EFTA00314334.pdf

SOSIN PARTNERS, LP A Delaware Limited Partnership AMENDED AND RESTATED CONFIDENTIAL OFFERING MEMORANDUM March I, 2016 PRIVATE OFFERING OF LIMITED PARTNERSHIP INTERESTS Minimum Investment: $1,000,000 The assets of Sosin Partners, LP (the "Partnership") will be principally invested in a concentrated portfolio of tradable credit and equity instruments (on a long and short basis) with the goal of outperforming the S&P 500 (as measured by a specific S&P 500 ETF) over time. This Amended and Restated Confidential Offering Memorandum, as the same may be further amended, restated and/or supplemented from time to time (the "Offering Memorandum") is being furnished by the Partnership's general partner, Sosin, LLC (the "General Partner") solely for use by prospective subscribers in evaluating the offering and the Partnership. Interests are being offered to those investors who meet the definition of an "accredited investor" ("Accredited Investor"), as that term is defined in Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"). An investment in the Partnership is speculative and involves substantial risks, several of which are described in this Offering Memorandum (See "Certain Risk Factors"). Prospective investors should satisfy themselves that an investment in the Partnership is suitable for them and should carefully examine this Offering Memorandum and the Agreement of Limited Partnership attached hereto as Exhibit II. Offering Memorandum No. Recipient's Name This Offering Memorandum is being given to the recipient solely for the purpose of his or her evaluation of an investment in the limited partnership interests described herein. It may not be reproduced or distributed to anyone else (other than the identified recipient's professional advisers). The recipient, by accepting delivery of this Offering Memorandum, agrees to return it and all related documents to the General Partner if the recipient does not subscribe for a limited partnership interest. GENERAL PARTNER MANAGER Sosin, LLC CAS Investment Partners, LLC 135 East 571° Street, Suite 18-108 135 East 57th Street, Suite 18-108 New York, NY 10022 New York, NY 10022 THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") NOR QUALIFIED, APPROVED OR DISAPPROVED UNDER ANY OTHER FEDERAL OR STATE SECURITIES LAWS. NEITHER THE SECURITIES AND EXCHANGE COMMISSION ("SEC") NOR ANY OTHER FEDERAL 4817-3945-5313 v.7 EFTA00314334 OR STATE REGULATORY AUTHORITY HAS PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE SECURITIES OFFERED HEREBY MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY AN INVESTOR UNLESS THEY ARE REGISTERED UNDER THE SECURITIES ACT AND, WHERE REQUIRED, UNDER THE LAWS OF OTHER JURISDICTIONS, UNLESS SUCH PROPOSED SALE, TRANSFER OR DISPOSITION IS EXEMPT FROM SUCH REGISTRATION. THE GENERAL PARTNER IS EXEMPT FROM REGISTRATION WITH THE COMMODITY FUTURES TRADING COMMISSION ("CFTC") AS A COMMODITY POOL OPERATOR PURSUANT TO RULE 4.13(A)(3) AND THEREFORE, UNLIKE A REGISTERED COMMODITY POOL OPERATOR, IT IS NOT REQUIRED TO DELIVER A DISCLOSURE DOCUMENT AND A CERTIFIED ANNUAL REPORT TO PARTICIPANTS IN THE POOL. THE GENERAL PARTNER'S ELIGIBILITY FOR SUCH EXEMPTION FROM REGISTRATION IS BASED ON THE FACT THAT AT ALL TIMES, THE POOL MEETS ONE OR MORE TESTS WITH RESPECT TO ITS COMMODITY INTEREST POSITIONS REQUIRED UNDER CFTC REGULATION §4.13(A)(3)(ii), AS DESCRIBED MORE FULLY IN THIS OFFERING MEMORANDUM, AND THAT (1) AT ALL TIMES INTERESTS IN THE POOL ARE EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND SUCH INTERESTS ARE OFFERED AND SOLD WITHOUT MARKETING TO THE PUBLIC IN THE UNITED STATES AND (2) EACH PERSON PARTICIPATING IN THE POOL IS (A) AN "ACCREDITED INVESTOR," AS THAT TERM IS DEFINED IN §230.501 OF TITLE 17 OF THE UNITED STATES CODE OF FEDERAL REGULATIONS, (B) A TRUST THAT IS NOT AN ACCREDITED INVESTOR BUT THAT WAS FORMED BY AN ACCREDITED INVESTOR FOR THE BENEFIT OF A FAMILY MEMBER, (C) A "QUALIFIED ELIGIBLE PERSON," AS THAT TERM IS DEFINED IN CFTC REGULATION §4.7(A)(2)(viiiXA) OR (D) A "KNOWLEDGEABLE EMPLOYEE," AS THAT TERM IS DEFINED IN CFTC REGULATION §270.3C-5. THESE SECURITIES ARE SUBJECT TO A HIGH DEGREE OF RISK. SEE "CERTAIN RISK FACTORS." 