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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
LOT$OFF CORPORATION
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(Name of Issuer)
Common Stock, Par Value $.01
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(Title of Class of Securities)
545674103
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(CUSIP NUMBER)
Patrick Daugherty, Esq.; NationsBank Corporate Center,
100 North Tryon Street, Suite 2600,
Charlotte, North Carolina 28202; Telephone (704) 417-3101
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
October 10, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this statement [ ].
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SCHEDULE 13D
(Cover Page -- Part II)
CUSIP NO. 545674103
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1) Name of Reporting Person/S.S. or I.R.S. Identification No. of Above
Person
Chap-Cap Partners, L.P.
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2) Check the Appropriate Box if a Member of a Group
(a)
(b)
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3) SEC Use Only
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4) Source of Funds: WC
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5) Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Item 2(d) or 2(e) [ ]
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6) Citizenship or Place of Organization: Delaware
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Number of Shares 7) Sole Voting Power: 76,000
Beneficially Owned
By Each Reporting -------------------------------
Person With 8) Shared Voting Power:
-------------------------------
9) Sole Dispositive Power: 76,000
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10) Shared Dispositive Power:
-------------------------------
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11) Aggregate Amount Beneficially Owned by Each Reporting Person: 76,000
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12) Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
[ ]
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13) Percent of Class Represented by Amount in Row (11): 8.8%
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14) Type of Reporting Person: PN
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ITEM 1. SECURITY AND ISSUER.
This Statement on Schedule 13D dated as of October 10, 1997 ("Statement"),
filed by Chap-Cap Partners, L.P. (the "Partnership"), relates to the common
stock, par value $.01 per share ("Common Stock"), of LOT$OFF Corporation, a
Delaware corporation (the "Company"), and is filed pursuant to Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Act"). Under Rule
13d-3(d)(i)(B) of the Act, the Partnership is the beneficial owner of the
Common Stock by virtue of its purchase of Series A Preferred Stock, par value
$.01 per share ("Preferred Stock").
The address of the principal executive offices of the Company is 8750 Tesoro
Drive, San Antonio, Texas 78217.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is being filed by the Partnership, a Delaware limited
partnership whose principal business is investment in marketable securities.
The address of its principal business and its principal office is Citicorp
Center, 23d Floor, 725 S. Figueroa Street, Los Angeles, CA 90017.
Robert L. Chapman, Jr. ("Chapman") is the managing member of Chapman Capital
L.L.C. (the "LLC"), the general partner of the Partnership. His address is
Citicorp Center, 23d Floor, 725 S. Figueroa Street, Los Angeles, CA 90017.
Chapman is a citizen of the United States.
During the last five years, no such person has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or was a
party to a civil proceeding of a judicial or administrative body of a competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The Partnership acquired its shares of Preferred Stock with its own funds,
amounting to $191,125.
ITEM 4. PURPOSE OF TRANSACTION.
The Partnership acquired its shares of Preferred Stock for investment purposes
only and does not have any plans or proposals that relate to or would result in
any of the actions enumerated in Item 4 of Schedule 13D under the Act.
Notwithstanding the foregoing, the Partnership may, based on continuing review
of its investments in the Preferred Stock or Common Stock, acquire additional
shares of Preferred Stock or Common Stock or dispose
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of shares of Preferred Stock or Common Stock and/or otherwise modify or change
its intentions.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) As of October 10, 1997, the Partnership beneficially owned 76,000
shares of Common Stock, constituting 8.8% of the Common Stock at such
date (assuming that no Preferred Stock had been converted into Common
Stock at such date).
As of October 10, 1997, the LLC beneficially owned, as the general
partner of the Partnership, 76,000 shares of Common Stock,
constituting 8.8% of the outstanding Common Stock.
(b) Chapman, as the managing member of the LLC, has the sole power to vote
and the sole power to dispose of the 76,000 shares of the Common Stock
that the LLC beneficially owns.
(c) Except as disclosed on Schedule A to this Statement (incorporated
herein by reference thereto), there have been no transactions in
shares of the Preferred Stock or Common Stock effected by or for the
account of the Partnership from August 10, 1997 to December 9, 1997,
the date of execution of this Statement.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Inasmuch as the Partnership Agreement is a contract that includes arrangements,
understandings and relationships among the Partnership, the LLC and Chapman
with respect to the Preferred Stock and Common Stock, the entire Partnership
Agreement is incorporated herein by this reference thereto. There are no other
contracts, arrangements, understandings or relationships with respect to the
Preferred Stock and Common Stock. The Partnership Agreement provisions that
relate directly to the Preferred Stock and Common Stock include the following:
(i) Chapman, as the managing member of the LLC, has the power to
purchase and transfer securities and contracts and to vote securities.
(ii) Losses are allocated to the partners of the Partnership in
accordance with their partnership percentages until the aggregate adjusted
capital accounts of the limited partners equal zero.
(iii) To the extent that profits exceed losses, 20% of such excess is
reallocated to the
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LLC.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
Exhibit 1 - Form of Partnership Agreement of Chap-Cap Partners, L.P.
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SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: As of October 10, 1997
CHAP-CAP PARTNERS, L.P.
By: /s/ Robert L. Chapman, Jr.
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Robert L. Chapman, Jr.
Managing Member, Chapman Capital, L.L.C.
