<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-2
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] PRE-EFFECTIVE AMENDMENT NO.
[ ] POST-EFFECTIVE AMENDMENT NO.
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
12555 MANCHESTER ROAD
ST. LOUIS, MISSOURI 63131
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (314) 515-2000
------------------------
DANIEL A. BURKHARDT
C/O EDWARD D. JONES & CO., L.P.
12555 MANCHESTER ROAD
ST. LOUIS, MISSOURI 63131
(314) 515-2000
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
COPY TO:
JAMES L. NOUSS, JR., ESQ.
BRYAN CAVE LLP
211 NORTH BROADWAY
ONE METROPOLITAN SQUARE
ST. LOUIS, MISSOURI 63102
(314) 259-2000
------------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or a continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan check the following box: [X]
------------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF AMOUNT BEING OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES BEING REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units of Limited Partnership
Interest.......................... 200,000 $25 $5,000,000 $1,515.15
========================================================================================================================
</TABLE>
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE 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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
COMMUNITY INVESTMENT PARTNERS III, LLLP
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NO. OF FORM N-2 CAPTION IN PROSPECTUS
- ------------------------------------------------- -------------------------------------------
<C> <S> <C>
PART A -- INFORMATION REQUIRED IN PROSPECTUS
1. Outside Front Cover........................ Outside Front Cover
2. Inside Front and Outside Bank Cover Page... Not Applicable
3. Fee Table and Synopsis..................... Prospectus Summary; Management Compensation
and Other Expenses
4. Financial Highlights....................... Not Applicable
5. Plan of Distribution....................... Cover Page; Offering and Sale of Units
6. Selling Shareholders....................... Not Applicable
7. Use of Proceeds............................ Use of Proceeds; Investment Objective and
Policies
8. General Description of the Registrant...... Prospectus Summary; Risk and Other
Important Factors; Management; Prior
Investment Partnerships
9. Management................................. Management
10. Capital Stock, Long-Term Debt and Other
Securities................................. Not Applicable
11. Defaults and Arrears on Senior
Securities................................. Not Applicable
12. Legal Proceedings.......................... Not Applicable
13. Table of Contents of the Statement of
Additional Information..................... Not Applicable
PART B -- INFORMATION REQUIRED IN A STATEMENT OF
ADDITIONAL INFORMATION
14. Cover Page................................. Not Applicable
15. Table of Contents.......................... Not Applicable
16. General Information and History............ Not Applicable
17. Investment Objective and Policies.......... Risk and Other Important Factors;
Investment Objective and Policies
18. Management................................. Management
19. Control Persons and Principal Holders of
Securities................................. Management
20. Investment Advisory and Other Services..... Management; Management Fees and Other
Expenses
21. Brokerage Allocation and Other Services.... Not Applicable
22. Tax Status................................. Taxation; Partnership Distributions and
Allocations
23. Financial Statements....................... Financial Statements
PART C -- OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate Item, so
numbered, in Part C to this Registration Statement
</TABLE>
<PAGE> 3
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 OFFICER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 26, 1997
PROSPECTUS
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
- --------------------------------------------------------------------------------
A Business Development Company
$5,000,000
200,000 UNITS OF LIMITED PARTNERSHIP INTEREST PRICED AT $25 PER UNIT
Community Investment Partners III L.P., LLLP, (the "Partnership") is a
newly-formed business development company under the Investment Company Act of
1940, organized as a Missouri limited liability limited partnership. The
Partnership's investment objective is to seek long-term capital appreciation by
making investments in companies which Management of the Partnership believes
offer long-term growth possibilities. Current income will not be a primary
factor in the selection of investments but may be considered in structuring
investments. See "Investment Objective and Policies." There can be no assurance
that the investment objective of the Partnership will be realized. The
Partnership will be a non-diversified company as such term is defined in the
Investment Company Act of 1940. The Partnership will terminate on December 31,
2012, subject to the right of the Individual General Partners, under certain
circumstances, to extend the term for up to two additional two-year periods.
CIP Management L.P., LLLP (the "Managing General Partner") is the Managing
General Partner of the Partnership and is responsible for the Partnership's
capital investments. The Managing General Partner is a limited liability limited
partnership in which CIP Management, Inc. acts as the managing general partner.
The Managing General Partner also performs the management and administrative
services necessary for the operation of the Partnership. See "Management." CIP
Management, Inc. is an indirect subsidiary of The Jones Financial Companies,
L.P., LLP., an affiliate of Edward D. Jones & Co., L.P. ("Edward Jones"), the
selling agent of the Units being offered hereby. The address of the Partnership
is 12555 Manchester Road, St. Louis, Missouri 63131 and its telephone number is
(314) 515-2000.
The subscription price of $25.00 per Unit is required to be paid in two
stages: $12.50 upon subscription and all or such portion of the balance as is
required at a subsequent capital call date. THE FAILURE BY A LIMITED PARTNER TO
CONTRIBUTE SUCH REQUIRED BALANCE OF HIS, HER OR ITS SUBSCRIPTION PRICE WILL
RESULT IN THE TRANSFER OF TWENTY PERCENT (20%) OF SUCH PARTNER'S CAPITAL
CONTRIBUTION TO THE OTHER PARTNERS, WHICH WILL HAVE THE EFFECT OF REDUCING SUCH
PARTNER'S INTEREST AND UNITS IN THE PARTNERSHIP BY SIXTY PERCENT (60%) (OR
PROPORTIONATE LESSER PERCENTAGES IN THE CASE OF ADDITIONAL CAPITAL CONTRIBUTIONS
OF LESS THAN THE ENTIRE REMAINING BALANCE OF THE SUBSCRIPTION PRICE).
Investment in these Units may not be suitable for tax exempt entities and
the General Partners will not accept subscriptions from individual retirement
accounts, employee benefit plans or similar tax exempt entities.
Investment in the Units involves certain risks, including the following:
- There is a high degree of business and financial risk associated with
investments in portfolio companies.
- If the Partnership sells only the minimum 40,000 Units, the Partnership
will have only a few investments and will not be significantly
diversified.
- The Units are illiquid; there is no public market for the Units and none
is likely to develop; and there are significant restrictions on transfer
in the Partnership Agreement. See "Transferability of Units."
THESE ARE SPECULATIVE SECURITIES. SEE "RISK AND OTHER IMPORTANT FACTORS" FOR
A FULLER DISCUSSION OF THE RISKS OF INVESTMENT IN THE UNITS. THE PARTNERSHIP IS
A NEWLY ORGANIZED ENTITY AND THE PARTNERSHIP'S UNITS WILL HAVE NO HISTORY OF
PUBLIC TRADING.
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE PARTNERSHIP
THAT A PROSPECTIVE INVESTOR SHOULD KNOW BEFORE INVESTING. INVESTORS ARE ADVISED
TO READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
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.
<TABLE>
<CAPTION>
=================================================================================================================
PROCEEDS TO THE
PRICE TO PUBLIC(1) COMMISSIONS(2) PARTNERSHIP(3)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Unit (100 Units minimum)(4).......... $25.00 None $25.00
Total Minimum (40,000 Units)............. $1,000,000 None $1,000,000
Total Maximum (200,000 Units)............ $5,000,000 None $5,000,000
=================================================================================================================
</TABLE>
NOTES AND TEXT CONTINUED ON PAGE 2
EDWARD D. JONES & CO., L.P.
The Date of this Prospectus is , 1997
<PAGE> 4
------------------------------------
NOTES AND TEXT CONTINUED FROM COVER PAGE
(1) Assumes entire balance of subscription price is called and full payment at
subsequent capital call date.
(2) The Partnership and the Managing General Partner have agreed to indemnify
Edward Jones against, or to provide contribution with respect to, certain
liabilities, including liabilities under the Securities Act of 1933, as
amended, and state securities laws.
(3) Before deducting offering and organizational expenses payable by the
Partnership, estimated at $150,000 (but not to exceed 6% of the gross
offering proceeds).
(4) The minimum number of Units required of South Carolina investors shall be
200.
------------------------------------
The Units are being offered by Edward Jones, as selling agent, on a "best
efforts" basis. This offering will terminate not later than March 31, 1998 (the
"Offering Termination Date"). If subscriptions acceptable to the Managing
General Partner for 40,000 Units have not been received by the Offering
Termination Date, no Units will be sold and the subscribers' funds will be
refunded promptly with any interest earned thereon. Funds paid by subscribers
will be deposited in a bank escrow account and subscriptions may not be
terminated or funds withdrawn by subscribers. See "Offering and Sale of Units."
ANY SUPPLEMENTS AND/OR STICKERS WHICH UPDATE
THIS PROSPECTUS ARE CONTAINED INSIDE THE BACK COVER
2
<PAGE> 5
PROSPECTUS SUMMARY
The summary information below should be read in conjunction with the
detailed information appearing elsewhere in this Prospectus. A glossary of terms
has been included on page 9 of this Prospectus. See "Glossary."
The Offering.................. The Partnership is offering 200,000 units of
limited partnership interest (the "Units") in
the Partnership through Edward D. Jones & Co.,
L.P. ("Edward Jones"), as selling agent, on a
"best efforts" basis. The offering price is $25
per Unit (the "Subscription Price"), $12.50 of
which is required to be paid upon subscription
for the Units and the balance of which (or such
portion thereof as is required) is to be paid
on the Capital Call Date, described below. The
minimum investment is 100 Units ($2,500),
except in South Carolina in which the minimum
investment is 200 Units ($5,000). The offering
will terminate not later than March 31, 1998
(the "Offering Termination Date").
The initial Capital Contribution is required to
be made in cash in an amount equal to one-half
of each Partner's Subscription Price. Each
Partner will be required to contribute all or
such part of the balance of the Subscription
Price as is required by the Individual General
Partners to be contributed to the Partnership
on a subsequent capital call date (the "Capital
Call Date"), following at least 45 days' notice
by the Individual General Partners given at any
time, but only once, during the two-year period
commencing on the Offering Termination Date,
such notice to be given not less than 45 days
prior to the end of such two-year period. Such
notice will be in writing and will be addressed
to the Limited Partners at the addresses listed
in the Partnership records. Such notice will
state the amount required and the date on which
such amount is due (not earlier than 45 days
after the date of notice). Any Partner's
failure to contribute all or such portion of
the balance of his, her or its Subscription
Price as is required on the Capital Call Date
(a "Defaulting Partner") will result in the
transfer of twenty percent (20%) of his, her or
its Capital Contribution to the other Partners,
which will have the effect of reducing such
Defaulting Partner's interest and Units in the
Partnership by sixty percent (60%), as more
fully set forth in paragraph 3.3.3 of the
Partnership Agreement (or proportionate lesser
percentages in the case of additional Capital
Contributions of less than the entire remaining
balance of the Subscription Price). The
subsequent capital call will be in an amount
sufficient to result in at least $1,000,000 in
total Capital Contributions (including initial
contributions), assuming no Defaulting
Partners.
If acceptable subscriptions for at least 40,000
Units have been received by October 30, 1997,
as may be extended by the Managing General
Partner, in its discretion, up to or until the
Offering Termination Date and if all conditions
precedent to closing have been met, there will
be at least one closing of the sale of Units
(the "Initial Closing Date") at such time, and
for such number of Units, as the Partnership
and Edward Jones determine; provided, however,
that the first Closing will take place for no
fewer than 40,000 Units. If more than one
Closing is held, a second and final Closing
will take place on the Offering Termination
Date. If acceptable subscriptions for at
3
<PAGE> 6
least 40,000 Units have not been received by
the Initial Closing Date, as may be extended,
or if all conditions precedent to closing have
not been met, no Units will be sold and all
funds will be refunded promptly without
deduction. Funds paid by subscribers will be
deposited in a bank escrow account and
subscriptions deposited in the escrow account
may not be terminated or withdrawn by
subscribers. Interest, if any, earned on funds
deposited in the escrow account will be
distributed to subscribers on a pro rata basis,
as soon as practicable after Closing or return
of subscribers' funds, as the case may be. For
investment purposes, the Managing General
Partner or its affiliates intend to subscribe
for Units on the same terms and conditions as
other investors. These subscriptions may be
made in order to satisfy the 40,000 Unit
minimum.
The subscription price of Units subsequent to
the first Closing will remain at $25.00,
payable $12.50 upon subscription and up to
$12.50 subsequently upon being notified of a
capital call date, unless a significant event
occurs prior to the second Closing which would
cause the fair market value of the assets to
fall below the $25.00 subscription price, in
which event no second Closing will take place.
The Units are being offered to certain general
and limited partners of The Jones Financial
Companies, L.P., LLP, other persons associated
with or employed by it or its affiliates, and
certain other selected individuals.
See "Offering and Sale of Units."
The Partnership............... The Partnership is a limited liability limited
partnership which was organized under Missouri
law as a limited partnership on July 23, 1997
and which also registered as a limited
liability limited partnership under Missouri
law on July 23, 1997. See "Summary of the
Partnership Agreement." The Partnership has
elected to be a business development company
under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). As a
business development company, the Partnership
is required to invest at least 70% of its total
assets in qualifying investments as specified
in the Investment Company Act. See
"Regulation." The Partnership will be a
non-diversified company as such term is defined
in the Investment Company Act. As a
non-diversified company, the Partnership is
subject to certain risks in terms of
concentration of its holdings to which
diversified companies are not subject. See
"Risk and Other Important Factors -- Risks of
Investment" and "-- Size of Partnership."
The Partnership intends to invest at least 65%
of the total assets received by the partnership
as Capital Contributions in securities of
portfolio companies pursuant to the investment
objectives herein within two years of the
Partnership's last Closing Date and, in the
case of Capital Contributions received by the
Partnership at the Capital Call Date, will
invest at least 65% in such portfolio companies
within two years of receipt by the Partnership
of Capital Contributions at the Capital Call
Date. In each case, if such 65% level of
portfolio company investment is not achieved
within said
4
<PAGE> 7
two-year period, the Partnership will
distribute that amount of assets required to
reach the 65% level.
The Partnership aims to provide investors with
the opportunity to participate with a minimum
investment of $2,500 (except in South Carolina
where the minimum investment is $5,000) in
investments which are generally not available
to the public and which typically require
substantially larger commitments.
The Partnership will terminate on December 31,
2012, subject to the right of the Individual
General Partners, without the approval of the
limited partners, to extend the term for up to
two additional two-year periods if the
Individual General Partners determine that such
extensions are in the best interest of the
Partnership. The Partnership will thus
terminate not later than December 31, 2016.
Investment Objective.......... The investment objective of the Partnership is
to seek long-term capital appreciation by
making investments in companies which
Management (as defined herein) of the
Partnership believes offer long-term growth
possibilities. The Partnership will seek to
achieve this objective by investing in
companies or divisions thereof that Management
believes offer special opportunities for
growth. Current income will not be a primary
factor in the selection of investments but may
be considered in structuring investments. The
securities acquired will consist primarily of
common stock and securities convertible into
common stock, but may also consist of a
combination of equity and debt securities and
warrants, options and other rights to acquire
such securities. There can be no assurance that
the investment objective of the Partnership
will be realized. See "Investment Objective and
Policies."
The Partnership may make some or many of its
investments as a co-investor with other
investment funds if such funds are presented to
the Partnership and appear to offer appropriate
investment opportunities. The Partnership may
co-invest with other entities sponsored by
affiliates. Such co-investments will generally
require exemptive orders from the Securities
and Exchange Commission. There can be no
assurance that such orders will be obtained.
See "Investment Objectives and
Policies -- Co-Investment."
Use of Leverage............... Leverage is a speculative technique. The
Partnership has authority to utilize leverage
for the purpose of making follow-on
investments. Although the Partnership presently
has no plans to borrow funds or to issue senior
securities, it expects that such borrowings or
securities, if any, would not be incurred or
issued until the Partnership has utilized any
cash reserves held by the Partnership for
follow-on investments. The Partnership will not
otherwise incur indebtedness except to pay
operating expenses, in the event of
insufficient reserve amounts or of shortfalls
in cash flows; to assist one of its portfolio
company investments; to meet other
extraordinary or emergency purposes; or to make
investments to meet applicable regulatory
requirements as to the composition of the
Partnership's portfolio. The incurrence of debt
or issuance of senior securities will limit
distributions to limited partners. The
Partnership may not incur indebtedness for
borrowed money in excess of 50% of the value of
5
<PAGE> 8
its assets at such time. See "Risk and Other
Important Factors -- Use of Leverage" and
"Investment Objective and Policies --
Indebtedness."
Risks......................... The purchase of Units involves a number of
significant risk factors. The Partnership's
investments will involve a high degree of
business and financial risk that can result in
substantial losses, including, without
limitation, the possibility that the companies
in which the Partnership invests may be highly
leveraged. There is no public market for the
Units and none is expected to develop. The
Managing General Partner was formed in 1989 and
has prior experience in managing only two other
business development companies. See "Risk and
Other Important Factors" and "Prior Investment
Partnerships." Prospective investors should
also see the information set forth under
"Conflict of Interest."
Taxation...................... The federal income tax consequences described
herein depend on the treatment of the
Partnership as a partnership for federal income
tax purposes. No ruling has been sought from
the Internal Revenue Service concerning the tax
status of the Partnership. However, in the
opinion of counsel to the Partnership (which
opinion is not binding on the Internal Revenue
Service and which opinion is subject to certain
conditions), the Partnership will be treated as
a partnership for federal income tax purposes.
See "Risk and Other Important
Factors -- Federal Income Tax
Considerations -- Risk of Loss of Partnership
Status" and "Taxation -- Classification as a
Partnership."
Assuming the Partnership is classified as a
partnership for federal income tax purposes,
the Partnership will not be liable for any
federal income taxes. Instead, all of the
income, gains, losses and deductions and
credits of the Partnership will be passed
through to the Partners. Limited Partners will
be required to pay federal income taxes and may
in certain cases, be required to pay state and
local income taxes on their allocable share of
the Partnership's income and gain, if any,
whether or not they receive cash distributions
from the Partnership. See
"Taxation -- Allocation of Income and Loss."
Management.................... CIP Management L.P., LLLP, (the "Managing
General Partner") and certain individuals (the
"Individual General Partners"), a majority of
whom are required to be independent (the
"Independent General Partners"), will act as
General Partners of the Partnership. The
Individual General Partners will consist of two
individuals, each of whom constitutes an
Independent General Partner. The Managing
General Partner, a limited liability limited
partnership, originally formed in 1989 as a
Missouri limited partnership, and which, on
July 23, 1997, elected to register as a limited
liability limited partnership, is responsible
for finding, evaluating, structuring,
approving, monitoring and liquidating the
Partnership's portfolio company investments and
will be reimbursed for its out-of-pocket
expenses in connection therewith. The Managing
General Partner will also perform management
and administrative services for the operation
of the Partnership and will be paid quarterly a
management fee at an annual rate equal to 1.5%
of the total assets of the Partnership as
reflected on its most recent quarterly or
annual
6
<PAGE> 9
balance sheet. See "Management Compensation and
Other Expenses." The Managing General Partner,
its general partners, the directors and
officers of its managing general partner and
the Individual General Partners are at times
referred to herein as "Management." See
"Management."
Relationship with Edward
Jones......................... The Managing General Partner is a limited
liability limited partnership in which CIP
Management, Inc., a Missouri corporation, acts
as the managing general partner. CIP
Management, Inc. is an indirect subsidiary of
The Jones Financial Companies, L.P., LLP, which
is the parent of Edward Jones, the selling
agent for the Units being offered hereby. See
"Conflicts of Interest."
Cash Distributions............ Until such time as the Limited Partners have
received in the aggregate cumulative
distributions in an amount equal to their
Capital Contributions (up to $25 per Unit), all
cash that the General Partners do not expect to
use in the operation of the Partnership and
that is available after the payment of all
expenses then due and the creation of
reasonable reserves for liabilities and
follow-on investments ("Distributable Cash")
will be distributed to the Partners in the
ratio of 99% to the Limited Partners in
proportion to their Capital Contributions and
1% to the General Partners. Thereafter, all
such Distributable Cash will be distributed
100% to the General Partners until they have
received any outstanding amounts previously
deferred, as described below; then 90% to the
Limited Partners (in proportion to their
Capital Contributions) and 10% to the General
Partners (9% being a General Partner
Distribution) until such time as the Limited
Partners have received in the aggregate
cumulative distributions in an amount equal to
two times the amount of their Capital
Contributions, at which time all Distributable
Cash will be distributed 80% to the Limited
Partners (in proportion to their Capital
Contributions) and 20% to the General Partners
(19% being a General Partner Distribution).
Amounts otherwise distributable to the General
Partners as General Partner Distributions will
be deferred (but remain credited to their
capital accounts) to the extent that such
distribution would result in General Partners
receiving cumulative General Partner
Distributions from capital gains in excess of
20% of the cumulative capital gains realized by
the Partnership (net of realized capital losses
and unrealized capital depreciation). See
"Partnership Distributions and
Allocations -- Distributions."
When excess cash, if any, becomes available, it
is the Partnership's intent to make
distributions on an annual basis. It is not
anticipated that any investments will be sold
until the later years of the Partnership.
Accordingly, it is unlikely that any
significant distributions of the proceeds from
the disposition of investments will be made
until the later years of the Partnership.
The Managing General Partner may not reinvest
proceeds from the liquidation of portfolio
company investments except in connection with
follow-on investments, to reduce borrowings
incurred to make follow-on investments or to
meet applicable regulatory requirements as to
the composition of the Partnership's portfolio.
7
<PAGE> 10
Interest or income earned prior to the final
Closing will be distributed among those
Partners admitted as of the time such income
was earned or realized, that is, investors who
are admitted at the final Closing will not be
entitled to income earned prior thereto.
As soon as possible after the Partnership's
termination, the Partners will receive a
liquidating distribution of the remaining
assets of the Partnership based upon their
allocable share thereof.
See "Partnership Distributions and
Allocations."
Annual Allocation of Profits
and Losses.................... The Profits and Losses of the Partnership will
be determined and allocated as of the end of,
and within sixty days after the end of each
calendar year. Generally, Profits will be
allocated 99% to the Limited Partners and 1% to
the General Partners until the Partners'
Capital Accounts equal their undistributed
Capital Contributions. Thereafter, Profits will
be allocated 90% to the Limited Partners and
10% to the General Partners in an amount
sufficient to cause their Capital Accounts to
equal an amount equal to (i) two times their
Capital Contributions less (ii) cumulative
distributions pursuant to paragraph 4.1 and
paragraph 9.2.2 of the Partnership Agreement,
at which time profits will be allocated 80% to
the Limited Partners and 20% to the General
Partners.
Generally, Losses will be allocated 99% to the
Limited Partners and 1% to the General
Partners; provided, however, that Losses will
be allocated 80% to the Limited Partners and
20% to the General Partners to the extent of
any prior allocations of Profits which were
made to the Partners on an 80%/20% basis. Next,
Losses will be allocated 90% to the Limited
Partners and 10% to the General Partners to the
extent of any prior allocations of Profits
which were made to the Partners on an 90%/10%
basis. Thereafter, losses, if any, will be
allocated to those Partners who bear the
economic risk of loss.
Fees and Expenses Payable by
the Partnership............... The Partnership will pay its organizational and
offering expenses up to 6% of the maximum gross
offering proceeds of $5 million (a maximum
reimbursement of $300,000). Any organizational
and offering expenses incurred on behalf of the
Partnership in connection with this offering
which do not exceed 6% of such proceeds will be
reimbursed to the Managing General Partner and
its affiliates by the Partnership.
Following commencement of its operations, the
Partnership will pay the Managing General
Partner a quarterly fee at an annual rate equal
to 1.5% of the total assets of the Partnership
as reflected on the most recent balance sheet
as compensation for its services. The
Partnership will also pay or reimburse the
Managing General Partner for other expenses
relating to the operations of the Partnership,
including fees and expenses of the Independent
General Partners (including annual fees of
$6,000 and a fee of $1,000 for each meeting
attended, per individual), legal and accounting
expenses, expenses of portfolio transactions
and other expenses described under "Management
Compensation and Other Expenses," which the
Managing General
8
<PAGE> 11
Partner estimates will equal approximately
$45,000 in the first year of operation. The
Managing General Partner will provide the
Partnership, at the Managing General Partner's
expense, with office space, equipment and
personnel as described under "Management." The
Partnership will establish a reserve fund equal
to at least 2 1/2% of the gross offering
proceeds to fund initial operational expenses.
See "Use of Proceeds."
How to Subscribe.............. A prospective purchaser must complete, date and
deliver to Marilyn A. Gaffney, c/o Edward
Jones, 12555 Manchester Road, St. Louis,
Missouri 63131, one copy of a Subscription
Qualification and Acceptance Page attached as
part of the Subscription Agreement which is
attached as Exhibit B to this Prospectus.
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GLOSSARY
Following are definitions of certain terms used in this Prospectus.
ADJUSTED CAPITAL CONTRIBUTION -- means, at any specified time, the Capital
Contribution to the Partnership by all Partners or any one Partner, as the case
may be, reduced by distributions of Distributable Cash and Liquidation Assets to
the Partners or such Partner, as the case may be, pursuant to paragraphs 4.1 and
9.2.2 of the Partnership Agreement, respectively.
CAPITAL ACCOUNT -- means a Partner's capital contribution (up to $25 per
Unit), plus the Partner's share of any Partnership Profits, reduced by the
Partner's share of any Partnership Losses and by the Partner's share of any
distributions of cash or assets and as otherwise increased or decreased in
accordance with tax accounting principles of the Internal Revenue Code of 1986,
as amended, and the regulations thereunder.
CAPITAL CALL DATE -- means the date on which investors will be required to
contribute all or part of the unpaid balance of their Subscription Price as set
forth in paragraph 3.3.3 of the Partnership Agreement. The date and the amount
required to be contributed will be specified in a notice given at least 45 days
prior thereto by the Individual General Partners at any time, but only once,
during the two year period commencing on the Offering Termination Date, such
notice to be given not less than 45 days prior to the end of said two-year
period. Such capital call will be in an amount sufficient to result in at least
$1,000,000 in total Capital Contributions (including initial contributions),
assuming no defaulting partners.
CAPITAL CONTRIBUTION -- means, at any specified time, the total amount of
money actually contributed to the Partnership by all Partners or any one
Partner, as the case may be (or any predecessor holders of the interest of such
Partner or Partners), subject to adjustment pursuant to Section 3.3.3 of the
Partnership Agreement.
CLOSING -- means the Initial Closing Date or the Offering Termination Date.
DISTRIBUTABLE CASH -- means all cash that the General Partners do not
expect to use in the operation of the Partnership and that is available after
the payment of all expenses then due and the creation of reasonable reserves for
liabilities and follow-on investments.
INDEPENDENT GENERAL PARTNERS -- means Thomas A. Hughes and Ralph G. Kelly
and/or any other individual who becomes a successor or additional General
Partner of the Partnership and who is not an "interested person" of the
Partnership (within the meaning of the Investment Company Act of 1940).
INDIVIDUAL GENERAL PARTNER -- means the Independent General Partners and/or
any other individual who becomes a successor or additional Individual General
Partner of the Partnership.
LIQUIDATION ASSETS -- means the assets of the Partnership to be distributed
upon liquidation of the Partnership.
LOSSES -- means the Losses of the Partnership for federal income tax
purposes including, without limitation, each item of Partnership income, gain,
loss, deduction, and tax-exempt income and non-deductible expenses of the
Partnership.
MANAGEMENT -- means the Managing General Partner, its general partners, the
directors and officers of its managing general partner and the Individual
General Partners.
MANAGING GENERAL PARTNER -- means CIP Management L.P., LLLP, a Missouri
limited liability limited partnership, the general partners of which are CIP
Management, Inc. and Daniel A. Burkhardt, and the limited partner of which is
The Jones Financial Companies, L.P., LLP.
PROFITS -- means the Profits of the Partnership for federal income tax
purposes including, without limitation, each item of Partnership income, gain,
loss, deduction, and tax-exempt income and non-deductible expenses of the
Partnership.
SUBSCRIPTION PRICE -- means the total amount of money required to be
contributed to the Partnership by any one Limited Partner (up to $25 per Unit),
as determined by the number of Units to which such Limited Partner has
subscribed.
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INVESTOR SUITABILITY STANDARDS
THE PURCHASE OF UNITS INVOLVES SIGNIFICANT RISKS
AND IS NOT A SUITABLE INVESTMENT FOR ALL POTENTIAL INVESTORS.
SEE "RISK AND OTHER IMPORTANT FACTORS."
1. SUBSTANTIAL MEANS AND NET WORTH. Purchase of Units is suitable only for
investors who have no need for liquidity in this investment and who have
adequate means of providing for their annual needs and contingencies.
Accordingly, no Units will be sold to a prospective investor unless such
investor (i) has a net worth (exclusive of home, home furnishings and personal
automobiles) of not less than $100,000 in excess of the purchase price of the
Units subscribed for or (ii) has a net worth (exclusive of home, home
furnishings and personal automobiles) of not less than $35,000 in excess of the
purchase price of the Units subscribed for and expects to have in the current
and next three taxable years, gross income from all sources in excess of
$35,000. Certain States in which the Partnership may offer Units have
established suitability standards different from those set by the Partnership.
Such standards are set forth in Exhibit C to this Prospectus.
2. ABILITY AND WILLINGNESS TO ACCEPT RISKS. The economic benefit from an
investment in the Partnership depends upon many factors beyond the control of
the General Partners and their affiliates. The Partnership's investments will
involve a high degree of business and financial risk that can result in
substantial losses. See "Risk and Other Important Factors." Accordingly, the
suitability for any particular investor of a purchase of the Units will depend
upon, among other things, such investor's investment objectives and such
investor's ability to accept speculative risks. The Units are not a suitable
investment for investors seeking current income.
3. ABILITY TO ACCEPT LIMITATIONS ON TRANSFERABILITY. Limited Partners may
not be able to liquidate their investment in the event of emergency or for any
other reason because there is not now any public market for Units and it is not
anticipated that one will develop. Moreover, the transferability of Units is
subject to significant restrictions in the Amended and Restated Agreement of
Limited Partnership (the "Partnership Agreement"), attached as Exhibit A to this
Prospectus, and may be affected by restrictions on resales imposed by the laws
of some states. See "Transferability of Units."
4. RETIREMENT ACCOUNT CONSIDERATIONS. The General Partners will not accept
subscriptions from, or admit as a Limited Partner, (a) any employee benefit plan
or individual retirement account, (b) an "employee benefit plan," as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (including any qualified pension, profit-sharing, stock bonus or Keogh
Plan); (c) a plan described in Internal Revenue Code Section 4975(e)(1)
(including an IRA); or (d) any entity whose underlying assets include "plan
assets," as defined in ERISA Regulation Section 2510.3-101 by reason of a plan's
interest in the entity.
5. OFFERING TO PUBLIC AND TO EDWARD JONES PERSONNEL AND OTHER SELECTED
INDIVIDUALS. The Units are being offered to general and limited partners of The
Jones Financial Companies, L.P., LLP, and other persons associated with or
employed by it or its affiliates, and other select persons with whom such
entities have business relationships. Investors may acquire Units only if they
have the intention of holding them for investment and not with a view to the
distribution thereof.
6. DUTY OF SALESMEN. Persons selling the Units will be obligated to make
every reasonable effort to assure that those persons being offered and sold the
Units are suitable considering such persons' age, investment objectives, general
financial situation and recognizable capacity to understand the important
aspects of an investment in the Units.
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RISK AND OTHER IMPORTANT FACTORS
The purchase of Units involves a number of significant risk and other
important factors. In addition to the factors described hereunder, prospective
investors should also consider the information set forth under "Conflicts of
Interest" elsewhere in this Prospectus.
RISKS OF INVESTMENT
While the Partnership's portfolio company investments will offer the
opportunity for significant gains, such investments also involve a high degree
of business and financial risk that can result in substantial losses. Among
these are the risks associated with investment in companies with little
operating history, companies operating at a loss or with substantial variations
in operating results from period to period, and companies with the need for
substantial additional capital to support expansion or to achieve or maintain a
competitive position. Such companies may face intense competition, including
competition from companies financed by venture capitalists, or from companies
with greater financial resources, more extensive development, manufacturing,
marketing and service capabilities, and larger numbers of qualified managerial
and technical personnel.
The companies in which the Partnership invests may be highly leveraged and
subject to risks associated with leverage, in addition to risks directly related
to the companies' operations. While investments in highly leveraged companies
offer the opportunity for capital appreciation, such investments involve a high
degree of risk and can result in substantial losses of principal and interest.
In the event any such portfolio company cannot generate adequate cash flow to
meet debt service, all or part of the principal of such company's debt may not
be repaid, and, in such event, the value of the Partnership's equity
participation will be diminished.
To the extent the Partnership invests in debt securities, such securities
are likely to be unrated and less than investment grade. Risk of loss upon
default by the borrower is significantly greater with respect to such unrated
debt securities than investments in investment grade debt securities, because,
in addition to the other risks described herein, these securities are generally
unsecured and are often subordinated to other creditors of the issuer.
In addition, due to the level of leverage utilized, other general business
risks, such as labor problems, casualty losses, and other problems that require
additional company resources, will have a more aggravated effect on more
leveraged companies. The effects of a recession may have a more pronounced
effect on the profitability of such highly leveraged companies as well. Profits
of such companies may tend to decrease during a recession, which would result in
a decrease in the value of the Partnership's investment.
Changes in interest rates generally may have an adverse affect on the
Partnership's investments. See "Use of Leverage" below. Fluctuations in interest
rates may have an adverse impact on the Partnership indirectly through the
effect of interest rate fluctuations on portfolio companies. Certain of the
Partnership's debt investments may pay interest at fixed rates. However, other
floating interest bearing debt of a portfolio company may be substantial and may
be senior to the Partnership's investment. In that instance, rising interest
rates may have an adverse effect on the portfolio company's ability to pay
principal and interest on the Partnership's investment.
Additionally, to the extent the Partnership's debt investments bear
interest at a fixed rate and interest rates generally rise while such
investments are outstanding, investors in the Partnership may receive interest
income at lower rates than are prevailing in the market place.
Further, in the event the Partnership borrows money from a lender which
sets minimum and maximum rates of interest on the repayment of such borrowed
funds, the Partnership may benefit if market interest rates rise above the
maximum level set by the lender but may be adversely affected if such rates drop
below the minimum level required by the lender.
In addition, the Partnership may be the sole or primary lender to a
portfolio company. In such case the Partnership's exposure would be substantial.
In instances in which the Partnership's loan is not retired by other debt and/or
equity, the interest rate that may be charged on such loan may adversely affect
the company's ability to pay its debts. The Partnership, as a business
development company under the Investment Company Act, is limited to making
investments only in specified types of companies, and accordingly its ability to
diversify will
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be limited. See "Regulations." In addition, because of the amount of leverage
which may be used by portfolio companies, such companies will also tend to be
less diversified than companies with lower debt.
SIZE OF PARTNERSHIP
The Partnership will be funded with contributions of not less than $1
million (assuming full payment of the balance of the Subscription Price called
by the Individual General Partners on the Capital Call Date) and not more than
$5 million. The contributions would be less if contributions are not made at the
Capital Call Date. Its potential profitability could be affected by the amount
of funds at its disposal. The Partnership will be a non-diversified company.
Since the Partnership intends to invest only in a few companies, a loss or other
problem with a single investment would have a material adverse effect on the
Partnership.
ABILITY TO INVEST FUNDS
In making its investments, the Partnership expects to encounter competition
from other entities having similar investment objectives. The Jones Financial
Companies, L.P., LLP, and its affiliates currently sponsor two other entities
with investment objectives similar to the Partnership (see "Prior Investment
Partnerships"), and they intend to consider sponsoring similar entities
subsequent to the offering contemplated herein. Historically, the primary
competition for investments such as those contemplated by the Partnership has
been from investment partnerships and corporations, investment affiliates of
large industrial and financial companies, small business investment companies
and wealthy individuals. Competition also exists from large industrial and
financial companies investing directly rather than through investment affiliates
and from foreign investors. The Partnership may frequently be a co-investor with
other entities sponsored by affiliates (see "Conflicts of Interest") or
professional investment groups.
TIME REQUIRED TO MATURITY OF INVESTMENT; ILLIQUIDITY OF INVESTMENTS
The Partnership has adopted a policy pursuant to which it intends to invest
all of its funds available for investment (excluding funds committed to
investment (as referred to in paragraph 3.9.1 of the Partnership Agreement
attached hereto) and amounts held in reserve) in portfolio company investments
within two years from the date of the last Closing or a Capital Call Date, as
the case may be. However, it is anticipated that there will be a significant
period of time (up to the two year period referenced above) before the
Partnership has completed the selection of its portfolio company investments. In
the event the Partnership has not invested all such funds as are available for
investment within such two-year period, it will distribute such excess funds,
together with interest, if any, actually earned thereon, to the Partners on a
pro rata basis as a return of capital. See "Investment Objective and Policies --
Temporary Investments." In addition, the Partnership intends to invest at least
65% of the total assets received by the Partnership as Capital Contributions in
securities of portfolio companies pursuant to the investment objectives herein
within two years of the Partnership's last Closing Date and, in the case of
Capital Contributions received by the Partnership at the Capital Call Date, will
invest at least 65% in such portfolio companies within two years of receipt by
the Partnership of Capital Contributions at the Capital Call Date. In each case,
if such 65% level of portfolio company investment is not achieved within said
two-year period, the Partnership will distribute that amount of assets required
to reach the 65% level. Portfolio company investments may typically take from
four to seven years (or longer) from the date of initial investment to reach
such a state of maturity that disposition can be considered. In light of the
foregoing, it is unlikely that any significant distributions of the proceeds
from the disposition of investments will be made until the later years of the
term of the Partnership.
Further, the time required for the Partnership to invest substantially all
of the net proceeds of this offering may result in a delay to investors in
receiving a return on their investments.
It is anticipated that a substantial portion or all of the Partnership's
investments will consist of securities that are subject to restrictions on sale
by the Partnership because they were acquired from the issuer in "private
placement" transactions or because the Partnership is deemed to be an affiliate
of the issuer. Generally, the Partnership will not be able to sell these
securities publicly without the expense and time required to register the
securities under the Securities Act of 1933, as amended (the "Securities Act"),
unless it sells the securities in
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transactions exempt from registration under Rule 144 or other rules under the
Securities Act which permit only limited sales under specified conditions. If
the Partnership sells restricted securities to the public, the Partnership may
be deemed an "underwriter," or possibly a controlling person, for the purpose of
the Securities Act and be subject to liability under the Securities Act.
In addition, practical limitations may inhibit the Partnership's ability to
sell or distribute its portfolio securities because the issuers of the portfolio
securities are privately held, the Partnership owns a relatively large
percentage of the issuer's outstanding securities, or the issuer's customers,
joint venture associates, other investors, financial institutions or management
are relying on the Partnership's continued investment. Sales may also be limited
by contractual arrangements with underwriters of securities of portfolio
companies or by conditions in the securities market, which may be unfavorable
for sales of securities of particular issuers or issuers in particular
industries. Such limitations on liquidity could prevent the successful sale of
investments in portfolio companies, result in delay of any sale or reduce the
amount of proceeds that might otherwise be realized. The Partnership will
reflect these restrictive factors in the valuation of its investments. See
"Investment Objective and Policies -- Portfolio Valuation."
NEED FOR FOLLOW-ON INVESTMENTS
Following its initial investment in portfolio companies, Management
anticipates that the Partnership may frequently be called upon to provide
additional funds to portfolio companies or have the opportunity to increase its
investment in a successful operation. See "Investment Objective and Policies."
Although the Partnership intends to establish reserves considered adequate for
follow-on investments and is permitted to use leverage to make follow-on
investments, there can be no assurance that the Partnership will have sufficient
funds from reserves or borrowings to make all such investments. In this regard,
Management presently intends to initially maintain reserves for follow-on
investments of approximately 10-20% of its Capital Contributions; the level of
reserves will be monitored by Management on an ongoing basis to determine the
appropriate level in light of the perceived development of portfolio companies
and their anticipated needs for subsequent financing. Any decision by the
Partnership not to make follow-on investments or its inability to make them may
have a substantial negative impact on a portfolio company in need of such
investment or may result in a missed opportunity for the Partnership to increase
its participation in a successful operation.
USE OF LEVERAGE
The Partnership has authority to utilize leverage (i.e., borrow funds or
issue senior securities) for the purpose of making follow-on investments. The
Partnership will not otherwise incur indebtedness except to pay operating
expenses, in the event of insufficient reserve amounts or of shortfalls in cash
flows, to assist one of its portfolio company investments, to meet other
extraordinary or emergency purposes, or to make investments to meet applicable
regulatory requirements as to the composition of the Partnership's portfolio.
See "Investment Objective and Policies -- Indebtedness." Leverage is a
speculative technique. The use of leverage would exaggerate increases or
decreases in the Partnership's net asset value as contrasted to the value of its
total assets. In addition, in order to meet required payments on borrowings or
senior securities, the Partnership may be required to liquidate portfolio
securities at times when it is disadvantageous to do so. Further, the incurrence
of debt or issuance of senior securities may limit distributions to Limited
Partners. Although the Investment Company Act permits the Partnership to issue
multiple classes of senior debt and a single class of limited partnership
interests senior to the Units, the Act limits distributions to holders of the
Units while such securities are outstanding unless certain conditions are
satisfied. See "Regulation." Although the Partnership presently has no plans to
borrow funds, it expects that borrowings, if any, would generally be made from
banks. There can be no assurance that any such borrowings, if needed, would be
available. The Partnership will be subject to the risks associated with interest
rate fluctuations in connection with any such borrowings.
UNSPECIFIED INVESTMENTS
The Partnership has not identified any particular investments it will make.
Accordingly, an investor in the Units must rely upon the ability of the Managing
General Partner in making portfolio investments consistent with
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the Partnership's investment objective and policies. See "Investment Objective
and Policies." Further, Management anticipates that many of the Partnership's
investments may be in privately-held companies. Therefore, the investor will not
have the opportunity to evaluate personally the relevant economic, financial and
other information which will be utilized by Management in its selection and
monitoring of investments.
RELIANCE ON MANAGEMENT
All decisions with respect to the management of the Partnership will be
made exclusively by Management. Limited Partners have no right or power to take
part in the management of the Partnership. Further, the Partnership Agreement
does not prohibit Management from changing the investment objective and policies
of the Partnership without the vote of the Limited Partners, except as described
under "Investment Objective and Policies -- Investment Company Act Policies."
Moreover, Limited Partners will not be able to remove the General Partners
except with the consent of a majority-in-interest. See "Summary of the
Partnership Agreement -- Withdrawal or Removal of the General Partners." The
Individual General Partners and certain affiliates of the Managing General
Partner intend to subscribe for the purchase of Units in this offering, ranging
in the aggregate from up to approximately 6,000 Units (15%), in the event the
40,000 minimum number of Units are sold, to up to approximately 18,000 Units
(9%), in the event the 200,000 maximum number of Units are sold. See
"Management." In addition, The Jones Financial Companies, L.P., LLP ("JFC"), or
one of its affiliates, may subscribe for up to an additional 5% of the total
number of Units sold. Accordingly, the Individual General Partners and such
affiliates of the Managing General Partner and JFC will control a significant
percentage of Units, with the result that Limited Partners may have difficulty
removing the General Partners or otherwise to influence Partnership matters.
Further, these subscriptions may be made in order to satisfy the 40,000 Unit
minimum. Investors will not receive the detailed financial information issued by
portfolio companies which is provided to Management. Accordingly, no person
should purchase Units unless such person is willing to entrust all aspects of
the management of the Partnership to Management.
NEW BUSINESS
While the key personnel of the Managing General Partner have considerable
prior experience in investment banking and in structuring investments similar to
those which the Partnership intends to pursue (see "Management"), the Managing
General Partner has managed only two other business development companies since
its formation in 1989 and thus has a relatively brief operating history upon
which Limited Partners may consider in connection with an investment in the
Partnership. See "Prior Investment Partnerships." The Partnership has only
recently been formed and has no operating history on which to base such an
evaluation.
NO MARKET FOR UNITS
The Units will not be freely transferable. There is no market for the Units
and there are restrictions in the Partnership Agreement which are intended to
prevent the development of a public market. The Units will be transferable only
in accordance with the restrictions contained in the Partnership Agreement and
may be affected by restrictions on resales imposed by the laws of some states.
See "Transferability of Units." Moreover, there is presently no market for the
resale of Units, and it is not anticipated that any public market for the resale
of Units will develop. Consequently, Limited Partners may not be able to
liquidate their investments in the event of emergency or for any other reason.
Such factors will likely also limit the price which a Limited Partner would be
able to obtain for Units. Securities of closed-end funds such as the Partnership
frequently trade for amounts less than net asset value.
DISTRIBUTIONS IN KIND
The Partnership expects to liquidate its investments through a variety of
transactions (see "Investment Objectives and Policies -- Liquidation of
Investments"). However, in rare instances, the Partnership may distribute its
portfolio securities to its Limited Partners. The sale of such securities by
Limited Partners may be limited by market factors or regulatory restrictions and
Limited Partners may incur additional expenses in disposing of such securities.
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STATUS AS A LIMITED LIABILITY LIMITED PARTNERSHIP
The Partnership has registered under Missouri law as a limited liability
limited partnership. As such, the General Partners shall be accorded all the
limited liability protection of a partner in a general partnership registered as
a limited liability partnership under applicable Missouri law. Generally,
Missouri law provides that no partner in a registered limited liability
partnership shall be liable or accountable, directly or indirectly, for any
debts, obligations and liabilities of, or chargeable to, the partnership,
whether in tort, contract or otherwise, which are incurred, created or assumed
by such partnership while the partnership is a registered limited liability
partnership, except for any such liabilities for such partner's own negligence,
wrongful acts, omissions, misconduct or malpractice or that of any person under
the partner's direct supervision and control or for liability of such partner
for certain taxes and fees. In order to qualify as a limited liability limited
partnership under Missouri law, the Partnership must file an annual registration
with the Missouri Secretary of State electing to be treated as such.
FEDERAL INCOME TAX CONSIDERATIONS
RISK OF LOSS OF PARTNERSHIP STATUS
The anticipated tax benefits of an investment in the Partnership depend, in
large part, upon the Partnership being treated as a partnership for federal
income tax purposes rather than as an association taxable as a corporation. If
at any time the Partnership were determined to be an association taxable as a
corporation for federal income tax purposes, Partnership income would be taxable
to the Partnership at corporate rates which could result in a substantial
reduction in the amount of distributions to Limited Partners, and such
distributions could be taxable as dividends. If the loss of partnership tax
status occurred at a time when the Partnership's allocable share of total
liabilities exceeded the aggregate tax basis of the Partnership's assets, each
Limited Partner could be taxed on his share of the difference between such
liabilities and tax basis. Furthermore, if the Partnership were treated as a
publicly traded limited partnership (see "Taxation -- Classification as a
Partnership"), the Partnership could be treated as an association taxable as a
corporation with the tax results described above.
The Partnership has not sought a ruling from the Internal Revenue Service
("IRS") as to its tax status. However, the Partnership has received an opinion
of Bryan Cave LLP, St. Louis, Missouri, its counsel, to the effect that the
Partnership will be treated as a partnership for federal income tax purposes.
This opinion is conditioned upon (a) the assumed validity and continued
existence of the current law and the regulations and existing administrative
interpretations, (b) the General Partners not electing pursuant to Treasury
Regulation Section 301.7701-3 to be classified as an association taxable as a
corporation, (c) the operation of the Partnership in accordance with the
Partnership Agreement, and (d) certain other factual representations made by the
General Partners. See, e.g. "Taxation -- Classification as a Partnership." Such
an opinion is not binding on the IRS (or any other taxing authority) and,
therefore, would not preclude an adverse determination as to the Partnership's
tax status. An adverse determination by the IRS is, however, appealable in
court. Such appeal could, nevertheless, cause the Partnership to incur legal and
accounting expenses. Since no ruling has been obtained, there is greater risk
that the IRS, upon audit, may challenge the classification of the Partnership.
OTHER TAX MATTERS
The following is a brief summary of other material tax risks of an
investment in the Partnership. For a more detailed summary of the federal income
tax consequences and tax risks of an investment in the Partnership, see
"Taxation."
Tax Liability Exceeding Cash Distributions or Cash Proceeds from
Disposition. Limited Partners will be required to pay federal income taxes and
may in certain cases, be required to pay state and local income taxes on their
allocable share of the Partnership's income and gain, whether or not they
receive cash distributions from the Partnership. See "Taxation -- Allocation of
Income and Loss." Furthermore, any reduction in a Limited Partner's allocable
share of the Partnership's nonrecourse debt could result in a concurrent tax
liability to the Limited Partner even though no cash will have been distributed.
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Audit. Under the procedures for auditing partnerships and for contesting
the treatment of partnership items, the federal income tax treatment of
Partnership income, gain, loss, deduction or credit will be determined in a
unified proceeding at the Partnership level rather than individually for each
Limited Partner. Prospective investors are cautioned that if the IRS were to
propose any adjustments in the treatment of a Partnership item, these procedures
could cause Limited Partners to be bound by proceedings, both administrative and
judicial, conducted by the Partnership. See "Taxation -- Audit by Internal
Revenue Service and Adjustment Procedures."
THE FOREGOING IS A SUMMARY OF THE CERTAIN SIGNIFICANT FEDERAL INCOME TAX
RISKS RELATING TO AN INVESTMENT IN THE PARTNERSHIP. THIS SUMMARY SHOULD NOT BE
INTERPRETED AS A REPRESENTATION THAT THE MATTERS REFERRED TO HEREIN ARE THE ONLY
TAX RISKS INVOLVED IN THIS INVESTMENT OR THAT THE MAGNITUDE OF SUCH RISKS IS
NECESSARILY EQUAL. FOR A MORE DETAILED DISCUSSION OF THE FEDERAL INCOME TAX
RISKS OF AN INVESTMENT IN THE PARTNERSHIP, SEE "TAXATION."
STATE INCOME TAX CONSIDERATIONS
Pursuant to the final Regulations issued under Section 7701 (Sections
301.7701-2 and -3 of the Code) that are effective January 1, 1997 (hereinafter
"Check the Box Regulations"), the Partnership has received an opinion of counsel
for federal income tax purposes that the Partnership will be classified as a
partnership. Many states have not announced whether for state income tax
purposes the elective Check the Box federal classification system will be
followed. Under prior federal law and the states' interpretation thereof, the
Partnership believes it would be classified as a partnership for state income
tax purposes. However, since state tax classification issues are uncertain at
this time, no assurances can be given that the Partnership will be classified as
a partnership under any particular state tax entity classification systems.
VARIOUS ASPECTS OF TAXATION, INCLUDING, WITHOUT LIMITATION, STATE AND LOCAL
TAXATION AND THE ALTERNATIVE MINIMUM TAX PRODUCE EFFECTS WHICH VARY BASED ON AN
INDIVIDUAL'S PARTICULAR CIRCUMSTANCES. THEREFORE, PROSPECTIVE INVESTORS ARE
URGED AND EXPECTED TO CONSULT THEIR OWN TAX ADVISORS AS TO ALL TAX CONSEQUENCES
OF AN INVESTMENT IN THE PARTNERSHIP.
POSSIBLE LOSS OF STATUS AS LIMITED PARTNERS
The Partnership Agreement provides certain rights for the Limited Partners
by vote of less than all of the Limited Partners to, among other things, amend
the Partnership Agreement, dissolve the Partnership, approve or consent to
certain actions of the General Partners and approve the sale of all or
substantially all of the Partnership's assets. In some jurisdictions, there is
uncertainty under present law as to whether the exercise of these rights under
certain circumstances could cause the Limited Partners to be deemed general
partners of the Partnership under applicable state laws with a resulting loss of
the limited liability of limited partners. If the Limited Partners were deemed
to be general partners of the Partnership in such circumstances, they would
likely be afforded the same protection from personal liability as the general
partners are as a result of the status of the Partnership as a limited liability
limited partnership. See "Status as a Limited Liability Limited Partnership."
However, in order to minimize any risk of increased exposure to liability
for the Limited Partners, the Partnership Agreement provides that the Limited
Partners may not exercise these rights unless the Partnership has received an
opinion of counsel to the effect that the existence and exercise of such rights
will not adversely affect the status of the Limited Partners as limited partners
of the Partnership.
See "Summary of the Partnership Agreement -- Voting Rights of Limited
Partners."
REPAYMENT OF CERTAIN DISTRIBUTIONS
In the event that the Partnership is unable otherwise to meet its
obligations, the Limited Partners may be required to repay to the Partnership or
to pay to creditors of the Partnership distributions previously received by them
to the extent such distributions are deemed to constitute a return of their
capital contributions or are deemed to have been wrongfully paid to them. See
"Summary of the Partnership Agreement -- Liability of Partners to Third
Parties."
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REGULATION
The Partnership has elected to be a business development company under the
Investment Company Act of 1940, as amended (the "Investment Company Act" or the
"Act"). The Act imposes numerous restrictions on the activities of the
Partnership, including, without limitation, restrictions on the nature of its
investments, its use of leverage and the issuance of securities, options,
warrants or rights, and requires that a majority of the General Partners be
individuals who are not "interested persons" of the Partnership as defined in
the Investment Company Act. See "Regulation." Because there are no judicial and
few administrative interpretations of portions of the legislation applicable to
the Partnership, there is no assurance that the legislation will be interpreted
or administratively implemented in a manner consistent with the Partnership's
objective and intended manner of operation. In the event that the General
Partners determine that the Partnership cannot operate effectively under the
Investment Company Act, the General Partners may at some future date decide to
withdraw the Partnership's election as a business development company and
transform the Partnership into an operating company not subject to regulation
under the Act or cause the Partnership to liquidate. These changes may not be
effected without the approval of the Limited Partners holding a majority of the
outstanding Units.
As indicated under "Conflicts of Interest" and "Investment Objective and
Policies," Management may determine that it is appropriate for the Partnership
to co-invest with other investment partnerships that are managed by an affiliate
of the Managing General Partner. Such co-investments generally will require
exemptive orders from the Securities and Exchange Commission. Such exemptive
orders would not reflect the approval by the Securities and Exchange Commission
of any proposed co-investment or a review of the merits of such investment but
rather indicate that the staff of the Securities and Exchange Commission has
reviewed the terms and conditions of the proposed co-investment. There can be no
assurance that such orders will be obtained. The failure to obtain such orders
may result in missed investment opportunities for the Partnership.
CONFLICTS OF INTEREST
The Managing General Partner and its affiliates, including Edward Jones,
which is acting as selling agent in the offering made hereby, will be subject to
various conflicts of interest in their relationship with the Partnership. The
arrangements and agreements among the Partnership, the Managing General Partner
and their affiliates, including the selling agent, have been established by the
Managing General Partner and are not the result of arm's-length negotiation. The
conflicts of interest include, but are not limited to, the following:
TRANSACTIONS WITH THE PARTNERSHIP
As required of a "business development company" under the Investment
Company Act, the Partnership, its Management and its affiliates, including
Edward Jones, must make available "significant managerial assistance" and thus
may perform various services for portfolio companies in which the Partnership
has invested. The Partnership may receive various fees and reimbursements, such
as management fees, consulting fees and expense reimbursements, with respect to
its management assistance provided to portfolio companies. This management
assistance may be provided by the Partnership or any of its General Partners.
Additionally, transaction, commitment, and similar fees for arranging and
structuring proposals may be received from portfolio companies. These services
are most likely to be performed by one of the General Partners of the
Partnership, including the managing General Partner or its general partner or
its officers. Such fees, commissions and expenses will be paid directly to the
account of the Partnership. Depending upon Management's influence and control
with respect to such portfolio companies, the selection of Edward Jones and
other affiliates of Management to perform such services may not be a
disinterested decision and the terms and conditions for the performances of such
services, and the amount and terms of such compensation, may not be determined
in arm's-length negotiations.
Article Five of the Partnership Agreement imposes various constraints on
Management and their affiliates in their dealing with the Partnership, and the
terms and conditions of the compensation for services rendered by a General
Partner or its affiliates to the Partnership are intended to be consistent with
and governed by industry norms. Additionally, Article Eleven prohibits the
General Partners and their Affiliates from voting their Partnership Interests
with respect to matters which involve conflicts of interest between themselves
and the Partnership. Furthermore, the Investment Company Act contains
restrictions as to certain transactions between
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<PAGE> 21
the Partnership and its affiliates. See "Regulation." Generally, transactions
involving the Partnership and affiliates of the Managing General Partner must
receive the prior approval of the Securities and Exchange Commission or the
Independent General Partners.
RELATIONSHIPS WITH COMMUNITY INVESTMENT PARTNERS, L.P. AND COMMUNITY INVESTMENT
PARTNERS II, L.P.
As discussed below, Community Investment Partners, L.P. and Community
Investment Partners II, L.P. (collectively, the "Prior Investment Partnerships")
are each venture capital partnerships which commenced operations in 1990 and
1992, respectively. The Managing General Partner acts as managing general
partner for both Prior Investment Partnerships. Community Investment Partners,
L.P. has completed its initial investments while Community Investment Partners
II, L.P. still has approximately $350,000 left to invest in one or more
portfolio companies. In addition, both Prior Investment Partnerships may make
follow-on investments in their respective portfolio companies. See "Prior
Investment Partnerships." The Partnership may desire to participate as a
co-investor in certain of those investments. There is no predetermined basis on
which investments will be allocated between the partnerships. With respect to
certain investment opportunities, there may be conflicting interests among the
partnerships. These conflicts could affect the availability of investments to
the partnerships or the terms of such investments. Management of the Prior
Investment Partnerships and the Partnership is overlapping and will not be
independent with respect to these investments decisions. In addition,
co-investments by the Partnership will generally require exemptive orders from
the Securities and Exchange Commission. There can be no assurance that such
orders will be obtained.
CONFLICTS WITH RESPECT TO INVESTMENT OPPORTUNITIES
Management or its affiliates or any Partner may serve as directors or
officers or perform investment advisory services for other investment entities
with investment objectives and policies similar to those of the Partnership. As
discussed above, The Jones Financial Companies, L.P., LLP, and its affiliates
currently sponsor two other entities with investment objectives similar to the
Partnership. See "Prior Investment Partnership." They may sponsor other entities
subsequent to the offering contemplated herein. Any such entities may compete
with the Partnership for investment opportunities. Furthermore, Management or
its affiliates or any Partner may invest with or without the Partnership
directly in portfolio company investments that would be appropriate investments
for the Partnership. Conflicts of interest may arise between the Partnership and
such an affiliate, particularly if they hold different levels of security (for
example, if the Partnership holds equity and the affiliate holds debt, the best
interests of the Partnership and such affiliate may diverge, and actions of the
affiliate could materially impair the equity interest of the Partnership). The
Partnership does not currently contemplate any such specific instances of
conflicts arising out of investments in different levels of securities by the
Partnership and any affiliate. In the event such a situation is specifically
contemplated, the Partnership would apply for exemptive orders from the
Securities and Exchange Commission, if required by the Investment Company Act.
There can be no assurance that such orders will be obtained. While the Managing
General Partner is obligated to use its best efforts to provide the Partnership
with a continuing and suitable investment program consistent with its investment
objective and polices, neither any affiliates of the Managing General Partner
nor any Partner (other than the Managing General Partner) is required to present
to the Partnership any particular investment opportunity which has come to its
attention, even if such opportunity is within the investment objective and
policies of the Partnership. See "Summary of the Partnership Agreement --
Partner's Independent Activities." Management, upon the request of the
Individual General Partners, will promptly furnish the Individual General
Partners with information on a confidential basis as to any portfolio company
investments made by the Managing General Partner or its affiliates for their own
account or for other investment advisory clients. The Partnership may be a
co-investor in portfolio companies with Management or its affiliates or their
other investment advisory clients. Such co-investments generally will require
exemptive orders from the Securities and Exchange Commission, for which
application will be made, if required, at the time any such co-investment is
under consideration. There can be no assurance that such orders will be
obtained. Such exemptive orders do not reflect the approval by the Securities
and Exchange Commission of any proposed co-investment or a review of the merits
of such investment but rather indicate that the staff of the Securities and
Exchange Commission has reviewed the terms and conditions of the proposed
co-investment. Because of different objectives or other factors, a particular
investment may be bought by Management or its affiliates or one of their
clients, including the Partnership, at a time when
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<PAGE> 22
one of such entities is selling such investment. Management will endeavor to
resolve conflicts of interest with respect to investment opportunities in a
manner deemed equitable to all to the extent possible under the prevailing facts
and circumstances. The Partnership will not make any co-investments in which a
General Partner or its affiliates will receive fees which are duplicative of
those permitted under the Partnership Agreement.
ALLOCATION OF MANAGEMENT TIME AND SERVICES
The Partnership will not have independent management or employees and will
rely upon Management and its affiliates for management and administration of the
Partnership and its assets. The Managing General Partner currently provides
management and administrative services to the Prior Investment Partnerships and
Daniel A. Burkhardt, an affiliate of the Managing General Partner, currently
provides management and administrative services to Oakwood Investors I, L.L.C.,
each of the foregoing, an investment fund similar to the Partnership. The
Managing General Partner and/or its affiliates may enter into other management
arrangements in the future on similar or different terms. Management believes
that it and its affiliates have or can attract sufficient personnel to discharge
all their responsibilities to the Partnership. Conflicts of interest will arise
in allocating management time, services or functions between the Partnership and
other entities for which Management and its affiliates may provide services. The
officers, directors and partners of Management and its affiliates will devote
such time to the affairs of the Partnership as they, in their sole discretion,
determine to be necessary for the conduct of the business of the Partnership.
TIMING OF CAPITAL CALLS AND DISPOSITION OF PARTNERSHIP INVESTMENTS
The Managing General Partner and, indirectly, its partners have an interest
in the profits and losses of the Partnership as set forth under "Partnership
Distributions and Allocations" and in the management fee as set forth under
"Management Compensation and Other Expenses". The Managing General Partner's
interest may in some cases be inconsistent with the interests of the Limited
Partners with respect to the timing and amount of additional Capital
Contributions required on the Capital Call Date and the timing of disposition of
Partnership investments. However, the acts of the Managing General Partner are
subject to supervision by the Individual General Partners, and all of the
Individual General Partners will be subject to a fiduciary duty to the
Partnership in evaluating decisions as to the retention and disposition of the
Partnership's investments.
OTHER RELATIONS WITH PORTFOLIO COMPANIES
Management and their affiliates may have other relationships on an on-going
basis with portfolio companies in which the Partnership has invested. Such
relationships could influence Management to take actions, or forebear from
taking actions, which an independent general partner might not take or forebear
from taking.
