INVESTMENT MANAGEMENT AGREEMENT
dated as of December 15, 2006
BY AND BETWEEN
XXXXXXXXXX OPPORTUNITIES PARTNERS V, LP,
a Delaware limited partnership
AND
XXXXXXXXXX CAPITAL PARTNERS, LLC,
a Delaware limited liability company
TABLE OF CONTENTS
Page
1. General Duties of the Investment Manager..............................1
2. Duties and Obligations of the Investment Manager with Respect
to the Administration of the Company..................................3
3. Authority to Bind the Company; No Joint Venture.......................4
4. Limitations Relating to Investments...................................5
5. Brokerage.............................................................7
6. Compensation..........................................................7
7. Expenses..............................................................9
8. Services to Other Companies or Accounts..............................10
9. Duty of Care and Loyalty.............................................10
10. Indemnification......................................................11
11. Term of Agreement; Events Affecting the Investment Manager;
Survival of Certain Terms............................................12
12. Power of Attorney; Further Assurances................................14
13. Amendment of this Agreement..........................................14
14. Notices..............................................................14
15. Binding Nature of Agreement; Successors and Assigns..................15
16. Entire Agreement.....................................................15
17. Costs and Expenses...................................................16
18. Books and Records....................................................16
19. Titles Not to Affect Interpretation..................................16
20. Provisions Separable.................................................16
21. Governing Law........................................................16
22. Execution in Counterparts............................................16
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INVESTMENT MANAGEMENT AGREEMENT
This Investment Management Agreement (the "Agreement"), dated as of
December 15, 2006, is made by and between Xxxxxxxxxx Opportunities Partners V,
LP (the "Company"), a Delaware limited partnership which will be registered as
a nondiversified closed-end management investment company under the Investment
Company Act of 1940 (the "1940 Act"), and Xxxxxxxxxx Capital Partners, LLC
(the "Investment Manager"), a Delaware limited liability company registered as
an investment adviser under the Investment Advisers Act of 1940 (the "Advisers
Act"). Capitalized terms used but not otherwise defined in this Agreement
shall have the meanings given to them in the Partnership Agreement of the
Company dated as of December 15, 2006 (as the same may be amended from time to
time, the "Partnership Agreement") or the Operating Agreement of the Parent,
as the case may be.
1. General Duties of the Investment Manager.
Subject to the direction and control of the Company's Board of
Directors (the "Board") and subject to and in accordance with the terms of the
Credit Agreement, the Operating Agreement, the Pledge and Intercreditor
Agreement (as defined in the Credit Agreement), the Custodial Agreement (as
defined in the Credit Agreement), the Co-Management Agreement (as defined in
the Credit Agreement), the policies adopted or approved by the Board, the
conditions of any exemptive order obtained by or for the benefit of the
Company from the Securities and Exchange Commission (the "SEC") and this
Agreement, the Investment Manager agrees to supervise and direct the
investment and reinvestment of the Assets and perform the duties set forth
herein or in the Partnership Agreement (subject to the approval of the
Investment Committee (as defined in Section 4(a) hereof) to the extent
provided in Section 4 hereof), and shall perform on behalf of the Company
those investment and leverage related duties and functions assigned to the
Company or the Investment Manager in the Credit Agreement, the Pledge and
Intercreditor Agreement, the Statements of Preferences for any Preferred
Shares or Preferred Interests and the Custodial Agreement (collectively, the
"Transaction Documents"), and shall have such other powers with respect to the
investment and leverage related functions of the Company as shall be delegated
from time to time to the Investment Manager by the Board. The Company has
executed or will execute the Transaction Documents and the Co-Management
Agreement, and the Investment Manager is hereby granted, and shall have, full
power to take all actions and execute and deliver all necessary and
appropriate documents and instruments on behalf of the Company in accordance
with such of the Transaction Documents as have been executed from time to
time, the Partnership Agreement, the policies adopted or approved by the
Board, the conditions of any exemptive order obtained by or for the benefit of
the Company or the Investment Manager from the SEC and this Agreement. The
Investment Manager shall endeavor to comply in all material respects with the
1940 Act and all rules and regulations thereunder, all other applicable
federal and state laws and regulations and the applicable provisions of the
Transaction Documents in performing its duties under this Agreement. Subject
to the foregoing and the other provisions of this Agreement, and subject to
the decisions of the Investment Committee and the direction and control of the
Board, the Investment Manager is hereby appointed as the Company's agent and
attorney-in-fact with authority to negotiate, execute and deliver all
documents and agreements on behalf of the Company and to do or take all
related acts, with the power of substitution, to acquire, dispose of or
otherwise take action
with respect to or affecting the Investments (as defined in Section 4(b)
hereof), including, without limitation:
(a) identifying and originating Investments (defined below) to be
purchased by the Company, selecting the dates for such purchases, and
purchasing or directing the purchase of such Investments on behalf of the
Company;
(b) identifying Investments owned by the Company to be sold by the
Company, selecting the dates for such sales, and selling such Investments on
behalf of the Company;
(c) negotiating and entering into, on behalf of the Company,
documentation providing for the purchase and sale of Investments, including
without limitation, confidentiality agreements and commitment letters;
(d) structuring the terms of, and negotiating, entering into and/or
consenting to, on behalf of the Company, documentation relating to Investments
to be purchased, held, exchanged or sold by the Company, including any
amendments, modifications or supplements with respect to such documentation;
(e) exercising, on behalf of the Company, rights and remedies
associated with Investments, including without limitation, rights to petition
to place an obligor or issuer in bankruptcy proceedings, to vote to accelerate
the maturity of an Investment, to waive any default, including a payment
default, with respect to an Investment and to take any other action which the
Investment Manager deems necessary or appropriate in its discretion in
connection with any restructuring, reorganization or other similar transaction
involving an obligor or issuer with respect to an Investment, including
without limitation, initiating and pursuing litigation;
(f) responding to any offer in respect of Investments by tendering
the affected Investments, declining the offer, or taking such other actions as
the Investment Manager may determine;
(g) exercising all voting, consent and similar rights of the Company
on its behalf and advising the Company with respect to matters concerning the
Investments;
(h) advising and assisting the Company with respect to the valuation
of the Assets;
(i) retaining legal counsel and other professionals (such as
financial advisers) to assist in the structuring, negotiation, documentation,
administration and modification and restructuring of Investments; and
(j) providing the Company with assistance in processing subscription
and/or transfer applications for the Interests, including assistance in
determining whether such applications and prospective or existing partners of
the Company satisfy applicable requirements under the Partnership Agreement.