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SCHEDULE A
The Partnership acquired and disposed of its shares of Preferred Stock
and Common Stock in open market transactions as follows:
<TABLE>
<CAPTION>
DATE TRANSACTION PRICE PER SHARE
---- ----------- ---------------
<S> <C> <C>
9/30/97 Bought 6,000 shares of $3.00
Preferred Stock
10/01/97 Bought 4,000 shares of $3.13
Preferred Stock
10/02/97 Bought 5,000 shares of $3.00
Preferred Stock
10/03/97 Bought 5,000 shares of $3.00
Preferred Stock
10/10/97 Bought 5,000 shares of $3.00
Preferred Stock
11/21/97 Bought 13,000 shares of $8.89
Preferred Stock
12/05/97 Converted 76,000 shares of Not applicable
Preferred Stock
12/05/97 Sold 10,000 shares of $5.63
Common Stock
12/05/97 Sold 16,000 shares of $5.50
Common Stock
</TABLE>
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Exhibit 1
LIMITED PARTNERSHIP AGREEMENT
OF
CHAP-CAP PARTNERS, L.P.
AGREEMENT OF LIMITED PARTNERSHIP dated as of ____________, 19__ by and
among Chapman Capital L.L.C. as General Partner (the "General Partner") and all
the parties who sign copies of this agreement to become Limited Partners. (The
General Partner and the persons who sign as Limited Partners are sometimes
collectively referred to as the "Partners".) Whenever the masculine or feminine
gender is used in this document it shall equally, where the context admits,
include the other, as well as include entities.
ARTICLE I
GENERAL PROVISIONS
Section 1.01 Formation The parties hereto hereby form Chap-Cap
Partners, L.P. as a limited partnership (the "Partnership") pursuant to the
provisions of the Delaware Revised Uniform Limited Partnership Act. The
existence of the Partnership shall commence upon the filing with the Secretary
of State of Delaware of a Certificate of Limited Partnership in accordance with
the provisions of such law.
Section 1.02 Partnership Name. The name of the Partnership is Chap-Cap
Partners, L.P.
Section 1.03 Purpose. The purpose of the Partnership is to serve as a
fund through which the assets of its Partners will be utilized to invest, hold
and trade in securities and other financial instruments and rights and options
relating thereto.
Section 1.04 Registered Office and Agent for Service of Process. The
registered office of the Partnership shall be at 1209 Orange Street, Wilmington,
Delaware 19801 and the registered agent for service of process at such office
shall be The Corporation Trust Company.
Section 1.05 Place of Business. The principal place of business of the
Partnership shall be at Citicorp Center, 725 South Figueroa Street, 23rd Floor,
Los Angeles, California 90017 or at such other place as the General Partner
shall determine from time to time.
Section 1.06 Fiscal Year and Fiscal Periods. The fiscal year of the
Partnership shall end on December 31 of each year, subject to change by the
General Partner from time to time; provided, however, that the first fiscal year
of the Partnership shall be the period beginning on the date the Partnership
commences operations and ending on the last day of the twelfth full month after
the Partnership commences operations and the second fiscal year will end on the
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following December 31. A new fiscal period ("Fiscal Period") shall commence on
the first day of each fiscal year, on each date of any capital contribution to
the Partnership and on each date next following the date of any withdrawal of
capital or retirement from the Partnership, and the prior Fiscal Period shall
end on the date immediately preceding such date of commencement of a new Fiscal
Period.
Section 1.07 Liability of Limited Partners. Except as expressly
provided in the Delaware Revised Uniform Limited Partnership Act, the Limited
Partners shall not be liable for any liabilities, or for the payment of any
debts and obligations, of the Partnership.
Section 1.08 Assignability of Limited Partnership Interest. The limited
partnership interest of a Limited Partner in the Partnership or any beneficial
interest therein may not be assigned, in whole or in part, except with the
consent thereto of the General Partner given in its sole and absolute
discretion. Upon such an assignment of a limited partnership interest, the
assignee shall become a Limited Partner upon the execution of such agreements
and other documents as shall be required by the General Partner.
ARTICLE II
COMPOSITION AND ADMISSIONS
Section 2.01 Partners. The names and addresses of the General Partner
and of each of the Limited Partners shall be set forth in a schedule of the
Partnership to be kept on file at all times at the principal place of business
of the Partnership. A Partner may change his address for purposes of this
Agreement upon five days prior written notice to the General Partner.
Section 2.02 Admission of Partners. With the consent of the General
Partner, additional Limited Partners may be admitted to the Partnership on any
date selected by the General Partner. Additional general partners may be
admitted by the General Partner (i) as of January 1 and July 1 of any year;
provided that the General Partner shall give 45 days prior written notice of the
proposed admission to all of the Limited Partners, (ii) at any time; provided
that the additional general partner is, or is an entity controlled by, Robert L.
Chapman, Jr., or (iii) at any time with the consent of a majority in interest of
the Limited Partners. In connection with the admission of a Partner to the
Partnership, such Partner shall, in advance of such admission and as a condition
thereto, sign a copy of this Agreement or a supplement hereto pursuant to which
he agrees to be bound by the terms of this Agreement.