PARTICIPATION BY AN AFFILIATE AS SELLING AGENT
As an affiliate of Management, Edward Jones may experience a conflict of
interest in performing its due diligence in connection with the public offering
of the Units. The review performed by Edward Jones cannot be considered as
independent.
LACK OF SEPARATE REPRESENTATION
The Partnership, Management and Edward Jones are represented by the same
legal counsel. However, it is anticipated that separate counsel would be
retained for the Partnership in connection with any dispute which arises between
the Partnership and Management or any affiliate of Management.
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USE OF PROCEEDS
The following table shows the estimated minimum and maximum net proceeds to
the Partnership and the amounts available for investment in portfolio companies
as set forth under "Investment Objective and Policies," assuming full payment of
the balance of the Subscription Price called by the Individual General Partners
on the Capital Call Date.
<TABLE>
<CAPTION>
MINIMUM CONTRIBUTION MAXIMUM CONTRIBUTION
--------------------- ---------------------
DOLLARS PERCENT DOLLARS PERCENT
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Gross Offering Proceeds............................. $1,000,000 100.0% $5,000,000 100.0%
Less Offering Expenses:
Commissions....................................... -- -- -- --
Marketing and Sales............................... -- -- -- --
Organization and Offering Expenses(1)............. 60,000 6.0% 300,000 6.0%
Less Minimum Reserve(2)............................. 25,000 2.5% 125,000 2.5%
---------- ------- ---------- -------
Amount Available for Investment from Gross
Proceeds(3)....................................... $ 915,000 91.5% $4,575,000 91.5%
========= ====== ========= ======
</TABLE>
- ------------------
(1) Organizational and offering expenses borne by the Partnership will not
exceed 6% of gross offering proceeds. Organizational and offering expenses,
including printing, accounting, legal, clerical and other expenses and
registration and filing fees, estimated at $150,000, incurred by the
Managing General Partner and its affiliates on behalf of the Partnership in
connection with the organization of the Partnership and this offering will
be reimbursed to the Managing General Partner and its affiliates by the
Partnership. Organizational and offering expenses in excess of 6% of gross
offering proceeds will be borne by the Managing General Partner and its
affiliates.
(2) The Managing General Partner will establish an initial reserve fund equal to
at least 2 1/2% of the gross offering proceeds to fund operational expenses,
including the management fee. See"Risk and Other Important Factors -- Use of
Leverage" and "Management Compensation and Expenses."
(3) Does not reflect contributions of the General Partners of 1% of the total
Capital Contributions to the Partnership (approximately $10,000, if 40,000
Units are sold; approximately $50,000 if 200,000 Units are sold).
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Partnership is to seek long-term capital
appreciation by making investments in companies that Management believes offer
significant long-term growth possibilities. The Partnership will seek to achieve
this objective by investment in established companies or divisions thereof that
Management believes offers special long-term opportunities for growth, that is,
long-term growth opportunities that do not generally become available to the
public. Current income will not be a primary factor in the selection of
investments but may be considered in structuring investments as described below
under "Structuring of Investments."
Management anticipates that the typical initial investment by the
Partnership will approximate $100,000 to $750,000. The Partnership will not
invest more than 30% of its assets in any one portfolio company. Management
anticipates making seven to ten investments in portfolio companies from the
proceeds from the sale of Units if the maximum number of Units is sold.
THERE CAN BE NO ASSURANCE THAT THE PARTNERSHIP WILL BE SUCCESSFUL IN
MEETING ITS OBJECTIVE OR POLICIES WITHIN THE TIME PERIODS CONTEMPLATED OR THAT
THE OBJECTIVE OR POLICIES WILL BE ATTAINED AT ALL.
The Partnership Agreement does not prohibit Management from changing the
investment objective and policies of the Partnership without the vote of the
Limited Partners, except as described below under "Investment Company Act
Policies."
IDENTIFYING INVESTMENTS
Investment proposals may come to the attention of the Managing General
Partner from many sources, including unsolicited proposals from the public,
personal contacts of Management, other venture capitalists and referrals from
banks, lawyers, accountants and other members of the financial community,
including Edward Jones partners and personnel. Partners and personnel of Edward
Jones, who provide the Partnership with referrals
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<PAGE> 24
which lead to investments by the Partnership may, in certain circumstances, be
granted the right to invest in such investments on more favorable terms and
conditions than those granted to the Partnership, subject to compliance with any
applicable rules or regulations.
The Partnership intends to invest the net offering proceeds in portfolio
companies located in the United States.
Management intends to maintain a flexible approach with respect to the
industries in which the Partnership makes equity investments. Management
anticipates that the Partnership's equity investments will include investments
in manufacturers, distributors, utilities and agricultural and service
businesses. The Partnership may invest directly in real estate or real estate
mortgage loans but does not intend to invest in commodities or commodity
contracts, including futures contracts in a contract market or other futures
market. With respect to real estate investments, the Partnership shall not give
to Edward Jones or the Managing General Partner sole right to sell or exclusive
employment to sell property for the Partnership but shall allow the Managing
General Partner to manage and control such sales of property, subject to the
Management Agreement and the supervision of the Individual General Partners, in
the exercise of their authority and subject to any obligation to the partnership
of fiduciary duty. In the event of the acquisition of real property, such
acquisition shall be supported by an appraisal prepared by a competent,
independent appraiser, which appraisal shall be retained by the Partnership for
at least five years and shall be available for inspection and duplication by any
Limited Partner.
The Partnership's investments will generally be made in companies that are
privately held. Subject to applicable restrictions under the Investment Company
Act (see "Regulations"), investments may be made to a lesser extent in
established publicly-held or privately-held companies or divisions thereof
either in the form of direct investments in businesses which Management believes
constitute special situations offering opportunities for growth or in the form
of leveraged buyouts. Direct investments in companies with operating histories
may involve businesses that are marginally profitable or incurring losses, that
are highly leveraged, that have negative net worth or that are involved in
bankruptcy or reorganization proceedings. These companies can require
significant managerial assistance, and investments in these special situations
may require identification of a specific strategy to improve operating
performance, including, without limitation, a specific strategy to generate
sufficient cash flow to fund indebtedness.
Leveraged buyout transactions may involve a purchase of an established
company or division thereof by a new company in which the Partnership has an
interest. The high degree of debt financing typically involved in these
transactions may introduce substantial risks apart from those directly related
to the company's operations. See "Risk and Other Important Considerations --
Risks of Investment" and "-- Use of Leverage."
CO-INVESTMENT
The Partnership anticipates making many of its investments as a co-investor
with professional investment groups. In such cases, the co-investor may act as
lead investor. Management has contacts within the investment industry which will
be of assistance in selecting other groups as co-investors when appropriate.
Working with other experienced investor groups may provide Management with
further investment opportunities for the Partnership. These groups may also
provide significant management assistance to portfolio companies. The investment
position of the Partnership, along with co-investors, if any, in portfolio
companies will typically involve a substantial, and may constitute a
controlling, interest in such companies.
The professional investment groups sought as investment partners may
include small business investment companies and venture capital investors
because they generally constitute potential sources of investors in portfolio
companies. Additionally, working with other experienced investors is likely to
provide the Partnership with further investment opportunities. The groups sought
are not generally anticipated to be affiliates of the partnership. In the event
co-investments arise with affiliates, the appropriate exemptive order from the
SEC will be sought by the Partnership, if required. There can be no assurance
that such orders will be issued.
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<PAGE> 25
EVALUATION OF INVESTMENT OPPORTUNITIES
Prior to committing funds to an investment opportunity, investigation and
research will be conducted by the Managing General Partner to assess the
prospects and risks of the potential investment.
Prospective portfolio company investments will be evaluated by Management
upon selection criteria established by Management from time to time. The
following are typical of the criteria which may be utilized by Management to
analyze prospective portfolio companies:
- A competent management team with knowledge of a business, and the ability
to work together and direct a growing company. If capable management does
not exist in a situation where the other basic criteria are in place,
Management may assume a significant role in identifying the necessary
management talent.
- A market characterized by a favorable relationship among the variables of
size, growth potential and competitive factors.
- Possibility for the Partnership to obtain an effective investment
position which would allow it, either singly or in cooperation with other
outside investors, to influence the selection of management and the
strategic direction of the company.
STRUCTURING OF INVESTMENTS
An important factor in successful investing in portfolio companies is
proper structuring of the transaction in terms of such matters as price, type of
security, restrictions of use of funds, commitments or rights to provide
additional financing, control and involvement in the issuer's business and
liquidity. The Managing General Partner will be responsible for conducting such
negotiations on behalf of the Partnership and will seek to structure the terms
of the investment which provide for the capital needs and success of the issuer
and at the same time maximize the Partnership's opportunity for long-term
capital appreciation.
The Partnership's investments will typically be structured in negotiated,
private transactions directly with the portfolio company or an affiliate. The
securities acquired will generally consist of common stock and securities
convertible into common stock, but also may consist of a combination of equity
and debt securities and warrants, options and other rights to acquire such
securities. The securities acquired may also include partnership interests. See
"Taxation -- Possible Tax Law Changes."
MANAGEMENT ASSISTANCE AND MONITORING OF INVESTMENTS
Representatives of Management may serve as members of the board of
directors of portfolio companies. This Board representation, as well as a close
working relationship with operating management, may enable the Partnership to
exercise significant influence and provide management assistance with respect to
such matters as capital structure, budgets, profit goals, diversification
strategy, financing requirements, management additions or replacements and
developing a public market for the securities of portfolio companies.
Managerial assistance by the Managing General Partner or personnel of the
Managing General Partner to portfolio companies may be provided in a variety of
methods in addition to naming one or more directors of the portfolio company,
including assisting the portfolio company in recruiting capable directors or any
management personnel, assisting a portfolio company in establishing working
relationships with professional advisers, such as investment bankers, commercial
bankers, accountants and lawyers, assigning personnel of the Managing General
Partner with financial or management expertise to work closely with a portfolio
company on an ongoing basis or to serve as directors of a portfolio company and
providing periodic consultations and advice to the directors or management of a
portfolio company relating to particular business decisions or policies.
INDEBTEDNESS
Although the Partnership presently has no plans to borrow funds, it expects
that such borrowings, if any, would generally not be incurred until the
Partnership has utilized any cash reserves held by the Partnership for follow-on
investments. The Partnership will not otherwise incur indebtedness except to pay
operating expenses, in the event amounts held in reserve are insufficient or in
the event of shortfalls in cash flows; to assist one of its
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<PAGE> 26
portfolio company investments; to meet other extraordinary or emergency
purposes; or to make additional investments to meet regulatory requirements as
to the composition of the Partnership's portfolio. The Partnership may not incur
indebtedness for borrowed money in excess of 50% of the value of its assets at
such time. See "Regulation."
FOLLOW-ON INVESTMENTS
Following its initial investment in a portfolio company, the Partnership
anticipates that it may provide additional or "follow-on" funds to the portfolio
company. Follow-on investments may be made pursuant to rights to acquire
additional securities or otherwise in order to maintain or increase the
Partnership's position in a successful or promising portfolio company. The
Partnership may also be called upon to provide follow-on investments for a
number of other reasons, including providing additional capital to a company to
implement fully its business plans, to develop a new line of business or to
recover from unexpected business problems. The Partnership may use leverage
(i.e., borrowed funds or senior securities) to raise all or a portion of the
funds required to make follow-on investments.
TEMPORARY INVESTMENTS
It is expected that it may take up to two years for the Partnership to
complete the selection of its portfolio investments. If any of the net proceeds
of this offering available for investment (excluding amounts held in reserve)
have not been invested or committed for investment in portfolio company
investments within two years from the date of receipt of Capital Contributions
at the last Closing or the Capital Call Date, as the case may be, the
Partnership will distribute the non-invested or non-committed amount together
with interest, if any, actually earned thereon, as soon as practicable at the
end of the two-year period, to the Partners on a pro rata basis as a return of
their Capital Contributions. In addition, the Partnership intends to invest at
least 65% of the total assets received by the Partnership as Capital
Contributions in securities of portfolio companies pursuant to the investment
objectives herein within two years of the Partnership's last Closing Date and,
in the case of Capital Contributions received by the Partnership at the Capital
Call Date, will invest at least 65% in such portfolio companies within two years
of receipt by the Partnership of Capital Contributions at the Capital Call Date.
If such 65% level of portfolio company investment is not achieved within said
two-year period the Partnership will distribute that amount of assets required
to reach the 65% level. Management expects that assets not invested in portfolio
company investments will be invested in U.S. Government securities, investment
grade state and municipal bonds, certificates of deposit at banks with at least
$25,000,000 in assets, or money market securities sold by a bank, such money
market securities having investments in securities with investment grade
ratings. It should be noted that investment grade securities may have
speculative characteristics. Additionally, certain investment grade securities
may not be used to satisfy the percentage of portfolio investment required by
the Investment Company Act.
LIQUIDATION OF INVESTMENTS
Typically, the Partnership's investments may take from four to seven years
(or longer) from the time of investment to reach such a state of maturity that
disposition can be considered. Most of the investments made by the Partnership
will be in private companies or restricted securities of publicly traded
companies and consequently will generally be restricted as to resale or
disposition. See "Risk and Other Important Factors -- Time Required to Maturity
of Investment; Illiquidity of Investments."
The Partnership expects to begin to consider disposing of investments
commencing in its fifth year. The decision will be based on a number of factors,
including, without limitation, Management's then current assessment of the
portfolio company's value, prospects for appreciation in the company's value,
and the availability of means to liquidate the Partnership's investment. The
Partnership does not expect co-investments to significantly affect the timing of
such dispositions. See "Co-Investment."
The Partnership expects to liquidate its investments through a variety of
transactions, including mergers of portfolio companies with third parties,
acquisitions of portfolio companies by third parties, sales in registered
underwritten offerings, sales in the public market pursuant to exemptions from
registration or negotiated private
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<PAGE> 27
sales to the portfolio companies, to other investors in the companies or to
other investment fund investors. In addition, in rare instances, the Partnership
may distribute its portfolio securities to its Limited Partners. The sale of
such securities by Limited Partners may be limited by market factors or
regulatory restrictions and Limited Partners may incur additional expenses in
disposing of such securities.
In structuring investments, the Managing General Partner may endeavor to
reach such understandings with the issuer as may be appropriate as to the method
and timing of liquidation of the Partnership's investment and may seek to obtain
registration rights at the expense of the issuer and reporting compliance for
eligible companies under Rule 144. See "Risk and Other Important Factors -- Time
Required to Maturity of Investment; Illiquidity of Investments." To the extent
the Partnership does not obtain registration rights, it will be able to sell
publicly traded securities, if any, in accordance with the requirements of Rule
144. With certain exceptions, Rule 144 permits holders of publicly traded
securities acquired in private placements to sell such securities after a
one-year holding period, subject to the requirements of the Rule; however, the
Partnership does not expect to consider liquidating any investments until later
years. The Partnership will be required to bear the costs of liquidating
investments to the extent not paid by the issuer.
It is expected that the Partnership's general policy will be to liquidate
portfolio securities, if any, in publicly traded companies in an orderly fashion
when they become eligible for sale under Rule 144.
REINVESTMENT OF FUNDS
The Partnership will not reinvest proceeds from the liquidation of
portfolio company investments except in connection with follow-on investments,
to reduce borrowings incurred to make follow-on investments or to make
additional investments to meet applicable regulatory requirements relating to
the composition of the Partnership's portfolio. The Partnership intends to make
distributions of such proceeds as described under "Partnership Distributions and
Allocations."
INVESTMENT COMPANY ACT POLICIES
By virtue of the election by the Partnership to be treated as a business
development company under the Investment Company Act, there are certain
limitations on the Partnership's choice of investments. See "Regulation." As
required by the Investment Company Act, under the Partnership Agreement the
Partnership may not change its investment objective and policies so that it
would cease to be, or withdraw its election as, a business development company
under the Investment Company Act unless authorized by the vote of Limited
Partners holding a majority of the outstanding Units.
Because portfolio company investments are generally made for relatively
long periods, it is expected that the Partnership's average rate of portfolio
turnover will be low. The short-term nature of the money market securities in
which the Partnership will invest will result in high portfolio turnover in that
segment of the portfolio. The Partnership will not purchase any securities on
margin, except for use as short-term credit necessary for the clearance of
transactions, will not make short sales of securities and will not purchase or
sell commodities or commodity contracts.
PORTFOLIO VALUATION
Pursuant to the requirements of the Investment Company Act, the valuation
of the Partnership's portfolio will be made quarterly by the Managing General
Partner under the supervision of the Individual General Partners.
The fair market value for portfolio company investments for which no market
exists cannot be precisely determined. There is a range of values which is
reasonable for such investments at any particular time. In the early stages of
development, portfolio company investments will typically be valued based upon
their original cost to the Partnership (the "cost method"). The cost method will
be utilized until significant developments (such as the sale of other securities
or assets, entering into of material contracts, or other material developments)
affecting the portfolio company provide a basis for use of an appraisal
valuation (the "appraisal method"). The appraisal method will be based upon such
factors affecting the portfolio company as earnings and net worth, the market
prices for similar securities of comparable companies, and the Managing General
Partner's assessment of
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<PAGE> 28
the company's future prospects. In the case of unsuccessful operations, the
appraisal may be based upon liquidation value. Valuations based on the appraisal
method are necessarily subjective. To the extent deemed appropriate, the
Managing General Partner may also use third party transactions (actual or
proposed) in the portfolio companies' securities as the basis of valuation (the
"private market method"). The private market method will only be used with
respect to actual transactions or actual firm offers by sophisticated,
independent investors.
Any of the above valuation methods will only be used after the General
Partners have determined that the proposed method constitutes "fair value" under
the Act in the circumstances.
Investments of the Partnership for which market quotations are readily
available and which are freely marketable and not restricted as to transfer will
be valued as follows: (a) securities traded on a securities exchange will be
valued at the closing price on the most recent trading day; and (b) securities
traded in the over-the-counter market will be valued at the average of the
closing bid and asked prices on the most recent trading day. The money market
securities in which the Partnership may invest are traded primarily in the
over-the-counter markets and will be valued at the most recent bid price or
yield equivalent as obtained from dealers that make markets in such securities.
Although the valuation methods provided above may consider restrictions on
transfer when valuing portfolio company investments, securities with legal,
contractual or practical restrictions on transfer may be valued at a further
discount from their value determined by the foregoing methods to reflect the
effect of such restrictions.
MANAGEMENT
The General Partners will be responsible for the management and
administration of the Partnership. In accordance with the authority provided in
the Partnership Agreement, a copy of which is attached to the Prospectus as
Exhibit A, CIP Management L.P., LLLP will act as the Managing General Partner.
The other General Partners will be individuals and are referred to herein
as the Individual General Partners. As required by the Investment Company Act, a
majority of the General Partners must be individuals who are not "interested
persons" of the Partnership as defined in such Act (such independent General
Partners are referred to herein as the "Independent General Partners"). Under
applicable rules of the Securities and Exchange Commission, the Individual
General Partners will not be considered "interested persons" of the Partnership
within the meaning of the Investment Company Act.
The Managing General Partner and the Independent General Partners set forth
in this Prospectus will serve as General Partners until successors have been
elected or until their earlier resignation or removal. In the event that the
Managing General Partner is removed or is not re-elected at any meeting of the
Limited Partners held for the purpose of electing General Partners (see,
however, "Summary of the Partnership Agreement -- Voting Rights of the Limited
Partners -- Meetings"), the Partnership will have to seek alternate arrangements
with respect to the management of its portfolio company investments. Subject to
the supervision of the Individual General Partners, the Managing General Partner
provides the Partnership with certain management and administrative services as
described below.
The directors and executive officers of CIP Management, Inc., which is the
managing general partner of the Managing General Partner, the general partners
of the Managing General Partner, and the Independent General Partners intend to
subscribe for the purchase of Units in this offering, ranging in the aggregate
from up to approximately 6,000 Units (15%), in the event the 40,000 minimum
number of Units are sold, to up to approximately 18,000 Units (9%), in the event
the 200,000 maximum number of Units are sold. In addition, JFC or one of its
affiliates may subscribe for up to an additional 5% of the total number of Units
sold. These subscriptions may be made in order to satisfy the 40,000 Unit
minimum. All purchases of Units referenced above will be made for investment
purposes only and not for resale.
26
<PAGE> 29
GENERAL PARTNERS
THE MANAGING GENERAL PARTNER
CIP Management L.P., LLLP, the Managing General Partner, a limited
liability limited partnership originally organized under the laws of the State
of Missouri in 1989 as a limited partnership and which elected to register as a
limited liability limited partnership under Missouri law on July 23, 1997,
maintains its principal office at 12555 Manchester Road, St. Louis, Missouri
63131. The Managing General Partner also serves as the managing general partner
of the Prior Investment Partnerships, which are similar to the Partnership. See
"Prior Investment Partnerships." The Managing General Partner is engaged in no
other activities at the date of this Prospectus. The capital contribution of the
Managing General Partner to the Partnership is $1,000. The aggregate capital
contributions of the General Partners, as a class, will equal 1% of the total
Capital Contributions to the Partnership and will range from approximately
$10,000, in the event the 40,000 minimum number of Units are sold, to
approximately $50,000, in the event the 200,000 maximum number of Units are
sold.
The Partnership Agreement provides that the Managing General Partner,
subject to the supervision of the Individual General Partners, has exclusive
power and authority to manage and control the Partnership's portfolio company
investments. The Managing General Partner is authorized to and will be
responsible for making all decisions regarding the Partnership's investment
portfolio and, among other things, finding, evaluating, structuring, approving,
monitoring and liquidating such investments and providing or arranging for the
provision of, managerial assistance to the portfolio companies in which the
Partnership invests. The Managing General Partner will also perform the
management and administrative services necessary for the operation of the
Partnership. The Partnership will pay the Managing General Partner a management
fee as compensation for its services at an annual rate of 1.5% of the total
assets of the Partnership as reflected in the most recent quarterly or annual
balance sheet. In addition, the Managing General Partner will be reimbursed for
its out-of-pocket expenses (that is, expenses other than personnel and overhead)
directly from the Partnership, except with respect to those expenses borne
directly by the Partnership as set forth under "Management Compensation and
Other Expenses" below.
At the date of this Prospectus, the general partners of the Managing
General Partner are CIP Management, Inc., a Missouri corporation, and Daniel A.
Burkhardt, and the sole limited partner of the Managing General Partner is The
Jones Financial Companies, L.P., LLP, a Missouri limited partnership that has
registered as limited liability partnership under Missouri law and the parent
company of Edward Jones, the selling agent. CIP Management, Inc. is the managing
general partner of the Managing General Partner. Information concerning Mr.
Burkhardt is set forth below.
CIP Management, Inc., an indirect wholly-owned subsidiary of The Jones
Financial Companies, L.P., LLP, was incorporated under Missouri law on October
5, 1989. CIP Management, Inc., maintains its principal office at 12555
Manchester Road, St. Louis, Missouri 63131.
Set forth below is certain information concerning the directors and
executive officers of CIP Management, Inc.:
<TABLE>
<CAPTION>
POSITION(S) HELD WITH
NAME AGE CIP MANAGEMENT, INC.
---- --- ---------------------
<S> <C> <C>
Daniel A. Burkhardt 50 President, Treasurer and Director
Ray L. Robbins, Jr. 53 Vice President and Director
Marilyn A. Gaffney 38 Secretary
</TABLE>
DANIEL A. BURKHARDT
Mr. Burkhardt has served as President, Treasurer and Director of CIP
Management, Inc. since October 1989 and as general partner of CIP Management
L.P., LLLP since February 1990. He is a general partner of The Jones Financial
Companies, L.P., LLP, the parent company of Edward Jones, where he has
specialized in investment banking and structuring investments since 1980. He is
also a director of Essex County Gas Company, a gas company located in Amesbury,
Massachusetts; St. Joseph Light & Power Co., an electric utility located in St.
Joseph, Missouri; MidAmerica Realty Investments, a real estate investment trust
headquartered in Omaha,
27
<PAGE> 30
Nebraska; and Southeastern Michigan Gas Enterprises, a gas distribution utility
headquartered in Port Huron, Michigan. Mr. Burkhardt also served as President
and Chairman of the Board of Lake Communications, Inc., a cable television and
telephone company, from 1982 until all of the company's properties were sold in
1985. He also served as a director and Chairman of the Board and Treasurer of
Community Service Radio, Inc., an owner/operator of radio broadcast stations
headquartered in Peoria, Illinois from its formation in 1987 until its sale in
1993.
RAY L. ROBBINS, JR.
Mr. Robbins has served as Vice President and Director of CIP Management,
Inc. since October 1989. He is a general partner of The Jones Financial
Companies, L.P., LLP, the parent company of Edward Jones. Mr. Robbins joined the
Corporate Bond Trading Department of Edward Jones in 1971 and in 1974 was given
responsibility for its Municipal Bond Department until he was given the
responsibility for all of the Fixed Income Area in 1982. From July 1983 until
January 1993, Mr. Robbins was in charge of the Product Review Development. Mr.
Robbins became Director of Research in January 1993, and is Co-Chairman of the
Edward Jones Investment Policy Committee. He was also a director of Community
Service Radio, Inc.
MARILYN A. GAFFNEY
Ms. Gaffney has served as Secretary of CIP Management, Inc. since October
1989. Ms. Gaffney is a Limited Partner of The Jones Financial Companies, L.P.,
LLP, the parent company of Edward Jones, where she serves as a senior investment
administrator. She has been employed by the firm in investment banking since
1980.
The directors of CIP Management, Inc. are elected at each annual meeting of
its shareholders and serve until their successors have been elected and
qualified. The officers serve at the discretion of the Board of Directors.
Directors of CIP Management, Inc. will receive no fees or reimbursement from the
Partnership for their services as directors.
The articles of incorporation of CIP Management, Inc. provide for
indemnification of the directors and officers to the fullest extent permitted by
law, against liabilities, costs and expenses (including legal fees and expenses)
incurred by them in connection with all claims, suits or proceedings if such
person acted in good faith and in a manner reasonably believed to be in or not
opposed to the interests of CIP Management, Inc. and with respect to criminal
proceedings, has no reasonable cause to believe such conduct was unlawful. The
Jones Financial Companies, L.P., LLP, has agreed to guaranty such
indemnification obligation of CIP Management, Inc. to such directors and
officers.
Pursuant to a management agreement (the "Management Agreement") between the
Partnership and CIP Management L.P., LLLP, the Managing General Partner, and
subject to the supervision of the Individual General Partners, the Managing
General Partner performs, or arranges for affiliates to perform, the management
and administrative services necessary for the operation of the Partnership. The
Managing General Partner is also responsible for the management of the
Partnership's money market securities portfolio. The Managing General Partner
will provide the Partnership with office space, facilities, equipment and
personnel necessary to carry out its obligations under such agreement and such
other services as the Managing General Partner, subject to supervision by the
Individual General Partners, shall from time to time determine to be necessary
and appropriate. See "Management Compensation and Other Expenses."
The Management Agreement has been approved by the Independent General
Partners, and the initial Limited Partner of the Partnership. Unless earlier
terminated as described below, the agreement will remain in effect until the
first anniversary of the date of this Prospectus and thereafter will continue in
effect from year to year if approved annually by a majority of the Individual
General Partners. Such agreement is not assignable and may be terminated without
penalty on 60 days' written notice at the option of either party thereto or by
vote of a majority-in-interest of the Limited Partners. In the event of an
assignment, the agreement will automatically terminate.
Under the Management Agreement, the Partnership has agreed to indemnify the
Managing General Partner, its partners and their officers, directors, employees,
agents and affiliates generally to the same extent as provided
28
<PAGE> 31
in the Partnership Agreement. See "Summary of the Partnership Agreement --
Indemnification of the General Partners by the Partnership."
THE INDIVIDUAL GENERAL PARTNERS
The Individual General Partners will be two Independent General Partners.
Pursuant to rules under the Investment Company Act, the Independent General
Partners will not be considered "interested persons" of the Partnership as
defined by the Investment Company Act. The Individual General Partners will
provide overall guidance and supervision with respect to the operations of the
Partnership and will perform the various duties imposed on the directors of a
business development company by the Investment Company Act. In addition to
general fiduciary duties, the Individual General Partners, among other things,
will supervise the management and underwriting arrangements of the Partnership,
the custody arrangement with respect to portfolio securities, the selection of
accountants, fidelity bonding and transactions with affiliates. Because the
Partnership has registered under Missouri law as a limited liability limited
partnership, the General Partners will be accorded all the limited liability
protection of a partner in a general partnership registered as a limited
liability partnership under applicable Missouri law. Generally, Missouri law
provides that no partner in a registered limited liability partnership shall be
liable or accountable, directly or indirectly, for any debts, obligations and
liabilities of, or chargeable to, the partnership, whether in tort, contract or
otherwise, which are incurred, created or assumed by such partnership while the
partnership is a registered limited liability partnership, except for any such
liabilities for such partner's own negligence, wrongful acts, omissions,
misconduct or malpractice or that of any person under the partner's direct
supervision and control or for liability of such partner for certain taxes and
fees. The address of the Individual General Partners is c/o CIP Management,
Inc., 12555 Manchester Road, St. Louis, Missouri 63131.
Set forth below is certain information concerning the Independent General
Partners of the Partnership:
<TABLE>
<CAPTION>
POSITION(S) HELD WITH
NAME AGE COMMUNITY INVESTMENT PARTNERS III
---- --- ---------------------------------
<S> <C> <C>
Thomas A. Hughes 53 Independent General Partner
Ralph G. Kelly 40 Independent General Partner
</TABLE>
THOMAS A. HUGHES
Mr. Hughes is the Associate General Counsel and Manager-Legal of The
Detroit Edison Company, the utility subsidiary of DTE Energy Company. He also
serves as the Associate General Counsel of DTE Energy Company. Headquartered in
Detroit, Michigan, Detroit Edison is Michigan's largest electric utility serving
two million customers in Southeastern Michigan. Prior to joining Detroit Edison
in 1978, Mr. Hughes served as General Counsel of the Missouri Public Service
Commission. Mr. Hughes has served as a Trustee of the Detroit Metropolitan Bar
Association Foundation, and as a member of the Michigan State Bar Association
Administrative Law Section Council and is currently serving as a member of the
Board of Directors of the Michigan Chapter of the American Corporate Counsel
Association.
RALPH G. KELLY
Mr. Kelly joined Charter Communications, Inc. in 1993 as Vice President --
Finance, a position he held until early 1994, when he became Chief Financial
Officer of CableMaxx, Inc., a wireless cable television operator. Mr. Kelly
returned as Senior Vice President -- Treasurer of Charter Communications, Inc.
in February 1996, and has responsibility for treasury operations, investor and
financial reporting and also assists with the acquisition efforts of Charter
Communication, Inc. Mr. Kelly has worked in the cable industry since 1984 when
he joined Cencom Cable Associates, Inc. as Controller. Mr. Kelly was promoted to
Treasurer of Cencom Cable Associates, Inc. in 1989, and was responsible for
treasury management, loan compliance, budget administration, supervision of
internal audit and SEC reporting. He has served on the Accounting Committee of
the Board of Directors for the National Cable Television Association. Mr. Kelly
is a Certified Public Accountant and was in the audit division of Arthur
Andersen & Co. from 1979 to 1984.
29
<PAGE> 32
Each Independent General Partner will receive an annual fee of $6,000 from
the Partnership and a fee of $1,000 for each meeting attended together with all
out-of-pocket expenses relating to attendance at meetings of the Individual
General Partners. However, it is not anticipated that any such meetings will be
held on a regular basis. Compensation paid to any of the Independent General
Partners, including fees for any special services performed, must be approved by
a majority of the Individual General Partners.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNERS
The General Partners are under a fiduciary duty to conduct the affairs of
the Partnership in the best interest of the Partnership and consequently must
exercise good faith and integrity in handling Partnership affairs. See, however,
"Conflicts of Interest" and "Status as a Limited Liability Limited Partnership."
Prospective Limited Partners who have questions concerning the duties of the
General Partners should consult with their counsel.
The Partnership Agreement provides that the General Partners and their
affiliates will not be liable to the Partnership or the Limited Partners for any
loss, damage or expense incurred by reason of any act or omission performed or
omitted by them in good faith, provided that such act or omission does not
constitute negligence or misfeasance in the performance of the duties of a
General Partner. The General Partners will be indemnified to the fullest extent
permitted by law by the Partnership for any liability not arising out of
negligence or misfeasance in the performance of the duties of a General Partner
on the part of such General Partner. In addition, The Jones Financial Companies,
L.P., LLP, has agreed to indemnify the Individual General Partners, the general
partners of the Managing General Partner, and the directors and officers of CIP
Management, Inc. to the fullest extent permitted by law in connection with all
claims, suits or proceedings if such person acted in good faith and in a manner
reasonably believed to be in or not opposed to the interests of the Partnership
and with respect to criminal proceedings, had no reasonable cause to believe
such conduct was unlawful. See "Summary of the Partnership Agreement --
Indemnification of the General Partners by the Partnership"; and "--
Indemnification of the Individual General Partners by the Managing General
Partner."
In the opinion of the Securities and Exchange Commission, indemnification
for liabilities arising under the Securities Act of 1933 is against public
policy and, therefore, unenforceable.
30
<PAGE> 33
MANAGEMENT COMPENSATION AND OTHER EXPENSES
The Partnership will pay the Managing General Partner on a quarterly basis
a management fee for its services under the Management Agreement at an annual
rate equal to 1.5% of the total assets of the Partnership as reflected in the
most recent quarterly or annual balance sheet of the Partnership. In addition,
the Managing General Partner will be reimbursed for its out-of-pocket expenses.
Management expects to fund these fees and out-of-pocket expenses by establishing
from the net proceeds of this offering an initial reserve fund equal to at least
2 1/2% of the gross proceeds of this offering. The Managing General Partner will
provide the Partnership with office space, facilities, equipment and personnel
necessary to carry out its obligations.
The Partnership will pay all expenses relating to its operations, fees and
expenses of the Independent General Partners, expenses for legal, auditing and
consulting services, costs of printing and mailing proxies and reports to
Limited Partners, expenses of meetings of the Individual General Partners,
custodian fees, portfolio transaction expenses, taxes, interest, litigation and
other extraordinary or nonrecurring expenses, and other expenses properly
payable by the Partnership. The Individual General Partners are authorized to
retain consultants for the Partnership and consultants may be utilized under
special circumstances with respect to particular portfolio investments.
Consulting fees, which must be approved by a majority of the Individual General
Partners, may be paid by the Partnership to the Independent General Partners but
will not be paid to Management or its affiliates.
The Partnership estimates the annual operating expenses for the initial
fiscal year of the Partnership as follows:
<TABLE>
<S> <C>
Management Fee........................................................ $ 7,500-$37,500*
Accounting............................................................ 10,000
Legal................................................................. 10,000
Printing and Postage.................................................. 3,000
General Partner Compensation.......................................... 12,000
Miscellaneous......................................................... 4,000
---------------
Total................................................................. $46,500-$76,500
===============
</TABLE>
- ------------------
* The management fee will be an amount equal to 1.5% of the total assets of
the Partnership as reflected in the most recent quarterly or annual
balance sheet. In the event the minimum number of Units are sold and
Capital Contributions total approximately $500,000, the annual fee will
initially be approximately $7,500. In the event that the maximum Units are
sold, the annual fee will initially be approximately $37,500. After the
initial year, the receipt of the balance of the Subscription Price from
the Limited Partners could in certain circumstances double the assets of
the Partnership and the management fee proportionately.
The Partnership intends initially to retain at least 2 1/2% of the offering
proceeds in reserve to pay such operating expenses. See "Use of Proceeds."
However, there can be no assurance that such reserve fund will be sufficient to
pay the operating expenses of the Partnership. Because of the nature of the type
of portfolio investments the Partnership intends to make, the Partnership may
receive little, if any, income on an ongoing basis and may have to borrow funds
to pay operating expenses. See "Risk and Other Important Factors -- Use of
Leverage."
Partners and personnel of Edward Jones, who may provide the Partnership
with referrals which lead to investments by the Partnership may, in certain
circumstances, be granted the right to invest in such investments on more
favorable terms and conditions than those granted to the Partnership, subject to
compliance with any applicable rules or regulations. Under no circumstances will
the value of the preference exceed 10% of the Partnership's investment in the
portfolio company. The Partnership does not believe that an exemptive order from
the Securities and Exchange Commission is required in such circumstances.
The General Partners will also receive distributions from the Partnership
of Distributable Cash pursuant to the following schedule of distributions: 99%
to the Limited Partners and 1% to the General Partners until such time as the
Limited Partners have received in the aggregate cumulative distributions in an
amount equal to their Capital Contributions. Thereafter, all such Distributable
Cash will be distributed 100% to the General Partners until they have received
any outstanding amounts previously deferred, as described below; then 90% to the
Limited Partners and 10% to the General Partners (9% being a General Partner
Distribution) until such time as the Limited Partners have received in the
aggregate cumulative distributions in an amount equal to two times their
31
<PAGE> 34
Capital Contributions; thereafter all such Distributable Cash will be
distributed 80% to the Limited Partners and 20% to the General Partners (19%
being a General Partner Distribution). Amounts otherwise distributable to the
General Partners as General Partner Distributions will not be distributed to the
General Partners (but will remain credited to their capital accounts) to the
extent that such distribution would result in General Partners receiving
cumulative General Partner distributions for capital gains in excess of 20% of
the cumulative capital gains realized by the Partnership (net of realized
capital losses and unrealized capital depreciation) but shall be deferred and
payable as described above when such payment would not cause such result. The
amount of additional Capital Contributions required on the Capital Call Date
will determine the amount of aggregate Capital Contributions to be distributed
to Limited Partners pursuant to the foregoing formula.
The Partnership believes that the provisions of the Partnership Agreement
and the Management Agreement setting forth the responsibilities of the Managing
General Partner and governing allocations and distributions to the Managing
General Partner comply with the Investment Advisers Act of 1940.
PORTFOLIO TRANSACTIONS
Subject to policy established by the Individual General Partners, the
Managing General Partner is responsible for the management of the Partnership's
portfolio company investments and, pursuant to the Management Agreement, its
investments in the money market securities.
The portfolio company investments will typically be acquired in private
transactions negotiated directly with the portfolio company or an affiliate
thereof. The Managing General Partner will be responsible for conducting such
negotiations on behalf of the Partnership.
With respect to the execution of transactions in publicly traded
securities, if any, the Managing General Partner will seek to obtain the best
net results for the Partnership, taking into account such factors as price
(including the applicable brokerage commission or dealer spread), size of order,
difficulty of execution and operational facilities of the firm involved and the
firm's risk in purchasing a block of securities. While the Partnership will
generally seek reasonably competitive commission rates, the Partnership will not
necessarily pay the lowest commission or spread available. The market for
securities of small and emerging growth companies in which the Partnership may
invest will generally lack liquidity and transactions with respect thereto may
involve greater efforts on the part of the broker or dealer than would be the
case with more widely traded securities, with the result that such transactions
may entail higher commissions or spreads than might otherwise be the case.
The Partnership has no obligation to deal with any broker in the execution
of transactions for its portfolio securities, including Edward Jones brokers and
dealers, including Edward Jones, who provided supplemental investment research
to the Managing General Partners, may receive orders for transactions by the
Partnership.
The securities of small and emerging growth companies will to a large
extent be traded, if at all, only in the over-the-counter market. Transactions
in the over-the-counter market are generally principal transactions with dealers
and the costs of such transactions involve dealer spreads rather than brokerage
commissions. With respect to over-the-counter transactions, the Partnership,
where possible, expects to deal directly with the dealers who make a market in
the securities involved except in those circumstances where better prices and
execution are available elsewhere. Under the Investment Company Act, persons
affiliated with the Partnership are prohibited from dealing with the Partnership
as a principal in the purchase and sale of securities. Since transactions in the
over-the-counter market usually involve transactions with dealers acting as
principal for their own account, affiliated persons of the Partnership,
including Edward Jones, may not serve as the Partnership's dealer in connection
with such transactions. However, affiliated persons of the Partnership,
including Edward Jones, may serve as its broker in over-the-counter transactions
conducted on an agency basis.
In placing orders for money market securities, it will be the policy of the
Managing General Partner to obtain the best net results taking into account such
factors as price (including the applicable dealer spread), the size, type and
difficulty of the transaction involved, the firm's general execution and
operational facilities, and the firm's risk in positioning the securities
involved. While the Managing General Partner will generally seek reasonably
competitive spreads or commissions, the Partnership will not necessarily be
paying the lowest spread
32
<PAGE> 35
or commission available. Neither Edward Jones nor any of its affiliates may
serve as the Partnership's dealer in connection with such transactions.
PRIOR INVESTMENT PARTNERSHIPS
The Managing General Partner has sponsored and serves as the managing
general partner of Community Investment Partners, L.P., a public limited
partnership ("CIP I"), which first admitted limited partners in March 1990 and
Community Investment Partners II, L.P., a public limited partnership ("CIP II"),
which first admitted limited partners in November 1992 . The Prior Investment
Partnerships were organized for the primary purpose of investing in companies or
divisions thereof which the Managing General Partner believes offer long-term
growth possibilities. The Prior Investment Partnerships thus have investment
objectives similar to those of the Partnership. The Managing General Partner
provides management, administrative and investment advisory services to the
Prior Investment Partnerships.
The Partnership will furnish, without charge, to each person to whom this
Prospectus is delivered, upon request, a copy of the most recent Annual Reports
on Form 10-K and Quarterly Reports on form 10-Q of the Prior Limited
Partnerships filed with the Securities and Exchange Commission and for a
reasonable fee the exhibits to such Forms. Requests should be addressed to
Marilyn A. Gaffney, c/o Edward Jones, 12555 Manchester Road, St. Louis, Missouri
63131.
CIP I commenced its public offering of 160,000 limited partnership
interests on March 12, 1990 and held two closings, one on March 29, 1990 and one
on May 8, 1990. Pursuant to the offering, CIP I sold 91,820 Units of limited
partnership interest, or approximately 57% of the total number of Units offered,
for an aggregate price of $2,295,500. The expenses of the offering, consisting
only of organizational and offering expenses, totaled approximately $125,000,
resulting in CIP I receiving approximately $2,113,112 in proceeds available for
investment, net of a reserve of 2.5% of gross offering proceeds (or $57,388) to
fund initial operating expenses. Together with $500,000 in capital contributions
from the general partners, CIP I raised $2,613,112 in aggregate proceeds
available for investment.
CIP II commenced its public offering of 200,000 limited partnership
interests on November 4, 1992 and held two closings, one on December 1, 1992 and
the other on December 31, 1992. Pursuant to the offering, CIP II sold 111,410
Units of limited partnership interest, or approximately 56% of the total number
of Units offered, for an aggregate price of $2,785,250. Investors in CIP II were
required to pay one-half of the purchase price for the Units upon subscription
for the Units and the balance of the purchase price on one or more subsequent
capital call dates. As of December 31, 1992, CIP II had collected $1,392,625 of
the aggregate purchase price of the Units. On September 15, 1994, CIP II
collected an additional $1,362,625, the balance of the purchase price for Units,
from the limited partners of CIP II. The expenses of the offering, consisting
only of organizational and offering expenses, totaled approximately $183,000.
CIP II received in the aggregate approximately $2,500,000 in proceeds available
for investment (giving effect to the subsequent capital call), net of a reserve
of 2.5% of gross offering proceeds (or $68,881) to fund initial operating
expenses. Together with approximately $28,000 in aggregate capital contributions
from the general partners, CIP II raised approximately $2,528,000 in aggregate
proceeds available for investment.
33
<PAGE> 36
SELECTED FINANCIAL INFORMATION FOR CIP I
SELECTED BALANCE SHEET AND INCOME STATEMENT INFORMATION (UNAUDITED)
The following table sets forth selected Balance Sheet and Income Statement
information concerning CIP I from its inception through 1996. Prospective
investors will not acquire any interest in CIP I. In addition, investments made
and investment results achieved by CIP I are not necessarily indicative of those
that may be made or achieved by the Partnership. Differences between such
investments and results may be material. Investors in the Partnership should not
assume that they will experience returns, if any, comparable to those
experienced by investors in CIP I. In addition, investors should note that CIP I
pays no management fee to the Managing General Partner, in contrast to the
Partnership, and that the General Partners in CIP I have a percentage interest
that is at all time proportionate to their capital contributions, in contrast to
the Partnership:
BALANCE SHEET:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Assets................... $2,413,382 $3,577,659 $3,221,998 $3,235,105 $4,270,686 $2,837,233 $2,877,762
Portfolio Investments........ 2,341,691 3,217,156 3,075,566 3,051,309 4,025,971 1,609,113 650,300
</TABLE>
INCOME STATEMENT:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Income (Loss) before
Unrealized Gains
(Losses):.................. $1,645,082 $ 575,891 $ (110,514) $ 374,346 $ 67,174 $ 518,571 $ 82,262
Unrealized (Losses) Gains.... (652,959) 318,870 97,407 (765,827) 1,925,379 -- --
Net Income (Loss)............ 992,123 894,761 (13,107) (391,481) 1,992,553 518,571 82,262
Per Unit of Partnership
Interest:
Net Asset Value.............. 22.38 33.18 29.88 30.00 38.19 25.37 25.74
Net Income (Loss) before
Unrealized Gains
(Losses)................... 15.26 5.34 (1.02) 3.47 .60 4.64 .74
Unrealized (Losses) Gains.... (6.06) 2.96 .90 (7.10) 17.22 -- --
Net Income (Loss)............ 9.20 8.30 (.12) (3.63) 17.82 4.64 .74
Distribution................. 20.00 5.00 -- 5.00 5.00 5.00 --
</TABLE>
34
<PAGE> 37
SCHEDULE OF PORTFOLIO DISPOSITIONS OF CIP I BY YEAR (UNAUDITED)
As previously described on page 33 of this Prospectus, CIP I raised
$2,613,112 in aggregate proceeds available for investment. The following
schedule shows dispositions of CIP I's portfolio investments by year, which have
resulted in a total realized gain of $3,301,999. The current portfolio holdings
of CIP I are described in detail on page 36 of this Prospectus. As of June 30,
1997, the fair market value of CIP I's portfolio investments was $2,089,749.
Prospective investors will not acquire any interest in CIP I. In addition,
investments made and investment results achieved by CIP I are not necessarily
indicative of those that may be made or achieved by the Partnership. Differences
between such investments and results may be material. Investors in the
Partnership should not assume that they will experience returns, if any,
comparable to those experienced by investors in CIP I. In addition, investors
should note that CIP I pays no management fee to the Managing General Partner,
in contrast to the Partnership, and that the General Partners in CIP I have a
percentage interest that is at all time proportionate to their capital
contributions, in contrast to the Partnership:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
YEAR OF DISPOSITION/ REALIZED
NAME OF COMPANY TYPE OF INVESTMENT COST PROCEEDS GAIN/LOSS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
1991
Orion Medical Services, Inc. Common Stock $ 100,300 $ 602,591 $ 502,291
- -----------------------------------------------------------------------------------------------------------
1992
Midland Detroit Tool, L.P. Limited Partnership Interest 249,500 324,880 75,380
- -----------------------------------------------------------------------------------------------------------
1993
Community Service Radio, Inc. Convertible Notes 150,000 160,313 10,313
Driehaus Small Capital Growth
Fund Limited Partnership Interest 125,000 145,778 20,778
Intermedia Communications of
Florida Common Stock 58,800 327,524 268,724
- -----------------------------------------------------------------------------------------------------------
1994
Guidance Technologies, Inc. Common Stock 95,000 -- (95,000)
- -----------------------------------------------------------------------------------------------------------
1995
PDT, Inc. Common Stock 49,404 379,560 330,156
Saztec International, Inc. Common Stock 21,676 6,875 (14,801)
Intermedia Communications of
Florida Common Stock 45,200 253,026 207,826
Citation Computers Common Stock 61,000 132,500 71,500
- -----------------------------------------------------------------------------------------------------------
1996
Intermedia Communications of
Florida Common Stock 126,000 1,005,563 879,563
Citation Computers Common Stock 148,840 679,375 530,535
Isolyser Company, Inc. Common Stock 206,349 443,750 237,401
- -----------------------------------------------------------------------------------------------------------
1997
Intermedia Communications of
Florida Common Stock 19,712 216,618 196,906
Isolyser Company, Inc. Common Stock 38,200 26,874 (11,326)
PDT, Inc. Common Stock 9,294 101,047 91,753
- -----------------------------------------------------------------------------------------------------------
TOTALS $1,504,275 $4,806,274 $3,301,999
- -----------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 38
SELECTED ADDITIONAL INFORMATION CONCERNING INVESTMENTS BY CIP I (UNAUDITED)
The following table sets forth selected additional information concerning
investments by CIP I as of June 30, 1997. Prospective investors will not acquire
any interest in CIP I. In addition, investments made and investment results
achieved by CIP I are not necessarily indicative of those that may be made or
achieved by the Partnership. Differences between such investments and results
may be material. Investors in the Partnership should not assume that they will
experience returns, if any, comparable to those experienced by investors in CIP
I. In addition, investors should note that CIP I pays no management fee to the
Managing General Partner, in contrast to the Partnership, and that the General
Partners in CIP I have a percentage interest that is at all time proportionate
to their capital contributions, in contrast to the Partnership:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
JUNE 30,
INITIAL 1997 FAIR
PORTFOLIO COMPANY (BUSINESS) INVESTMENT INVESTMENT DATE COST MARKET VALUE
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Saztec International, Inc. 108,400 shares of Common June 7, 1990 $ 78,324 $ 23,713
(Provides services for database Stock
construction and information
conversion)
- --------------------------------------------------------------------------------------------------------------------
Intermedia Communications of 22,285 shares of Common May 31, 1991 62,749 721,477
Florida (Organized to install and Stock
provide private, dedicated
telecommunications lines using
fiber optic cable)
- --------------------------------------------------------------------------------------------------------------------
Innovation Medical Technologies, 5,769 shares of 6% Class A July 26, 1991 149,994 149,994
Inc. (Manufactures highly Cumulative Convertible
specialized medical instruments for Preferred Stock
use in ophthalmic surgery)
- --------------------------------------------------------------------------------------------------------------------
5,625 shares of Class B March 11, 1992 90,000 90,000
Convertible Preferred Stock
- --------------------------------------------------------------------------------------------------------------------
5% Term Notes, due December September 30, 40,763 40,763
31, 1997 and Warrants to 1992
purchase 14,440 shares of
Common Stock
- --------------------------------------------------------------------------------------------------------------------
5% Term Notes, due December May 26, 1994 15,008 15,008
31, 1997 and Warrants to
purchase 2,800 shares of
Common Stock
- --------------------------------------------------------------------------------------------------------------------
Citation Computers (Provides 16,480 shares of Common October 31, 1991 40,410 140,080
clinical laboratory information) Stock
- --------------------------------------------------------------------------------------------------------------------
PDT, Inc. (Develops, manufactures 2,323.50 shares of Common May 28, 1992 9,294 84,808
and markets the drug devices used Stock
in Photodynamic Therapy)
- --------------------------------------------------------------------------------------------------------------------
Vision Partners, L.P. (Owns stock Limited Partnership October 19, 1992 450,000 450,000
in Family Vision Center, Inc., Interests
which operates leased optical
departments in host stores)
- --------------------------------------------------------------------------------------------------------------------
Limited Partnership December 1, 1993 124,965 124,965
Interests
- --------------------------------------------------------------------------------------------------------------------
Isolyser Company, Inc. (Makes 91,563 shares of Common August 30, 1996 350,063 248,941
healthcare disposables from Stock
hot-water soluble polymer)
- --------------------------------------------------------------------------------------------------------------------
Total Funds Invested and Value at End of $1,411,570 $2,089,749
Period
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The following describes certain events subsequent to June 30, 1997:
On July 1, 1997, CIP I completed the following transactions: (i) sold
10,000 shares of Isolyser Company, Inc. resulting in a loss of $11,326 and (ii)
sold 2,000 shares of Intermedia Communications of Florida resulting in a gain of
$57,366.
36
<PAGE> 39
On July 15, 1997, CIP I sold the remainder of its investment in PDT, Inc.,
resulting in a gain of $91,753.
On July 16, 1997, CIP I sold 2,000 shares of Intermedia Communications of
Florida, resulting in a gain of $61,366.
No assurance can be given that any of the remaining unliquidated
investments of CIP I will be successful.
SELECTED INFORMATION CONCERNING OPERATING RESULTS OF CIP I (UNAUDITED)
The following table sets forth certain information concerning the operating
results of CIP I for the years ending December 31, 1996 and 1995. Prospective
investors will not acquire any interest in CIP I. In addition, investments made
and investment results achieved by CIP I are not necessarily indicative of those
that may be made or achieved by the Partnership. Differences between such
investments and results may be material. Investors in the Partnership should not
assume that they will experience returns, if any, comparable to those
experienced by investors in CIP I. In addition, investors should note that CIP I
pays no management fee to the Managing General Partner, in contrast to the
Partnership, and that the General Partners in CIP I have a percentage interest
that is at all time proportionate to their capital contributions, in contrast to
the Partnership:
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
Investment income...................................... $ 11,486 $ 8,282
Management and consulting fee income................... -- --
Realized and Unrealized Gains (Losses) on
Investments.......................................... 994,539 913,551
Less: Operating expenses............................... 13,902 23,014
Amortization of deferred organizational costs........ -- 4,058
Net Income (Loss) -- GAAP Basis........................ 992,123 894,761
Taxable Income
-- from operations................................... (23,943) (31,475)
-- from gain on sale................................. 1,660,436 570,611
Cash provided by operations............................ 1,841,266 791,285
Cash (used) generated from financing activities........ -- --
Less: Cash distributions to investors from operating
cash flow............................................ (2,156,400) (539,100)
Cash (used) generated after cash distributions......... (315,134) 252,185
TAX AND DISTRIBUTION DATA PER $1000 INVESTED
Federal Income Tax Results:
Ordinary income from operations...................... (8.88) (11.67)
Capital gain......................................... 616.00 211.69
Cash Distributions..................................... 800.00 200.00
Amounts remaining invested in at the end of 1996
(expressed as a percentage of the amount originally
invested in portfolio companies)*...................... 0%
</TABLE>
- ------------------
* This percentage is based on the total dollar amount invested in portfolio
companies as of December 31, 1996 compared to the total amount of capital
received by CIP I. See "Selected Additional Information Concerning Investments
by CIP I", above, with respect to investments and distributions subsequent to
December 31, 1996.
37
<PAGE> 40
SELECTED FINANCIAL INFORMATION FOR CIP II
SELECTED BALANCE SHEET AND INCOME STATEMENT INFORMATION (UNAUDITED)
The following table sets forth selected Balance Sheet and Income Statement
information concerning CIP II from its inception through 1996. Prospective
investors will not acquire any interest in CIP II. In addition, investments made
and investment results achieved by CIP II are not necessarily indicative of
those that may be made or achieved by the Partnership. Differences between such
investments and results may be material. Investors in the Partnership should not
assume that they will experience returns, if any, comparable to those
experienced by investors in CIP II.
BALANCE SHEET:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Assets................................. $1,982,725 $2,014,889 $2,645,511 $1,355,231 $1,403,625
Portfolio Investments...................... 1,397,330 545,013 1,000,013 500,013 --
</TABLE>
INCOME STATEMENT:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Income (Loss):......................... $ (32,164) $ (630,622) $ (86,345) $ (48,394) $ (3,000)
Per Unit of Partnership Interest:
Net Asset Value............................ 17.62 17.91 23.50 12.04 12.47
Net Income (Loss).......................... (.29) (5.60) (.77) (.43) (.03)
Distribution............................... -- -- -- -- --
</TABLE>
SCHEDULE OF PORTFOLIO DISPOSITIONS OF CIP II BY YEAR (UNAUDITED)
As previously described on page 33 of this Prospectus, CIP II raised
approximately $2,528,000 in aggregate proceeds available for investment. The
following schedule shows dispositions of CIP II's portfolio investments by year,
which have resulted in an aggregate loss of ($89,578). The current portfolio
holdings of CIP II are described in detail on page 39 of this Prospectus. As of
June 30, 1997 the fair market value of CIP II's portfolio investments was
$1,541,649.
Prospective investors will not acquire any interest in CIP II. In addition,
investments made and investment results achieved by CIP II are not necessarily
indicative of those that may be made or achieved by the Partnership. Differences
between such investments and results may be material. Investors in the
Partnership should not assume that they will experience returns, if any,
comparable to those experienced by investors in CIP II.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
YEAR OF DISPOSITION/ REALIZED
NAME OF COMPANY TYPE OF INVESTMENT COST PROCEEDS GAIN/LOSS
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
1995
Common Stock and
West End Soda Preferred Stock $ 600,000 -- $ (600,000)
- -----------------------------------------------------------------------------------------------------------
1997
Class A cumulative
Houghton Acquisition Corporation redeemable Preferred Stock 200,013 710,435 510,422
- -----------------------------------------------------------------------------------------------------------
TOTALS $ 800,013 $ 710,435 $ (89,578)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 41
SELECTED ADDITIONAL INFORMATION CONCERNING INVESTMENT BY CIP II (UNAUDITED)
The following table sets forth selected additional information concerning
investments by CIP II as of June 30, 1997. Prospective investors will not
acquire any interest in CIP II. In addition, investments made and investment
results achieved by CIP II are not necessarily indicative of those that may be
made or achieved by the Partnership. Differences between such investments and
results may be material. Investors in the Partnership should not assume that
they will experience returns, if any, comparable to those experienced by
investors in CIP II.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
JUNE 30,
INITIAL 1997 FAIR
PORTFOLIO COMPANY (BUSINESS) INVESTMENT INVESTMENT DATE COST MARKET VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Houghton Acquisition Corporation 8% Convertible Promissory January 2, 1997 $ 77,400 $ 77,400
(Organized for the purpose of Note due 1/2/99
acquiring Hutchinson Foundry
Products, Inc.)
- --------------------------------------------------------------------------------------------------------------------
Contingent EBITDA January 2, 1997 0 0
Promissory Note
- --------------------------------------------------------------------------------------------------------------------
Global Surgical Corporation (Formed 3,000 shares of Common January 31, 1994 300,000 300,000
to acquire the Urban Microscope Stock
Division and the Surgical Mechanical
Research subsidiary of Storz
Medical)
- --------------------------------------------------------------------------------------------------------------------
7% Promissory Note, due June 30, 1995 45,000 45,000
6/29/00
- --------------------------------------------------------------------------------------------------------------------
7% Promissory Note, due January 26, 1996 67,500 67,500
1/25/01
- --------------------------------------------------------------------------------------------------------------------
Computer Motion, Inc. (Develops and Prime + 1% Term Note, due May 3, 1996 125,000 125,000
supplies medical robotics) 10/31/98
- --------------------------------------------------------------------------------------------------------------------
78,947.5 warrants, June 26, 1997 8 8
exercisable for 7 years
from issuance at $2.37 per
warrant
- --------------------------------------------------------------------------------------------------------------------
25,000 shares of Series E September 9, 1996 125,000 125,000
Preferred Stock convertible
into 31,250 shares of
Common Stock
- --------------------------------------------------------------------------------------------------------------------
31,250 warrants, September 9, 1996 250 250
exercisable at $4.00 per
warrant
- --------------------------------------------------------------------------------------------------------------------
FCOA Acquisition Corporation (d/b/a 26,063 Common Shares July 30, 1996 249,865 151,491
Factory Card Outlet) (A chain of
greeting card/party stores which
offer a full line of products at
everyday value prices)
- --------------------------------------------------------------------------------------------------------------------
Permalok Corporation (Develops and 25,000 shares of September 24, 200,000 200,000
sells steel pipe joining system to Convertible Preferred Stock 1996
the domestic underground utility
construction industry)
- --------------------------------------------------------------------------------------------------------------------
Stereotaxis, Inc. (Develops and 138,889 shares of Preferred December 30, 1996 100,000 100,000
markets a system by which surgery Stock
can be conducted remotely using
computer controlled magnets)
- --------------------------------------------------------------------------------------------------------------------
Medical Device Alliance, Inc. 20,000 shares of Common January 24, 1997 100,000 100,000
(Specializes in the development, Stock
manufacture and marketing of devices
for ultrasound-assisted lipoplasty)
- --------------------------------------------------------------------------------------------------------------------
Online Resources & Communications 8% Promissory Note, due March 17, 1997 150,000 150,000
Corporation (Provides a variety of 8/31/97 and Warrants to
interactive banking and financial purchase 20,000 shares of
services to end-users and corporate Common Stock, expiring
customers in the banking and 1/31/04
financial services industry)
- --------------------------------------------------------------------------------------------------------------------
Advanced UroScience, Inc. 25,000 shares of Series A April 7, 1997 100,000 100,000
(Developing Acyst, an injectable Preferred Stock
bulking agent, for the treatment of
stress urinary incontinence)
- --------------------------------------------------------------------------------------------------------------------
Total Funds Invested and Value at End of $1,640,023 $1,541,649
Period
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 42
As of the date hereof, no material events have occurred subsequent to June
30, 1997.
No assurance can be given that any of the remaining unliquidated
investments of CIP II will be successful.
SELECTED INFORMATION CONCERNING OPERATING RESULTS OF CIP II (UNAUDITED)
The following table sets forth certain information concerning the operating
results of CIP II for the years ending December 31, 1996 and 1995. Prospective
investors will not acquire any interest in CIP II. In addition, investments made
and investment results achieved by CIP II are not necessarily indicative of
those that may be made or achieved by the Partnership. Differences between such
investments and results may be material. Investors in the Partnership should not
assume that they will experience returns, if any, comparable to those
experienced by investors in CIP II.
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Investment income....................................... $ 83,635 $ 79,868
Management and consulting fee income.................... -- --
Realized and Unrealized Gains (Losses) on Investments... (15,298) (600,000)
Less: Operating expenses................................ 63,817 73,807
Amortization of deferred organizational costs......... 36,684 36,683
Net Income (Loss) -- GAAP Basis......................... (32,164) (630,622)
Taxable Income
-- from operations.................................... 19,348 (128,341)
-- from gain on sale.................................. 0 0
Cash (used) from operations............................. (858,498) (134,145)
Cash (used) generated from financing activities......... -- --
Less: Cash distributions to investors from operating
cash flow............................................. -- --
Cash (used) after cash distributions.................... (858,498) (134,145)
TAX AND DISTRIBUTION DATA PER $1000 INVESTED
Federal Income Tax Results:
Ordinary income from operations....................... 6.97 (46.24)
Capital gain.......................................... 0 0
Cash Distributions...................................... -- --
Amounts remaining invested in at the end of 1996
(expressed as a percentage of the amount originally
invested in portfolio companies)........................ 100%
</TABLE>
- ------------------
* This percentage is based on the total dollar amount invested in portfolio
companies as of December 31, 1996 compared to the total amount of capital
received by CIP II. See "Selected Additional Information Concerning
Investments by CIP II", above, with respect to investments and distributions
subsequent to December 31, 1996.
