ASTON ASSET MANAGEMENT LLC AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT DATED AS OF APRIL 20, 2006
EXHIBIT
10.6
ASTON
ASSET MANAGEMENT LLC
AMENDED
AND RESTATED
DATED
AS OF APRIL 20, 2006
TABLE
OF CONTENTS
|
Page
|
||
|
DEFINITIONS
|
1
|
|
|
Section
1.1.
|
Definitions
|
1
|
|
ARTICLE
II
|
ORGANIZATION
AND GENERAL PROVISIONS
|
12
|
|
Section
2.1.
|
Continuation
|
12
|
|
Section
2.2.
|
Name
|
13
|
|
Section
2.3.
|
Term
|
13
|
|
Section
2.4.
|
Registered
Agent and Registered Office
|
13
|
|
Section
2.5.
|
Principal
Place of Business
|
13
|
|
Section
2.6.
|
Qualification
in Other Jurisdictions
|
13
|
|
Section
2.7.
|
Purposes
and Powers
|
13
|
|
Section
2.8.
|
Title
to Property
|
15
|
|
ARTICLE
III
|
MANAGEMENT
OF THE LLC
|
15
|
|
Section
3.1.
|
Management
in General
|
15
|
|
Section
3.2.
|
Management
Committee of the LLC
|
16
|
|
Section
3.3.
|
Officers
of the LLC
|
18
|
|
Section
3.4.
|
Employees
of the LLC
|
18
|
|
Section
3.5.
|
Operation
of the Business of the LLC
|
19
|
|
Section
3.6.
|
Compensation
and Expenses of the Members
|
25
|
|
Section
3.7.
|
Other
Business of the Manager Member and Its Affiliates
|
25
|
|
Section
3.8.
|
Restrictions
on Competition, Non-Solicitation and Non-Disclosure by Non-Manager
Members
and Employee Stockholders
|
26
|
|
Section
3.9.
|
Remedies
Upon Breach
|
29
|
|
Section
3.10.
|
Purchase
Provisions
|
29
|
|
Section
3.11.
|
No
Employment Obligation
|
35
|
|
Section
3.12.
|
Capitalization
of Excess Operating Cash Flow
|
35
|
|
Section
3.13.
|
Miscellaneous
|
35
|
|
ARTICLE
IV
|
CAPITAL
CONTRIBUTIONS; CAPITAL ACCOUNTS AND ALLOCATIONS;
DISTRIBUTIONS
|
36
|
|
Section
4.1.
|
Capital
Contributions
|
36
|
|
Section
4.2.
|
Capital
Accounts; Allocations
|
36
|
|
Section
4.3.
|
Distributions
|
40
|
|
Section
4.4.
|
Distributions
Upon Dissolution; Establishment of a Reserve Upon
Dissolution
|
42
|
|
Section
4.5.
|
Proceeds
from Capital Contributions and the Sale of Securities; Insurance
Proceeds;
Certain Special Allocations
|
43
|
|
Section
4.6.
|
Tax
Allocations
|
45
|
|
Section
4.7.
|
Other
Allocation Provisions
|
46
|
|
Section
4.8.
|
Withholding
|
46
|
-i-
TABLE
OF CONTENTS
(continued)
|
Page
|
||
|
ARTICLE
V
|
TRANSFER
OF LLC INTERESTS BY NON-MANAGER MEMBERS; RESIGNATION, REDEMPTION
AND
WITHDRAWAL BY NON-MANAGER MEMBERS; ADMISSION OF ADDITIONAL NON-MANAGER
MEMBERS
|
46
|
|
Section
5.1.
|
Transferability
of Interests
|
46
|
|
Section
5.2.
|
Substitute
Non-Manager Members
|
48
|
|
Section
5.3.
|
Allocation
of Distributions Between Transferor and Transferee; Successor to
Capital
Accounts
|
49
|
|
Section
5.4.
|
Resignation,
Redemptions and Withdrawals
|
49
|
|
Section
5.5.
|
Issuance
of Additional LLC Interests
|
49
|
|
Section
5.6.
|
Additional
Requirements for Transfer or for Issuance
|
50
|
|
Section
5.7.
|
Registration
of LLC Interests
|
50
|
|
Section
5.8.
|
Representation
of Members
|
51
|
|
Section
5.9.
|
Conversion
of Series B LLC Interests
|
51
|
|
ARTICLE
VI
|
TRANSFER
OF LLC INTERESTS BY THE MANAGER MEMBER; REDEMPTION, REMOVAL AND
WITHDRAWAL
|
52
|
|
Section
6.1.
|
Transferability
of Interest
|
52
|
|
Section
6.2.
|
Resignation,
Redemption, and Withdrawal
|
53
|
|
ARTICLE
VII
|
DISSOLUTION
AND TERMINATION
|
53
|
|
Section
7.1.
|
No
Dissolution
|
53
|
|
Section
7.2.
|
Events
of Dissolution
|
54
|
|
Section
7.3.
|
Notice
of Dissolution
|
54
|
|
Section
7.4.
|
Liquidation
|
54
|
|
Section
7.5.
|
Termination
|
54
|
|
Section
7.6.
|
Claims
of the Members
|
54
|
|
ARTICLE
VIII
|
RECORDS
AND REPORTS
|
54
|
|
Section
8.1.
|
Books
and Records
|
54
|
|
Section
8.2.
|
Accounting
|
55
|
|
Section
8.3.
|
Financial
and Compliance Reports
|
55
|
|
Section
8.4.
|
Meetings
|
56
|
|
Section
8.5.
|
Tax
Matters
|
56
|
-ii-
TABLE
OF CONTENTS
(continued)
|
Page
|
||
|
ARTICLE
IX
|
LIABILITY,
EXCULPATION AND INDEMNIFICATION
|
57
|
|
Section
9.1.
|
Liability
|
57
|
|
Section
9.2.
|
Exculpation
|
57
|
|
Section
9.3.
|
Fiduciary
Duty
|
57
|
|
Section
9.4.
|
Indemnification
|
58
|
|
Section
9.5.
|
Notice;
Opportunity to Defend and Expenses
|
58
|
|
Section
9.6.
|
Miscellaneous
|
60
|
|
ARTICLE
X
|
MISCELLANEOUS
|
60
|
|
Section
10.1.
|
Notices
|
60
|
|
Section
10.2.
|
Successors
and Assigns
|
60
|
|
Section
10.3.
|
Amendments
|
60
|
|
Section
10.4.
|
No
Partition
|
61
|
|
Section
10.5.
|
No
Waiver; Cumulative Remedies
|
61
|
|
Section
10.6.
|
Dispute
Resolution
|
61
|
|
Section
10.7.
|
Prior
Agreements Superseded
|
62
|
|
Section
10.8.
|
Captions
|
62
|
|
Section
10.9.
|
Counterparts
|
62
|
|
Section
10.10.
|
Applicable
Law; Jurisdiction
|
62
|
|
Section
10.11.
|
Interpretation
|
62
|
|
Section
10.12.
|
Severability
|
62
|
|
Section
10.13.
|
Creditors
|
62
|
|
Section
10.14.
|
References
to This Agreement
|
63
|
|
Section
10.15.
|
Exhibits,
Schedules and Annexes
|
63
|
|
Section
10.16.
|
Additional
Documents and Acts
|
63
|
EXHIBITS
|
Exhibit
A
|
-
|
Form
of Promissory Note for Repurchases
|
SCHEDULES
|
Schedule
A
|
-
|
LLC
Units and Capital Contributions
|
|
Schedule
B
|
-
|
Retirement
|
-iii-
ASTON
ASSET MANAGEMENT LLC
AMENDED
AND RESTATED
This
Amended and Restated Limited Liability Company Agreement (the “Agreement”)
of
Aston Asset Management LLC (the “LLC”)
is
made and entered into as of April 20, 2006 (the “Effective
Time"),
by
and among the Persons identified as the Manager Member and the Non-Manager
Members on Schedule
A
attached
hereto as members of the LLC, and the Persons who become members of the LLC
in
accordance with the provisions hereof.
WHEREAS,
a
limited liability company has been formed pursuant to the Delaware Limited
Liability Company Act, 6 Del.
C§ 18-101,
et seq.,
as it
may be amended from time to time and any successor to such Act (the
“Act”),
by
filing a Certificate of Formation of the LLC with the office of the Secretary
of
State of the State of Delaware on April 19, 2006, and entering into a Limited
Liability Company Agreement of the LLC, dated as of April 19, 2006;
WHEREAS,
the
parties hereto desire to amend and restate the Limited Liability Company
Agreement of the LLC as of the date hereof in its entirety as herein set forth,
such amendment and restatement to become effective as of, and subject to, the
Effective Time;
NOW,
THEREFORE,
for good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and in consideration of the mutual covenants hereinafter set
forth, the parties hereby agree as follows:
ARTICLE
I
DEFINITIONS
Section
1.1. Definitions.
Unless
the context otherwise requires, the terms defined in this Article I shall,
for
the purposes of this Agreement, have the meanings herein specified.
“1940
Act”
shall
mean the Investment Company Act of 1940, as it may be amended from time to
time,
and any successor to such act.
“Act”
shall
have the meaning specified in the recitals hereto.
“Additional
Non-Manager Members”
shall
have the meaning specified in Section 5.5 hereof.
“Advisers
Act”
shall
mean the Investment Advisers Act of 1940, as it may be amended from time to
time, and any successor to such act.
“Affiliate”
shall
mean, with respect to any person or entity (herein the “first
party”),
any
other person or entity that directly or indirectly controls, or is controlled
by, or is under common control with, such first party. The term “control”
as
used
herein (including the terms “controlled
by”
and
“under
common control with”)
means
the possession, directly or indirectly, of the power to (a) vote twenty-five
percent (25%) or more of the outstanding voting securities of such person or
entity, or (b) otherwise direct the management or policies of such person or
entity by contract or otherwise (other than solely as a director of a
corporation (or similar entity) that has five (5) or more directors). For
purposes of this Agreement, the LLC is not an Affiliate of any
Member.
-1-
“Agreement”
shall
have the meaning specified in the preamble hereto.
“Applicable
Aggregate Non-Manager Member Allocation Percentage”
shall
mean, as of the date of any transaction described in Section 4.2(e) hereof,
the
quotient (expressed as a percentage) obtained by dividing (i) the aggregate
number of LLC Units held by the Non-Manager Members as of the date of such
transaction by (ii) the number of LLC Units outstanding as of the date of such
transaction.
“Applicable
Cash Flow”
shall
have the meaning specified in Section 3.10(c)(i)(B) hereof.
“Applicable
Fraction”
shall
have the meaning specified in Section 3.10(c)(i)(C) hereof.
“Applicable
Manager Member Allocation Percentage”
shall
mean, as of the date of any transaction described in Section 4.2(e) hereof,
the
quotient (expressed as a percentage) obtained by dividing (i) the aggregate
number of LLC Units held by the Manager Member and its Affiliates as of the
date
of such transaction by (ii) the number of LLC Units outstanding as of the date
of such transaction.
“Asserted
Liability”
shall
have the meaning specified in Section 9.5(a) hereof.
“Base
Owners’ Allocation”
shall
mean, for any period, the Owners’ Allocation for that period minus the
Performance Owners’ Allocation (if any) for that period (determined on an
accrual basis in accordance with GAAP consistently applied).
“Capital
Account”
shall
mean the capital account maintained by the LLC with respect to each Member
in
accordance with the capital accounting rules described in Section 4.2
hereof.
“Capital
Contribution”
shall
mean, as to each Member, the amount of money and/or the agreed fair market
value
of any property (net of any liabilities encumbering such property that the
LLC
is considered to assume or take subject to) contributed to the capital of the
LLC by such Member.
“Carrying
Value”
shall
mean, with respect to any LLC asset, the asset’s adjusted basis for federal
income tax purposes, except that the Carrying Values of all LLC assets shall
be
adjusted to equal their respective Fair Market Values in accordance with the
rules set forth in Treasury Regulations Section 1.704-1(b)(2)(iv)(f), except
as
otherwise provided herein, immediately prior to: (a) the date of the acquisition
of any additional LLC Interest by any new or existing Member in exchange for
more than a de minimis Capital Contribution; (b) the date of the distribution
of
more than a de minimis amount of LLC property (other than a pro rata
distribution) to a Member; or (c) the date of the termination of the LLC under
Section 708(b)(1)(B) of the Code, provided that adjustments pursuant to clauses
(a) and (b) above shall be made only if the Manager Member reasonably determines
that such adjustments are necessary or appropriate to reflect the relative
economic interests of the Members. The Carrying Value of any LLC asset
distributed to any Member shall be adjusted immediately prior to such
distribution to equal its Fair Market Value.
-2-
“Certificate”
shall
mean the Certificate of Formation of the LLC filed under the Act, as the same
may be amended and/or restated from time to time in accordance with the terms
hereof.
“Claims
Notice”
shall
have the meaning specified in Section 9.5(a) hereof.
“Client”
shall
mean all Past Clients, Present Clients and Potential Clients, subject to the
following general rules: (i) with respect to each Client, the term shall also
include any Persons which are known to the Employee Stockholder to be Affiliates
of such Client, directors, officers or employees of such Client or any such
Affiliates thereof, or Persons who are known to the Employee Stockholder to
be
members of the Immediate Family of any of the foregoing Persons or Affiliates
of
any of them and (ii) with respect to any Client that is a Fund, the term shall
also include any investor or participant in such Fund and any Person that has
participated in the distribution or sale of such Fund.
“Code”
shall
mean the United States Internal Revenue Code of 1986, as from time to time
amended, and any successor thereto, together with all regulations promulgated
thereunder.
“Committee
Vote”
shall
have the meaning specified in Section 3.2(b)(iv) hereof.
“Contingent
Consideration”
shall
mean, with respect to the Manager Member’s (or its assignee’s) purchase of LLC
Units pursuant to Section 3.10, an obligation on the part of the Manager Member
(or its successor or assigns) to pay to the Selling Member (or its successors
or
assigns), on the Liquidation Date, an amount equal to the lesser
of:
(i) the
portion of the Purchase Price designated as Contingent Consideration in Section
3.10(f)(i)(D) or Section 3.10(f)(ii), as applicable; or
(ii) the
amount calculated in clause (i) of this definition, multiplied by a fraction
(A)
the numerator of which is the Applicable Cash Flow measured for the twenty-four
(24) months (in the case of Base Owners’ Allocation), or the forty-eight (48)
months (in the case of Earned Performance Owners’ Allocation), ending on the
last day of the most recently completed calendar quarter prior to the
Liquidation Date, and (B) the denominator of which is the Applicable Cash Flow
measured for the twenty-four (24) months (in the case of Base Owners’
Allocation), or the forty-eight (48) months (in the case of Earned Performance
Owners’ Allocation), ending on the last day of the calendar quarter in which the
termination of the Selling Member’s (or its related Employee Stockholder’s, as
applicable) employment with the LLC occurred.
Notwithstanding
any provision of this Agreement to the contrary (including, without limitation,
the provision of Section 3.10(f) hereof), the Manager Member may (without the
need for any vote or consent of any Member or Members) assign and delegate
its
obligation to pay the Contingent Consideration (including, by way of example
and
not of limitation, to a transferee of LLC Interests pursuant to Section
6.1(a)).
In
the
event that a change is made in the definition of Applicable Cash Flow following
the date on which a Contingent Consideration obligation initially is
outstanding, an appropriate adjustment will be made to that Contingent
Consideration obligation to give effect to that change in definition. Such
a
change will be made by the Manager Member in its sole discretion, and such
change will be binding on all parties absent a mathematical error. The Manager
Member will notify all persons who owe or are owed Contingent Consideration
of
any such change.
-3-
“Controlled
Affiliate”
shall
mean, with respect to a Person, any Affiliate of such Person under its
“control,”
as
the
term “control”
is
defined in the definition of Affiliate.
“Convert”
shall
have the meaning specified in Section 5.9 hereof, and “Conversion”
shall
have the corresponding meaning.
“Covered
Person”
shall
mean a Member, any Affiliate of a Member, any officer, director, shareholder,
partner, employee or member of a Member or any of its Affiliates, or any
Officer.
“Earned
Performance Owners’ Allocation”
shall
mean, with respect to a calendar quarter in which any fees or other payments
falling within the definition of Performance Owners’ Allocation have been
definitively allocated to or earned by the LLC and are no longer subject to
any
offset, reduction or return, an amount equal to such definitively allocated
or
earned Performance Owners’ Allocation.
“Effective
Time”
shall
have the meaning specified in the preamble hereto.
“Eligible
Person”
shall
have the meaning specified in Section 3.2(b)(i) hereof.
“Employee
Stockholder”
shall
mean (a) in the case of any Non-Manager Member which is a natural person, such
Non-Manager Member, and (b) in the case of any Non-Manager Member which is
not a
natural person, that certain employee of the LLC (or one of its Controlled
Affiliates) who is the owner of the issued and outstanding capital stock of,
or
other equity interests in, such Non-Manager Member and is listed as such on
Schedule
A
hereto
(including any such employee after such employee has transferred any of his
or
her interest in such Non-Manager Member to a Permitted Transferee).
“ERISA”
shall
mean the Employee Retirement Income Security Act of 1974, as amended from time
to time, and any successor to such Act.
“Fair
Market Value”
shall
mean the fair market value as reasonably determined by the Manager Member or,
for purposes of Section 4.4 hereof, if there shall be no Manager Member, the
Liquidating Trustee.
“For
Cause”
shall
mean, with respect to the termination of an Employee Stockholder’s employment
with the LLC (or any of its Controlled Affiliates), or his removal from the
Management Committee or from his position as an Officer, any of the
following:
(a) The
Employee Stockholder has been convicted of or indicted for (i) any criminal
offense which is classified as a felony in the United States, or (ii) any other
criminal offense which involves a violation of federal or state securities
laws
or regulations (or equivalent laws or regulations of any country or political
subdivision thereof in which the criminal offense occurs), embezzlement, fraud,
wrongful taking or misappropriation of property, theft, or any other crime
involving dishonesty;
-4-
(b) The
Employee Stockholder has persistently and willfully failed to perform his or
her
duties, or has failed to devote substantially all of his or her working time
to
the performance of such duties, and in either such case such failure has not
been cured by the Employee Stockholder within thirty (30) days following written
notice; or
(c) The
Employee Stockholder has (i) engaged in a Prohibited Competition Activity,
(ii)
violated or breached any material provision of this Agreement, or (iii) engaged
in any of the activities prohibited by Section 3.8 hereof; provided,
however,
that,
in any such case described in clauses (i)-(iii) of this paragraph (c), in the
event such action by such Employee Stockholder has not resulted (and is not
reasonably likely to result) in harm that is material to the Manager Member,
the
LLC or any of their respective Controlled Affiliates or any of the Funds, such
Employee Stockholder shall be provided with an opportunity to cure such action
promptly (and in any event within thirty (30) days) following written notice
thereof (provided
that
such
an opportunity to cure shall be available to a particular Employee Stockholder
solely with respect to the first three such actions by such Employee Stockholder
with respect to which such a written notice is provided, and provided,
further,
that
such an opportunity to cure shall in no event be provided to an Employee
Stockholder if his or her violation, breach or other applicable action was
willful or reckless).
“Fund”
shall
mean any Mutual Fund or other commingled fund for which the LLC provides
Investment Services.
“GAAP”
shall
mean U.S. generally accepted accounting principles.
“Governmental
Authority”
shall
mean any foreign, federal, state or local court, governmental authority or
regulatory body.
“Immediate
Family”
shall
mean, with respect to any natural person, (a) such person’s spouse, parents,
grandparents, children, grandchildren and siblings, (b) such person’s former
spouse(s) and current spouses of such person’s children, grandchildren and
siblings and (c) estates, trusts, partnerships and other entities of which
substantially all of the interests are held directly or indirectly by the
foregoing.
“Indebtedness”
shall
mean, with respect to a Person, (a) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property or services (other than
current trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), (b) any other indebtedness
of
such Person which is evidenced by a note, bond, debenture or similar instrument,
(c) all obligations of such Person under any financing leases, (d) all
obligations of such person in respect of acceptances issued or created for
the
account of such Person, (e) all obligations of such Person under non-competition
agreements reflected as liabilities on a balance sheet of such Person in
accordance with GAAP, (f) all liabilities secured by any Lien on any property
owned by such Persons even though such Person has not assumed or otherwise
become liable for the payment thereof, and (g) all net obligations of such
Person under interest rate, commodity, foreign currency and financial markets
swaps, options, futures and other hedging obligations.
-5-
“Independent
Public Accountants”
shall
mean any independent certified public accountant retained by the LLC and
satisfactory to the Manager Member.
“Initial
LLC Units”
means,
with respect to a Non-Manager Member and its Permitted Transferees, those Series
B LLC Units held by such Non-Manager Member in the LLC at the Effective Time,
provided that LLC Units shall cease to be Initial LLC Units from and after
the
date on which they are acquired by the Manager Member (or its
assignee).
“Initial
Members”
shall
mean those Persons who are Members at the Effective Time.
“Intellectual
Property”
shall
have the meaning specified in Section 3.8(d) hereof.
“Investment
Services”
shall
mean any services which involve (a) the management, administration, solicitation
or distribution of an investment account, Mutual Fund or other commingled fund
(or portions thereof or a group of investment accounts, Mutual Funds or other
commingled funds) for compensation, (b) the giving of advice with respect to
the
investment and/or reinvestment of assets or funds (or any group of assets or
funds) for compensation, or (c) otherwise acting as an “investment adviser”
within the meaning of the Advisers Act.
“IRS”
shall
mean the Internal Revenue Service of the United States Department of the
Treasury, and any successor Governmental Authority thereto.
“Lien”
shall
mean any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge or other security interest or
any
preference, priority or other security agreement or preferential arrangement
of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement and any financing lease having
substantially the same economic effect as any of the foregoing) or any other
restrictions, liens or claims of any kind or nature whatsoever, excluding liens
of lessors under operating leases that do not extend beyond the property leased.
Notwithstanding the foregoing, the following items shall not constitute Liens
under this Agreement (i) Liens for taxes, assessments, governmental charges
or
claims that are being contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and for which an adequate reserve
or other appropriate provision, if any, as shall be required in conformity
with
GAAP shall have been made; (ii) statutory Liens of landlords and carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen or other similar
Liens arising in the ordinary course of business and with respect to amounts
not
yet delinquent or being contested in good faith by appropriate legal proceedings
promptly instituted and diligently conducted and for which an adequate reserve
or other appropriate provision, if any, as shall be required in conformity
with
GAAP shall have been made; and (iii) statutory Liens incurred in the ordinary
course of business in connection with workers’ compensation, unemployment
insurances and other types of social security.
“Liquidating
Trustee”
shall
have the meaning specified in Section 7.4 hereof.
“Liquidation
Date”
shall
mean (a) the date upon which the final distribution is made to the Members
under
Section 4.4 hereof or (b) the date of the closing of a transaction under the
last sentence of Section 6.1(a).
