OPERATING AGREEMENT
OF
TORTOISE TOTAL RETURN FUND, LLC
The Units referred to in this Operating Agreement have not been registered under
the Securities Act of 1933 or any other securities laws, and such Units may not
be transferred without appropriate registration or the availability of an
exemption from such registration requirements.
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TABLE OF CONTENTS
Page
RECITAL:..........................................................................1
AGREEMENT:........................................................................1
ARTICLE I - DEFINITIONS...........................................................1
1.1 TERMS DEFINED HEREIN...................................................1
1.2 OTHER DEFINITIONAL PROVISIONS..........................................6
ARTICLE II - BUSINESS PURPOSES AND OFFICES........................................6
2.1 NAME; BUSINESS PURPOSE.................................................6
2.2 POWERS.................................................................6
2.3 PRINCIPAL OFFICE.......................................................7
2.4 REGISTERED OFFICE AND REGISTERED AGENT.................................7
2.5 AMENDMENT OF THE CERTIFICATE...........................................7
2.6 EFFECTIVE DATE.........................................................7
2.7 LIABILITY OF MEMBERS...................................................7
2.8 INTEREST NOT ACQUIRED FOR RESALE.......................................8
ARTICLE III - CAPITAL CONTRIBUTIONS AND LOANS.....................................8
3.1 CAPITAL CONTRIBUTIONS..................................................8
3.2 ADDITIONAL CAPITAL CONTRIBUTIONS.......................................8
3.3 CAPITAL ACCOUNTS.......................................................8
3.4 CAPITAL WITHDRAWAL RIGHTS, INTEREST AND PRIORITY.......................9
3.5 LOANS..................................................................9
ARTICLE IV - ALLOCATIONS AND DISTRIBUTIONS........................................9
4.1 NON LIQUIDATION CASH DISTRIBUTIONS.....................................9
4.2 LIQUIDATION DISTRIBUTIONS.............................................10
4.3 INCOME, LOSSES AND DISTRIBUTIVE SHARES OF TAX ITEMS...................10
4.4 ALLOCATION OF INCOME, LOSS AND CREDITS................................10
4.5 SPECIAL RULES REGARDING ALLOCATION OF TAX ITEMS.......................10
4.6 WITHHOLDING OF DISTRIBUTIONS..........................................14
4.7 NO PRIORITY...........................................................14
4.8 TAX WITHHOLDING.......................................................14
4.9 RESERVES..............................................................14
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ARTICLE V - MANAGEMENT...........................................................14
5.1 MANAGEMENT............................................................14
5.2 ELECTION OF THE BOARD OF DIRECTORS....................................14
5.3 MEETINGS OF THE BOARD OF DIRECTORS; PLACE OF MEETINGS.................15
5.4 QUORUM; VOTING REQUIREMENT............................................15
5.5 NOTICE OF MEETING.....................................................15
5.6 WAIVER OF NOTICE......................................................15
5.7 ACTION WITHOUT A MEETING..............................................15
5.8 COMPENSATION OF DIRECTORS.............................................15
5.9 RESTRICTIONS ON AUTHORITY OF BOARD OF DIRECTORS.......................15
5.10 MEETINGS OF MEMBERS; PLACE OF MEETINGS................................16
5.11 QUORUM; VOTING REQUIREMENT............................................16
5.12 PROXIES...............................................................16
5.13 ACTION WITHOUT MEETING................................................17
5.14 NOTICE OF MEETINGS....................................................17
5.15 WAIVER OF NOTICE......................................................17
5.16 EXECUTION OF DOCUMENTS FILED WITH SECRETARY OF STATE OF DELAWARE
AND WAIVER OF RECEIPT OF COPY OF FILED DOCUMENTS......................17
5.17 VOTING BY CERTAIN HOLDERS.............................................17
5.18 LIMITATION OF LIABILITY; INDEMNIFICATION..............................17
5.19 CONTRACTS WITH MEMBERS, DIRECTORS OR THEIR AFFILIATES.................21
5.20 OTHER BUSINESS VENTURES...............................................21
ARTICLE VI - COMMITTEES..........................................................21
6.1 NUMBER, TENURE AND QUALIFICATIONS.....................................21
6.2 POWERS................................................................22
6.3 MEETINGS..............................................................22
6.4 TELEPHONE MEETINGS....................................................22
6.5 CONSENT BY COMMITTEES WITHOUT A MEETING...............................22
6.6 VACANCIES.............................................................22
ARTICLE VII - OFFICERS...........................................................22
7.1 GENERAL PROVISIONS....................................................22
7.2 REMOVAL AND RESIGNATION...............................................23
7.3 VACANCIES.............................................................23
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7.4 CHIEF EXECUTIVE OFFICER...............................................23
7.5 CHIEF OPERATING OFFICER...............................................23
7.6 CHIEF FINANCIAL OFFICER...............................................23
7.7 CHIEF COMPLIANCE OFFICER..............................................23
7.8 PRESIDENT.............................................................23
7.9 VICE PRESIDENTS.......................................................24
7.10 SECRETARY.............................................................24
7.11 TREASURER.............................................................24
7.12 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS........................24
ARTICLE VIII - ACCOUNTING AND BANK ACCOUNTS......................................25
8.1 FISCAL YEAR...........................................................25
8.2 BOOKS AND RECORDS.....................................................25
8.3 FINANCIAL REPORTS.....................................................25
8.4 TAX RETURNS AND ELECTIONS; TAX MATTERS MEMBER.........................25
8.5 SECTION 754 ELECTION..................................................26
8.6 BANK ACCOUNTS.........................................................26
ARTICLE IX - TRANSFERS OF INTERESTS AND EVENTS OF WITHDRAWAL.....................26
9.1 GENERAL RESTRICTIONS..................................................26
9.2 PERMITTED TRANSFERS...................................................26
9.3 SUBSTITUTE MEMBERS....................................................26
9.4 EFFECT OF ADMISSION AS A SUBSTITUTE MEMBER............................27
9.5 ADDITIONAL MEMBERS AND INTERESTS......................................27
9.6 REDEMPTION OF INTERESTS...............................................28
9.7 WITHDRAWAL............................................................29
ARTICLE X - DISSOLUTION AND TERMINATION..........................................29
10.1 EVENTS CAUSING DISSOLUTION............................................29
10.2 EFFECT OF DISSOLUTION.................................................29
ARTICLE XI - MISCELLANEOUS.......................................................29
11.1 TITLE TO THE PROPERTY.................................................29
11.2 NATURE OF INTEREST IN THE COMPANY.....................................30
11.3 ORGANIZATIONAL EXPENSES...............................................30
11.4 NOTICES...............................................................30
11.5 WAIVER OF DEFAULT.....................................................30
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11.6 NO THIRD PARTY RIGHTS.................................................30
11.7 ENTIRE AGREEMENT......................................................30
11.8 AMENDMENTS TO THIS AGREEMENT..........................................30
11.9 SEVERABILITY..........................................................31
11.10 BINDING AGREEMENT.....................................................31
11.11 HEADINGS..............................................................31
11.12 COUNTERPARTS..........................................................31
11.13 GOVERNING LAW.........................................................32
11.14 REMEDIES..............................................................32
11.15 POWER OF ATTORNEY.....................................................32
SCHEDULE A.......................................................................34
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OPERATING AGREEMENT
OF
TORTOISE TOTAL RETURN FUND, LLC
THIS OPERATING AGREEMENT (this "Agreement"), made and entered into this 7th
day of June, 2007, by and among the persons set forth on Schedule A attached
hereto.
RECITAL:
Tortoise Total Return Fund, LLC (the "Company") has been formed as a
limited liability company under the Delaware Limited Liability Company Act and
the parties hereto do hereby adopt this Agreement as the operating agreement of
the Company.
AGREEMENT:
In consideration of the premises and the mutual agreements contained
herein, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
1.1 Terms Defined Herein. As used herein, the following terms shall have
the following meanings, unless the context otherwise specifies:
"Act" means the Delaware Limited Liability Company Act, as amended from
time to time.
"Adjusted Capital Account Deficit" means, with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant fiscal year, after giving effect to the following adjustments: (i)
increased for any amounts such Member is unconditionally obligated to restore
and the amount of such Member's share of Company Minimum Gain and Member Minimum
Gain after taking into account any changes during such year; and (ii) reduced by
the items described in Treasury Regulation ss. 1.704-1(b)(2)(ii)(d)(4), (5) and
(6).
"Agreement" means this Operating Agreement of the Company, as amended from
time to time.
"Available Cash" means the aggregate amount of cash on hand or in bank,
money market or similar accounts of the Company as of the end of each fiscal
quarter derived from any source (other than Capital Contributions and
Liquidation Proceeds) that the Board of Directors determines is available for
distribution to the Members after taking into account any amount required or
appropriate to maintain a reasonable amount of Reserves.
"Bankruptcy", with respect to any Person, means the entry of an order for
relief with respect to such Person under the Federal Bankruptcy Code or the
insolvency of such Person under any state insolvency act.
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"Board of Directors" means the group of Directors elected by the Members
pursuant to Article V to manage the business and affairs of the Company.
"Capital Account" means the separate account established and maintained by
the Company for each Member and each Transferee pursuant to Section 3.3.
"Capital Contribution" means with respect to a Member the total amount of
cash and the agreed upon net Fair Value of property contributed by such Member
(or such Member's predecessor in interest) to the capital of the Company for
such Member's Interest.
"Certificate" means the Certification of Formation of the Company filed
with the Delaware Secretary of State, as amended from time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or the corresponding provisions of future laws.
"Company" means Tortoise Total Return Fund, LLC, a Delaware limited
liability company.
"Company Minimum Gain" shall have the same meaning as partnership minimum
gain set forth in Treasury Regulation ss. 1.704 2(d)(1). Company Minimum Gain
shall be determined, first, by computing for each Nonrecourse Debt any gain that
the Company would realize if the Company disposed of the property subject to
that liability for no consideration other than full satisfaction of such
liability and, then, aggregating the separately computed gains. For purposes of
computing gain, the Company shall use the basis of such property that is used
for purposes of determining the amount of the Capital Accounts under Section 3.3
hereof. In any taxable year in which a Revaluation occurs, the net increase or
decrease in Company Minimum Gain for such taxable year shall be determined by:
(1) calculating the net decrease or increase in Company Minimum Gain using the
current year's book value and the prior year's amount of Company Minimum Gain,
and (2) adding back any decrease in Company Minimum Gain arising solely from the
Revaluation.
"Credits" means all tax credits allowed by the Code with respect to
activities of the Company or the Property.
"Director" means each of the natural persons elected by the Members
pursuant to Article V to serve on the Board of Directors and, as permitted under
the 1940 Act, each natural person appointed by the remaining members of the
Board of Directors to fill vacancies.
