EXHIBIT 10.3
EXECUTION COPY
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LIMITED LIABILITY COMPANY AGREEMENT
OF
CENTERBROOK FINANCIAL LLC
Dated as of June 28, 2006
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CENTERBROOK CREDIT INTERMEDIATION PROGRAM
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*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
TABLE OF CONTENTS
PAGE
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ARTICLE I CERTAIN DEFINITIONS.....................................................................................1
SECTION 1.2. TERMS GENERALLY...........................................................................10
ARTICLE II FORMATION, NAME, OFFICES AND PURPOSES; MEMBERS........................................................10
SECTION 2.1. FORMATION.................................................................................10
SECTION 2.2. NAME......................................................................................10
SECTION 2.3. OFFICES...................................................................................10
SECTION 2.4. PURPOSES; POWER...........................................................................10
SECTION 2.5. PROGRAM PERIOD............................................................................11
SECTION 2.6. CAPITAL MODEL.............................................................................11
SECTION 2.7. SCOPE OF MEMBERS' AUTHORITY...............................................................12
SECTION 2.8. MEMBER INTERESTS..........................................................................12
SECTION 2.9. OTHER JURISDICTIONS.......................................................................12
SECTION 2.10. CERTAIN COVENANTS RELATING TO SEPARATENESS; TRANSACTIONS WITH AFFILIATES..................12
SECTION 2.11. GENERAL COVENANTS.........................................................................14
SECTION 2.12. REGISTER OF MEMBERS.......................................................................15
ARTICLE III ACCOUNTS.............................................................................................15
SECTION 3.1. ESTABLISHMENT OF ACCOUNTS; USE OF AMOUNTS ON DEPOSIT......................................15
SECTION 3.2. COLLECTION ACCOUNT........................................................................15
SECTION 3.3. EXPENSE ACCOUNT...........................................................................16
SECTION 3.4. RESERVE ACCOUNT...........................................................................16
ARTICLE IV CAPITAL CONTRIBUTIONS.................................................................................16
SECTION 4.1. INITIAL CAPITAL CONTRIBUTION; NO FURTHER CAPITAL CONTRIBUTIONS REQUIRED...................16
SECTION 4.2. NO NON-CASH CAPITAL CONTRIBUTIONS.........................................................16
SECTION 4.3. RIGHTS AND OBLIGATIONS OF MEMBERS.........................................................16
ARTICLE V ADDITIONAL EQUITY INTERESTS............................................................................17
SECTION 5.1. ISSUANCE OF ADDITIONAL EQUITY INTERESTS...................................................17
SECTION 5.2. AMENDMENTS TO REFLECT OTHER EQUITY........................................................17
ARTICLE VI PARTICIPATION IN COMPANY PROPERTY.....................................................................17
SECTION 6.1. OWNERSHIP BY MEMBER OF COMPANY............................................................17
SECTION 6.2. RETURN OF CAPITAL.........................................................................17
ARTICLE VII MANAGEMENT...........................................................................................17
SECTION 7.1. MANAGEMENT BY THE MANAGING MEMBER.........................................................17
SECTION 7.2. INDEPENDENT MANAGER.......................................................................17
SECTION 7.3. ACTIONS BY MANAGING MEMBER................................................................18
SECTION 7.4. OFFICERS..................................................................................18
SECTION 7.5. CONFLICTS OF INTEREST.....................................................................18
SECTION 7.6. BANK ACCOUNTS.............................................................................18
SECTION 7.7. COMPENSATION..............................................................................18
SECTION 7.8. INDEMNIFICATION OF MANAGING MEMBER, INDEPENDENT MANAGER, OFFICERS AND OTHER AGENTS........19
ARTICLE VIII DISTRIBUTIONS; ALLOCATIONS OF NET INCOME AND NET LOSS...............................................20
SECTION 8.1. DISTRIBUTIONS.............................................................................20
SECTION 8.2. RECORD DATES..............................................................................20
SECTION 8.3. RECEIPT OF DISTRIBUTIONS..................................................................21
SECTION 8.4. EXCESS PAYMENTS...........................................................................21
SECTION 8.5. ALLOCATIONS...............................................................................21
SECTION 8.6. SPECIAL ALLOCATIONS.......................................................................21
SECTION 8.7. AMOUNTS WITHHELD..........................................................................21
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
- i -
ARTICLE IX ACCOUNTING............................................................................................21
SECTION 9.1. BOOKS AND RECORDS.........................................................................21
SECTION 9.2. REPORTS AND NOTICES.......................................................................22
ARTICLE X TRANSFERS AND ADMISSION................................................................................23
SECTION 10.1. TRANSFERS................................................................................23
SECTION 10.2. EFFECT OF PERMITTED TRANSFERS............................................................23
SECTION 10.3. EFFECT OF VOID TRANSFERS.................................................................23
SECTION 10.4. RULE 144A INFORMATION....................................................................24
ARTICLE XI TERM AND DISSOLUTION..................................................................................24
SECTION 11.1. DISSOLUTION; LIQUIDATING EVENTS..........................................................24
SECTION 11.2. EFFECT OF WIND-DOWN EVENT................................................................24
SECTION 11.3. DISSOLUTION..............................................................................24
SECTION 11.4. BANKRUPTCY AND INSOLVENCY PROCEEDINGS....................................................24
SECTION 11.5. BANKRUPTCY CONSIDERATIONS................................................................24
ARTICLE XII WIND-DOWN PERIOD.....................................................................................25
SECTION 12.1. WIND-DOWN EVENTS.........................................................................25
SECTION 12.2. WIND-DOWN PROCEDURES.....................................................................25
ARTICLE XIII PAYMENTS AND DISTRIBUTIONS..........................................................................26
SECTION 13.1. PAYMENTS FROM ACCOUNTS...................................................................26
SECTION 13.2. PREPARATION OF QUARTERLY DISTRIBUTION SCHEDULE...........................................26
SECTION 13.3. DISTRIBUTIONS ON PAYMENT DATES...........................................................26
ARTICLE XIV GENERAL PROVISIONS...................................................................................27
SECTION 14.1. BINDING EFFECT AND BENEFIT...............................................................27
SECTION 14.2. CERTIFICATES, ETC........................................................................27
SECTION 14.3. MEMBERS' RELATIONSHIPS INTER SE..........................................................27
SECTION 14.4. NOTICES, STATEMENTS, ETC.................................................................27
SECTION 14.5. AMENDMENTS; ETC..........................................................................28
SECTION 14.6. GOVERNING LAW............................................................................28
SECTION 14.7. NO PETITION; LIMITED RECOURSE............................................................28
SECTION 14.8. SEVERABILITY.............................................................................28
SECTION 14.9. COUNTERPARTS.............................................................................28
SECTION 14.10. WAIVER OF JURY TRIAL....................................................................28
SECTION 14.11. NO WAIVER; CUMULATIVE REMEDIES..........................................................28
SECTION 14.12. CONSENT TO JURISDICTION.................................................................29
SECTION 14.13. CERTAIN TAX MATTERS.....................................................................29
SECTION 14.14. STANDARDS OF DISCRETION.................................................................29
SCHEDULES AND EXHIBITS
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Schedule I - Register of Members
Schedule II - List of the Managing Member and Independent Manager
Schedule III - Addresses for Notices
Schedule IV - Eligibility Criteria
Schedule V - Capital Model Inputs
Exhibit A - Forms of CDS
Exhibit B - Form of Custody Agreement
Exhibit C - Form of Collateral Support Swap
Exhibit D - Forms of Tax Credit Investments
Exhibit E - Form of Subordinated Debt Facility
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
- ii -
LIMITED LIABILITY COMPANY AGREEMENT of CENTERBROOK FINANCIAL LLC (the
"COMPANY"), dated as of June 28, 2006 (this "AGREEMENT"), entered into by
Centerbrook Holdings LLC, a Delaware limited liability company ("HOLDINGS"), as
the sole member of the Company, and Xxxxxx X. Xxxxxxx, as the Independent
Manager (as defined below).
PRELIMINARY STATEMENTS
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WHEREAS, the Company intends to provide credit intermediation in the
form of credit default swaps or other forms of credit intermediation in respect
of certain Multifamily Revenue Bonds, low income housing tax credits and other
activities described herein, all in accordance with the terms and conditions
hereof (the "CDS PROGRAM");
WHEREAS, Holdings intends to capitalize the Company by making an
initial equity contribution to the Company in an amount equal to the Initial
Capital Contribution (as defined below), and in exchange the Company will issue
to Holdings a member interest representing the sole initial limited liability
company interest in the Company;
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. DEFINITIONS. As used in this Agreement, capitalized terms
shall have the respective meanings ascribed thereto in this Section 1.1.
"ACCOUNTS" has the meaning ascribed thereto in Section 3.1.
"ADMINISTRATIVE EXPENSES" means amounts payable by the Company to (a)
the trustee, administrative agents, collateral agents, transfer agents and
paying or other agents under the Debt Facilities or hereunder or in respect of
the CDS for any fees, expenses and indemnities hereunder or thereunder, (b) the
Company Auditor and the Company's agents and counsel for fees, expenses and
indemnities, (c) the Rating Agencies for fees, expenses and indemnities in
connection with any rating and surveillance of the Debt Facilities, (d) Managing
Member Administrative Expenses, (e) any other Person in respect of any
governmental fee, charge or tax in relation to the Company and (f) any other
Person in respect of any other fees, expenses or indemnities permitted hereunder
and under the other Program Documents; PROVIDED that Administrative Expenses
shall not include (i) fees and expenses owing by the Company under Off-Setting
Swaps, (ii) principal, interest or commitment fees owing under any of the Debt
Facilities and (iii) Contingent Management Fees.
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such Person, PROVIDED that, in
any event, any Person that owns directly or indirectly securities having 5% or
more of the voting power for the election of directors or other governing body
of a corporation or 5% or more of the partnership or other ownership interests
of any other Person (other than as a limited partner of such other Person) will
be deemed to "control" such corporation or other Person for purposes of this
definition. The term "control" (including the correlative term "controlled")
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AGREEMENT" has the meaning ascribed thereto in the introductory
paragraph hereof.
"APPRAISAL" means, with respect to any CDS or Project Investments, an
appraisal conducted by the Company of the market value of the related
Multifamily Revenue Bonds.
"AVAILABLE MEZZANINE LOAN AMOUNTS" has the meaning ascribed thereto in
the Mezzanine Facility.
"BANKRUPTCY ACTIONS" has the meaning ascribed thereto in Section 11.4.
"BANKRUPTCY CODE" means the U.S. Bankruptcy Code of 1978.
"BANKRUPTCY EVENT" means, with respect to any Person, that such
Person:
(a) is dissolved (other than pursuant to a consolidation, amalgamation
or merger);
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
(b) becomes insolvent or is unable to pay its debts or fails, or
admits in writing its inability generally, to pay its debts as they become
due;
(c) makes a general assignment, arrangement or composition with or for
the benefit of its creditors;
(d) (A) institutes or has instituted against it, by a regulator,
supervisor or any similar official with primary insolvency, rehabilitative
or regulatory jurisdiction over it, a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors' rights, or a
petition is presented for its winding-up or liquidation by it or such
regulator, supervisor or similar official, or (B) has instituted against it
a proceeding seeking a judgment of insolvency or bankruptcy or any other
relief under any bankruptcy or insolvency law or other similar law
affecting creditors' rights, or a petition is presented for its winding-up
or liquidation, and such proceeding or petition is instituted or presented
by a Person or entity not described in clause (A) above and either (I)
results in a judgment of insolvency or bankruptcy or the entry of an order
for relief or the making of an order for its winding-up or liquidation or
(II) is not dismissed, discharged, stayed or restrained in each case within
60 days of the institution or presentation thereof;
(e) has a resolution passed for its winding-up or liquidation (other
than pursuant to a consolidation, amalgamation or merger);
(f) seeks or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its assets;
(g) has a secured party take possession of all or substantially all
its assets or has a distress, execution, attachment, sequestration or other
legal process levied, enforced or sued on or against all or substantially
all its assets and such secured party maintains possession, or any such
process is not dismissed, discharged, stayed or restrained, in each case
within 60 days thereafter; or
(h) causes or is subject to any event with respect to it which, under
the applicable laws of any jurisdiction, has an analogous effect to any of
the events specified in clauses (a) to (g) above (inclusive).
"BENEFIT PLAN INVESTOR" has the meaning ascribed thereto in the Plan
Asset Regulations issued by the U.S. Department of Labor at 29 C.F.R. Section
2510.3-101.
"BUSINESS DAY" means any day, other than Saturday or Sunday, on which
commercial banks are not authorized or required to close in New York City.
"CAPITAL ACCOUNT" means, with respect to each Member, the account
established and maintained for such Member on the books of the Company in a
manner that would comply with Regulation Sections 1.704-1(b)(2)(iv) and 1.704-2.
Subject to the preceding sentence, each Member's Capital Account balance shall
initially equal the amount reflected on the books of the Company as of the date
hereof. Throughout the term of the Company, each Capital Account will be (i)
increased by the amount of (A) income and gains allocated to such Capital
Account pursuant to Article VIII and (B) any Cash subsequently contributed to
such Capital Account, and (ii) decreased by the amount of (A) losses and
deductions allocated to such Capital Account pursuant to Article VIII and (B)
Cash distributed to such Member pursuant to Article XIII.
"CAPITAL MODEL" means the computer model, the contents and method of
application of which have been submitted to the Rating Agencies and the master
copy thereof is held by the Managing Member, and which shall be run in
accordance with the procedures set forth in Schedule V.
"CAPITAL MODEL DEFICIENCY AMOUNT" means, at any time that the Capital
Model is run, the excess (if any) of (i) the "Minimum Capital Requirement" as
determined by the Capital Model OVER (ii) the aggregate amount of Permitted
Investments held in the Reserve Account at such time.
"CAPITAL MODEL EVENT" has the meaning ascribed thereto in Section
2.6(a).
"CASH" means cash, amounts credited to deposit accounts and other
immediately available funds that are denominated in U.S. dollars.
"CDS" means credit default swaps or other forms of credit
intermediation provided by the Company directly or indirectly in connection with
Underlying Portfolio Assets, each either (i) in substantially the form of any of
the forms contained in Exhibit A with such industry-standard changes as the
Company may negotiate so long as (x) the changes so negotiated do not result in
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
2
a material increase in the risks undertaken by the Company thereunder (other
than credit risk) or subject the Company to additional risks not theretofor
undertaken by the Company thereunder and (y) notice of any such changes is
delivered by the Company to the Rating Agencies promptly after the execution of
the related definitive documentation or (ii) in substantially such other form as
to which the Rating Condition shall have been satisfied (and, upon any such
satisfaction, Exhibit A shall be deemed amended to include such other form), in
each case directly or indirectly relating to an Underlying Portfolio Asset.
