Exhibit (25)(2)(a)(2)
OPERATING AGREEMENT
GROSVENOR REGISTERED MULTI-STRATEGY
FUND, (TI 1), LLC
The interests in Grosvenor Registered Multi-Strategy Fund (TI 1), LLC issued
pursuant to this Operating Agreement have not been registered under the
Securities Act of 1933, or under the securities or "Blue Sky" laws of any state
or other jurisdiction, and may not be sold or transferred unless they are
registered under the Securities Act of 1933, and any other applicable securities
or "Blue Sky" laws, or unless an exemption from such registration is available.
Such interests are subject to the restrictions on transfer set forth in this
Agreement.
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS........................................................................ 1
ARTICLE 2 - GENERAL PROVISIONS................................................................. 1
SECTION 2.1. Formation of the Limited Liability Company................................. 1
SECTION 2.2. Fund Name.................................................................. 1
SECTION 2.3. Purposes of the Fund....................................................... 1
SECTION 2.4. Fiscal Year................................................................ 1
SECTION 2.5. Ownership of Interests..................................................... 2
SECTION 2.6. Status of Interests and Limitation of Personal Liability................... 2
ARTICLE 3 - MANAGEMENT OF THE FUND............................................................. 2
SECTION 3.1. Board of Directors......................................................... 2
SECTION 3.2. Reliance by Third Parties.................................................. 6
SECTION 3.3. Advisory, Management and Distribution Contracts............................ 6
SECTION 3.4. Indemnification, etc....................................................... 7
SECTION 3.5. Compensation and Limitation of Liability of Directors...................... 10
ARTICLE 4 - MEMBERS' RIGHTS, VOTING POWERS AND MEETINGS........................................ 11
SECTION 4.1. No Management or Control................................................... 11
SECTION 4.2. Voting Powers.............................................................. 11
SECTION 4.3. Meetings................................................................... 11
SECTION 4.4. Quorum and Required Vote................................................... 12
SECTION 4.5. Action by Written Consent.................................................. 12
SECTION 4.6. Record Dates............................................................... 12
SECTION 4.7. Investors' Rights to Records............................................... 13
SECTION 4.8. Additional Provisions...................................................... 13
ARTICLE 5 - ADMISSION OF INVESTORS; CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS; ALLOCATIONS....... 13
SECTION 5.1. Admission of Investors; Capital Contributions.............................. 13
SECTION 5.2. Rights of Investors to Capital............................................. 14
SECTION 5.3. Capital Accounts........................................................... 14
SECTION 5.4. Allocation of Net Profit and Net Loss...................................... 15
SECTION 5.5. Incentive Allocation....................................................... 15
SECTION 5.6. Allocation of Special Items................................................ 16
SECTION 5.7. Tax Allocations............................................................ 16
SECTION 5.8. Reserves................................................................... 17
SECTION 5.9. Allocation of Organizational Expenses...................................... 17
SECTION 5.10. Distributions.............................................................. 17
ARTICLE 6 - TRANSFERS AND REPURCHASES.......................................................... 17
SECTION 6.1. Transfer of Interests of Investors......................................... 17
SECTION 6.2. Withdrawal and Expulsion of Investors...................................... 18
SECTION 6.3. Repurchase of Interests.................................................... 19
SECTION 6.4. Conversion to Open-End Management Investment Company....................... 21
ARTICLE 7 - TERM AND DISSOLUTION OF THE FUND................................................... 21
SECTION 7.1. Term....................................................................... 21
SECTION 7.2. Events Not Causing Dissolution............................................. 21
ARTICLE 8 - LIQUIDATION OF THE FUND............................................................ 21
ARTICLE 9 - ACCOUNTING AND REPORTING PROVISIONS................................................ 22
SECTION 9.1. Books and Accounts......................................................... 22
SECTION 9.2. Tax Elections.............................................................. 22
SECTION 9.3. Tax Matters Partner........................................................ 22
SECTION 9.4. Valuation of Assets........................................................ 22
ARTICLE 10 - MISCELLANEOUS PROVISIONS.......................................................... 23
SECTION 10.1. Principal Place of Business; Registered Agent and Office................... 23
SECTION 10.2. Force Majeure.............................................................. 23
SECTION 10.3. Applicable Law............................................................. 23
SECTION 10.4. Waivers.................................................................... 23
SECTION 10.5. Construction............................................................... 23
SECTION 10.6. Amendments................................................................. 24
SECTION 10.7. Execution.................................................................. 24
SECTION 10.8. Binding Effect............................................................. 24
SECTION 10.9. Severability............................................................... 24
SECTION 10.10. Confidential Information................................................... 24
SECTION 10.11. Power of Attorney.......................................................... 25
APPENDIX A
Definitions................................................................................. A-1
GROSVENOR REGISTERED MULTI-STRATEGY FUND (TI 1), LLC
AMENDED AND RESTATED OPERATING AGREEMENT
This Operating Agreement (as in effect from time to time, the "AGREEMENT")
of Grosvenor Registered Multi-Strategy Fund (TI 1), LLC (the "FUND") is made and
entered into by and among those persons and entities listed on the counterpart
signature pages hereto as Investors.
ARTICLE 1 - DEFINITIONS
For purposes of this Agreement, capitalized terms shall have the meanings
set forth in APPENDIX A hereto.
ARTICLE 2 - GENERAL PROVISIONS
SECTION 2.1. FORMATION OF THE LIMITED LIABILITY COMPANY
The Fund was formed by the filing of its Certificate of Formation in the
Office of the Secretary of State of the State of Delaware pursuant to the
Delaware Act on October 26, 2009. The Board of Directors shall have the
authority to amend, correct and/or restate the Certificate of Formation from
time to time as determined in its sole discretion or as required by vote of the
Investors and to execute and file any other instruments, documents or
certificates in any other jurisdiction deemed necessary or appropriate by the
Fund or its counsel to effectuate, implement or continue the valid existence and
business of the Fund.
SECTION 2.2. FUND NAME
The name of the Fund shall be "Grosvenor Registered Multi-Strategy Fund (TI
1), LLC" or such other name as the Board of Directors shall designate. All
business of the Fund shall be conducted under the Fund name.
SECTION 2.3. PURPOSES OF THE FUND
The principal purposes of the Fund are as follows: to acquire, hold, sell
and generally deal or invest in Securities; to exercise all rights, powers,
privileges and other incidents of ownership or possession with respect to
Securities held or owned by the Fund from time to time; and to engage in any
business related thereto or useful in connection therewith. Subject to approval
by the Board of Directors, the Fund may pursue its investment objective by
investing substantially all of its assets in another investment fund that has
the same investment objective and substantially the same investment policies as
the Fund.
SECTION 2.4. FISCAL YEAR
The fiscal year of the Fund (the "FISCAL YEAR") shall be the period
commencing on the Closing Date and ending on the first March 31st following the
closing, and thereafter each period
commencing on April 1 of each year and ending on the earlier of (i) March 31 of
such year and (ii) the termination of the Fund.
SECTION 2.5. OWNERSHIP OF INTERESTS
The ownership of Interests shall be recorded on the books of the Fund or a
transfer or similar agent for the Fund. No certificates certifying the ownership
of Interests shall be issued except as the Board of Directors may otherwise
determine from time to time.
SECTION 2.6. STATUS OF INTERESTS AND LIMITATION OF PERSONAL LIABILITY
Interests shall be deemed to be personal property giving only the rights
provided in this instrument. Ownership of Interests shall not entitle the
Investors to any title in or to the whole or any part of Fund property or right
to call for a partition or division of the same or for an accounting, nor shall
the ownership of Interests constitute the Investors partners of each other.
Neither the Fund nor the Board of Directors, nor any officer, employee or agent
of the Fund, shall have any power to bind personally any Investor, nor, except
as specifically provided herein, to call upon any Investor for the payment of
any sum of money or assessment whatsoever other than such as the Investor may at
any time personally agree to pay.
ARTICLE 3 - MANAGEMENT OF THE FUND
SECTION 3.1. BOARD OF DIRECTORS
(a) The management and operation of the Fund and its business and affairs
shall be, and hereby is, vested solely in a board of managers (the "BOARD OF
DIRECTORS"), and the Persons constituting the Board of Directors shall be the
"managers" of the Company for all purposes of the Delaware Act (each, a
"DIRECTOR," and collectively, the "DIRECTORS"), and in no event shall any
Investor as such have any role in the management of the Fund's affairs. Subject
to any voting powers of one or more classes of Interests as set forth in this
Operating Agreement or in the Bylaws or by resolution of the Board of Directors,
the Board of Directors shall be governed as set forth in this Section 3.1. The
number of Directors shall be fixed by the Board of Directors, provided that
subsequent to the Closing Date, there shall be not less than three Directors.
Any vacancies occurring in the Board of Directors may be filled by the Board of
Directors if, immediately after filling any such vacancy, at least two-thirds of
the Directors then holding office shall have been elected to such office by the
Investors (exclusive of the Special Members). In the event that at any time less
than a majority of the Directors then holding office were elected to such office
by the Investors, the Board of Directors shall call a meeting of Investors in
accordance with the provisions of Section 4.3 for the purpose of electing
Directors. Each Director elected by the Investors or by the Board of Directors
shall serve until the next meeting of Investors called for the purpose of
electing Directors and until the election and qualification of his or her
successor or until he or she sooner dies, resigns or is removed. The initial
Directors, each of whom shall serve until the first meeting of Investors at
which Directors are elected and until his or her successor is elected or
qualified, or until he or she sooner dies, resigns or is removed, shall be Xxxx
Xxxxx, Xxxx X. Xxxxx XX, Xxxxxx X. Xxxxxxx, Xx., Xxxxxxx X. Xxxxxx and Xxxxxx X.