"Distributions" means any distributions by the Company to the Members of
Available Cash or Liquidation Proceeds or other amounts.
"Event of Withdrawal" means an event upon the occurrence of which a Member
ceases to be a Member of the Company pursuant to Section 9.7.
"Fair Value" of an asset means its fair market value, as determined
pursuant to policies adopted by the Board of Directors.
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"Income" and "Loss" mean, respectively, for each fiscal year or other
period, an amount equal to the Company's taxable income or loss for such year or
period, determined in accordance with Code ss. 703(a), except that for this
purpose (i) all items of income, gain, deduction or loss required to be
separately stated by Code ss. 703(a)(1) shall be included in taxable income or
loss; (ii) tax exempt income shall be added to taxable income or loss; (iii) any
expenditures described in Code ss. 705(a)(2)(B) (or treated as Code ss.
705(a)(2)(B) expenditures pursuant to Treasury Regulation ss.
1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing taxable
income or loss shall be subtracted; and (iv) taxable income or loss shall be
adjusted to reflect any item of income or loss specifically allocated in Article
IV.
"Initial Capital Contributions" means the Capital Contributions made by the
Members pursuant to Section 3.1 of this Agreement.
"Interest" refers to all of a Member's rights and interests in the Company
in such Member's capacity as a Member, all as provided in this Agreement and the
Act, including, without limitation, the Member's interest in the capital,
income, gain, deductions, losses, and credits of the Company, if any.
"Liquidation Proceeds" means all Property at the time of liquidation of the
Company and all proceeds thereof.
"Majority in Interest" means any Member or group of Members holding an
aggregate of more than fifty percent (50%) of the Percentage Interests held by
all Members.
"Member" means each Person executing this Agreement and each Person who is
subsequently admitted to the Company as a Member pursuant to Section 9.3 or
Section 9.5 of this Agreement (including those acquiring Preferred Units), other
than a Person who ceases to be a Member of the Company pursuant to Section 9.7
as a result of an Event of Withdrawal. For purposes of the allocation of Income
or Loss, or items thereof, Member shall include a transferee of a Member.
"Member Minimum Gain" shall have the same meaning as partner nonrecourse
debt minimum gain as set forth in Treasury Regulation ss. 1.704-2(i)(3). With
respect to each Member Nonrecourse Debt, Member Minimum Gain shall be determined
by computing for each Member Nonrecourse Debt any gain that the Company would
realize if the Company disposed of the property subject to that liability for no
consideration other than full satisfaction of such liability. For purposes of
computing gain, the Company shall use the basis of such property that is used
for purposes of determining the amount of the Capital Accounts under Section 3.3
of this Agreement. In any taxable year in which a Revaluation occurs, the net
increase or decrease in Member Minimum Gain for such taxable year shall be
determined by: (1) calculating the net decrease or increase in Member Minimum
Gain using the current year's book value and the prior year's amount of Member
Minimum Gain, and (2) adding back any decrease in Member Minimum Gain arising
solely from the Revaluation.
"Member Nonrecourse Debt" shall have the same meaning as partner
nonrecourse debt set forth in Treasury Regulation ss. 1.704-2(b)(4).
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"Member Nonrecourse Deductions" shall have the same meaning as partner
nonrecourse deductions set forth in Treasury Regulation ss. 1.704-2(i)(2).
Generally, the amount of Member Nonrecourse Deductions with respect to a Member
Nonrecourse Debt for a fiscal year equals the net increase during the year in
the amount of the Member Minimum Gain (determined in accordance with Treasury
Regulation ss. 1.704-2(i)) reduced (but not below zero) by the aggregate
distributions made during the year of proceeds of Member Nonrecourse Debt and
allocable to the increase in Member Minimum Gain determined according to the
provisions of Treasury Regulation ss. 1.704-2(i).
"Net Asset Value" means an amount equal to the excess of (A) the sum of (i)
the Fair Value of any securities held by the Company; plus (ii) any cash,
receivables, prepaid expenses, and deferred charges and other assets of the
Company, over (B) the sum of (i) the amount of all liabilities of the Company
and all proper reserves with respect thereto, including, without limitation,
brokerage fees, advisory fees, professional and administrative fees, notes and
accounts payable, and accrued expenses, including, without limitation, both
current and deferred income and expense reimbursement; plus (ii) any
distributions payable on Interests. The Board of Directors shall be responsible
for determining the Net Asset Value promptly after completion of each fiscal
quarter and from time to time, as determined by the Board of Directors.
"Nonrecourse Debt" means a Company liability with respect to which no
Member bears the economic risk of loss as determined under Treasury Regulation
▇▇.▇▇. 1.752-1(a)(2) and 1.752-2.
"Nonrecourse Deductions" shall have the same meaning as nonrecourse
deductions set forth in Treasury Regulation ss. 1.704-2(c). Generally, the
amount of Nonrecourse Deductions for a fiscal year equals the net increase in
the amount of Company Minimum Gain (determined in accordance with Treasury
Regulation ss. 1.704-2(d)) during such year reduced (but not below zero) by the
aggregate distributions made during the year of proceeds of a Nonrecourse Debt
that are allocable to the increase in Company Minimum Gain, determined according
to the provisions of Treasury Regulation ss. 1.704-2(c) and (h).
"Percentage Interest", with respect to each Member, shall mean the
percentage determined by dividing the number of units (other than Preferred
Units that may be issued pursuant to Section 9.5(c)) held by such Member by the
total number of units (other than such Preferred Units) held by all Members.
"Person" means any individual, partnership, limited liability company,
corporation, cooperative, trust or other entity.
"Preferred Units" Means the Units that may be issued by the Company
pursuant to Section 9.5(c) hereof, having such rights, preferences, and
interests in capital, income, gain, deductions, losses, and credits as is
determined by the Board of Directors and as is otherwise consistent with the
terms hereof. Preferred Units shall not give the holder thereof any right
hereunder other than the right to participate in a specified guaranteed payment.
Specifically, Preferred Units shall not give the holder thereof the right to
vote, except as required by the Act or the ▇▇▇▇ ▇▇▇.
4
"Prime Rate" means the rate of interest reported from time to time in the
money section of The Wall Street Journal as the prime rate.
"Property" means all properties and assets that the Company may own or
otherwise have an interest in from time to time.
"Redeemed Member" shall have the meaning set forth in Section 4.5(a)(ii)
hereof.
"Redeemed Member Gain Potential" shall mean the excess, if any, of (i) the
proceeds received by the Redeemed Member on the redemption of the applicable
Units pursuant to Section 9.6 hereof over (ii) the Redeemed Member's adjusted
basis of such Units for Federal income tax purposes.
"Redeemed Member Loss Potential" shall mean the excess, if any, of (i) the
Redeemed Member's adjusted basis of the applicable redeemed Units pursuant to
Section 9.6 hereof for Federal income tax purposes, over (ii) the proceeds
received by the Redeemed Member on the redemption of such Units.
"Reserves" means amounts set aside from time to time by the Board of
Directors pursuant to Section 4.9 of this Agreement.
"Revaluation" shall mean the occurrence of any event described in clause
(x), (y) or (z) in the third paragraph of Section 3.3 of this Agreement in which
the book basis of Property is adjusted to its Fair Value.
"Substitute Member" shall have the meaning set forth in Section 9.3.
"Super-Majority in Interest" means any Member or group of Members holding
an aggregate of at least seventy-five percent (75%) of the Percentage Interests
held by all Members.
"Tax Matters Member" means the Person designated pursuant to Section 8.4 to
represent the Company in matters before the Internal Revenue Service.
"Transfer" means (i) when used as a verb, to give, sell, exchange, assign,
transfer, pledge, hypothecate, bequeath, devise or otherwise dispose of or
encumber, and (ii) when used as a noun, the nouns corresponding to such verbs,
in either case voluntarily or involuntarily, by operation of law or otherwise.
"Transferee" shall have the meaning set forth in Section 9.2 of this
Agreement.
"Transferor" shall have the meaning set forth in Section 9.2 of this
Agreement.
"Treasury Regulations" means the regulations promulgated by the Treasury
Department with respect to the Code, as such regulations are amended from time
to time, or the corresponding provisions of future regulations.
"Unit" is a measure of each Member's relative ownership of the Interests.
5
"1940 Act" means the Investment Company Act of 1940, as amended from time
to time.
1.2 Other Definitional Provisions.
(a) As used in this Agreement, accounting terms not defined in this
Agreement, and accounting terms partly defined to the extent not defined,
shall have the respective meanings given to them under generally accepted
accounting principles.
(b) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and section,
subsection, schedule and exhibit references are to this Agreement unless
otherwise specified.
(c) Words of the masculine gender shall be deemed to include the
feminine or neuter genders, and vice versa, where applicable. Words of the
singular number shall be deemed to include the plural number, and vice
versa, where applicable.
ARTICLE II - BUSINESS PURPOSES AND OFFICES
2.1 Name; Business Purpose. The name of the Company shall be as set forth
in the Certificate. The business purpose of the Company shall be to transact any
and all lawful business for which a limited liability company may be formed
under the Act.
2.2 Powers. In addition to the powers and privileges conferred upon the
Company by law and those incidental thereto, the Company shall have the same
powers as a natural person to do all things necessary or convenient to carry out
its business and affairs, including, without limitation, the power to do the
following:
(a) ▇▇▇ and be sued, complain and defend, and participate in
administrative or other proceedings, in its name;
(b) Issue, by sale or otherwise, or acquire, by purchase, redemption
or otherwise, any Interest;
(c) Purchase, take, receive, lease as lessee, take by gift, legacy, or
otherwise acquire, own, hold, improve, use, and otherwise deal in and with
any real or personal property, or any interest therein, wherever situated;
(d) Sell, convey, mortgage, pledge, lease as lessor, exchange,
transfer, and otherwise dispose of all, any part of, or any interest in,
its property and assets;
(e) Purchase, take, receive, subscribe for or otherwise acquire, own,
hold, vote, use, employ, sell, mortgage, loan, pledge, or otherwise dispose
of, and otherwise use and deal in and with, shares or other interests in,
or obligations of, other domestic or foreign limited liability companies,
corporations, associations, general or limited partnerships, or
individuals, or direct or indirect obligations of the United States or of
any other government, state, territory, governmental district or
municipality or of any instrumentality thereof;
6
(f) Incur liabilities, borrow money for its proper purposes at any
rate of interest that the Company may determine without regard to the
restrictions of any usury law of the State of Delaware, issue notes, bonds,
and other obligations, secure any of its obligations by mortgage or pledge
or deed of trust of all or any part of its property, franchises, and
income, and make contracts, including contracts of guaranty and suretyship;
(g) Conduct its business, carry on its operations, have offices within
and without the State of Delaware, and exercise in any other state,
territory, district, or possession of the United States or in any foreign
country the powers granted by the Act, the Certificate or this Agreement;
(h) Make and alter this Agreement, in any manner not inconsistent with
the Certificate or the laws of the State of Delaware, for the
administration and regulation of the affairs of the Company;
(i) Become a partner, member, or associate of any general partnership,
limited partnership, joint venture or similar association, limited
liability company, or any other enterprise; and
(j) Cease the activities of the Company and surrender the franchise of
the Company.