4817-3945-5313 v.7 ii EFTA00314335  NOTICE TO ALL INVESTORS THIS IS A PRIVATE OFFERING MADE PURSUANT TO APPLICABLE FEDERAL AND STATE "PRIVATE PLACEMENT" EXEMPTIONS. THE INTERESTS MUST BE ACQUIRED FOR INVESTMENT PURPOSES ONLY AND, ONCE ACQUIRED, WILL NOT BE FREELY TRANSFERABLE. THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS UNLAWFUL. THIS OFFERING MEMORANDUM CONSTITUTES AN OFFER ONLY IF DELIVERY OF THIS OFFERING MEMORANDUM IS PROPERLY AUTHORIZED BY THE GENERAL PARTNER. THIS OFFERING MEMORANDUM HAS BEEN PREPARED BY THE GENERAL PARTNER SOLELY FOR THE BENEFIT OF PERSONS INTERESTED IN THE PROPOSED SALE OF THE INTERESTS, AND ANY DISTRIBUTION OR REPRODUCTION OF THIS OFFERING MEMORANDUM, IN WHOLE OR IN PART, WITHOUT THE PRIOR WRITTEN CONSENT OF THE GENERAL PARTNER, IS PROHIBITED. NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY REPRESENTATIONS OR PROVIDE ANY INFORMATION WITH RESPECT TO THE INTERESTS EXCEPT SUCH INFORMATION AS IS CONTAINED IN THIS OFFERING MEMORANDUM. IN MAKING AN INVESTMENT DECISION, EACH PROPSPECTIVE INVESTOR MUST RELY ON ITS OWN EXAMINATION OF THE PARTNERSHIP AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE CONTENTS OF THIS OFFERING MEMORANDUM SHOULD NOT BE CONSTRUED AS INVESTMENT, LEGAL, ERISA (AS DEFINED HEREIN) OR TAX ADVICE. A NUMBER OF FACTORS MATERIAL TO A DECISION WHETHER TO INVEST IN THE INTERESTS HAVE BEEN PRESENTED IN THIS OFFERING MEMORANDUM IN SUMMARY OR OUTLINE FORM ONLY IN RELIANCE ON THE FINANCIAL SOPHISTICATION OF THE OFFEREES. EACH PROSPECTIVE INVESTOR IS URGED TO SEEK INDEPENDENT INVESTMENT, LEGAL, ERISA AND TAX ADVICE CONCERNING THE CONSEQUENCES OF INVESTING IN THE PARTNERSHIP. NO REPRESENTATIONS OR WARRANTIES OF ANY KIND ARE INTENDED OR SHOULD BE INFERRED WITH RESPECT TO THE ECONOMIC RETURN OR THE TAX CONSEQUENCES FROM AN INVESTMENT IN THE PARTNERSHIP. NO ASSURANCE CAN BE GIVEN THAT EXISTING LAWS WILL NOT BE CHANGED OR INTERPRETED ADVERSELY TO THE PARTNERSHIP OR THE LIMITED PARTNERS OF THE PARTNERSHIP. THE DELIVERY OF THIS OFFERING MEMORANDUM DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE ON THE COVER HEREOF. INTERESTS ARE AVAILABLE ONLY TO PERSONS WILLING AND ABLE TO BEAR THE ECONOMIC RISKS OF THIS INVESTMENT. THE INVESTMENT IN THE PARTNERSHIP IS SPECULATIVE, ILLIQUID AND INVOLVES A HIGH DEGREE OF RISK, INCLUDING THE RISK OF A COMPLETE LOSS OF CAPITAL, AND IS SUITABLE ONLY FOR SOPHISTICATED INVESTORS. SEE "CERTAIN RISK FACTORS." THE INVESTMENTS ARE SUITABLE AS AN 4817-3945-5313 v.7 iii EFTA00314336 INVESTMENT ONLY FOR A LIMITED PORTION OF THE RISK SEGMENT OF AN INVESTOR'S PORTFOLIO. TO THE EXTENT THAT THESE MATERIALS CONTAIN STATEMENTS ABOUT THE FUTURE, SUCH STATEMENTS ARE FORWARD LOOKING AND SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES, INCLUDING, BUT NOT LIMITED TO, THE IMPACT OF COMPETITIVE PRODUCTS, PRODUCT DEMAND AND MARKET ACCEPTANCE RISKS, RELIANCE ON KEY STRATEGIC ALLIANCES, FLUCTUATIONS IN OPERATING RESULTS AND OTHER RISKS. THESE RISKS COULD AFFECT THE VALUE OF THE INTERESTS DESCRIBED HEREIN AND COULD CAUSE THE RESULTS FOR THE CURRENT FISCAL YEAR AND BEYOND TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD LOOKING STATEMENTS MADE HEREIN. THIS OFFERING MEMORANDUM IS BEING GIVEN TO THE RECIPIENT SOLELY FOR THE PURPOSE OF EVALUATING AN INVESTMENT IN THE INTERESTS DESCRIBED HEREIN. IT MAY NOT BE REPRODUCED OR DISTRIBUTED TO ANYONE ELSE (OTHER THAN THE RECIPIENT'S PROFESSIONAL ADVISERS). BY ACCEPTING DELIVERY OF THIS OFFERING MEMORANDUM, RECIPIENT AGREES NOT TO DISTRIBUTE IT AND, IF THE RECIPIENT DETERMINES NOT TO SUBSCRIBE FOR INTERESTS, RECIPIENT AGREES TO RETURN THE OFFERING MEMORANDUM AND ALL RELATED DOCUMENTS TO THE GENERAL PARTNER. INVESTORS (AND EACH EMPLOYEE, REPRESENTATIVE OR OTHER AGENT OF INVESTORS) MAY DISCLOSE TO ANY AND ALL PERSONS, WITHOUT LIMITATIONS OF ANY KIND, THE TAX TREATMENT AND TAX STRUCTURE OF THE TRANSACTION AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS OR OTHER TAX ANALYSIS) THAT ARE PROVIDED TO INVESTORS RELATING TO SUCH TAX TREATMENT AND TAX STRUCTURE. THIS AUTHORIZATION OF TAX DISCLOSURE IS RETROACTIVELY EFFECTIVE TO THE COMMENCEMENT OF THE FIRST DISCUSSIONS BETWEEN SUCH INVESTOR AND THE PARTNERSHIP REGARDING THE TRANSACTIONS CONTEMPLATED HEREIN. DISCUSSIONS IN THIS OFFERING MEMORANDUM BELOW AS THEY RELATE TO CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES ARE NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING UNITED STATES FEDERAL TAX PENALTIES. SUCH DISCUSSIONS WERE WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED IN THIS