-6-
“Liquidation
Preference”
shall
mean, as of any time of determination, an amount equal to the sum of (i) the
aggregate positive Capital Account balances of those Members holding Series
A
LLC Units as of such time of determination (or an allocable portion thereof,
in
the case of any Member holding both Series A LLC Units and Series B LLC Units
at
such time of determination), plus (ii) ninety-five million eight hundred
thousand dollars ($95,800,000.00), plus (iii) accretion at a rate of ten percent
(10%) per annum (compounded annually), calculated from the Effective Time
through such time of determination, on a principal amount equal to the aggregate
positive Capital Account balances of the Members holding Series A LLC Units
as
of the Effective Time plus ninety-five million eight hundred thousand dollars
($95,800,000.00).
“LLC”
shall
have the meaning specified in the preamble hereto.
“LLC
Interest”
means
a
Member’s limited liability company interest in the LLC, which includes such
Member’s LLC Units as well as such Member’s Capital Account and other rights
under this Agreement and the Act.
“LLC
Units”
shall
mean, collectively, the Series A LLC Units and the Series B LLC Units authorized
by the LLC pursuant hereto, entitling the holders thereof to the relative
rights, title and interests in the profits, losses, deductions and credits
of
the LLC at any particular time as are set forth in this Agreement, and any
and
all other benefits to which a holder thereof may be entitled as a Member as
provided in this Agreement (including, without limitation, certain voting rights
as set forth herein). With respect to a particular Member as of any date,
“LLC
Units”
shall
mean the aggregate number of Series A LLC Units and Series B LLC Units belonging
to such Member as set forth on Schedule
A
hereto,
as amended from time to time in accordance with the terms hereof, and as in
effect on such date.
“Losses”
shall
have the meaning specified in Section 9.4 hereof.
“Majority
Vote”
shall
mean the affirmative approval, by vote or written consent, of Non-Manager
Members holding a majority of the outstanding LLC Units then held by all
Non-Manager Members.
“Management
Committee”
shall
have the meaning specified in Section 3.2(a) hereof.
“Manager
Member”
shall
mean Highbury Financial Inc., and any Person who becomes a successor Manager
Member as provided herein.
“Members”
shall
mean any Person admitted to the LLC as a “member” within the meaning of the Act,
which includes the Manager Member and the Non-Manager Members, and includes
any
Person admitted as an Additional Non-Manager Member or a substitute Non-Manager
Member pursuant to the provisions of this Agreement, in such Person’s capacity
as a member of the LLC (unless otherwise indicated). For purposes of the Act,
the Members shall constitute one (1) class or group of members.
“Mutual
Fund”
shall
mean a registered investment company (or series of registered investment
companies).
-7-
“Non-Manager
Member”
shall
mean any Person admitted to the LLC as a Member pursuant to the terms hereof,
other than the Manager Member.
“Nonrecourse
Deductions”
shall
have the meaning set forth in Treasury Regulations Section 1.704-2(b). The
amount of Nonrecourse Deductions for a partnership taxable year equals the
net
increase, if any, in the amount of Partnership Minimum Gain during that
partnership taxable year, reduced (but not below zero) by the aggregate
distributions made during the year of proceeds of a nonrecourse liability that
are allocable to an increase in partnership minimum gain, determined according
to the provisions of Treasury Regulations Section 1.704-2(c).
“Notices”
shall
have the meaning specified in Section 10.1 hereof.
“Officers”
shall
have the meaning specified in Section 3.3 hereof
“Operating
Allocation”
shall
mean, for any period, an amount equal to the sum of (i) the difference between
Revenues From Operations for such period and the Owners’ Allocation for such
period plus (ii) any amounts expressly required to be added directly to the
Operating Allocation for such period by the provisions of this
Agreement.
“Owners’
Allocation”
shall
mean, for any period, the sum of the Owners’ Allocation Percentage multiplied by
the Revenues From Operations for such period.
“Owners’
Allocation Account”
shall
have the meaning specified in Section 4.3(b) hereof.
“Owners’
Allocation Expenditure”
shall
have the meaning specified in Section 3.5(b) hereof.
“Owners’
Allocation Percentage”
shall
mean twenty-eight percent (28%).
“Partner
Nonrecourse Debt Minimum Gain”
shall
mean an amount with respect to each partner nonrecourse debt (as defined in
Treasury Regulations Section 1.704-2(b)(4)) equal to the Partnership Minimum
Gain that would result if such partner nonrecourse debt were treated as a
nonrecourse liability (as defined in Treasury Regulations Section 1.752-1(a)(2))
determined in accordance with Treasury Regulations Section
1.704-2(i)(3).
“Partner
Nonrecourse Deductions”
shall
have the meaning set forth in Treasury Regulations Section
1.704-2(0(2).
“Partnership
Minimum Gain”
shall
have the meaning set forth in Treasury Regulations Sections 1.704-2(b)(2) and
1.704-2(d).
“Past
Client”
shall
mean at any particular time, any Person who at any point prior to such time
had
been engaged to distribute or sell any Fund, an advisee or investment advisory
customer of, or otherwise a recipient of Investment Services from, the LLC,
a
Controlled Affiliate of the LLC, a Predecessor Business or any such predecessor,
or any shareholder, partner, member, director or officer of any such Person
(in
each case whether directly or through one or more intermediaries, e.g., a wrap
sponsor, or through investment in a Fund), but at such time is not an advisee
or
investment advisory customer or client of, or recipient of Investment Services
from, the LLC or any of its Controlled Affiliates (directly or
indirectly).
-8-
“Performance
Owners’ Allocation”
shall
mean the product of (i) the sum of (a) all “carried interests” and other items
of gain allocated (directly or indirectly) to the LLC and any Controlled
Affiliates thereof (other than allocations which are made pro rata based on
contributed capital to all partners, members, beneficiaries or other holders
of
similar economic interests in the Client) and (b) all “performance fee” and
other payments based, in whole or in part, on the investment performance of
a
Client or a Client’s account, multiplied by (ii) Owners’ Allocation
Percentage.
“Permanent
Incapacity”
shall
mean, with respect to an Employee Stockholder, that such Employee Stockholder
has been permanently and totally unable, by reason of injury, illness or other
similar cause (as reasonably determined by the Manager Member) to have performed
his or her substantial and material duties and responsibilities for a period
of
three hundred sixty-five (365) consecutive days, which injury, illness or
similar cause (as reasonably determined by the Manager Member) would render
such
Employee Stockholder incapable of operating in a similar capacity and manner
in
the future.
“Permitted
Transferee”
shall
mean, with respect to any Non-Manager Member, its transferees pursuant to the
provisions of Sections 5.1(b) and 5.1(c) hereof and, to the extent set forth
in
any consent of the Manager Member pursuant to Section 5.1(a), its transferees
pursuant to Section 5.1(a) hereof.
“Person”
means
any individual, partnership (limited or general), corporation, limited liability
company, limited liability partnership, association, trust, joint venture,
unincorporated organization or other entity.
“Potential
Client”
shall
mean, at any particular time, any Person or any shareholder, partner, member,
director, officer employee, agent or consultant (or persons acting in any
similar capacity) of any such Person to whom the LLC, a Controlled Affiliate
of
the LLC or the Predecessor Business has, within two (2) years prior to such
time, offered (whether by means of a personal meeting, telephone call, letter,
written proposal or otherwise) to serve as investment adviser or otherwise
provide Investment Services or solicited to invest in, or participated in the
distribution or sale of, any Fund, but who is not at such time an advisee or
investment advisory customer of, or otherwise a recipient of Investment Services
from, the LLC, any of its Controlled Affiliates (directly or indirectly) or
any
investor in, or participant in the distribution or sale of, any Fund. The
preceding sentence is meant to exclude (i) advertising, if any, through mass
media in which the offer, if any, is available to the general public, such
as
magazines, newspapers and sponsorships of public events and (ii) “cold calls”
and mass-mailing form letters, in each case to the extent not directed towards
any particular Person and not resulting in an indication of interest or a
request for further information.
“Predecessor
Business”
shall
mean the business of the parties to the Purchase Agreement immediately prior
to
the Closing (as such term is defined in the Purchase Agreement).
-9-
“Present
Client”
shall
mean, at any particular time, any Person who is at such time an advisee or
investment advisory customer of, or otherwise a recipient of Investment Services
from, the LLC, any of its Controlled Affiliates (directly or indirectly) or
any
investor in, or participant in the distribution or sale of, any
Fund.
“Prohibited
Competition Activity”
shall
mean any of the following activities:
(a) directly
or indirectly, whether as owner, part owner, member, director, officer, trustee,
employee, agent or consultant for or on behalf of any Person other than the
LLC
or any Controlled Affiliate of the LLC: (i) diverting or taking away any funds
or investors from any Fund; (ii) soliciting or otherwise inducing or attempting
to cause any Person to divert or take away any assets or funds invested in
such
Funds; or (iii) soliciting or otherwise inducing or attempting to cause any
subadviser, distributor or seller of the Funds to terminate or reduce its
services on behalf of the Funds; and
(b) directly
or indirectly, whether as owner, part owner, partner, member, director, officer,
trustee, employee, agent or consultant for or on behalf of any Person other
than
the LLC or any Controlled Affiliate of the LLC, performing any Investment
Services.
“Purchase”
shall
have the meaning specified in Section 3.10(a).
“Purchase
Agreement”
shall
mean that certain Asset Purchase Agreement, dated as of April 20, 2006, by
and
among ABN AMRO Asset Management Holdings, Inc., ABN AMRO Investment Fund
Services, Inc., ABN AMRO Asset Management, Inc., Montag & Xxxxxxxx, Inc.,
Tamro Capital Partners LLC, Veredus Asset Management LLC, River Road Asset
Management LLC and the LLC.
“Purchase
Closing Date”
shall
have the meaning specified in Section 3.10(b).
“Purchase
Notice”
shall
have the meaning specified in Section 3.10(a).
“Purchase
Price”
shall
have the meaning specified in Section 3.10(c).
“Purchased
Interest”
shall
have the meaning specified in Section 3.10(a).
“Receipts
Account”
shall
have the meaning specified in Section 4.3(b) hereof.
“Regulatory
Allocations”
shall
have the meaning specified in Section 4.5(f) hereof.
“Removal
For Acting Contrary to the Best Interests of the LLC”
shall
mean, with respect to a Non-Manager Member, a determination by (i) the
Management Committee (excluding for all purposes the Non-Manager Member whose
removal is being considered (or its related Employee Stockholder, as
applicable)), with the prior written consent of the Manager Member, or (ii)
the
Manager Member, in either such case to remove such Non-Manager Member as a
member of the LLC following a termination of the employment of such Non-Manager
Member (or the Employee Stockholder which is related to such Non-Manager Member,
as applicable) For Cause or after a written determination of Unsatisfactory
Performance hereunder.
-10-
“Removal
Upon the Instruction of the Management Committee”
shall
mean, with respect to a Non-Manager Member, a determination by the Chairman,
Chief Executive Officer and one member of the Management Committee (excluding
for all purposes the Non-Manager Member whose removal is being considered (or
its related Employee Stockholder, as applicable)), with the prior written
consent of the Manager Member, to remove such Non-Manager Member as a member
of
the LLC (following a termination of the employment of such Non-Manager Member
(or the Employee Stockholder which is related to such Non-Manager Member, as
applicable) with the LLC) for any reason other than those described in the
definition of Removal For Acting Contrary to the Best Interests of the LLC
(and,
for the avoidance of doubt, any Purchase under Section 3.10 hereof following
a
termination at the election of the LLC of the employment of a Non-Manager Member
(or its related Employee Stockholder) for any reason other than those described
in the definition of Removal for Acting Contrary to the Best Interests of the
LLC shall be deemed a Removal Upon the Instruction of the Management
Committee).
“Retirement”
shall
mean, with respect to an Employee Stockholder, the termination by such Employee
Stockholder of such Employee Stockholder’s employment with the LLC and its
Controlled Affiliates: (a) after the date such Employee Stockholder shall have
been continuously employed by the LLC for a period of time specified as to
such
Employee Stockholder on Schedule B hereto commencing with the later of the
Effective Time or the date such Employee Stockholder commenced his or her
employment with the LLC and (b) pursuant to a written notice given to the LLC
and the Manager Member not less than one (1) year prior to the date of such
termination.
“Revenues
From Operations”
shall
mean, for any period, the consolidated gross revenues of the LLC and any
Controlled Affiliates thereof, determined on an accrual basis in accordance
with
GAAP consistently applied (but including other income such as interest, dividend
income and gains on the sale of assets); provided,
however,
that
Revenues From Operations shall not include (a) proceeds during such period
from
the sale, exchange or other disposition of all, or substantially all, of the
assets of the LLC and its Controlled Affiliates (and any such proceeds shall
be
allocated in accordance with Sections 4.2(e) and 4.2(f) hereof), (b) revenues
from the issuance by the LLC of additional LLC Units, other LLC Interests,
or
other securities issued by the LLC or any of its Controlled Affiliates (and
any
such proceeds shall be utilized in accordance with Section 4.5(g) hereof),
and
(c) payments received from third parties to the extent constituting direct
reimbursements of expenses previously paid from the Operating Allocation (and
any such payments shall be added back to the Operating Allocation for the period
in which such expenses were originally paid from the Operating
Allocation).
“SEC”
shall
mean the Securities and Exchange Commission, and any successor Governmental
Authority thereto.
“Securities
Act”
shall
mean the Securities Act of 1933, as it may be amended from time to time, and
any
successor thereto.
“Selling
Member”
shall
have the meaning specified in Section 3.10(a).
“Series
A LLC Units”
shall
mean, as of any date, with respect to a Member, the number of Series A LLC
Units
of such Member as set forth on Schedule
A
hereto,
as amended from time to time in accordance with the terms hereof, and as in
effect on such date. Series A LLC Units shall have the rights and preferences
set forth in this Agreement, but except where otherwise specified shall be
treated as one class of LLC Units with the Series B LLC Units.
-11-
“Series
B LLC Units”
shall
mean, as of any date, with respect to a Member, the number of Series B LLC
Units
of such Member as set forth on Schedule
A
hereto,
as amended from time to time in accordance with the terms hereof, and as in
effect on such date. Series B LLC Units shall have the rights and preferences
set forth in this Agreement, but except where otherwise specified shall be
treated as one class of LLC Units with the Series A LLC Units.
“Transfer”
shall
have the meaning specified in Section 5.1 hereof, and “Transferred”
shall
have the correlative meaning.
“Unsatisfactory
Performance”
shall
mean a written determination by the Management Committee, with the written
consent of the Manager Member, that an Employee Stockholder has failed to meet
minimum requirements of satisfactory performance of his or her job, after such
Employee Stockholder has received written notice (with a copy to the Manager
Member) that the Management Committee was considering such a determination
and
the Employee Stockholder has had a reasonable opportunity to respond in writing
or in person (at such Employee Stockholder’s request) after his or her receipt
of such notice.
In
addition to the foregoing, other capitalized terms used in this Agreement shall
have the meaning ascribed thereto in the text of this Agreement.
ARTICLE
II
ORGANIZATION
AND GENERAL PROVISIONS
Section
2.1. Continuation.
(a) The
Members hereby agree to continue the LLC as a limited liability company under
and pursuant to the provisions of the Act, and agree that the rights, duties
and
liabilities of the Members shall be as provided in the Act, except as otherwise
provided herein.
(b) Upon
the
execution of this Agreement or a counterpart of this Agreement, the Initial
Members shall continue as members of the LLC.
(c) The
name,
LLC Units and Capital Contribution of each Member (including the agreed value
of
such Capital Contribution) shall be listed on Schedule
A
attached
hereto and the Manager Member shall initially hold 65% of the LLC Interests
and
the Non-Manager Members shall initially hold an aggregate of 35% of the LLC
Interests. The Manager Member shall update Schedule
A
from
time to time as it deems necessary, to accurately reflect the information to
be
contained therein. Any amendment or revision to Schedule
A
shall
not be deemed an amendment to this Agreement. Any reference in this Agreement
to
Schedule
A
shall be
deemed to be a reference to Schedule
A
as
amended and in effect from time to time.
-12-
(d) The
Manager Member, as an authorized person within the meaning of the Act, shall
execute, deliver and file any certificates required or permitted by the Act
to
be filed in the office of the Secretary of State of the State of
Delaware.
Section
2.2. Name.
The
name of the LLC heretofore formed and continued hereby is Aston Asset Management
LLC. At any time the Management Committee, with the written consent of the
Manager Member, may change the name of the LLC. The business of the LLC (and
of
any Controlled Affiliate of the LLC) may be conducted (upon compliance with
all
applicable laws) under any other name designated by the Management Committee
with the prior written consent of the Manager Member (and the LLC and its
Controlled Affiliates shall in no event conduct business under other names
without such agreement of the Management Committee and the Manager Member,
subject to Section 2.6).
Section
2.3. Term.
The
term of the LLC commenced on the date the Certificate was filed in the Office
of
the Secretary of State of the State of Delaware and shall continue until the
LLC
is dissolved in accordance with the provisions of this Agreement.
Section
2.4. Registered
Agent and Registered Office.
The
LLC’s registered agent and registered office in Delaware shall be Corporation
Service Company, 0000 Xxxxxx Xxxx, Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx, Xxxxxxxx
00000. At any time, the Manager Member may designate another registered agent
and/or registered office.
Section
2.5. Principal
Place of Business.
The
principal place of business of the LLC (and any Controlled Affiliates of the
LLC) shall be at 000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 0000 Xxxxxxx, XX 00000. At
any
time the Management Committee (with the prior written consent of the Manager
Member) may change the location of the LLC’s (or any Controlled Affiliate’s)
principal place of business (and the LLC’s and its Controlled Affiliates’
principal place of business shall in no event be changed without such agreement
of the Management Committee and the Manager Member).
Section
2.6. Qualification
in Other Jurisdictions.
The
Manager Member shall cause the LLC (and any Controlled Affiliates thereof)
to be
qualified or registered (under assumed or fictitious names if necessary) in
any
jurisdiction in which they transact business or in which such qualification
or
registration otherwise is required.
Section
2.7. Purposes
and Powers.
The
principal business activity and purposes of the LLC (and any Controlled
Affiliates thereof) shall be to engage in the investment advisory and investment
management business and any businesses related thereto or useful in connection
therewith, including, without limitation, the provision of Investment Services.
However, the business and purposes of the LLC (and any Controlled Affiliates
thereof) shall not be limited to such initial principal business activities
if
the Management Committee and the Manager Member otherwise agree in writing,
and
in such event, the LLC (and any Controlled Affiliates thereof) shall have
authority to engage in any other lawful business, purpose or activity permitted
by the Act. The LLC shall possess and may exercise all of the powers and
privileges granted by the Act, together with any powers incidental thereto,
including such powers or privileges that are necessary or convenient to the
conduct, promotion or attainment of the business purposes or activities of
the
LLC, including without limitation the following powers:
-13-
(a) to
conduct its business and operations and to have and exercise the powers granted
to a limited liability company by the Act in any state, territory or possession
of the United States or in any foreign country or jurisdiction;
(b) to
purchase, receive, take, lease or otherwise acquire, own, hold, improve,
maintain, use or otherwise deal in and with, sell, convey, lease, exchange,
transfer or otherwise dispose of, mortgage, pledge, encumber or create a
security interest in all or any of its real or personal property, or any
interest therein, wherever situated;
(c) to
borrow
or lend money or obtain or extend credit and other financial accommodations,
to
invest and reinvest its funds in any type of security or obligation of or
interest in any public, private or governmental entity, and to give and receive
interests in real and personal property as security for the payment of funds
so
borrowed, loaned or invested;
(d) to
make
contracts, including contracts of insurance, incur liabilities and give
guaranties, including without limitation, guaranties of obligations of other
Persons who are interested in the LLC or in whom the LLC has an
interest;
(e) to
employ
Officers, employees, agents and other persons, to fix the compensation and
define the duties and obligations of such personnel, to establish and carry
out
retirement, incentive and benefit plans for such personnel, and to indemnify
such personnel to the extent permitted by this Agreement and the
Act;
(f) to
make
donations irrespective of benefit to the LLC for the public welfare or for
community, charitable, religious, educational, scientific, civic or similar
purposes;
(g) to
institute, prosecute and defend any legal action or arbitration proceeding
involving the LLC, and to pay, adjust, compromise, settle or refer to
arbitration any claim by or against the LLC or any of its assets;
(h) to
indemnify any Person in accordance with the Act and to obtain any and all types
of insurance;
(i) to
negotiate, enter into, renegotiate, extend, renew, terminate, modify, amend,
waive, execute, acknowledge or take any other action with respect to any lease,
contract or security agreement in respect of any assets of the LLC;
(j) to
form,
sponsor, organize or enter into joint ventures, general or limited partnerships,
limited liability companies, trusts and any other combinations or associations
formed for investment purposes;
(k) to
make,
execute, acknowledge and file any and all documents or instruments necessary,
convenient or incidental to the accomplishment of the purposes of the LLC;
and
(l) to
cease
its activities and cancel its Certificate.
-14-
Section
2.8. Title
to Property.
All
property owned by the LLC, real or personal, tangible or intangible, shall
be
deemed to be owned by the LLC as an entity, and no Member, individually, shall
have any ownership of such property.
ARTICLE
III
MANAGEMENT
OF THE LLC
Section
3.1. Management
in General.
Subject
to the other terms and conditions of this Agreement, including the delegations
of power and authority set forth herein, the management and control of the
business of the LLC shall be vested exclusively in the Manager Member, and
the
Manager Member shall have exclusive power and authority, in the name of and
on
behalf of the LLC, to perform all acts and do all things which, in its sole
discretion, it deems necessary or desirable to conduct the business of the
LLC,
with or without the vote or consent of the other Members in their capacity
as
such; provided,
however,
that
the Manager Member shall not have any powers or privileges with respect to
those
matters delegated exclusively to the Management Committee pursuant to Section
3.2 hereof. Members, in their capacity as such, shall have no right to amend
or
terminate this Agreement or to appoint, select, vote for or remove the Manager
Member, the Officers or their agents or to exercise voting rights or call a
meeting of the Members, except as specifically provided in this Agreement.
No
Member other than the Manager Member shall have the power to sign for or bind
the LLC in its capacity as a Member, but the Manager Member may delegate the
power to sign for or bind the LLC to one or more Officers (including without
limitation through delegation to the Management Committee).
(a) The
Manager Member shall, subject to all applicable provisions of this Agreement
and
the Act, be authorized in the name of and on behalf of the LLC: (i) to enter
into, execute, amend, supplement, acknowledge and deliver any and all contracts,
agreements, leases or other instruments for the operation of the LLC’s business;
and (ii) in general to do all things and execute all documents necessary or
appropriate to conduct the business of the LLC as set forth in Section 2.7
hereof, or to protect and preserve the LLC’s assets. The Manager Member may
delegate any or all of the foregoing powers to one or more of the Officers
(including without limitation through delegation to the Management
Committee).