"CDS PROGRAM" has the meaning ascribed thereto in the preliminary
statements hereof.
"CDS PROGRAM TRANSACTION" means any of the following transactions: (i)
entering into by the Company of a CDS, (ii) entering into by the Company of an
Off-Setting Swap and (iii) the addition or substitution of any Multifamily
Revenue Bonds constituting collateral in respect of the Collateral Support Swap.
"CERTIFICATE OF FORMATION" has the meaning ascribed thereto in Section
2.1.
"CHARTERMAC" means CharterMac, a Delaware statutory trust.
"COLLATERAL SUPPORT SWAP" means the credit default swap in
substantially the form of Exhibit C.
"COLLECTION ACCOUNT" has the meaning ascribed thereto in Section 3.1.
"COLLECTION PERIOD" has the meaning ascribed thereto in Section 13.3.
"COMPANY" has the meaning ascribed thereto in the introductory
paragraph hereof.
"COMPANY AUDITOR" means, initially, Deloitte & Touche LLP and,
thereafter, such other independent certified public accountants of recognized
national standing as may be appointed by the Managing Member from time to time.
"CONTINGENT MANAGEMENT FEES" means the fees payable to a special
manager selected by the Collateral Agent (as defined in the Subordination and
Security Agreement) pursuant to Section 4.05(a) of the Subordination and
Security Agreement at any time after an Event of Default (as defined in the
Subordination and Security Agreement) shall have occurred and be continuing.
Accrued but unpaid Contingent Management Fees shall be payable on each Payment
Date in accordance with Section 13.3.
"CUSTODIAN" means Deutsche Bank National Trust Company, as custodian
under the Custody Agreement.
"CUSTODIAN RATINGS CRITERIA" means criteria satisfied on any date with
respect to the Custodian if (a) either (i) the unsecured, unguaranteed and
otherwise unsupported short-term debt obligations of the Custodian are rated at
least "A-1+" by S&P, unless the Custodian shall have certified to the Company
and the Rating Agencies that it holds the assets of the Company in a segregated
trust account at an institution that is a member bank of the Federal Reserve
System, in which case the unsecured, unguaranteed and otherwise unsupported
short-term debt obligations of the Custodian shall be rated at least "A-1" by
S&P, and (b) either (i)(x) the unsecured, unguaranteed and otherwise unsupported
short-term debt obligations of the Custodian are rated "P-1" by Moody's and such
rating is not on watch for possible downgrade by Moody's and (y) the unsecured,
unguaranteed and otherwise unsupported long-term senior debt obligations of the
Custodian are rated higher than "A1" by Moody's or are rated "A1" by Moody's and
such rating is not on watch for possible downgrade by Moody's or (ii) if there
is no such Moody's short-term debt obligations rating, the unsecured,
unguaranteed and otherwise unsupported long-term senior debt obligations of the
Custodian are rated higher than "Aa3" by Moody's or are rated "Aa3" by Moody's
and such rating is not on watch for possible downgrade by Moody's.
"CUSTODY AGREEMENT" means the Custody Agreement between Charter Mac
Equity Issuer Trust, as depositor, and the Custodian, in substantially the form
of Exhibit B.
"DEBT FACILITIES" means, collectively, the Senior Facility, the
Mezzanine Facility and the Subordinated Debt Facility.
"DEFAULTING LENDER" means any Lender that failed to comply with its
obligation to fund its loan under the Senior Facility or the Mezzanine Facility,
as the case may be, and such failure was not remedied on or before the third
Business Day after the occurrence of such failure.
"DELAWARE LLC ACT" means the Delaware Limited Liability Company Act, 6
DEL. C. Section 18-101, ET SEQ.
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
3
"DISTRIBUTION SCHEDULE" has the meaning ascribed thereto in Section
13.2.
"ELIGIBILITY CRITERIA" means, with respect to CDS, Off-Setting Swaps,
the entering into of the Collateral Support Swap and additions or substitutions
of any Multifamily Revenue Bonds constituting collateral in respect of the
Collateral Support Swap, the criteria applicable to such activity set forth in
Schedule IV.
"EXPENSE ACCOUNT" has the meaning ascribed thereto in Section 3.1.
"EXPENSE AMOUNT" means the aggregate amount of fees, expenses and
other items specified in the Expense Statement as payable by the Company.
"EXPENSE STATEMENT" means a statement of the Company delivered to the
Managing Member on or prior to the date hereof specifying (a) each of the fees,
expenses and other items payable by the Company on the date hereof, (b) the
respective amounts of such fees, expenses and other items, (c) the respective
payees of such amounts and (d) the party responsible for payment of each such
amount.
"FISCAL QUARTER" means a calendar quarter of each Fiscal Year.
"FISCAL YEAR" means a calendar year.
"GAAP" means United States generally accepted accounting principles.
"HEDGING AGREEMENT" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"HOLDINGS" has the meaning ascribed thereto in the introductory
paragraph hereof.
"HOLDINGS OPERATING AGREEMENT" means the limited liability company
operating agreement of Holdings dated the date hereof among Charter Mac
Corporation, IXIS Financial Products Inc. and the other members parties thereto.
"INDEMNIFIED PERSONS" has the meaning ascribed thereto in Section
7.8(a).
"INDEPENDENT MANAGER" means a Person meeting the criteria set forth in
Section 7.2 and shall initially be the Person described as such in Schedule II.
"INDEPENDENT MANAGER LETTER AGREEMENT" has the meaning ascribed
thereto in Section 7.7.
"INITIAL CAPITAL CONTRIBUTION" has the meaning ascribed thereto in
Section 4.1.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940.
"LENDER" means any Person party to a Debt Facility having an
obligation to make loans to the Company.
"LIEN" means, with respect to any property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
property.
"LOCAL PARTNERSHIP" has the meaning ascribed thereto in the definition
of "Tax Credit Investments".
"MANAGING MEMBER" means, initially on the date hereof, Holdings, so
long as it is a Member, and, thereafter, such Person as shall be selected by the
Required Members. Such Person shall be deemed to be a "manager" within the
meaning of Section 18-101(10) of the Delaware LLC Act.
"MANAGING MEMBER ADMINISTRATIVE EXPENSES" means amounts payable by the
Company to the Managing Member for fees, expenses and indemnities incurred by
the Managing Member in connection with managing and administering the Company as
Managing Member under this Agreement (including amounts paid by the Managing
Member to third parties or Affiliates of the Managing Member pursuant to
administrative services agreements between the Managing Member and such
Persons).
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
4
"MATERIAL ADVERSE EFFECT" means, with respect to any Person, a
material adverse effect on the business, operations, property, liabilities or
condition (financial or otherwise) of such Person or on the ability of such
Person to perform its obligations under any Program Document to which it is a
party.
"MEMBER" means, initially on the date hereof, Holdings and,
thereafter, any additional or successor members of the Company as provided in
Article X, but excluding any Person who has ceased to be a member in the
Company. Each Member shall be deemed to be a "member" within the meaning of
Section 18-101(11) of the Delaware LLC Act.
"MEMBER INTERESTS" means all of the limited liability company
interests in the Company (as defined in Section 18-101(8) of the Delaware LLC
Act).
"MEZZANINE FACILITY" means the Mezzanine Loan Agreement dated as of
June 28, 2006 among the Company and the Lenders and agent parties thereto.
"MEZZANINE STEP UP AMOUNTS" means interest and commitment fees
accruing under the Mezzanine Facility in respect of the Mezzanine Step Up Rate
(as defined therein).
"MINIMUM CAPITAL REQUIREMENT" means, at any time and with respect to
any proposed transaction and use of funds by the Company, the "Minimum Capital
Requirement" at such time as determined by the Capital Model (after giving
effect to any such proposed transaction and use of funds) that is necessary (i)
in the case of Moody's, such that the expected losses calculated by the Capital
Model for the Senior Facility and the Mezzanine Facility are less than the
target expected losses determined by reference to Moody's expected loss tables
and (ii) in the case of S&P, such that the default probability losses calculated
by the Capital Model for the Senior Facility and the Mezzanine Facility are less
than the target default probability by reference to S&P's default probability
losses tables.
"MINIMUM CAPITAL REQUIREMENT EVENT" means, at any time that the
Capital Model is run, the aggregate amount of Permitted Investments held in the
Reserve Account at such time is less than the aggregate amount of Permitted
Investments required to be held in the Reserve Account as determined by the
Capital Model.
"MONTHLY PERIOD" means a period consisting of each calendar month of
each Fiscal Year.
"MOODY'S" means Xxxxx'x Investors Service, Inc.
"MULTIFAMILY REVENUE BONDS" means revenue bonds issued pursuant to
Section 142(d) of the Tax Code or Section 103(b)(4)(A) of the U.S. Internal
Revenue Code of 1954 (or taxable revenue obligations related thereto) to finance
or refinance multifamily housing facilities.
"NET LOSS TRIGGER EVENT" means at any time that the aggregate amount
of Permitted Investments held in the Reserve Account at such time (including at
the face amount thereof uninvested cash contemporaneously contributed and
received but excluding amounts required to be contemporaneously paid from such
account in respect of CDS or otherwise) is ***.
"OFFER" means, with respect to any obligation, (i) any offer by the
obligor of such obligation or by any other Person made to all of the holders of
such obligation to purchase or otherwise acquire such obligation or to convert
or exchange such obligation for any other obligation or other property (other
than pursuant to any redemption in accordance with the terms of such obligation)
or (ii) any solicitation by the obligor of such obligation or any other Person
to amend, modify or waive any provision of such obligation.
"OFF-SETTING SWAP" means, with respect to any CDS, an off-setting
credit default swap, insurance or other form of credit intermediation for the
Company's obligations in respect of such CDS either (i) in substantially the
form of such CDS or (ii) in substantially such other form as to which the Rating
Condition shall have been satisfied.
"OTHER EQUITY" has the meaning ascribed thereto in Section 5.1.
"PASS THROUGH ENTITY" means any entity which is a pass through or
disregarded entity for federal income tax purposes.
"PAYMENT DATE" means each Quarterly Payment Date and the Termination
Date.
"PERMANENT MINIMUM CAPITAL REQUIREMENT EVENT" means six months shall
have passed since the occurrence of any Minimum Capital Requirement Event and at
no time during such six-month period did, at any time that the Capital Model was
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
5
run, the aggregate amount of Permitted Investments held in the Reserve Account
at such time exceed the aggregate amount of Permitted Investments required to be
held in the Reserve Account as determined by the Capital Model.
"PERMITTED INVESTMENTS" means any dollar denominated investment that,
at the time of purchase by the Company, is one or more of the following
obligations or securities:
(a) cash;
(b) direct Registered debt obligations of, and Registered obligations
the timely payment of principal of and interest on which is fully and
expressly guaranteed by, the U.S. or any full faith and credit agency or
instrumentality thereof;
(c) demand deposits in any U.S. federal or state depository
institution or trust company, the commercial paper and/or debt obligations
of which (or, in the case of the principal depository institution in a
holding company system, the commercial paper or debt obligations of such
holding company) at the time of such investment or contractual commitment
providing for such investment have a long-term credit rating of "Aaa" by
Moody's and "AAA" by S&P, in the case of long-term debt obligations, or
"Prime-1" by Moody's (and is not on credit watch for possible downgrade by
Moody's) and "A-1+" by S&P, in the case of commercial paper and short-term
obligations;
(d) Any security issued or guaranteed as to principal or interest by
the U.S., or by a person controlled or supervised by and acting as an
instrumentality of the U.S. pursuant to authority granted by the Congress
of the U.S., or any certificate of deposit for any of the foregoing,
including securities issued by any of the following instrumentalities:
(i) Federal Farm Credit Bank
(ii) Federal Home Loan Bank
(iii) Federal National Mortgage Association
(iv) Federal Home Loan Mortgage Corporation
(v) Government National Mortgage Association, and
(vi) Tennessee Valley Authority,
so long as at the time of such investment or contractual commitment
providing for such investment the related security (i) has a short-term
credit rating of "A-1+" by S&P or, if no short-term credit rating from S&P
is then available, a long-term credit rating of "AAA" by S&P and (ii) has a
short-term credit rating of "Prime-1" by Moody's or, if no short-term
credit rating from Xxxxx'x is then available, a long-term credit rating of
"Aaa" by Moody's; and
(e) the shares of an investment company registered under the
Investment Company Act, whose shares are registered under the Securities
Act, PROVIDED that (x) any such fund holds itself out as a money market
fund and seeks to maintain a stable net asset value of $1.00 and is subject
to Rule 2a-7 under the Investment Company Act and (y) the obligations of
any such fund are rated "Prime-1" by Moody's (and is not on credit watch
for possible downgrade by Moody's) and "AAAm" by S&P;
and, in each case, (x) with respect to Permitted Investments purchased for
deposit to the Expense Account or the Collection Account, with a stated maturity
(giving effect to any applicable grace period) not later than the Business Day
immediately preceding the next Payment Date and (y) with respect to Permitted
Investments purchased for deposit to the Reserve Account, with a stated maturity
(giving effect to any applicable grace period) not later than the Business Day
immediately preceding the next Payment Date or such longer stated maturity as to
which the Rating Condition shall have been satisfied; PROVIDED that Permitted
Investments shall not include (i) any interest-only security, any security
purchased at a price in excess of 100% of the par value thereof or any security
whose repayment is subject to substantial non-credit related risk as determined
in the sole judgment of the Managing Member, (ii) any security whose rating
assigned by S&P includes the subscript "p", "t", "pi", "q" or "r", (iii) any
other security that is an asset the payments on which are subject to withholding
tax if owned by the Company unless the relevant issuer or obligor or other
Person (and guarantor, if any) is required to make "gross-up" payments that
cover the full amount of any such withholding taxes, (iv) any security subject
to an Offer or (v) any security that is a mortgage-backed security.
