1
EXHIBIT (a)(3)
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
EXCELSIOR VENTURE PARTNERS III, LLC
This LIMITED LIABILITY COMPANY OPERATING AGREEMENT (the "Agreement") of
Excelsior Venture Partners III, LLC, a Delaware limited liability company (the
"Company"), is made as of the 26th day of May, 2000, by and among the initial
member and the other parties who shall hereafter be admitted as members and
whose names and addresses are listed from time to time as members on Schedule A
hereto as members (each, a "Member" and collectively, the "Members") and has
been executed for the purpose of providing for the operation of the Company
pursuant to the provisions of the Delaware Limited Liability Company Act.
Accordingly, in consideration of the mutual covenants contained herein, the
Members agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the following meanings and
all such terms which relate to accounting matters shall be interpreted in
accordance with generally accepted accounting principles in effect from time to
time except as otherwise specifically provided herein:
"Act" means the Delaware Limited Liability Company Act, as at any time now
existing or in the future.
"Adjusted Capital Account Deficit" shall mean, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant Fiscal Period, after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts which such Member is
obligated to restore or is deemed to be obligated to restore pursuant to
Treasury Regulations under Section 704 of the Code; and
(ii) Debit to such Capital Account the items described in Treasury
Regulations Sections 1.704-l(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Treasury Regulations Section 1.704-l(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
"Affiliate" shall mean an affiliated person, as that term is defined in the
Investment Company Act, of a Special Member and any officer, director, employee
or member of an investment committee of such affiliated person.
"Agreement" means this Limited Liability Company Operating Agreement as
originally executed and as amended, modified, supplemented or restated from time
to time.
"Applicable Rate" shall mean a rate per annum equal, at the time of
determination, to the sum of (i) the highest "prime rate" then published in the
"Money Rates" section of The Wall Street Journal or in such successor
publication as shall be acceptable to the Board of Managers and (ii) two percent
(2%).
"Appropriate Officer" means an officer of the Company appointed in
accordance with Section 4.7(d), who has not resigned, been removed or become
incapacitated.
"Attribution Rules" shall have the meaning specified in Section 3.21.
"Board of Managers" shall mean those natural persons who at any given time
are serving as Managers of the Company in accordance with this Agreement.
"Capital Accounts" shall have the meaning specified in Section 7.2.
"Capital Commitment" shall mean, for any Member, the amount set forth
opposite his, her or its name on Schedule A hereto, as amended from time to time
(i) to take account of Capital Contributions made by Members and (ii) as
otherwise provided in this Agreement.
2
"Capital Contribution" shall mean with respect to any Member, the amount
contributed by such Member to the capital of the Company pursuant to this
Agreement.
"Capital Investment" shall mean, with respect to any Member, the Capital
Contribution of such Member net of the return to such Member by the Company of
any portion thereof.
"Closing" shall have the meaning specified in Section 7.1(a).
"Closing Date" shall have the meaning specified in Section 7.1(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time (or any corresponding provision of succeeding law).
"Communications Act" shall mean the Communications Act of 1934, as amended.
"Company" means Excelsior Venture Partners III, LLC, a Delaware limited
liability company.
"Company Expenses" means any expenses incurred by the Company during a
Fiscal Period including, but not limited to, fees and expenses of the Board of
Managers; fees and expenses of the Investment Adviser; expenses of registering
the Units for sale under federal and state securities laws and other expenses in
connection with the offering of the Units; interest; taxes; fees and expenses of
the Company's legal counsel and independent accountants; fees and expenses of
the Company's administrator, transfer agent and custodian; expenses of printing
and mailing Unit certificates (if any), reports to Members, notices to Members,
proxy statements; reports to regulatory bodies; brokerage and other expenses in
connection with the execution, recording and settlement of portfolio security
transactions; expenses in connection with the acquisition and disposition of
portfolio securities or the registration of privately issued portfolio
securities; costs of third party evaluations or appraisals of the Company (or
its assets) or its investments; expenses of membership in investment company and
other trade associations; expenses of fidelity bonding and other insurance
premiums; expenses of Members' meetings; fees payable to the National
Association of Securities Dealers, Inc. (the "NASD"), if any, in connection with
the offering of its Units; indemnification costs and expenses; fees and expenses
of counsel to the members of the Board of Managers that are not interested
persons of the Company (within the meaning of the Investment Company Act) and
all of the Company's other business and operating expenses.
"Direct Investments" means investments in domestic companies in which the
equity is closely held by company founders, management and/or a limited number
of investors, negotiated private investments in public companies and investments
in foreign companies in which the equity is closely held by company founders,
management and/or a limited number of investors.
"Disinterested Manager" shall mean any member of the Board of Managers that
is not an "interested person" of the Company as such term is defined in the
Investment Company Act, as the same may be amended from time to time.
"FCC" shall have the meaning specified in Section 3.21.
"Final Subscription Closing Date" shall mean the date of the final closing
of the offering of the Company's Units not later than December 31, 2000 or such
later date as determined by the Board of Managers.
"Fiscal Period" means the period commencing on the Closing Date, and
thereafter each period commencing on the day immediately following the last day
of the preceding Fiscal Period, and ending at the close of business on the first
to occur of the following dates:
(i) December 31 of such period; and
(ii) any other day as determined in the sole and absolute discretion
of the Board of Managers.
"Fiscal Year" means the period commencing on February 18, 2000 and ending
on the first October 31st following the Closing Date (or such earlier October
31st as the Appropriate Officers may determine), and thereafter each period
commencing on November 1st of each year and ending on October 31st of each year
2
3
(or on the date of a final distribution pursuant to Section 13.2), unless the
Board of Managers shall designate another fiscal year for the Company.
"40 Act Majority of Members" means the lesser of (a) the holders of 67% or
more of the outstanding Units present at a meeting of Members at which the
holders of more than 50% of the outstanding Units are present in person or by
proxy or (b) more than 50% of the outstanding Units.
"Incentive Carried Interest" means, for any given Fiscal Period, an amount
equal to 20% of the excess, if any, of the cumulative amount of all capital
gains on Direct Investments realized by the Company from the commencement of
operations through the end of such Fiscal Period over the sum of:
(i) the cumulative amount of all capital losses on all investments of
any type realized by the Company from the commencement of operations
through the end of such Fiscal Period;
(ii) the excess, if any, of the aggregate amount of unrealized capital
depreciation on all Company investments of any type over the aggregate
amount of all unrealized capital appreciation on all Company investments of
any type, each as determined as of the close of such Fiscal Period; and
(iii) the excess, if any, of the cumulative amount of all expenses of
any type incurred by the Company over the cumulative amount of all income
of any type earned by the Company, in each case from the commencement of
operations through the end of such fiscal period.
"Indemnified Liabilities" shall have the meaning specified in Section
11.2(a).
"Indemnified Person" shall have the meaning specified in Section 11.2(a).
"Incapacity" shall mean as to any Person, the entry of an order for relief
in a bankruptcy proceeding ("bankruptcy"), entry of an order of incompetence or
insanity or the death, dissolution or termination (other than by merger or
consolidation), as the case may be, of such Person.
"Interest" shall mean a Member's rights and interest in the Company.
"Interested Manager" shall mean any member of the Board of Managers that is
an "interested person" of the Company as such term is defined in the Investment
Company Act, as the same may be amended from time to time.
"Investment Adviser" means any Person who is party to an Investment
Advisory Agreement with the Company.
"Investment Advisory Agreement" means any agreement between or among the
Company and any Person or Persons that provides for the provision of investment
advisory services by such Person to the Company and the payment therefor as in
effect from time to time.
"Investment Company Act" shall mean the Investment Company Act of 1940, as
amended.
"Investment Proceeds" shall have the meaning specified in Section 8.2.
"Majority in Interest of the Members" means Members who in the aggregate
own more than 50% of the outstanding Units.
"Manager" shall mean a member of the Board of Managers of the Company. Each
Manager shall be a manager within the meaning of the Act, afforded the
limitation of liability accorded to managers thereunder.
"Media or Common Carrier Company" shall have the meaning specified in
Section 3.21.
"Member" means any Person admitted to the Company as a member of the
Company pursuant to the provisions of this Agreement and named as a member of
the Company in the books and records of the Company, including any Person
admitted as a Substituted Member, in such Person's capacity as a member of the
Company. "Members" means two or more Persons acting in their capacity as members
of the Company.
"Net Loss" shall mean the net loss of the Company with respect to a Fiscal
Period, as determined for federal income tax purposes, provided that such loss
shall be decreased by the amount of all income during
3
4
such period that is exempt from federal income tax and increased by the amount
of all expenditures made by the Company during such period that are not
deductible for federal income tax purposes and that do not constitute capital
expenditures.
"Net Profit" shall mean the net income of the Company with respect to a
Fiscal Period, as determined for federal income tax purposes, provided that such
income shall be increased by the amount of all income during such period that is
exempt from federal income tax and decreased by the amount of all expenditures
made by the Company during such period that are not deductible for federal
income tax purposes and that do not constitute capital expenditures.
"Nonrecourse Deductions" shall have the meaning set forth in Treasury
Regulations Section 1.704-2(b)(1).
"Nonrecourse Liability" shall have the meaning set forth in Treasury
Regulations Section 1.752-l(a)(2).
"Ownership Rules" shall have the meaning specified in Section 3.21.
"Partner Nonrecourse Debt" shall have the meaning set forth in Treasury
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" shall have the meaning set forth in
Treasury Regulations Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" shall have the meaning set forth in
Treasury Regulations Section 1.704-2(i).
"Partnership Minimum Gain" shall have the meaning set forth in Treasury
Regulations Section 1.704-2(b)(2).
"Pass-Through Member" shall have the meaning set forth in Section 10.5.
"Permitted Transfer" shall have the meaning specified in Section 9.2(a).
"Person" means any natural person, individual, corporation, partnership,
trust, estate, limited liability company, custodian, unincorporated organization
or association or any other entity.
"Portfolio Companies" means any Person in which the Company makes an
investment, other than a Short-Term Investment.
"Portfolio Investments" means investments in Portfolio Companies and
Short-Term Investments.
"Prospectus" shall mean the prospectus of the Company as included in the
most recent effective registration statement of the Company under the Securities
Act of 1933, as amended, as such prospectus may be amended, supplemented or
modified from time to time.
"Regulatory Allocations" shall have the meaning set forth in Section
7.4(e).
"Short-Term Investments" means liquid investments in interest-bearing bank
accounts, money market mutual funds, U.S. treasury securities and/or
certificates of deposit, commercial paper and other short-term securities.
"Special Member" shall mean a Member admitted pursuant to Section 6.1.
"Subscription Agreement" means a contract for the purchase of Units.
"Substituted Member" means any Person admitted to the Company as a Member
pursuant to the provisions of Section 9.5 and shown as a Member in the books and
records of the Company.
"Supermajority of Members" means Members who in the aggregate own more than
67% of the outstanding Units.
"Tax Matters Member" shall have the meaning set forth in Section 10.5.
"Transfer" shall have the meaning specified in Section 9.2(a).
4
5
"Treasury Regulations" shall mean the income tax regulations, including
temporary regulations, promulgated under the Code, as the same may be amended
hereafter from time to time (including corresponding provisions of succeeding
income tax regulations).
"Unit" means the unlimited number of common equity interests of the Company
and are the increment by which Interests of Members other than the Special
Member are measured; and includes fractions of Units as well as whole Units.
Units may be subdivided into such number of equal, undivisible shares as the
Appropriate Officers may determine.
ARTICLE II
GENERAL PROVISIONS
2.1 Formation. Excelsior Private Equity Fund III, LLC was formed as a
limited liability company under the laws of the State of Delaware by the filing
of the Certificate of Formation on the 18th day of February, 2000 pursuant to
the Act. The Company filed an Amended Certificate on the 26th day of April, 2000
changing the name of the Company to Excelsior Venture Partners III, LLC. Except
as expressly provided herein to the contrary, the rights and obligations of the
Members and the administration and termination of the Company shall be governed
by the Act.
2.2 Name. The name of the Company is "Excelsior Venture Partners III,
LLC." The name of the Company may be changed from time to time by the Board of
Managers.
2.3 Purpose. The Company has been formed initially, primarily for the
purpose of acting as a vehicle for collective investment, and may engage in any
legal activity whatsoever, without limitation. The Company is authorized and
empowered to elect to operate, and to operate, as a business development company
under the Investment Company Act.
2.4 Principal Place of Business. The Company shall maintain its office and
principal place of business at, and its business shall be conducted from, ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such place or places inside or
outside the United States as the Board of Managers may determine.
2.5 Registered Office and Registered Agent. The address of the Company's
registered office and registered agent for service of process in the State of
Delaware is The Corporation Trust Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The address of the Company's registered office
and registered agent for service of process in the State of Delaware of the
Company may be changed from time to time by the Board of Managers.
2.6 Term. The Company will terminate and dissolve as set forth herein on
the earlier of the tenth anniversary of the Final Subscription Closing Date, or
the dissolution prior thereto pursuant to the provisions hereof; provided,
however, that the Board of Managers may twice extend the time of termination and
dissolution beyond the tenth anniversary of the Final Subscription Closing Date,
with each such extension being for a period of not more than two years as
determined by the Board of Managers and, provided further, with the approval of
the Board of Managers, Members, by the vote of a Majority in Interest of the
Members, may extend the time of termination and dissolution of the Company to
any date.
2.7 Title to Company Property. All property owned by the Company, whether
real or personal, tangible or intangible, shall be owned by the Company as an
entity, and no Member or Manager, individually, shall have title to or any
interest in such property.
2.8 No State Law Partnership. The Members intend that the Company not be a
partnership (including a limited partnership) or joint venture and that no
Member or Manager be a partner or joint venturer of any other Member or Manager
for any purposes other than applicable tax laws. This Agreement may not be
construed to suggest otherwise. Notwithstanding the foregoing, the Members
intend that the Company shall be treated as a partnership for tax purposes.