OFFERING MEMORANDUM, AND ANY TAXPAYER TO WHOM THE TRANSACTIONS OR MATTERS ARE BEING PROMOTED, MARKETED OR RECOMMENDED SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR. NOTICE TO RESIDENTS OF ALL STATES: THE INTERESTS OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE INTERESTS ARE SUBJECT TO RESTRICTION ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE INTERESTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE 4817-3945-5313 v.7 iv EFTA00314337 ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. NOTICE TO FLORIDA INVESTORS: THE INTERESTS HAVE NOT BFFN REGISTERED UNDER THE FLORIDA SECURITIES ACT. IF SALES ARE MADE TO FIVE (5) OR MORE INVESTORS IN FLORIDA, ANY FLORIDA INVESTOR MAY, AT HIS OR HER OPTION, VOID ANY PURCHASE HEREUNDER WITHIN A PERIOD OF THREE (3) DAYS AFTER HE OR SHE (A) FIRST TENDERS OR PAYS TO THE PARTNERSHIP, AN AGENT OF THE PARTNERSHIP OR AN ESCROW AGENT THE CONSIDERATION REQUIRED HEREUNDER OR (B) DELIVERS HIS OR HER EXECUTED SUBSCRIPTION AGREEMENT, WHICHEVER OCCURS LATER. TO ACCOMPLISH THIS, IT IS SUFFICIENT FOR A FLORIDA INVESTOR TO SEND A LETTER OR TELEGRAM TO THE PARTNERSHIP WITHIN SUCH THREE-DAY (3) PERIOD, STATING THAT HE OR SHE IS VOIDING AND RESCINDING THE PURCHASE. IF ANY INVESTOR SENDS A LETTER, IT IS PRUDENT TO DO SO BY CERTIFIED MAIL RETURN RECEIPT REQUESTED, TO INSURE THAT THE LETTER IS RECEIVED AND TO EVIDENCE THE TIME OF MAILING. NOTICE TO GEORGIA INVESTORS: THE INTERESTS HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE "GEORGIA SECURITIES ACT OF 1973," AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION THAT IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT. NOTICE TO PROSPECTIVE INVESTORS IN HONG KONG: YOU ARE ADVISED TO EXERCISE CAUTION IN RELATION TO AN INVESTMENT IN THE PARTNERSHIP IF YOU ARE IN ANY DOUBT ABOUT ANY OF THE CONTENTS OF THIS DOCUMENT, YOU SHOULD OBTAIN INDEPENDENT PROFESSIONAL ADVICE. THIS DOCUMENT HAS NOT BEEN REGISTERED BY THE REGISTRAR OF COMPANIES IN HONG KONG PURSUANT TO THE COMPANIES ORDNANCE ("CO") AND ITS CONTENTS HAVE NOT BFFN REVIEWED BY ANY REGULATORY AUTHORITY IN HONG KONG. ACCORDINGLY, IN HONG KONG OTHER THAN (1) TO "PROFESSIONAL INVESTORS" AS DEFINED IN THE SECURITIES AND FUTURES ORDINANCE (CHAPTER 571) OF THE LAWS OF HONG KONG ("SFO") AND ANY RULES MADE UNDER THAT ORDNANCE, TO PERSONS AND IN CIRCUMSTANCES WHICH DO NOT RESULT IN THIS DOCUMENT BEING A "PROSPECTUS" AS DEFINED IN SECTION 2(1) OF THE COMPANIES ORDINANCE (CHAPTER 32) ("CO") OR WHICH DO NOT CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE MEANING OF THE CO AND (2) NO PERSON MAY ISSUE ANY INVITATION, ADVERTISEMENT OR OTHER DOCUMENT RELATING TO THE INTERESTS WHETHER IN HONG KONG OR ELSEWHERE, WHICH IS DIRECTED AT, OR THE CONTENTS OF WHICH ARE LIKE TO BE ACCESSED OR READ BY, THE PUBLIC IN HONG KONG (EXCEPT IF PERMITTED TO DO SO UNDER THE SECURITIES LAWS OF HONG KONG) OTHER THAN WITH RESPECT TO THE INTERESTS WHICH ARE OR ARE INTENDED TO BE DISPOSED OF ONLY TO PERSONS OUTSIDE HONG KONG OR ONLY TO "PROFESSIONAL INVESTORS" WITHIN THE MEANING OF THE SFO AND RULES MADE THEREUNDER. 4817-3945-5313 v.7 v EFTA00314338  Table of Contents Page DIRECTORY VII SUMMARY OF TERMS VIII OVERVIEW 1 INVESTMENT OBJECTIVE AND STRATEGY 1 PARTNERSHIP PROFESSIONALS 7 SUBSCRIPTIONS, CAPITAL ACCOUNTS, ALLOCATIONS, NET ASSET VALUATION 12 WITHDRAWALS 19 FEES AND EXPENSES 21 SUITABILITY 23 CERTAIN RISK FACTORS 29 POTENTIAL CONFLICTS OF INTEREST 47 TAX CONSIDERATIONS 50 CERTAIN ERISA CONSIDERATIONS 60 MISCELLANEOUS 63 INDEPENDENT REGISTERED PUBLIC ACCOUNTING AND TAX ACCOUNTING FIRM 64 LEGAL MATTERS 64 ACCESS TO INFORMATION 64 EXHIBIT I- PRIVACY NOTICE 66 EXHIBITS I. PRIVACY NOTICE II. AGREEMENT OF LIMITED PARTNERSHIP III. SUBSCRIPTION DOCUMENT 4817-3945-5313 v.7 vi EFTA00314339  DIRECTORY SOSIN PARTNERS, LP General Partner Sosin, LLC Telephone: 135 East 57th Street, Suite 18-108 New York, NY 10022 Manager CAS Investment Partners, LLC Telephone: 135 East 57th Street, Suite 18-108 New York, NY 10022 Principal Office of Sosin Partners, LP Telephone: the Partnership 135 East 57th Street, Suite 18-108 New York, NY 10022 Auditors Spicer Jeffries LLP Telephone: 5251 S. Quebec Street, Suite 200 Facsimile: Greenwood Village, CO 8011 1 Administrator Panoptic Fund Administration, LLC Telephone: 11835 W. Olympic Blvd., Suite 625E Facsimile: Los Angeles, CA 90064 Attn: