EXHIBIT (2)(a)(3)
▇.▇. ▇▇▇▇▇▇ MULTI-STRATEGY FUND, L.L.C.
Amended and Restated Limited Liability Company Agreement
Dated as of May 26, 2004
TABLE OF CONTENTS
ARTICLE I DEFINITIONS ........................................................................... 1
ARTICLE II ORGANIZATION; ADMISSION OF MEMBERS; DIRECTORS ........................................ 6
2.1. FORMATION AND CONTINUATION OF LIMITED LIABILITY COMPANY ........................... 6
2.2. NAME .............................................................................. 7
2.3. PRINCIPAL AND REGISTERED OFFICE ................................................... 7
2.4. DURATION .......................................................................... 7
2.5. BUSINESS OF THE FUND .............................................................. 7
2.6. MANAGING MEMBER ................................................................... 8
2.7. MEMBERS ........................................................................... 8
2.8. ORGANIZATIONAL MEMBER ............................................................. 9
2.9. LIMITED LIABILITY ................................................................. 9
2.10. DIRECTORS ........................................................................ 9
ARTICLE III MANAGEMENT OF THE FUND .............................................................. 11
3.1. MANAGEMENT AND CONTROL ............................................................ 11
3.2. POWERS RESERVED BY THE MANAGING MEMBER ............................................ 11
3.3. ACTIONS BY DIRECTORS .............................................................. 12
3.4. MEETINGS OF MEMBERS ............................................................... 12
3.5. APPOINTMENT OF INVESTMENT MANAGER ................................................. 13
3.6. CUSTODY OF ASSETS OF THE FUND ..................................................... 14
3.7. OTHER ACTIVITIES .................................................................. 14
3.8. EXCULPATION ....................................................................... 15
3.9. INDEMNIFICATION ................................................................... 16
3.10. FEES, EXPENSES AND REIMBURSEMENT ................................................. 18
ARTICLE IV TERMINATION OF STATUS OF MANAGING MEMBER; REMOVAL OF MANAGING MEMBER; TRANSFERS AND
REPURCHASES OF INTERESTS ....................................................... 20
4.1. TERMINATION OF STATUS OF MANAGING MEMBER .......................................... 20
4.2. REMOVAL OF MANAGING MEMBER ........................................................ 21
4.3. TRANSFER OF INTEREST OF MANAGING MEMBER ........................................... 21
4.4. TRANSFER OF INTERESTS OF MEMBERS .................................................. 21
4.5. REPURCHASE OF INTERESTS ........................................................... 23
ARTICLE V CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS; ALLOCATIONS .................................. 27
5.1. CONTRIBUTIONS TO CAPITAL .......................................................... 27
5.2. RIGHTS OF MEMBERS TO CAPITAL ...................................................... 28
5.3. CAPITAL ACCOUNTS .................................................................. 28
5.4. ALLOCATION OF NET CAPITAL APPRECIATION AND DEPRECIATION; MANAGEMENT FEE AND
MANAGER ADMINISTRATIVE SERVICES FEE ............................................ 29
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5.5. ALLOCATION OF CERTAIN WITHHOLDING TAXES, OTHER EXPENDITURES, AND RESERVES ......... 29
5.6. INCENTIVE ALLOCATION .............................................................. 31
5.7. TAX ALLOCATIONS AND OTHER TAX MATTERS ............................................. 32
5.8. DISTRIBUTIONS ..................................................................... 34
ARTICLE VI DISSOLUTION AND LIQUIDATION .......................................................... 35
6.1. DISSOLUTION ....................................................................... 35
6.2. LIQUIDATION OF ASSETS ............................................................. 35
ARTICLE VII ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS ........................................ 36
7.1. ACCOUNTING AND REPORTS ............................................................ 36
7.2. DETERMINATIONS BY MANAGING MEMBER ................................................. 37
7.3. VALUATION OF ASSETS ............................................................... 37
ARTICLE VIII MISCELLANEOUS PROVISIONS ........................................................... 38
8.1. AMENDMENT OF THIS AGREEMENT ....................................................... 38
8.2. SPECIAL POWER OF ATTORNEY ......................................................... 40
8.3. NOTICES ........................................................................... 41
8.4. AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS ..................................... 41
8.5. CHOICE OF LAW; WAIVER OF JURY TRIAL ............................................... 41
8.6. NO THIRD PARTY BENEFICIARIES ...................................................... 42
8.7. CONSENTS .......................................................................... 42
8.8. MERGER AND CONSOLIDATION .......................................................... 42
8.9. PRONOUNS .......................................................................... 42
8.10. CONFIDENTIALITY .................................................................. 43
8.11. SEVERABILITY ..................................................................... 43
8.12. ENTIRE AGREEMENT ................................................................. 43
8.13. DISCRETION ....................................................................... 44
8.14. COUNTERPARTS ..................................................................... 44
8.15. HEADINGS ......................................................................... 44
EXHIBITS
EXHIBIT A - Directors Agreement
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▇.▇. ▇▇▇▇▇▇ MULTI-STRATEGY FUND, L.L.C.
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of ▇.▇. ▇▇▇▇▇▇
MULTI-STRATEGY FUND, L.L.C. dated as of May 26, 2004 by and among ▇▇▇▇ ▇▇▇▇▇▇▇,
as Organizational Member, ▇▇▇▇▇▇▇ Associates, L.L.C., as Managing Member, CMRCC,
Inc., as Special Member, and those Persons who are admitted to the Fund as
Members in accordance with this Agreement.
ARTICLE I
DEFINITIONS
For purposes of this Agreement:
"1933 Act" means the Securities Act of 1933 and the rules, regulations and
orders under the 1933 Act, as amended from time to time, or any successor law.
"1940 Act" means the Investment Company Act of 1940 and the rules, regulations
and orders under the 1940 Act, as amended from time to time, or any successor
law.
"Action" has the meaning set out in Section 3.9(a) of this Agreement.
"Advisers Act" means the Investment Advisers Act of 1940 and the rules,
regulations and orders under the Advisers Act, as amended from time to time, or
any successor law.
"Affiliate" means "affiliated person" as that term is defined in Section 2(a)(3)
of the 1940 Act.
"Agreement" means this Amended and Restated Limited Liability Company Agreement,
as further amended and/or restated from time to time.
"Allocation Period" means a period beginning on the Initial Closing Date (or, in
the case of each subsequent Allocation Period, a period beginning immediately
after the close of the preceding Allocation Period) and closing on the first to
occur of (1) the last day of each month, (2) the date immediately prior to the
effective date of (a) the admission of a new Member or (b) an increase in a
Member's Capital Contribution, (3) the effective date of any repurchase of
Interests or (4) the date when the Fund dissolves.
"Associated Person" has the meaning set out in Section 3.8(a) of this Agreement.
"Board of Directors" means the Board of the Directors of the Fund who have been
delegated the authority described in this Agreement.
"Business Day" means any day on which banks in New York City are open for
business.
"Capital Account" means, with respect to each Member, the capital account
established and maintained on behalf of the Member in accordance with Section
5.3 of this Agreement.
"Capital Contribution" means the contribution, if any, made, or to be made, as
the context requires, to the capital of the Fund by a Member or former Member,
as the case may be.
"Catch-Up" has the meaning set out in Section 5.6(a) of this Agreement.
"Certificate" means the Certificate of Formation of the Fund filed with the
office of the Secretary of State of the State of Delaware on April 6, 2004, and
any amendments to the Certificate and/or restatements of the Certificate as
filed with the office of the Secretary of State of the State of Delaware from
time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to time, or
any successor law.
"Commodity Exchange Act" means the Commodity Exchange Act of 1974 and the rules,
regulations and orders under the Commodity Exchange Act, as amended from time to
time, or any successor law.
"Delaware Act" means the Delaware Limited Liability Company Act, 6 Del.C.
Sections 18-801, et seq., as amended from time to time, or any successor law.
"Directors" means those natural persons designated as "Directors" in accordance
with this Agreement (including Independent Directors) who are delegated the
authority provided for in this Agreement and any other natural persons who, from
time to time after the date of this Agreement, become Directors in accordance
with the terms and conditions of this Agreement. ▇▇▇▇▇▇▇ ▇. Beer, ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and S. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ are designated the initial
Directors of the Fund.
"Disabling Conduct" has the meaning set out in Section 3.9(a) of this Agreement.
"Expense Limitation and Reimbursement Agreement" has the meaning set out in
Section 3.10(e) of this Agreement.
"Fiscal Year" means the period commencing on the Initial Closing Date and ending
on March 31, 2005, and thereafter each period commencing on April 1 of each year
and ending on March 31 of the following year (or on the date of a final
distribution made in accordance with Section 6.2 of this Agreement), unless the
Managing Member designates another Fiscal Year for the Fund.
"Form N-2" means the Fund's Registration Statement on Form N-2 filed with the
SEC, as amended from time to time.
"Fund" means ▇.▇. ▇▇▇▇▇▇ Multi-Strategy Fund, L.L.C., the limited liability
company governed by this Agreement and formed under the laws of the State of
Delaware, as the limited liability company may from time to time be constituted.
"Incentive Allocation" has the meaning set out in Section 5.6(a) of this
Agreement.
"Indemnitee" has the meaning set out in Section 3.9(a) of this Agreement.
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"Independent Directors" mean those Directors who are not "interested persons" of
the Fund as that term is defined in Section 2(a)(19) of the 1940 Act, or any
other natural persons who, from time to time after the date of this Agreement,
become Independent Directors in accordance with the terms and conditions of this
Agreement. ▇▇▇▇▇▇▇ ▇. Beer, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and S. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ are
designated the initial Independent Directors of the Fund.
"Initial Agreement" has the meaning set out in Section 2.1 of this Agreement.
"Initial Closing Date" means the initial closing date for subscriptions for
Interests.
"Initial Payment" has the meaning set out in Section 4.5(d)(4) of this
Agreement.
"Interest" means the interest in the Fund at any particular time of a Member or
other Person to whom or which an Interest or portion of an Interest has been
Transferred in accordance with Sections 4.3 or 4.4 of this Agreement, including
the limited liability company interest and the rights and obligations of the
Member or other Person under this Agreement and the Delaware Act. References in
this Agreement to an "Interest" or the "Interests" (including references to the
repurchase of an Interest or Interests) include all or any portion of a Member's
Interest, as the context requires.
"Investment Fund" means an investment company, a general or limited partnership,
a limited liability company or other pooled investment vehicle in which the Fund
has invested and that is advised by a Portfolio Manager, whether or not, in each
case, the entity is registered under the 1940 Act, and includes entities that
may be formed by the Fund.
"Investment Management Agreement" has the meaning set out in Section 3.5(a) of
this Agreement.
"Investment Manager" means ▇.▇. ▇▇▇▇▇▇ Alternative Asset Management, Inc., a
corporation formed under the laws of the State of Delaware, and any other Person
or Persons subsequently engaged to provide investment management services to the
Fund in a similar capacity.
"Investment Percentage" means a percentage, established for each Member as of
the first day of each Allocation Period, that is determined by dividing the
balance of the Member's Capital Account as of the commencement of the Allocation
Period by the sum of the balances of all Capital Accounts of all Members as of
the commencement of the Allocation Period. The sum of the Investment Percentages
of all Members for each Allocation Period will equal 100%.
"JPMorgan Chase" means ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇ & Co., a corporation formed under the
laws of the State of New York.
"Loss" or "Losses" has the meaning set out in Section 3.9(a) of this Agreement.
"Loss Carryforward" has the meaning set out in Section 5.6(b) of this Agreement.
"Management Fee" has the meaning set out in Section 3.10(a) of this Agreement.
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"Manager Administrative Services Fee" has the meaning set out in Section 3.10(a)
of this Agreement.
"Managing Member" means the member of the Fund given the authority granted to
the Managing Member under this Agreement, and initially is designated ▇▇▇▇▇▇▇
Associates, L.L.C., a limited liability company formed under the laws of the
State of Delaware, and includes any substitute managing member of the Fund
admitted in accordance with Section 2.6 of this Agreement.
"Members" means the Managing Member, the Special Member, and any other Person
admitted to the Fund as a member of the Fund in accordance with this Agreement,
in its capacity as a "member" (within the meaning of the Delaware Act) of the
Fund, that has not ceased to be a member of the Fund for any reason.
"Member Signature Page" means with respect to every Member (1) the pages
designated as Signature Pages in each Member's subscription agreement with
respect to the Fund or (2) any other instrument executed by the Member
evidencing the Member's agreement to be bound by the terms of this Agreement.
"Memorandum" means the Fund's private placement memorandum, as included in the
Form N-2, as amended or supplemented from time to time.
"Negative Basis" has the meaning set out in Section 5.7(d) of this Agreement.
"Negative Basis Member" has the meaning set out in Section 5.7(d) of this
Agreement.
"Net Assets" means the total value of all assets of the Fund, less an amount
equal to all accrued debts, liabilities and obligations of the Fund.
"Net Capital Appreciation" means any increase in the value of the Fund's Net
Assets, including unrealized gains, from the beginning of each Allocation Period
to the end of such Allocation Period (before giving effect to repurchases of
Interests, Management Fees and Manager Administrative Services Fees, but after
giving effect to expenses other than Management Fees and Manager Administrative
Services Fees), and with respect to any calendar year or other period used to
determine the Incentive Allocation, refers to any aggregate Net Capital
Appreciation for such period in excess of the aggregate Net Capital Depreciation
for such period.
"Net Capital Depreciation" means any decrease in the value of the Fund's Net
Assets, including unrealized losses, from the beginning of each Allocation
Period to the end of such Allocation Period (before giving effect to repurchases
of Interests, Management Fees and Manager Administrative Services Fees, but
after giving effect to expenses other than Management Fees and Manager
Administrative Services Fees), and with respect to any calendar year or other
period used to determine the Incentive Allocation, refers to any aggregate Net
Capital Depreciation for such period in excess of the aggregate Net Capital
Appreciation for such period.
"Notice Due Date" has the meaning set out in Section 4.5(c) of this Agreement.
4
"Officers" means those natural persons designated as officers of the Fund in
accordance with this Agreement.
"Organizational Member" means ▇▇▇▇ ▇▇▇▇▇▇▇ in his capacity as the initial member
of the Fund.
"Person" means any individual, corporation, partnership, association, limited
liability company, joint-stock company, trust, estate, joint venture,
organization, unincorporated organization or other entity.
"Placement Agent" means any Person retained by the Fund or the Managing Member
to assist in the placement of Interests.
"Portfolio Manager" means any Person that manages (1) a portion of the assets of
the Fund through the investment by the Fund in an Investment Fund selected by
the Investment Manager or (2) a Subadviser (as defined in this Article I). Other
than when acting as a Subadviser, a Portfolio Manager will not be deemed to be a
subadviser of the Fund with the meaning of the 1940 Act.
"Positive Basis" has the meaning set out in Section 5.7(d) of this Agreement.
