AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
ON MAY 7, 1998
INVESTMENT COMPANY ACT FILE NO. 811-08637
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
Registration Statement Under The Investment Company Act of 1940
Amendment No.
(check appropriate box or boxes)
THE PACIFIC CORPORATE GROUP
PRIVATE EQUITY FUND
(Exact Name of Registrant as Specified in Charter)
c/o PACIFIC CORPORATE GROUP, INC.
1200 PROSPECT STREET, SUITE 200
LA JOLLA, CALIFORNIA 92037
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (619) 456-6000
CHRISTOPHER J. BOWER
c/o PACIFIC CORPORATE GROUP, INC.
1200 PROSPECT STREET, SUITE 200
LA JOLLA, CALIFORNIA 92037
(Name and Address of Agent for Service)
COPIES TO:
PHILIP M. POSNER COUNSEL FOR THE FUND
PACIFIC CORPORATE GROUP, INC. BROWN & WOOD LLP
1200 PROSPECT STREET ONE WORLD TRADE CENTER
LA JOLLA, CALIFORNIA 92037 NEW YORK, NEW YORK 10048-0557
ATTENTION: JOHN A. MACKINNON
PART A
INFORMATION REQUIRED IN A PROSPECTUS
ITEM 1. OUTSIDE FRONT COVER.
Not Applicable.
ITEM 2. INSIDE FRONT AND OUTSIDE BACK COVER PAGE.
Not Applicable.
ITEM 3. FEE TABLE AND SYNOPSIS.
Not Applicable.
ITEM 4. FINANCIAL HIGHLIGHTS.
Not Applicable.
ITEM 5. PLAN OF DISTRIBUTION.
Not Applicable.
ITEM 6. SELLING SHAREHOLDERS.
Not Applicable.
ITEM 7. USE OF PROCEEDS.
Not Applicable.
ITEM 8. GENERAL DESCRIPTION OF THE REGISTRANT.
1. General. The Pacific Corporate Group Private Equity Fund (the "Fund") is
a Delaware business trust formed on July 29, 1997 and registered under the
Investment Company Act of 1940 (the "Investment Company Act") as a
non-diversified, closed-end, management investment company. The Fund has
retained Pacific Corporate Group, Inc. ("PCG" or "Management Company") as its
investment adviser. PCG also acts as the Fund's adviser trustee (in such
capacity, the "Adviser Trustee"). The address of the Fund is c/o Pacific
Corporate Group, Inc., 1200 Prospect Street, Suite 200, La Jolla, California
92037, and its telephone number is (619) 456-6000. The Fund held closings of a
private placement of shares of beneficial interest, without par value
("Shares"); on February 9, 1998, February 27, 1998, March 9, 1998, April 24,
1998 and April 30, 1998. At those times, it issued an aggregate of approximately
108,660 Shares in consideration of capital commitments to the Fund by investors
in the Fund (the "Investors") aggregating $110,586,375. Of such commitments,
$55,231,875 (approximately 50%) were funded on such dates.
2. Investment Objective and Policies. The investment objective of the Fund
is to achieve, through selected private market investments ("Private Market
Investments"), rates of return that are superior to public market investment
alternatives, while reducing risk through diversification within the private
market.
The Fund seeks to achieve its objective through investment in selected
private market opportunities in: (i) Indirect Investments, which are privately
negotiated transactions in a portfolio of partnerships (or similar vehicles)
organized by established general partner managers who invest in private market
investment opportunities such as corporate restructurings, recapitalizations,
venture capital and special situations; and (ii) Direct Investments, which are
privately-negotiated investments directly in private or public operating
companies, including co-investments alongside general partner managers of
Indirect Investments. Direct Investments only target companies with established
products or services and are not made in early stage venture capital
investments. The Fund may invest up to 25% of committed capital in such Direct
Investments. The Fund's principal function is to provide individual investors
and smaller institutions with access to an alternative to public market
investments through a portfolio of Indirect and Direct Investments managed by an
adviser with extensive private market experience.
The Fund seeks to diversify its Indirect Investments among the various
sectors of the private market, including corporate restructurings,
recapitalizations, venture capital, and special situations. Indirect Investments
are expected to be diversified geographically and may include international
opportunities. Direct Investments consist of co-investments with general partner
groups and other direct equity and equity-related investments in situations that
offer the potential for attractive returns to the Fund. The Fund may also
acquire Indirect Investments and Direct Investments through selected secondary
market opportunities.
The Fund invests its capital in accordance with the following investment
guidelines: (i) the Fund will not make any new investments after five years;
(ii) the Fund will not invest in excess of 15% of its total committed capital in
any Direct or Indirect Investment; (iii) the Fund will not acquire 10% or more
of the outstanding voting securities of any Indirect Investment that is a
private investment company, as described below; (iv) the Fund will not invest in
excess of 25% of its total committed capital in Direct Investments; and (v) the
Fund will not invest in excess of 20% of its total committed capital in Indirect
Investments focused primarily on investments in issuers located outside of the
United States or Direct Investments in issuers that at the time of investment
derive more than 50% of their revenues outside of the United States. For
purposes of the foregoing, a private investment company is an investment fund
that is exempt from registration under the Investment Company Act as a result of
having its securities owned by not more than 100 persons. While there is no
minimum amount of the Fund's assets that will be designated for Direct
Investments, under current market conditions the Fund will target 20% to 25% of
its assets for Direct Investments. Under restrictions contained in the
Investment Company Act, to the extent the Fund owns in excess of 5% of the
voting securities of any issuer, it may not participate in co-investments with
such issuer.
The Fund invests primarily in a diversified portfolio of approximately
seven to ten Indirect Investments. Indirect Investments are pools of capital
managed by general partner managers that target high risk investments such as
corporate restructurings, recapitalizations, venture capital and special
situations.
The Fund may invest up to 25% of its total committed capital in Direct
Investments. Direct Investments can include common stock, preferred stock (with
or without warrants), convertible preferred stock, and convertible debentures,
in combination with other equity-related instruments such as attached common
equity warrants, and may include co-investment opportunities developed with
general partner managers of Indirect Investments held by the Fund.
The types of Direct Investments that are evaluated by PCG include, but are
not limited to: (i) Transaction Capital - investment in the equity or debt of a
public or private company to pursue a transaction strategy involving an
acquisition, merger or purchase of assets of another company; (ii)
Recapitalizations investment in the equity or debt of a public or private
company designed to restructure the outstanding capital profile of that company,
including debt and equity buybacks, exchange offers and refinancings; (iii)
Strategic Capital - a friendly equity investment in a public company to augment
such company's defenses against an unfriendly or hostile takeover attempt; (iv)
Restructuring Capital - investment in the equity or debt of a public or private
company pursuing a leveraged, management or employee buyout which may result in
a significant change in ownership or control; (v) Patient Capital - investments
in the equity or debt of public or private companies to pursue long-term
strategies aimed at maximizing shareholder value through capital investment;
(vi) Equity or Debt Secondary Investments - investment in minority equity or
debt positions of public or private companies purchased from third party
investors; and (vii) Later Stage Development Capital - investment in the equity
or debt of private companies in the later stages of development which have
limited access to public equity or debt financing or institutional financing.
As is the case with Indirect Investments, the Fund actively monitors its
Direct Investments. While PCG will not seek majority control in Direct
Investments on behalf of the Fund, it may seek an advisory role with, or
visitation rights to, the board of directors of the Direct Investment issuer,
and at a minimum negotiate specific rights enabling the Fund to take remedial
action if necessary.
3. Risk Factors (a) General.
Investment Risks in General. Investments by the Fund in Private Market
Investments involve significant risks not otherwise present in public market
investments. The Fund expects that the Indirect Investments in which it invests
may involve companies that have little or no operating histories or are
experiencing or are expected to experience financial difficulties, which
difficulties may never be overcome. The Fund's investments in Indirect and
Direct Investments may involve highly speculative investment techniques,
including extremely high leverage, highly concentrated portfolios, workouts and
startups, control positions, and illiquid investments. If the Fund receives
distributions in kind from any of its investments, it may incur additional costs
and risks to dispose of such assets.
Availability of Investments. The success of the Fund as a whole depends on
the availability of appropriate investment opportunities and PCG's ability to
identify, select, develop and complete appropriate investments. In addition, the
success of a particular Indirect Investment depends upon the availability of
appropriate investments to the issuer of the Indirect Investment. The
availability of investment opportunities generally will be subject to market
conditions. In certain instances, Indirect Investments in which the Fund wishes
to invest may restrict the Fund from doing so based on regulatory or other
concerns. Although PCG believes that significant opportunities may exist, there
can be no assurance that suitable investments will be available or selected by
PCG or that the Fund will be able to invest fully its committed capital within
the investment period. To the extent that any portion of the Fund's committed
capital is not invested in a timely manner, the Fund's potential for return will
be diminished.
Leverage. The use of leverage, which exposes the borrower to changes in
price at a ratio higher than 1:1 in reference to the amount invested, magnifies
both the favorable and unfavorable effects of price movements in the investments
made by the Fund. Most of the companies in which the Fund may be indirectly or
directly invested are likely to have significant leverage. The leveraged capital
structures of such companies will increase exposure of these companies to
adverse economic factors such as rising interest rates, downturns in the economy
or deterioration in the condition of the company or its industry. The Fund
itself may also borrow for the purpose of making distributions, paying operating
expenses or such other purposes as the Adviser Trustee shall determine, although
the Adviser Trustee generally does not expect the Fund to borrow money for
investment purposes or otherwise. The Fund will also be subject to limitations
on its ability to borrow imposed by the Investment Company Act.
Concentration. The limited partnerships or other Indirect Investments in
which the Fund invests may in certain cases concentrate their investments in
only a few companies or investments. This concentration by individual general
partner managers could cause a proportionately greater loss than if a larger
number of investments were made. Additionally, the Fund's Direct Investments may
be focused on only a few companies, leading to potential concentration.
Workouts and Startups. With respect to Indirect Investments, investments in
distressed companies and new ventures are subject to greater risk of loss than
investments in companies with more stable operations or financial condition.
Control Positions. The Indirect Investments in which the Fund invests may
take control positions in companies. In addition, the Fund may be deemed to have
a control position in respect of a Direct Investment. The exercise of control
over a company imposes additional risks of liability for environmental damage,
product defects, failure to supervise management, violation of governmental
regulations and other types of liability in which the limited liability
generally characteristic of business operations may be ignored. If these
liabilities were to occur, the Fund would likely suffer losses in its
investments.
Illiquid Investments. The Fund's investments will be illiquid and not able
to be transferred without the consent of other parties involved in such
investments. With respect to the Indirect Investments, the Fund generally must
comply with the purchase and redemption requirements of the underlying funds.
Additionally, the Indirect Investments in which the Fund invests may acquire
securities that cannot be sold except pursuant to a registration statement filed
under the Securities Act of 1933 (the "Securities Act") or in accordance with
Rule 144 of the Securities Act or another exemption under the Securities Act.
This illiquidity could result in losses if the Fund or the respective limited
partnerships sell positions.
Third Party Involvement. PCG may determine to make co-investments on behalf
of the Fund in Direct Investments with general partner managers. Such
co-investments may involve risks not present in investments where a third party
is not involved, including the possibility that a third party general partner
may at any time have economic or business interests or goals which are
inconsistent with those of the Fund, or may be in a position to take action
contrary to the Fund's investment objective. In addition, the Fund may in
certain circumstances be deemed liable for actions of its third party general
partners.
Lack of Operating History. The Fund has only recently commenced operations
and, accordingly, has limited operating history upon which investors may
evaluate its likely performance. PCG has previously formed only one investment
vehicle such as the Fund.
Changes in Access to Deal Flow. Although PCG will seek access to attractive
transactions for the Fund through its network of relationships, changes in such
relationships, including the loss of large institutional clients, may negatively
affect such access.
Risks Inherent in International Investments. Investments on an
international basis involve certain risks not involved in domestic investments,
including fluctuations in foreign exchange rates, future political and economic
developments, different legal systems and the existence or possible imposition
of exchange controls or other foreign or U.S. governmental laws or restrictions
applicable to such investments.
Conflicts of Interest. PCG acts as the investment adviser for the Private
Market Fund, L.P., a $73 million private investment fund with an investment
objective that is substantially identical to the Fund's investment objective and
that commenced operations in December 1996. In addition, PCG and its affiliates
perform investment advisory services for other investment entities and
individuals (which may include investors in the Fund) with investment objectives
and policies similar to those of the Fund. These other investors may compete
with the Fund for investment opportunities similar to those sought by the Fund
and, if permissible under the Investment Company Act or an exemption therefrom,
may co-invest with the Fund in certain transactions. In this regard, the
Securities and Exchange Commission (the "SEC") has issued an order to the Fund
and PCG permitting such co-investments, subject to certain conditions. Pursuant
to such order, the Fund may participate on a proportionate basis with other
co-investors, on the same terms and at the same price. Other clients of PCG also
may invest directly in investments that would be appropriate investments for the
Fund. PCG will endeavor to resolve conflicts with respect to investment
opportunities in a manner which it deems equitable to all to the extent possible
under the prevailing facts and circumstances. In addition, the Fund may, if
permissible under the Investment Company Act or an exemption therefrom, invest
in portfolio investments in which affiliates of PCG or clients of PCG have an
existing investment. Under such circumstances, PCG's affiliates or other clients
of PCG may benefit from the Fund's participation. The Fund's investment will, in
all cases, be on the same terms as an investment then offered to affiliated
parties.
The general partners, investment managers and others affiliated with any of
the Fund's portfolio investments may have conflicts of interest. For example,
such persons may be affiliated or have a relationship with a broker-dealer firm
through which a portion of the portfolio transactions are conducted and such
person may receive a portion of the brokerage commissions resulting from such
transactions. In addition, portfolio investments may engage in other
transactions (although generally not lending transactions) with affiliated
persons on terms and conditions not determined through arm's-length
negotiations. Further, the general partner manager of an Indirect Investment
will likely be entitled to a fee based upon a percentage of such Indirect
Investment's profits, which may induce it to select riskier investments on
behalf of the Indirect Investment than would otherwise be the case.
The Fund may invest up to 25% of committed capital in Direct Investments.
Since PCG will be entitled to a performance allocation on Direct Investments,
there may be conflicts of interest in PCG's determination of the portion of the
Fund's committed capital to be invested in Direct Investments.
Officers of the Management Company and Other Managers Not Full Time.
Although the officers of the Management Company and the managers of the
portfolio investments selected by the Management Company will devote as much
time as they believe is necessary to assist the Fund or their portfolio
investment, as the case may be, in achieving its investment and rate of return
objectives, none of them expects to devote substantially all of his or her
working time to the affairs of the Fund or portfolio investments of the Fund.
Management Experience. Although PCG has provided investment advisory
services since 1979, the services have primarily consisted of non-discretionary
advisory services provided to large institutional clients. With the exception of
the Private Market Fund, L.P., which was formed in 1996, PCG has not previously
formed or managed an investment vehicle such as the Fund.
Lack of Management Control. Under the Fund's Second Amended and Restated
Declaration of Trust (the "Declaration of Trust"), Investors do not have the
right to participate in the management, control or operation of the Fund. The
Investors also will not have the opportunity to evaluate personally the relevant
economic, financial and other information which will be utilized by PCG in its
selection, structuring, monitoring and disposition of investments. In addition,
the Investors will not receive all of the detailed financial information issued
by the Fund's Indirect and Direct Investments which may be available to PCG.
PCG does not expect to have rights to participate in the management,
control or operation of its Indirect Investments or remove the managers thereof
except pursuant to provisions granting such rights in the applicable limited
partnership agreements (or similar documents). As a result, the Fund will
surrender a significant amount of control over Indirect Investments. Subsequent
to the investment by the Fund, an Indirect Investment partnership may change its
investment objectives or policies. In addition, an Indirect Investment
partnership may adopt a time horizon for its underlying investments that differs
from that of the Fund. This may cause the expected term of the Fund to continue
beyond the date the Fund otherwise would have terminated.
Multiple Levels of Expense. Both the Fund and the Indirect Investments in
which the Fund invests impose management costs and performance fees or
allocations on realized and unrealized appreciation and other income and will
incur administrative and other expenses. It is currently estimated that the
management fees charged by general partner managers of Indirect Investments in
which the Fund invests will range from approximately 1.25% to 2.50%. In
addition, such general partner managers also typically receive a performance fee
of approximately 20% of capital gains after a preferred return payable to
limited partners. This will result in greater expense than if such fees were not
charged.
Multi-Managers and Multiple Types of Investments. While some
diversification of investment risk is expected to result from the investment
approach of having multiple types of investments and investments made through
different general partner managers (e.g., limited partnerships and direct
investments involving corporate restructurings, recapitalizations, venture
capital and special situations and secondary investments in limited
partnerships), no assurance can be given that such diversification will be
sufficient, or that it will increase, rather than reduce, potential net profits.
Furthermore, each investment opportunity will present specific risks relevant to
the industry, structure, management and environment in which the underlying
company competes. These risks cannot be fully assessed at this time and could be
significant.
Incomplete Information. In addition, since private market transactions and
securities are generally exempt from registration and reporting requirements of
the SEC, available data relating to these transactions may result in incomplete
information to properly evaluate the Private Market Investment opportunity.
Performance Allocation. The entitlement of the Adviser Trustee to a
performance allocation on Direct Investments could create an incentive for the
Management Company to choose investments that are riskier or more speculative
than would otherwise be the case. The same risk applies to the general partner
managers of the Indirect Investments in which the Fund will invest.
Failure to Make Capital Contribution. Investors that fail to make their
required capital contribution will be liable to forfeiture of all capital
contributed by such Investors, including any and all income, distributions and
capital gains, without limitation, whether or not such amounts have been
distributed.
Lack of Transferability of Shares. The Fund's Shares have not and will not
be registered under federal or state securities laws and are subject to
restrictions on transfer contained in such laws and the Declaration of Trust.
The Shares are not transferable except with the prior written consent of the
Adviser Trustee which consent may be withheld in its sole discretion. It is
unlikely that there will be any market for the Shares. An Investor will not have
the ability to make full or partial withdrawals from the Fund pursuant to the
terms of the Declaration of Trust.
Annual Tax Information. It is expected that annual tax information from
Indirect Investments in which the Fund invests may not be received in sufficient
time to permit the Fund to incorporate such information into its annual tax
information and distribute such information to Investors prior to April 15 of
each year. As a result, Investors may be required to obtain extensions for
filing federal, state and local income tax returns each year. In obtaining such
extensions, Investors may be required to make estimated tax payments to the
extent they anticipate having to make tax payments in respect of the preceding
year. Investors anticipating tax refunds in respect of such year will not be
able to file their tax return requesting such refund until receipt of the annual
tax information from the Fund. To the extent practicable, the Fund anticipates
that it will provide estimated annual tax information in a timely manner in
order to assist Investors in estimating their tax liabilities. The Fund's
ability to make such estimates will be dependent upon its ability to obtain
estimated annual tax information from the Indirect Investments.
Involuntary Liquidation of Shares. The Adviser Trustee may terminate the
interest of any Investor in the Fund upon five days' prior written notice to any
Investor if the Adviser Trustee determines that the continued participation of
such Investor in the Fund would be detrimental to the Fund, e.g., by
jeopardizing the treatment of the Fund as a partnership for tax purposes or
involving the Fund or any Investor in litigation. In the event of termination by
the Adviser Trustee of an Investor's interest, such Investor shall be paid its
capital account as of the termination date within 90 days or as soon thereafter
as the Fund has available funds.
Recourse to the Fund's Assets. The Fund's assets, including any investments
and funds held by the Fund, are available to satisfy all liabilities and other
obligations of the Fund. If the Fund becomes subject to any liability, parties
seeking to have the liability satisfied may have recourse to the Fund's assets
generally and may not be limited to any particular asset, such as the asset
representing the investment giving rise to liability.
Possibility of Taxation Without Corresponding Distribution. The Fund may
derive income from its investments that is not matched by corresponding
distributions of cash. As a result, an Investor's federal and other income tax
liabilities with respect to its allocable share of the Fund's income in a
particular tax year could exceed the cash distributions to such Investor for
such year.
Liability for Return of Certain Distributions. Under Delaware law,
Investors will generally not incur personal liability for the liabilities and
obligations of the Fund in excess of its unfulfilled obligation to make capital
contributions. However, in the event that the Fund is unable otherwise to meet
its obligations, the Investors may be required to repay to the Fund or to pay to
creditors of the Fund distributions previously received by them to the extent
such distributions are deemed to have been wrongfully paid to them. In addition,
Investors may be required to repay to the Fund any amounts distributed which are
required to be withheld by the Fund for tax purposes.
Investments in Passive Foreign Investment Companies. To the extent the Fund
invests in Indirect Investments organized outside the United States which are
classified as passive foreign investment companies ("PFICs"), U.S. investors
will be subject to special rules with respect to the Fund's interest in such
PFICs. In this regard, gain (but not loss) recognized upon the sale, exchange or
redemption of an equity interest in a PFIC would be treated as ordinary income,
and, in addition, a portion of the distributions received with respect to such
equity interest could, and any gain realized from the sale, exchange or
redemption of such interest would, be subject to the tax imposed on excess
distributions under the PFIC provisions of the U.S. Internal Revenue Code.
(b) Effect of Leverage. Not Applicable.
4. Other Policies. See "2. Investment Objective and Policies" above.
5. Share Price Data. Not Applicable.
6. Business Development Companies. Not Applicable.
ITEM 9. MANAGEMENT.
1. General.
Board of Trustees. The Trustees of the Fund presently consist of four
individuals, three of whom are not "interested persons" of the Fund as defined
in the Investment Company Act, and the Adviser Trustee. The Trustees are
responsible for the overall supervision of the operations of the Fund and the
Trustees that are individuals perform various duties imposed on the directors of
investment companies by the Investment Company Act. The individual Trustees and
executive officers of the Fund, their ages and their principal occupations for
at least the last five years are set forth below.
Christopher J. Bower (40) - Trustee and President (1) (2) - Senior Managing
Director, Chairman - Investment Committee of the Management Company. Mr. Bower
is the founder of PCG and has been responsible for the overall management of the
firm since its inception. Mr. Bower has over 17 years of Direct and Indirect
Investment experience. Mr. Bower received his undergraduate degree from the
University of Colorado and holds a juris doctor degree from the University of
San Diego. Mr. Bower is also a Certified Public Accountant.
Harry G. Bubb (72) - Trustee (2) - Chairman Emeritus, Pacific Mutual Life
Insurance Company. Mr. Bubb served as President and Chief Executive Officer of
Pacific Mutual from September, 1986 to September, 1987, and as Chairman and
Chief Executive Officer thereof from September, 1987 to January, 1990. Mr. Bubb
continued to serve as a director of Pacific Mutual until March, 1997. Mr. Bubb
currently serves as a director of the Bowers Art Museum and as a member of the
Orange County Business Committee for the Arts. Mr. Bubb received his B.A. in
Economics and M.B.A. from Stanford University and is a graduate of the Advanced
Management Program at Harvard University. Mr. Bubb is also a Chartered Life
Underwriter.
Alan C. Shapiro (51) - Trustee (2) - Ivadelle and Theodore Johnson
Professor of Banking and Finance at the Marshall School of Business, University
of Southern California. Dr. Shapiro has previously served as an Assistant
Professor at the Wharton School of the University of Pennsylvania and as a
Visiting Professor at Yale University, UCLA, the Stockholm School of Economics
and the University of British Columbia. Dr. Shapiro is the author of over 50
published articles in finance and several text books, including Multinational
Financial Management and Modern Corporate Finance. Dr. Shapiro received his B.A.
in Mathematics from Rice University and a Ph.D. in Economics from Carnegie
Mellon University.
DeWitt F. Bowman (66) - Trustee (2) - Pension Investment Consultant. Mr.
Bowman currently serves as a director of the RREEF American REIT, RCM Equity
Funds, Inc., RCM Capital Funds, Wilshire Target Funds, Brandes International
Fund and as a trustee of the Pacific Gas and Electric Nuclear Decommissioning
Trust. From January, 1989 to February, 1994, Mr. Bowman served as the Chief
Investment Officer for the California Public Employees Retirement System
(CalPERS). Mr. Bowman has 40 years investment experience, including 10 years as
Chief Investment Officer for pension funds. Mr. Bowman is a graduate of
University of Wisconsin and is a Chartered Financial Analyst.
Kelly K. DePonte (45) - Secretary (2) - Mr. DePonte is Managing Director of
the Adviser Trustee. Mr. DePonte was with First Interstate Bancorp for 15 years,
where he held various positions in the Corporation's treasury and capital
markets divisions. He was most recently responsible for managing First
Interstate's investments in venture capital and leveraged buyout limited
partnerships and also served as president of First Interstate Equity
Corporation, a small business investment company ("SBIC"). Mr. DePonte received
his undergraduate degree from Stanford University and his Master of Business
Administration degree from the Anderson School of Management at the University
of California, Los Angeles.
Philip M. Posner (48) - Treasurer (2) - Mr. Posner is Chief Financial
Officer of the Adviser Trustee. Mr. Posner has over 25 years of public and
private accounting, business management and tax experience. Mr. Posner was a
partner with a regional accounting firm. Mr. Posner is a Certified Public
Accountant and received his undergraduate degree from the Bernard Baruch School
of Business.
