CO-MANAGEMENT AGREEMENT
dated as of December 15, 2006
BY AND AMONG
XXXXXXXXXX OPPORTUNITIES PARTNERS V, LP,
a Delaware limited partnership
XXXXXXXXXX CAPITAL PARTNERS, LLC,
a Delaware limited liability company
AND
BABSON CAPITAL MANAGEMENT LLC
a Delaware limited liability company
TABLE OF CONTENTS
Page
1. General Duties of the Co-Manager..............................1
2. Compensation of the Co-Manager................................3
3. Duty of Care and Loyalty......................................4
4. Indemnification...............................................4
5. Duration and Termination......................................5
6. Amendment of this Agreement; Assignment.......................7
7. Notices.......................................................7
8. Binding Nature of Agreement: Successors and Assigns...........8
9. Entire Agreement..............................................8
10. Costs and Expenses............................................8
11. Titles Not to Affect Interpretation...........................8
12. Provisions Separable..........................................8
13. Books and Records.............................................8
14. Governing Law.................................................9
15. Execution in Counterparts.....................................9
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CO-MANAGEMENT AGREEMENT
CO-MANAGEMENT AGREEMENT (this "Agreement"), dated as of December 15,
2006, among Xxxxxxxxxx Opportunities Partners V, LP (the "Company"), a
Delaware limited partnership, Xxxxxxxxxx Capital Partners, LLC (the
"Investment Manager"), a Delaware limited liability company, and Babson
Capital Management LLC (the "Co-Manager" or "Babson"), a Delaware limited
liability company registered as an investment adviser under the Investment
Advisers Act of 1940. Capitalized terms used but not otherwise defined in this
Agreement shall have the meanings given to them in the Partnership Agreement
of the Company, dated as of December 15, 2006 (as the same may be amended from
time to time, the "Partnership Agreement").
1 General Duties of the Co-Manager.
(a) The Co-Manager agrees, for the compensation set forth in
Section 2 below and to the extent reasonably requested by the Investment
Manager, to assist the Investment Manager in performing its duties under the
Investment Management Agreement, dated as of the date hereof (the "Investment
Management Agreement"), between the Company and the Investment Manager and to
act as Co-Manager to the Company with respect to the Investments (as defined
in the Investment Management Agreement) and to perform any other duties and
functions contemplated by this Agreement to be performed by the Co-Manager, in
each case, in the manner contemplated by this Agreement. The Co-Manager will
provide advice to the Investment Manager, but will not exercise investment
discretion with respect to the Assets of, or otherwise manage, the Company.
(b) The Co-Manager shall make available to the Investment Manager
one (1) investment professional selected by the Co-Manager and reasonably
acceptable to the Investment Manager to serve as a voting member of the
Investment Manager's Investment Committee (as defined in the Investment
Management Agreement) which shall be principally responsible for advising the
Company with respect to the Investments. The Co-Manager and the Investment
Manager agree that the Investment Committee shall consist initially of eleven
(11) persons (such number being subject to increase or decrease at any time in
the sole discretion of the Investment Manager) and that any approval by the
Investment Manager of the acquisition or sale by the Company of any Investment
(other than short-term Investments in high quality debt, securities maturing
in less than 367 days or investment funds whose portfolios at all times have
an effective duration of less than 367 days and other than hedging and risk
management transactions) shall require a majority vote of the voting members
of the Investment Committee, the number of voting members being subject to
increase or decrease at any time in the sole discretion of the Investment
Manager. The Co-Manager's initial member of the Investment Committee shall be
Xxxxxxx X. Xxxxxxx XX. So long as such individual serves on the Investment
Committee, such individual shall receive assistance from other of the
Co-Manager's investment professionals reasonably acceptable to the Investment
Manager. Additional employees of the Co-Manager who are reasonably acceptable
to the Investment Manager may serve from time to time as substitutes for the
Co-Manager's member of the Investment Committee. Notwithstanding
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the foregoing, the Co-Manager agrees to make available to the Investment
Manager additional investment professionals to serve on the Investment
Committee to the extent required by the terms of the Investment Management
Agreement and to have such additional investment professionals subsequently
removed from the Investment Committee as provided for in the Investment
Management Agreement. The Co-Manager and the Investment Manager agree that (i)
such additional investment professionals shall be experienced employees of
Babson or an Affiliate of Babson who are reasonably acceptable to the
Investment Manager, (ii) in no event shall Babson be obligated to provide more
than a total of four (4) investment professionals to serve as voting members
on the Investment Committee at any time, and (iii) in the event that the
number of Babson representatives on the Investment Committee is less than the
number of Investment Manager representatives on the Investment Committee at a
time when the Babson representatives are entitled to the same number of votes
as the Investment Manager representatives, the Babson representatives shall be
allocated additional votes sufficient to give them, as a group, the requisite
number of votes; provided, however, that during any such time there shall be
not less than three (3) Babson representatives on the Investment Committee.
