SEAWAY VALLEY FUND, LLC, continued:
ARTICLE II
ORGANIZATION
2.1. Formation of Limited Liability Company
The Members hereto hereby form the Company under and pursuant to the Act. The Manager has executed, acknowledged and filed a Certificate with the Secretary of State of the State of Delaware in accordance with the Act. In addition, the Manager shall execute, acknowledge and file any amendments to the Certificate as may be required by the Act and any other instruments, documents and certificates which, in the opinion of the Company's legal counsel, may from time to time be required by the laws of the United States of America, the State of Delaware or any other jurisdiction in which the Company shall determine to do business, or any political subdivision or agency thereof, or which such legal counsel may deem necessary or appropriate to effectuate, implement and continue the valid and subsisting existence and business of the Company. Any required amendment to the Certificate shall be filed by the Manager promptly following the event requiring said amendment. All amendments may be signed either personally or by an attorney-in-fact.
2.2. Name of Company
The name of the Company shall be Seaway Valley Fund, LLC or such other name as the Manager may hereafter adopt upon (i) causing an amendment to the Certificate to be filed with the Secretary of State of the State of Delaware; and (ii) sending notice thereof to the Members. The Company shall have the exclusive ownership and right to use the Company name so long as the Company continues, despite the withdrawal, expulsion, resignation or removal of any Member, but upon the Company's termination, the Company shall assign the name and the goodwill attached thereto to the Manager.
2.3. Registered Office and Agent
The Company shall have its registered office at 1220 North Market Street, Suite 606, Wilmington, DE 19801 or at such other place as the Manager may designate from time to time, and its initial registered agent in Delaware is American Incorporators Ltd.
2.4. Term of Company
(a) The term of the Company commenced on the date on which the Certificate was filed with the Secretary of State of the State of Delaware, and shall continue until the earliest of the following dates:
(i) any date on which the Manager shall elect to dissolve the Company; or
(ii) the date on which (A) the Manager is declared bankrupt by a court with appropriate jurisdiction, (B) the Manager files a petition commencing a voluntary case under any bankruptcy law, (C) the Manager makes an assignment for the benefit of creditors, (D) a receiver for the property or affairs of the Manager is appointed, (E) the entire Manager Unit of the Manager is withdrawn from the Manager, or (F) the Manager is dissolved and a winding up thereof commenced.
(b) Except as otherwise provided in Article 2.4(a) or in the Act, the death, mental illness, dissolution, termination, liquidation, bankruptcy, 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 Company of a new Manager or Member, the admission to the Manager of a new member, the withdrawal of a Member from the Company, or the transfer by a Member of his interest in the Company to a third party shall not cause the Company to dissolve.
(c) The parties agree that irreparable damage would be done to the goodwill and reputation of the Members if any Member should bring an action in court to dissolve the Company. Care has been taken in this Agreement to provide for fair and just payment in liquidation of the Interests of all Members. Accordingly, each Member hereby waives and renounces its right to such a court decree of dissolution or to seek the appointment by the court of a liquidator for the Company except as provided herein.
2.5. Objects of Company
The objects of the Company shall be to purchase, sell (including short sales), invest and trade in Securities, to engage in financial transactions relating thereto, and to engage in any other lawful activity.
2.6. Actions by Company
The Company may execute, deliver and perform all contracts, agreements and other undertakings and engage in all activities and transactions as may in the opinion of the Manager be necessary or advisable to carry out the foregoing objects.
ARTICLE III
CAPITALIZATION
Acceptance of Subscription Agreements shall be at the sole discretion of the Manager.
3.1. Contributions to Capital
(a) The Manager will contribute $1,000 in cash to the Company in exchange for the Manager Unit. Except as provided in the Act, the Manager shall not be required or obligated to make any additional contributions to the Company.
(b) The minimum initial contribution of each Member to the capital of the Company shall be $25,000 (twenty-five thousand Membership Units) or such lower amount as the Manager, in its discretion, may permit. Initial contributions to the capital of the Company may be accepted on the first day of any calendar month (or on such other day as may be approved in advance by the Manager, which approval may be withheld by the Manager in its sole discretion). The amount of the initial contribution of each Member shall be recorded by the Manager upon acceptance as a contribution to the capital of the Company.
