Exhibit A
OPERATING AGREEMENT
OF
SPECIAL VALUE CONTINUATION FUND, LLC
a Delaware Limited Liability Company
Dated as of July 31, 2006
TABLE OF CONTENTS
Page
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SECTION 1. DEFINED TERMS....................................................1
SECTION 2. LIMITED LIABILITY COMPANY FORMATION AND IDENTIFICATION...........6
2.1 Formation.................................................6
2.2 Name and Place of Business................................6
2.3 Records of Members........................................7
2.4 Limited Liability Company.................................7
SECTION 3. PURPOSE, NATURE OF BUSINESS AND POWERS...........................7
SECTION 4. TERM.............................................................8
SECTION 5. SHARES OF MEMBERSHIP INTEREST....................................8
5.1 Beneficial Interest.......................................8
5.2 Classes and Series........................................8
5.3 Issuance of Shares........................................8
5.4 Rights of Members.........................................9
SECTION 6. REGISTERED OFFICE AND AGENT FOR SERVICE OF PROCESS...............9
SECTION 7. CAPITAL CONTRIBUTIONS............................................9
7.1 Capital Contributions of Members..........................9
7.2 Withdrawal of Capital......................................
SECTION 8. DISTRIBUTIONS...................................................10
8.1 Distributions............................................10
SECTION 9. MANAGEMENT AND BOARD OF DIRECTORS...............................12
9.1 Management Generally.....................................12
9.2 Board of Directors.......................................12
9.3 Expenses of the Company..................................15
9.4 Members' Consent.........................................16
9.5 Exculpation..............................................16
9.6 Indemnification; No Duty of Investigation;
Reliance on Experts.................................17
9.7 Director Limited Liability...............................18
9.8 Certain Other Activities.................................19
SECTION 10. MEMBERS........................................................19
10.1 Identity and Contributions...............................19
10.2 No Management Power or Liability.........................19
10.3 Amendments...............................................20
10.4 Merger, Consolidation, Liquidation.......................21
10.5 List of Members..........................................22
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10.6 Limitations..............................................22
10.7 Meetings.................................................22
10.8 Action Without a Meeting.................................23
10.9 Procedures...............................................23
10.10 Voting...................................................23
SECTION 11. ADMISSION OF ADDITIONAL MEMBERS; ASSIGNMENTS OR TRANSFERS
OF SHARES...........................................25
11.1 Admission of Additional Members..........................25
11.2 Assignments or Transfers of Shares.......................25
SECTION 12. POWER OF ATTORNEY..............................................27
12.1 Appointment of Investment Manager........................27
12.2 Nature of Special Power..................................28
SECTION 13. BOOKS, RECORDS AND REPORTS.....................................28
13.1 Books....................................................28
13.2 Reports..................................................29
SECTION 14. VALUATION OF ASSETS AND INTERESTS..............................30
SECTION 15. BANK ACCOUNTS; CUSTODIAN.......................................30
15.1 Bank Accounts Generally..................................30
15.2 Custodian................................................31
SECTION 16. DISSOLUTION AND TERMINATION OF THE COMPANY.....................31
16.1 Dissolution Generally....................................31
16.2 Continuation of Company..................................31
16.3 Events Causing Dissolution...............................31
16.4 Distribution of Assets on Liquidation....................32
16.5 Liquidation Statement....................................32
16.6 Director's Liability Upon Dissolution or Removal.........32
SECTION 17. GENERAL PROVISIONS.............................................33
17.1 Notices and Distributions................................33
17.2 Survival of Rights.......................................33
17.3 Construction.............................................33
17.4 Section Headings.........................................33
17.5 Agreement in Counterparts................................34
17.6 Governing Law............................................34
17.7 Additional Documents.....................................34
17.8 Severability.............................................34
17.9 Pronouns.................................................34
17.10 Entire Agreement.........................................34
17.11 Arbitration..............................................35
17.12 Waiver of Partition......................................35
17.13 Non-Petition Covenant....................................35
17.14 Filing...................................................35
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Appendix A Statement of Preferences of Series S Preferred Share.....A-1
Appendix B Statement of Preferences of Series Z Preferred Shares....B-1
Appendix C Statement of Preferences of Series A Cumulative
Preferred Shares....................................C-1
Appendix D Form of Notice of Transfer...............................D-1
Appendix E Subscription Agreement...................................E-1
Appendix F Schedule of Members......................................F-1
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SPECIAL VALUE CONTINUATION FUND, LLC
A Delaware Limited Liability Company
OPERATING AGREEMENT
This Operating Agreement, dated as of July 31, 2006 (this
"Agreement"), has been approved by a majority of the Board of Directors of the
Company and the sole Member of the Company in accordance with Section 10.3(b)
of the Operating Agreement and, when executed by Xxxxxx Xxxxxxxxx, as Secretary
of the Company, in accordance with Section 17.14 of the Operating Agreement,
shall be the Operating Agreement of the Company.
Upon the terms and subject to the conditions described below, the
parties to this Agreement, which shall include all Persons becoming Members at
any time, as a condition of becoming and for so long as they remain Members,
agree as follows:
SECTION 1.
DEFINED TERMS
The terms set forth below shall have the indicated meanings.
"Advisers Act" means the Investment Advisers Act of 1940 and the rules
and regulations promulgated thereunder and applicable exemptions granted
therefrom, as amended from time to time.
"Advisory Agreement" means the Investment Management Agreement between
the Company and the Investment Manager, dated on or about the Closing Date, as
such agreement may be amended, modified, revised or restated, from time to
time, in accordance with the terms hereof and thereof, and any substantially
similar agreement with a successor Investment Manager permitted by the terms
hereof and thereof.
"Advisory Fee" means the fee payable to the Investment Manager under
the Advisory Agreement.
"Affiliated Person" has the meaning set forth in the Investment
Company Act.
"Aggregate Capital Contributions" means, with respect to any Member as
of any date, the aggregate amount of all Capital Contributions made by such
Member on or prior to such date.
"Agreement" or "Operating Agreement" means this Operating Agreement,
as originally executed and as amended from time to time.
"Assets" means all cash, Cash Equivalents, securities, investments and
other property and assets of any type of the Company.
"Base Rate" means, on any date, a variable rate per annum equal to the
rate of interest published from time to time by The Wall Street Journal as the
"prime rate" at large U.S. money center banks.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which banks in New York, New York or Los Angeles, California are
required by law to be closed. All references to Business Day herein shall be
based on the time in New York, New York.
"By-Laws" has the meaning set forth in Section 9.2(g).
"Capital Contribution" means a contribution to the Company in cash by
a Member or by any predecessor holder of the Shares held by such Member.
"Cash Equivalents" has the meaning assigned to such term in the Credit
Agreement; provided that if the Credit Agreement is terminated without
replacement, such term shall have the meaning assigned to it in the relevant
Statement of Preferences (or if the Statement of Preferences has been
terminated, those provisions in effect on the date of such termination).
"Certificate" means the Certificate of Formation of the Company, filed
with the Secretary of State on July 17, 2006, and any and all amendments
thereto and restatements thereof filed with the Secretary of State.
"Closing Date" means the date as of which the transactions
contemplated by the Contribution Agreement among Special Value Bond Fund II,
LLC, Special Value Absolute Return Fund, LLC and Special Value Continuation
Partners, L.P. shall have occurred.
"Co-Advisory Agreement" means the Co-Management Agreement among the
Company, the Co-Manager and the Investment Manager, dated on or about the
Closing Date, as such agreement may be amended, modified, revised or restated,
from time to time, in accordance with the terms hereof and thereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
"Co-Manager" means Babson Capital Management, in its capacity as
co-investment manager to the Company and any successor thereto selected in
accordance with the Co-Advisory Agreement and the Investment Company Act.
"Common Member" means a Member holding Common Shares of the Company.
"Common Shares" means the common Shares of membership interests of the
Company having the rights and other terms set forth in this Agreement.
"Company" means Special Value Continuation Fund, LLC, a Delaware
limited liability company, as it may from time to time be constituted.
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"Consent Dividend" shall have the meaning assigned to such term in
Section 8.1(g).
"Credit Agreement" means (a) the Credit Agreement, dated on or about
the Closing Date, by and among the Company, the Portfolio Partnership, certain
lenders party thereto and the arranger and administrative agent therefor, as
the same may be amended, modified, restated, supplemented, refinanced,
extended, refunded or replaced (in whole or in part) (including with lenders
other than the initial lenders) from time to time and (b) any related
agreements or instruments in respect of any amendment, modification,
restatement, supplement, refinancing, extension, refunding or replacement of
senior indebtedness (including one or more replacement credit agreements).
"Custodial Account" means one or more segregated trust accounts
maintained pursuant to the requirements of the Investment Company Act and other
applicable law to hold the Assets.
"Custodian" means an entity which maintains the Custodial Account
pursuant to the requirements of the Investment Company Act and other applicable
law.
"Delaware Act" means the Delaware Limited Liability Company Act (6
Del.C. ss. 18-101, et seq.), as amended from time to time and any successor
thereto.
"Director" means each director of the Company who at the time in
question has been duly elected or appointed and has qualified as a director in
accordance with the provisions hereof and is then in office.
"Disabling Conduct" shall have the meaning set forth in Section 9.5.
"Disinterested Non-Party Directors" shall have the meaning set forth
in Section 9.6.
"Distribution Restriction Event" means (i) a violation of the
Over-Collateralization Test (without giving effect to the grace period provided
therein) under the Credit Agreement, or (ii) an Event of Default under the
Credit Agreement, or (iii) Company Equity (including any outstanding Affiliate
Equity Security) being less than Adjusted Contributed Company Capital under the
Credit Agreement. Terms used in this definition and not defined herein shall
have the meanings given to such terms in the Credit Agreement.
"Fiscal Quarter" means a three calendar month period ending March 31,
June 30, September 30 or December 31 of a Fiscal Year.
"Fiscal Year" means the Company's fiscal year, which shall end on each
December 31 unless otherwise determined by the Board of Directors.
"Incapacity" or "Incapacitated" means, as to any Person, the
bankruptcy, insolvency, death, disability, adjudication of incompetence or
insanity, dissolution or termination, as the case may be, of such Person.
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"Indemnified Person" shall have the meaning assigned to such term in
Section 9.5.
"Independent Director" means a Director that is not an Interested
Person.
"Initial Member" means Xxxxxx Xxxxxxxxx, in his capacity as Initial
Member of the Company.
"Interested Person" has the meaning given to such term in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940 and
the rules and regulations promulgated thereunder and applicable exemptions
granted therefrom, as amended from time to time.
"Investment Manager" means Xxxxxxxxxx Capital Partners, LLC, a
Delaware limited liability company, in its capacity as investment manager to
the Company, and any successor thereto selected in accordance with the Advisory
Agreement and the Investment Company Act.
