Document:

Description of Securities

 DESCRIPTION OF SECURITIES 

Capitalized terms used but not defined herein have the meaning ascribed to them in the annual report on
Form 10-K to which this Description of Securities is an exhibit (the “Annual Report”). 

Description of our Units 
 Limited
Liability Company Units 
 Under the terms of the LLC Agreement, we retain the right to issue additional Common Units to newly
admitted Members or to existing Members during the Closing Period, provided that certain conditions described in the LLC Agreement are met. On January 21, 2022, we completed the first closing of the sale of our Common Units pursuant to which we
sold 4,543,770 Common Units at an aggregate purchase price of $454.4 million. The Closing Period is set to end on January 21, 2023, the 12-month anniversary of the Initial Closing Date, unless
extended according to the terms of the LLC Agreement. 
 In addition, Unitholders are entitled to one vote for each Unit held on all matters
submitted to a vote of Unitholders and do not have cumulative voting rights. Accordingly, subject to the rights of any outstanding Preferred Units, holders of a majority of the Units entitled to vote in any election of directors may elect all of the
directors standing for election. Any Units held by the Adviser shall be voted by or on behalf of the Adviser in the same proportion as the Units not held by the Adviser are voted. Unitholders are entitled to receive proportionately any dividends
declared by the board of directors, subject to any preferential dividend rights of outstanding Preferred Units. Upon our liquidation, dissolution or winding up, the Unitholders will be entitled to receive ratably our net assets available after the
payment of all debts and other liabilities and will be subject to the prior rights of any outstanding Preferred Units. Unitholders have no redemption or preemptive rights. The rights, preferences and privileges of Unitholders are subject to the
rights of the holders of any series of Preferred Units that we may designate and issue in the future. 
 Preferred Units 

Under the terms of the LLC Agreement, our board of directors is authorized to issue Preferred Units in one or more series without Unitholder
approval. Prior to the issuance of Preferred Units of each series, our board of directors is required by the LLC Agreement to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions,
qualifications and terms or conditions of redemption for each series. The 1940 Act as currently in force limits our flexibility as certain rights and preferences of the Preferred Units require, among other things: (i) immediately after
issuance and before any distribution is made with respect to Units, we must meet a coverage ratio of total assets to total senior securities, which include all of our borrowings and Preferred Units, of at least 200%; and (ii) the holders
of Preferred Units, if any are issued, must be entitled as a class to elect two directors at all times and to elect a majority of the directors if and for so long as dividends on the Preferred Units are unpaid in an amount equal to two full years of
dividends on the Preferred Units. 
 Transfer and Resale Restrictions 

Unitholders may not sell, assign, transfer or otherwise dispose of (a “Transfer”) any Units unless (i) we and, if required by
our lending arrangements, our lenders give consent, such consent by us not to be unreasonably withheld, and (ii) the Transfer is made in accordance with applicable securities laws. No Transfer will be effectuated except by registration of the
Transfer on our books. Each transferee must agree to be bound by these restrictions and all other obligations as a Unitholder. There is currently no market for the Units, and there can be no assurance that a market for the Units will develop in the
future. 
 Delaware Law and Certain Limited Liability Company Agreement Provisions 

Organization and Duration 

We were formed on September 3, 2020, and will remain in existence until dissolved in accordance with our LLC Agreement or pursuant to
Delaware law. 

  
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 Purpose 

Under the LLC Agreement, we are permitted to engage in any lawful act or activity for which limited liability companies may be formed under the
laws of the State of Delaware and we have all the powers available to us as a limited liability company formed under the laws of the State of Delaware. 

