APPENDIX A
PHOENIX/LJH ADVISORS FUND LLC
(A DELAWARE LIMITED LIABILITY COMPANY)
LIMITED LIABILITY COMPANY AGREEMENT
DATED AS OF JANUARY 1, 2003
LIMITED LIABILITY COMPANY AGREEMENT
THIS LIMITED LIABILITY COMPANY AGREEMENT of PHOENIX/LJH ADVISORS FUND
LLC (the "Company") is dated as of January 1, 2003 by and among Xxxxx X.
XxxXxxx, as the Organizational Member.
W I T N E S S E T H:
WHEREAS, the Company has heretofore been formed as a limited liability
company under the Delaware Limited Liability Company Act pursuant to an initial
Certificate of Formation (the "Certificate") dated and filed with the Secretary
of State of Delaware on June 21, 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
Company pursuant to an administrative services agreement.
ADVISER The person who at any particular time serves as the
investment adviser to the Company pursuant to an
Investment Advisory Agreement.
ADVISERS ACT The Investment Advisers Act of 1940 and the rules,
regulations and orders there under, 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 mended from
time to time.
BOARD OF DIRECTORS The Board of Directors 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 hereof.
CERTIFICATE The Certificate of Formation of the Company 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 Member other than
the Organizational Member is admitted to the Company.
CODE The United States Internal Revenue Code of 1986, as
amended from time to time, or any successor law.
COMPANY The limited liability company governed hereby, as such
limited liability company may from time to time be
constituted.
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.
DIRECT ALLOCATION
UNDERLYING
MANAGERS Those investment managers for which a separate investment
vehicle has been created in which the investment manager
serves as general partner and the Company is the sole
limited partner and those investment managers who manage
the Company's assets directly through a separate managed
account.
DIRECTOR An individual designated as a Director of the Company
pursuant to the provisions of Section 2.6 of the
Agreement and who serves on the Board of Directors of the
Company. As used herein, the term "Director" shall have
the same meaning as the term "manager" within the meaning
of the Delaware Act.
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EXPENSE
ALLOCATION DATE The Closing Date, and thereafter, each day on or before
December 31, 2003, as of which a contribution to the
capital of the Company is being made pursuant to Section
5.1 hereof.
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 calendar day of each month;
(2) the last day of a Fiscal Quarter; (3) the last day of
a Taxable Year; (4) the day preceding any day as of which
a contribution to the capital of the Company is made
pursuant to Section 5.1; or (5) any day (other than one
specified in clause (3) 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 June 30, 2003, and thereafter each 12-month period
ending on June 30 of each year (or on the date of a final
distribution pursuant to Section 6.2 hereof), unless the
Board of Directors shall elect another fiscal year for
the Company.
FORM N-2 The Company's Registration Statement on Form N-2 filed
with the Securities and Exchange Commission, as
amended from time to time.
INCENTIVE
ALLOCATION With respect to any Member, 10% of the combined amount,
determined as of the close of each calendar year with
respect to such Member (appropriately adjusted for any
repurchases or Transfers of Interests), by which the Net
Profit allocated to such Member for each six-month period
in such calendar year above any Net Loss so allocated, if
any, exceeds the sum of the respective amounts that such
Member would have been allocated, had such Member
received a return for each such six-month period equal to
that of the three-month Treasury xxxx rate published in
the Federal Reserve Statistical
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Release H.15 as of the last business day prior to the
inception of such period (the "Hurdle") and any positive
balance in such Member's Loss Recovery Account as of the
most recent prior date as of which any adjustment has
been made thereto.
INDEPENDENT
DIRECTORS Those Directors who are not "interested persons" of the
Company as such term is defined in the 1940 Act.
INSURANCE One or more "key man" insurance policies on the life of
any principal of the Adviser or of any subadvisers
appointed by the Adviser, the benefits of which are
payable to the Company.
INTEREST The entire interest in the Company at any particular
time, of a Member, or other person to whom an Interest
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. To the extent permitted by the 1940 Act,
the Board of Directors may authorize the division of
interests into two separate series, each of which shall
function as a Class ("Class") with the variations in the
rights and preferences as between the different Classes
to be fixed and determined by the Board of Directors.
INVESTMENT
ADVISORY
AGREEMENT A separate written agreement entered into by the Company
pursuant to which the Adviser provides Management
Services to the Company.
INVESTMENT FUNDS Unregistered investment funds and registered investment
companies.
INVESTMENT
PERCENTAGE A percentage established for each Member on the Company'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 of such Class as of the commencement of
such Fiscal Period. The sum of the Investment
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Percentages of all Members of such Class for each Fiscal
Period shall equal 100%.
LOSS RECOVERY
ACCOUNT A memorandum account to be recorded in the books and
records of the Company with respect to each Member, which
shall have an initial balance of zero and which shall be
adjusted as follows:
(1) As of the first day after the close of each
calendar year for such Member, the balance of the
Loss Recovery Account shall be increased by the
amount, if any, by which the sum of Net Loss
allocated to the Member for such year plus the
Hurdle exceeds Net Profit so allocated and shall be
reduced (but not below zero) by the amount, if any,
by which Net Profit allocated to the Member for
such year exceeds the sum of the Hurdle and Net
Loss so allocated.
(2) The balance of the Loss Recovery Account shall be
reduced (but not below zero) as of the first date
as of which the Capital Account balance of any
Member is reduced as a result of repurchase or
Transfer with respect to such Member's Interest by
an amount determined by multiplying (a) such
positive balance by (b) a fraction, (i) the
numerator of which is equal to the amount of the
repurchase or Transfer, and (ii) the denominator of
which is equal to the balance of such Member's
Capital Account immediately before giving effect to
such repurchase or Transfer.
No transferee of any Interest shall succeed to any
Loss Recovery Account balance or portion thereof
attributable to the transferor unless the Transfer
by which such transferee received such Interest
did not involve a change of beneficial ownership.
MANAGEMENT
SERVICES Such investment advisory and other services as the
Adviser is required to provide to the Company pursuant to
the Investment Advisory Agreement as contemplated by
Section 3.8(a), provided that the Adviser may delegate
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its duties to provide such services to one or more
subadvisers.
MEMBER Any person who shall have been admitted to the Company as
a member (including any Director in such person's
capacity as a member of the Company but excluding any
Director in such person's capacity as a Director of the
Company) until the Company repurchases the entire
Interest of such person as a member pursuant to Section
4.5 hereof or a substituted Member or Members are
admitted with respect to any such person's entire
Interest as a member pursuant to Section 4.4 hereof; such
term includes the Adviser, in its capacity as a member of
the Company, to the extent the Adviser makes a capital
contribution to the Company and shall have been admitted
to the Company as a member.
