Exhibit a(2)
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EXCELSIOR DIRECTIONAL HEDGE FUND OF FUNDS (TI), LLC
(A DELAWARE LIMITED LIABILITY COMPANY)
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LIMITED LIABILITY COMPANY AGREEMENT
DATED AS OF MARCH 30, 2007
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▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
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ARTICLE II
ORGANIZATION; ADMISSION OF MEMBERS
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2.1 Formation of Limited Liability Company............................6
2.2 Name..............................................................6
2.3 Principal and Registered Office...................................6
2.4 Duration..........................................................6
2.5 Objective and Business of the Company.............................6
2.6 Board of Managers.................................................7
2.7 Members...........................................................7
2.8 Organizational Member.............................................8
2.9 Both Managers and Members.........................................8
2.10 Limited Liability.................................................8
ARTICLE III
MANAGEMENT
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3.1 Management and Control............................................8
3.2 Actions by the Board of Managers..................................9
3.3 Officers..........................................................9
3.4 Meetings of Members..............................................10
3.5 Custody of Assets of the Company.................................11
3.6 Other Activities of Members and Managers.........................11
3.7 Duty of Care.....................................................11
3.8 Indemnification..................................................12
3.9 Fees, Expenses and Reimbursement.................................14
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ARTICLE IV
TERMINATION OF STATUS OF
MANAGERS, TRANSFERS AND REPURCHASES
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4.1 Termination of Status of a Manager...............................14
4.2 Removal of the Managers..........................................15
4.3 Transfer of Interests of Members.................................15
4.4 Repurchase of Interests..........................................16
ARTICLE V
CAPITAL
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5.1 Contributions to Capital.........................................18
5.2 Rights of Members to Capital.....................................19
5.3 Capital Accounts.................................................19
5.4 Allocation of Net Profit and Net Loss............................19
5.5 Allocation of Certain Expenditures...............................20
5.6 Reserves.........................................................20
5.7 Tax Allocations..................................................21
5.8 Distributions....................................................22
5.9 Withholding......................................................22
ARTICLE VI
DISSOLUTION AND LIQUIDATION
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6.1 Dissolution......................................................23
6.2 Liquidation of Assets............................................23
ARTICLE VII
ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS
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7.1 Accounting and Reports...........................................24
7.2 Determinations by the Board of Managers..........................25
7.3 Valuation of Assets..............................................25
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
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8.1 Amendment of Limited Liability Company Agreement.................26
8.2 Special Power of Attorney........................................27
8.3 Notices..........................................................28
8.4 Agreement Binding Upon Successors and Assigns....................28
8.5 Applicability of 1940 Act and Form N-2...........................28
8.6 Choice of Law; Arbitration.......................................29
8.7 Not for Benefit of Creditors.....................................30
8.8 Consents.........................................................30
8.9 Merger and Consolidation.........................................30
8.10 Pronouns.........................................................30
8.11 Confidentiality..................................................30
8.12 Certification of Non-Foreign Status..............................31
8.13 Severability.....................................................31
8.14 Filing of Returns................................................32
8.15 Tax Matters Partner..............................................32
8.16 Section 754 Election.............................................32
8.17 Member Tax Basis.................................................33
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EXCELSIOR DIRECTIONAL HEDGE FUND OF FUNDS (TI), LLC
LIMITED LIABILITY COMPANY AGREEMENT
THIS LIMITED LIABILITY COMPANY AGREEMENT of Excelsior
Directional Hedge Fund of Funds (TI), LLC (the "Company") is dated as of March
30, 2007 by and among ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and those persons hereinafter admitted as Members.
W I T N E S S E T H :
WHEREAS, the Company has heretofore been formed as a limited
liability company under the Delaware Limited Liability Company Act pursuant to
an initial Certificate of Formation (the "Certificate") dated and filed with the
Secretary of State of Delaware on February 26, 2007;
NOW, THEREFORE, for and in consideration of the foregoing and
the mutual covenants hereinafter set forth, it is hereby agreed as follows:
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ARTICLE I
DEFINITIONS
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For purposes of this Agreement:
1940 ACT The Investment Company Act of 1940, as
amended, and the rules, regulations and
orders thereunder, as amended from time to
time, or any successor law.
ADMINISTRATOR The person who provides administrative
services to the Company pursuant to an
administrative services agreement.
ADVISERS ACT The Investment Advisers Act of 1940 and
the rules, regulations and orders
thereunder, as amended from time to time,
or any successor law.
AFFILIATE An affiliated person of a person, as such
term is defined in the 1940 Act.
AGREEMENT This Limited Liability Company Agreement,
as amended from time to time.
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BOARD OF MANAGERS The Board of Managers established pursuant
to Section 2.6.
CAPITAL ACCOUNT With respect to each Member, the
capital account established and maintained
on behalf of each Member pursuant to
Section 5.3 hereof.
CERTIFICATE The Certificate of Formation of the Company
and any amendments thereto as filed with
the office of the Secretary of State of
Delaware.
CLOSING DATE The first date on or as of which a
Member other than the Organizational Member
is admitted to the Company.
CODE The United States Internal Revenue Code of
1986, as amended from time to time, or any
successor law.
COMPANY The limited liability company governed
hereby, as such limited liability company
may from time to time be constituted.
DELAWARE ACT The Delaware Limited Liability Company Act
as in effect on the date hereof and as
amended from time to time, or any successor
law.
FISCAL PERIOD Each period commencing on the day
immediately following the last day of the
preceding Fiscal Period, and ending at the
close of business on the first to occur of
the following dates:
(1) the last day of a Fiscal Year;
(2) the last day of a Taxable Year;
(3) the day preceding any day as of which
a contribution to the capital of the
Company is made pursuant to Section
5.1; or
(4) any day (other than one specified in
clause (2) above) as of which this
Agreement provides for any amount to
be credited to or debited against the
Capital Account of any Member, other
than an amount to be credited to or
debited against the Capital Accounts
of all Members in accordance with
their respective Investment
Percentages.
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FISCAL YEAR Each period commencing on April 1 of each
year and 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 Managers shall elect another
fiscal year for the Company.
FORM N-2 The Company's Registration Statement on
Form N-2 filed with the Securities and
Exchange Commission, as amended from time
to time.
INDEPENDENT MANAGERS Those Managers who are not "interested
persons" of the Company as such term is
defined in the 1940 Act.
INTEREST The entire ownership interest in the
Company at any particular time of a Member,
or other person to whom an Interest of a
Member or portion thereof has been
transferred pursuant to Section 4.3 hereof,
including the rights and obligations of
such Member or other person under this
Agreement and the Delaware Act.
INVESTMENT FUNDS Unregistered investment funds and
registered investment companies.
INVESTMENT MANAGERS Investment advisers who enter into advisory
agreements to manage a designated portfolio
of investments for the Company or who
manage Investment Funds in which the
Company has invested.
INVESTMENT PERCENTAGE A percentage established for each Member on
the Company's books as of the first day of
each Fiscal Period. The Investment
Percentage of a Member for a Fiscal Period
shall be determined by dividing the balance
of the Member's Capital Account as of the
commencement of such Fiscal Period by the
sum of the Capital Accounts of all of the
Members as of the commencement of such
Fiscal Period. The sum of the Investment
Percentages of all Members for each Fiscal
Period shall equal 100%.
MANAGEMENT AGREEMENT A separate written agreement entered into
by the Company pursuant to which the
Management Services Provider provides
Management Services to the Company.
MANAGEMENT SERVICES Such administrative and other services as
the Management Services Provider is
required to provide to the Company pursuant
to the Management Agreement.
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MANAGEMENT SERVICES The person who at any particular time
PROVIDER provides non-investment advisory related
management services and certain
administrative services to the Company
pursuant to a Management Agreement.
MANAGER An individual designated or elected as a
manager of the Company pursuant to the
provisions of Section 2.6 of this Agreement
and who serves on the Board of Managers of
the Company.
MEMBER Any person who shall have been admitted to
the Company as a member (including any
Manager in such person's capacity as a
member of the Company but excluding any
Manager in such person's capacity as a
Manager of the Company) until the Company
repurchases the entire Interest of such
person as a member pursuant to Section 4.4
hereof or a substituted Member or Members
are admitted with respect to any such
person's entire Interest as a member
pursuant to Section 4.3 hereof; such term
includes the Management Service Provider to
the extent the Management Service Provider
makes a capital contribution to the Company
and shall have been admitted to the Company
as a member.
NET ASSETS The total value of all assets of the
Company, less an amount equal to all
accrued debts, liabilities and obligations
of the Company, calculated before giving
effect to any repurchases of Interests.
NET PROFIT OR NET LOSS The amount by which the Net Assets as of
the close of business on the last day of a
Fiscal Period exceed (in the case of Net
Profit) or are less than (in the case of
Net Loss) the Net Assets as of the
commencement of the same Fiscal Period (or,
with respect to the initial Fiscal Period
of the Company, at the close of business on
the Closing Date), such amount to be
adjusted to exclude any items to be
allocated among the Capital Accounts of the
Members on a basis which is not in
accordance with the respective Investment
Percentages of all Members as of the
commencement of such Fiscal Period pursuant
to Sections 5.5 and 5.6 hereof.