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2. Duties and Obligations of the Investment Manager with Respect to
the Administration of the Company.
The Investment Manager also agrees to furnish office facilities and
equipment and clerical, bookkeeping and administrative services (other than
such services, if any, provided by the Company's custodian and other service
providers) to the Company. To the extent requested by the Company, the
Investment Manager agrees to provide the following administrative services:
(a) oversee the determination and publication of the Company's net
asset value in accordance with the Company's policy as adopted from time to
time by the Board and communicated to the Investment Manager in writing;
(b) maintain or oversee the maintenance of the books and records of
the Company as required under the 1940 Act and maintain (or oversee
maintenance by other persons) such other books and records required by law or
for the proper operation of the Company;
(c) oversee the preparation and filing of the Company's federal,
state and local income tax returns and any other required tax returns or
reports;
(d) review the appropriateness of and arrange for payment of the
Company's expenses;
(e) prepare for review and approval by officers and other authorized
persons of the Company (collectively, the "Authorized Signatories") financial
information for the Company's semi-annual and annual reports and other
communications with shareholders required or otherwise to be sent to Company
shareholders, and arrange for the printing and dissemination of such reports
and communications to Partners;
(f) prepare for review by the Authorized Signatories and Board of the
Company the Company's periodic financial reports required to be filed with the
SEC on Form N-SAR, Form N-CSR, Form N-PX, Form N-Q and such other reports,
forms and filings, as may be mutually agreed upon or as may be required by
law, the Credit Agreement or any Statement of Preferences;
(g) prepare reports relating to the business and affairs of the
Company as may be mutually agreed upon and not otherwise prepared by others;
(h) make such reports and recommendations to the Board concerning the
performance and fees of any of the Company's service providers as the Board
may reasonably request or deem appropriate;
(i) oversee and review calculations of fees paid to the Company's
service providers;
(j) oversee the Company's portfolio and perform necessary
calculations as required under Section 18 of the 1940 Act;
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(k) consult with the Audit Committee of the Board, the Authorized
Signatories, and the Company's independent accountants, legal counsel,
custodian and other service providers in establishing the accounting policies
of the Company and monitor financial and shareholder accounting services;
(l) review implementation of any Interest purchase programs
authorized by the Board;
(m) determine the amounts available for distribution as dividends and
distributions to be paid by the Company to its Partners;
(n) prepare and arrange for the printing of dividend notices to
Partners;
(o) provide the Company's dividend disbursing agent and custodian
with such information as is required for such parties to effect the payment of
dividends and distributions;
(p) prepare such information and reports as may be required under the
Credit Agreement and by any other banks, if any, from which the Company
borrows funds;
(q) provide such assistance to the Company's custodian, counsel,
auditors and other service providers as generally may be required to properly
carry on the business and operations of the Company;
(r) assist in the preparation and filing of Forms 3, 4, and 5
pursuant to Section 16 of the Securities Exchange Act of 1934, as amended, and
Section 30(h) of the 1940 Act for the officers, Authorized Signatories and
directors of the Company, such filings to be based on information provided by
those persons;
(s) respond to or refer to the Company's officers or Authorized
Signatories Interest holder (including any potential partners) inquiries
relating to the Company; and
(t) supervise any other aspects of the Company's administration as
may be agreed to by the Company and the Investment Manager.
All services are to be furnished through the medium of any directors,
officers, Authorized Signatories or employees of the Investment Manager or its
affiliates as the Investment Manager deems appropriate in order to fulfill its
obligations hereunder.
The Company will reimburse the Investment Manager or its affiliates
for all out-of-pocket expenses incurred by them in connection with the
performance of the administrative services described in this Section 2.
3. Authority to Bind the Company; No Joint Venture.
(a) Except as provided in or pursuant to Sections 1 and 12 hereof,
the Investment Manager shall have no authority to bind or obligate the
Company. The Board and the General Partner shall retain the sole authority to
act on behalf of the Company, and all acts of the Investment Manager (other
than as provided in the Transaction Documents, the Partnership
4
Agreement or in Section 1 or Section 12 hereof with respect to any approved
Investment) shall require the Board's consent and approval to bind the
Company. Nothing in this Agreement shall be deemed to create a joint venture
or partnership between the parties with respect to the arrangements set forth
in this Agreement. For all purposes hereof, the Investment Manager shall be
deemed to be an independent contractor and, unless otherwise provided herein
or specifically authorized by the Board from time to time, shall have no
authority to act for or represent the Company.
