Exhibit G
INVESTMENT MANAGEMENT AGREEMENT
This Investment Management Agreement (the "Agreement"),
dated as of September 1, 2004, is made by and between Special Value Expansion
Fund, LLC (the "Company"), a Delaware limited liability company which will be
registered as a nondiversified closed-end investment company under the
Investment Company Act of 1940 (the "1940 Act"), and ▇▇▇▇▇▇▇▇▇▇ Capital
Partners, LLC (the "Investment Manager"), a Delaware limited liability company
registered as an investment adviser under the Investment Advisers Act of 1940
(the "Advisers Act"). Capitalized terms used but not otherwise defined in this
Agreement shall have the meanings given to them in the Amended and Restated
Operating Agreement of the Company, dated as of August 19, 2004 (as the same
may be amended from time to time, the "Operating Agreement").
1. General Duties of the Investment Manager.
Subject to the direction and control of the Company's Board
of Directors (the "Board") and subject to and in accordance with the terms of
any documentation relating to any indebtedness incurred by the Company, the
Operating Agreement, the Company's Custodial Agreement with ▇▇▇▇▇ Fargo Bank,
National Association, as the same may be amended from time to time (the
"Custodial Agreement"), the policies adopted or approved by the Board, the
conditions of any exemptive order obtained by or for the benefit of the
Company from the Securities and Exchange Commission (the "SEC") and this
Agreement, the Investment Manager agrees to supervise and direct the
investment and reinvestment of the Assets and perform investment management
and administrative duties set forth herein or in the Operating Agreement
(subject to the approval of the Investment Committee (as defined in Section
4(a) hereof) to the extent provided in Section 4 hereof), and shall perform on
behalf of the Company those investment and leverage related duties and
functions assigned to the Company or the Investment Manager in any
documentation relating to any indebtedness incurred by the Company, the
Statements of Preferences for any Preferred Shares issued by the Company and
the Custodial Agreement (collectively, the "Transaction Documents"), and shall
have such other powers with respect to the investment and leverage related
functions of the Company as shall be delegated from time to time to the
Investment Manager by the Board. The Investment Manager is hereby granted, and
shall have, full power to take all actions and execute and deliver all
necessary and appropriate documents and instruments on behalf of the Company
in accordance with the Transaction Documents, the Operating Agreement, the
policies adopted or approved by the Board and transmitted to the Investment
Manager, the conditions of any exemptive order obtained by or for the benefit
of the Company or the Investment Manager from the SEC and this Agreement. The
Investment Manager shall endeavor to comply in all material respects with the
1940 Act and all rules and regulations thereunder, all other applicable
federal and state laws and regulations and the applicable provisions of the
Transaction Documents in performing its duties under this Agreement. Subject
to the foregoing and the other provisions of this Agreement, and subject to
the decisions of the Investment Committee and the direction and control of the
Board, the Investment Manager is hereby appointed as the Company's agent and
attorney-in-fact with authority to negotiate, execute and deliver all
documents and agreements on behalf of the Company and to do or take all
related acts, with the power of substitution, to acquire, dispose of or
otherwise take action with respect to or affecting the Investments (as defined
in Section 4(b) hereof), including, without limitation:
(a) identifying and originating Investments (defined below)
to be purchased by the Company, selecting the dates for such purchases, and
purchasing or directing the purchase of such Investments on behalf of the
Company;
(b) identifying Investments owned by the Company to be sold
by the Company, selecting the dates for such sales, and selling such
Investments on behalf of the Company;
(c) negotiating and entering into, on behalf of the Company,
documentation providing for the purchase and sale of Investments, including
without limitation, confidentiality agreements and commitment letters;
(d) structuring the terms of, and negotiating, entering into
and/or consenting to, on behalf of the Company, documentation relating to
Investments to be purchased, held, exchanged or sold by the Company, including
any amendments, modifications or supplements with respect to such
documentation;
(e) exercising, on behalf of the Company, rights and
remedies associated with Investments, including without limitation, rights to
petition to place an obligor or issuer in bankruptcy proceedings, to vote to
accelerate the maturity of an Investment, to waive any default, including a
payment default, with respect to an Investment and to take any other action
which the Investment Manager deems necessary or appropriate in its discretion
in connection with any restructuring, reorganization or other similar
transaction involving an obligor or issuer with respect to an Investment,
including without limitation, initiating and pursuing litigation;
(f) responding to any offer in respect of Investments by
tendering the affected Investments, declining the offer, or taking such other
actions as the Investment Manager may determine;
(g) exercising all voting, consent and similar rights of the
Company on its behalf and advising the Company with respect to matters
concerning the Investments;
(h) advising and assisting the Company with respect to the
valuation of the Assets;
(i) retaining legal counsel and other professionals (such as
financial advisers) to assist in the structuring, negotiation, documentation,
administration and modification and restructuring of Investments; and
(j) providing the Company with such assistance as the Board
may request in processing subscription and/or transfer applications for the
Membership Interests, including assistance in determining whether such
applications and prospective or existing Members of the Company satisfy
applicable requirements under the Operating Agreement.
