EXHIBIT G-1
INVESTMENT MANAGEMENT AGREEMENT
dated as of October 10, 2006
BY AND BETWEEN
XXXXXXXXXX OPPORTUNITIES FUND V, LLC,
a Delaware limited liability company
AND
XXXXXXXXXX CAPITAL PARTNERS, LLC,
a Delaware limited liability company
TABLE OF CONTENTS
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Page
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1. General Duties of the Investment Manager................................1
2. Duties and Obligations of the Investment Manager with Respect
to the Administration of the Company....................................3
3. Authority to Bind the Company; No Joint Venture.........................4
4. Limitations Relating to Investments.....................................5
5. Brokerage...............................................................7
6. Compensation............................................................7
7. Expenses................................................................9
8. Services to Other Companies or Accounts................................10
9. Duty of Care and Loyalty...............................................10
10. Indemnification........................................................11
11. Term of Agreement; Events Affecting the Investment Manager;
Survival of Certain Terms..............................................12
12. Power of Attorney; Further Assurances..................................14
13. Amendment of this Agreement............................................14
14. Notices................................................................15
15. Binding Nature of Agreement; Successors and Assigns....................15
16. Entire Agreement.......................................................15
17. Costs and Expenses.....................................................16
18. Books and Records......................................................16
19. Titles Not to Affect Interpretation....................................16
20. Provisions Separable...................................................16
21. Governing Law..........................................................16
22. Execution in Counterparts..............................................16
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INVESTMENT MANAGEMENT AGREEMENT
This Investment Management Agreement (the "Agreement"), dated as of
October 10, 2006, is made by and between Xxxxxxxxxx Opportunities Fund V, LLC
(the "Company"), a Delaware limited liability company which will be registered
as a nondiversified closed-end management investment company under the
Investment Company Act of 1940 (the "1940 Act"), and Xxxxxxxxxx Capital
Partners, LLC (the "Investment Manager"), a Delaware limited liability company
registered as an investment adviser under the Investment Advisers Act of 1940
(the "Advisers Act"). Capitalized terms used but not otherwise defined in this
Agreement shall have the meanings given to them in the Operating Agreement of
the Company dated as of October 10, 2006 (as the same may be amended from time
to time, the "Operating Agreement") or the Partnership Agreement of the
Portfolio Partnership, as the case may be.
1. General Duties of the Investment Manager.
Subject to the direction and control of the Company's Board of
Directors (the "Board") and subject to and in accordance with the terms of the
Credit Agreement, the Operating Agreement, the Pledge and Intercreditor
Agreement (as defined in the Credit Agreement), the Custodial Agreement (as
defined in the Credit Agreement), the Co-Management Agreement (as defined in the
Credit Agreement), the policies adopted or approved by the Board, the conditions
of any exemptive order obtained by or for the benefit of the Company from the
Securities and Exchange Commission (the "SEC") and this Agreement, the
Investment Manager agrees to supervise and direct the investment and
reinvestment of the Assets and perform the duties set forth herein or in the
Operating Agreement (subject to the approval of the Investment Committee (as
defined in Section 4(a) hereof) to the extent provided in Section 4 hereof), and
shall perform on behalf of the Company those investment and leverage related
duties and functions assigned to the Company or the Investment Manager in the
Credit Agreement, the Pledge and Intercreditor Agreement, the Statements of
Preferences for any Preferred Shares and the Custodial Agreement (collectively,
the "Transaction Documents"), and shall have such other powers with respect to
the investment and leverage related functions of the Company as shall be
delegated from time to time to the Investment Manager by the Board. The Company
has executed or will execute the Transaction Documents and the Co-Management
Agreement, and the Investment Manager is hereby granted, and shall have, full
power to take all actions and execute and deliver all necessary and appropriate
documents and instruments on behalf of the Company in accordance with such of
the Transaction Documents as have been executed from time to time, the Operating
Agreement, the policies adopted or approved by the Board, the conditions of any
exemptive order obtained by or for the benefit of the Company or the Investment
Manager from the SEC and this Agreement. The Investment Manager shall endeavor
to comply in all material respects with the 1940 Act and all rules and
regulations thereunder, all other applicable federal and state laws and
regulations and the applicable provisions of the Transaction Documents in
performing its duties under this Agreement. Subject to the foregoing and the
other provisions of this Agreement, and subject to the decisions of the
Investment Committee and the direction and control of the Board, the Investment
Manager is hereby appointed as the Company's agent and attorney-in-fact with
authority to negotiate, execute and deliver all documents and agreements on
behalf of the Company and to do or take all related acts, with the power of
substitution, to acquire, dispose of or otherwise take action with respect to or
affecting the Investments (as defined in Section 4(b) hereof), including,
without limitation:
(a) identifying and originating Investments (defined below) to be
purchased by the Company, selecting the dates for such purchases, and purchasing
or directing the purchase of such Investments on behalf of the Company;
(b) identifying Investments owned by the Company to be sold by the
Company, selecting the dates for such sales, and selling such Investments on
behalf of the Company;
(c) negotiating and entering into, on behalf of the Company,
documentation providing for the purchase and sale of Investments, including
without limitation, confidentiality agreements and commitment letters;
(d) structuring the terms of, and negotiating, entering into and/or
consenting to, on behalf of the Company, documentation relating to Investments
to be purchased, held, exchanged or sold by the Company, including any
amendments, modifications or supplements with respect to such documentation;
(e) exercising, on behalf of the Company, rights and remedies
associated with Investments, including without limitation, rights to petition to
place an obligor or issuer in bankruptcy proceedings, to vote to accelerate the
maturity of an Investment, to waive any default, including a payment default,
with respect to an Investment and to take any other action which the Investment
Manager deems necessary or appropriate in its discretion in connection with any
restructuring, reorganization or other similar transaction involving an obligor
or issuer with respect to an Investment, including without limitation,
initiating and pursuing litigation;
(f) responding to any offer in respect of Investments by tendering the
affected Investments, declining the offer, or taking such other actions as the
Investment Manager may determine;
(g) exercising all voting, consent and similar rights of the Company
on its behalf and advising the Company with respect to matters concerning the
Investments;
(h) advising and assisting the Company with respect to the valuation
of the Assets;
(i) retaining legal counsel and other professionals (such as financial
advisers) to assist in the structuring, negotiation, documentation,
administration and modification and restructuring of Investments;
(j) providing the Company with assistance in processing subscription
and/or transfer applications for the Membership Interests, including assistance
in determining whether such applications and prospective or existing Members of
the Company satisfy applicable requirements under the Operating Agreement; and
(k) if it is determined to utilize the Portfolio Partnership, the
Investment Manager will invest substantially all of the Company's assets for a
common limited partner interest in the Portfolio Partnership.