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(1) Interested person, as defined in the Investment Company Act, of the Fund;
address is c/o Pacific Corporate Group, Inc., 1200 Prospect Street, Suite
200, La Jolla, California 92037.
(2) These individuals assumed their indicated positions with the Fund prior to
the initial Closing, other than Mr. Bowman who became a Trustee subsequent
to the final Closing.
The Fund will pay each Trustee not affiliated with the Adviser Trustee an
annual fee of $10,000 per year plus $500 per meeting attended, together with
such Trustee's actual out-of-pocket expenses relating to attendance at meetings.
The Fund also pays members of its audit committee, which consists of all of the
Trustees not affiliated with the Adviser Trustee, an annual fee of $2,500 plus
$250 per meeting attended. The Trustees affiliated with the Adviser Trustee will
not receive compensation from the Fund for their services as Trustees or be
reimbursed by the Fund for their out-of-pocket expenses incurred in performing
their duties as Trustees.
None of the Trustees serves as a director or trustee, or receives
compensation from, any other investment company advised by PCG.
Investment Advisory Services. PCG serves as the Fund's Adviser Trustee. PCG
also serves as the Fund's Management Company and is responsible for managing the
Fund's investments. PCG is a wholly-owned subsidiary of Pacific Corporate Group
Holdings, Inc. and has its principal office located at 1200 Prospect Street,
Suite 200, La Jolla, California 92037.
The Declaration of Trust provides that the Adviser Trustee is responsible
for the overall management of the Fund, subject to the supervision of the
individual Trustees, and authorizes the entry into the management agreement (the
"Management Agreement") with PCG. Pursuant to the Management Agreement, the
responsibility for making decisions to buy, sell or hold a particular security
rests with PCG, subject to review by the Trustees. In connection with its
responsibilities under the Management Agreement, PCG considers analyses from
various sources, makes the necessary investment decisions, and place orders for
any transactions accordingly.
For the services provided by PCG under the Management Agreement, the Fund
will pay PCG a management fee computed at the rate of 1.25% per annum of the
total capital commitments of the Fund less any distributions of capital and
realized investment losses (the "Management Fee"). The Management Fee is paid to
PCG, quarterly in advance, computed as of the end of the prior quarter. PCG pays
the Placement Agent or Agents out of the Management Fee an aggregate quarterly
fee in an amount up to, on an annual basis, 0.45%.
The quarterly Management Fee will be reduced by one hundred percent of
directors' fees or other remuneration received by PCG or its employees in
connection with ongoing portfolio management with respect to portfolio
investments during such quarter. To the extent such fees or other remuneration
exceed the quarterly Management Fee, the excess amount will be credited one
hundred percent against subsequent quarterly Management Fees.
Unless earlier terminated as described below, the Management Agreement will
remain in effect from year to year if approved annually (a) by the Board of
Trustees of the Fund or by a majority-in-interest of the Fund and (b) by a
majority of the Trustees who are not parties to such contract or interested
persons (as defined in the Investment Company Act) of any such party. Such
contract is not assignable and may be terminated without penalty on 60 days'
written notice at the option of either party thereto or by the vote of the
Shareholders in the Fund.
The Adviser Trustee also receives distributions as described below under
Item 10.
Portfolio Management. The Portfolio Manager for the Fund is PCG's
investment committee, of which Mr. Bower is the chairman. Information regarding
Mr. Bower is set forth above.
Administrator. Under the terms of an administration agreement with the Fund
(the "Administration Agreement"), Palmeri Fund Administrators (in such capacity,
the "Administrator") will provide or arrange for the provision of,
administrative, accounting, tax reporting and other services, including
preparation of shareholder reports, semi-annual reports containing unaudited
financial statements and annual reports containing audited financial statements
and annual tax reporting statements on IRS Form 1065, Schedule K-1.
For the administrative services rendered to the Fund, the Fund will pay the
Administrator an annual fee of $75,000, to be paid quarterly in advance, on the
first day of each calendar quarter.
Custodian. Citibank, N.A., 120 Broadway, New York, New York 10271, acts as
the custodian for the Fund (the "Custodian"). For the initial twelve months, the
Fund will pay the Custodian an all inclusive fee of $2,500 per month and for
each month following the initial twelve months, the Fund will pay the Custodian
an all inclusive fee of $4,000 per month.
Expenses. The Fund pays all other expenses incurred in the operation of the
Fund, including, among other things, expenses for legal and auditing services,
taxes, if any, costs of printing proxies and shareholder reports, Securities and
Exchange Commission fees, state Blue Sky filing fees, fees and expenses with
respect to borrowing, fees and expenses of unaffiliated Trustees, insurance,
interest, brokerage costs, litigation and other extraordinary or non-recurring
expenses, mailing and other expenses properly payable by the Fund. The
organizational expenses of the Fund are being amortized over a five-year period.
Affiliated Brokerage. Not Applicable.
2. Non-resident Managers. Not Applicable.
3. Control Persons. None.
ITEM 10. CAPITAL STOCK, LONG-TERM DEBT AND OTHER SECURITIES.
The Fund is authorized to issue an unlimited number of shares of beneficial
interest. The Fund has issued and outstanding one class of capital stock: common
shares of beneficial interest, without par value. Holders of Shares (the
"Shareholders") will have no control of the Fund's business but may exercise the
rights and powers of a Shareholder under the Declaration of Trust, including,
without limitation, voting, approval, consent and similar rights required under
the Investment Company Act for voting security holders. Meetings of the
Shareholders, if any, will generally be held only when necessary to comply with
the requirements of the Investment Company Act. Each Shareholder will have one
vote for each Share held by him or her, and a fractional vote for each
fractional Share so held. Holders may vote in person or by proxy. The presence
in person or by proxy of Shareholders holding more than 50% of the Shares
constitutes a quorum at any meeting.
The liability of Shareholders will, except as otherwise provided by law, be
limited to the amount of their respective capital contributions.
All Shareholders will receive annual reports containing financial
statements audited by the Fund's independent certified public accountants,
consisting of a balance sheet, a statement of operations and a statement of cash
flows together with a list of the Fund's investment portfolio. In addition,
Shareholders will receive from the Administrator, or its agent, federal tax
information, including an IRS Form 1065, Schedule K-1, for use in the
preparation of Shareholders' federal income tax returns. Unaudited semi-annual
reports will also be furnished to the Shareholders.
Distributions of cash from investment income may be made in the sole
discretion of the Trustees. The timing and amount of all distributions are
within the discretion of the Trustees. Returns of capital will be distributed in
proportion to the capital contributions of the Shareholders.
All distributions to Shareholders in respect of proceeds from Indirect
Investments and pre-portfolio investments will be made to the Shareholders in
proportion to their capital contributions.
If the aggregate cumulative amount of the investment income and net
realized capital gains and losses from Direct Investments (including pari passu
co-investments) is positive, distributions (other than returns of capital) will
be made in an amount equal to a 20% incentive "carried interest" distribution to
the Adviser Trustee (reduced to a 15% distribution for cumulative investment
income and gains and losses attributable to pari passu co-investments) and the
balance to the Shareholders in proportion to their capital contributions (such
incentive "carried interest" distribution is referred to herein as the "Adviser
Trustee's Incentive Distribution"). If the aggregate cumulative amount of the
investment income and net realized capital gains and losses from Direct
Investments is negative, distributions will be made to Shareholders in
proportion to their capital contributions.
At the dissolution of the Fund, the Adviser Trustee will be required to
contribute to the capital of the Fund an amount equal to the negative balance,
if any, in its capital account up to the amount of any prior distributions in
respect of the Adviser Trustee's Incentive Distribution (such requirement is
referred to herein as the "Repayment Obligation").
Generally, at a minimum, in any year in which net income is allocated to
the Shareholders, distributions are expected to the extent practicable to be
made to the Shareholders in an amount sufficient to satisfy federal, state and
city tax liabilities (the "Tax Distribution").
The Adviser Trustee intends to distribute the proceeds from all significant
sales of portfolio securities and, when deemed appropriate by the Adviser
Trustee, to make in-kind distributions of publicly-traded securities of
portfolio companies. The Adviser Trustee does not expect to re-invest the
proceeds from portfolio investments; however, it reserves the right to do so at
its sole discretion.
Although it is anticipated that distributions by the Fund will typically
consist of cash, the Fund reserves the right, in the sole discretion of PCG, to
distribute marketable securities listed on a national securities exchange or
quoted through NASDAQ.
Because Shareholders subject to United States taxes are taxed on their
distributive share of income and gains whether or not distributed, it is
possible that such Shareholders could incur income tax liabilities without
receiving from the Fund sufficient distributions to cover such tax liabilities.
No transfer by a Shareholder of his or her Shares shall be effective unless
made in accordance with the provisions of the Declaration of Trust. No transfer
of Shares may be made without the consent of the Adviser Trustee, which consent
may be withheld in its sole discretion for any reason or for no reason. In
addition, no transfer of Shares may be made unless, in the opinion of counsel
for the Fund, such transfer would not result in a termination of the Fund for
purposes of Section 708 of the Internal Revenue Code. The Declaration of Trust
authorizes the Trustees to impose additional restrictions on transfers of
interest in the Fund or redemptions in order to ensure that the Fund will not be
classified as a publicly traded partnership subject to tax as a corporation. No
transfer of Shares may be made if the net asset value of the number of Shares
being transferred is less than $20,000.
Shares may be sold, transferred, assigned or otherwise disposed of by a
Shareholder only if, in the opinion of counsel, such transfer or assignment
would not violate federal securities laws or state securities or "blue sky" laws
(including investor suitability standards). Because of the structure and
anticipated operation of the Fund, it is expected that Rule 144 under the
Securities Act will not be available to Shareholders in connection with any such
sales. The Declaration of Trust provides, however, that a Shareholder who is a
natural person may assign his or her beneficial interest in the Shares to a
spouse, child, parent or other close relative or to any non-profit organization
which qualifies under Section 501(c)(3) of the Internal Revenue Code, or to a
trust of which such a person or entity is the beneficiary, and that such
beneficial interest in the Shares may be transferred by operation of law to the
estate of a deceased Shareholder without the consent of the Adviser Trustee;
provided that, in the absence of the foregoing consents, such assignee or estate
will be entitled only to the transferor Shareholder's economic interest in the
profits, losses and capital of the Fund, but will not be entitled to the
corresponding voting rights of such Shareholder. An assignment of a
Shareholder's interest in accordance with and subject to the foregoing will be
recognized by the Fund when it has received written notice of such assignment in
form satisfactory to the Adviser Trustee, signed by both parties, and a
representation from the parties that the assignment was lawful. Such an
assignment will be effective as of the first day of the quarter following the
fiscal quarter in which such notice is filed with the Fund. In no event shall
all or any part of a Shareholder's Shares be assigned to a minor or an
incompetent, unless in trust for the benefit of such person.
The following table sets forth the authorized shares of the Fund, the
number of shares held by the Fund for its own account and the total number of
shares outstanding as of May 1, 1998:
<TABLE>
<CAPTION>
Amount held by Fund Amount Outstanding
Amount for own as of
Class of Shares Authorized account May 1, 1998
- ---------------------------- ---------------- ------------------------- ------------------------
<S> <C> <C> <C>
Common Shares of unlimited none 108,659.8075
Beneficial Interest,
without par value
</TABLE>
- ------------------------------
ITEM 11. DEFAULTS AND ARREARS ON SENIOR SECURITIES.
Not Applicable.
ITEM 12. LEGAL PROCEEDINGS.
None.
ITEM 13. TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.
Not Applicable.
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
ITEM 14. COVER PAGE.
Not Applicable.
ITEM 15. TABLE OF CONTENTS.
Not Applicable.
ITEM16. GENERAL INFORMATION AND HISTORY.
Not Applicable.
ITEM 17. INVESTMENT OBJECTIVES AND POLICIES.
See Item 8.
ITEM 18. MANAGEMENT.
See Item 9.
ITEM 19. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
None.
ITEM 20. INVESTMENT ADVISORY AND OTHER SERVICES.
See Item 9.
ITEM 21. BROKERAGE ALLOCATION AND OTHER PRACTICES.
Subject to policies established by the Trustees of the Fund, the Management
Company is primarily responsible for the execution of the Fund's portfolio
transactions. In executing such transactions, the Management Company seeks to
obtain the best results for the Fund, taking into account such factors as price
(including the applicable fee, commission or spread), size of order, difficulty
of execution and operational facilities of the firm involved and the firm's risk
in positioning a block of securities. While the Management Company generally
seeks reasonably competitive fee or commission rates, the Fund does not
necessarily pay the lowest commission or spread available.
ITEM 22. TAX STATUS.
It is the Fund's tax counsel's opinion, based on certain representations
made to tax counsel by the Adviser Trustee, that the Fund will be classified as
a partnership and not as a corporation, and each Shareholder will be treated as
a partner in the Fund for federal income tax purposes upon his or her admission
to the Fund. This conclusion is based on representations made to tax counsel by
the Adviser Trustee regarding the interest in the Fund to be retained by the
Adviser Trustee.
The Fund will file a federal partnership information return, but the Fund
will not, as an entity, be subject to federal income tax liability. Each
Shareholder will be required to report on his or her personal federal income tax
return his or her allocable share of the Fund's income, gains, losses,
deductions and other tax items, even if no cash or other property is distributed
to a Shareholder. Partnership income will generally be allocated to all
Shareholders based on the number of Shares held by each of them. Allocation of
the taxable gain or loss on a sale of securities, including securities
contributed by the Shareholders, is subject to special rules. Each Shareholder
will include his or her share of the Fund's taxable income for its full taxable
year that ends within or with such Shareholder's taxable year.
The Fund will furnish annually to each Shareholder a report containing an
IRS Form 1065, Schedule K-l that indicates such Shareholder's distributive share
for such year of the Fund's taxable income or loss and other tax items for use
in the preparation of the Shareholder's income tax return.
ITEM 23. FINANCIAL STATEMENTS.
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
INDEPENDENT AUDITORS' REPORT
The Pacific Corporate Group Private Equity Fund:
We have audited the accompanying balance sheet of The Pacific Corporate Group
Private Equity Fund (the "Trust"), including the schedule of portfolio
investments, as of March 31, 1998 and the related statements of operations,
changes in shareholders' equity, cash flows and financial highlights for the
period from February 9, 1998 (Commencement of Operations) to March 31, 1998.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The Pacific
Corporate Group Private Equity Fund as of March 31, 1998 and the results of its
operations, its cash flows and its financial highlights for the period from
February 9, 1998 (Commencement of Operations) to March 31, 1998 in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
April 30, 1998
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
BALANCE SHEET
March 31, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Portfolio investments at fair value, which approximates cost $ 2,144,627
Cash and cash equivalents 41,582,833
Accrued interest receivable 159,219
Deferred organizational costs (net of accumulated amortization of $5,048) 176,696
Prepaid expenses 130,936
Due from affiliates 5,786
----------------
TOTAL ASSETS $ 44,200,097
================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 411,521
----------------
Total liabilities 411,521
----------------
Shareholders' equity:
Shares of beneficial interest, 90,587.1575 shares issued and outstanding:
Adviser Trustee (500 shares) 246,280
Shareholders (90,087.1575 shares) 43,542,296
----------------
Total shareholders' equity 43,788,576
----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 44,200,097
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
As of March 31, 1998
<TABLE>
<CAPTION>
Cost Fair Value
---------------- ---------------
<S> <C> <C>
Indirect Investments:
Exxel Capital Partners V, L.P.
.004% limited partnership interest $ 1,566,030 $ 1,566,030
Triumph Partners III, L.P.
.83% limited partnership interest 578,597 578,597
---------------- ---------------
Total Portfolio Investments $ 2,144,627 $ 2,144,627
================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
STATEMENT OF OPERATIONS
For the Period from February 9, 1998 (Commencement of Operations)
to March 31, 1998
INVESTMENT INCOME AND EXPENSES
Interest from short-term investments $ 225,906
--------------
Expenses:
Management fee 163,233
Legal fees 7,521
Accounting fees 21,125
Independent Trustee fees 12,043
Custody fees 4,286
Insurance expense 13,765
Amortization of deferred organizational costs 5,048
--------------
Total expenses 227,021
--------------
NET INVESTMENT LOSS BEFORE ALLOCATION
FROM INDIRECT INVESTMENTS (1,115)
Net investment loss from indirect investments (109,840)
--------------
NET LOSS $ (110,955)
==============
The accompanying notes are an integral part of these financial statements.
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Period from February 9, 1998 (Commencement of Operations)
to March 31, 1998
<TABLE>
<CAPTION>
Adviser
Trustee Shareholders Total
------------- -------------------- ------------------
<S> <C> <C> <C>
Capital contributions $ 250,000 $ 45,804,250 $ 46,054,250
Selling commissions - (1,591,593) (1,591,593)
Other syndication costs (3,108) (560,018) (563,126)
------------ ---------------- -----------------
Net capital contributions 246,892 43,652,639 43,899,531
Net loss (612) (110,343) (110,955)
------------ ---------------- -----------------
Balance as of March 31, 1998 $ 246,280 $ 43,542,296 $ 43,788,576
============ ================ =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
STATEMENT OF CASH FLOWS
For the Period from February 9, 1998 (Commencement of Operations)
to March 31, 1998
<TABLE>
<CAPTION>
CASH FLOWS USED FOR OPERATING ACTIVITIES
<S> <C>
Net loss $ (110,955)
Adjustments to reconcile net loss to net cash used for operating activities:
Amortization of deferred organizational costs 5,048
(Increase) in accrued interest receivable (159,219)
Increase in accounts payable and accrued expenses 25,521
(Increase) in receivables and other assets (136,722)
----------------
Net cash used for operating activities (376,327)
----------------
CASH FLOWS USED FOR INVESTING ACTIVITIES
Capital contributed to indirect investments (2,144,627)
----------------
Net cash used for investing activities (2,144,627)
----------------
CASH FLOWS PROVIDED FROM FINANCING ACTIVITIES
Cash contributions from Shareholders 45,804,250
Cash contribution from Adviser Trustee 250,000
Payment of deferred organizational costs (36,744)
Payment of selling commissions (1,591,593)
Payment of other syndication costs (322,126)
----------------
Net cash provided from financing activities 44,103,787
----------------
Increase in cash and cash equivalents 41,582,833
Cash and cash equivalents at beginning of period -
----------------
Cash and cash equivalents at end of period $ 41,582,833
================
Supplemental disclosure of non-cash investing and financing activities:
Accrual of deferred organizational costs $ 145,000
Accrual of other syndication costs $ 241,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
FINANCIAL HIGHLIGHTS
For the Period from February 9, 1998 (Commencement of Operations)
to March 31, 1998
THE FOLLOWING PER SHARE DATA AND RATIOS HAVE BEEN DERIVED FROM INFORMATION
PROVIDED IN THE FINANCIAL STATEMENTS.
Increase (Decrease) in Net Asset Value
<TABLE>
<CAPTION>
Per Share Operating Performance:
- -------------------------------
<S> <C>
Net asset value, beginning of period $ 0.00
Net capital contributions 484.61
Net investment loss (1.22)
-------------
Net asset value, end of period $ 483.39
=============
Total investment return (0.25)%
====
Ratios to Average Net Assets:
- ----------------------------
Investment expenses 1.04%
=====
Net loss (0.51)%
====
Supplemental Data:
- -----------------
Net assets, end of period $ 43,788,576
=============
Portfolio turnover 0.00%
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
1. Organization and Purpose
The Pacific Corporate Group Private Equity Fund (the "Trust") is a Delaware
business trust, formed on September 22, 1997. The Trust, which began operations
on February 9, 1998 ("Commencement of Operations"), is registered under the
Investment Company Act of 1940, as amended, as a closed-end, management
investment company. Pacific Corporate Group, Inc., the Adviser Trustee of the
Trust (the "Adviser Trustee"), manages the investment policies and operations of
the Trust. The Adviser Trustee and four individual Trustees, (collectively the
"Trustees"), three of whom are not affiliated with the Adviser Trustee (the
"Independent Trustees"), are responsible for the overall supervision of the
Trust. The objective of the Trust is to achieve, through selected private market
equity and equity-related investments, rates of return superior to public market
investment alternatives, while reducing risks through the diversification of
investments within the private market. The Trust will seek to achieve this
objective through investments, primarily in a portfolio of partnerships
("Indirect Investments") and, with respect to up to 25% of committed capital,
direct investment in private or public operating companies ("Direct
Investments").
The Trust is scheduled to terminate on December 31, 2009, subject to extension
in the sole discretion of the Trustees, for up to three additional one-year
periods.
2. Summary of Significant Accounting Policies
Valuation of Investments - Short-term investments are valued at amortized cost,
which approximates market. Portfolio investments are carried at fair value as
determined quarterly by the Adviser Trustee in accordance with procedures
established by the Trustees. Valuations of Indirect Investments generally
reflect the valuations provided by the general partners or other managers of the
Indirect Investments. Such valuations are reviewed by the Adviser Trustee for
reasonableness and may be adjusted in the discretion of the Adviser Trustee.
Valuations of Direct Investments are determined in accordance with the
following: (i) unrestricted publicly-held securities for which market quotations
are readily available are valued at the closing public market price for the last
trading day of the accounting period, (ii) restricted publicly-held securities
may be valued at a discount from the closing public market price, depending on
the circumstances; and (iii) privately-held securities are valued at cost until
significant developments affecting the portfolio company provide a basis for
change in valuation. Factors to be considered in arriving at a change in
valuation of privately-held securities include the price of recent transactions
in the company's securities and the company's earnings, sales and book value.
The Trust's portfolio investments involve a high degree of business and
financial risk that can result in substantial losses. The Adviser Trustee
considers such risks in determining the fair value of the Trust's investments.
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Organizational and Start-Up Costs - Organizational and start-up costs of
$181,744 are being amortized over a period of sixty months from the date of the
Trust's initial closing.
Syndication Costs - Selling commissions of $1,591,593 and other costs of
$563,126 associated with selling shares of the Trust have been recorded as a
direct reduction to shareholders' equity.
Income Taxes - No provision for income taxes has been made since all income and
losses are allocable to the shareholders for inclusion in their respective tax
returns.
Statement of Cash Flows - The Trust considers its interest-bearing account to be
a cash equivalent.
Financial Instruments - The Trust carries its financial instruments at amounts
which approximate fair value.
3. Capital Commitments
At the initial closing, held on February 9, 1998, the Trust sold 62,813 shares
of beneficial interest (the "Shares"), accepting capital commitments from
shareholders totaling $64.1 million. The Trust held additional closings during
February and March 1998, selling an additional 27,774 Shares and accepting
additional capital commitments totaling $28.1 million. As of March 31, 1998, the
shareholders had contributed $46.1 million, or 50% of their total capital
commitments to the Trust. The shareholders' remaining capital commitments to the
Trust are scheduled to be called on February 9, 1999. Of the total Shares
outstanding, the Adviser Trustee owns 500 Shares and has a capital commitment of
$500,000, of which $250,000 was contributed as of March 31, 1998.
Subsequent to March 31, 1998, the Trust held an additional closing on April 24,
1998 and the final closing on April 30, 1998, selling an additional 18,073
Shares and accepting additional capital commitments from shareholders totaling
$18.4 million.
4. Management Fee
The Adviser Trustee receives a management fee at the annual rate of 1.25% of the
aggregate capital commitments to the Trust, reduced by capital returned and
realized investment losses. Such fee is determined and payable quarterly in
advance. The management fee is reduced by 100% of directors' fees or other cash
remuneration received by the Adviser Trustee from any portfolio company of the
Trust.
5. Independent Trustee Fees
As compensation for services rendered to the Trust, each Independent Trustee
receives $10,000 annually in quarterly installments and $500 for each meeting of
the Independent Trustees attended, plus out-of-pocket expenses. Additionally,
the Independent Trustees also are members of the Audit Committee. As
compensation for services rendered to the Trust as members of the Audit
Committee, each of the Independent Trustees receives an additional $2,500
annually in quarterly installments and $250 for each Audit Committee meeting
attended.
6. Allocation of Net Income and Net Loss
Net income and net loss from Indirect Investments, and all other net income and
net loss, other than net income and net loss from Direct Investments, is
allocated to all shareholders, including the Adviser Trustee, pro rata based on
Shares held.
Additionally, the Adviser Trustee will be allocated, on a cumulative basis over
the life of the Trust, 20% of the Trust's aggregate net income and net loss from
Direct Investments, other than "pari passu co-investments", and 15% from Direct
Investments in "pari passu co-investments", provided that such amount is
positive. The remaining 80% and/or 85% of such amounts is allocated to all
shareholders including the Adviser Trustee, pro rata based on Shares held. If
the aggregate net income and net loss from Direct Investments (including "pari
passu co-investments") is negative, such net income and net loss is allocated to
all shareholders, including the Adviser Trustee, pro rata based on Shares held.
"Pari passu co-investments" refers to Direct Investments that are co-investments
in the same securities and on the same terms alongside general partner managers
of Indirect Investments held by the Trust, in transactions involving issuers
held by investment vehicles in which the Trust has invested.
