Exhibit (a)(3)
[NAME OF AETOS FUND]
LIMITED LIABILITY COMPANY AGREEMENT
THIS LIMITED LIABILITY COMPANY AGREEMENT of [Name of Aetos Fund] (the
"Fund") is dated as of August __, 2002 by and among Xxxxx X. Xxxxxx, Xxxxx
Xxxxxx and Pierre de Saint Phalle, as the Managers, Xxxxx X. Xxxxxx, as the
Organizational Member, and those persons hereinafter admitted as Members.
WHEREAS, the Fund has heretofore been formed as a limited liability
company under the Delaware Limited Liability Company Act pursuant to an initial
Certificate of Formation dated and filed with the Secretary of State of Delaware
on March 19, 2002, as amended on August 16, 2002;
NOW, THEREFORE, for and in consideration of the foregoing and the
mutual covenants hereinafter set forth, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement:
Administrator The person who provides administrative
services to the Fund pursuant to an
administrative services agreement.
Advisers Act The Investment Advisers Act of 1940 and
the rules, regulations and orders
thereunder, as amended from time to
time, or any successor law.
Affiliate An affiliated person of a person as such
term is defined in the 1940 Act.
Agreement This Limited Liability Company
Agreement, as amended from time to time.
Board of Managers The Board of Managers established
pursuant to Section 2.6.
Capital Account With respect to each Member, the capital
account established and maintained on
behalf of each Member pursuant to
Section 5.3.
Certificate The Certificate of Formation of the Fund
and any amendments thereto as filed with
the office of the Secretary of State of
the State of Delaware.
Closing Date The first date on or as of which a
person other than an Organizational
Member is admitted to the Fund as a
Member.
Code The United States Internal Revenue Code
of 1986,
as amended, and as hereafter amended
from time to time, or any successor law.
Delaware Act The Delaware Limited Liability Company
Act as in effect on the date hereof and
as amended from time to time, or any
successor law.
Fiscal Period The period commencing on the Closing
Date, and thereafter each period
commencing on the day immediately
following the last day of the preceding
Fiscal Period, and ending at the close
of business on the first to occur of the
following dates:
(1) the last day of a Fiscal Year;
(2) the last day of a Taxable Year;
(3) the day preceding any day as of
which a contribution to the capital
of the Fund is made pursuant to
Section 5.1; or
(4) any day on which the Fund
repurchases any Interest or portion
of an Interest of any Member;
(5) any day (other than one specified in
clause (2) above) as of which this
Agreement provides for any amount to
be credited to or debited against
the Capital Account of any Member,
other than an amount to be credited
to or debited against the Capital
Accounts of all Members in
accordance with their respective
Investment Percentages.
Fiscal Year The period commencing on the Closing
Date and ending on January 31, 2003, and
thereafter each period commencing on
February 1 of each year and ending on
January 31 of each year (or on the date
of a final distribution pursuant to
Section 6.2 hereof), unless and until
the Board of Managers shall elect
another fiscal year for the Fund.
Form N-2 The Fund's Registration Statement on
Form N-2 filed with the Securities and
Exchange Commission, as amended from
time to time.
Fund The limited liability company governed
hereby, as such limited liability
company may from time to time be
constituted.
2
Independent Managers Those Managers who are not "interested
persons" of the Fund as such term is
defined by the 1940 Act.
Initial Managers Xxxxx X. Xxxxxx, Xxxxxxx Xxxxx and
Xxxxxx X. Xxxxxxx, the persons who
directed the formation of the Fund and
served as the initial Managers.
Interest The entire ownership interest in the
Fund at any particular time of a
Member or other person to whom an
Interest of a Member or portion
thereof has been transferred pursuant
to Section 4.4 hereof, including the
rights and obligations of such Member
or other person under this Agreement
and the Delaware Act.
Investment Advisory Agreement A separate written agreement entered
into by the Fund pursuant to which the
Investment Manager provides investment
advisory services to the Fund.
Investment Management Agreement The written agreement entered into
among the Fund, the Investment Manager
and an investor, pursuant to which the
investor grants the Investment Manager
full discretionary authority (unless
the investor otherwise directs) to
allocate the investor's assets among
the Fund and the other 1940
Act-registered funds advised by the
Investment Manager.
Investment Manager Aetos Alternatives Management, LLC, a
Delaware limited liability company, or
any person who may hereinafter serve
as the investment manager of the Fund.
Investment Percentage A percentage established for each
Member on the Fund's books as of the
first day of each Fiscal Period. The
Investment Percentage of a Member for
a Fiscal Period shall be determined by
dividing the balance of the Member's
Capital Account as of the commencement
of such Fiscal Period by the sum of
the Capital Accounts of all of the
Members as of the commencement of such
Fiscal Period. The sum of the
Investment Percentages of all Members
for each Fiscal Period shall equal
100%.
Management Fee The monthly management fee payable
to the Investment Manager pursuant to
the Investment Advisory Agreement at
the annual rate of 0.75% of the Fund's
month end net asset value.
3
Manager An individual designated as a manager
of the Fund pursuant to the provisions
of Section 2.6 of the Agreement and
who serves on the Board of Managers of
the Fund.
Member Any person who shall have been
admitted to the Fund as a member
(including any Manager in such
person's capacity as a member of the
Fund but excluding any Manager in such
person's capacity as a Manager of the
Fund) until the Fund repurchases the
entire Interest of such person
pursuant to Section 4.4 hereof or a
substituted member or members are
admitted with respect to any such
person's entire Interest as a member
pursuant to Section 4.3 hereof; such
term includes the Investment Manager
or an Affiliate of the Investment
Manager to the extent the Investment
Manager (or such Affiliate) makes a
capital contribution to the Fund and
shall have been admitted to the Fund
as a member.
Net Assets The total value of all assets of the
Fund, less an amount equal to all
accrued debts, liabilities and
obligations of the Fund, calculated
before giving effect to any
repurchases of Interests.
Net Profit or Net Loss The amount by which the Net Assets
as of the close of business on the
last day of a Fiscal Period exceed (in
the case of Net Profit) or are less
than (in the case of Net Loss) the Net
Assets as of the commencement of the
same Fiscal Period (or, with respect
to the initial Fiscal Period of the
Fund, as of the close of business on
the Closing Date), such amount to be
adjusted to exclude any items to be
allocated among the Capital Accounts
of the Members on a basis that is not
in accordance with the respective
Investment Percentages of all Members
as of the commencement of such Fiscal
Period pursuant to Sections 5.5 and
5.6 hereof.
1940 Act The Investment Company Act of 1940 and
the rules, regulations and orders
thereunder, as amended from time to
time, or any successor law.
Organizational Member Xxxxx X. Xxxxxx in his capacity as the
initial Member of the Fund.
4
Portfolio Funds Investment funds in which the Fund's
assets are invested.
Portfolio Managers The organizations that manage and
direct the investment activities of
Portfolio Funds or are retained to
manage and invest directly designated
portions of the Fund's assets.
Prospectus The combined Prospectus of the Fund
and the other 1940 Act-registered
funds advised by the Investment
Manager that is a part of the Form
N-2.
Securities Securities (including, without
limitation, equities, debt
obligations, options, and other
"securities" as that term is defined
in Section 2(a)(36) of the 0000 Xxx)
and any contracts for forward or
future delivery of any security, debt
obligation or currency, or commodity,
all types of derivative instruments
and financial instruments and any
contracts based on any index or group
of securities, debt obligations or
currencies, or commodities, and any
options thereon.
Transfer The assignment, transfer, sale,
encumbrance, pledge or other
disposition of all or any portion of
an Interest, including any right to
receive any allocations and
distributions attributable to an
Interest.
Valuation Date The date as of which the Fund values
an Interest for purposes of
determining the price at which the
Interest is to be purchased by the
Fund pursuant to an offer made by the
Fund pursuant to Section 4.4 hereof.
ARTICLE II
ORGANIZATION; ADMISSION OF MEMBERS
Section 2.1 Formation of Limited Liability Company
The Fund has been formed as a limited liability company at the
direction of the Initial Managers who authorized the filing of the Certificate,
which actions are hereby ratified by the execution of this Agreement. The Board
of Managers shall execute and file in accordance with the Delaware Act any
amendment to the Certificate and shall execute and file with applicable
governmental authorities any other instruments, documents and certificates that,
in the opinion of the Fund's legal counsel, may from time to time be required by
the laws of the United States of America, the State of Delaware or any other
jurisdiction in which the Fund shall determine to do business, or any political
subdivision or agency
5
thereof, or that such legal counsel may deem necessary or appropriate to
effectuate, implement and continue the valid existence and business of the Fund.
Section 2.2 Name
The name of the Fund shall be "[Name of Aetos Fund]" or such other name
as the Board of Managers may hereafter adopt upon (i) causing an appropriate
amendment to the Certificate to be filed in accordance with the Delaware Act and
(ii) taking such other actions as may be required by law.
Section 2.3 Principal and Registered Office
The Fund shall have its principal office at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, or at such other place designated from time to time by the Board of
Managers.