Agreement to be Bound by the LLC Agreement; Power of Attorney 

By subscribing for the Units, investors will be admitted as a member of the Company and will be deemed to have agreed to be bound by the terms
of the LLC Agreement. Pursuant to the LLC Agreement, each Unitholder and each person who acquires Units from a Unitholder grants to certain of our officers (and, if appointed, a liquidator) a power of attorney to, among other things, execute and
file documents required for our qualification, continuance or dissolution. The power of attorney also grants our board of directors the authority to make certain amendments to, and to make consents and waivers under and in accordance with, the LLC
Agreement. 
 Capital Call Mechanics 

From time to time in its discretion, the Adviser may draw down all or any portion of the Undrawn Commitment with respect to each Unit upon at
least ten business days’ prior written notice to the Unitholders (except that only five business days’ prior written notice will be required with respect to the initial drawdown). The Undrawn Commitment per Unit will equal $100 reduced by
the Original Issuance Price and any amounts that have already been contributed (or deemed contributed) with respect to such Unit; provided, that (a) the Undrawn Commitment of a Unit will not be reduced for any NAV Balancing Contributions or
Late-Closer Contributions made by a Unitholder, (b) the Undrawn Commitment will be increased for certain distributions attributable to True-Up Contributions, and (c) the Undrawn Commitment
will be increased for any Recallable Amount. 
 Each capital call will be issued in the amount per Unit specified by us, and such amount
will be applicable to all Units outstanding as of the date such capital call is due to be contributed to us; provided that in connection with the issuance of any new Units, the amount to be contributed as payment for such newly issued Units will be
determined in accordance with “Item 1. Business--The Private Offering & Closing Period.” 

During the Commitment Period, the Adviser may issue capital calls for any permitted purpose. After the expiration of the Commitment Period,
Unitholders will be released from any further obligation with respect to their Undrawn Commitments, except to the extent necessary to: (i) cover expenses, liabilities (including the repayment of any of our indebtedness) and our obligations or
reserves therefor, including, without limitation, indemnification obligations, Management Fees and Incentive Fees, (ii) complete investments by us in transactions that were significantly in process as of the end of the Commitment Period and as
to which we and the prospective portfolio company have commenced, in good faith, negotiating the terms of the investment and which the Adviser reasonably expects to be consummated prior to the date that is 90 days after the date of the
expiration of the Commitment Period, and (iii) effect follow-on investments in existing portfolio companies up to an aggregate maximum of 10% of aggregate cumulative invested amounts. 

In addition to making contributions of its Undrawn Commitments, a Unitholder may be required
to re-contribute amounts previously distributed to it with respect to its Units, as described under Section 4.5.3 of the LLC Agreement. For the avoidance of doubt, if the amount of any deemed
contribution or deemed distribution is disregarded, the sum of total contributions and re-contributions, minus any distributions, will not exceed a Unitholder’s Commitment. 

Action by Unitholders 

Under the LLC Agreement, Unitholder action can be taken only at an annual or special meeting of Unitholders or by written consent in lieu of a
meeting by Unitholders representing at least the number of Units required to approve the matter in question. The LLC Agreement provides that with respect to an annual or special meeting of Unitholders, nominations of persons for election to the
board of directors and the proposal of business to be considered by Unitholders may be made only pursuant to our notice of the meeting, as determined by our board of directors. 

  
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 Amendment of the Limited Liability Company Agreement; No Approval by Unitholders

 Except as otherwise provided in the LLC Agreement, the terms and provisions of the LLC Agreement may be amended (which term
includes any waiver, modification, or deletion of the LLC Agreement) during or after the term of the Company, with the prior written consent of (i) in the case of an amendment not affecting the rights of the Preferred Unitholders, a majority in
interest of the Unitholders, (ii) in the case of an amendment not affecting the rights of a Unitholder (including rights or protections with respect to tax consequences of Unitholders), a majority in interest of the Preferred Unitholders, and
(iii) in case of an amendment affecting the rights (including rights or protections with respect to tax consequences of Unitholders) of both the Unitholders and the Preferred Unitholders, a majority in interest of the Unitholders and a majority
in interest of the Preferred Unitholders. Notwithstanding the immediately preceding sentence, certain limited amendments, as set forth in the LLC Agreement, may be made with the consent of the board of directors and without the need to seek the
consent of any Unitholder. 
 Default Provisions 

Pursuant to the LLC Agreement, if a Unitholder fails to make a capital contribution when due, interest will accrue at the Default Rate on the
outstanding unpaid balance of such capital contribution. The “Default Rate” with respect to any period will be the lesser of (a) a variable rate equal to the prime rate of interest (as reported in The Wall Street Journal)
during such period plus 6% or (b) the highest interest rate for such period permitted by applicable law. The Adviser may waive the requirement to pay interest, in whole or in part. 