(b) The Investment Manager shall act in conformity with the written
instructions and directions of the Board, except to the extent that authority
has been delegated to the Investment Manager pursuant to the terms of this
Agreement, the Partnership Agreement and the Transaction Documents. The
Investment Manager will not be bound to follow any amendment to any
Transaction Document or the Partnership Agreement until it has received
written notice thereof and until it has received a copy of the amendment from
the Company or the Administrative Agent (as defined in the Credit Agreement);
provided that if any such amendment materially and adversely affects the
rights or duties of the Investment Manager, the Investment Manager shall not
be obligated to respect or comply with the terms of such amendment unless it
consents thereto. Subject to the fiduciary duty of the Board, the Company
agrees that it shall not permit any amendment to any Transaction Document or
the Partnership Agreement that materially and adversely affects the rights or
duties of the Investment Manager to become effective unless the Investment
Manager has been given prior written notice of such amendment and has
consented thereto in writing.
(c) The Investment Manager may, with respect to the affairs of the
Company, consult with Babson Capital Management LLC (the "Co-Manager") and its
Affiliated Persons (collectively, "Babson"), as co-investment manager, and
with such legal counsel, accountants and other advisors as may be selected by
the Investment Manager. The Investment Manager shall be fully protected, to
the extent permitted by applicable law, in acting or failing to act hereunder
if such action or inaction is taken or not taken in good faith by the
Investment Manager in accordance with the advice or opinion of Babson or such
counsel, accountants or other advisors. The Investment Manager shall be fully
protected in relying upon any writing signed in the appropriate manner with
respect to any instruction, direction or approval of any of the Board or
Babson and may also rely on opinions of the Investment Manager's counsel with
respect to such instructions, directions and approvals. The Investment Manager
shall also be fully protected when acting upon any instrument, certificate or
other writing the Investment Manager believes in good faith to be genuine and
to be signed or presented by the proper person or persons. The Investment
Manager shall be under no duty to make any investigation or inquiry as to any
statement contained in any such writing and may accept the same as conclusive
evidence of the truth and accuracy of the statements therein contained if the
Investment Manager in good faith believes the same to be genuine.
4. Limitations Relating to Investments.
(a) Investments Requiring the Investment Committee's Approval. The
Investment Manager will establish an Investment Committee (the "Investment
Committee") comprised initially of eleven (11) individuals (such number of
members being subject to increase or decrease at any time in the sole
discretion of the Investment Manager). Five of the individuals
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on the Investment Committee will be voting members (such number of voting
members being subject to increase or decrease at any time in the sole
discretion of the Investment Manager). Subject to the following sentence and
Section 11(b), all of the voting members of the Investment Committee will be
appointed by the Investment Manager, and initially such voting members will be
Xxxxxxx X. Xxxxxxxxxx, Xxxx X. Xxxxxxxxxx, Xxxxxx X. Xxxxxxxxx and Xxxxxxx X.
Xxxxxxx or such other persons as may be appointed by the Investment Manager.
Except as provided by Section 11(b), one voting member of the Investment
Committee will be appointed by Babson, with the approval of the Investment
Manager. Xxxxxxx X. Xxxxxxx XX shall be Babson's representative on the
Investment Committee until removed or until replaced by Babson with the
approval of the Investment Manager for such replacement. Additionally, the
Investment Manager shall have the right to appoint any number of non-voting
members to the Investment Committee. The Investment Committee will review and
discuss the purchase and sale of all Investments other than short-term
Investments in high quality debt, securities maturing in less than 367 days or
investment funds whose portfolios at all times have an effective duration of
less than 367 days and other than hedging and risk management transactions,
and approval by a majority vote of the voting members of the Investment
Committee will be required prior to the purchase or sale of any Investment
required to be reviewed by the Investment Committee. The Company shall not be
bound by any Investment made by the Investment Manager on behalf of the
Company for which the necessary approval has not been obtained.
(b) Investments. Except as otherwise provided in this Section 4 and
subject to the requirements of the Transaction Documents, the Operating
Agreement, the Partnership Agreement and applicable law, the Investment
Manager may cause the Company (which term shall include, for all purposes
relating to the purchase and sale of Investments and the duties and
obligations of the Investment Manager set forth in Section 1 hereof, the
Company and its consolidated subsidiaries) from time to time to purchase:
(i) debt securities or debt obligations, including bank
loans or interests therein ("Debt Obligations");
(ii) stock, warrants or other equity securities
("Securities"); and
(iii) any other investments of any type of asset the
Company is permitted to make (together with Securities and Debt
Obligations, "Investments").
(c) Company is not a Bank. The Investment Manager may not purchase
any Debt Obligation if the related credit agreement, note, indenture or other
documentation by its terms requires any such purchase to be made only by a
bank, savings and loan, thrift, trust company or other similar deposit-taking
institution.
(d) Origination Fees. The Company shall, except to the extent the
Investment Manager determines such sharing could cause the Xxxxxxxxxx
Opportunities Fund V, LLC (the "Parent") to fail to satisfy any requirement
for qualification as a regulated investment company under Subchapter M of the
Code, receive its pro-rata share, measured by the amount invested or proposed
to be invested by the investors in any Investment, of any origination,
structuring, or similar fees normally payable to lenders or structurers as
compensation for services ("Origination or Similar Fees") payable with respect
to any Investment, whether or not any other investment
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funds or accounts for which the Investment Manager or its Affiliated Persons
acts as investment adviser (the "Xxxxxxxxxx Accounts") share in such fees.