2.3 Principal Office. The principal office of the Company shall be located
at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, or at such
other place(s) as the Board of Directors may determine from time to time.
2.4 Registered Office and Registered Agent. The initial location of the
registered office and the name of the registered agent of the Company in the
State of Delaware shall be as stated in the Certificate. The registered office
and registered agent of the Company in the State of Delaware may be changed,
from time to time, by the Board of Directors.
2.5 Amendment of the Certificate. The Company shall amend the Certificate
at such time or times and in such manner as may be required by the Act and this
Agreement.
2.6 Effective Date. This Agreement shall be effective upon the date that
the Certificate is filed with the Secretary of State of Delaware.
2.7 Liability of Members. No Member or Director, solely by reason of being
a Member or Director, or both, shall be liable, under a judgment, decree or
order of a court, or in any other manner, for a debt, obligation or liability of
the Company, whether arising in contract, tort or otherwise, or for the acts or
omissions of any other Member, Director, agent, or employee of the Company. The
failure of the Company to observe any formalities or requirements relating to
the exercise of its powers or management of its business or affairs under this
Agreement or the Act shall not be grounds for imposing liability on the Members
or Directors for the debts, obligations, or liabilities of the Company.
7
2.8 Interest Not Acquired for Resale. Each Member hereby represents and
warrants to the Company and to each other Member that: (a) in the case of a
Member who is not a natural person, that the Member is duly organized, validly
existing, and in good standing under the law of its state of organization and
that it has the requisite power and authority to execute this Agreement and to
perform its obligations hereunder; (b) the Member is acquiring an Interest for
such Member's own account as an investment and without an intent to distribute
such Interest; and (c) the Member acknowledges that the Interests have not been
registered under the Securities Act of 1933 or any state securities laws, and
such Member's Interest may not be resold or transferred by the Member without
appropriate registration or the availability of an exemption under such laws.
ARTICLE III - CAPITAL CONTRIBUTIONS AND LOANS
3.1 Capital Contributions. Upon the execution of this Agreement, each
Member shall make an initial cash contribution to the capital of the Company in
the amount set forth opposite such Member's name on Schedule A attached hereto.
3.2 Additional Capital Contributions. No Member shall be required to make
any additional capital contributions to the Company after the initial cash
contribution contemplated by Section 3.1.
3.3 Capital Accounts. A separate Capital Account shall be maintained for
each Member and each Transferee. Each Member's Capital Account shall be (a)
increased by (i) the amount of money contributed by such Member, (ii) the Fair
Value of property contributed by such Member (net of liabilities secured by such
contributed property that the Company is considered to assume or take subject to
under Code ss. 752), (iii) allocations to such Member, pursuant to Article IV,
of Company income and gain (or items thereof), and (iv) to the extent not
already netted out under clause (b)(ii) below, the amount of any Company
liabilities assumed by the Member or which are secured by any property
distributed to such Member; and (b) decreased by (i) the amount of money
distributed to such Member, (ii) the Fair Value of property distributed to such
Member (net of liabilities secured by such distributed property that such Member
is considered to assume or take subject to under Code ss. 752), (iii)
allocations to such Member, pursuant to Article IV, of Company loss and
deductions (or items thereof), and (iv) to the extent not already netted out
under clause (a)(ii) above, the amount of any liabilities of the Member assumed
by the Company or which are secured by any property contributed by such Member
to the Company.
In the event any Interest is transferred in accordance with the terms
of this Agreement, the Transferee shall succeed to the Capital Account of the
Transferor to the extent it relates to the transferred interest and the Capital
Account of each Transferee shall be increased and decreased in the manner set
forth above.
In the event of (x) an additional capital contribution by an existing or an
additional Member of more than a de minimis amount that results in a shift in
Percentage Interests, (y) the distribution by the Company to a Member of more
than a de minimis amount of property as consideration for an Interest or a
distribution of property other than money or (z) the liquidation of the Company
within the meaning of Treasury Regulation ss. 1.704-1(b)(2)(ii)(g), the book
basis
8
of the Property shall be adjusted to Fair Value and the Capital Accounts of all
the Members shall be adjusted simultaneously to reflect the aggregate net
adjustment to book basis as if the Company recognized gain or loss equal to the
amount of such aggregate net adjustment; provided, however, that the adjustments
resulting from clause (x) or (y) above shall be made only if (and to the extent)
the Board of Directors determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Members.
In the event that Property is subject to Code ss. 704(c) or is revalued on
the books of the Company in accordance with the preceding paragraph pursuant to
ss. 1.704-1(b)(2)(iv)(f) of the Treasury Regulations, the Members' Capital
Accounts shall be adjusted in accordance with ss. 1.704-1(b)(2)(iv)(g) of the
Treasury Regulations for allocations to the Members of depreciation,
amortization and gain or loss, as computed for book purposes (and not tax
purposes) with respect to such Property.
The foregoing provisions of this Section 3.3 and the other provisions of
this Agreement relating to the maintenance of capital accounts are intended to
comply with Treasury Regulation ▇▇.▇▇. 1.704-1(b) and 1.704-2, and shall be
interpreted and applied in a manner consistent with such Treasury Regulations.
In the event it is determined by the Board of Directors that it is prudent or
advisable to modify the manner in which the Capital Accounts, or any increases
or decreases thereto, are computed in order to comply with such Treasury
Regulations, the Board of Directors may cause such modification to be made
provided that it is not likely to have a material effect on the amounts
distributable to any Member upon the dissolution of the Company, and the Board
of Directors, upon any such determination by the Board of Directors, is
empowered to amend or modify this Agreement, notwithstanding any other provision
of this Agreement.
3.4 Capital Withdrawal Rights, Interest and Priority. Except as expressly
provided in this Agreement, no Member shall be entitled to withdraw or reduce
such Member's Capital Account or to receive any Distributions. No Member shall
be entitled to demand or receive any Distribution in any form other than in
cash. No Member shall be entitled to receive or be credited with any interest on
the balance in such Member's Capital Account at any time. Except as may be
otherwise expressly provided herein, no Member shall have any priority over any
other Member as to the return of the balance in such Member's Capital Account.
3.5 Loans. Any Member may make a loan to the Company in such amounts, at
such times and on such terms and conditions as may be approved by the Board of
Directors. Loans by any Member to the Company shall not be considered as
contributions to the capital of the Company.
ARTICLE IV - ALLOCATIONS AND DISTRIBUTIONS
4.1 Non Liquidation Cash Distributions. The Board of Directors may
determine from time to time at their sole and absolute discretion whether to
make any distribution of Available Cash. The Board of Directors may from time to
time, at its sole discretion, change any distribution policy it may adopt. If
the Board of Directors does determine to make any cash distributions, the
Company shall distribute such amount in accordance with the Member's respective
Percentage Interests.
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4.2 Liquidation Distributions. Liquidation Proceeds shall be distributed in
the following order of priority:
(a) To the payment of debts and liabilities of the Company (including
to Members to the extent otherwise permitted by law) and the expenses of
liquidation.
(b) Next, to the setting up of such reserves as the Person required or
authorized by law to wind up the Company's affairs may reasonably deem
necessary or appropriate for any disputed, contingent or unforeseen
liabilities or obligations of the Company, provided that any such reserves
shall be paid over by such Person to an independent escrow agent, to be
held by such agent or its successor for such period as such Person shall
deem advisable for the purpose of applying such reserves to the payment of
such liabilities or obligations and, at the expiration of such period, the
balance of such reserves, if any, shall be distributed as hereinafter
provided.
(c) The remainder to the Members in accordance with and to the extent
of their respective positive Capital Account balances after taking into
account the allocation of all Income or Loss pursuant to this Agreement for
the fiscal year(s) in which the Company is liquidated.
4.3 Income, Losses and Distributive Shares of Tax Items. Except as set
forth in Section 4.4 or 4.5 hereof, the Company's Income or Loss, as the case
may be, for each fiscal year of the Company, as determined in accordance with
such method of accounting as may be adopted for the Company pursuant to Article
VI hereof, shall be allocated to the Members for both financial accounting and
income tax purposes as set forth in this Article IV, except as otherwise
provided for herein or unless all Members agree otherwise.
4.4 Allocation of Income, Loss and Credits.
(a) Income or Loss and Credits for each fiscal year shall be allocated
among the Members in accordance with their Percentage Interests.
(b) If the Company shall have a change in the relative Percentage
Interests among the Members during the fiscal year, the Company shall
separate the fiscal year into separate periods and shall compute the
Income, Loss and Credits for each such period and shall allocate such
Income, Loss and Credits as if each such period was a separate fiscal year
for purposes of Section 4.4(a) consistent with the provisions of Section
4.5(k) below.
4.5 Special Rules Regarding Allocation of Tax Items. Notwithstanding the
foregoing provisions of Article IV, the following special rules shall apply in
allocating tax items of the Company:
(a) ss. 704(c) and Revaluation Allocations and Allocations of Gain or
Loss Incurred as a Result of a Redemption.
(i) In accordance with Code ss. 704(c) and the Treasury
Regulations thereunder, income, gain, loss and deduction with respect
to any property
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contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company
for federal income tax purposes and its Fair Value at the time of
contribution. In the event of a Revaluation, subsequent allocations of
income, gain, loss and deduction with respect to such property shall
take account of any variation between the adjusted basis of such
property to the Company for federal income tax purposes and its Fair
Value immediately after the adjustment in the same manner as under
Code ss. 704(c) and the Treasury Regulations thereunder. Any elections
or other decisions relating to such allocations shall be made by the
Board of Directors in a manner that reasonably reflects the purpose
and intention of this Agreement. Allocations pursuant to this Section
4.5(a)(i) are solely for income tax purposes and shall not affect, or
in any way be taken into account in computing, for book purposes, any
Member's Capital Account or share of Income or Loss, pursuant to any
provision of this Agreement.
