Exhibit A
LIMITED LIABILITY COMPANY AGREEMENT
OF
FORTRESS PINNACLE INVESTMENT FUND LLC
This LIMITED LIABILITY COMPANY AGREEMENT (the "Agreement") of Fortress
Pinnacle Investment Fund LLC, a Delaware limited liability company (the
"Company"), is made as of the 10th day of October, 2002, by and among the
members set forth on the signature pages hereto and any other persons whose
names and addresses are listed from time to time as members on Schedule A
hereto, as members (each, a "Member" and collectively, the "Members") and has
been executed for the purpose of providing for the operation of the Company
pursuant to the provisions of the Delaware Limited Liability Company Act.
Accordingly, in consideration of the mutual covenants contained herein,
the Members agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the following
meanings and all such terms which relate to accounting matters shall be
interpreted in accordance with generally accepted accounting principles in
effect from time to time except as otherwise specifically provided herein:
"Act" means the Delaware Limited Liability Company Act, as at any time
now existing or in the future.
"Adjusted Capital Account Deficit" shall mean, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant Fiscal Period, after giving effect to the following
adjustments:
(i) Credit to such Capital Account any amounts which
such Member is obligated to restore or is deemed to be obligated to
restore pursuant to Treasury Regulations Sections 1.704-2(g) and
1.704-2(i)(5); and
(ii) Debit to such Capital Account the items
described in Treasury Regulations Sections 1.704-l(b)(2)(ii)(d)(4), (5)
and (6).
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Treasury Regulations Section
1.704-l(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Advisory Member" shall initially mean FIG Advisors LLC and thereafter
shall mean any Investment Advisor admitted as a Member pursuant to Section 6.3.
"Agreement" means this Limited Liability Company Agreement as
originally executed and as amended, modified, supplemented or restated from time
to time.
"Applicable Rate" shall mean a rate per annum equal, at the time of
determination, to the sum of (i) the highest "prime rate" then published in the
"Money Rates" section of The Wall Street Journal or in such successor
publication as shall be acceptable to the Board of Managers, and (ii) two
percent (2%).
"Appropriate Officer" means an officer of the Company appointed in
accordance with Section 4.6(d), who has not resigned, been removed, or become
Incapacitated.
"Board of Managers" shall mean those natural persons who at any given
time are serving as Managers of the Company in accordance with this Agreement.
"Capital Accounts" shall have the meaning specified in Section 7.2.
"Capital Commitment" shall mean, for any Member, the amount set forth
opposite his, her or its name on Schedule A hereto, as amended from time to time
(i) to take account of additional Capital Contributions made by Members, and
(ii) as otherwise provided in this Agreement; provided that Schedule A shall not
be amended with respect to any Member without the consent of such Member.
"Capital Contribution" shall mean with respect to any Member, the
amount contributed by such Member to the capital of the Company pursuant to this
Agreement.
"Capital Demand Date" shall have the meaning specified in Section
7.1(b).
"Capital Demand Notice" shall have the meaning specified in Section
7.1(b).
"Capital Investment" shall mean, with respect to any Member, the
Capital Contribution of such Member net of the return to such Member, by the
Company of any portion thereof.
"Certificate of Designation" shall mean the certificate of designations
setting forth the relative rights, powers, preferences, duties, liabilities and
obligations of the Preferred Interests attached hereto as Appendix B and
incorporated into and made a part of this Agreement.
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"Closing Date" shall have the meaning specified in Section 7.1(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provision of succeeding law).
"Company" means Fortress Pinnacle Investment Fund LLC, a Delaware
limited liability company .
"Company Expenses" means any expenses incurred by the Company during a
Fiscal Period including, but not limited to, fees and expenses of the Board of
Managers; fees of the Investment Adviser; expenses of registering the Shares and
Preferred Interests for sale under state securities laws and other expenses in
connection with the offering of the Shares and the Preferred Interests;
interest; taxes; fees and expenses of the Company's legal counsel and
independent accountants; fees and expenses of the Company's administrator,
transfer agent and custodian; expenses of printing and mailing Share and
Preferred Interest certificates (if any), reports to Members, notices to
Members, proxy statements; reports to regulatory bodies; brokerage and other
expenses in connection with the execution, recording and settlement of portfolio
security transactions; expenses in connection with the acquisition and
disposition of portfolio securities or the registration of privately issued
portfolio securities; costs of third party evaluations or appraisals of the
Company (or its assets) or its investments; expenses of membership in investment
company and other trade associations; expenses of fidelity bonding and other
insurance premiums; expenses of Members' meetings; indemnification costs and
expenses; and all of the Company's other business and operating expenses.
"Defaulting Member" shall have the meaning specified in Section 7.5(a).
"Disinterested Manager" shall mean any member of the Board of Managers
that is not an "interested person" of the Company as such term is defined in the
Investment Company Act.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Failed Capital Commitment" shall have the meaning specified in Section
7.5(b).
"Fair Market Value" shall mean the fair market value of the Company's
assets as determined by the Company's Valuation Policies.
"Fiscal Period" means the period commencing on the Closing Date, and
thereafter each period commencing on the day immediately following the last day
of the preceding Fiscal Period, and ending at the close of business on the first
to occur of the following dates:
(i) December 31 of such period; and
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(ii) any other day as determined in the sole and absolute
discretion of the Board of Managers.
"Fiscal Year" means the period commencing on the Closing Date and
ending on the first December 31st following the Closing Date, and thereafter
each period commencing on January 1st of each year and ending on December 31st
of each year (or on the date of a final distribution pursuant to Section 13.2),
unless the Board of Managers shall designate another fiscal year for the
Company.
"FPA" shall mean Fortress Pinnacle Acquisition LLC.
"40 Act Majority of Members" means the lesser of (a) the holders of 67%
or more of the outstanding Shares and Preferred Interests present at a meeting
of Members and entitled to vote at which the holders of more than 50% of the
outstanding Shares and Preferred Interests entitled to vote are present in
person or by proxy or (b) more than 50% of the outstanding Shares and Preferred
Interests entitled to vote.
"Indemnified Liabilities" shall have the meaning specified in Section
11.2(a).
"Indemnified Person" shall have the meaning specified in Section
11.2(a).
"Incapacity" shall mean as to any Person, the entry of an order for
relief in a bankruptcy proceeding ("bankruptcy"), entry of an order of
incompetence or insanity or the death, dissolution or termination (other than by
merger or consolidation), as the case may be, of such Person.
"Interest" shall mean a Member's rights and interest in the Company.
"Interested Manager" shall mean any member of the Board of Managers
that is an "interested person" of the Company as such term is defined in the
Investment Company Act, as the same may be amended from time to time.
"Investment Advisor" means initially FIG Advisors LLC and shall include
any person appointed by the Board of Managers pursuant to Section 6.1 that is
responsible for identifying, evaluating, structuring, monitoring and disposing
of the Company's investments and providing such other services for the Company.
"Investment Company Act" shall mean the Investment Company Act of 1940,
as amended.
"Investment Proceeds" shall have the meaning specified in Section 8.2.
"Majority in Interest of the Members" means Members who in the
aggregate own more than 50% of the outstanding Shares and Preferred Interests
entitled to vote on a matter.
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"Manager" shall mean a member of the Board of Managers of the Company.
"Member" means any Person admitted to the Company as a member of the
Company pursuant to the provisions of this Agreement and named as a member of
the Company in the books and records of the Company, including any Person
admitted as a Substituted Member, in such Person's capacity as a member of the
Company. "Members" means two or more Persons acting in their capacity as members
of the Company.
"NAV" shall have the meaning specified in Section 7.8.
"Net Loss" shall mean the net loss of the Company with respect to a
Fiscal Period, as determined for federal income tax purposes, provided that such
loss shall be decreased by the amount of all income during such period that is
exempt from federal income tax and increased by the amount of all expenditures
made by the Company during such period that are not deductible for federal
income tax purposes and that do not constitute capital expenditures.
"Net Profit" shall mean the net income of the Company with respect to a
Fiscal Period, as determined for federal income tax purposes, provided that such
income shall be increased by the amount of all income during such period that is
exempt from federal income tax and decreased by the amount of all expenditures
made by the Company during such period that are not deductible for federal
income tax purposes and that do not constitute capital expenditures.
"Nonrecourse Deductions" shall have the meaning set forth in Treasury
Regulations Section 1.704-2(b)(1).
"Nonrecourse Liability" shall have the meaning set forth in Treasury
Regulations Section 1.752-l(a)(2).
"Partner Nonrecourse Debt Minimum Gain" shall have the meaning set
forth in Treasury Regulations Section 1.704-2(i)(2).
"Partnership Minimum Gain" shall have the meaning set forth in Treasury
Regulations Section 1.704-2(b)(2).
"Pass-Through Member" shall have the meaning set forth in Section 10.5.
"Permitted Transfer" shall have the meaning specified in Section
9.2(a).
"Person" means any natural person, individual, corporation,
partnership, trust, estate, limited liability company, custodian, unincorporated
organization or association or any other entity.
"Portfolio Company" shall mean FPA.
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"Portfolio Investments" means investments in FPA and Short-Term
Investments.
"Preferred Interest" shall mean a preferred limited liability company
equity interest in the Company with the relative rights, powers, preferences,
duties, liabilities and obligations set forth in the Certificate of Designations
and an aggregate liquidation preference not to exceed US$120,000. After the
issuance of Shares, holders of Preferred Interests will have one vote per
Preferred Interest on any matter on which Preferred Interests are entitled to
vote.
"Preferred Member" shall mean any Member that holds a Preferred
Interest.
"Qualified Income Offset" shall have the meaning set forth in Treasury
Regulations Section 1.704-1(b)(2).
"Real Estate-Related Assets" shall mean any of the following, whether
denominated in dollars or in another currency, whether located in the United
States or a foreign jurisdiction and howsoever interests therein may be
acquired: (a) mortgage loans and non-mortgage receivables; (b) securities
secured by or evidencing interests in assets described in clause (a); (c) fee or
leasehold interests in real properties, whether improved or unimproved, whether
commercial, residential or multifamily; (d) debt interests (whether secured or
unsecured, recourse or non- recourse, senior or subordinated, convertible or
otherwise), equity interests (whether preferred or common) and derivative
interests in entities (whether in the form of partnerships, limited liability
companies, trusts, corporations or otherwise) the assets of which consist
primarily of assets described in clauses (a), (b) or (c) hereof, or in entities
that otherwise have substantial assets of the type described in clauses (a), (b)
or (c) hereof or in entities that provide services to or management in
connection with any other asset included in this definition; (e) options,
including without limitation, rights of first refusal, rights of first offer,
and puts or calls with respect to in any of the foregoing; and (f) xxxxxx
relating to any of the foregoing.
"Regulatory Allocations" shall have the meaning set forth in Section
7.3(e).
"Share" means a limited liability company equity interest in the
Company (other than the interests of the Advisory Member and the interests of
holders of Preferred Interests) and includes fractions of Shares as well as
whole Shares. Shares shall have an initial NAV of $500 per Share.
"Short-Term Investments" means United States government and agency
obligations with maturities of not more than one (1) year and one (1) day from
the date of acquisition, commercial paper with maturities of not more than six
(6) months and one (1) day from the date of acquisition and having a rating
assigned to such commercial paper by Standard & Poor's Ratings Services, a
Division of the XxXxxx-Xxxx Companies, Inc. ("S&P") or Xxxxx'x Investor Service,
Inc. ("Moody's") (or, if neither such organization shall rate such commercial
paper at such time, by any nationally recognized statistical rating organization
in the United States of America) equal to one of the two highest commercial
paper ratings assigned by such organization, it being understood that as of the
date hereof such ratings by S&P are "P1" and "P2" and such ratings by
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Moody's are "Al" and "A2," and interest bearing deposits in dollars in United
States banks with an unrestricted surplus of at least two hundred fifty million
dollars ($250,000,000), maturing within one (1) year.
"Subscription Agreement" means a contract for the purchase of Shares or
Preferred Interests.
"Substituted Member" means any Person admitted to the Company as a
Member pursuant to the provisions of Section 9.5 and shown as a Member in the
books and records of the Company.
"Supermajority of Members" means Members who in the aggregate own more
than 67% of the outstanding Shares and Preferred Interests entitled to vote on a
matter.
"Tax Matters Member" shall have the meaning set forth in Section 10.5.
"Transfer" shall have the meaning specified in Section 9.2(a).
"Treasury Regulations" shall mean the income tax regulations, including
temporary regulations, promulgated under the Code, as the same may be amended
hereafter from time to time (including corresponding provisions of succeeding
income tax regulations).
"Unpaid Capital Obligation" shall mean an amount equal to the Capital
Commitment of a Member that has not at the time been contributed to the Company.
"Valuation Policies" shall mean the valuation policies adopted by the
Board of Managers at the Company's organizational meeting, as amended from time
to time.
ARTICLE II
GENERAL PROVISIONS
2.1 Formation. Fortress Pinnacle Investment Fund LLC has been
formed as a limited liability company under the laws of the State of Delaware by
the filing of the Certificate of Formation on the 24th day of July, 2002
pursuant to the Act. Except as expressly provided herein to the contrary, the
rights and obligations of the Members and the administration and termination of
the Company shall be governed by the Act.
2.2 Name. The name of the Company is "Fortress Pinnacle
Investment Fund LLC". The name of the Company may be changed from time to time
by the Board of Managers, except that the name of the Company shall not be
changed to include the name of any Member without that Member's prior written
consent.
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2.3 Organizational Certificates and other Filings. If
requested by the Managers, the Members shall promptly execute all certificates
and other documents, and any amendments or renewals of such certificates and
other documents as thereafter reasonably required, consistent with the terms of
this Agreement, necessary for the Board of Managers to accomplish all filing,
recording, publishing and other acts as may be appropriate to comply with all
requirements for (a) the formation, continuation and operation of the Company as
a limited liability company under the laws of the State of Delaware, (b) if the
Board of Managers deems it advisable, the operation of the Company as a limited
liability company, in all jurisdictions where the Company proposes to operate
and (c) all other filings required under any applicable law, rule or regulation
to be made by the Company. Each Member hereby grants to the Board of Managers a
power of attorney, in the event such Member fails to comply with the foregoing
provisions of this Section 2.3, to execute all such certificates and other
documents, and amendments or renewals of such certificates and other documents
provided for in this Section 2.3, in the name and on behalf of such Member as
the Board of Managers deems appropriate, the foregoing power of attorney being
irrevocable and coupled with an interest. Additionally, Xxxxxx X. Xxxxxxx, of
the Investment Advisor and Xxxxxxx Xxxxxxx of the New York, New York office and
Xxxx Xxxxx and Xxxxxxx Xxxxxx of the Wilmington, Delaware office of Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP are authorized to execute and file the
Certificate on behalf of the Company, and, at the request of the Board of
Managers, to publish any certificates contemplated in this Section 2.3 for so
long as such persons are employed by the identified firms and are acting on
behalf of the Company.
