to a
decline in price of the underlying security while depriving the Partnership of
the opportunity to invest the segregated assets.
The Partnership may close out a position when writing options by
purchasing an option on the same security with the same exercise price and
expiration date as the option that it has previously written on such security.
The Partnership will realize a profit or loss if the amount paid to purchase an
option is less or more, as the case may be, than the amount received from the
sale thereof. To close out a position as a purchaser of an option, the
Partnership would ordinarily make a similar "closing sale transaction," which
involves liquidating the Partnership's position by selling the option
previously purchased, although the Partnership would be entitled to exercise
the option should it deem it advantageous to do so. The Partnership may also
invest in so-called "synthetic" options or other derivative instruments written
by broker-dealers.
Options transactions may be effected on securities exchanges or in the
over-the-counter market. When options are purchased over-the-counter, the
Partnership bears the risk that the counterparty that wrote the option will be
unable or unwilling to perform its obligations under the option contract. Such
options may also be illiquid and, in such cases, the Partnership may have
difficulty closing out its position. Over-the-counter options purchased and
sold by the Partnership may also include options on baskets of specific
securities.
WARRANTS. Warrants are derivative instruments that permit, but do not
obligate, the holder to subscribe for other securities or commodities.
Warrants do not carry with them the right to dividends or voting rights with
respect to the securities that they entitle the holder to purchase, and they do
not represent any rights in the assets of the issuer. As a result, warrants
may be considered more speculative than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities or commodities and a warrant ceases to have value if
it is not exercised prior to its expiration date.
CALL AND PUT OPTIONS ON SECURITIES INDICES. The Partnership may
purchase and sell call and put options on stock indices (such as the Standard &
Poor's Composite Index of 500 Stocks (the "S&P 500") or the Standard & Poor's
100 Index) listed on national securities exchanges or traded in the
over-the-counter market for hedging purposes and non-hedging purposes to
pursue its investment objective. A stock index fluctuates with changes in the
market values of the stocks
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<PAGE> 28
included in the index. The effectiveness of purchasing or writing stock index
options for hedging purposes will depend upon the extent to which price
movements in the Partnership's portfolio correlate with price movements of the
stock index selected. Because the value of an index option depends upon
movements in the level of the index rather than the price of a particular
stock, whether the Partnership will realize a gain or loss from the purchase or
writing of options on an index depends upon movements in the level of stock
prices in the stock market generally or, in the case of certain indexes, in an
industry or market segment, rather than movements in the price of a particular
stock. Accordingly, successful use by the Partnership of options on stock
indexes will be subject to the Manager's ability to predict correctly movements
in the direction of the stock market generally or of a particular industry or
market segment. This requires different skills and techniques than predicting
changes in the price of individual stocks.
LENDING PORTFOLIO SECURITIES
The Partnership may lend its portfolio securities to domestic and
foreign brokers, dealers and financial institutions. These loans will be
secured by collateral (consisting of cash, U.S. Government Securities or
irrevocable letters of credit) maintained in an amount equal to at least 100%
of the market value, determined daily, of the loaned securities. The
Partnership may at any time call the loan and obtain the return of the
securities loaned. The Partnership will be entitled to payments equal to the
interest and dividends on the loaned security and may receive a premium for
lending the securities. Lending portfolio securities may result in income to
the Partnership, but there may be delays in the recovery of the loaned
securities or a loss of rights in the collateral supplied should the borrower
fail financially. Securities lending involves a form of leverage, and the
Partnership may incur a loss if securities purchased with the collateral from
securities loans decline in value.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
The Partnership may purchase securities on a "when-issued" basis and
may purchase or sell securities on a "forward commitment" basis in order to
hedge against anticipated changes in interest rates and prices. These
transactions involve a commitment by the Partnership to purchase or sell
securities at a future date (ordinarily one or two months later). The price of
the underlying securities, which is generally expressed in terms of yield, is
fixed at the time the commitment is made, but delivery and payment for the
securities takes place at a later date. No income accrues on securities that
have been purchased pursuant to a forward commitment or on a when-issued basis
prior to delivery to the Partnership. When-issued securities and forward
commitments may be sold prior to the settlement date. If the Partnership
disposes of the right to acquire a when-issued security prior to its
acquisition or disposes of its right to deliver or receive against a forward
commitment, it may incur a gain or loss. These transactions will be subject to
the Partnership's limitation on indebtedness unless, at the time the
Partnership enters into such a transaction, a segregated account consisting of
cash, U.S. Government Securities or liquid securities equal to the value of the
when-issued or forward commitment securities is established and maintained.
There is a risk that securities purchased on a when-issued basis may not be
delivered and that the purchaser of securities sold by the Partnership on a
forward basis will not honor its purchase obligation. In such cases, the
Partnership may incur a loss.
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RESTRICTED AND ILLIQUID INVESTMENTS
Although the Partnership will invest primarily in publicly traded
securities, it may invest up to 15% of the value of its total assets in
restricted securities and other investments which are illiquid. Restricted
securities are securities that may not be sold to the public without an
effective registration statement under the Securities Act of 1933 ("1933 Act")
or, if they are unregistered, may be sold only in a privately negotiated
transaction or pursuant to an exemption from registration. In recognition of
the increased size and liquidity of the institutional markets for unregistered
securities and the importance of institutional investors in the formation of
capital, the SEC has adopted Rule 144A under the 1933 Act, which is designed to
further facilitate efficient trading among eligible institutional investors by
permitting the sale of certain unregistered securities to qualified
institutional buyers. The Partnership will be eligible to purchase securities
in Rule 144A transactions if and when it owns at least $100 million of
securities of unaffiliated issuers. To the extent privately placed securities
held by the Partnership qualify under Rule 144A, and an institutional market
develops for those securities, the Partnership likely will be able to dispose
of the securities without registering them under the 1933 Act. To the extent
that institutional buyers become, for a time, uninterested in purchasing these
securities, investing in Rule 144A securities could have the effect of
increasing the level of the Partnership's illiquidity. The Partnership may
adopt procedures under which certain Rule 144A securities will not be deemed to
be illiquid, if certain criteria are satisfied with respect to those securities
and the market therefor. Foreign securities that can be freely sold in the
markets in which they are principally traded are not considered by the
Partnership to be restricted. Regulation S under the 1933 Act permits the sale
abroad of securities that are not registered for sale in the U.S. Repurchase
agreements with maturities of more than seven days will be treated as illiquid.
Where registration is required to sell a security, the Partnership may
be obligated to pay all or part of the registration expenses, and a
considerable period may elapse between the decision to sell and the time the
Partnership may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to
develop, the Partnership might obtain a less favorable price than prevailed
when it decided to sell. Restricted securities for which no market exists and
other illiquid investments are valued at fair value as determined in accordance
with procedures approved and periodically reviewed by the Individual General
Partners.
Restricted securities and other illiquid investments involve the risk
that the securities will not be able to be sold at the time desired by the
Manager or at prices approximating the value at which the Partnership is
carrying the securities.
TEMPORARY INVESTMENTS
For defensive purposes, the Partnership may temporarily invest all or
a substantial portion of its assets in high quality fixed-income securities and
money market instruments, or may temporarily hold cash or cash equivalents in
such amounts as the Manager deems appropriate under the circumstances.
Securities will be deemed to be of high quality if they are rated "A" or
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better by an NRSRO or, if unrated, are determined to be of comparable quality
by the Manager. Money market instruments are high quality, short-term
fixed-income obligations (which generally have remaining maturities of one year
or less), and may include: U.S. Government Securities; commercial paper;
certificates of deposit and banker's acceptances issued by domestic branches of
United States banks that are members of the Federal Deposit Insurance
Corporation; and repurchase agreements for U.S. Government Securities. In lieu
of purchasing money market instruments, the Partnership may purchase shares of
money market mutual funds that invest primarily in U.S. Government Securities
and repurchase agreements involving those securities, subject to certain
limitations imposed by the 1940 Act.
The Partnership may also invest in money market instruments or
purchase shares of money market mutual funds pending investment of its assets
in equity securities or non-money market fixed-income securities, or to
maintain such liquidity as may be necessary to effect repurchases of Limited
Partner interests or for other purposes.
Repurchase agreements are agreements under which the Partnership
purchases securities from a bank that is a member of the Federal Reserve
System, a foreign bank or a securities dealer that agrees to repurchase the
securities from the Partnership at a higher price on a designated future date.
If the seller under a repurchase agreement becomes insolvent, the Partnership's
right to dispose of the securities may be restricted, or the value of the
securities may decline before the Partnership is able to dispose of them. In
the event of the commencement of bankruptcy or insolvency proceedings with
respect to the seller of the securities before the repurchase of the securities
under a repurchase agreement is accomplished, the Partnership may encounter
delay and incur costs, including a decline in the value of the securities,
before being able to sell the securities. If the seller defaults, the value of
such securities may decline before the Partnership is able to dispose of them.
If the Partnership enters into a repurchase agreement that is subject to
foreign law and the other party defaults, the Partnership may not enjoy
protections comparable to those provided to certain repurchase agreements under
U.S. bankruptcy law, and may suffer delays and losses in disposing of the
collateral as a result. The Partnership has adopted procedures designed to
minimize certain of the risks of loss from the Partnership's repurchase
agreement transactions.
FUNDAMENTAL INVESTMENT POLICIES
The Partnership has adopted the following fundamental investment
policies, which cannot be changed without the vote of a majority of the
Partnership's outstanding voting securities:
(1) The Partnership will not issue senior securities representing stock,
but may borrow money to finance portfolio transactions from banks,
brokers and other lenders, and engage in other transactions involving
the issuance by the Partnership of "senior securities" representing
indebtedness to the extent permitted by the 1940 Act.
(2) The Partnership will not underwrite securities of other issuers,
except insofar as the Partnership may be deemed an underwriter under
the 1933 Act in connection with the disposition of its portfolio
securities.
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<PAGE> 31
(3) The Partnership will not lend money to other persons, except through
purchasing fixed-income securities, lending portfolio securities or
entering into repurchase agreements in a manner consistent with the
Partnership's investment policies.
(4) The Partnership will not purchase or sell real estate, but the
Partnership may invest in securities secured by, or issued by
companies that invest in, real estate or interests therein including,
without limitation, equity and debt securities of real estate
investment trusts as defined in the Internal Revenue Code of 1986, as
amended (the "Code"), and debt securities of operating partnerships of
which the general partner is a real estate investment trust.
(5) The Partnership will not purchase or sell commodities or commodity
contracts, but the Partnership may engage in currency transactions and
may engage in other transactions in financial instruments, in each
case to the extent permitted under the Partnership's investment
policies.
(6) The Partnership will not invest more than 25% of the value of its
total assets in the securities of issuers engaged in any one industry;
provided, however, that this limitation does not apply to investments
in U.S. Government Securities.
Under the 1940 Act, the vote of a majority of the outstanding voting
securities of an investment company, such as the Partnership, means the vote,
at the annual or a special meeting of the security holders of such company duly
called, (A) of 67 percent or more of the voting securities present at such
meeting, if the holders of more than 50 percent of the outstanding voting
securities of such company are present or represented by proxy; or (B) of more
than 50 percent of the outstanding voting securities of such company, whichever
is less.
With respect to these investment restrictions, and other policies
described in this Confidential Memorandum, if a percentage restriction is
adhered to at the time of an investment or transaction, a later change in
percentage resulting from a change in the values of investments or the value of
the Partnership's total assets, unless otherwise stated, will not constitute a
violation of such restriction or policy. In addition to the restrictions
contained in the fundamental investment policies stated above, the Partnership
is subject to certain restrictions imposed by the 1940 Act on registered
investment companies, including restrictions with respect to its investment in
other investment companies and in securities of insurance companies and brokers
and dealers.
The Manager will not cause the Partnership to make loans to or receive
loans from the Manager or its affiliates. The Partnership may effect brokerage
transactions through the affiliates of the Manager, subject to compliance with
the 1940 Act. (See "CONFLICTS OF INTEREST - Opco" and "BROKERAGE.")
The investment objective of the Partnership is fundamental and may not
be changed without the vote of a majority (as defined by the 1940 Act) of the
Partnership's outstanding voting securities.
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<PAGE> 32
ADDITIONAL RISK FACTORS
INCENTIVE ALLOCATION
The special allocation of 20% of net profits to the capital account of
the Manager may create an incentive for the Manager to cause the Partnership to
make investments that are riskier or more speculative than would be the case in
the absence of such allocation. In addition, because such allocation is
calculated on a basis that includes unrealized appreciation of the
Partnership's assets, such allocation may be greater than if such allocation
was based solely on realized gains. (See "CAPITAL ACCOUNTS AND ALLOCATIONS -
Incentive Allocation.")
TAX RISKS
Counsel to the Partnership has rendered an opinion that the
Partnership will be treated as a partnership and not as an association taxable
as a corporation for Federal income tax purposes. Counsel to the Partnership
has also rendered its opinion that, under a "facts and circumstances" test set
forth in regulations adopted by the U.S. Treasury Department, the Partnership
will not be treated as a "publicly traded partnership" taxable as corporation.
If it were determined that the Partnership should be treated as an association
or publicly traded partnership taxable as a corporation (as a result of a
successful challenge to the opinions rendered by counsel to the Partnership or
otherwise), the taxable income of the Partnership would be subject to corporate
income tax and distributions of profits from the Partnership would be treated
as dividends. (See "TAX ASPECTS - Tax Treatment of Partnership Operations -
Classification of the Partnership.")
LACK OF OPERATING HISTORY
The Partnership and the Manager are newly formed entities and have no
operating histories upon which investors can evaluate the performance of the
Partnership. However, as discussed below, the principal members of the Manager
(including such members' employees and affiliates) have substantial experience
in managing portfolios of securities through separately managed client accounts
and through private investment partnerships. Moreover, the principal member of
the Manager that is primarily responsible for managing the Partnership's
investment portfolio has substantial experience in managing separately managed
client accounts and private investment partnerships that have investment
programs that are substantially similar to the Partnership's investment
program. (See "PERFORMANCE INFORMATION," "THE MANAGER, OPCO AND MAMC" and
"CONFLICTS OF INTEREST - Participation in Investment Opportunities.")
LIQUIDITY RISKS
Limited Partner interests in the Partnership will not be traded on any
securities exchange or other market and are subject to substantial restrictions
on transfer. Although the Partnership may offer to repurchase such interests
from time to time, a Limited Partner may not be able to liquidate its interest
in the Partnership for up to two years. Beginning in 1998, the Manager expects
that generally it will recommend to the Individual General Partners that the
Partnership offer to repurchase interests from Partners once in each year,
effective at the end of the year, and also
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<PAGE> 33
intends to recommend the making of an offer to repurchase interests effective
as of March 31, 1998. (See "REDEMPTIONS, REPURCHASES OF INTERESTS AND
TRANSFERS.")
DISTRIBUTIONS TO LIMITED PARTNERS AND PAYMENT OF TAX LIABILITY
The Partnership does not intend to make periodic distributions of its
net income or gains, if any, to Limited Partners. Whether or not distributions
are made, Limited Partners will be required each year to pay applicable Federal
and state income taxes on their respective shares of the Fund's taxable income,
and will have to pay applicable taxes from other sources. The amount and times
of any distributions will be determined in the sole discretion of the
Individual General Partners.
PERFORMANCE INFORMATION
Appendix A contains performance information for the one private
investment partnership ("Mark LP") that is managed by Morris Mark (discussed
below) in accordance with an investment program that is substantially similar
to the Partnership's expected investment program. In addition, Appendix A
contains composite performance information for all accounts (including
investment funds) managed by MAMC pursuant to an investment program that
utilizes, among other tools, leverage (the "MAMC Accounts"), which program is
also substantially similar to the Partnership's expected investment program.
The future performance of Mark LP and the MAMC Accounts may vary from the
future performance of the Partnership. (See "CONFLICTS OF INTEREST -
Participation in Investment Opportunities.") PAST PERFORMANCE DOES NOT
GUARANTEE FUTURE RESULTS.
INDIVIDUAL GENERAL PARTNERS
Ultimate responsibility for the affairs of the Partnership is vested
in the Individual General Partners. The Individual General Partners exercise
the same powers, authority and responsibilities on behalf of the Partnership as
are customarily exercised by the directors of a registered investment company
organized as a corporation, and they have complete and exclusive authority to
oversee and to establish policies regarding the management, conduct and
operation of the Partnership's business. The Individual General Partners have
vested the responsibility for the day-to-day management of the Partnership with
the Manager.
A majority of the Individual General Partners are not "interested
persons" (as defined in the 1940 Act) of the Partnership (collectively, the
"Independent General Partners") and perform the same functions for the
Partnership as are customarily exercised by the non-interested directors of a
registered investment company organized as a corporation. The remaining
Individual General Partners are employees of Opco, which is the managing member
of the Manager. Individual General Partners will not contribute to the capital
of the Partnership in their capacity as Individual General Partners, but may
subscribe for interests in the Partnership, subject to the eligibility
requirements described in this Confidential Memorandum.
The identity of the Individual General Partners, and brief
biographical information regarding each Individual General Partner, is set
forth below.
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<PAGE> 34
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING
THE PARTNERSHIP PAST 5 YEARS
<S> <C> <C>
Sol Gittleman Individual General Partner Mr. Gittleman has been Senior Vice
President and Provost of Tufts
Ballou Hall University since 1981. Mr. Gittleman
Tufts University is a Director of the Mexico Equity and
Medford, MA 02155 Income Fund, Inc. and an Individual
Age 62 General Partner of Augusta Partners,
L.P.
Joyce L. Kramer* Individual General Partner Ms. Kramer is Deputy General Counsel
of Opco and a Managing Director since
Oppenheimer & Co., Inc. 1989. She has been employed by Opco
Oppenheimer Tower since 1981. Ms. Kramer is also the
One World Financial Chairperson of the National
Center Association of Securities Dealers,
200 Liberty Street Inc. District Committee for District
New York, NY 10281 10 and an executive committee member
Age 45 of the Securities Industry
Association.
Luis Rubio** Individual General Partner Dr. Rubio is President of Centro de
Investigation Para el Desarrollo, A.C.
Centro de Investigacion (Center of Research Development), a
Para el Desarrollo, A.C. Director of The Czech Republic Fund,
Jaime Balmes No. 11, D-2 Inc. (a closed-end investment
Los Morales Polanco company), Adjunct Fellow, Center for
Mexico D.F. 11510 Strategic and International Studies
Age 40 and a Member of the Advisory Board of
the National Council of Science and
Technology of Mexico. He is also a
Director of The Mexico
</TABLE>
---------------------------
* Individual General Partner who is an "interested person" (as defined
by the 1940 Act) of the Partnership.
** Dr. Rubio does not have an authorized agent in the United States.
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<PAGE> 35
<TABLE>
<S> <C> <C>
Equity and Income Fund, Inc. and an
Individual General Partner of Augusta
Partners, L.P., as well as certain
other private investment funds
associated with Opco.
Janet L. Schinderman Individual General Partner Ms. Schinderman is Associate Dean for
Special Projects and Secretary to the
Columbia Business School Board of Overseers at Columbia
103 Uris Hall Business School of Columbia
Columbia University University. From 1987 to 1990, Ms.
New York, NY 10027 Schinderman served as Executive
Age 45 Assistant to the President at the
Illinois Institute of Technology. Ms.
Schinderman is an Individual General
Partner of Augusta Partners, L.P.
Mitchell A. Tanzman* Principal Individual General Mr. Tanzman has been Managing
Partner Director of Opco since 1994 and
Oppenheimer & Co., Inc. the co-head of Opco's Investment
Oppenheimer Tower Partnership and Offshore Fund
One World Financial Center Department since 1992. From
200 Liberty Street 1991 to 1994, he was a Senior
New York, NY 10281 Vice President of Opco, and from
Age 37 1989 to 1991 he was a Vice
President of Opco. Mr. Tanzman
is an Individual General Partner of
Augusta Partners, L.P. and he is
also an officer of other investment
funds associated with Opco.
</TABLE>
Each of the Individual General Partners was appointed by the Manager
and, on December 19, 1996, was elected to serve in such position by the Manager
and Mr. Tanzman (in his capacity as the Partnership's organizational limited
partner), who were the sole holders of interests in the Partnership on such
date.
---------------------------
* Individual General Partner who is an "interested person" (as defined
by the 1940 Act) of the Partnership.
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<PAGE> 36
An Individual General Partner's position in that capacity will
terminate if such Individual General Partner is removed, resigns or is subject
to various disabling events such as death, incapacity or bankruptcy. An
Individual General Partner may resign upon 90 days' prior written notice to the
other Individual General Partners, and may be removed either by vote of
two-thirds (2/3) of the Individual General Partners not subject to the removal
vote or vote of the Partners holding not less than two-thirds (2/3) of the
total number of votes eligible to be cast by all Partners. Individual General
Partners may not transfer their interests in the Partnership as Individual
General Partners. In the event of any vacancy in the position of an Individual
General Partner, the remaining Individual General Partners may appoint an
individual to serve as an Individual General Partner, so long as immediately
after such appointment at least two-thirds (2/3) of the Individual General
Partners then serving would have been elected by the Partners. The Individual
General Partners may call a meeting of Partners to fill any vacancy in the
position of an Individual General Partner, and must do so within 60 days after
any date on which Individual General Partners who were elected by the Partners
cease to constitute a majority of the Individual General Partners then serving.
If no Individual General Partner remains to continue the business of the
Partnership, the Manager may manage and control the Partnership, but must
convene a meeting of Partners within 60 days for the purpose of either electing
new Individual General Partners or dissolving the Partnership.
The Independent General Partners are each paid an annual retainer of
$5,000 and per meeting fees of $700 (or $100 in the case of telephonic
meetings) by the Partnership. The other Individual General Partners receive no
annual or other fees from the Partnership. All Individual General Partners are
reimbursed by the Partnership for their reasonable out-of-pocket expenses. It
is estimated that the aggregate annual compensation paid by the Partnership to
each Independent General Partner will be $7,800 during the coming year, and
that, together with compensation paid to them by other registered investment
companies advised by affiliates of the Manager, Mr. Gittleman, Ms. Schinderman
and Dr. Rubio will receive aggregate annual compensation from all such
companies of $23,400, $15,600 and $31,200, respectively, for such year. The
Individual General Partners do not receive any pension or retirement benefits
from the Partnership.
THE MANAGER,
OPCO AND MAMC
The Manager is a General Partner of, provides investment advice to,
and is responsible for the day-to-day management of, the Partnership, in each
case under the ultimate supervision of and subject to any policies collectively
established by the Individual General Partners. The Manager was formed as a
Delaware limited liability company on December 12, 1996 and, upon commencement
of the Partnership's operations, will be registered as an investment adviser
under the Advisers Act. The offices of the Manager are located at Oppenheimer
Tower, One World Financial Center, 33rd Floor, 200 Liberty Street, New York,
New York 10281, and its telephone number is (212) 667-4225. As of December 19,
1996, the Manager owned 99% of the outstanding interests in the Partnership
(thereby controlling the Partnership) and was the only person known by the
Partnership to own of record or beneficially 5% or more of the outstanding
interests in the Partnership. The Manager maintains the Partnership's
accounts, books and other documents
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<PAGE> 37
required to be maintained under the 1940 Act at 400 Bellevue Parkway,
Wilmington, Delaware 19809.
The Manager is a joint venture between Oppenheimer & Co., Inc.
("Opco") and Mark Asset Management Corporation ("MAMC"). Opco is the managing
member of (and therefore controls) the Manager and oversees the Manager's
provision of investment advice and day-to-day management to the Partnership.
MAMC provides the Manager with use of and access to such of its personnel and
research as the Manager requires to manage the Partnership's investment
portfolio, and such personnel have the sole responsibility, subject only to the
supervision of the Manager and the Individual General Partners, for the
investment advisory services provided to the Partnership.
Opco, organized as a Delaware corporation in 1950, is registered as an
investment adviser under the Advisers Act and provides investment advice
(directly or through affiliates) to registered investment companies, private
investment partnerships and individuals on a non-pooled basis. As of November
30, 1996, Opco (directly or through affiliates) managed assets of more than $54
billion. Opco is also registered as a broker-dealer under the Securities
Exchange Act of 1934 (the "1934 Act") and is a member of the New York Stock
Exchange, Inc. (the "NYSE") and other principal securities exchanges.
MAMC, organized as a New York corporation in 1986, is registered as an
investment adviser under the Advisers Act and provides investment advisory
services on a pooled and non-pooled basis to pension and profit sharing plans,
to individual accounts, and to trusts, estates and charitable organizations.
MAMC's offices are located in New York, New York. Mr. Morris Mark is the
President, Treasurer, principal shareholder and a director of MAMC. He is the
person who will be primarily responsible for the day-to-day management of the
Partnership's investment portfolio, and he will be directly assisted by other
investment professionals employed by MAMC who act on behalf of the Manager.
MAMC (which Morris Mark founded and controls) and its affiliates have provided
investment advisory services to individuals, businesses and other entities
since 1987. Morris Mark also is the general partner and investment manager of
Mark LP. As of November 30, 1996, MAMC and its affiliates managed assets of
approximately $750 million.
Morris Mark has more than 27 years of experience in the securities and
investment businesses with an extensive background in fundamental investment
research and risk arbitrage. During his professional career, he has been
directly involved as an industry specialist in the analysis of building,
lodging, media, real estate, and financial service companies. In addition, as
a professional investor with extensive experience, Mr. Mark has been involved
with a wide range of industries.
Mr. Mark started his career in the securities business as a securities
analyst at First Manhattan Company, where he became a Vice President. In 1973,
he joined Parker/Hunter Inc. as a Vice President specializing in securities
analysis. In 1974, Mr. Mark joined Goldman, Sachs & Co. as Vice President in
the Investment Research Department. In his nine years at Goldman, Sachs, he
participated in the firm's risk arbitrage activities, in addition to his
research responsibilities. In 1983, Mr. Mark joined Furman Selz LLC as a
partner and Vice President.
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<PAGE> 38
On more than ten occasions, Mr. Mark has been voted onto the annual
Institutional Investor All-Star Team. He is one of the few investment industry
professionals to have been named an "All-Star" analyst in more than one
category, having been selected in both the REIT and Building categories. Mr.
Mark is co-founder, and past president, of the Real Estate Analysts Group and
the Real Estate Investment Trust Analyst Association. He has also been asked
to speak at conferences sponsored by a number of prominent professional
organizations, such as the National Association of Home Builders, the
International Council of Shopping Centers, the National Association of Real
Estate Investment Trusts and Institutional Investor magazine. In addition, on
a number of occasions, he has been invited to appear as an expert witness on
proposed housing and financial services legislation before a number of United
States Congressional committees. Mr. Mark is currently a member of the
"Concept" Group, the Club for Growth, New York Society of Security Analysts,
the Consumer Analysts Group, the Real Estate Analysts Group, the Construction
Analysts Group, the Media and Entertainment Analysts Group, the Merchandising
Analysts Group and, as a Chartered Financial Analyst, the Financial Analysts
Federation.
The authority of the Manager to serve or act as investment adviser,
and be responsible for the day-to-day management, of the Partnership
(collectively, "Advice and Management"), and the incentive allocation
arrangement between the Partnership and the Manager (as the foregoing are set
forth in the limited partnership agreement of the Partnership (the "Partnership
Agreement")) was initially approved by the Individual General Partners,
including each of the Independent General Partners, and by vote of Partners
holding interests in the Partnership on December 19, 1996. The authority of
the Manager to provide Advice and Management will terminate under the following
circumstances:
(1) if revoked by (A) vote of a majority (as defined in
the 1940 Act) of the outstanding voting securities of
the Partnership or (B) the Individual General
Partners, including a majority of the Independent
General Partners, in either case with 60 days' prior
written notice to the Manager;
(2) at the election of the Manager, with 60 days' prior
written notice to the Individual General Partners;
(3) if any period of 12 consecutive months following the
effectiveness of such authority shall conclude
without the approval of the continuation of such
authority by (A) the vote of a majority (as defined
in the 1940 Act) of the outstanding voting securities
of the Partnership or (B) the Individual General
Partners, and in either case, approval by a majority
of the Independent General Partners by vote cast at a
meeting called for such purpose;
(4) upon the occurrence of any event in connection with
the Manager, its provision of Advice and Management,
the Partnership Agreement or otherwise constituting
an "assignment" within the meaning of the 1940 Act;
or
(5) if the Manager is no longer a General Partner of the
Partnership.
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The Manager may also withdraw, or be removed by the Partnership, as a
General Partner. If the Manager gives notice to the Partnership of its
intention to withdraw, it will be required to remain as a General Partner for
one year (or until such earlier date as a successor Manager is approved by the
Partnership) if, in the opinion of counsel to the Partnership, earlier
withdrawal is likely to cause the Partnership to lose its partnership tax
classification or as otherwise required by Rule 2a19-2 under the 1940 Act. At
the request of the Partnership, the Manager will remain as a General Partner of
the Partnership for a period of six months if the Partnership has terminated
the authority of the Manager to provide Advice and Management, unless a
successor General Partner to the Manager is earlier approved by the
Partnership.
VOTING
Each Partner will have the right to cast a number of votes based on
the value of such Partner's respective capital account at any meeting of
Partners called by the Individual General Partners or Partners holding 25% or
more of the total number of votes eligible to be cast by all Partners. Limited
Partners will be entitled to vote on any matter on which shareholders of a
registered investment company organized as a corporation would be entitled to
vote, including selection of Individual General Partners, approval of the
authority of the Manager to provide Advice and Management to the Partnership
and approval of the Partnership's auditors. Except for the exercise of their
voting privileges, Limited Partners will not be entitled to participate in the
management or control of the Partnership's business, and may not act for or
bind the Partnership.
CONFLICTS OF INTEREST
OPCO
In addition to managing the Manager, Opco (directly or through
affiliates) manages the assets of registered investment companies, private
investment partnerships and individual accounts on a non-pooled basis
(collectively, "Opco Clients"). The Partnership has no interest in these
activities. As a result of the foregoing, Opco and its officers or employees
who assist Opco in its oversight of the Manager will be engaged in substantial
activities other than on behalf of the Manager and may have conflicts of
interest in allocating their time and activity between the Manager and Opco
Clients. Opco and such officers and employees will devote only so much time to
the affairs of the Manager as in their judgment is necessary and appropriate.
Opco acts as the placement agent for the Partnership and will bear
costs associated with such activities. Opco, as managing member of the Manager
and in its capacity as placement agent for the Partnership, intends to
compensate its account executives for their ongoing servicing of Opco clients
with whom they have placed interests in the Partnership. Opco intends to
compensate such account executives based upon a formula that takes into account
the amount of client assets being serviced as well as the investment results
attributable to such clients' assets in the Partnership. (See "FEES AND
EXPENSES" and "CAPITAL ACCOUNTS AND ALLOCATIONS - Incentive Allocation.")
Opco and/or its affiliates may provide brokerage and other services
from time to time to one or more accounts or entities managed by MAMC or one of
its affiliates.
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MAMC AND MORRIS MARK
Morris Mark is the general partner of and provides investment advisory
and other services to Mark LP, a private investment partnership. MAMC (of
which Morris Mark is the President, Treasurer, principal shareholder and a
director) provides investment advisory and other services to two private
investment funds and separately managed client accounts. MAMC and certain of
the investment professionals who are principals of or employed by MAMC
(collectively with MAMC, the "Mark Managers") also carry on substantial
investment activities for their own accounts, for the accounts of family
members and for the accounts of friends of such professionals who do not
qualify for an investment in any account or entity to which MAMC or Morris Mark
provide advisory services. (All investment funds and other accounts managed by
the Mark Managers, including Mark LP, but excluding the Partnership, are
referred to collectively as the "Mark Accounts.") The Partnership has no
interest in these activities. As a result of the foregoing, MAMC and the
investment professionals who, on behalf of the Manager, will manage the
Partnership's investment portfolio will be engaged in substantial activities
other than on behalf of the Manager and may have conflicts of interest in
allocating their time and activity between the Partnership and the Mark
Accounts. Such persons will devote only so much time to the affairs of the
Manager as in their judgment is necessary and appropriate.
In addition, the Mark Managers may receive research products and
services in connection with the brokerage services that Opco and its affiliates
may provide from time to time (i) to one or more Mark Accounts or (ii) to the
Partnership.
PARTICIPATION IN INVESTMENT OPPORTUNITIES
The Manager expects to employ an investment program for the
Partnership that is substantially similar to the investment program employed by
the Mark Managers for the Mark Accounts that utilize leverage and that is also
similar to the investment program employed by the Mark Managers for the Mark
Accounts that do not utilize leverage. Accordingly, as a general matter, the
Manager will consider participation by the Partnership in all appropriate
investment opportunities that are under consideration for investment by the
Mark Managers for all Mark Accounts. There may be, however, circumstances
under which the Mark Managers will cause certain Mark Accounts to commit a
larger percentage of their respective assets to an investment opportunity than
to which the Manager will commit the Partnership's assets. There may also be
circumstances under which the Mark Managers will consider participation by the
Mark Accounts in investment opportunities in which the Manager does not intend
to invest on behalf of the Partnership.
The Manager will evaluate for the Partnership, and it is anticipated
that the Mark Managers will evaluate for each Mark Account, a variety of
factors that may be relevant in determining whether a particular investment
opportunity or strategy is appropriate and feasible for the Partnership or a
Mark Account at a particular time, including, but not limited to, the
following: (1) the nature of the investment opportunity taken in the context
of the other investments at the time; (2) the liquidity of the investment
relative to the needs of the particular entity or account; (3) the availability
of the opportunity (i.e., size of obtainable position); (4) the
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transaction costs involved; and (5) the investment or regulatory limitations
applicable to the particular entity or account. Because these considerations
may differ for the Partnership and the Mark Accounts in the context of any
particular investment opportunity, the investment activities of the Partnership
and the Mark Accounts may differ considerably from time to time. In addition,
the fees and expenses of the Partnership will differ from those of the Mark
Accounts. Accordingly, prospective Limited Partners should note that the
future performance of the Partnership and the Mark Accounts may vary.
When the Manager and the Mark Managers determine that it would be
appropriate for the Partnership and one or more Mark Accounts to participate in
an investment opportunity at the same time, they will aggregate, place and
allocate orders on a basis that the Manager believes to be fair and equitable,
consistent with its responsibilities under the Advisers Act and the 1940 Act.
Decisions in this regard are necessarily subjective and there is no requirement
that the Partnership participate, or participate to the same extent as the Mark
Accounts, in all trades. However, no participating entity or account will
receive preferential treatment over any other and the Manager and the Mark
Managers will take steps to ensure that no participating entity or account will
be systematically disadvantaged by the aggregation, placement and allocation of
orders.
Situations may occur, however, where the Partnership could be
disadvantaged because of the investment activities conducted by the Mark
Managers for the Mark Accounts. Such situations may be based on, among other
things, the following: (1) legal restrictions on the combined size of positions
that may be taken for the Partnership and the Mark Accounts, thereby limiting
the size of the Partnership's position; (2) the difficulty of liquidating an
investment for the Partnership and the Mark Accounts where the market cannot
absorb the sale of the combined positions; and (3) the determination that a
particular investment is warranted only if hedged with an option or other
instrument and there is a limited availability of such options or other
instruments. In particular, the Partnership may be legally restricted from
entering into a "joint transaction" (as defined in the 1940 Act) with the Mark
Accounts with respect to the securities of an issuer without first obtaining
exemptive relief from the SEC. (See "CONFLICTS OF INTEREST - Other Matters.")
The members of the Manager, and their directors, officers and
employees, may buy and sell securities or other investments for their own
accounts and may have actual or potential conflicts of interest with respect to
investments made on behalf of the Partnership. As a result of differing
trading and investment strategies or constraints, positions may be taken by
directors, officers and employees of Opco or MAMC, or by the Mark Managers for
the Mark Accounts, that are the same, different or made at a different time
than positions taken for the Partnership. In order to mitigate the possibility
that the Partnership will be adversely affected by such personal trading, the
Partnership and the Manager have adopted a Joint Code of Ethics in compliance
with Section 17(j) of the 1940 Act that restricts securities trading in the
personal accounts of investment professionals and others who normally come into
possession of information regarding the Partnership's portfolio transactions.