Georgia Goodman Prime Broker BTIG, LLC Telephone: 825 Third Avenue, FL-6 Facsimile: New York, NY 10022 Custodian Pershing, LLC Telephone: One Pershing Plaza Jersey City, NJ 07399 Legal Haynes and Boone, LLP Telephone: Advisors 30 Rockefeller Plaza, 261° Floor Facsimile: New York, New York 10112 Attn: Ricardo W. Davidovich, Esq. 4817-3945-5313 v.7 vii EFTA00314340  SUMMARY OF TERMS The following is a summary of the terms and conditions of an investment in Sosin Partners, LP, a Delaware limited partnership (the "Partnership"). The following summary is qualified in its entirety by the information appearing elsewhere herein and in the amended and restated agreement of limited partnership of the Partnership, as the same may be further amended, restated and/or supplemented from time to time (the "Partnership Agreement"). The description of any document is qualified by reference to such document. The Partnership The Partnership is a Delaware limited partnership which is currently offering through private placement limited partnership interests (the "Interests" and each individually, an "Interest") through this Amended and Restated Confidential Offering Memorandum, as the same may be further amended, restated and/or supplemented from time to time (the "Memorandum") to eligible investors as set forth herein. Investors admitted to the Partnership will acquire an Interest and become limited partners of the Partnership (the "Limited Partners'). The Limited Partners and the General Partner (as defined below) are sometimes referred to herein collectively as the "Partners." The Partnership is authorized to issue additional classes of Interests from time to time pursuant to this or other offering materials and without the consent of the Limited Partners. Such classes may have terms that differ from (and may be more favorable than) those set forth herein, including different investment strategies and/or fee structures. General Partner Sosin, LLC, a Delaware limited liability company (the "General Partner") controlled by Clifford A. Sosin, is the general partner of the Partnership. The General Partner exercises ultimate authority over the Partnership and is responsible for the day-to- day operations of the Partnership. The General Partner is the "Tax Matters Partner" for Internal Revenue Service ("IRS") purposes. The General Partner has filed for an exemption from registration as a commodity pool operator pursuant to CFTC Regulation 4.13(a)(3). Manager The General Partner has delegated its responsibility for the Partnership's investment decisions to CAS Investment Partners, LLC, a Delaware limited liability company (the "Manager") also controlled by Clifford A. Sosin pursuant to a management agreement, as amended or restated from time to time (the "Management Agreement"). The Manager relies on the exemption from registration as a commodity trading advisor pursuant to CFTC Regulation 4.14(a)(10). Master Fund While not currently anticipated, at the election of the General 4817-3945-5313 v.7 viii EFTA00314341  Partner, the Partnership may adopt a "master-feeder" structure and invest all, or substantially all, of its assets in another entity with an investment program identical to that of the Partnership. Such master fund (referred to herein as the "Master Fund") may utilize the services of the General Partner, the Manager and/or their affiliates and invest and reinvest assets of the Partnership, together with assets of other similar entities, following the same investment strategy described herein. Investment Strategy and Process The assets of the Partnership will be principally invested in a concentrated portfolio of tradable credit and equity instruments (on a long and short basis) with the goal of outperforming the S&P 500 (as measured by a specific S&P 500 ETF) over time. The Manager does not seek to maintain any specific directional market bias or asset class bias. Instead, the Partnership's overall market and asset class exposure (i.e. long or short equities or long or short credit) is endogenous to the Manager's opinion of risks and expected returns of individual securities. Special Situation Investments The Manager does not intend to seek out a significant number of Special Situation Investments (as defined herein); nevertheless, the Manager reserves the right to make Special Situation Investments, as provided