EXHIBIT 3
LIMITED LIABILITY COMPANY AGREEMENT
OF
XXXXXXX XXXXX HEDGE FUND PARTNERS II, LLC
DATED AS OF AUGUST 1, 2003
TABLE OF CONTENTS
Page
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ARTICLE I GENERAL PROVISIONS.................................................1
Section 1.01 Company Name and Address.....................................1
Section 1.02 Fiscal Year..................................................1
Section 1.03 Liability of Members.........................................1
Section 1.04 Purposes of the Company......................................2
Section 1.05 Assignability of Units; Assignment by Managing Member........3
Section 1.06 Registered Office and Agent for Service of Process...........3
ARTICLE II MANAGEMENT OF THE COMPANY.........................................3
Section 2.01 Management Generally.........................................3
Section 2.02 Delegation by Managing Member................................4
Section 2.03 Authority of the Managing Member.............................4
Section 2.04 Reliance by Third Parties....................................6
Section 2.05 Activity of the Managing Member..............................6
Section 2.06 Standard of Care; Indemnification............................6
Section 2.07 Management Fee; Payment of Costs and Expenses................8
Section 2.08 Principal Transactions and Other Related Party
Transactions.................................................9
Section 2.09 Termination of the Managing Member...........................9
ARTICLE III SERIES OF UNITS; ADMISSION OF NEW MEMBERS.......................10
Section 3.01 Series of Units.............................................10
Section 3.02 Conversion of Series........................................10
Section 3.03 New Members.................................................10
Section 3.04 Adjustment to Number of Units Issued........................11
ARTICLE IV CAPITAL ACCOUNTS OF MEMBERS AND OPERATION THEREOF................11
Section 4.01 Definitions.................................................11
Section 4.02 Capital Contributions.......................................12
Section 4.03 Capital Accounts............................................12
Section 4.04 Membership Percentages......................................13
Section 4.05 Allocation of Net Capital Appreciation or Net Capital
Depreciation................................................13
Section 4.06 Amendment of Incentive Allocation...........................14
Section 4.07 Determination of Net Assets.................................14
Section 4.08 Determination of Net Asset Value............................15
Section 4.09 Allocation for Tax Purposes.................................16
Section 4.10 Determination by Managing Member of Certain Matters;
Managing Member's.............................................
Discretion..................................................16
Section 4.11 Adjustments to Take Account of Interim Year Events..........17
Section 4.12 Tax Withholding.............................................17
ARTICLE V REDEMPTIONS AND DISTRIBUTIONS.....................................17
Section 5.01 Redemptions and Distributions in General....................17
Section 5.02 Redemptions.................................................17
Section 5.03 Limitation on Redemptions...................................18
Section 5.04 Distributions...............................................19
ARTICLE VI WITHDRAWAL, DEATH, DISABILITY....................................20
Section 6.01 Withdrawal, Death, etc. of Members..........................20
Section 6.02 Required Withdrawals........................................20
ARTICLE VII DURATION AND DISSOLUTION OF THE COMPANY.........................20
Section 7.01 Duration....................................................20
Section 7.02 Dissolution.................................................21
ARTICLE VIII TAX RETURNS; REPORTS TO MEMBERS................................21
Section 8.01 Independent Auditors........................................21
Section 8.02 Filing of Tax Returns.......................................21
Section 8.03 Tax Matters Partner.........................................21
Section 8.04 Financial Reports to Current Members........................22
Section 8.05 Tax Reports to Members and Former Members...................22
Section 8.06 Partnership Status of Company...............................22
ARTICLE IX MISCELLANEOUS....................................................22
Section 9.01 General.....................................................22
Section 9.02 Power of Attorney...........................................22
Section 9.03 Amendments to Limited Liability Company Agreement...........23
Section 9.04 Instruments.................................................24
Section 9.05 No Personal Liability For Return of Capital.................24
Section 9.06 Choice of Law...............................................24
Section 9.07 Waiver of Trial By Jury.....................................24
Section 9.08 No Third Party Rights.......................................24
Section 9.09 Notices.....................................................25
Section 9.10 Counterparts................................................25
Section 9.11 Grantors of Revocable Trusts................................25
Section 9.12 Each Interest in the Company is a Security..................25
Section 9.13 Goodwill....................................................25
Section 9.14 Headings....................................................25
Section 9.15 Pronouns....................................................25
Section 9.16 Confidentiality.............................................25
LIMITED LIABILITY COMPANY AGREEMENT OF
XXXXXXX SACHS HEDGE FUND PARTNERS II, LLC
Dated as of August 1, 2003
The undersigned (herein called the "Members", which term shall
include any persons hereafter admitted to the Company (as defined below)
pursuant to Article III of this Agreement (as defined below) and shall
exclude any persons who cease to be Members pursuant to Article V or VI of
this Agreement) hereby agree to form and hereby form, as of the date and
year first above written, a limited liability company (herein called the
"Company"), pursuant to the provisions of the Limited Liability Company Act
of the State of Delaware (6 Del. Code ss. 18-101, et seq.) (the "Act"),
which shall be governed by, and operated pursuant to, the terms and
provisions of this Limited Liability Company Agreement (herein called this
"Agreement").
ARTICLE I
GENERAL PROVISIONS
Section 1.01 Company Name and Address. The name of the Company is
Xxxxxxx Xxxxx Hedge Fund Partners II, LLC. Its principal office is located
at 000 Xxxxx Xxxxx Xxxx, Xxxxxxxxx, Xxx Xxxxxx 00000, or at such other
location as the Managing Member (as defined in Section 1.03) in the future
may designate. The Managing Member shall promptly notify the Non-Managing
Members (as defined in Section 1.03) of any change in the Company's
address.
Section 1.02 Fiscal Year. The fiscal year of the Company (herein
called the "fiscal year") shall end on December 31 of each calendar year;
provided, however, that the Managing Member may change the Company's fiscal
year-end, without the consent of the Non-Managing Members, as deemed
appropriate by the Managing Member, in its sole discretion.
Section 1.03 Liability of Members. The names of all of the
Members and the amounts of their respective contributions to the Company
(herein called the "Capital Contributions") are set forth in a schedule
(herein called the "Schedule"), which shall be filed with the records of
the Company at the Company's principal office (as set forth in Section
1.01) and is hereby incorporated by reference and made a part of this
Agreement.
The Member designated in Part I of the Schedule as the Managing
Member (herein called the "Managing Member") shall manage the operations of
the Company. The Members designated in Part II of the Schedule are referred
to herein as the "Non-Managing Members." The Managing Member, the
Non-Managing Members and the former Non-Managing Members shall be liable
for the repayment and discharge of all debts and obligations of the Company
attributable to any fiscal year (or relevant portion thereof) during which
they are or were Members of the Company.
The Members and all former Members shall share all losses,
liabilities or expenses suffered or incurred by virtue of the operation of
the preceding paragraph of this Section 1.03 in the proportions of their
respective Capital Accounts (as defined in Section 4.03) for the fiscal
year (or relevant portion thereof) to which any debts or obligations of the
Company are attributable. A Member's or former Member's share of all
losses, liabilities or expenses shall not be greater than its respective
interest in the Company for such fiscal year (or relevant portion thereof).
As used in this Section 1.03, the terms "interests in the
Company" and "interest in the Company" shall mean with respect to any
fiscal year (or relevant portion thereof) and with respect to each Member
(or former Member), the Capital Account (or, in the case of a Member with
more than one series of Units (as defined below), the Capital Accounts)
that such Member (or former Member) would have received (or in fact did
receive) pursuant to the terms and provisions of Article VI upon withdrawal
from the Company as of the end of such fiscal year (or relevant portion
thereof).
Notwithstanding any other provision in this Agreement to the
contrary, in no event shall any Member (or former Member) be obligated to
make any additional contribution or payment whatsoever to the Company, or
have any liability for the repayment and discharge of the debts and
obligations of the Company (apart from its interest in the Company), except
that a Non-Managing Member (or former Non-Managing Member) shall, in the
discretion of the Managing Member, be required, for purposes of meeting
such Member's (or former Member's) obligations under this Section 1.03, to
make additional contributions or payments, respectively, up to, but in no
event in excess of, the aggregate amount of returns of capital and other
amounts actually received by it from the Company during or after the fiscal
year to which any debt or obligation is attributable.
As used in this Agreement, the terms "former Non-Managing Member"
and "former Member" refer to such persons or entities as hereafter from
time to time cease to be a Non-Managing Member or Member, respectively,
pursuant to the terms and provisions of this Agreement.
Section 1.04 Purposes of the Company.
