BlackRock Core Alternatives Portfolio LLC Limited Liability Company Agreement September 10, 2008
Exhibit
99.(a)
September
10, 2008
TABLE
OF CONTENTS
Page
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ARTICLE
I
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||
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DEFINITIONS
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ARTICLE
II
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||
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ORGANIZATION;
ADMISSION OF MEMBERS
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||
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SECTION
2.1.
|
FORMATION
OF LIMITED LIABILITY COMPANY
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6
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SECTION
2.2.
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NAME
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6
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SECTION
2.3.
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PRINCIPAL
AND REGISTERED OFFICE
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6
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SECTION
2.4.
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DURATION
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7
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SECTION
2.5.
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PURPOSE,
NATURE OF BUSINESS AND POWERS
|
7
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SECTION
2.6.
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BOARD
OF DIRECTORS
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7
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SECTION
2.7.
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MEMBERS
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8
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SECTION
2.8.
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BOTH
DIRECTORS AND MEMBERS
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8
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SECTION
2.9.
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LIMITED
LIABILITY
|
9
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SECTION
2.10.
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AUTHORITY
TO DO BUSINESS
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9
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ARTICLE
III
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MANAGEMENT
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SECTION
3.1.
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MANAGEMENT
AND CONTROL
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9
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SECTION
3.2.
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ACTIONS
BY THE BOARD OF DIRECTORS
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13
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SECTION
3.3.
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MEETINGS
OF MEMBERS
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13
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SECTION
3.4.
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CUSTODY
OF ASSETS OF THE COMPANY
|
16
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SECTION
3.5.
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OTHER
ACTIVITIES OF MEMBERS AND DIRECTORS
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16
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SECTION
3.6.
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DUTY
OF CARE
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16
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SECTION
3.7.
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INDEMNIFICATION
|
16
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SECTION
3.8.
|
NO
BOND REQUIRED OF DIRECTORS
|
18
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SECTION
3.9.
|
NO
DUTY OF INVESTIGATION; NO NOTICE IN COMPANY INSTRUMENTS,
ETC.
|
18
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SECTION
3.10.
|
RELIANCE
ON EXPERTS, ETC.
|
18
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SECTION
3.11.
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FEES,
EXPENSES AND REIMBURSEMENT
|
19
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ARTICLE
IV
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||
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TRANSFERS
AND REPURCHASES
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||
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SECTION
4.1.
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TRANSFER
OF UNITS
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19
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SECTION
4.2.
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REPURCHASE
OF UNITS
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20
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i
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ARTICLE
V
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CAPITAL
|
||
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SECTION
5.1.
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CONTRIBUTIONS
TO CAPITAL
|
24
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SECTION
5.2.
|
RIGHTS
OF MEMBERS TO CAPITAL
|
24
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SECTION
5.3.
|
CAPITAL
ACCOUNTS
|
24
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SECTION
5.4.
|
ALLOCATION
OF NET PROFIT AND NET LOSS
|
25
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SECTION
5.5.
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ALLOCATION
OF CERTAIN EXPENDITURES
|
25
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SECTION
5.6.
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RESERVES
|
26
|
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SECTION
5.7.
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TAX
ALLOCATIONS
|
27
|
|
SECTION
5.8.
|
TRANSFER
OF OR CHANGE IN INTERESTS.
|
27
|
|
SECTION
5.9.
|
REGULATORY
AND RELATED ALLOCATIONS.
|
27
|
|
SECTION
5.10.
|
CURATIVE
ALLOCATIONS.
|
28
|
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SECTION
5.11.
|
FEDERAL
INCOME TAX.
|
28
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SECTION
5.12.
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DEEMED
SALE OF ASSETS.
|
28
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SECTION
5.13.
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CERTAIN
DETERMINATIONS BY TAX MATTERS PARTNER.
|
28
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SECTION
5.14.
|
DISTRIBUTIONS
|
29
|
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SECTION
5.15.
|
WITHHOLDING
|
29
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|
SECTION
5.16.
|
ALLOCATION
OF ORGANIZATIONAL EXPENSES
|
30
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ARTICLE
VI
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||
|
DISSOLUTION
AND LIQUIDATION
|
||
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SECTION
6.1.
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DISSOLUTION
|
30
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SECTION
6.2.
|
WINDING
UP
|
30
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| ARTICLE VII | ||
| ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS | ||
|
SECTION
7.1.
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ACCOUNTING
AND REPORTS
|
31
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SECTION
7.2.
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VALUATION
OF NET ASSETS
|
32
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ARTICLE
VIII
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||
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MISCELLANEOUS
PROVISIONS
|
||
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SECTION
8.1.
|
AMENDMENT
OF LIMITED LIABILITY COMPANY AGREEMENT
|
32
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SECTION
8.2.
|
SPECIAL
POWER OF ATTORNEY
|
34
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SECTION
8.3.
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NOTICES
|
35
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SECTION
8.4.
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AGREEMENT
BINDING UPON SUCCESSORS AND ASSIGNS
|
35
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SECTION
8.5.
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APPLICABILITY
OF 1940 ACT
|
35
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ii
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SECTION
8.6.
|
CONVERSION
|
35
|
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SECTION
8.7.
|
CHOICE
OF LAW; ARBITRATION
|
36
|
|
SECTION
8.8.
|
NOT
FOR BENEFIT OF CREDITORS.
|
37
|
|
SECTION
8.9.
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CONSENTS
|
37
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|
SECTION
8.10.
|
MERGER
AND CONSOLIDATION
|
37
|
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SECTION
8.11.
|
CERTAIN
TRANSACTIONS
|
38
|
|
SECTION
8.12.
|
PRONOUNS;
USAGE; GENERIC TERMS
|
39
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SECTION
8.13.
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CONFIDENTIALITY
|
39
|
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SECTION
8.14.
|
CERTIFICATION
OF NON-FOREIGN STATUS
|
41
|
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SECTION
8.15.
|
SEVERABILITY
|
41
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SECTION
8.16.
|
FILING
OF RETURNS
|
41
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SECTION
8.17.
|
TAX
DECISIONS AND TAX MATTERS PARTNER
|
41
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SECTION
8.18.
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COUNTERPARTS
|
42
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iii
(A
DELAWARE LIMITED LIABILITY COMPANY)
THIS
LIMITED LIABILITY COMPANY AGREEMENT of BLACKROCK CORE ALTERNATIVES PORTFOLIO
LLC, is made as of September 10, 2008 and shall be effective as of the time of
the Company's formation.
W
I T N E S S E T H:
WHEREAS,
this Company has been formed to carry on business as set forth more particularly
hereinafter;
WHEREAS,
this Company is authorized to issue an unlimited number of its limited liability
company interests all in accordance with the provisions hereinafter set
forth;
WHEREAS,
the Directors of the Company have agreed to manage all property coming into
their hands as Directors of a Delaware limited liability company in accordance
with the provisions hereinafter set forth; and
WHEREAS,
the parties hereto intend that the Company created by the filing of the
Certificate (defined below) with the Secretary of State of the State of Delaware
on September 10, 2008 shall constitute a limited liability company under the
Delaware Limited Liability Company Act and that this Agreement shall constitute
the governing instrument of such limited liability company.
NOW,
THEREFORE, for and in consideration of the foregoing and the mutual covenants
hereinafter set forth and for other good and valuable consideration the receipt
and adequacy of which are hereby acknowledged, it is hereby agreed as
follows:
ARTICLE I
DEFINITIONS
For
purposes of this Agreement, the following terms shall have the following
meanings:
"Adjusted
Capital Account Deficit" means, with respect to any Member, the deficit balance,
if any, in such Member's Capital Account as of the end of the relevant Fiscal
Year, after giving effect to the following adjustments:
(i) Credit
to such Capital Account any amounts which such Member is obligated to restore or
is deemed to be obligated to restore pursuant to Regulations Section
1.704-1(b)(2)(ii)(c); and
(ii) Debit
to such Capital Account the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4),(5) and (6).
The
foregoing definition of Adjusted Capital Account Deficit is intended to comply
with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Advisor"
means a person who at any particular time serves as an investment advisor to the
Company pursuant to an Investment Management Agreement, initially BlackRock
Advisors, LLC.
"Affiliate"
has the meaning given to such term in the 1940 Act.
"Agreement"
means this Limited Liability Company Agreement, as amended or supplemented from
time to time.
"Board
of Directors" means the Board of Directors established pursuant to Section 2.6
of this Agreement.
"Business
Day" means any day other than a Saturday, Sunday or any other day on which banks
in New York, New York are required by law to be closed. All
references to Business Day herein shall be based on the time in New York, New
York.
"Capital
Account" means, with respect to each Member, the capital account(s) established
and maintained on behalf of each Member pursuant to Section 5.3
hereof.
"Certificate"
means the Certificate of Formation of the Company dated September 10, 2008, and
any amendments thereto as filed with the office of the Secretary of State of the
State of Delaware.
"Closing
Date" means the first date on or as of which the first Member, who is not an
Affiliate of the Company or the Advisor, is admitted to the
Company.
"Code"
means the United States Internal Revenue Code of 1986, as amended from time to
time, or any successor law.
"Company"
means BlackRock Core Alternatives Portfolio LLC, the Delaware limited liability
company formed pursuant to the filing of the Certificate and operated pursuant
to this Agreement.
"Compulsorily
Repurchased Member" shall have the meaning ascribed in Section 4.2(f)(2)
hereof.
"Compulsory
Repurchase Redemption Instrument" shall have the meaning ascribed in Section
4.2(f)(3) hereof.
"Compulsory
Repurchase Valuation Date" shall have the meaning ascribed in Section 4.2(f)(1)
hereof.
2
"Confidential
Information" shall have the meaning ascribed in Section 8.13(c)
hereof.
"Delaware
Act" means the Delaware Limited Liability Company Act, as in effect on the date
hereof and as amended from time to time, or any successor law.
"Director"
means an individual designated and qualified as a Director of the Company
pursuant to the provisions of Section 2.6 of this Agreement and who serves on
the Board of Directors of the Company.
"Disinterested
Non-Party Director" means a Director that is not an ''interested person" of the
Company (as defined in Section 2(a)(19) of the ▇▇▇▇ ▇▇▇) or a party to any
agreement or proceeding in question.
"ERISA"
means the Employee Retirement Income Security Act of 1974, as
amended.
"Expense
Allocation Date" means the Closing Date and thereafter each day on or before the
12-month anniversary of such date as of which a contribution to the capital of
the Company is made pursuant to Section 5.1 hereof.
"Fiscal
Period" means the period commencing on the Closing Date, and thereafter each
period commencing on the day immediately following the last day of the preceding
Fiscal Period, and in each case ending at the close of business on the first to
occur of the following dates: (1) the last day of a Fiscal Quarter or Fiscal
Year; (2) the last day of a tax year; (3) the day preceding any day on which a
contribution to the capital of the Company is made pursuant to Section 5.1; (4)
the effective date of a repurchase of Units made pursuant to Section 4.2; (5)
the day on which a substituted Member is admitted; or (6) any day (other than
one specified in clause (2) above) on which this Agreement provides for any
amount to be credited to or debited against the Capital Account of any Member
other than an amount to be credited to or debited against the Capital Accounts
of all Members in accordance with their respective Investment
Percentages.
"Fiscal
Quarter" means each three-month period ending each March 31, June 30, September
30 and December 31 (or on the date of a final distribution pursuant to Section
6.2 hereof), unless the Board of Directors shall elect a Fiscal Year for the
Company ending on a date other than March 31 of each year, in which event the
Company's Fiscal Quarters shall be determined by reference to such other Fiscal
Year. The first Fiscal Quarter of the Company shall commence on the
Closing Date and end as of the first quarterly end date mentioned above to
occur.
"Fiscal
Year" means the period commencing on the Closing Date and ending on March 31,
2009, and thereafter each 12-month period ending on March 31 of each year (or on
the date of a final distribution pursuant to Section 6.2 hereof), unless the
Board of Directors shall elect another Fiscal Year for the Company.
"Fundamental
Policies" shall mean the investment policies and restrictions as set forth from
time to time in any Registration Statement of the Company filed with the
Securities and Exchange Commission and designated as fundamental policies
therein, as they may be amended from time to time in accordance with the
requirements of the 1940 Act.
3
"Independent
Directors" means those Directors who are not "interested persons" of the
Company, as such term is defined in the 1940 Act.
"Initial
Sole Director" means the initial sole Director of the Company who served in such
capacity for the purpose of organizing the Company.
"Investment
Management Agreement" means a separate written agreement, subject to Section 15
of the 1940 Act, between the Company and an Advisor, pursuant to which the
Advisor provides Management Services to the Company.
"Investment
Percentage" means a percentage established for each Member on the Company's
books as of the first day of each Fiscal Period. The Investment
Percentage of a Member for a Fiscal Period shall be determined by dividing the
balance of the Member's Capital Account as of the commencement of such Fiscal
Period by the sum of the Capital Accounts of all of the Members as of the
commencement of such Fiscal Period. The sum of the Investment Percentages of all
Members for each Fiscal Period shall equal 100%.
"Majority
Vote" means the affirmative vote of Members holding (i) 67% or more of the
voting power (determined in accordance with Section 3.3(i) hereof) present at
any duly called meeting, if the holders of more than 50% of the outstanding
voting power of the Company are present or represented by proxy; or (ii) more
than 50% of the outstanding voting power of the Company, whichever is the less;
or such greater or lesser percentage vote as defined and currently in effect
under the 1940 Act.
"Management
Services" means such investment advisory and other services as the Advisor is
required to provide to the Company pursuant to an Investment Management
Agreement.
"Master
Fund" means BlackRock Core Alternatives Master Fund LLC.
"Net
Assets" means the total value of all assets of the Company, less an amount equal
to all accrued debts, liabilities and obligations of (or allocable to) the
Company excluding any amounts borrowed for investment purposes, calculated
before giving effect to any repurchases of Units as of the date of
calculation.