NET ASSETS The total value of all assets of the Company, less an
amount equal to all accrued debts, liabilities and
obligations of the Company, calculated before giving
effect to any repurchases of Interests.
NET PROFIT OR NET
LOSS For each Class, 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 Company, at the close
of business on the Closing Date), such amount to be
adjusted to exclude any items to be allocated among the
Capital Accounts of the Members on a basis which 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
EXPENSES The expenses incurred by the Company in connection with
its formation, its initial registration as an
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investment company under the 1940 Act, and the initial
offering of Interests.
ORGANIZATIONAL
MEMBER Xxxxx X. XxxXxxx
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 manner of
derivative instruments and any contracts based on any
index or group of securities, debt obligations or
currencies, or commodities, and any options thereon, as
well as investments in registered investment companies
and private investment funds.
SPECIAL ADVISORY
ACCOUNT A Capital Account established and maintained on behalf of
the Special Advisory Member pursuant to Section 5.3(f)
hereof to which amounts are credited under Section 5.11
hereof.
SPECIAL ADVISORY
MEMBER The Adviser in its capacity as the investment adviser to
the Company.
TAXABLE YEAR The 12-month period ending December 31 of each year.
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.
UNDERLYING
MANAGERS Investment advisers (which may include the Adviser) who
enter into advisory agreements to manage a designated
portfolio of investments for the Company or who manage
Investment Funds in which the Company has invested.
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ARTICLE II
ORGANIZATION; ADMISSION OF MEMBERS
2.1 FORMATION OF LIMITED LIABILITY COMPANY
Each member of the Board of Directors and the Organizational Member shall
be a designated "authorized person" within the meaning of the Delaware Act, and
any Director may 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
which, in the opinion of the Company'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 Company shall determine to do business, or
any political subdivision or agency thereof, or which such legal counsel may
deem necessary or appropriate to effectuate, implement and continue the valid
existence and business of the Company.
2.2 NAME.
The name of the Company shall be "PHOENIX-LJH ADVISORS FUND LLC" or such
other name as the Board of Directors may hereafter adopt upon (i) causing an
appropriate amendment to the Certificate to be filed in accordance with the
Delaware Act and (ii) sending notice thereof to each Member.
2.3 PRINCIPAL AND REGISTERED OFFICE.
The Company shall have its principal office at 0000 Xxxxxx Xxxx Xxxxxxx,
Xxxxx 000, Xxxxxx, Xxxxxxx 00000, or at such other place designated from time to
time by the Board of Directors.
The Company shall have its registered office in Delaware at 0000 Xxxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000, and shall have The Corporation Trust 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
Directors.
2.4 DURATION.
The term of the Company commenced on the filing of the Certificate with
the Secretary of State of Delaware and shall continue until the Company is
dissolved pursuant to Section 6.1 hereof.
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2.5 OBJECTIVE AND BUSINESS OF THE COMPANY.
(a) The objective and business of the Company is to directly or
indirectly 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 Company 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 Directors be necessary or advisable to carry out its objective or business.
(b) The Company 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 set forth in the Form N-2.
2.6 BOARD OF DIRECTORS.
(a) Prior to the Closing Date, the Organizational Member may
designate such persons who shall agree to be bound by all of the terms of this
Agreement to serve as the initial Directors on the Board of Directors, subject
to the election of such persons prior to the Closing Date by the Organizational
Member. By signing this Agreement or the signature page of the Company's
subscription agreement, a Member admitted on the Closing Date shall be deemed to
have voted for the election of each of the initial Directors to the Board of
Directors. After the Closing Date, the Board of Directors 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 Director of and the provisions of
Section 3.3 hereof with respect to the election of Directors to the Board of
Directors by Members, designate any person who shall agree to be bound by all of
the terms of this Agreement as a Director. The names and mailing addresses of
the Directors shall be set forth in the books and records of the Company. The
number of Directors shall be fixed from time to time by the Board of Directors.
(b) Each Director shall serve on the Board of Directors for the
duration of the term of the Company, unless his or her status as a Director
shall be sooner terminated pursuant to Section 4.2 hereof. In the event of any
vacancy in the position of Director, the remaining Directors may appoint an
individual to serve in such capacity, so long as immediately after such
appointment at least two-thirds (2/3) of the Directors then serving would have
been elected by the Members. The Board of Directors may call a meeting of
Members to fill any vacancy in the position of Director, and shall do so within
60 days after any date on which Directors who were elected by the Members cease
to constitute a majority of the Directors then serving on the Board of
Directors.
(c) If no Director remains, the Adviser shall promptly call a
meeting of the Members, to be held within 60 days after the date on which the
last Director
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ceased to act in that capacity, for the purpose of determining whether to
continue the business of the Company and, if the business shall be continued, of
electing the required number of Directors. If the Members shall determine at
such meeting not to continue the business of the Company or if the required
number of Directors is not elected within 60 days after the date on which the
last Director ceased to act in that capacity, then the Company shall be
dissolved pursuant to Section 6.1 hereof and the assets of the Company shall be
liquidated and distributed pursuant to Section 6.2 hereof.
2.7 MEMBERS.
The Board of Directors may admit one or more Members on the Closing Date,
and thereafter, as of the first business day of each calendar month; provided,
however, that upon delivery to the Board of Directors of a letter of advice from
counsel to the Adviser that no applicable law or regulation prevents the Company
from admitting Members more often than monthly, the Company may, in the
discretion of the Board of Directors, admit Members more frequently. All
subscriptions are subject to the receipt of cleared funds on or before the
acceptance date in the full amount of the subscription, plus the applicable
sales charge, if any. Subject to the foregoing terms, Members may be admitted to
the Company subject to the condition that each such Member shall execute an
appropriate signature page of this Agreement or of the Company's subscription
agreement pursuant to which such Member agrees to be bound by all the terms and
provisions hereof. The Board of Directors may in its absolute discretion reject
any subscription for Interests. The Board of Directors may in its sole
discretion, suspend subscriptions for 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 Company to reflect the name and the contribution to the capital
of the Company of such additional Member.
2.8 SPECIAL ADVISORY MEMBER
Upon signing this Agreement, the Adviser shall be admitted to the Company
as the Special Advisory Member, subject to due approval, in accordance with the
requirements of the 1940 Act and the Investment Advisory Agreement. The Interest
of the Special Advisory Member shall be non-voting. If at any time the
Investment Advisory Agreement between the Company and the person then serving as
Adviser terminates, the Board shall admit as a substitute Special Advisory
Member, upon its signing this Agreement, such person as may be retained by the
Company to provide investment advisory services pursuant to an Investment
Advisory Agreement, subject to the due approval of such Investment Advisory
Agreement in accordance with the requirements of the 1940 Act.