2.4 Investment Objective. The Company has been organized for
the purpose of seeking capital appreciation and income by (i) acquiring, owning,
holding and selling or otherwise transferring limited liability company
interests in FPA; (ii) making Short-Term Investments; and (iii) engaging in all
activities and transactions as the Board of Managers may deem reasonably
necessary, advisable or incidental in connection therewith.
2.5 Principal Place of Business. The Company shall maintain
its office and principal place of business at, and its business shall be
conducted from, 1251 Avenue of the Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000, or such place or places inside the United States as the Board of Managers
may determine.
2.6 Registered Office and Registered Agent. The address of the
Company's registered office and registered agent for service of process in the
State of Delaware is The Corporation Trust Company, The Corporation Trust
Company, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx, Xxxxxxxx 00000. The
address of the Company's registered office and registered agent for service of
process in the State of Delaware of the Company may be changed from time to time
by the Board of Managers.
2.7 Term. Unless terminated earlier in accordance with the
Act, the Company shall terminate on the earlier to occur of (1) the first
anniversary of the termination of FPA
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(provided that for purposes of this Section 2.7, the merger, amalgamation, sale
of substantially all of the assets of or other combination of Pinnacle Holdings
Inc. with or in to FPA or any of its affiliates shall not be deemed to be a
termination of FPA), or (2) a determination to terminate the Company by a vote
of the holders of 75% of the then outstanding Shares and 75% of the then
outstanding Preferred Interests.
2.8 Title to Company Property. All property owned by the
Company, whether real or personal, tangible or intangible, shall be owned by the
Company as an entity, and no Member or Manager, individually, shall have title
to or any interest in such property.
2.9 No State Law Partnership. The Members intend that the
Company not be a partnership (including a limited partnership) or joint venture
and that no Member or Manager be a partner or joint venturer of any other Member
or Manager for any purposes other than applicable tax laws. This Agreement may
not be construed to suggest otherwise. Notwithstanding the foregoing, the
Members intend that the Company shall be treated as a partnership for tax
purposes.
2.10 No Liability of Members. All debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company, and no
Member shall be obligated personally for any such debt, obligation or liability
of the Company solely by reason of being a Member.
ARTICLE III
MEMBERS; CAPITAL STRUCTURE; AND MEETINGS
3.1 Members. The name, address and Capital Commitment of each
initial Member is as set forth on Schedule A hereto. From time to time, the
books and records of the Company shall, and Schedule A hereto shall, be amended
to reflect the name, address and Capital Commitment of each Member (including,
as permitted by this Agreement, adding the name, address and Capital
Contribution of each additional Member who is admitted or becomes a Substituted
Member pursuant to the transfer of Interests and deleting the name, address and
Capital Commitment of Persons ceasing to be Members). The Members shall have the
management and voting rights set forth in this Agreement and provided under the
Act and the Investment Company Act and shall have all rights to any allocations
and to any distributions as may be authorized and set forth under this Agreement
and under the Act.
3.2 Capital Structure.
(a) Subject to the terms of this Agreement, the Company is
authorized to issue limited liability company interests in the Company
designated as "Shares," which shall constitute an unlimited number of limited
liability company interests under the Act. The relative rights,
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powers, preferences, duties, liabilities and obligations of holders of the
Shares shall be as set forth herein. Other than as set forth in this Agreement,
each Share shall be identical in all respects with each other Share. Subject to
the terms of this Agreement, the Company is authorized to issue limited
liability company interests in the Company designated as "Preferred Interests"
with an aggregate liquidation preference not to exceed $120,000, which shall
have the relative rights, powers, preferences, duties, liabilities and
obligations set forth in the Certificate of Designation. The capital structure
of the Company shall consist of just the Shares, the Advisory Member's interest
pursuant to Section 7.3 herein and the Preferred Interests.
(b) The Company is authorized to issue Shares to any Person at
NAV in exchange for cash capital contributions.
(c) In further consideration for services provided and
expenses incurred by FIG Advisors LLC in connection with the organization of the
Company, the Company is authorized, and shall issue and deliver, to FIG Advisors
LLC 100 Preferred Interests, which Preferred Interests shall be duly authorized,
validly issued, fully paid and nonassessable without any further consideration
paid by, or services provided by, FIG Advisors LLC.
(d) The number of Shares and Preferred Interests issued to
Members shall be listed in the membership records of the Company, which shall be
amended from time to time by the Company as required to reflect issuances of
Shares and Preferred Interests to new Members, changes in the number of Shares
and Preferred Interests held by Members and to reflect the addition or cessation
of Members. The number of Shares and Preferred Interests held by each Member
shall not be affected by any (i) issuance by the Company of Shares or Preferred
Interests to other Members or (ii) change in the Capital Account of such Member
(other than such changes to reflect additional Capital Contributions from such
Member in exchange for new Shares or Preferred Interests).
(e) In the sole discretion of the Board of Managers, the
issued and outstanding Shares and Preferred Interests may be represented by
certificates.
3.3 Issuance of Shares and Preferred Interests. The Board of
Managers in their discretion may cause the Company to issue Shares and Preferred
Interests to Persons from whom the Company has accepted, on or prior to the
Closing Date, binding agreements to subscribe therefor, as the case may be. No
additional Shares or Preferred Interests may be issued after the Closing Date
without the consent of Majority in Interest of the Members. All issuances of
Shares and Preferred Interests shall be in accordance with the terms of the
relevant forms of subscription agreements. The maximum aggregate dollar amount
of Shares for which subscription agreements may be accepted is $100 million. The
maximum aggregate dollar amount of Preferred Interests for which Subscription
Agreements may be accepted is $120,000.
3.4 No Management Responsibility. No Member, other than a
Manager, Appropriate Officer or Advisory Member, shall participate in the
management or control of the
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business of or transact any business for the Company, but may exercise the
voting rights and powers of a Member set forth in this Agreement. All management
responsibility is vested in the Board of Managers. The Members hereby consent to
the taking of any action by the Board of Managers, Appropriate Officers and the
Advisory Member contemplated under this Agreement or otherwise permitted under
the Act.
3.5 No Authority to Act. No Member, other than a Manager, an
Appropriate Officer and the Advisory Member, shall have the power to represent,
act for, sign for, or to bind the Company. All authority to act on behalf of the
Company is vested in the Board of Managers, Appropriate Officers, and the
Advisory Member. The Members consent to the exercise by the Board of Managers,
Appropriate Officers and the Advisory Member of the powers conferred on them
under this Agreement or otherwise permitted under the Act.
3.6 No Preemptive Rights. Holders of Shares will have no
preemptive rights with respect to the issuance of any membership or other equity
interest in the Company or any other securities of the Company convertible into,
or carrying rights or options to purchase any such membership or other equity
interest.
3.7 Redemption or Repurchase Rights. Except as otherwise
provided in this Agreement, the Company shall not redeem or repurchase any
Member's Shares and no Member shall have the right to withdraw from the Company,
except as provided in Article IX, or to receive any return of any Capital
Commitment, except upon dissolution of the Company pursuant to Article XIII.
3.8 Member Meetings. Unless required by the Act or other
applicable law, the Company shall not be required to hold an annual meeting of
Members or any other regular, periodic meetings of members. Special meetings of
the Members may be called to consider any matter requiring the consent of all or
any of the Members pursuant to this Agreement. Special meetings of the Members
may be called by the Board of Managers or by Members who are the holders of not
less than 51% of the outstanding Shares. Meetings so requested by Members shall
be held no less than twenty (20) days nor more than sixty (60) days after
receipt of the request.
3.9 Place of Meetings. The Board of Managers may designate any
place within the United States as the place of meeting for any annual meeting or
for any special meeting called by the Managers. If no designation is made, or if
a special meeting be otherwise called, the place of meeting shall be the
principal executive offices of the Company. Members may participate in a meeting
in person, by proxy or by means of a telephone conference call or similar
communications equipment by which all persons participating in the meeting can
hear and speak to each other at the same time, and any such participation in a
meeting shall constitute presence in person of such Member at such meeting.
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3.10 Notice of Members' Meetings.
(a) Written notice stating the place, day, and hour of the
meeting and, in case of a special meeting, the purpose for which the meeting is
called shall be delivered not less than ten days nor more than ninety days
before the date of the meeting, either personally, by facsimile, electronic mail
or by postal mail, by or at the direction of the Board of Managers or Member
calling the meeting to each Member of record entitled to vote at such meeting.
(b) Notice to Members, if mailed by post, shall be deemed
delivered as to any Member when deposited in the United States mail, addressed
to the Member, with postage prepaid, but, if two successive letters mailed to
the last-known address of any Member are returned as undeliverable, no further
notices to such Member shall be necessary until another address for such Member
is made known to the Company. Notice to Members, if by facsimile or by
electronic mail, shall be deemed delivered upon receipt of a confirmation of
transmission.
(c) At an adjourned meeting, the Company may transact any
business which might have been transacted at the original meeting without
additional notice.
3.11 Waiver of Notice.
(a) When any notice is required to be given to any Member of
the Company under the provisions of this Agreement, a waiver thereof in writing
signed by the Person entitled to such notice, whether before, at, or after the
time stated therein, shall be equivalent to the giving of such notice.
(b) By attending a meeting, a Member:
(i) Waives objection to lack of notice or defective
notice of such meeting unless the Member, at the beginning of the
meeting, objects to the holding of the meeting or the transacting of
business at the meeting; and
(ii) Waives objection to consideration at such
meeting of a particular matter not within the purpose or purposes
described in the meeting notice unless the Member objects to
considering the matter when it is presented.
3.12 Record Dates. For the purpose of determining the Members
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to participate in any dividend or distribution, or for the
purpose of any other action, the Managers may fix a date and time at least ten
(10) days and not more than ninety (60) days prior to the date of any meeting of
Members or other action as the date and time of record for the determination of
Members entitled to vote at such meeting or any adjournment thereof or to be
treated as Members of record for purposes of such other action, and any Member
who was a Member at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or to be treated
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as a Member of record for purposes of such other action, even though he has
since that date and time disposed of his Shares or Preferred Interests, and no
Member becoming such after that date and time shall be so entitled to vote at
such meeting or any adjournment thereof or to be treated as a Member of record
for purposes of such other action.
3.13 Voting Record. The Person having charge of the membership
records of the Company shall make, at least two days before such meeting of
Members, a complete record of the Members entitled to vote at each meeting of
Members or any adjournment thereof, with the address of each. The record, for a
period of two days prior to such meeting, shall be kept on file at the principal
executive offices of the Company, and shall be subject to inspection by any
Member for any proper purpose germane to the meeting at any time during usual
business hours. Such records shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any Member during
the whole time of the meeting for the purposes thereof. The original membership
records shall be the prima facie evidence as to who are the Members entitled to
examine the record or transfer books or to vote at any meeting of Members.
3.14 Proxies, etc. At any meeting of Members, any holder of
Shares or Preferred Interests entitled to vote thereat may vote by properly
executed proxy, provided that no proxy shall be voted at any meeting unless it
shall have been placed on file with a Secretary, or with such other officer of
the Company as a Secretary may direct, for verification prior to or
simultaneously with the time at which such vote shall be taken. Pursuant to a
resolution of a majority of the Managers, proxies may be solicited in the name
of one or more Managers or one or more of the officers of the Company. Only
Members of record shall be entitled to vote. When any Share or Preferred
Interest is held jointly by several persons, any one of them may vote at any
meeting in person or by proxy in respect of such Share or Preferred Interest,
but if more than one of them shall be present at such meeting in person or by
proxy, and such joint owners or their proxies so present disagree as to any vote
to be cast, such vote shall not be received in respect of such Share or
Preferred Interest, as the case may be. A proxy purporting to be executed by or
on behalf of a Member shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the challenger. If
the holder of any such Share or Preferred Interest is a minor or a person of
unsound mind, and subject to guardianship or to the legal control of any other
person as regards the charge or management of such Share or Preferred Interest,
he may vote by his guardian or such other person appointed or having such
control, and such vote may be given in person or by proxy.
3.15 Voting; Quorum of Members; Vote Required. (a) Except as
otherwise set forth herein, each Member shall be entitled to one vote per Share
or Preferred Interest upon all matters upon which such Member shall have the
right to vote based upon the membership records of the Company. The presence, in
person or by proxy, of Members holding more than 50% of the Shares and Preferred
Interests entitled to vote at the time of the action taken constitutes a quorum
at any meeting of holders of Members. If a quorum is present, the affirmative
vote, in person or by proxy, of the owners of more than 50% of the Shares and
Preferred Interests then outstanding and represented in person or by proxy at
the meeting and entitled to vote on the
13
subject matter shall be the act of the Members, unless the vote of a greater
proportion or number or voting by classes is required by the Act, the Investment
Company Act or this Agreement. If a quorum is not represented at any meeting of
the Members, such meeting may be adjourned.
(b) If the Preferred Interests are required to vote as a
separate class under the Investment Company Act, the presence, in person or by
proxy, of Members holding more than 50% of the Preferred Interests entitled to
vote at the time of the action taken constitutes a quorum at any meeting of
holders of Preferred Interests. If a quorum is present, the affirmative vote, in
person or by proxy, of the owners of more than 50% of the Preferred Interests
then outstanding and represented in person or by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the holders of
Preferred Interests, unless the vote of a greater proportion or number is
required by the Act, the Investment Company Act or this Agreement. If a quorum
is not represented at any meeting of the Members, such meeting may be adjourned.
