EFTA01399366.pdf

Execution LONG TERM INSURED CREDIT FUND, LLC AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT EFTA01399366 TABLE OF CONTENTS Page 1. GENERAL PROVISIONS 1 1.1 Continuation 1 1.2 1.3 1.4 1.5 Name 1 Purpose. 1 Principal Place of Business and Registered Offices 2 Term 2 2. 3. CERTAIN DEFINITIONS 2 INTERESTS, MEMBERS, CAPITAL COMMITMENTS AND CAPITAL CONTRIBUTIONS 7 3.1 3.2 Interests and Members. 7 Admission of Members; Capital Commitments. 7 3.3 Capital Contributions. 9 3.4 Default by Members 9 3.5 Capital Accounts 11 3.6 Return of Capital Contributions 11 4. DISTRIBUTIONS EFTA01399367  11 4.1 4.2 4.3 Distributions Generally 11 Distributions of Distributable Proceeds 11 Tax Distributions 12 4.4 Limitations on Distributions 12 4.5 Withholding Taxes 13 4.6 Liability for Certain Taxes 13 5. 6. ALLOCATIONS OF PROFITS AND LOSSES 13 5.1 Allocation of Profits and Losses 13 5.2 Regulatory Allocation Provisions 14 FEES AND EXPENSES 15 6.1 Expenses 15 7. MANAGEMENT 16 7.1 Management of Fund Business 16 7.2 Removal of Manager 16 7.3 7.4 7.5 Powers of the EFTA01399368 Manager. 16 Other Businesses 19 Exclusivity 19 Determination by the Manager of Certain Matters 21 7.6 Liability and Indemnification 20 7.7 8. 7.8 Conflicts Derived by Dual Status of the Manager 21 RIGHTS AND OBLIGATIONS OF THE MEMBERS 21 EFTA01399369 8.1 Limitations on the Members 21 8.2 Liability of the Members 21 8.3 Consents 22 9. BOOKS, RECORDS AND REPORTS 22 9.1 Books and Records 22 9.2 Accounting Basis 22 Tax Information 22 9.3 Reports. 22 9.4 10. TRANSFERS AND WITHDRAWALS 22 10.1 Restrictions on Transfers of Interest. ...23 10.2 Assignees. 23 10.3 Substituted Members. 24 10.4 Transfer of Interests by the Manager 24 10.5 Withdrawals 25 11. WINDING UP, DISSOLUTION AND LIQUIDATION OF THE FUND 25 11.1 Winding UP 25 11.2 Procedure for EFTA01399370 Dissolution. 25 11.3 Distributions at Liquidation 26 11.4 Termination 26 12. AMENDMENTS 27 12.1 Amendments 27 12.2 Amendment of Registration Statement 27 13. FURTHER INSTRUMENTS 27 14. REPRESENTATIONS, WARRANTIES, COVENANTS AND UNDERSTANDINGS OF THE MEMBERS 27 15. BANK HOLDING COMPANY REGULATORY COMPLIANCE 27 15.1 Non-Voting Interests 27 15.2 Withdrawals of Non-Permitted Interests 27 16. CONFIDENTIALITY 28 16.1 Confidentiality 28 16.2 Confidential Information 28 16.3 Disclosure of Confidential Information 28 17. MISCELLANEOUS 29 17.1 Notice 29 17.2 Governing EFTA01399371 Law 29 17.3 Venue; Waiver of Jury Trial. 29 17.4 Entire Agreement 29 17.5 Headings 29 17.6 Binding Effect 30 ii EFTA01399372 17.7 Legends 30 17.8 Third Party Rights 30 17.9 AEOI 30 17.10 Counterparts 30 17.11 Creditors 30 17.12 Severability 30 17.13 Context 31 iii EFTA01399373 AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF LONG TERM INSURED CREDIT FUND, LLC This Amended and Restated Limited Liability Company Agreement (as amended or restated from time to time, this "Agreement") is made on September 26, 2018 by and among ESM Management LLC, a Delaware limited liability company, as the Manager (as defined below), and such other Person (as defined below) or Persons as may become parties to this Agreement by executing a counterpart hereof, as members (each a "Member" and, collectively, the "Members"). Recitals A. Long Term Insured Credit Fund, LLC (the "Fund") is a Cayman Islands limited liability company that was formed pursuant to the filing of the Registration Statement (as defined below) with the Registrar (as defined below) on September 10, 2018, and has been operating pursuant to that certain Initial Limited Liability Company Agreement dated as of September 10, 2018 (the "Prior Agreement"). B. The Manager and the Members have determined to amend and restate the Prior Agreement to govern the management and operation of the Fund and the relationship of the parties from and after the date hereof in accordance with the terms and subject to the conditions set forth in this Agreement. Agreement In consideration of the mutual covenants hereinafter contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: 1. GENERAL PROVISIONS 1.1 Continuation. The parties hereby ratify the execution, delivery and filing of the Registration Statement with the Registrar. The parties hereby agree to continue the Fund pursuant to the terms and conditions of this Agreement. The rights and liabilities of the Manager and the Members shall be as provided in this Agreement and, to the extent not inconsistent with the provisions contained herein, in the Limited Liability Companies Law (as amended) of the Cayman Islands, as amended from time to time (the "LLC Law"). The Manager shall cause to be executed and filed additional certificates, notices, statements or other instruments required by law for the operation of a EFTA01399374 limited liability company in all jurisdictions where the Fund is required to qualify or be authorized to do business as a foreign limited liability company, or as otherwise necessary to carry out the purpose of this Agreement and the business of the Fund. 1.2 Name. The name of the Fund shall be Long Term Insured Credit Fund, LLC. The Manager may, without the approval of, or prior notice to, the Members, change the name of the Fund or cause the Fund to transact business under another name. 1 3 Purpose. 1.3.1 The purposes of the Fund shall be to (i) invest in the Bonds (as defined below) and (ii) engage in any and all activities and transactions that the Manager reasonably determines to be necessary or incidental in connection with the foregoing. 