(c) The Members may make additional contributions to the capital of the Company at such times and in such amounts as the Manager, in its discretion, may permit. No Member shall be obligated to make any additional contribution to the capital of the Company. Additional contributions to the capital of the Company which are permitted by the Manager may be accepted on the first day of each calendar month (or on such other day as may be approved in advance by the Manager, which approval may be withheld by the Manager in its sole discretion).
(d) Except as otherwise permitted by the Manager, (i) initial and any additional contributions to the capital of the Company by any Member shall be payable in cash or in such Securities which the Manager, in its absolute discretion, may agree to accept on behalf of the Company, and (ii) initial and any additional contributions shall be payable in one installment and shall be paid prior to the date of the proposed acceptance of the contribution (or within five business days thereafter with the Manager's approval, which may be withheld by the Manager in its sole discretion). The Company shall be entitled to deduct from the amount of any contribution to be credited to the Capital Account of any Member introduced by a placement agent or other financial intermediary a subscription charge of up to two percent (2%) of the subscription amount, which may be paid to such placement agent or intermediary. Each Member allowed to contribute Securities to the capital of the Company shall, prior to the date of any such contribution, furnish to the Company evidence as to his dates of acquisition of such Securities, his unencumbered ownership thereof, his adjusted basis thereof for income tax purposes and his holding period of such Securities.
3.2. Rights of Members in Capital
(a) No Member shall be entitled to interest on the Member's contributions to the capital of the Company.
(b) No Member shall have the right to distributions or the return of any contribution to the capital of the Company except (i) upon withdrawal of such Member pursuant to Article 5.5 or (ii) upon the dissolution of the Company pursuant to Article 6.1. The entitlement to any such distribution or return at such time shall be limited to the value of the Capital Account of the Member. The Manager shall not be liable for the distribution or return of any such amounts.
3.3. Capital Accounts or Members Capital Accounts
(a) The Company shall maintain a separate Capital Account for each Member.
(b) Each Member's Capital Account shall have an initial balance equal to the amount of cash and the value of any Securities' constituting such Member's initial contribution to the capital of the Company (net of any sales charges.)
(c) Each Member's Capital Account shall be increased by the sum of (i) the amount of cash and the value of any Securities constituting additional contributions by such Member to the capital of the Company permitted pursuant to Article 3.1, plus (ii) the portion of any Net Profit allocated to such Member's Capital Account pursuant to Article 3.4, plus (iii) any Performance Allocation credited to such Member's Capital Account pursuant to Article 3.7, plus (iv) a ratable portion of any amounts deducted from any withdrawal payment pursuant to Article 5.5(e), plus (v) any decreases in any reserves recorded by the Company pursuant to Article 3.6(a), and any receipts determined to be applicable to a prior Fiscal Period pursuant to Article 3.6(b), to the extent the Manager determines that, pursuant to any provision of this Agreement, such item is to be credited to such Member's Capital Account on a basis which is not in accordance with the current respective Membership Percentages of all Members.
(d) Each Member's Capital Account shall be reduced by the sum of (i) the amount of any cash and the net value of any property withdrawn by or distributed to such Member pursuant to Article 5.5 or 6.1, including any amount deducted from any such withdrawal or distribution pursuant to Article 5.5(c), plus (ii) the portion of any Net Loss allocated to such Member's Capital Account pursuant to Article 3.4, plus (iii) the Management Fees and any withholding taxes or other expense items charged to such Member's Capital Account pursuant to Article 3.5, plus
(iv) any Performance Allocation charged to such Member's Capital Account pursuant to Article 3.7, plus (v) any increases in any reserves recorded by the Company pursuant to Article 3.6(a), and any payments determined to be applicable to a prior Fiscal Period pursuant to Article 3.6(b) and any charges made to a former Member pursuant to Article 3.6(c) which the Company fails to collect from such former Member, to the extent the Manager determines that, pursuant to any provision of this Agreement, such item is to be charged to such Member's Capital Account on a basis which is not in accordance with the current respective Membership Percentages of all Members.
3.4. Allocation of Net Profit and Net Loss
(a) Subject to Articles 3.4(b) and 3.8, as of the, last day of each Fiscal Period, any Net Profit or Net Loss for the Fiscal Period shall be allocated among and credited to or debited against the Capital Accounts of the Members in proportion to their respective Membership Percentages for the Fiscal Period.