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ARTICLE III
MANAGEMENT OF PARTNERSHIP
Section 3.01 Management of the Partnership. The Partnership shall be
managed by the General Partner, which shall have the discretion of making
investments on behalf of the Partnership and of exercising the powers set forth
in Section 3.02. The General Partner may appoint such agents of the Partnership
as it deems necessary who shall hold such offices, exercise such powers and
perform such duties as shall be determined from time to time by the General
Partner. The General Partner shall devote so much of its time and efforts to
the affairs of the Partnership as may, in its judgment, be necessary to
accomplish the purposes of the Partnership. Nothing herein contained shall
prevent the General Partner, its members or any of its affiliates or any other
Partner from conducting any other business, including any business within the
securities industry whether or not such business is in competition with the
Partnership. Without limiting the generality of the foregoing, the General
Partner, its members or any of its affiliates may act as investment adviser or
investment manager for others, may manage funds or capital for others and may
serve as an officer, director, consultant, partner or stockholder of one or more
investment funds, partnerships, securities firms or advisory firms. It is
recognized that in effecting transactions, it may not always be possible or
consistent with the investment objectives of the various persons or entities
described above and of the Partnership to take or liquidate the same investment
positions at the same time or at the same prices.
Section 3.02 Powers of the General Partner. The General Partner shall
have the power on behalf of the Partnership:
(a) To purchase, hold, sell and otherwise deal in
securities of any sort and rights therein, on margin or otherwise;
(b) To sell short securities of any sort and rights
therein, on margin or otherwise, and to cover such short sales;
(c) To write, purchase, hold, sell, and otherwise deal in
put and call options of any sort and in any combination thereof;
(d) To purchase, hold, sell and otherwise deal in
commodities, commodity contracts, commodity futures, financial futures
and options in respect thereof (but the General Partner will not do so
until, to the extent required, it has registered with the Commodity
Futures Trading Commission);
(e) To purchase, hold, sell and otherwise deal in
currencies, forwards, swaps, partnership interests, interests in other
investment companies and any other financial instruments which exist
now or are hereafter created;
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(f) To conduct margin accounts with brokers; to open,
maintain and close bank accounts and draw checks or other orders for
the payment of moneys; to pledge securities for loans, and, in
connection with any such pledge, to effect borrowings from brokers,
banks and other financial institutions;
(g) To make unsecured indexed loans to Robert L. Chapman,
Jr. for the purpose of capturing an investment return indexed to all
or a portion of the return on certain thrift conversions;
(h) To enter into, make and perform any other contracts,
agreements or other undertakings it may deem advisable in conducting
the business of the Partnership, including but not limited to
contracts, agreements or other undertakings with persons, firms or
corporations with which the General Partner or any other Partner is
affiliated; and
(i) To act for the Partnership in all other matters.
Section 3.03 Limitation of Liability; Indemnification.
(a) The General Partner, its members, any employee or
affiliate of the General Partner and the person or persons designated
pursuant to Section 9.02 shall not be liable for any loss or
cost arising out of, or in connection with, any act or activity
undertaken (or omitted to be undertaken) in fulfillment of any
obligation or responsibility under this Agreement, including any such
loss sustained by reason of any investment or the sale or retention of
any security or other asset of the Partnership; provided that any
persons exculpated from liability under this Section shall not be
exculpated from any liability arising from losses caused by his, her
or its gross negligence or willful malfeasance.
(b) The General Partner, its members, any employee or
affiliate of the General Partner and the person or persons designated
pursuant to Section 9.02 shall be indemnified and held harmless by the
Partnership to the fullest extent legally permissible under and by
virtue of the laws of the State of Delaware, as amended from time to
time, from and against any and all loss, liability and expense
(including without limitation judgments, fines, amounts paid or to be
paid in settlement and reasonable attorney's fees) incurred or
suffered by the General Partner, its members, any employee or
affiliate of the General Partner or such other persons in connection
with the good faith performance by the General Partner, its members,
any employee or affiliate of the General Partner or such other persons
of their responsibilities to the Partnership; provided that, any
person entitled to be indemnified under this Section shall not be
indemnified nor held harmless for any loss, liability or expense
resulting from his, her or its gross negligence or willful
malfeasance.
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ARTICLE IV
EXPENSES OF PARTNERSHIP, ORGANIZATIONAL EXPENSES,
OVERHEAD EXPENSES AND FEE TO THE GENERAL PARTNER
Section 4.01 Expenses of Partnership Generally. The General Partner is
authorized to incur and pay in the name and on behalf of the Partnership all
expenses which it deems necessary or advisable.
Section 4.02 Organizational Expenses. The General Partner is authorized
to incur and pay in the name and on behalf of the Partnership the organizational
expenses of the Partnership including expenses incurred in connection with the
initial offer and sale of interests in the Partnership ("Organizational
Expenses"). Organizational Expenses will be borne by the Partnership and will
be amortized over a period of 60 months from the formation of the Partnership.