"Positive Basis Member" has the meaning set out in Section 5.7(d) of this
Agreement.
"Post-Audit Payment" has the meaning set out in Section 4.5(d)(5) of this
Agreement.
"Preferred Return" has the meaning set out in Section 5.6(a) of this Agreement.
"Promissory Note" has the meaning set out in Section 4.5(d)(2) of this
Agreement.
"Repurchase Fee" has the meaning set out in Section 4.5(k) of this Agreement.
"Repurchase Date" means (1) generally, any date determined by the Board of
Directors and notified to Members as a date on which Interests are to be
repurchased by the Fund in accordance with Section 4.5 of this Agreement, and
(2) specifically with respect to any Interest, the date on which the Interest is
repurchased by the Fund in accordance with Section 4.5 of this Agreement.
"SEC" means the Securities and Exchange Commission.
"Securities" means securities (including, without limitation, equity securities,
debt obligations, options, and other "securities" as that term is defined in
Section 2(a)(36) of the ▇▇▇▇ ▇▇▇) and any contracts for forward or future
delivery of any security, debt obligation, currency or commodity, all manner of
derivative instruments and any contracts based on any index or group of
securities, debt obligations, currencies or commodities, and any options on
those contracts.
"Separately Managed Account" means (1) any managed account with a Portfolio
Manager or (2) any Investment Fund of or in which the Fund and a Portfolio
Manager are the only members, partners or other interest holders, that, in the
case of both (1) and (2) above, is established
5
specifically by the Fund or that Portfolio Manager to facilitate the separate
management of a portion of the Fund's assets directly by that Portfolio Manager.
"Special Laws or Regulations" has the meaning set out in Section 4.5(g)(5) of
this Agreement.
"Special Member" means CMRCC, Inc., a corporation formed under the laws of the
State of Delaware, and any substitute or successor Special Member admitted to
the Fund as such upon its execution of a counterpart of this Agreement or any
other instrument evidencing its agreement to be bound by the terms of this
Agreement, and such Person shall be listed on the books and records of the Fund
as the Special Member. The Special Member is a Member that also has the right to
receive the Incentive Allocation.
"Subadviser" means a Portfolio Manager responsible for managing a Separately
Managed Account.
"Taxable Year" means the 12-month period ending December 31 of each year, unless
the Managing Member designates another Taxable Year for the Fund, or any other
taxable year as required by the Code.
"Transfer" means an assignment, transfer, sale or other disposition of an
Interest, including any right to receive any allocations and distributions
attributable to an Interest. Verbs, adverbs or adjectives such as "Transfer,"
"Transferred" and "Transferring" have correlative meanings.
ARTICLE II
ORGANIZATION; ADMISSION OF MEMBERS; DIRECTORS
2.1. FORMATION AND CONTINUATION OF LIMITED LIABILITY COMPANY
The Fund was formed as a limited liability company pursuant to the
Certificate and the Limited Liability Company Agreement, dated as of April 6,
2004 (the "Initial Agreement"), executed by the Organizational Member. This
Agreement amends and restates and replaces the Initial Agreement in its
entirety. The Members agree to continue the Fund as a limited liability company
pursuant to this Agreement and further agree that their rights, duties and
liabilities will be as provided in the Delaware Act, except as otherwise
provided in this Agreement. The Managing Member is designated an "authorized
person" within the meaning of the Delaware Act and will cause to be executed and
filed in accordance with the Delaware Act any amendment to the Certificate and
will cause to be executed and filed with applicable governmental authorities any
other instruments, documents and certificates that the Managing Member concludes
may from time to time be required by the laws of the United States of America,
the State of Delaware or any other jurisdiction in which the Managing Member
determines that the Fund should do business, or any political subdivision or
agency of any such jurisdiction, or that the Managing Member determines is
necessary or appropriate to effectuate, implement and continue the valid
existence and business of the Fund.
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2.2. NAME
The name of the Fund is "▇.▇. ▇▇▇▇▇▇ Multi-Strategy Fund, L.L.C." or
any other name that the Managing Member may adopt after the date of this
Agreement upon (a) causing an appropriate amendment to this Agreement to be
executed in accordance with this Agreement, (b) causing an appropriate amendment
to the Certificate to be filed in accordance with the Delaware Act, and (c)
sending notice of the amendment to each Member. ▇.▇. ▇▇▇▇▇▇ Alternative Asset
Management, Inc. has granted to the Fund a non-exclusive license to use the
words "▇.▇. ▇▇▇▇▇▇" in its name for so long as ▇.▇. ▇▇▇▇▇▇ Alternative Asset
Management, Inc., or one of its Affiliates, remains the Investment Manager. The
Members acknowledge that, except with respect to the foregoing limited license,
the Fund has no legal right or title in or to the words "▇.▇. ▇▇▇▇▇▇," and agree
to change the Fund's name immediately to a name that does not contain "▇.▇.
▇▇▇▇▇▇" or a derivative or abbreviation thereof if ▇.▇. ▇▇▇▇▇▇ Alternative Asset
Management, Inc., or one of its Affiliates, ceases to be the Investment Manager.
2.3. PRINCIPAL AND REGISTERED OFFICE
The Fund will have its principal office at the principal office of the
Investment Manager, or at any other place designated from time to time by the
Managing Member. The Fund's registered office in the State of Delaware is c/o
The Corporation Trust Company, Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and The Corporation Trust Company
is the Fund's registered agent for service of process at such address in the
State of Delaware, unless a different registered office or agent is designated
from time to time by the Managing Member in accordance with the Delaware Act.
2.4. DURATION
The term of the Fund commenced on the filing of the Certificate and
will continue until the Fund is dissolved and wound up in accordance with the
Delaware Act and Article VI of this Agreement and the Certificate is canceled in
accordance with the Delaware Act.
2.5. BUSINESS OF THE FUND
(a) The Fund was formed, and is hereby continued, for the object and
purpose of (and the nature of the business to be conducted by the Fund is)
purchasing, selling, investing and trading in Securities and engaging in any
financial or derivative transactions relating to Securities, engaging in any
lawful activity for which limited liability companies may be formed under the
Delaware Act, and engaging in any and all activities necessary or incidental to
the foregoing. Portions of the Fund's assets (which may constitute, in the
aggregate, all of the Fund's assets) may be invested in Investment Funds
(including any Investment Funds that are Separately Managed Accounts) that
purchase, sell, invest, and trade in Securities. The Fund may execute, deliver
and perform all contracts, agreements and other undertakings and engage in all
activities and transactions as the Managing Member, the Directors or the
Investment Manager may deem necessary or advisable to carry out its objective or
business.
(b) The Fund will operate as a closed-end, management investment company in
accordance with the 1940 Act and subject to any fundamental policies and
investment restrictions described in the Form N-2.
7
(c) The Fund may designate from time to time Persons to act as signatories
for the Fund, including, without limitation, Persons authorized to execute and
deliver any filings with the SEC or applicable federal or state regulatory
authorities or self-regulatory organizations.
(d) The Fund is hereby authorized to execute, deliver and perform, and the
Managing Member on behalf of the fund is hereby authorized to execute and
deliver, subject to the 1940 Act and any required approval of the Board of
Directors, (1) a subscription agreement with each Person being admitted to the
Fund as a Member, (2) a Custodian Services Agreement with PFPC Trust Company,
(3) an Administration Agreement with PFPC Inc., (4) an Escrow Agreement with
PFPC Inc., (5) an Investment Management Agreement with ▇.▇. ▇▇▇▇▇▇ Alternative
Asset Management, Inc., (6) an Expense Limitation and Reimbursement Agreement
with ▇.▇. ▇▇▇▇▇▇ Alternative Asset Management, Inc., and (7) all documents,
agreements, certificates or financing statements contemplated thereby or related
thereto, in each case without further act, vote or approval of any Member or
other Person notwithstanding any other provision of this Agreement. The
foregoing authorization shall not be deemed a restriction on the powers of the
Fund or the Managing Member on behalf of the Fund to enter into other
agreements.
2.6. MANAGING MEMBER
(a) ▇▇▇▇▇▇▇ Associates, L.L.C. was admitted to the Fund as the Managing
Member upon its execution of this Agreement. The Managing Member may admit to
the Fund as a substitute Managing Member any Person to which it has Transferred
its Interest as a Managing Member in accordance with Section 4.3 of this
Agreement. In the event the Managing Member ceases to be the managing member of
the Fund (other than by Transfer of its Interest in accordance with Section 4.3
of this Agreement), the Board of Directors (including a majority of the
Independent Directors, to the extent required by the ▇▇▇▇ ▇▇▇) shall be
authorized to appoint a substitute Managing Member of the Fund. The name and
mailing address of the Managing Member and the Capital Contribution of the
Managing Member will be reflected on the books and records of the Fund.
(b) The Managing Member will serve for the duration of the term of the
Fund, unless the Managing Member ceases to be the Managing Member in accordance
with Section 4.1 of this Agreement.
(c) Any substitute Managing Member will be admitted to the Fund as Managing
Member upon its execution of a counterpart of this Agreement or other instrument
evidencing the substitute Managing Member's agreement to be bound by the terms
of this Agreement.
2.7. MEMBERS
(a) CMRCC, Inc. was admitted to the Fund as the Special Member upon its
execution of this Agreement.
(b) The Managing Member may, at any time and without advance notice to or
consent from any other Member, admit to the Fund as an additional Member any
Person who agrees to be bound by all of the terms of this Agreement. The
Managing Member may in its absolute discretion reject subscriptions for
Interests and may suspend subscriptions for Interests at any time and from time
to time. The admission of any Person as an additional Member will be
8
effective upon the Managing Member's acceptance on behalf of the Fund of such
Person's subscription for an Interest and the execution and delivery by, or on
behalf of, such Person of a counterpart of this Agreement or an instrument
evidencing such Person's agreement to be bound by the terms of this Agreement.
The Managing Member will cause the books and records of the Fund to reflect the
name and the initial contribution to the capital of the Fund of the additional
Member.
(c) Subject to Sections 4.2(b) and 4.5(g) of this Agreement, the bankruptcy
(as defined in the Delaware Act) of a Member (including the Managing Member and
the Special Member) shall not cause such Member to cease to be a member of the
Fund.
2.8. ORGANIZATIONAL MEMBER
(a) ▇▇▇▇ ▇▇▇▇▇▇▇ was admitted to the Fund as the Organizational Member upon
his execution of the Initial Agreement. Immediately following the admission of
the Managing Member and the Special Member as members of the Fund, the
Organizational Member shall withdraw from the Fund as the Organizational Member
and, upon such withdrawal, the Organizational Member will cease to be a member
of the Fund.
(b) The Organizational Member will not have any liability for the
obligations or liabilities of the Fund except to the extent required by the
Delaware Act.
2.9. LIMITED LIABILITY
Except as otherwise expressly provided by the Delaware Act, the debts,
obligations and liabilities of the Fund, whether arising in contract, tort or
otherwise, shall be the debts, obligations and liabilities solely of the Fund,
and no Member, Officer or Director shall be obligated personally for any such
debt, obligation or liability of the Fund solely by reason of being a Member,
Officer or Director of the Fund. No Member (or former Member) shall be obligated
to make any additional contribution to the Fund, or, except as required by the
Delaware Act or other applicable law, have any liability for the repayment of
any amount paid to the Member by the Fund, except as required pursuant to
Section 5.5 of this Agreement and in no event in excess of the aggregate amount
of returns of capital and other amounts actually received by it from the Fund.
2.10. DIRECTORS
(a) The number of Directors at the date of this Agreement is fixed at four
(4). After the Initial Closing Date, the number of Directors may be fixed from
time to time by the Directors then in office with the approval of the Managing
Member, except that no reduction in the number of Directors will serve to effect
the removal of any Director. Each Member approves the delegation by the Managing
Member to the Board of Directors, in accordance with Section 3.1 of this
Agreement, of certain of the Managing Member's rights and powers.
(b) Each Director will serve for the duration of the term of the Fund,
unless his or her status as a Director is terminated sooner in accordance with
Section 2.10(d) of this Agreement. Except to the extent the 1940 Act requires
election by Members, if any vacancy in the position of a Director occurs,
including by reason of an increase in the number of Directors as contemplated
9
by Section 2.10(a) of this Agreement, the remaining Directors may appoint an
individual to serve in that capacity in accordance with the provisions of the
1940 Act. Independent Directors will at all times constitute at least a majority
of the Directors then serving. An Independent Director will be replaced by
another Independent Director selected and nominated by the remaining Independent
Directors, or in a manner otherwise permissible under the 1940 Act.
(c) In the event no Director remains, or less than a majority of Directors
then holding office have been elected by the Members, the Managing Member will
promptly call a meeting of the Members, to be held within 60 days after such
event, for the purpose of electing Directors to fill any existing vacancies in
the Board of Directors as required by the 1940 Act.
(d) The status of a Director will terminate (1) if the Director dies; (2)
if the Director resigns as a Director; or (3) if the Director is removed in
accordance with Section 2.10(e) of this Agreement.
(e) Any Director may be removed with or without cause by a vote of Members
holding not less than 80% of the total number of votes eligible to be cast by
all Members.
(f) The Directors may establish and maintain committees of the Board of
Directors, and the Directors may grant to such committees the authority to,
among other things: monitor the valuation policies of the Fund; select and
nominate to the Board of Directors the Independent Directors; recommend to the
Board of Directors the compensation to be paid to the Independent Directors;
oversee the Fund's accounting and financial reporting policies and practices,
its internal controls and, as deemed necessary or appropriate, the internal
controls of certain of the Fund's service providers; oversee the quality and
objectivity of the Fund's financial statements and the independent audit of
those statements; act as a liaison between the Fund's independent auditors and
the Board of Directors; and review the contracts between the Fund and its
independent auditors, and in this regard, to generally oversee the audit
engagement and make any necessary auditor independence determinations.
(g) The Directors may establish or designate committees of the Board of
Directors or the Fund, whose members may include the Directors and/or other
Persons who are not Directors, to provide advice and other services to the Fund,
which committees may include (but are not limited to) a committee that will
monitor the valuation policies of the Fund.
(h) The Independent Directors will receive compensation for their services
as Independent Directors, as determined by the Board of Directors.
(i) Each person elected as a Director shall accept his or her appointment
by executing a counterpart of the Directors Agreement in the form attached to
this Agreement as Exhibit A.
10
ARTICLE III
MANAGEMENT OF THE FUND
3.1. MANAGEMENT AND CONTROL
(a) The Board of Directors has overall responsibility for monitoring and
overseeing the Fund's investment program and its management and operation and
has approved the Fund's investment program. The Managing Member, to the fullest
extent permitted by applicable law, irrevocably delegates to the Board of
Directors the Managing Member's rights and powers to monitor and oversee the
business affairs of the Fund. Rights and powers delegated to the Directors
include, without limitation, the authority as Directors to oversee and to
establish policies regarding the management, conduct and operation of the Fund's
business, and to do all things necessary and proper as Directors to carry out
the objective and business of the Fund, including, without limitation, the power
to engage the Investment Manager in accordance with Section 3.5 of this
Agreement and to remove the Investment Manager, as well as to exercise any other
rights and powers expressly given to the Directors under this Agreement. During
any period in which the Fund has no Directors, the Managing Member will, subject
to Section 2.10(c) of this Agreement, possess all of the rights, powers and
authority delegated to the Board of Directors of the Fund under this Agreement.