OFFICER An individual designated as an officer of
the Company pursuant to the provisions of
Section 3.3 of the Agreement and who serves
as an officer of the Company.
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ORGANIZATIONAL MEMBER ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
SECURITIES 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 manner of
derivative instruments and any contracts
based on any index or group of securities,
debt obligations or currencies, or
commodities, and any options thereon, as
well as shares of or interests in
Investment Funds, including but not limited
to another Investment Fund that has the
same investment objective and substantially
the same investment policies as the
Company.
SUBADVISORS Those Investment Managers for which a
separate investment vehicle has been
created in which the Investment Manager
serves as general partner and the Company
is the sole limited partner and those
Investment Managers who manage the
Company's assets directly through a
separate managed account.
TAXABLE YEAR The 12-month period ending December 31 of
each year.
TRANSFER The assignment, transfer, sale,
encumbrance, pledge or other disposition of
all or any portion of an Interest,
including any right to receive any
allocations and distributions attributable
to an Interest.
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ARTICLE II
ORGANIZATION; ADMISSION OF MEMBERS
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2.1 FORMATION OF LIMITED LIABILITY COMPANY.
The Board of Managers shall execute and file in accordance with
the Delaware Act any amendment to the Certificate and shall execute and file
with applicable governmental authorities any other instruments, documents and
certificates that, in the opinion of the 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 that such legal
counsel may deem necessary or appropriate to effectuate, implement and continue
the valid existence and business of the Company.
2.2 NAME.
The name of the Company shall be "Excelsior Directional Hedge
Fund of Funds (TI), LLC" or such other name as the Board of Managers may
hereafter adopt upon (i) causing an appropriate amendment to the Certificate to
be filed in accordance with the Delaware Act and (ii) sending notice thereof to
each Member.
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 Managers.
The Company shall have its registered office in Delaware at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and shall have National Corporate
Research, Ltd. as its registered agent for service of process in Delaware,
unless a different registered office or agent is designated from time to time by
the Board of Managers.
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.
2.5 OBJECTIVE AND BUSINESS OF THE COMPANY.
(a) The objective and business of the Company is to purchase,
sell (including short sales), invest and trade in Securities, on margin or
otherwise, and to engage in any financial or derivative transactions relating
thereto or otherwise. The Company may execute, deliver and perform all
contracts, agreements, subscription documents and other undertakings and engage
in
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all activities and transactions as may in the opinion of the Board of Managers
be necessary or advisable to carry out its objective or business. The Company
shall be operated subject to any applicable restrictions of the Bank Holding
Company Act of 1956, as amended. Subject to approval by the Board of Managers,
the Company may pursue its investment objective by investing substantially all
of its assets in another Investment Fund that has the same investment objective
and substantially the same investment policies as the Company.
(b) The Company shall operate as a closed-end,
non-diversified, management investment company in accordance with the 1940 Act
and subject to any fundamental policies and investment restrictions set forth in
the Form N-2.
2.6 BOARD OF MANAGERS.
(a) The Board of Managers may, subject to the provisions of
paragraphs (a) and (b) of this Section 2.6 with respect to the number of and
vacancies in the position of Manager and the provisions of Section 3.4 hereof
with respect to the election of Managers to the Board of Managers by Members,
designate any person who shall agree to be bound by all of the terms of this
Agreement as a Manager. The names and mailing addresses of the Managers shall be
set forth in the books and records of the Company. The number of Managers shall
be fixed from time to time by the Board of Managers.
(b) Each Manager shall serve on the Board of Managers for the
duration of the term of the Company, unless his or her status as a Manager shall
be sooner terminated pursuant to Section 4.1 hereof. In the event of any vacancy
in the position of Manager, the remaining Managers may appoint an individual to
serve in such capacity, so long as immediately after such appointment at least
two-thirds (2/3) of the Managers then serving would have been elected by the
Members. The Board of Managers may call a meeting of Members to fill any vacancy
in the position of Manager, and shall do so within 60 days after any date on
which Managers who were elected by the Members cease to constitute a majority of
the Managers then serving on the Board of Managers.
(c) In the event that no Manager remains to continue the
business of the Company, the Management Services Provider shall promptly call a
meeting of the Members, to be held within 60 days after the date on which the
last Manager ceased to act in that capacity, for the purpose of determining
whether to continue the business of the Company and, if the business shall be
continued, of electing the required number of Managers to the Board of Managers.
If the Members shall determine at such meeting not to continue the business of
the Company or if the required number of Managers is not elected within 60 days
after the date on which the last Manager ceased to act in that capacity, then
the Company shall be dissolved pursuant to Section 6.1 hereof and the assets of
the Company shall be liquidated and distributed pursuant to Section 6.2 hereof.
2.7 MEMBERS.
The Board of Managers may admit one or more Members as of the
first day of each calendar quarter or more frequently in the sole discretion of
the Board of Managers. Subject to the foregoing terms, Members may be admitted
to the Company subject to the condition
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that each such Member shall execute an appropriate signature page of this
Agreement or of the Company's subscription agreement pursuant to which such
Member agrees to be bound by all the terms and provisions hereof. The Board of
Managers may in its absolute discretion reject any subscription for Interests.
The admission of any person as a Member shall be effective upon the revision of
the books and records of the Company to reflect the name and the contribution to
the capital of the Company of such additional Member.
2.8 ORGANIZATIONAL MEMBER.
The initial contribution of capital to the Company by the
Organizational Member shall be represented by an Interest, which Interest shall
have the same rights as other Interests.
2.9 BOTH MANAGERS AND MEMBERS
A Member may at the same time be a Manager and a Member, in
which event such Member's rights and obligations in each capacity shall be
determined separately in accordance with the terms and provisions hereof or as
provided in the Delaware Act.
2.10 LIMITED LIABILITY
Except as provided under applicable law, a Member shall not be
liable for the Company's debts, obligations and liabilities in any amount in
excess of the Capital Account balance of such Member, plus such Member's share
of undistributed profits and assets. Except as provided under applicable law, a
Manager shall not be liable for the Company's debts, obligations and
liabilities.
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ARTICLE III
MANAGEMENT
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3.1 MANAGEMENT AND CONTROL.
(a) Management and control of the business of the Company
shall be vested in the Board of Managers, 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 Manager shall have the authority individually to act
on behalf of or to bind the Company except within the scope of such Manager's
authority as delegated by the Board of Managers. The parties hereto intend that,
except to the extent otherwise expressly provided herein, (i) each Manager shall
be vested with the same powers, authority and responsibilities on behalf of the
Company as are customarily vested in each director of a Delaware corporation and
(ii) each Independent Manager shall be vested with the same powers, authority
and responsibilities on behalf of the Company as are customarily vested in each
director of a closed-end management investment company registered under the 1940
Act that is organized as a Delaware corporation who is not an "interested
person" of such company as
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such term is defined in the 1940 Act. During any period in which the Company
shall have no Managers, the Management Services Provider shall continue to serve
as the Management Services Provider to the Company and to provide the Management
Services to the Company.
(b) Each Member agrees not to treat, on such Member's personal
income tax return or in any claim for a tax refund, any item of income, gain,
loss, deduction or credit in a manner inconsistent with the treatment of such
item by the Company. The Board of Managers shall have the exclusive authority
and discretion to make any elections required or permitted to be made by the
Company under any provisions of the Code or any other revenue laws.
(c) Members shall have no right to participate in and shall
take no part in the management or control of the Company's business and shall
have no right, power or authority to act for or bind the Company. Members shall
have the right to vote on any matters only as provided in this Agreement or on
any matters that require the approval of the holders of voting securities under
the 1940 Act or as otherwise required in the Delaware Act.
(d) The Board of Managers may delegate to any other person
any rights, power and authority vested by this Agreement in the Board of
Managers to the extent permissible under applicable law, and may appoint persons
to serve as Officers.
3.2 ACTIONS BY THE BOARD OF MANAGERS.
(a) Unless provided otherwise in this Agreement, the Board of
Managers shall act only: (i) by the affirmative vote of a majority of the
Managers (including the vote of a majority of the Independent Managers if
required by the ▇▇▇▇ ▇▇▇) present at a meeting duly called at which a quorum of
the Managers shall be present (in person or, if in person attendance is not
required by the 1940 Act, by telephone) or (ii) by unanimous written consent of
all of the Managers without a meeting, if permissible under the ▇▇▇▇ ▇▇▇.
(b) The Board of Managers may designate from time to time a
Principal Manager who shall preside at all meetings. Meetings of the Board of
Managers may be called by the Principal Manager or by any two Managers, and may
be held on such date and at such time and place as the Board of Managers shall
determine. Each Manager shall be entitled to receive written notice of the date,
time and place of such meeting within a reasonable time in advance of the
meeting. Notice need not be given to any Manager who shall attend a meeting
without objecting to the lack of notice or who shall execute a written waiver of
notice with respect to the meeting. Managers may attend and participate in any
meeting by telephone except where in person attendance at a meeting is required
by the 1940 Act. A majority of the Managers shall constitute a quorum at any
meeting.
