LIMITED LIABILITY COMPANY AGREEMENT
OF
XXXXXX INVESTMENTS EMPLOYEES' SECURITIES COMPANY II LLC
Dated as of
June 15, 2001
The undersigned (the "Members,") hereby agree to form and hereby form,
as of the date and year first above written, a limited liability company (the
"Company") pursuant to the provisions of the Delaware Limited Liability Company
Act, which shall be governed by, and operated pursuant to, the terms and
provisions of this Limited Liability Company Agreement (the "Agreement").
ARTICLE I
General Provisions
Section 1.1 Definitions. For the purposes of this Agreement:
(a) "Advisers Act" shall mean the Investment Advisers Act of 1940, as
amended.
(b) "Affiliate" shall have the meaning as set forth in the Investment
Company Act.
(c) "AFR Rate" shall mean the fixed rate of return equal to the
long-term "applicable federal rate" (within the meaning of section 1274(d) of
the Code and the Treasury Regulations thereunder), compounded semi-annually, as
of the date of the first Initial Closing.
(d) "AFR Return" shall have the meaning set forth in Section 4.2(b).
(e) "Agreement" shall have the meaning set forth in the preamble.
(f) "Business Day" shall mean any day other than (i) Saturday or
Sunday and (ii) any other day on which banks located in New York City are
required or authorized by law to remain closed.
(g) "Capital Account" shall have the meaning set forth in Section 3.2.
(h) "Capital Commitment" shall mean, with respect to any Profits
Member, the amount set forth opposite such Member's name and designated as such
in the books of the Company.
(i) "Capital Contribution" shall mean, with respect to the Managing
Member or any Profits Member, the amount contributed to the capital of the
Company pursuant to this Agreement.
(j) "Cause" means misappropriation of assets of Xxxxxx or any
Subsidiary, willful misconduct in the performance of the duties of the Profit
Member's position, refusal to perform the duties of the Profit Member's
position, violation of the Profit Member's Non-Solicitation Agreement or
Confidentiality Agreement or other restrictive covenant with Xxxxxx or any
Subsidiary, violation of the Xxxxxx Code of Ethics, violation of rules and
regulations issued by any regulatory authority, breach of fiduciary duty or
breach of trust, willful violation of an important Xxxxxx policy, conviction of
a felony, imprisonment for any crime, or any other action likely to bring
substantial discredit to Xxxxxx.
(k) "Change in Control of MMC" means the first to occur of the
following events after the date of this Agreement:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended ("Exchange
Act") (other than MMC, any trustee or other fiduciary holding
securities under an employee benefit plan of MMC or any corporation
owned, directly or indirectly, by the stockholders of MMC in
substantially the same proportions as their ownership of stock of
MMC), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of MMC
representing 50% or more of the combined voting power of MMC's then
outstanding voting securities; or
(ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of
MMC (the "MMC Board"), and any new director (other than a director
designated by a person who has entered into an agreement with MMC to
effect a transaction described in clause (i), (iii), or (iv) of this
definition whose election by the MMC Board or nomination for election
by MMC's stockholders was approved by a vote of at least two-
2
thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof; or
(iii) the stockholders of MMC approve a merger or consolidation
of MMC with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of MMC
outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities
of the surviving or parent entity) more than 50% of the combined
voting power of the voting securities of MMC or such surviving or
parent entity outstanding immediately after such a merger or
consolidation or (B) a merger or consolidation effected to implement a
recapitalization of MMC (or similar transaction) in which no "person"
(as hereinabove defined) acquired 50% or more of the combined voting
power of MMC's then outstanding securities; or
(iv) the stockholders of MMC approve a plan of complete
liquidation of MMC or an agreement for the sale or disposition by MMC
of all or substantially all of MMC's assets (or any transaction having
a similar effect).
(l) "Change in Control of Xxxxxx" means the first to occur of the
following events after the date of this Agreement:
(i) MMC approves a plan of complete liquidation of Xxxxxx or a
sale or other disposition of all or substantially all of its assets to
an entity of which MMC holds less than 50% of the voting power of
securities; or
(ii) MMC, together with its subsidiaries, trustees or other
fiduciaries holding securities of Xxxxxx under an employee benefit
plan maintained by MMC or by a subsidiary of MMC, ceases for any
reason (including by reason of a sale or other disposition, including
a spinoff or public offering) to be a beneficial owner of securities
of representing more than 50% of the voting power of the securities of
Xxxxxx.