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2.9 ORGANIZATIONAL MEMBER.
Upon the admission of any Member, the Organizational Member shall
withdraw from the Company as the Organizational Member and shall be entitled to
the return of his or her Capital Contribution, if any, without interest or
deduction.
2.10 BOTH DIRECTORS AND MEMBERS.
A Member may at the same time be a Director and a Member or a Special
Advisory Member 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 hereof or as provided in the Delaware Act.
2.11 LIMITED LIABILITY.
Except as provided under applicable law, a Member and the Special
Advisory Member shall not be liable for the Company'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 Director shall not be liable for the Company's
debts, obligations and liabilities.
ARTICLE III
MANAGEMENT
3.1 MANAGEMENT AND CONTROL.
(a) Management and control of the business of the Company shall
be vested in the Board of Directors, which shall have the right, power and
authority, on behalf of the Company and in its name, to exercise all rights,
powers and authority of Directors under the Delaware Act and to do all things
necessary and proper to carry out the objective and business of the Company and
their duties hereunder. No Director shall have the authority individually to act
on behalf of or to bind the Company except within the scope of such Director's
authority as delegated by the Board of Directors. The parties hereto intend
that, except to the extent otherwise expressly provided herein, (i) each
Director shall be vested with the same powers, authority and responsibilities on
behalf of the Company as are customarily vested in each director of a Delaware
corporation and (ii) each Independent Director shall be vested with the same
powers, authority and responsibilities on behalf of the Company 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 in the 1940 Act. During any period in which the Company shall have no
Directors, the Adviser shall continue to serve as the Adviser to the Company and
to provide the Management Services to the Company.
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(b) Each Member agrees not to treat, on his personal income tax
return or in any claim for a tax refund, any item of income, gain, loss,
deduction or credit in a manner inconsistent with the treatment of such item by
the Company. The Board of Directors shall have the exclusive authority and
discretion to make any elections required or permitted to be made by the Company
under any provisions of the Code or any other revenue laws.
(c) Members shall have no right to participate in and shall
take no part in the management or control of the Company's business and shall
have no right, power or authority to act for or bind the Company. 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. Members of each Class
shall vote together except on matters that affect only one Class.
(d) The Board of Directors may delegate to any other person any
rights, power and authority vested by this Agreement in the Board of Directors
to the extent permissible under applicable law.
3.2 ACTIONS BY THE BOARD OF DIRECTORS.
(a) Unless provided otherwise in this Agreement, the Board of
Directors shall act only: (i) by the affirmative vote of a majority of the
Directors (including the vote of a majority of the Independent Directors if
required by the 0000 Xxx) present at a meeting duly called at which a quorum of
the Directors 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 Directors without a meeting, if permissible under the 0000 Xxx.
(b) The Board of Directors may designate from time to time a
Chairman who shall preside at all meetings. Meetings of the Board of Directors
may be called by the Chairman or by any two Directors, and may be held on such
date and at such time and place, as the Board of Directors shall determine. Each
Director 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. Notice need
not be given to any Director 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. Directors may attend and participate in any meeting by telephone
except where in person attendance at a meeting is required by the 1940 Act. A
majority of the Directors shall constitute a quorum at any meeting.
(c) The Board may designate from time to time agents and
employees of the Company who shall have the same powers and duties on behalf of
the Company (including the power to bind the Company) as are customarily vested
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in officers of a Delaware corporation, and designate them as officers of the
Company.
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 Directors or by Members
holding 25% 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 Directors
shall determine. The Board of Directors 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 Directors 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
(determined on a Company-wide basis) as of the record date for such meeting. The
Board of Directors shall establish a record date not less than 10 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 thereat, 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 Company 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
Company 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
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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.
3.4 CUSTODY OF ASSETS OF THE COMPANY.
The physical possession of all funds, Securities or other properties of
the Company shall at all times, be held, controlled and administered by one or
more custodians retained by the Company in accordance with the requirements of
the 1940 Act and the rules thereunder.
3.5 OTHER ACTIVITIES OF MEMBERS AND DIRECTORS.
(a) The Directors shall not be required to devote full time to
the affairs of the Company, but shall devote such time as may reasonably be
required to perform their obligations under this Agreement.
(b) Any Member or Director, and any Affiliate of any Member or
Director, 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 Director shall
have any rights in or to such activities of any other Member or Director, or any
profits derived therefrom.
3.6 DUTY OF CARE.
(a) A Director shall not be liable to the Company or to any of
its Members for any loss or damage occasioned by any act or omission in the
performance of his or her services under this Agreement, 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 such
Director constituting willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Director's
office.
(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 Company, any Member or third parties only as provided under the
Delaware Act.
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3.7 INDEMNIFICATION.
(a) To the fullest extent permitted by law, the Company shall,
subject to Section 3.7(b) hereof, indemnify each Director and the Adviser
(including for this purpose his or her 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 Director or Adviser of the Company or the past
or present performance of services to the Company 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 an indemnitee 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.
(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
Company 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 Company 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 Company 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 Directors (excluding any
Director 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.
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(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 by
any other body before which the proceeding shall have been brought, that an
indemnitee is liable to the Company 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 Company by a majority of the Directors (excluding any Director
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 Company and that such indemnitee is not liable
to the Company 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 Directors 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 Company 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 Company 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 Director (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 Company to recover any
indemnification or advancement of expenses made pursuant to this Section 3.7 the
Company shall be entitled to recover such expenses upon a final adjudication
that, the Director 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 Director 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 Company (or any Member acting derivatively or otherwise on behalf of the
Company or its Members).
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(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 Company,
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 Company to purchase and maintain liability insurance on
behalf of any Director or other person.
3.8 FEES, EXPENSES AND REIMBURSEMENT.
(a) So long as the Administrator provides administrative
services to the Company, it shall be entitled to receive fees for such services
as may be agreed to by the Administrator and the Company pursuant to an
administrative services agreement.
(b) The Board of Directors may cause the Company to compensate
each Director for his or her services as such. In addition, the Directors shall
be reimbursed by the Company for reasonable out-of-pocket expenses incurred by
them in performing their duties under this Agreement.
(c) The Company shall bear all expenses incurred in its
business and operations, other than those specifically required to be borne by
the Adviser pursuant to the Investment Advisory Agreement or by the
Administrator pursuant to the agreement referred to in Section 3.8(a) hereof.