Each Director will be the agent of the Fund but will not, for any purpose, be
deemed a Managing Member. Notwithstanding the delegation described in this
Section 3.1(a), the Managing Member will not cease to be the Managing Member and
will retain the rights, powers and authority described in Section 3.2 and in no
event will a Director be considered a Managing Member by agreement, estoppel or
otherwise as a result of the performance of his or her duties under this
Agreement or otherwise. Directors will not make Capital Contributions to the
Fund in their capacity as Directors, but may subscribe for Interests as Members,
in accordance with Section 2.7 of this Agreement.
(b) No Member, other than the Managing Member, will have any right to
participate in or take any part in the management or control of the Fund's
business in his, her or its capacity as a Member, and no Member, other than the
Managing Member, will have any right, power or authority to act for or bind the
Fund in his, her or its capacity as a Member. Members will have the right to
vote on any matters only as provided in this Agreement or on any matters that
require the approval of the holders of voting securities under the 1940 Act and
will have no right with respect to the Fund to exercise any other vote capable
of being granted to members under the Delaware Act, any such voting rights being
vested in the Managing Member and may be exercised without requiring the
approval of any other Member.
3.2. POWERS RESERVED BY THE MANAGING MEMBER
Notwithstanding anything in this Agreement to the contrary, the
Managing Member retains all rights, duties and powers to manage the affairs of
the Fund that are not otherwise delegated by the Managing Member to the Board of
Directors or assumed by the Investment Manager or any other Person under the
terms of any agreement between the Fund and the Investment Manager or any other
Person. Specifically, and without limitation, the Managing Member will retain
full power and authority on behalf of and in the name of the Fund to:
11
(1) approve the acceptance of initial and additional subscriptions from
investors on behalf of the Fund and making determinations as to the
dates on which the Fund will accept such subscriptions;
(2) make determinations as to the suspension of subscriptions;
(3) make determinations regarding the Transfer of Interests;
(4) determine appropriate reserves to be created for the contingent,
conditional or unmatured liabilities of the Fund;
(5) act as tax matters partner; and
(6) manage or oversee the general administrative and operational
aspects of the Fund.
3.3. ACTIONS BY DIRECTORS
(a) Unless provided otherwise in this Agreement, the Directors will act
only: (1) by the affirmative vote of a majority of the Directors (which majority
will include, if applicable, any requisite number of Independent Directors
required by the ▇▇▇▇ ▇▇▇) present at a meeting duly called at which a quorum of
the Directors is present either in person or, to the extent consistent with the
provisions of the 1940 Act, by conference telephone or other communications
equipment by means of which all Persons participating in the meeting can hear
each other; or (2) by unanimous written consent of all of the Directors without
a meeting, if permissible under the ▇▇▇▇ ▇▇▇.
(b) The Directors may designate from time to time a Director or an Officer
of the Fund or a representative of the Managing Member who will preside at all
meetings. Subject to the 1940 Act, a representative of the Managing Member may
attend any meeting of the Board of Directors as a non-voting observer. Meetings
of the Directors may be called by the Managing Member, the Chairman of the Board
of Directors or any two Directors, and may be held on any date and at any time
and place determined by the Directors. Each Director will be entitled to receive
written notice of the date, time and place of a meeting within a reasonable time
in advance of the meeting. Notice need not be given to any Director who attends
a meeting without objecting to the lack of notice or who executes a written
waiver of notice with respect to the meeting. A majority of the Directors then
in office will constitute a quorum at any meeting of Directors.
(c) The Directors may appoint from time to time Officers and agents of the
Fund who will have the same powers and duties on behalf of the Fund as are
customarily vested in officers of a corporation incorporated under Delaware law,
or such other powers and duties as may be designated by the Directors, in their
sole discretion, and designate them as Officers or agents of the Fund by
resolution of the Directors specifying their titles or functions.
3.4. MEETINGS OF MEMBERS
(a) Actions requiring the vote of the Members may be taken at any duly
constituted meeting of the Members at which a quorum is present or by means of a
written consent. Meetings of the Members may be called by the Board of
Directors, the Managing Member, or by Members
12
holding at least two-thirds of the total number of votes eligible to be cast by
all Members. Meetings may be held at any time, date and place determined by the
Managing Member, in the case of meetings called by the Managing Member or the
Members, and at any time, date and place determined by the Directors, in the
case of meetings called by the Directors. In each case, the Managing Member will
provide notice of the meeting, stating the date, time and place of the meeting
and the record date for the meeting, to each Member entitled to vote at the
meeting within a reasonable time prior to the meeting. Failure to receive notice
of a meeting on the part of any Member will not affect the validity of any act
or proceeding of the meeting, so long as a quorum is present at the meeting.
Except as otherwise required by applicable law, only matters set out in the
notice of a meeting may be voted on by the Members at the meeting. The presence
in person or by proxy of Members holding a majority of the total number of votes
eligible to be cast by all Members as of the record date will constitute a
quorum at any meeting of Members. In the absence of a quorum, a meeting may be
adjourned to the time or times as determined by the Managing Member and
communicated to the Directors in the manner described above in this Section
3.4(a). Except as otherwise required by any provision of this Agreement or of
the 1940 Act, (1) those candidates receiving a plurality of the votes cast at
any meeting of Members called in accordance with this Section 3.4(a) or elected
in accordance with the requirements of Section 2.10(b) of this Agreement will be
elected as Directors and (2) all other actions of the Members taken at a meeting
will require the affirmative vote of Members holding a majority of the total
number of votes eligible to be cast by those Members who are present in person
or by proxy at the meeting.
(b) Each Member will be entitled to cast at any meeting of Members or
pursuant to written consent a number of votes equivalent to the Member's
Investment Percentage as of the record date for the meeting or the written
consent. The Managing Member will establish a record date not less than 10 nor
more than 60 days prior to the date of any meeting of Members or mailing
(including by electronic transmission) to the Members of any written consent, to
determine eligibility to vote at the meeting and the number of votes that each
Member will be entitled to cast at the meeting, and will maintain for each
record date a list setting out the name and Investment Percentage of each
Member.
(c) A Member may vote at any meeting of Members by a properly executed
proxy transmitted to the Fund at any time at or before the time of the meeting
by telegram, telecopier or other means of electronic communication or other
readable reproduction as contemplated by the provisions relating to proxies
applicable to corporations incorporated under the laws of Delaware now or in the
future in effect. A proxy may be suspended or revoked, as the case may be, by
the Member executing the proxy by a later writing delivered to the Fund at any
time prior to exercise of the proxy or if the Member executing the proxy is
present at the meeting and votes in person. Subject to the 1940 Act, any action
of the Members that is permitted to be taken at a meeting of the Members may be
taken without a meeting if consents in writing, setting out the action to be
taken, are signed by Members holding a majority of the total number of votes
eligible to be cast or any greater percentage as may be required under this
Agreement to approve the action.
3.5. APPOINTMENT OF INVESTMENT MANAGER
(a) The Board of Directors will, among its powers, have the authority to
cause the Fund to engage the Investment Manager to provide investment advice,
management and other services to
13
the Fund under the direction of the Board of Directors, subject to any approval
of such engagement by the Members that may be required under the 1940 Act. As
directed by the Board of Directors, the Fund and the Managing Member, on behalf
of the Fund, will have the authority to execute, deliver and monitor the
performance of any contract or agreement to provide investment advice and
management to the Fund (each, an "Investment Management Agreement"). Any such
Investment Management Agreement will require that the Investment Manager
acknowledge its obligations under this Agreement.
(b) So long as the Investment Manager has been and continues to be
authorized to provide services under an Investment Management Agreement, it will
have, subject to any policies and restrictions described in the Memorandum or
adopted from time to time by the Directors and communicated in writing to the
Investment Manager (in each case, as more fully described in such Investment
Management Agreement), full discretion and authority on behalf of and in the
name of the Fund (1) to manage the assets and liabilities of the Fund, (2) to
identify and evaluate Portfolio Managers and Investment Funds and to determine
the assets of the Fund to be committed to each Portfolio Manager and Investment
Fund from time to time, in each case subject to the terms and conditions of the
governing documents of each Portfolio Manager and Investment Fund, and (3) to
invest directly the assets of the Fund in investments pending allocation or
reallocation of the assets in Investment Funds or to ensure the availability of
cash as required by the Fund in the ordinary course of its business.
(c) The Investment Manager, to the extent of its powers set out in this
Agreement or otherwise vested in it under any Investment Management Agreement,
is an agent of the Fund, and the actions of the Investment Manager taken or
refrained from being taken in accordance with such powers will bind the Fund.
3.6. CUSTODY OF ASSETS OF THE FUND
Notwithstanding anything to the contrary in this Agreement, the
Managing Member will not have any authority to hold or have possession or
custody of any funds, Securities or other property of the Fund. The physical
possession of all funds, Securities or other property of the Fund will at all
times be held, controlled and administered by one or more custodians retained by
the Fund. The Managing Member will have no responsibility, other than that
associated with the oversight and supervision of custodians retained by the
Fund, with respect to the collection of income or the physical acquisition or
safekeeping of the funds, Securities or other assets of the Fund, all duties of
collection, physical acquisition or safekeeping being the sole obligation of
such custodians.
3.7. OTHER ACTIVITIES
(a) Notwithstanding any duty otherwise existing at law or in equity, none
of the Managing Member, the Investment Manager and their principals, partners,
directors, officers, members, employees and beneficial owners nor the Directors
or Officers will be required to devote their full time to the affairs of the
Fund, but each will devote such time as each may reasonably be required to
perform its obligations under this Agreement and under the 1940 Act.
14
(b) Notwithstanding any duty otherwise existing at law or in equity, (i)
the Investment Manager, the Directors, the Officers, any Member, and any
Affiliate of any Member may engage in or possess an interest in other business
ventures or commercial dealings of every kind and description, independently or
with others, including, but not limited to, acquisition and disposition of
Securities, provision of investment advisory or brokerage services, serving as
directors, officers, employees, advisors or agents of other companies, partners
of any partnership, members of any limited liability company, or trustees of any
trust, or entering into any other commercial arrangements, and (ii) no Member
will have any rights in or to such activities of any other Member, the
Investment Manager, the Directors, the Officers or any Affiliate of any Member
or any profits derived from these activities.
(c) Notwithstanding any duty otherwise existing at law or in equity, the
Managing Member, the Investment Manager and their principals, partners,
directors, officers, members, employees and beneficial owners and the Directors
and Officers, from time to time may acquire, possess, manage, hypothecate and
dispose of Securities or other investment assets, and engage in any other
investment transaction for any account over which they exercise discretionary
authority, including their own accounts, the accounts of their families, the
account of any entity in which they have a beneficial interest or the accounts
of others for whom or which they may provide investment advisory or other
services.
(d) The Members acknowledge and agree that, notwithstanding any duty
otherwise existing at law or in equity, the Managing Member, the Investment
Manager and their Affiliates may engage in activities (including, without
limitation, those activities described in the Memorandum) in which their
respective interests or the interests of their clients may conflict with the
interests of the Fund or the Members, and that the resolution of such conflicts
may not always be resolved by the Managing Member, the Investment Manager or
their Affiliates in favor of the Fund or the Members.
(e) To the extent that at law or in equity the Directors, the Officers, the
Investment Manager or the Managing Member has duties (including fiduciary
duties) and liabilities relating to those duties to the Fund or to any other
Member or other Person bound by this Agreement, any such Person acting under
this Agreement will not be liable to the Fund or to any other Member or other
Person bound by this Agreement for its good faith reliance on the provisions of
this Agreement. The provisions of this Agreement, to the extent that they
restrict the duties and liabilities of the Managing Member, the Investment
Manager or the Directors otherwise existing at law or in equity, are agreed by
the Members to replace the other duties and liabilities of the Managing Member,
the Investment Manager or the Directors.
3.8. EXCULPATION
(a) The Investment Manager and the Managing Member (including each officer,
director, member, partner, principal, employee or agent of, or any Person who
controls, is controlled by or is under common control with, a Managing Member or
Investment Manager or member or partner of a Managing Member or Investment
Manager, and their executors, heirs, assigns, successors or other legal
representatives (each, an "Associated Person")) and each Director and Officer
(and his or her executors, heirs, assigns, successors or other legal
representatives) will not be liable to the Fund or to any of its Members for any
loss or damage occasioned by any act
15
or omission in the performance of the Person's services under this Agreement, in
the absence of a final judicial decision on the merits from which no further
right to appeal may be taken that the loss is due to an act or omission of the
Person constituting willful misfeasance, bad faith, gross negligence (or, in the
case of any Investment Manager and its Associated Persons, in their capacity as
such, negligence) or reckless disregard of the Person's duties under this
Agreement.
(b) Members not in breach of any obligation under this Agreement or under
any agreement under which the Member subscribed for Interests will be liable to
the Fund, any Member or third parties only as required by this Agreement or
applicable law.
3.9. INDEMNIFICATION
(a) To the fullest extent permitted by law, the Fund will, subject to
Section 3.9(c) of this Agreement, indemnify each Managing Member and Investment
Manager (and their Associated Persons) and each Director and Officer (and his or
her executors, heirs, assigns, successors or other legal representatives) (each
such Person being referred to as an "Indemnitee") against all losses, claims,
damages, liabilities, costs and expenses ("Losses," and, individually, a "Loss")
arising by reason of being or having been a Managing Member, Investment Manager,
Director or Officer of the Fund, or the past or present performance of services
to the Fund by the Indemnitee, except to the extent that the Loss has been
determined in a final judicial decision on the merits from which no further
right of appeal may be taken in any action, suit, investigation or other
proceeding, whether civil or criminal ("Action"), to have been incurred or
suffered by the Indemnitee by reason of willful misfeasance, bad faith, gross
negligence (or, in the case of any Investment Manager and its Associated
Persons, in their capacity as such, negligence) or reckless disregard of the
duties involved in the conduct of the Indemnitee's office ("Disabling Conduct").
Losses include, but are not limited to, amounts paid in satisfaction of
judgments, in compromise, or as fines or penalties, and counsel fees and
expenses incurred in connection with the defense or disposition of any Action
before any judicial, arbitral, administrative or legislative body, in which the
Indemnitee may be or may have been involved as a party or otherwise, or with
which the Indemnitee may be or may have been threatened, while in office or
thereafter. The rights of indemnification provided under this Section 3.9 are
not to be construed so as to provide for indemnification of an Indemnitee for
any liability (including liability under U.S. federal securities laws that,
under certain circumstances, impose liability even on Persons that act in good
faith) to the extent (but only to the extent) that indemnification would be in
violation of applicable law, but will be construed so as to effectuate the
applicable provisions of this Section 3.9.