(ii) Notwithstanding Section 4.3 and Section 4.5(a), if (x) a
Member ("Redeemed Member") shall have all or a portion of his Interest
in the Company redeemed pursuant to Section 9.6 hereof and (y) the
Company recognizes taxable gain or loss (such net amount shall be
referred to as either the "Redeemed Taxable Gain" or the "Redeemed
Taxable Loss") on the disposition of its assets as a result of the
Company's redemption of any Units pursuant to Section 9.6 hereof, the
Company shall determine the amount of taxable gain or taxable loss
recognized by the Company on the sale or exchange of its assets in
order to fund the Company's payment of redemption proceeds. If, and to
the extent, the Redeemed Member shall have Redeemed Member Gain
Potential, the Company shall allocate to such Redeemed Member an
amount of Redeemed Taxable Gain equal to the lesser of the Redeemed
Taxable Gain or the Redeemed Member Gain Potential. If, and to the
extent, the Redeemed Member shall have Redeemed Member Loss Potential,
the Company shall allocate to such Redeemed Member an amount of
Redeemed Taxable Loss equal to the lesser of the Redeemed Taxable Loss
or the Redeemed Member Loss Potential. To the extent Redeemed Taxable
Gain or Redeemed Taxable Loss is allocated pursuant to this Section
4.5(a)(ii), the Company shall take such allocation into account in
allocating the remaining taxable gain or taxable loss to the Redeemed
Member (with respect to Units not redeemed) and the other Members.
Allocations pursuant to this Section 4.5(a)(ii) are solely for income
tax purposes and shall not affect, or in any way be taken into account
in computing, for book purposes, any Member's Capital Account or share
of Income or Loss, pursuant to any provision of this Agreement.
(b) Minimum Gain Chargeback. Notwithstanding any other provision of
this Article IV, if there is a net decrease in Company Minimum Gain during
a Company taxable year, each Member shall be allocated items of income and
gain for such year (and, if necessary, for subsequent years) in an amount
equal to that Member's share of the net decrease in Company Minimum Gain
during such year (hereinafter referred to as the "Minimum Gain Chargeback
Requirement"). A Member's share of the net decrease in Company Minimum Gain
is the amount of the total decrease multiplied by the Member's
11
percentage share of the Company Minimum Gain at the end of the immediately
preceding taxable year. A Member is not subject to the Minimum Gain
Chargeback Requirement to the extent: (i) the Member's share of the net
decrease in Company Minimum Gain is caused by a guarantee, refinancing or
other change in the debt instrument causing it to become partially or
wholly recourse debt or a Member Nonrecourse Debt, and the Member bears the
economic risk of loss for the newly guaranteed, refinanced or otherwise
changed liability; (ii) the Member contributes capital to the Company that
is used to repay the Nonrecourse Debt and the Member's share of the net
decrease in Company Minimum Gain results from the repayment; or (iii) the
Minimum Gain Chargeback Requirement would cause a distortion and the
Commissioner of the Internal Revenue Service waives such requirement.
A Member's share of Company Minimum Gain shall be computed in
accordance with Treasury Regulation ss. 1.704-2(g) and as of the end of any
Company taxable year shall equal: (1) the sum of the Nonrecourse Deductions
allocated to that Member up to that time and the distributions made to that
Member up to that time of proceeds of a Nonrecourse Debt allocable to an
increase of Company Minimum Gain, minus (2) the sum of that Member's
aggregate share of net decrease in Company Minimum Gain plus that Member's
aggregate share of decreases resulting from revaluations of Property
subject to Nonrecourse Debts. In addition, a Member's share of Company
Minimum Gain shall be adjusted for the conversion of recourse and Member
Nonrecourse Debts into Nonrecourse Debts in accordance with Treasury
Regulation ss. 1.704-2(g)(3). In computing the above, amounts allocated or
distributed to the Member's predecessor in interest shall be taken into
account.
(c) Member Minimum Gain Chargeback. Notwithstanding any other
provision of this Article IV other than Section 4.5(b), if there is a net
decrease in Member Minimum Gain during a Company taxable year, each Member
who has a share of the Member Minimum Gain (determined under Treasury
Regulation ss. 1.704-2(i)(5) as of the beginning of the year) shall be
allocated items of income and gain for such year (and, if necessary, for
subsequent years) equal to that Member's share of the net decrease in
Member Minimum Gain. In accordance with Treasury Regulation ss.
1.704-2(i)(4), a Member is not subject to this Member Minimum Gain
Chargeback requirement to the extent the net decrease in Member Minimum
Gain arises because the liability ceases to be Member Nonrecourse Debt due
to a conversion, refinancing or other change in the debt instrument that
causes it to be partially or wholly a Nonrecourse Debt. The amount that
would otherwise be subject to the Member Minimum Gain Chargeback
requirement is added to the Member's share of Company Minimum Gain.
(d) Qualified Income Offset. In the event any Member unexpectedly
receives an adjustment, allocation or distribution described in Treasury
Regulation ss. 1.704-1(b)(2)(ii)(d)(4), (5) or (6), that causes or
increases such Member's Adjusted Capital Account Deficit, items of Company
income and gain shall be specially allocated to such Member in an amount
and manner sufficient to eliminate such Adjusted Capital Account Deficit as
quickly as possible, provided that an allocation under this Section 4.5(d)
shall be made if and only to the extent such Member would have an Adjusted
Capital Account Deficit after all other allocations under this Article IV
have been made.
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(e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year
or other period shall be allocated to the Members in proportion to their
Percentage Interests.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions
shall be allocated to the Member who bears the risk of loss with respect to
the loan to which such Member Nonrecourse Deductions are attributable in
accordance with Treasury Regulation ss. 1.704-2(i).
(g) Curative Allocations. Any special allocations of items of income,
gain, deduction or loss pursuant to Sections 4.5(b), (c), (d), (e) and (f)
shall be taken into account in computing subsequent allocations of income
and gain pursuant to this Article IV, so that the net amount of any items
so allocated and all other items allocated to each Member pursuant to this
Article IV shall, to the extent possible, be equal to the net amount that
would have been allocated to each such Member pursuant to the provisions of
this Article IV if such adjustments, allocations or distributions had not
occurred. In addition, allocations pursuant to this Section 4.5(g) with
respect to Nonrecourse Deductions in Section 4.5(e) and Member Nonrecourse
Deductions in Section 4.5(f) shall be deferred to the extent the Members
reasonably determine that such allocations are likely to be offset by
subsequent allocations of Company Minimum Gain or Member Minimum Gain,
respectively.
(h) Loss Allocation Limitation. Notwithstanding the other provisions
of this Article IV, unless otherwise agreed to by all of the Members, no
Member shall be allocated Loss in any taxable year that would cause or
increase an Adjusted Capital Account Deficit as of the end of such taxable
year.
(i) Share of Nonrecourse Liabilities. Solely for purposes of
determining a Member's proportionate share of the "excess nonrecourse
liabilities" of the Company within the meaning of Treasury Regulation ss.
1.752-3(a)(3), each Member's interest in Company profits is equal to such
Member's respective Percentage Interest.
(j) Compliance with Treasury Regulations. The foregoing provisions of
this Section 4.5 are intended to comply with Treasury Regulation ▇▇.▇▇.
1.704-1(b), 1.704-2 and 1.752-1 through 1.752-5, and shall be interpreted
and applied in a manner consistent with such Treasury Regulations. In the
event it is determined by the Board of Directors that it is prudent or
advisable to amend this Agreement in order comply with such Treasury
Regulations, the Board of Directors is empowered to amend or modify this
Agreement, notwithstanding any other provision of this Agreement.
(k) General Allocation Provisions. Except as otherwise provided in
this Agreement, all items that are components of Income or Loss shall be
divided among the Members in the same proportions as they share such Income
or Loss, as the case may be, for the year. For purposes of determining the
Income, Loss or any other items for any period, Income, Loss or any such
other items shall be determined on a daily, monthly or other basis, as
determined by the Board of Directors using any permissible method under
Code ss. 706 and the Treasury Regulations thereunder.
13
4.6 Withholding of Distributions. Notwithstanding any other provision
of this Agreement, the Board of Directors (or any Person required or
authorized by law to wind up the Company's affairs) may suspend, reduce or
otherwise restrict Distributions of Available Cash and Liquidation Proceeds
when, in its sole opinion, such action is in the best interests of the
Company.
4.7 No Priority. Except as may be otherwise expressly provided herein,
no Member shall have priority over any other Member as to Company capital,
income, gain, deductions, loss, credits or distributions.
4.8 Tax Withholding. Notwithstanding any other provision of this
Agreement, the Board of Directors is authorized to take any action that it
determines to be necessary or appropriate to cause the Company to comply
with any withholding requirements established under any federal, state or
local tax law, including, without limitation, withholding on any
Distribution to any Member. For all purposes of this Article IV, any amount
withheld on any Distribution and paid over to the appropriate governmental
body shall be treated as if such amount had in fact been distributed to the
Member.
4.9 Reserves. The Board of Directors shall have the right to
establish, maintain and expend Reserves to provide for working capital, for
future maintenance, repair or replacement of the Property, for debt
service, for future investments and for such other purposes as the Board of
Directors may deem necessary or advisable.
ARTICLE V - MANAGEMENT
5.1 Management. The business and affairs of the Company shall be
managed by five (5) natural persons who shall be referred to as "Directors"
and who, acting as a board, shall constitute the "Board of Directors." Each
Director shall hold office until such Director's successor is duly elected
or until such Director's earlier death or resignation. Directors need not
be Members of the Company. Except as expressly limited by law, the
Certificate or this Agreement, the Property and the business of the Company
shall be controlled and managed by the Board of Directors. The Board of
Directors shall have and is vested with all powers and authorities, except
as expressly limited by law, the Certificate, or this Agreement, to do or
cause to be done any and all lawful things for and in behalf of the
Company, to exercise or cause to be exercised any or all of its powers,
privileges and franchises, and to seek the effectuation of its objects and
purposes. From time to time, the Board of Directors may, but shall not be
required to, elect one of the Directors to serve as the "Chairman of the
Board." The Chairman of the Board shall carry out the decisions of the
Board of Directors.
5.2 Election of the Board of Directors. The initial Board of Directors
shall be selected by the initial Member of the Company. Elections of
Directors shall not be required to be held at any regular frequency, but
shall be held as required by the 1940 Act, to the extent the Company is
subject to such Act. In electing each Director, each Member shall have the
right to cast as many votes in the aggregate as shall equal the Units held
by such Member. Vacancies on the Board of Directors may be filled by the
remaining members of the Board of Directors, except as required by the 1940
Act, to the extent the Company is subject to such Act.
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5.3 Meetings of the Board of Directors; Place of Meetings. Meetings of
the Board of Directors shall be held periodically. All meetings of the
Board of Directors shall be held at the principal office of the Company or
at such other place, either within or without the State of Kansas, as shall
be designated by the Director[s] calling the meeting and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Directors may participate in a meeting of the Board of Directors by means
of conference telephone equipment or similar communications equipment
whereby all Directors participating in the meeting can hear each other and
participation in a meeting in this manner shall constitute presence in
person at the meeting.
5.4 Quorum; Voting Requirement. At all meetings of the Board of
Directors, a majority of the number of Directors then serving shall
constitute a quorum for the transaction of business. The act of a majority
in number of the Directors present at any meeting of the Board of Directors
at which a quorum is present shall be the act of the Board of Directors.