"Investment Period" means the period commencing on the Closing Date
and ending on July 31, 2016.
"Manager Affiliate" shall have the meaning set forth in Section 9.8.
"Member" means any Person that is admitted as a Common Member,
Preferred Member or Special Member of the Company in accordance with the terms
of this Agreement at the time of reference thereto.
"Net Asset Value" means the value of the Assets less the liabilities
of the Company, calculated pursuant to Section 14 in accordance with generally
accepted accounting principles and in compliance with the Investment Company
Act.
"Offering Memorandum" means the Confidential Private Offering
Memorandum, dated May, 2006, relating to the Common Shares, as amended or
supplemented from time to time.
"Other Accounts" shall have the meaning set forth in Section 9.8.
"Person" means any human being, partnership, limited liability
company, corporation, trust or other entity.
"Portfolio Company" means any Person that has issued any securities or
incurred any obligations that are then owned, or that previously were owned, by
the Company.
"Portfolio Partnership" means Special Value Continuation Partners,
L.P., a Delaware limited partnership, as it may from time to time be
constituted.
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"Preferred Member" means a Member holding Preferred Shares of the
Company.
"Preferred Shares" means the preferred Shares of membership interests
of the Company having the rights and other terms set forth in the Statement of
Preferences for the applicable series thereof, including without limitation any
Series A Preferred Shares, any Series S Preferred Shares and any Series Z
Preferred Shares.
"Secretary of State" means the Secretary of State of the State of
Delaware.
"Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder and applicable exemptions granted therefrom,
as amended from time to time.
"Series A Preferred Shares" means the Series A Cumulative Preferred
Shares of the Company, the Statement of Preferences of which is attached hereto
as Appendix C.
"Shares" means the units of beneficial interest into which the
membership interests of the Company shall be divided from time to time and
includes fractions of Shares as well as whole Shares.
"Special Share" means the Series S Preferred Share provided for
pursuant to Section 5.2 and having the designations, powers, preferences,
voting, conversion and other rights, limitations, qualifications and terms and
conditions set forth in the Statement of Preferences therefor substantially in
the form attached as Appendix A together with such changes as the Directors and
SVOF/MM, LLC shall agree upon.
"Statement of Preferences" means any statement of preferences setting
forth the rights and other terms of any Preferred Shares issued by the Company.
"Subscription Agreement" means each subscription agreement and any
related supplemental subscription agreement executed by any existing or
prospective Member relating to such Member's investment in the Company.
"Substituted Member" means any Person admitted as a Member pursuant to
Section 11.2(b).
"Transaction Documents" has the meaning assigned to such term in the
Credit Agreement.
"Transfer" or "Transferred" means, with respect to any legal or
beneficial interest in the Company, a direct or indirect sale, transfer,
assignment, gift, pledge, hypothecation or other disposition or encumbrance of
any nature of or on such interest, whether by operation of law or otherwise
(including a transfer as a result of a merger or consolidation involving a
Member or a sale of all or substantially all of a Member's assets).
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"Transferee" means, with respect to any legal or beneficial interest
in the Company, the Person to whom the Transferor of such interest desires to
Transfer or has Transferred such interest.
"Transferor" means, with respect to any legal or beneficial interest
in the Company, the Member or other Person desiring to Transfer such interest.
"Treasury Regulations" means the United States Treasury regulations
promulgated under the Code.
"Valuation Date" means (i) the last Business Day of each Fiscal
Quarter, (ii) a date selected by the Company within 48 hours prior to each
issuance (exclusive of Sundays and holidays) of Common Shares by the Company,
(iii) each distribution declaration date (after giving effect to the relevant
declaration), (iv) the date on which the Company terminates, and (v) such other
dates as determined by the Board of Directors, in accordance with the valuation
policies and guidelines approved from time to time by the Board of Directors.
SECTION 2.
LIMITED LIABILITY COMPANY FORMATION AND IDENTIFICATION
2.1 Formation
The Company has been formed as a limited liability company pursuant to
the Delaware Act by the filing of the Certificate with the Secretary of State,
Division of Corporations, in accordance with the Delaware Act on July 17, 2006.
The Company is hereby continued under, and its business and affairs shall be
conducted in accordance with, the Delaware Act, and this Agreement shall be
governed by the laws of the State of Delaware. Common Members shall be admitted
as Members of the Company upon the Closing Date and upon any approved Transfer.
Preferred Members shall be admitted as Members of the Company pursuant to the
provisions of the applicable Statement of Preferences. The designations,
powers, preferences, voting, conversion and other rights, limitations,
qualifications and terms and conditions of the Series A Preferred Shares,
Series S Preferred Shares and Series Z Preferred Shares in the form of the
Statement of Preferences therefor are attached as Appendices C, A and B,
respectively.
2.2 Name and Place of Business
The name of the Company shall be "Special Value Continuation Fund,
LLC" or such other name or names as may be selected by the Investment Manager
from time to time with written notice given to the Members of such change. The
principal office of the Company shall be at the principal place of business of
the Investment Manager at 0000 00xx Xxxxxx, Xxxxx 0000, Xxxxx Xxxxxx,
Xxxxxxxxxx 00000, or other or additional places of business as may be selected
from time to time by the Company.
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2.3 Records of Members
The addresses and schedules of share accounts and other matters
related to the Members shall be those set forth in the Company records. A
Member may change its address by written notice to the Company, in care of the
Investment Manager, at the address set forth in Section 2.2.
2.4 Limited Liability Company
The Company has been formed as a limited liability company under and
pursuant to the Delaware Act. The Board of Directors and the Members
specifically intend and agree that the Company shall, for purposes of the Code
and state tax laws, be classified as a regulated investment company and none of
them shall make any election or take any other action that would cause their
relationship under this Agreement to be excluded from the application of all or
any part of Subchapter M of the Code (or any successor provisions). The Members
specifically intend and agree that the Company shall not be a partnership
(including, but not necessarily limited to, a limited partnership) or any other
venture, but a limited liability company under and pursuant to the Delaware
Act. No Member shall be construed to be a partner in the Company or a partner
of any Member or other Person in the Company, and the Certificate, this
Agreement and the relationships created thereby and arising therefrom shall not
be construed to suggest otherwise. The Members hereby acknowledge and agree
that the Investment Manager and any persons that may be appointed as such by
the Board of Directors or the Investment Manager are "authorized persons"
within the meaning of Section 18-204 of the Delaware Act.
SECTION 3.
PURPOSE, NATURE OF BUSINESS AND POWERS
(a) The purposes of the Company and the business to be carried on by
it, subject to the limitations contained elsewhere in this Agreement, are to
engage in any business lawful for a corporation or partnership formed under the
laws of the State of Delaware, including to act as an investment company.
(b) The Company shall have the power to do any and all acts necessary,
appropriate, proper, advisable, incidental or convenient to or for the
furtherance of the purposes and business described herein and for the
protection and benefit of the Company, and shall have, without limitation, any
and all of the powers of a business corporation or partnership organized under
the laws of the State of Delaware.
(c) All property owned by the Company, real or personal, tangible or
intangible, shall be deemed to be owned by the Company as an entity, and no
Member or Director, individually, shall have any ownership of such property.
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SECTION 4.
TERM
The existence of the Company commenced on the date the Certificate was
filed in the Office of the Secretary of State and shall continue in full force
and effect until the end of the Investment Period, plus up to two one-year
extensions if requested by the Investment Manager and approved by a majority of
the outstanding Shares.
SECTION 5.
SHARES OF MEMBERSHIP INTEREST
5.1 Beneficial Interest
The interest of the Members in the Company hereunder shall be divided
into an unlimited number of shares of membership interest, par value $.001 per
share. All Shares issued in accordance with the terms hereof, including,
without limitation, Shares issued in connection with a dividend in Shares or a
split of Shares, shall be fully paid and nonassessable when the consideration
determined by the Company (if any) therefor shall have been received by the
Company.
5.2 Classes and Series
The Directors shall have the authority, without the approval of any
Members of the Company, to classify and reclassify issued and unissued Shares
into one or more classes and one or more series of any or all of such classes,
each of which classes and series thereof shall have such designations, powers,
preferences, voting, conversion and other rights, limitations, qualifications
and terms and conditions as the Directors shall determine from time to time
with respect to each such class or series; provided, however, that no
reclassification of any issued and outstanding Shares and no modifications of
any of the designations, powers, preferences, voting, conversion or other
rights, limitations, qualifications and terms and conditions of any issued and
outstanding Shares may be made by the Directors without the affirmative vote of
the Shares specified in Section 10.3 to the extent required thereby and the
satisfaction of any conditions to such reclassification as set forth in the
applicable Statement of Preferences. The designations, powers, preferences,
voting, conversion and other rights, limitations, qualifications and terms and
conditions of the Series A Preferred Shares, Series S Preferred Shares and
Series Z Preferred Shares in the form of the Statement of Preferences therefor
are attached as Appendices C, A and B, respectively.
5.3 Issuance of Shares
The Directors, in their discretion, may from time to time without vote
of the Members issue Shares of any class or any series of any such class to
such Person or Persons and for such amount and type of consideration, including
cash or property, at such time or times, and on such terms as the Directors may
determine, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with the assumption of,
8
liabilities) and businesses. The Directors may from time to time divide or
combine the Shares of any class or any series of any such class into a greater
or lesser number without thereby changing the proportionate beneficial interest
in such Shares. Issuances and repurchases of Shares may be made in whole Shares
and/or fractions as the Directors may determine.
5.4 Rights of Members
The Shares shall be personal property giving only the rights in this
Agreement specifically set forth. The ownership of the Assets of every
description is vested in the Company. The right to conduct and supervise the
conduct of the business of the Company is vested exclusively in the Directors
(subject to the right of the Board of Directors to delegate all or any part of
their authority to any person or group of persons, including, without
limitation, the Investment Manager), and the Members shall have no interest
therein other than the beneficial interest conferred by their Shares, and they
shall have no right to call for any partition or division of any property,
profits, rights or interests of the Company nor can they be called upon to
share or assume any losses of the Company or suffer an assessment of any kind
by virtue of their ownership of Shares. No Shares of any class or series shall
entitle the holder to preference, preemptive, appraisal, conversion or exchange
rights (except as otherwise specified in this Agreement or as specified by the
Directors in the designation or redesignation of any such class or series).
SECTION 6.
REGISTERED OFFICE AND AGENT FOR SERVICE OF PROCESS
The Corporation Trust Company is hereby designated, subject to change
by the Investment Manager, as the registered office of the Company and as the
agent upon whom process issued by authority of or under any law of the State of
Delaware may be served.
SECTION 7.