(b) Expenses, including counsel fees and expenses, incurred by any
Indemnitee (but excluding amounts paid in satisfaction of judgments, in
compromise, or as fines or penalties) may be paid from time to time by the Fund
in advance of the final disposition of any Action upon receipt of an undertaking
by or on behalf of the Indemnitee to repay to the Fund amounts paid if a
determination is made that indemnification of the expenses is not authorized
under Section 3.9(a) of this Agreement, so long as (1) the Indemnitee provides
security for the undertaking, (2) the Fund is insured by or on behalf of the
Indemnitee against Losses arising by reason of the Indemnitee's failure to
fulfill his, her or its undertaking, or (3) a majority of the Independent
Directors (excluding any Director who is either seeking advancement of expenses
under this Agreement or is or has been a party to any other Action involving
claims similar to
16
those involved in the Action giving rise to a claim for advancement of expenses
under this Agreement) or independent legal counsel in a written opinion
determines, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that reason exists to believe that the Indemnitee
ultimately will be entitled to indemnification.
(c) With respect to the disposition of any Action (whether by a compromise
payment, pursuant to a consent decree or otherwise) without a final decision on
the merits by a court, or by any other body before which the Action has been
brought, that an Indemnitee was liable to the Fund or its Members by reason of
Disabling Conduct, indemnification will be provided in accordance with Section
3.9(a) of this Agreement if (1) the indemnification is approved as in the best
interests of the Fund by a majority of the Independent Directors (excluding any
Director who is either seeking indemnification under this Agreement or is or has
been a party to any other Action involving claims similar to those involved in
the Action giving rise to a claim for indemnification under this Agreement) upon
a determination, based upon a review of readily available facts (as opposed to a
full trial-type inquiry), that the Indemnitee acted in good faith and in the
reasonable belief that the actions were in the best interests of the Fund and
that the Indemnitee is not liable to the Fund or its Members by reason of
Disabling Conduct, or (2) the Directors secure a written opinion of independent
legal counsel, based upon a review of readily available facts (as opposed to a
full trial-type inquiry), to the effect that indemnification would not protect
the Indemnitee against any liability to the Fund or its Members to which the
Indemnitee would otherwise be subject by reason of Disabling Conduct.
(d) Any indemnification or advancement of expenses made in accordance with
this Section 3.9 will not prevent the recovery from any Indemnitee of any amount
if the Indemnitee subsequently is determined in a final judicial decision on the
merits in any Action involving the liability or expense that gave rise to the
indemnification or advancement of expenses to be liable to the Fund or its
Members by reason of Disabling Conduct. In any suit brought by an Indemnitee to
enforce a right to indemnification under this Section 3.9, it will be a defense
that the Indemnitee has not met the applicable standard of conduct described in
this Section 3.9. In any suit in the name of the Fund to recover any
indemnification or advancement of expenses made in accordance with this Section
3.9, the Fund will be entitled to recover the expenses upon a final adjudication
from which no further right of appeal may be taken. In any suit brought to
enforce a right to indemnification or to recover any indemnification or
advancement of expenses made in accordance with this Section 3.9, the burden of
proving that the Indemnitee is not entitled to be indemnified, or to any
indemnification or advancement of expenses, under this Section 3.9 will be on
the Fund (or on any Member acting derivatively or otherwise on behalf of the
Fund or its Members).
(e) An Indemnitee may not satisfy any right of indemnification or
advancement of expenses granted in this Section 3.9 or to which he, she or it
may otherwise be entitled except out of the assets of the Fund, and no Member
will be personally liable with respect to any such claim for indemnification or
advancement of expenses.
(f) The rights of indemnification provided in this Section 3.9 will not be
exclusive of or affect any other rights to which any Person may be entitled by
contract or otherwise under law. Nothing contained in this Section 3.9 will
affect the power of the Fund to purchase and maintain
17
liability insurance on behalf of any Managing Member, any Director, any Officer,
the Investment Manager or other Person.
(g) The Managing Member may enter into agreements indemnifying Persons
providing services to the Fund to the same, lesser or greater extent as set out
in this Section 3.9.
3.10. FEES, EXPENSES AND REIMBURSEMENT
(a) As consideration for providing services under an Investment Management
Agreement, and for so long as the Investment Manager provides such services to
the Fund under an Investment Management Agreement, the Fund will pay the
Investment Manager a monthly management fee of 0.125% per month (the "Management
Fee") plus an additional administrative services fee of 0.0125% per month (the
"Manager Administrative Services Fee") of the month-end Capital Account balance
of each Member. The Management Fee and the Manager Administrative Services Fee
will be computed based on the Capital Account of each Member as of the end of
business on the last day of each month, before giving effect to repurchases,
Repurchase Fees or the Incentive Allocation, and after giving effect to other
expenses. The Management Fee and the Manager Administrative Services Fee will be
an expense paid out of the Fund's assets, and will be allocated to and debited
against each Member's Capital Account (including the Capital Accounts of the
Investment Manager, the Managing Member, the Special Member and any of their
respective Affiliates to the extent any of them holds an Interest). The
Management Fee and the Manager Administrative Services Fee will be paid monthly
in arrears within 20 days after the end of each month. Subject to the 1940 Act,
the Investment Manager, in its discretion, may remit to any Member all or a
portion of its past profits earned with respect to the Capital Account of that
Member.
(b) The Fund will compensate each Independent Director for his or her
services rendered in connection with the Fund as may be agreed to by the
Directors and the Managing Member, and as described in the Memorandum. The Fund
will reimburse all Directors for reasonable out-of-pocket expenses incurred by
them in attending meetings of the Board of Directors and committees of the Board
of Directors. In addition, if a representative of the Managing Member elects to
attend a meeting of the Board of Directors pursuant Section 3.3(b) of this
Agreement, the Fund will reimburse such representative of the Managing Member
for reasonable out-of-pocket expenses incurred in attending the meeting of the
Board of Directors.
(c) Placement Agents, which may include the Investment Manager and its
Affiliates, may be retained by the Fund or the Managing Member to assist in the
placement of Interests. Any placement fee will be payable by a prospective
investor in addition to the investor's subscription amount and will not
constitute a capital contribution made by the investor to the Fund nor part of
the assets of the Fund.
(d) The Fund will pay or assume all operating expenses of the Fund, other
than the expenses assumed by the Investment Manager under the terms of the
applicable Investment Management Agreement. Expenses to be borne by the Fund
include, without limitation:
(1) all expenses related to its investment program, including, but not
limited to, fees paid and expenses reimbursed directly or indirectly to
Investment Funds or Portfolio
18
Managers (including management fees, performance or incentive fees or
allocations and redemption or withdrawal fees, however titled or
structured), all costs and expenses directly related to portfolio
transactions and positions for the Fund's account such as direct and
indirect expenses associated with the Fund's investments, including its
investments in Investment Funds or Separately Managed Accounts (whether
or not consummated), and enforcing the Fund's rights in respect of such
investments, transfer taxes and premiums, taxes withheld on non-U.S.
dividends, fees for data and software providers, third-party research
expenses, professional fees (including, without limitation, the fees
and expenses of consultants, attorneys (including JPMorgan Chase
internal legal counsel) and experts for advice relating to the Fund)
and, if applicable in the event the Fund invests through a Separately
Managed Account (or in connection with its temporary or cash management
investments), brokerage commissions, interest and commitment fees on
loans and debit balances, borrowing charges on securities sold short,
dividends on securities sold but not yet purchased and margin fees;
(2) all costs and expenses associated with the establishment of
Separately Managed Accounts (whether or not consummated);
(3) any non-investment related interest expense;
(4) attorneys' fees and disbursements associated with preparing and
updating the Form N-2, including the Memorandum, agreements between the
Fund and its service providers, subscription documents and other
Fund-related documents, and with qualifying prospective investors;
(5) expenses, including attorneys' fees and disbursements, relating to
litigation or proceedings or examinations brought in state or federal
courts, including, but not limited to, those by the Internal Revenue
Service or other governmental bodies or self-regulatory organizations;
(6) fees and disbursements of any accountants engaged by the Fund, and
expenses related to the annual audit of the Fund;
(7) fees paid and out-of-pocket expenses reimbursed to the Fund's
administrator;
(8) fees paid and out-of-pocket expenses reimbursed to the Fund's
custodian;
(9) escrow and other recordkeeping fees and expenses;
(10) the costs of directors' and officers' errors and omissions
insurance and a fidelity bond;
(11) the fees of the Independent Directors and out-of-pocket expenses
of all Directors in attending meetings of the Board of Directors and
committees of the Board of Directors;
(12) the out-of-pocket expenses of any representative of the Managing
Member in attending meetings of the Board of Directors;
19
(13) the Management Fee;
(14) the Manager Administrative Services Fee;
(15) the costs of preparing and mailing reports and other
communications, including proxy, tender offer correspondence or similar
materials, to Members;
(16) all expenses relating to meetings of the Members, including travel
and other out-of-pocket expenses of all Directors and any
representative of the Managing Member in attending such meetings;
(17) all costs and charges for equipment or services used in
communicating information regarding the Fund's transactions among the
Investment Manager and any custodian or other agent engaged by the
Fund; and
(18) any extraordinary expenses, including indemnification expenses as
provided for in Section 3.9 of this Agreement.
(e) The Fund may enter into an Expense Limitation and Reimbursement
Agreement with the Investment Manager (the "Expense Limitation and Reimbursement
Agreement") under which the Investment Manager will waive its fees and, if
necessary, reimburse expenses in respect of the Fund for each fiscal year that
the Expense Limitation and Reimbursement Agreement is in place.
(f) Subject to any Expense Limitation and Reimbursement Agreement, the
Investment Manager and the Managing Member will be repaid by the Fund for any of
the expenses set out in Section 3.9(d) of this Agreement that they pay on behalf
of the Fund, except as otherwise set out in this Agreement. Each of the
Investment Manager and the Managing Member may in its discretion from time to
time elect to bear certain expenses usually borne by the Fund.
(g) The Fund's organizational expenses will be borne and recognized as
expenses by the Fund on the Initial Closing Date, subject to any obligation of
the Investment Manager to reimburse those expenses under any Expense Limitation
and Reimbursement Agreement. Costs incurred and to be incurred in connection
with the initial offering of Interests under the Form N-2 will be deferred and
amortized by the Fund over the period of benefit not to exceed 12 months from
the Initial Closing Date.
ARTICLE IV
TERMINATION OF STATUS OF MANAGING MEMBER; REMOVAL OF MANAGING
MEMBER; TRANSFERS AND REPURCHASES OF INTERESTS
4.1. TERMINATION OF STATUS OF MANAGING MEMBER
The Managing Member will cease to be the managing member of the Fund if
the Managing Member (a) is dissolved or otherwise terminates its existence; (b)
is removed in accordance with Section 4.2 of this Agreement; (c) Transfers its
entire Interest as Managing Member as permitted under Section 4.3 of this
Agreement and the Person to which the Interest is
20
Transferred is admitted as a substitute Managing Member under Section 2.6(a) of
this Agreement; or (d) otherwise ceases to be a member of the Fund under the
Delaware Act. In addition, ▇▇▇▇▇▇▇ Associates, L.L.C. shall cease to be the
managing member of the Fund upon the death, disability or incapacity of ▇▇.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
4.2. REMOVAL OF MANAGING MEMBER
(a) The Managing Member may be removed from its position as managing member
of the Fund by the vote or written consent of Members holding not less than 80%
of the total number of votes eligible to be cast by all Members.
(b) The Managing Member may be removed from its position as managing member
of the Fund by the Board of Directors upon the bankruptcy (as defined in the
Delaware Act) of the Managing Member.
4.3. TRANSFER OF INTEREST OF MANAGING MEMBER
A Managing Member may not Transfer its Interest as the Managing Member
except with the consent of the Board of Directors and only to a Person who has
agreed to be bound as a Managing Member of the Fund by all of the terms of this
Agreement and applicable law. If a Managing Member Transfers its entire Interest
as Managing Member, it will not cease to be a Managing Member unless and until
the transferee is admitted to the Fund as a substitute Managing Member in
accordance with Section 2.6 of this Agreement. In executing this Agreement, each
Member is deemed to have consented to any Transfer contemplated by this Section
4.3.
4.4. TRANSFER OF INTERESTS OF MEMBERS
(a) An Interest or portion of an Interest held by a Member may be
Transferred only (1) by operation of law as a result of (i) the death, divorce,
bankruptcy, insolvency, adjudicated incompetence or dissolution of the Member or
(ii) the enforcement of any pledge or other security interest with respect to
the Interest; or (2) with the written consent of the Managing Member, which may
be withheld in its sole discretion and is expected to be granted, if at all,
only under limited circumstances. No Member may grant a pledge or other security
interest on an Interest or portion of an Interest without the written consent of
the Managing Member, which consent may be withheld in the Managing Member's sole
discretion. Any Transfer or pledge or other grant of any security interest not
made in accordance with this Section 4.4(a) shall be void.
(b) Unless the Fund consults with legal counsel to the Fund and counsel
confirms that the Transfer will not cause the Fund to be treated as a "publicly
traded partnership" taxable as a corporation, the Managing Member generally will
not consent to a Transfer unless the following conditions are met: (i) the
Transferring Member has been a Member for at least six months; (ii) the proposed
Transfer is to be made effective as of a Repurchase Date; and (iii) the Transfer
is (A) one in which the tax basis of the Interest in the hands of the transferee
is determined, in whole or in part, by reference to its tax basis in the hands
of the Transferring Member (for example, certain Transfers to Affiliates, gifts
and contributions to family entities), (B) to members of the Transferring
Member's immediate family (siblings, spouse, parents and
21
children) or (C) a distribution from a qualified retirement plan or an
individual retirement account.
(c) The Managing Member may not consent to a Transfer unless the Person to
whom or which an Interest or portion of an Interest is Transferred (or each of
the Person's equity owners if the Person is a "private investment company" as
defined in Rule 205-3(d)(3) under the Advisers Act, an investment company
registered under the 1940 Act, or a business development company as defined
under the Advisers Act) is a Person whom or that the Managing Member believes is
an "accredited investor" as defined in Regulation D under the 1933 Act, and
meets the requirements of paragraph (d)(1) of Rule 205-3 under the Advisers Act
or successor provision of any of those rules, or is otherwise exempt from the
requirements of those rules. In the event that other investor eligibility
requirements are established by the Fund, the Person to whom or which an
Interest or portion of an Interest is Transferred must satisfy these other
requirements.
