<PAGE>
As filed with the Securities and Exchange Commission on February 21, 1997
Investment Company Act File No. 811-_____
Securities Act File No. 33-______
___________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM N-2
(CHECK APPROPRIATE BOX OR BOXES)
[X] 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
_____________________
LEVCO ZERO COUPON/PUT FUND I, L.P.
(Exact name of Registrant as specified in Charter)
One Rockefeller Plaza
25th Floor
New York, New York 10020
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code: (212) 332-8400
_____________________
NORRIS NISSIM, ESQ.
John A. Levin & Co., Inc.
One Rockefeller Plaza
25th Floor
New York, New York 10020
(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
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
It is proposed that this filing will become effective (check appropriate box)
[X] when declared effective pursuant to section 8 (c)
Registrant hereby amends the Registration Statement on such date or dates as may
be necessary to delay its effective date until Registrant shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Title of Securities Amount Being Offering Price Aggregate Amount of
Being Registered Registered* Per Unit* Offering Price Registration Fee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Limited Partnership $25,000,000 $7,575.76
Interests
</TABLE>
---------------------------------------------------
- ---------------------------
* Registrant is registering limited partnership interests. Accordingly, the
amount of shares being registered and the offering price per unit are
inapplicable.
<PAGE>
FORM N-2
LEVCO ZERO COUPON/PUT FUND I, L.P.
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
PART A
ITEM NUMBER CAPTION PROSPECTUS CAPTION
- ----------- ------- ------------------
1. Outside Front Cover Outside Front Cover of Prospectus
2. Inside Front and Outside Outside Front Cover of Prospectus
Back Cover Page
3. Fee Table and Synopsis Summary of Fees and Expenses;
Prospectus Summary; Fees and
Expenses; Capital Accounts and
Allocations - Incentive Allocation
4. Financial Highlights Not Applicable
5. Plan of Distribution Distributions to Limited Partners
6. Selling Shareholders Not Applicable
7. Use of Proceeds Prospectus Summary; The Fund;
Investment Objective and Policies
8. General Description of the Prospectus Summary; The Fund;
Registrant Investment Objective and Policies;
Investment Restrictions; Risk
Considerations
9. Management Prospectus Summary; The Fund;
Brokerage Transactions; Management of
the Fund; Fees and Expenses; Capital
Accounts and Allocations - Incentive
Allocation; Summary of Partnership
Agreement; Additional Information
<PAGE>
PART A
ITEM NUMBER CAPTION PROSPECTUS CAPTION
- ----------- ------- ------------------
10. Capital Stock, Long-Term Prospectus Summary; The Fund;
Debt, and Other Securities Subscriptions for Interests;
Redemptions and Transfer of
Interests; Capital Accounts and
Allocations; Taxation; Summary of
Partnership Agreement
11. Defaults and Arrears on Not Applicable
Senior Securities
12. Legal Proceedings Not Applicable
13. Table of Contents of the Not Applicable
Statement of Additional
Information
PART B
ITEM NUMBER CAPTION PROSPECTUS CAPTION*
- ----------- ------- -------------------
14. Cover Page Not Applicable
15. Table of Contents Not Applicable
16. General Information and Not Applicable
History
17. Investment Objective and Prospectus Summary; The Fund;
Policies Investment Objective and Policies;
Investment Restrictions; Risk
Considerations; Brokerage Transactions
18. Management Prospectus Summary; Management of the
Fund
19. Control Persons and Additional Information - Control
Principal Holders of Person
Securities
- --------------------------
* The prospectus contains all of the information required to be contained in
the Statement of Additional Information ("SAI"). Therefore, there is no SAI.
<PAGE>
PART B
ITEM NUMBER CAPTION PROSPECTUS CAPTION*
- ----------- ------- -------------------
20. Investment Advisory and Prospectus Summary; Management of the
Other Services Fund; Fees and Expenses; Capital
Accounts and Allocations - Incentive
Allocation; Summary of Partnership
Agreement
21. Brokerage Allocation and Brokerage Transactions
Other Practices
22. Tax Status Prospectus Summary; Taxation
23. Financial Statements Because Registrant has no assets,
financial statements are omitted.
- --------------------------
* The prospectus contains all of the information required to be contained in
the Statement of Additional Information ("SAI"). Therefore, there is no SAI.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.
PRELIMINARY PROSPECTUS -- SUBJECT TO COMPLETION -- FEBRUARY 21, 1997
LEVCO ZERO COUPON/PUT FUND I, L.P.
(SEPTEMBER 30, 1998 REDEMPTION DATE)
One Rockefeller Plaza (25th Floor)
New York, New York 10020
(212) 332-8400
LEVCO Zero Coupon/Put Fund I, L.P. (the "Fund") ([September 30, 1998]
Redemption Date) is a newly formed non-diversified, closed-end management
investment company. The investment objective of the Fund is to seek capital
appreciation from declines in U.S. stock market prices generally, and in the
prices of stocks of domestic issuers in particular market sectors, that may
occur during the period [April 1, 1997] through [September 30, 1998] (the
"Redemption Date"), while seeking to preserve capital in the event such prices
increase during that period. The Fund will pursue its objective primarily by
purchasing listed and over-the-counter put options on stock indices and groups
of stocks, which offer the opportunity for capital appreciation based on
declines in the values of the indices and the prices of the stocks underlying
the options, and by investing a significant portion of its assets in short-term
U.S. government securities maturing on or shortly before the Redemption Date.
See "INVESTMENT OBJECTIVE AND POLICIES." On or shortly before the Redemption
Date, the Fund's investments will be liquidated and its assets will be
distributed to investors. By holding its investments in U.S. government
securities to maturity, the Fund expects that the value of an investment in the
Fund on the Redemption Date will not be less than its initial value. There can
be no assurance that the value of an investment in the Fund on the Redemption
Date will not be less than its initial value or that the Fund will achieve its
investment objective.
John A. Levin & Co., Inc. (the "Adviser"), an indirect, wholly-owned
subsidiary of Baker, Fentress & Company, serves as the investment adviser of the
Fund. See "MANAGEMENT OF THE FUND-The Adviser." Its subsidiary, LEVCO GP, INC.
(the "Manager"), serves as the Fund's Corporate General Partner.
An aggregate of $25 million of limited partnership interests in the
Fund ("Interests") are being offered for sale to eligible investors by LEVCO
Securities, Inc., which serves as the distributor of Interests (the
"Distributor"). The minimum investment in the Fund by an investor is $250,000.
Interests may be purchased through the Distributor or through selected
securities dealers and other financial institutions. A sales commission of 1% of
the amount invested will generally be charged by the Distributor and paid to
selling dealers and financial institutions. Securities dealers and other
financial institutions will also receive certain other compensation. See
"SUBSCRIPTIONS FOR INTERESTS." The offering of Interests being made by this
Prospectus (the "Offering") will close on [April 1, 1997] or such later date not
more than 30 days thereafter as may be determined by the Fund (the "Closing
Date"). Subscriptions for Interests, together with cleared funds in the full
amount of an investor's subscription, must be received by Lehman Brothers Inc.,
as escrow agent for the Fund, not later than [_] days prior to the Closing Date.
All subscriptions are subject to acceptance by the Manager. See "SUBSCRIPTIONS
FOR INTERESTS." In the event that the Distributor does not receive by the
Closing Date acceptable subscriptions for an aggregate of at least $25 million
of Interests, the Offering will be terminated and the subscription amounts will
be returned to investors, together with interest.
Interests will be redeemed automatically as of the Redemption Date.
Interests are not otherwise redeemable, are subject to significant transfer
restrictions and will not be traded on any securities exchange or other market.
See "REDEMPTIONS AND TRANSFERS OF INTERESTS." AN INVESTMENT IN THE FUND WILL BE
ILLIQUID UNTIL THE REDEMPTION DATE, AND INVESTORS MUST BE WILLING AND ABLE TO
BEAR THE RISKS OF AN INVESTMENT IN THE FUND UNTIL SUCH DATE.
An investment in the Fund involves certain risks. See "RISK
CONSIDERATIONS." Also, in addition to certain fees and expenses of the type
normally paid by closed-end investment companies and indirectly borne by their
shareholders, the Manager will be entitled to an incentive allocation equal to
20% of the amount, if any, by which the value, as of the Redemption Date, of
each investor's capital account, plus the amount of any distributions made to
the investor, exceeds the amount of such investor's initial investment in the
Fund (the "Incentive Allocation"). The Incentive Allocation will be debited
against the capital accounts of investors as of the Redemption Date.
________________________________________________
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE
REFERENCE. THIS PROSPECTUS CONTAINS ALL OF THE INFORMATION REQUIRED TO BE
CONTAINED IN THE FUND'S STATEMENT OF ADDITIONAL INFORMATION.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Sales Commissions Proceeds to Fund*
Price to Public (as % of Offering Price)
- --------------------------------------------------------------------------------
<S> <C> <C>
Per Share Not Applicable
Not applicable 1%
- --------------------------------------------------------------------------------
Total $24,750,000
$25,000,000 $250,000
- --------------------------------------------------------------------------------
</TABLE>
*Before deduction of offering expenses payable by the Fund, estimated at $_____.
These costs will be reflected as a reduction of the initial net assets of the
Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is _____________, 1997.
LEVCO Securities, Inc.
Distributor
<PAGE>
SUMMARY OF FEES AND EXPENSES
The following table shows the estimated fees and expenses that will be
borne by investors in the Fund.
Shareholder Transaction Expenses
Maximum Sales Commission (as a percentage of offering price)... 1%
Annual Expenses (as a percentage of net assets)
Management Fee................................................. 0.25%
Other Expenses................................................. ____%
Total.......................................................... ____%*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Example 1 Year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming a 5% annual return: $______ $________**
</TABLE>
* In addition to the expenses shown in the table, an incentive allocation may
be debited against the capital accounts of investors as of the Redemption Date.
The Manager will be entitled to an incentive allocation equal to 20% of the
amount, if any, by which the value as of the Redemption Date of each investor's
capital account plus the amount of any distributions received by the investor
exceeds the amount of such investor's initial investment in the Fund. Under
certain limited circumstances, an incentive allocation may be made prior to
the Redemption Date. See "CAPITAL ACCOUNTS AND ALLOCATIONS - Incentive
Allocation".
** The incentive allocation described in the note above has been treated as an
expense for purposes of this example, and would amount to $______ of the $______
of "Life of Fund" expenses.
The purpose of the foregoing table and example is to assist investors
in understanding the various costs, expenses and allocations that an investor in
the Fund will bear directly or indirectly. Expenses shown are estimated
expenses for the Fund's first year of operations and assume that assets of $25
million will be raised in the Offering. Actual expenses will vary and may be
greater or less than those shown. The 5% annual return used in the table is an
assumed rate of total return which is required to be used in accordance with
rules adopted by the Securities and Exchange Commission. The example assumes
expenses as shown in the table. Because the Fund does not intend to make
regular, periodic distributions of income or any net gains to investors or to
permit reinvestment of any distributions, the example does not reflect the
effect of any reinvestment of distributions. No assurance can be given that the
Fund's annual return will equal that assumed in the example.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus and by the terms and
conditions of the Limited Partnership Agreement of LEVCO Zero Coupon/Put Fund I,
L.P. (the "Partnership Agreement"), each of which should be read carefully
before investing and retained for future reference.
The Fund LEVCO Zero Coupon/Put Fund I, L.P. (the
"Fund") (September 30, 1998 Redemption
Date) is a newly formed Delaware limited
partnership which is registered under the
Investment Company Act of 1940 (the "1940
Act") as a closed-end, non-diversified,
management investment company.
The Fund is a specialized investment
vehicle that, in certain respects, is
similar to an unregistered private
investment partnership. For example,
limited partnership interests in the Fund
("Interests") are being offered only to
high net worth individual and
institutional investors willing to invest
at least $250,000 and are subject to
significant restrictions on transfer. In
addition, the capital accounts of
investors will be subject to both asset-
based charges in the amount of their pro
rata shares of the Fund's fees and
expenses, as well as a performance-based
incentive allocation (the "Incentive
Allocation"). Unlike private investment
partnerships, however, the Fund and
Interests are being registered under the
1940 Act and the Securities Act of 1933,
respectively, to enable Interests to be
offered publicly to and held by an
unlimited number of investors.
Investors purchasing Interests in the
offering being made by the Prospectus
(the "Offering") will become limited
partners of the Fund ("Limited Partners"
and, together with the Corporate General
Partner and the Individual General
Partners of the Fund, "Partners").
Investment Objective
and Policies The Fund's investment objective is to
seek capital appreciation from declines
in U.S. stock market prices generally,
and in the prices of stocks of domestic
issuers in particular market sectors,
that may occur during the period [April
1, 1997] through [September 30, 1998]
1
<PAGE>
(the "Redemption Date"), while seeking to
preserve capital in the event such prices
increase during that period. The Fund
will pursue its objective primarily by
purchasing listed and over-the-counter
put options on stock indices and groups
of stocks, which offer the opportunity
for capital appreciation in the event of
a decline in the prices of the indices
and stocks underlying the options, and by
investing in short-term debt obligations
issued or guaranteed by the U.S.
government or by an agency or
instrumentality of the U.S. government
("U.S. Government Securities") maturing
on or shortly before the Redemption Date.
See "INVESTMENT OBJECTIVE AND POLICIES."
The Fund will invest in and intends to
hold U.S. Government Securities,
primarily zero coupon obligations, having
an aggregate maturity value approximately
equal to the aggregate initial value of
Interests sold to investors in the
Offering. The balance of the Fund's
assets will be invested in options and
money market instruments. Substantially
all of the Fund's assets will consist of
zero coupon U.S. Government Securities
(including receipts representing
interests in such securities) and put
options, absent unusual market
conditions.
Approximately 85% to 95% of the value of
the Fund's net assets will initially be
invested in short-term U.S. Government
Securities. By holding these investments
to maturity, the Fund expects that the
value of Interests on the Redemption Date
will not be less than their initial
value. However, there can be no assurance
that, on the Redemption Date, Interests
will not be less than their initial
value. Any capital appreciation will be
obtained primarily from investments and
trading in options. On or shortly before
the Redemption Date, the Fund's
investments will be liquidated. Interests
will be redeemed automatically as of the
Redemption Date and the amount owed by
the Fund in connection with such
redemptions will promptly be distributed
to Limited Partners.
The Fund will seek capital appreciation
by purchasing and trading put options on
U.S. stock indices, and put options on
groups of stocks of domestic issuers in
particular market sectors, which options
will generally
2
<PAGE>
increase in value in the event of a
decline in the value of the indices or
the prices of the stocks underlying the
options. The Fund may also sell (or
write) put options and purchase call
options to lock-in gains on existing
options positions or to hedge those
positions. Options purchased and sold by
the Fund may include customized options
on "baskets" (or specified groups) of
stocks.
Although the Fund expects to hold its
investments in U.S. Government Securities
to maturity, its options positions will
be actively traded with the goal of
obtaining capital appreciation. Such
trading will result in the Fund incurring
greater brokerage commissions than would
be the case if the Fund followed a less
active, long-term trading strategy. If
successful, such trading will result in
the realization of gains which will be
taxable to investors annually and a
significant portion of which may be
short-term capital gains. See "TAXATION."
For liquidity purposes, to protect
profits, or for temporary purposes during
periods of rising markets, the Fund may
invest without limit in high quality
money market instruments. In addition,
the Fund may invest in such instruments
and securities for cash management
purposes, pending investment in
accordance with the Fund's objectives and
policies, and to generate income to
meet operating expenses.
Risk Factors The Fund's investment program involves
certain risks, and there can be no
assurance that the Fund's investment
objective will be achieved. See "RISK
CONSIDERATIONS."
The Fund's investment characteristics
differ significantly from those of most
other investment funds because the Fund
will seek appreciation from declines in
stock market prices generally and in the
prices of stocks of issuers in particular
market sectors. Because during most 18
month periods concluding since October
1982 (and every 18 month period since
February 1991), the U.S. stock market
performance, as measured by broad-based
indices such as the S&P 500 Index, has
been positive, the Fund's investment
3
<PAGE>
approach as it relates to options
involves significant risk. However,
through its investments in short-term
U.S. Government Securities, the Fund will
seek to assure that the value of its
portfolio as of the Redemption Date will
not be less than its initial value.
Transactions in options entail certain
risks which should be considered by
prospective investors. Certain over-the-
counter options may be illiquid, in which
case the Fund may not be able to close
out its position or may be able to do so
only at an unfavorable price. See "RISK
CONSIDERATIONS" and "INVESTMENT OBJECTIVE
AND POLICIES - Options Transactions -
Risks of Options."
As a non-diversified investment company,
there are no percentage limitations on
the portion of the Fund's assets that may
be invested in the securities of any one
issuer. The Fund may also concentrate its
option investments in options on the
stocks of companies within one or more
particular market sectors. Due to these
policies, the investment portfolio of the
Fund may be subject to greater risk and
volatility than would be the case if
investments were made in a broader range
of issuers and market sectors.
The Incentive Allocation that may be
debited against the capital account of
each Limited Partner may create an
incentive for the Adviser to make
investments for the Fund that are riskier
or more speculative than would be the
case in the absence of the Incentive
Allocation. Depending on the Fund's
investment performance, the Incentive
Allocation may also result in Limited
Partners bearing aggregate fees, expenses
and charges that are higher than those
typically borne by investors in closed-
end investment companies, but which are
comparable to those borne by investors in
private investment partnerships.
There are special tax risks associated
with an investment in the Fund. See
"PROSPECTUS SUMMARY -Taxation".