(m) "Closing" shall mean the Initial Closing and any date as of which
the Managing Member shall admit one or more additional members to the Company.
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(n) "Code" shall have the meaning set forth in Section 2.2(h).
(o) "Company" shall have the meaning set forth in the preamble.
(p) "Confidentiality Agreement" shall mean the Confidentiality
Agreement or any similar agreement or provision in effect from time to time
between the Profits Member and the Managing Member or any of its Affiliates.
(q) "Employee" shall mean a person who is employed by Xxxxxx or any of
its subsidiaries at the time such person receives a Profits Interest in the
Company.
(r) "Fiscal Period" shall mean the period commencing on the Initial
Closing, and thereafter each period commencing on the day immediately following
the last day of the preceding Fiscal Period and ending at the close of business
on the first to occur of (i) December 31 of such period and (ii) any other day
as determined in the sole and absolute discretion of the Managing Member.
(s) "Fiscal Year" shall have the meaning set forth in Section 1.3.
(t) "Indemnified Persons" shall have the meaning set forth in Section
2.7(a).
(u) "Initial Closing" means the first date as of which the Company
receives the initial Capital Contributions from or on behalf of Members.
(v) "Interests" shall mean the interest of a Member in the profits and
losses of the Company, such Member's right to receive distributions of the
Company's assets and all other rights and obligations of such Member under this
Agreement.
(w) "Investment Company Act" shall mean the Investment Company Act of
1940, as amended.
(x) "Majority of the Unaffiliated Interests" means the Members (other
than the Managing Member, its Affiliates, and any member that is not entitled to
vote on or consent to any matter) who, at the time in question, have Capital
Commitments aggregating more than 50% of all Capital Commitments of the Members
(other than the Managing Member, its Affiliates and any member that is not
entitled to vote on or consent to any matter).
(y) "Managing Member" shall have the meaning set forth in Section
1.5(b).
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(z) "Managing Member Capital Commitment" shall have the meaning set
forth in Section 3.1(a).
(aa) "Marketable Securities" shall mean securities that are (i) traded
on an established U.S. national or non-U.S. securities exchange or (ii) reported
through NASDAQ or a comparable established non-U.S. over-the-counter trading
system or (iii) otherwise traded over-the-counter or purchased and sold in
transactions effected pursuant to Rule 144A under the Securities Act of 1933, as
amended ("Securities Act"), in each case that the Managing Member believes are
marketable at a price approximating their value as determined in Section 3.6
within a reasonable period of time and are not subject to restrictions on
transfer under the Securities Act or other applicable securities laws or subject
to contractual restrictions on transfer.
(bb) "Members" shall mean the Managing Member and the Profits Members
set forth on Schedule A hereto.
(cc) "MMC" means Xxxxx & McLennan Companies, Inc., a Delaware
corporation, and any successor thereto.
(dd) "Net Loss" shall mean the net loss of the Company with respect to
a Fiscal Period, as determined for federal income tax purposes, PROVIDED that
such loss shall be decreased by the amount of all income during such period that
is exempt from federal income tax and increased by the amount of all
expenditures made by the Company during such period that are not deductible for
federal income tax purposes and that do not constitute capital expenditures.
(ee) "Net Profit" shall mean the net income of the Company with
respect to a Fiscal Period, as determined for federal income tax purposes,
provided that such income shall be increased by the amount of all income during
such period that is exempt from federal income tax and increased by the amount
of all expenditures made by the Company during such period that are not
deductible for federal income tax purposes and that do not constitute capital
expenditures.
(ff) "Nonrecourse Deductions" shall have the meaning set forth in
Treasury Regulations Section 1.704-2(b)(1).
(gg) "Nonrecourse Liability" shall have the meaning set forth in
Treasury Regulations Section 1.752-1(a)(2).
(hh) "Non-Solicitation Agreement" shall mean the Non-Solicitation
Agreement or any similar agreement or provision in effect from time to time
between the Profits Member and the Managing Member or any of its Affiliates.