CAPITAL CONTRIBUTIONS
7.1 Capital Contributions of Members
(a) Each prospective initial Common Member, to be admitted as a Member
of the Company at the Closing Date, must deliver to the Investment Manager a
completed, executed Subscription Agreement, which must be satisfactory to the
Investment Manager, and in which, among other things, such prospective Common
Member represents that it is an "accredited investor" as defined in Rule 501(a)
under the Securities Act and a "qualified client" within the meaning of Rule
205-3 of the Advisers Act. On the Closing Date, each initial Common Member
shall be deemed to have contributed to the Company the portion of the Company's
Net Asset Value on the Closing Date attributable to the interest of such Common
Member in Special Value Bond Fund II, LLC and/or Special Value Absolute Return
Fund, LLC that it contributed to the Portfolio Partnership. On the date of
issuance of any Preferred Share, the Person who is admitted as a Member in
respect of such Preferred Share of such series in accordance with the
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applicable Statement of Preferences shall, in connection therewith, contribute
to the Company an amount in cash equal to the purchase price for such Preferred
Share.
7.2 Withdrawal of Capital
No Member shall have any right to withdraw from the Company except in
connection with the admission of one or more Transferees of all of such
Member's Shares in the Company. No Member shall have any right to require the
Company to repurchase or redeem all or any portion of its Shares except as
provided in or pursuant to any Statement of Preferences.
SECTION 8.
DISTRIBUTIONS
8.1 Distributions
(a) The Company shall from time to time distribute among the Shares
(or one or more classes or series thereof) such portion of the net profits,
surplus (including paid-in surplus), capital, or assets held by the Company as
the Directors may deem proper or as may otherwise be determined pursuant to
this Agreement or the Statement of Preferences for class or series, which need
not be ratable with respect to distributions in respect of Shares of any other
class or series thereof of the Company, but must be ratable within each class
or series of Shares. The Preferred Shares shall not be entitled to receive, and
the Directors shall be prohibited from declaring or distributing in respect of
any of the Preferred Shares, any amount in excess of the distributions
specified for such Preferred Shares in the applicable Statement of Preferences
therefor. Such distributions may be made in cash or property (including without
limitation any type of obligations of the Company or any assets thereof) or any
combination thereof. The Directors may delegate any of their powers and
authority in respect of distributions to the Investment Manager or to the
Company's officers.
(b) Distributions may be made to the holders of record of the Shares
entitled to such distribution at the time such distribution is declared or at
such later date as shall be determined by the Company prior to the date of
payment.
(c) The Directors or their delegate may always retain from any source
such amount as they may deem necessary to pay the debts or expenses of the
Company or to meet obligations of the Company, or as they otherwise may deem
desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business of the Company.
(d) Any distribution by the Company pursuant to the terms of this
Section 8.1 or Section 16 to the Person shown on the Company's records as a
Member or to its legal representatives, or to the assignee of the right to
receive such distributions as provided herein, shall relieve the Company, the
Directors and the Investment Manager of all liability to any other Person who
may be interested in such distribution by reason of any Transfer of any
interest in any of such Member's Shares (including a Transfer thereof by
operation of law or by reason of death, incompetence, bankruptcy or liquidation
of such Member, as the case may be).
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(e) Notwithstanding any provision to the contrary contained in this
Agreement, neither the Company, neither the Directors nor the Investment
Manager on behalf of the Company shall make any distribution to a Member on
account of its Shares if such distribution would violate Section 18-607 of the
Delaware Act or other applicable law.
(f) Notwithstanding any other provision of this Agreement, the Company
may set aside reasonable reserves for anticipated liabilities, obligations or
commitments of the Company which it determines to be reasonably necessary or
desirable, in its sole judgment.
(g) Each Common Member agrees, within ten (10) calendar days following
the receipt of each written request from the Company, in the event a
Distribution Restriction Event shall have occurred and is continuing so that
the Company is prevented from making distributions to the Common Members such
that its deduction for dividends paid during the taxable year does not equal at
least ninety-eight percent (98%) of each of (i) the Company's investment
company taxable income (as determined for purposes of Section 852 of the Code)
and (ii) the amount described in Section 852(a)(1)(B) of the Code, to execute
and deliver to the Company, or an agent of the Company specified by the
Company, with respect to any such taxable year, a consent in accordance with
Section 565 of the Code and the Treasury Regulations promulgated thereunder,
and any successor provision, in the manner specified by the Company, to treat
the amount specified by the Company in such request as a dividend (the "Consent
Dividend") for United States federal income tax purposes for the taxable year
indicated by the Company.
(h) In the case that a Common Member reasonably believes that there
may be a withholding tax imposed on a Consent Dividend under the laws of the
United States or any political subdivision thereof, upon the written request of
such Common Member given to the Company within five (5) Business Days of the
written request by the Company for the Consent Dividend forms and documentation
described in Section 8.1(g) hereof, such Common Member shall not be required to
execute or deliver such Consent Dividend forms unless the Company has delivered
to such Common Member a certificate signed by an authorized officer of the
Company stating that the Company has sufficient funds available to make the
payments required and shall make such payments; provided that such Common
Member shall execute and deliver to the Company such Consent Dividend forms and
documentation within five (5) Business Days of the receipt of such certificate.
(i) If it is determined by the Board of Directors that the requisite
consents for a Consent Dividend have not been obtained from the Common Members,
after taking such actions, if any, as the Board of Directors deems appropriate
to enforce the provisions of Section 8.1(g) hereof, but a dividend payment or
distribution would otherwise be required to be made on the Common Shares in
order to preserve the U.S. federal income tax status of the Company as a
regulated investment company or to avoid the imposition of the excise tax under
Section 4982 of the Code, such payment or distribution shall be distributed for
the benefit of the Common Members and deposited into one or more escrow
accounts. If any amounts deposited in the escrow accounts are paid over to the
senior secured creditors of the Company, the Common Members will have an
unsecured, recourse claim against the Company for any such amounts paid to such
senior secured creditors. For United States federal, state and local tax
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purposes, each Common Member agrees to treat its share of any amount so
deposited as a dividend received by such Common Member at the time of such
deposit.
SECTION 9.
MANAGEMENT AND BOARD OF DIRECTORS
9.1 Management Generally
(a) Subject to the voting rights of the Shares, the management of the
Company shall be vested exclusively in the Board of Directors, which shall have
all of the power and authority of a "manager" of the Company within the meaning
of the Delaware Act, including the authority to appoint officers and to
authorize persons to act on behalf of the Company and engage third parties to
provide services to the Company and to perform any permissible activity and is
further authorized to delegate such power and authority to such officers or
authorized Persons as it determines to be appropriate, subject to the
requirements of the Investment Company Act. The Board of Directors may
designate one or more committees each of which shall have all or such lesser
portion of the power and authority of the entire Board of Directors as the
Directors shall determine from time to time, except to the extent that action
by the entire Board of Directors or particular Directors is required by the
Investment Company Act.
(b) Except as expressly set forth herein, the Members, in their
capacity as such, shall have no part in the management of the Company, and
shall have no authority or right to act on behalf of the Company in connection
with any matter. Employees, officers, authorized Persons and agents of the
Company shall have authority to act on behalf and in the name of the Company to
the extent authorized by the Board of Directors or pursuant to authority
granted by it. It is contemplated that the Board of Directors will delegate
substantially all of its power and authority with respect to the operations of
the Company to the Investment Manager and other authorized Persons.
9.2 Board of Directors
(a) Subject to the terms of each Statement of Preferences, the number
of Directors shall be such number, not less than three, as shall be approved
from time to time by a majority of Directors then in office. No reduction in
the number of Directors shall have the effect of removing any Director from
office prior to the expiration of his or her term. An individual nominated as a
Director shall be at least 21 years of age and not older than such age as shall
be approved from time to time by not less than two-thirds of the Directors then
in office and shall not be under legal disability. Directors need not own
Shares and may succeed themselves in office. The names and addresses of the
Directors shall be set forth in the records of the Company.
(b) Any Director may resign as a Director (without need for prior or
subsequent accounting) by an instrument in writing signed by him and delivered
or mailed to the Chairman, if any, the President or the Secretary and such
resignation shall be effective upon such delivery, or at a later date provided
in such instrument. Subject to the rights of the Preferred Shares with respect
to Directors elected solely by the Preferred Shares pursuant to the Investment
12
Company Act, any Director may be removed (provided that the aggregate number of
Directors after such removal shall not be less than the minimum number
specified in Section 9.2(a) hereof) for cause at any time by the act of a
majority of the remaining Directors, specifying the date when such removal
shall become effective. Subject to the rights of the Preferred Shares with
respect to Directors elected solely by the Preferred Shares pursuant to the
Investment Company Act, any Independent Director may be removed (provided that
the aggregate number of Directors after such removal shall not be less than the
minimum number Section 9.2(a) hereof) without cause at any time by the act of
two-thirds of the remaining Directors, and any Director can be removed without
cause by vote of not less than two-thirds of the aggregate number of Shares
entitled to vote in the election of such Director, specifying the date when
such removal shall become effective.
(c) The term of office of a Director shall terminate and a vacancy
shall occur in the event of the removal, resignation, incompetence or other
incapacity to perform the duties of the office, or death, of a Director.
Subject to the rights of the Preferred Shares with respect to Directors elected
solely by the Preferred Shares pursuant to the Investment Company Act and
pursuant to any Statement of Preferences, whenever a vacancy in the Board of
Directors shall occur, the remaining Directors may fill such vacancy by
appointing an individual having the qualifications described in this Agreement
by a written instrument signed or adopted by a majority of the Directors then
in office or by election of the holders of Shares, or may leave such vacancy
unfilled, or may reduce the number of Directors (provided that the aggregate
number of Directors after such removal shall not be less than the minimum
number specified in Section 9.2(a) hereof). Any vacancy created by an increase
in Directors may be filled by the appointment of an individual having the
qualifications described in this Agreement by a majority of the Directors then
in office or by election of the holders of Shares. No vacancy shall operate to
annul this Agreement or to revoke any existing agency created pursuant to the
terms of this Agreement. Whenever a vacancy in the number of Directors shall
occur, until such vacancy is filled as provided herein, the Directors in
office, regardless of their number, shall have all the powers granted to the
Directors and shall discharge all the duties imposed upon the Directors by this
Agreement.
(d) Meetings of the Directors shall be held from time to time upon the
call of the Chairman, if any, the President, the Secretary or any two
Directors. Regular meetings of the Directors may be held without call or notice
at a time and place fixed by resolution of the Directors. Notice of any other
meeting shall be mailed via overnight courier not less than 48 hours before the
meeting or otherwise actually delivered orally or in writing not less than 24
hours before the meeting, but may be waived in writing by any Director either
before or after such meeting. The attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting except where a Director attends a
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting has not been lawfully called or convened. The
Directors may act with or without a meeting. A quorum for all meetings of the
Directors shall be one-third of the Directors then in office. Unless provided
otherwise in this Agreement, any action of the Directors may be taken at a
meeting by vote of a majority of the Directors present (a quorum being present)
or without a meeting by written consent of a majority of the Directors or such
other proportion as shall be specified herein for action at a meeting at which
all Directors then in office are present.