(b) The
Manager Member is required to be a Member, and shall hold office until its
resignation in accordance with the provisions hereof. The Manager Member is
the
“manager” (within the meaning of the Act) of the LLC. The Manager Member shall
devote such time to the business and affairs of the LLC as it deems necessary,
in its sole discretion, for the performance of its duties, but in any event,
shall not be required to devote full time to the performance of such duties
and
may delegate its duties and responsibilities as provided in Section
3.3.
(c) Any
action taken by the Manager Member, and the signature of the Manager Member
(or
an authorized representative thereof) on any agreement, contract, instrument
or
other document on behalf of the LLC, shall be sufficient to bind the LLC and
shall conclusively evidence the authority of the Manager Member and the LLC
with
respect thereto.
-15-
(d) Any
Person dealing with the LLC, the Manager Member or any Member may rely upon
a
certificate signed by the Manager Member as to (i) the identity of the Manager
Member or any other Member; (ii) any factual matters relevant to the affairs
of
the LLC; (iii) the Persons who are authorized to execute and deliver any
document on behalf of the LLC; or (iv) any action taken or omitted by the LLC
or
the Manager Member.
Section
3.2. Management
Committee of the LLC.
(a) The
LLC
shall have a Management Committee (the “Management
Committee”).
The
Manager Member hereby delegates to the greatest extent permitted by applicable
law the power and authority under Section 3.5(a) of this Agreement to the
Management Committee to conduct the day-to-day operations, business and
activities of the LLC. Each Non-Manager Member hereby grants to the Management
Committee (acting by a Committee Vote) a revocable proxy to vote the LLC Units
held by such Member in connection with any election pursuant to Section
3.2(b)(ii) hereof to fill a vacancy in the Management Committee, and such proxy
may only be revoked by written notice from a Member to the Management Committee
and the Manager Member, which written notice must expressly reference this
Section of this Agreement.
(b) The
Management Committee shall be comprised as follows:
(i) The
Management Committee shall initially have three (3) members and consist of
Xxxxxx Xxxxxx, Xxxxxxx Xxxxxxxx, and Xxxxxx Xxxxxxxxxx. The number of members
of
the Management Committee may be increased or decreased by the Management
Committee at any time with the written consent of the Manager Member (but not
decreased to a number less than two (2) members). No person who is not both
an
active employee of the LLC (or any of its Controlled Affiliates) and an Employee
Stockholder (an “Eligible
Person”)
may
be, become or remain a member of the Management Committee (subject to clause
(v)
below).
(ii) Any
vacancy in the Management Committee, however occurring (including a vacancy
resulting from an increase in the size of the Management Committee), may be
filled by any Eligible Person reasonably acceptable to the Manager Member and
elected by a majority vote of all Members holding LLC Units, with each LLC
Unit
(regardless of whether such LLC Unit is a Series A LLC Unit or a Series B LLC
Unit) being counted equally in such vote. In lieu of any such vacancy being
filled, the Management Committee may determine to reduce the size of the
Management Committee in accordance with clause (i) above (but not to a number
less than two (2) members); provided that if at any time there are fewer than
three (3) members of the Management Committee, such vacancies must be filled
and, if they remain unfilled for a period of greater than five days, shall
be
filled by any Eligible Person(s) reasonably acceptable to the Manager Member
and
elected by a majority vote of all Members holding LLC Units, with each LLC
Unit
(regardless of whether such LLC Unit is a Series A LLC Unit or a Series B LLC
Unit) being counted equally in such vote.
(iii) Members
of the Management Committee shall remain members of the Management Committee
until their resignation, removal or death. Any member of the Management
Committee may resign by delivering his or her written resignation to the
Management Committee and the Manager Member. At any time that there are more
than two (2) members of the Management Committee, any member of the Management
Committee may be removed from such position: (A) with or without cause, by
the
Management Committee acting by a Committee Vote (with such Committee Vote being
calculated for all purposes as if the member of the Management Committee whose
removal is being considered were not a member of the Management Committee)
with
the written consent of the Manager Member, or (B) with or without cause, by
the
Non-Manager Members acting by a Majority Vote, with the written consent of
the
Manager Member, or (C) For Cause by the Manager Member, with notice to the
Management Committee specifying the reasons for the decision. Any Employee
Stockholder who is a member of the Management Committee shall be deemed to
have
resigned from the Management Committee and shall no longer be a member of the
Management Committee immediately upon such Employee Stockholder ceasing to
be an
active employee of the LLC (or any of its Controlled Affiliates) or otherwise
ceasing to be an Employee Stockholder, in each case for any reason.
-16-
(iv) At
any
meeting of the Management Committee, presence in person or by telephone (or
other electronic means) of a majority of the members of the Management Committee
shall constitute a quorum. At any meeting of the Management Committee at which
a
quorum is present, a majority of the total members of the Management Committee
may take any action on behalf of the Management Committee (any such action
taken
by such members of the Management Committee is sometimes referred to herein
as a
“Committee
Vote”).
Any
action required or permitted to be taken at any meeting of the Management
Committee may be taken without a meeting of the Management Committee only if
(A)
a written consent thereto is signed by all the members of the Management
Committee and (B) the Manager Member has been given a copy of such written
consent not less than forty-eight (48) hours prior to such action. Notice of
the
time, date and place of any meeting of the Management Committee shall be given
to all members of the Management Committee and the Manager Member at least
forty-eight (48) hours in advance of the meeting. A representative of the
Manager Member shall be entitled to attend each meeting of the Management
Committee. Notice need not be given to any member of the Management Committee
or
the Manager Member if a waiver of notice is given (orally or in writing) by
such
member of the Management Committee or the Manager Member (as applicable),
before, at or after the meeting. Members of the Management Committee are not
“managers” (within the meaning of the Act) of the LLC.
(v) The
Manager Member hereby grants to the Management Committee (acting by a Committee
Vote) a revocable proxy to vote the LLC Units held by the Manager Member in
connection with any majority vote pursuant to Section 3.2(b)(ii) hereof to
fill
a vacancy in the Management Committee. Notwithstanding any other provisions
of
this Agreement to the contrary, the Manager Member shall have full power and
authority at any time in its sole discretion (and without the consent or
approval of the Management Committee or the Non-Manager Members) to (A) increase
the number of members of the Management Committee and to fill the vacancies
created by any such increase with one or more other Employee Stockholders or
with any other persons selected by the Manager Member and/or (B) to revoke
the
proxy granted by the Manager Member to the Management Committee in the
immediately preceding sentence, provided that any such increase and/or proxy
revocation may only be effected by written notice from the Manager Member to
the
Management Committee, which written notice must expressly reference this Section
of this Agreement.
-17-
Section
3.3. Officers
of the LLC.
The
Management Committee may designate employees of the LLC as officers of the
LLC
(the “Officers”)
as it
deems necessary or desirable to carry on the business of the LLC. The Management
Committee may delegate any of its power or authority to an Officer or Officers
subject to modification and withdrawal of such delegated power and authority
by
the Management Committee. Any two or more offices may be held by the same
person. New offices may be created and filled by the Management Committee.
Each
Officer shall hold office until his or her successor is designated by the
Management Committee or until his or her earlier death, resignation or removal.
Any Officer may resign at any time upon written notice to the Management
Committee and the Manager Member. Any Officer designated by the Management
Committee may be removed from his or her office (with or without a concurrent
termination of employment) (i) with or without cause by the Management Committee
(excluding for all purposes the Person whose removal is being considered) or
(ii) For Cause by the Manager Member, in each case at any time. A vacancy in
any
office occurring because of death, resignation, removal or otherwise may be
filled by the Management Committee. Any designation of Officers, a description
of any duties delegated to such Officers, and any removal of such Officers
by
the Management Committee, shall be approved by the Management Committee in
writing, which approval shall be delivered to the Manager Member. The Officers
are not “managers” (within the meaning of the Act) of the LLC.
Section
3.4. Employees
of the LLC.
(a) The
decision to employ, and the terms of employment of any employee of the LLC
(or
any Controlled Affiliates thereof) who is not an Employee Stockholder
(including, without limitation, with respect to the hiring, all aspects of
compensation, promoting, demoting and terminating of such employees), shall
be
determined by the Management Committee or such Person or Persons to whom the
Management Committee may delegate such power and authority (subject, in all
instances, to the power of the Management Committee to revoke such delegation
in
whole or in part (by a Committee Vote that excludes any Person to whom such
power and authority has been delegated)), subject, in all cases, to compliance
with all applicable laws, rules and regulations and with the provisions of
Section 3.5 hereof. Notwithstanding the foregoing, the Manager Member may
terminate the employment by the LLC (or any Controlled Affiliate thereof) of
any
employee who has engaged in any activity included in the definition of “For
Cause” with notice to the Management Committee specifying the reasons for such
decision.
-18-
(b) The
granting or Transferring of LLC Interests in connection with any hiring or
promotion of an employee shall be subject to the terms and conditions set forth
in Articles V and VI hereof.
(c) Any
Person who is an Employee Stockholder may have his or her employment with the
LLC terminated by the LLC only: (i) in the case of a termination For Cause,
either by the Manager Member or by the Management Committee (excluding for
all
purposes the Person whose termination is being considered) with the prior
written consent of the Manager Member, or (ii) in the case of any other
termination by the LLC, by the Management Committee (excluding for all purposes
the Person whose termination is being considered) with the prior written consent
of the Manager Member.
Section
3.5. Operation
of the Business of the LLC.
(a) Subject
to the Manager Member’s rights, duties and obligations set forth in the Act and
elsewhere in this Agreement (including, without limitation, the provisions
of
this Section 3.5), the Management Committee is hereby delegated to the greatest
extent permitted by applicable law the power and authority from the Manager
Member to manage the day-to-day operations, business and activities of the
LLC;
including, without limitation, the power and authority, in the name of and
on
behalf of the LLC, to:
(i) determine
the use of the Operating Allocation as set forth in Section 3.5(b)
below;
(ii) execute
such documents and do such acts as are necessary to register (or provide or
qualify for exemptions from any such registrations) or qualify the LLC (or
any
Controlled Affiliates thereof) under applicable federal and state securities
laws;
(iii) enter
into contracts and other agreements with respect to the provision of Investment
Services and execute other instruments, documents or reports on behalf of the
LLC (and any Controlled Affiliates thereof) in connection
therewith;
(iv) enter
into contracts, agreements and commitments with respect to the operation of
the
business of the LLC (and any Controlled Affiliates thereof) as are consistent
with the other provisions of this Agreement and the Act; and
(v) act
for
and on behalf of the LLC (and any Controlled Affiliates thereof) in all matters
incidental to the foregoing and other day-to-day matters.
(b) The
Operating Allocation for any period shall be used to provide for and pay the
LLC’s (and any Controlled Affiliates’ thereof) business expenses and other costs
(including without limitation (i) the payment of premiums during such period
with respect to any insurance coverages maintained (except to the extent
otherwise provided for in Section 3.5(d)), (ii) all capital expenditures and
capital contributions made by the LLC (or any Controlled Affiliate thereof)
during such period, except to the extent that Owners’ Allocation has been
retained therefor as an Owners’ Allocation Expenditure, (iii) the satisfaction
of any net worth, working capital or similar requirements imposed by applicable
laws and regulations in connection with the businesses conducted and
registrations held by the LLC (or any Controlled Affiliate thereof) or otherwise
reasonably necessary in connection with the conduct of the businesses of the
LLC
(and any Controlled Affiliates thereof), (iv) all payments to subadvisers,
brokers and other vendors, and (v) compensation and benefits payable to
employees (including the Officers and the Employee Stockholders), and at the
discretion of the Management Committee, establishing reserves for such future
payments), as determined by the Management Committee, and all such business
expenses and other costs of the LLC (and any Controlled Affiliates thereof)
shall be paid out of the Operating Allocation. Without the prior written consent
of the Manager Member (which written consent makes specific reference to this
Section 3.5(b)), the LLC shall not (nor shall any Controlled Affiliate of the
LLC) incur (and the Employee Stockholders shall use their reasonable best
efforts to prevent the LLC (or any Controlled Affiliate thereof) from incurring)
any expenses or take any action to incur other obligations which expenses and
obligations exceed the ability of the LLC to pay or provide for them out of
the
Operating Allocation on a current or previously reserved basis. Except to the
extent otherwise required by applicable law, the LLC (and any Controlled
Affiliates thereof) shall only make payments of compensation (including bonuses)
to employees (including the Officers and the Employee Stockholders) out of
the
balance of the Operating Allocation remaining after the payment (or reservation
for payment) of all the other business expenses, requirements and other costs
for the applicable period. Any excess Operating Allocation remaining for any
fiscal year following the payment (or reservation for payment) of all business
expenses and other costs (including any such amount established as a reserve
in
a prior period that is reasonably determined by the Management Committee to
have
been in excess of what was necessary for such reserve) may be used by the LLC
in
such fiscal year and/or in future fiscal years in accordance with this Section
3.5(b). The Owners’ Allocation shall in no event be used to provide for or pay
the business expenses or other costs of the LLC (or any Controlled Affiliate
thereof), except to the extent expressly permitted by Section 3.5(d) or as
otherwise agreed to in writing by the Manager Member and the Management
Committee (any such permitted use of the Owners’ Allocation being referred to
herein as an “Owners’
Allocation Expenditure”).
-19-
(c) The
LLC
shall not (nor shall any Controlled Affiliate of the LLC) do or commit to do,
and the Employee Stockholders and Non-Manager Members shall prevent the LLC
(or
any Controlled Affiliate thereof) from doing or committing to do, any of the
following without the prior written consent of the Manager Member (which written
consent makes specific reference to this Section 3.5(c)):
(i) enter
into, amend, modify or terminate any contract, agreement or understanding
(written or oral) if such action or the resulting contract, agreement or
understanding could reasonably be expected to conflict with the provisions
of
this Section 3.5;
(ii) enter
into, amend, modify or terminate any contract, agreement or understanding
(written or oral) if such action or the resulting contract, agreement or
understanding (individually or in the aggregate) could have a material adverse
impact on the availability of the Operating Allocation in future periods
(including, without limitation, long-term leases or employment
contracts);
-20-
(iii) enter
into, amend, modify or terminate any contract, agreement or understanding
(written or oral) if such action or the resulting contract, agreement or
understanding has the effect of creating a Lien upon any of the assets of the
LLC (other than Liens securing indebtedness of the LLC incurred to finance
the
acquisition of fixed or capital assets (whether pursuant to a deferred purchase
agreement with a vendor, a loan, a financing lease or otherwise), provided
that
(A) such Liens shall be created substantially simultaneously with the
acquisition of such fixed or capital assets, (B) such Liens do not at any time
encumber any property other than property financed by such indebtedness, (C)
the
amount of indebtedness secured thereby is not thereafter increased (D) the
principal amount of indebtedness secured by such Lien shall at no time exceed
the purchase price of such property and (E) the purchase price for such property
shall not exceed $100,000) or upon any portion of the Owners’
Allocation;
(iv) take
any
action (or omit to take any action) if such action (or omission) could
reasonably be expected to result in the termination of the employment by the
LLC
of any Employee Stockholder (provided that the foregoing shall not impose any
limitation on the ability of an Employee Stockholder to terminate his or her
employment with the LLC in accordance with the provisions hereof, and shall
not
require the LLC to pay additional compensation to retain the services of any
Employee Stockholder);
(v) create,
incur, assume, or suffer to exist any Indebtedness;
(vi) establish
or modify any material compensation arrangement (other than salary and cash
bonuses in the ordinary course) or program (whether cash or non-cash benefits)
applicable to any employee, in any such case which is subject to ERISA, which
requires qualification under the Code, or which otherwise (A) requires the
Manager Member (other than in its capacity as Manager Member) or any of its
Affiliates to take any action which it would not take but for the establishment
or modification of such compensation arrangement or program or (B) prevents
the
Manager Member or any of its Affiliates from taking any action which it would
otherwise have been able to take but for the establishment or modification
of
such compensation arrangement or program (and the Management Committee shall
give the Manager Member not less than thirty (30) days prior written notice
before the LLC (or any Controlled Affiliate thereof) establishes or modifies
any
material compensation arrangement (other than salary and cash bonuses in the
ordinary course) or program);
(vii) enter
into, amend, modify or terminate any contract, agreement or understanding
(written or oral) (A) containing severance or termination payment arrangements,
other than severance or termination payment arrangements with bona fide
employees of the LLC or its Controlled Affiliates (other than any Employee
Stockholder or Non-Manager Member or an Immediate Family member thereof) which
do not exceed $250,000 individually to any one such employee or represent
potential liabilities at any one time outstanding (taking into account such
contract, agreement or understanding and all other such contracts, agreements
and understandings of the LLC and its Controlled Affiliates then in effect)
in
excess of $250,000 in the aggregate, (B) which could cause the Manager Member
or
any of its Affiliates to be liable for termination or severance payments or
other contractual payments upon a termination of any employee’s employment with
the LLC (or any Controlled Affiliate thereof) or (C) which is with an Employee
Stockholder, a Non-Manager Member, an Affiliate of an Employee Stockholder
or a
Non-Manager Member, or a partner, shareholder, member, manager, director,
officer, employee or Immediate Family member of any of the
foregoing;
-21-
(viii) (A)
enter
into any line of business other than the provision of Investment Services,
(B)
acquire, form or otherwise establish any subsidiary or Controlled Affiliate
of
the LLC or otherwise make any investment in, or otherwise conduct business
through, any other Person, (C) acquire any material assets or other properties,
other than capital expenditures made out of Operating Allocation in the ordinary
course of business consistent with past practice and not involving the
acquisition of any Person as a going concern, or (D) sell, transfer or otherwise
dispose of any material assets or other properties, other than sales of worn-out
or obsolete equipment made in the ordinary course of business consistent with
past practice;
(ix) (A)
make
any change in the Certificate (or the constituent documents of any Controlled
Affiliate of the LLC), (B) authorize or issue any membership or other equity
or
ownership interests or other securities of any type of the LLC (or any
Controlled Affiliate thereof), (C) repurchase, redeem or otherwise acquire
any
outstanding membership or other equity or ownership interests or other
securities of the LLC (or any Controlled Affiliate thereof), (D) make any
dividend or other distribution in respect of its membership or other equity
or
ownership interests (other than as expressly required by other provisions of
this Agreement), (E) settle or compromise any material litigation, arbitration,
investigation, audit or other proceeding, (F) terminate its existence or
voluntarily file for or otherwise commence proceedings with respect to
bankruptcy, reorganization, receivership or similar status, (G) make or change
any tax election, waive or extend the statute of limitations in respect of
taxes, amend any tax return, enter into any closing agreement with respect
to
taxes, settle any tax claim or assessment or surrender any right to a claim
for
a tax refund, change any method or principle of accounting in a manner
inconsistent with past practice or change regular independent accountants,
or
(H) make any loan or advance to any Person, other than advances of business
expenses in the ordinary course of business consistent with past practice;
or
(x) (A)
take
any action which pursuant to any provision of this Agreement (other than Section
3.1) may be taken only by the Manager Member with or without the consent of
the
Non-Manager Members or the Employee Stockholders, or (B) take any action which
requires the approval or consent of the Manager Member pursuant to any provision
of this Agreement.
-22-
(d) The
LLC
(and each Controlled Affiliate thereof) shall maintain (and the Employee
Stockholders and Non-Manager Members shall use their reasonable best efforts
to
cause the LLC (and each Controlled Affiliate thereof) to maintain), in full
force and effect, such insurance as is customarily maintained by companies
of
similar size in the same or similar businesses (including, without limitation,
errors and omissions liability insurance), the premiums on which will be paid
out of the Operating Allocation (and the beneficiary of which shall be the
LLC
and/or its applicable Controlled Affiliates, as applicable). With the prior
written consent of the Manager Member and the Management Committee, the LLC
also
may elect to maintain key-man and/or disability insurance policies with respect
to any Employee Stockholder, in which event the premiums on such policies will
be paid out of the Owners’ Allocation (and the beneficiary of any such policy
shall be the LLC). In the event that the Manager Member or any of its Affiliates
shall determine (at its own expense) to maintain separate key-man and/or
disability insurance policies with respect to any Employee Stockholder (of
which
the Manager Member or any of its Affiliates may be the beneficiary), and in
connection with any such policies maintained by the LLC for its own benefit,
such Employee Stockholder shall cooperate with the Manager Member, its
Affiliates and the LLC (as applicable) in connection with obtaining and
maintaining such insurance policies (including without limitation by submitting
to any required examinations and truthfully answering any questions asked by
the
insurer in connection with obtaining such policies).
(e) In
addition to, and not in limitation of, the Manager Member’s powers and authority
under this Agreement (including, without limitation, pursuant to Section 3.1(a)
hereof), the Manager Member shall also have the power, in its sole discretion
(after consultation with the Management Committee, to the extent practicable),
whether or not they involve day-to-day operations, business and activities
of
the LLC (or any Controlled Affiliate thereof), to take any or all of the
following actions:
(i) such
actions as it deems necessary or appropriate to cause the LLC or any Affiliate
of the LLC, or any officer, employee, member, partner, or agent thereof, to
comply with applicable laws, rules or regulations;
(ii) such
actions as it deems necessary or appropriate to coordinate any initiative which
could materially affect the Manager Member and/or any of its Affiliates (but
only on such terms and conditions as the participation of the LLC (or any
Controlled Affiliates thereof) in such initiative has been approved by the
Management Committee);
(iii) such
actions as it deems necessary or appropriate to cause the LLC to fulfill its
obligations and exercise its rights under the Purchase Agreement and this
Agreement; and
(iv) any
other
action necessary or appropriate to prevent actions that require the Manager
Member’s consent pursuant to the terms of this Agreement if such consent has not
then been given.
(f) Notwithstanding
any of the provisions of this Agreement to the contrary, all accounting,
financial reporting and bookkeeping procedures of the LLC (and any Controlled
Affiliates thereof) shall be established in conjunction with policies and
procedures determined under the supervision of the Manager Member. The
Management Committee shall have a continuing obligation to keep the Manager
Member’s chief financial officer informed of material financial developments
with respect to the LLC (and any Controlled Affiliates thereof). Notwithstanding
any other provisions of this Agreement to the contrary, all legal, compliance
and regulatory matters of the LLC (and any Controlled Affiliates thereof) shall
be coordinated with the Manager Member and the LLC’s (and any of its Controlled
Affiliates’) legal compliance activities shall be conducted and established in
conjunction with policies and procedures determined under the supervision of
the
Manager Member.
-23-
(g) Each
Employee Stockholder and Non-Manager Member covenants and agrees that such
Employee Stockholder or Non-Manager Member, as the case may be, will at all
times conduct its activities in connection with the LLC (and any Controlled
Affiliates thereof), and any services provided to the LLC (or to any Controlled
Affiliates thereof), in accordance with all applicable laws, rules and
regulations, and that it will use its reasonable best efforts (i) to ensure
that
the business and activities of the LLC (and any Controlled Affiliates thereof)
are conducted in compliance with all applicable laws, rules and regulations
in
all material respects and (ii) to preserve the goodwill and franchise value
of
the LLC (and any Controlled Affiliates thereof).