"Net
Profit" or "Net Loss" means the amount by which the Net Assets as of the close
of business on the last day of a Fiscal Period exceed (in the case of Net
Profit) or are less than (in the case of Net Loss) the Net Assets as of the
commencement of the same Fiscal Period (or, with respect to the initial Fiscal
Period of the Company, at the close of business on the Closing Date), such
amount to be adjusted to exclude any items to be allocated among the Capital
Accounts of the Members on a basis that is not in accordance with respective
Investment Percentages as of the commencement of such Fiscal Period pursuant to
Sections 5.5 and 5.6 hereof.
"Notice
Date" means the date, as specified in any tender offer made by the Company, by
which Members choosing to tender Units for repurchase must notify the Company of
their intent.
"1933
Act" means the Securities Act of 1933 and the rules thereunder, as amended from
time to time.
4
"1940
Act" means the Investment Company Act of 1940 and the rules thereunder,
including any applicable orders thereunder, as amended from time to
time.
"Organizational
Expenses" means the expenses incurred by the Company in connection with its
formation and registration as an investment company under the 1940
Act.
"Pass-Thru
Member" shall have the meaning ascribed in Section 8.17(c) hereof.
"Person"
means a natural person, partnership, corporation, business trust, joint stock
company, trust, unincorporated association, limited liability company, joint
venture, or other entity of whatever nature.
"Portfolio
Funds" means unregistered investment funds and registered investment companies
in which the Company invests directly or indirectly through the Master
Fund.
"Redemption
Instrument" has the meaning ascribed in Section 4.2(e)(2) hereof.
"Registration
Statement" means the Company's registration statement on Form N-2 filed with the
Securities and Exchange Commission, as amended or supplemented from time to
time.
"Repurchase
Valuation Date" means the date as of which the Units to be repurchased are
valued by the Company.
"Securities"
means securities (including, without limitation, equities, debt obligations,
options, and other "securities" as that term is defined in section 2(a)(36) of
the ▇▇▇▇ ▇▇▇) and any contracts for forward or future delivery of any security,
debt obligation or currency, or commodity, all types of derivative instruments
and any contracts based on any index or group of securities, debt obligations or
currencies, or commodities, and any options thereon, as well as investments in
Portfolio Funds.
"Special
Laws or Regulations" means regulatory or compliance requirements imposed by laws
other than the 1933 Act, the Securities Exchange Act of 1934 or the 1940 Act,
including without limitation those imposed by the Bank Holding Company Act,
certain Federal Communications Commission regulations, or ERISA.
"Tax
Matters Partner" shall have the meaning ascribed in Section
8.17(a).
"Transfer"
means, directly or indirectly, the assignment, transfer, sale, encumbrance,
pledge or other disposition of Units, in whole or in part, or including any
right to receive any allocations and distributions attributable to any
Units.
"Treasury
Regulations" means the regulations promulgated under the Code.
"Member"
means any person admitted to the Company as a member (which may include any
Director in such person's capacity as a member of the Company) until the Company
has repurchased all of the Units of such person pursuant to Section 4.2 hereof
or a substituted Member or Members has been admitted with respect to all of such
person's Units pursuant to Section 4.2 hereof; such term includes the Advisor or
any of its Affiliates, in their capacity as a
5
member
of the Company, to the extent they make one or more capital contributions to the
Company and shall have been admitted to the Company as a Member. Persons seeking
to be admitted to the Company as Members, or seeking to make additional
contributions to the Company pursuant to Section 5.1 hereof, shall be required
to provide such subscription materials in the form and substance as the Company
may require from time to time.
"Units"
means the limited liability company interests of Members in the
Company.
"Valuation
Date" means the last Business Day of each Fiscal Period and any other date,
designated by the Board of Directors, on which the Company determines the value
of its Units.
ARTICLE II
ORGANIZATION;
ADMISSION OF MEMBERS
SECTION 2.1. FORMATION OF LIMITED LIABILITY
COMPANY.
Each
member of the Board of Directors, any officer of the Company and any other
person authorized and designated by the Board of Directors shall be considered
an "authorized person" within the meaning of the Delaware Act, and may execute
and file in accordance with the Delaware Act any amendment to the Certificate
and may execute and file with applicable governmental authorities any other
instruments, documents and certificates that, in the opinion of the Company's
legal counsel, may from time to time be required by the laws of the United
States of America, the State of Delaware or any other jurisdiction in which the
Company shall determine to do business, or any political subdivision or agency
thereof, or which such legal counsel may deem necessary or appropriate to
effectuate, implement and continue the valid existence and business of the
Company.
SECTION 2.2. NAME.
The
name of the Company shall be "BLACKROCK CORE ALTERNATIVES PORTFOLIO LLC" or such
other name as the Board of Directors may hereafter adopt upon causing an
appropriate amendment to the Certificate to be filed in accordance with the
Delaware Act.
SECTION 2.3. PRINCIPAL AND REGISTERED
OFFICE.
The
Company shall have its principal office at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place designated from time to time by the Board
of Directors.
The
Company shall have its registered office in Delaware at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and shall have The Corporation
Trust Company as its registered agent for service of process in Delaware, unless
a different registered office or agent is designated from time to time by the
Board of Directors. Said agent shall act under the direction of the
Advisor, the Board of Directors and the Company's legal counsel in all matters
arising out of or pertaining to said agency.
6
SECTION 2.4.
DURATION.
The
term of the Company commenced on the filing of the Certificate with the
Secretary of State of Delaware and shall continue until the Company is dissolved
pursuant to Section 6.1 hereof.
SECTION 2.5. PURPOSE, NATURE OF BUSINESS AND
POWERS.
(a) The purposes of the Company and the
business to be carried on by it, subject to the limitations contained elsewhere
in this Agreement, are to engage in any business lawful for a limited liability
company formed under the laws of the State of Delaware, including to act as an investment
company.
(b) The Company shall have the power to do
any and all acts necessary, appropriate, proper, advisable, incidental or
convenient to or for the furtherance of the purposes and business described
herein and for the
protection and benefit of the Company, and shall have, without
limitation, any and all of the powers of a limited liability company organized
under the laws of the State of Delaware.
(c) All property owned by the Company, real or personal, tangible or
intangible, shall be deemed
to be owned by the Company as an entity, and no Member or Director, individually, shall have
any ownership of such property.
SECTION 2.6. BOARD OF DIRECTORS.
(a) Prior to an offering of Units there may be an initial sole Director, who may also serve as the initial sole
officer. Thereafter, the
number of Directors shall be determined by a written instrument signed by a
majority of the Directors then in office, provided that the number of Directors
shall be no less than two or more than fifteen. No reduction in the number
of Directors shall have the effect of removing any Director from office prior to
the expiration of his or
her term. An individual
nominated as a Director shall be at least 21 years of age and not older than 80
years of age at the time of
nomination and not under legal disability. Directors need not own Units and may
succeed themselves in office. Each Director shall be a
"Manager" of the Company for purposes of the Delaware Act.
(b) The Directors shall be elected at
meetings of the Members called by the Board of Directors from time to
time in their sole discretion for that purpose, except as provided in Section
2.6(d) of this Article,
and each Director elected
shall hold office until his or her successor shall have been elected and shall have qualified. The
term of office of a Director shall terminate and a vacancy shall occur in the
event of the death, resignation, removal, bankruptcy, adjudicated incompetence
or other incapacity to perform the duties of the office, or removal, of a
Director.
(c) Any of the Directors may resign (without
need for prior or subsequent accounting) by an instrument in writing signed by
such Director and delivered or mailed to the Directors or the Chairman, if any,
the President or the Secretary and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any of the Directors may be removed (provided the aggregate number
of Directors after such removal shall not be
7
less than the minimum number required by Section 2.6(a)
hereof) for cause only, and not without cause, and only by action taken by a
majority of the remaining Directors followed by the vote of Members holding at least seventy-five percent (75%)
of the voting power
(determined in accordance
with Section 3.3(i) hereof) of the Company then entitled to vote in an election of
such Director. Upon the resignation or removal of a Director, each such
resigning or removed Director shall execute and deliver such documents as the
remaining Directors shall
require for the purpose of effecting such resignation or
removal.
(d) Whenever a vacancy in the Board of
Directors shall occur, the remaining Directors may fill such vacancy by
appointing an individual having the qualifications described in this Section by a written instrument signed by a
majority of the Directors then in office or may leave such vacancy unfilled or
may reduce the number of Directors; provided the aggregate number of Directors
after such reduction shall not be less than the minimum number required by Section
2.6(a) hereof; provided, further, that if the Members of any class or series of Units are
entitled separately to elect one or more Directors, a majority of the remaining
Directors or the sole remaining Director elected by that class or series may fill any
vacancy among the number of Directors elected by that class or series. Any
vacancy created by an increase in Directors may be filled by the appointment of
an individual having the
qualifications described in Section 2.6(a) made by a written instrument signed by a
majority of the Directors then in office. No vacancy shall operate to annul this
Agreement. Whenever a vacancy in the number of Directors shall occur, until such
vacancy is filled as provided herein, the Directors in office, regardless of their
number, shall have all the powers granted to the Directors and shall discharge
all the duties imposed upon the Directors by this Agreement.
SECTION 2.7. MEMBERS.
The
Board of Directors or its authorized delegate may admit one or more Members as
of the first Business Day of each calendar month or more frequently as
determined by the Board of Directors as in accordance with applicable law. All
subscriptions are subject to the receipt of cleared funds on or before the
acceptance date in the full amount of the subscription, plus the applicable
sales charge, if any. Each potential Member must execute a signature page of
this Agreement or of the Company's subscription agreement pursuant to which such
Member agrees to be bound by all the terms and provisions hereof. The
Board of Directors or its authorized delegate may, in its sole discretion,
reject any subscription for Units. The Board of Directors may, in its
sole discretion, suspend subscriptions for Units at any time and from time to
time, for any reason. The admission of any person as a Member shall be effective
upon the revision of the books and records of the Company to reflect the name
and the contribution to the capital of the Company of such additional
Member. No act, vote or approval of any Member of the Company is
required to admit a new Member in accordance with this Section 2.7.
SECTION 2.8. BOTH DIRECTORS AND MEMBERS.
A
Person may at the same time be a Director and a Member, in which event such
Person's rights and obligations in each capacity shall be determined separately
in accordance with the terms and provisions hereof or as provided in the
Delaware Act.
8
SECTION 2.9. LIMITED LIABILITY.
No
Member of the Company shall be subject in such capacity to any personal
liability whatsoever to any Person in connection with Property of the Company or
the acts, obligations or affairs of the Company. Members shall have the same
limitation of personal liability as is extended to stockholders of a private
corporation for profit incorporated under the Delaware General Corporation Law.
No Director or officer of the Company shall be subject in such capacity to any
personal liability whatsoever to any Person, save only liability to the Company
or its Members arising from bad faith, willful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and, subject to the foregoing
exception, all such Persons shall look solely to the Property of the Company for
satisfaction of claims of any nature arising in connection with the affairs of
the Company. If any Member, Director or officer, as such, of the Company, is
made a party to any suit or proceeding to enforce any such liability, subject to
the foregoing exception, he shall not, on account thereof, be held to any
personal liability. Any repeal or modification of this Section 2.9 shall not
adversely affect any right or protection of a Director or officer of the Company
existing at the time of such repeal or modification with respect to acts or
omissions occurring prior to such repeal or modification.
SECTION 2.10. AUTHORITY TO DO BUSINESS.
If
determined to be in the interest of the Company by the Board of Directors, an
officer shall execute, deliver and file any other certificates (and any
amendments and/or restatements thereof) necessary for the Company to qualify to
do business in New York and in any other jurisdiction in which the Company may
wish to conduct business.
ARTICLE III
MANAGEMENT
SECTION 3.1. MANAGEMENT AND CONTROL.
(a) Management
and control of the business of the Company shall be vested in the Board of
Directors, which shall have the right, power and authority, on behalf of the
Company and in its name, to exercise all rights, powers and authority of
"Managers" under the Delaware Act and to do all things necessary and proper to
carry out the objective and business of the Company and their duties
hereunder. No Director shall have the authority individually to act
on behalf of or to bind the Company except within the scope of such Director's
authority as delegated by the Board of Directors. The parties hereto
intend that, except to the extent otherwise expressly provided herein, (i) each
Director shall be vested with the same powers, authority and responsibilities on
behalf of the Company as are customarily vested in a director of a Delaware
corporation and (ii) each Independent Director shall be vested with the same
powers, authority and responsibilities on behalf of the Company as are
customarily vested in each director of a closed-end management investment
company registered under the 1940 Act who is not an "interested person" of such
company as such term is defined in the 1940 Act. During any period in
which the Company shall have no Directors, the Advisor may continue to serve as
the Advisor to the Company and to provide the Management Services to the
Company.
9
(b) The Directors shall owe to the Company
and its Members the same fiduciary duties as directors
of corporations owe
to such corporations and
their stockholders under the Delaware General Corporation Law. The Directors may perform
such acts as in their sole discretion are proper for conducting the business of
the Company. The enumeration of any specific power herein shall not be construed
as limiting the aforesaid power. Such powers of the Directors may be exercised without order of
or resort to any court.
(c) The Directors shall have power, subject
to the Fundamental Policies in effect from time to time with respect to the
Company, to:
(1) manage, conduct, operate and carry on
the business of an
investment company;
(2) subscribe for, invest in, reinvest in,
purchase or otherwise acquire, hold, pledge, sell, assign, transfer, exchange,
distribute or otherwise deal in or dispose of any and all sorts of property,
tangible or intangible, including but not limited to securities of any type
whatsoever, whether equity or non-equity, of any issuer, evidences of
indebtedness of any person and any other rights, interests, instruments or
property of any sort and to exercise any and all rights, powers and
privileges of ownership or interest in
respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more Persons to exercise
any of said rights, powers and privileges
in respect of any of said investments. The Directors shall not be limited by any
law limiting the investments which may be made by
fiduciaries.