(a) The Company is organized for the purposes of (i) allocating
its assets among investment funds managed by Xxxxxxx Xxxxx Princeton LLC or
any successor entities thereto (such funds, their successors or any funds
which replace them or to which the Company allocates its assets in
accordance with this Agreement, the "Investment Funds"), each of which
directly or indirectly through limited liability companies or other
entities managed by Xxxxxxx Sachs Princeton LLC or an Affiliate (as defined
in Section 2.05) thereof (the "Portfolio Companies") allocates its assets
to, or invests in entities managed by, independent investment managers (the
"Advisors") (that may or may not be Affiliates of the Managing Member) that
employ investment strategies primarily within the tactical trading sector,
the equity long/short sector, the relative value sector or the event driven
sector, (ii) engaging in any other lawful act or activity for which limited
liability companies may be organized under the Act, and (iii) engaging in
any and all activities and transactions as the Managing Member may deem
necessary or advisable in connection therewith. The initial Investment
Funds shall be Xxxxxxx Xxxxx Global Tactical Trading II, LLC, Xxxxxxx Sachs
Global Equity Long/Short, LLC, Xxxxxxx Xxxxx Global Relative Value II, LLC
and Xxxxxxx Sachs Global Event Driven, LLC. The allocation of the Company's
assets among the Investment Funds shall be determined in the sole
discretion of the Managing Member.
(b) Upon the termination of any Investment Fund or if an
Investment Fund is no longer accepting additional subscriptions, the
Managing Member may, in its sole discretion, allocate the assets previously
allocated to such Investment Fund or other assets to any successor entity
thereto (or, if there are multiple successors, to the successors thereto),
to one or more entities which individually or collectively have an
investment objective similar to that of such Investment Fund, or, after
notifying the Non-Managing Members and providing them with an opportunity
to redeem their Units in accordance with the applicable provisions of
Section 5.02, as it shall otherwise determine in its sole discretion.
Section 1.05 Assignability of Units; Assignment by Managing
Member.
(a) Except as provided in paragraph (b) below, without the prior
written consent of the Managing Member, which may be withheld in its sole
and absolute discretion, with or without cause, a Member may not pledge,
assign or otherwise transfer its units of limited liability company
interests in the Company ("Units") in whole or in part to any person except
by operation of law (i) pursuant to the death, adjudication of
incompetency, insolvency or bankruptcy of the Member, or (ii) pursuant to
the corporate reorganization or merger of the Member, nor substitute any
other person as a Member. Any attempted pledge, assignment, transfer or
substitution not made in accordance with this Section 1.05 shall be void.
(b) Without the consent of the Non-Managing Members, the Managing
Member may assign or otherwise transfer its Managing Member interest in the
Company to any corporation, partnership, limited liability company or other
entity controlling, controlled by or under common control with the Managing
Member, and may substitute any such corporation, partnership, limited
liability company or other entity as the Managing Member, as long as such
transfer does not, as determined by the Managing Member in its sole
discretion, cause the Company to be taxable as a corporation. The Managing
Member's limited liability company interest in the Company in respect of
its Incentive Allocation (as defined in Section 4.05 (b)(i)) and the
Capital Account maintained in respect thereof will not be represented by
Units.
Section 1.06 Registered Office and Agent for Service of Process.
The registered office of the Company shall be: Corporation Trust Center,
0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000, and the registered agent
for service of process at such office shall be The Corporation Trust
Company. The Company may from time to time have such other place or places
of business within or without the State of Delaware as may be designated by
the Managing Member.
ARTICLE II
MANAGEMENT OF THE COMPANY
Section 2.01 Management Generally. The management of the Company
shall be vested exclusively in the Managing Member. Except as authorized by
the Managing Member, or as expressly set forth in this Agreement, the
Non-Managing Members shall have no part in the management of the Company,
and shall have no authority or right to act on behalf of the Company in
connection with any matter. The Managing Member, and any Affiliate of the
Managing Member, may engage in any other business venture, whether or not
such business is similar to the business of the Company, and neither the
Company nor any Non-Managing Member shall have any rights in or to such
ventures or the income or profits derived therefrom.
Section 2.02 Delegation by Managing Member. The Managing Member
shall have the power and authority to delegate to one or more Persons (as
defined in Section 2.03(d)), including, without limitation, any officer,
employee or agent of the Company or the Managing Member, the Managing
Member's rights and powers to manage and control the business and affairs
of the Company. The Managing Member may, by written instrument, authorize
any Person to enter into and perform under any document on behalf of the
Company.
Section 2.03 Authority of the Managing Member. The Managing
Member shall have the power on behalf of and in the name of the Company to
carry out any and all of the objects and purposes of the Company set forth
in Section 1.04 and Section 2.01, and to perform all acts and enter into
and perform all contracts and other undertakings which it may deem
necessary or advisable or incidental thereto, including, without
limitation, the power to:
(a) open, maintain and close accounts, including custodial
accounts, with banks, including banks located inside and
outside the United States, and draw checks or other orders
for the payment of monies;
(b) lend, either with or without security, funds or other
properties of the Company, and borrow or raise funds
(including borrowing from the Managing Member or its
Affiliates) and secure the obligations of the Company by
pledges or hypothecation of all or any part of the property
of the Company;
(c) do any and all acts on behalf of the Company, and exercise
all rights, powers, privileges and other incidents of
ownership or possession with respect to the Company's
interest in the assets and other property and funds held or
owned by the Company, including, without limitation,
participation in arrangements with creditors, the
institution and settlement or compromise of suits and
administrative proceedings and all other like or similar
matters;
(d) engage any person, general partnership, limited partnership,
limited liability company, corporation, joint venture,
trust, business trust, cooperative, association or other
entity (each a "Person") (including the Managing Member and
any of its Affiliates) pursuant to an administration
agreement to provide certain administrative services (any
such person, firm or entity providing such services being
referred to herein as the "Administrator"), including,
without limitation, calculating the net asset value (the
"NAV") of each series of Units and Members' Capital
Accounts, valuing the Company's assets, assisting with the
valuation of securities which are not readily marketable,
assisting in the preparation of the Company's financial
statements, assisting in the preparation and distribution of
reports to each Member, maintaining a registry for the
ownership of each series of Units and providing other
administrative services to the Company;
(e) consent on behalf of the Company to any changes in the
members, directors or officers of the Managing Member, if
such consent is required by applicable law;
(f) engage any personnel, whether part time or full time,
attorneys, financial advisers, underwriters, accountants,
consultants, appraisers, custodians of the assets of the
Company or other Persons as the Managing Member may deem
necessary or desirable, whether or not any such Person may
be an Affiliate of the Managing Member or may also be
employed by any Affiliate of the Managing Member;
(g) initially allocate, in its sole discretion, the Company's
assets or any portion thereof among the Investment Funds in
the manner set forth in the Company's Confidential Private
Placement Memorandum (as amended or supplemented from time
to time, the "Memorandum"), oversee such allocations and,
from time to time, in its sole discretion, re-allocate the
Company's assets among the Investment Funds;
(h) invest any of the Company's cash balances which it
determines at any time, in its sole discretion, not to
allocate to the Investment Funds, in any instruments it
deems appropriate in its sole discretion, including, without
limitation, money market funds sponsored by Xxxxxxx, Xxxxx &
Co. or its Affiliates;
(i) redeem the Company's interests in any Investment Fund in
order to obtain cash necessary to meet the redemption
requests of the Members, or for any other reason in its sole
discretion;
(j) bring and defend actions and proceedings at law or equity
and before any governmental, administrative or other
regulatory agency, body or commission;
(k) make distributions to Members in cash or (to the extent
permitted hereunder) otherwise;
(l) prepare and file all necessary returns and statements, pay
all taxes, assessments and other impositions applicable to
the assets of the Company and withhold amounts with respect
thereto from funds otherwise distributable to any Member;
(m) determine the accounting methods and conventions to be used
in the preparation of any accounting or financial records of
the Company;
(n) make any and all tax elections permitted to be made under
the Internal Revenue Code of 1986, as amended (the "Code"),
and any applicable state, local or foreign tax law;
(o) determine the tax treatment of any Company transaction or
item for purposes of completing the Company's federal,
state, local or foreign tax returns; and
(p) take all actions, and authorize any member, employee,
officer, director or other agent of the Managing Member or
agent or employee of the Company, to act for and on behalf
of the Company, in all matters necessary to, in connection
with, or incidental to, any of the foregoing.
Section 2.04 Reliance by Third Parties. Persons dealing with the
Company are entitled to rely conclusively upon the certification of the
Managing Member to the effect that it is then acting as the Managing Member
and upon the power and authority of the Managing Member as herein set
forth.