(d) Notice to the Fund of any proposed Transfer of an Interest or portion
of an Interest must include evidence satisfactory to the Managing Member that
the proposed Transfer is exempt from registration under the 1933 Act and that
the proposed transferee meets any requirements imposed by the Fund or applicable
law with respect to investor eligibility and suitability, including the
requirements set out in Section 4.4(c) of this Agreement. Notice of a proposed
Transfer of an Interest must also be accompanied by a properly completed
subscription agreement in respect of the proposed transferee. The Managing
Member generally will not consent to a Transfer of a portion of an Interest by a
Member unless the Transfer is to a single transferee and, after the Transfer of
such portion of the Member's Interest, the balance of the Capital Account of
each of the transferee and transferor is not less than $50,000. A Member
Transferring an Interest or portion of an Interest may be charged reasonable
expenses, including attorneys' and accountants' fees, incurred by the Fund in
connection with the Transfer. In connection with any request to Transfer an
Interest or portion of an Interest, the Managing Member may require the Member
requesting the Transfer to obtain, at the Member's expense, an opinion of
counsel selected by the Managing Member as to such matters as the Managing
Member may reasonably request.
(e) Any transferee acquiring an Interest or portion of an Interest by
operation of law as the result of the death, divorce, bankruptcy, insolvency,
adjudicated incompetence or dissolution of a Member, the enforcement of any
pledge or other security interest with respect to the Interest, or otherwise,
will be entitled to the allocations and distributions allocable to the Interest
so acquired, to Transfer the Interest or portion of the Interest in accordance
with the terms of this Agreement and to tender the Interest or portion of the
Interest for repurchase by the Fund, but will not be entitled to the other
rights of a Member unless and until the transferee becomes a substituted Member
as specified in this Agreement. No Person may become a substituted Member
without the written consent of the Managing Member, which consent may be
withheld for any reason in its sole discretion.
(f) If a Member Transfers an Interest or portion of an Interest with the
approval of the Managing Member, the Fund will promptly take all necessary
actions so that each transferee or successor to whom the Interest or portion of
the Interest is transferred is admitted to the Fund as a Member. The admission
of any transferee as a substituted Member will be effective upon the execution
and delivery by, or on behalf of, the transferee of a counterpart of this
Agreement or
22
any other instrument evidencing the transferee's agreement to be bound by the
terms of this Agreement. If a Member Transfers its entire Interest as a Member,
it will not cease to be a Member unless and until the transferee is admitted to
the Fund as a substituted Member in accordance with this Section 4.4(f).
(g) In subscribing for an Interest or becoming a substituted Member, a
Member agrees to indemnify and hold harmless the Managing Member and the
Investment Manager and any of their respective employees and Affiliates, the
Fund, the Board of Directors, the Special Member and each other Member against
all losses, claims, damages, liabilities, costs and expenses (including legal or
other expenses incurred in investigating or defending against any losses,
claims, damages, liabilities, costs and expenses or any judgments, fines and
amounts paid in settlement), joint or several, to which those Persons may become
subject by reason of or arising from any Transfer made by that Member in
violation of these provisions or any misrepresentation made by that Member or a
substituted Member in connection with any such Transfer.
(h) The Fund shall maintain books for the purpose of registering Transfers
of Interests. The Fund shall not register a Transfer of an Interest or portion
of an Interest unless the transferee has executed a counterpart of this
Agreement or another instrument evidencing the transferee's agreement to be
bound by the terms of this Agreement.
4.5. REPURCHASE OF INTERESTS
(a) No Member or other Person holding an Interest acquired from a Member
will have the right to require the Fund to redeem or otherwise repurchase the
Interest.
(b) The Fund may from time to time repurchase Interests from Members in
accordance with written tenders by Members at those times, in those amounts, and
on terms and conditions as the Board of Directors may determine in its sole
discretion. The Fund will not offer to repurchase Interests on more than four
occasions during any one Fiscal Year, unless the Fund has been advised by legal
counsel to the Fund to the effect that more frequent offers would not cause any
adverse tax consequences to the Fund or the Members. The Investment Manager and
the Managing Member expect that they will recommend to the Board of Directors
that the Fund offer to repurchase Interests from Members approximately six
months after the Initial Closing Date (or, if such date is not the last day of a
calendar quarter, the last day of that calendar quarter), and, after that date,
quarterly, effective as of the last day of March, June, September and December.
In determining whether to accept such a recommendation, the Board of Directors
will consider the following factors, among others:
(1) whether any Members have requested to tender Interests to the Fund;
(2) the liquidity of the Fund's assets (including fees and costs
associated with withdrawing from Investment Funds and/or disposing of
assets managed by Subadvisers);
(3) the investment plans and working capital and reserve requirements
of the Fund;
(4) the relative economies of scale of the tenders with respect to the
size of the Fund;
23
(5) the history of the Fund in repurchasing Interests;
(6) the availability of information as to the value of the Fund's
interests in Investment Funds;
(7) the existing conditions of the securities markets and the economy
generally, as well as political, national or international developments
or current affairs;
(8) any anticipated tax consequences to the Fund of any proposed
repurchases of Interests; and
(9) the recommendations of the Managing Member and/or the Investment
Manager.
(c) The Fund will repurchase Interests from Members at net asset value in
accordance with written tenders on terms and conditions that the Board of
Directors determines to be fair to the Fund and to all Members or Persons
holding Interests acquired from Members. The net asset value of a Member's
Interest will be calculated in accordance with the Fund's procedures as of the
relevant Repurchase Date, after giving effect to all allocations that are made
as of that date (including any Incentive Allocation to the Special Member in
respect of the Interest (or portion of the Interest) being repurchased). When
the Board of Directors determines that the Fund will repurchase Interests,
notice will be provided to Members, specifying the date on which repurchase
requests must be received by the Fund (the "Notice Due Date"), describing the
terms of the offer, containing information Members should consider in deciding
whether to participate in the repurchase opportunity and containing information
on how to participate. The Notice Due Date will be a date set by the Board of
Directors occurring no sooner than 20 Business Days after the commencement of
the repurchase offer and such date may be extended by the Board of Directors in
its absolute discretion. Members deciding whether to tender their Interests
during the period that a repurchase offer is open may obtain the most recently
calculated net asset value of their Interests by contacting the Investment
Manager during the period.
(d) The Fund expects to employ the following repurchase procedures, which
procedures may be deviated from, varied or amended by the Board of Directors in
their sole discretion upon notice to the Members:
(1) A Member choosing to tender an Interest for repurchase must do so
by the Notice Due Date, which generally will be the 25th calendar day
of the second month prior to the month in which the Repurchase Date
falls (or, if such date is not a Business Day, the preceding Business
Day).
(2) Promptly after the Notice Due Date, the Fund will give to each
Member whose Interest has been accepted for repurchase a promissory
note (the "Promissory Note") entitling the Member to be paid an amount
equal to the net asset value, as of the Repurchase Date, of the
repurchased Interest. The determination of the value of Interests as of
the Repurchase Date is subject to adjustment based upon the results of
the next annual audit of the Fund's financial statements.
(3) The Promissory Note, which will be non-interest-bearing and
non-transferable, is expected to contain terms providing for payment at
two separate times.
24
(4) The initial payment in respect of the Promissory Note (the "Initial
Payment") will be in an amount equal to at least 95% of the net asset
value of the repurchased Interest as of the Repurchase Date less any
Repurchase Fee due to the Fund in connection with the repurchase. The
Initial Payment will be made on or before the later of (i) 30 days
after the Repurchase Date, or (ii) if the Fund has requested
withdrawals of its capital from any Investment Funds in order to fund
the repurchase of Interests, ten Business Days after the Fund has
received at least 95% of the aggregate amount withdrawn by the Fund
from the Investment Funds.
(5) The second and final payment in respect of the Promissory Note (the
"Post-Audit Payment") is expected to be in an amount equal to the
excess, if any, of (i) the net asset value of the repurchased Interest
as of the Repurchase Date and based upon the results of the annual
audit of the Fund's financial statements for the year in which the
Repurchase Date occurs, less any Repurchase Fee due to the Fund in
connection with the repurchase, over (ii) the Initial Payment. The
Managing Member anticipates that the annual audit of the Fund's
financial statements will be completed within 60 days after the end of
each Fiscal Year of the Fund and that the Post-Audit Payment will be
made promptly after the completion of the audit.
(e) In the event that the Managing Member, the Special Member, the
Investment Manager or any of their respective Affiliates holds an Interest in
his, her or its capacity as a Member, the Interest may be tendered for
repurchase in connection with any repurchase offer made by the Fund.
(f) If the Managing Member ceases to serve in that capacity under Section
4.1 of this Agreement (other than under Section 4.1(c) of this Agreement), the
Board of Directors may, by written notice to the former Managing Member (or its
trustee or other legal representative) within 60 days of the former Managing
Member ceasing to serve as managing member of the Fund, require the former
Managing Member to tender to the Fund its entire Interest on a date set out in
the notice. On such date, the Board of Directors will cause the Interest to be
repurchased by the Fund for cash at a valuation determined by the Board of
Directors in accordance with Section 4.5(c) of this Agreement, and the former
Managing Member will thereupon cease to be a Member.
(g) The Fund may repurchase an Interest of a Member or any Person acquiring
an Interest from or through a Member without consent or other action by the
Member or other Person if the Managing Member in its sole discretion determines
that:
(1) the Interest has been Transferred or has vested in any Person other
than with the consent of the Managing Member or by operation of law as
the result of the death, divorce, bankruptcy, insolvency, adjudicated
incompetence or dissolution of the Member;
(2) ownership of the Interest by a Member or other Person is likely to
cause the Fund to be in violation of, or require registration of any
Interest under, or subject the Fund to additional registration or
regulation under, the securities, commodities or other laws of the
United States or any other relevant jurisdiction;
25
(3) continued ownership of the Interest may be harmful or injurious to
the business or reputation of the Fund, the Board of Directors, the
Managing Member, the Special Member, the Investment Manager or any of
their Affiliates, or may subject the Fund or any of the Members to an
undue risk of adverse tax or other fiscal or regulatory consequences;
(4) any of the representations and warranties made by a Member or other
Person in connection with the acquisition of the Interest was not true
when made or has ceased to be true;
(5) with respect to a Member subject to special regulatory or
compliance requirements, such as those imposed by Employee Retirement
Income Security Act of 1974, the Bank Holding Company Act of 1956 or
certain Federal Communication Commission regulations (collectively,
"Special Laws or Regulations"), such Member will likely be subject to
additional regulatory or compliance requirements under these Special
Laws or Regulations by virtue of continuing to hold an Interest; or
(6) it would be in the best interests of the Fund for the Fund to
repurchase the Interest.
(h) A Member (other than the Managing Member or the Special Member)
tendering for repurchase only a portion of the Member's Interest will be
required to maintain a Capital Account balance of at least $50,000 after giving
effect to the repurchase. If a Member (other than the Managing Member or the
Special Member) tenders an amount that would cause the Member's Capital Account
balance to fall below the required minimum, the Managing Member shall have the
right to either (1) reduce the amount to be repurchased from the Member so that
the required minimum balance is maintained or (2) repurchase the remainder of
the Member's Interest in the Fund. The Managing Member may, in its sole
discretion, cause the Fund to repurchase the entire Interest held by a Member
(other than the Managing Member or Special Member) if the Member's Capital
Account balance in the Fund, as a result of repurchase or Transfer by the
Member, is less than $50,000. If the entire Interest of a Member (other than the
Managing Member or Special Member) is repurchased, that Member will cease to be
a Member.
(i) Repurchases of Interests from Members by the Fund may be paid, in the
discretion of the Managing Member, in cash, or by the distribution of Securities
in-kind or partly in cash and partly in-kind. The Fund, however, expects not to
distribute Securities in-kind, except in the unlikely event that making a cash
payment would result in a material adverse effect on the Fund or on Members not
tendering Interests for repurchase. Any Securities distributed will be valued in
accordance with this Agreement and will be distributed to all tendering Members
on a proportional basis.
(j) The Fund may suspend or postpone a repurchase offer in certain limited
circumstances, and only by a vote of a majority of the Board of Directors,
including a majority of the Independent Directors. These circumstances include
the following:
(1) for any period during which circumstances exist as a result of
which it is not reasonably practicable for the Fund to dispose of
Securities it owns or to determine the value of the Fund's net assets;
26
(2) for any other periods that the SEC permits by order for the
protection of Members; or
(3) other unusual circumstances as the Board of Directors in its
discretion deems advisable to the Fund and its Members.
(k) A fee (a "Repurchase Fee") will be charged by the Fund on any
repurchase of an Interest from a Member at any time prior to the day immediately
preceding the one-year anniversary of the Member's purchase of the Interest.
Partial Interests will be repurchased on a "first in - first out" basis (in
other words, the portion of the Interest repurchased will be deemed to have been
taken from the earliest Capital Contribution made by such Member (adjusted for
subsequent appreciation and depreciation) until that Capital Contribution is
decreased to zero, and then from each subsequent Capital Contribution made by
such Member (as adjusted) until such Capital Contribution is decreased to zero).
Other than any Repurchase Fee, the Fund will not impose any charges in
connection with repurchases of Interests. At the Managing Member's discretion,
no Repurchase Fee will be charged by the Fund in connection with any repurchase
of a Member's Interest under Section 4.5(g).
(l) A repurchase of a Member's Interest under Sections 4.5(g) or (h) shall
be on terms and conditions as the Managing Member may determine in its sole
discretion, provided that (1) valuation of the Interest shall be determined in
accordance with Section 4.5(c), and (2) payment for the Interest shall be made
no later than as provided under the Fund's then-current tender offer procedures.
(m) Notwithstanding any provision to the contrary contained in this
Agreement, the Fund and the Managing Member on behalf of the Fund will not
repurchase any Interest or make a distribution to any Member on account of the
Member's Interest, if such repurchase or distribution would violate the Delaware
Act or other applicable law.
ARTICLE V
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS; ALLOCATIONS
5.1. CONTRIBUTIONS TO CAPITAL
(a) The minimum initial Capital Contribution of each Member (other than the
Managing Member and the Special Member) will be $50,000 or such other amount as
the Managing Member determines from time to time. The amount of the initial
Capital Contribution of each Member will be recorded by the Fund upon acceptance
as a contribution to the capital of the Fund. Any amounts received in advance of
a closing with respect to the Fund will be placed in an interest-bearing escrow
account with the Fund's escrow agent prior to their investment in the Fund. Each
Member's entire initial Capital Contribution will be paid to the Fund
immediately prior to the Fund's acceptance of the Member's subscription for
Interests, unless otherwise agreed by the Fund and such Member. Cleared funds
received prior to the due date set out in the subscription agreement will earn
interest until such due date, and any such interest will be added to the amount
of the Member's subscription and invested in the Fund.
27
(b) A Member may make additional Capital Contributions effective as of
those times and in amounts as the Managing Member may permit, but no Member will
be obligated to make any additional Capital Contribution except to the extent
provided in Sections 5.5 and 5.7 of this Agreement. Each additional Capital
Contribution made by a Member (other than a contribution made in accordance with
Section 5.5 or Section 5.7 of this Agreement) will be in the minimum amount of
$25,000 or such other amount as the Managing Member determines from time to
time.