13
(i) Any committee of the Directors may act with or without a
meeting. A quorum for all meetings of any such committee shall be one
third of the members thereof. Unless provided otherwise in this
Agreement, any action of any such committee may be taken at a meeting
by vote of a majority of the members of such committee present (a
quorum being present) or without a meeting by written consent of a
majority of the members of such committee or such other proportion as
shall be specified herein for action at a meeting at which all
committee members are present.
(ii) With respect to actions of the Directors and any
committee of the Directors, Directors who are Interested Persons in
any action to be taken may be counted for quorum purposes under this
Section and shall be entitled to vote to the extent not prohibited by
the Investment Company Act.
(iii) All or any one or more Directors may participate in a
meeting of the Directors or any committee thereof by means of a
conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other;
participation in a meeting pursuant to any such communications system
shall constitute presence in person at such meeting except as
otherwise provided by the Investment Company Act.
(iv) The Directors may, but shall not be required to, elect
a Chairman of the Board of Directors, who shall not, in his or her
capacity as such, be an officer of the Company and who shall serve at
the pleasure of the Board of Directors. Any Chairman of the Board of
Directors elected by the Directors need not be an Independent
Director, unless otherwise required by applicable law.
(e) The Directors shall elect a Chief Executive Officer, a Secretary
and a Chief Financial Officer and any other authorized persons who shall serve
at the pleasure of the Board of Directors or until their successors are
elected. The Directors may elect or appoint or may authorize the Chairman, if
any, or Chief Executive Officer to appoint such other officers or agents or
other authorized persons with such other titles and powers as the Board of
Directors may deem to be advisable. Any Chairman shall, and the Chief Executive
Officer, Secretary and Chief Financial Officer may, but need not, be a
Director.
(f) The Directors and officers shall owe to the Company and the
holders of Shares the same fiduciary duties as owed by directors and officers
of corporations to such corporations and their stockholders under the general
corporation law of the State of Delaware. Directors elected by the holders of
Preferred Shares shall have no special duties to the holders of Preferred
Shares. The Directors shall have exclusive and absolute control over the Assets
and over the business of the Company to the same extent as if the Directors
were the sole owners of the property and business in their own right, but with
such powers of delegation as may be permitted by this Agreement. The Directors
shall have power to engage in any activity not prohibited by Delaware law. The
enumeration of any specific power herein shall not be construed as limiting the
aforesaid power. The Directors may perform such acts as in their sole
discretion are proper for conducting the business of the Company. The powers of
the Directors may be exercised without order of or resort to any court. No
Director shall be obligated to give any bond or other security for the
performance of any of his duties or powers hereunder.
14
(g) The Board of Directors may adopt and from time to time amend or
repeal By-Laws ("By-Laws") for the conduct of the business of the Company. Such
By-Laws shall be binding on the Company and the Members unless inconsistent
with the provisions of this Agreement. The Members shall not have authority to
adopt, amend or repeal By-Laws.
(h) Any determination as to what is in the interests of the Company
made by the Directors in good faith shall be conclusive. In construing the
provisions of this Agreement, the presumption shall be in favor of a grant of
power to the Directors.
(i) The Directors shall have the power, without any amendment to this
Agreement or any Statement of Preferences adopted hereunder, to impose
restrictions on the activities of Members with respect to the Company or any
Portfolio Company to prevent limitations on the Company's ability to invest in
certain industries, such as utilities, communications, gambling, interstate
transportation and insurance. Such limitations shall be binding upon all
Members.
9.3 Expenses of the Company
(a) The Company shall have power to incur and pay out of the Assets or
income of the Company any expenses necessary or appropriate to carry out any of
the purposes of this Agreement, and the business of the Company. The Directors
may pay themselves such compensation as they in good faith may deem reasonable
and may be reimbursed for expenses reasonably incurred by themselves on behalf
of the Company.
(b) The Company shall pay, and shall reimburse the Investment Manager,
the Co-Manager and each of their respective Affiliates for, any costs and
expenses that, in the good faith judgment of the Board of Directors, are
incurred in the formation, financing or operation of the Company, including,
without limitation, the Advisory Fees and other costs and expenses specified
herein or in the Advisory Agreement or the Co-Advisory Agreement to be paid by
the Company; fees and expenses of offering Shares or debt instruments and
enhancing or assuring the credit quality thereof; fees and expenses relating to
short-term investments of cash and investments in Portfolio Companies including
the structuring, negotiation, acquisition,, syndication, holding,
restructuring, recapitalization and disposition thereof or relating to proposed
portfolio investments which are not consummated; reasonable premiums for
insurance protecting the Company, the Investment Manager, the Co-Manager, any
of their respective Affiliates and any of their respective employees and
agents; legal, compliance, administrative, custodial and accounting expenses;
auditing expenses; appraisal expenses; expenses relating to organizing
companies through or in which investments in Portfolio Companies will be made;
expenses incurred in maintaining the places of business of the Company; costs
and expenses of preparing and maintaining the books and records of the Company
and entities through which it invests; costs and expenses that are classified
as extraordinary expenses under generally accepted accounting principles; taxes
or other governmental charges payable by the Company; costs and expenses
incurred in connection with any actual or threatened litigation, and any
judgments or settlements paid in connection with litigation, involving the
Company, a Portfolio Company or a Person entitled to indemnification from the
Company; expenses (including legal fees and expenses) incurred in connection
with the bankruptcy or reorganization of any Portfolio Company; costs of
reporting to the Members, creditors and regulatory authorities; costs of
15
responding to regulatory inquiries; costs of Member meetings and the
solicitation of Member consents; costs incurred in valuing assets; costs of
winding up and liquidating the Company; and interest, distributions and fees
under the Credit Agreement, other indebtedness incurred by the Company and the
Shares.
(c) The Company shall pay, and shall reimburse the Investment Manager,
the Co-Manager and each of their Affiliates for, all legal, tax, accounting and
other expenses (including organizational expenses) incurred in connection with
the Credit Agreement, the Preferred Shares and the formation of the Company and
related entities, and all fees payable to any placement agents in connection
with subscriptions for the Shares and to any other agents, lenders, arrangers
or other Persons in connection with the Credit Agreement and the placement and
sale of the Preferred Shares.
(d) The Company shall pay, and shall reimburse the Co-Manager for, any
reasonable transportation and other travel costs and expenses incurred by the
Co-Manager in connection with making any representative on any investment
committee available for meetings with the other members of such investment
committee.
9.4 Members' Consent
To the fullest extent permitted by law, each Member hereby consents to
the exercise by the Board of Directors and the Investment Manager of the powers
conferred on them by this Agreement.
9.5 Exculpation
No Member shall be subject in such capacity to any personal liability
whatsoever to any Person in connection with the Assets or the acts, obligations
or affairs of the Company. Members shall have the same limitation of personal
liability as is extended to stockholders of a private corporation for profit
incorporated under the general corporation law of the State of Delaware. Except
as otherwise required by law, the Directors, the Investment Manager, the
Co-Manager, and their respective Affiliated Persons, or any officer, director,
member, manager, employee, stockholder, assign, representative or agent
(including the Placement Agents) of any such Person (each an "Indemnified
Person", and collectively, the "Indemnified Persons") shall not be liable,
responsible or accountable in damages or otherwise to the Company, any Member
or any other Person for any loss, liability, damage, settlement cost, or other
expense (including reasonable attorneys' fees) incurred by reason of any act or
omission or any alleged act or omission performed or omitted by such
Indemnified Person (other than solely in such Indemnified Person's capacity as
a Member, if applicable) in connection with the establishment, management or
operations of the Company or the management of the Assets (including in
connection with serving on any creditors' committee or board of directors for
any Portfolio Company ), except that an Indemnified Person shall be liable to
the Company or any Member, as the case may be, if such act or failure to act
arises out of the bad faith, willful misfeasance, gross negligence or reckless
disregard of such Person's duty to the Company or such Member, as the case may
be (such conduct, "Disabling Conduct"). Subject to the foregoing, all such
Persons shall look solely to the Assets for satisfaction of claims of any
nature arising in connection with the affairs of the Company. If any
Indemnified Person is made a party to any suit or proceeding to enforce any
16
such liability, subject to the foregoing exception, such Indemnified Person
shall not, on account thereof, be held to any personal liability.
9.6 Indemnification; No Duty of Investigation; Reliance on Experts
(a) To the fullest extent permitted by applicable law, each of the
Indemnified Persons shall be held harmless and indemnified by the Company (out
of the Assets and not out of the separate assets of any Member) against any
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and reasonable counsel fees reasonably
incurred by such Indemnified Person in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or investigative body in which such
Indemnified Person may be or may have been involved as a party or otherwise
(other than as authorized by the Directors, as the plaintiff or complainant) or
with which such Indemnified Person may be or may have been threatened, while
acting in such Person's capacity as an Indemnified Person, except with respect
to any matter as to which such Indemnified Person shall not have acted in good
faith in the reasonable belief that such Person's action was in the best
interest of the Company or, in the case of any criminal proceeding, as to which
such Indemnified Person shall have had reasonable cause to believe that the
conduct was unlawful, provided, however, that an Indemnified Person shall only
be indemnified hereunder if (i) such Indemnified Person's activities do not
constitute Disabling Conduct and (ii) there has been a determination (a) by a
final decision on the merits by a court or other body of competent jurisdiction
before whom the issue of entitlement to indemnification was brought that such
Indemnified Person is entitled to indemnification or, (b) in the absence of
such a decision, by (1) a majority vote of a quorum of those Directors who are
neither "interested persons" of the Company (as defined in Section 2(a)(19) of
the Investment Company Act) nor parties to the proceeding, that the Indemnified
Person is entitled to indemnification (the "Disinterested Non-Party
Directors"), or (2) if such quorum is not obtainable or even if obtainable, if
such majority so directs, independent legal counsel in a written opinion that
concludes that the Indemnified Person should be entitled to indemnification.
Notwithstanding the foregoing, with respect to any action, suit or other
proceeding voluntarily prosecuted by any Indemnified Person as plaintiff,
indemnification shall be mandatory only if the prosecution of such action, suit
or other proceeding by such Indemnified Person was authorized by a majority of
the Directors. All determinations to make advance payments in connection with
the expense of defending any proceeding shall be authorized and made in
accordance with the immediately succeeding paragraph (b) below.