The Members shall have the following voting rights:
(a) to the extent required by the Investment Company
Act or as otherwise provided for herein, the right to elect Managers by the
affirmative vote of a plurality of votes cast;
(b) as provided herein, the right to remove Managers
for cause by the affirmative vote of a Supermajority of Members at a meeting of
Members duly called for such purpose;
(c) to the extent required by the Investment Company
Act, the right to approve any proposed investment advisory agreement or to
disapprove and terminate any such existing agreement by the affirmative vote of
a 40 Act Majority of Members; provided, however, in the case of approval that
such agreement is also approved by a majority of Managers who are not parties to
such contract or "interested persons" of any such party as such term is defined
in the Investment Company Act, as the same may be amended from time to time;
(d) to the extent required by the Investment Company
Act, the right to ratify the appointment of the independent accountants of the
Company by the affirmative vote of more than 50% of the Shares and/or Preferred
Interests then outstanding and represented in person or by proxy at the meeting
and entitled to vote; provided, however, that such appointment is approved by a
majority of the Disinterested Managers;
(e) to the extent required by the Investment Company
Act, the right to terminate the Company's independent accountants by the
affirmative vote of a 40 Act Majority of Members;
(f) to the extent required by Section 13.2, the
selection of a liquidator by the affirmative vote of a Majority of Interests of
the Members;
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(g) to the extent required by Section 14.1 or 14.3,
the right to approve certain amendments to this Agreement by the affirmative
vote of a Majority of Interests of the Members;
(h) so long as the Company is subject to the
provisions of the Investment Company Act, the right to approve any other matters
that the Investment Company Act requires to be approved by the Members by the
affirmative vote of Members as specified in the Investment Company Act;
(i) with respect to any merger, consolidation, other
business combination, voluntary bankruptcy, liquidation or other dissolution of
the Company, or the entering into of any agreement contemplating any of the
foregoing; the right to approve by the affirmative vote of a Majority of
Interests of the Members; and
(j) with respect to the disposition of all or
substantially all of the Company's assets, the rights to approve by the
affirmative vote of a Majority of Interests of the Members.
3.16 Inspectors. The Board of Managers may, in advance of any
meeting of shareholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspector shall not be so appointed or if any
of them shall fail to appear or act, the chairman of the meeting may, and on the
request of any shareholder entitled to vote thereat shall, appoint inspectors.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath to execute faithfully the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of Shares and Preferred Interests outstanding and the
voting powers of each, the number of Shares and Preferred Interests represented
at the meeting, the existence of a quorum, the validity and effect of proxies,
and shall receive votes, ballots or consents, hear and determine all challenges
and questions arising in connection with the right to vote, count and tabulate
all votes, ballots or consents, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all shareholders. On
request of the chairman of the meeting or any shareholder entitled to vote
thereat, the inspectors shall make a report in writing of any challenge, request
or matter determined by them and shall execute a certificate of any fact found
by them. No Manager or candidate for the office of Manager shall act as
inspector of an election of managers. Inspectors need not be shareholders.
3.17 No Consent Required. Notwithstanding the foregoing, no
vote, approvals, or other consent shall be required of the Members to amend this
Agreement in any of the following respects: (i) to reflect any change in the
amount of the Capital Contribution of any Member provided that the affected
Member agrees in writing to the change; (ii) to admit a Substituted Member or
withdraw a Member in accordance with the terms of this Agreement; (iii) to
correct any false or erroneous statement, or to make a change in any statement
in order that such statement shall accurately represent the agreement among the
Members in this Agreement provided
15
that if a Member is adversely affected by such a change, that Member has
consented to the change; (iv) a change that is necessary to qualify the Company
as a limited liability company under the laws of any state or that is necessary
or advisable in the opinion of the Board of Managers to assure that the Company
will not be treated as a publicly traded partnership or otherwise treated as a
corporation for federal income tax purposes; and (v) to reflect any change in
the name or principal place of business of the Company in accordance with the
terms of this Agreement; provided that such change or Amendment has been
approved by a majority of the Board of Managers and a majority of the
Disinterested Managers.
3.18 Limitations on Requirements for Consents. Notwithstanding
any other provisions of this Agreement, but subject to the requirements of the
Investment Company Act, in the event that counsel for the Company or counsel
designated by Members holding not less than 10% of the Shares owned by all
Members shall have delivered to the Company an opinion to the effect that either
the existence of a particular consent right or particular consent rights or the
exercise thereof will violate the provisions of the Act or the laws of the other
jurisdictions in which the Company is then formed or qualified, will adversely
affect the limited liability of the Members, or will adversely affect the
classification of the Company as a partnership for federal or state income tax
purposes a special meeting of Members shall be immediately called to allow the
Members to review the opinion and remedy the matter on which the opinion has
been delivered. Should the special meeting of Members fail to remedy the matter
then, notwithstanding the other provisions of this agreement, the Members shall
no longer have such right, or shall not be entitled to exercise such right in
the instant case, as the case may be.
3.19 Informal Action by Members. Any action that may be taken
by Members at a meeting of Members may be taken without a meeting without prior
notice and without a vote if consent in writing setting forth the action to be
taken is signed by the Members holding not less than the minimum percentage of
Shares and/or Preferred Interests that would be necessary to authorize or take
such action at a meeting at which all the Members were present and voted;
provided that all Members receive at least twenty (20) days notice of any action
proposed to be taken by written consent. Members may waive this notice
requirement. Written consent by the Members has the same force and effect as a
vote of such Members held at a duly held meeting of the Members and may be
stated as such in any document.
3.20 Voting by Ballot. Voting on any question or in any
election may be by voice vote unless the presiding officer shall order or any
Member shall demand that voting be by ballot.
3.21 No Cumulative Voting. No Members shall be entitled to
cumulative voting in any circumstance.
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ARTICLE IV
MANAGEMENT OF COMPANY
4.1 Board of Managers. The number of Managers shall be one (1)
or such other number of Managers as shall be fixed from time to time by a
written instrument signed by a majority of the Managers; provided, however, that
if the number of Managers is one (1), such Manager shall be a Disinterested
Manager; and provided further, that if the number of Managers is greater than
one (1), it shall not be less than three (3), and more than 50% of said Managers
shall be Disinterested Managers. The initial Manager shall be Xxxxxx X. Xxxxx.
The Managers shall hold office until their successors are approved and elected,
unless they are sooner removed pursuant to Section 4.3 or sooner resign pursuant
to Section 4.2 or sooner are incapacitated pursuant to Section 4.4, as the case
may be. Managers may succeed themselves in office. No reduction in the number of
Managers shall have the effect of removing any Manager from office unless
specially removed pursuant to Section 4.3 at the time of such decrease. Subject
to the requirements of the Investment Company Act, the Board of Managers may
designate successors to fill vacancies created by an authorized increase in the
number of Managers, the resignation of a Manager pursuant to Section 4.2, the
removal of a member of the Board of Managers pursuant to Section 4.3 or the
incapacity of a Manager pursuant to Section 4.4. In the event that no Managers
remain, the Appropriate Officers shall continue the business of the Company and
shall perform all duties of the Managers under this Agreement and shall as soon
as practicable call a special meeting of Members for the purpose of approving
and electing Managers. When Managers are subject to election by Members,
Managers are elected by a plurality of the Shares voting at the meeting.
Managers may, but need not be, admitted to the Company as Members to act in
their capacity as Managers.
4.2 Resignation by a Manager. A Manager may voluntarily resign
from the Board of Managers upon the giving of notice thereof to the Company,
such resignation to take effect upon receipt of such notice by the Company or
such later date as set forth in such notice.
4.3 Removal of a Manager; Designation of a Successor Manager.
(a) Any Manager may be removed either: (i) for cause
by the action of at least two-thirds of the remaining Managers, including in the
case of a Disinterested Manager 50% or more of the remaining Disinterested
Managers; (ii) by failure to be re-elected by the Members; or (iii) with or
without cause by the affirmative vote of a Supermajority of Members. The removal
of a Manager shall in no way derogate from any rights or powers of such Manager,
or the exercise thereof, or the validity of any actions taken pursuant thereto,
prior to the date of such removal.
(b) The remaining Managers shall designate a
successor Manager to fill any vacancy existing in the number of Managers fixed
pursuant to Section 4.1 resulting from removal of a Manager. Any such successor
Manager shall hold office until his or her successor
17
has been approved and elected. The designation of a Disinterested Manager shall
be made by the remaining Disinterested Manager(s).
(c) Any removal of a Manager shall not affect any
rights or liabilities of the removed Manager that matured prior to such removal.
4.4 Incapacity of a Manager.
(a) In the event of the Incapacity of a Manager, the
business of the Company shall be continued with the Company property by the
remaining Managers. The remaining Managers shall, within 90 days, call a meeting
of the Board of Managers for the purpose of designating a successor Manager. Any
such successor Manager shall hold such office until his or her successor has
been approved and elected. The Managers shall make such amendments to the
certificate of formation and execute and file for recordation such amendments or
other documents or instruments as are necessary and required by the Act or this
Agreement to reflect the fact that such Incapacitated Manager has ceased to be a
Manager, and the appointment of such successor Manager.
(b) In the event of the Incapacity of all Managers,
the Investment Advisor shall as promptly as practicable convene a meeting of
Members for the purpose of electing new Managers nominated by the Advisory
Member. Upon the Incapacity of a Manager, the Manager shall immediately cease to
be a Manager.
(c) Any such termination of a Manager shall not
affect any rights or liabilities of the Incapacitated Manager that matured prior
to such Incapacity.
4.5 Continuation. In the event of the withdrawal, removal, or
retirement of a Manager, the Company shall not be dissolved and the business of
the Company shall be continued by the remaining Managers.
4.6 Board of Managers Powers. Subject to the terms hereof, the
Managers shall have full and complete discretion in the management and control
of the affairs of the Company, shall make all decisions affecting Company
affairs and shall have all of the rights, powers, and obligations with respect
to the Company as the directors of a corporation have with respect to a
corporation under the Delaware General Corporations Law. The Board of Managers
shall provide overall guidance and supervision with respect to the operations of
the Company, shall perform all duties imposed on the directors of registered
investment companies by the Investment Company Act, and shall monitor the
activities of the Appropriate Officers, the Investment Advisor and any
administrator to the Company. Except as otherwise expressly provided in this
Agreement, the Board of Managers is hereby granted the right, power, and
authority to do on behalf of the Company all things which, in its sole judgment,
are necessary or appropriate to manage the Company's affairs and fulfill the
purposes of the Company. Any determination as to what is in the interests of the
Company made by the Managers in good faith shall be conclusive.
18
In construing the provisions of the Agreement, the presumption shall be in the
favor of a grant of power to the Managers. The powers of the Managers include,
by way of illustration and not by way of limitation, the power and authority
from time to time to do the following:
(a) invest the assets of the Company or cause the
assets of the Company to be invested only in such investments as are consistent
with the Company's purpose as set forth in Section 2.4 hereof;
(b) incur all expenses permitted by this Agreement;
(c) to the extent that funds are available, cause to
be paid all expenses, debts, and obligations of the Company;
(d) appoint and dismiss such Persons to serve as
officers of the Company ("Appropriate Officers") with such powers and authority
as may be provided to such Persons by the Board of Managers or by this
Agreement;
(e) employ and dismiss from employment such agents,
employees, managers, accountants, attorneys, consultants, registrars, transfer
agents, custodians, paying agents, administrations and other Persons necessary
or appropriate to carry out the business and affairs of the Company, whether or
not any such Persons so employed are affiliated persons of any Manager, and to
pay such compensation to such Persons as is competitive with the compensation
paid to unaffiliated Persons in the area for similar services;
(f) subject to the indemnification provisions in this
Agreement, pay, extend, renew, modify, adjust, submit to arbitration, prosecute,
defend, or settle, upon such terms it deems sufficient, any obligation, suit,
liability, cause of action, or claim (including, in consultation with the Tax
Matters Member in accordance with Section 10.5, tax audits), either in favor of
or against the Company;
(g) sell Shares pursuant to the Subscription
Agreements;
(h) sell Preferred Interests in an aggregate
principal amount of up to US$120,000;
(i) borrow money in accordance with Section 7.9;
(j) establish valuation principles and periodically
apply such principles to the Company's investment portfolio;
(k) to the extent permitted by the Investment Company
Act, designate and appoint one or more agents for the Company who shall have
such authority as may be conferred upon them by the Board of Managers and who
may perform any of the duties of, and exercise any of the powers and authority
conferred upon, the Board of Managers hereunder including,
19
but not limited to, designation of one or more agents as authorized signatories
on any bank accounts maintained by the Company;
(l) subject to the other provisions of this
Agreement, to enter into, make, and perform such contracts, agreements, and
other undertakings, and to do such other acts, as it may deem necessary or
advisable for, or as may be incidental to, the conduct of the business
contemplated by this Agreement, including, without in any manner limiting the
generality of the foregoing, contracts, agreements, undertakings, and
transactions with any Member, Manager, Appropriate Officer or Investment Advisor
or with any other person, firm, or corporation having any business, financial,
or other relationship with any Member, Manager, Appropriate Officer or
Investment Advisor, provided, however, such transactions with such Persons and
entities (i) shall only be entered into to the extent permitted under the
Investment Company Act and (ii) shall be on terms no less favorable to the
Company than are generally afforded to unrelated third parties in comparable
transactions;
(m) purchase, rent, or lease equipment for Company
purposes;
(n) purchase and maintain, at the Company's expense,
liability and other insurance to protect the Company's assets from third party
claims; and cause the Company to purchase or bear the cost of any insurance
covering any potential liabilities of the Members, Managers, Appropriate
Officers, Advisory Member or agents of the Company, or officers, employees,
directors, members or partners of the Investment Advisor or any agent of the
Company as well as the potential liabilities of any Person serving at the
request of the Investment Advisor as a director of or advisor to the Portfolio
Company;
(o) cause to be paid any and all taxes, charges, and
assessments that may be levied, assessed or imposed upon any of the assets of
the Company;
(p) make or caused to be made any election on behalf
of the Company under the Code and other tax laws and supervise the preparation
and filing of all tax and information returns that the Company may be required
to file provided that such election is consistent with this Agreement;
(q) take any action that may be necessary or
appropriate for the continuation of the Company's valid existence as a limited
liability company under the laws of the State of Delaware and of each other
jurisdiction in which such existence is necessary to protect the limited
liability of the Members or to enable the Company to conduct the business in
which it is engaged;
(r) to the extent desirable, take any and all actions
necessary to ensure that the assets of the Company are not "plan assets" within
the meaning of the regulation promulgated by the United States Department of
Labor, as set forth in 29 C.F.R. Section 2510.3- 101 (the "Plan Asset
Regulation");
20
(s) admit Members to the Company in accordance with
Sections 3.3 and 7.1; admit an assignee of a Member's Interest to be a
Substituted Member in the Company, pursuant to and subject to the terms of
Section 9.5, without the consent of any Member;
(t) delegate all or any portion of its rights, powers
and authority to any committee or subset of the Board of Managers, or to
Appropriate Officers or agents of the Company, subject to the control and
supervision of the Managers; and
(u) perform all normal business functions, and
otherwise operate and manage the business and affairs of the Company, in
accordance with and as limited by this Agreement.