2. Duties and Obligations of the Investment Manager with
Respect to the Administration of the Company.
The Investment Manager also agrees to furnish office
facilities and equipment and clerical, bookkeeping and administrative services
(other than such services, if any, provided by the Company's custodian and
other service providers) to the Company. To the extent requested by the
Company, the Investment Manager agrees to provide the following administrative
services:
(a) oversee the determination and publication of the
Company's net asset value in accordance with the Company's policy as adopted
from time to time by the Board and communicated to the Investment Manager in
writing;
(b) maintain or oversee the maintenance of the books and
records of the Company as required under the 1940 Act and maintain (or oversee
maintenance by other persons) such other books and records required by law or
for the proper operation of the Company;
(c) oversee the preparation and filing of the Company's
federal, state and local income tax returns and any other required tax returns
or reports;
(d) review the appropriateness of and arrange for payment of
the Company's expenses;
(e) prepare for review and approval by officers and other
Authorized Signatories of the Company (collectively, the "Authorized
Signatories") financial information for the Company's semi-annual and annual
reports and other communications with shareholders required or otherwise to be
sent to Company shareholders, and arrange for the printing and dissemination
of such reports and communications to shareholders;
(f) prepare for review by the Authorized Signatories and
Board of the Company the Company's periodic financial reports required to be
filed with the SEC on Form N-SAR, Form N-CSR, Form N-PX, Form N-Q and such
other reports, forms and filings, as may be mutually agreed upon or as may be
required by law, the documentation relating to any indebtedness incurred by
the Company or any Statement of Preferences;
(g) prepare reports relating to the business and affairs of
the Company as may be mutually agreed upon and not otherwise prepared by
others;
(h) make such reports and recommendations to the Board
concerning the performance and fees of any of the Company's service providers
as the Board may reasonably request or deem appropriate;
(i) oversee and review calculations of fees paid to the
Company's service providers;
(j) oversee the Company's portfolio and perform necessary
calculations as required under Section 18 of the 1940 Act;
(k) consult with the Audit Committee of the Board, the
Officers and Authorized Persons of the Company, and the Company's independent
accountants, legal counsel, custodian and other service providers in
establishing the accounting policies of the Company and monitor financial and
shareholder accounting services;
(l) review implementation of any share purchase programs
authorized by the Board;
(m) determine the amounts available for distribution as
dividends and distributions to be paid by the Company to its shareholders;
(n) prepare and arrange for the printing of dividend notices
to shareholders;
(o) provide the Company's dividend disbursing agent and
custodian with such information as is required for such parties to effect the
payment of dividends and distributions;
(p) prepare such information and reports as may be required
in any documentation relating to any indebtedness incurred by the Company and
by any other banks, if any, from which the Company borrows funds;
(q) provide such assistance to the Company's custodian,
counsel, auditors and other service providers as generally may be required to
properly carry on the business and operations of the Company;
(r) assist in the preparation and filing of Forms 3, 4, and
5 pursuant to Section 16 of the Securities Exchange Act of 1934, as amended,
and Section 30(h) of the 1940 Act for the Officers and Authorized Persons of
the Company and Directors of the Company, such filings to be based on
information provided by those persons;
(s) respond to or refer to the Company's Officers or
Authorized Persons shareholder (including any potential shareholder) inquiries
relating to the Company; and
(t) supervise any other aspects of the Company's
administration as may be agreed to by the Company and the Investment Manager.
All services are to be furnished through the medium of any
directors, officers, authorized persons or employees of the Investment Manager
or its affiliates as the Investment Manager deems appropriate in order to
fulfill its obligations hereunder.
The Company will reimburse the Investment Manager or its
affiliates for all out-of-pocket expenses incurred by them in connection with
the performance of the administrative services described in this paragraph 2.
3. Authority to Bind the Company; No Joint Venture.
(a) Except as provided in or pursuant to Sections 1, 2 and
12 hereof, the Investment Manager shall have no authority to bind or obligate
the Company. The Board shall retain the sole authority to act on behalf of the
Company, and all acts of the Investment Manager (other than as provided in the
Transaction Documents, the Operating Agreement or in Sections 1, 2 or 12
hereof with respect to any Approved Investment) shall require the Board's
consent and approval to bind the Company. Nothing in this Agreement shall be
deemed to create a joint venture or partnership between the parties with
respect to the arrangements set forth in this Agreement. For all purposes
hereof, the Investment Manager shall be deemed to be an independent contractor
and, unless otherwise provided herein or specifically authorized by the Board
from time to time, shall have no authority to act for or represent the
Company.
(b) The Investment Manager shall act in conformity with the
written instructions and directions of the Board, except to the extent that
authority has been delegated to the Investment Manager pursuant to the terms
of this Agreement, the Operating Agreement and the Transaction Documents. The
Investment Manager will not be bound to follow any amendment to any
Transaction Document or the Operating Agreement until it has received written
notice thereof and until it has received a copy of the amendment from the
Company; provided that if any such amendment materially and adversely affects
the rights or duties of the Investment Manager, the Investment Manager shall
not be obligated to respect or comply with the terms of such amendment unless
it consents thereto. Subject to the fiduciary duty of the Board, the Company
agrees that it shall not permit any amendment to any Transaction Document or
the Operating Agreement that materially and adversely affects the rights or
duties of the Investment Manager to become effective unless the Investment
Manager has been given prior written notice of such amendment and has
consented thereto in writing.