1 EFTA01399375 1.3.2 All purchases and sales of the Bonds and/or other financial instruments shall be for the account and at the risk of the Fund. 1.3.3 In connection with the Fund's investments, the Manager shall have the right to effect any investment through, or to transfer all or a portion of such investment to, one or more investment vehicles owned by the Fund and other Person(s) ("Investment Vehicles") that are established solely for purposes of enabling the Fund to overcome or minimize legal and regulatory constraints, enhance tax efficiencies or address other tax considerations, or otherwise facilitate the Fund's participation in such investments; provided that the Manager shall not have the right to establish any parallel fund that would invest alongside the Fund. 1.4 Principal Place of Business and Registered Offices. The principal place of business of the Fund is 262 West 38th Street, Suite 507, New York, NY 10018, United States. The Fund may from time to time change its principal place of business and may establish additional places of business when and where required by the business of the Fund. The name and initial address of the Fund's registered agent shall be as set forth in the Registration Statement, until such time as it is changed in accordance with the LLC Law. The registered office of the Fund initially shall be located at c/o Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands. The Manager may change the location of the registered office of the Fund to such other location within the Cayman Islands as the Manager may determine at any time, upon written notice to the Members indicating the new location of such registered office. 1.5 Term. The term of the Fund commenced on September 10, 2018 and shall continue in existence in perpetuity until the Fund is wound up and subsequently dissolved pursuant to Section 11.1. 2 CERTAIN DEFINITIONS 2 1 (a) (b) "Adjusted Capital Account Deficit" means, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the EFTA01399376 relevant taxable year or other period, after giving effect to the following adjustments: credit such Capital Account by any amounts that such Member is obligated to restore pursuant to this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentence of each of Treasury Regulations Sections 1.704-2(i)(5) and 1.704-2(g); and debit such Capital Account by the items described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. 2.2 "Adjusted Capital Contribution" means, with respect to any Member and as of any date of determination, an amount equal to (i) the aggregate amount of Capital Contributions made by such Member on or prior to such date, reduced (but not below zero) by (ii) the cumulative amount of (x) all distributions made to such Member on or prior to such date pursuant to Section 4.2.1, (y) all unused capital returned to such Member on or prior to such date pursuant to Section 3.3.3, and (z) any Capital Contribution by such Member that is held in Capital Reserves. 2 3 "AEOI" means one or more of the following, as the context requires: (a) FATCA, the Common Reporting Standard issued by the Organization for Economic Cooperation and Development, or 2 EFTA01399377 similar legislation, regulations or guidance enacted in any other jurisdiction which seeks to implement equivalent tax reporting and/or withholding tax regimes; (b) any intergovernmental agreement, treaty or any other arrangement between the Cayman Islands and the US or any other jurisdiction (including between any government bodies in each relevant jurisdiction), entered into to facilitate, implement, comply with or supplement the legislation, regulations or guidance described in paragraph (a); and (c) any legislation, regulations or guidance implemented in the Cayman Islands to give effect to the matters outlined in the preceding paragraphs. 2.4 "Affiliate" of any Person means any other Person controlling, controlled by or under common control with the subject Person; and "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. 2.5 26 2 7 "Affiliated Members" has the meaning set forth in Section 3.1.2. "Agreement" has the meaning set forth in the Preamble. "Auction Rate Bonds" means various series of Class A3 notes issued by the Issuer pursuant to the Indenture. 2.8 "Bankruptcy" means, with respect to any Key Person, the happening of any of the following: (i) the filing of an application by such Key Person for, or a consent to, the appointment of a trustee of all or a portion of such Key Person's assets for the benefit of creditors generally, (ii) the filing by such Key Person of a voluntary petition in bankruptcy or the filing of a pleading in any court of record admitting in writing such Key Person's inability to pay its debts generally as they come due, (iii) the making by such Key Person of a general assignment for the benefit of creditors, or (iv) the entry of an order, judgment or decree by any court of competent jurisdiction adjudicating such Key Person as bankrupt or appointing a trustee of all or a portion of such Key Person's assets for the benefit of creditors generally, and such order, judgment or decree continuing unstayed and in effect for a period of ninety EFTA01399378 (90) days. 2.9 2.10 2.11 2.12 2.13 2.14 2.15 "BBA Audit Rules" means Subchapter C of Chapter 63 of the Code (Sections 6221 et seq.), as enacted by the U.S. Bipartisan Budget Act of 2015, as amended from time to time, any similar state and local provisions, and any Treasury Regulations and other guidance promulgated thereunder. "BHC Act" means the U.S. Bank Holding Company Act of 1956, as amended. "BHC Limit" has the meaning set forth in Section 15.2. "BHC Member" has the meaning set forth in Section 15.1. "Bonds" means the Auction Rate Bonds and the Related Bonds "Brokers" has the meaning set forth in Section 7.2.2(x). "Business Day" means a day (other than a Saturday or Sunday) on which banks and relevant financial markets are open for business in in New York, New York and the Cayman Islands. 