4.7 Certain Restrictions. Except upon approval by a Majority
in Interest of Members and a majority of Managers, the Company will not engage
in any of the investment practices set forth in Appendix A hereto, except to the
extent described in such Appendix A.
4.8 Meetings. Meetings of the Managers shall be held from time
to time upon the call of a Chairman, if any, President, Secretary or Manager.
Regular meetings of the Managers may be held at a time and place fixed by the
by-laws or by resolution of the Managers. Notice of any in-person meetings of
the Board or any committee thereof shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
courier) not less than ten (10) nor more than ninety (90) days before such
meeting. Notice of any telephonic meetings of the Managers or any committee
thereof shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than five (5) days
before a meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of a Manager at a meeting shall constitute a waiver of notice of such
meeting except where a Manager attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting has
not been lawfully called or convened. Unless provided otherwise in this
Agreement or as required by the Investment Company Act, any action of the
Managers may be taken at a meeting by vote of a majority of the Managers present
(whether in person or by telephone) and eligible to vote with respect to such
matter, provided that a quorum is present, or without a meeting by the unanimous
written consent of the Managers.
4.9 Quorum for Board of Managers Meetings. A majority of the
number of Managers shall constitute a quorum for the transaction of business at
any meeting of the Board of Managers, but if less than such majority is present
at a meeting, a majority of the Managers present may adjourn the meeting from
time to time without further notice.
4.10 Manner of Acting for Board of Managers. Except as
otherwise required by the Act, the act of the majority of the Managers present
at a meeting at which a quorum is present shall be the act of the Board of
Managers. Each Manager shall be entitled to one vote upon all matters submitted
to the Board of Managers.
21
4.11 Written Consent by Board of Managers. Unless otherwise
required by the Investment Company Act, any action required or permitted to be
taken at any meeting of the Board of Managers or by a committee thereof may be
taken without a meeting without prior notice and without a vote if all members
of the Board of Managers or such committee consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Managers or such committee.
4.12 Committees of Managers. By resolution adopted by the
Board of Managers, the Board of Managers may designate two or more Managers to
constitute a committee, any of which shall have such authority in the management
of the Company as the Board of Managers shall designate.
4.13 Manager Presumption of Assent. A Manager of the Company
who is present at a meeting of the Board of Managers at which action on any
matter taken shall be presumed to have assented to the action taken unless a
dissent shall be entered in the minutes of the meeting or unless the Manager
files a written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Company immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a Manager
who voted in favor of such action.
4.14 Manager Power to Bind Company. Unless the Board of
Managers consists of one Manager, no Manager (acting in his capacity as such)
shall have any authority to bind the Company to any third party with respect to
any matter except pursuant to a resolution expressly authorizing such action
which resolution is duly adopted by the Board of Managers by the affirmative
vote required for such matter pursuant to the terms of this Agreement.
4.15 Liability of the Managers. No Manager shall be (i)
personally liable for the debts, obligations or liabilities of the Company,
including any such debts, obligations or liabilities arising under a judgement
decree or order of a court; (ii) obligated to cure any deficit in any Capital
Account; (iii) required to return all or any portion of any Capital
Contribution; or (iv) required to lend any funds to the Company.
4.16 Reliance by Third Parties. Persons dealing with the
Company are entitled to rely conclusively upon the power and authority of the
Board of Managers, Appropriate Officers and the Advisory Member of the Company
herein set forth.
4.17 Appointment of Auditors. Subject to the approval or
ratification of the Members and the Disinterested Managers if and to the extent
required under the Investment Company Act, the Board of Managers, in the name
and on behalf of the Company, is authorized to appoint independent certified
public accountants for the Company.
22
4.18 Contracts with Affiliates. The Board of Managers may, on
behalf of the Company, subject to approval by a majority of the Managers who do
not have an interest in the contract and a majority of the Disinterested
Managers and to compliance with the Investment Company Act, enter into contracts
for goods or services with any affiliate of a Manager, Member, Appropriate
Officer or the Investment Advisor, provided that the charges for such goods or
services do not exceed those charged by unaffiliated Persons in the area for
similar goods and services.
4.19 Obligations of the Managers. The Managers shall devote
such time and effort to the Company business as, in their judgment, may be
necessary or appropriate to oversee the affairs of the Company.
4.20 Other Business of Managers. Any Manager and any affiliate
of any Manager may engage in or possess any interest in other business ventures
of any kind, nature or description, independently or with others, whether such
ventures are competitive with the Company or otherwise. Neither the Company nor
any Manager shall have any rights or obligations by virtue of this Agreement or
the relationship created hereby in or to such independent ventures or the income
or profits or losses derived therefrom, and the pursuit of such ventures, even
if competitive with the business of the Company, shall not be deemed wrongful or
improper. Neither the Managers nor any affiliate of the Managers shall be
obligated to present any investment opportunity to the Company.
4.21 Limitations on Board of Managers and Appropriate
Officers.
(a) Notwithstanding anything expressed or implied to
the contrary in this Agreement (other than Article IX), the Board of Managers
and the Appropriate Officers shall not authorize or otherwise cause or allow the
Company to purchase all or any portion of any Member's Interest (or any
attributes thereof).
(b) Notwithstanding anything expressed or implied to
the contrary in this Agreement, the Board of Managers and the Appropriate
Officers shall not (i) participate in the establishment of a secondary market
(or the substantial equivalent thereof) with respect to the Interests for
purposes of Treasury Regulation ss. 1.7704-1(d)(1) or (ii) take any action that
would have the effect of causing the Company (A) to be treated as a publicly
traded partnership for purposes of Section 7704(b) of the Code or (B) otherwise
to be treated as a corporation for federal income tax purposes.
23
ARTICLE V
OFFICERS
5.1 Executive Officers. The Appropriate Officers of the
Company shall be chosen by the Board of Managers and shall be one or more
co-Chief Executive Officers, one or more Co-Presidents, a Secretary and a
Treasurer. The Board of Managers may also choose one or more Co-Chairman of the
Board of Managers (who must be a Manager), Vice Chairman of the Board, one or
more Vice Presidents, a Chief Operating Officer, a Chief Financial Officer, one
or more Assistant Secretaries and one or more Assistant Treasurers. In addition,
the Board of Managers may elect or appoint such other officers with such powers
and duties as they shall deem necessary or proper. Any number of offices may be
held by the same person, unless otherwise prohibited by law. The officers of the
Company need not be Members of the Company nor, except in the case of the
Chairman of the Board, need such officers be Managers of the Company.
5.2 Election of Officers. The officers of the Company shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board of Managers;
and all officers of the Company shall hold office until their successors are
chosen and qualified, or until their earlier death, resignation or removal. Any
officer elected by the Board of Managers may be removed at any time, with or
without cause, by the affirmative vote of the Board of Managers or upon the
Incapacity of such officer. Any vacancy occurring in any office of the Company
shall be filled by the Board of Managers. The officers of the Company shall not
be compensated.
5.3 Voting Securities Owned by the Company. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Company may be executed in the name of and
on behalf of the Company by the President or any Vice President or any other
officer authorized to do so by the Board of Managers and any such officer may,
in the name of and on behalf of the Company, take all such action as any such
officer may deem advisable to vote in person or by proxy at any meeting of
security holders of any entity in which the Company may own securities and at
any such meeting shall possess and may exercise any and all rights and power
incident to the ownership of such securities and which, as the owner thereof,
the Company might have exercised and possessed if present. The Board of Managers
may, by resolution, from time to time confer like powers upon any other person
or persons.
5.4 Chairman of the Board of Managers. The Chairman of the
Board of Managers, if there be one, shall preside at all meetings of the Members
and of the Board of Managers. The Chairman of the Board of Managers shall be
selected from time to time by the Board of Managers. The Chairman of the Board
of Managers shall possess the same power as the President to sign all contracts,
certificates and other instruments of the Company which may be authorized by the
Board of Managers. During the absence or disability of the President,
24
the Chairman of the Board of Managers shall exercise all the powers and
discharge all the duties of the President. The Chairman of the Board of Managers
shall also perform such other duties and may exercise such other powers as may
from time to time be assigned by this Agreement or by the Board of Managers.
5.5 President. The President shall, subject to the control of
the Board of Managers and, if there be one, the Chairman of the Board of
Managers, have general supervision of the business of the Company and shall see
that all orders and resolutions of the Board of Managers are carried into
effect. The President or, when authorized by this Agreement, the Board of
Managers or the President, the other officers of the Company shall execute all
bonds, mortgages, contracts, documents and other instruments of the Company. In
the absence or disability of the Chairman of the Board of Managers, or if there
be none, the President, shall preside at all meetings of the Members and the
Board of Managers. Unless the Board of Managers shall otherwise designate, the
President shall be the Chief Executive Officer of the Company. The President
shall also perform such other duties and may exercise such other powers as may
from time to time be assigned to such officer by this Agreement or by the Board
of Managers.
5.6 Vice Presidents. At the request of the President or in the
President's absence or in the event of the President's inability or refusal to
act (and if there be no Chairman of the Board of Managers), the Vice President,
or the Vice Presidents if there is more than one (in the order designated by the
Board of Managers), shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President. Each Vice President shall perform such other duties and have such
other powers as the Board of Managers from time to time may prescribe. If there
be no Chairman of the Board of Managers and no Vice President, the Board of
Managers shall designate the officer of the Company who, in the absence of the
President or in the event of the inability or refusal of the President to act,
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President.
5.7 Secretary. The Secretary shall attend all
meetings of the Board of Managers and all meetings of Members and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for committees of the Board of Managers
when required. The Secretary shall give, or cause to be given, notice of all
meetings of the Members and special meetings of the Board of Managers, and shall
perform such other duties as may be prescribed by the Board of Managers, the
Chairman of the Board of Managers or the President, under whose supervision the
Secretary shall act. If the Secretary shall be unable or shall refuse to cause
to be given notice of all meetings of the Members and special meetings of the
Board of Managers, and if there be no Assistant Secretary, then either the Board
of Managers or the President may choose another officer to cause such notice to
be given. The Secretary shall have custody of the seal of the Company, if any,
and the Secretary or any Assistant Secretary, if there be one, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by the signature of the Secretary or by the signature of any
such Assistant Secretary. The Board of Managers may give general authority to
any other officer to affix the seal of the Company and to attest to the affixing
by such officer's signature. The Secretary
25
shall see that all books, reports, statements, certificates and other documents
and records required by law to be kept or filed are properly kept or filed, as
the case may be.
5.8 Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Company and shall deposit
all moneys and other valuable effects in the name and to the credit of the
Company in such depositories as may be designated by the Board of Managers. The
Treasurer shall disburse the funds of the Company as may be ordered by the Board
of Managers, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Managers, at its regular meetings, or when the
Board of Managers so requires, an account of all transactions as Treasurer and
of the financial condition of the Company. If required by the Board of Managers,
the Treasurer shall give the Company a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Managers for the faithful
performance of the duties of the office of the Treasurer and for the restoration
to the Company, in case of the Treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the Treasurer's possession or under the Treasurer's control
belonging to the Company.
5.9 Assistant Secretaries. Assistant Secretaries, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Managers, the President, any Vice President, if
there be one, or the Secretary, and in the absence of the Secretary or in the
event of the Secretary's disability or refusal to act, shall perform the duties
of the Secretary, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Secretary.
5.10 Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Managers, the President, any Vice President, if
there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of the Treasurer's disability or refusal to act, shall perform the duties
of the Treasurer, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Treasurer. If required by the Board of
Managers, an Assistant Treasurer shall give the Company a bond in such sum and
with such surety or sureties as shall be satisfactory to the Board of Managers
for the faithful performance of the duties of the office of Assistant Treasurer
and for the restoration to the Company, in case of the Assistant Treasurer's
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in the Assistant Treasurer's
possession or under the Assistant Treasurer's control belonging to the Company.
5.11 Other Officers. Such other officers as the Board of
Managers may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Managers, the Chairman of the
Board of Managers or the President. The Board of Managers may delegate to any
other officer of the Company the power to choose such other officers and to
prescribe their respective duties and powers.
26
ARTICLE VI
INVESTMENT ADVISOR
6.1 Investment Advisor. (a) The Board of Managers shall
appoint an Investment Advisor for the Company. Subject to the direction and
control of the Managers, the Investment Advisor shall, consistent with the
investment objective set forth in Section 2.4, (i) act as investment advisor for
and supervise and manage the investment and reinvestment of the Company's assets
and in connection therewith have complete discretion, subject to the Company's
restrictions and limitations on investments as set forth herein, in purchasing
and selling securities and other assets for the Company and in voting,
exercising consents and exercising all other rights appertaining to such
securities and other assets on behalf of the Company; (ii) supervise
continuously the investment program of the Company and the composition of its
investment portfolio; (iii) supervise the operations and employees of the
Company's affiliates; (iv) arrange, subject to the provisions of this Section
6.1 hereof, for the purchase and sale of securities and other assets held in the
investment portfolio of the Company; (v) arrange for the administration of all
other affairs of the Company and its affiliates and, in this regard, provide
supervision of third parties engaged in such administration; (vi) maintain all
of the Company's books and records other than those maintained by a third party
administrator, transfer agent, custodian or accountant; and (vii) provide the
Company with adequate office space and all necessary office equipment and
services.