Xxxxxx and such other persons as the Director or Directors then in office shall,
prior to the Closing Date, appoint. By vote of a majority of the Directors then
in office, the Board of
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Directors may remove a Director with or without cause. At any meeting of
Investors called for the purpose, a Director may be removed, with or without
cause, by vote of the Investors (other than the Special Members) representing in
the aggregate at least two-thirds of the combined Capital Account balances of
all the Investors (other than the Special Members). Any Director may resign at
any time by written instrument signed by him or her and delivered to any officer
of the Fund or to a meeting of the Board of Directors. Such resignation shall be
effective upon receipt unless specified to be effective at some other time.
Except to the extent expressly provided in a written agreement with the Fund, no
Director resigning and no Director removed shall have any right to any
compensation for any period following his resignation or removal, or any right
to damages on account of such removal.
(b) Subject to the provisions of this Agreement, the business of the Fund
shall be managed by the Board of Directors, and it shall have all powers
necessary or convenient to carry out that responsibility including the power to
engage in Securities transactions of all kinds on behalf of the Fund. Without
limiting the foregoing, the Board of Directors may adopt Bylaws not inconsistent
with this Agreement providing for the regulation and management of the affairs
of the Fund and may amend and repeal them to the extent that such Bylaws do not
reserve that right to the Investors; they may, subject to Section 3.1(a), remove
from their number with or without cause; they may, subject to Section 3.1(a),
fill vacancies in their number (including any vacancies created by an increase
in the number of Directors and any vacancies created by the removal of a
Director); they may elect and remove such officers and appoint and terminate
such agents as they consider appropriate; they may appoint from their own number
and terminate one or more committees consisting of two or more Directors which
may exercise the powers and authority of the Board of Directors to the extent
that the Directors determine; they may employ one or more custodians of the
assets of the Fund and may authorize such custodians to employ subcustodians and
to deposit all or any part of such assets in a system or systems for the central
handling of Securities or with a Federal Reserve Bank; they may retain a
transfer agent or a shareholder servicing agent, or both; they may provide for
the distribution of Interests by the Fund, through one or more principal
underwriters or otherwise; they may set record dates for the determination of
the eligibility of Investors to vote with respect to various matters; and in
general they may delegate such authority as they consider desirable to any
officer of the Fund, to any committee of the Board of Directors and to any agent
or employee of the Fund or to any such custodian or underwriter.
Without limiting the foregoing, the Board of Directors shall have power and
authority:
(i). To invest and reinvest cash, and to hold cash uninvested;
(ii). To sell, exchange, lend, pledge, mortgage, hypothecate, lease or
write options with respect to or otherwise deal in any property rights
relating to any or all of the assets of the Fund;
(iii). To vote or give assent, or exercise any rights of ownership,
with respect to stock or other Securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the
Board of Directors shall deem proper, granting to such person or persons
such power and discretion with relation to Securities or property as the
Board of Directors shall deem proper;
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(iv). To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of Securities;
(v). To hold any Security or property in a form not indicating any
ownership by the Fund, whether in bearer, unregistered or other negotiable
form, or in their own name or in the name of a custodian or subcustodian or
a nominee or nominees or otherwise;
(vi). To allocate assets, liabilities and expenses of the Fund among
the Capital Accounts of the Investors;
(vii). To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer of any
Security which is held by the Fund; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer; and
to pay calls or subscriptions with respect to any Security held by the
Fund;
(viii). To join with other Security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that connection
to deposit any Security with, or transfer any Security to, any such
committee, depositary or trustee, and to delegate to them such power and
authority with relation to any Security (whether or not so deposited or
transferred) as the Board of Directors shall deem proper, and to agree to
pay, and to pay, such portion of the expenses and compensation of such
committee, depositary or trustee as the Board of Directors shall deem
proper;
(ix). To pay, extend, renew, modify, adjust, submit to arbitration,
prosecute, defend or compromise, upon such terms as it may determine and
upon such evidence as it may deem sufficient, any debt, obligation, suit,
liability, cause of action or claim, including taxes, either in favor of or
against the Fund;
(x). To enter into, form, own, invest in and acquire shares of or
interests in joint ventures, general or limited partnerships and any other
combinations or associations, including the power and authority to pursue
the investment objective of the Fund by investing in a Master Fund;
(xi). To borrow funds or other property;
(xii). To endorse or guarantee the payment of any notes or other
obligations of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;
(xiii). To purchase and pay for entirely out of Fund property such
insurance as the Board of Directors may deem necessary or appropriate for
the conduct of the Fund's business, including without limitation insurance
policies insuring the assets of the Fund and payment of distributions and
principal on its portfolio investments, and insurance policies insuring the
Investors, Directors, officers, employees, agents, Advisers or Subadvisers,
principal underwriters or independent contractors of the Fund individually
against all claims and liabilities of every nature arising by reason of
holding, being or
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having held any such office or position, or by reason of any action alleged
to have been taken or omitted by any such person as Director, officer,
employee, agent, Adviser or Subadviser, principal underwriter or
independent contractor, including any action taken or omitted that may be
determined to constitute negligence, whether or not the Fund would have the
power to indemnify such person against liability;
(xiv). To pay pensions as deemed appropriate by the Board of Directors
and to adopt, establish and carry out pension, profit-sharing, share bonus,
share purchase, savings, thrift and other retirement, incentive and benefit
plans, trusts and provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Directors, officers, employees and agents
of the Fund;
(xv). To enter into forward commitments, futures contracts and swap
contracts and to buy and sell options on futures contracts or swap
contracts and to buy and or to enter into transactions with respect to any
other Securities or derivative instruments;
(xvi). To make such filings under the Delaware Act as may be necessary
or desirable to give effect to the provisions of this Agreement or any
amendments thereto;
(xvii). To exercise such further rights and powers incidental or
related to any or all of the foregoing or as may be necessary or desirable
in connection with the conduct of the Fund's business and to carry out its
purposes, except as and to the extent expressly limited or prohibited by
this Agreement; and
(xviii). To engage in any other lawful act or activity in which
limited liability companies organized under the Delaware Act may engage.
The Board of Directors shall not in any way be bound or limited by any
present or future law or custom in regard to investments by fiduciaries. The
Board of Directors shall not be required to obtain any court order to deal with
any assets of the Fund or take any other action hereunder.
Except as otherwise provided herein, by law or from time to time in the
Bylaws, any action to be taken by the Board of Directors may be taken by a
majority of the Directors present at a meeting of the Board of Directors (a
quorum being present), within or without Delaware, including any meeting held by
means of a conference telephone or other communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time and participation by such means shall constitute presence in person at a
meeting, or by written consents of a majority of the Directors then in office.
(c) The Board of Directors may cause title to all or any portion of the
assets of the Fund, including, without limiting the generality of the foregoing,
title to all or any portion of any Securities, to be held in the name of a
nominee or trustee, in street name or in such other manner as the Board of
Directors may, from time to time, deem advisable. The Board of Directors may
hold any assets of the Fund in bearer form and deposit any Securities or other
property with a custodian or in a depository, clearing corporation or similar
corporation, either domestic or
5
foreign, including with or in the Adviser or any Affiliate thereof, and may
deposit or invest any cash or other assets in one or more money market mutual
funds or other accounts of any Person.
(d) Without limiting the generality of the other powers and authority
granted to the Board of Directors hereunder, the Board of Directors is
authorized to (i) pay out of the assets of the Fund all Fund Expenses and the
Management Fee and (ii) reimburse out of the assets of the Fund any Person
providing services to the Fund for the payment of any Fund Expenses.
(e) The Board of Directors shall have the authority in its sole discretion
to establish and maintain such cash or cash equivalent reserves as it deems
appropriate in connection with the business of the Fund, including without
limitation reserves for fees and expenses, working capital purposes and
potential claims, if any.
SECTION 3.2. RELIANCE BY THIRD PARTIES
Notwithstanding any other provision of this Agreement, any contract,
instrument or act of the Board of Directors on behalf of the Fund shall be
conclusive evidence in favor of any third party dealing with the Fund that the
Board of Directors has the authority, power and right to execute and deliver
such contract or instrument and to take such act on behalf of the Fund.
SECTION 3.3. ADVISORY, MANAGEMENT AND DISTRIBUTION CONTRACTS
(a) Subject to such requirements and restrictions as may be set forth in
the Bylaws, the Board of Directors may, at any time and from time to time,
contract for exclusive or nonexclusive advisory and/or management services for
the Fund with Banc of America Investment Advisors, Inc., a Delaware corporation
("BAIA"), or any other partnership, corporation, trust, association or other
organization to serve as Adviser; and any such contract may contain such other
terms as the Board of Directors may determine, including without limitation,
authority for the Adviser (i) to determine from time to time without prior
consultation with the Board of Directors what investments shall be purchased,
held, sold or exchanged and what portion, if any, of the assets of the Fund
shall be held uninvested and to make changes in the Fund's investments and (ii)
to delegate all or any part of its authority thereunder to one or more
Subadvisers. The Board of Directors may also, at any time and from time to time,
contract with the Adviser or any other partnership, corporation, trust,
association, limited liability company or other organization, appointing it
exclusive or nonexclusive distributor, principal underwriter or placement agent
for the Interests, every such contract to comply with such requirements and
restrictions, if any, as may be set forth in the Bylaws; and any such contract
may contain such other terms as the Board of Directors may determine.
The fact that:
any of the Investors, Directors or officers of the Fund is a
shareholder, director, officer, partner, trustee, employee, member,
manager, advisor, subadvisor, principal underwriter, placement agent,
distributor or Affiliate or agent of or for any partnership,
corporation, trust, association, limited liability company or other
organization, or of or for any parent or Affiliate of any
organization, with which an advisory, subadvisory or management
contract, or principal underwriter's or distributor's contract, or
placement agreement or transfer, shareholder servicing
6
or other agency contract may have been or may hereafter be made with
the Fund, or that any such organization, or any parent or Affiliate
thereof, is an Investor of or has an interest in the Fund, or that
any partnership, corporation, trust, association, limited liability
company or other organization with which an advisory, subadvisory or
management contract, or principal underwriter's or distributor's
contract, or placement agreement or transfer, shareholder servicing or
other agency contract (or any Affiliate thereof) may have been or may
hereafter be made with the Fund also has an advisory, subadvisory or
management contract, or principal underwriter's or distributor's
contract, placement agreement or transfer, shareholder servicing or
other agency contract with one or more other corporations, trusts,
associations, limited liability companies or other organizations, or
has other business or interests,
shall not affect the validity of any such contract or disqualify any Investor,
Director or officer of the Fund from voting upon or executing the same or create
any liability or accountability to the Fund or its Investors.