2.16 "Capital Account" means, with respect to each Member, the account established and maintained for such Member on the books of the Fund in compliance with Treasury Regulations Section 3 EFTA01399379 1.704-1(b)(2)(iv). For this purpose, the Manager may, in its reasonable discretion, upon the occurrence of any of the events specified in Treasury Regulations Section 1.704-1(b)(2)(iv)- (f), increase or decrease the Capital Accounts in accordance with rules of such regulation and Treasury Regulations Section 1.7041(b)(2)(iv)(g) to reflect a revaluation of Fund property. 2 17 2.18 "Capital Commitment" means, with respect to any Member, the amount of cash that such Member agreed to contribute to the Fund as set forth in such Member's Subscription Agreement, as it may be adjusted in accordance with the terms of this Agreement. "Capital Contribution" means the total amount of cash contributed to the Fund by each Member, from time to time, in accordance with the terms of this Agreement. 2.19 2.20 2.21 "Capital Reserve" has the meaning set forth in Section 3.3.3. "Carried Interest" has the meaning set forth in Section 4.2.1. "Cause" means, with respect to the Manager, that the Manager is found by a court of competent jurisdiction to have committed gross negligence (as such term is construed under the laws of the State of Delaware), willful misconduct, fraud or material breach of this Agreement in the conduct of its duties to the Fund hereunder. 2 22 "Closing Date" means October 11, 2018, subject to extension by the Manager in its sole discretion, provided that in no event shall the Manager extend the Closing Date past December 31, 2018. 2 23 "Code" means the U.S. Internal Revenue Code of 1986, as amended. 2 24 2.25 2.26 "Complete Disposition Event" means the complete settlement, sale, redemption or other disposition of all of the Fund's investments as reasonably determined by the Manager, and receipt by the Fund of the proceeds in consideration thereof. "Confidential Information" has the meaning set forth in Section 16.2. "Confidential Offering Memorandum" means the document used to offer Interests in the Fund, as such document is amended and supplemented from time to time. 2.27 "Damages" has the meaning set forth in Section 7.6.2. 2.28 EFTA01399380 "Disposition Event," "Disposition" or "Disposed" means, with respect to any investment of the Fund, a sale, settlement or other disposition of any portion such investment (including, with respect to any Bonds, a redemption of such Bonds) as reasonably determined by the Manager, and receipt by the Fund of the proceeds in consideration thereof. 2.29 "Distributable Proceeds" means, with respect to any period, (i) all proceeds (or, in the Manager's reasonable discretion, securities or other non-cash consideration) received by the Fund during such period in respect of any investment held by the Fund, including as the result of the Disposition of any such investment, together with settlement proceeds, dividends, interest income and other similar items received by the Fund on account of such investment, less (ii) all expenses, liabilities and Reserves of the Fund, as determined by the Manager in its reasonable discretion. 2.30 amended. 4 "ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as EFTA01399381 2.31 "Fair Market Value" means the fair market value of an investment, asset, security or Interest as determined by the Manager in accordance with its valuation policy. 2.32 2.33 2.34 2.35 "Fiscal Year" has the meaning set forth in Section 9.2. "Fund" has the meaning set forth in the Recitals. "Hurdle Amount" means, with respect to any Member and for any period, (x) the amount equal to an annual return of eight percent (8%) computed on the basis of the actual number of days in such period over a year, compounded annually, on the amount of such Member's Adjusted Capital Contribution outstanding from time to time during such period, less (y) the amount of such Member's Preferred Return determined for the same period. 2.36 "Indenture" means that certain Indenture dated as of May 2, 2006 by and among the Issuer, Ambac Assurance UK Limited and Assured Guaranty (UK) Ltd. as financial guarantors, The Bank of New York (acting through its London Branch) as trustee, The Bank of New York as auction agent and The Bank of New York as securities intermediary. 2.37 2.38 2.39 laws of Ireland. 2.40 2.41 "Initial Member" means WNL Limited. "Interest" means an interest in the Fund entitling a Member to a share of the profits, losses, distributions, capital and assets of Fund as provided herein. Interests need not be evidenced by certificates. There are no voting rights associated with any Interests issued by the Fund. "Issuer" means Ballantyne Re, plc, a public limited company incorporated under the "IRS" means the U.S. Internal Revenue Service. "Key Person Event" means, with respect to Eric Meyer or William Van de Water (each, a "Key Person"): (i) such Key Person ceases to be actively involved in the management activities of the Fund for a period of sixty (60) consecutive days, (ii) the Manager becoming aware that it is reasonably likely that such Key Person will cease to be actively involved in the management activities of the Fund EFTA01399382 for a period of sixty (60) consecutive days, (iii) any resignation, termination of employment, death, or permanent disability which interferes with such Key Person's ability to perform its responsibilities related to the Fund, or (iv) the Bankruptcy of such Key Person. 