Section 2.05 Activity of the Managing Member. The Managing Member
and persons controlling, controlled by or under common control with the
Managing Member and any of such person's directors, members, stockholders,
partners, officers, employees and controlling persons (each an "Affiliate"
and collectively, "Affiliates"), shall devote so much of their time to the
affairs of the Company as in the judgment of the Managing Member the
conduct of its business shall reasonably require, and none of the Managing
Member or its Affiliates shall be obligated to do or perform any act or
thing in connection with the business of the Company not expressly set
forth herein. Nothing herein contained in this Section 2.05 shall be deemed
to preclude the Managing Member or its Affiliates from exercising
investment responsibility, from engaging directly or indirectly in any
other business or from directly or indirectly purchasing, selling or
holding securities, options, separate accounts, investment contracts,
currency, currency units or any other asset and any interest therein for
the account of any such other business, for their own accounts, for any of
their family members or for other clients.
Section 2.06 Standard of Care; Indemnification.
(a) None of the Managing Member (including, without limitation,
in its capacity as the Administrator) or its Affiliates (each an
"Indemnified Person" and collectively the "Indemnified Persons") shall be
liable to the Company or to the Members for (i) any act or omission
performed or failed to be performed by such person (other than any criminal
wrongdoing), or for any losses, claims, costs, damages, or liabilities
arising therefrom, in the absence of any criminal wrongdoing, willful
misfeasance or gross negligence on the part of such person, (ii) any tax
liability imposed on the Company or any Member, or (iii) any losses due to
the actions or omissions of any brokers or other agents of the Company.
In the event that any Indemnified Person becomes involved in any
capacity in any action, proceeding or investigation brought by or against
any person (including any Non-Managing Member) in connection with any
matter arising out of or in connection with the Company's business or
affairs (including a breach of this Agreement by any Member), the Company
will periodically reimburse such Indemnified Person for its legal and other
expenses (including the costs of any investigation and preparation)
incurred in connection therewith, provided that such Indemnified Person
shall promptly repay to the Company the amount of any such reimbursed
expenses paid to it if it shall ultimately be determined by a court having
appropriate jurisdiction in a decision that is not subject to appeal, that
such Indemnified Person is not entitled to be indemnified by the Company in
connection with such action, proceeding or investigation as provided in the
exception contained in the next succeeding sentence.
To the fullest extent permitted by applicable law, the Company
shall also indemnify any Indemnified Person, jointly and severally, against
any losses, claims, costs, damages or liabilities to which such Indemnified
Person may become subject in connection with any matter arising out of or
in connection with the Company's business or affairs, except to the extent
that any such loss, claim, cost, damage, or liability results solely from
the willful misfeasance, bad faith or gross negligence of, or any criminal
wrongdoing by, such Indemnified Person. If for any reason (other than the
willful misfeasance, bad faith or gross negligence of, or any criminal
wrongdoing by, such Indemnified Person) the foregoing indemnification is
unavailable to such Indemnified Person, or is insufficient to hold it
harmless, then the Company shall contribute to the amount paid or payable
to the Indemnified Person as a result of such loss, claim, cost, damage, or
liability in such proportion as is appropriate to reflect not only the
relative benefits received by the Company on the one hand and such
Indemnified Person on the other hand but also the relative fault of the
Company and such Indemnified Person, as well as any relevant equitable
considerations.
The Company may purchase and maintain insurance on behalf of an
Indemnified Person against any liability incurred by such person at the
Company's expense.
The reimbursement, indemnity and contribution obligations of the
Company under this Section 2.06 shall be in addition to any liability which
the Company may otherwise have, both as to action in an Indemnified
Person's official capacity and to action in any other capacity, and shall
continue as to an Indemnified Person who has ceased to have an official
capacity for acts or omissions during such official capacity or otherwise
when acting at the request of the Managing Member, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs, and
personal representatives of the Company, the Managing Member and any other
Indemnified Person. The foregoing provisions shall survive any termination
of this Agreement.
(b) The reimbursement, indemnification and contribution rights
provided by this Section 2.06 shall not be deemed to be exclusive of any
other rights to which the Indemnified Person may be entitled under any
agreement or as a matter of law, or otherwise, both as to action in an
Indemnified Person's official capacity and to action in any other capacity,
and shall continue as to an Indemnified Person who has ceased to have an
official capacity for acts or omissions during such official capacity or
otherwise when acting at the request of the Managing Member and shall inure
to the benefit of the successors, assigns, heirs and personal
representatives of such Indemnified Person.
(c) Notwithstanding any of the foregoing to the contrary, the
provisions of this Section 2.06 shall not be construed as to relieve (or
attempt to relieve) from liability or to provide for the indemnification of
any Indemnified Person for any liability (including liability under federal
securities law 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
(including ERISA), but shall be construed so as to effectuate the
provisions of this Section 2.06 to the fullest extent permitted by
applicable law (including ERISA).
(d) The Managing Member shall have power to purchase and maintain
insurance on behalf of the Managing Member and the Indemnified Persons at
the expense of the Company against any liability asserted against or
incurred by them in any such capacity or arising out of the Managing
Member's status as such, whether or not the Company would have the power to
indemnify the Indemnified Persons against such liability under the
provisions of this Agreement.
(e) An Indemnified Person may rely upon and shall be protected in
acting or refraining from action upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
bond debenture, or other document believed by it to be genuine and to have
been signed or presented by the proper party or parties.
(f) An Indemnified Person may consult with counsel, accountants
and other experts reasonably selected by it, and any opinion of an
independent counsel, accountant or expert retained with reasonable care
shall be full and complete protection in respect of any action taken or
suffered or omitted by the Indemnified Person hereunder in good faith and
in accordance with such opinion.
(g) The Managing Member may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys, and the Managing Member shall not be responsible for
any misconduct or negligence on the part of any agent or attorney appointed
with reasonable care by it hereunder.
Section 2.07 Management Fee; Payment of Costs and Expenses. The
Company shall pay to the Managing Member a management fee, payable in
arrears, for investment management and other management services (the
"Management Fee"), accruing daily and calculated and paid on a monthly
basis, of one-twelfth of 1.25% of the Net Assets (as defined in Section
4.01(d)) of the Company in respect of each series of Units as of the end of
each month, appropriately adjusted to reflect capital appreciation or
depreciation and any subscriptions, redemptions or distributions. For
purposes of determining the Management Fee, Net Assets shall not be reduced
to reflect any accrued Incentive Allocation and any Management Fee for such
month.
If a Member is admitted to, or withdraws from, the Company as of
a date other than the first day of a month, the portion of the Management
Fee determined with respect to such Member's Capital Account shall be
appropriately pro-rated to take into account the number of days in such
month during which such Member was a Member. Partial withdrawals will
result in similar pro-ration.
The Managing Member has the right, in its sole discretion, to
waive fees or impose different fees on any Member, as may be agreed to by
the Managing Member and the Member, and to make the appropriate amendments
to this Agreement in order to reflect such fee arrangements.
The Managing Member shall bear its own overhead costs and
expenses and provide to the Company news, quotation and computer equipment
and services (except to the extent paid for through the permitted use of
soft dollars), office space and utilities, and secretarial and clerical
personnel.
The Company shall bear its operating expenses, including but not
limited to legal expenses, professional fees (including, without
limitation, expenses of consultants and experts) relating to investments,
accounting, auditing and tax preparation expenses, custodial expenses,
taxes, printing and mailing expenses, fees and out-of-pocket expenses of
any service company retained to provide accounting and bookkeeping services
to the Company, investment expenses and other expenses associated with the
operation of the Company.
In addition, the Company will bear its organizational expenses
and the expenses incurred in connection with the offer and sale of Units,
including printing costs and legal fees and expenses of the Company, the
Managing Member and any placement agent and other expenses of the offering
of Units. In addition, the Company will bear, indirectly through its
investment in each Investment Fund, its pro rata portion of the offering,
organizational and operating expenses of such Investment Fund, including
expenses related to the investment of the Company's assets, such as fees to
the Advisors, fees and expenses of Portfolio Companies and investment funds
in which the Investment Funds invest, brokerage commissions, expenses
relating to short sales, clearing and settlement charges, custodial fees,
bank service fees, interest expenses, borrowing costs and extraordinary
expenses.
To the extent that expenses to be borne by the Company are paid
by the Managing Member, the Company shall reimburse the Managing Member for
such expenses. The Managing Member may elect, from time to time, to bear
certain of the Company's expenses described above.
Section 2.08 Principal Transactions and Other Related Party
Transactions. Each Non-Managing Member hereby authorizes the Managing
Member, on behalf of such Non-Managing Member, to select one or more
persons, who shall not be affiliated with the Managing Member, to serve on
a committee, the purpose of which will be to consider and, on behalf of the
Non-Managing Members, approve or disapprove, to the extent required by
applicable law, of principal transactions and certain other related party
transactions. In no event shall any such transaction be entered into unless
it complies with applicable law.