(b) In consideration for its provision of investment advisory and/or
management services to the Fund, the Adviser shall be entitled to receive a
management fee (the "Management Fee"), which shall be determined in accordance
with the terms of a separate agreement between the Adviser and the Fund (the
"Management Agreement"), subject to the requirements of this Section 3.3(b).
Each Investor's proportionate share of the Management Fee for each Fiscal Period
shall be determined based on the Capital Account balance of the Investor as of
the end of such Fiscal Period (after any contribution of capital by the Investor
as of such date) and shall be specially allocated to the Investor as of the last
day of the Fiscal Period as provided for in Section 5.3(a)(iii) of this
Agreement; provided, however, that if (i) prior to the commencement of such
Fiscal Period, an investment fund that was a party to a reorganization with the
Fund (a "Predecessor Fund"), had agreed at any time to make a performance-based
incentive allocation to its adviser or a subadviser, and (ii) no arrangement for
the making of an Incentive Allocation by the Fund is then in effect, the
Management Fee allocated for such Fiscal Period to an Investor who acquired its
Interest in connection with a reorganization with a Predecessor Fund, who as of
the consummation of such reorganization had a positive Loss Carryforward shall,
until such time as the Investor's Loss Carryforward is first reduced to zero, be
reduced in such amount (not to exceed the full amount of the Management Fee that
otherwise would be allocable to the Investor) as may be necessary so that the
aggregate of the Management Fee to be allocated to the Investor and the
Investor's pro rata share of any management fee and/or advisory fee borne by the
Fund as an investor in a Master Fund does not exceed an amount equal to the
aggregate of (i) the pro rata share of the management fee and/or advisory fee of
the Predecessor Fund that the Investor would have borne under the management
agreement and/or investment advisory agreement of the Predecessor Fund, and (ii)
the Investor's pro rata share of any management and/or advisory fee borne by the
Predecessor Fund as an investor in a Master Fund, each as in effect immediately
prior to consummation of the reorganization and computed based on the Capital
Account balance of the Investor as of the end of such Fiscal Period (after any
contribution of capital as of such date). Any Management Agreement entered into
by the Fund shall provide for the determination of the Management Fee in a
manner consistent with the provisions of this Section 3.3(b) and the intent of
such provisions.
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SECTION 3.4. INDEMNIFICATION, ETC.
(a) Subject to the provisions of Section 3.5(b) hereof, the Fund shall
indemnify each of its Directors and officers (including its Directors or
officers who serve at the Fund's request as directors, officers, members,
partners or trustees of another organization in which the Fund has any interest
as a shareholder, creditor or otherwise) (hereinafter referred to as a "COVERED
PERSON") against all liabilities and expenses, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by any Covered 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
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a Covered Person except with respect to any matter as to which such
Covered Person shall have been finally adjudicated in any such action, suit or
other proceeding to be liable to the Fund or its Investors by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office. Expenses, including
reasonable counsel fees so incurred by any such Covered Person (but excluding
amounts paid in satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by the Fund in advance of the final
disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so paid to
the Fund if it is ultimately determined that indemnification of such expenses is
not authorized under this Section 3.4, provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Fund shall be insured against losses arising from any such advance
payments or (c) either a majority of the disinterested Directors acting on the
matter (provided that a majority of the disinterested Directors then in office
act on the matter), or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as opposed to a
full trial type inquiry) that there is reason to believe that such Covered
Person will be found entitled to indemnification under this Article.
(b) As to any matter disposed of (whether by a compromise payment, pursuant
to a consent decree or otherwise) without an adjudication by a court, or by any
other body before which the proceeding was brought, that such Covered Person is
liable to the Fund or its Investors by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office, indemnification shall be provided if (a) approved, after
notice that it involves such indemnification, by at least a majority of the
disinterested Directors acting on the matter (provided that a majority of the
disinterested Directors then in office act on the matter) upon a determination,
based upon a review of readily available facts (as opposed to a full trial type
inquiry) that such Covered Person is not liable to the Fund or its Investors by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office or (b) there has been
obtained an opinion in writing of independent legal counsel, based upon a review
of readily available facts (as opposed to a full trial type inquiry) that such
Covered Person is not liable to the Fund or its Investors by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. Any approval pursuant to this
Section 3.4 shall not prevent the recovery from any Covered Person of any amount
paid to such Covered Person in accordance with this Section as indemnification
if such Covered Person is subsequently
8
adjudicated by a court of competent jurisdiction to have been liable to the Fund
or its Investors by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such Covered
Person's office.
(c) The right of indemnification hereby provided shall not be exclusive of
or affect any other rights to which such Covered Person may be entitled. As used
in this Section 3.4, the term "Covered Person" shall include such person's
heirs, executors and administrators and a "disinterested Director" is a Director
who is not an "interested person" of the Fund as defined in Section 2(a)(19) of
the 1940 Act (or who has been exempted from being an "interested person" by any
rule, regulation or order of the Commission), and against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending. Nothing contained in
this Article shall affect any rights to indemnification to which personnel of
the Fund, other than Directors or officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Fund to purchase and
maintain liability insurance on behalf of any such person; provided, however,
that the Fund shall not purchase or maintain any such liability insurance in
contravention of applicable law, including without limitation the 1940 Act. For
purposes of the determination or opinion referred to in clauses (a) and (b) of
this Section 3.4, the majority of disinterested Directors acting on the matter
or independent legal counsel, as the case may be, shall be entitled to rely upon
a rebuttable presumption that the Covered Person has not engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office.
(d) In case any Investor or former Investor shall be held to be personally
liable solely by reason of his or her being or having been an Investor and not
because of his or her acts or omissions or for some other reason, the Investor
or former Investor (or his or her heirs, executors, administrators or other
legal representatives or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled to be held harmless from
and indemnified out of the assets of the Fund against all loss and expense
arising from such liability.
(e) All persons extending credit to, contracting with or having any claim
against the Fund shall look only to the assets of the Fund for payment under
such credit, contract or claim; and neither the Investors nor the Directors, nor
any of the Fund's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. Nothing in this Agreement shall
protect any Director against any liability to which such Director would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Director.
Every note, bond, contract, instrument, certificate or undertaking made or
issued on behalf of the Fund by the Board of Directors, by any officers or
officer or otherwise shall give notice that this Agreement is on file at the
offices of the Fund and shall recite that the same was executed or made by or on
behalf of the Fund or by them as Director or Directors or as officer or officers
or otherwise and not individually and that the obligations of such instrument
are not binding upon any of them or the Investors individually but are binding
only upon the assets and property of the Fund for the benefit of which the Board
of Directors have caused the note, bond, contract, instrument, certificate or
undertaking to be made or issued, and may contain such further recital as he or
they may deem appropriate, but the omission of any such recital shall not
9
operate to bind any Director or Directors or officer or officers or Investors or
any other person individually; PROVIDED, HOWEVER, that such a recital shall not
be required if it is not necessary to achieve the purpose of protecting the
Board of Directors and Investors from any personal liability arising out of
obligations of the Fund.
(f) The exercise by the Board of Directors of its powers and discretions
hereunder shall be binding upon everyone interested.
(g) No person dealing with the Board of Directors shall be bound to make
any inquiry concerning the validity of any transaction made or to be made by the
Board of Directors or to see to the application of any payments made or property
transferred to the Fund or upon its order.
SECTION 3.5. COMPENSATION AND LIMITATION OF LIABILITY OF DIRECTORS
(a) The Directors as such shall be entitled to reasonable compensation from
the Fund; they may fix the amount of their compensation. Nothing herein shall in
any way prevent the employment of any Director for advisory, management, legal,
accounting, investment banking or other services and payment of the same by the
Fund.
(b) (i). A Director shall be liable for his or her own willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of the office of Director, and for nothing else, and shall not
be liable for errors of judgment or mistakes of fact or law. The Board of
Directors may (but shall not be required to) take advice of counsel or
other experts with respect to the meaning and operation of this Agreement,
and shall be under no liability for any act or omission in accordance with
such advice or for failing to follow such advice, but nothing herein
contained shall protect any Director against any liability to which he or
she would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his or her office. The Board of Directors shall not be required
to give any bond as such, nor any surety if a bond is required.
(ii). The Directors shall not be responsible or liable in any event
for any neglect or wrong-doing of any officer, agent, employee, Adviser,
Subadviser or principal underwriter of the Fund, nor shall any Director be
responsible for the act or omission of any other Director, but nothing
herein contained shall protect any Director against any liability to which
he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
(iii). Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever issued, executed or
done by or on behalf of the Fund or the Directors or any of them in
connection with the Fund shall be conclusively deemed to have been issued,
executed or done only in or with respect to their, his or her capacity as
Directors or Director, and such Directors or Director shall not be
personally liable thereon.
10
ARTICLE 4 - MEMBERS' RIGHTS, VOTING POWERS AND MEETINGS
SECTION 4.1. NO MANAGEMENT OR CONTROL
Except as expressly provided in this Agreement, no Investor (other than a
Special Member) as such shall take part in or interfere in any manner with the
management of the business and affairs of the Fund or have any right or
authority to act for or bind the Fund.