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OTHER MATTERS
The Manager and its members will not buy securities or other property
from, or sell securities or other property to, the Partnership. However, the
Partnership may effect certain principal transactions in securities with one or
more Mark Accounts, except for accounts in which MAMC or any affiliate thereof
serves as a general partner or in which it has a financial interest (other than
an interest that results solely from MAMC's or any affiliate's appointment as
an investment adviser to the account). Such transactions would be made in
circumstances where the Manager has determined it would be appropriate for the
Partnership to purchase and a Mark Account to sell, or the Partnership to sell
and a Mark Account to purchase, the same security or instrument on the same
day. Any such purchases and sales would be made pursuant to procedures adopted
by the Partnership pursuant to Rule 17a-7 under the 1940 Act. Among other
things, those procedures are intended to ensure that (1) each such transaction
will be effected for cash consideration at the current market price of the
particular securities, (2) no such transaction will involve restricted
securities or securities for which market quotations are not readily available
and (3) no brokerage commissions, fees (except for customary transfer fees) or
other remuneration will be paid in connection with any such transaction.
Future investment activities of Opco (including its affiliates) or
MAMC (including its affiliates) and the principals, partners, directors,
officers or employees of the foregoing may give rise to additional conflicts of
interest.
BROKERAGE
The Manager is responsible for the execution of the Partnership's
portfolio transactions and the allocation of brokerage. Transactions on U.S.
stock exchanges and on some foreign stock exchanges involve the payment of
negotiated brokerage commissions. On the great majority of foreign stock
exchanges, commissions are fixed. No stated commission is generally applicable
to securities traded in over-the-counter markets, but the prices of those
securities include undisclosed commissions or mark-ups.
In executing transactions on behalf of the Partnership, the Manager
seeks to obtain the best price and execution for the Partnership, taking into
account factors such as price, size of order, difficulty of execution and
operational facilities of a brokerage firm, and in the case of transactions
effected by the Partnership with unaffiliated brokers, the firm's risk in
positioning a block of securities. Although the Manager generally seeks
reasonably competitive commission rates, the Partnership will not necessarily
pay the lowest commission available on each transaction. The Partnership has
no obligation to deal with any broker or group or brokers in executing
transactions in portfolio securities.
Following the principle of seeking best price and execution, the
Manager may place brokerage business on behalf of the Partnership with brokers
that provide the Manager and its affiliates (including the Mark Managers) with
supplemental research, market and statistical information, including advice as
to the value of securities, the advisability of investing in, purchasing or
selling securities, and the availability of securities or purchasers or sellers
of securities, and furnishing analyses and reports concerning issuers,
industries, securities,
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economic factors and trends, portfolio strategy and the performance of
accounts. The expenses of the Manager are not necessarily reduced as a result
of the receipt of this supplemental information, which may be useful to the
Manager and its affiliates in providing services to clients other than the
Partnership. In addition, not all of the supplemental information is used by
the Manager in connection with the Partnership. Conversely, the information
provided to the Manager by brokers and dealers through which other clients of
the Manager and its affiliates effect securities transactions may be useful to
the Manager in providing services to the Partnership.
Although the Partnership cannot accurately predict its portfolio
turnover, the Partnership expects that its annual portfolio turnover rate will
not exceed 100%. Higher portfolio turnover rates usually generate additional
brokerage commissions and expenses and the short-term gains realized from these
transactions are taxable to the Limited Partners as ordinary income.
The Partnership may execute portfolio brokerage transactions through
Opco or its affiliates. Any such transactions would be effected pursuant to
procedures adopted by the Partnership pursuant to Section 17(e) of the 1940 Act
and Rule 17e-1 thereunder. Among other things, those procedures provide that
when acting as broker for the Partnership in connection with the sale of
securities to or by the Partnership, Opco and its affiliates may not receive
any compensation exceeding the following limits: (1) if the sale is effected
on a securities exchange, the compensation may not exceed the "usual and
customary broker's commission" (as defined in Rule 17e-1 under the 1940 Act);
(2) if the sale is effected in connection with a secondary distribution of
securities, the compensation cannot exceed 2% of the sale price; and (3) the
compensation for sales otherwise effected cannot exceed 1% of the sales price.
Rule 17e-1 defines a "usual and customary broker's commission" as one that is
fair compared to the commission received by other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
an exchange during a comparable period of time.
FEES AND EXPENSES
Opco provides certain management and administrative services to the
Partnership, including, among other things, providing office space and other
support services to the Partnership. In consideration for such services, the
Partnership will pay Opco a monthly fee of 0.08333% (1% on an annualized basis)
of the Partnership's net assets, excluding assets attributable to the Manager's
capital account (the "Opco Fee"). 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. The Opco Fee will be computed based on the
net assets of the Partnership as of the start of business on the first business
day of each month, after adjustment for any subscriptions effective on such
date, and will be due and payable in arrears within five business days after
the end of such month. The Opco Fee will be charged in each fiscal period to
the capital accounts of all Limited Partners in proportion to their capital
accounts at the beginning of such fiscal period. A portion of the Opco Fee
will be paid by Opco to MAMC.
PFPC Inc. provides administration, accounting and investor services to
the Partnership, which are in addition to the services provided by Opco to the
Partnership, as described above. In
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consideration for such services, the Partnership will pay PFPC Inc. a fee (the
"PFPC Fee") that is not anticipated to exceed 0.20% (annualized) of the
Partnership's net assets (as defined above), plus reimbursement of certain
out-of-pocket expenses.
In addition, the capital accounts of Limited Partners may be subject
to an Incentive Allocation depending upon the investment performance of the
Partnership. (See "CAPITAL ACCOUNTS AND ALLOCATIONS - Incentive Allocation.")
The Partnership will bear all expenses incurred in the business of the
Partnership other than those specifically required to be borne by Opco.
Expenses to be borne by the Partnership include, but are not limited to, the
following:
o all costs and expenses directly related to portfolio
transactions and positions for the Partnership's account,
including, but not limited to, brokerage commissions, research
fees, interest and commitment fees on loans and debit
balances, borrowing charges on securities sold short,
dividends on securities sold but not yet purchased, custodial
fees, margin fees, transfer taxes and premiums, taxes withheld
on foreign dividends and indirect expenses from investments in
investment funds;
o all costs and expenses associated with the organization and
registration of the Partnership (which shall be amortized over
a 60-month period), certain offering costs and the costs of
compliance with any applicable Federal or state laws;
o the costs and expenses of holding any meetings of any Partners
that are regularly scheduled, permitted or required to be held
under the terms of the Partnership Agreement, the 1940 Act or
other applicable law;
o fees and disbursements of any attorneys, accountants, auditors
and other consultants and professionals engaged on behalf of
the Partnership;
o the Opco Fee and the fees of custodians and persons (such as
PFPC Inc.) providing administrative services to the
Partnership;
o the costs of a fidelity bond and any liability insurance
obtained on behalf of the Partnership or its General Partners;
and
o such other types of expenses as may be approved from time to
time by the Individual General Partners.
The Manager will be reimbursed by the Partnership for any of the above expenses
that it pays on behalf of the Partnership.
The Partnership's organizational expenses are estimated at $350,000,
and the Partnership will also bear certain offering expenses not to exceed
$50,000. Organizational expenses will be amortized by the Partnership over 60
months from the date the Partnership commences operations. Offering costs
cannot be deducted by the Partnership or the Partners.
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CAPITAL ACCOUNTS AND ALLOCATIONS
CAPITAL ACCOUNTS
The Partnership will maintain a separate capital account for each
Partner, which will have an opening balance equal to such Partner's initial
contribution to the capital of the Partnership. Each Partner's capital account
will be increased by the sum of the amount of cash and the value of any
securities constituting additional contributions by such Partner to the capital
of the Partnership, plus any amounts credited to such Partner's capital account
as described below. Similarly, each Partner's capital account will be reduced
by the sum of the amount of any repurchase by the Partnership of the interest,
or portion thereof, of such Partner, plus the amount of any distributions to
such Partner which are not reinvested, plus any amounts debited against such
Partner's capital account as described below. To the extent that any debits
would reduce the balance of the capital account of any Limited Partner below
zero, that portion of any such debits will instead be allocated to the capital
account of the Manager; any subsequent credits that would otherwise be
allocable to the capital account of any such Limited Partner will instead be
allocated to the capital account of the Manager in such amounts as are
necessary to offset all previous debits attributable to such Limited Partner.
Capital accounts of Partners are adjusted as of the close of business
on the last day of each fiscal period. Fiscal periods begin on the day after
the last day of the preceding fiscal period and end at the close of business on
(1) the last day of each year, (2) the day preceding the date on which a
contribution to the capital of the Partnership is made, (3) the day on which
the Partnership repurchases any interest or portion of an interest of any
Partner, or (4) the day on which any amount is credited to or debited from the
capital account of any Partner other than an amount to be credited to or
debited from the capital accounts of all Partners in accordance with their
respective partnership percentages. A partnership percentage will be
determined for each Partner as of the start of each fiscal period by dividing
the balance of such Partner's capital account as of the commencement of such
date by the sum of the balances of all capital accounts of all Partners as of
the commencement of such date.
ALLOCATION OF NET PROFITS AND NET LOSSES
Net profits or net losses of the Partnership for each fiscal period
will be allocated among and credited to or debited against the capital accounts
of all Partners as of the last day of each fiscal period in accordance with
Partners' respective partnership percentages for such fiscal period. Net
profits or net losses will be measured as the net change in the value of the
net assets of the Partnership (including any net change in unrealized
appreciation or depreciation of investments and realized income and gains or
losses and expenses during a fiscal period), before giving effect to any
repurchases by the Partnership of interests or portions thereof, and excluding
the amount of any items to be allocated among the capital accounts of the
Partners other than in accordance with the Partners' respective partnership
percentages.
Allocations for Federal income tax purposes generally will be made
among the Partners so as to reflect equitably amounts credited or debited to
each Partner's capital account for the current and prior fiscal years.
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INCENTIVE ALLOCATION
So long as the Manager provides Advice and Management to the
Partnership, the Manager will be entitled to an incentive allocation (the
"Incentive Allocation"), charged to the capital account of each Limited Partner
as of the last day of each "allocation period," of 20% of the amount by which
any "allocated gain" during an "allocation period" exceeds the positive balance
in such Limited Partner's "loss recovery account." Such Incentive Allocation
will be credited to the capital account of the Manager.
For purposes of calculating the Incentive Allocation, "allocated gain"
means the excess of the balance of such Limited Partner's capital account at
the end of an "allocation period" (after giving effect to allocations other
than the Incentive Allocation, but before giving effect to repurchases of
interests by the Partnership or debits to such capital account to reflect any
item not chargeable ratably to all Partners), over the balance of such Limited
Partner's capital account at the start of such "allocation period".
Consequently, any Incentive Allocation to be credited to the Manager will be
increased by a portion of the amount of any net unrealized appreciation, as
well as net realized gains, allocable to a Limited Partner.
An Incentive Allocation will be charged only with respect to any
"allocated gain" in excess of the positive balance of a "loss recovery account"
maintained for each Limited Partner. A "loss recovery account" is a memorandum
account maintained by the Partnership for each Limited Partner, which has an
initial balance of zero and is (1) increased after the close of each
"allocation period" by the amount of any negative performance for such Limited
Partner during such "allocation period," and (2) decreased (but not below zero)
after the close of each "allocation period" by the amount of any allocated gain
for such Limited Partner during such "allocation period." Any positive balance
in a Limited Partner's "loss recovery account" would be reduced as the result
of a repurchase or certain transfers with respect to such Limited Partner's
interest in the Partnership in proportion to the reduction of such Limited
Partner's capital account.
An "allocation period" as to each Limited Partner is a period
commencing on the admission of such Limited Partner to the Partnership and
ending at the close of business on the last day of the twelfth complete
calendar month after such admission, and thereafter is each period commencing
as of the day following the last day of the preceding allocation period with
respect to any such Limited Partner and ending as of the close of business on
the first to occur of (1) the last day of a fiscal year of the Partnership, (2)
the day as of which the Partnership repurchases the entire interest of such
Limited Partner, (3) the day as of which the Partnership admits as a substitute
Limited Partner a person to whom the entire interest of such Limited Partner
has been transferred or (4) the day as of which the authority of the Manager to
provide Advice and Management is terminated. The measurement of any Incentive
Allocation for an "allocation period" must take into account any negative
performance from a prior allocation period to the extent reflected in the "loss
recovery account." Therefore, the Incentive Allocation for any allocation
period after the initial twelve-month period in effect is a reflection of the
extent to which cumulative performance achieved with respect to a Limited
Partner's account since such Partner's admission to the Partnership exceeds the
highest previous level of performance achieved through the close of any prior
allocation period. If any subsequent allocation period is less than twelve
calendar months, the Incentive Allocation for
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such period will be computed over the period commencing at the start of the
last allocation period which commenced more than twelve calendar months
previously and ending at the end of the current allocation period, with
appropriate adjustment for any Incentive Allocation made with respect to the
prior allocation periods.
Within 30 days of each allocation period with respect to each Limited
Partner, and subject to certain limitations, the Manager may withdraw up to 98%
of the Incentive Allocation (computed on the basis of unaudited data) that was
credited to the Manager's capital account and debited from such Limited
Partner's capital account with respect to such allocation period. The
Partnership will pay the balance (subject to audit adjustments) within 30 days
after the completion of the audit of the Partnership's books.
ALLOCATION OF SPECIAL ITEMS - CERTAIN WITHHOLDING TAXES AND OTHER EXPENDITURES
Withholding taxes or other tax obligations incurred by the Partnership
which are attributable to any Partner will be debited against the capital
account of such Partner as of the close of the fiscal period during which the
Partnership paid such obligation, and any amounts then or thereafter
distributable to such Partner will be reduced by the amount of such taxes. If
the amount of such taxes is greater than any such distributable amounts, then
the Partner and any successor to such Partner's interest is required to pay to
the Partnership as a contribution to the capital of the Partnership, upon
demand of the Partnership, the amount of such excess. The Partnership is not
obligated to apply for or obtain a reduction of or exemption from withholding
tax on behalf of any Partner that may be eligible for such reduction or
exemption, although in the event that the Partnership determines that a Partner
is eligible for a refund of any withholding tax, it may, at the request and
expense of such Partner, assist such Partner in applying for such refund.
Generally, any expenditures payable by the Partnership, to the extent
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 such payments are made or whose
particular circumstances gave rise to such payments. Such charges shall be
debited to the capital accounts of such Partners as of the close of the fiscal
period during which any such items were paid or accrued by the Partnership.
RESERVES
Appropriate reserves may be created, accrued and charged against net
assets and proportionately against the capital accounts of the Partners for
contingent liabilities as of the date any such contingent liabilities become
known to the Partnership. Such reserves will be in such amounts (subject to
increase or reduction) which the Partnership may deem necessary or appropriate.
The amount of any such reserve (or any increase or decrease therein) will be
proportionately charged or credited, as appropriate, to the capital accounts of
those investors who are Partners at the time when such reserve is created,
increased or decreased, as the case may be; provided, however, that if any such
reserve (or any increase or decrease therein) exceeds the lesser of $500,000 or
1% of the aggregate value of the capital accounts of all such Partners, the
amount of such reserve, increase, or decrease shall instead be charged or
credited to those investors who were Partners at the time, as determined by the
Partnership, of the act or omission giving rise to the
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contingent liability for which the reserve was established, increased or
decreased in proportion to their capital accounts at that time.
NET ASSET VALUATION
Net asset valuations will be determined by or at the direction of the
Manager as of the close of business at the end of any fiscal period in
accordance with the valuation principles set forth below or as may be
determined from time to time pursuant to policies established by the Individual
General Partners.
Domestic exchange traded and NASDAQ listed equity securities will be
valued at their last composite sale prices as reported on the exchanges where
such securities are traded. If no sales of such securities are reported on a
particular day, the securities will be valued based upon their composite bid
prices for securities held long, or their composite ask prices for securities
held short, as reported by such exchanges. Securities traded on a foreign
securities exchange will be valued at their last sale prices on the exchange
where such securities are primarily traded, or in the absence of a reported
sale on a particular day, at their bid prices (in the case of securities held
long) or ask prices (in the case of securities held short) as reported by such
exchange. Listed options will be valued using last sales prices as reported by
the exchange with the highest reported daily volume for such options or, in the
absence of any sales on a particular day, at their bid prices as reported by
the exchange with the highest volume on the last day a trade was reported.
Other securities for which market quotations are readily available will be
valued at their bid prices (or ask prices in the case of securities held short)
as obtained from one or more dealers making markets for such securities. If
market quotations are not readily available, securities and other assets will
be valued at fair value as determined in good faith by, or under the
supervision of, the Individual General Partners.
Debt securities will be valued in accordance with the procedures
described above, which with respect to such securities may include the use of
valuations furnished by a pricing service which employs a matrix to determine
valuations for normal institutional size trading units. The Individual General
Partners will periodically monitor the reasonableness of valuations provided by
any such pricing service. Debt securities with remaining maturities of 60 days
or less will, absent unusual circumstances, be valued at amortized cost, so
long as such valuation is determined by the Individual General Partners to
represent fair value.
All assets and liabilities initially expressed in foreign currencies
will be converted into U.S. dollars using foreign exchange rates provided by a
pricing service compiled as of 4:00 p.m. London time. Trading in foreign
securities generally is completed, and the values of such securities are
determined, prior to the close of securities markets in the U.S. Foreign
exchange rates are also determined prior to such close. On occasion, the
values of such securities and exchange rates may be affected by events
occurring between the time as of which determination of such values or exchange
rates are made and the time as of which the net asset value of the Partnership
is determined. When such events materially affect the values of securities
held by the Partnership or its liabilities, such securities and liabilities
will be valued at fair value as determined in good faith by, or under the
supervision of, the Individual General Partners.
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Prospective investors should be aware that situations involving
uncertainties as to the valuation of portfolio positions could have an adverse
effect on the Partnership's net assets if the Individual General Partners'
judgments regarding appropriate valuations should prove incorrect.
SUBSCRIPTION FOR INTERESTS
SUBSCRIPTION TERMS
Both initial and additional interests in the Partnership may be
accepted from eligible investors (as described below) at such times as the
Manager may determine on the terms set forth below. The Partnership may, in
its discretion, suspend subscriptions for interests at any time or permit
subscriptions on a more frequent basis. The Partnership reserves the right to
reject any subscription for interests in the Partnership. The minimum required
initial contribution to the capital of the Partnership from each investor is
$150,000, and the minimum additional investment in the Partnership is $25,000.
The initial closing date for subscriptions of interests in the Partnership is
February 21, 1997. The Manager, in its sole discretion, may postpone the
closing date for up to 30 days. Interests may not be purchased by nonresident
aliens, foreign corporations, foreign partnerships, foreign trusts or foreign
estates, all as defined in the Code. In addition, because the Partnership may
generate "unrelated business taxable income" ("UBTI"), charitable remainder
trusts may not want to purchase interests in the Partnership because a
charitable remainder trust will not be exempt from Federal income tax under
Section 664(c) of the Code for any year in which it has UBTI.
Except as otherwise permitted by the Partnership, initial and any
additional contributions to the capital of the Partnership by any Partner will
be payable in cash, and all contributions must be transmitted by such time and
in such manner as is specified in the subscription documents of the
Partnership. Initial and any additional contributions to the capital of the
Partnership will be payable in one installment and will be due prior to the
proposed acceptance of the contribution, although the Partnership may accept,
in its discretion, a subscription prior to its receipt of cleared funds.
Each new Limited Partner will be obligated to agree to be bound by all
of the terms of the Partnership Agreement. Each potential investor will also
be obligated to represent and warrant in a subscription agreement, among other
things, that such investor is purchasing an interest for its own account, and
not with a view to the distribution, assignment, transfer or other disposition
of such interest.
If and when the Partnership determines to accept securities as a
contribution to the capital of the Partnership, the Partnership will charge
each Partner making such contribution an amount determined by the Individual
General Partners and not exceeding 2% of the value of such contribution in
order to reimburse the Partnership for any costs it incurs in liquidating and
accepting such securities. Any such charge will be due and payable by the
contributing Partner in full at the time the contribution to the capital of the
Partnership to which such charge relates is due.
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ELIGIBLE INVESTORS
Each prospective investor will be required to certify that the
interest subscribed for is being acquired directly or indirectly for the
account of an "accredited investor" as defined in Regulation D under the 1933
Act, and that such investor (as well as each of the investor's beneficial
owners under certain circumstances) has a net worth immediately prior to the
time of subscription of at least $1 million. Existing Limited Partners who
subscribe for additional interests in the Partnership will be required to
represent that the Limited Partner meets the foregoing eligibility criteria at
the time of the additional subscription. The relevant investor qualifications
will be set forth in a subscription agreement to be provided to prospective
investors, which must be completed by each prospective investor.
MANAGER'S INVESTMENT IN THE PARTNERSHIP
The Manager is required by the Partnership Agreement to contribute
amounts to the Partnership sufficient to maintain its capital account balance
at a level, if any, necessary to ensure that the Partnership will be treated as
a partnership for Federal income tax purposes.
REDEMPTIONS, REPURCHASES OF
INTERESTS AND TRANSFERS
NO RIGHT OF REDEMPTION
No Partner or other person holding an interest or a portion of an
interest will have the right to require the Partnership to redeem such interest
or portion thereof. There is no public market for interests in the
Partnership, and none is expected to develop. Consequently, investors may not
be able to liquidate their investment other than as a result of repurchases of
interests by the Partnership, as described below.
REPURCHASES OF INTERESTS
The Individual General Partners may, from time to time and in their
complete and exclusive discretion, determine to direct the Manager to cause the
Partnership to repurchase interests or portions thereof from Partners pursuant
to written tenders by Partners on such terms and conditions as they may
determine. In determining whether the Partnership should repurchase interests
or portions thereof from Partners pursuant to written tenders, the Individual
General Partners will consider the recommendation of the Manager. Beginning in
1998, the Manager expects that generally it will recommend to the Individual
General Partners that the Partnership offer to repurchase interests from
Partners once in each year, effective at the end of the year, and also intends
to recommend the making of an offer to repurchase interests effective as of
March 31, 1998. The Individual General Partners will also consider the
following factors, among others, in making such determination:
o whether any Partners have requested to tender interests or
portions thereof to the Partnership;
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o the liquidity of the Partnership's assets;
o the investment plans and working capital requirements of the
Partnership;
o the relative economies of scale with respect to the size of
the Partnership;
o the history of the Partnership in repurchasing interests or
portions thereof;
o the economic condition of the securities markets; and
o the anticipated tax consequences of any proposed repurchases
of interests or portions thereof.
The Individual General Partners will determine that the Partnership
repurchase interests or portions thereof from Partners pursuant to written
tenders only on such terms as they determine to be fair to the Partnership and
to all Partners or persons holding interests acquired from Partners, or to one
or more classes of Partners, as applicable. When the Individual General
Partners determine that the Partnership shall repurchase interests in the
Partnership or portions thereof, notice will be provided to Partners describing
the terms thereof, containing information Partners should consider in deciding
whether to participate in such repurchase opportunity and containing
information on how to participate. Partners who are deciding whether to tender
their interests or portions thereof during the period that a repurchase offer
is open may ascertain the net asset value of their interest in the Partnership
from the Manager during such period.
The Partnership Agreement provides that the Partnership shall be
dissolved if any Limited Partner that has submitted a written request to tender
its entire interest for repurchase by the Partnership has not been permitted to
do so for a period of two years.
Repurchases of interests or portions thereof from Partners by the
Partnership may be made, in the discretion of the Manager, in part or in whole
for cash or for securities of equivalent value and shall be effective after
receipt by the Partnership of all eligible written tenders of interests or
portions thereof from Partners. The amount due to any Partner whose interest
or portion thereof is repurchased shall be equal to the value of such Partner's
capital account or portion thereof based on the net asset value of the
Partnership's assets as of the effective date of repurchase, after giving
effect to all allocations to be made to such Partner's capital account as of
such date. Payment of the purchase price pursuant to a tender of interests
will consist of, first, cash and/or marketable securities traded on an
established securities exchange (valued at net asset value in accordance with
the Partnership Agreement and distributed to tendering Partners on a pari passu
basis) in an aggregate amount equal to at least 95% of the estimated unaudited
net asset value of the interests tendered, determined as of the expiration date
of the tender offer (the "expiration date"). Payment of such amount will be
made promptly after the expiration date (the "cash payment"). Generally,
payment pursuant to such a tender will also consist of a promissory note that
neither bears interest nor is transferable (the "note") entitling the holder
thereof to a contingent payment equal to the excess, if any, of (a) the net
asset value of the interests tendered as of the expiration date, determined
based on the audited financial statements of the Partnership, over (b) the cash
payment. The note would be delivered to the tendering Partner promptly after
the expiration date and would
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be payable in cash promptly after completion of the audit of the financial
statements of the Partnership. The audit of the Partnership's financial
statements will be completed within 60 days after the end of each year. The
Partnership does not impose any charges on a repurchase of interests or portion
of interests in the Partnership.
The Partnership intends to maintain daily a segregated custodial
account containing cash, U.S. Government Securities or other liquid securities
in an amount equal to the aggregate amount of the notes. Payment for
repurchased interests may require the Partnership to liquidate portfolio
holdings earlier than the Manager would otherwise liquidate such holdings,
potentially resulting in losses, and may increase the Partnership's portfolio
turnover. The Manager intends to take measures to attempt to avoid or minimize
such potential losses and turnover.
A Limited Partner who tenders for repurchase any amount of the
interest of such Partner in the Partnership prior to having been a Limited
Partner for twelve consecutive months will be required to maintain a capital
account balance equal to the greater of (1) $150,000 and (2) the amount of
Incentive Allocation that would be debited from such Partner's capital account
if the date of repurchase were a date on which an Incentive Allocation would
otherwise be made.
The Partnership may repurchase an interest in the Partnership or
portion thereof of a Partner or any person acquiring an interest or portion
thereof from or through a Partner in the event that:
o such an interest or portion thereof has been transferred or
such an interest or portion thereof has vested in any person
by operation of law as the result of the death, dissolution,
bankruptcy or incompetency of a Partner;
o ownership of such an interest by a Partner or other person
will cause the Partnership to be in violation of, or require
registration of any interest or portion thereof under, or
subject the Partnership to additional registration or
regulation under, the securities, commodities or other laws of
the United States or any other relevant jurisdiction;
o continued ownership of such an interest may be harmful or
injurious to the business or reputation of the Partnership,
the Individual General Partners or the Manager, or may subject
the Partnership or any Partners to an undue risk of adverse
tax or other fiscal consequences;
o any of the representations and warranties made by a Partner in
connection with the acquisition of an interest in the
Partnership or portion thereof was not true when made or has
ceased to be true; or
o it would be in the best interests of the Partnership for the
Partnership to repurchase such an interest or portion thereof.
The Manager is entitled to tender for repurchase all or a portion of
its interest in the Partnership only if the Manager maintains the requisite
minimum capital account balance described previously, or if, in the opinion of
legal counsel to the Partnership, such repurchase would not
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jeopardize the classification of the Partnership as a partnership for U.S.
Federal income tax purposes. The Manager is also entitled to tender its
interest to the Partnership in certain circumstances described in the
Partnership Agreement where the status of the Manager is terminated or the
authority of the Manager to provide Advice and Management is terminated.
TRANSFERS OF INTERESTS
No person shall become a substituted Limited Partner without the
written consent of the Manager, which consent may be withheld for any reason in
the Manager's sole and absolute discretion. Limited Partner interests may be
transferred only (i) by operation of law pursuant to the death, bankruptcy,
insolvency or dissolution of a Limited Partner or (ii) with the written consent
of the Manager (which may be withheld in its sole and absolute discretion and
is expected to be granted, if at all, only under extenuating circumstances) in
connection with a transfer to a family trust or other entity that does not
result in a change of beneficial ownership. Notice to the Manager of any
proposed transfer must include evidence satisfactory to the Manager that the
proposed transfer is exempt from registration under the 1933 Act, that the
proposed transferee meets any requirements imposed by the Partnership with
respect to investor eligibility and suitability, including the requirement that
any investor (or investor's beneficial owners in certain circumstances) has a
net worth immediately prior to the time of subscription of at least $1 million,
and must be accompanied by a properly completed subscription agreement. The
Manager is not authorized under the Partnership Agreement to consent to a
transfer of an interest or portion thereof of a Limited Partner unless the
entire interest of the Limited Partner is transferred to a single transferee
and after such transfer the balance of the capital account of the transferee
(and any Partner transferring less than its entire interest) is not less than
$150,000.
Any transferee that acquires an interest or portion thereof in the
Partnership by operation of law as the result of the death, dissolution,
bankruptcy or incompetency of a Limited Partner or otherwise, shall be entitled
to the allocations and distributions allocable to the interest so acquired and
to transfer such interest in accordance with the terms of the Partnership
Agreement, but shall not be entitled to the other rights of a Limited Partner
unless and until such transferee becomes a substituted Limited Partner as
provided in the Partnership Agreement. If a Limited Partner transfers an
interest or portion thereof with the approval of the Manager, under the
policies established by the Individual General Partners, the Manager shall
promptly take all necessary actions so that each transferee or successor to
whom such interest or portion thereof is transferred is admitted to the
Partnership as a Limited Partner. Each Limited Partner and transferee must pay
all expenses, including attorneys' and accountants' fees, incurred by the
Partnership in connection with such transfer.
By subscribing for an interest in the Partnership, each Limited
Partner has agreed to indemnify and hold harmless the Partnership, the
Individual General Partners, the Manager, each other Limited Partner and any
affiliate of the foregoing against all losses, claims, damages, liabilities,
costs and expenses (including legal or other expenses incurred in investigating
or defending against any such losses, claims, damages, liabilities, costs and
expenses or any judgments, fines and amounts paid in settlement), joint or
several, to which such persons may become subject by reason of or arising from
any transfer made by such Limited Partner in violation
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of these provisions or any misrepresentation made by such Limited Partner in
connection with any such transfer.
The Manager may not transfer its interest as a General Partner except
to a person who has agreed to be bound by all of the terms of the Partnership
Agreement and, if the transfer would constitute an "assignment" within the
meaning of the 1940 Act, with the prior approval of (a) the Individual General
Partners (including a majority of the Independent General Partners) by vote
cast in person at a meeting called for such purpose, and (b) Partners holding a
majority of the total number of votes eligible to be cast by all Partners.
Individual General Partners may not transfer their interests as Individual
General Partners.
TAX ASPECTS
The following is a summary of certain aspects of the income taxation of
the Partnership and its Partners which should be considered by a prospective
Limited Partner. The Partnership has not sought a ruling from the Internal
Revenue Service (the "Service") or any other Federal, state or local agency with
respect to any of the tax issues affecting the Partnership, nor has it obtained
an opinion of counsel with respect to any tax issues other than the
characterization of the Partnership as a partnership for Federal income tax
purposes.
This summary of certain aspects of the Federal income tax treatment of
the Partnership is based upon the Code, judicial decisions, Treasury Regulations
(the "Regulations") and rulings in existence on the date hereof, all of which
are subject to change. This summary does not discuss the impact of various
proposals to amend the Code which could change certain of the tax consequences
of an investment in the Partnership. This summary also does not discuss all of
the tax consequences that may be relevant to a particular investor or to certain
investors subject to special treatment under the Federal income tax laws, such
as insurance companies.
EACH PROSPECTIVE LIMITED PARTNER SHOULD CONSULT WITH ITS OWN TAX
ADVISER IN ORDER FULLY TO UNDERSTAND THE FEDERAL, STATE, LOCAL AND FOREIGN
INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE PARTNERSHIP.
In addition to the particular matters set forth in this section,
tax-exempt organizations should review carefully those sections of the
Confidential Memorandum regarding liquidity and other financial matters to
ascertain whether the investment objective of the Partnership is consistent with
their overall investment plans. Each prospective tax-exempt Limited Partner is
urged to consult its own counsel regarding the acquisition of Interests.
TAX TREATMENT OF PARTNERSHIP OPERATIONS
CLASSIFICATION OF THE PARTNERSHIP. The Partnership has received an
opinion of Schulte Roth & Zabel LLP, counsel to the Partnership, that under the
provisions of the Code and the Regulations, as in effect on the date of the
opinion, as well as under the relevant authority interpreting the Code and the
Regulations, and based upon certain representations of the General
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Partners, the Partnership will be treated as a partnership for Federal income
tax purposes and not as an association taxable as a corporation.
Under Section 7704 of the Code, "publicly traded partnerships" are
generally treated as corporations for Federal income tax purposes. A publicly
traded partnership is any partnership the interests in which are traded on an
established securities market or which are readily tradable on a secondary
market (or the substantial equivalent thereof). Interests in the Partnership
will not be traded on an established securities market. Regulations (the
"Regulations") concerning the classification of partnerships as publicly traded
partnerships provide certain safe harbors under which interests in a partnership
will not be considered readily tradable on a secondary market (or the
substantial equivalent thereof). The Partnership will not be eligible for any
of those safe harbors. In particular, it will not qualify under the private
placement safe harbor set forth in the Regulations if, as is anticipated, the
Partnership has more than 100 Partners.
The Regulations specifically provide that the fact that a partnership
does not qualify for the safe harbors is disregarded for purposes of determining
whether interests in a partnership are readily tradable on a secondary market
(or the substantial equivalent thereof). Rather, in this event the
partnership's status is examined under a general facts and circumstances test
set forth in the Regulations. Schulte Roth & Zabel LLP has also render its
opinion that, under this "facts and circumstances" test, and based upon the
anticipated operations of the Partnership as well as the legislative history to
Section 7704 and the text of the Regulations, the interests in the Partnership
will not be readily tradable on a secondary market (or the substantial
equivalent thereof) and, therefore, that the Partnership will not be treated as
a publicly traded partnership taxable as a corporation.
Neither of the opinions of counsel described above, however, is binding
on the Service or the courts. If it were determined that the Partnership should
be treated as an association or a publicly traded partnership taxable as a
corporation for Federal income tax purposes (as a result of a successful
challenge to such opinions by the Service, changes in the Code, the Regulations
or judicial interpretations thereof, a material adverse change in facts, or
otherwise), the taxable income of the Partnership would be subject to corporate
income tax when recognized by the Partnership; distributions of such income,
other than in certain redemptions of Interests, would be treated as dividend
income when received by the Partners to the extent of the current or accumulated
earnings and profits of the Partnership; and Partners would not be entitled to
report profits or losses realized by the Partnership.
As a partnership, the Partnership is not itself subject to Federal
income tax. The Partnership files an annual partnership information return with
the Service which reports the results of operations. Each Partner is required
to report separately on its income tax return its distributive share of the
Partnership's net long-term capital gain or loss, net short-term capital gain or
loss and all other items of ordinary income or loss. Each Partner is taxed on
its distributive share of the Partnership's taxable income and gain regardless
of whether it has received or will receive a distribution from the Partnership.
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ALLOCATION OF PROFITS AND LOSSES. Under the Partnership Agreement, the
Partnership's net capital appreciation or net capital depreciation for each
accounting period is allocated among the Partners and to their capital accounts
without regard to the amount of income or loss actually recognized by the
Partnership for Federal income tax purposes. The Partnership Agreement provides
that items of income, deduction, gain, loss or credit actually recognized by the
Partnership for each fiscal year generally are to be allocated for income tax
purposes among the Partners pursuant to Regulations issued under Sections 704(b)
and 704(c) of the Code, based upon amounts of the Partnership's net capital
appreciation or net capital depreciation allocated to each Partner's capital
account for the current and prior fiscal years. A Partner that contributes
property other than cash (including amounts of accrued interest) to the
Partnership will be specifically allocated items of income, deduction, gain,
loss or credit attributable to such property to the extent of the difference, if
any, between the book value and the adjusted tax basis at the time of such
contribution.
Under the Partnership Agreement, the Manager has the discretion to
allocate specially an amount of the Partnership's net capital gains (including
short-term capital gain) for Federal income tax purposes to a withdrawing
Limited Partner to the extent that the Partner's capital account exceeds its
Federal income tax basis in its partnership interest. There can be no assurance
that, if the Manager makes such a special allocation, the Service will accept
such allocation. If such allocation is successfully challenged by the Service,
the Partnership's gains allocable to the remaining Partners would be increased.
A Limited Partner admitted to the Partnership other than as of January
1 of a fiscal year will be allocated its distributive share of Partnership tax
items at the end of its year of admission based on its pro rata share of the
Partnership's capital. Such allocation does not account for the possibility of
a subsequent reallocation in the following year to the Manager in respect of the
initial Incentive Allocation. The Manager, in its discretion, may attempt to
minimize any negative tax consequences which may result to a Partner from the
foregoing, including by utilizing special allocations of Partnership tax items.
However, there is no assurance that any such attempt will successfully minimize
any negative tax consequence resulting to a Partner from the initial Incentive
Allocation.