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(ii) "Partner Nonrecourse Debt" shall have the meaning set forth in
Treasury Regulations Section 1.704-2(b)(4).
(jj) "Partner Nonrecourse Debt Minimum Gain" shall have the meaning
set forth in Treasury Regulations Section 1.704-2(i)(2).
(kk) "Partner Nonrecourse Deductions" shall have the meaning set forth
in Treasury Regulations Section 1.704-2(i)(1).
(ll) "Partnership Minimum Gain" shall have the meaning set forth in
Treasury Regulations Section 1.704-2(b)(2).
(mm) "Pass-Thru Member" shall have the meaning set forth in Section
8.3.
(nn) "Percentage Interest" shall mean, with respect to a Profits
Member, a fraction, the numerator of which is the amount of such Member's
Capital Commitment and the denominator of which is the sum of all Profits
Members' Capital Commitments.
(oo) "Person" shall mean any natural person, corporation, partnership,
trust, limited liability company or other entity.
(pp) "Portfolio Investment" shall mean any investment made by the
Company, other than a Temporary Investment.
(qq) "Profits Interest" shall mean interest in the Company held by a
Profits Member.
(rr) "Profits Member" shall have the meaning set forth in Section
1.5(a).
(ss) "Xxxxxx" shall mean Xxxxxx Investments LLC, a Delaware Limited
Liability Company, and any successor thereto.
(tt) "Regulatory Allocations" shall have the meaning set forth in
Section 3.3(b).
(uu) "Retirement" shall mean, as to a Profits Member, a termination of
the Profits Member's employment under circumstances that the Committee, as
described in the Xxxxxx Investments LLC Equity Partnership Plan, determines as
qualifying as retirement for purposes hereof and not inconsistent with the
treatment of the Managing Member's other plans.
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(vv) "Special Termination" shall mean termination of a Profits
Member's employment by reason of death, Total Disability or Retirement.
(ww) "Tax Matters Member" shall have the meaning set forth in Section
8.3.
(xx) "Temporary Investments" shall mean investments in (i) cash or
cash equivalents, (ii) marketable direct obligations issued or unconditionally
guaranteed by the United States, or issued by any agency thereof, maturing
within one year from the date of acquisition thereof, (iii) money market
instruments, commercial paper or other short-term debt obligations having at the
date of purchase by the Company the highest or second highest rating obtainable
from either Standard & Poor's Ratings Services or Xxxxx'x Investors Services, or
their respective successors, (iv) interest bearing accounts at a registered
broker-dealer, (v) money market mutual funds, (vi) certificates of deposit
maturing within one year from the date of acquisition thereof issued by
commercial banks incorporated under the laws of the United States or any state
thereof or the District of Columbia, each having at the date of acquisition by
the Company combined capital and surplus of not less than $100 million, (vii)
overnight repurchase agreements with primary Federal Reserve Bank dealers
collateralized by direct U.S. Government obligations, (viii) short- and
medium-term fixed income investments paying interest exempt, in the opinion of
counsel to the issuer thereof, from federal income tax, (ix) pooled investment
funds or accounts that invest only in securities or instruments of the type
described in (i) through (viii).
(yy) "THL Fund V" shall mean the Xxxxxx X. Xxx Equity Fund V, L.P.
(zz) "Total Disability" means, as to any Profits Member, a total
disability within the meaning of any long-term disability plan maintained for
the benefit of the Profits Member or, if the Profits Member is not covered by
such disability plan, then as determined by the Managing Member. A person will
be considered to have terminated employment due to his or her "Total Disability"
on the first day of his or her continuous absence from work on account of the
disability supporting his or her certification as having a Total Disability.
(aaa) "Treasury Regulations" shall mean the income tax regulations
promulgated under the Code, as amended, reformed or otherwise modified from time
to time.
Section 1.2 COMPANY NAME. The Company shall do business under the name
of Xxxxxx Investments Employees' Securities Company II LLC or such other name as
the Managing Member may select from time to time.
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Section 1.3 FISCAL YEAR. The fiscal year of the Company ("Fiscal
Year") shall end on December 31 of each year (or such other day as determined in
the sole and absolute discretion of the Managing Member).