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2. Duties and Obligations of the Investment Manager with Respect to
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the Administration of the Company.
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The Investment Manager also agrees to furnish office facilities and
equipment and clerical, bookkeeping and administrative services (other than such
services, if any, provided by the Company's custodian and other service
providers) to the Company. To the extent requested by the Company, the
Investment Manager agrees to provide the following administrative services:
(a) oversee the determination and publication of the Company's net
asset value in accordance with the Company's policy as adopted from time to time
by the Board and communicated to the Investment Manager in writing;
(b) maintain or oversee the maintenance of the books and records of
the Company as required under the 1940 Act and maintain (or oversee maintenance
by other persons) such other books and records required by law or for the proper
operation of the Company;
(c) oversee the preparation and filing of the Company's federal, state
and local income tax returns and any other required tax returns or reports;
(d) review the appropriateness of and arrange for payment of the
Company's expenses;
(e) prepare for review and approval by officers and other authorized
persons of the Company (collectively, the "Authorized Signatories") financial
information for the Company's semi-annual and annual reports and other
communications with shareholders required or otherwise to be sent to Company
shareholders, and arrange for the printing and dissemination of such reports and
communications to shareholders;
(f) prepare for review by the Authorized Signatories and Board of the
Company the Company's periodic financial reports required to be filed with the
SEC on Form N-SAR, Form N-CSR, Form N-PX, Form N-Q and such other reports, forms
and filings, as may be mutually agreed upon or as may be required by law, the
Credit Agreement or any Statement of Preferences;
(g) prepare reports relating to the business and affairs of the
Company as may be mutually agreed upon and not otherwise prepared by others;
(h) make such reports and recommendations to the Board concerning the
performance and fees of any of the Company's service providers as the Board may
reasonably request or deem appropriate;
(i) oversee and review calculations of fees paid to the Company's
service providers;
(j) oversee the Company's portfolio and perform necessary calculations
as required under Section 18 of the 1940 Act;
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(k) consult with the Audit Committee of the Board, the Authorized
Signatories, and the Company's independent accountants, legal counsel, custodian
and other service providers in establishing the accounting policies of the
Company and monitor financial and shareholder accounting services;
(l) review implementation of any share purchase programs authorized by
the Board;
(m) determine the amounts available for distribution as dividends and
distributions to be paid by the Company to its shareholders;
(n) prepare and arrange for the printing of dividend notices to
shareholders;
(o) provide the Company's dividend disbursing agent and custodian with
such information as is required for such parties to effect the payment of
dividends and distributions;
(p) prepare such information and reports as may be required under the
Credit Agreement and by any other banks, if any, from which the Company borrows
funds;
(q) provide such assistance to the Company's custodian, counsel,
auditors and other service providers as generally may be required to properly
carry on the business and operations of the Company;
(r) assist in the preparation and filing of Forms 3, 4, and 5 pursuant
to Section 16 of the Securities Exchange Act of 1934, as amended, and Section
30(h) of the 1940 Act for the officers, Authorized Signatories and directors of
the Company, such filings to be based on information provided by those persons;
(s) respond to or refer to the Company's officers or Authorized
Signatories shareholder (including any potential shareholder) inquiries relating
to the Company; and
(t) supervise any other aspects of the Company's administration as may
be agreed to by the Company and the Investment Manager.
All services are to be furnished through the medium of any directors,
officers, Authorized Signatories or employees of the Investment Manager or its
affiliates as the Investment Manager deems appropriate in order to fulfill its
obligations hereunder.
The Company will reimburse the Investment Manager or its affiliates
for all out-of-pocket expenses incurred by them in connection with the
performance of the administrative services described in this paragraph 2.
3. Authority to Bind the Company; No Joint Venture.
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(a) Except as provided in or pursuant to Sections 1 and 12 hereof, the
Investment Manager shall have no authority to bind or obligate the Company. The
Board shall retain the sole authority to act on behalf of the Company, and all
acts of the Investment Manager (other than as provided in the Transaction
Documents, the Operating Agreement or in Section 1
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or Section 12 hereof with respect to any Approved Investment) shall require the
Board's consent and approval to bind the Company. Nothing in this Agreement
shall be deemed to create a joint venture or partnership between the parties
with respect to the arrangements set forth in this Agreement. For all purposes
hereof, the Investment Manager shall be deemed to be an independent contractor
and, unless otherwise provided herein or specifically authorized by the Board
from time to time, shall have no authority to act for or represent the Company.