SECTION 4.2. VOTING POWERS
Subject to any voting powers of one or more classes of Interests as set
forth elsewhere in this Operating Agreement or in the Bylaws or by resolution of
the Board of Directors, the Investors shall have the voting powers set forth in
this Section 4.2. The Investors (other than the Special Members, none of whom
shall be eligible to vote on any matter hereunder) shall have power to vote only
(i) for the election of Directors as provided in Section 3.1, (ii) with respect
to any amendment of this Agreement to the extent and as provided in Section
10.6, (iii) with respect to a conversion of the Fund to an open-end management
investment company pursuant to the provisions of Section 6.4 and (iv) with
respect to such additional matters relating to the Fund as may be required by
this Agreement, the Bylaws, applicable law or any registration of the Fund with
the Commission or any state, or as the Board of Directors may consider necessary
or desirable. With respect to any matter, the Investors shall vote in proportion
to their Capital Account balances as of the record date applicable to the
consideration of such matter and shall vote together. There shall be no
cumulative voting in the election of Directors. The Investors may vote in person
or by proxy.
SECTION 4.3. MEETINGS
Meetings of the Investors may be called by the Board of Directors for the
purpose of electing Directors as provided in Section 3.1 and for such other
purposes as may be prescribed by law, by this Agreement or by the Bylaws.
Meetings of the Investors may also be called by the Board of Directors from time
to time for the purpose of taking action upon any other matter deemed by the
Directors to be necessary or desirable. A meeting of Investors may be held at
any place designated by the Board of Directors. Written notice of any meeting of
Investors, stating the time and place of the meeting, shall be given or caused
to be given by the Board of Directors to each Investor at least seven days
before such meeting by mailing such notice, postage prepaid, to the address an
Investor has most recently furnished to the Fund or its agent or by transmitting
such notice by facsimile or other electronic means, to the telephone or
facsimile number or e-mail or other electronic address an Investor has most
recently furnished to the Fund or its agent. Whenever notice of a meeting is
required to be given to an Investor under this Agreement or the Bylaws, a
written waiver thereof, executed before or after the meeting by such Investor or
his, her or its attorney thereunto authorized and filed with the records of the
meeting, shall be deemed equivalent to such notice.
11
SECTION 4.4. QUORUM AND REQUIRED VOTE
Subject to any voting powers of one or more classes of Interests as set
forth elsewhere in this Operating Agreement or in the Bylaws or by resolution of
the Board of Directors, the provisions set forth in this Section 4.2 shall apply
to meetings and votes of Investors. Except when a larger quorum is required by
law, by the Bylaws or by this Agreement, Investors with Capital Account balances
representing in aggregate thirty per centum (30%) of the aggregate Capital
Account balances of all Investors (exclusive of any Special Members) and who are
entitled to vote shall constitute a quorum at a meeting of Investors. Any
meeting of Investors may be adjourned from time to time by the vote of Investors
whose Capital Account balances in the aggregate represent more than one-half of
the aggregate Capital Account balances of all Investors present at such meeting
in person or by proxy and who are entitled to vote and have voted with respect
to such adjournment, whether or not a quorum is present, and the meeting may be
held as adjourned within a reasonable time after the date set for the original
meeting without further notice. When a quorum is present at any meeting, the
vote of Investors whose Capital Account balances in the aggregate represent more
than one-half of the aggregate Capital Account balances of all Investors present
at such meeting in person or by proxy and who are entitled to vote shall decide
any questions and the vote of a plurality (measured by Capital Account balances
of Investors, exclusive of Capital Accounts of any Special Member) shall elect a
Director, except when a larger vote is required by any provision of this
Agreement or the Bylaws or by law.
SECTION 4.5. ACTION BY WRITTEN CONSENT
Any action taken by Investors may be taken without a meeting if Investors
whose Capital Account balances in the aggregate represent more than one-half of
the total Capital Account balances of all Investors (exclusive of any Special
Members) entitled to vote on the matter (or such larger proportion thereof as
shall be required by any express provision of this Agreement or by the Bylaws)
consent to the action in writing and such written consents are filed with the
records of the meetings of Investors. Such action by written consent shall be
treated for all purposes as a vote taken at a meeting of Investors.
SECTION 4.6. RECORD DATES
For the purpose of determining the Investors who are entitled to vote or
act at any meeting or any adjournment thereof, the Board of Directors may from
time to time fix a time as the record date for determining the Investors having
the right to notice of and to vote at such a meeting and any adjournment
thereof, and in such case only Investors of record on such record date shall
have such right, notwithstanding any transfer of Interests on the books of the
Fund after the record date. For the purpose of determining the Investors who are
entitled to receive payment of any distribution, the Board of Directors may from
time to time fix a date, which shall be before the date for the payment of such
distribution, as the record date for determining the Investors having the right
to receive such distribution. Without fixing a record date the Board of
Directors may for voting and/or distribution purposes close the register or
transfer books for all or any part of the period between a record date and a
meeting of Investors or the payment of a distribution.
12
SECTION 4.7. INVESTORS' RIGHTS TO RECORDS
Any documents which an Investor may have a right to obtain pursuant to the
Delaware Act, the 1940 Act or otherwise shall be furnished at the Fund's
principal office only after the Investor gives 30 days' prior written notice of
its intent to obtain such records, and further subject to such rules and
procedures (including with respect to payment of associated expenses, to the
extent permitted by law) as the Board of Directors may establish, which may
include rules and procedures established after the date of such request.
SECTION 4.8. ADDITIONAL PROVISIONS
The Bylaws may include further provisions for Investors' votes and meetings
and related matters.
ARTICLE 5 - ADMISSION OF INVESTORS; CAPITAL CONTRIBUTIONS; CAPITAL
ACCOUNTS; ALLOCATIONS
SECTION 5.1. ADMISSION OF INVESTORS; CAPITAL CONTRIBUTIONS
The Board of Directors (or its designated agent) may admit Investors to the
Fund from time to time upon the completion by a prospective Investor, and the
acceptance of the same by the Board of Directors (or its designated agent), of a
Subscription Agreement in a form specified by the Board of Directors (or its
designated agent) from time to time. Each such Subscription Agreement shall
specify the Capital Contribution to be made by such prospective Investor and
shall contain representations and warranties by the prospective Investor as to
such prospective Investor's eligibility to purchase an Interest. The Board of
Directors (or its designated agent) may adopt procedures from time to time
governing the remittance by prospective Investors of Capital Contributions and
the receipt and handling of the same by the Fund. The Board of Directors (or its
designated agent) may set maximum and minimum amounts from time to time (as well
as incremental limits) applicable to each Capital Contribution. Notwithstanding
the foregoing, the Board of Directors may admit any Adviser and any Subadviser
to the Fund as a Special Member without requiring that such Special Member
complete a Subscription Agreement (provided that such Special Member provides
the Board of Directors with such information as shall satisfy the Board of
Directors that such Special Member is eligible to be admitted to the Fund as an
Investor) or that such Special Member make any Capital Contribution.
The Board of Directors (or its designated agent) may also from time to time
accept additional Capital Contributions from existing Investors, and may adopt
procedures relating to the remittance by Investors and receipt and handling of
the same by the Fund (which procedures may include the completion by each such
Investor of a Subscription Agreement, but shall at least require each such
Investor to renew or otherwise make representations and warranties as to such
Investor's continued eligibility to purchase Interests). The Board of Directors
(or its designated agent) may from time to time set maximum and minimum amounts
(as well as incremental limits) applicable to each such additional Capital
Contribution.
The Board of Directors (or its designated agent) shall be authorized in its
discretion not to accept a Capital Contribution from any Investor or prospective
Investor for any reason.
13
SECTION 5.2. RIGHTS OF INVESTORS TO CAPITAL
No Investor shall be entitled to interest on any contribution to the
capital of the Fund, nor shall any Investor be entitled to the return of any
capital of the Fund except (i) upon the repurchase by the Fund of part or all of
such Investor's Interest pursuant to Section 6.3 hereof, (ii) pursuant to the
provisions of Sections 5.8 or 5.10 or (iii) upon the liquidation of the Fund's
assets pursuant to Article 8. No Investor shall have the right to require
partition of the Fund's property or to compel any sale or appraisal of the
Fund's assets.
SECTION 5.3. CAPITAL ACCOUNTS
(a) A separate Capital Account shall be maintained for each Investor. The
opening balance of an Investor's Capital Account shall equal the initial Capital
Contribution of such Investor. Thereafter, the Capital Account shall be adjusted
as follows:
(i). increased by the amount of any additional Capital Contribution
made by such Investor to the Fund pursuant to Section 5.1;
(ii). increased or decreased, as the case may be, by the amounts
allocated to such Capital Account pursuant to Sections 5.4, 5.8 or 5.9;
(iii). decreased by the amount of the Management Fee allocable for a
Fiscal Period to such Investor;
(iv). decreased by the amount of any Incentive Allocation reallocated
to each Special Member from such Capital Account pursuant to Section 5.5;
(v). decreased by the sum of the amount of any repurchase of the
Interest, or portion thereof, of such Investor and the amount of any cash
and the fair market value of any property distributed to such Investor
pursuant to Sections 5.10 or 6.3 (but not reinvested) or Article 8;
(vi). decreased for withholding taxes (or other special items not
chargeable ratably to all Investors) pursuant to Section 5.6.
(b) The Fund shall maintain a "SPECIAL ADVISORY ACCOUNT" for any Special
Member (for so long as such Special Member is an Investor) solely for purposes
of receiving any Incentive Allocation made pursuant to Section 5.5 hereof. Each
Special Advisory Account shall have an initial balance of zero and shall be
adjusted in accordance with the provisions of Section 5.5, 5.6 and Section 5.10.
(c) If all or a portion of an Interest is Transferred in accordance with
the terms of this Agreement, the Transferee shall succeed to the Capital Account
of the Transferor to the extent it relates to the Transferred Interest.
14
SECTION 5.4. ALLOCATION OF NET PROFIT AND NET LOSS
As of the last day of each Fiscal Period, any Net Profit or Net Loss for
the Fiscal Period shall be allocated among the Capital Accounts (other than the
Special Advisory Accounts) of all Investors, in proportion to their respective
opening Capital Account balances for such Fiscal Period (after taking into
account any Capital Contributions as of the first day of such Fiscal Period).