Interests will be redeemed automatically
as of the Redemption Date. However,
Interests are not
4
<PAGE>
redeemable prior to such date and will be
subject to significant restrictions on
transfer. In addition, Interests will not
be traded on any securities exchange or
other market. AN INVESTMENT IN THE FUND
WILL BE ILLIQUID UNTIL THE REDEMPTION
DATE (SEPTEMBER 30, 1998), AND INVESTORS
MUST BE WILLING AND ABLE TO BEAR THE
RISKS OF AN INVESTMENT IN THE FUND UNTIL
SUCH DATE. See "PROSPECTUS SUMMARY -
Transfer Restrictions".
Management of the Fund Investment advice will be provided to the
Fund by John A. Levin & Co., Inc. (the
"Adviser"). In addition, the Adviser is
responsible for providing administrative
services to the Fund, managing the Fund's
day-to-day business affairs, maintaining
the Fund's books and records, and
providing such office space, personnel
and other facilities to the Fund as may
be required in connection with the Fund's
operations. The Adviser is a registered
investment adviser and an indirect,
wholly-owned subsidiary of Baker,
Fentress & Company ("Baker, Fentress"), a
closed-end investment company listed on
the New York Stock Exchange. Aggregate
assets under management exceed $6
billion. The Adviser was established in
1982 and, together with its affiliates,
currently provides investment advisory
services to a variety of clients,
including individuals and their related
trusts and charitable organizations,
pooled funds and investment partnerships,
endowments, and pension and profit-
sharing plans. Certain of the Adviser's
clients may have investment objectives
similar to those of the Fund. See
"MANAGEMENT OF THE FUND - The Adviser."
A subsidiary of the Adviser, LEVCO GP,
Inc. (the "Manager"), is the Corporate
General Partner of the Fund and will
receive any Incentive Allocation that is
debited against the capital accounts of
Limited Partners. At its own expense, the
Adviser may retain other organizations,
including its affiliates, to provide
certain of the administrative services
required to be provided to the Fund.
5
<PAGE>
Ultimate responsibility over the affairs
of the Fund is vested in the Fund's five
individual General Partners (the
"Individual General Partners").
Fees and Expenses The Fund will pay a monthly management
fee to the Adviser computed at the annual
rate of 0.25% of the value of the Fund's
month end net assets. See "MANAGEMENT OF
THE FUND - The Adviser." The Fund will
also bear all other fees and expenses
incurred in connection with its
operations. See "FEES AND EXPENSES."
Allocation of Profit and Loss The net profits or net losses of the Fund
(including, without limitation, net
realized gain or loss and the net change
in unrealized appreciation or
depreciation of securities positions)
will be allocated among and credited to
or debited against the capital accounts
of Limited Partners at the end of each
fiscal period in accordance with their
respective partnership percentages for
such period. Each Limited Partner's
partnership percentage will be determined
by dividing, as of the start of a fiscal
period, the balance of the Limited
Partner's capital account by the sum of
the balances of the capital accounts of
all Partners.
Incentive Allocation As of the Redemption Date, an Incentive
Allocation will be debited against the
capital accounts of the Limited Partners
and credited to the capital account of
the Manager in an amount equal to 20% of
the amount, if any, by which the value,
as of the Redemption Date, of each
Limited Partner's capital account plus
the amount of any distributions to the
Limited Partner exceeds the amount of
such Limited Partner's initial investment
in the Fund. See "CAPITAL ACCOUNTS AND
ALLOCATIONS - Incentive Allocation; and
Allocations for Income Tax Purposes."
The Offering An aggregate of $25 million of Interests
are being offered for sale to investors
in the Offering by LEVCO Securities,
Inc., as the Fund's distributor (the
"Distributor"). Interests may be
purchased through the Distributor, or
through securities dealers and other
financial institutions which have entered
into selling agreements with the
Distributor. A sales commission of 1% of
the amount invested will be charged by
the
6
<PAGE>
Distributor and paid to selling dealers
and financial institutions. This sales
commission will be waived under certain
circumstances. See "SUBSCRIPTIONS FOR
INTERESTS." The Manager will pay
securities dealers and other financial
institutions that sell Interests up to
25% of any Incentive Allocation received
by the Manager that is attributable to
Limited Partners who are their customers.
The Offering will end on [April 1, 1997],
or on such later date not more than 30
days thereafter as may be determined by
the Fund (the "Closing Date"). Interests
will not be offered after completion of
the Offering. In the event that the
Distributor does not receive by the
Closing Date acceptable subscriptions for
an aggregate of at least $25 million of
Interests (the "Minimum Subscription
Amount"), the Offering will be terminated
and the subscription amounts will be
returned to investors, together with
interest.
If subscriptions in the Minimum
Subscription Amount are received and
accepted by the Closing Date, Interests
will be issued as of such date to all
investors whose subscriptions have been
accepted. All subscriptions for Interests
are subject to acceptance by the Manager,
and any subscription may be rejected in
whole or in part by the Manager. The Fund
may, in its sole discretion, suspend the
Offering at any time or increase the
aggregate amount of Interests being
offered. Net proceeds received by the
Fund from the sale of Interests will be
used by the Fund in its investment
program.
Subscriptions for Interests Subscriptions for Interests by eligible
investors must be received by Lehman
Brothers Inc., as escrow agent for the
Fund, not later than [______] days prior
to the Closing Date, accompanied by
cleared funds in the full amount of the
subscription. The minimum investment in
the Fund by any investor is $250,000.
However, the Fund may waive this minimum
in special circumstances. See
"SUBSCRIPTIONS FOR INTERESTS."
Eligible Investors Interests in the Fund will be sold only
to investors who certify that they (as
well as each of the investor's beneficial
owners under certain circumstances) have
a net worth, immediately prior to the
time of subscription, of at least $1
million. Investors will also
7
<PAGE>
be required to satisfy certain additional
eligibility requirements.
Distributions The Fund does not intend to make regular,
periodic distributions of its net income
or gains, if any, to Limited Partners.
However, distributions may be made to
Limited Partners, in the sole discretion
of the Individual General Partners, when
and if the Fund has cumulative net
realized gains exceeding 20% of the
initial net assets of the Fund. Limited
Partners will be required each year to
pay applicable Federal and state income
taxes on their share of the Fund's
taxable income, including original issue
discount accrued for such year on zero
coupon obligations held by the Fund, and
net gains from the Fund's transactions in
options, regardless of whether
distributions are made. If distributions
are not made, any such taxes will have to
be paid by Limited Partners from other
sources. See "DISTRIBUTIONS TO LIMITED
PARTNERS."
Transfer and Withdrawal
Restrictions An Interest in the Fund may be
transferred by a Limited Partner only:
(i) by operation of law pursuant to the
death, bankruptcy, insolvency or
dissolution of the 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. However, any
permitted transferees will not be allowed
to become substituted Limited Partners in
the Fund without the consent of the
Manager, which may be withheld in its
sole and absolute discretion.
Interests will be redeemed automatically
as of the Redemption Date, absent unusual
circumstances. Prior to such date, no
Limited Partner will have the right to
require the Fund to redeem such person's
Interest. In addition, the Fund does not
intend to make offers to repurchase
Interests, and Interests will not be
traded on any securities exchange or
other market.
FOR THESE VARIOUS REASONS, AN INVESTMENT
IN THE FUND WILL BE ILLIQUID UNTIL THE
REDEMPTION DATE AND
8
<PAGE>
INVESTORS MUST BE WILLING AND ABLE TO
BEAR THE RISKS OF AN INVESTMENT IN THE
FUND UNTIL SUCH DATE.
Taxation Counsel to the Fund will render an
opinion that the Fund will be treated as
a partnership and not as an association
taxable as a corporation for Federal
income tax purposes. Counsel to the Fund
will also render its opinion that, under
a "facts and circumstances" test set
forth in regulations adopted by the U.S.
Treasury Department, the Fund will not be
treated as a "publicly traded
partnership" taxable as a corporation.
Accordingly, the Fund should not be
subject to Federal income tax, and each
Limited Partner will be required to
report on its own annual tax return such
Limited Partner's distributive share of
the Fund's taxable income or loss.
If it were determined that the Fund
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 Fund or otherwise), the
taxable income of the Fund would be
subject to corporate income tax and any
distributions of profits from the Fund
would be treated as dividends.
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 with the
approval of the Manager. Although the
Fund may borrow money for certain limited
purposes (e.g., as a temporary measure
for extraordinary or emergency purposes),
the Fund does not expect to incur any
borrowings. Therefore, it is not expected
that tax-exempt entities which purchase
Interests will realize any "unrelated
business taxable income" with respect to
which they would be subject to Federal
income tax. See "ERISA CONSIDERATIONS."
Investment in the Fund by tax-exempt
entities requires special considerations
and may not be appropriate for certain
types of such entities. Trustees or
administrators of such entities are urged
to carefully review the matters discussed
in this Prospectus.
9
<PAGE>
Term In general, Interests in the Fund will be
redeemed automatically on the earlier of
[September 30, 1998] or the date the Fund
is otherwise terminated under the terms
of the Partnership Agreement.
Reports to Partners The Fund will furnish Limited Partners as
soon as practicable after the end of each
taxable year such information as is
necessary for them to complete Federal
and state income tax or information
returns, along with any other tax
information required by law. The Fund
will also send Limited Partners a semi-
annual report and an audited annual
report generally within 60 days after the
close of the period for which it is being
made, and monthly reports summarizing the
Fund's investment performance.
Fiscal Year The Fund's fiscal year ends on December
31. The first fiscal year of the
Partnership will commence on the Closing
Date and will end on December 31, 1997.
10
<PAGE>
THE FUND
LEVCO Zero Coupon/Put Fund I, L.P. (the "Fund") (September 30, 1998
Redemption Date) is a Delaware limited partnership that was organized on January
30, 1997, and is registered as a non-diversified, closed-end investment company
under the Investment Company Act of 1940 (the "1940 Act"). John A. Levin & Co.,
Inc. serves as the Fund's investment adviser (the "Adviser"). The Fund is
designed for use by professional money managers for accounts they manage, and
for use by other sophisticated investors, as an investment alternative offering
the opportunity for capital appreciation in the event of a general stock market
decline (or "bear market"). An investment in the Fund should be used to achieve
a specialized type of investment exposure within a broader investment program.
Although registered under the 1940 Act, the Fund is similar in certain
respects to an unregistered private investment partnership. Limited partnership
interests in the Fund ("Interests") are being offered only to high net worth
individual and institutional investors willing to invest at least $250,000, and
are subject to significant restrictions on transfer. See "SUBSCRIPTIONS FOR
INTERESTS." In addition, the capital accounts of investors will be subject to
both asset-based charges in the amount of their pro rata shares of the Fund's
fees and expenses, as well as a performance-based incentive allocation (the
"Incentive Allocation"). See "CAPITAL ACCOUNTS AND ALLOCATIONS - Incentive
Allocation." Unlike unregistered investment partnerships, the Fund and Interests
are being registered under the 1940 Act and the Securities Act of 1933,
respectively, to enable Interests to be offered publicly to and held by an
unlimited number of investors.
Investors purchasing Interests pursuant to the offering being made by
this Prospectus will become limited partners of the Fund ("Limited Partners").
LEVCO GP, Inc. (the "Manager"), a subsidiary of the Adviser, serves as the
Fund's Corporate General Partner. The Fund also has five Individual General
Partners. (The Limited Partners, the Manager and the Individual General Partners
are collectively referred to as the "Partners.")
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek capital appreciation
from declines in U.S. stock market prices generally, and in the prices of stocks
of domestic issuers in particular market sectors, that may occur during the
period [April 1, 1997] through [September 30, 1998] (the "Redemption Date"),
while seeking to preserve capital in the event such prices increase during that
period. The Fund will pursue its objective primarily by purchasing listed and
over-the-counter put options on stock indices and groups of stocks, and by
investing a significant portion of its assets in short-term debt obligations
issued or guaranteed by the U.S. government or by an agency or instrumentality
of the U.S. government ("U.S. Government Securities") maturing on or shortly
before the Redemption Date. The purchase of put options offers an opportunity
for capital appreciation based on declines in the values of U.S. stock indices
and in the prices of stocks of domestic issuers within particular market
sectors. Through its investments in U.S. Government Securities maturing on or
shortly before the Redemption Date, the Fund will
11
<PAGE>
seek to protect the value of Interests against any decline in value resulting
from its options investments. Absent unusual market conditions, substantially
all of the assets of the Fund will consist of "zero coupon" U.S. Government
Securities (including receipts representing interests in such securities) and
put options.
Approximately 85% to 95% of the value of the Fund's net assets will
initially be invested in U.S. Government Securities. By holding these
investments to maturity, the Fund expects that the value of Interests on the
Redemption Date will not be less than their initial value. Any capital
appreciation will be derived primarily from investments in options. However,
there can be no assurance that on the Redemption Date Interests will not be
less than their initial value.
The Fund will seek capital appreciation primarily by purchasing and
trading put options on U.S. stock indices and on groups of stocks of domestic
issuers in particular market sectors. These options will generally increase in
value in the event of a decline in the values of the indices or the prices of
the stocks underlying the options. If the values of the underlying indices or
the prices of the underlying stocks increase, however, the Fund will incur
losses on its investments in put options. The Fund may also sell (or write) put
options and purchase call options to lock-in gains on existing options positions
or to hedge its options positions. See "Options Transactions."
Because the Fund pursues an investment approach under which it seeks
appreciation from declines in securities prices, the risk characteristics of an
investment in the Fund are significantly different from those of most other
investment funds which generally seek appreciation from increases in securities
prices by holding long positions in equity securities. This investment approach
as it relates to options involves a significant risk because during most 18
month periods concluding since October 1982 (and every 18 month period since
February 1991), stock market performance, as measured by broad-based indices
such as the S&P 500 Index, has been positive. However, through its investments
in short-term U.S. Government Securities, the Fund will seek to assure that the
value of its portfolio as of the Redemption Date will not be less than its
initial value. The amount of gains or losses resulting from the Fund's
investment strategy will be affected by the premiums or amounts in lieu of
dividends or interest the Fund pays or receives in connection with its options
transactions.
In addition, for liquidity purposes, to protect profits, or for
temporary purposes during periods of rising markets, the Fund may invest without
limit in high quality money market instruments. The Fund also may invest in such
instruments and securities for cash management purposes, pending investment in
accordance with the Fund's objectives and policies, and to generate income to
meet operating expenses.
The Fund's investment objective may not be changed without the
affirmative vote of a majority, as defined by the 1940 Act, of the outstanding
voting securities of the Fund. Except as otherwise noted, all investment
policies and investment restrictions of the Fund may be changed by the
Individual General Partners of the Fund without the approval of the Limited
Partners. See "INVESTMENT RESTRICTIONS."
OPTIONS TRANSACTIONS
- --------------------
The Fund will purchase exchange listed and over-the-counter put
options on U.S. stock indices and on groups of stocks of domestic issuers in
particular market sectors. In addition, the Fund may sell (or write) put options
and purchase call options on such stock indices
12
<PAGE>
and groups of stocks to lock-in gains on or to hedge its options positions.
There is no requirement that the Fund hedge its positions.
Stock Index Options. A stock index fluctuates with movements in the
market values of the stocks comprising the index. Options on stock indices grant
the holder a right to receive an amount of cash upon exercise of the option. In
the case of a put option purchased by the Fund, receipt of this cash amount
requires that the closing level of the stock index upon which the option is
based be less than the exercise price of the option. The amount of cash
received, if any, will be the difference between the closing price of the index
and the exercise price of the option, multiplied by a specified dollar multiple.
The writer (seller) of the option is obligated, in return for the premiums
received from the purchaser of the option, to deliver this amount to the
purchaser. Unlike options on groups of securities, which are discussed below,
all settlements of exchange listed stock index options transactions are in cash.
Certain of the stock index options in which the Fund may invest are
based on a broad market index such as the S&P 500 Index, the NYSE Composite
Index, or the AMEX Major Market Index. Other of the stock options in which the
Fund may invest are based on a narrower index, such as the Philadelphia Stock
Exchange Over-the-Counter Index. Currently, options are traded on the Chicago
Board Options Exchange, the AMEX, and other securities exchanges.
Limits are generally imposed by exchanges on the maximum number of put options
on the same index that a single investor may buy, whether such investor is
acting alone or in concert with others (regardless of whether the options are
held on one or more accounts or through one or more brokers). Under these
limitations, options positions of all investment companies and other accounts
advised by the same investment adviser are aggregated, and an exchange may
require the liquidation of positions, and may impose other sanctions or
restrictions if position limits are exceeded. Position limits may therefore
restrict the number of listed options which the Fund may buy or sell.
Options on Groups of Securities. The Fund's options transactions may
include customized options on groups (or "baskets") of securities of issuers
within particular market sectors (e.g., biotechnology, consumer durables or
transportation) selected by the Adviser. Buying a put option of this type
typically gives the Fund a right in return for the premium it pays, during the
term of the option, to sell the securities underlying the option at the exercise
price. However, in some cases, the options may be cash settled like index
options. The Fund will not purchase equity securities except insofar as may be
necessary to effect settlements of transactions in options.
Options on groups of securities purchased by the Fund will be
privately negotiated in over-the-counter transactions ("OTC options"). To a
limited extent the Fund may also purchase stock index options in over-the-
counter transactions. OTC options will be purchased from dealers or financial
institutions which enter into direct agreements with the Fund. The exercise
prices, expiration dates and other features of OTC options will be determined by
the agreement between the Fund and the other party to the option. The Fund may
also invest in "European-style" options. Unlike the options discussed above,
which give the Fund a right to sell the securities
13
<PAGE>
underlying the options during the term of the options, the Fund has a right to
sell the securities underlying European options only on a specific date.