(c) The Investment Manager may, with respect to the affairs
of the Company, consult with such legal counsel, accountants and other
advisors as may be selected by the Investment Manager. The Investment Manager
shall be fully protected, to the extent permitted by applicable law, in acting
or failing to act hereunder if such action or inaction is taken or not taken
in good faith by the Investment Manager in accordance with the advice or
opinion of such counsel, accountants or other advisors. The Investment Manager
shall be fully protected in relying upon any writing signed in the appropriate
manner with respect to any instruction, direction or approval of the Board and
may also rely on opinions of the Investment Manager's counsel with respect to
such instructions, directions and approvals. The Investment Manager shall also
be fully protected when acting upon any instrument, certificate or other
writing the Investment Manager believes in good faith to be genuine and to be
signed or presented by the proper person or persons. The Investment Manager
shall be under no duty to make any investigation or inquiry as to any
statement contained in any such writing and may accept the same as conclusive
evidence of the truth and accuracy of the statements therein contained if the
Investment Manager in good faith believes the same to be genuine.
4. Limitations Relating to Investments.
(a) Investments Requiring the Investment Committee's
Approval. The Investment Manager will establish an Investment Committee (the
"Investment Committee") comprised initially of nine persons (such number of
members being subject to increase or decrease at any time in the sole
discretion of the Investment Manager). Three of the persons on the Investment
Committee will be voting members (such number of voting members being subject
to increase or decrease at any time in the sole discretion of the Investment
Manager). All of the voting members of the Investment Committee will be
appointed by the Investment Manager, and initially such voting members will be
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ or such
other persons as may be appointed by the Investment Manager. Additionally, the
Investment Manager shall have the right to appoint any number of non-voting
members to the Investment Committee. The Investment Committee will review and
discuss the purchase and sale of all Investments other than short-term
Investments in high quality debt, securities maturing in less than 367 days or
investment funds whose portfolios at all times have an effective duration of
less than 367 days and other than hedging and risk management transactions,
and approval by a majority vote of the voting members of the Investment
Committee will be required prior to the purchase or sale of any Investment
required to be reviewed by the Investment Committee. The Company shall not be
bound by any Investment made by the Investment Manager on behalf of the
Company for which the necessary approval has not been obtained.
(b) Investments. Except as otherwise provided in this
Section 4 and subject to the requirements of the Transaction Documents, the
Operating Agreement and applicable law, the Investment Manager may advise the
Company from time to time to purchase:
(i) debt securities or debt obligations, including bank
loans or interests therein ("Debt Obligations");
(ii) stock, warrants or other equity securities
("Securities"); and
(iii) any other investments of any type of asset the
Company is permitted to make (together with Securities and Debt
Obligations, "Investments").
(c) Company is not a Bank. The Investment Manager may not
purchase any Debt Obligation if the related credit agreement, note, indenture
or other documentation by its terms requires any such purchase to be made only
by a bank, savings and loan, thrift, trust company or other similar
deposit-taking institution.
(d) Origination Fees. The Company shall, except to the
extent the Investment Manager determines such sharing could cause the Company
to fail to satisfy any requirement for qualification as a regulated investment
company under Subchapter M of the Code, receive its pro-rata share, measured
by the amount invested or proposed to be invested by the investors in any
Investment, of any origination, structuring, or similar fees normally payable
to lenders or structurers as compensation for services ("Origination or
Similar Fees") payable with respect to any Investment, whether or not any
other investment funds or accounts for which the Investment Manager or its
Affiliated Persons acts as investment adviser (the "▇▇▇▇▇▇▇▇▇▇ Accounts")
share in such fees. Notwithstanding anything herein, in the Operating
Agreement or in any Transaction Document to the contrary, to the extent that
any Origination or Similar Fees with respect to the Company's share of such
Investment are paid to the Investment Manager or its Affiliated Persons as
additional compensation, such amount shall be reimbursed to the Company unless
the exception to the preceding sentence is in effect, in which case such
amount shall be paid to the other accounts participating in such Investment or
returned to the party paying such Origination or Similar Fees.
(e) Co-Investments. The Company may not co-invest with any
fund or account managed by the Investment Manager or its Affiliated Persons
that is not a registered investment company under the 1940 Act in any
Investment as to which the Investment Manager or its Affiliated Persons has
negotiated non-pricing terms, except (i) to the extent permitted by the 1940
Act or any exemptive relief obtained by the Company and the Investment Manager
thereunder, including any conditions to the granting by the SEC of such
relief, and (ii) pursuant to any policies and procedures adopted by the Board
with respect to such co-investments and any other applicable provisions of any
Transaction Document, the Operating Agreement and this Agreement. For the
avoidance of doubt, subject to the conditions of any exemptive relief
obtained, the provisions of this Section 4(e) shall not be interpreted so as
to prevent the Company from making co-investments with respect to investments
in which the Investment Manager or its Affiliated Persons negotiated only
pricing terms.