2.42 "Majority-in-Interest of the Members" means, with respect to a particular amendment to this Agreement or other action that requires the consent or approval of the Members, Members whose aggregate Capital Commitment at such time exceeds 50% of the aggregate Capital Commitment of all Members (in each case not counting for purposes of this calculation any Defaulting Members or any Members who are Affiliated Members). 2.43 2.44 "Manager" has the meaning set forth in Section 7.1. "Manager Parties" has the meaning set forth in Section 7.6.1. "FATCA" means Sections 1471 through 1474 of the Code, as amended from time to time, and any regulations thereunder or official interpretations thereof, including any successor regulations or interpretations, and any intergovernmental agreement implementing the foregoing. 5 EFTA01399383 2.45 2.46 "Member" has the meaning set forth in the Preamble to this Agreement "Percentage Interest" means, with respect to any Member, the percentage calculated by dividing such Member's Capital Commitment by the aggregate Capital Commitments of all Members. 2.47 "Permitted Interests" has the meaning set forth in Section 15.2. 2.48 2.49 2.50 "Person" means any individual, partnership, limited liability company, joint venture, corporation, trust, unincorporated organization, government (or any agency or political subdivision thereof) or other entity, whether or not having legal personality. "Plan Asset Regulations" means the regulations concerning the definition of "Plan Assets" under ERISA adopted by the United States Department of Labor and codified in 29 C.F.R. 2510.3-101, as modified by Section 3(42) of ERISA. "Preferred Return" means, with respect to any Member and for any period, the amount equal to an annual return of four percent (4%) computed on the basis of the actual number of days in such period over a year, compounded annually, on the amount of such Member's Adjusted Capital Contribution outstanding from time to time during such period. 2 51 2 52 "Representatives" has the meaning set forth in Section 16.1. "Reserve" means an amount of funds deemed sufficient by the Manager in its reasonable discretion, as of the date of determination, for working capital, capital expenditures, other future uses of capital, and to pay taxes (specifically including the Manager's authority to retain reserves for purposes of paying tax obligations of the Fund), insurance and/or other costs and expenses incident to the operation of the Fund. 2.53 2.54 "Related Bonds" means Class A2 notes issued by the Issuer pursuant to the Indenture. "Register" means the Register of Limited Liability Companies maintained by the Registrar, as required by the LLC Law. 2.55 2.56 "Registrar" means the Limited Liability Companies of the Cayman Islands. EFTA01399384 "Registration Statement" means the registration statement referred to in section 5(2) of the LLC Law, and as amended pursuant to the LLC Law. 2.57 2.58 "Special Member" has the meaning set forth in Section 3.1.2. "Subscription Agreement" means a subscription agreement, in a form approved by the Manager, executed in connection with the acquisition of an Interest from the Fund. 2.59 2.60 acquire the Bonds. 2.61 2.62 "Substituted Member" has the meaning set forth in Section 10.3.1. "Tender Offer" means the tender offer process which the Fund intends to utilize to "Transfer" has the meaning set forth in Section 10.1.1. "Transferee" has the meaning set forth in Section 10.2.1. 6 EFTA01399385 2.63 2.64 "Transferor" has the meaning set forth in Section 10.2.1. "Treasury Regulations" means the income tax regulations promulgated under the Code, as such regulations may be amended from time to time. 2.65 "Unpaid Preferred Return" means, with respect to any Member and as of any date of determination, (i) such Member's Preferred Return accrued for all periods prior to such date, reduced (but not below zero) by (ii) the cumulative amount of all distributions made to such Member on or prior to such date pursuant to Section 4.2.1(ii)(b). 2.66 "USD" or "$" means the lawful currency of the United States of America. 3 INTERESTS, MEMBERS, CAPITAL COMMITMENTS AND CAPITAL CONTRIBUTIONS 3.1 Interests and Members. 3.1.1 The names, addresses, Capital Commitments and Capital Contributions of the Members and such other information as may be required by the LLC Law shall be maintained by the Manager on the books and records of the Fund. 3.1.2 The Manager shall have the authority, in its sole discretion, to designate certain Members (including investors who are affiliated with the Manager ("Affiliated Members")) as Special Members and, when deemed appropriate by the Manager in its sole discretion, to enter into separate agreements and/or side letters with such Special Members setting forth the terms of their investment in the Fund. A "Special Member" shall have the same rights and obligations as a Member, except that the Interest held by a Special Member (i) may have preferential terms, including, but not limited to, more favorable reporting or information rights (i.e., greater transparency); and/or (ii) may not be (x) subject