(c) The Co-Manager will bear certain expenses in connection with
the performance of its duties as the Co-Manager to the Company, including,
without limitation, compensation of, and office space for, the Co-Manager's
officers and employees involved in investment and economic research, trading
and investment advice for the Company, and legal, tax and accounting expenses
and filing fees which are not related to the performance of its duties under
this Agreement. Notwithstanding the foregoing, and subject to review by the
Board, the Company will bear costs and expenses of the Co-Manager as set forth
in Section 9 of the Operating Agreement, which may not be amended without the
Co-Manager's written consent. The Co-Manager shall maintain complete and
accurate records with respect to costs and expenses and shall furnish the
Board with receipts or other written vouchers with respect thereto upon
request of the Board; provided, however, that any expenses incurred by the
Co-Manager pursuant to Section 9 of the Operating Agreement shall be approved
in advance by the Investment Manager.
(d) The Co-Manager shall give the Company and the Investment
Manager the benefit of its best judgment and effort in rendering the services
required hereunder, but neither the Co-Manager nor any of its Affiliated
Persons shall be liable for any act or omission or for any loss sustained by
the Company in connection with the matters to which this Agreement relates
except to the extent provided in Section 3 hereof.
(e) Nothing in this Agreement shall prevent the Co-Manager or any
director, officer, employee or other Affiliated Person of the Co-Manager from
acting as an investment adviser, investment manager or in any similar capacity
for any other Person, or from engaging in any other lawful activity, and shall
not in any way limit or restrict the Co-Manager or any of its directors,
officers, employees or other Affiliate Persons from buying, selling or trading
any securities or other property for its or their own accounts or for the
accounts of others for whom it or they may be acting.
(f) It is expressly understood by the Company and the Investment
Manager that the Co-Manager presently serves, and will in the future serve, as
investment adviser to other investment entities with investment objectives
similar to those of the Company. Investment
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opportunities made available to the Co-Manager that would be appropriate for
both the Company and such other entities may be offered by the Co-Manager to
such other entities to the exclusion of, or in addition to, the Company. The
Co-Manager is an indirect, wholly-owned subsidiary of Massachusetts Mutual
Life Insurance Company ("MassMutual"). The Co-Manager and MassMutual are
parties to an order of the United States Securities and Exchange Commission
(the "SEC") granting exemptions from the limitations of Section 17(d) of the
Investment Company Act and Rule 17d-1 thereunder (the "MassMutual 17(d)
Order") to the extent necessary to permit MassMutual and two registered
investment companies (the "Registered Funds") and private investment funds for
which the Co-Manager or MassMutual serves as investment advisor to co-invest
in securities acquired in private placements. In accordance with the terms of
the MassMutual 17(d) Order, MassMutual and its Affiliates, including the
Co-Manager, are required to offer to each of the Registered Funds an
opportunity to co-invest in certain private placements that MassMutual or its
Affiliates intend to make, up to an amount equal to the aggregate amount of
any such private placement to be purchased directly or indirectly by
MassMutual. If any co-investor with the Registered Funds proposes to dispose
of some or all of its investment, each Registered Fund must be offered an
opportunity to dispose of its own investment, proportionately, on the same
terms. Unless the MassMutual 17(d) Order and the similar exemptive order for
which the Company has applied are appropriately amended, the Company will be
unable to invest in such private placements and, even thereafter, in certain
circumstances, may also be unable to purchase other securities of the same
issuer or its Affiliates. Although the Company may be permitted to co-invest
with the Registered Funds in compliance with its own exemptive order and the
MassMutual 17(d) Order, if so amended, any additional purchases, dispositions,
exercises of rights and other actions in respect of such private placements
and such other securities would also be subject to the Company's exemptive
order and the MassMutual 17(d) Order, and, as such, may be constrained or
otherwise affected by the Company's exemptive order and the MassMutual 17(d)
Order. The Company intends to comply fully with its own exemptive order and
the MassMutual 17(d) Order.
(g) For all purposes of this Agreement, the Co-Manager shall be
deemed to be an independent contractor and, unless otherwise provided herein
or specifically authorized by the Company from time to time, shall have no
authority to act for or represent the Company.