(d) The Directors shall have the power to
issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in, Units, including
Units in fractional denominations, and, subject to the more detailed provisions
set forth in this Agreement, to apply to any such repurchase,
redemption, retirement,
cancellation or acquisition of Units any funds or property whether capital or
surplus or otherwise, to the full extent now or hereafter permitted corporations
formed under the Delaware General Corporation Law.
(e) Subject to the Fundamental Policies in effect from time to
time with respect to the Company, the Directors shall have the power to borrow
money or otherwise obtain credit or utilize leverage to the maximum extent
permitted by law or regulation as such may be needed from time to time and to secure the same by
mortgaging, pledging or otherwise subjecting as security the assets of the
Company, including the lending of portfolio securities, and to endorse,
guarantee, or undertake the performance of any obligation, contract or
engagement of any other person, firm,
association or corporation.
(f) The Directors shall have the power,
consistent with their continuing exclusive authority over the management of the
Company and the Property of
the Company, to delegate
from time to time to such
of their number or to officers, employees or agents of the Company the doing of
such things, including any matters set forth in this Agreement, and the
execution of such instruments either in the name of the Company or the names of
the Directors or otherwise as the Directors may deem
expedient. The Directors may designate one or more committees which shall have
all or such lesser portion of the authority of the entire Board of Directors as
the
10
Directors shall determine from time to
time except to the extent
action by the entire Board of Directors or particular Directors is required by
the ▇▇▇▇ ▇▇▇.
(g) The Directors shall have power to
collect all property due to the Company; to pay all claims, including taxes,
against the Property of the
Company or the Company, the Directors or any
officer, employee or agent of the Company; to prosecute, defend, compromise or
abandon any claims relating to the Property of the Company or the Company, or the Directors or any
officer, employee or agent of the Company; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the
Company; and to enter into releases, agreements and other instruments. Except to
the extent required for a corporation formed under the Delaware General Corporation Law, the Members shall have no power to vote as to
whether or not a court action, legal proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Company
or the Members.
(h) The Directors shall have power to incur and
pay out of the assets or income of the Company any expenses which in the opinion
of the Directors are necessary or incidental to carry out any of the purposes of
this Agreement, and the business of the Company, and to pay reasonable compensation from the
funds of the Company to themselves as Directors. The Directors shall fix the
compensation of all officers, employees and Directors. The Directors may pay
themselves such compensation for special services, including legal, underwriting, syndicating and
brokerage services, as they in good faith may deem reasonable and reimbursement
for expenses reasonably incurred by themselves on behalf of the Company. The
Directors shall have the power, as frequently as they may determine, to cause each Member to pay directly, in advance or arrears,
for charges of distribution, of the custodian or transfer, Member servicing or similar agent, a pro rata
amount as defined from time to time by the Directors, by setting off such
charges due from such
Member from declared but unpaid dividends or
distributions owed such Member and/or by reducing the number of
Units in the account of such Member by that number of full and/or
fractional Units which represents the outstanding
amount of such charges due
from such Member.
(i) The Directors shall have the exclusive
authority to adopt and from time to time amend or repeal By-Laws for the conduct
of the business of the Company.
(j) The Directors shall have the power to:
(a) employ or contract with such Persons as the Directors may deem
desirable for the transaction of the business of the Company; (b) enter into
joint ventures, partnerships and any other combinations or associations; (c)
purchase, and pay for out of Property of the Company, insurance policies insuring the Members, Directors, officers, employees,
agents, investment advisors, distributors, selected dealers or independent
contractors of the Company against all claims arising by reason of holding any
such position or by reason of any action taken or omitted by any such Person in such
capacity, whether or not constituting negligence, or whether or not the Company
would have the power to indemnify such Person against such liability; (d)
establish pension,
profit-sharing, unit
purchase, and other retirement, incentive and benefit plans
for any Directors, officers, employees and agents of the Company; (e) make
donations, irrespective of benefit to the Company, for charitable, religious,
educational, scientific, civic or similar purposes; (f) to the extent permitted by law, indemnify any
Person with whom the Company has dealings, including without limitation any
advisor, administrator, manager, transfer agent, custodian, distributor or
selected dealer, or any other
11
person as the Directors may see
fit to such extent as the
Directors shall determine; (g) guarantee indebtedness or contractual obligations
of others; (h) determine and change the Fiscal Year of the Company and the method in
which its accounts shall be kept; (i) notwithstanding the Fundamental Policies of the Company, convert the
Company from a master-feeder structure to another structure; and (j) adopt a seal for the Company
but the absence of such seal shall not impair the validity of any instrument
executed on behalf of the Company.
(k) The Directors shall have the power to
conduct the business of the Company and carry on its operations in any and all
of its branches and maintain offices both within and without the State of
Delaware, in any and all states of the United States of America, in the District of Columbia, and in any
and all commonwealths, territories, dependencies, colonies, possessions,
agencies or instrumentalities of the United States of America and of foreign
governments, and to do all such other things and execute all such instruments as they deem necessary, proper
or desirable in order to promote the interests of the Company although such
things are not herein specifically mentioned. Any determination as to what is in
the interests of the Company made by the Directors in good faith shall be conclusive. In
construing the provisions of this Agreement, the presumption shall be in favor
of a grant of power to the Directors. The Directors will not be required to
obtain any court order to deal with the Property of the Company.
(l) Each Member agrees not to treat, on his personal income tax return
or in any claim for a tax
refund, any item of income, gain, loss, deduction or credit in a manner inconsistent with the treatment of such
item by the Company. The Tax Matters Partner, subject to the supervision of the Board of Directors, shall make such elections under the
Code and other relevant tax laws as to the treatment of items of Company income,
gain, loss, deduction and credit, and as to all other relevant matters, as may
be provided herein or as
the Tax Matters Partner deems necessary or appropriate, including, without
limitation, elections referred to in Section 754 of the Code, determination of
which items of cash outlay are to be capitalized or treated as current expenses,
and selection of the method of accounting and
bookkeeping procedures to be used by the Company.
(m) Members shall have no right to participate in and shall take no part in the management or control of the
Company's business and shall have no
right, power or authority to act for or bind the
Company. Members shall have the right to vote on any matters only as provided
in this Agreement or on any matters that require the approval of the holders of
"voting securities" under the 1940 Act.
(n) The Directors shall elect a President, a Secretary and a Treasurer
and may elect a Chairman or
Vice Chairman who shall
serve at the pleasure of the Directors or until their successors are elected.
The Directors may elect or appoint or may authorize
the Chairman, if any, the
Vice Chairman, if any,
or President to appoint
such other officers or agents with such powers as the Directors may deem to be advisable. A Chairman
and any Vice Chairman shall, and the President, Secretary and
Treasurer may, but need not, be a Director. The term of office of an officer shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office, or removal, of an officer.
12
(o) The Tax Matters Partner may in the future, subject to the supervision of the Board of Directors, incorporate the Company and, if
desired, elect to treat the Company as an association taxable as a corporation
for U.S. federal income tax purposes and seek to qualification thereof as a registered investment
company under Subchapter M of the Code.
SECTION 3.2. ACTIONS BY THE BOARD OF
DIRECTORS.
(a) Meetings of the Directors shall be held
from time to time upon the call of the Chairman, if any, or the President or any
two Directors. Regular
meetings of the Directors may be held without call or notice at a time and place
fixed by the By-Laws or by resolution of the Directors. Notice of any other
meeting shall be given by the Secretary and shall be delivered to the Directors
orally not less than 24 hours, or in
writing not less than 72 hours, before the meeting, but may be waived in writing
by any Director either before or after such meeting. The attendance of a
Director at a meeting shall constitute a waiver of notice of such meeting except where a Director attends a
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting has not been properly called or convened. Any
time there is more than one Director, a quorum for all meetings of the Directors shall be
one-third, but not less than two, of the Directors. Unless provided otherwise in
this Agreement and except as required under the 1940 Act, any action of the
Directors may be taken at a meeting by vote of a majority of the Directors present (a quorum being present)
or without a meeting by written consent of a majority of the
Directors.
Any
committee of the Directors, including an executive committee, if any, may act
with or without a meeting. A quorum for all meetings of any such committee shall
be one-third, but not less than two, of the members thereof. Unless provided
otherwise in this Declaration, any action of any such committee may be taken at
a meeting by vote of a majority of the committee members present (a quorum being
present).
With
respect to actions of the Directors and any committee of the Directors,
Directors who are Interested Directors in any action to be taken may be counted
for quorum purposes under this Section and shall be entitled to vote to the
extent not prohibited by the 1940 Act.
All
or any one or more Directors may participate in a meeting of the Directors or
any committee thereof by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other; participation in a meeting pursuant to any such
communications system shall constitute presence in person at such
meeting.
(b) Any action which may be taken by
Directors by vote may be taken without a meeting if that number of
the Directors, or members
of a committee, as the case may be, required for approval of such action at a
meeting of the Directors or of such committee consent to the action in writing
and the written consents are filed with the records of the meetings of
Directors. Such consent shall be treated for
all purposes as a vote taken at a meeting of Directors.
SECTION 3.3. MEETINGS OF MEMBERS.
(a) The
Company may hold meetings of Members at any time called by a majority of the
Directors or the President and shall be called by any Director for any proper
purpose upon
13
written request of Members holding in the aggregate not less than
fifty-one percent (51%) of the voting power (determined in accordance
with Section 3.3(i) hereof)
of the Company or class or series of Units having voting rights on the matter,
such request specifying the purpose or purposes for which such meeting is to be called. Any Member meeting shall be held within or without
the State of Delaware on such day and at such time as the Directors shall
designate.
(b) Members shall have no power to vote on any
matter except matters on which a vote of Members is required by applicable law, this
Agreement or resolution of the Directors. This Agreement expressly provides that
no matter for which voting is required by the Delaware Act in the absence of the contrary
provision in the Agreement shall require any vote. Except as otherwise provided
herein, any matter required to be submitted to Members and affecting one or more classes or
series of Units shall require approval by the required voting power
(determined in accordance with Section 3.3(i) hereof) of all the affected classes and series
of Units voting together as a single class; provided, however, that as to any
matter with respect to which a separate vote of any class or series of Units is
required by the 1940 Act, such requirement as to a separate vote by that class
or series of Units shall apply in addition to a vote of all the affected classes
and series voting together as a single class. Members of a particular class or series of Units shall
not be entitled to vote on any matter that affects only one or more other
classes or series of Units. There shall be no cumulative voting in the election
or removal of Directors.
(c) Notice of all meetings of Members, stating the time, place and purposes of
the meeting, shall be given by the Directors by mail to each Member of record entitled to vote thereat at
its registered address, mailed at least 10 days and not more than 90 days before
the meeting or otherwise in compliance with applicable law. Only the
business stated in the notice of the meeting shall be considered at such
meeting. Any adjourned meeting may be held as adjourned one or more times
without further notice not later than 120 days after the record date. For the purposes of determining the
Members who are entitled to notice of and to
vote at any meeting the Directors may, without closing the transfer books, fix a
date not more than 90 days
nor less than 10 days prior
to the date of such meeting of Members as a record date for the determination
of the Persons to be treated as Members of record for such
purposes.
(d) The holders of a majority of
the voting power
(determined in accordance with Section 3.3(1) hereof) entitled to vote on any matter at a
meeting present in person
or by proxy shall constitute a quorum at such meeting of the Members for purposes of conducting business on
such matter. The absence from any meeting, in person or by proxy, of a quorum of
Members for action upon any given matter shall
not prevent action at such
meeting upon any other matter or matters which may properly come before the
meeting, if there shall be present thereat, in person or by proxy, a quorum of
Members in respect of such other
matters.
Subject
to any provision of applicable law, this Agreement or a resolution of the
Directors specifying a greater or a lesser vote requirement for the transaction
of any item of business at any meeting of Members, (i) the affirmative vote of
Members holding a majority of the voting power (determined in accordance with
Section 3.3(i) hereof) present in person or represented by proxy and entitled to
vote on the subject matter shall be the act of the Members with respect to such
matter, and (ii) where a separate vote of one or more classes or series of Units
is required on any matter, the affirmative vote of Members holding a majority of
the voting power (determined in accordance with Section 3.3(i) hereof) of such
class or series of Units
14
present in person or represented by
proxy at the meeting shall
be the act of the Members of such class or series with respect to
such matter.
(e) At any meeting of Members, any holder of Units entitled to vote
thereat may vote by properly executed proxy, provided that no proxy shall be
voted at any meeting unless
it shall have been placed on file with the Secretary, or with such other officer
or agent of the Company as the Secretary may direct, for verification prior to
the time at which such vote shall be taken. Pursuant to a resolution of a
majority of the Directors, proxies may be solicited in
the name of one or more Directors or one or more of the officers or employees of
the Company. No proxy shall be valid after the expiration of 11 months from the
date thereof, unless otherwise provided in the proxy. Only Members of record shall be entitled to vote.
Each full Unit shall be entitled to one vote and fractional Units shall be
entitled to a vote of such fraction. When any Unit is held jointly by several
persons, any one of them may vote at any meeting in person or by proxy in respect of such Unit,
but if more than one of them shall be present at such meeting in person or by
proxy, and such joint owners or their proxies so present disagree as to any vote
to be cast, such vote shall not be received in respect of such Unit. A proxy purporting to be
executed by or on behalf of a Member shall be deemed valid unless challenged
at or prior to its exercise, and the burden of proving invalidity shall rest on
the challenger. If the holder of any such Unit is a minor or a person of unsound mind, and subject to
guardianship or to the legal control of any other person as regards the charge
or management of such Unit, he may vote by his guardian or such other person
appointed or having such control, and such vote may be given in person or by
proxy.