Section 1.4 PRINCIPAL OFFICE. The principal office of the Company
shall be at Xxx Xxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, or such other
place as may from time to time be designated by the Managing Member. The
Managing Member shall give prompt notice of any change to each Member.
Section 1.5 MEMBERS, LIABILITY OF MEMBERS.
(a) The names of all of the Members other than the Managing Member
(the "Profits Members") are set forth in Part II of Schedule A hereto.
(b) The Member who is designated in Part I of Schedule A as the
Managing Member (the "Managing Member") shall be the Managing Member.
(c) Except as may be otherwise provided by the Delaware Limited
Liability Company Act or herein, the debts, obligations and liabilities of the
Company, whether arising in contract, tort or otherwise, shall be solely the
debts, obligations and liabilities of the Company, and the Members shall not be
obligated personally for any such debt, obligation or liability of the Company
solely by reason of being a member of the Company.
Section 1.6 PURPOSES OF COMPANY.
(a) The Company is organized for the purpose of (i) making direct,
side-by-side co-investments, to the extent practicable, with the THL Fund V and
(ii) engaging in all activities and transactions as the Managing Member may deem
reasonably necessary, advisable or incidental in connection therewith,
including, without limitation:
(A) to place record title to, or the right to use, Company
assets in, the name or names of one or more nominees (corporate
or otherwise) or trustees for any purpose convenient or
beneficial to the Company;
(B) to have its business and affairs managed by the Managing
Member, subject to and in accordance with Article II;
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(C) to engage third parties to provide administrative
services to the Company or for any other permissible activity;
and
(D) to engage personnel and employees of the Company, the
Managing Member or its affiliates, whether part-time or
full-time, to engage attorneys, independent auditors or such
other persons as the Managing Member may deem necessary or
advisable, and to do all such other acts as the Managing Member,
or such personnel or employees acting within the scope of
authority granted to them by the Managing Member or this
Agreement, may deem necessary or advisable in connection with
carrying out the business of the Company including, without
limitation, subject to the supervision of the Company, to offer
and sell interests in the Company to prospective investors in
accordance with the Securities Act, as amended or any exemption
thereunder and all applicable state securities or blue sky laws
with such sales charges payable by the Managing Member and to do
all things necessary or appropriate in connection with making
such offers and sales.
Section 1.7 ASSIGNABILITY OF INTEREST.
(a) Except with the express written consent of the Managing Member,
which may be withheld in its sole and absolute discretion, a Profits Member may
not assign, sell, transfer, pledge, hypothecate or otherwise dispose of any of
the attributes of its interest in the Company in whole or in part to any Person.
Any assignment, sale, transfer, pledge, hypothecation or other disposition made
in violation of this Section 1.7 shall be void and of no effect. Furthermore, no
transferee of an Interest shall become a Profits Member except upon admission
pursuant to Section 5.1 upon the consent of the Managing Member which may be
withheld in its sole and absolute discretion.
(b) Without the consent of a Majority of the Unaffiliated Interests,
the Managing Member may not assign, sell, transfer, pledge, hypothecate or
otherwise dispose of any of the attributes of its interest in the Company, as
Managing Member, as a whole or in part, to any Person, unless, immediately prior
to and after such assignment, sale, transfer, pledge, hypothecation or other
disposal, such Person was controlled by the Managing Member or by the Person or
Persons who controlled the Managing Member immediately prior to such
transaction.
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Section 1.8 REGISTERED OFFICE AND AGENT IN DELAWARE. The address of
the Company's registered office in the State of Delaware is 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx, which may be changed by the Managing Member from time to
time in its sole and absolute discretion. The name of its registered agent at
that address is The Corporation Trust Company. The Company may from time to time
have such other place or places of business within or without the State of
Delaware as may be designated by the Managing Member.
ARTICLE II
Management of Company
Section 2.1 MANAGEMENT GENERALLY. The management of the Company shall
be vested exclusively in the Managing Member. The Profits Members shall have no
part in the management of the Company, and shall have no authority or right in
their capacity as Profits Members to act on behalf of the Company in connection
with any matter. Employees of the Company shall have authority to act on behalf
and in the name of the Company to the extent authorized by the Managing Member
acting as the equivalent of the board of directors of a corporation or as
expressly authorized by this Agreement.