TAX ELECTIONS; RETURNS; TAX AUDITS. The Code provides for optional
adjustments to the basis of partnership property upon distributions of
partnership property to a partner and transfers of partnership interests
(including by reason of death) provided that a partnership election has been
made pursuant to Section 754. Under the Partnership Agreement, at the request
of a Partner, the Manager, in its sole discretion, may cause the Partnership to
make such an election. Any such election, once made, cannot be revoked without
the Service's consent. As a result of the complexity and added expense of the
tax accounting required to implement such an election, the Manager does not
presently intend to make such election.
The Manager decides how to report the partnership items on the
Partnership's tax returns, and all Partners are required under the Code to treat
the items consistently on their own returns, unless they file a statement with
the Service disclosing the inconsistency. In the event the income tax returns
of the Partnership are audited by the Service, the tax treatment of the
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Partnership's income and deductions generally is determined at the partnership
level in a single proceeding rather than by individual audits of the Partners.
The Manager, designated as the "Tax Matters Partner", has considerable
authority to make decisions affecting the tax treatment and procedural rights
of all Partners. In addition, the Tax Matters Partner has the authority to
bind certain Partners to settlement agreements and the right on behalf of all
Partners to extend the statute of limitations relating to the Partners' tax
liabilities with respect to Partnership items.
TAX CONSEQUENCES TO A WITHDRAWING LIMITED PARTNER
A Limited Partner receiving a cash liquidating distribution from the
Partnership, in connection with a complete withdrawal from the Partnership
generally will recognize capital gain or loss to the extent of the difference
between the proceeds received by such Limited Partner and such Limited Partner's
adjusted tax basis in its partnership interest. Such capital gain or loss will
be short-term or long-term depending upon the Limited Partner's holding period
for its interest in the Partnership. However, a withdrawing Limited Partner
will recognize ordinary income to the extent such Limited Partner's allocable
share of the Partnership's "unrealized receivables" exceeds the Limited
Partner's basis in such unrealized receivables (as determined pursuant to the
Regulations). For these purposes, accrued but untaxed market discount, if any,
on securities held by the Partnership will be treated as an unrealized
receivable, with respect to which a withdrawing Limited Partner would recognize
ordinary income. A Limited Partner receiving a cash nonliquidating distribution
will recognize income in a similar manner only to the extent that the amount of
the distribution exceeds such Limited Partner's adjusted tax basis in its
partnership interest.
As discussed above, the Partnership Agreement provides that the Manager
may specially allocate items of Partnership capital gain (including short-term
capital gain) to a withdrawing Limited Partner to the extent its liquidating
distribution would otherwise exceed its adjusted tax basis in its partnership
interest. Such a special allocation may result in the withdrawing Partner
recognizing capital gain, which may include short-term gain, in the Partner's
last taxable year in the Partnership, thereby reducing the amount of long-term
capital gain recognized during the tax year in which it receives its liquidating
distribution upon withdrawal.
Distributions of property other than cash, whether in complete or
partial liquidation of a Limited Partner's interest in the Partnership,
generally will not result in the recognition of taxable income or loss to the
Limited Partner (except to the extent such distribution is treated as made in
exchange for such Limited Partner's share of the Partnership's unrealized
receivables).*
- ---------------------------
* It should be noted, however, that gain generally must be recognized
where the distribution consists of marketable securities unless the
distributing partnership is an "investment partnership" and the
recipient is an "eligible partner" as defined in Section 731(c) of the
Code. While there can be no assurance, the General Partner anticipates
that the Partnership will qualify as an "investment partnership."
Thus, if a Limited Partner is an "eligible partner", which term should
include a Limited Partner whose sole contributions to the Partnership
consisted of cash, the nonrecognition rule described above should
apply.
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TAX TREATMENT OF PARTNERSHIP INVESTMENTS
IN GENERAL. The Partnership expects to act as a trader or investor,
and not as a dealer, with respect to its securities transactions. A trader and
an investor are persons who buy and sell securities for their own accounts. A
dealer, on the other hand, is a person who purchases securities for resale to
customers rather than for investment or speculation.
Generally, the gains and losses realized by a trader or investor on the
sale of securities are capital gains and losses. Thus, subject to the treatment
of certain currency exchange gains as ordinary income (see "Currency
Fluctuations - 'Section 988' Gains or Losses" below) and certain other
transactions described below, the Partnership expects that its gains and losses
from its securities transactions typically will be capital gains and capital
losses. These capital gains and losses may be long-term or short-term
depending, in general, upon the length of time the Partnership maintains a
particular investment position and, in some cases, upon the nature of the
transaction. Property held for more than one year generally will be eligible
for long-term capital gain or loss treatment. The application of certain rules
relating to short sales, to so-called "straddle" and "wash sale" transactions
and to "Section 1256 contracts" may serve to alter the manner in which the
Partnership's holding period for a security is determined or may otherwise
affect the characterization as long-term or short-term, and also the timing of
the realization, of certain gains or losses. Moreover, the straddle rules and
short sale rules may require the capitalization of certain related expenses of
the Partnership.
The maximum ordinary income tax rate for individuals is 39.6 percent
and the maximum individual income tax rate for long-term capital gains is 28
percent (unless the taxpayer elects to be taxed at ordinary rates - see
"Limitation on Deductibility of Interest" below), although in either case the
actual rate may be higher due to the phase out of certain tax deductions and
exemptions. The excess of capital losses over capital gains may be offset
against the ordinary income of an individual taxpayer, subject to an annual
deduction limitation of $3,000. For corporate taxpayers, the maximum income tax
rate is 35 percent. Capital losses of a corporate taxpayer may be offset only
against capital gains, but unused capital losses may be carried back three years
(subject to certain limitations) and carried forward five years.
The Partnership may realize ordinary income from accruals of interest
and dividends on securities. The Partnership may hold debt obligations with
"original issue discount." In such case, the Partnership would be required to
include amounts in taxable income on a current basis even though receipt of such
amounts may occur in a subsequent year. The Partnership may also acquire debt
obligations with "market discount." Upon disposition of such an obligation, the
Partnership generally would be required to treat gain realized as interest
income to the extent of the market discount which accrued during the period the
debt obligation was held by the Partnership. The Partnership may realize
ordinary income or loss with respect to its investments in partnerships engaged
in a trade or business. Income or loss from transactions involving derivative
instruments, such as swap transactions, entered into by the Partnership also
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may constitute ordinary income or loss. Moreover, gain recognized from certain
"conversion transactions" will be treated as ordinary income.*
CURRENCY FLUCTUATIONS - "SECTION 988" GAINS OR LOSSES. To the extent
that its investments are made in securities denominated in a foreign currency,
gain or loss realized by the Partnership frequently will be affected by the
fluctuation in the value of such foreign currencies relative to the value of the
dollar. Generally, gains or losses with respect to the Partnership's
investments in common stock of foreign issuers will be taxed as capital gains or
losses at the time of the disposition of such stock. However, under Section 988
of the Code, gains and losses of the Partnership on the acquisition and
disposition of foreign currency (e.g., the purchase of foreign currency and
subsequent use of the currency to acquire stock) will be treated as ordinary
income or loss. Moreover, under Section 988, gains or losses on disposition of
debt securities denominated in a foreign currency to the extent attributable to
fluctuation in the value of the foreign currency between the date of acquisition
of the debt security and the date of disposition will be treated as ordinary
income or loss. Similarly, gains or losses attributable to fluctuations in
exchange rates that occur between the time the Partnership accrues interest or
other receivables or accrues expenses or other liabilities denominated in a
foreign currency and the time the Partnership actually collects such receivables
or pays such liabilities may be treated as ordinary income or ordinary loss.
As indicated above (See "TYPES OF INVESTMENTS AND RELATED RISK FACTORS
- - Foreign Securities"), the Partnership may acquire foreign currency forward
contracts. Generally, any gain or loss realized by the Partnership with respect
to any forward currency contracts will be ordinary, unless (i) the contract is a
capital asset in the hands of the Partnership and is not a part of a straddle
transaction and (ii) the Partnership makes an election (by the close of the day
the transaction is entered into) to treat the gain or loss attributable to such
contract as capital gain or loss.
SECTION 1256 CONTRACTS. In the case of "Section 1256 Contracts," the
Code generally applies a "mark to market" system of taxing unrealized gains and
losses on such contracts and otherwise provides for special rules of taxation. A
Section 1256 Contract includes certain regulated futures contracts, certain
foreign currency forward contracts, and certain options contracts. Under these
rules, Section 1256 Contracts held by the Partnership at the end of each taxable
year of the Partnership are treated for Federal income tax purposes as if they
were sold by the Partnership for their fair market value on the last business
day of such taxable year. The net gain or loss, if any, resulting from such
deemed sales (known as "marking to market"), together
- ---------------------------
* Generally, a conversion transaction is one of several enumerated
transactions where substantially all of the taxpayer's return is
attributable to the time value of the net investment in the
transaction. The enumerated transactions are (i) the holding of any
property (whether or not actively traded) and entering into a contract
to sell such property (or substantially identical property) at a price
determined in accordance with such contract, but only if such property
was acquired and such contract was entered into on a substantially
contemporaneous basis, (ii) certain straddles, (iii) generally any
other transaction that is marketed or sold on the basis that it would
have the economic characteristics of a loan but the interest-like
return would be taxed as capital gain or (iv) any other transaction
specified in Regulations.
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with any gain or loss resulting from actual sales of Section 1256 Contracts,
must be taken into account by the Partnership in computing its taxable income
for such year. If a Section 1256 Contract held by the Partnership at the end
of a taxable year is sold in the following year, the amount of any gain or loss
realized on such sale will be adjusted to reflect the gain or loss previously
taken into account under the "mark to market" rules.
Capital gains and losses from such Section 1256 contracts generally are
characterized as short-term capital gains or losses to the extent of 40% thereof
and as long-term capital gains or losses to the extent of 60% thereof. Such
gains and losses will be taxed under the general rules described above. Gains
and losses from certain foreign currency transactions will be treated as
ordinary income and losses. (See "Currency Fluctuations - 'Section 988' Gains
or Losses.") If an individual taxpayer incurs a net capital loss for a year,
the portion thereof, if any, which consists of a net loss on "Section 1256
Contracts" may, at the election of the taxpayer, be carried back three years.
Losses so carried back may be deducted only against net capital gain to the
extent that such gain includes gains on "Section 1256 Contracts."
MIXED STRADDLE ELECTION. The Code allows a taxpayer to elect to offset
gains and losses from positions which are part of a "mixed straddle." A "mixed
straddle" is any straddle in which one or more but not all positions are Section
1256 Contracts.
Pursuant to Temporary Regulations, the Partnership may be eligible to
elect to establish one or more mixed straddle accounts for certain of its mixed
straddle trading positions. The mixed straddle account rules require a daily
"marking to market" of all open positions in the account and a daily netting of
gains and losses from positions in the account. At the end of a taxable year,
the annual net gains or losses from the mixed straddle account are recognized
for tax purposes. The application of the Temporary Regulations' mixed straddle
account rules is not entirely clear. Therefore, there is no assurance that a
mixed straddle account election by the Partnership will be accepted by the
Service.
SHORT SALES. Gain or loss from a short sale of property is generally
considered as capital gain or loss to the extent the property used to close the
short sale constitutes a capital asset in the Partnership's hands. Except with
respect to certain situations where the property used by the Partnership to
close a short sale has a long-term holding period on the date of the short sale,
special rules would generally treat the gains on short sales as short-term
capital gains. These rules may also terminate the running of the holding period
of "substantially identical property" held by the Partnership. Moreover, a loss
on a short sale will be treated as a long-term capital loss if, on the date of
the short sale, "substantially identical property" has been held by the
Partnership for more than one year.
EFFECT OF STRADDLE RULES ON PARTNERS' SECURITIES POSITIONS. The Service
may treat certain positions in securities held (directly or indirectly) by a
Partner and its indirect interest in similar securities held by the Partnership
as "straddles" for Federal income tax purposes. The application of the
"straddle" rules in such a case could affect a Partner's holding period for the
securities involved and may defer the recognition of losses with respect to such
securities.
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LIMITATION ON DEDUCTIBILITY OF INTEREST. For noncorporate taxpayers,
Section 163(d) of the Code limits the deduction for "investment interest" (i.e.,
interest or short sale expenses for "indebtedness incurred or continued to
purchase or carry property held for investment"). Investment interest is not
deductible in the current year to the extent that it exceeds the taxpayer's
"investment income," consisting of net gain and ordinary income derived from
investments in the current year. For this purpose, any long-term capital gain
is excluded from investment income unless the taxpayer elects to pay tax on such
amount at ordinary income tax rates.
For purposes of this provision, the Partnership's activities will be
treated as giving rise to investment income for a Limited Partner, and the
investment interest limitation would apply to a noncorporate Limited Partner's
share of the interest and short sale expenses attributable to the Partnership's
operation. In such case, a noncorporate Limited Partner would be denied a
deduction for all or part of that portion of its distributive share of the
Partnership's ordinary losses attributable to interest and short sale expenses
unless it had sufficient investment income from all sources including the
Partnership. A Limited Partner that could not deduct losses currently as a
result of the application of Section 163(d) would be entitled to carry forward
such losses to future years, subject to the same limitation. The investment
interest limitation would also apply to interest paid by a noncorporate Limited
Partner on money borrowed to finance its investment in the Partnership.
Potential investors are advised to consult with their own tax advisers with
respect to the application of the investment interest limitation in their
particular tax situations.
DEDUCTIBILITY OF PARTNERSHIP INVESTMENT EXPENDITURES BY NONCORPORATE
PARTNERS. Investment expenses (e.g., investment advisory fees) of an
individual, trust and estate are deductible only to the extent they exceed 2% of
adjusted gross income.* In addition, the Code further restricts the ability of
an individual with an adjusted gross income in excess of a specified amount (for
1997, $121,200 or $60,600 for a married person filing a separate return) to
deduct such investment expenses. Under such provision, investment expenses in
excess of 2% of adjusted gross income may only be deducted to the extent such
excess expenses (along with certain other itemized deductions) exceed the lesser
of (i) 3% of the excess of the individual's adjusted gross income over the
specified amount or (ii) 80% of the amount of certain itemized deductions
otherwise allowable for the taxable year. Moreover, such investment expenses
are miscellaneous itemized deductions which are not deductible by a noncorporate
taxpayer in calculating its alternative minimum tax liability.
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* However, Section 67(e) of the Code provides that, in the case of a
trust or an estate, such limitation does not apply to deductions or
costs which are paid or incurred in connection with the administration
of the estate or trust and would not have been incurred if the
property were not held in such trust or estate. The Federal Court of
Appeals for the Sixth Circuit, reversing a Tax Court decision, has
held that the investment advisory fees incurred by a trust were exempt
(under Section 67(e)) from the 2% of adjusted gross income floor on
deductibility. The Service, however, has stated that it will not
follow this decision outside of the Sixth Circuit. Limited Partners
that are trusts or estates should consult their tax advisors as to the
applicability of this case to the investment expenses that are
allocated to them.
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Pursuant to Temporary Regulations issued by the Treasury Department,
these limitations on deductibility will apply to a noncorporate Limited
Partner's share of the expenses of the Partnership, including the Management
Fee. Although the Partnership intends to treat the Incentive Allocation
(including the initial Incentive Allocation) to the Manager as not being subject
to the foregoing limitations on deductibility, there can be no assurance that
the Service may not treat such allocations as an investment expense which is
subject to the limitations.
The consequences of these limitations will vary depending upon the
particular tax situation of each taxpayer. Accordingly, noncorporate Limited
Partners should consult their tax advisers with respect to the application of
these limitations.
APPLICATION OF RULES FOR INCOME AND LOSSES FROM PASSIVE ACTIVITIES.
The Code restricts the deductibility of losses from a "passive activity" against
certain income which is not derived from a passive activity. This restriction
applies to individuals, personal service corporations and certain closely held
corporations. Pursuant to Temporary Regulations issued by the Treasury
Department, income or loss from the Partnership's securities trading activity
generally will not constitute income or loss from a passive activity. Therefore,
passive losses from other sources generally could not be deducted against a
Limited Partner's share of income and gain from the Partnership. Income or loss
attributable to investments in partnerships engaged in a trade or business may
constitute passive activity income or loss.
"PHANTOM INCOME" FROM PARTNERSHIP INVESTMENTS. Pursuant to various
"anti-deferral" provisions of the Code (the "Subpart F," "passive foreign
investment company" and "foreign personal holding company" provisions),
investments (if any) by the Partnership in certain foreign corporations may
cause a Limited Partner to (i) recognize taxable income prior to the
Partnership's receipt of distributable proceeds, (ii) pay an interest charge on
receipts that are deemed as having been deferred or (iii) recognize ordinary
income that, but for the "anti-deferral" provisions, would have been treated as
long term capital gain.
FOREIGN TAXES
It is possible that certain dividends and interest received by the
Partnership from sources within foreign countries will be subject to withholding
taxes imposed by such countries. In addition, the Partnership may also be
subject to capital gains taxes in some of the foreign countries where it
purchases and sells securities. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. It is impossible to predict
the rate of foreign tax the Partnership will pay in advance since the amount of
the Partnership's assets to be invested in various countries is not known.
The Partners will be informed by the Partnership as to their
proportionate share of the foreign taxes paid by the Partnership, which they
will be required to include in their income. The Partners generally will be
entitled to claim either a credit (subject to the limitations discussed below)
or, if they itemize their deductions, a deduction (subject to the limitations
generally applicable to deductions) for their share of such foreign taxes in
computing their Federal income taxes. A Partner that is tax exempt will not
ordinarily benefit from such credit or deduction.
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Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the Partner's Federal tax (before the credit) attributable to
its total foreign source taxable income. A Partner's share of the Partnership's
dividends and interest from non-U.S. securities generally will qualify as
foreign source income. Generally, the source of income realized upon the sale
of personal property, such as securities, will be based on the residence of the
seller. In the case of a partnership, the determining factor is the residence
of the partner. Thus, absent a tax treaty to the contrary, the gains from the
sale of securities allocable to a Partner that is a U.S. resident will be
treated as derived from U.S. sources (even though the securities are sold in
foreign countries); and certain currency fluctuation gains, including
fluctuation gains from foreign currency denominated debt securities, receivables
and payables, will also be treated as ordinary income derived from U.S. sources.
The limitation on the foreign tax credit is applied separately to
foreign source passive income, such as dividends and interest. In addition, the
foreign tax credit is allowed to offset only 90% of the alternative minimum tax
imposed on corporations and individuals. Because of these limitations, Partners
may be unable to claim a credit for the full amount of their proportionate share
of the foreign taxes paid by the Partnership. The foregoing is only a general
description of the foreign tax credit under current law. Moreover, since the
availability of a credit or deduction depends on the particular circumstances of
each Partner, Partners are advised to consult their own tax advisers.
UNRELATED BUSINESS TAXABLE INCOME
Generally, an exempt organization is exempt from Federal income tax on
its passive investment income, such as dividends, interest and capital gains,
whether realized by the organization directly or indirectly through a
partnership in which it is a partner.*
This general exemption from tax does not apply to the UBTI of an exempt
organization. Generally, except as noted above with respect to certain
categories of exempt trading activity, UBTI includes income or gain derived
(either directly or through partnerships) from a trade or business, the conduct
of which is substantially unrelated to the exercise or performance of the
organization's exempt purpose or function. UBTI also includes "unrelated
debt-financed income," which generally consists of (i) income derived by an
exempt organization (directly or through a partnership) from income-producing
property with respect to which there is "acquisition indebtedness" at any time
during the taxable year, and (ii) gains derived by an exempt organization
(directly or through a partnership) from the disposition of property with
respect to which there is "acquisition indebtedness" at any time during the
twelve-month period ending with the date of such disposition. With respect to
its investments in partnerships engaged in a trade or business, the
Partnership's income (or loss) from these investments may constitute UBTI.
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* With certain exceptions, tax-exempt organizations which are private
foundations are subject to a 2% Federal excise tax on their "net
investment income." The rate of the excise tax for any taxable year
may be reduced to 1% if the private foundation meets certain
distribution requirements for the taxable year. A private foundation
will be required to make payments of estimated tax with respect to
this excise tax.
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The Partnership may incur "acquisition indebtedness" with respect to
certain of its transactions, such as the purchase of securities on margin.*
Based upon a published ruling issued by the Service which generally holds that
income and gain with respect to short sales of publicly traded stock does not
constitute income from debt financed property for purposes of computing UBTI,
the Partnership will treat its short sales of securities as not involving
"acquisition indebtedness" and therefore not resulting in UBTI. To the extent
the Partnership recognizes income (i.e., dividends and interest) from securities
with respect to which there is "acquisition indebtedness" during a taxable year,
the percentage of such income which will be treated as UBTI generally will be
based on the percentage which the "average acquisition indebtedness" incurred
with respect to such securities is of the "average amount of the adjusted basis"
of such securities during the taxable year.
To the extent the Partnership recognizes capital gain from securities
with respect to which there is "acquisition indebtedness" at any time during the
twelve-month period ending with the date of their disposition, the percentage of
such gain which will be treated as UBTI will be based on the percentage which
the highest amount of such "acquisition indebtedness" is of the "average amount
of the adjusted basis" of such securities during the taxable year. In
determining the unrelated debt-financed income of the Partnership, an allocable
portion of deductions directly connected with the Partnership's debt-financed
property is taken into account. Thus, for instance, a percentage of capital
losses from debt-financed securities (based on the debt/basis percentage
calculation described above) would offset gains treated as UBTI.
Since the calculation of the Partnership's "unrelated debt-financed
income" is complex and will depend in large part on the amount of leverage, if
any, used by the Partnership from time to time,** it is impossible to predict
what percentage of the Partnership's income and gains will be treated as UBTI
for a Limited Partner which is an exempt organization. An exempt organization's
share of the income or gains of the Partnership which is treated as UBTI may not
be offset by losses of the exempt organization either from the Partnership or
otherwise, unless such losses are treated as attributable to an unrelated trade
or business (e.g., losses from securities for which there is acquisition
indebtedness).
To the extent that the Partnership generates UBTI, the applicable
Federal tax rate for such a Limited Partner generally would be either the
corporate or trust tax rate depending upon the nature of the particular exempt
organization. An exempt organization may be required to support, to the
satisfaction of the Service, the method used to calculate its UBTI. The
Partnership will be required to report to a Partner which is an exempt
organization information as to the portion, if any, of its income and gains from
the Partnership for each year which will be treated as UBTI. The calculation of
such amount with respect to transactions entered into by the
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* Moreover, income realized from option writing and futures contract
transactions generally would not constitute UBTI.
** The calculation of a particular exempt organization's UBTI would also
be affected if it incurs indebtedness to finance its investment in the
Partnership. An exempt organization is required to make estimated tax
payments with respect to its UBTI.
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Partnership is highly complex, and there is no assurance that the Partnership's
calculation of UBTI will be accepted by the Service.
In general, if UBTI is allocated to an exempt organization such as a
qualified retirement plan or a private foundation, the portion of the
Partnership's income and gains which is not treated as UBTI will continue to be
exempt from tax, as will the organization's income and gains from other
investments which are not treated as UBTI. Therefore, the possibility of
realizing UBTI from its investment in the Partnership generally should not
affect the tax-exempt status of such an exempt organization.* However, a
charitable remainder trust will not be exempt from Federal income tax under
Section 664(c) of the Code for any year in which it has UBTI. A title-holding
company will not be exempt from tax if it has certain types of UBTI. Moreover,
the charitable contribution deduction for a trust under Section 642(c) of the
Code may be limited for any year in which the trust has UBTI. A prospective
investor should consult its tax adviser with respect to the tax consequences of
receiving UBTI from the Partnership. (See "ERISA CONSIDERATIONS.")
CERTAIN ISSUES PERTAINING TO SPECIFIC EXEMPT ORGANIZATIONS
PRIVATE FOUNDATIONS. Private foundations and their managers are
subject to excise taxes if they invest "any amount in such a manner as to
jeopardize the carrying out of any of the foundation's exempt purposes." This
rule requires a foundation manager, in making an investment, to exercise
"ordinary business care and prudence" under the facts and circumstances
prevailing at the time of making the investment, in providing for the short-term
and long-term needs of the foundation to carry out its exempt purposes. The
factors which a foundation manager may take into account in assessing an
investment include the expected rate of return (both income and capital
appreciation), the risks of rising and falling price levels, and the needs for
diversification within the foundation's portfolio.
In order to avoid the imposition of an excise tax, a private foundation
may be required to distribute on an annual basis its "distributable amount,"
which includes, among other things, the private foundation's "minimum investment
return," defined as 5% of the excess of the fair market value of its
nonfunctionally related assets (assets not used or held for use in carrying out
the foundation's exempt purposes), over certain indebtedness incurred by the
foundation in connection with such assets. It appears that a foundation's
investment in the Partnership would most probably be classified as a
nonfunctionally related asset. A determination that an interest in the
Partnership is a nonfunctionally related asset could conceivably cause cash flow
problems for a prospective Limited Partner which is a private foundation. Such
an organization could be required to make distributions in an amount determined
by reference to unrealized appreciation in the value of its interest in the
Partnership. Of course, this factor would create less of a
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* Certain exempt organizations which realize UBTI in a taxable year will
not constitute "qualified organizations" for purposes of Section
514(c)(9)(B)(vi)(I) of the Code, pursuant to which, in limited
circumstances, income from certain real estate partnerships in which
such organizations invest might be treated as exempt from UBTI. A
prospective tax-exempt Limited Partner should consult its tax adviser
in this regard.
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problem to the extent that the value of the investment in the Partnership is
not significant in relation to the value of other assets held by a foundation.
In some instances, an investment in the Partnership by a private
foundation may be prohibited by the "excess business holdings" provisions of the
Code. For example, if a private foundation (either directly or together with a
"disqualified person") acquires more than 20% of the capital interest or profits
interest of the Partnership, the private foundation may be considered to have
"excess business holdings." If this occurs, such foundation may be required to
divest itself of its interest in the Partnership in order to avoid the
imposition of an excise tax.
A substantial percentage of investments of certain "private operating
foundations" may be restricted to assets directly devoted to their tax-exempt
purposes. Otherwise, generally, rules similar to those discussed above govern
their operations.
QUALIFIED RETIREMENT PLANS. Employee benefit plans subject to the
provisions of ERISA, Individual Retirement Accounts ("IRA's") and Keogh Plans
should consult their counsel as to the implications of such an investment under
ERISA. (See "ERISA CONSIDERATIONS.")
ENDOWMENT FUNDS. Investment managers of endowment funds should
consider whether the acquisition of an Interest is legally permissible. This is
not a matter of Federal law, but is determined under state statutes. It should
be noted, however, that under the Uniform Management of Institutional Funds Act,
which has been adopted, in various forms, by a large number of states,
participation in investment partnerships or similar organizations in which funds
are commingled and investment determinations are made by persons other than the
governing board of the endowment fund is allowed.
STATE AND LOCAL TAXATION
In addition to the Federal income tax consequences described above,
prospective investors should consider potential state and local tax consequences
of an investment in the Partnership. State and local laws often differ from
Federal income tax laws with respect to the treatment of specific items of
income, gain, loss, deduction and credit. A Partner's distributive share of the
taxable income or loss of the Partnership generally will be required to be
included in determining its reportable income for state and local tax purposes
in the jurisdiction in which it is a resident.
A partnership in which the Partnership acquires an interest may conduct
business in a jurisdiction which will subject to tax a Limited Partner's share
of the Partnership's income from that business. Prospective investors should
consult their tax advisers with respect to the availability of a credit for such
tax in the jurisdiction in which that Limited Partner is a resident.
The Partnership should not be subject to the New York City
unincorporated business tax, which is not imposed on a partnership which
purchases and sells securities for its "own account." (This exemption may not
be applicable if a partnership in which the Partnership invests conducts a
business in New York City.) By reason of a similar "own account"
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exemption, it is also expected that a nonresident individual Partner should not
be subject to New York State personal income tax with respect to his share of
income or gain realized directly by the Partnership. A nonresident individual
Partner will not be subject to New York City earnings tax on nonresidents with
respect to his investment in the Partnership.
Individual Limited Partners who are residents in New York State and New
York City should be aware that the New York State and New York City personal
income tax laws limit the deductibility of itemized deductions for individual
taxpayers at certain income levels. This limitation would likely apply to a
Limited Partner's share of some or all of the Partnership's expenses.
Prospective Limited Partners are urged to consult their tax advisers with
respect to the impact of these provisions and the Federal limitations on the
deductibility of certain itemized deductions and investment expenses on their
New York State and New York City tax liability.
For purposes of the New York State corporate franchise tax and the New
York City general corporation tax, a corporation generally is treated as doing
business in New York State and New York City, respectively, and is subject to
such corporate taxes as a result of the ownership of a limited partnership
interest in a partnership which does business in New York State and New York
City, respectively.* Each of the New York State and New York City corporate
taxes are imposed, in part, on the corporation's taxable income or capital
allocable to the relevant jurisdiction by application of the appropriate
allocation percentages. Moreover, a non-New York corporation which does
business in New York State may be subject to a New York State license fee. A
corporation which is subject to New York State corporate franchise tax solely as
a result of being a limited partner in a New York partnership may, under certain
circumstances, elect to compute its New York State corporate franchise tax by
taking into account only its distributive share of such partnership's income and
loss. There is currently no similar provision in effect for purposes of the New
York City general corporation tax.
Regulations under both the New York State corporate franchise tax and
the New York City general corporation tax, however, provide an exception to this
general rule in the case of a "portfolio investment partnership", which is
defined, generally, as a partnership which meets the gross income requirements
of Section 851(b)(2) of the Code. New York State (but not New York City) has
adopted regulations that also include income and gains from commodity
transactions described in Section 864(b)(2)(B)(iii) as qualifying gross income
for this purpose. The Partnership's qualification as such a portfolio
investment partnership must be determined on an annual basis and with respect to
a taxable year, the Partnership may not qualify as a portfolio investment
partnership.
A trust or other unincorporated organization which by reason of its
purposes or activities is exempt from Federal income tax is also exempt from New
York State and New York City personal income tax. A nonstock corporation which
is exempt from Federal income tax is
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* New York State (but not New York City) generally exempts from
corporate franchise tax a non-New York corporation which (i) does not
actually or constructively own a 1% or greater limited partnership
interest in a partnership doing business in New York and (ii) has a
tax basis in such limited partnership interest not greater than $1
million.
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generally presumed to be exempt from New York State corporate franchise tax and
New York City general corporation tax. New York State imposes a tax with
respect to such exempt entities on UBTI (including unrelated debt-financed
income) at a rate which is currently equal to the New York State corporate
franchise tax rate (plus the corporate surtax). There is no New York City tax
on the UBTI of an otherwise exempt entity.
ERISA CONSIDERATIONS
Persons who are fiduciaries with respect to an employee benefit plan,
IRA, Keogh plan or other arrangement subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or the Code (an "ERISA Plan") should
consider, among other things, the matters described below before determining
whether to invest in the Partnership.
ERISA imposes certain general and specific responsibilities on persons
who are fiduciaries with respect to an ERISA Plan, including prudence,
diversification, prohibited transaction and other standards. In determining
whether a particular investment is appropriate for an ERISA Plan, Department of
Labor ("DOL") regulations provide that a fiduciary of an ERISA Plan must give
appropriate consideration to, among other things, the role that the investment
plays in the ERISA Plan's portfolio, taking into consideration whether the
investment is designed reasonably to further the ERISA Plan's purposes, an
examination of the risk and return factors, the portfolio's composition with
regard to diversification, the liquidity and current return of the total
portfolio relative to the anticipated cash flow needs of the ERISA Plan, the
income tax consequences of the investment (see "TAX ASPECTS - Unrelated
Business Taxable Income" and "- Certain Issues Pertaining to Specific Exempt
Organizations"), and the projected return of the total portfolio relative to
the ERISA Plan's funding objectives. Before investing the assets of an ERISA
Plan in the Partnership, a fiduciary should determine whether such an
investment is consistent with its fiduciary responsibilities and the foregoing
regulations. For example, a fiduciary should consider whether an investment in
the Partnership may be too illiquid or too speculative for a particular ERISA
Plan, and whether the assets of the ERISA Plan would be sufficiently
diversified. If a fiduciary with respect to any such ERISA Plan breaches his
responsibilities with regard to selecting an investment or an investment course
of action for such ERISA Plan, the fiduciary may be held personally liable for
losses incurred by the ERISA Plan as a result of such breach.
Because the Partnership will register as an investment company under
the 1940 Act, the underlying assets of the Partnership should not be considered
to be "plan assets" of the ERISA Plans investing in the Partnership for
purposes of ERISA's fiduciary responsibility and prohibited transaction rules.
Thus, neither the Manager nor the Individual General Partners will be
fiduciaries within the meaning of ERISA.
The Manager will require an ERISA Plan proposing to invest in the
Partnership to represent that it, and any fiduciaries responsible for the
Plan's investments, are aware of and understand the Partnership's investment
objective, policies and strategies, that the decision to invest plan assets in
the Partnership was made with appropriate consideration of relevant investment
factors with regard to the ERISA Plan and is consistent with the duties and
responsibilities imposed upon fiduciaries with regard to their investment
decisions under ERISA.
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Certain prospective Plan investors may currently maintain
relationships with the Manager or the Individual General Partners or other
entities which are affiliated with the Manager or the Individual General
Partners. Each of such persons may be deemed to be a party in interest to
and/or a fiduciary of any ERISA Plan to which it provides investment
management, investment advisory or other services. ERISA prohibits ERISA Plan
assets to be used for the benefit of a party in interest and also prohibits an
ERISA Plan fiduciary from using its position to cause the ERISA Plan to make an
investment from which it or certain third parties in which such fiduciary has
an interest would receive a fee or other consideration. ERISA Plan investors
should consult with counsel to determine if participation in the Partnership is
a transaction which is prohibited by ERISA or the Code. Additional conditions
may be imposed on such ERISA Plan investors, and the fiduciaries of such an
ERISA Plan will be required to represent that the decision to invest in the
Partnership was made by them as fiduciaries that are independent of such
affiliated persons, that are duly authorized to make such investment decision
and that have not relied on any individualized advice or recommendation of such
affiliated persons, as a primary basis for the decision to invest in the
Partnership.
The provisions of ERISA are subject to extensive and continuing
administrative and judicial interpretation and review. The discussion of ERISA
contained in this Confidential Memorandum, is, of necessity, general and may be
affected by future publication of regulations and rulings. Potential investors
should consult with their legal advisors regarding the consequences under ERISA
of the acquisition and ownership of interests.
ADDITIONAL INFORMATION AND SUMMARY OF
LIMITED PARTNERSHIP AGREEMENT
The following is a summary description of additional items and of
select provisions of the Partnership Agreement which are not described
elsewhere in this Confidential Memorandum. The description of such items and
provisions is not definitive and reference should be made to the complete text
of the Partnership Agreement.
LIABILITY OF LIMITED PARTNERS
Pursuant to applicable Delaware law, Limited Partners are not
generally personally liable for obligations of the Partnership unless, in
addition to the exercise of their rights and powers as Limited Partners, they
participate in the control of the business of the Partnership. Any such
Limited Partner would be liable only to persons who transact business with the
Partnership reasonably believing, based on such Limited Partner's conduct, that
the Limited Partner is a General Partner. Under the terms of the Partnership
Agreement, the Limited Partners do not have the right to take part in the
control of the Partnership, but they may exercise the right to vote on matters
requiring approval under the 1940 Act and on certain other matters. Although
such right to vote should not constitute taking part in the control of the
Partnership's business under applicable Delaware law, there is no specific
statutory or other authority for the existence or exercise of some or all of
these powers in some other jurisdictions. To the extent that the Partnership
is subject to the jurisdiction of courts in jurisdictions other than the State
of Delaware, it is possible that these courts may not apply Delaware law to the
question of the limited liability of the Limited Partners.
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Under Delaware law and the Partnership Agreement, each Limited Partner
may be liable up to the amount of any contributions to the capital of the
Partnership (plus any accretions in value thereto prior to withdrawal) and a
Limited Partner may be obligated to return to the Partnership amounts
distributed to him in accordance with the Partnership Agreement in certain
circumstances where after giving effect to the distribution, certain
liabilities of the Partnership exceed the fair market value of the
Partnership's assets.
DUTY OF CARE OF GENERAL PARTNERS
The Partnership Agreement provides that a General Partner shall not be
liable to the Partnership or any of the Limited Partners for any loss or damage
occasioned by any act or omission in the performance of such General Partner's
services as a General Partner in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
such General Partner's office. The Partnership Agreement also contains
provisions for the indemnification, to the extent permitted by law, of a
General Partner by the Partnership (but not by the Limited Partners
individually) against any liability and expense to which such General Partner
may be liable as a General Partner which arise in connection with the
performance of such General Partner's activities on behalf of the Partnership.