SECTION 5.5. INCENTIVE ALLOCATION
(a) As of the last day of each Incentive Period, after giving effect to
allocations pursuant to Sections 5.3(a)(iii), 5.4, 5.8 and 5.9 for the period,
but before giving effect to any distributions pursuant to Section 5.10,
repurchases of Interests by the Fund pursuant to Section 6.3, or debits to such
Investor's Capital Account to reflect any items other than the Management Fee
not chargeable ratably to all Investors pursuant to Section 5.6, any Incentive
Allocation then in effect will be charged to each Investor's Capital Account
(other than that of any Special Member) and paid to the Adviser and Subadviser
and/or credited to the relevant Special Advisory Account pursuant to the terms
of the advisory agreement between the Fund and the Adviser and the subadvisory
agreement between the Fund, the Adviser and the Subadviser, each as in effect
from time to time; provided, however, that there shall be no Incentive
Allocation charged for any Incentive Period during which the Fund is pursuing
its investment objective by investing substantially all of its assets in a
Master Fund.
(b) The "INCENTIVE ALLOCATION" with respect to any Investor Interest, other
than any Special Member Interest, for an Incentive Period shall be such amount ,
if any, as may be provided for in the Management Agreement or any investment
advisory agreement with a Subadviser.
(c) An Investor's "LOSS CARRYFORWARD" for the first Incentive Period
following such Investor's contribution of capital to the Fund shall be zero and
for each Incentive Period thereafter shall equal such Investor's Loss
Carryforward for the prior Incentive Period, increased or decreased (but not
below zero) by the positive or negative difference, as the case may be, between
the Net Loss over the Net Profit allocated to such Investor for the current
Incentive Period; provided, however, that the Loss Carryforward of an Investor
who acquired its Interest in connection with a reorganization of a Predecessor
Fund with the Fund shall initially be the amount of the Investor's loss
carryforward account balance, if any, in such Predecessor Fund as of the date of
such reorganization. For purposes of the computation required by Section 3.3(b),
an Investor's Loss Carryforward shall be determined as of the end of each Fiscal
Period.
(d) For purposes of maintaining Capital Account balances and allocations,
in the case of a repurchase of only a portion of an Interest other than on the
last business day of the calendar year, the Investor shall be treated as having
two independent Interests in the Fund, one of which is being repurchased in its
entirety and the Incentive Period with respect to which terminates on the
repurchase date. Net Profit and Net Loss allocated to the Investor and all
Capital Contributions made by the Investor during the Incentive Period prior to
such repurchase, and the Investor's opening Capital Account balance and Loss
Carryforward as of the beginning of such
15
Incentive Period, shall be allocated between the two Interests based on the
Investor's Allocation Ratio.
SECTION 5.6. ALLOCATION OF SPECIAL ITEMS
(a) Withholding taxes or other tax obligations incurred by the Fund that
are attributable to any Investor will be debited against the Capital Account of
that Investor as of the close of the Fiscal Period during which the Fund paid
those obligations, thereby reducing the amount distributable to the Investor. If
the amount of those taxes is greater than the distributable amounts, then the
Investor or any successor to such Investor's Interest will be required to pay
upon demand to the Fund, as a contribution to the capital of the Fund, the
amount of the excess.
(b) Except as otherwise provided for in this Agreement and unless
prohibited by the 1940 Act, any expenditures payable by the Fund, to the extent
determined by the Board of Directors (or its designated agent) to have been paid
or withheld on behalf of, or by reason of particular circumstances applicable
to, one or more but fewer than all of the Investors, shall be charged to only
those Investors on whose behalf such payments are made or whose particular
circumstances gave rise to such payments. Such charges shall be debited from the
Capital Accounts of such Investors as of the close of the Fiscal Period during
which any such items were paid or accrued by the Fund.
SECTION 5.7. TAX ALLOCATIONS
The income, gains, losses, deductions and credits of the Fund shall be
allocated for federal, state and local income tax purposes among the Investors
so as to reflect, in the judgment of the Adviser, the Interests of the Investors
in the Fund set forth in this Agreement. The Adviser, in consultation with the
Fund's tax advisor, is authorized: (a) to select such tax allocation methods as
may in the Adviser's judgment be appropriate to satisfy the requirements of
section 704(c) of the Code regarding allocations of gain, income and loss for
federal income tax purposes, including without limitation an "aggregate
approach" involving "partial netting" or "full netting" with respect to reverse
section 704(c) allocations to the extent permitted by Treasury Regulations
Section 1.704-3; (b) to interpret and apply the allocation provisions hereof as
providing for a "qualified income offset," "minimum gain chargeback" and such
other allocation principles as may be required under section 704 of the Code and
applicable regulations (provided that if such principles are applied in making
allocations hereunder, subsequent allocations shall be made so as to reverse, to
the extent possible in the Adviser's judgment, the effect of the application of
such principles); (c) to make special allocations of gain, income or loss to
Investors all or part of whose Interests have been repurchased by the Fund; (d)
to make special allocations of income in respect of Incentive Allocations; (e)
to determine the allocation of specific items of income or loss on a gross
rather than net basis; (f) to determine the allocation of specific items of
income, gain, loss, deduction and credit of the Fund; and (g) to vary any and
all of the foregoing allocation provisions to the extent necessary in the
judgment of the Adviser to comply with section 704 of the Code and applicable
regulations. The Adviser shall have the power and authority to make all
accounting, tax and financial reporting determinations and decisions with
respect to the Fund. The Investors are aware of the potential income tax
consequences of the allocations made by this Section 5.7 and hereby agree to be
bound by the
16
provisions of this Section 5.7 in reporting their shares of Fund income and loss
for income tax purposes.
SECTION 5.8. RESERVES
Appropriate reserves may be created, accrued and charged against Net Assets
and proportionately against the Capital Accounts of the Investors for contingent
liabilities, if any, as of the date any such contingent liability becomes known
to the Adviser or the Board of Directors, such reserves to be in the amounts
which the Board of Directors, in its sole discretion, deem necessary or
appropriate. The Board of Directors or the Adviser may increase or reduce any
such reserves from time to time by such amounts, as the Board or the Adviser,
each in its sole discretion, deems necessary or appropriate. The amount of any
such reserve, or any increase or decrease therein, shall be proportionately
charged or credited, as appropriate, to the Capital Accounts of those parties
who are Investors at the time when such reserve is created, increased or
decreased, as the case may be.
SECTION 5.9. ALLOCATION OF ORGANIZATIONAL EXPENSES
Organizational Expenses shall be allocated among and debited against the
Capital Accounts of the Investors as of the last day of the Fiscal Period in
which such expenses were incurred by the Fund in proportion to their respective
Capital Account balances as of the first day of such Fiscal Period.
SECTION 5.10. DISTRIBUTIONS
The Fund shall (i) when authorized by the Board of Directors in its sole
discretion make distributions in cash or in kind at any time to all of the
Investors on a pro rata basis in accordance with each Investor's Capital Account
balance at such time, (ii) in accordance with the terms of any agreement between
the Fund and any Special Member, make distributions in cash (to the extent cash
is available for such distribution) or in kind (to the extent cash is not
available for such distribution) at any time to one or more Special Members
promptly following an allocation to such Special Member's Special Advisory
Account and (iii) if an Adviser or Subadviser that is a Special Member shall for
any reason cease to serve as Adviser or Subadviser, as the case may be, make a
complete distribution to such Special Member of the balance of such Special
Member's Special Advisory Account as soon as reasonably practicable following
such cessation of service. Notwithstanding the foregoing or any other provision
contained in this Agreement, the Fund, and the Board of Directors on behalf of
the Fund, shall not be required to make a distribution to an Investor in respect
of its Interest if such distribution would violate the Delaware Act or other
applicable law.
ARTICLE 6 - TRANSFERS AND REPURCHASES
SECTION 6.1. TRANSFER OF INTERESTS OF INVESTORS
(a) An Interest or portion thereof may be Transferred only (i) by operation
of law resulting from an Investor's death, divorce, disability, dissolution,
bankruptcy or incompetence or (ii) with the written consent of the Adviser,
which consent may be withheld in its sole
17
discretion and shall not be subject to challenge by any potential assignor or
assignee. Notwithstanding the foregoing, no Interest or portion thereof to which
any Special Advisory Account relates may be Transferred.
(b) Unless the Adviser consults with its counsel and counsel confirms that
the Transfer will not cause the Fund to be treated as a publicly traded
partnership taxable as a corporation (which confirmation shall be obtained at
the expense of the transferor), the Adviser generally may not consent to a
Transfer of an Interest unless the following conditions are met: (i) the
transferring Investor has been an Investor of the Fund for at least six months;
(ii) the proposed Transfer is to be made on the effective date of an offer by
the Fund to repurchase Interests; and (iii) the Transfer is (a) (1) one in which
the tax basis of the Interest in the hands of the transferee is expected to be
determined, in whole or in part, by reference to its tax basis in the hands of
the transferring Investor (e.g., gifts and contributions to family entities) and
(2) to members of the transferring Investor's immediate family (siblings,
spouse, parents or children), or (b) a distribution from a qualified retirement
plan or an individual retirement account.
(c) Unless otherwise waived by the Adviser in its sole discretion, any
Transfer shall be made only upon the receipt by the Fund of an Opinion of
Counsel (which opinion shall be obtained at the expense of the transferor) that
the Transfer will be made pursuant to an available exemption from registration
under the 1933 Act and applicable state securities laws and of an executed and
complete Subscription Agreement from the transferee. An Investor who Transfers
all or any portion of an Interest may be charged reasonable expenses, including
attorneys' and accountants' fees, incurred by the Fund in connection with the
Transfer.