Section 2.09 Termination of the Managing Member. Upon the written
consent of the Members having at least 66-2/3% of the voting power of the
outstanding Units (other than the Units held by Xxxxxxx, Xxxxx & Co. and
its Affiliates), based on the NAV of such Units, the Managing Member will
be required to withdraw from the Company, and the Company will be wound-up
and terminated in accordance with Article VII, unless the Members having at
least 66-2/3% of the voting power of the outstanding Units (other than the
Units held by Xxxxxxx, Sachs & Co. and its Affiliates), based on the NAV of
such Units, agree in writing to continue the business of the Company and to
the appointment of one or more new managing members. If the withdrawal of
the Managing Member pursuant to this Section 2.09 occurs prior to the end
of a month, the Managing Member shall receive the amount of the Management
Fee prorated through the date of the effective date of the withdrawal, and
the Managing Member shall receive the Incentive Allocation for the fiscal
year in which the withdrawal occurred calculated in accordance with Section
4.05(c) as if the date of withdrawal were the last day of the fiscal year.
ARTICLE III
SERIES OF UNITS; ADMISSION OF NEW MEMBERS
Section 3.01 Series of Units. An initial series of Units (the
"Initial Series") will be issued on the initial closing date. The initial
purchase price per Unit for the Initial Series of Units shall be $100. The
Managing Member may, at any time and from time to time, in its sole
discretion, elect to raise additional capital for the Company from Members
and from new subscribers on such terms and conditions as may be determined
by the Managing Member in its sole discretion. Generally, a new series of
Units will be issued on each date an existing Member makes an additional
Capital Contribution in accordance with Section 4.02 and on each date a new
Member is admitted to the Company in accordance with Section 3.03, except
that the Managing Member may issue additional Units of an existing series,
or Units of a new series at an initial purchase price other than $100,
provided that any such issuance does not have a material adverse effect on
the NAV or Prior High NAV (as defined in Section 4.05(b)(i)) of the Units
of any Member. Each Unit will carry equal rights and privileges with each
other Unit of the same series. Units issued at the beginning of any fiscal
year will be offered at the then current NAV per Unit of the Initial Series
if such Initial Series is at or above its Prior High NAV per Unit. If the
Initial Series is not at or above its Prior High NAV per Unit, Units will
be issued in the next offered series that is at or above its Prior High
NAV. If no series of Units is at or above its Prior High NAV at such time,
such additional Units will be issued as a separate series at a price per
Unit determined by the Managing Member, in its sole discretion. Fractions
of Units may be issued to one ten-thousandth of a Unit.
Section 3.02 Conversion of Series. Following the end of each
fiscal year, any issued and outstanding series of Units (other than the
Initial Series) that is at or above its Prior High NAV may, in the sole
discretion of the Managing Member, be exchanged (after reduction for the
Management Fee and any Incentive Allocation) into Units of the Initial
Series (or if the Initial Series is not at or above its Prior High NAV per
Unit, the next offered series that is at or above its Prior High NAV) at
the prevailing NAV per Unit of the Initial Series or such other series of
Units (as applicable).
Section 3.03 New Members. Subject to the condition that each new
Member shall execute an appropriate counterpart to this Agreement pursuant
to which it agrees to be bound by the terms and provisions hereof, the
Managing Member may admit one or more new Members on the first day of each
calendar quarter or at such other times as the Managing Member may
determine in its sole discretion. Admission of a new Member shall not be a
cause for dissolution or termination of the Company.
Section 3.04 Adjustment to Number of Units Issued. If at any time
the Managing Member determines, in its sole discretion, that an incorrect
number of Units was issued to a Member because the NAV in effect on the
date of issuance was incorrect, the Company will adjust such Member's Units
by increasing or decreasing them, as appropriate, to such number of Units
as would have been issued at the correct NAV.
ARTICLE IV
CAPITAL ACCOUNTS OF MEMBERS
AND OPERATION THEREOF
Section 4.01 Definitions. For the purposes of this Agreement,
unless the context otherwise requires:
(a) The term "Accounting Period" shall mean the following
periods: The initial Accounting Period shall commence upon
the commencement of operations of the Company. Each
subsequent Accounting Period shall commence immediately
after the close of the preceding Accounting Period. Each
Accounting Period hereunder shall close immediately before
the opening of business on the first to occur of (i) the
first day of each fiscal year of the Company, (ii) the
effective date of the admission of a new Member pursuant to
Section 3.03, (iii) the effective date of an additional
Capital Contribution pursuant to Section 4.02, or (iv) the
effective date of any redemption or complete withdrawal
pursuant to Articles V or VI hereof. The final Accounting
Period shall end on the date the Company dissolves.
(b) The term "Beginning Value" shall, with respect to any
Accounting Period, mean the value of the Company's Net
Assets at the beginning of such Accounting Period.
(c) The term "Ending Value" shall, with respect to any
Accounting Period, mean the value of the Company's Net
Assets at the end of such Accounting Period (before giving
effect to the Incentive Allocation and the Management Fee
for such Accounting Period, but after giving effect to all
other expenses for such Accounting Period).
(d) The term "Net Assets" shall mean the excess of the Company's
total assets over its total liabilities, determined in
accordance with Section 4.07.
(e) The term "Net Capital Appreciation," with respect to any
Accounting Period, shall mean the excess, if any, of the
Ending Value over the Beginning Value.
(f) The term "Net Capital Depreciation," with respect to any
Accounting Period, shall mean the excess, if any, of the
Beginning Value over the Ending Value.
Section 4.02 Capital Contributions. Each Member has paid or
conveyed by way of contribution to the Company in exchange for the issuance
of Units cash and/or marketable securities having an aggregate value equal
to the amount set forth opposite such Member's name in Part I or II of the
Schedule. Additional Capital Contributions may be made by Members only in
accordance with the provisions of this Section 4.02.
Upon the approval of the Managing Member, any existing or
prospective Member may purchase additional or newly-issued Units by
contributing cash and/or marketable securities to the Company on the first
day of any calendar quarter or at such other times as the Managing Member
may determine in its sole discretion. The Managing Member and any of its
Affiliates may make additional Capital Contributions to the Company in cash
and/or marketable securities at any time and in any amounts.
Whether marketable securities shall be accepted as a contribution
to the Company shall be determined in the sole discretion of the Managing
Member.
Section 4.03 Capital Accounts.
(a) A separate capital account (herein called a "Capital
Account") shall be established on the books of the Company for each series
of Units. The Capital Account of each series shall initially be an amount
equal to the initial Capital Contributions with respect to such series. The
Capital Account of a series shall be (i) increased as of the beginning of
each Accounting Period to reflect any additional Capital Contributions
pursuant to Section 4.02 in respect of such series; (ii) increased as of
the end of each Accounting Period to reflect the Net Capital Appreciation
of such series; (iii) decreased as of the beginning of each Accounting
Period to reflect the redemption of any Units of such series, pursuant to
Section 5.02; (iv) decreased as of the end of each Accounting Period to
reflect the amount of any distributions (other than in redemption of Units
pursuant to Section 5.02) pursuant to Section 5.04 in respect of such
series (including any deemed distributions of taxes paid by the Company
pursuant to Section 5.04(c) in respect of such series); (v) decreased for
any Incentive Allocation pursuant to Section 4.05(b) and any Management Fee
in respect of such series; and (vi) decreased as of the end of each
Accounting Period to reflect the Net Capital Depreciation of such series.
(b) At the time of the conversion of any series of Units into
Units of the Initial Series or any other series of Units pursuant to
Section 3.02, the Capital Account of the converted series of Units shall be
reduced to zero, and the Capital Account of the series of Units into which
such Units were converted shall be increased by the balance of the Capital
Account of the converted series of Units immediately prior to the
conversion.
(c) A separate Capital Account shall also be established on the
books of the Company for each Member with respect to each series of Units
held by such Member. Each Member's Capital Account with respect to a series
of Units shall equal the Capital Account of such series times the Member's
Membership Percentage (as defined in Section 4.04) with respect to such
series of Units.
(d) The Managing Member shall have a separate Capital Account,
which shall initially be equal to zero, and which shall be (A) increased by
any Incentive Allocation at the time such Incentive Allocation is made, and
(B) decreased to reflect the amount of any distributions (including any
deemed distributions in connection with the withholding of taxes in respect
of such Incentive Allocation pursuant to Section 5.04(c)) made to, or
withdrawals made by, the Managing Member in respect of such Incentive
Allocation for such Accounting Period.
Section 4.04 Membership Percentages. A membership percentage (a
"Membership Percentage") shall be determined for each Member for any given
series of Units for each Accounting Period of the Company by dividing the
number of Units owned by such Member within a given series by the aggregate
number of outstanding Units of such series as of the beginning of such
Accounting Period. The aggregate Membership Percentages for each series of
Units shall equal 100 percent.
