Pre-Effective Amendment to Registration Statement of a Closed-End Investment Company — Form N-2
Filing Table of Contents
Document/Exhibit Description Pages Size
1: N-2/A Amendment No.1 216 942K
2: EX-25.2(A)(2) Operating Agreement 177 673K
3: EX-25.2(A)(3) Indenture 175 695K
4: EX-25.2(G) Investment Management Agreement 21 87K
5: EX-25.2(H)(1) Placement Agency Agreement for Common Shares 42 142K
6: EX-25.2(H)(2) Placemt Agency Agmt-Pref Shares & Revolving 30 105K
Notes
7: EX-25.2(J)(1) Custodial Agreement 62 308K
8: EX-25.2(J)(2) Sub-Custodial Agreement 8 35K
9: EX-25.2(K) Fund Services Agreement 23 62K
EX-25.2(G) — Investment Management Agreement
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EXHIBIT 25.2(g)
INVESTMENT MANAGEMENT AGREEMENT
dated as of November 17, 2005
BY AND BETWEEN
YORK ENHANCED STRATEGIES FUND, LLC,
a Delaware limited liability company
AND
YORK ENHANCED STRATEGIES MANAGEMENT LLC,
a New York limited liability company
1. General Duties of the Investment Manager...............................1
2. Duties and Obligations of the Investment Manager with Respect to
the Administration of the Company......................................3
3. Authority to Bind the Company; No Joint Venture........................5
4. Limitations Relating to Investments....................................6
5. Brokerage..............................................................7
6. Compensation...........................................................7
7. Expenses...............................................................9
8. Services to Other Companies or Accounts................................9
9. Standard of Care; Exculpation.........................................10
10. Indemnification.......................................................11
11. Term of Agreement; Events Affecting the Investment Manager;
Survival of Certain Terms.............................................13
12. Power of Attorney; Further Assurances.................................14
13. Amendment of this Agreement...........................................14
14. Notices...............................................................15
15. Binding Nature of Agreement; Successors and Assigns...................16
16. Entire Agreement......................................................16
17. Costs and Expenses....................................................16
18. Books and Records.....................................................16
19. Confidentiality.......................................................16
20. No Recourse...........................................................17
21. Survival of Representations, Warranties and Indemnities...............17
22. Remedies Cumulative...................................................18
23. No Waiver of Rights...................................................18
24. Headings..............................................................18
25. Provisions Separable..................................................18
26. Governing Law; Arbitration............................................18
27. Execution in Counterparts.............................................18
EXECUTION COPY
INVESTMENT MANAGEMENT AGREEMENT
This Investment Management Agreement (the "Agreement"), dated as of
November 17, 2005, is made by and between York Enhanced Strategies Fund, LLC
(the "Company"), a Delaware limited liability company which will be registered
as a nondiversified, closed-end management investment company under the
Investment Company Act of 1940, as amended, and the rules and regulations
promulgated thereunder (the "Investment Company Act"), and York Enhanced
Strategies Management, LLC (the "Investment Manager"), a New York limited
liability company registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"). Capitalized terms used
but not otherwise defined in this Agreement shall have the meanings given to
them in the Operating Agreement of the Company dated as of November 3, 2005 (as
the same may be amended from time to time, the "Operating Agreement").
1. General Duties of the Investment Manager.
(a) Subject to the direction and control of the Company's Board of
Directors (the "Board") and subject to and in accordance with the
terms of the Operating Agreement, the Transaction Documents (as
defined in the Indenture) and any Statement of Preferences for
Preferred Shares (collectively, the "Principal Documents"), the
policies adopted or approved by the Board, the conditions of any
exemptive order obtained by or for the benefit of the Company or the
Investment Manager ("Exemptive Order") from the Securities and
Exchange Commission (the "SEC") and this Agreement, the Investment
Manager agrees to:
(i) supervise and direct the investment and reinvestment of the
Assets;
(ii) perform the duties set forth herein or in the Operating
Agreement;
(iii) perform on behalf of the Company those investment-related and
leverage-related duties and functions assigned to the Company
or the Investment Manager in the Principal Documents; and
(iv) exercise such other powers and duties with respect to the
investment-related and leverage-related functions of the
Company as shall be delegated from time to time to the
Investment Manager by the Board.
(b) The Investment Manager is hereby granted, and shall have, full power
and authority to take all actions and execute and deliver all
necessary and appropriate documents and instruments on behalf of the
Company in accordance with the Principal Documents, the policies
adopted or approved by the Board and this Agreement. In performing
its duties under this Agreement, the Investment Manager shall comply
in all material respects with any applicable law, rule, regulation
or order of any governmental entity, agency, authority or other
applicable regulatory position, including, without limitation, the
Investment Company Act, the Advisers Act and all rules and
regulations thereunder
("Applicable Law"), the conditions of any Exemptive Order and the
applicable provisions of the Principal Documents.