2.9 No Liability of Members. All debts, obligations and liabilities of the
Company, whether arising in contract, tort or otherwise, shall be solely the
debts, obligations and liabilities of the Company, and no
5
6
Member or Manager shall be obligated personally for any such debt, obligation or
liability of the Company solely by reason of being a Member or Manager.
ARTICLE III
MEMBERS; CAPITAL STRUCTURE; AND MEETINGS
3.1 Members. The name, address and Capital Commitment of each initial
Member is as set forth on Schedule A hereto. From time to time, the books and
records of the Company shall, and Schedule A hereto shall, be amended to reflect
the name, address and Capital Commitment of each Member (including, as permitted
by this Agreement, adding the name, address and Capital Contribution of each
additional Member who is admitted or becomes a Substituted Member pursuant to
the transfer of Interests and deleting the name, address and Capital Commitment
of Persons ceasing to be Members). The Members shall have the management and
voting rights set forth in this Agreement and provided under the Act and the
Investment Company Act and shall have all rights to any allocations and to any
distributions as may be authorized and set forth under this Agreement and under
the Act.
3.2 Capital Structure.
(a) Subject to the terms of this Agreement, the Company is authorized to
issue common equity interests in the Company designated as "Units," which shall
constitute an unlimited number of limited liability company interests under the
Act. Other than as set forth in this Agreement, each Unit shall be identical in
all respects with each other Unit. Units may be subdivided into such number of
equal, undivisible shares as the Appropriate Officers may determine. The
relative rights, powers, preferences, duties, liabilities and obligations of
Members shall be as set forth herein.
(b) The Company is authorized to issue Units to any Person at such prices
per Unit as may be determined by the Board of Managers or a duly authorized
committee thereof and in exchange for either capital contributions or the
provision of property, services or otherwise, as may be determined by the Board
of Managers. The number of Units issued to Members shall be listed in the
membership records of the Company, which shall be amended from time to time by
the Company as required to reflect issuances of Units to new Members, changes in
the number of Units held by Members and to reflect the addition or cessation of
Members. The number of Units held by each Member shall not be affected by any
(i) issuance by the Company of Units to other Members or (ii) change in the
Capital Account of such Member (other than such changes to reflect additional
Capital Contributions from such Member in exchange for new Units). Subject to
the requirements of the Investment Company Act, the Company is authorized to
issue options or warrants to purchase Units, restricted Units, Unit appreciation
rights, phantom Units and other securities convertible, exchangeable or
exercisable for Units, on such terms as may be determined by the Board of
Managers or a duly authorized committee thereof.
(c) In the sole discretion of the Board of Managers, the issued and
outstanding Units may be represented by certificates. In addition to any other
legend required with respect to a particular class, group or series of Units,
each such certificate shall bear the following legend:
THE UNITS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO, AND MAY NOT
BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, ENCUMBERED, HYPOTHECATED OR
OTHERWISE DISPOSED OF WITHOUT COMPLYING WITH THE PROVISIONS OF THE
LIMITED LIABILITY COMPANY OPERATING AGREEMENT BY AND AMONG THE MEMBERS
OF EXCELSIOR VENTURES PARTNERS III, LLC (THE "COMPANY"), AS IT MAY BE
AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE WITH THE
COMPANY. IN ADDITION TO THE RESTRICTIONS ON TRANSFER SET FORTH IN SUCH
AGREEMENT, NO TRANSFER OF THE INTERESTS REPRESENTED BY THIS
CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER (THE "1933 ACT"),
AND ALL APPLICABLE STATE
6
7
SECURITIES LAWS OR ALL APPLICABLE NON-U.S. SECURITIES LAWS OR (B) IF SUCH
TRANSFER IS PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE 1933 ACT AND PURSUANT TO SUCH EXEMPTION UNDER APPLICABLE STATE OR
NON-U.S. SECURITIES LAWS, THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF
THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF THE
AFORESAID AGREEMENT.
3.3 Changes to Capital Structure. Additional Persons may be admitted as
Members, and additional Units or other equity interests may be created and
issued from time to time; the terms of admission or issuance may provide for the
creation of different classes, groups or series of membership interests having
different rights, powers and duties, which rights, powers and duties may be
senior, pari passu or junior to the rights, powers and duties of the Units, as
determined by the Board of Managers. Any creation of any new class, group or
series of units or other equity interests shall be reflected in a supplemental
exhibit to this Agreement indicating such rights, powers and duties.
3.4 No Management Responsibility. No Member, in such capacity, shall
participate in the management or control of the business of or transact any
business for the Company, but may exercise the voting rights and powers of a
Member set forth in this Agreement. All management responsibility is vested in
the Board of Managers. The Members hereby consent to the taking of any action by
the Board of Managers, Appropriate Officers and the Special Member contemplated
under this Agreement or otherwise permitted under the Act.
3.5 No Authority to Act. No Member, in such capacity, shall have the power
to represent, act for, sign for, or to bind the Company, except for the Special
Member to the extent expressly set forth herein. All authority to act on behalf
of the Company is vested in the Board of Managers, Appropriate Officers and the
Investment Adviser. The Members consent to the exercise by the Board of
Managers, Appropriate Officers and the Investment Adviser of the powers
conferred on them under this Agreement or otherwise permitted under the Act.
3.6 No Preemptive Rights. Holders of Units will have no preemptive rights
with respect to the issuance of any membership or other equity interest in the
Company or any other securities of the Company convertible into, or carrying
rights or options to purchase any such membership or other equity interest.
3.7 Redemption or Repurchase Rights. Except as otherwise provided in this
Agreement, the Company shall not redeem or repurchase any Member's Units and no
Member shall have the right to withdraw from the Company or to receive any
return of any Capital Commitment.
3.8 Member Meetings. Unless required by the Act or other applicable law,
the Company is not required to hold annual or other regular meetings of Members.
Special meetings of the Members may be called to consider any matter requiring
the consent of all or any of the Members pursuant to this Agreement and as
otherwise determined by the Board of Managers. Special meetings of the Members
may be called by the Board of Managers or by Members who are the holders of not
less than 66 2/3 % of the outstanding Units.
3.9 Place of Meetings. The Board of Managers may designate any place,
either within or outside of the State of Delaware, as the place of meeting for
any annual meeting or for any special meeting called by the Managers. If no
designation is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal executive offices of the Company. Members may
participate in a meeting in person, by proxy or by means of a conference
telephone or similar communications equipment by which all persons participating
in the meeting can hear and speak to each other at the same time, and any such
participation in a meeting shall constitute presence in person of such Member at
such meeting.
3.10 Notice of Members' Meetings.
(a) Written notice stating the place, day and hour of the meeting and, in
case of a special meeting, the purpose for which the meeting is called shall be
delivered not less than ten days nor more than ninety days before the date of
the meeting, either personally, by facsimile, electronic mail or by postal mail,
by or at the direction of the Board of Managers or Members calling the meeting
to each Member of record entitled to vote at such meeting.
7
8
(b) Notice to Members, if mailed by post, shall be deemed delivered as to
any Member when deposited in the United States mail, addressed to the Member,
with postage prepaid, but, if two successive letters mailed to the last-known
address of any Member are returned as undeliverable, no further notices to such
Member shall be necessary until another address for such Member is made known to
the Company. Notice to Members, if by facsimile or by electronic mail, shall be
deemed delivered upon receipt of a confirmation of transmission.
(c) At an adjourned meeting, the Company may transact any business which
might have been transacted at the original meeting without additional notice.
3.11 Waiver of Notice.
(a) When any notice is required to be given to any Member of the Company
under the provisions of this Agreement, a waiver thereof in writing signed by
the Person entitled to such notice, whether before, at, or after the time stated
therein, shall be equivalent to the giving of such notice.
(b) By attending a meeting, a Member:
(i) Waives objection to lack of notice or defective notice of such
meeting unless the Member, at the beginning of the meeting, objects to the
holding of the meeting or the transacting of business at the meeting; and
(ii) Waives objection to consideration at such meeting of a particular
matter not within the purpose or purposes described in the meeting notice
unless the Member objects to considering the matter when it is presented.
3.12 Record Dates. For the purpose of determining the Members who are
entitled to vote or act at any meeting or any adjournment thereof, or who are
entitled to participate in any distribution, or for the purpose of any other
action, the Managers may fix a date and time not more than ninety (90) days
prior to the date of any meeting of Members or other action as the date and time
of record for the determination of Members entitled to vote at such meeting or
any adjournment thereof or to be treated as Members of record for purposes of
such other action, and any Member who was a Member at the date and time so fixed
shall be entitled to vote at such meeting or any adjournment thereof or to be
treated as a Member of record for purposes of such other action, even though he
has since that date and time disposed of his Units, and no Member becoming such
after that date and time shall be so entitled to vote at such meeting or any
adjournment thereof or to be treated as a Member of record for purposes of such
other action.
3.13 Voting Record. The Person having charge of the membership records of
the Company shall make, at least two days before such meeting of Members, a
complete record of the Members entitled to vote at each meeting of Members or
any adjournment thereof, with the address of each. The record, for a period of
two days prior to such meeting, shall be kept on file at the principal executive
offices of the Company, and shall be subject to inspection by any Member for any
proper purpose germane to the meeting at any time during usual business hours;
provided, however, that such Member shall have made a demand to view such
records not less than 5 business days after receipt of notice of such meeting,
properly delivered to the Company and setting forth in reasonable detail the
purpose for which such Member desires to view such information. The original
membership records shall be the prima facie evidence as to who are the Members
entitled to examine the record or transfer books or to vote at any meeting of
Members.
3.14 Voting; Quorum of Members; Vote Required. Except as otherwise set
forth herein, each Member shall be entitled to one vote per Unit and a
proportionate fractional vote for each fractional Unit upon all matters upon
which Members have the right to vote based upon the Units of the Company as set
forth in the membership records of the Company as of the applicable record date.
The presence, in person or by proxy, of Members owning more than 50% of the
Units at the applicable record date for the action to be taken constitutes a
quorum for the transaction of business. If a quorum is present, the affirmative
vote, in person or by proxy, of the owners of more than 50% of the Units then
outstanding and represented in person or by proxy at the meeting and entitled to
vote on the subject matter shall be the act of the Members, unless the vote of a
greater proportion or number or voting by classes is required by the Act, the
Investment Company Act or this
8
9
Agreement. If a quorum is not represented at any meeting of the Members, such
meeting may be adjourned by an Appropriate Officer.
The Members shall have the following voting rights:
(a) to the extent required by the Investment Company Act or as
otherwise provided for herein, the right to elect Managers by the
affirmative vote of a plurality of votes cast;
(b) as provided herein, the right to remove Managers for cause by the
affirmative vote of a Supermajority of Members at a meeting of Members duly
called for such purpose;
(c) to the extent required by the Investment Company Act, the right to
approve proposed changes in the nature of the Company's business so as to
cause the Company to cease to be, or to withdraw its election as, a
business development company under the Investment Company Act by the
affirmative vote of a 40 Act Majority of Members;
(d) to the extent required by the Investment Company Act, the right to
approve any proposed investment advisory agreement or to disapprove and
terminate any such existing agreement by the affirmative vote of a 40 Act
Majority of Members; provided, however, in the case of approval that such
agreement is also approved by a majority of Managers who are not parties to
such contract or "interested persons" of any such party as such term is
defined in the Investment Company Act, as the same may be amended from time
to time;
(e) to the extent required by the Investment Company Act, the right to
ratify the appointment of the independent accountants of the Company by the
affirmative vote of more than 50% of the Units then outstanding and
represented in person or by proxy at the meeting and entitled to vote;
provided, however, that such appointment is approved by a majority of the
Disinterested Managers;
(f) to the extent required by the Investment Company Act, the right to
terminate the Company's independent accountants by the affirmative vote of
a 40 Act Majority of Members;
(g) extension of the time of termination and dissolution of the
Company to the extent provided in Section 2.6 hereof by the affirmative
vote of a Majority in Interest of the Members;
(h) to the extent required by the Investment Company Act, the right to
consent to the dissolution of the Company pursuant to Section 13.1 by the
affirmative vote of a 40 Act Majority of Members;
(i) to the extent required by Section 13.2, the selection of a
liquidator by the affirmative vote of a Majority in Interest of the
Members;
(j) to the extent required by Section 14.1 or 14.3, the right to
approve certain amendments to this Agreement by the affirmative vote of a
Majority in Interest of the Members; and
(k) so long as the Company is subject to the provisions of the
Investment Company Act, the right to approve any other matters that the
Investment Company Act requires to be approved by the Members by the
affirmative vote of Members as specified in the Investment Company Act.
3.15 No Consent Required. Notwithstanding the foregoing, no vote,
approvals, or other consent shall be required of the Members to amend this
Agreement in any of the following respects: (i) to reflect any change in the
amount or character of the Capital Contribution of any Member; (ii) to admit an
additional Member or a Substituted Member or withdraw a Member in accordance
with the terms of this Agreement; (iii) to correct any false or erroneous
statement, or to make a change in any statement in order that such statement
shall accurately represent the agreement among the Members in this Agreement;
(iv) to reflect any change that is necessary to qualify the Company as a limited
liability company under the laws of any state or that is necessary or advisable
in the opinion of the Board of Managers to assure that the Company will not be
treated as a publicly traded partnership or otherwise treated as a corporation
for federal income tax purposes; (v) to reflect any change in the name or
principal place of business of the Company; (vi) to make any other change or
amendment that does not require the vote, approval or consent of Members under
the Investment Company
9
10
Act, the Act or expressly hereunder, provided that such change or Amendment has
been approved by a majority of the Board of Managers and a majority of the
Disinterested Managers.
3.16 Limitations on Requirements for Consents. Notwithstanding any other
provisions of this Agreement, but subject to the requirements of the Investment
Company Act, in the event that counsel for the Company or counsel designated by
Members holding not less than 10% of the Units owned by all Members shall have
delivered to the Company an opinion to the effect that either the existence of a
particular consent right or particular consent rights, or the exercise thereof,
will violate the provisions of the Act or the laws of the other jurisdictions in
which the Company is then formed or qualified, will adversely affect the limited
liability of the Members, or will adversely affect the classification of the
Company as a partnership for federal or state income tax purposes, then
notwithstanding the other provisions of this agreement, the Members shall no
longer have such right, or shall not be entitled to exercise such right in the
instant case, as the case may be.