Notwithstanding anything herein, in the Partnership Agreement or in any
Transaction Document to the contrary, to the extent that any Origination or
Similar Fees with respect to the Company's share of such Investment are paid
to the Investment Manager, Babson or any of their respective Affiliated
Persons as additional compensation, such amount shall be reimbursed to the
Company unless the exception to the preceding sentence is in effect, in which
case such amount shall be paid to the other accounts participating in such
Investment or returned to the party paying such Origination or Similar Fees.
(e) Co-Investments. The Company may not co-invest with any account
managed by the Investment Manager or its Affiliated Persons in any Investments
subject to any exemptive order obtained by, on behalf of or for the benefit of
the Company except to the extent permitted by such exemptive relief or
otherwise permitted by the 1940 Act.
5. Brokerage.
The Investment Manager shall effect all purchases and sales of
securities in a manner consistent with the principles of best execution,
taking into account net price (including commissions) and execution capability
and other services which the broker or other intermediary may provide. In this
regard, the Investment Manager may effect transactions which cause the Company
to pay a commission in excess of a commission which another broker or other
intermediary would have charged; provided, however, that the Investment
Manager shall have first determined that such commission is reasonable in
relation to the value of the brokerage or research services performed by that
broker or other intermediary or that the Company is the sole beneficiary of
the services provided.
6. Compensation.
(a) The Company agrees to pay to the Investment Manager and the
Investment Manager agrees to accept as partial compensation for all services
rendered by the Investment Manager as such, a fee (the "Management Fee"),
payable monthly in arrears at an annual rate equal to 1.50% of the sum of (i)
(A) prior to the end of the Subscription Period, the Common Share Commitments
entered into, regardless of whether the Parent has drawn down or repaid such
commitments, and (B) after the end of the Subscription Period, the Common
Share Commitments drawn less the amount by which the sum of all distributions
exceeds the excess of the cumulative items of income and gain (realized or
unrealized), over the cumulative items of loss and deduction ( realized or
unrealized) (such remainder, the "Undistributed Capital"), (ii) on and after
the date the Credit Agreement is entered into by the parties thereto, the
maximum amount available to be borrowed by the Company and/or the Parent under
the Credit Agreement, regardless of whether
7
the Company and/or the Parent has borrowed any amounts under the Credit
Agreement and (iii) on and after the date the Credit Agreement is entered into
by the parties thereto and the Company and/or the Parent has issued more than
$1,000,000 in liquidation preference of Preferred Interests or Preferred
Shares, the maximum aggregate liquidation preference of Preferred Shares or
Preferred Interests the Company and/or the Parent would be authorized to issue
under the 1940 Act based upon the total amount of Common Share Commitments
entered into and assuming that the Company and/or the Parent has borrowed the
maximum amount available to be borrowed under the Credit Agreement, regardless
of whether the Company and/or the Parent has issued all of such Preferred
Shares or Preferred Interests (the sum of (i) through (iii) being referred to
as the "Management Fee Capital"). At such time as all borrowings under the
Credit Agreement have been repaid and no further borrowings are permitted
thereunder, Management Fee Capital shall be equal to the sum of the
Undistributed Capital, plus the aggregate liquidation preference of Preferred
Shares or Preferred Interests outstanding from time to time, thereby reducing
the amounts on which the Management Fee is paid. At such time as all
borrowings under the Credit Agreement have been repaid and no further
borrowings are permitted thereunder, and no more than $1,000,000 in
liquidation preference of Preferred Shares or Preferred Interests remains
outstanding, Management Fee Capital shall be equal to the Undistributed
Capital, thereby further reducing the amounts on which the Management Fee is
paid. The Management Fee shall be prorated for any partial payment period.