(c) Subject to the foregoing and the other provisions of this Agreement,
and subject to the decisions of the Investment Committee (as defined
in Section 4(a) hereof) and the direction and control of the Board,
the Investment Manager is hereby appointed as the Company's agent
and attorney-in-fact with authority to negotiate, execute and
deliver all documents and agreements on behalf of the Company and to
do or take all related acts, with full power of substitution, to
acquire, dispose of or otherwise take action with respect to or
affecting the Investments (as defined in Section 4(b) hereof),
including, without limitation:
(i) identifying and effecting the purchase and sale of Investments
(as defined below) by the Company, selecting the dates for
such purchases and sales, and otherwise directing the purchase
or sale of such Investments on behalf of the Company;
(ii) structuring the terms of, and negotiating, entering into
and/or consenting to, on behalf of the Company, all
documentation relating to Investments to be purchased, held,
exchanged or sold by the Company (including, without
limitation, purchase or sale agreements, subscription
agreements, option agreements, warrants, loan agreements,
confidentiality agreements, commitment letters, term sheets,
swap agreements, repurchase agreements and other
Investment-related contracts and documents), and any
amendments, modifications or supplements with respect to such
documentation;
(iii) exercising, on behalf of the Company, rights and remedies
associated with Investments, including, without limitation,
rights to petition to place an obligor or issuer in bankruptcy
proceedings, to vote to accelerate the maturity of an
Investment, to waive any default, including a payment default,
with respect to an Investment and to take any other action
which the Investment Manager deems necessary or appropriate in
its sole discretion in connection with any restructuring,
reorganization or other similar transaction involving an
obligor or issuer with respect to an Investment, including,
without limitation, initiating and pursuing litigation;
(iv) responding to any offer in respect of Investments by tendering
the affected Investments, declining the offer or taking such
other actions as the Investment Manager may determine;
(v) exercising all voting, consent and similar rights of the
Company on its behalf and advising the Company with respect to
matters concerning the Investments;
(vi) advising and assisting the Company with respect to the
valuation of the Assets and liabilities;
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(vii) retaining legal counsel and other professionals (such as
financial advisers and other consultants) to assist in the
structuring, negotiation, documentation, administration and
modification and restructuring of Investments;
(viii) designating the brokers, dealers, banks, clearing
associations, depositaries (both U.S. and non-U.S.
depositaries) and other counterparties and financial
institutions (collectively, "brokers and dealers") to be used
for all transactions by the Company;
(ix) consulting with the Rating Agencies at such times as may be
reasonably requested by the Rating Agencies and providing the
Rating Agencies with any information reasonably requested in
connection with the Rating Agencies' maintenance of their
ratings of the Term Preferred Shares and the Notes and their
assigning credit indicators to prospective Investments, if
applicable; and
(x) taking all applicable action required or permitted to be taken
under the Advisers Act, this Agreement or the Principal
Documents.
2. Duties and Obligations of the Investment Manager with Respect to the
Administration of the Company.
The Investment Manager also agrees to furnish office facilities and
equipment and clerical, bookkeeping and administrative services (other than such
services, if any, provided by the Company's custodian and other service
providers) to the Company. To the extent requested by the Company, the
Investment Manager agrees to provide the following administrative services:
(a) provide the Company with such assistance as the Board may request in
processing subscription and/or transfer applications for the
membership interests, including assistance in determining whether
such applications and prospective or existing Members of the Company
satisfy applicable requirements under the Operating Agreement;
(b) oversee the determination and publication of the Company's net asset
value in accordance with the Company's policy as adopted from time
to time by the Board and communicated to the Investment Manager in
writing;
(c) maintain or oversee the maintenance of the books and records of the
Company as required under the Investment Company Act and maintain
(or oversee maintenance by other Persons) such other books and
records required by Applicable Law or necessary for the proper
operation of the Company in accordance with the Principal Documents;
(d) oversee the preparation and filing of the Company's federal, state
and local income tax returns and any other required tax returns or
reports;
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(e) review the appropriateness of and arrange for payment of the
Company's expenses;
(f) prepare, for review and approval by officers and other authorized
signatories of the Company (collectively, the "Authorized
Signatories"), financial information for the Company's quarterly and
annual reports and other communications with Members required or
otherwise to be sent to Members, and arrange for the printing and
dissemination of such reports and communications to Members;
(g) prepare, for review by the Authorized Signatories and the Board, the
Company's periodic financial reports required to be filed with the
SEC on Form N-SAR, Form N-CSR, Form N-PX, Form N-Q and such other
reports, forms and filings, as may be mutually agreed upon or as may
be required by Applicable Law, the Indenture or any Statement of
Preferences;
(h) prepare reports relating to the business and affairs of the Company
as may be mutually agreed upon and not otherwise prepared by others;
(i) make such reports and recommendations to the Board concerning the
performance and fees of any of the Company's service providers as
the Board may reasonably request or deem appropriate;
(j) oversee and review calculations of fees paid to the Company's
service providers;
(k) oversee the Company's portfolio and perform necessary calculations
as required under Section 18 of the Investment Company Act;
(l) consult with the Audit Committee of the Board, the Authorized
Signatories and the Company's independent accountants, legal
counsel, custodian and other service providers in establishing the
accounting policies of the Company;
(m) review implementation of any share purchase programs authorized by
the Board;
(n) determine the amounts available for distribution as dividends and
distributions to be paid by the Company to its Members and holders
of its Notes;
(o) prepare and arrange for the printing of dividend notices to Members;
(p) provide the Company's dividend disbursing agent and custodian with
such information as is required for such parties to effect the
payment of dividends and distributions;
(q) prepare such notices, information and reports as may be required
under the Indenture and the Statement of Preferences for the Term
Preferred Shares;
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(r) provide such assistance to the Company's custodian, transfer agent,
trustee, collateral agent, counsel, auditors and other service
providers as generally may be required to properly carry on the
business and operations of the Company;
(s) assist in the preparation and filing of Forms 3, 4, and 5 pursuant
to Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), Section 13 of the Exchange Act and Section
30(h) of the Investment Company Act for the officers, Authorized
Signatories and directors of the Company, such filings to be based
on information provided by those Persons;
(t) respond to, or refer to the Company's officers or Authorized
Signatories, Members' (including any potential Members) inquiries
relating to the Company;
(u) monitor the Company's status as a regulated investment company under
Subchapter M of the Code;
(v) take all applicable actions under this Agreement and the Principal
Documents necessary, advisable or appropriate under any Applicable
Law; and
(w) supervise any other aspects of the Company's administration as may
be agreed to by the Company and the Investment Manager.