The Fund shall have its registered office in Delaware at 0000 Xxxxxxxxxxx
Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000, and shall have Corporation Service
Company as its registered agent for service of process in Delaware, unless a
different registered office or agent is designated from time to time by the
Board of Managers.
Section 2.4 Duration
The term of the Fund commenced on the filing of the Certificate with the
Secretary of State of Delaware and shall continue until the Fund is dissolved
pursuant to Section 6.1 hereof.
Section 2.5 Business of the Fund
(a) The business of the Fund is to purchase, sell (including short
sales), invest and trade in Securities, on margin or otherwise, and to engage in
any financial or derivative transactions relating thereto or otherwise. The Fund
may execute, deliver and perform all contracts, agreements, subscription
documents and other undertakings and engage in all activities and transactions
as may in the opinion of the Board of Managers be necessary or advisable to
carry out its objective or business.
(b) The Fund shall operate as a closed-end, non-diversified,
management investment company in accordance with the 1940 Act and subject to any
fundamental policies and investment restrictions as may be adopted by the Board
of Managers and in accordance with the 1940 Act.
Section 2.6 Board of Managers
(a) Prior to the Closing Date, the Initial Managers may designate such
persons who shall agree to be bound by all of the terms of this Agreement to
serve as Managers on the Board of Managers, subject to the election of such
persons prior to the Closing Date by the Organizational Member. By signing this
Agreement or signing an Investment Management Agreement, a Member admitted on
the Closing Date shall be deemed to have voted for the election of each of the
Managers so designated. After the Closing Date, the Board of Managers may,
subject to the provisions of paragraphs (a) and (b) of this Section 2.6 with
respect to the number of and vacancies in the position of Manager and the
provisions of Section 3.3 hereof with respect to the election of Managers to the
Board of Managers by Members, designate any person who shall agree to be bound
by all of the terms of this Agreement as a Manager. The names and mailing
addresses of the Managers shall be set forth in the books and records of the
Fund. The number of Managers shall be fixed from time to time by the Board of
Managers.
(b) Each Manager shall serve on the Board of Managers for the duration
of the term of the Fund, unless his or her status as a Manager shall be sooner
terminated pursuant to Section 4.1 hereof. In the event of any vacancy in the
position of Manager, the remaining Managers may appoint an individual
6
to serve in such capacity, so long as immediately after such appointment at
least two-thirds (2/3) of the Managers then serving would have been elected by
the Members. The Board of Managers may call a meeting of Members to fill any
vacancy in the position of Manager, and shall do so within 60 days after any
date on which Managers who were elected by the Members cease to constitute a
majority of the Managers then serving on the Board of Managers.
(c) In the event that no Manager remains to continue the business of the
Fund, the Investment Manager shall promptly call a meeting of the Members, to be
held within 60 days after the date on which the last Manager ceased to act in
that capacity, for the purpose of determining whether to continue the business
of the Fund and, if the business shall be continued, of electing the required
number of Managers to the Board of Managers. If the Members shall determine at
such meeting not to continue the business of the Fund or if the required number
of Managers is not elected within 60 days after the date on which the last
Manager ceased to act in that capacity, then the Fund shall be dissolved
pursuant to Section 6.1 hereof and the assets of the Fund shall be liquidated
and distributed pursuant to Section 6.2 hereof.
Section 2.7 Members
The Fund may offer Interests for purchase by investors in such manner and
at such times as may be determined by the Board of Managers. All subscriptions
for Interests are subject to the receipt by the Fund or its custodian of cleared
funds on or before the acceptance date for such subscriptions in the full amount
of the subscription. Subject to the foregoing, a person may be admitted to the
Fund as a Member subject to the condition that such person shall execute an
appropriate signature page of this Agreement or an Investment Management
Agreement pursuant to which such Member agrees to be bound by all the terms and
provisions of this Agreement. The Board of Managers may in its sole discretion
reject any subscription for an Interest. The Board of Managers may, in its sole
discretion, suspend the offering of the Interests at any time. The admission of
any person as a Member shall be effective upon the revision of the books and
records of the Fund to reflect the name and the contribution to the capital of
the Fund of such additional Member.
Section 2.8 Organizational Member
The initial contribution of capital to the Fund by the Organizational
Member shall be represented by an Interest, which Interest shall have the same
rights as other Interests held by Members.
Section 2.9 Both Managers and Members
A Member may at the same time be a Manager and a Member, in which event
such Member's rights and obligations in each capacity shall be determined
separately in accordance with the terms and provisions of this Agreement or as
provided in the Delaware Act.
Section 2.10 Limited Liability
Except as provided under applicable law, a Member shall not be liable for
the Fund's debts, obligations and liabilities in any amount in excess of the
capital account balance of such Member, plus such Member's share of
undistributed profits and assets. Except as provided under applicable law, a
Manager shall not be liable for the Fund's debts, obligations and liabilities.
7
ARTICLE III
MANAGEMENT
Section 3.1 Management and Control
(a) Management and control of the business of the Fund shall be vested
in the Board of Managers, which shall have the right, power and authority, on
behalf of the Fund and in its name, to exercise all rights, powers and authority
of Managers under the Delaware Act and to do all things necessary and proper to
carry out the objective and business of the Fund and their duties hereunder. No
Manager shall have the authority individually to act on behalf of or to bind the
Fund except within the scope of such Manager's authority as delegated by the
Board of Managers. The parties hereto intend that, except to the extent
otherwise expressly provided herein, (i) each Manager shall be vested with the
same powers, authority and responsibilities on behalf of the Fund as are
customarily vested in each director of a Delaware corporation and (ii) each
Independent Manager shall be vested with the same powers, authority and
responsibilities on behalf of the Fund as are customarily vested in each
director of a closed-end management investment company registered under the 1940
Act that is organized as a Delaware corporation who is not an "interested
person" of such company, as such term is defined by the 1940 Act. During any
period in which the Fund shall have no Managers, the Investment Manager shall
continue to serve as the Investment Manager to the Fund and shall have the
authority to manage the business and affairs of the Fund.
(b) Members shall have no right to participate in and shall take no
part in the management or control of the Fund's business and shall have no
right, power or authority to act for or bind the Fund. Members shall have the
right to vote on any matters only as provided in this Agreement or on any
matters that require the approval of the holders of voting securities under the
1940 Act or as otherwise required in the Delaware Act.
(c) The Board of Managers may delegate to any other person (including
the Investment Manager) any rights, power and authority vested by this Agreement
in the Board of Managers to the extent permissible under applicable law, and may
appoint persons to serve as officers of the Fund, with such titles and authority
as may be determined by the Board of Managers consistent with applicable law.
Section 3.2 Actions by the Board of Managers
(a) Unless provided otherwise in this Agreement, the Board of Managers
shall act only: (i) by the affirmative vote of a majority of the Managers
(including the vote of a majority of the Independent Managers if required by the
0000 Xxx) present at a meeting duly called at which a quorum of the Managers
shall be present (in person or, if in person attendance is not required by the
1940 Act, by telephone) or (ii) by unanimous written consent of all of the
Managers without a meeting, if permissible under the 0000 Xxx.
(b) The Board of Managers may designate from time to time a Chairman
who shall preside at all meetings of the Board of Managers. Meetings of the
Board of Managers may be called by the Chairman or by any two Managers, and may
be held on such date and at such time and place as the Board of Managers shall
determine. Each Manager shall be entitled to receive written notice of the date,
time and place of such meeting within a reasonable time in advance of the
meeting. Except as otherwise required by the 1940 Act, notice need not be given
to any Manager who shall attend a meeting without objecting to the lack of
notice or who shall execute a written waiver of notice with respect to the
meeting. Managers may attend and participate in any meeting by telephone except
where in-person attendance at a
8
meeting is required by the 1940 Act. A majority of the Managers shall constitute
a quorum at any meeting.
Section 3.3 Meetings of Members
(a) Actions requiring the vote of the Members may be taken at any duly
constituted meeting of the Members at which a quorum is present. Meetings of the
Members may be called by the Board of Managers or by Members holding 75% or more
of the total number of votes eligible to be cast by all Members, and may be held
at such time, date and place as the Board of Managers shall determine. The Board
of Managers shall arrange to provide written notice of the meeting, stating the
date, time and place of the meeting and the record date therefor, to each Member
entitled to vote at the meeting within a reasonable time prior thereto. Failure
to receive notice of a meeting on the part of any Member shall not affect the
validity of any act or proceeding of the meeting, so long as a quorum shall be
present at the meeting, except as otherwise required by applicable law. Only
matters set forth in the notice of a meeting may be voted on by the Members at a
meeting. The presence in person or by proxy of Members holding a majority of the
total number of votes eligible to be cast by all Members as of the record date
shall constitute a quorum at any meeting. In the absence of a quorum, a meeting
of the Members may be adjourned by action of a majority of the Members present
in person or by proxy without additional notice to the Members. Except as
otherwise required by any provision of this Agreement or of the 1940 Act, (i)
those candidates receiving a plurality of the votes cast at any meeting of
Members shall be elected as Managers and (ii) all other actions of the Members
taken at a meeting shall require the affirmative vote of Members holding a
majority of the total number of votes eligible to be cast by those Members who
are present in person or by proxy at such meeting.