Section 2.2 AUTHORITY OF MANAGING MEMBER. The Managing Member shall
have the power by itself on behalf and in the name of the Company to carry out
any and all of the objects and purposes of the Company set forth in Section 1.6
and to perform all acts and enter into and perform all contracts and other
undertakings necessary or advisable or incidental thereto, including, without
limitation, the power to:
(a) exercise with full discretion to purchase, sell and exercise
voting or consent rights with respect to all instruments, investments and other
property in which the Company assets may be invested and otherwise on such terms
and conditions as the Managing Member shall determine, including but not limited
to the power to invest funds held by the Company in Temporary Investments
pending investment in Portfolio Investments, pending distributions or for any
other purpose;
(b) open, maintain and close accounts with brokers, dealers, banks,
currency dealers and others, including the Managing Member and its affiliates,
and issue all instructions and authorizations to entities regarding the purchase
and sale or entering into, as the case may be, of securities, certificates of
deposit, bankers acceptances, agreements for the borrowing and lending of
portfolio securities and other assets, instruments and investments for the
purpose of seeking to achieve the Company purposes as well as to facilitate
capital contributions, distributions,
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withdrawals, the payment of Company expenses and the business and affairs of the
Partnership in general;
(c) open, maintain and close bank accounts and draw checks or other
orders for the payment of monies;
(d) acquire, lease, sell, hold or dispose of any assets, liabilities
or investments in the name or for the account of the Company or enter into any
contract or endorsement in the name or for the account of the Company with
respect to any such assets or investments or in any other manner bind the
Company to acquire, lease, sell, hold or dispose of any such assets or
investments whatsoever on such terms as the Managing Member shall determine and
to otherwise deal in any manner with the assets of the Partnership in accordance
with the purposes of the Managing Member;
(e) borrow money from any source or with any party, upon such terms
and conditions as the Managing Member may deem advisable and proper, to execute
promissory notes, drafts, bills of exchange and other instruments and evidences
of indebtedness and to secure the payment thereof by mortgage, pledge or
assignment of or security interest in all or any part of property then owned or
thereafter acquired by the Company, and refinance, recast, modify or extend any
of the obligations of the Company and the instruments securing those
obligations;
(f) employ, retain, or otherwise secure or enter into contracts,
agreements and other undertakings with persons in connection with the management
and operation of the Company's business, including, without limitation, any
attorneys and accountants, and including, without limitation, contracts,
agreements or other undertakings and transactions with the Managing Member, any
other Member or any person controlling, under common control with or controlled
by the Managing Member or any other Member, all on such terms and for such
consideration as the Managing Member deems advisable; provided, however, that
any such contracts, agreements or other undertakings and transactions with the
Managing Member or any other Member or any person controlling, under common
control with or controlled by the Managing Member or any other Member shall be
on terms and for consideration which are arm's-length and fair to the parties
consistent with the fiduciary standards applicable to the Managing Member and
shall also be subject to the terms of Section 2.5 to the extent applicable;
(g) take any and all action which is permitted under the Delaware
Limited Liability Company Act and which is customary or reasonably related to
the business of the Company;
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(h) make such elections under the Internal Revenue Code of 1986, as
amended (the "Code"), and other relevant tax laws as to the treatment of items
of Company income, gain, loss, deduction and expense, and as to all other
relevant matters, as the Managing Member deems necessary or appropriate,
including, without limitation, the election referred to in Section 754 of the
Code, determination of which items are to be capitalized or treated as current
expenses, and selection of the method of accounting and bookkeeping procedures
to be used by the Company;
(i) bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Company;
(j) deposit, withdraw, invest, pay, retain and distribute the
Company's funds in a manner consistent with the provisions of this Agreement;
(k) cause the Company to carry such indemnification insurance as the
Managing Member deems necessary to protect it and any other individual or entity
entitled to indemnification by the Company pursuant to Section 2.7;
(l) do any and all acts on behalf of the Company, and exercise all
rights and perform all obligations of the Company, with respect to its interest
in any property or any Person, including, without limitation, the voting of
securities, the filing of reports and other documents with governmental
authorities and self-regulatory organizations, participation in arrangements
with creditors, the institution and settlement or compromise of suits and
administrative proceedings and other like or similar matters;
(m) authorize any officer, director, employee or other agent of the
Managing Member or any employee or agent of the Company to act for and on behalf
of the Company in any or all of the foregoing matters and all matters incidental
thereto as fully as if such person were the Managing Member;
(n) create any classes of Members having such relative rights, powers
and duties as may from time to time be established by the Managing Member, so
long as such relative rights, powers and duties do not adversely affect any of
the rights, powers and duties of any Members who are Members at the time of the
creation of such classes, and to amend, without the consent of any of the
Members, the terms and provisions of this Agreement to reflect such relative
rights, powers and duties as are applicable to such classes which have been
created pursuant to this Section 2.2(n).