Sales of Options. As the holder of an option, the Fund may liquidate
its position by effecting a "closing sale transaction." This is done by selling
(or writing) an option of the same series as the option previously purchased by
the Fund. The Fund will realize a gain (or a loss) on a closing sale transaction
for a put option previously purchased by the Fund if the premium, less
commission costs, received by the Fund from the sale of the put option to close
the transaction is greater (or less) than the premium, plus commission costs,
paid by the Fund to purchase the put option. There is no certainty, however,
that a closing sale transaction can be accomplished. If a put option which the
Fund has purchased is not exercised or sold and expires out-of-the-money, the
option will become worthless on the expiration date, and the Fund will realize a
loss in the amount of the premium paid, plus commission costs. The Fund will not
be able to effect a closing purchase transaction after being notified of the
exercise of an option written by the Fund. Instead of selling a put option on an
index or group of securities to terminate an options position or to reduce the
Fund's exposure to a particular put option, the Fund may purchase a call option
on the same index or group of securities.
Risks of Options. The use of stock index options and options on
groups of securities involves certain risks, including the risk of an imperfect
correlation between the option price and the value of the index or group of
securities underlying the option. Particularly in the case of OTC options, there
is also a risk that there may not be a liquid secondary market. In such cases,
the Fund may not be able to terminate or hedge its position. Because the value
of an option depends upon movements in the level of the underlying index or in
the prices of the underlying securities, rather than changes in the price of an
individual stock, whether the Fund realizes a gain or loss from its options
transactions will depend upon movements in the level of U.S. stock prices
generally or, in the case of options on narrow based indices or groups of
securities, upon general movements in the prices of the securities of issuers
within particular market sectors, rather than upon movements in the price of a
single security. Investing in options therefore requires the use of different
skills and techniques than those associated with investing in individual stocks.
When the Fund sells (or writes) a put option it will be exposed to an
obligation to another party. In such cases, the Fund will cover its exposure by
holding an offsetting option position (e.g., the Fund would hold a put option
with an exercise price that is the same as or lower than the exercise price of
the put option written) or the Fund will maintain (and mark-to-market on a daily
basis) a segregated account in the Fund's custodian bank consisting of cash and
liquid securities that, when added to the premiums deposited with respect to the
option, are equal to the market value of the underlying stock index or
securities not otherwise covered.
Buying a call option gives the Fund a right, in exchange for a premium
paid and during the term of the option, to receive cash if the closing level of
the stock index upon which the option is based is greater than the exercise
price of the option or to buy the group of securities underlying the option at
the exercise price. For the Fund to profit from the exercise of a call
14
<PAGE>
option held by it, the closing level of the stock index upon which the option is
based, or the price of the securities underlying the option, would have to be
greater than the exercise price.
There is no guarantee that a market will exist at all times for all
options purchased or sold by the Fund. If a market for a particular option held
by the Fund is not available, the Fund may not be able to realize its profits or
limit its losses on the option until such time as the Fund can exercise the
option or, in the case of an option written by the Fund, the Fund may remain
obligated under the option until it is exercised or expires. In addition, in the
event of the bankruptcy of a broker with or through which the Fund has entered
into an option transaction, the Fund could experience delays or losses in
liquidating the position or lose all or part of the value of the option.
The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the options
markets close before the markets for the securities comprising an index or the
securities underlying the option, significant price and rate movements can take
place in the underlying markets that cannot be reflected in the options markets.
Because option premiums paid or received by the Fund are relatively
small compared to the market value of the investments or instruments underlying
the options, transactions in options are more speculative than investing
directly in common stocks.
The Adviser will invest the Fund's assets in those types of put
options which, in the Adviser's view, offer the greatest opportunity for capital
appreciation based upon its expectations regarding market trends and movements.
Thus, the options held by the Fund will vary over time. If the Adviser is
correct in its expectations regarding the future direction of stock prices, the
net assets of the Fund should increase. If the Adviser's expectations are
incorrect, the Fund will incur a loss on its options transactions.
U.S. GOVERNMENT SECURITIES
- --------------------------
U.S. Government Securities are obligations issued by or guaranteed by
the United States government or by one of its agencies or instrumentalities.
Certain of these obligations, including U.S. Treasury notes and bonds, and
Federal Housing Administration debentures, are supported by the full faith and
credit of the United States. Certain other U.S. Government securities, issued or
guaranteed by Federal agencies or government-sponsored enterprises, are not
supported by the full faith and credit of the United States. Securities of this
type include obligations supported by the right of the issuer to borrow from the
U.S. Treasury, such as obligations of Federal Home Loan Banks, and obligations
supported solely by the credit of the instrumentality, such as Federal National
Mortgage Association bonds. U.S. Government Securities are considered among the
most creditworthy of fixed income investments. Yields available from U.S.
Government Securities are generally lower than the yields available from
corporate debt securities and will change as interest rates fluctuate.
The Fund's investments in U.S. Government Securities will consist
primarily of "zero coupon" securities. These include U.S. Treasury notes and
bonds and other U.S.
15
<PAGE>
Government Securities which have been stripped of their unmatured interest
coupons and receipts and certificates representing interests in such stripped
debt obligations and coupons. A zero coupon security pays no interest to its
holder during its life. For this reason, zero coupon obligations usually trade
at a deep discount from their face or par value and will be subject to greater
fluctuations of market value in response to changing interest rates than debt
obligations of comparable maturities which make current distributions of
interest. Current Federal tax law requires that a holder of a zero coupon
security accrue a portion of the discount at which the security was purchased as
income each year even though the holder receives no interest payment in cash on
the security during the year. For additional discussion of the tax treatment of
zero coupon U.S. Government Securities, see "TAXATION - Tax Treatment of Fund
Investment - Other Income."
MONEY MARKET INVESTMENTS
- ------------------------
Subject to the policies described above, the Fund may invest in high
quality money market instruments. Investments in money market instruments will
be limited to the following types of U.S. dollar-denominated debt obligations
having remaining maturities of one year or less:
(1) U.S. Government Securities: Obligations issued or guaranteed by
the U.S. Government or its agencies or instrumentalities (discussed above).
(2) Bank Obligations: Certificates of deposit, bankers' acceptances,
loan participation agreements, time deposits, and letters of credit issued or
guaranteed by a U.S. bank, or by a U.S. branch of a foreign bank, having total
assets in excess of $1 billion.
(3) Commercial Paper: Obligations rated "A-1" or "A-2" by Standard &
Poor's Corporation ("Standard & Poor's") or Prime-1 or Prime-2 by Moody's
Investors Services, Inc. ("Moody's") or if not rated, issued by a U.S.
corporation having an existing debt security rated "A" or better by Standard &
Poor's or "A" or better by Moody's.
(4) Corporate Obligations: Corporate debt obligations (including
master demand notes but not including commercial paper) if they are issued by
U.S. corporations and are rated "A" or better by Standard & Poor's or "A" or
better by Moody's or unrated securities which are of comparable quality in the
opinion of the Adviser.
INVESTMENT RESTRICTIONS
In addition to the policies and limitations described above under
"Investment Objective and Policies," the Fund is subject to certain restrictions
on its investments. Under the following investment restrictions adopted by the
Fund, which may not be changed without the approval of a "majority" (as defined
by the 1940 Act) of the outstanding voting securities of the Fund (the vote of
Limited Partners representing 67% or more of the outstanding Interests, if the
holders of more than 50% of outstanding Interests are present at a meeting or
represented by proxy, or representing 50% of the outstanding Interests,
whichever is less), the Fund may not:
16
<PAGE>
1. borrow money, except that the Fund may, as a temporary measure for
extraordinary or emergency purposes, borrow from banks in an amount
not exceeding 10% of the value of the Fund's total net assets (and
subject to the limitation that the Fund will not purchase any
securities at a time while such borrowings exceed 5% of its total net
assets);
2. issue senior securities, as defined by the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from entering
into repurchase agreements, borrowing money from banks and writing put
options, in each case, in accordance with the Fund's investment
policies and restrictions;
3. underwrite the securities of other issuers, except to the extent that
in connection with the disposition of its investments or the sale of
its own shares the Fund may be deemed to be an underwriter;
4. invest more than 25% of the value of its total net assets in the
securities of issuers engaged in any one industry (other than U.S.
Government Securities);
5. purchase real estate or interests therein, although the Fund may
purchase securities of issuers which deal in real estate or interests
therein and may purchase securities which are secured by real estate
or such interests;
6. purchase commodities or commodities futures contracts; or
7. make loans of money or other property to other persons, except through
the purchase of debt securities consistent with the Fund's investment
objective and policies and by entering into repurchase agreements.
The Fund has also adopted the following additional investment
restrictions, which are not fundamental and may (subject to such limitations as
may be imposed by applicable laws and regulations) be changed by the Individual
General Partners of the Fund. Under these restrictions, the Fund may not:
1. purchase securities issued by other investment companies in an amount
exceeding such limitations as are imposed by the 1940 Act and the
rules thereunder, except in connection with a reorganization, merger,
consolidation or offer of exchange;
2. invest for the purpose of exercising control over the management of
any company; or
3. mortgage, hypothecate or pledge any of its assets, except that the
Fund may pledge assets to secure permitted borrowings and enter into
collateral arrangements with respect to transactions in options.
All percentage limitations imposed by the investment policies or
restrictions of the Fund, unless otherwise stated, apply only at the time an
investment is purchased or sold by
17
<PAGE>
the Fund and shall not be deemed to be violated as a result of any subsequent
change in the value of the investment or in the value of the Fund's total net
assets. Except as otherwise stated herein, the investment policies and
restrictions of the Fund are not fundamental and may be changed by the
Individual General Partners of the Fund.
RISK CONSIDERATIONS
In evaluating the suitability of an investment in the Fund,
prospective investors should consider the various risks associated with the
investment policies of the Fund. The investment characteristics of the Fund
differ significantly from those of most other investment funds. See "INVESTMENT
OBJECTIVE AND POLICIES." In addition, various risks are associated with the
Fund's transactions in options. See "INVESTMENT OBJECTIVE AND POLICIES -
Options Transactions - Risks of Options." The following additional risks should
also be considered.
ILLIQUID INVESTMENTS
- --------------------
The Fund's options transactions may be effected on securities
exchanges or in the over-the-counter markets. OTC options may be illiquid and,
in such cases, the Fund may have difficulty closing out its positions or may be
able to do so only at unfavorable prices. The illiquid nature of an investment
may adversely affect the ability of the Fund to sell the investment at the time
desired, and may therefore preclude the Fund from making another investment
deemed more attractive by the Adviser. The Fund will not invest more than 20%
of the value of its assets in illiquid investments.
LIMITED DIVERSIFICATION
- -----------------------
The Fund is a "non-diversified" investment company and there are no
general percentage limitations on the portion of the Fund's assets that may be
invested in the securities of any one issuer or in options on the stock of
issuers in any one market sector. The Fund may concentrate its option
investments in options on the stocks of companies within one or more particular
market sectors. Due to these policies, the investment portfolio of the Fund may
be subject to greater risk and volatility than would be the case if investments
were made in a broader range of issuers and market sectors.
The Fund will generally not expose more than 5% of the value of its
total net assets to the risks of any one non-governmental issuer of securities
(excluding exchange traded options) because, except for investments in U.S.
Government Securities and money market instruments, it will invest primarily in
options on stock indices and on groups of stocks. However, the Fund will be
exposed to counterparty risks when entering into OTC options. Under limitations
imposed by the 1940 Act, the Fund may not enter into an OTC option with a broker
if, as a result thereof, more than 5% of the value of the Fund's assets would be
invested in options (or other securities) issued by such broker.
To the extent the Fund purchases put options on groups of stocks of
issuers within particular market sectors, it will be exposed to investment risks
associated with the stocks of issuers
18
<PAGE>
engaged in similar or related industries, which issuers are often faced with the
same obstacles, issues or regulatory burdens. The values of such options will be
adversely affected by events and developments affecting the issuers of the
underlying stocks. Thus, the Fund's portfolio may be more susceptible to any
single economic, political or regulatory occurrence than the portfolio of a
company that does not focus a portion of its investments in particular market
sectors. This investment practice may result in an investment in the Fund being
subject to greater risk and volatility than would be the case if the Fund did
not purchase options on groups of stocks of issuers within particular sectors.
INCENTIVE ALLOCATION
- --------------------
The Incentive Allocation which may be made to the capital account of
the Manager (see "CAPITAL ACCOUNTS AND ALLOCATIONS - Incentive Allocation") may
create an incentive for the Adviser to cause the Fund to make investments that
are riskier or more speculative than would be the case in the absence of such
allocation. The Incentive Allocation will be charged to the capital accounts of
the Limited Partners and will be in addition to the fees and expenses borne
indirectly by Limited Partners as investors in the Fund. Depending on the
Fund's investment performance, the Incentive Allocation may result in Limited
Partners bearing aggregate fees, expenses and charges that are higher than those
typically borne by investors in closed-end investment companies, but which are
comparable to those borne by investors in private investment partnerships.
TAX RISKS
- ---------
Counsel to the Fund will render opinions that the Fund will be treated
as a partnership and not as an association or a "publicly traded partnership"
taxable as a corporation for Federal income tax purposes. If it were determined
that the Fund 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 Fund or otherwise), the taxable income of the Fund
would be subject to corporate income tax and distributions of profits from the
Fund would be treated as dividends. See "TAXATION - Tax Treatment of
Partnership Operations - Classification of the Partnership."
It is likely, although not necessary, that a substantial portion of
the Fund's put option transactions will involve listed options on broad-based
indices. Thus, under mark-to-market rules applicable to such options, the Fund
(and the Limited Partners) will recognize gains or loss with respect to these
options at the end of each fiscal year even if the options are not disposed of.
See "TAXATION - Tax Treatment of Fund Investments - Taxation of Put Option
Transactions - Equity Options." Thus, since the Fund generally will not make
distributions until the Redemption Date, Limited Partners may recognize capital
gains prior to the Redemption Date without receiving a distribution of cash.
NO REGULAR DISTRIBUTIONS
- ------------------------
The Fund does not intend to make regular, periodic distributions of
its net income or gains, if any, to Limited Partners. Nevertheless, Limited
Partners will be required each year to
19
<PAGE>
pay applicable Federal and state income taxes on their share of the Fund's
taxable income, including accrued original issue discount on zero coupon
obligations held by the Fund, which taxes will have to be paid from other
sources. Distributions will be made in the sole discretion of the Individual
General Partners. However, distributions may be made, in the sole discretion of
the Individual General Partners, when and if the Fund has net realized
undistributed gains exceeding 20% of the initial net assets of the Fund. See
"DISTRIBUTIONS TO LIMITED PARTNERS."
PORTFOLIO TURNOVER
- ------------------
There are no fixed limitations regarding portfolio turnover.
Frequency of portfolio turnover will, therefore, not be a limiting factor if the
Adviser considers it advantageous to purchase or sell certain options for the
account of the Fund. It is expected that the Fund's annual portfolio turnover
rate will not exceed [ ]%. However, under the formula prescribed by the
Securities and Exchange Commission, portfolio turnover rate is calculated
without regard to securities, including options, having maturities of less than
one year. To the extent that the Fund's options positions are actively traded,
the Fund will incur greater brokerage commissions than would be the case if Fund
followed a less active, long-term trading strategy and, if successful, will
result in the realization of gains which will be taxable to Limited Partners
annually as short-term gains.
LIQUIDITY RISKS
- ---------------
Interests will not be traded on any securities exchange or other
market and are subject to substantial restrictions on transfer. Additionally,
although Interests will be redeemed automatically on the Redemption Date
(September 30, 1998), prior to such date, no Limited Partner will have the right
to require the Fund to redeem such person's Interest and the Partnership does
not intend to make offers to repurchase Interests. FOR THESE REASONS, AN
INVESTMENT IN THE FUND WILL BE ILLIQUID UNTIL THE REDEMPTION DATE, AND INVESTORS
MUST BE WILLING AND ABLE TO BEAR THE RISKS OF AN INVESTMENT IN THE FUND UNTIL
SUCH DATE. SEE "REDEMPTIONS AND TRANSFERS OF INTERESTS."
BROKERAGE TRANSACTIONS
The Adviser places orders for the purchase and sale of securities by
the Fund with brokers and dealers based upon its evaluation of their financial
responsibility, subject to their ability to effect transactions at the best
available prices. In selecting brokers, the Adviser evaluates the overall
reasonableness of brokerage commissions paid by reviewing the quality of
executions obtained on the Fund's portfolio transactions, viewed in terms of the
size of transactions, prevailing market conditions in the security purchased or
sold, and general economic and market conditions. In seeking to ensure that the
commissions charged the Fund are consistent with prevailing and reasonable
commissions, the Adviser also endeavors to monitor brokerage industry practices
with regard to the commissions charged by brokers on
20
<PAGE>
transactions effected for other comparable institutional investors. While the
Adviser seeks reasonably competitive rates, the Fund does not necessarily pay
the lowest commissions available. Transactions in U.S. Government Securities and
other securities traded over-the-counter will not generally involve the payment
of commissions by the Fund. However, the prices at which such transactions are
effected typically involve a "spread" which represents profit to the dealer.
Consistent with the standard of seeking to obtain the best execution
on portfolio transactions, the Adviser may select brokers that provide research
services to effect such transactions. Research services consist of, among other
things, statistical and analytical reports relating to issuers, industries,
securities and economic factors and trends, which may be of assistance or value
to the Adviser in making informed investment decisions. Research services
prepared and furnished by brokers through which the Fund effects securities
transactions may be used by the Adviser in servicing all of its accounts, and
not all such services may be used by the Adviser in connection with the Fund.
In recognition of the above-described brokerage and research services provided
by certain brokers, the Adviser, consistent with the standard of seeking to
obtain the best execution on portfolio transactions, may place orders with such
brokers for the execution of Fund transactions on which the commissions are in
excess of those which other brokers might have charged for effecting the same
transactions.
