AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF ROXBURY CAPITAL
MANAGEMENT, LLC DATED AS OF JULY 31, 1998
EXHIBIT 10.47
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ROXBURY CAPITAL MANAGEMENT, LLC
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TABLE OF CONTENTS
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1 DEFINED TERMS......................................................... 1
2 GENERAL PROVISIONS.................................................... 14
2.1 Formation, Name and Continuation.................................. 14
2.2 Term.............................................................. 14
2.3 Registered Agent and Office; Principal Place of Business.......... 14
2.4 Fiscal Year....................................................... 15
3 PURPOSE AND POWERS OF THE LLC......................................... 15
3.1 Purpose........................................................... 15
3.2 Powers of the LLC................................................. 15
3.3 Authorized Persons................................................ 15
4 MEMBERS............................................................... 15
4.1 Voting............................................................ 15
4.2 Meetings of Members............................................... 15
4.3 Quorum............................................................ 15
4.4 Action by Consent................................................. 16
4.5 Telephonic Meetings............................................... 16
4.6 Non-voting Members................................................ 16
5 MANAGERS AND OFFICERS................................................. 16
5.1 Managers.......................................................... 16
5.2 Designation of Managers........................................... 16
5.3 Term.............................................................. 17
5.4 Resignation or Removal of a Manager............................... 17
5.5 Vacancies......................................................... 17
5.6 Meetings.......................................................... 17
5.7 Quorum............................................................ 17
5.8 Action by Consent................................................. 18
5.9 Telephonic Meetings............................................... 18
5.10 Managers as Agents; Limitation on Power of Members............... 18
5.11 Board Action..................................................... 18
5.12 Approval of Annual Budget........................................ 19
5.13 Officers......................................................... 19
5.14 Powers of the Board; Powers of Officers.......................... 19
5.15 Reimbursement.................................................... 20
5.16 Duties of Managers............................................... 20
5.17 Fiduciary Duties................................................. 20
6 CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS; DISTRIBUTIONS; ALLOCATIONS... 21
6.1 Capital Contributions............................................. 21
6.2 Capital Accounts.................................................. 21
6.3 Distributions..................................................... 21
6.4 Allocation of Profits and Losses.................................. 23
6.5 Special Allocations............................................... 24
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6.6 Tax Allocations: Code Section 704(c).............................. 25
6.7 Proration for Partial Years....................................... 25
7 TRANSFER OF LLC INTERESTS, PUT AND CALL OPTIONS, MANDATORY PURCHASES
AND ADMISSION OF ADDITIONAL MEMBERS............................... 25
7.1 Assignability of Interests........................................ 25
7.2 Put Options....................................................... 26
7.3 Purchase on Occurrence of an Extraordinary Event or a Roxbury
Extraordinary Event; Wilmington Call............................ 28
7.4 LLC Interests Subject to Option Rights............................ 30
7.5 Substitute Members................................................ 30
7.6 Recognition of Transfer by LLC.................................... 30
7.7 Effective Date of Transfer; Order of Puts, Calls and Purchases
Under Section 7.3(b)............................................ 30
7.8 Indemnification................................................... 31
7.9 Issuance of Additional LLC Interests.............................. 31
7.10 Assignment of Wilmington's Rights and Obligations................ 31
8 BOOKS AND RECORDS..................................................... 31
8.1 Books, Records and Financial Statements........................... 31
8.2 Accounting Method................................................. 32
9 TAX................................................................... 32
9.1 Tax Matters Member................................................ 32
9.2 Section 754 Election.............................................. 33
10 LIABILITY, EXCULPATION AND INDEMNIFICATION............................ 33
10.1 Liability........................................................ 33
10.2 Exculpation...................................................... 33
10.3 Indemnification.................................................. 34
10.4 Expenses......................................................... 34
11 CERTAIN COVENANTS..................................................... 34
11.1 Compliance with Laws; Maintenance................................ 34
12 DISSOLUTION, LIQUIDATION AND TERMINATION.............................. 35
12.1 Events Causing Dissolution....................................... 35
12.2 Notice of Dissolution............................................ 35
12.3 Liquidation...................................................... 35
12.4 Termination...................................................... 36
12.5 Claims of the Members............................................ 36
13 REPRESENTATIONS AND WARRANTIES........................................ 36
13.1 Representation and Warranties of Roxbury......................... 36
13.2 Representations and Warranties of Principals..................... 37
13.3 Representations and Warranties of Wilmington and WTI............. 37
13.4 Representations and Warranties of Wilmington..................... 38
13.5 Representations and Warranties of All Members.................... 38
14 MISCELLANEOUS......................................................... 39
14.1 Amendments....................................................... 39
14.2 Notices.......................................................... 39
14.3 Waivers.......................................................... 39
14.4 Binding Effect................................................... 40
14.5 Severability..................................................... 40
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14.6 Counterparts..................................................... 40
14.7 Governing Law; Arbitration....................................... 40
14.8 Captions......................................................... 40
14.9 Gender........................................................... 40
14.10 Third Party Beneficiaries....................................... 41
14.11 Failure to Pursue Remedies...................................... 41
14.12 Cumulative Remedies............................................. 41
14.13 Integration..................................................... 41
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ROXBURY CAPITAL MANAGEMENT, LLC
This Amended and Restated Limited Liability Company Agreement of Roxbury
Capital Management, LLC (the "LLC") is made as of July 31, 1998 ("Agreement"),
by and among Roxbury Capital Management, a California corporation ("Roxbury"),
WT Investments, Inc. ("WTI"), a Delaware corporation which is a wholly-owned
subsidiary of Wilmington Trust Company, a Delaware-chartered bank and trust
company ("WTC"), the Principals (as hereinafter defined) and Wilmington Trust
Corporation, a Delaware corporation ("Wilmington").
WHEREAS, the LLC has heretofore been formed as a limited liability company
pursuant to the Delaware Limited Liability Company Act, 6 Del. C. Section
18-101, et seq., as amended from time to time (the "Delaware Act"), by the
filing of a Certificate of Formation of the LLC with the office of the Secretary
of State of the State of Delaware on April 14, 1998, as amended by that certain
Certificate of Amendment dated July 20, 1998 (as amended, the "Certificate"),
and by the execution of the Limited Liability Company Agreement of the LLC by
Roxbury and Xxxxxxx X. Xxxxxx as of April 14, 1998 (the "Original LLC
Agreement");
WHEREAS, pursuant to the LLC Interest Purchase Agreement (as hereinafter
defined), WTI purchased the Preferred Interests in the LLC from Roxbury; and
WHEREAS, the Members desire to continue to operate the LLC as a limited
liability company under the Delaware Act on the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, Roxbury, the Principals,
Wilmington and WTI, intending to be legally bound hereby, agree as follows:
1
DEFINED TERMS
Unless the context otherwise requires, the terms defined in this Article 1
shall, for the purposes of this Agreement, have the meanings herein specified.
1.1 "Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant Fiscal Year or other period, after giving effect to the
following adjustments:
(i) Credit to such Capital Account for any amounts that such
Member is deemed to be obligated to restore with respect to any deficit
balance in its Capital Account pursuant to Sections
1.704-1(b)(2)(ii)(b)(3) and 1.704-1(b)(2)(ii)(c) of the Treasury
Regulations;
(ii) Credit to such Capital Account for any amounts that such
Member is (or would be) deemed to be obligated to restore with respect to
any deficit balance in its Capital Account pursuant to Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury Regulations; and
(iii) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations and shall be interpreted consistently therewith.
1.2 "Adjusted Free Cash Flow" for a Fiscal Year means the Free Cash Flow
for such Fiscal Year adjusted by: (i) adding the Excess Cash Flow Split,
recalculated using [*] as the Hurdle Rate, for such Fiscal Year (see examples in
Exhibit A); and (ii) subtracting 70% of any revenue not attributable to Advisory
Fees for such Fiscal Year.
1.3 "Adjusted LLC Value" is the LLC Value that shall be used to
determine the Call Price. If a Wilmington Call is exercised prior to the third
anniversary of the later of the Commencement Date or the date of this Agreement,
the Adjusted LLC Value shall equal the Adjusted Free Cash Flow for the Fiscal
Year ending on the Determination Date immediately preceding the year in which
the Wilmington Call Notice is delivered or the Free Cash Flow for Fiscal Year
1998 if the Wilmington Call Notice is delivered in 1998 or 1999. If a Wilmington
Call is exercised after the third anniversary of the later of the Commencement
Date or the date of this Agreement, but prior to the fourth anniversary of such
event, the Adjusted LLC Value shall be computed in the same manner as the LLC
Value using a multiple that is reduced by two. If a Wilmington Call is exercised
after the fourth anniversary of the later of the Commencement Date or the date
of this Agreement, but prior to the fifth anniversary of such event, the
Adjusted LLC Value shall be computed in the same manner as the LLC Value using a
multiple that is reduced by one. If a Wilmington Call is exercised after the
fifth anniversary of the later of the Commencement Date or the date of this
Agreement, the Adjusted LLC Value shall equal the LLC Value.
1.4 "Advance Payment" means, with respect to the purchase of LLC
Interests under Section 7.3(b) hereof upon the occurrence of an Extraordinary
Event or Roxbury Extraordinary Event that occurs after December 31, 1998, an
amount equal to the product of (i) 0.75 and (ii) six times the Average Adjusted
Free Cash Flow for the Fiscal Year immediately preceding the year in which such
Extraordinary Event or Roxbury Extraordinary Event occurs or, in the case of an
Extraordinary Event or Roxbury Extraordinary Event that occurs during 1999, six
times the Free Cash Flow for Fiscal Year 1998.
* CONFIDENTIAL TREATMENT REQUESTED
2
1.5 "Advisory Fees" means the fees for investment advisory,
sub-advisory, investment management or administration services payable to the
LLC pursuant to written agreements with Clients.
1.6 "Affiliate" of a designated Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with the designated Person. As used in this definition, the
term "control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power (a) to vote
10% or more of the outstanding voting securities of the designated Person or (b)
otherwise direct the management policies of the designated Person by contract or
otherwise. An "Affiliate" of a Person also includes any officer, director,
member or partner of the designated Person and, if the designated Person is an
officer, director, member or partner, any company for which such Person acts in
such capacity.
1.7 "Assumed Fee Income" has the meaning set forth in Section
6.3(a)(ii).
1.8 "Average Adjusted Free Cash Flow" has the meaning set forth in the
definition of LLC Value.
1.9 "Board" has the meaning set forth in Section 4.2 hereof.
1.10 "Business Day" means a day when WTC is open for business.
1.11 "Call Price" means an amount equal to the Adjusted LLC Value
multiplied by a fraction, the numerator of which is the number of Common
Membership Points included in the LLC Interests to be purchased by Wilmington or
its designee from a Principal or Roxbury and the denominator of which is the sum
of all of the Common Membership Points outstanding on the Purchase Closing Date
plus all Common Membership Points relating to LLC Interests that have been
issued or may be purchased from the LLC pursuant to an Incentive Plan or options
issued thereunder that are outstanding, exercisable and unexercised in whole or
in part on the Purchase Closing Date.
1.12 "Capital Account" means, with respect to any Member, the Capital
Account established and maintained for such Member in accordance with the
provisions of Section 1.704-1(b)(2)(iv) of the Treasury Regulations.
1.13 "Carrying Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Carrying Value of any asset contributed by a
Member to the LLC shall be the gross fair market value of such asset, as
determined by the contributing Member and the Board;
(ii) The Carrying Value of all assets of the LLC shall be adjusted
to equal their respective gross fair market values, as determined by the
Board, as of the following times: (a) the acquisition of an additional
interest in the LLC by any new or existing Member in exchange for a
capital contribution; (b) the distribution by the LLC to a Member of
property
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as consideration for an interest in the LLC; and (c) the liquidation of
the LLC within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury
Regulations; provided, however, that adjustments pursuant to clauses (a)
and (b) above shall be made only if the Board reasonably determines that
such adjustments are necessary or appropriate to reflect the relative
economic interests of the Members in the LLC;
(iii) The Carrying Value of any asset distributed by the LLC to any
Member shall be the gross fair market value of such asset on the date of
distribution; and
(iv) The Carrying Value of assets of the LLC shall be increased or
decreased to reflect any adjustments to the adjusted bases of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Treasury
Regulations; provided, however, that Carrying Values shall not be adjusted
pursuant to this clause (iv) to the extent the Board determines that an
adjustment pursuant to clause (ii) hereof is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment
pursuant to this clause (iv). If the Carrying Value of an asset has been
determined or adjusted pursuant to clause (i), (ii) or (iv) hereof, such
Carrying Value shall thereafter be adjusted by the Depreciation taken into
account with respect to such assets for purposes of computing Profits and
Losses.
1.14 "Cause" means:
(i) a willful and intentional material breach of this Agreement by
a Principal or an employee that is not remedied within twenty (20)
Business Days after written notice thereof to the Principal or employee by
the LLC; provided, however, that neither notice nor opportunity to cure
need be given if there is a repeat of the same type of breach for which a
prior notice has been given;
(ii) an act of fraud, misappropriation, dishonesty, embezzlement or
similar conduct by a Principal or an employee involving the business or
assets of the LLC, a Client or a Wilmington Client;
(iii) willful misconduct or gross negligence by a Principal or an
employee in connection with the performance of his duties for the LLC;
(iv) any conduct on the part of a Principal or an employee that
constitutes a willful breach of any statutory or common law duty of
loyalty owed to the LLC, a Client or a Wilmington Client;
(v) a Principal's or an employee's conviction of a felony; or
(vi) a disqualification or revocation of a registration or license
held by a Principal or an employee that would preclude the performance of
the material duties by him or her for the LLC.