"PERMITTED LIENS" means:
(a) Liens imposed by any governmental authority for taxes not yet
due or that are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained
on the books of the Company in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business that are not overdue for a period of more than 30 days or
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
6
that are being contested in good faith and by appropriate proceedings
and Liens securing judgments that are being contested in good faith
and by appropriate appellate proceedings, are fully bonded in the
amount of such judgment and are stayed pending appeal;
(c) pledges and deposits made in the ordinary course of business
in compliance with workers' compensation, unemployment insurance and
other social security laws or regulations;
(d) Cash deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in
the ordinary course of business; and
(e) easements, zoning restrictions, rights-of-way and similar
Liens on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do
not materially detract from the value of the affected property or
interfere with the ordinary conduct of business of the Company;
PROVIDED that the term "Permitted Liens" shall not include any Lien securing
indebtedness.
"PERSON" means any individual, corporation, company, voluntary
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"PLAN ASSET REGULATION" means the regulation promulgated by the U.S.
Department of Labor at 29 C.F.R. Section 2510.3-101.
"PORTFOLIO PERIOD" has the meaning ascribed thereto in Section 2.5.
"PROGRAM DOCUMENTS" means this Agreement, the Debt Facilities, the
Subordination and Security Agreement, the Right of First Refusal Letter and the
Independent Manager Letter Agreement.
"PROGRAM VIOLATION" means a violation of an express limitation or
criterion of the Eligibility Criteria, determined solely at the time of
incurrence of the CDS Program Transaction causing the violation (and not as the
result of a market movement or subsequent change in any condition or
circumstance).
"PROJECT INVESTMENTS" means (i) loans or equity contributions made,
directly or indirectly, to limited partnerships or limited liability companies
(or the general partner or managing member of such limited partnership or
limited liability company) that own directly or indirectly the underlying
projects that directly or indirectly are the subject of any CDS in order to
cover the development or operating expenses (including debt service obligations)
of such limited partnership or limited liability company and so long as such
loans or equity contributions are senior in right to distributions to the
partners or members of such limited partnerships or limited liability companies,
(ii) payments of other sums or expenditures that may be necessary or
appropriate, in the reasonable opinion of the Managing Member, to address
conditions or events with respect to Underlying Portfolio Assets or underlying
projects that are the subject of any CDS, or (iii) acquisitions of interests in
limited partnerships or limited liability companies (or the general partner or
managing member of such limited partnership or limited liability company) that
own directly or indirectly the underlying projects that directly or indirectly
are the subject of any CDS and made in connection with entering into such CDS
and so long as the aggregate amount of each such acquisition does not exceed
$10,000.
"QUARTERLY CAP" means, with respect to any Collection Period, an
amount equal to (i) 0.0125% MULTIPLIED BY (ii) the average daily closing
aggregate principal amount of the Multifamily Revenue Bonds that are reference
obligations under the CDS or pledged as collateral under the Collateral Support
Swap.
"QUARTERLY PAYMENT DATE" means the tenth Business Day of January,
April, July and October of each calendar year, commencing with such Business Day
occurring in October 2006.
"RATABLE PERCENTAGE" means, at any time with respect to any Member,
the ratio (expressed as a percentage) of (i) the aggregate amount of Cash
contributions in respect of all of the Member Interests owned by such Member
(without regard to any distributions made hereunder) TO (ii) the aggregate
amount of Cash contributions in respect of all of the Member Interests (without
regard to any distributions made hereunder).
"RATING AGENCY" means each of Moody's and S&P.
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
7
"RATING CONDITION" means, with respect to each Rating Agency and any
action taken or to be taken under this Agreement, a condition that is satisfied
when each Rating Agency has confirmed to the Company in writing that no
withdrawal, reduction, suspension or other adverse action with respect to any
then current rating by such Rating Agency (including any private or confidential
rating) of any Debt Facility will occur as a result of such action.
"RECORD DATE" has the meaning ascribed thereto in Section 8.2.
"REGISTER" has the meaning ascribed thereto in Section 2.12.
"REGISTERED" means, with respect to any Permitted Investment, that
such Permitted Investment is issued after July 18, 1984 and is in registered
form for purposes of the Tax Code.
"REGULATIONS" means the income tax regulations, including temporary
regulations, promulgated under the Tax Code.
"RELATED PARTIES" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"REQUIRED QUARTERLY EXPENSES AMOUNT" means $150,000.
"REQUIRED MEMBERS" means, at any time, Members holding Member
Interests representing more than 50% of the aggregate amount of Cash
contributions in respect of all of the Member Interests (without regard to any
distributions made hereunder).
"RESERVE ACCOUNT" has the meaning ascribed thereto in Section 3.1.
"RIGHT OF FIRST REFUSAL LETTER" means the Letter Agreement dated as of
June 28, 2006 between the Company and CharterMac.
"S&P" means Standard & Poor's Ratings Services, a division of The
XxXxxx-Xxxx Companies, Inc.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933.
"SENIOR FACILITY" means the Senior Loan Agreement dated as of June 28,
2006 among the Company and the Lenders and agent parties thereto.
"SENIOR STEP UP AMOUNTS" means interest and commitment fees accruing
under the Senior Facility in respect of the Senior Step Up Rate (as defined
therein).
"SERVICE" means the Internal Revenue Service.
"SUBORDINATED DEBT FACILITY" means the Subordinated Loan Agreement
among the Company and the Lenders and agent parties thereto and in the form of
Exhibit E with such changes as shall be permitted under the Senior Facility and
the Mezzanine Facility.
"SUBORDINATION AND SECURITY AGREEMENT" means the Subordination and
Security Agreement dated as of June 28, 2006 among the Company and the agents
parties thereto.
"TAX CODE" means the U.S. Internal Revenue Code of 1986.
"TAX CREDIT INVESTMENTS" means ownership interests in a Pass Through
Entity that invests directly or indirectly in a Pass Through Entity (the "LOCAL
PARTNERSHIP") in respect of which certain new market tax credits, low-income
housing tax credits, state low-income housing tax credits, historic
rehabilitation tax credits, state historic rehabilitation tax credits, home
ownership tax credits (if such credits are enacted as part of the Tax Code) and
other similar tax credits established by state programs, as well as depreciation
and losses derived from the multifamily affordable housing transactions owned by
such Local Partnership, are anticipated to be available and are allocated to the
limited partners or members in respect thereof in accordance with the Internal
Revenue Code and any applicable state legislation (the credits, depreciation and
losses so allocated, the "SPECIFIED RISKS"), each either (i) in substantially
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
8
the form of any of the forms contained in Exhibit D with such changes as may be
negotiated so long as (x) the changes so negotiated do not result in a material
increase in the risks of ownership thereof (other than an increase relating to
the Specified Risks) or subject the Company to additional risks not theretofor
undertaken by the Company thereunder and (y) notice of any such changes is
delivered by the Company to the Rating Agencies promptly after the execution of
the related definitive documentation or (ii) in substantially such other form as
to which the Rating Condition shall have been satisfied (and, upon any such
satisfaction, Exhibit D shall be deemed amended to include such other form), and
with respect to which the Company has entered into a CDS.
"TAX MATTERS MEMBER" has the meaning ascribed thereto in Section
8.6(d).
"TAX PROFITS AND LOSSES" mean, for each Fiscal Year, an amount equal
to the Company's taxable income or loss for such Fiscal Year determined in
accordance with Section 703(a) of the Tax Code (for this purpose, all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Tax Code shall be included in taxable income or loss),
with the following adjustments (without duplication):
(a) any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing profits or
losses pursuant to this definition of "Tax Profits and Losses" shall
be added to such taxable income or loss;
(b) any expenditures of the Company described in Section
705(a)(2)(B) of the Tax Code or treated as Tax Code Section
705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing
profits or losses pursuant to this definition of "Tax Profits and
Losses" shall be subtracted from such taxable income or loss;
(c) any further adjustments as the Tax Matters Member deems
necessary or appropriate to satisfy the requirements of Regulations
Section 1.704-1(b); and
(d) notwithstanding any other provision of this definition, any
items that are specially allocated pursuant to Section 8.6 shall not
be taken into account in computing profits or losses pursuant to this
definition of "Tax Profits and Losses".
The amounts of the items of Company income, gain, loss or deduction
available to be specially allocated pursuant to Section 8.6 shall be determined
by applying rules analogous to those set forth in paragraphs (a) through (d)
above.
"TERMINATION DATE" has the meaning ascribed thereto in Section 2.5.
"TOP-UP EVENT" has the meaning ascribed thereto in Section 2.6(b).
"TRANSFER" means any sale, assignment, transfer, disposition,
mortgage, pledge, charge or encumbrance or contract to do or permit any of the
foregoing, whether voluntary or by operation of law (and, in each case, whether
absolutely, beneficially, nominally, as collateral security or otherwise).
"TRANSFEREE" means any Person who has acquired a beneficial interest
in a Member Interest in accordance with the terms of this Agreement.
"TRANSFEROR" means any Person who has sold, assigned, transferred,
disposed of, mortgaged, pledged, charged or encumbered a Member Interest or
contracted to do or permit any of the foregoing, whether voluntarily or by
operation of law.
"UCC" has the meaning ascribed thereto in Section 2.8(b).
"UNDERLYING PORTFOLIO ASSETS" means, collectively, (i) Tax Credit
Investments as to which the Rating Condition for S&P shall have been satisfied
and notice shall have been given to Moody's and (ii) Multifamily Revenue Bonds.
"U.S." means the United States of America.
"WIND-DOWN DATE" means the date on which a Wind-Down Event occurs.
"WIND-DOWN EVENT" has the meaning ascribed thereto in Section 12.1.
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
9
Section 1.2. TERMS GENERALLY. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall". The
term "date hereof" refers to the date of this Agreement first above written.
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
restated, supplemented or otherwise modified (subject to any restrictions on
such amendments, restatements, supplements or modifications set forth therein or
herein, including Section 14.5), (b) references to any law, constitution,
statute, treaty, regulation, rule or ordinance, including any section or other
part thereof (each, for purposes of this Section 1.2, a "law"), shall refer to
that law as amended from time to time and shall include any successor law, (c)
any reference herein to any Person shall be construed to include such Person's
successors and permitted assigns, (d) the words "herein", "hereof", "hereto",
"hereunder" and "herewith", and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (e) all references herein to Sections, Exhibits and Schedules shall be
construed to refer to Sections of, and Exhibits and Schedules to, this
Agreement, unless otherwise specified, (f) accounting terms have the meanings
given to them by GAAP applied on a consistent basis by the accounting entity to
which they refer, (g) references to "dollars" or "$" shall mean the lawful
currency of the U.S. and (h) the words "asset" and "property" shall be construed
to have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including Cash, securities, accounts and
contract rights.
ARTICLE II
FORMATION, NAME, OFFICES AND PURPOSES; MEMBERS
Section 2.1. FORMATION. The Company was formed as a limited liability
company on June 15, 2006 by the filing of a Certificate of Formation with the
Secretary of State of the State of Delaware (the "CERTIFICATE OF FORMATION").
Except as otherwise provided in this Agreement, the rights, duties, liabilities
and obligations of the Members, present and future, and the administration,
dissolution, winding up and termination of the Company shall be governed by the
Delaware LLC Act. This Agreement is the "limited liability company agreement" of
the Company as defined in Section 18-101(7) of the Delaware LLC Act. Holdings
shall be admitted as a Member upon its execution of a counterpart of a signature
page to this Agreement. The existence of the Company as a separate legal entity
shall continue until cancellation of the Certificate of Formation as provided in
the Delaware LLC Act.
Section 2.2. NAME. The name of the Company shall be "Centerbrook
Financial LLC", and all business of the Company shall be conducted in such name.
The filing of the Certificate of Formation with the Secretary of State of the
State of Delaware by Holdings, as an authorized person, is hereby ratified and
approved in all respects. Upon the filing of the Certificate of Formation with
the Secretary of State of the State of Delaware, the powers of Holdings as an
"authorized person" ceased. The Managing Member is hereby designated as an
"authorized person" within the meaning of the Delaware LLC Act. Any Person
designated as an "authorized person" by the Company is authorized to execute,
deliver and file on behalf of the Company any certificate or certificates
required by law to be filed in connection with changes in the name of the
Company or the conduct of the business of the Company and shall cause such
certificate or certificates to be filed with the appropriate governmental
officials as an "authorized person" within the meaning of the Delaware LLC Act,
if applicable.
Section 2.3. OFFICES. The principal office of the Company shall be
located at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. The Company's
registered office and the name of its registered agent at such address in the
State of Delaware shall be as set forth in the Certificate of Formation. The
Company may have such substituted and additional offices at such other locations
as the Managing Member shall designate. The Company's registered office and
registered agent in the State of Delaware may be changed from time to time by
filing the address of the new registered office and/or the name of the new
registered agent with the Secretary of State of the State of Delaware pursuant
to the Delaware LLC Act.
Section 2.4. PURPOSES; POWER. The purpose of the Company shall be, and
the Company shall have the power and authority, to:
(a) issue the Member Interests;
(b) enter into, and incur liabilities and perform its obligations
under, any Program Document to which it is a party;
(c) acquire, hold and dispose of Permitted Investments to the extent
permitted hereunder;
(d) make payments and distributions in accordance with Article XIII;
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
10
(f) enter into CDS and the Collateral Support Swap;
(g) make Project Investments; (h) enter into Off-Setting Swaps;
(i) take such actions that are necessary or appropriate, in the
Managing Member's reasonable discretion, to settle or resolve any claims or
disputes or exercise or enforce its rights and remedies relating to any of
the foregoing, any Underlying Portfolio Assets or the Custody Agreement;
(j) engage in such other activities relating to the CDS Program as to
which the Rating Condition shall have been satisfied; and
(k) enter into, make and perform all contracts and other undertakings
and engage in all activities and transactions incidental to the foregoing;
PROVIDED that the Company shall in no event have the power or authority to:
(i) engage in any activity other than as required or authorized
by this Section 2.4 or any other provision of this Agreement; and
(ii) enter into, make or perform any written contract, agreement
or other undertaking (other than CDS) that does not contain a "No
Petition; Limited Recourse" provision substantially similar to the
provisions in Section 14.7 or amend any such provision without first
satisfying the Rating Condition.
Section 2.5. PROGRAM PERIOD. The term of the CDS Program shall consist
of two periods, the earlier period (the "PORTFOLIO PERIOD"), commencing on and
including the date hereof and ending on but excluding the Wind-Down Date, and
the later period, commencing on and including the Wind-Down Date and ending on
and including the date (the "TERMINATION DATE") of the final winding up and
liquidation of the CDS Program, the final distributions in respect thereof and
the payment in full of all obligations of the Company under the Debt Facilities.
The Company shall, during the Portfolio Period, create and manage the CDS
Program in accordance with the Eligibility Criteria and the terms and conditions
of this Agreement.
