AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 15, 1998
SECURITIES ACT FILE NO. 333-
INVESTMENT COMPANY ACT FILE NO. 811-
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
|X| REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO.
AND/OR
|X| REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO.
------------------------------
MERRILL LYNCH KECALP L.P. 1999
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
------------------------------
WORLD FINANCIAL CENTER - SOUTH TOWER
225 LIBERTY STREET
NEW YORK, NEW YORK 10080-6123
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 236-7302
KECALP INC.
WORLD FINANCIAL CENTER - NORTH TOWER
250 VESEY STREET
NEW YORK, NEW YORK 10281-1334
ATTN: MARK B. GOLDFUS
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- --------------------------------------------- -------------- ------------ ----------------- -------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
BEING PRICE PER OFFERING REGISTRATION
TITLE OF SECURITIES BEING REGISTERED REGISTERED UNIT PRICE FEE
- --------------------------------------------- -------------- ------------ ----------------- -------------------
<S> <C> <C> <C> <C>
Limited Partnership Interest................ 75,000 Units $1,000.00 $75,000,000 $22,125
============================================= ============== ============ ================= ===================
</TABLE>
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
files a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
CROSS REFERENCE SHEET
Between Items of Registration Statement (Form N-2)
and Prospectus
Pursuant to Rule 404 (c)
PARTS A and B
Item
No. Caption Location in Prospectus
1. Outside Front Cover............... Outside Front Cover
2. Inside Front and Outside
Back Cover Page................... Inside Front and Outside Back Cover
Page
3. Fee Table and Synopsis............ Prospectus Summary
4. Financial Highlights.............. Not Applicable
5. Plan of Distribution.............. Outside Front Cover; Offering and Sale
of Units
6. Selling Shareholders.............. Not Applicable
7. Use of Proceeds................... The Partnership; Investment Objective
and Policies
8. General Description of the
Registrant...................... Cover Page of Prospectus; The Partner-
ship; Risk and Other Important Factors;
Investment Objective and Policies;
Summary of the Partnership Agreement
9. Management........................ The General Partner and Its Affiliates;
Summary of the Partnership Agreement
10. Capital Stock, Long-Term Debt,
and Other Securities............ Summary of the Partnership Agreement;
Transferability of the Units
11. Defaults and Arrears on Senior
Securities ..................... Not Applicable
12. Legal Proceedings................. Not Applicable
13. Table of Contents of the
Statement of Additional........... Not Applicable
14. Cover Page........................ Not Applicable
15. Table of Contents................. Not Applicable
16. General Information and History.. Not Applicable
17. Investment Objective and Policies. Investment Objective and Policies
18. Management........................ The General Partner and Its Affiliates;
Summary of the Partnership Agreement
19. Control Persons and
Principal Holders of Securities. Cover Page; The General Partner and Its
Affiliates
20. Investment Advisory and Other
Services........................ The General Partner and Its Affiliates
21. Brokerage Allocation and Other
Practices Not Applicable
22. Tax Status........................ Tax Aspects of Investment in the
Partnership
23. Financial Statements.............. Financial Statements
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 15, 1998
$___,000,000
________ UNITS OF LIMITED PARTNERSHIP INTEREST
MERRILL LYNCH KECALP L.P. 1999
$1,000 PER UNIT MINIMUM INVESTMENT--5 UNITS ($5,000)
Merrill Lynch KECALP L.P. 1999 (the "Partnership") hereby offers _______
units of limited partnership interest (the "Units") in the Partnership to
certain employees of Merrill Lynch & Co., Inc. ("ML & Co.") and its
subsidiaries, to non-employee directors of ML & Co. and to members of the
Advisory Committee of the General Partner, as defined below. ("Eligible
Investors"). Units are also being offered to ML & Co. for purchase in connection
with a deferred compensation program of ML & Co. for certain of its key
employees. The Partnership's principal offices are at South Tower, World
Financial Center, 225 Liberty Street, New York, New York 10080-6123. Its
telephone number is (212) 236-7302. KECALP Inc., a wholly-owned subsidiary of ML
& Co., is the general partner (the "General Partner") of the Partnership. The
Partnership will operate as a closed-end investment company of the management
type. The General Partner has obtained an order from the Securities and Exchange
Commission exempting the Partnership, as an "employees' securities company",
from certain provisions of the Investment Company Act of 1940. See "Exemptions
from the Investment Company Act of 1940".
The principal investment objective of the Partnership is long-term capital
appreciation. It is expected that a significant portion of the proceeds of this
offering will be invested in privately-offered equity investments in U.S. and
non-U.S. issuers. The Partnership's investments may include securities issued
in leveraged buyout transactions, financings of companies in an early stage of
development, investments in growth equities and transactions involving
financial restructurings or recapitalizations of operating companies, as
described herein. Investments may also be made in real estate opportunities.
Investments in non-U.S. issuers may include opportunities in both emerging
markets and developed countries. The Partnership's investments may be made
directly or through the purchase of interests in other funds. The Partnership
may make other investments in equity and fixed income securities that the
General Partner considers appropriate in terms of their potential for long-term
capital appreciation and/or income generation. The Partnership's investment
policies involve a very high degree of risk. See "Investor Suitability
Standards", "Conflicts of Interest", "Risk and Other Important Factors" and
"Investment Objective and Policies". The Partnership may borrow funds for
investment in securities, which would have the effect of leveraging the Units.
See "Investment Objective and Policies--Leverage".
The Units are being offered by Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S") on a "best efforts" basis. Eligible Investors must
submit completed subscription documents not later than November 1, 1998, or
such other subsequent date, not later than February 5, 1999, as MLPF&S and the
General Partner may agree upon. Subsequent to such date, the General Partner
will advise such investors as to whether their subscriptions have been accepted
and thereupon MLPF&S shall promptly debit funds from accepted investors'
accounts for payment into the Partnership's escrow account. The General Partner
will also advise prospective investors of the termination date of the offering
(the "Offering Termination Date"). If subscriptions (including subscriptions of
ML & Co.) for 75,000 Units have not been received by the Offering Termination
Date, no Units will be sold. Funds paid by subscribers will be deposited in a
bank escrow account, and, if the required minimum is not obtained or other
conditions not satisfied, will be refunded promptly with interest, if any.
Subscriptions deposited in the escrow account may not be terminated or
withdrawn by subscribers. See "Offering and Sale of Units".
--------------------------
This Prospectus sets forth concisely information about the Partnership
that a prospective investor ought to know before investing. Investors are
advised to read this Prospectus and retain it for future reference.
--------------------------
THE UNITS ARE A SPECULATIVE INVESTMENT AND THIS OFFERING INVOLVES
VARIOUS SUBSTANTIAL RISKS AS DESCRIBED IN THIS PROSPECTUS.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------- ------------------- ---------------- -------------------
PROCEEDS
PRICE TO PUBLIC SALES LOAD(1) TO PARTNERSHIP(2)
- -------------------- ------------------- ---------------- -------------------
Per Unit........... $1,000 -- $1,000
Total Minimum...... $75,000,000 -- $75,000,000
Total Maximum...... $ -- $
- -------------------- ------------------- ---------------- ===================
(footnotes on next page)
MERRILL LYNCH & CO.
----------------------
THE DATE OF THIS PROSPECTUS IS SEPTEMBER ___, 1998.
<PAGE>
(Continued from cover page)
(1) No sales commission will be charged purchasers of Units. The General
Partner has agreed to indemnify MLPF&S against certain liabilities,
including liabilities under the Securities Act of 1933. See "Offering
and Sale of Units".
(2) Before deducting organizational and offering expenses payable by the
Partnership, estimated at $_______ but not exceeding 1.5% of the
proceeds of the offering. The General Partner will bear the remaining
costs, if any, of forming the Partnership and registering the Units
under the Securities Act of 1933 and the securities laws of various
states.
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT
BE RELIED UPON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER.
UNTIL __________, 1999, ALL DEALERS EFFECTING TRANSACTIONS IN THE UNITS,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
CURRENT COPY OF THIS PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS.
INVESTOR SUITABILITY STANDARDS
Only employees of ML & Co. and its subsidiaries, non-employee directors
of ML & Co. and members of the Advisory Committee of the General Partner, who
meet the suitability standards described below ("Eligible Investors"), together
with ML & Co., will be eligible to purchase Units. THE PURCHASE OF UNITS
INVOLVES SIGNIFICANT RISKS AND UNITS ARE NOT A SUITABLE INVESTMENT FOR ALL
QUALIFIED INVESTORS. See "Risk and Other Important Factors".
1. Substantial Means and Net Worth. The purchase of Units is suitable only
for those persons who have no need for liquidity in this investment and who
have adequate means of providing for their current needs and contingencies.
Accordingly, no Units will be sold to an employee of ML & Co. or its
subsidiaries, a non-employee director of ML & Co., or a member of the Advisory
Committee of the General Partner, unless such investor (i) in the case of
employees of ML & Co. or its subsidiaries, had an annual salary in an amount
which, together with bonus received from ML & Co. or its subsidiaries in
respect of 1997, equaled at least $100,000 or, if employed for less than a full
calendar year, is employed with an annualized gross income from ML & Co. or its
subsidiaries of at least $100,000, or (ii) in the case of non-employee
directors of ML & Co. and members of the Advisory Committee, (a) has a net worth
(exclusive of homes, home furnishings, personal automobiles and the amount to
be invested in Units) of not less than $125,000 in excess of the price of the
Units for which such investor has subscribed, or (b) has a net worth (exclusive
of homes, home furnishings, personal automobiles and the amount to be invested
in Units) of not less than $100,000 in excess of the price of the Units for
which such investor has subscribed and expects to have during each of the
current and the next three taxable years, gross income from all sources in
excess of $100,000. Investors will be required to represent in writing in the
Subscription Agreement that they meet the applicable requirements. Investors
who can make such representation, together with ML & Co., are hereinafter
referred to as "Qualified Investors".
2. Ability and Willingness to Accept Risks. The economic benefit from an
investment in the Partnership depends on many factors beyond the control of the
General Partner, including general economic conditions, changes in governmental
regulation, inflation, tax treatment of portfolio investments and resale value
of such investments. Accordingly, the suitability for any Qualified Investor of
a purchase of Units will depend on, among other things, such investor's
investment objectives and such investor's ability to accept speculative risks.
See "Risk and Other Important Factors".
3. Ability to Accept Limitations on Transferability. PURCHASERS OF UNITS
SHOULD VIEW THEIR INTEREST IN THE PARTNERSHIP AS A LONG-TERM, ILLIQUID
INVESTMENT. Limited partners may not be able to liquidate their investment in
the event of emergency or for any other reason because there is not any public
market for Partnership Units and there are restrictions contained in the
Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement"), the form of which is attached as Exhibit A to this Prospectus,
which are intended to prevent the development of a public market for Units.
Moreover, the transferability of Units is subject to certain restrictions in
the Partnership Agreement and may be affected by restrictions on resales
imposed by the laws of some states. See "Transferability of Units".
<PAGE>
SUMMARY OF THE OFFERING
The summary information below should be read in conjunction with the
detailed information provided elsewhere in this Prospectus.
THE OFFERING: ________ Units of limited partnership interest in
the Partnership, each representing a capital
contribution of $1,000. MLPF&S is acting as
selling agent for the Partnership and the General
Partner. The minimum investment is five Units
($5,000) and additional Units may be purchased in
increments of $1,000. Eligible Investors must
submit completed subscription documents not later
than November 1, 1998, or such subsequent date,
not later than February 5, 1999, as the General
Partner and MLPF&S may determine. Subsequent to
such date, the General Partner will advise such
investors as to whether their subscriptions have
been accepted and thereupon MLPF&S shall promptly
debit funds from accepted investors' accounts for
payment into the Partnership's escrow account.
The Partnership is also offering Units to ML &
Co. for purchase by it in connection with its
obligations under deferred compensation plans
offered by ML & Co. to certain of its key
employees. Such employees will not, themselves,
be Limited Partners of the Partnership by virtue
of their participation in such plan. ML & Co. has
advised the Partnership that it may purchase up
to ________ Units as a result of participation by
eligible employees in such deferred compensation
plan. See "Offering and Sale of Units--Purchase
of Units by ML & Co."
The General Partner will advise investors of the
termination date of the offering (the "Offering
Termination Date"). If subscriptions (including
subscriptions of ML & Co.) for 75,000 Units are
not received by the Offering Termination Date,
the offering will be terminated, and all funds
received will be refunded with interest, if any,
actually earned thereon. If subscriptions for
more than ________ Units are received, the
General Partner may reject any subscription in
whole or part. Funds paid for any subscription
for Units that is rejected will be refunded
promptly. Certain maximum purchase restrictions
will be imposed on Qualified Investors (see
"Offering and Sale of Units--Maximum Purchase by
Qualified Investor"). Qualified Investors
admitted as limited partners are hereinafter
referred to, together with the initial limited
partner and any substituted limited partners, as
the "Limited Partners". See "Offering and Sale of
Units".
THE PARTNERSHIP: A Delaware limited partnership formed on July 10,
1998. Its address is South Tower, World Financial
Center, 225 Liberty Street, New York, New York
10080-6123 (telephone: (212) 236-7302). The
Partnership will operate as a closed-end
investment company of the management type under
the Investment Company Act of 1940. An order has
been obtained from the Securities and Exchange
Commission (the "SEC") exempting the Partnership
from certain provisions of such Act. The
functions and responsibilities of the General
Partner and the rights of the Limited Partners
are authorized by or specified in the Partnership
Agreement. See "The Partnership", "Summary of the
Partnership Agreement" and "Exemptions from the
Investment Company Act of 1940".
THE GENERAL PARTNER: KECALP Inc. (the "General Partner"), an indirect
subsidiary of ML & Co., is located at South
Tower, World Financial Center, 225 Liberty
Street, New York, New York 10080-6123 (telephone:
(212) 236-7302). The General Partner will manage
and make investment decisions for the
Partnership. KECALP Inc. has served as the
general partner of eight limited partnerships,
which have been established since 1983, for
investment by qualifying employees of ML & Co.
(collectively, the "KECALP Partnerships"), and it
is contemplated that in the future it will serve
in the same capacity for similar partnerships
that may be offered. See "The General Partner and
Its Affiliates".
The General Partner has also been designated to
serve as Tax Matters Partner for the Partnership
with respect to all administrative and judicial
proceedings relating to an audit of the
Partnership's U.S. Federal income tax information
return. See "Tax Aspects of Investment in the
Partnership".
INVESTMENT OBJECTIVE: The principal investment objective of the
Partnership is long-term capital appreciation. It
is expected that a significant portion of its
assets will be invested in privately-offered
equity investments in U.S. and non-U.S. issuers.
The Partnership's investments may include
securities issued in leveraged buyout
transactions, financings of companies in an early
stage of development, investments in growth
equities and transactions involving financial
restructurings or recapitalizations of operating
companies, as described below. Investments may
also be made in real estate opportunities.
Investments in non-U.S. issuers may include
opportunities in both emerging markets and
developed countries. The Partnership's
investments may be made directly in portfolio
companies or through the purchase of interests in
other investment funds, including hedge funds.
The Partnership may make other investments in
equity and fixed income securities that the
General Partner considers appropriate in terms of
potential for capital appreciation and/or income
generation. There can be no assurance that the
Partnership's investment objective will be
attained. See "Investment Objective and
Policies".
The Partnership anticipates that many of its
investments will be made available to it by ML &
Co. or its affiliates. Information concerning
potential sources of investments, including
potential co-investment opportunities, is set
forth under "Investment Objective and
Policies--Sources of Investment Opportunities".
LEVERAGE: The Partnership is authorized to borrow funds
when it believes such action is desirable to
enable the Partnership to make new investments or
follow-on investments. Such use of leverage would
exaggerate increases or decreases in the
Partnership's net assets. See "Investment
Objective and Policies--Leverage".
REINVESTMENT POLICY: The General Partner has the discretion to
reinvest all Partnership revenues. To the extent
portfolio investments are disposed of within two
years after the closing of the sale of Units, the
General Partner will consider reinvesting all or
a substantial portion of the proceeds realized by
the Partnership. However, the General Partner
does not expect to reinvest proceeds from the
liquidation of portfolio investments (other than
temporary investments) occurring more than two
years after the closing of the sale of Units,
except in connection with follow-on investments
made in existing portfolio companies. The General
Partner may also cause the Partnership to
maintain reserves for follow-on investments or to
apply cash received from investments to the
prepayment of any borrowings made by the
Partnership. To the extent that cash received by
the Partnership is not required for such purposes
or to reimburse the General Partner for any
expenses incurred, it will be distributed to the
Partners at least annually. See "Investment
Objective and Policies".
PARTNERSHIP DISTRIBUTIONS
AND ALLOCATIONS: If the Partnership receives the exemptive order
described under "Partnership Expenses", items of
income, gain, deduction, loss and credit will
generally be allocated to the Partners in
proportion to their capital contributions. If the
Partnership does not receive such order, such
items will generally be allocated 99% to the
Limited Partners and 1% to the General Partner;
the General Partner will not contribute any cash
to the Partnership in exchange for such 1%
interest beyond the $99.00 it contributed on
formation of the Partnership. Cash distributions
will be made in the same manner. The General
Partner may make distributions of Partnership
assets in kind, in addition to cash
distributions. See "Partnership Allocations and
Distributions".
In computing his federal tax liability, each
Limited Partner will be required to take into
account in computing his Federal income tax
liability his allocable share of the
Partnership's income, gain, loss, deductions,
credits and items of tax preference for any
taxable year of the Partnership ending within or
with the taxable year of such Limited Partner,
without regard to whether he has received or will
receive any distribution from the Partnership.
The Partnership has adopted a calendar year for
tax reporting purposes. TO THE EXTENT THE
PARTNERSHIP INVESTS IN OTHER INVESTMENT FUNDS, IT
MAY EXPERIENCE DELAYS IN OBTAINING ANNUAL TAX
INFORMATION, WHICH MAY REQUIRE LIMITED PARTNERS
TO OBTAIN EXTENSIONS FOR FILING INCOME TAX
RETURNS. See "The Partnership" and "Tax Aspects
of Investment in the Partnership".
DISSOLUTION: The Partnership term extends to December 31,
2039. However, pursuant to the Partnership
Agreement, the General Partner may dissolve the
Partnership, without the consent of the Limited
Partners, at any time after January 1, 2005. It
is not the General Partner's intention to
dissolve the Partnership prior to the time when
the Partnership's equity investments have matured
and disposition of its other portfolio
investments can be effected. See "Summary of the
Partnership Agreement".
COMPENSATION AND FEES: The Partnership will pay its organizational and
offering expenses in an amount of up to 1.5% of
the proceeds of the offering. Under the terms of
an exemptive order requested from the Securities
and Exchange Commission (the "SEC"), the
Partnership will pay its operating expenses and
reimburse the General Partner for its personnel,
overhead and administrative expenses attributable
to the Partnership, subject to an annual limit on
such expense payments and reimbursements of 1.5%
of Limited Partners' capital contributions. Under
this exemptive order, the Partnership will also
pay commissions and other fees and expenses
relating to portfolio investment transactions
(including non-completed transactions).
If the Partnership does not obtain the exemptive
order it has requested, the General Partner will
pay all expenses, fees, commissions and other
expenditures on behalf of the Partnership. The
General Partner will be entitled to receive
annual reimbursement from the Partnership for
operating expenses and specified transaction
expenses incurred by the General Partner with
respect to the Partnership, in amounts up to 1%
of Limited Partners' capital contributions.
Unreimbursed expenses paid by the General Partner
shall be deemed a contribution to capital and be
reflected in the General Partner's capital
account. Since repayment of any positive amount
in a Partner's capital account is a priority item
upon dissolution, the General Partner may, upon
dissolution, recoup expenditures made on behalf
of the Partnership in addition to its 1%
interest. See "Partnership Expenses" and
"Partnership Allocations and Distributions."
RISKS: The purchase of Units involves a number of
significant risk factors. See "Risk and Other
Important Factors".
HOW TO SUBSCRIBE: (a) The Qualified Investor completes, dates,
executes and delivers to KECALP Inc., a copy of
the Limited Partner Signature Page and Power of
Attorney attached as part of the Subscription
Agreement, a form of which is attached as Exhibit
B to this Prospectus.
(b) The Qualified Investor's MLPF&S securities
account will be debited in the amount of $1,000
for each Unit (minimum purchase of five Units)
that he desires to purchase. A securities account
will be opened by MLPF&S for any Qualified
Investor who does not have such an account.
<PAGE>
PARTNERSHIP EXPENSES
The Partnership will pay its organizational and offering expenses in an
amount of up to 1.5% of the proceeds of the offering. The Partnership will also
pay the expenses described below.
The General Partner has requested an exemptive order from the SEC
governing the expenses to be paid by the Partnership and similar partnerships
organized in the future. Under the terms of this order, the Partnership will
pay its operating expenses and reimburse the General Partner for its personnel,
overhead and administrative expenses attributable to the Partnership, subject
to an annual limit on such expense payments and reimbursements of 1.5% of
Limited Partners' capital commitments. Under such order, the Partnership will
also pay commissions and other fees and expenses relating to the acquisition,
monitoring and disposition of portfolio investments, including fees payable to
MLPF&S, expenses relating to evaluation and negotiation of prospective
investments, and litigation and similar expenses that are not subject to the
annual limit on operating expenses.
If the Partnership does not obtain the exemptive order it has requested,
the General Partner will pay all expenses, fees, commissions and other
expenditures on behalf of the Partnership, but will not be obligated to pay
debt service on interest charges incurred in connection with Partnership
investments. The General Partner will be entitled to receive annual
reimbursements from the Partnership, in amounts of up to 1.0% of the Limited
Partners' capital contributions, of operating expenses and transaction expenses
incurred by the General Partner with respect to the Partnership relating to the
acquisition, monitoring and disposition of portfolio investments and the
evaluation and negotiation of prospective investments. Unreimbursed expenses
paid by the General Partner shall be deemed a contribution to capital and be
reflected in the General Partner's capital account. Since repayment of any
positive amount in a Partner's capital account is a priority item upon
dissolution, the General Partner may, upon dissolution, recoup expenditures
made on behalf of the Partnership in addition to its 1% interest.
The following table is intended to assist potential investors in
understanding the operating expenses associated with investing in the
Partnership.
Limited Partner Transaction Expenses
Sales Load (as a percentage of offering price)............... None
Annual Expenses (as a percentage of net assets)
Operating expenses and reimbursements
to the General Partner(1)(2)..... ......................... 1.5%
----
Total Annual Expenses........................................ 1.5%
====
------------------
(1) Does not include portfolio transaction expenses incurred by the
Partnership, management fees that may be payable by the
Partnership to managers of any investment funds in which the
Partnership invests, which will be accounted for as an item of
Partnership expense, or expenses incurred by entities in which
the Partnership invests.
(2) Operating expenses and reimbursements to the General Partner
have been estimated for the current year and assume Limited
Partners' capital contributions of $75 million, the minimum for
the Partnership's offering.
Example
An investor would pay the following cumulative expenses on a hypothetical
$1,000 investment in the Partnership, assuming a 5% annual return:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
$15 $47 $83 $189
This "Example" assumes that all distributions are reinvested at net asset
value and that the percentage amounts listed under Annual Expenses remain the
same in the years shown. However, Limited Partners will not be able to reinvest
distributions of the Partnership. The above tables and the assumption in the
Example of a 5% annual return are required by regulations of the Securities and
Exchange Commission applicable to all investment companies. THE ASSUMED 5%
ANNUAL RETURN AND ANNUAL EXPENSES SHOULD NOT BE CONSIDERED A REPRESENTATION OF
ACTUAL OR EXPECTED PARTNERSHIP PERFORMANCE OR EXPENSES, BOTH OF WHICH MAY VARY.
RISK AND OTHER IMPORTANT FACTORS
The purchase of Units offered hereby involves a number of significant risk
factors. In addition to risk factors set forth elsewhere in this Prospectus,
prospective purchasers should consider the following:
A. GENERAL RISKS
1. Risk of Unspecified and Unprofitable Investments. The proceeds of
this offering are intended to be invested primarily in speculative growth
securities most of which have not yet been selected by the General Partner.
Therefore, persons who purchase Units will not have an opportunity to evaluate
for themselves the specific investments in which funds of the Partnership will
be invested or the terms of any such investments. In addition, there can be no
assurance that the Partnership's investments will prove to be profitable. The
purchasers of Units must depend solely on the ability of the General Partner
with respect to the selection and timing of investments. See "The General
Partner and Its Affiliates" and "Investment Objective and Policies--Sources of
Investment Opportunities".
2. Availability of and Competition for Investments. The success of the
Partnership depends upon the availability of appropriate investment
opportunities. The availability of investment opportunities generally will be
subject to market conditions. It may be expected that the Partnership will
encounter substantial competition for certain investments, particularly from
other entities having similar investment objectives. There can be no assurance
that the Partnership will be successful in obtaining suitable investment
opportunities or that a desirable mix of investments will be achieved.
3. Delay in Partnership Investments. Although the General Partner will use
its best efforts to commit Partnership funds as promptly as practicable, it is
anticipated that there may be a significant period of time (up to three to four
years) before the proceeds from the offering will be fully committed. In
addition, investment funds in which the Partnership invests may not draw down
on the Partnership's commitment (i.e., require the Partnership to contribute
the funds it has previously committed) for an additional period of up to four
to five years. Such investment funds also may re-invest capital returned to
them from portfolio investments during an initial period. These delays in the
Partnership's investments will detract from the average annual return of an
investment in the Partnership.
4. Investment Risks. The Partnership is authorized to make equity
investments offering the potential for long-term capital appreciation in U.S.
and non-U.S. issuers. These investments may include equity investments in:
leveraged buyout transactions, companies in an early stage of development,
growth equities, and financial restructurings or recapitalizations of operating
companies, real estate opportunities and venture capital transactions.
These investments involve a high degree of business and financial risk
that can result in substantial losses. Among these are the risks associated
with investment in companies with little or no operating history and companies
operating at a loss or with substantial variations in operating results from
period to period. These companies may encounter intense competition from
established companies with greater resources. In addition, companies in
high-technology fields face special risks of product obsolescence. Leveraged
buyout investments typically involve a high degree of debt financing and the
highly leveraged financial structure of these transactions introduces
substantial additional risks. Investments in companies that undertake financial
recapitalization or restructuring transactions involve the risk, among others,
that the transaction may not resolve financial or operational conditions that
led to the recapitalization or restructuring; in addition, to the extent that a
company remains leveraged following the completion of such a transaction, an
equity investment in the company may involve risks similar to an equity
investment in a leveraged buyout transaction. Companies in which the
Partnership makes private equity investments frequently require additional
capital.
Real estate investments are subject to a number of risks, including
uncertainty of cash flow to meet fixed obligations, adverse changes in local
market conditions and neighborhoods, changes in interest rates, the need for
unanticipated renovation, changes in real estate taxes and increases in other
operating expenses. Real estate investments may be illiquid. Investments in
real estate of the type contemplated by the Partnership are usually long term
and can be as long as fifteen years. Real estate investment cycles typically
have lasted three to five years, but recently have been longer.
The Partnership is authorized to make investments in high yield
corporate debt securities (also referred to as "junk bonds") offering the
potential for long-term capital appreciation. High yield debt securities are
predominantly speculative with respect to the capacity to pay interest and
repay principal in accordance with the terms of the security and generally
involve a greater volatility of price than securities in higher rating
categories.
5. Use of Leverage. The Partnership has authority to utilize leverage
(i.e., borrowed funds or senior securities) in making investments as will many
of the entities in which the Partnership will make its investments. The use of
leverage, either by the Partnership or by the entities in which it invests,
would exaggerate increases or decreases in the Partnership's net assets and,
because of required debt service obligations, may result in delays in the
distribution of cash to Limited Partners. The Partnership Agreement does not
limit the amount of indebtedness that the Partnership may incur. The Investment
Company Act of 1940 (the "Investment Company Act") generally limits the amount
of indebtedness the Partnership may incur to 33-1/3% of its gross assets.
6. Illiquid Investments. Investments of the types to be made by the
Partnership are generally illiquid. Leveraged buyout and venture capital
investments may typically take from four to seven years to reach a state of
maturity where disposition can be considered. Investments in corporate
restructurings and recapitalization transactions may also require a substantial
time period before dispositions can be effected. In addition, investments
acquired by the Partnership in private transactions will generally be subject
to restrictions imposed by the Federal securities laws, including the
Investment Company Act, on resale by the Partnership. Investments made by the
Partnership in issuers in which ML & Co. or its affiliates have significant
investment positions may be subject to further limitations imposed by the
Federal securities laws which may delay the disposition of publicly-traded
securities owned by the Partnership.
7. Need for Investment Company Act Exemptions. In addition to the
restrictions described above, the Investment Company Act contains restrictions
on co-investments by a registered investment company (such as the Partnership)
and affiliates of its sponsor and on purchases of securities by a registered
investment company from affiliates of its sponsor. Exemptions under the
Investment Company Act may be required before the Partnership can make
investments in transactions where ML & Co. or its affiliates are co-investors
or where ML & Co. or its affiliates seek to sell an investment to the
Partnership. In this regard, the General Partner has obtained blanket exemptive
relief from the SEC permitting co-investments and other transactions with ML &
Co. and its affiliates in leveraged buyout and other equity investments. There
can be no assurance that the Partnership will be able to obtain similar
exemptions in the future with respect to proposed purchases and sales of
portfolio securities in transactions in which affiliates of the Partnership are
participants and which do not qualify under the terms of existing exemptions or
those currently pending. See "Investment Objective and Policies--Sources of
Investment Opportunities".
8. Reliance on the General Partner and Others. All decisions with respect
to the management of the Partnership will be made exclusively by the General
Partner. Limited Partners have no right or power to take part in the management
or control of the business of the Partnership. Accordingly, no person should
purchase Units unless such person is willing to entrust all aspects of the
management of the Partnership to the General Partner. There are limitations
imposed in the Partnership Agreement on the Limited Partners' ability to remove
the General Partner as general partner. As a minority interest investor, the
Partnership will make equity investments in corporations, general partnerships,
limited partnerships, grantor trusts or management programs where it is
permitted at most a limited role in influencing decisions of such ventures. See
"Summary of the Partnership Agreement".
9. Absence of Operating History and Management Experience. The Partnership
has been recently formed and has no operating history upon which purchasers of
Units may base an evaluation of its likely performance. While the composition
of its officers and directors has changed over the years since the General
Partner's formation, the General Partner has managed similar partnerships for
more than eleven years. See "The General Partner and Its Affiliates".
B. INTERNATIONAL INVESTMENT RISKS
1. General. International investments involve certain additional risks,
including fluctuations in foreign exchange rates, different legal systems and
the existence or possible imposition of exchange controls or other foreign or
U.S. government laws or restrictions applicable to such investments.