General Partners shall not be personally liable to any Limited Partner for the
repayment of any positive balance in such Limited Partner's capital account or
for contributions by such Limited Partner to the capital of the Partnership or
by reason of any change in the Federal or state income tax laws applicable to
the Partnership or its investors. The rights of indemnification and
exculpation provided under the Partnership Agreement shall not be construed so
as to provide for indemnification of a General Partner for any liability
(including liability under 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 such indemnification would be in violation
of applicable law, but shall be construed so as to effectuate the applicable
provisions of the Partnership Agreement to the fullest extent permitted by law.
AMENDMENT OF THE PARTNERSHIP AGREEMENT
The Partnership Agreement may be amended with the approval of (i) the
Individual General Partners (including the vote of a majority of the
Independent General Partners, if required by the 1940 Act), (ii) the Manager
and (iii) a majority (as defined in the 1940 Act) of the outstanding voting
securities of the Partnership. Certain amendments involving capital accounts
and allocations thereto may not be made without the consent of any Partner
adversely affected thereby or unless each Limited Partner has received notice
of such amendment and any Limited Partner objecting to such amendment has been
allowed a reasonable opportunity to tender its entire interest for repurchase
by the Partnership. However, the Manager may at any time without the consent
of the other Partners of the Partnership amend the Partnership Agreement to (i)
reflect any change in the Partners or their respective capital contributions,
(ii) restate the Partnership Agreement, (iii) effect compliance with any
applicable law or regulation, or (iv) make such changes as may be necessary to
assure the Partnership's continuing eligibility for U.S. Federal income tax
purposes as a partnership not treated as a corporation under Section 7704(a) of
the Code, subject to the requirement that any amendment of the Partnership
Agreement made pursuant to items (iii) or (iv) above shall be valid only if
approved by the Individual General Partners.
-53-
<PAGE> 71
POWER OF ATTORNEY
By subscribing for an interest in the Partnership, each Partner will
appoint the Manager his attorney-in-fact for purposes of filing required
certificates and documents relating to the formation and maintenance of the
Partnership as a Limited Partnership under Delaware law or signing all
instruments effecting authorized changes in the Partnership or the Partnership
Agreement and conveyances and other instruments deemed necessary to effect the
dissolution or termination of the Partnership.
The power-of-attorney granted as part of each Partner's subscription
agreement is a special power-of-attorney and is coupled with an interest in
favor of the Manager and as such shall be irrevocable and will continue in full
force and effect notwithstanding the subsequent death or incapacity of any
Limited Partner granting such power-of-attorney, and shall survive the delivery
of a transfer by a Partner of the whole or any portion of such Partner's
interest, except that where the transferee thereof has been approved by the
Individual General Partners for admission to the Partnership as a substitute
Partner, or upon the withdrawal of a Partner from the Partnership pursuant to a
periodic tender or otherwise this power-of-attorney given by the transferor
shall terminate.
TERM, DISSOLUTION AND LIQUIDATION
The Partnership shall be dissolved:
o upon the affirmative vote to dissolve the Partnership by both
(1) the Individual General Partners and (2) Partners holding
at least two-thirds (2/3) of the total number of votes
eligible to be cast by all Partners;
o upon either of (1) an election by the Manager to dissolve the
Partnership or (2) the termination of the Manager's status as
such, unless as to either event both (A) the Individual
General Partners, and (B) Partners holding not less than
two-thirds (2/3) of the total number of votes eligible to be
cast by all Partners shall elect within 60 days after such
event to continue the business of the Partnership and either a
person has been admitted to the Partnership as the Manager or
one or more General Partners have agreed to make such
contributions to the capital of the Partnership as are
required to be made by the Manager;
o upon the expiration of any two year period which commences on
the date on which any Limited Partner has submitted a written
notice to the Partnership requesting to tender his entire
interest for repurchase by the Partnership if such Limited
Partner has not been permitted to do so at any time during
such period;
o on December 31, 2021, unless both (1) the Individual General
Partners and (2) a majority (as defined in the 1940 Act) of
the outstanding voting securities of the Partnership shall
elect within 60 days of such date to continue the business of
the Partnership;
-54-
<PAGE> 72
o upon the failure of Partners to elect successor Individual
General Partners at a meeting called by the Manager when no
Individual General Partner remains to continue the business of
the Partnership; or
o as required by operation of law.
Upon the occurrence of any event of dissolution, the General Partners
(or a liquidator, if the General Partners are unable to perform this function)
are charged with winding up the affairs of the Partnership and liquidating its
assets. Net profits or net loss during the fiscal period including the period
of liquidation will be allocated as described in the section titled "CAPITAL
ACCOUNTS AND ALLOCATIONS - Allocation of Net Profits and Net Loss".
Upon the liquidation of the Partnership, its assets are to be
distributed (1) first to satisfy the debts, liabilities and obligations of the
Partnership (other than debts to Partners) including actual or anticipated
liquidation expenses, (2) next to repay debts owing to the Partners, and (3)
finally to the Partners proportionately in accordance with the balances in
their respective capital accounts. Assets may be distributed in kind on a pro
rata basis if the General Partners or liquidator determines that such a
distribution would be in the interests of the Partners in facilitating an
orderly liquidation.
REPORTS TO PARTNERS
The Partnership will furnish to Partners as soon as practicable after
the end of each taxable year such information as is necessary for such Partners
to complete Federal and state income tax or information returns, along with any
other tax information required by law. The Partnership will send to Partners a
semi-annual and an audited annual report within 60 days after the close of the
period for which it is being made, or as otherwise required by the 1940 Act.
Quarterly reports from the Manager regarding the Partnership's operations
during such period will also be sent to Partners.
FISCAL YEAR
The Partnership's fiscal year is the twelve month period ending on
December 31. The first fiscal year of the Partnership will commence on the
date of the initial closing and will end on December 31, 1997.
ACCOUNTANTS AND LEGAL COUNSEL
The Individual General Partners have selected Ernst & Young LLP as the
independent public accountants of the Partnership. Ernst & Young LLP's
principal business address is located at 787 Seventh Avenue, 15th Floor, New
York, New York.
Schulte Roth & Zabel LLP, New York, New York, acts as legal counsel to
the Partnership and to the Manager in connection with this Confidential
Memorandum and as legal counsel to the Manager, its members and their
affiliates with respect to certain other matters. Stroock & Stroock & Lavan,
New York, New York, acts as legal counsel to the Independent General Partners.
-55-
<PAGE> 73
CUSTODIAN
Morgan Stanley Trust Company ("Morgan Stanley") serves as the primary
custodian of the Partnership's assets, and may maintain custody of the
Partnership's assets with domestic and foreign subcustodians (which may be
banks, trust companies, securities depositories and clearing agencies),
approved by the Individual General Partners of the Partnership in accordance
with the requirements set forth in Section 17(f) of the 1940 Act and the rules
adopted thereunder. Assets of the Partnership are not held by the Manager or
commingled with the assets of other accounts other than to the extent that
securities are held in the name of a custodian in a securities depository,
clearing agency or omnibus customer account of such custodian. Morgan
Stanley's principal business address is One Evertrust Plaza, Jersey City, New
Jersey 07302.
INQUIRIES
Inquiries concerning the Partnership and interests in the Partnership
(including information concerning subscription and withdrawal procedures)
should be directed to:
Troon Management, L.L.C.
c/o Oppenheimer & Co., Inc.
Oppenheimer Tower
One World Financial Center
33rd Floor
200 Liberty Street
New York, New York 10281
Telephone: 212-667-4225
Telecopier: 212-667-4839
For additional information contact:
Joyce Martin O'Brien
Senior Vice President
Oppenheimer & Co., Inc.
* * * * *
All potential investors in the Partnership are encouraged to consult
appropriate legal and tax counsel.
-56-
<PAGE> 74
APPENDIX A
PERFORMANCE INFORMATION
Troon Management, L.L.C. (the "Manager") expects to employ an
investment program for Troon Partners, L.P. (the "Partnership") that is
substantially similar to the investment program employed by Morris Mark for a
private investment partnership ("Mark LP") and by MAMC for accounts (including
investment funds) that utilize, among other tools, leverage (the "MAMC
Accounts" and, together with Mark LP, the "Accounts").
Because of the similarity of investment programs, as a general matter,
the Manager will consider participation by the Partnership in all appropriate
investment opportunities that are under consideration by Morris Mark and MAMC
for investment by Mark LP and the MAMC Accounts, respectively. The Manager
will evaluate for the Partnership a variety of factors that may be relevant in
determining whether a particular investment opportunity or strategy to be used
by Mark LP or the MAMC Accounts is appropriate and feasible for the Partnership
at that particular time. Because these considerations may differ for the
Partnership and the Accounts in the context of any particular investment
opportunity, the investment activities of the Partnership and the Accounts may
differ from time to time. (See "CONFLICTS OF INTEREST - Participation in
Investment Opportunities.")
THE FOLLOWING TABLES SET FORTH THE PERFORMANCE RECORD OF MARK LP AND
COMPOSITE PERFORMANCE OF THE MAMC ACCOUNTS FOR THE PERIODS INDICATED. THE
TABLES SHOULD BE READ IN CONJUNCTION WITH THE NOTES THERETO. THIS PERFORMANCE
AND THE STATISTICAL INFORMATION INCLUDED HEREIN HAVE BEEN OBTAINED FROM SOURCES
BELIEVED TO BE RELIABLE BUT ARE NOT WARRANTED AS TO ACCURACY OR COMPLETENESS.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. PROSPECTIVE INVESTORS
SHOULD RECOGNIZE THAT THERE ARE CERTAIN DIFFERENCES BETWEEN THE INVESTMENT
POLICIES OF THE PARTNERSHIP AND THOSE OF THE ACCOUNTS AND THAT THEIR FEES AND
EXPENSES DIFFER. FUTURE PERFORMANCE OF THE PARTNERSHIP AND THE ACCOUNTS MAY
DIFFER.
A-1
<PAGE> 75
TABLE 1
PERFORMANCE RECORD OF
MARK LP
<TABLE>
<CAPTION>
YEAR MARK LP S&P 500
<S> <C> <C>
1985* 12.45% 12.54%
1986 35.23 18.56
1987 40.67 5.10
1988 31.11 16.61
1989 56.69 31.69
1990 -14.66 -3.10
1991 48.74 30.47
1992 9.84 7.62
1993 25.07 10.08
1994 -15.36 1.32
1995 30.04 37.58
1996** 16.00 25.44
Cumulative Return
1985 - 1996*** 878.40 463.97
</TABLE>
* For the period July 1, 1985 through December 31, 1985.
** Through November 30, 1996.
*** For the period July 1, 1985 through November 30, 1996.
The above returns are net of all fees and expenses and a 20% incentive
allocation payable to Morris Mark, the general partner and investment manager
of Mark LP. Unlike the Partnership, Mark LP does not pay a management fee.
The above returns are based upon the results achieved by an investor who
invested $1 million at the commencement of the Mark LP's operations. At all
times under consideration, Mark LP's assets under management were between $10
million and $290 million. Performance of the Standard & Poor's Composite Index
of 500 Stocks (the "S&P 500") is provided for comparison purposes. Mark LP,
however, does not restrict its investments in securities only to those
securities comprising the S&P 500. Cumulative return is calculated by using a
compounded, time-weighted return. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.
A-2
<PAGE> 76
TABLE 2
COMPOSITE
PERFORMANCE RECORD OF
MAMC ACCOUNTS
<TABLE>
<CAPTION>
YEAR MAMC COMPOSITE S&P 500
<S> <C> <C>
1987* 11.81% -8.15%
1988 30.56 16.61
1989 57.32 31.69
1990 -14.65 -3.10
1991 48.54 30.47
1992 9.27 7.62
1993 25.24 10.08
1994 -12.57 1.32
1995 29.99 37.58
1996** 18.06 25.44
Cumulative Return
1987 - 1996*** 434.61 269.39
</TABLE>
* For the period February 1, 1987 through December 31, 1987.
** Through November 30, 1996.
*** For the period February 1, 1987 through November 30, 1996.
The above MAMC composite returns are shown net of certain expenses,
including advisory fees, paid to MAMC by the accounts included in the
composite. The advisory fees mentioned above are asset based fees plus
performance based fees or, in certain cases, asset based fees in lieu of
performance based fees in years where performance based fees were not earned.
The composite reflects the performance of all accounts (including investment
funds) that were managed during the periods shown by MAMC in accordance with an
investment program that utilizes, among other tools, leverage, which program is
substantially similar to the Partnership's expected investment program. In
circumstances where the investment program being used for an account changed
(either as a result of a client's direction or as a result of a decision made
by MAMC in light of a change in the client's investment goals or risk
tolerance) so as to no longer be the same as the investment program used for
other accounts in the composite, that account was removed prospectively from
the composite. All determinations as to the accounts included in the
composite, as well as the performance information and composite methodology,
were made by MAMC. The composite returns are dollar-weighted averages of the
individual returns of the accounts included in the composite. At all times
under consideration, the MAMC Accounts' assets under management were between
$13 million and $208 million. Performance of the S&P 500 is provided for
comparison purposes. The accounts, however, do not restrict their investments
in securities only to those securities comprising the S&P 500. Cumulative
return is calculated by using a compounded, time-weighted return. PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
A-3
<PAGE> 77
FORM N-2
TROON PARTNERS, L.P.
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Financial Statements:
Because Registrant has no assets, financial
statements are omitted.
(2) Exhibits:
(a) (1) Certificate of Limited Partnership.
(2) Limited Partnership Agreement.
(b) Not Applicable.
(c) Not Applicable.
(d) See Item 24(2)(a)(2).
(e) Not Applicable.
(f) Not Applicable.
(g) See Item 24(2)(a)(2).
(h) Placement Agency Agreement
(i) Not Applicable.
(j) Custody Agreement.
(k) (1) Management and Administration
Agreement.
(2) Administration, Accounting and
Investor Services Agreement.
(l) Not Applicable.
(m) Not Applicable.
(n) Not Applicable.
(o) Not Applicable.
(p) Not Applicable.
(q) Not Applicable.
(r) Not Applicable.
ITEM 25. MARKETING ARRANGEMENTS
Not Applicable.
<PAGE> 78
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Blue Sky Fees and Expenses (including fees
of counsel) . . . . . . . . . . . . . . . . . . . . . $ 14,000
Legal fees and expenses . . . . . . . . . . . . . . . . . 100,000
Printing and engraving . . . . . . . . . . . . . . . . . 100,000
Offering Expenses . . . . . . . . . . . . . . . . . . . . 50,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 136,000
--------
$400,000
========
</TABLE>
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
After completion of the private offering of interests, Registrant
expects that no person will be directly or indirectly under common control with
Registrant, except that Registrant may be deemed to be controlled by Troon
Management, L.L.C., a general partner of the Registrant, which, in turn, is
controlled by Oppenheimer & Co., Inc. Information regarding the ownership of
Oppenheimer & Co., Inc. is set forth in its Form ADV, as filed with the
Commission (File No. 801-10574).
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Limited Partnership Interests 1 (Registrant anticipates that as a result of
the private offering of interests there will be
more than 100 record holders of such interests
in the future.)
</TABLE>
ITEM 29. INDEMNIFICATION
Reference is made to Section 3.9 of Registrant's Limited Partnership
Agreement (the "Partnership Agreement") filed as Exhibit 2(a)(2) hereto.
Registrant hereby undertakes that it will apply the indemnification provision
of the Partnership Agreement in a manner consistent with Release 40-11330 of
the Securities and Exchange Commission under the Investment Company Act of
1940, so long as the interpretation therein of Sections 17(h) and 17(i) of such
Act remains in effect.
Registrant, in conjunction with the Manager, Registrant's Individual
General Partners and other registered investment management companies managed
by the Manager or its affiliates, maintains insurance on behalf of any person
who is or was an Independent General Partner, officer, employee, or agent of
Registrant, or who is or was serving at the request of Registrant as an
Independent General Partner, director, officer employee or agent of another
managed investment company, against certain liability asserted against him or
her and incurred by him or her or arising out of his or her position. However,
in no event will Registrant pay that portion of
<PAGE> 79
the premium, if any, for insurance to indemnify any such person or any act for
which Registrant itself is not permitted to indemnify.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
A description of any other business, profession, vocation, or
employment of a substantial nature in which the investment adviser of
Registrant, and each director, executive officer, or partner of any such
investment adviser, is or has been, at any time during the past two fiscal
years, engaged in for his or her own account or in the capacity of director,
officer, employee, partner or trustee, is set forth in Registrant's
Confidential Memorandum in the sections entitled "THE MANAGER, OPCO AND MAMC."
Information as to the directors and officers of Oppenheimer & Co., Inc. is
included in its Form ADV as filed with the Commission (File No. 801-10574), and
is incorporated herein by reference. Information as to the directors and
officers of Mark Asset Management Corporation is included in its Form ADV as
filed with the Commission (File No. 801-28992), and is incorporated herein by
reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The Administrator maintains certain required accounting related and
financial books and records of Registrant at PFPC Inc., 400 Bellevue Parkway,
Wilmington, Delaware 19809. The other required books and records are
maintained by the Manager c/o Oppenheimer & Co., Inc., Oppenheimer Tower, One
World Financial Center, 33rd Floor, 200 Liberty Street, New York, New York
10281.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
Not Applicable.
<PAGE> 80
FORM N-2
TROON PARTNERS, L.P.
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940,
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
and State of New York, on the 31st day of December, 1996.
TROON PARTNERS, L.P.
By: TROON MANAGEMENT, L.L.C.
General Partner
By: OPPENHEIMER & CO., INC.
Managing Member
By: /s/ Mitchell A. Tanzman
--------------------------------------
Mitchell A. Tanzman
Managing Director
<PAGE> 81
FORM N-2
TROON PARTNERS, L.P.
EXHIBIT INDEX
EXHIBIT NUMBER DOCUMENT DESCRIPTION
<TABLE>
<S> <C> <C>
(a) (1) Certificate of Limited Partnership
(2) Limited Partnership Agreement
(c) Not Applicable
(d) See Exhibit (a)(2)
(e) Not Applicable
(f) Not Applicable
(g) See Exhibit (a)(2)
(h) Placement Agency Agreement
(i) Not Applicable
(j) Custodian Agreement
(k) (1) Management and Administration Agreement
(2) Administration, Accounting and Investor
Services Agreement
(l) Not Applicable
(m) Not Applicable
(n) Not Applicable
(o) Not Applicable
(p) Not Applicable
(q) Not Applicable
</TABLE>
<PAGE> 1
Exhibit (a)(1)
CERTIFICATE OF LIMITED PARTNERSHIP
OF
TROON PARTNERS, L.P.
This Certificate of Limited Partnership of Troon Partners,
L.P. (the "Partnership") is being duly executed and filed by the undersigned
general partner (the "General Partner") to form a limited partnership under the
Delaware Revised Uniform Limited Partnership Act (6 Del. C. Section 17-101, et
seq.).
1. The name of the limited partnership formed hereby is
Troon Partners, L.P.
2. The address of the Partnership's registered office in
the state of Delaware is Corporation Service Company, 1013 Centre
Road, County of New Castle, City of Wilmington, State of Delaware
19805-1297. The name of the Partnership's registered agent for
service of process on the Partnership in the State of Delaware is
Corporation Service Company, 1013 Centre Road, Wilmington, Delaware
19805-1297.
3. The name and business address of the General Partner
of the Partnership is as follows:
Troon Management, L.L.C.
c/o Oppenheimer & Co., Inc.
Oppenheimer Tower
One World Financial Center
200 Liberty Street
New York, NY 10281
4. IN WITNESS WHEREOF, the undersigned have executed
this Certificate of Limited Partnership of Troon Partners, L.P., this
12th day of December, 1996.
Troon Partners, L.P.
By: Troon Management, L.L.C.
General Partner
By: Oppenheimer & Co., Inc.
Managing Member
By: /s/ Mitchell A. Tanzman
----------------------------------------
Name: Mitchell A. Tanzman
Title: Managing Director
<PAGE> 1
Exhibit (a)(2)
------------------------------------
TROON PARTNERS, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
------------------------------------
LIMITED PARTNERSHIP AGREEMENT
DATED AS OF DECEMBER 19, 1996
------------------------------------
OPPENHEIMER TOWER
ONE WORLD FINANCIAL CENTER, 33RD FLOOR
200 LIBERTY STREET
NEW YORK, NEW YORK 10281
(212) 667-4225
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II ORGANIZATION; ADMISSION OF PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Formation of Limited Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Principal and Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Objective and Business of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6 General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7 Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.8 Organizational Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.9 Both General and Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.10 Limited Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1 Management and Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2 Actions by Individual General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 Meetings of Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 Advice and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.5 Custody of Assets of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.6 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.7 Other Activities of Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.8 Duty of Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.9 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.10 Fees, Expenses and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV TERMINATION OF STATUS AS GENERAL PARTNER, TRANSFERS AND REPURCHASES . . . . . . . . . . . . . . 21
4.1 Termination of Status of the Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.2 Termination of Status of an Individual General Partner . . . . . . . . . . . . . . . . . . . 21
4.3 Removal of General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.4 Transfer of Interests of General Partners . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.5 Transfer of Interests of Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.6 Repurchase of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE V CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.1 Contributions to Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.2 Rights of Partners to Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.3 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.4 Allocation of Net Profit and Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.5 Allocation of Insurance Premiums and Proceeds . . . . . . . . . . . . . . . . . . . . . . . 27
5.6 Allocation of Certain Withholding Taxes and Other Expenditures . . . . . . . . . . . . . . . 27
5.7 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.8 Incentive Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.9 Allocation to Avoid Capital Account Deficits . . . . . . . . . . . . . . . . . . . . . . . . 29
5.10 Allocations Prior to Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.11 Tax Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.12 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VI DISSOLUTION AND LIQUIDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.2 Liquidation of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1 Accounting and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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7.2 Determinations By Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3 Valuation of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VIII MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.1 Amendment of Partnership Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2 Special Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.4 Agreement Binding Upon Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . 38
8.5 Applicability of 1940 Act and Form N-2 . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.6 Choice of Law; Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.7 Not for Benefit of Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.8 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.9 Merger and Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.10 Pronouns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.11 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.12 Certification of Non-Foreign Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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TROON PARTNERS, L.P.
LIMITED PARTNERSHIP AGREEMENT
THIS LIMITED PARTNERSHIP AGREEMENT of Troon Partners, L.P. (the
"Partnership") is dated as of December 19, 1996 by and among Troon Management,
L.L.C., a Delaware limited liability company, as the Manager, Sol Gittleman,
Joyce L. Kramer, Luis Rubio, Janet L. Schinderman and Mitchell A. Tanzman as
the Individual General Partners and those persons hereinafter admitted and
listed on Schedule I hereto as General Partners and as Limited Partners.
W I T N E S S E T H :
WHEREAS, the Partnership has heretofore been formed as a limited
partnership under the Delaware Revised Uniform Limited Partnership Act pursuant
to an initial Certificate of Limited Partnership (the "Certificate") dated and
filed with the Secretary of State of Delaware on December 12, 1996;
NOW, THEREFORE, for and in consideration of the foregoing and the
mutual covenants hereinafter set forth, it is hereby agreed as follows:
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ARTICLE I
DEFINITIONS
----------------------
For purposes of this Agreement:
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ADVICE AND MANAGEMENT Those services provided to the Partnership by the Manager
pursuant to Section 3.4(b) hereof.
ADVISERS ACT The Investment Advisers Act of 1940 and the rules, regulations
and orders thereunder, as amended from time to time, or any
successor law.
AFFILIATE An affiliated person as such term is defined in the 1940 Act.
AGREEMENT This Limited Partnership Agreement, as amended from time to time.
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ALLOCATION CHANGE With respect to each Limited Partner for each Allocation Period,
the difference between:
(1) the sum of (a) the balance of such Limited
Partner's Capital Account as of the close of the
Allocation Period (after giving effect to all
allocations to be made to such Limited Partner's
Capital Account as of such date other than any
Incentive Allocation to be debited against such
Limited Partner's Capital Account), plus (b) any
debits to such Limited Partner's Capital Account
during the Allocation Period to reflect any actual
or deemed distributions or repurchases with
respect to such Limited Partner's Interest, plus
(c) any debits to such Limited Partner's Capital
Account during the Allocation Period to reflect
any Insurance premiums allocable to such Limited
Partner, plus (d) any debits to such Limited
Partner's Capital Account during the Allocation
Period to reflect any items allocable to such
Limited Partner's Capital Account pursuant to
Section 5.6 hereof other than Management Fees; and
(2) the sum of (a) the balance of such Limited
Partner's Capital Account as of the commencement
of the Allocation Period, plus (b) any credits to
such Limited Partner's Capital Account during the
Allocation Period to reflect any contributions by
such Limited Partner to the capital of the
Partnership, plus (c) any credits to such Limited
Partner's Capital Account during the Allocation
Period to reflect any Insurance proceeds allocable
to such Limited Partner.
If the amount specified in clause (1) exceeds the amount
specified in clause (2), such difference shall be a POSITIVE
ALLOCATION CHANGE, and if the amount specified in clause (2)
exceeds the amount specified in clause (1), such difference shall
be a NEGATIVE ALLOCATION CHANGE.
If an Allocation Period is less than 12 complete calendar months
(an "Incomplete Allocation Period"), then solely for purposes of
determining the Incentive Allocation, the
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Positive Allocation Change shall be measured from the beginning
of the last preceding Allocation Period that commenced at least
12 complete calendar months prior to the end of the Incomplete
Allocation Period (disregarding all Incentive Allocations made
from the Limited Partner since such last preceding Allocation
Period) through the end of the Incomplete Allocation Period, less
the Positive Allocation Change for such prior Allocation Period.
ALLOCATION PERIOD With respect to each Limited Partner, the period commencing as of
the date of admission of such Limited Partner to the Partnership
and ending at the close of business on the last day of the
twelfth complete calendar month since the admission of such
Limited Partner to the Partnership, and thereafter each period
commencing as of the day following the last day of the preceding
Allocation Period with respect to such Limited Partner, and
ending at the close of business on the first to occur of the
following:
(1) the last day of a Fiscal Year;
(2) the day as of which the Partnership repurchases
the entire Interest of such Limited Partner;
(3) the day as of which the Partnership admits as a
substituted Limited Partner a person to whom the
Interest of such Limited Partner has been
Transferred (unless there is no change of
beneficial ownership); and
(4) the day as of which the authority of the Manager
to provide Advice and Management is terminated
pursuant to Section 3.4(a) hereof.
CAPITAL ACCOUNT With respect to each Partner, the capital account established and
maintained on behalf of each Partner pursuant to Section 5.3
hereof.
CERTIFICATE The Certificate of Limited Partnership of the Partnership and any
amendments thereto as filed with the office of the Secretary of
State of Delaware.
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CLOSING DATE The first date on or as of which a Limited Partner other than the
Organizational Limited Partner is admitted to the Partnership.
CODE The United States Internal Revenue Code of 1986, as amended and
as hereafter amended from time to time, or any successor law.
DELAWARE ACT The Delaware Revised Uniform Limited Partnership Act as in effect
on the date hereof and as amended from time to time, or any
successor law.
FISCAL PERIOD The period commencing on the Closing Date, and thereafter each
period commencing on the day immediately following the last day
of the preceding Fiscal Period and ending at the close of
business on the first to occur of the following dates:
(1) the last day of a Fiscal Year;
(2) the day preceding any day as of which a
contribution to the capital of the Partnership
is made pursuant to Section 5.1; or
(3) any day (other than one specified in clause (2)
above) as of which this Agreement provides for
any amount to be credited to or debited against
the Capital Account of any Partner, other than
an amount to be credited to or debited against
the Capital Accounts of all Partners in
accordance with their respective Partnership
Percentages.
FISCAL YEAR The period commencing on the Closing Date and ending on December
31, 1997, and thereafter each period commencing on January 1 of
each year and ending on December 31 of each year (or on the date
of a final distribution pursuant to Section 6.2 hereof), unless
the Individual General Partners shall elect another fiscal year
for the Partnership that is a permissible taxable year under the
Code.
FORM N-2 The Partnership's Registration Statement on Form N-2 filed with
the Securities and Exchange Commission, as amended from time to
time.
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GENERAL PARTNERS The Manager and the Individual General Partners in such persons'
capacity as general partners of the Partnership, collectively,
and GENERAL PARTNER means any of the General Partners.
INCENTIVE ALLOCATION With respect to any Limited Partner, 20% of the amount,
determined as of the close of each Allocation Period with respect
to such Limited Partner, by which such Limited Partner's Positive
Allocation Change for such Allocation Period, if any, exceeds any
positive balance in such Limited Partner's Loss Recovery Account
as of the most recent prior date as of which any adjustment has
been made thereto.
INDEPENDENT GENERAL PARTNERS Those Individual General Partners who are not "interested
persons" of the Partnership as such term is defined in the 1940
Act.
INDIVIDUAL GENERAL PARTNERS Those natural persons admitted to the Partnership as General
Partners; such term shall not include the Manager.
INSURANCE One or more "key man" insurance policies on the life of any
principal of a member of the Manager, the benefits of which are
payable to the Partnership.
INTEREST The entire ownership interest in the Partnership at any
particular time of a Partner or other person to whom an Interest
or portion thereof has been transferred pursuant to Sections 4.4
or 4.5 hereof, including the rights and obligations of such
Partner or other person under this Agreement and the Delaware
Act.
LIMITED PARTNER Any person who shall have been admitted to the Partnership as a
limited partner (including any General Partner in such person's
capacity as a limited partner of the Partnership but excluding
any General Partner in such person's capacity as a general
partner of the Partnership) until the Partnership repurchases the
entire Interest of such person as a limited partner pursuant to
Section 4.6 hereof or a substituted Limited Partner or Partners
are admitted with respect to any such person's entire Interest as
a limited partner pursuant to Section 4.5 hereof.
LOSS RECOVERY ACCOUNT A memorandum account to be recorded in the books and records of
the Partnership with respect to each Limited Partner, which shall
have an initial balance of zero and
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which shall be adjusted as follows:
(1) As of the first day after the close of each Allocation Period
for such Limited Partner, the balance of the Loss Recovery
Account shall be increased by the amount, if any, of such
Limited Partner's Negative Allocation Change for such
Allocation Period and shall be reduced (but not below zero) by
the amount, if any, of such Limited Partner's Positive
Allocation Change for such Allocation Period.
(2) The balance of the Loss Recovery Account shall be reduced (but
not below zero) as of the first date as of which the Capital
Account balance of any Limited Partner is reduced as a result
of repurchase or transfer with respect to such Limited
Partner's Interest by an amount determined by multiplying (a)
such positive balance by (b) a fraction, (i) the numerator of
which is equal to the amount of the repurchase or transfer, and
(ii) the denominator of which is equal to the balance of such
Limited Partner's Capital Account immediately before giving
effect to such repurchase or transfer.
No transferee of any Interest shall succeed to any Loss Recovery
Account balance or portion thereof attributable to the transferor
unless the Transfer by which such transferee received such
Interest did not involve a change of beneficial ownership.
MANAGER Troon Management, L.L.C., a limited liability company organized
under Delaware law, or any other person admitted to the
Partnership as the Manager.
NEGATIVE ALLOCATION CHANGE The meaning given such term in the definition of Allocation
Change.
NET ASSETS 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.
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NET PROFIT OR NET LOSS 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), such amount to be
adjusted to exclude:
(1) the amount of any Insurance premiums or proceeds
to be allocated among the Capital Accounts of
the Partners pursuant to Section 5.5 hereof; and
(2) any items to be allocated among the Capital
Accounts of the Partners on a basis which is not
in accordance with the respective Partnership
Percentages of all Partners as of the
commencement of such Fiscal Period pursuant to
Sections 5.6 and 5.7 hereof.
1940 ACT The Investment Company Act of 1940 and the rules, regulations and
orders thereunder, as amended from time to time, or any successor
law.
1934 ACT The Securities Exchange Act of 1934 and the rules, regulations
and orders thereunder, as amended from time to time, or any
successor law.
OPCO Oppenheimer & Co., Inc., or any successor thereto.
OPCO SERVICES Such management and administrative services as Opco shall provide
to the Partnership pursuant to a separate written agreement with
the Partnership as contemplated by Section 3.10(a) hereof.
ORGANIZATIONAL LIMITED PARTNER Mitchell A. Tanzman.
PARTNERS The General Partners and the Limited Partners, collectively.
PARTNERSHIP The limited partnership governed hereby, as such limited
partnership may from time to time be constituted.
PARTNERSHIP PERCENTAGE A percentage established for each Partner on the Partnership's
books as of the first day of each Fiscal
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Period. The Partnership Percentage of a Partner for a Fiscal
Period shall be determined by dividing the balance of the
Partner's Capital Account as of the commencement of such Fiscal
Period by the sum of the Capital Accounts of all of the Partners
as of the commencement of such Fiscal Period. The sum of the
Partnership Percentages of all Partners for each Fiscal Period
shall equal 100%.
POSITIVE ALLOCATION CHANGE The meaning given such term in the definition of Allocation
Change.
RELATED PERSON With respect to any person, (i) a relative, spouse or relative of
a spouse who has the same principal residence as such person,
(ii) any trust or estate in which such person and any persons who
are related to such person collectively have more than 50% of the
beneficial interests (excluding contingent interests) and
(iii) any corporation or other organization of which such person
and any persons who are related to such person collectively are
beneficial owners of more than 50% of the equity securities
(excluding directors' qualifying shares) or equity interests.
SECURITIES Securities (including, without limitation, equities, debt
obligations, options, and other "securities" as that term is
defined in Section 2(a)(36) of the 1940 Act) 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 thereon.
TRANSFER The assignment, transfer, sale, encumbrance, pledge or other
disposition of all or any portion of an Interest, including any
right to receive any allocations and distributions attributable
to an Interest.
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------------------------
ARTICLE II
ORGANIZATION; ADMISSION OF PARTNERS
----------------------
2.1 FORMATION OF LIMITED PARTNERSHIP.
The General Partners shall execute and file in accordance with
the Delaware Act any amendment to the Certificate and shall execute and file
with applicable governmental authorities any other instruments, documents and
certificates which, in the opinion of the Partnership's legal counsel, 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 Partnership shall determine
to do business, or any political subdivision or agency thereof, or which such
legal counsel may deem necessary or appropriate to effectuate, implement and
continue the valid existence and business of the Partnership.
2.2 NAME.
The name of the Partnership shall be "Troon Partners, L.P." or
such other name as the Manager may hereafter adopt with the approval of the
Individual General Partners upon (i) causing an appropriate amendment to the
Certificate to be filed in accordance with the Delaware Act and (ii) sending
notice thereof to each Partner.
2.3 PRINCIPAL AND REGISTERED OFFICE.
The Partnership shall have its principal office at the
principal office of the Manager, or at such other place designated from time to
time by the Individual General Partners.
The Partnership shall have its registered office in Delaware
at 1013 Center Road, Wilmington, Delaware 19805-1297, and shall have
Corporation Service Company as its registered agent for service of process in
Delaware, unless a different registered office or agent is designated from time
to time by the Individual General Partners.
2.4 DURATION.
The term of the Partnership commenced on the filing of the
Certificate with the Secretary of State of Delaware and shall continue until
the Partnership is dissolved pursuant to Section 6.1 hereof (unless its term is
extended).
2.5 OBJECTIVE AND BUSINESS OF THE PARTNERSHIP.
(a) The objective and business of the Partnership is to
purchase, sell (including short sales), invest and trade in Securities, and to
engage in any financial or derivative transactions
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relating thereto or otherwise. The Partnership may execute, deliver and
perform all contracts, agreements and other undertakings and engage in all
activities and transactions as may in the opinion of the General Partners be
necessary or advisable to carry out its objective or business.
(b) The Partnership shall operate as a closed-end,
non-diversified, management investment company in accordance with the 1940 Act
and subject to any fundamental policies and investment restrictions set forth
in the Form N-2.