Section 4.05 Allocation of Net Capital Appreciation or Net
Capital Depreciation.
(a) Any Net Capital Appreciation or Net Capital Depreciation, as
the case may be, for an Accounting Period shall be allocated among the
different series of Units pro rata in accordance with the relative Capital
Accounts (determined prior to any year to date accrued Incentive
Allocation) of each series at the beginning of such Accounting Period.
(b) (i) At the end of each fiscal year of the Company, or at such
other date during a fiscal year as of which the following determination is
required pursuant to this Section 4.05, five percent (5%) of the amount by
which the NAV of a series of Units, (determined prior to any applicable
Incentive Allocation accrual with respect to such series of Units and
appropriately adjusted as determined by the Managing Member in its sole
discretion for contributions, distributions and redemptions, but after
giving effect to the allocation, pursuant to Section 4.05(a), of Net
Capital Appreciation and Net Capital Depreciation for the Accounting Period
then ending) exceeds such series' Prior High NAV at such date, shall be
reallocated to the Capital Account of the Managing Member (the "Incentive
Allocation"). The "Prior High NAV" with respect to a series of Units
initially shall mean an amount equal to the NAV of such series as of the
date of its initial issue. The new Prior High NAV with respect to a series
of Units immediately following the end of any period for which an Incentive
Allocation has been made with respect to such series shall be reset to
equal the NAV of such series, unless the series is exchanged pursuant to
Section 3.02 into the Initial Series or another series, in which case the
new Prior High NAV shall be reset to equal the NAV of the Initial Series or
other series. If the NAV of such series at the end of any fiscal year of
the Company, and such other date during a fiscal year as of which the
determination of the Incentive Allocation is required pursuant to Section
4.05(c) is less than its Prior High NAV, the Prior High NAV of that series
shall not change. The Prior High NAV for each series of Units shall be
appropriately adjusted as determined by the Managing Member in its sole
discretion to account for contributions, distributions and redemptions made
with respect to such series of Units.
(ii) The Incentive Allocation with respect to a series of
Units accrues daily and the Company shall credit the Capital Account of the
Managing Member as of December 31 of each year for the Incentive
Allocation.
(c) In the event that the Company is dissolved other than at the
end of a fiscal year, or the effective date of a Member's redemption of
Units is other than a fiscal year-end, then the Incentive Allocation
described above shall be determined and made as if such date were a fiscal
year-end.
(d) Notwithstanding anything to the contrary herein, to the
extent that the Company invests in "Hot Issues" (as defined below), and
there are Members who are restricted persons within the meaning of the
National Association of Securities Dealers, Inc. (the "NASD") Conduct Rule
2110 and the interpretation set forth thereunder in IM-2110-1 entitled
"Free-Riding and Withholding" (collectively, the "Interpretation"),
investments in Hot Issues will be made through a special account and
profits and losses attributable to Hot Issues will not be allocated to the
Capital Accounts of Members who are restricted from participating in Hot
Issues under the Interpretation. Only those Members who are not restricted
persons shall have any beneficial interest in such an account.
Notwithstanding anything in this Agreement to the contrary, the Managing
Member shall have the right, without the consent of the Members, to make
such amendments to this Agreement, and to take such other actions, as it
deems advisable and appropriate, in its sole discretion, to implement the
purposes of this Section 4.05(d). A "Hot Issue" is any of the securities of
a public offering which trade at a premium in the secondary market whenever
such secondary market begins, or otherwise as such term may be interpreted
from time to time under the then current rules of the NASD.
Section 4.06 Amendment of Incentive Allocation. The Managing
Member shall have the right to amend, without the consent of the
Non-Managing Members, Section 4.05 of this Agreement so that the Incentive
Allocation (or other performance-based allocation) therein provided
conforms to any applicable requirements of the Securities and Exchange
Commission and other regulatory authorities; provided, however, that no
such amendment shall increase the Incentive Allocation (or other
performance-based allocation) as so amended to more than the amount payable
in accordance with Section 4.05 of this Agreement (or, in the case of any
other performance-based allocation arrangement, the specific arrangement
set forth in a written agreement between the affected Non-Managing Member
and the Company), without the written consent of the affected Non-Managing
Member. The Managing Member reserves the right, in its sole discretion, to
apply different performance-based percentage allocations and performance
compensation arrangements to any Member, as may be agreed by the Managing
Member and such Member.
Section 4.07 Determination of Net Assets.
(a) The Company's Net Assets shall be determined in accordance
with U.S. generally accepted accounting principles consistently applied as
a guideline and the following principles:
(i) The value of the Company's investment in an Investment
Fund shall be equal to the net asset value of the Company's
interest in the Investment Fund, determined in accordance with
the terms and conditions of the respective governing agreement of
each Investment Fund, as it may be amended, supplemented or
otherwise modified from time to time.
(ii) All other assets or liabilities of the Company shall be
assigned such value as the Administrator may reasonably
determine.
(iii) The amount of the Company's assets and liabilities
(including without limitation indebtedness for money borrowed and
the Management Fee) shall be determined in accordance with U.S.
generally accepted accounting principles and guidelines, applied
on a consistent basis, provided that the Administrator in its
discretion may provide reserves for estimated accrued expenses,
liabilities and contingencies, even if such reserves are not
required by U.S. generally accepted accounting principles.
(iv) The amount payable to a Member or former Member in
redemption of part or all of such Member's or former Member's
Units pursuant to Section 5.02 shall be treated as a liability of
the Company, until paid, from (but not prior to) the beginning of
the Accounting Period on the Redemption Date (as defined in
Section 5.02(a)) for such Units.
(v) The amount to be received by the Company on account of
any Capital Contributions pursuant to Section 4.02 shall be
treated as an asset of the Company from (but not before) the
beginning of the Accounting Period on the effective date of such
Capital Contributions.
(vi) Distributions (other than in redemption of Units
pursuant to Section 5.02) made pursuant to Section 5.04
(including deemed tax distributions pursuant to Section 5.04(c))
other than as of the beginning of an Accounting Period shall be
treated as an advance and as an asset of the Company, until the
beginning of the Accounting Period following the date of
distribution.
(vii) The Incentive Allocation, if any, credited to the
Capital Account of the Managing Member pursuant to Section
4.05(b) shall be treated as a liability, until distributed, from
the beginning of the Accounting Period following the Accounting
Period in which the Incentive Allocation was credited to such
Capital Account.
(b) The Company may suspend the valuation of its assets and
liabilities, and any distributions or redemptions of any amounts from
Capital Accounts, for any period during which an Investment Fund has
suspended the valuation of its assets and liabilities. The Managing Member
shall promptly notify Members of any such suspension, and the termination
of any such suspension, by means of a written notice.
(c) All values assigned to securities and other assets by the
Managing Member or the Administrator pursuant to this Section 4.07 shall be
final and conclusive as to all of the Members. The Managing Member may
consult with and rely upon valuations of the Company's securities and other
assets provided by the Administrator.
Section 4.08 Determination of Net Asset Value. The NAV of a
series of Units shall be equal to the balance of the Capital Account with
respect to such series of Units. The NAV per Unit of a series shall be
equal to the NAV of such series divided by the number of outstanding Units
of such series.
Section 4.09 Allocation for Tax Purposes. For each fiscal year,
items of income, deduction, gain, loss or credit shall be allocated for
income tax purposes among the Members in such manner as to equitably
reflect the 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 4.09 shall be made by the Managing Member in
accordance with the principles of Sections 704(b) and 704(c) of the Code
and in conformity with applicable Treasury Regulations promulgated
thereunder (including, without limitation, Treasury Regulation Sections
1.704-1(b)(2)(iv)(f)(4), 1.704-1(b)(4)(i) and 1.704-3(e)).
If any Member redeems all of its Units in the Company during a
fiscal year or immediately following the end of a fiscal year, and the
Member would (absent this sentence) recognize gain under Section 731 of the
Code as a result of such withdrawal, the Managing Member may elect to
specially allocate to such Member, for U.S. federal income tax purposes,
any income and capital gains (including short-term capital gains) realized
by the Company during such fiscal year, through and including the date of
withdrawal, in an amount up to that amount of income and gain which if so
allocated would avoid the Member recognizing gain on the withdrawal under
Section 731 of the Code (ignoring for this purpose any adjustments that
have been made to the tax basis of the withdrawing Member's Units resulting
from any transfers or assignment of the Units (other than the original
issue of the Units), including by reason of death). Any such election by
the Managing Member shall, to the extent reasonably practicable as
determined by the Managing Member in its sole discretion, be applied on an
equitable basis to all Members withdrawing during such fiscal year or
immediately following the end of such fiscal year.