(b) Each Member shall be entitled to cast at any meeting of Members a
number of votes equivalent to such Member's Investment Percentage as of the
record date for such meeting. The Board of Managers shall establish a record
date not less than 10 days nor more than 60 days prior to the date of any
meeting of Members to determine eligibility to vote at such meeting and the
number of votes that each Member will be entitled to cast at the meeting, and
shall maintain for each such record date a list setting forth the name of each
Member and the number of votes that each Member will be entitled to cast at the
meeting.
(c) A Member may vote at any meeting of Members by a proxy properly
executed in writing by the Member and filed with the Fund before or at the time
of the meeting. A proxy may be suspended or revoked, as the case may be, by the
Member executing the proxy by a later writing delivered to the Fund at any time
prior to exercise of the proxy or if the Member executing the proxy shall be
present at the meeting and decide to vote in person. Any action of the Members
that is permitted to be taken at a meeting of the Members may be taken without a
meeting if consents in writing, setting forth the action taken, are signed by
Members holding a majority of the total number of votes eligible to be cast or
such greater percentage as may be required in order to approve such action.
Section 3.4 Custody of Assets of the Fund
The physical possession of all funds, Securities or other properties of the
Fund shall at all times, be held, controlled and administered by one or more
custodians retained by the Fund in accordance with the requirements of the 1940
Act and the rules thereunder.
9
Section 3.5 Other Activities of Members and Managers
(a) The Managers shall not be required to devote all of their time to
the affairs of the Fund, but shall devote such time as may reasonably be
required to perform their obligations under this Agreement.
(b) Any Member or Manager, and any Affiliate of any Member or Manager,
may engage in or possess an interest in other business ventures or commercial
dealings of every kind and description, independently or with others, including,
but not limited to, acquisition and disposition of Securities, provision of
investment advisory or brokerage services, serving as directors, officers,
employees, advisors or agents of other companies, partners of any partnership,
members of any limited liability company, or trustees of any trust, or entering
into any other commercial arrangements. No Member or Manager shall have any
rights in or to such activities of any other Member or Manager, or any profits
derived therefrom.
Section 3.6 Duty of Care
(a) No Manager shall be liable to the Fund or to any of its Members for
any loss or damage occasioned by any act or omission in the performance of the
Manager's services pursuant to any agreement, including this Agreement, between
a Manager and the Fund for the provision of services to the Fund unless it shall
be determined by final judicial decision on the merits from which there is no
further right to appeal that such loss is due to an act or omission of the
Manager constituting willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the performance of the Manager's
services to the Fund.
(b) Members not in breach of any obligation hereunder or under any
agreement pursuant to which the Member subscribed for an Interest shall be
liable to the Fund, any Member or third parties only as provided under the
Delaware Act.
Section 3.7 Indemnification
(a) To the fullest extent permitted by law, the Fund shall, subject to
Section 3.7(b) hereof, indemnify each Manager (including for this purpose his or
her respective executors, heirs, assigns, successors or other legal
representatives), against all losses, claims, damages, liabilities, costs and
expenses, including, but not limited to, amounts paid in satisfaction of
judgments, in compromise, or as fines or penalties, and reasonable counsel fees,
incurred in connection with the defense or disposition of any action, suit,
investigation or other proceeding, whether civil or criminal, before any
judicial, arbitral, administrative or legislative body, in which such indemnitee
may be or may have been involved as a party or otherwise, or with which such
indemnitee may be or may have been threatened, while in office or thereafter, by
reason of being or having been a Manager of the Fund or the past or present
performance of services to the Fund by such indemnitee, except to the extent
such loss, claim, damage, liability, cost or expense shall have been finally
determined in a decision on the merits in any such action, suit, investigation
or other proceeding to have been incurred or suffered by such indemnitee by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of such indemnitee's office. The
rights of indemnification provided under this Section 3.7 shall not be construed
so as to provide for indemnification of a Manager for any liability (including
liability under federal securities laws which, under certain circumstances,
impose liability even on persons that act in good faith) to the extent (but only
to the extent) that such indemnification would be in violation of applicable
law, but shall be construed so as to effectuate the applicable provisions of
this Section 3.7 to the fullest extent permitted by law.
10
(b) Expenses, including reasonable counsel fees, so incurred by any
such indemnitee (but excluding amounts paid in satisfaction of judgments, in
compromise, or as fines or penalties), may be paid from time to time by the Fund
in advance of the final disposition of any such action, suit, investigation or
proceeding upon receipt of an undertaking by or on behalf of such indemnitee to
repay to the Fund amounts so paid if it shall ultimately be determined that
indemnification of such expenses is not authorized under Section 3.7(a) hereof;
provided, however, that (i) such indemnitee shall provide security for such
undertaking, (ii) the Fund shall be insured by or on behalf of such indemnitee
against losses arising by reason of such indemnitee's failure to fulfill such
undertaking, or (iii) a majority of the Managers (excluding any Manager who is
either seeking advancement of expenses hereunder or is or has been a party to
any other action, suit, investigation or proceeding involving claims similar to
those involved in the action, suit, investigation or proceeding giving rise to a
claim for advancement of expenses hereunder) or independent legal counsel in a
written opinion shall determine based on a review of readily available facts (as
opposed to a full trial-type inquiry) that there is reason to believe such
indemnitee ultimately will be entitled to indemnification.
(c) As to the disposition of any action, suit, investigation or
proceeding (whether by a compromise payment, pursuant to a consent decree or
otherwise) without an adjudication or a decision on the merits by a court or any
other body before which the proceeding shall have been brought that an
indemnitee is liable to the Fund or its Members by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of such indemnitee's office, indemnification shall be
provided pursuant to Section 3.7(a) hereof if (i) approved as in the best
interests of the Fund by a majority of the Managers (excluding any Manager who
is either seeking indemnification hereunder or is or has been a party to any
other action, suit, investigation or proceeding involving claims similar to
those involved in the action, suit, investigation or proceeding giving rise to a
claim for indemnification hereunder) upon a determination based upon a review of
readily available facts (as opposed to a full trial-type inquiry) that such
indemnitee acted in good faith and in the reasonable belief that such actions
were in the best interests of the Fund and that such indemnitee is not liable to
the Fund or its Members by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of such
indemnitee's office, or (ii) the Board of Managers secures a written opinion of
independent legal counsel based upon a review of readily available facts (as
opposed to a full trial-type inquiry) to the effect that such indemnification
would not protect such indemnitee against any liability to the Fund or its
Members to which such indemnitee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of such indemnitee's office.
(d) Any indemnification or advancement of expenses made pursuant to
this Section 3.7 shall not prevent the recovery from any indemnitee of any such
amount if such indemnitee subsequently shall be determined in a decision on the
merits in any action, suit, investigation or proceeding involving the liability
or expense that gave rise to such indemnification or advancement of expenses to
be liable to the Fund or its Members by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of such indemnitee's office. In (i) any suit brought by a Manager (or
other person entitled to indemnification hereunder) to enforce a right to
indemnification under this Section 3.7 it shall be a defense that, and (ii) in
any suit in the name of the Fund to recover any indemnification or advancement
of expenses made pursuant to this Section 3.7 the Fund shall be entitled to
recover such expenses upon a final adjudication that, the Manager or other
person claiming a right to indemnification under this Section 3.7 has not met
the applicable standard of conduct set forth in this Section 3.7. In any such
suit brought to enforce a right to indemnification or to recover any
indemnification or advancement of expenses made pursuant to this Section 3.7,
the burden of proving that the Manager or other person claiming a right to
indemnification is not entitled to be indemnified, or to any indemnification or
advancement of expenses, under this Section 3.7 shall be on the Fund (or any
Member acting derivatively or otherwise on behalf of the Fund or its Members).
11
(e) An indemnitee may not satisfy any right of indemnification or
advancement of expenses granted in this Section 3.7 or to which such indemnitee
may otherwise be entitled except out of the assets of the Fund, and no Member
shall be personally liable with respect to any such claim for indemnification or
advancement of expenses.
(f) The rights of indemnification provided hereunder shall not be
exclusive of or affect any other rights to which any person may be entitled by
contract or otherwise under law. Nothing contained in this Section 3.7 shall
affect the power of the Fund to purchase and maintain liability insurance on
behalf of any Manager or other person.
Section 3.8 Fees, Expenses and Reimbursement
(a) Pursuant to the terms of the Investment Advisory Agreement, the
Investment Manager shall be entitled to receive the Management Fee. The
Management Fee will be accrued monthly and paid quarterly. The Management Fee is
payable by the Fund to the Investment Manager within 10 days after the end of
the relevant month.
(b) The Board of Managers may cause the Fund to compensate each
Manager who is not an officer or employee of the Investment Manager (or of any
Affiliate of the Investment Manager) for his or her services as such, and such
Manager shall be reimbursed by the Fund for reasonable travel and out-of-pocket
expenses incurred by him in performing his duties under this Agreement.