INVESTORS SHOULD BE AWARE THAT ALTHOUGH THE PARTNERSHIP'S INVESTMENT
OBJECTIVES AND STRATEGIES ARE SIMILAR TO THOSE OF THE PRIOR LIMITED
PARTNERSHIPS, THE RESPECTIVE TRACK RECORDS OF THE PRIOR LIMITED PARTNERSHIPS ARE
RELEVANT ONLY AS TO A DETERMINATION OF THE EXPERIENCE OF THE MANAGING GENERAL
PARTNER, AND IS NOT NECESSARILY INDICATIVE OF THE RESULTS THAT SHOULD BE
ANTICIPATED FROM AN INVESTMENT IN THE PARTNERSHIP.
40
<PAGE> 43
PARTNERSHIP DISTRIBUTIONS AND ALLOCATIONS
DISTRIBUTIONS
Until such time as the Limited Partners have received in the aggregate
cumulative distributions in an amount equal to their Capital Contributions (up
to $25 per Unit), all Distributable Cash will be distributed to the Partners in
the ratio of 99% to the Limited Partners in proportion to their Capital
Contributions and 1% to the General Partners. Thereafter, all such Distributable
Cash will be distributed 100% to the General Partners until they have received
any outstanding amounts previously deferred, as described below; then 90% to the
Limited Partners (in proportion to their Capital Contributions) and 10% to the
General Partners (9% being a General Partner Distribution) until such time as
the Limited Partners have received in the aggregate cumulative distributions in
an amount equal to twice the amount of their Capital Contributions, at which
time all Distributable Cash will be distributed 80% to the Limited Partners (in
proportion to their Capital Contributions) and 20% to the General Partners (19%
being a General Partner Distribution). Amounts otherwise distributable to the
General Partners as General Partner Distributions will not be distributed to the
General Partners (but will remain credited to their capital accounts) to the
extent that such distribution would result in General Partners receiving
cumulative General Partner Distributions from capital gains in excess of 20% of
the cumulative capital gains realized by the Partnership (net of realized
capital losses and unrealized capital depreciation) but shall be deferred and
payable as described above when such payment would not cause such results. The
amount of additional Capital Contributions required on the Capital Call Date
will determine the amount of aggregate Capital Contributions to be distributed
to Limited Partners pursuant to the foregoing formula.
It is the intent of the General Partners that all distributions will be
distributed in the above 99%/1% ratio until such time as the Limited Partners
have received in the aggregate cumulative distributions in an amount equal to
their respective Subscription Prices. To this end, the General Partners have the
authority in their reasonable discretion to amend the Partnership Agreement or
adjust the cash distributions to reflect this intent, without the consent of the
Limited Partners.
When excess cash, if any, becomes available, it is the Partnership's intent
to make distributions on an annual basis. It is not anticipated that any
investments will be sold until the later years of the Partnership. See
"Investment Objective and Policies." The Managing General Partner may not
reinvest the proceeds realized from the sale of portfolio company investments
except in connection with the follow-on investments, to reduce borrowings
incurred to make follow-on investments or to make investments to meet applicable
regulatory requirements as to the composition of the Partnership's portfolio. To
the extent the Partnership incurs certain indebtedness, the Investment Company
Act prohibits distributions to Partners unless the asset coverage ratio is at
least 200% at the time of the distribution. See "Regulation."
If any of the Partnership's funds available for investment (excluding
committed funds and amounts held in reserve) are not invested in portfolio
company investments within two years of the date such funds were received by the
Partnership (at a Closing or the Capital Call Date, as the case may be), the
Partnership will distribute such excess funds together with interest, if any,
actually earned thereon to the Partners as a return of capital on the same basis
as the Distributable Cash. In addition, the Partnership intends to invest at
least 65% of the total assets received by the Partnership as Capital
Contributions in securities of portfolio companies pursuant to the investment
objectives herein within two years of the Partnership's last Closing Date and,
in the case of Capital Contributions received by the Partnership at the Capital
Call Date, will invest at least 65% in such portfolio companies within two years
of receipt by the Partnership of Capital Contributions at the Capital Call Date.
In each case, if such 65% level of portfolio company investment is not achieved
within said two-year period, the Partnership will distribute that amount of
assets required to reach the 65% level as a return of capital on the same basis
as Distributable Cash.
In the event of an interim Closing (See "Offering and Sale of Units"), any
distributions of net interest or income earned prior to the final Closing will
be made among Partners admitted as of the time such income or interest was
earned in a manner so that the Capital Accounts of all Limited Partners are
equal; that is, investors who are admitted at the final Closing will not be
distributed any income earned prior thereto.
41
<PAGE> 44
In rare instances, the Partnership may also make in-kind distributions of
its portfolio securities in such amounts and at such times as the Individual
General Partners shall determine; provided, however, that such securities must
be marketable on a securities exchange and must be distributed into and through
a liquidating trust. The sale of such securities by Limited Partners will
probably be limited by market factors or regulatory restrictions and Limited
Partners may incur additional expenses in disposing of such securities, which
expense may take the form of a discount on the sales price of the security.
In addition to the distributions provided for above, to the extent the per
Unit Capital Accounts of Limited Partners whose Units were purchased at
different Closings differ in amount, the Partnership may, but is not required
to, make one or more special cash distributions to certain Partners so as to
equalize the per Unit Capital Accounts of all Limited partners for allocation
and distribution purposes.
As soon after the date of termination of the Partnership as practicable,
the Partners will receive a liquidating distribution of the remaining assets of
the Partnership based upon their allocable shares thereof, provided that if the
General Partners have received cumulative General Partner Distributions in
excess of the permitted amounts (described above), the General Partners shall be
obligated to return any excess amount to the Partnership for distribution as
described above. On final distribution, any such excess deferred will be
distributed to the Partners in proportion to their Capital Contributions.
ANNUAL ALLOCATION OF PROFITS AND LOSSES
The following is only a general summary of the allocations of the
Partnership's Profits and Losses. It does not include all of the provisions
dealing with allocations. Prospective investors should refer to Article Four of
the Partnership Agreement for a complete statement of allocations of Profits and
Losses.
The Profits and Losses of the Partnership will be determined and allocated
as of the end of, and within sixty days after the end of, each calendar year.
Except as otherwise provided in Section 4.2.3 of the Partnership Agreement,
all Profits and Losses of the Partnership shall be allocated as follows:
(i) Losses of the Partnership will be allocated among the Partners as
follows:
(a) First, to those Partners in an amount equal to any Profits that
were allocated to the Partners pursuant to subparagraph (ii)(d) below in
the same ratio as such prior allocations of Profits taking into account
all prior and contemporaneous allocations of Losses pursuant to this
subparagraph (i)(a),
(b) Second, to those Partners in an amount equal to any Profits
that were allocated to the Partners pursuant to subparagraph (ii)(c)
below in the same ratio as such prior allocations of Profits taking into
account all prior and contemporaneous allocations of Losses pursuant to
this subparagraph (i)(b), and
(c) Third, 99% to the Limited Partners in proportion to their
Capital Contributions and 1% to the General Partners, provided, however,
if any such allocation of Losses would reduce any Partner's Capital
Account below zero or would increase the negative balance in such
Partner's Capital Account at a time when another Partner has a positive
capital account, determined after taking into account all prior and
contemporaneous allocations of income, gain, loss, deduction or credit
and as determined at the close of the taxable year in respect of which
such Losses are to be allocated, such excess Losses will be allocated as
follows:
(1) First, to those Partners with positive Capital Accounts in
proportion to their positive Capital Accounts until no Partner shall
have a positive capital account, and
(2) Second, any remaining Losses will be allocated to the
Partners in accordance with the manner in which such Partners bear
the economic risk of loss.
(ii) Profits of the Partnership will be allocated among the Partners,
as follows:
(a) First, pro rata to the Partners in proportion to their deficit
Capital Account balances, in an amount equal to the sum of the deficit
Capital Account balances,
42
<PAGE> 45
(b) Second, 99% to the Limited Partners in proportion to their
Capital Contributions and 1% to the General Partners in an amount
sufficient to cause their Capital Accounts to equal their Adjusted
Capital Contributions,
(c) Third, 90% to the Limited Partners in proportion to their
Capital Contributions and 10% to the General Partners in an amount
sufficient to cause their Capital Accounts to equal an amount equal to
(i) two times their Capital Contributions less (ii) cumulative
distributions pursuant to paragraph 4.1 and 9.2.2 of the Partnership
Agreement,
(d) Fourth, 80% to the Limited Partners in proportion to their
Capital Contributions and 20% to the General Partners.
In the event of an interim Closing, net interest or income earned prior to
the final Closing will be allocated among those Partners admitted as of the time
such interest or income was earned. All unrealized gains and losses at the
termination of the Partnership will be deemed realized at the time. Unrealized
gains or losses attributable to any securities distributed in kind to Partners
will be deemed realized upon such distribution.
ALLOCATION AND DISTRIBUTIONS UPON TRANSFER OF UNITS BY LIMITED PARTNERS
All Profits and Losses allocated to the holders of Units will be allocated
to the persons who held such Units as of last day of the month for which the
allocation is made or such other allocation method as permitted under the
Internal Revenue Code of 1986, as amended (e.g., a mid-month convention). See
"Taxation--Allocation of Income and Loss." All cash distributions to the holders
of Units will be made to the persons who held such Units as of the last day of
the month preceding the month in which the distribution is made. For these
purposes, a permitted assignee of a Unit will be treated as having been assigned
such Unit on the first day of the month following the month in which
notification of the sale, assignment or transfer is filed with the Partnership.
TRANSFERABILITY OF UNITS
GENERAL
Limited Partners' interests in the Partnership will be recorded in the
books and records of the Partnership as provided by Missouri law. No assignment
by a Limited Partner of his, her or its interest in the Partnership will be
effective except to the extent made in accordance with the provisions of the
Partnership Agreement. Except for certain gratuitous transfers and transfers
incident to divorce, no sale, transfer or assignment of a Limited Partner's
Units may be made without the consent of the Managing General Partner, which
consent will not be unreasonably withheld. "Assign" shall mean, with respect to
an Interest or Unit or any part thereof, to offer, sell, exchange, assign,
transfer, redeem, give or otherwise dispose of, whether voluntarily or by
operation of law.
Subject to the requirements described herein, Units will be transferable
upon submission to the Managing General Partner, for its review and acceptance,
of duly executed transfer documentation in form and substance acceptable to the
Managing General Partner. In connection with any transfer, the transferor must
provide an instrument of assignment and notification of transfer in the form
provided by the Managing General Partner. Each transferor will be required to
represent to the Managing General Partner (and provide other documentation
satisfactory in form and substance to the Managing General Partner) that such
transfer was not effected through a broker-dealer or matching agent which makes
a market in Units or which provides a readily available regular and ongoing
opportunity to Unitholders to sell or exchange their Units through a public
means of obtaining or providing information of offers to buy, sell or exchange
Units. In the case of the transfer of any Unit, the Managing General Partner
must determine that such transfer will not, by itself or together with any other
transfers, increase the risk of the Partnership's being classified as a publicly
traded partnership. A transferor will not be required to make the
representations described above if he, she or it represents that the transfer is
effected through an agent whose procedures have been approved by the Managing
General Partner as consistent with the requirements for avoiding classification
as a publicly traded partnership.
There is not now any market for Units, and there are restrictions in the
Partnership Agreement intended to prevent the formation or existence of a public
market. See "Restrictions" below. The ability of a market to
43
<PAGE> 46
develop will be limited by restrictions on trading provided in the Partnership
Agreement for the purpose of preventing the Partnership from being reclassified
as a publicly traded partnership taxable as a corporation. See
"Taxation--Classification as a Partnership." Limited Partners therefore may not
be able to liquidate their investment in the Partnership in the event of an
emergency or for any other reason. Moreover, the lack of a public market likely
will limit the price for which a Limited Partner would be able to sell his, her
or its Units. Accurate information as to the actual market value of a Unit on
any given date may not be available. The Managing General Partner does not
intend to redeem or repurchase Units. Accordingly, Limited Partners deciding to
sell their Units may have to arrange for such sales themselves.
The sale, transfer or assignment of a Partnership interest may result in
adverse income tax consequences to the transferor. Limited Partners are advised
to consult their tax advisors prior to any such transfer. See "Taxation--Sale of
Units by Partners."
Each Limited Partner may be obligated to pay all reasonable expenses,
including attorneys' fees, incurred by the Partnership in connection with the
assignment of a Unit or the substitution of any assignee as a Limited Partner,
whether or not the Managing Partner consents to such assignment or substitution.
In addition, each Limited Partner and assignee will be obligated to indemnify
the Partnership, the General Partners and each Limited Partner from any
expenses, including attorneys' fees, incurred in connection with any action,
suit or proceeding arising from any actual or alleged misrepresentation or
misstatement in connection with any assignment by such Limited Partner or
assignee or admission of a substituted Limited Partner. Any such liability shall
extend only to misrepresentations or misstatements by the Limited Partner or
Assignee him or herself and not to misrepresentations or misstatements made by
any other party.
RESTRICTIONS
No sale, assignment or transfer that would result in the transferor or any
transferee holding less than one Unit will be recognized for any purpose. In no
event may any Units be sold, transferred or assigned to a minor or incompetent,
except in trust, pursuant to the Uniform Gifts to Minors Act or by will or by
intestate succession, or to a person who is a market maker in securities unless
such person certifies that it is purchasing the Units solely for investment
purposes and not for resale. Any sale, assignment or transfer of an interest in
the Partnership to a person who makes a market in securities will be void ab
initio unless such person certifies to the Managing General Partner that it has
acquired such interest solely for investment purposes and not for the purpose of
resale. Except for transfers by will or intestate succession, in no event may
all or any part of a Unit be sold, transferred or assigned to a non-U.S. citizen
or resident.
No sale, transfer or assignment of an interest in the Partnership will be
recognized or effective if such sale, transfer or assignment, together with all
other such transfers on the books of the Partnership during the immediately
preceding 12-month period, would result in the transfer of 50% or more of the
Units. See "Taxation--Liquidation of Partnership; Termination." In addition, the
Managing General Partner may in its sole determination, comply with the terms of
a safe harbor limitation from classification as a publicly traded partnership
which would impose more restrictive numerical limitations on the number of Units
transferred. One safe harbor under current law would restrict transfers (except
for certain exempt transfers) of 5% or more Units during the same taxable year.
The Individual General Partners have the authority, without the consent of
the Limited Partners, to amend the transferability provisions of the Partnership
Agreement, in their reasonable discretion, in such manner as may be necessary or
desirable to preserve the tax status of the Partnership.
The Partnership will also require that each transferee of an interest in
the Partnership, as a condition to becoming a Limited Partner, certify that such
transferee satisfies the suitability standards generally applicable to investors
in the initial offering of Units pursuant to this Prospectus and that if such
transferee is either a Limited Partner or is a partner or employee of Edward
Jones or one of its affiliates, that he or she is acquiring the Units for
investment and not with a view to the distribution thereof. See "Investor
Suitability Standards."
In connection with any sale, transfer or assignment, the Managing General
Partner may, in its discretion, require an opinion of the Partnership's counsel
satisfactory in form and substance to the Managing General
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Partner that such sale, transfer or assignment would not result in a termination
of the Partnership for purposes of Section 708 of the Internal Revenue Code of
1986, as amended, cause the Partnership to lose its status as a partnership or
to be classified as a publicly traded partnership and be taxable as a
corporation for federal income tax purposes or violate any federal securities
laws or any state securities or "blue sky" laws, including investor suitability
standards thereunder.
ASSIGNEES
The assignee of a Unit in the Partnership does not become a Limited Partner
by virtue of such assignment, and obtains no rights (including no voting rights
or rights to Partnership reports or other information), except as provided below
under "Substituted Limited Partners") other than the right to receive
distributions from the Partnership and allocations of the income, gains or
losses of the Partnership. A purported sale, assignment or transfer of a Limited
Partner's Units which has been approved by the Managing General Partner will be
recognized by the Partnership when it has received written notice of such sale,
assignment or transfer in form and substance satisfactory to it, signed by both
parties, containing the purchaser's, transferee's or assignee's assumption of
all the liabilities and obligations of the assignor under the Partnership
Agreement and acceptance of the terms of the Partnership Agreement, and a
representation by the parties that the sale, transfer or assignment was lawful.
Such sale, transfer or assignment will be effective as of the first day of the
month following the month in which such notice is filed with the Partnership and
is recognized. The assignee of Units who does not become a Limited Partner and
desires to make a further assignment of such Units is subject to all of the
restrictions on transferability of Units described in this Prospectus and the
Partnership Agreement. In the event of death, adjudication of incompetence or
bankruptcy of a Limited Partner, his, her or its legal representatives will have
all the rights of a Limited Partner for the purpose of settling or managing his,
her or its interest in the Partnership and to join with such assignee in
satisfying conditions precedent to such assignee's becoming a Substituted
Limited Partner. Units may only be transferred to transferees who represent that
they satisfy the investor suitability standards generally applicable to
purchasers of Units pursuant to this Prospectus. See "Investor Suitability
Standards."
SUBSTITUTED LIMITED PARTNERS
No Limited Partner has the right to substitute an assignee as a Limited
Partner in his, her or its place. The Managing General Partner has the right in
its sole discretion to permit an assignee to become a substituted Limited
Partner, and any such consent by the Managing General Partner is binding and
conclusive without the consent or approval of any Limited Partner. In any event,
such consent shall be given only if the assignee executes and acknowledges such
instruments as the Managing General Partner deems necessary or desirable to give
effect to such substitution. The substituted Limited Partner shall pay all
reasonable expenses, including attorneys' fees, incurred by the Partnership in
connection with such substitution of the Limited Partner.
If a Limited Partner assigns his Units in a manner which is effective under
the Partnership Agreement, the Managing General Partner will either promptly
consent to take all necessary actions to insure that such assignee shall become
a substituted Limited Partner or, if such consent is withheld, the Managing
General Partner shall exercise the voting rights under the Investment Company
Act of 1940 in accordance with the written instructions of the assignee.
SUMMARY OF THE PARTNERSHIP AGREEMENT
The rights and obligations of the Partners will be governed by the
Partnership Agreement, a form of which is included as Exhibit A to this
Prospectus. It is recommended that each prospective purchaser read the
Partnership Agreement in its entirety.
Certain provisions of the Partnership Agreement have been described
elsewhere in this Prospectus. With regard to the management of the Partnership
and the fees and payments to be made to the Managing General Partner and its
affiliates, see "Management" and "Management Compensation and Other Expenses";
with regard to various transactions by and relationships of the Partnership with
the Managing General Partner and its
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affiliates, see "Conflicts of Interest" and "Management"; with regard to the
transfer of Units, see "Transferability of Units"; with regard to the
distribution and allocation of profits and losses, see "Partnership
Distributions and Allocations"; and with regard to reports to be made to the
Limited Partners, see "Reports."
The following is a summary of certain portions of the Partnership Agreement
which are not described elsewhere in this Prospectus. All statements made below
and elsewhere in this Prospectus relating to the Partnership Agreement are
qualified in their entirety by reference to the Partnership Agreement.
PARTNERSHIP CAPITAL
General. No Partner will be entitled to interest on any capital
contribution to the Partnership or on such Partner's Capital Account. Except as
otherwise provided in the Partnership Agreement, no Partner has the right to
withdraw, or to receive any return of, his capital contribution.
Additional Capital Contributions. The Managing General Partner is
authorized to admit Limited Partners to the Partnership in the manner and
subject to the conditions set forth in this Prospectus. No Limited Partner, as
such, will be required or authorized to make any capital contributions to the
Partnership other than the amount of his, her or its Subscription Price for such
Limited Partner's Units, which Subscription Price is required to be paid
one-half upon subscription for the Units and all or part of the balance on the
Capital Call Date. Any Partner's failure to contribute all or such part of the
balance of his, her or its Subscription Price as is required will result in the
transfer of twenty percent (20%) of his, her or its Capital Contribution to the
other Partners, effective as of the Capital Call Date, which will have the
effect of reducing such Defaulting Partner's interest and Units in the
Partnership by sixty percent (60%), as more fully set forth in paragraph 3.3.3
of the Partnership Agreement (or proportionate lesser percentages in the case of
additional Capital Contributions less than the entire remaining balance of the
Subscription Price). The portion of the Defaulting Partner's Capital
Contribution transferred to the non-defaulting Partners will be deemed a Capital
Contribution by such non-defaulting Partners on a pro rata basis in proportion
to their Capital Contributions and will proportionately increase such
non-defaulting Partners' interests and Units in the Partnership. Such transfer
will constitute the sole and exclusive remedy of the Partnership and the other
Partners for any such default in making additional Capital Contributions by an
investor.
See, also, "Liability of Partners to Third Parties" below and "Risk and
Other Important Factors -- Repayment of Certain Distributions." Under the
Partnership Agreement, the General Partners are obligated to make Capital
Contributions to the Partnership equal to one percent of the aggregate Capital
Contributions of all Partners. See "Management -- General Partners -- The
Managing General Partner."
THE GENERAL PARTNERS
Term and Election. The General Partners will consist of the Individual
General Partners and the Managing General Partner. See "Management." General
Partners will hold office until their resignation or removal pursuant to the
terms of the Partnership Agreement or until a successor has been elected at any
meeting of the Individual General Partners, in the case of an Individual General
Partner, or of Limited Partners in the case of any General Partner. See "--
Withdrawal or Removal of the General Partners" below. The Limited Partners may
elect a successor to a removed General Partner as of the effective date of such
removal by the written consent or affirmative vote of a majority-in-interest of
the Limited Partners (subject to the condition described under "Voting Rights of
Limited Partners -- Limitations on Voting Rights" below).
The number of Individual General Partners will be fixed from time to time
by the Individual General Partners then in office. However, the number of
Individual General Partners will not, except prior to the initial public
offering of Units, be less than two or more than six. A majority of the General
Partners will at all times be Independent General Partners. If at any time the
number of Independent General Partners is less than a majority of the General
Partners, the Individual General Partners will, within 90 days thereafter,
designate one or more successor Independent General Partners so as to restore
the number of Independent General Partners to a majority of the General
Partners. Any General Partner will hold office until his resignation, incapacity
or removal or until his successor has been elected at any meeting of Limited
Partners. See, however, "-- Voting Rights of Limited Partners -- Meetings"
below. In the event that no Individual General Partners remain, the Managing
General
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Partners will, within 90 days, call a meeting of Limited Partners for the
purpose of electing Individual General Partners.
Authority. The Individual General Partners will have exclusive management
and control of the business of the Partnership, and will have the authority, on
behalf of the Partnership, to do all things which, in their sole judgment, are
necessary or appropriate to carry out their duties, except as the Partnership
Agreement may expressly limit such powers. Subject to the supervision of the
Individual General Partners, the Managing General Partner will have exclusive
power and authority, among other things, to manage and control the portfolio
company investments of the Partnership, including, but not limited to, the power
to make all decisions regarding the Partnership's portfolio company investments
and to find, evaluate, structure, approve, monitor and liquidate, upon
dissolution or otherwise, such investments and provide, or arrange for the
provision of, managerial assistance to those companies in which the Partnership
invests.
WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNERS
An Individual General Partner may voluntarily resign or withdraw from the
Partnership, at any time, in his discretion, upon 60 days written notice to the
other General Partners; provided however, that if such registration or
withdrawal is likely to cause the Partnership to lose its partnership tax
classification, at least one (1) year's prior written notice is required. Upon
such resignation or withdrawal (other than by means of the assignment of his
general partner interest to a substituted general partner in exchange for
compensation therefor), the Partnership will pay to the withdrawing Individual
General Partner an amount equal to the lesser of his capital contribution (as
reduced by any prior returns of capital) or the fair value of his general
partner interest in the Partnership.
The Managing General Partner may voluntarily resign or withdraw from the
Partnership at any time, in its discretion, but only in compliance with the
following: (i) the General Partner provides 60 days written notice to all
Partners; and (ii) a majority-in-interest of the Limited Partners consent to the
appointment of the successor. Upon such resignation or withdrawal (other than by
means of the assignment of its general partner interest to a substituted general
partner in exchange for compensation therefor), the Partnership will pay to the
withdrawing Managing General Partner an amount equal to the lesser of its
capital contribution (as reduced by any prior returns of capital) or the fair
value of its general partner interest in the Partnership.
The Managing General Partner may, without the approval of any Partner,
substitute in its stead as Managing General Partner any person that has, by
merger, consolidation or otherwise, acquired all of its assets and continued its
business at the time of the dissolution or succession of the Managing General
Partner.
The Partnership Agreement provides that the Individual General Partners may
be removed either (i) for cause by the action of at least two-thirds of the
remaining Individual General Partners, (ii) by failure to be re-elected by the
Limited Partners at any meeting of the Limited Partners called for the purpose
of electing Individual General Partners (see, however, "-- Voting Rights of
Limited Partners -- Meetings" below), or (iii) with the consent of a
majority-in-interest of the Limited Partners. The Managing General Partner may
be removed either (i) by a majority of the Independent General Partners, (ii) by
failure to be re-elected by the Limited Partners at any meeting of the Limited
Partners called for the purpose of electing the Managing General Partner (see,
however, "-- Voting Rights of Limited Partners -- Meetings" below), or (iii)
with the consent of a majority-in-interest of the Limited Partners.
Upon the removal of a General Partner, the investments of the Partnership
will be appraised and the removed General Partner will receive a final
allocation of Profits and Losses. If the removed General Partner's Capital
Account has a positive balance after such allocation, the Partnership will
promptly deliver a promissory note in the principal amount equal to the excess
of the positive Capital Account over such Partner's Capital Contribution,
bearing interest at the prime rate and payable from any available cash before
distribution to Partners. If such allocation is not permissible under the
Investment Advisers Act, the interest of the General Partner will convert to
that of a Limited Partner.
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AMENDMENT OF PARTNERSHIP AGREEMENT
Amendments to the Partnership Agreement may be proposed by the Individual
General Partners or by Limited Partners owning 10% or more of the Units. The
Individual General Partners are not required to submit any proposed amendment to
the Limited Partners for consideration if the Individual General Partners have
received written approval to such amendment from Limited Partners holding the
requisite percentage interest required to approve the proposed amendment.
Proposed amendments (other than described below) must be approved by holders of
at least a majority-in-interest. Paragraph 10.2.1 of the Partnership Agreement
sets forth those amendments which cannot be adopted without the approval of each
Partner affected thereby. See, however, "-- Voting Rights of Limited Partners --
Limitations on Voting Rights" below.
The Individual General Partners may make amendments to the Partnership
Agreement without the consent of the Partners to the extent set forth in
paragraph 10.2.2 thereof.
So long as the Partnership is a business development company subject to the
provisions of the Investment Company Act, the Individual General Partners are
required to amend the Partnership Agreement to reflect any matters that the
Investment Company Act requires to be approved or disapproved by the Limited
Partners and will propose such amendment to the Limited Partners.
VOTING RIGHTS OF LIMITED PARTNERS
GENERAL
The Limited Partners cannot participate in the management or control of the
Partnership. However, the Partnership Agreement provides that, subject to
certain conditions described below, the Limited Partners may approve certain
Partnership matters. Upon notification to the Individual General Partners,
Limited Partners may, at their expense, obtain a list of the names and addresses
of all the Limited Partners for a purpose reasonably related to the Limited
Partner's interest as a limited partner. See "Reports".
Subject to the provisions described under "Limitations on Voting Rights"
below, the General Partners may not, without the consent of all of the Limited
Partners, do the acts listed in paragraph 5.3.1 of the Partnership Agreement,
including: (i) admit any person as a General Partner or Limited Partner, except
as specifically provided in the Partnership Agreement, or (ii) continue the
business with the Partnership property on the death, retirement, removal,
dissolution, adjudication of bankruptcy, incompetence or insanity of a General
Partner, except as specifically provided in the Partnership Agreement.
Subject to the provisions described under "Limitations on Voting Rights"
below, the Individual General Partners may not, without the consent of a
majority-in-interest of the Limited Partners: (i) sell or otherwise dispose of
all or substantially all of the Partnership's assets at any one time or (ii)
elect to dissolve the Partnership.
Subject to the provisions described under "Limitations on Voting Rights"
below, the Limited Partners may: (i) approve or disapprove the removal of any
General Partner and the appointment of a successor to a removed General Partner;
(ii) approve or disapprove proposed material changes in the nature of the
Partnership's business or investment objectives, including, without limitation,
changes that would cause the Partnership to cease to be, or to withdraw its
election as, a business development company under the Investment Company Act
(provided, that the General Partners will not be entitled to vote any Units
owned by them to approve or disapprove such changes); (iii) approve or
disapprove any proposed investment advisory contract or management agreement or
to terminate any such existing contracts; provided, however, that such contracts
are also approved by a majority of the Independent General Partners; (iv)
approve or disapprove the admission of a successor Managing General Partner; or
(v) approve or disapprove of amendments to the Partnership Agreement, provided,
however, that no such amendment shall conflict with the Investment Advisers Act.
The General Partners and their affiliates may purchase and hold Units for
their own account. Management intends to subscribe for the purchase of Units in
this offering, ranging in the aggregate from up to approximately 6,000 Units
(15%) in the event the 40,000 minimum number of Units are sold, to up to
approximately 18,000
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Units (9%), in the event the 200,000 maximum number of Units are sold. JFC or
one of its affiliates may subscribe for up to an additional 5% of the total
number of Units sold in the offering. See "Management."
LIMITATIONS ON VOTING RIGHTS
In order to preserve the limited liability of the Limited Partners and
protect the tax status of the Partnership, paragraph 11.2 of the Partnership
Agreement limits the foregoing rights.
Notwithstanding any other provisions of the Partnership Agreement, if,
prior to the exercise by the Limited Partners of the foregoing voting rights,
the Partnership has obtained an opinion of counsel for the Partnership to the
effect that there is a substantial likelihood that the exercise of such right or
rights will (i) violate the provisions of the Missouri Revised Uniform Limited
Partnership Act, as amended, or the laws of such other jurisdiction in which the
Partnership is then formed or qualified, (ii) adversely affect the limited
liability of the Limited Partners or (iii)adversely affect the classification of
the Partnership as a partnership for Federal income tax purposes, then the
General Partners and/or the Limited Partners, as the case may be, will be
prohibited from taking the proposed action or exercising such voting right;
except that under any circumstances, the Limited Partners shall be entitled to
all voting rights under the Investment Advisers Act. Any such opinion of counsel
for the Partnership will be subject to refutation and nullification by an
opinion of counsel representing a majority-in-interest of non-management
affiliated Limited Partners, which opinion will be paid for by the Partnership
as a Partnership expense, provided, that such opinion and such counsel shall be
reasonably satisfactory to the Partnership.
The Individual General Partners may amend the Partnership Agreement as
provided in paragraph 10.2.2 of the Partnership Agreement.
MEETINGS
The Managing General Partner does not anticipate that any meeting (annual
or otherwise) of Limited Partners will be called in the foreseeable future or
know of any proposals to be presented to the Limited Partners for a vote, except
that the Managing General Partner will hold a meeting of the Limited Partners
within sixteen months from the date of this Prospectus, to submit the Management
Agreement and selection of independent accountants for the approval of the
Limited Partners. Any action that is required or permitted to be taken by the
Limited Partners may be taken either at a meeting of the Limited Partners or
without a meeting if approvals in writing setting forth the action so taken are
signed by Limited Partners holding such number of Units that would be necessary
to authorize or take such action at a meeting of the Limited Partners. For
example, the removal of the Managing General Partner, which requires the vote of
the holders of a majority-in-interest of the Limited Partners, could also be
effected by the written approval of the holders of a majority-in-interest.
Meetings of the Limited Partners may be called by the Individual General
Partners and will be called by the Individual General Partners within 30 days
after receipt of a written request for such a meeting by Limited Partners owning
at least 10% of the total number of Units outstanding. Limited Partners may vote
either in person or by proxy at meetings. Substantially all matters submitted to
the Limited Partners for determination are determined by the affirmative vote,
in person or by proxy, of holders of a majority-in-interest of the Limited
Partners.
ROLL-UP TRANSACTIONS
The Partnership Agreement prohibits the Partnership from participating in
certain acquisition, merger, conversion or consolidation transactions (a
"Roll-Up"), except for certain specified conversions in which voting rights,
compensation arrangements and investment objectives are not affected, if, as a
consequence of the Roll-Up, (i) voting rights of Partners are materially
reduced, (ii) Partners' rights of access would be materially reduced, (iii) the
charter documents of the surviving entity would materially limit accumulation of
shares or interests in such entity, or (iv) any of the costs of the transactions
would be borne by the Partnership if the Roll-Up transaction is not approved by
the Partners.
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LIMITATION ON LIABILITY OF THE GENERAL PARTNERS
Neither the General Partners nor any of their affiliates (including their
officers, directors and employees) will be liable, responsible or accountable in
damages or otherwise to the Partnership or any Limited Partner or Assignee for
any loss, damage or expense incurred by reason of any act or omission performed
or omitted by the General Partners or such affiliates in good faith either on
behalf of the Partnership or in furtherance of the interests of the Partnership
and in a manner reasonably believed by them to be within the scope of the
authority granted to them by the Partnership Agreement or by law or by the
consent of the Limited Partners, provided that the General Partners or such
affiliates were not guilty of negligence or misfeasance in the performance of
his, her or its duties with respect to such acts or omissions or of any
disabling conduct within the meaning of Section 17(h) of the Investment Company
Act. Moreover, as a result of the Partnership's registration as a limited
liability limited partnership, the General Partners will be accorded all the
limited liability protection of a partner in a general partnership registered as
a limited liability partnership under applicable Missouri law. Generally,
Missouri law provides that no partner in a registered limited liability
partnership shall be liable or accountable, directly or indirectly, for any
debts, obligations and liabilities of, or chargeable to, the partnership,
whether in tort, contract or otherwise, which are incurred, created or assumed
by such partnership while the partnership is a registered limited liability
partnership, except for any such liabilities for such partner's own negligence,
wrongful acts, omissions, misconduct or malpractice or that of any person under
the partner's direct supervision and control or for liability of such partner
for certain taxes and fees. See "Status as a Limited Liability Limited
Partnership."
INDEMNIFICATION OF THE GENERAL PARTNERS BY THE PARTNERSHIP
The Partnership, out of its assets and not out of the assets of the General
Partners (except insofar as the Managing General Partner satisfies a claim by an
Individual General Partner that the Partnership has failed to satisfy) or the
Limited Partners, will, to the fullest extent permitted by law, indemnify and
hold harmless any General Partner and any of his, her, or its affiliates
(including their officers, directors and employees) who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether criminal, civil, administrative or investigative
(including any action by or in the right of the Partnership), by reason of any
acts, omissions or alleged acts or omissions arising out of such person's
activities as a General Partner, or as an affiliate of such General Partner, if
such activities were performed in good faith either on behalf of the Partnership
or in furtherance of the interests of the Partnership, and in a manner
reasonably believed by such person to be within the scope of the authority
conferred by the Partnership Agreement or by law or were consented to by the
Limited Partners in accordance with the Partnership Agreement against losses,
damages or expenses for which such person has not otherwise been reimbursed
(including attorneys' fees, judgments, fines and amounts paid in settlement),
provided that such person was not guilty of negligence or misfeasance in the
performance of his, her or its duties with respect to such acts or omissions
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. Absent a court determination that a General
Partner or any of his affiliates seeking indemnification was not liable on the
merits or guilty of disabling conduct within the meaning of Section 17(h) of the
Investment Company Act of 1940, the decision by the Partnership to indemnify a
General Partner or any such affiliate must be based upon the reasonable
determination of independent counsel or non-party Independent General Partners,
after review of the facts, that such disabling conduct did not occur. The
Partnership is authorized to provide advances of litigation expenses to the
Individual General Partners to the extent permitted by the Investment Company
Act of 1940 and Investment Company Release No. 11330 and if certain other
conditions are met. A successful claim for indemnification by a General Partner
would reduce the assets of the Partnership.
INDEMNIFICATION OF THE INDIVIDUAL GENERAL PARTNERS BY THE MANAGING GENERAL
PARTNER
The Partnership Agreement provides that to the extent that an Individual
General Partner has a valid claim for indemnification from the Partnership (as
described under "Indemnification of the General Partners by the Partnership"
above) and has pursued such claim against the Partnership, but such claim has
not been satisfied, the Managing General Partner, in its individual capacity,
shall satisfy such claim. In addition, The Jones Financial Companies, L.P., LLP,
has agreed to guaranty such indemnification obligation of the Managing General
Partner
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and to indemnify the Individual General Partners, the general partners of the
Managing General Partner and the officers and directors of CIP Management, Inc.
to the fullest extent permitted by law, without regard to the limitations on
indemnification by the Partnership, against all claims, suits or proceedings if
such person acted in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of the Partnership and, with respect to
criminal proceedings, had no reasonable cause to believe such conduct was
unlawful.
LIABILITY OF PARTNERS TO THIRD PARTIES
In accordance with Missouri law applicable to limited liability limited
partnerships, the General Partners will not be individually liable for all the
general obligations of the Partnership. Rather, as a result of the Partnership's
registration as a limited liability limited partnership, the General Partners
will be accorded all the limited liability protection of a partner in a general
partnership registered as a limited liability partnership under applicable
Missouri law. Generally, Missouri law provides that no partner in a registered
limited liability partnership shall be liable or accountable, directly or
indirectly, for any debts, obligations and liabilities of, or chargeable to, the
partnership, whether in tort, contract or otherwise, which are incurred, created
or assumed by such partnership while the partnership is a registered limited
liability partnership, except for any such liabilities for such partner's own
negligence, wrongful acts, omissions, misconduct or malpractice or that of any
person under the partner's direct supervision and control or for liability of
such partner for certain taxes and fees. See "Status as a Limited Liability
Limited Partnership." The Partnership Agreement provides that no Limited Partner
will be personally liable for the debts of the Partnership beyond the amount
subscribed for by such Limited Partner to the capital of the Partnership. See,
however, "Risk and Other Important Factors--Possible Loss of Limited Liability."
In the event the Partnership is unable otherwise to meet its obligations, the
Limited Partners might, under applicable law, be obligated under some
circumstances to return or to pay to creditors of the Partnership distributions
previously received by them to the extent such distributions are deemed to
constitute a return of their capital contributions or are deemed to have been
wrongfully paid to them. See "Risk and Other Important Factors--Repayment of
Certain Distributions."
PARTNER'S INDEPENDENT ACTIVITIES
The Partnership Agreement provides that the General Partners (as well as
any Limited Partner) and any shareholder, director, employee or affiliate
thereof may engage in or possess an interest in other business ventures of every
nature and description, whether or not such ventures are competitive with the
Partnership. Neither the Partnership nor any Partner will have any interest in
any independent business venture of another Partner by virtue of the Partnership
Agreement or any relationship created thereby. See "Conflicts of Interest."
TERM AND DISSOLUTION
The Partnership will dissolve on December 31, 2012, subject to the right of
the Individual General Partners to extend the term for up to two additional
two-year periods if they determine that such extensions are in the best
interests of the Partnership. The Partnership will sooner dissolve upon the
occurrence of any one or more of the following events: (i) the adjudication of
bankruptcy, incompetency or insanity, or the death, incapacity, dissolution,
removal, withdrawal or resignation of all General Partners; (ii) the election to
dissolve the Partnership by a majority-in-interest of the Limited Partners
(subject to the condition described under "Voting Rights of Limited
Partners--Limitations on Voting Rights" above); (iii) the withdrawal,
resignation, removal, incapacity or the dissolution or adjudication of
bankruptcy of the Managing General Partner without the designation of a
successor Managing General Partner; or (iv) the sale or other disposition at any
one time of all of substantially all of the assets of the Partnership.
Upon dissolution of the Partnership, the Individual General Partners, or a
liquidating trustee, if one is appointed, will liquidate all or any part of the
Partnership's assets and distribute such assets or the proceeds thereof in
accordance with paragraph 9.2 of the Partnership Agreement.
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APPOINTMENT OF GENERAL PARTNERS AS ATTORNEYS-IN-FACT
In paragraph 12.1 of the Partnership Agreement, each Limited Partner and
assignee thereof irrevocably constitutes and appoints the General Partners, and
each of them, such Limited Partner's true and lawful attorney-in-fact, with full
power of substitution and with full power and authority in such Limited
Partner's name, place and stead to, among other things, make, execute,
acknowledge and file all certificates and other instruments deemed advisable by
the General Partners to permit the Partnership to become or continue as a
limited partnership, all instruments that effect a change or modification of the
Partnership in accordance with the Partnership Agreement or carry out the
provisions of the Partnership Agreement or applicable law, all conveyances and
other instruments deemed advisable by the General Partners to effect the
dissolution and termination of the Partnership, including a certificate of
cancellation, and all other instruments that may be required or permitted by law
to be filed on behalf of the Partnership.
DISTINCTIONS FROM CORPORATE FORM
The Partnership is organized in the form of a limited liability limited
partnership, which differs from the corporate form in a number of respects
including management, the term of existence, liability of investors and
taxation. A limited partnership is managed by a general partner(s) whereas a
corporation is managed by a board of directors. The term of a limited
partnership is fixed whereas a corporation typically has perpetual existence.
Although limited partners and corporate shareholders generally have limited
liability, under certain conditions the limited partners may have liabilities to
third parties. See "Risk and Other Important Factors--Possible Loss of Limited
Liability"; and "Summary of the Partnership Agreement--Liability of Partners to
Third Parties." For information with respect to the limitations on the liability
of the General Partners as a result of the registration of the Partnership as a
limited liability limited partnership, see "Status as a Limited Liability
Limited Partnership." For information with respect to the taxation of a limited
partnership, see "Taxation."
PRINCIPAL OFFICE OF THE PARTNERSHIP
The address of the principal of the Partnership is 12555 Manchester Road,
St. Louis, Missouri 63131, unless changed by the General Partners. The business
of the Partnership may also be conducted at such additional places as the
General Partners may determine. Applicable Law
The Partnership Agreement will be construed and enforced in accordance with
the laws of the State of Missouri.
TAXATION
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT WITH HIS TAX ADVISOR WITH
RESPECT TO THE TAX CONSEQUENCES OF AN INVESTMENT IN THE PARTNERSHIP
(PARTICULARLY THE POTENTIAL ADVERSE EFFECTS DESCRIBED HEREIN).
GENERAL
The following is a general summary of the material federal income tax
consequences affecting the Partnership and its Partners. This summary is based
on, and qualified in the entirety by, the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations, positions of the Internal Revenue
Service ("IRS") contained in published Revenue Rulings and Revenue Procedures,
other administrative interpretations of the IRS and judicial decisions, all of
which are subject to change at any time. Any such change could be retroactive
with respect to transactions occurring prior to such change.
No rulings have been sought by the Partnership from the IRS with respect to
any of the tax matters described in this Prospectus. There can be no assurance
that a position taken by the Partnership will not be challenged by the IRS. Any
adjustment by the IRS would likely result in an unfavorable adjustment to the
returns of the Partners and a tax deficiency.
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The amount and timing of the taxable income, gain and loss, if any, to be
recognized by the Partnership as well as the availability and amount of
deductions that can be taken by the Partnership will depend on various factual
and legal determinations. Since none of the investments in which the Partnership
will invest have been selected as of the date of this Prospectus, counsel to the
Partnership has not expressed any opinion concerning the tax treatment of any
income, deduction, gain or loss which may be recognized by the Partnership with
respect to such investments.
The following summarizes the material federal income tax consequences of an
investment in the Partnership to investors who are individual citizens or
residents of the United States. It does not address, among other things, the
special tax consequences of foreign investors or corporations or the tax
consequences to any Partner that fails to contribute the balance of his, her or
its Subscription Price (or such portion thereof as is required) as an additional
Capital Contribution on or prior to the Capital Call Date. Since the tax
consequences of an investment in the Partnership will vary by investor,
prospective investors are urged to consult their own tax advisors as to the
particular federal income tax and state income tax consequences to them of an
investment in the Partnership.
This summary (and the discussion in "Risk and Other Important Factors --
Federal Income Tax Considerations"), to the extent it pertains to partnerships
in general, is applicable with respect to the tax treatment of "non-operating"
partnerships (i.e., partnerships which only invest in stock, debt instruments or
other equity instruments). This summary does not address the special tax
consequences which may result if the Partnership invests in an operating
partnership (i.e., a partnership engaged in a trade or business). Such an
investment could have materially adverse tax consequences to investors.
Prospective investors are urged to consult with their tax advisors with respect
to the tax consequences of such investments.
CLASSIFICATION AS A PARTNERSHIP
General. The anticipated tax benefits of an investment in the Partnership
depend, in large part, upon the Partnership being treated as a partnership for
federal income tax purposes rather than as an "association" taxable as a
corporation. If at any time the Partnership were determined to be an association
for federal income tax purposes rather than a partnership, income of the
Partnership would be taxable to the Partnership at corporate rates, and
distributions to the Partners could be taxable as dividends. Furthermore, any
deductions, losses, and credits would be allowed only to the Partnership and
would not pass through to the Partners.
Under the recently finalized "Check the Box" Regulations Sections
301.7701-2 and -3, effective January 1, 1997, a limited partnership such as the
Partnership will automatically be classified as a partnership for federal income
tax purposes unless an election is made to treat the limited partnership as an
association taxable as a corporation.
No ruling has been sought by the Partnership from the IRS regarding whether
the Partnership will be treated as a partnership for federal income tax
purposes. However, the Partnership has received an opinion of its counsel, Bryan
Cave LLP, to the effect that the Partnership will be treated as a partnership
for federal income tax purposes and should not be treated as a publicly traded
partnership. Such opinion is conditioned upon the assumed validity and continued
existence of the current law, Treasury Regulations and existing administrative
interpretations, the Managing General Partner and the Partnership not electing
pursuant to Treasury Regulation Section 301.7701-3 to be classified as an
association taxable as a corporation, the continued maintenance by the general
partners of a certain level of net worth, certain factual representations made
by the general partners as to their net worth and intent to remain partners of
the Partnership, and the operation of the Partnership in accordance with the
terms of the Partnership Agreement.
Publicly Traded Partnerships. Certain publicly traded partnerships are
taxed as corporations for federal income tax purposes. In general, a publicly
traded partnership is any partnership in which partnership interests are traded
on an established securities market or are readily tradeable on a secondary
market (or the substantial equivalent thereof).
Units in the Partnership will not be listed for trading on an established
securities market and the Managing General Partner will use its best efforts to
ensure that Units will not be readily tradeable on any secondary market (or
substantial equivalent thereof). See "Transferability of Units."
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Treasury Regulations under Section 7704 of the Code provide safe harbors
that, if satisfied by the Partnership, will result in Units in the Partnership
not being treated as readily tradable on a secondary market (or the substantial
equivalent thereof). The Partnership Agreement contains provisions designed to
maximize the likelihood that the Partnership will satisfy at least one of these
safe harbors and also provides that any transfers of Units to a market maker for
other than investment purposes will be null and void ab initio. The Managing
General Partner has also represented that it intends to exercise its discretion
regarding transfers of Units in a manner designed to prevent the Partnership
from becoming a publicly traded partnership. See "Transferability of Units."
Accordingly, if the above restrictions on transfer are legally effective and
enforced by the Managing General Partner, the Partnership should not be
considered a publicly traded partnership. While the Managing General Partner
will use its best efforts to enforce the restrictions on transfer and will take
any other reasonable measure to avoid causing the Partnership to be treated as a
publicly traded partnership, no assurances can be given that the Managing
General Partner will be successful in these efforts or that future Treasury
Regulations, administrative or judicial interpretations will not be adopted that
cause the Partnership to be treated as a publicly traded partnership.
TAXATION OF THE PARTNERSHIP
The Partnership will file annual informational tax returns, but will not be
required to pay federal income tax on any income unless the Partnership is
treated as an association taxable as a corporation. See "Classification as a
Partnership" above. Instead, each Partner will be subject to tax on his
allocable share of the Partnership's income, gain, loss, deduction or credits.
Such items generally will retain the same character in the hands of the
Partners.
ALLOCATION OF INCOME AND LOSS
For federal income tax reporting purposes, each Partner's annual allocable
share of Partnership items of income, gain, loss, deduction, credit and items of
tax preference will be allocated to the Partners (regardless of whether there is
distributable cash). Such allocable share must be included in the taxable income
of a Limited Partner in the taxable year with or within which the taxable year
of the Partnership ends. A Limited Partner's allocable share of income subject
to tax may exceed cash distributions to him in a particular year. In particular,
if the Partnership acquired debt obligations at a discount, the Partner could be
required to accrue ratably his allocable share of such discount as interest
income even though such Partner would not realize contemporaneously a
corresponding amount of cash.
The Partnership Agreement's allocation of a Partner's allocable share of
income, gain, loss, deduction or credit (or item thereof) will be respected for
federal income tax purposes if the allocation has "substantial economic effect"
or is in accordance with such Partner's interest in the Partnership (determined
by taking into account all the facts and circumstances). Treasury Regulations
provide safe-harbor tests under which allocations are deemed to have
"substantial economic effect" or are made in accordance with a "partner's
interest in the partnership." The Partnership Agreement's allocations would not
meet the safe-harbor tests set forth in the Regulations. Counsel to the
Partnership is, however, of the opinion that the Partnership Agreement's
allocations of Profit and Losses more likely than not will be treated as made in
accordance with the "partner's interest in the partnership."
If an allocation of an item of Profits and Losses were found to lack
"substantial economic effect" and not be in accordance with a "partner's
interest in the partnership," the item would be reallocated in accordance with a
"partner's interest in the partnership." The effect of such a reallocation could
be adverse with respect to a Limited Partner's share of taxable income and gain,
with a consequent effect on such Partner's adjusted basis for his Units.
Items of partnership income, gain, loss and deduction must generally be
allocated among the transferor and transferee of a partnership interest (as well
as among partners whose partnership interests otherwise vary during a taxable
period) either (1) by a proration of such items based on the number of days
during the partnership's tax year when such person was a partner or (2) by
separating the partnership's tax year into two or more segments and allocating
to each person who was a partner during such segment such items occurring in or
deemed to have occurred in such segment. Although no Treasury Regulations have
been issued concerning the allocation of
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partnership tax items to partners whose interest in a partnership vary during
the taxable year of the partnership, the legislative history of this provision
indicates that monthly and mid-month conventions may be permitted by the
Treasury Regulations in non-abusive situations. The Partnership's taxable income
and losses will be determined as required and subsequently apportioned among
Limited Partners in proportion to the number of Units owned by them as of the
last day of the month for which the allocation is made.
PARTNER'S ADJUSTED BASIS
The amount of a Partner's basis in his Partnership interest has a
significant impact on that Partner's ability to claim losses and receive
distributions (and deemed distributions) without the immediate imposition of
tax. Generally, a Partner will be entitled to deduct his allocable share of
Partnership losses for a taxable year only in an amount up to the adjusted basis
of his interest in the Partnership at the end of such year. In addition, cash
distributions to a Partner generally will be treated as a tax-free return of
capital only to the extent of such Partner's adjusted basis in his Partnership
interest immediately before the distribution.
A Limited Partner's Capital Contribution will be contributed to the
Partnership over an unspecified period of time. A Limited Partner's initial
basis in his Partnership interest will equal the Capital Contribution actually
made by the Partner to the Partnership for his Units plus, subject to the
discussion below, his proportionate share of the Partnership's nonrecourse debt
("Nonrecourse Debt"), if any. A Limited Partner's initial adjusted basis for his
Units will be increased from time to time by (1) any additional Capital
Contribution actually made by the Partner to the Partnership (2) his allocable
share of Partnership taxable income and tax-exempt income and (3) his
proportionate share of increases in the Partnership's Nonrecourse Debt, if any.
A Limited Partner's adjusted basis for his interest in the Partnership will be
decreased from time to time, but not below zero, by (1) Partnership
distributions to him (including, for this purposes, his proportionate share of
decreases in Partnership Nonrecourse Debt), (2) his allocable share of
Partnership losses and deductions, and (3) his allocable share of nondeductible
Partnership expenditures which are not properly chargeable to a capital account
for federal income tax purposes. In general, a Limited Partner's allocable share
of the Partnership's Nonrecourse Debt, if any, will be based on such Limited
Partner's share of Partnership profits as determined in accordance with the
Partnership Agreement.
Any reduction in a Limited Partner's allocable share of the Partnership's
Nonrecourse Debt, if any, will be treated for federal income tax purposes as a
cash distribution to the Limited Partner in an amount equal to such reduction,
which could result in a concurrent liability to such Limited Partner although no
cash will have been distributed. See "Partnership Distributions."
DEDUCTIONS TAKEN BY THE PARTNERSHIP
General. The availability and amount of various deductions taken by the
Partnership will depend not only upon general legal principles, but also upon
certain factual determinations relating to the operation of the Partnership. The
Partnership does not expect to incur substantial deductions. There can be no
assurance, however, that some of the deductions claimed by the Partnership will
not be challenged by the IRS. Since all of the facts regarding the nature of the
expenses to be incurred by the Partnership are not known and may vary according
to the circumstances presented, no prediction can be made whether all or a
portion of such expenses would be deductible, if challenged, and there can be no
assurance that any such challenge would not be upheld.
The ability of Limited Partners to deduct Partnership expenses will depend
in part upon whether the Partnership is engaged in a "trade or business." Since
the Partnership's principal activity is investing in and holding securities as
an investment, the Partnership probably is not engaged in a trade or business.
To the extent the Partnership is considered to be engaged in an activity for the
"production of income" rather than in a "trade or business," a Limited Partner
will be able to deduct his allocable share of certain Partnership expenses only
to the extent such expenses, when combined with similar expenses, exceed 2% of
such individual Limited Partner's adjusted gross income. Accordingly, a Limited
Partner probably will be able to deduct his allocable share of the management
fee paid to the Managing General Partner and other trade or business Partnership
expenses only to the extent that such Limited Partner's share of the fee and
such expenses, when combined with other miscellaneous itemized deductions,
exceeds 2% of such Limited Partner's adjusted gross income.
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Organization and Syndication Expenses. Organization expenses (those capital
expenditures incident to the creation of a partnership) are not deductible by a
partnership but may be amortized over a period of not less than 60 months. In
the case of the Partnership, such organization expenses would include legal fees
for services such as preparation of the Partnership Agreement, accounting fees
for the establishment of the Partnership's accounting system and filing fees
relating to organization of the Partnership. The Partnership intends to amortize
organization expenses over a period of 60 months. The Partnership may not deduct
or amortize syndication expenditures (expenses connected with the issuing and
marketing of Units).
SALE OR OTHER DISPOSITION OF PARTNERSHIP PROPERTY
Upon the sale, exchange or other disposition of any Partnership assets,
gain or loss will be recognized and measured by the difference between the
Partnership's adjusted basis for the assets and the amount realized on such sale
or exchange. The basis of property (for purposes of determining gain or loss
upon disposition thereof) is generally determined by its cost and will include
the amount of debt incurred to purchase such property and the amount of any
expenditures that are properly capitalizable.
Any gain on the sale of securities held by the Partnership would be treated
as ordinary income if the Partnership were considered as holding the securities
primarily for sale to customers in the ordinary course of its trade or business,
i.e., the Partnership were treated as a "dealer." This determination is an
inherently factual question based on all the facts and circumstances surrounding
the purchase, holding and sale of the securities involved. However, based upon
the representation of the Managing General Partner that the investment
objectives of the Partnership are to obtain long-term capital appreciation in
the value of the Partnership's assets, the Partnership should not be treated as
a dealer.
Assuming the Partnership's assets are treated as capital assets, any gain
recognized on the sale of its assets (excluding any amount attributable to
accrued interest) should be taxed as long or short-term capital gain, and loss
taxed as long or short-term capital loss. See "Taxation of Net Capital Gains."
Special rules may be applicable if the Partnership were to sell any securities
on the installment method.
PARTNERSHIP DISTRIBUTIONS
The tax consequences of Partnership distributions may differ depending upon
whether the distribution is made in cash or property and depending upon whether
the distribution is made prior to or upon liquidation.
Gain will be recognized upon a cash distribution prior to liquidation only
to the extent that the cash distributed (including reductions in a Limited
Partner's allocable share of Partnership Nonrecourse Debt) exceeds the Limited
Partner's adjusted basis in his Units. Once such adjusted basis is reduced to
zero, additional cash distributions generally will be treated as capital gain,
provided that the Limited Partner's interest in the Partnership is a capital
asset. Loss may be recognized by reason of a liquidating cash distribution if
only cash is distributed and a Limited Partner's adjusted basis in his Units
exceeds the amount of such cash.
Generally, gain will not be recognized upon the distribution of assets in
kind to the Limited Partners. If the distribution is made prior to the
liquidation of the Partnership, a Limited Partner's basis in the assets received
in the distribution will equal the lesser of (i) the Limited Partner's adjusted
basis in his Units or (ii) the Partnership's basis in such assets. If the
distribution is made in connection with the liquidation of the Partnership, a
Limited Partner's basis in the assets distributed will equal his basis in his
Units reduced by any cash distributed in connection with such liquidation.
SALE OF UNITS BY PARTNERS
It is anticipated that there will be no public market for a Limited
Partner's interest in the Partnership, and an investor may, therefore, be unable
to liquidate his investment. See "Classification as a Partnership -- Publicly
Traded Partnerships." If, however, a Limited Partner should sell or exchange all
or some of his Units to a third party, gain or loss will be recognized, measured
by the difference between (1) the fair market value of any property and any cash
received on the sale or exchange plus the Limited Partner's share of the
Partnership's
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Nonrecourse Debt, if any, and (2) the Limited Partner's adjusted basis in the
Units sold or exchanged. See "Partner's Adjusted Basis."
Gain or loss recognized upon the sale or exchange of an interest in the
Partnership generally would be taxable as long-term capital gain or loss if such
Partnership interest is a capital asset of the Limited Partner and has been held
by the Limited Partner for more than one year. See "Taxation of Net Capital
Gains". However, the sale or exchange by a Partner of all or a portion of his
interest in the Partnership will be treated as a sale or exchange of his
allocable share of all assets owned by the Partnership. Accordingly, such a sale
or exchange could cause the selling Partner to recognize ordinary income to the
extent the Partnership owned property that would generate ordinary income upon
sale. See "Sale or Other Disposition of Partnership Property."
In connection with the sale or exchange of Units, the selling Limited
Partner is required to inform the Partnership of the sale or exchange. A selling
Limited Partner who fails to inform the Partnership of such a sale could be
liable to the IRS for a penalty of $50, or if such failure is intentional the
greater of $100 or 5% of the aggregate amount required to be reported.
The IRS has ruled that a partner must maintain an aggregate adjusted tax
basis in a single partnership (consisting of all interests acquired in separate
transactions). Upon a sale of a portion of such interests, such partner would be
required to allocate his aggregate tax basis between the interests sold and the
interests retained by some equitable apportionment method. (The ruling by the
IRS apportioned the aggregate tax basis in accordance with the relative fair
market value of such interests on the date of sale.) If applicable, the
aggregation of tax basis for all Partnership interests of a Limited Partner
effectively prohibits Limited Partners from choosing among interests with
varying amounts of inherent gain or loss to control the timing of the
recognition of such inherent gain or loss. Thus, the ruling may result in an
acceleration of gain or deferral of loss on the sale of a portion of the
interests. The ruling does not address whether this aggregation concept results
in the tacking of the holding period of earlier purchased interests on the
holding period of more recently acquired interests.
LIQUIDATION OF PARTNERSHIP; TERMINATION
Upon liquidation of the Partnership, income generally will be recognized by
a Limited Partner only to the extent that cash distributed to him and his
proportionate share of any reduction in Nonrecourse Debt exceeds such Limited
Partner's adjusted basis in his Units immediately before the distribution. See
"Sale or Other Disposition of Partnership Assets."
Although unlikely, if within any 12-month period the Partners in the
aggregate were to sell or exchange 50% or more of their total interests in
Partnership capital and profits, the Partnership would be treated as terminated
for federal income tax purposes. In that event, pursuant to the Treasury
Regulations with respect to Partnership terminations, the Partnership would be
deemed to have contributed its assets to a new partnership in return for the
interests in the new partnership and the Partnership would then be deemed to
liquidate and distribute such new partnership interest to the Partners. Whether
any Partner would recognize any income would be determined according to the
consequences described above for a liquidation. The Partnership Agreement has
been drafted to minimize the likelihood that 50% or more of the Units would be
sold or exchanged within a 12-month period.
Another consequence of a termination of the Partnership is that such a
termination may either accelerate the application of (or subject the Partnership
to the application of) any Treasury Regulations or legislation effective after
the date hereof.
ADJUSTMENT OF COST BASIS OF PARTNERSHIP ASSETS
The Partnership is permitted to make an election under Code Section 754 to
have the cost basis of its assets adjusted upon a transfer of any Partnership
interest. Such an election would, in effect, require the Partnership to adjust,
but only with respect to the transferee of the Partnership interest, the
Partnership's basis in its properties to reflect the difference between the cost
to the transferee of his Partnership interest and his pro rata share of the
Partnership's basis in its properties. This adjustment would also require, in
certain circumstances, an adjustment to the Partnership's basis in its assets
upon distributions of appreciated or depreciated assets.
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The Partnership Agreement permits but does not require the General Partners
to make such an election. It is unlikely that the General Partners would make
such an election on behalf of the Partnership because (i) an election under Code
Section 754, once made, cannot be revoked without obtaining the consent of the
IRS, (ii) such an election may not necessarily be advantageous to all Limited
Partners, and (iii) accounting complexities can result from having such an
election in effect. The failure to make such an election could significantly
change the amount received by a transferee upon the sale of his Units or the
amount of gain or loss recognized by a Partner on the sale of Partnership
assets. In addition, the failure to make such an election could significantly
limit the ability of a Limited Partner to sell his Units.
TAX RATES
The Code provides five rate brackets of 15%, 28%, 31%, 36% and 39.6% for
noncorporate taxpayers. For tax years beginning in 1997, the 39.6% bracket
applies to taxpayers filing either single individual or joint returns with
taxable income over $271,050. In addition, a taxpayer's personal exemptions will
be reduced by 2% for each $2,500 (or fraction thereof) by which the taxpayer's
adjusted gross income exceeds a threshold amount. The threshold amount for tax
years beginning in 1997 is $181,800 for taxpayers filing joint returns and
$121,200 for single taxpayers.
In addition, taxpayers whose adjusted gross income exceeds a threshold
amount ($121,200 for both joint and single individual return filers) are
required to reduce the amount allowable for itemized deductions by 3% of the
excess over that threshold amount, but in no event may the reduction be more
than 80% of allowable itemized deductions (other than the deductions for medical
expenses, investment interest, casualty losses or wagering losses to the extent
of wagering gains).