(b) The Investment Manager shall act in conformity with the written
instructions and directions of the Board, except to the extent that authority
has been delegated to the Investment Manager pursuant to the terms of this
Agreement, the Operating Agreement and the Transaction Documents. The Investment
Manager will not be bound to follow any amendment to any Transaction Document or
the Operating Agreement until it has received written notice thereof and until
it has received a copy of the amendment from the Company or the Administrative
Agent (as defined in the Credit Agreement); provided that if any such amendment
materially and adversely affects the rights or duties of the Investment Manager,
the Investment Manager shall not be obligated to respect or comply with the
terms of such amendment unless it consents thereto. Subject to the fiduciary
duty of the Board, the Company agrees that it shall not permit any amendment to
any Transaction Document or the Operating Agreement that materially and
adversely affects the rights or duties of the Investment Manager to become
effective unless the Investment Manager has been given prior written notice of
such amendment and has consented thereto in writing.
(c) The Investment Manager may, with respect to the affairs of the
Company, consult with Babson Capital Management LLC (the "Co-Manager") and its
Affiliated Persons (collectively, "Babson"), as co-investment manager, and with
such legal counsel, accountants and other advisors as may be selected by the
Investment Manager. The Investment Manager shall be fully protected, to the
extent permitted by applicable law, in acting or failing to act hereunder if
such action or inaction is taken or not taken in good faith by the Investment
Manager in accordance with the advice or opinion of Babson or such counsel,
accountants or other advisors. The Investment Manager shall be fully protected
in relying upon any writing signed in the appropriate manner with respect to any
instruction, direction or approval of any of the Board or Babson and may also
rely on opinions of the Investment Manager's counsel with respect to such
instructions, directions and approvals. The Investment Manager shall also be
fully protected when acting upon any instrument, certificate or other writing
the Investment Manager believes in good faith to be genuine and to be signed or
presented by the proper person or persons. The Investment Manager shall be under
no duty to make any investigation or inquiry as to any statement contained in
any such writing and may accept the same as conclusive evidence of the truth and
accuracy of the statements therein contained if the Investment Manager in good
faith believes the same to be genuine.
4. Limitations Relating to Investments.
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(a) Investments Requiring the Investment Committee's Approval. The
Investment Manager will establish an Investment Committee (the "Investment
Committee") comprised initially of eleven (11) persons (such number of members
being subject to increase or decrease at any time in the sole discretion of the
Investment Manager). Six of the persons on the Investment Committee will be
voting members (such number of voting members being subject to
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increase or decrease at any time in the sole discretion of the Investment
Manager). Subject to the following sentence and Section 11(b), all of the voting
members of the Investment Committee will be appointed by the Investment Manager,
and initially such voting members will be Xxxxxxx X. Xxxxxxxxxx, Xxxx X.
Xxxxxxxxxx, Xxxxxx X. Xxxxxxxxx, Xxxx X. Xxxxxxxxx and Xxxxxx X. Xxxxx or such
other persons as may be appointed by the Investment Manager. Except as provided
by Section 11(b), one voting member of the Investment Committee will be
appointed by Babson, with the approval of the Investment Manager. Xxxxxxx X.
Xxxxxxx XX shall be Babson's representative on the Investment Committee until
removed or until replaced by Babson with the approval of the Investment Manager
for such replacement. Additionally, the Investment Manager shall have the right
to appoint any number of non-voting members to the Investment Committee. The
Investment Committee will review and discuss the purchase and sale of all
Investments other than short-term Investments in high quality debt, securities
maturing in less than 367 days or investment funds whose portfolios at all times
have an effective duration of less than 367 days and other than hedging and risk
management transactions, and approval by a majority vote of the voting members
of the Investment Committee will be required prior to the purchase or sale of
any Investment required to be reviewed by the Investment Committee. The Company
shall not be bound by any Investment made by the Investment Manager on behalf of
the Company for which the necessary approval has not been obtained.
(b) Investments. Except as otherwise provided in this Section 4 and
subject to the requirements of the Transaction Documents, the Operating
Agreement and applicable law, the Investment Manager may cause the Company from
time to time to purchase:
(i) debt securities or debt obligations, including bank loans or
interests therein ("Debt Obligations");
(ii) stock, warrants or other equity securities ("Securities");
and
(iii) any other investments of any type of asset the Company is
permitted to make (together with Securities and Debt Obligations,
"Investments").
(c) Company is not a Bank. The Investment Manager may not purchase any Debt
Obligation if the related credit agreement, note, indenture or other
documentation by its terms requires any such purchase to be made only
by a bank, savings and loan, thrift, trust company or other similar
deposit-taking institution.
(d) Origination Fees. The Company shall, except to the extent the
Investment Manager determines such sharing could cause the Company to fail to
satisfy any requirement for qualification as a regulated investment company
under Subchapter M of the Code, receive its pro-rata share, measured by the
amount invested or proposed to be invested by the investors in any Investment,
of any origination, structuring, or similar fees normally payable to lenders or
structurers as compensation for services ("Origination or Similar Fees") payable
with respect to any Investment, whether or not any other investment funds or
accounts for which the Investment Manager or its Affiliated Persons acts as
investment adviser (the "Xxxxxxxxxx Accounts") share in such fees.