(b) If the Parent sells and issues to SVOF/MM, LLC, a company
wholly-owned by the Investment Manager, the Co-Manager and their affiliates,
at such date as the Investment Manager requests, one share of Series S
Preferred Stock (the "Special Share") of the Parent at a price equal to its
liquidation preference of $1,000, the Parent shall not be obligated to conduct
its investment obligations through the Company or pay the incentive fee
determined in accordance with the last sentence of this Section 6(b) so long
as such Special Share is outstanding. As set forth in the Statement of
Preferences for such Special Share, the Special Share will pay dividends at a
rate equal to the greater of (i) 4% per year of the liquidation preference of
such Special Share, but in no event greater than $40 per year, or (ii) (A)
100% of the amount by which the cumulative distributions and amounts
distributable in respect of the Common Shares of the Parent exceed an 8%
annual weighted average return on Undistributed Capital until the total of (1)
amounts paid as a fee pursuant to the last sentence of this paragraph (b), (2)
the cumulative distributions made in respect of the Special Share during the
time it was outstanding or held by the Investment Manager or an Affiliated
Person thereof and (3) any amounts paid to SVOF/MM, LLC pursuant to the
Partnership Agreement equals 25% of the aggregate cumulative distributions of
net income and gain in respect of the Common Shares, and thereafter (B) an
amount (payable at the same time as, and not in advance of, any distributions
in respect of the Common Shares) such that, after payment thereof, the total
of (x) amounts paid as a fee pursuant to the last sentence of this paragraph
(b), (y) the cumulative distributions made in respect of the Special Share
during the time it was outstanding or held by the Investment Manager or an
Affiliated Person thereof and (z) any amounts paid to SVOF/MM, LLC pursuant to
the Partnership Agreement equals 20% of the aggregate incremental
distributions of net income and gain in respect of the Common Shares and the
Special Share and the amounts paid as a fee pursuant to the last sentence of
this paragraph (b). For the avoidance of doubt, the expenses of the Company,
including the Management Fee, shall not reduce the amount of Undistributed
Capital for purposes of calculating the 8% annual weighted average return on
Undistributed Capital attributable to the Common Shares of the Parent acquired
by such investors. If the Investment Manager or the Parent determines on the
advice of counsel that this sale and issuance of the Special Share or its
Statement of Preferences is inconsistent with the requirements of the 1940 Act
in any material respect and that such inconsistency is unlikely to be able to
be remedied without fundamental alteration of such Statement of Preferences,
the Company and the Investment Manager agree that the Parent will repurchase
such share at liquidation preference plus accumulated and unpaid
distributions. If for any reason the Investment Manager or the Parent
determines on the advice of counsel that the profit allocation set forth in
the Partnership
8
Agreement would be inconsistent with the requirements of the 1940 Act in any
material respect and that such inconsistency would be unlikely to be able to
be remedied without fundamental alteration of such profit allocation and
without having a material adverse effect on any shareholder of the Parent, the
Company will pay to the Investment Manager as a fee the amounts computed in
accordance with the second and third sentences of this paragraph.
(c) If this Agreement is terminated for any reason prior to the end
of the Investment Period, the Company will engage at its own expense a firm
acceptable to the Company and the Investment Manager to determine the maximum
reasonable fair value as of the termination date of the Company's consolidated
Assets (assuming each Asset is readily marketable among institutional
investors without minority discount and with an appropriate control premium
for any control positions and ascribing a net present value (discounted at AA
borrowing rates) to any unamortized portion of the Company's organizational,
offering and issuance expenses and to any going concern value identified by
such firm). After review of such firm's work papers by the Investment Manager
and the Company and resolution of any comments therefrom, such firm shall
render its report as to valuation, and the Company shall pay to the Investment
Manager and/or SVOF/MM, LLC, as the case may be, any Management Fees or other
distributions or fees due under, or referenced in, this Agreement (which, for
the avoidance of doubt, includes any amount due to SVOF/MM, LLC as referred to
in Section 6(b) hereof), as the case may be, payable pursuant to the terms of
this Agreement as if all of the consolidated Assets of the Company had been
sold or realized at the values indicated in such report and any net income and
gain distributed. Such report shall be completed within 90 days after notice
of termination of the relevant agreement.
(d) If this Agreement is terminated due to conduct that is determined
by a trier of fact, after a final non-appealable determination on the merits,
to be Disabling Conduct prior to the end of the Investment Period, the Company
shall follow the procedures set forth in Section 6(c) of this Agreement and
pay any amount due to the Investment Manager and/or SVOF/MM, LLC to such
party, provided that any amount owing to either the Investment Manager and/or
SVOF/MM, LLC pursuant to this Section 6(d) shall be reduced by an amount equal
to 15% of the total amount due to such party under this Section 6(d).
7. Expenses.
The Company will be responsible for paying the compensation of the
Investment Manager and the Placement Agent, due diligence and negotiation
expenses, fees and expenses of custodians, administrators, transfer and
distribution agents, counsel and directors, insurance, filings and
registrations, proxy expenses, expenses of communications to investors,
interest, taxes, portfolio transaction expenses, indemnification, litigation
and other extraordinary expenses and such other expenses as the Investment
Manager is not obligated to provide (such as services the Investment Manager
is required to supervise) and as are approved by the directors as being
reasonably related to the organization, offering, capitalization, operation,
regulatory compliance or administration of the Company and any portfolio
investments. Expenses associated with the general overhead of the Investment
Manager or Co-Manager will not be covered by the Company. Notwithstanding the
foregoing, and subject to review by the Board, the Parent and/or the Company
will bear the costs and expenses of the Investment Manager as set forth in
Section 9 of the Operating Agreement and Section 9.3 of the Partnership
Agreement, which provisions
9
may not be amended without the Investment Manager's written consent. On behalf
of the Company, the Investment Manager may advance payment of any such fees
and expenses of the Company, and the Company shall reimburse the Investment
Manager therefor within 30 days following written request from the Investment
Manager. Nothing in this Section 7 shall limit the ability of the Investment
Manager to be reimbursed by any Person (including issuers or obligors of
securities, instruments or obligations owned by the Company) for out-of-pocket
expenses incurred by the Investment Manager in connection with the performance
of services hereunder. The Investment Manager shall maintain complete and
accurate records with respect to costs and expenses and shall furnish the
Board with receipts or other written vouchers with respect thereto upon
request of the Board. The Investment Manager will be responsible for paying
the Co-Manager the amounts set forth in the Co-Management Agreement.