The reduction in the amount of deductions for personal exemptions and the
overall limitation on itemized deductions may result in an effective top
marginal tax rate that is greater than the applicable marginal tax rate.
TAXATION OF NET CAPITAL GAINS
Depending on the nature of a transaction, a capital gain or loss could
occur upon the sale or exchange by a Partner of his interest in the Partnership
or upon the sale, exchange or other disposition of Partnership property. The
Taxpayer Relief Act of 1997 substantially changes the tax treatment for capital
gains for non-corporate taxpayers. For capital assets held more than 18 months,
the maximum rate of tax on the net capital gains for individuals is 20 percent.
Capital gains on assets held more than 12 but not more than 18 months, however,
are subject to tax at a 28 percent maximum rate.
The capital losses that a taxpayer can deduct in any one tax year are
limited to $3,000 plus the taxpayer's capital gains for the tax year.
Accordingly, a Limited Partner may be unable to deduct their full allocable
share of capital losses sustained by the Partnership in a particular year.
Gains on property held by individual taxpayers for more than five years,
the holding period for which begins after December 31, 2000, are subject to a
reduced rate of 18 percent. To eliminate the need to sell and repurchase assets
to start a new post-2000 holding period, individual taxpayers may elect to treat
such capital assets as if they had been sold and repurchased for the purposes of
recognizing gains but not losses on January 1, 2001.
ALTERNATIVE MINIMUM TAX
Each Limited Partner must include his or her allocable share of the
Partnership's tax preference items in the computation of his or her own
alternative minimum tax liability. It is not anticipated that the Partnership
will generate any significant items of tax preference for Limited Partners.
However, if an investor is otherwise subject to the alternative minimum tax,
such tax would also be applied against items of income from the Partnership.
Prospective investors are urged to consult their tax advisors with regard to the
specific effect of the alternative minimum tax on an investment in the
Partnership.
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LIMITATIONS ON TAX SHELTER LOSSES: THE PASSIVE LOSS RULES
The Code substantially limits the ability of certain taxpayers to use
losses sustained in "passive activities" to offset other taxable income. These
provisions (commonly referred to as the "Passive Loss Rules") generally apply to
interests in limited partnerships.
Generally, taxpayers with passive losses from one passive activity can use
those losses to offset income (other than "portfolio income") from another
passive activity. However, "portfolio income" (for example, dividends, interest,
and gains on stock and securities held for investment purposes) is not
considered to be income from a "passive activity" and, accordingly, may not be
offset against losses realized from such passive activities. It is expected that
most, if not all, of the income generated by the Partnership will be treated as
"portfolio income" and as such a Limited Partner generally will not be able to
shelter any such income by passive activity losses realized from other
investments. A Partner's allocable share of the Partnership's capital losses,
however, would be deductible (subject to the other limitations discussed herein)
without regard to the Passive Loss Rules. See "Taxation of Net Capital Gains."
LIMITATIONS ON INTEREST DEDUCTIONS
Investment Interest. A taxpayer's annual deduction for investment interest
is generally limited to the amount of such taxpayer's "net investment income."
"Investment interest" means interest on indebtedness incurred or continued to
purchase or carry property held for investment, other than interest taken into
account in determining a taxpayer's income or loss from an activity subject to
the Passive Loss Rules. See "Limitations on Tax Shelter Losses: The Passive Loss
Rules." "Net investment income" means the excess of nontrade or business income
from interest, dividends, annuities, royalties and net gain from investment
assets over deductible investment expenses (other than interest) directly
connected with the production of investment income. Generally, income from
passive activities (e.g., a limited partnership engaged in a trade or business)
is not treated as investment income, and expenses of such activity are not taken
into account in computing net investment income. However, "portfolio income"
(e.g., interest and dividends) of a passive activity, less any allocable
expenses, generally increases a partner's net investment income. Since the
Partnership is expected to generate only "portfolio income," any interest
expenses incurred by the Partnership to finance the acquisition of its
securities should be subject to the investment interest limitations rather than
the Passive Loss Rules. However, such "portfolio income" generally would
increase a Partner's "net investment income" against which investment interest
may be deducted.
Investment interest paid by a Partner and subject to the above limitation
will include interest paid or incurred in respect of a Partner's own investments
(including interest paid or incurred in connection with the purchase of Units,
but excluding interest paid or incurred to acquire an investment in a "passive
activity") and his proportionate share of the allocable share of investment
interest, if any, paid by the Partnership. Investment interest deductions which
are disallowed may be carried forward and deducted in subsequent years to the
extent of net investment income in such years.
Interest Relating to Tax-Exempts. Interest paid in respect of indebtedness
incurred or continued to purchase or carry tax-exempt obligations, the interest
on which is wholly exempt from federal income taxes, is not deductible.
Accordingly, if a Limited Partner were to finance the purchase of a Unit, the
interest paid would not be deductible to the extent it could be shown that the
indebtedness incurred permitted the Partner to carry tax-exempt investments.
Generally, where the adjusted basis of a taxpayer's tax-exempt investments does
not exceed 2% of the adjusted basis of all of his portfolio investments and any
assets held in the active conduct of a trade or business, interest will not be
determined to have been paid in respect of indebtedness incurred or continued to
carry tax-exempt investments (in the absence of direct evidence to the
contrary).
A partner's pro rata share of a partnership's indebtedness will be deemed
incurred by the partner for purposes of the above limitations. The IRS could,
therefore, seek to deny the deductibility by a Partner of all or a portion of
his pro rata share of the Partnership's interest payments, if any, if there
existed a "sufficiently direct relationship" between the Partnership's
incurrence or continuance of the indebtedness and a Limited Partner's
acquisition or holding of tax-exempt investments.
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PENALTY FOR SUBSTANTIAL UNDERSTATEMENT
A civil penalty is imposed on any taxpayer for a substantial understatement
of income tax in the amount of 20% of such understatement. An understatement of
income tax will exist if the correct tax for the year (as finally determined
after all administrative and judicial proceedings) exceeds the tax which is
shown on the taxpayer's return for such year. An understatement of income tax
will be considered "substantial" if its exceeds the greater of 10% of the
correct amount of tax or $5,000 for noncorporate taxpayers. The penalty will not
apply to a substantial understatement with respect to an item if (1) substantial
authority supported the taxpayer's treatment of such item, (2) the relevant
facts concerning the treatment of the item were adequately disclosed on the
taxpayer's return or (3) the IRS waives the penalty where there was reasonable
cause for the understatement and the taxpayer acted in good faith.
Limited Partners are cautioned that an adjustment of a Partnership item by
the IRS could result in the imposition of the penalty in the event (1)
substantial authority failed to support treatment of an item and (2) the
Partnership did not adequately disclose the item on its return.
INTEREST ON TAX DEFICIENCIES
Interest on federal tax deficiencies is generally due for the period
beginning on the due date of the return (excluding extensions) and ending on the
date of the payment of the tax deficiency. The applicable interest rate is
redetermined quarterly, and the rate for tax overpayments will be lower than the
rate for deficiencies. For the three-month period commencing July 1, 1997, the
applicable rate for tax underpayments is 9% per annum. Interest on tax
deficiencies is compounded daily. Interest will also be imposed on the amounts
of the valuation overstatement and substantial understatement penalties.
Interest on tax deficiency arising out of an investment by a noncorporate
taxpayer in the Partnership is nondeductible.
Limited Partners are cautioned that any adjustment of a Partnership item by
the IRS could result in liability for interest on any tax deficiency arising by
reason of such adjustment.
BACKUP WITHHOLDING
Distributions to Limited Partners whose Units are held on their behalf by a
broker may constitute "reportable payments" under the federal income tax rules
regarding backup withholding. Backup withholding, however, would apply only if
the Limited Partner (i) failed to furnish his Social Security number or other
taxpayer identification number to the person subject to the backup withholding
requirement (e.g., the broker) or (ii) furnished an incorrect Social Security
number or taxpayer identification number. If backup withholding were applicable
to a Limited Partner, the person subject to the backup withholding requirement
would be required to withhold 31% of each distribution to such Partner and to
pay such amount to the IRS on behalf of such Partner.
RETURN PREPARATION AND FILING RESPONSIBILITY
The Partnership will provide each Limited Partner with the Partnership
information required for the federal, state and local tax returns he may be
obligated to file. The preparation and filing of such returns will be the
personal responsibility of each Partner.
AUDIT BY INTERNAL REVENUE SERVICE AND ADJUSTMENT PROCEDURES
The IRS has instituted several procedures for auditing limited partnerships
that increase the risk of an audit of the Partnership. These additional audit
procedures as well as the presence of Limited Partners who have significant
income and net worth, substantially increase the likelihood that the
Partnership's tax return will receive close scrutiny by the IRS. Further, the
IRS has announced additional criteria for classifying partnership returns for
audit purposes that could lead to an audit by the IRS of the Partnership.
Under the procedures for auditing partnerships and for contesting the
treatment of the partnership items, the federal income tax treatment of
partnership income, gain, loss, deduction or credit will be determined in a
unified
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proceeding at the partnership level rather than individually for each partner.
In any Partnership level audit, the Partnership will be represented by the
Managing General Partner as the "Tax Matters Partner."
Prospective investors are cautioned that if the IRS were to propose any
adjustments in the treatment of a Partnership item, the unified procedures may
cause Limited Partners to be bound by proceedings, both administrative and
judicial, conducted by the Partnership. Thus, Limited Partners may be precluded
from contesting any such adjustments individually.
Each Partner will be required to treat Partnership items on his individual
return in a manner consistent with the Partnership's informational return or
notify the IRS of any inconsistency. Penalties may be imposed for intentional or
negligent disregard of this consistency requirement.
While a Partnership level proceeding may not be used by the IRS or any
Partner for the purpose of contesting non-Partnership items, the IRS will not be
prevented from separately auditing a Partner's return and making adjustments
with respect to non-Partnership items.
STATE INCOME TAXES
Pursuant to the Check the Box Regulations, the Partnership has received an
opinion of counsel for federal income tax purposes that the Partnership will be
classified as a partnership. Many states have not announced whether for state
income tax purposes, the elective Check the Box federal classification system
will be followed. Under prior federal law and the states' interpretation
thereof, the Partnership believes it would be classified as a partnership for
state income tax purposes. However, since state tax classification issues are
uncertain at this time, no assurances can be given that the Partnership will be
classified as a partnership under any particular state tax entity classification
systems.
While a partnership is not generally subject to state taxes, its partners
may be subject to state income taxes, if any, on their respective shares of
partnership income, gain, loss and deduction in the state or states in which
they reside or in which the Partnership does business.
Each prospective investor is urged to consult his tax advisor for advice as
to state and local taxes that may be payable by reason of an investment in the
Partnership.
POSSIBLE TAX LAW CHANGES
Pursuant to Section 1402(a)(13), the term "net earnings from
self-employment" means an individual's distributive share of partnership
ordinary income unless the individual is a limited partner. The proposed
amendments to the limited partner regulations define which partners of a
partnership are considered limited partners under section 1402(a)(13).
Generally, an individual will be treated as a limited partner under the proposed
regulations unless the individual (1) has personal liability for the debts of or
claims against the partnership by reason of being a partner; (2) has authority
to contract on behalf of the partnership under the statute or law pursuant to
which the partnership is organized; or (3) participates in the partnership's
trade or business for more than 500 hours during the taxable year. It is
unlikely that the individual investors of CIP III will satisfy any of these
provisions. The Taxpayer Relief Act of 1997, however, has included a moratorium
on these proposed amendments to the limited partner regulations. The Act
provides that no temporary or final regulations with respect to the definition
of limited partner under Section 1402(a)(13) of the Code may be issued or made
effective before July 1, 1998. Accordingly, they should be considered limited
partners, and their distributive share should not be treated as net earnings
from self-employment.
NECESSITY OF INVESTORS OBTAINING PROFESSIONAL ADVICE
The tax matters relating to the Partnership and the proposed transactions
are complex and are subject to varying interpretations. The effects of the
existing tax laws and proposed changes in tax laws on prospective Partners are
of particular importance to each prospective Partner. It should be emphasized
that the foregoing is only a summary of certain important federal and state tax
consequences of, or relating to, the offering. Furthermore, no tax rulings from
the IRS will be requested or obtained with respect to any of the above-stated
tax
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consequences. In view of the foregoing, each prospective investor should consult
with his own tax advisor and counsel with regard to all tax aspects as they
pertain to such prospective investor's particular situation.
REGULATION
The Small Business Investment Incentive Act of 1980 became law on October
21, 1980. This law modified the provisions of the Investment Company Act that
are applicable to an entity, such as the Partnership, which elects to be treated
as a "business development company." The Partnership elected to be treated as a
business development company on August , 1997. The Partnership may not
withdraw its election without first obtaining the approval of a
majority-in-interest of the Limited Partners. The following is a brief
description of the Investment Company Act, as amended, and is qualified in its
entirety by reference to the full text of the Investment Company Act and the
rules and regulations thereunder.
A business development company must be operated for the purpose of
investing in the securities of certain present and former "eligible portfolio
companies" and certain bankrupt or insolvent companies and must make available
significant managerial assistance to investee companies. An eligible portfolio
company generally is a U.S. company that is not an investment company (except
for wholly-owned Small Business Investment Companies ("SBICs") licensed by the
Small Business Administration) and that (1) does not have a class of securities
registered on an exchange or included in the Federal Reserve Board's
over-the-counter margin list, (2) is actively controlled by a business
development company either alone or as part of a group acting together and an
affiliate of the business development company is a member of the portfolio
company's board of directors, or (3) meets such other criteria as may be
established by the Securities and Exchange Commission (the "SEC"). Control,
under the Investment Company Act, is presumed to exist where the business
development company owns 25% of the outstanding voting securities of the
portfolio company.
The Investment Company Act prohibits or restricts the Partnership from
investing in certain types of companies, such as brokerage firms, insurance
companies, investment banking firms and investment companies. Moreover, the
Investment Company Act limits the type of assets that the Partnership may
acquire to "qualifying assets" and certain assets necessary for its operations
(such as office furniture, equipment and facilities), if, at the time of the
acquisition, less than 70% of the value of the Partnership's assets consists of
qualifying assets. Qualifying assets include: (1) securities of companies that
were eligible portfolio companies at the time that the Partnership acquired
their securities; (2) securities of bankrupt or insolvent companies that are not
otherwise eligible portfolio companies; (3) securities acquired as follow-on
investments in companies that were eligible at the time of the Partnership's
initial acquisition of their securities but are no longer eligible, provided
that the Partnership has maintained a substantial portion of its initial
investment in those companies; (4) securities received in exchange for or
distributed on or with respect to any of the foregoing; and (5) cash items,
Government securities and high-quality short-term debt. The Investment Company
Act also places restrictions on the nature of the transactions in which, and the
persons from whom, securities can be purchased in order for the securities to be
considered qualifying assets.
The Partnership is permitted by the Investment Company Act, under specified
conditions, to issue multiple classes of senior debt and a single class of
limited partnership interests senior to the Units if its asset coverage, as
defined in the Investment Company Act, is at least 200% after the issuance of
the debt or the senior partnership interests. In addition, provision must be
made to prohibit any distribution to Partners or the repurchase of any Units
unless the asset coverage ratio is at least 200% at the time of the distribution
or repurchase.
The Investment Company Act limits the ability of the Partnership to sell
interests at a price representing proceeds to the Partnership of an amount less
than the then net asset value per Unit. Units in the Partnership will be sold at
a public offering price of $25.00, $12.50 of which is to be paid upon
subscription for the Units and the balance of which (or such portion thereof as
is required) is to be paid on the Capital Call Date. There will be no additional
closings during the offering made hereby if the market value of a Unit, based
upon the Partnership's net asset value plus applicable selling commissions,
decreases due to a change in the value of the Partnership's investment.
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After this offering, the Partnership is permitted to sell its securities at
a price that is below the prevailing net asset value per Unit only upon the
approval of the policy by the holders of a majority of its voting securities,
including a majority of the voting securities held by non-affiliated persons. In
addition, although it has no present intention to do so, the Partnership is
permitted to repurchase its Units, subject to the restrictions of the Investment
Company Act.
Many transactions involving the Partnership and its affiliates (as well as
affiliates of those affiliates) require the prior approval of a majority of the
Independent General Partners and a majority of the General Partners having no
financial interest in the transactions. Transactions involving certain closely
affiliated persons of the Partnership, including its General Partners,
investment advisor and principal underwriter, will require the prior approval of
the SEC. In general, (a) any person who owns, controls, or holds with power to
vote, more than 5% of the outstanding Units, (b) any director, executive officer
or general partner of that person, and (c) any person who directly or indirectly
controls, is controlled by, or is under common control with, that person, must
obtain the prior approval of a majority of the Independent General Partners and,
in some situations, the prior approval of the SEC, before engaging in certain
transactions involving the Partnership or any company controlled by the
Partnership. In accordance with the Investment Company Act, a majority of the
General Partners must be persons who are not "interested persons" as defined in
the Act. See "Management." The Investment Company Act generally does not
restrict transactions between the Partnership and its portfolio companies.
OFFERING AND SALE OF UNITS
OFFERING OF UNITS
Edward Jones has entered into an Agency Agreement with the Partnership and
the Managing General Partner pursuant to which Edward Jones has agreed to act as
selling agent for the Partnership and the Managing General Partner to assist in
the sale of the Units to qualified investors on a best efforts basis. In the
Agency Agreement, the Partnership and the Managing General Partner have agreed
that the Partnership and the Managing General Partner will pay no selling
commission. The principal business address of Edward Jones is 12555 Manchester
Road, St. Louis, Missouri 63131.
PLAN OF DISTRIBUTION
The Agency Agreement contains provisions for the indemnification of, or
contribution to, Edward Jones by the Partnership with respect to certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
Edward Jones may be deemed to be an "underwriter" for purposes of the Securities
Act of 1933 in connection with this offering.
Edward Jones and its affiliates will not receive, directly or indirectly,
any payment or compensation in connection with the offering and sale of Units,
except as described above. However, the Managing General Partner and Edward
Jones will receive reimbursements of offering and organization expenses and
compensation in connection with the management of the Partnership, as described
under "Management."
The offering will terminate not later than March 31, 1998 (the "Offering
Termination Date"), except that unless 40,000 Units are subscribed for by the
Offering Termination Date, none will be sold and all payments received will be
refunded with interest, if any, actually earned and received thereon. Edward
Jones may terminate the Agency Agreement (i) in the event of a material adverse
change affecting the Partnership, the Managing General Partner or CIP
Management, Inc., (ii) in the event of any outbreak of hostilities or other
national or international calamity, the effect of which on the financial
markets, in its judgment, makes the offering impractical, or (iii) if trading on
the New York Stock Exchange shall have been suspended, or maximum or minimum
prices have been fixed, or maximum ranges for prices for securities have been
required, or a banking moratorium shall have been declared by Federal or New
York or Missouri authorities.
If properly executed subscriptions from suitable investors acceptable to
the Managing General Partner of at least 40,000 Units have been received by
October 30, 1997, as may be extended by the Managing General Partner, in its
discretion, up to or until the Offering Termination Date, and all conditions
precedent to closing are met, there will be at least one closing of the sale of
Units in the Partnership (a "Closing") at such time and for
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such number of Units as the Partnership and Edward Jones determine; provided,
however, that the first Closing will take place for no fewer than 40,000 Units.
If more than one Closing is held, a second and final Closing will take place on
the Offering Termination Date. At each Closing, acceptable subscriptions not
theretofore accepted at a prior Closing will be accepted and such investors will
be admitted to the Partnership as Limited Partners. Management and its
affiliates intend to subscribe for Units on the same terms and conditions as
other subscribers, but such purchases will be for investment only. See
"Management."
Units in the Partnership will be sold at a price of up to $25.00, $12.50 of
which is to be paid upon subscription and the balance of which (or such portion
thereof as is required) is to be paid on the Capital Call Date. There will be no
additional Closings during the offering made hereby if the market value of a
Unit, based upon the Partnership's net asset value, decreases due to a change in
the value of the Partnership's investments. The subscription price of Units
subsequent to the first Closing will remain at $25.00, payable $12.50 upon
subscription and up to $12.50 subsequently upon being notified of a capital call
date, unless a significant event occurs prior to the second Closing which would
cause the fair market value of the assets to fall below the $25.00 subscription
price, in which event no second Closing will take place.
SUBSCRIPTION TO PURCHASE UNITS
Each prospective investor who meets the qualifications described above
under "Investor Suitability Standards" and desires to purchase any Units must:
(a) subscribe to purchase 100 or more Units (except in South Carolina
where an investor must subscribe to purchase 200 or more Units);
(b) complete, date, execute and deliver to Marilyn A. Gaffney, c/o
Edward Jones, 12555 Manchester Road, St. Louis, Missouri 63131, one copy of
a Subscription Qualification and Acceptance Page, a copy of which is
attached as part of the Subscription Agreement, attached to this Prospectus
as Exhibit B (including a special questionnaire for California residents);
and
In addition, prospective purchasers that are not natural persons may be
required to deliver evidence of authority to subscribe for Units and/or opinions
of counsel as to such authority and the binding effect of such subscriptions.
Prospective purchasers that are not taxpayers will be required to make certain
representations as to understandings of the consequences of investment.
Additional copies of the Subscription Qualification and Acceptance Page
separate from this Prospectus are available from representatives of Edward
Jones.
Tenants in common and joint tenants (other than a husband and wife)
purchasing Units must purchase at least 100 Units for each such tenant in common
or joint tenant (except in South Carolina where an investor must subscribe to
purchase 200 or more Units), and each such tenant in common or joint tenant
individually must meet the applicable investor suitability requirements. Any
partnership, corporation, trust or other entity that has been formed for the
specific purpose of purchasing Units must purchase at least 100 Units for each
beneficial owner of such entity, and each such beneficial owner must
individually meet the applicable investor suitability requirements.
The Managing General Partner will not, under any circumstances, accept
subscriptions for a fractional interest in a Unit.
PAYMENT FOR UNITS
Each investor who subscribes to purchase units will agree to pay the
Subscription Price of $25.00 for each Unit subscribed for, $12.50 of which is to
be paid upon subscription and the balance of which (or such portion thereof as
is required) is to be paid on the Capital Call Date. Each investor must
subscribe to purchase at least 100 Units. All initial Capital Contributions for
subscriptions must be made in U.S. dollars by cash, check or money order for
one-half of the purchase price for each Unit payable to the order of
"ChaseMellon Shareholder Services, L.L.C./CIP III-Escrow Account." A
subscriber's payment will be promptly returned in full together with such
subscriber's pro rata share of interest earned thereon, if any, if such payment
is not accepted by the
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Managing General Partner. Funds paid by subscribers will be deposited in a bank
escrow account and subscriptions may not be terminated or funds withdrawn by
subscribers.
Each investor shall at the request of the Individual General Partners,
contribute all or such portion of the remaining amount of his, her or its
Subscription Price to the Partnership as is required on the Capital Call Date.
The manner, terms and conditions of such additional Capital Contributions will
be as provided in Paragraph 3.3 of the Partnership Agreement. In the event any
Partner fails to make such additional Capital Contribution on or before the
Capital Call Date, the Defaulting Partner will be deemed to have transferred to
the non-defaulting Partners on a pro rata basis in proportion to their Capital
Contributions an amount equal to twenty percent (20%) of the Defaulting
Partner's Capital Contribution, effective as of such Capital Call Date, which
will have the effect of reducing such Defaulting Partner's interest in the
Partnership and Units by sixty percent (60%) (or proportionate lesser
percentages in the case of additional Capital Contributions less than the entire
remaining balance of the Subscription Price). Such notice will be in writing and
will be addressed to the Limited Partners at the addresses listed in the
Partnership records. Such notice will state the amount required and the date on
which such amount is due (not earlier that 45 days after the date of notice).
The subsequent capital call will be in an amount sufficient to result in at
least $1,000,000 in total Capital Contributions (including initial
contributions), assuming no Defaulting Partners.
The Managing General Partner reserves the right to reject all or any part
of any subscription, and to allocate subscriptions received, in the event the
offering of Units is oversubscribed. The Managing General Partner will accept or
reject the subscriptions within thirty days of the receipt of such subscription
and, if rejected, all funds paid by such subscriber will be returned to such
subscriber within ten business days.
Edward Jones will promptly deposit all payments for Units into a separate
escrow account for the benefit of subscribers for Units. The escrow agent for
such account, Chase Mellon Shareholder Services, L.L.C., may, at the direction
of Edward Jones (if, in light of the Closing schedule, interim investment of
such funds is practical), invest such payment in U.S. government securities,
bank certificates of deposit or securities for the payment of which the full
faith and credit of the United States of America is pledged and which mature
prior to Closing, such as FNMA and GNMA securities or bank money market accounts
which are invested in the foregoing. The investor's funds in such account,
except, however, accrued interest thereon, will be released to the Partnership
if each of the following conditions shall have been satisfied:
(i) on the date of the first Closing, investors acceptable to the
Managing General Partner shall have subscribed for at least 40,000 Units of
the Partnership;
(ii) on the date of each Closing, the escrow agent shall have received
one-half of each Limited Partner's Subscription Price for the Units being
sold at such Closing ($12.50 per Unit);
(iii) on the date of each Closing, the representations and warranties
of the Partnership, the Managing General Partner, the Individual General
Partners, and CIP Management, Inc. contained in the Agency Agreement shall
be true and correct in all material respects and Edward Jones shall have
received a signed certificate to that effect;
(iv) on the date of each Closing, Bryan Cave LLP shall have delivered
its written opinions, dated the date of such Closing, relating to certain
legal matters concerning the Partnership, the Managing General Partner and
CIP Management, Inc., the Registration Statement and the Units, and shall
have delivered its written opinions, referred to under "Taxation," that the
Partnership will be treated as a partnership for federal income tax
purposes and should not be treated as a publicly traded partnership within
the meaning of Section 7704 of the Internal Revenue Code of 1986, as
amended; and that allocations of profits and losses for tax purposes in the
Partnership Agreement are, more likely than not, in accordance with the
Partners' interests in the Partnership; and
(v) prior to the date of each Closing, Edward Jones shall have
received reasonably satisfactory information concerning any investments
made by the Partnership after the initial effective date of the
Registration Statement.
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If such conditions are not timely satisfied, all the subscribers' funds so
held in such account will be promptly returned to the subscribers, with
interest, if any, actually earned and received thereon. If all of such
conditions are timely satisfied, then each subscriber whose subscription to
purchase Units was accepted will become a Limited Partner of the Partnership and
thereafter (but only thereafter) such subscriber's Capital Contributions will be
paid to the Partnership, to be applied by it as described in this Prospectus.
Interest, if any, earned on a subscriber's funds deposited in the escrow account
will be paid to such subscriber at the time of the return of his, her or its
funds, in case all of the conditions described above shall not have been timely
satisfied, or as soon as practicable after Closing, in case his, her or its
subscriptions shall have been accepted and all of such conditions shall have
been timely satisfied.
Each Limited Partner will be entitled to the distributive share of profits,
losses and cash allocable to his interest in the Partnership arising after a
Closing, as provided in the Partnership Agreement, without regard to the dates
on which any Limited Partners may have subscribed to purchase Units or paid
funds or on which such funds were deposited with the bank escrow agent.
EXPERTS
The balance sheets of the Partnership, CIP Management L.P., LLLP and CIP
Management, Inc. included in this Prospectus have been so included in reliance
on the reports of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
REPORTS
The Managing General Partner will use its best efforts to furnish Limited
Partners with tax information concerning the Partnership's operations within 75
days following the end of each calendar year. The Managing General Partner will
also use its best efforts to furnish Limited Partners with an annual report
containing financial statements of the Partnership audited by independent public
accountants within 120 days after the end of each calendar year. The Managing
General Partner will use its best efforts to furnish Limited Partners with an
unaudited balance sheet and statement of income of the Partnership within 60
days after the end of each fiscal quarter other than the fourth quarter. Such
reports will also describe investment activities of the Partnership to the
extent provided in paragraphs 13.2 and 13.3 of the Partnership Agreement. Any
Limited Partner, or his duly authorized representatives, upon paying the costs
of collection, duplication and mailing, shall be entitled to a copy of
information to which such person is entitled under the Missouri Revised Uniform
Limited Partnership Act, as amended (including a list of names and addresses of
the Limited Partners). Such information shall be kept confidential and shall be
used for Partnership purposes only. Assignees who have not been admitted to the
Partnership as Substituted Limited Partners do not have the right to receive
reports and tax information from the Partnership.
The Partnership is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith will
file reports, proxy statements and other information with the Securities and
Exchange Commission. Such reports, proxy statements and other information filed
by the Partnership can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Judiciary Plaza, Washington, D.C. 20549, and at the Commission's Regional
Offices, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 75
Park Place, Room 1228, New York, New York 10007. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Room 1024, Judiciary Plaza, Washington, D.C. 20549, at prescribed
rates.
CUSTODIAN
Chase Mellon Shareholder Services, L.L.C. acts as the custodian of the
securities owned by the Partnership. The principal business address of Chase
Mellon Shareholder Services, L.L.C. is P.O. Box 3315, South Hackensack, New
Jersey 07606-1915. Chase Mellon Shareholder Services, L.L.C. is also serving as
Escrow Agent in this offering. See "Plan of Distribution--Payment for Units."
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LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Partnership by Bryan Cave LLP, St. Louis, Missouri. The statements under the
heading "Taxation" with respect to federal income tax law have been reviewed by
Bryan Cave LLP. Bryan Cave LLP also serves as counsel to the Selling Agent.
SUPPLEMENTAL SALES LITERATURE
This offering is made only by means of this Prospectus, as amended and
supplemented. Sales materials may be used in connection with this offering only
when accompanied or preceded by the delivery of the Prospectus. In certain
states, such sales materials may not be available.
REGISTRATION STATEMENT
The Partnership has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form N-2 under the Securities Act of
1933 (the "Registration Statement") with respect to the Units offered hereby.
This Prospectus filed as a part of the Registration Statement, does not contain
all the information set forth in the Registration Statement, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. For further information regarding the Partnership and the Units
offered hereby, reference is made to the Registration Statement including the
exhibits and schedules filed as part thereof. Statements contained in this
Prospectus as to the contents of any contract or document filed as an exhibit to
the Registration Statement are not necessarily complete and, in each instance,
reference is made to the copy of such contract filed as an exhibit to the
Registration Statement, each such statement being qualified in its entirety by
such reference. The Registration Statement, including the exhibits and schedules
thereto, may be inspected without charge and copied at prescribed rates at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies may be
obtained therefrom at prescribed rates.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
Report of Independent Accountants...................... F-1
Balance Sheet as of August 11, 1997.................... F-2
Notes to Balance Sheet................................. F-2
CIP MANAGEMENT, L.P.
Report of Independent Accountants...................... F-4
Balance Sheet as of June 30, 1997...................... F-5
Notes to Balance Sheet................................. F-5
CIP MANAGEMENT, INC.
Report of Independent Accountants...................... F-7
Balance Sheet as of June 30, 1997...................... F-8
Notes to Balance Sheet................................. F-8
</TABLE>
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Community Investment Partners III L.P., LLLP
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of Community Investment Partners III
L.P., LLLP (the "Partnership") at August 11, 1997, in conformity with generally
accepted accounting principles. This financial statement is the responsibility
of the Partnership's management; our responsibility is to express an opinion on
this financial statement based on our audit. We conducted our audit of this
financial statement in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
St. Louis, Missouri
August 12, 1997
F-1
<PAGE> 72
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
BALANCE SHEET
AUGUST 11, 1997
<TABLE>
<S> <C>
ASSETS
Cash...................................................... $1,100
------
Total Assets...................................... $1,100
======
PARTNERS' CAPITAL
General Partners....................................... $1,000
Initial Limited Partner................................ 100
------
Total Partners' Capital........................... $1,100
======
</TABLE>
NOTE 1 -- PARTNERSHIP ORGANIZATION
Community Investment Partners III L.P., LLLP (the "Partnership") was formed
as a limited partnership on July 23, 1997 under the Revised Uniform Limited
Partnership Act of Missouri and subsequently registered on July 23, 1997 as a
limited liability limited partnership under the Uniform Partnership Act of
Missouri. The Partnership was formed with initial capital contributions on
August 11, 1997 of $1,000 by CIP Management L.P., LLLP (the "Managing General
Partner") and $100 by the Initial Limited Partner. The Initial Limited Partner,
which is a related party, purchased an interest in the Partnership of $100 to
permit the formation of the Partnership. The Managing General Partner will own
approximately 1% of total contributed capital.
The Managing General Partner is a Missouri limited liability limited
partnership formed on October 10, 1989 as a limited partnership and registered
as a limited liability limited partnership on July 23, 1997. The general partner
of the Managing General Partner is CIP Management, Inc., an indirect subsidiary
of The Jones Financial Companies, L.P., LLP. CIP Management, Inc. made an
initial capital contribution of $1,000 to the Managing General Partner. On
February 20, 1990, Daniel A. Burkhardt made a capital contribution of $5,000 to
the Managing General Partner in exchange for a general partner interest and CIP
Management, Inc. made an additional capital contribution of $4,000 and became
the managing general partner of the Managing General Partner. The Managing
General Partner is authorized to admit additional limited partners to the
Partnership. In the event that the required minimum of capital contributions is
not attained, the Partnership will be dissolved. Upon the admission of
additional limited partners, the Initial Limited Partner will withdraw from the
Partnership and receive the return of its capital contribution.
A portion of the costs incurred and to be incurred in connection with the
organization and initial registration of the Partnership will be paid by the
Managing General Partner and its affiliates; however, the Partnership will
reimburse such costs up to a maximum of 6% of gross offering proceeds.
Organization and offering expenses in excess of 6% of gross offering proceeds
will be borne by the Managing General Partner and its affiliates. Such costs
reimbursed by the Partnership will be capitalized and amortized over a 60 month
period.
NOTE 2 -- BUSINESS
The Partnership has elected to be a business development company under the
Investment Company Act of 1940, as amended. As a business development company,
the Partnership is required to invest at least 70% of its assets in qualifying
investments as specified in the Investment Company Act.
The Partnership intends to seek long-term capital appreciation by making
investments in companies and other special investment situations. The
Partnership shall not engage in any other business or activity. The Partnership
will dissolve on December 31, 2012, subject to the right of the Individual
General Partners to extend the term for up to two additional two-year periods.
The Managing General Partner expects to have invested the net proceeds of
the Partnership's offering (excluding amounts held in reserve) within two years
from the date of the last Closing.
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NOTE 3 -- ALLOCATION OF PARTNERSHIP PROFITS AND LOSSES
The Partnership Agreement contains provisions that govern the allocation of
profits and losses to the Partners of the Partnership in the manner described
below.
Generally, profits under the Partnership's Partnership Agreement will be
allocated 99% to the Limited Partners and 1% to the General Partners until the
Partners' capital accounts equal their undistributed capital contributions.
Thereafter, profits will be allocated 90% to the Limited Partners and 10% to the
General Partners in an amount sufficient to cause their capital accounts to
equal an amount equal to two times their capital contributions less cumulative
distributions, at which time profits will be allocated 80% to the Limited
Partners and 20% to the General Partners.
Generally, losses under the Partnership's Partnership Agreement will be
allocated 99% to the Limited Partners and 1% to the General Partners; provided,
however, that losses will be allocated 80% to the Limited Partners and 20% to
the General Partners to the extent of any prior allocations of profits which
were made to the Partners on an 80%/20% basis. Next, losses will be allocated
90% to the Limited Partners and 10% to the General Partners to the extent of any
prior allocations of profits which were made to the Partners on a 90%/10% basis.
Thereafter, losses, if any, will be allocated to those Partners who bear the
economic risk of loss.
NOTE 4 -- MANAGEMENT FEE
The Partnership will pay the Managing General Partner a quarterly
management fee at an annual rate equal to 1.5% of the total assets of the
Partnership as reflected on its most recent quarterly or annual balance sheet.
NOTE 5 -- INCOME TAXES
Income taxes are not provided for by the Partnership because taxable income
(loss) of the Partnership is includable in the income tax returns of the
partners.
NOTE 6 -- USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
CIP Management, L.P.
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of CIP Management, L.P. (the "Managing
General Partner") at June 30, 1997, in conformity with generally accepted
accounting principles. This financial statement is the responsibility of the
Managing General Partner's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
St. Louis, Missouri
August 12, 1997
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CIP MANAGEMENT, L.P.
BALANCE SHEET
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS
Cash...................................................... $119,597
Investment in CIP, L.P.................................... 408,818
Investment in CIP II, L.P................................. 18,319
--------
Total Assets...................................... $546,734
========
PARTNERS' CAPITAL
General Partners.......................................... $ 10,935
Limited Partner........................................... 535,799
--------
Total Partners' Capital........................... $546,734
========
</TABLE>
NOTE 1 -- ORGANIZATION AND BUSINESS
CIP Management L.P., LLLP (the "Managing General Partner") is a Missouri
limited liability partnership which was formed on October 10, 1989 as a limited
partnership and which registered as a limited liability limited partnership on
July 23, 1997. The Managing General Partner was formed with initial capital
contributions of $1,000 from its managing general partner, which is CIP
Management, Inc., an indirect subsidiary of The Jones Financial Companies, L.P.,
LLP, and $100 from its sole limited partner, which is The Jones Financial
Companies, L.P., LLP. The Managing General Partner is the general partner of
Community Investment Partners, L.P., Community Investment Partners II, L.P., and
Community Investment Partners III L.P., LLLP, a Missouri limited liability
limited partnership (the "Partnership").
On February 20, 1990, Daniel A. Burkhardt made a capital contribution of
$5,000 to the Managing General Partner in consideration of a general partnership
interest; CIP Management, Inc. made an additional $4,000 capital contribution to
the Managing General Partner in consideration of its general partnership
interest and became the managing general partner thereof; and The Jones
Financial Companies, L.P., LLP made an additional $489,900 capital contribution
to the Managing General Partner in consideration of its limited partnership
interest.
NOTE 2 -- INVESTMENT IN PARTNERSHIPS
CIP Management L.P., LLLP owns an approximate 18% interest in Community
Investment Partners, L.P. ("CIP I"). Profits and losses are allocated to the
general and limited partners of CIP I on a pro rata basis. CIP Management L.P.,
LLLP owns an approximate 1% interest in Community Investment Partners II, L.P.
("CIP II"). Profits and losses are allocated to the general and limited partners
of CIP II in a similar manner as described below for Community Investment
Partners III L.P., LLLP.
On August 11, 1997, CIP Management L.P., LLLP made a capital contribution
of $1,000 in consideration of a Managing General Partner interest in Community
Investment Partners III L.P., LLLP ("CIP III"). Under the terms of the CIP III
Partnership Agreement, the Managing General Partner is authorized to admit
additional limited partners to the Partnership. The Managing General Partner
will acquire interests in the Partnership in an amount equal to 1% of total
capital contributions to the Partnership.
Generally, profits under the CIP III Partnership Agreement will be
allocated 99% to the Limited Partners and 1% to the General Partners until the
Partners' capital accounts equal their undistributed capital contributions.
Thereafter, profits will be allocated 90% to the Limited Partners and 10% to the
General Partners in an amount sufficient to cause their capital accounts to
equal an amount equal to two times their capital contributions less cumulative
distributions, at which time profits will be allocated 80% to the Limited
Partners and 20% to the General Partners.
Generally, losses under the CIP III Partnership Agreement will be allocated
99% to the Limited Partners and 1% to the General Partners; provided, however,
that losses will be allocated 80% to the Limited Partners and 20%
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to the General Partners to the extent of any prior allocations of profits which
were made to the Partners on an 80%/20% basis. Next, losses will be allocated
90% to the Limited Partners and 10% to the General Partners to the extent of any
prior allocations of profits which were made to the Partners on a 90%/10% basis.
Thereafter, losses, if any, will be allocated to those Partners who bear the
economic risk of loss.
The Partnership intends to seek long-term capital appreciation by making
investments in companies and other special investment situations. The
Partnership will not engage in any other business or activity.
NOTE 3 -- INDEMNIFICATION OF THE INDIVIDUAL GENERAL PARTNERS
The Partnership Agreements for CIP I, CIP II and CIP III provide that to
the extent that an Individual General Partner has a valid claim for
indemnification from the Partnership (as described under "Summary of the
Partnership Agreement -- Indemnification of the General Partners by the
Partnership" in this Prospectus) and has pursued such claim against the
Partnership, but such claim has not been satisfied, the Managing General
Partner, in its individual capacity, will satisfy such claim.
NOTE 4 -- MANAGEMENT FEE
The Partnership will pay the Managing General Partner a quarterly
management fee at an annual rate equal to 1.5% of the total assets of the
Partnership as reflected on its most recent quarterly or annual balance sheet.
NOTE 5 -- INCOME TAXES
Income taxes are not provided for by the Managing General Partner because
taxable income (loss) of the Managing General Partner is includable in the
income tax returns of the partners.
NOTE 6 -- USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
PURCHASERS OF THE UNITS WILL NOT BE PURCHASING ANY INTEREST IN CIP
MANAGEMENT L.P., LLLP.
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<PAGE> 77
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
CIP Management, Inc.
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of CIP Management, Inc. (the
"Company") at June 30, 1997, in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Company's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial statement
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
St. Louis, Missouri
August 12, 1997
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<PAGE> 78
CIP MANAGEMENT, INC.
BALANCE SHEET
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS
Cash............................................................................. $ 1,550
Investment in CIP Management, L.P. .............................................. 5,477
-------
Total Assets.................................................................. $ 7,027
======
LIABILITIES AND SHAREHOLDER'S EQUITY
Liability
Due to Affiliate.............................................................. $ 3,045
Shareholder's Equity
Common Shares -- $1.00 par value; 30,000 shares authorized; 1,000 shares
issued and outstanding....................................................... 1,000
Pain-In-Capital............................................................... 4,000
Retained Deficit.............................................................. (1,018)
-------
Total Liabilities and Shareholder's Equity....................................... $ 7,027
======
</TABLE>
NOTE 1 -- ORGANIZATION AND BUSINESS
CIP Management, Inc. (the "Company"), a Missouri corporation formed on
October 5, 1989, is an indirect wholly-owned subsidiary of The Jones Financial
Companies, L.P., LLP, and is the managing general partner of CIP Management
L.P., LLLP (which registered as a limited liability limited partnership on July
23, 1997), which in turn is the managing general partner of Community Investment
Partners, L.P., Community Investment Partners II, L.P. and Community Investment
Partners III L.P., LLLP. On October 13, 1989, the Company contributed $1,000 to
CIP Management L.P., LLLP. On February 20, 1990, the sole shareholder of the
Company made an additional $4,000 capital contribution to the Company. On the
same date, the Company made an additional $4,000 capital contribution to CIP
Management L.P., LLLP in consideration of its general partnership interest. CIP
Management, Inc. owns 1% of CIP Management L.P., LLLP.
NOTE 2 -- RELATED PARTY TRANSACTIONS
The Company is furnished certain management and accounting services by The
Jones Financial Companies, L.P., LLP. The allocated cost of such services
approximates the earnings of the Company.
NOTE 3 -- USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
PURCHASERS OF THE UNITS WILL NOT BE PURCHASING ANY INTEREST IN CIP
MANAGEMENT, INC.
F-8
<PAGE> 79
EXHIBIT A
================================================================================
AMENDED AND RESTATED
AGREEMENT OF
LIMITED PARTNERSHIP OF
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
(A MISSOURI LIMITED PARTNERSHIP REGISTERED AS A LIMITED LIABILITY LIMITED
PARTNERSHIP)
-------------------------
DATED AS OF , 1997
================================================================================
<PAGE> 80
AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
(A MISSOURI LIMITED PARTNERSHIP REGISTERED AS A LIMITED LIABILITY LIMITED
PARTNERSHIP)
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of Community
Investment Partners III L.P., LLLP (the "Partnership") dated as of
, 1997, among CIP Management L.P., LLLP, a Missouri limited
liability limited partnership, as Managing General Partner, Thomas A. Hughes and
Ralph G. Kelly, as Individual General Partners, Steven Novik, the Initial
Limited Partner, and those parties who shall hereafter be admitted as and listed
in the books and records of the Partnership as Additional Limited Partners and
as Substituted Limited Partners.
WHEREAS, certain of the parties hereto have previously formed a limited
partnership under the Missouri Revised Uniform Limited Partnership Act pursuant
to a Certificate of Limited Partnership dated July 23, 1997.
WHEREAS, also on July 23, 1997, the Managing General Partner caused to be
filed with the Missouri Secretary of State an Application for Registration of a
Limited Liability Limited Partnership in accordance with the Missouri Uniform
Partnership Act and Missouri Revised Uniform Limited Partnership Act.
WHEREAS, the parties hereto desire to continue said limited liability
limited partnership pursuant to said Acts.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein made and intending to be legally bound, the Partners hereby agree as
follows:
ARTICLE ONE
DEFINED TERMS
The defined terms as used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article One.
1.1.1 "Additional Limited Partners" shall mean those Persons admitted to
the Partnership as limited partners pursuant to paragraph 3.3 and shown as
Limited Partners on the books and records of the Partnership and who are named
or deemed to be named in the Certificate of Limited Partnership as limited
partners of the Partnership.
1.1.2 "Adjusted Capital Contribution" shall mean, at any specified time,
the Capital Contribution to the Partnership by all Partners or any one Partner,
as the case may be, reduced by distributions of Distributable Cash and
Liquidation Assets to the Partners or such Partner, as the case may be, pursuant
to paragraph 4.1 and paragraph 9.2.2, respectively.
1.1.3 "Affiliate" shall have the same meaning that "affiliated person" has
in the 1940 Act.
1.1.4 "Agreement" shall mean this Agreement of Limited Partnership, as
originally executed and as amended, modified, supplemented or restated from time
to time, as the context requires.
1.1.5 "Assign" shall mean, with respect to an Interest or Unit or any part
thereof, to offer, sell, exchange, assign, redeem, transfer, give or otherwise
dispose of, whether voluntarily or by operation of law, except that in the case
of a bona fide pledge or hypothecation, no Assignment shall be deemed to have
occurred unless and until the secured party has exercised his right of
foreclosure with respect thereto.
1.1.6 "Assignee" shall mean a Person to whom one or more Units have been
Assigned in a manner permitted under Article Eight hereof and who has executed
and delivered the instruments described in paragraph 8.2 hereof, but who has not
become a Substituted Limited Partner.
1.1.7 "Capital Account" as to any Partner, shall mean such Partner's
Capital Contribution, plus his share of any Profits, reduced by his share of any
Losses and by his share of any distributions of cash or assets (including
without limitation, any note of the Partnership issued to a removed Managing
General Partner pursuant to paragraph 6.3.2) and as otherwise increased or
decreased in accordance with the tax accounting principles set forth in Treasury
Regulation Section 1.704-1(b)(2)(iv) of the Code.
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<PAGE> 81
1.1.8 "Capital Call Date" shall have the meaning contained in paragraph
3.3.3 hereof.
1.1.9 "Capital Contribution" shall mean, at any specified time, the total
amount of money actually contributed to the Partnership by all Partners or any
one Partner, as the case may be (or any predecessor holders of Interests of such
Partner or Partners), subject to adjustment pursuant to paragraph 3.3.3.
1.1.10 "Certificate of Limited Partnership" shall mean the document filed
as a Certificate of Limited Partnership with the Secretary of State of the State
of Missouri in order to form the Partnership under the laws of such State, as it
may be amended, modified, supplemented or restated from time to time, as the
context requires.
1.1.11 "Closing" shall have the meaning assigned to it by the Prospectus.
1.1.12 "Code" shall mean the Internal Revenue Code of 1986, as amended and
in effect from time to time, and applicable regulations thereunder. Any
reference herein to a specific section or sections of the Code shall be deemed
to include a reference to any corresponding provisions of future law.
1.1.13 "Consent" shall mean the approval of a Person, given as provided in
paragraph 11.1, to do the act or thing for which the approval is solicited, or
the act of granting such approval, as the context may require. Reference to the
Consent of a majority or specified percentage in Interest of the Limited
Partners means the Consent of Limited Partners whose aggregate Capital
Contributions represent over 50% or at least such specified percentage,
respectively, of the Capital Contributions of all Limited Partners.
1.1.14 "Deferred Distribution Amount" shall have the meaning contained in
paragraphs 4.1.1 and 9.2.2.
1.1.15 "Distributable Cash" shall have the meaning contained in paragraph
4.1.1.
1.1.16 "Fiscal Year" shall mean the calendar year.
1.1.17 "General Partner Distribution" shall have the meaning contained in
paragraphs 4.1.1 and 9.2.2.
1.1.18 "General Partners" shall mean the Individual General Partners and
the Managing General Partner, and/or any other Person which becomes a successor
or additional General Partner of the Partnership as provided herein, in such
Person's capacity as a General Partner of the Partnership.
1.1.19 "Incapacity" shall mean, as to any Person, the entry of an order for
relief in a bankruptcy proceeding ("bankruptcy"), death, adjudication of
incompetence or insanity, disability, incapacity, dissolution or termination
(other than by merger or consolidation), as the case may be, of such Person.
1.1.20 "Independent" shall mean any individual who is not an "interested
person" of the Partnership, as defined in the 1940 Act.
1.1.21 "Independent Expert" shall mean a Person with no material current or
prior business or personal relationship with the Managing General Partner or its
Affiliates who is engaged to a substantial extent in the business of rendering
opinions regarding the value of assets of the type held by the Partnership, and
who is qualified to perform such work.
1.1.22 "Independent General Partners" shall mean Ralph G. Kelly and Thomas
A. Hughes and/or any other natural person who becomes a successor or additional
General Partner of the Partnership as provided herein and who is not an
"interested person" of the Partnership (within the meaning of the 1940 Act), in
such individual's capacity as an Independent General Partner of the Partnership.
1.1.23 "Individual General Partners" shall mean the Independent General
Partners and/or any other natural person who becomes a successor or additional
Individual General Partner of the Partnership as provided herein, in such
individual's capacity as an Individual General Partner of the Partnership.
1.1.24 "Initial Limited Partner" shall mean Steven Novik.
1.1.25 "Interest" shall mean (a) the entire ownership interest of a Partner
in the Partnership at any particular time, including the right of such Partner
to any and all benefits to which a Partner may be entitled as provided in this
Agreement, together with the obligations of such Partner to comply with all the
terms and provisions of this Agreement and (b) for purposes of determining and
maintaining Capital Accounts as provided in paragraph 4.3
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<PAGE> 82
and for determining allocations and distributions under Articles Four and Nine,
the interest of an Assignee therein. Reference to a majority or specified
percentage in Interest of Limited Partners shall mean Limited Partners whose
aggregate Capital Contributions represent over 50% or at least such specified
percentage, respectively, of the aggregate Capital Contributions of all Limited
Partners.
1.1.26 "Limited Partner" shall mean any Person who is a limited partner of
the Partnership as shown as such on the books and records of the Partnership
(whether the Initial Limited Partner, an Additional Limited Partner or a
Substituted Limited Partner) at the time of reference thereto and who is named
or deemed to be named in the Certificate of Limited Partnership as a limited
partner of the Partnership, in such Person's capacity as a limited partner of
the Partnership, and for purposes of determining and maintaining Capital
Accounts as provided in paragraph 4.3 and for determining allocations and
distributions under Articles Four and Nine, an Assignee. Any reference to
"Limited Partner" shall include the then current Limited Partner and the
predecessor(s) of the Interest in the Partnership of such Limited Partner.
1.1.27 "Liquidation Assets" shall have the meaning contained in paragraph
9.2.2.
1.1.28 "Losses" shall mean the losses of the Partnership for Federal income
tax purposes including, without limitation, each item of Partnership income,
gain, loss, deduction, and tax-exempt income and non-deductible expenses of the
Partnership.
1.1.29 "Management Agreement" shall mean the management agreement between
the Partnership and the Management Company in substantially the form filed as an
exhibit to the Registration Statement, as amended or renewed from time to time,
and any successor or replacement management or investment advisory agreement
thereto entered into in accordance with this Agreement.
1.1.30 "Management Company" shall mean CIP Management L.P., LLLP, a
Missouri limited liability limited partnership, and/or any other Person which
becomes a successor Management Company, in such Person's capacity as the
Management Company to the Partnership.
1.1.31 "Managing General Partner" shall mean CIP Management L.P., LLLP, a
Missouri limited liability limited partnership, and/or any other Person which
becomes a successor Managing General Partner of the Partnership as provided
herein, in such Person's capacity as Managing General Partner of the
Partnership.
1.1.32 The "1940 Act" shall mean the Investment Company Act of 1940 and the
rules and regulations thereunder, as amended by the Small Business Investment
Incentive Act of 1980, and as amended from time to time.
1.1.33 "Notification" shall mean a writing, containing the information
required by this agreement to be communicated to any Person sent as provided in
paragraph 14.1.
1.1.34 "Partners" shall mean the General Partners and the Limited Partners
unless otherwise indicated.
1.1.35 "Partnership" shall mean the limited partnership continued by and
governed under and pursuant to this Agreement, as such limited partnership may
from time to time be constituted.
1.1.36 "Partnership Act" shall mean the Missouri Revised Uniform Limited
Partnership Act, as amended from time to time.
1.1.37 "Person" shall mean any individual or a partnership, corporation,
unincorporated organization or association, trust or other entity.
1.1.38 "Profits" shall mean the profits of the Partnership for Federal
income tax purposes including, without limitation, each item of Partnership
income, gain, loss, deduction, and tax-exempt income and non-deductible expenses
of the Partnership.
1.1.39 "Prospectus" shall, at the time of reference thereto, mean the
prospectus contained in the Registration Statement at the time in effect; except
that if the prospectus filed by the Partnership pursuant to Rule 424(b) or (c)
under the Securities Act of 1933 differs from the prospectus contained in the
Registration Statement, as aforesaid, then the term "Prospectus" refers to the
Rule 424(b) or 424(c) prospectus from and after the time it is mailed to the
Securities and Exchange Commission for filing.
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<PAGE> 83
1.1.40 "Registration Statement" shall mean the registration statement on
file with the Securities and Exchange Commission pursuant to the Securities Act
of 1933 for the registration of the Units to be sold to the Additional Limited
Partners at the time the registration statement becomes effective, including
financial statements and schedules and the information deemed to be included
therein pursuant to Rule 430A under said Act; except that if the Partnership
files a post-effective amendment to the registration statement or a new
registration statement the prospectus included in which may be used by the
Partnership pursuant to Rule 429 under the Securities Act of 1933, then the term
"Registration Statement" shall, from and after the declaration of the
effectiveness of such post-effective amendment of such new registration
statement, refer to the registration statement as amended by such post-effective
amendment thereto or the then effective registration statement, as the case may
be.
1.1.41 "Roll-Up" shall mean the acquisition, merger, conversion or
consolidation, either directly or indirectly, of the Partnership and the
issuance of securities of a Roll-Up Entity. Such term does not include:
(a) a transaction involving securities of the Partnership that have
been listed for at least 12 months on a national securities exchange or
traded through the NASDAQ National Market System; or
(b) a transaction involving the conversion to corporate, trust or
association form of only the Partnership if, as a consequence of the
transaction, there will be no significant adverse change in any of the
following: (i) Limited Partners' voting rights; (ii) the term of existence
of the Partnership; (iii) compensation of the Managing General Partner or
its affiliates; or (iv) the Partnership's investment objectives.
1.1.42 "Roll-Up Entity" shall mean a partnership, real estate investment
trust, corporation, trust or other entity that would be created or would survive
after the successful completion of a proposed Roll-Up transaction.
1.1.43 "Subscription Price" shall mean the total amount of money required
to be contributed to the Partnership by any one Additional Limited Partner as
determined by the number of Units at $25 each for which any one Additional
Limited Partner has subscribed.
1.1.44 "Substituted Limited Partner" shall mean any Person admitted to the
Partnership as a Limited Partner pursuant to the provisions of paragraph 8.3 and
shown as such on the books and records of the Partnership and who is named or
deemed to be named in the Certificate of Limited Partnership as a limited
partner of the Partnership.
1.1.45 "Unit" shall mean the Interest attributable to a subscription of $25
to the Partnership by, or on behalf of, the Limited Partner who originally
acquired the Interest.
ARTICLE TWO
ORGANIZATION
2.1 GOVERNANCE. The undersigned parties hereto continue the Partnership
formed pursuant to the provisions of the Partnership Act and registered as a
limited liability limited partnership pursuant to the Uniform Partnership Act
and the Partnership Act. The rights and liabilities of the Partners shall be as
provided in the Partnership Act and/or the Missouri Uniform Partnership Act, as
applicable, except as herein otherwise expressly provided. An Interest shall be
personal property for all purposes.
2.2 NAME, PLACE OF BUSINESS AND OFFICE. The name of the limited liability
limited partnership continued hereby shall be "Community Investment Partners III
L.P., LLLP" The business of the Partnership may be conducted, upon compliance
with all applicable laws, under any other name designated in writing by the
Individual General Partners from time to time. The Partnership shall maintain
its principal office at 12555 Manchester Road, St. Louis, Missouri 63131. The
Managing General Partner may at any time change the location of the
Partnership's offices and may establish additional offices, if it deems it
advisable. Notification of any such change shall be given to the Limited
Partners on or before the date of any such change.
2.3 PURPOSE. The Partnership is authorized and empowered to elect to
operate, and to operate, as a business development company under the 1940 Act.
The Partnership's investment objective is to provide the Partners with long-term
capital appreciation on their investment. Subject to paragraph 5.2, the
Partnership will seek to
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accomplish this objective by providing capital to corporations, partnerships,
joint ventures and other enterprises and assisting in developing the business of
such enterprises in which the Partnership has an interest, direct or indirect.
The Partnership may engage in any and all activities necessary or incidental to
the accomplishment of the foregoing purposes.
2.4 TERM. The Partnership shall continue in existence until December 31,
2012, unless further extended by the Individual General Partners for up to two
additional two-year periods from such date if the Individual General Partners
determine that such an extension is in the best interest of the Partnership, or
until dissolution prior thereto pursuant to paragraph 9.1 hereof.
2.5 REGISTERED AGENT AND REGISTERED OFFICE. The address of the
Partnership's registered office in the State of Missouri is 12555 Manchester
Road, St. Louis, Missouri 63131. The name and address of the Partnership's
registered agent for service of process on the Partnership at such registered
office is Daniel A. Burkhardt, 12555 Manchester Road, St. Louis, Missouri 63131.
The Individual General Partners may at any time change the address of the
registered office or the identity of the registered agent.
2.6 QUALIFICATION IN OTHER JURISDICTIONS. The Individual General Partners
shall cause the Partnership to be qualified, formed, reformed or registered
under assumed or fictitious name statutes or similar laws in any jurisdiction in
which the Partnership owns property or transacts business if such qualification,
formation, reformation or registration is necessary or appropriate in order to
protect the limited liability of the Limited Partners or to permit the
Partnership lawfully to own property or transact business. The Individual
General Partners shall execute, file and publish all such certificates, notices,
statements or other instruments necessary to permit the Partnership to conduct
business as a limited partnership in all jurisdictions where the Partnership
elects to do business and to maintain the limited liability of the Limited
Partners.
ARTICLE THREE
PARTNERS AND CAPITAL
3.1 GENERAL PARTNERS.
3.1.1 The General Partners shall consist of such number of Individual
General Partners as shall be fixed pursuant to paragraph 3.1.2 and a Managing
General Partner. The mailing addresses of the General Partners are set forth
opposite their respective names on the signature page hereof. The Managing
General Partner has made a cash Capital Contribution to the Partnership in the
aggregate amount of $1,000. If necessary, the Managing General Partner and the
Individual General Partners shall make additional cash Capital Contributions in
an amount sufficient so that the General Partners' aggregate Capital
Contributions shall at all times equal at least 1% of the aggregate Capital
Contributions of all Partners. The relative amounts of the Capital Contributions
of the respective General Partners shall be determined by agreement among the
General Partners.
3.1.2 The number of Individual General Partners shall be fixed from time to
time by the Individual General Partners then in office, provided, however, that
the number of Individual General Partners shall in no event be less than two or
more than six (except prior to the initial public offering of Units). A majority
of the General Partners shall at all times be Independent General Partners. If
at any time the number of Independent General Partners is less than a majority
of the General Partners, within 90 days thereafter the remaining Individual
General partners shall designate and admit one or more successor Independent
General Partners so as to restore the number of Independent General Partners to
a majority of the General Partners. Each Limited Partner hereby Consents to the
admission of any successor Independent General Partner pursuant to this
paragraph 3.1.2 and no further Consent shall be required.
3.1.3 Any Person named herein, or elected or appointed, to the office of
General Partner shall thereafter hold office until his removal pursuant to
paragraph 6.3 or withdrawal pursuant to paragraph 6.1 or 6.2, as the case may
be, or until his successor shall have been elected and admitted at a meeting of
Limited Partners called pursuant to paragraph 11.4 for the purpose of electing
General Partners. General Partners may succeed themselves in office. The
Individual General Partners may designate and admit successor Individual General
Partners to fill vacancies created by the retirement or withdrawal of an
Individual General Partner pursuant to paragraph 6.1 or by the removal of an
Individual General Partner by the Individual General Partners pursuant to
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paragraph 6.3 and the Individual General Partners may also designate and admit
Individual General Partners to fill any vacancies created by an increase in the
number of Individual General Partners pursuant to paragraph 3.1.2. In the event
that no Individual General Partner remains, the Managing General Partner shall
perform all duties of an Individual General Partner under this Agreement to the
extent permitted by the 1940 Act and shall, within 90 days, call a special
meeting of Limited Partners for the purpose of electing and admitting Individual
General Partners. Each Limited Partner hereby Consents to the admission of any
successor Individual General Partner pursuant to this paragraph 3.1.3 and no
further Consent shall be required.
3.1.4 No General Partner, as such, shall be required to lend any funds to
the Partnership or to make any additional capital contribution to the
Partnership except as set forth in paragraph 3.1.1 or paragraph 9.2.3.
3.2 INITIAL LIMITED PARTNER.
3.2.1 The name and mailing address of the Initial Limited Partner is Steven
Novik, 12555 Manchester Road, St. Louis, Missouri 63131. The Initial Limited
Partner will make a $100 Capital Contribution to the Partnership in order to
form the Partnership under the Partnership Act.
3.2.2 Upon the admission of the Additional Limited Partners pursuant to
paragraph 3.3.1, the Initial Limited Partner shall withdraw from the Partnership
and shall be entitled to receive forthwith his Capital Contribution, without
interest or reduction.