7. Investment Commitments
The Trust has unfunded investment commitments in the following Indirect
Investments:
Investment
Exxel Capital Partners V, L.P. $ 933,970
Triumph Partners III, L.P. 4,421,403
Apollo Investment Fund IV, L.P. 5,000,000
First Reserve Fund VIII, L.P. 5,000,000
Sprout Capital VII, L.P. 5,000,000
----------------
Thomas Lee Equity Fund IV, L.P. 10,000,000
Total $ 30,355,373
================
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENT AND EXHIBITS.
(1) Financial Statements.
Balance Sheet as of March 31, 1998.
Schedule of Portfolio Investments as of March 31, 1998.
Statement of Operations for the period from February 9, 1998
(commencement of operations) to March 31, 1998.
Statement of Changes in Shareholders' Equity for the period from
February 9, 1998 (commencement of operations) to March 31, 1998.
Statement of Cash Flows for the period from February 9, 1998
(commencement of operations) to March 31, 1998.
Financial Highlights for the period from February 9, 1998
(commencement of operations) to March 31, 1998.
Notes to financial Statements.
(2) Exhibits:
Exhibit
Letter Description
- ------ -----------
(a) Seconded Amended and Restated Declaration of Trust ("Declaration of
Trust") of Registrant.
(b) Form of By-Laws of Registrant.
(c) Not Applicable.
(d) Portions of the Declaration of Trust and By-Laws of the Registrant
defining the rights of holders of
shares of the Registrant. (a)
(e) Not Applicable.
(f) Not Applicable.
(g) (1) Management Agreement between Registrant and Pacific Corporate
Group, Inc.
(2) Administration Agreement between Registrant and Palmeri Fund
Administrators.
(h) Not Applicable.
(i) Not Applicable.
(j) Custodian Contract between Registrant and Citibank, N.A.
(k) None.
(l) Not Applicable.
(m) Not Applicable.
(n) Not Applicable.
(o) Not Applicable.
(p) Not Applicable.
(q) Not Applicable.
(r) Financial data schedule.
- -----------
(a) Reference is made to Articles III, V, VI, VIII and X of the Registrant's
Declaration of Trust, filed as Exhibit (a); and to Articles IX and XI of
the Registrant's By-Laws, filed as Exhibit (b).
ITEM 25. MARKETING ARRANGEMENTS.
Not Applicable.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Not Applicable.
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 28. NUMBER OF HOLDERS AND SECURITIES.
Number of Holders as
Title of Class of May 1, 1998
- -------------- --------------
Shares of beneficial interest, without par value......... 273
ITEM 29. INDEMNIFICATION.
Reference is made to Article VIII of Declaration of Trust and Article X of
By-Laws. Article VIII of the Declaration of Trust provides that each person who
is or was a Trustee (including an Adviser Trustee), Management Company, officer,
employee or agent of the Registrant or who serves or has served at the
Registrant's request as a director, officer or trustee of another person in
which the Registrant has or had any interest as a shareholder, creditor or
otherwise shall be entitled to indemnification out of the assets of the
Registrant to the extent provided in, and subject to the provisions of, the
By-Laws, provided that no indemnification shall be granted by the Registrant in
contravention of applicable law.
Article X of the By-Laws provides that, to the fullest extent permitted by
law, the Registrant shall indemnify each of its Trustees and officers (including
persons who serve at the Registrant's request as directors, officers or
employees of another person in which the Registrant has any interest as a
shareholder, creditor or otherwise) (hereinafter referred to as a "Covered
Person") against all liabilities and expenses, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil, criminal, administrative or investigative, before any
court or administrative or legislative body, in which such Covered Person may be
or may have been involved as a party or otherwise or with which such person may
be or may have been threatened, while in office or thereafter, in any way
relating to the Registrant or by reason of being or having been such a Trustee
or officer, except with respect to any matter as to which such Covered Person
shall have been finally adjudicated in a decision on the merits in any such
action, suit or other proceeding not to have acted in good faith in the
reasonable belief that such Covered Person's action was in the best interests of
the Registrant and except that no Covered Person shall be indemnified against
any liability to the Registrant or its Shareholders to which such Covered Person
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Covered Person's office. Expenses, including counsel fees so incurred by any
such Covered Person (but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), shall be paid from time to time by the
Registrant in advance of the final disposition of any such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Covered Person
to repay amounts so paid by the Registrant if it is ultimately determined that
indemnification of such expenses is not authorized under this Article, provided
that (a) such Covered Person shall provide security for his undertaking, (b) the
Registrant shall be insured against losses arising by reason of such Covered
Person's failure to fulfill his undertaking, or (c) a majority of the Trustees
who are disinterested persons and who are not Interested Persons (as that term
is defined in the Investment Company Act) (provided that a majority of such
Trustees then in office act on the matter), or independent legal counsel in a
written opinion, shall determine, based on a review of readily available facts
(but not a full trial-type inquiry), that there is reason to believe such
Covered Person ultimately will be entitled to indemnification.
As to any matter disposed of (whether by a compromise payment, pursuant to
a consent decree or otherwise) without an adjudication in a decision on the
merits by a court, or by any other body before which the proceeding was brought,
the such Covered Person either (a) did not act in good faith in the reasonable
belief that such Covered Person's action was in the best interests of the
Registrant or (b) is liable to the Registrant or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office, indemnification
shall be provided if (a) approved as in the best interest of the Registrant,
after notice that it involves such indemnification, by at least a majority of
the Trustees who are disinterested persons and are not Interested Persons
(provided that a majority of such Trustees then in office act on the matter),
upon a determination, based upon a review of readily available facts (but not a
full trial-type inquiry) that such Covered Person acted in good faith in the
reasonable belief that such Covered Person's action was in the best interests of
the Registrant and is not liable to the Registrant or its Shareholders by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office, or (b) there has
been obtained an opinion in writing of independent legal counsel, based upon a
review of readily available facts (but not a full trial-type inquiry) to the
effect that such Covered Person appears to have acted in good faith in the
reasonable belief that such Covered Person's action was in the best interests of
the Registrant and that such indemnification would not protect such Covered
Person against any liability to the Registrant to which such Covered Person
would otherwise be subject by reason of willful misfeasance, bad faith gross
negligence or reckless disregard of the duties involved in the conduct of his
office. Any approval pursuant to this Section shall not prevent the recovery
from any Covered Person of any amount paid to such Covered Person in accordance
with this Section as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good faith
in the reasonable belief that such Covered Person's action was in the best
interests of the Registrant or to have been liable to the Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
The right of indemnification hereby provided shall not be exclusive of or
affect any other rights to which any such Covered Person may be entitled. The
term "Covered Person" shall include such person's heirs, executors and
administrators, and a "disinterested person" is a person against whom none of
the actions, suits or other proceedings in question or another action, suit, or
other proceeding on the same or similar grounds is then or has been pending.
Nothing contained in this article shall affect any rights to indemnification to
which personnel of the Registrant, other than Trustees and officers, and other
persons my be entitled by contract or otherwise under law, nor the power of the
Registrant to purchase and maintain liability insurance on behalf of such
person.
Notwithstanding any provisions in the Declaration of Trust and these
By-Laws pertaining to indemnification, all such provisions are subject to any
limitations that may be required under the Investment Company Act.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF MANAGEMENT COMPANY.
Pacific Corporate Group, Inc. (the "Management Company") does not act as
investment adviser for any other registered investment companies.
Set forth below is a list of each executive officer and director of the
Management Company indicating each business, profession, vocation or employment
of a substantial nature in which each such person has been engaged since
December 31, 1995 for his, her or its own account or in the capacity of
director, officer, partner or trustee.
<TABLE>
<CAPTION>
Position with Other Substantial Business
Name Management Company Profession, Vocation or Employment
---- ------------------ ----------------------------------
<S> <C> <C>
Christopher J. Bower Chairman None
Kelly K. DePonte Managing Director None
Philip M. Posner Chief Financial Officer None
Brian E. Kinsman Managing Director None
A.J. Matsura Managing Director None
Laura Vossman Vice President None
Michael Russell Vice President None
Walter Fitzsimmons Vice President None
Tara A. Blackburn Vice President None
</TABLE>
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the Rules
thereunder will be maintained at the offices of the Management Company at 1200
Prospect Street, Suite 200, La Jolla, California 92037 and the offices of the
Administrator at 700 Godwin Avenue, Suite 110, Midland Park, New Jersey 07432,
except that the books and records of the Fund with respect to custody will be
maintained at the offices of Citibank, N.A., 120 Broadway, Suite 200, New York,
New York 10271.
ITEM 32. MANAGEMENT SERVICES.
Not Applicable.
ITEM 33. UNDERTAKINGS.
Not Applicable.
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of La Jolla
and State of California, on the 7th day of May, 1998.
THE PACIFIC CORPORATE GROUP PRIVATE
EQUITY FUND
(Registrant)
By: /s/ Christopher J. Bower
-------------------------------
Name: Christopher J. Bower
Title: President and Trustee
Exhibit (a)
PACIFIC CORPORATE GROUP
PRIVATE EQUITY FUND
(a Delaware Business Trust)
SECOND AMENDED AND RESTATED
DECLARATION OF TRUST
SECOND AMENDED AND RESTATED
DECLARATION OF TRUST
TABLE OF CONTENTS
ARTICLE I
Name and Definitions
Section 1. Definitions.........................................................1
Section 2. Name................................................................2
Section 3. Registered Office; Registered Agent.................................5
Section 4. Designation of Trustees.............................................5
ARTICLE II
Purposes and Powers of Trust
Section 1. Purposes............................................................5
ARTICLE III
Beneficial Interest
Section 1. Shares of Beneficial Interest......................................6
Section 2. Issuance of Shares in the Offering.................................6
Section 3. Admission of Shareholders..........................................7
Section 4. Certain Returns of Capital.........................................8
Section 5. Trust Capital......................................................8
Section 6. Capital Accounts; Allocations of Net Income and Net Loss...........9
Section 7. Allocation of Income, Gains and Losses.............................9
Section 8. Tax Allocations...................................................10
Section 9. Waiver of UBTI....................................................10
Section 10. Assignment During the Fiscal Year.................................10
Section 11. Qualified Income Offset...........................................11
Section 12. Book-Ups..........................................................11
Section 13. Special Tax Allocations...........................................12
Section 14. No Deficit Makeup.................................................13
Section 15. Additional Allocations............................................13
Section 16. Basis Adjustment..................................................13
Section 17. Special Allocation to Non-U.S. Shareholders.......................13
Section 18. Additional Capital Contributions by Non-U.S. Shareholders.........13
Section 19. Non-Transferability...............................................14
Section 20. Ownership of Shares...............................................14
Section 21. Additional Issuances of Shares....................................14
Section 22. No Preemptive Rights; Derivative Suits............................14
Section 23. Status of Shares and Limitation of Personal Liability.............14
ARTICLE IV
Trustees
Section 1. Election...........................................................15
Section 2. Powers.............................................................15
Section 3. Meetings...........................................................19
Section 4. Ownership of Assets of the Trust...................................20
Section 5. Removal and Resignation of Trustees................................20
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers......................................................20
Section 2. Meetings...........................................................21
Section 3. Quorum and Required Vote...........................................21
Section 4. Action by Written Consent..........................................21
Section 5. Additional Provisions..............................................21
ARTICLE VI
Withdrawals and Distributions of Capital
Section 1. Withdrawals and Distributions in General...........................21
Section 2. Current Distributions..............................................22
Section 3. Limitations on Distributions.......................................23
Section 4. Restrictions on Distributions......................................23
ARTICLE VII
Compensation and Limitation of Liability of Individual Trustees,
Adviser Trustee, Officers, Employees and Agents
Section 1. Compensation.......................................................24
Section 2. Limitation of Liability............................................24
ARTICLE VIII
Indemnification
Section 1. Indemnification of Trustees, Officers, Employees and Agents........25
Section 2. Merged Persons.....................................................25
Section 3. Shareholders.......................................................26
ARTICLE IX
Partnership Classification for Tax Purposes;
Appointment of Tax Matters Partner
Section 1. Partnership Classification; Federal Tax Elections..................26
Section 2. Tax Matters Partners...............................................27
ARTICLE X
Other General Provisions
Section 1. Trustee's Good Faith Action, Expert Advice, No Bond or Surety......28
Section 2. Liability of Third Persons Dealing with
Trustees or an Adviser Trustee.....................................28
Section 3. Individual Trustees, Adviser Trustees,
Officers, etc Not Personally Liable................................29
Section 4. Dissolution and Termination of Trust...............................29
Section 5. Filing of Copies, References, Headings.............................29
Section 6. Applicable Law.....................................................30
Section 7. Amendments.........................................................30
Section 8. Reorganization.....................................................30
Section 9. Severability.......................................................31
Section 10.Integration........................................................31
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
Second Amended and Restated Declaration of Trust
THIS SECOND AMENDED AND RESTATED DECLARATION OF TRUST, made this 9th
day of February, 1998, by Christopher J. Bower, Harry G. Bubb, Alan C. Shapiro
and Pacific Corporate Group, Inc., a California corporation (hereinafter with
any additional and successor trustees referred to as the "Trustees"), by Kelly
K. DePonte as depositor ("Depositor"), and by the holders of shares of
beneficial interest to be issued.
W I T N E S S E T H :
WHEREAS, the Depositor and an initial trustee have previously entered
into a Declaration of Trust dated as of July 29, 1997 (the "Original
Declaration"), creating The Pacific Corporate Group Private Equity Fund;
WHEREAS, the Depositor and the Trustees have previously entered into
an Amended and Restated Declaration of Trust dated December 2, 1997 (the
"Amended Declaration"); and
WHEREAS, the parties hereto desire to amend and restate the Amended
Declaration in all respects.
NOW, THEREFORE, the parties hereto agree to amend and restate the
Amended Declaration as provided herein, and the Trustees hereby declare that
they will hold all cash, securities and other assets, which they may from time
to time acquire in any manner as Trustees hereunder IN TRUST to manage and
dispose of the same upon the following terms and conditions for the pro rata
benefit of the holders from time to time of Shares, whether or not certificated,
in this Trust as hereinafter set forth. Upon the execution and delivery of
counterpart signature pages hereto by the parties hereto, the Amended
Declaration will be automatically amended and restated in its entirety to read
as provided herein.
ARTICLE I
Name and Definitions
Section 1. Name. This Trust is and shall be known as THE PACIFIC
---------- ----
CORPORATE GROUP PRIVATE EQUITY FUND.
Section 2. Definitions. Whenever used herein, unless otherwise
---------- -----------
required by the context or specifically provided:
"Adjusted Capital Account Deficit" shall mean, with respect to any
Shareholder, the deficit balance, if any, in such Shareholder's Capital Account
as of the end of the relevant fiscal year, after giving effect to the following
adjustments: (a) credit to such Capital Account any amounts which such
Shareholder is obligated to restore pursuant to any provision of this
Declaration of Trust or is deemed to be obligated to restore pursuant to
Treasury Regulations section 1.704-2(g) and Treasury Regulations section
1.704-2(i) (5) and (b) debit to such Capital Account the items described in
Treasury Regulations sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6);
"Adviser Trustee" shall mean Pacific Corporate Group, Inc., a
California corporation, the business address of which is 1200 Prospect Street,
Suite 200, La Jolla, California 92037, and/or any Person which becomes a
successor Adviser Trustee of the Trust as provided herein, in such Person's
capacity as Adviser Trustee of the Trust;
"Adviser Trustee's Incentive Distribution" shall have the meaning
given in Article VI, Section 2;
"By-Laws" shall mean the By-Laws of the Trust as amended from time to
time;
"Capital Account" shall mean the capital account of each Shareholder
established and maintained in accordance with Article III, Section 6 of this
Declaration of Trust;
"Capital Contribution" shall mean, with respect to any Shareholder,
the total amount of money contributed to the Trust by such Shareholder;
"Closing Date" shall mean a date as of which the Adviser Trustee
admits Shareholders to the Trust in connection with an initial offering of
Shares;
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations issued thereunder;
"Commission" shall have the meaning provided in the 1940 Act;
"Commitment" shall mean with respect to any Shareholder, the
commitment to make one or more Capital Contributions to the Trust in the
aggregate amount set forth in such Shareholder's subscription agreement;
"Declaration of Trust" shall mean this Amended and Restated
Declaration of Trust as amended or restated from time to time;
"Delaware Act" shall mean the Delaware Business Trust Act, 12 Del. C.
ss. 3801, et seq., as it may be amended from time to time;
"1940 Act" shall refer to the Investment Company Act of 1940, and the
Rules and Regulations thereunder, becomes a successor or additional Individual
Trustee of the Trust and is not any "interested person" of the Trust as such
term is defined in the 1940 Act as provided herein, in such individual's
capacity as an Independent Trustee of the Trust;
"Fiscal Period" shall commence at the beginning of the Fiscal Year or
on the date of the admission or withdrawal of any Shareholder and shall end on
the date immediately preceding the next Fiscal Period or Fiscal Year;
"Fiscal Year" shall mean the fiscal year of the Trust as established
from time to time by the Trustees, at the direction of the Adviser Trustee;
provided that such fiscal year shall be a year that is a permissible tax year
under Section 706(b) of the Code;
"Gross Asset Value" shall mean, with respect to any asset, such
asset's adjusted basis for Federal income tax purposes, except as adjusted by
the Adviser Trustee as provided herein;
"Independent Trustees" shall mean Harry G. Bubb and Alan C. Shapiro,
and/or any other individual who becomes a successor or additional Individual
Trustee of the Trust and is not any "interested person" of the Trust as such
term is defined in the 1940 Act as provided herein, in such individual's
capacity as an Independent Trustee of the Trust;
"Individual Trustees" shall mean Christopher J. Bower, Harry G. Bubb
and Alan C. Shapiro, and/or any other individual who becomes a successor or
additional Individual Trustee of the Trust as provided herein, in such
individual's capacity as an Individual Trustee of the Trust;
"Initial Closing Date" shall mean the first Closing Date;
"Memorandum" shall mean the Confidential Private Placement Memorandum
of the Trust dated September 22, 1997, as the same may be amended, modified or
supplemented from time to time, including, but not limited to, the Supplement
dated January 26, 1998;
"Net Assets" shall mean the total value of all assets of the Trust
(including net unrealized appreciation or depreciation of such assets and
accrued interest, dividends and other income receivable) less an amount equal to
all accrued debts, liabilities and obligations of the Trust (including any
reserves for contingencies), calculated in the manner authorized by the
Trustees;
"Net Income" shall mean the net income generated by the Trust with
respect to a Fiscal Period, as determined for U.S. Federal income tax purposes,
provided that such income shall be increased by the amount of all income during
such period which is exempt from U.S. Federal income tax and decreased by the
amount of all expenditures made by the Trust during such period which are
deductible for U.S. Federal income tax purposes and which do not constitute
capital expenditures;
"Net Loss" shall mean the net loss generated by the Trust with respect
to Fiscal Period, as determined for U.S. Federal income tax purposes, provided
that such loss shall be decreased by the amount of all income during such period
which is exempt from U.S. Federal income tax and increased by the amount of all
expenditures made by the Trust during such period which are not deductible for
U.S. Federal income tax purposes and which do not constitute capital
expenditures;
"Non-U.S. Shareholders" shall mean a Shareholder that is not a U.S.
citizen or resident nor a corporation or partnership created or organized under
the laws of the United States or any state, nor an estate or trust, the income
of which is required to be included in gross income for U.S. Federal income tax
purposes regardless of source;
"Nonrecourse Deductions" shall have the meaning set forth in Treasury
Regulations;
"Offering" shall mean the offering of the Trust's shares in an
offering exempt from registration under the Securities Act of 1933 through
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Donaldson, Lufkin &
Jenrette Securities Corporation or other placement agents approved by the
Individual Trustees;
(aa) "Offshore Fund" means The Pacific Corporate Group Offshore
Private Equity Fund, L.P., an exempted limited partnership to be formed and
registered in the Cayman Islands.
(ab) "Pari Passu Co-Investments" shall mean Direct Investments that
----------
are co-investments in the same securities and on the same terms, alongside
general partner managers of Indirect Investments held by the Trust, in
transactions involving issuers held by investment vehicles in which the Trust
has invested.
(ac) "Person" shall mean an individual or any corporation,
partnership, limited liability company, joint venture, trust or other
enterprise;
(ad) "Pre-Portfolio Investment" shall mean Capital Contributions that
have not yet been invested in Direct Investments or Indirect Investments and are
invested in debt obligations in any or all of the following categories: (i) U.S.
Treasury or agency obligations; (ii) corporate short-term obligations of less
than one year maturity having a rating of A-1/P-1 or better; and (iii) debt
obligations or time deposits from corporations or banks with long term credit
ratings of A or better;
(ae) "Repayment Obligation" shall have the meaning given in Article
VI, Section 2(d);
(af) "Service" shall mean the Internal Revenue Service;
(ag) "Shareholder" shall mean a record owner of Shares of the Trust,
each such person constituting a beneficial owner within the meaning of the
Delaware Act;
(ah) "Shareholder Nonrecourse Debt" shall have the meaning set forth
in Treasury Regulations section 1.704-2(b)(4);
(ai) "Shareholder Nonrecourse Debt Minimum Gain" shall have the
meaning set forth in Treasury Regulations section 1.704-2(i)(3);
(aj) "Shareholder Nonrecourse Deductions" shall have the meaning set
forth in Treasury Regulations section 1.704-2(i)(2);
(ak) "Shares" shall mean the equal proportionate units of interest
into which the beneficial interest in the Trust shall be divided from time to
time, and includes a fraction of a Share as well as a whole Share;
(al) "Treasury Regulations" shall mean the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time to
time;
(am) "Trust" shall refer to the Delaware business trust heretofore
established and continued by this Declaration of Trust, as amended from time to
time; and
(an) "Trust Minimum Gain" shall have the meaning set forth in Treasury
Regulations section 1.704-2(b)(2).
(ao) "UBTI" means income that would qualify as unrelated business
taxable income under the Code.
Section 3. Registered Office; Registered Agent. The address of the
--------- --------------------------------------
registered office of the Trust in the State of Delaware is c/o The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801 in the County of New Castle. The registered agent for service of
process on the Trust in the State of Delaware at such address is The Corporation
Trust Company.
Section 4. Designation of Trustees. Pacific Corporate Group, Inc.,
--------- -----------------------
Christopher J. Bower, Harry G. Bubb and Alan C. Shapiro, are hereby designated
and appointed as trustees of the Trust and such Trustees accept such
designation.
ARTICLE II
Purposes and Powers of Trust
Section 1. Purposes. This Trust has been formed for the following
---------- --------
purpose or purposes:
to conduct, operate and carry on the business of an investment company
and to operate as an investment company registered under the 1940 Act and to
maintain such registration throughout the term of the Trust;
to generate, through making, holding and disposing of selected private
market investments, rates of return that are superior to public market
investment alternatives, while reducing risks through the diversification of
investments within the private market (x) through investments primarily in
privately negotiated transactions in a portfolio of partnerships (or similar
vehicles) organized by established advisers that will invest in private market
investment opportunities such as corporate restructurings, recapitalizations,
venture capital and special situations ("Indirect Investments") and (y) with
respect to up to 25% of aggregate Shareholders' commitments, through investments
in privately negotiated investments directly in private or public operating
companies ("Direct Investments"), and to engage in all activities and
transactions on behalf of the Trust as the Adviser Trustee may deem reasonably
necessary, advisable or incidental in connection therewith.
to borrow money or otherwise obtain credit and to secure the same by
mortgaging, pledging or otherwise subjecting as security the assets of the
Trust;
to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, and otherwise deal in, Shares including Shares in
fractional denominations, and to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds or other assets of
the Trust, whether capital or surplus or otherwise, to the full extent now or
hereafter permitted by the laws of the State of Delaware;
to conduct its business, promote its purposes, and carry on its
operations in any and all of its branches and maintain offices both within and
without the State of Delaware, in any and all States of the United States of
America, in the District of Columbia, and in any other parts of the world; and
to do all and everything necessary, suitable, convenient, or proper
for the conduct, promotion, and attainment of any of the businesses and purposes
herein specified or which at any time may be incidental thereto or may appear
conducive to or expedient for the accomplishment of any of such businesses and
purposes and which might be engaged in or carried on by a Trust organized under
the Delaware Act, and to have and exercise all of the powers conferred by the
laws of the State of Delaware upon a Delaware business trust.
The foregoing provisions of this Article II shall be construed both as
purposes and powers and each as an independent purpose and power.
ARTICLE III
Beneficial Interest
Section 1. Shares of Beneficial Interest. The beneficial interest in
--------- ------------------------------
the Trust at all times shall be divided into Shares, each of which shall
represent an equal proportionate interest in the Trust with each other Share,
none having priority or preference over another. The number of Shares authorized
shall be unlimited, and the Shares so authorized may be represented in part by
fractional shares. From time to time, the Trustees may divide or combine the
Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust.
Section 2. Issuance of Shares in the Offering. The Trustees are
---------- ------------------------------------
authorized to issue or authorize the issuance of Shares and to fix the price or
the minimum price or the consideration or minimum consideration for such Shares
in the Offering and for shares issued at subsequent dates upon which
Shareholders make Capital Contributions. Shareholders shall be deemed to have
approved the issuance of, and the Trustees are hereby authorized to issue,
Shares at subsequent dates upon which Shareholders make Capital Contributions at
a price equal to $1,000 per share.