Section 4.03 Overhead Expenses. The General Partner will be responsible
for and will pay or cause to be paid the "Office Overhead Expenses" of the
Partnership. "Office Overhead Expenses" shall mean overhead expenses of an
ordinarily recurring nature such as rent, supplies, secretarial expenses,
telephone expenses, printing and stationery, charges for furniture and fixtures,
employee insurance, payroll taxes, compensation of security analysts and
administrative personnel, and other reasonable expenses of the Partnership as
determined by the General Partner in its sole and absolute discretion. The
Partnership will be responsible for all of its other expenses including
Organizational Expenses, legal, accounting and other professional fees,
investment expenses such as commissions, research expenses, out-of-pocket travel
expenses incurred in connection with research of investment opportunities for
the Partnership, interest on margin accounts and other indebtedness, borrowing
charges on securities sold short, custodial fees, bank service fees and any
other reasonable expenses related to the purchase, sale or transmittal of
Partnership assets as shall be determined by the General Partner in its sole and
absolute discretion. Certain services included in Office Overhead Expenses may
be obtained by the use of commissions arising from the Partnership's portfolio
transactions.
Section 4.04 Basic Fee to the General Partner. In partial consideration
for the General Partner paying (or causing to be paid) all of the Office
Overhead Expenses (as defined in Section 4.03) and providing other services, the
Partnership shall pay the General Partner (or any persons or entities designated
by the General Partner) a quarterly basic fee computed at an annual rate of 1%
(i.e., 1/4 of 1% per quarter) of the net assets of the Partnership. Such fee
shall be paid promptly after the last day of each quarter (or the day the
Partnership terminates if other than the last day of a quarter ) and shall be
calculated based on the value of the net assets of the Partnership as of the
last day of such quarter (or the day the Partnership terminates, as the case may
be) adjusted for contributions or withdrawals made during the quarter. Such fee
shall be prorated for periods less than a full quarter.
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ARTICLE V
CAPITAL ACCOUNTS AND CAPITAL CONTRIBUTIONS
Section 5.01 Capital Accounts. A Partner's "Capital Account" as of a
particular date shall consist of the following:
(a) an amount equal to his original capital contribution;
(b) the additions, if any, to such account by reason of
capital contributions made on or before such date; and
(c) the adjustments, if any, to such account in
accordance with the provisions of Section 5.03 and Article VI.
Section 5.02 Capital Contributions. Contributions to the capital of the
Partnership shall be made in cash or, in the sole and absolute discretion of the
General Partner, in securities or partly in cash and partly in securities.
Section 5.03 Certain Adjustments to Capital Accounts. The amount of
withdrawals, if any, made by a Partner shall be deducted from such Partner's
Capital Account as of the date of such withdrawal.
Section 5.04 Additional Contributions to Capital. A Partner may, with
the consent of the General Partner, make additional contributions to the capital
of the Partnership on any date selected by the General Partner.
ARTICLE VI
ALLOCATION OF NET PROFITS AND NET LOSSES;
DETERMINATION OF NET PROFITS AND NET LOSSES;
PRIOR FISCAL PERIOD ITEMS; HOT ISSUES
Section 6.01 Allocation of Net Profits and Net Losses.
(a) Except as otherwise provided in Section 6.03
regarding the treatment of "Hot Issues" (as hereinafter defined) any
Net Profits or Net Losses (as defined in Section 6.02) during any
Fiscal Period shall be allocated as of the end of such Fiscal Period
to the Capital Accounts of all the Partners in the proportions which
each Partner's Capital Account as of the beginning of such Fiscal
Period bore to the sum of the Capital Accounts of all the Partners as
of the beginning of such Fiscal Period.
(b) If in any fiscal year ("Current Year") the Net
Profits allocated to the Capital Account of a Limited Partner pursuant
to Section 6.01(a) exceed the Net Losses so allocated to such
Limited Partner's Capital Account, there shall
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be reallocated to the General Partner as of the end of the Current Year
an amount equal to 20% of such excess; provided, however, that this
reallocation will be subject to a loss carryforward provision such
that the amount so reallocated from such Limited Partner's Capital
Account to the General Partner for the Current Year may not exceed 20%
of the excess of the Net Profits for the Current Year over such Limited
Partner's loss carryforward amount applicable to the Current Year and
provided, further, that the amount reallocated from all Limited
Partners to the General Partner shall not exceed the Net Profits of the
Partnership for the Current Year. For purposes of the first proviso of
the preceding sentence, the loss carryforward amount for a particular
limited partner applicable to the Current Year shall be the sum of all
prior year Net Losses allocated to the Limited Partner and not
subsequently offset by prior year Net Profits. The loss carryforward
amount shall be reduced proportionately to reflect any net withdrawals
made by such Limited Partner subsequent to any such prior year Net
Losses.
The total amount so reallocated pursuant to this Section
6.01(b) shall be credited as of the end of the fiscal year to the
Capital Account of the General Partner and to the Capital Accounts of
such Limited Partners as the General Partner shall designate.
(c) In the event of the retirement of a Partner at
anytime other than the end of a fiscal year, the allocation provided
for in Section 6.01(b) shall be made with respect to such Partner for
the Fiscal Period ending on such date as though the last day of such
Fiscal Period was the last day of a fiscal year. The amount so
deducted from the Capital Accounts of all Partners who so retire shall
be held in a "Suspense Account" until the end of such fiscal year at
which time the total of such amounts shall be credited to the Capital
Account of the General Partner up to the amount by which the Net
Profit of the Partnership for such fiscal year exceeds the amount
reallocated from the Limited Partners under Section 6.01(b) or such
fiscal year, and the balance, if any, of such amount shall be credited
to the Capital Accounts of the Partners as of the last day of such
fiscal year.