5. Brokerage.
The Investment Manager shall effect all purchases and sales
of securities in a manner consistent with the principles of best execution,
taking into account net price (including commissions) and execution capability
and other services which the broker or other intermediary may provide. In this
regard, the Investment Manager may effect transactions which cause the Company
to pay a commission in excess of a commission which another broker or other
intermediary would have charged; provided, however, that the Investment
Manager shall have first determined that such commission is reasonable in
relation to the value of the brokerage, research, performance measurement
service and other services performed by that broker or other intermediary.
6. Compensation.
(a) The Company agrees to pay to the Investment Manager and
the Investment Manager agrees to accept as partial compensation for all
services rendered by the Investment Manager as such, a fee (the "Management
Fee"), payable monthly in arrears at an annual rate equal to 0.60% of the sum
of (i) the Common Share Commitments, regardless of whether the Company has
drawn down or repaid such commitments, (ii) the maximum amount available to be
borrowed by the Company under the documents pertaining to any indebtedness of
the Company, regardless of whether the Company has borrowed any amounts
thereunder or, prior to entering into such documents, the same amount as in
clause (i) above, and (iii) upon entering into documents pertaining to
indebtedness of the Company, the maximum aggregate liquidation preference of
Preferred Shares the Company would be authorized to issue under the 1940 Act
based upon the total amount of Common Share Commitments and assuming that the
Company has borrowed the maximum amount available to be borrowed under the
documents pertaining to any indebtedness of the Company, regardless of whether
the Company has issued such Preferred Shares (the sum of (i) through (iii)
being referred to as the "Management Fee Capital"). At such time as all
borrowings under the documents pertaining to secured indebtedness of the
Company have been repaid and no further borrowings are permitted thereunder,
Management Fee Capital shall be equal to the sum of the Common Share
Commitments, regardless of whether the Company has drawn down or repaid such
commitments, plus the aggregate liquidation preference of Preferred Shares
then outstanding, thereby reducing the amounts on which the Management Fee is
paid. At such time as all borrowings under the documentats pertaining to any
indebtedness incurred by the Company have been repaid and no further
borrowings are permitted thereunder, and no more than $1,000,000 in
liquidation preference of Preferred Shares remains outstanding, Management Fee
Capital shall be equal to the Common Capital Commitments, regardless of
whether the Company has drawn down or repaid such commitments, thereby further
reducing the amounts on which the Management Fee is paid. The Management Fee
shall be prorated for any partial payment period.
(b) The Company agrees to issue to SVOF/MM, LLC, a company
wholly-owned by the Investment Manager and its Affiliated Persons, at the
initial Closing or such later date as the Investment Manager requests, one
share of Series S Preferred Stock (the "Special Share") at a price equal to
its liquidation preference of $1,000. As set forth in the Statement of
Preferences for such Special Share, the Special Share will pay dividends at a
rate equal to the greater of (i) 4% per year of the liquidation preference of
such Special Share, but in no event greater than $40 per year, or (ii) (A)
100% of the amount by which the cumulative distributions and amounts
distributable in respect of the Common Shares exceed a 12% annual weighted
average return on undistributed capital contributions attributable to the
Common Shares until the total of (1) the cumulative distributions that had
been made in respect of the Special Share during the time it was outstanding
or held by the Investment Manager or an Affiliated Person thereof and (2) any
amounts paid to the Investment Manager pursuant to the Statement of
Preferences for the Special Share equals 25% of the aggregate cumulative
distributions of net income and gain in respect of the Common Shares, and
thereafter (B) an amount (payable at the same time as, and not in advance of,
any distributions in respect of the Common Shares) such that, after payment
thereof, the total of (y) the cumulative distributions that have been made in
respect of the Special Share during the time it was outstanding or held by the
Investment Manager or an Affiliated Person thereof and (z) any amounts paid to
the Investment Manager pursuant to the Statement of Preferences for the
Special Share equals 20% of the aggregate incremental distributions of net
income and gain in respect of the Common Shares and the Special Share. For the
avoidance of doubt, the expenses of the Company, including the Management Fee,
shall not reduce the amount of undistributed capital contributions
attributable to the Common Shares for purposes of calculating the 12% annual
weighted average return on undistributed capital contributions attributable to
the Common Shares. If the Investment Manager or the Company determines on the
advice of counsel that the Statement of Preferences is inconsistent with the
requirements of the 1940 Act in any material respect and that such
inconsistency is unlikely to be able to be remedied without fundamental
alteration of such Statement of Preferences, the Company and the Investment
Manager agree that the Company will repurchase such share at liquidation
preference plus accumulation and unpaid distributions and form a subsidiary
taxable as a partnership through which the Company will carry on substantially
all of its business and which will provide SVOF/MM, LLC with a profit
allocation on the same terms as the contingent dividend set forth above with
respect to the Special Share. If for any reason the Investment Manager or the
Company determines on the advice of counsel that such profit allocation would
be inconsistent with the requirements of the 1940 Act in any material respect
and that such inconsistency would be unlikely to be able to be remedied
without fundamental alteration of such profit allocation and without having a
material adverse effect on any shareholder of the Company, the Company will
pay to SVOF/MM, LLC as a fee the amounts computed in accordance with the
second sentence of this paragraph.