3.3 ADDITIONAL LIMITED PARTNERS.
3.3.1 The Managing General Partner is authorized to admit Additional
Limited Partners to the Partnership. The initial Capital Contribution of each of
the Additional Limited Partners shall be made in cash in an amount equal to
one-half of his, her or its Subscription Price. The manner of the offering of
the Units, the terms and conditions under which subscriptions for such Units
will be accepted, and the manner of and conditions to the sale of Units to
subscribers therefor and the admission of such subscribers as Additional Limited
Partners will be as provided in the Prospectus in all material respects and
subject to any provisions thereof.
3.3.2 The names, mailing addresses and Capital Contributions of the
Additional Limited Partners shall be set forth in the books and records of the
Partnership, as amended from time to time.
3.3.3 Each Additional Limited Partner shall, at the request of the
Individual General Partners, made at any time but only once during the two-year
period commencing on the date of the last Closing (as defined in the
Prospectus), contribute such amount of its remaining Subscription Price as is
required by the Individual General Partners as an additional Capital
Contribution to the Partnership. Such additional Capital Contribution shall be
due and payable in cash on the date and in the amount specified in the
Notification from the Individual General Partners making such request, which
date shall be not earlier than the 45th day following the date of such
Notification (the "Capital Call Date") and which Notification shall be given not
less than 45 days prior to the end of said two-year period. In the event any
Additional Limited Partner fails to make such additional Capital Contribution on
or before the Capital Call Date (a "Defaulting Partner"), the Defaulting Partner
shall be deemed to have transferred to the other non-Defaulting Partners on a
pro rata basis in proportion to their Capital Contributions an amount equal to
twenty percent (20%) of the Defaulting Partner's Capital Contribution, effective
as of such Capital Call Date, which will have the effect of reducing such
Defaulting Partner's Interest and Units in the Partnership by sixty percent
(60%) (or such proportionate lesser percentages in the case of additional
Capital Contributions of less than the entire remaining Subscription Price). The
portion of the Defaulting Partner's Capital Contribution transferred to the
non-Defaulting Partners shall be deemed a Capital Contribution by such
non-Defaulting Partners on a pro rata basis in proportion to their Capital
Contributions and shall proportionately increase their Interest and Units in the
Partnership. Such transfer shall constitute the sole and exclusive remedy of the
Partnership and the other Partners for any such default in making additional
Capital Contributions by an Additional Limited Partner.
3.3.4 No Limited Partner, as such, shall be required or authorized to lend
any funds to the Partnership or (except as provided in paragraph 3.3.3) to make
any additional capital contributions to the Partnership.
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3.4 PARTNERSHIP CAPITAL.
3.4.1 No Partner shall be paid interest on any Capital Contribution to the
Partnership or on such Partner's Capital Account.
3.4.2 No Partner shall have any right to demand and receive the return of
his, her or its Capital Contribution, except upon the withdrawal of a General
Partner pursuant to Article Six or upon dissolution of the Partnership pursuant
to Article Nine, and except as provided in paragraph 3.2.2 or 3.9. No Partner
shall have the right to demand property other than cash in return for its
Capital Contribution. The Individual General Partners may, however, from time to
time, elect to make partial returns of Capital Contributions to Partners,
provided that at the time of such partial returns of Capital Contributions to
Partners: (1) all liabilities of the Partnership to Persons other than Partners
have been paid or, in the good faith determination of the Individual General
Partners, there remains property of the Partnership sufficient to pay them and
(2) the Individual General Partners cause the books and records of the
Partnership to be amended to reflect a reduction in Capital Contributions. In
the event that the Individual General Partners elect to make a partial return of
Capital Contributions to Partners, such distribution shall be made in accordance
with paragraph 4.1 hereof. Each Partner, by becoming such, consents to such
distribution theretofore and thereafter duly authorized and made in accordance
with this paragraph 3.4.2.
3.4.3 The Partnership may, but is not required to, redeem or repurchase
Units to the extent permitted by the 1940 Act. The General Partners and their
Affiliates may purchase and hold Units for their own accounts, to the extent
permitted by the 1940 Act.
3.5 LIABILITY OF PARTNERS.
3.5.1 Subject to paragraph 3.5.2, no Limited Partner shall have any
personal liability whatever in his, her or its capacity as a Limited Partner,
whether to the Partnership, to any of the Partners or to the creditors of the
Partnership, for the debts, liabilities, contracts or any other obligations of
the Partnership or for any losses of the Partnership. A Limited Partner shall be
liable only to make his, her or its Capital Contribution in the amount of his,
her or its Subscription Price and shall not be required to lend any funds to the
Partnership or, after his, her or its Capital Contribution shall have been fully
paid, subject to paragraph 3.5.2, to make any further capital contributions to
the Partnership or to repay to the Partnership, any Partner, or any creditor of
the Partnership all or any fraction of any negative amount of such Limited
Partner's Capital Account.
3.5.2 In accordance with the laws of the State of Missouri, a Limited
Partner may, under certain circumstances, be required to return to the
Partnership, for the benefit of the Partnership's creditors, amounts previously
distributed to such Partner as a return of his, her or its contribution or
wrongfully made to such Limited Partner. It is the intent of the Individual
General Partners that no distribution to any Limited Partner of available cash
pursuant to paragraph 4.1 (except as provided in paragraph 3.4.2) shall be
deemed a return or withdrawal of his, her or its contribution, and that no
Limited Partner shall be obligated to pay any such amount to, or for the account
of, the Partnership or any creditor of the Partnership. Any such obligation of a
Limited Partner to return amounts distributed to it shall be the obligation of
such Limited Partner and not of the General Partners.
3.5.3 Neither the General Partners nor any of their Affiliates shall have
any personal liability to any Limited Partner for the repayment of any amounts
outstanding in the Capital Account of a Limited Partner, including, but not
limited to, Capital Contributions. Any such payment shall be solely from the
assets of the Partnership. The General Partners shall not be liable to any
Limited Partner by reason of any change in Federal or state income tax laws as
they apply to the Partnership and the Limited Partners, whether such change
occurs through legislative, judicial or administrative action, so long as the
General Partners have acted in good faith and in a manner reasonably believed to
be in the best interests of the Partnership.
3.5.4 Neither the General Partners nor any of their Affiliates shall have
any personal liability to repay to the Partnership any portion or all of any
negative amount of the General Partner's Capital Account, except as otherwise
provided in paragraph 9.2.3.
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3.6 LENDER AS PARTNER. No creditor who makes a loan to the Partnership may
have or acquire, at any time as a result of making the loan, any direct or
indirect interest in the profits, capital or property of the Partnership, other
than as a secured creditor or other than as result of the exercise of the rights
thereof.
3.7 GENERAL PARTNER AS LIMITED PARTNER. A General Partner shall also be a
Limited Partner to the extent that he purchases Units or purchases or becomes a
transferee of all or any part of the Interest of a Limited Partner, and to such
extent shall be treated in all respects as a Limited Partner, and the Consent of
any Limited Partner to such transfer to a General Partner need not be obtained.
The General Partners' Capital Contributions referred to in paragraph 3.1.1 will
be made in their capacity as General Partners and such Capital Contributions
will not entitle the General Partners to any rights of a Limited Partner,
including without limitation, those rights set forth in Article Seven.
3.8 NO PREEMPTIVE RIGHTS. No Partner or Assignee shall have any preemptive
right, including, without limitation, any preemptive right with respect to (a)
additional Capital Contributions; (b) issuance or sale of Units, whether
unissued, held in the treasury or hereafter created; (c) issuance of any
obligations, evidences of indebtedness or other securities of the Partnership
convertible into or exchangeable for, or carrying or accompanied by any rights
to receive, purchase or subscribe to, any such unissued Units or Units held in
treasury; (d) issuance of any right of, subscription to or right to receive, or
any warrant or option for the purchase of, any of the foregoing securities; or
(e) issuance or sale of any other securities that may be issued or sold by the
Partnership.
3.9 CERTAIN RETURNS OF CAPITAL.
3.9.1 Any portion of the Capital Contributions of the Partners available
for investment that has not been invested or committed for investment in
portfolio company investments within two years from the date of receipt by the
Partnership thereof at a Closing or a Capital Call Date, as the case may be
("Investment Period"), shall be distributed as Distributable Cash as soon as
practicable after the end of the Investment Period to the Partners, together
with any interest actually earned thereon and not theretofore distributed, in
accordance with paragraph 4.1 hereof, by the Partnership.
For the purpose of this Agreement, funds will be deemed to have been
committed to investment and will not be returned to the Limited Partners to the
extent that:
(a) such funds have been utilized or set aside to pay acquisition fees
or acquisition expenses, if any, in connection with any Partnership funds
invested or committed for investment in portfolio company investments
within the Investment Period;
(b) such funds have been set aside for working capital;
(c) such funds have been set aside to pay amounts payable, or expected
to be payable, under written agreements or under agreements in principle,
commitment letters, letters of intent or understanding, option agreements
or any similar contracts or understandings which have been executed and are
in effect at the end of the Investment Period; or
(d) such funds have been set aside and reserved at the end of the
Investment Period to make contingent payments in connection with any
portfolio company investments, including for payment of additional or
follow-on funds to the portfolio company.
3.9.2 In the event that the Independent General Partners shall determine
that any funds referred to in paragraph 3.9.1(a)-(d) have not been and will not
be applied to the uses for which such funds were set aside and reserved, such
funds shall, as promptly as practicable thereafter, be distributed by the
Partnership as Distributable Cash in accordance with paragraph 4.1 hereof.
3.9.3 The Partnership intends to invest at least 65% of the total assets
received by the Partnership as Capital Contributions in securities of portfolio
companies pursuant to the investment objectives in the Prospectus within two
years of the Partnership's last Closing Date and, in the case of Capital
Contributions received by the Partnership at the Capital Call Date, will invest
at least 65% in such portfolio companies within two years of receipt by the
Partnership of Capital Contributions at the Capital Call Date. In each case, if
such 65% level of portfolio company investment is not achieved within said
two-year period, the Partnership will distribute the amount of assets required
to reach the 65% level in accordance with paragraph 4.1 hereof.
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ARTICLE FOUR
DISTRIBUTIONS; ALLOCATIONS OF PROFITS AND LOSSES
4.1 DISTRIBUTIONS.
4.1.1 All cash that the General Partners do not expect to use in the
operation of the Partnership or to invest in portfolio company investments and
that is available after the payment of all expenses then due and the creation of
reasonable reserves for liabilities and follow-on investments ("Distributable
Cash") shall be distributed to the Partners as follows:
(a) first, 99% to the Limited Partners in proportion to their Capital
Contributions and 1% to the General Partners until such time as the Limited
Partners shall have received in the aggregate cumulative distributions of
Distributable Cash in an amount equal to their Capital Contributions,
(b) second, 100% to the General Partners shall have received pursuant
to this clause (b) an amount equal to any unpaid Deferred Distribution
Amount;
(c) third, 90% to the Limited Partners in proportion to their Capital
Contributions and 10% to the General Partners (9% being a General Partner
Distribution) until such time as the Limited Partners shall have received
in the aggregate cumulative distributions of Distributable Cash in an
amount equal to two times their Capital Contributions;
(d) thereafter, 80% to the Limited Partners in proportion to their
Capital Contributions and 20% to the General Partners (19% being a General
Partner Distribution).
All such distributions shall be made no less frequently than annually.
Notwithstanding the foregoing, to the extent that making any General Partner
Distribution pursuant to clause (c) or (d) or making a distribution pursuant to
clause (b) would at the time otherwise payable result in the General Partners
receiving cumulative General Partner Distributions from capital gains in excess
of 20% of cumulative capital gains realized by the Partnership (net of realized
capital losses and unrealized capital depreciation), such excess shall be
deferred (and defined to be a Deferred Distribution Amount) and be payable
pursuant to clause (b) only to the extent that when paid such payment would not
cause such result. Notwithstanding the foregoing, for purposes of this
Agreement, such excess shall be treated as having been distributed to the
General Partners for purposes of determining General Partner Capital Accounts
and Adjusted Capital Contributions.
4.1.2 In the event of an interim Closing of the sale of Units (as referred
to in the Prospectus), Distributable Cash shall be distributed to the Partners,
in the proportions in which net investment income has been allocated to them
pursuant to paragraph 4.2.2 so that the Capital Accounts of all Limited Partners
are equalized on a per Unit basis, such distributions made from Distributable
Cash at such times as may be approved by the Individual General Partners.
4.1.3 To the extent permitted under the 1940 Act, the Individual General
Partners may also make in-kind distributions of any or all of the Partnership's
portfolio securities in such amounts and at such times as they may determine in
their discretion, provided, however, that such securities must be marketable on
a securities exchange and must be distributed into and through a liquidating
trust. To the extent permitted under the 1940 Act under any required exemptive
order received from the Securities and Exchange Commission under the 1940 Act,
the Individual General Partners, under terms they determine to be fair and
reasonable, may in their discretion approve in-kind distributions to the
Managing General Partner in lieu of cash distributions. Unrealized Profits and
Losses attributable to securities distributed in kind shall be deemed realized
pursuant to paragraph 4.2.1 and shall be allocated as provided in paragraph 4.2.
4.1.4 The foregoing provisions of this paragraph 4.1 notwithstanding, at
any time, but no later than 45 days after the close of the second fiscal quarter
of the first fiscal year of the Partnership commencing after the final Closing
(as referred to in the Prospectus), and within 45 days after each subsequent
fiscal quarter, to the extent necessary, the Individual General Partners may
make a special distribution to Partners of Distributable Cash in such amounts as
may be necessary to equalize the Capital Accounts of Limited Partners on a per
Unit basis. From and after such time (after the third fiscal quarter of the
first fiscal year of the Partnership commencing after the
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final Closing) as Capital Accounts of all Limited Partners are first equalized
on a per Unit basis pursuant to this paragraph 4.1.4, no further special
distributions shall be made pursuant hereto.
4.1.5 The foregoing provisions of paragraph 4.1 notwithstanding,
distributions shall not be made pursuant hereto to the extent that such
distributions are prohibited by restrictions contained in the 1940 Act that are
applicable to distributions by the Partnership.
4.2 ALLOCATION OF PROFITS AND LOSSES.
4.2.1 The Profits and Losses of the Partnership shall be determined and
allocated with respect to each Fiscal Year as of the end of, and within sixty
days after the end of, such Fiscal Year. Unrealized Profits and Losses
attributable to any securities distributed in kind to Partners shall be deemed
realized and shall be thereupon reflected in Capital Accounts in accordance with
this Agreement.
4.2.2 Except as otherwise provided in Section 4.2.3 below, all Profits and
Losses shall be allocated as follows:
(i) Losses of the Partnership shall be allocated among the Partners as
follows:
(a) First, to those Partners in an amount equal to any Profits that
were allocated to the Partners pursuant to subparagraph 4.2.2(ii)(d) in
the same ratio as such prior allocations of Profits taking into account
all prior and contemporaneous allocations of Losses pursuant to this
subparagraph 4.2.2(i)(a),
(b) Second, to those Partners in an amount equal to any Profits
that were allocated to the Partners pursuant to
subparagraph 4.2.2(ii)(c) in the same ratio as such prior allocations of
Profits taking into account all prior and contemporaneous allocations of
Losses pursuant to this subparagraph 4.2.2(i)(b), and
(c) Third, 99% to the Limited Partners in proportion to their
Capital Contributions and 1% to the General Partners, provided, however,
if any such allocation of Losses would reduce any Partner's Capital
Account below zero or would increase the negative balance in such
Partner's Capital Account at a time when another Partner has a positive
Capital Account, determined after taking into account all prior and
contemporaneous allocations of income, gain, loss, deduction or credit
and as determined at the close of the taxable year in respect of which
such Losses are to be allocated, such excess Losses shall be allocated
as follows:
(1) First, to those Partners with positive Capital Accounts in
proportion to their positive Capital Accounts until no Partner shall
have a positive Capital Account, and
(2) Second, any remaining Losses shall be allocated to the
Partners in accordance with the manner in which such Partners bear
the economic risk of loss.
(ii) Profits of the Partnership shall be allocated among the Partners,
as follows:
(a) First, pro rata to the Partners in proportion to their deficit
Capital Account balances, in an amount equal to the sum of the deficit
Capital Account balances,
(b) Second, 99% to the Limited Partners and 1% to the General
Partners in an amount sufficient to cause their Capital Accounts to
equal their Adjusted Capital Contributions,
(c) Third, 90% to the Limited Partners in proportion to their
Capital Contributions and 10% to the General Partners in an amount
sufficient to cause their Capital Accounts to equal an amount equal to
(i) two times their Capital Contribution less (ii) cumulative
distributions pursuant to paragraph 4.1 and paragraph 9.22, and
(d) Fourth, 80% to the Limited Partners in proportion to their
Capital Contributions and 20% to the General Partners.
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4.2.3 Notwithstanding paragraph 4.2.2:
(a) In the case of any item of Partnership loss, deduction or Section
705(a)(2)(B) expenditure attributable to a Partnership debt in which a
Partner or related person bears the economic risk of loss, such item of
loss, deduction or Section 705(a)(2)(B) expenditure shall be allocated to
that Partner to the minimum extent required by Treasury Regulation 1.704-1
or any successor thereto;
(b) If any Partner that is not obligated to restore any deficit
balance in such Partner's Capital Account unexpectedly receives any
adjustment, allocation or distribution described in Treasury Regulation
Section 1.704-(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), items of Partnership Profits shall be specially
allocated to such Partner in an amount and manner sufficient to eliminate a
deficit in its Capital Account created by such adjustments, allocations or
distributions as quickly as possible. This subparagraph 4.2.3(b), is
intended to constitute a "qualified income offset" as defined in Treasury
Regulation Section 1.704-1(b)(2)(ii)(d);
(c) Notwithstanding any other provision of this Agreement to the
contrary, the collective interest of the General Partners in each material
item of Partnership income, gain, loss, deduction or credit shall be equal
to at least 1% of each such item at all times during the existence of the
Partnership. In determining the General Partners' interest in such item,
Units owned by the General Partners shall be taken into account.
4.2.4 For purposes of determining the Capital Account balance of any
Limited Partner or Individual General Partner as of the end of any Fiscal Year
under paragraph 4.2.3 hereof, any such Partner's Capital Account shall be
reduced by:
(a) Allocations of Loss (or any item thereof) as of the end of such
Fiscal Year, which reasonably are expected to be allocated to such Partner
pursuant to Code Section 704(e)(2), Code Section 706(d), and paragraph
(b)(2)(ii) of Section 1.751-1 of the Treasury Regulations promulgated under
the Code; and
(b) Distributions that, as of the end of such Fiscal Year, reasonably
are expected to be made to such Partner to the extent they exceed
offsetting increases to such Partner's Capital Account that reasonably are
expected to occur during (or prior to) the Partnership's Fiscal Year in
which such distributions reasonably are expected to be made.
4.3 CAPITAL ACCOUNT. The Partnership shall establish and maintain a Capital
Account for each Partner in accordance with tax accounting set forth in Treasury
Regulation Section 1.704-1(b)(2)(iv).
4.4 ALLOCATIONS AND DISTRIBUTION UPON TRANSFERS OF UNITS BY LIMITED
PARTNERS.
4.4.1 If any Unit is transferred during any fiscal year of the Partnership
every item of Partnership income, gain, loss, deduction and credit attributable
to such Unit of such fiscal year shall be divided and allocated proportionately
between the transferor and the transferee based upon the number of months during
such fiscal year for which each party was the holder of the Unit transferred.
All Profits and Losses allocated to the Limited Partners shall be allocated to
the Persons who were Limited Partners as of the last day of the month for which
the allocation is made, provided, however, that a Person who is an Assignee or
who is admitted as a Substituted Limited Partner shall be treated as having been
assigned such Unit or as having been admitted as a Substituted Limited Partner
on such date as the sale, assignment or transfer to such Person was recognized
by the Partnership pursuant to paragraph 8.2.1. The Individual General Partners
are authorized to amend this Agreement in accordance with paragraph 10.2.2 in
order to alter this accounting convention to conform with any regulations issued
by the Treasury Department or rulings or advice of the Internal Revenue Service
as the Individual General Partners shall deem necessary or appropriate.
4.4.2 With respect to any period during which a Limited Partner is first
entitled to a share of partnership income, gain, loss, deduction or credit, the
Partnership shall, with respect to such items of income, gain, loss, deduction
or credit, allocate such items among the Persons who are entitled to such items
on a basis consistent with the provisions of the Code and the regulations
promulgated thereunder.
4.4.3 All cash distributions to the Limited Partners shall be made to the
Persons who were Limited Partners as of the last day of the month preceding the
month in which the distribution is made; provided, however, that a
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Person who is admitted as a Substituted Limited Partner shall be treated as
having been admitted as a Substituted Limited Partner on such date as the sale,
assignment or transfer to such Person was recognized by the Partnership pursuant
to paragraph 8.2.1.
4.5 INTENT OF GENERAL PARTNERS RESPECTING ALLOCATIONS AND DISTRIBUTION.
4.5.1 It is the intent of the General Partners that all distributions shall
be distributed in the above 99%/1% ratio until such time as the Limited Partners
have received cumulative distributions in the aggregate in an amount equal to
their respective Subscription Price. To this end, the General Partners have the
authority in their reasonable discretion to amend the Partnership Agreement or
adjust the allocations or cash distributions to reflect this intent, without the
consent of the Limited Partners.
ARTICLE FIVE
RIGHTS AND DUTIES OF THE GENERAL PARTNERS
5.1 MANAGEMENT POWER.
5.1.1 Subject to the terms hereof, including but not limited to paragraph
5.1.2, the General Partners shall have full, exclusive and complete discretion
in the management and control of the affairs of the Partnership, shall make all
decisions affecting Partnership affairs and shall have all of the rights, powers
and obligations of a general partner of a limited partnership under the
Partnership Act and otherwise as provided by law. The Individual General
Partners shall provide overall guidance and supervision with respect to the
operations of the Partnership and shall assume the responsibilities and
obligations imposed by the 1940 Act and the regulations thereunder on the
directors or general partners who are not interested persons of business
development companies. Except as otherwise expressly provided in this Agreement,
the Individual General Partners are hereby granted the right, power and
authority to do on behalf of the Partnership all things which, in their sole
judgment, are necessary or appropriate to manage the Partnership's affairs and
fulfill the purposes of the Partnership, including, by way of illustration and
not by way of limitation, the power and authority from time to time to do the
following:
(a) subject to paragraph 5.2, to acquire in any manner any security or
securities (of any class or nature) of any Person and any real or personal
property of any nature;
(b) to incur all expenditures permitted by this Agreement;
(c) to employ and dismiss from employment any and all employees,
agents, attorneys, consultants, custodians of the assets of the
Partnership, transfer agents or servicing agents;
(d) to enter into any sales, agency or dealer agreements and escrow
agreements with respect to the sale of Units to Additional Limited Partners
and provide for the distribution of such Units by the Partnership through
one or more underwriters (which may be Affiliates of the General Partners)
or otherwise;
(e) to enter into, execute, amend, supplement, acknowledge and deliver
any and all contracts, agreements or other instruments including, but not
limited to, contracts with one or more banks, trust companies or other
investment advisers, including General Partners and any of their
Affiliates, for the performance of such functions, including the investment
and reinvestment of all or part of the Partnership's assets, execution of
portfolio transactions, and any or all administrative functions;
(f) to establish and maintain one or more bank accounts for the
Partnership in such bank or banks having assets of at least $25,000,000 as
the Individual General Partners may, from time to time, designate as
depositaries of the funds of the Partnership;
(g) to the extent that funds of the Partnership are available, to pay
all expenses, debts, obligations and liabilities of the Partnership;
(h) to the extent that funds of the Partnership are available, to make
all distributions periodically to the Partners in accordance with the
provisions of paragraph 4.1;
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(i) to borrow money and issue multiple classes of senior indebtedness
to the extent permitted by the 1940 Act, and to secure the same by
mortgage, pledge or other lien on the assets of the Partnership, and to
refinance or repay, in whole or in part, any such borrowings or
indebtedness;
(j) to establish and maintain a Capital Account for each Partner in
accordance with this Agreement;
(k) to the extent permitted by the 1940 Act, to designate and appoint
one or more agents for the Partnership who shall have such authority as may
be conferred upon them by the Individual General Partners, and who may
perform any of the duties, and exercise any of the powers and authority,
conferred upon the Individual General Partners hereunder including, but not
limited to, designation of one or more agents as authorized signatories on
any bank accounts maintained by the Partnership;
(l) to cause securities owned by the Partnership to be registered in
the Partnership name or in the name of a nominee or to be held in street
name, as they shall elect and to cause assets of the Partnership to be held
in custody in compliance with the applicable requirements of the 1940 Act;
(m) to establish and maintain the books and records of the Partnership
in accordance with paragraph 13.1;
(n) to establish valuation principles and to periodically apply such
principles to the Partnership's portfolio company investment portfolio;
(o) to make temporary investments of Partnership capital in United
States government obligations, investment grade state and municipal bonds,
certificates of deposit at banks with at least $25,000,000 in assets and
money market securities sold by a bank, such money market securities having
investments in securities with investment grade ratings pending final
investment disposition or cash distributions to the Partners;
(p) to purchase put options, and write covered call options, on
securities owned by the Partnership to the extent permitted under policies
adopted by the Individual General Partners;
(q) to bring and defend actions at law or in equity;
(r) to cause the Partnership to purchase or bear the cost of any
insurance covering the potential liabilities of a General Partner or any of
its Affiliates or any other person serving at the request of a General
Partner as a director and/or officer of a corporation or official of any
other entity in which the Partnership has an investment;
(s) to resolve any questions relating to potential conflicts of
interest between the Partnership and any of the General Partners or their
Affiliates, subject to the provisions of this Article Five;
(t) to compromise the obligation of a Limited Partner to make a
Capital Contribution or return money or other property paid or distributed
to it in violation of the Missouri Act; and
(u) to engage in any kind of activity and to perform and carry out
contracts of any kind necessary to, or in connection with, or incidental to
the accomplishment of the purposes of the Partnership, so long as said
activities and contracts may be lawfully carried on or performed by a
limited partnership under the 1940 Act and the Partnership Act.
5.1.2 The Managing General Partner is hereby granted the exclusive power
and authority from time to time to do the following:
(a) subject to the supervision of the Individual General Partners, to
manage and control the portfolio company investments of the Partnership,
including, but not limited to, the power to make all decisions regarding
the Partnership's investment portfolio and, among other things, to find,
evaluate, structure, approve, monitor and liquidate, upon dissolution or
otherwise, such investments, to provide, or arrange for the provision of,
managerial assistance to those Persons in which the Partnership invests to
the extent required by the 1940 Act or otherwise considered necessary or
incidental by the Managing General Partner and in connection therewith to
enter into, execute, amend, supplement, acknowledge and deliver any and all
contracts, agreements or other instruments, including, but not limited to,
contracts with one or more banks,
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trust companies or other investment advisers, including the investment and
reinvestment of all or part of the Partnership's assets, execution of
portfolio transactions, and any or all administrative functions;
(b) to admit Additional Limited Partners to the Partnership in
accordance with paragraph 3.3 and to admit an Assignee to be a Substituted
Limited Partner in the Partnership, pursuant to and subject to the terms of
paragraph 8.3, without the Consent of any Limited Partner;
(c) to offer to provide and, if accepted, provide or arrange to
provide, management assistance to the Management Company to the extent
required by the 1940 Act or otherwise considered necessary or incidental by
the Managing General Partner; and
(d) to provide such administrative and management services to the
Partnership as shall be necessary or appropriate for the operation of the
Partnership.
The grant of exclusive power and authority to the Managing General Partner
under this paragraph 5.1.2 in no way limits the rights, powers or authority of
the Individual General Partners under this Agreement, the Partnership Act or as
otherwise provided by law or exemptive order issued by the Securities and
Exchange Commission.
5.1.3 Subject to the approval of the Individual General Partners, including
a majority of the Independent General Partners, the Managing General Partner, in
the name and on behalf of the Partnership, is hereby authorized to enter into
the Agency Agreement, the Escrow Agreement, the Custody Agreement, and the
Management Agreement, each as referred to in the Prospectus, and in
substantially the forms attached to the Registration Statement. Each Partner
agrees that the General Partners are authorized to execute, deliver and perform
the other agreements, acts, transactions and matters contemplated hereby or
described in or contemplated by the Registration Statement on behalf of the
Partnership without any further consent of the Partners, notwithstanding any
other provision of this Agreement, the Partnership Act or any applicable law,
rule or regulation.
5.1.4 The Individual General Partners, subject to such approvals by the
Limited Partners as may be required by the 1940 Act, in the name and on behalf
of the Partnership, are authorized to appoint independent certified public
accountants for the Partnership.
5.1.5 In accordance with paragraph 5.9, any document executed by any of the
General Partners while acting in the name and on behalf of the Partnership shall
be deemed to be the action of the Partnership vis-a-vis any third parties
(including the Limited Partners as third parties for such purpose).
5.1.6 If there is a determination by the Internal Revenue Service, which in
the opinion of counsel to the Partnership is likely to be sustained by a court
of competent jurisdiction, or if at any time in the opinion of counsel to the
Partnership it is likely that the Partnership will or, at some future date,
would be classified as an association taxable as a corporation or a publicly
traded partnership for federal income tax purposes, the General Partners may,
but shall not be obligated to, take such steps as they deem necessary or
desirable to minimize the adverse tax consequences of such classification
including, without limitation, suspending all transfers of Units for one or more
quarterly transfer dates, and the Individual General Partners may, without
limitation, (i) amend this Agreement to the extent necessary to ensure that the
Partnership will, in the opinion of counsel to the Partnership, be classified as
a partnership for Federal income tax purposes, or (ii) reorganize the
Partnership so that it qualifies as a regulated investment company pursuant to
Section 851 of the Code.
5.1.7 With respect to real estate investments, the Partnership shall not
give to Edward Jones or the Managing General Partner sole right to sell or
exclusive employment to sell property for the Partnership but shall allow the
Managing General Partner to manage and control such sales of property, subject
to the Management Agreement and the supervision of the Individual General
Partners, in the exercise of their authority and subject to any obligation to
the Partnership of fiduciary duty. In the event of the acquisition of real
property, such acquisition shall be supported by an appraisal prepared by a
competent, independent appraiser, which appraisal shall be retained by the
Partnership for at least five years and shall be available for inspection and
duplication by any Limited Partner.
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5.2 PROHIBITED TRANSACTIONS. The following transactions are specifically
prohibited to the Partnership except to the extent otherwise permitted by this
Agreement:
(a) The Partnership shall not lend money or other property to a
General Partner or any of his, her or its Affiliates.
(b) The Partnership shall not sell or purchase any security or other
property to or from a General Partner or any of its Affiliates, or effect
any transaction in which a General Partner is a joint or a joint and
several participant or effect any reciprocal transactions or business
arrangements in which a General Partner or any of its Affiliates is a
party, except as permitted by the 1940 Act or any exemptive order issued by
the Securities and Exchange Commission thereunder.
(c) The Partnership shall not make short sales of securities, purchase
or sell commodities or commodity contracts, or purchase any securities on
margin, except in connection with clearance of transactions.
(d) Expenses of the Partnership shall not be billed except directly to
the Partnership (but shall be paid pursuant to the terms of this
Agreement), and no reimbursements shall be made therefor to the General
Partners or any of their Affiliates except as required by the Management
Agreement or permitted by paragraph 5.6. The aggregate annual expenses of
the Partnership, excluding amounts payable under the Management Agreement
and interest, taxes, capital items, brokerage costs incurred in connection
with execution of securities transactions and costs incurred as a result of
events or transactions outside the ordinary course including, without
limitation, the costs of litigation and amounts paid as indemnification
pursuant to this Agreement, shall not exceed 2 1/2% of the average net
assets of the Partnership for that year.
(e) The Partnership shall not, at any time, incur indebtedness for
borrowed money that exceeds 50% of the value of its assets at such time.
(f) The Partnership shall not enter into contracts for services to be
provided by the Individual General Partners, the Managing General Partner
or any of its Affiliates unless the contract is in writing and specifically
describes the services to be rendered and the compensation to be paid.
Services other than those permitted by this Agreement or the Management
Agreement shall be provided to the Partnership at competitive rates in the
ordinary course of the Partnership's business by entities that are
substantially engaged in the business of rendering such services to
unrelated parties. An agreement entered into pursuant to this paragraph
shall be subject to the approval of the majority of the Independent General
Partners after they have found the transaction to be in the best interest
of the Partnership.
5.3 RESTRICTIONS ON THE AUTHORITY OF THE GENERAL PARTNERS.
5.3.1 Without the written Consent or ratification of all of the Limited
Partners, subject to paragraph 11.2, the General Partners shall not have the
authority to:
(a) do any act in contravention of this Agreement;
(b) do any act which would make it impossible to carry on the ordinary
business of the Partnership;
(c) admit a person as a General Partner, except as provided in this
Agreement;
(d) admit a person as a Limited Partner, except as provided in this
Agreement; or
(e) continue the business with Partnership property on the retirement,
removal or Incapacity of a General Partner, except as provided in this
Agreement, including Article Six hereof.
In the event that the written Consent or ratification of all of the Limited
Partners is obtained under this paragraph 5.3.1, the General Partners agree
promptly to amend the Certificate of Limited Partnership of the Partnership and
this Agreement to the extent necessary to reflect such actions.
5.3.2
(a) Except as permitted by the 1940 Act or any exemptive order issued
by the Securities and Exchange Commission thereunder, the General Partners
and their Affiliates shall not, acting as principal, (1) sell any
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security or other property to the Partnership or to any Person controlled
by the Partnership; (2) purchase any security or other property from the
Partnership or from any Person controlled by the Partnership; (3) borrow
money or other property from the Partnership or from any Person controlled
by the Partnership; or (4) effect any transaction in which the Partnership
or a Person controlled by the Partnership is a joint or a joint and several
participant with such General Partner or Affiliate thereof.
(b) Edward Jones shall not enter into an agreement to provide services
to portfolio companies of the Partnership unless such agreement has been
approved by a majority of the Independent General Partners.
(c) The Partnership shall not invest in companies or partnerships (i)
in which a General Partner or Affiliate of a General Partner of the
Partnership serves as an officer, director or general partner or (ii) in
which a General Partner or Affiliate of a General Partner of the
Partnership owns more than 25% of the voting securities or partnership
interests. Notwithstanding the foregoing, however, the restrictions of this
paragraph shall apply only to initial investments and not to follow-on
investments.
5.3.3 Except as permitted by the 1940 Act or any exemptive order issued by
the Securities and Exchange Commission thereunder, the General Partners shall
not, acting as agent or broker, accept from any source any compensation, other
than pursuant to paragraph 5.6, for the purchase or sale of any property to or
for the Partnership or any Person controlled by the Partnership, or for
effecting any such transaction.
5.3.4 The General Partners shall not perform any act that would in their
good faith judgment subject any Limited Partner to liability as a general
partner in any jurisdiction.
5.3.5 Without the Consent of a majority in Interest of the Limited
Partners, subject to paragraph 11.2, the Individual General Partners shall not
have the authority to:
(a) elect to dissolve the Partnership; or
(b) sell or otherwise dispose of at any one time all or substantially
all of the assets of the Partnership, except as contemplated by Article
Nine.
5.3.6 The Individual General Partners shall not cause the Partnership to
consent to, or join in, any waiver, amendment, or modification of the terms of
any partnership agreement, limited partnership agreement, management agreement
or investment contract to which it is a party unless, in the good faith judgment
of the Individual General Partners, such waiver, amendment, or modification
would be in the best interest of the Partnership. This Section shall not be used
to modify this Partnership Agreement nor contracts with the Sponsor.
5.3.7 The General Partners will not accept subscriptions from, or admit as
a Limited Partner, (a) any employee benefit plan or individual retirement
account, (b) an employee benefit plan as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (including any
qualified pension, profit-sharing, stock bonus or Keogh plan); (c) a plan
described in Internal Revenue Code Section 4975(e)(1) (including an Individual
Retirement Account) or (d) any entity whose underlying assets include "plan
assets," as defined in ERISA Regulation Section 2510.3-101 by reason of a plan's
interest in the entity.
5.3.8 Except as permitted by the 1940 Act or any exemptive order issued by
the Securities and Exchange Commission thereunder, and notwithstanding any other
provision of this Agreement, the General Partners shall not have authority to
act individually on behalf of, or to bind, the Partnership, except:
(a) in the capacity of any such General Partner as an investment
adviser, principal underwriter or administrator and as otherwise provided
herein;
(b) within the scope of such General Partner's authority as delegated
by the Individual General Partners; or
(c) in the event that no Individual General Partner remains, to the
extent necessary to continue the Partnership, for such limited periods as
are permitted by the 1940 Act to fill Individual General Partner vacancies.
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5.4 DUTIES AND OBLIGATIONS OF THE GENERAL PARTNERS.
5.4.1 The General Partners shall take all action which may be necessary or
appropriate for the continuation of the Partnership's valid existence as a
limited partnership under the laws of the State of Missouri and of each other
jurisdiction in which such existence is necessary to protect the limited
liability of the Limited Partners or to enable the Partnership to conduct the
business in which it is engaged.
5.4.2 Subject to paragraph 5.5, the General Partners shall devote to the
Partnership such time as the General Partners shall deem to be necessary to
conduct the Partnership's business and affairs in an appropriate manner.
5.4.3 The General Partners shall be under a duty and obligation to conduct
the affairs of the Partnership in the best interests of the Partnership,
including the safekeeping and use of all Partnership funds and assets (whether
or not in the immediate possession or control of the General Partners) and the
use thereof for the benefit of the Partnership. Neither the General Partners nor
any of their Affiliates shall enter into any transaction with the Partnership
which may significantly benefit the General Partners or such Affiliates in their
independent capacities unless the transaction is approved by a majority of the
Independent General Partners and is expressly permitted hereunder and under the
1940 Act or any exemptive order issued by the Securities and Exchange Commission
thereunder or is entered into principally for the benefit of the Partnership in
the ordinary course of Partnership business.
5.4.4 The General Partners represent, warrant and agree as follows:
(a) As of the date of the Prospectus, the Individual General Partners
and the general partners of the Managing General Partner will have an
aggregate net worth at least equal to 10% of the total Capital
Contributions to the Partnership of all of the Partners, exclusive of (i)
any interest in the Partnership and any other limited partnership in which
they act as general partners and (ii) accounts and notes receivable from
and payable to the Partnership or any other such limited partnership.
(b) At all times subsequent to the date of the Prospectus the
Individual General Partners and the general partners of the Managing
General Partner shall use their best efforts to maintain a net worth equal
to the total amount required for the Partnership to be treated as a
partnership for federal income tax purposes.
5.4.5 The General Partners shall at all times use their best efforts to
conduct their affairs and the affairs of all of their Affiliates and of the
Partnership in such a manner that neither the Partnership nor any Partner nor
any Affiliate of any Partner will have any personal liability with respect to
any Partnership indebtedness, unless in the case of personal liability with
respect to the Partnership, the General Partners or any Affiliate of the General
Partners, the General Partners are of the opinion that such conduct would be in
the best interests of the Partnership. The General Partners shall use reasonable
efforts, in the conduct of the Partnership's business, to put all Persons with
whom the Partnership does business or in whom the Partnership invests on notice
that the Limited Partners are not liable for Partnership obligations, but the
General Partners shall not be liable to the Limited Partners for any failure to
give such notice to such Person.
5.4.6 The General Partners shall prepare or cause to be prepared and shall
file on or before the due date (or any extension thereof) any Federal, state or
local tax returns required to be filed by the Partnership. The General Partners
shall cause the Partnership to pay taxes by the Partnership (it being understood
that the expenses of preparation and filing of such tax returns, and the amounts
of such taxes, are expenses of the Partnership and not of the General Partners);
provided, however, that the General Partners shall not be required to cause the
Partnership to pay any tax so long as the General Partners or the Partnership
are in good faith and by appropriate legal proceeding contesting the validity,
applicability or amount thereof and such contest does not materially endanger
any right or interest of the Partnership.
5.4.7 The General Partners shall, from time to time, on behalf of the
Partnership submit to any appropriate state securities administrator all
documents, papers, statistics and reports required to be filed with or submitted
to such state securities administrator.
5.4.8 The Managing General Partner shall perform all duties imposed by
Sections 6221 through 6232 of the Code as "tax matters partner" of the
Partnership, including (but not limited to) the following: (a) the power to
conduct all audits and other administrative proceedings with respect to
Partnership tax items; (b) the power to
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extend the statute of limitations of all Partners with respect to Partnership
tax items; (c) the power to file a petition with an appropriate Federal court
for review of a final Partnership administrative adjustment; and (d) the power
to enter into a settlement with the Internal Revenue Service on behalf of, and
binding upon, those Limited Partners having less than a 1% interest in the
profits of the Partnership (unless a Limited Partner notifies the Internal
Revenue Service and the Managing General Partner that the Managing General
Partner may not act on such Limited Partner's behalf).
5.5 OTHER BUSINESSES OF PARTNERS. Subject to paragraph 5.4.2, any Partner
and any Affiliate of any Partner may engage in or possess any interest in other
business ventures of any kind, nature or description, independently or with
others, whether or not such ventures are competitive with the Partnership.
Neither the Partnership nor any Partners shall have any rights or obligations by
virtue of this Agreement or the partnership relationship created hereby in or to
such independent ventures or the income or profits or losses derived therefrom,
and the pursuit of such ventures, even if competitive with the business of the
Partnership, shall not be deemed wrongful or improper. Neither the General
Partners nor any Affiliate of the General Partners (other than the Managing
General Partner) shall be obligated to present any particular investment
opportunity to the Partnership even if such opportunity is of a character which,
if presented to the Partnership, could be taken by the Partnership, and the
General Partners and their Affiliates shall each have the right to take for
their own account (individually or as a trustee, partner or fiduciary) or to
recommend to others any such particular investment opportunity. The Managing
General Partner hereby consents and agrees to promptly furnish the Individual
General Partners, upon request, with information on a confidential basis as to
any portfolio company investments made by it, the Management Company, or any of
their Affiliates, for their own account or for others based upon their
recommendation.
5.6 REIMBURSEMENT AND COMPENSATION.
5.6.1 The Managing General Partner shall be entitled to receive out of
Partnership funds available therefor reimbursement of all amounts expended by
the Managing General Partner on behalf of the Partnership in connection with (i)
the organization of the Partnership and the offering of the Units, including,
but not limited to, amounts expended for accounting, legal, printing and
clerical expenses, registration and filing fees of any kind and mailing and
courier expenses and (ii) the operation of the Partnership; provided, however,
that such operational expenses are properly payable by the Partnership under the
terms of the Management Agreement. Reimbursement pursuant to this paragraph
5.6.1 shall not be duplicative of payments to the General Partners or their
Affiliates under other provisions of this Agreement or any other agreement.
Reimbursements of such organizational and offering expenses to be made by the
Partnership to the Managing General Partner and to its Affiliates shall be
limited to 6% of the public offering price of Units sold by the Partnership
(based on Subscription Price amount). Reimbursements made by the Partnership to
the General Partners or their Affiliates shall be limited to the actual cost of
goods and materials used for or by the Partnership and obtained from entities
unaffiliated with the General Partners. Administrative expenses shall be
reimbursed to the General Partners at the lower of (i) the General Partner's or
Affiliate's actual cost or (ii) the amount the Partnership would be required to
pay independent parties for comparable services in the same geographic location.
Reimbursements shall not include: rent or depreciation; utilities; capital
equipment; salaries; fringe benefits; and other administrative items incurred or
allocated to any controlling person of the Partnership or its Affiliates. For
purposes of this section "controlling person" shall include any person, whatever
his or her or its title, who performs functions for the General Partners similar
to those of (i) a member of the Board of Directors, (ii) executive officer,
(iii) senior management, or (iv) those holding 5% or more equity interest in the
General Partner or a person having the power to direct or cause the direction of
the General Partner or its Affiliates, whether through the ownership of voting
securities, by contract or otherwise.
5.6.2 As compensation for services rendered to the Partnership, each
Independent General Partner initially be paid (i) the sum of $6,000 annually in
quarterly installments, (ii) the sum of $1,000 for each meeting of the
Individual General Partners attended by such Independent General Partner; and
(iii) all out-of-pocket expenses relating to attendance at the meetings,
committee or otherwise, of the Individual General Partners, including travel,
food and lodging expenses; provided, however, that the Managing General Partner
or any Affiliate thereof shall not receive any compensation from the Partnership
under this paragraph 5.6.2. The amounts of compensation set forth above payable
to the Independent General Partners shall be reviewed annually by the Individual
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General Partners and may be increased or decreased by the Individual General
Partners to provide for such compensation as the Individual General Partners may
deem reasonable under the circumstances. Payment of compensation to an
Independent General Partner hereunder shall not be deemed a distribution for
purposes of paragraph 4.1 nor shall such payment affect such Person's right to
receive any distribution to which he would otherwise be entitled as a Limited
Partner. Compensation paid to Independent General Partners for consulting
services must be approved by a majority of the other Individual General
Partners.
5.6.3 The General Partners shall not, either in their capacity as General
Partners or in their individual capacities, receive any salary, fees, profits,
distributions or compensation, except as provided in Article Four, this Article
Five and the Management Agreement, as in effect from time to time, referred to
in paragraph 5.1.3, and except as may be received as a partner of the Managing
General Partner.
5.6.4 The Partnership will not make any co-investments in which a General
Partner or its Affiliates will receive fees which are duplicative of those
permitted under the Partnership Agreement.
5.7 INDEMNIFICATION OF THE GENERAL PARTNERS BY THE PARTNERSHIP.
5.7.1 Neither the General Partners nor any of their Affiliates shall be
liable, responsible or accountable in damages or otherwise to the Partnership or
any Limited Partners or Assignees for any loss, damage or expense incurred by
reason of any act or omission performed or omitted by the General Partners or
such Affiliates in good faith either on behalf of the Partnership or in the
furtherance of the interests of the Partnership and in a manner reasonably
believed by them to be within the scope of the authority granted to them by this
Agreement, by law or by the Consent of the Limited Partners, provided that the
General Partners or such Affiliates were not guilty of negligence or misconduct
in the performance of his, her or its duties with respect to such acts or
omissions. To the fullest extent permitted by law the Partnership, out of its
assets and, subject to paragraph 5.8, not out of the assets of the General
Partners or Limited Partners, shall indemnify and hold harmless any General
Partner and any of his, her or its Affiliates who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding whether civil, criminal, administrative or investigative
(including any action by or in the right of the Partnership), by reason of any
acts or omissions or alleged acts or omissions arising out of such Person's
activities as a General Partner or as an Affiliate of a General Partner, if such
activities were performed or omitted in good faith either on behalf of the
Partnership or in furtherance of the interests of the Partnership, and in a
manner reasonably believed by such Person to be within the scope of the
authority granted to them by this Agreement, by law or by the Consent of the
Limited Partners, against losses, damages or expenses for which such Person has
not otherwise been reimbursed (including attorneys' fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by such Person in
connection with such action, suit or proceeding, so long as such Person was not
guilty of negligence or misconduct in the performance of his, her or its duties
with respect to such acts or omissions and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his, her or its conduct was
unlawful, and provided that the satisfaction of any indemnification and any
holding harmless shall be from and limited to Partnership assets and no Limited
Partner shall have any personal liability on account thereof. Notwithstanding
the foregoing, absent a court determination that a General Partner or any of
his, her or its Affiliates seeking indemnification was not liable on the merits
or guilty of disabling conduct within the meaning of Section 17(h) of the 1940
Act, the decision by the Partnership to indemnify a General Partner or any such
Affiliate must be based upon the reasonable determination of independent counsel
or non-party Independent General Partners, after review of the facts, that such
disabling conduct did not occur. The Partnership is authorized to provide
advances of litigation expenses to the Individual General Partners to the extent
permitted by the 1940 Act and Investment Company Release No. 11330 and if the
following conditions are met: (i) the legal action relates to acts or omissions
with respect to the performance of duties or services on behalf of the
Partnership, (ii) the legal action is initiated by a third party who is not a
Partner, or the legal action is initiated by a Partner and a court of competent
jurisdiction specifically approves such advancement, and (iii) the indemnified
person signs a statement undertaking to repay the advanced funds to the
Partnership with interest, at a rate per annum equal to 2 percent above the from
time to time publicly-announced corporate base rate of interest of Mercantile
Bank, N.A. of St. Louis, or its successors or assigns (the "Corporate Base
Rate") at the time the advancement is made, from the date of advancement until
said advancement is ultimately repaid, if it is ultimately determined that such
Person is not entitled to indemnification under this paragraph 5.7. The
Partnership shall not incur the cost of that portion of any liability insurance
which
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insures the General Partners or their Affiliates for any liability as to which
they are prohibited from being indemnified under this paragraph.
5.7.2 Notwithstanding the provisions of paragraph 5.7.1, neither the
Managing General Partner, any controlling person of the Managing General Partner
nor any of its Affiliates acting as a broker-dealer in connection with the
offering of Units shall be indemnified by the Partnership for any losses,
liabilities or expenses arising from or out of an alleged violation of Federal
or state securities laws unless (i) there has been a successful adjudication on
the merits of each count involving alleged securities violations, (ii) such
claims have been dismissed with prejudice on the merits by a court of competent
jurisdiction, or (iii) in the case of a legal proceeding which has been settled
without a court ruling, a court, after having been informed in writing of the
terms of the proposed indemnification, of the opinion of the Securities and
Exchange Commission and of the opinion of any applicable state securities
regulatory authority with respect to such indemnification, shall have approved
the proposed indemnification.
5.8 INDEMNIFICATION OF THE INDIVIDUAL GENERAL PARTNERS BY THE MANAGING
GENERAL PARTNER. To the extent that an Individual General Partner has a valid
claim for indemnification from the Partnership pursuant to paragraph 5.7 and has
pursued such claim against the Partnership, but such claim has not been
satisfied, the Managing General Partner, in its individual capacity, shall
satisfy such claim.
5.9 RELIANCE BY THIRD PARTIES. Notwithstanding any other provision of this
Agreement to the contrary, no lessee, lender, seller or purchaser, including any
seller or purchaser of stock or assets to or from the Partnership, or any other
Person dealing with the Partnership, shall be required to look to the
application of proceeds hereunder or to verify any representation by the General
Partners as to the extent of the interest in the stock or assets that the
General Partners are entitled to lease, encumber, purchase, sell or otherwise
use, and any such lessee, lender, seller or purchaser or other Person shall be
entitled to rely exclusively on the representations of the General Partners as
to their authority to enter into such leasing, financing, purchase or sale
arrangements and shall be entitled to deal with the General Partners as if they
were the sole parties in interest therein, both legally and beneficially. Each
Partner and Assignee hereby waives any and all defenses or other remedies that
may be available against such lessee, lender, seller, purchaser or other Person
to contest, negate or disaffirm any action of the General Partners in connection
with any lease, purchase, sale or refinancing. In no event shall any Person
dealing with the General Partners or the General Partners' representatives with
respect to any business or property of the Partnership be obligated to ascertain
that the terms of this Agreement have been complied with, or be obligated to
inquire into the necessity or expedience of any act or action of the General
Partners or the General Partners' representatives; and every lease, contract,
agreement, deed, mortgage, security agreement, promissory note or other
instrument or document executed by the General Partners or the General Partners'
representatives with respect to any business or assets of the Partnership shall
be conclusive evidence in favor of any and every Person relying thereon or
claiming thereunder that (a) at the time of the execution and/or delivery
thereof this Agreement was in full force and effect, (b) such instrument or
document was duly executed in accordance with the terms and provisions of this
Agreement and is binding upon the Partnership, and (c) the General Partners or
the General Partners' representatives were duly authorized and empowered to
execute and deliver any and every such instrument or document for and on behalf
of the Partnership.
ARTICLE SIX
TRANSFERABILITY OF A GENERAL PARTNER'S INTEREST
6.1 WITHDRAWAL OR RESIGNATION BY AN INDIVIDUAL GENERAL PARTNER. Subject to
paragraphs 6.5 and 8.7, an Individual General Partner may voluntarily resign or
withdraw from the Partnership, but only upon compliance with all of the
following procedures:
(a) The Individual General Partner shall give Notification of
resignation or withdrawal to the General Partners (i) at least 60 days
prior to the date that he, she or it proposes to withdraw, or (ii) if such
resignation or withdrawal is likely to cause the Partnership to lose its
partnership tax classification, at least one (1) years' prior written
notice to the date that he, she or it proposes to withdraw.
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(b) Subject to paragraph 3.1.2, the remaining Individual General
Partners may designate a successor Individual General Partner who shall
hold such office as provided in paragraph 3.1.3.
(c) The withdrawing Individual General Partner shall cooperate fully
with the successor Individual General Partner so that the responsibilities
of the withdrawing Individual General Partner may be transferred to the
successor Individual General Partner with as little disruption of the
Partnership's business and affairs as practicable.
(d) The Partnership shall have received an opinion of counsel (which
counsel may be counsel to the Partnership) to the effect that such
withdrawal will not affect the classification of the Partnership as a
partnership by the Internal Revenue Service under the Code, Treasury
Regulations thereunder or administrative guidelines or interpretations
related thereto.
Upon such resignation or withdrawal (other than by reason of the assignment
of his or her Interest to a successor General Partner in exchange for
compensation therefor), the Partnership shall pay the withdrawing Individual
General Partner the lesser of his or her Capital Contribution or the fair market
value of its general partner Interest in the Partnership. The General Partners
shall make such amendments to the Certificate of Limited Partnership and to this
Agreement and execute and file and/or record such amendments or other documents
or instruments as are necessary to reflect the termination of the Interest, if
any, of the withdrawing General Partner, the fact that such withdrawing General
Partner has ceased to be a General Partner, and the appointment of such
successor General Partner, all without the Consent of the Limited Partners.
6.2 WITHDRAWAL OR RESIGNATION BY THE MANAGING GENERAL PARTNER. Subject to
paragraphs 6.5 and 8.7, the Managing General Partner may voluntarily resign or
withdraw from the Partnership, but only upon compliance with all of the
following procedures:
(a) The Managing General Partner shall, at least 60 days prior to such
withdrawal, give Notification to all Partners that it proposes to withdraw
and that there be substituted in its place a Person designated and
described in such Notification;
(b) Subject to paragraph 11.2, a majority in Interest of the Limited
Partners has Consented to the appointment of any successor Managing General
Partner pursuant to this paragraph 6.2;
(c) The withdrawing Managing General Partner shall cooperate fully
with the successor Managing General Partner so that the responsibilities of
the withdrawing Managing General Partner may be transferred to the
successor Managing General Partner with as little disruption of the
Partnership's business and affairs as practicable; and
(d) The Partnership shall have received an opinion of counsel (which
counsel may be counsel to the Partnership) to the effect that such
withdrawal will not affect the classification of the Partnership as a
partnership by the Internal Revenue Service under the Code, Treasury
Regulations thereunder or administrative guidelines or interpretations
related thereto.
Upon such resignation or withdrawal (other than by reason of the assignment
of its Interest to a successor Managing General Partner in exchange for
compensation therefor), the Partnership shall pay the withdrawing Managing
General Partner the lesser of its Capital Contribution or the fair market value
of its general partner Interest in the Partnership. The General Partners shall
make such amendments to the Certificate of Limited Partnership and to this
Agreement and execute and file and/or record such amendments or other documents
or instruments as are necessary to reflect the termination of the Interest of
the withdrawing Managing General Partner, the fact that such withdrawing
Managing General Partner has ceased to be a General Partner, and the appointment
of such successor Managing General Partner, all without the Consent of the
Limited Partners.
6.3 REMOVAL OF A GENERAL PARTNER; DESIGNATION OF A SUCCESSOR GENERAL
PARTNER.
6.3.1 Any of the Individual General Partners may be removed either (i) for
cause by the action of at least two-thirds of the remaining Individual General
Partners, (ii) subject to paragraph 11.2, by failure to be re-elected by the
Limited Partners at any special meeting of the Limited Partners held for such
purpose pursuant to paragraph 11.4, or (iii) subject to paragraph 11.2, with the
Consent of a majority in Interest of the Limited
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Partners. The Managing General Partner may be removed either (i) by a majority
of the Independent General Partners, (ii) subject to paragraph 11.2, by failure
to be re-elected by the Limited Partners at any special meeting of the Limited
Partners held for such purpose pursuant to paragraph 11.4, or (iii) subject to
paragraph 11.2, with the Consent of a majority in Interest of the Limited
Partners. The removal of a General Partner shall in no way derogate from any
rights or powers of such General Partner, or the exercise thereof, or the
validity of any actions taken pursuant thereto, prior to the date of such
removal.
6.3.2 In the event of the removal of a General Partner and continuation of
the Partnership, the investments held by the Partnership at the time of removal
shall be appraised by two independent appraisers, one selected by the removed
General Partner and one by the remaining Independent General Partners. In the
event that such two appraisers are unable to agree on the value of the
Partnership's investment portfolio, they shall jointly appoint a third
independent appraiser whose determination shall be final and binding. The cost
of the appraisal conducted by the appraiser selected by the removed General
Partner shall be borne by the removed General Partner and the cost of the
appraisal conducted by the appraiser selected by the remaining Independent
General Partners shall be borne by the Partnership. The cost of the appraisal
conducted by a third appraiser shall be borne equally by the Partnership and the
removed General Partner. All unrealized capital gains and losses of the
Partnership shall be deemed realized at that time solely for purposes of making
a final allocation to the removed General Partner. To the extent permissible
under the Investment Advisers Act of 1940, the removed General Partner shall
receive a final allocation to its Capital Account of Profits and Losses equal to
the Profits and Losses that it would have been allocated pursuant to paragraph
4.2 if all unrealized capital gains and losses of the Partnership were deemed
realized, an allocation of Profits and Losses were made at such time and such
time were deemed to be the end of a Fiscal Year. If the Capital Account of the
removed General Partner has a positive balance after such allocation, to the
extent permissible under the Investment Advisers Act of 1940, the Partnership
shall promptly deliver a promissory note issued by it to the removed General
Partner, the principal amount of which shall be equal to the amount, if any, by
which the positive amount of the removed General Partner's Capital Account
exceeds the amount of its Capital Contribution and which bears interest at a
rate per annum equal to the Corporate Base Rate of Boatmen's National Bank of
St. Louis at the time of removal, with interest payable annually and principal
payable, if at all, from any available cash before any distributions thereof are
made to the Partners pursuant to Article Four. In the event that the foregoing
allocation is not permissible under the Investment Advisers Act of 1940, the
Interest of the removed General Partner shall convert to that of a Limited
Partner on a proportionate basis, and the removed General Partner shall continue
to receive, as a Limited Partner, distributions pursuant to paragraph 4.1 and
related allocations of the Profits and Losses pursuant to paragraph 4.2.
6.3.3 Subject to paragraph 3.1.2, the remaining Individual General Partners
may designate one or more Persons to fill any vacancy existing in the number of
Individual General Partners fixed pursuant to paragraph 3.1.2 resulting from
removal of an Individual General Partner by the Individual General Partners
pursuant to paragraph 6.3.1, and each Limited Partner hereby Consents to the
admission of such successor or successors, no further Consent being required
unless otherwise provided in the 1940 Act. The Individual General Partners may
designate one or more Persons to be successors to a Managing General Partner
removed by the Independent General Partners pursuant to paragraph 6.3.1, and
each Limited Partner hereby Consents to the admission of such successor or
successors, no further consent being required. With the Consent of a majority in
Interest of the Limited Partners, the Limited Partners may, subject to the
provisions of paragraphs 3.1.2, 6.5 and 11.2, at any time propose and approve a
Person to be a successor to a General Partner concurrently therewith being
removed by the Limited Partners pursuant to paragraph 6.3.1.
6.3.4 The General Partners shall make such amendments to the Certificate of
Limited Partnership and to this Agreement and execute and file and/or record
such amendments or other documents or instruments as are necessary to reflect
the removal of a General Partner or a designation of a successor General Partner
pursuant to this Section 6.3, the fact that such removed General Partner has
ceased to be a General Partner, and the appointment of such successor General
Partner, all without the Consent of the Limited Partners.
6.4 INCAPACITY OF A GENERAL PARTNER.
6.4.1 In the event of the Incapacity of a General Partner, the business of
the Partnership shall be continued by the remaining General Partners. Subject to
paragraph 3.1.3, the remaining General Partners shall give
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Notification to the Limited Partners of such event and shall, within 90 days,
call a meeting of General Partners for the purpose of designating and admitting
a successor General Partner. Any such successor General Partner shall hold such
office until the next meeting of Partners or until his successor has been
elected. The General Partners shall make such amendments to the Certificate of
Limited Partnership and to this Agreement and execute and file and/or record
such amendments or other documents or instruments as are necessary to reflect
the termination of the Interest of the General Partner subject to such
Incapacity, the fact that such General Partner subject to such Incapacity has
ceased to be a General Partner, and the appointment of such successor General
Partner all without the Consent of the Limited Partners.
6.4.2 In the event of the Incapacity of all General Partners, the
Partnership shall be dissolved. Upon the Incapacity of a General Partner, the
General Partner subject to such Incapacity shall immediately cease to be a
General Partner and his, her or its General Partner's Interest, as such, shall
continue only for the purpose of determining the amount, if any, that it is
entitled to receive upon any dissolution pursuant to paragraph 9.2. Any such
Incapacity of a General Partner shall not affect any rights or liabilities of
the General Partner subject to such Incapacity that matured prior to such
Incapacity.
6.5 ADMISSION OF A SUCCESSOR GENERAL PARTNER.
6.5.1 The admission of any successor General Partner pursuant to paragraph
6.1, 6.2 or 6.3, as the case may be, shall be effective only if and after all of
the following conditions are satisfied:
(a) the successor General Partner shall agree to assume and be bound
by the provisions of this Agreement, including, without limitation,
paragraph 5.4.4, and shall assume in writing the departing General
Partner's obligation to make Capital Contributions hereunder;
(b) the designation of such Person as successor General Partner shall
occur, and for all purposes shall be deemed to have occurred, prior to the
withdrawal or removal of the withdrawing or removed General Partner, or
transfer of the withdrawing or removed General Partner's Interest, pursuant
to paragraph 6.1, 6.2 or 6.3, as the case may be;
(c) the Interests of the Limited Partners shall not be affected by the
admission of such successor General Partner or the transfer of the General
Partner's Interests; and
(d) the Certificate of Limited Partnership and this Agreement shall be
amended to reflect the admission of a successor General Partner pursuant to
paragraph 10.3.