Section 2.6. CAPITAL MODEL(a) The Capital Model shall be run by the
Managing Member prior to undertaking any of the following actions (each, a
"CAPITAL MODEL EVENT") to determine whether the Minimum Capital Requirement will
be met (after giving effect to any proposed transaction and use of funds as
determined by the Capital Model), and the Company shall only be permitted to
undertake such Capital Model Event if such Minimum Capital Requirement will be
met (after giving effect to such proposed transaction and use of funds as
determined by the Capital Model):
(i) ***;
(ii) ***;
(iii) ***;
(iv) ***;
(v) ***; and
(vi) ***.
(b) The Capital Model shall be run by the Managing Member upon the
occurrence of any of the following circumstances (each, a "TOP-UP EVENT") to
determine whether the Minimum Capital Requirement is met (after giving effect to
any proposed transaction and use of funds as determined by the Capital Model):
(i) ***;
(ii) ***; and
(iii) ***.
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
11
Any payments required to be made by the Company in respect of any Top-Up Event
shall be made by the Company regardless of whether the Minimum Capital
Requirement is met. ***, the Company shall use its best efforts to do one or
more of the following to ensure that the Minimum Capital Requirement is met: (x)
request Cash capital contributions from Holdings and deposit the proceeds
thereof in the Reserve Account and/or (y) increase the available commitments in
respect of the Senior Facility or the Mezzanine Facility and/or (z) borrow
additional amounts under the Subordinated Debt Facility.
(c) On the first Business Day of each Monthly Period, commencing with
the first Monthly Period beginning after the date hereof, the Managing Member
shall run the Capital Model to determine whether the Minimum Capital Requirement
is met. In addition, the Managing Member shall run the Capital Model at least
once during each calendar week, commencing with the first calendar week
beginning after the date hereof, to determine whether the Minimum Capital
Requirement is met.
(d) The Managing Member shall cause the Capital Model to be run at the
times required in this Agreement (including pursuant to Section 13.3) in
accordance with the procedures set forth in Schedule V and otherwise in
accordance with the terms of this Agreement.
Section 2.7. SCOPE OF MEMBERS' AUTHORITY. No Member (other than the
Managing Member to the extent that it is also a Member) shall have any authority
to bind or act for, or assume any obligations or responsibilities on behalf of,
the Company. Neither the Company nor any Member shall be responsible or liable
for any indebtedness or obligation of any other Member incurred or arising
either before or after the execution of this Agreement. The debts, obligations
and liabilities of the Company, whether arising in contract, tort or otherwise,
shall be the debts, obligations and liabilities solely of the Company, and
neither any Member nor the Independent Manager shall be obligated personally for
any such debt, obligation or liability of the Company solely by reason of being
a Member or Independent Manager of the Company.
Section 2.8. MEMBER INTERESTS(a) The Member Interests to be issued to
Holdings on the date hereof are duly authorized and validly issued limited
liability company interests in the Company.
(b) The Member Interests shall constitute "securities" within the
meaning of (i) Article 8 of the Uniform Commercial Code (the "UCC") (including
Section 8-102(a)(15) thereof) as in effect from time to time in the State of
Delaware and in the State of New York and (ii) the law of any other applicable
jurisdiction that presently or hereafter substantially includes the 1994
revisions to Article 8 of the UCC as adopted by the American Law Institute and
the National Conference of Commissioners on Uniform State Laws and approved by
the American Bar Association on February 14, 1995.
(c) The Members shall be entitled to receive distributions in respect
of their Member Interests from the Company on each Quarterly Payment Date in
accordance with Section 13.3 to the extent of funds available therefor.
(d) Members shall be entitled to vote only in connection with those
matters specified in this Agreement as requiring the vote of the Required
Members or in connection with any amendment of this Agreement or other Program
Document to which the Company is a party, as provided in Section 14.5.
(d) The Member Interests shall not be redeemable.
Section 2.9. OTHER JURISDICTIONS. In the event that the Managing
Member determines that it is necessary for the Company to qualify to do business
under the laws of one or more jurisdictions in addition to the State of
Delaware, the Company shall take such actions as may be necessary to exist or
qualify to do business in each such jurisdiction; PROVIDED that in any such
event the Company shall at all times continue to be a limited liability company
formed under and governed by the provisions of the Delaware LLC Act.
Section 2.10. CERTAIN COVENANTS RELATING TO SEPARATENESS; TRANSACTIONS
WITH AFFILIATES. Notwithstanding anything to the contrary contained in this
Agreement, the Company shall maintain its separate existence, agrees that this
Section 2.10 is set forth herein to qualify the Company as a "single purpose
entity", and, specifically, shall conduct its affairs in accordance with, and
each Member agrees that it will not take any actions in its dealings with the
Company or with other Persons (including their creditors) that are inconsistent
with, the following:
(a) The Company shall: (i) maintain and prepare separate financial
reports (if any) and financial statements (if any) in accordance with GAAP,
showing its assets and liabilities separate and apart from those of any
other Person, and will not have its assets listed on the financial
statement of any other Person, PROVIDED that the Company's assets may be
included in a consolidated financial statement of a Member if inclusion on
such consolidated financial statement is required to comply with the
requirements of GAAP, but only if (x) such consolidated financial statement
shall be appropriately footnoted to the effect that the Company is a
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
12
separate entity and the Company's assets are separately owned by the
Company and that they are being included on the consolidated financial
statement of such Member solely to comply with the requirements of GAAP,
and (y) such assets shall be listed on the Company's own separate balance
sheet; (ii) maintain accurate and appropriately detailed books, financial
records and accounts, including checking and other bank accounts and
custodian and other securities safekeeping accounts, that are separate and
distinct from those of any of its Affiliates and any other Person; and
(iii) not permit any Affiliate or any other Person independent access to
its bank accounts, except as specifically provided in the Program
Documents.
(b) The Company shall not commingle or pool any of its funds or other
assets with those of any Affiliate or any other Person, and it shall hold
all of its assets in its own name.
(c) The Company shall conduct its own business in its own name and
shall not operate, or purport to operate, collectively as a single or
consolidated business entity with respect to any Person.
(d) The Company shall, insofar as is consistent with commercial and
business circumstances affecting its business and financial condition,
remain solvent and pay its own debts, liabilities and expenses (including
overhead expenses, if any) only out of its own assets as the same shall
become due; PROVIDED that this Section 2.10(d) shall not constitute a
guaranty or "keep well" obligation by any Member, any administrator of or
with respect to the Company or any other Person in respect of the Company
or its debts, liabilities or expenses or any financial or balance sheet
condition or ratio of or relating to the Company.
(e) The Company shall do, or cause to be done, all things necessary to
observe all Delaware limited liability company formalities and other
organizational formalities, and preserve its existence (subject to Article
XI and the other express provisions hereof), and it shall not, nor shall it
permit any Affiliate or any other Person to, amend, modify or otherwise
change this Agreement in a manner which would adversely affect the
existence of the Company as a special purpose entity.
(f) The Company shall not (i) guarantee, become obligated for, or hold
itself or its credit out to be responsible for or available to satisfy, the
debts or obligations of any other Person or (ii) control the decisions or
actions respecting the daily business or affairs of any other Person,
except in each case as permitted by or pursuant to the Program Documents.
(g) The Company shall, to the extent it utilizes stationery, invoices
and checks, maintain and utilize separate stationery, invoices and checks
bearing its own name.
(h) The Company shall, at all times, hold itself out to the public as
a legal entity separate and distinct from any other Person and shall
correct any known misunderstanding regarding its separate identity.
(i) The Company shall not identify itself as a division of any other
Person.
(j) The Company shall maintain its assets in such a manner that it
will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any Affiliate or any other Person.
(k) The Company shall not use its separate existence to abuse
creditors or to perpetrate a fraud, injury or injustice on creditors in
violation of applicable law.
(l) The Company shall not act with an intent to hinder, delay or
defraud any of its creditors in violation of applicable law.
(m) The Company shall not make loans or advances to any Person, except
as permitted by the Program Documents.
(n) The Company shall not xxxxx x Xxxx on any of its assets for the
benefit of any Person, except for Permitted Liens and as permitted by or
pursuant to the Program Documents.
(o) The issuances of the Member Interests to the Members are intended
to be, and shall be accounted for on the books, records and financial
statements of the Company and the Members as, the issuance of equity
capital and not as a loan by the Members to the Company.
(p) The Company shall make no transfer of its assets, except as
permitted by or pursuant to the Program Documents.
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
13
(q) The Company shall cause all material transactions and agreements
between it and any one or more of its Affiliates (including transactions
and agreements pursuant to which assets or property of one is used or to be
used by the other) to be entered into in the names of the Persons that are
parties to the transaction or agreement and to be formally documented in
writing.
(r) To the extent that the Company and its Affiliates jointly contract
or do business with vendors or service providers or share overhead
expenses, the Company shall allocate fairly, appropriately and
nonarbitrarily the costs and expenses incurred in so doing between or among
such Persons, with the result that each such Person bears its fair share of
all such costs and expenses.
(s) To the extent that the Company contracts or does business with
vendors or service providers where the goods or services are wholly or
partially for the benefit of its Affiliates, it shall allocate fairly,
appropriately and nonarbitrarily the costs incurred in so doing to the
Persons for whose benefit the goods or services are provided, with the
result that each such Person bears its fair share of all such costs and
expenses.
(t) The Company shall ensure that decisions with respect to its
business and daily operations shall be made independently by the officers
of the Managing Member and/or agents or officers of the Company, in each
case acting in their capacity as such (although the individual making any
particular decision may also be an employee, officer or director of any one
or more of its Affiliates).
(u) To the extent it occupies any premises in the same location or
shares the use of equipment with its Affiliates, the Company shall allocate
fairly, appropriately and nonarbitrarily any rent and overhead expenses
among and between such Persons, with the result that each bears its fair
share of all such rent and expenses.
(v) The Company shall maintain an arm's-length relationship with its
Affiliates and enter into transactions with Affiliates only on a
commercially reasonable basis and on terms not less favorable than those
that could be obtained from an independent third party that is not an
Affiliate of the Company.
(w) The Company shall have no employees, but may have officers as
permitted under this Agreement.
(x) The Company shall not enter into any transaction of merger or
consolidation or amalgamation, or, to the fullest extent permitted by law,
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), except as provided in this Agreement.
Section 2.11. GENERAL COVENANTS
The Company shall:
(a) preserve and maintain all of its material rights, privileges,
licenses and franchises;
(b) obtain and maintain, or cause to be obtained and maintained, in
full force and effect all necessary governmental approvals and permits
required to be obtained in its name from time to time, unless failure to
obtain or maintain the same would not reasonably be expected to have a
Material Adverse Effect with respect to the Company;
(c) comply with the requirements of all applicable laws, rules,
regulations and orders of the SEC and all other governmental and regulatory
authorities if failure to comply with such requirements could (either
individually or in the aggregate) have a Material Adverse Effect with
respect to the Company;
(d) not change the last day of its Fiscal Year from December 31;
(e) maintain insurance with financially sound and reputable insurance
companies, and with respect to property and risks of a character usually
maintained by companies engaged in the same or similar business similarly
situated, against loss, damage and liability of the kinds and in the
amounts customarily maintained by such companies and, in any event, shall
maintain business interruption insurance for actual losses sustained for a
twelve-month period;
(f) cooperate with all reasonable requests of the Company Auditor in
connection with the performance of its agreed upon procedures reviews of
the Company and, upon the completion of any such review, the Company shall
promptly deliver the results of such review to each Rating Agency;
(g) enter into CDS only if (i) the Eligibility Criteria with respect
to any such CDS shall have been satisfied, (ii) permitted by this Agreement
and (iii) the Minimum Capital Requirement shall have been met (after giving
effect to the proposed transaction and use of funds as determined by the
Capital Model);
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
14
(h) make Project Investments only if (i) permitted by this Agreement
and (ii) the Minimum Capital Requirement shall have been met (after giving
effect to the proposed transaction and use of funds as determined by the
Capital Model);
(i) enter into Off-Setting Swaps only if (i) the Eligibility Criteria
with respect to any such Off-Setting Swaps shall have been satisfied, (ii)
permitted by this Agreement, (iii) the Minimum Capital Requirement shall
have been met (after giving effect to the proposed transaction and use of
funds as determined by the Capital Model) and (iv) the Rating Condition
shall have been satisfied with respect thereto;
(j) enter into the Collateral Support Swap or release any of the
collateral subject to the Collateral Support Swap or permit any addition or
substitution of collateral in respect thereof only if (i) the Eligibility
Criteria with respect to any such action shall have been satisfied, (ii)
permitted by this Agreement and (iii) the Minimum Capital Requirement shall
have been met (after giving effect to the proposed transaction and use of
funds as determined by the Capital Model);
(k) enter into any Hedging Agreement only in the ordinary course of
business and not for speculative purposes, so long as the Rating Condition
shall have been satisfied with respect thereto;
(l) within 45 days after the end of each Fiscal Year, commencing with
the current Fiscal Year, or upon the request by the Managing Member for
purposes of running the Capital Model, cause to be obtained an Appraisal
(i) for each CDS as to which the Company has made a settlement payment but
has not received a recovery and (ii) with respect to each outstanding
Project Investment of the type described in clauses (i) and (ii) of the
definition thereof;
(m) not form or acquire any subsidiaries, except as permitted by the
Program Documents;
(n) not take any action that would require registration of the Company
as an "investment company" under the Investment Company Act; and
(o) to the extent that the Company receives any upfront unamortized
premiums in respect of CDS, the Company shall deposit such premiums into
the Reserve Account for application in accordance with Section 13.3(b),
PROVIDED that the restrictions set forth in this clause (o) shall not apply
if and to the extent that the Rating Condition shall have been satisfied.
Section 2.12. REGISTER OF MEMBERS. The Managing Member shall prepare
and maintain a register of the Members of the Company (the "REGISTER") and shall
enter into the Register any Person who has become a Member in accordance with
Article X. The Managing Member shall record in the Register the name and mailing
address of each Member, the date such Person became a Member and the percentage
of the Member Interests held by such Member. The initial Register shall be in
the form attached hereto as Schedule I. The Managing Member shall furnish to
each Member, within 15 days after receipt by the Company of a written request
therefor from such Member, a list, in such form as such party may reasonably
require, of the names and addresses of the Members as of the most recent
practicable date. Every Member, by receiving and holding a Member Interest,
agrees that neither the Company nor any agent thereof shall be held accountable
or liable for any losses that may occur by reason of the disclosure of any such
information as to the names and addresses of the Members under this Agreement,
regardless of the source from which such information was derived. The Company
and any agent of the Company may treat the Person in whose name any Member
Interest is registered as the owner of such Member Interest for the purpose of
receiving distributions pursuant to Section 13.3 and for all other purposes
whatsoever, and neither the Company nor any agent of the Company shall be
affected by any notice to the contrary.