Notwithstanding anything herein, in the Operating Agreement or in any
Transaction Document to the contrary, to the extent that any Origination or
Similar Fees with respect to the Company's share of such Investment are paid
to the Investment Manager, Babson
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or any of their respective Affiliated Persons as additional compensation, such
amount shall be reimbursed to the Company unless the exception to the preceding
sentence is in effect, in which case such amount shall be paid to the other
accounts participating in such Investment or returned to the party paying such
Origination or Similar Fees.
(e) Co-Investments. The Company may not co-invest with any account
managed by the Investment Manager or its Affiliated Persons in any Investments
subject to any exemptive order obtained by, on behalf of or for the benefit of
the Company except to the extent permitted by such exemptive relief or otherwise
permitted by the 1940 Act.
5. Brokerage.
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The Investment Manager shall effect all purchases and sales of
securities in a manner consistent with the principles of best execution, taking
into account net price (including commissions) and execution capability and
other services which the broker or other intermediary may provide. In this
regard, the Investment Manager may effect transactions which cause the Company
to pay a commission in excess of a commission which another broker or other
intermediary would have charged; provided, however, that the Investment Manager
shall have first determined that such commission is reasonable in relation to
the value of the brokerage or research services performed by that broker or
other intermediary or that the Company is the sole beneficiary of the services
provided.
6. Compensation.
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(a) The Company agrees to pay to the Investment Manager and the
Investment Manager agrees to accept as partial compensation for all services
rendered by the Investment Manager as such, a fee (the "Management Fee"),
payable monthly in arrears at an annual rate equal to 1.50% of the sum of (i)
(A) prior to the end of the Subscription Period the Common Share Commitments
entered into, regardless of whether the Company has drawn down or repaid such
commitments and (B) after the end of the Subscription Period, the Common Share
Commitments drawn less the amount by which the sum of all distributions exceeds
the excess of the cumulative items of income and gain (realized or unrealized)
over the cumulative items of loss and deduction (realized or unrealized) (such
remainder, the "Undistributed Capital"), (ii) on and after the date the Credit
Agreement is entered into by the parties thereto, the maximum amount available
to be borrowed by the Company and/or the Portfolio Partnership under the Credit
Agreement, regardless of whether the Company and/or the Portfolio Partnership
has borrowed any amounts under the Credit Agreement and (iii) on and after the
date the Credit Agreement is entered into by the parties thereto and the Company
and/or the Portfolio Partnership has issued more than $1,000,000 in liquidation
preference of Preferred Shares or Preferred Interests, the maximum aggregate
liquidation preference of Preferred Shares the Company and/or the Portfolio
Partnership would be authorized to issue under the 1940 Act based upon the total
amount of Common Share Commitments entered into and assuming that the Company
and/or the Portfolio Partnership has borrowed the maximum amount available to be
borrowed under the Credit Agreement, regardless of whether the Company and/or
the Portfolio Partnership has issued all of such Preferred Shares or Preferred
Interests (the sum of (i) through (iii) being referred to as the "Management Fee
Capital"). At such time as all borrowings under the Credit Agreement have been
repaid and no further borrowings are permitted thereunder,
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Management Fee Capital shall be equal to the sum of the Undistributed Capital,
plus the aggregate liquidation preference of Preferred Shares or Preferred
Interests outstanding from time to time, thereby reducing the amounts on which
the Management Fee is paid. At such time as all borrowings under the Credit
Agreement have been repaid and no further borrowings are permitted thereunder,
and no more than $1,000,000 in liquidation preference of Preferred Shares or
Preferred Interests remains outstanding, Management Fee Capital shall be equal
to the Undistributed Capital, thereby further reducing the amounts on which the
Management Fee is paid. The Management Fee shall be prorated for any partial
payment period. The Management Fee payable pursuant to this Section 6(a) shall
be reduced by the amount of management fees paid to the Investment Manager by
the Portfolio Partnership pursuant to Section 6(a) of the Investment Management
Agreement between the Portfolio Partnership and the Investment Manager.