Investments in different countries are subject to different economic,
financial, political and social factors. Because the Partnership may invest in
securities denominated in currencies other than the U.S. dollar, changes in
foreign currency exchange rates may affect the value of securities owned by the
Partnership. With respect to certain countries, there may be the possibility of
expropriation of assets, confiscatory taxation, high rates of inflation,
political or social instability, changes in laws and rules or in
interpretations thereof, or diplomatic developments which could adversely
affect investments, or result in a total loss of investments, in issuers in
those countries. These risks may be heightened in developing economies,
including countries located in the Far East, the Indian subcontinent, Eastern
Europe and Latin America. In addition, certain foreign investments may be
subject to foreign withholding taxes. Further, satisfactory custodial services
for investment securities may not be available in certain countries.
2. Regulatory Considerations. There will likely be less publicly available
information about a foreign company than about a U.S. company, and foreign
companies may not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those to which U.S. companies are
subject. In addition, certain countries in which the Partnership may invest may
not have a comprehensive system of laws protecting the rights and interests of
investors (particularly foreign investors), and the enforcement of existing
laws may be inconsistent. The profitability of foreign investments may also be
impacted by regulatory burdens, such as lengthy regulatory approval processes
and strict environmental regulation. Some countries prohibit or impose
substantial restrictions on investments in their countries by foreign entities
such as the Partnership. Certain countries may also limit the ability of the
Partnership to dispose of investments by requiring regulatory approvals prior
to such disposition or by other means, including limiting the ability to
convert local currencies.
C. INVESTMENT FUND CONSIDERATIONS
1. General. Investments by the Partnership in investment funds involve
considerations or risks not otherwise present in direct investments. The
managers of investment funds are usually compensated from the assets of the
funds based upon a fixed percentage of assets or capital, and usually receive
an incentive performance component such as a carried interest in the profits
generated by the funds. These fees will be paid by the Partnership and will not
be counted toward the limitation on the annual expenses of the Partnership.
Further, to the extent the Partnership invests in investment funds, it will
surrender control over the underlying investment. In addition, investment funds
incur certain administrative and other expenses. As a result, the Partnership
may incur additional, indirect expenses with respect to investments in such
funds in the form of management compensation paid to such managers and other
expenses incurred by such funds. Furthermore, such funds may adopt time
horizons for their underlying investments that differ from that of the
Partnership. Investments in such funds may cause the expected term of the
Partnership to continue beyond the date the Partnership would otherwise have
terminated and may have a negative impact on investors' rate of return.
It is possible that the Partnership's allocable share of
earnings from an investment fund or a hedge fund for a taxable year could exceed
the amount of cash distributed to the Partnership by the investment fund for
such year. As a result, Limited Partners may receive allocations of income or
gain during a taxable year without a corresponding distribution of cash from the
Partnership to pay the related tax.
2. Delays in Preparation of Tax Information. It is expected that annual
tax information from investment funds in which the Partnership invests may not
be received in sufficient time to permit the Partnership to incorporate such
information into its annual tax information and distribute such information to
Limited Partners prior to April 15 of each year. As a result, Limited Partners
may be required to obtain extensions for filing Federal, state and local income
tax returns each year. Limited Partners 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 Partnership. To the extent
practicable, the Partnership anticipates that it will provide estimated annual
tax information in a timely manner in order to assist Limited Partners in
estimating their tax liabilities. The Partnership's ability to make such
estimates will be dependent upon its ability to obtain estimated annual tax
information from the investment funds.
3. Investments in Hedge Funds. The Partnership may invest in hedge funds
which, for purposes of the Partnership's policy, consist of private investment
funds seeking to maximize total return through use of various trading
strategies. Investments in hedge funds are speculative and involve substantial
risks, including risks related to implementation of the funds' trading
strategies, leverage and investments in derivative instruments.
D. INCOME TAX RISKS
1. Fringe Benefits. The General Partner will incur various expenses
in connection with the organization and operation of the Partnership. Since
Units are being offered to ML & Co. employees and non-employee directors, it is
possible that the IRS would view the General Partner's payment of such expenses
as an indirect method of compensating the employee-Limited Partner (i.e., as a
fringe benefit). If the IRS were successful in such characterization, an amount
equal to the fair market value of the underlying goods and services provided by
the General Partner in connection with the Partnership might be includable in
the Limited Partner's gross income as additional compensation. The Limited
Partner may not, however, be allocated a Partnership deduction in an amount
corresponding to such income inclusion because some of such fees and expenses
incurred by the General Partner on behalf of the Partnership would be
attributable to nondeductible syndication expenses, or investment expenses
subject to the limitations on deductibility of itemized miscellaneous expenses,
or treated as part of the capitalized cost of the Partnership's portfolio
assets. See "Fringe Benefits" under "Tax Aspects of Investment in the
Partnership--Other Tax Considerations".
2. Possible Changes in Law. The rules dealing with Federal income
taxation are under continual review by Congress and the IRS, resulting in
frequent revisions of the Federal tax laws and regulations promulgated
thereunder and revised interpretations of established concepts. No assurance can
be given that, during the term of the Partnership, applicable Federal income tax
laws or the interpretations thereof will not be changed in a manner that would
have a material adverse effect on an investment in the Partnership.
E. CONFLICTS OF INTEREST
1. Conflicts with Respect to Investment Opportunities. Affiliates of the
General Partner may in the future perform investment advisory services for
other investment entities with investment objectives and policies similar to
those of the Partnership and such entities may compete with the Partnership for
investment opportunities. Conflicts may exist concerning allocations of
investments to the Partnership or other investment vehicles or programs (the
"Offshore KECALP Funds") that are offered to employees of subsidiaries of ML &
Co. located outside of the United States, including investment vehicles
expected to be offered concurrently with the offering by the Partnership. It is
anticipated that, to the extent permitted by the Investment Company Act or
exemptions, the Offshore KECALP Funds will co-invest with the Partnership in
making portfolio investments, except where such investments would not be
advisable for such vehicles due to tax or other considerations. Furthermore, ML
& Co. and its affiliates may invest directly in investments that would be
appropriate investments for the Partnership but are not made available to the
Partnership.
Subject to the provisions of the Investment Company Act or applicable
exemptions, the Partnership may invest in companies in which ML & Co. and its
affiliates (including other KECALP Partnerships (as defined below)) have an
existing investment. The General Partner will endeavor to resolve conflicts
with respect to investment opportunities in a manner deemed equitable to all to
the extent possible under the prevailing facts and circumstances. Because of
different objectives or other factors, a particular investment may be bought by
the Partnership, the General Partner or its affiliates or one of their clients
at a time when one of such entities is selling such investment. In addition,
affiliates of the General Partner, including its officers and directors, may
benefit to the extent the Partnership invests in securities offered to other
investors by MLPF&S in public offerings or private placements.
2. Relations with Issuers of Portfolio Investments. Affiliates of the
General Partner may receive management, investment banking or lending fees from
companies or investment funds or other entities in which the Partnership
invests. Affiliates of the General Partner, including MLPF&S, may also perform
financial services for issuers of securities held by the Partnership or for
affiliates of such issuers. These relationships could influence the General
Partner to take actions, or forbear from taking actions, that an independent
general partner might not take or forbear from taking.
3. Purchases of Securities Offered by Affiliates. Affiliates of ML & Co.
are involved in the origination of investments that may be acquired by the
Partnership. Purchases of such securities by the Partnership may increase sales
fees received by such affiliates and increase compensation of their employees
(who may include certain members of the Advisory Committee of the General
Partner).
4. Participation by an Affiliate as Underwriter. As an affiliate of the
General Partner, MLPF&S may experience a conflict of interest in performing its
due diligence in connection with the public offering of the Units. Although
MLPF&S believes that its investigation of the General Partner, the Partnership
and their affairs for purposes of this offering has in fact been as complete as
would be the case in dealing with nonaffiliated persons, the review performed
by MLPF&S cannot be considered independent.
5. Conflicts Resulting from ML & Co.'s Ownership of Units and the 1999
Deferred Compensation Plan. Conflicts may arise in the selection of investments
for the Partnership as a result of ML & Co.'s ownership of Units and the
participation in the 1999 deferred compensation plan by certain employees
involved with the Partnership. Employee participants in the 1999 deferred
compensation plan (including certain directors and officers of the General
Partner and members of the Advisory Committee of the General Partner who are
expected to participate through such plan and may participate on an
economically leveraged basis) will have an interest in seeking to maximize
total return (including the receipt of ordinary income) as opposed to capital
gains. Participants in such plan who are not Limited Partners of the
Partnership would receive no advantageous tax treatment for capital gains in
respect of their participation in such plan, while Limited Partners would
receive such advantageous treatment for capital gains. In addition, ML & Co.,
in light of its anticipated significant holdings as a Limited Partner in the
Partnership, would have the ability to determine matters submitted to the vote
of Limited Partners. However, ML & Co. will agree to vote its Units in the same
proportion as other Limited Partners in respect of any matter submitted to the
vote of Limited Partners.
6. Lack of Separate Representation. The Partnership, the General Partner
and MLPF&S are represented by the same legal counsel and auditors. However,
should a dispute arise between the Partnership and either the General Partner
or any affiliate, the General Partner anticipates that it will retain separate
counsel or auditors as required for the Partnership for such matter.
7. Conflicts with Respect to Dissolution. The General Partner has the
authority to dissolve the Partnership, without the consent of the Limited
Partners, at any time after January 1, 2005. The General Partner does not
intend to dissolve the Partnership until its equity investments have reached a
level of maturity where their disposition can be considered and the Partnership
can dispose of its portfolio securities. However, the General Partner may
dissolve the Partnership, for its administrative convenience, at a time when
some Limited Partners might prefer to have the Partnership continue its
operations.
F. PARTNERSHIP AND CONTRACTUAL RISKS
1. Funds Available from Offering. The potential profitability of the
Partnership and the risks associated therewith could be affected by the amount
of funds at its disposal. In the event the Partnership receives significantly
less than the maximum proceeds, its ability to invest in a diversity of
investments and obtain a spreading of risk will be lessened and thus the risks
associated with the investment may be increased. See "Investment Objective and
Policies".
2. Possible Loss of Limited Liability. The Partnership Agreement
provides certain rights for the Limited Partners by vote of a
majority-in-interest of the Limited Partners to, among other things, remove and
replace the General Partner, amend the Partnership Agreement, dissolve the
Partnership, approve or consent to certain actions of the General Partner and
approve the sale of all or substantially all of the Partnership's assets. (As
used in this Prospectus, "majority-in-interest" means the Limited Partners
whose aggregate capital contributions represent over 50% of the aggregate
capital contributions of all Limited Partners.) Although under current law in
Delaware, the jurisdiction of the Partnership's organization, such rights are
permitted without resulting in a loss of limited liability of Limited Partners,
in some jurisdictions there may be uncertainty as to whether the exercise of
these rights under certain circumstances could cause the Limited Partners to be
deemed general partners of the Partnership under applicable laws with a
resulting loss of limited liability. If the Limited Partners were deemed to be
general partners of the Partnership, they would be generally liable for
Partnership obligations (other than non-recourse obligations), which could be
satisfied out of their personal assets.
In order to minimize the risk of general liability, the exercise of
these rights by the Limited Partners is subject under the Partnership Agreement
to the prior receipt of an opinion of counsel to the effect that the existence
and exercise of such rights will not adversely affect the status of the Limited
Partners as limited partners of the Partnership. See "Summary of the Partnership
Agreement--Voting Rights". It should be noted that due to present and possible
future uncertainties in this area of partnership law, it may be difficult or
impossible to obtain an opinion of counsel to the effect that the Limited
Partners may exercise certain of their rights without jeopardizing their status
as Limited Partners.
3. Repayment of Certain Distributions. In the event that the
Partnership is unable otherwise to meet its obligations, its Limited Partners
may be required to pay to the Partnership or to pay to creditors of the
Partnership distributions previously received by them to the extent such
distributions are deemed to have been wrongfully paid to them. In addition,
Limited Partners may be required to repay to the Partnership any amounts
distributed which are required to be withheld by the Partnership for tax
purposes.
4. Absence of Market for Partnership Units. Purchasers of Units
should view their interest in the Partnership as a long-term, illiquid
investment. There is not now any market for Partnership Units and no market is
expected to develop. See "Transferability of Units". In addition, Units will
not be redeemable, except that the estate of any deceased Limited Partner will
be able to elect to have the Limited Partner's Units repurchased by the General
Partner or the Partnership for a price equal to the value of the Limited
Partner's interest determined at the next succeeding annual appraisal date,
which will generally occur as of the last day of the fiscal year. To have Units
repurchased, the estate of a Limited Partner must notify the General Partner of
its election to have the Units repurchased within 30 days after the date the
annual appraisal is sent to Limited Partners.
5. Reinvestment. The General Partner has the discretion to reinvest
all Partnership revenues. See "Summary of the Offering--Reinvestment Policy".
6. Dissolution. The General Partner has the right to dissolve the
Partnership without the consent of the Limited Partners at any time after
January 1, 2005. See "Summary of the Offering--Dissolution".
THE PARTNERSHIP
The Partnership was formed on July 10, 1998, as a limited partnership
under Delaware law. The Partnership has registered under the Investment Company
Act as a non-diversified, closed-end investment company. See "Exemptions from
the Investment Company Act of 1940" for a summary of certain exemptions from
the Investment Company Act applicable to the Partnership.
FINANCIAL STATUS OF THE PARTNERSHIP
The Partnership was formed with a minimal capitalization of $100.00,
consisting of capital contributions of $99.00 by the General Partner and $1.00
by the Initial Limited Partner. The Partnership has not commenced operations,
other than to borrow funds from an affiliate of the General Partner to complete
an investment in Orbital Imaging Corporation and invest its start-up monies in
a money market fund sponsored by a subsidiary of ML & Co. The Partnership has
adopted a calendar year for tax reporting purposes.
USE OF PROCEEDS
All of the proceeds of the offering of Units will be contributed to the
Partnership as capital contributions of the Limited Partners. After payment by
the Partnership of organizational and offering expenses, estimated at
$_________, but not exceeding 1.5% of Limited Partners' capital contribution,
the net proceeds will be available for investment.
The Partnership will expend substantially all of its funds for Partnership
investments as soon as practicable. Pending selection of long-term investments,
Partnership funds will be temporarily invested in money market instruments,
securities issued by other investment companies and other marketable
securities. The Partnership may maintain reserves for follow-on investments and
other investment contingencies and, to the extent necessary, to reimburse the
General Partner for expenses it has incurred relating to the Partnership.
INVESTMENT OBJECTIVE AND POLICIES
GENERAL
The principal investment objective of the Partnership is to seek long-term
capital appreciation. It is expected that a significant portion of the
Partnership's assets will be invested in privately-offered equity investments in
U.S. and non-U.S. issuers. The Partnership's investments may include securities
issued in leveraged buyout transactions, financings of companies in an early
stage of development, investments in growth equities and transactions involving
financial restructurings or recapitalizations of operating companies, as
described below. Investments may also be made in real estate opportunities.
Investments in non-U.S. issuers may include opportunities in both the emerging
markets and developed countries. The Partnership's investments may be made
directly in portfolio companies or through the purchase of interests in other
investment funds, including hedge funds. The Partnership may make other
investments in equity and fixed income securities that the General Partner
considers appropriate in terms of their potential for capital appreciation
and/or income generation. There can be no assurance that the investment
objective of the Partnership will be attained.
While privately-offered equity investments of the types expected to be
acquired by the Partnership generally have the potential for achieving greater
appreciation than investments in publicly-traded securities of established
companies, these investments are highly speculative and involve substantial
risks which are increased by the long-term nature and limited liquidity of such
investments. It is anticipated that the proceeds of the offering will be
invested, or committed for investment, within three to four years after the
date the Partnership commences operations. To the extent portfolio investments
are disposed of within two years after the closing of the sale of Units, the
General Partner will consider reinvesting all or a substantial portion of the
proceeds realized by the Partnership. However, the General Partner does not
expect to reinvest proceeds from the liquidation of portfolio investments
(other than temporary investments) occurring more than two years after the
closing of the sale of Units, except in connection with follow-on investments
made in existing portfolio companies.
The Partnership may invest, without limit, in the securities of non-U.S.
corporations and other issuers. While there are no prescribed limits on the
geographic allocation of the Partnership's international investments, the
Partnership expects that a substantial portion of these investments may be made
in developing countries, including developing countries located in the Far
East, the Indian subcontinent, Eastern Europe (including the former Soviet
Union) and Latin America. The General Partner believes that private equity
investments in growing companies in developing countries are consistent with
the Partnership's investment objective and can provide attractive
opportunities.
In addition to its direct investments, the Partnership may invest in U.S.
or non-U.S. investment funds offering opportunities consistent with its
investment objective. The Partnership expects that investments in investment
funds organized or operating outside the United States will be made to
facilitate the Partnership's investments in selected regions or industries. In
addition, such investments may be made when it is considered more efficient to
invest in a particular market on an indirect basis rather than through direct
investments in non-U.S. issuers. The Partnership expects that domestic
investment funds in which it invests may have access to certain investment
opportunities that will not otherwise be available to the Partnership. In
addition, managers of investment funds may have specialized investment skills
regarding certain industries, types of investments or regions. The Partnership
may also invest in hedge funds as described below.
The Partnership may not change its investment objective unless authorized
by the vote of a majority-in-interest of the Limited Partners of the
Partnership.
SOURCES OF INVESTMENT OPPORTUNITIES
The Partnership expects to locate suitable investments from a variety of
sources, including affiliates of the General Partner and third parties.
Although the Partnership cannot predict what percentage of its investments will
be in opportunities presented by affiliates of the General Partner or by third
parties, it expects that a significant portion will be invested in
opportunities presented by affiliates of the General Partner. See "The General
Partner and Its Affiliates--Significant Affiliates of the General Partner".
INVESTMENT FACTORS
Prospective investments will be evaluated by the General Partner upon
selection factors established by the General Partner from time to time. The
following are typical of the factors which may be considered by the General
Partner:
(1) the potential return that may be earned from the investment in
relation to the degree and nature of the risks associated with
such investment (e.g., industry risks or risks related to the
structure of the investment opportunity);
(2) the degree of diversification in the Partnership's investment
portfolio;
(3) the financial stability, creditworthiness and reputation of any
proposed partners or joint venturers;
(4) in the case of indirect investments made through third parties,
the background, experience and, where applicable, prior
performance of the issuer of the constituent securities;
(5) the potential return available in alternative investments; and
(6) other considerations relative to a specific investment being
considered.
TYPES OF INVESTMENTS
Leveraged buyout transactions typically involve the purchase of public or
privately-held corporations, or divisions or subsidiaries of such corporations,
through financing provided by equity investors and debt financing. The
transactions generally involve a significant degree of debt financing and the
highly leveraged financial structure of these investments may introduce
substantial risks to equity investors apart from those directly related to a
company's operations. The Partnership anticipates that it may seek to co-invest
in a number of these investments with ML & Co. or its affiliates.
The Partnership also expects that it will make investments in venture
capital transactions offering investment potential consistent with the
Partnership's objective of seeking long-term capital appreciation. To the
extent the Partnership makes such investments, it expects that these
investments will generally consist of investments in a limited number of new
companies or companies in an early stage of development that the General
Partner believes have significant appreciation and profit potential. Typically
venture capital investments may take from four to seven years to reach a state
of maturity where disposition can be considered.
The Partnership anticipates that it will also invest in "growth equities".
These investments are equity investments in mid- to later-stage companies
seeking to expand current operations or enter new types of business.
The Partnership anticipates that it may also make equity investments in
transactions involving financial restructurings or recapitalizations of
operating companies. It is expected that these investments would be made in
connection with the restructuring or recapitalization of a leveraged company
pursuant to which a portion of its outstanding capitalization is to be
exchanged for, or repaid from the proceeds of the issuance of, one or more
classes of new securities. A company will generally undertake a financial
restructuring or recapitalization transaction because its financial structure
is overly leveraged in light of its current or anticipated operations. These
companies may also be encountering difficulties in meeting current debt service
payments. The Partnership anticipates that it will seek to co-invest in
financial restructuring or recapitalization transactions with ML & Co. or its
affiliates. The Partnership may also invest a portion of its assets in real
estate investments.
In considering international investments, the Partnership may seek
investments particularly in emerging markets, where there is generally more
limited access to capital than in developed countries. Such international
investments may include companies in a variety of sectors, including
manufacturing, telecommunications, infrastructure, and financial and other
services. In reviewing international investment opportunities, the General
Partner will consider factors such as whether companies have an established
record of profitability, proven management capability, the potential for above
average rates of growth, a significant market share and competitive advantages
in their markets (such as barriers to entry). The General Partner will also
review the potential exit strategies with respect to international investments,
and factors particular to the location of a company such as the availability of
trained labor, political, economic and social conditions and tax and regulatory
considerations.
The investment funds in which the Partnership may invest include
investment vehicles that are deemed to be "investment companies" under the
Investment Company Act and similarly managed investment vehicles organized
outside the United States that are outside the scope of such Act. The
Investment Company Act contains limitations on the ability of the Partnership
to invest in entities that are considered "investment companies" for purposes
of such Act, although this limitation does not apply to the Partnership's
investments in U.S.-organized private investment funds. Pursuant to the
Investment Company Act, the Partnership may invest generally no more than 10%
of its total assets in interests in other investment companies (as defined in
such Act) and no more than 5% of its total assets in any one investment
company. To the extent the Partnership and its "affiliated persons" (as defined
in the Investment Company Act) own no more than 3% of the outstanding interest
in an investment company, the Partnership's ownership of the securities of such
investment company is not subject to the foregoing 5% and 10% limitations.
The Partnership may invest in hedge funds. These funds, for purposes of
the Partnership's policy, consist of private investment partnerships or other
private investment funds seeking to maximize total return through use of
various trading strategies. The Partnership anticipates that the hedge funds in
which it may invest will typically operate on a leveraged basis and may reserve
authority to maintain long and short positions in equity and debt securities
and to invest in a variety of financial instruments, including derivative
instruments, warrants, swap agreements and currency-related obligations, and
commodities. The Partnership expects that it will typically re-invest income or
gains generated by investments in hedge funds until such time as the
Partnership disposes of its investments in a particular fund.
The Partnership may make direct investments in high yield non-convertible
corporate debt securities that the General Partner believes have significant
potential for capital appreciation and/or income generation. These securities
may be acquired in restructuring or reorganization transactions in which ML &
Co. or its affiliates are participating as financial adviser or in other
capacities. High yield debt securities, also referred to as "junk bonds", are
regarded as predominantly speculative as to the issuer's ability to make
payments of principal and interest. The Fund also may make investments in funds
that invest in high yield corporate debt securities. The Fund will not invest
more than 30% of its total assets in the aggregate in hedge funds and high
yield non-convertible high yield bonds. See "Risk and Other Important Factors".
After an initial equity investment in transactions described above, the
Partnership anticipates that it may, at times, provide additional or follow-on
funds to the issuer. Follow-on investments may be made pursuant to rights to
acquire additional securities, or otherwise, in order to increase the
Partnership's position in a successful or promising portfolio company. The
Partnership may also be called on to provide follow-on investments for a number
of other reasons including providing additional capital to a company to fully
implement its business plans, to develop a new line of business or to recover
from unexpected business problems.
The Partnership will not invest more than 15% of its assets in any one
portfolio company. For purposes of this limitation, to the extent the
Partnership invests in an investment fund or other pooled investment vehicle,
the 15% limit will be applicable to the underlying investments owned by such
investment vehicle rather than to the Partnership's investment in the
investment vehicle. The equity investments made by the Partnership in portfolio
companies will typically be structured in negotiated private transactions and
will generally be restricted as to the manner of resale or disposition. The
securities acquired by the Partnership will primarily consist of common stocks
and securities convertible into common stocks, but may also consist of a
combination of equity and debt securities and warrants, options and other
rights to obtain such securities or, in the case of high yield debt securities,
the debt securities themselves.
PROPOSED INITIAL INVESTMENTS
As of the date of this Prospectus, the General Partner has approved the
purchase by the Partnership of 14 investments, the details of which are set
forth below. With the exception of the investment in Orbital Imaging
Corporation, which the Partnership has completed with funds borrowed from an
affiliate of the General Partner, the Partnership expects that these
investments will be acquired following the closing of its offering. It is
anticipated that, to the extent permitted by the Investment Company Act or
exemptions therefrom, each of the investments that are deemed suitable
investments for the Offshore KECALP Funds will be allocated proportionately
among the Partnership and the Offshore KECALP Funds based upon uncommitted
capital (or, prior to the closings of the Offshore KECALP Funds, based upon the
estimated uncommitted capital of such funds), although such investments may be
allocated in a different manner at the discretion of the General Partner. The
Offshore KECALP Funds may refrain from investing in one or more of the
investments due to tax or other considerations. The cost of the investments
that the General Partner has approved for investment by the Partnership and, to
the extent suitable, the Offshore KECALP Funds, aggregates approximately $125
million. There can be no assurance that the Partnership will acquire each of
the following investments, or that the Partnership will acquire such
investments in the amounts indicated.
THE ADVENT CENTRAL & EASTERN EUROPE II L.P.
The Advent International Corporation formed the $200 million Advent
Central & Eastern Europe II Limited Partnership ("Fund II") the successor to
the Advent Private Equity Fund-Central Europe LP ("APEF-CE"). It will own a
diversified portfolio of investments in companies mainly in Hungary, Poland,
the Czech Republic and Slovakia, continuing the investment program Advent
established in Central Europe, but extending the investment region to cover
Romania and Croatia. The General Partner has approved an investment of $5.0
million in Fund II.
AMERICAN CELLULAR CORPORATION
American Cellular Corporation ("AmCell") was formed through a leveraged
buyout of PriCellular Corporation ("PriCellular"), a company originally taken
public in December, 1994, whose shares were quoted on the NASDAQ. Spectrum
Equity Investors L.P. II ("Spectrum") and MLC Industries ("MLC") formed the
buyer group and restructured PriCellular's management with individuals from
MLC. AmCell owns and operates FCC-licensed cellular systems primarily in rural
areas of the middle and eastern U.S. The company sells and markets its products
and services principally under the CELLULARONE brand name. The General Partner
has approved an investment of $4.5 million in AmCell.
THE BEACON GROUP ENERGY INVESTMENT FUND II, L.P.
The Beacon Group Energy Investment Fund II, L.P. ("Beacon") is a $1
billion limited partnership fund managed by the Beacon Group, L.L.C., making
equity and/or equity-related investments in energy companies and energy-related
assets across the entire "energy chain" from extraction through transportation
and processing to end use. Beacon manages its risk exposure to the volatility
of energy prices through the use of strategic hedging techniques to minimize
commodity-pricing risk. The General Partner has approved an investment of $15
million in Beacon.
COLONY INVESTORS III, L.P.
Colony Investors III, L.P. ("Colony") is a $1 billion limited partnership
fund managed by Colony Capital, Inc. investing in real estate related
businesses. Three themes define Colony's strategic approach: (i) investing
ahead of the general market by early identification of capital misalignment and
anticipation of areas of cyclical recovery, (ii) capitalizing on significant
complexity, information advantages and proprietary transaction sourcing to
secure investments with limited competitive pressures and (iii) early
identification of optimal exit strategies and intensive management aimed at
maximizing values. The General Partner has approved an investment of $15
million in Colony.
CREST COMMUNICATIONS PARTNERS L.P.
Crest Communications Partners L.P. ("Crest") is a limited partnership fund
seeking to raise $200 million. It is managed by Crest International Holdings
LLC. Crest intends to make majority and significant minority investments in
private equity and equity-related securities of companies in the
telecommunications, media and information-based industries. Crest believes it
has a compelling combination of key strategic relationships, industry knowledge
and private equity investing experience to capitalize on the industry's demand
for private equity engendered by the introduction of new technologies,
decreasing regulation and increasing worldwide demand for telecommunication
products. The General Partner has approved an investment of $5 million in
Crest.
DOLPHIN COMMUNICATIONS FUND, L.P.
Dolphin Communications Fund, L.P. ("Dolphin") is a limited partnership
fund, managed by Dolphin Communications, L.P., seeking to raise $150 million.
Dolphin intends to make equity and equity-related investments, mainly in
private communications companies throughout the United States. Dolphin's
objective is to invest primarily in expansion stage companies with a strong
industry and business franchise, experienced management and potential for
substantial capital appreciation. The General Partner has approved an
investment of $5 million in Dolphin.
INNOVA/98, L.P.
Innova/98, L.P. ("Innova") is a $125 million limited partnership organized
to make equity and equity linked investments in Central European countries.
Innova will have an anchor presence in Poland, with investments in Hungary,
Romania, and the Czech Republic. The Fund is being organized by Innova Capital,
LLC and is the successor to Poland Partners, L.P., a limited partnership
focused on investing in Poland. The General Partner has approved an investment
of $5.0 million in Innova.
INSURANCE PARTNERS II, L.P.
Insurance Partners II, L.P. ("Insurance Partners") is projected to be a
$1.5 billion limited partnership fund managed by Capital Z Partners, L.P. It
will make investments in a diversified global portfolio of insurance, financial
services and healthcare services companies and other related businesses.
Insurance Partners will focus primarily on opportunities within the United
States and Western Europe and, to a lesser extent, the emerging markets of
Asia, Latin America and Eastern Europe. The Zurich Group, a leading global
financial services and insurance organization, has committed $750 million. The
General Partner has approved an investment of $20 million in Insurance
Partners.
JERUSALEM VENTURE PARTNERS, L.P.
Jerusalem Venture Partners, L.P. ("Jerusalem Ventures") is a $75 million
limited partnership fund managed by Oxton Israel Capital Ltd. Jerusalem
Ventures invests in venture capital opportunities to expand Israeli-based
technology companies through international growth and expansion. The portfolio
companies will be selected for their international growth potential due to a
demonstrable competitive advantage typically resulting from superior product
development capabilities, and the ability to attract strong management teams
capable of establishing leading positions among international players. The
General Partner has approved an investment of $2 million in Jerusalem Ventures.
KINGSBURY CAPITAL PARTNERS, L.P. III
Kingsbury Capital Partners, L.P. III ("KCP III") is a $30 million
California-based limited partnership seeking to maximize long term capital
appreciation by investing in U.S. companies with products and services in human
health care. KCP III plans to invest in start-up companies, development stage
companies and companies in the portfolios of the predecessor funds, Kingsbury
Capital Partners, L.P. I and II. KCP III is managed by Kingsbury Associates,
L.P. The General Partner has approved an investment of $10.0 million in KCP
III.
ORBITAL IMAGING CORPORATION
Orbital Imaging Corporation ("Orbimage") is a satellite operator in the
global space-based imagery industry. Orbimage develops and operates a fleet of
small, low-cost, low-altitude-orbit, earth observation satellites to collect,
process and distribute digital imagery of land areas, oceans and weather.