5.5 Notice of Meeting. Notice of each meeting of the Board of
Directors, stating the place, day and hour of the meeting shall be given to
each Director at least one day before the day on which the meeting is to be
held. The notice may be given by any Director. "Notice" and "call" with
respect to such meetings shall be deemed to be synonymous.
5.6 Waiver of Notice. Whenever any notice is required to be given to
any Director under the provisions of this Agreement, a waiver thereof in
writing signed by such Director, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
Attendance of a Director at any meeting shall constitute a waiver of notice
of such meeting except where a Director attends a meeting for the express
purposes of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
5.7 Action Without a Meeting. Any action that is required to be or may
be taken at a meeting of the Board of Directors may be taken without a
meeting if consents in writing, setting forth the action so taken, are
signed by all of the Directors. The consents shall have the same force and
effect as a unanimous vote at a meeting duly held.
5.8 Compensation of Directors. Directors shall not receive any stated
salary for their services as Directors but, by resolution of the Board of
Directors, may receive compensation per year and/or per meeting and/or per
visit to real property or other facilities owned or leased by the Company
and for any service or activity they performed or engaged in as Directors.
Directors may be reimbursed for expenses of attendance, if any, at each
annual, regular or special meeting of the Board of Directors or of any
committee thereof and for their expenses, if any, in connection with each
property visit and any other service or activity they performed or engaged
in as Directors; but nothing herein contained shall be construed to
preclude any Directors from serving the Company in any other capacity and
receiving compensation therefor.
5.9 Restrictions on Authority of Board of Directors. The Board of
Directors shall not be authorized to act to consummate any of the
following:
(a) A merger or consolidation of the Company with another Person;
15
(b) Change of the status of the Company from one in which
management is vested in the Board of Directors to one in which
management is vested in the Members;
(c) The sale, lease, exchange, or other disposition, other than
by mortgage, deed of trust, or pledge, of all, or substantially all,
the Property, with or without the goodwill, of the Company; or
(d) Modify, compromise or release the amount and character of the
contributions that a Member shall make as the consideration for the
issuance of an Interest.
The approval of a Super-Majority in Interest shall be required for the foregoing
transactions.
5.10 Meetings of Members; Place of Meetings. Meetings of the Members shall
not be required to be held on any regular frequency. Meetings of the Members may
be held for any purpose or purposes, unless otherwise prohibited by law or by
the Certificate, and may be called by the Board of Directors. All meetings of
the Members shall be held at the principal office of the Company or at such
other place, within or without the State of Kansas, as shall be designated from
time to time by the Board of Directors and stated in the notice of the meeting
or in a duly executed waiver of the notice thereof. Members may participate in a
meeting of the Members by means of conference telephone or similar
communications equipment whereby all Members participating in the meeting can
hear each other and participation in a meeting in this manner shall constitute
presence in person at the meeting.
5.11 Quorum; Voting Requirement. The presence, in person or by proxy, of a
Majority in Interest shall constitute a quorum for the transaction of business
by the Members. If less than a Majority in Interest are represented at a
meeting, a majority of the Interests so represented may adjourn the meeting to a
specified date not longer than ninety (90) days after such adjournment, without
further notice. At such adjourned meeting at which a quorum shall be present or
represented by proxy, any business may be transacted that might have been
transacted at the meeting as originally noticed. The Members present at a duly
convened meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Members to constitute less than a
quorum. Each Member shall have the right to vote in accordance with such
Member's Percentage Interest. The affirmative vote of a Majority in Interest
shall constitute a valid decision of the Members, except where a larger vote is
required by the Act, the Certificate or this Agreement. At any time that no
Person shall have the right to vote or to participate in the management of the
business and affairs of the Company with respect to a particular Interest, then
the Percentage Interest represented by such Interest shall be disregarded for
the purposes of determining whether a quorum is present at a meeting of Members
and in determining whether the requisite Percentage Interest necessary for a
valid decision of the Members has been obtained.
5.12 Proxies. At any meeting of the Members, every Member having the right
to vote thereat shall be entitled to vote in person or by proxy appointed by an
instrument in writing signed by such Member and bearing a date not more than one
year prior to such meeting.
16
5.13 Action Without Meeting. Any action required or permitted to be taken
at any meeting of the Members of the Company may be taken without a meeting if
the action is evidenced by one or more written consents setting forth the action
to be taken and signed by each Member entitled to vote.
5.14 Notice of Meetings. Notice stating the place, day, hour and the
purpose for which the meeting is called shall be given, not less than ten (10)
days nor more than sixty (60) days before the date of the meeting, by or at the
direction of the Members calling the meeting, to each Member entitled to vote at
such meeting. A Member's attendance at a meeting:
(a) Waives objection to lack of notice or defective notice of the
meeting, unless such Member, at the beginning of the meeting, objects to
holding the meeting or transacting business at the meeting; and
(b) Waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the notice
of meeting, unless such Member objects to considering the matter when it is
presented.
5.15 Waiver of Notice. When any notice is required to be given to any
Member of the Company hereunder, a waiver thereof in writing signed by such
Member, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice.
5.16 Execution of Documents Filed with Secretary of State of Delaware and
Waiver of Receipt of Copy of Filed Documents. Any Director shall be authorized
to execute and file, or cause the execution and filing, with the Secretary of
State of Delaware any document permitted or required by the Act. Such documents
shall be executed and filed only after the Members or the Board of Directors
have approved or consented to such action in the manner provided herein and
under the Act. The Members hereby waive any requirement under the Act of
receiving a copy of any document filed with the Secretary of State of Delaware.
5.17 Voting by Certain Holders. In the case of a Member that is a
corporation, its Interest may be voted by such officer, agent or proxy as the
by-laws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. In the case of a
Member that is a general or limited partnership, its Interest may be voted, in
person or by proxy, by such Person as is designated by such Member. In the case
of a Member that is another limited liability company, its Interest may be
voted, in person or by proxy, by such Person as is designated by the operating
agreement of such other limited liability company, or, in the absence of such
designation, by such Person as is designated by the limited liability company.
5.18 Limitation of Liability; Indemnification.
(a) Limitation. No Person shall be liable to the Company or its
Members for any loss, damage, liability or expense suffered by the Company
or its Members on account of any action taken or omitted to be taken by
such Person as a Director or officer of the Company or by such Person while
serving at the request of the Company as a director, officer or in any
other comparable position of any Other Enterprise, if such Person
discharges such Person's duties in good faith, exercising the same degree
of care
17
and skill that a prudent person would have exercised under the
circumstances in the conduct of such prudent person's own affairs, and in a
manner such Person reasonably believes to be in the best interest of the
Company. A Director's liability hereunder shall be limited only for those
actions taken or omitted to be taken by such Director in the discharge of
such Director's obligations for the management of the business and affairs
of the Company. The provisions of this subsection are not intended to limit
the liability of any Director or officer for any obligations of such
Director or officer undertaken in this Agreement in such Director's or
officer's capacity as a Member.
(b) Right to Indemnification. The Company shall indemnify each Person
who has been or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, investigative or appellate (regardless of whether
such action, suit or proceeding is by or in the right of the Company or by
third parties) by reason of the fact that such Person is or was a Director
or officer of the Company, or is or was serving at the request of the
Company as a director, officer or in any other comparable position of any
Other Enterprise against all liabilities and expenses, including, without
limitation, judgments, amounts paid in settlement, attorneys' fees, excise
taxes or penalties, fines and other expenses, actually and reasonably
incurred by such Person in connection with such action, suit or proceeding
(including, without limitation, the investigation, defense, settlement or
appeal of such action, suit or proceeding); provided, however, that the
Company shall not be required to indemnify or advance expenses to any
Person from or on account of such Person's conduct that was finally
adjudged to have been knowingly fraudulent, deliberately dishonest or
willful misconduct; provided, further, that the Company shall not be
required to indemnify or advance expenses to any Person in connection with
an action, suit or proceeding initiated by such Person unless the
initiation of such action, suit or proceeding was authorized in advance by
the Board of Directors; provided, further, that a Director shall be
indemnified hereunder only for those actions taken or omitted to be taken
by such Director in the discharge of such Director's obligations for the
management of the business and affairs of the Company or Other Enterprise
and that the provisions of this Section 5.18 are not intended to extend
indemnification to any Director or officer for any obligations of such
Director or officer undertaken in this Agreement in such Director's or
officer's capacity as a Member. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or under a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that such Person's conduct was finally adjudged to have been
knowingly fraudulent, deliberately dishonest or willful misconduct.
(c) Enforcement of Indemnification. In the event the Company refuses
to indemnify any Person who may be entitled to be indemnified or to have
expenses advanced under this Section 5.18, such Person shall have the right
to maintain an action in any court of competent jurisdiction against the
Company to determine whether or not such Person is entitled to such
indemnification or advancement of expenses hereunder. If such court action
is successful and the Person is determined to be entitled to such
indemnification or advancement of expenses, such Person shall be reimbursed
by the Company for all fees and expenses (including attorneys' fees)
actually and reasonably
18
incurred in connection with any such action (including, without limitation,
the investigation, defense, settlement or appeal of such action).
(d) Advancement of Expenses. Expenses (including attorneys' fees)
reasonably incurred by any Person potentially entitled to indemnification
hereunder in defending an action, suit or proceeding, whether civil,
criminal, administrative, investigative or appellate, shall be paid by the
Company in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Person to
repay such amount if it shall ultimately be determined that such Person is
not entitled to indemnification by the Company. In no event shall any
advance be made in instances where the Board of Directors or independent
legal counsel reasonably determines that such Person would not be entitled
to indemnification hereunder.
(e) Non-Exclusivity. The indemnification and the advancement of
expenses provided by this Section 5.18 shall not be exclusive of any other
rights to which those seeking indemnification or advancement of expenses
may be entitled under any statute, or any agreement, vote of Members,
policy of insurance or otherwise, both as to action in their official
capacity and as to action in another capacity while holding their
respective offices, and shall not limit in any way any right that the
Company may have to make additional indemnifications with respect to the
same or different Persons or classes of Persons. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Section
5.18 shall continue as to a Person who has ceased to be a Director or
officer of the Company, and as to a Person who has ceased serving at the
request of the Company as a director, officer or in any other comparable
position of any Other Enterprise and shall inure to the benefit of the
heirs, executors and administrators of such Person.
(f) Insurance. Upon the approval of the Board of Directors, the
Company may purchase and maintain insurance on behalf of any Person who is
or was a Director, officer, Tax Matters Member, agent or employee of the
Company, or is or was serving at the request of the Company as a director,
officer or in any other comparable position of any Other Enterprise,
against any liability asserted against such Person and incurred by such
Person in any such capacity, or arising out of such Person's status as
such, whether or not the Company would have the power, or the obligation,
to indemnify such Person against such liability under the provisions of
this Section 5.18.