(c) If this Agreement is terminated prior to the end of the
Investment Period for any reason other than Disabling Conduct (as defined in
Section 9) as determined in accordance with Section 6(d) below, the Company
will engage at its own expense a firm acceptable to the Company and the
Investment Manager to determine the maximum reasonable fair value as of the
termination date of the Company's consolidated assets (assuming each asset is
readily marketable among institutional investors without minority discount and
with an appropriate control premium for any control positions and ascribing a
net present value (discounted at AA borrowing rates) to any unamortized
portion of the Company's organizational, offering and issuance expenses and to
any going concern value identified by such firm). After review of such firm's
work papers by the Investment Manager and the Company and resolution of any
comments therefrom, such firm shall render its report as to valuation, and the
Company shall pay to the Investment Manager and/or SVOF/MM, LLC, as the case
may be, any Management Fees or other dividends or fees due under this
Agreement (which, for the avoidance of doubt, includes any amount due to
SVOF/MM, LLC pursuant to Section 6(b) hereof), as the case may be, payable
pursuant to the terms of this Agreement as if all of the consolidated assets
of the Company had been sold or realized at the values indicated in such
report and any net income and gain distributed. Such report shall be completed
within 90 days after notice of termination of the relevant agreement.
(d) If this Agreement is terminated due to conduct that is
determined by a trier of fact, after a final non-appealable determination on
the merits, to be Disabling Conduct prior to the end of the Investment Period,
the Company shall follow the procedures set forth in Section 6(c) of this
Agreement and pay any amount due to the Investment Manager and/or SVOF/MM, LLC
to such party, provided that any amount owing to either the Investment Manager
and/or SVOF/MM, LLC pursuant to this Section 6(d) shall be reduced by an
amount equal to 15% of the total amount due to such party under this Section
6(d).
7. Expenses.
The Company will be responsible for paying the compensation
of the Investment Manager, due diligence and negotiation expenses, fees and
expenses of custodians, administrators, transfer and distribution agents,
counsel and directors, insurance, filings and registrations, proxy expenses,
expenses of communications to investors, interest, taxes, portfolio
transaction expenses, indemnification, litigation and other extraordinary
expenses and such other expenses as the Investment Manager is not obligated to
provide (such as services the Investment Manager is required to supervise) and
as are approved by the directors as being reasonably related to the
organization, offering, capitalization, operation, regulatory compliance or
administration of the Company and any portfolio investments. Expenses
associated with the general overhead of the Investment Manager will not be
covered by the Company. Notwithstanding the foregoing, and subject to review
by the Board, the Company will bear the costs and expenses of the Investment
Manager as set forth in Section 9 of the Operating Agreement, and no amendment
of such provision that the Investment Manager has not consented to in writing
shall be effective in regard to the Investment Manager's duties hereunder. On
behalf of the Company, the Investment Manager may advance payment of any such
fees and expenses of the Company, and the Company shall reimburse the
Investment Manager therefor within 30 days following written request from the
Investment Manager. Nothing in this Section 7 shall limit the ability of the
Investment Manager to be reimbursed by any Person (including issuers or
obligors of securities, instruments or obligations owned by the Company) for
out-of-pocket expenses incurred by the Investment Manager in connection with
the performance of services hereunder. The Investment Manager shall maintain
complete and accurate records with respect to costs and expenses and shall
furnish the Board with receipts or other written vouchers with respect thereto
upon request of the Board.
8. Services to Other Companies or Accounts.
(a) The Investment Manager and its Affiliated Persons,
employees or associates are in no way prohibited from, and intend to, spend
substantial business time in connection with other businesses or activities,
including, but not limited to, managing investments, advising or managing
entities whose investment objectives are the same as or overlap with those of
the Company, participating in actual or potential investments of the Company
or any Member, providing consulting, merger and acquisition, structuring or
financial advisory services, including with respect to actual, contemplated or
potential investments of the Company, or acting as a director, officer or
creditors' committee member of, adviser to, or participant in, any
corporation, partnership, trust or other business entity; provided, however,
that any such other activities shall be conducted in respect of the business
of investment management and related financial services, charitable or
community service activities or the management of firm or family assets. The
Investment Manager and its Affiliated Persons may, and expect to, receive fees
or other compensation from third parties for any of these activities, which
fees will be for the benefit of their own account and not the Company.
(b) In addition, the Investment Manager and its Affiliated
Persons may manage ▇▇▇▇▇▇▇▇▇▇ Accounts other than the Company that invest in
assets eligible for purchase by the Company.