2.6 GENERAL PARTNERS.
(a) Prior to the Closing Date, the Manager may admit any
person who shall agree to be bound by all of the terms of this Agreement as an
Individual General Partner, subject to such person's election as such prior to
the Closing Date by the Manager and the Organizational Limited Partner. After
the Closing Date, the Individual General Partners may, subject to the
provisions of paragraphs (a) and (b) of this Section 2.6 with respect to the
number of and vacancies in the position of Individual General Partners and the
provisions of Section 3.3 hereof with respect to the election of Individual
General Partners by Partners, admit any person who shall agree to be bound by
all of the terms of this Agreement as an Individual General Partner. The
Manager may admit to the Partnership as a substitute Manager any person to
which it has Transferred its Interest as the Manager pursuant to Section 4.4
hereof. The Individual General Partners may admit to the Partnership any
person as a new Manager if the status of the Manager is terminated pursuant to
Section 4.1 hereof and both the Individual General Partners (including a
majority of the Independent General Partners by vote cast in person at a
meeting called for such purpose) and Partners holding not less than a majority
of the total number of votes eligible to be cast by all Partners elect to
continue the business of the Partnership as provided in Section 6.1(a)(3)
hereof. The names and mailing addresses of the General Partners, and the
Capital Contribution of the Manager, shall be set forth on Schedule I hereto.
The General Partners shall be listed separately as the "Individual General
Partners" and the "Manager." The number of Individual General Partners shall
be fixed from time to time by the Individual General Partners but, at the
Closing Date, shall not be less than five. At and after the Closing Date, not
less than a majority of the Individual General Partners shall be Independent
General Partners.
(b) The Manager shall serve for the duration of the term
of the Partnership, unless its status as the Manager shall be sooner terminated
pursuant to Section 4.1 hereof. Each Individual General Partner admitted to
the Partnership shall serve for the duration of the term of the Partnership,
unless his status as an Individual General Partner shall be sooner terminated
pursuant to Section 4.2 hereof. In the event of any vacancy in the position of
an Individual General Partner, the remaining Individual General Partners may
appoint an individual to serve in such capacity, so long as immediately after
such appointment at least two-thirds (2/3) of the Individual General Partners
then serving would have been elected by the Partners. The Individual General
Partners may call a meeting of Partners to fill any vacancy in the position of
an Individual General Partner, and shall do so within 60 days after any date on
which Individual General Partners who were elected by the Partners cease to
constitute a majority of the Individual General Partners then serving.
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(c) In the event that no Individual General Partner
remains to continue the business of the Partnership, the Manager shall promptly
call a meeting of the Partners, to be held within 60 days after the date on
which the last Individual General Partner ceased to act in that capacity, for
the purpose of determining whether to continue the business of the Partnership
and, if the business shall be continued, of electing the required number of
Individual General Partners. If the Partners shall determine at such meeting
not to continue the business of the Partnership or if the required number of
Individual General Partners is not elected within 60 days after the date on
which the last Individual General Partner ceased to act in that capacity, then
the Partnership shall be dissolved pursuant to Section 6.1 hereof and the
assets of the Partnership shall be liquidated and distributed pursuant to
Section 6.2 hereof.
2.7 LIMITED PARTNERS.
The Manager (subject to any policies established by the
Individual General Partners) may at any time and without advance notice to or
consent from any other Partner admit any person who shall agree to be bound by
all of the terms of this Agreement as a Limited Partner. The Manager may in
its absolute discretion reject subscriptions for limited partnership Interests
in the Partnership. The admission of any person as a Limited Partner shall be
effective upon the revision of Schedule I to this Agreement to reflect the name
and the required contribution to the capital of the Partnership of such
additional Limited Partner.
2.8 ORGANIZATIONAL LIMITED PARTNER.
Upon the admission 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.
2.9 BOTH GENERAL AND LIMITED PARTNER.
A Partner may at the same time be a General Partner and a
Limited Partner, in which event such Partner's rights and obligations in each
capacity shall be determined separately in accordance with the terms and
provisions hereof or as provided in the Delaware Act.
2.10 LIMITED LIABILITY.
Except as provided under applicable law, a Limited Partner
shall not be liable for the Partnership's obligations in any amount in excess
of the capital account balance of such Partner, plus such Partner's share of
undistributed profits and assets.
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----------------------
ARTICLE III
MANAGEMENT
----------------------
3.1 MANAGEMENT AND CONTROL.
(a) The ultimate authority over the management and
control of the business of the Partnership shall be vested in the Individual
General Partners, who shall have the right, power and authority, on behalf of
the Partnership and in its name, to exercise all rights, powers and authority
of general partners under the Delaware Act and to do all things necessary and
proper to carry out the objective and business of the Partnership and their
duties hereunder. The parties hereto intend that, except to the extent
otherwise expressly provided herein, (i) each Individual General Partner shall
be vested with the same powers, authority and responsibilities on behalf of the
Partnership as are customarily vested in each director of a Delaware
corporation and (ii) each Independent General Partner shall be vested with the
same powers, authority and responsibilities on behalf of the Partnership as are
customarily vested in each director of a closed-end management investment
company registered under the 1940 Act that is organized as a Delaware
corporation who is not an "interested person" of such company as such term is
defined in the 1940 Act. During any period in which the Partnership shall have
no Individual General Partners, the Manager shall continue the management and
control of the Partnership.
(b) The Manager shall be the designated tax matters
partner for purposes of Section 6231(a)(7) of the Code. Each Partner agrees
not to treat, on his personal 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 such item by the Partnership. The Manager shall 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.
(c) Limited Partners shall have no right to participate
in and shall take no part in the management or control of the Partnership's
business and shall have no right, power or authority to act for or bind the
Partnership. Limited Partners shall 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 or as otherwise required in
the Delaware Act.
3.2 ACTIONS BY INDIVIDUAL GENERAL PARTNERS.
(a) Unless provided otherwise in this Agreement, the
Individual General Partners shall act only: (i) by the affirmative vote of a
majority of the Individual General Partners (which majority shall include any
requisite number of Independent General Partners required by the 1940 Act)
present at a meeting duly called at which a quorum of the Individual General
Partners shall be present (in person or, if in person attendance is not
required by the 1940 Act, by telephone) or (ii) by unanimous written consent of
all of the Individual General Partners without a meeting, if permissible under
the 1940 Act.
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(b) The Individual General Partners may designate from
time to time a Principal Individual General Partner, who shall preside at all
meetings. Meetings of the Individual General Partners may be called by the
Principal Individual General Partner or by any two Individual General Partners,
and may be held on such date and at such time and place as the Individual
General Partners shall determine. Each Individual General Partner shall be
entitled to receive written notice of the date, time and place of such meeting
within a reasonable time in advance of the meeting. Notice need not be given
to any Individual General Partner who shall attend a meeting without objecting
to the lack of notice or who shall execute a written waiver of notice with
respect to the meeting. Individual General Partners may attend and participate
in any meeting by telephone except where in person attendance at a meeting is
required by the 1940 Act. A majority of the Individual General Partners shall
constitute a quorum at any meeting.
3.3 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. Meetings of the Partners may be called by the Manager, by the
Individual General Partners or by Partners holding 25% or more of the total
number of votes eligible to be cast by all Partners, and may be held at such
time, date and place as the Manager shall determine. The Manager shall arrange
to provide written notice of the meeting, stating the date, time and place of
the meeting and the record date therefor, to each Partner entitled to vote at
the meeting within a reasonable time prior thereto. Failure to receive notice
of a meeting on the part of any Partner shall not affect the validity of any
act or proceeding of the meeting, so long as a quorum shall be present at the
meeting. Only matters set forth in the notice of a meeting may be voted on by
the Partners at a 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 shall constitute a quorum at any meeting. In
the absence of a quorum, the Manager may adjourn a meeting to the time or times
as determined by the Manager without additional notice to the Partners. Except
as otherwise required by any provision of this Agreement or of the 1940 Act,
(i) those candidates receiving a plurality of the votes cast at any meeting of
Partners shall be elected as Individual General Partners and (ii) all other
actions of the Partners taken at a meeting shall 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 such meeting.
(b) Each Partner shall be entitled to cast at any meeting
of Partners a number of votes equivalent to such Partner's Partnership
Percentage as of the record date for such meeting. The Manager shall establish
a record date not less than 10 nor more than 60 days prior to the date of any
meeting of Partners to determine eligibility to vote at such meeting and the
number of votes which each Partner will be entitled to cast thereat, and shall
maintain for each such record date a list setting forth 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
proxy properly executed in writing by the Partner and filed with the
Partnership before or at the time of the meeting. 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
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executing the proxy shall be present at the meeting and decide to vote 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
forth the action taken, are signed by Partners holding a majority of the total
number of votes eligible to be cast or such greater percentage as may be
required in order to approve such action.
3.4 ADVICE AND MANAGEMENT.
(a) The Manager shall provide Advice and Management to
the Partnership under the general supervision of the Individual General
Partners, subject to the initial approval thereof of such authority prior to
the Closing Date by the Individual General Partners (including the vote of a
majority of the Independent General Partners at a meeting called for such
purpose) and by the Organizational Limited Partner. The authority of the
Manager granted under this Section 3.4 shall become effective upon such initial
approvals and shall terminate: (i) if any period of 12 consecutive months
following the first twelve consecutive months of the effectiveness of such
authority shall conclude without the approval of the continuation of such
authority by (A) the vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Partnership or (B) the Individual General
Partners, and in either case, approval by a majority of the Independent General
Partners by vote cast in person at a meeting called for such purpose; (ii) if
revoked by the Individual General Partners or by vote of a majority (as defined
in the 1940 Act) of the outstanding voting securities of the Partnership, in
either case with 60 days prior written notice to the Manager; (iii) at the
election of the Manager with 60 days prior written notice to the Individual
General Partners; or (iv) upon the termination of the status of the Manager
pursuant to Section 4.1(a) hereof other than by reason of a Transfer of the
Manager's Interest pursuant to Section 4.4 hereof that does not involve an
"assignment" within the meaning of the 1940 Act. The authority of the Manager
under this Section 3.4 shall not be terminated in the event of a Transfer of
the Manager's Interest pursuant to Section 4.4 that does not involve an
"assignment" within the meaning of the 1940 Act, and shall instead be vested in
such Transferee. The authority of the Manager to provide Advice and Management
pursuant to this Section 3.4 shall automatically terminate upon the occurrence
of any event in connection with the Manager, its provision of Advice and
Management, this Agreement or otherwise constituting an "assignment" within the
meaning of the 1940 Act. If the authority of the Manager under this Section
3.4 is terminated as provided herein, the Individual General Partners may
appoint, subject to the approval thereof by a majority of the Independent
General Partners and by vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Partnership, a person or persons to
provide Advice and Management to the Partnership, and shall cause the terms and
conditions of such appointment to be stated in an agreement executed on behalf
of the Partnership and such person or persons.
(b) So long as the Manager has been and continues to be
authorized to provide Advice and Management, it shall have, subject to any
policies and restrictions set forth in any current offering memorandum issued
by the Partnership, this Agreement, the Form N-2 or the 1940 Act, or adopted
from time to time by the Individual General Partners and communicated in
writing to the Manager, full discretion and authority (i) to manage the assets
and liabilities of the Partnership and (ii) to manage the day-to-day business
and affairs of the Partnership. In furtherance
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of and subject to the foregoing, the Manager shall have full power and
authority on behalf of the Partnership:
(1) to purchase, sell, exchange, trade and otherwise deal
in and with Securities and other property of the
Partnership and to loan Securities of the
Partnership;
(2) 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 such terms as the Manager considers
appropriate, and to grant limited discretionary
authorization to such persons with respect to price,
time and other terms of investment and trading
transactions;
(3) to borrow from banks or other financial institutions
and to pledge Partnership assets as collateral
therefor, 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 Partners with respect to
repurchases of Interests and the payment of
Partnership expenses, including those relating to the
organization and registration of the Partnership;
(4) to issue to any Partner an instrument certifying that
such Partner is the owner of an Interest;
(5) to call and conduct meetings of Partners at the
Partnership's principal office or elsewhere as it may
determine and to assist the Individual General
Partners in calling and conducting meetings of the
Individual General Partners;
(6) to engage such attorneys, accountants and other
professional advisers and consultants as the Manager
may deem necessary or advisable in connection with
the affairs of the Partnership or as may be directed
by the Individual General Partners;
(7) to engage the services of others to assist the
Manager in providing, or to provide under the
Manager's control and supervision, Advice and
Management to the Partnership at the expense of the
Manager;
(8) to assist in the preparation and filing of any
required tax or information returns to be made by the
Partnership;
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(9) as directed by the Individual General Partners, to
commence, defend and conclude any action, suit,
investigation or other proceeding that pertains to
the Partnership or any assets of the Partnership;
(10) if directed by the Individual General Partners, to
arrange for the purchase of (A) Insurance, or (B) any
insurance covering the potential liabilities of the
Partnership or relating to the performance of the
Individual General Partners or the Manager, or any of
their principals, directors, officers, members,
employees and agents; and
(11) to execute, deliver and perform such contracts,
agreements and other undertakings, and to engage in
such activities and transactions as are necessary and
appropriate for the conduct of the business of the
Partnership.
3.5 CUSTODY OF ASSETS OF THE PARTNERSHIP.
The Manager shall not have any authority to hold or have
possession or custody of any funds, Securities or other properties of the
Partnership. The physical possession of all funds, Securities or other
properties of the Partnership shall at all times, be held, controlled and
administered by one or more custodians retained by the Partnership. The
Manager shall have no responsibility with respect to the collection of income,
physical acquisition or the safekeeping of the funds, Securities or other
assets of the Partnership, and all such duties of collection, physical
acquisition or safekeeping shall be the sole obligation of such custodians.
3.6 BROKERAGE.
In the course of selecting brokers, dealers and other
financial intermediaries for the execution, clearance and settlement of
transactions for the Partnership pursuant to section 3.4(b)(2) and (3) hereof,
the Manager may, subject to such policies as are adopted by the Partnership and
to the provisions of applicable law, agree to such commissions, fees and other
charges on behalf of the Partnership as it shall deem reasonable in the
circumstances taking into account all such factors as it deems relevant
(including the quality of research and other services made available to it even
if such services are not for the exclusive benefit of the Partnership and the
cost of such services does not represent the lowest cost available) and shall
be under no obligation to combine or arrange orders so as to obtain reduced
charges unless otherwise required under the federal securities laws. The
Manager may, subject to such procedures as may be adopted by the Individual
General Partners, use Affiliates of the Manager as brokers to effect the
Partnership's Securities transactions and the Partnership may pay such
commissions to such brokers in such amounts as are permissible under applicable
law.
3.7 OTHER ACTIVITIES OF PARTNERS.
(a) The General Partners shall not be required to devote
full time to the affairs of the Partnership, but shall devote such time as may
reasonably be required to perform their obligations under this Agreement.
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(b) 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 shall
have any rights in or to such activities of any other Partner, or any profits
derived therefrom.
(c) The Manager, and its members, directors, officers,
employees and beneficial owners, may from time to time acquire, possess,
manage, hypothecate and dispose of Securities or other investment assets, and
engage in any other investment transaction, for any account over which it or
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 they may provide
investment advisory or other services, notwithstanding the fact that the
Partnership may have or may take a position of any kind or otherwise; provided,
however, that the Manager shall not cause the Partnership to purchase any asset
from or sell any asset to any such discretionary account without the consent of
the Individual General Partners and in accordance with the 1940 Act.
3.8 DUTY OF CARE.
(a) A General Partner shall 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 his or its services under this Agreement,
unless it shall be determined by final judicial decision on the merits from
which there is no further right to appeal that such loss is due to an act or
omission of such General Partner constituting willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
such General Partner's office.
(b) Limited Partners not in breach of any obligation
hereunder or under any agreement pursuant to which the Limited Partner
subscribed for an Interest shall be liable to the Partnership, any Partner or
third parties only as provided under the Delaware Act.
3.9 INDEMNIFICATION.
(a) To the fullest extent permitted by law, the
Partnership shall, subject to Section 3.9(b) hereof, indemnify each General
Partner (including for this purpose each director, officer, member, partner,
employee or agent of, or any person who controls, a General Partner or a member
thereof, and their executors, heirs, assigns, successors or other legal
representatives), against all losses, claims, damages, liabilities, costs and
expenses, including, but not limited to, amounts paid in satisfaction of
judgments, in compromise, or as fines or penalties, and reasonable counsel
fees, 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 such
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, by reason of being or having been a general partner of the
Partnership or the past or present performance of services to the Partnership
by such indemnitee, except to the extent such
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loss, claim, damage, liability, cost or expense shall have been finally
determined in a decision on the merits in any such action, suit, investigation
or other proceeding to have been incurred or suffered by such indemnitee by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of such indemnitee's office.
The rights of indemnification provided under this Section 3.9 shall not be
construed so as to provide for indemnification of a General Partner for any
liability (including liability under 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 such indemnification would be in
violation of applicable law, but shall be construed so as to effectuate the
applicable provisions of this Section 3.9 to the fullest extent permitted by
law.
(b) Expenses, including reasonable counsel fees, so
incurred by any such 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 such action,
suit, investigation or proceeding upon receipt of an undertaking by or on
behalf of such indemnitee to repay to the Partnership amounts so paid if it
shall ultimately be determined that indemnification of such expenses is not
authorized under Section 3.9(a) hereof; provided, however, that (i) such
indemnitee shall provide security for such undertaking, (ii) the Partnership
shall be insured by or on behalf of such indemnitee against losses arising by
reason of such indemnitee's failure to fulfill his or its undertaking, or (iii)
a majority of the Independent General Partners (excluding any General Partner
who is either seeking advancement of expenses hereunder 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 advancement of expenses hereunder) or independent
legal counsel in a written opinion shall determine based on a review of readily
available facts (as opposed to a full trial-type inquiry) that there is reason
to believe such indemnitee ultimately will be entitled to indemnification.
(c) As to the disposition of any action, suit,
investigation or 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 shall have
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 such indemnitee's office,
indemnification shall be provided pursuant to Section 3.9(a) hereof if (i)
approved as in the best interests of the Partnership by a majority of the
Independent General Partners (excluding any General Partner who is either
seeking indemnification hereunder 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 hereunder) upon a determination based upon a review
of readily available facts (as opposed to a full trial-type inquiry) that such
indemnitee acted in good faith and in the reasonable belief that such actions
were in the best interests of the Partnership and that such 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 such indemnitee's office, or (ii) the Individual General Partners
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 such indemnification would not protect such indemnitee against any
liability to the Partnership
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or its Partners to which such 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 such indemnitee's office.
(d) Any indemnification or advancement of expenses made
pursuant to this Section 3.9 shall not prevent the recovery from any indemnitee
of any such amount if such indemnitee subsequently shall be determined in a
decision on the merits in any action, suit, investigation or proceeding
involving the liability or expense that gave rise to such 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 such indemnitee's office.
In (i) any suit brought by a General Partner (or other person entitled to
indemnification hereunder) to enforce a right to indemnification under this
Section 3.9 it shall be a defense that, and (ii) in any suit in the name of the
Partnership to recover any indemnification or advancement of expenses made
pursuant to this Section 3.9 the Partnership shall be entitled to recover such
expenses upon a final adjudication that, the General Partner or other person
claiming a right to indemnification under this Section 3.9 has not met the
applicable standard of conduct set forth in this Section 3.9. In any such suit
brought to enforce a right to indemnification or to recover any indemnification
or advancement of expenses made pursuant to this Section 3.9, the burden of
proving that the General Partner or other person claiming a right to
indemnification is not entitled to be indemnified, or to any indemnification or
advancement of expenses, under this Section 3.9 shall 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 3.9 or to
which he or it may otherwise be entitled except out of the assets of the
Partnership, and no Partner shall be personally liable with respect to any such
claim for indemnification or advancement of expenses.
(f) The rights of indemnification provided hereunder
shall 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
3.9 shall affect the power of the Partnership to purchase and maintain
liability insurance on behalf of any General Partner or other person.
3.10 FEES, EXPENSES AND REIMBURSEMENT.
(a) So long as Opco provides Opco Services to the
Partnership, it shall be entitled to receive such fees as may be agreed to by
Opco and the Partnership pursuant to a separate written agreement.
(b) The Individual General Partners may cause the
Partnership to compensate each Individual General Partner for his services as
such. In addition, the Individual General Partners shall be reimbursed by the
Partnership for reasonable out-of-pocket expenses incurred by them in
performing their duties under this Agreement.
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(c) The Partnership shall bear all expenses incurred in
the business of the Partnership other than those specifically required to be
borne by the Manager pursuant hereto. Expenses to be borne by the Partnership
include, but are not limited to, the following:
(1) all costs and expenses related to portfolio
transactions and positions for the
Partnership's account, including, but not
limited to, brokerage commissions, research
fees, interest and commitment fees on loans
and debit balances, borrowing charges on
Securities sold short, dividends on
Securities sold short but not yet purchased,
custodial fees, margin fees, transfer taxes
and premiums, taxes withheld on foreign
dividends and indirect expenses from
investments in investment funds;
(2) all costs and expenses associated with the
organization and registration of the
Partnership (which shall be amortized over a
60 month period), certain offering costs and
the costs of compliance with any applicable
federal or state laws;
(3) the costs and expenses of holding any
meetings of any Partners that are regularly
scheduled, permitted or are required to be
held by this Agreement, the 1940 Act or other
applicable law;
(4) fees and disbursements of any attorneys,
accountants, auditors and other consultants
and professionals engaged on behalf of the
Partnership;
(5) the costs of a fidelity bond and any
liability insurance obtained on behalf of the
Partnership or its General Partners;
(6) any fees payable to Opco for Opco Services
and the fees of custodians and persons
providing administrative services to the
Partnership; and
(7) such other types of expenses as may be
approved from time to time by the Individual
General Partners, other than those required
to be borne by the Manager, as provided in
Section 3.10(d) below.
The Manager shall be entitled to reimbursement from the Partnership for any of
the above expenses that it pays on behalf of the Partnership.
(d) Subject to procuring any required regulatory
approvals, from time to time the Partnership may, alone or in conjunction with
other accounts for which the Manager, or any Affiliate of the Manager, acts as
general partner or investment adviser, purchase Insurance in such amounts, from
such insurers and on such terms as the Individual General Partners shall
determine.
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----------------------
ARTICLE IV
TERMINATION OF STATUS AS GENERAL
PARTNER, TRANSFERS AND REPURCHASES
----------------------
4.1 TERMINATION OF STATUS OF THE MANAGER.
(a) The status of the Manager shall terminate if the
Manager (i) shall be dissolved or otherwise shall terminate its existence; (ii)
shall voluntarily withdraw as Manager; (iii) shall be removed; (iv) shall
transfer its Interest as Manager as permitted under Section 4.4 hereof and such
person to which such Interest is transferred is admitted as a substitute
Manager pursuant to Section 2.6(a) hereof; or (v) shall otherwise cease to be a
general partner of the Partnership under Section 17-402(4) or (5) of the
Delaware Act.
(b) The Manager may not voluntarily withdraw as Manager
until the earliest of (i) one year from the date on which the Manager shall
have given the Individual General Partners written notice of its intention to
effect such withdrawal (or upon lesser notice if in the opinion of counsel to
the Partnership, such withdrawal is not likely to cause the Partnership to lose
its partnership tax classification or as otherwise permitted by Rule 2a19-2 of
the 1940 Act); (ii) the date on which the authority of the Manager to provide
Advice and Management is terminated (other than at the election of the Manager)
pursuant to Section 3.4(a) hereof, unless within 30 days after such
termination, the Individual General Partners request the Manager not to
withdraw, in which case 180 days after the date of such termination; and (iii)
the date on which one or more persons shall have agreed to assume the
obligations of the Manager hereunder with the approval of the Individual
General Partners and such other approvals as may be required by the 1940 Act.
4.2 TERMINATION OF STATUS OF AN INDIVIDUAL GENERAL PARTNER.
The status of an Individual General Partner shall terminate if
the Individual General Partner (i) shall die; (ii) shall be adjudicated
incompetent; (iii) shall voluntarily withdraw as an Individual General Partner
(upon not less than 90 days' prior written notice to the other Individual
General Partners); (iv) shall be removed; (v) shall be certified by a physician
to be mentally or physically unable to perform his duties hereunder; (vi) shall
be declared bankrupt by a court with appropriate jurisdiction, file a petition
commencing a voluntary case under any bankruptcy law or make an assignment for
the benefit of creditors; (vii) shall have a receiver appointed to administer
the property or affairs of such Partner; or (viii) shall otherwise cease to be
a general partner of the Partnership under the Delaware Act.
4.3 REMOVAL OF GENERAL PARTNERS.
Any General Partner may be removed either by (a) the vote or
written consent of at least two-thirds (2/3) of the Individual General Partners
not subject to the removal vote or (b) the
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vote or written consent of Partners holding not less than two-thirds (2/3) of
the total number of votes eligible to be cast by all Partners.
4.4 TRANSFER OF INTERESTS OF GENERAL PARTNERS.
The Manager may not Transfer its Interest as the Manager
except to a person who has agreed to be bound by all of the terms of this
Agreement and, if the Transfer would constitute an "assignment" within the
meaning of the 1940 Act, with the prior approval of (a) the Individual General
Partners (including a majority of the Independent General Partners by vote cast
in person at a meeting called for such purpose) and (b) Partners holding a
majority (as defined in the 1940 Act) of the total number of votes eligible to
be cast by all Partners. By executing this Agreement, each other Partner shall
be deemed to have consented to any such Transfer permitted by the preceding
sentence. Individual General Partners may not Transfer their Interests as
Individual General Partners.
4.5 TRANSFER OF INTERESTS OF LIMITED PARTNERS.
(a) An Interest or portion thereof of a Limited Partner
may be Transferred only (i) by operation of law pursuant to the death,
bankruptcy, insolvency or dissolution of such Limited Partner or (ii) with the
written consent of the Manager (which may be withheld in its sole and absolute
discretion) in connection with a Transfer to an entity that does not result in
a change of beneficial ownership. In addition, the Manager may not consent to
a Transfer of an Interest or a portion thereof of a Limited Partner unless the
person to whom such Interest is transferred (or each of such person's
beneficial owners if such a person is a "private investment company" as defined
in Rule 205-3(g)(2) under the Advisers Act) is a person whom the Manager
believes meets the requirements of paragraph (b)(1) of Rule 205-3 under the
Advisers Act or successor rule thereto. Any transferee which acquires an
Interest by operation of law as the result of the death, bankruptcy, insolvency
or dissolution of a Limited Partner or otherwise, shall be entitled to the
allocations and distributions allocable to the Interest so acquired and to
Transfer such Interest in accordance with the terms of this Agreement, but
shall not be entitled to the other rights of a Limited Partner unless and until
such transferee becomes a substituted Limited Partner. If a Limited Partner
transfers an Interest or portion thereof with the approval of the Manager, the
Manager, unless otherwise directed by the Individual General Partners, shall
promptly take all necessary actions so that each transferee or successor to
whom such Interest or portion thereof is transferred is admitted to the
Partnership as a Limited Partner. Each Limited Partner and transferee agrees
to pay all expenses, including attorneys' and accountants' fees, incurred by
the Partnership in connection with such Transfer.
(b) Each Limited Partner shall indemnify and hold
harmless the Partnership, the Individual General Partners, the Manager, each
other Limited Partner and any Affiliate of the foregoing against all losses,
claims, damages, liabilities, costs and expenses (including legal or other
expenses incurred in investigating or defending against any such losses,
claims, damages, liabilities, costs and expenses or any judgments, fines and
amounts paid in settlement), joint or several, to which such persons may become
subject by reason of or arising from (i) any Transfer made by such Limited
Partner in violation of this Section 4.5 and (ii) any misrepresentation by such
Limited Partner in connection with any such Transfer.
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4.6 REPURCHASE OF INTERESTS.
(a) Except as otherwise provided in this Agreement, no
Partner or other person holding an Interest or portion thereof shall have the
right to withdraw or tender to the Partnership for repurchase an Interest or
portion thereof. The Individual General Partners may from time to time, in
their complete and exclusive discretion and on such terms and conditions as
they may determine, direct the Manager to cause the Partnership to repurchase
Interests or portions thereof pursuant to written tenders. However, the
Partnership shall not offer to repurchase Interests on more than one occasion
during any one Fiscal Year (other than during its first full Fiscal Year,
during which it may make two such offers) unless it has received an opinion of
counsel to the effect that such more frequent offers would not cause any
adverse tax consequences to the Partnership or its investors. In determining
whether to cause the Partnership to repurchase Interests or portions thereof
pursuant to written tenders, the Individual General Partners shall consider the
recommendation of the Manager, and shall also consider the following factors,
among others:
(1) whether any Partners have requested to tender
Interests or portions thereof to the
Partnership;
(2) the liquidity of the Partnership's assets;
(3) the investment plans and working capital
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 thereof;
(6) the economic condition of the securities
markets; and
(7) the anticipated tax consequences of any
proposed repurchases of Interests or portions
thereof.
The Individual General Partners shall cause the Partnership to repurchase
Interests or portions thereof pursuant to written tenders only on terms fair to
the Partnership and to all Partners or one or more classes of Partners
(including persons holding Interests acquired from Partners), as applicable.
(b) A Limited Partner who tenders for repurchase such
Partner's Interest or portion thereof shall be required to maintain a Capital
Account balance equal to the greater of $150,000 or the amount of Incentive
Allocation that would be debited against such Capital Account if the date of
repurchase of such Interest or portion thereof were a date on which an
Incentive Allocation would otherwise be made.
(c) Except as set forth in Section 4.6(d) and (e) hereof,
the Manager may tender its Interest or a portion thereof as a general partner
of the Partnership under Section 4.6(a) hereof
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only if and to the extent that (1) such repurchase would not cause the value of
the Capital Account of the Manager to be less than the value thereof required
to be maintained pursuant to Section 5.1(c) hereof or (2), in the opinion of
legal counsel to the Partnership, such repurchase would not jeopardize the
classification of the Partnership as a partnership for U.S. federal income tax
purposes.
(d) Not later than 180 days after termination pursuant to
Section 3.4(a) hereof of its authority to provide Advice and Management, the
Manager may, by written notice to the Individual General Partners, tender to
the Partnership all or any portion of its Capital Account which it is not
required to maintain pursuant to Section 5.1(c) hereof until the termination of
its status as the Manager pursuant to Section 4.1(a) hereof. Not later than 30
days after the receipt of such notice, the Individual General Partners shall
cause the tendered portion of such Capital Account to be repurchased by the
Partnership for cash, subject to any adjustment pursuant to Section 5.7 hereof.
(e) If the Manager's status as Manager is terminated
pursuant to Section 4.1 hereof and the business of the Partnership is continued
pursuant to Section 6.1(a)(3) hereof, the former Manager (or its trustee or
other legal representative) may, by written notice to the Individual General
Partners within 60 days of the action resulting in the continuation of the
Partnership pursuant to Section 6.1(a)(3) hereof, tender to the Partnership all
or any portion of its Interest. Not later than thirty (30) days after the
receipt of such notice, the Individual General Partners shall cause such
Interest to be repurchased by the Partnership for cash in an amount equal to
the balance of the former Manager's Capital Account or applicable portion
thereof, subject to any adjustment pursuant to Section 5.7 hereof. If the
former Manager does not tender to the Partnership all of its Interest as
permitted by this Section 4.6(d) such Interest shall be thereafter deemed to be
and shall be treated in all respects as the Interest of a Limited Partner.
(f) The Individual General Partners may cause the
Partnership to repurchase an Interest or portion thereof of a Limited Partner
or any person acquiring an Interest or portion thereof from or through a
Limited Partner in the event that the Individual General Partners determine or
have reason to believe that:
(1) such an Interest or portion thereof has been
transferred in violation of Section 4.5
hereof, or such an Interest or portion
thereof has vested in any person by operation
of law as the result of the death,
dissolution, bankruptcy or incompetency of a
Partner;
(2) ownership of such an Interest by a Partner or
other person will cause the Partnership to be
in violation of, or require registration of
any Interest or portion thereof under, or
subject the Partnership to additional
registration or regulation under, the
securities or commodities laws of the United
States or any other relevant jurisdiction;
(3) continued ownership of such an Interest may
be harmful or injurious to the business or
reputation of the Partnership, the Individual
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General Partners or the Manager, or may
subject the Partnership or any of the
Partners to an undue risk of adverse tax or
other fiscal consequences;
(4) any of the representations and warranties
made by a Partner in connection with the
acquisition of an Interest or portion thereof
was not true when made or has ceased to be
true; or
(5) it would be in the best interests of the
Partnership, as determined by the Individual
General Partners in their absolute
discretion, for the Partnership to repurchase
such an Interest or portion thereof.
(g) Repurchases of Interests or portions thereof by the
Partnership shall be payable promptly after the effective date of such
repurchase in cash, without interest, or, in the discretion of the Manager, in
marketable Securities (or any combination of marketable Securities and cash)
having a value, determined as of the date of repurchase, equal to the amount to
be repurchased. All such repurchases shall be subject to any and all
conditions as the Individual General Partners may impose in their sole
discretion and shall be effective as of a date set by the Individual General
Partners which is not less than 60 days after receipt by the Partnership of all
eligible written tenders of Interests or portion thereof. The amount due to
any Partner whose Interest or portion thereof is repurchased shall be equal to
the value of such Partner's Capital Account or portion thereof as applicable as
of the effective date of repurchase, after giving effect to all allocations to
be made to such Partner's Capital Account as of such date.
----------------------
ARTICLE V
CAPITAL
----------------------
5.1 CONTRIBUTIONS TO CAPITAL.
(a) The minimum initial contribution of each Partner to
the capital of the Partnership shall be such amount as the Manager, in its
discretion, may determine from time to time (subject to any policies
established by the Individual General Partners), but in no event shall be less
than $150,000. The amount of the initial contribution of each Partner shall be
recorded by the Manager upon acceptance as a contribution to the capital of the
Partnership. Individual General Partners shall not be entitled to make
voluntary contributions of capital to the Partnership as general partners of
the Partnership, but may make voluntary contributions to the capital of the
Partnership as limited partners if permitted by the Manager.
(b) The Limited Partners may make additional
contributions to the capital of the Partnership of at least $25,000 and
effective as of such times as the Manager, in its discretion may permit
(subject to any policies established by the Individual General Partners), but
no Limited
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Partner shall be obligated to make any additional contribution to the capital
of the Partnership except to the extent provided in Section 5.7 hereof.
(c) The Manager may make additional contributions to the
capital of the Partnership of at least $25,000 and effective as of such times
as it may determine; and shall be required to make additional contributions to
the capital of the Partnership 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 federal income
tax purposes. Except as provided above or in the Delaware Act, no General
Partner shall be required or obligated to make any additional contributions to
the capital of the Partnership.
(d) Except as otherwise permitted by the Manager, (i)
initial and any additional contributions to the capital of the Partnership by
any Partner shall be payable in cash or in such Securities that the Manager, in
its absolute discretion, may agree to accept on behalf of the Partnership, and
(ii) initial and any additional contributions in cash shall be payable in
readily available funds at the date of the proposed acceptance of the
contribution. The Partnership shall charge each Partner making a contribution
in Securities to the capital of the Partnership such amount as may be
determined by the Individual General Partners not exceeding 2% of the value of
such contribution in order to reimburse the Partnership for any costs incurred
by the Partnership by reason of accepting such Securities, and any such charge
shall be due and payable by the contributing Partner in full at the time the
contribution to the capital of the Partnership to which such charges relate is
due. The value of contributed Securities shall be determined in accordance
with Section 7.3 hereof as of the date of contribution.
(e) The minimum initial and additional contributions set
forth in (a) and (b) of this Section 5.1 may be reduced by the Manager upon
approval of the Individual General Partners.
5.2 RIGHTS OF PARTNERS TO CAPITAL.
No Partner shall be entitled to interest on his contribution
to the capital of the Partnership, nor shall any Partner be entitled to the
return of any capital of the Partnership except (i) upon the repurchase by the
Partnership of a part or all of such Partner's Interest pursuant to Section 4.6
hereof, (ii) pursuant to the provisions of Section 5.7(c) hereof or (iii) upon
the liquidation of the Partnership's assets pursuant to Section 6.2 hereof. No
Partner shall be liable for the return of any such amounts. No Partner shall
have the right to require partition of the Partnership's property or to compel
any sale or appraisal of the Partnership's assets.
5.3 CAPITAL ACCOUNTS.
(a) The Partnership shall maintain a separate Capital
Account for each Partner.
(b) Each Partner's Capital Account shall have an initial
balance equal to the amount of cash and the value of any Securities (determined
in accordance with Section 7.3 hereof) constituting such Partner's initial
contribution to the capital of the Partnership.
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(c) Each Partner's Capital Account shall be increased by
the sum of (i) the amount of cash and the value of any Securities (determined
in accordance with Section 7.3 hereof) constituting additional contributions by
such Partner to the capital of the Partnership permitted pursuant to Section
5.1 hereof, plus (ii) any amount credited to such Partner's Capital Account
pursuant to Sections 5.4 through 5.7 hereof.