All services are to be furnished by any directors, officers,
Authorized Signatories or employees of the Investment Manager or its Affiliated
Persons as the Investment Manager deems appropriate in order to fulfill its
obligations hereunder, and the Investment Manager, in its sole discretion, may
delegate or assign any and all of its duties under this Section 2 and any other
administrative duties hereunder to any of its Affiliated Persons; provided that
no such delegation or assignment shall relieve the Investment Manager of its
duties hereunder. In the event of such a delegation or assignment to an
Affiliated Person of any such duties, and in connection with the performance of
such duties, such Affiliated Person may exercise any of the powers (including
powers of attorney) granted to the Investment Manager pursuant to Section 1(b),
Section 1(c)(vi), Section 1(c)(ix), Section 1(c)(x) and clause (a) of Section 12
hereof to the same extent, and on the same terms, as the Investment Manager, and
all actions taken by such Affiliated Person pursuant thereto shall be deemed
authorized hereunder or under the relevant Principal Documents; provided,
however, that any such delegation relates solely to the administrative duties of
the Investment Manager hereunder and under the Principal Documents and does not
in any way relate to the delegation of investment management or investment
advisory duties.
3. Authority to Bind the Company; No Joint Venture.
(a) Except as provided in or pursuant to this Agreement, the Investment
Manager shall have no authority to bind or obligate the Company. The
Company agrees that the Investment Manager is an independent
contractor and not a general agent of the Company. Nothing contained
herein shall create or constitute the Company and the Investment
Manager as members of any partnership, joint venture, association,
syndicate, unincorporated business or other separate entity, nor
shall it be deemed to confer on either of them any express, implied
or apparent authority to incur any obligation or liability on behalf
of the other.
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(b) The Investment Manager shall act in conformity with the written
instructions and directions of the Board, except to the extent that
authority has been delegated to the Investment Manager pursuant to
the terms of this Agreement. The Investment Manager will not be
bound to comply with any amendment to any Principal Document until
it has received written notice thereof and until it has received a
copy of the amendment from the Company or the Trustee (as defined in
the Indenture); provided that if any such amendment materially and
adversely affects the rights or duties of the Investment Manager,
the Investment Manager shall not be obligated to respect or comply
with the terms of such amendment unless it consents thereto. Without
limiting the foregoing and subject to the fiduciary duty of the
Board, the Company shall not permit any amendment to any Principal
Document that materially and adversely affects the rights or duties
of the Investment Manager to become effective unless the Investment
Manager has been given prior written notice of such amendment and,
in the sole discretion of the Investment Manager, has consented
thereto in writing.
(c) The Investment Manager may, with respect to the affairs of the
Company, consult with such legal counsel, accountants and other
advisors as may be selected by the Investment Manager. The
Investment Manager shall be fully protected, to the extent permitted
by Applicable Law, in acting or failing to act hereunder if such
action or inaction is taken or not taken in good faith by the
Investment Manager in accordance with the advice or opinion of such
counsel, accountants or other advisors. The Investment Manager shall
be fully protected in relying upon any writing signed in the
appropriate manner with respect to any instruction, direction or
approval of the Board and may also rely on opinions of the
Investment Manager's counsel with respect to such instructions,
directions and approvals. The Investment Manager shall also be fully
protected when acting upon any instrument, certificate or other
writing the Investment Manager believes in good faith to be genuine
and to be signed or presented by the proper person or persons. The
Investment Manager shall be under no duty to make any investigation
or inquiry as to any statement contained in any such writing and may
accept the same as conclusive evidence of the truth and accuracy of
the statements therein contained if the Investment Manager in good
faith believes the same to be genuine.
4. Limitations Relating to Investments.
(a) Investments Requiring the Investment Committee's Approval. The
Investment Manager will establish an Investment Committee (the
"Investment Committee") comprised initially of three persons (such
number of members being subject to increase or decrease at any time
in the sole discretion of the Investment Manager). All of the
members of the Investment Committee will be voting members thereof.
All of such members will be appointed by the Investment Manager, and
initially such voting members will be James G. Dinan, Daniel A.
Schwartz and Alan H. Cohen. The Investment Committee will review and
discuss the purchase and sale of Investments, and approval by one
member of the Investment Committee will be required prior to the
purchase or sale of any
6
Investment. The Company shall not be bound by any Investment made by
the Investment Manager on behalf of the Company for which the
necessary approval has not been obtained.
(b) Definition of Investments. "Investments" shall mean and include all
investments or financial instruments of any type of asset the
Company is permitted to make, purchase, trade or effect in
accordance with the Principal Documents, including, without
limitation, debt securities and debt obligations (including bank
loans or interests therein), stocks, warrants and other equity
securities, short sales of securities and other instruments,
securities lending arrangements, repurchase agreements, and futures,
forward contracts, swaps and other derivatives and instruments to
manage or hedge interest rate, currency exchange, industry, equity
and other risks or otherwise.