(b) The Company shall make advance payments in connection with the
expenses of defending any action with respect to which indemnification might be
sought hereunder if the Company receives a written affirmation by the
Indemnified Person of the Indemnified Person's good faith belief that the
standards of conduct necessary for indemnification have been met and a written
undertaking to reimburse the Company unless it is subsequently determined that
he is entitled to such indemnification and if a majority of the Directors
determine that the applicable standards of conduct necessary for
indemnification appear to have been met. In addition, at least one of the
following conditions must be met: (1) the Indemnified Person shall provide
adequate security for his undertaking, (2) the Company shall be insured against
losses arising by reason of any lawful advances, or (3) a majority of a quorum
of the Disinterested Non-Party Directors, or if a majority vote of such quorum
so direct, independent legal counsel in a written opinion, shall conclude,
17
based on a review of readily available facts (as opposed to a full trial-type
inquiry), that there is substantial reason to believe that the Indemnified
Person ultimately will be found entitled to indemnification.
(c) The rights accruing to any Indemnified Person under these
provisions shall not exclude any other right to which he may be lawfully
entitled.
(d) Notwithstanding the foregoing, subject to any limitations provided
by the Investment Company Act and this Agreement, the Company shall have the
power and authority to indemnify Persons providing services to the Company to
the full extent provided by law as if the Company were a corporation organized
under the Delaware General Corporation Law provided that such indemnification
has been approved by a majority of the Directors or, with respect to agreements
to which the Investment Manager is not a party, by the Investment Manager.
(e) No purchaser, lender, transfer agent or other person dealing with
the Directors or with any officer, employee or agent of the Company shall be
bound to make any inquiry concerning the validity of any transaction purporting
to be made by the Directors or by said officer, employee or agent or be liable
for the application of money or property paid, loaned, or delivered to or on
the order of the Directors or of said officer, employee or agent. Every
obligation, contract, undertaking, instrument, certificate, Share and other
security of the Company, and every other act or thing whatsoever executed in
connection with the Company shall be conclusively taken to have been executed
or done by the executors thereof only in their capacity as Directors under this
Agreement or in their capacity as officers, employees or agents of the Company.
The Company may maintain insurance for the protection of the Assets, its
Members, Directors, officers, employees or agents in such amounts as the
Directors shall deem adequate to cover possible liability, and such other
insurance as the Directors in their sole judgment shall deem advisable or is
required by the Investment Company Act.
(f) Each Indemnified Person shall, in the performance of its duties,
be fully and completely justified and protected with regard to any act or any
failure to act resulting from reliance in good faith upon the books of account
or other records of the Company, upon an opinion of counsel, or upon reports
made to the Company by any of the Company's officers or employees or by any
advisor, administrator, manager, distributor, selected dealer, accountant,
appraiser or other expert or consultant selected with reasonable care by the
Directors, officers or employees of the Company, regardless of whether such
counsel or other person may also be a Director.
9.7 Director Limited Liability
Except as otherwise provided by law, the Directors shall not be
obligated personally for any debt, obligation or liability of the Company
solely by reason of being the manager of the Company, and the debt, obligations
and liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company.
18
9.8 Certain Other Activities
The Investment Manager, the Co-Manager and their respective Affiliated
Persons, employees and associates (collectively, the "Manager Affiliates") may
manage funds and accounts other than the Assets ("Other Accounts") that invest
in assets eligible for purchase by the Company. Subject to the requirements of
the Investment Company Act and the Advisers Act, the Manager Affiliates are in
no way prohibited from spending, and may spend, substantial business time in
connection with other businesses or activities, including, but not limited to,
managing Other Accounts, managing investments, advising or managing entities
whose investment objectives are the same as or overlap with those of the
Company, participating in actual or potential investments of the Company or any
Member, providing consulting, merger and acquisition, structuring or financial
advisory services, including with respect to actual, contemplated or potential
investments of the Company, or acting as a director, officer, manager, member
or creditors' committee member of, or adviser to, or participant in, any
corporation, company, limited liability company, trust or other Person. Subject
to the requirements of the Investment Company Act and the Advisers Act, the
Manager Affiliates are in no way prohibited from receiving, and may receive,
fees or other compensation from third parties for any of these activities,
which fees will be for their own account and not for the account of the
Company. Such fees may relate to actual, contemplated or potential investments
of the Company and may be payable by entities in which the Company directly or
indirectly has invested or contemplates investing. Neither the Company nor any
Member shall, by virtue of this Agreement, have any right, title or interest in
or to the businesses or activities permitted by this Section 9.8 or in or to
any fees or consideration derived therefrom. Allocation of investments or
opportunities among the Company and Other Accounts will be made as described in
the Offering Memorandum or as otherwise approved by the Board of Directors in
accordance with the Investment Company Act, the Advisers Act and any exemptive
order obtained from the U.S. Securities and Exchange Commission.
SECTION 10.
MEMBERS
10.1 Identity and Contributions
The names and addresses of the Members, the Shares owned by each
Member and the Capital Contributions of each will be set forth in the Company's
records.
10.2 No Management Power or Liability
Subject to the requirements of the Investment Company Act, except as
otherwise provided herein, the Members as such shall have no right or power to,
and shall not, take part in the management of or transact any business for the
Company, including but not limited to, any acts or decisions relating to
investment activities of the Company, and shall have no power to sign for or
bind the Company. Except as otherwise required by law, no Member, in its
capacity as such, shall be personally liable for any debt, loss, obligation or
liability of the Company. Except to the extent expressly provided in the
preceding sentence, the Company shall indemnify and hold harmless each Member
19
(in its capacity as such) in the event such Member becomes liable for any debt,
loss, obligation or liability of the Company unless such Member has engaged in
fraud, willful misconduct, gross negligence or criminal conduct constituting a
felony with respect to such debt, loss, obligation or liability.
10.3 Amendments
(a) If a vote of the holders of Shares is required by applicable law
or this Agreement to amend this Agreement, or if the Directors determine to
submit an amendment to a vote of the holders of Shares, then, other than with
respect to Sections of this Agreement where a different affirmative vote is
specifically required, this Agreement may be amended, after a majority of the
Directors then in office have approved a resolution therefor, by the
affirmative vote set forth in Section 10.10. Section 10.10 may only be amended,
after a majority of Directors then in office have approved a resolution
therefor, by the affirmative vote of the holders of not less than 75% of the
affected Shares then outstanding. Section 16.7 may only be amended, after a
majority of Directors then in office have approved a resolution therefor, by
the affirmative vote of the holders of not less than 100% of the Series A
Preferred Shares then outstanding. Notwithstanding the foregoing, without the
unanimous approval of all of the Members affected thereby, no such amendment
may:
(i) require any Common Member to make Capital Contributions
in excess of its initial Capital Contribution as of the Closing Date,
require any Member that is not a Common Member to make additional
Capital Contributions in excess of its contractual commitment or
otherwise increase the liability of any Member hereunder; or
(ii) adversely affect distributions to such Member; or
(iii) modify this Section 10.3(a).
(b) Subject to the requirements of the Investment Company Act and
other applicable law, notwithstanding the foregoing provisions of this Section
10.3, the Board of Directors may amend this Agreement, without the consent of
any Member, (i) to change the name of the Company or any class or series of
Shares, (ii) to make any change that does not adversely affect the relative
rights or preferences of any class or series of Shares, (iii) to conform this
Agreement to the requirements of the Investment Company Act or any other
applicable law; (iv) in connection with qualifying the Company to permit
limited liability under the laws of any state; (v) to prevent any material and
adverse effect to any Member or the Company arising from the application of
legal restrictions to any Member, the Investment Manager, the Co-Manager or the
Company, subject to the requirement that the Members not be materially and
adversely affected; (vi) to make any change that is necessary or desirable to
cure any ambiguity or inconsistency, subject to the requirement that the
Members not be materially and adversely affected; (vii) to make any other
changes similar to the foregoing, subject to the requirement that the Members
not be materially and adversely affected; or (viii) to make such conforming
changes as may be necessary to reflect the termination of the Portfolio
Partnership and the assumption by the Company of all of the assets and
obligations of the Portfolio Partnership to the extent not prohibited by
applicable law; provided that the Board of Directors shall not be liable for
failing to do so. Prior to entering into any amendment pursuant to this Section
10.3(b), the Board of Directors shall notify the Members in writing of the
material terms of such amendment. The Board of Directors may reflect in its
20
records changes made in the composition of the Members and their respective
Capital Contributions and Shares in accordance with the provisions of this
Agreement without the consent of the Members.
(c) After any amendment to this Agreement becomes effective, the
Company shall send to the Members a copy of such amendment.
(d) Nothing contained in this Agreement shall permit the amendment of
this Agreement to impair the exemption from personal liability of the Members,
Directors, officers, employees and agents of the Company and their respective
Affiliates, to permit assessments upon Members or to permit the Company to be
converted at any time from a "closed-end investment company" to an "open-end
investment company" as those terms are defined by the Investment Company Act or
a company obligated to repurchase shares under Rule 23c-3 of the Investment
Company Act.
(e) An amendment duly adopted by the requisite vote of the Board of
Directors and, if required, Members as aforesaid, shall become effective at the
time of such adoption or at such other time as may be designated by the Board
of Directors or Members, as the case may be. A certification signed by a
majority of the Directors or the Secretary setting forth an amendment and
reciting that it was duly adopted by the Directors and, if required, Members as
aforesaid, or a copy of the Agreement, as amended, and executed by a majority
of the Directors or the Secretary, shall be conclusive evidence of such
amendment when lodged among the records of the Company or at such other time
designated by the Directors.
(f) Notwithstanding any other provision hereof, until such time as
Shares are issued and outstanding, this Agreement may be terminated or amended
in any respect by the affirmative vote of a majority of the Directors or by an
instrument signed by a majority of the Directors then in office.
(g) Notwithstanding anything to the contrary contained herein, no
holder of Shares of any class or series, other than to the extent expressly
determined by the Directors with respect to Shares qualifying as preferred
stock pursuant to Section 18(a) of the Investment Company Act, shall have any
right to require the Company or any person controlled by the Company to
purchase any of such holder's Shares.
10.4 Merger, Consolidation, Liquidation
Subject to the provisions of the Investment Company Act and other
applicable law, the Company may merge or consolidate with any other entity, or
sell, lease or exchange all or substantially all of the Assets upon approval by
two-thirds of the Directors then in office and the affirmative vote of not less
than two-thirds of the outstanding Shares. Notwithstanding the foregoing, the
Portfolio Partnership shall automatically be merged into the Company and
terminate its existence at such times as, pursuant to receipt of no-action or
other appropriate relief from the Securities and Exchange Commission or its
staff, the board of directors is able to authorize issuance of the Series S
Preferred Shares to the general partner of the Portfolio Partnership. Each
Member, upon becoming a Member, consents to such merger, including the exchange
by each holder of preferred limited partner interests of the Portfolio
21
Partnership for an equivalent amount of Preferred Shares having substantially
similar terms and the exchange of the general partner interest of the general
partner of the Portfolio Partnership for the share or shares of Series S
Preferred Shares, to the extent any consent of Members would be required
therefor. Such merger shall occur on the basis of the net asset value of the
Common Shares, the liquidation preference of the Preferred Shares and the
amount of indebtedness outstanding under the Credit Agreement and in accordance
with the requirements of Rule 17a-8 under the Investment Company Act. No Member
shall have any rights of redemption or appraisal in connection with any such
merger.