(d) Any transferee acquiring an Interest by operation of law as a result of
the death, divorce, disability, dissolution, bankruptcy or incompetence of an
Investor or otherwise will be entitled to the allocations and distributions
allocable to the Interest so acquired, to Transfer all or any portion of an
Interest in accordance with the terms of this Agreement and to tender all or any
portion of an Interest for repurchase by the Fund, but will not be entitled to
the other rights of an Investor unless and until the transferee becomes a
substituted Investor of the Fund. If an Investor Transfers its Interest with the
approval of the Adviser, the Fund will take all necessary actions so that each
transferee or successor to whom the Interest is Transferred is admitted to the
Fund as an Investor.
(e) In subscribing for an Interest, an Investor agrees to indemnify and
hold harmless the Fund, the Board of Directors, the Adviser, the Subadviser,
each other Investor and their affiliates against all losses, claims, damages,
liabilities, costs and expenses (including legal or other expenses incurred in
investigating or defending against any losses, claims, damages, liabilities,
costs and expenses or any judgments, fines and amounts paid in settlement),
joint or several, to which those persons may become subject by reason of or
arising from any Transfer made by that Investor in violation of these provisions
or any misrepresentation made by that Investor in connection with any Transfer.
SECTION 6.2. WITHDRAWAL AND EXPULSION OF INVESTORS
(a) Except as provided below, an Investor may not withdraw from the Fund
(whether voluntarily, by operation of law or otherwise) prior to the dissolution
and winding up of the Fund
18
except in connection with a transfer of its Interest and substitution of another
Person as Investor, or repurchase of such Investor's Interest, pursuant to, and
in compliance with, the provisions of Article 6 of this Agreement.
(b) A Special Member shall be deemed to have withdrawn from the Fund
immediately after it ceases to serve as Adviser or Subadviser, as the case may
be, whether by reason of the expiration or termination of the relevant advisory
or subadvisory agreement or otherwise.
(c) An Investor may be expelled as an Investor by the Board of Directors in
connection with a repurchase of such Investor's entire Interest pursuant to
Section 6.3(b).
(d) After the Fund commences operations, an Investor, other than a Special
Member, shall be deemed to have withdrawn from the Fund at such time as such
Investor's Capital Account balance is reduced to zero dollars.
SECTION 6.3. REPURCHASE OF INTERESTS
(a) Except as otherwise provided in this Agreement, no Investor or other
person holding an Interest or portion thereof shall have the right to withdraw,
require redemption of such Interest or tender to the Fund for repurchase that
Interest or portion thereof; PROVIDED, HOWEVER, that a Special Member may
receive distributions as provided in Section 5.10. Any repurchases of Interests
or portions thereof will be made pursuant to written tenders and at times and on
terms and conditions as the Board of Directors may determine in its sole
discretion.
(b) The Board of Directors may cause the Fund to repurchase an Interest or
portion thereof of an Investor or any person acquiring an Interest or portion
thereof from or through an Investor without consent or other action by the
Investor or other person, or cause an Investor to sell all or a portion of its
Interest to another Investor, at the most recently calculated net asset
valuation of such Investor's Available Capital Account Balance, for any reason
deemed advisable by the Board of Directors, including but not limited to
situations in which:
(i). such an Interest or portion thereof has been transferred in
violation of Section 6.1 hereof, or such an Interest or portion thereof has
vested in any person other than by operation of law as the result of the
death, divorce, disability, dissolution, bankruptcy or incompetence of an
Investor;
(ii). ownership of the Interest or portion of the Interest by an
Investor or other person is likely to cause the Fund to be in violation of,
or require registration of all or any portion of any Interest under, or
subject the Fund to additional registration or regulation under, the
securities, commodities or other laws of the United States or any other
relevant jurisdiction, or may subject the Fund or any Investor to an undue
risk of adverse tax (such as the Fund no longer being taxed as a
partnership rather than an association taxable as a corporation) or other
fiscal or regulatory consequences;
(iii). continued ownership of the Interest or portion of it by the
Investor or other person may be harmful or injurious to the business of the
Fund, the Board of Directors, the Adviser or any Subadviser;
19
(iv). any of the representations and warranties made by an Investor in
connection with the acquisition of an Interest or portion of an Interest
was not true when made or has ceased to be true; or
(v). the value of an Investor's Interest is less than an amount that
the Board of Directors determines to be a minimum investment in the Fund,
or more than an amount that the Board determines to be a maximum investment
in the Fund.
(c) Without limitation upon the powers of the Board of Directors specified
in paragraph (b) of this Section 6.3, the Board of Directors may elect, at its
sole discretion, to cause the Fund to repurchase Interests pursuant to written
tender offers to all Investors conducted on a quarterly basis beginning no later
than as of June 30, 2010 or at such other intervals or times as the Board of
Directors in its sole discretion shall determine. If any such tender offers are
made, payment for Interests (or portions thereof) tendered and accepted for
purchase may consist of a non-interest bearing, non-transferable promissory note
entitling the holder to payment(s) in cash and/or marketable securities equal to
the net asset value of the Interest (or portion thereof) as of the valuation
date (which would ordinarily be the last day of each quarter), after giving
effect to all allocations to be made to such Investor's Capital Account as of
such date, including the Incentive Allocation. The terms and amounts of each
such tender offer, including without limitation any extensions or amendments of
each such tender offer, shall be determined in the Board of Directors' sole
discretion in accordance with applicable law; provided, however, that such
tender offers shall not be conditioned on any minimum amount of Interests being
tendered and that each Investor may tender its entire Interest or a portion of
its Interest up to any amount such that such Investor maintains the minimum
Capital Account Balance, if any, specified by such tender offer.
(d) Repurchases of Interests or portions thereof by the Fund shall be
payable in such time and such manner as the Board of Directors in its discretion
shall determine. Payment of the purchase price for an Interest or portion
thereof may consist of: (i) cash or a promissory note, which need not bear
interest, in an amount equal to such percentage, as may be determined by the
Board of Directors, of the estimated unaudited net asset value of the Interest
(or portion thereof) repurchased by the Fund determined as of the valuation date
for such repurchase (the "INITIAL PAYMENT"); and, if determined to be
appropriate by the Board of Directors or if the Initial Payment is less than
100% of the estimated unaudited net asset value of the repurchased Interest,
(ii) a contingent payment in cash or a promissory note, which need not bear
interest, equal to the excess, if any, of (x) the net asset value of the
Interest (or portion thereof) repurchased by the Fund as of the valuation date
for such repurchase, as subsequently determined (which determination may but
need not be based on the audited financial statements of the Fund for the Fiscal
Year in which such repurchase was effective), over (y) the Initial Payment.
Notwithstanding anything to the contrary, the Fund, in the discretion of the
Board of Directors, may pay all or any portion of the repurchase price in
Securities (or any combination of Securities and cash) of equivalent value. All
such repurchases shall be subject to any and all conditions as the Board of
Directors may impose and shall be effective as of a date set by the Board of
Directors. The amount due to any Investor whose Interest or portion thereof is
repurchased shall be equal to the value of such Investor's Capital Account or
portion thereof as applicable as of the valuation date for such repurchase,
after giving effect to all allocations to be made to such Investor's Capital
Account as of such date, including the Incentive Allocation.
20
SECTION 6.4. CONVERSION TO OPEN-END MANAGEMENT INVESTMENT COMPANY
Notwithstanding any other provisions in this Agreement or the Bylaws, the
conversion of the Fund from a "closed-end company" to an "open-end company," as
those terms are defined in Sections 5(a)(2) and 5(a)(1), respectively, of the
1940 Act, together with any necessary amendments to this Agreement to permit
such a conversion, shall require the affirmative vote or consent of Investors
whose Capital Account balances represent in the aggregate at least two-thirds of
the total balance of all Capital Accounts (exclusive of those of the Special
Members) entitled to vote on the matter, unless a majority of the Board of
Directors and seventy-five percent (75%) of the Directors who are not
"interested persons" of the Fund, as such term is defined in the 1940 Act,
approve such conversion and related actions. In the event of such approval by
the Board of Directors as referred to in the preceding sentence, the 1940 Act
shall govern whether and to what extent a vote or consent of Investors shall be
required to approve such conversion and related actions. Any requirement for an
affirmative vote or consent under this Section 6.4 shall be in addition to any
requirement for a vote or consent of the Investors pursuant to applicable law or
any agreement between the Fund and any national securities exchange.
ARTICLE 7 - TERM AND DISSOLUTION OF THE FUND
SECTION 7.1. TERM
Except as otherwise provided in this SECTION 7.1, the Fund shall have
perpetual existence. The Fund shall be dissolved upon the happening of: (i) the
written determination of the Board of Directors to dissolve the Fund; (ii) the
entry of a decree of judicial dissolution under Section 18-802 of the Delaware
Act; or (iii) a vote of a "majority of the outstanding voting securities" of the
Fund, as such term is defined in the 1940 Act, at a meeting called by the Board
of Directors pursuant to the following sentence. The Board of Directors will
call a meeting of Investors for the purpose of determining whether the Fund
should be dissolved in the event that the Fund does not at least once during any
24-month period beginning after January 1, 2010 repurchase any of the Interests
tendered in accordance with the procedures determined by the Board of Directors
from time to time.
SECTION 7.2. EVENTS NOT CAUSING DISSOLUTION
The withdrawal, resignation, expulsion, death, insanity, incompetency,
bankruptcy, insolvency, dissolution or liquidation of, or the making of an
assignment for the benefit of creditors by, or any other act or circumstance
with respect to an Investor (including the occurrence of any of the events
described in Section 18-304 of the Delaware Act) shall not cause the dissolution
of the Fund; the Investors shall not otherwise have the right to cause a
dissolution of the Fund (except as set forth in Section 7.1); and the Fund shall
continue until dissolved pursuant to SECTION 7.1 hereof.
ARTICLE 8 - LIQUIDATION OF THE FUND
On dissolution of the Fund, the Board of Directors shall have full power
and authority to liquidate and distribute (in cash or in kind) the net assets of
the Fund to the Investors in accordance with SECTION 5.10. Any such distribution
shall be made solely from the Fund's
21
assets. Each Investor shall be furnished with a statement which shall set forth
the assets and liabilities of the Fund as at the date of complete liquidation,
and each Investor's share thereof. Following the distribution of the Fund's
assets, the Investors shall cease to be such, and a certificate of cancellation
for the Fund shall be filed with the State of Delaware.