to the same Carried Interest; (y) subject to the same restrictions as to transfers as the Interests held by other Members; and/or (z) subject to such other provisions as the Manager may specify and/or as set forth in any applicable separate agreement or side letter. Each Special Member shall be designated as a Special Member in the books and records of the Fund. Except as otherwise agreed with a particular Special Member, any Special Member may lose its designation as a Special Member in the sole discretion of the EFTA01399386 Manager. Neither the Manager nor the Fund shall be required to obtain the consent or approval of, or give notice to, any other Member in connection with the designation of any Member as a Special Member. Except as otherwise agreed with a particular Member, the designation of one or more Special Members will not entitle any other Member to similar terms or designation, and neither the Manager nor the Fund will be required to obtain the consent or approval of, or provide notice to, any Member in connection therewith. 3.2 Admission of Members; Capital Commitments. 3.2.1 The Manager may, in its sole discretion, admit one or more Persons to the Fund as Members as of the Closing Date. A Person shall be admitted to the Fund as a Member (and shall be shown as such in the books and records of the Fund) upon execution and delivery by such Person of this Agreement (or a counterpart hereof) and a Subscription Agreement and the acceptance by the Manager of such subscription in accordance with the terms and conditions of this Agreement. It is understood and agreed that the Manager may execute this Agreement on behalf of the Members pursuant to the power-of-attorney granted by each of the Members in their respective Subscription Agreement. Notwithstanding anything to the contrary contained herein, 7 EFTA01399387 the Manager may decline to accept a subscription by any Person, in whole or in part, and for any reason or no reason, in its sole discretion. Immediately following the admission of one or more Members on the Closing Date, the Initial Member, by its execution and delivery of a counterpart of this Agreement, shall resign from the Fund and shall have no further rights or claims against, or obligations as the Initial Member of, the Fund. 3.2.2 Each Member shall commit to contribute to the capital of the Fund an amount equal to its Capital Commitment. The minimum Capital Commitment for any Member shall be $1,000,000, subject to waiver, reduction or increase by the Manager in its sole discretion and any adjustment in accordance with Section 3.2.4 and/or Section 3.2.5. Subject to certain specific limitations contained in other provisions of this Agreement, such obligation to contribute capital to the Fund shall be irrevocable, unconditional and not subject to any defense, counterclaim or offset of any kind. 3.2.3 The Manager and/or its principals shall make aggregate Capital Commitments to the Fund of at least $2,000,000. In addition, ESM Fund I LP (the "ESM Fund"), a private investment fund managed by the Manager, shall make a Capital Commitment of $3,000,000 to the Fund. 3.2.4 Notwithstanding anything to the contrary contained herein, the Manager will allocate the Bonds to be acquired by the Fund first to the Affiliated Members and call capital from the Affiliated Members on a pro rata basis based on their respective Capital Commitments (as set forth in Section 3.2.3) to fund the acquisition cost until each Affiliated Member's unfunded Capital Commitment is reduced to zero, unless otherwise determined by the Manager, and then allocate the remaining portion of the Bonds to be acquired by the Fund to the other Members (the "Unaffiliated Members") and call capital from the Unaffiliated Members on a pro rata basis based on their respective Capital Commitments in accordance with the provisions of Section 3.3 to fund the remaining portion of the acquisition cost. In the event that any Unaffiliated Member's level of participation in the acquired Bonds is less than the level of participation that such Unaffiliated Member would have had in the acquired Bonds had the EFTA01399388 Manager allocated the investment opportunity to (and called capital from) all Members pro rata based on their respective Capital Commitments without giving any priority to the Affiliated Members, then such Unaffiliated Member's Capital Commitment and unfunded Capital Commitment shall be deemed to have been reduced by the same proportion as the reduction of its level of participation in the acquired Bonds resulting from the priority allocation of acquired Bonds to the Affiliated Members. 3.2.5 Unless otherwise agreed with a particular Member, after thirty (30) calendar days following the completion of the Tender Offer, each Member shall be released from further obligations with respect to its unfunded Capital Commitment except to the extent as reasonably determined by the Manager to be necessary to: (i) pay amounts owing or which may become due under any indebtedness or to satisfy obligations under existing guarantees, indemnities, covenants or other undertakings; (ii) pay Fund expenses when due; and (iii) establish Reserves for the purpose of funding the matters described in clauses (i) and (ii). Notwithstanding anything to the contrary in the foregoing, if, within the thirty (30) calendar period following the completion of the Tender Offer, there remain unfunded Capital Commitments available for drawdown, and any holders of the Bonds who did not accept the Tender Offer contact the Manager, then the Manager may in its sole discretion acquire additional Bonds from these holders in one or more privately negotiated transactions on behalf of the Fund and call capital from the Members to fund such transaction(s), in which event the Members will not be released from their unfunded Capital Commitments until such transactions have been completed. 