Satellite-provided digital imagery can produce spatial and spectral
information, for forestry, crop health, urban growth and development, the
locations and movements of military assets, land and ocean-based natural
resources, weather patterns and wind conditions. The General Partner has
approved an investment of $5.6 million in Orbimage.
QUAD-C PARTNERS V, L.P.
Quad-C Partners V, L.P. ("Quad-C") is a limited partnership which is
managed by Quad-C Advisors V, L.L.C. Quad-C will focus primarily on taking
majority ownership positions, in conjunction with existing management teams, in
leveraged acquisitions and recapitalizations of middle-market companies with
enterprise values ranging from $50 million to $250 million. Quad-C believes its
consistent, disciplined, team-oriented approach and substantial network of
proprietary contacts is a competitive advantage. The General Partner has
approved an investment of $10.8 million in Quad-C.
VOYAGER CAPITAL FUND I, L.P.
Voyager Capital Fund I, L.P. ("Voyager") is a limited partnership fund,
managed by Voyager Capital, L.L.C. seeking to raise $50 million. Voyager
invests in private information technology companies located primarily in the
Pacific Northwest, a region rich in emerging opportunities spawned by first
generation companies such as Microsoft, Adobe, AT&T Wireless and others but
underserved by venture capital. The General Partner has approved an investment
of $5 million in Voyager.
WINDWARD CAPITAL PARTNERS II, L.P.
Windward Capital Partners II, L.P. ("Windward") is a $500 million limited
partnership fund which will be managed by Windward Capital Partners, L.P.
Windward will make control investments in leveraged buyouts and
recapitalizations primarily of U.S. based industrial companies. Windward
differentiates itself through its extensive network of operating executives who
help source and complete transactions, serve as Board members and/or manage
operations of investee companies. The General Partner has approved an
investment of $15 million in Windward.
TEMPORARY INVESTMENTS
Prior to the expenditure of the capital contributions of the Limited
Partners, and pending distributions of available cash, the Partnership will
invest funds in various types of marketable securities. Reserves maintained for
follow-on investments or to reimburse the General Partner for expenses it has
incurred will also be invested in marketable securities. These securities
include money market instruments and securities issued by taxable or tax-exempt
money market funds (including funds sponsored by affiliates of the General
Partner). An exemptive order obtained from the Securities and Exchange
Commission permits the Partnership to purchase money market instruments, shares
of money market funds and certain other securities from affiliates of ML & Co.
in principal transactions.
REINVESTMENT POLICY
The General Partner has the discretion to reinvest all Partnership
revenues. To the extent portfolio investments are disposed of within two years
after the closing of the sale of Units, the General Partner will consider
reinvesting all or a substantial portion of the proceeds realized by the
Partnership. However, the General Partner does not expect to reinvest proceeds
from the liquidation of portfolio investments (other than temporary
investments) occurring more than two years after the closing of the sale of
Units, except in connection with follow-on investments made in existing
portfolio companies. To the extent that cash received by the Partnership is not
required for such purposes or to reimburse the General Partner for expenses
incurred by it, such cash will be distributed to the Partners at least
annually.
LEVERAGE
The Partnership Agreement permits the General Partner to borrow funds on
behalf of or lend funds to the Partnership. The General Partner will obtain
funds for making Partnership investments when it believes such action is
desirable. The Partnership may also borrow funds to enable it to make follow-on
investments with respect to any direct investments it might make in portfolio
companies. However, it is expected that the Partnership would not otherwise
incur substantial debt with respect to other types of investments. The
Investment Company Act generally limits the amount of indebtedness the
Partnership may incur to 33-1/3% of its gross assets. However, the General
Partner has obtained an order from the Securities and Exchange Commission
applicable to the Partnership which permits the Partnership to enter into
non-recourse loans relating to investments other than securities without regard
to such limitation.
The use of leverage would exaggerate increases or decreases in the
Partnership's net assets. To the extent that Partnership revenues are required
to meet debt service obligations, the Partners may be allocated income (and
therefore tax liability) in excess of cash available for distribution.
LIQUIDATION OF INVESTMENTS
The Partnership intends to liquidate its portfolio investments prior to
dissolution. Leveraged buyout and venture capital investments typically require
from four to seven years to reach a state of maturity before disposition can be
considered. Investments in corporate restructuring and recapitalization
transactions may also require a substantial holding period. Investments in
partnerships involved in real estate investments may also be illiquid for
significant periods, including periods extending for the term of the underlying
investment vehicle. As a result, the Partnership's investments will generally
be held for a significant time period until disposition can be considered
through negotiated private sales or sales made in the public market pursuant to
exemptions from registration under the Federal securities laws. The Partnership
expects to utilize the services of MLPF&S, to the extent permitted by the
Investment Company Act, in executing transactions for the sale of its
investments. In the absence of a specific exemption, the Partnership is
generally precluded by the Investment Company Act from selling portfolio
securities, including high yield debt securities, to MLPF&S on a principal
basis.
INVESTMENT RESTRICTIONS
The Partnership has adopted the following investment restrictions which
may not be changed unless authorized by an amendment of the Partnership
Agreement by the vote of a majority-in-interest of the Limited Partners of the
Partnership. These restrictions provide that the Partnership may not (i) issue
senior securities other than in connection with borrowings described in (iii)
below, (ii) make short sales of securities, purchase securities on margin,
except for use of short-term credit necessary for the clearance of
transactions, or write put or call options, (iii) borrow amounts in excess of
33-1/3% of its gross assets, except that the Partnership may enter into
non-recourse loans relating to investments other than securities without regard
to such limitation, (iv) underwrite securities of other issuers, except insofar
as the Partnership may be deemed an underwriter under the Securities Act of
1933 in selling portfolio securities, (v) invest more than 25% of its Partners'
capital contributions in the securities of issuers in any particular industry,
except for temporary investments in United States Government and Government
agency securities, domestic bank money market instruments and money market
funds, or (vi) make loans to other persons in excess of 33-1/3% of its gross
assets, provided that investments in privately offered debt securities issued
by entities in which the Partnership has an equity participation or with which
the Partnership has contracted to acquire an equity participation are not
considered loans for purposes of this restriction. In addition, the Partnership
will not invest any of its assets in the securities of other registered
investment companies or investment companies organized outside of the United
States, except to the extent permitted by the Investment Company Act.
THE GENERAL PARTNER AND ITS AFFILIATES
KECALP Inc., an indirect wholly-owned subsidiary of ML & Co., is the
General Partner of the Partnership and as such will manage and control the
business and affairs of the Partnership and invest Partnership funds. The
General Partner is a Delaware corporation formed in June 1981 for the purpose
of serving as general partner of employee benefit partnerships such as the
Partnership, and has its business and executive offices at South Tower, World
Financial Center, 225 Liberty Street, New York, New York 10080-6123 (telephone:
(212) 236-7302). Although most of the officers and directors of the General
Partner have been employed in the financial community for many years, the
experience of the General Partner in managing portfolios of investments has
been limited to the management of eight partnerships similar to the
Partnership. Two of the partnerships have recently been dissolved, having
distributed all of the net proceeds of their investment portfolios. Certain of
the officers and directors of the General Partner and members of the Advisory
Committee (as defined below) are expected to participate in the 1999 deferred
compensation plan or purchase Units directly and may participate on an
economically leveraged basis. The directors and principal officers of the
General Partner and their business experience for the past five years are:
John L. Steffens Chairman of the Board and Director
Matthias B. Bowman President, Chief Investment Officer and
Director
Rosemary T. Berkery Vice President and Director
James V. Caruso Vice President and Director
Mark B. Goldfus Vice President and Director
Andrew J. Melnick Vice President and Director
Mary E. Taylor Vice President and Director
Edward J. Higgins Vice President
Margaret T. Monaco Vice President and Chief Administrative
Officer
Robert F. Tully Vice President and Treasurer
Margaret E. Nelson Secretary and Counsel
John L. Steffens, age 56, Chairman of the Board and Director. Mr. Steffens
has served the General Partner as a member of the Board of Directors since
1981. Mr. Steffens is Vice Chairman and Head of the Domestic Private Client
Group of ML & Co. From 1990-1996, Mr. Steffens was Executive Vice President and
Head of the Private Client Group of ML & Co. Prior to that, from July 1985, he
was President of the Consumer Markets Sector of ML & Co.
Matthias B. Bowman, age 49, President, Chief Investment Officer and
Director. Mr. Bowman has served the General Partner in various capacities since
1981. Previously, Mr. Bowman managed a department within the Investment Banking
Group that had responsibility for certain of the Group's principal investments.
Mr. Bowman has been a Managing Director in the Investment Banking Group of ML &
Co. since 1978 and a Vice Chairman since 1993.
Rosemary T. Berkery, age 44, Vice President and Director. Ms. Berkery has
been associated with the Investment Adviser since 1993. Ms. Berkery is a Senior
Vice President of ML & Co. and Co-head of Global Securities Research and
Economics. From 1993 until 1997, Ms. Berkery served as General Counsel of the
Corporate Law Department. From 1988 until 1993, Ms. Berkery was Assistant
General Counsel of MLPF&S and General Counsel to the Investment Banking Group.
James V. Caruso, age 47, Vice President and Director. Mr. Caruso has
served the General Partner in various capacities since 1981 and as a member of
the Board of Directors since 1986. Mr. Caruso is a Director in the Investment
Banking Group of ML & Co., managing the Investment Banking Group Corporate
Accounting Department and the Controller's area of the Partnership Analysis and
Finance Group. He also serves as the chief administrative officer for certain
of ML & Co.'s key employee investment partnerships and is also an officer and
Director of other ML & Co. subsidiaries which serve as general partners or
managers for certain ML & Co. partnerships and other entities.
Mark B. Goldfus, age 51, Vice President and Director. Mr. Goldfus was
elected to the Board of Directors of the General Partner in 1997. Mr. Goldfus
is General Counsel of the Corporate Law Department of ML & Co. and a Senior
Vice President of MLPF&S. From January 1985 until April 1997, Mr. Goldfus was
Vice President of Merrill Lynch Asset Management.
Andrew J. Melnick, CFA, age 56, Vice President and Director. Mr. Melnick
has served the General Partner as a member of the Board of Directors since
1990. Mr. Melnick is a Senior Vice President of MLPF&S and co-head of Global
Research & Economics at ML & Co. From 1988 to March 1997, Mr. Melnick was
Director of the Global Fundamental Equity Research Department.
Mary E. Taylor, age 37, Vice President and Director. Ms. Taylor was elected
to the Board of Directors of the General Partner in February 1998. Ms. Taylor is
a Senior Vice President, Human Resources of ML & Co. From 1989 until 1998, Ms.
Taylor served in the Investment Banking Group of ML & Co., most recently as a
Managing Director and relationship manager for major healthcare services
companies.
Edward J. Higgins, age 46, Managing Director and Investment Officer of
KECALP. Mr. Higgins joined the Investment Advisor in 1998. Mr. Higgins
previously has been a Managing Director in the Investment Banking Group of ML &
Co. From 1990 to 1998, he was responsible for a number of the firm's major
global corporate clients in the manufacturing, natural resources,
telecommunication and transportation. He has directed ML's efforts as global
coordinator for the privatization of Indonesia's international and domestic
telecommunications providers and has been responsible for various aspects of
the firm's world-wide privatization activities.
Margaret T. Monaco, age 50. Ms. Monaco has served the General Partner as
Vice President and Chief Administrative Officer since 1998. Ms. Monaco was the
Principal of Probus Advisors, a financial and management consulting business,
from 1993 until joining KECALP Inc. Previously, she was Vice President and
Treasurer of The Limited, Inc. She is a director of Barnes & Noble, Inc.
Robert F. Tully, age 50, Vice President and Treasurer. Mr. Tully has
served the General Partner as a Vice President and Treasurer since 1993. Mr.
Tully has been a Vice President in the Investment Banking Group of ML & Co.
since 1989.
Margaret E. Nelson, age 48, Secretary and Counsel. Ms. Nelson has served
the General Partner as Counsel and Corporate Secretary since 1993. Ms. Nelson
is a Director and Senior Counsel in the Corporate Law Department of the General
Counsel's Office of ML & Co.
In addition, the General Partner has an advisory committee (the "Advisory
Committee") to assist the directors and principal officers of the General
Partner in evaluating investment opportunities presented to the Partnership.
The members of the Advisory Committee and their business experience for the
past five years are:
Kevin K. Albert
James J. Burke, Jr.
Kevin M. Cox
Paul R. Galietto
Alain Lebec
G. Kelly Martin
Alison J. Mass
Steven M. Milunovich
Daniel T. Napoli
Stephen I. Silverman
Charles K. Sweeney
Nathan C. Thorne
Daniel P. Tully
Kevin K. Albert, age 45. Mr. Albert was appointed to the Advisory
Committee in April 1997. Mr. Albert is head of the Private Equity Group of ML &
Co. Mr. Albert has also served as a Managing Director in the Investment Banking
Group since 1988 and as a Vice President in such group from 1983 to 1988.
James J. Burke, Jr., age 47. Mr. Burke has served the General Partner in
various capacities since 1987. Mr. Burke is a Partner and Director of
Stonington Partners, Inc., a private investment firm, a position that he has
held since 1993. He has also been a member of the Board of Directors of MLCP
since 1987. He was the Managing Partner of MLCP from 1993 to July 1994 and
President of MLCP from 1987 to 1994. Mr. Burke was also a Managing Director of
the Investment Banking Division of MLPF&S from 1985 to 1994.
Kevin M. Cox, age 45. Mr. Cox has served the General Partner as a member
of the Advisory Committee since 1990. Mr. Cox is a Managing Director and head
of Capital Commitment Management in Debt Markets. Prior to that he was head of
the Leveraged Finance Group in New York and of MLPF&S's Investment Banking
office in Tokyo. Mr. Cox, who has been with Merrill Lynch since 1984, has also
held various positions in the Merchant Banking, High Yield and Treasury/Finance
departments.
Paul R. Galietto, age 41. Mr. Galietto was appointed to the Advisory
Committee in July 1998. Mr. Galietto is a Managing Director of Merrill Lynch's
International Equities Group (U.S.) which is responsible for the delivery of
non-U.S. equity research and capital markets products to U.S.-based
institutional investors. He also has responsibility for non-dollar trading in
the U.S. Mr. Galietto has more than 15 years experience in institutional equity
sales and management including both U.S. domestic and international equity
products.
Alain Lebec, age 48. Mr. Lebec has served the General Partner in various
capacities since 1987. Mr. Lebec is a Vice Chairman of the Investment Banking
Group of ML & Co. Mr. Lebec joined ML & Co. as a Managing Director in the
Investment Banking Group, and has been co-head of its Mergers and Acquisitions
Department from 1988 to 1993 and head or co-head of its Telecommunications,
Media and Technology Department from 1993 to 1996 before being named a Vice
Chairman of Investment Banking in 1996.
G. Kelly Martin, age 39. Mr. Martin was appointed to the Advisory
Committee in April 1997. Mr. Martin is Chief Operating Officer of ML & Co.'s
Corporate and Institutional Client Group, a position he has held since 1993,
and serves as CICG's Chief Technology Officer.
Alison J. Mass, age 39. Ms. Mass has served the General Partner as a
member of the Advisory Committee since 1994. Ms. Mass is a Managing Director in
the Institutional Client Division of ML & Co. She has responsibility for the
New York Institutional Equity Sales Group. Ms. Mass joined ML & Co. in 1990.
Steven M. Milunovich, age 37. Mr. Milunovich was appointed to the Advisory
Committee in July, 1998. Mr. Milunovich has been a Managing Director in Merrill
Lynch's Global Securities Research & Economics Group and coordinator of global
technology research since 1997. Previously, he was a Managing Director with
Morgan Stanley. Since 1989, Mr. Milunovich has ranked first on the Institutional
Investor All-America Research Team for his research on large computers; he has
been a team member since 1986.
Daniel T. Napoli, age 49. Mr. Napoli was appointed to the Advisory
Committee in July 1998. Mr. Napoli is a Senior Vice President of Merrill Lynch
& Co. and a member of the Executive Management Committee. Mr. Napoli is
Chairman of the Merrill Lynch Risk Council, which reviews all risk and
institutional market controls, and he is head of Global Risk Management, a
position he has held since 1987.
Stephen I. Silverman, age 47. Mr. Silverman was appointed to the Advisory
Committee in April 1997. Mr. Silverman is a Portfolio Manager of the Merrill
Lynch Pacific Fund, a position he has held since 1983, and the Portfolio
Manager of Merrill Lynch Global Value Fund.
Charles K. Sweeney, age 56. Mr. Sweeney has served the General Partner as
a member of the Advisory Committee since 1993. Mr. Sweeney joined MLPF&S in
1965 as a member of the Junior Executive Training Program. Since 1966, he has
continued to work as a Financial Consultant within both the Private Client and
Capital Markets Groups of the firm. He was elected a Senior Vice President
Investments in 1989.
Nathan C. Thorne, age 44. Mr. Thorne has served the General Partner as a
member of the Advisory Committee since 1995. Mr. Thorne has been a Managing
Director in the Investment Banking Group of ML & Co. since 1986. Mr. Thorne has
managed many different departments within MLPF&S's Investment Banking Group
including the High Yield Finance and Restructuring Group and is presently head
of a department within the Investment Banking Group that has responsibility for
certain of the Group's principal investments.
Daniel P. Tully, age 66. Mr. Tully was appointed to the Advisory Committee
in 1998. Prior to April 15, 1997 when he retired from ML & Co., Mr. Tully was
Chairman of the Board of ML & Co. Mr. Tully was Chief Executive Officer of ML &
Co. from May 1992 until December 1996. He became Chairman of the Board and CEO
in June 1993. Mr. Tully was President and Chief Operating Officer of ML & Co.
from 1985 until 1992.
AUTHORITY OF THE GENERAL PARTNER
The General Partner will have the authority to make all decisions
regarding the acquisition, financing, operation, management and ultimate
disposition of Partnership investments, assets and properties. The General
Partner will also be responsible for the general supervision and administration
of Partnership activities. In investing the Partnership's capital, the General
Partner will consider those investments proposed by unrelated third parties as
well as opportunities presented to the Partnership by affiliates of the General
Partner. All investments chosen by the General Partner for the Partnership,
whether from third parties or from other opportunities presented to the
Partnership by affiliates, will be evaluated independently of each other and
chosen only if the General Partner believes they are suitable for and in the
best interest of the Partnership. The General Partner is unable to predict to
what extent Partnership investments will be made in affiliate-proposed
investments or investment opportunities proposed by unrelated third parties.
The General Partner will execute or cause to be executed any and all
agreements, purchase orders, debt agreements, documents, certificates and other
instruments necessary for the purchase of, and investment in, assets by the
Partnership.
FINANCIAL STATUS OF THE GENERAL PARTNER
The General Partner was formed with minimal capitalization. The General
Partner has agreed to use its best efforts at all times to maintain its net
worth at a level necessary to meet any present or future requirements of the
Federal income tax law regarding the net worth of a general partner of a
limited partnership. ML & Co. will issue a demand promissory note to the
General Partner in an amount necessary to meet current requirements and provide
the General Partner with such funds as are necessary to meet its other
obligations under the Partnership Agreement. See "Financial Statements".
SIGNIFICANT AFFILIATES OF THE GENERAL PARTNER
MLPF&S and the General Partner are both wholly-owned subsidiaries of ML &
Co. It is anticipated that ML & Co. and the Investment Banking Group within
MLPF&S will be important sources of Partnership investments, and that other
groups within MLPF&S and other subsidiaries of ML & Co. may also be sources of
investments. Any one of these sources, from time to time, may also be
co-investors with the Partnership. See "Risk and Other Important Factors".
PRIOR PARTNERSHIPS
The General Partner also acts as the general partner or investment adviser
for Merrill Lynch KECALP L.P. 1997, Merrill Lynch KECALP International L.P.
1997 (together, the "1997 Partnerships"), Merrill Lynch KECALP L.P. 1994 (the
"1994 Partnership"), Merrill Lynch KECALP L.P. 1991 (the "1991 Partnership"),
Merrill Lynch KECALP L.P. 1989 (the "1989 Partnership"), Merrill Lynch KECALP
L.P. 1987 (the "1987 Partnership") and Merrill Lynch KECALP L.P. 1986 (the
"1986 Partnership" and, together with the other partnerships, the "KECALP
Partnerships"). The General Partner also acted as the general partner for
Merrill Lynch KECALP L.P. 1984 (the "1984 Partnership") and Merrill Lynch
KECALP Growth Investments Limited Partnership 1983 (the "1983 Partnership"),
which were liquidated during 1997 following the disposition of their remaining
investments. The limited partnership interests in these partnerships were
offered only to certain employees and directors of ML & Co. and its
subsidiaries. Set forth in the Appendix is information concerning these
investments by the partnerships. This information should not be construed to
indicate that the Partnership will or could make investments that will produce
results comparable to those of the investments made by the earlier
partnerships. Investors should note that the average annual return of an
investment in the KECALP Partnerships may be adversely affected by delays in
the making and realizing of investments. The Partnership expects that the types
of investments it will make will more closely resemble those of the 1997
Partnerships than the earlier partnerships and that, like the 1997
Partnerships, it may invest in international investments and investment funds
to a greater extent than have other KECALP Partnerships.
TAX ASPECTS OF INVESTMENT IN THE PARTNERSHIP
EACH PROSPECTIVE LIMITED PARTNER IS URGED TO CONSULT A PERSONAL TAX ADVISOR
WITH RESPECT TO THE MATTERS DISCUSSED BELOW AS THEY RELATE TO SUCH PROSPECTIVE
LIMITED PARTNER'S CIRCUMSTANCES. THE FOLLOWING ANALYSIS SHOULD NOT BE USED AS A
SUBSTITUTE FOR CAREFUL TAX PLANNING.
SCOPE AND LIMITATION
The following discussion of the Federal income tax consequences of an
investment in the Partnership is applicable only to U.S. citizens and residents
and is based upon the existing provisions of the Internal Revenue Code of 1986,
as amended to date (the "Code") and existing interpretations thereof. The Code
or the interpretation of its provisions by the IRS or courts could change. Any
such changes may be retroactive and could significantly modify the disclosure
below. In addition, the following discussion does not address the federal gift
or estate tax consequences of the sale, transfer or assignment of an investment
in the Partnership.
The Code provides that a partnership is not itself subject to Federal
income taxation. Rather, each Limited Partner is required to take into account
in computing his or her Federal income tax liability his or her allocable share
of the Partnership's capital gains and losses and other income, losses,
deductions, credits and items of tax preference for any taxable year of the
Partnership ending within or with the taxable year of such Limited Partner,
without regard to whether he or she has received or will receive any
distribution from the Partnership. Partnership revenues may be retained by the
Partnership to be applied to working capital reserves, or used to reduce
outstanding debts or borrowings or Partnership expenses. In addition, some of
the investment funds in which the Partnership may invest, including hedge
funds, may re-invest all or a portion of realized capital gains or other income
rather than making cash distributions. Also, certain of the temporary
investments which may be made by the Partnership or any investment partnership
in which the Partnership invests include zero coupon bonds or other obligations
having original issue discount. For Federal income tax purposes, accrual of
original issue discount will be attributable to Partners as interest income
even though the Partnership does not realize any cash flow as a result of such
accrual.
PUBLICLY TRADED PARTNERSHIP STATUS. A partnership whose interests are
considered readily tradable (a "publicly traded partnership" or "PTP") is taxed
as a corporation for Federal income tax purposes. The IRS has issued
regulations that set forth certain safe harbors for transfers that will not be
considered to cause a partnership's interests to be readily tradable. The
Partnership Agreement provides that the Partnership will satisfy one of the
safe harbors provisions in such regulations. The Partnership Agreement also
provides that any transfer of Units to a market maker will be null and void
unless the market maker certifies that it is holding such Units for investment
purposes. The General Partner intends to exercise its discretion regarding
transfers in a manner designed to prevent the Partnership from becoming a PTP,
which could delay, perhaps substantially, a Limited Partner's transfer of his
or her Units. Accordingly, it is not anticipated that the Partnership will be a
PTP. However, the General Partner must rely on certain representations of
Limited Partners with respect to transfers and there can be no assurance that
the General Partner will be successful in its efforts.
The Partnership would be taxable on its income if it were treated as a
corporation. In addition, capital gains and losses and other income and
deductions of the Partnership would not be passed through to the Limited
Partners, and the Limited Partners would be treated as shareholders for tax
purposes. Any distributions by the Partnership to each Limited Partner would be
taxable to that Limited Partner as a dividend, to the extent of the
Partnership's current and accumulated earnings and profits, and treated as gain
from the sale of a Partnership interest to the extent it exceeded both the
current and accumulated earnings and profits of the Partnership and the Limited
Partner's tax basis for his or her interest.
---------------------
In the opinion of counsel, the Partnership will be treated as a
partnership for Federal income tax purposes assuming compliance with the
operative documents and the accuracy of any required representations provided
for in such documents. The remainder of the discussion under "Tax Aspects of
Investment in the Partnership" is based on the assumption that the Partnership
will be classified as a partnership for Federal income tax purposes and is
generally limited to the Federal income tax aspects of investment in the
Partnership.
GENERAL PRINCIPLES OF PARTNERSHIP TAXATION
A Partner's share of items of Partnership income are included directly in
the computations of the Partner's adjusted gross income and taxable income. The
Partner's share of any Partnership deductions or losses may, subject to certain
exceptions discussed below offset the Partner's allocable share of Partnership
income and, if sufficient in amount, a Partner's income from other sources.
See "Basis of Partnership Interest"; "`At Risk' Limitation on Deducting
Losses"; "Passive Activity Loss Limitation"; "Deductibility of Operating
Expenses"; and "Limitations on the Deductibility of Interest".
As a general rule, any cash distributions or constructive distributions
(e.g., a decrease in the Partner's share of Partnership liabilities) by the
Partnership will be taxable to a Partner only to the extent that such
distributions exceed the tax basis of the recipient Partner in the year of
receipt or are received in exchange for the recipient Partner's interest in
"unrealized receivables" or substantially appreciated "inventory items" under
Section 751 of the Code. Conversely, the mere absence of cash or constructive
distributions will not, of itself, limit or affect the recognition of taxable
income by Partners. See "Basis of Partnership Interest" and "Transfer of a
Partnership Interest" below.
BASIS OF PARTNERSHIP INTEREST. A partner's basis for his or her
partnership interest represents a measure of the partner's "investment" in the
partnership at any given time for Federal income tax purposes. A Limited
Partner's basis in his or her interest in the Partnership will initially be the
amount of such Partner's cash contribution to the capital of the Partnership,
plus such Partner's share, as discussed below, of any Partnership liabilities.
Such basis will be increased by (i) the Partner's share of Partnership income
(including capital gain and tax-exempt income) and (ii) any increase in the
Partner's share of Partnership liabilities. A Partner's basis will be decreased
(but not below zero) by (i) the Partner's share of cash distributions, (ii) the
Partner's share of Partnership losses and deductions, (iii) any decrease in the
Partner's share of Partnership liabilities, and (iv) the Partner's share of
Partnership expenditures that cannot be deducted or capitalized. Distributions
of property other than cash will also reduce a Partner's basis in the
Partnership, although the reduction can be affected by the Partnership's own
tax basis in such property, and the Partnership does not anticipate making
distributions to Partners of any property other than cash.
Debt financing is expected to be used by investment funds in which the
Partnership will acquire interests. Such borrowings will usually be nonrecourse
liabilities by their terms secured solely by the assets of such other
investment funds and for which no Partner will have any personal liability.
Each Limited Partner will be permitted (with certain restrictions) to include
his or her allocable share of any such nonrecourse liabilities in the basis of
his or her Partnership interest. However, such borrowings generally will not
increase the amount the Limited Partner is considered "at risk" for purpose of
the deductibility of Partnership losses. See "`At Risk' Limitation on Deducting
Losses".
If an allocation of a loss to a Partner would reduce the tax basis of the
Partner's interest in the Partnership below zero, the recognition of such loss
is deferred until such time as the recognition of such loss would not reduce
the Partner's basis below zero. To the extent that Partnership cash
distributions, or any decrease in a Partner's share of the nonrecourse
liabilities of the Partnership (which is considered a constructive cash
distribution to the Partners), would reduce a Partner's basis below zero, such
distributions are treated as gain from the sale of the Partnership Interest. As
discussed below, the character of the gain can be affected by the Partnership's
assets and the length of time the Partner has held his or her interest.
`AT RISK' LIMITATION ON DEDUCTING LOSSES. Individuals and certain closely
held corporations can only deduct their share of partnership losses to the
extent of the amount they are considered "at risk" with respect to the
partnership investment or activity generating the loss at the end of the
taxable year. The "at risk" rules are complex, but, in general, limit the
losses and deductions that a partner can claim from an investment or activity
to the amount the partner could actually lose from such investment or activity.
As part of its annual tax reporting, the Partnership will disclose to each
Limited Partner the amount of any of its losses allocated to such Partner that
are subject to the "at risk" rules. Prospective Limited Partners should
consider the effect of the "at risk" rules in arranging any financing for a
purchase of Units.
PASSIVE ACTIVITY LOSS LIMITATION. Under the passive activity loss
provisions of the Code, losses and credits from trade or business activities in
which a Limited Partner does not materially participate (i.e., "passive
activities") are treated as passive activity losses. Generally such losses and
credits cannot be used to offset salary or other earned income, active business
income or "portfolio income" (such as dividends, interest, royalties and
nonbusiness capital gains) of the Limited Partner. Losses and credits suspended
under this limitation can be carried forward indefinitely and used in later
years against income from passive activities and, in certain limited
circumstances, against income from other sources. The passive activity loss
limitation applies to individuals, estates, trusts, and most personal service
corporations. A modified form of the rule also applies to closely held
corporations.
The primary activity of the Partnership will be the investment in and
holding and eventual disposition of privately offered securities acquired in
connection with direct equity investments. Prior to the commitment of
Partnership funds to such investments, and pending distributions of available
cash to the Partners, the Partnership will temporarily invest funds in various
types of marketable securities. Any ordinary income (such as interest or
dividend income) derived from either of such investment activities, or capital
gains realized upon disposition of such investments, will be treated as
portfolio income. Portfolio income is not considered passive income and, thus,
cannot be offset by a Partner's passive losses from other activities of the
Partnership (such as investment in certain other investment funds) or other
sources. Accordingly, a prospective Limited Partner should not invest in the
Partnership with the expectation of using his or her proportionate share of
portfolio income and capital gain from the Partnership to offset losses from
his or her interest in passive activities. However, a Limited Partner's share
of any capital loss from portfolio investments or any ordinary expense
(including any interest expense) allocable to portfolio investments will not be
subject to the passive loss limitation rules.