8. Services to Other Companies or Accounts.
(a) The Investment Manager and its Affiliated Persons, employees or
associates are in no way prohibited from, and intend to, spend substantial
business time in connection with other businesses or activities, including,
but not limited to, managing investments, advising or managing entities whose
investment objectives are the same as or overlap with those of the Company,
participating in actual or potential investments of the Company or any
Partner, providing consulting, merger and acquisition, structuring or
financial advisory services, including with respect to actual, contemplated or
potential investments of the Company, or acting as a director, officer or
creditors' committee member of, adviser to, or participant in, any
corporation, partnership, trust or other business entity. The Investment
Manager and its Affiliated Persons may, and expect to, receive fees or other
compensation from third parties for any of these activities, which fees will
be for the benefit of their own account and not the Company.
(b) In addition, the Investment Manager and its Affiliated Persons
may manage Xxxxxxxxxx Accounts other than the Company that invest in assets
eligible for purchase by the Company.
(c) The Company may have the ability, under certain circumstances, to
take certain actions that would have an adverse effect on Xxxxxxxxxx Accounts
other than the Company. In these circumstances, the Investment Manager and its
Affiliated Persons will act in a manner believed to be equitable to the
Company and such other Xxxxxxxxxx Accounts, including co-investment in
accordance with the conditions of any exemptive relief obtained by the company
and the Investment Manager.
9. Duty of Care and Loyalty.
Except as otherwise required by law, none of the General Partner, the
Investment Manager, or any of their respective Affiliated Persons, directors,
officers, employees, shareholders, managers, members, assigns, representatives
or agents (each, an "Indemnified Person" and, collectively, the "Indemnified
Persons") shall be liable, responsible or accountable in damages or otherwise
to the Company, any Partner or any other Person for any loss, liability,
damage, settlement cost, or other expense (including reasonable attorneys'
fees) incurred by reason of any act or omission or any alleged act or omission
performed or omitted by such
10
Indemnified Person (other than solely in such Indemnified Person's capacity as
a Partner, if applicable) in connection with the establishment, management or
operations of the Company or the management of its Assets (including those in
connection with serving on boards of directors of, or creditors' committees
for, any Portfolio Company) except that the Investment Manager shall be liable
to the Company or any Partner, as the case may be, if such act or failure to
act arises out of the bad faith, willful misfeasance, gross negligence or
reckless disregard of an Indemnified Person's duty to the Company or such
Partner, as the case may be (such conduct, "Disabling Conduct"). Subject to
the foregoing, all such Indemnified Persons shall look solely to the Assets
(including, without limitation, the Unfunded Commitments) for satisfaction of
claims of any nature arising in connection with the affairs of the Company. If
any Indemnified Person is made a party to any suit or proceeding to enforce
any such liability, subject to the foregoing exception, such Indemnified
Person shall not, on account thereof, be held to any personal liability.
10. Indemnification.
(a) To the fullest extent permitted by applicable law, each of the
Indemnified Persons shall be held harmless and indemnified by the Company (out
of the Assets (including, without limitation, the Unfunded Commitments) and
not out of the separate assets of any Partner) against any liabilities and
expenses, including amounts paid in satisfaction of judgments, in compromise
or as fines and penalties, and reasonable counsel fees reasonably incurred by
such Indemnified Person in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court
or administrative or investigative body in which such Indemnified Person may
be or may have been involved as a party or otherwise (other than as authorized
by the Directors, as the plaintiff or complainant) or with which such
Indemnified Person may be or may have been threatened, while acting in such
Person's capacity as an Indemnified Person, except with respect to any matter
as to which such Indemnified Person shall not have acted in good faith in the
reasonable belief that such Person's action was in the best interest of the
Company or, in the case of any criminal proceeding, as to which such
Indemnified Person shall have had reasonable cause to believe that the conduct
was unlawful, provided, however, that an Indemnified Person shall only be
indemnified hereunder if (i) such Indemnified Person's activities do not
constitute Disabling Conduct and (ii) there has been a determination (a) by a
final decision on the merits by a court or other body of competent
jurisdiction before whom the issue of entitlement to indemnification was
brought that such Indemnified Person is entitled to indemnification or, (b) in
the absence of such a decision, by (1) a majority vote of a quorum of those
Directors who are neither "interested persons" of the Company (as defined in
Section 2(a)(19) of the 0000 Xxx) nor parties to the proceeding (the
"Disinterested Non-Party Directors") that the Indemnified Person is entitled
to indemnification, or (2) if such quorum is not obtainable or even if
obtainable, if a majority so directs, independent legal counsel in a written
opinion that concludes that the Indemnified Person should be entitled to
indemnification. Notwithstanding the foregoing, with respect to any action,
suit or other proceeding voluntarily prosecuted by any Indemnified Person as
plaintiff, indemnification shall be mandatory only if the prosecution of such
action, suit or other proceeding by such Indemnified Person was authorized by
a majority of the Directors. All determinations to make advance payments in
connection with the expense of defending any proceeding shall be authorized
and made in accordance with the immediately succeeding paragraph (b) below.
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(b) The Company shall make advance payments in connection with the
expenses of defending any action with respect to which indemnification might
be sought hereunder if the Company receives a written affirmation by the
Indemnified Person of the Indemnified Person's good faith belief that the
standards of conduct necessary for indemnification have been met and a written
undertaking to reimburse the Company unless it is subsequently determined that
such Indemnified Person is entitled to such indemnification and if a majority
of the Directors determine that the applicable standards of conduct necessary
for indemnification appear to have been met. In addition, at least one of the
following conditions must be met: (i) the Indemnified Person shall provide
adequate security for his undertaking, (ii) the Company shall be insured
against losses arising by reason of any lawful advances, or (iii) a majority
of a quorum of the Disinterested Non-Party Directors, or if a majority vote of
such quorum so direct, independent legal counsel in a written opinion, shall
conclude, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is substantial reason to believe that the
Indemnified Person ultimately will be found entitled to indemnification.