(f) The Directors shall cause to be prepared
at least annually and more frequently to the extent and in the form required by law or
applicable regulation a
report of operations containing a balance sheet and statement of income
and undistributed income of
the Company prepared in conformity with generally accepted accounting principles
and an opinion of an independent public accountant on such financial statements.
Copies of such reports shall be mailed to all Members of record within the time required by the 1940
Act. The Directors shall, in addition,
furnish to the Members at least semi-annually to the extent
required by law, interim reports containing an unaudited balance sheet of the
Company as of the end of such period and an unaudited statement of income and surplus
for the period from the beginning of the current fiscal year to the end of such
period.
(g) The records of the Company shall be open
to inspection by Members to the same extent as is permitted stockholders of a corporation formed under the Delaware General Corporation
Law.
(h) Any action which may be taken by
Members by vote may be taken without a meeting
if the holders entitled to vote thereon of the proportion of Units required for
approval of such action at a meeting of Members pursuant to this Section 3.3 consent to the action in writing and
the written consents are filed with the records of the meetings of Members. Such consent shall be treated for all
purposes as a vote taken at a meeting of Members.
(i) Each
Member shall be entitled to cast at any meeting of Members a number of votes
equal to the numeric value of such Member's Investment Percentage as of the
record date for such meeting multiplied by 1000. (For example, if a Member's
Investment Percentage was equal to 10%, such Member would receive 100 votes
(0.10 * 1000 = 100 votes). Similarly, a
15
Member whose Investment Percentage was equal to 0.2% would receive 2 votes (0.002 * 1000
= 2)).
SECTION 3.4. CUSTODY OF ASSETS OF THE
COMPANY.
The
physical possession of all funds, Securities or other properties of
the Company shall at all times, be held, controlled and administered by one or
more custodians retained by the Company in accordance with the requirements of
the 1940 Act and the rules thereunder.
SECTION
3.5. OTHER ACTIVITIES OF MEMBERS AND DIRECTORS.
(a) The Directors shall not be required to
devote full time to the affairs of the Company, but shall devote such time as may reasonably be required to perform their obligations under this
Agreement.
(b) Any
Member, Director, Advisor, and any Affiliate of any of them, may engage in or
possess an interest in other business ventures or commercial dealings of every
kind and description, independently or with others, including, but not limited
to, acquisition and disposition of Securities, provision of investment advisory
or brokerage services, serving as directors, officers, employees, advisors or
agents of other companies, partners of any partnership, members of any limited
liability company, or trustees of any trust, or entering into any other
commercial arrangements. No Member or Director shall have any rights
in or to such activities of any other Member, Director or Advisor or any
Affiliate thereof, or any profits derived therefrom.
SECTION 3.6. DUTY OF CARE.
(a) No
Director or officer of the Company shall be liable to the Company or to any of
its Members for any loss or damage occasioned by any act or omission in the
performance of his or her services to the Company as a Director, unless it shall
be determined by final judicial decision on the merits from which there is no
further right to appeal that such loss is due to an act or omission of such
Director or officer constituting willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Director's or officer's office.
(b) Members
not in breach of any obligation hereunder or under any agreement pursuant to
which the Member subscribed for Units shall be liable to the Company, any Member
or third parties only as provided under the Delaware Act.
SECTION 3.7. INDEMNIFICATION.
(a) The Company hereby agrees to indemnify
each person who at any time serves as a Director or officer of the Company (each such
person being an "indemnitee") 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 indemnitee 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 indemnitee may be or may have been involved as a
party or otherwise or with
which such indemnitee
may
16
be or may have been threatened, while
acting in any capacity set
forth in this Section
3.7 by reason of
the indemnitee having acted in any such capacity,
except with respect to any matter as to which the indemnitee shall not have acted in good faith in
the reasonable belief that the indemnitee's action was in the best interest of the Company or,
in the case of any criminal proceeding, as to which the indemnitee shall have had reasonable cause to
believe that the conduct was unlawful, provided, however, that no indemnitee
shall be indemnified hereunder against any liability to any person or any
expense of such indemnitee arising by reason of (i) willful misfeasance, (ii)
bad faith, (iii) gross negligence, or (iv) reckless disregard of the duties
involved in the conduct of the indemnitee's position (the conduct referred to in such clauses (i) through
(iv) being sometimes referred to as "disabling conduct"). Notwithstanding the
foregoing, with respect to any action, suit or other proceeding voluntarily
prosecuted by any indemnitee as plaintiff, indemnification shall be mandatory only if the prosecution
of such action, suit or other proceeding by such indemnitee (1) was authorized
by a majority of the Directors or (2) was instituted by the
indemnitee to enforce his or her rights to indemnification hereunder in a
case in which the
indemnitee is found to be entitled to such indemnification. The rights to
indemnification set forth in this Agreement shall continue as to a person who has
ceased to be a Director or officer of the Company and shall
inure to the benefit of his
or her heirs, executors and personal and legal representatives. No amendment or
restatement of this Agreement or repeal of any of its provisions
shall limit or eliminate any of the benefits provided to any person who at any
time is or was a Director or officer of the Company or otherwise
entitled to indemnification hereunder in respect of any act or omission that
occurred prior to such amendment, restatement or repeal.
(b) Notwithstanding the foregoing, no
indemnification shall be made hereunder unless there has been a determination (i) by a
final decision on the merits by a court or other body of competent jurisdiction
before whom the issue of entitlement to indemnification hereunder was brought
that such indemnitee is entitled to indemnification hereunder or, (ii) in the absence of such a
decision, by (1) a majority vote of a quorum of those Directors who are Disinterested Non-Party Directors
that the indemnitee is
entitled to indemnification hereunder, or (2) if such quorum is not obtainable
or even if obtainable, if
such majority so directs, independent legal counsel in a written opinion
concludes that the indemnitee should be entitled to indemnification hereunder.
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 (c)
below.
(c) 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 indemnitee
of the indemnitee'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 the
indemnitee 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 indemnitee shall provide adequate security for his or her 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),
17
that there is substantial
reason to believe that the
indemnitee ultimately will be found entitled to
indemnification.
(d) The rights accruing to any indemnitee
under these provisions shall not exclude any other right which any person may
have or hereafter acquire under this Agreement, the By-Laws of the Company, any statute,
agreement, vote of Members or Directors who are ''disinterested persons'' (as
defined in Section 2(a)(19) of the ▇▇▇▇ ▇▇▇) or any other right to which he or
she may be lawfully entitled.
(e) Subject to any limitations provided by the 1940 Act and this
Agreement, the Company shall have the power and
authority to indemnify and provide for the advance payment of expenses to
employees, agents and other Persons providing services to the Company or serving
in any capacity at the
request of the Company to the full extent corporations organized under the
Delaware General Corporation Law may indemnify or provide for the advance
payment of expenses for such Persons, provided that such indemnification has
been approved by a majority of the Directors.
(f) Each Member covenants for itself and its
successors, assigns, heirs and personal representatives that such Person shall,
at any time prior to or after the dissolution of the Company, whether before of
after such Member's withdrawal from the Company, pay to the Company
and/or the Tax Matters Partner on demand any amount which the Company or the Tax
Matters Partner, as the case may be, is required to pay in respect of taxes
(including withholding taxes and, if applicable, interest, penalties and costs and expenses of
contesting any such taxes) imposed upon income of or distributions to such
Member.
SECTION
3.8. NO BOND REQUIRED OF DIRECTORS. No Director shall, as such, be obligated to give
any bond or other security for the performance of any of his or her duties hereunder.
SECTION 3.9. NO DUTY OF INVESTIGATION; NO NOTICE IN COMPANY
INSTRUMENTS,
ETC. No purchaser, lender, transfer agent or
other person dealing with the Directors or with any officer, employee or agent
of the Company shall be
bound to make any inquiry concerning the validity of any transaction purporting
to be made by the Directors or by said officer, employee or agent
or be liable for the application of money or property paid, loaned, or delivered
to or on the order of the
Directors or of said officer, employee or agent.
Every obligation, contract, undertaking, instrument, certificate, Unit, other security of the Company, and
every other act or thing whatsoever executed in connection with the Company
shall be conclusively taken
to have been executed or done by the executors thereof only in their capacity as
Directors under this Agreement or in their capacity as officers,
employees or agents of the Company. The Directors may maintain insurance for the
protection of the property
of the Company, the
Members, Directors, officers, employees and agents in
such amount as the Directors shall deem adequate to cover possible
tort liability, and such other insurance as the Directors in their sole judgment shall deem
advisable or is required by
the 1940 Act.
SECTION 3.10. RELIANCE ON EXPERTS, ETC. Each Director and officer or employee of the Company
shall, in the performance of his or duties, be fully and completely
justified and protected with regard to any act or any failure to act resulting
from reliance in good
18
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 expert may also be a Director.
SECTION 3.11. FEES, EXPENSES AND
REIMBURSEMENT.
(a) The
Board of Directors may cause the Company to compensate each Director for his or
her services as such. In addition, the Directors shall be reimbursed by the
Company for reasonable out-of-pocket expenses incurred by them in performing
their duties under this Agreement.
(b) The
Company shall bear all expenses incurred in its business and operations, other
than those specifically required to be borne by the Advisor pursuant to an
Investment Management Agreement or by any other service provider to the Company
pursuant to a duly authorized Agreement with the Company. Expenses to
be borne by the Company include, but are not limited to, organizational and
initial offering expenses; ongoing offering expenses; Directors' fees; costs of
directors and officers/errors and omissions insurance; fidelity bond expenses;
administrative expenses; legal, tax, custodial, audit, professional, escrow,
internal and external fund accounting, transfer agency and valuation expenses;
corporate licensing and printing expenses; record keeping expenses; expenses
incurred in communicating with Members, including the costs of preparing,
printing and mailing reports to Members; and extraordinary
expenses. Company expenses will also include investment-related
expenses, including, but not limited to, brokerage commissions, dealer ▇▇▇▇-ups,
and other transactions costs on its cash management or any direct investment in
Securities; interest expense on any borrowings it may make; and any subscription
or redemption charges imposed by the Portfolio Funds. The Advisor shall be
entitled to reimbursement from the Company for any of the Company's expenses
that it pays on behalf of the Company other than those required to be borne by
the Advisor pursuant to the Investment Management Agreement.
(c) Subject
to procuring any required regulatory approvals, from time to time the Company
may, alone or in conjunction with other accounts for which the Advisor, or any
Affiliate of the Advisor, acts as general partner or investment adviser,
purchase insurance in such amounts, from such insurers and on such terms as the
Board of Directors shall determine.
ARTICLE IV
TRANSFERS
AND REPURCHASES
SECTION 4.1. TRANSFER OF UNITS.
(a) Except with the express written consent
of the Board of Directors, which may be withheld, a Member may not Transfer any of its Units or any attributes of its
Units in whole or in part
to any Person, except by last will and testament or by operation of
law. Any Transfer made in violation of this Section
4.1 shall be void and of no
effect. No transferee of any Unit shall
19
become a Member except upon admission pursuant to this
Agreement upon the consent of the Board of Directors.
(b) Without
limiting Section 4.1(a) the Company shall not consent to a Transfer of Units
unless: (i) the person to whom such Units are to be Transferred is a
person whom the Company reasonably believes is an "accredited investor," as such
term is defined in Regulation D under the 1933 Act or any successor thereto; and
(ii) all of the Units are to be Transferred to a single transferee or, after the
Transfer of less than all Units, the balance of the Capital Account of each
transferee and the transferor would not be less than $100,000. Any
transferee that acquires Units by operation of law as the result of the death,
divorce, bankruptcy, insolvency, adjudication of incompetence, dissolution,
merger, reorganization or termination of a Member or otherwise shall be entitled
to the allocations and distributions allocable to Units so acquired and to
Transfer such Units in accordance with the terms of this Agreement, but to the
extent permitted by applicable law (including the ▇▇▇▇ ▇▇▇) shall not be
entitled to the other rights of a Member unless and until such transferee
becomes a substituted Member. If a Member transfers Units with the
approval of the Board of Directors (or its delegates), the Board of Directors
shall promptly take all necessary actions so that the transferee is admitted to
the Company as a Member. Each Member effecting a Transfer and its
transferee agree to pay all expenses, including attorneys' and accountants'
fees, incurred by the Company in connection with such
Transfer.
(c) Each Member shall indemnify and hold harmless the
Company, the Board of Directors, the Advisor, each other Member and any Affiliate of the
foregoing against all losses, claims, damages,
liabilities, costs and expenses
(including legal or other expenses incurred in investigating or defending
against any such losses, claims, damages, liabilities,
costs and expenses or any judgments, fines and amounts paid in settlement), joint or several, to which such persons may become subject by reason of or arising
from (i) any Transfer made by such Member in violation of this Section
4.1 and (ii) any misrepresentation by such Member in connection with any such
Transfer.
SECTION 4.2. REPURCHASE OF UNITS.
(a) Except
as otherwise provided in this Agreement, no Member or other person holding Units
shall have the right to require the Company to redeem its Units. The
Board of Directors may, from time to time and in its sole discretion and on such
terms and conditions as it may determine (subject to the 1940 Act and other
applicable law), cause the Company to offer to repurchase Units pursuant to
written tender offers. The Company shall not offer to repurchase
Units on more than four occasions during any one Fiscal Year unless it has been
advised by counsel to the Company to the effect that more frequent offers would
not cause material adverse tax consequences to the Company. In
determining whether to cause the Company to offer to repurchase Units pursuant
to written tender offers, the Board of Directors shall consider the
recommendation of the Advisor, and will also consider the following factors,
including:
(1) whether
any Members have requested to tender Units to the
Company;
20
(2) the
liquidity of the Company's assets (including fees and costs associated with the
Company or Master Fund, as the case may be, withdrawing from Portfolio
Funds);
(3) the
investment plans and working capital requirements of the Company or Master Fund,
as the case may be;
(4) the
history of the Company in repurchasing Units;
(5) the
availability of information as to the value of the Company's or the Master
Fund's, as the case may be, interests in underlying Portfolio
Funds;
(6) the
existing conditions of the securities markets and the economy generally, as well
as political, national or international developments or current affairs;
and
(7) any
anticipated tax or regulatory consequences to the Company or the Master Fund of
any proposed repurchases of Units.