Section 4.10 Determination by Managing Member of Certain Matters;
Managing Member's Discretion.
(a) All matters concerning the valuation of securities and other
assets and liabilities of the Company, the allocation of profits, gains and
losses among the Members (including for tax purposes) and accounting
procedures not expressly provided for by the terms of this Agreement
(including, without limitation, allocation and accounting procedures in the
event a Member that has an account managed by the Managing Member in a
manner similar to the investment program utilized by the Company which
causes the assets and liabilities in such account to be transferred to the
Company) shall be determined by the Managing Member (or such person as the
Managing Member may authorize to make such determination), whose
determination shall be final, binding and conclusive as to all of the
Members.
(b) Whenever in this Agreement the Managing Member is permitted
or required to make a decision (i) in its "sole discretion" or
"discretion," or under a similar grant of authority or latitude, the
Managing Member shall be entitled to consider only such interests and
factors as it desires and may consider its own interests and the interests
of its Affiliates and its determination shall be final, binding and
conclusive as to all of the Members, or (ii) in its "good faith" the
Managing Member shall act under such express standards and shall not be
subject to any other or different standards imposed by this Agreement or by
law or any other agreement contemplated herein.
Section 4.11 Adjustments to Take Account of Interim Year Events.
If the Code or regulations promulgated thereunder require an adjustment to
the Capital Account of a Member or some other interim year event occurs
necessitating in the Managing Member's judgment an equitable adjustment,
the Managing Member shall make such adjustments in the determination and
allocation among the Members of Net Capital Appreciation, Net Capital
Depreciation, Capital Accounts, Membership Percentages, Incentive
Allocation, the Management Fee, Company expenses, items of income,
deduction, gain, loss, credit or withholding for tax purposes, accounting
procedures or such other financial or tax items as shall equitably take
into account such interim year event and applicable provisions of law, and
the determination thereof by the Managing Member shall be final, binding
and conclusive as to all of the Members.
Section 4.12 Tax Withholding. If the Company is required to
withhold taxes on any distribution to, or to pay or incur any tax with
respect to any income allocable to or otherwise on account of, any Member
or series of Units, the Company may withhold such amounts and make such
payments to such taxing authorities as are necessary to ensure compliance
with such tax laws.
ARTICLE V
REDEMPTIONS AND DISTRIBUTIONS
Section 5.01 Redemptions and Distributions in General. No Member
shall be entitled (i) to receive distributions from the Company, except as
provided in Section 5.04 and Section 7.02; or (ii) to redeem any of its
Units other than upon such Member's withdrawal from the Company, except as
provided in Sections 5.02 and 6.01 or upon the consent of, or as may be
required by, and upon such terms as may be determined by, the Managing
Member in its sole discretion. In no event shall a Member be entitled to
demand to receive property other than cash.
Section 5.02 Redemptions.
(a) Subject to Section 5.03, each Member shall have the right to
redeem some or all of its Units as of the time immediately prior to the
opening of business on each January 1 or July 1 occurring on or after the
first anniversary of the purchase of such Units by the Member (each, a
"Redemption Date"), upon prior written notice received by the Managing
Member at least 61 calendar days prior to the Redemption Date. No partial
redemption shall be permitted if thereafter the aggregate NAV of the
remaining Units held by the redeeming Member would be less than $500,000,
unless such limitation is waived by the Managing Member in its sole
discretion. Units of a particular series will be redeemed at a per Unit
price (the "Redemption Price") based upon the NAV of such series as of the
close of business on the day immediately preceding the applicable
Redemption Date (taking into account the allocation of any Net Capital
Appreciation or Net Capital Depreciation under Section 4.05 and any
distributions under Section 5.04 for the Accounting Period then ending),
after reduction for any Management Fee and Incentive Allocation and other
liabilities of the Company to the extent accrued or otherwise attributable
to the Units being redeemed (calculated as if the Redemption Date were the
last day of the fiscal year), and the amount of any such reduction for the
Management Fee shall be paid to the Managing Member, and the amount of any
such reduction for any Incentive Allocation shall be allocated to the
Capital Account of the Managing Member. If a redeeming Member owns Units of
more than one series, unless otherwise specified by such Member in writing,
Units shall be redeemed on a "first in-first out" basis for purposes of
determining the Redemption Price. The Company will endeavor to pay the
redemption proceeds, within 45 days following the applicable Redemption
Date, without interest. The Managing Member may permit redemptions at other
times, in other amounts and upon other terms subject to any conditions that
it may impose in its sole discretion.
(b) The Managing Member shall have the right, in its sole
discretion, as of any date that it determines (including during a fiscal
year) and for any reason (including, without limitation, pursuant to
Article VI, for regulatory or tax reasons, or for any other reason), to
redeem any or all of a Member's Units. Any redemptions made pursuant to
this Section 5.02(b) shall be paid out in accordance with Section 5.02(a).
(c) Subject to the redemption provisions of this Agreement, the
Managing Member, and any Affiliate of the Managing Member, shall have the
right to redeem any and all of its Units without notice to the Non-Managing
Members.
(d) If at any time after a redemption of Units (including in
connection with any withdrawal of a Member from the Company pursuant to
Article VI) the Managing Member determines, in its sole discretion, that
the amount paid to such Member or former Member pursuant to such redemption
was materially incorrect (including because the NAV at which the Member or
former Member purchased such Units was incorrect), the Company will pay to
such Member or former Member any additional amount that it determines such
Member or former Member would have been entitled to receive had the
redemption been effected at the correct NAV, or, in its sole discretion,
seek payment from such Member or former Member of (and such Member or
former Member shall be required to pay) the amount of any excess payment
that the Managing Member determines such Member or former Member received,
in each case without interest.
Section 5.03 Limitation on Redemptions.
(a) The right of any Member to redeem some or all of its Units
pursuant to the provisions of Section 5.02 is subject to the provision by
the Managing Member for all Company liabilities in accordance with the Act,
and for reserves for estimated accrued expenses, liabilities and
contingencies in accordance with Section 4.07.
(b) The Managing Member may suspend redemptions, at any time
prior to the effective date of the redemption, and notwithstanding the fact
that a timely redemption request has previously been made, for the whole,
or any part, of any of the following periods: (i) during the closing of the
principal stock exchanges or other markets on which any substantial portion
of the Company's direct or indirect investments, in the opinion of the
Managing Member, is quoted or dealt in other than for ordinary holidays, or
the restriction of suspension of dealings therein; (ii) during the
existence of any state of affairs which, in the opinion of the Managing
Member, constitutes an emergency as a result of which the determination of
the price, value or disposition of the Company's direct or indirect
investments would be impractical or prejudicial to Members; (iii) during
which redemptions would, in the opinion of the Managing Member, result in a
violation of applicable law; (iv) during any breakdown in the means of
communication or computation normally employed in determining the price or
value of any of the investments of the Company or the current price or
values on any stock exchange in respect of assets of the Company; (v)
during the occurrence of any period when the Company is unable to withdraw
sufficient funds from the Investment Funds or Portfolio Companies or
otherwise to meet redemption requests or in circumstances when the disposal
of part or all of the Company's assets to meet such redemption requests
would be prejudicial to Members; and (vi) during which any transfer of
funds involved in the realization or acquisition of investments or payments
due on redemption of Units cannot, in the opinion of the Managing Member,
be effected at advantageous rates of exchange. Postponed redemptions shall
be effected at the month-end following the termination of the suspension.
Any part of a redemption request that is postponed shall take precedence
over later-received redemption requests until the postponed request or
requests have been satisfied in full. Members shall be given notice in
writing of the suspension of redemptions and the termination of any such
suspension. Units shall be held by the Member during the suspension period
as if no redemption request had been made.
Section 5.04 Distributions.
(a) The Managing Member may make distributions in cash (i) in its
discretion, in connection with redemptions from the Company by a Member or
in connection with a Member's complete withdrawal from the Company pursuant
to Article VI, (ii) in its discretion, at any time to the Managing Member
in an amount not in excess of the then positive balance in its Capital
Account to which the Incentive Allocation is credited pursuant to Section
4.03, and (iii) in its discretion, at any time to all of the Members on a
pro rata basis in accordance with the Members' Capital Accounts.
(b) If a distribution is made in-kind, immediately prior to such
distribution, the Managing Member shall determine the fair market value of
the property distributed and adjust the Capital Accounts of all Members
upwards or downwards to reflect the difference between the book value and
the fair market value thereof, as if such gain or loss had been recognized
upon an actual sale of such property and allocated pursuant to Section
4.05. Each such distribution shall reduce the Capital Account of the Member
to which the distribution was made by the fair market value thereof.