(b) The Investment Advisor will use its best efforts
to (i) cause the Company's outstanding securities (other than short-term paper)
to be beneficially owned at all times by more than 100 persons as determined in
accordance with the provisions of Section 3(c)(1) of the Investment Company Act
and (ii) cause the Company not to be a company described in Sections 3(c)(5)
and/or 3(c)(6) of the Investment Company Act. The Investment Advisor will
provide the Managers a compliance report at each quarterly meeting reviewing
each factor related to the Manager's regulatory and tax obligations described.
(c) Subject to Section 6.1 (h) hereof, in the
performance of its duties under this Agreement, the Investment Advisor shall at
all times conform to, and act in accordance with, any requirements imposed by
(i) the provisions of the Investment Company Act and of the Investment Advisers
Act of 1940, as amended, including any rules or regulations in force thereunder;
(ii) any other applicable provision of law; (iii) the provisions of this
Agreement, as amended from time to time; (iv) the investment objective, policies
and restrictions of the Company as set forth in the Company's registration
statement on Form N-2, as amended from time to time, and any resolutions adopted
by requisite approval of the Managers and/or requisite approval of Members
holders and (v) any other policies and determinations of the Managers. In
addition, the Investment Advisor shall use its best efforts to cause the Company
not to engage in any transaction involving any person known to the Investment
Advisor to be subject to Sections
27
17(a), 17(d) or 17(e) of the Investment Company Act and the rules thereunder
with respect to the Company such that any such person would violate any such
provision of the Investment Company Act or the rules thereunder.
(d) The Investment Advisor will bear all costs and
expenses of its directors, officers and employees, any overhead incurred in
connection with its duties hereunder, the costs of any compensation of any
officers or Managers of the Company who are partners, directors, officers or
employees of the Investment Advisor and all other costs and expenses of the
Company not expressly stated in the sections below to be borne by the Company.
(e) In the event of the dissolution, bankruptcy,
insolvency or resignation of the Investment Advisor, the Company may award
investment advisory responsibilities to another party with the consent of a
Majority in Interest of the Members; otherwise, the Company will promptly wind
up its affairs.
(f) Nothing shall prevent the Investment Advisor or
any director, officer, employee or other affiliate thereof from acting as
investment advisor for any other person, firm or corporation, or from engaging
in any other lawful activity, and shall not in any way limit or restrict the
Company or any of its directors, officers, employees or agents from buying,
selling or trading any securities for its or their own accounts or for the
accounts of others for who it or they may be acting, provided, however that the
Investment Advisor, will undertake no activities which, in its judgment, will
adversely affect the performance of its obligations under this Agreement.
(g) Other investment companies or accounts which the
Investment Advisor manages may also own the same investments as the Company.
Investment decisions for the Company are made independently from those of such
other investment companies or accounts; however, from time to time, the same
investment decision may be made for more than one company or account. Subject to
the foregoing, when two or more investment companies or accounts managed by the
Investment Advisor seek to purchase or sell the same securities, the securities
actually purchased or sold will be allocated among the companies and accounts on
a good faith equitable basis by the Investment Advisor in its discretion in
accordance with the accounts' various investment objectives. In some cases, this
system may adversely affect the price or size of the position obtainable for the
Company. In other cases, however, the ability of the Company to participate in
volume transactions may produce better execution for the Company.
(h) The Investment Advisor shall, for the purchase
and sale of the Company's portfolio securities, employ such securities dealers
as will, in the reasonable judgment of the Investment Advisor, result in the
Company's obtaining the best net results taking into account such factors as
price, including dealer spread, the size, type and difficulty of the transaction
involved, the firm's general execution and operational facilities and the firm's
risk in positioning the securities involved. Consistent with this requirement,
the Investment Advisor is authorized to direct the execution of the Company's
portfolio transactions to dealers and brokers furnishing
28
statistical information or research reasonably deemed by the Investment Advisor
to be useful or valuable to the performance of its investment advisory functions
for the Company subject to the general supervision of the Board of Managers.
(i) The Investment Advisor may continue to serve as
such for no more than two years from the date hereof unless its service beyond
such date is specifically approved by the Board of Managers, including a
majority of the Board of Managers who are not "interested persons" of the
Company or the Investment Advisor, at an in person meeting called for that
purpose or by a vote of a 40 Act Majority of the Members, which approval shall
be required annually after such initial two year period. The Investment
Advisor's services hereunder may be terminated at any time, without the payment
of any penalty, by the Board of Managers or by a vote of a 40 Act Majority of
the Members, in either case on not more than 60 days written notice to the
Investment Advisor. The Investment Advisor's services hereunder shall terminate
automatically in the event of the assignment of its services.
(j) The Investment Advisor will not receive any
compensation pursuant to Section 7.3(a)(i) except for those periods in which the
investment advisory arrangement contained in this Section 6.1 has been approved
by the Board of Managers in accordance with Section 15 of the Investment Company
Act.
6.2 [Reserved.]
6.3 In the event the Investment Advisor is removed in
accordance with Section 6.1(i), the Board of Managers may admit any Investment
Adviser as a Member of the Company with the rights, powers and obligations of an
Advisory Member as set forth herein. An Advisory Member shall not make a Capital
Contribution to the Company in its capacity as Advisory Member and shall not be
issued any Shares or Preferred Interests representing its interest as a Advisory
Member pursuant to Section 7.3. After the Closing Date, no Advisory Member shall
have any voting rights in the Company.
6.4 [Reserved.]
ARTICLE VII
CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS AND ALLOCATIONS
7.1 Capital Contributions. (a) The initial Member or Members
are as set forth on Schedule A hereto. Each Member making a Capital Commitment
shall make an initial contribution to the Company at the Advisory Member's
discretion on October 10, 2002 (the "Closing Date") which initial contribution
may equal a Member's Capital Contribution.
29
(b) On each Capital Demand Date, each Member making a
Capital Commitment shall further contribute to the Company an amount equal to
all or a portion of such Member's Unpaid Capital Obligation as set forth in the
respective Capital Demand Notice. For purposes of this Agreement, (i) the
"Capital Demand Date" shall mean the date specified by an Appropriate Officer on
which Members are required to contribute all or a portion of Unpaid Capital
Obligation to the Company, which, shall be (A) specified by the Company in a
Capital Demand Notice sent by the Company to each of the Members or their
representatives and (B) no less than seven (7) days from the date such Capital
Demand Notice is sent by the Company and (ii) a "Capital Demand Notice" shall
mean a written notice requiring the contribution of capital to the Company,
which notice shall (A) be by the Company to each Member and (B) call for
contribution to the Company of the Unpaid Capital Obligation of each Member. All
capital calls will be made on a pro rata basis in proportion to each Member's
Unpaid Capital Obligation.
(c) Capital Contributions by the Members shall be
made in dollars by wire transfer of federal funds to an account or accounts of
the Company as specified by the Company in the Capital Demand Notice or in such
other manner as the Company may direct. No Member shall be entitled to any
interest or compensation by reason of his, her or its Capital Contributions or
by reason of being a Member. No Member shall be required to lend any funds to
the Company.
(d) On each Capital Demand Date, Schedule A hereto
shall be amended appropriately to reflect the Unpaid Capital Obligations of the
Members. Further, the Appropriate Officers shall cause Schedule A hereto to be
amended from time to time to reflect the transfer of a Member's Interests and
the admission and withdrawal of Members which are accomplished in accordance
with the provisions hereof.
(e) Except as may be required by law, no Member shall
be required to reimburse the Company for any negative balance in such Member's
Capital Account; provided, however, that each Member shall remain fully liable
to make contributions of capital to the extent of such Member's Unpaid Capital
Obligation.
7.2 Capital Accounts. A capital account ("Capital Account")
shall be established and maintained on the Company's books with respect to each
Member, in accordance with the provisions of Treasury Regulations Section
1.704-1(b).
7.3 Allocation of Net Profits from Operations. (a) The Net
Profits of the Company for each Fiscal Year shall be allocated as follows:
(i) First, to the Advisory Member in an amount equal
to a cumulative return of 1.5% per annum on all Capital Contributions;
provided, however, that in no event shall the payments to the Advisory
Member under this Section 7.3(i) exceed 1.5% of the Capital
Contributions made on or before the first anniversary of the Closing
Date; and provided further that for any period in which
30
the Advisory Member does not serve as Investment Advisor pursuant to an
investment advisory arrangement that has been approved according to the
applicable provisions of the Investment Company Act, the Advisory
Member shall receive an annual allocation based on a percentage equal
to the days the Advisory Member served as Investment Advisor pursuant
to a duly approved investment advisory arrangement divided by 365 days;
(ii) Second, to the holders of the Preferred
Interests in accordance with the Certificate of Designation;
(iii) Third, to the Members other than the Advisory
Member who have negative balances in their Capital Accounts, in
proportion to the respective amounts of such negative balances; and
(iv) Fourth, to the Members other than the Advisory
Member pro rata in accordance with such Member's respective Capital
Accounts.
(b) All provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with the Code and
Treasury Regulations thereunder and shall be interpreted and applied in a
manner consistent with such law. Upon notification to the Members, the Managers
shall make any necessary modifications to this Section 7.3 in the event
unanticipated events occur that might otherwise cause this Agreement not to
comply with such law or any changes thereto.
(c) Additional Rule. In furtherance and not in
limitation of Section 7.6(a), (b) and (c), and except as otherwise provided in
this Agreement, the Board of Managers may, in its sole and absolute discretion,
allocate Net Profit (and items thereof) and Net Loss (and items thereof) for
any Fiscal Period in a manner that the Board of Managers deems necessary or
appropriate in order to effectuate the intended economic sharing arrangement of
the Members as reflected in Article VIII.
(d) Regulatory and Related Allocations.
Notwithstanding anything expressed or implied to the contrary in this
Agreement, the following special allocations shall be made in the following
order:
(i) Minimum Gain Charge back. If there is a net
decrease in Partnership Minimum Gain during any Fiscal Period, each
Member shall be specially allocated items of Company income and gain
for such Fiscal Period (and, if necessary, subsequent Fiscal Periods)
in an amount equal to the greater of (i) the portion of such Member's
share of the net decrease in such Partnership Minimum Gain, as
determined in accordance with Treasury Regulations Section
1.704-2(d)(1), that is allocable to the disposition of Company
property, subject to Nonrecourse Liabilities or (ii) if such Member
would otherwise have an Adjusted
31
Capital Account Deficit attributable solely to such Member's Capital
Account at the end of such Fiscal Period, an amount sufficient to
eliminate such Adjusted Capital Account Deficit. Allocations pursuant
to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to the Members pursuant thereto. The
items to be so allocated shall be determined in accordance with
Treasury Regulations Section 1.704-2. This Section 7.3(d)(i) is
intended to comply with the minimum gain charge back requirement in
such Treasury Regulations and shall be interpreted consistently
therewith. To the extent permitted by such Treasury Regulations and for
purposes of this Section 7.3(d)(i) only, each Member's Adjusted Capital
Account Deficit shall be determined prior to any other allocations
pursuant to this Article VII with respect to such Fiscal Period.
(ii) Partner Minimum Gain Chargeback. If there is a
net increase in Partner Nonrecourse Debt Minimum Gain attributable to
partner nonrecourse debt (as defined in Treasury Regulations Section
1.704-2(b)(4)) during any Fiscal Period, each Member shall be specially
allocated items of Company income and gain for such Fiscal Period (and,
if necessary, subsequent Fiscal Periods) in an amount equal to the
portion of such Member's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Member's nonrecourse
debt, as determined in accordance with Treasury Regulations Section
1.704-2(i). This Section 7.3(d)(ii) is intended to comply with the
minimum gain chargeback requirements in such Treasury Regulations and
shall be interpreted consistently therewith.
(iii) Qualified Income Offset. In the event any
Member unexpectedly receives any adjustments, allocations or
distributions described in Treasury Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6) with respect to such Member's
Capital Account, items of Company income and gain shall be specially
allocated to each such Member in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations, the
Adjusted Capital Account Deficit of such Member as quickly as possible;
provided, however, that an allocation pursuant to this Section
7.3(d)(iii) shall be made only if and to the extent that such Member
would have an Adjusted Capital Account Deficit after all
other allocations provided for herein have been tentatively made as if
this Section 7.3(d)(iii) were not in this Agreement.
(iv) Nonrecourse Deductions. Any Nonrecourse
Deductions for any Fiscal Period shall be allocated to the Members in
proportion to their respective Capital Contributions.
(v) Gross Income Allocation. In the event any Member
has an Adjusted Capital Account Deficit, items of Company income and
gain shall be
32
specially allocated to such Member in an amount and manner sufficient
to eliminate such Member's Adjusted Capital Account Deficit as quickly
as possible; provided, however, that an allocation pursuant to this
Section 7.3(d)(v) shall be made only if and to the extent that such
Member would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section 7.3 (other than Section
7.3(d)(iii)) have been tentatively made as if this Section 7.3(d)(v)
were not in this Agreement.
(vi) Loss Allocation Limitation. No allocation of Net
Loss (or items thereof) shall be made to any Member to the extent that
such allocation would create or increase an Adjusted Capital Account
Deficit with respect to such Member.
(e) Curative Allocations. The allocations set forth
in Section 7.3(d)
(the "Regulatory Allocations") are intended to comply with certain requirements
of Treasury Regulations Section 1.704-l(b). Notwithstanding any other provision
of this Article VII (other than the Regulatory Allocations), the Regulatory
Allocations shall be taken into account in allocating other Company items of
income, gain, loss, deduction and expense among the Members so that, to the
extent possible, the net amount of such allocations of other Company items and
the Regulatory Allocations shall be equal to the net amount that would have been
allocated to the Members pursuant to this Section 7.3 if the Regulatory
Allocations had not occurred.
(f) Section 754 Adjustments. Pursuant to Treasury
Regulations
Section 1.704-1(b)(2)(iv)(m), to the extent an adjustment to the adjusted tax
basis of any Company asset under Section 734(b) or Section 743(b) of the Code is
required to be taken into account in determining Capital Accounts, the amount of
such adjustment to the Capital Accounts shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Members in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such Treasury Regulations.