(c) Origination and Other Fees. Origination, management, finders,
breakup and similar fees payable with respect to Investments will be
payable to the Company rather than the Investment Manager. The
Investment Manager will assist the Company with monitoring such fees
with a view to maintaining the Company's status as a regulated
investment company under the Code, including by attempting to limit
income that is not related to investments to no more than 10% of the
Company's annual gross income.
5. Brokerage.
The Investment Manager shall effect all purchases and sales of
Investments in a manner consistent with the rules, regulations and
interpretations of the Securities and Exchange Commission that may be put into
effect from time to time.
6. Compensation.
(a) The Company shall pay to the Investment Manager and the Investment
Manager agrees to accept as partial compensation for all services
rendered by the Investment Manager as such, a fee (the "Management
Fee"), payable on a quarterly basis at the end of March, June,
September and December at a rate initially equal to 0.75% per annum
of the Management Fee Capital as of such calendar quarter end.
"Management Fee Capital" shall mean (i) during the period commencing
on the Closing Date and ending on December 31, 2006 (the "Initial
Draw Period"), the sum of (A) the aggregate Common Share
Commitments, regardless of whether the Company has drawn down such
commitments, (B) the aggregate Preferred Share Commitments,
regardless of whether the Company has drawn down such commitments,
and (C) the aggregate amount of commitments to purchase the Notes,
regardless of whether the Company has drawn down or repaid such
commitments, and (ii) after the Initial Draw Period, the Net Asset
Value of the Company using the applicable quarter-end Net Asset
Value of the Company (without reduction for any dividends accrued on
Common Shares or the Carried Interest). After December 31, 2007, the
Management Fee shall be equal to 1.0% per annum of the Net Asset
Value of the Company using the applicable quarter-
7
end Net Asset Value of the Company (without reduction for any
dividends accrued on Common Shares or the Carried Interest)
(b) The Company shall issue to the Investment Manager, at the initial
Closing, one share of Series A-2 Preferred Stock (the "Special
Share") at a price equal to its Base Liquidation Preference (as such
term is defined in the Statement of Preferences for the Special
Share) of $1,000. As holder of the Special Share, the Investment
Manager shall be entitled to contingent dividends as set forth in
the Statement of Preferences for the Special Share. The Company
shall not permit any amendment to the Statement of Preferences for
the Special Share to become effective, except to the extent required
by applicable law, unless the Investment Manager has been given
prior written notice of such amendment and, in the sole discretion
of the Investment Manager, has consented thereto in writing and such
consent shall not be unreasonably withheld. If for any reason the
Investment Manager or the Company determines on the advice of
counsel that the Statement of Preferences is inconsistent with the
requirements of the Investment Company Act or any other Applicable
Law in any material respect, or with the requirements of the Code
governing regulated investment companies, and that such
inconsistency is unlikely to be able to be remedied without material
alteration of such Statement of Preferences, then the Company shall
repurchase the Special Share at the liquidation preference and will
take such other actions or enter into such other transactions,
including, without limitation, paying amounts to the Investment
Manager, which, on the advice of counsel, may be likely to remedy
such inconsistency and which will provide the Investment Manager
with amounts that are materially the same as the contingent
dividends mentioned above with respect to the Special Share.
(c) If this Agreement is terminated for any reason prior to the end of
the Investment Period, then the Company will engage at its own
expense a firm acceptable to the Company and the Investment Manager
to determine the maximum reasonable fair value as of the termination
date of the Company's Assets and liabilities. After review of such
firm's work papers by the Investment Manager and the Company and
resolution of any comments therefrom, such firm shall render its
report as to valuation within 90 days after notice of termination of
this Agreement, and the Company shall promptly pay to the Investment
Manager (i) any Management Fees and other fees due under this
Agreement (which, for the avoidance of doubt, includes any amount
due to the Investment Manager pursuant to Section 6(b) hereof), and
(ii) the liquidation preference for the Special Share pursuant to
the Statement of Preferences that would be payable if all of the
consolidated assets of the Company had been sold or realized at the
values indicated in such report and any net income and gain had been
distributed as of the date of termination. For purposes of
calculating the Management Fee payable in respect of clause (i) in
the preceding sentence, the date of the termination shall be
considered a calendar quarter end for purposes of calculating
whether any Management Fee is then payable, and the Management Fee
payable in respect of such period shall be prorated based upon the
ratio of (x) the number of days elapsed between the end of most
recent preceding calendar quarter end through
8
the termination date to (y) the total actual number of days in the
calendar quarter in which the termination date occurs.
7. Expenses.
The Company will be responsible for paying the Management Fee, fees
of the Placement Agent and any other placement agents, organizational and
offering fees and expenses relating to the Common Shares, the Term Preferred
Shares and the Notes, marketing and travel expenses, dividends on the Preferred
Shares (including the Special Share), due diligence and negotiation expenses,
research expenses, fees and expenses of custodians, administrators, transfer and
distribution agents, trustees, collateral agents, brokerage fees and
commissions, dealer spreads, legal fees and expenses of the Company and the
Investment Manager incurred in connection with matters relating to or for the
Company, fees and expenses of Directors, insurance, including periodic premiums
and certain fees payable under the insurance policy for the benefit of the
holders of the Term Preferred Shares, filings and registrations, proxy expenses,
rating agency fees and expenses, expenses of communications to investors,
compliance expenses, audit expenses, interest, taxes, portfolio transaction
expenses, costs of responding to regulatory inquiries and reporting to
regulatory authorities, costs and expenses of preparing and maintaining the
books and records of the Company, indemnification, litigation and other
extraordinary fees and expenses and such other fees and expenses as are approved
by the Directors as being reasonably related to the organization, offering,
capitalization, operation or administration of the Company and any Investments.