(c) The Fund shall bear all expenses incurred in its business and
operations, other than those specifically required to be borne by the Investment
Manager pursuant to the Investment Advisory Agreement. Expenses to be borne by
the Fund include, but are not limited to, the following:
(1) all costs and expenses directly related to portfolio
transactions and positions for the Fund's account, including, but not limited
to, brokerage commissions, research fees, interest and commitment fees on loans
and debit balances, borrowing charges on securities sold short, dividends on
securities sold but not yet purchased, custodial fees, margin fees, transfer
taxes and premiums, taxes withheld on foreign dividends and indirect expenses
from investments in Portfolio Funds;
(2) all costs and expenses associated with the registration of
the Fund under, and costs of compliance with, any applicable Federal or state
laws;
(3) all costs and expenses associated with the organization of
separate investment funds managed by Portfolio Managers retained by the Fund;
(4) attorneys' fees and disbursements associated with the
preparation, review and updating of the Form N-2, the Prospectus and other
offering related documents (the "Offering Materials");
(5) the costs of printing the Offering Materials;
(6) the costs of distributing the Offering Materials to
prospective investors;
(7) the costs and expenses of holding meetings of the Board and
any meetings of Members, including legal costs associated with the preparation
and filing of proxy materials;
12
(8) the fees and disbursements of Fund counsel, legal counsel
to the Independent Managers, independent accountants for the Fund and other
consultants and professionals engaged on behalf of the Fund;
(9) the Management Fee and all other fees payable to various
service providers pursuant to the Fund's Administration Agreement and Custodian
Services Agreement;
(10) the costs of a fidelity bond and any liability insurance
obtained on behalf of the Fund or the Board;
(11) all costs and expenses of preparing, setting in type,
printing and distributing reports and other communications to Members;
(12) all expenses of computing the Fund's net asset value,
including any equipment or services obtained for these purposes;
(13) all charges for equipment or services used in communicating
information regarding the Fund's transactions among the Investment Manager and
any custodian or other agent engaged by the Fund; and
(14) such other types of expenses as may be approved from time
to time by the Board of Managers.
The Investment Manager shall be entitled to reimbursement from the Fund for
any of the above expenses that it pays on behalf of the Fund.
(d) Subject to procuring any required regulatory approvals, from time to
time the Fund may, alone or in conjunction with other registered or unregistered
investment funds or other accounts for which the Investment Manager, or any
Affiliate of the Investment Manager, acts as general partner or investment
adviser, purchase insurance in such amounts, from such insurers and on such
terms as the Board of Managers shall determine.
ARTICLE IV
TERMINATION OF STATUS OF THE MANAGERS,
TRANSFERS AND REPURCHASES
Section 4.1 Termination of Status of a Manager
The status of a Manager shall terminate if the Manager (i) shall die; (ii)
shall be adjudicated incompetent; (iii) shall voluntarily withdraw as a Manager
(upon not less than 90 days' prior written notice to the other Managers); (iv)
shall be removed; (v) shall be certified by a physician to be mentally or
physically unable to perform his or her duties hereunder; (vi) shall be declared
bankrupt by a court with appropriate jurisdiction, file a petition commencing a
voluntary case under any bankruptcy law or make an assignment for the benefit of
creditors; (vii) shall have a receiver appointed to administer the property or
affairs of such Manager; or (viii) shall otherwise cease to be a Manager of the
Fund under the Delaware Act.
13
Section 4.2 Removal of the Managers
Any Manager may be removed either by (a) the vote or written consent of at
least two-thirds (2/3) of the Managers not subject to the removal vote or (b)
the vote or written consent of Members holding not less than two-thirds (2/3) of
the total number of votes eligible to be cast by all Members.
Section 4.3 Transfer of Interests of Members
(a) An Interest of a Member may be Transferred only (i) by operation
of law pursuant to the death, divorce, bankruptcy, insolvency, dissolution or
incompetency of such Member or (ii) with the written consent of the Board of
Managers (which may be withheld in its sole discretion); provided, however, that
the Board of Managers may not consent to any Transfer other than a Transfer (i)
in which the tax basis of the Interest in the hands of the transferee is
determined, in whole or in part, by reference to its tax basis in the hands of
the transferor (e.g., certain Transfers to affiliates, gifts and contributions
to family partnerships), (ii) to members of the Member's immediate family
(brothers, sisters, spouse, parents and children), (iii) as a distribution from
a qualified retirement plan or an individual retirement account, or (iv) a
Transfer to which the Board of Managers may consent pursuant to the following
sentence. The Board of Managers may consent to other pledges, transfers, or
assignments under such other circumstances and conditions as it, in its sole
discretion, deems appropriate; provided, however, that prior to any such pledge,
transfer, or assignment, the Board of Managers shall consult with counsel to the
Fund to ensure that such pledge, transfer, or assignment will not cause the Fund
to be treated as a "publicly traded partnership" taxable as a corporation. In no
event, however, will any transferee or assignee be admitted as a Member without
the consent of the Board of Managers which may be withheld in its sole
discretion. Any pledge, transfer, or assignment not made in accordance with this
Section 4.3 shall be void.
(b) The Board of Managers may not consent to a Transfer of an Interest
or a portion thereof of a Member unless; (i) the person to whom the Interest is
Transferred (or each of the person's beneficial owners if such a person is a
"private investment company" as defined in paragraph (d)(3) of Rule 205-3 under
the Advisers Act) is a person whom the Board of Managers believes meets the
requirements of paragraph (d)(1) of Rule 205-3 under the Advisers Act or any
successor rule thereto; and (ii) the entire Interest of the Member is
Transferred to a single transferee or, after the Transfer of a portion of an
Interest, the balance of the Capital Account of each of the transferee and
transferor is not less than $100,000. Such minimum Capital Account balance may
be reduced or waived by the Board of Managers or the Manager. Any transferee
that acquires an Interest by operation of law as the result of the death,
divorce, bankruptcy, insolvency, dissolution or incompetency of a Member or
otherwise, shall be entitled to the allocations and distributions allocable to
the Interest so acquired and to Transfer such Interest in accordance with the
terms of this Agreement, but shall not be entitled to the other rights of a
Member unless and until such transferee becomes a substituted Member. If a
Member transfers an Interest with the approval of the Board of Managers, the
Board of Managers shall promptly take all necessary actions so that the
transferee to whom such Interest is transferred is admitted to the Fund as a
Member. Each Member effecting a Transfer and its transferee agree to pay all
expenses, including attorneys' and accountants' fees, incurred by the Fund in
connection with such Transfer.
(c) Each Member shall indemnify and hold harmless the Fund, the
Managers, the Investment Manager, each other Member and any Affiliate of the
foregoing against all losses, claims, damages, liabilities, costs and expenses
(including legal or other expenses incurred in investigating or defending
against any such losses, claims, damages, liabilities, costs and expenses or any
judgments, fines and amounts paid in settlement), joint or several, to which
such persons may become subject by reason of or arising from (i) any Transfer
made by such Member in violation of this Section 4.3 and (ii) any
misrepresentation by such Member in connection with any such Transfer.
14
Section 4.4 Repurchase of Interests
(a) Except as otherwise provided in this Agreement, no Member or other
person holding an Interest or portion thereof shall have the right to withdraw
or tender to the Fund for repurchase that Interest or portion thereof. The Board
of Managers from time to time, in its sole discretion and on such terms and
conditions as it may determine, may cause the Fund to repurchase Interests or
portions thereof pursuant to written tenders. However, the Fund shall not offer
to repurchase Interests on more than four occasions during any one Fiscal Year
unless it has received an opinion of counsel to the effect that such more
frequent offers would not cause any adverse tax consequences to the Fund or the
Members. In determining whether to cause the Fund to repurchase Interests or
portions thereof pursuant to written tenders, the Board of Managers shall
consider the recommendation of the Investment Manager, and shall also consider
the following factors, among others;
(1) whether any Members have requested to tender Interests or
portions thereof to the Fund;
(2) the liquidity of the Fund's assets;
(3) the investment plans and working capital requirements of the
Fund;
(4) the relative economies of scale with respect to the size of
the Fund;
(5) the history of the Fund in repurchasing Interests or
portions thereof;
(6) the economic condition of the securities markets; and
(7) the anticipated tax consequences of any proposed repurchases
of Interests or portions thereof.
The Board of Managers shall cause the Fund to repurchase Interests or
portions thereof pursuant to written tenders only on terms determined by the
Board of Managers to be fair to the Fund and to all Members (including persons
holding Interests acquired from Members), as applicable.
(b) A Member who tenders for repurchase only a portion of the Member's
Interest will be required to maintain a capital account balance equal to at
least $100,000. Such minimum Capital Account balance may be reduced or waived by
the Board of Managers or the Manager. If a Member tenders an amount that would
cause the Member's capital account balance to fall below the required minimum,
the Fund reserves the right to reduce the amount to be purchased from the Member
so that the required minimum balance is maintained.