ARTICLE 9 - ACCOUNTING AND REPORTING PROVISIONS
SECTION 9.1. BOOKS AND ACCOUNTS
Consistent with the requirements of applicable law, complete and accurate
books and accounts shall be kept and maintained for the Fund at its principal
place of business or at such other place as the Board of Directors may determine
in its sole discretion. Such books and accounts shall be kept on the accrual
basis method of accounting in accordance with generally accepted accounting
principles and shall include separate accounts for each Investor.
SECTION 9.2. TAX ELECTIONS
Any election required or permitted to be made by the Fund under the Code is
permitted to be made by the Adviser, to the extent permitted by Section 10.11,
in its sole discretion. The Adviser is further permitted to make any tax
election (including a "check-the-box" election for a prior period pursuant to
Section 7701 of the Code, even if one or more Persons who was an Investor during
any portion of such prior period is not an Investor as of the date of such
election) with respect to the Fund on behalf of an Investor or a former
Investor. Each Investor hereby consents to any such election.
SECTION 9.3. TAX MATTERS PARTNER
The tax matters partner, as defined in Section 6231 of the Code, of the
Fund shall be any Investor or such other Person as designated by the Board of
Directors (the "TAX MATTERS PARTNER"). All expenses incurred by the Tax Matters
Partner in connection with the Fund shall be borne by the Fund. Any Person who
serves as Tax Matters Partner shall not be liable to the Fund or any Investor
thereof for any action it takes or fails to take as Tax Matters Partner with
respect to any administrative or judicial proceeding involving "partnership
items" (as defined in Section 6231 of the Code) of the Fund, unless such action
or failure to act constitutes willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of such office. The
Fund (but not the Investors themselves) shall indemnify the Tax Matters Partner
as provided in Section 3.4 to the same extent as if the Tax Matters Partner were
a Covered Person.
SECTION 9.4. VALUATION OF ASSETS
(a) Except as may be required by the 1940 Act, the Board of Directors shall
value or have valued any Securities held by the Fund or other assets and
liabilities of the Fund as of the close of business on the last day of each
Fiscal Period (and as of any other date determined by the Board) in accordance
with such valuation procedures as shall be established from time to time by the
Board of Directors and which conform to the requirements of the 1940 Act.
22
(b) The value of Securities held by the Fund and other assets and
liabilities of the Fund determined pursuant to this Section 9.4 shall be
conclusive and binding on all of the Investors and all parties claiming through
or under them.
ARTICLE 10 - MISCELLANEOUS PROVISIONS
SECTION 10.1. PRINCIPAL PLACE OF BUSINESS; REGISTERED AGENT AND OFFICE
The principal business office of the Fund shall be One Financial Center,
Attn: Banc of America Investment Advisors, Inc., Xxxxxx, Xxxxxxxxxxxxx 00000, or
such other place as the Board of Directors may designate from time to time. The
Fund may also maintain additional offices at such place or places as the Board
of Directors may designate from time to time. The Fund's registered agent and
office in Delaware shall be National Corporate Research, Ltd, 000 Xxxxx XxXxxx
Xxxxxxx, Xxxxx, Xxxxxxxx 00000. At any time, the Board of Directors may
designate another registered agent and/or registered office in Delaware.
SECTION 10.2. FORCE MAJEURE
Whenever any act or thing is required of the Fund, the Board of Directors
or the Adviser hereunder to be done within any specified period of time, the
Fund, the Directors or the Adviser, as applicable, shall be entitled to such
additional period of time to do such act or thing as shall equal any period of
delay resulting from causes beyond the reasonable control of the Fund, the
Directors or the Adviser, including, without limitation, bank holidays, actions
of governmental agencies and financial crises of a nature materially affecting
the purchase and sale of Securities; provided, that this provision shall not
have the effect of relieving the Fund, the Directors or the Adviser from the
obligation to perform any such act or thing.
SECTION 10.3. APPLICABLE LAW
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, and all rights and remedies shall be governed by
such laws without regard to principles of conflict of laws.
SECTION 10.4. WAIVERS
No waiver of the provisions hereof shall be valid unless in writing and
signed by the party to be bound and then only to the extent therein set forth.
Except as specifically herein provided, no failure or delay by any party in
exercising any right or remedy hereunder shall operate as a waiver thereof, and
a waiver of a particular right or remedy on one occasion shall not be deemed a
waiver of any other right or remedy or a waiver on any subsequent occasion.
SECTION 10.5. CONSTRUCTION
(a) The captions used herein are intended for convenience of reference
only, and shall not modify or affect in any manner the meaning or interpretation
of any of the provisions of this Agreement.
23
(b) As used herein, the singular shall include the plural, the masculine
and feminine shall include the neuter, and the neuter gender shall include the
masculine and feminine, unless the context otherwise requires.
(c) The words "hereof," "herein" and "hereunder," and words of similar
import, when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.
SECTION 10.6. AMENDMENTS
This Agreement may be amended at any time by an instrument in writing
signed by a majority of the then Directors, when authorized to do so by a vote
of a "majority of the outstanding voting securities" of the Fund, as such term
is defined in the 1940 Act, except that amendments having the purpose of
changing the name of the Fund, supplying any omission, curing any ambiguity or
curing, correcting or supplementing any defective or inconsistent provision
contained herein or ensuring compliance with applicable laws or regulations or
making changes necessary or advisable under applicable tax laws or regulations
shall not require any authorization by vote of the Investors.
SECTION 10.7. EXECUTION
This Agreement may be executed in any number of counterparts, and all such
counterparts together shall constitute one agreement binding on all the
Investors.
SECTION 10.8. BINDING EFFECT
This Agreement shall be binding upon and shall inure to the benefit of the
respective heirs, executors, administrators, legal representatives, successors
and assigns of the parties hereto; provided that this provision shall not be
construed to permit any assignment or transfer which is otherwise prohibited
hereby.
SECTION 10.9. SEVERABILITY
If any one or more of the provisions contained in this Agreement, or any
application thereof, shall be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein and all other applications thereof shall not in any way be affected or
impaired thereby.
SECTION 10.10. CONFIDENTIAL INFORMATION
Each Investor shall not, and shall use reasonable efforts to ensure that
every person connected with or associated with each such Investor (including
attorneys, accountants and other advisors) shall not, disclose to any person,
firm or corporation (other than such Investor's attorneys, accountants and other
advisors for the purpose of monitoring or administering such Investor's
investment in the Fund, PROVIDED that such attorneys, accountants and other
advisors shall be required by such Investor to observe the provisions of this
Section 10.10 with respect to such confidential information) or use to the
detriment of the Fund or any of the Investors any confidential information
concerning the affairs of the Fund, unless required to do so by any
24
applicable law or to comply with applicable regulatory requirements or
guidelines, PROVIDED that such Investor provides the Fund with prior notice
sufficient to afford the Fund an opportunity to contest such disclosure or use
in any applicable judicial or administrative forum. Confidential information
concerning the Fund shall be construed broadly and shall include, without
limitation, information relating to direct or indirect investments made by the
Fund, financial reports by the Fund, correspondence of the Fund with Investors
and information communicated to the Fund by investment vehicles in which the
Fund has an interest. Each Investor agrees that monetary damage would not be a
sufficient remedy for breach of this Section 10.10 by such Investor, and that in
addition to any other remedies available to the Fund in respect of such breach,
the Fund shall be entitled to specific performance and injunctive or other
equitable relief as a remedy for any such breach. Notwithstanding the foregoing,
each Investor (and each employee, representative, or other agent of such
Investor) may disclose to any and all persons, without limitation of any kind,
the tax treatment and tax structure of an investment in the Fund and all
materials of any kind (including opinions or other tax analyses) that are
provided to Investors relating to such tax treatment and tax structure. For this
purpose, "tax structure" is limited to any facts relevant to the U.S. federal
income tax treatment of an investment in the Fund and does not include
information relating to the identity of the parties.
SECTION 10.11. POWER OF ATTORNEY
Each Investor, by its execution hereof, hereby irrevocably makes,
constitutes and appoints each of the Fund's Directors and officers and the
Adviser as such Investor's true and lawful agent and attorney-in-fact, with full
power of substitution and full power and authority in its name, place and stead,
acting singly, to make, execute, sign, acknowledge, swear to, record and file:
(i) the Certificate of Formation of the Fund and all amendments thereto required
by law or permitted by law and the provisions of this Agreement; (ii) all
certificates required or desirable in connection with distributions by the Fund
to the Investors and other certificates and instruments deemed advisable by any
Director or officer of the Fund or the Adviser to carry out the provisions of
this Agreement and any applicable law; (iii) all instruments that any Director
or officer of the Fund or the Adviser deems appropriate to reflect an amendment,
change or modification of this Agreement in accordance with this Agreement,
including, without limitation, the admission of additional Investors or the
substitution of assignees as Investors pursuant to the provisions of this
Agreement; (iv) all conveyances and other instruments or papers deemed advisable
by the Board of Directors, including, without limitation, those to effect a
termination of the Fund and those to effect a permitted Transfer of all or a
part of such Investor's Interest, or a repurchase of all or part of such
Investor's Interest pursuant to Section 6.3; (v) all other instruments,
documents or papers which may be required or permitted by law to be filed on
behalf of the Board of Directors or the Fund and which are of a ministerial or
administrative nature; and (vi) any election described in Section 9.2.
[INTENTIONALLY LEFT BLANK]
25
GROSVENOR REGISTERED MULTI-STRATEGY FUND (TI 1), LLC
OPERATING AGREEMENT
INVESTOR SIGNATURE PAGE
The undersigned, desiring to become an Investor of Grosvenor Registered
Multi-Strategy Fund (TI 1), LLC, a Delaware limited liability company (the
"FUND"), hereby becomes a party to the Operating Agreement of the Fund. The
undersigned hereby agrees to all the provisions of said Operating Agreement, and
agrees that this signature page may be attached to any counterpart copy of said
Operating Agreement.