Expenses associated with the general overhead of the Investment Manager will not
be covered by the Company except to the extent paid for with soft dollar
arrangements. Notwithstanding the foregoing, and subject to review by the Board,
the Company will bear the costs and expenses of the Investment Manager as set
forth in Section 9 of the Operating Agreement, which may not be amended without
the Investment Manager's written consent. On behalf of the Company, the
Investment Manager may advance payment of any such fees and expenses of the
Company, and the Company shall reimburse the Investment Manager therefor within
30 days following written request from the Investment Manager. Nothing in this
Section 7 shall limit the ability of the Investment Manager to be reimbursed by
any Person (including issuers or obligors of securities, instruments or
obligations owned by the Company) for out-of-pocket expenses incurred by the
Investment Manager in connection with the performance of services hereunder. The
Investment Manager shall maintain complete and accurate records with respect to
costs and expenses and shall furnish the Board with receipts or other written
vouchers with respect thereto upon request of the Board.
8. Services to Other Companies or Accounts.
(a) The Investment Manager and its Affiliated Persons and their
respective affiliates, directors, officers, employees, shareholders,
managers, members, assigns, representatives or agents (collectively,
"Affiliates") may spend substantial time on other business
activities, including investment management and advisory activities
for entities with the same or overlapping investment objectives,
investing for their own account with the Company or for any investor
in the Company, financial advisory services (including services for
entities in which the Company invests), acting as directors,
officers, creditor committee members or in similar capacities, and
engaging in any other activities
9
contemplated by Section 9.8 of the Operating Agreement. Subject to
the requirements of the Investment Company Act and the Advisers Act,
the Investment Manager and its Affiliates may (and intend to) engage
in such activities and may receive compensation from third parties
for their services. Subject to such requirements and the provisions
of this Agreement, such compensation may be payable by entities in
which the Company invests in connection with actual or contemplated
Investments and the Investment Manager may receive fees and other
compensation in connection with structuring Investments which may be
shared with such other entities.
(b) The Investment Manager and its respective Affiliates currently do
and in the future may manage other funds and accounts other than the
assets of the Company, including for certain holders of the Common
Shares, the Term Preferred Shares and the Notes (collectively,
"Other Adviser Accounts"), that invest in Investments eligible for
purchase or sale by the Company. The investment policies, fee
arrangements and other circumstances of the Company may vary from
those of Other Adviser Accounts. As permitted by the Investment
Company Act and any Exemptive Order, the Investment Manager and its
related companies generally will allocate investment opportunities
in accordance with the Exemptive Order and Applicable Law if no
Exemptive Order is issued.
9. Standard of Care; Exculpation.
(a) Except as otherwise required by law, none of the Investment Manager
or any of its Affiliates shall be liable, responsible or accountable
in damages or otherwise to the Company, any Member or any other
Person for any loss, liability, damage, settlement, cost or other
expense (including reasonable attorneys' fees) incurred by reason of
any act or omission or any alleged act or omission performed or
omitted by such Person (other than solely in such Person's capacity
as a Member, if applicable) in connection with the establishment,
management or operations of the Company or the management of its
Investments (including those in connection with serving on boards of
directors of, or creditors' committees for, any company in which the
Company has made an Investment) except that the Investment Manager
shall be liable to the Company if such act or failure to act arises
out of the bad faith, willful misfeasance, gross negligence or
reckless disregard of the Investment Manager's duty (or such
Person's duty, if applicable) to the Company (such conduct,
"Disabling Conduct").
(b) In performing its duties hereunder, the Investment Manager shall
endeavor to manage the Investments with the objective of (i)
permitting a timely performance of all payment obligations of the
Company under the Principal Documents and (ii) maximizing returns on
the Common Shares consistent with the investment objectives of the
Company. The Company hereby acknowledges that the Investment Manager
cannot, and does not, guarantee such timely performance or returns.
The Investment Manager shall comply with and perform
10
all the duties and functions that have been specifically delegated
to it under the Principal Documents.
(c) The Investment Manager shall use reasonable efforts to ensure that
no action taken by it, and shall not intentionally or with reckless
disregard take any action which, would (i) materially adversely
affect the Company under, or otherwise violate, any Applicable Law,
(ii) not be permitted under the Company's organizational documents,
or (iii) result in the Company violating, the terms of the Indenture
or the Statement of Preferences for the Term Preferred Shares. If
the Investment Manager is ordered by the Company to take any action
that will, or that reasonably could be expected to, result in any of
the consequences specified in the immediately preceding sentence,
the Investment Manager shall promptly notify the Company of the
Investment Manager's judgment that such action would have one or
more of the consequences set forth above and the Investment Manager
need not take such action.
(d) Nothing herein shall be construed in any way to (i) imply a duty
hereunder on the part of any Person other than the Investment
Manager or the Company, (ii) imply a duty on the part of the
Investment Manager to any Person other than the Company or (iii)
constitute a waiver or limitation of any rights the Company may have
under any U.S. federal or state securities laws.