(c) The rights accruing to any Indemnified Person under these
provisions shall not exclude any other right to which such Indemnified Person
may be lawfully entitled.
(d) Each Indemnified Person shall, in the performance of its duties,
be fully and completely justified and protected with regard to any act or any
failure to act resulting from reliance in good faith upon the books of account
or other records of the Company, upon an opinion of counsel, or upon reports
made to the Company by any of the Company's officers or employees or by any
advisor, administrator, manager, distributor, selected dealer, accountant,
appraiser or other expert or consultant selected with reasonable care by the
Directors, officers or employees of the Company, regardless of whether such
counsel or other person may also be a Director.
11. Term of Agreement; Events Affecting the Investment Manager;
Survival of Certain Terms.
(a) This Agreement shall become effective as of the time at which the
Company registers as an investment company with the SEC and, unless sooner
terminated by the Company or Investment Manager as provided herein, shall
continue in effect for a period of two years. Thereafter, if not terminated,
this Agreement shall continue in effect with respect to the Company for
successive periods of 12 months, provided such continuance is specifically
approved at least annually by both (i) the vote of a majority of the Board or
the vote of a majority of the outstanding voting securities of the Company at
the time outstanding and entitled to vote, and (ii) by the vote of a majority
of the Directors who are not parties to this Agreement or interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval. Notwithstanding the foregoing, this
Agreement may be terminated by the Company at any time, without the payment of
any penalty, upon giving the Investment Manager 60 days' notice (which notice
may be waived by the Investment Manager), provided that such termination by
the Company shall be directed or approved by the vote of a majority of the
Directors of the Company in office at the time or by the vote of the holders
of a majority of the voting securities of the Company at the time outstanding
and entitled to vote, or by the Investment Manager on 60 days' written notice
(which notice may be waived by the
12
Company). This Agreement will also immediately terminate in the event of its
assignment. As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested person" and "assignment" shall have the same
meanings as such terms are given in the 0000 Xxx.
(b) If any two of Xxxxxxx X. Xxxxxxxxxx, Xxxx Xxxxxxxxxx and Xxxxxx
Xxxxxxxxx die, become incapacitated or depart from the Investment Manager or
cease to be actively involved in the management or operations of the
Investment Manager or the Company, (i) if such event occurs during the
Subscription Period, the Investment Manager will promptly notify Babson, the
credit agent for the Company's senior credit facility, the credit enhancer, if
any, and the Partners of such event and the Partners may determine at any time
during the six months following such notice, by vote of 75% or more of the
Common Interests, to terminate the Subscription Period or, voting together
with the Preferred Interests as a single class, to liquidate the Company, and
(ii) if such event occurs after the Subscription Period, the Investment
Manager will promptly notify Babson, the credit agent for the Company's senior
credit facility, the credit enhancer, if any, and the Partners of such event,
will increase the number of voting Babson representatives on the Investment
Committee to a number that is equivalent at all times to the number of voting
Investment Manager representatives on such committee and will promptly replace
one or both of such individuals with another individual with skills reasonably
comparable to those which such individual or individuals employed on behalf of
the Investment Manager for the benefit of the Company (a person having such
skills being a "Replacement Principal"), as determined by the approval of a
majority of the Common Interests and Preferred Interests voting as a single
class within sixty days after the date notice of such replacement is given.
Upon the approval of a Replacement Principal, the number of Babson
representatives on the Investment Committee shall be reduced to one and such
Replacement Principal's name shall be substituted for purposes of the first
sentence of this subsection (b) for the name of the individual for whom he or
she is a Replacement Principal.
(c) Notwithstanding anything herein to the contrary, Sections 6(c),
7, 9 and 10 of this Agreement shall survive any termination hereof.
(d) Subject to the provisions of Section 6 with respect to payments
to be made after termination from and after the effective date of termination
of this Agreement, the Investment Manager and its Affiliated Persons shall not
be entitled to compensation for further services hereunder, but shall be paid
all compensation and reimbursement of expenses accrued to the date of
termination. Upon such termination, and upon receipt of payment of all
compensation and reimbursement of expenses owed, the Investment Manager shall
as soon as practicable (and in any event within 90 days after such
termination) deliver to the Company all property (to the extent, if any, that
the Investment Manager has custody thereof) and documents of the Company or
otherwise relating to the Assets of the Company then in the custody of the
Investment Manager (although the Investment Manager may keep copies of such
documents for its records). The Investment Manager agrees to use reasonable
efforts to cooperate with any successor investment manager in the transfer of
its responsibilities hereunder, and will, among other things, provide upon
receipt of a written request by such successor investment manager any
information available to it regarding any Assets of the Company. The
Investment Manager agrees that, notwithstanding any termination, it will
reasonably cooperate in any proceeding arising in connection with this
Agreement, any of the Transaction Documents or any Investment (excluding any
such proceeding in which claims are asserted against the Investment Manager or
13
any Affiliated Person of the Investment Manager) upon receipt of appropriate
indemnification and expense reimbursement.