(c) The Board of Managers may cause the Fund to repurchase an Interest
or portion thereof of a Member or any person acquiring an Interest or portion
thereof from or through a Member in the event that the Board of Managers
determines or has reason to believe that:
(1) such an Interest or portion thereof has been transferred in
violation of Section 4.3 hereof, or such an Interest or portion thereof has
vested in any person by operation of law as the result of the death, divorce,
bankruptcy, insolvency, dissolution or incompetency of a Member;
(2) ownership of such an Interest by a Member or other person
will cause the Fund to be in violation of, or subject the Fund to additional
registration or regulation under, the securities laws of the United States or
any other relevant jurisdiction;
15
(3) continued ownership of such an Interest may be harmful or
injurious to the business or reputation of the Fund, the Managers or the
Investment Manager, or may subject the Fund or any of the Members to an undue
risk of adverse tax or other fiscal consequences;
(4) such Member's continued participation in the Fund may cause
the Fund to be classified as a "publicly traded partnership" within the meaning
of Section 7704 of the Code and the Treasury Regulations thereunder;
(5) any of the representations and warranties made by a Member
in connection with the acquisition of an Interest or portion thereof was not
true when made or has ceased to be true; or
(6) it would be in the best interests of the Fund, as determined
by the Board of Managers in its sole discretion, for the Fund to repurchase such
an Interest or portion thereof.
(d) Repurchases of Interests or portions thereof by the Fund shall be
payable promptly after the date of each such repurchase or, in the case of an
offer by the Fund to repurchase Interests, promptly after the expiration date of
such repurchase offer in accordance with the terms of such offer. Payment of the
purchase price for an Interest (or portion thereof) shall consist of: (i) cash
in an amount equal to such percentage, as may be determined by the Board of
Managers, of the estimated unaudited net asset value of the Interest (or portion
thereof) repurchased by the Fund determined as of the date of such repurchase to
be paid within the applicable time period set forth in the Prospectus (the
"Initial Payment"), and, if the Initial Payment is less than 100% of the
estimated unaudited net asset value, (ii) cash in an amount equal to the excess,
if any, of (x) the net asset value of the Interest (or portion thereof)
repurchased by the Fund as of the date of such repurchase, determined based on
the audited financial statements of the Fund for the Fiscal Year in which such
repurchase was effective, over (y) the Initial Payment, to be paid promptly
after the completion of the Fund's audit for such Fiscal Year. Notwithstanding
anything in the foregoing to the contrary, the Board of Managers, in its
discretion, may pay any portion of the repurchase price in marketable Securities
(or any combination of marketable Securities and cash) having a value,
determined as of the date of repurchase, equal to the amount to be repurchased.
(e) Subject to the approval of the Board of Managers and compliance
with the 1940 Act, the Fund may impose a redemption fee in connection with
repurchases of Interests, including a fee applicable to repurchases of Interests
(or portions thereof) effected prior to expiration of a specified period
subsequent to a Member's admission to the Fund.
ARTICLE V
CAPITAL
Section 5.1 Contributions to Capital
(a) The minimum initial contribution of each Member to the capital of
the Fund shall be such amount as the Board of Managers, in its discretion, may
determine from time to time. The amount of the initial contribution of each
Member shall be recorded on the books and records of the Fund upon acceptance as
a contribution to the capital of the Fund. The Managers shall not be entitled to
make contributions of capital to the Fund as Managers of the Fund, but may make
contributions to the capital of the Fund as a Member. The Investment Manager may
make contributions to the capital of the Fund as a Member.
16
(b) Members may make additional contributions to the capital of the Fund
effective as of such times as the Board of Managers, in its discretion, may
permit, subject to Section 2.7 hereof, but no Member shall be obligated to make
any additional contribution to the capital of the Fund except to the extent
provided in Section 5.6 hereof. The minimum initial capital contribution of a
Member to the capital of the Fund shall be such amount as the Board of Managers,
in its sole discretion, may determine from time to time.
(c) Initial and any additional contributions to the capital of the Fund
by any Member shall be payable in cash, payable in readily available funds at
the date of the proposed acceptance of the contribution.
Section 5.2 Rights of Members to Capital
No Member shall be entitled to interest on any contribution to the
capital of the Fund, nor shall any Member be entitled to the return of any
capital of the Fund except (i) upon the repurchase by the Fund of a part or all
of such Member's Interest pursuant to Section 4.4 hereof, (ii) pursuant to the
provisions of Section 5.6(c) hereof or (iii) upon the liquidation of the Fund's
assets pursuant to Section 6.2 hereof. No Member shall be liable for the return
of any such amounts. No Member shall have the right to require partition of the
Fund's property or to compel any sale or appraisal of the Fund's assets.
Section 5.3 Capital Accounts
(a) The Fund shall maintain a separate Capital Account for each Member.
(b) Each Member's Capital Account shall have an initial balance equal to
the amount of cash constituting such Member's initial contribution to the
capital of the Fund.
(c) Each Member's Capital Account shall be increased by the sum of (i)
the amount of cash constituting additional contributions by such Member to the
capital of the Fund permitted pursuant to Section 5.1 hereof, plus (ii) all
amounts credited to such Member's Capital Account pursuant to Sections 5.4
through 5.6 hereof.
(d) Each Member's Capital Account shall be reduced by the sum of (i) the
amount of any repurchase of the Interest, or portion thereof, of such Member or
distributions to such Member pursuant to Sections 4.4, 5.10 or 6.2 hereof which
are not reinvested (net of any liabilities secured by any asset distributed that
such Member is deemed to assume or take subject to under Section 752 of the
Code), plus (ii) any amounts debited against such Capital Account pursuant to
Sections 5.4 through 5.6 hereof.
Section 5.4 Allocation of Net Profit and Net Loss
As of the last day of each Fiscal Period, any Net Profit or Net Loss for
the Fiscal Period shall be allocated among and credited to or debited against
the Capital Accounts of the Members in accordance with their respective
Investment Percentages for such Fiscal Period.
Section 5.5 Allocation of Certain Income and Expenditures
Except as otherwise provided for in this Agreement and unless prohibited
by the 1940 Act, any income earned or expenditures payable by the Fund, to the
extent determined by the Board of Managers to have been earned or paid (or
withheld) on behalf of, or by reason of particular circumstances applicable to,
one or more but fewer than all of the Members, shall be allocated to only those
Members on whose behalf such income was earned or payments were made or whose
particular circumstances gave rise to such income or payments. Such income or
charges shall be credited to or debited from the Capital
17
Accounts of such Members as of the close of the Fiscal Period during which any
such income was earned or such expenses were paid or accrued by the Fund.
Section 5.6 Reserves
(a) Appropriate reserves may be created, accrued and charged against Net
Assets and proportionately against the Capital Accounts of the Members for
contingent liabilities, if any, as of the date any such contingent liability
becomes known to the Investment Manager or the Board of Managers, such reserves
to be in the amounts that the Board of Managers, in its sole discretion, deems
necessary or appropriate. The Board of Managers may increase or reduce any such
reserves from time to time by such amounts as the Board of Managers, in its sole
discretion, deems necessary or appropriate. The amount of any such reserve, or
any increase or decrease therein, shall be proportionately charged or credited,
as appropriate, to the Capital Accounts of those parties who are Members at the
time when such reserve is created, increased or decreased, as the case may be;
provided, however, that if any such individual reserve item, adjusted by any
increase therein, exceeds the lesser of $500,000 or 1% of the aggregate value of
the Capital Accounts of all such Members, the amount of such reserve, increase,
or decrease shall instead be charged or credited to those parties who were
Members at the time, as determined by the Board of Managers, in its sole
discretion, of the act or omission giving rise to the contingent liability for
which the reserve was established, increased or decreased in proportion to their
Capital Accounts at that time.
(b) If at any time an amount is paid or received by the Fund (other than
contributions to the capital of the Fund, distributions or repurchases of
Interests or portions thereof) and such amount exceeds the lesser of $500,000 or
1% of the aggregate value of the Capital Accounts of all Members at the time of
payment or receipt and such amount was not accrued or reserved for but would
nevertheless, in accordance with the Fund's accounting practices, be treated as
applicable to one or more prior Fiscal Periods, then such amount shall be
proportionately charged or credited, as appropriate, to those parties who were
Members during such prior Fiscal Period or Periods.
(c) If any amount is required by paragraph (a) or (b) of this Section
5.6 to be charged or credited to a party who is no longer a Member, such amount
shall be paid by or to such party, as the case may be, in cash, with interest
from the date on which the Board of Managers determines that such charge or
credit is required. In the case of a charge, the former Member shall be
obligated to pay the amount of the charge, plus interest as provided above, to
the Fund on demand; provided, however, that (i) in no event shall a former
Member be obligated to make a payment exceeding the amount of such Member's
Capital Account at the time to which the charge relates; and (ii) no such demand
shall be made after the expiration of three years since the date on which such
party ceased to be a Member. To the extent that a former Member fails to pay to
the Fund, in full, any amount required to be charged to such former Member
pursuant to paragraph (a) or (b), whether due to the expiration of the
applicable limitation period or for any other reason whatsoever, the deficiency
shall be charged proportionately to the Capital Accounts of the Members at the
time of the act or omission giving rise to the charge to the extent feasible,
and otherwise proportionately to the Capital Accounts of the current Members.
