Exhibit EX-99.2a(2)
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GAM AVALON MULTI-GLOBAL, LLC
GAM AVALON MULTI-U.S., LLC
GAM AVALON MULTI-EUROPE, LLC
GAM AVALON MULTI-TECHNOLOGY, LLC
GAM AVALON MULTI-MARKET NEUTRAL, LLC
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LIMITED LIABILITY COMPANY AGREEMENT
January 11, 2002
TABLE OF CONTENTS
Page
Article I DEFINITIONS.............................................................................................2
Article II ORGANIZATION; ADMISSION OF MEMBERS; DIRECTORS..........................................................5
2.1. FORMATION OF LIMITED LIABILITY COMPANY.................................................................5
2.2. NAME...................................................................................................5
2.3. PRINCIPAL AND REGISTERED OFFICE........................................................................6
2.4. DURATION...............................................................................................6
2.5. BUSINESS OF THE FUND...................................................................................6
2.6. ADVISOR................................................................................................6
2.7. MEMBERS................................................................................................7
2.8. LIMITED LIABILITY......................................................................................7
2.9. DIRECTORS..............................................................................................7
Article III MANAGEMENT; ADVICE AND MANAGEMENT.....................................................................8
3.1. MANAGEMENT AND CONTROL.................................................................................8
3.2. ACTIONS BY DIRECTORS...................................................................................8
3.3. MEETINGS OF MEMBERS....................................................................................9
3.4. ADVICE AND MANAGEMENT.................................................................................10
3.5. CUSTODY OF ASSETS OF THE FUND.........................................................................13
3.6. BROKERAGE.............................................................................................13
3.7. OTHER ACTIVITIES......................................................................................13
3.8. DUTY OF CARE..........................................................................................14
3.9. INDEMNIFICATION.......................................................................................14
3.10. FEES, EXPENSES AND REIMBURSEMENT......................................................................16
Article IV TERMINATION OF STATUS OF ADVISOR; REMOVAL OF ADVISOR; TRANSFERS AND REPURCHASES.......................18
4.1. TERMINATION OF STATUS OF THE ADVISOR..................................................................18
4.2. REMOVAL OF ADVISOR....................................................................................18
4.3. TRANSFER OF INTEREST OF ADVISOR.......................................................................18
4.4. TRANSFER OF UNITS OF MEMBERS..........................................................................19
4.5. REPURCHASE OF INTERESTS...............................................................................19
Article V CAPITAL................................................................................................21
5.1. CONTRIBUTIONS TO CAPITAL..............................................................................21
5.2. RIGHTS OF MEMBERS TO CAPITAL..........................................................................22
5.3. CAPITAL ACCOUNTS......................................................................................22
5.4. ALLOCATION OF NET PROFIT AND LOSS.....................................................................23
5.5. ALLOCATION OF CERTAIN WITHHOLDING TAXES AND OTHER EXPENDITURES........................................23
5.6. RESERVES..............................................................................................23
5.7. ALLOCATION TO AVOID CAPITAL ACCOUNT DEFICITS..........................................................24
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5.8. ALLOCATIONS PRIOR TO CLOSING DATE.....................................................................24
5.9. TAX ALLOCATIONS.......................................................................................24
5.10. DISTRIBUTIONS.........................................................................................25
Article VI DISSOLUTION AND LIQUIDATION...........................................................................25
6.1. DISSOLUTION...........................................................................................25
6.2. LIQUIDATION OF ASSETS.................................................................................26
Article VII ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS.........................................................27
7.1. ACCOUNTING AND REPORTS................................................................................27
7.2. DETERMINATIONS BY BOARD...............................................................................28
7.3. VALUATION OF ASSETS...................................................................................28
Article VIII MISCELLANEOUS PROVISIONS............................................................................29
8.1. AMENDMENT OF AGREEMENT................................................................................29
8.2. SPECIAL POWER OF ATTORNEY.............................................................................30
8.3. NOTICES...............................................................................................31
8.4. AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS.........................................................31
8.5. APPLICABILITY OF 1940 ACT AND FORM N-2................................................................31
8.6. CHOICE OF LAW; ARBITRATION............................................................................31
8.7. NOT FOR BENEFIT OF CREDITORS..........................................................................33
8.8. CONSENTS..............................................................................................33
8.9. MERGER AND CONSOLIDATION..............................................................................33
8.10. PRONOUNS..............................................................................................33
8.11. CONFIDENTIALITY.......................................................................................33
8.12. CERTIFICATION OF NON-FOREIGN STATUS...................................................................34
8.13. SEVERABILITY..........................................................................................34
8.14. ENTIRE AGREEMENT......................................................................................34
8.15. DISCRETION............................................................................................35
8.16. COUNTERPARTS..........................................................................................35
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GAM AVALON MULTI-GLOBAL, LLC
GAM AVALON MULTI-U.S., LLC
GAM AVALON MULTI-EUROPE, LLC
GAM AVALON MULTI-TECHNOLOGY, LLC
GAM AVALON MULTI-MARKET NEUTRAL, LLC
LIMITED LIABILITY COMPANY AGREEMENT
THIS LIMITED LIABILITY COMPANY AGREEMENT of [GAM Avalon Multi-Global, LLC]
[GAM Avalon Multi-U.S., LLC] [GAM Avalon Multi-Europe, LLC] [GAM Avalon
Multi-Technology, LLC] [GAM Avalon Multi-Market Neutral, LLC], (the "Fund") is
dated as of January 11, 2002, by and among Global Asset Management (USA) Inc., a
Delaware corporation, as the Advisor, and each person hereinafter admitted to
the Fund and reflected on the books of the Fund as a Member.
WITNESSETH:
[WHEREAS, the Fund* was formed as a limited partnership under the Delaware
Revised Uniform Limited Partnership Act, 6 Del. C.ss.ss.17-101 et. seq.,
pursuant to an initial Certificate of Limited Partnership filed with the
Secretary of State of the State of Delaware [on June 7, 2000, and amended on
August 22, 2000] ** [on August 22, 2000];***
WHEREAS, the Fund* was converted from a limited partnership to a limited
liability company by the filing with the Secretary of State of the State of
Delaware on January 11 , 2002, of a Certificate of Conversion to Limited
Liability Company and a Certificate of Formation pursuant to Section 18-214 of
the Delaware Act;]
[WHEREAS, the Fund**** was formed as a limited liability company under the
Delaware Act pursuant to an initial Certificate of Formation filed with the
Secretary of State of the State of Delaware on January 11, 2002;]
WHEREAS, the parties hereto hereby desire to form and operate the Fund as a
limited liability company under and pursuant to the provisions of the Delaware
Act and agree that the rights, duties and liabilities of the Members shall be as
provided in the Delaware Act, except as otherwise provided herein.
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Each Fund is governed by a separate identical Limited Liability Company
Agreement.
* GAM Avalon Multi-Global, LLC, GAM Avalon Multi-Europe, LLC and GAM Avalon
Multi-Technology, LLC.
** GAM Avalon Multi-Technology, LLC.
*** GAM Avalon Multi-Global, LLC and GAM Avalon Multi-Europe, LLC.
**** GAM Avalon Multi-U.S., LLC and GAM Avalon Multi-Market Neutral, LLC.
NOW, THEREFORE, for and in consideration of the foregoing and the mutual
covenants hereinafter set forth, it is hereby agreed as follows:
Article I
DEFINITIONS
For purposes of this Agreement:
"Advice and Management" means those services provided to the Fund by the
Advisor pursuant to Section 3.4(b) hereof.
"Advisor" means Global Asset Management (USA), Inc.
"Advisers Act" means the Investment Advisers Act of 1940 and the rules,
regulations and orders thereunder, as amended from time to time, or any
successor law.
"Affiliate" means affiliated person as such term is defined in the 1940
Act.
"Agreement" means this Limited Liability Company Agreement, as amended
and/or restated from time to time.
"Board" means the Board of Directors established pursuant to Section 2.9
hereof.
"Capital Account" means, with respect to each Member, the capital account
established and maintained on behalf of each Member pursuant to Section 5.3
hereof.
"Capital Contribution" means the contribution, if any, made, or to be made,
as the context requires, to the capital of the Fund by a Member.
"Certificate" means the Certificate of Formation of Limited Liability
Company of the Fund and any amendments thereto and/or restatements thereof as
filed with the office of the Secretary of State of the State of Delaware.
"Closing Date" means the first date on or as of which a Member other than
GAM Services, Inc. was admitted to the Fund (or the predecessor limited
partnership of the Fund).*****
"Code" means the United States Internal Revenue Code of 1986, as amended
and as hereafter amended from time to time, or any successor law.
"Delaware Act" means the Delaware Limited Liability Company Act as in
effect on the date hereof and as amended from time to time, or any successor
law.
"Directors" means Xx. Xxxxxxxx Xxxxxxxxx, Xxxxxx X. Xxxxxx, Xxxxxx X.
XxXxxxx, Xxxxxx Xxxxxx or such other natural persons who, from time to time,
pursuant hereto shall become Directors.
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***** May 1, 2001, with respect to each of GAM Avalon Multi-Global, LLC, GAM
Avalon Multi-Europe, LLC and GAM Avalon Multi-Technology, LLC; March 26, 2002,
with respect to each of GAM Avalon Multi-U.S., LLC and GAM Avalon Multi-Market
Neutral, LLC.
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"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:
(1) the last day of a Fiscal Year;
(2) the day preceding the date as of which a contribution to the capital
of the Fund is made by any Member pursuant to Section 5.1;
(3) the day on which the Fund repurchases all or a portion of the Units of
any Member pursuant to Section 4.5;
(4) the day as of which the Fund admits a substituted Member to whom an
Interest (or portion thereof) of a Member has been Transferred (unless
there is no change of beneficial ownership);
(5) the day as of which any amount is credited to or debited against the
Capital Account of any Member, other than an amount that is credited
to or debited against the Capital Accounts of all Members in
accordance with their respective Fund Percentages; or
(6) December 31, or any other date which constitutes the last day of the
taxable year of the Fund.
"Fiscal Year" means the period commencing on the Closing Date and ending on
March 31, 2001, and thereafter each period commencing on April 1 of each year
and ending on March 31 of each year (or on the date of a final distribution
pursuant to Section 6.2 hereof), unless the Directors shall designate another
fiscal year for the Fund. The taxable year of the Fund shall end on December 31
of each year, or on any other date designated by the Board which is a permitted
taxable year end for tax purposes, and need not be the same as the Fiscal Year.
"Form N-2" means the Fund's Registration Statement on Form N-2 filed with
the Securities and Exchange Commission, as amended from time to time.
"Fund" means the limited liability company governed hereby, as such limited
liability company may from time to time be constituted.
"Fund Percentage" means a percentage established for each Member on the
Fund's books as of the first day of each Fiscal Period. The Fund Percentage of a
Member for a Fiscal Period shall be determined by dividing the balance of the
Member's Capital Account as of the commencement of such Fiscal Period by the sum
of the Capital Accounts of all of the Members as of the commencement of such
Fiscal Period. The sum of the Fund Percentages of all Members for each Fiscal
Period shall equal 100%.
"Independent Directors" means those Directors who are not "interested
persons" of the Fund as such term is defined in the 1940 Act.
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"Interest" means the entire ownership interest in the Fund at any
particular time of a Member or other person to whom an Interest or portion
thereof has been transferred pursuant to Section 4.3 or 4.4 hereof, including
the rights and obligations of such Member or other person under this Agreement
and the Delaware Act.
"Member" means any person who shall have been admitted to the Fund as a
member (including without limitation (i) the Advisor or any Substitute Advisor
when acting in such person's capacity as a member of the Fund and (ii) any
person who was a limited partner in the Fund at the time of the conversion of
the Fund from a limited partnership to a limited liability company) until the
Fund repurchases the entire Interest of such person as a member pursuant to
Section 4.5 hereof or a substitute Member or Members are admitted with respect
to any such person's entire Interest as a member pursuant to Section 4.4 hereof,
in such person's capacity as a member of the Fund.