3.3 OFFICERS.
(a) The Board of Managers may elect one or more Officers. The
Board of Managers may also delegate to an Officer the authority to appoint,
remove or fix the duties, compensation or terms of office of, one or more other
Officers as the Board of Managers shall at any time and from time to time deem
to be advisable. A person holding more than one office may not act in more than
one capacity to execute, acknowledge or verify on behalf of the
9
Company any instrument required by law to be executed, acknowledged and verified
by more than one Officer. No Officer need also be a Manager.
(b) Each Officer shall hold office until his successor is
elected or appointed or until his earlier displacement from office by
resignation, removal or otherwise; provided, that if the term of office of any
Officer shall have been fixed by the Board of Managers, or by an Officer acting
under authority delegated by the Board of Managers, such Officer shall cease to
hold such office no later than the date of expiration of such term, regardless
of whether any other person shall have been elected or appointed to succeed him.
Any Officer may resign at any time by written notice to the Company. Any Officer
may be removed at any time by the Board of Managers or by an Officer acting
under authority delegated by the Board of Managers if in its or his judgment the
best interest of the Company would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an Officer shall not of itself create contract rights
between the Company and such Officer.
(c) If the office of any Officer becomes vacant for any
reason, the vacancy may be filled by the Board of Managers or by the Officer
acting under authority delegated by the Board of Managers. Each Officer elected
or appointed to fill a vacancy shall hold office for the balance of the term for
which his predecessor was elected or appointed.
(d) All Officers as between themselves and the Company shall
have such powers, perform such duties and be subject to such restrictions, if
any, in the management of the Company as may be provided in this Agreement or,
to the extent not so provided, as may be prescribed by the Board of Managers or
by the Officer acting under authority delegated by the Board of Managers.
3.4 MEETINGS OF MEMBERS.
(a) Actions requiring the vote of the Members may be taken at
any duly constituted meeting of the Members at which a quorum is present.
Meetings of the Members may be called by the Board of Managers or by Members
holding 25% or more of the total number of votes eligible to be cast by all
Members, and may be held at such time, date and place as the Board of Managers
shall determine. The Board of Managers shall arrange to provide written notice
of the meeting, stating the date, time and place of the meeting and the record
date therefor, to each Member entitled to vote at the meeting within a
reasonable time prior thereto. Failure to receive notice of a meeting on the
part of any Member shall not affect the validity of any act or proceeding of the
meeting, so long as a quorum shall be present at the meeting, except as
otherwise required by applicable law. Only matters set forth in the notice of a
meeting may be voted on by the Members at a meeting. The presence in person or
by proxy of Members holding a majority of the total number of votes eligible to
be cast by all Members as of the record date shall constitute a quorum at any
meeting. In the absence of a quorum, a meeting of the Members may be adjourned
by action of Members present at such meeting in person or by proxy holding a
majority of the total number of votes eligible to be cast by such Members,
without additional notice to the Members. Except as otherwise required by any
provision of this Agreement or of the 1940 Act, (i) those candidates receiving a
plurality of the votes cast at any meeting of Members shall be elected as
Managers and (ii) all other actions of the Members taken at a
10
meeting shall require the affirmative vote of Members holding a majority of the
total number of votes eligible to be cast by those Members who are present in
person or by proxy at such meeting.
(b) Each Member shall be entitled to cast at any meeting of
Members a number of votes equivalent to such Member's Investment Percentage as
of the record date for such meeting. The Board of Managers shall establish a
record date not less than 10 nor more than 60 days prior to the date of any
meeting of Members to determine eligibility to vote at such meeting and the
number of votes that each Member will be entitled to cast thereat, and shall
maintain for each such record date a list setting forth the name of each Member
and the number of votes that each Member will be entitled to cast at the
meeting.
(c) A Member may vote at any meeting of Members by a proxy
properly executed in writing by the Member and filed with the Company before or
at the time of the meeting. A proxy may be suspended or revoked, as the case may
be, by the Member executing the proxy by a later writing delivered to the
Company at any time prior to exercise of the proxy or if the Member executing
the proxy shall be present at the meeting and decide to vote in person. Any
action of the Members that is permitted to be taken at a meeting of the Members
may be taken without a meeting if consents in writing, setting forth the action
taken, are signed by Members holding a majority of the total number of votes
eligible to be cast or such greater percentage as may be required in order to
approve such action.
3.5 CUSTODY OF ASSETS OF THE COMPANY.
The physical possession of all funds, Securities or other
properties of the Company shall at all times, be held, controlled and
administered by one or more custodians retained by the Company in accordance
with the requirements of the 1940 Act and the rules thereunder.
3.6 OTHER ACTIVITIES OF MEMBERS AND MANAGERS.
(a) The Managers shall not be required to devote full time to
the affairs of the Company, but shall devote such time as may reasonably be
required to perform their obligations under this Agreement.
(b) Any Member or Manager, and any Affiliate of any Member or
Manager, may engage in or possess an interest in other business ventures or
commercial dealings of every kind and description, independently or with others,
including, but not limited to, acquisition and disposition of Securities,
provision of investment advisory or brokerage services, serving as directors,
officers, employees, advisors or agents of other companies, partners of any
partnership, members of any limited liability company, or trustees of any trust,
or entering into any other commercial arrangements. No Member or Manager shall
have any rights in or to such activities of any other Member or Manager, or any
profits derived therefrom.
3.7 DUTY OF CARE.
(a) A Manager shall not be liable to the Company or to any of
its Members for any loss or damage occasioned by any act or omission in the
performance of his or her
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services under this Agreement, unless it shall be determined by final judicial
decision on the merits from which there is no further right to appeal that such
loss is due to an act or omission of such Manager constituting willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Manager's office.
(b) Members not in breach of any obligation hereunder or under
any agreement pursuant to which the Member subscribed for an Interest shall be
liable to the Company, any Member or third parties only as provided under the
Delaware Act.
3.8 INDEMNIFICATION.
(a) To the fullest extent permitted by law, the Company shall,
subject to Section 3.8(b) hereof, indemnify each Manager (including for this
purpose his or her respective executors, heirs, assigns, successors or other
legal representatives), against all losses, claims, damages, liabilities, costs
and expenses, including, but not limited to, amounts paid in satisfaction of
judgments, in compromise, or as fines or penalties, and reasonable counsel fees,
incurred in connection with the defense or disposition of any action, suit,
investigation or other proceeding, whether civil or criminal, before any
judicial, arbitral, administrative or legislative body, in which such indemnitee
may be or may have been involved as a party or otherwise, or with which such
indemnitee may be or may have been threatened, while in office or thereafter, by
reason of being or having been a Manager of the Company or the past or present
performance of services to the Company by such indemnitee, except to the extent
such loss, claim, damage, liability, cost or expense shall have been finally
determined in a decision on the merits in any such action, suit, investigation
or other proceeding to have been incurred or suffered by such indemnitee by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of such indemnitee's office. The
rights of indemnification provided under this Section 3.8 shall not be construed
so as to provide for indemnification of a Manager for any liability (including
liability under federal securities laws which, under certain circumstances,
impose liability even on persons that act in good faith) to the extent (but only
to the extent) that such indemnification would be in violation of applicable
law, but shall be construed so as to effectuate the applicable provisions of
this Section 3.8 to the fullest extent permitted by law.
(b) Expenses, including reasonable counsel fees, so incurred
by any such indemnitee (but excluding amounts paid in satisfaction of judgments,
in compromise, or as fines or penalties), may be paid from time to time by the
Company in advance of the final disposition of any such action, suit,
investigation or proceeding upon receipt of an undertaking by or on behalf of
such indemnitee to repay to the Company amounts so paid if it shall ultimately
be determined that indemnification of such expenses is not authorized under
Section 3.8(a) hereof; PROVIDED, HOWEVER, that (i) such indemnitee shall provide
security for such undertaking, (ii) the Company shall be insured by or on behalf
of such indemnitee against losses arising by reason of such indemnitee's failure
to fulfill such undertaking, or (iii) a majority of the Managers (excluding any
Manager who is either seeking advancement of expenses hereunder or is or has
been a party to any other action, suit, investigation or proceeding involving
claims similar to those involved in the action, suit, investigation or
proceeding giving rise to a claim for advancement of expenses hereunder) or
independent legal counsel in a written opinion shall
12
determine based on a review of readily available facts (as opposed to a full
trial-type inquiry) that there is reason to believe such indemnitee ultimately
will be entitled to indemnification.
(c) As to the disposition of any action, suit, investigation
or proceeding (whether by a compromise payment, pursuant to a consent decree or
otherwise) without an adjudication or a decision on the merits by a court, or by
any other body before which the proceeding shall have been brought, that an
indemnitee is liable to the Company or Members by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of such indemnitee's office, indemnification shall be provided pursuant
to Section 3.8(a) hereof if (i) approved as in the best interests of the Company
by a majority of the Managers (excluding any Manager who is either seeking
indemnification hereunder or is or has been a party to any other action, suit,
investigation or proceeding involving claims similar to those involved in the
action, suit, investigation or proceeding giving rise to a claim for
indemnification hereunder) upon a determination based upon a review of readily
available facts (as opposed to a full trial-type inquiry) that such indemnitee
acted in good faith and in the reasonable belief that such actions were in the
best interests of the Company and that such indemnitee is not liable to the
Company or its Members by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of such
indemnitee's office, or (ii) the Board of Managers secures a written opinion of
independent legal counsel based upon a review of readily available facts (as
opposed to a full trial-type inquiry) to the effect that such indemnification
would not protect such indemnitee against any liability to the Company or its
Members to which such indemnitee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of such indemnitee's office.