In addition, if any Unitholder fails to make a capital contribution when due, and has also failed to make such payment on or before the date
that is seven business days after the Adviser has given written notice to such Unitholder of such Unitholder’s failure to make such contribution, then the Adviser may, in its discretion, and subject to applicable law, take any actions available
under the LLC Agreement or at law or at equity, which may include causing such defaulting Unitholder to forfeit a significant portion of its Units or to transfer its Units to a third party for a price that is less than the net asset value of such
Units. 
 Merger, Sale or Other Disposition of Assets 

The board of directors may, without the approval of holders of our outstanding Units, cause us to, among other things, sell, exchange or
otherwise dispose of all or substantially all of our assets in a single transaction or a series of related transactions, or approve on our behalf the sale, exchange or other disposition of all or substantially all of our assets. The board of
directors may also cause the sale of all or substantially all of our assets under a foreclosure or other realization without Unitholder approval. Unitholders are not entitled to dissenters’ rights of appraisal under the LLC Agreement or
applicable Delaware law in the event of a merger or consolidation, a sale of all or substantially all of our assets or any other similar transaction or event. 

Term of the Company 

Under the terms of the LLC Agreement, our term will expire on the sixth anniversary of the Final Closing Date; provided, that, it may be
extended by our board of directors for two additional one-year periods upon written notice to the members at least 90 days prior to the expiration of the term or the end of the first one-year period, as the case may be, and, thereafter, for additional one-year periods with the consent of Unitholders holding 66 2/3% of our
outstanding Units. 
 The Company shall be dissolved (i) upon the expiration of its term (as such term may be extended pursuant to the
preceding paragraph), (ii) upon the determination by our board of directors in its sole discretion to dissolve the Company because it has determined that there is a substantial likelihood that due to a change in the text, application or
interpretation of the provisions of the U.S. federal securities laws (including the Securities Act, the 1940 Act and the Advisers Act) or the provisions of the United States Employee Retirement Income Security Act of 1974, as amended
(“ERISA”) (including the applicable regulations of the U.S. Department of Labor included within 29 C.F.R. section 2510.3-101, as modified by Section 3(42) of ERISA and
otherwise from time to time), the Code, or any other applicable statute, regulation, case law, administrative ruling or other similar authority (including changes that result in the Company being taxable as a corporation or association under
U.S. federal income tax law), the Company cannot operate effectively in the manner contemplated herein, (iii) if there are no Unitholders, unless the business of the Company is continued in accordance with the LLC Agreement or applicable
law, or (iv) upon the entry of a decree of judicial dissolution under applicable law. 

  
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 Books and Reports 

We are required to keep appropriate books of our business at our principal offices. The books will be maintained for both tax and financial
reporting purposes on an accrual basis in accordance with U.S. generally accepted accounting principles (“GAAP”). For tax and financial reporting purposes, our fiscal year is a calendar year ending December 31, unless otherwise
required by the Code or permitted by law. 
 Indemnification of Directors and Officers. 

Limitation on Liability of Directors and Officers; Indemnification and Advance of Expenses 

Under the LLC Agreement, we will fully indemnify any person who was or is involved in any actual or threatened action, suit or proceeding by
reason of the fact that such person is or was one of our directors or officers. So long as we are regulated under the 1940 Act, the above indemnification and limitation of liability is limited by the 1940 Act or by any valid rule,
regulation or order of the SEC thereunder. The 1940 Act provides, among other things, that a company may not indemnify any director or officer against liability to it or its security holders to which he or she might otherwise be subject by
reason of his or her willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office unless a determination is made by final decision of a court, by vote of a majority of a quorum of
directors who are disinterested, non-party directors or by independent legal counsel that the liability for which indemnification is sought did not arise out of the foregoing conduct. In addition, we
have obtained liability insurance for our officers and directors. 
 Under the Advisory Agreement, we may, to the extent permitted by
applicable law, in the discretion of our board of directors, indemnify the Adviser and certain of its affiliates. 
 Conflict with 1940 Act 

The LLC Agreement provides that, if and to the extent that any provision of the law of the State of New York or any provision of the LLC
Agreement conflicts with any applicable provisions of the 1940 Act, the applicable provision of the 1940 Act will control. 