The
Board of Directors shall cause the Company to repurchase Units pursuant to
written tender offers only on terms it determines, in its sole discretion, to be
reasonable and fair to the Company and to all Members.
(b) A
Member who tenders for repurchase only a portion of such Member's Units shall be
required to maintain a Capital Account balance of at least $100,000 (or such
lower amount equal to the Member's initial capital contribution net of any
placement or other fees) after giving effect to the repurchase. If a
Member tenders an amount that would cause the Member's Capital Account balance
to fall below the required minimum Capital Account balance, the Company reserves
the right to reduce the amount to be purchased from the Member pursuant to the
tender so that the required minimum balance is maintained or to cause the
Company to repurchase the Member's entire interest in the Company.
(c) The
Advisor or any Director may tender its Units as a Member under Section 4.2(a)
hereof.
(d) The
Board of Directors may cause the Company to repurchase Units of a Member or any
person acquiring Units from or through a Member, and each Member shall by
acquiring such Units be deemed to have affirmatively consented to such
repurchase, in the event that the Board of Directors in its sole discretion
determines that:
(1) such
Units have been transferred in violation of Section 4.1, or such Units have
vested in any person other than by operation of law as the result of the death,
divorce, bankruptcy, insolvency, adjudicated incompetence, dissolution, merger,
reorganization or termination of a Member and the Board of Directors, in its
sole discretion, did not approve the admission of a substitute
Member;
(2) ownership
of such Units by a Member or other person is likely to cause the Company to be
in violation of, or require registration of any Units under, or
subject
21
the
Company to additional registration or regulation under, the securities,
commodities or other laws of the United States or any other relevant
jurisdiction;
(3) continued
ownership of such Units by a Member may be harmful or injurious to the business
or reputation of the Company, the Board of Directors, the Advisor or any of
their affiliates, or may subject the Company, or any Member to an undue risk of
adverse tax or other fiscal or regulatory consequences;
(4) any
of the representations and warranties made by a Member or other person in
connection with the acquisition of Units was not true when made or has ceased to
be true;
(5) with
respect to a Member subject to Special Laws or Regulations, such Member is
likely to cause the Company to be subject to additional regulatory or compliance
requirements under these Special Laws or Regulations by virtue of such Member
continuing to hold Units; or
(6) it
would be in the best interests of the Company for the Company to repurchase the
Units or a portion of them, including without limitation in connection with the
liquidation or termination of the Company.
(e) Repurchases
pursuant to Company tender offers shall be effective after receipt and
acceptance by the Company of all eligible written tenders of Units from Members
and, unless otherwise determined by the Board of Directors from time to time
including as a result of changes in applicable law or the interpretation
thereof, shall be subject to the following repurchase procedures:
(1) Members
choosing to tender Units for repurchase must do so by the applicable Notice
Date. Generally, the Notice Date will be the 25th day of the second
month prior to the month containing the date as of which Units are to be
repurchased. (For example, the Notice Date for a repurchase offer
having a December 31 repurchase date would be October 25.) Units (or portions
thereof) will be valued as of the "Repurchase Valuation Date" (which date,
unless otherwise determined by the Board of Directors, shall be the last
Business Day of the month on which such Units are to be
repurchased);
(2) promptly
after the Notice Date, the Company will give to each Member whose Units (or
portion thereof) have been accepted for repurchase an instrument (the
"Redemption Instrument") entitling the Member to be paid an amount equal to the
value, determined as of the Repurchase Valuation Date and in accordance with
Section 7.2 hereof, of the repurchased Units; and
(3) the
Redemption Instrument will be non-negotiable, non-interest bearing and
nontransferable. Payment in respect of the Redemption Instrument will be made as
of the later of (i) a period of within 45 days after the Repurchase Valuation
Date, or (ii) if the Company has requested withdrawal of its capital from one or
more Portfolio Funds in order to fund the repurchase of Units, within ten
Business Days after the Company has received at least 90% of the aggregate
amount withdrawn from such Portfolio Funds.
22
Notwithstanding
anything in the foregoing to the contrary, the Board of Directors, in its sole
discretion, may pay all or any portion of the Redemption Instrument in
marketable Securities (or any combination of marketable Securities and
cash). Persons holding Units will cease to be Members of the Company
upon the Company's issuance of a Redemption Instrument representing payment for
all of the remaining Units held by such Person. The Board of
Directors may from time to time establish such other policies and procedures in
connection with the repurchase of Units as it deems to be necessary or desirable
and in the interests of the Company and the Members, including without
limitation the imposition of fees for the repurchase or all or some Units
through tender offers.
(f) In
the event that the Board of Directors determines that the Company should
repurchase Units of a Member, or any person acquiring Units from or through a
Member, pursuant to Section 4.2(d) hereof, repurchases shall be subject to the
following repurchase procedures unless otherwise determined by the Board of
Directors from time to time:
(1) Units
(or portions thereof) will be valued as of the "Compulsory Repurchase Valuation
Date" (which date, unless otherwise determined by the Board of Directors, shall
be the last Business Day of the month in which the Company intends to repurchase
the Units);
(2) promptly
after the Board of Directors determines that the Company should repurchase Units
of a Member, or any person acquiring Units from or through a Member, pursuant to
Section 4.2(d) hereof, the Company will give to such Person whose Units (or
portion thereof) have been called for repurchase (a "Compulsorily Repurchased
Member") notice of the Company's intent to repurchase the Units and the expected
Compulsory Repurchase Valuation Date for such Units;
(3) promptly
after the Compulsory Repurchase Valuation Date, the Company will give to the
Compulsorily Repurchased Member an instrument (the "Compulsory Repurchase
Redemption Instrument") entitling the Compulsorily Repurchased Member to be paid
an amount equal to the value, determined as of the Compulsory Repurchase
Valuation Date and in accordance with Section 7.2 hereof, of the repurchased
Units; and
(4) the
Compulsory Repurchase Redemption Instrument will be non-negotiable, non-interest
bearing and nontransferable. Payment in respect of the Compulsory
Repurchase Redemption Instrument will be made as of the later of (i) a period of
within 45 days after the Compulsory Repurchase Valuation Date, or (ii) if the
Company has requested withdrawal of its capital from one or more Portfolio Funds
in order to fund the repurchase of Units, within ten Business Days after the
Company has received at least 90% of the aggregate amount withdrawn from such
Portfolio Funds.
Notwithstanding
anything in the foregoing to the contrary, the Board of Directors, in its sole
discretion, may pay all or any portion of the Repurchase Redemption Instrument
in marketable Securities (or any combination of marketable Securities and
cash). Persons holding Units will cease to be Members of the Company
upon the Company's issuance of a Compulsory Repurchase Redemption Instrument
representing payment for all of the remaining Units held by such
Person.
23
ARTICLE V
CAPITAL
SECTION 5.1. CONTRIBUTIONS TO CAPITAL.
(a) The
minimum initial contribution by a Member to the capital of the Company shall be
$100,000 (not including any placement or similar fees). The amount of the
initial contribution of each Member shall be recorded on the books and records
of the Company upon acceptance as a contribution to the capital of the
Company. The Directors shall not be entitled to make voluntary
contributions of capital to the Company as Directors of the Company, but may
make voluntary contributions to the capital of the Company as
Members. Notwithstanding the foregoing, the Advisor shall contribute
$1,000 to the capital of the Company and shall be treated as a Member for all
purposes of this Agreement.
(b) Members
may make additional contributions to the capital of the Company in increments of
such amount as the Board of Directors or its delegate, in their respective
discretion, may determine from time to time, but will generally not be less than
$25,000, effective as of such times as the Board of Directors, in its
discretion, may permit, subject to the limitations applicable to the admission
of Members pursuant to Section 2.7 hereof, but no Member shall be obligated to
make any additional contribution to the capital of the Company except to the
extent provided in Section 5.6 hereof.
(c) Except
as otherwise permitted by the Board of Directors, (i) initial and any additional
contributions to the capital of the Company by any Member shall be payable in
cash or in such Securities as the Board of Directors, in its absolute
discretion, may agree to accept on behalf of the Company, and (ii) initial and
any additional contributions in cash shall be payable in readily available funds
at the date of the proposed acceptance of the contribution. The value
of contributed Securities shall be determined in accordance with Section 7.2
hereof.
SECTION
5.2. RIGHTS OF MEMBERS TO CAPITAL.
No
Member shall be entitled to interest on any contribution to the capital of the
Company, nor shall any Member be entitled to the return of any capital of the
Company except (i) upon the repurchase by the Company of such Member's Units
pursuant to Section 4.2 hereof, (ii) pursuant to the provisions of Section
5.6(c) hereof or (iii) upon the liquidation of the Company's assets pursuant to
Section 6.2 hereof. Except as provided by applicable law, no Member
shall be liable for the return of any such capital properly paid to such Member
pursuant to the provisions of (i), (ii) and/or (iii) of the preceding sentence.
No Member shall have the right to require partition of the Company's property or
to compel any sale or appraisal of the Company's assets.
SECTION 5.3. CAPITAL ACCOUNTS.
(a) The
Company will maintain a separate Capital Account for each Member.
(b) Each
Member's Capital Account will have an initial balance equal to the amount
constituting such Member's initial contribution to the capital of the
Company.
24
(c) Each Member's Capital Account will be increased by the
sum of (i) the amount of cash constituting additional
contributions by such Member to the capital of the Company permitted pursuant to Section
5.1 hereof, plus (ii) all amounts credited to such Member's Capital Account pursuant to Sections
5.4 through 5.6.
(d) Each Member's Capital Account will be reduced by the sum of
(i) the amount paid to repurchase the Member's Units or distributions to such Member pursuant to Sections 4.2, 5.14 or 6.2 hereof (net of any liabilities secured by any asset distributed that such Member is deemed to assume or take for
purposes of section 752 of the Code), plus (ii) any amounts debited against such
Capital Account pursuant to Sections 5.4 through
5.6 hereof.
(e) No Member shall be required to pay to the Company or to any other Member or person any deficit in such
Member's Capital Account upon dissolution or otherwise.
(f) Before decreasing a Member's Capital Account (as described in this
Article V) with respect to the distribution of any property (other than cash) to
such Member, all Members' accounts shall be adjusted as
provided in Section 5.12.
(g) In determining the amount of any liability for purposes of
this Section
5.3, there shall be taken
into account Code Section 752 and any other applicable provisions of the Code
and any Regulations promulgated thereunder.
(h) Members' Capital Accounts shall be adjusted in
accordance with, and upon
the occurrence of an event described in Regulations Section 1.704-1(b)(2)(iv)(f)
to reflect a revaluation of the Company's assets on the Company's
books. Such adjustments to the Members' Capital Accounts shall be made in
accordance with Regulations
Section 1.704-1(b)(2)(iv)(g) for allocations of depreciation, depletion,
amortization and gain or loss with respect to such revalued
property.
(i) All provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with the Regulations under
Section 1.704 of the Code, and shall be interpreted and applied in a manner
consistent with such Regulations. The Tax Matters Partner, subject to the supervision of the Board of Directors, shall make any appropriate modifications in the event unanticipated
events might otherwise cause this Agreement not to comply with the Regulations
promulgated under Section 1.704 of the Code.
SECTION 5.4. ALLOCATION OF NET PROFIT AND NET
LOSS.
As
of the last day of each Fiscal Period, any Net Profit or Net Loss for the Fiscal
Period shall be allocated among and credited to or debited against the Capital
Accounts of the Members in accordance with their respective Investment
Percentages for such Fiscal Period.
SECTION 5.5. ALLOCATION OF CERTAIN EXPENDITURES.
Except
as otherwise provided for in this Agreement and unless prohibited by the 1940
Act, any expenditures payable by the Company, to the extent determined by the
Board of Directors to have been paid or withheld on behalf of, or by reason of
particular circumstances applicable to, one or more but fewer than all of the
Members, shall be charged only to those
25
Members
on whose behalf such payments are made or whose particular circumstances gave
rise to such payments. Such charges shall be debited from the Capital
Accounts of such Members as of the close of the Fiscal Period during which any
such items were paid or accrued by the Company.
SECTION 5.6. RESERVES.
(a) Appropriate
reserves may be created, accrued and charged against Net Assets and
proportionately against the related Capital Accounts for any liabilities,
including those contingent liabilities where the contingency has occurred and is
recognizable, as of the date any such liability becomes known to the Advisor or
the Board of Directors, such reserves to be in the amounts that the Board of
Directors (or its authorized delegate), in its sole discretion, deems necessary
or appropriate. The Board of Directors (or its authorized delegate)
may increase or reduce any such reserves from time to time by such amounts as
the Board of Directors (or its authorized delegate), in its sole discretion,
deems necessary or appropriate. The amount of any such reserve, or any increase
or decrease therein, shall be proportionately charged or credited, as
appropriate, to the Capital Accounts of those parties who are Members of the
Company at the time such reserve is created, increased or decreased, as the case
may be; provided, however, that if any such individual reserve item, adjusted by
any increase therein, exceeds the lesser of $500,000 or 1% of the aggregate
value of the Capital Accounts of all such Members, the amount of such reserve,
increase, or decrease shall instead be charged or credited to those parties who
were Members at the time, as determined by the Board of Directors in its sole
discretion, of the act or omission giving rise to the contingent liability for
which the reserve was established, increased or decreased in proportion to their
Capital Accounts at that time.