Expenses to be borne by the Company include, but are not limited to, taxes,
organizational (including costs and expenses related to registration of the
Company), offering and investment-related expenses (such as, fees and expenses
charged by the Underlying Managers and Investment Funds, placement fees,
interest on indebtedness, administrative and investor servicing fees and
expenses, custodial, administration and transfer agent fees and expenses, bank
service fees, other expenses related to the purchase, sale or transmittal of
Company investments, all costs and expenses of preparing, setting in type,
printing and distributing reports and other communications to Members, fees for
data and software providers, research expenses, professional fees (including,
without limitation, expenses of consultants and experts relating to
investments), legal expenses, internal and external accounting, audit and tax
preparation expenses, corporate licensing, all costs and expenses of preparing,
setting in type, printing and distributing reports and other communications to
Members, Board of Directors' fees and expenses, including travel, insurance and
other expenses associated with the operation of the Company. In addition, the
Company will bear the Management Fee (as defined in the Investment Advisory
Agreement) paid to
17
the Adviser. The Adviser shall be entitled to reimbursement from the Company for
any of the above expenses that it pays on behalf of the Company.
(d) Subject to procuring any required regulatory approvals,
from time to time the Company may, alone or in conjunction with other accounts
for which the Adviser, or any Affiliate of the Adviser, acts as general partner
or investment adviser, purchase Insurance in such amounts, from such insurers
and on such terms as the Board of Directors shall determine.
ARTICLE IV
TERMINATION OF STATUS OF ADVISER AND DIRECTORS,
TRANSFERS AND REPURCHASES
4.1 TERMINATION OF STATUS OF THE ADVISER.
The status of the Adviser as Special Advisory Member shall terminate if
the Investment Advisory Agreement with the Adviser terminates and the Company
does not enter into a new Investment Advisory Agreement with the Adviser,
effective as of the date of such termination.
4.2 TERMINATION OF STATUS OF A DIRECTOR.
The status of a Director shall terminate if the Director (i) shall die;
(ii) shall be adjudicated incompetent; (iii) shall voluntarily withdraw as a
Director (upon not less than 90 days' prior written notice to the other
Directors); (iv) shall be removed; (v) shall be certified by a physician to be
mentally or physically unable to perform his 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 Director; or (viii) shall otherwise cease to be
a Director of the Company under the Delaware Act.
4.3 REMOVAL OF THE DIRECTORS.
Any Director may be removed either by (a) the vote or written consent of
at least two-thirds (2/3) of the Directors 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.
4.4 TRANSFER OF INTERESTS OF MEMBERS.
(a) To the fullest extent permitted by law, an Interest of a
Member may be Transferred only (i) by operation of law pursuant to the death,
divorce, bankruptcy, insolvency or dissolution of such Member or (ii) with the
written consent of the Board of Directors (which may be withheld in its sole
discretion);
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provided, however, that the Board of Directors may not consent to any Transfer
other than a Transfer in which the transferring Member has been a Member for at
least six months, in which the proposed transfer is to be made on the effective
date of an offer by the Company to repurchase Interests or portions of
Interests, and (i) (a) 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), and (b) to members of the Member's
immediate family (brothers, sisters, spouse, parents and children), or (ii) a
distribution from a qualified retirement plan or an individual retirement
account, unless it consults with counsel to the Company and counsel to the
Company confirms that such Transfer will not cause the Company to be treated as
a "publicly traded partnership" taxable as a corporation.
(b) The Board of Directors may not consent to a Transfer of an
Interest or a portion thereof of a Member unless: (i) the person to whom such
Interest is Transferred is a person whom the Company believes is an accredited
investor, as such term is defined in Regulation D under the Securities Act of
1933 or any successor thereto; (ii) the person to whom such Interest is
Transferred (or each of such person's beneficial owners if such 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 Company believes meets the requirements
of paragraph (d)(1) of Rule 205-3 under the Advisers Act; and (iii) 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 $25,000. Any transferee that
acquires an Interest by operation of law as the result of the death, divorce,
bankruptcy, insolvency or dissolution 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 Directors, the Board of Directors
shall promptly take all necessary actions so that the transferee to whom such
Interest is transferred is admitted to the Company as a Member. Each Member
effecting a Transfer and its transferee agree to pay all expenses, including
attorneys' and accountants' fees, incurred by the Company in connection with
such Transfer.
(c) Each Member shall indemnify and hold harmless the Company,
the Directors, the Adviser, 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
19
violation of this Section 4.4 and (ii) any misrepresentation by such Member in
connection with any such Transfer.
4.5 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 Company for repurchase that Interest or portion
thereof. The Board of Directors from time to time, in its complete and exclusive
discretion and on such terms and conditions as it may determine, may cause the
Company to repurchase Interests or portions thereof pursuant to written tenders.
However, the Company shall not offer to repurchase Interests on more than four
occasions during any one Fiscal Year unless it has been advised by counsel to
the Company to the effect that such more frequent offers would not cause any
adverse tax consequences to the Company or the Members. In determining whether
to cause the Company to repurchase Interests or portions thereof pursuant to
written tenders, the Board of Directors shall consider the recommendation of the
Adviser, and shall also consider the following factors, among others:
(1) whether any Members have requested to tender
Interests or portions thereof to the Company;
(2) the liquidity of the Company's assets;
(3) the investment plans and working capital
requirements of the Company;
(4) the relative economies of scale with respect to the
size of the Company;
(5) the history of the Company in repurchasing Interests
or portions thereof;
(6) the availability of information as to the value of
the Company's interests in the Investment Funds;
(7) the economic condition of the securities markets;
and
(8) the anticipated tax consequences of any proposed
repurchases of Interests or portions thereof.
The Board of Directors shall cause the Company to
repurchase Interests or portions thereof pursuant to written tenders only on
terms fair to the Company and to all Members or one or more classes of Members
(including persons holding Interests acquired from Members), as applicable.
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(b) A Member who tenders for repurchase only a portion of such
Member's Interest shall be required to maintain a Capital Account balance at
least $25,000 after giving effect to the repurchase. If a Member tenders an
amount that would cause the Member's Capital Account balance to fall below the
required minimum Capital Account, the Company reserves the right to reduce the
amount to be purchased from the Member pursuant to the tender so that the
required minimum balance is maintained.
(c) The Adviser may tender its Interest or a portion thereof as
a Member or Special Advisory Member under Section 4.5(a) hereof.
(d) The Board of Directors may cause the Company 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
Directors determines or has reason to believe that:
(1) such an Interest or portion thereof has been
transferred in violation of Section 4.5 hereof, or such an Interest or
portion thereof has vested in any person other than by operation of law
as the result of the death, divorce, dissolution, bankruptcy or
incompetence of a Member;
(2) ownership of such an Interest by a Member or other
person will cause the Company to be in violation of, or require
registration of any Interest or portion thereof under, or subject the
Company to additional registration or regulation under, the securities
laws of the United States or any other relevant jurisdiction, or may
subject the Company or any of the Members to an undue risk of adverse tax
or other fiscal or regulatory consequences;
(3) continued ownership of such an Interest may be
harmful or injurious to the business of the Company, the Directors or the
Adviser, or may subject the Company or any of the Members to an undue
risk of adverse tax or other fiscal consequences;
(4) 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
(5) it would be in the best interests of the Company, as
determined by the Board, for the Company to repurchase such an Interest
or portion thereof.