(c) The minimum initial and additional contributions set out in Sections
5.1(a) and (b) of this Agreement may be increased or reduced by the Managing
Member from time to time. Reductions may be applied to all investors, individual
investors or to classes of investors, in each case in the sole discretion of the
Managing Member.
(d) Subject to the provisions of the 1940 Act, and except as otherwise
permitted by the Managing Member, (1) initial and any additional Capital
Contributions by any Member will be payable in cash or in Securities that the
Managing Member, in its absolute discretion, causes the Fund to accept, and (2)
initial and any additional Capital Contributions in cash will be payable in
readily available funds on the due date set forth in the subscription agreement
or agreements executed with respect to such Capital Contributions. The Fund will
charge each Member making a Capital Contribution in Securities to the capital of
the Fund such amount as may be determined by the Managing Member to reimburse
the Fund for any costs incurred by the Fund by reason of accepting the
Securities, and any charge will be due and payable by the contributing Member in
full at the time the Capital Contribution to which the charges relate is due.
The value of contributed Securities will be determined in accordance with
Section 7.3 of this Agreement as of the date of contribution.
(e) The Investment Manager may make Capital Contributions and own an
Interest in the Fund and, in so doing, upon compliance with Section 2.7(b),
will, to the extent not already a Member, become a Member with respect to the
Interest.
5.2. RIGHTS OF MEMBERS TO CAPITAL
No Member will be entitled to interest on the Member's Capital
Contribution. No Member will be entitled to the return of any capital of the
Fund except (a) upon the repurchase by the Fund of the Member's Interest in
accordance with Section 4.5 of this Agreement, (b) in accordance with the
provisions of Section 5.7 of this Agreement or (c) upon the liquidation of the
Fund's assets in accordance with Section 6.2 of this Agreement. To the fullest
extent permitted by applicable law, no Member will have the right to require
partition of the Fund's property or to compel any sale or appraisal of the
Fund's assets.
5.3. CAPITAL ACCOUNTS
(a) The Fund will maintain a separate Capital Account for each Member
(including the Investment Manager, the Managing Member, the Special Member and
any of their respective Affiliates to the extent any of them holds an Interest).
(b) Each Member's Capital Account will have an initial balance equal to the
amount of cash and the value of any Securities (determined in accordance with
Section 7.3 of this Agreement) constituting the Member's initial Capital
Contribution.
28
(c) Each Member's Capital Account will be increased by the sum of (1) the
amount of cash and the value of any Securities (determined in accordance with
Section 7.3 of this Agreement) constituting additional Capital Contributions by
the Member permitted under Section 5.1 of this Agreement, plus (2) any amount
credited to the Member's Capital Account under Sections 5.4 through 5.7 of this
Agreement.
(d) Each Member's Capital Account will be reduced by the sum of (1) the
amount of any repurchase with respect to the Member's Interest or distributions
to the Member under Section 4.5, 5.8 or 6.2 of this Agreement, plus (2) any
amounts debited against the Member's Capital Account under Sections 5.4 through
5.7 of this Agreement.
(e) In the event the Interest of a Member is Transferred in accordance with
the terms of this Agreement, the transferee will succeed to the Capital Account
of the transferor to the extent of the Transferred Interest.
(f) Subject to Section 5.5 of this Agreement, no Member will be required to
pay to the Fund or any other Member or Person any deficit in such Member's
Capital Account upon dissolution of the Fund or otherwise.
5.4. ALLOCATION OF NET CAPITAL APPRECIATION AND DEPRECIATION; MANAGEMENT FEE AND
MANAGER ADMINISTRATIVE SERVICES FEE
(a) At the end of each Allocation Period of the Fund, the Capital Account
of each Member (including the Investment Manager, the Managing Member, the
Special Member and any of their respective Affiliates to the extent any of them
holds an Interest) shall be adjusted by crediting (in the case of Net Capital
Appreciation) or debiting (in the case of Net Capital Depreciation) the Net
Capital Appreciation or Net Capital Depreciation, as the case may be, to the
Capital Accounts of all the Members (including the Investment Manager, the
Managing Member, the Special Member and any of their respective Affiliates to
the extent any of them holds an Interest) in proportion to their respective
Investment Percentages for such Allocation Period.
(b) At the end of each month, the Capital Account of each Member (including
the Investment Manager, the Managing Member, the Special Member and any of their
respective Affiliates to the extent any of them holds an Interest) shall be
decreased by the amount of the Management Fee and the Manager Administrative
Services Fee calculated in respect of such Capital Account in accordance with
Section 3.10(a).
5.5. ALLOCATION OF CERTAIN WITHHOLDING TAXES, OTHER EXPENDITURES, AND RESERVES
(a) If the Fund incurs a withholding tax or other tax obligation with
respect to the share of Fund income allocable to any Member, then the Managing
Member, without limitation of any other rights of the Fund or the Managing
Member, will cause the amount of the obligation to be debited against the
Capital Account of the Member when the Fund pays the obligation, and any amounts
then or in the future distributable to the Member will be reduced by the amount
of the taxes. If the amount of the taxes is greater than any distributable
amounts, then the Member and any successor to the Member's Interest will pay to
the Fund as a Capital Contribution, upon demand by the Managing Member, the
amount of the excess. The Managing Member will not be
29
obligated to apply for or obtain a reduction of or exemption from withholding
tax on behalf of any Member that may be eligible for the reduction or exemption,
except that, in the event that the Managing Member determines that a Member is
eligible for a refund of any withholding tax, the Managing Member may, at the
request and expense of the Member, assist the Member in applying for such
refund.
(b) Except as otherwise provided for in this Agreement and unless
prohibited by the 1940 Act, any expenditures payable by the Fund, to the extent
determined by the Managing Member to have been paid or withheld on behalf of, or
by reason of particular circumstances applicable to, one or more but fewer than
all of the Members, will be charged only to those Members on whose behalf the
payments are made or whose particular circumstances gave rise to such payments.
The charges will be debited from the Capital Accounts of the Members as of the
close of the Allocation Period during which the items were paid or accrued by
the Fund.
(c) The Managing Member may cause appropriate reserves to be created,
accrued and charged by the Fund against Net Assets and proportionately against
the Capital Accounts of the Members for contingent, conditional or unmatured
liabilities, if any, as of the date any contingent, conditional or unmatured
liability becomes known to the Managing Member and accruable under accounting
principles generally accepted in the United States. The reserves shall be in the
amounts that the Managing Member in its sole discretion deems necessary or
appropriate. The Managing Member may increase or reduce any reserves from time
to time by such amounts as it in its sole discretion deems necessary or
appropriate. The amount of any reserve, or any increase or decrease in a
reserve, will be charged or credited, as appropriate, to the Capital Accounts of
the Members in proportion to their Investment Percentages at the time the
reserve is created, or increased or decreased, except that if any individual
reserve item, or any increase or decrease in a reserve item, is deemed by the
Managing Member, in its sole discretion, to be material, the amount of the
reserve item or increase or decrease in the reserve item may instead, at the
discretion of the Managing Member, be charged or credited to the Capital
Accounts of those Persons who were Members at the time, as determined by the
Managing Member in its sole discretion, of the act or omission giving rise to
the liability for which the reserve was established, increased or decreased in
proportion to their Investment Percentages as at that time.
(d) In the event that the Fund borrows money in order to fund the payment
of any withholding taxes, expenditures or other amounts described in this
Section 5.5, expenses associated with such borrowing shall be specially
allocated in the same proportions to the Capital Accounts of those Members
against whom the expense giving rise to such payment is debited or charged
pursuant to this Section 5.5.
(e) Members and former Members shall be liable to the Fund, upon the demand
of the Managing Member, which demand the Managing Member may make or refrain
from making in its absolute discretion, in an amount equal to any expenses or
liabilities of the Fund allocated to their respective Capital Accounts in
accordance with this Section 5.5, provided, however, that in no event will such
amount with respect to any Member or former Member exceed the aggregate amount
of returns of capital and other amounts actually received by the Member or
former Member from the Fund. To the extent that a former Member fails to repay
to the Fund in full, upon the demand of the Managing Member, any amount required
to be charged to the former
30
Member under this Section 5.5, the deficiency will be charged to the Capital
Accounts of the Members in proportion to their Investment Percentages at the
time of the act or omission giving rise to the charge to the extent feasible,
and otherwise to the Capital Accounts of the current Members in proportion to
their Investment Percentages. The provisions of this Section 5.5(e) are intended
solely to benefit the Fund and, to the fullest extent permitted by law, shall
not be construed as conferring any benefit upon any Member (other than the
Managing Member) or creditor of the Fund. No Member other than the Managing
Member shall have any right to demand payment from any other Member pursuant to
this Section 5.5(e), and the Managing Member shall not have any duty or
obligation to any other Member or creditor of the Fund to make any demand for
payment pursuant to this Section 5.5(e).
5.6. INCENTIVE ALLOCATION
(a) At the end of each calendar year, each Member's return on investment
for the year will be determined and a portion of the Net Capital Appreciation
allocated to the Member's Capital Account during the year, net of the Member's
allocable share of the Management Fee and the Manager Administrative Services
Fee, will be reallocated to the Capital Account of the Special Member in the
following manner: (1) Net Capital Appreciation up to a 6.00% return will remain
allocated to the Capital Account of the Member (the "Preferred Return"); (2) Net
Capital Appreciation in excess of the Preferred Return will be reallocated to
the Capital Account of the Special Member until the Special Member has been
allocated the next 0.30% of return (the "Catch-Up"); and (3) thereafter, 95.00%
of any Net Capital Appreciation in excess of the Preferred Return plus the
Catch-Up will remain allocated to the Capital Account of the Member, and 5.00%
of such Net Capital Appreciation will be reallocated to the Capital Account of
the Special Member. The amounts reallocated to the Special Member under clauses
(2) and (3) above will be referred to as the "Incentive Allocation."
(b) No Incentive Allocation will be made with respect to a Member's Capital
Account until any cumulative Net Capital Depreciation previously allocated to
such Member's Capital Account plus any Management Fees and Manager
Administrative Services Fees charged to such Capital Account (collectively, the
"Loss Carryforward") have been recovered. Any Loss Carryforward of a Member will
be reduced proportionately to reflect the repurchase of any portion of that
Member's Interest.
(c) The performance of each Capital Contribution made by a Member during a
calendar year will be separately tracked, and the Incentive Allocation, the
Preferred Return and any Loss Carryforward for a Member will be determined
separately with respect to each such Capital Contribution as if it were a
separate Capital Account.
(d) If a particular Capital Contribution relating to a Member's Capital
Account has been in the Fund for less than a 12-month period, the Incentive
Allocation will be determined as follows: (1) the Preferred Return will be the
monthly rate of return that, if compounded on a monthly basis for a full year,
would result in a return of 6.00% per year, (in other words, a monthly rate of
return of 0.4868%), compounded for the number of months such Capital
Contribution has been in the Fund and (2) the Catch-Up will be pro-rated to
reflect the portion of the year for which such Capital Contribution has been in
the Fund.
31
(e) Upon a repurchase of an Interest (other than at the end of a calendar
year) from a Member in accordance with Section 4.5, an Incentive Allocation will
be determined and allocated to the Special Member, and, in the case of any
repurchase of a portion of an Interest, as follows: the portion of the Interest
being repurchased (and the amount with respect to which the Incentive Allocation
is calculated) will be deemed to have been taken from the first Capital
Contribution of such Member (as such Capital Contribution has been adjusted for
Net Capital Appreciation and Net Capital Depreciation, Management Fees, Manager
Administrative Services Fees and other expenses) until it is decreased to zero
and from each subsequent Capital Contribution until such Capital Contribution
(as adjusted) is decreased to zero.
(f) An Incentive Allocation will be determined in respect of each Member
and allocated to the Special Member at the time of liquidation of the Fund.
(g) Any Incentive Allocation to be determined and allocated in respect of a
period of less than 12 months will be determined in the same manner as the
Incentive Allocation for any Capital Contributions that have been in the Fund
for less than a 12-month period, as set out in Section 5.6(d).
(h) Within 30 days after the close of each calendar year, the Special
Member may withdraw up to 100% of the Incentive Allocation (computed on the
basis of unaudited data) that was credited to the Capital Account of the Special
Member and debited from the Member's Capital Account with respect to the
calendar year. Such withdrawal will not cause the Special Member to cease to be
the Special Member.
(i) The Special Member may assign its right to receive all or any part of
the Incentive Allocation to one or more entities that are owned by JPMorgan
Chase or its Affiliates and/or certain employees of JPMorgan Chase, and any such
entity may, with the consent of the Managing Member, be admitted to the Fund as
an additional or substitute Special Member by executing a counterpart of this
Agreement or any other instrument evidencing its agreement to be bound by the
terms of this Agreement.
(j) Subject to the 1940 Act, the Special Member may, in its sole
discretion, elect to remit to a Member a portion of the Incentive Allocation
made with respect to such Member's Capital Account.
(k) The Managing Member has the right to amend, without the consent of the
Members, this Agreement so that the Incentive Allocation provided in the
Agreement conforms to any applicable requirements of the SEC and other
regulatory authorities; provided that such amendment does not increase the
Incentive Allocation or otherwise have an adverse economic effect on the Members
(other than the Special Member).
5.7. TAX ALLOCATIONS AND OTHER TAX MATTERS
(a) For each Taxable Year of the Fund, items of income, deduction, gain,
loss or credit will be allocated for federal income tax purposes among the
Members in a manner so as to reflect equitably amounts credited or debited to
each Member's Capital Account for the current and prior Taxable Years (or
relevant portions of those years). Allocations under this Section 5.7 will be
made in accordance with the principles of sections 704(b) and 704(c) of the
Code, and in
32
conformity with Treasury Regulations promulgated under these sections, or the
successor provisions to such sections and Treasury Regulations. Notwithstanding
anything to the contrary in this Agreement, the Fund will allocate to the
Members those gains or income necessary to satisfy the "qualified income offset"
requirement of Treasury Regulations Section 1.704-1(b)(2)(ii)(d).
(b) If the Fund realizes capital gains (including short-term capital gains)
or ordinary income for U.S. federal income tax purposes for any Taxable Year
during or as of the end of which one or more Positive Basis Members (as defined
in this Section 5.7) withdraw from the Fund under Articles IV or VI of this
Agreement, the Managing Member, in its sole discretion, may elect to allocate
such gains or income as follows: (i) to such Positive Basis Members, in
proportion to the respective Positive Basis (as defined in this Section 5.7) of
each such Positive Basis Member, until either the full amount of such gains or
income has been so allocated or the Positive Basis of each such Positive Basis
Member has been eliminated, and (ii) to allocate any gains or income not so
allocated to Positive Basis Members to the other Members in a manner that
reflects equitably the amounts credited to the Members' Capital Accounts under
Section 5.4.