Shares may be issued in fractional denominations to the same extent as
whole Shares, and Shares in fractional denominations shall be Shares having
proportionately to the respective fractions represented thereby all the rights
of whole Shares, including, without limitation, the right to vote, the right to
receive dividends and distributions, and the right to participate upon
liquidation of the Trust.
Section 3. Admission of Shareholders. (a) The Adviser Trustee, at any
--------- -------------------------
time and from time to time, is authorized to admit Shareholders to the Trust.
The Capital Contributions of the Shareholders shall be made in cash in U.S.
dollars. The manner of the offering of Shares, the terms and conditions under
which subscriptions for such Shares will be accepted, and the manner of and
conditions to the sale of Shares to subscribers therefor and the admission of
such subscribers as Shareholders will be as provided in the Memorandum in all
material respects and subject to any provisions hereof. A Person may be admitted
as a Shareholder if such Person (or a representative authorized by such Person)
orally, in writing or by other action executes the subscription agreement with
respect to Shares or any other writing evidencing the intent of such Person to
become a Shareholder.
The names, residence, business or mailing address and Capital
Contributions of the Shareholders shall be set forth on the books and records of
the Trust, as amended from time to time.
The minimum capital Commitment to the Trust by any Shareholder shall
be $250,000 or such other amount as the Adviser Trustee shall determine in its
sole discretion. Each Shareholder shall pay, as a Capital Contribution to the
Trust, such Shareholder's respective Commitment amount at such times as provided
for herein. Each Shareholder shall pay at the Closing Date, or, in the sole
discretion of the Adviser Trustee, on a date subsequent thereto as determined by
the Adviser Trustee, 50% of the amount of such Shareholder's Commitment. The
remaining 50% of each Shareholder's Commitment shall be due on the first
anniversary date of the Trust's initial closing unless the Adviser Trustee, in
its sole discretion, determines to delay collection of all or a portion of such
amount based upon its determination that the full amount of the contribution is
not required by the Fund at that time. If the Adviser Trustee determines to
delay collection of all or part of such remaining 50%, it shall notify
Shareholders in writing as to the percentage of each Shareholder's Commitment
due on the first anniversary date of the Trust's initial Closing and of the
percentage due at a subsequent date, which shall be determined by the Adviser
Trustee in its sole discretion. In the event that a Shareholder fails to pay the
required share of its Commitment on or before the applicable payment date
determined by the Adviser Trustee:
(i) such Shareholder shall automatically be granted an additional
thirty (30) business days to pay the installment, provided, however, that
such Shareholder shall be required to pay interest on such installment at a
rate equal to the London Interbank Offered Rate ("LIBOR") for three month
deposits plus 500 basis points compounded daily for each day such
installment is not paid subsequent to the payment date; and
(ii) if such Shareholder does not pay the installment and interest
payment accrued in accordance with (i) above, by 4:00 pm New York time on
the thirtieth (30th) business day following the payment date, that
Shareholder shall be liable to forfeiture of all capital contributed by
that Shareholder as of that date and its entire Capital Account, including
any and all income, distributions and capital gains without limitation,
whether or not such amounts have been distributed, with all such forfeited
amounts to become property of the Trust for the pro rata benefit only of
those Shareholders who have made their capital contribution(s) in
accordance with this Section 3(c) and upon forfeiture as provided herein,
such forfeiting Person shall no longer be a Shareholder.
It is understood that the Offshore Fund shall maintain its investment
in the Trust as a series of separate investments in relation to each limited
partner in the Offshore Fund. Notwithstanding anything in this Declaration of
Trust to the contrary, to the extent the Offshore Fund is unable to pay its
entire commitment to the Trust as a result of the failure of one or more of the
Offshore Fund's limited partners ("Defaulting Partners") to pay the required
shares of their capital commitments to the Offshore Fund when due, the Offshore
Fund shall be subject to the provisions of subsection (c) in respect of the
portion of its Commitment attributable to the Defaulting Partners, and only the
capital contributed relating to Defaulting Partners shall be liable to
forfeiture as provided in such subsection.
Immediately after the admittance of any Person as a Shareholder, the
Depositor shall be deemed to have resigned from the Trust, and to have conveyed,
assigned and transferred to the Shareholders, and to their successors and
assigns, all of his interest in the Trust.
Section 4. Certain Returns of Capital. To the extent that as of the
--------- ---------------------------
fifth anniversary of the Closing Date any portion of the Capital Contributions
of the Shareholders has not been invested or committed for investment in Direct
Investments or Indirect Investments (except for any amounts used to pay
offering, organization or operating expenses of the Trust or reserved for
ongoing expenses or contingencies, follow-on investments in existing portfolio
investments of the Trust or for other appropriate Trust matters), such portion
of the Capital Contribution shall be returned to the Shareholders, pro rata in
proportion to their Capital Contributions, as a return of capital.
Section 5. Trust Capital. (a) No Shareholder shall be paid interest
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on any Capital Contribution to the Trust or on such Shareholder's Capital
Account, notwithstanding any disproportion therein as between Shareholders.
The Trust shall not redeem or repurchase any Shareholder's Shares and
no Shareholder shall have the right to withdraw from the Trust, except as
provided in Article VI or Article X, or receive any return of any Capital
Contribution, except as provided in Section 4 hereof, and except upon
dissolution of the Trust pursuant to Article X.
Section 6. Capital Accounts; Allocations of Net Income and Net Loss.
--------- --------------------------------------------------------
The Trust shall establish and maintain a separate account (the
"Capital Account") for each Shareholder. The initial balance of the Capital
Account for each Shareholder shall be such Shareholder's initial Capital
Contribution (not including any placement fee) that has been paid to the Trust.
The Capital Account of each Shareholder shall be increased by (i) the fair
market value of any property (other than cash) contributed to the Trust by such
Shareholder (net of liabilities to which such property is subject), (ii)
allocations to such Shareholder of income and gain (including income exempt from
tax), and (iii) the amount of any Trust liabilities that are assumed by such
Shareholder or that are secured by any Trust assets distributed to such
Shareholder. The Capital Account of each Shareholder shall be decreased by (i)
the dollar amount of any distributions made to such Shareholder, (ii) the fair
market value of any property distributed to such Shareholder (net of liabilities
to which such property is subject), (iii) allocations to such Shareholder of
loss and deduction (including expenditures not deductible in computing the
Trust's income or loss for Federal income tax purposes), and (iv) the amount of
any liabilities of such Shareholder that are assumed by the Trust. Simultaneous
with the closing of the Offering, each Shareholder's Capital Account shall be
reduced by the selling commissions paid by the Trust with respect to such
Shareholder's Capital Contribution to the Trust. For purposes of this
Declaration of Trust, such commissions shall be treated as specially allocated
items of Trust expense.
Except where this Declaration of Trust otherwise requires, a
substitute Shareholder (to the extent such a substitute is permitted to be a
Shareholder under this Declaration of Trust) shall be deemed to have received
the Capital Account and to have made the Capital Contributions to the Trust that
were made by the Shareholder whom such substitute Shareholder succeeds, and to
have received from the Trust the distributions and allocations received from the
Trust by such former Shareholder.
Section 7. Allocation of Income, Gains and Losses. The Net Income of
--------- ---------------------------------------
the Trust attributable to interest and ordinary dividend income, the Net Income
of the Trust attributable to the sale or other disposition of portfolio
investments and the Net Loss of the Trust for each Fiscal Year shall be
allocated as follows:
Allocation with respect to Indirect Investments and Pre-Portfolio
Investments. Net Income attributable to interest and ordinary dividend income in
respect of Indirect Investments and Pre-Portfolio Investments, Net Income
attributable to the sale or other disposition of Indirect Investments and
Pre-Portfolio Investments and Net Loss of the Trust other than Net Loss in
respect of Direct Investments shall be allocated to Shareholders (including the
Adviser Trustee) in proportion to their Capital Contributions. Upon the
admission of Shareholders on a Closing Date, such items of income, gain and loss
(whether or not realized) or deduction arising subsequent to such Closing Date
will be specially allocated to such Shareholders until each Shareholder has been
allocated a proportional share of items of income, gain, loss (whether or not
realized) and deduction from the Initial Closing Date.
Allocation with respect to Direct Investments. If the aggregate
cumulative amount of Net Income attributable to interest and ordinary dividend
income in respect of Direct Investments ("Direct Investment Income"), Net Income
attributable to the sale or other disposition of Direct Investments ("Direct
Investment Gain") and Net Loss of the Trust in respect of Direct Investments
(the "Direct Investment Loss") is positive, Direct Investment Income, Direct
Investment Gain and Direct Investment Loss shall be allocated as follows: (i) of
such amount attributable to Direct Investments other than Pari Passu
Co-Investments, 80% to the Shareholders (including the Adviser Trustee) in
proportion to their Capital Contributions and 20% to the Adviser Trustee, and
(ii) of such amount attributable to Direct Investments in Pari Passu
Co-Investments, 85% to the Shareholders (including the Adviser Trustee) in
proportion to their Capital Contributions and 15% to the Adviser Trustee. If the
aggregate cumulative amount of Direct Investment Income, Direct Investment Gain
and Direct Investment Loss is negative, Direct Investment Income, Direct
Investment Gain and Direct Investment Loss shall be allocated to the
Shareholders (including the Adviser Trustee) in proportion to their Capital
Contributions.
Section 8. Tax Allocations. Allocations of Trust Net Income and Net
--------- ----------------
Loss shall be made to the Shareholders for Federal, state and other tax purposes
in accordance with the provisions of this Article III. In the event the
allocations set forth in this Article III are disallowed by the Service, such
allocations shall be deemed to be amended to the minimum extent necessary to
conform with Section 704 of the Code, while preserving the intent of the
foregoing allocations to the maximum possible extent and by making such
adjustments to the allocations as are necessary to allow distributions to be
made in accordance with Section 2 of Article VI.
Section 9. Waiver of UBTI. Shareholders may provide the Trust with a
--------- --------------
revocable written waiver (a "UBTI Waiver") of income and associated expenses of
the Trust that would qualify as UBTI under the Code. To the extent a Shareholder
provides such a waiver and has not revoked the same, notwithstanding anything to
the contrary in this Declaration of Trust, any UBTI otherwise allocable to such
Shareholder shall instead be allocated pro rata to all other Shareholders who
have not submitted a UBTI Waiver, and distributions in respect thereof shall be
paid only to such Shareholders. Shareholders submitting UBTI Waivers shall
forego such income and shall not be allocated any other income in lieu of UBTI
that has been waived. Any such waiver must be in a form reasonably acceptable to
the Adviser Trustee and any Shareholder may revoke a UBTI Waiver by providing
written notice thereof in a form reasonably acceptable to the Adviser Trustee.
Such notices may only be submitted during January of each year and shall be
effective upon receipt by the Trust. It is understood that neither the Trust nor
the Trustees makes any representation to Shareholders as to the effectiveness of
UBTI Waivers.
Section 10. Assignment During the Fiscal Year. If a Shareholder's
---------- -----------------------------------
Share in the Trust is transferred at any time other than at the end of a Fiscal
Year of the Trust, each item of income, gain, loss, deduction and credit
attributable to such interest for the Fiscal Year in which the transfer occurs
shall be divided and allocated proportionately between the transferor and the
transferee in the same ratio as the number of days in the Fiscal Year
respectively before and after the date the transfer is recognized by the Trust
bears to the number of days in such Fiscal Year.
Section 11. Qualified Income Offset. Notwithstanding anything to the
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contrary that may be express or implied in this Declaration of Trust except for
Section 13 of this Article III, if any Shareholder unexpectedly receives any
adjustment, allocation or distribution described in Treasury Regulation section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Trust income and gain shall be
specially allocated to such Shareholder in an amount and manner sufficient to
eliminate as soon as practicable any Adjusted Capital Account Deficit created by
such adjustment, allocation or distribution, but only to the extent such
Adjusted Capital Account Deficit is in excess of the amount of the Adviser
Trustee's Incentive Distributions then or theretofore distributed to the Adviser
Trustee pursuant to Section 2(c) of Article VI. This Section 11 is intended to
constitute a "Qualified Income Offset" within the meaning of Treasury Regulation
section 1.704-1(b)(2)(ii)(d)(3).
Section 12. Book-Ups. Consistent with Treasury Regulation section
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1.704-1(b)(2)(iv)(f) and (g), the Adviser Trustee may adjust the Gross Asset
Values of all the Trust's assets to equal their respective gross fair market
values, as determined by the Adviser Trustee, and reflect any such increase or
decrease in the Capital Account of the Shareholders, as of the following times:
(i) the acquisition of an additional Share by any new or existing
Shareholder in exchange for more than a de minimis Capital Contribution; (ii)
the distribution by the Trust to a Shareholder of property as consideration for
all or any part of a Share owned by the Shareholder other than a de minimis
amount; (iii) at such times as the Adviser Trustee shall determine in order to
carry out the purposes for which the Trust is established, and (iv) the
liquidation of the Trust within the meaning of Treasury Regulations section
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses
(i) , (ii) and (iii) above shall be made only if the Adviser Trustee reasonably
determines that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Shareholders in the Trust and are appropriate
under generally accepted industry accounting practices;
the distribution of any Trust asset to any Shareholder, which
distribution shall be treated as made for an amount equal to the gross fair
market value of such asset on the date of distribution; and
the Gross Asset Values of Trust assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code section 734(b) or Code section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Treasury Regulations section 1.704-1(b)(2)(iv)(m) and section 754 of
the Code; provided, however, that Gross Asset Values shall not be adjusted
pursuant to this subsection (c) to the extent the Adviser Trustee determines
that an adjustment pursuant to subsection (a) above is necessary or appropriate
in connection with a transaction that would otherwise result in an adjustment
pursuant to this subsection (c).
If the Adviser Trustee revalues any of the Trust assets pursuant to
this Section 12, each Shareholder's share of gain or loss from such assets (and
to the extent applicable, share of depreciation, depletion, and amortization)
shall be computed for tax purposes so as to take into account the variation
between the adjusted tax basis and book value of such assets in the same manner
as under section 704(c) for property contributed to a partnership and the
Shareholders' capital accounts shall be adjusted for allocations to them of gain
or loss (and to the extent applicable, share of depreciation, depletion, and
amortization) as computed for book purposes with respect to such assets. This
provision is intended to satisfy the requirements of Treasury Regulation section
1.704-1(b)(2)(iv)(f)(3) and (4), and accordingly, shall be interpreted
consistent with such requirements.
Section 13. Special Tax Allocations.
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Minimum Gain Chargeback. Except as otherwise provided in Treasury
Regulations section 1.704-2(f), notwithstanding any other provision of this
Article III, if there is a net increase in Trust Minimum Gain during any Fiscal
Year, each Shareholder shall be specially allocated items of Trust income and
gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an
amount equal to such Shareholder's share of the net decrease in Trust Minimum
Gain, determined in accordance with Treasury Regulations section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Shareholder pursuant
thereto. The items to be so allocated shall be determined in accordance with
Treasury Regulations sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section
13(a) is intended to comply with the minimum gain chargeback requirement in
Treasury Regulations section 1.704-2(f) and shall be interpreted consistently
therewith.
Shareholder Minimum Gain Chargeback. Except as otherwise provided in
Treasury Regulations section 1.704-2(i)(4), notwithstanding any other provision
of this Article III, if there is a net decrease in Shareholder Nonrecourse Debt
Minimum Gain attributable to a Shareholder Nonrecourse Debt during any Fiscal
Year, each Shareholder who has a share of the Shareholder Nonrecourse Debt
Minimum Gain attributable to such Shareholder Nonrecourse Debt, determined in
accordance with Treasury Regulations section 1.704-2(i)(5), shall be specially
allocated items of Trust income and gain for such Fiscal Year (and, if
necessary, subsequent Fiscal Years) in an amount equal to such Shareholder's
share of the net decrease in Shareholder Nonrecourse Debt Minimum Gain
attributable to such Shareholder Nonrecourse Debt, determined in accordance with
Treasury Regulations 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Shareholder pursuant thereto. The items to be so allocated
shall be determined in accordance with Treasury Regulations sections
1.704-2(i)(4) and 1.704-2(j)(2). This Section 13(b) is intended to comply with
the minimum gain chargeback requirement in Treasury Regulations section
1.704-2(i)(4) and shall be interpreted consistently therewith.
Nonrecourse Deductions. Any Nonrecourse Deductions for any Fiscal Year
shall be specially allocated among the Shareholders in the same manner as other
deduction except as otherwise required by Treasury Regulations section 1.704-2.
Shareholder Nonrecourse Deductions. Any Shareholder Nonrecourse
Deductions for any Fiscal Year shall be specially allocated to the Shareholder
who bears the economic risk of loss with respect to the Shareholder Nonrecourse
Debt to which such Shareholder Nonrecourse Deductions are attributable in
accordance with Treasury Regulations section 1.704-2(i).
Section 14. No Deficit Makeup. Notwithstanding anything herein to the
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contrary, upon the liquidation of the Trust, no Shareholder shall be required to
make any Capital Contribution to the Trust in respect of any deficit in such
Shareholder's Capital Account, except with respect to any amounts payable by the
Adviser Trustee in respect of the Repayment Obligation set forth in Section 2(d)
of Article VI and any deficit in a Non-U.S. Shareholder's Capital Account up to
the amount, if any, allocated to such Shareholder pursuant to Section 17 hereof.
Section 15. Additional Allocations. Notwithstanding the foregoing
---------- -----------------------
except for Sections 9, 11 and 13 hereof, if, upon the final dissolution and
termination of the Trust and after taking into account all allocations of Net
Income and Net Losses (and other tax items) under this Article III, the
distributions to be made in accordance with the positive Capital Account balance
would result in a distribution that would be different from a distribution under
Section 2 of Article VI below, then gross items of income and gain (and other
tax items) for the taxable year of the final dissolution and termination (and,
to the extent permitted under section 761(c) of the Code, gross items of income
and gain (and other tax items) for the immediately preceding taxable year) shall
be allocated to the Shareholders to increase or decrease Capital Account
balances, as the case may be, so that the final distribution will occur in the
same manner as a distribution under Section 2 of Article VI below.
Section 16. Basis Adjustment. In the event of a transfer of all or any
---------- ----------------
part of a Shareholder's Shares, the death of a Shareholder, or the distribution
of assets in kind to a Shareholder, the Adviser Trustee may (but shall not be
required to) cause the Trust to elect to adjust the basis of the Trust's assets
pursuant to an election made under section 754 of the Code.
Section 17. Special Allocation to Non-U.S. Shareholders.
------------ -----------------------------------------------------
Notwithstanding any provision in this Declaration of Trust to the contrary, any
amounts paid or payable by the Trust, including taxes and penalties, as a result
of its failure to withhold amounts in respect of any distributions made to a
Non-U.S. Shareholder will be allocated as an expense solely to such Non-U.S.
Shareholder and reduce distributions to such Shareholder as a result of such
expense.
Section 18. Additional Capital Contributions by Non-U.S. Shareholders.
---------- ---------------------------------------------------------
Notwithstanding any provision in this Declaration of Trust to the contrary, if
any amounts are paid or payable by the Trust, including taxes and penalties, as
a result of its failure to withhold amounts in respect of any distributions made
to a Non-U.S. Shareholder, such Non-U.S. Shareholder will contribute additional
capital to the Trust upon demand by the Adviser Trustee in an amount equal to
the amounts paid or payable by the Trust as a result of its failure to withhold.
If such Non-U.S. Shareholder does not pay such additional capital contribution
within 10 business days of demand by the Adviser Trustee, such Non-U.S.
Shareholder shall be liable, in the sole discretion of the Adviser Trustee, to
forfeiture of all of its Shares, including without limitation all capital
contributed by such Non-U.S. Shareholder as of that date and its entire Capital
Account, whether or not such amounts have been distributed, with all such
forfeited amounts to become property of the Trust for the pro rata benefit of
the other Shareholders and upon forfeiture as provided herein, such forfeiting
Person shall no longer be a Shareholder. Payment of any such additional capital
contributions must be made in cash in U.S. dollars.
Section 19. Non-Transferability. A Shareholder may not transfer, sell
---------- -------------------
or exchange Shares of the Trust, without the consent of the Adviser Trustee,
which consent may be withheld in its sole discretion for any reason or for no
reason. In addition, no transfer of Shares may be made unless, in the opinion of
counsel for the Trust, such transfer would not result in a termination of the
Trust for purposes of Section 708 of the Code. No transfer of Shares may be made
if the net asset value of the Shares to be transferred is less than $20,000. In
no event shall all or any part of a Shareholder's Shares be assigned to a minor
or an incompetent, unless in trust for the benefit of such person. In addition,
Shares may be sold, transferred, assigned or otherwise disposed of by a
Shareholder only if, in the opinion of counsel, such transfer or assignment
would not violate federal securities laws or state securities or "blue sky" laws
(including investor suitability standards).
The Trustees may impose additional restrictions on transfers or
redemptions (if redemptions are otherwise permitted at such time) of Shares in
order to ensure that the Trust will not be classified as a publicly traded
partnership subject to tax as a corporation.
Section 20. Ownership of Shares. The ownership of Shares will be
---------- --------------------
recorded in the books of the Trust or a transfer agent. The record books of the
Trust or any transfer agent, as the case may be, shall be conclusive as to who
are the holders of Shares and as to the number of Shares held from time to time
by each holder. No certificates certifying the ownership of Shares need be
issued except as the Trustees may otherwise determine from time to time
Section 21. Additional Issuances of Shares. The Trust may issue
----------- ---------------------------------
additional Shares subsequent to the Offering, including the issuance of Shares
in connection with the Final Installment Date, as may be authorized by the
Trustees, subject to the requirements of the 1940 Act
Section 22. No Preemptive Rights; Derivative Suits. Shareholders
---------- ------------------------------------------
shall have no preemptive or other right to subscribe for any additional Shares
or other securities issued by the Trust.
Section 23. Status of Shares and Limitation of Personal Liability.
---------- --------------------------------------------------------
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the same nor entitle the representative
of any deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but only to the rights of said
decedent under this Trust. Ownership of Shares shall not entitle the Shareholder
to any title in or to the whole or any part of the Trust property or right to
call for a partition or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders as partners, irrespective of the
fact that the Trust is intended to be classified as a partnership for federal
income tax purposes. Except as otherwise provided in this agreement, neither the
Trust nor the Trustees, nor any officer, employee or agent of the Trust shall
have any power to bind any Shareholder or Trustee personally or to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever other
than such as the Shareholder at any time personally may agree to pay by way of
subscription for any Shares or otherwise.
ARTICLE IV
Trustees
Section 1. Election. Subject to the provisions of the 1940 Act, a
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Trustee may be elected either by the Trustees or the Shareholders. The Trustees
named herein shall serve until the first meeting of the Shareholders or until
the election and qualification of their successors. Prior to the first meeting
of Shareholders the initial Trustees hereunder may elect additional Trustees to
serve until such meeting and until their successors are elected and qualified.
The Trustees also at any time may elect Trustees to fill vacancies in the number
of Trustees. The number of Trustees shall be fixed from time to time by the
Trustees and, at or after the commencement of the business of the Trust, shall
be not less than three. Each Trustee, whether named above or hereafter becoming
a Trustee, shall serve as a Trustee during the lifetime of this Trust, until
such Trustee dies, resigns, retires, or is removed, or, if sooner, until the
next meeting of Shareholders called for the purpose of electing Trustees and the
election and qualification of his or her successor. Subject to Section 16(a) of
the 1940 Act, the Trustees may elect their own successors and, pursuant to this
Section, may appoint Trustees to fill vacancies.
Section 2. Powers. (a) Subject to the terms hereof, including but not
--------- ------
limited to subsections (b) and (c) of this Section, the Trustees shall have all
powers necessary or desirable to carry out the purposes of the Trust, including,
without limitation, the powers referred to in Article II hereof.
Without limiting the generality of the foregoing and subject to the
terms hereof, including, but not limited to, the powers of the Adviser Trustee
and the Individual Trustees set forth in this Section, the Trustees shall have
full power and authority:
(i) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such power
and discretion with relation to securities or property as the Trustees
shall deem proper;
(ii) To hold any security or property in a form not indicating any
trust whether in bearer, unregistered or other negotiable form or in the
name of the Trust or a custodian, subcustodian or other depository or a
nominee or nominees or otherwise;
(iii) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which is held in the Trust; to consent to any contract, lease, mortgage,
purchase or sale of property by such corporation or concern, and to pay
calls or subscriptions with respect to any security held in the Trust;
(iv) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that connection
to deposit any security with, or transfer any security to, any such
committee, depositary or trustee, and to delegate to them such power and
authority with relation to any security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to
pay, such portion of the expenses and compensation of such committee,
depositary or trustee as the Trustees shall deem proper;
(v) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy, including, but not
limited to, claims for taxes;
(vi) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
(vii) To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Individual Trustees, officers, employees, agents (including placement
agents), investment advisers or Adviser Trustee, principal underwriters, or
independent contractors of the Trust individually against all claims and
liabilities of every nature arising by reason of holding, being or having
held any such office or position, or by reason of any action alleged to
have been taken or omitted by any such person as Shareholder, Individual
Trustee, officer, employee, agent (including placement agents), investment
adviser or Adviser Trustee, principal underwriter, or independent
contractor, including any action taken or omitted that may be determined to
constitute negligence, whether or not the Trust would have the power to
indemnify such person against such liability;
(viii) To change the registered office or registered agent in the
State of Delaware;
(ix) Subject to Article X, Section 9 hereof, to reorganize the Trust;
(x) To sell all or substantially all of the assets of the Trust; and
(xi) To take such actions as may be necessary to maintain the
registration of the Trust as a registered investment company under the 1940
Act, including the issuance of additional Shares at a price equal to not
less than the then net asset value per Share.