(e) Repurchases of Interests or portions thereof by the Company
shall be payable promptly after the date of each such repurchase or, in the case
of an offer by the Company to repurchase Interests, promptly after the
expiration date of such repurchase offer in accordance with the terms of the
Company's repurchase
21
offer. Payment of the purchase price for an Interest (or portion thereof) shall
consist of: (i) cash in an amount equal to the net asset value of the Interest
(or portion thereof) repurchased by the Company determined as of the date of
such repurchase (the "Initial Payment"); and, (ii) a second payment equal to the
excess, if any, of (x) the net asset value of the Interest (or portion thereof)
repurchased by the Company as of the date of such repurchase, determined based
on the audited financial statements of the Company for the Fiscal Year in which
such repurchase was effective, over (y) the Initial Payment. Notwithstanding
anything in the foregoing to the contrary, the Board of Directors, in its
discretion, may pay all or any portion of the repurchase price in Securities (or
any combination of Securities and cash) having a value, determined as of the
date of repurchase, equal to the amount to be repurchased. All repurchases of
Interests shall be subject to any and all conditions as the Board of Directors
may impose in its sole discretion. The amount due to any Member whose Interest
or portion thereof is repurchased shall be equal to the value of such Member's
Capital Account or portion thereof, as applicable, as of the effective date of
repurchase, after giving effect to all allocations to be made to such Member's
Capital Account as of such date.
(f) If the Adviser's status as Special Advisory Member is
terminated pursuant to Section 4.1 hereof, it (or its trustee or other legal
representative) may, by written notice to the Board within 60 days of the
effective date of such termination, tender to the Company for repurchase all or
any portion of its Capital Account. Not later than 30 days after the receipt of
such notice, the Board shall cause such tendered portion of the Capital Account
to be repurchased by the Company for cash.
4.6 TRANSFER OF INTERESTS OF SPECIAL ADVISORY MEMBER
The Adviser may not Transfer its Interest as the Special Advisory member.
ARTICLE V
CAPITAL
5.1 CONTRIBUTIONS TO CAPITAL.
(a) The minimum initial contribution of each Member to the
capital of the Company shall be such amount as the Board of Directors, in its
discretion, may determine from time to time, but in no event shall be less than
$25,000. For the purposes of this minimum, amounts constituting placement fees
will not be considered, and placement fees are not deemed to be investments in,
or capital contributions to, the Company. The amount of the initial contribution
of each Member shall be recorded on the books and records of the Company upon
acceptance as a contribution to the capital of the Company. The Directors shall
not be entitled to make voluntary contributions of capital to the Company as
Directors
22
of the Company, but may make voluntary contributions to the capital of the
Company as Members.
(b) The Members may make additional contributions to the
capital of the Company of at least $25,000, effective as of such times as the
Board of Directors in its discretion may permit, subject to the limitations
applicable to the admission of Members pursuant to Section 2.7 hereof, but no
Member shall be obligated to make any additional contribution to the capital of
the Company except to the extent provided in Section 5.6 hereof.
(c) Except as otherwise permitted by the Board of Directors,
(i) initial and any additional contributions to the capital of the Company by
any Member shall be payable in cash or in such Securities that the Board of
Directors, in its absolute discretion, may agree to accept on behalf of the
Company, and (ii) initial and any additional contributions in cash shall be
payable in readily available funds at the date of the proposed acceptance of the
contribution. The Company shall charge each Member making a contribution in
Securities to the capital of the Company such amount as may be determined by the
Board of Directors not exceeding 2% of the value of such contribution in order
to reimburse the Company for any costs incurred by the Company by reason of
accepting such Securities, and any such charge shall be due and payable by the
contributing Member in full at the time the contribution to the capital of the
Company to which such charges relate is due. The value of contributed Securities
shall be determined in accordance with Section 7.3 hereof as of the date of
contribution.
(d) The minimum initial and additional contributions set forth
in (a) and (b) of this Section 5.1 may be reduced by the Board of Directors in
accordance with such schedule of reductions as may be adopted by the Board of
Directors it its sole discretion.
5.2 RIGHTS OF MEMBERS TO CAPITAL.
No Member shall be entitled to interest on any contribution to the
capital of the Company, nor shall any Member be entitled to the return of any
capital of the Company except (i) upon the repurchase by the Company of a part
or all of such Member's Interest pursuant to Section 4.5 hereof, (ii) pursuant
to the provisions of Section 5.6(c) hereof or (iii) upon the liquidation of the
Company'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 Company's property or to compel any sale or appraisal of the
Company's assets.
5.3 CAPITAL ACCOUNTS.
(a) The Company shall maintain a separate Capital Account for
each Member.
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(b) Each Member's Capital Account shall have an initial balance
equal to the amount of cash and the value of any Securities (determined in
accordance with Section 7.3 hereof) (net of any liabilities secured by such
Securities that the Company is considered to assume or take subject to under
Section 752 of the Code) constituting such Member's initial contribution to the
capital of the Company.
(c) Each Member's Capital Account shall be increased by the sum
of (i) the amount of cash and the value of any Securities (determined in
accordance with Section 7.3 hereof) (net of any liabilities secured by such
Securities that the Company is considered to assume or take subject to under
Section 752 of the Code) constituting additional contributions by such Member to
the capital of the Company 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.
(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 4.5, 5.8 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.
(e) No Member shall be required to pay to the Company or any
other Member any deficit in such Member's Capital Account upon dissolution of
the Company or otherwise.
(f) The Company shall maintain a Special Advisory Account for
the Adviser in its capacity as Special Advisory Member to which amounts shall be
credited pursuant to Section 5.11 hereof. The Special Advisory Account shall
have an initial balance of zero.
(g) If all or a portion of an Interest is transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the transferred
Interest.
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 by Class among and credited to or debited
against the Capital Accounts of the Members in accordance with their respective
Investment Percentages for such Fiscal Period.
24
5.5 ALLOCATION OF CERTAIN EXPENDITURES.
Except as otherwise provided for in this Agreement and unless prohibited
by the 1940 Act, any expenditures payable by the Company, to the extent
determined by the Board of Directors to have been paid or withheld on behalf of,
or by reason of particular circumstances applicable to, one or more but fewer
than all of the Members, shall be charged to only those Members on whose behalf
such payments are made or whose particular circumstances gave rise to such
payments. Such charges shall be debited from the Capital Accounts of such
Members as of the close of the Fiscal Period during which any such items were
paid or accrued by the Company.