(d) Each Partner's Capital Account shall be reduced by
the sum of (i) the amount of any repurchase of the Interest, or portion
thereof, of such Partner or distributions to such Partner pursuant to Sections
4.6, 5.12 or 6.2 hereof which are not reinvested, plus (ii) any amounts debited
against such Partner's Capital Account pursuant to Sections 5.4 through 5.8
hereof.
5.4 ALLOCATION OF NET PROFIT AND LOSS.
Subject to Section 5.9 hereof, as of the last day of each
Fiscal Period, any Net Profit or Net Loss for the Fiscal Period shall be
allocated among and credited to or debited against the Capital Accounts of the
Partners in accordance with their respective Partnership Percentages for such
Fiscal Period.
5.5 ALLOCATION OF INSURANCE PREMIUMS AND PROCEEDS.
(a) Any premiums payable by the Partnership for Insurance
purchased pursuant to Section 3.10(d) hereof shall be apportioned evenly over
each Fiscal Period or portion thereof falling within the period to which such
premiums relate under the terms of such Insurance, and the portion of the
premiums so apportioned to any Fiscal Period shall be allocated among and
debited against the Capital Accounts of each Partner who is a partner of the
Partnership during such Fiscal Period in accordance with such Partner's
Partnership Percentage for such Fiscal Period.
(b) Proceeds, if any, to which the Partnership may become
entitled pursuant to such Insurance shall be allocated among and credited to
the Capital Accounts of each Partner who is a partner of the Partnership during
the Fiscal Period in which the event which gives rise to recovery of proceeds
occurs in accordance with such Partner's Partnership Percentage for such Fiscal
Period.
5.6 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 Manager, without limitation of any other rights of the
Partnership or the General Partners, shall cause the amount of such obligation
to be debited against the Capital Account of such Partner when the Partnership
pays such obligation, and any amounts then or thereafter distributable to such
Partner shall be reduced by the amount of such taxes. If the amount of such
taxes is greater than any such distributable amounts, then such Partner and any
successor to such Partner's Interest shall pay to the Partnership as a
contribution to the capital of the Partnership, upon demand of the Manager, the
amount of such excess. The Manager shall 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 such reduction or exemption; provided, that in
the event that the Manager determines that a Partner is eligible for a refund
of any
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withholding tax, the Manager may, at the request and expense of such Partner,
assist such 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 Manager 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, shall be charged to only those
Partners on whose behalf such payments are made or whose particular
circumstances gave rise to such payments. Such charges shall be debited from
the Capital Accounts of such Partners as of the close of the Fiscal Period
during which any such items were paid or accrued by the Partnership.
5.7 RESERVES.
(a) Appropriate reserves may be created, accrued and
charged against Net Assets and proportionately against the Capital Accounts of
the Partners for contingent liabilities, if any, as of the date any such
contingent liability becomes known to the Manager, such reserves to be in the
amounts which the Manager in its sole discretion deem necessary or appropriate.
The Manager may increase or reduce any such reserves from time to time by such
amounts as the Manager in its sole discretion deem necessary or appropriate.
The amount of any such reserve, or any increase or decrease therein, shall be
proportionately charged or credited, as appropriate, to the Capital Accounts of
those parties who are Partners at the time when such reserve is created,
increased or decreased, as the case may be; provided, however, that if any such
individual reserve item, adjusted by any increase therein, exceeds the lesser
of $500,000 or 1% of the aggregate value of the Capital Accounts of all such
Partners, the amount of such reserve, increase, or decrease shall instead be
charged or credited to those parties who were Partners at the time, as
determined by the Manager 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 at that time.
(b) If at any time an amount is paid or received by the
Partnership (other than contributions to the capital of the Partnership,
distributions or repurchases of Interests or portions thereof) and such amount
exceeds the lesser of $500,000 and/or 1% of the aggregate value of the Capital
Accounts of all Partners at the time of payment or receipt and such amount was
not accrued or reserved for but would nevertheless, in accordance with the
Partnership's accounting practices, be treated as applicable to one or more
prior Fiscal Periods, then such amount shall be proportionately charged or
credited, as appropriate, to those parties who were Partners during such prior
Fiscal Period or Periods.
(c) If any amount is required by paragraph (a) or (b) of
this Section 5.7 to be charged or credited to a party who is no longer a
Partner, such amount shall be paid by or to such party, as the case may be, in
cash, with interest from the date on which the Manager determines that such
charge or credit is required. In the case of a charge, the former Partner
shall be obligated to pay the amount of the charge, plus interest as provided
above, to the Partnership on demand; provided, however, that (i) in no event
shall a former Partner be obligated to make a payment exceeding the amount of
such Partner's Capital Account at the time to which the charge relates; and
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(ii) no such demand shall be made after the expiration of three years since the
date on which such party 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 such former Partner pursuant to paragraph (a) or (b), whether due to
the expiration of the applicable limitation period or for any other reason
whatsoever, the deficiency shall 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.
5.8 INCENTIVE ALLOCATION.
(a) So long as the authority of the Manager to provide
Advice and Management under Section 3.4 hereof shall remain effective, the
Incentive Allocation shall be debited against the Capital Account of each
Limited Partner as of the last day of each Allocation Period with respect to
such Limited Partner and the amount so debited shall simultaneously be credited
to the Capital Account of the Manager, or, subject to compliance with the 1940
Act and the Advisers Act, to the Capital Accounts of such Partners as have been
designated in any written notice delivered by the Manager to the Individual
General Partners within 90 days after the close of such Allocation Period.
(b) Within 30 days of each Allocation Period with respect
to each Limited Partner, the Manager may withdraw up to 98% of the Incentive
Allocation (computed on the basis of unaudited data) that was credited to the
Manager's Capital Account and debited from such Limited Partner's Capital
Account with respect to such Allocation Period only if and to the extent that
such withdrawal would not cause the value of the Manager's Capital Account to
be less than the value thereof required to be maintained pursuant to Section
5.1(c) hereof. Subject to the criteria set forth in items (1) and (2) of this
clause (b), the Partnership shall pay the Manager the undrawn balance of such
Incentive Allocation (subject to audit adjustments) within 30 days after the
completion of the audit of the Partnership's books. Any amount of such
Incentive Allocation not withdrawn by the Manager pursuant to the first
sentence of this Section 5.8(b) shall be deemed reinvested in the Partnership
by the Manager.
5.9 ALLOCATION TO AVOID CAPITAL ACCOUNT DEFICITS.
To the extent that any debits pursuant to Sections 5.4 through
5.7 hereof would reduce the balance of the Capital Account of any Limited
Partner below zero, that portion of any such debits shall instead be allocated
to the Capital Account of the Manager. Any credits in any subsequent Fiscal
Period which would otherwise be allocable pursuant to Sections 5.4 through 5.7
hereof to the Capital Account of any Limited Partner previously affected by the
application of this Section 5.9 shall instead be allocated to the Capital
Account of the Manager in such amounts as are necessary to offset all previous
debits attributable to such Limited Partner pursuant to this Section 5.9 not
previously recovered.
5.10 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 shall be
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allocated to the Capital Account of the Manager. (No unrealized item of profit
or loss shall be allocated pursuant to this Section 5.10 to the Capital Account
of any Partner.)
5.11 TAX ALLOCATIONS.
For each fiscal year, items of income, deduction, gain, loss
or credit shall be allocated for income tax purposes among the Partners in such
manner as to reflect equitably amounts credited or debited to each Partner's
Capital Account for the current and prior fiscal years (or relevant portions
thereof). Allocations under this Section 3.09 shall be made pursuant to the
principles of Sections 704(b) and 704(c) of the Internal Revenue Code of 1986,
as amended (the "Code"), and in conformity with Regulations Sections
1.704-1(b)(2)(iv)(f), 1.704-1(b)(4)(i) and 1.704-3(e) promulgated thereunder,
as applicable, or the successor provisions to such Section and Regulations.
Notwithstanding anything to the contrary in this Agreement, there shall be
allocated to the Partners such gains or income as shall be necessary to satisfy
the "qualified income offset" requirement of Treasury Regulation Section
1.704- 1(b)(2)(ii)(d).
If the Partnership realizes net capital gains for Federal
income tax purposes for any fiscal year as of the end of which one or more
Positive Basis Partners (as hereinafter defined) withdraw from the Partnership
pursuant to Articles IV or VI hereof, the General Partners may elect to
allocate such net gains as follows: (i) to allocate such net gains among such
Positive Basis Partners, pro rata in proportion to the respective Positive
Basis (as hereinafter defined) of each such Positive Basis Partner, until
either the full amount of such net gains shall have been so allocated or the
Positive Basis of each such Positive Basis Partner shall have been eliminated
and (ii) to allocate any net gains not so allocated to Positive Basis Partners
to the other Partners in such manner as shall equitably reflect the amounts
credited to such Partners' Capital Accounts pursuant to Section 3.05.
As used herein, (i) the term "Positive Basis" shall mean, with
respect to any Partner and as of any time of calculation, the amount by which
its interest in the Partnership (determined in accordance with Section 1.03) as
of such time exceeds its "adjusted tax basis", for Federal income tax purposes,
in its interest in the Partnership as of such time (determined without regard
to any adjustments made to such "adjusted tax basis" by reason of any transfer
or assignment of such interest, including by reason of death), and (ii) the
term "Positive Basis Partner" shall mean any Partner who withdraws from the
Partnership and who has Positive Basis as of the effective date of its
withdrawal, but such Partner shall cease to be a Positive Basis Partner at such
time as it shall have received allocations pursuant to clause (i) of the
preceding sentence equal to its Positive Basis as of the effective date of its
withdrawal.
5.12 DISTRIBUTIONS.
(a) The Individual General Partners may, in their
sole discretion, authorize the Partnership to make distributions in cash at any
time to all of the Partners on a pro rata basis in accordance with the
Partners' Partnership Percentages.
(b) The Manager 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
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Agreement, any taxes so withheld by the Partnership with respect to any amount
distributed by the Partnership to any Partner shall be deemed to be a
distribution or payment to such Partner, reducing the amount otherwise
distributable to such Partner pursuant to this Agreement and reducing the
Capital Account of such Partner.
----------------------
ARTICLE VI
DISSOLUTION AND LIQUIDATION
----------------------
6.1 DISSOLUTION.
(a) The Partnership shall be dissolved:
(1) on December 31, 2021, unless both (i) the
Individual General Partners, and (ii) a
majority (as defined in the 1940 Act) of the
outstanding voting securities of the
Partnership, shall elect within 60 days of
such date to continue the business of the
Partnership;
(2) upon the affirmative vote to dissolve the
Partnership by both (i) the Individual
General Partners and (ii) Partners holding at
least two-thirds (2/3) of the total number of
votes eligible to be cast by all Partners;
(3) upon either of (i) an election by the Manager
to dissolve the Partnership or (ii) the
termination of the Manager's status as such
pursuant to Section 4.1 hereof (other than in
conjunction with a Transfer of the Interest
of the Manager permitted by Section 4.4
hereof to a person who is admitted as a
substitute Manager pursuant to Section 2.6(a)
hereof), unless as to either event both (i)
the Individual General Partners, and (ii)
Partners holding not less than two-thirds
(2/3) of the total number of votes eligible
to be cast by all Partners, shall elect
within 60 days after such event to continue
the business of the Partnership and either a
person has been admitted to the Partnership
as the Manager or one or more general
partners have agreed to make such
contributions to the capital of the
Partnership as are required to be made by the
Manager pursuant to Section 5.1(c) hereof;
(4) upon the failure of Partners to elect
successor Individual General Partners at a
meeting called by the Manager in accordance
with Section 2.6(c) hereof when no Individual
General Partner remains to continue the
business of the Partnership;
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(5) upon the expiration of any two year period
which commences on the date on which any
Limited Partner has submitted a written
notice to the Partnership requesting to
tender his entire Interest for repurchase by
the Partnership if such Limited Partner has
not been permitted to do so at any time
during such period; or
(6) as required by operation of law.
Dissolution of the Partnership shall be effective on the later of the day on
which the event giving rise to the dissolution shall occur or the conclusion of
any applicable 60 day period during which the Individual General Partners and
Partners may elect to continue the business of the Partnership as provided
above, but the Partnership shall not terminate until the assets of the
Partnership have been liquidated in accordance with Section 6.2 hereof and the
Certificate has been canceled.
(b) Upon the occurrence of an event of withdrawal under
Section 17-402 of the Delaware Act with respect to any General Partner
(including any event specified in Section 4.1, 4.2, 4.3 or 4.4 hereof that
causes such General Partner to cease to be a Partner in the Partnership), all
remaining General Partners are authorized to carry on the business of the
Partnership as permitted by Section 17-801(3) of the Delaware Act and to the
extent permitted by this Agreement. Except as provided in Section 6.1(a)
hereof or in the Delaware Act, the death, mental illness, 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
his Interest to a third party shall not cause the Partnership to dissolve.
6.2 LIQUIDATION OF ASSETS.
(a) Upon the dissolution of the Partnership as provided
in Section 6.1 hereof, the Individual General Partners or the Manager shall
promptly liquidate the business and administrative affairs of the Partnership,
except that if the Individual General Partners or the Manager are 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 shall promptly
liquidate the business and administrative affairs of the Partnership. Net
Profit and Net Loss during the period of liquidation shall be allocated
pursuant to Section 5.4 hereof. The proceeds from liquidation (after
establishment of appropriate reserves for contingencies in such amount as the
Individual General Partners, Manager or liquidator shall deem appropriate in
their or its sole discretion as applicable) shall be distributed in the
following manner:
(1) the debts, of the Partnership, other than
debts, liabilities or obligations to
Partners, and the expenses of liquidation
(including legal and accounting expenses
incurred in connection therewith), up to and
including the date that distribution of the
Partnership's assets to the Partners has been
completed, shall first be paid on a pro rata
basis;
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(2) such debts, liabilities or obligations as are
owing to the Partners shall next be paid in
their order of seniority and on a pro rata
basis; and
(3) the Partners shall next be paid on a pro rata
basis the positive balances of their
respective Capital Accounts after giving
effect to all allocations to be made to such
Partners' Capital Accounts for the Fiscal
Period ending on the date of the
distributions under this Section 6.2(a)(3).
(b) Anything in this Section 6.2 to the contrary
notwithstanding, upon dissolution of the Partnership, the Individual General
Partners, Manager or other liquidator may distribute ratably in kind any assets
of the Partnership; provided, however, that if any in-kind distribution is to
be made (i) the assets distributed in kind shall be valued pursuant to Section
7.3 hereof 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) above, and (ii)
any profit or loss attributable to property distributed in-kind shall be
included in the Net Profit or Net Loss for the Fiscal Period ending on the date
of such distribution.
----------------------
ARTICLE VII
ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS
----------------------
7.1 ACCOUNTING AND REPORTS.
(a) The Partnership shall adopt for tax accounting
purposes any accounting method which the Manager shall decide in its sole
discretion is in the best interests of the Partnership. The Partnership's
accounts shall be maintained in U.S. currency.
(b) After the end of each taxable year, the Partnership
shall furnish to each Partner such information regarding the operation of the
Partnership and such Partner's Interest as is necessary for Partners to
complete federal and state income tax or information returns and any other tax
information required by federal or state law.
(c) Except as otherwise required by the 1940 Act, or as
may otherwise be permitted by rule, regulation or order, within 60 days after
the close of the period for which a report required under this Section 7.1(c)
is being made, the Partnership shall furnish to each Limited Partner a
semi-annual report and an annual report containing the information required by
such Act. The Partnership shall cause financial statements contained in each
annual report furnished hereunder 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 such other periodic reports in as it deems necessary or appropriate in
its discretion.
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(d) The Manager shall provide the Individual General
Partners with the identity of the members of the Manager and shall thereafter
notify the Individual General Partners of any change in the membership of the
Manager within a reasonable time after such change.
7.2 DETERMINATIONS BY MANAGER.
(a) All matters concerning the determination and
allocation among the Partners of the amounts to be determined and allocated
pursuant to Article V hereof, including any taxes thereon and accounting
procedures applicable thereto, shall be determined by the Manager unless
specifically and expressly otherwise provided for by the provisions of this
Agreement or required by law, and such determinations and allocations shall be
final and binding on all the Partners.
(b) The Manager may make such adjustments to the
computation of Net Profit or Net Loss, the Allocation Change with respect to
any Limited Partner, or any components comprising any of the foregoing as it
considers appropriate to reflect fairly and accurately the financial results of
the Partnership and the intended allocation thereof among the Partners.
7.3 VALUATION OF ASSETS.
(a) Except as may be required by the 1940 Act, the
Individual General Partners shall value or 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 in accordance with such valuation procedures as
shall be established from time to time by the Individual General Partners and
which conform to the requirements of the 1940 Act. In determining the value of
the assets of the Partnership, no value shall be placed on the goodwill or name
of the Partnership, or the office records, files, statistical data or any
similar intangible assets of the Partnership not normally reflected in the
Partnership's accounting records, but there shall be taken into consideration
any items of income earned but not received, expenses incurred but not yet
paid, liabilities fixed or contingent, the unamortized portion of any
organizational expenses 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 such valuation date.
(b) The value of Securities and other assets of the
Partnership and the net worth of the Partnership as a whole determined pursuant
to this Section 7.3 shall be conclusive and binding on all of the Partners and
all parties claiming through or under them.
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----------------------
ARTICLE VIII
MISCELLANEOUS PROVISIONS
----------------------
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 (i)
the Individual General Partners (including the vote of a majority of the
Independent General Partners, if required by the 1940 Act), (ii) the Manager
and (iii) a majority (as defined in the 1940 Act) of the outstanding voting
securities of the Partnership.
(b) Any amendment that would:
(1) increase the obligation of a Partner to make
any contribution to the capital of the
Partnership;
(2) reduce the Capital Account of a Partner
other than in accordance with Article V; or
(3) modify the events causing the dissolution of
the Partnership;
may be made only if (i) the written consent of each Partner adversely affected
thereby is obtained prior to the effectiveness thereof or (ii) such amendment
does not become effective until (A) each Limited Partner has received written
notice of such amendment and (B) any Limited Partner objecting to such
amendment has been afforded a reasonable opportunity (pursuant to such
procedures as may be prescribed by the Individual General Partners) to tender
his entire Interest for repurchase by the Partnership.
(c) The Manager may at any time without the consent of
the other Partners:
(1) amend Schedule I hereto to reflect any change
required to be made therein pursuant to the
terms of this Agreement;
(2) restate this Agreement together with any
amendments hereto which have been duly
adopted in accordance herewith to incorporate
such amendments in a single, integrated
document;
(3) amend this Agreement (other than with respect
to the matters set forth in Section 8.1(b)
hereof) to effect compliance with any
applicable law or regulation or to cure any
ambiguity or to correct or supplement any
provision hereof which may be inconsistent
with
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any other provision hereof, provided that
such action does not adversely affect the
rights of any Partner in any material
respect; and
(4) amend this Agreement to make such changes as
may be 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 which is
not treated as a corporation under Section
7704(a) of the Code,
subject, however, to the limitation that any amendment to this Agreement
pursuant to Sections 8.1(c)(3) or (4) hereof shall be valid only if approved by
the Individual General Partners (including the vote of a majority of the
Independent General Partners, if required by the 1940 Act).
(d) The Manager shall give prior written notice of any
proposed amendment to this Agreement (other than any amendment of the type
contemplated by clause (1) or (2) of Section 8.1(c) hereof) to each Partner,
which notice shall set forth (i) the text of the proposed amendment or (ii) a
summary thereof and a statement that the text thereof will be furnished to any
Partner upon request.
8.2 SPECIAL POWER OF ATTORNEY.
(a) Each Partner hereby irrevocably makes, constitutes
and appoints the Manager, each of the Individual General Partners, acting
severally, and any liquidator of the Partnership's assets appointed pursuant to
Section 6.2 hereof with full power of substitution, the true and lawful
representatives and attorneys-in-fact of, and in the name, place and stead of,
such 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 which
complies with the provisions of this
Agreement (including the provisions of
Section 8.1 hereof);
(2) any amendment to the Certificate required
because this Agreement is amended, including,
without limitation, an amendment to
effectuate any change in the membership of
the Partnership; and
(3) all such other instruments, documents and
certificates which, in the opinion of legal
counsel to the Partnership, 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
Partnership shall determine to do business,
or any political subdivision or agency
thereof, or which such 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.
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<PAGE> 41
(b) Each Partner is aware that the terms of this
Agreement permit certain amendments to this Agreement to be effected and
certain other actions to be taken or omitted by or with respect to the
Partnership without such Partner's consent. 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, each Partner agrees that,
notwithstanding any objection which such Partner may assert with respect to
such action, the attorneys-in-fact appointed hereby are authorized and
empowered, with full power of substitution, to exercise the authority granted
above in any manner which may be necessary or appropriate to permit such
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) This power-of-attorney is a special power-of-attorney
and is coupled with an interest in favor of the Manager and each of the
Individual General Partners and as such:
(1) shall be irrevocable and continue in full
force and effect notwithstanding the
subsequent death or incapacity of any party
granting this power-of-attorney, regardless
of whether the Partnership or the Manager or
Individual General Partners shall have had
notice thereof; and
(2) shall survive the delivery of a Transfer by a
Partner of the whole or any portion of such
Partner's Interest, except that where the
transferee thereof has been approved by the
Individual General Partners for admission to
the Partnership as a substituted Partner,
this power-of-attorney given by the
transferor shall survive the delivery of such
assignment for the sole purpose of enabling
the Manager or Individual General Partners to
execute, acknowledge and file any instrument
necessary to effect such substitution.
8.3 NOTICES.
Notices which may or are required to be provided under this
Agreement by any party to another party shall be made by hand delivery,
registered or certified mail return receipt requested, commercial courier
service, telex or telecopier, and shall be addressed to the respective parties
hereto at their addresses as set forth on Schedule I hereto (or to such other
addresses as may be designated by any party hereto by notice addressed to the
Manager in the case of notice given to any Partner, and to each of the Partners
in the case of notice given to the Manager). Notices shall 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 commercial courier
service, telex or telecopier. 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.
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<PAGE> 42
8.4 AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, successors, assigns,
executors, trustees or other legal representatives, but the rights and
obligations of the parties hereunder may not be Transferred or delegated except
as provided in this Agreement and any attempted Transfer or delegation thereof
which is not made pursuant to the terms of this Agreement shall be void.
8.5 APPLICABILITY OF 1940 ACT AND FORM N-2.
The parties hereto acknowledge that this Agreement is not
intended to, and does not, set forth the substantive provisions contained in
the 1940 Act and the Form N-2 which affect numerous aspects of the conduct of
the Partnership's business and of the rights, privileges and obligations of the
Partners. Each provision of this Agreement shall be subject to and interpreted
in a manner consistent with the applicable provisions of the 1940 Act and the
Form N-2.
8.6 CHOICE OF LAW; ARBITRATION.
(a) Notwithstanding the place where this Agreement may
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed under the laws of the State of
Delaware, including the Delaware Act without regard to the conflict of law
principles of such State.
(B) UNLESS OTHERWISE AGREED IN WRITING, EACH PARTNER
AGREES TO SUBMIT ALL CONTROVERSIES ARISING BETWEEN PARTNERS OR ONE OR MORE
PARTNERS AND THE PARTNERSHIP TO ARBITRATION IN ACCORDANCE WITH THE PROVISIONS
SET FORTH BELOW AND UNDERSTAND THAT:
(1) ARBITRATION IS FINAL AND BINDING ON THE
PARTIES;
(2) THEY ARE WAIVING THEIR RIGHT TO SEEK REMEDIES
IN COURT, INCLUDING THE RIGHT TO A JURY
TRIAL;
(3) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE
LIMITED AND DIFFERENT FROM COURT PROCEEDINGS;
(4) THE ARBITRATOR'S AWARD IS NOT REQUIRED TO
INCLUDE FACTUAL FINDINGS OR LEGAL REASONING
AND A PARTY'S RIGHT TO APPEAL OR TO SEEK
MODIFICATION OF RULINGS BY ARBITRATORS IS
STRICTLY LIMITED; AND
(5) THE PANEL OF ARBITRATORS WILL TYPICALLY
INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR
ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
(B) ALL CONTROVERSIES THAT MAY ARISE AMONG PARTNERS AND
ONE OR MORE PARTNERS AND THE PARTNERSHIP CONCERNING THIS AGREEMENT SHALL BE
DETERMINED BY ARBITRATION IN NEW YORK CITY IN ACCORDANCE WITH THE FEDERAL
ARBITRATION ACT, TO THE FULLEST
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<PAGE> 43
EXTENT PERMITTED BY LAW. ANY ARBITRATION UNDER THIS AGREEMENT SHALL BE
DETERMINED BEFORE AND IN ACCORDANCE WITH THE RULES THEN OBTAINING OF EITHER THE
NEW YORK STOCK EXCHANGE, INC. (THE "NYSE") OR THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC. (THE "NASD"), AS THE PARTNER OR ENTITY INSTITUTING THE
ARBITRATION MAY ELECT. IF THE NYSE OR NASD DOES NOT ACCEPT THE ARBITRATION FOR
CONSIDERATION, THE ARBITRATION SHALL BE SUBMITTED TO, AND DETERMINED IN
ACCORDANCE WITH THE RULES THEN OBTAINING OF, THE CENTER FOR PUBLIC RESOURCES,
INC. IN NEW YORK CITY. JUDGMENT ON ANY AWARD OF ANY SUCH ARBITRATION MAY BE
ENTERED IN THE SUPREME COURT OF THE STATE OF NEW YORK OR IN ANY OTHER COURT
HAVING JURISDICTION OF THE PERSON OR PERSONS AGAINST WHOM SUCH AWARD IS
RENDERED. ANY NOTICE OF SUCH ARBITRATION OR FOR THE CONFIRMATION OF ANY AWARD
IN ANY ARBITRATION SHALL BE SUFFICIENT IF GIVEN IN ACCORDANCE WITH THE
PROVISIONS OF THIS AGREEMENT. EACH PARTNER AGREES THAT THE DETERMINATION OF
THE ARBITRATORS SHALL BE BINDING AND CONCLUSIVE UPON THEM.
(C) NO PARTNER SHALL BRING A PUTATIVE OR CERTIFIED CLASS
ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION
AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE CLASS
ACTION; OR WHO IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE
CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION
UNTIL: (I) THE CLASS CERTIFICATION IS DENIED; OR (II) THE CLASS IS DECERTIFIED;
OR (III) THE PARTNER IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE
TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY
RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN.
8.7 NOT FOR BENEFIT OF CREDITORS.
The provisions of this Agreement are intended only for the
regulation of relations among past, present and future Partners and the
Partnership. This Agreement is not intended for the benefit of non-Partner
creditors and no rights are granted to non-Partner creditors under this
Agreement.
8.8 CONSENTS.
Any and all consents, agreements or approvals provided for or
permitted by this Agreement shall be in writing and a signed copy thereof shall
be filed and kept with the books of the Partnership.
8.9 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 pursuant to an agreement of merger or consolidation which has
been approved in the manner contemplated by Section 17-211(b) of the Delaware
Act.
(b) Notwithstanding anything to the contrary contained
elsewhere in this Agreement, an agreement of merger or consolidation approved
in accordance with Section 17-211(b) of the Delaware Act may, to the extent
permitted by Section 17-211(g) of the Delaware Act, (i) effect any amendment to
this Agreement (ii) effect the adoption of a new partnership agreement
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<PAGE> 44
for the Partnership if it is the surviving or resulting limited partnership in
the merger or consolidation, or (iii) 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) shall be the partnership agreement of the surviving or resulting
limited partnership.
8.10 PRONOUNS.
All pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular or plural, as the identity of the person or persons,
firm or corporation may require in the context thereof.
8.11 CONFIDENTIALITY.
(a) A Limited Partner may obtain from the Partnership
such information regarding the affairs of the Partnership as is just and
reasonable under the Delaware Act, subject to reasonable standards (including
standards governing what information and documents are to be furnished, at what
time and location and at whose expense) established by the General Partners.
(b) Each Partner covenants that, except as required by
applicable law or any regulatory body, it will not divulge, furnish or make
accessible to any other person the name and/or address (whether business,
residence or mailing) of any Limited Partner (collectively, "Confidential
Information") without the prior written consent of the Manager, which consent
may be withheld in the Manager's sole discretion.
(c) Each Partner recognizes that in the event that this
Section 8.11 is breached by any Partner or any of its principals, partners,
members, directors, officers, employees or agents or any of its affiliates,
including any of such affiliates' principals, partners, members, directors,
officers, employees or agents, irreparable injury may result to the
non-breaching Partners and the Partnership. Accordingly, in addition to any
and all other remedies at law or in equity to which the non-breaching Partners
and the Partnership may be entitled, such Partners shall also have 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 therewith. In the
event that any non-breaching Partner or the Partnership determines that any of
the other Partners or any of its principals, partners, members, directors,
officers, employees or agents or any of its affiliates, including any of such
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 pursue in a court of appropriate jurisdiction such
injunctive relief.
8.12 CERTIFICATION OF NON-FOREIGN STATUS.
Each Limited Partner or transferee of an Interest from a
Limited Partner shall certify, upon admission to the Partnership and at such
other time thereafter as the Manager may request, whether he is a "United
States Person" within the meaning of Section 7701(a)(30) of the Code on forms
to be provided by the Partnership, and shall notify the Partnership within 30
days of
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<PAGE> 45
any change in such Partner's status. Any Limited Partner who shall fail to
provide such certification when requested to do so by the Manager may be
treated as a non-United States Person for purposes of U.S. federal tax
withholding.
8.13 SEVERABILITY.
If any provision of this Agreement is determined by a court of
competent jurisdiction not to be enforceable in the manner set forth in this
Agreement, each Partner agrees that it is the intention of the Partners that
such provision should be enforceable to the maximum extent possible under
applicable law. If any provisions of this Agreement are held to be invalid or
unenforceable, such invalidation or unenforceability shall not affect the
validity or enforceability of any other provision of this Agreement (or portion
thereof).
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<PAGE> 46
THE UNDERSIGNED ACKNOWLEDGES HAVING READ THIS AGREEMENT IN ITS
ENTIRETY BEFORE SIGNING, INCLUDING THE PRE- DISPUTE ARBITRATION CLAUSE SET
FORTH IN SECTION 8.6 AND THE CONFIDENTIALITY CLAUSE SET FORTH IN SECTION 8.11.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MANAGER:
TROON MANAGEMENT, L.L.C.
By: OPPENHEIMER & CO., INC.
Managing Member
By: /s/ Mitchell A. Tanzman
-------------------------------
Mitchell A. Tanzman
Managing Director
INDIVIDUAL GENERAL PARTNERS:
/s/ Sol Gittleman
-----------------------------------
Sol Gittleman
/s/ Joyce L. Kramer
-----------------------------------
Joyce L. Kramer
/s/ Luis Rubio
-----------------------------------
Luis Rubio
/s/ Janet L. Schinderman
----------------------------------
Janet L. Schinderman
/s/ Mitchell A. Tanzman
----------------------------------
Mitchell A. Tanzman
LIMITED PARTNERS:
Each person who shall sign a Limited Partner
Signature Page and who shall be accepted by
the Manager to the Partnership as a Limited
Partner.
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<PAGE> 47
SCHEDULE I
TROON PARTNERS, L.P.
MANAGER
<TABLE>
<CAPTION>
Name and Address Capital Contribution
---------------- --------------------
<S> <C>
Troon Management, L.L.C. $1,000,000
Oppenheimer Tower
One World Financial Center, 33rd Floor
200 Liberty Street
New York, New York 10281
</TABLE>
INDIVIDUAL GENERAL PARTNERS
<TABLE>
<CAPTION>
Name and Address
----------------
<S> <C>
Sol Gittleman Janet L. Schinderman
Ballou Hall Office of the Dean
Tufts University 101 Uris Hall
Medford, MA 02155 Columbia University
New York, NY 10027
Joyce L. Kramer
Oppenheimer & Co., Inc. Mitchell A. Tanzman
One World Financial Oppenheimer & Co., Inc.
Center One World Financial Center
200 Liberty Street 200 Liberty Street
New York, NY 10281 New York, NY 10281
Luis Rubio
Centro de Investigation
Para el Desarrollo, A.C.
Jaime Balmes No. 11, D-2
Los Morales Polanco
Mexico D.F. 11510
</TABLE>
<PAGE> 1
Exhibit (h)
TROON PARTNERS, L.P.
C/O OPPENHEIMER & CO., INC.
OPPENHEIMER TOWER
ONE WORLD FINANCIAL CENTER
33RD FLOOR
200 LIBERTY STREET
NEW YORK, NEW YORK 10281
Oppenheimer & Co., Inc.
Oppenheimer Tower
One World Financial Center - 33rd Floor
200 Liberty Street
New York, New York 10281
Re: Appointment as Placement Agent
Ladies and Gentlemen:
Troon Partners, L.P., a limited partnership organized under
the laws of the State of Delaware (the "Partnership"), hereby agrees with you
as follows:
1. Partnership Offering.
The Partnership proposes to issue and to sell its limited
partnership interests ("Interests") in accordance with a Confidential
Memorandum issued by the Partnership dated January 1997, as amended from time
to time (the "Memorandum").
2. Definitions.
All capitalized terms used in this Agreement which are not
separately defined herein shall have the respective meaning set forth in the
Memorandum.
3. Placement of Interests.
(a) Subject to the terms and conditions set forth herein,
the Partnership hereby appoints you as its placement agent in connection with
the placement of Interests. Subject to the performance in all material
respects by the Partnership of its obligations hereunder, and to the
completeness and accuracy in all material respects of all of the
representations and warranties of the Partnership contained herein, you hereby
accept such agency and agree on the terms and conditions herein set forth to
use your best efforts to find qualified subscribers for Interests and to use
all reasonable efforts to assist the Partnership in obtaining performance by
each subscriber. You shall not have any liability to the Partnership in the
event that any subscriber fails to
<PAGE> 2
consummate the purchase of Interests for any reason other than your willful
misconduct or gross negligence.
(b) The offers and sales of Interests are to be effected
pursuant to the exemption from the registration requirements of the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to Section 4(2)
thereof and Regulation D under the Securities Act. Both you and the
Partnership have established the following procedures in connection with the
offer and sale of Interests and agree that neither of you will make offers or
sales of any Interests except in compliance with such procedures:
(i) Offers and sales of Interests will be made
only in compliance with Regulation D and only to investors that qualify as
"accredited investors," as defined in Rule 501(a) under the Securities Act.
(ii) No sale of Interests to any one Purchaser
will be for less than the minimum denominations as may be specified in the
Memorandum.
(iii) No offer or sale of any Interest shall be
made in any state or jurisdiction, or to any prospective investor located in
any state or jurisdiction, where such Interests have not been registered or
qualified for offer and sale under applicable state securities laws unless such
Interests are exempt from the registration or qualification requirements of
such laws.
(iv) Sales of Interests will be made only to
investors that qualify as eligible clients under Rule 205-3 under the
Investment Advisers Act of 1940, as amended.
(c) For purposes of the offering of Interests, the
Partnership has furnished to you copies of the Memorandum and subscription
documentation which shall be furnished to prospective investors. Additional
copies will be furnished in such numbers as you may reasonably request for
purposes of the offering. You are authorized to furnish to prospective
purchasers only such information concerning the Partnership and the offering as
may be contained in the Memorandum or any written supplements thereto, and such
other materials as you have prepared and which comply with applicable laws and
regulations, including to the extent applicable the rules of the National
Association of Securities Dealers, Inc. (the "NASD").
4. Subscriptions During the Initial Offering Period.
(a) The initial offering period for the Interests shall
commence as soon as practicable after the date as of which this Agreement is
effective and be closed on February 21, 1997 or on such later date as may be
agreed to by Troon Management, L.L.C., as manager of the Partnership (the
"Initial Offering Period").
(b) All subscriptions for Interests and payments by
subscribers of subscription amounts for Interests shall be made pursuant to the
terms and conditions set forth in the Memorandum and subscription
documentation. Subscriptions shall be subject to acceptance by you as agent
for the Partnership, as described in Section 6 below.
-2-
<PAGE> 3
(c) All payments received by you hereunder for
subscriptions in the name and on behalf of the Partnership shall be handled by
you in accordance with the terms of the subscription documentation.
(d) If the offering is not completed in accordance with
the conditions set forth in the Memorandum, the Partnership may terminate the
offering. In such case, you will instruct PFPC Inc. to return all subscription
payments to investors.
5. Subscriptions After the Initial Offering Period.
(a) After the Initial Offering Period, the Partnership
may from time to time, in its sole discretion, offer Interests to investors for
purchase ("Subsequent Offerings").
