1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Chestnut Street Exchange Fund
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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CHESTNUT STREET EXCHANGE FUND
400 BELLEVUE PARKWAY
SUITE 100
WILMINGTON, DELAWARE 19809
---------------
NOTICE OF ANNUAL MEETING OF PARTNERS
---------------
October __, 1997
TO THE PARTNERS OF
CHESTNUT STREET EXCHANGE FUND:
The Annual Meeting of Partners of CHESTNUT STREET EXCHANGE FUND (the
"Fund") will be held on December 18, 1997 at 3:00 p.m. (Eastern time) in the
Fourth Floor Conference Room, Bellevue Park Corporate Center, 400 Bellevue
Parkway, Wilmington, Delaware for the following purposes:
(1) To approve or disapprove an Amended and Restated
Certificate and Agreement of Limited Partnership which would:
- Delete references to the Non-Managing General
Partner and to partnership tax status;
- Remove the list of investment limitations
from the Partnership Agreement (the
limitations will remain applicable to the
Fund under the requirements of the
Investment Company Act of 1940);
- Simplify the prescribed procedures for
transferring shares;
- Remove provisions illustrating the
anticipated timing and amount of
distributions to Partners and other outdated
references to the fund's initial offering and
capitalization; and
- Make certain other non-material changes.
(2) To elect five (5) Managing General Partners;
(3) To ratify the appointment by the Managing General
Partners of Coopers & Lybrand L.L.P. as the Fund's independent
accountants for its fiscal year ending December 31, 1997; and
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(4) To transact such other business as may properly
come before the meeting or any adjournment thereof.
The subjects referred to above are discussed in detail in the Proxy
Statement attached to this Notice. Each Partner is invited to attend the Annual
Meeting of Partners in person. Partners of record at the close of business on
November 3, 1997 have the right to vote at the meeting. If you cannot be present
at the meeting, we urge you to fill in, sign and promptly return the enclosed
proxy in order that the meeting can be held and a maximum number of shares may
be voted.
MORGAN R. JONES
Secretary
A POSTAGE PAID RETURN ENVELOPE IS ENCLOSED
FOR YOUR CONVENIENCE IN RETURNING YOUR
PROXY CARD AS SOON AS POSSIBLE
5
CHESTNUT STREET EXCHANGE FUND
400 BELLEVUE PARKWAY
SUITE 100
WILMINGTON, DELAWARE 19809
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Managing General Partners of Chestnut Street Exchange Fund
(the "Fund") for use at the Annual Meeting of Partners to be held in the Fourth
Floor Conference Room, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware on December 18, 1997 at 3:00 p.m. (Eastern time), and at
any adjournment thereof (the "Meeting").
Any person giving a proxy may revoke it at any time prior to its use.
Signed proxies received by the Fund in time for voting and not so revoked will
be voted in accordance with the directions specified therein. The Managing
General Partners recommend a vote FOR an Amended and Restated Certificate and
Agreement of Limited Partnership, FOR the election of Managing General Partners
as listed, and FOR the ratification of Coopers & Lybrand L.L.P. as the Fund's
independent accountants. If no specification is made, the proxy will be voted
for the matters as listed.
The Fund will bear all proxy solicitation costs. It is expected that
the solicitation of proxies will be primarily by mail. The Fund's officers and
transfer agent may also solicit proxies personally or by telephone or telefax.
Any Partner giving a proxy may revoke it at any time before it is exercised by
submitting to the Fund a written notice of revocation or a subsequently executed
proxy or by attending the Meeting and electing to vote in person.
Only Partners of record at the close of business on November 3, 1997
will be entitled to vote at the Meeting. Excluding units of partnership interest
of the Fund owned of record by the Fund's Non-Managing General Partner, The
Sandridge Corporation (which are not entitled to vote), on that date there were
_____________ units of partnership interest ("Shares") outstanding and entitled
to be voted at the Meeting. Partners of record, other than the Non-Managing
General Partner, are entitled to one vote for each Share owned of record on the
record date. Shares owned of record by the Non-Managing General Partner will not
be counted for purposes of a quorum or any vote at the Meeting. This Proxy
Statement, the accompanying Notice of Annual Meeting of Partners, and the
enclosed proxy are being mailed on or about November __, 1997 to Partners of
record on the record date.
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THE FUND HAS PREVIOUSLY FURNISHED TO PARTNERS ITS ANNUAL REPORT,
CONTAINING AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31,
1996, AND ITS SEMI-ANNUAL REPORT, CONTAINING UNAUDITED FINANCIAL STATEMENTS FOR
THE PERIOD ENDED JUNE 30, 1997. REQUESTS FOR COPIES OF SUCH REPORTS, WHICH THE
FUND WILL FURNISH TO PARTNERS WITHOUT CHARGE, SHOULD BE DIRECTED TO THE FUND'S
TRANSFER AGENT, PFPC INC., P.O. BOX 8950, WILMINGTON DELAWARE 19889 OR TELEPHONE
TOLL-FREE (800) 852-4750. THE SEMI-ANNUAL AND ANNUAL REPORTS ARE NOT TO BE
REGARDED AS PROXY SOLICITING MATERIAL.
There are three separate subjects to be considered by the Partners at
the meeting: (1) the proposed Amended and Restated Certificate and Agreement of
Limited Partnership (see p. 2), (2) the election of five Managing General
Partners (see p. 6), and (3) the ratification of the selection of the
independent auditors of the Fund (see p. 10). Each of these matters is discussed
below.
1. AMENDMENTS TO THE FUND'S RESTATED CERTIFICATE AND AGREEMENT
OF LIMITED PARTNERSHIP
BACKGROUND
The Fund is a California Limited Partnership which is registered under
the Investment Company Act of 1940 (the "1940 Act") as an open-end, diversified
management investment company. The Fund was formed in 1976, and since that time
has been classified as a partnership for federal tax purposes. In 1976, the Fund
obtained a ruling from the Internal Revenue Service that it would be classified
as a partnership, subject to the condition that the Fund's General Partners
maintain at all times in the aggregate an interest of at least 1% in the Fund.
This condition was also incorporated into the Fund's Restated Certificate and
Agreement of Limited Partnership (the "Partnership Agreement").
To satisfy this condition, the Partnership Agreement provided for a
Non-Managing General Partner. In addition, the Fund's Investment Advisory
Agreement requires PNC Bank, N.A. ("PNC Bank") to provide the Fund with a
Non-Managing General Partner and to pay the compensation of the Non-Managing
General Partner. The Sandridge Corporation ("Sandridge") has served as the
Non-Managing General Partner since inception, and has held at least 1% of the
Fund's total shares outstanding throughout the period. To compensate the
Non-Managing General Partner for its services to the Fund and the risk
undertaken, PNC Bank agreed to pay Sandridge annually an amount equal to .1% of
the Fund's average net assets.
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Effective on January 1, 1998 the need for a Non-Managing General
Partner will be eliminated, because the Fund will be treated as a corporation
for federal tax purposes and will retain essentially the same pass-through tax
treatment by electing regulated investment company tax status.
CHANGES TO BE MADE IN THE CURRENT STRUCTURE
Federal tax legislation passed in 1987, which was directed at publicly
traded partnerships such as the Fund, allowed partnership tax treatment for the
Fund to continue only through 1997. While the Taxpayer Relief Act of 1997 made
some changes in the rules applicable to publicly traded partnerships, it would
not be beneficial for the Fund to elect to continue as a partnership after 1997.
As a result, effective January 1, 1998, the Fund will no longer be treated as a
partnership for tax purposes, and will instead elect to be taxed as a regulated
investment company. As noted in the Fund's letter to Partners dated February 14,
1997, this will mean that essentially the same pass-through tax treatment of the
Fund's income will continue. The Fund believes that there will be very little
change in the operation of the Fund when it operates as a regulated investment
company, and minor changes in the tax treatment of the Limited Partners. There
will be a change in the Fund's policy with respect to the distribution of net
capital gains that is intended to leave Partners in at least as favorable a tax
position as they were under the previous policy. Partners who would like a copy
of the letter to Partners outlining these changes should contact Mr. Roach at
the address set forth above.
Under the tax rules which will be in effect after January 1, 1998, it
will no longer be necessary for the Fund to have a Non-Managing General Partner
for tax purposes, and there is no requirement that there be such a position
under the California Revised Limited Partnership Act. The effect of the
elimination of the need for a Non-Managing General Partner, and consequently PNC
Bank's responsibility to provide a Non-Managing General Partner, is to reduce
the expenses of the advisers associated with the performance of their
obligations under the Investment Advisory Agreement with the Fund by .1% per
annum. The Managing General Partners are currently considering whether under all
of the circumstances, there should be an adjustment to the compensation payable
to the advisers.
AMENDMENTS TO THE PARTNERSHIP AGREEMENT
In connection with the review of the Partnership Agreement for the
purpose of eliminating the references to the Non-Managing General Partner and to
partnership tax status, the Managing General Partners decided that it would be
desirable to submit to the Partners an Amended and Restated Partnership
Agreement that would make additional changes designed essentially to modernize
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the Partnership Agreement and to eliminate matters that were applicable in 1976
but are no longer necessary. The proposed changes are grouped for the purposes
of the meeting of the Partners into three separate topics. The Managing General
Partners recommend that the Amended and Restated Certificate and Agreement of
Limited Partnership in the form attached hereto as Exhibit A be approved. The
proposed changes are as follows:
(1) to delete references to the Non-Managing General Partner and
to partnership tax status;
(2) to remove the listing of investment limitations from the
Partnership Agreement (each will remain a fundamental policy
under the Fund's Registration Statement as a registered
investment company);
(3) to eliminate as no longer necessary (a) the cumbersome
procedures currently required for transferring shares in favor
of simplified transfer provisions, (b) illustrations that were
appropriate in 1976 of the anticipated timing and amounts of
distributions to Partners (this change would leave intact the
broad discretion of the Managing General Partners to make
distributions), and (c) to remove certain historic information
relevant at the time of organization of the Fund and
irrelevant now, and to make other conforming changes.
The Partnership Agreement attached to this Proxy Statement as Exhibit
A, shows the additions and deletions that would be effected by the approval of
this Proposal No. 1.
DELETION OF REFERENCES TO THE NON-MANAGING GENERAL PARTNER AND TO
PARTNERSHIP TAX STATUS.
In light of the change to the Fund's tax status and the removal of the
need to have a Non-Managing General Partner under federal tax law, the Managing
General Partners concluded that it would be appropriate to seek to terminate the
Non-Managing General Partner's services, and to delete references to the Fund's
prior tax status and the requirement for a Non-Managing General Partner from the
Partnership Agreement.
The elimination of the need for a Non-Managing General Partner from the
Partnership Agreement will enable the compensation arrangement between PNC Bank
and Sandridge to be terminated. The Non-Managing General Partner has agreed to
the termination of its status effective on the effective date of the proposed
amendment to the Partnership Agreement, and to the conversion of its shares into
limited partnership interests. As a limited partner, Sandridge would have the
right to vote, and all rights of any other limited partner. (Currently, the Non-
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Managing General Partner's shares are non-voting and subject to certain
contractual rights which limit its ability to redeem shares.)
REMOVAL OF INVESTMENT LIMITATIONS FROM THE PARTNERSHIP AGREEMENT.
The Managing General Partners also recommend approval of changes which
would remove Section 2.4 of the Partnership Agreement (which recites the Fund's
investment limitations). Such provisions are not required to be included in the
Partnership Agreement by California limited partnership or any other law, and
each of the policies is and will continue to be a "fundamental policy" of the
Fund under the 1940 Act. A fundamental policy can only be changed under the 1940
Act by the vote of a majority of the outstanding shares -- the same vote as is
required to amend this portion of the Partnership Agreement. Thus the removal of
these provisions from the Partnership Agreement will not adversely affect the
rights of Partners. Any changes to the Fund's objectives, policies and
limitations are now, and will continue to be subject to, the same requirements
as are provided in the 1940 Act. The Managing General Partners currently have no
intention of changing any of the Fund's investment limitations.