(c) If the Fund realizes capital losses (including short-term capital
losses) or ordinary losses for U.S. federal income tax purposes for any Taxable
Year during or as of the end of which one or more Negative Basis Members (as
defined in this Section 5.7) withdraw from the Fund under Articles IV or VI of
this Agreement, the Managing Member, in its sole discretion, may elect to
allocate such losses as follows: (i) to such Negative Basis Members, in
proportion to the respective Negative Basis (as defined in this Section 5.7) of
each such Negative Basis Member, until either the full amount of such losses has
been so allocated or the Negative Basis of each Negative Basis Member has been
eliminated, and (ii) to allocate any losses not so allocated to Negative Basis
Members, to the other Members in a manner that reflects equitably the amounts
debited against the Members' Capital Accounts under Section 5.4.
(d) As used in this Section 5.7, the term "Positive Basis" means, with
respect to any Member and as of any time of calculation, the amount by which
such Member's Capital Account as of that time exceeds such Member's "adjusted
tax basis," for U.S. federal income tax purposes, in such Member's Interest as
of that time (determined without regard to any adjustments made to the "adjusted
tax basis" by reason of any Transfer of the Interest, including by reason of
death, and without regard to such Member's share of the liabilities of the Fund
under section 752 of the Code). As used in this Section 5.7, the term "Positive
Basis Member" means any Member who withdraws from the Fund and who has a
Positive Basis as of the effective date of such Member's withdrawal. As used in
this Section 5.7, the term "Negative Basis" means, with respect to any Member
and as of any time of calculation, the amount by which such Member's "adjusted
tax basis," for U.S. federal income tax purposes, in such Member's Interest as
of that time (determined without regard to any adjustments made to the "adjusted
tax basis" by reason of any Transfer of the Interest, including by reason of
death, and without regard to such Member's share of the liabilities of the Fund
under section 752 of the Code) exceeds the Member's Capital Account as of such
time. As used in this Section 5.7, the term "Negative Basis Member" means any
Member who withdraws from the Fund and who has a Negative Basis as of the
effective date of such Member's withdrawal.
33
(e) Allocations under this Section 5.7 may be adjusted at any time by the
Managing Member to the extent the Managing Member determines in good faith that
such adjustments (i) would more equitably reflect the economic allocations
hereunder or (ii) would otherwise be in the overall best interests of the
Members.
(f) The Fund will file a tax return as a partnership for U.S. federal
income tax purposes. All decisions for the Fund relating to tax matters,
including, without limitation, whether to make any tax elections (including the
election under section 754 of the Code), the positions to be taken on the Fund's
tax returns and the settlement or further contest or litigation of any audit
matters raised by the Internal Revenue Service or any other taxing authority,
will be made by the Managing Member in its sole discretion. The Managing Member
will be the designated "tax matters partner" for purposes of the Code.
(g) Each Member agrees not to treat, on his, her or its income tax return
or in any claim for a refund, any item of income, gain, loss, deduction or
credit in a manner inconsistent with the treatment of such item by the Fund.
5.8. DISTRIBUTIONS
(a) Subject to the 1940 Act, the Managing Member may, in its sole
discretion, cause the Fund to make distributions in cash or in kind at any time
to all of the Members on a proportionate basis in accordance with the Members'
Investment Percentages.
(b) The Managing Member may withhold taxes from any distribution to any
Member to the extent required by the Code or any other applicable law. For
purposes of this Agreement, any taxes so withheld by the Fund with respect to
any amount distributed by the Fund to any Member will be deemed to be a
distribution or payment to the Member, reducing the amount otherwise
distributable to the Member under this Agreement and reducing the Capital
Account of the Member. Neither the Managing Member nor the Directors will be
obligated to apply for or obtain a reduction of or exemption from withholding
tax on behalf of any Member that may be eligible for reduction or exemption. To
the extent that a Member claims to be entitled to a reduced rate of, or
exemption from, a withholding tax under an applicable income tax treaty, or
otherwise, the Member will furnish the Fund with any information and forms that
the Member may be required to complete if necessary to comply with any and all
laws and regulations governing the obligations of withholding tax agents. Each
Member represents and warrants that any information and forms furnished by the
Member will be true and accurate and agrees to indemnify the Fund and each of
the other Members from any and all losses, claims, damages, liabilities, costs
and expenses resulting from the filing of inaccurate or incomplete information
or forms relating to the withholding taxes (including legal or other expenses
incurred in investigating or defending against any such losses, claims, damages,
liabilities, costs and expenses).
34
ARTICLE VI
DISSOLUTION AND LIQUIDATION
6.1. DISSOLUTION
(a) The Fund will be dissolved if at any time it has no members (unless it
is continued without dissolution in accordance with the Delaware Act) or upon
the occurrence of any of the following events:
(1) upon the affirmative vote to dissolve the Fund by either (A) a
majority of the Board of Directors (including a majority of the
Independent Directors) or (B) Members holding at least 80% of the total
number of votes eligible to be cast by all Members;
(2) upon an election by the Managing Member to dissolve the Fund;
(3) upon the failure of Members to approve successor Directors at a
meeting called by the Managing Member in accordance with Section
2.10(c) of this Agreement when no Director remains to continue the
Fund;
(4) upon the expiration of any two-year period that commences on the
date on which any Member has submitted a written notice to the Fund
requesting to tender the Member's entire Interest for repurchase by the
Fund (provided the Member indicates its intention to dissolve the Fund
in a separate written request to the Fund that specifically refers to
this Section 6.1(a)(4)), unless the Member has been given the
opportunity to so tender in accordance with the procedures described in
Section 4.5 of this Agreement (whether in a single repurchase offer or
multiple consecutive offers within the two-year period); or
(5) as otherwise required by Section 18-802 of the Delaware Act or
operation of law.
Dissolution of the Fund will be effective on the day on which the event
giving rise to the dissolution occurs, provided, that the Fund will not
terminate until the assets of the Fund have been liquidated and distributed in
accordance with Section 6.2 of this Agreement and the Certificate has been
canceled in accordance with the Delaware Act.
(b) Except as provided in Section 6.1(a) of this Agreement or in the
Delaware Act, the death, adjudicated incompetence, dissolution, divorce,
termination, liquidation, bankruptcy (as defined in the Delaware Act),
reorganization, merger, sale of substantially all of the stock or assets of, or
other change in the ownership or nature of a Member, the admission to the Fund
of a new Member, the withdrawal of a Member from the Fund, or the Transfer by a
Member of the Member's Interest to a third party will not cause the Fund to
dissolve.
6.2. LIQUIDATION OF ASSETS
(a) Upon the dissolution of the Fund as provided in Section 6.1 of this
Agreement, the Managing Member, acting as liquidator (or if the Managing Member
is unable to perform this function, a liquidator elected by Members holding a
majority of the total number of votes eligible to be cast by all Members and
whose fees will be paid by the Fund) will promptly wind up the
35
affairs of the Fund and liquidate its assets. Net Capital Appreciation and Net
Capital Depreciation for any Allocation Period during the period of liquidation
will be allocated in accordance with Article V of this Agreement. Subject to the
Delaware Act, the proceeds from liquidation will be distributed in the following
order and manner:
(1) first, to satisfy (whether by payment or the making of a reasonable
provision for payment) the debts, liabilities and obligations of the
Fund, and the expenses of liquidation (including legal and accounting
fees and expenses incurred in connection with the liquidation), up to
and including the date on which distribution of the Fund's assets to
the Members has been completed, other than debts, liabilities or
obligations to Members;
(2) second, to satisfy on a proportionate basis the debts, liabilities
and obligations owing to the Members; and
(3) third, to the Members on a proportionate basis the positive
balances of their Capital Accounts after giving effect to all
allocations to be made to the Members' Capital Accounts for the
Allocation Period ending on the date of the distributions under this
Section 6.2(a)(3).
(b) Notwithstanding the provisions of this Section 6.2, upon dissolution of
the Fund, subject to the Delaware Act and the priorities set out in Section
6.2(a) of this Agreement, the Managing Member or liquidator may distribute
ratably in-kind any assets of the Fund, if the Board of Directors, Managing
Member or liquidator determines that the distribution of assets in-kind would be
in the interests of the Members in facilitating an orderly liquidation. If any
in-kind distribution is to be made under this Section 6.2(b), (1) the assets
distributed in-kind will be valued in accordance with Section 7.3 of this
Agreement as of the actual date of their distribution and charged as so valued
and distributed against amounts to be paid under Section 6.2(a) of this
Agreement, and (2) any profit or loss attributable to property distributed
in-kind will be included in the Net Capital Appreciation or Net Capital
Depreciation for the Allocation Period ending on the date of the distribution.
Notwithstanding any provision of this Agreement to the contrary, a Member may be
required to accept a distribution of any asset in-kind from the Fund even if the
percentage of the asset distributed to the Member exceeds a percentage of the
asset that is equal to the percentage in which the Member shares in
distributions from the Fund.
ARTICLE VII
ACCOUNTING, VALUATIONS AND BOOKS AND RECORDS
7.1. ACCOUNTING AND REPORTS
(a) The Fund will adopt for tax accounting purposes the accrual method of
accounting. The Fund's accounts will be maintained in U.S. currency.
(b) The Fund will furnish to Members, as soon as practicable after the end
of each Taxable Year, such information as is necessary for Members to complete
U.S. federal and state income tax or information returns and any other tax
information required by U.S. federal or state law.
36
(c) The Managing Member anticipates sending to each Member an unaudited
semiannual and an audited annual report within 60 days after the close of the
period covered by the report, or as otherwise required by the 1940 Act. The Fund
will cause financial statements contained in each annual report furnished under
this Section 7.1 to be accompanied by a certificate of independent public
accountants based upon an audit performed in accordance with U.S. generally
accepted auditing standards. All such financial statements will be prepared in
accordance with U.S. generally accepted accounting principles. The Fund will
also send to each Member quarterly reports regarding the Fund's operations
during each quarter as well as monthly updates. Such quarterly reports and
monthly updates shall contain information deemed appropriate by the Managing
Member, in its sole discretion. The Fund may furnish to each Member any other
periodic reports the Managing Member deems necessary or appropriate in its sole
discretion. Certain additional information regarding the Fund's operations may
be available to Members from time to time on written request.
7.2. DETERMINATIONS BY MANAGING MEMBER
(a) All matters concerning the determination and allocation among the
Members of the amounts to be determined and allocated under Article V of this
Agreement, including any taxes on those amounts and accounting procedures
applicable with respect to those amounts, will be determined by the Managing
Member unless specifically and expressly otherwise provided for by the
provisions of this Agreement or as required by law. Any such determinations and
allocations will be final and binding on all of the Members.
(b) The Managing Member may make any adjustments to the computation of Net
Capital Appreciation and/or Net Capital Depreciation, or any components
(including withholding any items of income, gain, loss or deduction)
constituting Net Capital Appreciation and/or Net Capital Depreciation as the
Managing Member deems appropriate to reflect fairly and accurately the financial
results of the Fund and the intended allocation of Net Capital Appreciation
and/or Net Capital Depreciation among the Members.
7.3. VALUATION OF ASSETS
(a) Except as may be required by the 1940 Act, the Board of Directors will
value or cause to have valued any Securities or other assets and liabilities of
the Fund as of the close of business on the last day of each Allocation Period
in accordance with valuation procedures established from time to time by the
Board of Directors and as described in the Memorandum. In accordance with these
procedures, the Fund will value its investments in Investment Funds at fair
value and the fair value as of each month-end ordinarily will be the value most
recently determined and reported to the Fund by each Investment Fund in
accordance with the Investment Fund's valuation policies.
(b) In determining the value of the assets of the Fund, no value will be
placed on the goodwill or name of the Fund, or the office records, files,
statistical data or any similar intangible assets of the Fund not normally
reflected in the Fund's accounting records. Any items of income earned but not
received, expenses incurred but not yet paid, liabilities fixed or contingent,
and any other prepaid expenses to the extent not otherwise reflected in the
books of account, and the value of options or commitments to purchase or sell
Securities or commodities under agreements
37
entered into prior to the valuation date will, however, be taken into account in
determining the value of the Fund's assets.
(c) Subject to the provisions of the 1940 Act, the value of Securities and
other assets of the Fund and the net asset value of the Fund as a whole
determined in accordance with this Section 7.3 will be conclusive and binding on
all of the Partners and all Persons claiming through or under them.
(d) Each Member acknowledges that, although the procedures approved by the
Board of Directors provide that the Investment Manager will review the
valuations provided by the Portfolio Managers or administrators to the
Investment Funds, none of the Investment Manager, Managing Member or Board of
Directors will be able to confirm independently the accuracy of valuations
provided by such Portfolio Managers or administrators. As a result, the
valuations reported by the Portfolio Managers or administrators of the
Investment Funds, upon which the Fund calculates its month-end net asset value
and net asset value for each Interest, may be subject to later adjustment, based
on information reasonably available at that time. Each Member acknowledges that
situations involving uncertainties as to the valuation of Investment Funds could
have an adverse effect on the Fund's net assets if the Board of Directors' or
the Investment Manager's judgments regarding appropriate valuations should prove
incorrect.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1. AMENDMENT OF THIS AGREEMENT
(a) Except as otherwise provided in this Section 8.1 and Section 5.6(j),
this Agreement may be amended, in whole or in part, with the approval of a
majority of the Board of Directors (including a majority of the Independent
Directors, to the extent required by the 1940 Act). Any amendment also must be
approved by a majority (as defined in the ▇▇▇▇ ▇▇▇) of the outstanding voting
securities of the Fund, to the extent such vote is required by the ▇▇▇▇ ▇▇▇.
(b) Any amendment that would:
(1) increase the obligation of a Member to make any Capital
Contribution; or
(2) reduce the Capital Account of a Member other than in accordance
with Article V of this Agreement,
may be made only if (A) the written consent of each Member adversely affected by
the proposed amendment is obtained prior to the effectiveness of the amendment
or (B) the proposed amendment does not become effective until (i) each Member
adversely affected by the proposed amendment has received written notice of the
proposed amendment and (ii) any Member adversely affected by the proposed
amendment that objects to the proposed amendment has been afforded a reasonable
opportunity (under procedures adopted by the Managing Member in its sole
discretion) to tender the Member's entire Interest for repurchase by the Fund.
38
(c) The following amendments may be made only with the unanimous consent of
the Members and, to the extent required by the 1940 Act, approval of a majority
of the Board of Directors (including a majority of the Independent Directors, to
the extent required by the 1940 Act):
(1) any amendment that would alter the provisions of Section 5.6 of
this Agreement relating to the Special Member's Incentive Allocation to
the extent such amendment would increase the Incentive Allocation or
otherwise have an adverse economic effect on the Members (other than
the Special Member);
(2) any material amendment that would alter the provisions of this
Section 8.1(b) or (c) relating to the amendment of this Agreement; and
(3) any amendment that would alter the provisions of Section 3.9 of
this Agreement relating to indemnification.