"Management Fee" means the fee paid to the Advisor out of the Fund's
assets, and debited against Members' Capital Accounts, as provided in Section
3.10(a).
"Memorandum" means the Fund's private placement memorandum, as amended from
time to time.
"Net Assets" means the total value of all assets of the Fund, less an
amount equal to all accrued debts, liabilities and obligations of the Fund,
calculated before giving effect to any repurchases of Interests.
"Net Profit" or "Net Loss" means the amount by which the Net Assets as of
the close of business on the last day of a Fiscal Period exceed (in the case of
Net Profit) or are less than (in the case of Net Loss) the Net Assets as of the
commencement of the same Fiscal Period (or, with respect to the initial Fiscal
Period of the Fund, at the close of business on the Closing Date), such amount
to be adjusted to exclude any items to be allocated among the Capital Accounts
of the Members on a basis which is not in accordance with the respective Fund
Percentages of all Members as of the commencement of such Fiscal Period pursuant
to Section 5.6 hereof.
"1940 Act" means the Investment Company Act of 1940 and the rules,
regulations and orders thereunder, as amended from time to time, or any
successor law.
"1934 Act" means the Securities Exchange Act of 1934 and the rules,
regulations and orders thereunder, as amended from time to time, or any
successor law.
"Person" means any individual, entity, corporation, partnership,
association, limited liability company, joint-stock company, trust, estate,
joint venture, organization or unincorporated organization.
"Portfolio Fund" means a registered investment company, unregistered
general or limited partnership, limited liability company or other pooled
investment vehicle in which the Fund has invested and which is advised by a
Portfolio Manager.
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"Portfolio Manager" means an individual or entity designated by the Advisor
to manage a portion of the assets of the Fund, either directly or through the
investment by the Fund in a Portfolio Fund. The term Portfolio Manager includes
Sub-Advisors.
"Related Person" means, with respect to any person, (i) a relative, spouse
or relative of a spouse who has the same principal residence as such person,
(ii) any trust or estate in which such person and any persons who are related to
such person collectively have more than 50% of the beneficial interests
(excluding contingent interests) and (iii) any corporation or other organization
of which such person and any persons who are related to such person collectively
are beneficial owners of more than 50% of the equity securities (excluding
directors' qualifying shares) or equity interests.
"Securities" means securities (including, without limitation, equities,
debt obligations, options, and other "securities" as that term is defined in
Section 2(a)(36) of the 1940 Act) and any contracts for forward or future
delivery of any security, debt obligation, currency or commodity, all manner of
derivative instruments and any contracts based on any index or group of
securities, debt obligations, currencies or commodities, and any options
thereon.
"Sub-Advisor" means a Portfolio Manager responsible either (i) for directly
managing a portion of the assets of the Fund in a managed account or (ii) for
managing a special purpose investment vehicle in which the Portfolio Manager and
the Fund are the sole investors.
"Transfer" means the assignment, transfer, sale or other disposition of all
or any portion of an Interest, including any right to receive any allocations
and distributions attributable to an Interest.
"Unit" means the interest of a Member in the Fund represented by an
original Capital Contribution of $100 at the initial closing of subscriptions
for interests in the limited partnership which was the predecessor entity of the
Fund, and with a net asset value determined from time to time thereafter as
provided in Section 7.3.
Article II
ORGANIZATION; ADMISSION OF MEMBERS; DIRECTORS
2.1. FORMATION OF LIMITED LIABILITY COMPANY. The parties hereto hereby form the
Fund as a limited liability company under and pursuant to the provisions of the
Delaware Act and agree that the rights, duties and liabilities of the Members
shall be as provided in the Delaware Act, except as otherwise provided herein.
The Advisor or any Director shall execute and file in accordance with the
Delaware Act any amendment to the Certificate and shall execute and file with
applicable governmental authorities any other instruments, documents and
certificates which, in the opinion of the Board or the Advisor or the Fund's
legal counsel, may from time to time be required by the laws of the United
States of America, the State of Delaware or any other jurisdiction in which the
Fund shall determine to do business, or any political subdivision or agency
thereof, or which such legal counsel may deem necessary or appropriate to
effectuate, implement and continue the valid existence and business of the Fund.
2.2. NAME. The name of the Fund shall be ["GAM Avalon Multi-Global, LLC"] ["GAM
Avalon Multi-U.S., LLC"] ["GAM Avalon Multi-Europe, LLC"] ["GAM Avalon
Multi-
5
Technology, LLC"] ["GAM Avalon Multi-Market Neutral, LLC"] or such other name as
the Board hereafter may adopt upon (i) causing an appropriate amendment to the
Certificate to be filed in accordance with the Delaware Act and (ii) sending
notice thereof to each Member. The Advisor hereby grants to the Fund a
non-exclusive license to use the name "GAM" in the name of the Fund for so long
as Global Asset Management (USA) Inc. shall remain the Advisor of the Fund. The
Fund hereby acknowledges that it shall not acquire any legal right or title in
or to such name, and agrees to change its name to a name that does not contain
the term "GAM" if Global Asset Management (USA) Inc. shall cease to be the
Advisor of the Fund for any reason.
2.3. PRINCIPAL AND REGISTERED OFFICE. The Fund shall have its principal office
at the principal office of the Advisor, or at such other place as shall be
designated from time to time by the Board. The Fund shall have its registered
office in the State of Delaware at 0000 Xxxxxx Xxxx, Xxxxxxxxxx, Xxx Xxxxxx
Xxxxxx, Delaware, and shall have Corporation Service Company as its registered
agent for service of process in the State of Delaware, unless a different
registered office or agent is designated from time to time by the Board in
accordance with the Delaware Act.
2.4. DURATION. The term of the Fund commenced on the filing of the Certificate
with the Secretary of State of the State of Delaware and shall continue until
the Fund is dissolved pursuant to Section 6.1 hereof.
2.5. BUSINESS OF THE FUND.
(a) The business of the Fund is to purchase, sell (including short sales),
invest and trade in Securities and engage in any financial or derivative
transactions relating thereto. Portions of the Fund's assets (which may
constitute, in the aggregate, all of the Fund's assets) may be invested in
general or limited partnerships and other pooled investment vehicles which
invest and trade in Securities or in separate managed accounts through which the
Fund may invest and trade in Securities, some or all of which may be advised by
one or more Portfolio Managers or Sub-Advisors. The Fund may execute, deliver
and perform all contracts, agreements and other undertakings and engage in all
activities and transactions as the Board or the Advisor may deem necessary or
advisable to carry out its objective or business.
(b) The Fund shall operate as a closed-end, management investment company in
accordance with the 1940 Act and subject to any fundamental policies and
investment restrictions set forth in the Form N-2.
2.6. ADVISER.
(a) The Board may admit to the Fund any person, who shall agree to be bound by
all of the terms of this Agreement as an Advisor, as an additional Advisor. The
Board may admit to the Fund as a substitute Advisor any person to which the
Advisor has Transferred its Interest as the Advisor pursuant to Section 4.3
hereof. Such person shall be admitted immediately prior to the Transfer and
shall continue the business of the Fund without dissolution. The name and
mailing address of the Advisor and the Capital Contribution of the Advisor, if
any, shall be reflected on the books and records of the Fund.
6
(b) Each Advisor shall serve for the duration of the term of the Fund, unless it
ceases to be an Advisor to the Fund pursuant to Section 4.1 hereof.
2.7. MEMBERS. The Board may, at any time and without advance notice to or
consent from any other Member, admit any person who shall agree to be bound by
all of the terms of this Agreement as an additional Member. The Board may in its
absolute discretion reject subscriptions for Units in the Fund. The admission of
any person as an additional Member shall be effective upon the execution and
delivery by, or on behalf of, such additional Member of this Agreement or an
instrument that constitutes the execution and delivery of this Agreement. The
Board shall cause the books and records of the Fund to reflect the name and the
required contribution to the capital of the Fund of such additional Member. For
all purposes of the Delaware Act, the Members shall constitute a single class or
group of members of the Fund.
2.8. LIMITED LIABILITY. Except as provided under applicable law, no Member shall
be liable for the Fund's obligations in any amount in excess of the Capital
Account balance of such Member, plus such Member's share of undistributed
profits and assets. In addition, subject to applicable law, a Member shall be
obligated to return to the Fund amounts distributed to the Member in accordance
with this Agreement if, after giving effect to such distribution, the Fund's
liabilities exceed the fair value of the Fund's assets.
2.9. DIRECTORS.
(a) The number of Directors at the Closing Date shall be fixed at four.
Thereafter, the number of Directors shall be fixed from time to time by the
Directors then in office, which number may be greater, or lesser, than four;
provided, however, that no reduction in the number of Directors shall serve to
effect the removal of any Director.
(b) Each Director shall serve for the duration of the term of the Fund, unless
his or her status as a Director shall be sooner terminated pursuant to Section
2.9(d) hereof. If any vacancy in the position of a Director occurs, including by
reason of an increase in the number of Directors as contemplated by Section
2.9(a) hereof, the remaining Directors may appoint an individual to serve in
such capacity, so long as immediately after such appointment at least two-thirds
of the Directors then serving have been approved by the Members. The Directors
may call a meeting of Members to fill any vacancy in the position of a Director,
and shall do so within 60 days after any date on which Directors who were
approved by the Members cease to constitute a majority of the Directors then
serving.
(c) If no Director remains, the Advisor shall promptly call a meeting of the
Members, to be held within 60 days after the date on which the last Director
ceased to act in that capacity, for the purpose of determining whether to
continue the business of the Fund and, if the business shall be continued,
approving the appointment of the requisite number of Directors. If the Members
shall determine at such meeting not to continue the business of the Fund, or if
the approval of the appointment of the requisite number of Directors is not
approved within 60 days after the date on which the last Director ceased to act
in that capacity, then the Fund shall be dissolved pursuant to Section 6.1
hereof and the assets of the Fund shall be liquidated and distributed pursuant
to Section 6.2 hereof.
7
(d) The status of a Director shall terminate if the Director (i) shall die; (ii)
shall be adjudicated incompetent; (iii) shall resign as a Director (upon not
less than 90 days' prior written notice to the other Directors); (iv) shall be
removed; (v) shall be certified by a physician to be mentally or physically
unable to perform his or her duties hereunder; or (vi) shall be determined to be
ineligible to serve as a director of a registered investment company pursuant to
the 1940 Act.
(e) Any Director may be removed by the vote or written consent of Members
holding not less than two-thirds of the total number of votes eligible to be
cast by all Members.
Article III
MANAGEMENT; ADVICE AND MANAGEMENT
3.1. MANAGEMENT AND CONTROL.
(a) Management and control of the business of the Fund shall be vested in the
Board, which shall have the right, power and authority, on behalf of the Fund
and in its name, to exercise all rights, powers and authority of managers under
the Delaware Act and to do all things necessary and proper to carry out the
objective and business of the Fund. No Director shall have the authority
individually to act on behalf of or to bind the Fund except within the scope of
such Director's authority as delegated by the Board. The parties hereto intend
that, to the fullest extent permitted by law, and except to the extent otherwise
expressly provided herein, (i) each Director shall be vested with the same
powers and authority on behalf of the Fund as are customarily vested in each
director of a Delaware corporation and (ii) each Independent Director shall be
vested with the same powers and authority on behalf of the Fund as are
customarily vested in each director of a closed-end management investment
company registered under the 1940 Act that is organized as a Delaware
corporation who is not an "interested person" of such company as such term is
defined in the 1940 Act. During any period in which the Fund shall have no
Directors, the Advisor shall manage and control the Fund. The Directors may make
Capital Contributions and own Units in the Fund.
(b) Global Asset Management (USA) Inc. shall be the designated tax matters
partner for purposes of Section 6231(a)(7) of the Code. Each Member agrees not
to treat, on his personal return or in any claim for a refund, any item of
income, gain, loss, deduction or credit in a manner inconsistent with the
treatment of such item by the Fund. The tax matters partner shall have the
exclusive authority and discretion to make any elections required or permitted
to be made by the Fund under any provisions of the Code or any other revenue
laws.