  
 4ex_351196.htm

 

Exhibit 10.2

 

INDEPENDENT CONTRACTOR AGREEMENT

 

THIS INDEPENDENT CONTRACTOR AGREEMENT (“Agreement”) is made as of March 28, 2022, by and between Daily Journal Corporation, a South Carolina corporation having executive offices at 915 East First Street, Los Angeles, California 90012 (the “Company”), and SMJ Holdings Inc. with a principal place of business set forth on Exhibit A hereto (“Service Provider”).

 

RECITALS

 

A.         The Company and Service Provider desire to enter into this Agreement in order to set forth the terms and conditions under which Service Provider will perform services for the Company.

 

B.         The parties desire to set forth this Agreement in writing.

 

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

1.         Provision of Services. During the term of this Agreement, Service Provider hereby agrees to provide services to the Company as its Interim Chief Executive Officer, subject to the direction of the Company’s Board of Directors (the “Board”). Service Provider will devote such hours as are necessary to provide such services, provided that Service Provider shall be entitled to reasonable leaves of absences for illness, injury and vacation.

 

2.         Payment for Services.

 

(a)         In exchange for provision of such services, the Company agrees to pay Service Provider a flat fee of USD$40,833 per month, plus any goods and services taxes that may be applicable in respect of such fee (the “Fee”), provided that if the Term begins on a day that is not the first day of a month or ends on a day that is not the last day of the month, the Fee for such first or last month shall be pro-rated.

 

(b)         The Company shall reimburse Service Provider for the following out-of-pocket expenses directly attributable to work performed under this Agreement: (i) reasonable travel expenses, including airfares and rental vehicles; (ii) reasonable long distance telephone charges; (iii) reasonable postage and courier services; and (iv) other reasonable expenses of the kind customarily incurred by independent contractors, to the extent directly attributable to work performed under this Agreement. In addition, the Company shall reimburse Service Provider for the reasonable costs of vision and dental insurance, supplemental health insurance not covered by Canadian Medicare, and up to a USD$30,000 life insurance policy, not to exceed USD$710 in the aggregate per month.

 

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3.         Independent Contractor. In the performance of all services hereunder, it is mutually understood and agreed that Service Provider shall be, and at all times is, acting and performing as an independent contractor in the performance of his professional duties as an independent contractor. Service Provider shall complete the services required hereunder according to his own equipment, and his own means and methods of work, which shall be in his exclusive charge and control. However, Service Provider agrees to perform his work and functions at all times in a strictly professional manner, and subject to any reasonable policies and procedures of the Company or as directed by the Board. Service Provider is authorized to act as the Company’s Interim Chief Executive Officer, and may bind the Company as its agent in such capacity, subject at all times to the direction of the Board. The parties acknowledge and agree that Service Provider is not performing exclusive services to the Company, and that Service Provider may perform services for and on behalf of third parties other than the Company, provided that if the performance of such services creates a material conflict of interest with the performance of Service Provider’s responsibilities and obligations to the Company under this Agreement, Service Provider shall promptly disclose such conflict of interest to the Board. In addition, Service Provider agrees to keep the Board reasonably informed of his services for and on behalf of third parties, regardless of whether a conflict of interest may exist.

 

4.         Term. This Agreement shall be effective when signed by both parties, and, unless the parties otherwise agree, shall terminate 30 days following the date on which the Company notifies Service Provider, in writing, that this Agreement is to be terminated because Service Provider’s services are no longer required or desired. Service Provider will notify the Company, in writing, 30 days prior to his termination of this Agreement.

 

5.         Non-Disclosure Agreement. Concurrently with the execution of this Agreement, Service Provider and the Company have entered into a Non-Disclosure and Creations Agreement, which is attached as Exhibit B, and is hereby incorporated by reference.