(d) Any indemnification or advancement of expenses made
pursuant to this Section 3.8 shall not prevent the recovery from any indemnitee
of any such amount if such indemnitee subsequently shall be determined in a
decision on the merits in any action, suit, investigation or proceeding
involving the liability or expense that gave rise to such indemnification or
advancement of expenses to be liable to the Company or its Members by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of such indemnitee's office. In (i) any suit
brought by a Manager (or other person entitled to indemnification hereunder) to
enforce a right to indemnification under this Section 3.8 it shall be a defense
that, and (ii) in any suit in the name of the Company to recover any
indemnification or advancement of expenses made pursuant to this Section 3.8 the
Company shall be entitled to recover such expenses upon a final adjudication
that, the Manager or other person claiming a right to indemnification under this
Section 3.8 has not met the applicable standard of conduct set forth in this
Section 3.8. In any such suit brought to enforce a right to indemnification or
to recover any indemnification or advancement of expenses made pursuant to this
Section 3.8, the burden of proving that the Manager or other person claiming a
right to indemnification is not entitled to be indemnified, or to any
indemnification or advancement of expenses, under this Section 3.8 shall be on
the Company (or any Member acting derivatively or otherwise on behalf of the
Company or its Members).
(e) An indemnitee may not satisfy any right of indemnification
or advancement of expenses granted in this Section 3.8 or to which such
indemnitee may otherwise
13
be entitled except out of the assets of the Company, and no Member shall be
personally liable with respect to any such claim for indemnification or
advancement of expenses.
(f) The rights of indemnification provided hereunder shall not
be exclusive of or affect any other rights to which any person may be entitled
by contract or otherwise under law. Nothing contained in this Section 3.8 shall
affect the power of the Company to purchase and maintain liability insurance on
behalf of any Manager or other person.
3.9 FEES, EXPENSES AND REIMBURSEMENT.
(a) So long as the Management Services Provider provides
Management Services to the Company, it shall be entitled to receive fees for
such services as may be agreed to by the Management Services Provider and the
Company pursuant to the Management Agreement.
(b) The Board of Managers may cause the Company to compensate
each Manager who is not an officer or employee of the Management Services
Provider (or of any Affiliate of the Management Services Provider) for his or
her services as such. In addition, the Managers shall be reimbursed by the
Company for reasonable out-of-pocket expenses incurred by them in performing
their duties under this Agreement.
(c) The Company shall bear all of its own operating expenses
other than those specifically required to be borne by the Management Services
Provider or another party pursuant to the Management Agreement or another
agreement with the Company. The Management Services Provider shall be entitled
to reimbursement from the Company for any expenses that it pays on behalf of the
Company.
(d) Subject to procuring any required regulatory approvals,
from time to time the Company may, alone or in conjunction with other accounts
for which the Management Services Provider, or any Affiliate of the Management
Services Provider, acts as general partner or investment adviser, purchase
insurance in such amounts, from such insurers and on such terms as the Board of
Managers shall determine.
---------------------------------
ARTICLE IV
TERMINATION OF STATUS OF
MANAGERS, TRANSFERS AND REPURCHASES
---------------------------------
4.1 TERMINATION OF STATUS OF A MANAGER.
The status of a Manager shall terminate if the Manager (i) shall
die; (ii) shall be adjudicated incompetent; (iii) shall voluntarily withdraw as
a Manager (upon not less than 90 days' prior written notice to the other
Managers); (iv) shall be removed; (v) shall be certified by a physician to be
mentally or physically unable to perform his or her duties hereunder; (vi) shall
be declared bankrupt by a court with appropriate jurisdiction, file a petition
commencing a voluntary case under any bankruptcy law or make an assignment for
the benefit of creditors;
14
(vii) shall have a receiver appointed to administer the property or affairs of
such Manager; or (viii) shall otherwise cease to be a Manager of the Company
under the Delaware Act.
4.2 REMOVAL OF THE MANAGERS.
Any Manager may be removed either by (a) the vote or written
consent of at least two-thirds (2/3) of the Managers not subject to the removal
vote or (b) the vote or written consent of Members holding not less than
two-thirds (2/3) of the total number of votes eligible to be cast by all
Members.
4.3 TRANSFER OF INTERESTS OF MEMBERS.
(a) An Interest of a Member may be Transferred only (i) by
operation of law pursuant to the death, divorce, bankruptcy, insolvency or
dissolution of such Member or (ii) with the written consent of the Board of
Managers (which may be withheld in its sole discretion); PROVIDED, HOWEVER, that
the Board of Managers may not consent to any Transfer other than a Transfer (i)
in which the tax basis of the Interest in the hands of the transferee is
determined, in whole or in part, by reference to its tax basis in the hands of
the transferor (E.G., certain Transfers to affiliates, gifts and contributions
to family partnerships), (ii) to members of the Member's immediate family
(brothers, sisters, spouse, parents and children), or (iii) a distribution from
a qualified retirement plan or an individual retirement account, unless it
consults with counsel to the Company and counsel to the Company confirms that
such Transfer will not cause the Company to be treated as a "publicly traded
partnership" taxable as a corporation.
(b) The Board of Managers may not consent to a Transfer of an
Interest or a portion thereof of a Member unless: (i) the person to whom such
Interest is Transferred is a person whom the Company believes is an accredited
investor, as such term is defined in Regulation D under the Securities Act of
1933 or any successor thereto; (ii) the person to whom such Interest is
Transferred (or each of such person's beneficial owners if such a person is a
"private investment company" as defined in paragraph (d)(3) of Rule 205-3 under
the Advisers Act) is a person whom the Company believes meets the requirements
of paragraph (d)(1) of Rule 205-3 under the Advisers Act and all then applicable
qualification requirements to invest in the Company as established by the Board
of Managers; and (iii) the entire Interest of the Member is Transferred to a
single transferee or, after the Transfer of a portion of an Interest, the
balance of the Capital Account of each of the transferee and transferor is not
less than $100,000. Any transferee that acquires an Interest by operation of law
as the result of the death, divorce, bankruptcy, insolvency or dissolution of a
Member or otherwise, shall be entitled to the allocations and distributions
allocable to the Interest so acquired and to Transfer such Interest in
accordance with the terms of this Agreement, but shall not be entitled to the
other rights of a Member unless and until such transferee becomes a substituted
Member. If a Member transfers an Interest with the approval of the Board of
Managers, the Board of Managers shall promptly take all necessary actions so
that the transferee to whom such Interest is transferred is admitted to the
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.
15
(c) Each Member shall indemnify and hold harmless the Company,
the Managers, the Management Services Provider, each other Member and any
Affiliate of the foregoing against all losses, claims, damages, liabilities,
costs and expenses (including legal or other expenses incurred in investigating
or defending against any such losses, claims, damages, liabilities, costs and
expenses or any judgments, fines and amounts paid in settlement), joint or
several, to which such persons may become subject by reason of or arising from
(i) any Transfer made by such Member in violation of this Section 4.3 and (ii)
any misrepresentation by such Member in connection with any such Transfer.
4.4 REPURCHASE OF INTERESTS.
(a) Except as otherwise provided in this Agreement, no Member
or other person holding an Interest or portion thereof shall have the right to
withdraw or tender to the Company for repurchase that Interest or portion
thereof. The Board of Managers from time to time, in its complete and exclusive
discretion and on such terms and conditions as it may determine, may cause the
Company to repurchase Interests or portions thereof pursuant to written tenders.
However, the Company shall not offer to repurchase Interests on more than two
occasions during any one Fiscal Year unless it has been advised by counsel to
the Company to the effect that such more frequent offers would not cause any
adverse tax consequences to the Company or the Members. In determining whether
to cause the Company to repurchase Interests or portions thereof pursuant to
written tenders, the Board of Managers shall consider the recommendation of the
Management Services Provider, and shall also consider the following factors,
among others:
(1) whether any Members have requested to tender Interests
or portions thereof to the Company;
(2) the liquidity of the Company's assets;
(3) the investment plans and working capital requirements
of the Company;
(4) the relative economies of scale with respect to the
size of the Company;
(5) the history of the Company in repurchasing Interests or
portions thereof;
(6) the economic condition of the securities markets; and
(7) the anticipated tax consequences of any proposed
repurchases of Interests or portions thereof.
The Board of Managers shall cause the Company to repurchase Interests or
portions thereof pursuant to written tenders only on terms fair to the Company
and to all Members or one or more classes of Members (including persons holding
Interests acquired from Members), as applicable.
16
(b) A Member who tenders for repurchase only a portion of such
Member's Interest shall be required to maintain a Capital Account balance at
least equal to $100,000, or such lesser amount as may be established by the
Board of Managers.
(c) The Management Services Provider may tender its Interest
or a portion thereof as a Member under Section 4.4(a) hereof.