ALLOCATIONS AND DISTRIBUTIONS. A Limited Partner's share of the income,
gain, loss and deduction for Federal income tax purposes is generally that
specified in the partnership agreement, assuming the partnership agreement
satisfies certain mechanical requirements. However, the IRS has the ability to
disregard certain allocations that would cause a Limited Partner's share of
income or loss for tax purpose to differ from a partner's actual economic
interest in the partnership's income or loss. Because the Partnership Agreement
of the Partnership satisfies the mechanical requirements of allocations to be
respected and the allocations are intended to be consistent with each Partner's
economic interest, the allocations of income contained in the Partnership
Agreement should be respected by the IRS. However, any determination by the IRS
that a different allocation is required would not alter the distribution of
cash flow under the Partnership Agreement.
Generally, retroactive allocations of income, gain, deductions, losses and
credits are not permitted under the Federal income tax laws. Accordingly, under
the Partnership Agreement, items of income, gain, deduction, loss or credit
will be allocable to Partners only for the quarterly periods of the tax year in
which they are members of the Partnership. When the Partnership recognizes a
transfer of an interest by a Limited Partner the distributive share of any
Partnership income, gain, loss, deduction or credit for the taxable year will
be allocated between the transferor Partner and the transferee based upon the
quarterly periods during the taxable year that each owned such Partnership
interest.
DEDUCTIBILITY OF OPERATING EXPENSES. The Code allows individual investors
a deduction for itemized expenses incurred for the production of income only to
the extent such expenses, combined with certain other itemized deductions, in
the aggregate exceed 2% of adjusted gross income. In addition, such expenses
are not deductible for purposes of calculating an individual's alternative
minimum taxable income. Accordingly, to the extent certain Partnership expenses
are deductible not as trade or business expenses, but rather as investment
expenses, a Limited Partner might not be able to fully claim their
proportionate shares of these expenses as an itemized deduction on their
individual income tax returns, causing such Partner to recognize more income.
However, the effect of this limitation will to some extent be mitigated by the
fact that the General Partner is responsible for paying Partnership certain
operating expenses. Moreover, the General Partner may attempt to minimize the
effect of the investment expense limitation provision by investing funds not
invested in equity investments in short term tax exempt securities. The
Partnership's distributive share of investment expenses incurred by any
investment fund in which the Partnership invests will pass through to
individual Partners as investment expenses subject to this deduction
limitation.
ORGANIZATION AND SYNDICATION EXPENSES. For Federal income tax purposes, a
partnership must capitalize organizational or syndication expenses. Expenses
incurred in selling or promoting the sale of interests in the partnership (such
as most of the printing costs and professional fees incurred in connection with
preparation and registration of this Prospectus), can only be deducted at the
termination of the Partnership. However, a partnership can amortize amounts
paid or incurred to organize the partnership over a period of 60 months and
claim a deduction for such amortization amount. Organizational expenses of a
partnership include legal fees for negotiation and preparation of the
partnership agreement; accounting fees for establishing a partnership
accounting system; and necessary filing fees.
The Partnership will pay expenses in connection with its organization and
the sale of Units in an amount up to 1.5% of the proceeds of this offering. The
General Partner will allocate expenses between organizational expenses and
syndication expenses. However, there can be no assurance that the IRS would not
challenge such allocation, attributing a greater amount of such expenditures to
nondeductible syndication costs.
TRANSFER OF A PARTNERSHIP INTEREST. The amount of gain recognized on the
sale by a Limited Partner of his or her interest in the Partnership generally
will be the excess of the sales price received over his or her adjusted basis
in such interest. Generally, the gain or loss from the sale of a partnership
interest is treated as gain or loss from a capital asset. However, to the
extent the proceeds of sale are attributable to ordinary gains inside the
Partnership or to assets the sale of which would cause the Partnership to
recognize ordinary income or loss, that portion of the sale is not treated as
the sale of a capital asset and any gain attributable to the proceeds will be
treated as ordinary income. With respect to the allocation of tax items between
the transferor and the transferee in the year in which an interest is
transferred, see "Allocations and Distributions" above.
Section 754 of the Code permits a partnership to make an election to
adjust the basis of the partnership's assets in the event of a distribution of
partnership property to a partner or transfer of a partnership interest.
Depending upon particular facts at the time of any such event, such an election
could increase the value of a partnership interest to the transferee (because
the election would increase the basis of the partnership's assets for the
purpose of computing the transferee's allocable share of partnership tax items)
or decrease the value of a partnership interest to the transferee (because the
election would decrease the basis of the partnership's assets for that
purpose). Because an election under Section 754, once made, cannot be revoked
without obtaining the consent of the IRS, because such an election may not
necessarily be advantageous to all the Limited Partners, and because of the
accounting complexities that can result from having such an election in effect,
it is unlikely that the General Partner would make such an election on behalf
of the Partnership. The General Partner will advise the Limited Partners prior
to any election under Section 754.
LIQUIDATION OF THE PARTNERSHIP. It is expected that Partners will only
receive cash upon the liquidation of the Partnership, and accordingly, a
Partner generally will not recognize gain or loss from the distribution of
cash. Rather, the Limited Partner will recognize gain or loss only upon the
sale by the Partnership of its assets. If the Partnership were to distribute
assets in kind to the Partners, such distributions could result in the deferral
of built-in gain or loss into such assets so distributed. However, under
certain circumstances a portion of such gain or loss could be realized by the
Limited Partners receiving such in kind distribution. Accordingly, any Limited
Partner receiving a distribution of property other than cash in liquidation of
his or her interest should consult with his or her tax advisor to determine the
tax consequences to such Partner from the distribution.
TAX RETURNS AND INFORMATION; AUDITS. The Partnership will use the calendar
year as its tax year and an accrual method of accounting for Federal income tax
purposes. The Partnership is required to (i) file annually an information
return on Form 1065 and (ii) provide to each Partner, following the close of
the Partnership's taxable years, a Schedule K-1 indicating such Partner's
allocable share of the Partnership's income, gain, losses, deductions, credits,
and items of tax preference and such additional information as is reasonably
necessary to permit the Limited Partners to prepare their own Federal, state
and local tax returns as soon as practical after the close of each year.
Assignees of Limited Partners who are not admitted to the Partnership will not
receive any tax information from the Partnership.
However, it is expected that the Partnership will not receive all the
annual tax information from investment funds in which the Partnership invests
in sufficient time to permit the Partnership to incorporate such information
into its annual tax information and distribute such information to Limited
Partners prior to April 15 of each year. As a result, Limited Partners may be
required to obtain extensions for filing Federal, state and local income tax
returns each year. Limited Partners 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 Partnership. To the extent
practicable, the Partnership anticipates that it will provide estimated annual
tax information in a timely manner in order to assist Limited Partners in
estimating their tax liabilities. The Partnership's ability to make such
estimates will be dependent upon its ability to obtain estimated annual tax
information from the investment funds. Employees who participate in the1999
deferred compensation plan will not, themselves, be Limited Partners by virtue
of their participation in such plan.
The Code provides for a single unified audit of partnerships at the
partnership level rather than separate audits of individual partners.
Generally, the final result of a Partnership audit will be binding on all
Partners. In limited circumstances, certain partners may be permitted to
separately contest any audit of the Partnership.
OTHER TAX CONSIDERATIONS
FOREIGN SOURCE INCOME, FOREIGN TAX CREDITS AND INVESTMENTS IN PASSIVE
FOREIGN INVESTMENT COMPANIES. Dividends and interest received by the
Partnership from foreign investments generally will be considered foreign
source income and may be subject to foreign withholding taxes. Each Limited
Partner may be entitled to credit his or her respective portion of any such
taxes against his or her U.S. federal income taxes or to deduct such taxes from
his or her U.S. taxable income. The amount of foreign withholding taxes that
may be credited against a Limited Partner's U.S. federal income tax liability
in any particular year will be limited, as a general rule, to an amount equal
to the Limited Partner's U.S. federal income tax rate multiplied by such
Limited Partner's foreign source taxable income. This limitation must be
applied separately to certain categories of foreign source income, one category
of which is foreign source "passive income". For this purpose, foreign source
"passive income" includes dividends and interest. As a consequence, although
certain Limited Partners may be able to carry back or carry forward their
unused foreign tax credits, certain Limited Partners may not be able to claim a
foreign tax credit for the full amount of their proportionate share of foreign
taxes paid by the Partnership. Any gain or loss recognized on the sale or
exchange of a foreign investment generally will be considered United States
source income. Accordingly, if a foreign jurisdiction were to impose a tax on
such gain, Limited Partners may not be able to derive effective U.S. foreign
tax benefits in respect of such tax.
The Partnership may invest directly or indirectly in equity interests of
an investment company organized under foreign law that is treated as a passive
foreign investment company ("PFIC"). Generally, income from a PFIC in excess of
a certain average amount and any gain on sale or exchange of an interest in a
PFIC is subject to an additional level of tax calculated in a manner that could
substantially reduce, eliminate, or even exceed such income or gain. Such
income or gain earned by the Partnership is treated as earned by the Limited
Partners and a Limited Partner that sells or exchanges an interest in the
Partnership is deemed to have sold or exchanged his or her pro rata share of
any PFIC stock held directly or indirectly by the Partnership. An election (the
"QEF Election") can be made by a U.S. shareholder of a PFIC that would
eliminate such additional tax but would require a current inclusion by such
shareholder of its share of the earnings of the PFIC, whether or not such
earnings are distributed by the PFIC. The QEF Election is permitted only if the
PFIC makes certain information available to shareholders. It is uncertain
whether any PFIC in which the Partnership acquires an interest will provide
such information. It should be noted, however, that only the first U.S. person
that owns stock in a PFIC may make the QEF election. Accordingly, Limited
Partners cannot make such election individually with respect to shares owned by
the Partnership, and if the Partnership owns its interest in a PFIC through
another U.S. partnership, the election can only be made by that other
partnership. Any such election by the first U.S. shareholder would bind all
direct and indirect partners of such partnership. To the extent that the
Partnership is eligible to make a QEF Election with respect to a particular
PFIC, the Partnership intends to make such an election.
LIMITATIONS ON THE DEDUCTIBILITY OF INTEREST. "Investment interest"
generally is deductible by a Limited Partner only to the extent of "net
investment income" with the excess, subject to certain limitations, carried
forward and deductible in subsequent taxable years. Investment interest is
broadly defined as interest which is paid or accrued on indebtedness incurred
or continued to purchase or carry property held for investment including
generally the purchase by Limited Partners of Units. Interest taken into
account in determining a Limited Partner's passive losses, including generally
any interest incurred or continued by a Limited Partner to purchase or carry an
interest in a partnership to which the passive loss rules apply, is not
considered investment interest for purposes of the investment interest
limitations. In addition to the "investment interest" limitation described
above, interest paid by a Limited Partner or a related person on indebtedness
incurred or continued to purchase or carry tax exempt obligations cannot be
deducted.
FRINGE BENEFITS. Employee "fringe benefits" generally are includable in
gross income. Under the Partnership Agreement, the General Partner may be
responsible for the payment of certain expenses. Since Units are being offered
solely to ML & Co. and its employees and non-employee directors, it is possible
that the IRS would view the General Partner's payment of such expenses as an
indirect method of compensating employee Limited Partners (i.e., a fringe
benefit). If the IRS were successful in such characterization, a Limited
Partner's pro rata share of such expenses (equal to the fair market value of
the underlying goods and services rendered the Limited Partner) might be
includable in the Limited Partner's gross income as additional compensation.
The Limited Partner may not, however, be allocated a deduction for such
expenses in an amount corresponding to such income inclusion because some of
such expenses would be attributable to syndication expenses, or investment
expenses subject to the limitation on the deductibility of itemized
miscellaneous expenses, or treated as part of the capitalized cost of the
Partnerships portfolio assets. See "General Principles of Partnership
Taxation--Deductibility of Operating Expenses; Organization and Syndication
Expenses" above.
STATE AND LOCAL TAXES. State and local laws often differ from Federal
income tax law with respect to the treatment of specific items of income, gain,
loss, deductions and credit. A Limited Partner's distributive share of the
taxable income or loss of the Partnership generally will be required to be
included in determining his or her reportable income for state and local tax
purposes in the jurisdiction in which he or she is a resident. In addition, a
number of other states in which the Partnership may do business or own
properties may impose a tax on nonresident Limited Partners determined with
reference to their allocable shares of Partnership income derived by the
Partnership from such state. Partners may be subject to tax return filing
obligations and income, franchise, estate, inheritance or other taxes in other
jurisdictions in which the Partnership does business, as well as in their own
states or localities of residence or domicile. Also, any tax losses derived
through the Partnership from operations in such states may be available to
offset only income from other sources within the same state. To the extent that
a nonresident Limited Partner pays tax to a state by virtue of Partnership
operations within that state, he or she may be entitled to a deduction or
credit against tax owed to his or her state of residence with respect to the
same income. In addition, estate or inheritance taxes might be payable in a
jurisdiction in which the Partnership owns property upon the death of a Limited
Partner. Prospective Limited Partners are urged to consult their tax advisors
with respect to possible state and local income and death tax consequences of
an investment in the Partnership.
BACKUP WITHHOLDING. When a Unit is sold through a broker, the proceeds of
the sale may constitute a "reportable payment" under the Federal income tax
rules regarding backup withholding. Backup withholding, however, would apply
only if the Limited Partner (i) failed to furnish and certify his or her Social
Security number or other taxpayer identification number to the person subject
to the backup withholding requirement (e.g., the broker) or (ii) furnished an
incorrect Social Security number or taxpayer identification number. If backup
withholding were applicable to a Limited Partner, the person subject to the
backup withholding requirement would be required to withhold 31% of each
distribution to such Partner and to pay such amount to the IRS on behalf of
such Partner.
PARTNERSHIP ALLOCATIONS AND DISTRIBUTIONS
As discussed under "Partnership Expenses" above, the Partnership has
requested an exemptive order from the SEC governing the expenses to be paid by
the Partnership. If such order is issued, all items of Partnership income,
gain, deduction, loss or credit will be allocated to the Partners in proportion
to their capital contributions. If the SEC does not issue this exemptive order,
the General Partner will receive a 1% interest in all items of Partnership
income, gain, deduction, loss and credit, for which it will make no cash
capital contribution beyond the $99.00 it contributed upon formation of the
Partnership. In this case, during the term of the Partnership, all items of
Partnership income, gain, deduction, loss or credit will generally be allocated
1% to the General Partner and 99% to the Limited Partners (except that (i)
profits will be allocated to the General Partner to the extent necessary for
its capital account balance to equal 1% of all Partners' capital account
balances and (ii) losses will be allocated to the General Partner to the extent
the Limited Partners' capital accounts equal zero and the General Partner's
capital account is positive due to its payment of organizational expenses of
the Partnership in excess of 1.5% of the Limited Partners' capital
contributions and annual operating expenses in excess of 1% of Limited
Partners' capital contributions).
If the SEC order is issued, upon liquidation of the Partnership, gross
income from the sale of the Partnership's assets will be allocated to the
Partners in the amount of their negative capital account balances and
thereafter in proportion to their capital contributions. If the order is not
issued and the General Partner has a 1% interest in the Partnership, upon
liquidation, gross income from the sale of the Partnership's assets will be
allocated to the Partners in the amount of their negative capital account
balances, then to the General Partner to the extent the amount of the capital
contribution made by it to the Partnership is in excess of 1% of the Limited
Partners' capital contributions, and thereafter 99% to the Limited Partners and
1% to the General Partner. These items will be allocated among the Limited
Partners in the ratio the capital contribution of each Limited Partner (or the
capital contribution attributable to the interest held by a transferee Limited
Partner) bears to the total capital contributions of all Limited Partners.
Distributable Cash, as defined in the Partnership Agreement, will be
distributed in proportion to the Partners' capital contributions if the
exemptive order is issued or, if the order is not issued, 99% to the Limited
Partners and 1% to the General Partner. The General Partner may also make
distributions in kind of securities or assets held by the Partnership,
including, in the discretion of the General Partner, distributions in which
certain Limited Partners receive cash while other Limited Partners receive
marketable securities of an equivalent value. Cash distributions will be
credited to the Limited Partner's MLPF&S securities account specified in his
Signature Page and Power of Attorney unless the General Partner is instructed
otherwise by a Limited Partner.
Allocations among the transferor and transferee of a Partnership interest
are described under "Transferability of Units".
SUMMARY OF THE PARTNERSHIP AGREEMENT
The form of the Amended and Restated Agreement of Limited Partnership (the
"Partnership Agreement") is included as Exhibit A to this Prospectus. It is
recommended that each prospective purchaser read it in its entirety.
Certain provisions of the Partnership Agreement have been described
elsewhere in this Prospectus. With regard to various transactions and
relationships of the Partnership with the General Partner and its affiliates,
see "Risk and Other Important Factors", with regard to the management of the
Partnership, see "The Partnership" and "The General Partner and Its
Affiliates", with regard to the transfer of Limited Partners' Units, see
"Transferability of Units", and with regard to reports to be made to the
Limited Partners, see "Reports".
The following briefly summarizes certain provisions of the Partnership
Agreement which are not described elsewhere in this Prospectus. All statements
made below and elsewhere in this Prospectus relating to the Partnership
Agreement are hereby qualified in their entirety by reference to the
Partnership Agreement. Capitalized terms used in this summary have the meanings
ascribed to them in the Partnership Agreement.
TERM
The Partnership shall continue in full force and effect until December 31,
2039, or until dissolution prior thereto.
PARTNERSHIP CAPITAL
No Partner shall be entitled to interest on any Capital Contribution to
the Partnership or on such Partner's Capital Account. No Partner, other than
the Initial Limited Partner, has the right to withdraw, or to receive any
return of, his or her Capital Contribution. However, upon the death of a
Limited Partner, the legal representative of such Partner may cause the
interest of such Partner to be purchased as described under "Transferability of
Units". No Partner has the right to receive property other than cash in return
for his or her Capital Contribution.
ANNUAL APPRAISAL
The Partnership Agreement provides that, beginning December 31, 1999 and
each succeeding December 31 (the "Valuation Date"), the General Partner will
make an Appraisal or have an Appraisal made of all of the assets of the
Partnership as of such date. The Appraisal, which may be made by independent
third parties appointed by the General Partner, is to be based on such methods
relating to the valuation of the Partnership's assets and liabilities as are
deemed appropriate by the General Partner or an independent third party. The
Appraisal will be incorporated in the annual financial statement and will be
sent to the Limited Partners within 180 days, or as soon as practicable, after
the end of the Partnership's fiscal year, which ends December 31. See "Reports"
for information as to the valuation procedures expected to be utilized with
respect to private equity investments.
LIABILITY OF THE GENERAL PARTNER; INDEMNIFICATION
The Partnership Agreement provides that neither the General Partner nor
any of its officers, directors, stockholders, employees, or agents shall be
liable to the Partnership or the Limited Partners for any act or omission based
on errors of judgment or other fault in connection with the business or affairs
of the Partnership so long as the person against whom liability is asserted
acted in good faith on behalf of the Partnership and in a manner reasonably
believed by such person to be within the scope of his or its authority under
the Partnership Agreement and in or not opposed to the best interests of the
Partnership, but only if such action or failure to act does not constitute
gross negligence or willful misfeasance, and, with respect to any criminal
proceeding, such person had no reasonable cause to believe his or its conduct
was unlawful. The General Partner and its officers, directors, stockholders,
employees, and agents will be indemnified by the Partnership to the fullest
extent permitted by law. In the absence of a court determination that the
General Partner or officers or directors of the General Partner were not liable
on the merits or guilty of disabling conduct within the meaning of Section
17(h) of the Investment Company Act, the decision by the Partnership to
indemnify the General Partner or any such person must be based on the
reasonable determination of independent counsel, after review of the facts,
that such disabling conduct did not occur.
VOTING RIGHTS
Under the Partnership Agreement, either the General Partner or 10% or more
in Interest of the Limited Partners may propose any act or other matter to
which the Consent of any Partner is required. Within 20 days of the making of
any such proposal, the General Partner must give all Partners Notification of
such proposal (including the text of any amendment or document, a statement of
its purposes and a favorable opinion of counsel, pursuant to Section 10.1A of
the Partnership Agreement).
Among other matters subject to approval by the Limited Partners are
admission of a successor General Partner, Removal of the General Partner, Sale
of all or substantially all of the assets of the Partnership, certain
amendments to the Partnership Agreement, and dissolution of the Partnership
prior to January 1, 2005. However, as provided in detail in Section 11.3 of the
Partnership Agreement, unless, at the time of the giving or withholding of
Consent for certain actions by the Limited Partners, counsel retained by the
Partnership at such time is of the opinion that the giving or withholding of
Consent for such action is permitted by the Delaware Revised Uniform Limited
Partnership Act, does not impair the limited liability of the Limited Partners
and does not adversely affect the tax status of the Partnership, certain voting
rights of the Limited Partners may be restricted.
In light of its anticipated significant holdings in the Partnership, ML &
Co. will agree to vote its Units in the same proportion as other Limited
Partners in respect of any matter submitted to the vote of Limited Partners.
LIABILITY OF PARTNERS TO THIRD PARTIES
The General Partner will be generally liable for all obligations of the
Partnership.
The Partnership Agreement provides that no Limited Partner shall be
personally liable for the debts of the Partnership beyond the amount committed
by such Limited Partner to the capital of the Partnership and such Limited
Partner's share of the Partnership's assets and undistributed profits. In the
event the Partnership is unable otherwise to meet its obligations, the Limited
Partners might, under applicable law, be obligated under some circumstances to
return distributions previously received by them. See "Risk and Other Important
Factors--Possible Loss of Limited Liability; --Repayment of Certain
Distributions".
DISSOLUTION
The Partnership shall be dissolved upon: the expiration of its term; the
Incapacity, Removal or withdrawal of the General Partner and failure to
designate a successor; the Sale or other disposition of all or substantially
all of the assets of the Partnership; an election prior to January 1, 2005 to
dissolve by the General Partner with the Consent of a Majority-in-interest of
the Limited Partners; the failure of the Limited Partners to approve, by
Consent of a Majority-in-Interest, the admission of a successor General Partner
to the General Partner pursuant to Section 6.1A of the Partnership Agreement;
after January 1, 2005, the General Partner's election to dissolve the
Partnership; or the occurrence of any other event causing dissolution of the
Partnership under the laws of the State of Delaware.
In settling accounts after the sale of all Partnership property upon
liquidation, the assets of the Partnership shall be paid out (i) to creditors
(including any creditor who is a Partner), in the order of priority as provided
by law; (ii) to each Partner in an amount equivalent to the positive amount of
his capital account on the date of distribution, after giving effect to any
allocation of profits or losses arising from sales on liquidation; and (iii)
the balance, to Partners in accordance with the Partnership Agreement. Upon
liquidation, the General Partner may distribute Partnership assets in kind.
AMENDMENT
Subject to the provisions of Section 10.1 thereof, the Partnership
Agreement may be amended by action of a Majority-in-interest of the Limited
Partners. However, without the Consent of all Partners, Section 4.3C of the
Partnership Agreement (relating to certain restrictions on the General
Partner's authority), Article Ten (relating to amendment of the Partnership
Agreement) and Section 11.3 (relating to certain limitations on Limited
Partners' voting rights) may not be amended. Also, without the Consent of each
Partner who may be adversely affected, the Partnership Agreement may not be
amended to (i) enlarge the obligation of any Partner under the Partnership
Agreement or convert a Limited Partner's Interest into a General Partner's
Interest; (ii) modify the limited liability of a Limited Partner; or (iii)
alter the provisions of the Partnership Agreement relating to distributions of
Distributable Cash and allocations of Profits and Losses. In addition, Sections
6.1 and 6.2 (relating to successors to the General Partner) may not be amended
without the Consent of the General Partner. However, in accordance with Section
10.1 of the Partnership Agreement, under certain circumstances the General
Partner, without the Consent of a Majority-in-interest of the Limited Partners,
may amend the Partnership Agreement if, in its opinion, such amendment does not
have a material adverse effect on the Limited Partners or the Partnership.
ELECTIONS
All elections required or permitted to be made by the Partnership under
the Code may be made by the General Partner in such manner as it deems most
advantageous to individual Limited Partners who are (i) married and filing
joint returns, (ii) not "dealers" for Federal income tax purposes, and (iii) in
the highest marginal Federal income tax bracket.
APPOINTMENT OF GENERAL PARTNER AS ATTORNEY-IN-FACT
Each Limited Partner irrevocably constitutes and appoints the General
Partner such Limited Partner's true and lawful attorney-in-fact, with full
power and authority in such Limited Partner's name, place and stead to make,
execute, acknowledge and file such documents, instruments and conveyances as
may be necessary or appropriate to carry out the provisions of the Partnership
Agreement.
PRINCIPAL OFFICE OF THE PARTNERSHIP
The principal business office of the Partnership shall be at South Tower,
World Financial Center, 225 Liberty Street, New York, New York 10080-6123,
unless changed by the General Partner. The business of the Partnership may also
be conducted at such additional places as the General Partner may determine.
APPLICABLE LAW
The Partnership Agreement will be construed and enforced in accordance
with the laws of the State of Delaware.
OFFERING AND SALE OF UNITS
OFFERING OF UNITS
MLPF&S has entered into an Agency Agreement with the Partnership and the
General Partner pursuant to which MLPF&S has agreed to act as selling agent for
the Partnership and the General Partner to assist in the sale of the Units to
Qualified Investors on a "best efforts" basis. MLPF&S and its affiliates will
not receive, directly or indirectly, any payments or compensation in connection
with the offering and sale of Units.
The Agency Agreement contains cross-indemnification clauses with respect
to certain liabilities under the Securities Act of 1933.
Eligible Investors must submit completed subscription documents not later
than November 1, 1998, or such subsequent date, not later than February 5,
1999, as the General Partner and MLPF&S may determine. Subsequent to such date,
the General Partner will advise such investors as to whether their
subscriptions have been accepted and thereupon MLPF&S shall promptly debit
funds from accepted investors' accounts for payment into the Partnership's
escrow account. The General Partner will also advise such investors of the
Offering Termination Date. If subscriptions (including subscriptions of ML &
Co.) for 75,000 Units are not received by the Offering Termination Date, the
offering will be terminated, and all funds received will be refunded with
interest, if any, actually earned thereon.
If subscriptions for more than ________ Units are received, the General
Partner may, in its sole discretion, reject, in whole or in part, any Limited
Partner's subscription.
INVESTOR SUITABILITY STANDARDS
Only Qualified Investors will be eligible to purchase Units. See "Investor
Suitability Standards" on page 2.
MAXIMUM PURCHASE BY QUALIFIED INVESTORS
The Partnership has imposed restrictions on the maximum amount of Units
which may be purchased by any Qualified Investor. An employee of ML & Co. or
its subsidiaries may only purchase Units in an amount which does not exceed 15%
of such employee's cash compensation from ML & Co. or its subsidiaries received
with respect to 1997 or, if employed for less than a full calendar year, does
not exceed 15% of such compensation on an annualized basis unless the employee
either (x) has a net worth, individually or jointly with the employee's spouse,
in excess of $1,000,000 at the time of purchase of the Units, or (y) had an
individual income in excess of $200,000 in each of 1996 and 1997 or joint
income with the employee's spouse in excess of $300,000 in each of those years
and reached or has a reasonable expectation of reaching the same level in 1998.
An employee of ML & Co. who meets the requirements of clause (x) or (y) above
may purchase Units in an amount which does not exceed 75% of the employee's
compensation in respect of 1997 on an annualized basis, unless otherwise
approved by the General Partner. A non-employee director of ML & Co. may only
purchase Units in an amount which does not exceed ten times the director's
compensation (including committee fees, but not including reimbursement of
expenses) received from ML & Co. during 1997. Notwithstanding the foregoing, a
Qualified Investor (other than ML & Co.) will only be permitted to purchase
Units in the Partnership in an aggregate amount in excess of $250,000 if the
offering is not fully subscribed, unless otherwise approved by the General
Partner. In the event that the offering is not fully subscribed, Qualified
Investors will be permitted to invest up to the specified percentage of their
1997 compensation (or directors fees, as applicable), provided that such amount
is equal to less than 10% of the outstanding limited partnership interests of
the Partnership.
PURCHASE OF UNITS BY ML & CO.
The Partnership is also offering Units to ML & Co. ML & Co. has advised
the Partnership that it intends to offer a deferred compensation plan to
certain key employees of ML & Co. and its subsidiaries pursuant to which such
employees will be permitted to defer compensation earned during 1998 and to
elect to receive a return from ML & Co. determined by reference to the
performance of the Partnership. ML & Co. intends to acquire Units having a
purchase price approximately equivalent to the aggregate amount of compensation
deferred under its plan. ML & Co. will acquire such Units at the Closing for a
purchase price of $1,000 per Unit. Participants in the plan will not be Limited
Partners in the Partnership by virtue of their participation in such plan and
will not acquire any ownership interest in the Units purchased by ML & Co.
SUBSCRIPTION TO PURCHASE UNITS
Each Qualified Investor who desires to purchase any Units must:
(a)......subscribe to purchase five or more Units;
(b)......complete, date, execute and deliver to KECALP Inc., South
Tower, World Financial Center, 225 Liberty Street, New York, NY 10080-6123, one
copy of the Signature Page and Power of Attorney, a form of which is attached
as part of the Subscription Agreement attached to this Prospectus as Exhibit B;
and
(c)......authorize an amount equal to $1,000 for each Unit that the
prospective purchaser desires to purchase to be debited from his MLPF&S
securities account.
The General Partner will not, under any circumstances, accept
subscriptions for a fractional interest in a Unit.
PAYMENT FOR UNITS
Each Qualified Investor who subscribes to purchase Units will, by
execution of the Subscription Agreement, agree to make a capital contribution
of $1,000 for each Unit subscribed for and authorize that amount to be debited
from his MLPF&S securities account specified on his Signature Page and Power of
Attorney. If sufficient funds are not already available in the Qualified
Investor's MLPF&S securities account, the Qualified Investor must deposit
additional funds so that the full amount of the capital contribution for the
Units for which the investor has subscribed will be available in such account.
MLPF&S will advise investors as to whether their subscriptions have been
accepted and thereupon promptly debit subscription amounts from subscribers'
MLPF&S securities accounts and deposit such funds in an escrow account with
[The Bank of New York], for the benefit of investors. The bank escrow agent for
such account may, at the direction of MLPF&S, invest such payment in U.S.
government securities, bank time deposits, certificates of deposit of a
domestic bank which mature prior to the Closing of the purchase of Units or
bank money market accounts. The Qualified Investors' funds in such account, but
not the interest earned thereon, will be released to the Partnership only if
each of the following conditions has been satisfied:
(a)......on the date of Closing, the Partnership has received
subscriptions for at least 75,000 Units;
(b)......on the date of Closing, the escrow agent has received the
full payment of the capital contributions for the Units which the Partnership
will issue and sell at such Closing; and
(c)......on the date of Closing, Brown & Wood LLP has delivered its
opinion that the Partnership will be treated as a partnership for Federal
income tax purposes and will not be treated as a publicly traded partnership
within the meaning of Section 7704(b) of the Internal Revenue Code of 1986, as
amended.