3.17 Informal Action by Members. Any action that may be taken by Members
at a meeting of Members may be taken without a meeting without prior notice and
without a vote if consent in writing setting forth the action to be taken is
signed by the Members holding not less than the minimum percentage of Units that
would be necessary to authorize or take such action at a meeting at which all
the Members were present and voted, with prompt written notice thereof delivered
to all Members. Written consent by the Members has the same force and effect as
a vote of such Members held at a duly held meeting of the Members and may be
stated as such in any document.
3.18 Voting by Ballot. Voting on any question or in any election may be by
voice vote unless the presiding officer shall order or any Member shall demand
that voting be by ballot.
3.19 No Cumulative Voting. No Members shall be entitled to cumulative
voting in any circumstance.
3.20 Representations and Warranties of Members; Indemnification.
(a) Each Member hereby represents and warrants to the Company and each
other Member as follows:
(i) In each case to the extent applicable, such Member is duly
incorporated or organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and has full
power and authority to execute and deliver this Agreement and to perform
its obligations hereunder. All requisite actions necessary for the due
authorization, execution, delivery and performance of this Agreement by
such Member have been duly taken.
(ii) Such Member has duly executed and delivered this Agreement. This
Agreement constitutes a valid and binding obligation of such Member
enforceable against such Member in accordance with its terms (except as may
be limited by bankruptcy, insolvency, or similar laws of general
application and by the effect of general principles of equity, regardless
of whether considered at law or in equity).
(iii) Such Member's authorization, execution, delivery and performance
of this Agreement does not and will not (i) conflict with, or result in a
breach, default or violation of (A) to the extent applicable, the
certificate or articles of incorporation, by-laws or other organizational
documents of such Member, (B) any material contract or agreement to which
that Member is a party or is otherwise subject, or (C) any law, order,
judgment, decree, writ, injunction or arbitration award to which that
Member is subject; or (ii) require any consent, approval, or authorization
from filing, or registration with or notice to, any governmental authority
or other Person, other than those that have already been obtained.
(iv) Such Member is familiar with the proposed business, financial
condition, properties, operations and prospects of the Company, and has
asked such questions and conducted such due diligence concerning such
matters and concerning its acquisition of any membership interests as it
has desired to ask and conduct, and all such questions have been answered
to its full satisfaction. Such Member has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and risks of an in vestment in the Company. Such Member understands that
owning membership interests involves various risks, including the
restrictions on transferability set forth in this Agreement, lack of any
public market for such membership interests, the risk of owning its
membership interests for an indefinite period of time and the risk of
losing its entire investment in the Company. Such Member is
10
11
able to bear the economic risk of such investment; is acquiring its
membership interests for investment and solely for its own beneficial
account and not with a view to or any present intention of directly or
indirectly selling, transferring, offering to sell or transfer,
participating in any distribution or otherwise disposing of all or a
portion of its membership interests.
(b) Each Member hereby indemnifies the Company from and against and agrees
to hold the Company free and harmless from any and all claims, losses, damages,
liabilities, judgments, fines, settlements, compromises, awards, costs, expenses
or other amounts (including without limitation any attorney fees, expert witness
fees or related costs) arising out of or otherwise related to a breach of any of
the representations and warranties of such Member as set forth in this Section
3.20.
(c) such Member shall not transfer, sell, or offer to sell such Member's
Units without compliance with the conditions and provisions of this Agreement;
(d) if such Member assigns all or any part of such Member's Units, then
until such time as one or more assignees thereof are admitted to the Company as
a Substituted Member with respect to the entire Interest so assigned, the
matters to which any holder thereof would covenant and agree if such holder were
to execute this Agreement as a Member shall be and remain true;
(e) such Member shall notify the Managers immediately if any
representations or warranties made herein or in any Subscription Agreement
should be or become untrue; and
(f) such Member shall not take any action that would have the effect of
causing the Company (i) to be treated as a publicly traded partnership for
purposes of Section 7704(b) of the Code or (ii) otherwise to be treated as a
corporation for federal income tax purposes.
3.21 Media and Common Carrier Restrictions. A "Media or Common Carrier
Company" shall mean any Person in whom the Company has acquired or is proposing
to acquire any direct or indirect interest that directly or indirectly owns,
controls or operates a broadcast radio or television station, a cable television
system, a "daily newspaper" (as such term is defined in the Attribution Rules
and/or the Ownership Rules), a multipoint multichannel distribution system, a
local multipoint distribution system, an open video system, a commercial mobile
radio service or any other communications facility the ownership of which is
subject to regulation by the Federal Communications Commission ("FCC") under (i)
the Communications Act; (ii) the Attribution Rules; or (iii) the Ownership
Rules. For purposes of this Section 3.21, "Attribution Rules" shall mean the
ownership attribution rules of the FCC, including, but not limited to, 47 C.F.R.
sec.sec. 20.6(d); 21.912, Note 1; 73.3555, Note 2(g); 76.501, Note 2(g);
76.15000(g); 101.10333(e); Attribution Reconsideration Order, 58 Rad. Reg. 2d (P
& F) 604 (1985); Further Attribution Reconsideration Order, 1 FCC Rcd 802
(1986); and "Ownership Rules" shall mean the multiple and cross-ownership rules
of the FCC including, but not limited to, 47 C.F.R. sec.sec. 20.6(a); 21.912;
73.3555; 74.931(h); 76.1501 and 101.1003(a) and any other regulations or written
policies of the FCC which limit or restrict ownership in Media or Common Carrier
Companies, all as the same may be amended or supplemented from time to time.
(a) If the Company acquires an interest in a Media Company and if as a
result of the Attribution Rules, a Member or a Media Company would, but for the
last clause of this Section 3.21(a) be in violation of:
(i) the Ownership Rules, or
(ii) the restrictions on ownership or participation in broadcast
licenses by aliens imposed by Section 310(b) of the Communications Act
or the policies and decisions of the FCC thereunder, or
(iii) the FCC's policy preventing persons from having
"meaningful" cross-interests in certain broadcast station
combinations, newspaper/broadcast station combinations, or cable
system/television station combinations serving the same market in
situations where such combinations would violate the Ownership Rules
if all such interests were attributable under the Attribution Rules,
then:
no Member nor any officer, director, member or partner of any Member nor any
person who owns more than 5% of any class of equity securities of any Member
shall, without the consent of the Investment Adviser: be an
11
12
employee of the Company whose functions directly or indirectly relate to the
media or common carrier business of any Media or Common Carrier Company; serve
in any material capacity as an independent contractor or agent with respect to
the media or common carrier business of such Media or Common Carrier Company;
communicate on matters pertaining to the day-to-day operations of any Media or
Common Carrier Company with (A) an officer, director, partner, agent,
representative or employee of such Media or Common Carrier Company, or (B) the
Investment Adviser; perform any services for the Company that materially relate
to any Media or Common Carrier Company; become actively involved in the
management or operation of any Media or Common Carrier Company; or become
actively involved in the management or operation of the media businesses.
ARTICLE IV
MANAGEMENT OF COMPANY
4.1 Board of Managers. The governing body of the Company shall be the
Board of Managers, which shall have the power to control the management and
policies of the Company. The maximum number of managers shall initially be set
at four (4), and may be increased or decreased by action of the Board of
Managers provided that at no time shall the number of Managers be set at less
than three (3) nor more than ten (10). The Managers shall be set forth in
Schedule B hereto or in the official records of the Company. The Managers shall
hold office until their successors are approved and elected, unless they are
sooner removed pursuant to Section 4.4, or sooner resign pursuant to Section 4.3
or sooner are incapacitated pursuant to Section 4.5, as the case may be.
Managers may succeed themselves in office. No reduction in the number of
Managers shall have the effect of removing any Manager from office unless
specially removed pursuant to Section 4.4 at the time of such decrease. Subject
to the requirements of the Investment Company Act, the Board of Managers may
designate successors to fill vacancies created by an authorized increase in the
number of Managers, the resignation of a Manager pursuant to Section 4.3, the
removal of a member of the Board of Managers pursuant to Section 4.4 or the
incapacity of a Manager pursuant to Section 4.5. In the event that no Managers
remain, the Appropriate Officers shall continue the business of the Company and
shall perform all duties of the Managers under this Agreement and shall as soon
as practicable call a special meeting of Members for the purpose of approving
and electing Managers. When Managers are subject to election by Members,
Managers are elected by a plurality of the Units voting at the meeting. Managers
may, but need not be, admitted to the Company as Members to act in their
capacity as Managers.
4.2 Disinterested Managers. Subject to the requirements of the Investment
Company Act, at any time that the Company shall have in effect an election to be
treated as a business development company under the Investment Company Act, then
at least a majority of the members of the Board of Managers shall be
Disinterested Managers. If at any time the number of Disinterested Managers is
less than a majority, action shall be taken pursuant to Section 4.1 or Section
4.4 to restore the number of Disinterested Managers to at least a majority.
4.3 Resignation by a Manager. A Manager may voluntarily resign from the
Board of Managers upon the giving of notice thereof to the Company, such
resignation to take effect upon receipt of such notice by the Company or such
later date as set forth in such notice.
4.4 Removal of a Manager; Designation of a Successor Manager.
(a) Any Manager may be removed either: (i) for cause by the action of at
least two-thirds of the remaining Managers, including in the case of a
Disinterested Manager a majority of the remaining Disinterested Managers; (ii)
by failure to be re-elected by the Members at a meeting of Members duly called
by the Managers for such purpose; or (iii) for cause by the affirmative vote of
a Supermajority of Members. The removal of a Manager shall in no way derogate
from any rights or powers of such Manager, or the exercise thereof, or the
validity of any actions taken pursuant thereto, prior to the date of such
removal.
(b) Subject to Section 4.2, the remaining Managers shall designate a
successor Manager to fill any vacancy existing in the number of Managers fixed
pursuant to Section 4.2 resulting from removal of a
12
13
Manager. Any such successor Manager shall hold office until his or her successor
has been approved and elected.
(c) Any removal of a Manager shall not affect any rights or liabilities of
the removed Manager that matured prior to such removal.
4.5 Incapacity of a Manager.
(a) In the event of the Incapacity of a Manager, the business of the
Company shall be continued with the Company property by the remaining Managers.
The remaining Managers shall, within 90 days, call a meeting of the Board of
Managers for the purpose of designating a successor Manager. Any such successor
Manager shall hold such office until his or her successor has been approved and
elected. The Managers shall make such amendments to the certificate of formation
and execute and file for recordation such amendments or other documents or
instruments as are necessary and required by the Act or this Agreement to
reflect the fact that such Incapacitated Manager has ceased to be a Manager and
the appointment of such successor Manager.
(b) In the event of the Incapacity of all Managers, an Appropriate Officer
shall as promptly as practicable convene a meeting of Members for the purpose of
electing new Managers nominated by the Special Member. Upon the Incapacity of a
Manager, the Manager shall immediately cease to be a Manager.
(c) Any such termination of a Manager shall not affect any rights or
liabilities of the Incapacitated Manager that matured prior to such Incapacity.
4.6 Continuation. In the event of the withdrawal, removal or retirement of
a Manager, the Company shall not be dissolved and the business of the Company
shall be continued by the remaining Managers.