Section 5.7 Tax Allocations
For each Fiscal Year, items of income, deduction, gain, loss or credit
shall be allocated for income tax purposes among the Members in such manner as
to reflect equitably amounts credited or debited to each Member's Capital
Account for the current and prior fiscal years (or relevant portions thereof).
Allocations under this Section 5.7 shall be made pursuant to the principles of
Sections 704(b) and 704(c) of the Code, and in conformity with Regulations
Sections l.704-l(b)(2)(iv)(f) and (g), l.704-1(b)(4)(i) and 1.704-3(e)
promulgated thereunder, as applicable, or the successor provisions to such
Section and Regulations. Notwithstanding anything to the contrary in this
Agreement, there shall be
18
allocated to the Members such gains or income as shall be necessary to satisfy
the "qualified income offset" requirement of Treasury Regulations
l.704-1(b)(2)(ii)(d).
If the Fund realizes capital gains (including short-term capital gains) for
Federal income tax purposes ("gains") for any Fiscal Year during or as of the
end of which the Interests of one or more Positive Basis Members (as hereinafter
defined) are repurchased by the Fund pursuant to Article IV, the Board of
Managers, unless otherwise determined by the Board of Managers, in its sole
discretion, shall allocate such gains as follows: (i) to allocate such gains
among such Positive Basis Members, pro rata in proportion to the respective
Positive Basis (as hereinafter defined) of each such Positive Basis Member,
until either the full amount of such gains shall have been so allocated or the
Positive Basis of each such Positive Basis Member shall have been eliminated and
(ii) to allocate any gains not so allocated to Positive Basis Members to the
other Members in such manner as shall equitably reflect the amounts allocated to
such Members' Capital Accounts pursuant to Section 5.4.
If the Fund realizes capital losses (including long-term capital losses)
for Federal income tax purposes ("losses") for any Fiscal Year during or as of
the end of which the Interests of one or more Negative Basis Members (as
hereinafter defined) are repurchased by the Fund pursuant to Article IV, the
Board of Managers, unless otherwise determined by the Board of Managers, in its
sole discretion, shall allocate such losses as follows: (i) to allocate such
losses among such Negative Basis Members, pro rata in proportion to the
respective Negative Basis (as hereinafter defined) of each such Negative Basis
Member, until either the full amount of such losses shall have been so allocated
or the Negative Basis of each such Negative Basis Member shall have been
eliminated and (ii) to allocate any losses not so allocated to Negative Basis
Members to the other Members in such manner as shall equitably reflect the
amounts allocated to such Members' Capital Accounts pursuant to Section 5.4.
As used herein, (i) the term "Positive Basis" shall mean, with respect to
any Member and as of any time of calculation, the amount by which its Interest
as of such time exceeds its "adjusted tax basis," for Federal income tax
purposes, in its Interest as of such time (determined without regard to any
adjustments made to such "adjusted tax basis" by reason of any transfer or
assignment of such Interest, including by reason of death, and without regard to
such Member's share of the liabilities of the Fund under Section 752 of the
Code) and (ii) the term "Positive Basis Member" shall mean any Member whose
Interest is repurchased by the Fund and who has Positive Basis as of the
effective date of the repurchase, but such Member shall cease to be a Positive
Basis Member at such time as it shall have received allocations pursuant to
clause (i) of the second paragraph of this Section 5.7 equal to its Positive
Basis as of the effective date of such repurchase.
As used herein, (i) the term "Negative Basis" shall mean, with respect to
any Member and as of any time of calculation, the amount by which its Interest
as of such time is less than its "adjusted tax basis," for Federal income tax
purposes, in its Interest as of such time (determined without regard to any
adjustments made to such "adjusted tax basis" by reason of any transfer or
assignment of such Interest, including by reason of death, and without regard to
such Member's share of the liabilities of the Fund under Section 752 of the
Code), and (ii) the term "Negative Basis Member" shall mean any Member whose
Interest is repurchased by the Fund and who has Negative Basis as of the
effective date of such repurchase, but such Member shall cease to be a Negative
Basis Member at such time as it shall have received allocations pursuant to
clause (i) of the third paragraph of this Section 5.7 equal to its Negative
Basis as of the effective date of such repurchase.
The Fund's taxable year shall end on December 31 unless otherwise
determined by the Fund's Treasurer.
19
Section 5.8 Taxation as a Partnership
The Members hereby agree that the Fund shall be treated as a partnership
for Federal, state and local income tax purposes and to not take any position or
action that would cause the Fund to be classified as an association taxable as a
corporation for Federal, state and local income tax purposes. The Board of
Managers therefore agrees that it: (a) will not cause or permit the Fund to
elect, without the unanimous consent of the Members, to be treated as a
corporation for Federal, state and local income tax purposes; and (b) will cause
the Company to make any election reasonably determined to be necessary or
appropriate in order to ensure the treatment of the Company as a partnership for
Federal, state and local income tax purposes.
Section 5.9 Distributions
The Board of Managers, in its sole discretion, may authorize the Fund to
make distributions in cash or in kind at any time to all of the Members on a pro
rata basis in accordance with the Members' Investment Percentages.
Section 5.10 Withholding
(a) The Board of Managers may withhold and pay over to the Internal
Revenue Service (or any other relevant taxing authority) taxes from any
distribution to any Member to the extent required by the Code or any other
applicable law.
(b) For purposes of this Agreement, any taxes so withheld by the Fund
with respect to any amount distributed by the Fund to any Member shall be deemed
to be a distribution or payment to such Member, reducing the amount otherwise
distributable to such Member pursuant to this Agreement and reducing the Capital
Account of such Member. If the amount of such taxes is greater than any such
distributable amounts, then such Member and any successor to such Member's
Interest shall pay to the Fund as a contribution to the capital of the Fund,
upon demand of the Board of Managers, the amount of such excess.
(c) The Board of Managers shall not be obligated to apply for or obtain
a reduction of or exemption from withholding tax on behalf of any Member that
may be eligible for such reduction or exemption. To the extent that a Member
claims to be entitled to a reduced rate of, or exemption from, a withholding tax
pursuant to an applicable income tax treaty, or otherwise, the Member shall
furnish the Board of Managers with such information and forms as such Member may
be required to complete where necessary to comply with any and all laws and
regulations governing the obligations of withholding tax agents. Each Member
represents and warrants that any such information and forms furnished by such
Member shall be true and accurate and agrees to indemnify the Fund and each of
the Members from any and all damages, costs and expenses resulting from the
filing of inaccurate or incomplete information or forms relating to such
withholding taxes.
ARTICLE VI
DISSOLUTION AND LIQUIDATION
Section 6.1 Dissolution
The Fund shall be dissolved:
20
(1) upon the affirmative vote to dissolve the Fund by both: (i)
the Board of Managers and (ii) Members holding at least two-thirds (2/3) of the
total number of votes eligible to be cast by all Members;
(2) at the election of the Investment Manager;
(3) upon the failure of Members to elect a successor Manager at a
meeting called by the Investment Manager in accordance with Section 2.6(c)
hereof when no Manager remains to continue the business of the Fund; or
(4) as required by operation of law.
Dissolution of the Fund shall be effective on the later of the day on
which the event giving rise to the dissolution shall occur or the conclusion of
any applicable 60 day period during which the Board of Managers and Members may
elect to continue the business of the Fund as provided above, but the Fund shall
not terminate until the assets of the Fund have been liquidated in accordance
with Section 6.2 hereof and the Certificate has been canceled.
Section 6.2 Liquidation of Assets
(a) Upon the dissolution of the Fund as provided in Section 6.1 hereof,
the Board of Managers shall promptly appoint the Administrator as the liquidator
and the Administrator shall liquidate the business and administrative affairs of
the Fund, except that if the Board of Managers does not appoint the
Administrator as the liquidator or the Administrator is unable to perform this
function, a liquidator elected by Members holding a majority of the total number
of votes eligible to be cast by all Members shall promptly liquidate the
business and administrative affairs of the Fund. Net Profit and Net Loss during
the period of liquidation shall be allocated pursuant to Section 5.4 hereof. The
proceeds from liquidation (after establishment of appropriate reserves for
contingencies in such amount as the Board of Managers or liquidator shall deem
appropriate in its sole discretion as applicable) shall be distributed in the
following manner:
(1) the debts of the Fund, other than debts, liabilities or
obligations to Members, and the expenses of liquidation (including legal and
accounting expenses incurred in connection therewith), up to and including the
date that distribution of the Fund's assets to the Members has been completed,
shall first be paid on a pro rata basis;
(2) such debts, liabilities or obligations as are owing to the
Members shall next be paid in their order of seniority and on a pro rata basis;
and
(3) the Members shall next be paid on a pro rata basis the
positive balances of their respective Capital Accounts after giving effect to
all allocations to be made to such Members' Capital Accounts for the Fiscal
Period ending on the date of the distributions under this Section 6.2(a).