(h) Notwithstanding
any of the provisions of this Agreement to the contrary, the Manager Member
shall have the power to establish and mandate that the LLC (and any of its
Controlled Affiliates) participate in employee benefit plans which are subject
to ERISA or require qualification under Section 401 of the Code to the extent
necessary in order to make the expenses of any such plan(s) deductible or
otherwise to comply with ERISA or the Code, and may establish or modify the
terms of any such plan to the extent necessary in connection therewith, provided
that any such action taken by the Manager Member shall treat the Affiliates
of
the Manager Member subject to such action in an equitable manner (i.e., a manner
not materially more disadvantageous to one Affiliate than to other Affiliates
of
the Manager Member, as reasonably determined by the Manager Member) to the
extent permissible under ERISA and the Code and consistent with achieving tax
deductibility.
(i) Notwithstanding
any other provisions of this Agreement to the contrary, the Management
Committee, each Employee Stockholder and each Non-Manager Member shall cooperate
with the Manager Member and its Affiliates in implementing any initiative
generally involving the LLC (and/or any Controlled Affiliates thereof) and
a
number of such Affiliates, but only on such terms and conditions as the
participation of the LLC (and any Controlled Affiliates thereof) in such
initiative has been approved by the Management Committee.
(j) Notwithstanding
any other provisions of this Agreement to the contrary, any (i) voluntary
liquidation of the LLC, (ii) sale, exchange or other disposition of all, or
a
substantial portion of, the assets of the LLC and its Controlled Affiliates,
or
(iii) Transfer by the Manager Member of all its interests in the LLC in a single
transaction or series of related transactions (subject to the same exceptions
applicable to any such Transfer by the Manager Member under Section 6.1 hereof),
shall require a majority vote of all Members holding LLC Units, with each LLC
Unit (regardless of whether such LLC Unit is a Series A LLC Unit or a Series
B
LLC Unit) being counted equally in such vote.
-24-
Section
3.6. Compensation
and Expenses of the Members.
The
Manager Member may receive compensation for services provided to the LLC (or
any
Controlled Affiliate thereof) only to the extent approved by the Management
Committee. The LLC shall, however, pay and/or reimburse the Manager Member
for
extraordinary expenses incurred by the Manager Member directly in connection
with the operation of the LLC (and any Controlled Affiliates thereof). It is
expressly understood by the parties hereto that the Manager Member’s general
overhead items and expenses (including, without limitation, salaries, rent
and
travel expenses) shall not be reimbursed by the LLC. Stockholders, officers,
directors, Members and agents of Members may serve as employees of the LLC
(or
any Controlled Affiliate thereof) and be compensated therefor out of the
Operating Allocation as determined by the Management Committee (or its
delegate(s)) pursuant to Section 3.5(b). Except in respect of their provision
of
services as employees of the LLC (or any Controlled Affiliate thereof) for
which
they may be compensated out of the Operating Allocation as contemplated by
the
preceding sentence, Employee Stockholders, Non-Manager Members and members
of
their Immediate Family may not receive compensation on account of the provision
of services to the LLC (or any Controlled Affiliate thereof) without the prior
written consent of the Management Committee and the Manager Member.
Section
3.7. Other
Business of the Manager Member and Its Affiliates.
The
Manager Member and its Affiliates may engage, independently or with others,
in
other business ventures of every nature and description, including the
acquisition, creation, financing, trading in, and operation and disposition
of
interests in, investment advisers or investment managers and other businesses
that may be competitive with the LLC’s (or any of its Controlled Affiliates’)
business. Neither the LLC (or any Controlled Affiliate thereof) nor any of
the
Employee Stockholders or Non-Manager Members shall have any right in or to
any
other such ventures by virtue of this Agreement or the limited liability company
created or continued hereby, nor shall any such activity by the Manager Member
or its Affiliates in and of itself be deemed wrongful or improper or result
in
any liability of the Manager Member or its Affiliates. Neither the Manager
Member nor any of its Affiliates shall be obligated to present any opportunity
to the LLC (or any Controlled Affiliate thereof) even if such opportunity is
of
such a character which, if presented to the LLC (or a Controlled Affiliate
thereof), would be suitable for the LLC (or such a Controlled Affiliate
thereof). The Manager Member shall not disclose any Intellectual Property owned
or used in the course of business by the LLC (or any Controlled Affiliate
thereof) to any Person, including, without limitation, any other of its
Affiliates, and the Manager Member agrees always to keep secret and not ever
to
publish, divulge, furnish, use or make accessible to anyone any Intellectual
Property that is not otherwise publicly available (other than as a result of
a
breach of the provisions of this Section 3.7), in each case other than in the
regular business of the LLC and its Controlled Affiliates, as required by court
order or by law or in connection with the enforcement of this Agreement or
the
Purchase Agreement. Notwithstanding any provision of this Section 3.7 to the
contrary, the Manager Member shall not (i) solicit or induce, or attempt to
solicit or induce (whether directly or indirectly), any Person for the purpose
(which need not be the sole purpose) of causing any funds invested in any Fund
to be withdrawn from such Fund or (ii) solicit or induce, or attempt to solicit
or induce (whether directly or indirectly), any employee of the LLC or any
Controlled Affiliate thereof to terminate his or her relationship
therewith.
-25-
Section
3.8. Restrictions
on Competition, Non-Solicitation and Non-Disclosure by Non-Manager Members
and
Employee Stockholders.
(a) Each
Non-Manager Member and each Employee Stockholder agrees, for the benefit of
the
LLC and the other Members, that such Non-Manager Member or Employee Stockholder
(as the case may be) shall not, while employed by the LLC or any of its
Affiliates, and for two (2) years following termination of such employment
(or
if a Non-Manager Member or Employee Stockholder holds less than 2.0% of the
outstanding LLC Interests at the time of termination of employment for one
(1)
year following termination) engage in any Prohibited Competition
Activity.
(b) In
addition to, and not in limitation of, the provisions of Section 3.8(a) hereto,
each Non-Manager Member and each Employee Stockholder agrees, for the benefit
of
the LLC and the other Members, that such Non-Manager Member or Employee
Stockholder (as the case may be) shall not, during the period beginning on
the
date such Non-Manager Member becomes a Non-Manager Member or Employee
Stockholder becomes an Employee Stockholder (as applicable), and until the
date
which is two (2) years after the termination (or if a Non-Manager Member or
Employee Stockholder holds less than 2.0% of the outstanding LLC Interests
at
the time of termination of employment until a date which is one (1) year after
the termination) of such Non-Manager Member’s status as a Non-Manager Member or
Employee Stockholder’s employment with the LLC and all of its Affiliates (as
applicable), without the express written consent of the Manager Member and
the
Management Committee, directly or indirectly, whether as owner, part-owner,
shareholder, partner, member, director, officer, trustee, employee, agent or
consultant, or in any other capacity, on behalf of itself or any firm,
corporation or other business organization other than the LLC and its Controlled
Affiliates:
(i) provide
Investment Services to any Person that is a Client (as defined herein, which
includes Past Clients, Present Clients and Potential Clients); provided,
however,
that
this clause (i) shall not be applicable to Clients of the LLC (including
Potential Clients) who are also members of the Immediate Family of the Employee
Stockholder or Non-Manager Member (as the case may be);
(ii) solicit
or induce, whether directly or indirectly, any Person for the purpose (which
need not be the sole or primary purpose) of (A) causing any funds invested
in
any Fund to-be
withdrawn from such Fund, or (B) causing any Client (including any Potential
Client) not to invest any additional funds in any Fund (or otherwise attempt
to
cause any of the foregoing to occur);
(iii) contact
or communicate with, whether directly or indirectly, any Past, Present or
Potential Clients with respect to the provision of Investment Services;
provided,
however,
that
this clause (iii) shall not be applicable to Clients (including Potential
Clients) who are also members of the Immediate Family of the Employee
Stockholder or Non-Manager Member; or
(iv) solicit
or induce, or attempt to solicit or induce, directly or indirectly, any employee
or agent of, or consultant to, the LLC or any of its Controlled Affiliates
to
terminate its, his or her relationship therewith, hire any such employee, agent
or consultant, or former employee, agent or consultant, or work in any
enterprise involving Investment Services with any employee, agent or consultant
or former employee, agent or consultant, of the LLC or any of its Controlled
Affiliates who was employed by or acted as an agent or consultant to the LLC
or
their respective Controlled Affiliates at any time during the two (2) year
period preceding the termination of the Employee Stockholder’s employment or
Non-Manager Member’s status as a member of the LLC, as applicable (excluding for
all purposes of this sentence, secretaries and persons holding other similar
positions).
-26-
For
purposes of this Section 3.8(b), the term “Past Client” shall be limited to
those Past Clients who were recipients of Investment Services, directly or
indirectly (including through investment in any Fund), from the LLC and/or
their
respective Controlled Affiliates at the date of termination of the Employee
Stockholder’s employment or Non-Manager Member’s status as a member of the LLC
(as applicable) or at any time during the two (2) years immediately preceding
the date of such termination.
Notwithstanding
the provisions of Sections 3.8(a) and 3.8(b), any Employee Stockholder may
(i)
make passive personal investments in an enterprise (whether or not competitive
with the Manager Member or the LLC) the shares or other equity interests of
which are publicly traded, provided his holding therein together with any
holdings of his Affiliates and members of his Immediate Family, are less than
five percent (5%) of the outstanding shares or comparable interests in such
entity; and (ii) serve as a trustee of a registered investment
company.
(c) Each
Member and each Employee Stockholder agrees that any and all presently existing
investment advisory businesses of the LLC and its Controlled Affiliates and
all
businesses developed by the LLC, any of its Controlled Affiliates, the
Predecessor Business and the Predecessor Business, including by such Employee
Stockholder or any other employee of the LLC or any of its Controlled
Affiliates, the Predecessor Business or any predecessor thereto (whether or
not
in such person’s individual capacity), including without limitation, all
investment methodologies, all investment advisory contracts, fees and fee
schedules, commissions, records, data, Client lists, agreements, trade secrets,
and any other incident of any business developed by the LLC, its Controlled
Affiliates, the Predecessor Business or any predecessor thereto, or earned
or
carried on by the Employee Stockholder for the LLC, any of its Controlled
Affiliates, the Predecessor Business or any predecessor thereto, and all trade
names, service marks and logos under which the LLC or its Affiliates (or any
predecessor thereto) do or have done business, and any combinations or
variations thereof and all related logos, are and shall be the exclusive
property of the LLC or such Controlled Affiliate thereof, as applicable, for
its
or their sole use, and (where applicable) shall be payable directly to the
LLC
or such Controlled Affiliate. In addition, each Member and each Employee
Stockholder acknowledges and agrees that the investment performance of the
accounts managed by the LLC or any Controlled Affiliate thereof was attributable
to the efforts of the team of professionals of the LLC, such Controlled
Affiliate thereof, such Predecessor Business or such predecessor thereto, and
not to the efforts of any single individual or subset of such team of
professionals, and that, therefore, the performance records of the accounts
managed by the LLC or any of its Controlled Affiliates (or any predecessor
to
any of them), including without limitation, the Funds, are and shall be the
exclusive property of the LLC or such Controlled Affiliate, as applicable (and
not of any other Person or Persons).
-27-
(d) Each
Non-Manager Member and each Employee Stockholder acknowledges that, in the
course of performing services hereunder and otherwise, such Member or Employee
Stockholder (as applicable) has had, and will from time to time have, access
to
information of a confidential or proprietary nature, including without
limitation, all confidential or proprietary investment methodologies, trade
secrets, proprietary or confidential plans, Client identities and information,
Client lists, service providers, business operations or techniques, records
and
data (“Intellectual
Property”)
owned
or used in the course of business by the LLC, its Controlled Affiliates or
any
of the parties to the Purchase Agreement. Each Non-Manager Member and each
Employee Stockholder agrees always to keep secret and not ever publish, divulge,
furnish, use or make accessible to anyone (otherwise than in the regular
business of the LLC and its Controlled Affiliates or as required by court order
or by law (on the written advice of outside counsel)) any Intellectual Property
of the LLC or any Controlled Affiliate thereof unless such information can
be
shown to be in the public domain through no fault of such Non-Manager Member
or
Employee Stockholder. At the termination of the Employee Stockholder’s
employment by the LLC and its Controlled Affiliates or the Non-Manager Member’s
status as a member of the LLC, all data, memoranda, Client lists, notes,
programs and other papers, items and tangible media, and reproductions thereof
relating to the foregoing matters in the Non-Manager Member’s or Employee
Stockholder’s possession or control, shall be returned to the LLC and remain in
its possession. The Management Committee shall procure that any Person who
becomes a Non-Manager Member of the LLC, or who acquires a beneficial interest
in an entity which is a Non-Manager Member of the LLC shall not be provided
access to any confidential or proprietary information of the LLC or any of
its
Controlled Affiliates (except to the extent as may be otherwise required by
applicable law).
(e) Each
Non-Manager Member and each Employee Stockholder acknowledges that, in the
course of entering into this Agreement, the Non-Manager Member or Employee
Stockholder (as applicable) has had and, in the course of the operation of
the
LLC and any Controlled Affiliates thereof, the Non-Manager Member or Employee
Stockholder will from time to time have, access to Intellectual Property owned
by or used in the course of business by the Manager Member. Each Non-Manager
Member and each Employee Stockholder agrees, for the benefit of the LLC and
its
Members, and for the benefit of the Manager Member, always to keep secret and
not ever publish, divulge, furnish, use or make accessible to anyone (otherwise
than at the Manager Member’s request or by court order or by law (on the written
advice of outside counsel)) any knowledge or information regarding Intellectual
Property (including, by way of example and not of limitation, the transaction
structures utilized by the Manger Member) of the Manager Member unless such
information can be shown to be in the public domain through no fault of such
Non-Manager Member or Employee Stockholder. At the termination of the Employee
Stockholder’s service to the LLC and Controlled Affiliates or the Non-Manager
Member’s status as a member of the LLC, all data, memoranda, documents, notes
and other papers, items and tangible media, and reproductions thereof relating
to the foregoing matters in the Non-Manager Member’s or Employee Stockholder’s
possession or control shall be returned to the Manager Member and remain in
its
possession.
-28-
(f) The
provisions of this Section 3.8 shall not be deemed to limit any of the rights
of
the LLC under applicable law, but shall be in addition to the rights under
applicable law.
Section
3.9. Remedies
Upon Breach.
(a) In
the
event that a Non-Manager Member or its related Employee Stockholder breaches
any
of the provisions of Section 3.8 hereof, then (i) such Non-Manager Member shall
forfeit its right to receive any payment for its LLC Interests under Section
3.10, although it shall cease to be a Non-Manager Member in accordance with
the
provisions of Section 3.10(e), (ii) the Manager Member (and any of its assignees
thereunder) shall have no further obligations under any promissory note
theretofore issued to such Non-Manager Member pursuant to Section 3.10(f),
and
(iii) the LLC shall be entitled to withhold any other payments to which such
Non-Manager Member or its related Employee Stockholder otherwise would be
entitled to offset damages resulting from such breach.
(b) Each
Non-Manager Member and each Employee Stockholder agrees that any breach of
the
provisions of Section 3.8 of this Agreement by such Non-Manager Member or
Employee Stockholder (as applicable) could cause irreparable damage to the
LLC
and the other Members, and that the LLC (by action of the Management Committee)
and the Manager Member shall have the right to an injunction or other equitable
relief (in addition to other legal remedies) to prevent any violation of a
Non-Manager Member’s or Employee Stockholder’s obligations hereunder or
thereunder.
Section
3.10. Purchase
Provisions.
The
Members of the LLC, having agreed that it is in the best interests of the LLC
not to have ex-employees who were (or were related persons of, as applicable)
Non-Manager Members remain as Non-Manager Members (or have their related
Non-Manager Members remain as Non-Manager Members, as applicable) following
the
termination of such employment, agree among themselves as follows:
(a) In
the
event that the employment by the LLC (and by any of its Controlled Affiliates
employing such Employee Stockholder) of any Employee Stockholder terminates
for
any reason, then the Manager Member shall have the option to purchase, and
such
Employee Stockholder (or the Non-Manager Member of which such Employee
Stockholder was an owner, if such Employee Stockholder is not itself the
Non-Manager Member) and each of its Permitted Transferees (such selling Persons,
collectively, a “Selling
Member”)
shall,
if the Manger Member elects to purchase such LLC Interests, sell to the Manager
Member (such purchases, collectively, a “Purchase”,
and
the LLC Interests purchased pursuant thereto, collectively, the “Purchased
Interest”),
all
of the LLC Interests held by the Selling Member for the Purchase Price (as
defined in Section 3.10(c) hereof) and otherwise pursuant to the terms of this
Section 3.10. The option to Purchase shall be exercised by the Manager Member
by
delivery to such Employee Stockholder of a written notice (the “Purchase
Notice”)
(i)
setting forth the Manager Member’s intent to exercise the option to Purchase and
containing the total number of Units to be sold to the Manager Member, and
(ii)
mailed, via postage pre-paid registered or certified United States mail, to
the
attention of or otherwise actually delivered to Employee Stockholder at Employee
Stockholder’s most recent address reflected in the LLC’s payroll.
-29-
(b) The
closing of the Purchase will take place on a date set by the Manager Member
(the
“Purchase
Closing Date”)
which
shall be after the last day of the calendar quarter in which the applicable
Employee Stockholder’s employment with the LLC (and any of its applicable
Controlled Affiliates) terminated (or, if later, after the last day of the
sixth
(6th) full
calendar month following the Effective Time), but which is not more than one
hundred twenty (120) days after the date such termination of employment occurred
(or, if later, not more than one hundred twenty (120) days after the last day
of
the sixth (6th)
full
calendar month following the Effective Time).
(c) The
aggregate purchase price payable by the Manager Member (or its assignee) for
a
Purchase (the “Purchase
Price”)
shall
be an amount equal to the fair value of the LLC Units subject to the Purchase,
which shall be conclusively determined as follows (and the price so determined
pursuant to the following provisions shall be final and binding upon the parties
hereto):
(i) Series
A
LLC Units shall be valued at the fair value thereof, which shall be conclusively
determined as follows:
|
(A)
|
five
(5.0), multiplied by
|
|
(B)
|
the
“Applicable Cash Flow”, which shall be defined as the positive difference
(if any) of (x) the sum of (I) fifty percent (50%) of the Base Owners’
Allocation for the twenty-four (24) months ending on the last day
of the
calendar quarter in which the termination of such Employee Stockholder’s
employment occurs (or, if later, the last day of the sixth (6th)
full calendar month following the Effective Time), plus (II) twenty-five
percent (25%) of the Earned Performance Owners’ Allocation for the
forty-eight (48) months ending on the last day of the calendar quarter
in
which the termination of such Employee Stockholder’s employment occurs
(or, if later, the last day of the sixth (6th)
full calendar month following the Effective Time), minus
(y) the amount (if any) by which the combined actual expenses of
the LLC
and any Controlled Affiliates thereof (determined on an accrual basis
in
accordance with GAAP consistently applied) exceeded the Operating
Allocation (including any previously reserved Operating Allocation)
during
the twelve (12) months ending the last day of the calendar quarter
in
which the termination of such Employee Stockholder’s employment occurs
(or, if later, the last day of the sixth (6th)
full calendar month following the Effective Time), multiplied
by
|
-30-
|
(C)
|
the
“Applicable Fraction”, which shall be defined as a fraction the numerator
of which is the number of Series A LLC Units being purchased in the
Purchase, and the denominator of which is the number of LLC Units
outstanding on the date of the closing of the Purchase (before giving
effect to any issuances or redemptions of LLC Units on such
date).
|
(ii) Series
B
LLC Units shall be valued at the fair value thereof, which shall be conclusively
determined as follows:
|
(A)
|
The
positive difference, if any, between (x) five (5.0) multiplied by
the
“Applicable Cash Flow” and (y) the Liquidation Preference, multiplied
by
|
|
(B)
|
A
fraction, the numerator of which is the number of Series B LLC Units
being
purchased in the Purchase and the denominator of which is the number
of
LLC Units outstanding on the date of the closing of the Purchase
(before
giving effect to any issuances or redemptions of LLC Units on such
date).
|
(d) The
rights of the Manager Member and its assignees hereunder are in addition to
and
shall not affect any other rights which the Manager Member, the LLC or their
assigns may otherwise have to purchase LLC Interests.
(e) On
the
Purchase Closing Date, the Manager Member (or its assignee, as applicable)
shall
pay to the Selling Member the Purchase Price for the LLC Interests purchased
in
the manner set forth in this Section 3.10, and upon such payment the Selling
Member shall cease to hold any LLC Interests, and such Selling Member
automatically shall be deemed to have withdrawn from the LLC and shall cease
to
be a Member of the LLC and shall no longer have any rights hereunder;
provided,
however,
that
the provisions of this Article III shall continue to be binding upon such
Selling Member and any related Employee Stockholder as provided in Section
3.13
hereof. On the Purchase Closing Date, the Selling Member and the Manager Member
(or its assignee) shall, if the Manager Member so requests, execute an agreement
reasonably acceptable to the Manager Member (i) in which the Selling Member
(including each Person included therein) represents and warrants to the Manager
Member (or its assignee), that it has sole record and beneficial title to the
Purchased Interest, free and clear of any Liens other than those imposed by
this
Agreement, and (ii) addressing such other matters as the Manager Member
reasonably requests.