(c) Any taxes paid over to a governmental authority by the
Company pursuant to Section 4.12 with respect to any Member (other than on
account of all Members equally) shall be deemed to be a distribution to
such Member. If a Member who receives a deemed distribution of taxes under
this Section 5.04(c) owns more than one series of Units, the Managing
Member in its sole discretion may allocate such deemed distribution among
such Member's different series of Units. Notwithstanding the foregoing, the
Managing Member in its sole discretion may elect to treat any deemed
distribution to a Member under this Section 5.04(c), not as a distribution,
but as an advance to the Member and a partial redemption of such Member's
Units as of the next Redemption Date following the deemed distribution, and
such Member's Units shall be reduced thereby as appropriately determined by
the Managing Member.
ARTICLE VI
WITHDRAWAL, DEATH, DISABILITY
Section 6.01 Withdrawal, Death, etc. of Members.
(a) The withdrawal, death, adjudication of incompetency,
insolvency or bankruptcy of a Member shall not dissolve the Company.
Subject to the restrictions set forth in Section 1.05(a), upon the
assignment of a Member's Units by operation of law (i) pursuant to the
death, adjudication of incompetency, insolvency or bankruptcy of such
Member or (ii) pursuant to the corporate reorganization or merger of such
Member, the legal representatives or successors of such Member shall
succeed as assignee to the Member's interest in the Company, but shall not
be admitted as a substituted member without the consent of the Managing
Member.
(b) In the event of the assignment of a Member's Units by
operation of law (i) pursuant to the death, adjudication of incompetency,
insolvency or bankruptcy of such Member or (ii) pursuant to the corporate
reorganization or merger of such Member, the legal representatives or
successors of such Member will be required to promptly provide written
notice of such event to the Company. The membership interest of such Member
shall continue at the risk of the Company's business until the last day of
the calendar month following the calendar month in which the Managing
Member received written notice of such event. At the end of such period,
the Managing Member shall, in its sole discretion, either (i) substitute
the legal representatives or successors of the former Members as Members of
the Company, provided that the Managing Member determines in its sole
discretion that such legal representatives or successors are qualified to
become Members of the Company, or (ii) redeem such former Member's interest
in the Company in accordance with the redemption provisions set forth in
Article V.
Section 6.02 Required Withdrawals. The Managing Member may at any
time and for any reason, in its sole discretion, terminate the interest of
any Member in the Company or require a Member to withdraw any part of its
Capital Account. A Member required to withdraw under this Section 6.02
shall be treated for all purposes of distribution of redemption proceeds as
a Member who has given notice of a redemption of all of its capital under
Article V.
ARTICLE VII
DURATION AND DISSOLUTION OF THE COMPANY
Section 7.01 Duration. The Company shall continue until the
earlier of (i) a determination by the Managing Member that the Company
should be dissolved and wound-up; (ii) the termination, bankruptcy,
insolvency, dissolution or withdrawal by the Managing Member other than by
assignment of the Managing Member's interest as provided in Section
1.05(b); or (iii) upon 60 days' prior written notice to the Managing Member
of the affirmative vote of the holders of at least 66-2/3% of the voting
power of the outstanding Units (other than Units held by Xxxxxxx, Xxxxx &
Co. and its Affiliates), based on the NAV of such Units, at a meeting duly
called for the purpose of liquidating the Company. Upon a determination to
dissolve the Company, redemptions, and distributions in respect thereof,
may not be made.
Section 7.02 Dissolution.
(a) On dissolution of the Company, the Managing Member shall,
within no more than 30 days after completion of a final audit of the
Company's financial statements, make distributions out of Company assets,
in the following manner and order:
(i) to creditors, including Members who are creditors, to
the extent otherwise permitted by law, in satisfaction of
liabilities of the Company (whether by payment or by
establishment of reserves); and
(ii) to the Members in the proportion of their respective
Capital Accounts.
(b) The Managing Member, in its discretion, at any time and from
time to time, may designate one or more liquidators, including, without
limitation, one or more partners, members or officers of the Managing
Member, who shall have full authority to wind up and liquidate the business
of the Company and to make final distributions as provided in this Section
7.02. The appointment of any liquidator may be revoked or a successor or
additional liquidator or liquidators may be appointed at any time by an
instrument in writing signed by the Managing Member. Any such liquidator
may receive compensation as shall be fixed, from time to time, by the
Managing Member.
(c) In the event that the Company is dissolved on a date other
than the last day of a fiscal year, the date of such dissolution shall be
deemed to be the last day of a fiscal year for purposes of adjusting the
Capital Accounts of the Members pursuant to Section 4.03. For purposes of
distributing the assets of the Company upon dissolution, the Managing
Member shall be entitled to a return, on a pari passu basis with the
Non-Managing Members, of the amount standing to its credit in its Capital
Account.
ARTICLE VIII
TAX RETURNS; REPORTS TO MEMBERS
Section 8.01 Independent Auditors. The financial statements of
the Company shall be audited by Ernst & Young LLP, or such other certified
public accountants of similar standing selected by the Managing Member, as
of the end of each fiscal year of the Company.
Section 8.02 Filing of Tax Returns. The Managing Member shall
prepare and file, or cause the 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.
Section 8.03 Tax Matters Partner. The Managing Member shall be
designated on the Company's annual federal information 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 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.
Section 8.04 Financial Reports to Current Members. The Company
shall prepare and mail to each Non-Managing Member (i) annual audited
financial statements after the end of the Company's fiscal year, (ii)
quarterly unaudited information as to the performance of the Company and
(iii) information necessary for such Member to complete its U.S. federal,
state and local income tax returns (including such information that such
Member may reasonably require annually to complete its tax filing
obligations, provided that the Managing Member may provide the same without
undue effort or expense).
Section 8.05 Tax Reports to Members and Former Members. The
Company shall use reasonable efforts to prepare and mail, or cause its
accountants to prepare and mail, to each Member and, to the extent
necessary, to each former Member (or its legal representatives), as soon as
possible after the close of each fiscal year of the Company, a report
setting forth in sufficient detail such information as shall enable such
Member or former Member (or such Member's legal representatives) to prepare
their respective federal income tax returns and/or extensions in accordance
with the laws, rules and regulations then prevailing.
Section 8.06 Partnership Status of Company. The Managing Member
intends for the Company to be treated as a partnership for U.S. federal
income tax purposes. Notwithstanding anything herein to the contrary,
neither the Company nor the Managing Member shall make an election (i.e.,
check-the-box) under Treasury Regulation Section 301.7701-3 for the Company
to be classified for federal income tax purposes as an association taxable
as a corporation.
ARTICLE IX
MISCELLANEOUS
Section 9.01 General. This Agreement (i) shall be binding on the
permitted transferees, assigns, executors, administrators, estates, heirs,
and legal successors and representatives of the Members and (ii) may be
executed, through the use of separate signature pages or supplemental
agreements in any number of counterparts with the same force and effect as
if the parties executing such counterparts had all executed one
counterpart; provided, however, that each such counterpart shall have been
executed by the Managing Member and that the counterparts, in the
aggregate, shall have been signed by all of the Members.
Section 9.02 Power of Attorney. Each of the Members hereby
appoints the Managing Member as its true and lawful representative and
attorney-in-fact, in its name, place and stead to make, execute, sign,
acknowledge, swear to and file:
(a) a Certificate of Formation of the Company and any amendments
thereto as may be required under the Act;
(b) any duly adopted amendment to this Agreement;
(c) any and all instruments, certificates, and other documents
that may be deemed necessary or desirable to effect the
dissolution and winding-up of the Company (including, but
not limited to, a Certificate of Cancellation of the
Certificate of Formation); and
(d) any business certificate, fictitious name certificate,
amendment thereto, or other instrument or document of any
kind whatsoever necessary, desirable or convenient to
accomplish the business, purpose and objectives of the
Company, or required by any applicable federal, state, local
or foreign law.
The power of attorney hereby granted by each of the Non-Managing
Members is coupled with an interest, is irrevocable, and shall survive, and
shall not be affected by, the subsequent death, disability, incapacity,
incompetency, termination, bankruptcy, insolvency or dissolution of such
Non-Managing Member; provided, however, that such power of attorney shall
terminate upon the substitution of another non-managing member for all of
such Non-Managing Member's interest in the Company or upon the complete
withdrawal of such Non-Managing Member from participation in the Company.
Section 9.03 Amendments to Limited Liability Company Agreement.