(c) Members shall have no right to participate in and shall take no part in the
management or control of the Fund's business and shall have no right, power or
authority to act for or bind the Fund. Members shall have the right to vote on
any matters only as provided in this Agreement or on any matters that require
the approval of the holders of voting securities under the 1940 Act.
3.2. ACTIONS BY DIRECTORS.
(a) Unless provided otherwise in this Agreement, the Directors shall act only:
(i) by the affirmative vote of a majority of the Directors (which majority shall
include any requisite number of Independent Directors required by the 1940 Act)
present at a meeting duly called at
8
which a quorum of the Directors shall be present either in person or, if
permitted by the 1940 Act, by conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other; or (ii) by unanimous written consent of all of the Directors without
a meeting, if permissible under the 1940 Act.
(b) The Directors may designate from time to time a Chairman of the Directors,
who shall preside at all meetings. Meetings of the Directors may be called by
the Chairman or any two Directors, and may be held on such date and at such time
and place as the Directors shall determine. Each Director shall be entitled to
receive written notice of the date, time and place of such meeting within a
reasonable time in advance of the meeting. Notice need not be given to any
Director who shall attend a meeting without objecting to the lack of notice or
who shall execute a written waiver of notice with respect to the meeting. A
majority of the Directors then in office shall constitute a quorum at any
meeting.
(c) The Directors may appoint from time to time agents and employees of the Fund
who shall have the same powers and duties on behalf of the Fund as are
customarily vested in officers of a Delaware corporation, and designate them as
officers of the Fund by resolution of the Directors specifying their functions.
(d) The Board may delegate the authority to execute agreements or instruments
and to take other actions on behalf of the Fund to the Advisor, the Selling
Agent or the Administrator of the Fund (as such terms are defined in the
Memorandum) or to such other party as the Board may determine, subject to
compliance with applicable laws, including without limitation the 1940 Act.
3.3. MEETINGS OF MEMBERS.
(a) Actions requiring the vote of the Members may be taken at any duly
constituted meeting of the Members at which a quorum is present. Meetings of the
Members may be called by the affirmative vote of a majority of Directors then in
office, or by Members holding at least a majority of the total number of votes
eligible to be cast by all Members, and may be held at such time, date and place
as the Board shall determine in the case of meetings called by the Board or the
Members and at such time, date and place as the Board shall determine in the
case of meetings called by the Board. In each case, the Board shall provide
notice of the meeting, stating the date, time and place of the meeting and the
record date therefor, to each Member entitled to vote at the meeting within a
reasonable time prior thereto. Failure to receive notice of a meeting on the
part of any Member shall not affect the validity of any act or proceeding of the
meeting, so long as a quorum shall be present at the meeting. Except as
otherwise required by applicable law, only matters set forth in the notice of a
meeting may be voted on by the Members at a meeting. The presence in person or
by proxy of Members holding a majority of the total number of votes eligible to
be cast by all Members as of the record date shall constitute a quorum at any
meeting. In the absence of a quorum, a meeting may be adjourned to the time or
times as determined by the Board without additional notice to the Members.
Except as otherwise required by any provision of this Agreement or of the 1940
Act, (i) those candidates receiving a plurality of the votes cast at any meeting
of Members shall be elected as Directors and (ii) all other actions of the
Members taken at a meeting shall require the affirmative vote of Members
9
holding a majority of the total number of votes eligible to be cast by those
Members who are present in person or by proxy at such meeting.
(b) Each Member shall be entitled to cast at any meeting of Members a number of
votes equivalent to such Member's Fund Percentage as of the record date for such
meeting. The Board shall establish a record date not less than 10 nor more than
60 days prior to the date of any meeting of Members to determine eligibility to
vote at such meeting and the number of votes which each Member will be entitled
to cast thereat, and shall maintain for each such record date a list setting
forth the name of each Member and the number of votes that each Member will be
entitled to cast at the meeting.
(c) A Member may vote at any meeting of Members by a properly executed proxy
transmitted to the Fund at any time at or before the time of the meeting by
telegram, telecopier or other means of electronic communication or other
readable reproduction as contemplated by the provisions relating to proxies
applicable to Delaware corporations now or hereinafter in effect. A proxy may be
suspended or revoked, as the case may be, by the Member executing the proxy by a
later writing delivered to the Fund at any time prior to exercise of the proxy
or if the Member executing the proxy shall be present at the meeting and vote in
person. Any action of the Members that is permitted to be taken at a meeting of
the Members may be taken without a meeting if consents in writing, setting forth
the action to be taken, are signed by Members holding a majority of the total
number of votes eligible to be cast or such greater percentage as may be
required under this Agreement to approve such action.
3.4. ADVICE AND MANAGEMENT.
(a) Among their powers, the Board shall have the power to engage the Advisor to
provide Advice and Management to the Fund under their direction, subject to the
initial approval thereof prior to the Closing Date by the Directors (including
the vote of a majority of the Independent Directors at a meeting called for such
purpose). The Directors also delegate to the Advisor the rights and powers
expressly given to the Advisor under this Agreement. The authority of the
Advisor granted under this Section 3.4 shall become effective upon such initial
approvals and shall terminate: (i) if any period of 12 consecutive months
following the first 12 consecutive months of the effectiveness of such authority
shall conclude without the approval of the continuation of such authority by
either (A) the vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Fund or (B) the Directors, and in either
case, approval by a majority of the Independent Directors by vote cast in person
at a meeting called for such purpose; (ii) if revoked by the Directors or by
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the Fund, in either case with 60 days' prior written notice to the
Advisor; or (iii) at the election of the Advisor with 60 days' prior written
notice to the Directors. The authority of the Advisor to provide Advice and
Management pursuant to this Section 3.4 shall automatically terminate upon the
occurrence of any event in connection with the Advisor, its provision of Advice
and Management, this Agreement or otherwise which constitutes an "assignment"
within the meaning of the 1940 Act. If the authority of the Advisor under this
Section 3.4 is terminated as provided herein, the Directors may appoint, subject
to the approval thereof by a majority of the Independent Directors and by vote
of a majority (as defined in the 1940 Act) of the outstanding voting securities
of the Fund, a person or persons to provide Advice and Management to the Fund,
and shall cause the terms and conditions of such
10
appointment to be stated in an agreement executed on behalf of the Fund and such
person or persons. Notwithstanding anything in this Agreement to the contrary,
upon receiving the requisite approval set forth in the preceding sentence, the
Fund, and the Board on behalf of the Fund, shall have the power and authority to
enter into such agreement without any further act, vote or approval of any
Member.
(b) So long as the Advisor has been and continues to be authorized to provide
Advice and Management, it shall have, subject to any policies and restrictions
set forth in any current offering memorandum issued by the Fund, this Agreement,
the Form N-2 or the 1940 Act, or adopted from time to time by the Directors and
communicated in writing to the Advisor, full discretion and authority (i) to
manage the assets and liabilities of the Fund using a multi-manager investment
management strategy as described in the Memorandum, (ii) to identify and
evaluate Portfolio Managers and Portfolio Funds and to determine the assets of
the Fund to be committed to each Portfolio Manager and Portfolio Fund from time
to time (subject to Section 3.4(b)(15) in the case of Sub-Advisors), in each
case subject to the terms and conditions of the respective governing documents
of each Portfolio Manager and Portfolio Fund, (iii) to invest directly the
assets of the Fund in liquid investments pending allocation or reallocation of
such assets in Portfolio Funds or to ensure the availability of cash as required
by the Fund in the ordinary course of its business, and (iv) to manage the
day-to-day business and affairs of the Fund. In furtherance of and subject to
the foregoing, the Advisor, except as otherwise provided in this Agreement,
shall have full power and authority on behalf of the Fund:
(1) to purchase, sell, exchange, trade and otherwise deal in and with
Securities and other property of the Fund, including without
limitation interests in Portfolio Funds, and to loan Securities of the
Fund;
(2) to do any and all acts and exercise all rights with respect to the
Fund's interest in any person, firm, corporation, partnership or other
entity, including, without limitation, the voting of limited
partnership interests or shares of Portfolio Funds;
(3) to enter into subscription or other agreements relating to investments
in Portfolio Funds (subject to Section 3.4(b)(15) in the case of
agreements with Sub-Advisors), including without limitation agreements
irrevocably to forego the Fund's right to vote its interests or shares
of the Portfolio Funds;
(4) to enter into agreements with Portfolio Managers and Portfolio Funds
(subject to Section 3.4(b)(15) in the case of agreements with
Sub-Advisors) that provide for, among other things, the payment of
management fees and allocations of profits to Portfolio Managers and
the indemnification by the Fund of Portfolio Managers and Portfolio
Funds to the same or different extent as provided for in respect of
the Advisor, and to terminate such agreements;
(5) to open, maintain and close accounts with brokers and dealers, to make
all decisions relating to the manner, method and timing of Securities
and other investment transactions, to select and place orders with
brokers, dealers or other financial intermediaries for the execution,
clearance or settlement of any transactions on behalf of the Fund on
such terms as the Advisor considers
11
appropriate, and to grant limited discretionary authorization to such
persons with respect to price, time and other terms of investment and
trading transactions;
(6) to borrow from banks or other financial institutions and to pledge
Fund assets as collateral therefor, to trade on margin, to exercise or
refrain from exercising all rights regarding the Fund's investments,
and to instruct custodians regarding the settlement of transactions,
the disbursement of payments to Members with respect to repurchases of
Units and the payment of Fund expenses, including those relating to
the organization and registration of the Fund;
(7) to issue to any Member an instrument certifying that such Member is
the owner of Units;
(8) to call and conduct meetings of Members at the Fund's principal office
or elsewhere as it may determine, and to assist the Directors in
calling and conducting meetings of the Directors;
(9) to engage and terminate such attorneys, accountants and other
professional advisers and consultants as the Advisor may deem
necessary or advisable in connection with the affairs of the Fund or
as may be directed by the Directors;
(10) subject to Section 3.4(b)(15), to engage the services of persons,
including GAM International Management Limited, to assist the Advisor
in providing, or to provide under the Advisor's control and
supervision, Advice and Management to the Fund at the expense of the
Advisor and to terminate such services;
(11) to assist in the preparation and filing of any required tax or
information returns to be made by the Fund;
(12) as directed by the Directors, to commence, defend and conclude any
action, suit, investigation or other proceeding that pertains to the
Fund or any assets of the Fund;
(13) if directed by the Directors, to arrange for the purchase of any
insurance covering the potential liabilities of the Fund or relating
to the performance of the Directors or the Advisor, or any of their
principals, directors, officers, members, employees and agents;
(14) to execute, deliver and perform such contracts, agreements and other
undertakings, and to engage in such activities and transactions as are
necessary and appropriate for the conduct of the business of the Fund;
and
(15) (A) to commit all or part of the Fund's assets to the discretionary
management of one or more Sub-Advisors, the selection of which shall
be subject to the approval of a majority (as defined in the 1940 Act)
of the Fund's outstanding voting securities, unless the Fund receives
an exemption from the provisions of the 1940 Act requiring such
approval, (B) to enter into agreements with the Sub-Advisors that
provide for, among other things, the indemnification by the Fund of
the Sub-
12
Advisors to the same or different extent as provided for in respect of
the Advisor, and to terminate such agreements, and (C) to authorize
the payment of fees and allocations of profits to Sub-Advisors
pursuant to their respective governing documents.
3.5. CUSTODY OF ASSETS OF THE FUND. Notwithstanding anything to the contrary
contained herein, the Advisor shall not have any authority to hold or have
possession or custody of any funds, Securities or other property of the Fund.
The physical possession of all funds, Securities or other property of the Fund
shall at all times be held, controlled and administered by one or more
custodians retained by the Fund. The Advisor shall have no responsibility with
respect to the collection of income or the physical acquisition or safekeeping
of the funds, Securities or other assets of the Fund, and all such duties of
collection, physical acquisition or safekeeping shall be the sole obligation of
such custodians.