1.15 "Certificate" has the meaning set forth in the recitals hereof.
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1.16 "Change of Control" means (i) the acquisition by any Person or group
of Persons of beneficial ownership, as that term is defined in Rule 13d-3
promulgated under the Exchange Act, directly or indirectly, of 25% or more of
the outstanding capital stock of WTI, Wilmington or WTC entitled to vote for the
election of directors ("Voting Shares"); (ii) the acquisition by any Person or
group of Persons (other than WTI, WTC or Wilmington) of "beneficial ownership,"
as that term is defined in Rule 13d-3 promulgated under the Exchange Act, of 50%
or more of the total outstanding Preferred Membership Points or 50% or more of
the total outstanding Common Membership Points; (iii) the merger or
consolidation of WTI, Wilmington or WTC with one or more other Persons as a
result of which the holders of the outstanding Voting Shares of WTI, Wilmington
or WTC, respectively, immediately before the merger or consolidation hold less
than 50% of the Voting Shares of the surviving or resulting Person; (iv) the
merger or consolidation of the LLC with one or more other Persons (other than
WTI, WTC or Wilmington) as a result of which the holders of the outstanding
Preferred Membership Points immediately before the merger or consolidation hold
less than 50% of the total outstanding Preferred Membership Points (or
equivalent) of the surviving or resulting Person, or the holders of the
outstanding Common Membership Points immediately before the merger or
consolidation hold less than 50% of the total outstanding Common Membership
Points (or equivalent) of the surviving or resulting Person; (v) the sale of all
or substantially all of WTI's, WTC's, Wilmington's or the LLC's assets; or (vi)
a proxy contest for the election of directors of Wilmington that results in
Persons constituting the Board of Directors of Wilmington immediately prior to
the initiation of such proxy contest ceasing to constitute a majority of the
Board of Directors of Wilmington upon the conclusion of such proxy contest;
provided, however, that neither (x) any transfer of the capital stock or assets
of WTI, Wilmington or WTC to, or merger or consolidation of WTI, Wilmington or
WTC with or into, (A) an entity that prior to and after such transfer, merger or
consolidation has been and will be consolidated with WTI, Wilmington or WTC for
federal income tax purposes, or (B) any newly-formed, wholly owned subsidiary of
WTI, Wilmington or WTC that will be consolidated with WTI, Wilmington or WTC for
federal income tax purposes, nor (y) a transfer of Common Interests by one or
more Principals to one or more Permitted Transferees or Related Entities, shall
be deemed to be a Change of Control for purposes of this Agreement.
1.17 "Client" and "Clients" shall mean, at any particular time, any
Person who is at such time an investment management customer or client of the
LLC, any Person who, within the twelve (12) months immediately preceding such
time, had been but at such time is not then an investment management customer or
client of the LLC, and any Person to whom the LLC, through any of its managers,
officers or employees, has within one (1) year prior to such time offered, by
means of a personal meeting with representatives of such Person, to serve as
investment manager but who is not at such time an investment management customer
or client of the LLC. The term "Client," when used in this Agreement with
respect to wrap accounts, shall mean the wrap sponsors, but not the underlying
wrap account holders.
1.18 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section of the Code refers not only to such
specific section but also to any corresponding provision of any Federal tax
statute enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
5
1.19 "Commencement Date" means, with respect to any Person exercising a
Put under Section 7.2 hereof or whose LLC Interests are the subject of a
Wilmington Call, the date on which such Person first (i) becomes a Member; (ii)
is granted an option to purchase a Common Interest pursuant to an Option
Agreement or an Incentive Plan; or (iii) receives a Common Interest (whether or
not vested) pursuant to an Incentive Plan.
1.20 "Common Interest" means an interest (including Common Membership
Points, distribution and allocation rights, and any capital accounts) in the LLC
held by a Common Member. A Common Interest represents a claim only on future
profits of the LLC (i.e., profits earned by the LLC after issuance of the Common
Interest). A holder of Common Interests has no interest in the capital of the
LLC with respect to such Common Interests at the time such Common Interests are
issued, and is not entitled to receive any assets upon liquidation of the LLC,
except to the extent it has a positive balance in its Capital Account.
1.21 "Common Member" means the Founding Principals, Roxbury and any other
Person subsequently admitted to the LLC as a Common Member.
1.22 "Common Membership Points" means those Membership Points relating to
Common Interests owned by Common Members.
1.23 "Delaware Act" has the meaning set forth in the recitals hereof.
1.24 "Depreciation" means, for each Fiscal Year or other period, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such Fiscal Year or other period, except
that, if the Carrying Value of an asset differs from its adjusted basis for
federal income tax purposes at the beginning of such Fiscal Year or other
period, Depreciation shall be an amount that bears the same ratio to such
beginning Carrying Value as the federal income tax depreciation, amortization,
or other cost recovery deduction for such Fiscal Year or other period bears to
such beginning adjusted tax basis; provided, however, that, if the federal
income tax depreciation, amortization or other cost recovery deduction for such
year is zero, Depreciation shall be determined with reference to such beginning
Carrying Value using any reasonable method selected by the Board.
1.25 "Derivative Share" of a shareholder in Roxbury at any time means the
portion of the LLC Interests then held by Roxbury and indirectly held by such
shareholder, which portion shall be determined in accordance with the following
formula:
Derivative All of the Common The percentage of the
Share = Membership Points then x outstanding shares of
held by Roxbury Roxbury common
stock held by
such shareholder
For example, if (i) a shareholder owns 10% of the outstanding shares of Roxbury
common stock and (ii) Roxbury owns 75.44 Common Membership Points, then the
shareholder's Derivative Share equals 75.44 x .10 = 7.544 Common Membership
Points.
6
1.26 "Determination Date" means, with respect to any year, December 31 of
such year.
1.27 "Disability" has the meaning set forth in a policy or policies of
disability insurance, if any, obtained by the LLC for the benefit of itself
and/or its employees. If there is no definition of "disability" applicable under
any such policy or policies of disability insurance, if any, obtained by the
LLC, or if the LLC maintains no such policy, then a Principal or an employee
shall be considered disabled if, such Principal or employee has been (a)
adjudged incompetent by a court of competent jurisdiction; (b) physically or
mentally incapable of performing the essential functions of his or her job for a
period of 180 days in any 12-month period, in the opinion of a licensed medical
doctor mutually approved by the Principal or employee and the LLC, with the
heads of internal medicine at the UCLA Medical Center and Cedars Sinai Medical
Center being deemed to be preapproved by each Principal, employee and the LLC;
or (c) certified as permanently disabled under the provisions of the Social
Security Act, as amended from time to time.
1.28 "Excess Cash Flow Split" for a Fiscal Year means the amount
described by Section 6.3(a)(ii) with respect to such Fiscal Year. See examples
in Exhibit B.
1.29 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
1.30 "Exercise Price," with respect to any LLC Interest that may be
purchased pursuant to an Option Agreement, shall mean the exercise price for
such LLC Interest as set forth in such Option Agreement.
1.31 "Extraordinary Events" has the meaning set forth in Section 7.3(a)
hereof.
1.32 "Fair Market Value" means the amount for which any asset could be
sold in an arm's length transaction by one who desires to sell, but is not under
any urgent requirement to sell, to a buyer who desires to buy, but is under no
urgent necessity to buy, when both have a reasonable knowledge of the facts.
1.33 "Fiscal Year" has the meaning set forth in Section 2.4 hereof.
1.34 "Founding Principals" means Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx and
Xxxxx X. Xxxxx.
1.35 "Free Cash Flow" means, with respect to any Fiscal Year, the
Revenues of the LLC for such Fiscal Year, plus cash previously set aside as
reserves that the Board determines is no longer needed for the LLC's business,
less the sum of (i) all cash expenditures made by the LLC during such Fiscal
Year, including, without limitation, operating expenses, bonuses paid to LLC
employees or Principals with respect to such Fiscal Year or portion thereof,
principal and interest payments on any indebtedness of the LLC and lease
payments on capitalized leases; (ii) all distributions made to the Preferred
Members with respect to such Fiscal Year pursuant to Section 6.3(a)(i) and all
distributions made to the Common Members with respect to such Fiscal Year
pursuant to Section 6.3(a)(ii); and (iii) such funds as shall have been set
aside by the Board as reserves for contingencies, working capital, debt service,
taxes, insurance or other costs and expenses in connection with the LLC's
business. For all purposes of this Agreement except Section
7
6.3(a)(iii), for Fiscal Year 1998, this calculation shall include the revenues
and expenditures of Roxbury for the calendar year ending December 31, 1998.
1.36 "Good Reason" means (i) a material breach by the LLC of its
employment agreement with a Principal or an employee; (ii) action taken by the
LLC which causes a material diminution in the position, authority, duties or
responsibilities of a Principal or an employee without the consent of the
Principal or employee, excluding for this purpose any isolated, immaterial or
inadvertent action, and any action which is remedied by the LLC promptly after
receipt of a notice thereof given by the Principal or employee, which notice
shall be given by the Principal or employee within sixty (60) days of the
adverse action; or (iii) a Change of Control.
1.37 "High Water Xxxx" means, with respect to any Person as of any
specified date, the largest number of Membership Points relating to LLC
Interests attributable to the Person, including that Person's Derivative Share
and any LLC Interests underlying all outstanding and unexercised options to
purchase LLC Interests held by such Person, at any one time during the period
beginning on the date hereof and ending on the specified date.
1.38 "Historic Preferred Share" shall have the meaning set forth in
Section 6.4(b) hereof.
1.39 "Hurdle Rate" shall have the meaning set forth in Section
6.3(a)(ii)(A) hereof, except as set forth in Section 1.2 hereof.
1.40 "Incentive Plan" has the meaning set forth in Section 7.9 hereof.
1.41 "Initial Put Price" shall have the meaning set forth in Section 1.68
hereof.
1.42 "Investment Advisory Agreement" means (i) the Investment Advisory
Agreement between Roxbury Partners Special Fund - II and the LLC or (ii) the
Investment Advisory Agreement between Ocean Avenue Investors, LLC and the LLC,
in each case in substantially the same form as the respective existing agreement
between such entity and Roxbury.
1.43 "Liquidating Trustee" has the meaning set forth in Section 12.2
hereof.
1.44 "LLC" means Roxbury Capital Management, LLC, the limited liability
company formed by the Original LLC Agreement and Certificate and continued under
and pursuant to the Delaware Act and this Agreement.
1.45 "LLC Interest" means a Common Interest or a Preferred Interest.
1.46 "LLC Interest Purchase Agreement" means the Limited Liability
Company Preferred Interest Purchase Agreement dated as of April 24, 1998 by and
among the LLC, Roxbury, the Founding Principals, WTI, Wilmington and WTC, as it
may, from time to time, be amended.
1.47 "LLC Value" is the fair market value of the LLC, which shall be
determined by multiplying the average of the Adjusted Free Cash Flow for the two
Fiscal Years ending on the Determination Date immediately preceding the Purchase
Closing Date ("Average Adjusted Free Cash Flow") by: (i) [*] , if the compound
annual growth rate of Advisory Fees for the five Fiscal
* CONFIDENTIAL TREATMENT REQUESTED
8
Years ending on the Determination Date immediately preceding the Purchase
Closing Date is 0% or less; or (ii) [*], if the compound annual growth rate of
Advisory Fees for the five Fiscal Years ending on the Determination Date
immediately preceding the Purchase Closing Date is [*]% or more. If the compound
annual growth rate of Advisory Fees for the five Fiscal Years ending on the
Determination Date immediately preceding the Purchase Closing Date is between 0%
and 10%, the multiple will be interpolated evenly between [*] and [*]. In
determining LLC Value as of the December 31, 1999 Determination Date, Average
Adjusted Free Cash Flow shall be an amount equal to the Adjusted Free Cash Flow
for the Fiscal Year ending on December 31, 1999. For the purpose of computing
the LLC Value, the LLC's Advisory Fees for the year ended December 31, 1998
shall include advisory fees collected by Roxbury for the calendar year ending
December 31, 1998.
If, at any time on or after December 31, 1999 at which the LLC Value is
calculated the LLC has been in operation for less than five years, the multiple
will be chosen by comparing the Advisory Fees for the period from January 1,
1999 through the applicable Determination Date with the LLC's Advisory Fees for
the year ended December 31, 1998 (as determined in the preceding paragraph).
LLC Value shall be determined only once each year; the determination will
be made on or before February 28 of each year with respect to LLC Value as of
December 31 of the immediately preceding year.
See examples in Exhibit C.
1.48 "Majority Vote" means the written approval of, or the affirmative
vote by, Voting Members holding a majority of the Membership Points held by all
Voting Members, as set forth on Schedule 1 hereto.