(f) Payment
of the Purchase Price with respect to any Purchased Interest shall be made
as
follows:
(i) In
the
case of a Purchase of Series A LLC Units,
|
(A)
|
in
the case of such a Purchase following a termination of the employment
of
the applicable Employee Stockholder in conjunction with a Removal
Upon the
Instruction of the Management Committee, on the Purchase Closing
Date by
wire-transfer of immediately available funds to an account designated
to
the Manager Member by the Selling Member at least three (3) business
days
prior to the Purchase Closing Date;
|
-31-
|
(B)
|
in
the case of such a Purchase following a termination of the employment
of
the applicable Employee Stockholder resulting from the death of such
Employee Stockholder, on the Purchase Closing Date either (in the
sole
discretion of the Manager Member) (I) by wire-transfer of immediately
available funds to an account designated to the Manager Member by
the
Selling Member at least three (3) business days prior to the Purchase
Closing Date or (II) by delivery of a promissory note of the Manager
Member, in the form attached hereto as Exhibit
A,
having an initial principal amount equal to the Purchase Price, the
principal amount of which promissory note is payable in four (4)
equal
annual installments (subject to the terms and conditions of this
Agreement
and such promissory note), with the first installment payable on
the
Purchase Closing Date;
|
|
(C)
|
in
the case of such a Purchase following a termination of the employment
of
the applicable Employee Stockholder resulting from the Retirement
or
Permanent Incapacity of such Employee Stockholder, on the later to
occur
of (I) the Purchase Closing Date or (II) the date which is the first
business day after the second anniversary of the Effective Time,
in either
such case either (in the sole discretion of the Manager Member) (x)
by
wire-transfer of immediately available funds to an account designated
to
the Manager Member by the Selling Member at least three (3) business
days
prior to the date such payment is due or (y) by delivery of a promissory
note of the Manager Member, in the form attached hereto as Exhibit
A,
having an initial principal amount equal to the Purchase Price, the
principal amount of which promissory note is payable in four (4)
equal
annual installments (subject to the terms and conditions of this
Agreement
and such promissory note), with the first installment payable on
the date
such promissory note is delivered pursuant hereto;
or
|
|
(D)
|
in
the case of any other such Purchase (including without limitation
a
termination of the employment of the applicable Employee Stockholder
in
conjunction with a Removal For Acting Contrary to the Best Interests
of
the LLC), on the later to occur of (I) the Purchase Closing Date
or (II)
the date which is the first business day after the second anniversary
of
the Effective Time, in either such case (x) fifty percent (50%) in
Contingent Consideration payable on the Liquidation Date and (y)
fifty
percent (50%) (in the sole discretion of the Manager Member) either
(1) by wire-transfer of immediately available funds to an account
designated to the Manager Member by the Selling Member at least three
(3)
business days prior to the date such payment is due or (2) by delivery
of
a promissory note of the Manager Member, in the form attached hereto
as
Exhibit
A,
having an initial principal amount equal to fifty percent (50%) of
the
Purchase Price, the principal amount of which promissory note is
payable
in four (4) equal annual installments (subject to the terms and conditions
of this Agreement and such promissory note), with the first installment
payable on the date such promissory note is delivered pursuant hereto;
and
|
-32-
(ii) In
the
case of a Purchase of Series B LLC Units, on the later to occur of (A) the
Purchase Closing Date or (B) the date which is the first business day after
the
second anniversary of the Effective Time, in either such case one hundred
percent (100%) in Contingent Consideration payable on the Liquidation
Date.
(g) The
Manager Member may assign any or all of its rights and obligations under this
Section 3.10, in one or more instances, to any other Person; provided,
however,
that no
such assignment shall relieve the Manager Member of its obligation to make
payment of a Purchase Price (to the extent not paid by any such assignee).
The
Manager Member may, with the consent of the Management Committee, assign any
or
all of its rights and obligations under this Section 3.10, in one or more
instances, to the LLC.
(h) In
the
event that a Non-Manager Member, its related Employee Stockholder or any
Permitted Transferee thereof holding LLC Interests (or any other holder of
LLC
Interests, other than the Manager Member or any Affiliate thereof) (i) has
filed
a voluntary petition under the bankruptcy laws or a petition for the appointment
of a receiver or makes any assignment for the benefit of creditors, (ii) is
subject involuntarily to such a petition or assignment or to an attachment
or
other legal or equitable interest with respect to any of its LLC Interests
or,
in the case of an Employee Stockholder which is not a Non-Manager Member, its
interests in the Non-Manager Member which it owns, and such involuntary petition
or assignment or attachment is not discharged within sixty (60) days after
its
effective date, or (iii) otherwise is subject to a Transfer of any of its LLC
Interests or, in the case of an Employee Stockholder which is not a Non-Manager
Member, its interests in the Non-Manager Member which it owns, by court order
or
decree or by operation of law (other than any such Transfer permitted by Section
5.1 hereof without the consent of the Manager Member), then the Manager Member
shall in its sole discretion be entitled to purchase (or permit its assignee
to
purchase) all of the LLC Interests held by such Non-Manager Member (or other
holder of LLC Interests, other than the Manager Member or any Affiliate thereof)
pursuant to the terms of this Section 3.10 as if such Non-Manager Member (or
other holder of LLC Interests) was a Selling Member, with the purchase price
for
such purchase to be determined pursuant to Section 3.10(c)(ii) and the date
of
the closing to be determined by the Manager Member in its discretion;
provided,
however,
that in
the case of a Transfer as a result of divorce, the Manager Member shall be
entitled to purchase (or permit its assignee to purchase) only the LLC Interests
then held by (or subject to transfer to) the divorced spouse of such Non-Manager
Member (or in the case of an Employee Stockholder which is not a Non-Manager
Member, interests in its Non-Manager Member held by the divorced spouse of
such
Employee Stockholder) as if such spouse was a Selling Member under this Section
3.10, and not the LLC Interests (or interests in such Non-Manager Member, as
applicable) which continue to be held by such Non-Manager Member or Employee
Stockholder (as applicable). In order to give effect to clause (iii) of the
prior sentence, if any of the interests of a Non-Manager Member in the LLC,
or
of an Employee Stockholder in a Non-Manager Member, become subject to Transfer
(or purport to be or have been Transferred) by a court order or decree or by
operation of law, the Non-Manager Member (or other holder of LLC Interests,
other than the Manager Member or any Affiliate thereof) whose interests in
the
LLC, or the interests in which (as applicable), are subject to such Transfer
shall cease to be a Member of the LLC, and the transferee by court order or
decree or by operation of law shall not become a Member, and the Manager Member
(or its assignee) shall have the right in its sole discretion to purchase from
the Non-Manager Member which has ceased to be a Non-Manager Member (or other
holder of LLC Interests) all of his, her or its interests in the LLC in the
manner set forth in the preceding sentence. In the event that the Manager Member
in its sole discretion determines not to purchase (or permit another assignee
of
the Manager Member to purchase) the LLC Interests held by a Non-Manager Member
(or other holder of LLC Interests, other than the Manager Member or any
Affiliate thereof) pursuant to the foregoing provisions of this Section 3.10(h),
the Manager Member shall assign its right to make such purchase to any one
or
more other Non-Manager Members who desire to make such purchase for their own
accounts (and whom the Management Committee shall have authorized in writing
to
make such purchase, with the Management Committee determining the respective
percentages such other Non-Manager Members shall be permitted to purchase),
and
such other Non-Manager Member(s) shall be entitled to purchase such LLC
Interests on the same terms that would have been applicable to the Manager
Member had it elected to make such purchase pursuant to the foregoing provisions
of this Section 3.10(h).
-33-
(i) In
the
event that a Non-Manager Member (or other holder of LLC Interests, other than
the Manager Member or any Affiliate thereof) is required to sell its LLC
Interests pursuant to the provisions of this Section 3.10 and for any reason
fails to execute and deliver the agreements required by this Section 3.10 and
otherwise to consummate such sale in accordance with the provisions of this
Section 3.10 (including without limitation as a result of being unable for
any
reason to comply with the requirements hereof), the Manager Member (or its
assignee, as applicable) may deposit the Purchase Price therefor (including
cash
and/or promissory notes) with any bank doing business within fifty (50) miles
of
the LLC’s principal place of business, or with the LLC’s accounting firm, as
agent for such Non-Manager Member (or such other holder of LLC Interests),
to be
held by such bank or accounting firm for the benefit of and for delivery to
such
Non-Manager Member. Upon such deposit by the Manager Member (or its assignee,
as
applicable) and upon notice thereof given to such Non-Manager Member (or such
other holder of LLC Interests), and such Non-Manager Member’s (or such other
holder’s) LLC Interests automatically shall be deemed to have been sold,
transferred, conveyed and assigned to the Manager Member (or its assignee,
as
applicable), such Non-Manager Member (or such other holder) shall cease to
hold
any LLC Interests, shall cease to be a Member of the LLC (if previously a
Member) and shall have no further rights with respect thereto (other than the
right to withdraw the payment therefor, if any, held by the agent described
in
the preceding sentence), and the Manager Member shall record such transfer
on
Schedule
A
hereto.
-34-
Section
3.11. No
Employment Obligation.
Each
Non-Manager Member and each Employee Stockholder acknowledges that this
Agreement creates no obligation on the part of the LLC (or any Controlled
Affiliate thereof) to continue the employment of an Employee Stockholder or
any
other Person with the LLC (or any Controlled Affiliate thereof), and that such
Employee Stockholder is an employee at will of the LLC and any of its Controlled
Affiliates employing such Employee Stockholder.
Section
3.12. Capitalization
of Excess Operating Cash Flow.
If the
Management Committee advises the Manager Member that, in its reasonable judgment
(taking into account the anticipated revenue and expenses bases of the LLC),
the
Operating Allocation will exceed the foreseeable expenses of the LLC on a
sustained basis (taking into account business conditions at the time and
including both a reasonable allowance for either loss of business or a change
in
margins in the business), the Manager Member shall discuss in good faith with
the Management Committee whether the Manager Member concurs in that view, and
if
the Manager Member after such discussion concurs in that view in its sole
discretion, the Manager Member will further discuss with the Management
Committee whether to capitalize a portion of such excess cash flow, the amount
of any such excess that it is potentially appropriate to capitalize, and who
the
recipients of such capitalized excess cash flow should be from the management
group.
Section
3.13. Miscellaneous.
Each
Member and each Employee Stockholder agrees that the enforcement of the
provisions of Sections 3.8, 3.9 and 3.10 hereof are necessary to ensure the
protection and continuity of the business, goodwill and confidential business
information of the LLC (and any Controlled Affiliates thereof) for the benefit
of each of the Members. Each Member and each Employee Stockholder agrees that,
due to the proprietary nature of the LLC’s (and any of its Controlled
Affiliates’) business, the restrictions set forth in Section 3.8 hereof are
reasonable as to duration and scope. If any provision contained in this Article
III shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Article III. It is the intention of the parties hereto
that if any of the restrictions or covenants contained herein is held to cover
a
geographic area or to be for a length of time that is not permitted by
applicable law, or is any way construed to be too broad or to any extent
invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would then be valid or enforceable
under applicable law, such provision shall be construed and interpreted or
reformed to provide for a restriction or covenant having the maximum enforceable
geographic area, time period and other provisions as shall be valid and
enforceable under applicable law. Each Member and Employee Stockholder
acknowledges that the obligations and rights under Sections 3.8, 3.9 and 3.10
and this Section 3.13 shall survive the termination of the employment of an
Employee Stockholder with the LLC (and with any applicable Controlled Affiliates
thereof) and/or the withdrawal or removal of a Member from the LLC, regardless
of the manner of such termination, withdrawal or removal, in accordance with
the
provisions hereof. Moreover, each Member agrees that the remedies provided
herein are reasonably related to the anticipated loss that the LLC (and any
Controlled Affiliates thereof) and the Members (including, without limitation,
the Manager Member, which would be purchasing LLC Interests from a Non-Manager
Member) would suffer upon a breach of such provisions. Except as agreed to
by
the Manager Member in advance in a writing making specific reference to this
Article III, no Employee Stockholder or Non-Manager Member shall enter into
any
agreement or arrangement which is inconsistent with the terms and provisions
hereof.
-35-
ARTICLE
IV
CAPITAL
CONTRIBUTIONS;
CAPITAL
ACCOUNTS AND ALLOCATIONS; DISTRIBUTIONS
Section
4.1. Capital
Contributions.
(a) As
of
immediately prior to the Effective Time, the LLC purchased all of assets,
properties, rights, powers, privileges and business (and the goodwill associated
therewith) described in the Purchase Agreement (and the LLC assumed all of
the
liabilities described in the Purchase Agreement), and the Members agree that
the
acquired property and the rights, subject to the liabilities, had the value
set
forth on Schedule
A
hereto
and the Manger Member shall be deemed to have made a Capital Contribution equal
to said value. Except as may be agreed to in connection with the issuance of
additional LLC Interests, as specifically set forth herein, or as may be
required under applicable law, the Members shall not be required to make any
further capital contributions to the LLC. No Member shall make any capital
contribution to the LLC without the prior consent of the Manager
Member.
(b) No
Member
shall have the right to withdraw any part of his, her or its (or his, her or
its
predecessors in interest) Capital Contribution until the dissolution and winding
up of the LLC (except as distributions otherwise expressly provided for in
this
Article IV may represent returns of capital, in whole or in part). No Member
shall be entitled to receive any interest on any Capital Contribution made
by it
(or its predecessors in interest) to the LLC. No Member shall have any personal
liability for the repayment of any Capital Contribution of any other
Member.
Section
4.2. Capital
Accounts; Allocations.
(a) There
shall be established for each Member a Capital Account (a “Capital
Account”)
which,
in the case of each Member, shall initially be equal to the Capital Contribution
of such Member as set forth on Schedule
A
hereto.
(b) The
Capital Account of each Member shall be adjusted in the following manner. Each
Capital Account shall be increased by such Member’s allocable share of income
and gain, if any, of the LLC (as well as the Capital Contributions made by
a
Member after the Effective Time, including, without limitation, any Capital
Contributions deemed to have been made to the LLC by the Manager Member pursuant
to the operation of clause (ii) of the last paragraph of Section 3.5(b) hereof)
and shall be decreased by such Member’s allocable share of deductions and
losses, if any, of the LLC and by the amount of all distributions made to such
Member. The amount of any distribution of assets other than cash shall be deemed
to be the Fair Market Value of such assets (net of any liabilities encumbering
such property that the distributee Member is considered to assume or take
subject to). Capital Accounts shall also be adjusted upon the issuance of
additional LLC Interests as set forth in Section 5.5(c) and upon the transfer
of
LLC Interests as set forth in Section 5.1. To the extent not otherwise provided
for in this Agreement, the Capital Accounts of the Members shall be adjusted
and
maintained in accordance with the rules of Treasury Regulations Section
1.704-1(b)(2)(iv), as the same may be amended or revised. Any references in
any
section of this Agreement to the Capital Account of a Member shall be deemed
to
refer to such Capital Account as the same may be credited or debited from time
to time as set forth above.
-36-
(c) Subject
to Sections 4.2(e), 4.2(g) and 4.5 hereof, all items of LLC income and gain
shall be allocated among the Members’ Capital Accounts at the end of every
calendar quarter as follows:
(i) first,
items of income and gain (if any) shall be allocated to the Manager Member
in an
amount equal to the product of (A) the Owners’ Allocation for such calendar
quarter, multiplied by (B) a fraction (I) the numerator of which is the number
of LLC Units held by the Manager Member as of the first day of such calendar
quarter and (II) the denominator of which is the number of LLC Units outstanding
as of the first day of such calendar quarter;
(ii) second,
items of income and gain (if any) shall be allocated to the Manager Member
until
the Manager Member has been allocated cumulative income and gain under this
Section 4.2(c)(ii) equal to the cumulative amount of losses and deductions
allocated to the Manager Member under Sections 4.2(d)(ii) and 4.2(d)(iii) in
prior periods (if any);
(iii) third,
items of income and gain (if any) shall be allocated to each Non-Manager Member
in an amount equal to the product of (I) the Owners’ Allocation for such
calendar quarter, multiplied by (II) a fraction (x) the numerator of which
is
the number of LLC Units held by such Non-Manager Member as of the first day
of
such calendar quarter and (y) the denominator of which is the number of LLC
Units outstanding as of the first day of such calendar quarter, until the
aggregate amount of such items of income and gain allocated to the Members
(including both the Manager Member and the Non-Manager Members) pursuant to
Sections 4.2(c)(i), 4.2(c)(ii) and this 4.2(c)(iii) for such calendar quarter
equals the total amount of the Owners’ Allocation for such calendar quarter;
and
(iv) finally,
all remaining items of LLC income and gain shall be allocated among the
Non-Manager Members in accordance with (and in proportion to) each Non-Manager
Member’s respective number of LLC Units on the first day of such calendar
quarter.
-37-
(d) Subject
to Sections 4.2(f), 4.2(g) and 4.5 hereof, all items of LLC loss and deduction
shall be allocated among the Members’ Capital Accounts at the end of every
calendar quarter as follows:
(i) first,
all items of LLC loss and deduction for such calendar quarter shall be
allocated: (A) first, among the Non-Manager Members in accordance with (and
in
proportion to) each Non-Manager Member’s respective number of LLC Units on the
first day of such calendar quarter, until the aggregate amount of such items
of
loss and deduction allocated to the Non-Manager Members pursuant to this clause
(A) equals the aggregate amount of allocations of income and gain to the
Non-Manager Members pursuant to Section 4.2(c)(iv) for such calendar quarter
and
(B) second, among the Non-Manager Members in accordance with (and in proportion
to) their respective numbers of LLC Units on the first day of such calendar
quarter, until the Capital Accounts of all of the Non-Manager Members shall
have
been reduced to zero (0) (after giving effect to the allocations of income
and
gain for such calendar quarter under Section 4.2(c)); provided that no
additional loss or deduction shall be allocated to any Non-Manager’s Capital
Account pursuant to this Section 4.2(d)(i) once such Capital Account has been
reduced to zero (0) (but items of loss and deduction shall continue to be
allocated to the Capital Accounts of the other Non-Manager Members pursuant
to
this Section 4.2(d)(i) until all such Non-Manager Members’ Capital Accounts have
been reduced to zero (0));
(ii) second,
any remaining items of LLC loss and deduction for such calendar quarter not
allocated to the Non-Manager Members under Section 4.2(d)(i) shall be allocated
to the Manager Member until its Capital Account shall have been reduced to
zero
(0); and
(iii) finally,
any remaining items of LLC loss and deduction for such calendar quarter not
allocated to the Members under Sections 4.2(d)(i) and 4.2(d)(ii) shall be
allocated among all Members in accordance with (and in proportion to) each
Member’s respective number of LLC Units as of the first day of such calendar
quarter.
(e) If
the
LLC has a net gain from the sale, exchange or other disposition of all, or
a
substantial portion (as determined by the Manager Member) of, the assets of
the
LLC and its Controlled Affiliates, then that net gain shall be allocated among
the Members as follows:
(i) first,
net gain shall be allocated to the Manager Member until the Manager Member
has
been allocated cumulative gain which, together with income and gain previously
allocated to the Manager Member under Section 4.2(c)(ii) hereof and this Section
4.2(e)(i), equals the cumulative amount of losses and deductions allocated
to
the Manager Member under Sections 4.2(d)(ii) and 4.2(d)(iii) in prior
periods;
(ii) second,
an aggregate amount of net gain equal to the positive difference between (A)
the
Liquidation Preference and (B) the aggregate positive Capital Account balances
of those Members holding Series A LLC Units as of the date of the transaction
(or an allocable portion thereof, in the case of any Member holding both Series
A LLC Units and Series B LLC Units as of the date of such transaction) shall
be
allocated among those Members holding Series A LLC Units as of the date of
the
transaction in accordance with (and in proportion to) their respective number
of
Series A LLC Units as of the date of the transaction; provided,
however,
that,
in the event the ratio of (I) the aggregate Capital Account balances of any
Non-Manager Members holding Series A LLC Units, on the one hand, to (II) the
Capital Account balance of the Manager Member, on the other hand, is less than
the ratio of (X) the Applicable Aggregate Non-Manager Member Allocation
Percentage, on the one hand, to (Y) the Applicable Manager Member Allocation
Percentage, on the other hand, then in such event, the aggregate net gain
described in this clause (ii) shall first be allocated to such Non-Manager
Members holding Series A LLC Units (in accordance with, and in proportion to,
their respective number of Series A LLC Units) until such ratios are equal
(and
thereafter shall be allocated in accordance with this clause (ii) without
further application of this proviso);
-38-
(iii) third,
net gain shall be allocated among the Non-Manager Members in accordance with
(and in proportion to) their respective number of LLC Units as of the date
of
the transaction, until the ratio of (I) the aggregate Capital Account balances
of the Non-Manager Members, on the one hand, to (II) the Capital Account balance
of the Manager Member, on the other hand, is equal to the ratio of (X) the
Applicable Aggregate Non-Manager Member Allocation Percentage, on the one hand,
to (Y) the Applicable Manager Member Allocation Percentage, on the other hand;
and
(iv) thereafter,
net gain shall be allocated among the Members in accordance with (and in
proportion to) their respective number of LLC Units as of the date of the
transaction.
(f) If
the
LLC has a net loss from any sale, exchange or other disposition of all, or
a
substantial portion (as determined by the Manager Member) of, the assets of
the
LLC and its Controlled Affiliates, then that net loss shall be allocated among
the Members in accordance with (and in proportion to) their respective number
of
LLC Units as of the date of the transaction; provided that no additional losses
shall be allocated to a Member once its Capital Account has been reduced to
zero
(0) (but losses shall continue to be allocated to the Capital Accounts of the
other Members pursuant to this Section 4.2(f)) until all Members’ Capital
Accounts have been reduced to zero (0), and thereafter any remaining amount
of
such losses shall be allocated among all Members pursuant to this Section 4.2(f)
in accordance with (and in proportion to) each Member’s respective number of LLC
Units as of the first day of such calendar quarter.
(g) In
the
event that during any calendar quarter (or any fiscal year of the LLC) there
is
any change of Members or LLC Units held by the Members (whether as a result
of
the admission of an Additional Non-Manager Member, the redemption by the LLC
of
all (or any portion) of any Member’s LLC Units, an issuance or transfer of any
LLC Units or otherwise), the following shall apply (and shall be implemented
as
determined by the Manager Member): (i) such change shall be deemed to have
occurred as of the end of the last day of the calendar quarter in which such
change occurred, (ii) the books of account of the LLC shall be closed effective
as of the close of business on the effective date of any such change as set
forth in clause (i) and such fiscal year shall thereupon be divided into two
or
more portions, (iii) each item of income, gain, loss and deduction shall be
determined (on the closing of the books basis) for the portion of such fiscal
year ending with the date on which the books of account of the LLC are so
closed, and (iv) each such item for such portion of such fiscal year shall
be
allocated (pursuant to the provisions of Sections 4.2(c) and (d) hereof) to
those Persons who were Members during such portion of such fiscal year in
accordance with their respective LLC Units during such period.