(g) Amendment and Vesting of Rights. Notwithstanding any other
provision of this Agreement, the terms and provisions of this Section 5.18
shall not be amended or repealed and the rights to indemnification and
advancement of expenses created hereunder shall not be changed, altered or
terminated except by the approval of a Super-Majority in Interest. The
rights granted or created hereby shall be vested in each Person entitled to
indemnification hereunder as a bargained-for, contractual condition of such
Person's being or serving or having served as a Director or officer of the
Company or serving at the request of the Company as a director, officer or
in any other comparable position of any Other Enterprise and, while this
Section 5.18 may be amended or repealed, no such amendment or repeal shall
release, terminate or adversely affect the
19
rights of such Person under this Section 5.18 with respect to any act taken
or the failure to take any act by such Person prior to such amendment or
repeal or with respect to any action, suit or proceeding with respect to
such act or failure to act filed after such amendment or repeal.
(h) Definitions. For purposes of this Section 5.18, references to:
(i) The "Company" shall include, in addition to the resulting or
surviving limited liability company (or other entity), any constituent
limited liability company (or other entity) (including any constituent
of a constituent) absorbed in a consolidation or merger so that any
Person who is or was a director or officer of such constituent limited
liability company (or other entity), or is or was serving at the
request of such constituent limited liability company (or other
entity) as a director, officer or in any other comparable position of
any Other Enterprise shall stand in the same position under the
provisions of this Section 5.18 with respect to the resulting or
surviving limited liability company (or other entity) as such Person
would if such Person had served the resulting or surviving limited
liability company (or other entity) in the same capacity;
(ii) "Other Enterprises" or "Other Enterprise" shall include,
without limitation, any other limited liability company, corporation,
partnership, joint venture, trust or employee benefit plan;
(iii) "fines" shall include any excise taxes assessed against a
person with respect to an employee benefit plan;
(iv) "defense" shall include investigations of any threatened,
pending or completed action, suit or proceeding as well as appeals
thereof and shall also include any defensive assertion of a
cross-claim or counterclaim; and
(v) "serving at the request of the Company" shall include any
service as a director, officer or in any other comparable position
that imposes duties on, or involves services by, a Person with respect
to an employee benefit plan, its participants, or beneficiaries; and a
Person who acted in good faith and in a manner such Person reasonably
believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted "in the best
interest of the Company" as referred to in this Section 5.18.
(i) Severability. If any provision of this Section 5.18 or the
application of any such provision to any Person or circumstance is held
invalid, illegal or unenforceable for any reason whatsoever, the remaining
provisions of this Section 5.18 and the application of such provision to
other Persons or circumstances shall not be affected thereby and, to the
fullest extent possible, the court finding such provision invalid, illegal
or unenforceable shall modify and construe the provision so as to render it
valid and enforceable as against all Persons and to give the maximum
possible protection to Persons subject to indemnification hereby within the
bounds of validity, legality and enforceability. Without limiting the
generality of the foregoing, if any Director or officer
20
of the Company or any Person who is or was serving at the request of the
Company as a director, officer or in any other comparable position of any
Other Enterprise, is entitled under any provision of this Section 5.18 to
indemnification by the Company for some or a portion of the judgments,
amounts paid in settlement, attorneys' fees, ERISA excise taxes or
penalties, fines or other expenses actually and reasonably incurred by any
such Person in connection with any threatened, pending or completed action,
suit or proceeding (including, without limitation, the investigation,
defense, settlement or appeal of such action, suit or proceeding), whether
civil, criminal, administrative, investigative or appellate, but not,
however, for all of the total amount thereof, the Company shall
nevertheless indemnify such Person for the portion thereof to which such
Person is entitled.
5.19 Contracts with Members, Directors or Their Affiliates. No contract or
transaction between the Company and one of its Members or Directors or between
the Company and any Person in which one of its Members or Directors is a
director or officer, or has a financial interest, shall be void or voidable
solely for this reason, or solely because such Member or Director is present at
or participates in any meeting of the Members or Board of Directors at which the
contract or transaction is authorized, or solely because such Member's or
Director's vote is counted for such purpose, if, in connection with any such
meeting of the Members, the material facts as to such Member's or Director's
relationship are known to the Members and the Members holding a majority of the
Percentage Interests held by those Members who are disinterested with respect to
such contract or transaction authorize such contract or transaction, even though
the disinterested Members be less than a quorum, or if, in connection with any
such meeting of the Board of Directors, the material facts as to such Member's
or Director's relationship are known to the Board of Directors, and the majority
of the Directors who are disinterested with respect to such contract or
transaction authorize such contract or transaction, even though the
disinterested Directors be less than a quorum. Interested Members or Directors
may be counted in determining the presence of a quorum at a meeting of the
Members or Board of Directors at which the contract or transaction is
authorized.
5.20 Other Business Ventures. Any Member or Director may engage in, or
possess an interest in, other business ventures of every nature and description,
independently or with others, whether or not similar to or in competition with
the business of the Company, and neither the Company nor the Members shall have
any right by virtue of this Agreement in or to such other business ventures or
to the income or profits derived therefrom. Neither the Members nor the
Directors shall be required to devote all of their time or business efforts to
the affairs of the Company, but shall devote so much of their time and attention
to the Company as is reasonably necessary and advisable to manage the affairs of
the Company to the best advantage of the Company.
ARTICLE VI - COMMITTEES
6.1 Number, Tenure and Qualifications. The Board of Directors may appoint
from among its members an Executive Committee, an Audit and Valuation Committee,
a Nominating and Governance Committee, a Compliance Committee and other
committees, composed of one or more directors, to serve at the pleasure of the
Board of Directors.
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6.2 Powers. The Board of Directors may delegate to committees appointed
under Section 1 of this Article any of the powers of the Board of Directors,
except as prohibited by law.
6.3 Meetings. Notice of committee meetings shall be given in the same
manner as notice for meetings of the Board of Directors. A majority of the
members of the committee shall constitute a quorum for the transaction of
business at any meeting of the committee. The act of a majority of the committee
members present at a meeting shall be the act of such committee. The Board of
Directors may designate a chairman of any committee, and such chairman or, in
the absence of a chairman, any two members of any committee (if there are at
least two members of the Committee) may fix the time and place of its meeting
unless the Board shall otherwise provide. In the absence of any member of any
such committee, the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint another director to act in the place of such
absent member. Each committee shall keep minutes of its proceedings.
6.4 Telephone Meetings. Members of a committee of the Board of Directors
may participate in a meeting by means of a conference telephone or other
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means shall
constitute presence in person at the meeting
6.5 Consent by Committees Without a Meeting. Any action required or
permitted to be taken at any meeting of a committee of the Board of Directors
may be taken without a meeting, if a consent in writing or by electronic
transmission to such action is given by each member of the committee and is
filed with the minutes of proceedings of such committee.
6.6 Vacancies. Subject to the provisions hereof, the Board of Directors
shall have the power at any time to change the membership of any committee, to
fill all vacancies, to designate alternate members to replace any absent or
disqualified member or to dissolve any such committee. Subject to the power of
the Board of Directors, the members of the committee shall have the power to
fill any vacancies on the committee.
ARTICLE VII - OFFICERS
7.1 General Provisions. The officers of the Company shall include a
president, a secretary and a treasurer and may include a chief executive
officer, one or more vice presidents, a chief operating officer, a chief
financial officer, a chief compliance officer, one or more assistant secretaries
and one or more assistant treasurers. In addition, the Board of Directors may
from time to time elect such other officers with such powers and duties as they
shall deem necessary or desirable. The Board of Directors may designate a
Chairman of the Board and a vice chairman of the Board, who shall not, solely by
reason of such designation, be officers of the Company but shall have such
powers and duties as determined by the Board of Directors from time to time. The
officers of the Company shall be elected annually by the Board of Directors,
except that the chief executive officer or president may from time to time
appoint one or more vice presidents, assistant secretaries and assistant
treasurers or other officers. Each officer shall hold office until his or her
successor is duly elected and qualifies or until his or her death, or his or her
resignation, or removal in the manner provided herein. Any two or more offices
except president and vice president may be held by the same person. Election of
an
22
officer or agent shall not of itself create contract rights between the Company
and such officer or agent.
7.2 Removal and Resignation. Any officer or agent of the Company may be
removed, with or without cause, by the Board of Directors if in its judgment the
best interests 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. Any
officer of the Company may resign at any time by giving written notice of his or
her resignation to the Board of Directors, the Chairman of the Board, the
president or the secretary. Any resignation shall take effect immediately upon
its receipt or at such later time specified in the notice of resignation. The
acceptance of a resignation shall not be necessary to make it effective unless
otherwise stated in the resignation. Such resignation shall be without prejudice
to the contract rights, if any, of the Company.
7.3 Vacancies. A vacancy in any office may be filled by the Board of
Directors for the balance of the term.
7.4 Chief Executive Officer. The Board of Directors may designate a chief
executive officer. The chief executive officer shall have general responsibility
for implementation of the policies of the Company, as determined by the Board of
Directors, and for the management of the business and affairs of the Company. He
or she may execute any deed, mortgage, bond, contract or other instrument in the
name of the Company, except in cases where the execution thereof shall be
expressly delegated by the Board of Directors or by this Agreement to some other
officer or agent of the Company or shall be required by law to be otherwise
executed; and in general shall perform all duties incident to the office of
chief executive officer and such other duties as may be prescribed by the Board
of Directors from time to time.
7.5 Chief Operating Officer. The Board of Directors may designate a chief
operating officer. The chief operating officer shall have the responsibilities
and duties as set forth by the Board of Directors or the chief executive
officer.
7.6 Chief Financial Officer. The Board of Directors may designate a chief
financial officer. The chief financial officer shall have the responsibilities
and duties as set forth by the Board of Directors or the chief executive
officer.
7.7 Chief Compliance Officer. The Board of Directors may designate a chief
compliance officer. The chief compliance officer shall have the responsibilities
and duties as may be assigned to him or her by the Board of Directors or the
chief executive officer.
7.8 President. In the absence of a designation of a chief executive officer
by the Board of Directors, the president shall be the chief executive officer
and in general supervise and control all of the business and affairs of the
Company. In the absence of a designation of a chief operating officer by the
Board of Directors, the president shall be the chief operating officer. He may
execute any deed, mortgage, bond, contract or other instrument in the name of
the Company, except in cases where the execution thereof shall be expressly
delegated by the Board of Directors or by this Agreement to some other officer
or agent of the Company or shall be required by law to be otherwise executed;
and in general shall perform all duties incident to the
23
office of president and such other duties as may be prescribed by the Board of
Directors from time to time.