1.49 "Manager" has the meaning set forth in Section 18-101(10) of the
Delaware Act. A Manager shall be deemed to be an "employee" of the LLC for
purposes of Sections 1.14, 1.27, 1.36 and 1.71 of this Agreement.
1.50 "Members" means the Preferred Members and the Common Members.
1.51 "Membership Points" means, as of any date, with respect to a Member,
the number of Common or Preferred Membership Points relating to the Member's LLC
Interest set forth opposite such Member's name on Schedule 1 hereto, and as in
effect on such date. For all voting purposes, Membership Points owned by
Non-voting Members may not be voted and are not counted in the calculation of
total Membership Points outstanding.
1.52 "Non-voting Member" means a Member owning an LLC Interest but,
pursuant to Section 4.6 hereof, not having the right to vote his or its
Membership Points.
1.53 "Officers" has the meaning set forth in Section 5.13 hereof.
1.54 "Option Agreement" means any written agreement by which a Person is
granted the right to purchase an LLC Interest from Roxbury.
* CONFIDENTIAL TREATMENT REQUESTED
9
1.55 "Original LLC Agreement" has the meaning set forth in the recitals
hereof.
1.56 "Permitted Transferee" shall mean WTI, Wilmington, WTC, an officer
of the LLC and, with respect to any Principal, the parents, siblings, spouses,
issue or spouses of issue of such Principal (in any such case who are the age of
21 or over) and any trust created by one or more of such aforementioned
individuals of which such individual or individuals are the trustees.
1.57 "Person" means any individual, partnership (general or limited),
corporation, limited liability company, limited liability partnership,
association, trust, joint venture, unincorporated organization, government,
governmental department or agency, instrumentality or political subdivision
thereof, or other entity of any kind or nature.
1.58 "Preferred Interest" means an interest (including Preferred
Membership Points, distribution and allocation rights, and any capital accounts)
in the LLC held by a Preferred Member.
1.59 "Preferred Member" means WTI, in its capacity as such, any successor
thereto, and any other Person subsequently admitted to the LLC as a Preferred
Member.
1.60 "Preferred Membership Points" means those Membership Points relating
to Preferred Interests owned by a Preferred Member.
1.61 "Preferred Member Revenue Share" for a Fiscal Year is the revenue
share to which the Preferred Members are entitled under Section 6.3(a)(i) with
respect to such Fiscal Year.
1.62 "Principal" or "Principals" means the individuals identified from
time to time on Schedule 1 hereto as Principals. All natural persons who hold
LLC Interests and Membership Points, including holders who have exercised
options to purchase LLC Interests and Membership Points, shall be identified on
Schedule 1 as Principals.
1.63 "Principal Entities" means (i) the Principal to whom the
Extraordinary Event has occurred or whose employment with the LLC has terminated
(other than because of an Extraordinary Event) and (ii) such Principal's estate
and Related Holders.
1.64 "Profits" and "Losses" for each Fiscal Year or other period means an
amount equal to the LLC's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), but
computed with the following adjustments:
(i) Any income of the LLC that is exempt from federal income tax
and not otherwise taken into account in computing Profits or Losses
pursuant to this definition of Profits and Losses shall be added to such
taxable income or loss;
(ii) Any expenditures of the LLC described in Code Section
705(a)(2)(b) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Section 1.704-1(b)(2)(iv)(i) of the Treasury Regulations, and not
otherwise taken into account in computing Profits and Losses pursuant to
this definition, shall be subtracted from such taxable income or loss;
10
(iii) Gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Carrying Value of the
property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Carrying Value;
(iv) In lieu of the Depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such Fiscal Year
or other period; and
(v) Notwithstanding any other provisions of this definition, any
items that are specially allocated pursuant to Section 6.5 hereof or which
result from an adjustment to basis of one or more Members pursuant to Code
Section 734(b) or 743(b) shall not be taken into account in computing
Profits or Losses.
1.65 "Purchase Closing Date" shall mean the date upon which LLC Interests
are purchased and paid for pursuant to Sections 7.2 or 7.3 hereof.
1.66 "Put" has the meaning set forth in Section 7.2(b) hereof.
1.67 "Put Notice" has the meaning set forth in Section 7.2(d) hereof.
1.68 "Put Price" means an amount equal to the LLC Value multiplied by a
fraction (the "Interest Fraction"), the numerator of which is the number of
Common Membership Points relating to the LLC Interest to be purchased by
Wilmington or its designee from a Principal or Roxbury and the denominator of
which is the sum of the number of Common Membership Points outstanding on the
Purchase Closing Date plus all Common Membership Points relating to LLC
Interests that have been issued by the LLC pursuant to an Incentive Plan or may
be purchased from the LLC pursuant to Incentive Plan options that are
outstanding, exercisable and unexercised in whole or in part on the Purchase
Closing Date. With respect to a Put under Section 7.2(b), the Put Price shall be
determined as of the Determination Date immediately preceding the Purchase
Closing Date.
With respect to a purchase under Section 7.3(b) hereof, the Put Price
shall be determined as follows: (i) a portion of the Put Price, which portion
shall be determined by multiplying a fraction, the numerator of which is the
number of days the Principal has been employed by the LLC during the Fiscal Year
in which the event giving rise to the purchase obligation arises and the
denominator of which is 365 (the "Employment Fraction"), by the LLC Value as of
the Determination Date immediately preceding the Purchase Closing Date, and (ii)
the balance of the Put Price shall be determined by multiplying (A) one minus
the Employment Fraction by (B) the LLC Value as of the penultimate Determination
Date preceding the Purchase Closing Date. For example, if (w) the LLC Value as
of December 31, 2000 is $[ * ]; (x) the LLC Value as of December 31, 2001 is
$[ * ]; (y) a Principal owns a 2% LLC Interest; and (z) such Principal
resigns his employment for Good Reason with the LLC on August 1, 2000, 212/365
of the Put Price would be based on the LLC Value determined as of December 31,
2001 and 153/365 of the Put Price would be based on the LLC Value determined as
of December 31, 2000. The Put Price would thus equal $[ * ] x .02 x 212/365,
or $[ * ], plus $[ * ] x .02, 153/365, or $[ * ], for a total Put
Price of $[ * ].
* CONFIDENTIAL TREATMENT REQUESTED
11
Notwithstanding the above:
(i) the Put Price with respect to any LLC Interest Roxbury owns
that may be purchased pursuant to an Option Agreement shall be the lesser
of: (A) the Put Price calculated under this Section 1.68, or (B) the
Exercise Price for such LLC Interest;
(ii) in the event of an Extraordinary Event or a Roxbury
Extraordinary Event that occurs on or before December 31, 1998, the Put
Price shall be equal to the sum of: (A) an amount equal to the product of
(x) six times the Free Cash Flow for Fiscal Year 1998 and (y) the Interest
Fraction (the "Initial Put Price") and (B) an amount (if greater than
zero) equal to the product of (x) the excess (if any) of the multiple
determined for purposes of determining LLC Value with respect to a
Determination Date of December 31, 1999 over six and (y) the Free Cash
Flow for Fiscal Year 1998 (the "Subsequent Put Price"); and
(iii) in the event of an Extraordinary Event or a Roxbury
Extraordinary Event that occurs between January 1, 1999 and June 30, 1999,
the Put Price will be determined by multiplying the LLC Value as of
December 31, 1999 by the Interest Fraction.
1.69 "Related Entities" shall mean, with respect to any Member or
Members, any partnership, limited liability company, corporation or family trust
in which such Member or Members or a Permitted Transferee of such Member or
Members own all of the partnership, membership, other equity interests, all of
the capital stock, or is the trustee or beneficiary as the case may be, and with
respect to WTI, shall mean any entity that is or will be consolidated with WTI
or WTC for federal income tax purposes.
1.70 "Related Holder" of a Principal shall mean all Persons (other than
Wilmington, WTC or WTI) who acquired LLC Interests from such Principal, from a
transferee from such Principal, or from a transferee of any such transferee or
subsequent transferee.
1.71 "Retirement" means, with respect to a Principal or an employee, when
that Principal or employee reaches age 62; provided, however, that Retirement
shall not occur with respect to a Principal or an employee who continues to work
for the LLC after reaching age 62 unless the Board notifies him or her that it
objects to his or her continued participation in the LLC. Retirement with
respect to a Principal or an employee who continues to participate in the LLC
after reaching age 62 shall occur upon the earlier of (i) the voluntary
cessation by the Principal or employee of his or her employment with the LLC, or
(ii) with respect to Principals or employees other than the Founding Principals,
notification from the Board that it objects to such Principal's or employee's
continued participation.
1.72 "Revenues" means the gross receipts of the LLC from whatever source,
including without limitation gross receipts from the sale of assets (including
deemed sales of assets in connection with the liquidation of the LLC); provided,
however, that Revenues shall not include gross receipts from the sale of all or
substantially all of the LLC's assets or the deemed sale of the LLC's assets in
connection with the liquidation of the LLC.
1.73 "Roxbury" shall have the meaning set forth in the recitals hereof.
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1.74 "Roxbury Extraordinary Event" shall have the meaning set forth in
Section 7.3(a) hereof.
1.75 "Roxbury Designees" means the individuals selected by the Principals
to serve on the Board in accordance with Section 5.2 hereof.
1.76 "Roxbury Shareholders Agreement" shall have the meaning set forth in
the LLC Interest Purchase Agreement. Each Founding Principal agrees that he will
not amend the Roxbury Shareholders Agreement without the prior written consent
of WTI and Wilmington.
1.77 "Special Profit Sharing Pool" means a pool of funds that Roxbury may
annually establish to distribute to LLC employees and Principals up to 30% of
the distribution Roxbury receives pursuant to Section 6.3(a) as a Common Member
with respect to such Fiscal Year.
1.78 "Special Roxbury Put" shall have the meaning set forth in Section
7.2(c) hereof.
1.79 "Subsequent Put Price" shall have the meaning set forth in Section
1.68 hereof.
1.80 "Subsidiary" means any corporation, partnership or other
organization, whether incorporated or unincorporated, of which more than fifty
percent (50%) of either the equity interests or the voting control is, directly
or indirectly, through Subsidiaries or otherwise, beneficially owned by the LLC,
or of which the LLC or any Subsidiary serves as the general partner.
1.81 "Tax Matters Member" has the meaning set forth in Section 9.1(a)
hereof.
1.82 "Transfer" has the meaning set forth in Section 7.1(a) hereof.
1.83 "Treasury Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
1.84 "Voting Members" means all Members other than Non-voting Members.
1.85 "Wilmington" has the meaning set forth in the recitals hereof.
1.86 "Wilmington Call" has the meaning set forth in Section 7.3(c)
hereof.
1.87 "Wilmington Call Notice" has the meaning set forth in Section 7.3(d)
hereof.
1.88 "Wilmington Clients" means investment management, custody and
personal trust clients of WTI, Wilmington or WTC (including any former clients
who were clients of WTI, Wilmington or WTC at any time during the one-year
period immediately prior to the date hereof) and any Person who has been
offered, by means of a personal meeting with such Person or representatives of
such Person, investment management, personal trust or custodial services by WTI,
Wilmington or WTC, and any Affiliates of such current, former and prospective
clients.
1.89 "WTC" has the meaning set forth in the recitals hereof.
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1.90 "WTI" has the meaning set forth in the recitals hereof.
1.91 "WTI Designee" means the individual(s) selected and authorized by
WTI, its successor or assign to represent WTI and serve on the Board in
accordance with Section 5.2 hereof.
2
GENERAL PROVISIONS
2.1 Formation, Name and Continuation. This Agreement supersedes and
replaces the Original LLC Agreement in its entirety and the Original LLC
Agreement shall henceforth have no effect as of and from the date hereof. The
name of the LLC heretofore formed and continued hereby is Roxbury Capital
Management, LLC. The business of the LLC may also be conducted under any other
name or names designated by the Board from time to time. The parties hereto
agree to continue the LLC and enter into this Agreement, and do hereby continue
the LLC and enter into this Agreement, pursuant to the provisions of the
Delaware Act and for the purposes hereinafter described. Upon the execution of
this Agreement or a counterpart of this Agreement, WTI shall be admitted to the
LLC as a Member. The name, mailing address, initial capital contribution and
Membership Points of each Member shall be listed on Schedule 1. The Secretary of
the LLC shall update any Schedule from time to time as necessary to accurately
reflect the information required to be contained therein. Any amendment or
revision to a Schedule made in accordance with this Agreement shall not be
deemed an amendment to this Agreement. Any reference in this Agreement to a
Schedule shall be deemed to be a reference to such Schedule as amended and in
effect from time to time.
2.2 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 in perpetuity, unless dissolved in accordance with the provisions of
this Agreement. The existence of the LLC as a separate legal entity shall
continue until the cancellation of the Certificate.
2.3 Registered Agent and Office; Principal Place of Business.
(a) The LLC's registered agent and office in the State of Delaware
shall be WT Investments, Inc., Xxxxxx Square North, 0000 Xxxxx Xxxxxx Xx., Xxx
Xxxxxx Xxxxxx, Xxxxxxxx 00000.
(b) The principal place of business of the LLC shall be at 000
Xxxxxxxx Xxxxxxxxx, Xxxxx 000 Xxxxx Xxxxxx, Xxxxxxxxxx 00000, and the LLC shall
qualify to do business in California and any other location where its business
requires it to qualify to do business.