Section 6.02 Determination of Net Profits and Net Losses. "Net Profits"
or "Net Losses" of the Partnership for a Fiscal Period shall be determined on
the accrual basis of accounting in accordance with generally accepted accounting
principles consistently applied and further in accordance with the following:
(a) Net Profits and Net Losses shall include realized and
unrealized profits and losses with respect to all securities
positions. In computing such realized and unrealized profits and
losses, profit and loss shall mean for each position held in a
security during any Fiscal Year, the realized or unrealized
appreciation or realized or unrealized depreciation, as the case may
be, with respect to such position, determined by comparing the net
proceeds from the
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closing of such position or the market value of such position at the
end of such Fiscal Period with (i) the cost of such position if
established during such Fiscal Period or (ii), if such position were
established during a prior Fiscal Period, the market value of such
position at the end of the last preceding Fiscal Period. Securities
contributed to the Partnership shall be treated as if purchased by the
Partnership at market value on the date of contribution and securities
distributed from the Partnership shall be treated as if sold by the
Partnership at market value on the date of distribution.
(b) The market value of positions in securities shall be
as follows: securities that are listed on the consolidated tape and
are freely transferable shall be valued at their last sales price on
the consolidated tape on the date of determination, or, if no sales
occurred on such day, at the "bid" price on the consolidated tape at
the close of business on such day if held long and at the "asked"
price at the close of business on such day if sold short. Securities
traded over the counter which are freely transferable shall be valued
at the last sales price on the date of determination, or, if no sales
occurred on such day, at the "bid" price at the close of business on
such day if held long and at the "asked" price at the close of
business on such day if sold short. Notwithstanding the foregoing, if
in the reasonable judgment of the General Partner, in its sole and
absolute discretion, the listed price for any security held by the
Partnership does not accurately reflect the value of such security,
the General Partner may value such security at a price which is
greater or less than the quoted market price for such security. All
other assets of the Partnership shall be valued in the manner
determined by the General Partner.
(c) There shall be deducted in computing Net Profits and
Net Losses estimated expenses for legal and audit services and other
expenses, if any, in respect of the particular Fiscal Period (whether
performed therein or to be performed thereafter), and such
reserves for contingent liabilities of the Partnership, including
estimated expenses, if any, in connection therewith, as the General
Partner shall determine. The fee payable to the General Partner
pursuant to Section 4.04 shall be deducted in computing Net Profits
and Net Losses; however, Office Overhead Expenses borne by the General
Partner pursuant to Section 4.03 shall not be deducted in computing
Net Profits and Net Losses.
(d) The Organizational Expenses of the Partnership shall
be amortized over a period of 60 months from the formation of the
Partnership and the amortizable portion of the Organizational Expenses
shall be deducted in computing Net Profits and Net Losses.
Section 6.03 Hot Issues. In the event the General Partner decides to
invest in securities which are the subject of a public distribution and which
the General Partner, in its sole discretion, believes may become a "hot issue"
as that term is defined in Article III,
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Section 1 of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., such investment shall be made in accordance with the
following provisions:
(a) any such investment made in a particular Fiscal
Period shall be made in a special account (the "Hot Issues Account");
(b) only those Partners who do not fall within the
proscription of Article III, Section 1 of the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. (the
"Unrestricted Partners") shall have any beneficial interest in the Hot
Issues Account;
(c) each Unrestricted Partner shall have a beneficial
interest in the Hot Issues Account for any Fiscal Period in the
proportion which (i) such Unrestricted Partner's Capital Account as of
the beginning of the Fiscal Period bore to (ii) the sum of the Capital
Accounts of all Unrestricted Partners as of the beginning of such
Fiscal Period;
(d) funds required to make a particular investment shall
be transferred to the Hot Issues Account from the regular account of
the Partnership; securities involved in the public distribution shall
be purchased in the Hot Issues Account, held in the Hot Issues Account
and eventually sold from the Hot Issues Account or, if permitted,
transferred to the regular account at fair market value as of the day
of transfer as determined by the General Partner with such transfer
being treated as a sale solely for purposes of computing Net Profits
and Net Losses; if such securities are sold from the Hot Issues
Account, the proceeds of the sale shall be transferred from the Hot
Issues Account to the regular account of the Partnership;
(e) as of the last day of each Fiscal Period in which a
particular investment or investments are held in the Hot Issues
Account: (A) interest shall be debited to the Capital Accounts of the
Unrestricted Partners in accordance with their beneficial interests in
the Hot Issues Account at the brokers' call rate charged by the
Partnership's principal broker during the period in that Fiscal Period
that funds from the regular account have been held in or made
available to the Hot Issues Account; and such interest shall be
credited to the Capital Accounts of all the Partners, both General and
Limited, in the proportions which (i) each Partner's Capital Account
as of the beginning of such Fiscal Period bore to (ii) the sum of the
Capital Accounts of all Partners as of the beginning of such Fiscal
Period and (B) any Net Profits or Net Losses during such Fiscal Period
with respect to the Hot Issues Account shall be allocated to the
Capital Accounts of the Unrestricted Partners in accordance with their
beneficial interests in the New Issues Account during the Fiscal
Period; and
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(f) the determination of the General Partner as to
whether a particular Partner falls within the proscription of Article
III, Section 1 of said Rules of Fair Practice shall be final.