4.7 Board of Managers Powers. Subject to the terms hereof, the Board of
Managers shall have full and complete discretion in the management and control
of the affairs of the Company, shall make all decisions affecting Company
affairs and shall have all of the rights, powers and obligations of a managing
member of a limited liability company under the Act and otherwise as provided by
law. The Board of Managers shall provide overall guidance and supervision with
respect to the operations of the Company, shall perform all duties imposed on
the directors of business development companies by the Investment Company Act,
and shall monitor the activities of the Appropriate Officers, Investment
Advisers and any administrator to the Company and distributor of the Company's
securities. Except as otherwise expressly provided in this Agreement, the Board
of Managers is hereby granted the right, power and authority to do on behalf of
the Company all things which, in its sole judgment, are necessary or appropriate
to manage the Company's affairs and fulfill the purposes of the Company. Any
determination as to what is in the interests of the Company made by the Managers
in good faith shall be conclusive. In construing the provisions of this
Agreement, the presumption shall be in the favor of a grant of power to the
Managers. The powers of the Managers include, by way of illustration and not by
way of limitation, the power and authority from time to time to do the
following:
(a) invest the assets of the Company in such investments as are
consistent with the Company's purpose and employ one or more Investment
Advisers to do the same;
(b) incur all expenses permitted by this Agreement;
(c) to the extent that funds are available, cause to be paid all
expenses, debts and obligations of the Company;
(d) appoint and dismiss such Persons to serve as officers of the
Company ("Appropriate Officers") with such powers and authority as may be
provided to such Persons by the Board of Managers or by this Agreement;
(e) employ and dismiss from employment such agents, employees,
managers, accountants, attorneys, consultants and other Persons necessary
or appropriate to carry out the business and affairs of the Company,
whether or not any such Persons so employed are affiliated persons of any
Manager, and to pay such compensation to such Persons as is competitive
with the compensation paid to unaffiliated Persons in the area for similar
services;
13
14
(f) subject to the indemnification provisions in this Agreement, pay,
extend, renew, modify, adjust, submit to arbitration, prosecute, defend or
settle, upon such terms it deems sufficient, any obligation, suit,
liability, cause of action or claim, including tax audits, either in favor
of or against the Company;
(g) enter into any sales, distribution, agency, or dealer agreements,
and escrow agreements, with respect to the sale of Units and provide for
the distribution of such Units by the Company through one or more Persons
(which may be affiliated persons of a Manager or Managers), or otherwise;
borrow money and issue multiple classes of senior indebtedness or a single
class of Interests senior to the Units to the extent permitted by the
Investment Company Act and repay, in whole or in part, any such borrowing
or indebtedness and repurchase or retire, in whole or in part, any such
Interests senior to the Units; and in connection with such loans or senior
instruments to mortgage, pledge, assign or otherwise encumber any or all
properties or assets owned by the Company, including any income therefrom,
to secure such borrowing or provide repayment thereof;
(h) establish and maintain accounts with financial institutions,
including federal or state banks, brokerage firms, trust companies, savings
and loan institutions or money market funds;
(i) make temporary investments of Company capital in Short-Term
Investments;
(j) to the extent permitted by the Investment Company Act, form or
cause to be formed one or more small business investment companies under
the Small Business Investment Fund Act of 1958, as amended;
(k) establish valuation principles and periodically apply such
principles to the Company's investment portfolio;
(l) to the extent permitted by the Investment Company Act, designate
and appoint one or more agents for the Company who shall have such
authority as may be conferred upon them by the Board of Managers and who
may perform any of the duties of, and exercise any of the powers and
authority conferred upon, the Board of Managers hereunder including, but
not limited to, designation of one or more agents as authorized signatories
on any bank accounts maintained by the Company;
(m) prosecute, protect, defend, or cause to be protected and defended,
or abandon, any patents, patent rights, copyrights, trade names, trademarks
and service marks, and any applications with respect thereto, that may be
held by the Company;
(n) take all reasonable and necessary actions to protect the secrecy
of and the proprietary rights with respect to any know-how, trade secrets,
secret processes or other proprietary information and to prosecute and
defend all rights of the Company in connection therewith;
(o) subject to the other provisions of this Agreement, to enter into,
make and perform such contracts, agreements, and other undertakings, and to
do such other acts, as it may deem necessary or advisable for, or as may be
incidental to, the conduct of the business contemplated by this Agreement,
including, without in any manner limiting the generality of the foregoing,
contracts, agreements, undertakings, and transactions with any Member,
Manager, Appropriate Officer or Investment Adviser or with any other
person, firm, or corporation having any business, financial, or other
relationship with any Member, Manager, Appropriate Officer or Investment
Adviser, provided, however, such transactions with such Persons and
entities (i) shall only be entered into to the extent permitted under the
Investment Company Act and (ii) shall be on terms no less favorable to the
Company than are generally afforded to unrelated third parties in
comparable transactions;
(p) purchase, rent or lease equipment for Company purposes;
(q) purchase and maintain, at the Company's expense, liability and
other insurance to protect the Company's assets from third party claims;
and cause the Company to purchase or bear the cost of any insurance
covering any potential liabilities of the Members, Managers, Appropriate
Officers, Investment Adviser or agents of the Company, or officers,
employees, directors, members or partners of the
14
15
Investment Adviser or any agent of the Company as well as the potential
liabilities of any Person serving at the request of the Investment Adviser
as a director of or adviser to a Portfolio Company;
(r) cause to be paid any and all taxes, charges and assessments that
may be levied, assessed or imposed upon any of the assets of the Company;
(s) make or caused to be made any election on behalf of the Company
under the Code and other tax laws and supervise the preparation and filing
of all tax and information returns that the Company may be required to
file;
(t) take any action that may be necessary or appropriate for the
continuation of the Company's valid existence as a limited liability
company under the laws of the State of Delaware and of each other
jurisdiction in which such existence is necessary to protect the limited
liability of the Members or to enable the Company to conduct the business
in which it is engaged;
(u) admit Members to the Company in accordance with Section 7.1; admit
an assignee of a Member's Interest to be a Substituted Member in the
Company, pursuant to and subject to the terms of Section 9.5, without the
consent of any Member; admit additional Persons as members by creating and
issuing Units or other equity interests from time to time with terms of
admission or issuance providing for the creation of different classes,
groups or series of membership interests having different rights, powers
and duties, which rights, powers and duties may be senior, pari passu or
junior to the rights, powers and duties of the Units, as determined by the
Board of Managers without the consent of Members;
(v) value the assets of the Company from time to time pursuant to and
consistent with the policies of the Company with respect thereto as in
effect from time to time;
(w) borrow money or otherwise incur indebtedness to fund loans and
other investments subject to the provision of applicable law and this
Agreement; each Member expressly agrees that any such borrowing may be
secured by the assets of the Company and that its Capital Account may be
pledged by the Company to secure any such borrowing or indebtedness;
(x) delegate all or any portion of its rights, powers and authority to
any committee or subset of the Board of Managers, or to any Investment
Adviser, Appropriate Officer or agent of the Company, subject to the
control and supervision of the Managers; and
(y) perform all normal business functions, and otherwise operate and
manage the business and affairs of the Company, in accordance with and as
limited by this Agreement.
4.8 Annual and other Regular Meetings of the Board of Managers. An annual
meeting of the Board of Managers shall be held without notice other than this
provision. The Board of Managers may provide, by resolution, the time and place,
either within or without the State of Delaware, for the holding of the annual
meeting and any additional regular meetings without notice other than such
resolution.
4.9 Special Meetings of the Board of Managers. Special meetings of the
Board of Managers may be called by an Appropriate Officer or the Chairman of the
Board of Managers, or, if no such Chairman exists, at the request of any two
Managers. The person or persons authorized to call special meetings of the Board
of Managers may fix any place, either within or without the State of Delaware,
as the place for holding any special meeting of the Board of Managers called by
them.
4.10 Notice of Meetings of the Board of Managers. Written notice of any
special meeting of the Board of Managers shall be given as follows:
(a) By mail to each Manager at the Manager's mailing address at least
five business days prior to the meeting; or
(b) By personal delivery, e-mail or facsimile transmission at least
three business days prior to the meeting to each Manager.
15
16
If mailed by post, such notice shall be deemed to be delivered when
deposited in the United States mail, so addressed, with postage thereon prepaid.
If notice be given by e-mail or facsimile transmission such notice shall be
deemed to be delivered when the e-mail or facsimile transmission is transmitted
by the sender.
(c) Any Manager may waive notice of any meeting. The attendance of a
Manager at any meeting shall constitute a waiver of notice of such meeting,
except where a Manager attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor
the purpose of, any regular or special meeting of the Board of Managers
need be specified in the notice or waiver of notice of such meeting.
4.11 Quorum for Board of Managers Meetings. A majority of the number of
Managers shall constitute a quorum for the transaction of business at any
meeting of the Board of Managers, but if less than such majority is present at a
meeting, a majority of the Managers present may adjourn the meeting from time to
time without further notice.
4.12 Manner of Acting for Board of Managers. Except as otherwise required
by the Act, the Investment Company Act or this Agreement the act of the majority
of the Managers present at a meeting at which a quorum is present shall be the
act of the Board of Managers. Each Manager shall be entitled to one vote upon
all matters submitted to the Board of Managers.
4.13 Written Consent by Board of Managers. Unless otherwise required by
the Investment Company Act, any action required or permitted to be taken at any
meeting of the Board of Managers or by a committee thereof may be taken without
a meeting, without prior notice and without a vote if the members of the Board
of Managers or such committee that would be required to approve such action at a
meeting consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board of Managers or such committee.
4.14 Participation by Electronic Means by Board of Managers. Any Manager
may participate in a meeting of the Board of Managers or any committee thereof
in person or by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear and speak
to each other at the same time. Except for purposes of the Investment Company
Act, such participation shall constitute presence in person at the meeting.
4.15 Committees of Managers. By resolution adopted by the Board of
Managers, the Board of Managers may designate two or more Managers to constitute
a committee, any of which shall have such authority in the management of the
Company as the Board of Managers shall designate.
4.16 Manager Presumption of Assent. A Manager of the Company who is
present at a meeting of the Board of Managers at which action on any matter
taken shall be presumed to have assented to the action taken unless a dissent
shall be entered in the minutes of the meeting or unless the Manager files a
written dissent to such action with the person acting as the secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Company immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Manager
who voted in favor of such action.
4.17 Manager Power to Bind Company. Unless the Board of Managers consists
of one Manager, no Manager (acting in his capacity as such) shall have any
authority to bind the Company to any third party with respect to any matter
except pursuant to a resolution expressly authorizing such action which
resolution is duly adopted by the Board of Managers by the affirmative vote
required for such matter pursuant to the terms of this Agreement.
4.18 Liability of the Managers. No Manager shall be: (i) personally liable
for the debts, obligations or liabilities of the Company, including any such
debts, obligations or liabilities arising under a judgement decree or order of a
court; (ii) obligated to cure any deficit in any Capital Account; (iii) required
to return all or any portion of any Capital Contribution; or (iv) required to
lend any funds to the Company.
4.19 Reliance by Third Parties. Persons dealing with the Company are
entitled to rely conclusively upon the power and authority of the Board of
Managers, the Appropriate Officers and the Special Member of the Company herein
set forth.
16
17
4.20 Appointment of Auditors. Subject to the approval or ratification of
the Members and the Disinterested Managers, if and to the extent required under
the Investment Company Act, the Board of Managers, in the name and on behalf of
the Company, is authorized to appoint independent certified public accountants
for the Company.
4.21 Contracts with Affiliates. The Board of Managers may, on behalf of
the Company subject to approval by a majority of the Managers who do not have an
interest in the contract and a majority of the Disinterested Managers and to
compliance with the Investment Company Act, enter into contracts for goods or
services with any affiliate of a Manager, Member, Appropriate Officer,
Investment Adviser or any other person, provided that the charges for such goods
or services do not exceed those charged by unaffiliated Persons in the area for
similar goods and services.
4.22 Obligations of the Managers. The Managers shall devote such time and
effort to the Company business as, in their judgment, may be necessary or
appropriate to oversee the affairs of the Company.
4.23 Other Business of Managers. Any Manager and any affiliate of any
Manager may engage in or possess any interest in other business ventures of any
kind, nature or description, independently or with others, whether such ventures
are competitive with the Company or otherwise. Neither the Company nor any
Member shall have any rights or obligations by virtue of this Agreement or the
company relationship created hereby in or to such independent ventures or the
income or profits or losses derived therefrom, and the pursuit of such ventures,
even if competitive with the business of the Company, shall not be deemed
wrongful or improper. Neither the Managers nor any affiliate of any Manager
shall be obligated to present any investment opportunity to the Company.
4.24 Limitations on Board of Managers and Appropriate Officers.
(a) Notwithstanding anything expressed or implied to the contrary in this
Agreement (other than Article IX), the Board of Managers and the Appropriate
Officers shall not authorize or otherwise cause or allow the Company to purchase
all or any portion of any Member's Interest (or any attributes thereof).
(b) Notwithstanding anything expressed or implied to the contrary in this
Agreement, the Board of Managers and the Appropriate Officers shall not (i)
participate in the establishment of a secondary market (or the substantial
equivalent thereof) with respect to the Interests for purposes of Treasury
Regulation sec.1.7704-1(d)(1) or (ii) take any action that would have the effect
of causing the Company (A) to be treated as a publicly traded partnership for
purposes of Section 7704(b) of the Code or (B) otherwise to be treated as a
corporation for federal income tax purposes.
ARTICLE V
OFFICERS
5.1 Appropriate Officers. The day-to-day management and operation of the
Company and its business shall be the responsibility of the Appropriate Officers
of the Company, subject to the supervision and control of the Board of Managers.
The Appropriate Officers shall, subject to the supervision and control of the
Board of Managers, exercise all powers necessary and convenient for the purposes
of the Company, on behalf and in the name of the Company. Notwithstanding
anything to the contrary contained herein, the acts of an Appropriate Officer in
carrying on the business of the Company as authorized herein shall bind the
Company.
The Appropriate Officers of the Company shall be chosen by the Board of
Managers and shall include a President, a Secretary and a Treasurer. The Board
of Managers may also choose a Chairman of the Board of Managers (who must be a
Manager) and the following additional Appropriate Officers: a Chief Executive
Officer, a Chief Financial Officer, a Chief Operating Officer, and one or more
Vice Presidents (and, in the case of each Vice President, with such descriptive
title, if any, as the Board of Managers shall determine), Assistant Secretaries,
Assistant Treasurers and other officers. Any number of offices may be held by
the same person, unless otherwise prohibited by law. The officers of the Company
need not be Members of the Company nor, except in the case of the Chairman of
the Board, need such officers be Managers of the Company.
17
18
5.2 Election of Officers. The Board of Managers shall elect the officers
of the Company who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by
the Board of Managers; and all officers of the Company shall hold office until
their successors are chosen and qualified, or until their earlier death,
resignation or removal. Any officer elected by the Board of Managers may be
removed at any time, with or without cause, by the affirmative vote of the Board
of Managers or upon the Incapacity of such officer. Any vacancy occurring in any
office of the Company shall be filled by the Board of Managers. The salaries of
all officers of the Company shall be fixed by the Board of Managers. The Board
of Managers may delegate such duties to any such officers or other employees,
agents and consultants of the Company as the Board of Managers deems
appropriate, including the power, acting individually or jointly, to represent
and bind the Company in all matters, in accordance with the scope of their
respective duties.
5.3 Voting Securities Owned by the Company. Powers of attorney, proxies,
waivers of notice of meeting, consents and other instruments relating to
securities owned by the Company may be executed in the name of and on behalf of
the Company by the President or any Vice President or any other officer
authorized to do so by the Board of Managers and any such officer may, in the
name of and on behalf of the Company, take all such action as any such officer
may deem advisable to vote in person or by proxy at any meeting of security
holders of any entity in which the Company may own securities and at any such
meeting shall possess and may exercise any and all rights and powers incident to
the ownership of such securities and which, as the owner thereof, the Company
might have exercised and possessed if present. The Board of Managers may, by
resolution, from time to time confer like powers upon any other person or
persons.
5.4 Chairman of the Board of Managers. The Chairman of the Board of
Managers, if there be one, shall preside at all meetings of the Members and of
the Board of Managers. The Chairman of the Board of Managers shall be selected
from time to time by the Board of Managers. The Chairman of the Board of
Managers shall possess the same power as the President to sign all contracts,
certificates and other instruments of the Company which may be authorized by the
Board of Managers. During the absence or disability of the President, the
Chairman of the Board of Managers shall exercise all the powers and discharge
all the duties of the President. The Chairman of the Board of Managers shall
also perform such other duties and may exercise such other powers as may from
time to time be assigned by this Agreement or by the Board of Managers.