(o) appoint persons to act as officers of the Company as desirable,
necessary or appropriate; and
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(p) make any determinations required hereunder including but not
limited to determinations of amounts attributable to Portfolio Investments;
amounts not attributable to Portfolio Investments; whether a disposition had
been complete or partial; and amounts credited or debited to each Capital
Account with respect to each Portfolio Investment.
Section 2.3 MEETINGS. There shall be no meetings of the Members unless
called by the Managing Member.
Section 2.4 RELIANCE BY THIRD PARTIES. Persons dealing with the
Company are entitled to rely conclusively upon the certificate of the Managing
Member or any officer to which it delegates authority to the effect that it is
then acting as the Managing Member of one or more classes or such agent with
respect to one or more classes and upon the power and authority of the Managing
Member and any employee or agent of the Managing Member or the Company as herein
set forth.
Section 2.5 ACTIVITIES OF MANAGING MEMBER AND AFFILIATES; CONFLICTS OF
INTEREST.
(a) The Managing Member, its officers, directors, managers, employees
or other agents and agents and employees of the Company shall devote so much of
their time to the affairs of the Company as in their judgment the conduct of the
Company business shall reasonably require and the Managing Member, its officers,
directors, managers, employees or agents and agents and employees of the Company
shall not be obligated to do or perform any act or thing in connection with the
business of the Company not expressly set forth herein. Notwithstanding anything
to the contrary in this Agreement, the officers, directors, managers and
employees of the Managing Member and any Person controlling, under common
control with or controlled by the Managing Member and any employees of the
Company will be permitted to perform similar duties for any entity.
(b) Nothing herein contained shall be deemed to preclude the Managing
Member or its Affiliates, its officers, directors, managers, employees or other
agents or agents of any of them or employees of the Company, from engaging
directly or indirectly in any other business or from directly or indirectly
purchasing, selling or holding securities, options, separate accounts,
investment contracts, commodities, futures, currency, currency units and forward
currency or currency unit contracts or any other asset and any interests therein
for their own accounts or for the account of any other Person, whether as
investment manager, dealer, broker or otherwise. No Member shall, by reason of
being a Member in the Company, have any right to participate in any manner in
any profits or income earned or derived by or accruing to the Managing Member or
its Affiliates, or its officers, directors, manag-
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ers, employees or other agents, from the conduct of any business other than the
business of the Company or from the conduct of any activities for any account
other than that of the Company.
(c) The Managing Member may, in its sole and absolute discretion,
allocate investment opportunities that are appropriate for more than one entity
or account sponsored or managed by the Managing Member or its Affiliates in a
manner determined to be fair to such entities by the Managing Member acting in
good faith in accordance with applicable fiduciary standards. The Managing
Member shall have the right to cause the Company or other entities that the
Company controls or invests in to do business with any other investment
partnership of which the Managing Member is the managing member, general
partner, manager or performs similar functions or entities which such other
partnership controls or invests in, in each case, in its sole and absolute
discretion. The Managing Member shall have the right to cause the Company to
execute trades in securities and other instruments with or through the Managing
Member or any of its affiliates so long as such transactions substantially
comply with all applicable regulatory requirements and represent "best
execution" in the good faith judgment of the Managing Member, taking into
account all factors pertinent to the transaction.