Further, without limiting the generality of the foregoing, the
Trustees shall have full power and authority to incur and pay out of the
principal or income of the Trust such expenses and liabilities as may be deemed
by the Trustees to be necessary or proper for the purposes of the Trust.
Any determination made in good faith and, so far as accounting matters
are involved, in accordance with generally accepted accounting principles by or
pursuant to the authority granted by the Trustees, as to the amount of the
assets, debts, obligations or liabilities of the Trust or its Shareholders; the
amount of any reserves or charges set up and the propriety thereof; the time of
or purpose for creating such reserves or charges; the use, alteration or
cancellation of any reserves or charges (whether or not any debt, obligation or
liability for which such reserves or charges shall have been created shall have
been paid or discharged or shall be then or thereafter required to be paid or
discharged); the price or closing bid or asked price of any investment owned or
held by the Trust; the market value of any investment or fair value of any other
asset of the Trust; the number of Shares outstanding; the estimated expense to
the Trust in connection with purchases of its Shares; the ability to liquidate
investments in an orderly fashion; and the extent to which it is practicable to
deliver a selection of securities held by the Trust in payment for any such
Shares, or as to any other matters relating to the issue, sale, purchase and/or
other acquisition or disposition of investments or Shares of the Trust, shall be
final and conclusive, and shall be binding upon the Trust and its Shareholders,
past, present and future, and Shares shall be deemed issued and sold on the
condition and understanding that any and all such determinations shall be
binding as aforesaid.
Any Trustee or any organization with which any Trustee may be
associated also may act as broker for the Trust in making purchases and sales of
securities for or to the Trust for its investment portfolio, and may charge and
receive from the Trust the usual and customary commission for such service. Any
organization with which a Trustee may be associated in acting as broker for the
Trust shall be responsible only for the proper execution of transactions in
accordance with the instructions of the Trust and shall be subject to no further
liability of any sort whatever.
(1) Subject to the provisions of the 1940 Act, the Adviser Trustee
shall have the exclusive power and authority from time to time to do the
following:
(xii) subject to the supervision of the Individual Trustees, to
manage and control the portfolio investments of the Trust, including,
but not limited to, the power to make all decisions regarding the
Trust's investment portfolio and, among other things, to find,
evaluate, structure, monitor and liquidate, upon dissolution or
otherwise, such investments 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, trust companies or other
investment advisers, including the Trustees, for the performance of
such functions, including the investment and reinvestment of all or
part of the Trust's assets and execution of portfolio transactions;
and
(xiii) in accordance with Section 19 of Article III, to
determine, in its sole discretion, whether to permit transfers of
Shares.
The grant of exclusive power and authority to the Adviser Trustee
under this Section in no way limits the rights, powers or authority of the
Trustees as otherwise provided under the Delaware Act or as otherwise provided
by law.
(2) Subject to the requirements of the 1940 Act, the Individual
Trustees, in the name and on behalf of the Trust, are authorized to enter into a
management agreement with the Adviser Trustee for the management of the
portfolio of the Trust and to enter into a placement agency agreement with one
or more placement agents for the placement of the Shares. The parties hereto
acknowledge that the Adviser Trustee may pay to the placement agents offering
Shares a portion of the fee payable to the Adviser Trustee pursuant to the
management agreement.
(3) The Adviser Trustee will make a Commitment to the Trust in an
amount equal to 1% of all Commitments, up to a maximum Commitment of $500,000.
(4) If an Adviser Trustee is removed or resigns as provided herein,
such Adviser Trustee will transfer its interest in the Trust at a price per
Share equal to the then current net asset value of the Trust to any other
Adviser Trustee (a "Successor Adviser Trustee") appointed by the Trustees or the
Shareholders. A Successor Adviser Trustee will acquire its requisite interest in
the Trust from an Adviser Trustee whose appointment has been revoked.
Unless otherwise permitted by the 1940 Act, an Adviser Trustee may not
withdraw as an Adviser Trustee or reduce its interest in the Trust without
giving at least one year's prior written notice to the Trust if such withdrawal
or reduction is likely to cause the Trust to lose its classification as a
partnership for federal income tax purposes, provided, however, that the
foregoing shall not apply if the Trust terminates its management agreement with
the Adviser Trustee.
The Adviser Trustee, or any affiliate thereof, also may be a person
controlled by or affiliated with any Trustee or a person in which any Trustee is
interested financially, subject only to applicable provisions of law.
(5) To enter into an arrangement with the Offshore Fund pursuant to
which the Offshore Fund shall be obligated to vote any proxies in respect of the
Offshore Fund's holdings of Shares in the same proportion as the vote of all
other Shareholders. Such arrangement shall also require that the Offshore Fund
refrain from substituting the Shares in its portfolio unless the Offshore Fund
obtains any required approval of the Commission.
Subject to the terms of subsections (a) and (b) hereof, the Individual
Trustees shall have the exclusive power and authority from time to time to do
the following:
(1) adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and may amend and repeal
them to the extent that they do not reserve that right to the Shareholders and
such By-Laws are deemed to be incorporated and included in this Declaration of
Trust;
(2) fill vacancies in their number, including vacancies resulting from
increases in their own number, and may elect and remove such officers and
employ, appoint and terminate such employees or agents as they consider
appropriate;
(3) appoint from their own number and terminate any one or more
committees;
(4) employ one or more custodians, administrators, transfer agents,
shareholder servicing agents, agents for the distribution of Shares, and set
record dates;
(5) delegate such authority as they consider desirable including, the
determination of the Trust's net income, total assets and per Share net asset
value to any officer of the Trust, committee of the Trustees, or any employee or
agent; and
(6) execute such deeds, agreements or other instruments in the name of
the Trust as they may deem appropriate from time to time.
In addition, the Individual Trustees shall perform all duties imposed
on the directors of registered investment companies by the 1940 Act, and the
Adviser Trustee will not be entitled to vote on any matters in respect of such
duties.
Section 3. Meetings. At any meeting of the Individual Trustees, not
--------- --------
less than three of the Individual Trustees then in office shall constitute a
quorum. If the number of Trustees then in office shall be less than three, then
all of the Trustees shall constitute a quorum. Any meeting may be adjourned from
time to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held at a later date set prior to such
adjournment without the necessity of further notice.
When a quorum is present at any meeting, a majority of the Trustees
present may take any action, except when a larger vote is required by this
Declaration of Trust, the By-laws or the 1940 Act.
Any action required or permitted to be taken at any meeting of the
Trustees or of any committee thereof may be taken without a meeting, if a
written consent to such action is signed by all of the Trustees or members of
any such committee then in office, as the case may be, and such written consent
is filed with the minutes of proceedings of the Trustees or any such committee.
The Individual Trustees or any committee designated by the Individual
Trustees may participate in a meeting of the Trustees or such committee by means
of a conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other at the same time.
Participation by such means shall constitute presence in person at a meeting.
Section 4. Ownership of Assets of the Trust. Title to all of the
--------- -----------------------------------
assets of the Trust at all times shall be vested in the Trust as a separate
legal entity under the Delaware Act.
Section 5. Removal and Resignation of Trustees. The Trustees or the
--------- -------------------------------------
Shareholders by vote of 66-2/3% of the outstanding Shares entitled to vote
thereon may remove at any time any Individual Trustee with or without cause, and
any Trustee may resign at any time as Trustee, except, with respect to the
Adviser Trustee, as provided in Section 2 of this Article IV, without penalty by
written notice to the Trust; provided that twenty days' advance written notice
shall be given in the event that there are only three or fewer Individual
Trustees at the time a notice of resignation is submitted. The Adviser Trustee
may be removed by a majority vote of the Individual Trustees or by the vote of a
majority-in-interest of the Trust.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. The Shareholders shall have power to vote
--------- -------------
only (i) for the election of Trustees as provided in Article IV, Section 1, of
this Declaration of Trust; provided, however, that no meeting of Shareholders is
required to be called for the purpose of electing Trustees unless and until such
time as less than a majority of the Trustees have been elected by the
Shareholders, (ii) for the removal of Trustees as provided in Article IV,
Section 5, (iii) with respect to any amendment of this Declaration of Trust as
provided in Article X, Section 8, (iv) with respect to the dissolution and
termination of the Trust as provided in Article X, Section 4, and (v) with
respect to such additional matters relating to the Trust as may be required by
law, by this Declaration of Trust, or the By-laws of the Trust or any
registration of the Trust with the Securities and Exchange Commission or any
state, or as the Trustees may consider desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote (except
that in the election of Trustees said vote may be cast for as many persons as
there are Trustees to be elected), and each fractional Share shall be entitled
to a proportionate fractional vote. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy. A proxy with
respect to Shares held in the name of two or more persons shall be valid if
executed by any one of them, unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest on the challenger.
Section 2. Meetings. Meetings of the Shareholders may be called by
--------- --------
the Trustees or such other person or persons as may be specified in the By-laws
and shall be called by the Trustees upon the written request of Shareholders
owning at least 10% of the outstanding Shares entitled to vote. Shareholders
shall be entitled to at least ten days' prior notice of any meeting.
Section 3. Quorum and Required Vote. Fifty percent (50%) of the
--------- ---------------------------
outstanding Shares shall be a quorum for the transaction of business at a
Shareholders' meeting. Any lesser number, however, shall be sufficient for
adjournment, and adjournments with respect to any particular matter to be
considered at a meeting with respect to which there are insufficient votes may
be made from time to time; and any adjourned session or sessions may be held
within 120 days after the date ------------------ ------------------------ set
for the original meeting without the necessity of further notice. Except when a
larger vote is required by any provision of this Declaration of Trust or the
By-laws of the Trust and subject to any applicable requirements of law, a
majority of the Shares voted shall decide any question.
Section 4. Action by Written Consent. Any action required or permitted
--------- -------------------------
to be taken at any meeting may be taken without a meeting if a consent in
writing, setting forth such action, is signed by a majority of Shareholders
entitled to vote on the subject matter thereof (or such larger proportion
thereof as shall be required by any express provision of this Declaration of
Trust or the By-laws of the Trust and subject to any applicable requirements of
law) and such consent is filed with the records of the Trust.
Section 5. Additional Provisions. The By-laws may include further
--------- ----------------------
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
Withdrawals and Distributions
of Capital
Section 1. Withdrawals and Distributions in General. No Shareholder
--------- ------------------------------------------
shall have any right to demand the return of his Capital Contribution, except
upon dissolution of the Trust pursuant to Article X, and except as provided in
Section 4 of Article III. The Trustees may, however, from time to time, elect to
make partial returns of Capital Contributions to Shareholders, in addition to
the returns provided in Section 4 of Article III, provided that at the time of
such partial returns: (1) all liabilities of the Trust to Persons other than
Shareholders have been paid or, in the good faith determination of the Trustees,
there remains property of the Trust sufficient to pay them and (2) the Trustees
cause the books and records of the Trust to be amended to reflect a reduction in
Capital Contributions. In the event that the Trustees elect to make a partial
return of Capital Contributions to Shareholders, such distribution shall be made
pro rata to all of the Shareholders in proportion to their Capital Contributions
and this Section 1 and any such return shall be deemed to be a compromise and
the Shareholders receiving such return shall not be obligated to return any such
money or property to the Trust or any creditor of the Trust. Each Shareholder,
by becoming such, consents to the pro rata distribution made in accordance with
this Section 1 without further consent required.
Section 2. Current Distributions.
--------- ---------------------
Cash Distributions. The Trust may make distributions to the
Shareholders in the sole discretion of the Trustees.
Indirect Investments and Pre-Portfolio Investments. All distributions
to Shareholders in respect of proceeds from Indirect Investments and
Pre-Portfolio Investments shall be made to the Shareholders (including the
Adviser Trustee) in proportion to their Capital Contributions.
Direct Investments. If the aggregate cumulative amount of Direct
Investment Income, Direct Investment Gain and Direct Investment Loss is
positive, distributions, other than returns of capital, shall be made as
follows: (i) of such amount attributable to Direct Investments other than Pari
Passu Co-Investments, to 80% to the Shareholders (including the Adviser Trustee)
in proportion to their capital contributions and a 20% incentive carried
interest distribution to the Adviser Trustee, and (ii) of such amount
attributable to Direct Investments in Pari Passu Co-Investments, 85% to the
---- -----
Shareholders (including the Adviser Trustee) in proportion for their Capital
Contributions and 15% to the Adviser Trustee (such 20% and 15% incentive carried
interest distribution is referred to herein as the "Adviser Trustee's Incentive
Distribution"). If the aggregate cumulative amount of Direct Investment Income,
Direct Investment Gain and Direct Investment Loss is negative, distributions
shall be made to Shareholders (including the Adviser Trustee) in proportion to
their capital contributions. Distributions with respect to returns of capital
from Direct Investments shall be made to the Shareholders (including the Adviser
Trustee) in proportion to their Capital Contributions.
Repayment Obligation. At the dissolution of the Trust, the Adviser
Trustee shall be required to contribute to the capital of the Trust an amount
equal to its Adjusted Capital Account Deficit, if any, up to the amount of any
prior distributions to the Adviser Trustee in respect of the Adviser Trustee's
Incentive Distribution (such requirement is referred to herein as the "Repayment
Obligation"). Prior to the dissolution of the Trust, the Adviser Trustee shall
have no obligation to contribute to the capital of the Trust in respect of the
Repayment Obligation. In addition, at the dissolution of the Trust, each
Non-U.S. Shareholder shall be required to contribute to the capital of the Trust
an amount equal to such Shareholder's Adjusted Capital Account Deficit, if any,
up to an amount equal to any special allocation allocated to such Non-U.S.
Shareholder pursuant to Section 17 of Article III to the extent such Shareholder
has not made the additional capital contribution required by Section 18 of
Article III.
Distributions in Kind. The Trustees may make distributions in kind if
in its judgment a disposition of the assets at the time of distribution would be
in the best interest of the Shareholders. In the event that at any time or from
time to time the Trustees must make a distribution of property other than cash,
such property shall be deemed to be sold for its fair market value on the date
of such distribution, and any gain or loss associated with such deemed sale
shall be included in determining Net Income or Net Loss for the applicable
Fiscal Year. Any such distribution shall be made after giving effect to the
allocation of Net Income and Net Loss required by Sections 7, 8 and 9 of Article
III. All distributions pursuant to this Section 2(e) shall be made in the same
priority and proportions, as distributions at such time would be made pursuant
to Section 2(b) or 2(c) hereof, whichever is applicable to such distribution.
The Trust may, if requested by the Offshore Fund, make distributions in kind
directly to the limited partners of the Offshore Fund.
Notwithstanding any other provision of this Declaration of Trust, the
Trustees are authorized to take any action that they determine to be necessary
or appropriate to cause the Trust to comply with any Federal, state, local and
foreign withholding requirement with respect to any payment or distribution by
the Trust to any Shareholder or other Person. All amounts so withheld, and, in
the manner determined by the Trustees, amounts withheld with respect to any
payment or distribution by any Person to the Trust, shall be treated as
distributions to the Shareholders to which such amounts would have been
distributed (under this Section 2 or Article X, as the case may be) but for the
withholding. If any such withholding requirement with respect to any Shareholder
exceeds the amount distributable to such Shareholder under this Section 2 or
Article X, such Shareholder and any successor or assignee with respect to such
Shareholder's Shares will indemnify and hold harmless the Individual Trustees,
the Adviser Trustee and the Trust for such excess amount or such withholding
requirement, as the case may be (including interest on such amount at the prime
rate as published in The Wall Street Journal, plus 200 basis points, compounded
semiannually).
Section 3. Limitations on Distributions. The right of any Shareholder
--------- ----------------------------
to receive any distribution in respect of his Capital Account pursuant to this
Article VI is subject to the provision by the Trustees for all Trust liabilities
in accordance with Section 3808(e) of the Delaware Act, and for reserves and
contingencies.
Section 4. Restrictions on Distributions. The foregoing provisions of
--------- -----------------------------
this Article VI to the contrary notwithstanding, no distribution shall be made
(a) if such distribution would violate any contract or agreement to which the
Trust is then a party or any law, rule, regulation, order or directive of any
governmental authority then applicable to the Trust, (b) to the extent that the
Trustees, in their sole discretion, determine that any amount otherwise
distributable should be retained by the Trust to pay, or to establish a reserve
for the payment of, any liability or obligation of the Trust, whether
liquidated, fixed, contingent or otherwise, (c) to hedge an existing investment
or (d) to the extent that the Trustees, in their sole discretion, determine that
the cash available to the Trust is insufficient to permit such distribution.
ARTICLE VII
Compensation and Limitation of Liability of Individual
Trustees, Adviser Trustee, Officers, Employees and Agents
Section 1. Compensation. Each Trustee not affiliated with the Trust's
--------- ------------
investment adviser, administrator or consultant shall be entitled to reasonable
compensation from the Trust and the Individual Trustees may fix the amount of
their compensation. An Adviser Trustee shall be entitled to such compensation as
may be set forth in any contract between the Trust and the Adviser Trustee
referred to in Section 2 of Article IV.
Section 2. Limitation of Liability. An Individual Trustee or an
---------- -------------------------
Adviser Trustee or an officer, agent or employee of the Trust (each, a "Covered
Person", and collectively, the "Covered Persons"), when acting in their
respective capacities for the Trust, shall not be personally liable to any
person other than the Trust or a Shareholder for any act, omission or obligation
of the Trust, the Individual Trustee, Adviser Trustee or Covered Person.
Notwithstanding anything in this Declaration of Trust to the contrary, the
Individual Trustees or an Adviser Trustee shall not be responsible or liable to
the Trust or a Shareholder in any event for any neglect or wrongdoing of any
Covered Person, nor shall any Individual Trustee, Adviser Trustee or Covered
Person be responsible or liable to the Trust or a Shareholder for the act,
omission or obligation of any Individual Trustee, Adviser Trustee or Covered
Person; provided, that nothing herein contained shall protect any Individual
Trustee, Adviser Trustee or Covered Person against any liability to the Trust or
a Shareholder to which he or it would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her or its office.
In addition, the Trustees shall not be liable to the Trust or any
Shareholder by reason of (i) any failure to withhold income tax under federal or
state tax laws with respect to income allocated to the Shareholders or (ii) any
change in the federal or state tax laws or regulations or in the interpretations
thereof as they apply to the Trust or the Shareholders, whether such change or
interpretation occurs through legislative, judicial or administrative action.
Every note, bond, contract, instrument, certificate, share, or
undertaking and every other act or thing whatsoever executed or done by the
Individual Trustees, an Adviser Trustee, a Covered Person or any of them on
behalf of the Trust, in connection with the Trust's business, shall be deemed
conclusively to have been executed or done only in their or his or her capacity
as Individual Trustees, an Adviser Trustee or Covered Person, and such
Individual Trustees, Adviser Trustee or Covered Person shall not be personally
liable thereon to any Person.
To the extent that, at law or in equity, an Adviser Trustee, Trustee
or Covered Person has duties (including fiduciary duties) and liabilities
relating thereto to the Trust or to the Shareholders, an Adviser Trustee,
Individual Trustee or Covered Person acting in connection with the Trust's
business or affairs, shall not be liable to the Trust or to any Shareholder for
their, his or its good faith reliance on the provisions of this Declaration of
Trust. The provisions of this Declaration of Trust, to the extent that they
restrict the duties and liabilities of an Adviser Trustee, Individual Trustee or
Covered Person otherwise existing at law or in equity, are agreed by the
Shareholders to replace such other duties and liabilities of such Adviser
Trustee, Individual Trustee or Covered Person.
Notwithstanding any provision in this Declaration of Trust to the
contrary, if any amounts are paid or payable by the Adviser Trustee out of the
Adviser Trustee's assets, including taxes and penalties, as a result of the
failure to withhold amounts in respect of any distributions made to a Non-U.S.
Shareholder, such Non-U.S. Shareholder shall hereby be obligated to reimburse
the Adviser Trustee upon demand by the Adviser Trustee for any amounts paid or
payable by the Adviser Trustee in respect thereof.
ARTICLE VIII
Indemnification
Section 1. Indemnification of Trustees, Officers, Employees and
---------- ---------------------------------------------------------
Agents. Each person who is or was a Trustee (including an Adviser Trustee),
- ------
officer, employee or agent of the Trust or who serves or has served at the
Trust's request as a director, officer or trustee of another person in which the
Trust has or had any interest as a shareholder, creditor or otherwise shall be
entitled to indemnification out of the assets of the Trust to the extent
provided in, and subject to the provisions of, the By-Laws, provided that no
indemnification shall be granted by the Trust in contravention of applicable
law. The By-Laws may provide for advancing expenses to any party covered by the
indemnification set forth therein as they are incurred with respect to the
defending of any claim, suit, action or proceeding where an undertaking by or on
behalf of such party is received requiring such party to repay amounts advanced
if it is ultimately determined that such party is not entitled to
indemnification thereunder. In addition, the By-Laws may permit the Trustees to
purchase insurance for parties indicated in the By-Laws in respect of any
liability asserted against all or any of them in any of the above-referenced
capacities or arising out of their status as such.
Section 2. Merged Persons. For the purposes of this Article VIII
--------- ---------------
references to "the Trust" include any constituent person (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, trustees, officers, employees or agents as well as the
resulting or surviving person; so that any person who is or was a director,
trustee, officer, employee or agent of such a constituent person or is or was
serving at the request of such a constituent person as a trustee, director,
officer, employee or agent of another person shall stand in the same position
under the provisions of this Article VIII with respect to the resulting or
surviving person as he would have with respect to such a constituent person if
its separate existence had continued.
Section 3. Shareholders. Each Shareholder shall be entitled to the
--------- ------------
same limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware. Notwithstanding this limitation on a Shareholder's liability, in
case any Shareholder or former Shareholder shall be held to be liable by reason
of his or her being or having been a Shareholder and not because of his or her
acts or omissions or for some other reason, the Shareholder or former
Shareholder (or his or her heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled out of the assets of the Trust to
be indemnified against all losses and expenses arising from such liability. Upon
request, the Trust shall cause its counsel to assume the defense of any claim
which, if successful, would result in an obligation of the Trust to indemnify
the Shareholder as aforesaid.
ARTICLE IX
Partnership Classification for Tax Purposes;
Appointment of Tax Matters Partner
Section 1. Partnership Classification; Federal Tax Elections.
--------- -------------------------------------------------
Partnership Classification. The Trust is intended to be classified as
a partnership for federal income tax purposes and in accordance with the tax
laws of the State of Delaware and other jurisdictions in a manner consistent
with such intention. A Shareholder shall not take any action that is
inconsistent with the preceding sentence. The Trust will not elect to be treated
as a regulated investment company or a real estate investment trust under the
Code.
Federal Tax Elections. The Trust, in the sole discretion of the
Trustees, may make or revoke elections for federal tax purposes as follows:
(i) In the case of a distribution of property within the meaning of
Section 734 of the Code, the Trust, in the absolute discretion of the
Trustees, may elect pursuant to Section 754 of the Code (or corresponding
provisions of future law) and pursuant to similar provisions of applicable
state or local income tax laws, to adjust the basis of the remaining assets
of the Trust; and
(ii) All other elections required or permitted to be made by the Trust
under the Code shall be made by the Trustees in such manner as will, in the
opinion of the Trustees, be in the best interest of the Trust. (In reaching
such opinion the Trustees shall not be required to poll or survey the
Shareholders.) The Trust shall, to the extent permitted by applicable law
and regulations, elect to treat as an expense for federal income tax
purposes all amounts incurred by it for state and local taxes, interest and
other charges that may, in accordance with applicable law and regulations,
be considered as expenses.
Section 2. Tax Matters Partners.
--------- --------------------
The Trustees shall from time to time (but at least as frequently as
required by law) designate a Tax Matters Partner pursuant to Section 6231 of the
Code. Only a Shareholder may be designated as the Tax Matters Partner. The
Adviser Trustee is hereby designated as the initial Tax Matters Partner, and it
shall serve in that capacity unless and until a new Tax Matters Partner is
designated by the Trustees. The Tax Matters Partner shall have the following
duties:
(i) to the extent and in the manner required by applicable law and
regulations, to furnish the name, address, profits interest and taxpayer
identification number of each Shareholder, and such other information as
may be required by such law or regulations, to the Secretary of the
Treasury or his or her delegate (the "Secretary"); and
(ii) to the extent and in the manner required by applicable law and
regulations, to keep each Shareholder informed of administrative and
judicial proceedings for the adjustment at the Trust level of any item
required to be taken into account by a Shareholder for federal income tax
purposes (such administrative and judicial proceedings referred to
hereinafter as "judicial review").
The Trust shall indemnify and reimburse the Tax Matters Partner for
any and all expenses, including, without limitation, legal and accounting fees,
claims, liabilities, losses and damages incurred in connection with any judicial
or administrative review with respect to the tax liability of the Shareholders.