AMENDMENT TO THE PRESCRIBED PROCEDURES FOR TRANSFERRING SHARES, TO
REMOVE NOW-OBSOLETE ILLUSTRATIONS OF DISTRIBUTION POLICIES, STATEMENTS
OF HISTORIC INFORMATION NOT NOW RELEVANT, AND TO MAKE CONFORMING
CHANGES FOR EACH OF THE PROPOSALS THROUGHOUT THE PARTNERSHIP AGREEMENT.
The Managing General Partners also have approved changes to the
Partnership Agreement which would remove the current cumbersome requirements
that must be met in order to transfer Shares. These procedures include a
requirement that the transferee provide the Fund with an affidavit regarding the
transfer and an agreement to be bound by the Partnership Agreement. The current
requirements had their origins in the Fund's need to preserve its partnership
tax status, and after January 1, 1998, no such restrictions are required, and
the Managing General Partners do not believe there is any other reason to retain
these limits on free transferability of Shares. The proposed changes to the
Partnership Agreement will delete the procedure and provide that a transferee of
Shares shall become a Limited Partner and be bound by the Partnership Agreement
upon the recordation of his or her name in the records of the Fund.
Another change would remove obsolete illustrations of the Fund's
distribution policies. The Partnership Agreement gives the Managing General
Partners full discretion as to the timing and amount of distributions by the
Fund. Pursuant to this authority, distributions have been made to the Partners
since
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inception. The Partnership Agreement also includes an illustration of the
anticipated timing and amounts of distributions that were to be made. The
Managing General Partners believe that in 1976 this was an appropriate means of
advising prospective Partners as to the intended operation of the Fund, but that
it is no longer necessary to include this illustration in the Partnership
Agreement. Furthermore, the change to regulated investment company status and
the related change in distribution policy makes the illustration incorrect. The
illustration which is proposed to be removed in no way limits the discretion of
the Managing Partners to make distributions and to determine the timing thereof.
Additionally, the Partnership Agreement contains a number of references
to the offering of Shares which was completed in 1976. These references are now
obsolete, and the Managing General Partners have approved changes which would
remove these references. Finally, the amendments would make other, conforming
changes to make the Partnership Agreement consistent with the changes described
above.
CONCLUSION
The Managing General Partners have concluded that each of the proposed
amendments to the Partnership Agreement will benefit the Fund and its Partners.
If approved by the Partners at the Meeting, each of the approved amendments will
become effective on January 1, 1998. The Managing Partners recommend a vote FOR
these three Proposals.
The approval of these amendments requires the affirmative vote of (a) a
majority of the Shares present in person or by proxy and entitled to vote at a
meeting at which a quorum is present, and (b) a "majority" of the outstanding
Shares, defined as the affirmative vote of the holders of the lesser of: (i) 67%
of the Shares of the Fund present in person or by proxy at the meeting and
entitled to vote if the holders of more than 50% of the outstanding Shares are
present in person or by proxy; or (ii) more than 50% of the outstanding Shares
of the Fund.
2. ELECTION OF MANAGING GENERAL PARTNERS
At the Meeting, Partners will elect five Managing General Partners.
There are currently four Managing General Partners, and the number will be
increased by one at the time of the Meeting. Each Managing General Partner so
elected will serve until the next annual meeting of Partners, or special meeting
in lieu thereof, and until the election and qualification of the Managing
General Partner's successor, or until the Partner's status as a Managing General
Partner is sooner terminated as provided in the Fund's Partnership Agreement.
Normally, there
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will be no annual meeting of Partners for the purpose of electing Managing
General Partners except as required by the 1940 Act.
The persons named as proxies in the accompanying proxy have been
designated by the Managing General Partners and intend to vote for the nominees
named below. All Shares represented by valid proxies will be voted in the
election for all of the nominees named below unless authority to vote for all of
the nominees or a particular nominee is withheld. Each nominee has consented to
being named in this Proxy Statement and to serve if selected. In the event any
nominee should withdraw from the election or otherwise be unable to serve, the
named proxies will vote for the election of such substitute nominee as the
Managing General Partners may recommend unless a decision is made to reduce the
number of Managing General Partners.
The following table sets forth the nominees, their ages, principal
occupations for the past five or more years, and any other directorships they
hold in companies which are subject to the reporting requirements of the
Securities Exchange Act of 1934 or are registered as investment companies under
the 1940 Act.
SHARES
GENERAL BENEFICIALLY
PARTNER OWNED AS OF
NAME AGE SINCE AUGUST 31, 1997 BUSINESS EXPERIENCE
---- --- ------- --------------- -------------------
Richard C. Caldwell* 53 N/A N/A Executive Vice
President, PNC Bank;
Director of various
affiliates and
subsidiaries of PNC
Bank, including
Provident Institu-
tional Management
Corporation ("PIMC").
Robert R. Fortune* 80 1976 4,337.584 Financial Consultant;
Former Chairman,
President and Chief
Executive Officer,
Associated Electric &
Gas Insurance Services
Limited from 1984-1993;
Member of the Financial
Executives Institute and
American Institute of
Certified Public
Accountants; Director or
Trustee of 4 other
investment companies
advised by PIMC.
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SHARES
GENERAL BENEFICIALLY
PARTNER OWNED AS OF
NAME AGE SINCE AUGUST 31, 1997 BUSINESS EXPERIENCE
---- --- ------- --------------- -------------------
G. Willing Pepper 89 1976 500** Retired, Chairman of the
Board, Specialty
Composites Corporation
until May 1984; Chairman
of the Board, The
Institute for Cancer
Research until 1979;
Director, Philadelphia
National Bank until
1978; President, Scott
Paper Company, 1971-
1973; Director, Marmon
Group, Inc. until April
1986; Director or
Trustee of 5 other
investment companies
advised by PIMC.
David R. Wilmerding, Jr. 62 1976 1.933** Chairman, Gee Wilmerding
& Associates, Inc.
(investment advisers);
Director, Beaver
Management Corporation;
Chairman of the Board,
Compass Capital Funds;
Director, Independence
Square Income
Securities, Inc.;
Director, Mutual Fire
Marine & Inland
Insurance Co., Inc.;
Director, US Retirement
Communities, Inc.
Langhorne B. Smith 61 1997 43,133*** President and Director,
The Sandridge
Corporation; Executive
Vice President and
Director, Claneil
Enterprises, Inc.
- -----------------
* Messrs. Caldwell and Fortune are "interested persons" of the Fund as
that term is defined in the 1940 Act.
** Shares are beneficially owned by virtue of sole voting and investment
power.
*** Shares are beneficially owned by Sandridge. Mr. Smith has shared voting
and investment power.
Messrs. Fortune, Pepper and Wilmerding were most recently elected by
the Partners at the Annual Meeting of the Fund held on April 24, 1992. Mr.
Smith has served as a Managing General Partner since September 26, 1997 when he
was elected by the other Managing General Partners. R. Stewart Rauch, a
Managing General
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Partner of the Fund since 1980, resigned on February 27, 1997. Mr. Rauch's
resignation was not based upon any disagreement with the Fund's other Managing
General Partners or Fund management. Sandridge, the Non-Managing General Partner
of the Fund since its organization, is not standing for re-election for the
reason cited above under Proposal No. 1.
During 1996, no Managing General Partner or officer of the Fund was
also a director, officer, or employee of the Fund's advisers or any of their
parents. Drinker Biddle & Reath LLP, of which Morgan R. Jones, Secretary of the
Fund, is a partner, received fees during the year ended December 31, 1996 for
services rendered as the Fund's legal counsel. The Fund's Treasurer was paid
$18,694 (including amounts contributed to the retirement plan described below)
for his services in 1996. The Fund has a retirement plan (the "Plan") for
eligible employees. For the last fiscal year, the Fund contributed a total of
$2,207 to the Plan, and, based upon prior practice, it may be anticipated that
the Fund will contribute to the plan during the current fiscal year an amount
equal to 10% of the compensation of the Plan participants for the year. Such
contribution, based upon annual rates of compensation now in effect, would
approximate $2,323. Under the Plan, each participant is entitled to his vested
portion of the contributions made by the Fund based upon his compensation. As of
the record date, the Managing General Partners and officers of the Fund owned
beneficially ___% of the Fund's issued and outstanding Shares.
The Fund pays each Managing General Partner $6,000 annually, and pays
the Chairman an additional $4,000 annually. The following table provides
information concerning the compensation of each of the Fund's Managing General
Partners for services rendered during the Fund's last fiscal year ended December
31, 1996:
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Aggregate Pension or Retirement Estimated Annual Total Compensation
Name of Person/ Compensation Benefits Accrued as Benefits Upon from Registrant and
Position From Registrant Part of Fund Expenses Retirement Fund Complex(1)
- --------------- --------------- --------------------- ---------------- -------------
Robert R. Fortune $10,000 None None (4)(2) $67,100
President and Chairman
of the Managing General
Partners
G. Willing Pepper $6,000 None None (5)(2) $97,100
Managing General Partner
David R. Wilmerding, Jr. $6,000 None None (2)(2) $63,350
Managing General Partner
R. Stewart Rauch(3) $6,000 None None (1)(2) $12,000
Managing General Partner
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(1.) A Fund Complex means two or more investment companies that hold
themselves out to investors as related companies for purposes of
investment and investor services, or have a common investment adviser
or have an investment adviser that is an affiliated person of the
investment adviser of any of the other investment companies.
(2.) Total number of such other investment companies within the Fund Complex
of which the Managing General Partners serves as director or trustee.
(3.) Mr. Rauch resigned as a Managing General Partner of the Registrant on
February 27, 1997.
The Managing General Partners met four times during the last fiscal year.
All Managing General Partners attended at least 75% of the meetings. The Fund
does not have a standing audit or nominating committee.
3. RATIFICATION OR REJECTION OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
A majority of the Managing General Partners who are not "interested persons"
of the Fund have selected Coopers & Lybrand L.L.P. as independent accountants
for the Fund for the fiscal year ending December 31, 1997. The ratification of
the selection of independent accountants is to be voted on at the Meeting and it
is intended that the persons named in the accompanying proxy will vote for
Coopers & Lybrand L.L.P. unless contrary instructions are given. Coopers &
Lybrand L.L.P. has been the Fund's auditor since the Fund's organization and has
informed the Fund that it has no direct or material indirect financial
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interest in the Fund. A representative of Coopers & Lybrand L.L.P. is expected
to be present at the Meeting to make a statement if desired and to be available
to respond to appropriate questions.
4. OTHER MATTERS
No business other than the matters described above is expected to come
before the Meeting, but should any other matter requiring a vote of Partners
arise, including any question as to an adjournment of the Meeting, the persons
named in the enclosed proxy will vote thereon according to their best judgment
in the interests of the Fund.
VOTES REQUIRED FOR APPROVAL OF MATTERS AT THE MEETING
A quorum for the transaction of business at the Meeting is constituted by
the presence in person or by proxy of holders of a majority of the outstanding
Shares of the Fund. Shares owned of record by the Non-Managing General Partner
will not be counted for the purposes of a quorum or any vote at the Meeting. If
a Proxy is properly executed and returned accompanied by instructions to
withhold authority, or is marked with an abstention, the Shares represented
thereby will be considered to be present at the Meeting for purposes of
determining the existence of a quorum for the transaction of business.
Approval of Proposal No. 1 requires the affirmative vote of (a) a majority
of the Shares present in person or by proxy and entitled to vote at a meeting at
which a quorum is present, and (b) a "majority" of the outstanding Shares
defined as the affirmative vote of the holders of the lesser of: (i) 67% of the
Shares of the Fund present in person or any proxy at the meeting and entitled to
vote if the holders of more than 50% of the outstanding Shares are present in
person or by proxy; or (ii) more than 50% of the outstanding Shares of the Fund.
In the election of Managing General Partners, the nominees receiving the highest
number of votes cast at a meeting of Partners at which a quorum is present, up
to the number of Managing General Partners, will be elected; there is no
cumulative voting in the election of Managing General Partners. Ratification of
the selection of Coopers & Lybrand L.L.P. requires the affirmative vote of the
holders of the lesser of: (i) 67% of the Shares of the Fund present in person or
by proxy at the meeting and entitled to vote if the holders of more than 50% of
the outstanding Shares are present in person or by proxy; or (ii) more than 50%
of the outstanding Shares of the Fund.