-39-
Section
4.3. Distributions.
(a) Subject
to Section 4.4 hereof, from and after the Effective Time, within thirty (30)
days after the end of each calendar quarter, the LLC shall, to the extent cash
is available therefor at the LLC or any of its Controlled Affiliates (and the
LLC shall cause its Controlled Affiliates to distribute any such available
cash
to the LLC, to the extent required for distributions pursuant hereto and not
in
violation of any laws applicable to such Controlled Affiliates), and based
on
the unaudited financial statements for such calendar quarter prepared in
accordance with Section 8.3 hereof (after approval of such financial statements
by the Manager Member), (i) first, distribute to the Manager Member an amount
equal to the allocations of income and gain to the Manager Member pursuant
to
Sections 4.2(c)(i) and 4.2(c)(ii) for such calendar quarter (less the Manager
Member’s pro rata portion of any Owners’ Allocation Expenditures made in such
calendar quarter) plus any previous calendar quarter to the extent not then
distributed, and (ii) second, distribute to each Non-Manager Member (and each
Person who was a Non-Manager Member at any time during such calendar quarter)
an
amount equal to the allocation of income and gain to such Non-Manager Member
pursuant to Sections 4.2(c)(iii) and 4.2(c)(iv) for such calendar quarter (less
an amount equal to each such Person’s pro rata portion of any Owners’ Allocation
Expenditures made in such calendar quarter) plus any previous calendar quarter
to the extent not then distributed, less an amount equal to the allocation
of
losses and deductions to such Non-Manager Member pursuant to Section 4.2(d)(i)
for such calendar quarter. Within sixty (60) days after the end of each fiscal
year of the LLC, the LLC shall, based on the audited financial statements
prepared in accordance with Section 8.3 hereof, make a distribution of the
remaining amounts (if any) for such completed fiscal year which were allocated
pursuant to Sections 4.2(c)(i), 4.2(c)(ii), 4.2(c)(iii) and 4.2(c)(iv) (but
not
previously distributed) and any previous fiscal year to the extent not then
distributed (less each applicable recipient’s pro rata portion of any Owners’
Allocation expenditures made in such fiscal year), such distribution to be
made
in accordance with clauses (i) and (ii) of the prior sentence, whenever and
to
the extent cash is available therefor at the LLC or any of its Controlled
Affiliates (and the LLC shall cause its Controlled Affiliates to distribute
any
such available cash to the LLC, to the extent required for such distributions
and not in violation of any laws applicable to such Controlled Affiliates).
Notwithstanding the foregoing provisions of this Section 4.3(a), the Manager
Member may, with the approval of the Management Committee, from time to time
reserve and not distribute portions of the Owners’ Allocation for LLC purposes
(including without limitation to increase the net worth of the LLC, to make
capital expenditures (such as the creation of or investment in a Controlled
Affiliate) or to create a reserve for anticipated purchases of LLC Interests);
provided,
however,
that
any such reservation shall be made from all Members pro rata in proportion
to
LLC Units and that such funds shall be maintained in the Receipts Account (as
defined below) pending expenditure thereof; and provided,
further,
that to
the extent such reserve is not used for LLC purposes as contemplated by the
Manager Member and the Management Committee, such reserve shall be distributed
in accordance with this Section 4.3(a). To the extent that cash is for any
reason not available to make a distribution to the Manager Member pursuant
to
this Section 4.3(a) of the time such distribution otherwise would have been
required by this Section 4.3(a) to be made to the Manager Member if cash were
available therefor (or in the event that the LLC for any other reason does
not
make a required distribution to the Manager Member within thirty (30) days
following a calendar quarter end or sixty (60) days following a fiscal year
end,
as applicable), then such distribution shall be made to the Manager Member
by
the LLC as promptly as possible following the date it was otherwise required
to
be made under this Section 4.3(a), together with interest thereon calculated
from the thirtieth (30th)
day
following such calendar quarter end or the sixtieth (60th)
day
following such fiscal year end (as applicable) at a rate per annum equal to
the
prime lending rate then in effect as reported by XX Xxxxxx Xxxxx, which interest
shall be borne by the LLC as an operating expense payable out of the Operating
Allocation.
-40-
(b) To
give
effect to the foregoing, the LLC shall have two (2) bank accounts. The first
account (the “Receipts
Account”)
shall
have as its authorized signatories such representatives of the LLC and the
Manager Member as the Management Committee and the Manager Member shall deem
appropriate or desirable. All of the LLC’s receipts shall be paid into the
Receipts Account; provided,
however,
that on
a weekly basis, the LLC shall transfer twenty-eight percent (28%) of receipts
paid into this account to a second account (the “Owners’
Allocation Account”)
which
shall have as its authorized signatories such representatives of the LLC and
the
Manager Member as the Management Committee and the Manager Member shall deem
appropriate or desirable. The Manager Member shall use the Owners’ Allocation
Account to make all distributions of Owners’ Allocation pursuant to Section
4.3(a) above and to fund all Owners’ Allocation Expenditures. The Manager Member
shall retain in the Owners’ Allocation Account any amount which gives rise to
the right to make distributions pursuant to Section 4.3(c) hereof (including,
without limitation, the proceeds of sales of assets, insurance proceeds and
the
proceeds of issuance of additional LLC Interests) and shall distribute such
amounts in accordance with the provisions of Section 4.3(c). The Receipts
Account shall be used by the Management Committee to make all operating expense
payments (including payments of salary and bonus) out of the Operating
Allocation. Within thirty (30) days after the end of each calendar quarter,
based on the unaudited financial statements for such calendar quarter prepared
in accordance with Section 8.3 hereof, and within ninety-five (95) days after
the end of each fiscal year of the LLC, based on the audited financial
statements prepared in accordance with Section 8.3 hereof, the Manager Member
and the LLC shall cause such transfers between the Receipts Account and the
Owners’ Allocation Account to reflect the appropriate allocations between
Operating Allocation and Owners’ Allocation and other amounts excluded from the
definition of Revenue from Operations hereunder.
(c) Except
to
the extent distributions are provided for in Section 4.3(a) hereof, any other
amounts or proceeds available for distribution to the Members (if any) (after
taking into account the use or reservation of Operating Allocation pursuant
to
Section 3.5(b)) shall be distributed to the Members at such times as may be
determined by the Manager Member, provided that any such distribution shall
be
made among the Members (i) first, in accordance with (and in proportion to)
the
positive balances (if any) in the respective Capital Accounts of the Members
(as
determined immediately prior to such distribution) until all such positive
Capital Account balances have been reduced to zero, and (ii) thereafter, among
all Members in accordance with (and in proportion to) their respective numbers
of LLC Units at the time of such distribution (provided,
however,
that if
a Member has made a Capital Contribution after the Effective Time, the Manager
Member may cause the LLC first to make a priority return of such Capital
Contribution and provided further
that the
Manager Member may cause the LLC to first make a priority distribution to the
Manager Member of an amount equal to the working capital of the business
acquired pursuant to the Purchase Agreement on the date of said
acquisition).
-41-
(d) Notwithstanding
any other provision of this Agreement, the LLC shall not make a distribution
to
any Member on account of its LLC Interest if such distribution would violate
the
Act or other applicable law.
Section
4.4. Distributions
Upon Dissolution; Establishment of a Reserve Upon
Dissolution.
Upon
the
dissolution of the LLC, the assets of the LLC shall first go toward the payment
(or the making of reasonable provision for the payment) of all liabilities
of
the LLC owing to creditors, including without limitation the establishment
of
such reserves as the Manager Member (or if there is none, the Liquidating
Trustee) deems necessary or advisable to provide for any liabilities or other
obligations of the LLC. The Manager Member (or if there is none, the Liquidating
Trustee) may cause the LLC to pay any such reserves over to a bank (or other
third party) to be held in escrow for the purpose of paying any such liabilities
or other obligations. At the expiration of such period(s) as the Manager Member
(or Liquidating Trustee, if there is no Manager Member) may deem necessary
or
advisable, any remaining amount of such reserves (if any), and any other assets
available for distribution, or a portion thereof (as determined by the Manager
Member or, if there is none, the Liquidating Trustee), shall be distributed
to
the Members as follows:
(i) First,
among the Members holding Series A LLC Units as of the date of dissolution
in
accordance with the positive balances (if any) in their respective Capital
Accounts (as determined immediately prior to such distribution) until all such
positive Capital Account balances have been reduced to zero;
(ii) second,
among the Members holding Series A LLC Units as of the date of dissolution,
in
an amount equal to the Liquidation Preference minus the aggregate net gain
(if
any) allocated to such Members pursuant to Section 4.2(e)(ii) hereof in
connection with such dissolution, ratably in accordance with (and in proportion
to) the respective number of Series A LLC Units held by such Members as of
the
date of dissolution;
(iii) third,
among the Members holding Series B LLC Units as of the date of dissolution
in
accordance with the positive balances (if any) in their respective Capital
Accounts (as determined immediately prior to such distributions) until all
such
positive Capital Account balances have been reduced to zero; and
-42-
(iv) thereafter,
among the Members in accordance with (and in proportion to) their respective
number of LLC Units as of the date of dissolution.
If
any
assets of the LLC are to be distributed in kind in connection with such
liquidation, such assets shall be distributed on the basis of their Fair Market
Value (net of any liabilities encumbering such assets) and, to the greatest
extent practicable under the circumstances (as determined by the Manager Member
or, if there is none, the Liquidating Trustee), shall be distributed pro rata
in
accordance with the total amounts to be distributed to each Member. In the
event
that a distribution referenced in the preceding sentence is not distributed
pro
rata, the Members understand and acknowledge that a Member may be compelled
to
accept a distribution of any asset in kind from the LLC despite the fact that
the percentage of the asset distributed to such Member exceeds the percentage
of
that asset which is equal to the percentage in which such Member shares in
distributions from the LLC. Immediately prior to the effectiveness of any such
distribution-in-kind, each item of gain and/or loss that would have been
recognized by the LLC had the property being distributed instead been sold
by
the LLC for its Fair Market Value shall be determined and allocated to those
Persons who were Members immediately prior to the effectiveness of such
distribution in accordance with Section 4.2(c) and 4.2(d).
Section
4.5. Proceeds
from Capital Contributions and the Sale of Securities; Insurance Proceeds;
Certain Special Allocations.
(a) Minimum
Gain Chargeback.
Notwithstanding any other provision in this Article IV, if there is a net
decrease in Partnership Minimum Gain or Partner Nonrecourse Debt Minimum Gain
(determined in accordance with the principles of Treasury Regulations Sections
1.704-2(d) and 1.704-2(i)) during any taxable year, the Members shall be
specially allocated items of LLC income and gain for such year (and, if
necessary, subsequent years) in an amount equal to their respective shares
of
such net decrease during such year, determined pursuant to Treasury Regulations
Sections 1.7042(g)(2) and 1.704-2(i)(5). The items to be so allocated shall
be
determined in accordance with Treasury Regulations Section 1.704-2(f). This
Section 4.5(a) is intended to comply with the minimum gain chargeback
requirements in such Treasury Regulations Sections and shall be interpreted
consistently therewith; including that no chargeback shall be required to the
extent of the exceptions provided in Treasury Regulations Sections 1.7042(f)
and
1.704-2(i)(4).
(b) Qualified
Income Offset.
In the
event any Member unexpectedly receives any adjustments, allocations, or
distributions described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4),
(5) or (6), items of LLC income and gain shall be specially allocated to such
Member in an amount and manner sufficient to eliminate the deficit balance
in
his Capital Account created by such adjustments, allocations or distributions
as
promptly as possible.
(c) Gross
Income Allocation.
In the
event any Member has a deficit Capital Account at the end of any fiscal year
which is in excess of the sum of (i) the amount such Member is obligated to
restore, if any, pursuant to any provision of this Agreement, and (ii) the
amount such Member is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulations Section 1.704-2(g)(1) and
1.704-2(i)(5), each such Member shall be specially allocated items of LLC income
and gain in the amount of such excess as quickly as possible, provided that
an
allocation pursuant to this Section 4.5(c) shall be made only if and to the
extent that a Member would have a deficit Capital Account in excess of such
sum
after all other allocations provided for in this Article IV have been
tentatively made as if Section 4.5(b) and this Section 4.5(c) were not in this
Agreement.
-43-
(d) Nonrecourse
Deductions.
Nonrecourse Deductions shall be allocated among the Members in accordance with
their respective numbers of LLC Units.
(e) Partner
Nonrecourse Deductions.
Partner
Nonrecourse Deductions for any taxable period shall be allocated to the Member
who bears the economic risk of loss with respect to the liability to which
such
Partner Nonrecourse Deductions are attributable in accordance with Treasury
Regulations Section 1.704-2(j).
(f) Curative
Allocations.
The
allocations set forth in Sections 4.5(a), (b), (c), (d), and (e) hereof (the
“Regulatory
Allocations”)
are
intended to comply with certain requirements of the Treasury Regulations. It
is
the intent of the Members that, to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory Allocations or with
special allocations of other items of LLC income, gain, loss or deduction
pursuant to this Section 4.5(f), and to the extent Regulatory Allocations are
necessary, it is the intent of the Members that they be made in as consistent
a
manner with the provisions of Section 4.2 hereof as practicable, subject to
compliance with the Treasury Regulations. Therefore, notwithstanding any other
provision of this Article IV (other than the Regulatory Allocations), the
Manager Member shall make such offsetting special allocations of LLC income,
gain, loss or deduction in whatever manner it determines appropriate so that,
after such offsetting allocations are made, each Member’s Capital Account is, to
the extent possible, equal to the Capital Account balance such Member would
have
had if the Regulatory Allocations were not a part of this Agreement and all
LLC
items were allocated pursuant to Section 4.2. In exercising its discretion
under
this Section 4.5(f), the Manager Member shall take into account future
Regulatory Allocations under Section 4.5(a) that, although not yet made, are
likely to offset other Regulatory Allocations previously made under Sections
4.5(d) and (e).
(g) Proceeds
of Capital Contribution and Securities Issuances.
Capital
Contributions made by any Member after the Effective Time, and any proceeds
from
the issuance of securities by the LLC, may in the sole discretion of the Manager
Member be used for the benefit of the LLC (including without limitation
provision for the purchase or redemption of any LLC Interests to be purchased
or
redeemed by the LLC), or may be distributed by the LLC to the Members in the
sole discretion of the Manager Member, in which case any such proceeds shall
be
allocated and distributed among the Members in accordance with their respective
LLC Units immediately prior to the date of such contribution or issuance of
securities (it being understood that in the event the proceeds are a promissory
note or other receivable, any such distribution shall only occur (if at all)
upon receipt by the LLC of cash in respect thereof).
(h) Proceeds
of Key-Man Life or Disability Insurance.
In the
event of the death or Permanent Incapacity of an Employee Stockholder covered
by
key-man life or disability insurance, the premiums on which have been paid
by
the LLC (or any Controlled Affiliate thereof), the proceeds of any such policy
(net of any expected tax liability to be incurred by the LLC, any Controlled
Affiliate thereof and/or any Member as a result of the receipt by the LLC (or
a
Controlled Affiliate thereof) of such proceeds) may, in the sole discretion
of
the Manager Member, (i) be used for the benefit of the LLC (e.g., the making
of
capital expenditures), or (ii) be distributed by the LLC to the Members in
which
case such proceeds shall be allocated and distributed among the Members in
accordance with their respective LLC Units immediately following the Purchase
of
LLC Interests from such Employee Stockholder (or its related Non-Manager Member)
under Section 3.10 hereof. Notwithstanding any other provision of this Agreement
to the contrary, in the event the LLC (or any Controlled Affiliate thereof)
receives proceeds from any insurance policy owned or otherwise maintained by
or
benefiting the LLC (or a Controlled Affiliate thereof) and the receipt of such
proceeds is for any reason expected by the Manager Member to result in a tax
liability to one or more of the Members, the Manager Member may, in its sole
discretion, distribute that portion of such insurance proceeds to such Member(s)
as is necessary to partially or fully (in the Manager Member’s sole discretion)
reimburse such Member(s) for the actual tax liabilities incurred by such
Member(s) as a result of the LLC’s (or its Controlled Affiliate’s) receipt of
such proceeds and the receipt by such Member of a distribution pursuant to
this
sentence; provided that, in the event the Manager Member determines to make
any
distributions of proceeds pursuant to this sentence, each Member incurring
tax
liabilities as a-result of the LLC’s (or its Controlled Affiliate’s) receipt of
such insurance proceeds shall be reimbursed in the same proportion (as compared
to the total tax liability it incurs) as each other Member receiving
reimbursement pursuant to this sentence; and provided, further, that any Member
receiving reimbursement pursuant to this sentence shall promptly reimburse
to
the LLC any portion of such reimbursement that exceeds the actual tax
liabilities resulting to such Member as a result of the LLC’s (or its Controlled
Affiliate’s) receipt of such insurance proceeds and the receipt by such Member
of a distribution pursuant to this sentence.
-44-
(i) Depreciation
and Amortization.
All
items of depreciation or amortization (as calculated for book purposes in
accordance with GAAP, consistently applied) on account of the intangible items
of property of the LLC at the Effective Time shall be specially allocated to
the
Manager Member, and all items of depreciation or amortization (as calculated
for
book purposes in accordance with GAAP, consistently applied) on account of
the
tangible items of property of the LLC at the Effective Time shall be specially
allocated to the Non-Manager Members as set forth in Section 4.2(d)(i). All
items of depreciation or amortization (as calculated for book purposes in
accordance with GAAP, consistently applied) on account of property (whether
tangible or intangible) purchased out of the Operating Allocation shall be
allocated to the Non-Manager Members as set forth in Section 4.2(d)(i), and
all
items of depreciation or amortization (as calculated for book purposes in
accordance with GAAP, consistently applied) on account of property (whether
tangible or intangible) purchased out of the Owners’ Allocation shall be
allocated among the Members in accordance with their respective numbers of
LLC
Units on the date the property was purchased.
Section
4.6. Tax
Allocations.
For
income tax purposes only, each item of income, gain, loss and deduction of
the
LLC shall be allocated among the Members in the same manner as the corresponding
items of income, gain, loss and deduction and specially allocated items are
allocated for Capital Account purposes, provided that in the case of any LLC
asset the Carrying Value of which differs from its adjusted tax basis for
federal income tax purposes, income, gain, loss and deduction with respect
to
such asset shall be allocated solely for income tax purposes in accordance
with
the principles of Sections 704(b) and (c) of the Code (in any manner determined
by the Manager Member in its sole discretion) so as to take account of the
difference between the Carrying Value and the adjusted basis of such
asset.
-45-
Section
4.7. Other
Allocation Provisions.
The
foregoing provisions and the other provisions of this Agreement relating to
the
maintenance of Capital Accounts are intended to comply with Treasury Regulations
Section 1.704-1(b) and shall be interpreted and applied in a manner consistent
with such regulations. Sections 4.2(c) to 4.2(f), and Sections 4.5 and 4.6
may
be amended at any time by the Manager Member if necessary, in the opinion of
tax
counsel to the LLC or the Manager Member, to comply with such regulations,
so
long as any such amendment (a) does not materially change the relative economic
interests of the Members and (b) to the extent practicable in the Manager
Member’s reasonable judgment, applies consistently to all Non-Manager
Members.
Section
4.8. Withholding.
The
Manager Member is authorized to cause the LLC to withhold from distributions
to
a Member, or with respect to allocations to a Member, and to pay over to a
federal, state or local government, any amounts required to be withheld pursuant
to the Code or any other provisions of federal, state or local law. Any amounts
so withheld shall be treated as distributed to such Member pursuant to this
Article IV for all purposes of this Agreement and, if withheld from amounts
allocated but not distributed, shall be offset against the next amounts
otherwise distributable to such Member.
ARTICLE
V
TRANSFER
OF LLC INTERESTS BY NON-MANAGER
MEMBERS;
RESIGNATION, REDEMPTION AND WITHDRAWAL BY
NON-MANAGER
MEMBERS;
ADMISSION
OF ADDITIONAL NON-MANAGER MEMBERS
Section
5.1. Transferability
of Interests.
No
interest of a Non-Manager Member (or transferee thereof) in the LLC (including
without limitation LLC Interests) may, directly or indirectly, be sold,
assigned, transferred, gifted or exchanged, nor may any Non-Manager Member
(or
transferee thereof) offer to do any of the foregoing (each, a “Transfer”),
nor
may any direct or indirect interest in any Non-Manager Member be, directly
or
indirectly, Transferred by any holder thereof, nor may any stockholder or other
holder of an ownership interest in any Non-Manager Member which is not a natural
person offer to do any of the foregoing, and no Transfer by a Non-Manager Member
(or transferee thereof) or holder of an ownership interest in a Non-Manager
Member shall be binding upon the LLC or any Non-Manager Member, in each case
unless (i) such Transfer is expressly permitted by this Article V and (ii)
the
Manager Member receives an executed copy of the documents effecting such
Transfer and such documents are in compliance with the requirements of this
Article V and otherwise in form and substance reasonably satisfactory to the
Manager Member. The transferee of an interest in the LLC may become a substitute
Non-Manager Member, and a Non-Manager Member which is not a natural person
may
remain a Member of the LLC following the Transfer of an ownership interest
in
such Non-Manager Member, in each case only upon the terms and conditions set
forth in Section 5.2. If a transferee of an interest of a Non-Manager Member
in
the LLC does not become (and until any such transferee becomes) a substitute
Non-Manager Member, or if a Non-Manager Member in which an ownership interest
has been Transferred does not remain a Member of the LLC following such
Transfer, in either case in accordance with the provisions of Section 5.2,
such
Person shall not be entitled to exercise or receive any of the rights, powers
or
benefits of a Non-Manager Member other than the right to receive distributions
which the assigning Non-Manager Member has Transferred to such Person in
compliance with this Section 5.1. Each Employee Stockholder and Non-Manager
Member agrees to comply, and to cause its owners and transferees to comply
(as
applicable), with the provisions of this Article V.
-46-
A
Non-Manager Member’s LLC Interests (or, in the case of a Non-Manager Member
which is not a natural person, direct (but in no event indirect) ownership
interests in such Non-Manager Member) may be Transferred solely:
(a) with
the
prior written consent of the Manager Member, which consent may be granted or
withheld by the Manager Member in its reasonable discretion;
(b) (i)
upon
the death of such Non-Manager Member (in the case of a Non-Manager Member who
is
a natural person), with respect to LLC Interests held by such Non-Manager
Member, (ii) upon the death of a direct holder of ownership interests in such
Non-Manager-Member (in the case of a Non-Manager Member which is not a natural
person), with respect to the direct ownership interests in such Non-Manager
Member held by such deceased holder, in either such case such specified
ownership interests may be Transferred by will or the laws of descent and
distribution (without the consent of the Manager Member, but subject in all
cases to the provisions of Section 3.10 hereof, which shall continue to be
binding upon the LLC Interests of such Non-Manager Member (and the holders
thereof) notwithstanding such death) or (iii) in connection with the appointment
of a legal guardian or conservator for such Non-Manager Member or a direct
holder of equity interests therein (as applicable) in the event of incapacity,
to the extent such legal guardian or conservator succeeds as a matter of law
to
record ownership of such LLC Interests or direct ownership interests (as
applicable) and provided that such Non-Manager Member or holder of direct
ownership interests (as applicable) remains the beneficial owner of such
interests;
(c) (i)
an
Employee Stockholder who is a Non-Manager Member may Transfer his or her LLC
Interests, or (ii) direct ownership interests in a Non-Manager Member which
is
not a natural person may be Transferred by its related Employee Stockholder,
in
either such case to members of such Employee Stockholder’s Immediate Family (or
trusts for the benefit of such Employee Stockholder or the members of such
Employee Stockholder’s Immediate Family, provided that any such trust does not
require or permit distribution of such interests other than to such Employee
Stockholder, members of such Employee Stockholder’s Immediate Family, or such
Employee Stockholder’s related original Non-Manager Member that is a party
hereto) without the consent of the Manager Member;
provided
that in the case of (b) or (c) above, (i) the transferee first enters into
an
agreement with the LLC in form and substance reasonably satisfactory to the
Manager Member agreeing to be bound by the provisions of this Agreement, and
(ii) whether or not the transferee enters into such an agreement, such LLC
Interests and ownership interests in such Non-Manager Member (as applicable)
shall thereafter remain subject to this Agreement.