2. Compensation of the Co-Manager. As compensation for its services
hereunder, the Co-Manager shall be entitled to receive:
(a) From the Investment Manager, an amount equal to 10% of the
compensation actually paid to the Investment Manager pursuant to Section 6(a)
of the Investment Management Agreement or as a fee pursuant to Section 6(b) of
the Investment Management Agreement (the "Co-Manager Fee"); provided that, in
the event of the death, incapacity or departure from the Investment Manager of
any two of Xxxxxxx X. Xxxxxxxxxx, Xxxx Xxxxxxxxxx or Xxxxxx Xxxxxxxxx, such
percentage shall be increased to 15% until the Investment Manager replaces
either Xx. Xxxxxxxxxx, Xxxx Xxxxxxxxxx or Xxxxxx Xxxxxxxxx, as the case may
be, with a Replacement Principal as provided in Section 11 of the Investment
Management Agreement.
(b) From SVOF/MM, LLC, a company wholly-owned by the Investment
Manager, affiliates thereof and the Co-Manager, the Co-Manager's percentage
interest in
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the profits of SVOF/MM, LLC actually received by SVOF/MM, LLC pursuant to
Section 8.1 of the Partnership Agreement of the Company.
(c) If the Investment Management Agreement is terminated for any
reason prior to the end of the Investment Period, from the Investment Manager,
an amount equal to 10% of the compensation actually paid to the Investment
Manager pursuant to Sections 6(c) and (d) of the Investment Management
Agreement.
3. Duty of Care and Loyalty. Except as otherwise required by law,
neither the Co-Manager nor any of its Affiliated Persons, directors, officers,
employees, shareholders, managers, members, assigns, representatives or agents
(each, an "Indemnified Person" and, collectively, the "Indemnified Persons")
shall be liable, responsible or accountable in damages or otherwise to the
Investment Manager, the Company, any Partner or any other Person for any loss,
liability, damage, settlement cost, or other expense (including attorneys'
fees) incurred by reason of any act or omission or any alleged act or omission
performed or omitted by such Indemnified Person (other than solely in such
Indemnified Person's capacity as a Partner, if applicable) in connection with
the establishment, management or operations of the Company or the management
of its Assets (including those in connection with serving on boards of
directors of, or creditors' committees for, any Portfolio Company) except that
the Co-Manager shall be liable to the Company or any Partner, as the case may
be, if such act or failure to act arises out of the bad faith, willful
misfeasance, gross negligence or reckless disregard of an Indemnified Person's
duty to the Company or such Partner, as the case may be (such conduct,
"Disabling Conduct"). Subject to the foregoing, all such Persons shall look
solely to the Assets (including, without limitation, the Unfunded Commitments)
for satisfaction of claims of any nature arising in connection with the
affairs of the Company. If any Indemnified Person is made a party to any suit
or proceeding to enforce any such liability, subject to the foregoing
exception, such Indemnified Person shall not, on account thereof, be held to
any personal liability.
4. Indemnification.
(a) To the fullest extent permitted by applicable law, each of the
Indemnified Persons shall be held harmless and indemnified by the Company (out
of the Assets (including, without limitation, the Unfunded Commitments) and
not out of the separate assets of any Partner) against any liabilities and
expenses, including amounts paid in satisfaction of judgments, in compromise
or as fines and penalties, and reasonable counsel fees reasonably incurred by
such Indemnified Person in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court
or administrative or investigative body in which such Indemnified Person may
be or may have been involved as a party or otherwise (other than as authorized
by the Directors, as the plaintiff or complainant) or with which such
Indemnified Person may be or may have been threatened, while acting in such
Person's capacity as an Indemnified Person, except with respect to any matter
as to which such Indemnified Person shall not have acted in good faith in the
reasonable belief that such Person's action was in the best interest of the
Company or, in the case of any criminal proceeding, as to which such
Indemnified Person shall have had reasonable cause to believe that the conduct
was unlawful, provided, however, that an Indemnified Person shall only be
indemnified hereunder if (i) such Indemnified Person's activities do not
constitute Disabling Conduct and (ii) there has been a determination (a) by a
final decision on the merits by a court or other body of competent
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jurisdiction before whom the issue of entitlement to indemnification was
brought that such Indemnified Person is entitled to indemnification or, (b) in
the absence of such a decision, by (1) a majority vote of a quorum of those
Directors who are neither "interested persons" of the Company (as defined in
Section 2(a)(19) of the 0000 Xxx) nor parties to the proceeding, that the
Indemnified Person is entitled to indemnification (the "Disinterested
Non-Party Directors"), or (2) if such quorum is not obtainable or even if
obtainable, if such majority so directs, independent legal counsel in a
written opinion that concludes that the Indemnified Person should be entitled
to indemnification. Notwithstanding the foregoing, with respect to any action,
suit or other proceeding voluntarily prosecuted by any Indemnified Person as
plaintiff, indemnification shall be mandatory only if the prosecution of such
action, suit or other proceeding by such Indemnified Person was authorized by
a majority of the Directors. All determinations to make advance payments in
connection with the expense of defending any proceeding shall be authorized
and made in accordance with the immediately succeeding paragraph (b) below.