Section 6.04 Allocation of Prior Fiscal Period Items. Anything herein
to the contrary notwithstanding, any items of income, gain, loss or deduction
for a Fiscal Period ("Current Fiscal Period") attributable to any Partnership
matter or transaction occurring during a prior Fiscal Period (such items of
income, gain, loss or deduction are referred to herein as "Prior Fiscal Period
Items") which shall exceed the lesser of (a) $100,000 or (b) 1% of the Capital
Accounts of all Partners as of the beginning of the Current Fiscal Period may,
in the sole and absolute discretion of the General Partner, be allocated among
the Partners (including persons who have ceased to be Partners) in proportion to
their Capital Accounts as of the beginning of such prior Fiscal Period. In the
case of a person who is a Partner during the Current Fiscal Period, the Prior
Fiscal Period Items shall be considered an item of Net Profit or Net Loss for
the Current Fiscal Period for purposes of Section 6.01(b). In the case of a
person who has ceased to be a Partner, the Prior Fiscal Period Items shall be
considered an Item of Net Profit or Net Loss in the last fiscal period in which
such person was a Partner for purposes of computing the allocation of such Prior
Fiscal Period Items between the person who ceased to be a Partner and the
General Partner.
ARTICLE VII
ALLOCATION OF INCOME FOR TAX PURPOSES
Section 7.01 Ordinary Deductions and Ordinary Income. For Federal
income tax purposes, all items of deduction other than realized capital losses,
and all items of income other than realized capital gains, shall be allocated,
as nearly as is practicable, in accordance with the manner in which such items
of deduction or income affected the amounts which were either deducted from or
added to the Capital Accounts of the Partners.
Section 7.02 Capital Gains and Losses on Contributed Securities. For
Federal income tax purposes, capital gains and losses (short and long-term, as
the case may be) recognized by the Partnership on the disposition of securities
contributed by a Partner to the capital of the Partnership shall be allocated in
accordance with the provisions of Section 704(c) of the Internal Revenue Code of
1986, as amended.
Section 7.03 Other Capital Gains and Losses. Except as provided in
Section 7.02, for Federal income tax purposes, capital gains and capital losses
recognized in any Fiscal Period (short and long-term, as the case may be) shall
be allocated, as nearly as is practicable, in accordance with the manner in
which the aggregate of the increase or decrease in the value of the securities
positions giving rise to such gains or losses was added to or deducted from the
Capital Accounts of the Partners in such Fiscal Period and prior Fiscal Periods.
Section 7.04 Allocation of Capital Gains to Retiring Partners.
Notwithstanding Section 7.03 above, in the event a Partner withdraws all of his
Capital Account from the Partnership,
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the General Partner in its sole and absolute discretion may make a special
allocation to said Partner for Federal income tax purposes of the net capital
gains recognized by the Partnership in such a manner as will reduce the amount,
if any, by which such Partner's Liquidating Share (as defined in Section 10.01)
exceeds his Federal income tax basis in his interest in the Partnership before
such allocation.
ARTICLE VIII
WITHDRAWALS FROM CAPITAL ACCOUNTS AND RETIREMENTS
Section 8.01 Permissible Withdrawals. A Partner may withdraw all or
any part of his Capital Account (as defined in Section 5.01) in the manner and
to the extent provided in Section 8.02.
Section 8.02 Withdrawal Procedure.
(a) A Limited Partner may withdraw all or any part of his
Capital Account as of June 30 and December 31 of any year; provided,
however, that a Limited Partner may not make any withdrawals from his
Capital Account until he has been a partner at least twelve full
months. Any Limited Partner desiring to make a withdrawal from his
Capital Account shall, not less than 30 days before the date of such
withdrawal, give written notice to the Partnership of (i) such Limited
Partner's intention to make such withdrawal and (ii) the amount
thereof or the basis on which the amount thereof is to be determined.
(b) The General Partner may withdraw all or any part of
its Capital Account at any time. Notwithstanding the above, the
General Partner shall at all times maintain its Capital Account in an
amount equal to at least the lesser of 1% of the total Capital
Accounts in the Partnership and $500,000.
(c) A Partner withdrawing his entire Capital Account
pursuant to this Section 8.02 shall be deemed to have retired as of
the date of such withdrawal.
Section 8.03 Payment on Retirement. Retirement of a Partner, whether
by (a) withdrawal of such Partner's entire Capital Account, or (b) action of the
General Partner under Section 8.04, shall be subject to the provisions of
Section 10.01.
Section 8.04 Mandatory Retirement of a Limited Partner. The General
Partner, in its sole and absolute discretion, may require any Limited Partner to
retire from the Partnership at any time on not less than 20 days' notice, such
retirement to be effective on the date specified in such notice. If the
General Partner, in its sole and absolute discretion, deems it to be in the best
interests of the Partnership to do so because the continued participation of any
Limited Partner in the Partnership might cause the Partnership to violate any
law, rule or regulation or expose the Partnership to litigation, arbitration,
administrative proceedings or any similar action or proceeding,
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the General Partner may require such Limited Partner to retire from the
Partnership at any time on not less than 5 days' notice, such retirement to be
effective on the date specified in such notice. A Limited Partner who is so
required to retire pursuant to this Section 8.04 shall be entitled to receive
the value of his Liquidating Share (as defined in Section 10.01) computed as of
the date on which such Limited Partner's retirement shall become effective.