The Fund may effect portfolio brokerage transactions through LEVCO
Securities, Inc., an affiliate of the Adviser, subject to procedures adopted by
the Individual General Partners of the Fund. Under these procedures, the
commissions paid to LEVCO Securities, Inc. must be reasonable and fair compared
to the commissions, fees and other remuneration received by other brokers in
connection with comparable transactions involving comparable securities during a
comparable period of time.
One or more of the other accounts which the Adviser manages (including
investment companies and partnerships with investment objectives similar to the
Fund's) may from time to time engage in the same investment transactions as the
Fund. In addition, the Adviser or its affiliates may engage in transactions or
cause or advise other clients to engage in transactions or investments which may
differ from or be identical to the advice given, or the timing or nature of any
action taken, with respect to the Fund. Investment decisions for the Fund are
made independently from those of such other accounts; however, from time to
time, the same investment decision may be made for more than one company or
account, including the Fund. When two or more companies or accounts, including
the Fund, seek to engage in transactions involving the same underlying
securities, the securities actually purchased or sold will be allocated among
the companies and accounts on a good faith equitable basis by the Adviser, in
its discretion, in accordance with the accounts' various investment objectives.
In some cases, this system may adversely affect the price or size of the
position obtainable for the Fund. In other cases, however, the ability of the
Fund to participate in volume transactions may produce better execution for the
Fund. It is the opinion of the Fund's Individual General Partners that this
advantage, when combined with the other benefits available due to the Adviser's
organization, outweighs any disadvantages that may be said to exist from
exposure to simultaneous
21
<PAGE>
transactions. If any combined order is not filled at the same price, it may be
allocated on an average price basis.
The Adviser and its affiliates and their respective 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 Fund. As a result of differing
trading and investment strategies or constraints, positions may be taken by such
persons that are the same as, different from, or made at a different time than,
positions taken for the Fund. In order to mitigate the possibility that the
Fund will be adversely affected by such personal trading, the Fund and the
Adviser have each adopted a Code of Ethics in compliance with Rule 17j-1 under
the 1940 Act to govern securities trading in the personal accounts of investment
professionals and others who normally come into possession of information
regarding the Fund's portfolio transactions.
SUBSCRIPTIONS FOR INTERESTS
An aggregate of $25 million of limited partnership interests in the
Fund ("Interests") are being offered for sale to eligible investors. See
"Eligible Investors." The minimum subscription amount by any investor is
$250,000. However, the Fund may waive this in special circumstances. Interests
may be purchased through LEVCO Securities, Inc., the distributor of Interests in
the Fund (the "Distributor"), or through securities dealers which have entered
into selling agreements with the Distributor. A sales commission of 1% of the
amount invested will be charged by the Distributor and paid to selling dealers
and financial institutions. This sales commission will be waived for investors
who purchase Interests directly from the Distributor or who are clients of the
Adviser or its affiliates or who, during the past two years, have been solicited
by the Adviser or its affiliates to purchase any investment product or service.
The offering of Interests being made by this Prospectus (the "Offering") will
close on [April 1, 1997] or such later date not more than 30 days thereafter as
may be determined by the Fund (the "Closing Date"). The Fund will not offer
Interests to investors after completion of the Offering. Subscriptions for
Interests, together with cleared funds in the full amount of an investor's
subscription, must be received by the Distributor not later than [ ] days prior
to the Closing Date. All subscriptions are subject to acceptance by the Manager.
See "SUBSCRIPTIONS FOR INTERESTS." In the event that the Distributor or
securities dealers which have entered into selling agreements with the
Distributor do not receive by the Closing Date acceptable subscriptions for an
aggregate of at least $25 million of Interests, the Offering will be terminated
and the subscription amounts will be returned to investors, together with
interest. The Fund may, in its sole discretion, suspend the Offering at any time
or increase the aggregate amount of Interests being offered in the Offering.
The Distributor serves as such pursuant to the terms of a Distribution
Agreement dated as of ______________, 1997 (the "Distribution Agreement")
entered into by the Fund and the Distributor. Under the Distribution Agreement,
the Distributor serves as agent in selling Interests to eligible investors. In
addition, the Distributor is authorized to enter into selling agreements with
securities dealers and other financial institutions to assist in the
distribution of Interests. The Manager will pay securities dealers and other
financial institutions that distribute Interests up to
<PAGE>
25% of any Incentive Allocation it receives that is attributable to Limited
Partners who are customers of such securities dealers and other financial
institutions. Although the Fund does not pay any fee to the Distributor under
the Distribution Agreement, the Fund has agreed to bear offering costs in an
amount not exceeding $_________. See "FEES AND EXPENSES." All other expenses
associated with the distribution of Interests are required to be borne by the
Distributor or the Investment Adviser.
The Distributor has its principal office at One Rockefeller Plaza, New
York, New York 10020, and is a wholly-owned subsidiary of the Adviser.
SUBSCRIPTION TERMS
- ------------------
In order to invest in the Fund, a prospective investor must complete
and submit the subscription agreement and an investor questionnaire that will be
supplied to persons who wish to purchase Interests (the "Subscription
Documents"). The procedures to be followed in subscribing for Interests are set
forth in the Subscription Documents. All subscriptions are subject to
acceptance by the Manager and may be rejected (in whole or in part) in the sole
discretion of the Manager. If a subscription from an investor (or any portion
thereof) is rejected, the subscription amount (or the applicable portion
thereof, in the case of a subscription that has been partially rejected) will
promptly be returned to the investor, together with interest.
If subscriptions in the Minimum Subscription Amount are received and
accepted by the Closing Date, Interests will be issued as of such date to all
investors whose subscriptions have been accepted (in the amount of each accepted
subscription), and such investors will become Limited Partners.
By signing the Subscription Documents, an investor agrees to be bound
by all of the terms of the Partnership Agreement upon becoming a Limited
Partner. Each prospective investor will also be obligated to represent and
warrant in the Subscription Documents, 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.
ELIGIBLE INVESTORS
- ------------------
Interests are being offered to and will only be sold to prospective
investors who certify in the Subscription Documents that they (as well as each
of the investor's beneficial owners under certain circumstances) have a net
worth immediately prior to the time of subscription of at least $1 million.
Certain additional investor eligibility requirements are set forth in the
Subscription Documents. These requirements may vary, depending on the nature of
the investor. Investors may also be required to demonstrate their
qualifications under the eligibility standards imposed by applicable state
securities laws.
<PAGE>
REDEMPTIONS AND TRANSFERS OF INTERESTS
Interests in the Fund will be redeemed automatically as of the
Redemption Date (September 30, 1998), absent unusual circumstances. Prior
thereto, no Limited Partner or other person holding an Interest or a portion of
an Interest will have the right to require the Fund to redeem such Interest or
any portion thereof. In addition, Interests are subject to significant transfer
restrictions as described below, and will not be traded on any securities
exchange or other market. CONSEQUENTLY, AN INVESTMENT IN THE FUND WILL BE
ILLIQUID UNTIL THE REDEMPTION DATE, AND INVESTORS IN THE FUND MUST BE WILLING
AND ABLE TO BEAR THE RISK OF AN INVESTMENT IN THE FUND UNTIL SUCH DATE.
Under certain unusual circumstances, the Redemption Date may be
postponed and the payment of the proceeds of redemptions may be delayed. This
would occur in the event that on the Redemption Date the New York Stock Exchange
or any exchange on which securities held by the Fund are traded is closed or if
trading is suspended or restricted on such day, or in the event that an
emergency exists as a result of which disposal by the Fund of any securities or
other assets is not practicable, or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets on such day. Any such
postponement or delay must be approved by the Individual General Partners. If a
postponement of the Redemption Date is approved, Interests will be redeemed as
of the first trading day that the conditions giving rise to the postponement, in
the sole determination of the Individual General Partners, no longer exist.
The amount owed by the Fund in connection with redemptions and
repurchases of Interests or portions thereof by the Fund shall be payable in
cash, without interest. The Manager shall cause the Fund to pay not less than
95 percent of the amount of each redemption or repurchase of an Interest or
portion thereof (computed on the basis of unaudited data) to the Partner or
other holder thereof within ten days after the date as of which the redemption
or repurchase is effected. The balance of such proceeds owed shall be paid
(subject to audit adjustments) within 15 days after the completion of the audit
of the Fund's books for the fiscal year during which such redemption or
repurchase occurs or, in the case of the redemption of Interests automatically
as of the Redemption Date, after the completion of a final audit of the Fund's
books. It is expected that the final audit will be completed not more than 60
days after the Redemption Date.
TRANSFERS OF INTERESTS
- ----------------------
No person may become a substitute 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. An Interest in the Fund may be
transferred by a Limited Partner 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 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 transferee meets any requirements imposed by the
Fund with respect to investor eligibility and suitability, including the
requirement that any
<PAGE>
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 properly completed Subscription Documents.
Any transferee that acquires an Interest or portion thereof in the
Fund 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, if any, allocable to the Interest so acquired,
and to transfer such Interest subject to the restrictions 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 Fund as a Limited Partner.
Each Limited Partner and transferee must pay all expenses, including attorneys'
and accountants' fees, incurred by the Fund in connection with such transfer.
By subscribing for an Interest in the Fund, each Limited Partner will
agree to indemnify and hold harmless the Fund, 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 of these provisions or any misrepresentation made by such
Limited Partner in connection with any such transfer.
MANDATORY REDEMPTION
- --------------------
The Fund may effect a mandatory repurchase of Interests held by any
Limited Partner (or any portion thereof) or held by any person acquiring an
Interest or portion thereof from or through a Limited Partner in the event that:
. an Interest or portion thereof has been transferred or 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 Limited Partner;
. ownership of an Interest by a Limited Partner or other person will
cause the Fund to be in violation of, or subject the Fund to
additional registration or regulation under, the securities or other
laws of the United States or any other relevant jurisdiction;
. continued ownership of an Interest may be harmful or injurious to
the business or reputation of the Fund, the Individual General
Partners, the Adviser or the Manager, or may subject the Fund or any
Partners to an undue risk of adverse tax or other fiscal or
regulatory consequences;
<PAGE>
. any of the representations and warranties made by a Limited Partner
in connection with the acquisition of an Interest or portion thereof
was not true when made or has ceased to be true; or
. it would be in the best interests of the Fund for the Fund to
repurchase an Interest or portion thereof.
DISTRIBUTIONS TO LIMITED PARTNERS
The Fund will not make regular, 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,
state and local income taxes on their respective shares of the Fund's taxable
income, including original issue discount accrued for such year on zero coupon
obligations held by the Fund and net gains from the Fund's transactions in
options. If distributions are not made, Limited Partners will have to pay
applicable taxes from other sources.
In the event that the Fund has cumulative net realized gains exceeding
20% of the initial net assets of the Fund, the Individual General Partners may
make one or more distributions to the Limited Partners. The amount and times of
any such distributions will be determined in the sole discretion of the
Individual General Partners, and there is no requirement that the full amount of
gains be distributed.
MANAGEMENT OF THE FUND
INDIVIDUAL GENERAL PARTNERS
- ---------------------------
Ultimate responsibility for the affairs of the Fund is vested in the
individuals who serve as the Fund's Individual General Partners. These
individuals are responsible for overseeing the Fund's general operations. The
Individual General Partners generally have the same powers, authority and
responsibilities as those of directors of registered investment companies that
are organized as corporations and have complete and exclusive authority to
establish policies regarding the management, conduct and operation of the Fund's
business.
A majority of the Individual General Partners are persons who are not
"interested persons" (as defined by the 1940 Act) of the Fund (collectively, the
"Independent General Partners") and such persons perform the same functions for
the Fund as are customarily performed by the non-interested directors of
registered investment companies that are organized as corporations. The other
Individual General Partners are affiliated with the [Manager and the Adviser.]
Individual General Partners will not contribute to the capital of the
Partnership in their capacities as such, but may subscribe for Interests subject
to applicable eligibility requirements.
The identity of the Individual General Partners, and brief
biographical information regarding each Individual General Partner, is set forth
below.
<PAGE>
NAME, ADDRESS AND AGE POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
THE PARTNERSHIP DURING PAST 5 YEARS
John A. Levin, 58
One Rockefeller Plaza Individual General
(25th Floor) Partner
New York, New York 10020
Individual General
Partner
Individual General
Partner
Individual General
Partner
Principal Individual
General Partner
Each of the Individual General Partners was appointed by the Manager
and, on [ ], 1997, was elected to serve in such position by
Mr. Norris Nissim (in his capacity as the Fund's organizational Limited
Partner), who was the sole holder of Interests on such date.
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 Limited Partners holding not less than two-thirds (2/3) of the
total number of votes eligible to be cast by all Limited Partners. Individual
General Partners may not transfer their interests 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 Limited Partners. The Individual General
Partners may call a meeting of Limited 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 Limited
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 Fund, the Manager may manage and control the Fund, but must convene a
meeting of Limited Partners within 60 days for the purpose of either electing
new Individual General Partners or dissolving the Fund.
The Independent General Partners are each paid an annual retainer of
$[ ], and per meeting fees of $[ ] (or $[ ] in the case of telephonic
meetings), by the Fund. The other Individual General Partners receive no annual
or other fees from the Fund. All Individual General Partners are reimbursed by
the Fund for their reasonable out-of-pocket expenses. It is estimated that the
aggregate annual compensation paid by the Fund to each Independent General
Partner will be $[ ] during the coming year, and that, together with
compensation paid to them by other [registered investment companies] advised by
affiliates of the Manager, [Mr. and Mr. ] will receive aggregate
annual compensation from all such companies of $[ ] and $[ ],
respectively, for such year. The Individual General Partners do not receive any
pension or retirement benefits from the Fund.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
(1) (2) (3) (4) (5)
Name of Person, Estimated Pension or Estimated Annual Estimated
Position Aggregate Retirement Benefits Benefits Upon Total Compensation
Compensation From Accrued As Part of Retirement From Fund and Fund
Fund Fund Expenses Complex Paid to
Directors
</TABLE>
THE ADVISER
- -----------
John A. Levin & Co., Inc. (the "Adviser"), a Delaware corporation with
its principal offices at One Rockefeller Plaza, New York, New York 10020, serves
as investment adviser of the Fund pursuant to an investment management agreement
dated [ ], 1997 (the "Investment Management Agreement"). Together
with its predecessor, the Adviser has operated as an investment adviser since
1982, and is registered as an investment adviser under the Investment Advisers
Act of 1940 (the "Advisers Act"). The Adviser is a wholly-owned subsidiary of
Levin Management Co., Inc., which in turn is a wholly-owned subsidiary of Baker,
Fentress & Company ("Baker, Fentress"). Baker, Fentress is a closed-end
investment company listed on the New York Stock Exchange and is registered as an
investment company under the 1940 Act and as an investment adviser under the
Advisers Act. John A. Levin, the President of the Adviser, is also the
President and Chief Executive Officer of Baker, Fentress. The Adviser's clients
include U.S. and foreign individuals and their related trusts, non-profit
organizations, limited partnerships, registered investment funds, university and
college endowments and pension and profit-sharing funds. Some of these clients
(including other investment funds) may have investment objectives similar to
those of the Fund. The Adviser's current assets under management are
approximately $6.2 billion.
The persons who will be primarily responsible for the day-to-day
management of the Fund's investment portfolio are John A. Levin and Daniel E.
Aron. John A. Levin has been President of the Adviser and its predecessor since
1982 and President and Chief Executive Officer of Baker, Fentress since 1996.
Daniel E. Aron, currently Head Trader at the Adviser, has been with the Adviser
and its predecessor since 1989.
Under the Investment Management Agreement, the Adviser provides
investment advisory and other services to the Fund. It is responsible for the
day-to-day management of the Fund's investment program and the administration of
the Fund's operations, subject to the general supervision of the Individual
General Partners. The Adviser is also required to furnish office facilities and
equipment to the Fund and to supply all administrative services, facilities and
personnel necessary for the Fund's operations. At its own expense, the Adviser
may retain other organizations, including its affiliates, to provide certain of
the administrative services required to be provided to the Fund.
Pursuant to the Investment Management Agreement, the Fund will pay the
Adviser a monthly fee computed at the annual rate of 0.25% of the value of the
Fund's month end net assets. This 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. In addition, the Manager
<PAGE>
will be entitled to receive the Incentive Allocation for the period that the
Adviser (or one of its affiliates) provides investment advisory services to the
Fund. See "CAPITAL ACCOUNTS AND ALLOCATIONS - Incentive Allocation".
The Investment Management Agreement provides that the Adviser shall
not be liable for any act or omission, error of judgment or mistake of law or
for any loss suffered by the Fund in connection with matters to which the
Investment Management Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Adviser in the
performance of, or from reckless disregard of, its obligations and duties under
the Investment Management Agreement.
The Investment Management Agreement and the terms of the Incentive
Allocation were approved by the Individual General Partners, including each of
the Independent General Partners, by vote cast in a meeting held for such
purpose on __________, 1997, and were also approved by [ ], the
organizational Limited Partner, as the sole Limited Partner on such date. The
Investment Management Agreement has a term expiring on [February 26, 1999] or
upon the termination of the Fund, if earlier. It may be terminated at any time,
without penalty, by the Adviser, by the Board of Trustees of the Fund or by vote
of a majority of the outstanding voting securities of the Fund, in each case, on
60 days' written notice, and will automatically terminate in the event of its
"assignment," as such term is defined by the 1940 Act and the rules thereunder.
The Adviser currently serves as an adviser or sub-adviser to other
registered investment companies.