6.5.2 Notwithstanding anything to the contrary set forth in this Agreement,
upon the removal, withdrawal, Incapacity or retirement of any General Partner,
if one or more General Partners remain, the business of the Partnership shall
continue and the remaining and any successor General Partners may and shall
carry on the business of the Partnership. A General Partner shall not have the
right to transfer or assign its General Partner's Interest, except that a
General Partner may, subject to paragraph 8.7, (i) transfer its Interest to a
successor General Partner pursuant to paragraph 6.1 or 6.2 and (ii) subject to
paragraph 6.5.1, substitute in its stead as General Partner any Person that has,
by merger, consolidation or otherwise, acquired substantially all of its assets
and continued its business and is designated thereby to succeed to the rights of
the General Partner at the time of the dissolution of the General Partner. Each
Limited Partner hereby Consents to the admission of any additional or successor
General Partner pursuant to this paragraph 6.5.2, and no further Consent or
approval shall be required.
6.6 LIABILITY OF A WITHDRAWN OR REMOVED GENERAL PARTNER. Any General
Partner who shall withdraw or be removed from the Partnership, or who shall
sell, transfer or assign its General Partner's Interest, shall remain liable for
obligations and liabilities incurred by it as General Partner prior to the time
such withdrawal, removal, sale, transfer or assignment shall have become
effective, but it shall be free of any obligation or liability incurred on
account of the activities of the Partnership from and after the time such
withdrawal, removal, sale, transfer or assignment shall have become effective.
6.7 CONSENT OF LIMITED PARTNERS TO ADMISSION OF SUCCESSOR GENERAL
PARTNERS. Subject to paragraph 11.2, each Limited Partner hereby Consents
pursuant to paragraph 6.1, 6.2 or 6.3.4 to the admission in accordance with the
terms of paragraph 6.1, 6.2 or 6.3.4 of any Person as a successor General
Partner meeting the requirements of paragraph 6.1, 6.2 or 6.3.4, and no further
express Consent or approval shall be required.
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6.8 ADDITIONAL RESTRICTIONS. Notwithstanding anything to the contrary in
this Article Six, a General Partner's Interest shall at all times be subject to
the restrictions on transfer set forth in paragraphs 8.1 and 8.7.
ARTICLE SEVEN
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
7.1 NO PARTICIPATION IN MANAGEMENT. No Limited Partner, in its capacity as
a Limited Partner, shall have any right to control (within the meaning of the
Partnership Act) or participate in the management or control (within the meaning
of the Partnership Act) of the Partnership's business, but may exercise the
rights and powers of a Limited Partner under this Agreement.
7.2 NO AUTHORITY TO ACT. A Limited Partner shall have no power to
represent, act for, sign for or bind the General Partners or the Partnership.
The Limited Partners hereby Consent to the exercise by the General Partners of
the powers conferred on them by law and this Agreement.
7.3 APPROVAL RIGHTS.
7.3.1 Subject to paragraph 11.2, the Limited Partners shall have the
following approval rights:
(a) the right to propose and approve or disapprove the removal of
General Partners pursuant to paragraph 6.3.1;
(b) the right to propose and approve or disapprove the appointment of
a successor to a removed General Partner pursuant to paragraph 6.3.4;
(c) the right to approve or disapprove proposed material changes in
the nature of the Partnership's business or investment objectives
including, without limitation, changes that would cause the Partnership to
cease to be, or to withdraw its election as, a business development under
the 1940 Act. For purpose of this subparagraph (c) the Individual General
Partners and the Managing General Partner shall not be entitled to vote any
Units owned by them to approve or disapprove such changes;
(d) the right to approve or disapprove any proposed investment
advisory contract or management agreement or to terminate any such existing
contracts; provided, however, that such contracts are also approved by a
majority of the Independent General Partners;
(e) the right to approve or disapprove the admission of a successor
Managing General Partner pursuant to paragraph 6.2(b); and
(f) the right to approve or disapprove any amendments to this
Agreement as provided in Article Ten; provided, however, that no such
amendment shall conflict with the 1940 Act.
7.3.2 Notwithstanding the foregoing, no Consent shall be required of the
Limited Partners for the General Partners to amend this Agreement in either of
the following respects: (i) to admit an Additional Limited Partner or a
Substituted Limited Partner or withdraw a Limited Partner in accordance with the
terms of this Agreement; or (ii) to correct any false or erroneous statement, or
to make a change in any statement in order that such statements shall accurately
represent the agreement among the Partners in this Agreement; provided that no
such correction or change shall in any manner adversely affect the Interests of
any Limited Partner.
7.4 WITHDRAWAL OF LIMITED PARTNER. No Limited Partner shall have any right
to withdraw from the Partnership, subject, however, to Article Eight.
ARTICLE EIGHT
TRANSFERABILITY OF A LIMITED PARTNER'S INTEREST
8.1 RESTRICTIONS ON TRANSFERS OF INTERESTS.
8.1.1 Notwithstanding any other provisions of this paragraph 8.1, no
Assignment of a Limited Partner's Interest may be made unless in the opinion of
responsible counsel (who may be counsel for the Partnership),
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satisfactory in form and substance to the Managing General Partner and counsel
for the Partnership (which opinion may be waived, in whole or in part, at the
discretion of the Managing General Partner):
(a) such Assignment would not cause the Partnership to lose its status
as a partnership which is not a publicly-traded partnership pursuant to
Section 7704 of the Code, would not cause the Partnership to be treated as
an association taxable as a corporation for federal income tax purposes
and, when added to the total of all other Assignments of Interests within
the preceding 12-month period, would not result in the transfer of 50% or
more of the Interests or the Partnership otherwise being considered to have
terminated within the meaning of Section 708 of the Code; and
(b) such Assignment would not violate any federal securities laws or
any state securities or "Blue Sky" laws (including any investor suitability
standards) applicable to the Partnership or the Interest to be Assigned;
and
(c) any such opinion of counsel is delivered in writing to the
Partnership prior to the date of the Assignment. The Managing General
Partner is expressly authorized to suspend Assignments if and when any such
Assignment would result in the Assignment of 50% or more of the Interests
of the Partnership within a 12-month period.
8.1.2 In no event shall all or any part of an Interest be Assigned to a
minor or an incompetent except in trust, pursuant to the Uniform Gifts to Minors
Act or by will or intestate succession. Except for transfers by will or
intestate succession, in no event shall all or any part of an Interest be
Assigned to a person who is not a citizen of or resident in the United States.
8.1.3 Except for transfers incident to divorce, and gratuitous Assignments
(in trust or otherwise), whether on death or inter vivos, to or for the benefit
of (1) the transferor's spouse, parents, children, other descendants, spouses of
children, heirs or legatees or (2) a charitable, religious, scientific, literary
or educational organization, (a) no Assignment by a Limited Partner of all or
any part of his Interest may be made to any Person unless such Person (i) meets
the suitability requirements to become an Additional Limited Partner in
accordance with the terms of the offering of the Units contained in the
Prospectus or (ii) is a Partner, and (b) no Limited Partner's Interest or any
fraction thereof may be Assigned without the Consent of the Managing General
Partner, which Consent may not be unreasonably withheld.
8.1.4 No purported Assignment by a transferor of, or after which the
transferor and each transferee would hold, an Interest representing a Capital
Contribution of less than $25.00 will be permitted or recognized for any
purpose.
8.1.5 Each Limited Partner agrees that he will, upon request of the General
Partners, execute such certificates or other documents and perform such acts as
the General Partners deem appropriate after an Assignment of Interest by the
Limited Partner to preserve the limited liability of the Limited Partners under
the laws of the State of Missouri or the laws of any jurisdiction in which the
Partnership is doing business.
8.1.6 Any Assignment of an Interest to a Person who makes a market in
securities shall be void ab initio unless such Person shall certify to the
Managing General Partner that it has acquired such Interest solely for
investment purposes and not for the purpose of resale.
8.1.7 Any purported Assignment of an Interest which is not made in
compliance with this Agreement is hereby declared to be null and void ab initio
and of no force or effect whatsoever.
8.1.8 Each Limited Partner and Assignee agrees that he will, prior to the
time the Managing General Partner consents to any Assignment of an Interest by
that Limited Partner or any Assignee thereof or the substitution of the Assignee
as a Limited Partner, if the Managing General Partner so requests, pay all
reasonable expenses, including attorneys' fees, incurred by the Partnership in
connection with such Assignment and substitution, whether or not the Managing
General Partner consents to such Assignment or substitution.
8.1.9 The Managing General Partner may reasonably interpret, and is hereby
authorized to take such action as it deems necessary or desirable to effect the
foregoing provisions of this paragraph 8.1. The Individual General Partners may,
in their reasonable discretion, amend the provisions of this paragraph 8.1 in
such manner as may be
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necessary or desirable (or eliminate or amend such provisions to the extent they
are no longer necessary or desirable) to preserve the tax status of the
Partnership.
8.2 ASSIGNEES.
8.2.1 The Partnership shall not recognize for any purpose any purported
Assignment of all or any fraction of the Interest of a Limited Partner unless
the provisions of paragraph 8.1 shall have been complied with and there shall
have been filed with the Partnership a dated Notification of such Assignment, in
form satisfactory to the Managing General Partner, executed by both the assignor
and the Assignee, and such Notification (i) contains the assumption by the
Assignee of all the obligations and liabilities of the assignor under this
Agreement and the acceptance by the Assignee of all of the terms and provisions
of this Agreement and a power of attorney consistent with Article Twelve of this
Agreement and (ii) represents that such Assignment was made in accordance with
all applicable laws and regulations. Any Assignment shall be recognized by the
Partnership as effective on the first day of the month following the month in
which such Notification is filed with the Partnership. If an Interest is
Assigned more than once during a fiscal quarter, the last Assignee with respect
to whom Notification is received shall be recognized by the Partnership.
8.2.2 Unless and until an Assignee of an Interest becomes a Substituted
Limited Partner, such Assignee shall not be entitled to vote or give Consents
with respect to such Interest or to receive any Partnership reports or other
Partnership information, except to the extent required by law.
8.2.3 Any Limited Partner who shall Assign all of his Interest shall cease
to be a Limited Partner and shall not retain any statutory rights as a Limited
Partner.
8.2.4 Anything herein to the contrary notwithstanding, both the Partnership
and the General Partners shall be entitled to treat the assignor of an Interest
as the absolute owner thereof in all respects, and shall incur no liability for
distributions made in good faith to him, until such time as a written Assignment
by such assignor that conforms to the requirements of this Article Eight has
been received by the Partnership and accepted by the Managing General Partner.
8.2.5 A Person who is the Assignee of all or any fraction of the Interest
of a Limited Partner, but does not become a Substituted Limited Partner and
desires to make a further Assignment of such Interest, shall be subject to all
the provisions of this Article Eight to the same extent and in the same manner
as any Limited Partner desiring to make an Assignment of his Interest.
8.3 SUBSTITUTED LIMITED PARTNERS.
8.3.1 No Limited Partner shall have the right to substitute an Assignee of
all or any fraction of such Limited Partner's Interest as a Limited Partner in
his, her or its place. Any such Assignee of an Interest (whether pursuant to a
voluntary or involuntary transfer) shall be admitted to the Partnership as a
Substituted Limited Partner only (i) with the Consent of the Managing General
Partner, which Consent shall be granted or withheld in the absolute discretion
of the Managing General Partner and may be arbitrarily withheld subject to
paragraph 8.3.4, (ii) by satisfying the requirements of paragraphs 8.1 and 8.2
and (iii) if necessary, upon an amendment to this Agreement or such other
instrument, executed by all necessary parties and filed or recorded in the
proper records of each jurisdiction in which such filing or recordation is
necessary to qualify the Partnership to conduct business or to preserve the
limited liability of the Limited Partners. Any such Consent by the Managing
General Partner may be evidenced if necessary, by the execution by the General
Partners of an amendment to this Agreement evidencing the admission of such
Person as a Limited Partner. The admission of a Substituted Limited Partner
shall be shown in the books and records of the Partnership. The Limited Partners
hereby Consent and agree to such admission of a Substituted Limited Partner by
the Managing General Partner. The Managing General Partner agrees to process
such amendments, if any, not less frequently than quarterly.
8.3.2 Each Substituted Limited Partner, as a condition to his admission as
a Limited Partner, shall execute and acknowledge such instruments, in form and
substance satisfactory to the Managing General Partner, as the Managing General
Partner, in its sole discretion, deems necessary or desirable to effectuate such
admission and to confirm the agreement of the Substituted Limited Partner to be
bound by all the terms and provisions of this
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Agreement with respect to the Interest acquired. All reasonable expenses,
including attorneys' fees, incurred by the Partnership in this connection shall
be borne by such Substituted Limited Partner.
8.3.3 Until an Assignee shall have been admitted to the Partnership as a
Substituted Limited Partner pursuant to paragraph 8.3.1, such Assignee shall be
entitled to all of the rights of an Assignee of a limited partnership interest
under the Partnership Act.
8.3.4 If a Limited Partner Assigns his Interest in a manner which is
effective under this Agreement, the Managing General Partner will either
promptly consent to take all actions necessary to ensure that such Assignee
shall become a Substituted Limited Partner or, if such consent is withheld, the
Managing General Partner shall exercise the voting rights under the Investment
Company Act of 1940 in accordance with the written instructions of the Assignee.
8.4 INDEMNIFICATION AND TERMS OF ADMISSION. Each Limited Partner and
Assignee shall indemnify and hold harmless the Partnership, the General Partners
and every Limited Partner who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of or
arising from any actual or alleged misrepresentation or misstatement of facts or
omission to state facts made (or omitted to be made) by such Limited Partner or
Assignee in connection with any Assignment of all or any part of an Interest, or
the admission of a Substituted Limited Partner to the Partnership, against
expenses for which the Partnership or such other Person has not otherwise been
reimbursed (including attorneys' fees, judgments, fines and amounts paid in
settlement) actually and reasonably incurred by him in connection with such
action, suit or proceeding.
8.5 INCAPACITY OF A LIMITED PARTNER. If a Limited Partner dies, his
executor, administrator or trustee, or, if he is adjudicated incompetent, his
committee, guardian, or conservator, or, if he becomes bankrupt, the trustee or
receiver of his estate, shall have all the rights of a Limited Partner for the
purpose of settling or managing the estate of such Limited Partner, and such
power as the Incapacitated Limited Partner possessed to Assign all or any part
of the Incapacitated Limited Partner's Interest and to join with such Assignee
in satisfying conditions precedent to such Assignee becoming a Substituted
Limited Partner. The Incapacity of a Limited Partner shall not dissolve the
Partnership.
8.6 SALES BY THE MANAGEMENT COMPANY. Anything herein to the contrary
notwithstanding, in connection with the resale of Units by the Managing General
Partner or the Management Company at a Closing after the initial Closing of the
sale of Units, (i) a purchaser's subscription for Units will constitute
Notification to the Partnership satisfactory to the Managing General Partner of
such sale for purposes of paragraph 8.2.1; (ii) the Partnership shall recognize
such sale as effective on the date of such subsequent Closing; and (iii) such
purchasers shall be admitted to the Partnership as Substituted Limited Partners
as of the date of such subsequent Closing.
8.7 PUBLICLY TRADED PARTNERSHIP LIMITATION. Notwithstanding anything to the
contrary in this Agreement, no Assignment of an Interest, Unit, or any part
thereof will be recognized if, after giving effect to such Assignment, the
Partnership would not satisfy at least one of the safe harbors contained in the
regulations under Section 7704 of the Code. These safe harbors include: (1)
transfers not involving trading; (2) redemption and repurchase agreements; (3)
qualified matching services; (4) private placements; and (5) lack of actual
trading.
ARTICLE NINE
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE PARTNERSHIP
9.1 DISSOLUTION.
9.1.1 The Partnership shall be dissolved and its affairs shall be wound up
upon the happening of any of the following events:
(a) the expiration of its term;
(b) the withdrawal, resignation, removal or Incapacity of all General
Partners;
(c) the election to dissolve the Partnership by a majority in Interest
of the Limited Partners;
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(d) the withdrawal, resignation, removal or Incapacity of the Managing
General Partner without the designation of a successor Manager General
Partner under paragraph 6.2, 6.3 or 6.4; or
(e) the sale or other disposition at any one time of all or
substantially all of the assets of the Partnership. This subsection (e) is
subject to the Consent requirement of Section 5.3.5, except that such
Consent shall not be required in the instance of the sale or disposition of
a sole remaining asset of the Partnership.
Dissolution of the Partnership shall be effective on the day on which the
event occurs giving rise to the dissolution, but the Partnership shall not
terminate until the assets of the Partnership have been distributed as provided
in paragraph 9.2 and the Certificate of Limited Partnership of the Partnership
has been canceled.
9.2 LIQUIDATION.
9.2.1 Upon dissolution of the Partnership, the Individual General Partners
or a liquidating trustee, if one is appointed, shall wind up the affairs of the
Partnership and, in their sole discretion, liquidate all or any part of the
assets of the Partnership. The Individual General Partners or such liquidating
trustee shall, in their absolute discretion, determine the time, manner and
terms of any sale or other disposition of the Partnership's investments for the
purpose of obtaining in their opinion, fair value for such assets.
9.2.2 Profits and Losses arising from sales upon liquidation, and
unrealized Profits and Losses attributable to securities to be distributed in
kind that are deemed realized pursuant to paragraph 4.2.1, shall be allocated as
provided in paragraph 4.2. In settling accounts after dissolution, the assets of
the Partnership ("Liquidation Assets") shall be paid out in the following order:
(a) first, to the payment of debts and liabilities of the Partnership
and the expenses of liquidation (including any debts and liabilities of the
Partnership to any of the Partners or their Affiliates as creditors and not
with respect to distributions relating to Partnership Interests), other
than debts, liabilities or expenses for which reasonable provision for
payment has been made;
(b) second, to the establishment of any reserve which the Individual
General Partners may deem reasonably necessary for any contingent or
unforeseen liabilities or obligations of the Partnership, unless some other
reasonable provision therefor has been made. Such reserve may be paid over
by the Individual General Partners to any attorney-at-law or other
acceptable party, as escrow agent, to be held for disbursement in payment
of any of the aforesaid liabilities and, at the expiration of such period
as shall be deemed advisable by the Individual General Partners, for
distribution of the balance, in the manner hereinafter provided in this
paragraph 9.2; and
(c) third, 99% to the Limited Partners in proportion to their Capital
Contributions and 1% to the General Partners until the Limited Partners
have received cumulative distributions pursuant to paragraph 4.1 and this
paragraph 9.2.2 in an amount equal to their Capital Contributions;
(d) fourth, 100% to the General Partners until the General Partners
shall have received pursuant to this clause (d) an amount equal to any
unpaid Deferred Distribution Amount;
(e) fifth, 90% to the Limited Partners in proportion to their Capital
Contributions and 10% to the General Partners (9% being a General Partner
Distribution) until the Limited Partners have received cumulative
distributions pursuant to paragraph 4.1 and this paragraph 9.2.2 in an
amount equal to two times their Capital Contributions; and
(f) sixth, the balance shall be distributed 80% to the Limited
Partners in proportion to their Capital Contributions and 20% to the
General Partners (19% being a General Partner Distribution).
Notwithstanding the provisions of Article Four and the foregoing provisions
of paragraph 9.2.2, to the extent that making any General Partner Distribution
pursuant to clause (e) or (f) or making a distribution pursuant to clause (d)
would at the time otherwise payable result in the General Partners receiving
cumulative General Partner Distributions from capital gains in excess of 20% of
cumulative capital gains realized by the Partnership (net of realized capital
losses and unrealized capital depreciation), such excess shall be deferred (and
defined to be a Deferred Distribution Amount) and be payable only to the extent
that when paid such payment would not
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cause such result. If, at the time of liquidation, the General Partners shall
have received cumulative General Partner Distributions from capital gains in
excess of the permitted amount, the General Partners shall be obligated to
return any excess amount to the Partnership, which Deferred Distribution Amount
shall be distributed as otherwise provided herein; provided, on final
distribution, any remaining unpaid Deferred Distribution Amount shall be
distributed to the Partners in proportion to their Capital Contributions.
9.2.3 Upon dissolution and termination of the Partnership, the General
Partners will contribute to the Partnership an amount equal to the lesser of:
(a) the deficit balance, if any, in their Capital Accounts; or (b) the excess,
if any, of 1.01% of the total Capital Contributions of the Limited Partners over
the Capital Contributions previously contributed by the General Partners.
9.2.4 When the Individual General Partners or liquidating trustee have
complied with the foregoing liquidation plan, there shall be executed and filed
an instrument evidencing the cancellation of the Certificate of Limited
Partnership of the Partnership.
9.3 ROLL-UP TRANSACTIONS RESTRICTIONS.
9.3.1 The Partnership shall not participate in a proposed Roll-Up if as a
result of the transaction:
(a) the voting rights of the Partners as provided herein at the time
the Roll-Up is proposed would be materially reduced in the Roll-Up Entity;
(b) the Partners' right of access to books and records of the
Partnership as provided herein would be materially reduced in the Roll-Up
Entity;
(c) the charter, bylaws, partnership agreement or other charter
documents of the surviving entity would contain material limitations on the
accumulation of shares or interests by any purchaser of shares or
interests, except that minimum restrictions may be imposed as necessary to
preserve the tax status of the Roll-Up Entity; or
(d) any of the costs of the transaction would be borne by the
Partnership if the Roll-Up transaction is not approved by the Partners.
9.3.2 The Partnership shall, in connection with a proposed Roll-Up, obtain
an appraisal of Partnership assets from a competent, independent expert, which
appraisal shall be based on all relevant information and shall indicate the
value of the Partnership's assets as of a date immediately prior to the
announcement of the proposed Roll-Up. All Partnership assets shall be appraised
on a consistent basis assuming liquidation to occur on an orderly basis over a
twelve-month period. The terms of the engagement of the expert shall indicate
that the engagement is for the benefit of the Partnership and the Partners. A
summary of the expert's appraisal, including all material assumptions of the
appraisal, shall be included in a report to the Partners in connection with the
proposed Roll-Up.
9.3.3 The Partnership shall offer to those Partners who vote "no" on the
Roll-Up proposal the choice of:
(a) accepting the securities of the Roll-Up Entity offered in the
proposed Roll-Up; or
(b) one of the following:
(i) remaining as Partners in the Partnership and preserving their
Interests herein on the same terms and conditions as existed previously;
or
(ii) receiving cash in an amount equal to the Partner's pro rata
share of the appraised value of the net assets of the Partnership.
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ARTICLE TEN
AMENDMENTS
10.1 PROPOSAL OF AMENDMENTS GENERALLY.
10.1.1 Amendments to this Agreement to reflect the addition or substitution
of a Limited Partner, the admission of an additional or successor General
Partner or the withdrawal of a General Partner, shall be made at the time and in
the manner referred to in paragraph 6.5.1 or 8.3.1. Any amendment to this
Agreement may be proposed by the Individual General Partners or by 10% in
Interest of the Limited Partners. The Partners proposing such amendment shall
submit (a) the text of such amendment, and (b) a statement of the purpose of
such amendment. The Individual General Partners shall, within 20 days after
receipt of any proposal under this paragraph 10.1.1, give Notification to all
Partners of such proposed amendment and of such statement of purpose, together,
in the case of an amendment proposed by Limited Partners, with the views, if
any, of the Individual General Partners with respect to such proposed amendment.
However, the Individual General Partners shall not be required to give
Notification to all Partners as provided in this Section 10.1 of any such
proposed amendment and no such proposed amendment shall be voted on by Partners
if, within 20 days after receipt by the Individual General Partners of any
proposed amendment under this Section 10.1, counsel for the Partnership has
submitted to the Partners proposing such amendment an opinion to the effect that
there is a substantial likelihood that such amendment, or any vote thereon or
vote provided for therein, would not be permitted by the Partnership Act, would
impair the limited liability of the Limited Partners or would adversely affect
the classification of the Partnership as a partnership for federal income tax
purposes.
10.1.2 The Individual General Partners shall, within a reasonable time
after the adoption of any amendment to this Agreement, make any filings or
publications required or desirable to reflect such amendment, including any
required filing of any certificate of limited partnership or other instrument or
similar document of the type contemplated by paragraph 2.6.
10.2 ADOPTION OF AMENDMENTS; LIMITATIONS THEREON.
10.2.1 Subject to paragraph 11.2, a majority in Interest of the Limited
Partners may, without the concurrence of any General Partner, amend this
Agreement; provided, however, that no amendment to this Agreement may:
(a) add to, detract from or otherwise modify the purposes of the
Partnership without the Consent of all the Limited Partners;
(b) convert a Limited Partner's Interest into a General Partner's
Interest; modify the limited liability of a Limited Partner; alter the
Interest of any Partner in Profits or Losses; or increase the liabilities
or responsibilities of, or diminish the rights or protections of, the
General Partners or any General Partner under this Agreement; in each case,
without the Consent of each such affected Partner;
(c) modify the method provided in Article Four of determining and
allocating Profits and Losses and of determining distributions of available
cash without the Consent of each Partner adversely affected by such
modification;
(d) amend paragraph 6.5.2 without the Consent of the General Partners;
(e) amend any provisions hereof which require the Consent, action or
approval of a specified percentage in Interest of the Limited Partners
without the Consent of such specified percentage in Interest of the Limited
Partners; or
(f) amend this paragraph 10.2.1 or paragraph 11.2 without the Consent
of the affected Partners.
10.2.2 In addition to any amendments otherwise authorized hereby, each
Limited Partner and each Assignee agrees that the Individual General Partners
(pursuant to the powers of attorney granted in paragraph 12.1), without the
approval of or any Limited Partner or Assignee, may (but shall not be obligated
to) amend any
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provision of this Agreement, and execute, swear to, acknowledge, deliver,
certify, file and record whatever documents may be required in connection
therewith, to reflect:
(a) a change in the name of the Partnership; the location of the
principal place of business of the Partnership, the registered office of
the Partnership in the State of Missouri or the registered agent for
service of process on the Partnership in the State of Missouri;
(b) the admission, substitution, removal or withdrawal of Partners in
accordance with this Agreement;
(c) a change that the Individual General Partners in their sole
discretion have determined to be reasonable and necessary or appropriate to
qualify or continue the qualification of the Partnership as a limited
partnership or a partnership in which the Limited Partners have limited
liability under the laws of any state or that is necessary or advisable in
the opinion of the Individual General Partners to ensure that the
Partnership will continue to be treated as a partnership, and not an
association taxable as a corporation, for Federal income tax purposes;
(d) a change that is necessary or appropriate to change the
allocations of Partnership income, gain, losses, deductions or credits in
Article IV hereof to comport with the requirements of the Code, regulations
or interpretations of the law applicable to allocations, if the Individual
General Partners conclude in good faith that such amendments are in the
overall best interests of the Individual General Partners and the Limited
Partners; provided, however, that the Individual General Partners shall be
authorized to amend such provisions only to the minimum extent which in
good faith it judges to be necessary or advisable, based upon advice of
outside counsel or its accountants, to make the Partnership's allocations
of these items effective for Federal income tax purposes; and provided
further, that the Individual General Partners shall be under no obligation
to make any such amendment;
(e) a change (i) that in the sole discretion of the Individual General
Partners does not adversely affect the Limited Partners in any material
respect, or (ii) that is necessary or desirable to satisfy any
requirements, conditions or guidelines contained in any opinion, directive,
order, ruling or regulation of any Federal or state agency or judicial
authority or contained in any Federal or state statute, compliance with any
of which the Individual General Partners deem to be in the best interests
of the Partnership and the Limited Partners, or (iii) that is required or
contemplated by this Agreement;
(f) an amendment that is necessary, in the opinion of counsel to the
Partnership, to prevent the Partnership or the General Partners or any of
their directors, officers, employees or agents from in any manner being
subjected to the provisions of the "plan asset" regulations adopted under
the Employee Retirement Income Security Act of 1974, as amended, whether or
not substantially similar to plan asset regulations currently applied or
proposed by the United States Department of Labor;
(g) any amendment expressly permitted in this Agreement to be made by
the General Partners acting without the Consent of the Limited Partners;
(h) any amendment as is necessary or appropriate to cure any ambiguity
or to correct or supplement any provision of this Agreement which may be
inconsistent with any other provision of this Agreement and does not
materially adversely affect the Limited Partners;
(i) any amendment to the Management Agreement that is expressly
permitted to be adopted by the terms thereof without the Consent of the
Limited Partners; or
(j) any other amendments similar to the foregoing that are not
materially adverse to the Limited Partners.
10.2.3 So long as the Partnership is a business development company subject
to the provisions of the 1940 Act, the Individual General Partners shall amend
this Agreement to reflect any matters that the 1940 Act requires to be approved
or disapproved by the Limited Partners and shall propose such amendment to the
Limited Partners in accordance with this Article Ten.
10.2.4 Upon the adoption of any amendment to this Agreement, the amendment
shall be executed by the General Partners on behalf of themselves and all
Limited Partners and, if required by the Partnership Act, an
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amendment to the Certificate of Limited Partnership of the Partnership shall be
filed or recorded in the proper records of the State of Missouri and of each
jurisdiction in which filing or recordation is necessary for the Partnership to
conduct business or to preserve the limited liability of the Limited Partners.
Each Limited Partner hereby irrevocably appoints and constitutes the General
Partners, and each of them, as his, her or its agent and attorney-in-fact to
execute, deliver, swear to, file and record any and all such amendments. The
power of attorney given herewith is irrevocable, is coupled with an interest and
shall survive and not be affected by the subsequent Incapacity of a Limited
Partner granting it.
10.3 AMENDMENTS ON ADMISSION OR WITHDRAWAL OF A GENERAL PARTNER. If this
Agreement shall be amended to reflect the admission of an additional or
successor General Partner, such amendment shall be signed by all remaining
General Partners and such additional or successor General Partner. If this
Agreement shall be amended to reflect the withdrawal or removal of a General
Partner and the continuation of the business of the Partnership, such amendment
shall be signed by the remaining and successor General Partners.
10.4 COPIES OF AMENDMENTS. The Certificate of Limited Partnership and this
Agreement and each amendment thereto shall be kept in the files of the Managing
General Partner and copies thereof shall be made available to each Limited
Partner upon written request only for any purpose reasonably related to the
Limited Partner's interest as a limited partner in the Partnership, the General
Partners not being otherwise obligated to deliver or mail a copy of the
Certificate of Limited Partnership or this Agreement or any amendment hereto to
the Limited Partners, either before or after its filing, if any, in the State of
Missouri.
ARTICLE ELEVEN
CONSENTS, VOTING AND MEETINGS
11.1 METHOD OF GIVING CONSENT. Any Consent required by this Agreement may
be given as follows:
(a) by a written Consent given by the consenting Partner at or prior
to the doing of the act or thing for which the Consent is solicited,
provided that such Consent shall not have been nullified by either (a)
Notification to the General Partners by the consenting Partner at or prior
to the time of, or the negative vote by such consenting Partner at, any
meeting held to consider the doing of such act or thing, or (b)
Notification to the General Partners by the consenting Partner prior to the
doing of any act or thing the doing of which is not subject to approval at
such meeting; or
(b) by the affirmative vote by the Consenting Partner to the doing of
the act or thing for which the Consent is solicited at any meeting called
and held pursuant to paragraph 11.3 or 11.4 to consider the doing of such
act or thing.
11.2 LIMITATIONS ON REQUIREMENTS FOR CONSENTS. Notwithstanding any other
provisions of this Agreement, if, prior to the exercise by the Limited Partners
of the rights of the Limited Partners (i) to approve actions of the General
Partners pursuant to paragraph 5.3.1 or the actions of the Individual General
Partners pursuant to paragraph 5.3.5, (ii) to remove a General Partner pursuant
to paragraph 6.3 or to approve the appointment of a successor General Partner
pursuant to paragraph 6.2 or 6.3, (iii) to remove General Partners, to approve
successor General Partners and to approve certain Partnership and Management
Agreement matters pursuant to paragraph 7.3.1, (iv) to elect to dissolve the
Partnership pursuant to paragraph 9.1.1, or (v) to amend this Agreement pursuant
to paragraph 10.2.1, as the case may be, counsel for the Partnership shall have
delivered to the Partnership an opinion to the effect that there is a
substantial likelihood that the exercise of such right or rights will violate
the provisions of the Partnership Act or the laws of the other jurisdictions in
which the Partnership is then formed or qualified, will adversely affect the
limited liability of the Limited Partners or will adversely affect the
classification of the Partnership as a partnership for federal income tax
purposes, then
(a) notwithstanding the provisions of paragraph 5.3.1, the General
Partners shall be prohibited from taking an action, performing the act or
entering into the transaction, as the case may be;
(b) notwithstanding the provisions of paragraph 5.3.5, the Individual
General Partners shall be prohibited from taking an action, performing the
act or entering into the transaction, as the case may be;
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(c) notwithstanding the provisions of paragraph 6.2 or 6.3, the
Limited Partners shall be prohibited from removing a General Partner or
from approving the appointment of a successor General Partner;
(d) notwithstanding the provisions of paragraph 7.3.1, the Limited
Partners shall be prohibited from removing General Partners, approving
successor General Partners and approving certain Partnership and Management
Agreement matters, as the case may be;
(e) notwithstanding the provisions of paragraph 9.1.1, the Limited
Partners shall be prohibited from electing to dissolve the Partnership; and
(f) notwithstanding the provisions of paragraph 10.2.1, the Limited
Partners shall be prohibited from amending this Agreement.
except that under any circumstance, the Limited Partners shall be entitled
to all voting rights under the 1940 Act.
Such counsel may rely as to the law of any jurisdiction, other than a
jurisdiction in which such counsel's principal office is located, on an opinion
of counsel in such other jurisdiction in form and substance satisfactory to
them. Any such opinion of counsel for the Partnership shall be subject to
refutation and nullification by an opinion of counsel representing a majority in
Interest of the non-management affiliated Limited Partners, which opinion will
be paid for by the Partnership as a Partnership expense, provided, that such
opinion and such counsel shall be reasonably satisfactory to the Partnership.
11.3 ACTION BY THE INDIVIDUAL GENERAL PARTNERS. The Individual General
Partners shall act by majority vote at a meeting duly called or by unanimous
written Consent without a meeting, unless the 1940 Act requires that a
particular action be taken only at a meeting of the Individual General Partners.
Meetings of the Individual General Partners may be called by any two Individual
General Partners. Individual General Partners may participate in a meeting of
the Individual General Partners or of any committee designated by the Individual
General Partners by means of conference telephone or similar communications
equipment whereby all persons participating in the meeting can hear each other,
and participation in a meeting in this manner shall constitute presence in
person at the meeting, unless the 1940 Act requires that a particular action be
taken only at a meeting in person of the Individual General Partners. Subject to
the requirements of the 1940 Act, the Individual General Partners by majority
vote may delegate to any one of their number, or a committee thereof, their
authority to approve particular matters or take particular actions on behalf of
the Partnership. A quorum for all meetings of Individual General Partners shall
be a majority of the Individual General Partners.
11.4 MEETINGS OF LIMITED PARTNERS. The termination of the Partnership, the
removal of the General Partners and the election of successors and any other
matter requiring the Consent of all or any of the Limited Partners pursuant to
this Agreement may be considered at a meeting of the Partners held not less than
20 nor more than 60 days after the Notification thereof shall have been given by
the Individual General Partners to all Partners. Such Notification (a) may be
given by the Individual General Partners, in their discretion, at any time, and
(b) shall be given by the Individual General Partners within 30 days after
receipt by the Individual General Partners of a written request for such a
meeting made by 10% in Interest of the Limited Partners. Such request shall
describe the specific purposes for which the meeting is to be called. Any such
Notification shall state briefly the purpose, time and place of the meeting. All
such meetings shall be held within or outside the State of Missouri at such
reasonable place as the Individual General Partners shall designate and during
normal business hours. The Partners may vote at any meeting of Partners in
person or by proxy.
11.5 ELECTION OF GENERAL PARTNERS. In the election of Individual General
Partners by the Limited Partners, those candidates receiving the highest number
of votes cast, at a meeting at which a majority in Interest of the Limited
Partners is present in person or by proxy, up to the number of Individual
General Partners proposed to be elected, shall be elected; and each Limited
Partner shall have one vote for each Unit owned by him. In the election of the
Managing General Partner, the candidate receiving the highest number of votes
cast shall be elected pursuant to the foregoing provision. Any vote for the
election of General Partners shall be subject to the limitations of paragraph
11.2.
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11.6 RECORD DATES. The Individual General Partners may set in advance a
date for determining the Limited Partners entitled to Notification of and to
vote at any meeting or to give any Consent without a meeting. All record dates
shall not be more than 60 days prior to the date of the meeting or the Consent
solicitation to which such record date relates (unless such requirement
conflicts with any applicable rule, regulation, guideline or requirement, in
which case the rule, regulation, guideline or requirement shall govern). Only
those Limited Partners holding Units as of the record date shall be entitled to
Notification of and to vote at such meeting or to give the Consent so solicited.
11.7 SUBMISSIONS TO LIMITED PARTNERS. The Individual General Partners shall
give all the Limited Partners Notification of any proposal or other matter
required by any provision of this Agreement or by law to be submitted for the
consideration and approval of the Limited Partners. Such Notification shall
include any information required by the relevant provision of this Agreement or
by law.
11.8 ADJOURNMENT. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting and a new record date need not
be fixed, if the time and place thereof are announced at the meeting at which
the adjournment is taken, unless such adjournment shall be for more than 45
days. At the adjourned meeting, the Partnership may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than 45 days or if a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given in accordance with this Article
Eleven.
11.9 WAIVER OF NOTICE; APPROVAL OF MEETING; APPROVAL OF MINUTES. The
transactions at any meeting of Limited Partners, however called and noticed, and
whenever held, are as valid as though had at a meeting duly held after regular
call and notice, if a quorum is present either in person or by proxy, and if,
either before or after the meeting, each of the Limited Partners entitled to
vote, not present in person or by proxy, signs a written waiver of notice or an
approval of the holding of the meeting or an approval of the minutes thereof.
All waivers, Consents and approvals shall be filed with the Partnership records
or made a part of the minutes of the meeting. Attendance of a Limited Partner at
a meeting shall constitute a waiver of notice of the meeting, except when the
Limited Partner at beginning of the meeting disapproves of the transaction of
any business because the meeting is not lawfully called or convened, and except
that attendance at a meeting is not a waiver of any right to disapprove of the
consideration of matters required to be included in the notice of the meeting,
but not so included, if the disapproval is expressly made at the meeting.
11.10 QUORUM. A Majority-in-Interest of the Limited Partners represented in
person or by proxy shall constitute a quorum at a meeting of Limited Partners.
The Limited Partners shall be entitled to Consent to matters only as
specifically set forth in this Agreement, including the matters set forth in
paragraph 7.3 and as submitted to them by the General Partners or other Limited
Partners, as the case may be. At any meeting of the Limited Partners duly called
and held in accordance with this Agreement at which a quorum is present, the act
of Limited Partners holding at least a majority of the outstanding Units of the
Limited Partners entitled to vote and be present in person or by proxy at such
meeting shall be deemed to constitute the act of all Limited Partners, unless a
higher percentage is required with respect to such action under the provisions
of this Agreement, in which case the act of the Limited Partners owning such
higher percentage shall be required. In the absence of a quorum, any meeting of
Limited Partners may be adjourned from time to time by the affirmative vote of
the holders of a majority in Interest represented either in person or by proxy,
but no other business may be transacted, except as provided in paragraph 11.8.
11.11 CONDUCT OF MEETING. The Individual General Partners shall have full
power and authority concerning the manner of conducting any meeting of the
Limited Partners or solicitation of approvals in writing, including, without
limitation, the determination of Persons entitled to vote, the existence of a
quorum, the
satisfaction of the requirements of paragraph 11.4, the conduct of voting, the
validity and effect of any proxies, and the determination of any controversies,
votes or challenges arising in connection with or during the meeting or voting.
The Individual General Partners shall designate a Person to serve as chairman of
any meeting and shall further designate a Person to take the minutes of any
meeting, in either case including, without limitation, an Individual General
Partner or a director or officer of the general partner of the Managing General
Partner thereof. All minutes shall be kept with the records of the Partnership
maintained by the Individual General Partners. The Individual General Partners
may make such other regulations consistent with applicable law and this
Agreement
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as they may deem advisable concerning the conduct of any meeting of the Limited
Partners or solicitation of Consents in writing, including regulations in regard
to the appointment of proxies, the appointment and duties of inspectors of
Consents, the submission and examination of proxies and other evidence of the
right to Consent, and the revocation of Consents in writing.
11.12 ACTION WITHOUT A MEETING. Any action that may be taken at a meeting
of the Limited Partners may be taken without a meeting if a Consent in writing
setting forth the action so taken is signed by Limited Partners owning not less
than the minimum percentage of the outstanding Units that would be necessary to
authorize or take such action at a meeting at which all the Limited Partners
were present and voted. The Individual General Partners may specify that any
written ballot submitted to Limited Partners for the purpose of taking any
action without a meeting shall be returned to the Partnership within the time,
not less than 20 days, specified by the Individual General Partners. If a ballot
returned to the Partnership does not vote all of the Units held by the Limited
Partner, the Partnership shall be deemed to have failed to receive a ballot for
the Units which were not voted. If Consent to the taking of any action by the
Limited Partners is solicited by any Person other than by or on behalf of the
Individual General Partners, the written Consents shall have no force and effect
unless and until (a) they are deposited with the Partnership in care of the
Individual General Partners, (b) approvals sufficient to take
the action proposed are dated as of a date not more than 90 days prior to the
date sufficient approvals are deposited with the Partnership, and (c) an opinion
of counsel, provided by counsel reasonably acceptable to the Individual General
Partners, is delivered to the Individual General Partners to the effect that the
exercise of such right and the action proposed to be taken with respect to any
particular matter (i) will not cause the Limited Partners to be deemed to be
taking part in the management and control of the business and affairs of the
Partnership so as to subject the Limited Partners to unlimited liability, (ii)
will not jeopardize the status of the Partnership as a partnership under
applicable tax laws and regulations, and (iii) is not prohibited by the state
statutes then governing the rights, duties and liabilities of the Partnership
and the Partners.
11.13 CONFLICTS OF INTEREST. Neither the General Partners nor their
Affiliates shall be entitled to vote their Partnership Interests with respect to
matters which involve conflicts of interest between themselves and the
Partnership. For purposes of this paragraph 11.13, "Affiliates" shall not
include Limited Partners whose only affiliation with a party who has a conflict
of interest is that they are employees of Edward Jones or employees or limited
partners of The Jones Financial Companies, a Limited Partnership ("JFC") or
general partners of JFC with less than 5% interest in JFC.
ARTICLE TWELVE
POWER OF ATTORNEY
12.1 POWER OF ATTORNEY.
12.1.1 The Initial Limited Partner, each Limited Partner and each Assignee
hereby makes, constitutes and appoints the General Partners (and any successor
thereof by merger, assignment, election or otherwise), and each of them, and
each of their authorized agents, as his, her or its true and lawful agent and
attorney-in-fact, with full power of substitution and full power and authority
in his, her or its name, place and stead to make, execute, sign, acknowledge,
swear to, deliver, certify, record and file:
(a) (i) this Agreement and any amendment to this Agreement; (ii) the
original Certificate of Limited Partnership of the Partnership and all
amendments thereto required or permitted by law or the provisions of this
Agreement; (iii) all certificates and other instruments deemed advisable by
the General Partners to carry out the provisions of this Agreement and
applicable law or to permit the Partnership to become or to continue as a
limited partnership or partnership wherein the Limited Partners have
limited liability in the State of Missouri and in any jurisdiction where
the Partnership may be doing business; (iv) all instruments that the
General Partners deem necessary or appropriate to reflect an amendment,
change, modification or restatement of this Agreement or the Partnership in
accordance with this Agreement, including, without limitation, the
substitution of Assignees as Substituted Limited Partners pursuant to
paragraph 8.3 or the admission, withdrawal or substitution of any Partner
pursuant to this Agreement; (v) all conveyances and other instruments or
documents deemed necessary or advisable by the General Partners to effect
the dissolution and liquidation of the Partnership, including a
certification of cancellation; (vi) all fictitious or
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assumed name certificates required or permitted to be filed on behalf of
the Partnership; (vii) all instruments or documents required by law to be
filed in connection with the issuance of limited partnership interests
senior to the Units; and (viii) all other instruments or documents which
may be required or permitted by law to be filed or recorded on behalf of
the Partnership, including, without limitation, those relating to the
formation, qualification and operation of the Partnership;
(b) all ballots, Consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole discretion of the General
Partners, to make, evidence, give, confirm or ratify any Consent or other
action which is made or given by the Limited Partners or the General
Partners hereunder and is consistent with this Agreement and/or appropriate
or necessary, in the sole discretion of the General Partners, to effectuate
the terms or intent of this Agreement; and
(c) all agreements, tax returns, forms, schedules and similar
documents required to effectuate the terms or intent of this Agreement and
as required by federal, state or local tax laws.
12.1.2 The foregoing power of attorney:
(a) is coupled with an interest and shall be irrevocable and shall
survive and shall not be affected by the subsequent Incapacity of each
Limited Partner and Assignee;
(b) may be exercised by the General Partners or any of the General
Partners either by signing separately or jointly as attorneys-in-fact for
each or all Limited Partners; and
(c) shall survive the delivery of an assignment by a Limited Partner
or Assignee of the whole or any fraction of his, her or its Interest and
shall extend to such Limited Partner's or Assignee's heirs, successors,
assigns and personal representatives; except that, where the Assignee of
the whole of such Limited Partner's Interest has been approved by the
General Partners for admission to the Partnership as a Substituted Limited
Partner, the power of attorney of the assignee shall survive the delivery
of such assignment for the sole purpose of enabling the General Partners to
make, execute, sign, swear to, acknowledge, deliver, certify, record and
file any instrument necessary or appropriate to effect such substitution.
12.1.3 Each Limited Partner and Assignee hereby agrees to be bound by any
representations made by a General Partner, acting in good faith pursuant to such
power of attorney; and each Limited Partner and Assignee hereby waives any and
all defenses which may be available to contest, negate or disaffirm the action
of such General Partner, taken in good faith under such power of attorney.
12.1.4 Each Limited Partner and Assignee shall execute and deliver to the
General Partners within five days after receipt of the General Partner's request
therefor such further designations, powers-of-attorney and other instruments as
the General Partners deem necessary or appropriate to carry out the terms of
this Agreement.
ARTICLE THIRTEEN
RECORDS AND ACCOUNTING, REPORTS, FISCAL AFFAIRS
13.1 RECORDS AND ACCOUNTING.
13.1.1 Appropriate records and books of account of the business of the
Partnership, including a list of the names, business or mailing addresses,
telephone numbers, and Interest of all Limited Partners, shall be maintained at
the Partnership's principal place of business. Any records maintained by the
Partnership in the regular course of its business, including the record of
Limited Partners and Assignees, books of account and records of Partnership
proceedings, may be kept on or be in the form of punch cards, magnetic tape,
photographs, micrographics or any other information storage device. Each Limited
Partner or his, her or its duly authorized representative (but not Assignees)
shall have access to them, upon reasonable notice and for a purpose reasonably
related to the Limited Partner's interest as a limited partner of the
Partnership, including matters relating to the Limited Partner's voting rights
under the Partnership Agreement, and the exercise of the Limited Partner's
rights under federal proxy laws, at all reasonable times during business hours.
Any Limited Partner, or his, her or its duly authorized representatives, within
ten days after payment of the costs of collection, duplication and mailing,
shall be entitled to receive a copy of the Limited Partner list to which such
Person is entitled under the
A-36
<PAGE> 116
Partnership Agreement, which list shall be printed in alphabetical order, on
white paper, and in readily readable type size (no smaller than 10-point type)
and any Limited Partner, or his, her or its duly authorized representatives,
upon paying the costs of collection, duplication and mailing, shall be entitled
to a copy of information to which such Person is entitled under the Partnership
Act. All information received by a Limited Partner pursuant to this paragraph
shall be kept confidential and shall be used for Partnership purposes only.
13.1.2 The books and records of the Partnership shall be kept on the
accrual basis of accounting. The accrual basis of accounting shall be followed
by the Partnership for federal income tax purposes. The external financial
statements of the Partnership shall be prepared in accordance with generally
accepted accounting principles, and shall be appropriate and adequate for the
Partnership's business and for carrying out all provisions of this Agreement.
The taxable year of the Partnership shall be its Fiscal Year, unless the
Individual General Partners shall determine otherwise.
13.1.3 There shall be an interim closing of the books of account of the
Partnership as of the date of the withdrawal therefrom of the Initial Limited
Partner, the date of each admission thereto of Additional Limited Partners
pursuant to paragraph 3.3.1 and at such time as the Partnership's taxable year
ends pursuant to the Code and such other times as the Individual General
Partners shall determine are required by good accounting practices or may be
appropriate under the circumstances.
13.2 ANNUAL REPORTS. The General Partners shall use their best efforts to
cause to be delivered within 120 days after the end of each Fiscal Year to each
Person who was a Partner at any time during the fiscal year, an annual report
containing the following:
(a) financial statements of the Partnership, which shall be prepared
in accordance with generally accepted accounting principles and shall be
accompanied by a report containing an opinion of a firm of independent
certified public accountants;
(b) a general description of the investment activities of the
Partnership during the period covered by the annual report and, with
respect to the fourth quarter, a description required by paragraph
13.3(ii);
(c) a summary report of any material transactions between the
Partnership and the General Partners or any of their Affiliates, including
fees or compensation paid by the Partnership and the services performed by
the General Partners or any such Affiliate for such fees or compensation
and including a breakdown of any costs and expenses reimbursed to the
General Partners or any of their Affiliates; and
(d) a special report prepared by the independent certified public
accountants on the allocation of the costs and expenses to the Partnership
based on, at a minimum, a review of the time records of individual
employees, the costs of whose services were reimbursed; and a review of the
specific nature of the work performed by each such employee.
13.3 QUARTERLY REPORTS. The General Partners shall use their best efforts
to cause to be delivered within 60 days after the end of each quarter of each
Fiscal Year other than the fourth quarter to each Person who was a Partner at
any time during the quarter then ended, a quarterly report containing a balance
sheet and statement of income for the period covered by the report, each of
which may be unaudited but shall be certified by the Managing General Partner on
behalf of the General Partners as fairly presenting the financial position and
results of operations of the Partnership during the quarter covered by the
report. The report shall also contain (i) with respect to any quarter in which
the Partnership makes an investment in a portfolio company, a summary
description of such investment and the terms thereof, (ii) a description of any
material event regarding the business of the Partnership (including material
developments in the portfolio company investments made by the Partnership)
during the quarter covered by the report, (iii) with respect to any quarter in
which a partner or other personnel of Edward Jones have been granted the right
to invest in portfolio companies, in connection with an investment by the
Partnership in such portfolio company, a summary description of the right so
granted and the terms thereof, and (iv) with respect to any quarter in which the
holder of a right granted above exercises, sells, transfers or disposes of any
such right granted above or the interest acquired upon exercise of such right, a
summary description of the transaction and the terms thereof.
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<PAGE> 117
13.4 TAX INFORMATION. The General Partners will use their best efforts to
cause to be sent within 75 days after the end of each Fiscal Year to each Person
who was a Partner at any time during such Fiscal Year all information relating
to the Partnership necessary for the preparation of such Partner's Federal
income tax returns.
13.5 PARTNERSHIP FUNDS. No funds of the Partnership shall be kept in any
account other than a Partnership Account and funds shall not be commingled with
the funds of any other Person, and the General Partners shall not employ, or
permit any other Person to employ, such funds in any manner except for the
benefit of the Partnership. The funds of the Partnership not needed in the
operation of the business may be deposited in such bank accounts as the
Individual General Partners may designate pursuant to paragraph 5.1.1(f), or
invested pursuant to paragraphs 5.1.1(o) or 5.1.1(p). Withdrawals therefrom
shall be made upon such signatures as the Individual General Partners may
designate.
13.6 ELECTIONS. The General Partners may cause (but are not under any
obligation to do so) the Partnership to make all elections required or permitted
to be made by the Partnership under the Code and not otherwise expressly
provided for in this Agreement, in the manner that the General Partners believe
will be most advantageous to individual taxpayers who (i) are married and filing
joint federal income tax returns, (ii) are not "dealers" for federal income tax
purposes, and (iii) have income at least part of which, without giving effect to
any additional tax on preference items, is subject to the highest federal income
tax bracket.
ARTICLE FOURTEEN
MISCELLANEOUS
14.1 NOTIFICATION.
14.1.1 Any Notification to any Limited Partner or Assignee shall be at the
address of such Partner set forth in the books and records of the Partnership,
regardless of any claim of any Person who may have an interest in a Unit or
Interest by reason of an assignment or otherwise. An affidavit or certificate of
the giving of any Notification to any Limited Partner in accordance with the
provisions of this paragraph 14.1 executed by the Managing General Partner or
the mailing organization shall be prima facie evidence of the giving of such
Notification. If any Notification addressed to a Limited Partner or Assignee at
the address of such Limited Partner or Assignee appears in the books and records
of the Partnership is returned by the organization delivering such Notification
marked to indicate that such organization is unable to deliver it, such
Notification and any subsequent Notifications shall be deemed to have been duly
given without further mailing or delivery (until such time as the Limited
Partner or Assignee notifies the Partnership of a change in address) if they are
available for the Limited Partner or Assignee at the principal office of the
Partnership for a period of one year from the date of the giving of such
Notification to the other Limited Partners or Assignees. Any Notification to the
Partnership or the General Partners shall be at the principal office of the
Managing General Partner, as set forth in the books and records of the
Partnership and designated pursuant to paragraph 2.2. The Partnership and the
General Partners may rely on and shall be protected in relying on any
Notification or other communication from a Partner or other Person if believed
by them to be genuine.
14.1.2 Any Notification shall be deemed conclusively to have been given if
personally delivered or sent by United States mails or by telegram or telex
confirmed by letter and will be deemed given, unless earlier received, (i) if
sent by certified or registered mail, return receipt requested, or by
first-class mail, five calendar days after being deposited in the United States
mails, postage prepaid, (ii) if sent by United States Express Mail, two calendar
days after being deposited in the United States mails, postage prepaid, (iii) if
sent by telegram or telex or facsimile transmission, on the date sent provided
confirmatory notice is sent by first-class mail, postage prepaid, and (iv) if
delivered by hand, on the date of receipt.
14.2 GOVERNING LAW; SEPARABILITY OF PROVISION. It is the intention of the
parties that the internal laws of the State of Missouri, as the same may be
amended from time to time, shall govern the validity of this Agreement, the
construction of its terms and interpretation of the rights and duties of the
parties. If any provision of this Agreement shall be held to be invalid, illegal
or unenforceable in any respect the remainder of this Agreement shall not be
affected thereby.
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<PAGE> 118
14.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties; it supersedes any prior agreement or understandings among
them, oral or written, all of which are hereby canceled. This Agreement may not
be modified or amended other than pursuant to Article Ten.
14.4 HEADINGS, ETC. The headings in this Agreement are inserted for
convenience of reference only and shall not affect interpretations of this
Agreement. Wherever from the context it appears appropriate, each term stated in
either the singular or the plural shall include the singular and the plural, and
pronouns stated in either the masculine or the neuter gender shall include the
masculine, the feminine and the neuter.
14.5 BINDING PROVISIONS; CREDITORS. The covenants and agreements contained
herein shall be binding upon and inure to the benefit of the heirs, executors,
administrators, successors, legal representatives and permitted assigns of the
respective parties hereto. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any creditors of the Partnership.
14.6 NO WAIVER. The failure of any Partner to seek redress for violation,
or to insist on strict performance, of any covenant or condition of this
Agreement shall not prevent a subsequent act which would have constituted a
violation from having the effect of an original violation.
14.7 LEGENDS. If certificates are issued evidencing a Limited Partner's
Interest, each such certificate shall bear such legends as may be required by
applicable Federal and state laws or as may be deemed necessary or appropriate
by the General Partners, to reflect restrictions upon transfer contemplated
herein.
14.8 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MANAGING GENERAL PARTNER
CIP MANAGEMENT L.P., LLLP
By: CIP MANAGEMENT, INC.,
its managing general partner
By:
----------------------------------
Daniel A. Burkhardt, President
By:
----------------------------------
Daniel A. Burkhardt, General
Partner
Address:
12555 Manchester Road
- ------------------------------------
St. Louis, Missouri 63131
- ------------------------------------
A-39
<PAGE> 119
INDIVIDUAL GENERAL PARTNERS
------------------------------------
Ralph G. Kelly
Address:
- -------------------------------------
- -------------------------------------
------------------------------------
Thomas A. Hughes
Address:
- -------------------------------------
- -------------------------------------
LIMITED PARTNERS
All Limited Partners now and
hereafter admitted as limited
partners of the Partnership,
pursuant to Powers of Attorney and
authorizations now and hereafter
executed in favor of, and granted
and delivered to, the General
Partners.
CIP MANAGEMENT L.P., LLLP
By: CIP MANAGEMENT, INC.,
its managing general partner
By:
----------------------------------
Daniel A. Burkhardt, President
Address:
12555 Manchester Road
- -------------------------------------
St. Louis, Missouri 63131
- -------------------------------------
WITHDRAWING AND INITIAL LIMITED
PARTNER
------------------------------------
Steven Novik
Address:
12555 Manchester Road
- -------------------------------------
St. Louis, Missouri 63131
- -------------------------------------
A-40
<PAGE> 120
EXHIBIT B
SUBSCRIPTION AGREEMENT
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
CIP Management L.P., LLLP
Managing General Partner
of Community Investment Partners III L.P., LLLP
c/o Edward D. Jones & Co., L.P.
12555 Manchester Road
St. Louis, Missouri 63131
Managing General Partner:
The undersigned, by signing the Subscription Qualification and Acceptance
Page attached hereto, hereby tenders this subscription and applies for the
purchase of the number of units of limited partnership interest ("Units") set
forth below, in Community Investment Partners III L.P., LLLP (the
"Partnership"), at a price of $25 per Unit, minimum purchase of 100 Units
(except South Carolina residents whose minimum purchase must equal 200 Units).
The undersigned understands that the funds submitted herewith ($12.50 per Unit)
will be held by ChaseMellon Shareholder Services, L.L.C., St. Louis, Missouri,
as Escrow Agent, and will be returned promptly, together with any interest
earned thereon to the undersigned in the event that at least 40,000 Units of the
200,000 Units offered by the prospectus of the Partnership dated ,
1997 (the "Prospectus"), as from time to time supplemented, are not subscribed
for by October 30, 1997, as may be extended by the Managing General Partner, in
its discretion, up to or until March 31, 1998. The undersigned hereby
acknowledges receipt of a copy of the Prospectus, as well as the Amended and
Restated Agreement of Limited Partnership (the "Partnership Agreement") of the
Partnership attached to the Prospectus as Exhibit A, and hereby specifically
accepts and adopts each and every provision of the Partnership Agreement and
agrees to be bound thereby.
The undersigned hereby represents and warrants to you as follows:
1. The undersigned has received the Prospectus.
2. The undersigned is aware that he, she or it is required to contribute up
to an additional $12.50 per Unit subscribed for on a subsequent capital call
date, as described in the Prospectus.
3. The undersigned is 21 years of age or older (if a natural person), has
adequate means of providing for his, her or its current needs and personal
contingencies and has no need for liquidity in this investment.
4. The undersigned, if executing the Subscription Agreement in a
representative or fiduciary capacity, has full power and authority to execute
and deliver this Subscription Agreement on behalf of the subscribing individual,
ward, partnership, trust, estate, corporation or other entity for whom the
undersigned is executing this Subscription Agreement, and such individual, ward,
partnership, trust, estate, corporation or other entity has full right and power
to perform pursuant to such Subscription Agreement and become a limited partner
in the Partnership pursuant to the Partnership Agreement.
5. The undersigned represents that he, she or it is not (a) an employee
benefit plan or individual retirement account, (b) an "employee benefit plan,"
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), (including any qualified pension, profit-sharing,
stock bonus or Keogh plan, (c) a plan described in Internal Revenue Code Section
4975(e)(1) (including an IRA) or (d) any entity where underlying assets include
"plan assets," as defined in ERISA Regulatory Section 2510.3-101 by reason of
the plan's interest in the entity.
B-1
<PAGE> 121
6. The undersigned has:
(a) unless a resident of Arkansas, California, Iowa, Kansas, Kentucky,
Massachusetts, Michigan, Minnesota, Missouri, North Carolina, Oklahoma,
Oregon, South Dakota, Texas or Washington, (i) a net worth (exclusive of
home, home furnishings, and personal automobiles) of not less than $100,000
in excess of the price of the Units for which the undersigned has
subscribed or (ii) a net worth (exclusive of home, home furnishings, and
personal automobiles) of not less than $35,000 in excess of the price of
the Units for which the undersigned has subscribed and expects to have in
the current and next three taxable years, gross income from all sources in
excess of $35,000;
(b) if a resident of California (i) a net worth (exclusive of home,
home furnishings and personal automobiles) of not less than $250,000 in
excess of the price of the Units for which the undersigned has subscribed
or (ii) a net worth (exclusive of home, home furnishings and personal
automobiles) of not less than $65,000 in excess of the price of the Units
for which the undersigned has subscribed and current gross annual income
from all sources in excess of $65,000;
(c) if a resident of Iowa (i) a net worth (exclusive of home,
automobile and furnishings) of not less than $350,000 or (ii) a net worth
of $100,000 (exclusive of home, automobiles and furnishings) and an annual
taxable income of at least $75,000;
(d) if a resident of Arkansas, Massachusetts, Michigan, Minnesota,
Mississippi, Missouri, Oregon, South Dakota or Washington (i) a net worth
(exclusive of home, home furnishings and automobiles) of not less than
$225,000 in excess of the price of the Units for which the Undersigned has
subscribed or (ii) a net worth (exclusive of home, home furnishings and
automobiles) of not less than $60,000 in excess of the price of the Units
for which the undersigned has subscribed and a minimum gross annual income
of $60,000;
(e) if a resident of North Carolina (i) a net worth exclusive of
principal residence, mortgage thereon, home furnishings and automobiles of
not less than $225,000 or (ii) a net worth (exclusive of principal
residence, mortgage thereon, home furnishings and automobiles) of not less
than $60,000 and had during the last tax year or estimates having in the
current taxable year, taxable income of at least $60,000 without regard to
investment in the Units;
(f) if a resident of Oklahoma (i) a net worth (exclusive of home, home
furnishings and personal automobiles) of not less than $225,000, or (ii) a
net worth (exclusive of home, home furnishings and personal automobiles) of
not less than $60,000 and expects to have in the current taxable year,
gross income of $60,000 or more, without regard to investment in the Units;
(g) if a resident of Kansas or Texas (i) a net worth (exclusive of
home, furnishings and automobiles) of not less than $150,000, or (ii) a net
worth (exclusive of home, furnishings and automobiles) of not less than
$50,000 and $50,000 in current taxable income, and the price of the
investment in the Units represents 5% or less of the net worth (exclusive
of home, furnishings and automobiles) of the undersigned.