Section 8.05 Distributions in Cash or in Kind. All distributions to a
Partner by reason of a Partner's withdrawal or retirement from the Partnership
shall be made in cash or, in the discretion of the General Partner, in
securities selected by the General Partner or partly in cash and partly in
securities selected by the General Partner.
Section 8.06 Death, Bankruptcy, Insanity or Disability of a Limited
Partner. In the event the beneficial interest of a Limited Partner passes to
his estate or another person by reason of his death, bankruptcy, insanity or
disability, the General Partner may, with the consent of the estate or the
person or persons to whom such interest passed, admit the estate or such person
as a Limited Partner to the Partnership as a successor to the deceased, bankrupt
insane or disabled Limited Partner. Except as otherwise provided in the
preceding sentence, the deceased, bankrupt, insane or disabled Limited Partner
shall be deemed to have elected to withdraw all of his Capital Account as of the
last day of the calendar year in which the General Partner has been informed of
the death, bankruptcy, insanity or disability of such Limited Partner.
ARTICLE IX
TERM AND DISSOLUTION OF PARTNERSHIP
Section 9.01 Term of Partnership. The Partnership shall continue until
December 31, 2016 and thereafter from year to year, unless dissolved as
hereinafter provided.
Section 9.02 Dissolution of Partnership. The Partnership may be
dissolved at any time by the General Partner, and thereupon the affairs of the
Partnership shall be promptly wound up by the General Partner. The General
Partner's retirement, dissolution or bankruptcy or Mr. Chapman's death,
insanity, incapacitation such that he is unable to participate in the management
of the Partnership in the same manner as immediately before the onset of
incapacity or other cessation of involvement by him in the management of the
Partnership for more than 60 consecutive days shall dissolve the Partnership, in
which event the affairs of the Partnership shall be promptly wound up. In the
event of the dissolution of the Partnership, the General Partner, or if the
General Partner is unavailable, the person previously designated by the General
Partner or if the General Partner has made no such designation, the person (or
persons) designated by Limited Partners owning a majority in interest of the
Capital Accounts of all the Limited Partners, shall wind up the affairs of the
Partnership. Such person shall take all steps necessary or appropriate to wind
up the affairs of the Partnership as promptly
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as practicable thereafter. Such person is hereinafter referred to as the
"Liquidator." Neither the admission of Partners nor the retirement of a Limited
Partner shall dissolve the Partnership.
Section 9.03 Procedure on Winding Up.
(a) Upon the winding up of the Partnership, a full
account of the assets and liabilities of the Partnership shall be
taken and the assets of the Partnership shall be liquidated to the
extent determined by the General Partner (or the Liquidator) and, as
promptly as practicable, the cash proceeds thereof shall be applied in
the following order of priority:
(i) to the payment of all debts, taxes, obligations
and liabilities of the Partnership including the expenses of
liquidation; provided that the General Partner (or the
Liquidator) may establish reserves for contingent liabilities
of the Partnership in an amount (including estimated expenses,
if any, in connection therewith) determined by the General
Partner (or the Liquidator) and upon the satisfaction of such
contingent liabilities the amounts, if any, remaining in such
reserves shall be distributed as provided in subparagraphs (i)
and (ii) of this Section 9.03(a); and
(ii) to the payment to Partners of their remaining
Capital Accounts in proportion to the amounts thereof.
(b) Distributions to a Partner pursuant to subparagraph
(a)(ii) may be made in installments and shall be made in cash or, in
the discretion of the General Partner (or the Liquidator), in
securities selected by the General Partner (or the Liquidator), or
partly in cash and partly in securities selected by the General
Partner (or the Liquidator).
(c) Upon the winding up of the Partnership, the name of
the Partnership and its good will shall not be appraised, sold or
otherwise liquidated but shall remain the exclusive property of the
General Partner.
(d) Within 90 days after the completion of the winding up
of the Partnership, the General Partner (or the Liquidator) shall
cause to be prepared and forwarded to each Partner a final statement
and report of the Partnership, prepared in accordance with Section
11.04.
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ARTICLE X
PAYMENTS TO AND BY A PERSON
WHO HAS CEASED TO BE A PARTNER
Section 10.01 Payments on Retirement, Death, Bankruptcy, Insanity or
Disability of any Partner. Within 30 days after (a) the date of retirement of
a Partner hereunder or (b) in the discretion of the General Partner, the last
day of the fiscal year during which a Partner died or became bankrupt, insane
or disabled, there shall be paid or distributed to such Partner or to the legal
representative of such Partner, an amount in cash or, as determined by the
General Partner, in securities selected by the General Partner or in cash and
securities selected by the General Partner, equal in value to not less than 90%
of the estimated amount of the Liquidating Share (as hereinafter defined) of
such Partner. Promptly after the General Partner has determined the Capital
Accounts of the Partners as of such date (which in the General Partner's
discretion may be after the Partnership's independent public accountants have
completed their examination thereof required by Section 11.04), the Partnership
shall pay to such Partner or his representative, in cash and/or securities
selected by the General Partner, the amount of the excess, if any, of the
Liquidating Share of such Partner over the amount previously paid, or such
Partner or representative shall return and pay to the Partnership in cash the
amount of the excess, if any, of the amount so paid over such Liquidating
Share, in each case together with interest thereon, to the extent permitted by
applicable law, from the applicable date referred to in clauses (a) and (b)
above to the date of the payment at an annual rate equal to the brokers' call
rate charged on such applicable date by the Partnership's principal broker.