10.5 List of Members
A list of the names and addresses of all Members (to the extent known
to the Company) shall be made available to any Member or its representative for
inspection and, at the Member's cost, copying upon written request and at
reasonable times to the extent required by the Investment Company Act with
respect to trusts for any purpose.
10.6 Limitations
No Member shall have the right or power to (i) bring an action for
partition against the Company; (ii) cause the termination or dissolution of the
Company, except as set forth in this Agreement; or (iii) demand property other
than cash with respect to any distribution and then only in accordance with the
terms of this Agreement. For the avoidance of doubt, Members shall not have the
power provided for in Section 18-801(a)(3) of the Delaware Act, and the Company
may only be dissolved pursuant to the terms of this Agreement. Except to the
extent required for a Delaware business corporation, the Members shall have no
power to vote as to whether or not a court action, legal proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Company or the Members.
10.7 Meetings.
(a) The Company may, but shall not be required to, hold annual
meetings of the holders of any class or series of Shares. An annual or special
meeting of Members may be called at any time only by the Directors or by
Members in accordance with the requirements of the Investment Company Act
applicable to trusts. Any meeting of Members shall be held within or without
the State of Delaware on such day and at such time as the Directors shall
designate.
(b) Notice of all meetings of Members, stating the time, place and
purposes of the meeting, shall be given by the Directors by mail to each Member
of record entitled to vote thereat at its registered address, mailed at least
10 days before the meeting or otherwise in compliance with applicable law.
Except with respect to an annual meeting, at which any business required by the
Investment Company Act may be conducted, only the business stated in the notice
of the meeting shall be considered at such meeting. Any adjourned meeting may
be held as adjourned one or more times without further notice not later than
130 days after the record date. For the purposes of determining the Members who
are entitled to notice of and to vote at any meeting the Directors may, without
closing the transfer books, fix a date not more than 100 days prior to the date
of such meeting of Members as a record date for the determination of the
Persons to be treated as Members of record for such purposes.
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10.8 Action Without a Meeting
Any action that may be taken at a meeting of the Members may be taken
without a meeting if a consent in writing setting forth the action to be taken
is signed by Members owning not less than the minimum percentage of the Shares
of the Members that would be necessary to authorize or take such action at a
meeting at which all the Members were present and voted, and notice of the
action taken is provided to each Member. Any such written consent must be filed
with the records of the meetings of the Members.
10.9 Procedures
A Member shall be entitled to cast votes: (i) at a meeting, in person,
by written proxy or by a signed writing directing the manner in which its vote
is to be cast, which writing must be received by the Company at or prior to the
commencement of the meeting, or (ii) without a meeting, by a signed writing
directing the manner in which its vote is to be cast, which writing must be
received by the Company at or prior to the time and date on which the votes are
to be counted. Except as otherwise herein specifically provided, all procedural
matters relating to the holding of meetings of Members or taking action by
written consent, whether noticed or solicited by the Company or others,
including, without limitation, matters relating to the date for the meeting or
the counting of votes by written consent, the time period during which written
consents may be solicited, minimum or maximum notice periods, record dates,
proxy requirements and rules relating to the conduct of meetings or the
tabulation of votes, shall be as reasonably established by the Directors. To
the extent not otherwise provided by the Board of Directors pursuant to Section
10.10 or otherwise, the laws of the State of Delaware pertaining to the
validity and use of proxies regarding the shares of business corporations shall
govern the validity and use of proxies given by Members.
10.10 Voting
(a) Members shall have no power to vote on any matter except matters
on which a vote of Shares is required by or pursuant to the Investment Company
Act, a Statement of Preferences, this Agreement, the By-Laws or any resolution
of the Directors. Any matter required to be submitted for approval of any of
the Shares and affecting one or more classes or series shall require approval
by the required vote of Shares of the affected class or classes and series
voting together as a single class and, if such matter affects one or more
classes or series thereof differently from one or more other classes or series
thereof or from one or more series of the same class, approval by the required
vote of Shares of such other class or classes or series or series voting as a
separate class shall be required in order to be approved with respect to such
other class or classes or series or series; provided, however, that except to
the extent required by the Investment Company Act and any Statement of
Preferences, there shall be no separate class votes on the election or removal
of Directors or the selection of auditors for the Company. Members of a
particular class or series thereof shall not be entitled to vote on any matter
that affects the rights or interests of only one or more other classes or
series of such other class or classes or only one or more other series of the
same class. There shall be no cumulative voting in the election or removal of
Directors.
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(b) The holders of one-third of the outstanding Shares of the Company
on the record date present in person or by proxy shall constitute a quorum at
any meeting of the holders for purposes of conducting business on which a vote
of all Members of the Company is being taken. The holders of one-third of the
outstanding Shares of a class or classes on the record date present in person
or by proxy shall constitute a quorum at any meeting of the holders of such
class or classes for purposes of conducting business on which a vote of holders
of such class or classes is being taken. The holders of one-third of the
outstanding Shares of a series or series on the record date present in person
or by proxy shall constitute a quorum at any meeting of the holders of such
series or series for purposes of conducting business on which a vote of holders
of such series or series is being taken. Shares underlying a proxy as to which
a broker or other intermediary states its absence of authority to vote with
respect to one or more matters shall be treated as present for purposes of
establishing a quorum for taking action on any such matter only to the extent
so determined by the Directors at or prior to the meeting of holders of Shares
at which such matter is to be considered and shall not be treated as present
for purposes of voting or any other purpose except as determined by the
Directors.
(c) Subject to any provision of the Investment Company Act, any
Statement of Preferences or this Agreement specifying or requiring a greater or
lesser vote requirement for the transaction of any matter of business at any
meeting of Members or, in the absence of any such provision of the Investment
Company Act, any Statement of Preferences or this Agreement, subject to any
provision of the By-Laws or resolution of the Directors specifying or requiring
a greater or lesser vote requirement, (i) the affirmative vote of a plurality
(or, if provided by the By-Laws, a majority) of the Shares present in person or
represented by proxy and entitled to vote for the election of any Director or
Directors shall be the act of such Members with respect to the election of such
Director or Directors, (ii) the affirmative vote of a majority of the Shares
present in person or represented by proxy and entitled to vote on any other
matter who vote on such matter shall be the act of the Members with respect to
such matter, and (iii) where a separate vote of one or more classes or series
is required on any matter, the affirmative vote of a majority of the Shares of
such class or classes or series or series present in person or represented by
proxy and entitled to vote on such matter who vote on such matter shall be the
act of the Members of such class or classes or series or series with respect to
such matter.
(d) At any meeting of Members, any holder of Shares entitled to vote
thereat may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Secretary, or with such other
officer or agent of the Company as the Secretary may direct, for verification
prior to the time at which such vote shall be taken. Pursuant to a resolution
of a majority of the Directors, proxies may be solicited in the name of one or
more Directors or one or more of the officers or employees of the Company. Only
Members of record shall be entitled to vote. Each full Share shall be entitled
to one vote and each fractional Share shall be entitled to a vote equal to its
fraction of a full Share. When any Share is held jointly by several persons,
any one of them may vote at any meeting in person or by proxy in respect of
such Share, but if more than one of them shall be present at such meeting in
person or by proxy, and such joint owners or their proxies so present disagree
as to any vote to be cast, such vote shall not be received in respect of such
Share. A proxy purporting to be given by or on behalf of a Member of record on
the record date for a meeting shall be deemed valid unless challenged at or
prior to its exercise, and the burden of proving invalidity shall rest on the
challenger. If the holder of any such Share is a minor or a person of unsound
24
mind, and subject to guardianship or to the legal control of any other person
as regards the charge or management of such Share, he may vote by his guardian
or such other person appointed or having such control, and such vote may be
given in person or by proxy. The Directors shall have the authority to make and
modify from time to time regulations regarding the validity of proxies. In
addition to signed proxies, such regulations may authorize facsimile,
telephonic, Internet and other methods of appointing a proxy that are subject
to such supervision by or under the direction of the Directors as the Directors
shall determine.
SECTION 11.
ADMISSION OF ADDITIONAL MEMBERS;
ASSIGNMENTS OR TRANSFERS OF SHARES
11.1 Admission of Additional Members
No additional Members will be admitted after the Closing Date, except
as provided in Sections 5.2, 7.1 and 11.2.
11.2 Assignments or Transfers of Shares
(a) In no event shall all or any part of a Member's Preferred Shares
be Transferred, and any such purported Transfer shall be void and shall not be
recognized by the Company, unless all of the conditions set forth in the
applicable Statement of Preferences with respect thereto have been satisfied.
In no event shall all or any part of a Member's Common Shares be Transferred,
and any such purported Transfer shall be void and shall not be recognized by
the Company or the Members, unless all of the following conditions are
satisfied:
(i) The Transferor, if requested by the Company in its sole
discretion, has delivered to the Company an opinion of counsel
reasonably acceptable to the Company that such Transfer (A) would not
violate the Securities Act or any state blue sky laws (including any
investor suitability standards) and, (B) would not result in the
breach of any agreement to which the Company is a party or by which it
or any of the Assets is bound;
(ii) The Transferor has demonstrated to the reasonable
satisfaction of the Company that the Transferee is both an "accredited
investor" as defined in Rule 501(a) under the Securities Act and a
"qualified client" within the meaning of Rule 205-3 of the Advisers
Act;
(iii) The Company has received a notice of Transfer signed
by both the Transferor and Transferee, such notice to be substantially
in the form of Appendix D attached hereto (or such other document
specified in the applicable Statement of Preferences); and
(iv) the Company consents in writing to such Transfer (which
consent may be withheld in the Company's reasonable discretion).
25
(b) Provided the foregoing conditions are met, the Transferee may
become a Substituted Member if and only if, with respect to Preferred Shares,
any requirements set forth in the relevant Statement of Preferences are
satisfied and, with respect to Common Shares, each of the following conditions
is satisfied:
(i) The Company has consented in writing to the substitution
(which consent may be withheld in the Company's reasonable discretion
with respect to Transfers of Common Shares only if the transfer
conditions described above have not been met or have not been waived);
(ii) The Transferor and Transferee execute, acknowledge and
deliver such instruments as the Company deems necessary, appropriate
or desirable to effect such substitution, including the written
acceptance and adoption by the Transferee of this Agreement; and
(iii) The Transferee agrees to bear all of the Company's
expenses and costs incurred in connection with the Transfer and
substitution, including legal fees and filing fees.
Upon the satisfaction of the conditions set forth in this Section
11.2(b), the Company shall record on the books and records of the Company the
Substituted Member as a Member of the Company.