(c) The Company may have the ability, under certain
circumstances, to take certain actions that would have an adverse effect on
▇▇▇▇▇▇▇▇▇▇ Accounts other than the Company. In these circumstances, the
Investment Manager and its Affiliated Persons will act in a manner believed to
be equitable to the Company and such other ▇▇▇▇▇▇▇▇▇▇ Accounts, including
co-investment in accordance with the conditions of any exemptive relief
obtained by the company and the Investment Manager.
(d) Notwithstanding anything to the contrary contained
herein, for a twenty-eight month period commencing on the initial Drawdown
Date, the Investment Manager and its Affiliated Persons will not enter into
any new engagements to serve in an investment advisory capacity to any new
investment funds or accounts that would compete with the Company for
investments and that would cause either (i) any single additional fund or
account to have in excess of $300 million in common equity capital
commmitments, excluding, for the avoidance of doubt, Special Value
Opportunities Fund, LLC, or (ii) Special Value Opportunities Fund, LLC, the
Company and any such additional funds or accounts to have in excess of $1.1
billion in common equity capital commitments.
9. Duty of Care and Loyalty.
Except as otherwise required by law, none of the Special
Member, the Investment Manager, or any of their respective Affiliated Persons,
directors, officers, employees, shareholders, managers, members, assigns,
representatives or agents (each, an "Indemnified Person" and, collectively,
the "Indemnified Persons") shall be liable, responsible or accountable in
damages or otherwise to the Company, any Member or any other Person for any
loss, liability, damage, settlement cost, or other expense (including
reasonable attorneys' fees) incurred by reason of any act or omission or any
alleged act or omission performed or omitted by such Indemnified Person (other
than solely in such Indemnified Person's capacity as a Member, if applicable)
in connection with the establishment, management or operations of the Company
or the management of its Assets (including those in connection with serving on
boards of directors of, or creditors' committees for, any Portfolio Company)
except that the Investment Manager shall be liable to the Company or any
Member, as the case may be, if such act or failure to act arises out of the
bad faith, willful misfeasance, gross negligence or reckless disregard of an
Indemnified Person's duty to the Company or such Member, as the case may be
(such conduct, "Disabling Conduct"). Subject to the foregoing, all such
Indemnified Persons shall look solely to the Assets (including, without
limitation, the Unfunded Commitments) for satisfaction of claims of any nature
arising in connection with the affairs of the Company. If any Indemnified
Person is made a party to any suit or proceeding to enforce any such
liability, subject to the foregoing exception, such Indemnified Person shall
not, on account thereof, be held to any personal liability.
10. Indemnification.
(a) To the fullest extent permitted by applicable law, each
of the Indemnified Persons shall be held harmless and indemnified by the
Company (out of the Assets (including, without limitation, the Unfunded
Commitments) and not out of the separate assets of any Member) against any
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and reasonable counsel fees
reasonably incurred by such Indemnified Person in connection with the defense
or disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or investigative body in which
such Indemnified Person may be or may have been involved as a party or
otherwise (other than as authorized by the Directors, as the plaintiff or
complainant) or with which such Indemnified Person may be or may have been
threatened, while acting in such Person's capacity as an Indemnified Person,
except with respect to any matter as to which such Indemnified Person shall
not have acted in good faith in the reasonable belief that such Person's
action was in the best interest of the Company or, in the case of any criminal
proceeding, as to which such Indemnified Person shall have had reasonable
cause to believe that the conduct was unlawful, provided, however, that an
Indemnified Person shall only be indemnified hereunder if (i) such Indemnified
Person's activities do not constitute Disabling Conduct and (ii) there has
been a determination (a) by a final decision on the merits by a court or other
body of competent jurisdiction before whom the issue of entitlement to
indemnification was brought that such Indemnified Person is entitled to
indemnification or, (b) in the absence of such a decision, by (1) a majority
vote of a quorum of those Directors who are neither "interested persons" of
the Company (as defined in Section 2(a)(19) of the ▇▇▇▇ ▇▇▇) nor parties to
the proceeding (the "Disinterested Non-Party Directors") that the Indemnified
Person is entitled to indemnification, or (2) if such quorum is not obtainable
or even if obtainable, if a majority so directs, independent legal counsel in
a written opinion that concludes that the Indemnified Person should be
entitled to indemnification. Notwithstanding the foregoing, with respect to
any action, suit or other proceeding voluntarily prosecuted by any Indemnified
Person as plaintiff, indemnification shall be mandatory only if the
prosecution of such action, suit or other proceeding by such Indemnified
Person was authorized by a majority of the Directors. All determinations to
make advance payments in connection with the expense of defending any
proceeding shall be authorized and made in accordance with the immediately
succeeding paragraph (b) below.