(b) In Subsequent Offerings, the minimum additional
investment requirements shall be such amounts as are specified in the
Memorandum. All subscriptions for Interests in Subsequent Offerings and
payments therefor shall be made pursuant to the terms and conditions set forth
in the Memorandum, and subscriptions shall be subject to acceptance by you as
agent for the Partnership, as described in Section 6 below. In Subsequent
Offerings, the procedures set forth in Sections 4(c) and (d) shall also be
applicable.
6. Acceptance of Subscriptions.
You are appointed as agent of the Partnership for purposes of
determining whether to accept or to reject subscriptions for Interests.
Subscriptions shall be accepted only if the investor: (a) has supplied, or in
the case of an additional subscription by an existing limited partner,
previously supplied, to you properly completed subscription documentation; and
(b) has made proper payment for Interests. Subscriptions shall be rejected if
it appears to you that any of the terms or conditions applicable to
subscriptions for Interests as set forth in the Memorandum or subscription
documentation have not been satisfied.
7. Representations and Warranties of the Partnership.
The Partnership represents and warrants to you that:
(a) The Partnership has been duly formed and is validly
existing as a limited partnership in good standing under the laws of the State
of Delaware with all requisite power and authority, all necessary
authorizations, approvals, orders, licenses, certificates and permits of and
from all governmental regulatory officials and bodies, and all necessary
rights, licenses and permits from other parties, to conduct its business as
described in the Memorandum.
(b) Interests to be or which may be issued by the
Partnership have been duly authorized for issuance and sale and, when issued
and delivered by the Partnership, Interests will conform to all statements
relating thereto contained in the Memorandum.
-3-
<PAGE> 4
(c) The issue and sale of Interests and the execution,
delivery and performance of the Partnership's obligations under the Memorandum
will not result in the violation of any applicable law.
(d) The Partnership will apply the proceeds from the sale
of Interests for the purposes set forth in the Memorandum.
(e) The Memorandum will not contain an untrue statement
of any material fact or omit to state any material fact necessary in order to
make statements therein in the light of the circumstances under which they were
made, not misleading.
(f) This Agreement has been duly authorized, executed and
delivered by the Partnership and, assuming your execution hereof, will
constitute a valid and binding agreement of the Partnership.
(g) Prior to and on the effective date of this Agreement,
neither the Partnership, nor to the knowledge of the Partnership any person
acting on behalf of the Partnership, has directly or indirectly offered or
sold, or attempted to offer or sell any Interests to or solicited offers to buy
any Interests from, or otherwise approached or negotiated with respect thereto
with, any prospective investor in connection with the placement thereof.
8. Covenants of the Partnership.
The Partnership covenants and agrees with you as follows:
(a) You and your counsel shall be furnished with such
documents and opinions as you and they may require, from time to time, for the
purpose of enabling you or them to pass upon the issuance and sale of Interests
as herein contemplated and related proceedings, or in order to evidence the
accuracy of any of the representations and warranties, or the fulfillment of
any of the conditions herein contained; and all proceedings taken by the
Partnership and in connection with the issuance and sale of Interests as herein
contemplated shall be satisfactory in form and substance to you and your
counsel.
(b) If, at any time after the commencement of an offering
of Interests and prior to its termination, an event occurs which in the opinion
of counsel to the Partnership materially affects the Partnership and which
should be set forth in an amendment or supplement to the Memorandum in order to
make the statements therein not misleading in light of the circumstances under
which they are made, the Partnership will notify you as promptly as practical
of the occurrence of such event and prepare and furnish to you copies of an
amendment or supplement to the Memorandum, in such reasonable quantities as you
may request in order that the Memorandum will not contain any untrue statement
of any material fact or omit to state a material fact which in the opinion of
such counsel is necessary to make the statements therein not misleading in
light of the circumstances under which they are made.
-4-
<PAGE> 5
9. Representations and Warranties of the Placement Agent.
You represent and warrant that:
(a) You are duly authorized to enter into and perform,
and have duly executed and delivered, this Agreement.
(b) You have and will maintain all licenses and
registrations necessary under applicable law and regulations (including the
rules of the NASD) to provide the services required to be provided by you
hereunder.
(c) You have not and will not solicit any offer to buy or
offer to sell Interests in any manner which would be inconsistent with
applicable laws and regulations, or with the procedures for solicitations
contemplated by the Memorandum or by any form of general solicitation or
advertising, including, but not limited to, any advertisement, article, notice
or other communication published in any newspaper, magazine or similar medium
or broadcast over television or radio or conduct any seminar or meeting whose
attendees have been invited by any general solicitation or advertising.
(d) You will furnish each subscriber of Interests,
identified either by you or the Partnership, a copy of the Memorandum and
subscription documentation.
10. Compensation of Placement Agent.
(a) You will receive no fee, payment or other
remuneration for your services under this Agreement.
(b) Except as may otherwise by agreed to by the
Partnership, you shall be responsible for the payment of all costs and expenses
incurred by you in connection with the performance of your obligations under
this Agreement, including the costs associated with the preparation, printing
and distribution of any sales materials.
11. Indemnification and Contribution.
The parties agree to indemnify one another as follows:
(a) The Partnership agrees to indemnify and hold harmless
you and each person, if any, who controls you within the meaning of Section 15
of the Securities Act or Section 20(a) of the Securities Exchange Act of 1934
(the "Exchange Act"), against any and all losses, liabilities, claims, damages
and expenses whatsoever (including, but not limited to, attorneys' fees and any
and all expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation), joint or
several, to which you or they may become subject under the Securities Act, the
Exchange Act or any other law or statute in any jurisdiction otherwise, insofar
as such losses, liabilities, claims, damages or expense (or actions in respect
thereof) arise out of or are based upon any untrue
-5-
<PAGE> 6
statement or alleged untrue statement of a material fact contained in the
Memorandum or the subscription documentation or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the
Partnership will not be liable in any such case to the extent, but only to the
extent, that any such loss, liability, claim, damage or expense arises out of
or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Partnership by you or through you
expressly for the use therein; and further provided that this indemnity shall
not protect you or any other person who may otherwise be entitled to indemnity
hereunder from or against any liability to which you or they would be subject
by reason of your own or their own willful misfeasance, bad faith, gross
negligence or reckless disregard of your or their duties hereunder. This
indemnity will be in addition to any liability which the Partnership may
otherwise have included under this Agreement.
(b) You agree to indemnify and hold harmless the
Partnership and each person who controls the Partnership within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act, against
any losses, liabilities, claims, damages and expenses whatsoever (including,
but not limited to, attorneys' fees and any and all expenses whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation), joint or several, to which you or
they may become subject under the Securities Act, the Exchange Act or any other
law or statute in any jurisdiction, insofar as such losses, liabilities,
claims, damages or expenses (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Memorandum or Subscription Agreement, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Partnership by you
or on your behalf through you expressly for use therein. This indemnity will
be in addition to any liability which you may otherwise have incurred under
this Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under such subsection, notify the party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any other
liability which it may have under this Section 11 (except to the extent that it
has been prejudiced in any material respect by such failure) or from any
liability which it may have otherwise). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel satisfactory to
such indemnified party; provided, however, that if, in the judgment of such
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<PAGE> 7
indemnified party, a conflict of interest exists where it is advisable for such
indemnified party to be represented by separate counsel, the indemnified party
shall have the right to employ separate counsel in any such action, in which
event the fees and expenses of such separate counsel shall be borne by the
indemnifying party or parties. After notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof and the
approval by the indemnified party of counsel, the indemnifying party shall not
be liable to such indemnified party under such subsections for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof
other than reasonable costs of investigation unless (i) the indemnified party
shall have employed separate counsel in accordance with the proviso to the next
preceding sentence (it being understood, however, that the indemnifying party
or parties shall not be liable for the expenses of more than one such separate
counsel representing the indemnified parties under subparagraph (a) of this
Section 11 who are parties to such action), (ii) the indemnifying party or
parties shall not have employed counsel satisfactory to the indemnified party
to represent the indemnified party within a reasonable time after notice of
commencement of the action or (iii) the indemnifying party or parties have
authorized the employment of counsel for the indemnified party at the expense
of the indemnifying party or parties; and except that, if clause (i) or (iii)
is applicable, such liability shall be only in respect of the counsel referred
to in such clause (i) or (iii). No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
12. Representations and Indemnities to Survive Delivery.
The agreements, representations, warranties, indemnities and
other statements of the parties and their officers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of you, or the Partnership, any general partners, directors or officers
of any of the foregoing or any person controlling any of the foregoing, and
(iii) acceptance of any payment for Interests hereunder. The provisions of
this Section 12 shall survive the termination or cancellation of this
Agreement.
13. Effective Date and Term of Agreement.
This Agreement shall become effective for all purposes as of
December 19, 1996, and shall remain in effect for an initial term of two years
from such date. Thereafter, this Agreement shall continue in effect from year
to year, provided that each such continuance is approved by the Individual
General Partners of the Partnership (the "IGPs"), including the vote of a
majority of the IGPs who are not "interested persons" of the Partnership as
defined by the Investment Company Act of 1940 (the "1940 Act") and the rules
thereunder.
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14. Termination.
This Agreement may be terminated as follows:
(a) Either party may terminate this Agreement without
cause by written notice to the other on not less than thirty (30) days notice,
or, if there has been a material breach of any condition, warranty,
representation or other term of this Agreement by the other, by written notice
to such other at any time.
(b) By written notice to the Partnership, you may
terminate this Agreement at any time if (i) there has been, since the
respective dates as of which information is given in the Memorandum, any
material adverse change in the condition, financial or otherwise, of the
Partnership, which in your opinion, will make it inadvisable to proceed with
the delivery of Interests; (ii) there has occurred any outbreak of hostilities
or other domestic or international calamity or crisis the effect of which on
the financial markets is so substantial and adverse as to make it, in your
judgment, impracticable to market Interests or enforce contracts for the sale
of Interests; and (iii) any order suspending the sale of Interests shall have
been issued by any jurisdiction in which a sale or sales of Interests shall
have been made, or proceedings for that purpose shall have been initiated or,
to your best knowledge and belief, shall be contemplated.
(c) This Agreement shall terminate automatically in the
event of its "assignment" as such term is defined by the 1940 Act and the rules
thereunder.
15. Delegation of Powers.
You shall be entitled to delegate all or any of your duties,
functions or powers under this Agreement to another person as sub-agents
subject to the approval of the Partnership. However, you shall be solely
responsible for the acts and omissions of any such sub-agent and for the
payment of any remuneration to such sub-agent.
16. Notices.
All communications under this Agreement shall be given in
writing, sent by (i) telecopier, (ii) telex confirmed by answerback, or (iii)
registered mail to the address set forth below or to such other address as such
party shall have specified in writing to the other party hereto, and shall be
deemed to have been delivered effective at the earlier of its receipt or within
two (2) days after dispatch,
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If to Oppenheimer & Co., Inc.:
Oppenheimer & Co., Inc.
Oppenheimer Tower
One World Financial Center
33rd Floor
200 Liberty Street
New York, NY 10281
Telephone: (212) 667-7300
Attn.: Robert I. Kleinberg, General Counsel
If to Troon Partners, L.P.:
Troon Partners, L.P.
c/o Oppenheimer & Co., Inc.
Oppenheimer Tower
One World Financial Center
33rd Floor
200 Liberty Street
New York, NY 10281
Telephone: (212) 667-6607
Attn.: Mitchell A. Tanzman
17. Miscellaneous.
(a) This Agreement may be executed in two or more
counterparts, each of which when so executed and delivered shall constitute one
and the same instrument. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns and
no other person shall have any right or obligation hereunder.
(b) This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof, and neither this
Agreement nor any term hereof may be changed, waived, discharged or terminated
except by an instrument in writing signed by the party against whom enforcement
of the change, waiver, discharge or termination is sought. The headings in
this Agreement are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof.
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<PAGE> 10
18. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
conflicts of laws provisions thereof, and with the provisions of the 1940 Act.
In the event of any conflict between the provisions of the laws of New York and
those of the 1940 Act, the 1940 Act provisions shall control.
If the foregoing correctly sets forth our understanding with
you, please indicate your acceptance in the space provided below whereupon this
letter will form a valid and binding contract among the signers in accordance
with its terms.
Very truly yours,
TROON PARTNERS, L.P.
By: TROON MANAGEMENT, L.L.C.
By: OPPENHEIMER & CO., INC.
By: /s/ Mitchell A. Tanzman
---------------------------
Name: Mitchell A. Tanzman
Title: Managing Director
Date: December 19, 1996
Agreed to and accepted:
OPPENHEIMER & CO., INC.
By: /s/ Mitchell A. Tanzman
---------------------------
Name: Mitchell A. Tanzman
Title: Managing Director
Date: December 19, 1996
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<PAGE> 1
Exhibit (j)
CUSTODY AGREEMENT
This Custody Agreement is dated as of December 19, 1996
between MORGAN STANLEY TRUST COMPANY, a New York State chartered trust company
(the "Custodian"), and TROON PARTNERS, L.P., a Delaware limited partnership
(the "Client").
1. Appointment and Acceptance; Accounts. (a) The
Client hereby appoints the Custodian as a custodian of Property (as defined
below) owned or under the control of the Client that is delivered to the
Custodian, or any Subcustodian as appointed below, from time to time to be held
in custody for the benefit of the Client. In this regard, the Client agrees to
deliver or cause to be delivered to the Custodian all Property.
(b) Prior to the delivery of any Property by the Client
to the Custodian, the Client shall deliver to the Custodian each document and
other item listed in Appendix 1. In addition, the Client shall deliver to the
Custodian any additional documents or items as the Custodian may deem necessary
for the performance of its duties under this Agreement.
(c) The Client instructs the Custodian to establish on
the books and records of the Custodian the accounts listed in Appendix 2 (the
"Accounts") in the name of the Client. Upon receipt of Authorized Instructions
(as defined below) and appropriate documentation, the Custodian shall open
additional Accounts for the Client. Upon the Custodian's confirmation to the
Client of the opening of such additional Accounts, or of the closing of
Accounts, Appendix 2 shall be deemed automatically amended or supplemented
accordingly. The Custodian shall record in the Accounts and shall at all times
have general responsibility for the safekeeping of all securities, including
without limitation, shares, stocks, bonds, debentures, notes, mortgages or
other obligations and any certificates, receipts or warrants (collectively,
"Securities"), cash, cash equivalents and other property (all such Securities,
cash, cash equivalents and other property being collectively the "Property") of
the Client that are delivered to the Custodian for custody. Except with
respect to Securities held in custody or deposit accounts maintained with
Subcustodians, securities depositories or clearing agencies, the Custodian
shall at all times hold and physically segregate for the Client all Securities
held by the Custodian hereunder.
(d) The procedures the Custodian and the Client will use
in performing activities in connection with this Agreement are set forth in a
client services guide provided to the Client by the Custodian, as such guide
may be amended from time to time by the Custodian by written notice to the
Client (the "Client Services Guide").
2. Subcustodians. (a) The Property may be held in
custody and deposit accounts that have been established by the Custodian with
(i) one or more domestic banks (as such term is defined by the Investment
Company Act of 1940, the "Act") which are eligible to serve as a custodian for
investment companies under Section 17 of the Act or foreign banks which are
"Eligible Foreign Custodians" (as such term is defined in Rule 17f-5(c)(2) of
the Act), as listed, together with any domestic banks, on Exhibit A, except as
otherwise noted on such Exhibit (the
<PAGE> 2
"Subcustodians"), as such Exhibit may be amended from time to time by the
Custodian by sixty (60) days prior written notice to the Client, or (ii)
through the facilities of (A) one or more domestic clearing agencies registered
with the Securities and Exchange Commission (the "SEC") under Section 17A of
the Securities Exchange Act of 1934 which acts as a securities depository or
the book-entry system as provided in Subpart O of Treasury Circular No. 300, 31
CFR 306, Subpart B of 31 CFR Part 350 and the book-entry regulations of Federal
agencies substantially in the form of Subpart O or (B) one or more foreign
securities depositories or clearing agencies, as such domestic clearing
agencies, foreign securities depositories or clearing agencies are listed on
Exhibit B, as such Exhibit may be amended from time to time by the Custodian by
sixty (60) days prior written notice to the Client. The Custodian agrees to
deliver any Securities in its or its Subcustodians' possession as directed by
the Client in accordance with Section 7 herein.
(b) The Custodian shall hold Property through a
Subcustodian, securities depository or clearing agency only if (i) such
Subcustodian and any securities depository or clearing agency in which such
Subcustodian or the Custodian holds Property, or any of their creditors, may
not assert any right, charge, security interest, lien, encumbrance or other
claim of any kind to such Property except a claim of payment for its safe
custody or administration and (ii) beneficial ownership of such Property may be
freely transferred without the payment of money or value other than for safe
custody or administration. Any Subcustodian may hold Property in a securities
depository and may utilize a clearing agency, subject to the terms of this
Agreement.
3. Records. With respect to Property held by a
Subcustodian, securities depository or clearing agency:
(a) The Custodian may hold Property for all of its
customers with a Subcustodian in a single account identified as belonging to
the Custodian for the benefit of its customers or with a securities depository
or clearing agency in a single account identified as belonging to the Client or
the Custodian or Subcustodian for the benefit of their customers; provided that
the use of such single account is consistent with paragraph (b) in Section 2
above and that such single account at the Subcustodian shall include only
assets belonging to the customers of the Custodian and such single account at
any securities depository or clearing agency shall include only assets
belonging to the Client, customers of the Custodian or customers of the
Subcustodian, as the case may be;
(b) The Custodian shall identify on its books as
belonging to the Client any Property held by a Subcustodian, securities
depository or clearing agency;
(c) The Custodian shall require that Property held by the
Subcustodian be identified on the Subcustodian's books as separate from any
other property held by the Subcustodian other than property of the Custodian's
customers held solely for the benefit of customers of the Custodian; and
(d) The Custodian shall send the Client a confirmation of
any transfers to or from the Account. Where Securities are transferred to or
from the Account, the Custodian shall also, by book-entry or otherwise,
identify as belonging to the Client a quantity of Securities in a fungible bulk
of securities (i) registered in the name of the Custodian (or its nominee) or
(ii) shown
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<PAGE> 3
on the Client's, Custodian's or Subcustodian's, as the case may be, account on
the books of the securities depository, clearing agency, book-entry system or
the Custodian's account on the books of the Subcustodian and the Custodian
shall promptly send to the Client any report it or its Subcustodian receives
from the appropriate Federal Reserve Bank or clearing agency on its respective
system of internal accounting control. The Custodian shall send to the Client
such reports on its or its Subcustodian's own system of internal accounting
control as the Client may reasonably request from time to time.
(e) In the event the Subcustodian holds Property in a
securities depository or clearing agency, such Subcustodian shall be required
by its agreement with the Custodian to identify on its books such Property as
being held for the account of the Custodian as custodian for its customers or
in such other manner as is required by local law or market practice.
Notwithstanding any other provision in this Agreement, no Subcustodian shall be
permitted to deposit Securities in any securities depository or utilize a
clearing agency, incorporated or organized under the laws of a country other
than the United States, other than the Euro-clear System or Centrale de
Livraison des Valeurs Mobilieres S.A., without the written permission of the
Custodian unless such depository or clearing agency operates the central system
for handling of securities or equivalent book-entries in that country or
pursuant to Authorized Instructions.
4. Access to Records. The Custodian shall allow the
Client's accountants reasonable access to the Custodian's records relating to
the Property held by the Custodian as such accountants may reasonably require
in connection with their examination of the Client's affairs. The Custodian
shall also obtain from any Subcustodian (and shall require each Subcustodian to
use reasonable efforts to obtain from any securities depository or clearing
agency in which it deposits Property) an undertaking, to the extent consistent
with local practice and the laws of the jurisdiction or jurisdictions to which
such Subcustodian, securities depository or clearing agency is subject, to
permit independent public accountants such reasonable access to the records of
such Subcustodian, securities depository or clearing agency as may be
reasonably required in connection with the examination of the Client's affairs
or to take such other action as the Custodian in its judgment may deem
sufficient to ensure such reasonable access.
5. Reports. The Custodian shall provide from time to
time, but in no event less frequently than monthly, such reports and other
information to the Client and to such persons as the Client directs as the
Custodian and the Client may agree from time to time. Such reports shall
identify the Property in the Accounts and shall include without limitation (i)
the identity of any entity having custody of the Property and (ii) any
transfers of Property to or from the Accounts.
In addition, the Custodian shall furnish annually to the
Client information concerning the Subcustodians employed by the Custodian on
behalf of the Client. Such information shall be similar in kind and scope to
that furnished to the Client initially by the Custodian as of the date of this
Agreement. The Custodian agrees to promptly inform the Client in the event the
Custodian learns of a material adverse change in the financial condition of a
Subcustodian or is notified by any Subcustodian that such Subcustodian's
shareholders' equity has declined, (or there appears to be a substantial
likelihood that it will decline) below the requisite
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<PAGE> 4
shareholder's equity requirements identified in Rule 17f-5 of the Act or any
applicable exemptive order issued by the SEC under such Rule 17f-5.
6. Payment of Monies. Except as provided in Sections 9,
13 and 17, the Custodian shall make, or cause any Subcustodian to make,
payments from monies being held in the Accounts pursuant to Authorized
Instructions as follows:
(a) upon the purchase of Securities for the account of
the Client and then only upon the delivery of such Securities except as may
otherwise be consistent with local custom or market practice in the applicable
jurisdiction where settlement occurs;
(b) for payments to be made in connection with the
conversion, exchange or surrender of Securities;
(c) upon request of the Client that the Custodian
transfer monies being held in the Accounts to another custodian of the Client
or to an account of the Client at a deposit bank;
(d) to partners of the Client in connection with any
distribution to such partners or in connection with the repurchase by the
Client from such partners of interest in the Client;
(e) to third persons in payment of the fees or charges of
such third persons for services provided to the Client or for expenses incurred
in the operation of the Client;
(f) upon termination of this Custody Agreement as
hereinafter set forth in Section 17; and
(g) for any other purpose upon receipt of Authorized
Instructions.
All payments pursuant to this Section 6 shall be made only
upon receipt by the Custodian of Authorized Instructions of the Client;
provided, however, that: (i) the Authorized Instructions for purposes of
subparagraph (b), (c), (d), (e) or (f) of this Section 6 shall be accepted and
valid only if (A) such Authorized Instructions explicitly state that the
related payments are in connection with the transactions contemplated by (b),
(c), (d), (e) or (f) above, as the case may be, in accordance with the
procedures for processing such Authorized Instructions set forth in Exhibit C
hereto and (B) that such Authorized Instructions have been given by an
Authorized Person who is identified on Appendix 3 as an employee of Oppenheimer
& Co., Inc. ("Oppenheimer"); (ii) any payment in accordance with subparagraphs
(a), (b), (c), (d) or (e) of this Section 6 shall be made only to such
specifically identified accounts as shall have been pre-designated by the
Client to receive such payments, the initial pre-designated accounts as of the
date of this Agreement shall be limited to those accounts at both Morgan
Stanley & Co. Incorporated and PFPC, Inc. (or any successor administrator of
the Client) identified in accordance with the procedures for processing such
Authorized Instructions set forth in Exhibit C hereto and no additional
accounts shall be considered pre-designated without the written agreement of
each of the parties to this Agreement; and (iii) any payment pursuant to
subparagraph (g) shall be made only if accompanied by a certificate of an
Authorized Person who is identified on Appendix 3 as an employee of Oppenheimer
specifying the purpose of such payment and stating that the purpose thereof is
a
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<PAGE> 5
proper one which has been duly authorized by all necessary action of the Client
in accordance with the procedures for processing such Authorized Instructions
set forth in Exhibit C hereto. In the event that it is not possible to make a
payment in accordance with Authorized Instructions of the Client, the Custodian
shall proceed in accordance with the procedures set forth in the Client
Services Guide, except as may be otherwise provided by this Agreement.
The Custodian may act as the Client's agent or act as a
principal in foreign exchange transactions at such rates as are agreed from
time to time between the Client and the Custodian.
7. Transfer of Securities and Non-Cash Property. Except
as provided in Sections 9, 13 and 17, the Custodian shall make, or cause any
Subcustodian to make, transfers, exchanges or deliveries of Securities or other
non- cash Property pursuant to Authorized Instructions as follows:
(a) upon sale of such Securities for the account of the
Client and then only upon receipt of payment therefor except as may otherwise
be consistent with local custom or market practice in the applicable
jurisdiction where settlement occurs;
(b) upon exercise of conversion, subscription, purchase
or other similar rights represented by such Securities;
(c) in the case of warrant, rights or similar securities,
upon the surrender thereof in the exercise of such warrants, rights or similar
securities;
(d) for delivery in connection with any loans of
securities made by the Client, but only against receipt of such collateral as
agreed upon from time to time by the Custodian and the Client;
(e) to partners of the Client in connection with any
distributions in kind to the specifically designated accounts described in
clause (ii) below to such partners to or in connection with the repurchase by
the Client from such partners of interests in the Client in kind;
(f) upon the termination of this Custody Agreement as
hereinafter set forth in Section 17; and
(g) for any other purpose upon receipt of Authorized
Instructions.
Except as provided below, all transfer, exchanges or
deliveries ("Transfers") of Securities or other non-cash Property pursuant to
this Section 7 shall be made only upon receipt by the Custodian of Authorized
Instructions of the Client; provided, however, that: (i) the Authorized
Instructions for purposes of subparagraphs (b), (c), (d), (e) or (f) of this
Section 7 shall be accepted and valid only if (A) such Authorized Instructions
explicitly state that the related Transfer is in connection with the
transactions contemplated by (b), (c), (d), (e) or (f) of this Section 7, as
the case may be, in accordance with the procedures for processing such
Authorized Instructions set forth in Exhibit C hereto and (B) such Authorized
Instructions have been given by an Authorized Person who is identified on
Appendix 3 as a director, principal, officer or employee of Mark Asset
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<PAGE> 6
Management Corporation ("MAMC"); (ii) any delivery of Securities or non-cash
Property in accordance with subparagraphs (a), (b), (c), (d) (e) or (f) of this
Section 7 shall be made only to such specifically identified accounts as shall
have been pre-designated by the Client to receive deliveries of Securities or
non-cash Property, the initial pre- designated accounts as of the date of this
Agreement shall be limited to those accounts at both Morgan Stanley & Co.
Incorporated and PFPC, Inc. (or any successor administrator to the Client)
identified in accordance with the procedures for processing such Authorized
Instructions set forth in Exhibit C hereto and no additional accounts shall be
considered pre-designated without the written agreement of each of the parties
to this Agreement; and (iii) any delivery pursuant to subparagraph (g) of this
Section 7 shall be made only if accompanied by a certificate of an Authorized
Person who is identified on Appendix 3 as a director, principal, officer or
employee of MAMC specifying the purpose of such delivery and stating that the
purpose thereof is a proper one which has been duly authorized by all necessary
action of the Client in accordance with the procedures for processing such
Authorized Instructions set forth in Exhibit C hereto. In the event that it is
not possible to transfer Securities or other non-cash Property in accordance
with such Authorized Instructions, such Transfers shall be made in accordance
with the procedures set forth in the Client Services Guide, except as may be
otherwise provided by this Agreement.
8. Corporate Action. (a) The Custodian shall notify the
Client of details of all corporate actions affecting the Client's Securities
promptly upon its receipt of such information.
(b) The Custodian shall take, or cause any Subcustodian
to take, such action in response to any such corporate action as may be
permissible or necessary only in accordance with Authorized Instructions or as
provided in this Section 8 or Section 9.
(c) Neither the Custodian nor any nominee of Custodian
shall vote any of the Securities by or for the Accounts except in accordance
with Authorized Instructions. The Custodian shall promptly deliver, or cause
to be executed and delivered, to the Client all notices, proxies and proxy
soliciting materials with relation to such Securities, such proxies to be
executed by the registered holder of such Securities (if registered otherwise
than in the name of the Client), but without indicating the manner in which
such proxies are to be voted;
(d) The Custodian shall transmit promptly to the Client
all written information (including, without limitation, pendency of calls and
maturities of Securities and expiration of rights in connection therewith)
received by the Custodian from issuers of Securities being held for the Client.
With respect to tender or exchange offers, the Custodian shall transmit
promptly to the Client all written information received by the Custodian from
issuers of the Securities whose tender or exchange is sought and from the party
(or its agents) making the tender or exchange offer.
(e) In the event the Client does not provide timely
Authorized Instructions to the Custodian with respect to a corporate action,
the Custodian shall act in accordance with the default option provided by local
market practice and/or the issuer of the Securities.
(f) Fractional shares resulting from corporate action
activity shall be treated in accordance with local market practices.
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<PAGE> 7
9. General Authority. In the absence of Authorized
Instructions to the contrary, the Custodian may, and may authorize any
Subcustodian to:
(a) make payments to itself or others for expenses of
handling Property or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for to the
Client;
(b) receive and collect all income, cash dividends and
principal with respect to Securities and to credit cash receipts to the
Accounts;
(c) receive and collect all stock dividends, rights and
similar securities issued with respect to any Securities held by the Custodian
hereunder;
(d) exchange Securities when the exchange is purely
ministerial (including, without limitation, the exchange of interim receipts or
temporary securities for securities in definitive form and the exchange of
warrants, or other documents of entitlement to securities, for the securities
themselves);
(e) with prior notice to the Client, surrender Securities
at maturity or when called for redemption upon receiving payment therefor;
(f) execute in the Client's name such ownership and other
certificates as may be required to obtain the payment of income from
Securities;
(g) pay or cause to be paid, from the Accounts, any and
all taxes and levies in the nature of taxes imposed on Property by any
governmental authority in connection with custody of and transactions in such
Property;
(h) endorse for collection, in the name of the Client,
checks, drafts and other negotiable instruments;
(i) take non-discretionary action on mandatory corporate
actions; and
(j) in general, attend to all nondiscretionary details in
connection with the custody, sale, purchase, transfer and other dealings with
the Property.
10. Authorized Instructions; Authorized Persons. (a)
Except as otherwise provided in Sections 6 through 9, 13 and 17, all payments
of monies, all transfers, exchanges or deliveries of Property and all responses
to corporate actions shall be made or taken only upon receipt by the Custodian
of Authorized Instructions; provided that such Authorized Instructions are
timely received by the Custodian in accordance with the procedures for
processing such Authorized Instructions set forth on Exhibit C. "Authorized
Instructions" of the Client means instructions from an Authorized Person
received by telecopy, tested telex, electronic link or other electronic means
or by such other means as may be agreed in writing between the Client and the
Custodian.
(b) "Authorized Person" means each of the persons or
entities identified on Appendix 3 as amended from time to time by written
notice from the Client to the Custodian. The
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<PAGE> 8
Client represents and warrants to the Custodian that each Authorized Person
listed in Appendix 3, as amended from time to time, is authorized to issue
Authorized Instructions on behalf of the Client and the Client has set forth in
Appendix 3 the specific types of instructions that each such Authorized Person
is authorized to deliver pursuant to this Agreement. Prior to the delivery of
the Property to the Custodian, the Custodian shall provide a list of designated
system user ID numbers and passwords that the Client shall be responsible for
assigning to Authorized Persons. The Custodian shall assume that an electronic
transmission received and identified by a system user ID number and password
was sent by the Authorized Person assigned such user ID number. The Custodian
agrees to provide additional designated system user ID numbers and passwords as
needed by the Client. The Client authorizes the Custodian to issue new system
user ID numbers upon the request of a previously existing Authorized Person.
Upon the issuance of additional system user ID numbers by the Custodian to the
Client, Appendix 3 shall be deemed automatically amended accordingly. The
Client authorizes the Custodian to receive, act and rely upon any Authorized
Instructions received by the Custodian which have been issued, or purport to
have been issued, by an Authorized Person.
(c) Any Authorized Person may cancel/correct or otherwise
amend any Authorized Instruction received by the Custodian, but the Client
agrees to indemnify the Custodian for any liability, loss or expense incurred
by the Custodian and its Subcustodians as a result of their having relied upon
or acted on any prior Authorized Instruction. An amendment or cancellation of
an Authorized Instruction to deliver or receive any security or funds in
connection with a trade will not be processed once the trade has settled.
11. Registration of Securities. (a) In the absence of
Authorized Instructions to the contrary, Securities which must be held in
registered form shall be registered in the name of the Custodian or the
Custodian's nominee or, in the case of Securities in the custody of an entity
other than the Custodian, in the name of the Custodian, its Subcustodian or any
such entity's nominee. The Custodian may, without notice to the Client, cause
any Securities to be registered or re-registered in the name of the Client.
(b) Where the Custodian has been instructed by the Client
to hold any Securities in the name of any person or entity other than the
Custodian, its Subcustodian or any such entity's nominee, the Custodian shall
not be responsible for any failure to collect such dividends or other income or
participate in any such corporate action with respect to such Securities.
12. Deposit Accounts. All cash received by the Custodian
for the Accounts shall be held by the Custodian as a short-term credit balance
in favor of the Client and, if the Custodian and the Client have agreed in
writing in advance that such credit balances shall bear interest, the Client
shall earn interest at the rates and times as agreed between the Custodian and
the Client. The Client acknowledges that any such credit balances shall not be
accompanied by the benefit of any governmental insurance.
13. Short-term Credit Extensions. (a) From time to
time, the Custodian may extend or arrange short-term credit for the Client
which is (i) necessary in connection with payment and clearance of securities
and foreign exchange transactions or (ii) pursuant to an agreed schedule,
-8-
<PAGE> 9
as and if set forth in the Client Services Guide, of credits for dividends and
interest payments on Securities. All such extensions of credit shall be
repayable by the Client on demand.
(b) The Custodian shall be entitled to charge the Client
interest for any such credit extension at rates to be agreed upon from time to
time or, if such credit is arranged by the Custodian with a third party on
behalf of the Client, the Client shall reimburse the Custodian for any interest
charge. In addition to any other remedies available, the Custodian shall be
entitled to a right of set-off against the Property to satisfy the repayment of
such credit extensions and the payment of, or reimbursement for, accrued
interest thereon.
14. Representations and Warranties. (a) The Client
represents and warrants that (i) the execution, delivery and performance of
this Agreement (including, without limitation, the ability to obtain the short-
term extensions of credit in accordance with Section 13) are within the
Client's power and authority and have been duly authorized by all requisite
action (corporate or otherwise) of the Client and of the beneficial owner of
the Property, if other than the Client, and (ii) this Agreement (including,
without each extension of short-term credit extended to or arranged for the
benefit of the Client in accordance with Section 13) shall at all times
constitute a legal, valid and binding obligation of the Client enforceable
against the Client in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights in general and subject to the effect of general principles of
equity (regardless of whether considered in a proceeding in equity or at law).
(b) The Custodian represents and warrants that (i) the
execution, delivery and performance of this Agreement are within the
Custodian's power and authority and have been duly authorized by all requisite
action (corporate or otherwise) of the Custodian (ii) this Agreement
constitutes the legal, valid and binding obligation of the Custodian
enforceable against the Custodian in accordance with its terms, except as may
be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general and subject to the effect of
general principles of equity (regardless of whether considered in a proceeding
in equity or at law) and (iii) it will maintain insurance coverage reasonably
comparable to the insurance coverage in place as of the date of this Agreement,
as described in Exhibit B hereto.
15. Standard of Care; Indemnification. (a) The
Custodian shall be responsible for the performance of only such duties as are
set forth in this Agreement or contained in Authorized Instructions given to
the Custodian which are not contrary to the provisions of any relevant law or
regulation. The Custodian shall be liable to the Client for any loss,
liability or expense incurred by the Client in connection with this Agreement
to the extent that any such loss, liability or expense results from the
negligence or willful misconduct of the Custodian or any Subcustodian.
(b) The Client acknowledges that the Property may be
physically held outside the United States. The Custodian shall not be liable
for any loss, liability or expense resulting from events beyond the reasonable
control of the Custodian or of a Subcustodian, including, but not limited to,
force majeure.
-9-
<PAGE> 10
(c) In addition, the Client shall indemnify the Custodian
and Subcustodians and any nominee for, and hold each of them harmless from, any
liability, loss or expense (including attorneys' fees and disbursements)
incurred in connection with this Agreement, including without limitation, (i)
as a result of the Custodian having acted or relied upon any Authorized
Instructions or (ii) arising out of any such person acting as a nominee or
holder of record of Securities except to the extent such loss, liability or
expenses results from the Custodian's or its Subcustodian's own negligence or
wilful misconduct of the Custodian.