3.6. BROKERAGE. In the course of selecting brokers, dealers and other financial
intermediaries for the execution, clearance and settlement of transactions for
the Fund pursuant to Sections 3.4(b)(5) and (6) hereof, the Advisor may, subject
to such policies as are adopted by the Fund and to the provisions of applicable
law, agree to such commissions, fees and other charges on behalf of the Fund as
it shall deem reasonable in the circumstances, taking into account all such
factors as it deems relevant, including the reliability of the broker, financial
responsibility of the broker, strength of the broker, ability of the broker to
efficiently execute transactions, the broker's facilities, and the broker's
provision or payment of the costs of research and other services which are of
benefit to the Fund and the Advisor and other clients of and accounts managed by
the Advisor, even if the cost of such services does not represent the lowest
cost available. The Advisor shall be under no obligation to combine or arrange
orders so as to obtain reduced charges unless otherwise required under the
Federal securities laws. The Advisor, subject to such procedures as may be
adopted by the Directors, may use Affiliates of the Advisor as brokers to effect
the Fund's Securities transactions and the Fund may pay such commissions to such
brokers in such amounts as are permissible under applicable law.
3.7. OTHER ACTIVITIES.
(a) Neither any of the Directors nor the Advisor shall be required to devote
full time to the affairs of the Fund, but shall devote such time as may
reasonably be required to perform their obligations under this Agreement.
(b) Any Member, and any Affiliate of any Member, may engage in or possess an
interest in other business ventures or commercial dealings of every kind and
description, independently or with others, including, but not limited to,
acquisition and disposition of Securities, provision of investment advisory or
brokerage services, serving as directors, officers, employees, advisors or
agents of other companies, partners of any partnership, members of any limited
liability company, or trustees of any trust, or entering into any other
commercial arrangements. No Member shall have any rights in or to such
activities of any other Member, or any profits derived therefrom.
(c) The Advisor, and its members, directors, officers, employees and beneficial
owners, from time to time may acquire, possess, manage, hypothecate and dispose
of Securities or other
13
investment assets, and engage in any other investment transaction, for any
account over which it or they exercise discretionary authority, including their
own accounts, the accounts of their families, the account of any entity in which
it or they have a beneficial interest or the accounts of others for whom they
may provide investment advisory or other services, notwithstanding the fact that
the Fund may have or may take a position of any kind or otherwise; provided,
however, that the Advisor shall not cause the Fund to purchase any asset from or
sell any asset to any such discretionary account without the consent of the
Board and in accordance with the 1940 Act.
(d) To the extent that at law or in equity the Board or the Advisor have duties
(including fiduciary duties) and liabilities relating thereto to the Fund or to
any other Member, any such person acting under this Agreement shall not be
liable to the Fund or to any other Member for its good faith reliance on the
provisions of this Agreement. The provisions of this Agreement, to the extent
that they restrict the duties and liabilities of the Advisor or the Directors
otherwise existing at law or in equity, are agreed by the Members to replace
such other duties and liabilities of such person.
3.8. DUTY OF CARE.
(a) The Directors and the Advisor, including any officer, director, partner,
member, principal, employee or agent of the foregoing, shall not be liable to
the Fund or to any of its Members for any loss or damage occasioned by any act
or omission in the performance of such person's services under this Agreement,
unless it shall be determined by final judicial decision on the merits from
which there is no further right to appeal that such loss is due to an act or
omission of such person constituting willful misfeasance, bad faith, gross
negligence or reckless disregard of such person's duties hereunder.
(b) Members not in breach of any obligation hereunder or under any agreement
pursuant to which the Member subscribed for Units shall be liable to the Fund,
any Member or third parties only as required by the Delaware Act.
3.9. INDEMNIFICATION.
(a) To the fullest extent permitted by law, the Fund shall, subject to Section
3.9(b) hereof, indemnify the Advisor or any successor thereto (including for
this purpose each officer, director, member, partner, principal, employee or
agent of, or any person who controls, the Advisor or any successor thereto or a
member thereof, and their executors, heirs, assigns, successors or other legal
representatives) and each Director (and their executors, heirs, assigns,
successors or other legal representatives) (each such person being referred to
as an "indemnitee") against all losses, claims, damages, liabilities, costs and
expenses, including, but not limited to, amounts paid in satisfaction of
judgments, in compromise, or as fines or penalties, and reasonable counsel fees,
incurred in connection with the defense or disposition of any action, suit,
investigation or other proceeding, whether civil or criminal, before any
judicial, arbitral, administrative or legislative body, in which such indemnitee
may be or may have been involved as a party or otherwise, or with which such
indemnitee may be or may have been threatened, while in office or thereafter, by
reason of being or having been an Advisor or Director of the Fund, or the past
or present performance of services to the Fund by such indemnitee, except to the
extent such loss, claim, damage, liability, cost or expense shall have been
finally determined in a decision on the merits
14
in any such action, suit, investigation or other proceeding to have been
incurred or suffered by such indemnitee by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of such indemnitee's office. The rights of indemnification provided
under this Section 3.9 shall not be construed so as to provide for
indemnification of an indemnitee for any liability (including liability under
federal securities laws which, under certain circumstances, impose liability
even on persons that act in good faith) to the extent (but only to the extent)
that such indemnification would be in violation of applicable law, but shall be
construed so as to effectuate the applicable provisions of this Section 3.9 to
the fullest extent permitted by law.
(b) Expenses, including reasonable counsel fees, so incurred by any such
indemnitee (but excluding amounts paid in satisfaction of judgments, in
compromise, or as fines or penalties) may be paid from time to time by the Fund
in advance of the final disposition of any such action, suit, investigation or
proceeding upon receipt of an undertaking by or on behalf of such indemnitee to
repay to the Fund amounts so paid if it shall ultimately be determined that
indemnification of such expenses is not authorized under Section 3.9(a) hereof;
provided, however, that (i) such indemnitee shall provide security for such
undertaking, (ii) the Fund shall be insured by or on behalf of such indemnitee
against losses arising by reason of such indemnitee's failure to fulfill his or
its undertaking, or (iii) a majority of the Independent Directors (excluding any
Director who is either seeking advancement of expenses hereunder or is or has
been a party to any other action, suit, investigation or proceeding involving
claims similar to those involved in the action, suit, investigation or
proceeding giving rise to a claim for advancement of expenses hereunder) or
independent legal counsel in a written opinion shall determine based on a review
of readily available facts (as opposed to a full trial-type inquiry) that there
is reason to believe such indemnitee ultimately will be entitled to
indemnification.
(c) As to the disposition of any action, suit, investigation or proceeding
(whether by a compromise payment, pursuant to a consent decree or otherwise)
without an adjudication or a decision on the merits by a court, or by any other
body before which the proceeding shall have been brought, that an indemnitee is
liable to the Fund or its Members by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
such indemnitee's office, indemnification shall be provided pursuant to Section
3.9(a) hereof if (i) approved as in the best interests of the Fund by a majority
of the Independent Directors (excluding any Director who is either seeking
indemnification hereunder or is or has been a party to any other action, suit,
investigation or proceeding involving claims similar to those involved in the
action, suit, investigation or proceeding giving rise to a claim for
indemnification hereunder) upon a determination based upon a review of readily
available facts (as opposed to a full trial-type inquiry) that such indemnitee
acted in good faith and in the reasonable belief that such actions were in the
best interests of the Fund and that such indemnitee is not liable to the Fund or
its Members by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of such indemnitee's
office, or (ii) the Directors secure a written opinion of independent legal
counsel based upon a review of readily available facts (as opposed to a full
trial-type inquiry) to the effect that such indemnification would not protect
such indemnitee against any liability to the Fund or its Members to which such
indemnitee would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of such indemnitee's office.
15
(d) Any indemnification or advancement of expenses made pursuant to this Section
3.9 shall not prevent the recovery from any indemnitee of any such amount if
such indemnitee subsequently shall be determined in a decision on the merits in
any action, suit, investigation or proceeding involving the liability or expense
that gave rise to such indemnification or advancement of expenses to be liable
to the Fund or its Members by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of such
indemnitee's office. In any suit brought by an indemnitee to enforce a right to
indemnification under this Section 3.9 it shall be a defense that, and in any
suit in the name of the Fund to recover any indemnification or advancement of
expenses made pursuant to this Section 3.9 the Fund shall be entitled to recover
such expenses upon a final adjudication that, the indemnitee has not met the
applicable standard of conduct set forth in this Section 3.9. In any such suit
brought to enforce a right to indemnification or to recover any indemnification
or advancement of expenses made pursuant to this Section 3.9, the burden of
proving that the indemnitee is not entitled to be indemnified, or to any
indemnification or advancement of expenses, under this Section 3.9 shall be on
the Fund (or any Member acting derivatively or otherwise on behalf of the Fund
or its Members).
(e) An indemnitee may not satisfy any right of indemnification or advancement of
expenses granted in this Section 3.9 or to which he or it may otherwise be
entitled except out of the assets of the Fund, and no Member shall be personally
liable with respect to any such claim for indemnification or advancement of
expenses.
(f) The rights of indemnification provided hereunder shall not be exclusive of
or affect any other rights to which any person may be entitled by contract or
otherwise under law. Nothing contained in this Section 3.9 shall affect the
power of the Fund to purchase and maintain liability insurance on behalf of any
Advisor, Director or other person.
(g) The Board may enter into agreements indemnifying persons providing services
to the Fund to the same extent as set forth in this Section 3.9.
3.10. FEES, EXPENSES AND REIMBURSEMENT.
(a) As consideration for providing Advice and Management, and for so long as the
Advisor shall provide Advice and Management to the Fund, the Fund will pay the
Advisor a monthly management fee at the annual rate of 2% of the value of each
Member's Capital Account as of the first business day of each month (the
"Management Fee"), which amount shall be charged as of such date to the Capital
Account of each Member. The Management Fee will be computed based on the Capital
Account of each Member as of the end of business on the last business day of
each month, after adjustment for any subscriptions effective on such date and
before giving effect to any repurchase of Units effective as of such date, and
will be due and payable in arrears within five business days after the end of
the month. The Board may waive or reduce the Management Fee calculated with
respect to, and deducted from, the Capital Account of any Member and may pay all
or part of the Management Fee to third parties for services rendered in
connection with the placement of Units.
16
(b) The Fund shall compensate each Director for his or her services hereunder as
may be agreed to by the Board. In addition, the Fund shall reimburse the
Directors for reasonable out-of-pocket expenses incurred by them in performing
their duties under this Agreement.
(c) The Fund will deduct from all subscriptions for Units in the Fund, and pay
to GAM Services, Inc. or any selling agent appointed by GAM Services, Inc., a
front-end sales charge in an amount not to exceed 5% of the amount of the
subscription, or such lesser amount as shall be agreed with respect to any
investor from time to time by the Board and GAM Services, Inc. or any such
selling agent. The Capital Contribution credited to the Capital Account of each
Member shall be the net amount invested in the Fund after deduction of such
sales charge.
(d) The Fund shall bear all expenses incurred in the business of the Fund other
than those specifically required to be borne by the Advisor pursuant to this
Agreement. Expenses to be borne by the Fund include, but are not limited to, the
following:
(1) all costs and expenses related to portfolio transactions and positions
for the Fund's account, including, but not limited to, brokerage
commissions, research fees, interest and commitment fees on loans and
debit balances, borrowing charges on Securities sold short, dividends
on Securities sold short but not yet purchased, custodial fees, margin
fees, transfer taxes and premiums, taxes withheld on foreign
dividends, and indirect expenses from investments in Portfolio Funds;
(2) all costs and expenses associated with the organization and
registration of the Fund, the offering of Units, and compliance with
any applicable Federal or state laws;
(3) all costs and expenses associated with the organization of Portfolio
Funds managed by Sub-Advisors and with the selection of Portfolio
Managers, including due diligence and travel-related expenses;
(4) the costs and expenses of holding any meetings of the Board or Members
that are permitted or are required to be held by this Agreement, the
1940 Act or other applicable law;
(5) fees and disbursements of any attorneys, accountants, auditors and
other consultants and professionals engaged on behalf of the Fund;
(6) the costs of a fidelity bond and any liability insurance obtained on
behalf of the Fund, the Advisor or the Directors;
(7) all costs and expenses of preparing, setting in type, printing and
distributing reports and other communications to Members;
(8) all expenses of computing the net asset value of the Fund and the
Units, including any equipment or services obtained for the purpose of
valuing the Fund's investment portfolio;
17
(9) all charges for equipment or services used for communications between
the Fund and any custodian or other agent engaged by the Fund;
(10) fees payable to custodians and other persons providing administrative
or transfer agent services to the Fund; and
(11) such other types of expenses as may be approved from time to time by
the Directors, other than those required to be borne by the Advisor.