THE MANAGER
- -----------
The Manager, LEVCO GP, Inc., a wholly owned subsidiary of the Adviser,
serves as the Corporate General Partner of the Fund. The Manager also serves as
the sole general partner of several private investment partnerships that are not
registered under the 1940 Act.
Under the Partnership Agreement, the Manager has responsibility for
making available the services of one or more of its affiliates to provide the
Fund with such investment advisory, management and administrative services and
facilities as may be required in connection with the Fund's operations, and for
acting on behalf of the Partnership with respect to certain matters. As
discussed under "CAPITAL ACCOUNTS AND ALLOCATIONS - Incentive Allocation," so
long as an affiliate of the Manager continues to serve as the investment adviser
of the Fund, the Manager is entitled to receive the Incentive Allocation, which
is debited against the capital accounts of the Limited Partners.
The Manager may withdraw, or be removed by the Fund, as the Fund's
Corporate General Partner. If the Manager gives notice to the Fund of its
intention to withdraw, it will be required to remain as Corporate General
Partner for one year (or until such earlier date as a successor to the Manager
is approved by the Fund) if, in the opinion of counsel to the Fund, earlier
withdrawal is likely to cause the Fund to lose its partnership tax
classification or as otherwise
<PAGE>
required by the 1940 Act and the rules thereunder. At the request of the Fund,
the Manager will remain as Corporate General Partner of the Partnership for a
period of six months if the Fund terminates the Investment Management Agreement,
unless a successor Corporate General Partner to the Manager is earlier approved
by the Fund.
FEES AND EXPENSES
The Fund will bear all expenses incurred in connection with its
business and operations other than those specifically required to be borne by
the Adviser pursuant to the Investment Management Agreement. Limited Partners
each will indirectly bear their pro rata share of these expenses. In addition,
the capital accounts of Limited Partners may be charged the Incentive
Allocation, depending upon the investment performance of the Fund. See "CAPITAL
ACCOUNTS AND ALLOCATIONS - Incentive Allocation". Expenses to be borne by the
Fund include, but are not limited to: the investment management fee payable to
the Adviser; fees and charges of the Fund's custodian; fees and disbursements of
legal counsel to the Fund, of legal counsel, if any, to the Independent General
Partners, and of the independent public accountants to the Fund; taxes;
brokerage commissions and fees; interest on any borrowings by the Fund; costs
incident to meetings of the Individual General Partners and meetings of Limited
Partners; costs of preparing and printing prospectuses and reports to the
Limited Partners; costs of filing reports with regulatory bodies and of
maintaining the Fund's existence as a Delaware limited partnership; fees to
Federal and state authorities for the registration of Interests; fees and
expenses of the Independent General Partners; premiums for fidelity bonds and
liability insurance obtained on behalf of the Fund and its Individual General
Partners; and any extraordinary expenses of a non-recurring nature (including
litigation costs).
The Fund will also bear its organizational costs, which are estimated
at $[ ], and will bear certain offering expenses not to exceed $[ ].
Organizational expenses will be amortized by the Fund over 18 months from the
date the commencement of its operations. Offering costs cannot be deducted by
the Fund or the Partners.
CAPITAL ACCOUNTS AND ALLOCATIONS
CAPITAL ACCOUNTS
- ----------------
The Fund 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 Fund. Each Partner's capital account will be increased by
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 the Interest, or portion thereof, of such Partner redeemed or
repurchased by the Fund, plus the amount of any distributions to such Partner,
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, and any subsequent
credits that would otherwise be allocable to the capital account of any such
Limited Partner will instead be
<PAGE>
allocated to the capital account of the Manager in such amounts as are
necessary to offset all previous debits attributable to such Limited Partner not
previously recovered.
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 Fund is made; (3) the day on which the Fund
redeems or 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 period by the sum of
the balances of all capital accounts of all Partners as of the commencement of
such period.
ALLOCATION OF NET PROFITS AND NET LOSS
- --------------------------------------
Net profits or net losses of the Fund 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
Fund (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 redemptions or repurchases by the Fund 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.
INCENTIVE ALLOCATION
- --------------------
Under the Partnership Agreement, so long as an affiliate of the
Manager continues to serve as the Fund's investment adviser, the Manager will be
entitled to an Incentive Allocation, to be charged to the capital account of
each Limited Partner as of the Redemption Date, equal to 20% of the amount, if
any, by which the value, as of the Redemption Date, of such Limited Partner's
capital account, plus the amount of any distributions made to the Limited
Partner, exceeds the amount of such Limited Partner's initial investment in the
Fund. The Incentive Allocation will be credited to the capital account of the
Manager.
The Manager will be entitled to receive the Incentive Allocation only
with respect to the period during which the Adviser (or another affiliate of the
Manager) provides investment advisory services to the Fund. In the event that
subsequent to one year after the Closing Date, but before the Redemption Date,
(i) neither the Adviser nor one of its affiliates provides such services due to
a termination of an advisory agreement by the Fund or (ii) the Fund is
terminated, the Manager shall be entitled to receive an Incentive Allocation,
charged to the capital account of each Limited Partner, equal to 20% of the
amount, if any, by which the value, as of the relevant termination date, of such
Limited Partner's capital account, plus the amount of any distributions to the
Limited Partner, exceeds the amount of such Limited Partner's initial investment
in the Fund.
<PAGE>
In addition, in the unlikely event that the Interest of any Limited Partner is
repurchased by the Fund prior to the Redemption Date, the Incentive Allocation
will be computed as of such date with respect to such Limited Partner, provided
that the repurchase occurs at least one year after the Closing Date.
ALLOCATIONS FOR INCOME TAX PURPOSES
For each fiscal year, items of income, deduction, gain or loss shall
be allocated for income tax purposes as follows:
(a) Income or Loss -- General. All items of income and gain or
loss and deduction realized by the Fund, other than items of income and gain or
loss and deductions from Options Transactions, will be allocated 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).
(b) Income or Loss -- Options Transactions. All items of income
and gain or loss and deduction realized by the Fund in connection with its
Options Transactions will be allocated among the Partners as follows:
(i) If for a fiscal year (A) the Fund's net realized income
and gain from its Options Transactions ("Option Income") exceeds (B) the Fund's
cumulative net realized losses and deductions from its Option Transactions for
all prior fiscal years ("Positive Option Income Carryover"), then 20% of such
Positive Option Income Carryover will be allocated to the Manager, and the
balance of such Option Income shall be allocated to the capital accounts of the
Partners in accordance with their respective partnership percentages for such
fiscal year.
(ii) If for a fiscal year the Fund realizes net losses and
deductions from its Options Transactions ("Option Losses"), then 20% of such
Option Losses will be allocated to the Manager in an amount equal to any Option
Income previously allocated to the Manager in excess of Option Losses previously
allocated to the Manager, and the balance of such Option Losses will be
allocated to the capital accounts of the Partners in accordance with their
respective partnership percentages for such fiscal year.
For purposes of these allocation provisions, "Options Transactions"
means all transactions entered into by the Fund involving the purchase or sale,
and writing, of any option or the purchase or sale of any security in connection
with the exercise or termination of any option position.
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 Fund. Such reserves will be in such amounts (subject to increase
or reduction) which the Fund may deem necessary or appropriate. The amount of
any such reserve (or any increase or decrease therein) will be proportionately
charged or
<PAGE>
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 individual reserve item (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 Fund, 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.
NET ASSET VALUATION
The value of the Fund's net assets will be determined as of the close
of business at the end of each month and each 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. Net
assets means the total value of all assets of the Fund, less the amount of all
accrued debts, liabilities and obligations of the Fund.
In valuing the Fund's net assets, securities traded on a securities
exchange will be valued at their last sale prices on the exchanges where such
securities are primarily traded. Securities traded in the over-the-counter
market and listed securities for which no sales are reported on a particular day
will be valued at the mean between their bid and ask prices (or for debt
securities, the yield equivalents thereof) obtained from one or more dealers
making markets for such securities. If market quotations for any security are
not readily available, the security will be valued at its 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 review 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.
TAXATION
The following is a summary of certain aspects of the income taxation
of the Fund and its Partners which should be considered by a prospective Limited
Partner. The Fund 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 Fund, nor has it obtained an opinion of counsel
with respect to any Federal tax issues other than the characterization of the
Fund as a partnership which is not a "publicly traded partnership" for Federal
income tax purposes.
This summary of certain aspects of the Federal income tax treatment of
the Fund is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), judicial decisions, Treasury Regulations (the "Regulations") and
rulings in existence on the date hereof, all of which
<PAGE>
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 Fund. 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 AND LOCAL INCOME TAX
CONSEQUENCES OF AN INVESTMENT IN THE FUND.
In addition to the particular matters set forth in this section, tax-
exempt organizations should review carefully those sections of this Prospectus
regarding liquidity and other financial matters to ascertain whether the
investment objective of the Fund 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 FUND OPERATIONS
CLASSIFICATION OF THE FUND. Prior to the date the Fund commences
operations, counsel to the Fund, Schulte Roth & Zabel LLP, will render its
opinion 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 Partners, the Fund 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 Fund 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 Fund 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 Fund 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. Prior to the date the Fund commences operations,
Schulte Roth & Zabel LLP will render its opinion that, under this "facts and
circumstances" test, and based upon the anticipated operations of the Fund as
well as the legislative history to Section 7704 and the text of the Regulations,
the interests in the Fund will not be readily tradable on a secondary market (or
the substantial equivalent thereof) and, therefore, that the Fund will not be
treated as a publicly traded partnership taxable as a corporation.
<PAGE>
Neither of the opinions of counsel described above is binding on the
Service or the Courts. If it were determined that the Fund 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 Fund would be subject to corporate income tax when
recognized by the Fund; 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 Fund, and Partners would not be entitled to report profits or losses
realized by the Fund.
As a partnership, the Fund is not itself subject to Federal income
tax. The Fund 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 Fund'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 Fund's taxable income and gain regardless of whether
it has received or will receive a distribution from the Fund.
ALLOCATION OF PROFITS AND LOSSES. Under the Partnership Agreement,
the Fund'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 Fund
for Federal income tax purposes. On the Redemption Date, the Manager will be
entitled to the Incentive Allocation, to be charged to the capital account of
each Limited Partner as of the Redemption Date, equal to 20% of the amount, if
any, by which the value, as of the Redemption Date, of the Limited Partner's
capital account, plus the amount of any distributions made to the Limited
Partner, exceeds the amount of the Limited Partner's initial investment in the
Fund. The Incentive Allocation may, under certain limited circumstances, be
made at other times. See "CAPITAL ACCOUNTS AND ALLOCATIONS - Incentive
Allocation."
As described above (see "CAPITAL ACCOUNTS AND ALLOCATIONS -
Allocations for Income Tax Purposes"), the Partnership Agreement provides a
special allocation of all items of gain or loss realized by the Fund in
connection with its options transactions. Thus, even though the Manager's right
to receive the Incentive Allocation will not be determined until the Redemption
Date, if for a fiscal year the Fund's net realized income and gain from its
options transactions exceeds the Fund's cumulative net realized losses and
deductions from options transactions for all prior fiscal years ("Positive
Option Income Carryover"), then 20% of such Positive Option Income Carryover
will be allocated to the Manager, and the balance of such option income will be
allocated to the Partners in accordance with their partnership percentages.
Similarly, 20% of all realized net losses and deductions from the Fund's options
transactions (to the extent of any Positive Option Income previously allocated
to the Manager in excess of option losses previously allocated to the Manager)
will be allocated to the Manager, and the balance of such losses and deductions
shall be allocated to the Partners in accordance with their partnership
percentages.
<PAGE>
The consequence of the foregoing special allocations is that, in the
Fund's fiscal year(s) prior to the year of the Redemption Date, the Limited
Partners will be allocated a smaller portion of the Fund's income and gains from
its options transactions than would result if the Manager were not allocated any
of such gains until the fiscal year in which its right to receive the Incentive
Allocation is finally determined. Although the Manager believes that this is an
equitable and reasonable method of allocating the Fund's income and gains from
its options transactions, there can be no assurance that the Service will accept
this method. If the Service successfully challenged these special allocations,
the Limited Partners might have to report a higher amount of the Fund's gains
from its options transactions in the years prior to the fiscal year of the
Redemption Date.
All other items of income, deduction, gain, loss or credit actually
recognized by the Fund 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 Fund's net
capital appreciation or net capital depreciation allocated to each Partner's
capital account for the current and prior fiscal years. The Fund does not
intend to make periodic distributions to Partners. Therefore, taxes owed by the
Partners prior to the Redemption Date with respect to the Fund's income will
have to be paid from other sources.
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 Fund to make
such an election. Any such election, once made, cannot be revoked without the
Service's consent. Because of the complexity and added expense involved in
making a Section 754 election, the Manager does not presently intend to make
such an election.
The Manager decides how to report the partnership items on the Fund's
tax returns, and all Partners are required under the Code to treat the items
consistently on their own returns. In the event the income tax returns of the
Fund are audited by the Service, the tax treatment of the Fund'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
Fund items.
TAX CONSEQUENCES TO A REDEEMING PARTNER
- ---------------------------------------
It is expected that, generally, the tax basis of a Limited Partner in
its Interest in the Fund will equal the amount of cash received by such Partner
on the Redemption Date. Therefore, a Limited Partner should not recognize a
capital gain or loss in connection with the redemption of its Interest.
<PAGE>
TAX TREATMENT OF FUND INVESTMENTS
- ---------------------------------
IN GENERAL. The Fund expects to act as a trader or investor, and not
as a dealer, with respect to its securities transactions, including, in
particular, its options 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 transactions described below, the Fund 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 Fund maintains a
particular investment position and, in some cases, upon the nature of the
transaction. The application of certain rules relating to so-called "straddle"
and "wash sale" transactions and to "Nonequity Options" may serve to alter the
manner in which the Fund'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 may require the capitalization of certain related expenses of the Fund.
The maximum ordinary income tax rate for individuals is 39.6% and the
maximum individual income tax rate for long-term capital gains is 28% (unless
the taxpayer elects to be taxed at ordinary rates - see "TAXATION - Limitation
on Deductibility of Interest"), 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%. 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. Due to the nature of the Fund's
investment program, it is possible that, in a particular taxable year, the Fund
may realize ordinary income (from its debt investments) and net capital losses
(from its put transactions) for Federal income tax purposes. The use of such
losses to offset the taxable income of the Partners would be subject to the
limitations noted above with respect to both individual and corporate taxpayers.
TAXATION OF PUT OPTIONS. The following is a general description of
the tax consequences of the Fund's transactions involving put options. The Code
distinguishes between the taxation of transactions effected by taxpayers such as
the Fund involving "equity options" and "nonequity options."
EQUITY OPTIONS. Equity options ("Equity Options") can be either
listed options (i.e., options traded on or subject to the rules of a national
securities exchange, a board of trade designated as a contract market by the
CFTC, or a market designated by the Treasury) or unlisted options (options that
are not listed options). Equity Options include options on individual corporate
stocks and options on a narrow-based index of stocks, such as options on a
narrow-
<PAGE>
based index of transportation stocks and options on a narrow-based index of
technology stocks, unless such options have been designated as nonequity options
by the Service. The following are the general rules which are applicable to
transactions by the Fund involving Equity Options.
The Fund's basis in a put option that it purchases will be equal to
the premium paid for such option. Upon the sale of such option, the Fund will
realize a capital gain or loss in the amount of the difference between its basis
in the option and the sales proceeds. The gain or loss will be long-term or
short-term depending generally upon the Fund's holding period in the option. If
a put option expires unexercised, the Fund will recognize a capital loss equal
to the Fund's basis in such option. The Fund's gains or losses from the
expiration of a put option may be short-term or long-term, depending upon the
Fund's holding period in the option at the time of such expiration. Equity
options held for more than one year generally will be eligible for long-term
capital gain or loss treatment.
Upon the exercise of a put option by the Fund and the sale by the Fund
of the stocks underlying the option, the Fund will realize a capital gain or
loss equal to the amount by which the amount realized by the Fund (i.e., the
excess of the exercise price of the option over the option premium) exceeds the
Fund's basis in the underlying stock. The gain will be short-term or long-term
depending generally upon the Fund's holding period in the option.
The Fund will not incur income upon the receipt of an option premium
from its writing of a put option. Lapse of the option will result in the
recognition of a short-term capital gain equal to the premium received by the
Fund for the option. Upon the exercise of a put option written by the Fund, the
Fund will not realize gain or loss. Rather, the Fund's basis in the stock
purchased will be reduced by the amount of the option premium it received when
it sold the put option. The Fund's holding period in the stock will begin on
the date the option is exercised.
NONEQUITY OPTIONS. Nonequity options ("Nonequity Options") include
listed options on broad-based stock indices, such as the Standard & Poor's 100
and 500 and New York Stock Exchange Index, and options on certain narrow-based
stock indices if such options have been designated as Nonequity Options by the
Service (e.g., options on the High Technology Index of the Pacific Stock
Exchange). The rules described above with respect to Equity Options do not
apply to Nonequity Options. Rather, these options are treated as "Section 1256
Contracts."
Under the Section 1256 rules, Nonequity Options held by the Fund at
the end of each taxable year of the Fund are treated for Federal income tax
purposes as if they were sold by the Fund 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 with any gain or
loss resulting from actual sales of Nonequity Options, must be taken into
account by the Fund in computing its taxable income for such year. If a
Nonequity Option held by the Fund 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.
<PAGE>
Capital gains and losses from such Nonequity Options 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.
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".
OTHER INCOME. The Fund will realize ordinary income from stated
interest on debt securities. As noted above, the Fund's investment in Government
Securities will consist primarily of "zero coupon" securities. These securities
and others held by the Fund will be subject to the tax rules involving debt
obligations with "original issue discount." The Fund will be required to
include in taxable income the amount of such original issue discount accrued for
a particular year on a current basis, even though receipt of such amounts may
occur in a subsequent year. The Fund may also acquire debt obligations with
"market discount." Upon disposition of such an obligation, the Fund 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 Fund.