(b) Notwithstanding Article 3.4(a), the Company may establish one or more separate brokerage accounts in its name in which it shall hold all newly issued securities which it may acquire. To the extent required by applicable rules of NASD Regulation, Inc., including without limitation the Free-Riding and Withholding Interpretation or any successor rule or interpretation, gains or losses attributable to securities held in such account shall not be allocated to any Member who shall be prohibited from receiving such allocation, and such gain or loss shall instead be allocated to all other Members' pro rata in proportion to their respective Membership Percentages.
3.5. Allocation of Management Fees, Withholding Taxes and Certain Other Expenditures
(a) As of the first day of each Fiscal Period, and as of any other date on which a Member is admitted as a Member or makes an additional capital contribution, each Member's Management Fee for such quarter shall be debited against the Capital Account of such Member. If the Member is admitted on a day that does not represent the first day of a calendar quarter (that is, not the first day of January, April, July or October), the Management fee will be pro rated for that quarter and calculated for and applied to the remaining months of that particular quarter, after which, the regular quarterly Management Fee will be debited against the Member Capital Account.
(b) If the Company incurs a withholding tax or other tax obligation with respect to the share of Company income allocable to any Member, then the Manager shall cause the amount of such obligation to be debited against the Capital Account of such Member as of the close of the Fiscal Period during which the Company pays such obligation. The Manager shall not be obligated to apply for or obtain a reduction of or exemption from withholding tax on behalf of any Member that may be eligible for such reduction or exemption.
(c) Except as otherwise provided for in this Agreement, any expenditures payable by the Company, to the extent determined by the Manager to have been paid or withheld on behalf of, or by reason of particular circumstances applicable to, one or more but fewer than all of the Members, shall be charged to only those Members on whose behalf such payments are made or whose particular circumstances gave rise to such payments. Such charges shall be debited from the Capital Accounts of such Members as of the close of the Fiscal Period during which any such items were accrued by the Company.
3.6. Reserves; Adjustments for Certain Future Events
(a) Appropriate reserves may be created, accrued and charged against the Assets and proportionately against the Capital Accounts of the Members for contingent liabilities, if any, as of the date any such contingent liability becomes known to the Manager, such reserves to be in the amounts which the Manager in its sole discretion deems necessary or appropriate. The Manager may increase or reduce any such reserve from time to time by such amounts as the Manager in its sole discretion deems necessary or appropriate. The amount of any such reserve, or any increase or decrease therein, shall be proportionately charged or credited, as appropriate, to the Capital Accounts of those parties who are Members at the time when such reserve is created, increased or decreased, as the case may be; provided that if any such reserve, or any increase or decrease therein, exceeds the lesser of $50,000 or one percent (1%) of the aggregate Capital Accounts of all such Members, the amount of such reserve, increase or decrease may instead be charged or credited to those parties who were Members at the time, as determined by the Manager in its sole discretion, of the act or omission giving rise to the contingent liability for which the reserve was established in proportion to their Capital Accounts at that time.
(b) If at any time an amount is paid or received (other than in conjunction with investments or as capital contributions, withdrawals or distributions) by the Company and such amount exceeds the lesser of $50,000 or one percent (1%) of the aggregate Capital Accounts of all Members at the time of payment or receipt and such amount was not accrued or reserved for but would nevertheless, in accordance with the Company's accounting practices, be treated as applicable to one or more prior Fiscal Periods, then such amount may, at the discretion of the Manager, be proportionately charged or credited, as appropriate, to those parties who were Members during such prior Fiscal Period or Periods.
(c) If any amount is charged or credited pursuant to paragraph (a) or (b) of this Article 3.6 to a party who is no longer a Member, such amount shall be paid by or to such party, as the case may be, in cash, with interest from the date on which the Manager determines that such charge or credit is required at a floating rate determined by the Manager by reference to the interbank rate prevailing at that time. In the case of a charge, the former Member shall be obligated to pay the amount of the charge, plus interest as provided above, to the Company on demand; provided that (i) in no event shall a former Member be obligated to make a payment exceeding the amount of its Capital Account at the time to which the charge relates, and (ii) no such demand shall be made more than four years after such former Member ceased to be a Member. To the extent the Company fails to collect, in full, any amount charged to such former Member pursuant to paragraph
(a) or (b) of this Article 3.6, whether due to the expiration of the applicable limitation period or for any other reason whatsoever, the deficiency shall be charged proportionately to the Capital Accounts of the other persons who were Members at the time to which the charge relates and, failing collection from them, to the Capital Accounts of the current Members.