The Advisor shall be entitled to reimbursement from the Fund for any of the
above expenses that it pays on behalf of the Fund.
Article IV
TERMINATION OF STATUS OF ADVISER;
REMOVAL OF ADVISER;
TRANSFERS AND REPURCHASES
4.1. TERMINATION OF STATUS OF THE ADVISER.
(a) The Advisor shall cease to be the Advisor of the Fund if the Advisor (i)
shall be dissolved or otherwise shall terminate its existence; (ii) shall
voluntarily withdraw as Advisor; (iii) shall be removed; (iv) shall transfer its
entire Interest as Advisor as permitted under Section 4.3 hereof and such person
to which such Interest is transferred is admitted as a substitute Advisor
pursuant to Section 2.6(a) hereof; or (v) shall otherwise cease to be the
Advisor of the Fund.
(b) An Advisor may not withdraw voluntarily as an Advisor until the earliest of
(i) one year from the date on which the Advisor shall have given the Directors
written notice of its intention to effect such withdrawal (or upon lesser notice
if, in the opinion of counsel to the Fund, such withdrawal is not likely to
cause the Fund to lose its partnership tax classification) or as otherwise
permitted by the 1940 Act; (ii) the date on which the authority of the Advisor
to provide Advice and Management is terminated (other than at the election of
the Advisor) pursuant to Section 3.4(a) hereof, unless within 30 days after such
termination the Directors request the Advisor not to withdraw, in which case 180
days after the date of such termination, unless a successor adviser is earlier
approved by the Fund; and (iii) the date on which one or more persons shall have
agreed to assume the obligations of the Advisor hereunder with the approval of
the Directors and such other approvals as may be required by the 1940 Act.
4.2. REMOVAL OF ADVISER. Any Advisor may be removed by the vote or written
consent of Members holding not less than two-thirds of the total number of votes
eligible to be cast by all Members.
4.3. TRANSFER OF INTEREST OF ADVISER. An Advisor may not Transfer its Interest
as the Advisor except to persons who have agreed to be bound by all of the terms
of this Agreement and pursuant to applicable law. By executing this Agreement,
each other Member shall be deemed to have consented to any such Transfer
permitted by the preceding sentence.
18
4.4. TRANSFER OF UNITS OF MEMBERS.
(a) Units held by a Member may be Transferred only (i) by operation of law
pursuant to the death, bankruptcy, insolvency or dissolution of such Member or
(ii) with the written consent of the Board (which may be withheld in the Board's
sole and absolute discretion). In addition, the Board may not consent to a
Transfer of Units of a Member unless the person to whom such Units are
transferred (or each of such person's equity owners if such a person is a
"private investment company" as defined in Rule 205-3(d)(3) under the Advisers
Act, an investment company registered under the 1940 Act, or a business
development company as defined under the Advisers Act) is a person whom the
Board believes meets the requirements of paragraph (d)(1) of Rule 205-3 under
the Advisers Act or any successor rule thereto, or is otherwise exempt from such
requirements. If any transferee does not meet such investor eligibility
requirements, the Fund reserves the right to redeem such investor's Units. In
addition to the foregoing, no Member shall be permitted to Transfer such
Member's Units unless after such Transfer the balance of the Capital Account of
the transferee, and of the Member Transferring less than the Member's entire
Interest, is at least equal to the amount of the Member's initial Capital
Contribution. Any permitted transferee shall be entitled to the allocations and
distributions allocable to the Units so acquired and to Transfer such Units in
accordance with the terms of this Agreement, but shall not be entitled to the
other rights of a Member unless and until such transferee becomes a substituted
Member. If a Member Transfers Units with the approval of the Board, the Fund
shall promptly take all necessary actions so that each transferee or successor
to whom such Units is transferred is admitted to the Fund as a Member. The
admission of any transferee as a substituted Member shall be effective upon the
execution and delivery by, or on behalf of, such substituted Member of this
Agreement or an instrument that constitutes the execution and delivery of this
Agreement. Each Member and transferee agrees to pay all expenses, including
attorneys' and accountants' fees, incurred by the Fund in connection with such
Transfer.
(b) Each Member shall indemnify and hold harmless the Fund, the Advisor, the
Directors, each other Member and any Affiliate of the foregoing against all
losses, claims, damages, liabilities, costs and expenses (including legal or
other expenses incurred in investigating or defending against any such losses,
claims, damages, liabilities, costs and expenses or any judgments, fines and
amounts paid in settlement), joint or several, to which such persons may become
subject by reason of or arising from (i) any Transfer made by such Member in
violation of this Section 4.4 and (ii) any misrepresentation by such Member in
connection with any such Transfer.
4.5. REPURCHASE OF INTERESTS.
(a) Except as otherwise provided in this Agreement, no Member or other person
holding Units shall have the right to withdraw or tender Units to the Fund for
repurchase. The Directors may from time to time, in their complete and exclusive
discretion and on such terms and conditions as the Directors may determine,
cause the Fund to repurchase Units pursuant to written tenders. In determining
whether to cause the Fund to repurchase Units pursuant to written tenders, the
Directors shall consider the following factors, among others:
(1) whether any Members have requested to tender Units to the Fund;
19
(2) the liquidity of the Fund's assets;
(3) the investment plans and working capital requirements of the Fund;
(4) the relative economies of scale with respect to the size of the Fund;
(5) the history of the Fund in repurchasing Units;
(6) the condition of the securities markets; and
(7) the anticipated tax consequences of any proposed repurchases of Units.
The Directors shall cause the Fund to repurchase Units pursuant to written
tenders only on terms fair to the Fund and to all Members and persons holding
Interests acquired from Members, as applicable.
(b) Except as set forth in Sections 4.5(c) and (d) hereof, an Advisor may tender
its Units under Section 4.5(a) hereof only if and to the extent that, in the
opinion of legal counsel to the Fund, such repurchase would not jeopardize the
classification of the Fund as a partnership for U.S. Federal income tax
purposes.
(c) More than 180 days after termination of the authority to provide Advice and
Management, the Advisor may, by written notice to the Directors, tender to the
Fund all or any portion of its Capital Account, established and maintained by it
as a member of the Fund, which it is not required to maintain pursuant to
Section 5.1(c) hereof until it ceases to be an Advisor of the Fund pursuant to
Section 4.1(a) hereof. Within 30 days after the receipt of such notice, the
Directors shall cause the tendered portion of such Capital Account to be
repurchased by the Fund for cash.
(d) If an Advisor ceases to be an Advisor of the Fund pursuant to Section 4.1
hereof and the business of the Fund is continued pursuant to Section 6.1(a)(2)
hereof, the former Advisor (or its trustee or other legal representative) may,
by written notice to the Directors within 60 days of the action resulting in the
continuation of the Fund pursuant to Section 6.1(a)(2) hereof, tender to the
Fund all or any portion of its Interest. Within 30 days after the receipt of
such notice, the Directors shall cause such Interest to be repurchased by the
Fund for cash in an amount equal to the balance of the former Advisor's Capital
Account or applicable portion thereof. If the former Advisor does not tender to
the Fund all of its Interest as permitted by this Section 4.5(d), such Interest
shall be thereafter deemed to be and shall be treated in all respects as the
Interest of a Member.
(e) The Board may cause the Fund to repurchase Units of a Member or any person
acquiring Units from or through a Member in the event that the Board determines
or has reason to believe that:
(1) such Units have been transferred in violation of Section 4.4 hereof,
or such Units have vested in any person by operation of law as the
result of the death, dissolution, bankruptcy or incompetence of a
Member;
20
(2) ownership of such Units by a Member or other person will cause the
Fund to be in violation of, or require registration of any Units
under, or subject the Fund to additional registration or regulation
under, the securities or commodities laws of the United States or any
other relevant jurisdiction;
(3) continued ownership of Units may be harmful or injurious to the
business or reputation of the Fund, the Directors or the Advisor, or
may subject the Fund or any of the Members to an undue risk of adverse
tax or other fiscal consequences;
(4) any of the representations and warranties made by a Member in
connection with the acquisition of Units was not true when made or has
ceased to be true; or
(5) it would be in the best interests of the Fund, as determined by the
Board, for the Fund to repurchase such Units.
(f) Repurchases of Units by the Fund shall be payable in cash, without interest,
or, in the discretion of the Directors and subject to any applicable rules, in
Securities (or any combination of Securities and cash) of equivalent value. All
such repurchases shall be subject to any and all conditions as the Board may
impose and shall be effective as of a date set by the Board after receipt by the
Fund of all eligible written tenders of Units. The amount due to any Member
whose Units are repurchased shall be equal to the net asset value of the Units
repurchased as of the effective date of repurchase, after giving effect to all
allocations to be made to such Member's Capital Account as of such date.
Notwithstanding anything to the contrary in this Agreement, and subject to
compliance with any applicable rules, a Member may be compelled to accept a
distribution of any asset in kind from the Fund despite the fact that the
percentage of the asset distributed to such Member exceeds the percentage of
that asset which is equal to the percentage in which such Member shares in
distributions from the Fund.
Article V
CAPITAL
5.1. CONTRIBUTIONS TO CAPITAL.
(a) The minimum initial contribution of each Member to the capital of the Fund
shall be $50,000 ($25,000 for employees or directors of the Advisor and its
affiliates, and members of their immediate families, and, in the sole discretion
of the Board, attorneys, accountants or other professional advisors engaged on
behalf of the Fund, and members of their immediate families) or such other
amount as the Board may determine from time to time. The amount of the initial
Capital Contribution of each Member shall be recorded by the Fund upon
acceptance as a contribution to the capital of the Fund.
(b) The Members may make additional contributions to the capital of the Fund
effective as of such times and in such amounts as the Board may permit, but no
Member shall be obligated to make any additional contribution to the capital of
the Fund except to the extent provided in Section 5.6 hereof.
(c) An Advisor may make additional contributions to the capital of the Fund
effective as of such times and in such amounts as it may determine. Except as
provided in the Delaware Act, no
21
Advisor shall be required or obligated to make any additional contributions to
the capital of the Fund.
(d) Subject to the provisions of the 1940 Act, and except as otherwise permitted
by the Board, (i) initial and any additional contributions to the capital of the
Fund by any Member shall be payable in cash or in such Securities that the
Board, in its absolute discretion, may agree to accept on behalf of the Fund,
and (ii) initial and any additional contributions in cash shall be payable in
readily available funds at the date of the proposed acceptance of the
contribution. The Fund shall charge each Member making a contribution in
Securities to the capital of the Fund such amount as may be determined by the
Board not exceeding 2% of the value of such contribution in order to reimburse
the Fund for any costs incurred by the Fund by reason of accepting such
Securities, and any such charge shall be due and payable by the contributing
Member in full at the time the contribution to the capital of the Fund to which
such charges relate is due. The value of contributed Securities shall be
determined in accordance with Section 7.3 hereof as of the date of contribution.
(e) The minimum initial and additional contributions set forth in (a) and (b) of
this Section 5.1 may be increased or reduced by the Board.
(f) The Fund shall issue additional Units to Members making additional
contributions. The number of Units shall be determined by dividing the amount of
the additional contribution by the net asset value per Unit as of the date the
contribution is accepted.