(b) Anything in this Section 6.2 to the contrary notwithstanding, upon
dissolution of the Fund, the Board of Managers or other liquidator may
distribute ratably in kind any assets of the Fund; provided, however, that if
any in-kind distribution is to be made (i) the assets distributed in kind shall
be valued pursuant to Section 7.3 hereof as of the actual date of their
distribution and charged as so valued and distributed against amounts to be paid
under Section 6.2(a) above, and (ii) any profit or loss attributable to property
distributed in-kind shall be included in the Net Profit or Net Loss for the
Fiscal Period ending on the date of such distribution.
21
ARTICLE VII
ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS
Section 7.1 Accounting and Reports
(a) The Fund shall adopt for tax accounting purposes any accounting
method that the Board of Managers shall decide in its sole discretion is in the
best interests of the Fund. The Fund's accounts shall be maintained in U.S.
currency.
(b) After the end of each taxable year, the Fund shall furnish to each
Member such information regarding the operation of the Fund and such Member's
Interest as is necessary for Members to complete federal, state and local income
tax or information returns and any other tax information required by federal,
state or local law.
(c) Except as otherwise required by the 1940 Act, or as may otherwise
be permitted by rule, regulation or order, within 60 days after the close of the
period for which a report required under this Section 7.1(c) is being made, the
Fund shall furnish to each Member a semi-annual report and an annual report
containing the information required by such Act. The Fund shall cause financial
statements contained in each annual report furnished hereunder to be accompanied
by a certificate of independent public accountants based upon an audit performed
in accordance with generally accepted accounting principles. The Fund may
furnish to each Member such other periodic reports as it deems necessary or
appropriate in its discretion.
Section 7.2 Determinations by the Board of Managers
(a) All matters concerning the determination and allocation among the
Members of the amounts to be determined and allocated pursuant to Article V
hereof, including any taxes thereon and accounting procedures applicable
thereto, shall be determined by the Board of Managers unless specifically and
expressly otherwise provided for by the provisions of this Agreement or required
by law, and such determinations and allocations shall be final and binding on
all the Members.
(b) The Board of Managers may make such adjustments to the computation
of Net Profit or Net Loss with respect to any Member, or any components
comprising any of the foregoing as it considers appropriate to reflect fairly
and accurately the financial results of the Fund and the intended allocation
thereof among the Members.
Section 7.3 Valuation of Assets
(a) Except as may be required by the 1940 Act, the Board of Managers
shall value or have valued any Securities or other assets and liabilities of the
Fund as of the close of business on the last day of each Fiscal Period in
accordance with such valuation procedures as shall be established from time to
time by the Board of Managers and which conform to the requirements of the 1940
Act. In determining the value of the assets of the Fund, no value shall be
placed on the goodwill or name of the Fund, or the office records, files,
statistical data or any similar intangible assets of the Fund not normally
reflected in the Fund's accounting records, but there shall be taken into
consideration any items of income earned but not received, expenses incurred but
not yet paid, liabilities, fixed or contingent, and any other prepaid expenses
to the extent not otherwise reflected in the books of account, and the value of
options or commitments to purchase or sell Securities or commodities pursuant to
agreements entered into prior to such valuation date.
22
(b) The Fund will value interests in Portfolio Funds at their "fair
value," as determined in good faith by the Board of Managers, which value
ordinarily will be the value of an interest in a Portfolio Fund determined by
the Portfolio Manager of the Portfolio Fund in accordance with the policies
established by the Portfolio Fund, absent information indicating that such value
does not represent the fair value of the interest.
(c) The value of Securities and other assets of the Fund and the net
worth of the Fund as a whole determined pursuant to this Section 7.3 shall be
conclusive and binding on all of the Members and all parties claiming through or
under them.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1 Amendment of Limited Liability Company Agreement
(a) Except as otherwise provided in this Section 8.1, this Agreement may
be amended, in whole or in part, with; (i) the approval of the Board of Managers
(including the vote of a majority of the Independent Managers, if required by
the 0000 Xxx) and (ii) if required by the 1940 Act, the approval of the Members
by such vote as is required by the 0000 Xxx.
(b) Any amendment that would:
(1) increase the obligation of a Member to make any contribution
to the capital of the Fund;
(2) reduce the Capital Account of a Member other than in
accordance with Article V; or
(3) modify the events causing the dissolution of the Fund;
may be made only if (i) the written consent of each Member adversely affected
thereby is obtained prior to the effectiveness thereof or (ii) such amendment
does not become effective until (A) each Member has received written notice of
such amendment and (B) any Member objecting to such amendment has been afforded
a reasonable opportunity (pursuant to such procedures as may be prescribed by
the Board of Managers) to tender its entire Interest for repurchase by the Fund.
(c) The power of the Board of Managers to amend this Agreement at any
time without the consent of the other Members as set forth in paragraph (a) of
this Section 8.1 shall specifically include the power to:
(1) restate this Agreement together with any amendments hereto
that have been duly adopted in accordance herewith to incorporate such
amendments in a single, integrated document;
(2) amend this Agreement (other than with respect to the matters
set forth in Section 8.1(b) hereof) to effect compliance with any applicable law
or regulation or to cure any ambiguity or to correct or supplement any provision
hereof that may be inconsistent with any other provision hereof; and
23
(3) amend this Agreement to make such changes as may be necessary
or advisable to ensure that the Fund will not be treated as an association or a
publicly traded partnership taxable as a corporation as defined in Section
7704(b) of the Code.
(4) amend this Agreement to make any non-material changes.
(d) The Board of Managers shall cause written notice to be given of any
amendment to this Agreement (other than any amendment of the type contemplated
by clause (1) of Section 8.1(c) hereof) to each Member, which notice shall set
forth (i) the text of the amendment or (ii) a summary thereof and a statement
that the text thereof will be furnished to any Member upon request.
Section 8.2 Special Power of Attorney
(a) Each Member hereby irrevocably makes, constitutes and appoints the
Investment Manager and each of the Managers, acting severally, and any
liquidator of the Fund's assets appointed pursuant to Section 6.2 hereof with
full power of substitution, the true and lawful representatives and
attorneys-in-fact of, and in the name, place and stead of, such Member, with the
power from time to time to make, execute, sign, acknowledge, swear to, verify,
deliver, record, file and/or publish:
(1) any amendment to this Agreement that complies with the
provisions of this Agreement (including the provisions of Section 8.1 hereof);
(2) any amendment to the Certificate required because this
Agreement is amended, including, without limitation, an amendment to effectuate
any change in the membership of the Fund; and
(3) all such other instruments, documents and certificates that,
in the opinion of legal counsel to the Fund, may from time to time be required
by the laws of the United States of America, the State of Delaware or any other
jurisdiction in which the Fund shall determine to do business, or any political
subdivision or agency thereof, or that such legal counsel may deem necessary or
appropriate to effectuate, implement and continue the valid existence and
business of the Fund as a limited liability company under the Delaware Act.
(b) Each Member is aware that the terms of this Agreement permit certain
amendments to this Agreement to be effected and certain other actions to be
taken or omitted by or with respect to the Fund without such Member's consent.
If an amendment to the Certificate or this Agreement or any action by or with
respect to the Fund is taken in the manner contemplated by this Agreement, each
Member agrees that, notwithstanding any objection that such Member may assert
with respect to such action, the attorneys-in-fact appointed hereby are
authorized and empowered, with full power of substitution, to exercise the
authority granted above in any manner that may be necessary or appropriate to
permit such amendment to be made or action lawfully taken or omitted. Each
Member is fully aware that each Member will rely on the effectiveness of this
special power-of-attorney with a view to the orderly administration of the
affairs of the Fund.
(c) This power-of-attorney is a special power-of-attorney and is coupled
with an interest in favor of the Investment Manager and each of the Managers and
as such:
(1) shall be irrevocable and continue in full force and effect
notwithstanding the subsequent death or incapacity of any party granting this
power-of-attorney, regardless of whether the Fund or Board of Managers shall
have had notice thereof; and
24
(2) shall survive the delivery of a Transfer by a Member of the
whole or any portion of such Member's Interest, except that where the transferee
thereof has been approved by the Board of Managers for admission to the Fund as
a substituted Member, this power-of-attorney given by the transferor shall
survive the delivery of such assignment for the sole purpose of enabling the
Board of Managers to execute, acknowledge and file any instrument necessary to
effect such substitution.
Section 8.3 Notices
Except as otherwise set forth in this Agreement, notices that may or are
required to be provided under this Agreement shall be made, if to a Member, by
regular mail, or if to the Fund, the Board of Managers or the Investment
Manager, by hand delivery, registered or certified mail, return receipt
requested, commercial courier service, telex or telecopier, and shall be
addressed to the respective parties hereto at their addresses as set forth in
the books and records of the Fund. Notices shall be deemed to have been provided
when delivered by hand, on the date indicated as the date of receipt on a return
receipt or when received if sent by regular mail, commercial courier service,
telex or telecopier. A document that is not a notice and that is required to be
provided under this Agreement by any party to another party may be delivered by
any reasonable means.