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Broker "non-votes" (i.e., proxies from brokers or nominees indicating that
such persons have not received instructions from the beneficial owner or other
persons entitled to vote shares on a particular matter with respect to which the
brokers or nominees do not have discretionary power) will be deemed to be
abstentions.
ADDITIONAL INFORMATION
MANAGEMENT
Officers of the Fund are elected and appointed by the Managing General
Partners and hold office until they resign or are removed. The following table
sets forth certain information about the Fund's executive officers, except Mr.
Fortune, the President of the Fund, about whom information is provided on page
7.
Position
Officer with the Business Experience During
Name Age Since Fund Past Five Years
---- --- ------- -------- --------------------------
Edward J. Roach.... 73 1981 Treasurer Certified Public Accountant; Partner of the accounting firm of Main
Hurdman until 1981; Vice Chairman of the Board, Fox Chase Cancer Center;
Trustee Emeritus, Pennsylvania School for the Deaf; Trustee Emeritus,
Immaculata College; Former Director, Biotrol USA, Inc.; President, Vice
President and/or Treasurer of 7 other investment companies advised by
PIMC; Director, The Bradford Funds, Inc.
Morgan R. Jones.... 57 1976 Secretary Partner of the law firm of Drinker Biddle & Reath LLP, Philadelphia,
Pennsylvania.
THE INVESTMENT ADVISERS
PNC Bank and PIMC serve as the Fund's advisers. PNC Bank is located at
Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101. PIMC is located at
Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware
19809. The Fund has no administrator or underwriter.
PARTNER PROPOSALS FOR NEXT MEETING
The Fund does not hold annual partner meetings. Any proposal by a
partner for consideration at a subsequent meeting of Partners should be sent in
writing to Edward J. Roach, Chestnut Street Exchange Fund, 400 Bellevue Parkway,
Suite 100, Wilmington, DE 19809
Dated: October ____, 1997
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EXHIBIT A
TABLE OF CONTENTS
TO
RESTATED CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP
OF
CHESTNUT STREET EXCHANGE FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ARTICLE I - NAME AND STATUTORY OFFICE....................................A-1
1.1 Name........................................................A-1
1.2 Principal Place of Business.................................A-1
ARTICLE II - CHARACTER OF THE BUSINESS OF THE FUND.......................A-2
2.1 Purpose.....................................................A-2
2.2 Investment Objectives.......................................A-2
2.3 Operating Powers............................................A-2
ARTICLE III - GENERAL PARTNERS...........................................A-3
3.1 Identity of Managing General Partners.......................A-3
3.2 Designation and Election of Successor
or Additional General Partners..............................A-3
3.3 Management and Control......................................A-4
3.4 Limitations on the Authority of the General Partners........A-6
3.5 Action by the General Partners..............................A-6
3.6 Reimbursement and Indemnification...........................A-7
3.7 Limitation of Liability to Shareholders.....................A-8
3.8 Termination of Status and Interest of General Partners......A-8
3.9 Right of General Partners to Become Limited Partners........A-8
3.10 No Agency...................................................A-8
3.11 Voting of Shares Owned by General Partners..................A-9
ARTICLE IV - LIMITED PARTNERS............................................A-9
4.1 Sales of Additional Shares;
Admission of Additional Limited Partners....................A-9
4.2 Right to Assign Shares; Substituted
and Additional Limited Partners.............................A-9
4.3 No Power to Control Business................................A-10
4.4 Limited Liability...........................................A-10
4.5 Limited Partners Not Personally Liable......................A-11
4.6 Death of a Limited Partner..................................A-11
4.7 Partners' Representations to the Fund.......................A-11
ARTICLE V - CAPITAL CONTRIBUTIONS: SALES OF
SHARES; ALLOCATIONS TO SHARES.............................A-12
5.1 Shares of Partnership Interest..............................A-12
5.2 Contributions for Issuance of Shares........................A-12
5.3 Contributions by General Partners...........................A-12
5.4 Contributions by the Limited Partners.......................A-13
5.5 Allocation of Fund Income, Gains, Losses, Deductions and
Credits Among the Shares....................................A-13
ARTICLE VI - DISTRIBUTIONS AND RETURNS OF CONTRIBUTIONS..................A-13
6.1 In General..................................................A-13
6.2 Distributions with Respect to Income and Net Realized
Capital Gains...............................................A-13
6.3 Distributions in Connection With Redemption of Shares.......A-14
6.4 Distributions upon Winding Up of the Fund...................A-15
6.5 Returns of Contributions....................................A-16
ARTICLE VII - PARTNERS' RIGHTS TO VOTE UPON MATTERS AFFECTING THE BASIC
STRUCTURE OF THE FUND: EXERCISE OF VOTING RIGHTS..........A-17
7.1 Voting Rights of Partners...................................A-17
7.2 Meetings of the Partners....................................A-18
7.3 Quorum and Required Vote at Meetings of the Partners........A-18
7.4 Action by Written Consent...................................A-19
ARTICLE VIII - TERM AND DISSOLUTION OF THE FUND..........................A-19
8.1 Term........................................................A-19
8.2 Events Causing Earlier Dissolution of the Fund..............A-19
8.3 Right of General Partners to Continue the Business
of the Fund in Certain Events...............................A-19
8.4 Right of the Partners to Provide for Continuation
of the Business of the Fund in Certain Events...............A-20
ARTICLE IX - FUND DOCUMENTATION; AMENDMENT OF THE CERTIFICATE AND
AGREEMENT; POWER OF ATTORNEY................................A-20
9.1 Certificate and Agreement and Other Documentation...........A-20
9.2 Events Requiring Amendment of Certificate and Agreement.....A-21
9.3 Partnership Authorization...................................A-21
9.4 Power of Attorney by Substituted or Additional
Limited Partners............................................A-23
9.5 Amendments Requiring Signature by Less than All Limited
Partners....................................................A-23
9.6 Amendments Requiring Signature by All Partners..............A-23
18
ARTICLE X - BOOKS AND RECORDS: STATEMENTS AND INCOME TAX INFORMATION.....A-24
10.1 Fiscal Year.................................................A-24
10.2 Records and Accounting......................................A-24
10.3 Periodic Financial Statements...............................A-24
10.4 Record Dates................................................A-24
10.5 Income Tax Information......................................A-25
10.6 Statement Upon Winding Up of the Fund.......................A-25
ARTICLE XI - GENERAL PROVISIONS..........................................A-25
11.1 Definitions.................................................A-25
11.2 Independent Activities......................................A-27
11.3 Custodian...................................................A-27
11.4 Benefit.....................................................A-27
11.5 Nonrecourse Creditors.......................................A-27
11.6 Notices.....................................................A-28
11.7 Captions....................................................A-28
11.8 Certificate and Agreement in Counterparts...................A-28
11.9 Agent for Service of Process................................A-28
11.10 Principles of Construction; Severability....................A-28
11.11 California Law..............................................A-28
11.12 Integrated Agreement........................................A-28
SCHEDULE "A": Names, Places of Residence, Number of Shares of Partnership
Interest, and Contributions of the General Partners.
19
CHESTNUT STREET EXCHANGE FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
RESTATED CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP
This RESTATED CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP (the
"Certificate and Agreement") has been executed and delivered among the General
Partners and Limited Partners herein named, for the purpose of amending and
restating in full the Restated Certificate and Agreement of Limited Partnership
dated as of September 16, 1976, recorded on September 16, 1976, as Document
Number 8504, in the official records of the office of the County Recorder of Los
Angeles County, California, of Chestnut Street Exchange Fund (a California
Limited Partnership), a limited partnership formed pursuant to the Uniform
Limited Partnership Act as enacted by the State of California.
WHEREAS, the General Partners and Limited Partners herein named have
formed a Limited Partnership under the laws of the State of California which
will qualify as a diversified, open-end, management investment company under the
Investment Company Act of 1940;
WHEREAS, the General and Limited Partners desire to amend and restate
the Restated Certificate and Agreement of Limited Partnership previously
recorded as described above;
NOW, THEREFORE, THE GENERAL PARTNERS AND THE LIMITED PARTNERS HEREIN
NAMED HEREBY AMEND AND RESTATE THE RESTATED CERTIFICATE AND AGREEMENT OF LIMITED
PARTNERSHIP OF CHESTNUT STREET EXCHANGE FUND (A CALIFORNIA LIMITED PARTNERSHIP)
IN FULL AS FOLLOWS:
ARTICLE I
NAME AND STATUTORY OFFICE
1.1 NAME. This Partnership shall be known as and shall operate under
the firm name of "CHESTNUT STREET EXCHANGE FUND" (A California Limited
Partnership).
1.2 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the
Partnership for purposes of Section 15614 of the Limited Partnership Act shall
be c/o _________________. The Managing General Partners may from time to time
establish additional places of business of the Partnership in such other
locations, within and without California, as they deem necessary or desirable
for the conduct of the Partnership's business.
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20
ARTICLE II
CHARACTER OF THE BUSINESS OF THE FUND
2.1 PURPOSE. The purpose of the Fund is to create and operate an
open-end, diversified management investment company which will qualify under the
1940 Act.
2.2 INVESTMENT OBJECTIVES. The Fund's investment objectives are to seek
long-term growth of capital and, secondarily, current income. The Fund will
invest in a portfolio of common stocks and securities convertible into common
stocks, and may also invest in other types of securities for temporary or
defensive purposes including preferred stocks, investment grade bonds,
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, certificates of deposit, commercial paper and other
"money-market" obligations. Up to 10% of the value of the Fund's total assets
may be invested in securities which are subject to legal or contractual
restrictions on resale (for example restrictions on resale without registration
under the 1933 Act). The Fund may write exchange-traded call options on
portfolio securities and may loan portfolio securities.
2.3 OPERATING POWERS. Subject to the Fund's Investment Objectives in
Section 2.2, the Fund shall have the power to: (a) to invest and trade in
capital stock, subscriptions, bonds, notes, debentures, trust receipts and other
securities of any corporation or entity; (b) to engage personnel and do such
other acts and incur such other expenses on behalf of the Fund as may be
necessary or advisable; (c) to engage attorneys, accountants or such other
persons as may be deemed necessary or advisable; (d) to receive, acquire, buy,
sell, exchange, trade, loan, borrow and otherwise deal in and with property; (e)
to open, conduct and close accounts with brokers and to pay the customary fees
and charges applicable to transactions in all such accounts; (f) to open,
maintain, and close bank accounts and to draw checks and other orders for the
payment of money; (g) to enter into, make and perform such contracts, agreements
and other undertakings, and to do such other acts, as may be deemed necessary or
advisable, including, without in any manner limiting the generality of the
foregoing, contracts, agreements, undertakings and transactions with any Partner
or with any other person, firm or corporation having any business, financial or
other relationship with any Partner; (h) to institute and prosecute litigation
arising out of the regular course of its affairs or in the enforcement of its
obligations due it, including all rights of appeal; (i) to
A-2
21
compromise and settle any claims against the Fund and to provide for
indemnification by the Fund in the Fund's contracts and agreements; (j) to
defend any litigation, including all rights of appeal, whether or not arising in
the regular course of its affairs; (k) to appear before any governmental board
or agency or to otherwise participate in any administrative review or appeal;
(l) to employ one or more investment advisors for the Fund to supervise the
Fund's investments and to administer the affairs of the Fund subject to the
provisions of this Certificate and Agreement; (m) to file and publish all such
certificates, notices, statements or other instruments required by law for the
formation and operation of a limited partnership in any jurisdictions where the
Fund may elect to do business; (n) to exercise any and all other powers which
may be necessary to implement the purposes, policies and powers of the Fund and
not inconsistent therewith, including those granted to limited partnerships
under the CALIFORNIA REVISED Limited Partnership Act; and (o) to exercise such
other powers as the Managing General Partners reasonably believe to be necessary
to comply with the provisions of the 1940 Act.