5.2. RIGHTS OF MEMBERS TO CAPITAL. No Member shall be entitled to interest on
such Member's contribution to the capital of the Fund, nor shall any Member be
entitled to the return of any capital of the Fund except (i) upon the repurchase
by the Fund of all or a portion of such Member's Units pursuant to Section 4.5
hereof, (ii) pursuant to the provisions of Section 5.6(b) hereof or (iii) upon
the liquidation of the Fund's assets pursuant to Section 6.2 hereof. No Member
shall be liable for the return of any such amounts. To the fullest extent
permitted by applicable law, no Member shall have the right to require partition
of the Fund's property or to compel any sale or appraisal of the Fund's assets.
5.3. CAPITAL ACCOUNTS.
(a) The Fund shall maintain a separate Capital Account for each Member.
(b) Each Member's Capital Account shall have an initial balance equal to the
amount of cash and the value of any Securities (determined in accordance with
Section 7.3 hereof) constituting such Member's initial contribution to the
capital of the Fund.
(c) Each Member's Capital Account shall be increased by the sum of (i) the
amount of cash and the value of any Securities (determined in accordance with
Section 7.3 hereof) constituting additional contributions by such Member to the
capital of the Fund permitted pursuant to Section 5.1 hereof, plus (ii) any
amount credited to such Member's Capital Account pursuant to Sections 5.4
through 5.6 hereof.
(d) Each Member's Capital Account shall be reduced by the sum of (i) the amount
of any repurchase of the Units of such Member or distributions to such Member
pursuant to Sections
22
4.5, 5.10 or 6.2 hereof which are not reinvested, plus (ii) any amounts debited
against such Member's Capital Account pursuant to Sections 5.4 through 5.6
hereof.
(e) In the event all or a portion of the Units of a Member is transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent of the transferred Units.
5.4. ALLOCATION OF NET PROFIT AND LOSS. Subject to Section 5.7 hereof, as of the
last day of each Fiscal Period, any Net Profit or Net Loss for the Fiscal Period
shall be allocated among and credited to or debited against the Capital Accounts
of the Members in accordance with their respective Fund Percentages for such
Fiscal Period.
5.5. ALLOCATION OF CERTAIN WITHHOLDING TAXES AND OTHER EXPENDITURES.
(a) If the Fund incurs a withholding tax or other tax obligation with respect to
the share of Fund income allocable to any Member, then the Board, without
limitation of any other rights of the Fund or the Board, shall cause the amount
of such obligation to be debited against the Capital Account of such Member when
the Fund pays such obligation, and any amounts then or thereafter distributable
to such Member shall be reduced by the amount of such taxes. If the amount of
such taxes is greater than any such distributable amounts, then such Member and
any successor to such Member's Interest shall pay to the Fund as a contribution
to the capital of the Fund, upon demand to the Board, the amount of such excess.
The Board shall not be obligated to cause the Fund to apply for or obtain a
reduction of or exemption from withholding tax on behalf of any Member that may
be eligible for such reduction or exemption; provided that in the event that the
Board determines that a Member is eligible for a refund of any withholding tax,
the Board may, at the request and expense of such Member, cause the Fund to
assist such Member in applying for such refund.
(b) Except as otherwise provided for in this Agreement and unless prohibited by
the 1940 Act, any expenditures payable by the Fund, to the extent determined by
the Board to have been paid or withheld on behalf of, or by reason of particular
circumstances applicable to, one or more but fewer than all of the Members,
shall be charged to only those Members on whose behalf such payments are made or
whose particular circumstances gave rise to such payments. Such charges shall be
debited from the Capital Accounts of such Members as of the close of the Fiscal
Period during which any such items were paid or accrued by the Fund.
5.6. RESERVES.
(a) Appropriate reserves may be created, accrued and charged against Net Assets
and proportionately against the Capital Accounts of the Members for contingent
liabilities, if any, as of the date any such contingent liability becomes known
to the Board or the Advisor, such reserves to be in the amounts which the Board
in its sole discretion deem necessary or appropriate. The Board may increase or
reduce any such reserves from time to time by such amounts as it in its sole
discretion deems necessary or appropriate. The amount of any such reserve, or
any increase or decrease therein, shall be proportionately charged or credited,
as appropriate, to the Capital Accounts of those parties who are Members at the
time when such
23
reserve is created, increased or decreased, as the case may be; provided,
however, that if any such individual reserve item, adjusted by any increase
therein, exceeds the lesser of $500,000 or 1% of the aggregate value of the
Capital Accounts of all such Members, then the amount of such reserve, increase,
or decrease may instead, at the discretion of the Board, be charged or credited
to those parties who were Members at the time, as determined by the Board in its
sole discretion, of the act or omission giving rise to the contingent liability
for which the reserve was established, increased or decreased in proportion to
their Capital Accounts.
(b) If any amount is required by Section 5.6(a) to be charged or credited to a
party who is no longer a Member, such amount shall be paid by or to such party,
as the case may be, in cash, with interest from the date on which the Board
determines that such charge or credit is required. In the case of a charge, the
former Member shall be obligated to pay the amount of the charge, plus interest
as provided above, to the Fund on demand; provided, however, that (i) in no
event shall a former Member be obligated to make a payment exceeding the amount
of such Member's Capital Account at the time to which the charge relates; and
(ii) no such demand shall be made after the expiration of three years from the
date on which such party ceased to be a Member. To the extent that a former
Member fails to pay to the Fund, in full, any amount required to be charged to
such former Member pursuant to paragraph (a), the deficiency shall be charged
proportionately to the Capital Accounts of the Members at the time of the act or
omission giving rise to the charge to the extent feasible, and otherwise
proportionately to the Capital Accounts of the current Members.
5.7. ALLOCATION TO AVOID CAPITAL ACCOUNT DEFICITS. To the extent that any debits
pursuant to Sections 5.4 through 5.6 hereof would reduce the balance of the
Capital Account of any Member below zero, that portion of any such debits
instead shall be allocated to the Capital Accounts of the Members with positive
Capital Account Balances in proportion to such balances. Any credits in any
subsequent Fiscal Period which otherwise would be allocable pursuant to Sections
5.4 through 5.6 hereof to the Capital Account of any Member previously affected
by the application of this Section 5.7 instead shall be allocated to the Capital
Account of the Members allocated debits pursuant to the preceding sentence in
such amounts as are necessary to offset all previous debits attributable to such
Member, pursuant to this Section 5.7, that have not been recovered.
5.8. ALLOCATIONS PRIOR TO CLOSING DATE. Any net cash profits or any net cash
losses realized by the Fund from the purchase or sale of Securities during the
period ending on the day prior to the Closing Date shall be allocated to the
Capital Account of the Advisor. (No unrealized item of profit or loss shall be
allocated pursuant to this Section 5.8 to the Capital Account of any Member.)
5.9. TAX ALLOCATIONS. For each taxable year of the Fund, items of income,
deduction, gain, loss or credit shall be allocated for income tax purposes among
the Members in such a manner as to reflect equitably amounts credited or debited
to each Member's Capital Account for the current and prior taxable years (or
relevant portions thereof). Allocations under this Section 5.9 shall be made
pursuant to the principles of Sections 704(b) and 704(c) of the Code, and in
conformity with Treasury Regulations Sections 1.704-1(b)(2)(iv)(f),
1.704-1(b)(4)(i) and 1.704-3(e) promulgated thereunder, as applicable, or the
successor provisions to such Section and Regulations. Notwithstanding anything
to the contrary in this Agreement, there shall be
24
allocated to the Members such gains or income as shall be necessary to satisfy
the "qualified income offset" requirement of Treasury Regulations Section
1.704-1(b)(2)(ii)(d).
If the Fund realizes net capital gains for Federal income tax purposes for
any taxable year during or as of the end of which one or more Positive Basis
Members (as hereinafter defined) withdraw from the Fund pursuant to Articles IV
or VI hereof, the Board may elect to allocate such net gains as follows: (i) to
allocate such net gains among such Positive Basis Members, pro rata in
proportion to the respective Positive Basis (as hereinafter defined) of each
such Positive Basis Member, until either the full amount of such net gains shall
have been so allocated or the Positive Basis of each such Positive Basis Member
shall have been eliminated, and (ii) to allocate any net gains not so allocated
to Positive Basis Members to the other Members in such manner as shall reflect
equitably the amounts credited to such Members' Capital Accounts.
As used herein, (i) the term "Positive Basis" shall mean, with respect to
any Member and as of any time of calculation, the amount by which the total of
such Member's Capital Account as of such time exceeds such Member's "adjusted
tax basis," for Federal income tax purposes, in such Member's Interest in the
Fund as of such time (determined without regard to any adjustments made to such
"adjusted tax basis" by reason of any transfer or assignment of such Interest,
including by reason of death), and (ii) the term "Positive Basis Member" shall
mean any Member who withdraws from the Fund and who has a Positive Basis as of
the effective date of such Member's withdrawal.
5.10. DISTRIBUTIONS.
(a) The Board may authorize the Fund to make distributions in cash or in kind at
any time to all of the Members on a pro rata basis in accordance with the
Members' Fund Percentages.
(b) The Board may withhold taxes from any distribution to any Member to the
extent required by the Code or any other applicable law. For purposes of this
Agreement, any taxes so withheld by the Fund with respect to any amount
distributed by the Fund to any Member shall be deemed to be a distribution or
payment to such Member, reducing the amount otherwise distributable to such
Member pursuant to this Agreement and reducing the Capital Account of such
Member.
(c) Notwithstanding any provision to the contrary contained in this Agreement,
the Fund and the Board on behalf of the Fund shall not make a distribution to
any Member on account of such Member's Interest in the Fund if such distribution
would violate the Delaware Act or other applicable law.
Article VI
DISSOLUTION AND LIQUIDATION
6.1. DISSOLUTION.
(a) The Fund shall be dissolved if at any time there are no Members or upon the
occurrence of any of the following events:
25
(1) upon the affirmative vote to dissolve the Fund by both (i) the
Directors and (ii) Members holding at least two-thirds of the total
number of votes eligible to be cast by all Members;
(2) upon either of (i) an election by the Advisor to dissolve the Fund or
(ii) an Advisor ceasing to be an adviser of the Fund pursuant to
Section 4.1 hereof (other than in conjunction with a Transfer of the
Interest of an Advisor permitted by Section 4.3 hereof to a person who
is admitted as a substitute Advisor pursuant to Section 2.6(a)
hereof), unless (a) as to the event set forth in clause (ii) above,
there is at least one other adviser of the Fund who is authorized to
and does carry on the business of the Fund, and (b) as to either
event, both the Directors and the Members holding not less than
two-thirds of the total number of votes eligible to be cast by all
Members shall elect within 60 days after such event to continue the
business of the Fund;
(3) upon the failure of Members to approve successor Directors at a
meeting called by the Advisor in accordance with Section 2.9(c) hereof
when no Director remains to continue the business of the Fund; or
(4) upon the expiration of any two-year period which commences on the date
on which any Member has submitted a written notice to the Fund
requesting to tender such Member's entire Interest for repurchase by
the Fund if such Member has not been permitted to do so at any time
during such period; or
(5) as required by operation of law.
Dissolution of the Fund shall be effective on the later of the day on which
the event giving rise to the dissolution shall occur or, to the extent permitted
by the Delaware Act, the conclusion of any applicable 60-day period during which
the Directors and Members may elect to continue the business of the Fund as
provided above, but the Fund shall not terminate until the assets of the Fund
have been liquidated in accordance with Section 6.2 hereof and the Certificate
has been canceled.
(b) Except as provided in Section 6.1(a) hereof, the death, mental illness,
dissolution, termination, liquidation, bankruptcy, reorganization, merger, sale
of substantially all of the stock or assets of, or other change in the ownership
or nature of a Member, the admission to the Fund of a new Member, the withdrawal
of a Member from the Fund, or the transfer by a Member of such Member's Interest
to a third party shall not cause the Fund to dissolve.