8 EFTA01399389 3.3 Capital Contributions. 3.3.1 Each Member shall make Capital Contributions when and as called by the Manager upon at least five (5) Business Days' prior written notice to the Members (a "Capital Call Notice"). The amount of cash required to be contributed by each Member shall be equal to the total amount of capital called for by the Manager, multiplied by a fraction, the numerator of which shall be the amount of such Member's Capital Commitment and the denominator of which shall be the aggregate amount of all Members' Capital Commitments. 3.3.2 All Capital Contributions shall be made in immediately available funds in US dollars by 12:00 noon (Eastern Standard time) on the date specified in the applicable Capital Call Notice. Notwithstanding the foregoing, if the actual Capital Contribution amount of a Member changes after the delivery of a Capital Call Notice for any reason, the Manager shall issue a revised Capital Call Notice to the Members, and in such event the Capital Contributions required by such revised Capital Call Notice shall be made by 12:00 noon (Eastern Standard time) on the date specified in such revised Capital Call Notice. 3.3.3 Any capital called from the Members that is not used to acquire investments or pay Fund expenses shall be promptly returned to the Members, provided that the Manager may, in its sole discretion, hold back up to 5% of any such unused capital for up to ninety (90) days to fund investments, pay expenses of the Fund and/or for other use of capital incident to the operation of the Fund (any such amount held back, a "Capital Reserve"). 3.3.4 Except as otherwise specifically provided herein, nothing in this Agreement shall operate to increase any Member's Capital Commitment and no Member shall have any obligation to contribute any amounts in excess of such Member's Capital Commitment to the Fund. 3.3.5 The Manager shall not be personally liable for the return or repayment of all or any portion of the capital (or appreciation thereof) of any Member, it being expressly agreed that any such return of capital or appreciation made pursuant to this Agreement shall be made solely from the assets of the Fund, without any right of contribution from the Manager. 3.4 Default by Members. 3.4.1 Upon the failure of a Member (a "Defaulting Member") to make all or any portion of its required Capital Contribution in accordance with Section 3.3 (the "Default EFTA01399390 Amount"), which failure is not cured within five (5) Business Days following notice from the Manager to the Defaulting Member of such failure (such occurrence, a "Default"), the Manager may in its sole discretion take one or more of the following actions: (i) cause any non-defaulting Member (each, a "Non-Defaulting Member") to advance the Default Amount on behalf of the Defaulting Member (provided that in no event shall the Manager cause any Non-Defaulting Member to make any such advance to a Defaulting Member if such advance would cause such Non-Defaulting Member to contribute capital to the Fund in excess of such Non-Defaulting Member's Capital Commitment), in which event (x) the amount so advanced shall be treated as a loan from such Non-Defaulting Member to the Defaulting Member, payable on demand and bearing interest at a rate equal to the lesser of (A) 12% per annum and (B) the highest rate allowable under applicable law, from the date the Default Amount was due, plus expenses of collection (including attorneys' fees), (y) any such loan shall be secured by the Capital Commitment of the Defaulting Member and the Defaulting Member's 9 EFTA01399391 Interest, and (z) the Fund shall withhold all distributions that would otherwise be made to the Defaulting Member under this Agreement and pay such withheld amounts to such Non-Defaulting Member to offset the amount owed by the Defaulting Member to such Non-Defaulting Member under this clause (i); (ii) withhold all distributions (or portions thereof) that would otherwise be made to the Defaulting Member under this Agreement and apply such withheld distributions to offset the Defaulted Amount or other amounts owed by the Defaulting Member to the Fund; (iii) offer all or any portion of the Defaulting Member's Interest to the NonDefaulting Members or any other Person (including the Manager and its Affiliates), at such price and on such terms as the Manager deems appropriate, in its sole discretion, in which event the proceeds of the sale shall first be applied to the payment of the expenses of the sale, next to the payment of the amounts owed by such Defaulting Member to the Fund and/or any Non-Defaulting Member (including, but not limited to, amounts owed to any Non-Defaulting Member pursuant to clause (i) above), and the balance, if any, shall be remitted to the Defaulting Member; provided, however, that if a shortfall exists between (x) the amount of the proceeds from any such sale and (y) an amount equal to the difference between (A) such Defaulting Member's Capital Commitment and (B) such Defaulting Member's Adjusted Capital Contribution, the Defaulting Member shall remain liable for such shortfall; (iv) Member; (vi) Interest; and/or (vii) declare the Defaulting Member's entire unfunded Capital Commitment to be immediately due and payable; (v) suspend all investment participation and other rights of the Defaulting cause a complete or partial forfeiture of the Defaulting Member's pursue and enforce all other rights and remedies which the Fund may have against the Defaulting Member at law or in equity. 