(d) Except as discussed in the offering documents provided to
investors prior to subscribing (as to which consent shall be deemed to have been
given), the Managing Member and its Affiliates may not, acting as principal,
purchase from or sell to the Company any securities unless the Managing Member
shall have disclosed to the Members, prior to completion of such transaction,
the pertinent details thereof and its interest therein and received the consent
of Members holding a Majority of the Unaffiliated Interests. The Managing Member
and its Affiliates may engage in agency cross transactions (as defined for
purposes of the Advisers Act) with the Company if the Managing Member and its
Affiliates comply with all pertinent provisions of such Act and the rules and
regulations thereunder and all other pertinent laws and regulations; provided,
that the Company shall have authority to revoke the foregoing authority by a
resolution adopted by Members holding a Majority of the Unaffiliated Interests.
Section 2.6 EXCULPATION. No Indemnified Person shall be liable to any
Member or the Company for any act or failure to act on behalf of the Company,
unless such act or failure to act resulted from the willful misfeasance, bad
faith or gross negligence of the Indemnified Person. Each Indemnified Person may
consult with counsel and accountants in respect of Company affairs and shall be
fully protected and justified in any action or inaction which is taken in
accordance with the advice or opinion of such counsel or accountants reasonably
selected. Notwithstanding any of the foregoing to the contrary, the provisions
of this Section 2.6 shall not be
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construed so as to relieve (or attempt to relieve) any Indemnified Person of any
liability, to the extent (but only to the extent) that such liability may not be
waived, modified or limited under applicable law, but shall be construed so as
to effectuate the provisions of this Section 2.6 to the fullest extent permitted
by law.
Section 2.7 INDEMNIFICATION OF MANAGING MEMBER AND OTHERS.
(a) The Company, out of its own assets and not out of the assets of
any Member (except as provided in Section 2.7(b) below), shall indemnify and
hold harmless the Managing Member, its Affiliates and any of their respective
officers, directors, managers, members, shareholders, employees or agents,
and/or the legal representatives and any officer, employee or agent of the
Company and any member of any advisory board to the Managing Member or the
Company (herein collectively called the "Indemnified Persons"), to the fullest
extent permitted by law from and against any loss, expense, judgment, settlement
cost, fee and related expenses (including attorneys' fees and expenses), costs
or damages suffered or sustained by reason of being or having been the Managing
Member, an officer, director, member, employee or agent (or a legal
representative or controlling person of) of the Managing Member, or any officer,
employee or agent of the Company or any member of any advisory board to the
Managing Member or the Company, or arising out of or in connection with action
or failure to act on the part of such Indemnified Person unless such act or
failure to act was the result of the willful misfeasance, bad faith or gross
negligence of such Indemnified Person. To the extent that such costs and
expenses are directly attributable to a particular class, such costs and
expenses shall be borne entirely by such class; such costs and expenses not
attributable to any one class will be allocated pro rata. The Company shall,
upon advice of counsel that such Indemnified Person is not likely not to be
entitled to such indemnification, advance to any Indemnified Person reasonable
attorneys' fees and other costs and expenses incurred in connection with the
defense of any action or proceeding which arises out of conduct including any
costs and expenses incurred in enforcing the indemnification under this Section
2.7. The Managing Member hereby agrees and each other Indemnified Person shall
agree in the event that such an advance is made by the Company, it will be
subject to repayment to the extent that it is finally judicially determined that
the Indemnified Person was not entitled to indemnification under this Section
2.7.
(b) Notwithstanding any other provision of this Agreement, the
Managing Member is authorized to take any action that it determines to be
necessary or appropriate to cause the Company or any class of the Company to
comply with any Federal, state, local and foreign withholding requirement with
respect to any payment, allocation, or distribution by the Company to any Member
or other Person. All amounts so withheld, and, in the manner determined by the
Managing Member in its sole and absolute discretion, amounts withheld with
respect to any payment, allo-
15
cation or distribution by any Person to the Company, shall be treated as
distributions under the applicable provisions of this Agreement to the
applicable Members under this Agreement. If any such withholding requirement
with respect to any Member exceeds the amount distributable to such Member under
this Agreement, or if any such withholding requirement was not satisfied with
respect to any item previously allocated, paid or distributed to such Member,
such Member or any successor or assignee with respect to such Member's interest
hereby indemnifies and agrees to hold harmless the other Members and the Company
for such excess amount or such withholding requirement, as the case may be
(including any interest, additions and penalties).