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 Fund 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.
LIMITATIONS 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 Fund'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 expenses attributable to the Fund'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 Fund's ordinary losses attributable to
interest expenses unless it had sufficient investment income from all sources
including the Fund. 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
<PAGE>
Limited Partner on money borrowed to finance its investment in the Fund.
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.
Section 1277 of the Code limits the deduction of indebtedness incurred
to purchase or carry a security with market discount. Such indebtedness is not
deductible in the current taxable year except to the extent that it exceeds the
amount of market discount which accrued on the security during the portion of
the taxable year during which the taxpayer held the security. Deferred interest
expenses can be deducted in the year in which the taxpayer disposes of the
security or, at the taxpayer's election, in an earlier year in which the
taxpayer has net interest income from the security.
Section 1277 would apply to a Limited Partner's share of the Fund's
interest expenses attributable to securities held by the Fund with market
discount. In such case, a Limited Partner would be denied a current deduction
for all or part of that portion of its distributive share of the Fund's ordinary
losses attributable to such interest expenses except to the extent that the
expenses exceeded the market discount which had accrued on such securities
during the current taxable year while they were owned by the Partnership. Such
losses would be carried forward to future years, as described above. Section
1277 would also apply to the portion of interest paid by a Limited Partner on
money borrowed to finance its investment in the Fund to the extent such interest
was allocable to securities held by the Fund with market discount.
DEDUCTIBILITY OF FUND INVESTMENT EXPENDITURES BY NONCORPORATE
PARTNERS. Investment expenses (e.g., investment advisory fees) of an individual,
trust or estate are deductible only to the extent they exceed 2% of adjusted
gross income. 1 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.
_______________________________
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.
<PAGE>
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 Fund, including the Management Fee.
Although the Fund intends to treat the Incentive Allocation to the General
Partner as not being subject to the foregoing limitations on deductibility,
there can be no assurance that the Service may not treat such allocation 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 Fund'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 Fund.
UNRELATED BUSINESS TAXABLE INCOME
- ---------------------------------
Generally, an exempt organization is exempt from Federal income tax on
certain categories of income, such as dividends, interest, capital gains and
similar income realized from securities investment or trading activity, whether
realized by the organization directly or indirectly through a partnership in
which it is a partner./2/
This general exemption from tax does not apply to the "unrelated
business taxable income" ("UBTI") of an exempt organization. UBTI 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. The
Fund does not intend to incur "acquisition indebtedness." Therefore, it is
expected that the Fund will not realize UBTI.
________
/2/ 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.
<PAGE>
It is also expected that income realized by the Fund from Options
Transactions will not constitute UBTI. /3/
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 Fund would most probably be classified as a nonfunctionally
related asset. A determination that an Interest in the Fund 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 Fund. Of course,
this factor would create less of a problem to the extent that the value of the
investment in the Fund is not significant in relation to the value of other
assets held by a foundation.
In some instances, an investment in the Fund 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 Fund, 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 Fund 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
________
/3/ If a particular exempt organization incurs indebtedness to finance its
investment in the Fund, it may incur UBTI.
<PAGE>
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 Fund. 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 Fund 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.
The Fund 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." By reason of a similar "own account"
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 Fund. A nonresident individual Partner
will not be subject to New York City earnings tax on nonresidents with respect
to his investment in the Fund.
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. These limitations may apply to a Limited
Partner's share of some or all of the Fund'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./4/ Each of the New York State and New York City
________
/4/ 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
<PAGE>
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 Fund's qualification as such a portfolio investment
partnership must be determined on an annual basis and with respect to a taxable
year, the Fund may not qualify as a portfolio investment partnership. Each
prospective corporate Partner should consult its tax adviser with regard to the
New York State and New York City tax consequences of an investment in the Fund.
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 generally presumed to be exempt from New
York State corporate franchise tax and New York City general corporation tax.
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 Fund.
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
________
in a partnership doing business in New York and (ii) has a tax basis in such
limited partnership interest not greater than $1 million.
<PAGE>
return of the total portfolio relative to the anticipated cash flow needs of the
ERISA Plan, the income tax consequences of the investment (see "TAXATION -
Unrelated Business Taxable Income; 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 Fund, 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 Fund 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 Fund will register as an investment company under the 1940
Act, the underlying assets of the Fund should not be considered to be "plan
assets" of the ERISA Plans investing in the Fund 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 Fund
to represent that it, and any fiduciaries responsible for the Plan's
investments, are aware of and understand the Fund's investment objective,
policies and strategies, that the decision to invest plan assets in the Fund 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.
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 Fund 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 Fund 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 Fund.
The provisions of ERISA are subject to extensive and continuing
administrative and judicial interpretation and review. The discussion of ERISA
contained in this Prospectus, is, of necessity, general and may be affected by
future publication of regulations and rulings.
<PAGE>
Potential investors should consult with their legal advisors regarding the
consequences under ERISA of the acquisition and ownership of interests.
SUMMARY OF PARTNERSHIP AGREEMENT
The following is a summary description of select provisions of the
Partnership Agreement which are not described elsewhere in this Prospectus. The
description of such provisions is not definitive and reference should be made to
the complete text of the Partnership Agreement.
LIABILITY OF LIMITED PARTNERS
- -----------------------------
Under Delaware law, Limited Partners will not generally be personally
liable for obligations of the Fund unless, in addition to the exercise of their
rights and powers as Limited Partners, they participate in the control of the
business of the Fund. Any such Limited Partner would be liable only to persons
who transact business with the Fund reasonably believing, based on such Limited
Partner's conduct, that the Limited Partner is a General Partner. Under the
terms of the Partnership Agreement, Limited Partners do not have the right to
take part in the control of the Fund, but they may exercise the right to vote on
matters requiring approval under the 1940 Act and on certain other matters, as
described below. Although the right to vote should not constitute taking part
in the control of the Fund'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 Fund 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 Limited Partners.
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 Fund
(plus any accretions in value thereto prior to withdrawal) and a Limited Partner
may be obligated to return to the Fund amounts distributed to him in accordance
with the Partnership Agreement in certain circumstances where after giving
effect to the distribution, certain liabilities of the Fund exceed the fair
market value of the Fund's assets.
VOTING RIGHTS
- -------------
Each Limited Partner will have the right to cast such number of votes
as is equal to the value of such Partner's respective capital account at any
meeting of Limited Partners called by the Manager, the Individual General
Partners or by Partners holding 25% or more of the total number of votes
eligible to be cast by all Limited Partners. Limited Partners will be entitled
to vote only on certain matters as specified in the Partnership Agreement,
including the following matters on which shareholders of a registered investment
company organized as a corporation would be entitled to vote: the election of
Individual General Partners (to the extent required by the 1940 Act); the
approval of any new investment management or investment advisory agreement; and
the approval of the Partnership's auditors (to the extent required by the 1940
Act). There are no cumulative voting rights. Except for the exercise of their
voting rights, Limited Partners will not be
<PAGE>
entitled to participate in the management or control of the Fund's business, and
may not act for or bind the Fund.
The Fund is not required, and therefore does not intend to, hold
annual meetings of Partners. However, special meetings of Partners at which
Limited Partners will have the right to vote on matters coming before the
meeting will be held as may be required by the Partnership Agreement or
applicable law, or as may be determined by the Individual General Partners.
DUTY OF CARE OF GENERAL PARTNERS
- --------------------------------
The Partnership Agreement provides that a General Partner shall not be
liable to the Fund or to any of the 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, unless it is determined by a final judicial decision on the
merits from which there is no further right of appeal that such loss or damage
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. The Partnership
Agreement also contains provisions for the indemnification, to the extent
permitted by law, of a General Partner by the Fund (but not by the Limited
Partners individually) against any loss, claim damages, liability, cost and
expense for 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 Fund. 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 Fund or by reason of any change in the Federal or state income
tax laws applicable to the Fund 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) the
holders of a majority (as defined by the 1940 Act) of the outstanding voting
securities of the Fund. 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 his entire interest for repurchase by the Fund.
However, the Manager may at any time, without the consent of the other Partners,
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 to cure any
ambiguity or to correct or supplement any provision of the Partnership Agreement
inconsistent with any other provision of the Partnership Agreement,
<PAGE>
provided that any such action does not adversely affect the rights of any
Partner in any material respect, or (iv) make such changes as may be necessary
to assure the Fund's continuing eligibility for 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 (including the vote of a majority of the Independent
General Partners, if required by the 1940 Act).
POWER OF ATTORNEY
- -----------------
By subscribing for an Interest, each Limited 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 Fund as a limited
partnership under Delaware law or signing all instruments effecting authorized
changes in the Fund or the Partnership Agreement and conveyances and other
instruments deemed necessary to effect the dissolution or termination of the
Fund.
The power-of-attorney granted as part of each Limited Partner's
Subscription Documents 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 Limited 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 Fund as a
substituted Limited 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.
TERM, DISSOLUTION AND LIQUIDATION
- ---------------------------------
The Fund shall be dissolved:
. upon the affirmative vote to dissolve the Fund by both (1) the
Individual General Partners and (2) Limited Partners holding at
least two-thirds (2/3) of the total number of votes eligible to
be cast by all Limited Partners;
. upon either of (1) an election by the Manager to dissolve the
Fund or (2) the termination of the Manager's status as such,
unless as to either event both (A) the Individual General
Partners, and (B) Limited Partners holding not less than two-
thirds (2/3) of the total number of votes eligible to be cast by
all Limited Partners shall elect within 60 days after such event
to continue the business of the Fund, and a person has been
admitted to the Fund as a successor to the Manager;
. on [February 26, 1999], unless both (i) the Individual General
Partners, and (ii) a majority of the outstanding voting
securities of the Fund, shall elect within 60 days of such date
to continue the business of the Fund;
<PAGE>
. upon the failure of Limited 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 Fund; or
. 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 Fund 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
Allocations -- Net Profits and Net Loss."
Upon the liquidation of the Fund, its assets are to be distributed (1)
first to satisfy the debts, liabilities and obligations of the Fund (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 after giving effect to all allocations to be made to such Partners'
capital accounts for the fiscal period ending on the date of such distributions.
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.
ADDITIONAL INFORMATION
CONTROL PERSON
- --------------
As of the date of this Prospectus, all of the outstanding Interests
were owned by Mr. Norris Nissim, in his capacity as the Fund's organizational
Limited Partner.
REPORTS TO PARTNERS
- -------------------
The Fund will furnish to Limited 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 Fund will send to Limited 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.
Limited Partners will also be sent monthly reports regarding the Fund's
investment performance.
FISCAL YEAR
- -----------
The Fund's fiscal year is the twelve month period ending on December
31. The first fiscal year of the Fund will commence on the Closing Date and
will end on December 31, 1997.
CUSTODIAN
- ---------
[ ], [address], serves as custodian of the Fund's assets
and may maintain custody of the Fund's assets with subcustodians, securities
depositories
<PAGE>
and clearing agencies), approved by the Individual General Partners of the Fund
in accordance with the requirements set forth in Section 17(f) of the 1940 Act
and the rules adopted thereunder.
ACCOUNTANTS AND LEGAL COUNSEL
The Individual General Partners have selected [ ]
[address] as the independent public accountants of the Fund. The Statement of
Assets and Liabilities of the Fund at __________________, 1997, appearing in
this Prospectus, has been audited by [ ], as set forth in their report thereon
appearing elsewhere herein, and is included in reliance on such report and upon
the authority of such firm as experts in auditing and accounting.
Schulte Roth & Zabel LLP, New York, New York, acts as legal counsel to
the Fund and also acts as legal counsel to the Adviser and its affiliates with
respect to certain matters. [[ ], [address], acts as legal
counsel to the Independent General Partners.]
INQUIRIES AND FURTHER INFORMATION
Inquiries concerning the Fund and Interests (including information
concerning subscription and withdrawal procedures) should be directed to:
[Name]
[Address]
Telephone:
Telecopier:
Further information concerning the Fund and Interests is contained in
the Registration Statement, of which this Prospectus constitutes a part, which
is on file with the Securities and Exchange Commission.
* * * * *
All potential investors in the Fund are encouraged to consult
appropriate legal and tax counsel.
<PAGE>
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING OF ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY STATE
OR JURISDICTION OF THE UNITED STATES OR ANY COUNTRY WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
_________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary of Fees and Expenses............ 4
Prospectus Summary...................... 5
The Fund................................ 15
Investment Objective and Policies....... 15
Investment Restrictions................. 20
Risk Considerations..................... 21
Brokerage Transactions.................. 24
Subscriptions for Interests............. 26
Redemption and Transfer of Interests.... 28
Distributions to Limited Partners....... 30
Management of the Fund.................. 30
Fees and Expenses....................... 33
Capital Accounts and Allocations........ 34
Taxation................................ 37
ERISA Considerations.................... 48
Summary of Partnership Agreement........ 50
Additional Information.................. 53
Limited Partnership Agreement...........Exhibit A
Subscription Agreement..................Exhibit B
</TABLE>
================================================================================
$25,000,000 LIMITED
PARTNER INTERESTS
_________________
PROSPECTUS
_________________
LEVCO ZERO COUPON/PUT FUND I, L.P.
(September 30, 1998
Redemption Date)
______________________________
__________ __, 1997
LEVCO SECURITIES, INC.
Distributor
================================================================================
<PAGE>
FORM N-2
LEVCO ZERO COUPON/PUT FUND I, L.P.
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Financial Statements:
Statement of Assets and Liabilities.*
(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) (1) Distribution Agreement.*
(2) Investment Management Agreement.*
(i) Not Applicable.
(j) Custody Agreement.*
(k) Not Applicable.
(l) Opinion of Counsel and Consent.*
(m) Not Applicable.
(n) Auditor's Consent.*
(o) Not Applicable.
(p) Agreement regarding initial capital.*
(q) Not Applicable.
(r) Not Applicable.
ITEM 25. MARKETING ARRANGEMENTS
Not Applicable.
- -------------------
* To be filed by pre-effective amendment.
<PAGE>
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Blue Sky Fees and Expenses (including fees
of counsel)................................
Transfer Agent fees..........................
Accounting fees and expenses.................
Legal fees and expenses......................
Printing and engraving.......................
Miscellaneous................................ ____________
$
============
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
After completion of the 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 LEVCO GP, Inc., a
general partner of the Registrant, which, in turn, is controlled by John A.
Levin & Co., Inc., the Registrant's investment adviser. John A. Levin & Co.,
Inc. is an indirect, wholly-owned subsidiary of Baker, Fentress & Company, a
registered investment company. Information regarding Baker, Fentress & Company
is set forth in its registration statement on file with the Commission (files
No. 33-66662 and 811-2144). Information regarding the ownership of John A. Levin
& Co., Inc. is set forth in its Form ADV, as filed with the Commission (File No.
801-52602).
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
- -------------- ------------------------
<S> <C>
Limited Partnership Interests 1
</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 Rule 461(c) and Rule 484
of the Securities Act of 1933 and 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 LEVCO GP, Inc., Registrant's Independent
General Partners and other registered investment management companies managed by
the LEVCO GP, Inc., 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
<PAGE>
portion of the premium, if any, for insurance to indemnify any such person or
any act for which Registrant itself is not permitted to indemnify.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "1933 Act") may be permitted to Registrant's Individual
General Partners, officers, and controlling persons pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the 1933 Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by an Individual General Partner,
officer, or controlling person of Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such Individual General Partner,
officer, or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification is against public policy
as expressed in the 1933 Act and will be governed by the final adjudication of
such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
John A. Levin, the President of John A. Levin & Co., Inc., serves as a
director of the following investment companies: Morgan Stanley Africa
Investment Fund, Inc.; Morgan Stanley Asia-Pacific Fund, Inc.; Morgan Stanley
Emerging Markets Fund, Inc.; Morgan Stanley Emerging Markets Debt Fund, Inc.;
Morgan Stanley Global Opportunity Bond Fund, Inc.; The Morgan Stanley High Yield
Fund, Inc.; and The Morgan Stanley India Investment Fund, Inc.
In addition, 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 Prospectus
in the section entitled "MANAGEMENT OF THE FUND." Information as to the
directors and officers of John A. Levin & Co., Inc. is included in its Form ADV
as filed with the Commission (File No. 801-52602), and is incorporated herein by
reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
The required books and records of the Registrant are maintained by John A.
Levin & Co., Inc., One Rockefeller Plaza, 25th Floor, New York, New York 10020.
ITEM 32. MANAGEMENT SERVICES
Not applicable.
ITEM 33. UNDERTAKINGS
Registrant undertakes to suspend the offering of shares until the
Prospectus is amended if (1) subsequent to the effective date of its
Registration Statement, the net asset value declines
<PAGE>
more than ten percent from its net asset value as of the effective date of the
Registration Statement or (2) the net asset value increases to an amount greater
than its net proceeds as stated in the Prospectus.
<PAGE>
FORM N-2
LEVCO ZERO COUPON/PUT FUND I, L.P.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and 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 21st day of
February, 1997.
LEVCO ZERO COUPON/PUT FUND I, L.P.
By: LEVCO GP, INC.
General Partner
By: /s/ John A. Levin
-------------------------------
John A. Levin
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John A. Levin Individual General Partner
/s/ Glenn A. Aigen Chief Financial Officer of
the Corporate General Partner
</TABLE>
<PAGE>
FORM N-2
LEVCO ZERO COUPON/PUT FUND I, L.P.
EXHIBIT INDEX
EXHIBIT NUMBER DOCUMENT DESCRIPTION
(a) (1) Certificate of Limited Partnership.
(2) Limited Partnership Agreement.