5.5 President. The President shall, subject to the control of the Board of
Managers and, if there be one, the Chairman of the Board of Managers, have
general supervision of the business of the Company and shall see that all orders
and resolutions of the Board of Managers are carried into effect. The President
or, when authorized by this Agreement, the Board of Managers or the President,
the other officers of the Company shall execute all bonds, mortgages, contracts,
documents and other instruments of the Company. In the absence or disability of
the Chairman of the Board of Managers, or if there be none, the President, shall
preside at all meetings of the Members and the Board of Managers. Unless the
Board of Managers shall otherwise designate, the President shall be the Chief
Executive Officer of the Company. The President shall also perform such other
duties and may exercise such other powers as may from time to time be assigned
to such officer by this Agreement or by the Board of Managers.
5.6 Vice Presidents. At the request of the President or in the President's
absence or in the event of the President's inability or refusal to act (and if
there be no Chairman of the Board of Managers), the Vice President, or the Vice
Presidents if there is more than one (in the order designated by the Board of
Managers), shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Each Vice President shall perform such other duties and have such
other powers and duties as the Board of Managers, the Chairman of the Board of
Managers or the President from time to time may prescribe. The Vice President
shall act under the supervision of the President. If there be no Chairman of the
Board of Managers and no Vice President, the Board of Managers shall designate
the officer of the Company who, in the absence of the President or in the event
of the inability or refusal of the President to act, shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President.
18
19
5.7 Secretary. The Secretary shall attend all meetings of the Board of
Managers and all meetings of Members and record all the proceedings thereat in a
book or books to be kept for that purpose; the Secretary shall also perform like
duties for committees of the Board of Managers when required. The Secretary
shall give, or cause to be given, notice of all meetings of the Members and
special meetings of the Board of Managers, and shall perform such other duties
as may be prescribed by the Board of Managers, the Chairman of the Board of
Managers or the President, under whose supervision the Secretary shall act. If
the Secretary shall be unable or shall refuse to cause to be given notice of all
meetings of the Members and special meetings of the Board of Managers, and if
there be no Assistant Secretary, then either the Board of Managers or the
President may choose another officer to cause such notice to be given. The
Secretary shall have custody of the seal of the Company, if any, and the
Secretary or any Assistant Secretary, if there be one, shall have authority to
affix the same to any instrument requiring it and when so affixed, it may be
attested by the signature of the Secretary or by the signature of any such
Assistant Secretary. The Secretary may give general authority to any other
officer to affix the seal of the Company and to attest to the affixing by such
officer's signature. The Secretary shall see that all books, reports,
statements, certificates and other documents and records required by law to be
kept or filed are properly kept or filed, as the case may be.
5.8 Treasurer. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Company and shall deposit all moneys and
other valuable effects in the name and to the credit of the Company in such
depositories as may be designated by the Board of Managers. The Treasurer shall
disburse the funds of the Company as may be ordered by the Board of Managers,
taking proper vouchers for such disbursements, and shall render to the President
and the Board of Managers, at its regular meetings, or when the Board of
Managers so requires, an account of all transactions as Treasurer and of the
financial condition of the Company. If required by the Board of Managers, the
Treasurer shall give the Company a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Managers for the faithful
performance of the duties of the office of the Treasurer and for the restoration
to the Company, in case of the Treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the Treasurer's possession or under the Treasurer's control
belonging to the Company.
5.9 Assistant Secretaries. Assistant Secretaries, if there be any, shall
perform such duties and have such powers as from time to time may be assigned to
them by the Board of Managers, the President, any Vice President, if there be
one, or the Secretary, and in the absence of the Secretary or in the event of
the Secretary's disability or refusal to act, shall perform the duties of the
Secretary, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Secretary.
5.10 Assistant Treasurers. Assistant Treasurers, if there be any, shall
perform such duties and have such powers as from time to time may be assigned to
them by the Board of Managers, the President, any Vice President, if there be
one, or the Treasurer, and in the absence of the Treasurer or in the event of
the Treasurer's disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Managers,
an Assistant Treasurer shall give the Company a bond in such sum and with such
surety or sureties as shall be satisfactory to the Board of Managers for the
faithful performance of the duties of the office of Assistant Treasurer and for
the restoration to the Company, in case of the Assistant Treasurer's death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in the Assistant Treasurer's
possession or under the Assistant Treasurer's control belonging to the Company.
5.11 Other Officers. Such other officers as the Board of Managers may
choose shall perform such duties and have such powers as from time to time may
be assigned to them by the Board of Managers, the Chairman of the Board of
Managers or the President. The Board of Managers may delegate to any other
officer of the Company the power to choose such other officers and to prescribe
their respective duties and powers.
19
20
ARTICLE VI
INVESTMENT ADVISERS
6.1 Investment Advisers.
(a) The Investment Advisers, subject to the control and supervision of the
Board of Managers and the terms and conditions of the Investment Advisory
Agreement, are hereby granted the power and authority from time to time to do
the following: manage and control the investments of the Company, including, but
not limited to, the power to make all investment decisions regarding the
Company's investment portfolio and, among other things, to find, evaluate,
structure, monitor, sell and liquidate, upon dissolution or otherwise, such
investments, to assist the Appropriate Officers of the Company in the provision
of managerial assistance to Portfolio Companies and in connection therewith to
enter into, execute, amend, supplement, acknowledge, and deliver any and all
contracts, agreements, or other instruments for the performance of such
functions, including the investment and reinvestment of all or part of the
Company's assets, execution of portfolio transactions, and any or all related
administrative functions. The grant of power and authority to the Investment
Adviser under this Section 6.1 in no way limits the rights, powers or authority
of the Board of Managers under this Agreement, the Act or as otherwise provided
by law.
(b) The Board of Managers may admit any Investment Adviser as a Member of
the Company with the rights, powers and obligations of a Special Member as set
forth herein. A Special Member shall not make a Capital Contribution to the
Company in its capacity as Special Member and shall not be issued any Units
representing its interest as a Special Member.
6.2 Portfolio Investments
(a) Subject to the disclosure and reporting requirements contained in
Article X or elsewhere in this Agreement, except as any Member may be entitled
to under applicable law, the Investment Adviser may keep confidential from the
Members any information known by the Investment Adviser relating to investments
made or being considered by the Company.
(b) Any and all rights, including voting rights, pertaining to any
Portfolio Investments shall be vested exclusively in the Company and may be
exercised only by the Investment Adviser acting in accordance with the terms of
this Agreement and the Investment Advisory Agreement or by the Company pursuant
to the act of an Appropriate Officer or the Board of Managers.
6.3 Withdrawal by a Special Member.
(a) Subject to clause (b) below, a Special Member may voluntarily withdraw
from the Company, at any time upon notice to the Company. Such withdrawal shall
not affect the Special Member's status as Investment Adviser under the
Investment Advisory Agreement.
(b) A Special Member shall not voluntarily withdraw from the Company if
such withdrawal would cause material adverse tax consequences to the Company and
its Members as determined by the Board of Managers in its sole and absolute
discretion.
6.4 Removal of a Special Member.
(a) Subject to clause (b) below, in the event of termination without
renewal of an Investment Advisory Agreement with respect to a Special Member,
the Special Member shall be removed and terminated as a Member.
(b) In the event of the removal of the Special Member and continuation of
the Company, the investments held by the Company at the time of removal shall be
appraised by two independent appraisers, one selected by the Special Member and
one by the Disinterested Managers. In the event that such two appraisers are
unable to agree on the value of the Company's investment portfolio, they shall
jointly appoint a third independent appraiser whose determination shall be final
and binding. The cost of the appraisal conducted by the appraiser selected by
the Special Member shall be borne by the Special Member, and the cost of the
appraisal conducted by the appraiser selected by the Disinterested Managers
shall be borne by the
20
21
Company. The cost of the appraisal conducted by a third appraiser shall be borne
equally by the Company and by the Special Member. The Special Member shall
receive a final allocation of Net Profit or Net Loss pursuant to Article VII as
if all unrealized capital gains and losses of the Company as of the date of
removal determined on the basis of such approval were realized at such time and
the Fiscal Period ended at such time. If the Capital Account of the Special
Member has a positive balance after such allocation, the Company shall within 30
days of determination distribute such amount in cash to the Special Member or
deliver a promissory note of the Company to the Special Member, the principal
amount of which shall be equal to the amount, if any, by which the positive
amount of the Special Member's Capital Account exceeds the amount so distributed
in cash and which bears interest at a rate per annum equal to 100% of the prime
rate in effect at a major national bank selected by a majority of the
Disinterested Members at the time of removal, with interest payable annually and
principal payable, if at all, only from 20% of any available cash before any
distributions thereof are made to the Members pursuant to Article VIII. In the
event that any of the foregoing requires an exemptive order from the Securities
and Exchange Commission or its staff that is not granted, the Special Member
shall not be removed as a Member of the Company until such time as all Direct
Investments held by the Company at the time of the proposed removal have been
liquidated and allocations of Net Profit and Net Loss resulting therefrom have
been made pursuant to Article VII. In such event, the Investment Adviser upon
removal shall be entitled to payments in respect of its Capital Account as set
forth in Section 9.1(b).
6.5 Covenants of Special Member. Each Special Member covenants, warrants
and agrees with the Company and each of the other Members that the Special
Member will not:
(a) purchase all or any portion of any Member's Interest (or any
attributes thereof);
(b) participate in the establishment of a secondary market (or the
substantial equivalent thereof) with respect to the Interests for purposes
of Treasury Regulation sec.1.7704-1(d)(1); or
(c) take any action that would have the effect of causing the Company
(i) to be treated as a publicly traded partnership for purposes of Section
7704(b) of the Code or (ii) otherwise to be treated as a corporation for
federal income tax purposes.
ARTICLE VII
CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS AND ALLOCATIONS
7.1 Capital Contributions.
(a) The initial Member or Members are as set forth on Schedule A hereto.
Additional Persons making Capital Commitments shall be admitted as Members and
added to Schedule A at one or more closings (each a "Closing"), each such
Closing to be held on such date as may be determined by the Appropriate Officers
(the date of the first such Closing being referred to as the "Closing Date").
Members not making Capital Commitments may be admitted to the Company at any
time by the act of the Managers.
(b) RESERVED
(c) RESERVED
(d) Capital Contributions by the Members shall be made in dollars by wire
transfer of federal funds to an account or accounts of the Company as specified
by the Company or in such other manner as the Company may direct. No Member
shall be entitled to any interest or compensation by reason of his, her or its
Capital Contribution or by reason of being a Member. No Member shall be required
to lend any funds to the Company.
(e) At each Closing, Schedule A hereto shall be amended appropriately to
reflect the Capital Commitments of the Members, and the Appropriate Officers
shall take any appropriate action in connection therewith. Further, the
Appropriate Officers shall cause Schedule A hereto to be amended from time to
time to reflect the transfer of a Member's Interests, the admission and
withdrawal of Members and changes in Capital Commitments, which are accomplished
in accordance with the provisions hereof.
21
22
(f) RESERVED
(g) Negative Capital Accounts. Except as may be required by law, no Member
shall be required to reimburse the Company for any negative balance in such
Member's Capital Account.
7.2 Capital Accounts. A capital account ("Capital Account") shall be
established and maintained on the Company's books with respect to each Member,
in accordance with the provisions of Treasury Regulations Section 1.704-1(b),
including the following:
(a) Each Member's Capital Account shall be increased by: (i) the amount of
that Member's Capital Contribution; (ii) the amount of Net Profit (or items
thereof) allocated to that Member; and (iii) any other increases required by the
Treasury Regulations.
(b) Each Member's Capital Account shall be decreased by: (i) the amount of
Net Loss (or items thereof) allocated to that Member; (ii) all cash amounts
distributed to that Member pursuant to this Agreement, other than any amount
required to be treated as a payment for property or services for federal income
tax purposes; (iii) the fair market value of any property distributed in kind to
that Member (net of any liabilities secured by such distributed property that
such Member is considered to assume or take subject to for federal income tax
purposes); and (iv) any other decreases required by the Treasury Regulations.
(c) All provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with the Code and Treasury Regulations
thereunder and shall be interpreted and applied in a manner consistent with such
law. The Managers shall make any necessary modifications to this Section 7.2 in
the event unanticipated events occur that might otherwise cause this Agreement
not to comply with such law or any changes thereto.
(d) A Manager, in its capacity as a Manager, shall not be entitled to any
distributions.
7.3 Interest. No interest shall be paid or credited to the Members with
respect to their Capital Contributions, their Capital Accounts or upon any
undistributed funds left on deposit with the Company.
7.4 Allocations to Capital Accounts.
(a) Special Member Allocations. Except as provided in this Agreement, the
capital gains realized by the Company in a Fiscal Period shall be allocated
first to the Special Member in an amount equal to the excess, if any, of the
Incentive Carried Interest as calculated for such Fiscal Period over the
cumulative amount of all capital gains allocated to the Special Member pursuant
to this Section 7.4(a) for all prior Fiscal Periods. This allocation of capital
gain shall be made out of long-term capital gain and short-term capital gain in
proportion to the amount of such gains realized in such Fiscal Period.
(b) Member Allocations. Except as provided in this Agreement, all Net
Profit (and items thereof) and all Net Loss (and items thereof) remaining after
the allocation set forth in Section 7.4(a) has been made to the Special Member
shall be allocated to the Members (other than the Special Member) in proportion
to their Capital Investments.
(c) RESERVED
(d) Additional Rule. In furtherance and not in limitation of Section
7.4(a) and (b), and except as otherwise provided in this Agreement, the Board of
Managers may, in its sole and absolute discretion, allocate Net Profit (and
items thereof) and Net Loss (and items thereof) for any Fiscal Period in a
manner that the Board of Managers deems necessary or appropriate in order to
effectuate the intended economic sharing arrangement of the Members as reflected
in Article VIII.