(h) if a resident of Kentucky (i) a net worth (exclusive of home, home
furnishings, and personal automobiles) of not less than $150,000 in excess
of the price of the Units for which the undersigned has subscribed or (ii)
a net worth (exclusive of home, home furnishings, and personal automobiles)
of not less than $45,000 in excess of the price of the Units for which the
undersigned has subscribed and expects to have in the current and next
three taxable years, gross income from all sources in excess of $45,000.
7. The undersigned, if an employee of Edward D. Jones & Co., L.P. or one of
its affiliates, is acquiring such Units with the intention of holding such Units
for investment and not with a view to the distribution thereof.
8. The undersigned hereby acknowledges that the information as to name,
address, social security/federal taxpayer identification number and title of
account heretofore provided to Edward D. Jones & Co., L.P. remains true and
correct.
If the undersigned is purchasing the Units subscribed for hereby in a
fiduciary capacity, the above representations and warranties shall be deemed to
have been made on behalf of the person or persons for whom the undersigned is so
purchasing.
B-2
<PAGE> 122
The undersigned understands and recognizes that:
(a) This subscription may be accepted or rejected in whole or in part
by the Managing General Partner in its sole and absolute discretion, except
that, if this subscription is to be accepted in part only, it shall not be
reduced to an amount less than $2,500 ($5,000 if a South Carolina
resident).
(b) No federal or state agency has made any finding or determination
as to the fairness for public investment, nor any recommendation or
endorsement of the Units.
(c) There is not now any public market for the Units and there are
restrictions contained in the Partnership Agreement which are intended to
prevent the development of a public market in the Units. In addition, the
Partnership Agreement imposes restrictions on the transfer, sale and
assignment of Units that will greatly limit the ability of an investor to
liquidate an interest in the Partnership. Accordingly, it may not be
possible for the undersigned readily, if at all, to liquidate his, her or
its investment in the Partnership in case of an emergency.
The undersigned hereby acknowledges that by his, her or its signature
below, whether personally, pursuant to the authority set forth below or
otherwise, the undersigned irrevocably constitutes and appoints the General
Partners of the Partnership, and each of them, the true and lawful
attorney-in-fact of such person with full power and authority in the name, place
and stead of such person to execute, acknowledge, swear to, file and record at
the appropriate public offices, this Subscription Agreement, the Partnership
Agreement and amendments thereto, and to take such other actions as may be
necessary or appropriate to carry out the provisions of this Subscription
Agreement, the Partnership Agreement and the Prospectus as the General Partners
deem appropriate, and the undersigned further agrees to be bound by the terms of
such agreements, including the power of attorney contained in Section 12.1 of
the Partnership Agreement, and by such actions.
The undersigned hereby acknowledges and agrees that the undersigned is not
entitled to cancel, terminate or revoke this subscription or any agreements of
the undersigned hereunder and that such subscription and agreements shall
survive the death or disability of the undersigned.
This Subscription Agreement and all rights hereunder shall be governed by,
and interpreted in accordance with, the laws of the State of Missouri.
IN WITNESS WHEREOF, the undersigned executes and agrees to be bound by this
Subscription Agreement by executing the Subscription Qualification and
Acceptance Page attached hereto on the date therein indicated.
B-3
<PAGE> 123
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
SUBSCRIPTION QUALIFICATION AND ACCEPTANCE PAGE
PLEASE PRINT OR TYPE -- USE BLACK INK ONLY
I hereby certify that (i) I have received a copy of the Prospectus for the
Community Investment Partners III L.P., LLLP (ii) I satisfy, or the account I
represent satisfies, as the case may be, the investor suitability standards in
the Prospectus applicable to all investors and any that are set forth as being
applicable to a resident or domiciliary of the state indicated below, (iii) I
agree to all the terms and conditions of the within Subscription Agreement and
the Amended and Restated Agreement of Limited Partnership included as Exhibit A
to the Prospectus, (iv) I am subscribing for the number of Units set forth
below, (v) I am a resident of the state indicated below, and (vi) I am not an
"employee benefit plan," as defined in ERISA Section 3(3); a plan described in
Internal Revenue Code Section 4975(e)(1) (including an individual retirement
account) (see "Investor Suitability Standards" in the Prospectus); or any entity
whose underlying assets include "plan assets", as defined in ERISA Regulation
Section 2510.3-101, by reason of a plan's interest in the entity. CALIFORNIA
RESIDENTS MUST ALSO COMPLETE AND SIGN SCHEDULE I ATTACHED HERETO.
<TABLE>
<C> <C>
----------------------------
Number of Units:
----------------------------
(each representing up to $25)
- --------------------------------------------- ---------------------------------------------
State of Residence
- --------------------------------------------- ---------------------------------------------
Signature of Investor Print Name(s)
(indicate capacity of signatory if other than ---------------------------------------------
individual ownership)
- --------------------------------------------- ---------------------------------------------
Signature of Joint Investor (if any) Address
- --------------------------------------------- ---------------------------------------------
Date Telephone
---------------------------------------------
Social Security Number or F.E.I.N.
</TABLE>
SUBSCRIPTION ACCEPTED:
CIP Management L.P., LLLP, as Managing General Partner, hereby accepts this
subscription on behalf of the above-referenced Partnership, subject to the terms
and conditions of the within Subscription Agreement.
CIP Management L.P., LLLP
By: CIP Management, Inc., its
general partner
By:
------------------------------------
------------------------------------
Date
REGISTERED REPRESENTATIVE, IF ANY, MUST COMPLETE:
In recommending the purchase of Units to the investor whose signature
appears above, I have complied with and understand the requirements of the
provisions of Sections 3(b)(1) and 4(d) of Appendix F of the NASD Rules of Fair
Practice.
------------------------------------
Registered Representative
B-4
<PAGE> 124
SCHEDULE 1
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
INVESTOR QUESTIONNAIRE FOR CALIFORNIA RESIDENTS ONLY
The following representations are made with the intent that they may be
relied upon in determining the undersigned's suitability for investment in the
Units.
In what capacity are you subscribing for Units:
(please check one of the following)
<TABLE>
<S> <C> <C>
[ ] 1. INDIVIDUAL. If you are subscribing for Units in your individual name only, please
complete the Questionnaire and sign your name below.
[ ] 2. MARRIED COUPLE. If a married couple is subscribing for Units, both spouses should
execute this Questionnaire. The first spouse should answer each question marked
"First Investor" and the other spouse should answer each question marked "Spouse."
BOTH SPOUSES MUST SIGN BELOW.
[ ] 3. CORPORATION. If a corporation is subscribing for Units, this Questionnaire should
be completed and executed by an executive officer of such corporation and questions
concerning income, assets and net worth pertain to the partnership.
[ ] 4. PARTNERSHIP. If a partnership is subscribing for Units, this Questionnaire should
be completed and executed by a general partner of such partnership and questions
concerning income, assets and net worth pertain to the partnership.
[ ] 5. TRUST. If a trust is subscribing for Units, a trustee must complete and executive
this Questionnaire on behalf of the trust. All questions concerning income, assets
and liabilities will pertain to the trust.
</TABLE>
PLEASE ANSWER ALL QUESTIONS. If the appropriate answer if "None" or "Not
Applicable", so state. Please print or type your answers to all questions.
Attach additional sheets if necessary to complete your answers to any item.
<TABLE>
<S> <C> <C>
1. Please provide the following information:
A. FIRST INVESTOR
-------------------------------------------------
Date of Birth (or if an organization, date
of organization or incorporation)...........
-------------------------------------------------
Principal Address (including zip code)......
-------------------------------------------------
Telephone Number (including area code)......
-------------------------------------------------
Social Security Number or Taxpayer I.D.
Number......................................
-------------------------------------------------
Education Background........................
-------------------------------------------------
Country of Citizenship or State of formation
or organization.............................
-------------------------------------------------
B. SPOUSE
-------------------------------------------------
Name........................................
-------------------------------------------------
Age.........................................
-------------------------------------------------
Principal Residence Address (including zip
code).......................................
-------------------------------------------------
Telephone Number (including area code)......
-------------------------------------------------
</TABLE>
B-5
<PAGE> 125
<TABLE>
<S> <C> <C>
-------------------------------------------------
Social Security Number......................
-------------------------------------------------
Education Background........................
-------------------------------------------------
Country of Citizenship......................
-------------------------------------------------
2. Please provide the following information concerning your business experience:
A. FIRST INVESTOR
-------------------------------------------------
Name of Employer............................
-------------------------------------------------
Length of Time Employed There...............
-------------------------------------------------
Position and Duties.........................
-------------------------------------------------
Nature of Employer's Business...............
-------------------------------------------------
Business Address............................
-------------------------------------------------
Business Telephone Number (including area
code).......................................
-------------------------------------------------
B. SPOUSE
-------------------------------------------------
Name of Employer............................
-------------------------------------------------
Length of Time Employed There...............
-------------------------------------------------
Position and Duties.........................
-------------------------------------------------
Nature of Employer's Business...............
-------------------------------------------------
Business Address............................
-------------------------------------------------
Business Telephone Number (including area
code).......................................
=================================================
3. A. Does your current net worth, excluding the
value of homes, automobiles and home
furnishings, exceed $65,000?................ Yes [ ] No [ ]
-------------------------------------------------
B. Did your taxable income exceed $65,000 in
1996 and do you except your taxable income
to exceed that level in 1997?............... Yes [ ] No [ ]
=================================================
4. Does your current net worth, excluding the value
of homes, automobiles and home furnishings,
exceed $250,000?................................. Yes [ ] No [ ]
-------------------------------------------------
</TABLE>
The undersigned certifies that the foregoing statements are true and
complete to the best of the undersigned's information and belief and may be
relied upon by the Partnership in determining whether the undersigned is a
suitable investor in this offering.
<TABLE>
<S> <C>
--------------------------------------------
Print Name of First Investor
Dated Executed: , 1997 By:
----------------- -----------------------------------------
Signature of First Investor
--------------------------------------------
Print Name of Second Investor
Dated Executed: , 1997 By:
----------------- -----------------------------------------
Signature of Second Investor
</TABLE>
B-6
<PAGE> 126
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
- --------------------------------------------------------------------------------
A Business Development Company
September 2, 1997
Dear Partner:
One of the many benefits of partnership in Edward D. Jones & Co. is the
opportunity it affords to participate in a wide variety of endeavors as a member
of a larger group. From contributing to the firm's continued growth, to being a
member of our profit-sharing program, to participating in numerous
company-sponsored activities, partnership has given all of us opportunities that
would be difficult or impossible to take advantage of as individuals.
One of the particularly unique opportunities we have had over the last
fifteen years has been pursuing a variety of investment opportunities. Since
1981, our partners have invested over $12 million in a variety of business
ventures. Most recently, we raised approximately $2.8 million in Community
Investment Partners II, L.P. (CIP-II). Prior to that, we raised approximately
$2.6 million in Community Investment Partners, L.P. (CIP-I).
CIP-I and CIP-II have given their investors access to a number of
investments that would not have been available to them as individuals. Since
1990 (at the inception of CIP-I), we have made investments in more than 15
different companies whose businesses range from manufacturing robotic surgery
devices to fiber optic communications.
Given the history of CIP-I and CIP-II, we feel the time is right to form
Community Investment Partners III L.P., LLLP (CIP-III) so that we can continue
pursuing promising investment opportunities when they arise. We invite you to
become an investor. Please read the enclosed preliminary prospectus carefully.
If your portfolio is adequately diversified and sufficiently liquid, I encourage
you to consider an investment in CIP-III. If you have questions, or would like
more information, please don't hesitate to contact me.
Whether or not you are interested in purchasing units in CIP-III, please
complete and return the enclosed card no later than September 30, 1997 to Edward
D. Jones & Co., 12555 Manchester Road, St. Louis, Missouri 63131, Attention:
Marilyn A. Gaffney. You may return the enclosed reply card either via U.S. Mail
or via facsimile (314-515-2664). It is estimated that payment for units will be
required in late October.
/S/ DANIEL A. BURKHARDT
DANIEL A. BURKHARDT
Chairman, CIP Management, Inc.
A registration statement relating to the units of limited partnership
interests has been filed with the Securities and Exchange Commission but has not
yet become effective. These units may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes effective. This
letter shall not constitute an offer to sell or the solicitation of an offer to
buy nor shall there be any sale of these units in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
12555 Manchester Road - St. Louis, Missouri 63131-3729 - 314-515-2681 - Fax
314-515-2664
<PAGE> 127
[FORM OF REPLY CARD]
Please check the appropriate box:
[ ] I may be interested in investing $ for units of limited
partnership interests of Community Investment Partners III L.P., LLLP
[ ] I am not interested in investing any money for units of limited partnership
interests of Community Investment Partners III L.P., LLLP
Print Name(s):
________________________________________________________________________________
Print Name(s):
________________________________________________________________________________
Street Address:
________________________________________________________________________________
City/State:
________________________________________________________ Zip Code:_____________
Telephone: Home (____)_______________________________ Office (____)____________
Please complete and return to Edward D. Jones & Co., 12555 Manchester Road,
St. Louis, Missouri 63131, Attention: Marilyn A. Gaffney (Facsimile:
314-515-2664).
No offer to buy the units can be accepted and no part of the purchase price
can be received until the registration statement has become effective, and any
such offer may be withdrawn or revoked, without obligation or commitment of any
kind, at any time prior to notice of its acceptance given after the effective
date. An indication of interest in the Units will involve no obligation or
commitment of any kind.
<PAGE> 128
EXHIBIT C
SPECIAL SUBSCRIPTION REQUIREMENTS
RESIDENTS OF THE FOLLOWING STATES MUST MEET
THE SUITABILITY STANDARDS AS SET FORTH BELOW:
CALIFORNIA
California residents must have either (a) a net worth (exclusive of home,
home furnishings and personal automobiles) of not less than $350,000 in excess
of the purchase price of the Units subscribed for or (b) a net worth (exclusive
of home, home furnishings and personal automobiles) of not less than $65,000 in
excess of the purchase price of the Units subscribed for an minimum annual
income from all sources in excess of $65,000.
IOWA
Iowa residents must have either (a) a net worth (exclusive of home, home
furnishings and personal automobiles) of not less than $350,000 or (b) a net
worth (exclusive of home, home furnishings and personal automobiles) of not less
than $100,000 and an annual taxable income of at least $75,000.
ARKANSAS, MASSACHUSETTS, MICHIGAN, MINNESOTA, MISSISSIPPI, MISSOURI, OREGON,
SOUTH DAKOTA, WASHINGTON
Residents of the above states must have either (a) a net worth (exclusive
of home, home furnishings and personal automobiles) of not less than $225,000 in
excess of the purchase price of the Units subscribed for or (b) a net worth
(exclusive of home, home furnishings and personal automobiles) of not less than
$60,000 in excess of the purchase price of the Units subscribed for and minimum
gross annual income from all sources in excess of $60,000.
NORTH CAROLINA
North Carolina residents must have either (a) a minimum net worth of
$225,000 (exclusive of principal residence, mortgage thereon, home furnishings
and automobiles) or (b) a minimum net worth of $60,000 (exclusive of principal
residence, mortgage thereon, home furnishings and automobiles) and had during
the last tax year or estimates that the investor will have during the current
taxable year, taxable income of at least $60,000 without regard to the
investment in the Units.
OKLAHOMA
Oklahoma residents must have either (a) a net worth (exclusive of home,
home furnishings and personal automobiles) of not less than $225,000 or (b) a
net worth (exclusive of home, home furnishings and personal automobiles) of not
less than $60,000 and expects to have in the current taxable year, gross income
of $60,000 or more, without regard to the investment in the Units.
TEXAS, KANSAS
Texas and Kansas residents must have either (a) a net worth (exclusive of
home, furnishings, and automobiles) of not less than $150,000 or (b) a net worth
(exclusive of home, furnishings, and automobiles) of not less than $50,000 and
$50,000 in current taxable income. In addition, the price of investment in the
Units must not represent more than 5% of the Texas and Kansas residents' net
worth.
C-1
<PAGE> 129
=========================================================
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
WHERE SUCH OFFER WOULD BE UNLAWFUL.
UNTIL 90 DAYS AFTER THE DATE OF THE LAST CLOSING HEREOF, ALL DEALERS
EFFECTING TRANSACTIONS IN THE UNITS, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A CURRENT COPY OF THIS PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF THE DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
----------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary............................. 3
Glossary....................................... 10
Investor Suitability Standards................. 11
Risk and Other Important Factors............... 12
Conflicts of Interest.......................... 18
Use of Proceeds................................ 21
Investment Objective and Policies.............. 21
Management..................................... 26
General Partners............................... 27
Management Compensation and Other Expenses..... 31
Portfolio Transactions......................... 32
Prior Investment Partnerships.................. 33
Selected Financial Information for CIP I....... 34
Selected Financial Information for CIP II...... 38
Partnership Distributions and Allocations...... 41
Transferability of Units....................... 43
Summary of the Partnership Agreement........... 45
Taxation....................................... 52
Regulation..................................... 62
Offering and Sale of Units..................... 63
Experts........................................ 66
Reports........................................ 66
Custodian...................................... 66
Legal Matters.................................. 67
Supplemental Sales Literature.................. 67
Registration Statement......................... 67
Index to Financial Statements.................. 68
EXHIBITS
Form of Agreement of Limited Partnership....... A
Subscription Agreement......................... B
Special Subscription Requirements.............. C
</TABLE>
=========================================================
=========================================================
$5,000,000
COMMUNITY
INVESTMENT
PARTNERS III L.P., LLLP
---------------------------------------------------------
A Business Development Company
200,000 UNITS OF
LIMITED PARTNERSHIP
INTEREST
EDWARD D. JONES & CO., L.P.
, 1997
=========================================================
<PAGE> 130
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(1) Financial Statements
See "Index to Financial Statements" in the Prospectus for financial
statements included in Part I.
(2) Exhibits
<TABLE>
<S> <C>
(a) Amended and Restated Agreement of Limited Partnership
(b) Not Applicable
(c) Not Applicable
(d) Relevant portions of Amended and Restated Agreement of
Limited Partnership*
(e) Not Applicable
(f) Not Applicable
(g) Form of Management Agreement between the Registrant and CIP
Management L.P., LLLP
(h) Form of Agency Agreement between the Registrant, CIP
Management L.P., LLLP, CIP Management, Inc. and Edward D.
Jones & Co., L.P. relating to the offering of the Units
(i) Not Applicable
(j) Form of Custody Agreement between the Registrant and
ChaseMellon Shareholder Services, L.L.C.
(k) Form of Agency Agreement between the Registrant, CIP
Management L.P., LLLP, CIP Management, Inc. and Edward D.
Jones & Co., L.P. relating to the offering of the Units;
Form of Escrow Deposit Agreement among the Registrant,
Edward Jones and ChaseMellon Shareholder Services, L.L.C.
(l) Opinion and Consent of Bryan Cave LLP**
(m) Not Applicable
(n) Opinion and Consent of Bryan Cave LLP as to certain tax
matters**; consent of Price Waterhouse LLP
(o) Not Applicable
(p) Relevant Portions of Amended and Restated Agreement of
Limited Partnership***
(q) Not Applicable
(r) Financial Data Schedule**
</TABLE>
- ------------------
* Reference is made to Articles Three, Four, Seven, Eight, Nine, Ten, Eleven
and Thirteen of the Amended and Restated Agreement of Limited Partnership
** To be filed by Amendment
*** Reference is made to Section 3.2 of the Amended and Restated Agreement of
Limited Partnership
ITEM 25. MARKETING ARRANGEMENTS.
None.
C-i
<PAGE> 131
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTIONS.
The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities covered by this Registration
Statement.
<TABLE>
<S> <C>
Securities and Exchange Commission fee................... $1,515.15
National Association of Securities Dealers, Inc. Fee..... $1,000.00
Printing Expenses........................................ $ *
Accountants' fees and expenses........................... $ *
Blue Sky fees and expenses............................... $ *
Counsel fees and expenses................................ $ *
Miscellaneous............................................ $ *
---------
Total............................................... $ *
=========
</TABLE>
- ------------------
* To be completed by amendment
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL.
See Item 30 below.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES.
Steven Novik purchased a limited partnership interest in the Registrant for
$100 in order to become the Initial Limited Partner and permit formation of the
Registrant. CIP Management L.P., LLLP, purchased a general partner's interest in
the Registrant for $1,000 in order to become the Managing General Partner. These
sales were made as of July 23, 1997, as "private offerings" pursuant to the
exemption thereof contained in Section 4(2) of the Securities Act of 1933.
ITEM 29. INDEMNIFICATION.
The Partnership has registered under Missouri law as a limited liability
limited partnership. As such, the General Partners shall be accorded all the
limited liability protection of a partner in a general partnership registered as
a limited liability partnership under applicable Missouri law. Generally,
Missouri law provides that no partner in a registered limited liability
partnership shall be liable or accountable, directly or indirectly, for any
debts, obligations and liabilities of, or chargeable to, the partnership,
whether in tort, contract or otherwise, which are incurred, created or assumed
by such partnership while the partnership is a registered limited liability
partnership, except for any such liabilities for such partner's own negligence,
wrongful acts, omissions, misconduct or malpractice or that of any person under
the partner's direct supervision and control or for liability of such partner
for certain taxes and fees. In order to qualify as a limited liability limited
partnership under Missouri law, the Partnership must file an annual registration
with the Missouri Secretary of State electing to be treated as such.
Reference is hereby made to Section 5.7 of the Amended and Restated
Agreement of Limited Partnership of the Registrant under which the Partnership
agrees to indemnify the General Partners and their affiliates in certain
circumstances.
Reference is hereby made to paragraph 5.8 of the Partnership Agreement
which provides, to the extent that an Independent General Partner has a valid
claim for indemnification from the Partnership pursuant to paragraph 5.7 and has
pursued such claim against the Partnership, but such claim has not been
satisfied, the Managing General Partner, in its individual capacity, shall
satisfy such claim.
The Partnership Agreement of the Managing General Partner provides for
indemnification of CIP Management, Inc. and Daniel A. Burkhardt, its general
partner, and their affiliates to the same extent as the Partnership indemnifies
the Individual General Partners. The Articles of Incorporation of CIP
Management, Inc. provide for indemnification of the directors and officers
unless such person's conduct is finally adjudged to have been knowingly
fraudulent, deliberately dishonest or willful misconduct.
C-ii
<PAGE> 132
The Jones Financial Companies, L.P., L.L.P., has agreed to indemnify the
Individual General Partners, the Managing General Partner, and the partners of
the Managing General Partner and their directors and officers to the fullest
extent permitted by law, without regard to the limits on indemnification by the
Partnership, against all claims, suits or proceedings if such person acted in
good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the Partnership and, with respect to criminal proceedings, had
no reasonable cause to believe such conduct was unlawful.
Insofar as indemnification for liabilities under the Securities Act of
1933, as amended (the "Act"), may be permitted to the General Partners pursuant
to the foregoing provisions, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. If a claim for
indemnification against such liabilities under the Act (other than for expenses
incurred or paid in a successful defense of any action, suit or proceeding) is
asserted against the Registrant by the General Partners in connection with the
units of limited partners' interest being registered, under the Partnership
Agreement or otherwise, the 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 of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Reference is made to Section 6 of the Agency Agreement, filed as an Exhibit
to this Registration Statement for provisions regarding indemnification of, and
contribution to, the Registrant by Edward D. Jones & Co., L.P. by the Registrant
with respect to certain liabilities, including liabilities under the Act.
Reference is made to Section 3.2 of the Management Agreement, filed as an
Exhibit to this Registration Statement for provisions regarding indemnification
of CIP Management, LLLP, its partners and their officers, directors, employees,
agents and affiliates with respect to certain liabilities.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
As described in Part I of this Registration Statement under "Management,"
CIP Management L.P., LLLP (the "Managing General Partner") serves as an
investment adviser of the Registrant.
Set forth below is a list of each officer and director of CIP Management,
Inc., the managing general partner of the Managing General Partner, indicating
each business, profession, vocation or employment of a substantial nature in
which each such person has been engaged since January 1992 for his own account
or in the capacity of a director, officer, employee, partner or trustee.
Information concerning Daniel A. Burkhardt, the individual general partner of
the Managing General Partner, also appears below.
<TABLE>
<CAPTION>
OTHER SUBSTANTIAL
POSITION WITH BUSINESS PROFESSION
NAME CIP MANAGEMENT, INC. VOCATION OR EMPLOYMENT
- ---------------------------------- ---------------------- ----------------------------------------
<S> <C> <C>
Daniel A. Burkhardt............... President, Treasurer General Partner of The Jones Financial
and Director Companies, L.P., L.L.P.
Ray L. Robbins, Jr................ Vice President and General Partner of The Jones Financial
Director Companies, L.P., L.L.P.
Marilyn A. Gaffney................ Secretary Limited Partner of The Jones Financial
Companies, L.P., L.L.P.
</TABLE>
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS.
The accounts and records of the Registrant will be maintained at the
offices of the Registrant at 12555 Manchester Road, St. Louis, Missouri 63131.
ITEM 32. MANAGEMENT SERVICES.
Except as described in Part I of this Registration Statement, the
Registrant is not a party to any management-service related contract.
C-iii
<PAGE> 133
ITEM 33. UNDERTAKINGS.
The Registrant undertakes to suspend offering of its securities until it
amends its prospectus if (1) subsequent to the effective date of its
Registration Statement, the net asset value declines more than 10 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.
The Registrant further undertakes: (1) to file, during any period in which
offers or sales are being made, a post-effective amendment to this registration
statement (i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, (ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement, and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement; (2) that for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and (3) to remove from registration by
means of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
C-iv
<PAGE> 134
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Des Peres,
and State of Missouri, on the 26th day of August, 1997.
COMMUNITY INVESTMENT PARTNERS III
L.P., LLLP
By: CIP MANAGEMENT L.P., LLLP, its
Managing
General Partner
By: CIP Management, Inc., its
managing
general partner
By: /s/ DANIEL A. BURKHARDT
---------------------------------
Daniel A. Burkhardt,
President, Treasurer and Director
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Daniel A. Burkhardt and Ray L. Robbins, Jr., and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any other documents and
instruments incidental thereto, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents and/or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following directors and
officers of CIP Management, Inc., the general partner of CIP Management L.P.,
LLLP, the managing general partner of the Registrant, in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DANIEL A. BURKHARDT President, Treasurer and Director August 26, 1997
---------------------------------------
Daniel A. Burkhardt
/s/ RAY L. ROBBINS, JR. Vice President and Director August 26, 1997
---------------------------------------
Ray L. Robbins, Jr.
</TABLE>
C-v
<PAGE> 135
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
EXHIBITS
TO
FORM N-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. [ ]
---------------------
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
================================================================================
<PAGE> 136
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
99.2A Form of Amended and Restated Agreement of Limited
Partnership (Exhibit A to the Prospectus)
99.2B Not Applicable
99.2C Not Applicable
99.2D Relevant portions of Amended and Restated Agreement of
Limited Partnership* (Exhibit A to the Prospectus)
99.2E Not Applicable
99.2F Not Applicable
99.2G Form of Management Agreement between the Registrant and CIP
Management L.P., LLLP
99.2H Form of Agency Agreement between the Registrant, CIP
Management L.P., LLLP, CIP Management, Inc. and Edward D.
Jones & Co., L.P. relating to the offering of the Units
99.2I Not Applicable
99.2J Form of Custody Agreement between the Registrant and
ChaseMellon Shareholder Services, L.L.C.
99.2K-1 Form of Agency Agreement between the Registrant, CIP
Management L.P., LLLP, CIP Management, Inc. and Edward D.
Jones & Co., L.P. relating to the offering of the Units (See
Exhibit 99.2H)
99.2K-2 Form of Escrow Deposit Agreement among the Registrant,
Edward Jones and ChaseMellon Shareholder Services, L.L.C.
99.2L Opinion and Consent of Bryan Cave LLP**
99.2M Not Applicable
99.2N-1 Opinion and Consent of Bryan Cave LLP as to certain tax
matters**
99.2N-2 Consent of Price Waterhouse LLP
99.2O Not Applicable
99.2P Relevant portions of the Amended and Restated Agreement of
Limited Partnership*** (Exhibit A to the Prospectus)
99.2Q Not Applicable
99.2R Financial Data Schedule**
</TABLE>
- ------------------
* Reference is made to Articles Three, Four, Seven, Eight, Nine, Ten, Eleven
and Thirteen of the Amended and Restated Agreement of Limited Partnership
** To be filed by Amendment
*** Reference is made to Section 3.2 of the Amended and Restated Agreement of
Limited Partnership
<PAGE> 1
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT is made this ___ day of ________, 1997, by and
between COMMUNITY INVESTMENT PARTNERS III L.P., LLLP, a Missouri limited
liability limited partnership (the "Partnership"), and CIP MANAGEMENT L.P.,
LLLP, a Missouri limited liability limited partnership (the "Management
Company").
RECITALS:
1. The Partnership is a limited partnership organized on July 23, 1997
under the Missouri Revised Uniform Limited Partnership Act pursuant to a
Certificate of Limited Partnership and subsequently registered on July 23, 1997
as a limited liability limited partnership under the Missouri Uniform
Partnership Law and the Missouri Revised Uniform Limited Partnership Act, with
CIP Management L.P., LLLP, a Missouri limited liability limited partnership,
acting as Managing General Partner (the "Managing General Partner"), and is
engaged in business as a business development company under the Investment
Company Act of 1940, as amended and the Rules and Regulations thereunder (the
"1940 Act").
2. The Management Company is engaged in rendering management,
administrative and investment advisory services.
3. The Partnership desires to retain the Management Company to render
management, administrative and certain investment advisory services to the
Partnership in the manner and on the terms set forth herein.
4. The Management Company is willing to provide management, administrative
and investment advisory services to the Partnership on the terms and conditions
set forth herein.
In consideration of the premises and the covenants set forth below, the
Partnership and the Management Company hereby agree as follows:
<PAGE> 2
ARTICLE I
DUTIES OF THE MANAGEMENT COMPANY
Section 1.1 General Terms. The Partnership hereby employs the Management
Company to act as the management company for the Partnership and to furnish, or
arrange for affiliates to furnish, the management, administrative and
investment advisory services described below, subject to the supervision of the
general partners of the Partnership who are individuals ("Individual General
Partners"), for the period and on the terms and conditions set forth in this
Agreement. The Management Company hereby accepts such employment and agrees to
render, or arrange for the rendering of, the services described below for the
consideration and the period set forth in this Agreement. The Management
Company and its affiliates shall for all purposes herein be deemed an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Partnership in any
way or otherwise be deemed an agent of the Partnership.
Section 1.2 Management Services. The Management Company shall perform
(or arrange for the performance of) the management and administrative services
necessary for the operation of the Partnership, including providing managerial
assistance to portfolio companies of the Partnership and such other services
related to venture capital investments as shall be requested by the Managing
General Partner. The Management Company shall also perform (or arrange for the
performance of) services related to administering limited partners' accounts
and handling relations with limited partners. The Management Company shall
provide (or cause to be provided) the Partnership with office space, equipment
and facilities and such other services as the Management Company, subject to
review by the Individual General Partners, shall from time to time determine to
be necessary or useful to perform its obligations under this Agreement. The
Management Company shall also, on behalf of the Partnership, conduct relations
with custodians, depositories, transfer agents, other investor service agents,
2
<PAGE> 3
accountants, attorneys, underwriters, brokers and dealers, corporate
fiduciaries, insurers, banks and such other persons in any such other capacity
deemed to be necessary or desirable. The Management Company shall make reports
to the Individual General Partners of its performance of obligations hereunder
and shall furnish advice and recommendations with respect to such other aspects
of the business and affairs of the Partnership as it shall determine to be
desirable.
Section 1.3 Investment Advisory Services. Pursuant to the Amended and
Restated Agreement of Limited Partnership of the Partnership (the
"Partnership Agreement"), the Managing General Partner, subject to the
supervision of the Individual General Partners, is responsible for managing and
controlling the Partnership's venture capital investments. The Management
Company shall be responsible for providing (or arranging for the provision of)
investment advisory services in connection with the money market securities
held by the Partnership ("Other Investments"). The Management Company shall
provide (or cause to be provided) the Partnership with such investment
research, advice and supervision as the latter may from time to time consider
necessary for the proper supervision of the Other Investments, and shall
furnish continuously an investment program for the Other Investments and shall
determine from time to time which securities shall be purchased, sold or
exchanged and what portion of the assets shall be held in the various money
market securities or cash, subject always to any restrictions of the
Partnership Agreement as amended from time to time, the provisions of the 1940
Act and the statements relating to the Partnership's investment objectives,
investment policies and investment restrictions as the same are set forth in
the reports filed by the Partnership under the Securities Exchange Act of 1934,
as amended. The Management Company shall also make determinations with respect
to the manner in which voting rights, rights to consent to corporate action and
any other rights pertaining to the Partnership's Other Investments shall be
exercised. Should the Individual General Partners at any time, however, make
any determinations with respect to a fixed investment policy and notify the
Management Company thereof in writing, the Management Company shall be bound by
such determination for the period, if any, specified
3
<PAGE> 4
in such notice or until similarly notified that such determination has been
revoked. The Management Company shall take, on behalf of the Partnership, all
actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities with respect to the Other Investments
for the Partnership's account with brokers or dealers selected by it, and to
that end, the Management Company is authorized as the agent of the Partnership
to give instructions to ChaseMellon Shareholder Services, L.L.C., the Custodian
of the Partnership as to deliveries of securities and payments of cash for the
account of the Partnership. In connection with the selection of such brokers
or dealers and the placing of such orders with respect to the Other Investments
of the Partnership, the Management Company is directed at all times to seek to
obtain execution and price within the policy guidelines determined by the
Individual General Partners. Subject to this requirement and the provisions of
the 1940 Act, the Securities Exchange Act of 1934, as amended, and other
applicable provisions of law, the Management Company may select brokers or
dealers with which it or the Partnership is affiliated.
ARTICLE II
EXPENSES AND COMPENSATION
Section 2.1 Expenses. The Partnership assumes and shall pay all expenses
of the Management Company incident to the performance of its obligations under
this Agreement (to the extent not incurred directly by the Partnership).
Reimbursements for such expenses shall be limited to the actual cost of goods
and materials used for or by the Partnership and obtained from entities
unaffiliated with the Management Company. Administrative expenses shall be
reimbursed to the Management Company at the lower of (i) the Management
Company's actual cost or (ii) the amount the Partnership would be required to
pay independent parties for comparable services in the same geographic
location. The Partnership will also pay, or reimburse the Management Company
for, expenses relating to the
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operations of the Partnership, including fees and expenses of the Individual
General Partners (including annual fees of $6,000 and a fee of $1,000 for each
meeting attended, per individual), legal and accounting expenses, auditing and
consulting expenses, expenses of portfolio transactions, costs of printing and
mailing any proxies and reports to Limited Partners, custodian fees, taxes,
interest, litigation and other extraordinary or nonrecurring expenses, and any
and all other out-of-pocket expenses properly payable by the Partnership; any
such reimbursement shall be limited to the actual cost of goods and materials
used for or by the Partnership and obtained from entities unaffiliated with the
General Partners. Administrative expenses shall be reimbursed to the General
Partners at the lower of (i) the General Partner's or Affiliate's actual cost
or (ii) the amount the Partnership would be required to pay independent parties
for comparable services in the same geographic location. The expenses under
this Section 2.1 shall not include any rent or depreciation, utilities, capital
equipment, salaries, fringe benefits, or other administrative items incurred or
allocated to any "controlling person" (as defined in paragraph 5.6.1 of the
Partnership Agreement) of the Partnership or its affiliates. Such expenses
shall be billed directly to the Partnership. Such expenses shall be paid on a
quarterly basis, unless the parties shall otherwise agree.
Section 2.2 Compensation. The Partnership shall pay the Management
Company a management fee in cash for its services under this Agreement at an
annual rate of 1.5% of the total assets of the Partnership as of each March 31,
June 30, September 30 and December 31 (based on the Partnership's financial
statements as of such dates) while this Agreement remains in effect; such fee
shall be payable in arrears on or before each May 15, August 15, November 15
and February 15, respectively.
Section 2.3 Missouri Compensation Restrictions. The Partnership and the
Management Company are aware of the compensation restrictions of Section
409.102(b)(1) R.S.Mo., which prohibits investment advisory contracts in which
the investment advisor is compensated on the basis of a share of capital gains
upon or capital appreciation of the funds or any portion of the funds of the
client. Each
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party hereby agrees that execution hereof precludes such party from bringing
any suit based upon the compensation arrangement of this Agreement or the
Partnership Agreement pursuant to Section 409.411(f) R.S.Mo.
ARTICLE III
LIMITATION OF LIABILITY AND INDEMNIFICATION
OF THE MANAGEMENT COMPANY
Section 3.1 Limitation of Liability. The Management Company shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the management of the
Partnership, except for negligence or misconduct in the performance of its
duties, or by reason of reckless disregard of its obligations and duties
hereunder. As used in this Article, the term "Management Company" shall
include any affiliates of the Management Company performing services for the
Partnership contemplated hereby and directors, officers and employees of any
such affiliates.
Section 3.2 Indemnification. To the fullest extent permitted by law the
Partnership shall indemnify and hold harmless the Management Company and any of
its affiliates who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding whether civil,
criminal, administrative or investigative by reason of any acts or omissions or
alleged acts or omissions arising out of such person's activities as or on
behalf of the Management Company if such activities were performed in good
faith either on behalf of the Partnership or in furtherance of the interests of
the Partnership, and in a manner reasonably believed by such person to be
within the scope of the authority conferred by this Agreement or by law,
against losses, damages or expenses for which such person has not otherwise
been reimbursed (including attorneys' fees, judgments, fines and amounts paid
in settlement) actually and reasonably incurred by such person in connection
with such action, suit or proceeding, so long as such person was not guilty of
negligence or misconduct in the performance of his,
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her or its duties or of reckless disregard of his, her or its obligations and
duties hereunder with respect to such acts or omissions and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his, her
or its conduct was unlawful, and provided that the satisfaction of any
indemnification and any holding harmless shall be from and limited to
Partnership assets and no Limited Partner shall have any personal liability on
account thereof. Notwithstanding the foregoing, absent a court determination
that the Management Company was not liable on the merits or guilty of disabling
conduct within the meaning of Section 17(h) of the 1940 Act, the decision by
the Partnership to indemnify the Management Company must be based upon the
reasonable determination of independent counsel or non-party Independent
General Partners (as defined below), after review of the facts, that such
disabling conduct did not occur.
ARTICLE IV
ACTIVITIES OF THE MANAGEMENT COMPANY
The services of the Management Company of the Partnership are not to be
deemed to be exclusive, the Management Company being free to render services to
others. It is understood that General Partners and Limited Partners of the
Partnership are or may become interested in the Management Company, as
directors, officers, employees and shareholders or otherwise and that
directors, officers, employees and shareholders of the Management Company are
or may become interested in the Partnership as general partners, limited
partners or otherwise, and that the Management Company and its directors,
officers, employees and shareholders may become interested in the Partnership
as general partners, limited partners or otherwise.
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ARTICLE V
DURATION AND TERMINATION OF THIS CONTRACT
This Agreement shall become effective as of the date hereof and shall
remain in force until one year after the date hereof and thereafter will
continue in effect from year to year if approved annually by a majority of the
Individual General Partners of the Partnership who are not "interested persons"
as defined in the 1940 Act ("Independent General Partners").
This Agreement may be terminated at any time, without the payment of any
penalty, by a vote of a majority-in-interest of the Limited Partners of the
Partnership, or by the Management Company or the Partnership, on sixty (60)
days' written notice to the other party.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Amendments of this Agreement. This Agreement may be amended
by the parties only if such amendment is specifically approved by (a) the
Individual General Partners of the Partnership, or by the vote of a
majority-in-interest of the Limited Partners of the Partnership, and (b) a
majority of those General Partners who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such approval.
Section 6.2 Assignment. The parties hereto shall not assign any of their
rights or obligations under this Agreement, whether by operation of law or
otherwise. In the event of its assignment, this Agreement will automatically
terminate.
Section 6.3 Definitions of Certain Terms. The terms "assignment",
"affiliated person" and "interested person", when used in this Agreement, shall
have the respective meanings specified in the 1940 Act.
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Section 6.4 Governing Law. This Agreement shall be construed in
accordance with laws of the State of Missouri and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of Missouri,
or any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
By: CIP MANAGEMENT L.P., LLLP,
its Managing General Partner
By: CIP MANAGEMENT, INC.,
its Managing General Partner
By:
-------------------------------------
Daniel A. Burkhardt
President
CIP MANAGEMENT L.P., LLLP
By: CIP MANAGEMENT, INC., its
Managing General Partner
By:
-------------------------------------
Daniel A. Burkhardt
President
9
<PAGE> 1
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
200,000 Units of Limited Partnership Interest
AGENCY AGREEMENT
__________ ___, 1997
EDWARD D. JONES & CO., L.P.
12555 Manchester Road
St. Louis, Missouri 63131
Dear Sirs:
CIP Management L.P., LLLP, a limited partnership organized under the laws
of the State of Missouri and registered as a limited liability limited
partnership thereunder (the "Managing General Partner"), and
Steven Novik, as the initial limited partner, have caused the formation
of Community Investment Partners III L.P., LLLP (the "Partnership"), a limited
partnership organized pursuant to the Missouri Revised Uniform Limited
Partnership Act (the "Partnership Act"), and registered as a limited liability
limited partnership pursuant to the Missouri Uniform Partnership Law (the
"Partnership Law"). The managing general partner of the Managing General
Partner is CIP Management, Inc., a Missouri corporation (the "Company"). The
Partnership desires to increase the capital of the Partnership and proposes to
offer for sale up to 200,000 units of limited partnership interests in the
Partnership ("Units"). The price for each Unit is $25.00, $12.50 of which is
to be paid upon subscription and the balance of which is to be paid upon a
subsequent capital call date as more fully described in the Prospectus
(hereinafter defined). Each investor will be required to make a minimum
purchase of 100 Units ($2,500), unless otherwise required by any state
securities commission. No fractional Units will be sold. Prospective
investors subscribing to purchase Units (collectively, the "Subscribers") will
be required to execute and deliver a Subscription Qualification and Acceptance
Page to the Subscription Agreement, substantially in the form thereof attached
as exhibits to the Prospectus referred to below.
The Partnership has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form N-2 (No. 333-______), including
a preliminary prospectus, for the registration of the Units under the
Securities Act of 1933, as amended (the "1933 Act"). Such registration
statement as amended at the time it is declared effective by the Commission,
including financial statements, schedules and exhibits, and the information
deemed to be included therein pursuant to Rule 430A under the 1933 Act, is
hereafter referred to as the
<PAGE> 2
"Registration Statement" and the final prospectus included in the Registration
Statement at that time, including the information deemed to be included therein
pursuant to Rule 430A under the 1933 Act, is hereafter referred to as the
"Prospectus", except that (i) if the Partnership files a post-effective
amendment to the Registration Statement then the term "Registration Statement"
shall, from and after the declaration of the effectiveness of such
post-effective amendment thereto, refer to the Registration Statement as
amended, and the term "Prospectus" shall refer to the amended Prospectus
included in the Registration Statement as amended, and (ii) if any prospectus
filed by the Partnership pursuant to either Rule 424(b) or (c) of the rules and
regulations (the "Regulations") of the Commission under the 1933 Act differs
from the prospectus on file at the time the Registration Statement or any
post-effective amendment thereto as the case may be, becomes effective, the
term "Prospectus" shall refer to the Rule 424(b) or (c) prospectus from and
after the time it is delivered to the Commission for filing.
SECTION 1. Representations and Warranties of the Company, the Managing
General Partner, the Management Company and the Partnership.
(a) The Partnership, the Managing General Partner and the Company each
represents, warrants and agrees with you for your benefit as follows:
(i) At the time the Registration Statement initially becomes effective
and at the time that any post-effective amendment thereto becomes
effective, the Registration Statement and the Prospectus, and at each
Closing Time referred to below, the Prospectus, will comply in all
material respects with the provisions of the 1933 Act, the Regulations
and the Investment Company Act of 1940 (the "1940 Act") and the
regulations thereunder; at the time the Registration Statement initially
becomes effective and at the time that any post-effective amendment
thereto becomes effective, the Registration Statement will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; and at the time the Registration Statement initially
becomes effective and at the time that any post-effective amendment
thereto becomes effective, and at each Closing Time, neither the
Prospectus nor any supplemental sales material supplied or approved in
writing by the Partnership (when read in conjunction with the Prospectus)
will contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information furnished to the Partnership or the Managing
General Partner in writing by you expressly for use in the Registration
Statement or the Prospectus.
(ii) The Amended and Restated Agreement of Limited Partnership, which
will govern the Partnership (as such agreement may be amended from time
to time, the "Partnership Agreement"), provides for the subscription for
and sale of the Units; all action required to be taken by the General
Partners and the Partnership as a condition to the subscription for and
sale of the Units to qualified subscribers therefor has been, or prior to
each Closing Time
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referred to below will have been taken; the Managing General Partner has
admitted as general partners of the Partnership two individuals who,
pursuant to applicable rules promulgated under the 1940 Act, will not be
"interested persons" as defined in the 1940 Act with respect to the
Partnership (the "Independent General Partners"); (the Independent
General Partners and the Managing General Partner being collectively
referred to as the "General Partners"); and upon payment of the
consideration therefor specified in the Subscription Agreement, the Units
will constitute valid limited partnership interests in the Partnership,
and each purchaser of a Unit will become a Limited Partner, subject to
the terms and conditions of the Partnership Agreement and the Partnership
Act.
(iii) The Partnership is a limited partnership duly formed under the
Partnership Agreement and registered as a limited liability limited
partnership pursuant to the Partnership Law. It is subject to the
Partnership Act, and exists under the laws of the State of Missouri with
full partnership power and authority to conduct the business in which it
is engaged or proposes to engage as described in the Prospectus; the
Partnership is or will be duly formed or qualified under the laws of each
other jurisdiction, if any, in which such formation or qualification is
necessary in order to protect the limited liability of the Limited
Partners or to enable the Partnership to conduct the business in which it
is engaged or proposes to engage as described in the Prospectus; and the
filing or recordation of such amendments or supplements to, or
certificates in each of the jurisdictions in which the Partnership
conducts or proposes to conduct business, in accordance with the
applicable laws of such jurisdictions, will not adversely affect the
validity of the formation or qualification of the Partnership, or the
Partnership's right to transact business as a limited partnership in such
other jurisdictions or its existence in good standing as a limited
partnership in every jurisdiction in which it conducts or proposes to
conduct business.
(vi) The accountants who certified the financial statements filed with
the Commission as part of the Registration Statement are, with respect to
the General Partners and the Partnership, independent public accountants
as required by the 1933 Act and the Regulations.
(v) The balance sheets filed as a part of the Registration Statement and
those included in the Prospectus present fairly the financial position of
the Partnership, the Managing General Partner and the Company as at the
dates indicated and said balance sheets have been prepared in conformity
with generally accepted accounting principles (as described therein)
applied on a consistent basis.
(vi) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as may otherwise be
stated in or contemplated by the Registration Statement and the
Prospectus: (A) there has not been any material adverse change in the
condition, financial or otherwise, of the Company, the Managing General
Partner or the Partnership, or in the earnings, business affairs or
business prospects of the Company, the Managing General Partner or the
Partnership, whether or
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<PAGE> 4
not arising in the ordinary course of business, (B) there have not been
any material transactions entered into by the Partnership, the Managing
General Partner or the Company other than in the ordinary course of
business, (C) there has been no distribution of any kind declared, paid
or made by the Partnership or the Managing General Partner on any class
of its partnership interests or by the Company on any class of its
capital stock, and (D) except as disclosed in the Prospectus, there has
not been any change in the partnership interests nor any increase in the
long-term indebtedness of the Partnership or the Managing General Partner
nor any change in the ownership of the partnership interests of the
Partnership or the Managing General Partner or the capital stock of the
Company.
(vii) At each Closing Time referred to below the general partners of the
Managing General Partner and the Individual General Partners (as defined
in the Partnership Agreement) will have an aggregate net worth at least
equal to 10% of the total capital contributions to the Partnership of all
of its Partners, exclusive of (i) any interest in the Partnership and any
other limited partnership in which they are partners and (ii) accounts
and notes receivable from and payable to the Partnership or any other
such limited partnership.
(viii) This Agency Agreement has been duly and validly authorized,
executed and delivered by or on behalf of the Company, the Managing
General Partner and the Partnership.
(ix) At the first Closing Time referred to below, the management
agreement (the "Management Agreement") between the Partnership and CIP
Management L.P., LLLP, in its capacity as management company (the
"Management Company"), will have been duly and validly authorized,
executed and delivered on behalf of the Partnership, will comply with the
terms and conditions of the 1940 Act and will constitute a valid, binding
and enforceable obligation of the Partnership in accordance with its
terms.
(x) The Partnership Agreement has been duly and validly authorized,
executed and delivered by or on behalf of the Managing General Partner.
(xi) The execution and delivery of this Agency Agreement, the Management
Agreement and the Partnership Agreement, the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions contemplated herein, therein and in the Prospectus will not
constitute a breach of, or default under, any instrument by which either
the Company, the Managing General Partner or the Partnership is bound or
any law, order, rule or regulation of any court or any governmental body
or administrative agency having jurisdiction over the Company, a General
Partner or the Partnership which is applicable to the Company, the
Managing General Partner or the Partnership.
(xii) There is not pending, nor, to the knowledge of the Managing General
Partner or the Partnership, threatened or contemplated, any action, suit
or proceeding before or by
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<PAGE> 5
any court or other governmental body to which the Company, the Managing
General Partner, the Partnership or the Management Company is or may be a
party, which is not referred to in the Prospectus and which might result
in any material adverse change in the condition (financial or otherwise),
business or prospects of the Company, the Managing General Partner, the
Partnership or the Management Company or might materially adversely
affect any of the assets of the Company, the Managing General Partner,
the Partnership or the Management Company.
(xiii) All consents, approvals, authorizations or orders of any court or
governmental authority or agency have been obtained as required (i) for
the consummation by the Partnership of the transactions contemplated by
this Agency Agreement, except those consents or approvals as may be
required under the 1933 Act, the Regulations, the 1940 Act or the
regulations thereunder or state securities or blue sky laws; or, (ii)
except as disclosed in the Prospectus, for the Partnership to conduct its
business as contemplated in the Prospectus.
(xiv) The Partnership has elected to be regulated as a business
development company under the 1940 Act and has filed all statements and
other documents with the Commission in connection with such election
which are required by the 1940 Act, the Securities Exchange Act of 1934
and the rules and regulations thereunder; such election has not been
withdrawn by the Partnership pursuant to Section 54(c) of the 1940 Act;
the Partnership does not fail to meet any currently applicable
requirements for it to be a business development company; the Partnership
will, at each Closing Time as referred to below, meet all then applicable
requirements for it to be a business development company; the Commission
has not issued any order pursuant to Section 54(c) of the 1940 Act
revoking such election or, to the best of their knowledge and
information, instituted proceedings to issue such an order; there are no
contracts or documents of the Partnership which are required to be filed
as exhibits to the Registration Statement by the 1933 Act, by the
Regulations, or by the 1940 Act or the regulations thereunder that have
not been so filed.
(b) The Managing General Partner represents, warrants and agrees with
you for your benefit as follows:
(i) On the date hereof it is, and at all times through the Last
Closing Time referred to below, will be, duly formed and validly existing
as a limited partnership registered as a limited liability limited
partnership under the laws of the State of Missouri with full partnership
power and authority to act as Managing General Partner of the
Partnership, and is or will be duly formed or qualified in each other
jurisdiction in which its action as Managing General Partner of the
Partnership as described in the Prospectus, (i) requires such
qualification or (ii) may require such qualification if the failure to so
qualify might result in material adverse consequences to the Partnership,
and is not prohibited from acting as the Managing General Partner or the
Management Company to the Partnership as contemplated in the Prospectus.
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<PAGE> 6
(ii) The Management Agreement has been fully and validly authorized,
executed and delivered on behalf of the Management Company and
constitutes a valid, binding and enforceable obligation of the Management
Company in accordance with its terms. The execution and delivery of this
Agency Agreement and the Management Agreement, the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions contemplated herein, therein and in the Prospectus will not
constitute a breach of, or default under, any instrument by which the
Management Company is bound or any law, order, rule or regulation
applicable to the Management Company of any court or any governmental
body or administrative agency having jurisdiction over the Management
Company.
(c) The Company represents, warrants and agrees with you for your
benefit that it is a corporation duly organized, validly existing and in good
standing under the laws of the State of Missouri with full corporate power and
authority to act as the general partner of the Managing General Partner.
(d) For purposes of this Agreement, any certificate signed by the
Managing General Partner and delivered to you shall be deemed a representation
and warranty by such Managing General Partner and the Partnership to you as to
the matters covered thereby. For purposes of subsections (b) and (c),
respectively, of this Section 1, any certificate signed by the Managing General
Partner, the Management Company or the Company, respectively, and delivered to
you shall be deemed a representation and warranty of such Managing General
Partner, Management Company or Company, respectively.
SECTION 2. Offering and Sale of Units--Closing Time and Admission Dates.
(a) On the basis of the representations, warranties and covenants
herein contained, but subject to the terms and conditions herein set forth, you
are hereby appointed the exclusive Selling Agent of the Partnership during the
term herein specified (the "Offering Period") for the purpose of finding
acceptable Subscribers for the Units for the account and risk of the
Partnership through a public offering.
Subject to the performance by the Company, the Managing General
Partner and the Partnership of all of their obligations to be performed
hereunder, and to the completeness and accuracy of all the representations and
warranties contained herein, you hereby accept such agency and agree on the
terms and conditions herein set forth to use your best efforts during the
Offering Period to find Subscribers for the Units at a public offering price of
$25.00 per Unit, each Subscriber being required to subscribe for at least 100
Units, unless otherwise required by any state securities commission. You
hereby agree to instruct Subscribers to make checks for the purchase of Units
payable to "ChaseMellon Shareholder Services, L.L.C./CIP III - Escrow Account"
and in accordance with the Escrow Deposit Agreement dated ____________ ____,
1997 by and among you, ChaseMellon Shareholder Services, L.L.C. and the
Partnership, you agree to transfer such checks to the Escrow Agent by noon of
the next business day following receipt. Your agency hereunder, which is
coupled with an interest and, therefore, is not
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<PAGE> 7
terminable by the Partnership without your permission, shall continue until not
later than March 31, 1998.
You hereby confirm that you are aware of your obligation to
participate in a public offering of a direct participation program only if (1)
standards of suitability have been established and are disclosed to investors
which are consistent with the provisions of Rule 2810 of the Rules of Conduct
of the NASD ("Rule 2810") and all Subscribers are informed of all
pertinent facts relating to the liquidity and marketability of the Units, and
no subscriptions for Units in a discretionary account shall be made without the
Subscriber's prior written approval; (2) you have reasonable grounds to believe
that all material facts (based upon information obtained and due diligence
activities performed) are adequately and accurately disclosed and provide a
basis for evaluating the program (including the items of disclosure set forth
in Section (b)(3) of Rule 2810); and (3) the organization and offering expenses
reimbursed by the program are fair and reasonable, taking into account all
relevant factors (and in all events are not per se unreasonable in accordance
with the provisions of Section (b)(4) of Rule 2810.
(b) In the event the offering is commenced and acceptable subscriptions
for at least 40,000 Units shall not have been received by the Offering
Termination Date, all funds received from Subscribers (if any) shall be
returned in full, together with, except as set forth in the Prospectus, any
interest actually earned thereon and without deduction of any escrow or other
fee or expenses; and your agency and this Agency Agreement shall terminate
without obligation on your part or on the part of the Managing General Partner
or the Partnership, except as provided in Section 4 hereof. The Company, the
Managing General Partner or the Management Company may subscribe for Units (but
such subscriptions shall not be counted to satisfy the 40,000 Unit minimum) on
the same terms and conditions as other investors. Any such Units purchased by
the Company, the Managing General Partner or the Management Company will be
purchased for investment.
(c) At the Offering Termination Date or at such earlier time as may be
agreed upon by you and the Partnership, if at least 40,000 Units shall have
been properly subscribed for or at such earlier time as all the Units shall
have been properly subscribed for, you shall notify the Managing General
Partner of the aggregate number of Units for which you have received
subscriptions, and then shall deliver payment of the purchase price for the
Units for which you have found subscribers, and, with respect to each
subscriber for Units, deliver a copy of the Subscription Agreement signed by or
on behalf of such Subscriber (including the Subscription Qualification and
Acceptance Page with respect to each Subscriber, which may be accompanied by a
Subscription Qualification and Acceptance Page which has attached thereto a
listing of those Subscribers to which it relates), to the Partnership at the
office of the Management Company, 12555 Manchester Road, St. Louis, Missouri
63131, or at such other place as shall be agreed upon between you and the
Partnership, at 10:00 a.m. St. Louis Time, on or before October 30, 1997,
as may be extended by the Managing General Partner in its discretion up to or
until March 31, 1998, the date agreed upon by you and the Partnership
as the date for the initial Closing (a "Closing Time"). Thereafter an
additional closing may take place as of such date as may be agreed upon between
you and the Managing General Partner not later
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than March 31, 1998. The Closing Time for the last Units purchased by
subscribers is referred to herein as the "Last Closing Time." Without regard
to the date on which each Closing Time occurs, you will provide the Managing
General Partner with the opportunity to review and, in its sole discretion, to
reject each Subscription Agreement not later than ten days after the date of
such Subscription Agreement or otherwise promptly after receipt by the Managing
General Partner.
(d) You shall maintain for six years from the Offering Termination
Date a record of any information that may be obtained by you to indicate that
each Subscriber for Units is within the permitted class of investors.
(e) You will receive no compensation for your services and will not be
reimbursed for any marketing or sales expenses.
(f) None of you, the Partnership or any General Partner shall,
directly or indirectly, pay or award any finder's fees, commissions or other
compensation to any person engaged by a potential investor for investment
advice as an inducement to such advisor to advise the purchase of Units.
SECTION 3. Covenants of the Company, the Managing General Partner
and the Partnership. The Partnership, the Managing General Partner and the
Company each covenant with you as follows:
(a) They will notify you immediately (i) when the Registration
Statement and any amendment thereto shall have become effective, (ii) of the
receipt of any comments from the Commission with respect to the Registration
Statement, (iii) of any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information relating thereto, (iv) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration Statement or
of the issuance by the Commission of any order pursuant to Section 54(c) of the
1940 Act, or of any proceedings for these purposes, and (v) of the acquisition
of any investments acquired after the initial effective date of the
Registration Statement and prior to each Closing Time. The Company, the
Managing General Partner and the Partnership will make every reasonable effort
to prevent the issuance by the Commission of any stop order and, if any such
stop order shall at any time be issued, to obtain the lifting thereof at the
earliest possible moment.
(b) They will not file any amendments to the Registration Statement or
any amendment or supplement to the Prospectus (including a prospectus filed
pursuant to Rule 424(b) which differs from the prospectus on file at the time
the Registration Statement becomes effective) to which you or your counsel
reasonably object.
(c) They will deliver to you, as soon as available, two signed copies
of the Registration Statement as originally filed and of each amendment thereto
and two sets of exhibits thereto, and will also deliver to you such number of
conformed copies of the Registration
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<PAGE> 9
Statement as originally filed and of each amendment thereto (without exhibits)
as you shall require for the purposes contemplated by the 1933 Act.
(d) They will deliver to you, from time to time, before the
Registration Statement becomes effective, such number of copies of the
preliminary prospectus as originally filed and any amended preliminary
prospectus, and as soon as the Registration Statement initially becomes
effective and thereafter from time to time during the period when the
Prospectus is required to be delivered under the 1933 Act, such number of
copies of the Prospectus (as amended or supplemented) as you may reasonably
request for the purposes contemplated by the 1933 Act or the Regulations.
(e) During the period when the Prospectus is required to be delivered
pursuant to the 1933 Act, the Company, the Managing General Partner and the
Partnership will comply, so far as they are able and at their own expense, with
all requirements imposed upon them by the 1933 Act, as now and hereafter
amended, and by the Regulations, as from time to time in force, so far as
necessary to permit the continuance of sales of, or dealings in, the Units
during such period in accordance with the provisions hereof and as set forth in
the Prospectus.
(f) If any event relating to or affecting the Company, the Managing
General Partner, the Partnership or the Management Company shall occur as a
result of which it is necessary, in the opinion of your counsel, to amend or
supplement the Prospectus in order to make the Prospectus not misleading in
light of the circumstances existing at the time it is delivered to a
subscriber, the Company, the Managing General Partner and the Partnership will
forthwith prepare and furnish to you, without expense to you, a reasonable
number of copies of an amendment or amendments of, or a supplement or
supplements to, the Prospectus (in form and substance satisfactory to your
counsel) which will amend or supplement the Prospectus so that, in the opinion
of your counsel, as amended or supplemented, the Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein in the light of the circumstances
existing at the time the Prospectus is delivered to a subscriber, not
misleading.
(g) The Company, the Managing General Partner and the Partnership will
endeavor in good faith, in cooperation with you, to qualify the Units for
offering and sale under the applicable securities or "blue sky" laws of such
jurisdictions as you may designate; provided, however, that neither the Company
nor the Managing General Partner nor the Partnership shall be obligated to file
any general consent to service of process or to qualify to do business or to
qualify as a dealer in securities in any jurisdiction in which they are not so
qualified. In each jurisdiction where the Units shall have been qualified as
above provided, the Company, the Managing General Partner and the Partnership
will make and file such statements and reports in each year as are or may be
required by the laws of such jurisdiction.
(h) The Managing General Partner and the Partnership will use its
best efforts to make generally available to holders of Units within
120 days after the close of the period covered thereby, an earnings statement
of the Partnership that satisfies the provisions
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of Section 11(a) of the 1933 Act and Rule 158 thereunder, which need not be
certified by independent public accountants unless required by the 1933 Act or
the Regulations.
(i) They will, so long as any Units remain outstanding, furnish
directly to you the following:
(i) as soon as practicable after the end of each fiscal year, one
copy of the Partnership's annual report, including therein the
accountants' report, the balance sheet, the related statements of profit
and loss and changes in financial position for the Partnership (which
need not be audited), together with such accountants' comments and
notations with respect thereto in such detail as the Partnership may
customarily receive from such accountants, and any other tax related
information reasonably requested by you including, but not limited to,
such information which in your discretion is necessary to be provided to
investors whose tax exempt accounts are held with you;
(ii) as soon as practicable after the end of each fiscal quarterly
period, one copy of a balance sheet of the Partnership as of the end of
such period, setting forth in reasonable detail its financial position,
together with related statements of profit and loss, none of which
statements need be audited, but shall be certified as correct by the
Managing General Partner of the Partnership;
(iii) as soon as the same shall be filed with the Commission, copies
of any report, application or documents which the Partnership shall file
with the Commission; and
(iv) as soon as the same shall be sent to holders of Units, each
communication which shall be sent to the holders of Units, including any
other annual or interim report of the Partnership.