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22
ARTICLE III
GENERAL PARTNERS
3.1 IDENTITY OF MANAGING GENERAL PARTNERS. The General Partners of the
Fund shall consist of THE Managing General Partners (HEREINAFTER REFERRED TO AS
THE "GENERAL PARTNERS" OR THE "MANAGING GENERAL PARTNERS"). Only individuals may
act as Managing General Partners, and all individual General Partners shall act
as Managing General Partners.
The names of the currently acting Managing General Partners, their
places of residence and the number of Shares owned by each of them are set forth
in Schedule "A" to this Certificate and Agreement and are incorporated herein by
this reference.
3.2 DESIGNATION AND ELECTION OF SUCCESSOR OR ADDITIONAL GENERAL
PARTNERS. The Managing General Partners shall determine from time to time the
number of persons who will be proposed for election as General Partners. At the
annual meeting of Partners, if held in a given year, or at any special meeting
called for the purpose of electing General Partners, the Partners shall elect
the General Partners. Each of the Managing General Partners shall serve until
the next annual or special meeting at which General Partners are elected and
until the election and qualification of the person's successor, or until the
person's status as such is sooner terminated as provided in Section 3.8 below.
If at any time the number of Managing Partners is reduced to less than three,
the remaining Managing General Partners shall, within 120 days, call a meeting
of Partners for the purpose of electing an additional Managing General Partners
or Managing General Partners so as to restore the number of Managing General
Partners to at least three.
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23
If at any time a vacancy occurs among the Managing General Partners,
the VACANCY MAY BE FILLED BY THE MANAGING GENERAL PARTNERS SUBJECT TO THE
LIMITATIONS set forth in Sections 16(a) and (b) of the 1940 ACT.
Each General Partner, by becoming a General Partner, consents to the
admission as an added or substituted General Partner of any person elected by
the Partners in accordance with this Certificate and Agreement. Each Partner, by
becoming a Partner of the Fund, consents to and ratifies the actions of the
General Partners in determining the persons who will be proposed for election
and admission as additional or substituted General Partners, and the actions of
the Partners in electing an additional or substituted General Partner pursuant
to the procedure in Article VII of this Certificate and Agreement.
Any General Partner who is elected at a meeting of the Partners and who
is not then serving as a General Partner shall be admitted to the Partnership as
a General Partner effective as of the date of such election.
3.3 MANAGEMENT AND CONTROL. Subject to the provisions of this
Certificate and Agreement, the business of the Fund shall be managed solely by
the Managing General Partners, and they shall have complete and exclusive
control over the management, conduct and operation of the Fund's business.
Except as otherwise specifically provided in this Certificate and Agreement, the
Managing General Partners, acting pursuant to Section 3.5 hereof, shall have the
right, power and authority, on behalf of the Fund and in its name to exercise
all of the rights, powers and authority of a partner in a partnership without
limited partners under the California Uniform General Partnership Act. Without
limiting the foregoing, but subject to the right of the Partners to vote on
certain matters affecting the basic structure of the Fund in Article VII below,
the Managing General Partners, acting pursuant
A-6
24
to Section 3.5 below, shall have the power and authority to: (a) adopt, amend
and repeal a Code of Regulations not inconsistent with this Certificate and
Agreement providing for the operation of the Fund; appoint one of their number
to be President, who shall preside at all meetings of Partners, shall be
responsible for the execution of policies established by the Managing General
Partners and may be the chief executive, financial and accounting officer; (c)
appoint from their own number, and terminate, any one or more committees
consisting of two or more managing General Partners, including executive
committee which may, when the Managing General Partners are not in session,
exercise one or all of the power and authority of the Managing General Partners
as the Managing General Partners may determine; (d) elect and appoint, delegate
authority to, remove and terminate such officers and agents (who need not be
Partners) as they consider appropriate; (e) subject always to the continuing
supervision of the Managing General Partners, contract with one or more banks,
trust companies, investment advisers or other persons for the performance of
such functions as they may determine, including, but not by way of limitation,
the investment and reinvestment of all or part of the Fund's assets and
effecting portfolio transactions, and any or all administrative functions of the
Fund; (f) at any time and from time to time, contract with any corporation,
trust, association or other person to act as exclusive or nonexclusive
distributor or Principal Underwriter for the Shares; (g) purchase and pay for
entirely out of Fund property insurance policies insuring the Shareholders,
General Partners, Limited Partners, officers, employees, agents, investment
advisers, principal underwriters, or independent contractors of the Fund
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such person as
Partner, officer, employee, agent, investment adviser, principal underwriter, or
independent contractor, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Fund would have the
power to indemnify such person against such liability; and (h) pay or cause to
be paid out of the principal or income of the Fund, or partly out of principal
and partly out of income, all expenses, fees, charges, taxes and liabilities
incurred or arising in connection with the Fund, or in connection with the
management thereof, including but not limited to, the General Partners'
compensation and such expenses and charges for the services of the Fund's
officers, employees, investment adviser or Manager, Principal Underwriter,
auditor, counsel, custodian, transfer agent, Shareholder servicing agent, and
such other agents or independent contractors and such other expenses and charges
as the Managing General Partners may deem necessary or advisable to incur.
A-7
25
The Managing General Partners shall devote themselves to the Fund's
business to the extent they may determine necessary for the efficient conduct
thereof, which need not, however, occupy their full time. General Partners may
also engage in other businesses, whether or not similar in nature to the
business of the Fund, subject to the limitations of the 1940 Act. Further,
subject to the limitations of the 1940 Act and the Partnership Act, the fact
that:
(i) any of the Partners or officers of the Fund is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, Principal Underwriter or distributor or agent of or for any
corporation, trust, association, or other person, or of or for any
parent or affiliate of any person which handles brokerage transactions
for the Fund or with which the Fund has or may hereafter enter into an
advisory or management contract, or Principal Underwriter's or
distributor's contract, or transfer, Shareholder servicing or other
contract, or that any such organization, or any parent or affiliate
thereof, is a Shareholder or has an interest in the Fund, or that
(ii) any corporation, trust, association or other person which
handles brokerage transactions for the Fund or with which the Fund has
or may hereafter enter into an advisory or management contract or
Principal Underwriter's or distributor's contract, or transfer,
Shareholder servicing or other contract, also has an advisory or
management contract, or Principal Underwriter's or distributor's
contract, or transfer, Shareholder servicing or other contract with one
or more other corporations, trusts, associations, or other persons, in
which any of the Partners or officers of the Fund may have an interest,
shall not preclude such contracts or dealings, or affect the validity of any
such contract or dealings or disqualify any Partner or officer of the Fund from
voting upon or executing the same or create any liability or accountability to
the Fund or its Shareholders with respect to such contract or dealings.
3.4 LIMITATIONS ON THE AUTHORITY OF THE GENERAL PARTNERS. The General
Partners shall have no authority without the vote or written consent of all of
the Limited Partners to: (a) do any act in contravention of this Certificate and
Agreement, as it may be amended, or which would make it impossible to carry on
the ordinary business of the Fund; (b) confess a judgment against the Fund; (c)
possess Fund property, or assign the Fund's rights in specific Fund property,
for other than a Fund purpose.
A-8
26
In addition, certain actions of the Managing General Partners shall be
subject to a Majority Shareholder Vote as provided in paragraph 7.3 below.
3.5 ACTION BY THE GENERAL PARTNERS. Except as may otherwise be provided
herein or from time to time in the Code of Regulations, any action to be taken
by the Managing General Partners shall be taken: (a) by a majority of the
Managing General Partners present at a meeting of the Managing General Partners
at which at least 50% of the Managing General Partners are present, within or
without California, including any meeting held by means of a conference
telephone or other communications equipment by means of which all persons
participating in the meeting can hear each other at the same time, and
participation by such means shall constitute presence at a meeting; or (b) by
unanimous written consent of the Managing General Partners acting without a
meeting, unless the 1940 Act or the Partnership Act requires that a particular
action be taken by a greater vote or only at a meeting in person of the Managing
General Partners. Each Managing General Partner shall have one vote. No single
Managing General Partner shall have authority to act on behalf of the
Partnership or to bind the Partnership except as specifically authorized in a
particular case by the Managing General Partners.
3.6 REIMBURSEMENT AND INDEMNIFICATION. The General Partners shall be
reimbursed for all reasonable out-of-pocket expenses incurred in performing
their duties hereunder. Each General Partner and officer of the Fund, each
corporate Non-Managing General Partner and officer and director thereof, and
each former General Partner who has not ceased to be liable as a General Partner
under the Partnership Act (herein collectively referred to as "Agent"), shall be
indemnified by the Fund, to the extent permitted by applicable law, against
judgments, fines, amounts paid in settlement, and expenses (including counsel
fees) reasonably incurred by such Agent by virtue of being threatened to be
made, being or having been a party to any civil, criminal, administrative or
investigative proceeding in which such Agent is involved or threatened to be
involved by reason of such person being an Agent, provided that the Agent acted
in good faith and in a manner the Agent reasonably believed to be within the
scope of such person's authority and for a purpose which such person reasonably
believed to be in the best interests of the Fund or the Limited Partners. To the
extent that an Agent has been successful on the merits or otherwise in defense
of any such proceeding or in defense of any claim or matter therein, such person
shall be deemed to have acted in good faith and in a manner such person
reasonably believed to be in the best interests of the Fund or the Limited
Partners. The determination under any other circumstances as to whether an Agent
acted in good faith and in a manner such person reasonably believed to be within
the scope of the person's authority and for a purpose
A-9
27
which the person reasonably believed to be in the best interests of the Fund or
the Limited Partners shall be made, (i) by action of the Managing General
Partners who were not parties to such proceedings, or (ii) the court in which
such proceeding is or was pending upon application made by the Fund or the Agent
(whether or not such application is opposed by the Fund), or (iii) by
independent legal counsel (who may not be the regular counsel for the Fund) in a
written opinion. No Agent shall be indemnified against any liability to the Fund
or its Partners to which he would otherwise be subjected by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
The foregoing indemnification provisions shall not preclude any other
rights to which those persons indemnified hereunder may be entitled under any
applicable statute, agreement, vote of the General Partners or Limited Partners
or otherwise, nor shall the foregoing preclude the Fund from purchasing and
maintaining insurance on behalf of any Agent against liability which may be
asserted against or incurred by the Agent in such capacity, whether or not the
Fund would have the power to indemnify the Agent against such liability under
the provisions of this Section 3.6.
Expenses incurred in defending any proceeding may be advanced by the
Fund prior to final disposition of such proceeding upon receipt of an
undertaking by or on behalf of the Agent to repay such amount unless it shall be
determined ultimately that the Agent is entitled to be indemnified as authorized
in this Section 3.6.
3.7 LIMITATION OF LIABILITY TO SHAREHOLDERS. No General Partner shall
have any personal liability to any Shareholder for the repayment of the
contributions with respect to Shares held by him, or for the payment of the
amount standing in the individual accounts of the Limited Partners or any
portion thereof; any such amounts shall be paid solely from assets of the Fund,
if any, sufficient therefor, according to the terms of this Certificate and
Agreement, nor, to the extent permitted by the Partnership Act and the 1940 Act,
shall the General Partners be liable to any Shareholder for any neglect or
wrongdoing of any officer, agent, employee, investment adviser or principal
underwriter of the Fund, or by reason of any change in the general or state
income tax laws, or in interpretations thereof, as they apply to the Partnership
and the Shareholders, whether such change occurs through legislative, judicial
or administrative action, provided, that nothing herein shall protect a General
Partner against any liability to which he would otherwise be subject by reason
of misfeasance, bad faith, negligence, or reckless disregard of the duties
involved in the conduct of his office.
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3.8 TERMINATION OF STATUS AND INTEREST OF GENERAL PARTNERS.
(a) The status and interest of a person as a Managing General
Partner shall terminate and such person shall have no further right or power to
act as General Partner (except to execute any amendment to this Certificate and
Agreement to evidence his termination) effective when and if he: (1) dies; (2)
becomes insane; (3) is adjudicated a bankrupt; (4) voluntarily retires effective
upon not less than 180 days' written notice to the other General Partners or
election of his successor, whichever first occurs; (5) fails to be re-elected by
the Partners, as provided in Section 3.2 above; or (6) is removed by the
Partners, as provided in Section 7.1 below.