(c) The Board may, at any time and from time to time: (i) change
the location of the LLC's principal place of business and establish such
additional place or places of business of the LLC as it may determine; (ii)
change the location of the LLC's books and records; (iii) change the LLC's
registered office in Delaware; and (iv) change the LLC's resident agent for
service of process in Delaware.
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2.4 Fiscal Year. Except as otherwise determined by the Board, the Fiscal
Year of the LLC for accounting and tax purposes shall be the calendar year,
except for the short years in the years of the LLC's formation and termination
and as otherwise required by the Code.
3
PURPOSE AND POWERS OF THE LLC
3.1 Purpose. The LLC is formed for the object and purpose of engaging in
any lawful act or activity for which limited liability companies may be formed
under the Delaware Act and engaging in any and all activities necessary or
incidental to the foregoing, except that the LLC is not formed for the object
and purpose of and shall not engage in any business that would cause WTI,
Wilmington or WTC to be in violation of any Federal or Delaware state banking
law, as such laws may be amended from time to time.
3.2 Powers of the LLC. The LLC shall have all power and authority
granted under the Delaware Act to take any and all actions necessary,
appropriate, proper, advisable, incidental or convenient to or for the
furtherance of the purpose set forth in Section 3.1.
3.3 Authorized Persons. Any Manager shall be an "authorized person" for
purposes of the Delaware Act.
4
MEMBERS
4.1 Voting. Members shall have the power to vote only as provided in
this Article 4 and by Section 12.1 of this Agreement. Unless otherwise provided
in this Agreement or required by law, any vote of Members shall be determined by
a Majority Vote.
4.2 Meetings of Members. The Board of Managers of the LLC (the "Board")
or the Chairman may call a meeting of Voting Members. Meetings of Voting Members
shall be held at the principal place of business of the LLC or such other
location as may be selected by the Board upon at least 10 days' written notice
to all of the Voting Members. Any notice required hereunder may be waived in
writing by the Person to whom notice should have been sent, whether before or
after the related meeting, and attendance at any meeting waives that attendee's
right to any notice required hereunder unless the Person attends for the express
purpose of objecting at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened.
4.3 Quorum. At any meeting of the Voting Members, the presence of (a)
Preferred Members owning a majority of the Preferred Membership Points and (b)
Common Members owning a majority of the Common Membership Points, other than
Common Membership Points owned by Non-voting Members, shall constitute a quorum.
Any meeting may be adjourned from time to time by Voting Members holding a
majority of the votes present at the meeting, whether
15
or not a quorum is present, and the meeting may be held as adjourned upon at
least 10 days' written notice to all the Voting Members, unless such notice is
waived.
4.4 Action by Consent. Any action of the Voting Members may be taken
without a meeting if the Voting Members required to consent to the action to be
taken, if such action had been taken at a meeting of Voting Members, consent to
such action in writing. The written consents shall be filed with the records of
the meetings of the Members. Such actions by consent shall be treated for all
purposes as actions taken at a meeting.
4.5 Telephonic Meetings. Voting Members may participate in a meeting of
the Voting Members by means of a conference telephone or similar communications
equipment provided all Voting Members participating in the meeting can hear each
other at the same time, and participation by such means shall constitute
presence in person at a meeting.
4.6 Non-voting Members. Any Member whose employment with the LLC is
terminated for Cause, any Member who resigns from employment with the LLC other
than for Good Reason and any Member, during the periods described in Sections
7.2(e) and 7.3(e), shall become a Non-voting Member until his or its LLC
Interest has been purchased in full in accordance with Article 7 hereof. The
estate or other successor of any Member that dies, dissolves or otherwise ceases
to exist shall become a Non-voting Member until his or its LLC Interests have
been purchased in full in accordance with Article 7 hereof. The Board may, in
its sole and absolute discretion, waive the provisions of this Section 4.6
causing a Member to become a Non-voting Member. In accordance with Section 7.5
hereof, the Board may admit a substitute Member as a Voting or a Non-Voting
Member. Non-voting Members do not have the right to receive notice of meetings
of Voting Members or to participate in such meetings.
5
MANAGERS AND OFFICERS
5.1 Managers. The management of the LLC's business shall be vested in
the Board, which shall consist of seven Managers, all of whom must be Voting
Members, LLC employees, or officers or directors of Voting Members. Unless
otherwise specified in this Agreement, the Board shall act by majority vote of
those Managers present at a meeting at which a quorum is present, with each
Manager on the Board having one vote.
5.2 Designation of Managers.
(a) For so long as Principals and Roxbury together own 50% or more
of the outstanding Membership Points, then five of the Managers shall be
selected or replaced by the Principals by majority vote, which vote shall be
based on their direct and Derivative Share ownership of Membership Points
("Roxbury Designees"). For so long as the Principals and Roxbury together own
Membership Points that are less than 50% of the outstanding Membership Points,
then three of the Managers shall be Roxbury Designees.
16
(b) For so long as WTI, WTC or Wilmington is a Preferred Member,
two of the Managers shall be selected or replaced by WTI, WTC or Wilmington
("WTI Designee"). For so long as WTI, WTC or Wilmington is a Preferred Member
and such entities collectively own more than 50% of the outstanding Membership
Points, four of the Managers shall be WTI Designees.
5.3 Term. The term of any Manager shall begin immediately after his
election and shall last until the election of his successor or the effective
date of his resignation or removal, whichever is earlier.
5.4 Resignation or Removal of a Manager.
(a) Any Manager may resign by delivering to the LLC a signed
notice indicating his intent to resign and the effective date of his
resignation.
(b) The Board or the Voting Members, by Majority Vote, may remove
any Manager (i) for Cause, or (ii) if the Manager becomes subject to a
Disability. A Manager shall be automatically removed as such if he or she
becomes a Non-voting Member. Any Person that has designated a Manager may remove
the Manager, with or without Cause, using the same process that was used to
appoint the Manager at any time upon prior written notice to the LLC.
5.5 Vacancies. If a Manager should resign or be removed from the Board,
the Person(s) holding the power to designate that Manager pursuant to Section
5.2 hereof may at any time after the resignation or removal designate another
Person to serve as a Manager by written notice to the LLC.
5.6 Meetings. The Board shall hold regular quarterly meetings without
call or notice at the principal office of the LLC (or at such other place as
shall be determined by the Board) and at such times as the Board may from time
to time determine, provided reasonable notice of the first regular meeting
following any such determination is given to Managers absent at the meeting
fixing regular meetings. When called by the Chairman, or by any two Managers,
the Board may hold special meetings at such places and times as are designated
by the Board in the call of the meeting, upon at least two Business Days' notice
given by the Chairman, the Secretary or an Assistant Secretary, or by the
Managers calling the meeting. Any notice required hereunder may be waived in
writing by the Person to whom notice should have been sent, whether before or
after the related meeting, and attendance at any meeting waives that attendee's
right to any notice required hereunder unless the Person attends for the express
purpose of objecting at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened.
5.7 Quorum. At any meeting of the Board, the presence of four or more
Managers (at least one of whom shall be a WTI Designee) shall constitute a
quorum. Any meeting may be adjourned from time to time by Managers holding a
majority of votes present at the meeting, whether or not a quorum is present,
and the meeting may be held as adjourned upon at least two Business Days' notice
to all the Managers, unless notice is waived.
17
5.8 Action by Consent. Any action of the Board may be taken without a
meeting if all the Managers consent to the action in writing. The written
consents shall be filed with the records of the meetings of the Board. Such
actions by consent shall be treated for all purposes as actions taken at a
meeting.
5.9 Telephonic Meetings. Managers may participate in a meeting of the
Board by means of a conference telephone or similar communications equipment
provided all Managers participating in the meeting can hear each other at the
same time, and participation by such means shall constitute presence in person
at a meeting.
5.10 Managers as Agents; Limitation on Power of Members. The Managers, to
the extent of the powers set forth herein, are agents of the LLC for the purpose
of the LLC's business, and the actions of the Managers taken in accordance with
such powers shall bind the LLC. No Manager or Member in that Person's capacity
as Manager or Member, acting individually, and no Managers representing less
than the number of Managers necessary for Board action under Sections 5.1, 5.8,
5.9 or 5.11 hereof, may bind the LLC.
5.11 Board Action. Notwithstanding the other provisions of this Article
5, the approval of (a) at least one WTI Designee and (b) a majority of the
Roxbury Designees shall be required for any of the following matters: (i) any
determination to engage in a business other than investment management and
advisory services or to change in a fundamental manner the investment
methodology and strategy heretofore used by Roxbury; (ii) issuance of additional
LLC Interests other than upon exercise of an option granted pursuant to an
Incentive Plan; (iii) adoption of an Incentive Plan; (iv) compensation
arrangements and year end payments pursuant to any such arrangements, including
bonus plans, employment contracts, or severance agreements, between the LLC (or
any Affiliate thereof) and any Senior Managing Director or Managing Director of
the LLC; (v) hiring or termination of any Person described in Section 5.11(iv);
(vi) the LLC's annual budget; (vii) any sale, assignment or other disposition by
the LLC of all or substantially all of its assets or of any interest in a
Subsidiary; (viii) any consolidation or merger of the LLC with or into any other
Delaware limited liability company or other business entity (as defined in
Section 18-209(a) of the Delaware Act), or any dissolution of the LLC; (ix) (A)
the creation or acquisition of any Subsidiary, (B) any consolidation or merger
of any Subsidiary with or into any other Delaware limited liability company or
other business entity (as defined in Section 18-209(a) of the Delaware Act)
other than the LLC, (C) any sale by any Subsidiary of all or substantially all
of its assets other than to the LLC, or (D) any liquidation, dissolution or
winding up of any Subsidiary other than into the LLC; (x) any issuance of any
equity securities of any Subsidiary, or any securities convertible into equity
securities of any Subsidiary; (xi) any acquisition by the LLC or any Subsidiary,
other than for the accounts of Clients, of any stock or assets of another entity
or of capital assets, in a single transaction or a series of related
transactions in any 12-month period, for an aggregate purchase price in excess
of $300,000; (xii) any incurrence by the LLC and its Subsidiaries, on a combined
basis, of debt (including undrawn amounts under any credit facility) in excess
of $250,000; (xiii) grants of options by the LLC to purchase Common Interests;
(xiv) the resolution of third party claims involving an amount, including
expenses, in excess of $250,000; (xv) the resolution of material disputes with
any governmental, administrative or regulatory body, agency or similar entity;
(xvi) any amendment to, or termination by the LLC of, an Investment Advisory
Agreement, (xvii)
18
making a determination pursuant to Section 6.3(c); (xviii) any transfer of a
Common Interest to a Person other than a Permitted Transferee or Related Entity;
and (xix) whether a transferee of a Common Interest (whether or not a Permitted
Transferee or Related Entity) shall have voting rights; provided, however, that
the Board may (without the approvals required by this Section 5.11) grant
options to purchase Common Interests that (A) do not contain terms more
favorable to optionees than those set forth in Section 7.1(d) hereof with
respect to Option Agreements, (B) do not represent more than 10% of the Common
Membership Points outstanding on the date hereof and (C) are not granted prior
to the fifth anniversary of the date hereof.
5.12 Approval of Annual Budget. Subject to Section 5.11(vi) hereof, the
Board alone shall have the power to approve the annual budget of the LLC. If the
annual budget of the LLC is not approved in its entirety by the Board under this
Section, the Board shall approve the budget to the extent of those items on
which there is agreement and shall continue to negotiate in good faith until all
items of the budget are agreed upon.
5.13 Officers. The Board may appoint agents and employees of the LLC who
are designated as officers of the LLC (the "Officers"). The Officers of the LLC
shall include a Chairman (who must be a Manager), a President and a Secretary
and may include a Vice-Chairman (who must be a Manager), Chief Operating
Officer, Chief Investment Officer and Treasurer, one or more Senior Managing
Directors, Managing Directors, Executive Vice Presidents, Senior Vice
Presidents, Vice Presidents and Assistant Secretaries and such other Officers
with such titles as may be approved by the Board. Subject to Section 5.11, the
Board may remove any Officer at any time, for any reason, in its sole and
absolute discretion. The Officers shall be agents of the LLC, authorized to
execute and deliver documents and take other actions on behalf of the LLC,
subject to the direction of the Board, and to have such other duties as may be
approved by the Board; provided, however, that the delegation of any such power
or authority to the Officers shall not limit in any respect the power and
authority of the Board to take such actions (or any other action) on behalf of
the LLC as provided in this Agreement. The Secretary shall record the actions of
the Board, certify this Agreement and any related document or instrument,
certify resolutions of the Board, incumbency and other matters of the LLC, and
have such other ministerial duties as may be specified by the Board from time to
time.
5.14 Powers of the Board; Powers of Officers.
(a) Subject to the provisions of this Agreement requiring the
approval of the Members, the Board's powers on behalf and in respect of the LLC
shall be all powers and privileges permitted to be exercised by managers of a
limited liability company under the Delaware Act, including, without limitation,
Section 18-402 of the Delaware Act.
(b) Subject to Section 5.11 hereof and except to the extent that
this Agreement requires the Board to vote on a matter, the Board may delegate
any of its powers to the Officers of the LLC or any one or more of them.