7.9 Vice Presidents. In the absence of the president or in the event of a
vacancy in such office, the vice president (or in the event there be more than
one vice president, the vice presidents in the order designated at the time of
their election or, in the absence of any designation, then in the order of their
election) shall perform the duties of the president and when so acting shall
have all the powers of and be subject to all the restrictions upon the
president; and shall perform such other duties as from time to time may be
assigned to such vice president by the chief executive officer, the president or
by the Board of Directors. The Board of Directors may designate one or more vice
presidents as executive vice president, senior vice president, or as vice
president for particular areas of responsibility.
7.10 Secretary. The secretary shall (a) keep the minutes of the proceedings
of the stockholders, the Board of Directors and committees of the Board of
Directors in one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of this Agreement or as
required by law; (c) be custodian of the corporate records and of the seal of
the Company; (d) keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder; (e) have general
charge of the stock transfer books of the Company; and (f) in general perform
such other duties as from time to time may be assigned to him by the chief
executive officer, the president or by the Board of Directors.
7.11 Treasurer. The treasurer shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Company and shall deposit
all moneys and other valuable effects in the name and to the credit of the
Company in such depositories as may be designated by the Board of Directors. In
the absence of a designation of a chief financial officer by the Board of
Directors, the treasurer shall be the chief financial officer of the Company.
The treasurer shall disburse the funds of the Company as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the Board of Directors, the chief executive officer and the president
at the regular meetings of the Board of Directors or whenever it may so require,
an account of all his or her transactions as treasurer and of the financial
condition of the Company.
If required by the Board of Directors, the treasurer shall give the Company
a bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of his or her
office and for the restoration to the Company, in case of his or her death,
resignation, retirement or removal from office, of all books, papers, vouchers,
moneys and other property of whatever kind in his or her possession or under his
or her control belonging to the Company.
7.12 Assistant Secretaries and Assistant Treasurers. The assistant
secretaries and assistant treasurers, in general, shall perform such duties as
shall be assigned to them by the secretary or treasurer, respectively, or by the
chief executive officer, the president or the Board of Directors. The assistant
treasurers shall, if required by the Board of Directors, give bonds for
24
the faithful performance of their duties in such sums and with such surety or
sureties as shall be satisfactory to the Board of Directors.
ARTICLE VIII - ACCOUNTING AND BANK ACCOUNTS
8.1 Fiscal Year. The fiscal year and taxable year of the Company shall end
on December 31 of each year, unless a different year is required by the Code.
8.2 Books and Records. At all times during the existence of the Company,
the Company shall cause to be maintained full and accurate books of account,
which shall reflect all Company transactions and be appropriate and adequate for
the Company's business. The books and records of the Company shall be maintained
at the principal office of the Company or such other location as is authorized
by the Board of Directors. Each Member (or such Member's designated
representative) shall have the right during ordinary business hours and upon
reasonable notice to inspect and copy (at such Member's own expense) all books
and records of the Company.
8.3 Financial Reports.
(a) Within ninety (90) days after the end of each fiscal year, there
shall be prepared and delivered to each Member:
(i) a balance sheet as of the end of such year and related
financial statements for the year then ended; and
(ii) other pertinent information regarding the Company.
(b) As soon as practical after the end of each fiscal year, there
shall be prepared and delivered to each Member all information with respect
to the Company necessary for the preparation of the Members' Federal and
state income tax returns.
8.4 Tax Returns and Elections; Tax Matters Member. The Company shall cause
to be prepared and timely filed all Federal, state and local income tax returns
or other returns or statements required by applicable law. The Company shall
claim all deductions and make such elections for federal or state income tax
purposes that the Board of Directors reasonably believe will produce the most
favorable tax results for the Members. Tortoise Total Return Seed Corp. is
hereby designated as the Company's "Tax Matters Member," to serve with respect
to the Company in the same capacity as a "tax matters partner" as defined in the
Code, and in such capacity is hereby authorized and empowered to act for and
represent the Company and each of the Members before the Internal Revenue
Service in any audit or examination of any Company tax return and before any
court selected by the Members for judicial review of any adjustment assessed by
the Internal Revenue Service. Tortoise Total Return Seed Corp. does hereby
accept such designation. The Members specifically acknowledge, without limiting
the general applicability of this Section, that the Tax Matters Member shall not
be liable, responsible or accountable in damages or otherwise to the Company or
any Member with respect to any action taken by it in its capacity as a "Tax
Matters Member." All out-of-pocket expenses incurred by the Tax Matters Member
in the capacity of "Tax Matters Member" shall be considered expenses of the
Company for which the Tax Matters Member shall be entitled to full
reimbursement.
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8.5 Section 754 Election. In the event a distribution of Company assets
occurs that satisfies the provisions of Section 734 of the Code or in the event
a transfer of an Interest occurs that satisfies the provisions of Section 743 of
the Code, the Board of Directors in its sole and absolute discretion may
determine whether to elect, pursuant to Section 754 of the Code, to adjust the
basis of the Property to the extent allowed by such Section 734 or 743.
8.6 Bank Accounts. All funds of the Company shall be deposited in a
separate bank, money market or similar account(s) approved by the Board of
Directors and in the Company's name. Withdrawals therefrom shall be made only by
persons authorized to do so by the Board of Directors.
ARTICLE IX - TRANSFERS OF INTERESTS AND EVENTS OF WITHDRAWAL
9.1 General Restrictions. Except as expressly provided in this Agreement,
no Member may Transfer all or any part of such Member's Interest. Any purported
Transfer of an Interest in violation of the terms of this Agreement shall be
null and void and of no effect. A permitted Transfer shall be effective as of
the date specified in the instruments relating thereto. Any Transferee desiring
to make a further Transfer shall become subject to all of the provisions of this
Article IX to the same extent and in the same manner as any Member desiring to
make any Transfer.
9.2 Permitted Transfers. Each Member (a "Transferor") may, subject to the
approval of the Board of Directors in its sole discretion, Transfer (but not to
substitute the assignee as a Substitute Member in such Member's place, except in
accordance with Section 9.3), by a written instrument, all or any part of such
Member's Interest, provided that the Transfer would not result in the
"termination" of the Company pursuant to ss. 708 of the Code and further
provided that the Transfer (whether alone or taken in conjunction with any other
transaction) will not result in the Company being treated as a publicly traded
partnership within the meaning of ss. 7704(b) of the Code. Any assignee of an
Interest as allowed by this Section 9.2 who does not become a Substitute Member
as provided in Section 9.3 (a "Transferee") shall not be a Member and shall not
have any right to vote as a Member or to participate in the management of the
business and affairs of the Company, such right to vote such Interest and to
participate in the management of the business and affairs of the Company
continuing with the Transferor. The Transferee shall, however, be entitled to
distributions and allocations of the Company, as provided in Article IV of this
Agreement, attributable to the Interest that is the subject of the Transfer to
such Transferee. No Transfer as contemplated by this Section 9.2 shall be
permitted absent (i) compliance with the registration requirements under Federal
and applicable state securities laws or an opinion of counsel to the Company
that such Transfer qualifies for an exemption therefrom and (ii) compliance with
the regulatory safe harbors provided to insure that the Company shall not be
treated as a publicly traded partnership within the meaning of ss. 7704(b) of
the Code or an opinion of counsel to the Company that such Transfer (whether
alone or taken in conjunction with any other transaction) shall not result in
the Company being treated as a publicly traded partnership within the meaning of
ss. 7704(b) of the Code.
9.3 Substitute Members. No assignee of all or part of a Member's Interest
shall become a Member in place of the Transferor (a "Substitute Member") unless
and until:
26
(a) The Transferor (if living) has stated such intention in the
instrument of assignment;
(b) The Transferee has executed an instrument accepting and adopting
the terms and provisions of this Agreement;
(c) The Transferor or Transferee has paid all reasonable expenses of
the Company in connection with the admission of the Transferee as a
Substitute Member;
(d) If required by the Board of Directors, the Transferor shall have
obtained an opinion of counsel to the Company that such Transfer: (i)
complies with the registration requirements under Federal and applicable
state securities laws or qualifies for an exemption therefrom, and (ii)
will not result in the Company being treated as a publicly traded
partnership pursuant to ss. 7704 of the Code; and
(e) The Board of Directors has provided its prior written consent to
such Transfer, which consent may be withheld in its sole discretion.
Upon satisfaction of all of the foregoing conditions with respect to a
Transferee, the Board of Directors shall cause this Agreement to be duly amended
to reflect the admission of the Transferee as a Substitute Member.
9.4 Effect of Admission as a Substitute Member. Unless and until admitted
as a Substitute Member pursuant to Section 9.3, a Transferee shall not be
entitled to exercise any rights of a Member in the Company, including the right
to vote, grant approvals or give consents with respect to such Interest, the
right to require any information or accounting of the Company's business or the
right to inspect the Company's books and records, but a Transferee shall only be
entitled to receive, to the extent of the Interest transferred to such
Transferee, the Distributions to which the Transferor would be entitled. A
Transferee who has become a Substitute Member has, to the extent of the Interest
transferred to such Transferee, all the rights and powers of the Member for whom
such Transferee is substituted and is subject to the restrictions and
liabilities of a Member under this Agreement and the Act. Upon admission of a
Transferee as a Substitute Member, the Transferor shall cease to be a Member of
the Company to the extent of such Interest. A Person shall not cease to be a
Member upon assignment of all of such Member's Interest unless and until the
Transferee becomes a Substitute Member.
9.5 Additional Members and Interests.
(a) Authority to Admit Additional Members and Accept Additional
Contributions. Additional Members may be admitted to the Company and
additional Interests may be issued at such times and in exchange for
contributions in such amounts as are determined by the Board of Directors
in its sole discretion. The contributions may be made in exchange for
Units, as contemplated in Section 9.5(b) hereof, or for Preferred Units, as
contemplated in Section 9.5(c) hereof.
(b) Units. Any additional Interests issued by the Company for Units
are to be issued at a price equal to the Net Asset Value per Unit as
determined at any time within two business days prior to such issuance in
accordance with Section 23(b) of the 1940
27
Act. Whenever any additional Member is admitted to the Company, or any
additional Interest is issued, in accordance with this Section 9.5(b), the
Percentage Interest of each Member outstanding immediately prior to such
admission or issuance shall be decreased proportionately, as appropriate,
to maintain the aggregate Percentage Interests of the Members at one
hundred percent (100%). The Board of Directors shall cause Schedule A to
this Agreement to be amended to reflect any adjustment in the Percentage
Interests of the Members in accordance with this Section 9.5. This Section
9.5(b) shall not apply to the sale or issuance of any Preferred Units.
(c) Preferred Units. At the sole and absolute discretion of the Board
of Directors, the Company may admit additional Members or accept additional
contributions from Members in exchange for Preferred Units in the Company.
Any Preferred Units issued will only participate in the Company's Income or
Loss (or items thereof) to the extent of a specified guaranteed payment,
within the meaning of ss. 707(c) of the Code, as agreed to by the Board of
Directors and the holders of those Preferred Units. The holders of the
Preferred Units shall have only those rights or privileges required by the
Act and the 1940 Act, or as otherwise explicitly set forth in this
Agreement.