(g) Transfer of or Change in Interests. The Managers
are authorized to adopt any convention or combination of conventions that will
be upheld for federal income tax purposes regarding the allocation and/or
special allocation of items of Company income, gain, loss, deduction and expense
with respect to a newly issued Interest, a transferred Interest and a redeemed
Interest. Upon admission as a Substituted Member, a transferee of an Interest
shall succeed to the Capital Account of the transferor Member to the extent it
relates to the transferred Interest.
(h) Expenses. Syndication and organization expenses,
as defined in Section 709 of the Code, and other Company Expenses (and, to the
extent necessary as determined in the sole and absolute discretion of the
Managers, any other items) shall be allocated to the Capital Accounts of the
Members so that, as nearly as possible, the cumulative amount of
33
such syndication expenses, organization expenses, and other Company Expenses
(and other items, if relevant) allocated with respect to each dollar of Capital
Commitment for each Member is the same amount.
(i) Allocation Periods and Unrealized Items. Subject
to applicable Treasury Regulations and other applicable law and notwithstanding
anything expressed or implied to the contrary in this Agreement, the Managers
may, in their sole and absolute discretion, determine allocations to Capital
Accounts no lees frequently than annually and/or on realized and upon additional
investment in the Company by a new or existing Member, the transfers of a
Member's Interest or the redemption of a Member's Interest on unrealized net
increases or net decreases (as the case may be) in the Fair Market Value of
Company property.
7.4 Allocation of Net Losses from Operations. The Net Losses
of the Company for each Fiscal Year shall be allocated as follows:
(a) First, to the Members other than the Advisory
Member and the holders of the Preferred Interests pro rata in accordance with
such Member's respective Capital Accounts, until such Member's Capital Accounts
have a zero balance;
(b) Second, to the holders of the Preferred Interests
until their Capital Accounts have a zero balance; and
(c) Third, to the Members other than the Advisory
Member and the holders of the Preferred Interests.
7.5 Defaulting Member. (a) If any Member fails to contribute,
in a timely manner, any portion of the Capital Commitment required to be
contributed by such Member pursuant to this Agreement and such failure continues
for five (5) Business Days after delivery by the Appropriate Officer to such
Member of notice of such failure, then such Member shall be deemed a "Defaulting
Member," and this Section 7.5 shall apply. An Appropriate Officer shall deliver
to each non-Defaulting Member written notice of such default as promptly as
practicable after its occurrence.
(b) The Company may exercise any remedy available to
it at law or equity against a Defaulting Member. Not in limitation of any of the
Fund's remedies, interest will accrue on the portion of the Defaulting Member's
Capital Commitment that such Member has failed to fund ("Failed Capital
Commitment"), at the prime rate plus 2% per annum, up to the highest rate
permitted by law. The Company shall also be entitled to reimbursement from a
Defaulting Member for any and all costs and expenses in collecting any portion
of a Failed Capital Commitment including, without limitation, attorney's fees
and disbursements (to the extent permitted by applicable law).
34
7.6 Tax Allocations.
(a) Items of Company income, gain, loss, deduction
and expense shall be allocated, for federal, state and local income tax
purposes, among the Members in the same manner as the Net Profit (and items
thereof) and Net Loss (and items thereof) of which such items are components
were allocated pursuant to Sections 7.3 and 7.4; provided, however, that tax
allocations shall be made in accordance with Section 704(c) of the Code and the
Treasury Regulations promulgated thereunder, to the extent so required thereby.
(b) Allocations pursuant to this Section 7.6 are
solely for federal, state and local income tax purposes and shall not affect, or
in any way be taken into account in computing, any Member's Capital Account or
share of Net Profit (and items thereof) or Net Loss (and items thereof).
(c) The Members are aware of the tax consequences of
the allocations made by this Section 7.6 and hereby agree to be bound by the
provisions of this Section 7.6 in reporting their shares of items of Company
income, gain, loss, deduction and expense.
7.7 Determinations by Managers. All matters concerning the
computation of Capital Accounts, the allocation of Net Profit (and items
thereof) and Net Loss (and items thereof), the allocation of items of Company
income, gain, loss, deduction and expense for tax purposes and the adoption of
any accounting procedures not expressly provided for by the terms of this
Agreement shall be determined by the Managers in accordance with accounting
principles generally accepted in the United States in their reasonable
discretion. Such determination shall be final and conclusive as to all the
Members. Notwithstanding anything expressed or implied to the contrary in this
Agreement, in the event the Managers shall determine, in their reasonable
discretion, that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto, are computed in order to effectuate
the intended economic sharing arrangement of the Members as reflected in Article
VIII, the Managers may make such modification in their reasonable discretion
without the approval of Members.
7.8 Net Asset Value. The net asset value (the "NAV") of the
Company will be calculated quarterly as of each March 31, June 30, September 30
and December 31, in connection with each issuance of Shares or Preferred
Interests by the Company, as of each distribution declaration date (after giving
effect to the relevant declaration), as of the first anniversary of the
Company's operations, as of the date on which the Company terminates, and more
frequently as determined by the Investment Advisor or a majority of the
Managers, in accordance with Valuation Policies and guidelines approved from
time to time by a majority of the Managers.
7.9 Borrowing by the Company. The Company may borrow money or
otherwise incur indebtedness for temporary or emergency purposes in an amount up
to $500,000. The Company may not borrow for investment purposes.
35
ARTICLE VIII
WITHDRAWALS AND DISTRIBUTIONS OF CAPITAL
8.1 Withdrawals and Distributions in General. No Member shall
be entitled to withdraw any amount from any Capital Account other than as
provided in this Agreement.
8.2 Distributions. After provision for Company Expenses and
establishment of working capital and other reserves as the Appropriate Officers
shall deem appropriate, the Managers may cause all cash and other property
received by the Company in respect of its investments in any Fiscal Period
(collectively, "Investment Proceeds") to be distributed:
First, to the Advisory Member in an amount equal to
its allocation set forth in 7.3(a)(i);
Second, to holders of Preferred Interests on the
record date set by the Managers with respect to such distribution as required by
the Certificate of Designations; and
Third, to the holders of the Shares on the record
date set by the Managers with respect to such distribution, in proportion to
such Member's respective initial Capital Investment.
8.3 Restrictions on Distributions. Notwithstanding anything
expressed or implied to the contrary in this Agreement, no distribution shall be
made if, as determined in the sole and absolute discretion of the Managers, (i)
such distribution would violate any contract or agreement to which the Company
is then a party or any law, rule, regulation, order or directive of any
governmental authority then applicable to the Company or (ii) the amount to be
distributed pursuant to this Article VIII is immaterial.
8.4 Deemed Sale of Assets. For all purposes of this Agreement,
(i) any property (other than United States dollars) that is distributed in-kind
to one or more Members with respect to a Fiscal Period (including, without
limitation, any such in kind property that is distributed upon the dissolution
and winding up of the Company) shall be deemed to have been sold for cash equal
to its Fair Market Value, (ii) the unrealized gain or loss inherent in such
property shall be treated as recognized gain or loss for purposes of determining
the Net Profit and Net Loss, (iii) such gain or loss shall be allocated pursuant
to Sections 7.3 and 7.4 for such Fiscal Period and (iv) such in-kind
distribution shall be made after giving effect to such allocation.
8.5 Withholding. Notwithstanding anything expressed or implied
to the contrary in this Agreement, the Appropriate Officers are authorized to
take any action that they determine to be necessary or appropriate to cause the
Company to comply with any United States federal, state or local withholding
requirement with respect to any allocation, payment or distribution by the
Company to any Member or other Person. All amounts so withheld, and, in the
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manner determined by the Appropriate Officers, amounts withheld with respect to
any allocation, payment or distribution by any Person to the Company, shall be
treated as distributions to the applicable Members under the applicable
provision of this Agreement. If any such withholding requirement with respect to
any Member exceeds the amount distributable to such Member under this Agreement,
or if any such withholding requirement was not satisfied with respect to any
amount previously allocated, paid or distributed to such Member, such Member or
any successor or assignee with respect to such Member's Interest hereby
indemnifies and agrees to hold harmless the other Members and the Company for
such excess amount or such withholding requirement, as the case may be
(including any interest, additions and penalties).
ARTICLE IX
WITHDRAWAL OF MEMBERS; TRANSFER OF INTERESTS;
ADMISSION OF SUBSTITUTED MEMBERS; EFFECT OF DEATH, ETC.
9.1 Withdrawal of Members
(a) Except as otherwise provided herein, no Member
shall have the right to withdraw from the Company.
(b) The Managers may (but shall not be required to)
terminate the Interest of any Member and cause that Member to withdraw from the
Company at any time based on the advice of counsel and after a reasonable
opportunity for consultation with that Member. Upon a determination by the
Managers that the continued participation of that Member in the Company might
adversely affect the Company by jeopardizing the treatment of the Company as a
partnership for federal income tax purposes, involve the Company in any
litigation arising out of or relating to the participation of that Member in the
Company or subject the Company to restrictions or other adverse consequences as
a result of applicable laws or regulations. In the event that the Managers
terminate a Member's Interest, that Member shall immediately withdraw from the
Company and cease to be a Member of the Company. Such withdrawal shall occur
automatically upon termination without the necessity of any further act by the
member or any other Person. The date of termination shall be the effective date
of withdrawal of the terminated Member.
(c) The Company shall pay to the terminated Member
90% of the amount of the terminated Member's Capital Account balance (determined
in accordance with the next sentence) within 90 days of termination or as soon
thereafter as the Company shall have sufficient funds available and shall pay
the remainder upon completion of that year's audit. Such amounts paid to a
terminated Member shall not be entitled to interest for any period after the
date of termination.
(d) From and after the effective date of withdrawal
of a Member, such withdrawn Member shall cease to be a Member of the Company for
all purposes and the Shares or
37
Preferred Interests of a withdrawn Member shall not be included in calculating
the Shares or Preferred Interests of the Members required to take any action
under this Agreement.
9.2 General Provisions Relating to Transfers of Interests.
(a) A Member shall be entitled to transfer, assign,
sell, pledge, hypothecate or otherwise dispose of all or any portion of its
Interests (collectively, a "Transfer") upon the Managers' determination, which
determination the Managers shall make in their reasonable discretion, that the
Transfer meets each of the following conditions (a "Permitted Transfer"):
(i) such Transfer, itself or together with any other
Transfers, would not result in the Company being treated as a publicly
traded partnership within the meaning of Section 7704(b) of the Code or
otherwise being treated as a corporation for federal income tax
purposes;
(ii) such Transfer does not require the registration
or qualification of such Interests pursuant to any applicable federal
or state securities or "blue sky" laws;
(iii) such Transfer does not result in a violation of
other laws ordinarily applicably to such transactions;
(iv) the transferor and purported transferee each
shall have represented to the Manager in writing that such Transfer was
not effected through a broker-dealer or matching agent that makes a
market in Interests or that provides a readily available, regular and
ongoing opportunity to Members to sell or exchange their Interests;
(v) the transferor shall reaffirm, and the purported
transferee shall affirm, in writing his, her or its agreement to
indemnify as described in Section 9.4;
(vi) such Transfer would not cause the assets of the
Company to be or result in the assets of the Company being treated as
"plan assets" within the meaning of the Plan Asset Regulation;
(vii) no facts are known to the Managers that cause
the Managers to conclude that such transfer will have a material
adverse effect on the Company; and
(viii) the transferee has agreed in writing to become
a Member to and subject to all of the terms, obligations and
limitations of this Agreement.
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(b) The Managers may reasonably interpret, and are
hereby authorized to take such action as they deem necessary or desirable to
effect, the provisions of this Section 9.2. The Managers may, in their sole and
absolute discretion, amend the provisions of this Section 9.2 in such manner as
may be necessary or desirable (or eliminate or amend such provisions to the
extent they are no longer necessary or desirable) to preserve the status of the
Company as a partnership for federal income tax purposes.
9.3 Effect of Transfers. Upon any Permitted Transfer, the
transferee of the transferred Interest shall be entitled to receive the
distributions and allocations to which the transferring Member would be entitled
with respect to such transferred Interest, but shall not be entitled to exercise
any of the other rights of a Member with respect to such transferred Interest,
including, without limitation, the right to vote, unless and until such
transferee is admitted to the Company as a Substituted Member pursuant to
Section 9.5.
9.4 Transfer Indemnity. Each Member hereby agrees to indemnify
and hold harmless the Company, the Investment Advisor, the Managers, each
Appropriate Officer and each other Member (and any successor or assign of any of
the foregoing) from and against all costs, claims, damages, liabilities, losses
and expenses (including losses, claims, damages, liabilities, costs and expenses
of any judgments, fines and amounts paid in settlement), joint or several, to
which those persons may become subject by reason of or arising from any Transfer
made in contravention of the provisions of this Agreement or any
misrepresentation made by such Member in connection with any purported Transfer.
9.5 Substituted Members. No transferee of a transferred
Interest shall be admitted as a Member ("Substituted Member") until each of the
following conditions has been satisfied:
(a) the written consent of the Managers, which may be
withheld or granted in the sole and absolute discretion of the Managers;
(b) the execution and delivery to the Company of a
counterpart of this Agreement by the Substituted Member or its agent or
attorney-in-fact;
(c) receipt by the Company of other written
instruments reasonably necessary to complete the transfer that are in form and
substance satisfactory to the Managers (as determined in their sole and absolute
discretion);
(d) payment by the Substituted Member to the Company
of an amount determined by the Managers to be equal to the costs and expenses
incurred in connection with such assignment, including, without limitation,
costs incurred in preparing and filing such amendments to this Agreement as may
be required;
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(e) the updating of the books and records of the
Company and Schedule A hereto as soon as reasonably practicable to reflect the
Person's admission as a Substituted Member;
(f) if required by the Managers in their sole and
absolute discretion, execution and affirmation to an instrument by the terms of
which such Person acknowledges that the relevant transfer of Interests have not
been registered under the Securities Act of 1933, as amended, or any applicable
state securities laws, and covenants, represents and warrants that such Person
acquired the relevant Interests for investment only and not with a view to the
resale or distribution thereof; and
(g) any other information or documentation similar
to that described in Section 9.5(f) as the Managers may request;
9.6 Effect of Death, Etc. The death, retirement, withdrawal,
expulsion, disability, incapacity, incompetency, bankruptcy, insolvency or
dissolution of a Member, or the occurrence of any other event under the Act that
terminates the continued membership of a Member as a member of the Company,
shall not cause the Company to be dissolved and its affairs to be wound up so
long as the Company has at least one Member at all times. Upon the occurrence of
any such event, the business of the Company shall be continued without
dissolution. The legal representatives, if any, of a Member shall succeed as
assignee to the Member's Interest upon death, incapacity, incompetency,
bankruptcy, insolvency or dissolution of a Member, but shall not be admitted as
a Substituted Member except under the provisions of Section 9.5 of this
Agreement and with the written consent of the Managers, which written consent
the Managers may withhold in their sole and absolute discretion. Until such
time, the Shares or Preferred Interests held by such legal representative of a
Member shall not be included in calculating the Shares or Preferred Interests of
the Members required to take any action under this Agreement.