(b) If
at any time an amount is paid or received by the Company (other than
contributions to the capital of the Company, distributions or repurchases of
Units) and such amount exceeds the lesser of $500,000 or 1% of the aggregate
value of the Capital Accounts of all Members of the Company, at the time of
payment or receipt and such amount was not accrued or reserved for but would
nevertheless, in accordance with the Company's accounting practices, be treated
as applicable to one or more prior Fiscal Periods, then such amount shall be
proportionately charged or credited, as appropriate, to those parties who were
Members during such prior Fiscal Period or Periods.
(c) If
any amount is required by paragraph (a) or (b) of this Section 5.6 to be charged
or credited to a party who is no longer a Member, such amount shall be paid by
or to such party, as the case may be, in cash, with interest from the date on
which the Board of Directors determines that such charge or credit is required.
In the case of a charge, the former Member shall be obligated to pay the amount
of the charge, plus interest as provided above, to the Company on demand;
provided, however, that (i) in no event shall a former Member be obligated to
make a payment exceeding the amount of such Member's Capital Account at the time
to which the charge relates; and (ii) no such demand shall be made after the
expiration of three years since the date on which such party ceased to be a
Member. In the case of a credit, no former Member shall be entitled
to receive such a payment if the credit is received by the Company more than
three (3) years following the date on which such Person ceased to be a
Member. To the extent that a former Member fails to pay to the
Company, in full, any amount required to be charged to such former Member
pursuant to paragraph (a) or (b), whether due to
26
the
expiration of the applicable limitation period or for any other reason
whatsoever, the deficiency shall be charged proportionately to the Capital
Accounts of the Members at the time of the act or omission giving rise to the
charge to the extent feasible, and otherwise proportionately to the Capital
Accounts of the current Members.
SECTION 5.7. TAX ALLOCATIONS.
(a) Except as otherwise provided in this
Section 5.7, as of the end of each Fiscal Year, the Company's income, gain, loss,
deductions and credits, all as determined for federal income tax purposes, shall
be allocated among the Members in a manner consistent with the
economic allocations of Section 5.3 and giving effect to Sections 704(b)
and (c) of the Code and the
Regulations thereunder and Section 706(c)(1) of the Code as determined by the
Tax Matters Partner.
(b) The Tax Matters Partner may, subject to the supervision of the Board of Directors, adopt such methods and procedures as it
deems appropriate to
allocate items of gain and loss to eliminate the difference between the
Members' respective Capital Account balances
and their respective tax bases in their Membership Interests, in accordance with
approaches described in Treasury Regulations Sec.
1.704-3(e)(3).
(c) Allocations pursuant to this Section 5.7
are solely for U.S. federal, state and local income tax purposes and shall not
affect, or in any way be taken into account in computing, any Member's Capital Account(s) or share of
Net Profit (and items
thereof) or Net Loss (and items thereof). The Members are aware of the tax consequences of
the allocations made by this Section 5.7 and hereby agree to be bound by the
provisions of this Section 5.7 in reporting their shares of items of Company income, gain, loss, deduction
and expense.
SECTION 5.8. TRANSFER OF OR CHANGE IN
INTERESTS.
The
Tax Matters Partner, subject to the supervision of the Board of Directors, is
authorized to use any convention or combination of conventions likely to be
upheld for federal income tax purposes regarding the allocation of items of
Company income, gain, loss, deduction and expense with respect to a new Member's
Unit, a transferred Unit and a withdrawn Unit. A transferee who takes
all or part of a Member's Unit shall succeed to the Capital Account of the
transferor Member to the extent it relates to the whole or partial Unit
transferred.
SECTION 5.9. REGULATORY AND RELATED
ALLOCATIONS.
Notwithstanding
anything expressed or implied to the contrary in this Agreement, the following
special allocations shall be made, if and to the extent required by the
Regulations pursuant to Section 704 of the Code, in the following order: (A)
"minimum gain chargeback"; (B) "partner minimum gain chargeback"; and (C)
"qualified income offset" (each as defined in the Regulations under Section 704
of the Code). No allocation of Net Loss (or items thereof) shall be
made to any Member to the extent that such allocation would create or increase
an Adjusted Capital Account Deficit with respect to such Member. In
addition, all nonrecourse deductions (within the meaning of such Regulations)
for any Fiscal Period shall be allocated to the Members in accordance with any
permissible method under the applicable Regulations, and all "partner
nonrecourse deductions" (within the meaning of such Regulations) for any Fiscal
Period shall be
27
allocated to the Member who bears the economic risk of loss
with respect to the "partner nonrecourse debt" (within the meaning of such
Regulations) to which such
partner nonrecourse deductions are attributable in accordance with the
Regulations under Section 704 of the Code.
SECTION 5.10. CURATIVE
ALLOCATIONS.
The
allocations set forth in Section 5.9 (the "Regulatory Allocations'') are
intended to comply with certain requirements of Regulations Section 1.704.
Notwithstanding any other provisions of this Section, the Regulatory Allocations
shall be taken into account in allocating other profits, losses and items of
income, gain, loss and deduction among the Members so that, to the extent
possible, the net amount of such allocations of other profits, losses and other
items and the Regulatory Allocations to each Member shall be equal to the net
amount that would have been allocated to each such Member if the Regulatory
Allocations had not occurred.
SECTION 5.11. FEDERAL INCOME
TAX.
It
is the intent of this Company and its Members that this Company will be governed
by the applicable provisions of Subchapter K, of Chapter 1, of the
Code. The Members intend that the Company shall not be a partnership
(including a limited partnership) or joint venture, and that no Member or
Members shall be a partner or joint venturer of any other Member or Members, for
any purpose other than federal and, if applicable, state tax purposes, and this
Agreement shall not be construed to the contrary. The Members intend
that the Company shall be treated as a partnership for federal and, if
applicable, state income tax purposes, and each Member and the Company shall
file all tax returns and shall otherwise take all tax and financial reporting
positions in a manner consistent with such treatment and shall exercise
commercially reasonable efforts to cause the Company to remain classified as a
partnership for federal and, if applicable, state income tax
purposes.
SECTION 5.12. DEEMED SALE OF
ASSETS.
For
all purposes of this Agreement, any property (other than cash) that is
distributed or to be distributed in-kind to one or more Members for a Fiscal
Period (including, without limitation, any non-cash asset which shall be deemed
distributed immediately prior to the dissolution and winding up of the Company
so as to permit the unrealized gain or loss inherent in such assets to be
allocated to the Members), or that is constructively distributed on termination
of the Company pursuant to Section 708(b)(1)(B) of the Code, shall be deemed to
have been sold for cash equal to its fair market value, and the unrealized gain
or loss inherent in such assets shall be treated as recognized gain or loss for
purposes of determining the Net Profits and Net Loss of the Company to be
allocated pursuant to Section 5.2 hereof for such Fiscal Period.
SECTION 5.13. CERTAIN DETERMINATIONS BY TAX MATTERS
PARTNER.
All
matters concerning the computation of Capital Accounts, Loss Carryforward
Accounts, the allocation of Net Profit (and items thereof) and Net Loss (and
items thereof), the allocation of items of Company income, gain, loss, deduction
and expense for tax purposes and the adoption of any accounting procedures not
expressly provided for by the terms of this Agreement shall be determined by the
Tax Matters Partner subject to the supervision of the Board of
Directors. Such determination shall be final and conclusive as to all
Members.
28
Notwithstanding anything expressed or implied in this
Agreement to the contrary, in the event the Tax Matters Partner shall
determine, subject to the supervision of the Board of Directors, that it is prudent to modify the manner
in which the Members' Capital Accounts, or any debits or credits thereto, and/or
allocations of items of income, gain, loss, deduction or expense are computed in
order to effectuate the intended economic sharing arrangement of the
Members as reflected in Sections 5.2(a) and
(b), the Tax Matters Partner may make such
modification.
SECTION 5.14. DISTRIBUTIONS.
The
Board of Directors, in its sole discretion, may authorize the Company to make
distributions in cash at any time to all of the Members on a pro rata basis in
accordance with the Members' Investment Percentages. Notwithstanding
the foregoing or any other provision contained in this Agreement, the Company,
and the Board of Directors on behalf of the Company, shall not be required to
make a distribution to a Member in respect of its Units if such distribution
would violate the Delaware Act or other applicable law.
SECTION 5.15. WITHHOLDING.
(a) Notwithstanding anything expressed or
implied to the contrary in this Agreement, the Tax Matters Partner is authorized
to take any action that it determines to be necessary or appropriate to
cause the Company to comply with any foreign or United States federal, state or
local withholding requirement with respect to any allocation, payment or
distribution by the Company to any Member or other Person. All
amounts so withheld, and,
in the manner determined by the Tax Matters Partner, subject to the supervision of the Board of Directors, amounts withheld with respect to any
allocation, payment or distribution by any Person to the Company, shall be
treated as distributions to
the applicable Members under the applicable provision of this
Agreement. If any such withholding requirement with respect to any
Member exceeds the amount distributable to
such Member under this Agreement, or if any such
withholding requirement was
not satisfied with respect to any item previously allocated, paid or distributed
to such Member, or any successor or assignee with
respect to such Member's Unit, the Company hereby indemnifies
and agrees to hold harmless the Tax Matters Partner, the other Members and the Company for such excess amount
or such amount required to be withheld, as the case may be, together with any
applicable interest, additions or penalties thereon.
(b) The Tax Matters Partner shall not be obligated to apply for or
obtain a reduction of or
exemption from withholding tax on behalf of any Member that may be eligible for such reduction
or exemption. To the extent that a Member claims to be entitled to a reduced rate
of, or exemption from, a withholding tax pursuant to an applicable income tax treaty, or
otherwise, the Member shall furnish the Tax Matters Partner with such information and forms as such
Member may be required to complete when
necessary to comply with any and all laws and regulations governing the
obligations of withholding
tax agents. Each Member represents and warrants that any such
information and forms furnished by such Member shall be true and accurate and agrees
to indemnify the Company and each of the Members from any and all damages, costs and
expenses resulting from the
filing of inaccurate or incomplete information or forms relating to such
withholding taxes.
29
SECTION 5.16. ALLOCATION OF ORGANIZATIONAL
EXPENSES.
(a) Organizational
Expenses initially shall be borne by the Advisor or an affiliate, who shall be
reimbursed for such expenses by the Company over a period not to exceed 12
months from the Closing Date. Such reimbursements shall be allocated among and
debited against the Capital Accounts of the Members during such 12-month period
in accordance with the value of their respective Capital Accounts on each
applicable Expense Allocation Date.
(b) If
the Advisor is fully reimbursed before the 12-month anniversary of the Closing
Date, as of each Expense Allocation Date during the remainder of such 12-month
period, all amounts previously debited against the Capital Account of a Member
pursuant to this Section 5.16 on the preceding Expense Allocation Date shall be
credited to the Capital Account of such Member, and Organizational Expenses
shall then be re-allocated among and debited against the Capital Accounts of all
Members in accordance with the balance of their respective Capital Accounts on
such Expense Allocation Date.
ARTICLE VI
DISSOLUTION
AND LIQUIDATION
SECTION 6.1. DISSOLUTION.
The
Company will be dissolved:
(1) upon
the affirmative vote to dissolve the Company by not less than 80% of the
Directors (including a majority of the Independent Directors); or
(2) as
required by the Delaware Act or other applicable law.
Dissolution
of the Company will be effective on the day on which the event giving rise to
the dissolution shall occur, but the existence of the Company as a separate
legal entity shall not terminate until the assets of the Company have been
liquidated in accordance with Section 6.2 hereof and the Certificate has been
canceled.
SECTION 6.2. WINDING UP.
(a) Upon
the dissolution of the Company as provided in Section 6.1 hereof, the Board of
Directors (or its delegate), acting as the liquidator, shall wind up the
business and administrative affairs of the Company, except that if the Board of
Directors is unable to perform this function (or to designate an appropriate
delegate to do so), a liquidator elected by Members holding a majority of the
voting power (determined in accordance with Section 3.3(i) hereof) of the Units
eligible to vote shall promptly wind up the business and administrative affairs
of the Company. Net Profit and Net Loss during the period of winding up shall be
allocated pursuant to Section 5.4 hereof. The proceeds from
liquidation of the Company's assets shall be distributed in the following
manner:
(1) the
debts of the Company, other than debts, liabilities or obligations to Members,
and the expenses of liquidation (including legal and accounting
expenses
30
incurred
in connection therewith and amounts, if any, owed to Affiliates of the Company),
up to and including the date that distribution of the Company's assets to the
Members has been completed, shall first be satisfied (whether by payment or
reasonable provision for payment thereof) on a pro rata basis;
(2) such
debts, liabilities or obligations as are owing to the Members shall next be paid
in their order of seniority and on a pro rata basis; and
(3) to
the Members or their legal representatives in accordance with the positive
balances in their respective Capital Accounts as determined after taking into
account all adjustments to Capital Accounts for all periods.
(b) Anything
in this Section 6.2 to the contrary notwithstanding, but subject to the Delaware
Act, upon dissolution of the Company, the Board of Directors or other liquidator
may distribute ratably in kind any assets of the Company; provided, however,
that if any in-kind distribution is to be made (i) the assets distributed in
kind shall be valued pursuant to Section 7.2 hereof as of the actual date of
their distribution and charged as so valued and distributed against amounts to
be paid under Section 6.2(a) above, and (ii) any profit or loss attributable to
property distributed in kind shall be included in the Net Profit or Net Loss for
the Fiscal Period ending on the date of such distribution.
ARTICLE VII
ACCOUNTING,
VALUATIONS AND BOOKS AND RECORDS
SECTION 7.1. ACCOUNTING AND REPORTS.
(a) The
Company will maintain its books and records on the accrual method of accounting
based upon generally accepted accounting principles except as otherwise
described in this Agreement; provided that the Board of Directors may adopt any
accounting method determined by the Board of Directors to be in the best
interests of the Company, in its sole discretion. The Company's
accounts shall be maintained in U.S. currency. The Company shall
cause annual financial statements prepared in accordance with this Section
7.1(a), subject always to any requirements of the 1940 Act, to be accompanied by
a report of independent public accountants based upon an audit performed in
accordance with generally accepted auditing standards.