(e) Regulatory and Related Allocations. Notwithstanding anything expressed
or implied to the contrary in this Agreement, the following special allocations
shall be made in the following order:
(i) Minimum Gain Chargeback. Except as otherwise provided in Treasury
Regulations Section 1.704-2, if there is a net decrease in Partnership
Minimum Gain during any Fiscal Period, each Member shall be specially
allocated items of Company income and gain for such Fiscal Period (and, if
necessary, subsequent Fiscal Periods) in an amount equal to such Member's
share of the net decrease in
22
23
such Partnership Minimum Gain, as determined in accordance with Treasury
Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to
be allocated to the Members pursuant thereto. The items to be so allocated
shall be determined in accordance with Treasury Regulations Section
1.704-2. This Section 7.4(e)(i) is intended to comply with the minimum gain
chargeback requirements in such Treasury Regulations and shall be
interpreted consistently therewith.
(ii) Partner Minimum Gain Chargeback. Except as otherwise provided in
Treasury Regulations Section 1.704-2, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to Partner Nonrecourse Debt
during any Fiscal Period, each Member shall be specially allocated items of
Company income and gain for such Fiscal Period (and, if necessary,
subsequent Fiscal Periods) in an amount equal to such Member's share, if
any, of the net decrease in Partner Nonrecourse Debt Minimum Gain
attributable to such Member's Partner Nonrecourse Debt, as determined in
accordance with Treasury Regulations Section 1.704-2(i). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant
thereto. The items to be so allocated shall be determined in accordance
with Treasury Regulations Section 1.704-2. This Section 7.4(e)(ii) is
intended to comply with the minimum gain chargeback requirements in such
Treasury Regulations and shall be interpreted consistently therewith.
(iii) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations or distributions described in
Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6) with
respect to such Member's Capital Account, items of Company income and gain
shall be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Treasury
Regulations, the Adjusted Capital Account Deficit of such Member as quickly
as possible; provided, however, that an allocation pursuant to this Section
7.4(e)(iii) shall be made only if and to the extent that such Member would
have an Adjusted Capital Account Deficit after all other allocations
provided for in this Section 7.4 have been tentatively made as if this
Section 7.4(e)(iii) were not in this Agreement. This Section 7.4(e)(iii) is
intended to constitute a "qualified income offset" within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
(iv) Gross Income Allocation. In the event any Member has an Adjusted
Capital Account Deficit, items of Company income and gain shall be
specially allocated to such Member in an amount and manner sufficient to
eliminate such Member's Adjusted Capital Account Deficit as quickly as
possible; provided, however, that an allocation pursuant to this Section
7.4(e)(iv) shall be made only if and to the extent that such Member would
have an Adjusted Capital Account Deficit after all other allocations
provided for in this Section 7.4 (other than Section 7.4(e)(iii)) have been
tentatively made as if this Section 7.4(e)(iv) were not in this Agreement.
(v) Nonrecourse Deductions. Any Nonrecourse Deductions for any Fiscal
Period shall be allocated to the Members in proportion to their respective
Capital Contributions.
(vi) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Fiscal Period shall be allocated to the Member who bears
the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance
with Treasury Regulations Section 1.704-2.
(vii) Loss Allocation Limitation. No allocation of Net Loss (or items
thereof) shall be made to any Member to the extent that such allocation
would create or increase an Adjusted Capital Account Deficit with respect
to such Member.
(f) Curative Allocations. The allocations set forth in Section 7.4(e) (the
"Regulatory Allocations") are intended to comply with certain requirements of
Treasury Regulations under Section 704 of the Code. Notwithstanding any other
provision of this Article VII (other than the Regulatory Allocations), the
Regulatory Allocations shall be taken into account in allocating other Company
items of income, gain, loss, deduction and expense among the Members so that, to
the extent possible, the net amount of such allocations
23
24
of other Company items and the Regulatory Allocations shall be equal to the net
amount that would have been allocated to the Members pursuant to this Section
7.4 if the Regulatory Allocations had not occurred.
(g) Section 754 Adjustments. Pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(m), to the extent an adjustment to the adjusted tax basis of
any Company asset under Section 734(b) or Section 743(b) of the Code is required
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Members in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such Treasury Regulations.
(h) Transfer of or Change in Interests. The Managers are authorized to
adopt any convention or combination of conventions likely to be upheld for
federal income tax purposes regarding the allocation and/or special allocation
of items of Company income, gain, loss, deduction and expense with respect to a
newly issued Interest, a transferred Interest and a redeemed Interest. Upon
admission as a Substituted Member, a transferee of an Interest shall succeed to
the Capital Account of the transferor Member to the extent it relates to the
transferred Interest.
(i) Certain Expenses. Syndication and organization expenses, as defined in
Section 709 of the Code (and, to the extent necessary as determined in the sole
and absolute discretion of the Managers, any other items) shall be allocated to
the Capital Accounts of the Members so that, as nearly as possible, the
cumulative amount of such syndication and organization expenses (and other
items, if relevant) allocated with respect to each dollar of Capital Commitment
for each Member is the same amount; provided, however, that expenses related to
the registration and public offering of Units may be allocated solely to those
Members who acquired their Interests in such public offering of Interests. The
determination of the amount of Company expenses that are related to the
registration and public offering of the Units shall be made in the sole and
absolute discretion of the Managers, which determination shall be final and
conclusive as to all Members.
(j) Allocation Periods and Unrealized Items. Subject to applicable
Treasury Regulations and other applicable law and notwithstanding anything
expressed or implied to the contrary in this Agreement, the Managers may, in
their sole and absolute discretion, determine allocations to Capital Accounts
based on an annual, quarterly or other period and/or on realized and unrealized
net increases or net decreases (as the case may be) in the fair market value of
Company property.
7.5 Tax Allocations.
(a) Items of Company income, gain, loss, deduction and expense shall be
allocated, for federal, state and local income tax purposes, among the Members
in the same manner as the Net Profit (and items thereof) and Net Loss (and items
thereof) of which such items are components were allocated pursuant to Section
7.4; provided, however, that tax allocations shall be made in accordance with
Section 704(c) of the Code and the Treasury Regulations promulgated thereunder,
to the extent so required thereby.
(b) Allocations pursuant to this Section 7.5 are solely for federal, state
and local income tax purposes and shall not affect, or in any way be taken into
account in computing, any Member's Capital Account or share of Net Profit (and
items thereof) or Net Loss (and items thereof).
(c) The Members are aware of the tax consequences of the allocations made
by this Section 7.5 and hereby agree to be bound by the provisions of this
Section 7.5 in reporting their shares of items of Company income, gain, loss,
deduction and expense.
7.6 Determinations by Managers. All matters concerning the computation of
Capital Accounts, the allocation of Net Profit (and items thereof) and Net Loss
(and items thereof), the allocation of items of Company income, gain, loss,
deduction and expense for tax purposes and the adoption of any accounting
procedures not expressly provided for by the terms of this Agreement shall be
determined by the Managers in their sole and absolute discretion. Such
determination shall be final and conclusive as to all the Members.
Notwithstanding anything expressed or implied to the contrary in this Agreement,
in the event the Managers shall determine, in their sole and absolute
discretion, that it is prudent to modify the manner in which the
24
25
Capital Accounts, or any debits or credits thereto, are computed in order to
effectuate the intended economic sharing arrangement of the Members as reflected
in Article VIII, the Managers may make such modification in their sole and
absolute discretion without the approval of Members.
ARTICLE VIII
WITHDRAWALS AND DISTRIBUTIONS OF CAPITAL
8.1 Withdrawals and Distributions in General. No Member shall be entitled
to withdraw any amount from any Capital Account other than as provided in this
Agreement.
8.2 Distributions. After provision for Company Expenses and establishment
of working capital and other reserves as the Appropriate Officers shall deem
appropriate, the Managers may cause all cash and other property received by the
Company in respect of its investments in any Fiscal Period (collectively,
"Investment Proceeds") to be distributed as follows:
(a) First, to the Special Member in an amount equal to the excess, if
any, of the Incentive Carried Interest as calculated for such Fiscal Period
over the cumulative amount of all distributions made to the Special Member
pursuant to this Section 8.2(a) for all prior Fiscal Periods; and
(b) Second, the balance, if any, to the Members (other than the
Special Member) of record on the record date set by the Managers with
respect to such distribution, in proportion to such Member's respective
Capital Investment.
8.3 Restrictions on Distributions. Notwithstanding anything expressed or
implied to the contrary in this Agreement, no distribution shall be made if, as
determined in the sole and absolute discretion of the Managers, (i) such
distribution would violate any contract or agreement to which the Company is
then a party or any law, rule, regulation, order or directive of any
governmental authority then applicable to the Company or (ii) the amount to be
distributed pursuant to this Article VIII is immaterial.
8.4 Deemed Sale of Assets. Subject only to the requirements of the
Investment Advisers Act of 1940, as amended, for all purposes of this Agreement,
(i) any property (other than United States dollars) that is distributed in kind
to one or more Members with respect to a Fiscal Period (including, without
limitation, any such in kind property that is distributed upon the dissolution
and winding up of the Company) shall be deemed to have been sold for cash equal
to its fair market value, (ii) the unrealized gain or loss inherent in such
property shall be treated as recognized gain or loss for purposes of determining
the Net Profit and Net Loss, (iii) such gain or loss shall be allocated pursuant
to Section 7.4 for such Fiscal Period and (iv) such in kind distribution shall
be made after giving effect to such allocation.
8.5 Withholding. Notwithstanding anything expressed or implied to the
contrary in this Agreement, the Appropriate Officers are authorized to take any
action that they determine to be necessary or appropriate to cause the Company
to comply with any non-United States or United States federal, state or local
withholding requirement with respect to any allocation, payment or distribution
by the Company to any Member or other Person. All amounts so withheld, and, in
the manner determined by the Appropriate Officers, amounts withheld with respect
to any allocation, payment or distribution by any Person to the Company, shall
be treated as distributions to the applicable Members under the applicable
provision of this Agreement. If any such withholding requirement with respect to
any Member exceeds the amount distributable to such Member under this Agreement,
or if any such withholding requirement was not satisfied with respect to any
amount previously allocated, paid or distributed to such Member, such Member or
any successor or assignee with respect to such Member's Interest hereby
indemnifies and agrees to hold harmless the other Members and the Company for
such excess amount or such withholding requirement, as the case may be
(including any interest, additions and penalties).
25
26
ARTICLE IX
WITHDRAWAL OF MEMBERS; TRANSFER OF INTERESTS;
ADMISSION OF SUBSTITUTED MEMBERS; EFFECT OF DEATH, ETC.
9.1 Withdrawal of Members
(a) The Managers may (but shall not be required to) terminate the Interest
of any Member and cause that Member to withdraw from the Company at any time
upon at least five days' prior written notice upon (i) the request of such
Member; or (ii) a determination by the Managers that the continued participation
of that Member in the Company might adversely affect the Company by jeopardizing
the treatment of the Company as a partnership for federal income tax purposes,
involve the Company in any litigation arising out of or relating to the
participation of that Member in the Company or subject the Company to
restrictions or other adverse consequences as a result of applicable laws or
regulations. In the event that the Managers terminate a Member's Interest, that
Member shall immediately withdraw from the Company and cease to be a Member of
the Company. Such withdrawal shall occur automatically upon termination without
the necessity of any further act by the Member or any other Person. The date of
termination shall be the effective date of withdrawal of the terminated Member.
(b) (i) The Company shall pay to the terminated Member 90% of the amount of
the terminated Member's Capital Account balance (determined in accordance with
the next sentence) within 90 days of termination or as soon thereafter as the
Company shall have sufficient funds available and shall pay the remainder upon
completion of that year's audit. The amount of the terminated Member's Capital
Account shall be determined not more than ten days prior to the date of
termination in the case of a termination pursuant to Section 9.1(a)(i) and not
more than three days prior to the date of termination in the case of a
termination pursuant to Section 9.1(a)(ii). Such amounts paid to a terminated
Member shall not be entitled to interest for any period after the date of
termination.
(c) From and after the effective date of withdrawal of a Member, such
withdrawn Member shall cease to be a Member of the Company for all purposes and
the Units of a withdrawn Member shall not be included in calculating the Units
of the Members required to take any action under this Agreement.
9.2 General Provisions Relating to Transfers of Interests.
(a) Transfers. A Member may not transfer, assign, sell, pledge,
hypothecate or otherwise dispose of any of the attributes of his, her or its
Interest (collectively, a "Transfer"), in whole or in part, to any Person except
as follows (a "Permitted Transfer"):
(i) as permitted by the operation of law pursuant to the death,
bankruptcy, insolvency or dissolution of the Member or otherwise;
(ii) in connection with the transfer to a family trust or another
entity that does not result in a change in beneficial ownership;
(iii) a Transfer meeting the conditions in Section 9.2(b); or
(iv) an assignment described in Section 9.2 (d).
Any attempted transfer of Interests, other than in strict accordance with
this Article IX, shall be null and void and of no force or effect whatsoever,
and the purported transferee shall have no rights as a Member.
(b) Conditions to Transfers. A Member shall be entitled to make a Transfer
of all or any portion of its Interests pursuant to Section 9.2(a)(iii) only upon
the Managers' determination, which determination the Managers shall make in
their sole and absolute discretion, that the Transfer meets each of the
following conditions:
(i) such Transfer, itself or together with any other Transfers,
would not result in the Company being treated as a publicly traded
partnership within the meaning of Section 7704(b) of the Code or otherwise
being treated as a corporation for federal income tax purposes;
26
27
(ii) such Transfer does not require the registration or qualification
of such Interests pursuant to any applicable federal or state securities or
"blue sky" laws;
(iii) such Transfer does not result in a violation of other laws
ordinarily applicably to such transactions;
(iv) the transferor and purported transferee each shall have
represented to the Manager in writing that such Transfer was not effected
through a broker-dealer or matching agent that makes a market in Interests
or that provides a readily available, regular and ongoing opportunity to
Members to sell or exchange their Interests;
(v) the transferor shall reaffirm, and the purported transferee
shall affirm, in writing his, her or its agreement to indemnify as
described in Section 9.4;
(vi) such Transfer would not result in employee benefit plans (as
defined in Section 3(3) of ERISA or Code Section 4975(e)) and other benefit
plan investors (as defined in Section 2510.3-101(f) of the Department of
Labor Regulations under ERISA), directly or indirectly owning, in the
aggregate, 25% or more of the Interests (as determined in accordance with
such regulations);
(vii) no facts are known to the Managers that cause the Managers to
conclude that such transfer will have a material adverse effect on the
Company; and
(viii) the transferee has agreed in writing to become a Member to and
subject to all of the terms, obligations and limitations of this Agreement.