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 Adviser or the Board of Directors, such reserves
to be in the amounts that the Board of Directors in its sole discretion deems
necessary or appropriate. The Board of Directors may increase or reduce any such
reserves from time to time by such amounts, as the Board of Directors 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 Directors 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 Company
(other than contributions to the capital of the Company, 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 Company'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
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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 Directors 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 Company 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 Company, 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.
5.7 TAX ALLOCATIONS
For each Taxable 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 1.704-1(b)(2)(iv) (and, in particular, subparagraph (f) thereof),
1.704-1(b)(4)(i) and 1.704-3(e) promulgated there under, as applicable, or the
successor provisions to such Section and Regulations. Notwithstanding anything
to the contrary in this Agreement, there shall be allocated to the Members such
gains or income as shall be necessary to satisfy the "qualified income offset"
requirement of Treasury Regulation Section 1.704-1(b)(2)(ii)(d).
If the Company realizes capital gains (including short-term capital
gains) or ordinary income for Federal income tax purposes for any Taxable Year
during or as of the end of which all the Interests of one or more Positive Basis
Members (as hereinafter defined) are repurchased by the Company pursuant to
Article IV, the Board of Directors, in its sole discretion, may allocate such
gains or income as follows: (i) to 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) 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.
26
If the Company realizes capital losses (including short-term capital
losses) or ordinary losses for Federal income tax purposes for any Taxable Year
during or as of the end of which all the Interests of one or more Negative Basis
Members (as hereinafter defined) are repurchased by the Company pursuant to
Article IV, the Board of Directors, in its sole discretion, may allocate such
losses as follows: (i) to 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) 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 the value of
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 Company under Section 752 of
the Code), and (ii) the term "Positive Basis Member" shall mean any Member whose
Interest is repurchased by the Company and who has Positive Basis as of the
effective date of its withdrawal, 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 "adjusted
tax basis," for Federal income tax purposes, in its Interests 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
Company under section 752 of the Code) exceeds the value of its Interest as of
such time, and (ii) the term "Negative Basis Member" shall mean any Member whose
Interest is repurchased by the Company and who has Negative Basis as of the
effective date of its withdrawal, 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.
Notwithstanding anything to the contrary in the foregoing, if the Company
realizes taxable gains (including short-term capital gains) for Federal income
tax purposes in any Taxable Year with respect to which any amounts are credited
to the Special Advisory Account under Section 5.11(a) hereof, the Board (at the
request of
27
the Special Advisory Member) may specially allocate such gains to the Special
Advisory Member up to an amount by which the sum total of any such credited
amounts exceeds the Special Advisory Member's "adjusted tax basis" (determined
without regard to any allocation to be made pursuant to this paragraph) in its
Interest as of the time it withdraws any such credited amounts under Section
5.11(b) hereof.
5.8 DISTRIBUTIONS.
The Board of Directors, in its sole discretion, may authorize the Company
to make distributions in cash or in kind at any time to all of the Members on a
pro rata basis by Class in accordance with the Members' Investment Percentages.
Notwithstanding the foregoing or any other provision contained in this
Agreement, the Company, and the Board of Directors on behalf of the Company,
shall not be required to make a distribution to a Member in respect of its
Interest if such distribution would violate the Delaware Act or other applicable
law.
5.9 WITHHOLDING.
(a) The Board of Directors 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 Company with respect to any amount distributed by the Company 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 Company as a contribution to the
capital of the Company, upon demand of the Board of Directors, the amount of
such excess.
(c) The Board of Directors 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 Directors 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
Company and each of the Members from any and all damages, costs and expenses
resulting from the
28
filing of inaccurate or incomplete information or forms relating to such
withholding taxes.
5.10 ALLOCATION OF ORGANIZATIONAL EXPENSES.
(a) As of the first Expense Allocation Date, Organizational
Expenses shall be allocated among and debited against the Capital Accounts of
the Members in accordance with the value of their respective Capital Amounts on
such Expense Allocation Date.
(b) As of each subsequent Expense Allocation Date following the
first Expense Allocation Date, all amounts previously debited against the
Capital Account of a Member pursuant to this Section 5.10 on the preceding
Expense Allocation Date will be credited to the Capital Account of such Member,
and Organizational Expenses shall then be re-allocated among and debited against
the Capital Accounts of all Members in accordance with the balance of their
respective Capital Accounts on such Expense Allocation Date.
5.11 INCENTIVE ALLOCATION
(a) So long as the Adviser serves as the Special Advisory
Member of the Company, the Incentive Allocation shall be debited against the
Capital Account of each Member (other than the Adviser) as of the last day of
each calendar year with respect to such Member and the amount so debited shall
be credited to the Special Advisory Account, or, subject to compliance with the
1940 Act and the Advisers Act, to the Capital Accounts of such Members as have
been designated in any written notice delivered by the Adviser to the Company
within 90 days after the close of such period.
(b) The Special Advisory Member may withdraw up to 100% of any
such amounts (computed on the basis of unaudited data) that were credited to the
Special Advisory Account. Within 30 days after the completion of the audit of
the Company's books for the year in which any such amounts were credited to the
Special Advisory Account, the Company shall pay to the Special Advisory Member
any additional amounts determined to be owed to the Special Advisory Member
based on the audit, and the Special Advisory Member shall pay to the Company any
excess amounts that were credited to the Special Advisory Account.
ARTICLE VI
DISSOLUTION AND LIQUIDATION
6.1 DISSOLUTION.
The Company shall be dissolved:
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(1) upon the affirmative vote to dissolve the Company
by: (i) the Board of Directors, and (ii) Members holding at least
two-thirds (2/3) of the total number of votes eligible to be cast by all
Members;
(2) upon the expiration of any two year period that
commences on the date on which any Member has submitted a written notice
to the Company requesting the Company to commence a tender offer for at
least 5% of the Company's outstanding Interest if such offer has not been
commenced by the Company;
(3) upon the failure of Members to approve of successor
Directors at a meeting called by the Adviser in accordance with Section
2.6(c) hereof when no Director remains to continue the business of the
Company;
(4) upon the determination by the Adviser to dissolve
the Company;
(5) upon termination of the Investment Advisory
Agreement; or
(6) as required by the Delaware Act or other applicable
law.
Dissolution of the Company shall be effective on the day on which the
event giving rise to the dissolution shall occur, but the existence of the
Company as separate legal entity shall not terminate until the assets of the
Company have been liquidated in accordance with Section 6.2 hereof and the
Certificate has been canceled.