(b) After
the end of each tax year, the Company shall furnish to each Member such
information regarding the operation of the Company and such Member's Units as is
determined by the Board of Directors to be reasonably necessary for Members to
complete federal, state and local income tax or information returns and any
other tax information required by federal, state or local law.
(c) Except
as otherwise required by the 1940 Act, or as may otherwise be permitted by rule,
regulation or order, within 60 days after the close of the period for which a
report required under this Section 7.1(c) is being made, the Company shall
furnish to each Member a semi-annual report and an annual report containing the
information required by the 1940 Act.
31
The
Company may furnish to each Member such other periodic reports as it deems
necessary or appropriate in its discretion.
SECTION 7.2. VALUATION OF NET ASSETS.
(a) Except
as may be required by the 1940 Act, the Board of Directors shall value or have
valued any Securities or other assets and liabilities of the Company as of the
close of business on the last Business Day of each month prior to such date as
determined from time to time by the Advisor in accordance with such valuation
procedures as shall be established from time to time by the Board of Directors
and that conform to the requirements of the 1940 Act. In determining the value
of the assets of the Company, no value shall be placed on the goodwill or name
of the Company, or the office records, files, statistical data or any similar
intangible assets of the Company not normally reflected in the Company's
accounting records.
(b) The
Company will value its Securities, in accordance with policies and procedures
adopted from time to time by the Board of Directors.
(c) The
value of Securities and other assets of the Company and the net asset value of
the Company as a whole determined pursuant to this Section 7.2 shall be
conclusive and binding on all of the Members and all parties claiming through or
under them.
ARTICLE VIII
MISCELLANEOUS
PROVISIONS
(a) Except
as otherwise provided in this Section 8.1, this Agreement may be amended, in
whole or in part, with: (i) the approval of a majority of the Board of Directors
(including the approval of a majority of the Independent Directors, if required
by the ▇▇▇▇ ▇▇▇) and (ii) if required by the 1940 Act, the approval of the
Members by such vote as is required by the ▇▇▇▇ ▇▇▇.
(b) Any
amendment that would:
(1) increase
the obligation of a Member to make any contribution to the capital of the
Company; or
(2) reduce
the Capital Account of a Member;
may
be made only if (i) the written consent of each Member adversely affected
thereby is obtained prior to the effectiveness thereof or (ii) such amendment
does not become effective until (A) each affected Member has received written
notice of such amendment and (B) any such Member objecting to such amendment has
been afforded a reasonable opportunity (pursuant to such procedures as may be
prescribed by the Board of Directors) to tender all of its Units for repurchase
by the Company.
32
(c) No
amendment, supplement or other modification may be made to Section 2.6(a), this
Section 8.1(c), Section 8.6, Section 8.10 and Section 8.11 of this Agreement and
no amendment may be made to this Agreement which would change any rights with
respect to any Units by reducing the amount payable thereon upon liquidation of
the Company or by diminishing or eliminating any voting rights pertaining
thereto (except that this provision shall not limit the ability of the Directors
to authorize, and to cause the Company to issue, Units and other securities
pursuant to Section 6.2), except after a majority of the Directors have approved
a resolution therefore which thereafter is approved by the affirmative vote of
Members holding not less than seventy-five percent (75%) of the voting power
(determined in accordance with Section 3.3(i) hereof) of each affected class or
series outstanding, voting as separate classes or series, unless such amendment
has been approved by eighty percent (80%) of the Directors, in which case
approval by a Majority Vote of each affected class or series outstanding shall
be required. Nothing contained in this Agreement shall permit the amendment of
this Agreement to impair the exemption from personal liability of the Members,
Directors, officers, employees and agents of the Company or to permit
assessments upon Members. Any amendment that would affect any
Director's right to indemnification under this Agreement may only be effected by
the written consent of such Director.
(d) The
power of the Board of Directors to amend this Agreement at any time without the
consent of the Members in accordance with paragraph (a) of this Section 8.1
shall specifically (and without limitation) include the power to:
(1) restate
this Agreement together with any amendments hereto that have been duly adopted
in accordance herewith to incorporate such amendments in a single, integrated
document;
(2) amend
this Agreement (other than with respect to the matters set forth in Section
8.1(b) hereof) to effect compliance with any applicable law or regulation,
including to reflect any relaxation of the requirements of applicable law;
and
(3) amend
this Agreement to make such changes as may be necessary or advisable for federal
tax purposes, including, without limitation, to ensure that (i) the Company will
not be treated as an association or as a publicly traded partnership taxable as
a corporation as defined in section 7704(b) of the Code (or any successor
provision) and (ii) the allocation provisions hereunder are respected for
Federal income tax purposes, provided that such changes do not materially reduce
any Member's allocations or distributions hereunder.
(e) After
the Closing, the Board of Directors shall cause written notice to be given of
any amendment to this Agreement (other than any amendment of the type
contemplated by clause (1) of Section 8.1(c) hereof) to each Member, which
notice shall set forth (i) the text of the amendment or (ii) a summary thereof
and a statement that the text thereof will be furnished to any Member upon
request.
33
SECTION 8.2. SPECIAL POWER OF ATTORNEY.
(a) Each
Member hereby irrevocably makes, constitutes and appoints the Advisor, with full
power of substitution, the true and lawful representative and attorney-in-fact
of, and in the name, place and stead of, such Member, with the power from time
to time to make, execute, sign, acknowledge, swear to, verify, deliver, record,
file and/or publish:
(1) any
amendment to this Agreement that complies with the provisions of this Agreement
(including the provisions of Section 8.1 hereof);
(2) any
amendment to the Certificate required because this Agreement is amended,
including, without limitation, an amendment to effectuate any change in the
membership of the Company; and
(3) all
such other instruments, documents and certificates that, in the opinion of legal
counsel to the Company, may from time to time be required by the laws of the
United States of America, the State of Delaware or any other jurisdiction in
which the Company shall determine to do business, or any political subdivision
or agency thereof, or that such legal counsel may deem necessary or appropriate
to effectuate, implement and continue the valid existence and business of the
Company as a limited liability company under the Delaware Act.
(b) Each
Member is aware that the terms of this Agreement permit certain amendments to
this Agreement to be effected and certain other actions to be taken or omitted
by or with respect to the Company without such Member's consent. If
an amendment to the Certificate or this Agreement or any action by or with
respect to the Company is taken in the manner contemplated by this Agreement,
each Member agrees that, notwithstanding any objection that such Member may
assert with respect to such action, the attorney-in-fact appointed hereby is
authorized and empowered, with full power of substitution, to exercise the
authority granted above in any manner that may be necessary or appropriate to
permit such amendment to be made or action lawfully taken or
omitted. Each Member is fully aware that each Member will rely on the
effectiveness of this special power of attorney with a view to the orderly
administration of the affairs of the Company.
(c) This
power of attorney is a special power of attorney and is coupled with an interest
in favor of the Advisor and as such:
(1) shall
be irrevocable and continue in full force and effect notwithstanding the
subsequent death or incapacity of any party granting this power of attorney,
regardless of whether the Advisor shall have had notice thereof;
and
(2) shall
survive the delivery of a Transfer by a Member of all or portion of such
Member's Units, except that when the transferee thereof has been approved by the
Board of Directors for admission to the Company as a substituted Member, this
power of attorney given by the transferor shall survive the delivery of such
assignment for the sole purpose of enabling the Advisor to execute, acknowledge
and file any instrument necessary to effect such
substitution.
34
SECTION 8.3. NOTICES.
Any
and all notices to which any Member hereunder may be entitled and any and all
communications shall be deemed duly served or given if mailed by regular mail or
commercial courier, postage prepaid, addressed to any Member of record at his
last known address as recorded on the applicable register of the
Company. Notices that may be or are required to be provided under
this Agreement to the Board of Directors or the Advisor shall be made
by hand delivery, registered or certified mail return receipt requested,
commercial courier service, or telecopier (receipt confirmed), and shall be
addressed to the respective parties hereto at their addresses as set forth in
the books and records of the Company. Notices shall be deemed to have
been provided when delivered by hand, on the date indicated as the date of
receipt on a return receipt or when received if sent by regular mail, commercial
courier service, or telecopier. A document that is not a notice and
that is required to be provided under this Agreement by any party to another
party may be delivered by any reasonable means.
SECTION 8.4. AGREEMENT BINDING UPON SUCCESSORS AND
ASSIGNS.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and each Member of the Company and their respective heirs, successors, assigns,
executors, trustees or other legal representatives, but the rights and
obligations of the parties hereunder may not be Transferred or delegated except
as provided in this Agreement and any attempted Transfer or delegation thereof
that is not made pursuant to the terms of this Agreement shall be
void.
SECTION 8.5. APPLICABILITY OF 1940 ACT.
The
parties hereto acknowledge that this Agreement is not intended to, and does not,
set forth the substantive provisions contained in the 1940 Act that affect
numerous aspects of the conduct of the Company's business and of the rights,
privileges and obligations of the Members. Each provision of this
Agreement shall be subject to and interpreted in a manner consistent with the
applicable provisions of the 1940 Act.
SECTION 8.6. CONVERSION.
Notwithstanding
any other provisions of this Agreement or the By-Laws of the Company, a
favorable vote of a majority of the Directors then in office followed by the
favorable vote of the Members holding not less than seventy-five percent (75%)
of the voting power (determined in accordance with Section 3.3(i) hereof) of
each affected class or series outstanding, voting as separate classes or series,
shall be required to approve, adopt or authorize an amendment to this Agreement
that makes the Units a ''redeemable security'' as that term is defined in the
1940 Act, unless such amendment has been approved by eighty percent (80%) of the
Directors, in which case approval by Majority Vote shall be required. Upon the
adoption of a proposal to convert the Company from a ''closed-end company'' to
an ''open-end company'' as those terms are defined by the 1940 Act and the
necessary amendments to this Agreement to permit such a conversion of the
Company's outstanding Units entitled to vote, the Company shall, upon complying
with any requirements of the 1940 Act and state law, become an ''open-end''
investment company. Such affirmative vote or consent shall be in addition to the
vote or consent of the holders of the Units otherwise required by
law.
35
SECTION 8.7. CHOICE OF LAW; ARBITRATION.
(a) Notwithstanding
the place where this Agreement may be executed by any of the parties thereto,
the parties expressly agree that all the terms and provisions hereof shall be
construed in accordance with the laws of Delaware without regard to principles
of conflict of laws thereof that would mandate the application of the laws of
another jurisdiction and, without limitation thereof, that the
Delaware Act as now adopted or as may be hereafter amended shall govern the
limited liability company aspects of the Agreement.
(b) TO
THE FULLEST EXTENT PERMITTED BY LAW, UNLESS OTHERWISE AGREED IN
WRITING, EACH MEMBER AGREES TO SUBMIT ALL CONTROVERSIES ARISING BETWEEN MEMBERS
OR ONE OR MORE MEMBERS AND THE COMPANY TO ARBITRATION IN ACCORDANCE WITH THE
PROVISIONS SET FORTH BELOW AND UNDERSTANDS THAT:
(1) ARBITRATION
IS FINAL AND BINDING ON THE PARTIES;
(2) THE
PARTIES ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT
TO A JURY TRIAL;
(3) PRE-ARBITRATION
DISCOVERY IS GENERALLY MORE LIMITED AND DIFFERENT FROM COURT
PROCEEDINGS;
(4) THE
ARBITRATOR'S AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL
REASONING AND A PARTY'S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY
ARBITRATORS IS STRICTLY LIMITED; AND
(5) THE
PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE ARBITRATORS WHO WERE OR ARE
AFFILIATED WITH THE SECURITIES INDUSTRY.
(c) ALL
DISPUTES, CONTROVERSIES OR CLAIMS THAT MAY ARISE AMONG MEMBERS AND/OR ONE OR
MORE MEMBERS AND THE COMPANY CONCERNING OR RELATING TO THIS AGREEMENT OR THE
BREACH, TERMINATION OR VALIDITY THEREOF, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE PARTIES HERETO
INCLUDING, BUT NOT LIMITED TO, ANY DISPUTES REGARDING THE VALIDITY OR SCOPE OF
THIS AGREEMENT TO ARBITRATE (EACH A "DISPUTE") SHALL BE FINALLY DETERMINED BY
ARBITRATION IN NEW YORK CITY IN ACCORDANCE WITH THE RULES THEN OBTAINING OF THE
NATIONAL ASSOCIATION OF SECURITIES DEALERS CODE OF ARBITRATION PROCEDURE, (THE
"NASD CODE"), EXCEPT AS OTHERWISE SET FORTH HEREIN. IF THE FINANCIAL
INDUSTRY REGULATORY AUTHORITY ("FINRA") DOES NOT ACCEPT THE DISPUTE FOR
ARBITRATION UNDER THE NASD CODE, THE ARBITRATION SHALL BE HELD, AND DETERMINED
IN ACCORDANCE WITH THE RULES THEN OBTAINING OF, THE INTERNATIONAL INSTITUTE FOR
CONFLICT PREVENTION AND RESOLUTION ("CPR") RULES FOR NON-ADMINISTERED
ARBITRATION IN
36
NEW YORK CITY. THE FEDERAL
ARBITRATION ACT (9 U.S.C. SECTION 1 ET SEQ).SHALL APPLY TO ANY ARBITRATION HEREUNDER, AND JUDGMENT ON ANY
AWARD OF ANY SUCH ARBITRATION MAY BE ENTERED AND ENFORCED IN ANY COURT HAVING
JURISDICTION. ANY NOTICE OF SUCH ARBITRATION OR THE CONFIRMATION OF
ANY AWARD IN ANY ARBITRATION SHALL BE SUFFICIENT IF GIVEN IN ACCORDANCE
WITH THE PROVISIONS OF THIS
AGREEMENT. EACH MEMBER AGREES THAT THE DETERMINATION OF THE
ARBITRATORS SHALL BE FINAL, BINDING AND CONCLUSIVE UPON
THEM.