The payment of all such expenses shall be made before any distributions are
made. Neither the Adviser Trustee (nor any affiliate of the Adviser Trustee) nor
the Individual Trustees shall have any obligation to provide funds for such
purpose. The taking of any action and the incurring of any expense by the Tax
Matters Partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole discretion of the Tax Matters Partner.
The Tax Matters Partner is hereby authorized, but not required:
(iii) to enter into any settlement agreement with the Service with
respect to any tax audit or judicial review, in which agreement the Tax
Matters Partner may expressly state that such agreement shall bind the
Adviser Trustee, the Individual Trustees and the Shareholders, except that
such settlement agreement shall not bind any person or entity who is
entitled to file and who (within the time prescribed pursuant to the Code
and regulations thereunder) files a statement with the Service stating that
the Tax Matters Partner shall not have the authority to enter into a
settlement agreement on behalf of such person or entity;
(iv) in the event that a notice of a final administrative adjustment
at the Trust level of any item required to be taken into account by the
Adviser Trustee, the Individual Trustees or a Shareholder for tax purposes
(a "final adjustment") is mailed to the Tax Matters Partner, to seek
judicial review of such final adjustment, including the filing of a
petition for readjustment with the Tax Court, the District Court of the
United States for the district in which the Trust's principal place of
business is located or the United States Claims Court;
(v) to intervene in any action brought by or on behalf of the
Individual Trustees or a Shareholder for judicial review of a final
adjustment;
(vi) to file a request for an administrative adjustment with the
Service at any time and, if any part of such request is not allowed by the
Service, to file a petition for judicial review with respect to such
request;
(vii) to enter into an agreement with the Service to extend the period
for assessing any tax which is attributable to any Trust item required to
be taken into account by the Adviser Trustee, the Individual Trustees or a
Shareholder for tax purposes, or an item affected by any such item; and
(viii) to take any other action on behalf of the Adviser Trustee, the
Individual Trustees or a Shareholder in connection with any administrative
or judicial tax proceeding to the extent permitted by applicable law or
regulations.
ARTICLE X
Other General Provisions
Section 1. Trustee's Good Faith Action, Expert Advice, No Bond or
--------- ----------------------------------------------------------
Surety. The exercise by the Trustees of their powers and discretion hereunder
- ------
under the circumstances then prevailing, shall be binding upon everyone
interested. Subject to Article VII, Section 2 hereof, a Trustee shall be liable
for his, her or its own willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of the office of
Trustee, as the case may be, and for nothing else, and shall not be liable for
errors of judgment or mistakes of fact or law. The Trustees may take advice of
counsel or other experts with respect to the meaning and operation of this
Declaration of Trust, and subject to the provisions of Section 2 of Article VII
shall be under no liability for any act or omission in accordance with such
advice or for failing to follow such advice. The Trustees shall not be required
to give any bond as such, nor any surety if a bond is required.
Section 2. Liability of Third Persons Dealing with Trustees or an
--------- ----------------------------------------------------------
Adviser Trustee. No person dealing with the Individual Trustees or an Adviser
- ----------------
Trustee shall be bound to make any inquiry concerning the validity of any
transaction made or to be made by the Individual Trustees or an Adviser Trustee
pursuant hereto or to see to the application of any payments made or property
transferred to the Trust or upon its order.
Section 3. Individual Trustees, Adviser Trustees, Officers, etc Not
--------- ----------------------------------------------------------
Personally Liable. All persons extending credit to, contracting with or having
- ------------------
any claim against the Trust shall look only to the assets of the Trust for
payment under such credit, contract or claim; and none of the Individual
Trustees, an Adviser Trustee or any of the Trust's officers, employees or
agents, whether past, present or future, shall be personally liable therefor.
- ------------------
- --------------------------------------------------------------------------
Section 4. Dissolution and Termination of Trust. (a) Unless dissolved
--------- ------------------------------------
as provided herein, the Trust shall continue until December 31, 2009, subject to
extension in the sole discretion of the Trustees for up to three additional
one-year periods.
The Trust may be dissolved, and its affairs wound up, at any time
upon: (i) the vote or consent of the lesser of (a) the holders of 67% or more of
the Shares present at a meeting, if the holders of more than 50% of the Shares
are present or represented by proxy at such meeting, and (b) the holders of more
than 50% of the Shares; (ii) the election by the Trustees to dissolve the Trust
if the value of the Trust's assets is reduced to below $5,000,000, unless
applicable law with respect to such dissolution, at the time it is to be made,
requires a vote of the Shareholders; (iii) the disposition by the Trust of all
or substantially all of its assets; or (iv) the occurrence of any other act that
causes a dissolution of the Trust under the Delaware Act and the remaining
Trustees (or, if none remain, a majority-in-interest of the Shareholders) do not
elect to continue the operations of the Trust.
Upon dissolution of the Trust, after paying or making reasonable
provision for the payment of all charges, taxes, expenses and liabilities,
whether due or accrued or anticipated as may be determined by the Trustees, the
Trust shall reduce, in accordance with such procedures as the Trustees consider
appropriate, the remaining assets to distributable form in cash or shares or
other securities, or any combination thereof, and distribute the proceeds to the
Shareholders ratably according to the number of Shares held by the several
Shareholders on the date of termination.
Upon termination of the Trust, following completion of winding up of
its business, the Trustees shall cause a certificate of cancellation of the
Trust's certificate of trust to be filed in accordance with Section 3810 of the
Delaware Act, which certificate of cancellation may be signed by any one
Trustee.
Section 5. Filing of Copies, References, Headings. The initial
---------- ------------------------------------------
trustees filed a Certificate of Trust of the Trust with the Secretary of State
of the State of Delaware in accordance with Section 3810 of the Delaware Act.
The original or a copy of this instrument and of each amendment hereto and of
each Declaration of Trust supplemental hereto shall be kept at the office of the
Trust where it may be inspected by any Shareholder. Anyone dealing with the
Trust may rely on a certificate by an officer of the Trust as to whether or not
any such amendments or supplemental Declarations of Trust have been made and as
to matters in connection with the Trust hereunder; and, with the same effect as
if it were the original, may rely on a copy certified by an officer of the Trust
to be a copy of this instrument or of any such amendment or supplemental
Declaration of Trust. In this instrument or in any such amendment or
supplemental Declaration of Trust, references to this instrument, and all
expressions like "herein," "hereof," and "hereunder," shall be deemed to refer
to this instrument as amended or affected by any such amendment or supplemental
Declaration of Trust. Headings are placed herein for convenience of reference
only and in case of any conflict, the text of this instrument, rather than the
headings, shall control. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
Section 6. Applicable Law. This Declaration of Trust shall be governed
--------- --------------
by and construed in accordance with the laws of the State of Delaware without
regard to principles of conflict of laws. The trust created hereby shall be a
business trust created under, and subject to the provisions of, the Delaware Act
and may exercise all powers which are ordinarily exercised by such a trust under
the Delaware Act; provided, however, that there shall not be applicable to the
Trust, the Trustees or this Declaration of Trust (a) the provisions of Section
3540 of Title 12 of the Delaware Code or (b) any provisions of the laws
(statutory or common) of the State of Delaware pertaining to trusts which are
inconsistent with the rights, duties, powers, limitations or liabilities of the
Trustees set forth or referenced in this Declaration of Trust.
Section 7. Amendments. Except as specifically provided herein, the
--------- ----------
Trustees may, without Shareholder vote, amend or otherwise supplement this
Declaration of Trust by an instrument in writing signed by a majority of the
Trustees; provided, however, the Shareholders shall have the right to vote (a)
on any amendment which would affect their right to vote granted in Section 1 of
Article V hereof, (b) on any amendment to this Section, (c) on any amendment as
may be required by the 1940 Act and (d) on any amendment submitted to them by
the Trustees.
Section 8. Reorganization. Notwithstanding anything else herein, the
--------- --------------
Trustees, in order to change the form of organization of the Trust, may, without
Shareholder approval (unless otherwise required by applicable law), cause the
Trust to merge or consolidate with or into one or more trusts, partnerships,
limited liability companies, associations or corporations so long as the
surviving or resulting entity is an investment company under the 1940 Act, or is
a series thereof. Any agreement of merger or consolidation or certificate of
merger may be signed by a majority of the Trustees and facsimile signatures
conveyed by electronic or telecommunication means shall be valid.
Pursuant to and in accordance with the provisions of Section 3815(f)
of the Delaware Act, and notwithstanding anything else herein, an agreement of
merger or consolidation approved by the Trustees in accordance with this Section
may effect any amendment to this Declaration of Trust or effect the adoption of
a new declaration of trust of the Trust if it is the surviving or resulting
trust in the merger or consolidation.
Section 9. Severability. The invalidity or unenforceability of any
--------- ------------
particular provision of this Declaration of Trust shall not affect the other
provisions hereof, and this Declaration of Trust shall be construed in all
respects as if such invalid or unenforceable provision was omitted.
Section 10. Integration. This Declaration of Trust, together with the
---------- -----------
By-Laws, constitutes the entire agreement among the parties hereto pertaining to
the subject matter hereof and supersedes all prior agreements and understandings
pertaining thereto.
IN WITNESS WHEREOF, the undersigned Trustees have hereunto set their
hands for themselves and their assigns as of the day and year first above
written.
ADVISER TRUSTEE
PACIFIC CORPORATE GROUP, INC.
By:________________________________
Christopher J. Bower
President
INDIVIDUAL TRUSTEES
___________________________________
Christopher J. Bower
___________________________________
Harry G. Bubb
___________________________________
Alan C. Shapiro
Solely for the purpose of Section 3(e)
of Article III hereof
______________________________________
Kelly K. DePonte, Depositor
Exhibit (b)
BY-LAWS
OF
THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
ARTICLE I
Agreement and Declaration of Trust and Principal Office
1.1. Agreement and Declaration of Trust. These By-Laws shall be
-------------------------------------
subject to the Agreement and Declaration of Trust, as from time to time in
effect (the "Declaration of Trust"), of the above-captioned Delaware business
trust established by the Declaration of Trust (the "Trust").
1.2. Principal Office of the Trust. The principal office of the Trust
-----------------------------
shall be located in La Jolla, California.
ARTICLE II
Meetings of Trustees
2.1. Regular Meetings. Regular meetings of the Trustees may be held
-----------------
without call or notice at such places and at such times as the Trustees from
time to time may determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees.
2.2. Special Meetings. Special meetings of the Trustees may be held at
----------------
any time and at any place designated in the call of the meeting when called by
the President or the Treasurer or by two or more Trustees, sufficient notice
thereof being given to each Trustee by the Secretary or an Assistant Secretary
or by the officer or the Trustees calling the meeting.
2.3. Notice of Special Meetings. It shall be sufficient notice to a
---------------------------
Trustee of a special meeting to send notice by mail at least forty-eight hours
or by telegram at least twenty-four hours before the meeting addressed to the
Trustee at his or her usual or last known business or residence address or to
give notice to him or her in person or by telephone at least twenty-four hours
before the meeting. Notice of a meeting need not be given to any Trustee if a
written waiver of notice, executed by him or her before or after the meeting, is
filed with the records of the meeting, or to any Trustee who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him or her. Neither notice of a meeting nor a waiver of a notice need specify
the purposes of the meeting.
2.4. Notice of Certain Actions by Consent. If in accordance with the
-------------------------------------
provisions of the Declaration of Trust any action is taken by the Trustees by a
written consent of less than all of the Trustees, then prompt notice of any such
action shall be furnished to each Trustee who did not execute such written
consent, provided that the effectiveness of such action shall not be impaired by
any delay or failure to furnish such notice.
ARTICLE III
Officers
3.1. Enumeration; Qualification. The officers of the Trust shall be a
---------------------------
President, one or more Vice Presidents, if any, that may be Executive Vice
Presidents, Senior Vice Presidents or Vice Presidents, a Treasurer, a Secretary,
and such other officers, if any, as the Trustees from time to time may in their
discretion elect. The Trust also may have such agents as the Trustees from time
to time may in their discretion appoint. Officers may be but need not be a
Trustee or shareholder. Any two or more offices may be held by the same person.
3.2. Election. The President, the Treasurer and the Secretary shall be
--------
elected by the Trustees upon the occurrence of any vacancy in any such office.
Other officers, if any, may be elected or appointed by the Trustees at any time.
Vacancies in any such other office may be filled at any time.
3.3. Tenure. The President, Treasurer and Secretary shall hold office
------
in each case until he or she sooner dies, resigns, is removed or becomes
disqualified. Each other officer shall hold office and each agent shall retain
authority at the pleasure of the Trustees.
3.4. Powers. Subject to the other provisions of these By-Laws, each
------
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as commonly are incident
to the office occupied by him or her as if the Trust were organized as a
Delaware corporation or such other duties and powers as the Trustees may from
time to time designate.
3.5. President. Unless the Trustees otherwise provide, the President
---------
shall preside at all meetings of the shareholders and of the Trustees. Unless
the Trustees otherwise provide, the President shall be the chief executive
officer.
3.6. Vice President. Each Vice President shall have such powers and
---------------
perform such duties as the Board of Trustees or the President may from time to
time prescribe.
3.7. Treasurer. The Treasurer shall be the chief financial and
---------
accounting officer of the Trust, and, subject to the provisions of the
Declaration of Trust and to any arrangement made by the Trustees with a
custodian, investment adviser or manager, or transfer, shareholder servicing or
similar agent, shall be in charge of the valuable papers, books of account and
accounting records of the Trust, and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the President.
3.8. Secretary. The Secretary shall record all proceedings of the
---------
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the secretary from any meeting of the shareholders or Trustees, an Assistant
Secretary, or if there be none or if he or she is absent, a temporary Secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.9. Resignations and Removals. Any Trustee or officer may resign at
-------------------------
any time by written instrument signed by him or her and delivered to the
President or Secretary or to a meeting of the Trustees. Such resignation shall
be effective upon receipt unless specified to be effective at some other time.
The Trustees may remove any officer elected by them with or without cause.
Except to the extent expressly provided in a written agreement with the Trust,
no Trustee or officer ------------------------- resigning and no officer removed
shall have any right to any compensation for any period following his or her
resignation or removal, or any right to damages on account of such removal.
ARTICLE IV
Committees
4.1. Appointment. The Trustees may appoint from their number an
-----------
executive committee and other committees. Except as the Trustees otherwise may
determine, any such committee may make rules for conduct of its business.
4.2. Quorum; Voting. A majority of the members of any Committee of the
--------------
Trustees shall constitute a quorum for the transaction of business, and any
action of such a Committee may be taken at a meeting by a vote of a majority of
the members present (a quorum being present).
ARTICLE V
Reports
The Trustees and officers shall render reports at the time and in the
manner required by the Declaration of Trust or any applicable law. Officers and
Committees shall render such additional reports as they may deem desirable or as
may from time to time be required by the Trustees.
ARTICLE VI
Fiscal Year
The fiscal year of the Trust shall be fixed, and shall be subject to
change, by the Board of Trustees.
ARTICLE VII
Seal
The seal of the Trust shall consist of a flat-faced die with the word
"Delaware," together with the name of the Trust and the year of its organization
cut or engraved thereon but, unless otherwise required by the Trustees, the seal
shall not be necessary to be placed on, and in its absence shall not impair the
validity of any document, instrument or other paper executed and delivered by or
on behalf of the Trust.
ARTICLE VIII
Execution of Papers
Except as the Trustees generally or in particular cases may authorize
the execution thereof in some other manner, all deeds, leases, contracts, notes
and other obligations made by the Trustees shall be signed by the President, any
Vice President, or by the Treasurer and need not bear the seal of the Trust.
ARTICLE IX
Issuance of Share Certificates
9.1. Sale of Shares. Except as otherwise determined by the Trustees,
--------------
the Trust will issue and sell for cash or securities from time to time, full and
fractional shares of its shares of beneficial interest, such shares to be issued
and sold at a price of not less than net asset value per share as from time to
time determined in accordance with the Declaration of Trust and these By-Laws
and, in the case of fractional shares, at a proportionate reduction in such
price. In the case of shares sold for securities, such securities shall be
valued in accordance with the provisions for determining value of assets of the
Trust as stated in the Declaration of Trust and these By-Laws. The officers of
the Trust are severally authorized to take all such actions as may be necessary
or desirable to carry out this Section 9.1.
9.2. Share Certificates. In lieu of issuing certificates for shares,
------------------
the Trustees or the transfer agent either may issue receipts therefor or may
keep accounts upon the books of the Trust for the record holders of such shares,
who shall in either case, for all purposes hereunder, be deemed to be the
holders of certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
The Trustees at any time may authorize the issuance of share
certificates. In that event, each shareholder shall be entitled to a certificate
stating the number of shares owned by him, in such form as shall be prescribed
from time to time by the Trustees. Such certificates shall be signed by the
President or Vice President and by the Treasurer or Assistant Treasurer. Such
signatures may be facsimile if the certificate is signed by a transfer agent, or
by a registrar, other than a Trustee, officer or employee of the Trust. In case
any officer who has signed or whose facsimile signature has been placed on such
certificate shall cease to be such officer before such certificate is issued, it
may be issued by the Trust with the same effect as if he or she were such
officer at the time of its issue.
9.3. Loss of Certificates. The Trust, or if any transfer agent is
---------------------
appointed for the Trust, the transfer agent with the approval of any two
officers of the Trust, is authorized to issue and countersign replacement
certificates for the shares of the Trust which have been lost, stolen or
destroyed subject to the deposit of a bond or other indemnity in such form and
with such security, if any, as the Trustees may require.
9.4. Discontinuance of Issuance of Certificates. The Trustees at any
------------------------------------------
time may discontinue the issuance of share certificates and by written notice to
each shareholder, may require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the ownership
of shares in the Trust.
ARTICLE X
Indemnification
10.1. Trustees, Officers, etc. To the fullest extent permitted by law,
-----------------------
the Trust shall indemnify each of its Trustees and officers (including the
directors, officers or employees of any Trustee that is not a natural person and
persons who serve at the Trust's request as directors, officers or trustees of
another person in which the Trust has any interest as a shareholder, creditor or
otherwise) (hereinafter referred to as a "Covered Person") against all
liabilities and expenses, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and counsel
fees reasonably incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil, criminal,
administrative or investigative, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such person may be or may have been
threatened, while in office or thereafter, in any way relating to the Trust or
by reason of being or having been such a Trustee or officer, except with respect
to any matter as to which such Covered Person shall have been finally
adjudicated in a decision on the merits in any such action, suit or other
proceeding not to have acted in good faith in the reasonable belief that such
Covered Person's action was in the best interests of the Trust and except that
no Covered Person shall be indemnified against any liability to the Trust or its
Shareholders to which such Covered Person would otherwise be subject by reason
of wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office. Expenses,
including counsel fees so incurred by any such Covered Person (but excluding
amounts paid in satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by the Trust in advance of the final
disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so paid by
the Trust if it is ultimately determined that indemnification of such expenses
is not authorized under this Article, provided that (a) such Covered Person
shall provide security for his undertaking, (b) the Trust shall be insured
against losses arising by reason of such Covered Person's failure to fulfill his
undertaking, or (c) a majority of the Trustees who are disinterested persons and
who are not Interested Persons (as that term is defined in the Investment
Company Act of 1940) (provided that a majority of such Trustees then in office
act on the matter), or independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts (but not a full
trial-type inquiry), that there is reason to believe such Covered Person
ultimately will be entitled to indemnification.
10.2. Compromise Payment. As to any matter disposed of (whether by a
-------------------
compromise payment, pursuant to a consent decree or otherwise) without an
adjudication in a decision on the merits by a court, or by any other body before
which the proceeding was brought, that such Covered Person either (a) did not
act in good faith in the reasonable belief that such Covered Person's action was
in the best interests of the Trust or (b) is liable to the Trust or its
Shareholders by reason of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office, indemnification shall be provided if (a) approved as in the
best interest of the Trust, after notice that it involves such indemnification,
by at least a majority of the Trustees who are disinterested persons and are not
Interested Persons (provided that a majority of such Trustees then in office act
on the matter), upon a determination, based upon a review of readily available
facts (but not a full trial-type inquiry) that such Covered Person acted in good
faith in the reasonable belief that such Covered Person's action was in the best
interests of the Trust and is not liable to the Trust or its Shareholders by
reason of wilful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's office, or (b)
there has been obtained an opinion in writing of independent legal counsel,
based upon a review of readily available facts (but not a full trial-type
inquiry) to the effect that such Covered Person appears to have acted in good
faith in the reasonable belief that such Covered Person's action was in the best
interests of the Trust and that such indemnification would not protect such
Covered Person against any liability to the Trust to which such Covered Person
would otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. Any approval pursuant to this Section shall not prevent the recovery
from any Covered Person of any amount paid to such Covered Person in accordance
with this Section as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good faith
in the reasonable belief that such Covered Person's action was in the best
interests of the Trust or to have been liable to the Trust or its shareholders
by reason of wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered Person's office.
10.3. Indemnification Not Exclusive. The right of indemnification
-------------------------------
hereby provided shall not be exclusive of or affect any other rights to which
any such Covered Person may be entitled. As used in this Article X, the term
"Covered Person" shall include such person's heirs, executors and
administrators, and a "disinterested person" is a person against whom none of
the actions, suits or other proceedings in question or another action, suit, or
other proceeding on the same or similar grounds is then or has been pending.
Nothing contained in this article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under law, nor the power of the
Trust to purchase and maintain liability insurance on behalf of such person.
10.4. Limitation. Notwithstanding any provisions in the Declaration of
----------
Trust and these By-Laws pertaining to indemnification, all such provisions are
subject to any limitations that may be required under the Investment Company Act
of 1940.
ARTICLE XI
Shareholders
11.1. Meetings. A meeting of the shareholders shall be called by the
--------
Secretary whenever ordered by the Trustees, or requested in writing by the
holder or holders of at least 10% of the outstanding shares entitled to vote at
such meeting. If the meeting is a meeting of the shareholders of one or more
series of shares, but not a meeting of all shareholders of the Trust, then only
the shareholders of such one or more series shall be entitled to notice of and
to vote at the meeting. If the Secretary, when so ordered or requested, refuses
or neglects for more than five days to call such meeting, the Trustees, or the
shareholders so requesting may, in the name of the Secretary, call the meeting
by giving notice thereof in the manner required when notice is given by the
Secretary.
11.2. Access to Shareholder List. Shareholders of record may apply to
--------------------------
the Trustees for assistance in communicating with other shareholders for the
purpose of calling a meeting in order to vote upon the question of removal of a
Trustee. When ten or more shareholders of record who have been such for at least
six months preceding the date of application and who hold in the aggregate
shares having a net asset value of at least $25,000 or at least 1% of the
outstanding shares, whichever is less, so apply, the Trustees shall within five
business days either:
(i) afford to such applicants access to a list of names and addresses
of all shareholders as recorded on the books of the Trust; or
(ii) inform such applicants of the approximate number of shareholders
of record and the approximate cost of mailing material to them and, within a
reasonable time thereafter, mail materials submitted by the applicants to all
such shareholders of record. The Trustees shall not be obligated to mail
materials which they believe to be misleading or in violation of applicable law.
11.3. Record Dates. For the purpose of determining the shareholders of
------------
any series who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to receive payment of any dividend or of any other
distribution, the Trustees from time to time may fix a time, which shall be not
more than 90 days before the date of any meeting of shareholders or the date of
payment of any dividend or of any other distribution, as the record date for
determining the shareholders of such series having the right to notice of and to
vote at such meeting and any adjournment thereof or the right to receive such
dividend or distribution, and in such case only shareholders of record on such
record date shall have such right notwithstanding any transfer of shares on the
books of the Trust after the record date; or without fixing such record date the
Trustees may for any such purposes close the register or transfer books for all
or part of such period.
11.4. Place of Meetings. All meetings of the shareholders shall be
-----------------
held at the principal office of the Trust or at such other place within the
United States as shall be designated by the Trustees or the President of the
Trust.
11.5. Notice of Meetings. A written notice of each meeting of
shareholders, stating the place, date and hour and the purposes of the meeting,
shall be given at least ten days before the meeting to each shareholder entitled
to vote thereat by leaving such notice with him or at his residence or usual
place of business or by mailing it, postage prepaid, and addressed to such
shareholder at his address as it appears in the records of the Trust. Such
notice shall be given by the Secretary or an Assistant Secretary or by an
officer designated by the Trustees. No notice of any meeting of shareholders
need be given to a shareholder if a written waiver of notice, executed before or
after the meeting by such shareholder or his attorney thereunto duly authorized,
is filed with the records of the meeting.
11.6. Ballots. No ballot shall be required for any election unless
-------
requested by a shareholder present or represented at the meeting and entitled to
vote in the election.
11.7. Proxies. Shareholders entitled to vote may vote either in person
-------
or by proxy in writing dated not more than six months before the meeting named
therein, which proxies shall be filed with the Secretary or other person
responsible to record the proceedings of the meeting before being voted. Unless
otherwise specifically limited by their terms, such proxies shall entitle the
holders thereof to vote at any adjournment of such meeting but shall not be
valid after the final adjournment of such meeting.