(d) The Board of Managers may cause the Company to repurchase
an Interest or portion thereof of a Member or any person acquiring an Interest
or portion thereof from or through a Member in the event that the Board of
Managers determines or has reason to believe that:
(1) such an Interest or portion thereof has been
transferred in violation of Section 4.4 hereof, or such
an Interest or portion thereof has vested in any person
by operation of law as the result of the death,
divorce, dissolution, bankruptcy or adjudication of
incompetence of a Member;
(2) ownership of such an Interest by a Member or other
person will cause the Company to be in violation of, or
require registration of any Interest or portion thereof
under, or subject the Company to additional
registration or regulation under, the securities laws
of the United States or any other relevant
jurisdiction;
(3) continued ownership of such an Interest may be harmful
or injurious to the business or reputation of the
Company, the Managers or the Management Services
Provider, or may subject the Company or any of the
Members to an undue risk of adverse tax or other fiscal
consequences;
(4) any of the representations and warranties made by a
Member in connection with the acquisition of an
Interest or portion thereof was not true when made or
has ceased to be true;
(5) it would be in the best interests of the Company, as
determined by the Board of Managers in its absolute
discretion, for the Company to repurchase such an
Interest or portion thereof; or
(6) such repurchase is necessary to correct an
administrative error made by the Company or its agent
in connection with the sale or purchase of an Interest.
(e) Repurchases of Interests or portions thereof by the Company
shall be payable promptly after the date of each such repurchase or, in the case
of an offer by the Company to repurchase Interests, promptly after the
expiration date of such repurchase offer in accordance with the terms of the
Company's repurchase offer. Payment of the purchase price for an Interest (or
portion thereof) shall consist of: (i) cash or a promissory note, which need not
bear interest, in an amount equal to such percentage, as may be determined by
the Board of
17
Managers, of the estimated unaudited net asset value of the Interest (or portion
thereof) repurchased by the Company determined as of the date of such repurchase
(the "Initial Payment"); and, if determined to be appropriate by the Board of
Managers or if the Initial Payment is less than 100% of the estimated unaudited
net asset value, (ii) a promissory note entitling the holder thereof to a
contingent payment equal to the excess, any, of (x) the net asset value of the
Interest (or portion thereof) repurchased by the Company as of the date of such
repurchase, determined based on the audited financial statements of the Company
for the Fiscal Year in which such repurchase was effective, over (y) the Initial
Payment. Notwithstanding anything in the foregoing to the contrary, the Board of
Managers, in its discretion, may pay all or any portion of the repurchase price
in marketable Securities (or any combination of marketable Securities and cash)
having a value, determined as of the date of repurchase, equal to the amount to
be repurchased. Any promissory note given to satisfy the Initial Payment shall
be due and payable not more than 45 days after the date of repurchase or, if the
Company has requested withdrawal of its capital form any Investment Funds in
order to fund the repurchase of Interests, 10 business days after the Company
has received at least 90% of the aggregate amount withdrawn by the Company from
such Investment Funds. All repurchases of Interests shall be subject to any and
all conditions as the Board of Managers may impose in its sole discretion. The
amount due to any Member whose Interest or portion thereof is repurchased shall
be equal to the value of such Member's Capital Account or portion thereof, as
applicable, as of the effective date of repurchase, after giving effect to all
allocations to be made to such Member's Capital Account as of such date.
------------------------------------
ARTICLE V
CAPITAL
------------------------------------
5.1 CONTRIBUTIONS TO CAPITAL.
(a) The minimum initial contribution of each Member to the
capital of the Company shall be such amount as the Board of Managers, in its
discretion, may determine from time to time, but in no event shall be less than
$100,000. 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 Managers shall not be entitled
to make voluntary contributions of capital to the Company as Managers of the
Company, but may make voluntary contributions to the capital of the Company as
Members. The Management Services Provider may make voluntary contributions to
the capital of the Company as a Member.
(b) The Members and the Management Services Provider, as a
Member, may make additional contributions to the capital of the Company of at
least $25,000, effective as of such times as the Board of Managers, 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.
18
(c) Except as otherwise permitted by the Board of Managers, (i)
initial and any additional contributions to the capital of the Company by any
Member shall be payable in cash or in such Securities that the Board of
Managers, in its absolute discretion, may agree to accept on behalf of the
Company, and (ii) initial and any additional contributions in cash shall be
payable in readily available funds at the date of the proposed acceptance of the
contribution. The Company shall charge each Member making a contribution in
Securities to the capital of the Company such amount as may be determined by the
Board of Managers not exceeding 2% of the value of such contribution in order to
reimburse the Company for any costs incurred by the Company by reason of
accepting such Securities, and any such charge shall be due and payable by the
contributing Member in full at the time the contribution to the capital of the
Company to which such charges relate is due. The value of contributed Securities
shall be determined in accordance with Section 7.3 hereof as of the date of
contribution.
(d) The minimum initial and additional contributions set forth
in (a) and (b) of this Section 5.1 may be reduced by the Board of Managers in
accordance with such schedule of reductions as may be adopted by the Board of
Managers in its sole discretion.
5.2 RIGHTS OF MEMBERS TO CAPITAL.
No Member shall be entitled to interest on any contribution to
the capital of the Company, nor shall any Member be entitled to the return of
any capital of the Company except (i) upon the repurchase by the Company of a
part or all of such Member's Interest pursuant to Section 4.4 hereof, (ii)
pursuant to the provisions of Section 5.6(c) hereof or (iii) upon the
liquidation of the Company's assets pursuant to Section 6.2 hereof. No Member
shall be liable for the return of any such amounts. No Member shall have the
right to require partition of the Company's property or to compel any sale or
appraisal of the Company's assets.
5.3 CAPITAL ACCOUNTS.
(a) The Company shall maintain a separate Capital Account for
each Member.
(b) Each Member's Capital Account shall have an initial balance
equal to the amount of cash and the value of any Securities (determined in
accordance with Section 7.3 hereof) (net of any liabilities secured by such
Securities that the Company is considered to assume or take subject to under
Section 752 of the Code) constituting such Member's initial contribution to the
capital of the Company.
(c) Each Member's Capital Account shall be increased by the sum
of (i) the amount of cash and the value of any Securities (determined in
accordance with Section 7.3 hereof) (net of any liabilities secured by such
Securities that the Company is considered to assume or take subject to Section
under 752 of the Code) constituting additional contributions by such Member to
the capital of the Company permitted pursuant to Section 5.1 hereof, plus (ii)
all amounts credited to such Member's Capital Account pursuant to Sections 5.4
through 5.6 hereof.
(d) Each Member's Capital Account shall be reduced by the sum of
(i) the amount of any repurchase of the Interest, or portion thereof, of such
Member or distributions to such Member pursuant to Sections 4.4, 5.8 or 6.2
hereof which are not reinvested (net of any liabilities secured by any asset
distributed that such Member is deemed to assume or take subject
19
to under Section 752 of the Code), plus (ii) any amounts debited against such
Member's Capital Account pursuant to Sections 5.4 through 5.6 hereof.
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.
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 Managers to have been paid or withheld on
behalf of, or by reason of particular circumstances applicable to, one or more
but fewer than all of the Members, shall be charged to only those Members on
whose behalf such payments are made or whose particular circumstances gave rise
to such payments. Such charges shall be debited from the Capital Accounts of
such Members as of the close of the Fiscal Period during which any such items
were paid or accrued by the Company.
5.6 RESERVES.
(a) Appropriate reserves may be created, accrued and charged
against Net Assets and proportionately against the Capital Accounts of the
Members for contingent liabilities, if any, as of the date any such contingent
liability becomes known to the Management Services Provider or the Board of
Managers, such reserves to be in the amounts that the Board of Managers, in its
sole discretion, deems necessary or appropriate. The Board of Managers may
increase or reduce any such reserves from time to time by such amounts as the
Board of Managers, in its sole discretion, deems necessary or appropriate. The
amount of any such reserve, or any increase or decrease therein, shall be
proportionately charged or credited, as appropriate, to the Capital Accounts of
those parties who are Members at the time when such reserve is created,
increased or decreased, as the case may be; PROVIDED, HOWEVER, that if any such
individual reserve item, adjusted by any increase therein, exceeds the lesser of
$500,000 or 1% of the aggregate value of the Capital Accounts of all such
Members, the amount of such reserve, increase, or decrease shall instead be
charged or credited to those parties who were Members at the time, as determined
by the Board of Managers, in its sole discretion, of the act or omission giving
rise to the contingent liability for which the reserve was established,
increased or decreased in proportion to their Capital Accounts at that time.
(b) If at any time an amount is paid or received by the Company
(other than contributions to the capital of the Company, distributions or
repurchases of Interests or portions thereof) and such amount exceeds the lesser
of $500,000 or 1% of the aggregate value of the Capital Accounts of all Members
at the time of payment or receipt and such amount was not accrued or reserved
for but would nevertheless, in accordance with the Company's accounting
practices, be treated as applicable to one or more prior Fiscal Periods, then
such amount shall be proportionately charged or credited, as appropriate, to
those parties who were Members during such prior Fiscal Period or Periods.