(b) Termination of a person's status as a General Partner
shall not affect his status, if any, as a Limited Partner. A General Partner
shall not be entitled to any special payment from the Partnership as a result of
termination of his status as General Partner. Upon termination of his status and
in interest as a General Partner, a General Partner may redeem his Shares in
accordance with Section 6.3 or retain such Shares as a Limited Partner.
3.9 RIGHT OF GENERAL PARTNERS TO BECOME LIMITED PARTNERS. A General
Partner may also become a Limited Partner and thereby become entitled to all of
the rights of a Limited Partner to the extent of the Limited Partnership
interest so acquired, and the consent of the Limited Partners thereto need not
be obtained. Such event shall not, however, affect such General Partner's
liability hereunder.
3.10 NO AGENCY. Nothing in this Certificate and Agreement shall be
construed as establishing any General Partner as an agent of any Limited
Partner, except to the extent provided in Sections 9.3 and 9.4 below.
3.11 VOTING OF SHARES OWNED BY GENERAL PARTNERS. In accordance with
Section 7.1, the Managing General Partners shall have the right to vote any
Shares which they own, whether as a General or as a Limited Partner. Each
General Partner shall own at least one Share.
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29
ARTICLE IV
LIMITED PARTNERS
4.1 SALES OF ADDITIONAL SHARES; ADMISSION OF ADDITIONAL LIMITED
PARTNERS. The Fund SOLD SHARES through an initial public offering AND ADMITTED
such purchasers as additional Limited Partners in the Fund. In addition, without
the consent or approval of the Limited Partners, the Fund may issue additional
Shares from time to time in payment of the distributions to the Partners
contemplated by Article VI below or in connection with the admission of General
Partners pursuant to Section 3.2 above. The Fund shall not otherwise issue
additional Shares. Each purchaser of a Share from the Fund shall be bound by
all the terms and conditions of this Certificate and Agreement.
4.2 RIGHT TO ASSIGN SHARES; SUBSTITUTED AND ADDITIONAL LIMITED
PARTNERS. A Shareholder may assign the whole or any portion of his Shares by a
written instrument of assignment in form satisfactory to the Managing General
Partners.
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Each assignee of a Share shall be bound by all the terms and conditions of this
Certificate and Agreement including, without limitation, the allocation of
income, gains, losses, deductions and credits as provided in Section 5.5. Any
Shareholder who assigns Shares, and any assignee of such Shares who subsequently
assigns such Shares, by virtue of an assignment made in accordance with the
provisions hereof confers upon his assignee the right to be substituted as a
Limited Partner, AND THE ASSIGNEE SHALL BECOME A LIMITED PARTNER UPON BEING
ENTERED INTO THE RECORDS OF THE FUND AS A LIMITED PARTNER, BY WHICH ACT THE
ASSIGNEE SHALL BE DEEMED TO accept and adopt all OF the terms and provisions of
THE Certificate and Agreement, as the same may BE AMENDED.
4.3 NO POWER TO CONTROL BUSINESS. A Limited Partner shall have no
right to and shall take no part in the control of the Fund's business and shall
have no right or authority to act for or bind the Fund, but may exercise the
rights and powers of a Limited Partner under this Certificate and Agreement,
including without limitation, the voting rights and the giving of consents and
approvals provided for hereunder. The exercise of such rights and powers are
deemed to be matters affecting the basic structure of the Fund and not the
control of its business.
4.4 LIMITED LIABILITY. No Limited Partner shall be liable for any
debts, obligations or losses of the Fund, provided, however, that the
contributions of a Limited Partner shall be subject to the risks of the business
of the Fund and subject to the claims of the Fund's creditors and provided
further, that after any Limited Partner has received the return of any part of
his contribution, he will be liable to the Fund, only to the extent required by
the Partnership Act, for: (a) his proportionate share, not in excess of the
amount of such returned contributions plus interest thereon, of any sum
necessary to
A-13
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discharge any liabilities of the Fund to creditors who extended credit or whose
claims arose before such returns were made; (b) for his proportionate share, not
in excess of any amount of such sum wrongfully distributed to him and necessary
to discharge any liabilities of the Fund to any creditors.
In the event a Limited Partner or former Limited Partner who received
the return of any part of his contribution is required pursuant to the foregoing
paragraph to discharge more than his proportionate share of a Fund liability
("Discharged Liability"), the Fund shall indemnify such person, to the extent of
its net assets, against the Discharged Liability. In the event the Fund's net
assets are insufficient to satisfy such person's right of reimbursement for the
Discharged Liability, the Fund shall use its best efforts to obtain for such
person an amount equal to the insufficiency arising in its net assets to
reimburse ("Insufficiency Reimbursement") such person for the Discharged
Liability from each of the other Limited Partners or former Limited Partners of
the Fund who received a return of contribution after the time the creditor whose
claim was discharged extended credit to the Fund. The Insufficiency
Reimbursement to be sought against each other Limited Partner or former Limited
Partner shall be limited to that amount obtained by multiplying the amount of
the Insufficiency Reimbursement by that percentage of the aggregate
contributions so returned to all Limited Partners which was received by the
particular Limited Partner or former Limited Partner from whom the Insufficiency
Reimbursement is sought. Each Limited Partner, to the extent of his
proportionate share of such a returned contribution as above determined, hereby
agrees to indemnify each other Limited Partner against such Insufficiency
Reimbursement.
In addition, the General Partners and the Fund (to the extent of its
net assets) hereby further indemnify any Limited Partner against any liability
of the Fund discharged by him pursuant to the final decision of any court of
competent jurisdiction that such Limited Partner was liable for such liability
solely by virtue of the grant or exercise of the voting rights as set forth in
Article VII (and not by virtue of any action or representation by such Limited
Partner).
Any such right of indemnification pursuant to either of the preceding
two paragraphs shall be conditioned upon the party so seeking indemnification
giving to the Fund prompt notice of, and the opportunity to defend, any claim
instituted or threatened against such person by a creditor of the Fund. Each
Limited Partner further agrees that any sum or property wrongfully distributed
to him shall be held by him as trustee for the Fund to be delivered to the Fund
upon its demand in order to satisfy the Insufficiency Reimbursement.
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4.5 LIMITED PARTNERS NOT PERSONALLY LIABLE. All persons extending
credit to, contracting with or having any claim against the Fund shall look only
to the assets of the Fund and of the General Partners for payment under such
credit, contract or claim, or only to the assets of the Fund if any such person
has so agreed, and except to the extent provided in Section 4.4 hereof, neither
the Limited Partners, nor any of the Fund's officers, employees or agents,
whether past, present or future, shall be personally liable therefor.
4.6 DEATH OF A LIMITED PARTNER. The death of a Limited Partner shall
not dissolve or terminate the Partnership. Upon the death of a Limited Partner
the personal representative of such deceased Limited Partner shall have all the
rights of a Limited Partner, to the extent of the deceased's interest in the
Fund, for the sole purpose of settling his estate, including the right to assign
his Shares and to designate his assignee a substituted Limited Partner, upon
compliance with the provisions of Section 4.2 above. The estate of a deceased
Limited Partner shall be liable for all such deceased Limited Partner's
liabilities as a Limited Partner.
4.7 PARTNERS' REPRESENTATIONS TO THE FUND. Each person who has
deposited or may hereafter deposit or exchange securities with the Fund shall
furnish to the Fund upon request evidence satisfactory to the Managing General
Partners as to his date of acquisition and holding period of such securities and
their adjusted basis in his hands for Federal income tax purposes and shall
represent and warrant the accuracy of such information. The Managing General
Partners may also require each Partner or proposed Partner to make such
representations and warranties to the Fund, and to furnish such information
(including an opinion of counsel satisfactory to the Fund), as the Managing
General Partners consider reasonably necessary to assure that: (a) any
securities which he has contributed or proposes to contribute may be freely
marketed and sold by the Fund and are not subject to any restriction on
transferability, including but not limited to, any restriction contained in any
state securities law, the 1933 Act or regulations thereunder; and (b) he has
unencumbered ownership of any property contributed or proposed to be contributed
to the Fund. Each Partner, by becoming a Partner under this Certificate and
Agreement, agrees to notify the Fund immediately if any representations or
warranties made pursuant to this Section should become untrue.
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ARTICLE V
CAPITAL CONTRIBUTIONS: SALES OF SHARES; ALLOCATIONS TO SHARES
5.1 SHARES OF PARTNERSHIP INTEREST. The entire beneficial interest of
the Partners in the Fund and its assets shall be divided into equal
proportionate units of partnership interest, referred to herein as "Shares." The
Managing General Partners may from time to time divide or combine such units
into a greater or less number of Shares, provided that no such action shall in
and of itself alter the proportionate beneficial interest of the several Holders
of Shares in the Fund at the time. The Managing General Partners shall, by
appointment of an agent for the purpose or otherwise, at all times maintain a
record of the outstanding Shares and the Holders thereof from time to time.
5.2 CONTRIBUTIONS FOR ISSUANCE OF SHARES. The Fund shall exchange
Shares only in consideration for the exchange of deposits of cash and securities
which are acceptable to the Managing General Partners. The Managing General
Partners may maintain a list of representative companies whose securities may be
accepted for exchange, which list shall be subject to change at any time without
notice. All capital contributions for Shares shall be valued for purposes of the
exchange as of the close of business on the last business day preceding the day
on which such deposits are exchanged for Shares. A contribution shall be
considered to have been made to the Fund as of the effective date of the
exchange.
The value of securities deposited with the Fund for exchange shall be
conclusively determined by the Fund's investment adviser in the same manner as
is provided in Section 11.1(g) with respect to the valuation of the Fund's
portfolio securities.
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5.3 CONTRIBUTIONS BY GENERAL PARTNERS. Each of the General Partners has
purchased the number of Shares set forth in Schedule "A" to this Certificate and
Agreement. Each Share purchased by a General Partner will be held in such
person's capacity as a General Partner and not as a Limited Partner.
Except as provided in this Section, no General Partner has agreed to
make any contributions in addition to that required as a condition to admission
as a General Partner, or to lend additional funds to the Partnership.
5.4 CONTRIBUTIONS BY THE LIMITED PARTNERS.
(a) The original Limited Partner has purchased Shares of
Partnership interest in consideration for a contribution of $25 in cash to the
Fund for each such Share. Additional Limited Partners (other than an assignee of
a Limited Partner) shall contribute securities and cash to the capital of the
Fund valued for purposes of the exchange as described in Section 5.2.
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(b) Except to the extent a Limited Partner hereafter elects to
participate in an income and/or capital gains reinvestment program which may be
offered by the Fund, no Limited Partner has agreed to make any additional
contributions to or to lend additional funds to the Fund, and no Limited Partner
shall be liable for any additional assessment therefor.
5.5 ALLOCATION OF FUND INCOME, GAINS, LOSSES, DEDUCTIONS AND CREDITS
AMONG THE SHARES. All items of Fund income, gain, loss, deduction and credit
during each taxable year of the Fund shall be computed for the Fund on a daily
basis and shall be allocated equally among the outstanding Shares. A Holder of a
Share shall be allocated the proportionate part of such items actually realized
by the Fund during the specific days of the taxable year on which such Share was
owned by such Holder.
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ARTICLE VI
DISTRIBUTIONS AND RETURNS OF CONTRIBUTIONS
6.1 IN GENERAL. Distributions of cash or other property may be made by
the Managing General Partners in accordance with this Article: (a) with respect
to net income and net realized capital gains of the Fund; (b) in connection with
redemption of Shares; and (c) upon dissolution of the Fund. However, all such
distributions shall be in proportion to the number of Shares held and without
regard to the dollar amount of contributions received with respect thereto.