ARTICLE III
ACCOUNTS
Section 3.1. ESTABLISHMENT OF ACCOUNTS; USE OF AMOUNTS ON DEPOSIT. On
or prior to the date hereof, the Company shall have established account number
52800 (the "COLLECTION ACCOUNT"), account number 52801 (the "EXPENSE ACCOUNT")
and account number 52802 (the "RESERVE ACCOUNT" and, together with the
Collection Account and the Expense Account, the "ACCOUNTS"), each at Deutsche
Bank Trust Company Americas, into which the Company shall deposit amounts
required to be so deposited by the terms of this Agreement. The Company shall be
permitted to invest and reinvest any Cash held in or credited to the Accounts
from time to time in Permitted Investments. The funds credited to the Accounts
shall only be used to make distributions and payments pursuant from time to time
to Sections 13.1 and 13.3.
Section 3.2. COLLECTION ACCOUNT. The Company shall cause the following
amounts to be paid to it in the Collection Account:
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
15
(a) all earned investment income received by the Company, including
investment income earned on amounts in the Accounts;
(b) all fees received by the Company in respect of CDS (other than any
upfront unamortized premiums); and
(c) all settlement payments received by the Company in respect of
Hedging Agreements.
Section 3.3. EXPENSE ACCOUNT. The Company shall cause the following
amounts to be paid to it in the Expense Account:
(a) on the date hereof, a portion of the Initial Capital Contribution
in the amount equal to the Required Quarterly Expenses Amount; and
(b) all amounts required to be deposited in the Expense Account
pursuant to Section 13.3(a).
Section 3.4. RESERVE ACCOUNT. The Company shall cause the following
amounts to be paid to it in the Reserve Account:
(a) Cash proceeds of any borrowings under the Senior Facility;
(b) Cash proceeds of any borrowings under the Mezzanine Facility;
(c) Cash proceeds of any borrowings under the Subordinated Debt
Facility;
(d) Cash capital contributions made to the Company (other than the
portion of the Initial Capital Contribution in the amount equal to the
Required Quarterly Expenses Amount);
(e) all recoveries and settlement payments received by the Company in
respect of CDS and the Collateral Support Swap;
(f) all settlement payments received by the Company in respect of
Off-Setting Swaps;
(g) all amounts received in respect of Project Investments;
(h) all amounts required to be deposited in the Reserve Account
pursuant to Sections 2.11(o), 13.3(a) and 13.3(b); and
(i) any other Cash received by the Company and not required to be
deposited in the Collection Account or the Expense Account.
ARTICLE IV
CAPITAL CONTRIBUTIONS
Section 4.1. INITIAL CAPITAL CONTRIBUTION; NO FURTHER CAPITAL
CONTRIBUTIONS REQUIRED. On the date hereof, the initial Member shall make a Cash
capital contribution to the Company in the amount of $29,150,000 (the "INITIAL
CAPITAL Contribution"). Thereafter, no Member shall be required to make any
additional capital contribution to the Company.
Section 4.2. NO NON-CASH CAPITAL CONTRIBUTIONS. After the date hereof,
capital contributions shall not be made or deemed to be made to the Company in
any form other than Cash.
Section 4.3. RIGHTS AND OBLIGATIONS OF MEMBERS. Except as otherwise
provided in this Agreement, any other Program Document or the Delaware LLC Act:
(a) no Member (in its capacity as a Member) shall have any liability to the
Company in excess of such Member's unpaid capital contributions that such Member
is contractually obligated to make; (b) no Member shall have any liability to
any other Member for the return or repayment of the capital contributions of
such other Member; (c) no Member shall be required to pay to the Company or any
other Member any deficit in its own or such other Member's Capital Account (upon
dissolution or otherwise); and (d) no Member shall be personally liable for any
debts, obligations or losses of the Company.
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
16
ARTICLE V
ADDITIONAL EQUITY INTERESTS
Section 5.1. ISSUANCE OF ADDITIONAL EQUITY INTERESTS. The Managing
Member, with the consent of each of the Members, is authorized to cause the
Company to issue additional classes of equity (the "OTHER EQUITY") and to admit
Persons as Members in connection therewith, in one or more series or classes, or
in one or more series of any such class which may be senior or junior to other
Member Interests, which may include preferred equity entitling the holder
thereof to receive statutory credits in connection with the Community
Reinvestment Act generated by the Company, on such terms and conditions as the
Managing Member, with the consent of each of the Members, shall establish, in
each case, subject to Delaware law, including (i) the allocations of items of
Company income, gain, loss, deduction and credit with respect to the holder of
the Other Equity, (ii) the rights of the holder of the Other Equity to share in
Company distributions, and (iii) the rights of the holder of the Other Equity
upon dissolution and winding up of the Company, PROVIDED that in connection with
any such issuance the Rating Condition shall have been satisfied.
Section 5.2. AMENDMENTS TO REFLECT OTHER EQUITY. The Managing Member,
with the consent of each of the Members, shall have the authority to amend this
Agreement to the extent necessary to reflect the rights of the holders of the
Other Equity or additional Member Interests issued in accordance with Section
5.1.
ARTICLE VI
PARTICIPATION IN COMPANY PROPERTY
Section 6.1. OWNERSHIP BY MEMBER OF COMPANY. No Member shall have any
right of partition with respect to any property or assets of the Company. To the
fullest extent permitted by law, for so long as any obligation of the Company
under any Program Document, CDS or Off-Setting Swap is outstanding, each Member
hereby irrevocably waives any right or power that it might have to cause the
appointment of a receiver for all or any portion of the assets of the Company,
to compel any sale of all or any portion of the assets of the Company pursuant
to any applicable law or to file a complaint or to institute any proceeding at
law or in equity to cause the dissolution, liquidation, winding up or
termination of the Company. The Member shall not have any interest in any
specific assets of the Company, and the Member shall not have the status of a
creditor with respect to any distribution herein. The interest of the Member in
the Company is personal property.
Section 6.2. RETURN OF CAPITAL. Except as otherwise provided herein,
no Member shall have any right to demand or receive a distribution in respect of
its Member Interest prior to the dissolution of the Company, and no Member shall
have the right to demand that any such distribution to such Member be in the
form of property or assets other than Cash in return for its capital
contribution to the Company.
ARTICLE VII
MANAGEMENT
Section 7.1. MANAGEMENT BY THE MANAGING MEMBER.
(a) Except with respect to matters as to which the Members are
required to vote by non-waivable provisions of the Delaware LLC Act or are
otherwise entitled to vote pursuant to this Agreement and subject to Section
11.4, (i) the powers of the Company shall be exercised by or under the authority
of, and the business and affairs of the Company shall be managed under the
direction of, the Managing Member and (ii) the Managing Member may make or cause
to be made all decisions and take or cause to be taken all actions for the
Company.
(b) The Managing Member shall perform its obligations hereunder with
reasonable care, using a degree of skill and attention not less than that which
the Managing Member or its Affiliates would exercise (and in any event not less
than the degree of care and skill exercised by other similar managers of
recognized standing) with respect to comparable assets managed for itself and
others having similar investment objectives and restrictions. The Managing
Member agrees that its obligations hereunder shall be enforceable by the
Company, the Lenders and any trustee or agent on behalf of the Lenders.
Section 7.2. INDEPENDENT MANAGER. The Managing Member shall select and
appoint and be entitled to remove and replace the Independent Manager upon a
vacancy in such position. The Independent Manager shall at all times hold such
position until a successor shall have been appointed by the Managing Member. The
Independent Manager as of the date hereof is set forth on Schedule II. In
addition to being appointed by the Managing Member in accordance with the
preceding sentence, the Independent Manager shall be a Person who is not, and
for at least two years prior to such appointment has not been, (i) a director,
officer, employee, partner, member or stockholder of any Person owning
beneficially, directly or indirectly, any of the outstanding equity interests in
the Company, its Members or Affiliates or (ii) a director, officer, employee,
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
17
partner, member or a stockholder owning more than 1% of the outstanding equity
interests in any such beneficial owner's parent, subsidiaries or Affiliates (in
each case other than such Person's capacity as "Independent Manager" or
independent manager of the Company, any of its Affiliates or another direct or
indirect special purpose subsidiary of the Member). The Independent Manager
shall act in its capacity as a manager of the Company with only such duties and
rights as are expressly set forth in this Agreement. The Independent Manager is
hereby designated as a "manager" of the Company within the meaning of Section
18-101(10) of the Delaware LLC Act with only such duties and rights as are
expressly set forth in this Agreement. To the fullest extent permitted by law,
the Independent Manager shall consider the interests of the rated debtholders
and other creditors of the Company (other than the Lenders in respect of the
Subordinated Debt Facility) in making determinations hereunder. The Independent
Manager shall not be entitled to a vote on any matter other than a determination
by the Managing Member to commence insolvency proceedings, including the
commencement of a voluntary case under the Bankruptcy Code, with respect to the
Company as required under Section 11.4.
Section 7.3. ACTIONS BY MANAGING MEMBER. Each Member, by execution of
this Agreement or its acceptance of a Member Interest, agrees to, consents to
and acknowledges the delegation of powers and authority to the Managing Member
granted hereunder (subject to Section 11.4) and the actions and decisions of the
Managing Member that are within the scope of its power and authority as provided
herein (including the use by the Managing Member of property owned by or
licensed to the Company (including the Capital Model)). The Company, and the
Managing Member on behalf of the Company, may enter into the Program Documents
without any further act, vote or approval of any Member, notwithstanding any
other provision of this Agreement. The Managing Member may authorize any Person
to enter into any other document permitted hereunder on behalf of the Company
and to perform the duties thereunder, PROVIDED that the Managing Member shall
not be relieved of any of its obligations hereunder or the standard of care in
respect thereof regardless of the performance of any services by third parties.
The Managing Member shall take all actions necessary to administer the Program
Documents in accordance with their terms and to effect payments and
distributions of expenses and in respect of Member Interests in accordance with
this Agreement and the other Program Documents and take all other action on
behalf of the Company in order to cause the Company to comply with the terms of
the Program Documents; PROVIDED that the determination of the Company to engage
in any Bankruptcy Action with respect to itself, including the commencement of a
voluntary case under the Bankruptcy Code, shall require the affirmative vote (or
consent) of the Independent Manager as provided in Section 11.4. The Managing
Member shall not take any action that would (i) materially violate any law, rule
or regulation of any governmental body or agency having jurisdiction over the
Issuer including any Delaware law, United States Federal or state law or any
other law known to the Managing Member to be applicable to the Company, (ii)
require registration of the Company as an "investment company" under the
Investment Company Act, or (iii) cause the Company to materially violate any of
the terms of the Program Documents or any other agreement contemplated thereby.
The Managing Member agrees that it shall comply with all laws and regulations
applicable to it in connection with the performance of its duties under this
Agreement and the other Program Documents the violation of which has or could
reasonably be expected to have a material adverse effect on the Company, any
assets of the Company or the interests of the Lenders.
Section 7.4. OFFICERS. Subject to the rights and authority of the
Managing Member, the Company may have officers consisting of a chief executive
officer, president, a chief financial officer and a secretary to execute such
documents and certificates as may be appropriate from time to time on behalf of
the Company. Such officers shall have such additional power and authority as the
Managing Member shall specify.
Section 7.5. CONFLICTS OF INTEREST. Subject to the other provisions of
this Agreement and the other Program Documents (including the agreements and
obligations of the Managing Member herein): (a) the Managing Member, the
Independent Manager and each Member and officer of the Company at any time and
from time to time may engage in and possess interests in other business ventures
of any and every type and description, independently or with others, with no
obligation to offer to the Company, the Managing Member, the Independent Manager
or any Member or officer of the Company the right to participate therein; (b)
the Company may transact business with the Managing Member, the Independent
Manager or any Member or officer of the Company or any Affiliate of any of the
foregoing; PROVIDED that the terms of any such transaction are no less favorable
than those the Company could obtain from unrelated third parties; and (c) none
of the Managing Member, the Independent Manager, any Member or any Affiliate of
any of the foregoing shall be prohibited by this Agreement from engaging in any
other business or activity, whether or not in competition with the Company.
Section 7.6. BANK ACCOUNTS. Only the Managing Member, the chief
executive officer, president, the chief financial officer or the designees of
the Managing Member, the chief executive officer, president or the chief
financial officer in accordance with authorization cards on file with the
Company's banks may sign checks on behalf of the Company, PROVIDED that only the
Managing Member may withdraw (or cause to be withdrawn) funds from the Accounts.
Section 7.7. COMPENSATION. Except as otherwise provided in this
Agreement, the other Program Documents and the Independent Manager Letter
Agreement dated as of June 28, 2006 (the "INDEPENDENT MANAGER LETTER AGREEMENT")
between the Company and the Independent Manager, none of the officers of the
Company, the Managing Member, the Independent Manager or any Affiliate thereof
shall be entitled under this Agreement to any compensation from the Company or
to reimbursement for expenses incurred in connection with the business or
affairs of the Company.
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
18
Section 7.8. INDEMNIFICATION OF MANAGING MEMBER, INDEPENDENT MANAGER,
OFFICERS AND OTHER AGENTS(a) The Company shall indemnify, to the fullest extent
now or hereafter permitted by law, each of the Managing Member and the
Independent Manager and any Person formerly fulfilling any such function
hereunder and the directors, representatives, officers, employees, agents and
advisors of the foregoing (collectively, the "INDEMNIFIED PERSONS") to the
extent any such Person was or is made a party to or a witness in or is
threatened to be made a party to or a witness in any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such Person is or was an authorized
representative of the Company, both as to action in such Person's official
capacity and as to action in another capacity at the Company's request while
holding such office or position, against all expenses (including reasonable
attorneys' fees and disbursements), judgments, fines (including excise taxes and
penalties) and amounts paid in settlement actually and reasonably incurred by
such Person in connection with such action or proceeding.