ARTICLE XII
Amendments to the By-Laws
These By-Laws may be amended or repealed, in whole or in part, by a
majority of the Trustees then in office at any meeting of the Trustees, or by
one or more writings signed by such a majority.
Dated: December __, 1997
Exhibit (g)(1)
MANAGEMENT AGREEMENT
AGREEMENT made this 9th day of February, 1998, by and between THE
PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND, a Delaware business trust
(hereinafter referred to as the "Fund"), and PACIFIC CORPORATE GROUP, INC., a
California corporation (hereinafter referred to as the "Management Company").
WITNESSETH:
WHEREAS, the Fund proposes to engage in business as a closed-end
management investment company registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"); and
WHEREAS, the Management Company is engaged principally in rendering
management and investment advisory services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Fund desires to retain the Management Company to provide
management and investment advisory services to the Fund in the manner and on the
terms hereinafter set forth; and
WHEREAS, the Management Company is willing to provide management and
investment advisory services to the Fund on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
ARTICLE I
DUTIES OF THE MANAGEMENT COMPANY
The Fund hereby retains the Management Company to act as the manager of
the Fund and to furnish, or arrange for its affiliates to furnish, the Fund with
the management and investment advisory services described below, subject to the
policies of, review by and overall control of, the Board of Trustees of the
Fund, for the period and on the terms and conditions set forth in this
Agreement. The Management Company hereby accepts such employment and agrees
during such period, at its own expense, to render, or arrange for the rendering
of, such services and to assume the obligations herein set forth for the
compensation provided for herein.
(a) Management Services. The Management Company shall perform the
management services necessary for the operation of the Fund. The Management
Company shall provide the Fund with office space, equipment and facilities and
such other services as the Management Company, subject to review by the Board of
Trustees, 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 Fund, conduct relations with custodians, depositories, transfer
agents, dividend disbursing agents, other shareholder servicing agents,
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 generally
monitor the Fund's compliance with investment policies and restrictions as set
forth in filings made by the Fund under the United States Federal securities
laws. The Management Company shall co-ordinate with any administrator selected
by the Trustees and shall make reports to the Board of Trustees of the
performance of its obligations hereunder and furnish advice and recommendations
with respect to such other aspects of the business and affairs of the Fund as it
shall determine to be desirable. The Management Company and each of its
affiliates shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund in any way or otherwise be deemed an
agent of the Fund, except as otherwise provided in the Fund's Declaration of
Trust.
(b) Investment Advisory Services. The Management Company shall
provide, or arrange for its affiliates to provide, the Fund with such investment
research, advice and supervision as the latter may from time to time consider
necessary for the proper supervision of the assets of the Fund. The Management
Company shall act as investment adviser to the Fund and, in such capacity, shall
exercise investment discretion on behalf of the Fund and furnish continuously an
investment program for the Fund and shall determine from time to time which
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund shall be held in the various securities in which the Fund invests or
in cash, including without limitation, selecting Indirect Investments and Direct
Investments (as such terms are defined in the Confidential Private Placement
Memorandum, as supplemented (the "PPM")) and, prior to the purchase of Indirect
Investments and Direct Investments (as such terms are defined in the PPM),
investing funds in Pre-Portfolio Investments (as such term is defined in the
PPM), subject always to the restrictions of the Declaration of Trust and the
By-Laws of the Fund, as amended from time to time, the provisions of the
Investment Company Act and the Fund's investment objective, investment policies
and investment restrictions. The Management Company shall exercise voting
rights, rights to consent to corporate action and any other rights pertaining to
the Fun s portfolio securities. Should the Trustees at any time, however, make
any definite determination as to 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 in such notice or until
similarly notified that such determination has been revoked. The Management
Company shall take, on behalf of the Fund, 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
for the Fund's account with brokers or dealers selected by it, and to that end,
the Management Company is authorized as the agent of the Fund to give
instructions to the Custodian of the Fund as to deliveries of securities and
payments of cash for the account of the Fund. In connection with the selection
of such brokers and dealers and the placing of such orders with respect to
assets of the Fund, the Management Company is directed at all times to seek to
obtain execution and prices within the policy guidelines determined by the Board
of Trustees and set forth in the PPM. Subject to this requirement and the
provisions of the Investment Company 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 Fund, is affiliated.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
(a) The Management Company. The Management Company assumes and shall
pay for maintaining the staff and personnel necessary to perform its obligations
under this Agreement and shall, at its own expense, provide the office space,
equipment and facilities which it is obligated to provide under Article I
hereof, and shall pay all compensation of officers and Trustees of the Fund who
are affiliated persons of the Management Company.
(b) The Fund. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund, including, without limitation: organizational costs,
taxes, expenses for legal and auditing services, costs of printing proxies and
shareholder reports, administrative and custodial expenses, expenses of
portfolio transactions, Securities and Exchange Commission fees, state Blue Sky
filing fees, fees and expenses with respect to borrowing, fees and actual
out-of-pocket expenses of Trustees who are not affiliated persons of the
Management Company, insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, mailing and other like expenses
properly payable by the Fund.
ARTICLE III
COMPENSATION OF THE MANAGEMENT COMPANY
For the services provided by the Management Company under this
Agreement, the Fund shall pay the Management Company a management fee (the
"Management Fee") computed at the rate of 1.25% per annum of the total capital
commitments of the Fund less any distributions of capital and realized
investment losses, payable quarterly in advance, computed as of the end of the
prior quarter. If this Agreement becomes effective for any partial period,
compensation for such partial period shall be prorated in a manner consistent
with the calculation of the Management Fee as set forth above. The Management
Fee with respect to capital commitments of shareholders participating in a
closing subsequent to the initial closing of the Fund will accrue from the date
of the Fund's initial closing, and will be payable on the date of the closing in
which such shareholder participates. The Management Fee shall be reduced by 100%
of directors' fees or other remuneration received by the Management Company or
its employees from any portfolio company of the Fund. To the extent such fees or
other remuneration exceed the quarterly management fee, the excess amount will
be credited in full against subsequent payments of such fee.
ARTICLE IV
LIMITATION OF LIABILITY OF THE MANAGEMENT COMPANY
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 execution and management of the Fund in which the Management
Company has acted in good faith, except for losses arising from willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties hereunder. As used
in this Article IV, the term "Managemen Company" shall include any affiliates of
the Management Company performing services for the Fund contemplated hereby and
directors, officers and employees of the Management Company and such affiliates.
ARTICLE V
ACTIVITIES OF THE MANAGEMENT COMPANY
The services of the Management Company to the Fund are not to be
deemed to be exclusive, the Management Company and any person controlled by or
under common control with the Management Company (for purpose of this Article V
referred to as "affiliates") being free to render services to others. It is
understood that Trustees, officers, employees and shareholders of the Fund are
or may become interested in the Management Company and its affiliates, as
directors, officers, employees and shareholders or otherwise and that directors,
officers, employees and shareholders of the Management Company and its
affiliates are or may become interested in the Fund, as Trustees, officers,
employees and shareholders, and that the Management Company and directors,
officers, employees and shareholders of its affiliates are or may become
interested in the Fund as shareholders or otherwise.
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date first above
written and shall remain in force until November 30, 1999 and will continue in
effect thereafter so long as such continuance specifically is approved at least
annually by (i) the Board of Trustees of the Fund, or by the vote of a majority
of the outstanding voting securities of the Fund, and (ii) a majority of those
Trustees 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.
This Agreement may be terminated at any time, without the payment of
any penalty, by the Board of Trustees or by the vote of a majority of the
outstanding voting securities of the Fund, or by the Management Company, on
sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
ARTICLE VII
AMENDMENTS OF THIS AGREEMENT
This Agreement may be amended by the parties only if such amendment
specifically is approved by (i) the vote of a majority of outstanding voting
securities of the Fund, and (ii) a majority of those Trustees 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.
ARTICLE VIII
DEFINITIONS OF CERTAIN TERMS
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the rules and regulations thereunder, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission under
said Act.
ARTICLE IX
GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
laws of the State of California and the applicable provisions of the Investment
Company Act. To the extent that the applicable laws of the State of California,
or any of the provisions herein, conflict with the applicable provisions of the
Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
THE PACIFIC CORPORATE GROUP
PRIVATE EQUITY FUND
By:____________________________
Name: Philip M. Posner
Title: Treasurer
PACIFIC CORPORATE GROUP, INC.
By:____________________________
Name: Christopher J. Bower
Title: President
Exhibit (g)(2)
ADMINISTRATIVE SERVICES AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT dated as of September 3, 1997 between THE
PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND, L.P., a Delaware business trust
(the "Fund"), and PALMERI FUND ADMINISTRATORS, INC., a New Jersey corporation
("PFA").
W I T N E S S E T H:
WHEREAS, the Fund desires to retain PFA to provide certain accounting and
administrative services, including, among other things, matters related to the
day-to-day administrative affairs of the Fund and the maintenance of the books
and records of the Fund and PFA desires to render such services, all upon the
terms set forth herein;
NOW, THEREFORE, in consideration of the premises and subject to the terms and
conditions set forth herein, the parties hereto agree as follows:
1. Services; Payment. In accordance with the instructions of officers of Pacific
-----------------
Corporate Group, Inc., the Adviser Trustee and management company of the Fund
(the "Manager"), PFA shall provide the following accounting and administrative
services for the Fund:
Accounting services
-------------------
o maintain the detailed books and records of the Fund in accordance with the
terms of the private placement memorandum of the Fund, its Declaration of
Trust and Generally Accepted Accounting Principals,
o compute allocations and distributions to Investors in compliance with the
Declaration of Trust,
o coordinate and supervise annual audit, including preparation of all
necessary supporting worksheets for audit review and follow-up on all
questions and requests for additional information,
o provide detailed tax schedules and coordinate and supervise independent tax
review, including preparation of detailed tax schedules and roll-up of all
tax line items,
o prepare and coordinate distribution of tax information to Investors,
including IRS K-1 Schedule and state K-1 Schedules where required,
o prepare estimated tax schedules to provide Investors with estimated tax
information by Schedule K-1 line item.
It is understood that the completion of tax estimates and final tax accounting
by PFA is dependent upon the timely receipt of information from the general
partners of each of the Fund's indirect investments. Investors of the Fund have
been notified of the probable late delivery of such tax information.
Reporting services
------------------
o prepare and distribute quarterly and annual reports to Investors in a
format consistent with the requirements of the Fund and the Advisor
Trustee,
o prepare financial reports required to be filed by the Fund with the
Securities and Exchange Commission, including reports to be filed
semi-annually on Form N-SAR
o file federal, state and local tax returns for the Fund and the Advisor
Trustee and file foreign withholding tax returns for the Fund, if required,
o prepare all internal management reports relating to the activities of the
Fund and the Advisor Trustee as requested,
o prepare reports and analyses of Fund activity to assist Advisor Trustee
with the semi-annual valuation of portfolio investments, meetings of the
Independent Trustees of the Fund and Annual Meetings of Investors, if any,
o prepare internal rate of return analysis for realized and unrealized
investments as requested.
Administrative services
-----------------------
o coordinate relationships with professionals, including such custodian and
independent certified public accountants as are approved by the Independent
Trustees of the Trust,
o coordinate cash and in-kind distributions to Investors,
o coordinate direct deposit of distributions for Investors having Merrill
Lynch and DLJ accounts, as requested,
o provide for the collection of withholding tax due from foreign investors,
o assist outside legal counsel with completion and filing of SEC Rule 144
Forms, Form 3, Form 4, Form 5, Schedule 13D, Schedule 13G and all other
section 16 reporting forms or schedules as required,
o maintain Investor data files necessary for distribution of reports,
preparation of tax information and payment of cash and in-kind
distributions,
o coordinate and process transfers and assignments of ownership of Investor
interest when required,
o send copies of Investor reports to each Investor's representative financial
consultant, as requested,
o provide Merrill Lynch and DLJ with the Fund's net asset value per share, on
a semi-annual basis, if required for customer statements,
o provide timely response to Investors' inquiries and requests for additional
information; only after review by the Advisor Trustee or the Manager, as
appropriate,
o maintain income and expense detail by investment,
The Manager will manage a portfolio of short-term securities for the Fund, for
which PFA will not have responsibility.
For the services to be provided by PFA pursuant to this Agreement, the Fund will
pay to PFA the following:
Regular Fee
- -----------
For all services as provided above - flat annual fee to be paid quarterly in
advance, on the first day of each calendar quarter as follows:
Capital Commitments Annual Fee
------------------- ----------
up to $150 million $75,000
greater than $150 million, less than $200 million $80,000
more than $200 million $85,000
o regular fee will begin on the date on which initial capital contributions
are made to the Fund,
o regular fee will be increased 4% on each January 1 beginning January 1,
1999,
o other reasonable out-of-pocket expenses to be reimbursed quarterly
including fees and expenses for express mail, postage, messengers and other
delivery fees,
o the Fund will pay the costs of reproducing and mailing its own financial
and tax reports, letterhead, envelopes and other supplies.
One-Time Set-Up Fee
- -------------------
The one-time set-up fee will cover the following:
o development of the Investor data base,
o data collection and data input,
o coordination of subscription approval process and payment of initial
capital contribution into escrow,
o calculation of escrow interest amounts to Investors,
o coordination of payment of escrow interest by outside custodian,
o track sales by state for Blue Sky compliance,
o all other ministerial functions required in connection with the
subscription process.
The minimum set-up fee is payable on the first day of the month following the
date on which initial capital contributions are made to the Fund as follows:
Number of Investors Set-Up Fee
------------------- ----------
up to 400 Investors $20,000
greater than 400 Investors, less than 600 Investors $25,000
more than 600 Investors $30,000
The remaining set-up fee, if any, is payable upon the final closing of the
Fund's subscription period.
2. Information. In its performance of the services set forth in Section 1 above,
-----------
PFA will be entitled to rely on information provided by the officers of the
Manager. PFA shall have no duty to provide such information or to make an
independent investigation as to any information so provided to determine the
facts necessary for the provision of such services, including without
limitation, information with regard to financial activities, valuations of
venture capital and other investments and all other underlying facts as may be
required for the preparation of reports.
PFA shall deliver to the Fund and its counsel and auditors, for their review and
approval and, if applicable, signature, copies of all quarterly reports, all
annual reports, all tax returns and all tax information of the Fund. The Manager
acknowledges that such materials are based on information to be furnished to PFA
by the Manager, and the timing of the receipt of this information by PFA, and
the completeness of such information will determine when PFA can deliver such
materials to the Fund.
The Manager shall use its best efforts to deliver to PFA, on a timely basis, all
information reasonably necessary to enable PFA to provide the services
contemplated to be performed by it under this Agreement on a timely and
efficient basis. All of the books and records maintained by PFA pursuant to this
Agreement shall be the property of the Fund. PFA shall maintain a magnetic disk
containing a backup copy of all accounting records of the Fund at an off site
location. Such disk will be updated on a quarterly basis. A copy of such backup
disk will be provided to the Fund at any time upon request.
Any information relating to, or derived from the Manager, the Fund or any
portfolio company of the Fund including, without limitation, methods, computer
or data systems, financial data, clients, and business operations, shall be
treated as confidential and shall not be disclosed by PFA, except as may be
required by its duties hereunder or as may be required by law; provided that
PFA's duty of confidentiality will not apply to information that becomes part of
the public domain through no fault of PFA or that PFA received from a person
unrelated to the Fund or any of its portfolio companies or for which PFA
provides services and who does not violate a duty to the Manager or the Fund or
a portfolio company of the Fund in disclosing such information. All materials
supplied to PFA by the Manager, the Fund or any portfolio company of the Fund,
or obtained by PFA from the Manager, the Fund or any portfolio company of the
Fund, will remain the property of the Fund while in PFA's possession (which PFA
will hold for safe-keeping) and will be returned to the Fund, together with all
copies thereof, upon request or upon the termination of this Agreement,
whichever occurs sooner.
The Manager will provide, on a timely basis, the following information with
regard to the Fund to PFA:
o copies of all cash disbursements made including check and vendor invoice,
o copies of all cash receipts collected including check and supporting
documentation,
o copies of all bank statements to be sent to PFA directly from bank or faxed
by Manager,
o copies of trade tickets for all purchases and sales of short-term
investments or investments in public securities,
o copies of supporting documentation related to purchase of private
investments including copies of share certificates, bridge loan agreements,
warrant agreements, promissory and demand notes and a term sheet or
appropriate pages of purchase agreement indicating the financial terms of
the transaction,
o Manager's letter to Investors and portfolio company current status report,
for inclusion with the quarterly and annual financial reports to Investors,
o recommended portfolio valuation changes for each accounting period
required.
3. Indemnity.
---------
a) The Fund by its signature at the bottom of this Agreement hereby
indemnifies and holds harmless PFA, its officers, directors and shareholders
(the "Indemnified Persons"), against all losses, damages and out-of-pocket third
party expenses, including reasonable attorneys' fees, incurred as a result of or
related to the breach of the Fund's obligations hereunder and/or related to
claims of third persons against the Indemnified Persons concerning the services
rendered by PFA hereunder, except for claims resulting from the negligence or
misconduct of PFA; provided, however, nothing herein (i) shall limit the right
of the Fund to claim remedy from PFA in connection with any breach of PFA's
obligations hereunder, or (ii) shall require the Fund to indemnify or hold
harmless any Indemnified Person with respect to any claims resulting from the
negligence or misconduct of PFA.
b) Whenever any claim shall arise for indemnification hereunder, PFA
shall promptly notify the Manager of the claim and, when known, the facts
constituting the basis for such claim. The notice to the Manager shall specify,
if known, the amount or an estimate of the amount of the liability arising
therefrom. The Indemnified Persons shall not settle or compromise any claim by a
third party for which they are entitled to indemnification hereunder without the
prior written consent of the Manager, which shall not be unreasonably withheld
or delayed by the Manager, unless suit shall have been instituted against the
Indemnified Persons and the Manager shall not have taken control of the defense
of such suit after notification thereof, as provided below.
c) In connection with any claim for indemnity hereunder resulting from
or arising out of any claim or proceeding by a person who is not a party to this
Agreement, the Fund or the Manager, at its sole cost and expense may, upon
written notice to PFA, assume the defense of such claim or proceeding with
counsel reasonably satisfactory to PFA. The Indemnified Persons shall be
entitled to participate in (but not control) the defense of such claim or
proceeding with their counsel and at their own expense.
4. Term and Termination. This agreement will become effective upon the date
---------------------
first herein written and will continue in effect until terminated by the Fund
with 90 days written notice and will automatically terminate upon the
termination of the management agreements between the Manager and the Fund (if
the Manager receives such notice from the Fund, the Manager shall immediately
notify PFA of the same). This agreement can be terminated by PFA for failure by
the Manager to make a payment hereunder to PFA for a period of 30 days after the
same is due and payable. Upon termination, amounts prepaid, if any, from the
date of termination to the end of the prepaid period, will be reimbursed from
PFA to the Manager or the Fund.
5. General.
-------
Governing Law. This Agreement shall be deemed to have been made in the
--------------
State of New York, and its enforcement, execution, validity, construction,
performance and effect shall be determined in accordance with the laws of the
State of New York without regard to conflicts of law provisions.
Disputes. Any dispute hereunder shall be heard only in the Federal and
--------
State courts sitting in the City, County and State of New York. Each party
submits itself to the personal jurisdiction of such courts. Service of process
shall be made by personal delivery to a party and to its counsel at their
respective addresses, marked to the attention of the persons designated, for
such party as set forth below with respect to the giving of notice under this
Agreement. The party prevailing in such dispute shall be entitled to be
reimbursed for its reasonable legal fees and expenses by the party not
prevailing.
Assignment. This Agreement shall be binding upon and inure to the benefit
----------
of the parties, their legal representatives and permitted assigns. Neither the
Fund nor PFA shall assign this Agreement to any person, except that PFA may
assign this Agreement to the successor to all or the substantial part of its
business.
Force Majeure. If the performance of any part of this Agreement by either
-------------
party, or of any obligation under this Agreement (except an obligation to make a
payment) is prevented, restricted, interfered with or delayed by reason of any
cause beyond the reasonable control of the party liable to perform, such as from
fire, earthquake, insurrection or riot, the party so affected shall, upon giving
notice to the other party, not be deemed to be in breach of such performance or
obligation to the extent of such prevention, restriction, interference or delay,
provided that the affected party shall continue to use its reasonable best
efforts to avoid or remove such causes of nonperformance and shall continue
performance with the utmost dispatch whenever such causes are removed.
Notice. Any notice required or permitted under this Agreement shall be
------
given in writing and shall be deemed given upon delivery to a party, or on the
first attempted date of delivery to a party after being sent by express carrier
to the following addresses of the parties:
If to PFA: Palmeri Fund Administrators, Inc.
700 Godwin Avenue, Suite 110
Midland Park, NJ 07432
Attn: Frank J. Palmeri, President
with a copy to: Hollenberg Levin Solomon Ross Belsky & Daniels
585 Stewart Avenue
Garden City, NY 11530
Attn: Stuart M. Sieger, Esq.
If to the Fund: The Pacific Corporate Group Private Equity Fund
c/o Pacific Corporate Advisors, Inc.
1200 Prospect Street, Suite 200
La Jolla, California 92037
Attn: Kelly K. DePonte
with copies to: Brown & Wood LLP
One World Trade Center
New York, New York 10048
Attn: John A. MacKinnon, Esq.
Any party may change the address to which notice is to be given to it by giving
notice hereunder of such other address.
Non-Waiver. Any failure by either party to enforce any term or condition of
----------
this Agreement shall not constitute a waiver by such party of the particular
term or condition. Such a failure to enforce a term or condition shall not
affect or impair the right of such party to enforce the particular term or
condition at any other time.
Representations. Each party represents and warrants that it has the right
---------------
to enter into this Agreement and to perform all of its obligations hereunder and
that the execution of this Agreement and the performance by it of its
obligations hereunder will not result in any breach, violation or default under
any indenture, lease, license, mortgage, loan, or any other agreement,
instrument or understanding, law, governmental rule or regulation, court order
or decree of any kind, to which it, or any of its property, is or may be
subject.
Independent Contractors. Each party is an independent contractor as to the
-----------------------
other party. Neither party shall be the agent of the other party for any purpose
whatsoever, and shall not have any right or authority to make or underwrite any
promise, warranty or representation, to execute any contract or otherwise to
assume any obligation or responsibility in the name of or on behalf of the other
party.
Headings. All section and sub-section headings contained in this Agreement
--------
are for convenience of reference only, do not form a party of this Agreement and
shall not effect in any way the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties by their duly empowered officers, have
executed this Agreement as of the day and the year first above written.
Palmeri Fund Administrators, Inc. Private Equity Fund
By: Pacific Corporate Group,
Inc., Adviser Trustee
By:______________________________ By:___________________________
Frank J. Palmeri Christopher J. Bower
President President
Exhibit (j)
AMENDED AND RESTATED CUSTODIAN AGREEMENT
THIS AGREEMENT, made as of January 29, 1998 between The Pacific
Corporate Group Private Equity Fund (hereinafter referred to as "the Fund"), and
Citibank, a New York banking corporation having its principal place of business
at 120 Broadway, New York, New York (hereinafter referred to as "Citibank").
WITNESSETH
WHEREAS, the Fund is an investment company registered under the
Investment Company Act of 1940, and Citibank is a bank having the qualifications
prescribed by the Act to permit the Fund to place and maintain its securities
and similar investments in the custody of Citibank;
AND WHEREAS, the Fund desires Citibank to act as Custodian of the
assets of the Fund and to hold an administer the cash and securities of the Fund
upon the terms and subject to the conditions of this Agreement;
AND WHEREAS, Citibank is prepared to act as Custodian of the assets of
the Fund and to hold and administer the cash and securities of the Fund upon
such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Fund and Citibank agree as follows:
1. Appointment of Citibank as Custodian of the Assets of the Fund.
--------------------------------------------------------------
The Fund hereby appoints Citibank to hold in its sole custody all the
cash and securities of the Fund, upon the terms and subject to the conditions
hereafter set forth, and Citibank hereby accepts such appointment upon such
terms and subject to such conditions.
2. Construction of Agreement.
-------------------------
(1) Any reference in this Agreement to a person or thing in the
singular shall, where the context requires, be construed as a reference to such
persons or things in the plural, and vice versa.
(2) Any reference in this Agreement to a person or thing in the
singular shall, where the context requires, be construed as a reference to the
feminine or neuter gender.
3. Interpretation of Agreement.
---------------------------
In this Agreement -
(a) the expression "the Board" means the Board of Trustees of the
Fund; and, in the event that as Executive Committee of the Board has been
appointed, any reference to the Board includes a reference to the Executive
Committee;
(b) the expression "capital shares" means shares of the capital stock
of the Fund;
(c) the expression "officers' instruction" means an instruction,
direction or authorization in writing signed in the name of the Fund by any two
of the following persons, namely, Chairman of the Board, the President, any Vice
President, the Secretary or the Treasurer of the Fund, and any one of the
aforesaid persons and any other person duly authorized by the Board to sign
officers' instructions; provided, however that all officers' instructions shall
include the signature of the President of the Fund in the case of (i) a payment
permitted under the terms of paragraphs (d), (e), (f), (g) and (h) of subsection
(2) of Section 4, and (ii) a transfer, exchange or delivery of securities
permitted under the terms of paragraphs (h), (i) and (k) of subsection (1) of
Section 6;
(d) the expression "security" has the same meaning as that given to it
in the Investment Company Act of 1940, as amended;
(e) the expression "the Transfer Agent" means such bank, corporation
or other entity as is for the time being duly appointed by the Fund to act as
transfer agent and dividend disbursing agent for the Fund;
(f) the expression "designated broker" shall mean any brokerage firm
which is stated to be a designated broker in any officers' instruction furnished
by the fund to Citibank from time to time.