(d) THE COMPANY AND EACH MEMBER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY DISPUTE. EACH OF THE COMPANY AND EACH MEMBER ACKNOWLEDGES AND
AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION
AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR SUCH PARTY'S ENTERING INTO THIS
AGREEMENT.
SECTION 8.8. NOT FOR BENEFIT OF CREDITORS.
The
provisions of this Agreement are intended only for the regulation of relations
among past, present and future Members, Directors and the Company. This
Agreement is not intended for the benefit of non-Member creditors and no rights
are granted to non-Member creditors under this Agreement.
SECTION 8.9. CONSENTS.
Any
and all consents, agreements or approvals provided for or permitted by this
Agreement shall be in writing and a signed copy thereof shall be filed and kept
with the books of the Company.
SECTION 8.10. MERGER AND CONSOLIDATION.
(a) The Company may merge or consolidate
with or into one or more
limited liability companies formed under the Delaware Act or other business
entities pursuant to an agreement of merger or consolidation that has
been approved by two-thirds of the
Directors and in the manner contemplated by Section 18-209(b) of the Delaware Act. Notwithstanding any other provision of this
Agreement, the Company may
effect such merger or consolidation
without a vote of the Members, unless otherwise required by the ▇▇▇▇
▇▇▇.
(b) If approved by the Board of Directors
(and subject always to
any requirements or limitations imposed by
the 1940 Act),
notwithstanding anything to the contrary contained elsewhere in this
Agreement, an agreement of merger or consolidation approved in accordance with
Section 18-209(b) of the
Delaware Act may, to the extent permitted by Section 18-209(f) of the Delaware Act, (i) effect any amendment to this Agreement, (ii) effect the
adoption of a
new limited liability company agreement for the Company if it is the
surviving or resulting limited liability company in the merger or
consolidation, or
(iii) provide that the limited liability
company agreement of any other constituent limited liability company to the merger or consolidation (including a limited liability company formed for the purpose
of consummating the
37
merger or consolidation) shall be the limited
liability company agreement of the surviving or resulting limited liability
company.
SECTION 8.11. CERTAIN TRANSACTIONS.
(a) Notwithstanding any other provision of
this Agreement and subject to the exceptions provided in paragraph (d) of this
Section, the types of transactions described in paragraph (c) of this Section shall require
the affirmative vote or consent of a majority of the Directors then in office
followed by the affirmative vote of the Members holding not less than seventy-five percent (75%) of the voting power
(determined in accordance
with Section 3.3(i) hereof)
of each affected class or series outstanding, voting as separate classes or
series, when a Principal Member (as defined in paragraph (b) of this
Section) is a party to the transaction. Such affirmative vote or consent shall
be in addition to the vote
or consent of the holders of Units otherwise required by law or by the terms of
any class or series of preferred stock, whether now or hereafter authorized, or
any agreement between the Company and any national securities
exchange.
(b) The term ''Principal Member'' shall mean any corporation, Person or
other entity which is the beneficial owner, directly or indirectly, of five
percent (5%) or more of the outstanding Units of all outstanding classes or
series and shall include any affiliate or associate, as such terms are
defined in clause (ii) below, of a Principal Member. For the purposes of this Section, in
addition to the Units which a corporation, Person or other entity beneficially
owns directly, (a) any corporation, Person or other entity shall be deemed to be the
beneficial owner of any Units (i) which it has the right to acquire pursuant to
any agreement or upon exercise of conversion rights or warrants, or otherwise
(but excluding unit options granted by the Company) or
(ii) which are beneficially
owned, directly or indirectly (including Units deemed owned through application
of clause (i) above), by any other corporation, Person or entity with which its
''affiliate'' or ''associate'' (as defined below) has any agreement,
arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of Units, or which is its
''affiliate'' or ''associate'' as those terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934, and (b) the outstanding Units
shall include Units deemed owned through application of clauses (i) and (ii)
above but shall not include any other Units which may be issuable pursuant to
any agreement, or upon exercise of conversion rights or warrants, or otherwise.
(c) This Section shall apply to the
following transactions:
| (1) | The merger or consolidation of the Company or any subsidiary of the Company with or into any Principal Member; | |
|
|
(2)
|
The issuance of any securities of
the Company to any Principal Member for cash (other than pursuant to
any automatic dividend reinvestment
plan);
|
| (3) | The sale, lease or exchange of all or any substantial part of the assets of the Company to any Principal Member (except assets having an aggregate fair market value of less than two percent (2%) of the total assets of the Company, aggregating for the purpose of such computation |
38
all assets sold, leased or exchanged in
any series of similar transactions within a twelve-month period.); and
|
|
(4)
|
The sale, lease or
exchange to the
Company or any subsidiary thereof, in exchange for securities of the
Company, of any assets of any Principal Member (except assets having an
aggregate fair market value of less than two percent (2%) of the total
assets of the Company, aggregating for the purposes of such
computation all assets sold, leased or exchanged in any series of similar
transactions within a twelve-month
period).
|
(d) The provisions of this Section shall not
be applicable to (i) any of the transactions described in paragraph (c) of this Section if eighty percent
(80%) of the Directors shall by resolution have approved a memorandum of
understanding with such Principal Member with respect to and substantially
consistent with such transaction, in which case approval by a
Majority Vote shall be the
only vote of Members required by this Section, or (ii) any
such transaction with any entity of which a majority of the voting power (determined in accordance
with Section 3.3(i) hereto) of all classes and series of a stock
normally entitled to vote
in elections of directors is owned of record or beneficially by the Company and
its subsidiaries.
(e) The Board of Directors shall have the
power and duty to determine for the purposes of this Section on the basis of
information known to the Company whether (i) a corporation, person
or entity beneficially owns five percent (5%) or more of the outstanding Units
of any class or series, (ii) a corporation, person or entity is an ''affiliate''
or ''associate'' (as defined above) of another, (iii) the assets being acquired or leased to or
by the Company or any subsidiary thereof constitute a substantial part of the
assets of the Company and have an aggregate fair market value of less than two
percent (2%) of the total assets of the Company, and (iv) the memorandum of understanding referred
to in paragraph (d) hereof is substantially consistent with the transaction
covered thereby. Any such determination shall be conclusive and binding for all
purposes of this Section.
SECTION 8.12. PRONOUNS; USAGE; GENERIC TERMS.
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. The words "herein," "hereby,"
"hereof" and "hereto," and words of similar import, refer to this Agreement in
its entirety and not to any particular paragraph, clause or other subdivision,
unless otherwise specified. The word "including" shall mean
"including without limitation" unless otherwise specified. Section
references are to this Agreement unless otherwise specified.
SECTION 8.13. CONFIDENTIALITY.
(a) A Member may obtain from the Company such
information regarding
the affairs of the Company as is just and
reasonable under the Delaware Act, subject to reasonable standards (including standards governing
what information
and documents are to be furnished,
at what time and location and at
whose expense) established by the Board of
Directors.
(b) Each Member covenants that, except as required by
applicable law
or any regulatory body, it will not divulge, furnish or
make accessible to
any other person the
name
39
and/or address (whether business,
residence or mailing) of any Member (collectively, "Confidential Information") without the
prior written consent of the Board of Directors, which
consent may be withheld in
its sole discretion.
(c) Each of the Members wishes to maintain maximum
confidentiality
with respect to their investment in the
Company. Accordingly, pursuant to Section 18-305(g) of the Delaware Act, the Members desire to restrict the rights
of Members to obtain information as otherwise provided in
Section 18-305(a) of the Delaware Act. The
Members, therefore, agree that each
Member shall only be entitled to the information and reports
provided pursuant to
Article VII hereof and shall not be entitled to any other
information concerning the Company or its business or affairs or the Members or their Units in the
Company whether pursuant to Section 18-305(a) of the
Delaware Act or otherwise. Without limiting the generality of the foregoing, each
Member agrees that it shall have no
access to, and shall not be entitled to know,
the name and/or address
(whether business, residence or mailing) of any other Member. If,
notwithstanding
the foregoing restriction, any Member shall obtain any information
concerning the Company or its business or affairs or
any other Member or such Member's Units in the Company or any other information other than that provided
pursuant to Article VII hereof, such Member agrees that it will not divulge, furnish or
make accessible to any other person any such
information (all such
information being referred to herein as
"Confidential Information") without the prior
written consent of the Board of Directors which consent may be withheld at the sole discretion of the Board of
Directors.
(d) Each Member recognizes that in the event that this Section
8.13 is breached by any Member or any of its principals, partners,
members,
directors, officers, employees or agents or any of its
affiliates, including any of such affiliates' principals,
partners, members, directors, officers,
employees or agents, irreparable injury
may result to the non-breaching Members and the Company. Accordingly, in addition
to any and all other
remedies at law or
in equity to which the non-breaching
Members and the Company may be entitled,
such Members and the Company shall also have the right to obtain equitable relief, including, without limitation,
injunctive
relief, to prevent any disclosure of
Confidential Information,
plus reasonable attorneys' fees and other litigation
expenses incurred in
connection
therewith. In the event that any non-breaching
Member or the Company determines that any
of the other Members or any of its principals, partners, members,
directors, officers, employees or agents or any of its
affiliates, including any
of such affiliates' principals, partners, members, directors,
officers, employees
or agents should be enjoined from
or required to take any
action to prevent the disclosure of Confidential Information, each of the other non-breaching
Members agrees to pursue in a court of
appropriate jurisdiction such injunctive relief. Notwithstanding any other provision of
this Agreement, any Member or authorized representative may
disclose to any and all
persons, without limitation of any kind, the tax treatment and tax structure of
the Company and all materials of any kind (including opinions or other tax
analyses) that are provided to such Member relating to such tax treatment or tax
structure; provided that
the foregoing does not constitute an authorization to disclose information
identifying the Company, the Members or any parties to transactions engaged
in by the Company (except to the extent relating to such tax structure or tax
treatment) any non-public
commercial or financial information.
40
SECTION 8.14. CERTIFICATION OF NON-FOREIGN
STATUS.
Each
Member or transferee of Units from a Member shall certify, upon admission to the
Company and at such other times thereafter as the Tax Matters Partner may
request, whether such Member is a "United States Person" within the meaning of
section 7701(a)(30) of the Code on forms to be provided by the Company, and
shall notify the Company within 30 days of any change in such Member's
status. Any Member who shall fail to provide such certification when
requested to do so by the Tax Matters Partner may be treated as a non-United
States Person for purposes of U.S. federal tax withholding.
SECTION 8.15. SEVERABILITY.
If
any provision of this Agreement is determined by a court of competent
jurisdiction not to be enforceable in the manner set forth in this Agreement,
each Member agrees that it is the intention of the Members that such provision
should be enforceable to the maximum extent possible under applicable law. If
any provisions of this Agreement are held to be invalid or unenforceable, such
invalidity or unenforceability shall not affect the validity or enforceability
of any other provision of this Agreement (or portion thereof).
SECTION 8.16. FILING OF RETURNS.
The
Tax Matters Partner or its designated agent, subject to the supervision of the
Board of Directors, shall prepare and file, or cause the Advisor or accountants
of the Company to prepare and file, on behalf of the Company, 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 8.17. TAX DECISIONS AND TAX MATTERS
PARTNER.
(a) All
decisions for the Company relating to tax matters, including, without
limitation, whether to make any tax elections (including the election under
Section 754 of the Code), the positions to be made on the Company's tax and
information returns and the settlement or further contest or litigation of any
audit matters raised by the Internal Revenue Service or any other taxing
authority, shall be made by the Tax Matters Partner, subject to the supervision
of the Board of Directors.
(b) The
Advisor shall be designated on the Company's annual federal income tax
information 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.
The Tax Matters Partner for the Company for purposes of Section 6231(a)(7) of
the Code shall be subject to the supervision of the Board of
Directors. The Tax Matters Partner for the Company under section
6231(a)(7) of the Code shall be indemnified and held harmless by the Company
from any and all liabilities and obligations that arise from or by reason of
such designation.
(c) Each
person (for purposes of this Section 8.17, called a "Pass-Thru Member") that
holds or controls Units on behalf of, or for the benefit of, another person or
persons, or which Pass-Thru Member is beneficially owned (directly or
indirectly) by another person or persons, shall, within 10 days following
receipt from the Tax Matters Partner of any notice, demand,
41
request for information or similar document, convey such notice or other document
in writing to all holders of beneficial interests in the Company holding such interests through such Pass-Thru Member. In the event the Company shall be
the subject of an income tax audit by any
federal, state or local authority, to the extent the Company is treated as an
entity for purposes of such
audit, including administrative settlement and judicial review, the Tax
Matters Partner shall be authorized to act for, and its decision shall be final and binding upon, the Company and each Member thereof. All
expenses incurred in connection with any such audit, investigation, settlement or
review shall be borne by the Company. Each Member who elects to participate in
such proceedings shall be responsible for any expenses incurred by such Member
in connection with such participation. The costs of any resulting audits or
adjustments of a Member's tax return shall be borne solely by the affected
Member.
SECTION 8.18. COUNTERPARTS.
This
Agreement may be executed in any number of counterparts with the same effect as
if all parties had signed the same document. All counterparts shall be construed
together and shall constitute one instrument.
EACH
OF THE UNDERSIGNED ACKNOWLEDGES HAVING READ THIS AGREEMENT IN ITS ENTIRETY
BEFORE SIGNING, INCLUDING THE PRE-DISPUTE ARBITRATION CLAUSE SET FORTH IN
SECTION 8.7 AND THE CONFIDENTIALITY CLAUSE SET FORTH IN SECTION
8.13.
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IN
WITNESS WHEREOF, the undersigned has executed this Limited Liability Company
Agreement of the Company as of the day and year identified in the preamble
hereto.
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