10. Indemnification.
(a) Company Indemnification of the Investment Manager. The Company (the
"Indemnifying Party") shall indemnify, defend and hold harmless the
Investment Manager, its affiliates and its or their respective
members, partners, shareholders managers, directors, officers,
employees and agents (each, in such case, an "Indemnified Party")
from and against any and all damages, losses, claims, liabilities,
costs or expenses (including, without limitation, all reasonable
attorney's fees and expenses and accountant's fees and expenses)
("Losses"), in each case in respect of or arising from any acts or
omissions made in the performance of the duties of the Investment
Manager under this Agreement and the terms of the Principal
Documents, except to the extent that any such acts or omissions
constitute Disabling Conduct. Notwithstanding anything herein to the
contrary, the obligations of the Company under this Section 10 shall
be payable solely out of the Investments and the proceeds therefrom.
(b) Indemnification Procedures.
(i) In the event any proceeding (including any governmental
investigation) shall be instituted involving any Indemnified
Party, such Indemnified Party shall promptly notify the
Company in writing and the Indemnified Party shall retain
counsel reasonably satisfactory to the Company to represent
the Indemnified Party and the Company shall pay the fees and
disbursements of such counsel related to such proceeding. It
is understood that the Company shall not, in connection with
any
11
proceeding or related proceedings in the same jurisdiction, be
liable for the fees and expenses of more than one separate
firm (in addition to any local counsel) for all such
Indemnified Parties and that all such fees and expenses shall
be reimbursed as they are incurred. Such firm shall be
designated in writing by the Investment Manager. The Company
shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the
Company agrees to indemnify the Indemnified Party from and
against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, provided
that written notice of a proposed settlement is provided to
the Company no less than ten business days prior to the date
of such proposed settlement, consent of the Company to such
settlement shall not be required by an Indemnified Party if,
as of the date of any such notice to the Company, the Company
has not reimbursed the Indemnified Party for fees and expenses
of counsel as contemplated herein within 30 days of request
for such reimbursement by the Indemnified Party. The Company
shall not, without the prior written consent of the
Indemnified Party, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified
Party is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Party, unless such
settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the
subject matter of such proceeding.
(ii) An Indemnifying Party shall make advance payments to each
Indemnified Party in connection with the expenses of defending
any action with respect to which indemnification might be
sought by such Indemnified Party hereunder if the Indemnifying
Party receives a written affirmation by such Indemnified Party
of the Indemnified Party's good faith belief that the
standards of conduct necessary for indemnification have been
met and a written undertaking to reimburse the Indemnifying
Party if a final decision on the merits by a court or other
governmental authority of competent jurisdiction before whom
the issue of entitlement to indemnification is subsequently
brought determines that such Indemnified Person is not
entitled to indemnification. In addition, at least one of the
following conditions must be met: (1) the Indemnified Party
shall provide adequate security for its undertaking, (2) the
Indemnifying Party shall be insured against losses arising by
reason of any lawful advances, or (3) a majority of a quorum
of the Disinterested Non-Party Directors, or if a majority
vote of such quorum so directs, independent legal counsel in a
written opinion shall have concluded, based on a review of
readily available facts, that there is substantial reason to
believe that the Indemnified Party ultimately will be found
entitled to indemnification.
(iii) The remedies provided for in this Section 10 are not exclusive
and shall not limit any rights or remedies which may otherwise
be available to any Indemnified Party at law or in equity.
12
11. Term of Agreement; Events Affecting the Investment Manager; Survival
of Certain Terms.
(a) This Agreement shall become effective as of the date hereof and,
unless sooner terminated by the Company or Investment Manager as
provided herein, shall continue in effect until September 30, 2007.
Thereafter, if not terminated, this Agreement shall continue in
effect with respect to the Company for successive periods of 12
months, provided such continuance is specifically approved at least
annually by both (i) the vote of a majority of the Board or the vote
of a majority of the outstanding voting securities of the Company at
the time outstanding and entitled to vote and (ii) the vote of a
majority of the Directors who are not parties to this Agreement or
interested persons of any party to this Agreement, cast in person at
a meeting called for the purpose of voting on such approval.
Notwithstanding the foregoing, this Agreement may be terminated by
the Company at any time, without the payment of any penalty, upon
giving the Investment Manager 60 days' notice (which notice may be
waived by the Investment Manager in its sole discretion), provided
that such termination by the Company shall be directed or approved
by the vote of a majority of the Directors of the Company in office
at the time or by the vote of the holders of a majority of the
voting securities of the Company at the time outstanding and
entitled to vote, or by the Investment Manager on 60 days' written
notice (in which case notice may be waived by the Company). This
Agreement will also immediately terminate in the event of its
assignment. As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested person" and "assignment"
shall have the same meanings as such terms are given in the
Investment Company Act.
(b) In the event of the death, incapacity or the departure from the
Investment Manager of both James G. Dinan and Daniel A. Schwartz,
the Investment Manager will promptly notify the Members and the
holders of the Notes of such event and that the Investment Manager
may be replaced by a designee agreed upon by both (i) the vote of
the holders of a majority of the then-outstanding Common Shares and
Preferred Shares voting together as a single class and (ii) the vote
of the holders of a majority of aggregate amount of indebtedness
then outstanding under the Indenture.