(b) The Company shall make advance payments in connection
with the expenses of defending any action with respect to which
indemnification might be sought hereunder if the Company receives a written
affirmation by the Indemnified Person of the Indemnified Person's good faith
belief that the standards of conduct necessary for indemnification have been
met and a written undertaking to reimburse the Company unless it is
subsequently determined that he is entitled to such indemnification and if a
majority of the Directors determine that the applicable standards of conduct
necessary for indemnification appear to have been met. In addition, at least
one of the following conditions must be met: (i) the Indemnified Person shall
provide adequate security for his undertaking, (ii) the Company shall be
insured against losses arising by reason of any lawful advances, or (iii) a
majority of a quorum of the Disinterested Non-Party Directors, or if a
majority vote of such quorum so direct, independent legal counsel in a written
opinion, shall conclude, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is substantial reason to
believe that the Indemnified Person ultimately will be found entitled to
indemnification.
(c) The rights accruing to any Indemnified Person under
these provisions shall not exclude any other right to which he may be lawfully
entitled.
(d) Each Indemnified Person shall, in the performance of its
duties, be fully and completely justified and protected with regard to any act
or any failure to act resulting from reliance in good faith upon the books of
account or other records of the Company, upon an opinion of counsel, or upon
reports made to the Company by any of the Company's officers or employees or
by any advisor, administrator, manager, distributor, selected dealer,
accountant, appraiser or other expert or consultant selected with reasonable
care by the Directors, officers or employees of the Company, regardless of
whether such counsel or other person may also be a Director.
11. Term of Agreement; Events Affecting the Investment
Manager; Survival of Certain Terms.
(a) This Agreement shall become effective as of the date
hereof and, unless sooner terminated by the Company or Investment Manager as
provided herein, shall continue in effect for a period of two years.
Thereafter, if not terminated, this Agreement shall continue in effect with
respect to the Company for successive periods of 12 months, provided such
continuance is specifically approved at least annually by both (i) the vote of
a majority of the Board or the vote of a majority of the outstanding voting
securities of the Company at the time outstanding and entitled to vote, and
(ii) by the vote of a majority of the Directors who are not parties to this
Agreement or interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval.
Notwithstanding the foregoing, this Agreement may be terminated by the Company
at any time, without the payment of any penalty, upon giving the Investment
Manager 60 days' notice (which notice may be waived by the Investment
Manager), provided that such termination by the Company shall be directed or
approved by the vote of a majority of the Directors of the Company in office
at the time or by the vote of the holders of a majority of the voting
securities of the Company at the time outstanding and entitled to vote, or by
the Investment Manager on 60 days' written notice (which notice may be waived
by the Company). This Agreement will also immediately terminate in the event
of its assignment. As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested person" and "assignment" shall
have the same meanings as such terms are given in the 1940 Act.
(b) Notwithstanding anything herein to the contrary,
Sections 6(c), 7, 9 and 10 of this Agreement shall survive any termination
hereof.
(c) From and after the effective date of termination of this
Agreement, the Investment Manager and its Affiliated Persons shall not be
entitled to compensation for further services hereunder, but shall be paid all
compensation and reimbursement of expenses accrued to the date of termination.
Upon such termination, and upon receipt of payment of all compensation and
reimbursement of expenses owed, the Investment Manager shall as soon as
practicable (and in any event within 90 days after such termination) deliver
to the Company all property (to the extent, if any, that the Investment
Manager has custody thereof) and documents of the Company or otherwise
relating to the Assets of the Company then in the custody of the Investment
Manager (although the Investment Manager may keep copies of such documents for
its records). The Investment Manager agrees to use reasonable efforts to
cooperate with any successor investment manager in the transfer of its
responsibilities hereunder, and will, among other things, provide upon receipt
of a written request by such successor investment manager any information
available to it regarding any Assets of the Company. The Investment Manager
agrees that, notwithstanding any termination, it will reasonably cooperate in
any proceeding arising in connection with this Agreement, any of the
Transaction Documents or any Investment (excluding any such proceeding in
which claims are asserted against the Investment Manager or any Affiliated
Person of the Investment Manager) upon receipt of appropriate indemnification
and expense reimbursement.
12. Power of Attorney; Further Assurances.
In addition to the power of attorney granted to the
Investment Manager in Section 1 of this Agreement, the Company hereby makes,
constitutes and appoints the Investment Manager, with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full
power and authority in its name, place and stead, in accordance with the terms
of this Agreement (a) to sign, execute, certify, swear to, acknowledge,
deliver, file, receive and record any and all documents which the Investment
Manager reasonably deems necessary or appropriate in connection with its
investment management duties under this Agreement and as required by the 1940
Act and (b) to (i) subject to any policies adopted by the Board with respect
thereto, exercise in its discretion any voting or consent rights associated
with any securities, instruments or obligations included in the Company's
Assets, (ii) execute proxies, waivers, consents and other instruments with
respect to such securities, instruments or obligations, (iii) endorse,
transfer or deliver such securities, instruments and obligations and (iv)
participate in or consent (or decline to consent) to any modification,
work-out, restructuring, bankruptcy proceeding, class action, plan of
reorganization, merger, combination, consolidation, liquidation or similar
plan or transaction with regard to such securities, instruments and
obligations. To the extent permitted by applicable law, this grant of power of
attorney is irrevocable and coupled with an interest, and it shall survive and
not be affected by the subsequent dissolution or bankruptcy of the Company;
provided that this grant of power of attorney will expire, and the Investment
Manager will cease to have any power to act as the Company's attorney-in-fact,
upon termination of this Agreement in accordance with its terms. The Company
shall execute and deliver to the Investment Manager all such other powers of
attorney, proxies, dividend and other orders, and all such instruments, as the
Investment Manager may reasonably request for the purpose of enabling the
Investment Manager to exercise the rights and powers which it is entitled to
exercise pursuant to this Agreement. Each of the Investment Manager and the
Company shall take such other actions, and furnish such certificates, opinions
and other documents, as may be reasonably requested by the other party hereto
in order to effectuate the purposes of this Agreement and to facilitate
compliance with applicable laws and regulations and the terms of this
Agreement.