 

6.         Enforcement. If Service Provider should directly or indirectly violate the provisions of this Agreement, the Company or its assigns shall have the right to seek a temporary restraining order and an injunction against Service Provider and any other appropriate person, restraining him or such other person from violating any of the provisions of this Agreement. In addition to any injunctive relief that the Company or its assigns may be entitled to recover, the Company or its assigns shall have the right to recover any and all damages of whatever nature or kind resulting from Service Provider’s breach of this Agreement.

 

7.         Indemnification. Service Provider agrees to indemnify, defend and hold the Company harmless from and against any and all losses, claims, liabilities and costs of any kind whatsoever arising from Service Provider’s failure to file returns for and pay any taxes, insurance costs or any other costs which he may owe as a result of the performance of services hereunder, provided that the Company shall be solely responsible for any liabilities, costs, interests or penalties which may be assessed against the Company for its failure to withhold against the amounts collected or paid on Service Provider’s behalf.

 

8.         Fee and Reimbursements Only. Service Provider acknowledges and agrees that the Company shall not have any obligation or liability whatsoever to Service Provider or his successors, assigns or creditors for (i) any remuneration other than the Fee, reimbursement of expenses under Section 2(b) and any other fee awarded in the sole discretion of the compensation committee of the Board, including any salary, wages, annual leave, sick leave, long service leave or superannuation, (ii) any workers’ compensation, accident, disability or life insurance, except as provided in Section 2(b), or (iii) any taxes or levies imposed by any government. SERVICE PROVIDER ACKNOWLEDGES THAT SERVICE PROVIDER IS OBLIGATED TO PAY ALL PERSONAL INCOME TAXES ON ANY MONEYS PAID TO SERVICE PROVIDER PURSUANT TO THIS AGREEMENT BECAUSE NO SUCH TAXES ARE BEING WITHHELD BY THE COMPANY.

 

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9.         Effect of Invalidity.

 

(a)                  If any provision or clause of this Agreement, as applied to any party or to any circumstances, shall be adjudged by a court to be invalid or unenforceable, said adjudication shall in no way affect any other provision of this Agreement, the application of such provisions in any other circumstances, or the validity or enforceability of this Agreement. If any provisions, or any part hereof, is held to be unenforceable because of the duration of such provision or area covered hereby, the parties hereto agree that the court in making such determination shall have the power to reduce the duration and/or area of such provisions, and/or to delete specific words or phrases and in its reduced or reformed form, such provisions shall then be enforceable and shall be enforced.

 

(b)         The invalidity of any portion of this Agreement will not and shall not be deemed to affect the validity of any other provision. This is a severable Agreement, and in the event that any part or parts of this Agreement shall be held to be unenforceable to its or their full extent, the parties agree that the remaining provisions shall be deemed to be in full force and effect as if they had been executed by both parties subsequent to the expungement of the invalid provision.

 

11.         Notices. All notices or other communications given or made hereunder shall be given or made if delivered by hand, registered mail or email, addressed to the party at its address as set forth in the introduction to this Agreement or on Exhibit A, as applicable (or to such other address that either party may designate from time to time in accordance with this Section).

 

12.         Survival. The terms of the Non-Disclosure and Creations Agreement shall survive the termination of this Agreement.

 

13.         Waiver. Any waiver by the Company of any provision of this Agreement shall not operate as or be construed as a waiver of any subsequent default.

 

14.         Applicable Law. This Agreement shall be interpreted, construed and enforced in accordance with the laws of the State of California, and the parties agree to submit to the exclusive jurisdiction of the State courts located in the county of Los Angeles and their appellate courts.

 

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above.

 

 

	 	
			DAILY JOURNAL CORPORATION

			 

			 

			 

			By: /s/ Charles T. Munger                                    

			 

			Name: Charles T. Munger

			 

			Title: Chairman

			 

			Date: March 28, 2022

			 

			 

			 

			SMJ HOLDINGS INC.

			 

			 

			 

			By: /s/ Steven Myhill-Jones                           

			 

			Name: Steven Myhill-Jones

			 

			Title: President

			 

			Date: March 28, 2022

			

 

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