(c) The Managers may reasonably interpret, and are hereby authorized to
take such action as they deem necessary or desirable to effect, the provisions
of this Section 9.2. The Managers may, in their sole and absolute discretion,
amend the provisions of this Section 9.2 in such manner as may be necessary or
desirable (or eliminate or amend such provisions to the extent they are no
longer necessary or desirable) to preserve the status of the Company as a
partnership for federal income tax purposes.
(d) Notwithstanding the restrictions on transfers provided for in this
Section 9.2, a Special Member may assign the economic attributes of its
Interest, in whole or in part, to any Affiliate of such Special Member, and any
such Affiliate may further assign such economic attributes, in whole or in part,
to any other Affiliate of such Special Member, in each case without such
assignee Affiliate becoming admitted to the Company as a substituted Member
pursuant to Section 9.5.
9.3 Effect of Transfers. Upon any Permitted Transfer, the transferee of
the transferred Interest shall be entitled to receive the distributions and
allocations to which the transferring Member would be entitled with respect to
such transferred Interest, but shall not be entitled to exercise any of the
other rights of a Member with respect to such transferred Interest, including,
without limitation, the right to vote, unless and until such transferee is
admitted to the Company as a Substituted Member pursuant to Section 9.5.
9.4 Transfer Indemnity. Each Member hereby agrees to indemnify and hold
harmless the Company, the Special Member, the Managers, each Appropriate Officer
and each other Member (and any successor or assign of any of the foregoing) from
and against all costs, claims, damages, liabilities, losses and expenses
(including losses, claims, damages, liabilities, costs and expenses of any
judgments, fines and amounts paid in settlement), joint or several, to which
those persons may become subject by reason of or arising from any Transfer made
in contravention of the provisions of this Agreement or any misrepresentation
made by such Member in connection with any purported Transfer.
9.5 Substituted Members. No transferee of a transferred Interest shall be
admitted as a Member ("Substituted Member") until each of the following
conditions has been satisfied:
(a) the written consent of the Managers, which may be withheld or
granted in the sole and absolute discretion of the Managers;
(b) the execution and delivery to the Company of a counterpart of this
Agreement by the Substituted Member or its agent or attorney-in-fact;
27
28
(c) receipt by the Company of other written instruments that are in
form and substance satisfactory to the Managers (as determined in their
sole and absolute discretion);
(d) payment by the Substituted Member to the Company of an amount
determined by the Managers to be equal to the costs and expenses incurred
in connection with such assignment, including, without limitation, costs
incurred in preparing and filing such amendments to this Agreement as may
be required;
(e) the updating of the books and records of the Company and Schedule
A hereto to reflect the Person's admission as a Substituted Member;
(f) if required by the Managers in their sole and absolute discretion,
execution and affirmation to an instrument by the terms of which such
Person acknowledges that the relevant transfer of Interests have not been
registered under the Securities Act of 1933, as amended, or any applicable
state securities laws, and covenants, represents and warrants that such
Person acquired the relevant Interests for investment only and not with a
view to the resale or distribution thereof; and
(g) any other similar information or documentation as the Managers may
request.
9.6 Effect of Death, Etc. The death, retirement, withdrawal, expulsion,
disability, incapacity, incompetency, bankruptcy, insolvency or dissolution of a
Member, or the occurrence of any other event under the Act that terminates the
continued membership of a Member as a member of the Company, shall not cause the
Company to be dissolved and its affairs to be wound up so long as the Company
has at least one Member at all times. Upon the occurrence of any such event, the
business of the Company shall be continued without dissolution. The legal
representatives, if any, of a Member shall succeed as assignee to the Member's
Interest upon death, incapacity, incompetency, bankruptcy, insolvency or
dissolution of a Member, but shall not be admitted as a Substituted Member
except under the provisions of Section 9.5 of this Agreement and with the
written consent of the Managers, which written consent the Managers may withhold
in their sole and absolute discretion. The Units held by such legal
representative of a Member shall not be included in calculating the Units of the
Members required to take any action under this Agreement.
ARTICLE X
BOOKS AND RECORDS; REPORTS TO MEMBERS; TAX MATTERS
10.1 Books and Records. In compliance with Section 31 of the Investment
Company Act, the books and records of the Company, and a list of the names and
residence, business or mailing addresses and Interests of all Members, shall be
maintained at the principal executive offices of the Company or such other
location as the Managers' may approve. The Company shall not be required to
provide any documentation or other information to Members except that which it
is required to provide under the Investment Company Act, the Act or other
applicable law. Each Member shall have the right to obtain from the Company from
time to time upon reasonable demand for any proper purpose reasonably related to
the Member's interest as a Member of the Company, and upon paying the costs of
collection, duplication and mailing, the documents and other information which
the Company is required to provide under the Investment Company Act, the Act or
other applicable law. Any demand by a Member pursuant to this section shall be
in writing and shall state the purpose of such demand. The Company may maintain
such other books and records and may provide such financial or other statements
as the Managers or the Appropriate Officers in their discretion deem advisable.
10.2 Annual Reports to Current Members. Within 60 days after the end of
each Fiscal Year or as soon thereafter as practicable, the Company shall have
prepared and distributed to the Members, at the expense of the Company, an
annual report containing a summary of the year's activity and such financial
statements and schedules as may be required by law or as the Managers may
otherwise determine.
10.3 Accounting; Tax Year.
(a) The books and records of the Company shall be kept on the cash basis or
the accrual basis, as determined by the Managers in their sole and absolute
discretion. The Company shall report its operations for
28
29
tax purposes on the cash method or the accrual method, as determined by the
Managers in their sole and absolute discretion. The taxable year of the Company
shall be the calendar year, unless the Managers shall designate another taxable
year for the Company that is a permissible taxable year under the Code.
(b) The books and records of the Company shall be audited by the Company's
independent accountants as of the end of each Fiscal Year, commencing with the
first partial Fiscal Year, of the Company.
10.4 Filing of Tax Returns. The Appropriate Officers shall prepare and
file, or cause the Company's accountants to prepare and file, a federal
information tax return and any required state and local income tax and
information returns for each taxable year of the Company. The Managers have sole
and absolute discretion as to whether or not to prepare and file (or cause its
accountants to prepare and file) composite, group or similar state, local and
foreign tax returns on behalf of the Members where and to the extent permissible
under applicable law. Each Member hereby agrees to execute any relevant
documents (including a power of attorney authorizing such a filing), to furnish
any relevant information and otherwise to do anything necessary in order to
facilitate any such composite, group or similar filing. Any taxes paid by the
Company in connection with any such composite, group or similar filing shall be
treated as an advance to the relevant Members (with interest being charged
thereon) and shall be recouped by the Company out of any distributions
subsequently made to such relevant Members. Such advances may be funded by
Company borrowing. Both the deduction for interest payable by the Company with
respect to any such borrowing, and the corresponding income from interest
received by the Company from the relevant Members, shall be specifically
allocated to such Members.
10.5 Tax Matters Member. The Special Member shall be designated as the tax
matters member of the Company (the "Tax Matters Member") as provided in Section
6231(a)(7) of the Code. Each Person (for purposes of this provision, a
"Pass-Through Member") that holds or controls an Interest on behalf of, or for
the benefit of another Person or Persons, or which Pass-Through Member is
beneficially owned (directly or indirectly) by another Person or Persons shall,
within 30 days following receipt from the Tax Matters Member of a notice or
document, convey such notice or other document in writing to all holders of
beneficial interests in the Company holding such Interest through such
Pass-Through Member. In the event the Company becomes the subject of an income
tax audit by any federal, state or local authority, to the extent the Company is
treated as an entity for purposes of such audit, including administrative
settlement and judicial review, the Tax Matters Member shall be authorized to
act for, and its decision shall be final and binding upon, the Company and each
Member. The Company shall bear all expenses incurred in connection with any such
audit, investigation, settlement or review.
10.6 Tax Information for Current and Former Members. Within 90 days after
the end of each taxable year of the Company or as soon thereafter as
practicable, the Company shall prepare and distribute to each Member (and, to
the extent necessary, to each former Member (or such Member's legal
representatives)), at the expense of the Company, a report setting forth in
sufficient detail such information as shall enable such Member or former Member
(or such Member's legal representatives) to prepare its respective federal,
state and local income tax returns in accordance with the laws, rules and
regulations then prevailing. The Company shall also provide Schedules K-1 to
Members as soon as practicable after the end of each taxable year of the
Company.
ARTICLE XI
LIABILITY AND INDEMNIFICATION
11.1 Liability of the Members and Managers. Except for the obligations
hereunder and under the Subscription Agreements, the liability of the Members
shall be limited to the maximum extent permitted by the Act. In no event shall
the Members be obligated to make Capital Contributions in excess of their
respective Capital Commitments. If a Member is required under the Act to return
to the Company or pay, for the benefit of creditors of the Company, amounts
previously distributed to such Member, the obligation of such Member to return
or pay any such amount to the Company shall be the obligation of such Member and
29
30
not the obligation of the Managers. The liability of the Managers shall be
limited to the maximum extent permitted by the Act.
11.2 Indemnification.
(a) No Manager, Appropriate Officer, Member, Investment Adviser to the
Company, distributor or selling agent of or for the Units or any of their
respective affiliates, shareholders, partners, officers, directors, members,
employees, agents and representatives (each an "Indemnified Person") shall have
any liability, responsibility or accountability in damages or otherwise to any
Member or the Company for, and the Company agrees, to the fullest extent
permitted by law, to indemnify, pay, protect and hold harmless each Indemnified
Person from and against, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, proceedings, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
all reasonable costs and expenses of attorneys, defense, appeal and settlement
of any and all suits, actions or proceedings instituted or threatened against
the Indemnified Persons or the Company) and all costs of investigation in
connection therewith which may be imposed on, incurred by, or asserted against
the Indemnified Persons or the Company in any way relating to or arising out of,
or alleged to relate to or arise out of, any action or inaction on the part of
the Company, on the part of the Indemnified Persons when acting on behalf of the
Company or otherwise in connection with the business or affairs of the Company
or any Portfolio Investment, or on the part of any brokers or agents when acting
on behalf of the Company or any Portfolio Investment (collectively, the
"Indemnified Liabilities"); provided that the Company shall not be liable to any
Indemnified Person for any portion of any Indemnified Liabilities which results
from such Indemnified Person's willful misfeasance, bad faith or gross
negligence in the performance of his, her or its duties or by reason of his, her
or its reckless disregard of his, her or its obligations and duties. The
indemnification rights provided for in this Section 11.2(a) shall survive the
termination of the Company or this Agreement. Any indemnification rights
provided for in this Section 11.2(a) shall be retained by any removed, resigned
or withdrawn Manager, Member, Appropriate Officer, Investment Adviser,
distributor or selling agent and its constituent Indemnified Persons. Any
indemnification rights provided for in this Section 11.2(a) shall also be
retained by any Person who has acted in the capacity of officer, director,
partner, employee, agent, stockholder or affiliate of an Indemnified Person
after such Persons shall have ceased to hold such positions.
(b) The right of any Indemnified Person to the indemnification provided
herein shall be cumulative of, and in addition to, any and all rights to which
such Indemnified Person may otherwise be entitled by contract or as a matter of
law or equity and shall extend to such Indemnified Person's successors, assigns
and legal representatives.
(c) The provision of advances from Company funds to an Indemnified Person
for legal expenses and other costs incurred as a result of any legal action or
proceeding is permissible if (i) such suit, action or proceeding relates to or
arises out of, or is alleged to relate to or arise out of, any action or
inaction on the part of the Indemnified Person in the performance of its duties
or provision of its services on behalf of the Company or otherwise in connection
with the business or affairs of the Company or any Portfolio Investment; and
(ii) the Indemnified Person undertakes to repay any funds advanced pursuant to
this Section 11.2(c) in any case in which such Indemnified Person would not be
entitled to indemnification under Section 11.2(a). If advances are permissible
under this Section 11.2(c), the Indemnified Person shall furnish the Company
with an undertaking as set forth in clause (ii) of this paragraph and shall
thereafter have the right to ▇▇▇▇ the Company for, or otherwise request the
Company to pay, at any time and from time to time after such Indemnified Person
shall become obligated to make payment therefor, any and all amounts for which
such Indemnified Person believes in good faith that such Indemnified Person is
entitled to indemnification under Section 11.2(a) with the approval of the
Managers who are not seeking such indemnification, or if all Managers are
seeking such indemnification, the Special Member, which approval shall not be
unreasonably withheld. The person granting such approval may, but shall not be
required unless otherwise provided by applicable law, prior to approval require
an opinion of counsel to be in effect that such Indemnified Person is likely to
be entitled to indemnification. The Company shall pay any and all such bills and
honor any and all such requests for payment within sixty (60) days after such
▇▇▇▇ or request is received by the Company, and the Company's rights to
repayment of such amounts shall be secured by the Indemnified Person's Interest
in the Company, if any, or by such other security as the Managers, or if all
Managers are seeking indemnifica-
30
31
tion, the Special Member may require. In the event that a final judicial (or
binding arbitration) determination is made that the Company is not so obligated
in respect of any amount paid by it to a particular Indemnified Person, such
Indemnified Person will refund such amount within sixty (60) days of such final
determination, and in the event that a final determination is made that the
Company is so obligated in respect to any amount not paid by the Company to a
particular Indemnified Person, the Company will pay such amount to such
Indemnified Person within sixty (60) days of such final determination, in either
case together with interest (at the lesser of (x) the Applicable Rate and (y)
the maximum rate permitted by applicable law) from the date paid by the Company
until repaid by the Indemnified Person or the date it was obligated to be paid
by the Company until the date actually paid by the Company to the Indemnified
Person.