(c) A Transferee, legal representative or successor in interest of a
Member shall be subject to all of the restrictions upon a Member provided in
this Agreement.
(d) A Transferee of Shares who desires to make a further Transfer
shall be subject to all of the provisions of this Section 11 to the same extent
and in the same manner as a Member making the initial Transfer.
(e) Notwithstanding anything to the contrary in this Agreement, the
Company may elect (in the Company's sole discretion) to treat a Transferee who
has not become a Substituted Member as a Member in the place of the Transferor
should it determine such treatment to be in the best interests of the Company.
(f) Upon the Incapacity of an individual Member, such Member's
personal representative or other successor in interest shall have such rights
as the Incapacitated Member possessed to constitute a successor as a Transferee
of its Shares and to join with such Transferee in making application to
substitute such Transferee as a Member, all as provided in Sections 11.2(a) and
(b).
(g) Upon the Incapacity of a Member other than an individual, the
authorized representative of such entity shall have such rights as such entity
possessed to constitute a successor as a Transferee of its Shares and to join
with such Transferee in making application to substitute such Transferee as a
Member, all as provided in Sections 11.2(a) and (b).
(h) A Person who acquires Shares or an interest therein but is not
admitted to the Company as a Substituted Member pursuant to Section 11.2(b)
shall (i) in the case of a Person acquiring Common Shares or an interest
26
therein who does not satisfy Section 11.2(a)(ii), obtain no rights whatsoever
in the Company, such Transfer shall be void as between such Person and the
Company and the Company shall have the absolute right in its sole discretion to
Transfer such Common Shares to any Person who does satisfy Section 11.2(a)(ii)
for such consideration as the Company deems sufficient in the circumstances and
to remit to such Person who acquired such Common Shares in violation of this
Agreement such portion of such consideration not in excess of 75% thereof as
the Company receives in complete satisfaction of such Person's interest in the
Company and (ii) in the case of a Person acquiring Preferred Shares or an
interest therein, be entitled only to the allocations and distributions with
respect to such Shares in accordance with this Agreement or relevant Statement
of Preferences but shall have no right to any information or accounting of the
affairs of the Company and shall not have any voting or other rights of a
Member under this Agreement or relevant Statement of Preferences; provided,
however, that such Person described in this clause (ii) shall be entitled to
receive such information and accountings as shall be consented to by the
Company, which consent shall not be unreasonably withheld. A Substituted Member
shall succeed to all the rights and be subject to all the obligations of the
Transferor Member in respect of the Shares or other interest as to which it was
substituted.
SECTION 12.
POWER OF ATTORNEY
12.1 Appointment of Investment Manager
Each Member, by becoming a Member, makes, constitutes and appoints the
Investment Manager as its true and lawful attorney-in-fact, in its name, place
and stead, with full power to do any of the following:
(a) Execute on its behalf, file and record this Agreement and all
amendments to this Agreement made and otherwise approved in accordance with
Section 10.3 or otherwise made in accordance with the terms of this Agreement;
(b) Prepare, execute on its behalf, verify, file and record amendments
to this Agreement made in accordance with the terms of this Agreement or to the
books and records of the Company reflecting (i) a change of the name or
location of the principal place of business of the Company, (ii) a change of
the name or address of any Member, (iii) the addition of Members, (iv) the
disposal by a Member of its Shares in any manner, (v) a Person becoming or
ceasing to be a Member of the Company, (vi) the exercise by any Person of any
right or rights hereunder, (vii) the correction of typographical or similar
errors, (viii) any amendments made in accordance with Section 10.3, and (ix)
any amendment and restatement of this Agreement reflecting such amendments;
(c) Prepare, execute on its behalf and record any amendments to the
Certificate that the Investment Manager may deem advisable or necessary;
(d) Prepare, execute on its behalf, file and record any other
agreements, certificates, instruments and other documents required to continue
the Company, to admit Substituted Members, to liquidate and dissolve the
27
Company in accordance with Section 16, to comply with applicable law, and to
carry out the purposes of clauses (a) and (b) above, to the extent consistent
with this Agreement; and
(e) Take any further action that the Investment Manager shall consider
advisable in connection with the exercise of the authority granted in this
Section 12.1.
12.2 Nature of Special Power
The power of attorney granted under this Section 12 is a special power
of attorney coupled with an interest, is irrevocable and may be exercised by
the Investment Manager by listing all of the Members executing any agreement,
certificate, instrument or document with a single signature of such
attorney-in-fact acting as attorney-in-fact for all of them. The power of
attorney shall survive and not be affected by the Incapacity of a Member and
shall survive and not be affected by the Transfer by a Member of the whole or a
portion of its Shares, except where the Transfer is of all of the Shares and
the Transferee thereof with the consent of the Company is admitted as a
Substituted Member; provided, however, that this power of attorney shall
survive such Transfer for the sole purpose of enabling any such
attorney-in-fact to effect such substitution. This power of attorney does not
supersede any part of this Agreement, nor is it to be used to deprive any
Member of its rights hereunder. It is intended only to facilitate the execution
of documents and the carrying out of other procedural or ministerial functions.
SECTION 13.
BOOKS, RECORDS AND REPORTS
13.1 Books
(a) The Company shall maintain books and records required by law for
the Company at its principal office, which shall be in the United States, and
each Member shall have the right to inspect, examine and copy such books and
records at reasonable times and upon reasonable notice for the purposes
required by the Investment Company Act relating to trusts or as authorized by
the Directors or their delegate. All such books and records may be in
electronic format, including the register of Members and all capital account
and accounting records. Upon the request of a Member, the Company shall
promptly deliver to the requesting Member, at the expense of the Company, a
copy of any information which the Company is required by law to so provide in
paper or electronic format. Notwithstanding the foregoing inspection rights or
any other provision of this Section 13, the Company shall be entitled to keep
confidential from the Members certain information as and to the extent
permitted by Section 18-305(c) of the Delaware Act and the Investment Company
Act.
(b) A register shall be kept at the Company or any transfer agent duly
appointed by or under the direction of the Directors which shall contain the
names and addresses of the Members and the number of Shares held by them
respectively and a record of all authorized transfers thereof. Separate
registers shall be established and maintained for each class and each series of
each class. Each such register shall be conclusive as to who are the holders of
the Shares of the applicable class and series and who shall be entitled to
receive dividends or distributions or otherwise to exercise or enjoy the rights
of Members. No Member shall be entitled to receive payment of any dividend or
28
distribution, nor to have notice given to him as herein provided, until he has
given his address to a transfer agent or such other officer or agent of the
Directors as shall keep the register for entry thereon. Except as otherwise
provided in any Statement of Preferences, it is not contemplated that
certificates will be issued for the Shares; however, the Company may authorize
the issuance of share certificates and promulgate appropriate fees therefor and
rules and regulations as to their use.
(c) The Company shall have power to employ a transfer agent or
transfer agents, and a registrar or registrars, with respect to the Shares. The
transfer agent or transfer agents may keep the applicable register and record
therein, the original issues and transfers, if any, of the said Shares.
(d) Shares shall be transferable on the records of the Company only by
the record holder thereof or by its agent thereto duly authorized in writing,
upon delivery to the Company or a transfer agent of the Company of a duly
executed instrument of transfer, together with such evidence of the genuineness
of each such execution and authorization and of other matters as may reasonably
be required, including satisfaction of any or all of the requirements of
Section 11.2(a) or (b) for the addition or substitution of the Transferee as a
Member. Upon such delivery and satisfaction of such requirements the transfer
shall be recorded on the applicable register of the Company. Until such record
is made, the Member of record shall be deemed to be the holder of such Shares
for all purposes hereof and none of the Company, the Directors, any transfer
agent or registrar or any officer, employee or agent of the Company shall be
affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Member, or otherwise by operation of
law, shall be recorded on the applicable register of Shares as the holder of
such Shares upon production of the proper evidence thereof to the Directors or
a transfer agent of the Company, but until such record is made, the Member of
record shall be deemed to be the holder of such for all purposes hereof, and
neither the Directors nor any transfer agent or registrar nor any officer or
agent of the Company shall be affected by any notice of such death, bankruptcy
or incompetence, or other operation of law.
13.2 Reports
(a) The Company shall prepare and send to Members to the extent and in
the form required by the Investment Company Act and other applicable law or any
exchange on which Shares are listed a report of operations containing financial
statements of the Company prepared in conformity with generally accepted
accounting principles and applicable law and a schedule setting forth the
investments of the Company. Common Members shall receive quarterly reports of
operations.
(b) Within 60 days after the end of each Fiscal Year, the Company
shall communicate in writing to each Member (i) such information as is
necessary to complete such Member's United States federal and state income tax
or information returns and (ii) annual financial statements audited by an
accounting firm of national reputation.
29
(c) Further, the Directors may, in their sole and absolute discretion,
cause to be prepared (i) such reports or other information as may be necessary
with respect to any Member's qualification for the benefit of any income tax
treaty or provision of law reducing or eliminating any withholding or other tax
or governmental charge with respect to any Assets and (ii) such other reports
and financial statements of the Company as the Directors deem appropriate for
informing the Members about the operations of the Company.
The Company shall promptly distribute to the Members notice of the
occurrence of any Default or Event of Default (as defined in the Credit
Agreement) under the Credit Agreement.
(d) To the extent that the Company has access thereto and in
recognition of the various Members' obligations to comply with certain
regulatory requirements, the Company will also provide to each Member, with
reasonable promptness, such other data and information concerning the Company
or Company activities in response to a request by any applicable governmental
or regulatory agency as from time to time a Member may reasonably request. If
the Company is bound by confidentiality obligations with respect to any
information so requested, then the Company shall not be obligated to provide
such information. A Member shall, at the request of the Company, enter into a
confidentiality agreement relating to such information.
SECTION 14.
VALUATION OF ASSETS AND INTERESTS.
The value of the Assets of the Company, the amount of liabilities of
the Company, the Net Asset Value, and the Net Asset Value of each outstanding
Common Share of the Company shall be determined on each Valuation Date in
accordance with generally accepted accounting principles and the Investment
Company Act. The method of determination of Net Asset Value shall be determined
by or under the supervision of the Board of Directors. The making of Net Asset
Value determinations and calculations may be delegated by the Board of
Directors.
SECTION 15.
BANK ACCOUNTS; CUSTODIAN
15.1 Bank Accounts Generally
Subject to the requirements of the Investment Company Act, all funds
received by the Company may be deposited in one or more Custodial Accounts in
the name of the Company at the Custodian. Subject to Section 15.2,
disbursements therefrom may be made by the Company in conformity with the
purposes of this Agreement and the requirements of the Investment Company Act.
The Company may designate from time to time those Persons authorized to execute
checks and other items on the Company bank accounts. The funds of the Company
shall not be commingled with the funds of any other Person.