12. Power of Attorney; Further Assurances.
In addition to the power of attorney granted to the Investment
Manager in Section 1 of this Agreement, the Company hereby makes, constitutes
and appoints the Investment Manager, with full power of substitution, as its
true and lawful agent and attorney-in-fact, with full power and authority in
its name, place and stead, in accordance with the terms of this Agreement (a)
to sign, execute, certify, swear to, acknowledge, deliver, file, receive and
record any and all documents which the Investment Manager reasonably deems
necessary or appropriate in connection with its investment management duties
under this Agreement and as required by the 1940 Act and (b) to (i) subject to
any policies adopted by the Board with respect thereto, exercise in its
discretion any voting or consent rights associated with any securities,
instruments or obligations included in the Company's Assets, (ii) execute
proxies, waivers, consents and other instruments with respect to such
securities, instruments or obligations, (iii) endorse, transfer or deliver
such securities, instruments and obligations and (iv) participate in or
consent (or decline to consent) to any modification, work-out, restructuring,
bankruptcy proceeding, class action, plan of reorganization, merger,
combination, consolidation, liquidation or similar plan or transaction with
regard to such securities, instruments and obligations. To the extent
permitted by applicable law, this grant of power of attorney is irrevocable
and coupled with an interest, and it shall survive and not be affected by the
subsequent dissolution or bankruptcy of the Company; provided that this grant
of power of attorney will expire, and the Investment Manager will cease to
have any power to act as the Company's attorney-in-fact, upon termination of
this Agreement in accordance with its terms. The Company shall execute and
deliver to the Investment Manager all such other powers of attorney, proxies,
dividend and other orders, and all such instruments, as the Investment Manager
may reasonably request for the purpose of enabling the Investment Manager to
exercise the rights and powers which it is entitled to exercise pursuant to
this Agreement. Each of the Investment Manager and the Company shall take such
other actions, and furnish such certificates, opinions and other documents, as
may be reasonably requested by the other party hereto in order to effectuate
the purposes of this Agreement and to facilitate compliance with applicable
laws and regulations and the terms of this Agreement.
13. Amendment of this Agreement.
No provision of this Agreement may be amended, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the amendment, waiver, discharge or termination
is sought. Any amendment of this Agreement shall be subject to the 0000 Xxx.
If the Company has outstanding any securities rated by S&P or Xxxxx'x, the
Company shall promptly provide a copy of any such amendment or waiver to S&P
and/or Xxxxx'x, as applicable.
14. Notices.
14
Unless expressly provided otherwise herein, any notice, request,
direction, demand or other communication required or permitted under this
Agreement shall be in writing and shall be deemed to have been duly given,
made and received if sent by hand or by overnight courier, when personally
delivered, if sent by telecopier, when receipt is confirmed by telephone, or
if sent by registered or certified mail, postage prepaid, return receipt
requested, when actually received if addressed as set forth below:
(a) If to the Company:
Tennenbaum Opportunities Partners V, LP
Attn: Xxxxxx Xxxxxx
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
(b) If to the Investment Manager:
Xxxxxxxxxx Capital Partners, LLC
Attn: Xxxxxx X. Xxxxxxxxx
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
(c) If to any of the partners in the Company, as
provided in the Partnership Agreement, and if to
the Administrative Agent or any Lender under the
Credit Agreement, as provided in the applicable
Transaction Document.
Either party to this Agreement may alter the address to which communications
or copies are to be sent to it by giving notice of such change of address in
conformity with the provisions of this Section 14. Other addresses set forth
in this Section 14 shall be changed only with the consent of the relevant
addressee.
15. Binding Nature of Agreement; Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns as provided herein.
16. Entire Agreement.
This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied, oral or written, of any nature
whatsoever with respect to the subject matter hereof. The express terms hereof
control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof.
15
17. Costs and Expenses.
The costs and expenses (including the fees and disbursements of
counsel and accountants) incurred in connection with the negotiation,
preparation and execution of this Agreement, and all matters incident thereto,
shall be borne by the Company.
18. Books and Records. In compliance with the requirements of Rule
31a-3 under the Investment Company Act, the Investment Manager hereby agrees
that all records which it maintains for the Company are the property of the
Company and further agrees to surrender promptly to the Company any such
records upon the Company's request. The Investment Manager further agrees to
preserve for the periods prescribed by Rule 31a-2 under the Investment Company
Act the records required to be maintained by Rule 31a-1 under the Investment
Company Act.
19. Titles Not to Affect Interpretation.
The titles of sections contained in this Agreement are for
convenience only, and they neither form a part of this Agreement nor are they
to be used in the construction or interpretation hereof.
20. Provisions Separable.
The provisions of this Agreement are independent of and separable
from each other, and, to the extent permitted by applicable law, no provision
shall be affected or rendered invalid or unenforceable by virtue of the fact
that for any reason any other or others of them may be invalid or
unenforceable in whole or in part.
21. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York and, to the extent inconsistent therewith,
the 1940 Act.
22. Execution in Counterparts.
This Agreement may be executed in separate counterparts, each of
which shall be an original and all of which taken together shall constitute
one and the same instrument.
[Remainder of page intentionally left blank.]
16
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
XXXXXXXXXX CAPITAL PARTNERS, LLC
By: XXXXXXXXXX & CO., LLC, its Managing
Member
By:
--------------------------------------
Xxxxxxx X. Xxxxxxxxxx
Member
TENNENBAUM OPPORTUNITIES
PARTNERS V, LP
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxxxx
President