(b) The Company shall make advance payments in connection with the
expenses of defending any action with respect to which indemnification might
be sought hereunder if the Company receives a written affirmation by the
Indemnified Person of the Indemnified Person's good faith belief that the
standards of conduct necessary for indemnification have been met and a written
undertaking to reimburse the Company unless it is subsequently determined that
such Indemnified Person is entitled to such indemnification and if a majority
of the Directors determine that the applicable standards of conduct necessary
for indemnification appear to have been met. In addition, at least one of the
following conditions must be met: (i) the Indemnified Person shall provide
adequate security for his undertaking, (ii) the Company shall be insured
against losses arising by reason of any lawful advances, or (iii) a majority
of a quorum of the Disinterested Non-Party Directors, or if a majority vote of
such quorum so direct, independent legal counsel in a written opinion, shall
conclude, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is substantial reason to believe that the
Indemnified Person ultimately will be found entitled to indemnification.
(c) The rights accruing to any Indemnified Person under these
provisions shall not exclude any other right to which such Indemnified Person
may be lawfully entitled.
(d) Each Indemnified Person shall, in the performance of its
duties, be fully and completely justified and protected with regard to any act
or any failure to act resulting from reliance in good faith upon the books of
account or other records of the Company, upon an opinion of counsel, or upon
reports made to the Company by any of the Company's officers or employees or
by any advisor, administrator, manager, distributor, selected dealer,
accountant, appraiser or other expert or consultant selected with reasonable
care by the Directors, officers or employees of the Company, regardless of
whether such counsel or other person may also be a Director.
5. Duration and Termination.
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(a) This Agreement shall become effective as of the time at which
the Company registers as an investment company with the Securities and
Exchange Commission and, unless sooner terminated by the Company, the
Co-Manager or Investment Manager as provided herein, shall continue in effect
for a period of two years. Thereafter, if not terminated, this Agreement shall
continue in effect with respect to the Company for successive periods of 12
months, provided such continuance is specifically approved at least annually
by both (i) the vote of a majority of the Board or the vote of the holders of
a majority of the outstanding voting securities of the Company at the time
outstanding and entitled to vote, and (ii) by the vote of a majority of the
Directors who are not parties to this Agreement or interested persons of any
party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval. Notwithstanding the foregoing, this Agreement may be
terminated by the Company at any time, without the payment of any penalty,
upon giving the Co-Manager 60 days' notice (which notice may be waived by the
Co-Manager), provided that such termination by the Company shall be directed
or approved by the vote of a majority of the Directors of the Company in
office at the time or by the vote of the holders of a majority of the voting
securities of the Company at the time outstanding and entitled to vote, or by
the Co-Manager on 60 days' written notice (which notice may be waived by the
Company). This Agreement will also immediately terminate in the event of its
assignment. As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested person" and "assignment" shall have the same
meanings of such terms in the Investment Company Act.
(b) This Agreement may be terminated by the Investment Manager
without penalty or liability on the part of the Investment Manager or the
Company upon thirty (30) days' prior written notice to the Co-Manager (which
notice may be waived by the Co-Manager), if it is determined by a final
adjudication (after all appeals and the expiration of the time to appeal) of a
court of competent jurisdiction that the Co-Manager has committed fraud,
willful misconduct, gross negligence or criminal conduct constituting a felony
in the performance of its obligations under this Agreement.
(c) This Agreement may be terminated by the Co-Manager without
penalty or liability on the part of the Co-Manager upon thirty (30) days'
prior written notice to the Company and the Investment Manager in the event
that the Company or the Investment Manager fails to pay, reimburse for or
satisfy a material portion of the compensation payable to the Co-Manager as
provided herein or any material indemnification obligation of the Company as
provided herein. The Investment Manager shall give prompt written notice of
any such notice of termination to Xxxxx'x and S&P.
(d) Upon any termination of this Agreement pursuant to this
Section 5:
(i) The Co-Manager shall have the right, no sooner than
thirty (30) days prior to the effective date of such
termination, to inform investors who hold either the debt or
equity of the Company and any rating agencies rating such debt
and other interested parties of such termination.
(ii) The Co-Manager shall be entitled to receive the
Co-Manager Fee through the effective date of such termination.