ARTICLE X
BOOKS AND RECORDS; REPORTS TO MEMBERS; TAX MATTERS
10.1 Books and Records. In compliance with Section 31 of the
Investment Company Act, the books and records of the Company, and a list of the
names and residence, business or mailing addresses and Interests of all Members,
shall be maintained at the principal executive offices of the Company or such
other location as the Managers' may approve. The Company shall not be required
to provide any documentation or other information to Members except that which
it is required to provide under the Investment Company Act, the Act or other
applicable law. Each Member shall have the right to obtain from the Company from
time to time upon reasonable demand for any proper purpose reasonably related to
the Member's interest as a Member of the Company, and upon paying the costs of
collection, duplication and mailing, the documents and other information which
the Company is required to provide under the Investment
40
Company Act, the Act or other applicable law. Any demand by a Member pursuant to
this section shall be in writing. The Company may maintain such other books and
records and may provide such financial or other statements as the Managers or
the Appropriate Officers in their discretion deem advisable.
10.2 Reports to Current Members. The Board of Managers on
behalf of the Company will send to each of the Members (a) annual reports with
audited annual financial statements, together with a written certification of
the Board of Managers stating that the Company is in full compliance with all
material terms, conditions and guidelines as set forth in this Agreement, unless
otherwise specified, together with a statement of the nature and plan of
resolution for any non-compliant items, (b) quarterly reports with unaudited
financial statements, (c) copies of all tax filings made by the Company and (d)
annual and quarterly reports of FPA. In addition, the Investment Advisor on
behalf of the Company shall, within ninety (60) days after the end of each
fiscal year and within thirty (30) days after the end of each calendar quarter,
provide to each Member, with respect to such period, (A) either (i) a statement
that the Company did not generate UBTI during such period or (ii) a statement
representing the Investment Advisor's best estimate of the amount of UBTI
generated during such period attributable to such Member, and (B) either (i) a
statement that none of the underlying assets of any of the Company's investments
are "plan assets" of any employee benefits plan or (ii) a statement identifying
any investments that are reasonably likely to hold plan assets. Any audited
financial statements required under this Section 10.1 shall be prepared by a
"Big 5" accounting firm selected by the Board of Managers.
10.3 Accounting; Tax Year.
(a) The books and records of the Company shall be
kept on the accrual basis. The Company shall report its operations for tax
purposes on the accrual method, as determined by the Managers in their sole and
absolute discretion, subject to applicable tax laws. The taxable year of the
Company shall be the calendar year, unless the Managers shall designate another
taxable year for the Company that is a permissible taxable year under the Code.
(b) The books and records of the Company shall be
audited by the Company's independent accountants as of the end of each Fiscal
Year, commencing with the first partial Fiscal Year, of the Company. The audit
required under this Section 10.3(b) shall be prepared by a "Big 5" accounting
firm selected by the Board of Managers.
10.4 Filing of Tax Returns. The Appropriate Officers shall
prepare and file, or cause the Company's accountants to prepare and file, a
federal information tax return and any required state and local income tax and
information returns for each taxable year of the Company. The Managers have sole
and absolute discretion as to whether or not to prepare and file (or cause its
accountants to prepare and file) composite, group or similar state, local and
foreign tax returns on behalf of the Members where and to the extent permissible
under applicable law. Each Member hereby agrees to execute any relevant
documents to furnish any relevant information and otherwise to do anything
necessary in order to facilitate, any such composite, group or similar filing.
Any taxes paid by the Company in connection with any such composite, group or
41
similar filing shall be treated as an advance to the relevant Members (with
interest being charged thereon) and shall be recouped by the Company out of any
distributions subsequently made to such relevant Members. Such advances may be
funded by Company borrowing. Both the deduction for interest payable by the
Company with respect to any such borrowing, and the corresponding income from
interest received by the Company from the relevant Members, shall be
specifically allocated to such Members.
10.5 Tax Matters Member. The Advisory Member shall be
designated as the tax matters member of the Company (the "Tax Matters Member")
as provided in Section 6231(a)(7) of the Code. Each Person (for purposes of this
provision, a "Pass-Through Member") that holds or controls an Interest on behalf
of, or for the benefit of another Person or Persons, or which Pass-Through
Member is beneficially owned (directly or indirectly) by another Person or
Persons shall, within 30 days following receipt from the Tax Matters Member of a
notice or document, convey such notice or other document in writing to all
holders of beneficial interests in the Company holding such Interest through
such Pass-Through Member. In the event the Company becomes the subject of an
income tax audit by any federal, state or local authority, to the extent the
Company is treated as an entity for purposes of such audit, including
administrative settlement and judicial review, the Advisory Member shall be
authorized to act for, and its decision shall be final and binding upon, the
Company and each Member. The Company shall bear all expenses incurred in
connection with any such audit, investigation, settlement or review.
10.6 Tax Information for Current and Former Members. Within 90
days after the end of each taxable year of the Company or as soon thereafter as
practicable, the Company shall prepare and distribute to each Member (and, to
the extent necessary, to each former Member (or such Member's legal
representatives)), at the expense of the Company, a report setting forth in
sufficient detail such information as shall enable such Member or former Member
(or such Member's legal representatives) to prepare its respective federal,
state and local income tax returns in accordance with the laws, rules and
regulations then prevailing. The Company shall also provide Schedules K-1 to
Members as soon as practicable after the end of each taxable year of the Company
and in any event within the time period required by the Internal Revenue Service
("IRS") after the end of each taxable year of the Company.
10.7. Meetings with the IRS. Each Member, prior to any hearing
before the IRS, shall receive prior written notice of such hearing. Members
shall have the right to consult with representatives of the Company prior to the
hearing and to send representatives to observe the hearing. In the event of a
disagreement among the Members with respect to any issue before the IRS, the
Investment Advisor, in its sole and absolute discretion, shall present the
Company's position before the IRS.
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ARTICLE XI
LIABILITY AND INDEMNIFICATION
11.1 Liability of the Members and the Advisory Member. Except
as otherwise provided by applicable law, the debts, obligations and liabilities
of the Company, whether arising in contract, tort or otherwise, shall be solely
the debts, obligations and liabilities of the Company; none of the Members, the
Advisory Member nor any Person that is an affiliate of any of them shall be
obligated personally for any such debt, obligation or liability of the Company
solely by reason of being a Member, or the Advisory Member or being a Person
that is an affiliate of any of them. In furtherance, and not in limitation, of
the generality of the foregoing, except for the obligations hereunder and under
the Subscription Agreements, including the obligations to make Capital
Contributions pursuant to Section 7.1, the liability of the Members shall be
limited to the maximum extent permitted by the Act. In no event shall the
Members be obligated to make Capital Contributions in excess of their respective
Unpaid Capital Obligations. Losses and expenses incurred by the Company during
any fiscal year shall be allocated among the Members in accordance with the
procedures for allocating losses set forth in Section 7.4 hereof.
11.2 Indemnification. (a) None of the Investment Advisor, any
Manager, any Appropriate Officer or any of their respective affiliates,
shareholders, partners, officers, directors, members, employees, agents and
representatives (each an "Indemnified Person") shall have any liability,
responsibility or accountability in damages or otherwise to any Member or the
Company for, and the Company agrees, to the fullest extent permitted by law, to
indemnify, pay, protect and hold harmless each Indemnified Person from and
against, any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, proceedings, costs, expenses and disbursements of any
kind or nature whatsoever (including, without limitation, all reasonable costs
and expenses of attorneys, defense, appeal and settlement of any and all suits,
actions or proceedings instituted or threatened against the Indemnified Persons
or the Company) and all costs of investigation in connection therewith which may
be imposed on, incurred by, or asserted against the Indemnified Persons or the
Company in any way relating to or arising out of, or alleged to relate to or
arise out of, any action or inaction on the part of the Company, on the part of
the Indemnified Persons when acting on behalf of the Company or otherwise in
connection with the business or affairs of the Company or any Portfolio
Investment, or on the part of any brokers or agents when acting on behalf of the
Company or any Portfolio Investment (collectively, the "Indemnified
Liabilities") and the Indemnified Person shall not be released from such
Indemnified Person's willful misfeasance, bad faith or gross negligence in the
performance of his, her or its duties or by reason of his, her or its reckless
disregard of his, her or its obligations and duties. The indemnification rights
provided for in this Section 11.2(a) shall survive the termination of the
Company or this Agreement except that no claim may be asserted by any
Indemnified Person against any indemnitor after the third anniversary of the
termination of the Company unless written notice of such claim shall have been
provided to the indemnitor prior to the third anniversary date. Any
indemnification rights provided for in this Section 11.2(a) shall be retained by
any removed, resigned or withdrawn Investment Advisor, Manager or Appropriate
Officer and its
43
constituent Indemnified Persons. Any indemnification rights provided for in this
Section 11.2(a) shall also be retained by any Person who has acted in the
capacity of officer, director, partner, employee, agent, stockholder or
affiliate of an Indemnified Person after such Persons shall have ceased to hold
such positions.
(b) The right of any Indemnified Person to the
indemnification provided herein shall be cumulative of, and in addition to, any
and all rights to which such Indemnified Person may otherwise be entitled by
contract or as a matter of law or equity and shall extend to such Indemnified
Person's successors, assigns and legal representatives.
(c) The provision of advances from Company funds to
an Indemnified Person for legal expenses and other costs incurred as a result of
any legal action or proceeding is permissible if (i) such suit, action or
proceeding relates to or arises out of, or is alleged to relate to or arise out
of, any action or inaction on the part of the Indemnified Person in the
performance of its duties or provision of its services on behalf of the Company
or otherwise in connection with the business or affairs of the Company or any
Portfolio Investment; and (ii) the Indemnified Person undertakes to repay any
funds advanced pursuant to this Section 11.2(c) in any case in which such
Indemnified Person would not be entitled to indemnification under Section 11.2
(a). If advances are permissible under this Section 11.2(c), the Indemnified
Person shall furnish the Company with an undertaking as set forth in clause (ii)
of this paragraph and shall thereafter have the right to xxxx the Company for,
or otherwise request the Company to pay, at any time and from time to time after
such Indemnified Person shall become obligated to make payment therefor, any and
all amounts for which such Indemnified Person believes in good faith that such
Indemnified Person is entitled to indemnification under Section 11.2(a) with the
approval of the Managers who are not seeking such indemnification, or if all
Managers are seeking such indemnification, the Investment Advisor, which
approval shall not be unreasonably withheld. The person granting such approval
may, but shall not be required unless otherwise provided by applicable law,
prior to approval require an opinion of counsel to be in effect that such
Indemnified Person is likely to be entitled to indemnification. The Company
shall pay any and all such bills and honor any and all such requests for payment
within sixty (60) days after such xxxx or request is received by the Company,
and the Company's rights to repayment of such amounts shall be secured by the
Indemnified Person's Interest in the Company, if any, or by such other security
as the Managers, or if all Managers are seeking indemnification, the Investment
Advisor may require. In the event that a final judicial (or binding arbitration)
determination is made that the Company is not so obligated in respect of any
amount paid by it to a particular Indemnified Person, such Indemnified Person
will refund such amount within sixty (60) days of such final determination, and
in the event that a final determination is made that the Company is so obligated
in respect to any amount not paid by the Company to a particular Indemnified
Person, the Company will pay such amount to such Indemnified Person within sixty
(60) days of such final determination, in either case together with interest (at
the lesser of (x) the Applicable Rate and (y) the maximum rate permitted by
applicable law) from the date paid by the Company until repaid by the
Indemnified Person or the date it was obligated to be paid by the Company until
the date actually paid by the Company to the Indemnified Person.
44
(d) Any of the foregoing to the contrary
notwithstanding, in the event that an Indemnified Person is a party defendant in
an action brought by a Majority in Interest of the Members (excluding for
purposes of calculating such Majority in Interest the Indemnified Person), the
Company shall not make such advances; provided, however, that in the event such
Indemnified Person prevails in such action, such Indemnified Person shall be
entitled to all rights afforded it under this Section 11.2.
(e) With respect to the liabilities of the Company,
all such liabilities:
(1) shall be liabilities of the Company as an
entity, and shall be paid or otherwise satisfied from the
Company's assets; and
(2) except to the extent otherwise required by
law, shall not in any event be payable in whole or in part by
any Member, Manager, Appropriate Officer or Investment Advisor,
or by any director, officer, trustee, employee, agent,
shareholder, beneficiary, member or partner of any of them.
(f) The Managers may cause the Company, at the
Company's expense, to purchase insurance to insure the Indemnified Persons
against liability hereunder (including liability arising in connection with the
operation of the Company), including, without limitation, for a breach or an
alleged breach of their responsibilities hereunder.
ARTICLE XII
COMPENSATION AND REIMBURSEMENT
12.1 Board of Managers. As compensation for services rendered
to the Company, the Company will pay each Disinterested Manager the following
amounts: $15,000 per year, plus $1,000 for each physical meeting attended and
$125 for each telephonic meeting attended (subject to a cap of $500 per year for
all telephonic meetings attended). In addition, the Company shall reimburse each
Manager for all reasonable out-of-pocket expenses incurred by such Manager with
respect to such Manager's attendance of meetings of the Board of Managers.
12.2 Distributor, Administrator and Other Persons. As
compensation for services rendered to the Company or its Members, the Company
will pay each distributor, administrator, transfer agent, custodian, accountant,
attorney and other agent or independent contractor duly engaged by or on behalf
of the Company to provide such services. The approval of any contract or
agreement pursuant to which a Person serves as a principal underwriter to the
Company shall be subject to the applicable requirements of the Investment
Company Act.