-47-
Notwithstanding
the foregoing, no Non-Manager Member’s interest in the LLC may be Transferred
(and no ownership interest in a Non-Manager Member which is not a natural person
may be Transferred) (i) if after giving effect to such Transfer, the total
number of Members of the LLC would be deemed to exceed one hundred (100) (as
determined in accordance with Treasury Regulations § 1.7704-1(h)), unless
such Transfer is a Transfer described in Treasury Regulations §
1.7704-1(e), or (ii) if such Transfer (A) is required to be registered under
the
Securities Act, or (B) is not required to be registered under the Securities
Act
by reason of Regulation S thereunder, but would have been required to be
registered under the Securities Act if the Transfer had been made within the
United States, or if such Transfer would otherwise violate the securities or
other laws of any jurisdiction.
For
all
purposes of this LLC Agreement, any Transfers of LLC Interests shall be deemed
to occur as of the end of the last day of the calendar quarter in which any
such
Transfer would otherwise have occurred. Upon any Transfer of LLC Interests
in
accordance with the provisions hereof, the Manager Member shall make the
appropriate revisions to Schedule
A
hereto.
Each
time
LLC Interests (including without limitation additional LLC Units) are
Transferred or Purchased, the Manager Member may in its sole discretion elect
to
revalue the Capital Accounts of all the Members. If the Manager Member so
elects, then the Capital Accounts of all the Members shall be adjusted as
follows: (i) The Manager Member shall determine the proceeds which would be
realized if the LLC sold all its assets at such time for a price equal to the
Fair Market Value of such assets, and (ii) the Manager Member shall allocate
amounts equal to the gain or loss which would have been realized upon such
a
sale to the Capital Accounts of all the Members immediately prior to such
Transfer in accordance with Sections 4.2(e) and 4.2(f) hereof.
No
interests of a Non-Manager Member in the LLC (including without limitation
LLC
Interests) may be pledged, hypothecated, optioned or encumbered, nor may any
direct or indirect ownership interests in a Non-Manager Member be pledged,
hypothecated, optioned or encumbered, nor may any offer to do any of the
foregoing be made, without the prior written consent of the Manager Member
in
its sole discretion.
Section
5.2. Substitute
Non-Manager Members.
No
transferee of interests of a Member in the LLC (including without limitation
LLC
Interests) shall become a Member, and no Non-Manager Member in which any direct
or indirect ownership interests have been Transferred shall remain a Member
of
the LLC, in either case except in accordance with this Section 5.2. The Manager
Member may in its sole discretion admit as a substitute Non-Manager Member
(with
respect to all or a portion of the LLC Interests held by a Person), any Person
that acquires an LLC Interest by Transfer from another Member in accordance
with
Section 5.1 hereof, or that acquires an LLC Interest from the Manager Member
in
accordance with Section 6.1 hereof, and the Manager Member may in its sole
discretion permit any Non-Manager Member in which all of the ownership interests
have been Transferred to remain a Member of the LLC (and such Non-Manager Member
otherwise automatically shall cease to be a Member of the LLC). The admission
of
a transferee as a substitute Non-Manager Member shall, in all events, be
conditioned upon the execution of an instrument satisfactory in form and
substance to the Manager Member whereby such transferee becomes a party to
this
Agreement as a Non-Manager Member. Upon the admission of a substitute
Non-Manager Member in accordance with this Section 5.2, the Manager Member
shall
make the appropriate revisions to Schedule
A
hereto.
-48-
Section
5.3. Allocation
of Distributions Between Transferor and Transferee; Successor to Capital
Accounts.
Upon
the Transfer of LLC Interests in accordance with this Article V, distributions
pursuant to Article IV after the date of such Transfer shall be made to the
Person owning the LLC Interest at the date of distribution, unless the
transferor and transferee otherwise agree and so direct the LLC and the Manager
Member in a written statement signed by both the transferor and transferee.
In
connection with a Transfer by a Member of LLC Interests, the transferee shall
succeed to a pro rata (based on the percentage of such Person’s LLC Interests
Transferred) portion of the transferor’s Capital Account, unless the transferor
and transferee otherwise agree and so direct the LLC and the Manager Member
in a
written statement signed by both the transferor and transferee and consented
to
by the Manager Member.
Section
5.4. Resignation,
Redemptions and Withdrawals.
No
Non-Manager Member shall have the right to resign as a Member, to cause the
redemption of its interest in the LLC in whole or in part, or otherwise to
withdraw as a Member of the LLC, except (a) with the consent of the Manager
Member in its sole discretion or (b) as is expressly provided for in Section
3.10 hereof in connection with a Purchase. Upon any resignation, redemption
or
withdrawal as a Member, the Non-Manager Member shall only be entitled to the
consideration (if any) provided for by Section 3.10 hereof upon the purchase
of
its LLC Interest, if and to the extent that one of such Sections provides for
such a purchase (and shall in no event be entitled to a withdrawal, redemption
or distribution of its Capital Account in whole or in part). Upon the
resignation, redemption or withdrawal, in whole or in part, by a Non-Manager
Member, the Manager Member shall make the appropriate revisions to Schedule
A
hereto.
Section
5.5. Issuance
of Additional LLC Interests.
(a) Except
as
provided in Section 5.2, additional Non-Manager Members (each, an “Additional
Non-Manager Member”)
may be
admitted to the LLC, and such Additional Non-Manager Members may be issued
LLC
Units (or other LLC Interests), only upon the prior written consent of the
Manager Member and the Management Committee (and then upon such terms and
conditions as may be established by the Manager Member, including without
limitation upon such Additional Non-Manager Member’s execution of an instrument
in form and substance satisfactory to the Manager Member whereby such Person
becomes a party to this Agreement as a Non-Manager Member).
(b) Existing
Non-Manager Members may be issued additional LLC Units (or other LLC Interests)
by the LLC only upon the prior written consent of the Manager Member and the
Management Committee (and then upon such terms and conditions as may be
established by the Manager Member). The Manager Member or its Affiliates may
only be issued additional LLC Units (or other LLC Interests) upon the approval
of the Management Committee.
(c) Each
time
additional LLC Interests are issued (including, without limitation, additional
LLC Units), the Capital Accounts of all the Members shall be adjusted as
follows: (i) the Manager Member shall determine the proceeds which would be
realized if the LLC sold all its assets at such time for a price equal to the
Fair Market Value of such assets and (ii) the Manager Member shall allocate
amounts equal to the gain or loss which would have been realized upon such
a
sale to the Capital Accounts of all the Members immediately prior to such
issuance in accordance with Sections 4.2(e) and 4.2(f) hereof.
-49-
(d) Upon
the
issuance of additional LLC Interests in accordance with the provisions of this
Article V, the Manager Member shall make the appropriate revisions to
Schedule
A
hereto.
(e) Notwithstanding
anything in this Agreement to the contrary, (i) no additional LLC Interests
may
be issued if, giving effect to such issuance, the total number of Members would
be deemed to exceed one hundred (100) as determined in accordance with Treasury
Regulation Section 1.7704-1(h), and (ii) no LLC Interests may be issued (A)
in a
transaction that is required to be registered under the Securities Act, or
(B)
in a transaction that is not required to be registered under the Securities
Act
by reason of Regulation S thereunder unless the offering and sale of the LLC
Interests would not have been required to be registered under the Securities
Act
if the LLC Interests had been offered and sold within the United States, or
in
any transaction that would otherwise violate the securities or other laws of
any
jurisdiction.
Section
5.6. Additional
Requirements for Transfer or for Issuance.
As
additional conditions precedent to the validity of (x) any Transfer of a
Non-Manager Member’s interest in the LLC (or, in the case of a Non-Manager
Member which is not a natural person, direct or indirect ownership interests
in
such Non-Manager Member) (pursuant to Section 5.1 hereof), or (y) the issuance
of additional LLC Interests (pursuant to Section 5.5 above), such Transfer
or
issuance (as applicable) shall not: (i) cause the LLC to become subject to
regulation as an “investment company” under the 1940 Act, and the rules and
regulations of the SEC thereunder, (ii) result in the assignment or termination
of any contract to which the LLC (or any Controlled Affiliate thereof) is a
party and which individually or in the aggregate are material (it being
understood and agreed that any contract pursuant to which the LLC or a
Controlled Affiliate thereof provides Investment Services is material), or
(iii)
result in the treatment of the LLC as an association taxable as a corporation
or
as a “publicly traded partnership” for federal income tax purposes.
The
Manager Member may require reasonable evidence as to the foregoing, including,
without limitation, a favorable opinion of counsel in form and substance
reasonably acceptable to the Manager Member, which expense shall be borne by
the
parties to such transaction (and to the extent the LLC is such a party, shall
be
paid from the Operating Allocation).
To
the
fullest extent permitted by law, any Transfer or issuance that violates the
provisions of this Article V shall be null and void.
Section
5.7. Registration
of LLC Interests.
The LLC
Interests constitute “securities,” as such term is defined in 6
Del.
C. § 8-102(15),
governed by Article 8 of the Uniform Commercial Code as in effect in the State
of Delaware (6
Del. C. § 8-101, et seq.).
The
LLC shall maintain a record of the ownership of LLC Interests which shall be
set
forth on Schedule
A
hereto
(and which shall be amended from time to time to reflect transfers of ownership
of LLC Interests in accordance with the provisions of this Agreement). Subject
to restrictions on the transferability of LLC Interests as set forth herein,
LLC
Interests shall be transferred by delivery to the LLC of an instruction by
the
registered owner of an LLC Interest requesting registration of transfer of
such
LLC Interest and the recording of such transfer in the records of the
LLC.
-50-
Section
5.8. Representation
of Members.
The
Manager Member and each Non-Manager Member (including any Additional Non-Manager
Member) hereby represents and warrants to the LLC and each other Member, and
acknowledges (as applicable), that (a) it has such knowledge and experience
in
financial and business matters that it is capable of evaluating the merits
and
risks of an investment in the LLC and making an informed investment decision
with respect thereto, (b) it is able to bear the economic and financial risk
of
an investment in the LLC for an indefinite period of time, (c) it is acquiring
an interest in the LLC for investment only and not with a view to, or for resale
in connection with, any distribution to the public or public offering thereof,
(d) the equity interests in the LLC have not been registered under the
securities laws of any jurisdiction and cannot be disposed of unless they are
subsequently registered and/or qualified under applicable securities laws and
the provisions of this Agreement have been complied with, and (e) the execution,
delivery and performance of this Agreement, and of each other agreement
referenced herein to which such Member is a party, by such Member have been
duly
authorized in all necessary respects, do not require it to obtain any consent
or
approval that has not been obtained and do not contravene or result in a default
under any provision of any existing law or regulation applicable to it, any
provision of its charter, by-laws or other governing documents or any agreement
or instrument to which it is a party or by which it is bound, and this Agreement
and each such other agreement referenced herein to which such Member is a party
has been duly executed and delivered by such Member and is enforceable against
such Member in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other laws relating
to
or limiting creditors’ rights generally or by equitable principles relating to
enforceability.
Section
5.9. Conversion
of Series B LLC Interests.
(a) Each
Series B LLC Unit automatically shall convert (“Convert”)
into
one Series A LLC Unit as follows:
(i) In
the
case of a Series B LLC Unit which is issued and outstanding as of the Effective
Time, such Series B LLC Unit shall convert into one (1) Series A LLC Unit on
the
date which is five (5) years from the Effective Time;
(ii) In
the
case of a Series B LLC Unit which is sold and transferred to a Non-Manager
Member pursuant to the provisions of Section 6.1 hereof, or which is sold and
transferred to such Non-Manager Member pursuant to provisions of Section 5.5
hereof, such Series B LLC Unit shall convert into one (1) Series A LLC Unit
on
the date which is five (5) years from the date of such sale and transfer;
and
(iii) In
the
case of a Series B LLC Unit which is purchased by the Manager Member (or its
assignee) (whether pursuant to the provisions of Section 3.10 or otherwise),
such Series B LLC Unit shall convert into one (1) Series A LLC Unit immediately
following the consummation of such purchase by the Manager Member (or its
assignee).
-51-
(b) In
addition to the foregoing, each Series B LLC Unit which is held by a Non-Manager
Member who (i) dies (or whose related Employee Stockholder dies, in the case
of
a Non-Manager Member which is not itself an Employee Stockholder), (ii) has
his
or her (or whose related Employee Stockholder has his or her, in the case of
a
Non-Manager Member which is not itself an Employee Stockholder) employment
with
the LLC terminate as a result of Permanent Incapacity, or (iii) is removed
as a
Member of the LLC pursuant to a Removal Upon the Instruction of the Management
Committee, shall automatically immediately convert into one (1) Series A LLC
Unit as of immediately prior to such event. In addition to the foregoing, each
Series B LLC Unit which is held by a Non-Manager Member who is an Initial Member
shall automatically immediately convert into one (1) Series A LLC Unit as of
immediately following a delivery by the Manager Member of a written notice
expressly exercising its rights pursuant to Section 3.2(b)(v) of this
Agreement.
(c) In
connection with any sale and transfer by the Manager Member (or any of its
Affiliates) of Series A LLC Units to any Person, the Manager Member may
determine in its sole discretion to convert such Series A LLC Units into an
equal number of Series B LLC Units effective as of immediately prior to such
sale and transfer.
ARTICLE
VI
TRANSFER
OF LLC INTERESTS BY THE
MANAGER
MEMBER; REDEMPTION, REMOVAL
AND
WITHDRAWAL
Section
6.1. Transferability
of Interest.
(a) Except
as
set forth in this Section 6.1, without the prior written approval of the
Management Committee, (i) none of the Manager Member’s interest in the LLC
(including, without limitation, any interest which has been Transferred to
the
Manager Member) may be Transferred and (ii) the LLC may not undergo any merger,
consolidation, sale of all or substantially all of its assets or similar
transaction (any of which transactions described in this clause (ii) shall
also
require the prior written consent of the Manager Member); provided,
however,
(W) it
is understood and agreed that, in connection with the operation of the business
of the Manager Member (including, without limitation, the financing of its
interest herein and direct or indirect interests in additional investment
management companies), the Manager Member’s interest in the LLC may be pledged
and encumbered and lien holders of the Manager Member’s interest shall have and
be able to exercise the rights of secured creditors with respect to such
interest, (X) the Manager Member may Transfer some (but not a majority) of
its
LLC Interests to a Person who is not a Member but who is an Officer or employee
of the LLC (or any Controlled Affiliate thereof) or who becomes an Officer
or
employee of the LLC (or any Controlled Affiliate thereof) or a Person majority
owned by any such Person, (Y) the Manager Member may Transfer some (but not
a
majority) of its LLC Interests to existing Non-Manager Members, and (Z) the
Manager Member may Transfer all or any portion of its LLC Interests to an
Affiliate of the Manager Member (and any such Affiliate shall thereafter be
bound by the provisions of this Agreement). Notwithstanding anything else set
forth herein, the Manager Member may, with the approval of the Management
Committee, Transfer all its interests in the LLC in a single transaction or
a
series of related transactions, and, in any such case, each of the Non-Manager
Members shall be required to Transfer, in the same transaction or transactions,
all their interests in the LLC, provided that the price to be received by all
the Members shall be allocated among the Members in the same manner as the
purchase price would have been distributed pursuant to Section 4.4 following
a
sale of all or a substantial portion of the assets of the LLC and its Controlled
Affiliates (with any net gain or loss from such transaction first having been
allocated among the Members in accordance with Section 4.2(e) or 4.2(f), as
applicable).
-52-
(b) In
the
case of a Transfer upon foreclosure pursuant to proviso (W) of Section 6.1(a),
each transferee shall sign a counterpart signature page to this Agreement
agreeing thereby to become either a Non-Manager Member or the Manager Member
(provided,
however,
that
once one such other transferee elects to become the Manager Member, no
transferee (other than a subsequent transferee of such new Manager Member)
may
elect to be a Manager Member hereunder. If the transferees pursuant to proviso
(W) of Section 6.1(a) receive all of the Manager Member’s LLC Interests and none
of such transferees elects to become the Manager Member, then the Manager Member
shall be deemed to have withdrawn from the LLC. If, however, one of the
transferees elects to become the Manager Member and executes a counterpart
signature page to this Agreement agreeing thereby to become the Manager Member,
then notwithstanding any other provision hereof to the contrary, the old Manager
Member shall thereupon be permitted to withdraw from the LLC as Manager
Member.
(c) In
the
case of a Transfer pursuant to proviso (Z) of Section 6.1(a), the old Manager
Member shall be deemed to have withdrawn and its transferee shall be deemed
to
have become the new Manager Member hereunder.
Section
6.2. Resignation,
Redemption, and Withdrawal.
To the
fullest extent permitted by law, except as set forth in Section 6.1, without
the
approval of the Management Committee, the Manager Member shall not have the
right to resign or withdraw from the LLC as Manager Member. With the approval
of
the Management Committee, the Manager Member may resign or withdraw as Manager
Member upon prior written notice to the LLC. Without a prior Majority Vote,
the
Manager Member shall have no right to have all or any portion of its interest
in
the LLC redeemed. Any resigned, withdrawn or removed Manager Member shall retain
its interest in the capital of the LLC and its other economic rights under
this
Agreement as a Non-Manager Member having the number of LLC Units held by the
Manager Member prior to its resignation, withdrawal or removal. If a Manager
Member who has resigned, withdrawn or been removed no longer has any economic
interest in the LLC, then upon such resignation, withdrawal or removal such
Person shall cease to be a Member of the LLC.
ARTICLE
VII
DISSOLUTION
AND TERMINATION
Section
7.1. No
Dissolution.
The LLC
shall not be dissolved by any admission of Additional Non-Manager Members,
substitute Non-Manager Members or substitute Manager Members, or by the
withdrawal, resignation or removal of any Member from the LLC.
-53-
Section
7.2. Events
of Dissolution.
The LLC
shall be dissolved and its affairs wound up upon the occurrence of any of the
following events:
(a) any
date
approved by the Management Committee and by the written consent of the Manager
Member (in its sole discretion); or
(b) at
any
time there are no Members of the LLC, unless the LLC is continued in accordance
with the Act; or
(c) upon
the
entry of a decree of judicial dissolution under § 18-802 of the
Act.
Section
7.3. Notice
of Dissolution.
Upon
the dissolution of the LLC, the Manager Member shall promptly notify the other
Members of such dissolution.
Section
7.4. Liquidation.
Upon
the dissolution of the LLC, the Manager Member, or if there is none, a Person
or
Persons approved by the holders of more than fifty percent (50%) of the LLC
Units then outstanding (including those held by the Person that was the Manager
Member) shall carry out the winding up of the LLC (in such capacity, the
“Liquidating
Trustee”),
and
shall immediately commence to wind up the LLC’s affairs; provided,
however,
that a
reasonable time shall be allowed for the orderly liquidation of the assets
of
the LLC and the satisfaction of liabilities to creditors so as to enable the
Members to minimize the normal losses attendant upon a liquidation. The Members
shall continue to share in allocations and distributions during liquidation
in
the same proportions, as specified in Article IV hereof, as before liquidation.
The proceeds of liquidation shall be distributed as set forth in Section 4.4
hereof.
Section
7.5. Termination.
The LLC
shall terminate when all of the assets of the LLC, after payment of or due
provision for all debts, liabilities and obligations of the LLC, shall have
been
distributed to the Members in the manner provided for in Section 4.4 and the
Certificate shall have been canceled in the manner required by the
Act.
Section
7.6. Claims
of the Members.
The
Members and former Members shall look solely to the LLC’s assets for the return
of their Capital Contributions and Capital Accounts, and if the assets of the
LLC remaining after payment of or due provision for all debts, liabilities
and
obligations of the LLC are insufficient to return such Capital Contributions
or
Capital Accounts, the Members and former Members shall have no recourse against
the LLC or any other Member (including, without limitation, the Manager
Member).
ARTICLE
VIII
RECORDS
AND REPORTS
Section
8.1. Books
and Records.
The
Management Committee shall (and each of the Non-Manager Members and Employee
Stockholders shall use its reasonable best efforts to) cause the LLC to keep
complete and accurate books of account with respect to the operations of the
LLC, prepared in accordance with GAAP (using the accrual method of accounting,
consistently applied). Such books shall reflect that the interests in the LLC
have not been registered under the Securities Act, and that the interests may
not be sold or transferred without registration under the Securities Act or
exemption therefrom and without compliance with Article V or Article VI of
this
Agreement. Such books shall be maintained at the principal office of the LLC
in
Chicago, Illinois or at such other place as the Manager Member shall
determine.
-54-
Section
8.2. Accounting.
The
LLC’s books of account shall be kept on the accrual method of accounting, or on
such other method of accounting as the Manager Member may from time to time
determine with the advice of the Independent Public Accountants, and shall
be
closed and balanced at the end of each LLC fiscal year and shall be maintained
for each fiscal year in a manner consistent with GAAP and with the principles
and/or policies of the Manager Member applied consistently with respect to
its
Controlled Affiliates. The taxable year of the LLC shall be the twelve months
ending December 31, or such other taxable year as the Manager Member may
designate with the advice of the Independent Public Accountants.
Section
8.3. Financial
and Compliance Reports.
The
Management Committee shall (and each of the Non-Manager Members and Employee
Stockholders shall use its reasonable best efforts to) cause the LLC to furnish
to the Manager Member each of the following:
(a) Within
ten (10) days after the end of each month and each fiscal quarter, information
regarding the consolidated assets under management of the LLC and any Controlled
Affiliates thereof (including the components of any changes from the information
provided with respect to the prior period, information regarding net client
cash
flows and information regarding market appreciation and depreciation in client
portfolios), and an unaudited financial report of the LLC (consolidated with
any
Controlled Affiliates thereof) prepared in accordance with GAAP using the
accrual method of accounting consistently applied (except that the financial
report may (i) be subject to normal year-end audit adjustments which are neither
individually nor in the aggregate material and (ii) not contain all notes
thereto which may be required in accordance with GAAP to be included in audited
financial statements), which unaudited financial report shall have been
certified by the most senior financial officer of the LLC to have been so
prepared and shall include the following:
(i) statements
of operations, changes in members’ capital and cash flows for such month or
quarter, together with a cumulative income statement from the first day of
the
then-current fiscal year to the last day of such month or quarter;
(ii) a
balance
sheet as of the last day of such month or quarter; and
(iii) with
respect to the quarterly financial report, a detailed computation of the Owners’
Allocation for such quarter.