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(iii) The members of SVOF/MM, LLC (other than the
Co-Manager) shall have the right to purchase, on a pro rata or
such other basis as they may determine, or to arrange for the
purchase of, the Co-Manager's interest in SVOF/MM, LLC relating
to the Company at the fair market value of such interest, as
determined by good faith negotiations between the Co-Manager
and the other members of SVOF/MM, LLC. If such Persons cannot
in good faith agree on the fair market value of the
Co-Manager's interest in SVOF/MM, LLC within thirty (30) days
of termination of this Agreement, the members of SVOF/MM, LLC
(other than the Co-Manager), on the one hand, and the
Co-Manager, on the other hand, shall each select an arbitrator,
and the arbitrators, as so selected, shall attempt to agree
upon such fair market value. If the two arbitrators so selected
cannot agree within thirty (30) days of their selection on such
fair market value, they shall jointly select a third arbitrator
who shall within thirty (30) days after his or her selection
make such determination which shall be binding on all parties.
6. Amendment of this Agreement; Assignment. No provision of this
Agreement may be amended, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
amendment, waiver, discharge or termination is sought.
7. Notices. Unless expressly provided otherwise herein, any notice,
request, direction, demand or other communication required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly
given, made and received if sent by hand or by overnight courier, when
personally delivered, if sent by telecopier, when receipt is confirmed by
telephone, or if sent by registered or certified mail, postage prepaid, return
receipt requested, when actually received if addressed as set forth below:
(a) If to the Company:
Tennenbaum Opportunities Partners V, LP
Attn: Xxxxxx Xxxxxx
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
(b) If to the Investment Manager:
Xxxxxxxxxx Capital Partners, LLC
Attn: Xxxxxx X. Xxxxxxxxx
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxx Xxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
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(c) If to the Co-Manager:
Babson Capital Management LLC
Attn: Xxxxxxx X. Xxxxxxx XX
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Any party to this Agreement may alter the address to which communications or
copies are to be sent to it by giving notice of such change of address in
conformity with the provisions of this Section 7.
8. Binding Nature of Agreement: Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
9. Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or
written, of any nature whatsoever with respect to the subject matter hereof.
The express terms hereof control and supersede any course of performance or
usage of the trade inconsistent with any of the terms hereof. No provision of
this Agreement may be amended, waived, discharged or terminated orally, but
only by an instrument signed by the party against which the enforcement of the
amendment, waiver or discharge is sought. Any amendment of this Agreement
shall be subject to the 0000 Xxx. If the Company has outstanding any
securities rated by S&P or Xxxxx'x, the Company shall promptly provide a copy
of any such amendment or waiver to S&P and/or Xxxxx'x, as applicable.
10. Costs and Expenses. The costs and expenses (including the fees
and disbursements of counsel and accountants) incurred in connection with the
negotiation, preparation and execution of this Agreement, and all matters
incident thereto, shall be borne by the Company.
11. Titles Not to Affect Interpretation. The titles of sections
contained in this Agreement are for convenience only, and they neither form a
part of this Agreement nor are they to be used in the construction or
interpretation hereof.
12. Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and, to the extent permitted by
applicable law, no provision shall be affected or rendered invalid or
unenforceable by virtue of the fact that for any reason any other provision
may be invalid or unenforceable in whole or in part.
13. Books and Records. In compliance with the requirements of Rule
31a-3 under the Investment Company Act, the Co-Manager hereby agrees that all
records which it maintains for the Company are the property of the Company and
further agrees to surrender promptly to the Company or the Investment Manager
8
any such records upon the Company's or Investment Manager's request. The
Co-Manager further agrees to preserve for the periods prescribed by Rule 31a-2
under the Investment Company Act the records required to be maintained by Rule
31a-1 under the Investment Company Act.
14. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York and, to the extent
inconsistent therewith, the 1940 Act.
15. Execution in Counterparts. This Agreement may be executed in
separate counterparts, each of which shall be an original and all of which
taken together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
XXXXXXXXXX OPPORTUNITIES
PARTNERS V, LP
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------------
Xxxxxx X. Xxxxxxxxx
President
XXXXXXXXXX CAPITAL PARTNERS, LLC
By: XXXXXXXXXX & CO., LLC, its Managing
Member
By: /s/ Xxxx X. Xxxxxxxxxx
--------------------------------------
Xxxx X. Xxxxxxxxxx
Member
BABSON CAPITAL MANAGEMENT LLC
By: /s/ Xxxxxxx X. Xxxxxxx XX
--------------------------------------
Name: Xxxxxxx X. Xxxxxxx XX
Title: managing Director
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