3.4.2 Any Non-Defaulting Member or other Person acquiring a portion of the Defaulting Member's Interest shall assume the portion of the Defaulting Member's obligation to make both defaulted and future Capital Contributions pursuant to such EFTA01399392 Defaulting Member's Capital Commitment applicable to that portion of the Defaulting Member's Interest being acquired. 3.4.3 No right, power or remedy available to the Manager in this Section 3.4 shall be exclusive, and each such right, power or remedy shall be cumulative and in addition to any other right, power or remedy available at law or in equity. No course of dealing between the Manager or the Fund and any Defaulting Member, and no delay in exercising any right, power or remedy, shall operate as a waiver or otherwise prejudice the exercise of such right, power or remedy. 3.4.4 Each Member hereby consents to the application of the remedies provided in this Section 3.4 in recognition, in addition to actual damages suffered by the Fund or the other Members as the result of a Default by such Member, that the Fund may have no adequate remedy 10 EFTA01399393 at law for a Default by a Member and that damages resulting from such Default may be impossible to ascertain at the time of such Default. 3.4.5 Notwithstanding anything to the contrary in this Agreement, the Manager may, but shall not be obligated to, waive any Default, permit a Default to be cured by a Defaulting Member or advance funds on behalf of a Defaulting Member without interest, on such terms and conditions as the Manager deems appropriate in its sole discretion. 3.5 Capital Accounts. A separate Capital Account shall be maintained for each Member on the books of the Fund and shall be adjusted from time to time pursuant to the terms of this Agreement. 3.6 Return of Capital Contributions. No Member shall be entitled to receive any interest on its Capital Contributions except as specifically provided herein. The Members shall not have the right to demand return of their Capital Contributions, nor shall the Members have the right to demand and receive property other than cash in return for their Capital Contributions. 4 DISTRIBUTIONS 4.1 Distributions Generally. Subject to the other provisions of this Article IV, the Manager shall cause the Fund to distribute to the Members any Distributable Proceeds received by the Fund within five (5) Business Days after the Fund's receipt thereof. 4.2 Distributions of Distributable Proceeds. 4.2.1 Any distribution of Distributable Proceeds pursuant to Section 4.1 shall be made as follows: (i) first, Distributable Proceeds shall be divided among all Members pro rata based on their respective Percentage Interests; (ii) second, the Distributable Proceeds apportioned to the Affiliated Members pursuant to clause (i) above shall be distributed to such Persons, and the Distributable Proceeds apportioned to each Unaffiliated Member pursuant to clause (i) above (the "Reapportionable Proceeds") shall be distributed between such Unaffiliated Member and the Manager as follows: (a) first, 100% to such Unaffiliated Member, until such Unaffiliated Member's Adjusted Capital Contribution is reduced to zero (0) by distributions made to such Unaffiliated Member pursuant to this clause (a) on or prior to such distribution date and unused capital returned to such Unaffiliated Member EFTA01399394 pursuant to Section 3.3.3 on or prior to such distribution date; (b) second, 100% to such Unaffiliated Member, until such Unaffiliated Member's Unpaid Preferred Return is reduced to zero (0); (c) third: (I) until the sum of the remaining Reapportionable Proceeds and the cumulative amount of all distributions made to such Unaffiliated Member pursuant to this clause (c)(I) is equal to the Hurdle Amount 11 EFTA01399395 applicable to such Member determined as of such distribution date, 100% to the Unaffiliated Member; (II) next, 100% to the Manager until the Manager has been distributed pursuant to this clause (c)(II) an amount equal to 25% of the aggregate amounts distributed pursuant to clause (c)(I) above and this clause (c)(II); and (III) thereafter, 75% to such Unaffiliated Member and 25% to the Manager (the aggregate amount distributable to the Manager pursuant to clause c(II) above and this clause (c)(III), the "Carried Interest"). 4.2.2 For the avoidance of doubt, with respect to any distribution made by the Fund prior to the one (1) year anniversary of the Closing Date, the Carried Interest calculation shall be made (in accordance with Section 4.2.1) as a percentage of the total dollar amount of the portion of Reapportionable Proceeds for such period that represents net investment profits (and not as a percentage of annualized net investment return for such period). 4.2.3 Notwithstanding anything to the contrary in this Agreement, the Manager may, in its sole discretion, reduce, waive or rebate the Carried Interest with respect to any Member, including, without limitation, Affiliated Members, in each case without entitling any other Member to the same or similar reduction, waiver or rebate, and shall not be required to obtain the consent or approval of, or give notice to, any Member in connection therewith. 