(c) Subject to the limitation set forth in Section 5.14(b), the
Board hereby delegates to the Officers of the LLC the respective powers
delegated to comparable officers of a corporation under the Delaware General
Corporation Law, subject to the powers of a board of
19
directors of a corporation under such Delaware law; provided, however, that the
Board reserves the right to rescind the delegation of any such powers at any
time in the sole and absolute discretion of the Board.
5.15 Reimbursement. The LLC shall reimburse each Manager for all
reasonable and necessary out-of-pocket expenses incurred by such Manager on
behalf of the LLC according to such terms as shall be approved by the Board. The
Board's sole determination of which expenses may be reimbursed to a Manager and
the amount of such expenses shall be conclusive. Such reimbursement shall be
treated as an expense of the LLC that shall be deducted in computing Profits and
Losses and shall not be deemed to constitute a distributive share of Profits or
a distribution or return of capital to the Manager.
5.16 Duties of Managers. To the extent that, at law or in equity, a
Manager has duties (including fiduciary duties) and liabilities relating thereto
to the LLC or to any Member, a Manager acting under this Agreement shall not be
liable to the LLC or to any Member for his or her 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 Manager otherwise existing at
law or in equity, are agreed by the parties hereto to replace such other duties
and liabilities of such Manager.
5.17 Fiduciary Duties.
(a) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between Managers, or (ii) whenever this
Agreement or any other agreement contemplated herein or therein provides that a
Manager shall act in a manner that is, or provides terms that are, fair and
reasonable to the LLC or any Member, the Manager shall resolve such conflict of
interest, take such action or provide such terms, considering in each case the
relative interest of each party (including his or her own interest or the
interests of his or her employer) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Manager, the
resolution, action or term so made, taken or provided by the Manager shall not
constitute a breach of this Agreement or any other agreement contemplated herein
or of any duty or obligation of the Manager at law or in equity or otherwise.
(b) Whenever in this Agreement a Manager is permitted or required
to make a decision (i) in his or her "discretion" or under a grant of similar
authority or latitude, the Manager shall be entitled to consider such interests
and factors as he or she desires, including his or her own interests or the
interests of his or her employer, and shall have no duty or obligation to give
any consideration to any interest of or factors affecting the LLC or any other
person, or (ii) in "good faith" or under another express standard, the Manager
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.
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6
CAPITAL CONTRIBUTIONS; CAPITAL
ACCOUNTS; DISTRIBUTIONS; ALLOCATIONS
6.1 Capital Contributions.
(a) Each Member has contributed to the capital of the LLC, or as a
result of acquiring an LLC Interest has succeeded to, the amount set forth
opposite his or its name under the column labeled "Capital Account" on Schedule
1.
(b) No Member shall be required to make any additional capital
contribution to the LLC.
6.2 Capital Accounts.
(a) Each Member shall have a Capital Account on the books of the
LLC, which shall not bear interest.
(b) Except as provided in Section 12.3(a)(ii) hereof, no Member
has the right to demand a return of such Member's capital contributions (or the
balance of such Member's Capital Account). Further, no Member has the right (i)
to demand and receive any distribution from the LLC in any form other than cash
or (ii) to bring an action of partition against the LLC or its property.
6.3 Distributions.
(a) Except as provided in Section 6.3(f), within 90 days after the
end of each Fiscal Year, the Board shall cause to be distributed:
(i) first, to the Preferred Members in proportion to their
respective number of Preferred Membership Points, (A) [ * ]% of all
Revenues of the LLC for that Fiscal Year ("Preferred Member Revenue
Share") less (B) the Excess Cash Flow Split for such Fiscal Year.
(ii) second, the "Excess Cash Flow Split" shall be paid to
the Common Members in proportion to their respective number of Common
Membership Points beginning with distributions with respect to Fiscal Year
1999. The Excess Cash Flow Split shall be calculated as follows:
A) For the Fiscal Years 1999, 2000, 2001 and 2002,
multiply annual Advisory Fee revenue in 1998 by [ * ] ("Hurdle
Rate") taken to the "N"th power, where "N" is 1 with respect
to Fiscal Year 1999, "N" is 2 with respect to Fiscal Year
2000, "N" is 3 with respect to Fiscal Year 2001 and "N" is 4
with respect to Fiscal Year 2002. Annual Advisory Fee revenue
in 1998 shall be all 1998 advisory fee revenue earned by
Roxbury plus all 1998 Advisory Fee revenue earned by the LLC.
With respect to
* CONFIDENTIAL TREATMENT REQUESTED
21
Fiscal Years 2003 and thereafter, the Excess Cash Flow Split
shall be computed by multiplying the Advisory Fee revenue for
the fifth prior Fiscal Year (for example, with respect to
Fiscal Year 2003, use Advisory Fee revenue for Fiscal Year
1998) by [*] (which is [*] 5). An amount computed hereunder is
"Assumed Fee Income" for such Fiscal Year.
B) Subtract the Assumed Fee Income for such Fiscal
Year from the actual Advisory Fee revenue for such Fiscal
Year.
C) If the calculation in B) produces a positive
number, multiply that difference by .[ * ]. The product of
this multiplication is the Excess Cash Flow Split. (See
examples in Exhibit B.)
(iii) third, Free Cash Flow shall be paid to the Common
Members in proportion to their respective number of Common Membership
Points for such Fiscal Year.
(b) Notwithstanding the provisions of Section 6.3(a), the Board
shall make estimated distributions described by Sections 6.3(a)(i), (ii) and
(iii) to Members each quarter. To the extent the Board makes any distributions
with respect to any Fiscal Year prior to the end of that Fiscal Year, the
priority of distributions shall be in accordance with Section 6.3(a). All such
distributions shall be deemed advances against the distributions required by
Section 6.3(a). In the event that any such distributions are determined to be
excessive, Members shall be required to repay, without interest, any excessive
distribution within thirty (30) days of being notified in writing that the
payment was excessive and must be repaid to the LLC.
(c) If the Board determines that it is not possible to distribute
all or part of the Preferred Member Revenue Share for any Fiscal Year because
such a distribution would materially impair the LLC's ability to operate, the
LLC shall execute a promissory note, without interest, which provides for
payment within the subsequent 12 months of the unpaid portion of any amounts the
Preferred Members should have received under Section 6.3(a)(i) and there shall
be no distributions pursuant to Section 6.3(a) or (b) for that Fiscal Year or
any subsequent Fiscal Year until such promissory note is satisfied.
Notwithstanding anything herein to the contrary, the issuance of promissory
note(s) to the Preferred Members under this Section 6.3(c) for any Fiscal Year
shall not diminish or affect in any way the Preferred Members' right to a
distribution of the Preferred Member Revenue Share under Section 6.3(a)(i) for
any subsequent Fiscal Year.
(d) All amounts withheld pursuant to the Code or any provision of
any state or local tax law with respect to any payment, distribution or
allocation to the LLC or the Members shall be treated as amounts distributed to
the Members pursuant to this Section 6.3 for all purposes of this Agreement. The
LLC is authorized to withhold from distributions or with respect to allocations
to the Members and to pay over to any Federal, state or local government any
amounts required to be so withheld pursuant to the Code or any provision of any
other Federal, state or local law and shall allocate such amounts to those
Members with respect to which such amounts were withheld.
* CONFIDENTIAL TREATMENT REQUESTED
22
(e) Notwithstanding any provision to the contrary contained in
this Agreement, the LLC shall not make a distribution to any Member on account
of its LLC Interest if such distribution would (i) cause such Member to have an
Adjusted Capital Account Deficit, or (ii) violate Section 18-607 of the Delaware
Act or other applicable law.
(f) In the event of a sale of all or substantially all of the
assets of the LLC, or a deemed sale of assets in connection with the liquidation
of the LLC, the proceeds thereof shall be distributed as provided in Section
12.3(a).
6.4 Allocation of Profits and Losses.
(a) After giving effect to the special allocations provided in
Section 6.5 hereof, and except as otherwise provided in Section 6.4(b) hereof,
Profits for any Fiscal Year shall be allocated to the Members as follows:
(i) First, to the Preferred Members in proportion to their
respective number of Preferred Membership Points to the extent that the
cumulative Losses that have been allocated to the Preferred Members under
Section 6.4(c) hereof exceed the cumulative Profits that have been
allocated thereto under this Section 6.4(a);
(ii) Second, to the Preferred Members in proportion to their
respective number of Preferred Membership Points in an amount equal to the
Preferred Member Revenue Share distributed to the Preferred Members or
deferred pursuant to Section 6.3(c) hereof with respect to such Fiscal
Year;
(iii) Third, to the Common Members in proportion to their
respective number of Common Membership Points an amount equal to the
amount distributed to such Common Members pursuant to Section 6.3(a)(ii)
hereof; and
(iv) Fourth, to the Common Members in proportion to their
respective number of Common Membership Points for such Fiscal Year.
(b) Notwithstanding the provisions of Section 6.4(a) hereof,
Profits from the sale of all or substantially all of the assets of the LLC, and
Profits from a deemed sale of assets in connection with the liquidation of the
LLC, shall be allocated among the Members as follows:
(i) First, such Profits shall be allocated to the Preferred
Members in proportion to their respective number of Preferred Membership
Points to the extent that the cumulative Losses that have been allocated
to the Preferred Members under Section 6.4(c) hereof exceed the cumulative
Profits that have been allocated thereto under Section 6.4(a);
(ii) Second, an amount of such Profits equal to two-thirds
(2/3) of the Purchase Price (as such term is defined in the LLC Interest
Purchase Agreement) shall be allocated to the Common Members in proportion
to their respective numbers of Common Membership Points; and
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(iii) Thereafter, an amount of such Profits equal to the
Historic Preferred Share of such Profits (after reduction for the amounts
allocated to Members under Sections 6.4(b)(i) and (ii) above) shall be
allocated to the Preferred Members in proportion to their respective
numbers of Preferred Membership Points and the remainder of such Profits
shall be allocated to the Common Members in proportion to their respective
numbers of Common Membership Points.
For purposes of this Section 6.4(b), the "Historic Preferred Share" shall be
equal to a fraction, the numerator of which is the cumulative amount distributed
or distributable to the Preferred Member pursuant to Section 6.3(a)(i) hereof
for the five Fiscal Years (or, if fewer, the number of completed Fiscal Years)
immediately preceding the year in which the sale or deemed sale of assets occurs
and the denominator of which is the cumulative amount of all distributions made
to Members in accordance with Section 6.3 hereof for the same period.
(c) All Losses shall be allocated to the Preferred Members in
proportion to their respective number of Preferred Membership Points. However,
no allocation shall be made under this Section 6.4(c) to the extent it causes a
Preferred Member to have an Adjusted Capital Account Deficit.
6.5 Special Allocations.
(a) If and to the extent that any employee or Principal of the LLC
or an Affiliate recognizes or is deemed to recognize any item of income or gain
pursuant to Code Section 83 by virtue of any transaction or deemed transaction
between any Member and such employee, then any resulting item of loss recognized
by the LLC or deduction to which the LLC is entitled shall be specially
allocated to such Member.
(b) If and to the extent that any employee or Principal of the LLC
receives a payment from Roxbury pursuant to the Special Profit Sharing Pool,
then any resulting deduction to which the LLC is entitled shall be specially
allocated to Roxbury.
(c) The provisions of the Treasury Regulations promulgated under
Code Section 704(b) relating to the qualified income offset, minimum gain
chargeback, minimum gain chargeback with respect to nonrecourse debt, the
allocation of nonrecourse deductions and the allocation of items of deduction,
loss or expenditure relating to nonrecourse debt are hereby incorporated by this
reference and shall be applied to the allocation of items of income, gain, loss
or deduction of the LLC in the manner provided in such Treasury Regulations.
However, the Members do not intend that the "deficit restoration obligation"
described in Section 1.704-1(b)(2)(ii)(c) of the Treasury Regulations be
incorporated by reference herein.
(d) In the event that items of income, gain, loss or deduction are
allocated to one or more Members pursuant to Section 6.5(c) above, subsequent
items of income, gain, loss or deduction will first be allocated (subject to the
provisions of Section 6.5(c)) to the Members in a manner designed to result in
each Member having a Capital Account balance equal to what it would have been
had the original allocation of Profits or Losses, or items thereof pursuant to
Section 6.5(c) not occurred.
24
6.6 Tax Allocations: Code Section 704(c).
(a) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the LLC shall, solely for tax purposes,
be allocated among the Members so as to take account of any variation between
the adjusted basis of such property to the LLC for federal income tax purposes
and its initial Carrying Value at the time of its contribution to the LLC.
(b) Allocations of income, gain, loss and deduction with respect
to any asset revalued in accordance with Treasury Regulations under Code Section
704 shall take account of any variation between the adjusted basis of such asset
for federal income tax purposes and its Carrying Value in the same manner as
under Code Section 704(c) and the Treasury Regulations thereunder and as
required by Section 1.704-1(b)(2)(iv)(g) of the Treasury Regulations.
(c) Any elections or other decisions relating to allocations
described in paragraphs (a) or (b) of this Section 6.6 shall be made by the
Members in any manner that reasonably reflects the purposes and intention of
this Agreement. Allocations pursuant to this Section 6.6 are solely for purposes
of federal, state and local taxes and shall not affect, nor in any way be taken
into account in computing, any Member's Capital Account or share of Profits,
Losses or other items or distributions pursuant to any provision of this
Agreement.