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12.3 Reimbursement for Company Expenses. The Company shall
reimburse the Investment Advisor for Company Expenses incurred by the Investment
Advisor and its affiliates in connection with the organization of the Company,
the Company's offer and sale of Shares and Preferred Interests and the ongoing
operations of the Company.
ARTICLE XIII
DISSOLUTION AND TERMINATION
13.1 Dissolution. The Company shall be dissolved upon the
occurrence of any of the following:
(a) the merger, consolidation, other business
combination, voluntary bankruptcy, liquidation or other dissolution of the
Company, or the entering into of any agreement contemplating any of the
foregoing;
(b) the sale or other disposition at any one time of
all or substantially all of the assets of the Company; and
(c) dissolution required by operation of law.
Dissolution of the Company shall be effective on the day on which the event
occurs giving rise to the dissolution, but the Company shall not terminate until
the assets of the Company have been distributed as provided in Section 13.2 and
the certificate of formation of the Company has been canceled.
13.2 Liquidation. On dissolution of the Company, a liquidator
(who shall be selected by the Board of Managers, if still constituted, and
otherwise shall be a Person proposed and approved by a Majority in Interest of
the Members) and who may be the Investment Advisor or any of its affiliates,
shall cause to be prepared a statement setting forth the assets and liabilities
of the Company as of the date of dissolution, and such statement shall be
furnished to all of the Members. Then, those Company assets that the liquidator
determines should be liquidated shall be liquidated as promptly as possible, but
in an orderly and business-like manner to minimize loss. Assets that the
liquidator determines to distribute in kind shall be so distributed in a manner
consistent with applicable law. If the liquidator determines that an immediate
sale at the time of liquidation of all or part of the Company assets would cause
undue loss to the Members, the liquidator may, in order to avoid such loss,
either defer liquidation and retain the assets for a reasonable time, or
distribute the assets to the Members in kind. The liquidator shall then wind up
the affairs of the Company and distribute the proceeds of the Company by the end
of the calendar year of the liquidation (or, if later, within 90 days after the
date of such liquidation) in the following order or priority:
46
(a) to the payment of the expenses of liquidation and
to creditors (including Members who are creditors, to the extent permitted by
law) in satisfaction of liabilities of the Company other than liabilities for
distributions to Members, in the order of priority as provided by law;
(b) to the setting up of any reserves that the
liquidator may deem necessary or appropriate for any anticipated obligations or
contingencies of the Company or of the liquidator arising out of or in
connection with the operation or business of the Company. Such reserves may be
paid over by the liquidator to an escrow agent or trustee proposed and approved
by the liquidator to be disbursed by such escrow agent or trustee in payment of
any of the aforementioned obligations or contingencies and, if any balance
remains at the expiration of such period as the liquidator shall deem advisable,
to be distributed by such escrow agent or trustee in the manner hereinafter
provided;
(c) to the Members or their legal representatives in
accordance with the positive balances in their respective Capital Accounts, as
determined after taking into account all adjustments to Capital Accounts for
all periods.
13.3 Termination. The liquidator shall comply with any
requirements of the Act or other applicable law pertaining to the winding up of
a limited liability company, at which time the Company shall stand terminated.
ARTICLE XIV
AMENDMENTS
14.1 Proposal of Amendments. Except as otherwise specified in
this Agreement, any amendment to this Agreement may be proposed by any Manager,
by the Investment Advisor or by Members who, in aggregate, own not less than 51%
of the Shares owned by all such Members. The Person or Persons proposing such
amendment shall submit to the Board of Managers: (i) the text of such amendment;
(ii) a statement of the purpose of such amendment; and (iii) in the case of an
amendment so proposed by the Members (other than the Advisory Member), an
opinion of counsel reasonably acceptable to the Managers obtained by the Members
proposing such amendment to the effect that such amendment is permitted by the
Investment Company Act, the Act and the laws of any other jurisdiction where the
Company is qualified to do business, will not impair the limited liability of
the Managers or Members, and will not adversely affect the classification of the
Company as a partnership for federal and state income tax purposes. To the
extent required by the Investment Company Act, the Board of Managers shall,
within 40 days after receipt from Members of a proposal under clause (iii) of
this Section 14.1 and the required opinion, give notification to all Members of
such proposed amendment, of such statement of purpose, and of such opinion of
counsel, together with the views, if any, of the Board of Managers and the
Investment Advisor with respect to such proposed amendment.
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All amendments validly proposed by Members pursuant to clause (iii) of this
Section 14.1 or proposed by Managers or the Investment Advisor but requiring
the approval of Members shall be submitted to the Members for a vote no less
than 10 days nor more than 90 days after the date of mailing of such notice and
will be adopted if approved by an affirmative vote of a Majority in Interest of
the Members, subject to the approval of any greater number of Members as may be
required by applicable law.
14.2 Amendments to Be Adopted Solely by the Board of Managers.
Subject to Section 14.3, the Board of Managers may, without the consent of any
member may (i) amend any provision of this Agreement which requires any action
to be taken by or on behalf of the Board of Managers or the Company pursuant to
requirements of Delaware law if the provisions of Delaware law are amended,
modified or revoked so that the taking of such action is no longer required,
(ii) take such action in light of changing regulatory conditions or of the then
current ERISA regulations, as the case may be, as is necessary in order to
permit the Company to continue in existence or otherwise to comply with such
ERISA or other regulations, (iii) correct any clerical mistake or to correct or
supplement any immaterial provision herein or in the Certificate which may be
inconsistent with any other provision herein or therein, or correct any
printing, stenographic or clerical errors or omissions, which shall not be
inconsistent with the provisions of this Agreement or the status of the Company
as a partnership for federal income tax purposes, and (iv) change the name of
the Company.
14.3 Amendments Not Allowable. Unless approved by the Members
affected thereby, no amendment to this Agreement shall be permitted if the
effect of such amendment would be to:
(a) impair the limited liability of Members provided
for in Section 11.1; or
(b) adversely affect in any way the federal income
tax status of the Company as a partnership; or
(c) change the purpose, term, capital contribution,
allocation or distribution provisions of this Agreement.
ARTICLE XV
POWER OF ATTORNEY
15.1 Power of Attorney. Each Member hereby irrevocably
constitutes and appoints each Manager and each Appropriate Officer, and their
respective designees, as such Member's true and lawful agents and
attorneys-in-fact, with full power and authority in such Member's
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name, place, and stead, to make, execute, acknowledge, deliver, file, and record
the following documents and instruments in accordance with the other provisions
of this Agreement;
(a) this Agreement and a certificate of formation, a
certificate of doing business under fictitious name and any other instrument
that may be required to be filed in connection with the formation and operation
of the Company under the laws of Delaware or any other state;
(b) any and all amendments, restatements,
cancellations, or modifications of the instruments described in Section 15.1(a);
(c) any and all instruments related to the admission,
removal, or withdrawal of any Member; and
(d) all documents and instruments that may be
necessary or appropriate to effect the dissolution and termination of the
Company, pursuant to the terms hereof.
15.2 Irrevocability. The foregoing power of attorney is
coupled with an interest and such grant shall be irrevocable. Such power of
attorney shall survive the subsequent Incapacity of any such Member or the
transfer of any or all of such Member's Shares or Preferred Interests.
15.3 Priority of Agreement. In the event of any conflict
between provisions of this Agreement or any amendment hereto and any documents
executed, acknowledged, sworn to, or filed by any Manager or Appropriate Officer
under this power of attorney, this Agreement and its amendments shall govern.
15.4 Exercise of Power. This power of attorney may be
exercised by any of Managers either by signing separately as attorney-in-fact
for each such Manager or by a single signature of any Manager or Appropriate
Officer acting as attorney-in-fact for all Managers.
ARTICLE XVI
MISCELLANEOUS
16.1 Certificate of Formation. On each subsequent change in
the Company specified in the Act, the Managers shall, to the extent required by
the Act, cause to be executed and acknowledged an amended certificate of
formation pursuant to the provisions of the Act, which will be duly filed as
prescribed by Delaware law.
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16.2 Delaware Law. This Agreement and the rights and
obligations of the parties hereunder shall be governed by, and construed and
interpreted according to, the laws of Delaware.
16.3 Counterparts. This Agreement may be executed in
counterparts, and all counterparts so executed shall constitute one agreement
that shall be binding on all the parties hereto. Any counterpart of this
Agreement that has attached to it separate signature pages which altogether
contain the signatures of all Members or their attorneys-in-fact shall for all
purposes be deemed a fully executed instrument.
16.4 Binding upon Successors and Assigns. Subject to and
unless otherwise provided in this Agreement, each and all of the covenants,
terms, provisions, and agreements herein contained shall be binding upon and
inure to the benefit of the successors, successors-in- title, heirs and assigns
of the respective parties hereto.
16.5 Notices. Any notice, offer, consent, or demand permitted
or required to be made under this Agreement to any party hereto shall be given
in writing signed by the Person giving such notice either by (i) personal
delivery or (ii) by registered or certified mail, postage prepaid, addressed to
that party at the respective address shown on the Company's books and records,
or to such other address as that party shall indicate by proper notice to the
Board of Managers, in the same manner as provided above. All notices shall be
deemed effective upon receipt or five days after the date of mailing in
accordance with the above provisions.
16.6 Severability. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be effected thereby, but
shall be enforced to the maximum extent possible under applicable law.
16.7 Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to the subject
hereof and supersedes all prior agreements or understandings, written or oral,
between the parties with respect thereto.
16.8 Headings, Etc. The headings in this Agreement are
inserted for convenience of reference only and shall not affect interpretation
of this Agreement. Wherever from the context it appears appropriate, each term
stated in either the singular or the plural shall include the singular and the
plural, and pronouns stated in either the masculine or the neuter genders shall
include the masculine, the feminine and the neuter.
16.9 Legends. If certificates are issued evidencing a Member's
Shares or Preferred Interests, each such certificate shall bear such legends as
may be required by applicable federal and state laws, or as may be deemed
necessary or appropriate by the Board of Managers to reflect restrictions upon
transfer contemplated herein.
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16.10 Waiver of Partition. Except as may otherwise be provided
by law in connection with the winding up, liquidation and dissolution of the
Company, each Member hereby irrevocably waives any and all rights that it may
have to maintain an action for partition of any of the Company's property.
16.11 Survival of Certain Provisions. All indemnities and
reimbursement obligations made pursuant to this Agreement shall survive
dissolution and liquidation of the Company until the expiration of the longest
applicable statute of limitations (including extensions and waivers) with
respect to the matter for which a party would be entitled to be indemnified or
reimbursed, as the case may be.
16.12 Use of the Name "Fortress." Fortress has consented to
the use by the Company of the identifying word or name "Fortress" in the name of
the Company. Such consent is conditioned upon the employment of FIG Advisors LLC
as the Investment Advisor to the Company. The name or identifying word
"Fortress" may be used from time to time in other connections and for other
purposes by Fortress, Fortress Investment Corp., Fortress Investment Group, LLC
or their respective affiliates. Fortress may require the Company to cease using
"Fortress" in the name of the Company if the Company ceases to employ, for any
reason, FIG Advisors LLC, any successor thereto or any affiliate thereof as
Investment Advisor of the Company.
16.13 Transaction Origination and Other Fees. All transaction,
advisory, break- up, director's, origination and other similar fees earned in
connection with the Company's investment activities will be property of the
Company.
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Appendix A
Fundamental Investment Restrictions
The Company's purpose as set forth in Section 2.4 hereof and the
following investment restrictions are fundamental and cannot be changed without
approval of a majority of the Managers and the approval of Majority in Interest
of Members. If a percentage restriction on investment or use of assets set forth
below is adhered to at the time a transaction is effected, later changes in
percentage resulting from changing market values will not be considered a
deviation from policy. Subject to the foregoing, the Company may not:
(1) borrow money or issue senior securities except in compliance
with the Investment Company Act;
(2) make loans of money or property to any Person, except as may
be consistent with the Company's investment objectives and
policies;
(3) underwrite the securities of other issuers, except to the
extent that in connection with the disposition of portfolio
securities or the sale of its own Shares, Preferred Interests
or securities of its subsidiaries the Company may be deemed to
be an underwriter;
(4) purchase real estate or interests therein to the extent that
as a result of such investments the Company would not be (a)
an investment company by virtue of Section 3(c)(5)(C) of the
Investment Company Act or (b) a regulated investment company
under the Code;
(5) purchase or sell commodities or commodity contracts for any
purposes except as, and to the extent, permitted by applicable
law without the Company becoming subject to registration with
the Commodity Futures Trading Commission as a commodity pool;
or
(6) invest in excess of 25% of its capital in assets in any
industry other than the real estate and real estate financial
products industry, including mortgage loans and other Real
Estate-Related Assets of the types described herein except
that the Company may invest without limit in securities backed
by the credit of the United States of America or agencies or
instrumentalities thereof.
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IN WITNESS WHEREOF, the undersigned have executed this Limited
Liability Company Agreement as of October 10, 2002.
Advisory Member:
FIG Advisors LLC
/s/ Xxxxxx Xxxxxxx
By: _____________________________
Name: Xxxxxx Xxxxxxx
Title: Chief Operating Officer
Members:
Aurora Cayman Limited, by Xxxxxx
Xxxxxxx Investments LP,
its Investment Manager
/s/ Xxxx X. Xxxxxxx
By: _____________________________
Name: Xxxx X. Xxxxxxx
Title: Managing Director
Xxxxxx Xxxxxxx Private Markets Fund I LP
/s/ Xxxx X. Xxxxxxx
By: _____________________________
Name: Xxxx X. Xxxxxxx
Title: Authorized Signatory
Weyerhauser Company Master Retirement
Trust, by Xxxxxx Xxxxxxx Investments
LP, its Investment Manager
/s/ Xxxx X. Xxxxxxx
By: _____________________________
Name: Xxxx X. Xxxxxxx
Title: Managing Director
Xxxxxx Xxxxxx Medical Institute
/s/ Xxxx X. Xxxxxxx
By: _____________________________
Name: Xxxx X. Xxxxxxx
Title: Managing Director -
Private Investments
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