Name(s) of Investor(s): ________________________________________
________________________________________
________________________________________
________________________________________
------------------------------------- ----------------------------------------
Signature of Investor or Authorized Signature of Investor or Authorized
Person Person
------------------------------------- ----------------------------------------
Name of Signatory (please print) Name of Signatory (please print)
------------------------------------- ----------------------------------------
Title of Authorized Person Title of Authorized Person
(please print) (please print)
------------------------------------- ----------------------------------------
Signature of Investor or Authorized Signature of Investor or Authorized
Person Person
------------------------------------- ----------------------------------------
Name of Signatory (please print) Name of Signatory (please print)
------------------------------------- ----------------------------------------
Title of Authorized Person Title of Authorized Person
(please print) (please print)
Dated: ______________
[INVESTOR SIGNATURE PAGE]
APPENDIX A
DEFINITIONS
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1940 ACT" shall mean the Investment Company Act of 1940, as amended.
"ADVISER" shall mean the Person or Persons selected from time to time by
the Board of Directors to provide investment advisory services or management
services to the Fund pursuant to an investment advisory or management agreement.
"AFFILIATE" shall mean, with respect to any Person, a Person controlling,
controlled by or under common control with such Person. For this purpose,
"control" shall have the definition given in the 1940 Act.
"AGREEMENT" shall be as defined in the preamble hereof.
"ALLOCATION RATIO" shall mean, with respect to an Investor from which the
Fund is repurchasing less than all of the Investor's Interest, the ratio of the
cash to be received by the Investor upon the repurchase over the Investor's
Available Capital Account Balance as of such repurchase date.
"AVAILABLE CAPITAL ACCOUNT BALANCE" shall mean an Investor's Capital
Account balance on a particular date, reduced by the Incentive Allocation, if
any, that would be due if such date were the end of an Incentive Period.
"BAIA" shall be as defined in SECTION 3.3.
"BOARD OF DIRECTORS" shall be as defined in SECTION 3.1.
"BUSINESS DAY" shall mean a day on which Fleet National Bank is open for
business.
"BYLAWS" shall mean the Bylaws of the Fund, as adopted by the Board of
Directors and as from time to time in effect.
"CAPITAL ACCOUNT" shall mean, as to each Investor, the capital account
maintained on the books of the Fund for such Investor.
"CAPITAL CONTRIBUTION" shall mean, as to each Investor as of the time of
determination, the sum of the Investor's initial capital contribution to the
Fund pursuant to SECTION 5.1 and further amounts contributed to the Fund by the
Investor. In no event shall the Capital Contribution of an Investor include any
cash paid or contributed to the Fund denominated in this Agreement or otherwise
as fees, expenses, interest or penalties, regardless of the treatment of such
amounts for federal income tax purposes.
"CERTIFICATE OF FORMATION" shall mean the certificate of formation and any
and all amendments and corrections thereto and restatements thereof filed on
behalf of the Fund with the Office of the Secretary of State of Delaware
pursuant to the Delaware Act.
"CLOSING DATE" shall mean the first date on which Persons are admitted as
Investors of the Fund.
"CODE" shall mean the United States Internal Revenue Code of 1986, as from
time to time amended, and any successor thereto.
"COMMISSION" shall mean the United States Securities and Exchange
Commission or any successor thereto.
"COVERED PERSON" shall be as defined in SECTION 3.5.
"DELAWARE ACT" shall mean the Delaware Limited Liability Company Act, 6
DEL.C. Section 18-101, et seq., as amended from time to time, and any
legislative enactment which may replace or supersede such Act.
"DIRECTOR" shall be as defined in SECTION 3.1.
"ESTIMATED VALUE" shall mean, in reference to an Investor's Interest in the
Fund as of a particular time, the amount distributable to the Investor upon a
hypothetical sale of all Securities then owned by the Fund at prices equal to
the most recent valuation of such Securities and a distribution of the proceeds
pursuant to ARTICLE 8.
"FISCAL PERIOD" shall mean the period commencing on the Closing Date, and
thereafter each period commencing on the day immediately following the last day
of the preceding Fiscal Period and ending on the first to occur of: (1) the next
occurring last business day of a calendar month; (2) the day preceding the next
occurring day on which a Capital Contribution is made to the Fund pursuant to
SECTION 5.1; (3) the next occurring day on which the Fund repurchases any
Interest or portion of an Interest of an Investor; (4) the dissolution of the
Fund; or (5) any such other date as determined by the Adviser.
"FISCAL YEAR" shall be as defined in SECTION 2.4.
"FUND" shall be as defined in the preamble hereof.
"FUND EXPENSES" shall mean all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with the Fund, or in connection
with the management thereof, other than the Management Fee, and including, but
not limited to, the Directors' compensation and such expenses and charges for
the services of the Fund's officers, employees, any investment adviser of the
Fund, any Director, principal underwriter, auditor, counsel, custodian, transfer
agent, shareholder servicing agent and such other agents or independent
contractors and such other expenses and charges (including Organizational
Expenses) as the Board of Directors may deem necessary or proper to incur.
"INCENTIVE ALLOCATION" shall be as defined in SECTION 5.5.
"INCENTIVE PERIOD" shall mean, with respect to each Investor's Interest,
the period commencing on the Closing Date, and thereafter each period commencing
on the day immediately following the last day of the preceding Incentive Period
and ending on the first to occur of: (i) the next occurring last business day of
a calendar year; (ii) the next repurchase of all or any portion of such
Investor's Interest; (iii) the withdrawal of a Special Member in
connection with such Special Member's ceasing to serve as Adviser or Subadviser,
as appropriate; or (iv) the dissolution of the Fund.
"INITIAL PAYMENT" shall be as defined in SECTION 6.3(D).
"INTEREST" means the entire ownership interest in the Fund (except as set
forth in Section 5.5(d)) at any particular time of an Investor, or other person
to whom an Interest or portion thereof has been Transferred pursuant to Section
6.1 hereof, including the rights and obligations of such Investor or other
person under this Agreement and the Delaware Act.
"INVESTOR" shall mean any Person who holds an interest in the Fund as a
"member," within the meaning of the Delaware Act. As used in this Agreement, the
term "Investor" shall include any Person designated as a "Special Member"
herein.
"LOSS CARRYFORWARD" shall be as defined in SECTION 5.5.
"MAJORITY VOTE OF INVESTORS" shall mean a vote or consent by all Investors
voting as a single class representing a majority of the combined Capital Account
balances of all the Investors (exclusive of the Special Members).
"MANAGEMENT AGREEMENT" shall be as defined in SECTION 3.3(B).
"MANAGEMENT FEE" shall be as defined in SECTION 3.3(B).
"MASTER FUND" shall mean an investment fund in which the Fund or a
Predecessor Fund invests all or substantially all of its assets in order to
pursue its investment objective.
"NET ASSETS" shall mean the total value of all assets of the Fund, less an
amount equal to all accrued debts, liabilities and obligations of the Fund.
"NET PROFIT" OR "NET LOSS" shall mean, for a Fiscal Period, the amount by
which the Net Assets as of the close of business on the last day of such Fiscal
Period (determined after giving effect to all fees and expenses, other than the
Management Fee, but before giving effect to any Incentive Allocation,
distributions and repurchases on such date) exceed (in the case of Net Profit)
or are less than (in the case of Net Loss) the Net Assets as of the commencement
of the same Fiscal Period (determined after giving effect to any distributions
or repurchases for the preceding Fiscal Period and Capital Contributions for the
current Fiscal Period) or, with respect to the initial Fiscal Period of the
Fund, at the close of business on the Closing Date, such amount to be adjusted
to exclude any items to be allocated among the Capital Accounts of Investors on
a basis which is not in accordance with their proportionate opening Capital
Account balances for such Fiscal Period.
"OPINION OF COUNSEL" shall mean an opinion in writing and in form and
substance reasonably satisfactory to the Adviser, signed by legal counsel either
chosen by the Adviser or, if chosen by an Investor, reasonably satisfactory to
the Adviser.
"ORGANIZATIONAL EXPENSES" shall mean expenses incurred by the Fund in
connection with its formation, its initial registration as a closed-end
investment company under the 1940 Act with the Commission and the initial
offering of Interests.
"PERSON" shall include a corporation, limited liability company,
association, joint venture, partnership, trust or individual.
"PREDECESSOR FUND" shall be as defined in Section 3.3(b).
"SECURITY" means any "security" (as that term is defined in Section
2(a)(36) of the 1940 Act), any contracts for forward or future delivery of any
such security, any currency or any commodity, all manner of derivative
instruments and any contracts based on any index or group of securities,
currencies or commodities, and any options on any of the foregoing.
"SPECIAL ADVISORY ACCOUNT" shall be as defined in SECTION 5.3.
"SPECIAL MEMBER" shall mean any Adviser and any Subadviser all or a portion
of whose compensation from the Fund shall be satisfied by means of an Incentive
Allocation from the Fund or any successor thereto.
"SUBADVISER" shall mean any Person or Persons who from time to time shall
have contracted with an Adviser to provide investment advisory services to the
Fund pursuant to an investment subadvisory agreement.
"SUBSCRIPTION AGREEMENT" shall mean, as to each Investor, the Subscription
Agreement delivered by such Investor and accepted by the Board of Directors (or
its designated agent) pursuant to which the Investor subscribed for an Interest
in the Fund.
"TAX MATTERS PARTNER" shall be as defined in SECTION 9.3.
"TRANSFER" shall mean the assignment, transfer, sale, mortgage,
encumbrance, pledge, conveyance or other disposition of all or any portion of an
Interest, including any right to receive any allocations and distributions
attributable to an Interest.
"TREASURY REGULATIONS" shall mean the federal income tax and procedure and
administration regulations as promulgated by the U.S. Treasury Department, as in
effect from time to time.