30
15.2 Custodian
(a) The Company shall appoint one or more Custodians to hold the
Assets of the Company in one or more separately identified Custodial Accounts
or multiparty arrangements in accordance with the Advisory Agreement, the
Co-Advisory Agreement, the Credit Agreement, any Statement of Preferences, the
Custodial Agreement and the Pledge and Intercreditor Agreement (each as defined
in the Credit Agreement to the extent not defined herein) and in compliance
with the requirements of the Investment Company Act and other applicable law.
The Custodian shall at all times be responsible for the physical custody of the
Assets of the Company and for the collection of interest, dividends and other
income attributable to the Assets of the Company. The Company will direct the
Custodian to accept settlement instructions issued by the Investment Manager
and authorized Persons in accordance with the requirements of the Investment
Company Act.
(b) Nothing contained in this Agreement shall be construed to
authorize or require the Board of Directors or the Investment Manager to take
or receive physical possession of any Asset of the Company or to take any
action in violation of law, it being understood that the Custodian shall solely
be responsible for the safekeeping of the Assets and the consummation of all
such purchases, sales and deliveries of the Assets in accordance with this
Agreement and the Advisory Agreement, the Co-Advisory Agreement, the Credit
Agreement, any Statement of Preferences, the Custodial Agreement and the Pledge
and Intercreditor Agreement and in compliance with the requirements of the
Investment Company Act and other applicable law.
SECTION 16.
DISSOLUTION AND TERMINATION OF THE COMPANY
16.1 Dissolution Generally
Except as provided in this Agreement, no Member shall have the right
to cause any dissolution of the Company before expiration of its term.
16.2 Continuation of Company
The Company shall not be dissolved or terminated by the Incapacity of
any Member as such, the Transfer by any Member of its Shares or the admission
of a new or substituted Director or Member, and the existence and business of
the Company shall be continued notwithstanding the occurrence of any such
event.
16.3 Events Causing Dissolution
Subject to the restriction on liquidation set forth in Section 16.7,
the Company may be dissolved prior to the time set forth in Article 4 after
two-thirds of the Directors then in office have approved a resolution therefor,
upon approval by Shares having at least 75% of the votes of all of the Shares
outstanding on the record date for such meeting, voting as a single class
except to the extent required by the Investment Company Act.
31
16.4 Distribution of Assets on Liquidation
(a) In liquidating the Company, the Company will make distributions in
cash, in kind, or partly in cash and partly in kind as the Investment Manager,
under the supervision of the Board of Directors, may, in its sole discretion,
determine; provided, however, that any distribution made partly in cash and
partly in kind shall be pro rata among the Members in proportion to their
interests to the extent reasonably practicable and if not reasonably
practicable, in such non-pro rata manner as is determined by the Investment
Manager, under the supervision of the Board of Directors, to be fair and
equitable; provided, further, that the Investment Manager will use reasonable
efforts to make all distributions in kind, if any, in the form of freely
tradable securities. The Investment Manager need not distribute all of the
Assets at once, but may make partial distributions and shall not be required to
redeem the Preferred Shares prior to making any liquidating distribution in
respect of the Common Shares so long as the Company has set aside liquid assets
in excess of liabilities sufficient to pay the liquidation preference and all
accumulated and unpaid distributions of the Preferred Shares.
(b) In connection with the liquidation of the Company, the Assets
(after paying or otherwise providing for the claims of creditors of the
Company, the Advisory Fees, claims by the Board of Directors, the Investment
Manager, the Co-Manager or their respective Affiliated Persons for expenses of
the Company paid by any of them, any other liabilities of the Company and
reasonable reserves for any anticipated or contingent liabilities or
obligations and all accumulated and unpaid distributions on Preferred Shares)
shall be distributed to the Members in accordance with Section 8.1.
16.5 Liquidation Statement
(a) Upon compliance by the Company with all applicable requirements
for dissolution, the Members shall cease to be such and the Company shall
execute, acknowledge and cause to be filed a Certificate of Cancellation of the
Company or other appropriate documents evidencing its dissolution and winding
up.
(b) Notwithstanding anything to the contrary contained herein, if the
Board of Directors has been removed or resigned and the Company has been
dissolved, any Member or other Person appointed by the Members may act as
liquidating trustee for the Company during the winding up period, and receive
reasonable compensation for such activity, all as approved by the Members
holding Shares that represent a majority of the outstanding Shares.
16.6 Director's Liability Upon Dissolution or Removal
None of the Directors shall be personally liable for the return of all
or any part of the contributions of the Members to the Company or for any other
distributions to be made by the Company. Any such return or distributions shall
be made solely from the Assets.
32
SECTION 17.
GENERAL PROVISIONS
17.1 Notices and Distributions
Except as otherwise provided herein, any notice, distribution, offer
or other communication which may be given to any Member in connection with the
Company or this Agreement shall be duly given if reduced to writing and:
(a) if to any Member, when personally delivered, or if sent by mail,
postage prepaid, overnight courier or facsimile transmission, when actually
received at the last address furnished by such Member pursuant to Section 2.3
for notice purposes at the time of such mailing, overnight courier or facsimile
transmission; and
(b) if to the Company or the Board of Directors, sent to 0000 00xx
Xxxxxx, Xxxxx 0000, Xxxxx Xxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxx X.
Xxxxxxxxx with a copy to the Investment Manager, 0000 00xx Xxxxxx, Xxxxx 0000,
Xxxxx Xxxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxx X. Xxxxxxxxx, personally
delivered or if sent by mail, overnight courier or facsimile transmission when
actually received at the address of the Company or the Board of Directors,
respectively, set forth above or at such other address as the Company or the
Board of Directors, respectively, may then have specified pursuant to the terms
of this Agreement.
All distributions to the Members shall be made to the extent
practicable by wire transfer to the accounts specified by the Members, which
accounts may be changed from time to time by written notice to the Company.
17.2 Survival of Rights
This Agreement shall be binding upon and, as to permitted or accepted
successors, Transferees and assigns, inure to the benefit of the Members and
the Company and their respective heirs, legatees, legal representatives,
successors, Transferees and permitted assigns, in all cases whether by the laws
of descent and distribution, merger, consolidation, sale of assets, operation
of law, or otherwise.
17.3 Construction
The language in all parts of this Agreement shall be in all cases
construed simply according to its fair meaning and not strictly for or against
any Person.
17.4 Section Headings
The captions of the sections in this Agreement are for convenience
only and shall not be used in construing or interpreting this Agreement.
33
17.5 Agreement in Counterparts
This Agreement and any amendments hereto may be executed and delivered
by facsimile and in multiple counterparts, each of which shall be deemed an
original agreement and all of which shall constitute one and the same
agreement, notwithstanding the fact that all Members are not signatories to the
original or the same counterpart.
17.6 Governing Law
This Agreement has been executed by or on authority of a majority of
the Directors and the rights of all parties and the validity and construction
of every provision hereof shall be subject to and construed according to the
internal laws, and not the laws pertaining to choice or conflict of laws, of
the State of Delaware, and reference shall be specifically made to the general
corporation law of the State of Delaware as to the construction of matters not
specifically covered herein or as to which an ambiguity exists, although such
law shall not be viewed as limiting the powers otherwise granted to the
Directors hereunder and any ambiguity shall be viewed in favor of such powers.
17.7 Additional Documents
Each Member, upon the request of the Company, agrees to perform all
further acts and execute, acknowledge and deliver all further documents which
may be reasonably necessary, appropriate or desirable to carry out the
provisions of this Agreement, including but not limited to, acknowledging
before a Notary Public any signature heretofore or hereafter made by a Member.
17.8 Severability
Should any portion or provision of this Agreement be declared illegal,
invalid or unenforceable in any jurisdiction, then such portion or provision
shall be deemed to be severable from this Agreement to the extent practicable
while preserving the economic intention of the parties and, in any event, such
illegality, invalidity or unenforceability shall not affect the remainder
hereof.
17.9 Pronouns
All pronouns and defined terms and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as
the identity of the Persons referred to may require.
17.10 Entire Agreement
This Agreement, the Statements of Preferences adopted pursuant hereto
and the Subscription Agreements executed and delivered by the Members (i)
constitute the entire Agreement of the Members with respect to the Company and
(ii) supersede all prior or contemporaneous written or oral agreements,
understandings or negotiations with respect to the Company. The parties hereto
34
acknowledge that the ability of the Members and of the Company to take certain
of the actions contemplated hereby may be limited by the terms of the Credit
Agreement and the Statements of Preferences to the extent provided therein.
17.11 Arbitration
To the extent permitted by law, any dispute relating to this Agreement
or the Company which cannot be amicably resolved among the parties to such
dispute shall be resolved by binding arbitration conducted in Los Angeles,
California in accordance with the rules of the American Arbitration Association
then prevailing, and the decisions of the arbitrators shall be final and
binding on all the parties. The costs of the arbitration (other than fees and
expenses of counsel, which shall be the responsibility of the parties retaining
such counsel) shall be allocated among the parties as determined by the
arbitrator.
17.12 Waiver of Partition
Each Member hereby irrevocably waives and forfeits any and all rights
that it may have, whether arising under contract or statute or by operation of
law, to maintain an action for partition of the Company or any of the Assets.
17.13 Non-Petition Covenant
Each Member hereby agrees not to cause the filing of a petition in
bankruptcy against the Company for any reason until at least 367 days (or, if
longer, the preference period then in effect under applicable federal and state
law) after the termination of the Credit Agreement (without any replacement
thereof).
17.14 Filing
This Agreement and any amendment (including any supplement) hereto
shall be filed in such places as may be required or as the Company deem
appropriate. Each amendment shall be accompanied by a certificate signed and
acknowledged by an authorized Person stating that such action was duly taken in
a manner provided herein, and shall, upon insertion in the Company's minute
book, be conclusive evidence of all amendments contained therein. A restated
Agreement, containing the original Agreement as amended by all amendments
theretofore made, may be executed from time to time by an authorized Person and
shall, upon insertion in the Company's minute book, be conclusive evidence of
all amendments contained therein and may thereafter be referred to in lieu of
the original Agreement and the various amendments thereto.
35
IN WITNESS WHEREOF, the Secretary of the Company has hereunto
set his hands as of the date first written above.
SECRETARY:
-----------------------------
Xxxxx X. Xxxxxxxxx
S-1
COMMON MEMBERS:
Those Persons subscribing for
Common Shares and admitted as
Members by the Investment Manager:
By: Xxxxxxxxxx Capital Partners, LLC
By:
---------------------------------
Name:
Title:
S-2
APPENDIX A
Statement of Preferences of Series S Preferred Share
A-1
APPENDIX B
Statement of Preferences of Series Z Preferred Shares
B-1
APPENDIX C
Statement of Preferences of Series A Preferred Shares
C-1
APPENDIX D
Form of Notice of Transfer
D-1
Appendix E
Subscription Agreement
E-1
Appendix F
Schedule of Members
F-1