16. Fees; Liens. The Client shall pay to the Custodian
from time to time such compensation for its services pursuant to this Agreement
as may be mutually agreed upon as well as the Custodian's out-of-pocket and
incidental expenses. The Client shall hold the Custodian harmless from any
liability or loss resulting from any taxes or other governmental charges, and
any expenses related thereto, which may be imposed or assessed with respect to
the Accounts or any Property held therein. The Custodian is, and any
Subcustodians are, authorized to charge the Accounts for such items and the
Custodian shall have a lien, charge and security interest on any and all
Property for any amount owing to the Custodian from time to time under this
Agreement.
17. Termination. This Agreement may be terminated by the
Client or the Custodian by 60 days written notice to the other, sent by
registered mail. If notice of termination is given, the Client shall, within
30 days following the giving of such notice, deliver to the Custodian a
statement in writing specifying the successor custodian or other person to whom
the Custodian shall transfer the Property. In either event, the Custodian,
subject to the satisfaction of any lien it may have, shall transfer the
Property to the person so specified. If the Custodian does not receive such
statement the Custodian, at its election, may transfer the Property to a bank
or trust company established under the laws of the United States or any state
thereof and qualified to serve as the custodian for a registered investment
company under Section 17(f) of the Act to be held and disposed of pursuant to
the provisions of this Agreement or may continue to hold the Property until
such a statement is delivered to the Custodian. In such event the Custodian
shall be entitled to fair compensation for its services during such period as
the Custodian remains in possession of any Property and the provisions of this
Agreement relating to the duties and obligations of the Custodian shall remain
in full force and effect; provided, however, that the Custodian shall have no
obligation to settle any transactions in Securities for the Accounts. The
provisions of Sections 15 and 16 shall survive termination of this Agreement.
18. Investment Advice. The Custodian shall not
supervise, recommend or advise the Client relative to the investment, purchase,
sale, retention or other disposition of any Property held under this Agreement.
19. Confidentiality. (a) The Custodian, its agents and
employees shall maintain the confidentiality of information concerning the
Property held in the Client's account, including in dealings with affiliates of
the Custodian. In the event the Custodian or any Subcustodian is requested or
required to disclose any confidential information concerning the Property, the
Custodian shall, to the extent practicable and legally permissible, promptly
notify the Client of such request or requirement so that the Client may seek a
protective order or waive any objection to the Custodian's or such
Subcustodian's compliance with this Section 19. In the absence of such a
-10-
<PAGE> 11
waiver, if the Custodian or such Subcustodian is compelled, in the opinion of
its counsel, to disclose any confidential information, the Custodian or such
Subcustodian may disclose such information to such persons as, in the opinion
of counsel, is so required.
(b) The Client shall maintain the confidentiality of, and
not provide to any third parties absent the written permission of the
Custodian, any computer software, hardware or communications facilities made
available to the Client or its agents by the Custodian.
20. Notices. Any notice or other communication from the
Client to the Custodian, unless otherwise provided by this Agreement or the
Client Services Guide, shall be sent by certified or registered mail to Morgan
Stanley Trust Company, One Pierrepont Plaza, Brooklyn, New York, 11201,
Attention: President, and any notice from the Custodian to the Client is to be
mailed postage prepaid, addressed to the Client at the address appearing below,
or as it may hereafter be changed on the Custodian's records in accordance with
written notice from the Client.
21. Assignment. This contract may not be assigned by
either party without the prior written approval of the other.
22. Miscellaneous. (a) This Agreement shall bind the
successors and assigns of the Client and the Custodian.
(b) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to
its conflicts of law rules and to the extent not preempted by federal law. The
Custodian and the Client hereby irrevocably submit to the exclusive
jurisdiction of any New York State court or any United States District Court
located in the State of New York in any action or proceeding arising out of
this Agreement and hereby irrevocably waive any objection to the venue of any
such action or proceeding brought in any such court or any defense of an
inconvenient forum.
In witness whereof, the parties hereto have set their hands as
of the date first above written.
TROON PARTNERS, L.P.
By: Troon Management, L.L.C.
(General Partner)
By: Oppenheimer & Co., Inc.
(Managing Member)
By: /s/ Joyce Martin O'Brien
-------------------------------
Name: Joyce Martin O'Brien
Title: Senior Vice President
-11-
<PAGE> 12
Address for record:
Oppenheimer Tower
One World Financial Center
33rd Floor
200 Liberty Street
New York, New York 10281
Accepted:
MORGAN STANLEY TRUST COMPANY
By: /s/ Fred Walsh
----------------------
Authorized Signature
-12-
<PAGE> 13
APPENDIX 1
Account Documentation
REQUIRED DOCUMENTATION FOR CORE CUSTODIAL SERVICES (INCLUDING TAX RECLAIMS):
CUSTODY AGREEMENT
CLIENT SERVICES GUIDE (INCLUDING APPENDICES)
FEE SCHEDULE / BILLING GUIDE
GENERAL ACCOUNT INFORMATION
US TAX AUTHORITY DOCUMENTATION
LOCAL TAX OFFICE LETTER / APPLICATION LETTER
(NON-UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
FORM 6166 / REQUEST FOR FOREIGN CERTIFICATION FORM
(UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
CERTIFICATION OF BENEFICIAL OWNERSHIP, LEGAL NAME, LEGAL RESIDENCY, TAX STATUS
AND TAX IDS
TAX RECLAIM POWER OF ATTORNEY
PREVIOUS TAX RECLAIM FILING INFORMATION
(PREVIOUS FILERS, ONLY)
UK TAX AUTHORITY DOCUMENTATION
SOPHISTICATED INVESTOR (ACCREDITED INVESTOR) LETTER
(UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
-13-
<PAGE> 14
DOCUMENTATION THAT IS REQUIRED FROM AN ENTITY CLASSIFIED AS TAX-EXEMPT BY ITS
LOCAL TAX AUTHORITY:
UK FORM 4338
(EXEMPT NON-UNITED KINGDOM-RESIDENT BENEFICIAL OWNERS, ONLY)
UK FORM 309A
(EXEMPT UNITED STATES-RESIDENT BENEFICIAL OWNERS, ONLY)
FOREIGN EXEMPTION LETTERS / APPLICATION FOR AUSTRALIAN EXEMPTION LETTER
(EXEMPT BENEFICIAL OWNERS, ONLY)
DOCUMENTATION THAT IS REQUIRED ONLY IF YOU WILL USE THE PROXY VOTING SERVICE:
VOTING POWER OF ATTORNEY
DOCUMENTATION THAT IS REQUIRED ONLY IF YOU WILL DEAL IN CERTAIN SECURITIES:
JGB INDEMNIFICATION LETTER
KOREAN SECURITIES POWER OF ATTORNEY
NEW ZEALAND 'APPROVED ISSUER LEVY' LETTER
SPANISH POWER OF ATTORNEY WITH APOSTILE
-14-
<PAGE> 15
APPENDIX 2
Client Accounts
<TABLE>
<CAPTION>
Account Name Account Number Account Mnemonic
- ------------ -------------- ----------------
<S> <C> <C>
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
</TABLE>
-15-
<PAGE> 16
APPENDIX 3
Part I - Authorized Signatures
The Custodian is directed to accept and act upon Authorized Instructions
received from any of the following persons or entities:
<TABLE>
<CAPTION>
Telephone/ Authorized
Name Organization Title Fax Signature
---- ------------ ----- ---------- ---------
<S> <C> <C> <C> <C>
</TABLE>
Authorized by: ___________________________
-16-
<PAGE> 17
Part II - System User ID numbers
The Custodian is directed to accept and act upon Authorized Instructions
transmitted electronically and identified with the following mnemonics and
system user ID numbers for the following activities:
<TABLE>
<CAPTION>
Workstation Sessions
Work Station Account
User I.D. Mnemonic Number TE TCC SL FE CM MA TD
--------- -------- ------ -- --- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
Workstation Session Codes
TE Trade Entry
TCC Trade Cancel/Correct
SL Securities Lending
FE Foreign Exchange
CM Cash Movement
MA Mass Authorization
TD Time Deposit
-17-
<PAGE> 18
EXHIBIT A
Subcustodians
-18-
<PAGE> 19
EXHIBIT C
Troon Partners, L.P. Authorized Instructions Procedures:
1. Instructions to make any payments of cash in the form attached hereto as
C-1, respectively, will be faxed to the Custodian by an Authorized Person
identified on Appendix 3 to the Custody Agreement, as an employee of
Oppenheimer & Co., Inc. ("Oppenheimer") as may be appropriate and consistent
with the terms of the Custody Agreement ("Cash Instructions"). The Custodian
will review each Cash Instruction to ensure that it is consistent with the
forms attached hereto and that the following information is included therein:
a. Purpose has been cited on the fax
b. Fax has been signed by an Authorized Signatory
c. Beneficiary of the cash is in accordance with
standing instructions of the Client
d. Where necessary, a Certificate of Oppenheimer
accompanies the instruction
Client must supply standing instructions pre-designating accounts for cash
deliveries at both Morgan Stanely & Co. Incorporated and PFPC, Inc.
Cash Instructions will be kept on file by the Custodian.
2. The parties have not entered into any securities lending agreement at this
time, and no instructions will be processed under Section 7(d) of the Custody
Agreement. At such time as the parties enter into a securities lending
agreement, this exhibit will be amended to state the requisite procedure for
processing any Authorized Instructions under such Section 7(d).
3. Instructions in the form attached hereto as C-2, to transfer securities and
non-cash property (other than Trade Instructions) will be faxed to the
Custodian by an Authorized Person identified on Appendix 3 to the Custody
Agreement as a director, principal, officer or employee of Mark Asset
Management Corporation ("MAMC") as may be appropriate and consistent with the
terms of the Custody Agreement ("Securities Instructions"). The Custodian will
review each Securities Instruction to ensure that it is consistent with the
forms attached hereto and that the following information is included therein:
a. Purpose has been cited on the fax
b. Fax has been signed by an Authorized Signatory
c. Beneficiary of the securities in in accordance
with standing instructions of the Client (where
appropriate)
d. Where necessary, a Certificate of MAMC accompanies the instruction
Client must supply standing instructions pre-designating accounts for
securities deliveries at both Morgan Stanley & Co. Incorporated and PFPC, Inc.
where appropriate.
Securities Instructions will be kept on file by the Custodian.
<PAGE> 20
C-1
OPPENHEIMER
CASH MOVEMENT INSTRUCTION FORM
Please Fax Trade Sheets to (718) 754-5811 Trade date ___________
To Confirm Receipt of Trade Sheet Page ____ of ____
Please Contact Inez Gonzalez (718) 754-5385
****************************************************************************
* In accordance with the Custody Agreement between Morgan Stanley Trust *
* Company and Troon Partners L.P. (the "Client"), please process the *
* following transaction for the purpose indicated below: *
****************************************************************************
CHECK ONLY ONE OF THE FOLLOWING:
[ ] A payment in connection with the conversion, exchange or
surrender of securities
[ ] A transfer of Client funds to another custodian of the Client or
to an account of the Client at a deposit bank
[ ] A payment to partners of the Client in connection with any
distribution to such partners or in connection with the
repurchase by the Client from such partners of interest in the
Client
[ ] A payment to third persons in payment of the fees of charges of
such third persons for services provided to the Client or for
expenses incurred in the operation of the Client
[ ] Payment for other purpose (must be accompanied by a Certificate
of Authorized Person, who is an employee of Oppenheimer & Co.,
Inc.)
CASH MOVEMENT DETAILS
PAY TO:
Beneficiary:
-------------------------------
Bank Name:
-------------------------------
Clearing Number:
-------------------------------
Beneficiary Account
at Bank
-------------------------------
Standing Instructions (to
be supplied by client)
-------------------------------
TROON PARTNERS, L.P.
By: Troon Management L.L.C. (General Partner)
By: Oppenheimer & Co., Inc. (Managing Member)
Signatures (2) By: By:
-------------------- --------------------
Name: Name:
Title: Title:
*******************************************************************************
* This instruction must be signed by two Authorized Persons of Oppenheimer *
* & Co., Inc. in accordance with the Custody Agreement *
* C-1 *
*******************************************************************************
<PAGE> 21
C-2
MARK ASSET MANAGEMENT CORPORATION
SECURITIES MOVEMENT INSTRUCTION FORM
Please Fax Trade Sheets to (718) 754-5811 Trade date ____________
To Confirm Receipt of Trade Sheet Page ____ of ____
Please Contact Inez Gonzalez (718) 754-5385
****************************************************************************
* In accordance with the Custody Agreement between Morgan Stanley Trust *
* Company and Troon Partners L.P. (the "Client"), please process the *
* following transaction for the purpose indicated below: *
****************************************************************************
CHECK ONLY ONE OF THE FOLLOWING:
[ ] An exercise of conversion, subscription, purchase or other
similar rights represented by the securities indicated below
[ ] The surrender of the securities indicated below in the exercise
of warrants, rights or similar securities
[ ] A transfer, exchange or delivery of securities or other
non-cash property to partners of the Customer in connection with
any distributions in kind to the specifically designated
accounts described below to such partners or in connection with
the repurchase by the Client from such partners of interests in
kind (as per Section 7(e) of the Custody Agreement)
[ ] The transfer of Securities or other non-cash property for other
purpose (must be accompanied by a certificate of an Authorized
Person)
SECURITY MOVEMENT DETAILS
Action to be taken:
--------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Signature (1)
-------------------------------------------
****************************************************************************
* This instruction must be signed by an Authorized Person of Mark Asset *
* Management Corporation in accordance with the Custody Agreement *
****************************************************************************
<PAGE> 1
Exhibit (k)(1)
MANAGEMENT AND ADMINISTRATION AGREEMENT
BY AND BETWEEN
OPPENHEIMER & CO., INC.
AND
TROON PARTNERS, L.P.
Oppenheimer & Co., Inc. ("Opco") and Troon Partners, L.P. (the
"Partnership") hereby agree as follows:
THIS MANAGEMENT AND ADMINISTRATION AGREEMENT (the "Agreement")
is made as of this 19th day of December, 1996, by and between Opco and the
Partnership.
WHEREAS, Opco is in the business of providing, and the
Partnership wishes Opco to provide, certain management and administrative
services;
NOW THEREFORE, in consideration of the terms and conditions
herein contained, the parties agree as follows:
1. Appointment of Opco.
(a) The Partnership hereby appoints, and Opco
hereby accepts appointment, to serve as the Partnership's management company.
In such capacity, Opco agrees to provide certain management (but not investment
management) and administrative services to the Partnership. These services
shall include:
(i) the provision of office space, telephone and
utilities;
(ii) the provision of administrative and
secretarial, clerical and other personnel as
necessary to provide the services required to
be provided under this Agreement;
(iii) the general supervision of the entities which
are retained by the Partnership to provide
administrative services and custody services
to the Partnership;
<PAGE> 2
(iv) the handling of investor inquiries regarding
the Partnership and providing them with
information concerning their investment in
the Partnership and capital account balances;
(v) monitoring relations and communications
between investors and the Partnership;
(vi) overseeing the drafting and updating of
disclosure documents relating to the
Partnership and assisting in the distribution
of all offering materials to investors;
(vii) maintaining and updating investor
information, such as change of address and
employment;
(viii) overseeing the distribution and acceptance of
investor subscription documents and
confirming the receipt of such documents and
funds;
(ix) overseeing the provision of investment advice
to the Partnership by Troon Management,
L.L.C., the manager of the Partnership (or
any successor adviser), and monitoring
compliance by the manager with applicable
investment policies and restrictions of the
Partnership;
(x) coordinating and organizing meetings of the
Partnership's general partners (the "General
Partners");
(xi) preparing materials and reports for use in
connection with meetings of the General
Partners; and
(xii) reviewing and approving all regulatory
filings required under applicable law.
(b) Notwithstanding the appointment of Opco to
provide services hereunder, the Individual General Partners of the Partnership
(the "IGPs") shall remain responsible for supervising and controlling the
management, business and affairs of the Partnership.
2. Opco Fee; Reimbursement of Expenses.
(a) In consideration for the provision by Opco of
its services hereunder, the Partnership will pay Opco a monthly management fee
of 0.08333% (1% on annualized basis) of the Partnership's "net assets" (the
"Opco Fee"). "Net assets" shall equal 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
repurchase of interests.
-2-
<PAGE> 3
(b) The Opco Fee will be computed based on the
net assets of the Partnership as of the start of business on the first business
day of each month, after adjustment for any subscriptions effective on such
date, and will be due and payable in arrears within five days after the end of
such month. The Opco Fee will be charged in each fiscal period to the capital
accounts of the Partnership's limited partners in proportion to their capital
accounts at the beginning of such fiscal period. In the event that the Opco
Fee is payable in respect of a partial month, such fee will be appropriately
pro-rated.
(c) Opco is responsible for all costs and
expenses associated with the provision of its services hereunder. The
Partnership shall pay all other expenses associated with the conduct of its
business.
(d) The Partnership understands that Opco may pay
a portion of the fees received by it hereunder to Mark Asset Management
Corporation.
3. Liability. Opco will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Partnership
or its partners in connection with the performance of its duties under this
Agreement, except a loss (as to which it will be liable and will indemnify and
hold harmless the Partnership) resulting from willful misfeasance, bad faith or
gross negligence on Opco's part (or on the part of an officer or employee of
Opco) in the performance of its duties hereunder or reckless disregard by it of
its duties under this Agreement.
4. Effective Date and Termination. This Agreement
shall become effective as of the date first noted above, and shall remain in
effect for an initial term of one year from the date of its effectiveness.
This Agreement may be continued in effect from year to year thereafter provided
that each such continuance is approved by the IGPs, including the vote of a
majority of the IGPs who are not "interested persons" of the Partnership, as
defined by the Investment Company Act of 1940 and the rules thereunder (the
"1940 Act"). This Agreement may be terminated by Opco, by the IGPs or by vote
of a majority of the outstanding voting securities of the Partnership at any
time, in each case upon not less than 60 days' prior written notice. This
Agreement shall also terminate automatically in the event of its "assignment,"
as such term is defined by the 1940 Act.
5. Entire Agreement. This Agreement embodies the
entire understanding of the parties. This Agreement cannot be altered,
amended, supplemented, or abridged, or any provisions waived except by written
agreement of the parties.
6. Choice of Law. This Agreement shall be construed
and enforced in accordance with the laws of the State of New York and the 1940
Act. In the event the laws of New York conflict with the 1940 Act, the
applicable provisions of the 1940 Act shall control.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
OPPENHEIMER & CO., INC.
By: /s/ Mitchell A. Tanzman
-------------------------------------
Name: Mitchell A. Tanzman
Title: Managing Director
TROON PARTNERS, L.P.
By: Troon Management, L.L.C.
General Partner/Manager
By: Oppenheimer & Co., Inc.
Managing Member
By: /s/ Mitchell A. Tanzman
--------------------------------------
Name: Mitchell A. Tanzman
Title: Managing Director
-4-
<PAGE> 1
Exhibit (k)(2)
ADMINISTRATION, ACCOUNTING AND INVESTOR SERVICES AGREEMENT
THIS AGREEMENT is made as of December 19, 1996 by and between
TROON PARTNERS, L.P., a Delaware limited partnership, (the "Partnership"), and
PFPC INC., a Delaware corporation ("PFPC"), which is an indirect wholly owned
subsidiary of PNC Bank Corp.
W I T N E S S E T H :
WHEREAS, the Partnership is registered as a closed-end,
non-diversified management investment company under the Investment Company Act
of 1940, as amended (the "1940 Act"); and
WHEREAS, the Partnership wishes to retain PFPC to provide
certain administration and accounting services and PFPC wishes to furnish such
services.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, and intending to be legally bound hereby the
parties hereto agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as
amended.
(b) "1934 Act" means the Securities Exchange Act of 1934,
as amended.
(c) "Authorized Person" means any officer of the
Partnership and any other person duly authorized by the Partnership's General
Partners to give Oral Instructions and Written Instructions on behalf of the
Partnership and listed on the Authorized Persons Appendix attached hereto and
made a part hereof or any amendment thereto as may be received by PFPC. An
Authorized Person's scope of authority may be limited by the Partnership by
setting forth such limitation in the Authorized Persons Appendix.
<PAGE> 2
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "General Partners" and "Limited Partners" shall have
the same meanings as set forth in the Partnership's Limited Partnership
Agreement.
(f) "Oral Instructions" mean oral instructions received
by PFPC from an Authorized Person or from a person reasonably believed by PFPC
to be an Authorized Person.
(g) "SEC" means the Securities and Exchange Commission.
(h) "Securities Laws" means the 1933 Act, the 1934 Act,
the 1940 Act and the CEA.
(i) "Written Instructions" mean written instructions
signed by an Authorized Person and received by PFPC. The instructions may be
delivered by hand, mail, tested telegram, cable, telex or facsimile sending
device.
2. APPOINTMENT. The Partnership hereby appoints PFPC to
provide administration, accounting and investor services, in accordance with
the terms set forth in this Agreement. PFPC accepts such appointment and
agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Partnership has provided
or, where applicable, will provide PFPC with the following:
(a) certified or authenticated copies of the resolutions
of the Partnership's General Partners, approving the appointment of PFPC or its
affiliates to provide services and approving this Agreement;
(b) a copy of the Partnership's most recent effective
registration statement;
(c) a copy of the partnership agreement (pursuant to
which Troon Management, L.L.C., as a general partner, provides investment
advice to the Partnership);
(d) a copy of any distribution agreement with respect to
the Partnership;
-2-
<PAGE> 3
(e) a copy of any additional administration agreements;
(f) a copy of any other investor servicing agreement; and
(g) copies (certified or authenticated, where applicable)
of any and all amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC
undertakes to comply with all applicable requirements of the Securities Laws,
and any laws, rules and regulations of governmental authorities having
jurisdiction with respect to the duties to be performed by PFPC hereunder.
Except as specifically set forth herein, PFPC assumes no responsibility for
such compliance by the Partnership.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC
shall act only upon Oral Instructions and Written Instructions including
standing Written Instructions related to ongoing instructions received
electronically.
(b) PFPC shall be entitled to rely upon any Oral and
Written Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to this
Agreement. PFPC may assume that any Oral or Written Instruction received
hereunder is not in any way inconsistent with the provisions of organizational
documents or this Agreement or of any vote, resolution or proceeding of the
Partnership's General Partners or of the Partnership's Limited Partners, unless
and until PFPC receives Written Instructions to the contrary.
(c) The Partnership agrees to forward to PFPC Written
Instructions confirming Oral Instructions (except where such Oral Instructions
are given by PFPC or its affiliates) and shall endeavor to ensure that PFPC
receives the Written Instructions by the close of business on the same
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day that such Oral Instructions are received. The fact that such confirming
Written Instructions are not received by PFPC shall in no way invalidate the
transactions or enforceability of the transactions authorized by the Oral
Instructions. Where Oral Instructions or Written Instructions reasonably
appear to have been received from an Authorized Person, PFPC shall incur no
liability to the Partnership in acting upon such Oral or Written Instructions
provided that PFPC's actions comply with the other provisions of this
Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Partnership. If PFPC is in doubt as to
any action it should or should not take, PFPC may request directions or advice,
including Oral Instructions or Written Instructions, from the Partnership.
(b) Advice of Counsel. If PFPC shall be in doubt as to
any question of law pertaining to any action it should or should not take, PFPC
may request advice at its own cost from such counsel of its own choosing.
(c) Conflicting Advice. In the event of a conflict
between directions, advice or Oral Instructions or Written Instructions PFPC
receives from the Partnership and the advice PFPC receives from counsel, PFPC
may rely upon and follow the advice of counsel. PFPC shall promptly inform the
Partnership of such conflict and PFPC shall refrain from acting in the event of
a conflict unless counsel advises PFPC that a failure to take action is likely
to result in additional loss, liability or expense. In the event PFPC relies
on the advice of counsel, PFPC remains liable for any action or omission on the
part of PFPC which constitutes willful misfeasance, bad faith, gross negligence
or reckless disregard by PFPC of any duties, obligations or responsibilities
set forth in this Agreement.
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(d) Protection of PFPC. PFPC shall be protected in any
action it takes or does not take in reliance upon directions, advice or Oral
Instructions or Written Instructions it receives from the Partnership or (to
the extent permitted under clause (c) above) from counsel and which PFPC
believes, in good faith, to be consistent with those directions, advice and
Oral Instructions or Written Instructions. Nothing in this section shall be
construed so as to impose an obligation upon PFPC (i) to seek such directions,
advice or Oral Instructions or Written Instructions, or (ii) to act in
accordance with such directions, advice or Oral Instructions or Written
Instructions unless, under the terms of other provisions of this Agreement, the
same is a condition of PFPC's properly taking or not taking such action.
Nothing in this subsection shall excuse PFPC when an action or omission on the
part of PFPC constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard by PFPC of any duties, obligations or responsibilities set
forth in this Agreement.
7. RECORDS; VISITS.
(a) The books and records pertaining to the Partnership
which are in the possession or under the control of PFPC shall be the property
of the Partnership. Such books and records shall be prepared and maintained as
required by the 1940 Act and other applicable securities laws, rules and
regulations. The Partnership and Authorized Persons shall have access to such
books and records at all times during PFPC's normal business hours. Upon the
reasonable request of the Partnership, copies of any such books and records
shall be provided by PFPC to the Partnership or to an Authorized Person, at the
Partnership's expense.
(b) PFPC shall keep the following records:
(i) all books and records with respect to the
Partnership's books of account;
(ii) records of the Partnership's securities
transactions; and
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(iii) all other books and records as the
Partnership is required to maintain pursuant
to Rule 31a-1 of the 1940 Act in connection
with the services provided by PFPC hereunder.
8. CONFIDENTIALITY. PFPC agrees to keep confidential
all records of the Partnership and information relating to the Partnership and
its Limited Partners, unless the release of such records or information is
otherwise consented to, in writing, by the Partnership. The Partnership agrees
that such consent shall not be unreasonably withheld and may not be withheld
where PFPC may be exposed to civil or criminal contempt proceedings or when
required to divulge such information or records to duly constituted
authorities.
9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison
with the Partnership's independent public accountants and shall provide account
analyses, fiscal year summaries, and other audit-related schedules. PFPC shall
take all reasonable action in the performance of its duties under this
Agreement to assure that the necessary information is made available to such
auditors and accountants in a timely fashion for the expression of their
opinion, as required by the Partnership.
10. DISASTER RECOVERY. PFPC shall enter into and shall
maintain in effect with appropriate parties one or more agreements making
reasonable provisions for emergency use of electronic data processing equipment
to the extent appropriate equipment is available. In the event of equipment
failures, PFPC shall, at no additional expense to the Partnership, take
reasonable steps to minimize service interruptions. PFPC shall have no
liability with respect to the loss of data or service interruptions caused by
equipment failure, provided such loss or interruption is not caused by PFPC's
own willful misfeasance, bad faith, gross negligence or reckless disregard of
its duties or obligations under this Agreement.
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11. COMPENSATION. As compensation for services rendered
by PFPC during the term of this Agreement, the Partnership will pay to PFPC a
fee or fees as may be agreed to in writing by the Partnership and PFPC.
12. INDEMNIFICATION. The Partnership agrees to indemnify
and hold harmless PFPC and its affiliates from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation, liabilities
arising under the Securities Laws and any state or foreign securities and blue
sky laws, and amendments thereto), and expenses, including (without limitation)
reasonable attorneys' fees and disbursements arising directly or indirectly
from any action or omission to act which PFPC takes (i) at the request or on
the direction of or in reliance on the advice of the Partnership or (ii) upon
Oral Instructions or Written Instructions; Provided, however, neither PFPC,
nor any of its affiliates, shall be indemnified against any liability (or any
expenses incident to such liability) arising out of PFPC's or its affiliates
own willful misfeasance, bad faith, gross negligence or reckless disregard of
its duties and obligations under this Agreement.
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on
behalf of the Partnership except as necessary to fulfill its duties and
obligations as specifically set forth herein or as may be specifically agreed
to by PFPC in writing. PFPC shall be obligated to exercise care and diligence
in the performance of its duties hereunder, to act in good faith and to use its
best efforts, within reasonable limits, in performing services provided for
under this Agreement. PFPC shall be liable for any damages arising out of
PFPC's failure to perform its duties under this Agreement to the extent such
damages arise out of PFPC's willful misfeasance, bad faith, gross negligence or
reckless disregard of such duties.
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(b) Without limiting the generality of the foregoing or
of any other provision of this Agreement, (i) PFPC shall not be liable for
losses beyond its control, provided that PFPC has acted in accordance with the
standard of care set forth above; and (ii) PFPC shall not be liable for (A) the
validity or invalidity or authority or lack thereof of any Oral Instruction or
Written Instruction, notice or other instrument which conforms to the
applicable requirements of this Agreement, and which PFPC reasonably believes
to be genuine; or (B) subject to Section 10, delays or errors or loss of data
occurring by reason of circumstances beyond PFPC's control, including acts of
civil or military authority, national emergencies, labor difficulties, fire,
flood, catastrophe, acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply.
(c) Notwithstanding anything in this Agreement to the
contrary, neither PFPC nor its affiliates shall be liable to the Partnership
for any consequential, special or indirect losses or damages which the
Partnership or any Portfolio may incur or suffer by or as a consequence of
PFPC's or any affiliates' performance of the services provided hereunder,
whether or not the likelihood of such losses or damages was known by PFPC or
its affiliates.
14. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS
BASIS. PFPC will perform the following accounting services:
(i) Journalize investment, capital share and
income and expense activities;
(ii) Verify investment buy/sell trade tickets when
received from the investment adviser for a
Portfolio (the "Adviser") in accordance with
PFPC's written procedures;
(iii) Maintain individual ledgers for investment
securities;
(iv) Maintain historical tax lots for each
security;
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(v) Record and reconcile corporate action
activity and all other capital changes with
the Partnership's Adviser;
(vi) Reconcile cash and investment balances of the
Partnership with the Custodian, and provide
the Adviser and the Manager with the
beginning cash balance available for
investment purposes;
(vii) Update the cash availability throughout the
day as required by the Adviser, including
details of cash movements related to
securities and payment of Partnership
expenses;
(viii) Calculate contractual expenses (e.g.,
advisory and custody fees) in accordance with
the Partnership's Confidential Memorandum;
(ix) Prepare monthly the Statement of Assets and
Liabilities, the Statement of Operations,
Statement of Changes in Partner's Capital,
and the Statement of Changes in Net Assets,
Listing of Investment and Quarterly Reports,
if required;
(x) Maintain detailed line item expense budget
for the Partnership and notify an officer of
the Partnership of any proposed adjustments;
(xi) Control all disbursements and authorize such
disbursements from the Partnership's account
at PNC Bank, Delaware upon Written
Instructions;
(xii) Calculate capital gains and losses;
(xiii) Determine net income;
(xiv) Determine applicable foreign exchange gains
and losses on payables and receivables;
(xv) Interface with global custodian to monitor
collection of tax reclaims;
(xvi) Calculate daily asset coverage ratio;
(xvii) Obtain daily security market quotes from
independent pricing services approved by the
Adviser, or if such quotes are unavailable,
then obtain such prices from the Adviser, and
in either case calculate the market value of
and the appreciation/depreciation on the
Partnership's Investments;
(xviii) Transmit or otherwise send mail a copy of the
daily portfolio valuation to the Adviser and
Manager;
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(xix) Compute net asset value with frequency to
conform to the terms of the Partnership;
(xx) Research and recommend portfolio accounting
tax treatment for unique security types; and
(xxi) As appropriate, compute yields, total return,
expense ratios, portfolio turnover rate, and,
if required, portfolio average
dollar-weighted maturity in accordance with
applicable regulations.
15. DESCRIPTION OF ADMINISTRATION SERVICES ON A
CONTINUOUS BASIS. PFPC will perform the following administration services:
(i) Prepare quarterly broker security
transactions summaries including principal
and agency transactions and related
commissions;
(ii) Prepare monthly security transaction
listings;
(iii) Supply various normal and customary portfolio
and Partnership statistical data as requested
on an ongoing basis;
(iv) Provide to the extent contained in accounting
records materials required for board
reporting as may be requested from time to
time;
(v) Prepare for execution and file the
Partnership's Federal Form 1065 and state tax
returns;
(vi) Prepare and file the Partnership's Annual and
Semi-Annual Reports with the SEC on Form
N-SAR via EDGAR;
(vii) Prepare and coordinate printing of and filing
with the SEC via EDGAR the Partnership's
annual, semi-annual, and quarterly
shareholder reports;
(viii) Assist in the preparation of registration
statements;
(ix) Transmit or otherwise send, to the extent
practicable and feasible, requested detailed
information related to the Limited Partners,
including admission details, income, capital
gains and losses, and performance detail;
(x) Mail Partnership offering materials to
prospective investors; and
(xi) Mail quarterly reports of the Adviser and
Semi-Annual Financial Statements to investors
as well as any other necessary
correspondence.
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16. DESCRIPTION OF INVESTOR SERVICES ON A CONTINUOUS
BASIS. PFPC will perform the following functions:
(i) Maintain the register of Limited Partners of
the Partnership and enter on such register
all issues, transfers and repurchases of
interests in the Partnership;
(ii) Arrange for the calculation of the issue and
repurchase prices of interests in the
Partnership in accordance with the limited
partnership agreement and private offering
memorandum; and
(iii) Allocate income, expenses, gains and losses
to individual Limited Partners' capital
accounts in accordance with applicable tax
laws and with the private offering
memorandum,;
(iv) Calculate the Incentive Allocation in
accordance with the Confidential
Memorandum and reallocate corresponding
amounts from the applicable Limited Partners'
accounts to the General Partner's account.
(v) Mail to Partners annual Form K-1's in
accordance with applicable tax regulations;
and
(vi) Mail tender offers to Partners for purposes
of executing repurchases.
17. DURATION AND TERMINATION. This Agreement shall
continue until terminated by either party on sixty (60) days' prior written
notice to the other party.
18. NOTICES. All notices and other communications,
including Written Instructions, shall be in writing or by confirming telegram,
cable, telex or facsimile sending device. If notice is sent by confirming
telegram, cable, telex or facsimile sending device, it shall be deemed to have
been given immediately. If notice is sent by first-class mail, it shall be
deemed to have been given three days after it has been mailed. If notice is
sent by messenger, it shall be deemed to have been given on the day it is
delivered. Notices shall be addressed (a) if to PFPC, at 400 Bellevue Parkway,
Wilmington, Delaware 19809; Attn: Neal Andrews (b) if to the Partnership, at
c/o Oppenheimer & Co., Inc., One World Financial Center, 200 Liberty Street,
33rd Floor, New York, NY 10281 , Attn: Joyce O'Brien; or (c) if to neither of
the foregoing, at such other address as
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shall have been provided by like notice to the sender of any such notice or
other communication by the other party.
19. AMENDMENTS. This Agreement, or any term thereof, may
be changed or waived only by written amendment, signed by the party against
whom enforcement of such change or waiver is sought.
20. DELEGATION; ASSIGNMENT. This Agreement and the
rights and duties of the parties herein may not be assigned; provided, however,
that PFPC may assign its rights and delegate its duties hereunder, at no
additional cost to the Partnership, to any wholly-owned direct or indirect
subsidiary of PNC Bank, National Association or PNC Bank Corp., provided that
(i) PFPC gives the Partnership sixty (60) days' prior written notice; (ii) the
delegate (or assignee) agrees with PFPC and the Partnership to comply with all
relevant provisions of the Securities Laws; and (iii) PFPC and such delegate
(or assignee) promptly provide such information as the Partnership may request,
and respond to such questions as the Partnership may ask, relative to the
delegation (or assignment), including (without limitation) the capabilities of
the delegate (or assignee). Except as stated above, this Agreement may not be
assigned or delegated by any party without the written consent of each party.
21. COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
22. FURTHER ACTIONS. Each party agrees to perform such
further acts and execute such further documents as are necessary to effectuate
the purposes hereof.
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23. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof, provided
that the parties may embody in one or more separate documents their agreement,
if any, with respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be
a contract made in Delaware and governed by Delaware law, without regard to
principles of conflicts of law.
(d) Partial Invalidity. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any
party to this Agreement shall constitute the valid and binding execution hereof
by such party.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
PFPC INC.
By: /s/ Robert Crouse
--------------------------------
Name: Robert Crouse
Title: Vice President
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TROON PARTNERS, L.P.
BY: TROON MANAGEMENT, L.L.C.
General Partner
BY: OPPENHEIMER & CO., INC.
Manager
By: /s/ Joyce Martin O'Brien
-------------------------------
Title: Senior Vice President
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AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
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