4.3 Tax Distributions. Notwithstanding the provisions of Section 4.2.1, prior to any distribution being made pursuant to Section 4.2.1, the Manager may cause the Fund to distribute to the Manager an amount equal to the sum of any taxable income of the Fund allocable to the Manager with respect to the applicable Fiscal Year on account of its entitlement to the Carried Interest, after taking into account all tax losses allocable to the Manager with respect to any Fiscal Year (to the extent that such tax losses have not previously been applied against taxable income allocable to the Manager with respect to such Fiscal Year or any prior Fiscal Year), multiplied by an assumed tax rate equal to (i) the highest combined marginal federal, state and local tax rate applicable to individuals residing in New York, New York, and (ii) to the extent applicable, the highest rates of tax imposed in respect of any self-employment and Medicare contribution tax, taking into account (A) taxable income EFTA01399396 classified for tax purposes as ordinary income and (B) taxable income classified for tax purposes as net long term capital gains (calculated in accordance with the Code). Distributions to the Manager pursuant to this Section 4.3 shall only be made to the extent that the Manager would not receive, for the applicable Fiscal Year, distributions pursuant to Section 4.2.1(c) in an amount equal to the amount described in this Section 4.3. Any amount distributed to the Manager pursuant to this Section 4.3 shall be treated as an advance against future Carried Interest distributions. 4.4 Limitations on Distributions Notwithstanding anything to the contrary contained herein, no distribution pursuant to this Agreement shall be made if the Manager determines, based on the opinion of reputable outside legal counsel, that such distribution would violate the LLC Law or any applicable law. The Manager's good faith determination of the restrictions and limitations set forth in the preceding sentence shall be final and conclusive as to all Members. If a distribution is suspended or delayed pursuant to this Section 4.4, then all amounts so retained by the Fund shall continue to be subject to all the liabilities of the Fund and such distribution shall be made promptly after the Manager reasonably determines that such payment restrictions and limitations are no longer in effect. 12 EFTA01399397 4.5 Withholding Taxes. The Fund shall comply with withholding requirements under any applicable law (including under FATCA) and shall remit amounts withheld to and file required forms with the applicable jurisdictions. If requested by the Manager, each Member shall deliver to the Manager: (i) an affidavit in form satisfactory to the Manager that the applicable Member is not subject to withholding under the provisions of any U.S. federal (including under FATCA), state, local, foreign or other law; (ii) any certificate that the Manager may reasonably request with respect to any such laws; and/or (iii) any other form or instrument reasonably requested by the Manager relating to any Member's status under AEOI. In the event that a Member fails or is unable to deliver to the Manager an affidavit described in clause (i) of this Section 4.5, the Manager will withhold amounts from such Member in accordance with the remainder of this provision. To the extent the Fund is required to withhold and pay over any amounts (including under FATCA) to any authority with respect to distributions or allocations to any Member, the amount withheld shall be treated as a distribution in the amount of the withholding to that Member. In the event of any claimed over-withholding, Members shall be limited to an action against the applicable jurisdiction. If the amount withheld was not withheld from actual distributions, the Fund may, at its option, (A) require the Member to reimburse the Fund for such withholding or (B) reduce any subsequent distributions by the amount of such withholding. Each Member shall indemnify the Manager and the Fund against any losses and liabilities (including interest and penalties) related to any withholding obligations with respect to allocations or distributions made to it by the Fund (unless such loss or liability resulted from the bad faith of the Manager) and any taxes imposed on the Fund due to such Member's non-compliance with AEOI. The provisions contained in this Section 4.5 shall survive the dissolution of the Fund, the withdrawal of any Member or the transfer or assignment of any Member's Interest. 4.6 Liability for Certain Taxes. If the Fund is subject to any tax, interest and penalties under Section 6225 of the BBA Audit Rules ("Tax Liabilities"), the Manager shall allocate among the Members any such Tax Liability in a manner it determines to be fair and equitable by deducting amounts from Capital Accounts or reducing amounts otherwise distributable to the EFTA01399398 Members, taking into account any modifications attributable to a Member pursuant to Section 6225(c) of the BBA Audit Rules (if applicable). To the extent that the Manager cannot allocate such Tax Liabilities through adjustments to Capital Accounts or distributions to the Members and to the extent that a portion of the Tax Liabilities imposed under Section 6225 of the BBA Audit Rules for a prior year relates to a former Member, the Members and former Members shall indemnify and hold harmless the Fund for their respective share of such amounts as determined by the Manager in accordance with the f