(b) The Company shall pay all expenses (including reasonable
attorneys' fees and disbursements) incurred by an Indemnified Person in
defending or appearing as a witness in any action or proceeding described in
Section 7.8(a) in advance of the final disposition of such action or proceeding
upon receipt of an undertaking by or on behalf of such Person to repay all
amounts advanced if it is ultimately determined that such Person is not entitled
to be indemnified by the Company as provided in Section 7.8(d).
(c) The Company may, as determined by the Managing Member from time to
time, indemnify, to the fullest extent now or hereafter permitted by law, any
Person who was or is made a party to or a witness in or is threatened to be made
a party to or a witness in, or was or is otherwise involved in, any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such Person is or
was an authorized representative of the Company, both as to action in such
Person's official capacity and as to action in another capacity at the Company's
request while holding such office or position, against all expenses (including
reasonable attorneys' fees and disbursements), judgments, fines (including
excise taxes and penalties) and amounts paid in settlement actually and
reasonably incurred by such Person in connection with such action or proceeding.
The Company may, as determined by the Managing Member from time to time, pay
expenses (including reasonable attorneys' fees and disbursements) incurred by
any such Person by reason of such Person's participation in any action or
proceeding described in this Section 7.8(c) in advance of the final disposition
of such action or proceeding upon receipt of an undertaking by or on behalf of
such Person to repay all amounts advanced if it is ultimately determined that
such Person is not entitled to be indemnified by the Company as provided in
Section 7.8(d).
(d) Indemnification under this Section 7.8 shall not be provided by
the Company in any case where a court determines that the alleged act or failure
to act giving rise to the claim for indemnification (i) is expressly prohibited
by the Delaware LLC Act or any successor statute as in effect at the time of
such alleged action or failure to act or (ii) constitutes willful misconduct,
bad faith, fraud, gross negligence or reckless disregard of, or was outside the
scope of, a Person's duties.
(e) The Company may purchase and maintain insurance on behalf of any
Person who is or was an Indemnified Person, or is or was an authorized
representative of the Company, against any liability asserted against or
incurred by such Person in any such capacity, or arising out of the status of
such Person as such, whether or not the Company would have the power or
obligation to indemnify such Person against such liability under the provisions
of this Section 7.8.
(f) Each Indemnified Person shall be deemed to act in such capacity in
reliance upon the rights of indemnification and advancement of expenses as are
provided in this Section 7.8. The rights of indemnification and advancement of
expenses provided by this Section 7.8 shall not be deemed exclusive of any other
rights to which any Person seeking indemnification or advancement of expenses
may be entitled under any agreement, statute or otherwise, both as to action in
such Person's official capacity and as to action in another capacity at the
Company's request while holding such office or position, and shall continue as
to any Person who has ceased to be an authorized representative of the Company
and shall inure to the benefit of the heirs and personal representatives of such
Person. Indemnification and advancement of expenses under this Section 7.8 shall
be provided whether or not the indemnified liability arises or arose from any
threatened, pending or completed action by or in the right of the Company. Any
repeal or modification of this Section 7.8 shall not adversely affect any right
or protection existing at the time of such repeal or modification to which any
Person may be entitled under this Section 7.8.
(g) No Member shall have any obligation to indemnify any other Member
or any Indemnified Person, officer, agent or other authorized representative of
the Company under any circumstances in connection with this Agreement.
(h) No Member or officer of the Company or its agents and/or legal
representatives shall be liable to any Member, the Company or any other Person
for action or inaction which such Member, officer, agent or legal representative
reasonably believed to be in or not opposed to the best interests of the
Company, unless such action or inaction constitutes willful misconduct, bad
faith, fraud, gross negligence or reckless disregard of, or is outside the scope
of, his or its duties. Each Member may (on its own behalf or on behalf of any
representative of such Member or the respective agents and/or legal
representatives of any of them) consult with counsel, accountants and other
experts in respect of the Company's affairs, and such Person shall be fully
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
19
protected and justified in any action or inaction which is taken in accordance
with the advice or opinion of such counsel, accountants or other experts.
Notwithstanding any of the foregoing to the contrary, the provisions of this
Section 7.8(h) shall not be construed so as to relieve (or attempt to relieve)
(i) any Person of any liability, to the extent (but only to the extent) that
such liability may not be waived, modified or limited under applicable law but
shall be construed so as to effectuate the provisions of this Section 7.8(h) to
the fullest extent permitted by law or (ii) any Member of any liability for the
breach of any contract related to the business of the Company, including this
Agreement. In addition, notwithstanding any duty (fiduciary or otherwise) that
might otherwise have existed at law or in equity, to the fullest extent
permitted by law, no Member shall be deemed to owe any duty (including fiduciary
duties) to any Member, the Company or any other Person in connection with (i)
the business of the Company, (ii) any action by any Member pursuant to this
Agreement, (iii) any approval or withholding of consent contemplated by this
Agreement, (iv) ownership of any Member Interest or (v) their separate business
activities or otherwise. Notwithstanding any duty (fiduciary or otherwise) that
might otherwise have existed at law or in equity, to the fullest extent
permitted by law, whenever in this Agreement the Members are permitted or
required to make a decision or to give or withhold approval or consent, the
Members shall be entitled to act in their sole discretion. Moreover,
notwithstanding any duty (fiduciary or otherwise) that might otherwise have
existed at law or in equity, to the fullest extent permitted by law, no Member
shall have any obligation whatsoever to otherwise consider the interests of the
other Members in exercising any rights pursuant to this Agreement.
(i) No Indemnified Person shall be liable to any Member, the Company,
any other Indemnified Person or any other Person for action or inaction which
such Indemnified Person reasonably believed to be in or not opposed to the best
interests of the Company, unless such action or inaction constitutes willful
misconduct, bad faith, fraud, gross negligence or reckless disregard of, or is
outside the scope of, his or its duties to the Company. Each Indemnified Person
may (on its own behalf or on behalf of the Company or the respective agents
and/or legal representatives of any of them) consult with counsel, accountants
and other experts in respect of the Company's affairs, and such Person shall be
fully protected and justified in any action or inaction which is taken in
accordance with the advice or opinion of such counsel, accountants or other
experts. Notwithstanding any of the foregoing to the contrary, the provisions of
this Section 7.8(i) shall not be construed so as to relieve (or attempt to
relieve) (i) any Person of any liability, to the extent (but only to the extent)
that such liability may not be waived, modified or limited under applicable law
but shall be construed so as to effectuate the provisions of this Section 7.8(i)
to the fullest extent permitted by law or equity or (ii) any Indemnified Person
of any liability for the breach of any contract related to its duties to the
Company, including this Agreement. In addition, to the extent permitted by law
or equity, no Indemnified Person shall be deemed to owe any fiduciary duty to
any Member or any other Person in connection with (i) the business of the
Company, (ii) any action by any Indemnified Person or Member pursuant to this
Agreement, (iii) any approval or withholding of consent contemplated by this
Agreement or (iv) their separate business activities or otherwise. Subject to
the agreements and obligations of the Managing Member herein, whenever in this
Agreement the Indemnified Person are permitted or required to make a decision or
to give or withhold approval or consent, the Indemnified Person shall be
entitled to act in their sole discretion and, moreover, no Indemnified Person
shall have any obligation to otherwise consider the interests of any of the
Members in exercising any rights pursuant to this Agreement.
(j) The Managing Member shall indemnify and hold harmless the Company
and its directors, representatives, officers, agents and advisors from and
against any and all losses, claims, damages, judgments, assessments, costs or
other liabilities (and will reimburse each such Person for all expenses
(including reasonable attorneys' fees and disbursements)) in investigating,
preparing, pursuing or defending any claim, action, proceeding or investigation
with respect to any pending or threatened litigation caused by, or arising out
of or in connection with, the willful misconduct, bad faith, fraud or gross
negligence of the Managing Member or the reckless disregard by the Managing
Member of its duties hereunder.
(k) For purposes of this Section 7.8, the term "authorized
representative" shall mean (i) the Managing Member or an officer or agent of the
Company or an administrator or committeeman, or (ii) a Person serving another
limited liability company, corporation, partnership, joint venture, trust or
other enterprise in any of the foregoing capacities, in the case of each of
clauses (i) and (ii), at the request of the Company.
ARTICLE VIII
DISTRIBUTIONS; ALLOCATIONS OF NET INCOME AND NET LOSS
Section 8.1. DISTRIBUTIONS. Except as otherwise provided in this
Agreement, on each Payment Date, the Managing Member shall make distributions to
the Members in the amounts, at the times and in the order of priority set forth
in Section 13.3. Notwithstanding anything to the contrary contained in this
Agreement, the Company shall not make any distribution to any Member on account
of its Member Interest if such distribution would violate Section 18-607 of the
Delaware LLC Act or other applicable law.
Section 8.2. RECORD DATES. The record date for distributions with
respect to the Member Interests will be the last Business Day of the calendar
month preceding the month in which the distribution will be made (the "RECORD
DATE").
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
20
Section 8.3. RECEIPT OF DISTRIBUTIONS. The Members shall be entitled
to receive distributions hereunder by wire transfer to the account specified in
writing by the applicable Member to the Company. In each case, the account must
be specified in writing not later than the Record Date for the applicable
Payment Date on which wire transfers will commence.
Section 8.4. EXCESS PAYMENTS. Each Member shall be deemed to agree, by
its acceptance of a Member Interest, that it shall promptly remit to the
Managing Member (on behalf of the Company) any excess payment it has received.
Section 8.5. ALLOCATIONS. To the extent necessary if the Company is
treated as a partnership for U.S. federal, state and local income tax purposes
rather than as a disregarded entity, after giving effect to the special
allocations set forth in Section 8.6, Tax Profits and Losses and every item of
income, gain, deduction and loss entering into the computation thereof for any
Fiscal Year shall be allocated to the Members ratably based on each Member's
Ratable Percentage, PROVIDED that in the Fiscal Year in which the Company sells
all or substantially all of its assets or in which it liquidates, Tax Profits
and Tax Losses (and items thereof) shall be allocated so that each Member's
positive Capital Account balance equals, to the extent possible, the amount
distributable to such Person pursuant to Section 11.3.
Section 8.6. SPECIAL ALLOCATIONS(a) To the extent necessary if the
Company is treated as a partnership for U.S. federal, state and local income tax
purposes rather than as a disregarded entity, the Tax Matters Member may make
such special allocations as are required for the Company to satisfy the
requirements of Regulations Section 1.704-1(b) and 1.704-2, including such
allocations as are required pursuant to the rules governing allocations of
partner non-recourse deductions, minimum gain chargebacks and qualified income
offsets, and may make correlative allocations to offset such allocations;
PROVIDED that no such allocation shall affect the amount distributable to the
Members.
(b) To the extent necessary if the Company is treated as a partnership
for U.S. federal, state and local income tax purposes rather than as a
disregarded entity, subject to the requirement of Section 704(c) of the Tax
Code, each item of income, gain, loss, deduction or credit for federal income
tax purposes shall be allocated among the Members in the same manner in which
corresponding items of Tax Profits and Losses were allocated pursuant to Section
8.5.
(c) Upon the request of a Transferee or a distributee of a Company
distribution, the Company may, in the sole discretion of the Managing Member,
make the election provided for in Section 754 of the Tax Code.
(d) As used herein, "TAX MATTERS MEMBER" shall have the same meaning
as "tax matters partner" as used in the Tax Code. For so long as the initial
Member remains a Member, it shall be the Tax Matters Member, and otherwise the
Tax Matters Member shall be the Member having the largest Ratable Percentage.
For all purposes of Sections 6221 through 6232 of the Tax Code, the Tax Matters
Member shall make all tax elections available in such manner as he or she
determines is in the best interest of a Required Members and consistent with the
Tax Code and the Regulations. In the event a tax controversy shall arise, the
Tax Matters Member, with the consent of the Required Members, shall employ such
attorneys and accountants and other experts to represent the Company as the Tax
Matters Member determines to be appropriate. The Tax Matters Member shall have
exclusive authority to settle any income tax controversy or initiate any income
tax proceeding required to be conducted, maintained or settled in the name of
the Company, PROVIDED that such action imposes no financial or other liability
on any Member not affected by such claim, controversy, proceeding or settlement.
Section 8.7. AMOUNTS WITHHELD. All amounts withheld or required to be
withheld pursuant to the Tax Code or any provision of any state, local or
foreign Tax law, with respect to any distribution or allocation to or by the
Company or to or by the Members and treated by the Tax Code (whether or not
withheld pursuant to the Tax Code) or any other applicable Tax law as amounts
payable by or in respect of the Members, any Person owning an interest, directly
or indirectly, in such Member, shall be treated as a distribution to the Members
with respect to which such amount was withheld pursuant to this Article VIII for
all purposes under this Agreement (including an appropriate debit to such
Member's Capital Account).
ARTICLE IX
ACCOUNTING
Section 9.1. BOOKS AND RECORDS.
(a) The Managing Member shall cause to be kept books of account in
which shall be entered fully and accurately every transaction of the Company.
The books of account shall be kept on the accrual method of accounting and in
accordance with GAAP.
(b) Such books of account, together with all related correspondence,
papers and other documents, shall be kept at such offices of the Company as the
Managing Member shall designate and shall, upon reasonable notice to the
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
21
Managing Member, be open to the examination of each Rating Agency, any Member or
its authorized representatives (who will be permitted to make copies of all or
any part thereof at such Member's cost) or any governmental agency which has
authority over or any rights of inspection of the Company or a Member. Each
Member agrees, by execution of this Agreement or its acceptance of a Member
Interest, to keep the contents of all such books of account, together with all
related correspondence, papers and other documents, in confidence and shall not
disclose the same.
Section 9.2. REPORTS AND NOTICES.