6.2 WINDING UP
(a) Upon the dissolution of the Company as provided in Section
6.1 hereof, the Board of Directors shall promptly appoint the Administrator as
the liquidator and the Administrator shall wind up the business and
administrative affairs of the Company, except that if the Board of Directors
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 wind up the business and administrative affairs of the Company. Net
Profit and Net Loss during the period of winding up shall be allocated pursuant
to Section 5.4 hereof. The proceeds from liquidation of the Company's assets
shall be distributed in the following manner:
(1) the debts of the Company, 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
Company's assets to the Members has been
30
completed, shall first be satisfied (whether by payment or reasonable
provision for payment thereof) 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;
(3) the Special Advisory Member shall next be paid any
balance in the Special Advisory Account after giving effect to the
Incentive Allocation, if any, to be made pursuant to Section 5.11 hereof;
and
(4) the Members shall next be paid on a pro rata basis
in accordance with 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)(4).
(b) Anything in this Section 6.2 to the contrary
notwithstanding but subject to the Delaware Act, upon dissolution of the
Company, the Board of Directors or other liquidator may distribute ratably in
kind any assets of the Company; 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.
ARTICLE VII
ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS
7.1 ACCOUNTING AND REPORTS.
(a) The Company shall adopt for tax accounting purposes any
accounting method that the Board of Directors shall decide in its sole
discretion is in the best interests of the Company. The Company's accounts shall
be maintained in U.S. currency.
(b) After the end of each Taxable Year, the Company shall
furnish to each Member such information regarding the operation of the Company
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
31
Company shall furnish to each Member a semi-annual report and an annual report
containing the information required by such Act. The Company 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
Company may furnish to each Member such other periodic reports as it deems
necessary or appropriate in its discretion.
7.2 DETERMINATIONS BY THE BOARD OF DIRECTORS.
(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 Directors 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 Directors may make such adjustments to the
computation of Net Profit, Net Loss or any components comprising either of the
foregoing as it considers appropriate to reflect fairly and accurately the
financial results of the Company and the intended allocation thereof among the
Members.
7.3 VALUATION OF ASSETS.
(a) Except as may be required by the 1940 Act, the Board of
Directors shall value or have valued any Securities or other assets and
liabilities of the Company 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 Directors and which conform to the
requirements of the 1940 Act. In determining the value of the assets of the
Company, no value shall be placed on the goodwill or name of the Company, or the
office records, files, statistical data or any similar intangible assets of the
Company not normally reflected in the Company'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.
(b) The Company will value interests in Investment Funds not
managed by the Direct Allocation Underlying Managers at fair value, which
ordinarily will be the value determined by the respective Underlying Managers in
accordance with the policies established by the relevant Investment Fund.
(c) The value of Securities and other assets of the Company and
the net worth of the Company as a whole and by Class determined pursuant to this
32
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
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 Directors (including the vote of a majority of the Independent
Directors, 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 Company;
(2) reduce the Capital Account of a Member Account other
than in accordance with Article V; or
(3) modify the events causing the dissolution of the
Company;
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 Directors) to tender its entire Interest for repurchase by the
Company.
(c) The power of the Board of Directors to amend this Agreement
at any time without the consent of the other Members as set forth in paragraph
(a) of this Section 8.01 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, including but not limited to, to satisfy
the requirements, or to reflect any relaxation of such requirements in
the future, of the Bank Holding Company Act of 1956, as amended, or other
U.S. banking laws, or any regulations, guidelines or policies or
interpretations of
33
the banking regulatory agencies or the staff thereof, or to cure any
ambiguity or to correct or supplement any provision hereof that may be
inconsistent with any other provision hereof; and
(3) amend this Agreement to make such changes as may be
necessary or advisable for Federal tax purposes, including, without
limitation, to ensure that (i) the Company will not be treated as an
association or as a publicly traded partnership taxable as a corporation
as defined in Section 7704(b) of the Code and (ii) the allocation
provisions hereunder are respected for Federal income tax purposes,
provided that such changes do not materially reduce any Member's
allocations or distributions hereunder.
(d) The Board of Directors 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.
8.2 SPECIAL POWER OF ATTORNEY.
(a) Each Member hereby irrevocably makes, constitutes and
appoints each Director, acting severally, and any liquidator of the Company'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 Company; and
(3) all such other instruments, documents and
certificates that, in the opinion of legal counsel to the Company, 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
Company 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 Company 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
34
taken or omitted by or with respect to the Company without such Member's
consent. If an amendment to the Certificate or this Agreement or any action by
or with respect to the Company 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 Company.
(c) This power-of-attorney is a special power-of-attorney and
is coupled with an interest in favor of each of the Directors 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 Company or
Board of Directors shall have had notice thereof; and
(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 Directors for
admission to the Company 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 Directors to execute,
acknowledge and file any instrument necessary to effect such
substitution.
8.3 NOTICES.
Notices that may be or are required to be provided under this Agreement
shall be made, if to a Member, by regular mail, or if to the Board of Directors
or the Adviser, 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 Company. 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.
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
35
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.
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 Company'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.
8.6 CHOICE OF LAW; ARBITRATION.
(a) 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.
(b) TO THE FULLEST EXTENT PERMITTED BY LAW, UNLESS OTHERWISE
AGREED IN WRITING, EACH MEMBER AGREES TO SUBMIT ALL CONTROVERSIES ARISING
BETWEEN MEMBERS OR ONE OR MORE MEMBERS AND THE COMPANY TO ARBITRATION IN
ACCORDANCE WITH THE PROVISIONS SET FORTH BELOW AND UNDERSTANDS THAT:
(1) ARBITRATION IS FINAL AND BINDING ON THE PARTIES;
(2) THEY ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN
COURT, INCLUDING THE RIGHT TO A JURY TRIAL;
(3) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED
AND DIFFERENT FROM COURT PROCEEDINGS;
(4) THE ARBITRATOR'S AWARD IS NOT REQUIRED TO INCLUDE
FACTUAL FINDINGS OR LEGAL REASONING AND A PARTY'S RIGHT TO APPEAL OR TO
SEEK MODIFICATION OF RULINGS BY ARBITRATORS IS STRICTLY LIMITED; AND
(5) THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A
MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES
INDUSTRY.