6.7 Proration for Partial Years. In the event (a) the Membership Points
of any Common Member shall be adjusted, by Transfer or otherwise, during any
Fiscal Year or (b) any Common Member shall be admitted to the LLC during any
Fiscal Year, any distributions and any allocations to such Member pursuant to
this Article 6 shall be made based on the average of the Member's Membership
Points for such Fiscal Year, determined on a monthly basis. For example, if in
the months of January through July of a Fiscal Year (i.e., seven months) a
Common Member owned nine Membership Points, and in the months of August through
December of such Fiscal Year (i.e., five months) the Member owned three
Membership Points, the distributions and allocations to such Member pursuant to
this Article 6 would be based on an LLC Interest calculated as follows:
(7 x 9) + (5 x 3) = 6.5 Membership
----------------- Points
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7
TRANSFER OF LLC INTERESTS, PUT AND CALL OPTIONS,
MANDATORY PURCHASES AND ADMISSION OF ADDITIONAL MEMBERS
7.1 Assignability of Interests.
(a) Except as otherwise provided in this Article 7, no LLC
Interest of a Member may be sold, assigned, transferred, pledged, hypothecated,
gifted, exchanged, optioned, liened or encumbered (each, a "Transfer") and no
Transfer in violation of this Agreement shall be binding upon the LLC.
25
(b) A Member may transfer all or any portion of its or his LLC
Interest (i) to any one or more Permitted Transferees or Related Entities who
agree to be bound by the terms and conditions of this Agreement, or (ii) upon
obtaining the prior approval of the Board in accordance with Section 5.11
hereof, to any other Person who agrees to be bound by the terms and conditions
of this Agreement; provided, however, that notwithstanding anything contained in
this Agreement to the contrary, the transferring Member shall retain the right
to vote with respect to LLC Interests Transferred unless (A) the transferee is
WTI, WTC, Wilmington or an officer of the LLC, (B) the Transfer is pursuant to
an Option Agreement, or (C) the transferee is approved by the Board as a Voting
Member.
(c) In addition to Transfers permitted under Section 7.1(b),
certain Members, including Permitted Transferees of Principals, may exercise
Puts in accordance with Section 7.2 and certain Members are required to make
sales in accordance with Section 7.3, in accordance with the terms of such
Sections.
(d) Until December 31, 2003, Roxbury may grant options on LLC
Interests it owns to employees of the LLC in Roxbury's sole and absolute
discretion pursuant to a written Option Agreement if: (i) the aggregate exercise
price to purchase the LLC Interests subject to the option is not less than the
proportionate share of LLC Value represented by such LLC Interests determined on
the date of the grant using a multiple of six in determining LLC Value; (ii) not
more than one-third of the option shall vest before the end of the first year
after grant, not more than two-thirds of the option shall vest before the end of
the second year after grant, and not more than 100% of the option shall vest
before the end of the third year after grant; (iii) the option does not become
exercisable before the third anniversary of its date of grant (although an
option may become exercisable prior to such third anniversary (A) in the event
of death, Disability or Retirement of the option holder, (B) on termination of
the employment of the option holder without Cause or (c) on resignation by the
option holder for Good Reason); (iv) the option holder executes an employment
contract in a form acceptable to the LLC at the time of, or prior to, the
execution of the Option Agreement; (v) the option holder exercising the option
must sign this Agreement as a condition of exercise; and (vi) the optionee makes
representations and warranties to the LLC comparable to those contained in
Section 13.5 on the date of grant of the option and on the date of each exercise
thereof.
7.2 Put Options.
(a) On or before February 28 of each year, the LLC shall notify
all Members of the LLC Value as of December 31 of the immediately preceding
year.
(b) Subject to the terms, conditions and limitations of this
Section 7.2, each Principal and Roxbury may exercise an option to sell to
Wilmington all or any portion of his or its LLC Interest (each such Put to
Wilmington being referred to as a "Put"). Upon exercise of a Put under this
Section 7.2(b), Wilmington shall thereupon become obligated to purchase the LLC
Interest as to which the Put has been exercised.
(c) Notwithstanding anything contained in Section 7.2(b) to the
contrary, unless otherwise agreed to by Wilmington: (i) neither a Principal nor
Roxbury may exercise a Put prior to
26
the fifth anniversary of the later of the Commencement Date or the date hereof;
(ii) Puts may not be exercised in any Fiscal Year with respect to LLC Interests
representing more than 25% of the Common Membership Points of the LLC then
outstanding; (iii) each Founding Principal may not exercise Puts in any Fiscal
Year exceeding 50% of his High Water Xxxx and any other Principal may not
exercise Puts in any Fiscal Year exceeding 20% of his High Water Xxxx; and (iv)
a Put may not be exercised with respect to LLC Interests acquired on exercise of
an Option Agreement unless such LLC Interests have been held for at least six
months (other than after a Change of Control or in an amount with a Put Price
equal to the dollar amount of the maximum federal, state and local tax rates
applicable to the exercise of such Option Agreement). If, in any Fiscal Year,
Puts are exercised with respect to more than 25% of the outstanding Common
Membership Points, then each such Member shall be entitled to exercise Puts
equal to the product of (x) 25%, (y) the Common Membership Points of the LLC
then outstanding and (z) a fraction, the numerator of which is the Common
Membership Points relating to the LLC Interests for which a Put is sought to be
exercised by the Member (after giving effect to Section 7.2(c)(iii)) and the
denominator of which is the total Common Membership Points relating to LLC
Interests for which Puts are sought to be exercised by all Members (after giving
effect to Section 7.2(c)(iii)). Notwithstanding the foregoing limitations of
this Section 7.2(c), Roxbury may exercise a Put following an Extraordinary Event
with respect to a Founding Principal or the exercise of a Wilmington Call with
respect to the LLC Interests of a Founding Principal; provided, however, that
the number of Common Membership Points that are the subject of such Put shall
not exceed the Derivative Share of such Founding Principal (a "Special Roxbury
Put"). A Special Roxbury Put shall not be included in determining whether the
limitations set forth above in this Section 7.2(c) have been satisfied.
(d) A Member may exercise a Put if, on or before March 15 of any
year, Wilmington receives an irrevocable notice of exercise of the Put to
Wilmington substantially in the form of Exhibit D hereto (the "Put Notice")
stating that it or he is electing to exercise the Put and specifying the LLC
Interest to be sold pursuant to the Put. On or before the first day of April
after receipt of a Put Notice (or the next succeeding Business Day if such April
1 is not a Business Day), and subject to the limitations set forth in Section
7.2(c) hereof, Wilmington shall purchase from the Member the LLC Interest set
forth in the Put Notice. At the closing of the exercise of a Put, Wilmington
shall deliver the Put Price to the Member by certified check or wire transfer of
immediately available funds against delivery of such documents or instruments of
transfer as Wilmington may reasonably request.
(e) On the last day of the month in which a Put is exercised by a
Member, such Member shall cease to have any rights as a Member with respect to
the LLC Interest so Put other than (i) the right to receive the Put Price on the
Purchase Closing Date and (ii) the right to receive distributions and
allocations with respect to such LLC Interest through the Purchase Closing Date.
For example, this means that the LLC Interests to be purchased shall not have
any voting rights during such period.
(f) In the event of a Change of Control, a Member may send a Put
Notice at any time during the fifteen months following the Change of Control,
and the restrictions of Section 7.2(c)(i), (ii) and (iii) shall not apply to
such Put, in which case the LLC Value shall be determined as of December 31
immediately prior to the date of the Put Notice and the Purchase Closing Date
27
shall be 60 days following delivery of the Put Notice (or the next succeeding
Business Day if such date is not a Business Day).
7.3 Purchase on Occurrence of an Extraordinary Event or a Roxbury
Extraordinary Event; Wilmington Call.
(a) The provisions set forth in Section 7.3(b) shall apply to the
purchase and sale of an LLC Interest of a Principal or a Related Holder of such
Principal following the Principal's (i) death; (ii) Disability; (iii)
Retirement; (iv) termination of employment by the LLC without Cause; (v)
voluntary termination of employment with the LLC for Good Reason; (vi) a
transfer of LLC Interests required by operation of law; or (vii) other
involuntary transfers of an LLC Interest (all hereafter referred to as
"Extraordinary Events"). Notwithstanding anything herein to the contrary, if an
Extraordinary Event occurs that causes or permits a Person to become a Principal
for the first time as a result of accelerated exercisability of vested options
under an Option Agreement, the provisions of this Section 7.3(a) shall be
effective immediately as if such Person were a Principal at the time the
Extraordinary Event occurred. The provisions set forth in Section 7.3(b) shall
also apply to the purchase and sale of all of the LLC Interests held by Roxbury
once the last Founding Principal ceases to serve as an employee of the LLC for
whatever reason, which event shall be deemed a "Roxbury Extraordinary Event."
(b) In the event of an Extraordinary Event or a Roxbury
Extraordinary Event, Wilmington shall be obligated to purchase from such
Principal Entities or Roxbury, as the case may be, and such Principal Entities
or Roxbury, as the case may be, shall be obligated to sell to Wilmington, all of
such Principal Entities' or Roxbury's LLC Interests at a purchase price equal to
the Put Price thereof.
(i) If the Extraordinary Event or Roxbury Extraordinary
Event occurs on or before December 31, 1998, the Purchase Closing Date shall be
April 1, 1999 (or if such day is not a Business Day, the next succeeding
Business Day). On such Purchase Closing Date, Wilmington shall deliver to the
Principal Entities or Roxbury, as the case may be, the Initial Put Price by
certified check or wire transfer of immediately available funds against delivery
of such documents or instruments of transfer transferring the purchased LLC
Interests to Wilmington as may be reasonably requested by Wilmington. In
addition, in the event of an Extraordinary Event or Roxbury Extraordinary Event
that occurs on or before December 31, 1998, on April 3, 2000 (or if such day is
not a Business Day, the next succeeding Business Day), Wilmington shall deliver
to such Principal Entities or Roxbury, as the case may be, the Subsequent Put
Price, if any, by certified check or wire transfer of immediately available
funds.
(ii) If the Extraordinary Event or Roxbury Extraordinary
Event occurs between January 1 and June 30 of any year after 1998, the Purchase
Closing Date under this Section 7.3(b) shall be on April 1 (or if April 1 is not
a Business Day, the next succeeding Business Day) of the year following the year
of the date of the Extraordinary Event or Roxbury Extraordinary Event, at which
time Wilmington shall deliver to such Principal Entities or Roxbury, as the case
may be, the purchase price by certified check or wire transfer of immediately
available funds. If the Extraordinary Event or Roxbury Extraordinary Event
occurs between July 1 and December 31 of any year after 1998, the Purchase
Closing Date under this Section 7.3(b) shall be on April 1 (or if
28
April 1 is not a Business Day, the next succeeding Business Day) of the second
year following the year of the date of the Extraordinary Event or Roxbury
Extraordinary Event, at which time Wilmington shall deliver to such Principal
Entities or Roxbury, as the case may be, the purchase price by certified check
or wire transfer of immediately available funds. With respect to any
Extraordinary Event or Roxbury Extraordinary Event that occurs after December
31, 1998, on a date mutually agreed between Wilmington and the selling Principal
Entities or Roxbury, as the case may be, but in any event not later than 60 days
after the date on which such Extraordinary Event or Roxbury Extraordinary Event
occurs, Wilmington shall deliver to the Principal Entities or Roxbury, as the
case may be, the Advance Payment by certified check or wire transfer of
immediately available funds against delivery of such documents or instruments of
transfer as may be reasonably requested by Wilmington transferring 75% of the
LLC Interests to be purchased pursuant to this Section 7.3(b) to Wilmington. In
addition, on the Purchase Closing Date, such Principal Entities or Roxbury, as
the case may be, shall deliver to Wilmington such documents or instruments of
transfer as may be reasonably requested by Wilmington transferring the remaining
25% of the LLC Interests to be purchased pursuant to this Section 7.3(b) to
Wilmington, and (i) if the Put Price exceeds the Advance Payment, Wilmington
shall deliver to such Principal Entities or Roxbury, as the case may be, the
excess of the Put Price over the Advance Payment by certified check or wire
transfer of immediately available funds, and (ii) if the Advance Payment exceeds
the Put Price, such Principal Entities or Roxbury, as the case may be, shall
deliver to Wilmington the excess of the Advance Payment over the Put Price by
certified check or wire transfer of immediately available funds.
(c) Within 90 days following the termination of a Principal's
employment with the LLC (other than because of an Extraordinary Event),
Wilmington may exercise the right to purchase from such Principal Entities all
or a portion of such Principal Entities' LLC Interests (a "Wilmington Call").
The purchase price for any LLC Interest subject to a Wilmington Call shall be
the Call Price.