3.7. Performance Allocation
The Performance Allocation shall be debited against the Capital Account of each Member as of the last day of each Performance Period with respect to such Member (provided, however, that subject to compliance with the Advisers Act, such Performance Allocation may be reduced by the Manager in its discretion with respect to any Member) and the amount so debited shall simultaneously be credited to the Capital Account of the Manager, or, subject to compliance with the Advisers Act, to the Capital Accounts of such Members as have been designated in writing by the Manager within ninety (90) days after the close of such Performance Period.
3.8. Allocation to Avoid Capital Account Deficits
To the extent that any debits pursuant to Articles 3.4 through 3.7 hereof would reduce the balance of the Capital Account of any Member below zero, that portion of any such debits shall instead be allocated to the Capital Account of the Manager. Any credits in any subsequent Fiscal Period which would otherwise be allocable pursuant to Articles 3.4 through 3.7 hereof to the Capital Account of any Member previously affected by the application of this Article 3.8 shall instead be allocated to the Capital Account of the Manager in such amounts as are necessary to offset all previous debits attributable to such Member pursuant to this Article 3.8 not previously recovered.
3.9. Allocations for Income Tax Purposes
In each Fiscal Year, items of income, deduction, gain, loss or credit that are recognized for income tax purposes shall be allocated among the Members, in such manner as to reflect equitably amounts credited to or debited against each Member's Capital Account, whether in such Fiscal Year or in prior Fiscal Years (which shall include appropriate allocations to withdrawing or retiring Members). To this end, the Company shall establish and maintain records which shall show the extent to winch the Capital Account of each Member shall, as of the last day of each Fiscal Year, be comprised of amounts which have not been reflected in the taxable income of such Member. The Manager may, in its sole discretion, elect to use an "aggregate" allocation method permitted under Article 704(b)-(c) of the Code and the regulations thereunder. In the event a Member withdraws the entire balance of such Member's Capital Account, the Manager may in its sole discretion make a special allocation to the Member for federal income tax purposes of the capital gains recognized by the Company in such a manner as, will reduce the amount if any, by which the balance of such Member's Capital Account exceeds its federal income tax basis in its interest in the Company before such allocation. Otherwise, to the extent deemed by the Manager to be feasible and equitable, taxable income and gains in each Fiscal Year shall be allocated among the Members who have enjoyed the related credits, and items of deduction, loss and credit in each Fiscal Year shall be allocated among the Members who have bore the burden of the related debits. Taxable gain or loss realized from the sale of Securities which were contributed in kind by a Member (other than gain which was recognized by such contributing Member upon such contribution pursuant to Article 721(b) of the Code) shall be allocated to the contributing Member to the extent required under Article 704(c) of the Code and the regulations promulgated thereunder.
ARTICLE IV
MANAGEMENT
4.1. Rights, Duties and Powers of the Manager
(a) Subject to the terms and conditions of this Agreement, the Manager shall have complete and exclusive responsibility for managing and administering the affairs of the Company, and shall have the power and authority to do all things necessary or proper to carry out its duties hereunder.
(b) Without limiting the generality of the Manager's duties and obligations hereunder, the Manager shall have full power and authority:
(i) to solicit investments in the Company and to file all such documents and take all such other actions as may be necessary or appropriate to qualify Membership Units in the Company for offer and sale in any jurisdiction;
(ii) to receive from Members contributions to the capital of the Company;
(iii) to conduct meetings of the Members;
(iv) to open, maintain and close bank accounts and custodial accounts for the Company and draw checks and other orders for the payment of money;
(v) to disburse payments to Members in connection with withdrawals from the Company
(vi) to disburse payments as provided for in this Agreement;
(vii) to pay all expenses relating to the organization of the Company (including attorneys' fees);
(viii) to engage such attorneys, accountants and other professional advisers and consultants as the Manager may deem necessary or advisable for the affairs of the Company;
(ix) to furnish Members with the reports described in Article 7.1;
(x) to furnish Members with copies of all amendments to this Agreement;
(xi) to issue to any Member, in such form and on such terms as the Manager may consider appropriate, an instrument certifying that such Member is the owner of an Interest in the Company;
(xii) to prepare and file, on behalf of the Company, any required tax returns and all other documents relating to the Company and to make any elections (required or otherwise) in connection therewith;
(xiii) to commence or defend litigation that pertains to the Company or any of its assets;
(xiv) to provide office space, office and executive staff and office supplies and equipment for the Company's principal office;