If such conditions are not timely satisfied, all the investors' funds so
held in such account will be returned to the investors. If all of such
conditions are timely satisfied, each investor who has subscribed to purchase
Units to be issued and sold at such Closing will become a Limited Partner and
thereafter (but only thereafter) such investor's capital contributions will be
paid to the Partnership, to be applied by it as described in this Prospectus.
Any interest earned on funds held in escrow will be paid to subscribers in
proportion to their respective subscription amounts and the length of time
their subscription amounts were on deposit.
Each Limited Partner will be entitled to the distributive share of items
of income, gain, deduction, loss or credit and cash distributions allocable to
such Limited Partners interest in the Partnership, as provided in the
Partnership Agreement, without regard to the dates on which any Limited
Partners may have subscribed to purchase Units.
TRANSFERABILITY OF UNITS
RESTRICTIONS
The Partnership is designed as an investment vehicle for Qualified
Investors only. The Partnership has obtained exemptions from certain provisions
of the Investment Company Act on the basis that, with certain exceptions, only
Qualified Investors will become Limited Partners. PURCHASERS OF UNITS SHOULD
VIEW THEIR INTEREST IN THE PARTNERSHIP AS A LONG-TERM, ILLIQUID INVESTMENT.
No transfer or assignment by a Limited Partner of his or her interest in
the Partnership shall be effective unless made in accordance with the
provisions of the Partnership Agreement. The Partnership Agreement prohibits
transfer or assignment by a Limited Partner of his or her interest in the
Partnership to any person who is not a Qualified Investor, except transfers to
a member of his or her immediate family or transfers resulting by operation of
law. (For this purpose, the members of a Limited Partner's immediate family
consist of the partner's spouse and children.) No transfer of a Limited
Partner's interest may be made without the consent of the General Partner,
which consent may be withheld in the sole discretion of the General Partner. No
sale, assignment or transfer of, or after which the transferor and transferee
would each hold, an interest representing a capital contribution of less than
$1,000 will be permitted or recognized for any purpose without the consent of
the General Partner, which consent will be granted only for good cause shown.
The sale or transfer of a Partnership interest may result in adverse
income tax consequences to the transferor. Limited Partners are advised to
consult their tax advisors prior to any such transfer. See "Tax Aspects of
Investment in the Partnership--Transfer of a Partnership Interest".
No transfer, assignment or negotiation of an interest in the Partnership
will be recognized or effective if such transfer or assignment, together with
all other such transfers on the books of the Partnership during the immediately
preceding 12 months, would result in the transfer of 50% or more of the Units.
See "Tax Aspects of Investment in the Partnership--General Principles of
Partnership Taxation--Termination of the Partnership for Tax Purposes". In
addition, pursuant to the Partnership Agreement, the Partnership will satisfy
one or more safe harbor limitations from classification as a publicly traded
partnership which would impose more restrictive numerical limitations on the
number of Units transferred. One safe harbor under current law would restrict
transfers (except for certain exempt transfers) of 2% or more Units during the
same taxable year. Transfers, assignments or negotiations, the recognition and
effectiveness of which are so suspended and deferred, will be recognized (in
chronological order to the extent practicable) when, and to the extent that,
such recognition will not result in there having been transfers of Units in
excess of the limitations referred to above.
The General Partner has the authority to amend the transferability
provisions of the Partnership Agreement in such manner as may be necessary or
desirable to preserve the tax status of the Partnership.
Further, no sale, exchange, transfer or assignment of a Limited Partner's
interest may be made if the sale of such interest would, in the opinion of
counsel for the Partnership, result in a termination of the Partnership for
purposes of Section 708 of the Code, violate any applicable Federal or state
securities laws, cause the Partnership to be treated as an association taxable
as a corporation for Federal income tax purposes, cause the Partnership to be
classified as a publicly traded partnership and taxable as a corporation for
Federal income tax purposes, or cause all or a portion of the Partnership's
assets to be treated as "tax-exempt use property" under Section 168(j) of the
Code.
ACQUISITION OF CERTAIN LIMITED PARTNERS' INTERESTS BY THE GENERAL PARTNER OR
THE PARTNERSHIP
Upon the death of a Limited Partner, the legal representative(s) of such
Limited Partner may tender, and the General Partner shall purchase the interest
in the Partnership held by such Limited Partner at a purchase price equal to
the value of the interest determined at the next annual Valuation Date. To have
Units repurchased, the estate of a Limited Partner must notify the General
Partner of its election to have the Units repurchased within 30 days after the
date the appraisal is sent to the Limited Partners. The Partnership, rather
than the General Partner, may purchase such interest if it is determined the
purchase is in the best interests of the Partnership. If the General Partner
purchases any such interest for its own account pursuant to this provision, it
shall be entitled to the rights of an assignee of such interest, including the
right to vote as if it were a Substituted Limited Partner, and it may become a
Substituted Limited Partner. The General Partner may sell any interest acquired
pursuant to this provision and the purchaser will be entitled to be admitted as
a Substituted Limited Partner effective as of the date of payment to the
General Partner for such interest.
ASSIGNEES
An assignee of a Limited Partner does not automatically become a
Substituted Limited Partner, but has the right to receive the same share of
profits, losses and distributable cash of the Partnership to which the assignor
Limited Partner would have been entitled. A Limited Partner who assigns all of
his Partnership interest ceases to be a Limited Partner, and shall not retain
any statutory rights as a Limited Partner. The assignee of a Partnership
interest who does not become a Substituted Limited Partner and desires to make
further assignment of such interest is subject to all of the restrictions on
transferability of Partnership interests described in this Prospectus and the
Partnership Agreement.
In the event of the death, incapacity or bankruptcy of a Limited Partner,
his or her legal representatives will have all the rights of a Limited Partner
for the purpose of settling or managing his or her estate and such power as the
decedent, incompetent or bankrupt Limited Partner possessed to assign all or
any part of his interest in the Partnership, and to join with such assignee in
satisfying conditions precedent to such assignees becoming a Substituted
Limited Partner. In the event of the death of a Limited Partner, but not in the
event of adjudication of incompetence or bankruptcy, the deceased Limited
Partner's interest may be distributed as part of the estate, transferred by
operation of law, tendered to the General Partner as described above, or
assigned to another Qualified Investor.
A purported sale, assignment or transfer of a Limited Partner's interest
will be recognized by the Partnership on the first day of the fiscal quarter
following the quarter in which the Partnership has received written notice of
such sale, assignment or transfer in form satisfactory to the General Partner,
signed by both parties, containing the purchaser's, assignee's or transferee's
acceptance of the terms of the Partnership Agreement and a representation by
the parties that the sale or assignment was made in accordance with all
applicable laws and regulations.
SUBSTITUTED LIMITED PARTNERS
No Limited Partner has the right to substitute an assignee as a Limited
Partner in his or her place. The General Partner, however, has the right in its
sole and absolute discretion, to permit such assignee to become a Substituted
Limited Partner and any such permission by the General Partner is binding and
conclusive without the consent or approval of any Limited Partner. Any
Substituted Limited Partner must, as a condition to receiving any interest in
the Partnership, sign a Signature Page and Power of Attorney, pay the
reasonable legal fees and filing and publication costs of the Partnership and
the General Partner in connection with his or her substitution as a Limited
Partner and satisfy the other conditions specified in Section 10.2 of the
Partnership Agreement. Notwithstanding the actual time of the admission of a
Substituted Limited Partner, for purposes of allocating profits, losses and
distributable cash (as those terms are defined in the Partnership Agreement), a
person will be treated as having become a Limited Partner as of the date on
which the sale, assignment or transfer of such persons interest was recognized
by the Partnership, as described above, even if that person does not in fact
become a Substituted Limited Partner.
YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. As a consequence,
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in normal
business activities.
ML & Co. has undertaken a comprehensive review of the impact of the Year
2000 issue on its operations and the operations of its subsidiaries. However,
there can be no assurance that the systems of companies in which the
Partnership invests, particularly emerging market companies, will be timely
converted or that the value of such investments will not be adversely affected
by the Year 2000 issue.
REPORTS
Financial information contained in all reports to the Limited Partners
will be prepared on an accrual basis of accounting in accordance with generally
accepted accounting principles and will include, where applicable, a
reconciliation to information furnished to the Limited Partners for income tax
purposes. Federal and state tax information will be provided to the Limited
Partners within 75 days following the close of each calendar year or as soon as
practicable thereafter. (As described under "Risk and Other Important Factors",
to the extent the Partnership invests in other investment funds, it may
experience delays in obtaining annual tax information, which may require
Limited Partners to obtain extensions for filing income tax returns.) Financial
statements, which will be prepared annually, will be certified by independent
auditors and will be furnished within 180 days (or as soon as practicable
thereafter) following the close of the calendar year. A statement of appraisal
of the value of Partnership assets will be provided with the financial
statements. Limited Partners also have the right under applicable law to obtain
other information about the Partnership and may, at their expense, obtain a
list of the names and addresses of all of the Limited Partners for any proper
purpose.
In connection with the appraisal of the value of the Partnership's
investments that are not publicly traded, there is a range of values which is
reasonable for such investments at any particular time. The General Partner
presently expects that the following procedures will be utilized with respect
to these investments. In the early stages of development, these investments
will typically be valued based on their original cost to the Partnership (the
"cost method"). The cost method will be utilized until significant developments
affecting the portfolio company provide a basis for use of an appraisal
valuation (the "appraisal method"). The appraisal method will be based on such
factors affecting the portfolio company as earnings and net worth, the market
prices for similar securities of comparable companies and an assessment of the
company's future prospects. In the case of unsuccessful operations, the
appraisal may be based on liquidation value. Valuations based on the appraisal
method are necessarily subjective. The General Partner may also use third party
transactions (actual or proposed) in the portfolio company's securities as the
basis of valuation (the "private market method"). The private market method
will be used only with respect to actual transactions or actual firm offers by
sophisticated, independent investors. The valuation of debt securities that are
not publicly traded will be determined by or under the direction of the General
Partner. The General Partner expects that the private market method of
valuation will be the primary method utilized with respect to these securities.
Securities with legal, contractual or practical restrictions on transfer may be
valued at a discount from their value determined by the foregoing methods to
reflect the effect of such restrictions.
EXPERTS
The financial statements included in this Prospectus have been examined by
Deloitte & Touche LLP, independent auditors, as indicated in their opinions
with respect thereto, and are included herein in reliance upon the authority of
that firm as experts in accounting and auditing.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon by Brown
& Wood LLP, One World Trade Center, New York, New York 10048, as counsel to the
Partnership and the General Partner, who may rely as to matters of Delaware law
upon the opinion of Richards, Layton & Finger, One Rodney Square, Wilmington,
Delaware 19801.
The statements under the heading "Tax Aspects of Investment in the
Partnership" have been reviewed by Brown & Wood LLP.
EXEMPTIONS FROM THE INVESTMENT COMPANY ACT OF 1940
The Partnership will operate as a closed-end, management investment
company registered with the Securities and Exchange Commission (the
"Commission") under the Investment Company Act. However, an exemptive order was
obtained from the Commission in 1982 pursuant to Section 6(b) of the Act that
exempts the Partnership, as an "employees securities company" within the
meaning of the Investment Company Act, from certain provisions of such Act. The
exemptive order relates to the following provisions of the Investment Company
Act and the rules and regulations promulgated thereunder:
Section 8(b) to exempt the Partnership from filing annual amendments to
its Registration Statement under the Investment Company Act;
Section 10(a) to permit the Partnership to include the General Partner as
the sole general partner and to permit all of the directors and officers of the
General Partner to be persons who are employees of ML & Co. or its affiliates;
Section 10(b) to permit the Partnership to employ subsidiaries of ML & Co.
to act as broker and principal underwriter for the Partnership;
Section 10(f) to permit the Partnership to purchase securities in
underwritten offerings, a principal underwriter of which may be an affiliate of
the General Partner;
Section 14(a) to permit the Partnership to offer Units to Qualified
Investors prior to the time the Partnership has a net worth of $100,000;
Section 15(a) to permit the General Partner to act from time to time as
investment adviser to the Partnership without a written contract and without
the approval of the Limited Partners;
Section 16(a) to permit ML & Co. to appoint and replace the directors of
the General Partner in accordance with the Partnership Agreement;
Section 17(a) to permit ML & Co. and its subsidiaries to engage in certain
transactions as principal with the Partnership in addition to transactions as
agent, including transactions involving money market securities and real
estate, and, under limited circumstances and subject to certain conditions, the
acquisition of investments from the General Partner (or an affiliate thereof)
that were purchased for the Partnership prior to the closing of its offering;
Section 17(d) to permit the Partnership to engage in transactions in which
certain affiliated persons of the Partnership may also be participants;
Section 17(f) to permit ML & Co. or one of its subsidiaries to act as
custodian without a written contract;
Section 17(g) to permit the Partnership to comply with requirements
applicable to fidelity bonds without the necessity of having a majority of the
Board of Directors of the General Partner which are not "interested persons"
take such action and make such approvals as are set forth in Rule 17g1 under
the Investment Company Act;
Section 18(a)(1) to exempt the Partnership from certain limitations on
borrowings so that the Partnership may enter into non-recourse loans relating
to investments other than securities without regard to the restrictions on
"asset coverage" contained in the Investment Company Act;
Section 18(i) to permit the Limited Partners to have only those rights
with respect to the management of the Partnership as are set forth in the
Partnership Agreement;
Section 19(b) to permit the Partnership to distribute long-term capital
gains more frequently than annually;
Section 20(a) to exempt the Partnership from the proxy requirements set
forth in the rules under the Investment Company Act;
Section 23(c) to permit the Partnership to repurchase Partnership
interests pursuant to the terms of the Partnership Agreement;
Section 30(a), (b) and (d) to exempt the Partnership from filing annual
and quarterly reports with the Commission and from sending semiannual reports
to Limited Partners; and
Section 32(a) to permit the General Partner to select independent
certified public accountants for the Partnership without submitting their
selection to the Limited Partners for ratification or rejection.
In 1991, the Commission issued an order amending the order described above
to expand the categories of investments in which the Partnership and other
partnerships managed by the General Partner may participate with ML & Co. and
its affiliates. The transactions in which such joint investments may be made
relate generally to equity and equity-related investments in buyout
transactions and other transactions structured by ML & Co. or its affiliates or
in which ML & Co. or its affiliates have an equity or equity-related
investment. The order requires, among other things, that the General Partner
make specified findings before the Partnership participates in such investments
and that the General Partner, at least annually, provide to the Limited
Partners a list of such investments in which the Partnership has invested with
ML & Co. or its affiliates.
ADDITIONAL INFORMATION
This Prospectus does not contain all the information set forth in the
Registration Statement that the Partnership has filed with the Securities and
Exchange Commission, Washington, D.C., under the Securities Act of 1933 and the
Investment Company Act. For further information pertaining to the securities
offered hereby, reference is made to the Registration Statement including the
exhibits filed as a part thereof.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
Merrill Lynch KECALP L.P. 1999
Independent Auditors' Report.................................
Balance Sheet, ____________..................................
Notes to Balance Sheet.......................................
KECALP Inc. (Unaudited)
Balance Sheet, ____________..................................
Notes to Balance Sheet.......................................
<PAGE>
INDEPENDENT AUDITORS' REPORT
Merrill Lynch KECALP L.P. 1999:
We have audited the accompanying balance sheet of Merrill Lynch KECALP L.P.
1999 as of ____________. This financial statement is the responsibility of the
Partnership's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 balance sheet presents fairly, in all material respects,
the financial position of Merrill Lynch KECALP L.P. 1999 at ___________, in
conformity with generally accepted accounting principles.
New York, New York
__________, 1998
<PAGE>
MERRILL LYNCH KECALP L.P. 1999
BALANCE SHEET
TO BE PROVIDED BY AMENDMENT
<PAGE>
INVESTORS WILL NOT ACQUIRE ANY INTEREST IN THIS COMPANY
KECALP INC.
BALANCE SHEET (UNAUDITED)
--------------------
TO BE PROVIDED BY AMENDMENT
<PAGE>
APPENDIX
TO BE PROVIDED BY AMENDMENT
<PAGE>
EXHIBIT A
================================================================================
MERRILL LYNCH KECALP L.P. 1999
(A DELAWARE LIMITED PARTNERSHIP)
FORM OF
AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
================================================================================
<PAGE>
TABLE OF CONTENTS
CAPTION PAGE
ARTICLE ONE
DEFINED TERMS...............................................................A-1
ARTICLE TWO
ORGANIZATION................................................................A-4
Section 2.1 Governance.................................................A-4
Section 2.2 Name, Place of Business and Office; Registered Agent.......A-4
Section 2.3 Purpose....................................................A-4
Section 2.4 Term.......................................................A-4
ARTICLE THREE
PARTNERS AND CAPITAL........................................................A-4
Section 3.1 General Partner............................................A-4
Section 3.2 Initial Limited Partner....................................A-5
Section 3.3 Additional Limited Partners................................A-5
Section 3.4 Partnership Capital........................................A-5
Section 3.5 Liability of Partners......................................A-5
Section 3.6 Lender as Partner..........................................A-6
ARTICLE FOUR
MANAGEMENT..................................................................A-6
Section 4.1 Powers of the General Partner..............................A-6
Section 4.2 Prohibited Transactions....................................A-7
Section 4.3 Restrictions on the Authority of the General Partner.......A-8
Section 4.4 Expenses of the Partnership................................A-9
Section 4.5 Duties and Obligations of the General Partner..............A-9
Section 4.6 Compensation and Reimbursement of the General Partner......A-10
Section 4.7 Other Businesses of Partners...............................A-11
Section 4.8 Indemnification............................................A-11
Section 4.9 Management by Limited Partners.............................A-11
ARTICLE FIVE
DISTRIBUTIONS OF PARTNERSHIP FUNDS; ALLOCATIONS OF PROFITS AND LOSSES.......A-12
Section 5.1 Distributions of Partnership Funds.........................A-12
Section 5.2 Allocations of Profits and Losses..........................A-12
Section 5.3 Determinations of Allocations and Distributions Among
Limited Partners.........................................A-13
ARTICLE SIX
TRANSFERABILITY OF THE GENERAL PARTNER'S INTEREST..........................A-13
Section 6.1 Voluntary Withdrawal or Transfer by the General Partner...A-13
Section 6.2 Admission of Successor General Partner....................A-14
Section 6.3 Liability of a Withdrawn or Removed General Partner.......A-15
Section 6.4 Incapacity of the General Partner.........................A-15
Section 6.5 Removal of the General Partner............................A-15
Section 6.6 Distributions on Withdrawal or Removal of the
General Partner ........................................A-16
ARTICLE SEVEN
TRANSFERABILITY OF A LIMITED PARTNER'S INTEREST............................A-16
Section 7.1 Restrictions on Transfers of Interest.....................A-16
Section 7.2 Incapacity of Limited Partner.............................A-18
Section 7.3 Assignees.................................................A-18
Section 7.4 Substituted Limited Partners..............................A-18
Section 7.5 Acquisition of Certain Limited Partners' Interests by the
General Partner or the Partnership......................A-19
ARTICLE EIGHT
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE PARTNERSHIP................A-20
Section 8.1 Events Causing Dissolution................................A-20
Section 8.2 Liquidation...............................................A-21
ARTICLE NINE
BOOKS AND RECORDS; ACCOUNTING; APPRAISAL; TAX ELECTIONS; ETC...............A-22
Section 9.1 Books and Records.........................................A-22
Section 9.2 Accounting Basis for Tax and Reporting Purposes;
Fiscal Year.............................................A-22
Section 9.3 Bank Accounts.............................................A-22
Section 9.4 Appraisal.................................................A-22
Section 9.5 Reports...................................................A-22
Section 9.6 Elections.................................................A-23
ARTICLE TEN
AMENDMENTS.................................................................A-23
Section 10.1 Proposal and Adoption of Amendments Generally.............A-23
Section 10.2 Amendments on Admission or Withdrawal of Partners.........A-24
ARTICLE ELEVEN
CONSENTS, VOTING AND MEETINGS..............................................A-24
Section 11.1 Method of Giving Consent..................................A-24
Section 11.2 Meetings of Partners......................................A-25
Section 11.3 Limitations on Requirements for Consents..................A-25
Section 11.4 Submissions to Limited Partners...........................A-25
ARTICLE TWELVE
MISCELLANEOUS PROVISIONS...................................................A-26
Section 12.1 Appointment of the General Partner as Attorney-in-Fact....A-26
Section 12.2 Notification to the Partnership or the General Partner....A-27
Section 12.3 Binding Provisions........................................A-27
Section 12.4 Applicable Law............................................A-27
Section 12.5 Counterparts..............................................A-27
Section 12.6 Separability of Provisions................................A-27
Section 12.7 Entire Agreement..........................................A-27
Section 12.8 Headings..................................................A-27
<PAGE>
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF MERRILL LYNCH KECALP L.P. 1999
Amended and Restated Agreement of Limited Partnership of Merrill Lynch
KECALP L.P. 1999 (the "Partnership") dated _________, 1998, among KECALP Inc.,
a Delaware corporation, as General Partner, Robert F. Tully, the Initial
Limited Partner, and those Persons who shall be admitted as Additional Limited
Partners and as Substituted Limited Partners.
Whereas, pursuant to a Certificate of Limited Partnership dated as of July
10, 1998, and filed with the Delaware Secretary of State on July 9, 1998, and
an Agreement of Limited Partnership, dated July 9, 1998 ("Original Agreement"),
KECALP Inc. and Robert F. Tully have heretofore formed the Partnership under
the Delaware Revised Uniform Limited Partnership Act;
Whereas, KECALP Inc., the Initial Limited Partner, and the Additional
Limited Partners, as defined herein, desire to amend and restate in its
entirety the terms and provisions of the Original Agreement governing the
Partnership;
Now, Therefore, in consideration of the mutual promises made herein, the
parties, intending to be legally bound, hereby agree as follows:
ARTICLE ONE
Defined Terms
The defined terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article One. The
singular shall include the plural and the masculine gender shall include the
feminine, and vice versa, as the context requires.
"Act" means the Delaware Revised Uniform Limited Partnership Act (6 Del.
C.17-101 et seq.), as amended from time to time and any successor to the said
Act.
"Additional Limited Partners" means those Persons admitted to the
Partnership pursuant to Section 3.3 and shown as limited partners of the
Partnership on the books and records of the Partnership.
"Affiliate" means when used with reference to a specified Person, (i) any
Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the specified
Person, (ii) any Person that is an officer, partner (excluding unrelated third
parties who are joint venturers or participants in joint ventures electing to
be taxed as partners for Federal income tax purposes) or trustee of, or serves
in a similar capacity with respect to, the specified Person or of which the
specified Person is an officer, partner or trustee, or with respect to which
the specified Person serves in a similar capacity, (iii) any Person that,
directly or indirectly, is the beneficial owner of 5% or more of any class of
equity securities of the specified Person or of which the specified Person is
directly or indirectly the owner of 5% or more of any class of equity
securities and (iv) any member of the immediate family of the specified Person
or his or her spouse.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership, as originally executed and as amended and restated from time to
time, as the context requires.
"Appraisal" means the statement of valuation of the assets of the
Partnership as described in Section 9.4.
"Auditors" means Deloitte & Touche LLP or such other nationally or
regionally recognized firm of independent auditors as shall be engaged by the
Partnership.
"Capital Account", as to any Partner, means the sum of a Partner's Capital
Contributions, increased by his share of any Profits, and decreased by his
share of any Losses and by his share of any Partnership Distributable Cash
reasonably expected to be distributed to such Partner and other assets
distributed to such Partner or on behalf of such Partner in payment of any
taxes or other expenses allocable to such Partner and as otherwise increased or
decreased in accordance with the tax accounting principles set forth in
Treasury Regulation Section 1.7041(b)(2)(iv) of the Code.
"Capital Contribution" means the total amount of money contributed to the
Partnership by all Partners or any class of Partners or any one Partner (or the
predecessor holders of the Interests of such Partners or Partner), as the
context requires, upon the formation of the Partnership or the admission of
such Partner to the Partnership, or as that money is contributed to the
Partnership.
"Code" means the Internal Revenue Code of 1986, as amended (or any
corresponding provision of succeeding law).
"Consent" means the approval of a Person, given as provided in Section
11.1, to do the act or thing for which the approval is solicited, or the act of
granting such approval, as the context may require. Reference to the Consent of
a specified percentage in Interest of the Limited Partners means the Consent of
Limited Partners whose combined Capital Contributions represent, at the time in
question, at least such specified percentage of the Capital Contributions of
all the then Limited Partners.
"Distributable Cash" means, with respect to any fiscal period of the
Partnership, the cash assets of the Partnership on hand at the end of such
fiscal period (but not including the Capital Contribution to the Partnership)
less amounts required to be retained out of such cash assets in the sole
judgment of the General Partner to pay the Partnership's liabilities whether
accrued or anticipated to accrue in the future or to make permissible
investments.
"Fiscal Year" means the calendar year.
"General Partner" means KECALP Inc., a Delaware corporation whose business
address is South Tower, World Financial Center, 225 Liberty Street, New York,
New York 10080-6123, and any successor to it in its capacity as general partner
of the Partnership.
"Incapacity" or "Incapacitated" means the entry of an order for relief in
a case under Title 11 of the United States Code (the "Bankruptcy Code")
("bankruptcy") (except that, in the case of the General Partner, the term
"bankruptcy" shall mean only the being subject to Chapter 7 of the Bankruptcy
Code) or the incompetence, insanity, interdiction, death, incapacity,
disability, dissolution or termination (other than by merger or consolidation),
as the case may be, of any Person.
"Income" means the gross income of the Partnership as determined for
Federal income tax purposes including capital gains and Code Section 1231 gains
(but not losses).
"Initial Limited Partner" means Robert F. Tully.
"Interest" means the entire ownership interest of a Partner in the
Partnership at any particular time, including the right of such Partner to any
and all benefits to which a Partner may be entitled as provided in this
Agreement, together with the obligations of such Partner to comply with all the
terms and provisions of this Agreement. Reference to a specified percentage in
Interest of the Limited Partners shall mean Limited Partners whose Capital
Contributions represent, at the time in question, at least such specified
percentage of the Capital Contributions of all the then Limited Partners.
"Limited Partner" means any Person who is a limited partner of the
Partnership as shown on the books and records of the Partnership (whether the
Initial Limited Partner, an Additional Limited Partner or a Substituted Limited
Partner) at the time of reference thereto, in such Person's capacity as a
limited partner of the Partnership.
"Majority-in-interest" means the Limited Partners whose aggregate Capital
Contributions represent over 50% of the aggregate Capital Contributions of all
Limited Partners.
"Notification" means a writing, containing the information required by
this Agreement to be communicated to any Person, sent by first class mail,
postage prepaid, to such Person at the last known address of such Person, five
days after the mailing thereof being deemed the date of the giving of
Notification; provided however, that any communication containing the
information sent to the Person and actually received by the Person shall
constitute Notification for all purposes of this Agreement.
"Operating Expenses" consist of the following items incurred with respect
to the operation of the Partnership: Taxes of the Partnership, auditors' fees,
legal fees, postage, printing costs, Appraisal costs, and general and
administrative costs. The term does not include, among other items, (i)
commissions, selling agents' fees and other fees and expenses otherwise payable
by the Partnership relating to the acquisition, monitoring and disposition of
portfolio investments, (iii) transaction expenses incurred by the General
Partner in the evaluation or negotiation of prospective investments for the
Partnership, and (iv) litigation and other extraordinary expenses.
"Order" means the exemptive order under the Investment Company Act of 1940
governing the payment of expenses by the Partnership requested from the
Securities and Exchange Commission by the General Partner in an initial
application dated April 9, 1998.
"Partner" means the General Partner or a Limited Partner.
"Partnership" means the limited partnership governed hereby, as said
limited partnership may from time to time be constituted.
"Partnership Account" means the bank account or bank accounts to be
maintained by the General Partner on behalf of the Partnership with any bank in
the United States having assets in excess of $100,000,000.
"Person" means any individual, partnership, corporation, trust or other
entity.
"Profits" or "Losses" means the profits or losses of the Partnership for
Federal income tax purposes including, without limitation, each item of
Partnership Income, gain, loss, deduction or credit.
"Prospectus" means the prospectus contained in the registration statement
filed by the Partnership on Form N-2 at the time such registration statement
was declared effective by the Securities and Exchange Commission; except that
if a prospectus filed by the Partnership pursuant to Rule 497(b) or 497(d)
under the Securities Act of 1933 differs from the prospectus contained in the
registration statement, as aforesaid, then the term "Prospectus" refers to the
Rule 497(b) or 497(d) prospectus from and after the time it is mailed to the
Securities and Exchange Commission for filing.
"Remove", "Removed" or "Removal" when used in reference to the removal of
the General Partner means the termination of all management powers, duties and
responsibilities of the General Partner pursuant to Section 6.5, but not the
elimination of the General Partner as a Partner.
"Sale" means any event, action or transaction that is, for Federal income
tax purposes, considered a sale, exchange or abandonment by the Partnership of
any Partnership property.
"State" means the State of Delaware.
"Substituted Limited Partner" means any Person admitted to the Partnership
as a Limited Partner pursuant to the provisions of Section 7.4 and who is shown
on the books and records of the Partnership as a limited partner of the
Partnership.
"Unit" means an Interest in the Partnership attributable to an aggregate
payment of $1,000 to the Partnership by, or on behalf of, the Limited Partner
who originally acquired the Interest.
"Valuation Date" means each of the dates described in Section 9.4.
ARTICLE TWO
Organization
Section 2.1 Governance
The undersigned parties hereto hereby agree that the rights and
liabilities of the Partners shall be as provided in the Act except as herein
otherwise expressly provided.
Section 2.2 Name, Place of Business and Office; Registered Agent
The name of the limited partnership heretofore formed and hereby continued
shall be Merrill Lynch KECALP L.P. 1999. The business of the Partnership may be
conducted under any other name deemed necessary or desirable by the General
Partner in order to comply with local law. The Partnership shall maintain a
registered office in the State c/o RL&F Service Corp., One Rodney Square,
Wilmington, New Castle County, Delaware 19801. The Partnership shall maintain
its principal office at South Tower, World Financial Center, 225 Liberty
Street, New York, New York 10080-6123. The General Partner may at any time
change the location of the Partnership's offices and may establish additional
offices, if it deems it advisable. The name and address of the Partnership's
registered agent for service of process in the State is RL&F Service Corp., One
Rodney Square, Wilmington, New Castle County, Delaware 19801. The General
Partner has filed the certificate of limited partnership of the Partnership and
shall file any amendment to the certificate of limited partnership of the
Partnership as required by the Act in the proper office in the State and shall
take such steps as are necessary to qualify the Partnership to conduct business
in other jurisdictions in which it owns properties or conducts business and
otherwise to insure that the Limited Partners will have limited liability with
respect to the activities of the Partnership in such other jurisdictions.