(b) If the Company sells and issues to SVOF/MM, LLC, a company
wholly-owned by the Investment Manager, the Co-Manager and their affiliates, at
the initial Closing or such later date as the Investment Manager requests, one
share of Series S Preferred Stock (the "Special Share") at a price equal to its
liquidation preference of $1,000, the Company shall not be obligated to conduct
its operations through the Portfolio Partnership or pay the incentive fee
determined in accordance with the last sentence of this Section 6(b) so long as
such Special Share is outstanding. As set forth in the Statement of Preferences
for such Special Share, the Special Share will pay dividends at a rate equal to
the greater of (i) 4% per year of the liquidation preference of such Special
Share, but in no event greater than $40 per year, or (ii) (A) 100% of the amount
by which the cumulative distributions and amounts distributable in respect of
the Common Shares exceed an 8% annual weighted average return on Undistributed
Capital until the total of (1) amounts paid as a fee pursuant to the last
sentence of this paragraph (b), (2) the cumulative distributions made in respect
of the Special Share during the time it was held by the Investment Manager or an
Affiliated Person thereof and (3) any amounts paid to the Investment Manager or
an Affiliated Person thereof pursuant to the Partnership Agreement of the
Portfolio Partnership equals 25% of the aggregate cumulative distributions of
net income and gain in respect of the Common Shares, and thereafter (B) an
amount (payable at the same time as, and not in advance of, any distributions in
respect of the Common Shares) such that, after payment thereof, the total of (x)
amount paid as a fee pursuant to the last sentence of this paragraph (b), (y)
the cumulative distributions made in respect of the Special Share during the
time it was outstanding or held by the Investment Manager or an Affiliated
Person thereof and (z) any amounts paid to the Investment Manager or an
Affiliated Person thereof pursuant to the Partnership Agreement of the Portfolio
Partnership equals 20% of the aggregate incremental distributions of net income
and gain in respect of the Common Shares and the Special Share and the amounts
paid as a fee pursuant to the last sentence of this paragraph (b). For the
avoidance of doubt, the expenses of the Company, including the Management Fee,
shall not reduce the amount of Undistributed Capital for purposes of calculating
the 8% annual weighted average return on Undistributed Capital. If the
Investment Manager or the Company determines on the advice of counsel that the
sale and issuance of the Special Share or its Statement of Preferences is
inconsistent with the requirements of the 1940 Act in any material respect and
that such inconsistency is unlikely to be able to be remedied withoutfundamental
alteration of such Statement of Preferences, the Company and the Investment
Manager agree that the Company will repurchase such share, if outstanding, at
liquidation preference plus accumulated and unpaid distributions and utilize the
Portfolio Partnership as a subsidiary taxable as a partnership through
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which the Company will carry on substantially all of its business and which will
provide SVOF/MM, LLC with a profit allocation on the same terms as the
contingent dividend set forth above with respect to the Special Share. If for
any reason the Investment Manager or the Company determines on the advice of
counsel that such profit allocation would be inconsistent with the requirements
of the 1940 Act in any material respect and that such inconsistency would be
unlikely to be able to be remedied without fundamental alteration of such profit
allocation and without having a material adverse effect on any shareholder of
the Company or otherwise has not issued the Special Share or formed the
Portfolio Partnership, the Company will pay to the Investment Manager as a fee
the amounts computed in accordance with the second and third sentences of this
paragraph; provided, however, that the amount paid pursuant to this sentence
shall be reduced by the amount paid by the Portfolio Partnership pursuant to the
parallel sentence in Section 6(b) of the Investment Management Agreement between
the Portfolio Partnership and the Investment Manager.
(c) If this Agreement is terminated for any reason prior to the end of
the Investment Period, the Company will engage at its own expense a firm
acceptable to the Company and the Investment Manager to determine the maximum
reasonable fair value as of the termination date of the Company's consolidated
assets (assuming each asset is readily marketable among institutional investors
without minority discount and with an appropriate control premium for any
control positions and ascribing a net present value (discounted at AA borrowing
rates) to any unamortized portion of the Company's organizational, offering and
issuance expenses and to any going concern value identified by such firm). After
review of such firm's work papers by the Investment Manager and the Company and
resolution of any comments therefrom, such firm shall render its report as to
valuation, and the Company shall pay to the Investment Manager and/or SVOF/MM,
LLC, as the case may be, any Management Fees or other dividends or fees due
under this Agreement (which, for the avoidance of doubt, includes any amount due
to SVOF/MM, LLC pursuant to Section 6(b) hereof), as the case may be, payable
pursuant to the terms of this Agreement as if all of the consolidated assets of
the Company had been sold or realized at the values indicated in such report and
any net income and gain distributed. Such report shall be completed within 90
days after notice of termination of the relevant agreement.
(d) If this Agreement is terminated due to conduct that is determined
by a trier of fact, after a final non-appealable determination on the merits, to
be Disabling Conduct prior to the end of the Investment Period, the Company
shall follow the procedures set forth in Section 6(c) of this Agreement and pay
any amount due to the Investment Manager and/or SVOF/MM, LLC to such party,
provided that any amount owing to either the Investment Manager and/or SVOF/MM,
LLC pursuant to this Section 6(d) shall be reduced by an amount equal to 15% of
the total amount due to such party under this Section 6(d).
7. Expenses.
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The Company will be responsible for paying the compensation of the
Investment Manager and the Placement Agent, due diligence and negotiation
expenses, fees and expenses of custodians, administrators, transfer and
distribution agents, counsel and directors, insurance, filings and
registrations, proxy expenses, expenses of communications to investors,
interest, taxes, portfolio transaction expenses, indemnification, litigation and
other extraordinary expenses and such other expenses as the Investment Manager
is not obligated to provide (such as services
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the Investment Manager is required to supervise) and as are approved by the
directors as being reasonably related to the organization, offering,
capitalization, operation, regulatory compliance or administration of the
Company and any portfolio investments. Expenses associated with the general
overhead of the Investment Manager or Co-Manager will not be covered by the
Company. Notwithstanding the foregoing, and subject to review by the Board, the
Company will bear the costs and expenses of the Investment Manager as set forth
in Section 9 of the Operating Agreement, which may not be amended without the
Investment Manager's written consent. On behalf of the Company, the Investment
Manager may advance payment of any such fees and expenses of the Company, and
the Company shall reimburse the Investment Manager therefor within 30 days
following written request from the Investment Manager. Nothing in this Section 7
shall limit the ability of the Investment Manager to be reimbursed by any Person
(including issuers or obligors of securities, instruments or obligations owned
by the Company) for out-of-pocket expenses incurred by the Investment Manager in
connection with the performance of services hereunder. The Investment Manager
shall maintain complete and accurate records with respect to costs and expenses
and shall furnish the Board with receipts or other written vouchers with respect
thereto upon request of the Board. The Investment Manager will be responsible
for paying the Co-Manager the amounts set forth in the Co-Management Agreement.