9.6 Redemption of Interests. Any Interest may be redeemed by the Company,
by purchase or otherwise, upon the consent of the holder of such Interest and of
the Board of Directors. Whenever any Interest is redeemed by the Company in
accordance with this Section 9.6, the Percentage Interest of each Member
outstanding immediately following such redemption shall be increased
proportionately, as appropriate, to maintain the aggregate Percentage Interests
of the Members at one hundred percent (100%). The Board of Directors shall cause
Schedule A to this Agreement to be amended to reflect any adjustment in the
Percentage Interests of the Members in accordance with this Section 9.6.
The Board of Directors may redeem Interests through a tender offer process.
This process anticipates Members making written requests to tender their Units
by the first day of a calendar quarter. Following such notice, the Board of
Directors will consider a recommendation from the advisor retained to manage the
assets of the Company to initiate a tender offer. The Board of Directors, in its
sole discretion, will determine the terms and conditions pursuant to which the
Company may undertake a written tender offer. Notice of any such tender will be
sent to all Members describing the terms of the tender offer and providing
information on how to participate in such tender offer. In the event any such
tender offer is over subscribed, the Board of Directors may consider increasing
the tender offer size, subject to limitations of applicable law. If the Board of
Directors does not increase the size of the tender offer, the Company will
repurchase Interests on a pro rata basis from those seeking to sell interests.
The Company will seek to provide payment for any tendered Interests within ten
days after such Interests have been valued for purposes of the tender offer. The
terms, conditions, process, and timing of any tender offer will be determined by
the Board of Directors in its sole discretion. Any Member redeeming its Interest
may be paid, in the discretion of the Board of Directors, in cash or by the
distribution of securities in-kind, or partly in cash and partly in kind. Any
in-kind distribution of securities will be value at the Fair Value for such
securities. Any Member seeking to redeem a portion of the Interests held by such
Member, whether by tender offer or otherwise, must maintain a capital account
balance of at least $2,000,000, unless waived by the Board of
28
Directors in its sole discretion. The Company reserves the right not to
repurchase, by tender offer or otherwise, any Units that would cause a Member to
have a capital account balance of less than $2,000,000 after such repurchase.
9.7 Withdrawal. A Member ceases to be a Member of the Company upon the
occurrence of any of the following events (an "Event of Withdrawal"):
(a) All of the Interests of such Member are redeemed pursuant to
Section 9.6;
(b) The Board of Directors, in its sole discretion, reasonably
determines that a Member's Interest may cause: (i) a significant delay in
operations, an extraordinary expense, or a material adverse effect on the
Company or any of its affiliates, or any entity in which the Company or any
of its affiliates holds an investment or proposed investment, or (ii) the
Company to be deemed a "publicly traded partnership" under the Code.
ARTICLE X - DISSOLUTION AND TERMINATION
10.1 Events Causing Dissolution. The Company shall be dissolved upon the
first to occur of the following events:
(a) The unanimous written agreement of the Members to dissolve.
(b) An Event of Withdrawal with respect to the sole remaining Member.
(c) Upon the approval of the Board of Directors.
(d) Upon the entry of a decree of dissolution with respect to the
Company by a court of competent jurisdiction.
(e) When the Company is not the surviving entity in a merger or
consolidation under the Act.
10.2 Effect of Dissolution. Except with respect to the occurrence of an
event referred to in Section 10.1(e), and except as otherwise provided in this
Agreement, upon the dissolution of the Company, the Board of Directors shall
take such actions as may be required pursuant to the Act and shall proceed to
wind up, liquidate and terminate the business and affairs of the Company. In
connection with such winding up, the Board of Directors shall have the authority
to liquidate and reduce to cash (to the extent necessary or appropriate) the
assets of the Company as promptly as is consistent with obtaining Fair Value
therefor, to apply and distribute the proceeds of such liquidation and any
remaining assets in accordance with the provisions of Section 4.2, and to do any
and all acts and things authorized by, and in accordance with, the Act and other
applicable laws for the purpose of winding up and liquidation.
ARTICLE XI - MISCELLANEOUS
11.1 Title to the Property. Title to the Property shall be held in the name
of the Company. No Member shall individually have any ownership interest or
rights in the Property,
29
except indirectly by virtue of such Member's ownership of an Interest. No Member
shall have any right to seek or obtain a partition of the Property, nor shall
any Member have the right to any specific assets of the Company upon the
liquidation of or any distribution from the Company.
11.2 Nature of Interest in the Company. An Interest shall be personal
property for all purposes.
11.3 Organizational Expenses. The Company shall pay all expenses incurred
in connection with the creation and formation of the Company and preparation of
this Agreement.
11.4 Notices. Any notice, demand, request or other communication (a
"Notice") required or permitted to be given by this Agreement or the Act to the
Company, any Member, or any other Person shall be sufficient if in writing and
if hand delivered or mailed by registered or certified mail to the Company at
its principal office or to a Member or any other Person at the address of such
Member or such other Person as it appears on the records of the Company or sent
by facsimile transmission to the telephone number, if any, of the recipient's
facsimile machine as such telephone number appears on the records of the
Company. All Notices that are mailed shall be deemed to be given when deposited
in the United States mail, postage prepaid. All Notices that are hand delivered
shall be deemed to be given upon delivery. All Notices that are given by
facsimile transmission shall be deemed to be given upon receipt, it being agreed
that the burden of proving receipt shall be on the sender of such Notice and
such burden shall not be satisfied by a transmission report generated by the
sender's facsimile machine.
11.5 Waiver of Default. No consent or waiver, express or implied, by the
Company with respect to any breach or default by a Member hereunder shall be
deemed or construed to be a consent or waiver with respect to any other breach
or default by such Member of the same provision or any other provision of this
Agreement. Failure on the part of the Company to complain of any act or failure
to act of a Member or to declare such Member in default shall not be deemed or
constitute a waiver by the Company or the Member of any rights hereunder.
11.6 No Third Party Rights. None of the provisions contained in this
Agreement shall be for the benefit of or enforceable by any third parties,
including, but not limited to, creditors of the Company; provided, however, the
Company may enforce any rights granted to the Company under the Act, the
Certificate, or this Agreement.
11.7 Entire Agreement. This Agreement, together with the Certificate,
constitutes the entire agreement among the Members, in such capacity, concerning
the formation, operation and continuation of the Company.
11.8 Amendments to this Agreement.
(a) Except as otherwise provided herein, this Agreement shall not be
modified or amended in any manner other than by the written agreement of a
Super-Majority in Interest at the time of such modification or amendment.
(b) This Agreement may be amended by the Board of Directors, without
any execution of such amendment by the Members, in order to reflect the
occurrence of any
30
of the following events provided that all of the conditions, if any,
contained in the relevant sections of this Agreement with respect to such
event have been satisfied:
(i) an adjustment of the Percentage Interests of the Members upon
making a Capital Contribution (Section 3.2(b) hereof), upon the
admission of an additional Member or issuance of an additional
Interest (Section 9.5 hereof), or upon the redemption of an Interest
(Section 9.6 hereof);
(ii) the modification of this Agreement to comply with the
relevant tax laws pursuant to Sections 3.3 or 4.5(j) hereof or to
comply with any applicable provisions of the 1940 Act; and
(iii) the admission of a Substitute Member (Section 9.3 hereof).
(c) Anything in this Section 11.8 to the contrary notwithstanding,
without the written consent of all Members, no amendment to this Agreement
may:
(i) add to, detract from or otherwise modify the purposes of the
Company as set forth in the Certificate;
(ii) enlarge the obligations of any Member under this Agreement;
(iii) amend any provisions of Article IV other than an amendment
to comply with the relevant tax laws as provided in Section 4.5(j); or
(iv) amend this Section 11.8 or any provision of this Agreement
requiring the consent of a Super-Majority in Interest.
11.9 Severability. In the event any provision of this Agreement is held to
be illegal, invalid or unenforceable to any extent, the legality, validity and
enforceability of the remainder of this Agreement shall not be affected thereby
and shall remain in full force and effect and shall be enforced to the greatest
extent permitted by law.
11.10 Binding Agreement. Subject to the restrictions on the disposition of
Interests herein contained, the provisions of this Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
heirs, personal representatives, successors and permitted assigns.
11.11 Headings. The headings of the Certificate and Sections of this
Agreement are for convenience only and shall not be considered in construing or
interpreting any of the terms or provisions hereof.
11.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one agreement that is binding upon all of the parties hereto,
notwithstanding that all parties are not signatories to the same counterpart.
31
11.13 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
11.14 Remedies. In the event of a default by any party in the performance
of any obligation undertaken in this Agreement, in addition to any other remedy
available to the non-defaulting parties, the defaulting party shall pay to each
of the non-defaulting parties all costs, damages, and expenses, including
reasonable attorneys' fees, incurred by the non-defaulting parties as a result
of such default. In the event that any dispute arises with respect to the
enforcement, interpretation, or application of this Agreement and court
proceedings are instituted to resolve such dispute, the prevailing party in such
court proceedings shall be entitled to recover from the non-prevailing party all
costs and expenses, including, but not limited to, reasonable attorneys' fees,
incurred by the prevailing party in such court proceedings.
11.15 Power of Attorney.
(a) Each Member does hereby constitute and appoint the Tax Matters
Member as its true and lawful representative and attorney-in-fact, in its
name, place, and stead to make, execute, sign, and file (i) any amendment
to the Certificate required because of an amendment to this Agreement or an
order to effectuate any change in the Members of this Company, (ii) any
amendments to this Agreement made pursuant to Section 11.8 and (iii) all
such other instruments, documents, and certificates that may from time to
time be required by the laws of the State of Delaware to effectuate,
implement, and continue the valid and subsisting existence of the Company
or to dissolve the Company.
(b) The power of attorney granted pursuant to this Section 11.15 is
coupled with an interest and shall (i) survive and not be affected by the
subsequent dissolution, termination, or bankruptcy of the Member granting
such power of attorney or the Transfer of all or any portion of such
Member's Interest, and (ii) extend to such Member's successors, assigns,
and legal representatives.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
TORTOISE TOTAL RETURN SEED CORP.
By:
---------------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
EACH OTHER MEMBER OF THE COMPANY
By:
---------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President of the Company
pursuant to authority granted to him by each
other Member
33
SCHEDULE A
Capital Percentage
Name and Address of Member Contribution Interest
-------------------------- ------------ --------
$___________ ______%
-----------------------------------
$___________ ______%
-----------------------------------
$___________ ______%
-----------------------------------
$___________ ______%
-----------------------------------
$___________ ______%
-----------------------------------
$ $ %
========== =======
Total $___________ 100%
34