Section 2.3 Purpose
The purpose and character of the business of the Partnership is to invest
the funds of the Partnership in various speculative and non-speculative
investments, seeking, among other things, long-term capital appreciation, and
to engage in any and all activities necessary or incidental thereto.
Section 2.4 Term
The Partnership term commenced on July __, 1998, and shall continue in
full force and effect until December 31, 2039, or until dissolution prior
thereto pursuant to the provisions hereof.
ARTICLE THREE
Partners and Capital
Section 3.1 General Partner
A. The name, residence, business or mailing address and Capital
Contribution of the General Partner are set forth in the books and records of
the Partnership, as amended from time to time, and are incorporated herein by
reference.
B. If the Order is not issued, the General Partner, as general partner of
the Partnership, shall be deemed to have made additional Capital Contributions
to the Partnership to the extent it pays expenses of the Partnership pursuant
to this Agreement which are not reimbursed to it by either the Partnership or
an Affiliate of the General Partner.
Section 3.2 Initial Limited Partner
A. The name, business address and Capital Contribution of the Initial
Limited Partner are Robert F. Tully, South Tower, World Financial Center, 225
Liberty Street, New York, New York 10080-6123 and his Capital Contribution is
$1.00.
B. Upon the admission of Additional Limited Partners pursuant to Section
3.3, the Initial Limited Partner shall withdraw from the Partnership and
receive forthwith the return of his Capital Contribution without interest or
deduction.
Section 3.3 Additional Limited Partners
A. The General Partner is authorized to admit Additional Limited Partners
to the Partnership pursuant to the terms contained in the Prospectus and this
Agreement. The manner of the offering of Additional Limited Partners Units, the
terms and conditions under which subscriptions for such Units will be accepted,
and the manner of and conditions to the sale of Units to subscribers therefor
and the admission of such subscribers as Additional Limited Partners will be as
provided in the Prospectus and subject to any provisions thereof.
B. The name, residence, business or mailing address and Capital
Contribution of each Additional Limited Partner shall be set forth in the books
and records of the Partnership, as amended from time to time.
C. No Limited Partner shall be required to make any additional
contributions to the capital of the Partnership.
Section 3.4 Partnership Capital
A. No Partner shall be paid interest on any Capital Contribution to the
Partnership.
B. No Partner, other than the Initial Limited Partner pursuant to Section
3.2, shall have the right to withdraw any part of his Capital Contribution or
to receive any return of any portion of his Capital Contribution except as
otherwise provided herein.
C. Under circumstances involving a return of any Capital Contribution, no
Partner shall have the right to receive property other than cash, except as may
be specifically provided in this Agreement.
D. If the Order is not issued, the General Partner shall make additional
contributions to the capital of the Partnership in an amount sufficient to pay
for Partnership expenses allocable to it pursuant to Section 4.4A.
Section 3.5 Liability of Partners
A. No Limited Partner shall be liable for the debts, liabilities,
contracts or any other obligations of the Partnership, except to the extent of
his Capital Contribution and his share of the Partnership's assets and
undistributed profits, or for the debts or liabilities of any other Partner. To
the extent provided by law, a Limited Partner may, under certain circumstances,
be required to return, for the benefit of Partnership creditors, amounts
previously distributed to such Limited Partner.
B. A Limited Partner shall be liable only to make the payment of his
Capital Contribution as set forth in Sections 3.2A and 3.3B.
C. No Limited Partner shall be required to lend funds to the Partnership
or make any further contribution to the capital of the Partnership.
D. The General Partner shall not be required to contribute to the capital
of, or loan, the Partnership any funds other than the General Partner's Capital
Contributions to the capital of the Partnership as set forth in Sections 3.1
and 3.4D. Neither the General Partner nor any of its Affiliates shall have (i)
any personal liability for the return or repayment of the Capital Contribution
of any Limited Partner or (ii) to repay to the Partnership any portion or all
of any negative amount of the General Partner's Capital Account, except as
otherwise provided in Section 8.2D.
Section 3.6 Lender as Partner
No creditor who makes a non-recourse loan to the Partnership shall have or
acquire, at any time as a result of making the loan, any direct interest in the
profits, capital or property of the Partnership, other than as a secured
creditor.
ARTICLE FOUR
Management
Section 4.1 Powers of the General Partner
A. The General Partner shall manage the affairs of, and shall control the
business of, the Partnership and shall have all powers necessary to manage and
control the Partnership's affairs and business and fulfill the purposes of the
Partnership, including, by way of illustration and not by way of limitation:
(i) The power and duty to invest the balance (after the setting aside
of suitable reserves) of the Capital Contributions of the Partners and
reinvest revenues of the Partnership in accordance with the purpose of the
Partnership and in keeping with its investment objectives as stated in the
Prospectus.
(ii) The power to acquire securities or property of all types on
behalf of the Partnership, including, without limitation, stocks, bonds,
debentures, notes, shares in investment companies, general and limited
partnership interests, investment contracts and interests in trusts.
(iii) The power to enter into transactions and make investments with
or through Affiliates of the General Partner and to participate in
investment transactions sponsored or underwritten (either on a best
efforts or firm commitment basis) by Affiliates of the General Partner or
in entities as to which Affiliates of the General Partner serve as
investment adviser or placement agent.
(iv) The power to purchase interests in entities sponsored by
Affiliates of the General Partner or in which Affiliates of the General
Partner have an interest, including, but not limited to, limited
partnership interests in limited partnerships in which such Affiliates
serve as general partner.
(v) The power to cause securities owned by the Partnership to be
registered in the Partnership name or in the name of a nominee or to be
held in street name, as it shall elect.
(vi) The power and duty to maintain the books and records of the
Partnership in accordance with the provisions of Section 9.1.
(vii) The power to reserve funds out of Partnership Income or borrow
money in the name of the Partnership from any bank or other lending
institution in the United States or from an Affiliate of the General
Partner for the purpose of leveraging investments of the Partnership,
paying assessments levied on Partnership investments or paying other costs
of the Partnership (other than costs that the General Partner is obligated
to pay) and in connection with any borrowing, to mortgage, pledge,
encumber, and hypothecate the assets of the Partnership.
(viii) The power to lend money to the Partnership on commercially
reasonable terms.
(ix) The power to make temporary investments of Partnership capital
in all types of securities, including, without limitation, short-term U.S.
Government and Government agency securities, certificates of deposit,
interest-bearing deposits in U.S. banks, securities issued by or on behalf
of states, municipalities and their instrumentalities, the interest from
which is exempt from Federal income tax, securities issued by other
investment companies (including unit investment trusts and taxable and
tax-exempt money market funds sponsored and/or advised by Affiliates of
the General Partner) prior to long-term investment or pending cash
distributions to the Partners.
(x) The power to seek exemptions from provisions of the Investment
Company Act of 1940 from the Securities and Exchange Commission.
(xi) The power to enter into a sales agency agreement relating to the
offering and sale of Units by the Partnership with Merrill Lynch, Pierce,
Fenner & Smith Incorporated, or any other Affiliate of the General
Partner.
(xii) In addition to and not in limitation of any rights and powers
conferred by law or other provisions of this Agreement, and except as
limited, restricted or prohibited by the express provisions of this
Agreement, the General Partner shall have and may exercise on behalf of
the Partnership all powers and rights necessary, proper, convenient or
advisable to effectuate and carry out the purpose, business and objectives
of the Partnership including the power to have investment opportunities
evaluated by an advisory committee selected by the General Partner.
B. In order to expedite the handling of the Partnership's business, it is
understood and agreed that any document executed by the General Partner while
acting in the name and on behalf of the Partnership shall be deemed to be the
action of the Partnership vis-a-vis any third parties (including the Limited
Partners as third parties for such purpose).
C. In the event the original General Partner withdraws as provided in
Article Six, is Incapacitated or is Removed, any additional or successor
General Partner or General Partners shall possess all the power and authority
of the original General Partner. Any remaining and any additional and successor
General Partner is authorized to and shall continue the business of the
Partnership. The General Partner may admit an additional or successor General
Partner provided that if it subsequently wishes to withdraw or transfer its
interest, Sections 6.1 and 6.2 shall be complied with as to the additional or
successor General Partner prior to its becoming a sole General Partner, and
provided that the following conditions are satisfied:
(i) appropriate filings are made under the Act and in such other
jurisdictions as the Partnership's business requires;
(ii) the Interest of Limited Partners will not be adversely affected;
and
(iii) the sole General Partner shall not be Incapacitated. In the
event an additional or successor General Partner is admitted, the term
"General Partner" as used in this Agreement shall include the additional
or successor General Partner.
Section 4.2 Prohibited Transactions
Notwithstanding anything to the contrary contained herein, the following
transactions are specifically prohibited to the Partnership:
(i) The Partnership shall not make any loans to the General Partner
or any of its Affiliates unless permitted by the Investment Company Act of
1940 or an order of exemption therefrom;
(ii) The Partnership shall not sell or lease any property to the
General Partner or any of its Affiliates except on terms at least as
favorable as those obtainable from unaffiliated third parties and except
that this provision shall not prohibit any transaction contemplated by
Section 8.2 or permitted by the terms of any partnership agreement or
investment contract into which the Partnership may enter by virtue of its
investment as a general or limited partner, where an Affiliate of the
General Partner also acts as general partner of such partnership;
(iii) No funds of the Partnership shall be kept in any account other
than a Partnership Account, and funds shall not be commingled with the
funds of any other Person, and the General Partner shall not employ, or
permit any other Person to employ, such funds in any manner except for the
benefit of the Partnership; it being understood that the General Partner
may invest temporarily Partnership funds in accordance with the provisions
of Section 4.1 A (ix); and
(iv) No expense of the Partnership shall be billed except directly to
the Partnership (but shall be paid pursuant to the terms of this
Agreement), and no reimbursements shall be made therefor to the General
Partner or any of its Affiliates except as permitted by Section 4.6.
Section 4.3 Restrictions on the Authority of the General Partner
A. The General Partner shall not have the authority to:
(i) do any act in contravention of the Investment Company Act of
1940, as applied to the Partnership; or
(ii) do any act that would make it impossible to carry on the
ordinary business of the Partnership.
B. The General Partner shall not perform any act that would subject any
Limited Partner to liability as a general partner in any jurisdiction.
C. Without the Consent of a Majority-in-interest of the Limited Partners,
the General Partner shall not have the authority to:
(i) lease, sell, or otherwise dispose of at any one time all or
substantially all of the assets of the Partnership;
(ii) elect to dissolve the Partnership prior to January 1, 2005;
(iii) issue senior securities other than in connection with the
borrowings described in (v) below;
(iv) make short sales of securities, purchase securities on margin,
except for use of short-terms credit necessary for the clearance of
transactions, or write put or call options;
(v) borrow amounts in excess of 33 1/3% of the Partnership's gross
assets, or otherwise as permitted under the Investment Company Act of
1940, except that the Partnership may enter into non-recourse loans
relating to investments other than securities without regard to such
limitation;
(vi) underwrite securities of other issuers, except insofar as the
Partnership may be deemed an underwriter under the Securities Act of 1933
in selling portfolio securities;
(vii) invest more than 25% of its Partners' Capital Contributions in
the securities of issuers in any particular industry, except for real
estate investments and for temporary investments in U.S. Government and
Government agency securities, domestic bank money market instruments and
money market funds;
(viii) make loans to other Persons in excess of 33 1/3% of the
Partnership's gross assets, provided that investments in privately-offered
debt securities issued by entities in which the Partnership has an equity
participation or with which the Partnership has contracted to acquire an
equity participation shall not be considered loans for purposes of this
paragraph; or
(ix) alter the investment objective and business purpose of the
Partnership.
D. The General Partner shall not borrow funds on behalf of the Partnership
except in accordance with Section 4.1A (vii) and (xii).
E. The General Partner shall not cause the Partnership to consent to, or
join in, any waiver, amendment, or modification of the terms of any partnership
agreement, limited partnership agreement, management agreement or investment
contract to which it is a party unless, in the good faith judgment of the
General Partner, such waiver, amendment, or modification would be in the best
interest of the Partnership.
Section 4.4 Expenses of the Partnership
A. If the Order is not issued, the General Partner will pay (i) all
Operating Expenses of the Partnership, (ii) commissions, selling agents' fees
and other fees otherwise payable by the Partnership relating to the acquisition,
monitoring and disposition of portfolio investments, (iii) transaction expenses
incurred by the General Partner in the evaluation or negotiation of prospective
investments for the Partnership and (iv) litigation and other extraordinary
expenses. The General Partner will be entitled to reimbursements as provided in
Section 4.6.
B. If the Order is issued, the Partnership will be responsible for the
payment of its organizational and offering expenses and the expenses described
in Section 4.4A, and will make reimbursements to the General Partner, subject
to the limitations in Section 4.6C.
Section 4.5 Duties and Obligations of the General Partner
A. If the Order is not issued, the General Partner shall pay expenses of
the Partnership in accordance with Section 4.4A. The General Partner is not
obligated to pay from its own funds, debt service or other interest charges
incurred in connection with the making of Partnership investments and is
entitled to indemnification in accordance with Section 4.8. If the Order is
issued, in any year in which the Partnership has paid Operating Expenses and
made reimbursements to the General Partner pursuant to Section 4.6C that in the
aggregate equal 1.5% of Limited Partners' Capital Contributions, the General
Partner will pay remaining Operating Expenses for that year and expenses
otherwise reimbursable to it pursuant to Section 4.6C and the Partnership will
be responsible for its remaining expenses for that year.
B. The General Partner shall take all action that may be necessary or
appropriate for the continuation of the Partnership's valid existence as a
limited partnership under the laws of the State, and for the acquisition,
holding and disposition, in accordance with the provisions of this Agreement
and applicable laws and regulations, of the investments of the Partnership.
C. The General Partner shall devote to the Partnership the time that it
deems to be necessary to conduct the Partnership business and affairs in the
best interests of the Partnership and use its best efforts to obtain a suitable
investment portfolio for the Partnership.
D. The General Partner shall be under an obligation to conduct the affairs
of the Partnership in the best interest (or not opposed to the best interest)
of the Partnership, including the safekeeping and use of all Partnership funds
and assets (whether or not in the immediate possession or control of the
General Partner) and the use thereof for the benefit of the Partnership.
Notwithstanding the foregoing, the General Partner may, in its sole and
absolute discretion, elect to dissolve the Partnership at any time after
January 1, 2005, and, upon liquidation, to purchase Partnership assets in
accordance with Section 8.2. The General Partner shall at all times act with
integrity and good faith and exercise due diligence in all activities relating
to the conduct of the business of the Partnership and in resolving conflicts of
interest.
E. The General Partner will use its best efforts at all times to maintain
its net worth at a level that is sufficient to meet all present and future
requirements set by statute, Treasury Regulations, the Internal Revenue Service
or the courts applicable to a corporate general partner in a limited
partnership to insure that the Partnership will not fail to be classified for
Federal income tax purposes as a partnership, rather than as an association
taxable as a corporation, on account of the net worth of the General Partner.
F. The General Partner shall prepare or cause to be prepared and shall
file on or before the due date (or any extension thereof) any Federal, state or
local tax returns required to be filed by the Partnership. The General Partner
shall cause the Partnership to pay, from Partnership funds, any taxes payable
by the Partnership.
G. The General Partner shall, from time to time, submit to any appropriate
Federal or state securities administrator, or any other regulatory authorities
having jurisdiction, all documents, papers, statistics and reports required to
be filed with or submitted to such authority.
H. The General Partner shall use its best efforts to cause the Partnership
to be formed, reformed, qualified to do business, or registered under any
applicable assumed or fictitious name statute or similar law in any
jurisdiction in which the Partnership then owns property or transacts business,
if such formation, reformation, qualification or registration is necessary in
order to protect the limited liability of the Limited Partners or to permit the
Partnership lawfully to own property or transact business.
I. The General Partner shall, from time to time, prepare and file all
amendments to this Agreement, the certificate of limited partnership of the
Partnership and other similar documents that are required by law to be filed
and recorded for any reason, in the office or offices that are required under
the laws of the State or any other jurisdiction in which the Partnership is
then qualified or formed. The General Partner shall do all other acts and
things (including making publications or periodic filings of this Agreement or
amendments thereto or other similar documents) that may now or hereafter be
required, or deemed by the General Partner to be necessary, (i) for the
perfection and continued maintenance of the Partnership as a limited
partnership under the laws of the State and each other state in which the
Partnership is then qualified or formed, (ii) to protect the limited liability
of the Limited Partners under the laws of the State and each other state in
which the Partnership is then qualified or formed, and (iii) to cause such
certificates or other documents to reflect accurately the agreement of the
Partners, the identity of the Limited Partners and the General Partner and the
amounts of their respective Capital Contributions as may be required by such
laws.
J. The General Partner shall monitor the activities of entities invested
in by the Partnership and keep the Limited Partners informed of such activities
in the manner provided in this Agreement.
K. The General Partner shall inform each Limited Partner of all
administrative and judicial proceedings for an adjustment at the Partnership
level for Partnership tax items and forward to each Limited Partner within 30
days of receipt all notices received from the Internal Revenue Service
regarding the commencement of a partnership level audit or a final partnership
administrative adjustment and will perform all other duties imposed by Sections
6221 through 6232 of the Code on the General Partner as "tax matters partner"
of the Partnership, including (but not limited to) the following: (a) the power
to conduct all audits and other administrative proceedings (including windfall
profit tax audits) with respect to Partnership tax items; (b) the power to
extend the statute of limitations for all Partners with respect to Partnership
tax items; and (c) the power to file a petition with an appropriate Federal
court for review of a final partnership administrative adjustment. The General
Partner shall be the "tax matters partner" of the Partnership.
Section 4.6 Compensation and Reimbursement of the General Partner
A. Except as provided in Sections 4.4, 4.5, this Section 4.6 and Article
Five, the General Partner shall not receive any salary, fees or Profits from
the Partnership.
B. If the Order is not issued, the General Partner shall be entitled to
reimbursement from the Partnership (i) in an amount of up to 1.5% of the
Limited Partners' Capital Contributions for expenses it incurs in connection
with the organization of the Partnership and the offering of the Units and (ii)
commencing in 1999 and annually in each calendar year thereafter, in an annual
amount of up to 1.0% of the Limited Partners' Capital Contributions for
Operating Expenses and transaction expenses incurred by the General Partner
with respect to the Partnership relating to the acquisition, monitoring and
disposition of portfolio investments and the evaluation and negotiation of
prospective investments. Except as provided in this Article Four and Article
Eight, neither the General Partner nor its Affiliates shall be reimbursed out
of Partnership funds for expenses incurred by them on behalf of the
Partnership.
C. If the Order is issued, the Partnership will reimburse the General
Partner on a quarterly basis for its personnel, overhead and administrative
expenses attributable to the Partnership, subject to an annual limit under which
such reimbursements and payment of Operating Expenses by the Partnership will
not, in the aggregate, exceed 1.5% of Limited Partners' Capital Contributions.
Section 4.7 Other Businesses of Partners
Subject to Section 4.5C, any Partner, and any Affiliate of any Partner may
engage in or possess any interest in other business ventures of any kind,
nature or description, independently or with others, for his, her or its own
account or for the account of others. Neither the Partnership nor any Partner
as a result of this Agreement shall have any rights or obligations in or to
such independent ventures or the income or profits or losses derived therefrom.
Section 4.8 Indemnification
Neither the General Partner nor any of its officers, directors,
stockholders, employees, or agents shall be liable to the Partnership or the
Limited Partners for any act or omission based on errors of judgment, or other
fault in connection with the business or affairs of the Partnership so long as
the Person against whom liability is asserted acted in good faith on behalf of
the Partnership and in a manner reasonably believed by such Person to be within
the scope of its authority under this Agreement and in or not opposed to the
best interests of the Partnership, but only if such action or failure to act
does not constitute gross negligence or willful misfeasance, and, with respect
to any criminal proceeding, such Person had no reasonable cause to believe its
conduct was unlawful. The General Partner and its officers, directors,
stockholders, employees, and agents will be indemnified by the Partnership to
the fullest extent permitted by law for any (a) fees (including, without
limitation, legal fees), costs and expenses incurred in connection with or
resulting from any claim, action or demand, or threatened claim, action or
demand, against the General Partner, the Partnership or any of their officers,
directors, stockholders, employees, or agents that arises out of or in any way
relates to the Partnership, its properties, business or affairs and (b) losses
or damages resulting from such claims, actions and demands, or threatened
claims, actions or demands, including amounts paid in settlement or compromise
(if recommended by attorneys for the Partnership) of any such claim, action or
demand or threatened claims, actions or demands; provided, however, that this
indemnification shall apply only so long as the Person against whom a claim,
action or demand is asserted or threatened to be asserted has acted in good
faith on behalf of the Partnership and in a manner reasonably believed by such
Person to be within the scope of his or its authority under this Agreement and
in or not opposed to the best interests of the Partnership, but only if such
action or failure to act does not constitute gross negligence or willful
misfeasance. Absent a court determination that the General Partner or officers
or directors of the General Partner were not liable on the merits or guilty of
disabling conduct within the meaning of Section 17(h) of the Investment Company
Act of 1940, the decision by the Partnership to indemnify the General Partner
or any such Person must be based upon the reasonable determination of
independent counsel, after review of the facts, that such disabling conduct did
not occur. The rights set forth above shall continue as to the General Partner
and its officers, directors, stockholders, employees or agents who have ceased
to serve in such capacities and shall inure to the benefit of their heirs,
successors, assigns and administrators.
Section 4.9 Management by Limited Partners
No Limited Partner shall participate in the management or in the control
of the business of the Partnership or use his name in the Partnership's
business or perform any actions prohibited to limited partners under the laws
of the State or the laws of any other jurisdiction where the Partnership is
qualified or formed to conduct business. Limited Partners hereby consent to the
exercise by the General Partner of the powers conferred on it by this
Agreement.
ARTICLE FIVE
Distributions of Partnership Funds;
Allocations of Profits and Losses
Section 5.1 Distributions of Partnership Funds
Distributable Cash of the Partnership shall be distributed at least
annually, within 30 days after the end of the Fiscal Year, and distributions
may be made at such other times as the General Partner deems advisable. If the
Order is not issued and the General Partner has a 1% interest in Profits and
Losses, each such distribution shall be made 99% to the Limited Partners and 1%
to the General Partner; otherwise each such distribution will be based on the
basis of Partners' Capital Contributions. If the General Partner deems it
advisable, distributions of Partnership assets may be made in kind, in the same
manner and to the same Persons as Distributable Cash is then being distributed.
Cash distributions to Limited Partners will be credited to each Limited
Partner's securities account with Merrill Lynch, Pierce, Fenner & Smith
Incorporated or as otherwise instructed to the General Partner by a Limited
Partner.
Section 5.2 Allocations of Profits and Losses
A. The Profits and Losses of the Partnership shall be determined and
allocated with respect to each Fiscal Year of the Partnership as of the end of,
and within 75 days after the end of, such Fiscal Year or as soon as practicable
thereafter.
B. Profits and Losses of the Partnership, other than arising from Sales
upon liquidation pursuant to Section 8.2, shall be allocated among and credited
to or charged against each Partner's Capital Account as follows:
(i) If the Order is not issued, with respect to Losses, (a) 99% to
the Limited Partners and 1% to the General Partner until the Limited
Partners' Capital Accounts equal zero; (b) thereafter, 100% to the General
Partner until the General Partner's Capital Account equals zero; (c)
thereafter, 99% to the Limited Partners and 1% to the General Partner or
100% to the General Partner, as appropriate, to the extent necessary to
make the Capital Account balances of the General Partner and Limited
Partners equal 1% and 99%, respectively, of the total of the Partners'
Capital Accounts; and (d) thereafter, 99% to the Limited Partners and 1%
to the General Partner; and
(ii) If the Order is not issued, with respect to Profits, (a) 99% to
the Limited Partners and 1% to the General Partner or 100% to the General
Partner, as appropriate, to the extent necessary to make the Capital
Account balances of the General Partner and the Limited Partners equal 1%
and 99%, respectively, of the total of the Partners' Capital Accounts; and
(b) thereafter, 99% to the Limited Partners and 1% to the General Partner.
(iii) If the Order is issued, Profits and Losses shall be allocated
to each Partner's Capital Account proportionately based upon Partners'
respective Capital Contributions.
C. For purposes of determining the Capital Account balance of any Limited
Partner as of the end of any Fiscal Year under this Section 5.2, any such
Partner's Capital Account shall be reduced by:
(i) Allocations of Loss (or any item thereof) as of the end of such
Fiscal Year, which reasonably are expected to be made to such Partner
pursuant to Code Sections 704, 706, and 752 and Treasury Regulations
promulgated thereunder; and
(ii) Distributions that, as of the end of such Fiscal Year,
reasonably are expected to be made to such Partner to the extent they
exceed offsetting increases to such Partner's Capital Account that
reasonably are expected to occur during (or prior to) the Partnership's
Fiscal Year in which such distributions reasonably are expected to be
made.
D. Notwithstanding any provision of this Agreement to the contrary, if a
Partner receives an unexpected adjustment, allocation or distribution described
in Treasury Regulations Section 1.7041(b)(2)(ii)(d)(4), (5) or (6) which
creates or increases a deficit balance in the Partner's Capital Account, items
of income and gain shall be allocated to such Partner in an amount and manner
sufficient to eliminate the Partner's Capital Account deficit as quickly as
possible. If any allocations are made pursuant to the previous sentence, then
future allocations of income or gain to such Partner will be reduced by an
amount of income or gain equal to the amount previously allocated to the
Partner under the previous sentence.
E. If there is a net decrease in the Partnership's Minimum Gain (as
defined in Treasury Regulations under Section 704(b) of the Code) during a
taxable year, each Partner with a deficit balance in his Capital Account at the
end of the taxable year will be allocated, before any other allocation of
Partnership items is made pursuant to this Agreement, items of income and gain
for the taxable year and, if necessary, subsequent taxable years, in the amount
necessary to eliminate such deficit as quickly as possible. For the purpose of
this Minimum Gain calculation and for purposes of the preceding paragraph,
there will be excluded from the Partner's deficit balance in his Capital
Account (i) any amount the Partner is obligated to restore to his Capital
Account and (ii) any addition to his Capital Account represented by the
Partner's share of Minimum Gain. In addition, for the purpose of calculating
the amount of Minimum Gain, each Partner's Capital Account will be reduced for
items described in Treasury Regulations Section 1.7041(b)(2)(ii)(d)(4), (5) and
(6).
Section 5.3 Determinations of Allocations and Distributions Among Limited
Partners
A. All Distributable Cash distributed to the Limited Partners, as a class,
and all Profits and Losses allocated to the Limited Partners, as a class, shall
be distributed or allocated, as the case may be, to each Limited Partner in the
ratio that the Capital Contribution of such Limited Partner (or of his
predecessor in interest) bears to the total Capital Contribution of all Limited
Partners.
B. All Profits and Losses allocated to the Limited Partners shall be
allocated to the Persons who were Limited Partners as of the last day of the
fiscal quarter for which the allocation is made. If during any Fiscal Year of
the Partnership there is a change in any Partner's Interest in the Partnership,
then allocation of Profits and Losses among the Partners shall be determined by
the use of any method prescribed by Section 706(d)(1) of the Code and the
Treasury Regulations promulgated thereunder. Allocations of "allocable cash
basis items" shall be determined in accordance with the method prescribed by
Section 706(d)(2) of the Code and the Treasury Regulations promulgated
thereunder.
C. All Distributable Cash distributed to the Limited Partners shall be
distributed to the Persons who were Limited Partners as of the last day of the
fiscal quarter preceding the fiscal quarter in which the distribution is made.
ARTICLE SIX
Transferability of the General
Partner's Interest
Section 6.1 Voluntary Withdrawal or Transfer by the General Partner
A. Except as provided in Section 6.2, the General Partner (including by
definition any successor or additional General Partner) may withdraw as General
Partner at any time, but only upon compliance with all of the following
procedures:
(i) The General Partner shall give Notification to all Limited
Partners that it proposes to withdraw and that there be substituted in its
place a Person designated and described in such Notification.
(ii) Enclosed with the Notification shall be a certificate, duly
executed by or on behalf of such proposed successor General Partner, to
the effect that, (a) it is experienced in performing (or employs
sufficient personnel who are experienced in performing) functions of the
type then being performed by the resigning General Partner; (b) it has a
net worth of at least 10% of the Capital Contributions of the Partners or
will otherwise meet the net worth requirements of statutes, Treasury
Regulations, the Internal Revenue Service or the courts applicable to a
corporate general partner in a limited partnership in order to insure that
the Partnership will not fail to be classified for Federal income tax
purposes as a partnership rather than as an association taxable as a
corporation; and (c) it is willing to become the General Partner under
this Agreement without receiving any compensation for services from the
Partnership in excess of that payable under this Agreement to the
withdrawing General Partner or any interest in the Income or Profits of
the Partnership other than a transfer to the successor General Partner of
some or all of the withdrawing General Partner's Interest in the
Partnership, plus such other compensation as the successor General Partner
may receive from the withdrawing General Partner.
(iii) If the General Partner proposes to withdraw, there shall be on
file at the principal office of the Partnership, prior to such withdrawal,
audited financial statements of the proposed successor General Partner, as
of a date not earlier than 12 months prior to the date of the Notification
required by this Section 6.1A, certified by a nationally recognized firm
of independent auditors, together with a certificate duly executed by the
proposed successor General Partner, or on its behalf by its principal
financial officer, to the effect that no material adverse change in its
financial condition has occurred since the date of such audited financial
statements that has caused its net worth, apart from the purchase price of
its Interest in the Partnership, to be reduced to less than the amount
required under Section 6.1A(ii)(b). Such audited statements and
certificates shall be available for examination by any Limited Partner
during normal business hours.
(iv) The Consent of at least a Majority-in-interest of the Limited
Partners approving the appointment of any successor General Partner
pursuant to this Section 6.1A is obtained.
(v) The withdrawing General Partner shall cooperate fully with the
successor General Partner so that the responsibilities of the withdrawn
General Partner may be transferred to the successor General Partner with
as little disruption of the Partnership's business and affairs as is
practicable.
B. Except as part of a transfer to a successor General Partner pursuant to
Section 6.1A, the General Partner shall not have the right to withdraw or to
transfer or assign its General Partner Interest, except that the General
Partner may (i) substitute in its stead as General Partner any entity that has,
by merger, consolidation or otherwise, acquired substantially all of the assets
or capital stock of the General Partner and continued its business, (ii)
substitute in its stead any other wholly-owned subsidiary of its corporate
parent, and (iii) pledge or grant an interest in its right to receive payments
and distributions under this Agreement, in which event the General Partner
shall continue to be the general partner of the Partnership.