6.2. LIQUIDATION OF ASSETS.
(a) Upon the dissolution of the Fund as provided in Section 6.1 hereof, the
Board, acting directly or through a liquidator it selects, shall promptly
liquidate the business and administrative affairs of the Fund, except that if
the Board is unable to perform this function, a liquidator elected by Members
holding a majority of the total number of votes eligible to be cast by all
Members shall promptly liquidate the business and administrative affairs of the
Fund. Net Profit and Net Loss during the period of liquidation shall be
allocated pursuant to Article V hereof. Subject to the Delaware Act, the
proceeds from liquidation (after establishment of appropriate
26
reserves for all claims and obligations, including all contingent, conditional
or unmatured claims and obligations in such amount as the Board or liquidator
shall deem appropriate in its sole discretion as applicable) shall be
distributed in the following manner:
(1) the debts of the Fund, other than debts, liabilities or obligations to
Members, and the expenses of liquidation (including legal and
accounting expenses incurred in connection therewith), up to and
including the date that distribution of the Fund's assets to the
Members has been completed, shall first be paid on a pro rata basis;
(2) such debts, liabilities or obligations as are owing to the Members
shall be paid next in their order of seniority and on a pro rata
basis; and
(3) the Members shall be paid next on a pro rata basis the positive
balances of their respective Capital Accounts after giving effect to
all allocations to be made to such Members' Capital Accounts for the
Fiscal Period ending on the date of the distributions under this
Section 6.2(a)(3).
(b) Anything in this Section 6.2 to the contrary notwithstanding, upon
dissolution of the Fund, subject to the Delaware Act and the priorities set
forth in Section 6.2(a), the Board or other liquidator may distribute ratably
in-kind any assets of the Fund; provided, however, that if any in-kind
distribution is to be made (i) the assets distributed in kind shall be valued
pursuant to Section 7.3 hereof as of the actual date of their distribution and
charged as so valued and distributed against amounts to be paid under Section
6.2(a) above, and (ii) any profit or loss attributable to property distributed
in-kind shall be included in the Net Profit or Net Loss for the Fiscal Period
ending on the date of such distribution. Notwithstanding anything to the
contrary in this Agreement, the Board may compel a Member to accept a
distribution of any asset in-kind from the Fund notwithstanding that the
percentage of the asset distributed to the Member exceeds a percentage of that
asset that is equal to the percentage in which such Member shares in
distributions from the Fund.
Article VII
ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS
7.1. ACCOUNTING AND REPORTS.
(a) The Fund shall adopt for tax accounting purposes any accounting method which
the Board shall decide in its sole discretion is in the best interests of the
Fund. The Fund's accounts shall be maintained in U.S. currency.
(b) After the end of each taxable year, the Fund shall furnish to each Member
such information regarding the operation of the Fund and such Member's Interest
as is necessary for Members to complete Federal and state income tax or
information returns and any other tax information required by federal or state
law.
(c) Except as otherwise required by the 1940 Act, or as may otherwise be
permitted by rule, regulation or order, within 60 days after the close of the
period for which a report required under this Section 7.1(c) is being made, the
Fund shall furnish to each Member a semi-annual report and an annual report
containing the information required by the 1940 Act. The Fund shall cause
27
financial statements contained in each annual report furnished hereunder to be
accompanied by a certificate of independent public accountants based upon an
audit performed in accordance with generally accepted accounting principles. The
Fund may furnish to each Member such other periodic reports as it deems
necessary or appropriate in its discretion.
(d) The Advisor shall notify the Directors of any change in the membership of
the Advisor within a reasonable time after such change.
7.2. DETERMINATIONS BY BOARD.
(a) All matters concerning the determination and allocation among the Members of
the amounts to be determined and allocated pursuant to Article V hereof,
including any taxes thereon and accounting procedures applicable thereto, shall
be determined by the Board unless specifically and expressly otherwise provided
for by the provisions of this Agreement or as required by law, and such
determinations and allocations shall be final and binding on all the Members.
(b) The Board may make such adjustments to the computation of Net Profit or Net
Loss, or any components (withholding any items of income, gain, loss or
deduction) comprising any of the foregoing as it considers appropriate to
reflect fairly and accurately the financial results of the Fund and the intended
allocation thereof among the Members.
7.3. VALUATION OF ASSETS.
(a) Except as may be required by the 1940 Act, the Board shall value or have
valued any Securities or other assets and liabilities of the Fund (other than
assets invested in Portfolio Funds) as of the close of business on the last day
of each Fiscal Period in accordance with such valuation procedures as shall be
established from time to time by the Directors and which conform to the
requirements of the 1940 Act. Assets of the Fund that are invested in Portfolio
Funds managed by Sub-Advisors shall be valued in accordance with the terms and
conditions of the respective agreements of the Portfolio Funds. Assets of the
Fund invested in Portfolio Funds not managed by Sub-Advisors shall be valued at
fair value, which ordinarily will be the net redemption value determined by
their Portfolio Managers in accordance with the policies established by the
relevant Portfolio Fund. In determining the value of the assets of the Fund, no
value shall be placed on the goodwill or name of the Fund, or the office
records, files, statistical data or any similar intangible assets of the Fund
not normally reflected in the Fund's accounting records, but there shall be
taken into consideration any items of income earned but not received, expenses
incurred but not yet paid, liabilities fixed or contingent, and any other
prepaid expenses to the extent not otherwise reflected in the books of account,
and the value of options or commitments to purchase or sell Securities or
commodities pursuant to agreements entered into prior to such valuation date.
(b) The net asset value of each Unit as of any date shall equal the net asset
value of the Fund, determined as provided in Section 7.3(a), divided by the
number of outstanding Units on such date.
(c) Subject to the provisions of the 1940 Act, the value of Securities and other
assets of the Fund and the net asset value of the Fund and the Units determined
pursuant to this Section 7.3
28
shall be conclusive and binding on all of the Members and all parties claiming
through or under them.
Article VIII
MISCELLANEOUS PROVISIONS
8.1. AMENDMENT OF AGREEMENT.
(a) Except as otherwise provided in this Section 8.1, this Agreement may be
amended, in whole or in part, with the approval of (i) the Directors (including
the vote of a majority of the Independent Directors, if required by the 1940
Act), (ii) the Advisor and (iii) a majority (as defined in the 1940 Act) of the
outstanding voting securities of the Fund.
(b) Any amendment that would:
(1) increase the obligation of a Member to make any contribution to the
capital of the Fund;
(2) reduce the Capital Account of a Member other than in accordance with
Article V; or
(3) modify the events causing the dissolution of the Fund;
may be made only if (i) the written consent of each Member adversely
affected thereby is obtained prior to the effectiveness thereof or (ii) such
amendment does not become effective until (A) each Member has received written
notice of such amendment and (B) any Member objecting to such amendment has been
afforded a reasonable opportunity (pursuant to such procedures as may be
prescribed by the Board) to tender such Member's entire Interest for repurchase
by the Fund.
(c) The Board, at any time without the consent of the Members, may:
(1) restate this Agreement together with any amendments hereto which have
been duly adopted in accordance herewith to incorporate such
amendments in a single, integrated document;
(2) amend this Agreement (other than with respect to the matters set forth
in Section 8.1(b) hereof) to effect compliance with any applicable law
or regulation or to cure any ambiguity or to correct or supplement any
provision hereof which may be inconsistent with any other provision
hereof, provided that such action does not adversely affect the rights
of any Member in any material respect; and
(3) amend this Agreement to make such changes as may be necessary or
desirable, based on advice of legal counsel to the Fund, to assure the
Fund's continuing eligibility to be classified for U.S. Federal income
tax purposes as a partnership which is not treated as a corporation
under Section 7704(a) of the Code, subject, however, to the limitation
that any amendment to this Agreement pursuant to Sections 8.1(c)(2) or
(3) hereof shall be valid only if approved by the Directors
29
(including the vote of a majority of the Independent Directors, if
required by the 1940 Act).
(d) The Board shall give prior written notice of any proposed amendment to this
Agreement (other than any amendment of the type contemplated by clause (1) of
Section 8.1(c) hereof) to each Member, which notice shall set forth (i) the text
of the proposed amendment or (ii) a summary thereof and a statement that the
text thereof will be furnished to any Member upon request.
(e) The Board may establish additional classes or series of interests in the
Fund having such rights, privileges and obligations as shall be determined by
the Board consistent with the 1940 Act and the Delaware Act.
8.2. SPECIAL POWER OF ATTORNEY.
(a) Each Member hereby irrevocably makes, constitutes and appoints the Advisor
and each of the Directors, acting severally, and any liquidator of the Fund's
assets appointed pursuant to Section 6.2 hereof with full power of substitution,
the true and lawful representatives and attorneys-in-fact of, and in the name,
place and stead of, such Member, with the power from time to time to make,
execute, sign, acknowledge, swear to, verify, deliver, record, file and/or
publish:
(1) any amendment to this Agreement which complies with the provisions of
this Agreement (including the provisions of Section 8.1 hereof);
(2) any amendment to the Certificate required because this Agreement is
amended, including, without limitation, an amendment to effectuate any
change in the membership of the Fund; and
(3) all other such instruments, documents and certificates which, in the
opinion of legal counsel to the Fund, from time to time may be
required by the laws of the United States of America, the State of
Delaware or any other jurisdiction in which the Fund shall determine
to do business, or any political subdivision or agency thereof, or
which such legal counsel may deem necessary or appropriate to
effectuate, implement and continue the valid existence and business of
the Fund as a limited liability company under the Delaware Act.
(b) Each Member is aware that the terms of this Agreement permit certain
amendments to this Agreement to be effected and certain other actions to be
taken or omitted by or with respect to the Fund without such Member's consent.
If an amendment to the Certificate or this Agreement or any action by or with
respect to the Fund is taken in the manner contemplated by this Agreement, each
Member agrees that, notwithstanding any objection which such Member may assert
with respect to such action, the attorneys-in-fact appointed hereby are
authorized and empowered, with full power of substitution, to exercise the
authority granted above in any manner which may be necessary or appropriate to
permit such amendment to be made or action lawfully taken or omitted. Each
Member is fully aware that each Member will rely on the effectiveness of this
special power-of-attorney with a view to the orderly administration of the
affairs of the Fund.
30
(c) This power-of-attorney is a special power-of-attorney and is coupled with an
interest in favor of the Advisor and each of the Directors, acting severally,
and any liquidator of the Fund's assets, appointed pursuant to Section 6.2
hereof, and as such:
(1) shall be irrevocable and continue in full force and effect
notwithstanding the subsequent death or incapacity of any party granting this
power-of-attorney, regardless of whether the Fund, the Advisor, the Directors or
any liquidator shall have had notice thereof; and
(2) shall survive the delivery of a Transfer by a Member of the whole or
any portion of such Member's Interest, except that where the transferee thereof
has been approved by the Board for admission to the Fund as a substituted
Member, this power-of attorney given by the transferor shall survive the
delivery of such assignment for the sole purpose of enabling the Advisor, the
Directors or any liquidator to execute, acknowledge and file any instrument
necessary to effect such substitution.
8.3. NOTICES. Notices which may or are required to be provided under this
Agreement shall be made to a Member by hand delivery, regular mail (registered
or certified mail return receipt requested in the case of notice to the Board or
the Advisor), commercial courier service, telecopier, or electronic mail (with a
confirmation copy by registered or certified mail in the case of notices to the
Board or the Advisor by telecopier or electronic mail), and shall be addressed
to the respective parties hereto at their addresses as set forth on the books
and records of the Fund (or to such other addresses as may be designated by any
party hereto by notice addressed to the Board in the case of notice given to any
Member, and to each of the Members in the case of notice given to the Board or
the Advisor). Notices shall be deemed to have been provided when delivered by
hand, on the date indicated as the date of receipt on a return receipt or when
received if sent by regular mail, commercial courier service, telecopier or by
electronic mail. A document that is not a notice and that is required to be
provided under this Agreement by any party to another party may be delivered by
any reasonable means.
8.4. AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors, assigns, executors, trustees or other legal representatives,
but the rights and obligations of the parties hereunder may not be Transferred
or delegated except as provided in this Agreement and any attempted Transfer or
delegation thereof which is not made pursuant to the terms of this Agreement
shall be void.