(d) With respect to the liabilities of the Company, all such liabilities:
(1) shall be liabilities of the Company as an entity, and shall be
paid or otherwise satisfied from the Company's assets; and
(2) except to the extent otherwise required by law, shall not in any
event be payable in whole or in part by any Member, Manager, Appropriate
Officer, Investment Adviser, distributor or selling agent, or by any
director, officer, trustee, employee, agent, shareholder, beneficiary,
member or partner of any of them.
(e) The Managers may cause the Company, at the Company's expense, to
purchase insurance to insure the Indemnified Persons against liability hereunder
(including liability arising in connection with the operation of the Company),
including, without limitation, for a breach or an alleged breach of their
responsibilities hereunder.
ARTICLE XII
COMPENSATION AND REIMBURSEMENT
12.1 Investment Adviser.
(a) Reimbursement for Company Expenses. The Company shall reimburse any
Investment Adviser for Company Expenses incurred by such Investment Adviser and
its affiliates in connection with the organization of the Company, the Company's
offer and sale of Units and the ongoing operations of the Company, subject to
the terms and conditions of the Investment Advisory Agreement between the
Company and such Investment Adviser.
(b) Advisory Fee. The Company may pay any Investment Adviser an investment
advisory fee as set forth in, and subject to the terms and conditions of, the
Investment Advisory Agreement with such Investment Adviser. The approval of any
contract or agreement pursuant to which a Person serves as an Investment Adviser
to the Company shall be subject to the applicable requirements of the Investment
Company Act.
12.2 Board of Managers. As compensation for services rendered to the
Company, the Company may pay each Manager who is not an officer, director or
employee of any Investment Adviser or its affiliates such amounts as may be
determined from time to time by the Disinterested Managers. Subject to
compliance with the Investment Company Act, the Board of Managers may establish
pensions, profit sharing, Unit purchase and other retirement, incentive or
benefit plans for Managers.
12.3 Distributor, Selling Agents, Administrator, Custodian and Other
Persons. As compensation for services rendered to the Company or its Members,
the Company may pay each distributor, selling agent, administrator, transfer
agent, custodian, accountant, attorney and other agent or independent contractor
duly engaged by or on behalf of the Company to provide such services. The
approval of any contract or agreement pursuant to which a Person serves as a
principal underwriter to the Company shall be subject to the applicable
requirements of the Investment Company Act.
31
32
ARTICLE XIII
DISSOLUTION AND TERMINATION
13.1 Dissolution. The Company shall be dissolved upon the occurrence of
any of the following:
(a) the expiration of its term, except to the extent extended pursuant
to Section 2.6;
(b) the election by the Managers to dissolve the Company prior to the
expiration of its terms, subject, to the extent required by the Investment
Company Act, to the consent of the Members;
(c) voluntary bankruptcy, liquidation or other dissolution of the
Company;
(d) the sale or other disposition at any one time of all or
substantially all of the assets of the Company; and
(e) dissolution required by operation of law.
Except as otherwise determined by the Managers in their sole discretion, the
Company shall not be subject to dissolution at the election of Members.
Dissolution of the Company shall be effective on the day on which the event
occurs giving rise to the dissolution, but the Company shall not terminate until
the assets of the Company have been distributed as provided in Section 13.2 and
the certificate of formation of the Company has been canceled.
13.2 Liquidation. On dissolution of the Company, a liquidator (who shall
be selected by the Board of Managers, if still constituted, and otherwise shall
be a Person proposed and approved by a Majority in Interest of the Members) and
who may be any Investment Adviser or any of its affiliates, shall cause to be
prepared a statement setting forth the assets and liabilities of the Company as
of the date of dissolution, and such statement shall be furnished to all of the
Members. Then, those Company assets that the liquidator determines should be
liquidated shall be liquidated as promptly as possible, but in an orderly and
business-like manner to maximize proceeds. Assets that the liquidator determines
to distribute in kind shall be so distributed in a manner consistent with
applicable law. If the liquidator determines that an immediate sale at the time
of liquidation of all or part of the Company assets would be unduly
disadvantageous to the Members, the liquidator may, either defer liquidation and
retain the assets for a reasonable time, or distribute the assets to the Members
in kind. The liquidator shall then wind up the affairs of the Company and
distribute the proceeds of the Company by the end of the calendar year of the
liquidation (or, if later, within 90 days after the date of such liquidation) in
the following order or priority:
(a) to the payment of the expenses of liquidation and to creditors
(including Members who are creditors, to the extent permitted by law) in
satisfaction of liabilities of the Company other than liabilities for
distributions to Members, in the order of priority as provided by law;
(b) to the setting up of any reserves that the liquidator may deem
necessary or appropriate for any anticipated obligations or contingencies
of the Company or of the liquidator arising out of or in connection with
the operation or business of the Company. Such reserves may be paid over by
the liquidator to an escrow agent or trustee proposed and approved by the
liquidator to be disbursed by such escrow agent or trustee in payment of
any of the aforementioned obligations or contingencies and, if any balance
remains at the expiration of such period as the liquidator shall deem
advisable, to be distributed by such escrow agent or trustee in the manner
hereinafter provided;
(c) to the Special Member in an amount equal to the excess, if any, of
the Incentive Carried Interest as calculated for the Fiscal Period ending
on the date of distribution over the cumulative amount of all distributions
made to the Special Member pursuant to Section 8.2 and this Section 13.2(c)
for all prior Fiscal Periods; then
(d) to the Members or their legal representatives in accordance with
the positive balances in their respective Capital Accounts, as determined
after taking into account all adjustments to Capital Accounts for all
periods.
32
33
13.3 Termination. The liquidator shall comply with any requirements of the
Act or other applicable law pertaining to the winding up of a limited liability
company, at which time the Company shall stand terminated.
ARTICLE XIV
AMENDMENTS
14.1 Proposal of Amendments. Except as otherwise specified in this
Agreement, any amendment to this Agreement may be proposed by any Manager, by
the Investment Adviser or by Members who, in aggregate, own not less than 10% of
the Units owned by all such Members. The Person or Persons proposing such
amendment shall submit to the Board of Managers: (i) the text of such amendment;
(ii) a statement of the purpose of such amendment; and (iii) in the case of an
amendment so proposed by the Members (other than an Investment Adviser), an
opinion of counsel reasonably acceptable to the Managers obtained by the Members
proposing such amendment to the effect that such amendment is permitted by the
Investment Company Act, the Act and the laws of any other jurisdiction where the
Company is qualified to do business, will not impair the limited liability of
the Managers or Members, and will not adversely affect the classification of the
Company as a partnership for federal and state income tax purposes. To the
extent required by the Investment Company Act, the Board of Managers shall,
within 40 days after receipt from Members of a proposal under clause (iii) of
this Section 14.1 and the required opinion, give notification to all Members of
such proposed amendment, of such statement of purpose, and of such opinion of
counsel, together with the views, if any, of the Board of Managers and each
Investment Adviser with respect to such proposed amendment. All amendments
validly proposed by Members pursuant to clause (iii) of this Section 14.1 or
proposed by Managers or the Investment Adviser but requiring the approval of
Members shall be submitted to the Members for a vote no less than 10 days nor
more than 90 days after the date of mailing of notice of the proposed amendment
and will be adopted if approved (i) in the case of an amendment the adoption of
which is recommended by the Board of Managers, an affirmative vote of a Majority
in Interest of the Members, or (ii) in the case of an amendment the adoption of
which has not been recommended by the Board of Managers, an affirmative vote of
a Supermajority of Members, in each case subject to the approval of any greater
number of Members as may be required by this Agreement or applicable law.
14.2 Amendments to Be Adopted Solely by the Board of Managers. Subject to
Section 14.3, the Board of Managers may, without the consent of any Member,
amend any provision of this Agreement as set forth in Section 3.15, and execute
whatever documents may be required in connection therewith.
14.3 Amendments Not Allowable.
(a) Unless approved by a Majority in Interest of the Members affected
thereby, no amendment to this Agreement shall be permitted if the effect of such
amendment would be to:
(i) impair the limited liability of Members provided for in Section
11.1; or
(ii) adversely affect in any way the federal income tax status of the
Company as a partnership.
(b) Subject to Section 3.15(iii), unless approved by a 40 Act Majority of
Members and a Majority of the Disinterested Managers, no amendment shall be
permitted if the effect of such amendment would be to increase the amounts
distributable to the Special Member and decrease the amounts distributable to
the other Members.
ARTICLE XV
POWER OF ATTORNEY
15.1 Power of Attorney. Each Member hereby irrevocably constitutes and
appoints each Manager and each Appropriate Officer, and their respective
designees, as such Member's true and lawful agents and attorneys-in-fact, with
full power and authority in such Member's name, place, and stead, to make,
execute,
33
34
acknowledge, deliver, swear to, file and record the following documents and
instruments in accordance with the other provisions of this Agreement;
(a) this Agreement and a certificate of formation, a certificate of
doing business under fictitious name and any other instrument or filing
which the Board of Managers or the Appropriate Officers of the Company
consider necessary or desirable to carry out the purposes of this Agreement
or the business of the Company or that may be required under the laws of
any state or local government, or of any other jurisdiction;
(b) any and all amendments, restatements, cancellations, or
modifications of the instruments described in Section 15.1(a);
(c) any and all instruments related to the admission, removal, or
withdrawal of any Member; and
(d) all documents and instruments that may be necessary or appropriate
to effect the dissolution and termination of the Company, pursuant to the
terms hereof.
15.2 Irrevocability. The foregoing power of attorney is coupled with an
interest and such grant shall be irrevocable. Such power of attorney shall
survive the subsequent Incapacity of any such Member or the transfer of any or
all of such Member's Units.
15.3 Priority of Agreement. In the event of any conflict between
provisions of this Agreement or any amendment hereto and any documents executed,
acknowledged, sworn to, or filed by any Manager or Appropriate Officer under
this power of attorney, this Agreement and its amendments shall govern.
15.4 Exercise of Power. This power of attorney may be exercised by any
Manager or Appropriate Officer either by signing separately as attorney-in-fact
for each such Member or by a single signature of any Manager or Appropriate
Officer acting as attorney-in-fact for all Members.
ARTICLE XVI
MISCELLANEOUS
16.1 Certificate of Formation. On each subsequent change in the Company
specified in the Act, the Managers shall to the extent required by the Act cause
to be executed and acknowledged an amended certificate of formation pursuant to
the provisions of the Act, which will be duly filed as prescribed by Delaware
law.
16.2 Delaware Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by, and construed and interpreted according
to, the laws of Delaware subject to the provisions of the Investment Company
Act.
16.3 Counterparts. This Agreement may be executed in counterparts, and all
counterparts so executed shall constitute one agreement that shall be binding on
all the parties hereto. Any counterpart of this Agreement that has attached to
it separate signature pages which altogether contain the signatures of all
Members or their attorneys-in-fact shall for all purposes be deemed a fully
executed instrument.
16.4 Binding upon Successors and Assigns. Subject to and unless otherwise
provided in this Agreement, each and all of the covenants, terms, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the successors, successors-in-title, heirs and assigns of the respective parties
hereto.
16.5 Notices. Any notice, offer, consent, or demand permitted or required
to be made under this Agreement to any party hereto shall be given in writing
signed by the Person giving such notice either by (i) personal delivery or (ii)
by registered or certified mail, postage prepaid, addressed to that party at the
respective address shown on the Company's books and records, or to such other
address as that party shall indicate by proper notice to the Board of Managers,
in the same manner as provided above. All notices shall be deemed effective upon
receipt or five days after the date of mailing in accordance with the above
provisions.
34
35
16.6 Severability. If any provision of this Agreement, or the application
thereof, shall for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement and the application of such provision to other
Persons or circumstances shall not be effected thereby, but shall be enforced to
the maximum extent possible under applicable law.
16.7 Entire Agreement. This Agreement constitutes the entire understanding
and agreement of the parties hereto with respect to the subject hereof and
supersedes all prior agreements or understandings, written or oral, between the
parties with respect thereto.
16.8 Headings, Etc. The headings in this Agreement are inserted for
convenience of reference only and shall not affect interpretation of this
Agreement. Wherever from the context it appears appropriate, each term stated in
either the singular or the plural shall include the singular and the plural, and
pronouns stated in either the masculine or the neuter genders shall include the
masculine, the feminine and the neuter.
16.9 Legends. If certificates are issued evidencing a Member's Units, each
such certificate shall bear such legends as may be required by applicable
federal and state laws, or as may be deemed necessary or appropriate by the
Board of Managers to reflect restrictions upon transfer contemplated herein.
16.10 Waiver of Partition. Except as may otherwise be provided by law in
connection with the winding up, liquidation and dissolution of the Company, each
Member hereby irrevocably waives any and all rights that it may have to maintain
an action for partition of any of the Company's property.
16.11 Survival of Certain Provisions. All indemnities and reimbursement
obligations made pursuant to this Agreement shall survive dissolution and
liquidation of the Company until the expiration of the longest applicable
statute of limitations (including extensions and waivers) with respect to the
matter for which a party would be entitled to be indemnified or reimbursed, as
the case may be.
EXECUTED at
--------------------------------------
Initial Member
SPECIAL MEMBER
By:
--------------------------------------
President and Chief Executive
Officer
MEMBERS
(All Members now and hereafter
admitted as Members of the Company
pursuant to powers of attorney now and
hereafter executed in favor of, and
delivered to, the Managers or
Appropriate Officers)
By:
--------------------------------------
Attorney-in-Fact
35
36
SCHEDULE A
EXCELSIOR VENTURE PARTNERS III, LLC
SCHEDULE OF MEMBERS
AS OF MAY 26, 2000
NAME ADDRESS CAPITAL COMMITMENT
---- ------------------------------------------- ------------------
▇▇▇▇▇ ▇. ▇▇▇▇ c/o United States Trust Company of New York $500
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
36
37
SCHEDULE B
EXCELSIOR VENTURE PARTNERS III, LLC
SCHEDULE OF MANAGERS
AS OF MAY 26, 2000
NAME
----
▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
37