(c) Notwithstanding anything herein to the contrary, Sections 6(c), 7,
9, 10, 11(c), 13, 14, 15, 16, 17, 19, 20, 21, 22, 23, 24, 25, 26 and
27 of this Agreement shall survive any termination hereof. From and
after the effective date of termination of this Agreement, the
Investment Manager and its Affiliated Persons shall not be entitled
to any Management Fees from and after the date of termination, but
shall be paid all compensation and reimbursement of expenses accrued
to the date of termination. Upon such termination, and upon receipt
of payment of all compensation and reimbursement of expenses owed,
the Investment Manager shall as soon as practicable (and in any
event within 90 days after such termination) deliver to the Company
all property (to the extent, if any, that the Investment Manager has
custody thereof) and documents of the Company
13
or otherwise relating to the Assets and liabilities of the Company
then in the custody of the Investment Manager (although the
Investment Manager may keep copies of such documents for its
records). The Investment Manager agrees to use reasonable efforts to
cooperate with any successor investment manager in the transfer of
its responsibilities hereunder, and will, among other things,
provide upon receipt of a written request by such successor
investment manager any information available to it regarding any
Assets and liabilities of the Company. The Investment Manager agrees
that, notwithstanding any termination, it will reasonably cooperate
in any proceeding arising in connection with this Agreement, any of
the Principal Documents or any Investment (excluding any such
proceeding in which claims are asserted against the Investment
Manager or any Affiliated Person of the Investment Manager) upon
receipt of appropriate indemnification and expense reimbursement.
12. Power of Attorney; Further Assurances.
In addition to the power of attorney granted to the Investment
Manager in Section 1 of this Agreement, the Company hereby makes, constitutes
and appoints the Investment Manager, with full power of substitution, as its
true and lawful agent and attorney-in-fact, with full power and authority in its
name, place and stead, to (a) sign, execute, certify, swear to, acknowledge,
deliver, file, receive and record any and all documents that the Investment
Manager reasonably deems appropriate or necessary in connection with the
Investment Manager's powers and duties under this Agreement, the terms of the
Principal Documents and as required by the Investment Company Act and (b) (i)
subject to any policies adopted by the Board with respect thereto, exercise in
its discretion any voting or consent rights associated with any securities,
instruments or obligations included in the Company's Assets, (ii) execute
proxies, waivers, consents and other instruments with respect to such
securities, instruments or obligations, (iii) endorse, transfer or deliver such
securities, instruments and obligations and (iv) participate in or consent (or
decline to consent) to any modification, work-out, restructuring, bankruptcy
proceeding, class action, plan of reorganization, merger, combination,
consolidation, liquidation or similar plan or transaction with regard to such
securities, instruments and obligations. The Investment Manager hereby accepts
such appointment. The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive and not
be affected by the subsequent bankruptcy or insolvency or dissolution of the
Company; provided, however, that the foregoing power of attorney shall expire,
and the Investment Manager shall cease to have any power to act as the Company's
attorney-in-fact, upon termination of this Agreement in accordance with its
terms. The Company shall execute and deliver to the Investment Manager, or cause
to be executed and delivered to the Investment Manager, all such other powers of
attorney, proxies, dividend and other orders, and all such instruments as the
Investment Manager may reasonably request for the purpose of enabling the
Investment Manager to exercise the rights and powers which it is entitled to
exercise hereunder and to facilitate compliance with Applicable Law.
13. Amendment of this Agreement.
No provision of this Agreement may be amended, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which
14
enforcement of the amendment, waiver, discharge or termination is sought. Any
amendment of this Agreement shall be subject to the Investment Company Act. The
Company shall promptly provide a copy of any such amendment or waiver to S&P and
Moody's.
14. Notices.
Unless expressly provided otherwise herein, any notice, request,
direction, demand or other communication required or permitted under this
Agreement shall be in writing and shall be deemed to have been duly given, made
and received if sent by hand or by overnight courier, when personally delivered,
if sent by facsimile, when receipt is confirmed by telephone, or if sent by
registered or certified mail, postage prepaid, return receipt requested, when
actually received if addressed as set forth below:
(a) If to the Company:
York Enhanced Strategies Fund, LLC
Attn: Adam J. Semler
767 Fifth Avenue, 17th Floor
New York, NY 10153
Fax: (212) 300-1301
with a copy to:
Jones Day
Attn: David M. Mahle, Esq.
222 East 41st Street
New York, NY 10017
Fax: (212) 755-7306
(b) If to the Investment Manager:
York Enhanced Strategies Management, LLC
Attn: Adam J. Semler
767 Fifth Avenue, 17th Floor
New York, NY 10153
Fax: (212) 300-1301
15
with a copy to:
Arnold & Porter LLP
Attn: Richard P. Swanson, Esq.
399 Park Avenue
New York, NY 10022
Fax: (212) 715-1399
(c) If to any of the Members, as provided in the Operating Agreement,
and if to the Trustee or any holder of the Notes under the
Indenture, as provided in the applicable Transaction Document.
Either party to this Agreement may alter the address to which
communications or copies are to be sent to it by giving notice of such change of
address in conformity with the provisions of this Section 14. Other addresses
set forth in this Section 14 shall be changed only with the consent of the
relevant addressee.
15. Binding Nature of Agreement; Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns as provided herein.
16. Entire Agreement.
This Agreement contains the entire agreement and understanding of
the parties with respect to the subject matter and supersedes all oral
communications and prior writings with respect thereto.
17. Costs and Expenses.
The costs and expenses (including the fees and disbursements of
counsel and accountants) incurred in connection with the negotiation,
preparation and execution of this Agreement, and all matters incident thereto,
shall be borne by the Company.
18. Books and Records.
In compliance with the requirements of Rule 31a-3 under the
Investment Company Act, the Investment Manager hereby agrees that all records
which it maintains for the Company are the property of the Company and further
agrees to surrender promptly to the Company any such records upon the Company's
request. The Investment Manager further agrees to preserve for the periods
prescribed by Rule 31a-2 under the Investment Company Act the records required
to be maintained by Rule 31a-l under the Investment Company Act.