In addition, you shall be granted timely the same rights to
review the books and records of the Partnership as granted to a Limited Partner
pursuant to the Partnership Agreement.
(j) The Managing General Partner and the Partnership will deliver to
you, from time to time, all supplemental sales material (whether designated
only for broker-dealer use or otherwise, whether written or otherwise) proposed
to be used or delivered by the Partnership in connection with the offering of
Units, prior to the use or delivery to third parties of such material, and they
will not use or deliver any such material to which you shall object or which
shall be disapproved by your counsel; provided, however, that your failure to
object shall in no event be deemed an approval of any such material.
(k) The Partnership will file with the Commission such reports on
Form SR as may be required pursuant to Rule 463 under the 1933 Act.
SECTION 4. Payment of Expenses and Fees.
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Whether the offering of the Units is ever commenced or, if commenced,
whether such offering is terminated for any reason or the sale of the Units is
consummated, you shall pay your expenses in connection with the offering and
sale of the Units, including, without limitation, your travel expenses,
overhead expenses and direct personnel costs and the fees of your counsel. The
Managing General Partner (on behalf of the Partnership) or the Partnership will
pay all expenses incident to the performance of the obligations of the Managing
General Partner and of the Partnership under this Agency Agreement, including
(i) the printing and delivery to you in quantities as hereinabove stated of
copies of the Registration Statement and all amendments thereto, of a
preliminary prospectus and any amended preliminary prospectus of the
Registration Statement and any amendments thereto, of the Prospectus and any
supplements or amendments thereto; (ii) the printing and filing of the
Registration Statement and the Prospectus; (iii) the printing, execution,
filing and delivery to you in quantities as hereinabove stated of copies of the
Partnership Agreement and all amendments or supplements thereto; (iv) the
qualification of the Units under the securities or "blue sky" laws of the
jurisdictions designated by you in accordance with the provisions of Section
3(g), including filing fees and the fees and disbursements of counsel incurred
in connection therewith; (v) the fees and disbursements of counsel and
accountants for the Managing General Partner and the Partnership; (vi) the
filing fee of the National Association of Securities Dealers, Inc.; (vii) the
preparation and delivery to you of such number of copies as you may reasonably
request for the Blue Sky Survey; (viii) the fees and expenses incurred in
connection with any escrow deposit or similar arrangements entered into with
respect to the transactions contemplated hereby; and (ix) the printing and
delivery costs relating to any sales brochure for prospective investors
approved by the Partnership.
SECTION 5. Conditions of Your Obligations. Your obligations
hereunder are subject to the accuracy of and compliance with the
representations and warranties of the Company, the Managing General Partner,
the Partnership and the Management Company, to the performance by the Company,
the Managing General Partner and the Partnership of their obligations hereunder
and to the following further conditions:
(a) The Registration Statement shall initially become effective not
later than 4:00 p.m. St. Louis Time, on the date hereof, or, with your consent,
at a later time and date not later, however, than 4:00 p.m. St. Louis Time, on
the day following the date hereof, or at such later time and date as may be
approved by you; and at each Closing Time no stop order suspending the
effectiveness thereof shall have been issued under the 1933 Act or proceeding
therefor initiated or threatened by the Commission.
(b) At each Closing Time you shall receive the favorable opinion of
Bryan Cave LLP to the effect that:
(i) The Partnership Agreement provides for the subscription for and sale
of the Units; all action required to be taken by the Managing General
Partner and the Partnership as a condition to the subscription for and
sale of the Units to qualified subscribers therefor has been taken; and,
upon the payment of the consideration therefor specified in the
Subscription Agreements, the Units will constitute valid limited
partnership interests in the Partnership, as to which, subject to the
qualifications set forth in such opinion, the
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<PAGE> 12
subscribers thereto, as Limited Partners of the Partnership, will have no
liability in connection with the affairs of the Partnership in excess of
their respective capital contributions to the Partnership and their share
of the Partnership's assets and undistributed profits (subject to the
obligation of a Limited Partner to repay (1) for a period of six years
after the receipt of any part of his capital contribution wrongfully
returned to him, the amount of his contribution wrongfully returned, and
(2) for a period of one year after any rightful return, any part of his
capital contribution rightfully returned to him, but only to the extent
necessary to discharge the Partnership's liabilities to creditors who
extended credit to the Partnership during the period such capital
contribution was held by the Partnership) and the subscribers will be
Limited Partners of the Partnership entitled to all the benefits of
Limited Partners under the Partnership Agreement and the Missouri Revised
Uniform Limited Partnership Act.
(ii) The Partnership is a limited partnership registered as a limited
liability limited partnership duly formed and validly existing under the
laws of the State of Missouri with full partnership power and authority
to conduct in all material respects the business in which it is engaged
or proposes to engage as described in the Prospectus.
(iii) The Managing General Partner is duly formed and validly existing as
a limited partnership registered as a limited liability limited
partnership under the laws of the State of Missouri with full partnership
power and authority to act as Managing General Partner of the Partnership
at each Closing Time and is not prohibited from acting as the Managing
General Partner or the Management Company to the Partnership as
contemplated in the Prospectus.
(iv) The Company is a corporation duly incorporated and validly existing
under the laws of the State of Missouri with full corporate power and
authority to act as the general partner of the Managing General Partner.
(v) This Agency Agreement has been duly and validly authorized, executed
and delivered by or on behalf of the Company, the Managing General
Partner and the Partnership.
(vi) The Partnership Agreement has been duly and validly authorized,
executed and delivered by or on behalf of the Managing General Partner.
(vii) The Management Agreement has been duly and validly authorized,
executed and delivered by or on behalf of the Partnership and the
Management Company.
(viii) The execution and delivery of this Agency Agreement, the
Management Agreement and the Partnership Agreement, the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions contemplated herein, therein and in the Prospectus will not
constitute a breach of, or default under, any instrument known to such
counsel by which the Company, the Managing General Partner, the
Management Company or the Partnership is bound or, to the best of such
counsel's
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<PAGE> 13
knowledge and information, any Missouri or United States law, order, rule
or regulation applicable to the Company, the Managing General Partner,
the Partnership or the Management Company of any court or any Missouri or
United States governmental body or administrative agency having
jurisdiction over the Company, the Managing General Partner, the
Management Company or the Partnership, except as any indemnification or
contribution provisions contained therein may be limited by law.
(ix) To the best of such counsel's knowledge, there is not pending,
threatened or contemplated any action, suit or proceeding before or by
any court or other governmental body to which the Company, the Managing
General Partner, the Management Company or the Partnership is or may be a
party, that is not referred to in the Prospectus and that might result in
any material adverse change in the condition (financial or otherwise),
business or prospects of the Company, the Managing General Partner, the
Management Company or the Partnership or might materially adversely
affect any of the assets of the Partnership.
(x) All consents, approvals, authorizations or orders of any Missouri or
United States court or governmental authority or agency have been
obtained as required for the consummation by the Partnership of the
transactions contemplated by this Agency Agreement and for the
Partnership to conduct in all material respects its business as
contemplated in the Prospectus, except those consents or approvals as may
be required under the 1933 Act, the Regulations, the Investment Advisers
Act, the regulations thereunder, the 1940 Act or the regulations
thereunder or state securities or blue sky laws.
(xi) The terms and provisions of the Partnership Agreement conform in all
material respects to descriptions thereof contained in the Prospectus
under the caption "Summary of the Partnership Agreement."
(xii) The Registration Statement is effective under the 1933 Act and, to
the best of such counsel's knowledge, no proceedings for a stop order are
pending or threatened under Section 8(d) of the 1933 Act.
(xiii) At the time the Registration Statement initially became effective
and at the time any post-effective amendment thereto became effective,
the Registration Statement and the Prospectus (other than the financial
statements and related schedules and other financial and statistical data
included therein, as to which no opinion need be rendered) complied as to
form in all materials respects with the requirements of the 1933 Act and
the Regulations thereunder.
(xiv) To the best of such counsel's knowledge, there are no contracts,
indentures, mortgages, loan agreements, leases or other documents of a
character required to be described or referred to in the Registration
Statement or Prospectus or to be filed as exhibits to the Registration
Statement other than those described or referred to therein or filed as
exhibits thereto.
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<PAGE> 14
(xv) The Partnership has elected to be regulated as a business
development company under the 1940 Act and has filed all statements and
other documents with the Commission in connection with such election
which are required by the 1940 Act, the Securities Exchange Act of 1934
and the Rules and Regulations thereunder; such election has not been
withdrawn by the Partnership pursuant to Section 54(c) of the 1940 Act;
the Partnership does not fail to meet any currently applicable
requirements for it to be a business development company; the Commission
has not issued any order pursuant to Section 54(c) of the 1940 Act
revoking such election or, to the best of their knowledge, instituted
proceedings to issue such an order.
In addition, such counsel shall state that although they are not
passing upon, and do not assume responsibility for the accuracy, completeness or
fairness of, any portion of the Registration Statement and the Prospectus, as
amended or supplemented, they have participated in the preparation of the
Registration Statement and the Prospectus, including conferences with officials
and other representatives of the Partnership, with Price Waterhouse LLP the
independent accountants of the Partnership, and with your representatives, and
are generally familiar with the affairs of the Partnership, and nothing has
come to their attention that causes them to believe that, as of the time of the
effectiveness of the Registration Statement, the Registration Statement, but
excluding the financial statements and related schedules, other financial data
and statistical information included therein and other portions thereof
included upon the authority of experts and any such statements, reports or
information omitted therefrom, as to which they express no opinion, contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or that, as of such Closing Time, either the Registration Statement
or the Prospectus, or any such further amendment or supplement thereto, in each
case other than the financial statements and related schedules, other financial
data and statistical information included therein and other portions thereof
included upon the authority of experts and any such statements, reports or
information omitted therefrom, as to which they express no opinion, contains an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials.
(c) At each Closing Time, you shall receive the opinion of Bryan Cave
LLP, tax counsel, to the effect that:
(i) The discussion of income tax aspects contained in the
Prospectus under the captions "Risk and Other Important Factors--Federal
Income Tax and "Taxation" is an accurate description of the material
federal income tax aspects of an investment in the Partnership;
(ii) The Partnership will be classified as a partnership for
federal income tax purposes pursuant to Code Section 7701;
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<PAGE> 15
(iii) The Partnership should not be treated as a "publicly-traded
partnership" as defined in Code Section 7704; and
(iv) The allocations of profits and losses for tax purposes in the
Partnership Agreement more likely than not are in accordance with the
Partners' interests in the Partnership.
In rendering such opinion, such counsel may rely as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials.
(d) At each Closing Time you shall receive a certificate signed by the
Company on behalf of itself, the Managing General Partner and the Partnership
to the effect that (i) the signer has carefully examined the Partnership
Agreement, the Registration Statement, the Prospectus and the supplemental
sales literature and, in the signer's opinion, at the time when the
Registration Statement initially became effective, at the time any
post-effective amendment thereto became effective and at each Closing Time, as
the case may be, the Registration Statement did not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Prospectus and any supplemental sales material supplied or approved in writing
by the Partnership (when read in conjunction with the Prospectus, whether
intended solely for broker-dealer use or otherwise and whether written or
otherwise) did not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; (ii)
since the initial effective date of the Registration Statement no event has
occurred which should have been set forth in an amendment of, or supplement to,
the Prospectus, but which has not been so set forth; (iii) no stop order
suspending the effectiveness of the Registration Statement has been issued and
no proceedings therefor have been instituted or, to the best of their
knowledge, threatened by the Commission; and (iv) the representations and
warranties contained in Section 1(a) are true and correct with the same effect
as though expressly made at Closing Time.
(e) Prior to each Closing Time if any investments are made or
commitments entered into with respect thereto after the initial effectiveness
of the Registration Statement, you shall be provided such financial information
and, if any portion of such financial information has been audited, accountants'
letters, relating to such additional investments, in such form and content as
you may reasonably request.
If any of the conditions specified in this Section 5 shall not have
been fulfilled when and as required by this Agency Agreement to be fulfilled,
this Agency Agreement and all your obligations hereunder may be canceled by you
by notifying the Partnership and the Managing General Partner of such
cancellation in writing at any time at or prior to each Closing Time,
specifying the conditions that have not been satisfied, and any such
cancellation or
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<PAGE> 16
termination shall be without liability of any party to any other party except
as otherwise provided in Section 4 hereof.
SECTION 6. Indemnification.
(a) The Partnership agrees to indemnify and hold harmless you and each
person, if any, who controls you within the meaning of Section 15 of the 1933
Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever (including reasonable attorneys' fees) arising out of a breach
of any representation, warranty or covenant hereunder, or any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or arising out
of any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) or any supplemental sales material
supplied or approved in writing by the Partnership, provided that such
supplemental sales material is delivered along with a Prospectus, or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, unless (A) such untrue
statement or omission or such alleged untrue statement or omission was
made in reliance upon and in conformity with written information
furnished to the Partnership by you expressly for use in the Registration
Statement (or any amendment thereto) or a preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), or (B) such untrue
statement or omission or alleged untrue statement or omission was
contained in any preliminary prospectus or the Prospectus and corrected
in the Prospectus or an amended or supplemented Prospectus and you failed
to deliver a copy of the Prospectus or the amended or supplemented
Prospectus, as the case may be, to the person incurring the loss,
liability, claim, damage or expense;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever (including reasonable attorneys' fees) to the extent of the
aggregate amount paid in settlement of any litigation (including any
governmental investigation or proceeding), commenced or threatened, or of
any claim whatsoever based upon any such breach of a representation,
warranty or covenant hereunder, or any such untrue statement or omission,
or any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Partnership; and
(iii) against any and all expense whatsoever (including the fees and
disbursements of counsel chosen by you) reasonably incurred in
investigating, preparing or defending against any litigation (including
any governmental investigation or proceeding), commenced or threatened,
or any claim whatsoever based upon any such breach of a representation,
warranty or covenant hereunder or any such untrue statement
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<PAGE> 17
or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (i) or (ii)
above.
(b) The Managing General Partner and the Partnership each agrees to
indemnify and hold harmless you and each person, if any, who controls you, to
the same extent as the foregoing indemnity and subject to the same
qualifications set forth in clauses (i), (ii) and (iii) above, against any and
all loss, liability, claim, damage and expense whatsoever (including reasonable
attorneys' fees) directly arising out of the exercise by any person of any
right under the 1933 Act or the Securities Exchange Act of 1934 or the
securities or "blue sky" laws of any state on account of violations by the
Managing General Partner or the Partnership of the representations and
warranties of the Managing General Partner or the Partnership set forth in
Section 1.
(c) You agree to indemnify and hold harmless the Partnership, its
General Partners, the Management Company, the Company, each of the Company's
officers, and each person, if any, who controls the Partnership within the
meaning of Section 15 of the 1933 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection
(a) of this Section (including reasonable attorneys' fees), but only with
respect to untrue statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment thereto) or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Partnership by you expressly for use in the Registration Statement (or
any amendment thereto) or such preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(d) Notwithstanding the foregoing subsection (a) of this section,
neither you nor any person, if any, who controls you within the meaning of
Section 15 of the 1933 Act shall be indemnified by the Partnership for any
losses, liabilities or expenses arising from or out of an alleged violation of
Federal or state securities laws unless (i) there has been a successful
adjudication on the merits of each count involving alleged securities law
violations as to the particular indemnitee, provided that a court approves
indemnification of litigation costs; (ii) such claims have been dismissed with
prejudice on the merits by a court of competent jurisdiction as to the
particular indemnitee, provided that a court approves the proposed
indemnification; or (iii) in the case of a settlement of the claims against a
particular indemnitee without a court ruling, a court, after having been
informed in writing of the terms of the proposed indemnification and of the
opinion of the Securities and Exchange Commission with respect to such
indemnification, finds that indemnification of the settlement and related costs
should be made.
(e) Each indemnified party shall give prompt written notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve it from any liability which it may have otherwise than
on account of this indemnity agreement. An indemnifying party may participate
at its own expense in the defense of such action. If it so elects within a
reasonable time after receipt of such notice, an indemnifying party, jointly
with
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<PAGE> 18
any other indemnifying parties receiving such notice, may assume the defense of
such action with counsel chosen by it and approved by the indemnified parties
defendant in such action, unless such indemnified parties reasonably object to
such assumption on the ground that there may be legal defenses available to
them which are different from or in addition to those available to such
indemnifying party. If an indemnifying party assumes the defense of such
action, the indemnifying parties shall not be liable for any fees and expenses
of counsel for the indemnified parties incurred thereafter in connection with
such action. In no event shall the indemnifying parties be liable for the fees
and expenses of more than one counsel for all indemnified parties in connection
with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances.
(f) You or any person who controls you within the meaning of Section
15 of the Securities Act of 1933 will apprise a court of the position of the
Securities and Exchange Commission with respect to such indemnification before
seeking court approval for indemnification.
SECTION 7. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 6 is for any reason held to be unavailable to you in accordance with
its terms, the Partnership on the one hand, and you, on the other hand, shall
contribute to the aggregate loss, liability, claim, damage and expense
(including reasonable attorneys' fees) of the nature contemplated by said
indemnity agreement the portion that you are responsible for, such portion
represented by your relative monetary benefit from the offering; provided,
however, that no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section, each person, if any, who controls you within the
meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as you, and each General Partner of the Partnership, the
Management Company, the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Partnership
within the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Partnership.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agency Agreement or contained in certificates of the Company, the Managing
General Partner or of the Partnership submitted pursuant hereto shall remain
operative and in full force and effect, regardless of any investigation made
by, or on behalf of, you or any person who controls you, or by or on behalf of
the Partnership, the Managing General Partner, or the Company, and shall
survive the Last Closing Time.
SECTION 9. Termination of this Agency Agreement.
(a) You shall have the right to terminate this Agency Agreement by
giving the notice indicated below in this Section 9 at any time at or prior to
the Last Closing Time (i) if there shall have been, since the respective dates
as of which information is given in the
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Registration Statement and the Prospectus, any material adverse change in the
condition of the Partnership, the Management Company, the Company or the
Managing General Partner, financial or otherwise, or in the earnings, affairs
or business prospects of the Partnership, the Management Company, the Company
or the Managing General Partner, whether or not arising in the ordinary course
of business, which could materially adversely affect the Partnership or the
ability of the Management Company, the Company or the Managing General Partner
to carry out its obligations to the Partnership, (ii) if there shall have
occurred any outbreak of hostilities or other national or international
calamity or crisis, the effect of such outbreak, calamity or crisis on the
financial markets of the United States being such as in your judgment would
make the offering or delivery of the Units impracticable, or (iii) if trading
on the New York Stock Exchange shall have been suspended, or minimum or maximum
prices for trading shall have been fixed, or maximum ranges for prices for
securities shall have been required on such Exchange, or if a banking
moratorium shall have been declared by either Federal or New York or Missouri
authorities. If you terminate this Agency Agreement as provided in this
Section 9, such termination shall be without liability of any party to any
other party except as otherwise provided in Section 4 and liabilities which
survive an earlier Closing Time.
(b) If you elect to terminate this Agency Agreement as provided in
this Section 9, the Partnership and the Managing General Partner shall be
notified promptly by you in writing.
SECTION 10. Post-Effective Amendment. The Partnership and the
Managing General Partner represent and warrant to you that, if at the Offering
Termination Date subscriptions for at least 40,000 Units shall not have been
received, they will file a post-effective amendment to the Registration
Statement de-registering all of the Units and if at the Offering Termination
Date subscriptions for all 200,000 Units shall not have been received, they
will file a post-effective amendment to the Registration Statement
de-registering the unsold Units and, in either case, will terminate any
additional offerings of Units pursuant to such Registration Statement. In
addition, the Partnership and the Managing General Partner represent and
warrant to you that they will file all reports required by the Regulations with
regard to sales of the Units and use of the proceeds therefrom.
SECTION 11. Applicable Law. This Agency Agreement shall be
construed in accordance with the laws of the State of Missouri.
SECTION 12. Parties. This Agency Agreement shall inure to the
benefit of and be binding upon you, the Partnership, the Managing General
Partner, in its capacity as the Managing General Partner and as the Management
Company, and the Company, and your, the Partnership's, the Managing General
Partner's, the Management Company's and the Company's respective successors,
this Agency Agreement and the conditions and provisions hereof being intended
to be and being for the sole and exclusive benefit of the parties hereto and
their respective successors and controlling persons, and for the benefit of no
other person, firm or corporation. No purchaser of Units from you will be
deemed a successor because of such purchase.
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<PAGE> 20
SECTION 13. Notices and Authority to Act. All communications herein
shall be in writing and, if sent to you, shall be mailed, delivered or
telegraphed and confirmed to you at 12555 Manchester Road, St. Louis, Missouri
63131, or, if sent to the Company, the Managing General Partner or the
Partnership, shall be delivered or telegraphed and confirmed to either of them
at 12555 Manchester Road, St. Louis, Missouri 63131, Attention of Daniel A.
Burkhardt.
SECTION 14. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument along with all counterparts will become a binding agreement among
you, the Partnership, the Managing General Partner, the Management Company and
the Company in accordance with its terms.
Very truly yours,
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
By: CIP MANAGEMENT L.P., LLLP, its Managing General
Partner
By: CIP MANAGEMENT, INC., its managing general
partner
By:
-----------------------------------
Name: Daniel A. Burkhardt
Title: President
CIP MANAGEMENT L.P., LLLP, in its capacities as the Managing
General Partner and the Management Company
By: CIP MANAGEMENT, INC., its managing general partner
By:
----------------------------------------
Name: Daniel A. Burkhardt
Title: President
CIP MANAGEMENT, INC.
By:
----------------------------------------
Name: Daniel A. Burkhardt
Title: President
EDWARD D. JONES & CO., L.P.
Confirmed and accepted as of
the date first above written:
By
-----------------------
Authorized Signatory
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CUSTODY AGREEMENT
THIS CUSTODY AGREEMENT is made on August ____, 1997 between COMMUNITY
INVESTMENT PARTNERS III L.P., LLLP, a limited partnership organized under the
laws of Missouri and registered as a limited liability limited partnership (the
"Partnership"), and CHASEMELLON SHAREHOLDERS SERVICES, L.L.C., a New Jersey
limited liability company ("CMSS").
WHEREAS, the Partnership desires that its Securities (as hereinafter
defined) and cash shall be hereafter held and administered by CMSS pursuant to
the terms of this Agreement:
NOW, THEREFORE, in consideration of the mutual promises set forth in this
Agreement, the Partnership and CMSS agree as follows:
ARTICLE I
GENERAL TERMS
Section 1.1 Definitions. The word "Securities" as used herein includes
stocks, shares, bonds, debentures, notes, mortgages or other obligations and
any certificates, receipts, warrants or other instruments representing rights
to receive, purchase or subscribe for the same, or evidencing or representing
any other rights or interests therein, or in any property or assets.
The words "Officer's Certificate" shall mean a request, direction or
certification in writing signed in the name of the Partnership by an officer of
a general partner, general partner or a designated employee of CIP Management
L.P., LLLP, the Partnership's management company (the "Management Company"),
whose name(s) and signature(s) are covered by the most recent certified
resolution and incumbency and signature certificate delivered by the
Partnership to CMSS pursuant to Section 1.4 hereof.
Section 1.2 Appointment. The Partnership hereby appoints CMSS as
custodian of all its Securities and cash, and CMSS agrees to act as such upon
the terms and conditions herein set forth.
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Section 1.3 Delivery. The Partnership will cause to be delivered to CMSS
all of its portfolio Securities and cash and will deliver or cause to be
delivered to CMSS from time to time all Securities and cash hereafter acquired
by the Partnership, which Securities CMSS shall keep safely as custodian for
the Partnership and which cash shall be deposited with CMSS for the account of
the Partnership. These Securities and cash held by CMSS shall at all times be
subject to the instructions of the Partnership as set forth in an Officer's
Certificate or an Officer's Certificate accompanied by a certificate of a
general partner of the Partnership pursuant to the terms of this Agreement.
Section 1.4 Names, Titles and Signatures of the Management Company's
Officers. The Partnership will certify to CMSS a resolution indicating the
names and signatures of the persons authorized to sign under Section 1.1
hereof, together with any changes which may occur from time to time. In the
event that any person named in the most recent certification shall cease to be
an officer of a general partner, general partner or employee of the Management
Company, the Partnership will furnish CMSS with an Officer's Certificate
advising it to that effect. In the absence of such Officer's Certificate, CMSS
shall be entitled to rely, as aforesaid, upon the names and signatures given in
said most recent certification.
ARTICLE II
RECEIPT AND DISBURSEMENT OF MONEY
Section 2.1 Accounts. CMSS shall open and maintain a separate account or
accounts in the name of the Partnership, subject only to draft or order by CMSS
acting pursuant to the terms of this Agreement. CMSS shall hold in such
account or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Partnership.
Section 2.2 Disbursements. CMSS shall make payments of cash to, or for
the account of, the Partnership from such cash only:
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(a) upon the purchase of Securities for the portfolio of the
Partnership and the delivery of such Securities to CMSS, registered in the name
of the Partnership or of the nominee of CMSS referred to in Section 3.4 or in
proper form for transfer;
(b) for the payment of interest, dividends, taxes, management or
supervisory fees or operating expenses (including, without limitation thereto,
fees and expenses for printing, legal, accounting and auditing services);
(c) for payments in connection with the conversion, exchange or
surrender of Securities owned or subscribed to by the Partnership held by or to
be delivered to CMSS;
(d) for deposit in a commercial account or accounts as may be
designated by the Partnership, and for subsequent withdrawal by the Partnership
or its disbursing agent or agents, available funds in amounts necessary for the
payment of such distributions to limited partners as may from time to time be
declared by the General Partners of the Partnership; or
(e) for other proper Partnership purposes.
Section 2.3 Officers' Certificates. Before making any such payment CMSS
shall receive (and may rely upon) an Officer's Certificate requesting such
payment and stating that it is for the purpose permitted under the terms of
items (a), (b), (c) or (d) of Section 2.2. In respect of item (e), CMSS will
take such action only upon receipt of an Officer's Certificate, accompanied by
a certificate of a general partner of the Partnership, specifying the amount of
such payment, setting forth the purpose for which such payment is to be made
(which may include the purchase of venture capital investments), declaring such
purpose to be a proper purpose of the Partnership, and naming the person or
persons to whom such payment is to be made.
Section 2.4 Checks, Drafts and Other Orders. CMSS is hereby authorized
to endorse and collect all checks, drafts or other orders for the payment of
money received by CMSS for the account of the Partnership. Without an
Officer's Certificate from the Partnership, CMSS shall make cash
disbursements for expenses in handling Securities, including stamp taxes, and
other similar items in
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connection with its duties under this Agreement and including the reimbursement
of CMSS for its out-of-pocket expenses incurred in the performance of its
duties hereunder and CMSS shall advise the Partnership once each business day
of disbursements so made.
ARTICLE III
SECURITIES
Section 3.1 Receipt of Securities. CMSS shall hold in a separate
account, pursuant to the provisions hereof, all Securities received by it from
or for the account of the Partnership. All such Securities are to be held or
disposed of by CMSS for, and subject at all times to the instructions of the
Partnership as set forth in an Officer's Certificate pursuant to the terms of
this Agreement.
Section 3.2 Transfer, Exchange, Redelivery, Etc. of Securities. CMSS
shall have sole power to release or deliver any Securities of the Partnership
held by it pursuant to this Agreement. CMSS agrees to transfer, exchange or
deliver Securities held by it hereunder only:
(a) upon sales of such Securities for the account of the Partnership
and simultaneous receipt by CMSS of payment thereof;
(b) when such Securities are called, redeemed or otherwise become
payable;
(c) for examination by any broker selling any such Securities in
accordance with "street delivery" custom;
(d) in exchange for or upon conversion into other Securities alone or
other Securities and cash whether pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment, or otherwise;
(e) upon conversion of such Securities pursuant to their terms into
other Securities;
(f) upon exercise of subscription, purchase or other similar rights
represented by such Securities;
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(g) for the purpose of exchanging interim receipts or temporary
Securities for definitive Securities; or
(h) for other proper Partnership purposes.
As to any deliveries made by CMSS pursuant to items (b), (d), (e), (f) and
(g), Securities or cash receivable in exchange therefor shall be deliverable to
CMSS.
Section 3.3 Officer's Certificates. Before making any such transfer,
exchange or delivery CMSS shall receive (and may rely upon) an Officer's
Certificate requesting such transfer, exchange or delivery and stating that it
is for a purpose permitted under the terms of items (a), (b), (c), (d), (e),
(f) or (g) of Section 3.2 and also in respect of item (h) CMSS will take such
action only upon receipt of an Officer's Certificate, accompanied by a
certificate of a General Partner of the Partnership, specifying the Securities
to be delivered, setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper Partnership purpose, and naming the
person or persons (each of whom shall be stated in such certificate to be an
officer or employee of the Management Company or one of its general partners)
to whom delivery of such Securities shall be made.
Section 3.4 Registration of Securities. Except as otherwise directed by
an Officer's Certificate, CMSS shall register all Securities, except such as
are in bearer form, in the name of the Partnership in care of the custodian and
shall execute and deliver all such certificates in connection therewith as may
be required by such laws or regulations or under the laws of any State. CMSS
shall use its best efforts to the end that the specific Securities held by it
hereunder shall be at all times identifiable in its records.
The Partnership shall from time to time furnish to CMSS appropriate
instruments to enable CMSS to hold or deliver in proper form for transfer, or
to register in the name of its registered nominee, any Securities which it may
hold for the account of the Partnership and which may from time to time be
registered in the name of the Partnership.
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Section 3.5 Voting and Other Action. Neither CMSS nor any nominee of
CMSS shall vote any of the Securities held hereunder by or for the account of
the Partnership, except in accordance with the instructions contained in an
Officer's Certificate. CMSS shall promptly deliver, or cause to be promptly
executed and delivered, to the Partnership all notices, proxies and proxy
soliciting materials with relation to such Securities, such proxies to be
executed by the registered holder of such Securities (if registered otherwise
than in the name of the Partnership), but without indicating the manner in
which such proxies are to be voted.
Section 3.6 Transfer Tax and Other Disbursements. The Partnership shall
pay or reimburse CMSS from time to time for any transfer taxes payable upon
transfers of Securities made hereunder, and for all other necessary and proper
disbursements and expenses made or incurred by CMSS in the performance of this
Agreement.
CMSS shall, at the direction of the Partnership, execute and deliver such
certificates as are provided the Partnership in connection with Securities
delivered to it or by it under this Agreement as may be required under the
provisions of the Internal Revenue Code and any regulations of the Treasury
Department issued thereunder, or under the laws of any State, to exempt from
taxation any exemptible transfers and/or deliveries of any such Securities.
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ARTICLE IV
OTHER RIGHTS AND OBLIGATIONS
Section 4.1 Reorganization or Liquidation, Etc. of the Partnership. In
the case of the following transactions, not in the ordinary course of business,
namely the merger or consolidation or similar reorganization of the Partnership
and another business development or investment company or other entity; the
sale by the Partnership of all, or substantially all of its assets to another
business development or investment company or other entity; or the liquidation
or dissolution of the Partnership and distribution of its assets; CMSS shall
deliver the Securities held by it under this Agreement and disburse cash only
upon receipt of an Officer's Certificate together with advice of counsel
reasonably satisfactory to CMSS (who may be counsel for the Partnership) to the
effect that all necessary Partnership action theretofore has been taken, or,
concurrently with CMSS action, will be taken. In no event, however, shall CMSS
as custodian be deemed to be the agent of the Partnership for purposes of
merger, consolidation, reorganization, sale of assets, liquidation or
dissolution.
Section 4.2 CMSS Acts Not Requiring Officer's Certificate.
(a) Unless and until CMSS receives an Officer's Certificate to the
contrary, CMSS shall:
(i) Present for payment all coupons and other income items
held by it for the account of the Partnership which call for
payment upon presentation and hold the cash received by it upon
such payment for the account of the Partnership;
(ii) Hold for the account of the Partnership hereunder all
stock dividends, rights and similar Securities issued with respect
to any Securities held by it hereunder; and
(iii) At the direction of the Partnership, execute as agent
on behalf of the Partnership all necessary ownership certificates
as are provided by the Partnership required by the Internal Revenue
Code or the income tax regulations of the United States Treasury
Department or under the laws of any State now or hereafter in
effect, inserting the Partnership's name on such certificates as
the owner of the Securities covered thereby, to the extent it may
lawfully do so.
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(b) With respect to Securities of foreign issue, while CMSS will use
its best efforts to collect any moneys which may to its knowledge become
collectible arising from such Securities, including dividends, interest and
other income, and to notify the Partnership of any call for redemption, offer
of exchange, right of subscription, reorganization or other proceedings
affecting such Securities, it is understood that CMSS shall be under no
responsibility for any failure or delay in effecting such collections or giving
such notices, whether or not relevant information is published in any financial
service available to it.
(c) CMSS shall not be under any obligation or duty to take action to
effect collection of any amount, if the Securities (domestic or foreign) upon
which such amount is payable are in default and payment is refused after due
demand or presentation. CMSS will, however, promptly notify the Partnership in
writing of such default and refusal to pay.
Section 4.3 No Obligation.
(a) CMSS shall be under no duty or obligation to inquire into and
shall not be liable for:
(i) the validity of the issue of any Securities purchased by
or for the Partnership, the legality of the purchases thereof or
the propriety of the amount paid therefor;
(ii) the legality of any sale of any Securities by or for the
Partnership or the propriety of the amount for which the same are
sold;
(iii) the legality of an issue or sale of any units of
limited partnership interest of the Partnership or the sufficiency
of the amount to be received therefor;
(iv) the legality of the repurchase of any units of limited
partnership interest of the Partnership or the propriety of the
amount to be paid therefor;
(v) the legality of the declaration of any distribution by
the Partnership or the legality of the issue of any Securities held
by the Partnership as a payment in kind of such distribution; and
(vi) any property or moneys of the Partnership unless and
until received by it, and any such property or moneys delivered or
paid by it pursuant to the terms hereof.
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(b) CMSS shall not be under any duty or obligation to ascertain
whether any Securities at any time delivered to or held by it for the account
of the Partnership are such as may properly be held by the Partnership under
the provisions of its Agreement of Limited Partnership, as amended or restated
from time to time, any federal or state statutes or any rule or regulation of
any governmental agency.
Section 4.4 Reports by CMSS. CMSS shall furnish the Partnership
quarterly, or on such other basis, whether daily, weekly, or monthly, as the
Partnership may request, with advice of all transactions and entries for the
account of the Partnership, reflected on a daily basis. CMSS shall furnish the
Partnership, at the close of each quarter of the Partnership's fiscal year
(which is December 31), with a list of the Securities held by it for the
Partnership hereunder. The books and records of CMSS pertaining to its actions
under this Agreement shall be open to inspection and audit at reasonable times
by officers of and auditors employed by the Partnership, its general partners
or their partners.
Section 4.5 Compensation. The Partnership shall pay to CMSS compensation
for its services under this Agreement in accordance with the schedule of
charges heretofore agreed upon, or in accordance with any amended schedule of
charges which may in the future be substituted therefore by mutual agreement.
In the event of any advance of cash for any purpose made by CMSS pursuant
to an Officer's Certificate as hereinabove specified, or in the event that CMSS
or its nominee shall incur or be assessed any taxes, charges, expenses
(including counsel fees), assessments, claims or liabilities in connection with
the performance of this Agreement, the Partnership shall indemnify and
reimburse CMSS therefor and any property at any time held for the account of
the Partnership shall be security therefor.
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ARTICLE V
DURATION AND TERMINATION
Section 5.1 Termination. This Agreement may be terminated at any time
without penalty by written notice delivered by either party to the other.
Section 5.2 Effective Date. The effective date of termination shall be
as specified in such notice, except that at the option of CMSS or the
Partnership, the effective date of the termination may be postponed to a date
not more than sixty (60) days from the date of the delivery of such notice in
order to give CMSS an opportunity to prepare for the transfer of the
Partnership's assets, or to give the Partnership an opportunity to make
suitable arrangements for a successor custodian.
Section 5.3 Acts Upon Termination. Upon termination of this Agreement,
CMSS shall deliver at its office all Securities and cash held by it to such
bank or trust company eligible to serve as custodian as the Partnership may
designate, unless the Partnership shall have furnished to CMSS an Officer's
Certificate advising that a successor custodian cannot be found willing and
able to act upon reasonable and customary terms and that there has been
submitted to the limited partners of the Partnership the question of whether
the Partnership shall be liquidated. In that event the said Securities and
cash shall be delivered subject as aforesaid, in accordance with such action as
has been approved by the requisite vote of limited partners upon receipt of a
copy of the minutes of the meeting of limited partners at which such action was
taken, certified by a General Partner of the Partnership.
Section 5.4 Eligibility of Custodian. A bank or trust company shall be
deemed eligible to serve as custodian for the purpose of this paragraph if it
is authorized under the laws of the United States, or the State in which it has
its corporate existence, to act as custodian and it has a reported capital,
surplus and undivided profits aggregating not less than $4,000,000 with respect
to which CMSS shall be entitled to rely upon the certificate of an officer of
such bank or trust company.
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ARTICLE VI
MISCELLANEOUS
Section 6.1 Indemnification and Liability. CMSS shall not incur
liability to anyone and shall be indemnified and held harmless by the
Partnership from and against all liability, claims, demands, actions, suits,
costs or expense (including the fees of its counsel) for anything done or
suffered by CMSS in good faith in accordance with an Officer's Certificate or
pursuant to the terms of this Agreement. CMSS may apply for and obtain the
advice and opinion of counsel to the Partnership or its own counsel with
respect to questions of law and shall be fully protected with respect to
anything done or omitted by it in good faith in conformity with such advice or
opinion. In the performance of its duties hereunder, CMSS shall be held only
to the exercise of reasonable care and diligence. CMSS shall be protected in
any action taken or omitted by it in reliance upon an Officer's Certificate,
notice, request, certificate or other instrument reasonably believed by it to
be genuine.
Section 6.2 Notice. Any notice or other instrument in writing authorized
or required by this Agreement to be given to either party hereto shall be
sufficiently given if addressed to such party and mailed or delivered to it at
its office at the address set forth below:
In the case of the Partnership:
Community Investment Partners III L.P., LLLP
12555 Manchester Road
St. Louis, Missouri 63131
Attention: Daniel A. Burkhardt
In the case of CMSS:
ChaseMellon Shareholder Services, L.L.C.
510 Locust Street
P.O. Box 14737
St. Louis, Missouri 63178
or at such other place as such party may from time to time designate in
writing.
Section 6.3 Assignment. This Agreement shall be binding upon and shall
insure to the benefit of the parties hereto and their respective successors and
assigns, provided, however, that this
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Agreement shall not be assignable by the Partnership without the written
consent of CMSS or by CMSS without the written consent of the Partnership.
Section 6.4 Governing Law. This Agreement shall be construed and
governed in accordance with the laws of the State of Missouri.
Section 6.5 Counterparts. This Agreement may be executed in any number
of counterparts each of which shall be deemed to be an original and such
counterparts together shall constitute but one instrument.
Section 6.6 Additional Provisions. The terms and provisions of Exhibit A
are hereby incorporated herein.
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IN WITNESS WHEREOF, the parties hereto have caused this Custody Agreement
to be executed and the corporate seal of CMSS to be affixed hereto as of the
date first above written by their respective officers thereunder duly
authorized.
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
By: CIP Management L.P., LLLP, its Managing
General Partner
By: CIP Management, Inc., its Managing
General Partner
By:
----------------------------
Name: Daniel A. Burkhardt
Title: President
Attest:
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CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By:
----------------------------------
Name:
-------------------------------
Title:
Attest: -------------------------------
- -------------------
Assistant Secretary
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EXHIBIT A
GENERAL TERMS AND CONDITIONS FOR CUSTODY AGREEMENT
The following provisions shall be part of the Custody Agreement to which
this Exhibit is attached:
1. The duties of CMSS shall be as expressed under the Agreement and
CMSS shall have no implied duties. The permissive right or power to take
any action shall not be construed as a duty to take action under any
circumstances and CMSS shall not be liable except in the event of its
negligence or willful misconduct.
2. CMSS shall not be obligated to risk its own funds in the
administration of the account and shall have a lien against any funds,
securities or other property in its possession or control for its fees,
expenses and advancements. CMSS need not take any action under the
Agreement which may involve it in any expense or liability until
indemnified to its satisfaction for any expense or liability it
reasonably believes it may incur.
3. Any recitals contained in the Agreement shall be deemed to be
those of the Partnership and not those of CMSS.
4. Unless specifically required by the Agreement, CMSS shall not be
required to give any bond or surety or report to any Court despite any
statute, custom or rule to the contrary.
5. In the event CMSS becomes involved in litigation by reason of
the administration of this agreement, it is hereby authorized to deposit
with the Clerk of the Court in which the litigation is pending any and
all funds, securities, or other property held by it under the Agreement,
less its fees, expenses and advances, and shall stand fully relieved and
discharged of any further duties. Also, in the event CMSS is threatened
with litigation by reason of the Agreement, it is hereby authorized to
file an interpleader action in any court of competent jurisdiction and to
deposit with the Clerk of such Court any funds, securities, or other
property held by it, less its fees, expenses and advances, and thereupon
shall stand fully relieved and discharged of any further duties.
6. Unless specifically required by the terms of the Agreement, CMSS
need not take notice of or enforce, any other document or relationship,
including, without limiting the generality of the foregoing, any
contract, settlement, arrangement, plan, assignment, pledge, release,
decree or the like, but its duties shall be solely as set out in the
Agreement.
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ESCROW DEPOSIT AGREEMENT
THIS ESCROW DEPOSIT AGREEMENT is made and entered into as of the
_____ day of August, 1997 by and among CHASEMELLON SHAREHOLDER SERVICES,
L.L.C., a New Jersey limited liability company (the "Bank-Escrowee"), EDWARD D.
JONES & Co., L.P., a Missouri limited partnership (the "Depositor-Agent"), and
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP, a Missouri limited partnership
registered as a Missouri limited liability limited partnership (the
"Issuer-Partnership").
RECITALS:
1. The Issuer-Partnership, a limited partnership organized under the
Missouri Revised Uniform Limited Partnership Act and registered as a limited
liability limited partnership under the Missouri Uniform Partnership Law and
the Missouri Revised Uniform Limited Partnership Act, to invest primarily in
venture capital and other investments, proposes to sell up to 200,000 units of
limited partnership interests in the Issuer-Partnership (the "Units") at a
price of $25.00 each, as described in a Registration Statement on Form N-2 (No.
333-__________) filed with the Securities and Exchange Commission (the
"Commission") relating to the Issuer-Partnership and the Units (the
"Registration Statement").
2. In connection with the proposed sale of such Units, Edward D.
Jones & Co., L.P., c/o 12555 Manchester Road, Des Peres, Missouri 63131 (the
"Depositor-Agent"), has been named as the proposed agent for the sale of such
Units.
3. The Depositor-Agent proposes to sell the Units on a "best efforts"
basis.
4. In compliance with an Agency Agreement among the
Issuer-Partnership, CIP Management, Inc., CIP Management L.P., LLLP (the
"Managing General Partner"), and the Depositor-Agent (the "Agency Agreement")
and Rule 15c2-4 under the Securities Exchange Act of 1934, the Partnership and
the Depositor-Agent desire that subscription payments from the sale of the
Units be deposited in escrow with the Bank-Escrowee until certain terms and
conditions have been satisfied.
5. The Bank-Escrowee desires to act as escrow agent in connection
with the subscription payments.
6. Such offering will terminate not later than March 31, 1998
(the "Offering Termination Date"). If subscriptions acceptable to the Managing
General Partner for 40,000 Units are not received by October 30, 1997, as
may be extended in the discretion of the Managing General Partner (but not to
be extended later than the Offering Termination Date), no units will be sold
and the subscribers' funds will be refunded promptly with any interest earned
thereon. If acceptable subscriptions for at least 40,000 Units have been
received by October 30, 1997 (or such later date to which it may be
extended), and certain other conditions are met, there will be at least one
closing of the sale of Units at such time and for the
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number of units as the Partnership and Edward D. Jones & Co., L.P. determine
(the "Initial Closing"); provided, however, that the Initial Closing will take
place for no fewer than 40,000 Units.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
ESCROW ACCOUNT
Section 1.1 Agent/Account. The Bank-Escrowee agrees to act as escrow
agent in receiving and disbursing any proceeds from the sale of the Units in
accordance with the terms of this Agreement and to establish an account for
such purposes (the "Escrow Account").
Section 1.2 Delivery of Subscription Payments. The Depositor-Agent
will deliver to the Issuer-Partnership all copies of the subscription
agreements and to the Bank-Escrowee the subscription payments for Units in the
form of checks drawn by the subscribers, payable to the order of "ChaseMellon
Shareholder Services, L.L.C./CIP III-Escrow Account". Each subscription
payment shall be delivered by the Depositor-Agent by noon of the next business
day following its receipt by the Depositor-Agent. The Bank-Escrowee shall
promptly return to the Depositor-Agent any checks made payable other than as
stated above. Concurrently with the delivery of the subscription payments, the
Depositor-Agent shall deliver to the Bank-Escrowee a statement of:
(a) the name and address of each subscriber whose payment is then
being delivered;
(b) the amount received from each such subscriber;
(c) the number of Units which each such person has agreed to
purchase; and
(d) the taxpayer identification number of such person.
Section 1.3 Collection and Deposit. The Bank-Escrowee shall accept
each subscription check for credit and forward such check for collection. Upon
collection of the proceeds of each such check, the Bank-Escrowee shall deposit
the collected proceeds in the Escrow Account and make a written account of the
subscriber's name and address, tax identification number, number of Units
purchased, and date of and amount of consideration received. Upon notice of
any change of address whether by notification by the subscriber or by return of
mail addressed to the subscriber, the Bank-Escrowee will notify the
Issuer-Partnership and Depositor-Agent of any change of address or lack of
correct address and likewise the Issuer-Partnership and Depositor-Agent shall
inform the Bank-Escrowee of any such information acquired by the
Issuer-Partnership or the Depositor-Agent. If any check is returned unpaid to
the Bank-Escrowee, the Bank-Escrowee shall promptly return such check along
with the respective subscription information to the Depositor-Agent and
simultaneously, notify the
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Issuer-Partnership and do such other things in respect thereto to effect
collection of such check as may be reasonably requested by the
Issuer-Partnership, provided the Issuer-Partnership indemnifies the
Bank-Escrowee for all expenses and liabilities incurred thereby.
ARTICLE II
INVESTING OF FUNDS
Section 2.1 Investments. From time to time after the first deposit
of any funds pursuant to Article I hereof and until such time as all funds in
the Escrow Account have been disbursed pursuant to Article III hereof, the
Depositor-Agent shall instruct the Bank-Escrowee in writing to, and the
Bank-Escrowee thereupon shall, invest such funds being then held by the
Bank-Escrowee in any of the following securities:
(a) short-term direct obligations of the United States of America
or any instrumentality thereof for the payment of which the full faith and
credit of the United States of America is pledged;
(b) short-term bank time deposits or certificates of deposit of
banks or trust companies (including the Bank-Escrowee) organized under
the laws of the United States of America or any state thereof and having
combined capital and surplus of at least $5,000,000, provided, that the
maturity date of any such deposit or certificate does not extend beyond
the anticipated contingency occurrence date, unless such instrument can
be readily sold or otherwise disposed of for cash by the time the
contingency occurs without any dissipation of the offering proceeds
invested; and/or
(c) bank money market accounts, which are invested in the
foregoing.
Except as provided above, the Bank-Escrowee is under no duty to invest funds
deposited in the Escrow Account. If no investment instructions are received by
the Bank-Escrowee, the Bank-Escrowee shall invest in bank money market
accounts.
Section 2.2 Redemption or Sale. The Bank-Escrowee shall present for
redemption any obligation so purchased or sell such obligation upon the
direction of the Depositor-Agent.
Section 2.3 Part of Escrow Account. Obligations so purchased as an
investment of funds of the Escrow Account shall be deemed at all times to be a
part of the Escrow Account, and the interest accruing thereon shall be credited
to the Escrow Account for the account of the subscriber whose funds were thus
invested. If the Depositor-Agent so directs, the Bank-Escrowee shall make any
and all investments permitted by this paragraph through its own bond or
investment department.
Section 2.4 Loss. Neither the Bank-Escrowee nor the
Issuer-Partnership will be responsible for any loss suffered from any
investment.
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ARTICLE III
DISTRIBUTION OF FUNDS
Section 3.1 Closing. In the event that at least 40,000 Units have
been subscribed for prior to the Initial Closing and payments in the amount of
$12.50 for each Unit subscribed for shall have been deposited in the Escrow
Account in collected funds, the parties hereto shall proceed as follows:
a. Notice of Closing. The Depositor-Agent shall advise the
Bank-Escrowee in writing that all conditions precedent as to closing by
named subscribers have been satisfied, and the Depositor-Agent shall
arrange for a closing as to such named subscribers in accordance with the
Agency Agreement (a "Closing" or a "Closing Time"). The Depositor-Agent
shall give verbal notice of Closing Time, followed by written notice, to
the Bank-Escrowee at least three business days prior to such Closing
Time.
b. Application of Funds. At each Closing Time, the Bank-Escrowee
shall disburse to the Issuer-Partnership the cash representing collected
funds then being held in the Escrow Account for the account of the
subscribers for whose purchase of Units such Closing is being held in
accordance with the written direction of the Depositor-Agent, at which
time such amounts so applied shall no longer be a deposit or deposits
under this Agreement. In the event the funds have been invested on
behalf of the subscribers pursuant to Section 2.1, the interest income
shall be disbursed in accordance with Section 3.4.
For purposes of this Section 3.1, the term "collected funds" shall
mean all funds received by the Bank-Escrowee which have cleared normal banking
channels and are in the form of cash.
Section 3.2 No Closing. In the event that on or prior to fifteen
(15) business days after the Offering Termination Date, no Closing contemplated
by Section 3.1 above shall have been consummated, then the Depositor-Agent shall
promptly so advise in writing the Bank-Escrowee ("Notice of No Closing") and
authorize and direct in writing the Bank-Escrowee to return as promptly as
practicable, the funds held in the Escrow Account to or for the accounts of all
of the subscribers at their respective addresses provided pursuant to Section
1.2. In each case the Bank-Escrowee shall return such funds with interest, if
any, allocated as provided in Section 3.4.
Section 3.3 Rejected Subscription. In the event that before a
Closing Time with respect to any subscriber the Bank-Escrowee shall have
received written advice from the Depositor-Agent that such named subscriber has
been rejected by the Partnership, or that prior to such Closing Time it is
determined by the Partnership that such named subscriber does not meet the
suitability standards required by the Partnership for investment in the Units,
the Bank-Escrowee shall, upon receipt of the written direction of the
Depositor-Agent ("Notice of Rejection"), return funds deposited pursuant to
Section 1.2 to such subscribers at their respective
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addresses provided pursuant to Section 1.2. The Bank-Escrowee shall return
such funds without deduction and with interest earned to the date such notice
is received by the Bank-Escrowee in accordance with Section 3.4.
Section 3.4 Interest Allocation. In the event that the funds have
been invested on behalf of the subscribers pursuant to Section 2.1, the
Bank-Escrowee shall at Closing Time, or after receipt of Notice of No Closing
or Notice of Rejection return to such subscribers a pro rata portion (allocated
as set forth below) of the interest or income earned thereon, and within three
(3) business days thereafter send to the Issuer-Partnership a check register
indicating the amounts disbursed and the payees. Such interest and income
shall be allocated among the subscribers referred to in the preceding sentence
in proportion to the amounts of their respective subscription funds and the
lengths of time their subscription amounts were on deposit. The Bank-Escrowee
shall provide to each subscriber, before January 31, 199___, a Form 1099
indicating the interest or income earned on such investment during 199___.
ARTICLE IV
LIABILITIES AND FEES
Section 4.1 Liabilities.
(a) In the event that the Bank-Escrowee has disbursed funds in
accordance with Article III, then, as to each such named subscriber, the
Bank-Escrowee shall be relieved of all liabilities in connection with the
escrow deposits provided for herein with respect to such named
subscriber.
(b) In any event, the obligations and liabilities of the
Bank-Escrowee hereunder will terminate as of the Offering Termination
Date, and as to any funds remaining in the Escrow Account the
Bank-Escrowee shall be entitled to refrain from taking any action until
it has been directed otherwise in writing by the Depositor-Agent, or by a
final judgment of a court of competent jurisdiction.
Section 4.2 Fees. The Bank-Escrowee shall not receive any fee in
connection with its services rendered under this Escrow Deposit Agreement,
except for such fees specified in the letter from the Bank-Escrowee dated
_______, 1997. Payments to be made pursuant to this section shall be made by
the Issuer-Partnership, in accordance with the provisions of such letter. In
the event that the funds are returned to the subscribers because at least
40,000 Units were not subscribed for by the Initial Closing, as contemplated by
Section 3.2 above, the Bank-Escrowee's fee will be paid to the Bank-Escrowee on
behalf of the Issuer-Partnership, by the Managing General Partner of the
Issuer-Partnership on or prior to five business days after the Initial Closing.
ARTICLE V
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MISCELLANEOUS
Section 5.1 Duties of Bank-Escrowee. It is understood and agreed,
further, that the Bank-Escrowee shall:
(a) be under no duty to enforce payment of any purchase price
which is to be paid to and held by it hereunder;
(b) be under no duty to accept information from any person other
than the Issuer-Partnership and the Depositor-Agent and then only to the
extent and in the manner provided in this Agreement;
(c) be protected in acting upon any notice, opinion, request,
certificate, approval, consent or other paper believed by it to be
genuine and to be signed by the proper party or parties;
(d) be deemed conclusively to have given and delivered any notice
required to be given or delivered hereunder if the same is in writing,
signed by any one of its authorized officers and (i) mailed, by
registered or certified mail, postage prepaid, or (ii) hand delivered, in
a sealed wrapper, manually receipted for by the Depositor-Agent or the
Issuer-Partnership, addressed to the Depositor-Agent or the
Issuer-Partnership, respectively, at the following address:
Depositor-Agent:
Edward D. Jones & Co., L.P.
12555 Manchester Road
St. Louis, Missouri 63131
Issuer-Partnership:
Community Investment Partners III L.P., LLLP
c/o Edward Jones
12555 Manchester Road
St. Louis, Missouri 63131
Attention: Daniel A. Burkhardt
(e) have no liability, or duty to inquire into the terms and
conditions of this Agreement, the Agency Agreement, the Registration
Statement or any of the exhibits annexed thereto, and that its duties
under this Agreement are purely ministerial in nature;
(f) be entitled to refrain from taking any action other than
to keep all property held by it in escrow until it shall be directed
otherwise in writing by the Depositor-Agent, or by a final judgment by a
court of competent jurisdiction, provided that it shall be uncertain as
to its duties and rights hereunder;
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(g) have no liability for following the instructions herein
contained or expressly provided for, or written instructions given by the
Depositor-Agent.
Section 5.2 Indemnification. Depositor-Agent agrees to indemnify and
hold harmless the Bank-Escrowee for any claim made against it by reason of its
acting or failing to act in connection with any of the transactions
contemplated hereby and against any loss, liability or expense, including the
expense of defending itself against any claim of liability it may sustain in
carrying out the terms of this Agreement, except such claims which are
occasioned by its bad faith, gross negligence, willful misconduct or any other
breach of fiduciary duty.
Section 5.3 Advice of Counsel. The Bank-Escrowee shall be permitted
to consult with counsel of its choice, who may be counsel to the Depositor-Agent
or Issuer-Partnership or who may be in-house counsel, and shall not be liable
for any action taken, suffered or omitted by it in good faith in accordance
with the advice of such counsel, provided, however, that nothing contained in
this Section, nor any action taken by the Bank-Escrowee, or of any counsel,
shall relieve the Bank-Escrowee from liability for any claims which are
occasioned by its bad faith, gross negligence or willful misconduct or any
other breach of its fiduciary duty, all as provided in Section 5.2 above.
Section 5.4 Modification etc. This Agreement cannot be modified or
amended except in a writing signed by the parties hereto. In addition, the
Bank-Escrowee is not bound by any termination, cancellation, rescission or
supersession of this Agreement, unless the same shall be in writing and signed
by the parties hereto.
Section 5.5 Resignation. The Bank-Escrowee shall have the right,
at any time, to resign hereunder by giving written notice of its resignation
to the Depositor-Agent at its address set forth above, at least 30 business
days prior to the date specified for such resignation to take effect, and upon
the effective date of such resignation:
(a) all cash and other payments and all other property then
held by the Bank-Escrowee hereunder shall be delivered by it to
such person as may be designated in writing by the Depositor-Agent,
whereupon the Bank-Escrowee's obligations hereunder shall cease and
terminate;
(b) if no such person has been designated by such date, all
obligations of the Bank-Escrowee hereunder shall, nevertheless, cease and
terminate; and
(c) the Bank-Escrowee's sole responsibility thereafter shall
be to keep all property then held by it and to deliver the same to a
person designated in writing by the Depositor-Agent or in accordance with
the directions of a final order or judgment of a court of competent
jurisdiction and the provisions of Sections 5.1(f), 5.2 and 5.6 shall
remain in effect.
Section 5.6 Expenses. The Bank-Escrowee shall be reimbursed by the
Depositor-Agent upon its request for all reasonable expenses, disbursements and
advances incurred or made by it in accordance with any provisions of this
Agreement except any such
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expenses, disbursements or advances as may be attributable to its gross
negligence, willful misconduct or bad faith or any other breach of fiduciary
duty.
Section 5.7 Continuation of Offer. In the event the
Issuer-Partnership and the Depositor-Agent shall agree to extend the Initial
Closing beyond the close of business on October 30, 1997, the Depositor-Agent
shall notify the Bank-Escrowee of such fact in writing specifying the date and
time to which the Offering Period shall be continued, which date shall be no
later than March 31, 1998.
Section 5.8 Notices. All requests, notices, advices or other
communications hereunder to the Bank-Escrowee required to be in writing shall
be given either (a) by first class mail, postage prepaid, or (b) by hand
delivery in a sealed envelope, in each case addressed as follows:
ChaseMellon Shareholder Services, L.L.C.
P.O. Box 14737
510 Locust
St. Louis, Missouri 63101
Attention: Corporate Trust
Section 5.9 Third Party Rights/Governing Law. Nothing in this
Agreement is intended to or shall confer upon anyone other than the parties
hereto any legal or equitable right, remedy or claim. This agreement shall be
governed by, and its provisions construed in accordance with, the laws of the
State of Missouri and may be modified only in writing.
Section 5.10 Additional Provisions. The terms and provisions of
Exhibit A are hereby incorporated herein.
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IN WITNESS WHEREOF, the parties hereto have caused this Escrow Deposit
Agreement to be executed as of the date first above written by their respective
officers thereunder duly authorized.
CHASEMELLON SHAREHOLDER SERVICES,
L.L.C.
Bank-Escrowee
By
------------------------------
Name:
-------------------------
Title:
-------------------------
EDWARD D. JONES & CO., L.P.
Depositor-Agent
By
------------------------------
Name:
-------------------------
Title:
-------------------------
COMMUNITY INVESTMENT PARTNERS III L.P., LLLP
By: CIP Management L.P., LLLP
Managing General Partner
By: CIP Management, Inc.
its Managing General Partner
By:
------------------------
Daniel A. Burkhardt
President
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EXHIBIT A
---------
GENERAL TERMS AND CONDITIONS FOR ESCROW AGREEMENT
The following provisions shall be part of the Escrow Agreement to
which this Exhibit is attached:
1. The duties of the Bank-Escrowee shall be as expressed under the
Agreement and the Bank-Escrowee shall have no implied duties. The
permissive right or power to take any action shall not be construed as a
duty to take action under any circumstances and the Bank-Escrowee shall
not be liable except in the event of its gross negligence or willful
misconduct.
2. The Bank-Escrowee shall not be obligated to risk its own funds
in the administration of the account and shall have a lien against any
funds, securities or other property in its possession or control (the
"Escrow Account") for its fees, expenses and advancements. The
Bank-Escrowee need not take any action under the Agreement which may
involve it in any expense or liability until indemnified to its
satisfaction for any expense or liability it reasonably believes it may
incur.
3. Any recitals contained in the Agreement shall be deemed to be
those of the principal and not those of the Bank-Escrowee.
4. Unless specifically required by the Agreement, the
Bank-Escrowee shall not be required to give any bond or surety or report
to any Court despite any statute, custom or rule to the contrary.
5. Any notice to or demand upon the Bank-Escrowee shall be given
by being deposited, certified mail, postage prepaid, in the United States
mail, addressed (until another address is filed in writing) to the
Bank-Escrowee as follows:
ChaseMellon Shareholder Services, L.L.C.
510 Locust Street
P.O. Box 14768
St. Louis, Missouri 63178
Attention: Corporate Trust Division
6. The Bank-Escrowee may execute any of the duties under the
Agreement by or through agents or receivers.
7. The Bank-Escrowee shall not be required to take notice or be
deemed to have notice of any default or other fact or event under the
Agreement unless the Bank-Escrowee shall be specifically notified in
writing of the default, fact or event.
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8. In the event the Bank-Escrowee becomes involved in litigation
by reason of the administration of this agreement, it is hereby authorized
to deposit with the Clerk of the Court in which the litigation is pending
any and all funds, securities, or other property held by it under the
Agreement, less its fees, expenses and advances, and shall stand fully
relieved and discharged of any further duties. Also, in the event the
Bank-Escrowee is threatened with litigation by reason of the Agreement,
it is hereby authorized to file an interpleader action in any court of
competent jurisdiction and to deposit with the Clerk of such Court any
funds, securities, or other property held by it, less its fees, expenses
and advances, and thereupon shall stand fully relieved and discharged of
any further duties.
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[PRICE WATERHOUSE LETTERHEAD]
Consent of Independent Accountants
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form N-2 of our reports dated August 12, 1997,
relating to the balance sheets of CIP Management, L.P., CIP Management, Inc.
and Community Investment Partners III, L.P., LLLP which appear in such
Prospectus. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
Price Waterhouse LLP
Price Waterhouse LLP
St. Louis, Missouri
August 12, 1997