8. Services to Other Companies or Accounts.
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(a) The Investment Manager and its Affiliated Persons, employees or
associates are in no way prohibited from, and intend to, spend substantial
business time in connection with other businesses or activities, including, but
not limited to, managing investments, advising or managing entities whose
investment objectives are the same as or overlap with those of the Company,
participating in actual or potential investments of the Company or any Member,
providing consulting, merger and acquisition, structuring or financial advisory
services, including with respect to actual, contemplated or potential
investments of the Company, or acting as a director, officer or creditors'
committee member of, adviser to, or participant in, any corporation,
partnership, trust or other business entity. The Investment Manager and its
Affiliated Persons may, and expect to, receive fees or other compensation from
third parties for any of these activities, which fees will be for the benefit of
their own account and not the Company.
(b) In addition, the Investment Manager and its Affiliated Persons may
manage Xxxxxxxxxx Accounts other than the Company that invest in assets eligible
for purchase by the Company.
(c) The Company may have the ability, under certain circumstances, to
take certain actions that would have an adverse effect on Xxxxxxxxxx Accounts
other than the Company. In these circumstances, the Investment Manager and its
Affiliated Persons will act in a manner believed to be equitable to the Company
and such other Xxxxxxxxxx Accounts, including co-investment in accordance with
the conditions of any exemptive relief obtained by the company and the
Investment Manager.
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9. Duty of Care and Loyalty.
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Except as otherwise required by law, none of the Special Member, the
Investment Manager, or any of their respective Affiliated Persons, directors,
officers, employees, shareholders, managers, members, assigns, representatives
or agents (each, an "Indemnified Person" and, collectively, the "Indemnified
Persons") shall be liable, responsible or accountable in damages or otherwise to
the Company, any Member or any other Person for any loss, liability, damage,
settlement cost, or other expense (including reasonable attorneys' fees)
incurred by reason of any act or omission or any alleged act or omission
performed or omitted by such Indemnified Person (other than solely in such
Indemnified Person's capacity as a Member, if applicable) in connection with the
establishment, management or operations of the Company or the management of its
Assets (including those in connection with serving on boards of directors of, or
creditors' committees for, any Portfolio Company) except that the Investment
Manager shall be liable to the Company or any Member, as the case may be, if
such act or failure to act arises out of the bad faith, willful misfeasance,
gross negligence or reckless disregard of an Indemnified Person's duty to the
Company or such Member, as the case may be (such conduct, "Disabling Conduct").
Subject to the foregoing, all such Indemnified Persons shall look solely to the
Assets (including, without limitation, the Unfunded Commitments) for
satisfaction of claims of any nature arising in connection with the affairs of
the Company. If any Indemnified Person is made a party to any suit or proceeding
to enforce any such liability, subject to the foregoing exception, such
Indemnified Person shall not, on account thereof, be held to any personal
liability.
10. Indemnification.
---------------
(a) To the fullest extent permitted by applicable law, each of the
Indemnified Persons shall be held harmless and indemnified by the Company
(out of the Assets (including, without limitation, the Unfunded Commitments)
and not out of the separate assets of any Member) against any liabilities and
expenses, including amounts paid in satisfaction of judgments, in compromise
or as fines and penalties, and reasonable counsel fees reasonably incurred by
such Indemnified Person in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court
or administrative or investigative body in which such Indemnified Person may
be or may have been involved as a party or otherwise (other than as
authorized by the Directors, as the plaintiff or complainant) or with which
such Indemnified Person may be or may have been threatened, while acting in
such Person's capacity as an Indemnified Person, except with respect to any
matter as to which such Indemnified Person shall not have acted in good faith
in the reasonable belief that such Person's action was in the best interest
of the Company or, in the case of any criminal proceeding, as to which such
Indemnified Person shall have had reasonable cause to believe that the
conduct was unlawful, provided, however, that an Indemnified Person shall
only be indemnified hereunder if (i) such Indemnified Person's activities do
not constitute Disabling Conduct and (ii) there has been a determination (a)
by a final decision on the merits by a court or other body of competent
jurisdiction before whom the issue of entitlement to indemnification was
brought that such Indemnified Person is entitled to indemnification or, (b)
in the absence of such a decision, by (1) a majority vote of a quorum of
those Directors who are neither "interested persons" of the Company (as
defined in Section 2(a)(19) of the 0000 Xxx) nor parties to the proceeding
(the "Disinterested Non-Party Directors") that the Indemnified Person is
entitled to indemnification, or (2) if such quorum is not obtainable or even
if obtainable, if a majority so directs, independent legal counsel in a
written opinion that concludes that the Indemnified Person should be entitled
11
to indemnification. Notwithstanding the foregoing, with respect to any action,
suit or other proceeding voluntarily prosecuted by any Indemnified Person as
plaintiff, indemnification shall be mandatory only if the prosecution of such
action, suit or other proceeding by such Indemnified Person was authorized by a
majority of the Directors. All determinations to make advance payments in
connection with the expense of defending any proceeding shall be authorized and
made in accordance with the immediately succeeding paragraph (b) below.
(b) The Company shall make advance payments in connection with the
expenses of defending any action with respect to which indemnification might be
sought hereunder if the Company receives a written affirmation by the
Indemnified Person of the Indemnified Person's good faith belief that the
standards of conduct necessary for indemnification have been met and a written
undertaking to reimburse the Company unless it is subsequently determined that
he is entitled to such indemnification and if a majority of the Directors
determine that the applicable standards of conduct necessary for indemnification
appear to have been met. In addition, at least one of the following conditions
must be met: (i) the Indemnified Person shall provide adequate security for his
undertaking, (ii) the Company shall be insured against losses arising by reason
of any lawful advances, or (iii) a majority of a quorum of the Disinterested
Non-Party Directors, or if a majority vote of such quorum so direct, independent
legal counsel in a written opinion, shall conclude, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is
substantial reason to believe that the Indemnified Person ultimately will be
found entitled to indemnification.