C. Subject to the provisions of Section 11.3, each Limited Partner hereby
Consents pursuant to Section 6.1A to the admission as a successor General
Partner of any Person meeting the requirements of Section 6.1A to whose
admission as such at least a Majority-in-interest of the Limited Partners has
expressly approved, and no further express Consent or approval shall be
required.
D. Notwithstanding anything to the contrary in this Article Six, the
General Partner's Interest shall at all times be subject to any restrictions on
transfer imposed by Federal or state securities laws.
E. Any withdrawal of the General Partner, or transfer or assignment of the
General Partner's entire Interest shall occur immediately after the admission
of a successor General Partner.
Section 6.2 Admission of Successor General Partner
The admission of any successor General Partner pursuant to Section 6.1
shall be effective only if and after the following conditions are satisfied:
(i) this Agreement and the certificate of limited partnership of the
Partnership shall be amended to reflect the admission of such Person as
successor General Partner prior to the withdrawal of the withdrawing
General Partner or the transfer of the withdrawing General Partner's
Interest, pursuant to Section 6.1;
(ii) the Interests of the Limited Partners shall not be affected by
the admission of such successor General Partner;
(iii) any Person designated as successor General Partner pursuant to
Section 6.1 shall have satisfied the requirements of Section 10.2; and
(iv) the withdrawing General Partner shall not have ceased to be
General Partner because of its Incapacity.
Any successor General Partner is hereby authorized to and shall continue
the business of the Partnership.
Section 6.3 Liability of a Withdrawn or Removed General Partner
Any General Partner who shall withdraw or be Removed from the Partnership
shall remain liable for any obligations and liabilities incurred by it as
General Partner prior to the time such withdrawal or Removal shall have become
effective, but it shall be free of any obligation or liability incurred on
account of the activities of the Partnership from and after the time such
withdrawal or Removal shall have become effective.
Section 6.4 Incapacity of the General Partner
In the event of the Incapacity of the General Partner, the Partnership
shall be dissolved.
Upon the Incapacity of the General Partner, the General Partner shall
immediately cease to be General Partner and its General Partner's Interest, as
such, shall continue only for the purpose of determining the amount, if any,
that it is entitled to receive upon dissolution pursuant to Section 8.2. Any
termination or Removal of a General Partner shall not affect any rights or
liabilities of the Incapacitated or Removed General Partner that matured prior
to such Incapacity or Removal.
Section 6.5 Removal of the General Partner
A. Upon the delivery by counsel for the Partnership or counsel designated
by 10% in Interest of the Limited Partners of an opinion to the effect that the
possession and exercise by a Majority-in-interest of the Limited Partners of
the power to Remove the General Partner will not impair the liability of the
Limited Partners, then the power shall be vested in the Limited Partners to
Remove the General Partner upon the Consent of a Majority-in-interest of the
Limited Partners, but the exercise of that power shall be subject to the
conditions set forth in Section 11.3. The Removal of any General Partner
pursuant to this Section 6.5 shall be without prejudice to the rights, if any,
the Limited Partners may have against the General Partner for damages
attributable to its negligence or misconduct or other breach of duty.
B. Upon the delivery by counsel for the Partnership or counsel designated
by 10% in Interest of the Limited Partners of an opinion to the effect that the
possession and exercise by a Majority-in-interest of the Limited Partners of
the power to designate a successor General Partner will not impair the limited
liability of the Limited Partners, then with the Consent of a
Majority-in-interest of the Limited Partners to the admission of a general
partner, the Limited Partners may, subject to the provisions of Section 6.2, at
any time designate one or more Persons to be successors to the General Partner
being Removed pursuant to Section 6.5. Any such Removal shall occur immediately
after the admission of the successor General Partner.
C. Upon the Removal of the General Partner (and failure to designate a
successor General Partner) pursuant to Section 6.5A, the Partnership shall be
dissolved.
Section 6.6 Distributions on Withdrawal or Removal of the General Partner
In the event the General Partner (i) exercises its right to withdraw from
the Partnership in accordance with Section 6.1A or (ii) is Removed pursuant to
Section 6.5, the withdrawing or Removed General Partner shall have its then
existing Capital Account (to the extent not acquired by any successor)
converted into a capital account of a Limited Partner.
ARTICLE SEVEN
Transferability of a Limited Partner's Interest
Section 7.1 Restrictions on Transfers of Interest
A. Notwithstanding any other provisions of this Section 7.1, a sale,
exchange, transfer or assignment of a Limited Partner's Interest may not be
made if:
(i) such sale, exchange, transfer or assignment, when added to the total
of all other sales, exchanges, transfers or assignments of Interests
within the preceding 12 months, would result in the Partnership being
considered to have terminated within the meaning of Section 708 of the
Code;
(ii) such sale, exchange, transfer or assignment would violate any U.S.
securities laws, or any state securities or "blue sky" laws (including
any investor suitability standards) applicable to the Partnership or
the Interest to be sold, exchanged, transferred or assigned;
(iii) such sale, exchange, transfer or assignment would cause the
Partnership to lose its status as a partnership for Federal income tax
purposes;
(iv) such sale, exchange, transfer or assignment would cause all or any
portion of the Partnership's property to be deemed "tax-exempt use
property" within the meaning of Section 168(j) of the Code; or
(v) such sale, exchange, transfer or assignment would cause the
Partnership to be classified as a publicly traded partnership within
the meaning of Section 7704(b) of the Code.
B. In no event shall all or any part of an Interest be assigned or
transferred to an Incapacitated Person except by operation of law.
C. Except as provided in Section 7.5B, no transfer or assignment by a
Limited Partner of all or any part of his Interest may be made to any Person
who (i) is not a Partner, (ii) is not a member of the immediate family of a
Limited Partner or (iii) does not meet the requirements to become an Additional
Limited Partner in accordance with the terms of the offering of Units contained
in the Prospectus and this Agreement, as modified by the last sentence of this
Section 7.1C; provided, however, no Limited Partner's Interest or any fraction
thereof may be sold, assigned or transferred without the consent of the General
Partner, which consent may be withheld in the sole discretion of the General
Partner. For purposes of this Section 7.1C, the members of the immediate family
of a Limited Partner consist of persons within the meaning of such phrase as is
used in the definition of "employees' securities company" in the Investment
Company Act of 1940, and include the Partner's spouse and children, including
stepchildren and adopted children. With respect to the requirements referenced
in clause (iii), the requirement as to compensation from Merrill Lynch & Co.,
Inc. shall be measured on the basis of the current annual salary and the bonus
with respect to the most recently completed fiscal year.
D. Subject to Section 7.1C, no purported sale, assignment or transfer by a
transferor of, or after which the transferor and each transferee would hold, an
Interest representing a Capital Contribution of less than $1,000 will be
permitted or recognized for any purpose without the consent of the General
Partner, which consent shall be granted only for good cause shown.
E. No purported sale, assignment or transfer by a transferor of, or after
which the transferor and each transferee would hold, an Interest representing a
Capital Contribution of less than $1,000 will be permitted or recognized for
any purpose without the consent of the General Partner, which consent shall be
granted only for good cause shown, except for any sale, assignment or transfer
(i) that consists of the entire Interest of the transferor or (ii) that occurs
by operation of law.
F. Each Limited Partner agrees that he will, upon request of the General
Partner, execute such certificates or other documents and perform such acts as
the General Partner deems appropriate after an assignment of an Interest by the
Limited Partner to preserve the limited liability of the Limited Partners under
the laws of any jurisdiction in which the Partnership is doing business. For
purposes of this Section 7.1F, any transfer of an Interest, whether voluntary
or by operation of law, shall be considered an assignment.
G. Any sale, assignment or transfer of an Interest to a Person who makes a
market in securities shall be void ab initio unless such Person shall certify
to the General Partner that it has acquired such Interest solely for investment
purposes and not for the purpose of resale.
H. No purported sale, assignment or transfer by a transferor of an
Interest will be recognized unless (1) the transferor shall have represented
that such transfer (a) was effected through a broker-dealer or matching agent
whose procedures with respect to the transfer of Units have been approved by
the General Partner as not being incident to a public trading market and not
through any other broker-dealer or matching agent or (b) otherwise was not
effected through a broker-dealer or matching agent which makes a market in
Interests or which provides a readily available, regular and ongoing
opportunity to Limited Partners to sell or exchange their Interests through a
public means of obtaining or providing information of offers to buy, sell or
exchange Interests and (2) the General Partner determines that such sale,
assignment or transfer would not, by itself or together with any other sales,
transfers or assignments, likely result in, as determined by the General
Partner in its sole discretion, the Partnership's being classified as a
publicly traded partnership.
I. No purported sale, assignment or transfer of a Unit will be recognized
if, after giving effect to such sale, assignment or transfer, the Partnership
would not satisfy at least one of the safe harbors contained in Treasury
regulation 1.7704-1 (the "Final PTP Regulations"). Without limiting the
foregoing, no purported sale, assignment or transfer of a Unit will be
recognized if such sale, assignment or transfer, together with all other such
transfers during the same taxable year of the Partnership would result in
either (i) the transfer of more than 2% of the Units (excluding excludable
transfers and sales completed through a matching service which meets the
requirements of the Final PTP Regulations) or (ii) the transfer and sale of
more than 10% of the Units (excluding excludable transfers) completed through a
matching service which meets the requirements of the Final PTP Regulations. For
purposes of the limitations described in the preceding sentence, the following
transfers ("excludable transfers") will be disregarded: (i) transfers in which
the basis of the Unit in the hands of the transferee is determined, in whole or
in part, by reference to its basis in the hands of the transferor or is
determined under Section 732 of the Code; (ii) transfers at death, including
transfers from an estate or testamentary trust; (iii) transfers between members
of a family (as defined in Section 267(c)(4) of the Code); (iv) the issuance of
Units by or on behalf of the Partnership in exchange of cash, property or
services; (v) distributions from a retirement plan qualified under Section
401(a) of the Code; and (vi) block transfers; and for purposes of the 2%
limitation, there shall be disregarded transfers through a matching service
subject to the 10% limitation described in the previous sentence. For purposes
of the above limitations, the percentage of Units transferred during a taxable
year shall equal the sum of the monthly percentage of Units transferred. The
monthly percentage of Units transferred in any month shall be the percentage
equal to a fraction the numerator of which is the number of Units transferred
during such month and the denominator of which is the number of Units
outstanding on the last day of such month, provided that the denominator shall
not include Units owned by the General Partner or any Person related to the
General Partner (within the meaning of Section 267(b) or 707(b)(1) of the
Code). The term "block transfer" means the transfer by a Partner in one or more
transactions during any thirty calendar day period of Units representing in the
aggregate more than 2% of the total Interests in Partnership capital or
profits.
J. Any purported assignment of an Interest which is not made in compliance
with this Agreement is hereby declared to be null and void and of no force or
effect whatsoever.
K. The General Partner may reasonably interpret, and is hereby authorized
to take such action as it deems necessary or desirable to effect, the foregoing
provisions of this Section 7.1. The General Partner may, in its reasonable
discretion, amend the provisions of this Section 7.1 in such manner as may be
necessary or desirable (or eliminate or amend such provisions to the extent
they are no longer necessary or desirable) to preserve the tax status of the
Partnership.
Section 7.2 Incapacity of Limited Partner
If a Limited Partner dies, his executor, administrator or trustee, or, if
he becomes an adjudicated incompetent, his committee, guardian or conservator,
or, if he becomes bankrupt, the trustee or receiver of his estate, shall have
all the rights of a Limited Partner for the purpose of settling or managing the
estate of such Limited Partner, and such power as the Incapacitated Limited
Partner possessed to assign all or any part of the Incapacitated Limited
Partner's Interest and to join with such assignee in satisfying conditions
precedent to such assignee's becoming a Substituted Limited Partner. In the
event of death of a Limited Partner, but not in the event of bankruptcy or
adjudication of incompetence, the deceased Limited Partner's Interest may be
tendered to the General Partner within 90 days of receipt of the next Appraisal
pursuant to Section 7.5.
Section 7.3 Assignees
A. The Partnership shall not recognize for any purpose any purported sale,
assignment or transfer of all or any fraction of the Interest of a Limited
Partner unless the provisions of Section 7.1A shall have been complied with and
there shall have been filed with the Partnership a written and dated
Notification of such sale, assignment or transfer, in form satisfactory to the
General Partner, executed and acknowledged by both the seller, assignor or
transferor and the purchaser, assignee or transferee, and such Notification (i)
contains the acceptance by the purchaser, assignee or transferee of all of the
terms and provisions of this Agreement, (ii) represents that such sale,
assignment or transfer was made in accordance with all applicable laws and
regulations and (iii) contains the purchaser's, assignee's or transferee's
power of attorney identical to that provided in Section 12.1. Any sale,
assignment or transfer shall be recognized by the Partnership as effective as
of the first day of the fiscal quarter following the quarter in which such
Notification is filed with the Partnership.
B. Any Limited Partner who shall assign all of his Interest shall cease to
be a Limited Partner as of the first day of the fiscal quarter following the
quarter in which such Notification is filed with the General Partner.
C. A Person who is the assignee of all or any fraction of the Interest of a
Limited Partner, but does not become a Substituted Limited Partner and desires
to make a further assignment of such Interest, shall be subject to all the
provisions of this Article Seven to the same extent and in the same manner as
any Limited Partner desiring to make an assignment of his Interest.
Section 7.4 Substituted Limited Partners
A. No Limited Partner shall have the right to substitute a purchaser,
assignee, transferee, donee, heir, legatee, distributee or other recipient of
all or any portion of such Limited Partner's Interest as a Limited Partner in
his place. Any such purchaser, assignee, transferee, donee, heir, legatee,
distributee or other recipient of an Interest shall be admitted to the
Partnership as a Substituted Limited Partner only with the consent of the
General Partner, which consent shall be granted or withheld in the sole and
absolute discretion of the General Partner and may be arbitrarily withheld,
and, if necessary, by an amendment of this Agreement executed by all necessary
parties and filed or recorded in the proper records of each jurisdiction in
which such filing or recordation is necessary to qualify the Partnership to
conduct business or to preserve the limited liability of the Limited Partners.
The Limited Partners hereby consent to the admission of a Substituted Limited
Partner whose admission has been consented to by the General Partner. Any such
consent by the General Partner and the Limited Partners may be evidenced, if
necessary, by the execution by the General Partner of an amendment to this
Agreement on its behalf and on behalf of all Limited Partners pursuant to
Section 12.1 evidencing the admission of such Person as a Limited Partner and
the making of any filing required by law. The admission of a Substituted
Limited Partner shall be recorded on the books and records of the Partnership.
B. No Person shall become a Substituted Limited Partner until such Person
shall have satisfied the requirements of Section 10.2; provided, however, that
for the purpose of allocating Profits, Losses and Distributable Cash, a Person
shall be treated as having become, and as appearing in the books and records of
the Partnership as, a Limited Partner on such date as the sale, assignment or
transfer to such Person was recognized by the Partnership pursuant to Section
7.3A.
C. To the fullest extent permitted by law, each Limited Partner shall
indemnify and hold harmless the Partnership, the General Partner and every
Limited Partner who was or is a party or is threatened to be made a party of
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of or arising from any
actual or alleged misrepresentation or misstatement of facts or omission to
state facts made (or omitted to be made) by such Limited Partner in connection
with any assignment, transfer, encumbrance or other disposition of all or any
part of an Interest, or the admission of a Substituted Limited Partner to the
Partnership, against expenses for which the Partnership or such other Person
has not otherwise been reimbursed (including attorneys' fees, judgments, fines
and amounts paid in settlement) actually and reasonably incurred by him in
connection with such action, suit or proceeding.
D. (1) Each Limited Partner represents and warrants that the information
set forth on his Subscription Agreement is a true and correct statement of his
total direct and indirect, within the meaning of Section 318 of the Code,
holdings of stock of the General Partner or any of its Affiliates, as defined
in Section 1504(a) of the Code. No Person shall be accepted as a Limited
Partner if the admission of such Person would cause the Limited Partners to
own, directly or indirectly, more than 20% of the outstanding stock of the
General Partner or any of its Affiliates as defined in Section 1504(a) of the
Code.
(2) Each Limited Partner further represents and warrants that the
following statements are true: (i) if such Limited Partner is an individual, he
is over 21 years of age; if such Limited Partner is a corporation, it is
authorized and otherwise duly qualified to hold an Interest in the Partnership;
(ii) he has thoroughly read the Prospectus and this Agreement and understands
the nature of the risks involved in the proposed investment; (iii) he is
experienced in investment and business matters; (iv) in the case of an employee
of Merrill Lynch & Co., Inc. or its subsidiaries he has a current annual salary
in an amount which, together with bonus received from Merrill Lynch & Co., Inc.
or its subsidiaries in respect of 1997, equaled at least $100,000 or, if
employed for less than a full calendar year, is employed with an annualized
gross income from Merrill Lynch & Co., Inc. or its subsidiaries of at least
$100,000 and the aggregate amount of Units he will invest in will not exceed an
amount that would result in the price of such Units exceeding 15% of his cash
compensation from Merrill Lynch & Co., Inc. or its subsidiaries with respect to
the most recent calendar year on an annualized basis unless he either (x) has a
net worth, individually or jointly with his spouse, in excess of $1,000,000 at
the time of purchase of the Units or (y) had an individual income in excess of
$200,000 in each of the two most recent calendar years or joint income with his
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current calendar year, or
in the case of non-employee directors of Merrill Lynch & Co., Inc., (a) has a
net worth (exclusive of homes, home furnishings, personal automobiles and the
amount to be invested in Units) of not less than $125,000 in excess of the
price of the Units for which such investor has subscribed, or (b) has a net
worth (exclusive of homes, home furnishings, personal automobiles and the
amount to be invested in Units) of not less than $100,000 in excess of the
price of the Units for which such investor has subscribed and expects to have
during each of the current and the next three taxable years, gross income from
all sources in excess of $100,000; (v) he recognizes that the Partnership is
newly organized and has no history of operations or earnings and is subject to
speculative risks; (vi) he understands that the transferability of his
Interest(s) in the Partnership is restricted pursuant to the provisions of this
Agreement and that he cannot expect to be able to liquidate his investment
readily in case of emergency; and (vii) unless otherwise indicated in his
Subscription Agreement, he is the sole party in interest in his Interest and,
as such, is vested with all legal and equitable rights in such Interests.
Investors will be required to represent in writing in the Subscription
Agreement that they meet all applicable requirements and satisfy any more
restrictive suitability requirements imposed by applicable Blue Sky laws.
Section 7.5 Acquisition of Certain Limited Partners' Interests by the
General Partner or the Partnership
A. The General Partner shall purchase from its own funds for its own
account, or cause to be purchased by the Partnership, from the Partnership's
funds for the Partnership's account, any Limited Partner's Interest tendered to
it pursuant to Section 7.2. The purchase price shall be the value of such
Interest determined at the next annual Valuation Date less any distribution
paid in respect of such Interest subsequent to such Valuation Date.
B. The Partnership may, but is not obliged to, purchase from the
Partnership's funds for the Partnership's account any Interest tendered to the
General Partner pursuant to Section 7.2 if such purchase is in the best
interests of the Partnership.
C. If the General Partner purchases any Interest pursuant to this Section
7.5 for its own account and not for the account of the Partnership, the General
Partner shall be entitled to the rights of an assignee of such Interest and be
entitled to vote such Interest as if it were a Substituted Limited Partner or be
admitted as a Substituted Limited Partner. The General Partner may sell any
Interest acquired by it under the provisions of this Section 7.5 on such terms
as are acceptable to it, and if the purchaser of such Interests is not a Partner
of this Partnership, he will be entitled to be admitted to the Partnership as a
Substituted Limited Partner with respect to such Interest. The effective date of
any such sale shall be the date on which payment has been made by the purchaser
of such Interest.
ARTICLE EIGHT
Dissolution, Liquidation and
Termination of the Partnership
Section 8.1 Events Causing Dissolution
A. Except as provided in Section 8.1(B), the Partnership shall be
dissolved and its affairs shall be wound up upon the happening of any of the
following events:
(i) the expiration of its term;
(ii) the Incapacity of the General Partner;
(iii) the Removal of the General Partner and the failure to
designate a successor;
(iv) the Sale or other disposition at one time of all or
substantially all of the Partnership's assets;
(v) the election to dissolve the Partnership prior to January 1,
2005 by the General Partner with the Consent of a Majority-in-interest
of the Limited Partners, which Consent shall be subject to Article
Eleven;
(vi) the election to dissolve the Partnership by the General
Partner at any time after January 1, 2005; or
(vii) the withdrawal of the General Partner without the
designation of a successor General Partner under Section 6.1.
The occurrence of any event described in Sections 17-402(a)(4) or
17-402(a)(5) of the Act (other than an event that would cause the
Incapacity of the General Partner) shall not cause the General Partner to
cease to be a General Partner of the Partnership or cause the Partnership
to dissolve.
B. Upon the happening of an event described in Section 8.1A(ii), (iii) or
(vii), the Partnership shall not be dissolved if, at the time of the occurrence
of such event there is at least one other General Partner, or within ninety
(90) days after the occurrence of such an event, all remaining partners agree
to continue the business of the Partnership and to the appointment, effective
as of the date of such event, of one or more successor General Partners.
C. The Incapacity of any Limited Partner shall not dissolve the
Partnership and the seizure of the Interest of any Partner shall not dissolve
the Partnership. Dissolution of the Partnership shall be effective on the day
on which the event occurs giving rise to the dissolution, but the Partnership
shall not terminate until the Partnership's certificate of limited partnership
has been cancelled and the assets of the Partnership have been distributed as
provided in Section 8.2.
Section 8.2 Liquidation
A. Upon dissolution of the Partnership, its liabilities shall be paid in
the order provided herein. The General Partner shall cause Partnership property
to be sold in such manner as it, in its sole discretion, shall determine in an
effort to obtain the best price for such property. In order for the Partnership
to obtain a reasonable price for any Partnership investments which are
illiquid, the General Partner may, to the extent permitted by applicable law,
purchase from the Partnership any Partnership investments upon which there are
significant restrictions as to transferability or for which a fair market price
is not readily obtainable. Payment of the fair market value of any such
investment as established by the annual Appraisal made in accordance with
Section 9.4, adjusted for any distributions or other significant events
subsequent to the Valuation Date, shall be deemed fair and reasonable and not a
violation of any General Partner's duty to the Partnership. Pending Sale of
Partnership property, the General Partner shall have the right to continue to
operate and otherwise deal with Partnership property. In the event that the
General Partner has been Removed and a successor General Partner has not been
designated, the Limited Partners shall elect, in accordance with the provisions
of Article Eleven, a Person to perform the functions of the General Partner in
liquidating the assets of the Partnership and in winding up its affairs.
B. Profits and Losses arising from Sales upon liquidation shall be
allocated as follows:
(i) If the Order is not issued, Profits shall be allocated (a) first,
to the Partners in amounts equal to the negative balances, if any, in
their respective Capital Accounts, without giving effect to any cash
distributions arising from Sales at liquidation; (b) second, to the
General Partner up to the amount of the Capital Contributions of the
General Partner made to the Partnership during its term under Section 3.1B
in excess of 1% of the Limited Partners' Capital Contributions, but not to
exceed the amount of assets payable to the General Partner under Section
8.2C(ii); and (c) third, all remaining Profits, 99% to the Limited
Partners and 1% to the General Partner.
(ii) If the Order is not issued, Losses shall be allocated 99% to the
Limited Partners and 1% to the General Partner.
(iii) If the Order is issued, Profits and Losses shall be allocated
to each Partner's Capital Account proportionately based upon Partners'
respective Capital Contributions.
C. In settling accounts after dissolution, the assets of the Partnership
shall be paid out in the following order:
(i) first, to any creditors (including any creditor who is a
Partner), in the order of priority as provided by law or the establishment
of reasonable reserves for the payment of obligations to creditors;
(ii) second, to each Partner in an amount equivalent to the positive
amount of his Capital Account on the date of distribution, after giving
effect to any allocation of Profits or Losses arising from Sales on
liquidation; and
(iii) third, the balance, 99% to the Limited Partners and 1% to the
General Partner, unless the Order has been issued, in which case the
balance is to be paid based on relative Capital Contributions.
D. In the event that following the final dissolution under Section 8.2C,
the General Partner has a deficit balance in its Capital Account balance, the
General Partner shall contribute cash to the Partnership necessary to eliminate
said deficit balance.
ARTICLE NINE
Books and Records; Accounting; Appraisal;
Tax Elections; Etc.
Section 9.1 Books and Records
The books and records of the Partnership, including information relating
to the sale by the General Partner or any of its Affiliates of securities,
property, goods or services to the Partnership, and a list of the name,
residence, business or mailing address and Interest of each Limited Partner,
shall be maintained by the General Partner at the office of the Partnership or
of the General Partner and shall, for any purpose, other than commercial
purposes, reasonably related to a Limited Partner's Interest as a limited
partner, be available for examination there by any Limited Partner or his duly
authorized representative at any and all reasonable times. Any Limited Partner,
or his duly authorized representatives, upon paying the costs of collection,
duplication and mailing, for any purpose reasonably related to a Limited
Partner's Interest as a limited partner, shall be entitled to a copy of the
list of the name, residence, business or mailing address and Interest of each
Limited Partner. Such information shall be used for Partnership purposes only.
The Partnership may maintain such other books and records and may provide such
financial or other statements as the General Partner in its discretion deems
advisable.
Section 9.2 Accounting Basis for Tax and Reporting Purposes; Fiscal Year
The books and records, and the financial statements and reports of the
Partnership, both for tax and financial reporting purposes, shall be kept on an
accrual basis. The Fiscal Year of the Partnership for both tax and financial
reporting purposes shall be the calendar year.
Section 9.3 Bank Accounts
The General Partner shall maintain the Partnership Account and withdrawals
shall be made only in the regular course of the Partnership business on such
signature or signatures as the General Partner may determine. Temporary
investments of the type permitted by Section 4.1A(ix) are deemed activities in
the ordinary course of Partnership business.
Section 9.4 Appraisal
Beginning December 31, 1999, and as of December 31, of each succeeding
year thereafter (the "Valuation Date"), the General Partner will make or have
made an appraisal of all of the assets of the Partnership as of the Valuation
Date (the "Appraisal"). The Appraisal of the Partnership's assets may be by
independent third parties appointed by the General Partner and deemed qualified
by the General Partner to render an opinion as to the value of Partnership
assets, using such methods and considering such information relating to the
investments, assets and liabilities of the Partnership as such Persons may deem
appropriate, but in the case of an event subsequent to the Valuation Date
materially affecting the value of any Partnership asset or investment, the
General Partner may revise the Appraisal as it, in its good faith and sole
discretion, deems appropriate. For purposes of the Appraisal to be made on
December 31, 1999, the General Partner may use the purchase price of
Partnership assets as the value of such assets.
Section 9.5 Reports
Within 75 days after the end of each Fiscal Year or as soon as practicable
thereafter, the General Partner shall send to each Person who was a Limited
Partner at any time during the Fiscal Year then ended (i) a statement (which
shall be audited by the Auditors) showing the Distributable Cash (or assets
distributed in kind) distributed in respect of such year; (ii) such tax
information as shall be necessary for the preparation by such Limited Partner of
his Federal and state income tax returns; and (iii) a report of the investment
activities of the Partnership during such year. Within 180 days after the end of
each Fiscal Year, or as soon thereafter as practicable, the General Partner
shall send to each Person who was a Limited Partner at any time during the
Fiscal Year then ended Partnership financial statements audited by the Auditors
and a copy of the Appraisal. The General Partner shall not be required to
deliver or mail a copy of the certificate of limited partnership of the
Partnership or any amendment thereof to the Limited Partners.
Section 9.6 Elections
The General Partner may cause the Partnership to make all elections
required or permitted to be made by the Partnership under the Code and not
otherwise expressly provided for in this Agreement, in the manner that the
General Partner believes will be most advantageous to individual Limited
Partners who (i) are married and filing joint Federal income tax returns, (ii)
are not "dealers" for Federal income tax purposes, and (iii) have income at
least part of which, without giving effect to any additional tax on preference
items, is subject to Federal income taxation at the then highest marginal tax
rate for persons set forth in (i).
ARTICLE TEN
Amendments
Section 10.1 Proposal and Adoption of Amendments Generally
A. Amendments to this Agreement to reflect the addition or substitution of
a Limited Partner, the admission of a successor General Partner or the
withdrawal of the General Partner, shall be made at the time and in the manner
referred to in Section 10.2. Any other amendment to this Agreement may be
proposed by the General Partner or by 10% in Interest of the Limited Partners.
The Partner or Partners proposing such amendment shall submit (a) the text of
such amendment, (b) a statement of the purpose of such amendment, and (c) an
opinion of counsel obtained by the Partner or Partners proposing such amendment
to the effect that such amendment is permitted by the Act and the laws of any
other jurisdiction where the Partnership is qualified to do business, will not
impair the liability of the Limited Partner and will not adversely affect the
classification of the Partnership as a partnership for Federal income tax
purposes. The General Partner shall, within 20 days after receipt of any
proposal under this Section 10.1A, give Notification to all Partners of such
proposed amendment, of such statement of purpose and of such opinion of
counsel, together, in the case of an amendment proposed by Limited Partners,
with the views, if any, of the General Partner with respect to such proposed
amendment.
B. Amendments of this Agreement shall be adopted if:
(i) in the case of amendments referred to in Sections 10.2A and
10.2B, the conditions specified in Sections 6.1 and 6.2 shall have been
satisfactorily completed;
(ii) in the case of amendments referred to in Section 10.2C, the
conditions specified in Section 7.4 shall have been satisfactorily
completed; or
(iii) in the case of all amendments, subject to the provisions of
Section 11.3, such amendment shall have been Consented to by a
Majority-in-interest of the Limited Partners; provided, however, that no
such amendment may:
(a) enlarge the obligations of any Partner under this Agreement or
convert the Interest of any Limited Partner into the Interest of
a General Partner or modify the liability of any Limited Partner
without the Consent of such Partner;
(b) modify the method provided in Article Five of determining,
allocating or distributing, as the case may be, Profits and
Losses and Distributable Cash without the Consent of each
Partner adversely affected by such modification;
(c) amend Sections 6.1 or 6.2 without the Consent of the General
Partner;
(d) amend Section 4.3C, this Article Ten or Section 11.3 without the
Consent of all the Partners; or
(e) allow additional contributions of capital by some or all of the
Limited Partners without the Consent of the General Partner and
a Majority-in-interest of the Limited Partners.