20
(c) If any amount is required by paragraph (a) or (b) of this
Section 5.6 to be charged or credited to a party who is no longer a Member, such
amount shall be paid by or to such party, as the case may be, in cash, with
interest from the date on which the Board of Managers determines that such
charge or credit is required. In the case of a charge, the former Member shall
be obligated to pay the amount of the charge, plus interest as provided above,
to the Company on demand; PROVIDED, HOWEVER, that (i) in no event shall a former
Member be obligated to make a payment exceeding the amount of such Member's
Capital Account at the time to which the charge relates; and (ii) no such demand
shall be made after the expiration of three years since the date on which such
party ceased to be a Member. To the extent that a former Member fails to pay to
the Company, in full, any amount required to be charged to such former Member
pursuant to paragraph (a) or (b), whether due to the expiration of the
applicable limitation period or for any other reason whatsoever, the deficiency
shall be charged proportionately to the Capital Accounts of the Members at the
time of the act or omission giving rise to the charge to the extent feasible,
and otherwise proportionately to the Capital Accounts of the current Members.
5.7 TAX ALLOCATIONS.
For each fiscal year, items of income, deduction, gain, loss or
credit shall be allocated for income tax purposes among the Members in such
manner as to reflect equitably amounts credited or debited to each Member's
Capital Account for the current and prior fiscal years (or relevant portions
thereof). Allocations under this Section 5.7 shall be made pursuant to the
principles of Sections 704(b) and 704(c) of the Code, and Treasury Regulations
Sections 1.704-1(b)(2)(iv)(f) and (g), 1.704-1(b)(4)(i) and 1.704-3(e)
promulgated thereunder, as applicable, or the successor provisions to such
Section and Treasury Regulations. Notwithstanding anything to the contrary in
this Agreement, there shall be allocated to the Members such gains or income as
shall be necessary to satisfy the "qualified income offset" requirements of
Treasury Regulations 1.704-1(b)(2)(ii)(d).
If the Company realizes ordinary income and/or capital gains
(including short-term capital gains) for Federal income tax purposes
(collectively, "income") for any fiscal year during or as of the end of which
all the Interests of one or more Positive Basis Members (as hereinafter defined)
are repurchased by the Company pursuant to Article IV, the Board of Managers, in
its sole discretion, may allocate such income as follows: (i) to allocate such
income among such Positive Basis Members, PRO RATA in proportion to the
respective Positive Basis (as hereinafter defined) of each such Positive Basis
Member, until either the full amount of such income shall have been so allocated
or the Positive Basis of each such Positive Basis Member shall have been
eliminated; and (ii) to allocate any income not so allocated to Positive Basis
Members to the other Members in such manner as shall equitably reflect the
amounts allocated to such Members' Capital Accounts pursuant to Section 5.4.
If the Company realizes deductions, ordinary losses and/or
capital losses (including long-term capital losses) for Federal income tax
purposes (collectively, "losses") for any fiscal year during or as of the end of
which one or more Negative Basis Members (as hereinafter defined) withdraw from
the Company pursuant to Article V, the Board of Managers may elect to allocate
such losses as follows: (i) to allocate such losses among such Negative Basis
Members, pro rata in proportion to the respective Negative Basis (as hereinafter
defined)
21
of each such Negative Basis Member, until either the full amount of such losses
shall have been so allocated or the Negative Basis of each such Negative Basis
Member shall have been eliminated; and (ii) to allocate any losses not so
allocated to Negative Basis Members to the other Members in such manner as shall
equitably reflect the amounts allocated to such Members' Capital Accounts
pursuant to Section 5.4.
As used herein: (i) the term "Positive Basis" shall mean, with
respect to any Member and as of any time of calculation, the amount by which its
Interest as of such time exceeds its "adjusted tax basis," for Federal income
tax purposes, in its Interest as of such time (determined without regard to such
Member's share of the liabilities of the Company under Section 752 of the Code);
and (ii) the term "Positive Basis Member" shall mean any Member whose Interest
is repurchased by the Company and who has Positive Basis as of the effective
date of its withdrawal (determined prior to any allocations made pursuant to
this section).
As used herein: (i) the term "Negative Basis" shall mean, with
respect to any Member and as of any time of calculation, the amount by which its
Interest as of such time is less than its "adjusted tax basis," for Federal
income tax purposes, in its Interest as of such time (determined without regard
to such Member's share of the liabilities of the Company under Section 752 of
the Code); and (ii) the term "Negative Basis Member" shall mean any Member whose
Interest is repurchased by the Company and who has Negative Basis as of the
effective date of its withdrawal (determined prior to any allocations made
pursuant to this Section).
5.8 DISTRIBUTIONS.
The Board of Managers, 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.
5.9 WITHHOLDING.
(a) The Board of Managers may withhold and pay over to the
Internal Revenue Service (or any other relevant taxing authority) taxes from any
distribution to any Member to the extent required by the Code or any other
applicable law.
(b) For purposes of this Agreement, any taxes so withheld by the
Company with respect to any amount distributed by the Company to any Member
shall be deemed to be a distribution or payment to such Member, reducing the
amount otherwise distributable to such Member pursuant to this Agreement and
reducing the Capital Account of such Member. If the amount of such taxes is
greater than any such distributable amounts, then such Member and any successor
to such Member's Interest shall pay to the Company as a contribution to the
capital of the Company, upon demand of the Board of Managers, the amount of such
excess.
(c) The Board of Managers shall not be obligated to apply for or
obtain a reduction of or exemption from withholding tax on behalf of any Member
that may be eligible for such reduction or exemption. To the extent that a
Member claims to be entitled to a reduced rate of, or exemption from, a
withholding tax pursuant to an applicable income tax treaty, or otherwise, the
Member shall furnish the Board of Managers with such information and forms as
such Member may be required to complete where necessary to comply with any and
all laws and
22
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.
--------------------------
ARTICLE VI
DISSOLUTION AND LIQUIDATION
---------------------------
6.1 DISSOLUTION.
The Company shall be dissolved:
(1) upon the affirmative vote to dissolve the Company by:
(i) the Board of Managers or (ii) Members holding at
least two-thirds (2/3) of the total number of votes
eligible to be cast by all Members;
(2) upon the failure of Members to elect a successor
Manager at a meeting called by the Management
Services Provider in accordance with Section 2.6(c)
hereof when no Manager remains to continue the
business of the Company;
(3) upon the expiration of any two year period that
commences on the date on which any Member has
submitted a written notice to the Company requesting
to tender its entire Interest for repurchase by the
Company if such Interest has not been repurchased by
the Company; or
(4) as required by operation of law.
Dissolution of the Company shall be effective on the later of the day on which
the event giving rise to the dissolution shall occur or the conclusion of any
applicable 60 day period during which the Board of Managers and Members may
elect to continue the business of the Company as provided above, but the Company
shall not terminate until the assets of the Company have been liquidated in
accordance with Section 6.2 hereof and the Certificate has been canceled.
6.2 LIQUIDATION OF ASSETS.
(a) Upon the dissolution of the Company as provided in Section
6.1 hereof, the Board of Managers shall promptly appoint the Administrator as
the liquidator and the Administrator shall liquidate the business and
administrative affairs of the Company, except that
23
if the Board of Managers does not appoint the Administrator as the liquidator or
the Administrator is unable to perform this function, a liquidator elected by
Members holding a majority of the total number of votes eligible to be cast by
all Members shall promptly liquidate the business and administrative affairs of
the Company. Net Profit and Net Loss during the period of liquidation shall be
allocated pursuant to Section 5.4 hereof. The proceeds from liquidation (after
establishment of appropriate reserves for contingencies in such amount as the
Board of Managers or liquidator shall deem appropriate in its sole discretion as
applicable) shall be distributed in the following manner:
(1) the debts of the Company, other than debts,
liabilities or obligations to Members, and the
expenses of liquidation (including legal and
accounting expenses incurred in connection
therewith), up to and including the date that
distribution of the Company's assets to the Members
has been completed, shall first be paid on a pro rata
basis;
(2) such debts, liabilities or obligations as are owing
to the Members shall next be paid in their order of
seniority and on a pro rata basis; and
(3) the Members shall next be paid on a pro rata basis in
accordance with their respective Capital Accounts
after giving effect to all allocations to be made to
such Members' Capital Accounts for the Fiscal Period
ending on the date of the distributions under this
Section 6.2(a)(3).
(b) Anything in this Section 6.2 to the contrary
notwithstanding, upon dissolution of the Company, the Board of Managers or other
liquidator may distribute ratably in kind any assets of the Company; PROVIDED,
HOWEVER, that if any in-kind distribution is to be made (i) the assets
distributed in kind shall be valued pursuant to Section 7.3 hereof as of the
actual date of their distribution and charged as so valued and distributed
against amounts to be paid under Section 6.2(a) above, and (ii) any profit or
loss attributable to property distributed in-kind shall be included in the Net
Profit or Net Loss for the Fiscal Period ending on the date of such
distribution.
-----------------------------
ARTICLE VII
ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS
-----------------------------
7.1 ACCOUNTING AND REPORTS.
(a) The Company shall adopt for tax accounting purposes any
accounting method that the Board of Managers shall decide in its sole discretion
is in the best interests of the Company. The Company's accounts shall be
maintained in U.S. currency.