(a) Any forms as may be required by the Service shall be distributed
to the Members within 120 days after the close of each Fiscal Year. The Managing
Member shall deliver, or cause to be delivered, at the Company's expense, to
each of the Members and (except for any reports or statements pursuant to clause
(v) below) each Rating Agency:
(i) as soon as available and in any event within 45 days after the end
of each of the first three Fiscal Quarters, commencing with the first
Fiscal Quarter after the date hereof, (a) the statements of income of the
Company for (i) such Fiscal Quarter and (ii) if such Fiscal Quarter is the
second or third Fiscal Quarter of a Fiscal Year, the period from the
beginning of such Fiscal Year to the end of such Fiscal Quarter, (b) the
related balance sheets (including any related notes thereto) of the Company
as at the end of such Fiscal Quarter and statements of cash flows for the
period from the beginning of such Fiscal Year to the end of such Fiscal
Quarter and (c) a certificate of the chief financial officer of the
Managing Member, which certificate shall state that said financial
statements fairly present the financial condition and results of operations
of the Company in accordance with GAAP, consistently applied, as at the end
of, and for, such period, subject to normal year-end audit adjustments;
(ii) as soon as available and in any event within 90 days after the
end of each Fiscal Year, commencing with the current Fiscal Year, (a) the
statements of income of the Company for such Fiscal Year, (b) the related
balance sheets (including any related notes thereto) of the Company as at
the end of such Fiscal Year, (c) the related statements of equity and cash
flows for such Fiscal Year, (d) the related notes to the financial
statements and (e) an opinion of the Company Auditor, which opinion shall
state that the final statements of income, retained earnings and cash flows
and balance sheet (including the related notes thereto) delivered under
this clause (a)(ii) fairly present the financial condition and results of
operations of the Company as at the end of, and for, such Fiscal Year in
accordance with GAAP;
(iii) concurrently with any delivery of financial statements under
clause (i) or (ii) of this Section 9.2(a), a certificate of an officer of
the Company to the effect that no Wind-Down Event or Program Violation has
occurred and is continuing (or, if any Wind-Down Event or Program Violation
has occurred and is continuing, describing the same in reasonable detail);
(iv) within 120 days after the end of each Fiscal Year, commencing
with the current Fiscal Year, copies of any reports or statements necessary
for the Members to comply with any applicable income tax requirements of
the Tax Code with respect to such Person's investment in the Company;
(v) as soon as available and in any event within 30 days after the end
of each Fiscal Quarter, commencing with the first Fiscal Quarter ending
after the date hereof, a statement of the federal net taxable income of the
Company, determined in accordance with the Tax Code, for (a) such Fiscal
Quarter and (b) if such Fiscal Quarter is not the first Fiscal Quarter of a
Fiscal Year, the period from the beginning of such Fiscal Year to the end
of such Fiscal Quarter;
(vi) as soon as available and in any event within 15 Business Days
after the end of each Fiscal Quarter, commencing with the first Fiscal
Quarter ending after the date hereof, a statement detailing (a) all amounts
deposited into the Collection Account during such Fiscal Quarter, (b) all
amounts withdrawn from the Collection Account (other than for distribution
pursuant to Section 13.3(a)) during such Fiscal Quarter and the use
thereof, (c) all amounts deposited into the Expense Account during such
Fiscal Quarter, (d) all amounts withdrawn from the Expense Account during
such Fiscal Quarter and the use thereof, (e) all amount deposited into the
Reserve Account during such Fiscal Quarter and (f) all amounts withdrawn
from the Reserve Account (other than for distribution pursuant to Section
13.3(b)) during such Fiscal Quarter and the use thereof;
(vii) promptly after the occurrence of any Program Violation, a
certificate of the chief financial officer of the Company describing such
Program Violation in reasonable detail;
(viii) as soon as available and in any event within five Business Days
after the end of each calendar week, commencing with the first calendar
week beginning after the date hereof, a weekly report (a) describing the
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
22
outstanding CDS, Off-Setting Swaps and Project Investments and the
Collateral Support Swap as of the last day of such calendar week and,
except for Project Investments, containing a certification of the chief
financial officer, president or senior vice president of the Managing
Member stating whether the related Eligibility Criteria are satisfied as of
the last day of such calendar week (together with a reasonably detailed
summary of the related Eligibility Criteria), and (b) containing the inputs
and the results with respect to each time the Capital Model was run during
such calendar week;
(ix) on the first Business Day of each Collection Period, commencing
with the first Collection Period beginning after the date hereof, an agreed
upon procedures review conducted by the Company Auditor in conformity with
the procedures prescribed by the Rating Agencies;
(x) promptly upon the receipt of the same by the Company, copies of
all reports (including site inspection reports and financial statements)
relating to each underlying property in the CDS Program; and
(xi) from time to time such other information regarding the financial
condition, operations or business of the Company, or compliance by the
Company with the terms of this Agreement and the other Program Documents,
as any Member may reasonably request.
(b) The Managing Member, at the Company's expense, shall cause to be
prepared and timely filed with appropriate federal and state regulatory and
administrative bodies all reports required to be filed by the Company with such
entities under then-current applicable laws, rules and regulations. Such reports
shall be prepared on the accounting or reporting basis required by such
regulatory bodies. Any Member shall be provided with a copy of any such report
upon request and without expense to such Member. Each Member agrees, by
execution of this Agreement or its acceptance of a Member Interest, to keep the
contents of all such reports in confidence and shall not disclose the same. The
Managing Member hereby designates the Company Auditor as the independent public
accountants for the Company, and such independent public accountants may not be
discharged or otherwise replaced without the approval of the Managing Member.
(c) In addition to the reporting requirements above, any report or
notice delivered under this Agreement or under any Debt Facility (including with
respect to any waiver, amendment or other modification) to any Person shall also
be delivered to each of the Rating Agencies and the administrative agents in
respect of the Debt Facilities.
ARTICLE X
TRANSFERS AND ADMISSION
Section 10.1. TRANSFERS. A Member may Transfer all or any portion of
its Member Interest in the Company to any Person, PROVIDED that (i) the
affirmative consent of each of the other Members shall have been obtained for
any such Transfer, (ii) such Transfer is exempt from the registration
requirements of the Securities Act, would not require the registration of the
Company under the Investment Company Act and is exempt under applicable state
and foreign securities laws (and the Company may require the Transferee to
provide a legal opinion in form and substance satisfactory to the Company to the
foregoing effect), (iii) such Transfer shall not be effective if (x) immediately
after giving effect to such Transfer, Member Interests corresponding to 25% or
more (as determined under the Plan Asset Regulation) of the aggregate value of
the outstanding Member Interests or of any other class of equity interests in
the Company would be held by Benefit Plan Investors (for purposes of making the
foregoing determination, Member Interests held by or for the benefit of any
Person (other than a Benefit Plan Investor) that has discretionary authority or
control over the assets of the Company or that provides investment advice for a
fee (direct or indirect) with respect to such assets, or is an "affiliate" (as
defined in the Plan Asset Regulation) of any such Person, shall be disregarded)
or (y) such Transfer would (1) cause the Company to be treated as a publicly
traded partnership or (2) result in ownership of the Member Interests by a
Member that is not treated as a United States person within the meaning of
section 7701(a)(30) of the Tax Code and (iv) such Transfer shall not be
effective unless the Rating Condition shall have been satisfied with respect
thereto. The Transferor shall promptly give notice to the Company of any such
Transfer.
Section 10.2. EFFECT OF PERMITTED TRANSFERS. Without execution of this
Agreement, upon the Transfer of a Member Interest to a Transferee as permitted
by this Agreement, which Transfer shall be deemed to constitute a request by
such Person that the books and records of the Company reflect such Person's
admission as a Member, the Managing Member shall record such Transfer in the
Register as contemplated by Section 2.12 and such Person shall be admitted to
the Company as a Member and shall become bound by this Agreement upon such
recording. No Member shall be permitted to resign as a Member unless such
resignation is in connection with a Transfer permitted under this Article X.
Section 10.3. EFFECT OF VOID TRANSFERS. In the event of any purported
Transfer of any Member Interest (or portion thereof) in violation of the
provisions of this Agreement, such purported Transfer shall be void and of no
effect, and the Transferor shall remain as a Member.
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
23
Section 10.4. RULE 144A INFORMATION. Upon the request of a Member, the
Company shall promptly furnish or cause to be furnished such information as is
specified pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
provision thereto) to such Member or to a prospective purchaser of a Member
Interest designated by such Member, in order to permit compliance by such Member
with Rule 144A under the Securities Act in connection with the resale of such
Member Interest.
ARTICLE XI
TERM AND DISSOLUTION
Section 11.1. DISSOLUTION; LIQUIDATING EVENTS. The Company shall be
dissolved and its affairs wound up in accordance with the Delaware LLC Act, this
Agreement (including Article XII) and the other Program Documents (i) at any
time there are no Members, unless the Company is continued in accordance with
the Delaware LLC Act or this Agreement, or (ii) upon the entry of a decree of
judicial dissolution under Section 18-802 of the Delaware LLC Act.
Section 11.2. EFFECT OF WIND-DOWN EVENT. Upon the occurrence of a
Wind-Down Event, the Company shall not thereupon be dissolved but shall continue
until the winding up of the affairs of the Company in accordance with this
Agreement (including Article XII) and the other Program Documents has been
completed and a certificate of cancellation has been filed with the Secretary of
State of the State of Delaware.
Section 11.3. DISSOLUTION. Upon dissolution, the Company shall
continue solely for the purpose of winding up its affairs as provided in Section
11.2 and shall liquidate its assets and satisfy the claims of its creditors and
Members. Neither any Member nor the Managing Member shall take any action that
would prejudice the winding up of the Company's business and affairs in such
manner. Subject to the Delaware LLC Act, the proceeds from such winding up shall
be applied and distributed in accordance with the priority of payments set forth
in Section 13.3. Upon the completion of the winding up of the Company, a
certificate of cancellation, setting forth the information required by the
Delaware LLC Act, shall be filed with the Secretary of State of the State of
Delaware.
Section 11.4. BANKRUPTCY AND INSOLVENCY PROCEEDINGS. Notwithstanding
any other provision of this Agreement and any provision of law that so empowers
the Company, none of the Company, the Members, the Managing Member or any other
Person on behalf of the Company shall have authority to cause the Company to,
and the Company shall not, without the unanimous consent of the Managing Member
and the Independent Manager, (i) institute proceedings to have the Company be
adjudicated bankrupt or insolvent or consent to the institution of bankruptcy or
insolvency proceedings against the Company, including under the Bankruptcy Code;
(ii) file a petition seeking, or consent to, for or on behalf of the Company,
reorganization or relief under any applicable federal or state law relating to
bankruptcy; (iii) consent to the appointment of a receiver, liquidator,
assignee, trustee or sequestrator (or other similar official) of the Company or
a substantial part of its property; or (iv) make any assignment for the benefit
of creditors (collectively, "BANKRUPTCY ACTIONS"). Each of the Managing Member
and the Independent Manager shall, to the fullest extent permitted by law
(including the Delaware LLC Act), consider the interests of the Company,
including specific consideration of the interests of its rated debtholders and
other creditors, in acting or otherwise voting on the matters referred to in
this Section 11.4. The provisions of this Section 11.4 shall survive the
termination of this Agreement.
Section 11.5. BANKRUPTCY CONSIDERATIONS (a) Upon the occurrence of any
event that causes the last remaining Member to cease to be a Member (other than
upon (i) a Transfer by a Member of all of its Member Interests and the admission
of a Transferee pursuant to Article X and (ii) resignation of a Member and
admission of an additional Member pursuant to Article X), to the fullest extent
permitted by law, the personal representative of such Member is hereby
authorized to, and shall, within 90 days after the occurrence of the event that
terminated the continued membership of such Member in the Company, agree in
writing (i) to continue the Company and (ii) to the admission of the personal
representative or its nominee or designee, as the case may be, as a Member,
effective as of the occurrence of the event that terminated the continued
membership of the last remaining Member in the Company.
(b) Notwithstanding any other provision of this Agreement to the
contrary, the Bankruptcy (as defined below) of any Member shall not cause such
Member to cease to be a Member and upon the occurrence of such an event or the
dissolution, incapacity, death, insolvency or disability of any Member or the
Managing Member, to the fullest extent permitted by law, the Company shall
continue without dissolution.
(c) Notwithstanding any other provision of this Agreement to the
contrary, each Member and the Managing Member waives any right it might have to
agree in writing to dissolve the Company upon the Bankruptcy of such Member or
the Managing Member, or the occurrence of an event that causes such Member to
cease to be a member of the Company.
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
24
(d) As used in this Section 11.5, the term "Bankruptcy" means, with
respect to any Person, if such Person (i) makes an assignment for the benefit of
creditors, (ii) files a voluntary petition in bankruptcy, (iii) is adjudged a
bankrupt or insolvent, or has entered against it an order for relief, in any
bankruptcy or insolvency proceedings, (iv) files a petition or answer seeking
for itself any reorganization, arrangement, composition, readjustment,
liquidation or similar relief under any statute, law or regulation, (v) files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against it in any proceeding of this nature,
(vi) seeks, consents to or acquiesces in the appointment of a trustee, receiver
or liquidator of the Person or of all or any substantial part of its properties,
or (vii) if 120 days after the commencement of any proceeding against the Person
seeking reorganization, arrangement, composition, readjustment, liquidation or
similar relief under any statute, law or regulation, if the proceeding has not
been dismissed, or if within 90 days after the appointment without such Person's
consent or acquiescence of a trustee, receiver or liquidator of such Person or
of all or any substantial part of its properties, the appointment is not vacated
or stayed, or within 90 days after the expiration of any such stay, the
appointment is not vacated. The foregoing definition of "Bankruptcy" is intended
to replace and shall supersede and replace the definition of "Bankruptcy" set
forth in Sections 18-101(1) and 18-304 of the Act.
ARTICLE XII
WIND-DOWN PERIOD
Section 12.1. WIND-DOWN EVENTS. The CDS Program shall commence winding
down in accordance with Section 12.2 upon the occurrence of any of the events
(each, a "WIND-DOWN EVENT") expressly described below:
(a) ***;
(b) ***;
(c) ***;
(d) ***;
(e) ***;
(f) ***;
(g) ***;
(h) ***;
(i) ***;
(j) ***;
(k) ***; and
(l) ***.
Section 12.2. WIND-DOWN PROCEDURES. Upon the occurrence and during the
continuance of a Wind-Down Event, upon the occurrence of any Permanent Minimum
Capital Requirement Event or during any period in which there is a Defaulting
Lender party to the Senior Facility or the Mezzanine Facility:
(a) ***;
(b) ***;
(c) ***;
(d) ***; and
(e) ***.
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
25
ARTICLE XIII
PAYMENTS AND DISTRIBUTIONS
Section 13.1. PAYMENTS FROM ACCOUNTS.
(a) EXPENSE ACCOUNT AND COLLECTION ACCOUNT.***
(b) RESERVE ACCOUNT. Amounts in the Reserve Account shall be used by
the Company for the following:
(i) ***; and
(ii) ***.