C. Upon the adoption of any amendment to this Agreement, the amendment
shall be executed by the General Partner and the Limited Partners and, if
required by the Act, an amendment to the certificate of limited partnership of
the Partnership shall be filed or recorded in the proper records of the State
and of each jurisdiction in which filing or recordation is necessary for the
Partnership to conduct business or to preserve the limited liability of the
Limited Partners. Each Limited Partner hereby irrevocably appoints and
constitutes the General Partner as his agent and attorney-in-fact to execute,
file, and record any and all such amendments including, without limitation,
amendments to admit Limited Partners and to increase or decrease the amount of
the contribution to the Partnership of any Partner. The power of attorney given
herewith is irrevocable, is coupled with an interest and shall survive and not
be affected by the subsequent Incapacity of any Limited Partner granting it.
D. Notwithstanding anything to the contrary contained herein, the General
Partner may, without prior notice or Consent of any Limited Partner, amend any
provision of this Agreement if, in its opinion, such amendment does not have a
material adverse effect upon the Limited Partners.
Section 10.2 Amendments on Admission or Withdrawal of Partners
A. If this Agreement shall be amended to reflect the admission of a
General Partner, the amendment to this Agreement and to the certificate of
limited partnership of the Partnership shall be adopted, executed and filed as
required by the Act and this Agreement.
B. If this Agreement shall be amended to reflect the withdrawal or Removal
of the General Partner and the continuation of the business of the Partnership,
the amendment to this Agreement and to the certificate of limited partnership
shall be adopted, executed and filed as required by the Act and this Agreement.
C. No Person shall become a Partner unless such Person shall have become a
party to, and adopted all of the terms and conditions of, this Agreement, and
except for the Initial Limited Partner or an Additional Limited Partner, paid
any reasonable legal fees of the Partnership and the General Partner and filing
and publication costs in connection with such Person's becoming a Partner
elected to be so charged in the General Partner's discretion.
ARTICLE ELEVEN
Consents, Voting and Meetings
Section 11.1 Method of Giving Consent
Any Consent required by this Agreement may be given as follows:
(i) by a written Consent given by the approving Partner at or prior
to the date set by the General Partner for the delivery of the Consent,
provided that such Consent shall not have been nullified by either (a)
Notification to the General Partner by the approving Partner at or prior
to the time of, or the negative vote by such approving Partner at, any
meeting held to consider the doing of such act or thing, or (b)
Notification to the General Partner by the approving Partner prior to the
date set by the General Partner for the delivery of the Consent with
respect to actions the doing of which is not subject to approval at such
meeting; or
(ii) by the affirmative vote by the approving Partner to the doing of
the act or thing for which the Consent is solicited at any meeting called
and held pursuant to Section 11.2 to consider the doing of such act or
thing.
Section 11.2 Meetings of Partners
The termination of the Partnership and any other matter requiring the
Consent of all or any of the Limited Partners pursuant to this Agreement may be
considered at a meeting of the Partners held not less than 15 nor more than 30
days after Notification thereof shall have been given by the General Partner to
all Partners. Such Notification (i) may be given by the General Partner, in its
discretion, at any time and (ii) shall be given by the General Partner within
15 days after receipt by the General Partner of a request for such a meeting
made by 10% in Interest of the Limited Partners. Such meeting shall be held
within or outside the State at such reasonable place as shall be specified by
the General Partner if Notification of such meeting is given pursuant to this
Section 11.2.
Section 11.3 Limitations on Requirements for Consents
Notwithstanding the provisions of Sections 4.3C, 6.1A(iv), 6.1C, 6.5A,
6.5B, 8.1(v) and 10.1B, as the case may be,
(i) the provision of Section 4.3C(i) requiring the Consent of a
Majority-in-interest of the Limited Partners to the sale or other
disposition at any one time of all or substantially all of the assets of
the Partnership shall be void and the General Partner shall have authority
to sell or dispose at any one time all or substantially all of the assets
of the Partnership;
(ii) the provisions of Section 4.3C(ii) and 8.1(v) permitting the
General Partner to dissolve the Partnership prior to January 1, 2005 with
the Consent of the Majority-in-interest of the Limited Partners shall be
void and the General Partner shall have the authority to dissolve the
Partnership at any time without the Consent of the Limited Partners;
(iii) the provisions of Section 4.3C(iii) through (ix) requiring the
Consent of a Majority-in-interest of the Limited Partners as to the taking
of certain actions by the General Partner shall be void and the General
Partner may take such actions on behalf of the Partnership if not
prohibited by the Investment Company Act of 1940;
(iv) the provisions of Sections 6.1A(iv) and 6.1C permitting the
giving of the Consent of the Limited Partners by the express Consent of a
Majority-in-interest of the Limited Partners shall be void;
(v) the power granted pursuant to the provisions of Section 6.5A and
6.5B to Remove the General Partner and designate a successor General
Partner upon the Consent of a Majority-in-interest of the Limited Partners
may not be exercised; and
(vi) the provisions of Section 10.1B(iii) relating to the amendment
of this Agreement by or upon the Consent of a Majority-in-interest of the
Limited Partners shall be void;
unless at the time of the giving or withholding of the Consent pursuant to the
provisions of Sections 4.3C, 6.1A(iv), 6.1C, 6.5A, 6.5B, 8.1(v) or 10.1B, as the
case may be, counsel for the Partnership or counsel designated by 10% in
Interest of the Limited Partners shall have delivered to the Partnership an
opinion to the effect that the giving or withholding of the Consent is permitted
by the Act, will not impair the limited liability of the Limited Partners and
will not adversely affect the classification of the Partnership as a partnership
for Federal income tax purposes.
Section 11.4 Submissions to Limited Partners
The General Partner shall give all the Limited Partners Notification of
any proposal or other matters required by any provisions of this Agreement or
by law to be submitted for the consideration and approval of the Limited
Partners. Such Notification shall include any information required by the
relevant provision of this Agreement or by law.
ARTICLE TWELVE
Miscellaneous Provisions
Section 12.1 Appointment of the General Partner as Attorney-in-Fact
A. Each Limited Partner, by his execution hereof, hereby makes,
constitutes and appoints the General Partner and each of its officers his true
and lawful agent and attorney-in-fact, with full power of substitution and full
power and authority in his name, place and stead to make, execute, sign,
acknowledge, swear to, record and file, on behalf of him and on behalf of the
Partnership, such documents, instruments and conveyances that may be necessary
or appropriate to carry out the provisions or purposes of this Agreement,
including, without limitation:
(i) this Agreement and the certificate of limited partnership of the
Partnership and all amendments to this Agreement and the certificate of
limited partnership of the Partnership required or permitted by law or the
provisions of this Agreement including, without limitation, such
certificates, agreements and amendments thereto relating to the admission
to the Partnership of Partners and the increase or decrease of the amount
of the Capital Contributions of any Partner;
(ii) all certificates and other instruments deemed advisable by the
General Partner to carry out the provisions of this Agreement or to permit
the Partnership to become or to continue as a limited partnership or
partnership wherein the Limited Partners have limited liability in any
jurisdiction where the Partnership may be doing business;
(iii) all instruments that the General Partner deems appropriate to
reflect a change or modification of this Agreement, in accordance with
this Agreement, including, without limitation, the substitution of
assignees as Substituted Limited Partners pursuant to Sections 7.4 and
10.2C and, if required, the filing of certificates to effect the same;
(iv) all conveyances and other instruments or papers deemed advisable
by the General Partner to effect the dissolution and termination of the
Partnership, including a certificate of cancellation;
(v) all fictitious or assumed name certificates required or permitted
to be filed on behalf of the Partnership;
(vi) all instruments or papers required by law to be filed in
connection with the issuance of limited partnership interests senior to
the Units;
(vii) all other instruments or papers which may be required or
permitted by law to be filed on behalf of the Partnership; and
(viii) all instruments and filings required by Section 6111 of the
Code ("Registration of Tax Shelters") and Section 6112 of the Code
relating to maintenance of lists of investors in tax shelters.
B. The foregoing power of attorney:
(i) is coupled with an interest, shall be irrevocable, shall not be
affected by and shall survive the subsequent Incapacity of each Limited
Partner;
(ii) may be exercised by the General Partner either by signing
separately or jointly as attorney-in-fact for each or all Limited
Partner(s) or, with or without listing all of the Limited Partners
executing an instrument, by a single signature of the General Partner
acting as attorney-in-fact for all of them; and
(iii) shall survive the delivery of an assignment by a Limited
Partner of the whole of his Interest; except that, where the assignee of
the whole of such Limited Partner's Interests has been approved by the
General Partner for admission to the Partnership as a Substituted Limited
Partner, the power of attorney of the assignor shall survive the delivery
of such assignment for the sole purpose of enabling the General Partner to
execute, swear to, acknowledge and file any instrument necessary or
appropriate to effect such substitution.
C. Each Limited Partner shall execute and deliver to the General Partner
within five days after receipt of the General Partner's request therefor such
further designations, powers-of-attorney and other instruments as the General
Partner deems necessary or appropriate to carry out the terms of this Agreement.
Section 12.2 Notification to the Partnership or the General Partner
Any notification to the Partnership or the General Partner shall be sent
to the principal office of the Partnership.
Section 12.3 Binding Provisions
The covenants and agreements contained herein shall be binding upon and
inure to the benefit of the heirs, executors, administrators, permitted
successors and assigns of the respective parties hereto.
Section 12.4 Applicable Law
This Agreement shall be construed and enforced in accordance with the laws
of the State.
Section 12.5 Counterparts
This Agreement may be executed in several counterparts, all of which
together shall constitute one agreement binding on all parties hereto,
notwithstanding that not all the parties have signed the same counterpart
except that no counterpart shall be binding unless signed by the General
Partner. The General Partner may execute any document by facsimile signature of
a duly authorized officer.
Section 12.6 Separability of Provisions
If for any reason any provisions hereof that are not material to the
purposes or business of the Partnership or the Limited Partners' Interests are
determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation of or affect those portions of this
Agreement that are valid.
Section 12.7 Entire Agreement
This Agreement constitutes the entire agreement among the parties. This
Agreement supersedes any prior agreement or understanding among the parties and
may not be modified or amended in any manner other than as set forth therein.
Section 12.8 Headings
The headings in this Agreement are for descriptive purposes only and shall
not control or alter the meaning of this Agreement as set forth in the text.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
KECALP INC.
General Partner
By: _____________________________
Attest:
By: ____________________________
Secretary
Withdrawing and Initial Limited Partner
_______________________________________
Robert F. Tully
LIMITED PARTNERS
All Limited Partners now and hereafter
admitted as limited partners to the
Partnership, pursuant to Powers of
Attorney now and hereafter executed in
favor of, and delivered to, the General
Partner.
By: KECALP Inc.
By: ____________________________________
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
EXHIBIT B
SUBSCRIPTION AGREEMENT
MERRILL LYNCH KECALP L.P. 1999
KECALP Inc., General Partner of
Merrill Lynch KECALP L.P. 1999
South Tower
World Financial Center
225 Liberty Street
New York, New York 10080-6123
Gentlemen:
By signing the Limited Partner Signature Page and Power of Attorney
attached hereto, the undersigned hereby applies for the purchase of the number
of limited partner interests (the "Units"), set forth below, in Merrill Lynch
KECALP L.P. 1999, a Delaware limited partnership (the "Partnership"), at a
price of $1,000 per Unit (minimum purchase of five Units), and authorizes
Merrill Lynch, Pierce, Fenner & Smith Incorporated to debit his securities
account in the amount set forth below for such Units. The undersigned
understands that such funds will be held by The Bank of New York, as Escrow
Agent, and will be returned promptly in the event that 75,000 Units of the
Units offered by the Prospectus are not subscribed for by the Offering
Termination Date (as defined in the Prospectus). The undersigned hereby
acknowledges receipt of a copy of the Prospectus, as well as the Amended and
Restated Agreement of Limited Partnership (the "Partnership Agreement") of the
Partnership attached to the Prospectus as Exhibit A, and hereby specifically
accepts and adopts each and every provision of, and executes, the Partnership
Agreement and agrees to be bound thereby.
The undersigned hereby represents and warrants to you as follows:
1. The undersigned has carefully read the Prospectus and has relied solely
on the Prospectus and investigation made by the undersigned or his or her
representatives in making the decision to invest in the Partnership.
2. The undersigned is aware that investment in the Units involves certain
risk factors and has carefully read and considered the matters set forth under
the captions "Investment Objective and Policies", "Risk and Other Important
Factors" and "Tax Aspects of Investment in the Partnership" in the Prospectus.
3. The undersigned is 21 years of age or over, has adequate means of
providing for his or her current needs and personal contingencies and has no
need for liquidity in this investment.
4. The undersigned represents that he or she (i) in the case of an
employee of Merrill Lynch & Co., Inc. ("ML & Co.") or its subsidiaries, had an
annual salary which, together with bonus received from ML & Co. or its
subsidiaries in respect of 1997, equaled at least $100,000; or, if employed for
less than a full calendar year, is employed with an annualized gross income
from ML & Co. or its subsidiaries of at least $100,000 or (ii) in the case of a
non-employee director of ML & Co., (a) has a net worth (exclusive of homes,
home furnishings, personal automobiles and the amount to be invested in Units)
of not less than $125,000 in excess of the price of the Units for which such
investor has subscribed, or (b) has a net worth (exclusive of homes, home
furnishings, personal automobiles and the amount to be invested in Units) of
not less than $100,000 in excess of the price of the Units for which such
investor has subscribed and expects to have during each of the current and the
next three taxable years, gross income from all sources in excess of $100,000.
5. The undersigned represents that the amount of Units to be purchased
hereby (i) in the case of an employee of ML & Co. or its subsidiaries, does not
exceed an amount that would result in the price of such Units exceeding either
(a) 15% of the employee's cash compensation from ML & Co. or its subsidiaries
received in respect of 1997 unless the employee either (x) has a net worth,
individually or jointly with the employee's spouse, in excess of $1,000,000 at
the time of purchase of the Units, or (y) had an individual income in excess of
$200,000 in each of 1996 and 1997 or joint income with the employee's spouse in
excess of $300,000 in each of those years and reached or has a reasonable
expectation of reaching the same income level in 1998 or (b) 75% of his
compensation received in respect of 1997 on an annualized basis, provided that
the employee meets the standards of (x) or (y) above; or (ii) in the case of a
non-employee director of ML & Co., does not exceed an amount equal to two times
the director's fees (including committee fees, but not including reimbursements
of expenses) received from ML & Co. during 1997.
6. The undersigned represents and warrants that the statements contained
in Section 7.4D of the Partnership Agreement are true insofar as they relate to
the undersigned:
The undersigned understands and recognizes that:
(a) The subscription may be accepted or rejected in whole or in part
by the General Partner in its sole and absolute discretion, except that,
if this subscription is to be accepted in part only, it shall not be
reduced to an amount less than $5,000.
(b) No Federal or state agency has made any finding or determination
as to the fairness for public investment, nor any recommendation or
endorsement, of the Units.
(c) There are restrictions on the transferability of the Units, there
will be no public market for Units, and accordingly, it may not be
possible for the undersigned readily, if at all, to liquidate his or her
investment in the Partnership in case of an emergency.
(d) Prior to any contrary notification to the General Partner by the
undersigned, the undersigned hereby authorizes all cash distributions to
be made by the Partnership to the undersigned as a Limited Partner to be
credited to the undersigned's securities account at Merrill Lynch, Pierce,
Fenner & Smith Incorporated as specified in the Signature Page and Power
of Attorney attached hereto.
The undersigned hereby acknowledges and agrees that the undersigned is not
entitled to cancel, terminate or revoke this subscription or any agreements of
the undersigned hereunder and that such subscription and agreements shall
survive the disability of the undersigned.
This Subscription Agreement and all rights hereunder shall be governed by,
and interpreted in accordance with, the laws of the State of Delaware.
In Witness Whereof, the undersigned executes and agrees to be bound by
this Subscription Agreement by executing the Limited Partner Signature Page and
Power of Attorney attached hereto on the date therein indicated.
<PAGE>
INSTRUCTIONS FOR PURCHASERS OF UNITS
Any person desiring to subscribe for Units should carefully read and
review the Prospectus and, if he or she desires to subscribe for Units in the
Partnership, complete the following steps:
1. Complete, date and execute the Limited Partner Signature Page and Power
of Attorney (sent with Prospectus, on green paper).
2. Use the sample that follows, to assist you in the accurate completion
of the Signature Page.
3. Indicate in the four boxes provided the number of Units you would like
to purchase (minimum 5 Units). If this amount is in excess of 250 Units, your
subscription will be entered initially for 250 Units and, if the offering is
not fully subscribed at the offering termination date, you will receive as many
of the Units you have requested as are available on a pro rata basis based on
the amount of Units available subject to the limitations described in the
Prospectus.
4. Direct Investment Services will, if your subscription is accepted by
the Partnership (which will not occur prior to ______________), enter and
execute an order. An execution wire will be generated to your branch office and
a trade confirmation will be made to you. Settlement date will be three (3)
business days following execution.
Your MLPF&S Securities Account will be debited in the amount of $1,000 for
each Unit that you purchase.
5. Cancellations and quantity reductions are difficult to handle after an
investor has been accepted and the funds placed in escrow. Nonetheless, if you
wish to cancel, contact Andrew Kaufman at (212) 236-7302 or fax him at (212)
236-7360.
<PAGE>
MERRILL LYNCH KECALP L.P. 1999
LIMITED PARTNER SIGNATURE PAGE AND POWER OF ATTORNEY
The undersigned, desiring to become a Limited Partner of Merrill Lynch
KECALP L.P. 1999 (the "Partnership"), pursuant to Section 3.3 or 7.4 of the
Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement"), a form of which is included as Exhibit A to the Prospectus of the
Partnership dated __________, 1999 (the "Prospectus"), hereby executes, and
agrees to all of the terms of, the Partnership Agreement of the Partnership and
agrees to be bound by the terms and provisions thereof. The undersigned
further, by executing this Limited Partner Signature Page and Power of
Attorney, hereby executes, adopts and agrees to all terms, conditions and
representations of the Subscription Agreement included as Exhibit B to the
Prospectus. The undersigned further irrevocably constitutes and appoints KECALP
Inc., the General Partner of the Partnership, and its successors and assigns
with full power of substitution, the true and lawful attorney for the
undersigned and in the name, place and stead of the undersigned to make,
execute, sign, acknowledge, swear to, deliver, record and file any documents or
instruments which may be considered necessary or desirable by the General
Partner to carry out fully the provisions of the Partnership Agreement,
including, without limitation, the Partnership Agreement, the certificate of
limited partnership of the Partnership and any amendment or amendments thereto,
including, without limitation, amendments thereof for the purpose of increasing
or decreasing the capital contribution of any partner and adding and deleting
the undersigned and others as the partners in the Partnership, as contemplated
by the Partnership Agreement (which amendment(s) the undersigned hereby joins
in and executes, hereby authorizing his Limited Partner Signature Page and
Power of Attorney to be attached, if required, to any such amendment) and of
otherwise amending the Partnership Agreement from time to time, or canceling
the same. The power of attorney hereby granted shall be deemed to be coupled
with an interest and shall be irrevocable and survive and not be affected by
the subsequent death, disability, incapacity or insolvency of the undersigned
or any delivery by the undersigned of an assignment of the whole or any portion
of the interest of the undersigned. The place of residence of the undersigned
is as shown below.
ALL INFORMATION MUST BE COMPLETED
Signature of Limited Partner:__________________________
# of Units applied for (whole Units only) __ 25__ x $1,000. = Dollar Amount to
be debited from account listed below
$__ 25,000__
Does purchase price of Units applied for exceed 15% of your Merrill Lynch
compensation in respect of 1997? Yes ( ) No ( )
If so, do you satisfy either of the exceptions specified under "Maximum
Purchase by Qualified Investors" on page 50 of the Prospectus? Yes ( ) No ( )
Limited Partner Name: SMITH JAMES Q
-------------------------------------------------------
(Please Print or Type) Last Name First Name MI
Social Security/Indiv. Taxpayer ID ML Account ML Employee
Number 123-45-6789 Number 100-99200 Number 98765
--------------------------- ---------------- --------
SPECIMEN
<PAGE>
Name: JAMES Q. SMITH
Home
Address: 225 LIBERTY STREET
APT. 2F BUILDING #4
City: NEW YORK State: NY Zip Code: 10080-6123
Mailing Address: (If different from home address)
Address:
City: State: Zip Code:
Residence State if different from above:
Telephone: 212-236-7323 Telephone: 212-236-7303
Home Office
Fax: 212-236-7364 Fax:
Home Office
Are you an active Financial Consultant? Yes ( ) No ( )
Branch Office # 000 and F.C. # 00000
U.S. Citizen? Yes ( ) No ( ) If No, What Country or State
are you a Citizen of?
Resident alien ( ) Non-resident alien ( )
(If non-resident alien, please submit Form W-8)
SPECIMEN
<PAGE>
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<PAGE>
===============================================================================
UNITS OF
TABLE OF CONTENTS LIMITED PARTNERSHIP
INTEREST
Page
Investor Suitability Standards...................2
Summary of the Offering..........................3
Partnership Expenses.............................7
Risk and Other Important Factors.................8
The Partnership.................................13
Investment Objective and Policies...............14
The General Partner and Its Affiliates..........20
Tax Aspects of Investment MERRILL LYNCH KECALP
in the Partnership...........................24 L.P. 1999
Partnership Allocations and Distributions.......30
Summary of the Partnership Agreement............31
Offering and Sale of Units......................33
Transferability of Units........................35
Year 2000.......................................37
Reports.........................................37
Experts.........................................38
Legal Matters...................................38
Exemptions from the Investment
Company Act of 1940...........................38 , 1999
Additional Information..........................40
Index to Financial Statements...................41
Appendix........................................45 MERRILL LYNCH & CO.
----------------------------
Form of Amended and Restated Agreement
of Limited Partnership....................Ex. A
Subscription Agreement......................Ex. B
================================================= ==========================
================================================= ==========================
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(1) Financial Statements
Contained in Part A:
-- See "Index to Financial Statements" in the Prospectus.
Contained in Part B:
-- Not Applicable
Contained in Part C:
-- None
(2) Exhibits
(a)(i) -- Certificate of Limited Partnership of Merrill Lynch
KECALP L.P. 1999
(a)(ii) -- Form of Amended and Restated Agreement of Limited
Partnership of Merrill Lynch KECALP L.P. 1999 is
included as Exhibit A in the Prospectus
(a)(iii) -- Subscription Agreement is included in Exhibit B in the
Prospectus
(b) -- Not Applicable
(c) -- Not Applicable
(d) -- Copies of Instruments Defining the Rights of Unitholders*
(e) -- Not Applicable
(f) -- Not Applicable
(g) -- Not Applicable
(h) -- Form of Agency Agreement*
(i) -- Not Applicable
(j) -- Form of Escrow Deposit Agreement*
(k) -- Not Applicable
(l) -- Opinion and Consent of Brown & Wood LLP*
(m) -- Not Applicable
(n)(i) -- Consent of Independent Accountants*
(n)(ii) -- Form of opinion of Brown & Wood LLP as to certain tax
matters*
(o) -- Not Applicable
(p) -- Not Applicable
(q) -- Not Applicable
- ----------------
* To be filed by amendment
<PAGE>
Item 25. Marketing Arrangements.
None.
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement.
Registration fees.............................................. $ *
----
National Association of Securities Dealers, Inc. fees.......... *
-----
Printing....................................................... *
-----
Fees and expenses of qualifications under state
securities laws (including fees of counsel)................ *
-----
Legal fees and expenses........................................ *
-----
Accounting fees and expenses................................... *
-----
Miscellaneous.................................................. *
-----
Total........................................ $ *
=======
- ------------------
* To be completed by amendment
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
The General Partner of the Partnership is a wholly-owned subsidiary of
Merrill Lynch & Co., Inc.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES.
Robert F. Tully, an employee of Merrill Lynch & Co., Inc., purchased a
limited partnership interest in the Partnership for $1.00 in order to become
the Initial Limited Partner and permit the filing of the Agreement and
Certificate of Limited Partnership. This sale was prior to the date of
effectiveness of this Registration Statement, as a "private offering" pursuant
to the exemption contained in Section 4(2) of the Securities Act of 1933. Upon
admission of the purchasers of Units to the Partnership as Limited Partners,
Mr. Tully will withdraw from the Partnership and receive a return of his $1.00.
ITEM 29. INDEMNIFICATION.
Pursuant to Section 4.7 of the Partnership Agreement, neither the General
Partner nor any of its officers, directors or agents shall be liable to the
Partnership or the Limited Partners for any act or omission based upon errors
of judgment or other fault in connection with the business or affairs of the
Partnership so long as the person against whom liability is asserted acted in
good faith and in a manner reasonably believed by such person to be within the
scope of its authority under the Partnership Agreement and in or not opposed to
the best interests of the Partnership, but only if such action or failure to
act does not constitute negligence, misconduct or any other breach of fiduciary
duty. The General Partner and its officers, directors and agents will be
indemnified by the Partnership to the fullest extent permitted by law for any
(a) fees, costs and expenses incurred in connection with or resulting from any
claim, action or demand against the General Partner, the Partnership or any of
their officers, directors and agents that arises out of or in any way relates
to the Partnership, its properties, business or affairs and (b) such claims,
actions and demands and any losses or damages resulting from such claims,
actions and demands, including amounts paid in settlement or compromise (if
recommended by attorneys for the Partnership) of any such claim, action or
demand; provided, however, that this indemnification shall apply only so long
as the person against whom a claim, action or demand is asserted has acted in
good faith and in a manner reasonably believed by such person to be within the
scope of his or its authority under the Partnership Agreement and in or not
opposed to the best interests of the Partnership, but only if such action or
failure to act does not constitute negligence, misconduct or any other breach
of fiduciary duty.
Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to the General Partner, the Partnership has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against the public policy as expressed in such Act and is
therefore unenforceable. If a claim for indemnification against such
liabilities under the Securities Act of 1933 (other than for expenses incurred
in a successful defense) is asserted against the Partnership by the General
Partner under the Partnership Agreement or otherwise, the Partnership will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
such Act and will be governed by the final adjudication of such issue.
Reference is made to Section 8 of the form of Agency Agreement to be filed
as Exhibit (h) hereto, which contains provisions requiring indemnification of
the Partnership's principal underwriter by the General Partner and of the
Partnership and the General Partner by the Partnership's principal underwriter.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER.
Information concerning the General Partner and biographical information
for each of the directors and executive officers of the General Partner is
contained in Part A of this Registration Statement under the caption "The
General Partner and Its Affiliates."
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS.
The accounts and records of the Partnership will be maintained at the
office of the Partnership at South Tower, World Financial Center, 225 Liberty
Street, New York, New York 10080-6123.
ITEM 32. MANAGEMENT SERVICES.
Not Applicable.
ITEM 33. UNDERTAKINGS.
(1). Registrant undertakes to suspend offering of the Units covered
hereby until it amends its Prospectus contained herein if (i) subsequent to the
effective date of this Registration Statement, its net asset value declines
more than 10 percent from its net asset value as of the effective date of this
Registration Statement, or (ii) its net asset value increases to an amount
greater than its net proceeds as stated in the Prospectus contained herein.
(2). Not applicable.
(3). Not applicable.
(4). Registrant undertakes:
(a) to file, during any period in which offers or sales are
being made, a post-effective amendment to the registration
statement:
(1) to include any prospectus required by Section 10(a)(3) of
the 1933 Act [15 U.S.C. 77j(a)(3)];
(2) to reflect in the prospectus any facts or events after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; and
(3) to include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(b) that, for the purpose of determining any liability under
the 1933 Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of those securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(c) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(5). Registrant undertakes that:
(a) For the purposes of determining any liability under the
Act, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to
be part of this Registration Statement as of the time it was
declared effective.
(b) For the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(6). Not applicable.
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND 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 NEW YORK AND STATE OF NEW YORK ON THE 15TH DAY
OF JULY, 1998.
Merrill Lynch KECALP L.P. 1999
By KECALP Inc., its General Partner
By /s/ ROBERT F. TULLY
Robert F. Tully
Vice President
Each person whose signature appears below hereby authorizes Mark B.
Goldfus, Robert F. Tully and Margaret T. Monaco, or any of them, as
attorney-in-fact, to sign on his or her behalf, individually and in each
capacity stated below, any amendments to this Registration Statement (including
post-effective amendments) and to file the same, with all exhibits thereto,
with the Securities and Exchange Commission.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED AND ON THE 15TH DAY OF JULY, 1998.
Signature Title
/S/ JOHN L. STEFFENS Chairman of the Board and Director
(John L. Steffens) (Chief Executive Officer)
KECALP Inc.
/S/ MATTHIAS B. BOWMAN President and Director (Chief Investment
(Matthias B. Bowman) Officer)
Vice President and Treasurer (Chief
/S/ ROBERT F. TULLY Financial and Accounting Officer)
(Robert F. Tully) KECALP Inc.
/S/ ROSEMARY T. BERKERY Vice President and Director
(Rosemary T. Berkery) KECALP Inc.
/S/ JAMES V. CARUSO Vice President and Director
(James V. Caruso) KECALP Inc.
/S/ MARK B. GOLDFUS Vice President and Director
(Mark B. Goldfus) KECALP Inc.
/S/ ANDREW J. MELNICK Vice President and Director
(Andrew J. Melnick) KECALP Inc.
/S/ MARY E. TAYLOR Vice President and Director
(Mary E. Taylor) KECALP Inc.
<PAGE>
EXHIBIT INDEX
Exhibit Page No.
(a)(i) Certificate of Limited Partnership of Merrill Lynch
KECALP L.P. 1999
Exhibit 1
CERTIFICATE OF LIMITED PARTNERSHIP
OF
MERRILL LYNCH KECALP L.P. 1999
This Certificate of Limited Partnership of Merrill Lynch KECALP L.P. 1999
(the "Partnership"), dated as of July 9, 1998, is being duly executed and filed
by KECALP Inc., a corporation, as general partner, to form a limited
partnership under the Delaware Revised Uniform Limited Partnership Act (6 Del.
C. ss.17-101, et seq.).
1. Name. The name of the limited partnership formed hereby is Merrill
Lynch KECALP L.P. 1999.
2. Registered Office. The address of the registered office of the
Partnership in the State of Delaware is c/o RL&F Service Corp., One Rodney
Square, 10th floor, Tenth and King Streets, Wilmington, New Castle County,
Delaware 19801.
3. Registered Agent. The name and address of the registered agent for
service of process on the Partnership in the State of Delaware is RL&F Service
Corp., One Rodney Square, 10th floor, Tenth and King Streets, Wilmington, New
Castle County, Delaware 19801.
4. General Partner. The name and the business address of the sole general
partner of the Partnership is: KECALP Inc., South Tower, World Financial
Center, 225 Liberty Street, New York, New York 10080-6123.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Limited Partnership as of the date first above written.
KECALP Inc.
By _/s/ Margaret T. Monaco
Margaret T. Monaco
Vice President