(d) A Wilmington Call may be exercised by delivering to each
appropriate Person a written notice signed by Wilmington in substantially the
form of Exhibit E hereto (the "Wilmington Call Notice") stating that it is
exercising the Wilmington Call and any LLC Interest with respect to which the
Wilmington Call is being exercised. On April 1 of the year following the year in
which the Wilmington Call Notice is delivered (or if such April 1 is not a
Business Day, the next succeeding Business Day), each Person whose LLC Interest
is subject to the Wilmington Call shall sell to Wilmington the LLC Interest (or
portion thereof) set forth in the Wilmington Call Notice. At the closing of the
exercise by Wilmington of a Wilmington Call, Wilmington shall deliver the
purchase price by certified check or wire transfer of immediately available
funds against delivery of such documents or instruments of transfer as may be
reasonably requested by Wilmington.
(e) On the last day of the month in which an Extraordinary Event
or a Roxbury Extraordinary Event occurs or in which a Wilmington Call is
exercised, each Person whose LLC Interests have been called or who has
experienced the Roxbury Extraordinary Event or the Extraordinary Event, or his
estate, as the case may be, shall cease to have any rights as a Member with
respect to the LLC Interests being purchased, other than (i) the right to
receive the Advance Payment, the Initial Put Price, the Subsequent Put Price or
the Call Price, as the case may be, and (ii) the right to receive distributions
and allocations with respect to such LLC Interests through the
29
date on which such LLC Interests are transferred to Wilmington. For example,
this means that the LLC Interests to be purchased shall not have any voting
rights during such period.
7.4 LLC Interests Subject to Option Rights. If any LLC Interests
purchased by Wilmington pursuant to Sections 7.2 or 7.3 are subject to the
rights of an individual who has been granted the option to purchase such LLC
Interests pursuant to an Option Agreement, that option holder shall retain all
rights granted by that Option Agreement.
7.5 Substitute Members. Any Transfer of LLC Interests (other than a
transfer by WTI to a Permitted Transferee, a transfer pursuant to this Article 7
or a transfer as a result of the exercise of rights to acquire LLC Interests
under an Option Agreement) shall, nevertheless, not entitle the transferee,
unless already a Member, to become a Member or to be entitled to exercise or
receive any of the rights, powers or benefits of a Member other than the right
to share in such profits and losses, to receive distributions and allocations of
income, gain, loss, deduction, credit or similar item to which the transferor
Member would otherwise be entitled, to the extent assigned, unless the
transferor Member designates, in a written instrument delivered to the Board,
its transferee to become a substitute Member and the Board, in its sole and
absolute discretion, consents to the admission of such transferee as a
Non-voting Member; provided, however, that such transferee shall not become a
substitute Member without having first executed an instrument reasonably
satisfactory to the Board accepting and agreeing to the terms and conditions of
this Agreement, including a counterpart signature page to this Agreement, and
without having paid to the LLC a fee sufficient to cover all reasonable expenses
of the LLC in connection with such transferee's admission as a substitute
Member, and provided further that, upon the admission of such transferee as
provided herein, such admission shall be reflected upon the books and records of
the LLC, including Schedule 1 to this Agreement.
7.6 Recognition of Transfer by LLC. No Transfer of a Member's LLC
Interest, or any part thereof, that is in violation of this Article 7 shall be
valid or effective, and neither the LLC nor the Members shall recognize the same
for the purpose of making distributions pursuant to Articles 6 or 12 hereof with
respect to such transferred LLC Interest or part thereof. Neither the LLC, any
member of the Board nor any Member shall incur any liability as a result of
refusing to make any such distributions to the transferee of any such invalid
Transfer.
7.7 Effective Date of Transfer; Order of Puts, Calls and Purchases Under
Section 7.3(b).
(a) Any valid Transfer of a Member's LLC Interest, or part
thereof, pursuant to Sections 7.1, 7.2, 7.3 or 7.5 shall be effective as of the
close of business on the last day of the calendar month in which such Transfer
occurs. Upon the valid transfer of a Member's LLC Interest, such Person shall
cease to be a Member, and the books and records of the LLC, including Schedule 1
to this Agreement, shall reflect such event.
(b) With respect to Sections 7.2 and 7.3 hereof, the first to
occur of (i) the delivery of a Put Notice under Section 7.2(d) or (f), (ii) the
occurrence of the first Extraordinary Event or Roxbury Extraordinary Event under
Section 7.3(a) or (iii) the delivery of a Wilmington Call Notice under Section
7.3(d), shall govern the rights and obligations of the parties with respect
30
to the Common Interests subject to the Put Notice or the Wilmington Call Notice,
or the Common Interests to be purchased under Section 7.3(b), as the case may
be.
7.8 Indemnification. In the case of a Transfer or attempted Transfer of
an LLC Interest that has not received the consents required by this Article 7,
the parties engaging or attempting to engage in such Transfer shall, to the
fullest extent permitted by law, indemnify and hold harmless the LLC and the
other Members from all costs, liabilities and damages that any of such
indemnified Persons may incur (including, without limitation, incremental tax
liability and lawyers' fees and expenses) as a result of such Transfer or
attempted Transfer and efforts to enforce the indemnity granted hereby.
7.9 Issuance of Additional LLC Interests.
(a) Subject to Sections 5.11, 7.1 and 7.5 hereof, the Board may
admit new Members to the LLC, issue additional LLC Interests and, pursuant to a
written plan adopted and approved by the Board under Section 5.11 (an "Incentive
Plan") issue Common Interests, or grant options to purchase Common Interests. As
a condition to the admission of a new Member, such Member must become a party to
this Agreement by signing a counterpart signature page to this Agreement.
(b) Upon the issuance of additional LLC Interests to a Member, the
LLC shall make the appropriate revisions to Schedule 1 hereto to reflect the
additional LLC Interests issued to the Member and identifying the Member, other
than Roxbury or any entity consolidated with Wilmington for Federal income tax
purposes, as a Principal.
(c) Upon the issuance of additional Common Interests pursuant to
an Incentive Plan or otherwise, the percentage "[ * ]%" set forth in Section
6.3(a)(i)(A) hereof and used to calculate the Preferred Member Revenue Share
shall be reduced in an amount and in a manner agreed to by Members holding a
majority of the outstanding Preferred Membership Points and Members holding a
majority of the outstanding Common Membership Points to reflect the parties'
agreement that any such issuance of Common Interests will dilute the ownership
of the LLC represented by the Preferred Interests as well as the Common
Interests. See an example in Exhibit F.
7.10 Assignment of Wilmington's Rights and Obligations. Wilmington may
assign any or all of its rights and/or delegate any or all of its obligations
under Sections 7.2 and 7.3 hereof to WTC or WTI, provided, that in the case of
any such assignment or delegation, Wilmington shall remain obligated therefor.
8
BOOKS AND RECORDS
8.1 Books, Records and Financial Statements. The Board shall designate
an appropriate employee of the LLC to prepare and maintain, or cause to be
prepared and
* CONFIDENTIAL TREATMENT REQUESTED
31
maintained, the books of account of the LLC. Such books of account and all
financial records of the LLC shall be kept at the LLC's office located at 000
Xxxxxxxx Xxxxxxxxx, Xxxxx 000 Xxxxx Xxxxxx, Xxxxxxxxxx 00000. A Member shall
have the right to examine the books and records of the LLC at a reasonable time
and for purposes reasonably related to the Member's interest as a Member. Such
Person shall also cause the following documents to be transmitted at the times
hereinafter set forth:
(a) to each Member, as soon as available and in any event within
100 days after the end of each Fiscal Year of the LLC, a balance sheet, income
statement, cash flow statement and statement of capital accounts of the LLC as
of the end of such Fiscal Year, all of which shall be audited by the LLC's
accountants;
(b) to each Member, as soon as available and in any event within
30 days after the end of each quarter of each Fiscal Year of the LLC (other than
the fourth quarter), a balance sheet, income statement, cash flow statement and
statement of capital accounts of the LLC as of the end of such quarter;
(c) to each Member, as soon as available from the LLC's
accountants, the annual Federal and state income tax return of the LLC and a
Schedule K-1 indicating its taxable income or loss for such Fiscal Year;
(d) to each Member, ten days prior to the date on which any
Federal or state quarterly estimated tax payments are due, a schedule setting
forth the LLC's estimated taxable income allocable to each Member for such
Fiscal Year; and
(e) to WTI, within 10 Business Days after the end of each quarter,
an estimate of the net income of the LLC for the year-to-date period through the
end of such quarter.
8.2 Accounting Method. All records shall be maintained in accordance
with generally accepted accounting principles in a consistent manner and shall
reflect all LLC transactions and be appropriate and adequate for the LLC's
business.
9
TAX
9.1 Tax Matters Member.
(a) Roxbury is hereby designated as the initial tax matters Member
of the LLC (the "Tax Matters Member") for purposes of Code Section 6231(a)(7)
and shall have the power to manage and control, on behalf of the LLC, any
administrative proceeding at the LLC level with the Internal Revenue Service
relating to the determination of any item of LLC income, gain, loss, deduction
or credit for federal income tax purposes.
(b) The Tax Matters Member shall, within 10 days of the receipt of
any notice from the Internal Revenue Service in any administrative proceeding at
the LLC level relating to the
32
determination of any LLC item of income, gain, loss, deduction or credit, mail a
copy of such notice to each Member.
(c) The Board may at any time hereafter designate a new Tax
Matters Member.
9.2 Section 754 Election. The Board shall make, on behalf of the LLC, an
election in accordance with Code Section 754, so as to adjust the basis of LLC
property in the case of a distribution of property within the meaning of Code
Section 734 and, in the case of a transfer of a LLC interest within the meaning
of Code Section 743. Such election shall be made with respect to the taxable
year of the LLC during which WTI acquired its Preferred Interest from Roxbury.
Each Member shall, upon request of the Board, supply the information necessary
to give effect to such an election. The Board may revoke such election on behalf
of the LLC upon obtaining the required consent of the applicable IRS District
Director and complying with all requirements of the Code and the Treasury
Regulations; provided, however, that no such revocation may be made if it would
have an adverse effect on WTI, WTC or Wilmington without the prior written
consent thereof.
10
LIABILITY, EXCULPATION AND INDEMNIFICATION
10.1 Liability.
(a) Except as otherwise expressly provided in this Article 10 or
in Section 9.1 of the LLC Interest Purchase Agreement, the debts, obligations
and liabilities of the LLC, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the LLC, and no Member
shall be obligated personally for any such debt, obligation or liability of the
LLC solely by reason of being a Member.
(b) Except as otherwise expressly provided in this Article 10 or
in Section 9.1 of the LLC Interest Purchase Agreement, a Member, in his capacity
as such, shall have no liability in excess of (i) the amount of such Member's
capital contributions; (ii) such Member's share of any assets and undistributed
Profits of the LLC; and (iii) the amount of any distributions wrongfully
distributed to such Member.
10.2 Exculpation.
(a) No Officer or Manager shall be liable to the LLC or any Member
for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Officer or Manager in good faith on behalf of the
LLC and in a manner reasonably believed to be within the scope of authority
conferred on such Officer or Manager, except that an Officer or Manager shall be
liable for any such loss, damage or claim incurred by reason of such Officer's
or Manager's bad faith, gross negligence, reckless disregard of his duties
hereunder, willful misconduct or breach of the provisions of this Agreement.
33
(b) An Officer or Manager shall be fully protected in relying in
good faith upon the records of the LLC and upon such information, opinions,
reports or statements presented to the LLC by any person as to matters the
Officer or Manager reasonably believes are within such person's professional or
expert competence and who has been selected with reasonable care by or on behalf
of the LLC (including information, opinions, reports or statements as to the
value and amount of the assets, liabilities, profits, losses or net cash flow or
any other facts pertinent to the existence and amount of assets from which
distributions to Members might properly be paid).
10.3 Indemnification. To the fullest extent permitted by applicable law,
the LLC shall indemnify each of its Officers and Managers for any loss, damage
or claim incurred by any such Officer or Manager by reason of any act or
omission performed or omitted by such Officer or Manager in good faith on behalf
of the LLC and in a manner reasonably believed to be within the scope of
authority conferred on such Officer or Manager by this Agreement, except that no
Officer or Manager shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such Officer or Manager by reason of bad faith,
gross negligence, reckless disregard of his duties hereunder, willful misconduct
or breach of the provisions of this Agreement with respect to such acts or
omissions; provided, however, that (i) any indemnity under this Section 10.3
shall be provided out of and to the extent of LLC assets only, and no Member
shall have any personal liability on account thereof; and (ii) nothing contained
herein shall limit any indemnification or other rights of the LLC or any Member
under the LLC Interest Purchase Agreement or any of the documents referred to or
incorporated therein.
10.4 Expenses. To the fullest extent permitted by applicable law, the LLC
shall advance to an Officer or Manager any expenses (including legal fees)
incurred by such Officer or Manager in defending any claim, demand, action, suit
or proceeding (such advance to be made prior to the final disposition of such
claim, demand, action, suit or proceeding), including, without limitation,
claims, demands, actions, suits or proceedings with respect to which such
Officer or Manager is alleged to have not met the applicable standard of conduct
or is alleged to have acted or failed to act in a manner which, if such
allegations were true, would not entitle such Officer or Manager to
indemnification under this Agreement, upon receipt by the LLC of an undertaking
by or on behalf of such Officer or Manager to repay such amount if it shall be
determined that such Officer or Manager is not entitled to be indemnified as
authorized in Section 10.3 hereof.