Section 13.2. PREPARATION OF QUARTERLY DISTRIBUTION SCHEDULE. The
Company shall, with respect to each Fiscal Quarter prior to each Quarterly
Payment Date, prepare a schedule (the "DISTRIBUTION SCHEDULE") in reasonable
detail of the amounts payable or otherwise distributable in connection with the
CDS Program by the Company pursuant to Section 13.3 for such Fiscal Quarter on
such Quarterly Payment Date. The Company shall prepare such Distribution
Schedule based on the statement of deposits to and withdrawals from the Accounts
most recently delivered pursuant to Section 9.2(a)(vi). The Company shall
deliver to the Members a copy of the Distribution Schedule with respect to each
Quarterly Payment Date not later than 11:00 a.m. (New York City time) the fifth
Business Day immediately preceding such Quarterly Payment Date.
Section 13.3. DISTRIBUTIONS ON PAYMENT DATES. The Company shall on
each Payment Date cause funds to be withdrawn from the Collection Account and
the Reserve Account (to the extent such funds were held therein on the last day
of the preceding Fiscal Quarter or, if such Payment Date is the Termination
Date, on the Business Day immediately preceding the Termination Date (such
Fiscal Quarter or period, the "COLLECTION PERIOD")) and cause such funds to be
distributed or applied, in respect of the amounts specified in the Distribution
Schedule to be paid on such Payment Date for the related Collection Period, as
follows:
(a) COLLECTION ACCOUNT. Funds in the Collection Account (to the extent
held therein on the last day of the related Collection Period) shall be
distributed or applied on such Payment Date in the following order of
priority for the following payments (after giving effect to any payments
made pursuant to Section 13.1(a)):
(i) ***;
(ii) ***;
(iii) ***;
(iv) ***;
(v) ***;
(vi) ***;
(vii) ***;
(viii) ***;
(ix) ***;
(x) ***;
(xi) ***;
(xii) ***;
(xiii) ***;
(xiv) ***; and
(xv) ***.
(b) RESERVE ACCOUNT. Funds in the Reserve Account (to the extent held
therein on the last day of the related Collection Period), and not applied
or set aside as a reserve (in the reasonable discretion of the Managing
Member, which discretion is hereby authorized) for the purposes set forth
in Section 13.1(a), shall be distributed or applied on such Payment Date in
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
26
the following order of priority for the following payments (after giving
effect to any payments made pursuant to Section 13.1 and the priority of
payments set forth in Section 13.3(a)):
(i) ***;
(ii) ***;
(iii) ***;
(iv) ***;
(v) ***; and
(vi) ***.
(c) RATABLE PAYMENTS. Except as otherwise expressly provided in this
Section 13.3, if on any Payment Date the amount available in the Collection
Account and the Reserve Account from amounts received in the related
Collection Period are insufficient to make the full amount of the
disbursements required by any paragraph in this Section 13.3 to different
Persons, the Company shall make the disbursements called for by such
paragraph ratably in accordance with the respective amounts of such
disbursements then due and payable to the extent funds are available
therefor.
ARTICLE XIV
GENERAL PROVISIONS
Section 14.1. BINDING EFFECT AND BENEFIT. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
successors and permitted assigns. The Managing Member shall not Transfer any of
its obligations under this Agreement without the consent of each of the Members
and the Rating Agencies (and as to which the Rating Condition shall have been
satisfied). In addition, the parties hereto hereby acknowledge and agree that
each of the Members and the Independent Manager are intended third party
beneficiaries of the provisions relating to certain rights thereof as set forth
in this Agreement and hereby agree that they will not amend, supersede or
otherwise change the effectiveness of the provisions contained in this Agreement
other than as provided in Section 14.5.
Section 14.2. CERTIFICATES, ETC. The Company shall promptly cause to
be prepared and executed all legally required applications, registrations,
publications, certificates and affidavits for filing with the proper
governmental authorities and arrange for the advertisement, publication and
filing thereof where required by law in any applicable jurisdiction.
Section 14.3. MEMBERS' RELATIONSHIPS INTER SE. Except as otherwise
provided in this Agreement, nothing contained herein shall be construed to
constitute any Member the agent of any other Member or the Company or in any
manner to limit the Members in the conduct of their own respective businesses or
activities.
Section 14.4. NOTICES, STATEMENTS, ETC. Unless otherwise specifically
provided in any Program Document, all notices, consents, directions, approvals,
instructions, requests and other communications (each, for purposes of this
Section 15.02, a "notice") given to any party under any Program Document shall
be in writing to such party at the address set forth in Schedule III or at such
other address as such party shall designate by notice to each of the other
parties to such Program Document. Each notice to the Company shall be delivered
to the Managing Member. Each notice to any party may be delivered personally
(including delivery by private courier services) or by facsimile, and shall be
deemed to be duly given or made when received unless such day is not a Business
Day, in which case such delivery shall be deemed to be made as of the next
succeeding Business Day.
Section 14.5. AMENDMENTS; ETC. No amendment, restatement, supplement
or other modification, or waiver (each, for purposes of this Section 14.5, a
"MODIFICATION"), of any provision of this Agreement shall be effective, nor
shall the Company consent to any modification of any other Program Document,
without the written consent of the Required Members and then such consent shall
be effective only in the specific instance and for the specific purpose for
which given, PROVIDED that, to effect any amendment to Sections 2.4 or 7.2, the
proviso in the last sentence of Section 7.3, or Sections 7.5, 7.7, 7.8, 11.4,
14.1 or this Section 14.5, the approval of the Independent Manager, not to be
unreasonably delayed or withheld, to such amendment must be obtained. The
Company shall notify the Rating Agencies of any such amendment, waiver or
consent.
Notwithstanding the foregoing, the Company shall not execute any
amendment to any Program Document, or provide any written waiver, consent or
similar instrument with respect thereto, (i) for so long as any of the
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
27
obligations of the Company under any Debt Facility are rated by either Rating
Agency, unless the Rating Condition with respect to each Rating Agency is
satisfied with respect to any such amendment, waiver, consent or similar
instrument and (ii) that would directly reduce any amounts distributable to any
Member hereunder or materially delay the timing of the receipt of such amounts
by any Member, in each case without the prior written consent of such Member.
Section 14.6. GOVERNING LAW. THE LAWS OF THE STATE OF DELAWARE
(WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION
OF THE LAW OF ANY OTHER JURISDICTION) SHALL GOVERN THE VALIDITY OF THIS
AGREEMENT, THE CONSTRUCTION OF ITS TERMS AND THE INTERPRETATION OF THE RIGHTS
AND DUTIES OF THE MEMBERS.
Section 14.7. NO PETITION; LIMITED RECOURSE. Each Member agrees, in
its capacity as a creditor of the Company, (which agreement shall, pursuant to
the terms of this Agreement, be binding upon its successors, assigns, and
participants) that it shall not institute against, or join any other Person in
instituting against, the Company any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal or
state bankruptcy or similar law, for one year and a day (or, if longer, the then
applicable preference period) after the payment in full of all amounts due under
the Senior Facility, the Mezzanine Facility and the Subordinated Debt Facility.
Notwithstanding anything herein or any other Program Document to the contrary,
the obligations of the Company owing to the Members, the Managing Member and
other Persons hereunder and thereunder are limited recourse and are payable only
from the property and assets of the Company, only to the extent funds are
available for payment of such obligations in accordance with the priorities set
forth in Article XIII. No recourse shall be had and no claim shall be made,
whether by levy or execution or otherwise, for the payment or satisfaction of
any obligations of the Company hereunder or under any other Program Document
against any Member or any of its assets, other than the property and assets of
the Company, and no Member shall be liable for any deficiency judgment based
thereon, it being expressly understood and agreed that the sole remedies of each
of the Members and any other Person with respect to such amounts shall be
against the property and assets of the Company in accordance with this Agreement
(including Article XIII) and the other Program Documents.
Section 14.8. SEVERABILITY. If any term, provision, covenant or
condition of this Agreement, or the application thereof to any party or any
circumstance, is held to be unenforceable, invalid or illegal (in whole or in
part) for any reason (in any relevant jurisdiction), the remaining terms,
provisions, covenants and conditions of this Agreement, modified by the deletion
of the unenforceable, invalid or illegal portion (in any relevant jurisdiction),
will continue in full force and effect, and such unenforceablity, invalidity or
illegality will not otherwise affect the enforceability, validity or legality of
the remaining terms, provisions, covenants or conditions of this Agreement so
long as this Agreement as so modified continues to express, without material
change, the original intentions of the parties as to the subject matter hereof
and the deletion of such portion of this Agreement will not substantially impair
the respective expectations or reciprocal obligations of the parties or the
practical realization of the benefits that would otherwise be conferred upon the
parties. If any provision hereof is held to be unenforceable, invalid or illegal
as stated above, the parties will endeavor in good faith negotiations to replace
such provision with a valid provision, the economic effect of which comes as
close as possible to that of the prohibited or unenforceable provision.
Section 14.9. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which when executed shall be deemed to be an original, but
all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of a signature page to this Agreement by
telecopy shall be effective as delivery of a manually executed counterpart of
this Agreement.
Section 14.10. WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING,
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 14.11. NO WAIVER; CUMULATIVE REMEDIES. No failure on the part
of any Person to exercise, and no delay in exercising, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under this Agreement preclude any other or further
exercise thereof or the exercise of any other right. The remedies provided in
this Agreement are cumulative and not exclusive of any remedies provided by
applicable law.
Section 14.12. CONSENT TO JURISDICTION. Each Member (i) irrevocably
submits to the jurisdiction of any Delaware State court or Federal court sitting
in Wilmington, Delaware and of any New York State court or Federal court sitting
in the Borough of Manhattan in any action arising out of this Agreement, (ii)
agrees that all claims in such action may be decided in such court, (iii)
waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum and (iv) consents, to the fullest extent it may effectively
do so, to the service of process by mail. A final judgment in any such action
shall be conclusive and may be enforced in other jurisdictions. Nothing herein
shall affect the right of any party to serve legal process in any manner
permitted by law or affect its right to bring any action in any other court.
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
28
Section 14.13. CERTAIN TAX MATTERS. It is the intent of the parties
hereto that, for so long as there is a single owner of the Member Interests, the
Company shall be treated as a disregarded entity of such single owner within the
meaning of Regulations Section 301.7701-3, and, if there is more than one owner
of the Member Interests, the Company shall be treated as a partnership for U.S.
federal, state and local income tax purposes. The parties hereto and each Member
shall take no action (including filing any tax return, election or information
return) inconsistent with the foregoing.
Section 14.14. STANDARDS OF DISCRETION. Notwithstanding any other
provision of this Agreement or otherwise applicable provision of law or equity,
whenever in this Agreement a Person is permitted or required to make a decision
(i) in its "sole discretion" or "discretion" or under a grant of similar
authority or latitude, such Person shall be entitled to consider only such
interests and factors as it desires, including its own interests, and shall, to
the fullest extent permitted by applicable law, have no duty or obligation to
give any consideration to any interest of or factors affecting any other Person
or (ii) in its "good faith" or under another express standard, such Person shall
act under such express standard and shall not be subject to any other or
different standards.
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
29
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CENTERBROOK HOLDINGS LLC, as the sole Member and as
the Managing Member
By: /S/ XXXXX XXXXXX
----------------
Name: Xxxxx Xxxxxx
Title: President
XXXXXX X. XXXXXXX, as the Independent Manager
By: /S/ XXXXXX X. XXXXXXX
---------------------
Name: Xxxxxx X. Xxxxxxx
Title: Independent Manager
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
Schedule I
MEMBERS
MEMBER NAME
-----------
Centerbrook Holdings LLC
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
Schedule II
LIST OF MANAGING MEMBER AND INDEPENDENT MANAGER
MANAGING MEMBER Centerbrook Holdings LLC
INDEPENDENT MANAGER Xxxxxx X. Xxxxxxx
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
Schedule III
ADDRESSES FOR NOTICES
Centerbrook Holdings LLC
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx
Facsimile No.: 000-000-0000
Independent Manager
Xxxxxx X. Xxxxxxx
000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Facsimile No.: 000-000-0000
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
Schedule IV
ELIGIBILITY CRITERIA
Capitalized terms used solely in this Schedule IV are defined in Annex A
attached hereto.
I. CDS.
---
At the time the Company enters into any CDS or the Collateral Support Swap (a
"NEW SWAP"), or at the time of any addition or substitution of any of the
collateral subject to the Collateral Support Swap, or such other time as
specified below, such New Swap, such addition or substitution and the overall
CDS Program must meet the following criteria (which criteria, for the avoidance
of doubt, includes such New Swap), or, in the case of any of the concentration
limits set forth below that are not in compliance at the time the Company enters
into any New Swap or at the time of any such addition or substitution, such New
Swap or such addition or substitution does not cause any such concentration
limit to be out of compliance in a manner worse than immediately prior to the
Company's entering into such New Swap or such addition or substitution. For all
purposes of this Schedule IV, (i) references to the Underlying Portfolio Asset
or Multifamily Revenue Bond in respect of the Collateral Support Swap shall be
deemed to be references to the bonds constituting collateral for the Collateral
Support Swap and (ii) references to the "CDS Program" shall be deemed to include
the Collateral Support Swap.
***.
II. OFF-SETTING SWAPS.
-----------------
At the time the Company enters into any Off-Setting Swap, such Off-Setting Swap
must meet the following criteria (which criteria, for the avoidance of doubt,
includes such Off-Setting Swap):
***.
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
*** Indicates material omitted pursuant to a confidential treatment
request and filed separately with the Securities and Exchange
Commission.
ANNEX A
***.
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
Schedule V
CAPITAL MODEL PROCEDURES
The following describes the process to be followed for running the
Capital Model, including an outline of the information required to run the
Capital Model and a description of the parameters and inputs that must be
updated before running the model. Terms used but not defined herein shall have
the meanings assigned thereto in the Operating Agreement to which this Schedule
V is attached.
***.
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
Exhibit A
FORMS OF CDS
[TO BE ATTACHED]
[EXHIBIT OMITTED]
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
Exhibit B
FORMS OF CUSTODY AGREEMENT
[TO BE ATTACHED]
[EXHIBIT OMITTED]
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
Exhibit C
FORMS OF COLLATERAL SUPPORT SWAP
[TO BE ATTACHED]
[EXHIBIT OMITTED]
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
Exhibit D
FORMS OF TAX CREDIT INVESTMENTS
[TO BE ATTACHED]
[EXHIBIT OMITTED]
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
Exhibit E
FORM OF SUBORDINATED DEBT FACILITY
[TO BE ATTACHED]
[EXHIBIT OMITTED]
*** Indicates material omitted pursuant to a confidential treatment request and
filed separately with the Securities and Exchange Commission.