herein. Furthermore, certain investments held by the Partnership may become Special Situation Investments. Accordingly, a portion of the Partnership's investment portfolio may consist of (i) privately offered securities and other similarly illiquid securities that, in the sole opinion of the Manager, are subject to regulatory, contractual or other restrictions on disposition; (ii) structured products and over-the-counter derivative transactions that, in the sole opinion of the Manager, cannot be replicated by other securities available in the market, thereby making it (in each case) difficult or impossible to value accurately such securities, products or transactions; and/or (iii) investments that become illiquid due to regulatory action, bankruptcy or insolvency of an issuer or counterparty, or otherwise (each such security, product, transaction or investment is referred to herein as a "Special Situation Investment"). The Partnership, in the discretion of the General Partner, may invest in or hold Special Situation Investments through separate or wholly-owned limited liability companies, limited partnerships, liquidating trusts or special purpose vehicles. Any investment in a Special Situation Investment by the Partnership will be subject to the deduction of Management Fees (as defined herein) and the allocation of the Performance Allocation (as defined herein) in the manner as provided herein. No Assurance. There can be no assurance that the Manager will be successful in achieving the Partnership's investment 4817-3945-5313 v.7 ix EFTA00314342  objective or that the strategies set forth herein will be successful. Past results of the Partnership, the Manager and/or the principals or affiliates of the General Partner and/or the Manager in this or other activities are not necessarily indicative of the future performance of the Partnership. See "CERTAIN RISK FACTORS" and "POTENTIAL CONFLICTS OF INTEREST" for a description of the risks and conflicts associated with the Partnership's investment program and an investment in the Partnership. Administrator The Partnership has entered into an administration agreement ("Administration Agreement") with Panoptic Fund Administration, LLC ("Administrator"), to perform certain operational, accounting, administration and facilities support services on behalf of the Partnership. See "PARTNERSHIP PROFESSIONALS - The Administrator." Brokerage The General Partner has retained BTIG, LLC ("Prime Broker") to serve as the Partnership's introducing broker and Pershing, LLC to serve as its custodian and clearing agent ("Custodian"). In the discretion of the General Partner, portfolio assets may be held for the benefit of the Partnership by other financial institutions, including any brokers or dealers or other institutions through which the Partnership effects transactions. The Partnership may engage and pay fees and/or commissions to other or additional custodians, prime brokers and/or brokers, including without limitation, affiliates of the General Partner and/or the Manager at any time. The Partnership may retain additional parties to serve as prime broker and/or may terminate its relationship with the Prime Broker in the General Partner's sole discretion without the consent of the Limited Partners. Portfolio transactions are executed by brokers and dealers selected by the Manager on behalf of the Partnership on the basis of their ability to effect prompt and efficient executions at competitive rates and also in consideration of such brokers' provision or payment of brokerage or research services (the provision or payment of such services by brokers are referred to as payment made by "soft dollars," as further discussed herein). The Manager intends to use "soft dollars" within the parameters of the "safe harbor" established by Section 28(e) of the Securities Exchange Act of 1934, as amended. Certain prime brokers may charge the Partnership for custody if the Partnership does not meet minimum revenue requirements with the prime broker. The Manager will make its trading decisions irrespective of these minimum revenue requirements. As such, the Partnership may have to pay for custody. See "PARTNERSHIP PROFESSIONALS - Brokerage." 