Section 8.4 Agreement Binding Upon Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors, assigns, executors,
trustees or other legal representatives, but the rights and obligations of the
parties hereunder may not be Transferred or delegated except as provided in this
Agreement and any attempted Transfer or delegation thereof that is not made
pursuant to the terms of this Agreement shall be void.
Section 8.5 Applicability of 1940 Act and Form N-2
The parties hereto acknowledge that this Agreement is not intended to,
and does not, set forth the substantive provisions contained in the 1940 Act and
the Form N-2 that affect numerous aspects of the conduct of the Fund's business
and of the rights, privileges and obligations of the Members. Each provision of
this Agreement shall be subject to and interpreted in a manner consistent with
the applicable provisions of the 1940 Act and the Form N-2.
Section 8.6 Choice of Law
Notwithstanding the place where this Agreement may be executed by any of
the parties hereto, the parties expressly agree that all the terms and
provisions hereof shall be construed under the laws of the State of Delaware,
including the Delaware Act without regard to the conflict of law principles of
such State.
Section 8.7 Not for Benefit of Creditors
The provisions of this Agreement are intended only for the regulation of
relations among past, present and future Members and Managers, and the Fund.
This Agreement is not intended for the benefit of non-Member creditors and no
rights are granted to non-Member creditors under this Agreement.
Section 8.8 Consents
Any and all consents, agreements or approvals provided for or permitted
by this Agreement shall be in writing and a signed copy thereof shall be filed
and kept with the books of the Fund.
25
Section 8.9 Merger and Consolidation
(a) The Fund may merge or consolidate with or into one or more limited
liability companies formed under the Delaware Act or other business entities
pursuant to an agreement of merger or consolidation that has been approved in
the manner contemplated by Section 18-209(b) of the Delaware Act.
(b) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, an agreement of merger or consolidation approved in accordance
with Section 18-209(b) of the Delaware Act may, to the extent permitted by
Section 18-209(f) of the Delaware Act, (i) effect any amendment to this
Agreement, (ii) effect the adoption of a new limited liability company agreement
for the Fund if it is the surviving or resulting limited liability company in
the merger or consolidation, or (iii) provide that the limited liability company
agreement of any other constituent limited liability company to the merger or
consolidation (including a limited liability company formed for the purpose of
consummating the merger or consolidation) shall be the limited liability company
agreement of the surviving or resulting limited liability company.
Section 8.10 Pronouns
All pronouns shall be deemed to refer to the masculine, feminine,
neuter, singular or plural, as the identity of the person or persons, firm or
corporation may require in the context thereof.
Section 8.11 Confidentiality
(a) A Member may obtain from the Fund such information regarding the
affairs of the Fund as is just and reasonable under the Delaware Act, subject to
reasonable standards (including standards governing what information and
documents are to be furnished, at what time and location and at whose expense)
established by the Board of Managers.
(b) Each Member covenants that, except as required by applicable law or
any regulatory body, it will not divulge, furnish or make accessible to any
other person the name and/or address (whether business, residence or mailing) of
any Member (collectively, "Confidential Information") without the prior written
consent of the Board of Managers, which consent may be withheld in its sole
discretion.
(c) Each Member recognizes that in the event that this Section 8.11 is
breached by any Member or any of its principals, partners, members, directors,
officers, employees or agents or any of its Affiliates, including any of such
Affiliates' principals, partners, members, directors, officers, employees or
agents, irreparable injury may result to the non-breaching Members and the Fund.
Accordingly, in addition to any and all other remedies at law or in equity to
which the non-breaching Members and the Fund may be entitled, such Members shall
also have the right to obtain equitable relief, including, without limitation,
injunctive relief, to prevent any disclosure of Confidential Information, plus
reasonable attorneys' fees and other litigation expenses incurred in connection
therewith. In the event that any non-breaching Member or the Fund determines
that any of the other Members or any of its principals, partners, members,
directors, officers, employees or agents or any of its Affiliates, including any
of such Affiliates' principals, partners, members, directors, officers,
employees or agents should be enjoined from or required to take any action to
prevent the disclosure of Confidential Information, each of the other
non-breaching Members agrees to pursue in a court of appropriate jurisdiction
such injunctive relief.
Section 8.12 Certification of Non-Foreign Status
Each Member or transferee of an Interest from a Member shall certify,
upon admission to the Fund and at such other times thereafter as the Board of
Managers may request, whether such Member is a
26
"United States Person" within the meaning of Section 7701(a)(30) of the Code on
forms to be provided by the Fund, and shall notify the Fund within 60 days of
any change in such Member's status.
Section 8.13 Severability
If any provision of this Agreement is determined by a court of competent
jurisdiction not to be enforceable in the manner set forth in this Agreement,
each Member agrees that it is the intention of the Members that such provision
should be enforceable to the maximum extent possible under applicable law. If
any provisions of this Agreement are held to be invalid or unenforceable, such
invalidation or unenforceability shall not affect the validity or enforceability
of any other provision of this Agreement (or portion thereof).
Section 8.14 Filing of Returns
The Board of Managers or its designated agent shall prepare and file, or
cause the accountants of the Fund to prepare and file, a Federal information tax
return in compliance with Section 6031 of the Code and any required state and
local income tax and information returns for each tax year of the Fund.
Section 8.15 Tax Matters Partner
(a) The Investment Manager or any Manager who is a Member shall be
designated on the Fund's annual Federal income tax return, and have full powers
and responsibilities, as the Tax Matters Partner of the Fund for purposes of
Section 6231(a)(7) of the Code. In the event that neither the Investment Manager
nor any Manager is a Member, a Member shall be so designated. Should any Member
be designated as the Tax Matters Partner for the Fund pursuant to Section
6231(a)(7) of the Code, it shall, and each Member hereby does, to the fullest
extent permitted by law, delegate to a Manager selected by the Board of Managers
all of its rights, powers and authority to act as such Tax Matters Partner and
hereby constitutes and appoints such Manager as its true and lawful
attorney-in-fact, with power to act in its name and on its behalf, including the
power to act through such agents or attorneys as it shall elect or appoint, to
receive notices, to make, execute and deliver, swear to, acknowledge and file
any and all reports, responses and notices, and to do any and all things
required or advisable, in the Manager's judgment, to be done by such a Tax
Matters Partner. Any Member designated as the Tax Matters Partner for the Fund
under Section 6231(a)(7) of the Code shall be indemnified and held harmless by
the Fund from any and all liabilities and obligations that arise from or by
reason of such designation.
(b) Each person (for purposes of this Section 8.15, called a "Pass-Thru
Member") that holds or controls an interest as a Member on behalf of, or for the
benefit of, another person or persons, or which Pass-Thru Member is beneficially
owned (directly or indirectly) by another person or persons, shall, within 30
days following receipt from the Tax Matters Partner of any notice, demand,
request for information or similar document, convey such notice or other
document in writing to all holders of beneficial interests in the Fund holding
such interests through such Pass-Thru Member. In the event the Fund shall be the
subject of an income tax audit by any Federal, state or local authority, to the
extent the Fund is treated as an entity for purposes of such audit, including
administrative settlement and judicial review, the Tax Matters Partner shall be
authorized to act for, and its decision shall be final and binding upon, the
Fund and each Member thereof. All expenses incurred in connection with any such
audit, investigation, settlement or review shall be borne by the Fund.
Section 8.16 Section 754 Election
In the event of a distribution of Fund property to a Member or an
assignment or other transfer (including by reason of death) of all or part of
the interest of a Member in the Fund, at the request of a
27
Member, the Board of Managers, in its discretion, may cause the Fund to elect,
pursuant to Section 754 of the Code, or the corresponding provision of
subsequent law, to adjust the basis of the Fund property as provided by Sections
734 and 743 of the Code.
Section 8.17 Use of Name "Aetos"
Aetos Capital, LLC ("Aetos") hereby grants to the Fund a royalty-free,
non-exclusive license to use the name "Aetos" in the name of the Fund for the
duration of this Agreement and any extensions or renewals thereof. Each license
may, upon termination of this Agreement, be terminated by Aetos in which event
the Fund shall promptly take whatever action may be necessary to change its name
and discontinue any further use of the name "Aetos" in the name of the Fund or
otherwise. The name "Aetos" may be used or licensed by Aetos in connection with
any of its activities, or licensed by Aetos to any other party.
EACH OF THE UNDERSIGNED ACKNOWLEDGES HAVING READ THIS AGREEMENT IN ITS
ENTIRETY BEFORE SIGNING, INCLUDING THE CONFIDENTIALITY CLAUSE SET FORTH IN
SECTION 8.11.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MANAGERS:
________________________________
Xxxxx X. Xxxxxx
________________________________
Xxxxx Xxxxxx
________________________________
Pierre de Saint Phalle
ORGANIZATIONAL MEMBER:
________________________________
Xxxxx X. Xxxxxx
MEMBERS:
Each person who shall sign an Investment Management Agreement and who shall be
accepted by the Board of Managers to the Fund as a Member.
28