(d) Notwithstanding the provisions of Sections 8.1(a), 8.1(b) and 8.1(c) of
this Agreement, the Managing Member, at any time without the consent of any
other Member or (except as otherwise provided in this Section 8.1(d)) the Board
of Directors, may:
(1) amend the provisions relating to the Incentive Allocation so that
the provisions conform to any applicable requirements of the SEC and
other regulatory authorities; provided that such amendment does not
increase the Incentive Allocation or otherwise have an adverse economic
effect on the Members (other than the Special Member);
(2) restate this Agreement, together with any amendments to this
Agreement that have been duly adopted in accordance with the provisions
of this Agreement to incorporate the amendments in a single, integrated
document;
(3) amend this Agreement (other than with respect to the matters
described in Section 8.1(b) of this Agreement) to change the name of
the Fund in accordance with Section 2.2 hereof, or to effect compliance
with any applicable law or regulation, including, but not limited to,
to satisfy the requirements of applicable U.S. securities or banking
law or regulation or tax law, or to clarify any ambiguity or to correct
or supplement any provision of this Agreement that may be inconsistent
with any other provision of this Agreement, so long as the amendment
does not adversely affect the rights of any Member in any material
respect; and
(4) amend this Agreement to make any changes necessary or desirable,
based on advice of legal counsel to the Fund, to assure the Fund's
continuing eligibility to be classified as a partnership for U.S.
federal income tax purposes;
subject, however, to the limitation that any material amendment to this
Agreement under Section 8.1(d)(3) or (4) of this Agreement will be valid only if
approved by a majority of the Directors (including a majority of the Independent
Directors, to the extent required by the 1940 Act).
(e) The Managing Member will give prior written notice of any proposed
amendment to this Agreement (other than any amendment of the type contemplated
by Section 8.1(d)(2) of this
39
Agreement) to each Member, which notice sets out (1) the text of the proposed
amendment or (2) a summary of the amendment and a statement that the text of the
amendment will be furnished to any Member upon request.
8.2. SPECIAL POWER OF ATTORNEY
(a) Each Member irrevocably makes, constitutes and appoints the Managing
Member and each of the Officers and Directors, acting severally, and any
liquidator of the Fund's assets appointed under Section 6.2 of this Agreement,
with full power of substitution, the true and lawful representatives and
attorneys-in-fact of, and in the name, place and stead of, the Member, with the
power from time to time to make, execute, sign, acknowledge, swear to, verify,
deliver, record, file and/or publish:
(1) any amendment to this Agreement;
(2) any amendment to the Certificate, including, without limitation,
any such amendment required to reflect any amendments to this
Agreement, and including, without limitation, an amendment to
effectuate any change in the membership of the Fund; and
(3) all other such instruments, documents and certificates that, in the
view of legal counsel to the Fund, from time to time may be required by
the laws of the United States of America, the State of Delaware or any
other jurisdiction in which the Managing Member determines that the
Fund should do business, or any political subdivision or agency of any
such jurisdiction, or that legal counsel may deem necessary or
appropriate to effectuate, implement and continue the valid existence
and business of the Fund as a limited liability company under the
Delaware Act.
(b) Each Member is aware that the terms of this Agreement permit certain
amendments to this Agreement to be effected and certain other actions to be
taken or omitted by or with respect to the Fund without the Member's consent.
Each Member agrees that if an amendment to the Certificate or this Agreement or
any action by or with respect to the Fund is taken in the manner contemplated by
this Agreement, notwithstanding any objection that the Member may assert with
respect to the amendment or action, the attorneys-in-fact appointed under this
Agreement are authorized and empowered, with full power of substitution, to
exercise the authority granted in this Section 8.2 in any manner that may be
necessary or appropriate to permit the amendment to be made or the action to be
lawfully taken or omitted. Each Member is fully aware that each Member will rely
on the effectiveness of this special power of attorney with a view to the
orderly administration of the affairs of the Fund.
(c) The power of attorney contemplated by this Section 8.2 is a special
power of attorney and is coupled with an interest in favor of the Managing
Member and each of the Officers and Directors, acting severally, and any
liquidator of the Fund's assets appointed under Section 6.2 of this Agreement,
and as such the power of attorney:
(1) will be irrevocable and continue in full force and effect
notwithstanding the subsequent death or incapacity of any Person
granting the power of attorney, regardless of whether the Fund, the
Managing Member, the Officers, the Directors or any liquidator has had
notice of the death or incapacity; and
40
(2) will survive the Transfer by a Member of all or any part of its
Interest, except that, when the transferee of an Interest has been
approved by the Managing Member for admission to the Fund as a
substituted Member, or upon the withdrawal of Member from the Fund in
accordance with a periodic tender or otherwise, the power of attorney
given by the transferor will survive the delivery of the assignment for
the sole purpose of enabling the Managing Member, the Officers, the
Directors or any liquidator to execute, acknowledge and file any
instrument necessary to effect the substitution and, upon completion of
such substitution, will terminate (but, in the case of any transfer of
a portion of an Interest, with respect to that portion of the Interest
only).
8.3. NOTICES
Notices that may or are required to be provided under this Agreement
will be made to a Member by hand delivery, regular mail (registered or certified
mail return receipt requested in the case of notice to the Managing Member),
commercial courier service, facsimile, or electronic mail (with a confirmation
copy by registered or certified mail in the case of notices to the Managing
Member by telecopier or electronic mail), and will be addressed to the Member at
his, her or its address as set out in the books and records of the Fund (or to
any other address as may be designated by any Member by notice addressed to the
Managing Member in the case of notice given to any Member, and to each of the
Members in the case of notice given to the Managing Member). Notices will be
deemed to have been provided when delivered by hand, on the date indicated as
the date of receipt on a return receipt or when received if sent by regular
mail, commercial courier service, facsimile or electronic mail. A document that
is not a notice and that is required to be provided under this Agreement by any
party to another party may be delivered by any reasonable means.
8.4. AGREEMENT BINDING UPON SUCCESSORS AND ASSIGNS
This Agreement will be binding upon and inure to the benefit of the
Members and their respective heirs, successors, assigns, executors, trustees or
other legal representatives, but the rights and obligations of the Members may
not be transferred or delegated except as provided in this Agreement, and any
attempted transfer or delegation of those rights and obligations that is not
made in accordance with the terms of this Agreement will be void.
8.5. CHOICE OF LAW; WAIVER OF JURY TRIAL
(a) Notwithstanding the location at which this Agreement is executed by any
of the Members, the Members expressly agree that all the terms and provisions of
this Agreement are governed by and will be construed under the laws of the State
of Delaware, including the Delaware Act, without regard to the conflict of law
principles of the State of Delaware.
(b) EACH MEMBER KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS
HE, SHE OR IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON
THIS AGREEMENT, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF THE MEMBERS. EACH MEMBER ACKNOWLEDGES AND AGREES THAT IT
HAS
41
RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT.
8.6. NO THIRD PARTY BENEFICIARIES
The provisions of this Agreement are intended only for the regulation
of relations among past, existing and future Members, their permitted successors
and assignees, and the Fund. This Agreement is not intended for the benefit of
non-Member creditors or other third parties and, except to the extent
specifically provided in Section 3.9 of this Agreement, nothing in this
Agreement, express or implied, shall or is intended to confer any rights upon
any Person other than the Fund, the parties to this Agreement, or their
respective successors or assigns, and no Person shall be considered a third
party beneficiary of any provision of this Agreement.
8.7. CONSENTS
Any and all consents, agreements or approvals provided for or permitted
by this Agreement must, to the extent not given or obtained at a duly called
meeting of the Board of Directors or the Members, be in writing and a signed
copy of any such consent, agreement or approval will be filed and kept with the
books of the Fund.
8.8. MERGER AND CONSOLIDATION
(a) The Fund may merge or consolidate with or into one or more limited
liability companies or other business entities under an agreement of merger or
consolidation that has been approved in the manner contemplated by the Delaware
Act.
(b) Notwithstanding anything to the contrary in this Agreement, an
agreement of merger or consolidation approved in accordance with the Delaware
Act may, to the extent permitted by the Delaware Act, (1) effect any amendment
to this Agreement, (2) effect the adoption of a new limited liability company
agreement for the Fund if it is the surviving or resulting limited liability
company in the merger or consolidation, or (3) provide that the limited
liability company agreement of any other constituent limited liability company
to the merger or consolidation (including a limited liability company formed for
the purpose of consummating the merger or consolidation) will be the limited
liability company agreement of the surviving or resulting limited liability
company.
(c) The Fund may convert to another Delaware business entity in accordance
with the Delaware Act upon the approval of the Members representing a majority
(as defined in the ▇▇▇▇ ▇▇▇) of the outstanding voting securities of the Fund.
8.9. PRONOUNS
All pronouns used in this Agreement will be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Person
or Persons, firm or entity may require in the context in which they are used.
42
8.10. CONFIDENTIALITY
(a) The Managing Member will have the right to keep confidential from the
Members, for such period of time as the Managing Member deems reasonable in its
sole discretion, any information that the Managing Member reasonably believes to
be in the nature of trade secrets or other information the disclosure of which
the Managing Member in good faith believes is not in the best interest of the
Fund or could damage the Fund or its business or that the Fund is required by
law or by agreement with a third party to keep confidential.
(b) Notwithstanding anything to the contrary in this Agreement,
authorization is hereby expressly granted permitting each Member (and each
employee, representative, or other agent of such Member) to disclose to any and
all Persons, without limitation of any kind, the tax treatment and tax structure
of the Fund, and all materials of any kind (including opinions or other tax
analyses) that are provided to the Member related to tax treatment and tax
structure. The Fund acknowledges and agrees that a Member's disclosure of the
structure or tax aspects of the Fund is not limited in any way by an express or
implied understanding or agreement, oral or written (whether or not such
understanding or agreement is legally binding). In this regard, any aspects of
the Fund pertaining to its tax treatment and tax structure that would result in
an investment in the Fund being made under "conditions of confidentiality," as
such term is used in the Code or in Treasury Regulations issued under the Code
is specifically excluded from the provisions of Section 8.10(a) of this
Agreement.
8.11. SEVERABILITY
Each Member agrees that the Member intends that, if any provision of
this Agreement is determined by a court of competent jurisdiction or regulatory
authority with jurisdiction over the Fund, the Managing Member or the Investment
Manager to not be enforceable in the manner set out in this Agreement, then the
provision should be enforceable to the maximum extent possible under applicable
law. If any provision of this Agreement is held to be invalid or unenforceable,
the invalidation or unenforceability will not affect the validity or
enforceability of any other provision of this Agreement (or portion of the
provision).
8.12. ENTIRE AGREEMENT
(a) Subject to Section 8.12(b), this Agreement, together with each Member's
subscription agreement executed with respect to each Interest, constitute the
entire agreement among the Members and the Fund pertaining to the subject matter
of this Agreement and the subscription agreement and supersedes all prior
agreements and understandings pertaining to that subject matter.
(b) Notwithstanding any other provision of this Agreement, including
Section 8.1, or any subscription agreement, each Member acknowledges and agrees
that the Investment Manager and/or the Managing Member, on its own behalf or, to
the extent permitted by applicable law, on behalf of the Fund, without the
approval of the Members or any other Person, may enter into a written agreement
or agreements with any other Member affecting or modifying the terms of, or
establishing rights under, this Agreement or any subscription agreement. Each
Member agrees that any terms contained in any such other agreement with another
Member will govern with
43
respect to the other Member notwithstanding the provisions of this Agreement or
any subscription agreement, and that the Member will have no rights in respect
of those granted in favor of such other Member.
8.13. DISCRETION
To the fullest extent permitted by law, and notwithstanding any other
provision of this Agreement or in any agreement contemplated by this Agreement
or applicable provisions of law or equity or otherwise, whenever in this
Agreement a Person is permitted or required to make a decision (a) in its "sole
discretion" or "discretion" or under a grant of similar authority or latitude,
the Person will be entitled to consider only those interests and factors as he,
she or it desires, including his, her or its own interests, and will have no
duty or obligation to give any consideration to any interest of or factors
affecting the Fund or the Members, or (b) in its "good faith" or under another
express standard, then the Person will act under the express standard and will
not be subject to any other or different standards.
8.14. COUNTERPARTS
This Agreement may be executed in several counterparts, all of which
together will constitute one agreement binding on all Members, notwithstanding
that all the Members have not signed the same counterpart.
8.15. HEADINGS
The headings in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions of this
Agreement or otherwise affect their construction or effect.
[Remainder of Page Intentionally Left Blank]
44
EACH MEMBER ACKNOWLEDGES HAVING READ THIS AGREEMENT IN ITS ENTIRETY
BEFORE SIGNING OR OTHERWISE BECOMING BOUND HEREBY, INCLUDING THE WAIVER OF JURY
TRIAL CLAUSE SET OUT IN SECTION 8.5(B) AND THE CONFIDENTIALITY CLAUSES SET OUT
IN SECTION 8.10.
The Undersigned have executed this Agreement as of the day and year
first above written.
▇▇▇▇▇▇▇ ASSOCIATES, L.L.C.,
as Managing Member
By: /s/ ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman and Sole Member
▇▇▇▇ ▇▇▇▇▇▇▇,
as Organizational Member
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
CMRCC, INC.
as Special Member
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: President and Chief
Executive Officer
MEMBERS:
Each Person who or that has signed, or
has had signed on the Person's behalf,
a Member Signature Page, which will
constitute a counterpart of this
Agreement.
45
EXHIBIT A
Directors Agreement
____________ __, 200_
▇.▇. ▇▇▇▇▇▇ Multi-Strategy Fund, L.L.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: Directors Agreement -- ▇.▇. ▇▇▇▇▇▇ Multi-Strategy Fund, L.L.C.
Ladies and Gentlemen:
For good and valuable consideration, each of the undersigned Persons,
who have been appointed as Directors of ▇.▇. ▇▇▇▇▇▇ Multi-Strategy Fund, L.L.C.,
a Delaware limited liability company (the "Company"), in accordance with the
Amended and Restated Limited Liability Company Agreement of the Company, dated
as of May 26, 2004, as it may be amended or restated from time to time (the "LLC
Agreement"), hereby agree as follows:
1. Each of the undersigned accepts such Person's rights and
authority as a Director under the LLC Agreement and agrees to perform
and discharge such Person's duties and obligations as a Director under
the LLC Agreement, and further agrees that such rights, authorities,
duties and obligations under the LLC Agreement shall continue until
such Person ceases to be a Director in accordance with the LLC
Agreement.
2. THIS DIRECTORS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND
REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
Initially capitalized terms used and not otherwise defined herein have
the meanings set forth in the LLC Agreement.
This Directors Agreement may be executed in any number of counterparts,
each of which shall be deemed an original of this Directors Agreement and all of
which together shall constitute one and the same instrument.
46
IN WITNESS WHEREOF, the undersigned have executed this Directors
Agreement as of the day and year first above written.
_________________________
_________________________
_________________________
47