6.2 DISTRIBUTIONS WITH RESPECT TO INCOME AND NET REALIZED CAPITAL
GAINS. The Managing General Partners shall determine the amounts with respect to
net investment income and net realized capital gains, if any, to be distributed
to the Shareholders and the times when such distributions shall be made. Except
as otherwise provided in this Certificate and Agreement, such amounts shall be
distributed equally among the Shares outstanding. For purposes of such
distributions, a person will be deemed to be a Shareholder if such person's
interest is recorded on the books of the Fund maintained for that purpose on the
record date determined for such distribution.
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6.3 DISTRIBUTIONS IN CONNECTION WITH REDEMPTION OF SHARES.
(a) Subject to the requirement stated in Section 3.11 that
each General Partner own at least one Share, and to the limitations of Sections
6.3(b) and (d) below, a Shareholder may elect to redeem any or all of the Shares
held by him of record at the Net Asset Value Per Share next computed after
receipt by the Fund (or by a person designated by the Fund for such purpose) of
a written request for redemption. The request must be accompanied by either the
certificates representing the Shares to be redeemed, if certificates have been
issued, or a stock power, duly endorsed by the record Holder(s) with
signature(s) guaranteed by a commercial bank or trust company or member of a
registered national securities exchange. Except as otherwise provided in this
Section 6.3(a) and except to the extent Shares are redeemed for cash pursuant to
a Systematic Withdrawal Plan described in Section 6.3(e) below, payments upon
redemption may be made in cash, in any portfolio securities or in any
combination thereof, in the sole discretion of the Managing General Partners. If
securities which were subject to a legal or contractual restriction on their
resale by the Fund ("restricted securities") were exchanged for Shares, and such
securities are still subject to such a restriction at the time the Shares issued
in exchange therefor are redeemed, the Fund may distribute in such redemption
restricted securities of the same issuer or issuers as contributed to the Fund.
The Fund will not otherwise distribute restricted securities in redemption of
Shares.
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(b) The Managing General Partners may suspend redemptions and
defer payment of the redemption price during any period that the determination
of Net Asset Value Per Share is suspended pursuant to Section 11.1(g).
(c) No Holder shall be entitled to receive the return of any
part of the contribution with respect to his Shares unless all liabilities of
the Partnership, except liabilities to General Partners and to Limited Partners
on account of their contributions, have been paid or there remains property of
the Fund sufficient to pay them.
(d) Each Shareholder, by becoming a Shareholder: (i) agrees
that payment of the redemption price as determined hereunder with respect to a
Share owned by him as reflected in this Certificate and Agreement constitutes
full and complete discharge of any obligation of the Fund and the General
Partners with respect to his interest in the Fund represented by such Share,
including, without limitation, any right to the return of contribution
represented by such Share, and that, upon such redemption, he shall have no
further rights with respect to such share; (ii) agrees that the date upon which
Net Asset Value is computed for purposes of redeeming a Share shall constitute
the date specified in this Certificate and Agreement for the return of the
contribution with respect to such Shares for purposes of the Partnership Act;
and (iii) consents to the redemption of any Share in accordance with the
provisions of this Certificate and Agreement.
(e) The Managing General Partners may in their discretion
adopt a Systematic Withdrawal Plan (the "Plan") pursuant to which a Shareholder
electing to participate in the Plan will receive in cash as a partial redemption
of his Shares a stipulated percentage of the net asset value of such Shares as
of the close of trading on the New York Stock Exchange on such day or days as
the Managing General Partners may determine. The Managing General Partners may
in their sole discretion determine from time to time the percentage to be paid
to Plan participants, the amount of any fees or other service charges which may
be imposed upon participants, and such other matters as are necessary or
advisable in connection with the implementation and administration of the Plan.
Shareholders whose Shares were originally issued in exchange for restricted
securities or are evidenced by certificates issued by the Fund shall not be
eligible to participate in the Plan.
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6.4 DISTRIBUTIONS UPON WINDING UP OF THE FUND. Upon the dissolution of
the Fund pursuant to Section VIII, the Managing General Partners, or trustee, if
one is appointed, shall proceed to wind up the affairs for the Fund and to
liquidate its assets as promptly as is consistent with obtaining fair value. The
proceeds from such liquidation of the Fund assets shall be applied and
distributed in the following order of priority:
(a) to the payment of debts and liabilities of the Fund (other
than any loans or advances which may have been made by any of the
Partners to the Fund) and the expenses of liquidation;
(b) to create any reserve which the Managing General Partners
or trustee may deem reasonably necessary for any contingent or
unforeseen liabilities or obligations of the Fund. Such reserve shall
be paid over by the Managing General Partners or trustee to a bank or
trust company to act as escrow agent selected by the Managing General
Partners or trustee. Any such escrow agent shall hold such reserves for
payment of any of the aforementioned contingencies, and, at the
expiration of such period as the Managing General Partners or trustee
designate, shall distribute the balance thereafter remaining in the
manner hereinafter provided;
(c) to the repayment of any loans or advances that may have
been made by any of the Partners to the Fund, but if the amount
available for such repayment shall be insufficient, then pro rata on
account thereof; and
(d) the balance, if any, pro rata among the Shareholders in
proportion to the number of Shares held by them at the record date for
any such distribution.
When the Managing General Partners have complied with the foregoing
distribution plan (including payment over to the escrow agent), the Partners
shall execute, acknowledge, and cause to be filed a cancellation of this
Certificate and Agreement.
6.5 RETURNS OF CONTRIBUTION.
(a) Except upon dissolution of the Fund or the earlier
effective date of any redemption of the Shares of a Holder pursuant to Section
6.3 above (which shall be the date specified in this Certificate AND AGREEMENT
for return of contributions pursuant to the Partnership Act), no Partner has the
right to demand return of any part of his contribution. The Managing General
Partners may, however, from time to time, elect to make returns of contributions
to Shareholders, provided that: (i) all liabilities of the Fund to persons other
than shareholders have
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been paid or, in the good faith determination of the Managing General Partners,
there remains property of the Fund sufficient to pay them; (ii) the consent,
expressed or implied, of all of the Partners is obtained; and (iii) the Managing
General Partners cause this Certificate and Agreement to be amended to reflect a
reduction in contributions.
For purposes of the foregoing provisions, the condition of
subpart (ii) shall have been satisfied if such return of contribution is
effected by a distribution made pro rata to all of the Shareholders based upon
the number of Shares held by each of them, or upon the redemption of Shares
pursuant to the authority of Section 6.3 above. Each Partner, by becoming such,
consents to any such distribution theretofore or thereafter duly authorized and
made in accordance with the foregoing provisions.
(b) In the event subparts (i) and (ii) of part (a) above are
satisfied, the Managing General Partners agree to cause an appropriate amendment
to this Certificate and Agreement to be promptly filed.
(c) In return for his contribution, subject to the provisions
of Section 6.3 above, a Shareholder may receive cash or other property at the
sole discretion of the Managing General Partners, but a Shareholder has no right
to demand return of his contribution other than in cash.
ARTICLE VII
PARTNERS' RIGHTS TO VOTE UPON MATTERS AFFECTING
THE BASIC STRUCTURE OF THE FUND: EXERCISE OF VOTING RIGHTS
7.1 VOTING RIGHTS OF PARTNERS. Subject to the provisions of Section 4.3
and 4.4 above, the Managing General and Limited Partners shall have in
proportion to the numbers of Shares held of record by them, voting, approval,
consent or similar rights with respect to the following matters affecting the
basic structure of the Partnership, which include the voting, approval, consent
or similar rights required under the 1940 Act for voting security holders:
(a) the right to remove General Partners and to elect General
Partners;
(b) the right to approve or disapprove of proposed changes in
the investment limitations and policies;
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(c) the right to approve or disapprove of a proposed change in
the nature of the Fund's business so as to cease to be an investment
company;
(d) the right to approve or disapprove of any investment
advisory contract or the termination of such a contract entered into by
the Managing General Partners pursuant to Section 3.3(e) above;
(e) the right to ratify or reject the appointment of and to
terminate employment of the independent public accountants of the Fund
to the extent required by the 1940 Act or other applicable law;
(f) the right to approve or disapprove the sale of all or
substantially all of the assets of the Fund;
(g) the right to amend this Certificate and Agreement in any
other respect; provided, however, that no such amendment shall conflict
with the 1940 Act, so long as the FUND is registered thereunder, or
affect the liability of the General Partners without their consent nor
the limited liability of the Limited Partners as provided under Section
4.4 above and provided further that the foregoing shall not preclude
amendments to this Certificate and Agreement without the vote of the
Partners to the extent permitted in Article IX below; and
(h) The right to elect to wind up and dissolve the Fund.
Limited Partners shall not have the right to vote on any other matters.
7.2 MEETINGS OF THE PARTNERS. An annual meeting of the Partners for the
election of General Partners, the ratification or rejection of the appointment
of the independent public accountants of the Fund or other business is not
required to be held unless required by applicable law or otherwise determined by
the Managing General Partners. Any such meetings shall be held at the statutory
office of the Fund in California, or at such other place as may be designated in
the call thereof, which call shall be made by the Managing General Partners.
Special meetings may also be called by the Managing General Partners from time
to time for the purpose of taking action upon any matter requiring the vote or
authority of the Partners as herein provided.
7.3 QUORUM AND REQUIRED VOTE AT MEETINGS OF THE PARTNERS. Partners
holding a majority of the Shares entitled to vote present or represented by
proxy shall be a quorum for the
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transaction of business at a Partners' meeting, but any lesser number shall be
sufficient for adjournments.
Each Partner shall have one vote for each Share standing of record in
such Partner's name as of the record date set forth in the notice of meeting. A
majority of the Shares voted at a meeting at which a quorum is present shall
constitute action on the Partners, except:
(a) that in the election of General Partners, those candidates
receiving the highest number of votes cast at a meeting of Partners at
which a quorum is present, up to the number of General Partners to be
elected, shall be elected as General Partners of the Fund; there shall
be no cumulative voting in election of General Partners;
(b) that approval of matters referred to in (b), (c) and (d)
and the termination of the employment of independent public accountants
referred to in (e) of paragraph 7.1 above shall require a Majority
Shareholder Vote; and
(c) where a larger vote, if any, is otherwise required
by provision of this Certificate and Agreement.
Shares may be voted at a meeting of Partners in person or by proxy duly
executed by the Partner(s) holding the Shares of record on the record date for
such meeting fixed by the Managing General Partners as provided in Section 10.4.
All such proxies shall be filed with the Fund before or at the meeting. No such
proxy shall be valid after eleven months from the date of its execution. The law
of California pertaining to corporate proxies will govern all Partnership
proxies. Notwithstanding that a valid proxy is outstanding, powers of the proxy
holder will be suspended if the person executing the proxy is present at the
meeting and elects to vote in person.
7.4 ACTION BY WRITTEN CONSENT. Any action taken by Partners may be
taken without a meeting if all of the Partners entitled to vote on the matter
consent to the action in writing and such written consents are filed with the
records of the meetings of Partners. Such consent shall be treated for all
purposes as a vote taken at a meeting of Partners.
ARTICLE VIII
TERM AND DISSOLUTION OF THE FUND
8.1 TERM. The Term of this Partnership shall commence as of March 25,
1976, the date of the initial filing of this
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Certificate and Agreement with the County Recorder in the County of Los Angeles,
of the State of California, as required by the Partnership Act, and shall
continue in existence until December 31, 2071, on which date it shall commence
dissolution, unless it is sooner dissolved as hereinafter provided.
8.2 EVENTS CAUSING EARLIER DISSOLUTION OF THE FUND. The Fund shall
commence dissolution, and the affairs of the Fund shall be wound up, prior to
the date specified above, upon the happening of any of the following events:
(a) the Fund disposes of all of its assets; or
(b) if a Managing General Partner has not filed an amendment
to this Certificate and Agreement evidencing his determination to
continue the business of the Partnership within One Hundred and Eighty
(180) days after the death, retirement or insanity of a General
Partner; or
(c) partners holding a majority of the Shares vote to dissolve
the Fund.
The Limited Partners shall have no right or power to cause the
termination or dissolution of the Partnership except as set forth in this
Certificate and Agreement. No Limited Partner shall have the right to bring an
action for partition against the Partnership.