(b) Within
thirty (30) days after the end of each fiscal year of the LLC, audited financial
statements of the LLC (consolidated with any Controlled Affiliates thereof),
which shall include statements of operations, changes in members’ capital and
cash flows for such year and a balance sheet as of the last day thereof, each
prepared in accordance with GAAP, using the accrual method of accounting,
consistently applied, certified by the Independent Public
Accountants.
-55-
(c) If
requested by the Manager Member, within twenty-five (25) days after the end
of
each calendar quarter, the LLC’s (and any Controlled Affiliates’ thereof)
operating budget for each of the next four (4) fiscal quarters, in such form
and
containing such estimates as may be requested by the Manager Member from time
to
time, certified by the most senior financial officer of the LLC.
(d) If
requested by the Manager Member, copies of all financial statements, reports,
notices, press releases and other documents released to the public during such
period.
(e) As
promptly as is reasonably possible following request by the Manager Member
from
time to time, such other financial, operations, performance or other information
or data as may be requested.
Section
8.4. Meetings.
(a) The
Management Committee and the Officers shall hold such regular meetings at the
LLC’s principal place of business with representatives of the Manager Member as
may be reasonably requested by the Manager Member from time to time. These
meetings shall be attended (either in person or by telephone) by such members
of
the Management Committee, Officers and other employees of the LLC as may be
requested by the Manager Member or any of the members of the Management
Committee.
(b) At
each
meeting described in Section 8.4(a), the Officers and other employees of the
LLC
shall discuss such matters regarding the LLC and its performance, operations
and/or budgets as may be reasonably requested by the Manager Member, and each
of
the attendees (whether in person or by telephone) at such meeting shall have
the
right to submit proposals and suggestions regarding the LLC, and the attendees
at the meeting shall, in good faith, discuss and consider such proposals and
suggestions.
Section
8.5. Tax
Matters.
(a) The
Manager Member shall cause to be prepared and filed on or before the due date
(or any extension thereof) federal, state, local and foreign tax or information
returns required to be filed by the LLC (or any Controlled Affiliate thereof).
The Manager Member, to the extent that funds are available at the LLC (or at
any
Controlled Affiliates thereof), shall cause the LLC (or such Controlled
Affiliate thereof) to pay any taxes payable by the LLC (or such Controlled
Affiliate) (it being understood that the expenses of preparation and filing
of
such tax returns, and the amounts of such taxes, are to be treated as operating
expenses of the LLC to be paid from the Operating Allocation), provided that
the
Manager Member shall not be required to cause the LLC (or any Controlled
Affiliate thereof) to pay any tax so long as the LLC (or such Controlled
Affiliate thereof) is in good faith and by appropriate legal proceedings
contesting the validity, applicability or amount thereof and such contest does
not materially endanger any right or interest of the LLC (or such Controlled
Affiliate) and adequate reserves therefor have been set aside by the LLC (or
such Controlled Affiliate). Neither the LLC nor any Employee Stockholder or
Non-Manager Member shall do anything or take any action which would be
inconsistent with the foregoing or with the Manager Member’s actions as
authorized by the foregoing provisions of this Section 8.5(a).
-56-
(b) The
Manager Member shall be the tax matters partner for the LLC pursuant to Sections
6221 through 6233 of the Code.
(c) The
Manager Member shall, in its sole discretion, make or cause to be made by the
LLC (and any Controlled Affiliates thereof) any and all elections for federal,
state, local and foreign tax matters, including any election to adjust the
basis
of the LLC’s (or a Controlled Affiliate’s) property pursuant to Sections 734(b),
743(b) and 754 of the Code or comparable provisions of state, local or foreign
law.
ARTICLE
IX
LIABILITY,
EXCULPATION AND INDEMNIFICATION
Section
9.1. Liability.
Except
as otherwise provided by the Act, the debts, obligations and liabilities of
the
LLC (or of any Controlled Affiliate thereof), whether arising in contract,
tort
or otherwise, shall be solely the debts, obligations and liabilities of the
LLC
(or such Controlled Affiliate), and no Covered Person shall be obligated
personally for any such debt, obligation or liability of the LLC (or any
Controlled Affiliate thereof) solely by reason of being a Covered
Person.
Section
9.2. Exculpation.
(a) No
Covered Person shall be liable to the LLC, any Controlled Affiliate thereof
or
any other Covered Person for any loss, damage or claim incurred by reason of
any
act or omission performed or omitted by such Covered Person in good faith on
behalf of the LLC or any Controlled Affiliate thereof and in a manner reasonably
believed to be within the scope of authority conferred on such Covered Person
by
this Agreement, except that a Covered Person shall be liable for any such loss,
damage or claim incurred by reason of any action or inaction of such Covered
Person which constituted fraud, gross negligence, willful misconduct or a breach
of this Agreement or the Purchase Agreement.
(b) A
Covered
Person shall be fully protected in relying in good faith upon the records of
the
LLC (or of any Controlled Affiliate thereof) and upon such information,
opinions, reports or statements presented to the Covered Person by any Person
as
to matters the Covered Person reasonably believes are within such other Person’s
professional or expert competence and who has been selected with reasonable
care
by or on behalf of the LLC (or any Controlled Affiliate thereof).
Section
9.3. Fiduciary
Duty.
(a) To
the
extent that, at law or in equity, a Covered Person has duties (including
fiduciary duties) and liabilities relating thereto to the LLC, any Controlled
Affiliate thereof or any Member, a Covered Person acting under this Agreement
shall not be liable to the LLC, any Controlled Affiliate thereof or any Member
for its good faith reliance on the provisions of this Agreement. The provisions
of this Agreement, to the extent that they restrict the duties and liabilities
of a Covered Person otherwise existing at law or in equity, are agreed by the
parties hereto to replace such other duties and liabilities of such Covered
Person.
-57-
(b) Unless
otherwise expressly provided herein, whenever a conflict of interest exists
or
arises between the Manager Member and any other Member or the LLC (or any
Controlled Affiliate thereof) (other than in the case of any action permitted
to
be taken by the Manager Member in its “discretion” or “sole discretion”, with
respect to which this sentence shall not be applicable)), the Manager Member
shall resolve such conflict of interest considering the relative interests
of
each party (including its own interest) to such conflict and the benefits and
burdens relating to such interests, any customary or accepted industry
practices, and any applicable generally accepted accounting practices or
principles. A resolution reached by the Manager Member of a conflict of interest
described in the preceding sentence shall not constitute a breach of this
Agreement or any other agreement contemplated herein or of any duty or
obligation of the Manager Member at law or in equity or otherwise unless the
Managing Member did not act in good faith.
(c) Whenever
in this Agreement the Manager Member is permitted or required to make a decision
(i) in its “discretion” or “sole discretion” or under a grant of similar
authority or latitude, the Manager Member shall be entitled to consider such
interests and factors as it desires, including its own interests, and to reach
any decision it may select regardless of the reasons therefor, or (ii) in its
“good faith” or under another express standard, the Manager Member shall act
under such express standard and shall not be subject to any other or different
standard imposed by this Agreement or other applicable law.
(d) Wherever
in this Agreement a factual determination is called for and the applicable
provision of this Agreement does not indicate what party or parties are to
make
the applicable factual determination, and/or the applicable standard to be
used
in making the factual determination, such determination shall be made by the
Manager Member in the exercise of reasonable discretion.
Section
9.4. Indemnification.
To the
fullest extent permitted by applicable law, a Covered Person shall be entitled
to indemnification from the LLC for any loss, damage or claim (including any
amounts paid in settlement of any such claims) including expenses, fines,
penalties and counsel fees and expenses incurred by such Covered Person
(“Losses”)
by
reason of any act or omission performed or omitted by such Covered Person in
good faith on behalf of the LLC (or any Controlled Affiliate thereof) and in
a
manner reasonably believed to be within the scope of authority conferred on
such
Covered Person by this Agreement, except that no Covered Person shall be
entitled to be indemnified in respect of any Losses incurred by such Covered
Person by reason of any action or inaction of such Covered Person which
constituted fraud, gross negligence, willful misconduct or a breach of this
Agreement or the Purchase Agreement; provided,
however,
that
any indemnity under this Section 9.4 shall be provided out of and to the extent
of LLC assets only, and no Member or Covered Person shall have any personal
liability to provide indemnity on account thereof.
Section
9.5. Notice;
Opportunity to Defend and Expenses.
(a) Promptly
after receipt by any Covered Person from any third party of notice of any
demand, claim or circumstance that, immediately or with the lapse of time,
would
reasonably be expected to give rise to a claim or the commencement (or
threatened commencement) of any action, proceeding or investigation (an
“Asserted
Liability”)
that
could reasonably be expected to result in any Losses with respect to which
the
Covered Person might be entitled to indemnification from the LLC under Section
9.4, the Covered Person shall give written notice thereof (the “Claims
Notice”)
to the
Management Committee and the Manager Member; provided,
however,
that a
failure to give such notice shall not prejudice the Covered Person’s right to
indemnification hereunder except to the extent that the LLC, a Controlled
Affiliate thereof or the Manager Member is actually prejudiced thereby. The
Claims Notice shall describe the Asserted Liability in such reasonable detail
as
is practicable under the circumstances, and shall, to the extent practicable
under the circumstances, indicate the amount (estimated, if necessary) of the
Loss that has been or may be suffered by the Covered Person.
-58-
(b) The
LLC
may elect to compromise or defend, at its own expense and by its own counsel,
any Asserted Liability; provided,
however,
that if
the named parties to any action or proceeding include (or could reasonably
be
expected to include) both the LLC (or a Controlled Affiliate thereof) and a
Covered Person, or more than one Covered Persons, and the LLC is advised by
counsel that representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the Covered
Person may engage separate counsel at the expense of the LLC. If the LLC elects
to compromise or defend such Asserted Liability, it shall within twenty (20)
business days (or sooner, if the nature of the Asserted Liability so requires)
notify the Covered Person of its intent to do so, and the Covered Person shall
cooperate, at the expense of the LLC, in the compromise of, or defense against,
such Asserted Liability. If the LLC elects not to compromise or defend the
Asserted Liability, fails to notify the Covered Person of its election as herein
provided, contests its obligation to provide indemnification under this
Agreement, or fails to make or ceases making a good faith and diligent defense,
the Covered Person may pay, compromise or defend such Asserted Liability all
at
the expense of the Covered Person (in accordance with the provisions of Section
9.5(c) below). Except as set forth in the preceding sentence, neither the LLC
nor the Covered Person may settle or compromise any claim over the objection
of
the LLC or the Manager Member; provided,
however,
that
consent to settlement or compromise shall not be unreasonably withheld. In
any
event, the LLC and the Covered Person may participate at their own expense,
in
the defense of such Asserted Liability. The Covered Person shall in any event
make available to the LLC any books, records or other documents within its
control that are necessary or appropriate for such defense, all at the expense
of the LLC.
(c) If
the
LLC elects not to compromise or defend an Asserted Liability, or fails to notify
the Covered Person of its election as above provided, then, to the fullest
extent permitted by applicable law, expenses (including legal fees) incurred
by
a Covered Person in defending any Asserted Liability, shall, from time to time,
be advanced by the LLC prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the LLC of an undertaking by or
on
behalf of the Covered Person to repay such amount if it shall be determined
that
the Covered Person is not entitled to be indemnified as authorized in Section
9.4 hereof. The LLC may, if the Manager Member deems it appropriate, require
any
Covered Person for whom expenses are advanced to deliver adequate security
to
the LLC for his or her obligation to repay such indemnification.
-59-
Section
9.6. Miscellaneous.
(a) The
right
of indemnification hereby provided shall not be exclusive of, and shall not
affect, any other rights to which a Covered Person may be entitled at law,
under
other agreements or otherwise. Nothing contained in this Article X shall limit
any lawful rights to indemnification existing independently of this Article
X.
(b) The
indemnification rights provided by this Article X shall also inure to the
benefit of the heirs, executors, administrators, successors and assigns of
a
Covered Person and any officers, directors, members, partners, shareholders,
employees and Affiliates of such Covered Person (and any former officer,
director, member, partner, shareholder or employee of such Covered Person,
if
the Loss was incurred while such Person was an officer, director, member,
partner, shareholder or employee of such Covered Person). The Manager Member
(or
the Management Committee with the consent of the Manager Member, such consent
not to be unreasonably withheld) may extend the indemnification called for
by
Section 9.4 to non-employee agents of the LLC (or any Controlled Affiliate
thereof), the Manager Member or its Affiliates.
ARTICLE
X
MISCELLANEOUS
Section
10.1. Notices.
All
notices, requests, elections, consents or demands permitted or required to
be
made under this Agreement (“Notices”)
shall
be in writing, signed by the Person or Persons giving such notice, request,
election, consent or demand and shall be delivered personally or by confirmed
facsimile, or sent by registered, certified mail or commercial courier to the
Members at their addresses set forth on the signature pages hereof or on
Schedule
A
hereto,
or to the LLC as described in the next sentence (as applicable), or at such
other addresses as may be supplied by written notice given in conformity with
the terms of this Section 10.1. All Notices to the LLC shall be made to the
Manager Member at the address set forth on the signature pages hereof or on
Schedule
A
hereto,
with a copy (which shall not constitute notice) to the Management Committee
at
the principal offices of the LLC. The date of any such personal or facsimile
delivery, or the date of delivery by an overnight courier, or the date five
(5)
days after the date of mailing by registered or certified mail, as applicable,
shall be the date of such notice having been delivered hereunder.
Section
10.2. Successors
and Assigns.
Subject
to the restrictions on Transfer set forth herein, this Agreement shall be
binding upon and shall inure to the benefit of the Members, their respective
successors, successors-in-title, heirs and assigns, and each and every
successors-in-interest to any Member, whether such successor acquires such
interest by way of gift, purchase, foreclosure or by any other method, and
each
shall hold such interest subject to all of the terms and provisions of this
Agreement.
Section
10.3. Amendments.
No
amendments may be made to this Agreement without (i) the prior written consent
of the Manager Member and (ii) the approval of the Management Committee;
provided,
however,
that,
without the vote, consent or approval of any other Member, the Manager Member
shall make such amendments and additions to Schedule
A
hereto
as are required by the provisions hereof; and, provided further,
that,
without the vote, consent or approval of any other Member, the Manager Member
may amend this Agreement to cure any ambiguity, correct or supplement any
provision hereof which is incomplete or inconsistent with any other provision
hereof, or correct any printing, stenographic or clerical errors or omissions.
If the Manager Member shall make any amendments or additions to Schedule
A
hereto
or to this Agreement without the vote, consent or approval of any other Member
(as provided for in the preceding sentence), it shall notify the Management
Committee of such change and provide the Management Committee with a copy
thereof.
-60-
Section
10.4. No
Partition.
No
Member, nor any successor-in-interest to any Member, shall have the right while
this Agreement remains in effect to have the property of the LLC partitioned,
or
to file a complaint or institute any proceeding at law or in equity to have
the
property of the LLC partitioned, and each Member, on behalf of itself, its
successors, representatives, heirs and assigns, hereby waives any such right.
It
is the intent of the Members that during the term of this Agreement, the rights
of the Members and the Employee Stockholders, and their respective
successors-in-interest, as among themselves, shall be governed by the terms
of
this Agreement, and that the right of any Member or successors-in-interest
to
assign, Transfer, sell or otherwise dispose of his interest in the LLC shall
be
subject to the limitations and restrictions of this Agreement.
Section
10.5. No
Waiver; Cumulative Remedies.
The
failure of any Member to insist upon strict performance of a covenant hereunder
or of any obligation hereunder, irrespective of the length of time for which
such failure continues, shall not be a waiver of such Member’s right to demand
strict compliance in the future. No consent or waiver, express or implied,
to or
of any breach or default in the performance of any obligation hereunder, shall
constitute a consent or waiver to or of any other breach or default in the
performance of the same or any other obligation hereunder. The rights and
remedies provided by this Agreement are cumulative and the use of any one right
or remedy by any party shall not preclude or waive its right to use any or
all
other remedies. Said rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance or
otherwise.
Section
10.6. Dispute
Resolution.
All
disputes arising in connection with this Agreement shall be resolved by binding
arbitration in accordance with the applicable rules of the American Arbitration
Association. The arbitration shall be held in the
Borough of Manhattan in the City of New York before a single arbitrator selected
in accordance with Section 11 of the American Arbitration Association Commercial
Arbitration Rules who shall have substantial business experience in the
investment advisory industry, and shall otherwise be conducted in accordance
with the American Arbitration Association Commercial Arbitration Rules. The
parties covenant that they will participate in the arbitration in good faith
and
that they will share equally its costs except as otherwise provided herein.
The
provisions of this Section 10.6 shall be enforceable in any court of competent
jurisdiction, and the parties shall bear their own costs in the event of any
proceeding to enforce this Agreement except as otherwise provided herein. The
arbitrator shall assess costs and expenses (including the reasonable legal
fees
and expenses of the prevailing party or parties and any expenses incurred in
connection with compelling arbitration) in favor of the prevailing party or
parties against the other party or parties to such proceeding. Any party
unsuccessfully refusing to comply with an order of the arbitrators shall be
liable for costs and expenses, including attorney’s fees, incurred by the other
party in enforcing the award.
-61-
Section
10.7. Prior
Agreements Superseded.
This
Agreement, together with the schedules and exhibits hereto, supersedes the
prior
understandings and agreements among the parties with respect to the subject
matter hereof and thereof.
Section
10.8. Captions.
Titles
or captions of Articles or Sections contained in this Agreement are inserted
as
a matter of convenience and for reference, and in no way define, limit, extend
or describe the scope of this Agreement or the intent of any provision
hereof.
Section
10.9. Counterparts.
This
Agreement may be executed in a number of counterparts, all of which together
shall for all purposes constitute one Agreement, binding on all the Members
notwithstanding that all Members have not signed the same
counterpart.
Section
10.10. Applicable
Law; Jurisdiction.
This
Agreement and the rights and obligations of the parties hereunder shall be
governed by and interpreted, construed and enforced in accordance with the
laws
of the State of Delaware, without applying the choice of law or conflicts of
law
provisions thereof. Each of the parties hereby consents to personal
jurisdiction, service of process and venue in the federal or state courts
sitting in the Borough of Manhattan in the City of New York for any claim,
suit
or proceeding arising under this Agreement to enforce any arbitration award
or
obtain equitable relief and hereby irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in such state court
or,
to the extent permitted by law, in such federal court (subject to the provisions
of Section 10.6 hereof). To the extent permitted by law, each of the parties
hereby irrevocably consents to the service of process in any such action or
proceeding by the mailing by certified mail of copies of any service or copies
of the summons and complaint and any other process to such party at the address
specified in Section 10.1 hereof. The parties agree that a final judgment in
any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions.
Section
10.11. Interpretation.
All
terms herein using the singular shall include the plural; all terms using the
plural shall include the singular; in each case, the term shall be as
appropriate to the context of each sentence. Throughout this Agreement, nouns,
pronouns and verbs shall be construed as masculine, feminine and neuter,
whichever shall be applicable. Any reference to the Code, the Act or other
statutes or laws will include all amendments, modifications, or replacements
of
the specific sections and provisions concerned. The parties intend that this
Agreement and the provisions contained herein shall not be construed or
interpreted for or against any party hereto because that party drafted or caused
that party’s legal representative to draft any of its provisions.
Section
10.12. Severability.
The
invalidity or unenforceability of any particular provision of this Agreement
shall not affect the other provisions hereof, and this Agreement shall be
construed in all respects as if such invalid or unenforceable provision were
omitted.
Section
10.13. Creditors.
None of
the provisions of this Agreement shall be for the benefit of or, to the extent
permitted by law, enforceable by any creditor of (i) any Member, (ii) any
Employee Stockholder or (iii) the LLC, other than a Member who is also a
creditor of the LLC.
-62-
Section
10.14. References
to This Agreement.
Numbered or lettered articles, sections and subsections herein contained refer
to articles, sections and subsections of this Agreement unless otherwise
expressly stated. References to paragraphs refer to paragraphs in the same
Section unless otherwise expressly stated. References to clauses refer to
clauses in the same paragraph unless otherwise expressly stated.
Section
10.15. Exhibits,
Schedules and Annexes.
All
Exhibits, Schedules and Annexes attached to this Agreement are incorporated
and
shall be treated as if set forth herein. Only the Manager Member and the members
of the Management Committee shall have the right to review Schedule
A
hereto,
and each of the Non-Manager Members and Employee Stockholders (in his or her
capacity as a Non-Manager Member or Employee Stockholder, as applicable)
expressly waives his or her rights under the Act (including without limitation
under Section 18-315 thereof) to review Schedule
A
hereto
(and acknowledges and agrees that such waiver is reasonable in light of the
interests of the LLC and its Members). Each Non-Manager Member shall have the
right to receive a copy of this Agreement and the Exhibits, Schedules and
Annexes attached hereto, provided that Schedule
A
will be
redacted as to names, LLC Units, Capital Contributions, and other financial
information of the other Members, and such Non-Manager Member shall have the
right to review only that information regarding such Non-Manager Member’s own
LLC Units, Capital Contribution, as well as the total number of outstanding
LLC
Units and the total amount of capital contributed by the Members in the
aggregate. Notwithstanding the foregoing, the Management Committee may in its
sole discretion furnish to any one or more Non-Manager Members (and to the
exclusion of any one or more other Non-Manager Members) such additional
information relating to Schedule
A
as the
Management Committee (in its sole discretion) determines from time to
time.
Section
10.16. Additional
Documents and Acts.
Each
Non-Manager Member and Employee Stockholder agrees to execute and deliver such
additional documents and instruments and to perform such additional acts as
may
be reasonably requested by the Manager Member to effectuate, carry out and
perform all of the terms, provisions, and conditions of this Agreement and
the
actions contemplated hereby.
[INTENTIONALLY
LEFT BLANK]
-63-
IN
WITNESS WHEREOF the Initial Non-Manager Members and the Manager Member have
executed and delivered this Amended and Restated Limited Liability Company
Agreement as of the day and year first above written.
|
MANAGER
MEMBER:
By:
/s/
Xxxxxxx X. Xxxxx
Name:
Xxxxxxx X. Xxxxx
Title:
President and Chief Executive Offer
Address
000
Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx,
Xxxxxxxx 00000
|
|
|
NON-MANAGER
MEMBERS:
/s/
Xxxxxx Xxxxxx
Xxxxxx
Xxxxxx
/s/
Xxxxxxx X. Xxxxxxxx
Xxxxxxx
X. Xxxxxxxx
/s/
Xxxxxx Xxxxxxxxxx
Xxxxxx
Xxxxxxxxxx
/s/
Xxxxxxxxx X. Dragon
Xxxxxxxxx
X. Dragon
/s/
Xxxxxx Xxxx
Xxxxxx
Xxxx
/s/
Xxxxx Xxxxxxx
Xxxxx
Xxxxxxx
/s/
Xxxxx Xxxxxxx
Xxxxx
Xxxxxxx
/s/
Xxxx Xxxxx
Xxxx
Xxxxx
|