<PAGE>
Exhibit (a) (1)
CERTIFICATE OF LIMITED PARTNERSHIP
OF
LEVCO ZERO COUPON/PUT FUND I, L.P.
This Certificate of Limited Partnership of Levco Zero Coupon/Put Fund
I, L.P. (the "Partnership") is being duly executed and filed by the undersigned
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 Levco Zero
Coupon/Put Fund I, L.P.
2. The address of the Partnership's registered office in the state of
Delaware is Corporation Service Company, 1013 Centre Road, Wilmington,
Delaware 19805. 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.
3. The name and business address of the General Partner of the
Partnership is as follows:
Levco GP, Inc.
One Rockefeller Plaza
25th Floor
New York, New York 10020
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Limited Partnership of Levco Zero Coupon/Put Fund I, L.P., this 29th day of
January, 1997
LEVCO ZERO COUPON/PUT FUND I, L.P.
BY: LEVCO GP, INC.
GENERAL PARTNER
BY: /S/ NORRIS NISSIM
------------------------
NAME: NORRIS NISSIM
TITLE: AUTHORIZED PERSON
<PAGE>
SR&Z DRAFT
February 4, 1997
Exhibit (a)(2)
-------------------------------------------------------
LEVCO ZERO COUPON/PUT FUND I, L.P.
(A DELAWARE LIMITED PARTNERSHIP)
-------------------------------------------------------
LIMITED PARTNERSHIP AGREEMENT
DATED AS OF January 30, 1997
--------------------------------------------------------
One Rockefeller Plaza (25th Floor)
New York, New York 10020
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <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......................................... 10
2.4 Duration................................................................ 10
2.5 Objective and Business of the Partnership............................... 10
2.6 General Partners........................................................ 10
2.7 Limited Partners........................................................ 11
2.8 Organizational Limited Partner.......................................... 12
2.9 Both General and Limited Partner........................................ 12
2.10 Limited Liability...................................................... 12
ARTICLE III MANAGEMENT......................................................... 12
3.1 Management and Control.................................................. 12
3.2 Actions by Individual General Partners.................................. 13
3.3 Meetings of Partners.................................................... 13
3.4 Management Arrangements................................................. 14
3.5 Custodian and Distributor............................................... 15
3.6 Brokerage............................................................... 16
3.7 Other Activities of Partners............................................ 16
3.8 Duty of Care............................................................ 16
3.9 Indemnification......................................................... 18
3.10 Fees, Expenses and Reimbursement....................................... 20
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE IV TERMINATION OF STATUS AS GENERAL PARTNER, TRANSFERS AND REPURCHASES... 21
4.1 Termination of Status of the Corporate General Partne..................... 21
4.2 Termination of Status of an Individual General Partner.................... 21
4.3 Removal of General Partners............................................... 22
4.4 Transfer of Interests of General Partners................................. 22
4.5 Transfer of Interests of Limited Partners................................. 22
4.6 Redemption and Repurchase of Interests.................................... 23
ARTICLE V CAPITAL................................................................ 25
5.1 Contributions to Capital.................................................. 25
5.2 Rights of Partners to Capital............................................. 25
5.3 Capital Accounts.......................................................... 26
5.4 Allocation of Net Profit and Net Loss..................................... 26
5.5 Allocation of Certain Withholding Taxes and Other Expenditures............ 26
5.6 Reserves.................................................................. 28
5.7 Incentive Allocation...................................................... 29
5.8 Allocation to Avoid Capital Account Deficits.............................. 29
5.09 Tax Allocations.......................................................... 29
5.10 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
7.2 Determinations By Corporate General Partner............................... 33
7.3 Valuation of Assets....................................................... 34
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE VIII MISCELLANEOUS PROVISIONS.......................................... 34
8.1 Amendment of Partnership Agreement...................................... 34
8.2 Special Power of Attorney............................................... 36
8.3 Notices................................................................. 37
8.4 Agreement Binding Upon Successors and Assigns............................ 37
8.5 Applicability of 1940 Act and Form N-2................................... 37
8.6 Choice of Law............................................................ 38
8.7 Not for Benefit of Creditors............................................. 38
8.8 Consents................................................................. 38
8.9 Merger and Consolidation................................................. 38
8.10 Pronouns................................................................ 38
8.11 Confidentiality......................................................... 39
8.12 Certification of Non-Foreign Status..................................... 39
8.13 Severability............................................................ 39
8.14 Use of the Name "Levco"................................................. 41
</TABLE>
iii
<PAGE>
LEVCO ZERO COUPON/PUT FUND I, L.P.
LIMITED PARTNERSHIP AGREEMENT
THIS LIMITED PARTNERSHIP AGREEMENT of Levco Zero Coupon/Put Fund I, L.P.
(the "Partnership") is dated _________________, 1997 by and among Levco GP,
Inc., a Delaware corporation, as the Corporate General Partner, _______________,
and _______________ as the Individual General Partners, _______________, as the
Organizational Limited Partner, 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 _______, 1997;
NOW, THEREFORE, for and in consideration of the foregoing and the mutual
covenants hereinafter set forth, it is hereby agreed as follows:
______________________
ARTICLE I
DEFINITIONS
______________________
For purposes of this Agreement:
Adviser The person appointed to provide investment management
services to the Partnership pursuant to Section 3.4 hereof.
Adviser Act The Investment Advisers Act of 1940 and the rules,
regulations and orders thereunder, as amended from time to
time, or 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.
-1-
<PAGE>
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 items allocable to such Limited
Partner's Capital Account pursuant
to Section 5.5 hereof; 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
Capital Contributions by 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 one year
(an "Incomplete Allocation Period"), then
solely for purposes of determining the
Incentive Allocation, the Positive Allocation
Change shall be measured from the beginning of
the last preceding Allocation Period, if any,
that commenced at least one year 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.
-2-
<PAGE>
ALLOCATION PERIOD With respect to each Limited Partner: (1) the
period commencing as of the date of admission
of such Limited Partner to the Partnership and
ending on the earliest of (a) the date of the
Partnership's dissolution, (b) the Redemption
Date, (c) the date as of which a repurchase of
all Interests of such Limited Partner is
effected pursuant to Section 4.6(f) hereof,
(d) the date as of which the status of the
Corporate General Partner is terminated
pursuant to Section 4.1 hereof unless an
Affiliate of the Corporate General Partner has
been admitted as a substitute Corporate
General Partner, or (e) the date as of which
any Investment Management Agreement with an
Affiliate of the Corporate General Partner is
terminated (regardless of the cause of such
termination) if neither the Corporate General
Partner nor any Affiliate of the Corporate
General Partner becomes the Adviser effective
as of the date of such termination; and (2) if
applicable, each period commencing as of the
day following each date described in sub-
clause (d) or (e) of clause (1) of this
paragraph and ending on the earliest to occur
thereafter of the dates set forth in sub-
clauses (a) through (e) of clause (1);
provided that the first Allocation Period for
each Limited Partner shall be a period of not
less than one year from the date of the
admission of such Limited Partner to the
Partnership.
CAPITAL ACCOUNT With respect to each Partner, the capital
account established and maintained on behalf
of each Partner pursuant to Section 5.3
hereof.
CAPITAL CONTRIBUTION The initial contribution and any additional
contribution of cash to the Partnership by any
Partner, in accordance with Section 5.1
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.
CLOSING DATE The 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.
-3-
<PAGE>
Corporate General Partner Levco GP, Inc., a Delaware corporation, or any
other person admitted to the Partnership as
the Corporate General Partner.
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 Capital Contribution is made
pursuant to Section 5.1 hereof;
(3) the day as of which Interests are
redeemed by the Partnership pursuant
to Section 4.6(b) hereof; or
(4) 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.
-4-
<PAGE>
General Partners The Corporate General Partner 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 Corporate General
Partner.
Interest The entire ownership interest in the
Partnership at any particular time of a
Limited Partner or other person to whom a
Limited Partner's 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.
Investment Management Agreement The agreement identified in Section 3.4
hereof.
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.
-5-
<PAGE>
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 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.
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.
-6-
<PAGE>
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 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 5.5 and 5.6
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.
Option Income With respect to a Fiscal Year, the realized
net income and realized gains arising from the
Partnership's Options Transactions, as
determined for federal income tax purposes.
Option Losses With respect to a Fiscal Year, the realized
net losses and deductions arising from the
Partnership's Options Transactions, as
determined for federal income tax purposes.
Options Transactions Purchases and sales by the Partnership, and
the writing by the Partnership, of exchange
listed and over-the-counter options on
Securities indices, individual Securities or
groups of Securities, and purchases or sales
of Securities in connection with the exercise
of options or the termination of options
positions.
Organizational Limited Partner Mr. Norris Nissim.
Partners The General Partners and the Limited Partners,
collectively.
-7-
<PAGE>
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 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.
Positive Option Income Carryover With respect to a Fiscal Year, the amount by
which (a) the Partnership's Option Income for
such Fiscal Year exceeds (b) the amount by
which (i) the Partnership's Option Losses for
all prior Fiscal Years exceeds (ii) the
Partnership's Option Income for all prior
Fiscal Years; provided, however, that if (ii)
is greater that (i), then (b) shall be zero.
Prospectus The statutory prospectus (including any
statement of additional information) pursuant
to which Interests are offered to prospective
investors, as contained in the Form N-2, as
such prospectus may be amended and
supplemented from time to time.
Redemption Date September 30, 1998 or such later date as of
which the Partnership redeems Interests held
by Limited Partners pursuant to Section 4.6(c)
hereof.
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 Partnership 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.
-8-
<PAGE>
Securities All "securities" as that term is defined in
Section 2(a)(36) of the 1940 Act, including
options on securities and options on
securities indices, and commodity futures
contracts and related options, contracts for
forward or future delivery of any security,
currency or commodity, and all manner of
derivative instruments and any contracts based
on any index or group of securities,
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.
_________________________
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 LEVCO Zero Coupon/Put Fund I,
L.P. or such other name as the Corporate General Partner 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 Corporate General Partner, or at such other place designated from
time to time by the Individual General Partners.
-9-
<PAGE>
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 (which shall include
purchasing, selling and writing options on Securities and indices of
Securities), and to engage in any financial or derivative transactions 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 in accordance with
the investment objective of the Partnership and such investment policies and
investment restrictions as are established by the Individual General Partners.
2.6 General Partners.
(a) Prior to the Closing Date, Individual General Partners shall be
elected by the Organizational Limited Partner, as the sole holder of Interests.
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
Individual General Partners may admit to the Partnership any person as a new
Corporate General Partner if the status of the Corporate General Partner is
terminated pursuant to Section 4.1 hereof. The names and mailing addresses of
the General Partners, and the Capital Contribution of the Corporate General
Partner, shall be set forth on Schedule I hereto. The General Partners shall be
listed separately as the "Individual General Partners" and the "Corporate
General Partner." 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 three. At and after the Closing Date, not less than a majority
of the Individual General Partners shall be Independent General Partners.
(b) The Corporate General Partner shall serve for the duration of the
term of the Partnership, unless its status as the Corporate General Partner
shall be sooner terminated pursuant to Section 4.1 hereof. Each Individual
General Partner admitted to the Partnership shall serve for
-10-
<PAGE>
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.
(c) In the event that no Individual General Partner remains to
continue the business of the Partnership, the Corporate General Partner 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 Corporate General Partner (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 Corporate
General Partner 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 (i) the receipt and acceptance by the
Corporate General Partner of any subscription documents required by the
Partnership and (ii) the receipt by the Partnership of the minimum Capital
Contribution required to be made by Section 5.1. Schedule I to this Agreement
shall be revised as may be necessary to reflect the name and the Capital
Contribution of each Limited Partner.
2.8 ORGANIZATIONAL LIMITED PARTNER.
Upon the admission of other Limited Partners on the Closing Date, 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.
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<PAGE>
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.
__________________________
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 by the 1940 Act. During any
period in which the Partnership shall have no Individual General Partner, the
Corporate General Partner shall continue the management and control of the
Partnership.
(b) The Corporate General Partner 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 Corporate General Partner 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, as required by the 1940 Act or as 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
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(which majority shall include any requisite number of Independent General
Partners in the event approval by a majority of the Independent General Partners
is 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.
(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 shall
be held on such date and at such time and place as the Partner or Partners
calling the meeting 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.
(c) The Individual General Partners may elect a President, a
Vice-President, Assistant Vice-Presidents, Assistant Secretaries and Assistant
Treasurers, and such other officers and agents as the Individual General
Partners shall at any time and from time to time deem to be advisable. The
principal financial officer of the Partnership shall be the person acting as the
principal financial officer of the Corporate General Partner or such other
person as the Individual General Partners may appoint from time to time. Each
such officer shall hold office until his successor is elected or appointed or
until his earlier displacement from office by resignation, removal or otherwise;
provided, that if the term of office of any officer elected or appointed
pursuant to this Section shall have been fixed by the Individual General
Partners or by the President acting under authority delegated by the Individual
General Partners, such officer shall cease to hold such office no later than
the date of expiration of such term, regardless of whether any other person
shall have been elected or appointed to succeed him. Any officer of the
Partnership may resign at any time by written notice to the Partnership. Any
officer or agent of the Partnership may be removed at any time by the Individual
General Partners or by the President acting under authority delegated by the
Individual General Partners if in their or his judgment the best interest of the
Partnership would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed. Election or
appointment of an officer or agent shall not of itself create contract rights
between the Partnership and such officer or agent. The compensation, if any,
of all officers of the Partnership shall be fixed by the Individual General
Partners. All officers as between themselves and the Partnership shall have such
powers, perform such duties and be subject to such restrictions, if any, in the
management of the Partnership prescribed by the Individual General Partners.
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 Corporate General Partner, 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 shall be held on such
date and at such time and place as the Individual General Partners, or if the
Partnership shall have no Individual General Partner, the Corporate General
Partner, shall determine. The Corporate General Partner 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, any meeting may be adjourned to such time or times as determined by the
vote of Partners present in person or by proxy, 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 Individual General Partners, or if the
Partnership shall have no Individual General Partners, the
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Corporate General Partner, shall establish a record date for each meeting of
Partners, which date shall be not less than 10 nor more than 60 days prior to
the date of the meeting to determine eligibility to vote at such meeting and the
number of votes which each Partner will be entitled to cast thereat. For each
such record date, a list shall be maintained setting forth the name of each
Partner entitled to vote 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
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 MANAGEMENT ARRANGEMENTS.
(a) The Corporate General Partner shall be responsible for making
available one or more Affiliates of the Corporate General Partner to serve as
the investment adviser of the Partnership and to provide such management and
administrative services and facilities as may be required in connection with the
operations of the Partnership. The Corporate General Partner shall also be
responsible for and shall have the authority to take action with respect to such
matters as are specified in this Agreement and such other matters as may be
delegated to the Corporate General Partner by the Individual General Partners.
The authority of the Corporate General Partner shall include the
power:
(1) to issue to any Partner an instrument certifying that such
Partner is the owner of an Interest;
(2) to engage such attorneys, accountants and other professional
advisers and consultants as the Corporate General Partner
may deem necessary or advisable in connection with the
affairs of the Partnership or as may be directed by the
Individual General Partners;
(3) to assist in the preparation and filing of any required tax
or information returns to be made by the Partnership;
(4) 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; and
(5) to execute, deliver and perform on behalf of the Partnership
such contracts, agreements and other undertakings, and to
engage in such
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activities and transactions as are necessary and appropriate
for the conduct of the business of the Partnership.
(b) The Individual General Partners shall, subject to the approval
thereof of a majority of the Independent General Partners and the vote of a
majority (as defined by the 1940 Act) of the outstanding voting securities of
the Partnership, appoint a person (which may include an Affiliate of the
Corporate General Partner) or persons to serve as Adviser in such capacity and
to provide investment management services to the Partnership, and shall cause
the terms and conditions of such appointment to be stated in an investment
management agreement executed on behalf of the Partnership and such person or
persons. The Corporate General Partner shall not be responsible for, or have
any discretion or authority with respect to, any services provided by the
Adviser under the Investment Management Agreement.
(c) If the Investment Management Agreement is terminated as provided
therein, 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 by the 1940 Act) of the outstanding voting securities of
the Partnership, a substitute Adviser to provide investment management services
to the Partnership, and shall cause the terms and conditions of such appointment
to be stated in a substitute Investment Management Agreement executed on behalf
of the Partnership and such substitute Adviser.
3.5 CUSTODIAN AND DISTRIBUTOR.
(a) The Corporate General Partner 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
Corporate General Partner 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.
(b) The Individual General Partners may appoint a person (which may
include an Affiliate of the Corporate General Partner) or persons to serve as
the principal underwriter of the Partnership or to act as the distributor of
Interests. The terms and conditions of such appointment shall be stated in an
agreement executed on behalf of the Partnership and such person or persons and
such agreement shall be subject to approval by a majority of the Independent
General Partners.
3.6 BROKERAGE.
The Adviser shall select brokers, dealers and other financial
intermediaries for the execution, clearance and settlement of transactions for
the Partnership in accordance with the Investment Management Agreement and such
procedures as may be adopted by the Individual General Partners.
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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.
(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, acquisitions and dispositions of Securities, provision of investment
advisory or brokerage services, serving as directors, officers, employees,
advisors or agents of other companies, partners of any partnership, as 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) Subject to the requirements of applicable law, including Section
17(j) of the 1940 Act and Rule 17j-1 thereunder, the Corporate General Partner
and the Adviser, and their 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.
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.
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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, 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 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 against 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, and (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
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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 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.
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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) 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.