4817-3945-5313 v.7 X EFTA00314343  Minimum Initial and Subsequent The minimum initial investment in the Partnership is Investments $1,000,000, subject to the sole discretion of the General Partner to waive, reduce or increase such minimum amount. Eligible Investors Investors in the Partnership must be "accredited investors" within the meaning of Regulation D under the U.S. Securities Act of 1933 as amended (the "Securities Act") and "qualified clients" within the meaning of the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act") and will be required to meet other suitability requirements as set forth in the subscription documents. The foregoing suitability standards represent the minimum suitability requirements for prospective investors in the Partnership and satisfaction of these standards does not necessarily mean that an investment in the Partnership is a suitable investment for a prospective investor. See "SUITABILITY." Admissions; Additional Capital The General Partner may admit new Limited Partners and Contributions permit Limited Partners to make additional capital contributions on a monthly basis as of the first Business Day (as defined below) of any calendar month, or at any other time as determined by the General Partner in its sole discretion (each, a "Subscription Date"). The General Partner may modify the frequency of permitted admissions and/or additional contributions. The term "Business Day" refers to any day (other than a Saturday or Sunday) when banks in New York are open for business or such other day as determined by the General Partner in its sole discretion. The General Partner has the right, in its sole and absolute discretion, to accept, or to decline to accept, any capital contribution, in whole or in part for any or no reason. Additionally, the General Partner, in its sole discretion, may allow a Limited Partner to make in-kind contributions (either partially or fully) to the Partnership. Such contributions shall be valued by the General Partner as of the date of acceptance by the Partnership at their fair market value, net of costs and expenses incurred in accepting such contributions. The General Partner may, in its sole discretion, "close" the Partnership or any class of Interests at any time by refusing to (i) allow the admission of new Limited Partners and/or (ii) accept additional capital contributions by existing Limited Partners, without notice to the Limited Partners. Notwithstanding the foregoing, the General Partner may, at its sole discretion, reopen the Partnership or any class of Interests (as applicable) as of any date. Completed subscription materials must be received by the Administrator at least three (3) Business Days prior to the 4817-3945-5313 v.7 xi EFTA00314344  relevant Subscription Date, and cleared funds must be in the Partnership's account prior to the relevant Subscription Date. The General Partner may waive or reduce the required notice periods in its sole discretion, on a case by case basis. Capital Accounts; Generally. A capital account (the "Capital Account") is Special Situation Sub-Accounts established with respect to each Partner in the Partnership, including the General Partner, the opening value of which will be the Partner's initial capital contribution to the Partnership, adjusted as hereinafter provided. At the beginning of each Accounting Period (as defined herein), the Capital Account of each Partner shall be increased by the amount of any additional capital contributions made by such Partner as of the beginning of such Accounting Period. At the end of each Accounting Period, each Partner's Capital Account shall be (i) increased or decreased by any Net Capital Appreciation or Net Capital Depreciation (as each term is defined herein) allocated to such Partner's Capital Account for such Accounting Period; (ii) decreased by the amount, if any, reallocated from a Partner's Capital Account to its Special Situation Sub-Account(s) (as defined herein); (iii) increased by the amount, if any, reallocated from such Partner's Special Situation Sub-Account(s) to its Capital Account; and (iv) decreased by (x) the amount of any withdrawals made by, or distributions made to, such Partner as of the end of such Accounting Period and (y) the amount of any Management Fees charged to such Capital Account during such Accounting Period. Adjustments are then made to the Capital Accounts to account for Performance Allocations (as defined herein), if any, withholding and foreign taxes or tax