(c) The rights accruing to any Indemnified Person under these
provisions shall not exclude any other right to which he may be lawfully
entitled.
(d) Each Indemnified Person shall, in the performance of its duties,
be fully and completely justified and protected with regard to any act or any
failure to act resulting from reliance in good faith upon the books of account
or other records of the Company, upon an opinion of counsel, or upon reports
made to the Company by any of the Company's officers or employees or by any
advisor, administrator, manager, distributor, selected dealer, accountant,
appraiser or other expert or consultant selected with reasonable care by the
Directors, officers or employees of the Company, regardless of whether such
counsel or other person may also be a Director.
11. Term of Agreement; Events Affecting the Investment Manager;
----------------------------------------------------------
Survival of Certain Terms.
-------------------------
(a) This Agreement shall become effective as of the time at which the
Company registers as an investment company with the SEC and, unless sooner
terminated by the Company or Investment Manager as provided herein, shall
continue in effect for a period of two years. Thereafter, if not terminated,
this Agreement shall continue in effect with respect to the Company for
successive periods of 12 months, provided such continuance is specifically
approved at least annually by both (i) the vote of a majority of the Board or
the vote of a majority of the outstanding voting securities of the Company at
the time outstanding and entitled to vote, and (ii) by the vote of a majority of
the Directors who are not parties to this Agreement or interested persons of any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval. Notwithstanding the foregoing, this Agreement may be
12
terminated by the Company at any time, without the payment of any penalty, upon
giving the Investment Manager 60 days' notice (which notice may be waived by the
Investment Manager), provided that such termination by the Company shall be
directed or approved by the vote of a majority of the Directors of the Company
in office at the time or by the vote of the holders of a majority of the voting
securities of the Company at the time outstanding and entitled to vote, or by
the Investment Manager on 60 days' written notice (which notice may be waived by
the Company). This Agreement will also immediately terminate in the event of its
assignment. As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested person" and "assignment" shall have the same
meanings as such terms are given in the 0000 Xxx.
(b) If any two of Xxxxxxx X. Xxxxxxxxxx, Xxxx Xxxxxxxxxx and Xxxxxx
Xxxxxxxxx die, become incapacitated or depart from the Investment Manager or
cease to be actively involved in the management or operations of the Investment
Manager or the Company, (i) if such event occurs during the Subscription Period,
the Investment Manager will promptly notify Babson, the credit agent for the
Company's senior credit facility, the credit enhancer, if any, and the Members
of such event and the Members may determine at any time during the six months
following such notice, by vote of 75% or more of the Common Shares, to terminate
the Subscription Period or, voting together with the Preferred Shares as a
single class, to liquidate the Company, and (ii) if such event occurs after the
Subscription Period, the Investment Manager will promptly notify Babson, the
credit agent for the Company's senior credit facility, the credit enhancer, if
any, and the Members of such event, will increase the number of voting Babson
representatives on the Investment Committee to a number that is equivalent at
all times to the number of voting Investment Manager representatives on such
committee and will promptly replace one or both of such individuals with another
individual with skills reasonably comparable to those which such individual or
individuals employed on behalf of the Investment Manager for the benefit of the
Company (a person having such skills being a "Replacement Principal"), as
determined by the approval of a majority of the Common Shares and Preferred
Shares voting as a single class within sixty days after the date notice of such
replacement is given. Upon the approval of a Replacement Principal, the number
of Babson representatives on the Investment Committee shall be reduced to one
and such Replacement Principal's name shall be substituted for purposes of the
first sentence of this subsection (b) for the name of the individual for whom he
or she is a Replacement Principal.
(c) Notwithstanding anything herein to the contrary, Sections 6(c),
7, 9 and 10 of this Agreement shall survive any termination hereof.
(d) From and after the effective date of termination of this
Agreement, the Investment Manager and its Affiliated Persons shall not be
entitled to compensation for further services hereunder, but shall be paid
all compensation and reimbursement of expenses accrued to the date of
termination. Upon such termination, and upon receipt of payment of all
compensation and reimbursement of expenses owed, the Investment Manager shall
as soon as practicable (and in any event within 90 days after such
termination) deliver to the Company all property (to the extent, if any, that
the Investment Manager has custody thereof) and documents of the Company or
otherwise relating to the Assets of the Company then in the custody of the
Investment Manager (although the Investment Manager may keep copies of such
documents for its records). The Investment Manager agrees to use reasonable
efforts to cooperate with any successor investment manager in the transfer of
its responsibilities hereunder, and will, among
13
other things, provide upon receipt of a written request by such successor
investment manager any information available to it regarding any Assets of the
Company. The Investment Manager agrees that, notwithstanding any termination, it
will reasonably cooperate in any proceeding arising in connection with this
Agreement, any of the Transaction Documents or any Investment (excluding any
such proceeding in which claims are asserted against the Investment Manager or
any Affiliated Person of the Investment Manager) upon receipt of appropriate
indemnification and expense reimbursement.