(b) The Partnership shall bear all expenses incurred in the business
of the Partnership other than those specifically required to be borne by the
Corporate General Partner pursuant hereto or by the Adviser pursuant to the
Investment Management Agreement. The Adviser shall pay all expenses of providing
its services to the Partnership (except to the extent provided through soft
dollars generated by the Partnership), including overhead, office and salary
expenses. 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 and the offering of
Interests, including registration fees and other costs of
compliance with 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) the 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 the Individual
General Partners; and
(6) the fees and charges of the Adviser, custodians and persons
providing administrative or distribution services to the
Partnership.
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The Corporate General Partner shall be entitled to reimbursement from the
Partnership for any of the above expenses that it pays on behalf of the
Partnership.
_________________________________
ARTICLE IV
TERMINATION OF STATUS AS GENERAL
PARTNER, TRANSFERS AND REPURCHASES
_________________________________
4.1 TERMINATION OF STATUS OF THE CORPORATE GENERAL PARTNER.
(a) The status of the Corporate General Partner shall terminate if the
Corporate General Partner (i) shall be dissolved or otherwise shall terminate
its existence; (ii) shall voluntarily withdraw as Corporate General Partner;
(iii) shall be removed; (iv) shall transfer its Interest to another person, as
Corporate General Partner as permitted under Section 4.4 hereof and such person
to which such Interest is transferred is admitted as a substitute Corporate
General Partner 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. The Individual General Partners shall cause the Partnership to
distribute the Capital Account balance of the Corporate General Partner to such
Partner in the event that the Corporate General Partner's status as such is
terminated and the business of the Partnership is continued pursuant to Section
6.1(a)(3) hereof. Such distribution shall be paid in cash not more than 30 days
after the determination to continue the business pursuant to Section 6.1(a)(3)
is made.
(b) The Corporate General Partner may not voluntarily withdraw as
Corporate General Partner until the earliest of (i) one year from the date on
which the Corporate General Partner 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)
if an Investment Management Agreement with an Affiliate of the Corporate General
Partner is terminated by the Partnership or is not renewed by the Partnership
and the Partnership enters into an Investment Management Agreement with a person
who is not an affiliate of the Corporate General Partner, the date on which such
person commences to serve as the Adviser, unless within 30 days after such
termination or non-renewal, the Individual General Partners request the
Corporate General Partner not to withdraw, in which case 180 days after the date
of such termination or non-renewal; and (iii) the date on which one or more
persons shall have agreed to assume the obligations of the Corporate General
Partner 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
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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 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 Corporate General Partner may not Transfer its interest as a
General Partner, except that the Corporate General Partner may effect such a
Transfer in a transaction which does not constitute an "assignment" as defined
by the 1940 Act to a person who has agreed to be bound by all of the provisions
of this Agreement, subject to the prior approval of the Individual General
Partners. By executing this Agreement, each Partner other than the General
Partners shall be deemed to have consented to any 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 Corporate General Partner (which consent 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 Corporate
General Partner 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 Corporate General Partner believes meets the
requirements of paragraph (b)(1) of Rule 205-3 under the Advisers Act or if such
person is a person whom the Corporate General Partner otherwise believes may be
charged a performance fee in accordance with Section 205 of the Advisers Act.
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 Corporate General Partner, the Corporate General Partner, 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.
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Each Limited Partner and transferee agrees to pay all expenses, including
attorneys' and accountants' fees, incurred by the Partnership in connection with
such Transfer. The Corporate General Partner may in its sole discretion waive
the payment of such fees.
(b) Each Limited Partner shall indemnify and hold harmless the
Partnership, the Individual General Partners, the Corporate General Partner,
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.
4.6 REDEMPTION AND 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.
(b) The Partnership shall redeem, as of the Redemption Date, all
Interests then held by Limited Partners or by transferees of Limited Partners
who acquired Interests in transactions permitted by Section 4.5. The amounts
owing to Limited Partners with respect to such redemptions shall be paid as
provided by Section 4.6(h) below.
(c) The Redemption Date may be postponed and the payment of the
proceeds of redemption be delayed, if on the Redemption Date:
(1) the New York Stock Exchange (the "NYSE") or any national
securities exchange on which Securities held by the
Partnership is closed;
(2) trading on the NYSE or any such other exchange is suspended
or restricted; or
(3) an emergency exists as a result of which disposal by the
Partnership of any Securities or other assets is not
practicable or it is not reasonably practicable for the
Partnership fairly to determine the value of its Net Assets.
(d) In the event that the Individual General Partners postpone the
Redemption Date as provided in Section 4.6(c) above, the redemption of Interests
in accordance with Section 4.6(b) shall be effected as of the first trading day
that the conditions giving rise to the postponement are determined, in the sole
discretion of the Individual General Partners, no longer to exist.
(e) If the Corporate General Partner's status as Corporate General
Partner is terminated pursuant to Section 4.1 hereof and the business of the
Partnership is continued pursuant
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to Section 6.1(a)(3) hereof, the Individual General Partners shall cause the
Partnership to distribute to the former Corporate General Partner (or its
trustee or other legal representative), within 60 days of the action resulting
in the continuation of the Partnership pursuant to Section 6.1(a)(3) hereof,
cash in such amount as is equal to the balance of such Corporate General
Partner's Capital Account, subject to any adjustment pursuant to Section 5.6
hereof.
(f) The Individual General Partners may cause the Partnership to
repurchase an Interest or portion thereof of a Limited Partner or of 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) the Interest or portion thereof has been transferred in
violation of Section 4.5 hereof, or the 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 the Interest by a Partner or other person will
cause the Partnership to be in violation of, or subject the
Partnership to additional registration or regulation under,
the securities or commodities laws of the United States or
of any State or any other relevant jurisdiction;
(3) continued ownership of the Interest may be harmful or
injurious to the business or reputation of the Partnership,
the Individual General Partners or the Corporate General
Partner, 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 the 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 the
Interest or portion thereof.
(g) The amount due to any Partner or holder of an Interest whose
Interest or portion thereof is redeemed repurchased pursuant to this Section 4.6
shall be equal to the value of such Partner's Capital Account or portion thereof
as determined as of the date of redemption or repurchase, after giving effect to
all allocations to be made to such Partner's Capital Account as of such date.
(h) The amount owing to a Partner in connection with a redemption or
a repurchase of an Interest or portion thereof by the Partnership pursuant to
this Section 4.6 shall be payable in cash, without interest. The Corporate
General Partner shall cause the Partnership to pay not less than 95 percent of
such amount (computed on the basis of unaudited data) to the Partner or
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other holder thereof within ten days after the date as of which the redemption
or repurchase is effected. The balance of such amount shall be paid (subject to
audit adjustments) within 15 days after the completion of the audit of the
Partnership's books for the Fiscal Year during which such redemption or
repurchase occurs or, in the case of redemptions pursuant to Section 4.6(b),
after the completion of a final audit of the Partnership's books.
____________________________________
ARTICLE V
CAPITAL
____________________________________
5.1 CONTRIBUTIONS TO CAPITAL.
(a) The minimum initial Capital Contribution of each Limited Partner
shall be such amount as the Individual General Partners, in their discretion,
may determine from time to time, but in no event shall be less than $250,000 or
such other amount as the Individual General Partners may determine from time to
time. The Corporate General Partner, upon becoming Corporate General Partner,
shall make a Capital Contribution of $100,000 in its capacity as Corporate
General Partner. The amount of the initial Capital Contribution of each Partner
shall be recorded on the books of the Partnership upon acceptance as a
contribution to the capital of the Partnership. Individual General Partners
shall not be entitled to make voluntary Capital Contributions as general
partners of the Partnership, but may make voluntary Capital Contributions as
limited partners if permitted by the Corporate General Partner.
(b) The Limited Partners shall have no right to make any Capital
Contributions after the Closing Date.
(c) Initial Capital Contributions and any additional Capital
Contributions shall be made in cash.
5.2 RIGHTS OF PARTNERS TO CAPITAL.
No Partner shall be entitled to interest on his Capital Contributions,
nor shall any Partner be entitled to the return of any capital of the
Partnership except (i) upon the redemption or repurchase by the Partnership of a
part or all of such Partner's Interest pursuant to Section 4.1 or Section 4.6
hereof, (ii) upon a distribution to such Partner pursuant to Section 4.6(e) or
5.10 hereof, (iii) pursuant to the provisions of Section 5.6(c) hereof or (iv)
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.
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(b) Each Partner's Capital Account shall have an initial balance
equal to the amount of cash constituting such Partner's initial Capital
Contribution.
(c) Each Partner's Capital Account shall be increased by the sum of
(i) the amount of cash constituting additional Capital Contributions by such
Partner made pursuant to Section 5.1 hereof, plus (ii) any amount credited to
such Partner's Capital Account pursuant to Sections 5.4 through 5.6 hereof.
(d) Each Partner's Capital Account shall be reduced by the sum of (i)
the amount of any redemption or repurchase of the Interest, or portion thereof,
of such Partner pursuant to Section 4.6 hereof and the amount of any
distributions to such Partner pursuant to Section 4.6(e), 5.10 or 6.2 hereof,
plus (ii) any amounts debited against such Partner's Capital Account pursuant to
Sections 5.4 through 5.7 hereof.
5.4 ALLOCATION OF NET PROFIT AND NET LOSS.
Subject to Section 5.8 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 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 Corporate General Partner, 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 Capital Contribution, upon demand of the Corporate General
Partner, the amount of such excess. The Corporate General Partner 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 Corporate General Partner
determines that a Partner is eligible for a refund of any withholding tax, the
Corporate General Partner 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 Corporate General Partner to have been paid or withheld
on behalf of, or by reason of particular circumstances applicable to, one or
more but fewer than all of the Partners, 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.
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5.6 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 Corporate General Partner, such reserves to be in the
amounts which the Corporate General Partner in its sole discretion deems
necessary or appropriate. The Corporate General Partner may increase or reduce
any such reserves from time to time by such amounts as the Corporate General
Partner in its sole discretion deems 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
Corporate General Partner in its sole discretion, of the act or omission giving
rise to the contingent liability for which the reserve was established,
increased or decreased in proportion to their Capital Accounts at that time.
(b) If at any time an amount is paid or received by the Partnership
(other than Capital Contributions, distributions or redemptions 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
5.6 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 Corporate General Partner 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 (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.
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5.7 INCENTIVE ALLOCATION.
(a) 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 Corporate General
Partner, 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 Corporate General Partner to the Individual General
Partners within 90 days after the close of such Allocation Period.
(b) Within 30 days after the end of each Allocation Period with
respect to each Limited Partner, the Corporate General Partner shall withdraw up
to 98% of the Incentive Allocation (computed on the basis of unaudited data)
that was credited to the Corporate General Partner's Capital Account and debited
from such Limited Partner's Capital Account with respect to such Allocation
Period. Subject to the criteria set forth in items (1) and (2) of this clause
(b), the Partnership shall pay the Corporate General Partner 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.
5.8 ALLOCATION TO AVOID CAPITAL ACCOUNT DEFICITS.
To the extent that any debits pursuant to Sections 5.4 through 5.6
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 Corporate General Partner. Any credits in any subsequent
Fiscal Period which would otherwise be allocable pursuant to Sections 5.4
through 5.6 hereof to the Capital Account of any Limited Partner previously
affected by the application of this Section 5.8 shall instead be allocated to
the Capital Account of the Corporate General Partner in such amounts as are
necessary to offset all previous debits attributable to such Limited Partner
pursuant to this Section 5.8 not previously recovered.
5.9 TAX ALLOCATIONS.
(a) For each Fiscal Year, items of income, deduction, gain, or loss
shall be allocated for income tax purposes as follows:
(b) All items of income and gain or loss and deduction realized by
the Partnership, other than items of income and gain or loss and deduction from
Options Transactions, shall be allocated 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 5.09 shall be made pursuant to the principles of
Sections 704(b) and 704(c) of the Code.
(c) All items of income and gain or loss and deduction realized by
the Partnership in connection with its Options Transactions shall be allocated
among the Partners as follows:
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(1) If there is Option Income for a Fiscal Year, to the extent
that there is Positive Option Income Carryover, then 20% of
such Positive Option Income Carryover shall be allocated to
the Capital Account of the Corporate General Partner and the
balance of such Option Income shall be allocated to the
Capital Accounts of the Partners in accordance with their
respective Partnership Percentages for such Fiscal Year; and
(2) If there are Option Losses for a Fiscal Year, then 20% of
such Option Losses shall be allocated to the Capital Account
of the Corporate General Partner in an amount equal to any
Option Income previously allocated to the Corporate General
Partner in excess of Option Losses previously allocated to
the Corporate General Partner, and the balance of such
Option Losses shall be allocated to the Capital Accounts of
the Partners in accordance with their respective Partnership
Percentages for such Fiscal Year.
5.10 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. In the event that the Partnership has cumulative net realized gains
exceeding 20% of the initial net assets of the Partnership, the Individual
General Partners may elect to make one or more distributions to the Partners on
a pro rata basis in accordance with the Partners' Partnership Percentages. The
amount and times of any such distributions will be determined in the sole
discretion of the Individual General Partners, and there is no requirement that
the full amount of gains exceeding the amount set forth above be distributed.
(b) The Corporate General Partner may withhold taxes from any
distribution to any Partner to the extent required by the Code or any other
applicable law. For purposes of this Agreement, any taxes so withheld by the
Partnership with respect to any amount distributed by the Partnership to any
Partner 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.
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__________________________
ARTICLE VI
DISSOLUTION AND LIQUIDATION
___________________________
6.1 DISSOLUTION.
(a) The Partnership shall be dissolved:
(1) on [February 28, 1999], 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 Corporate General
Partner to dissolve the Partnership or (ii) the termination
of the Corporate General Partner's status as such pursuant
to Section 4.1 hereof (other than in conjunction with a
Transfer of the Interest of the Corporate General Partner
permitted by Section 4.4 hereof to a person who is admitted
as a substitute Corporate General Partner 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 a person has been admitted to the
Partnership as the Corporate General Partner;
(4) upon the failure of Partners to elect successor Individual
General Partners at a meeting called by the Corporate
General Partner in accordance with Section 2.6(c) hereof
when no Individual General Partner remains to continue the
business of the Partnership; or
(5) 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
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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 Corporate General Partner if
there are no Individual General Partners, shall promptly liquidate the business
and administrative affairs of the Partnership, except that if both the
Individual General Partners and the Corporate General Partner 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, Corporate General Partner or liquidator, as applicable, shall deem
appropriate in their or its sole discretion) 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;
(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, Corporate
General Partner or other
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liquidator, as applicable, 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 Corporate General Partner 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 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.
7.2 DETERMINATIONS BY CORPORATE GENERAL PARTNER.
(a) All matters concerning the determination and allocation among the
Partners of the amounts to be determined and allocated pursuant to Article V
hereof, including any taxes thereon and accounting procedures applicable
thereto, shall be determined by the Corporate General Partner 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 Corporate General Partner may make such adjustments to the
computation of Net Profit or Net Loss, the Allocation Change with respect to any
Limited Partner,
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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 otherwise be required by the 1940 Act, the
Securities and other assets and liabilities of the Partnership shall be valued
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.
___________________________
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 Corporate General Partner 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;
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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 Corporate General Partner 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 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 an
association taxable as a corporation or a "publicly traded
partnership" 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) 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) shall be given 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.
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8.2 SPECIAL POWER OF ATTORNEY.
(a) Each Partner hereby irrevocably makes, constitutes and appoints
the Corporate General Partner, 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.
(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 Corporate General Partner and each of
the Individual General Partners and as such:
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(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 Corporate General Partner 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 Corporate General
Partner 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 Corporate General
Partner in the case of notice given to any Partner, and to each of the Partners
in the case of notice given to the Corporate General Partner). 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.
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.
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8.6 CHOICE OF LAW
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.
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 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
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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 Corporate General Partner, which consent may be withheld
in the Corporate General Partner'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 Corporate General Partner 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 any change in such Partner's status. Any Limited Partner who shall fail to
provide such certification when requested to do so by the Corporate General
Partner 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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8.14 USE OF THE NAME "LEVCO".
The name "Levco" and all rights to use such name belongs to John A.
Levin & Co., Inc. and its affiliates ("Levin & Co."). Levin & Co. has consented
to the use by the Partnership of the word "Levco" and has granted to the
Partnership a non-exclusive license to use such word as part of the name of the
Partnership. In the event an affiliate of Levin & Co. is not appointed as the
Adviser or ceases to be the Adviser of the Partnership, or an affiliate of Levin
& Co. ceases to be the Corporate General Partner of the Partnership, the non-
exclusive license granted herein may be revoked in whole or in part by Levin &
Co., and the Partnership shall cease use of the name Levco as part of its name,
as soon as reasonably practicable, unless otherwise consented to by Levin & Co.
or any successor to its interest in such name.
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THE UNDERSIGNED ACKNOWLEDGES HAVING READ THIS AGREEMENT IN ITS ENTIRETY
BEFORE SIGNING, INCLUDING 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.
CORPORATE GENERAL PARTNER:
LEVCO GP, INC.
John A. Levin
By:____________________________________
President
Its:___________________________________
INDIVIDUAL GENERAL PARTNERS:
John A. Levin
_______________________________________
_______________________________________
_______________________________________
_______________________________________
LIMITED PARTNERS:
Each person who shall sign a Limited
Partner Signature Page and who shall be
accepted by the Corporate General Partner
to the Partnership as a Limited Partner.
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SCHEDULE I
----------
__________________________
CORPORATE GENERAL PARTNER
-------------------------
Name and Address Capital Contribution
---------------- --------------------
Levco GP, Inc.
________________
________________
INDIVIDUAL GENERAL PARTNERS
---------------------------
Name and Address
----------------
________________
________________
________________
________________
________________
________________
________________
________________
________________
________________
LIMITED PARTNERS
----------------
Name and Address
----------------
Norris Nissim $100,000
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