36
(c) ALL CONTROVERSIES THAT MAY ARISE AMONG MEMBERS AND ONE OR
MORE MEMBERS AND THE COMPANY CONCERNING THIS AGREEMENT SHALL BE DETERMINED BY
ARBITRATION IN NEW YORK CITY IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT, TO
THE FULLEST EXTENT PERMITTED BY LAW. ANY ARBITRATION UNDER THIS AGREEMENT SHALL
BE DETERMINED BEFORE AND IN ACCORDANCE WITH THE RULES THEN OBTAINING OF EITHER
THE NEW YORK STOCK EXCHANGE, INC. (THE "NYSE") OR THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC. (THE "NASD"), AS THE MEMBER OR ENTITY INSTITUTING THE
ARBITRATION MAY ELECT. IF THE NYSE OR NASD DOES NOT ACCEPT THE ARBITRATION FOR
CONSIDERATION, THE ARBITRATION SHALL BE SUBMITTED TO, AND DETERMINED IN
ACCORDANCE WITH THE RULES THEN OBTAINING OF, THE CENTER FOR PUBLIC RESOURCES,
INC. IN NEW YORK CITY. JUDGMENT ON ANY AWARD OF ANY SUCH ARBITRATION MAY BE
ENTERED IN THE SUPREME COURT OF THE STATE OF NEW YORK OR IN ANY OTHER COURT
HAVING JURISDICTION OF THE PERSON OR PERSONS AGAINST WHOM SUCH AWARD IS
RENDERED. ANY NOTICE OF SUCH ARBITRATION OR FOR THE CONFIRMATION OF ANY AWARD IN
ANY ARBITRATION SHALL BE SUFFICIENT IF GIVEN IN ACCORDANCE WITH THE PROVISIONS
OF THIS AGREEMENT. EACH MEMBER AGREES THAT THE DETERMINATION OF THE ARBITRATORS
SHALL BE BINDING AND CONCLUSIVE UPON THEM.
(d) NO MEMBER SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION
TO ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT
AGAINST ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE CLASS ACTION; OR WHO IS
A MEMBER OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO
ANY CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL: (I) THE CLASS
CERTIFICATION IS DENIED; OR (II) THE CLASS IS DECERTIFIED; OR (III) THE MEMBER
IS EXCLUDED FROM THE CLASS BY THE COURT. SUCH FORBEARANCE TO ENFORCE AN
AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THIS
AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN.
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, Directors and the Company.
This Agreement is not intended for the benefit of non-Member creditors and no
rights are granted to non-Member creditors under this Agreement.
37
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 Company.
8.9 MERGER AND CONSOLIDATION.
(a) The Company 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 Company 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.
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.
8.11 CONFIDENTIALITY.
(a) A Member may obtain from the Company such information
regarding the affairs of the Company 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 Directors.
(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 Directors, which consent may
be withheld in its sole discretion.
38
(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 Company. Accordingly, in addition to any and all other remedies at law
or in equity to which the non-breaching Members and the Company 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 Company 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.
(d) The Company shall have the right to keep confidential from
the Members for such period of time as it deems reasonable any information which
the Board reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the Board in good faith believes is not in
the best interest of the Company or could damage the Company or its business or
which the Company is required by law or by agreement with a third party to keep
confidential.
8.12 CERTIFICATION OF NON-FOREIGN STATUS.
Each Member or transferee of an Interest from a Member shall certify,
upon admission to the Company and at such other times thereafter as the Board of
Directors may request, whether such Member is a "United States Person" within
the meaning of Section 7701(a)(30) of the Code on forms to be provided by the
Company, and shall notify the Company within 30 days of any change in such
Member's status. Any Member who shall fail to provide such certification when
requested to do so by the Board of Directors may be treated as a non-United
States Person for purposes of U.S. federal tax withholding.
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).
39
8.14 FILING OF RETURNS.
The Board of Directors or its designated agent shall prepare and file, or
cause the Administrator or accountants of the Company 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 Company.
8.15 TAX DECISIONS AND TAX MATTERS PARTNER.
(a) The Company shall file a tax return as a partnership for
Federal income tax purposes. All decisions for the Company relating to tax
matters including, without limitation, whether to make any tax elections
(including the election under Section 754 of the Code), the positions to be made
on the Company's tax returns and the settlement of further contest or litigation
of any audit matters raised by the Internal Revenue Service or any other taxing
authority, shall be made by the Board of Directors. All actions (other than
ministerial actions) taken by the Tax Matters Partner, as designated below,
shall be subject to the approval of the Board of Directors.
(b) A Director who is a Member shall be designated on the
Company's annual Federal income tax return, and have full powers and
responsibilities, as the Tax Matters Partner of the Company for purposes of
Section 6231(a)(7) of the Code. In the event that no Director is a Member, a
Member shall be so designated. Should any Member be designated as the Tax
Matters Partner for the Company 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 Director selected by the Board of Directors all of its rights,
powers and authority to act as such Tax Matters Partner and hereby constitutes
and appoints such Director 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
Director's judgment, to be done by such a Tax Matters Partner. Any Member
designated as the Tax Matters Partner for the Company under Section 6231(a)(7)
of the Code shall be indemnified and held harmless by the Company from any and
all liabilities and obligations that arise from or by reason of such
designation.
(c) 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
40
document in writing to all holders of beneficial interests in the Company
holding such interests through such Pass-Thru Member. In the event the Company
shall be the subject of an income tax audit by any Federal, state or local
authority, to the extent the Company is treated as an entity for purposes of
such audit, including administrative settlement and judicial review, the Tax
Matters Partner shall be authorized to act for, and its decision shall be final
and binding upon, the Company and each Member thereof. All expenses incurred in
connection with any such audit, investigation, settlement or review shall be
borne by the Company.
8.16 SECTION 754 ELECTION
In the event of a distribution of Company 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 Company, the Board of Directors, in its
discretion, may cause the Company to elect, pursuant to Section 754 of the Code,
or the corresponding provision of subsequent law, to adjust the basis of the
Company property as provided by Sections 734 and 743 of the Code.
8.17 ENTIRE AGREEMENT
This Agreement (including any schedule attached hereto which is
incorporated herein) constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto. It is hereby acknowledged and agreed that the
Board, without the approval of any Member, may enter into written agreements
("Other Agreements") with Members, executed contemporaneously with the admission
of such Members to the Company, effecting the terms hereof or of any application
in order to meet certain requirements of such Members. The parties hereto agree
that any terms contained in an Other Agreement with a Member shall govern with
respect to such Member notwithstanding the provisions of this Agreement or of
any application.
8.18 COUNTERPARTS
This Agreement may be executed in several counterparts, all of which
together shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties have not signed the same counterpart.
EACH OF THE UNDERSIGNED ACKNOWLEDGES HAVING READ THIS AGREEMENT IN ITS
ENTIRETY BEFORE SIGNING, INCLUDING THE PRE-DISPUTE ARBITRATION CLAUSE SET FORTH
IN SECTION 8.6 AND THE CONFIDENTIALITY CLAUSE SET FORTH IN SECTION 8.11.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ORGANIZATIONAL MEMBER:
By:
------------------------------------
Name: Xxxxx X. XxxXxxx
MEMBERS:
Each person who shall sign a Member
Signature Page and who shall be
accepted by the Board of Directors to
the Company as a Member.
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