12. Power of Attorney; Further Assurances.
-------------------------------------
In addition to the power of attorney granted to the Investment
Manager in Section 1 of this Agreement, the Company hereby makes, constitutes
and appoints the Investment Manager, with full power of substitution, as its
true and lawful agent and attorney-in-fact, with full power and authority in
its name, place and stead, in accordance with the terms of this Agreement (a)
to sign, execute, certify, swear to, acknowledge, deliver, file, receive and
record any and all documents which the Investment Manager reasonably deems
necessary or appropriate in connection with its investment management duties
under this Agreement and as required by the 1940 Act and (b) to (i) subject
to any policies adopted by the Board with respect thereto, exercise in its
discretion any voting or consent rights associated with any securities,
instruments or obligations included in the Company's Assets, (ii) execute
proxies, waivers, consents and other instruments with respect to such
securities, instruments or obligations, (iii) endorse, transfer or deliver
such securities, instruments and obligations and (iv) participate in or
consent (or decline to consent) to any modification, work-out, restructuring,
bankruptcy proceeding, class action, plan of reorganization, merger,
combination, consolidation, liquidation or similar plan or transaction with
regard to such securities, instruments and obligations. To the extent
permitted by applicable law, this grant of power of attorney is irrevocable
and coupled with an interest, and it shall survive and not be affected by the
subsequent dissolution or bankruptcy of the Company; provided that this grant
of power of attorney will expire, and the Investment Manager will cease to
have any power to act as the Company's attorney-in-fact, upon termination of
this Agreement in accordance with its terms. The Company shall execute and
deliver to the Investment Manager all such other powers of attorney, proxies,
dividend and other orders, and all such instruments, as the Investment
Manager may reasonably request for the purpose of enabling the Investment
Manager to exercise the rights and powers which it is entitled to exercise
pursuant to this Agreement. Each of the Investment Manager and the Company
shall take such other actions, and furnish such certificates, opinions and
other documents, as may be reasonably requested by the other party hereto in
order to effectuate the purposes of this Agreement and to facilitate
compliance with applicable laws and regulations and the terms of this
Agreement.
13. Amendment of this Agreement.
---------------------------
No provision of this Agreement may be amended, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the amendment, waiver, discharge or termination is
sought. Any amendment of this Agreement shall be subject to the 0000 Xxx. If the
Company has outstanding any securities rated by S&P or Xxxxx'x, the Company
shall promptly provide a copy of any such amendment or waiver to S&P and/or
Xxxxx'x, as applicable.
14
14. Notices.
-------
Unless expressly provided otherwise herein, any notice, request,
direction, demand or other communication required or permitted under this
Agreement shall be in writing and shall be deemed to have been duly given, made
and received if sent by hand or by overnight courier, when personally delivered,
if sent by telecopier, when receipt is confirmed by telephone, or if sent by
registered or certified mail, postage prepaid, return receipt requested, when
actually received if addressed as set forth below:
(a) If to the Company:
Tennenbaum Opportunities Fund V, LLC
Attn: Xxxxxx Xxxxxx
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
(b) If to the Investment Manager:
Xxxxxxxxxx Capital Partners, LLC
Attn: Xxxxxx X. Xxxxxxxxx
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
(c) If to any of the Members, as provided in the Operating
Agreement, and if to the Administrative
Agent or any Lender under the Credit Agreement, as
provided in the applicable Transaction Document.
Either party to this Agreement may alter the address to which communications or
copies are to be sent to it by giving notice of such change of address in
conformity with the provisions of this Section 14. Other addresses set forth in
this Section 14 shall be changed only with the consent of the relevant
addressee.
15. Binding Nature of Agreement; Successors and Assigns.
---------------------------------------------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns as provided herein.
16. Entire Agreement.
----------------
This Agreement contains the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied,
15
oral or written, of any nature whatsoever with respect to the subject matter
hereof. The express terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of the terms hereof.
17. Costs and Expenses.
------------------
The costs and expenses (including the fees and disbursements of
counsel and accountants) incurred in connection with the negotiation,
preparation and execution of this Agreement, and all matters incident thereto,
shall be borne by the Company.
18. Books and Records.
-----------------
In compliance with the requirements of Rule 31a-3 under the
Investment Company Act, the Investment Manager hereby agrees that all records
which it maintains for the Company are the property of the Company and
further agrees to surrender promptly to the Company any such records upon the
Company's request. The Investment Manager further agrees to preserve for the
periods prescribed by Rule 31a-2 under the Investment Company Act the records
required to be maintained by Rule 31a-1 under the Investment Company Act.
19. Titles Not to Affect Interpretation.
-----------------------------------
The titles of sections contained in this Agreement are for convenience
only, and they neither form a part of this Agreement nor are they to be used in
the construction or interpretation hereof.
20. Provisions Separable.
--------------------
The provisions of this Agreement are independent of and separable from
each other, and, to the extent permitted by applicable law, no provision shall
be affected or rendered invalid or unenforceable by virtue of the fact that for
any reason any other or others of them may be invalid or unenforceable in whole
or in part.
21. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York and, to the extent inconsistent
therewith, the 1940 Act.
22. Execution in Counterparts.
-------------------------
This Agreement may be executed in separate counterparts, each of
which shall be an original and all of which taken together shall constitute
one and the same instrument.
[Remainder of page intentionally left blank.]
16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
XXXXXXXXXX CAPITAL PARTNERS, LLC
By: XXXXXXXXXX & CO., LLC, its Managing
Member
By: ______________________________________
Xxxxxxx X. Xxxxxxxxxx
Member
XXXXXXXXXX OPPORTUNITIES
FUND V, LLC
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------
Xxxxxx X. Xxxxxxxxx
President