24
(b) After the end of each Taxable Year, the Company shall
furnish to each Member such information regarding the operation of the Company
and such Member's Interest as is necessary for Members to complete Federal,
state and local income tax or information returns and any other tax information
required by Federal, state or local law.
(c) Except as otherwise required by the 1940 Act, or as may
otherwise be permitted by rule, regulation or order, within 60 days after the
close of the period for which a report required under this Section 7.1(c) is
being made, the Company shall furnish to each Member a semi-annual report and an
annual report containing the information required by such Act. The Company shall
cause financial statements contained in each annual report furnished hereunder
to be accompanied by a certificate of independent public accountants based upon
an audit performed in accordance with generally accepted accounting principles.
The Company may furnish to each Member such other periodic reports as it deems
necessary or appropriate in its discretion.
7.2 DETERMINATIONS BY THE BOARD OF MANAGERS.
(a) All matters concerning the determination and allocation
among the Members of the amounts to be determined and allocated pursuant to
Article V hereof, including any taxes thereon and accounting procedures
applicable thereto, shall be determined by the Board of Managers unless
specifically and expressly otherwise provided for by the provisions of this
Agreement or required by law, and such determinations and allocations shall be
final and binding on all the Members.
(b) The Board of Managers may make such adjustments to the
computation of Net Profit, Net Loss or any components comprising either of the
foregoing as it considers appropriate to reflect fairly and accurately the
financial results of the Company and the intended allocation thereof among
Members.
7.3 VALUATION OF ASSETS.
(a) Except as may be required by the 1940 Act, the Board of
Managers shall value or have valued any Securities or other assets and
liabilities of the Company as of the close of business on the last day of each
Fiscal Period in accordance with such valuation procedures as shall be
established from time to time by the Board of Managers and which conform to the
requirements of the 1940 Act. In determining the value of the assets of the
Company, no value shall be placed on the goodwill or name of the Company, or the
office records, files, statistical data or any similar intangible assets of the
Company not normally reflected in the Company's accounting records, but there
shall be taken into consideration any items of income earned but not received,
expenses incurred but not yet paid, liabilities, fixed or contingent, and any
other prepaid expenses to the extent not otherwise reflected in the books of
account, and the value of options or commitments to purchase or sell Securities
or commodities pursuant to agreements entered into prior to such valuation date.
(b) The value of Securities and other assets of the Company and
the net worth of the Company as a whole determined pursuant to this Section 7.3
shall be conclusive and binding on all of the Members and all parties claiming
through or under them.
25
--------------------------
ARTICLE VIII
MISCELLANEOUS PROVISIONS
-----------------------------
8.1 AMENDMENT OF LIMITED LIABILITY COMPANY AGREEMENT.
(a) Except as otherwise provided in this Section 8.1, this
Agreement may be amended, in whole or in part, with: (i) the approval of the
Board of Managers (including the vote of a majority of the Independent Managers,
if required by the ▇▇▇▇ ▇▇▇) and (ii) if required by the 1940 Act, the approval
of 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;
(2) reduce the Capital Account of a Member other than in
accordance with Article V; or
(3) modify the events causing the dissolution of the
Company;
may be made only if (i) the written consent of each Member adversely affected
thereby is obtained prior to the effectiveness thereof or (ii) such amendment
does not become effective until (A) each Member has received written notice of
such amendment and (B) any Member objecting to such amendment has been afforded
a reasonable opportunity (pursuant to such procedures as may be prescribed by
the Board of Managers) to tender its entire Interest for repurchase by the
Company.
(c) The power of the Board of Managers to amend this Agreement
at any time without the consent of Members as set forth in paragraph (a) of this
Section 8.01 shall specifically include the power to:
(1) restate this Agreement together with any amendments
hereto that have been duly adopted in accordance
herewith to incorporate such amendments in a single,
integrated document;
(2) amend this Agreement (other than with respect to the
matters set forth in Section 8.1(b) hereof) to effect
compliance with any applicable law or regulation,
including but not limited to, to satisfy
26
the requirements, or to reflect any relaxation of
such requirements in the future, of the Bank Holding
Company Act of 1956, as amended, or other U.S.
banking laws, or any regulations, guidelines or
policies or interpretations of the banking regulatory
agencies or the staff thereof, or to cure any
ambiguity or to correct or supplement any provision
hereof that may be inconsistent with any other
provision hereof; and
(3) amend this Agreement to make such changes as may be
necessary or advisable to ensure that 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.
(d) The Board of Managers shall cause written notice to be
given of any amendment to this Agreement (other than any amendment of the type
contemplated by clause (1) of Section 8.1(c) hereof) to each Member, which
notice shall set forth (i) the text of the amendment or (ii) a summary thereof
and a statement that the text thereof will be furnished to any Member upon
request.
8.2 SPECIAL POWER OF ATTORNEY.
(a) Each Member hereby irrevocably makes, constitutes and
appoints each Manager, acting severally, and any liquidator of the Company's
assets appointed pursuant to Section 6.2 hereof with full power of substitution,
the true and lawful representatives and attorneys-in-fact of, and in the name,
place and stead of, such Member, with the power from time to time to make,
execute, sign, acknowledge, swear to, verify, deliver, record, file and/or
publish:
(1) any amendment to this Agreement that complies with
the provisions of this Agreement (including the
provisions of Section 8.1 hereof);
(2) any amendment to the Certificate required because
this Agreement is amended, including, without
limitation, an amendment to effectuate any change in
the membership of the Company; and
(3) all such other instruments, documents and
certificates that, in the opinion of legal counsel to
the Company, may from time to time be required by the
laws of the United States of America, the State of
Delaware or any other jurisdiction in which the
Company shall determine to do business, or any
political subdivision or agency thereof, or that such
legal counsel may deem necessary or appropriate to
effectuate, implement and continue the valid
existence and business of the Company as a limited
liability company under the Delaware Act.
(b) Each Member is aware that the terms of this Agreement
permit certain amendments to this Agreement to be effected and certain other
actions to be taken or omitted by or with respect to the Company without such
Member's consent. If an amendment to the
27
Certificate or this Agreement or any action by or with respect to the Company is
taken in the manner contemplated by this Agreement, each Member agrees that,
notwithstanding any objection that such Member may assert with respect to such
action, the attorneys-in-fact appointed hereby are authorized and empowered,
with full power of substitution, to exercise the authority granted above in any
manner that may be necessary or appropriate to permit such amendment to be made
or action lawfully taken or omitted. Each Member is fully aware that each Member
will rely on the effectiveness of this special power-of-attorney with a view to
the orderly administration of the affairs of the Company.
(c) This power-of-attorney is a special power-of-attorney and
is coupled with an interest in favor of each of the Managers and as such:
(1) shall be irrevocable and continue in full force and
effect notwithstanding the subsequent death or
incapacity of any party granting this
power-of-attorney, regardless of whether the Company
or Board of Managers shall have had notice thereof;
and
(2) shall survive the delivery of a Transfer by a Member
of the whole or any portion of such Member's
Interest, except that where the transferee thereof
has been approved by the Board of Managers for
admission to the Company as a substituted Member,
this power-of-attorney given by the transferor shall
survive the delivery of such assignment for the sole
purpose of enabling the Board of Managers to execute,
acknowledge and file any instrument necessary to
effect such substitution.
8.3 NOTICES.
Notices that may be or are required to be provided under this
Agreement shall be made, if to a Member, by regular mail, or if to the Board of
Managers or the Management Services Provider, by hand delivery, registered or
certified mail return receipt requested, commercial courier service, telex or
telecopier, and shall be addressed to the respective parties hereto at their
addresses as set forth in the books and records of the Company. Notices to the
Company shall be deemed to have been provided when delivered by hand, on the
date indicated as the date of receipt on a return receipt or when received if
sent by regular mail, commercial courier service, telex or telecopier. Notices
to Members shall be deemed to have been provided when mailed to Members at their
addresses as set forth in the books and records of the Company. 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. Each Member
agrees to notify the Company (or its designated agent) of any change of address.
8.4 AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, successors, assigns, executors,
trustees or other legal representatives, but the rights and obligations of the
parties hereunder may not be Transferred or
28
delegated except as provided in this Agreement and any attempted Transfer or
delegation thereof that is not made pursuant to the terms of this Agreement
shall be void.
8.5 APPLICABILITY OF 1940 ACT AND FORM N-2.
The parties hereto acknowledge that this Agreement is not
intended to, and does not, set forth the substantive provisions contained in the
1940 Act and the Form N-2 that affect numerous aspects of the conduct of the
Company's business and of the rights, privileges and obligations of the Members.
Each provision of this Agreement shall be subject to and interpreted in a manner
consistent with the applicable provisions of the 1940 Act and the Form N-2.
8.6 CHOICE OF LAW; ARBITRATION.
(a) Notwithstanding the place where this Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed under the laws of the State of
Delaware, including the Delaware Act without regard to the conflict of law
principles of such State.