8.3 RIGHT OF GENERAL PARTNERS TO CONTINUE THE BUSINESS OF THE FUND IN
CERTAIN EVENTS. The death, retirement or insanity of a General Partner shall not
dissolve the Partnership. In any such event the business of the Partnership
shall continue pending the election to continue the business of the Fund
contemplated in this Section or the exercise of the rights of the Partners
provided in Section 8.4 below.
After the death, retirement or insanity of a General Partner, any
remaining Managing General Partner shall have the right to elect to continue the
business of the Fund. If a remaining Managing General Partner so elects to
continue the Fund, within THIRTY (30) days after such event he shall execute and
cause to be filed an appropriate amendment to this Certificate and Agreement to
evidence such election. If no remaining Managing General Partner is willing to
continue the business of the Partnership, then prior to the expiration of such
THIRTY-day period, the remaining Managing General Partners shall (or, if there
is no Managing General Partner then acting,
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any Partner or Partners owning 10% or more of the Shares then outstanding)
shall, within one hundred and twenty (120) days of such event, call a meeting of
the Partners for the purpose of exercising the rights provided in Section 8.4
below.
8.4 RIGHT OF THE PARTNERS TO PROVIDE FOR CONTINUATION OF THE BUSINESS
OF THE FUND IN CERTAIN EVENTS. In the event that: (a) at any time the status and
interest of all Managing General Partners has terminated by virtue of any of the
events or circumstances specified in Section 3.8 of this Certificate and
Agreement; or (b) the Managing General Partner(s) remaining after the death,
retirement or insanity of a General Partner do not elect to continue the Fund
(which failure to elect to continue the Fund shall constitute an election to
retire pursuant to Section 3.8(a)(4) above), then, to the extent permitted by
the Partnership Act, the Partners shall have the right to elect a successor
Managing General Partner or Partners who shall have the authority to elect to
continue the business of the Fund under its present name. Any such successor
Managing General Partner shall have all of the rights and powers, and be subject
to all of the duties and obligations of a Managing General Partner provided in
this Certificate and Agreement.
ARTICLE IX
FUND DOCUMENTATION; AMENDMENT OF THE
CERTIFICATE AND AGREEMENT; POWER OF ATTORNEY
9.1 CERTIFICATE AND AGREEMENT AND OTHER DOCUMENTATION. This Certificate
and Agreement shall constitute a Certificate of Limited Partnership within the
meaning of the Partnership Act, and the Managing General Partners shall promptly
cause it to be filed and recorded in accordance with the Partnership Act in the
County of the location of the Fund's statutory office, and to the extent
required by local law, in the appropriate place in each state in which the Fund
may hereafter establish a place of business.
9.2 EVENTS REQUIRING AMENDMENT OF CERTIFICATE AND AGREEMENT. This
Certificate and Agreement shall be promptly amended, as hereafter provided, upon
the occurrence of any of the following events: (a) there is a change in the name
of the Fund; (b) THERE IS A CHANGE IN THE STREET ADDRESS OF THE PRINCIPAL
EXECUTIVE OFFICE; (c) THERE IS A CHANGE IN THE ADDRESS OF A GENERAL PARTNER OR A
CHANGE IN THE ADDRESS OF THE AGENT FOR SERVICE OF PROCESS, UNLESS A CORPORATE
AGENT IS DESIGNATED, OR APPOINTMENT OF A NEW AGENT FOR
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SERVICE OF PROCESS; (d) a person is admitted as a General Partner; (e) a General
Partner retires, dies or becomes insane, and the business is continued as
permitted by Article VIII; (f) there is a false or erroneous statement in this
Certificate and Agreement; (g) THE PARTNERS DESIRE TO MAKE a change in ANY OTHER
STATEMENT in this Certificate and Agreement in order that it shall accurately
represent the agreement among them; or (h) there is a change in the right to
vote upon any of the matters described in Article VII.
9.3 PARTNERSHIP AUTHORIZATION. Each of the Limited Partners hereby
makes, constitutes and appoints the Managing General Partners of the Partnership
or any of them and each person who shall hereafter become a Managing General
Partner, with full power of substitution, the true and lawful attorney of, and
in the name, place and stead of such Limited Partner, with the power from time
to time to execute, acknowledge, make, swear to, verify, deliver, record, filed
and/or publish: (a) this Certificate and Agreement of Limited Partnership under
the laws of the State of California or any other jurisdiction, any amendment to
any such Certificate and Agreement of Limited Partnership (including, but not
limited to, amendments reflecting the withdrawal of any GENERAL Partner or the
return, in whole or in part, of the contribution of any Partner) or any other
document required from time to time to admit such Limited Partner, to effect his
substitution as a Limited Partner or to effect the substitution of the Limited
Partner's assignee as a Limited Partner as to any or all shares of limited
partnership interest assigned to such assignee; (b) any amendments to this
Certificate and Agreement or any other document required to reflect any action
of the Partners provided for in this Certificate and Agreement whether or not
such Limited Partner voted in favor of or otherwise consented to such action;
and (c) any other instrument, certificate or document as may be required by any
regulatory agency, the laws of the United States, any state or any other
jurisdiction in which the Fund is doing or intends to do business or which the
Managing General Partners deem advisable to file or record, provided such
instrument, certificate or document is in accordance with the terms of this
Certificate and Agreement as then in effect.
Each of the General Partners hereby makes, continues and appoints the
Managing General Partners and any one of them and each person who shall
hereafter become a Managing General Partner, and additionally appoints the
transfer agent and any
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successor transfer agent employed by the Fund, with full power of substitution,
the true and lawful attorney of, and in the name, place and stead of such
General Partner, with the powers from time to time to execute, acknowledge,
make, swear to, verify, deliver, record, file and/or publish the documents
specified or contemplated by subparts (a), (b) and (c) of the preceding
paragraph.
Each of the Limited Partners is aware that the terms of the Certificate
and Agreement permit certain amendments of the Certificate and Agreement to be
effected and certain other actions to be taken or omitted by or with respect to
the Partnership, in each case with the approval of less than all the Limited
Partners, provided that a specified percentage of Partners shall have voted in
favor of or otherwise consented to such action. Such actions include, without
limitation, admission of new General Partners duly elected at meetings of the
Partners. If, as and when (i) an amendment of the Certificate and Agreement is
proposed or an action is proposed to be taken or omitted by or with respect to
the Partnership which requires, under the terms of the Certificate and
Agreement, the approval of a specified percentage in interest (but less than
all) of the Partners, (ii) Partners holding the percentage of Partnership
interests in the Partnership specified in the Certificate and Agreement as being
required for such amendment or action have approved such amendment or action in
the manner contemplated by the Certificate and Agreement; and (iii) a Limited
Partner has failed or refused to approve such amendment or action (hereinafter
referred to as a non-consenting Limited Partner), each non-consenting Limited
Partner agrees that each special attorney specified above, with full power of
substitution, is hereby authorized and empowered to execute, acknowledge, make,
swear to, verify, delivery, record, file and/or publish, for and on behalf of
such non-consenting Limited Partner, and in his name, place and stead, any and
all instruments and documents which may be necessary or appropriate to permit
such amendment to be lawfully made or action lawfully taken or omitted. Each
consenting and non-consenting Limited Partner is fully aware that he and each
other Limited Partner have executed this special power of attorney, and that
each Limited Partner will rely on the effectiveness of such powers with a view
to the orderly administration of the Partnership's affairs.
The foregoing grant of authority (i) is a special power-of-attorney
coupled with an interest in favor of the Managing General Partners now and
hereafter acting and as such shall be irrevocable and shall survive the death or
insanity (or, in the case of a Limited Partner that is a corporation,
association, partnership, joint venture or trust, the merger, dissolution or
other termination of the existence) of such Limited Partner, (ii) may be
exercised for each Limited Partner by a facsimile
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signature of any Managing General Partner or by listing all of the Limited
Partners executing any instrument with a single signature of any Managing
General Partner acting as attorney-in-fact for all of them, (iii) shall survive
the assignment by such Limited Partner of the whole or any portion of his
interest, and (iv) shall survive the redemption by the Limited Partner of the
whole or any portion of his interest as provided in section 6.3 hereof, provided
that where all of such Limited Partner's interest is so redeemed, the power of
attorney shall survive such redemption for the sole purpose of enabling a
Managing General Partner to execute, acknowledge and file any instrument
necessary to effect the deletion of such person as a Limited Partner.
9.4 POWER OF ATTORNEY BY SUBSTITUTED OR ADDITIONAL LIMITED PARTNERS. As
a condition to effectiveness of any assignment of Shares and to becoming a
Limited Partner, each original purchaser or assignee of Shares shall execute and
deliver to the Managing General Partners one or more Partnership Authorizations,
including a power-of-attorney in form acceptable to the Managing General
Partners and in content substantially in accordance with the foregoing
provisions of Section 9.3, which shall similarly be irrevocable during the
period specified above.
9.5 AMENDMENTS REQUIRING SIGNATURE BY LESS THAN ALL LIMITED PARTNERS.
Anything herein to the contrary notwithstanding, any amendment to this
Certificate and Agreement substituting or adding a Partner may be signed by any
Managing General Partner and by the person to be substituted or added as a
Partner. The execution of any such amendment on behalf of a LIMITED Partner or
any proposed substituted or added Limited Partner may be effected by his
attorney-in-fact. An amendment reflecting the death, retirement or insanity of a
General Partner and the election of a Managing General Partner to continue the
business of the Fund pursuant to Article VIII above, need only be signed by any
General Partner.
9.6 AMENDMENTS REQUIRING SIGNATURE BY ALL PARTNERS. Any amendment to
this Certificate and Agreement other than amendments described in Section 9.5
shall be signed by or on behalf of all
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Partners. The execution of any such amendment on behalf of a General or Limited
Partner may be effected by his attorney-in-fact pursuant to Section 9.3 and
9.4.
ARTICLE X
BOOK AND RECORDS, STATEMENTS
AND INCOME TAX INFORMATION
10.1 FISCAL YEAR. The fiscal year of the Fund shall be the calendar
year for financial reporting and for federal income tax purposes.
10.2 RECORDS AND ACCOUNTING. At all times during the continuance of the
Fund, books of account and records, which shall be adequate and appropriate for
the Fund business, shall be kept on a basis consistent with the accounting
methods followed by the Fund for federal income tax purposes and, where deemed
appropriate, in accordance with generally accepted accounting principles and
procedures applied in a consistent manner. Such books and records shall include
such separate and additional accounts for each Partner and such records of each
other Shareholder as shall be necessary to reflect accurately the rights and
interest of its respective Shareholders and shall specifically reflect the name
and address of each Shareholder and number of Shares held by him for the purpose
of determining recipients of distributions and notices. Such books of account, a
copy of this Certificate and Agreement and all amendments hereto, the Code of
Regulations, all documents relating to the ownership and condition of title of
Fund properties, and copies of all Fund tax returns shall be maintained by the
Fund at all times during its operations, and each Partner shall have access to
them and the right, at such Partner's expense, to inspect and copy them at all
reasonable times upon reasonable notice to the Fund. In addition, each Partner
shall have the right to receive by mail, upon written request to the
Partnership, a copy of a list of the names and addresses of the Limited Partners
and the number of Shares held by each of them, against reimbursement of the cost
of duplicating and mailing the same.
10.3 PERIODIC FINANCIAL STATEMENTS. The Fund shall cause certified
annual and uncertified semiannual financial statements of the operations of the
Fund to be prepared and forwarded to the Partners. The annual statements shall
include a statement of assets and liabilities, statements of operations and
changes in net assets, and such supporting statements or schedules as required
by law or by the Managing General Partners.