4. Receipt and Disbursement of Monies by Citibank.
----------------------------------------------
(1) Citibank shall open and maintain a separate account or accounts in
the name of the Fund, subject only to draft or order by Citibank acting pursuant
to the provisions of this Agreement. Citibank shall hold in such account or
accounts, subject to the provisions of this Agreement, all cash received by it
from or for the account of the Fund.
(2) Citibank shall make payments of cash received for the account of
the Fund (insofar as cash is available for the purpose) only -
(a) upon the purchase of securities for the account of the Fund and
the delivery of such securities to Citibank, or to any other bank, banking firm
or trust company doing business in the United States and, with concurrence of
the Fund, designated by Citibank as its agent, registered in the name of the
Fund, or in the name of a nominee of Citibank referred to in Subsection (1) of
Section 9 of this Agreement, or in proper form for transfer; provided, however
that the provisions of this paragraph (a) shall be applicable to the purchase by
the Fund through designated brokers.
(b) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Fund held by, or to be
delivered to, Citibank;
(c) for expenses of Citibank in handling securities for, or on behalf
of, the Fund, including the amount of stamp or transfer taxes payable by the
Fund in respect of a security transaction, and other similar items connected
with matters falling within the purview of this Agreement, including the
reimbursement of Citibank for its disbursements and out-of-pocket expenses
incurred by Citibank in the performance of its duties under this Agreement;
(d) for the payment of interest, taxes, management or supervisory fees
or operating expenses of the Fund (including, without limitation thereto, fees
for custodian, transfer agency, legal, and auditing services and directors'
compensation), or for the transfer of funds to an account or accounts in the
name of the Fund in a qualified bank or banks for the purpose of paying
operating expenses, provided that such transfer or transfers shall be made only
upon receipt by Citibank of an officers' instruction stating that the account or
accounts is or are, as the case may be, to be used for paying operating expenses
of the Fund and stating that the aggregate amount in all such accounts does not
exceed the amount of the Fund's Fidelity Bond (pursuant to Section 17(g) of the
Investment Company Act of 1940, as amended), covering the officers and employees
authorized to draw on such account or accounts;
(e) for the payment of cash dividends and other distributions to
shareholders of the Fund;
(f) for the purchase of capital shares by the Fund;
(g) for the payment of any principal on any indebtedness of the Fund.
(h) for other proper corporate purposes of the Fund; or
(i) upon the termination of this Agreement as set forth in Section 25
of this Agreement.
(3) Before making any payment under subsection(s) of this Section,
Citibank -
(a) shall, in the case of a payment permitted under the terms of
paragraphs (a), (b), (d) or (g) of subsection (2) of this Section, have received
(and may rely on) an officers' instruction directing such payment and setting
forth the purpose for which such payment is to be made;
(b) shall, in the case of a payment permitted under the terms of
paragraph (e) or paragraph (f) of subsection (2) of this Section, have received
(and may rely on) an officers' instruction specifying that the payment is in
respect of a cash dividend or other distribution to shareholders of the Fund
duly declared by the Board or, as the case may be, is in respect of the purchase
of capital shares by the Fund duly authorized by the Board, and designating the
commercial account or accounts into which the amount of such payments are to be
deposited by Citibank for subsequent withdrawal by the Fund or the Transfer
Agent; and
(c) shall, in the case of a payment for corporate purposes permitted
under the terms of paragraph (1) of subsection (2) of this Section, have
received (and may rely on) a copy of a resolution of the Board signed by an
officer of the Fund (other than the officer certifying such resolution) and
certified by the Secretary or an Assistant Secretary of the Fund under its
corporate seal, specifying the amount of such payment, setting forth the purpose
for which such payment is to be made, declaring such purpose to be a proper
corporate purpose of the Fund, and naming the persons or persons to whom such
payment is to be made.
(4) Citibank shall have no responsibility with respect to supervising
or policing the disbursement of monies paid by Citibank into a commercial
account or accounts pursuant to paragraph (e), or paragraph (f) of subsection
(2) of this Section read with paragraph (b) of subsection (3) of this Section.
(5) No officers' instruction shall be required to be received by
Citibank from the Fund in the case of a payment permitted under paragraph (c) of
subsection (2) of this Section.
(6) Citibank is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received by Citibank for the
account of the Fund.
5. Custody of Securities by Citibank.
---------------------------------
(1) Citibank shall hold in a separate account, and physically
segregated at all times from the accounts of any other persons, firms or
corporations, pursuant to the provisions of this Agreement, all securities
received by it from or for the account of the Fund, except as provided in
subparagraph 9 hereof.
(2) All securities and other property or evidences thereof held by
Citibank under this Section are to be held or disposed of by Citibank for the
Fund pursuant to the provisions of this Agreement, and Citibank shall have no
power or authority to assign, hypothecate, pledge or otherwise dispose of any
such securities and other property or evidences thereof except pursuant to the
directions of the Fund and only for the account of the Fund as set forth in
Section 6 of this Agreement.
(3) Citibank shall use its best efforts to ensure that the specific
securities held by it hereunder are at all times identifiable in its records.
(4) Anything to the contrary in this Section 5 notwithstanding,
Citibank may (i) include any or all of the securities in a system whereby
Citibank files securities by issuer rather than by account, or (ii) subject to
the provisions of Section 17(f) of the Investment Company Act of 1940, as
amended, and any rules which may be promulgated thereunder, utilize the
depository facilities of any system for the central handling of securities
established by a national securities exchange or a national securities
association registered with the Securities and Exchange Commission under the
Securities Act of 1934, as amended, or such other persons as may be permitted by
the Securities and Exchange Commission. Citibank shall be entitled to rely upon
officer's instructions as certification that such filing of securities by issuer
or the utilization of such depository facilities is not in any way inconsistent
with the Fund's charter, By-Laws or with any law, rule or regulation which may
be applicable.
6. Transfer, Exchange, Delivery, etc. of Securities by Citibank.
------------------------------------------------------------
(1) Citibank shall have sole power to release or deliver any
securities owned by the Fund and held by Citibank for the account of the Fund
pursuant to the provisions of this Agreement. Citibank agrees to transfer,
exchange or deliver such securities held by it for the account of the Fund only
- -
(a) upon sales of such securities for the account of the Fund and
receipt by Citibank of payment therefor or of a check in payment therefor in
such form as it is satisfactory to Citibank;
(b) when such securities are called, redeemed or retired 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 and
cash, pursuant to any plan or merger, consolidation, reorganization,
recapitalization or readjustment, or for deposit with a reorganization committee
or protective committee pursuant to a deposit agreement;
(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;
(g) upon surrender of warrants, rights or similar securities in the
exercise of such warrants, rights or similar securities;
(h) as collateral on borrowing effected by the Fund;
(i) as a complete or partial redemption in kind of capital shares;
(j) upon sales of securities for the account of the Fund and receipt
by Citibank of payment therefor, including upon sales by the Fund through
designated brokers of put and/or call options written by persons other than the
Fund, combinations thereof and similar options issued by the Options Clearing
Corporation or any similar clearing corporation, in which event Citibank will
deliver any non-negotiable certificates (against receipt for such certificates)
issued by the Options Clearing Corporation, or any similar clearing corporation;
(k) for other proper corporate purposes of the Fund; or
(l) upon the termination of this Agreement as set forth in Section 25
of this Agreement.
(2) All certificates, evidences of receipt and all securities, cash or
other property receivable in exchange for securities delivered pursuant to the
provisions of this Agreement shall be delivered to Citibank or to its agent as
set forth above.
(3) Except as provided in Section 8 of this Agreement, before making
any transfer, exchange or delivery of securities under subsection (1) of this
Section, Citibank -
(a) shall, in the case of a transfer, exchange or delivery permitted
under the terms of paragraph (a), (b) (except as to securities which are
unconditionally and pursuant to their terms called, redeemed or retired or
otherwise become payable), (c), (d), (e), (f), (g), (h), (i), or (j), of
subsection (1) of this Section, have received (and may rely on) an officers'
instruction directing such transfer, exchange or delivery;
(b) shall in the case of a transfer or delivery permitted under the
terms of paragraph (i) of subsection (1) of this Section, have received (and may
rely on) an officers instruction directing the transfer or delivery of the
securities to be utilized for the redemption of shares, specifying the person or
persons to whom the transfer or delivery is to be made in respect of the
complete or, as the case may be, partial, redemption in kind of capital shares;
and
(c) shall, in the case of a transfer, exchange or delivery permitted
under the terms of paragraph (a) of subsection (1) of this Section, have
received (and may rely on) a copy of a resolution of the Board, signed by an
officer of the Fund (other than the officer certifying such resolution) and
certified by the Secretary or an Assistant Secretary of the Fund, under its
corporate seal, specifying the securities to be transferred, exchanged or
delivered, setting forth the purpose for which such transfer, exchange or
delivery is to be made, declaring such purpose to be a proper corporate purpose
of the Fund, and naming the persons or persons to whom delivery of such
securities shall be made, each of whom shall be stated in such resolution to be
a properly bonded officer or employee of the Fund.
(4) Citibank shall not deliver any of the assets of the Fund against
receipt of cash to any one or more of the directors, officers, employees or
agents of the Fund except as directed by an officers' instruction accompanied by
a resolution of the Board signed, certified and in form and substance similar to
a resolution required pursuant to paragraph (c) of subsection (3) of this
Section.
7. Reorganization, Dissolution etc. of the Fund.
--------------------------------------------
(1) In the case of any of the following transactions, not in the
ordinary course of business, namely -
(a) the merger or consolidation of the Fund with or into another
investment company; or
(b) the sale by the Fund of all, or substantially all, of its assets
to another investment company; or
(c) the dissolution or liquidation of the Fund and the distribution of
its assets, then in any such case Citibank shall deliver the securities held by
it under this Agreement, and disburse cash, only upon receipt of an officers'
instruction together with advice of counsel satisfactory to Citibank (who may be
counsel for the Fund) to the effect that all necessary corporate action therefor
has been taken or, concurrently with any action by Citibank, will be taken.
(2) In none of the circumstances specified in subsection (1) of this
Section shall Citibank, acting as Custodian under this Agreement, be deemed or
taken to be the agent of the Fund for the purposes of any merger, consolidation,
complete or substantial sale of assets, dissolution, liquidation or other
reorganization.
8. Matters where Citibank is to act without Specific Instructions.
--------------------------------------------------------------
(1) Unless and until Citibank receives an officers' instruction to the
contrary, Citibank shall, without instructions from the Fund -
(a) present for payment all securities held pursuant to the provisions
of this Agreement, which are unconditionally and, pursuant to their terms,
called, redeemed or retired or otherwise become payable, and all coupons and
other income items held pursuant to the provisions of this Agreement which call
for payment upon presentation, collect and receive payment on any and all other
income items, and hold the cash received by it upon such payment for the account
of the Fund;
(b) receive and hold for the account of the Fund all stock dividends,
rights and similar securities issued with respect to any securities held
pursuant to the provisions of this Agreement;
(c) execute as agent on behalf of the Fund such ownership and other
certificates as may be 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 in respect of securities held pursuant to the
provisions of this Agreement, inserting the Fund's name on such certificates as
the owner of the securities covered thereby, to the extent it may lawfully do
so; and
(d) exchange interim receipts or temporary securities for definitive
securities.
(2) With respect to securities of foreign issue, while Citibank will
use commercially reasonable efforts to collect any monies which may to its
knowledge become collectible arising from such securities, including dividends,
interest and other income, and to notify the Fund of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such securities, it is understood that Citibank 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.
(3) Citibank 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. Citibank will, however, notify the Fund in writing of
such default and refusal to pay.
9. Registration of Securities.
--------------------------
(1) Except as otherwise directed by an officers' instruction, Citibank
shall cause all securities held by it for the account of the Fund pursuant to
the provisions of this Agreement, except such as are in bearer form, to be
registered in the name of the Fund or of a registered nominee of Citibank, which
shall be a registered nominee as defined in the Internal Revenue Code and any
Regulations of the United States Treasury Department issued thereunder, or in
any provision of any subsequent federal law exempting nominee registration from
liability for stock transfer taxes, and shall execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or by the laws of any State.
(2) The Fund shall from time to time furnish to Citibank appropriate
instruments to enable Citibank to hold or deliver in proper form for transfer,
or to register in the name of a registered nominee of Citibank, any securities
which Citibank may hold for the account of the Fund pursuant to the provisions
of this Agreement and which may from time to time be registered in the name of
the Fund.
10. Voting of Securities; Proxies.
-----------------------------
(1) Neither Citibank nor any nominee of Citibank shall vote any of the
securities held by Citibank for the account of the Fund pursuant to the
provisions of this Agreement, except in accordance with instructions contained
in an officers' instruction.
(2) Citibank shall deliver, or cause to be executed and delivered, to
the Fund all notices of meetings, proxies and proxy solicitation material which
related to such securities, such proxies to be executed by the registered holder
of such securities (if registered otherwise than in the name of the Fund), but
without indicating the manner in which such proxies are to be voted. The Fund
understands that in regard to any foreign (i.e., non-U.S.) securities, it may be
difficult or impossible to provide the Fund with a proxy in a timely manner, and
the Fund relieves Citibank of such responsibility in such event.
11. Communications regarding Securities.
-----------------------------------
In any case where Citibank or its nominee receives any communication
containing financial information or other information of material importance to
security holders in respect of or relating to the securities held by Citibank
for the account of the Fund pursuant to the provisions of this Agreement (other
than notices of meeting, proxies and proxy solicitation material referred to in
Section 10 of this Agreement), Citibank shall forthwith deliver such
communication to the Fund.
12. Certificates in respect of Exempt Transfer.
------------------------------------------
Citibank shall execute and deliver such certificates in connection
with securities delivered to it or by it pursuant to any provision of this
Agreement as may be required under the provisions of the Internal Revenue Code
and any Regulations of the United States Treasury Department issued thereunder,
or by the laws of any State, now or hereafter in effect, to exempt from transfer
tax exemptable transfer and/or deliveries of any such securities and to deliver
upon instructions of the Fund such certificates as may be so required by the
laws of foreign jurisdictions.
13. Resolutions and Names of Officers and Persons Authorized to act for
----------------------------------------------------------------------
the Fund.
- --------
(1) The Fund shall furnish to Citibank a certified copy of resolutions
adopted by the Board authorizing the execution, delivery and performance of this
Agreement by the Fund and a copy of each resolution adopted by the Board
designating the persons authorized to sign officers' instructions on behalf of
the Fund, in each case certified by the Secretary or an Assistant Secretary of
the Fund under its corporate seal.
(2) The Fund shall also furnish to Citibank a certificate, similarly
certified and sealed, of the specimen signatures of persons authorized to sign
officers' instructions, the names of its Directors and members of the Executive
Committee of the Board (if any) and the names and titles of its officers and a
similar certification of any changes which may occur from time to time.
(3) In the event that any person named in the most recent
certification furnished to Citibank pursuant to sub-section (1) of this Section
ceases to be an officer of the Fund or as the case may be, another persons
authorized to sign officers' instructions, the Fund will furnish Citibank with
an officers' instruction advising it to that effect. In the absence of such an
officers' instruction Citibank shall be entitled to rely, as aforesaid, upon the
signatures of all officers and other persons named in such mot recent
certification.
14. Care and Diligence of the Bank.
------------------------------
Citibank represents and warrants that its officers and supervisory
personnel charged with carrying out its functions as Custodian of the assets of
the Fund will exercise the same skill with respect to such assets as they
exercise with respect to the property of Citibank of a similar character.
Citibank shall at all times exercise reasonable care and diligence in the
performance of its functions as custodian of the assets of the Fund.
15. Indemnification, etc.
---------------------
(1) The Fund shall fully indemnify and save harmless Citibank and its
nominee from any and all loss, liability or expense, including reasonable
counsel fees, arising out of its actions as Custodian of the assets of the Fund
pursuant to the provisions of this Agreement, other than loss, liability or
expense arising out of Citibank's gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
(2) Citibank agrees that, upon receipt of securities to be held by it
for the account of the Fund pursuant to the provisions of this Agreement, and
upon issuing its non-negotiable advice of receipt therefor, it assumes full
responsibility for exercising the skill, reasonable care and diligence described
in Section 14 of this Agreement with respect to the safekeeping thereof while
such securities are in the actual possession of Citibank, its officers or
employees. Citibank agrees that it will give such securities the same physical
care and safeguards as are afforded similar property owned by it.
16. Reliance of Citibank on Opinions, Instructions, etc.
---------------------------------------------------
(1) Citibank may consult with counsel, who may be counsel for the
Fund, in any case where it appears to Citibank necessary or desirable to do so.
Citibank may rely upon, and shall be protected in acting upon, written advice of
counsel for the Fund or of Citibank's outside general counsel. The Fund shall in
all events bear liability for the fees and disbursements of such counsel.
(2) Citibank may rely and act upon any officers' instruction, or other
instrument or paper believed by Citibank to be genuine and to have been signed
by any person thereunto duly authorized, where such documents are received from
or signed by or on behalf of the Fund or any officer or authorized employee of
the Fund. In any other case, Citibank may rely and act upon any direction,
instruction, certification, authorization or other instrument believed by
Citibank to be genuine or to have been signed by any person thereunto duly
authorized, where Citibank has exercised due care and diligence and has not been
guilty of any misconduct.
17. Responsibility for Compliance with the Fund's Investment Policies, etc
----------------------------------------------------------------------
(1) Citibank shall have no powers or duties with respect to ensuring
compliance by the Fund with any restrictions on the Fund's Investment powers or
policies imposed by law or contained in its Declaration of Trust, By-Laws,
Registration Statements or any amendments thereto or in its prospectus or
elsewhere. The sole responsibility for such compliance shall be borne by the
Fund.
(2) Citibank 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 Fund are such as may properly be held by the Fund under the provisions of
its Declaration of Trust or of its By-Laws, or under any provision of Federal or
State law or statute or of any rule, regulation or order of any Federal or State
agency.
(3) Citibank shall be under no duty or obligation to inquire into and
shall not be liable for
(a) the validity of the issue of any securities purchased by or for
the Fund, the legality of the purchase thereof, or the property of the amount
paid therefor;
(b) the legality of any sale of any securities by or for the Fund or
the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any capital shares or the
sufficiency of the amount to be paid thereof;
(d) the legality of the purchase of any capital shares or the
propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the Fund or the
legality of the issues of any securities held by the Fund as a payment in kind
of such dividend;
(f) any property or monies of the Fund unless and until received by
it, and any such property or monies delivered or paid by it pursuant to terms of
this Agreement.
18. Compensation of Citibank.
------------------------
(1) shall pay Citibank for its services rendered pursuant to the
provisions of this Agreement such compensation as may from time to time be
agreed upon in writing by the Fund and Citibank.
(2) The Fund shall pay or reimburse Citibank from time to time -
(a) for any transfer taxes payable upon transfers or securities made
under any provision of this Agreement; and
(b) for all other necessary and proper disbursements and third party
payments or expenses made or incurred by Citibank or its nominee in the
performance of its functions under any provision of this Agreement.
19. Reports by Citibank.
-------------------
Citibank shall, as soon as practicable after the close of each
business day, furnish to the Fund such advice on transactions and entries for
the account of the Fund occurring on that day as may be mutually agreed upon
from time to time between the Fund and Citibank. Citibank shall also furnish to
the Fund, at the end of each month of the Fund's fiscal year, a list of the
securities held by Citibank for the account of the Fund pursuant to the
provisions of this Agreement and, at the expense of the Fund, such additional
lists of securities held by Citibank as may be directed by an officers'
instructions.
20. Preservation of Records by the Bank.
-----------------------------------
The Bank shall preserve, for the periods and in the manner prescribed
by Rule 31a-2 of the Investment Company Act of 1940 (the "1940 Act") any records
as are required to be maintained by the provisions of Rule 31a-1 of the 1940 Act
pertaining to the account or accounts of the Fund maintained by Citibank
pursuant to this Agreement.
21. Access to Securities and Records.
--------------------------------
Citibank agrees to provide access from time to time to the portfolio
securities held by Citibank for the account of the Fund pursuant to the
provisions of this Agreement, or in an account for safekeeping as collateral
under subsection (2) of Section 5 of this Agreement, and to the records
maintained by Citibank in connection therewith, to such of the Fund's authorized
officers, auditors and counsel or members of the staff of the Securities and
Exchange Commission, as the Fund may request in writing upon reasonable notice
for any proper corporate purpose, subject in each case to such physical security
requirements as Citibank may consider necessary or advisable.
22. Communications.
--------------
All communications between the Fund and the Bank shall be addressed as
follows until such time as either party is notified by the other party of a
change in its address for the purpose of this Section, namely
To Fund The Pacific Corporate Group Private Equity Fund
c/o Pacific Corporate Group
1200 Prospect Street
Suite 200
La Jolla, CA 92037
Attn: Philip Posner - Chief Financial Officer
To Citibank Citibank
120 Broadway
New York, NY 10271
Suite 200
Attn: Barry Morris or Tom Ryan
23. Assignment of Agreement.
-----------------------
This Agreement may not be assigned by Citibank without the consent of
the Fund, authorized and approved by a resolution of the Board, or by the Fund
without the consent of Citibank.
24. Initial Delivery of Securities by the Fund.
------------------------------------------
The Fund will forthwith cause to be delivered to Citibank all of its
portfolio securities and cash.
25. Termination of Agreement.
------------------------
(1) This Agreement may be terminated by the Fund, or by Citibank, on
sixty days' written notice, signed by the President or any Vice President of the
Fund or, as the case may be, by the President or any Vice President of Citibank,
and sent by registered mail to Citibank or to the Fund, as the case may require.
Termination of this Agreement by the Fund shall be made only upon authorization
of the Board.
(2) Notwithstanding anything in the foregoing provisions of this
Section, if it appears in the circumstances impracticable to effect the delivery
of cash and other property of the Fund to a successor custodian as contemplated
by Section 26 of this Agreement within the time specified in the notice of
termination as aforesaid, Citibank agrees that the Agreement shall remain in
full force and effect for such reasonable period as may be required to complete
necessary arrangements with the successor custodian or, as the case may be, to
obtain an order from the Securities and Exchange Commission making effective any
post-effective amendment of the Registration Statement of the Fund necessary in
the circumstances.
26. Successor Custodian.
-------------------
Upon termination of this Agreement and payment by the Fund of all
proper charges and expenses, Citibank shall deliver at its offices all
securities duly endorsed and in proper form for transfer and all cash and other
property held by it for the Fund under this Agreement to one or more successor
custodians which shall meet the requirements of the 1940 Act, as specified in a
notice of termination or officers' instruction.
27. Amendment of Agreement.
----------------------
This Agreement may only be amended by an instrument in writing signed
by a property authorized officer of the Fund and of Citibank. Amendment of this
Agreement by the Fund shall be made only upon authorization by a resolution of
the Board.
28. Effective date of the Agreement.
-------------------------------
This Agreement shall become effective upon execution.
29. Governing Law.
-------------
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and their respective seals to be affixed hereto as of the date first
above written by their respective officers hereunto duly authorized.
Accepted by: The Pacific Corporate Accepted by Citibank, N.A.
Group Private Equity Fund
___________________________________ __________________________________
(Signature) (Signature) (Title)
___________________________________ __________________________________
(Signature) (Date)
___________________________________
(Date)
FEE SCHEDULE
THE FEES TO BE CHARGED THE PACIFIC CORPORATE GROUP PRIVATE EQUITY FUND
ARE AS FOLLOWS:
For the initial twelve months the account will be charged an all inclusive fee
of $2,500.00 per month.
For each month following the initial 12 months the account will be charged an
all inclusive fee of $4,000.00.
EXHIBIT (r)
[ARTICLE] 6
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN THE PACIFIC CORPORATE GROUP PRIVATE EQUITY
FUND'S REGISTRATION STATEMENT ON FORM N-2 FOR THE PERIOD FROM FEBRUARY 9,
1998 (COMMENCEMENT OF OPERATIONS) TO MARCH 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
[/LEGEND]
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] FEB-9-1998
[PERIOD-END] MAR-31-1998
[INVESTMENTS-AT-COST] 2,144,627
[INVESTMENTS-AT-VALUE] 2,144,627
[RECEIVABLES] 165,005
[ASSETS-OTHER] 307,632
[OTHER-ITEMS-ASSETS] 41,582,833
[TOTAL-ASSETS] 44,200,097
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 411,521
[TOTAL-LIABILITIES] 411,521
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 90,587
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 43,788,576
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 225,906
[OTHER-INCOME] 0
[EXPENSES-NET] 227,021
[NET-INVESTMENT-INCOME] (110,955)
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] (110,955)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 90,587
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 44,200,097
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 21,894,288
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] (1)
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 483
[EXPENSE-RATIO] .0104
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