credits with respect to any investments of the Partnership. Special Situation Sub-Accounts. When the Partnership acquires a Special Situation Investment or when an investment previously acquired becomes a Special Situation Investment, a new sub-account (a "Special Situation Sub-Account") will be established for each Limited Partner who is a Limited Partner at such time. With respect to each Special Situation Investment of the Partnership, a Limited Partner's Special Situation Sub- Account will be established in an amount equal to (i) its Special Situation Percentage (as defined in the Partnership Agreement) as of the time that the Partnership acquires such Special Situation Investment or an investment previously acquired becomes a Special Situation Investment, as the case may be, multiplied by (ii) the Book Value (as defined below) of such Special Situation Investment. Upon a determination by the Manager that the applicable Special Situation Investment no longer constitutes a Special Situation Investment or a disposition, in whole or in part, of such Special 4817-3945-5313 v.7 xii EFTA00314345  Situation Investment maintained in the applicable Special Situation Sub-Account of a Limited Partner (a "Liquid Date"), an amount equal to the product of (i) the fair value of such Special Situation Investment held or the proceeds thereof and (ii) the Special Situation Percentage with respect to such Limited Partner which is attributable to such Special Situation Investment shall be reallocated, at such time as the General Partner determines, in consultation with the Manager, from such Special Situation Sub-Account to the Capital Account of such Limited Partner (except as otherwise provided in the section entitled "WITHDRAWALS" herein), and, thereafter, such Special Situation Sub-Account shall be terminated. The General Partner will not be allocated a Performance Allocation with respect to any appreciation generated by a Special Situation Investment until the Liquid Date with respect to such Special Situation Investment in accordance with the terms of the Partnership Agreement. The term "Book Value" shall mean, with respect to a Special Situation Investment, the original price at which the Special Situation Investment was purchased (adjusted for amortizations of premiums or discounts, reserves, interest payments, principal amortization or other factors as deemed appropriate by the Manager) or, with respect to an existing investment that becomes a Special Situation Investment, the lower of: (i) the fair value of the investment determined by the Manager immediately preceding the time it was determined by the Manager to be a Special Situation Investment, or (ii) the estimated current fair value of the investment, as determined by the Manager in its sole discretion, based on all available information at such time, subject to adjustment pursuant to the following paragraphs. Notwithstanding anything to the contrary set forth herein, the Partnership will hire a third-party valuation agent to determine the Book Value of a Special Situation Investment previously acquired by the Partnership which was subsequently determined by the Manager to be a Special Situation Investment as of the date of such determination (the "SSI Determination Date") if all of the following criteria are met: (A) the fair value of such Special Situation Investment (as determined by the Manager) as of such SSI Determination Date is equal to or exceeds both (x) $5,000,000, and (y) ten percent (10%) of the Partnership's Net Asset Value as of such SSI Determination Date; and (B) the estimated accrued, but unallocated, Performance Allocation as of such SSI Determination Date is equal to or exceeds one percent (1.0%) of the Partnership's Net Asset Value as of such date. In addition, at the end of each calendar quarter (each such date a "Subsequent Determination Date"), the Manager shall estimate 4817-3945-5313 v.7 EFTA00314346  the fair value of each Special Situation Investment. If such estimated fair value of such Special Situation Investment is less than the Book Value of such Special Situation Investment, the Book Value of such Special Situation Investment shall be decreased to such estimated fair value as of such Subsequent Determination Date (the amount of such decrease, an "Estimated Write Down"). Further, notwithstanding anything to the contrary