13. Amendment of this Agreement.
No provision of this Agreement may be amended, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the amendment, waiver, discharge or
termination is sought. Any amendment of this Agreement shall be subject to the
1940 Act.
14. Notices.
Unless expressly provided otherwise herein, any notice,
request, direction, demand or other communication required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly
given, made and received if sent by hand or by overnight courier, when
personally delivered, if sent by telecopier, when receipt is confirmed by
telephone, or if sent by registered or certified mail, postage prepaid, return
receipt requested, when actually received if addressed as set forth below:
(a) If to the Company:
Special Value Expansion Fund, LLC
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Investment Manager:
▇▇▇▇▇▇▇▇▇▇ Capital Partners, LLC
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to any of the Members, as provided in the Operating
Agreement.
Either party to this Agreement may alter the address to which communications
or copies are to be sent to it by giving notice of such change of address in
conformity with the provisions of this Section 14. Other addresses set forth
in this Section 14 shall be changed only with the consent of the relevant
addressee.
15. Binding Nature of Agreement; Successors and Assigns.
This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns as
provided herein.
16. Entire Agreement.
This Agreement contains the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or
written, of any nature whatsoever with respect to the subject matter hereof.
The express terms hereof control and supersede any course of performance or
usage of the trade inconsistent with any of the terms hereof.
17. Costs and Expenses.
The costs and expenses (including the fees and disbursements
of counsel and accountants) incurred in connection with the negotiation,
preparation and execution of this Agreement, and all matters incident thereto,
shall be borne by the Company.
18. Books and Records. In compliance with the requirements
of Rule 31a-3 under the 1940 Act, the Investment Manager hereby agrees that
all records which it maintains for the Company are the property of the Company
and further agrees to surrender promptly to the Company any such records upon
the Company's request. The Investment Manager further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records required
to be maintained by Rule 31a-1 under the 1940 Act.
19. Titles Not to Affect Interpretation.
The titles of sections contained in this Agreement are for
convenience only, and they neither form a part of this Agreement nor are they
to be used in the construction or interpretation hereof.
20. Provisions Separable.
The provisions of this Agreement are independent of and
separable from each other, and, to the extent permitted by applicable law, no
provision shall be affected or rendered invalid or unenforceable by virtue of
the fact that for any reason any other or others of them may be invalid or
unenforceable in whole or in part.
21. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York and, to the extent
inconsistent therewith, the 1940 Act.
22. Execution in Counterparts.
This Agreement may be executed in separate counterparts,
each of which shall be an original and all of which taken together shall
constitute one and the same instrument.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
▇▇▇▇▇▇▇▇▇▇ CAPITAL PARTNERS, LLC
By: ▇▇▇▇▇▇▇▇▇▇ & CO., LLC, its Managing Member
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Managing Member
SPECIAL VALUE EXPANSION FUND, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President and Secretary
INVESTMENT MANAGEMENT AGREEMENT
dated as of September 1, 2004
BY AND BETWEEN
SPECIAL VALUE EXPANSION FUND, LLC,
a Delaware limited liability company
AND
▇▇▇▇▇▇▇▇▇▇ CAPITAL PARTNERS, LLC,
a Delaware limited liability company
TABLE OF CONTENTS
Page
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1. General Duties of the Investment Manager..............................................................1
2. Duties and Obligations of the Investment Manager with Respect to the Administration of the Company....3
3. Authority to Bind the Company; No Joint Venture.......................................................4
4. Limitations Relating to Investments...................................................................5
5. Brokerage.............................................................................................7
6. Compensation..........................................................................................7
7. Expenses..............................................................................................9
8. Services to Other Companies or Accounts..............................................................10
9. Duty of Care and Loyalty.............................................................................10
10. Indemnification......................................................................................11
11. Term of Agreement; Events Affecting the Investment Manager; Survival of Certain Terms................12
12. Power of Attorney; Further Assurances................................................................13
13. Amendment of this Agreement..........................................................................14
14. Notices..............................................................................................14
15. Binding Nature of Agreement; Successors and Assigns..................................................15
16. Entire Agreement.....................................................................................15
17. Costs and Expenses...................................................................................15
18. Books and Records....................................................................................15
19. Titles Not to Affect Interpretation..................................................................15
20. Provisions Separable.................................................................................16
21. Governing Law........................................................................................16
22. Execution in Counterparts............................................................................16