8.5. APPLICABILITY OF 1940 ACT AND FORM N-2. THE PARTIES HERETO ACKNOWLEDGE THAT
THIS AGREEMENT IS NOT INTENDED TO, AND DOES NOT, SET FORTH THE SUBSTANTIVE
PROVISIONS CONTAINED IN THE 1940 ACT AND THE FORM N-2 WHICH AFFECT NUMEROUS
ASPECTS OF THE CONDUCT OF THE FUND'S BUSINESS AND OF THE RIGHTS, PRIVILEGES AND
OBLIGATIONS OF THE MEMBERS. EACH PROVISION OF THIS AGREEMENT SHALL BE SUBJECT TO
AND INTERPRETED IN A MANNER CONSISTENT WITH THE APPLICABLE PROVISIONS OF THE
1940 ACT AND THE FORM N-2.
8.6. CHOICE OF LAW; ARBITRATION.
31
(a) Notwithstanding the place where this Agreement may be executed by any of the
parties hereto, the parties expressly agree that all the terms and provisions
hereof shall be construed under the laws of the State of Delaware, including the
Delaware Act, without regard to the conflict of law principles of such State.
(b) EACH MEMBER AGREES TO SUBMIT ALL CONTROVERSIES ARISING BETWEEN OR AMONG
MEMBERS OR ONE OR MORE MEMBERS AND THE FUND IN CONNECTION WITH THE FUND OR ITS
BUSINESSES OR CONCERNING ANY TRANSACTION, DISPUTE OR THE CONSTRUCTION,
PERFORMANCE OR BREACH OF THIS OR ANY OTHER AGREEMENT, WHETHER ENTERED INTO PRIOR
TO, ON OR SUBSEQUENT TO THE DATE HEREOF, TO ARBITRATION IN ACCORDANCE WITH THE
PROVISIONS SET FORTH BELOW. EACH MEMBER UNDERSTANDS THAT ARBITRATION IS FINAL
AND BINDING ON THE PARTIES AND THAT THE PARTIES ARE WAIVING THEIR RIGHTS TO SEEK
REMEDIES IN COURT, INCLUDING THE RIGHT TO JURY TRIAL.
(c) CONTROVERSIES SHALL BE FINALLY SETTLED BY, AND ONLY BY, ARBITRATION IN
ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION
ASSOCIATION (THE "AAA") TO THE FULLEST EXTENT PERMITTED BY LAW. THE PLACE OF
ARBITRATION SHALL BE NEW YORK, NEW YORK. ANY ARBITRATION HEREUNDER SHALL BE
CONDUCTED BEFORE A PANEL OF THREE ARBITRATORS. THE PARTY OR PARTIES INITIATING
ARBITRATION HEREUNDER SHALL APPOINT ONE ARBITRATOR IN THE DEMAND FOR
ARBITRATION. THE PARTY OR PARTIES AGAINST WHOM ARBITRATION IS SOUGHT SHALL
JOINTLY APPOINT ONE ARBITRATOR WITHIN THIRTY BUSINESS DAYS AFTER NOTICE FROM THE
AAA OF THE FILING OF THE DEMAND FOR ARBITRATION. THE TWO ARBITRATORS NOMINATED
BY THE PARTIES SHALL ATTEMPT TO AGREE ON A THIRD ARBITRATOR WITHIN THIRTY
BUSINESS DAYS OF THE APPOINTMENT OF THE SECOND ARBITRATOR. IF THE TWO
ARBITRATORS FAIL TO AGREE ON THE THIRD ARBITRATOR WITHIN SUCH PERIOD, THEN THE
AAA SHALL APPOINT THE THIRD ARBITRATOR WITHIN THIRTY BUSINESS DAYS FOLLOWING THE
EXPIRATION OF SUCH PERIOD. ANY AWARD RENDERED BY THE ARBITRATORS SHALL BE FINAL
AND BINDING ON THE PARTIES, AND JUDGMENT UPON ANY SUCH AWARD MAY BE ENTERED IN
THE SUPREME COURT OF THE STATE OF NEW YORK AND/OR THE U.S. DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK, OR ANY OTHER COURT HAVING JURISDICTION
THEREOF OR HAVING JURISDICTION OVER THE PARTIES OR THEIR ASSETS. THIS
ARBITRATION AGREEMENT SHALL NOT BE CONSTRUED TO DEPRIVE ANY COURT OF ITS
JURISDICTION TO GRANT PROVISIONAL RELIEF (INCLUDING BY INJUNCTION OR ORDER OF
ATTACHMENT) IN AID OF ARBITRATION PROCEEDINGS OR ENFORCEMENT OF AN AWARD. IN THE
EVENT OF ARBITRATION AS PROVIDED HEREIN, THE ARBITRATORS SHALL BE GOVERNED BY
AND SHALL APPLY THE SUBSTANTIVE (BUT NOT PROCEDURAL) LAW OF DELAWARE, TO THE
EXCLUSION OF THE PRINCIPLES OF THE CONFLICTS OF LAW OF DELAWARE. THE ARBITRATION
SHALL BE CONDUCTED IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THE COMMERCIAL
ARBITRATION RULES OF THE AAA. WHERE THOSE RULES ARE SILENT, THE
32
PROCEDURE SHALL BE AS AGREED BY THE PARTIES, OR IN THE ABSENCE OF SUCH
AGREEMENT, AS ESTABLISHED BY THE ARBITRATORS.
8.7. NOT FOR BENEFIT OF CREDITORS. The provisions of this Agreement are intended
only for the regulation of relations among past, present and future Members and
the Fund. This Agreement is not intended for the benefit of non-Member creditors
and no rights are granted to non-Member creditors under this Agreement.
8.8. CONSENTS. Any and all consents, agreements or approvals provided for or
permitted by this Agreement shall be in writing and a signed copy thereof shall
be filed and kept with the books of the Fund.
8.9. MERGER AND CONSOLIDATION.
(a) The Fund may merge or consolidate with or into one or more limited liability
companies formed under the Delaware Act or other business entities (as defined
in Section 18-209(a) of the Delaware Act) pursuant to an agreement of merger or
consolidation which has been approved in the manner contemplated by Section
18-209(b) of the Delaware Act.
(b) Notwithstanding anything to the contrary contained elsewhere in this
Agreement, an agreement of merger or consolidation approved in accordance with
Section 18-209(b) of the Delaware Act may, to the extent permitted by Section
18-209(b) of the Delaware Act, (i) effect any amendment to this Agreement, (ii)
effect the adoption of a new limited liability company agreement for the Fund if
it is the surviving or resulting limited liability company in the merger or
consolidation, or (iii) provide that the limited liability company agreement of
any other constituent limited liability company to the merger or consolidation
(including a limited liability company formed for the purpose of consummating
the merger or consolidation) shall be the limited liability company agreement of
the surviving or resulting limited liability company.
8.10. PRONOUNS. All pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular or plural, as the identity of the person or persons,
firm or corporation may require in the context thereof.
8.11. CONFIDENTIALITY.
(a) A Member may obtain from the Fund, for any purpose reasonably related to the
Member's Interest in the Fund, such information regarding the affairs of the
Fund as is just and reasonable under the Delaware Act, subject to reasonable
standards (including standards governing what information and documents are to
be furnished, at what time and location and at whose expense) established by the
Board.
(b) Each Member covenants that, except as required by applicable law or any
regulatory body, such Member will not divulge, furnish or make accessible to any
other person the name or address (whether business, residence or mailing) of any
Member (collectively, "Confidential Information") without the prior written
consent of the Board, which consent may be withheld in its sole discretion.
33
(c) Each Member recognizes that in the event that this Section 8.11 is breached
by any Member or any of its principals, partners, members, directors, officers,
employees or agents or any of such Member's affiliates, including any of such
affiliates' principals, partners, members, directors, officers, employees or
agents, irreparable injury may result to the non-breaching Members and the Fund.
Accordingly, in addition to any and all other remedies at law or in equity to
which the non-breaching Members and the Fund may be entitled, such Members also
shall have the right to obtain equitable relief, including, without limitation,
injunctive relief, to prevent any disclosure of Confidential Information, plus
reasonable attorneys, fees and other litigation expenses incurred in connection
therewith. If any non-breaching Member or the Fund determines that any of the
other Members or any of such Member's principals, partners, members, directors,
officers, employees or agents or any of such Member's affiliates, including any
of such affiliates' principals, partners, members, directors, officers,
employees or agents, should be enjoined from or required to take any action to
prevent the disclosure of Confidential Information, each of the other
non-breaching Members agrees to pursue in a court of appropriate jurisdiction
such injunctive relief.
(d) The Board shall have the right to keep confidential from the Members, for
such period of time as the Board deems reasonable, any information which the
Board reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the Board in good faith believes is not in
the best interest of the Fund or could damage the Fund or its business or which
the Fund is required by law or by agreement with a third party to keep
confidential.
8.12. CERTIFICATION OF NON-FOREIGN STATUS. Each Member or transferee of an
Interest from a Member that is admitted to the Fund in accordance with this
Agreement shall certify, upon admission to the Fund and at such other time
thereafter as the Board may request, whether he is a "United States Person"
within the meaning of Section 7701(a)(30) of the Code on forms to be provided by
the Fund, and shall notify the Fund within 30 days of any change in such
Member's status. Any Member who shall fail to provide such certification when
requested to do so by the Board may be treated as a non-United States Person for
purposes of U.S. Federal tax withholding.
8.13. SEVERABILITY. If any provision of this Agreement is determined by a court
of competent jurisdiction not to be enforceable in the manner set forth in this
Agreement, each Member agrees that it is the intention of the Members that such
provision should be enforceable to the maximum extent possible under applicable
law. If any provisions of this Agreement are held to be invalid or
unenforceable, such invalidation or unenforceability shall not affect the
validity or enforceability of any other provision of this Agreement (or portion
thereof).
8.14. ENTIRE AGREEMENT. This Agreement (including any Schedules attached hereto
which are incorporated herein) constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
It is hereby acknowledged and agreed that the Board, without the approval
of any Member, may enter into written agreements with Members, executed
contemporaneously with the admission of such Members to the Fund, affecting the
terms hereof in order to meet certain requirements of such Members. The parties
hereto agree that any terms contained in any such
34
other agreement with a Member shall govern with respect to such Member
notwithstanding the provisions of this Agreement.
8.15. DISCRETION. To the fullest extent permitted by law, whenever in this
Agreement a person is permitted or required to make a decision (i) in its "sole
discretion" or "discretion" or under a grant of similar authority or latitude,
such person shall be entitled to consider only such interests and factors as it
desires, including its own interests, and shall have no duty or obligation to
give any consideration to any interest of or factors affecting the Fund or the
Members, or (ii) in its "good faith" or under another express standard, then
such person shall act under such express standard and shall not be subject to
any other or different standards imposed by this Agreement or any other
agreement contemplated herein or by relevant provisions of law or in equity or
otherwise.
8.16. COUNTERPARTS. This Agreement may be executed in several counterparts, all
of which together shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties have not signed the same counterpart.
THE UNDERSIGNED ACKNOWLEDGES HAVING READ THIS AGREEMENT IN ITS ENTIRETY BEFORE
SIGNING, INCLUDING THE PRE-DISPUTE ARBITRATION CLAUSES SET FORTH IN SECTION 8.6
ON PAGES 31-32 AND THE CONFIDENTIALITY CLAUSES SET FORTH IN SECTION 8.11 ON
PAGES 33-34.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ADVISER:
GLOBAL ASSET MANAGEMENT (USA) INC.
By: /s/ Xxxxxx X. Xxxxxxxx
Name: Xxxxxx X. Xxxxxxxx
Title: Authorized Person
DIRECTORS:
/s/ Xx. Xxxxxxxx Xxxxxxxxx
------------------
Xx. Xxxxxxxx Xxxxxxxxx
/s/ Xxxxxx X. Xxxxxx
------------------
Xxxxxx X. Xxxxxx
/s/ Xxxxxx X. XxXxxxx
------------------
Xxxxxx X. XxXxxxx
35
/s/ Xxxxxx Xxxxxx
------------------
Xxxxxx Xxxxxx
MEMBERS:
Each person who has signed, or has had signed on such person's behalf, a Member
Signature Page, which shall constitute a counterpart hereof.
36