(xv) to cause the Company, if and to the extent the Manager deems such insurance advisable, to purchase or bear the cost of (A) any insurance covering the potential liabilities of the Company, the Manager and their members, officers, employees and agents, (B) fidelity or other insurance relating to the performance by the Manager of its duties to the Company, and (C) key-man life insurance on the lives of the key employees of the Manager provided that the Company is the beneficiary of such insurance;
(xvi) in the normal course of the Company's business and for any Company purpose, including without limitation payment of the Company's operating expenses and of Management Fees, to cause the Company to borrow money and make, issue, accept, endorse and execute promissory notes, drafts, bills of exchange, guarantees and other instruments and evidences of indebtedness, and secure the payment thereof by mortgage, pledge or assignment of or security interests in all or any part of the securities and other property then owned or thereafter acquired by the Company;
(xvii) generally to provide all other executive and administrative undertakings for and on behalf of the Company; and
(xviii) subject to the other terms and provisions of this Agreement, to execute, deliver and perform such contracts, agreements and other undertakings, and to engage in all activities and transactions, as it may deem necessary or advisable for, or as may be incidental to, the conduct of the business contemplated by this Article 4.1, including, without in any manner limiting the generality of the foregoing, contracts, agreements, undertakings and transactions with any Member or with any other person firm or corporation having any business, financial or other relationship with any Member or Members.
(c) The Manager shall be the tax matters Member for purposes of Article 6231(a)(7) of the Code. Each Member agrees not to treat, on his personal U.S. federal 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 Company. The Manager shall have the exclusive authority and discretion to make any elections required or permitted to be made by the Company under any provisions of the Code or any other revenue laws.
(d) The Manager may delegate to any person or persons any of the powers and authority vested in it hereunder, and may engage such person or persons to provide administrative and accounting services to the Company, on such terms and conditions as it may consider appropriate.
4.2. Investment Management
(a) The Manager shall have complete and exclusive responsibility for all investment and investment management decisions to be undertaken on behalf of the Company. Without limiting the foregoing, the Manager shall have full power and authority:
(i) to deposit funds in the Company's name in an account or accounts maintained in an insured, commercial financial institution, as determined by the Manager, and which will not be commingled with the funds of any other Person (checks may be drawn on the account or accounts of the Company only for the purposes of the Company and shall be signed by the Manager or by its duly authorized representatives);
(ii) to purchase, sell, exchange, trade and otherwise deal in and with Securities and other property of the Company;
(iii) to make all decisions relating to the manner, method and timing of investment and trading transactions, to select brokers, dealers or other financial intermediaries (including any firms with which the Manager or any of its principals is affiliated or associated) for the execution, clearance and settlement of any transactions on such terms as the Manager considers appropriate, and to grant limited discretionary authorization to such persons with respect to price, time and other terms of investment and trading transactions;
(iv) to trade on margin, to borrow from banks or other financial institutions, and to pledge Company assets as collateral therefore; and
(v) to arrange for the custody of Securities and other assets acquired or held on behalf of the Company, to direct custodians to deliver funds or securities for the purpose of effecting transactions, and to instruct custodians to exercise or abstain from exercising any right or privilege attaching to assets.
(b) In the course of selecting brokers, dealers, and other intermediaries for the execution, clearance and settlement of transactions for the Company, the Manager may agree to such commissions, fees and other charges on behalf of the Company as it shall deem reasonable in the circumstances taking into account all such factors as it deems relevant (including the quality of research and other services made available to it even if such services are not for the exclusive benefit of the Company and the cost of such services does not represent the lowest cost available) and shall be under no obligation to combine or arrange orders so as to obtain reduced charges.
(c) The Manager may establish an investment advisory committee (the "Investment Committee") to provide assistance to the Manager in determining the proposed Investments by the Company. In addition, the Manager may establish an advisory board (the "Advisory Board") which will provide strategic planning and other advisory services. The Manager shall have the right to select, remove and replace, with or without cause, all members of the Investment Committee and Advisory Board, provided that, when establishing such Committee and Board, or when adding a member thereto, the Manager shall invite a Member to serve as such a member to the end that, if the invited Member accepts such invitation, there is at least one Member on each of the Investment Committee and the Advisory Board. The Investment Committee and Advisory Board shall be advisory only, and the Manager shall retain ultimate decision making authority concerning all such Investments.
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