10.4 RECORD DATES. For the purpose of determining the Partners who are
entitled to notice of, and to vote or act at any
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Meeting of Partners or any adjournment thereof, or the Shareholders who are
entitled to receive payment of any dividend or of any other distribution, the
Managing General Partners may from time to time, in advance, fix a time, which
shall be not more than 50 days nor less than 10 days before the date of any
Meeting of Partners or the date for the payment of any dividend or of any other
distribution, as the record date for determining the Partners having the right
to notice of and to vote at such meeting and any adjournment thereof or
Shareholders having the right to receive such dividend or distribution, and in
such case only Partners or Shareholders of record, as appropriate, on such
record date shall have such right, notwithstanding any transfer of shares on the
books of the Fund after the record date; or without fixing such record date, the
Managing General Partners may, for any of such purposes, close the register or
transfer books for all or any part of such period.
10.5 INCOME TAX INFORMATION. The Fund shall provide to each Shareholder
information with respect to the Fund's federal taxable income or loss and each
class of income, gain, loss, deduction or credit that is relevant to reporting
fund income. The information shall also show each Shareholder's allocated share
of each class of income, gain, loss, deduction or credit. The information shall
be furnished to the Shareholders as soon as possible and in any event within 75
days after the close of the Fund's taxable year.
10.6 STATEMENT UPON WINDING UP OF THE FUND. As soon as possible after
completion of the winding up of the Fund pursuant to Section 6.4 above, each
Shareholder shall be furnished with a statement prepared by the Fund's
accountants which shall set forth the assets and liabilities of the Fund as at
the date of complete winding up.
ARTICLE XI
GENERAL PROVISIONS
11.1 DEFINITIONS. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) The terms "Affiliated Person," "Assignment," "Commission,"
"Interested Person," "Principal Underwriter" shall have the respective
meanings given such terms in Sections 2(a)(3), 2(a)(4), 2(a)(7),
2(a)(19), and 2(a)(29) respectively of the 1940 Act; "Majority
Shareholder Vote" shall mean "vote of a majority of outstanding voting
securities" as defined in Section 2(a)(42) of the 1940 Act;
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(b) "Certificate and Agreement" shall mean this Certificate
and Agreement of Limited Partnership, as amended or restated from time
to time;
(c) "Code of Regulations" shall mean the "Code of Regulations"
of the Fund as amended from time to time;
(d) "General Partners" refers to the Managing General Partners
named herein and any person who shall hereafter become a General
Partner. "Managing General Partner" refers to the individuals
designated as such in Section 3.1 and identified, from time to time, in
Schedule "A" to this Certificate and Agreement;
(e) The pronouns "he," "his," "him," "it" or "who," with
"Limited Partner" or "General Partner" as the antecedent shall be
deemed to refer also to a Limited Partner or General Partner who is a
woman, a partnership, a joint venture, an association, a corporation or
a trust;
(f) "Limited Partners" shall mean the original Limited Partner
and all other persons who shall hereafter be admitted to the Fund as
additional Limited Partners or substituted Limited Partners, except
those persons who (i) have redeemed all Shares of the Fund owned by
them, or (ii) have been replaced by a substituted Limited Partner to
the extent of their entire Limited Partnership Interest;
(g) "Net Asset Value Per Share." The Net Asset Value Per Share
of the Fund shall be determined as of the close of trading on the New
York Stock Exchange on each day on which the Exchange is open for
trading (and at such other times as the Fund may determine). The Net
Asset Value Per Share shall be computed by taking the total value of
all assets of the Fund, less its liabilities and dividing by the number
of Shares outstanding. Securities for which market quotations are
readily available shall be valued at their current market values in the
principal markets in which such securities are normally traded.
Securities and other assets for which market quotations are not readily
available (including restricted securities) shall be valued at their
fair value as determined in good faith under procedures established by
and under the general supervision of the Managing General Partners.
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The Partnership may suspend the determination of the Net Asset
Value Per Share in the event the New York Stock Exchange is closed for
other than customary weekends or holidays, or during periods when
trading on the Exchange is restricted or an emergency exists which
makes disposition or valuation of portfolio securities impractical, or
during any other period permitted by order of the Commission.
(h) The "1940 Act" refers to the Investment Company Act of
1940, as amended, and the Rules and Regulations thereunder, all as
amended from time to time; the "1933 Act" refers to the Securities Act
of 1933, as amended, and the Rules and Regulations thereunder, all as
amended from time to time;
(i) "Partners" shall mean collectively the General
Partners and the Limited Partners. Reference to a "Partner"
shall mean any one of the Partners.
(j) "Partnership" or the "Fund" refers to this Limited
Partnership formed under the law of the State of California and
established by this Certificate and Agreement, as amended from time to
time.
(k) The "Partnership Act" refers to The CALIFORNIA REVISED
Limited Partnership Act as enacted by the State of California and
hereafter amended, set forth presently at Sections 15611 and following,
of the Corporations Code of the State of California;
(l) "Person" means an individual, partnership, joint
venture, association, corporation or trust;
(m) "Shareholder" or "Holder" means a holder of Shares,
whether a General Partner, Limited Partner or assignee of any of them,
but only to the extent such person's interest is recorded on the books
of the Fund maintained for such purpose either by the Fund or by its
appointed transfer or similar agent.
(n) "Shares" shall mean the equal proportionate units into
which the Partnership Interests of the Fund shall be divided from time
to time as provided in Section 5.1 of this Certificate and Agreement.
11.2 INDEPENDENT ACTIVITIES. Each Partner reserves the right to conduct
activities similar to those conducted by the Fund, including buying or selling
securities for his own account or for others.
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11.3 CUSTODIAN. All assets of the Partnership shall be held by a
Custodian as required by the 1940 ACT, and may be registered in the name of the
Partnership or such custodian or a nominee thereof.
11.4 BENEFIT. Except as herein otherwise provided to the contrary, this
Certificate and Agreement shall be binding upon and inure to the benefit of the
parties signatory hereto, and their respective heirs, executors, guardians,
representatives, successors and assigns.
11.5 NONRECOURSE CREDITORS. No creditor making a nonrecourse loan to
the Partnership shall, by reason thereof, acquire any direct or indirect
interest in the profits, capital or property of the Partnership other than as a
secured creditor.
11.6 NOTICES. All notices required or permitted to be given under this
Certificate and Agreement shall be in writing and shall be given to the parties
at the addresses set forth in Schedule "A" to this Certificate and Agreement and
to the Fund at its statutory office in California, or at such other address as
any of the parties may hereafter specify in writing to the Fund.
11.7 CAPTIONS. Paragraph titles or captions contained in this
Certificate and Agreement are inserted only as a matter of convenience and for
reference and in on way define, limit, extend or describe the scope of this
Certificate and Agreement or the intent of any provision hereof.
11.8 CERTIFICATE AND AGREEMENT IN COUNTERPARTS. This Certificate and
Agreement may be executed in several counterparts, and as so executed, shall
constitute one Certificate and Agreement, binding on all of the parties hereto,
notwithstanding that all of the parties are not signatory to the original or the
same counterpart.
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11.9 AGENT FOR SERVICE OF PROCESS. The Managing General Partners shall
take whatever action is necessary to designate an agent at the Fund's office in
California upon whom service of process upon the Fund may lawfully be made.
11.10 PRINCIPLES OF CONSTRUCTION; SEVERABILITY. This Certificate and
Agreement shall be construed to the maximum extent possible to comply with all
of the terms and conditions of the 1940 Act and the Partnership Act. If,
nevertheless, it shall be determined by a court of competent jurisdiction that
any provision or wording of this Certificate and Agreement shall be invalid or
unenforceable under the 1940 Act, the Partnership Act or other applicable law,
such invalidity or unenforceability shall not invalidate the Certificate and
Agreement. In that case, the Certificate and Agreement shall be construed so as
to limit any term or provision so as to make it enforceable or valid within the
requirements of such law, and in the event such term or provision cannot be so
limited, this Certificate and Agreement shall be construed to omit such invalid
or unenforceable provision.
11.11 CALIFORNIA LAW. This Certificate and Agreement is made in the
State of California, and it is created under and is to be governed by and
construed and administered according to the laws of said state.
11.12 INTEGRATED AGREEMENT. This Certificate and Agreement constitutes
the entire understanding and agreement among the parties hereto with respect to
the subject matter hereof, and there are no agreements, understandings,
restrictions, representations or warranties among the parties other than those
set forth herein.
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SCHEDULE "A"
NAMES, PLACES OF RESIDENCE, NUMBER OF SHARES
OF PARTNERSHIP INTEREST, AND CONTRIBUTIONS
OF THE
GENERAL PARTNERS
MANAGING GENERAL PARTNERS
SHARES OF
NAMES AND ADDRESS PARTNERSHIP INTEREST
G. Willing Pepper 500
128 Springton Lake Road
Media, Pennsylvania
Robert R. Fortune 4,337.584
2920 Ritter Lane
Allentown, Pennsylvania 18104
David R. Wilmerding, Jr. 1.933
Gee, Wilmerding & Associates, Inc.
Villanova, PA 19085-1445
Richard C. Caldwell N/A
PNC Bank, N.A.
1600 Market Street
29th Floor
Philadelphia, PA 19103
Langhorne B. Smith 43,133
Claniel Enterprises, Inc.
Suite 400
630 West Germantown Pike
Plymouth Meeting, PA 19462
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FORM OF PROXY CARD
CHESTNUT STREET EXCHANGE FUND
THIS PROXY IS SOLICITED BY THE MANAGING GENERAL PARTNERS OF CHESTNUT
STREET EXCHANGE FUND (THE "FUND") FOR USE AT THE ANNUAL MEETING OF PARTNERS TO
BE HELD ON DECEMBER 18, 1997 AT 3:00 P.M. (EASTERN TIME) IN THE FOURTH FLOOR
CONFERENCE ROOM, BELLEVUE PARK CORPORATE CENTER, 400 BELLEVUE PARKWAY,
WILMINGTON, DELAWARE.
THE UNDERSIGNED HEREBY APPOINTS EDWARD J. ROACH AND VERNON STANTON,
JR., AND EACH OF THEM, WITH FULL POWER OF SUBSTITUTION, AS PROXIES OF THE
UNDERSIGNED TO VOTE AT THE ABOVE-STATED ANNUAL MEETING, AND ALL ADJOURNMENTS
THEREOF, ALL UNITS OF PARTNERSHIP INTEREST HELD OF RECORD BY THE UNDERSIGNED ON
THE RECORD DATE FOR THE MEETING, UPON THE FOLLOWING MATTERS, AND UPON ANY OTHER
MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING, AT THEIR DISCRETION.
1. PROPOSAL TO APPROVE AN AMENDED AND RESTATED CERTIFICATE
AND AGREEMENT OF LIMITED PARTNERSHIP.
FOR AGAINST ABSTAIN
---- ---- ----
2. ELECTION OF GENERAL PARTNERS: RICHARD C. CALDWELL
ROBERT R. FORTUNE
G. WILLING PEPPER
DAVID R. WILMERDING, JR.
LANGHORNE B. SMITH
FOR ALL NOMINEES LISTED ABOVE (EXCEPT AS MARKED
---- TO THE CONTRARY)
WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED ABOVE
----
(INSTRUCTION: To withhold authority to vote for any
individual nominee, write the name on the line provided
below.)
----------------------------------
56
3. PROPOSAL TO RATIFY THE SELECTION OF COOPERS & LYBRAND L.L.P.
AS INDEPENDENT AUDITORS FOR THE FUND FOR ITS FISCAL YEAR
ENDING DECEMBER 31, 1997.
FOR AGAINST ABSTAIN
---- ---- ----
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED
HEREON AND, in the absence of specification, will be treated as GRANTING
authority to vote FOR the election of general partners and FOR Proposals 1, 3
and 4 above.
PLEASE SIGN, DATE AND RETURN PROMPTLY.
Receipt of Notice of Annual Meeting and
Proxy Statement is hereby acknowledged.
-------------------------------------------
SIGN HERE EXACTLY AS NAME(S) APPEAR(S) ON
LEFT
DATE:
--------------------------------------
IMPORTANT - JOINT OWNERS MUST EACH SIGN.
WHEN SIGNING AS ATTORNEY, TRUSTEE,
EXECUTOR, ADMINISTRATOR, GUARDIAN, OR
CORPORATE OFFICER, PLEASE GIVE YOUR FULL
TITLE.