(b) Unless otherwise agreed in writing, each Member agrees to
submit all controversies arising between Members or one or more Members and the
Company to arbitration in accordance with the provisions set forth below and
understands that:
(1) arbitration is final and binding on the parties;
(2) they are waiving their right to seek remedies in
court, including the right to a jury trial;
(3) pre-arbitration discovery is generally more limited
and different from court proceedings;
(4) the arbitrator's award is not required to include
factual findings or legal reasoning and a party's
right to appeal or to seek modification of rulings by
arbitrators is strictly limited; and
(5) the panel of arbitrators will typically include a
minority of arbitrators who were or are affiliated
with the securities industry.
(c) All controversies that may arise among Members and one or
more Members and the Company concerning this Agreement shall be determined by
arbitration in New York City in accordance with the Federal Arbitration Act, to
the fullest extent permitted by law. Any arbitration under this Agreement shall
be determined before and in accordance with the rules then obtaining of either
the New York Stock Exchange, Inc. (the "NYSE") or the National Association of
Securities Dealers, Inc. (the "NASD"), as the Member or entity instituting the
arbitration may elect. If the NYSE or NASD does not accept the arbitration for
consideration, the arbitration shall be submitted to, and determined in
accordance with the rules then obtaining of, the Center for Public Resources,
Inc. in New York City. Judgment on any award of any such arbitration may be
entered in the Supreme Court of the State of New York or in any other court
having jurisdiction of the person or persons against whom such award is
29
rendered. Any notice of such arbitration or for the confirmation of any award in
any arbitration shall be sufficient if given in accordance with the provisions
of this Agreement. Each Member agrees that the determination of the arbitrators
shall be binding and conclusive upon them.
(d) No Member shall bring a putative or certified class action
to arbitration, nor seek to enforce any pre-dispute arbitration agreement
against any person who has initiated in court a putative class action; or who is
a member of a putative class who has not opted out of the class with respect to
any claims encompassed by the putative class action until: (i) the class
certification is denied; or (ii) the class is decertified; or (iii) the Member
is excluded from the class by the court. Such forbearance to enforce an
agreement to arbitrate shall not constitute a waiver of any rights under this
Agreement except to the extent stated herein.
8.7 NOT FOR BENEFIT OF CREDITORS.
The provisions of this Agreement are intended only for the
regulation of relations among past, present and future Members, Managers 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.
8.8 CONSENTS.
Any and all consents, agreements or approvals provided for or
permitted by this Agreement shall be in writing and a signed copy thereof shall
be filed and kept with the books of the Company.
8.9 MERGER AND CONSOLIDATION.
(a) The Company may merge or consolidate with or into one or
more limited liability companies formed under the Delaware Act or other business
entities pursuant to an agreement of merger or consolidation that has been
approved in the manner contemplated by Section 18-209(b) of the Delaware Act.
(b) Notwithstanding anything to the contrary contained
elsewhere in this Agreement, an agreement of merger or consolidation approved in
accordance with Section 18-209(b) of the Delaware Act may, to the extent
permitted by Section 18-209(f) of the Delaware Act, (i) effect any amendment to
this Agreement, (ii) effect the adoption of a new limited liability company
agreement for the Company if it is the surviving or resulting limited liability
company in the merger or consolidation, or (iii) provide that the limited
liability company agreement of any other constituent limited liability company
to the merger or consolidation (including a limited liability company formed for
the purpose of consummating the merger or consolidation) shall be the limited
liability company agreement of the surviving or resulting limited liability
company.
8.10 PRONOUNS.
All pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular or plural, as the identity of the person or persons,
firm or corporation may require in the context thereof.
30
8.11 CONFIDENTIALITY.
(a) A Member may obtain from the Company such information
regarding the affairs of the Company as is just and reasonable under the
Delaware Act, subject to reasonable standards (including standards governing
what information and documents are to be furnished, at what time and location
and at whose expense) established by the Board of Managers.
(b) Each Member covenants that, except as required by
applicable law or any regulatory body, it will not divulge, furnish or make
accessible to any other person the name and/or address (whether business,
residence or mailing) of any Member (collectively, "Confidential Information")
without the prior written consent of the Board of Managers, which consent may be
withheld in its sole discretion.
(c) Each Member recognizes that in the event that this Section
8.11 is breached by any Member or any of its principals, partners, members,
directors, officers, employees or agents or any of its Affiliates, including any
of such Affiliates' principals, partners, members, directors, officers,
employees or agents, irreparable injury may result to the non-breaching Members
and the Company. Accordingly, in addition to any and all other remedies at law
or in equity to which the non-breaching Members and the Company may be entitled,
such Members shall also have the right to obtain equitable relief, including,
without limitation, injunctive relief, to prevent any disclosure of Confidential
Information, plus reasonable attorneys' fees and other litigation expenses
incurred in connection therewith. In the event that any non-breaching Member or
the Company determines that any of the other Members or any of its principals,
partners, members, directors, officers, employees or agents or any of its
Affiliates, including any of such Affiliates' principals, partners, members,
directors, officers, employees or agents should be enjoined from or required to
take any action to prevent the disclosure of Confidential Information, each of
the other non-breaching Members agrees to pursue in a court of appropriate
jurisdiction such injunctive relief.
(d) Notwithstanding anything in this Agreement to the
contrary, each Member (and each employee, representative, or other agent of such
Member) may disclose to any and all persons, without limitation of any kind, the
tax treatment and tax structure of (i) the Company and (ii) any of its
transactions, and all materials of any kind (including opinions or other tax
analyses) that are provided to the Member relating to such tax treatment and tax
structure.
8.12 CERTIFICATION OF NON-FOREIGN STATUS.
Each Member or transferee of an Interest from a Member shall
certify, upon admission to the Company and at such other times thereafter as the
Board of Managers may request, whether such Member is a "United States Person"
within the meaning of Section 7701(a)(30) of the Code on forms to be provided by
the Company, and shall notify the Company within 30 days of any change in such
Member's status. Any Member who shall fail to provide such certification when
requested to do so by the Board of Managers may be treated as a non-United
States Person for purposes of U.S. federal tax withholding.
31
8.13 SEVERABILITY.
If any provision of this Agreement is determined by a court of
competent jurisdiction not to be enforceable in the manner set forth in this
Agreement, each Member agrees that it is the intention of the Members that such
provision should be enforceable to the maximum extent possible under applicable
law. If any provisions of this Agreement are held to be invalid or
unenforceable, such invalidation or unenforceability shall not affect the
validity or enforceability of any other provision of this Agreement (or portion
thereof).
8.14 FILING OF RETURNS.
The Board of Managers or its designated agent shall prepare and
file, or cause the Administrator or accountants of the Company to prepare and
file, a Federal information tax return in compliance with Section 6031 of the
Code and any required state and local income tax and information returns for
each tax year of the Company.
8.15 TAX MATTERS PARTNER.
(a) A Manager who is a Member shall be designated on the
Company's annual Federal information tax return, and have full powers and
responsibilities, as the Tax Matters Partner of the Company for purposes of
Section 6231(a)(7) of the Code. In the event that no Manager is a Member, a
Member shall be so designated. Should any Member be designated as the Tax
Matters Partner for the Company pursuant to Section 6231(a)(7) of the Code, it
shall, and each Member hereby does, to the fullest extent permitted by law,
delegate to a Manager selected by the Board of Managers all of its rights,
powers and authority to act as such Tax Matters Partner and hereby constitutes
and appoints such Manager as its true and lawful attorney-in-fact, with power to
act in its name and on its behalf, including the power to act through such
agents or attorneys as it shall elect or appoint, to receive notices, to make,
execute and deliver, swear to, acknowledge and file any and all reports,
responses and notices and to do any and all things required or advisable, in the
Manager's judgment, to be done by such a Tax Matters Partner. Any Member
designated as the Tax Matters Partner for the 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.
(b) Each person (for purposes of this Section 8.15, called a
"Pass-Thru Member") that holds or controls an interest as a Member on behalf of,
or for the benefit of, another person or persons, or which Pass-Thru Member is
beneficially owned (directly or indirectly) by another person or persons, shall,
within 30 days following receipt from the Tax Matters Partner of any notice,
demand, request for information or similar document, convey such notice or other
document in writing to all holders of beneficial interests in the 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.
32
8.16 SECTION 754 ELECTION.
In the event of a distribution of Company property to a Member
or an assignment or other transfer (including by reason of death) of all or part
of the interest of a Member in the Company, the Board of Managers, in its
discretion, may cause the Company to elect, pursuant to Section 754 of the Code,
or the corresponding provision of subsequent law, to adjust the basis of the
Company's property as provided by Sections 734 and 743 of the Code.
8.17 MEMBER TAX BASIS.
Upon request of the Board of Managers, each Member agrees to
provide to the Board of Managers information regarding its adjusted tax basis in
its interest in the Company along with documentation substantiating such amount.
33
EACH OF THE UNDERSIGNED ACKNOWLEDGES HAVING READ THIS AGREEMENT IN ITS
ENTIRETY BEFORE SIGNING, INCLUDING THE PRE-DISPUTE ARBITRATION CLAUSE SET FORTH
IN SECTION 8.6 AND THE CONFIDENTIALITY CLAUSE SET FORTH IN SECTION 8.11.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written. MANAGERS:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
MEMBERS:
Each person who shall sign a Member
Signature Page and who shall be accepted by
the Board of Managers to the Company as a
Member.
34