The terms and provisions of this Agreement may be modified or amended at
any time and from time to time with the written consent of Members having
in excess of 50% of the voting power of the outstanding Units, (or, if an
amendment affects only a particular series of Units, with the written
consent of Members having in excess of 50% of that series of Units), based
on the NAV of such Units, and the affirmative vote of the Managing Member
insofar as is consistent with the laws governing this Agreement; provided,
however, that without the consent of the Non-Managing Members, the Managing
Member may amend this Agreement or the Schedule hereto to (i) reflect
changes validly made in the membership of the Company, the Capital
Contributions, Membership Percentages and changes in the number of Units
held by the Members; (ii) change the provisions relating to the Incentive
Allocation so that such provisions conform to the applicable requirements
of the Securities and Exchange Commission and other regulatory authorities,
so long as such amendment does not increase the Incentive Allocation to
more than the amount that would otherwise be determined absent such
amendment; (iii) reflect a change in the name of the Company; (iv) make a
change that is necessary or, in the opinion of the Managing Member,
advisable to qualify the Company as a limited liability company or other
entity in which the Members have limited liability under the laws of any
state, or ensure that the Company shall not be treated as an association or
a publicly traded partnership taxable as a corporation for federal income
tax purposes; (v) make any change that does not adversely affect the
Members in any material respect; (vi) make a change that is necessary or
desirable to satisfy any requirements, conditions or guidelines contained
in any opinion, directive, order, ruling or regulation of any federal,
state or foreign statute, so long as such change is made in a manner which
minimizes to the extent practicable, as determined by the Managing Member
in its sole discretion, any adverse effect on the Members or that is
required or contemplated by this Agreement; (vii) make a change in any
provision of this Agreement that requires any action to be taken by or on
behalf of the Managing Member or the Company pursuant to the requirements
of applicable Delaware law if the provisions of applicable Delaware law are
amended, modified or revoked so that the taking of such action is no longer
required; (viii) prevent the Company or the Managing Member from in any
manner being deemed an "investment company" subject to the provisions of
the Investment Company Act of 1940, as amended; (ix) correct mistakes or
clarify ambiguities; (x) in the event of adverse changes in the tax law or
interpretations thereof applicable to the Company, amend this Agreement as
determined by the Managing Member if it deems advisable or necessary to
address such changes; (xi) conform this Agreement to the disclosure
provided in the Memorandum; (xii) correct or supplement any conflicting
provisions and delete or add provisions as may be required by applicable
law or regulations, in each case, as determined by the Managing Member in
its sole discretion; (xiii) make any other amendment provided such
amendment does not become effective until after such affected Members have
been given prior written notice of such change and have had the right
following receipt of such notice to request the redemption of their Units
and such redemption shall have become effective; or (xiv) make any other
amendments similar to the foregoing. Each Member, however, must consent to
any amendment that would (a) reduce its Capital Account or rights of
redemption or withdrawal; or (b) amend the provisions of this Agreement
relating to amendments.
Section 9.04 Instruments. The parties agree to execute and
deliver any further instruments or perform any acts which are or may become
necessary to carry on the Company created by this Agreement or to
effectuate its purposes.
Section 9.05 No Personal Liability For Return of Capital. The
Managing Member shall not be personally liable for the return or repayment
of all or any portion of Capital Contribution or profits of any Member, it
being expressly agreed that any such return of Capital Contribution or
profits made pursuant to this Agreement shall be made solely from the
assets (which shall not include any right of contribution from the Managing
Member) of the Company.
Section 9.06 Choice of Law. Notwithstanding the place where this
Agreement may be executed by any of the parties hereto, the parties
expressly agree that all the terms and provisions hereof shall be construed
under the laws of the State of Delaware and, without limitation thereof,
that the Act as now adopted or as may be hereafter amended shall govern the
limited liability company aspects of this Agreement. The parties also
expressly agree that all actions and proceedings brought by a party against
a Member or the Company, in connection with the Company's business or
affairs (including a breach of this Agreement by a party hereto) shall be
brought in and be subject to the jurisdiction of a court of the State of
New York or any federal district court in the State of New York.
Section 9.07 Waiver of Trial By Jury. The parties hereto
irrevocably waive to the fullest extent permitted by law any objection that
they may now or hereafter have to the laying of venue of any such action or
proceeding in the courts of the State of New York located in the City of
New York or of the United States District Court for the Southern District
of New York and any claim that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
Section 9.08 No Third Party Rights. The provisions of this
Agreement, including, without limitation, the provisions of Section 1.03,
are not intended to be for the benefit of any creditor or other person
(other than the Members in their capacities as such) to whom any debts,
liabilities or obligations are owed by (or who otherwise have a claim
against or dealings with) the Company or any Member, and no such creditor
or other Person shall obtain any rights under any of such provisions
(whether as a third party beneficiary or otherwise) or shall obtain any
rights under any of such provisions (whether as a third party beneficiary
or otherwise) or shall by reason of any such provisions make any claim in
respect to any debt, liability or obligation (or otherwise) including any
debt, liability or obligation pursuant to Section 1.03, against the Company
or any Member.
Section 9.09 Notices. Each notice relating to this Agreement
shall be in writing and delivered in person or by registered or certified
mail. All notices to the Company shall be addressed to its principal office
and place of business. All notices addressed to a Member shall be addressed
to such Member at the address set forth in the Schedule. Any Member may
designate a new address by notice to that effect given to the Company.
Unless otherwise specifically provided in this Agreement, a notice shall be
deemed to have been effectively given when mailed by registered or
certified mail to the proper address or delivered in person.
Section 9.10 Counterparts. This Agreement may be executed in
counterparts with the same force and effect as if each of the signatories
had executed the same instrument.
Section 9.11 Grantors of Revocable Trusts. Each Non-Managing
Member that is a revocable trust agrees that, if the trustee of such
revocable trust and the grantor of such revocable trust are the same
person, the trustee's execution of this Agreement and any other documents
executed in connection with the Company shall bind such person in his or
her capacity both as trustee and as grantor of such revocable trust.
Section 9.12 Each Interest in the Company is a Security. The
parties expressly agree that each interest in the Company, including
without limitation the Units and the interests of the Managing Member in
the Company, is a security governed by Article 8 of the Uniform Commercial
Code of the State of Delaware, and the Company, each Member and any other
party hereto expressly agrees that (i) this establishes the terms of the
interests in the Company, and (ii) interests in the Company shall not be
represented or evidenced by certificates.
Section 9.13 Goodwill. No value shall be placed on the name or
goodwill of the Company, which shall belong exclusively to the Managing
Member.
Section 9.14 Headings. The titles of the Articles and the
headings of the Sections of this Agreement are for convenience of reference
only, and are not to be considered in construing the terms and provisions
of this Agreement.
Section 9.15 Pronouns. All pronouns shall be deemed to refer to
the masculine, feminine, neuter, singular or plural, as the identity of the
person or persons, firm or corporation may require in the context thereof.
Section 9.16 Confidentiality. The Managing Member and the Company
may, in their discretion, keep confidential and not disclose to the
Non-Managing Members any proprietary information concerning the Company,
including, without limitation, investments, valuations, information
regarding potential investments, financial information, trade secrets and
the like which is proprietary in nature and non-public, any information
regarding the Non-Managing Members of the Company (including, without
limitation, the identities of, or the amount of capital contributed by,
such Non-Managing Member) or any information about any investment, to the
extent that such information is required to be kept confidential or is
otherwise subject to disclosure restrictions imposed by the issuer of the
investment or the Managing Member, in its reasonable discretion
(collectively, "Confidential Information"). Each Non-Managing Member shall
not disclose or cause to be disclosed any Confidential Information to any
other Person, except as otherwise required by any regulatory authority, law
or regulation, or by legal process, without the prior written consent of
the Managing Member. Notwithstanding anything in the foregoing or anything
else contained in this Agreement to the contrary, except as reasonably
necessary to comply with applicable securities laws, each Member (and any
employee, representative or other agent thereof) may disclose to any and
all persons, without limitation of any kind, the tax treatment and tax
structure of the offering and ownership of Units and any transaction
described in this Section 9.16 or elsewhere in this Agreement and all
materials of any kind (including opinions and other tax analyses) that are
provided to such Member relating to such tax treatment and tax structure.
For this purpose, "tax structure" means any facts relevant to the federal
income tax treatment of the offering and ownership of Units and any
transaction described in this Section 9.16 or elsewhere in this Agreement,
and does not include information relating to the identity of the Company or
its Affiliates.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands
as of the date first set forth above.
MANAGING MEMBER:
XXXXXXX XXXXX PRINCETON LLC
By: /s/ Xxxxx X. Xxxx
--------------------------------
Name: Xxxxx X. Xxxx
Title: Director
NON-MANAGING MEMBERS:
By: XXXXXXX SACHS PRINCETON LLC, on
behalf of each Member, as attorney-in-fact
By: /s/ Xxxxx X. Xxxx
--------------------------------
Name: Xxxxx X. Xxxx
Title: Director