The term "Liquidating Share", when used with respect to any retiring, deceased,
bankrupt, insane or disabled Partner, shall mean the Capital Account of such
Partner on the date in question.
Section 10.02 Reserve for Liability and Payment of Prior Fiscal
Period Items by Person Who Has Ceased to be a Partner.
(a) The right of any retired, deceased, bankrupt, insane or disabled
Partner (or their legal representative) to have distributed the Liquidating
Share of such Partner shall in all instances be subject to retention by the
Partnership of a reserve, in such amount as shall be determined by the General
Partner, in its sole and absolute discretion, for Partnership liabilities and
for other contingencies. Commencing on the applicable date referred to in
clauses (a) and (b) of Section 10.01, the reserve shall bear interest, payable
on each December 31 after such date, at an annual rate equal to the brokers'
call rate charged by the Partnership's principal broker from time to time.
Upon determination by the General Partner that such reserve (or portion
thereof) is no longer required there shall be distributed to such Partner his
proportionate share of the reserve which is no longer required together with
interest thereon. However, if the General Partner determines that the reserve
or any portion thereof is necessary to pay Partnership liabilities or other
contingencies, no interest accrued on such reserve or portion thereof shall be
paid to the retiring Partner.
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(b) A person who has ceased to be a Partner will be liable for his
proportionate share of Prior Fiscal Period Items as provided in Section 6.03 in
addition to his share of the reserve established with respect to such person
pursuant to Section 10.02(a) and such person shall pay his share of such
amounts promptly on demand, but the amount to be paid shall not be in excess of
his Capital Account at the time such Prior Fiscal Period Item arose.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01 Designation of Attorney. Each of the undersigned for
himself hereby irrevocably constitutes and appoints Chapman Capital L.L.C. and
Robert L. Chapman, Jr., and each of them, as his true and lawful attorney in
his name, place and stead, to make, execute, sign and file:
(a) the Certificate of Limited Partnership and any
amendment thereto or termination thereof which is or may be required
by the laws of the State of Delaware;
(b) any certificate required by reason of the dissolution
of the Partnership; and
(c) any application, certificate, report or similar
instrument or document required to be submitted by or on behalf of the
Partnership to any governmental or administrative agency or body, to
any securities exchange, board of trade, clearing corporation or
association or to any self-regulatory organization or trade
association.
Said attorney is not by this Section 11.01 granted any authority on behalf of
the undersigned to amend this Agreement.
Section 11.02 Withholding Taxes. Any taxes, fees or other charges
the Partnership is required to withhold under applicable law with respect to
any Partner shall be withheld by the Partnership (and paid to the appropriate
governmental authorities) and shall be deducted from the Capital Account of
such Partner as of the last day of the Fiscal Period with respect to which such
amount is required to be withheld.
Section 11.03 Maintaining Books of Account. Proper and complete
books of account shall be kept at all times and shall be open to inspection by
any Partner or their accredited representative at reasonable times during
office hours.
Section 11.04 Audit of Books. The books of account and records of
the Partnership shall be audited as of the end of each fiscal year by
independent certified public accountants designated from time to time by the
General Partner.
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Section 11.05 Reports to Partners. The Partnership shall furnish to
the Partners unaudited reports of the performance of the Partnership promptly
after the end of each fiscal quarter and the audited financial statements of
the Partnership prepared by the Partnership's independent certified accountants
promptly after the end of each fiscal year. In addition, as promptly as
practicable after the end of each fiscal year, the Partnership shall send to
each Partner a report indicating the amounts representing their respective
share of net long-term capital gain or loss, net short-term capital gain or
loss and operating profit or loss for purposes of reporting such amounts for
Federal income tax purposes.
Section 11.06 Amendment of Agreement. This Agreement may be amended
by the General Partner in any manner that does not adversely affect any Limited
Partner. Except as otherwise provided in this Section 11.06, this Agreement
may also be amended by action taken by both (a) the General Partner and (b) the
Limited Partners owning a majority in interest of the Capital Accounts owned by
the Limited Partners at the time of the amendment, provided that such amendment
does not discriminate among the Limited Partners.
Section 11.07 Notices. All notices provided for under this Agreement
shall be in writing and shall be sufficient if sent by first-class mail to the
last-known address of the Partnership or of any other party to whom such notice
is to be given. A Partner may change his or its address for purposes of this
Agreement upon five days' prior written notice to the General Partner.
Section 11.08 Binding Effect of Agreement. This Agreement, including
Section 11.01 hereof, shall be binding on the successors, assigns and the legal
representatives of each of the Partners.
Section 11.09 Counterparts. This Agreement may be executed in more
than one counterpart with the same effect as if the Partners executing the
several counterparts had all executed one document.
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IN WITNESS WHEREOF, the undersigned has hereunto signed this Agreement
on the date set forth below.
General Partner: Limited Partner:
Chapman Capital L.L.C.
By:________________________________ ________________________________
Robert L. Chapman, Jr. Type in name of Limited Partner
________________________________
Signature of Limited Partner
or Authorized Signatory
Date of Signature:______________
________________________________
Type in name and title of
Authorized Signatory
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