11
CERTAIN COVENANTS
11.1 Compliance with Laws; Maintenance.
(a) The LLC and its Subsidiaries shall (and the Board shall cause
the LLC and its Subsidiaries to) comply in all material respects with all laws
and regulations applicable to the LLC and its Subsidiaries, including, without
limitation, all laws and regulations applicable to the LLC and its Subsidiaries
as a registered investment adviser and an Affiliate of a bank or a thrift or
bank holding company.
34
(b) The LLC and its Subsidiaries shall maintain in full force and
effect their limited liability company or other existence, rights and franchises
and all other rights, licenses and registrations owned or possessed by them and
deemed by the LLC to be necessary to the conduct of their respective businesses.
(c) Any options to purchase LLC Interests granted by Roxbury shall
be granted in compliance with all statutes, rules and regulations governing the
issuance of securities.
12
DISSOLUTION, LIQUIDATION AND TERMINATION
12.1 Events Causing Dissolution. The LLC shall be dissolved and its
affairs shall be wound up only upon the occurrence of any of the following
events:
(a) the determination of the Board (subject to Section 5.11
hereof) and the Majority Vote of the Voting Members; or
(b) the entry of a decree of judicial dissolution under Section
18-802 of the Delaware Act.
With the exception of any event set forth in this Section 12.1, the Company
shall not be dissolved by any other event or vote set forth in Section 18-801 of
the Delaware Act.
12.2 Notice of Dissolution. Upon the dissolution of the LLC, the person
or persons appointed to carry out the winding up of the LLC (the "Liquidating
Trustee") shall promptly notify the Members of such dissolution.
12.3 Liquidation.
(a) The proceeds of liquidation shall be distributed, as realized,
in the following order and priority:
(i) to creditors of the LLC, including Members who are
creditors, to the extent otherwise permitted by law, in satisfaction of
the liabilities of the LLC (whether by payment or the making of reasonable
provision for payment thereof), other than liabilities for distributions
to Members; and
(ii) the remaining proceeds of liquidation shall be
distributed among the Members in accordance with their positive Capital
Account balances, after adjusting such Capital Accounts in accordance with
Article 6 for the allocation of Profits or Losses resulting from the
termination and liquidation of the LLC; provided, however, that such
proceeds shall be distributed first to the Preferred Members until they
have received an amount equal to the positive balance of their respective
Capital Accounts (as so adjusted) and then, if there are proceeds
remaining after the distribution to the Preferred Members, to the Common
Members in proportion to their respective positive Capital Account
balances.
35
(b) If the Liquidating Trustee shall determine that it is not
feasible to liquidate all of the assets of the LLC, then the Liquidating Trustee
shall cause the Fair Market Value of the assets not so liquidated to be
determined. Any unrealized appreciation or depreciation with respect to such
assets shall be allocated among the Members in accordance with Article 6 as
though the property were sold for its Fair Market Value and distribution of any
such assets in kind to a Member shall be considered a distribution of an amount
equal to the assets' Fair Market Value for purposes of Article 6 and this
Article 12.
(c) No Member shall have the right to demand or receive property
other than cash upon dissolution and termination of the LLC.
12.4 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 in this Article 12, and the Certificate shall have been canceled in the
manner required by the Delaware Act.
12.5 Claims of the Members. For purposes of this Article 12, the Members
shall look solely to the LLC's assets for the return of their capital
contributions 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, the Members shall have no recourse against
the LLC or any other Member.
13
REPRESENTATIONS AND WARRANTIES
13.1 Representation and Warranties of Roxbury. Roxbury hereby represents
and warrants to the LLC, WTI and Wilmington as follows:
(a) Roxbury is an entity duly organized, validly existing and in
good standing under the laws of California and has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted.
(b) Roxbury has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly approved and authorized by
all necessary corporate action of Roxbury. This Agreement has been duly executed
and delivered by Roxbury and constitutes the legal, valid and binding obligation
of Roxbury, enforceable against it in accordance with its terms.
(c) No approval, authorization, consent, license, clearance or
order of, declaration or notification to, or filing, registration or compliance
with, any governmental or regulatory authority which has not been obtained is
required in order to permit Roxbury to enter into this Agreement or perform its
obligations hereunder.
36
(d) Roxbury has validly assigned to the LLC good title to all of
the assets which have been necessary to, or used in, the conduct of its business
immediately prior to the execution of this Agreement, other than (i) the assets
identified on Schedule 2 as excluded assets and (ii) to the extent consents to
the assignments thereof have not been obtained, investment advisory agreements
with Roxbury's clients. Roxbury warrants that it will not provide investment
advisory services to any client after the date hereof except (i) for the purpose
of closing the relationship with the client and (ii) it may temporarily provide
services to existing clients until such clients consent to the assignment of
their investment advisory agreements to the LLC or terminate their relationship
with Roxbury.
(e) Roxbury will not issue any shares or any type of equitable
interest in Roxbury subsequent to the date hereof.
(f) The options granted pursuant to Option Agreements will be
granted, and the exercises thereof will be made, in compliance with all
applicable federal and state securities laws.
13.2 Representations and Warranties of Principals. Each of the Principals
hereby severally, but not jointly, represents and warrants to WTI, and the LLC
with respect to himself as follows:
(a) Such Principal has full legal capacity and authority to
execute, deliver and perform his obligations under this Agreement. This
Agreement has been duly executed and delivered by such Principal and constitutes
the legal, valid and binding obligation of such Principal enforceable against
him in accordance with its terms.
(b) No approval, authorization, consent, license, clearance or
order of, declaration or notification to, or filing, registration or compliance
with, any government or regulatory authority which has not been obtained is
required to permit such Principal to enter into this Agreement or perform his
obligations hereunder.
(c) The Founding Principals shall also perform their obligations
under the Roxbury Shareholders Agreement.
13.3 Representations and Warranties of Wilmington and WTI. Wilmington and
WTI hereby represent and warrant to Roxbury, the Founding Principals and the LLC
as follows:
(a) WTI is an entity duly organized, validly existing and in good
standing under the laws of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.
(b) WTI has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly approved and authorized by
all necessary corporate action of WTI. This Agreement has been duly executed and
delivered by WTI and constitutes the legal, valid and binding obligation of WTI,
enforceable against WTI in accordance with its terms.
37
(c) No approval, authorization, consent, license, clearance or
order of, declaration or notification to, or filing, registration or compliance
with, any governmental or regulatory authority which has not been obtained is
required in order to permit WTI to enter into this Agreement or perform its
obligations hereunder.
13.4 Representations and Warranties of Wilmington.
(a) Wilmington is an entity duly organized, validly existing and
in good standing under the laws of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted.
(b) Wilmington has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly approved and authorized by
all necessary corporate action of Wilmington. This Agreement has been duly
executed and delivered by Wilmington and constitutes the legal, valid and
binding obligation of Wilmington, enforceable against it in accordance with its
terms.
(c) No approval, authorization, consent, license, clearance or
order of, declaration or notification to, or filing, registration or compliance
with, any governmental or regulatory authority which has not been obtained is
required in order to permit Wilmington to enter into this Agreement or perform
its obligations hereunder.
13.5 Representations and Warranties of All Members.
(a) Each Member represents and warrants to the LLC and the other
Members that the property and other assets which it has contributed to the LLC
on the date hereof are free and clear of all liens, claims, encumbrances and
rights of others.
(b) Each Member hereby represents and warrants to the LLC and each
other Member and acknowledges that (i) he or it has such knowledge and
experience in financial and business matters that he or it is capable of
evaluating the merits and risks of an investment in the LLC and making an
informed investment decision with respect thereto; (ii) he or it is able to bear
the economic and financial risk of an investment in the LLC for an indefinite
period of time; (iii) he or 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; (iv) the LLC Interests 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 or exempt therefrom and the provisions of this Agreement have been complied
with; (v) that, with respect to WTI, Roxbury, and each of the Founding
Principals, he or it is an "accredited investor" within the meaning of Rule
501(a) of Regulation D; and (vi) the execution, delivery and performance of this
Agreement by him or it do not require him or 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 him or it,
or any agreement or instrument to which he or it is a party or by which he or it
is bound.
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14
MISCELLANEOUS
14.1 Amendments. Subject to Section 5.11 hereof and the next succeeding
sentence of this Section 14.1, any amendment to this Agreement shall be adopted
and be effective as an amendment hereto if it is approved by both (a) Common
Members holding at least 80% of the outstanding Common Membership Points and (b)
Preferred Members holding a majority of the outstanding Preferred Membership
Points. Notwithstanding the foregoing, the Board may amend this Agreement,
without the vote or approval of the Members, to (i) reflect a change in the name
of the LLC, (ii) cure any ambiguity or correct or supplement any provision
hereof that may be inconsistent with any other provision hereof, or to correct
any printing, stenographic or clerical errors or omissions and (iii) amend or
restate the Certificate.
14.2 Notices.
(a) All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be sent
as provided below:
(i) If to WTI, Wilmington or WTC, to:
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Xx., Esq.
(ii) If to Roxbury or a Principal, to:
000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
(b) All notices and other communications required or permitted
under this Agreement which are addressed as provided in this Section 14.2, (i)
shall be effective upon delivery if delivered personally against proper receipt
and (ii) shall be effective upon delivery if sent (A) by certified or registered
mail with postage prepaid or (B) by Federal Express or similar courier service
with courier fees paid by the sender. The parties hereto may from time to time
change their respective addresses for the purposes of notices to that party by a
similar notice specifying a new address, but no such change shall be deemed to
have been given unless it has been sent and received as provided in this Section
14.2.
14.3 Waivers. Any waiver of any term or condition or of the breach of any
covenant, representation or warranty of this Agreement in any one instance shall
not operate as or be deemed to be or construed as a further or continuing waiver
of any other breach of such term, condition, covenant, representation or
warranty or any other term, condition, covenant, representation or warranty, nor
shall any failure or delay at any time or times to enforce or require
39
performance of any provision hereof operate as a waiver of or affect in any
manner such party's right at a later time to enforce or require performance of
such provision or of any other provision hereof; provided, however, that no such
waiver, unless, by its own terms, it explicitly provides to the contrary, shall
be construed to effect a continuing waiver of the provision being waived and no
such waiver in any instance shall constitute a waiver in any other instance or
for any other purpose or impair the right of the party against whom such waiver
is claimed in all other instances or for all other purposes to require full
compliance.
14.4 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and, to the extent permitted by this
Agreement, their heirs, legal representatives, successors and assigns.
14.5 Severability. If any provision of this Agreement shall be held by
any court of competent jurisdiction or an Arbitrator to be illegal, invalid, or
unenforceable, such provision shall be construed and enforced as if it had been
more narrowly drawn so as not to be illegal, invalid or unenforceable, and such
illegality, invalidity or unenforceability shall have no effect upon and shall
not impair the enforceability of any other provision of this Agreement.
14.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.7 Governing Law; Arbitration. This Agreement and the rights of the
parties hereunder shall be interpreted in accordance with the laws of the State
of Delaware, and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws. All disputes arising out of or
relating to this Agreement and the matters covered herein shall be decided by
arbitration pursuant to the applicable J.A.M.S./Endispute Comprehensive
Arbitration Rules and Procedures in effect at the time. Among the disputes that
must be submitted to arbitration are those concerning the interpretation,
enforcement or alleged breach of this Agreement, as well as those based on state
and/or federal law. The arbitration shall be held in Los Angeles, California and
the laws of the State of Delaware shall be applied without effect given to that
State's choice of law rules. The decision of the Arbitrator shall be final and
binding on all parties. The prevailing party shall be entitled to recover all
provable damages, consequential or otherwise, in addition to all other remedies
as may be available under this Agreement, at law or in equity. The parties agree
that injunctive or other equitable relief preventing any breach or otherwise
enforcing this Agreement may be ordered by the Arbitrator to the fullest extent
permitted by applicable law. Notwithstanding the foregoing, for emergency
equitable relief (including temporary and preliminary injunctive relief), any
party may petition a state or federal court of competent jurisdiction.
14.8 Captions. The captions in this Agreement are for convenience only
and shall not affect the construction or interpretation of any term or provision
hereof.
14.9 Gender. Whenever used herein, the singular number shall include the
plural, the plural shall include the singular, unless the context otherwise
requires, and the use of any gender shall include all genders.
40
14.10 Third Party Beneficiaries. No Person who is not a party to this
Agreement shall be entitled to any rights or benefits under this Agreement.
14.11 Failure to Pursue Remedies. The failure of any party to seek redress
for violation of, or to insist upon strict performance of, any provision of this
Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
14.12 Cumulative Remedies. 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.
14.13 Integration. This Agreement (as it may from time to time be amended)
constitutes the entire agreement among the parties hereto pertaining to the
subject matter hereof and supersedes all prior agreements and understandings
pertaining thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above stated.
ROXBURY CAPITAL MANAGEMENT
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx X. Xxxxxx, Senior Managing
Director
WT INVESTMENTS, INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------------------
Xxxxx X. Xxxxxx, Senior Vice President
WILMINGTON TRUST CORPORATION
By: /s/ Xxxxx X. Xxxxxx
----------------------------------
Xxxxx X. Xxxxxx, Senior Vice President
/s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxx
----------------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxx
----------------------------------------
Xxxxx X. Xxxxx
41