set forth herein, the Partnership will hire a third-party valuation agent to determine the fair value of any Special Situation Investment as of the end of the fiscal year following the anniversary of the acquisition date or the SSI Determination Date, as applicable, with respect to such Special Situation Investment, and as of each subsequent fiscal year end thereafter, if all of the following criteria are met: (A) the fair value of such Special Situation Investment (as determined by the Manager) as of such fiscal year end is equal to or exceeds both (x) $5,000,000, and (y) ten percent (10%) of the Partnership's Net Asset Value as of such fiscal year end; and (B) the estimated accrued, but unallocated, Performance Allocation as of such fiscal year end is equal to or exceeds one percent (1.0%) of the Partnership's Net Asset Value as of such date. If the fair value of any Special Situation Investment determined by such third-party valuation agent as of a fiscal year end is less than the Book Value of such Special Situation Investment, the Book Value of such Special Situation Investment shall be decreased to such estimated fair value as of such fiscal year end (the amount of such decrease, a "Valuation Write Down"). New Issue Allocation Subject to the following paragraph, the Partnership may directly or indirectly invest in "new issues" (generally defined in Financial Industry Regulatory Authority ("FINRA") Rule 5130, as the same may be amended, supplemented or replaced from time to time ("FINRA Rule 5130') as any initial public offering of an equity security). New issues may not be sold, except in limited circumstances, to an account in which a member or person affiliated with or related to a member of FINRA (or to certain other securities industry professionals/companies) has an interest. In the event the Partnership invests in "new issues," Partners who are "restricted persons" within the meaning of FINRA Rule 5130 may be prohibited from participating in such "new issues" in whole or in part. Accordingly, to the extent that the Partnership purchases new issues, the Partnership will do so primarily, if not only, with the assets attributable to those Partners who are eligible to participate in "new issues." In addition, the General Partner may, in its sole discretion, make special allocations to prevent all or part of a Partner's Capital Account from participating in "new issues" so as to comply with FINRA Rule 5130. 4817-3945-5313 v.7 XiV EFTA00314347  Anti-Spinning. Notwithstanding the foregoing, the Partnership may be prohibited, in whole or in part, from receiving allocations of "new issues" based on FINRA Rule 5131 ("FINRA Rule 5131"). FINRA Rule 5131 restricts FINRA members (i.e. broker-dealers) from allocating new issues to any "account" (i.e. the Partnership) in which an executive officer or director of a public company or a covered non-public company (as defined herein), or a person materially supported (as defined herein) by such executive officer or director, has a beneficial interest, if one of the three (3) following conditions are met: (1) the executive officer or director's company must also either be a current or former (within the past twelve (12) months) investment banking services client of the member; (2) the person making the allocation decision on behalf of the FINRA member knows or has reason to know that the member intends to provide investment banking services for the company within the next three (3) months; or (3) on the express or implied condition that the executive officer or director will retain the FINRA member for the performance of future investment banking services. However, FINRA Rule 5131 provides a de minimis exception and expressly permits allocation of new issues to any account in which the executive officers and directors of that particular company do not receive, in the aggregate, more than twenty-five percent (25%) in the aggregate of such allocation. As such, the General Partner may, in its sole discretion, make special allocations to prevent all or part of any Partner's Capital Account from participating in new issues so as to comply with FINRA Rule 5131. Valuation In general, the Partnership's net asset value is equal to the Partnership's assets at fair value, less its liabilities, at fair value ("Net Asset Value"). The Partnership's Net Asset Value is