19. Confidentiality.
Each party hereto shall follow its customary procedures to keep
confidential any information obtained in connection with the services rendered
hereunder and contemplated hereby and shall not disclose any such information
except (a) with the prior written consent of
16
the other party hereto, (b) such information as any Rating Agency shall
reasonably request in connection with their rating of Term Preferred Shares or
the Notes, (c) as required by Applicable Law or the request of any regulatory or
self-regulating organization, body or official having jurisdiction over it, (d)
such information as shall have been publicly disclosed other than in violation
of this Agreement, (e) to its members, officers, directors, employees and
affiliates, and to its attorneys, accountants and other professional advisers in
conjunction with the transactions described herein, (f) such information that
was or is obtained by it on a non-confidential basis, (g) such information as
may be necessary or desirable in order for it to prepare, publish and distribute
to any Person any information relating to the investment performance of the
Investments, provided that such disclosure is in compliance with federal and
state securities laws, (h) in connection with the enforcement of its rights
hereunder and in any dispute or proceeding related hereto, (i) to the Trustee,
(j) to the holders and potential purchasers of or a placement agent with respect
to any securities issued by the Company, and (k) such disclosure as the
Investment Manager may determine to be in furtherance of the investment
objectives of the Company or its duties under this Agreement. In no event,
however, shall the Investment Manager be required to disclose to any Person any
information relating to particular Investments with respect to which the Company
or the Investment Manager is obligated by the terms of governing instruments or
other underlying documentation for such Investments to refrain from so
disclosing. Notwithstanding anything herein to the contrary, each party may
disclose to any and all Persons, without limitation of any kind, the tax
treatment and any facts that may be relevant to the tax structure of this
Agreement and the transactions contemplated by this Agreement; provided,
however, that neither party shall disclose any other information that is not
relevant to understanding the tax treatment or tax structure of this Agreement
or the transactions contemplated by this Agreement the disclosure of which is
otherwise limited pursuant to this Agreement, or any other information to the
extent that such disclosure could result in a violation of any federal or state
securities law.
20. No Recourse.
The Company's obligations hereunder will be solely the obligations
of the Company, and the Investment Manager will not have any recourse to any
affiliate of the Company or any of the directors, officers or equity holders of
the Company or any of their affiliates with respect to any claims, losses,
damages, liabilities, indemnities or other obligations in connection with any
transactions contemplated hereby. Notwithstanding any provision hereof, all
obligations of the Company and any claims arising from this Agreement or any
transactions contemplated by this Agreement shall be limited solely to the
proceeds of the Investments available after making any priority payments under
the organizational documents of the Company. If payments on any such claims from
the Investments are insufficient, no other assets will be available for payment
of the deficiency and, following liquidation of all of the Investments, the
obligations of the Company to pay such deficiencies will be extinguished.
21. Survival of Representations, Warranties and Indemnities.
Each representation and warranty made or deemed to be made herein or
pursuant hereto, and each indemnity provided for hereby, shall survive
indefinitely.
17
22. Remedies Cumulative.
Except as provided in this Agreement, the rights, powers, remedies
and privileges provided in this Agreement are cumulative and not exclusive of
any rights, powers, remedies and privileges provided by law.
23. No Waiver of Rights.
A failure or delay in exercising any right, power or privilege in
respect of this Agreement will not be presumed to operate as a waiver, and a
single or partial exercise of any right, power or privilege will not be presumed
to preclude any subsequent or further exercise, of that right, power or
privilege or the exercise of any other right, power or privilege.
24. Headings.
The headings of Sections contained in this Agreement are for
convenience only, and they neither form a part of this Agreement nor are they to
be used in the construction or interpretation hereof.
25. Provisions Separable.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable as written, such provision shall be construed in the manner most
closely resembling the apparent intent of the parties with respect to such
provision so as to be valid, legal and enforceable; provided, however, that if
there is no basis for such a construction, such provision shall be ineffective
only to the extent of such invalidity, illegality or unenforceability and,
unless the ineffectiveness of such provision substantially impairs the basis of
the bargain for one of the parties to this Agreement, the validity, legality and
enforceability of the remaining provisions hereof or thereof shall not in any
way be affected or impaired thereby.
26. Governing Law; Arbitration.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to any principles of
conflict of laws thereof. Notwithstanding anything to the contrary herein, in no
event shall any of the provisions hereof be construed in a manner inconsistent
with provisions of the Investment Company Act. To the extent permitted by law,
any dispute relating to this Agreement or the Company which cannot be amicably
resolved among the parties to such dispute shall be resolved by binding
arbitration conducted in New York, New York in accordance with the rules of the
American Arbitration Association then prevailing, and the decisions of the
arbitrators shall be final and binding on all the parties. The costs of the
arbitration (other than fees and expenses of counsel, which shall be the
responsibility of the parties retaining such counsel) shall be allocated among
the parties as determined by the arbitrator.
27. Execution in Counterparts.
This Agreement may be executed in separate counterparts, each of
which shall be an original and all of which taken together shall constitute one
and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
YORK ENHANCED STRATEGIES MANAGEMENT, LLC
By:
---------------------------------
Name:
Title:
YORK ENHANCED STRATEGIES FUND, LLC
By:
---------------------------------
Name:
Title:
Dates Referenced Herein and Documents Incorporated by Reference
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