(c) Notwithstanding any of the foregoing to the contrary, the
provisions of this Section 2.7 shall not be construed so as to provide for the
indemnification of any Indemnified Person for any liability to the extent (but
only to the extent) that such indemnification would be in violation of
applicable law or such liability may not be waived, modified or limited under
applicable law, but shall be construed so as to effectuate the provisions of
this Section 2.7 to the fullest extent permitted by law.
Section 2.8 PAYMENT OF COSTS AND EXPENSES.
(a) The Managing Member will be responsible for all legal, accounting,
filing and other out-of-pocket expenses of organizing and raising capital for
the Company.
(b) The Company shall pay all taxes imposed on and payable by the
Company, all investment expenses (i.e., expenses which the Managing Member
reasonably determines to be directly related to the investment of the Company's
assets, such as brokerage and commission expenses, fees and expenses of open and
closed-end funds, margin, premium and interest expenses, fees and disbursements
of transfer agents, registrars, custodians, subcustodians, administrators,
investment advisors, and escrow agents and all other investment related expenses
of any type), and any extraordinary expenses (such as litigation and
indemnification of the Managing Member). The Managing Member shall pay all other
operating expenses of the Company; including all general overhead expenses of
the Company, which includes the rent of the offices which the Managing Member
and Company will occupy, compensation and benefits of the administrative staff
and investment professionals of the Company and the Managing Member, any costs
or expenses of an advisory board to the Company or the Managing Member,
telephones and general purpose office equipment of the Company and the Managing
Member.
16
ARTICLE III
Capital Contributions; Capital Accounts; and Allocations
Section 3.1 CAPITAL COMMITMENTS AND CONTRIBUTIONS.
(a) CAPITAL COMMITMENTS. The Managing Member hereby agrees to make
Capital Contributions in an aggregate amount equal to the sum of all Capital
Commitments of the Profits Members as set forth in the separate subscription
agreements between the Company and each Profits Member (such aggregate amount,
the "Managing Member Capital Commitment").
(b) CAPITAL CONTRIBUTIONS. With respect to each Portfolio Investment,
the Managing Member shall make a Capital Contribution to the Company in an
amount equal to the amount of the capital to be invested in such Portfolio
Investment.
(c) NO THIRD PARTY BENEFICIARIES. The provisions of this Section 3.1
are intended solely to benefit the Company and the Members and, to the fullest
extent permitted by applicable law, shall not be construed as conferring any
benefit upon any creditor of the Company (and no such creditor shall be a third
party beneficiary of this Agreement), and no Member shall have any duty or
obligation to any creditor of the Company to make any contributions to the
Company pursuant to this Section 3.1.
Section 3.2 CAPITAL ACCOUNTS. A capital account (a "Capital Account")
shall be established and maintained on the Company's books with respect to each
Member, in accordance with the provisions of Treasury Regulations Section
1.704-1(b), including the following:
(a) Each Member's Capital Account shall be increased by (i) the amount
of that Member's Capital Contributions, if any; (ii) the amount of Net Profit
(or items thereof) allocated to that Member; and (iii) any other increases
required by the Treasury Regulations.
(b) Each Member's Capital Account shall be decreased by (i) the amount
of Net Loss (or items thereof) allocated to that Member; (ii) the amount of Net
Loss (or items thereof) allocated to that Member; (ii) all cash amounts
distributed to that Member pursuant to this Agreement, other than any amount
required to be treated as a payment for property or services for federal income
tax purposes; (iii) the fair market value of any property distributed in kind to
that Member (net of any liabilities secured by such distributed property that
such Member is considered to as-
17
sume or take subject to for federal income tax purposes); and (iv) any other
decreases required by the Treasury Regulations.
(c) All provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with the Code and Treasury Regulations
thereunder and shall be interpreted and applied in a manner consistent with such
law. The Managing Member shall make any necessary modifications to this Section
3.2 in the event events occur that might otherwise cause this Agreement not to
comply with such law or any changes thereto.
Section 3.3 ALLOCATIONS TO MEMBERS' CAPITAL ACCOUNTS.
(a) GENERAL RULE. Except as otherwise provided in this Agreement, the
Managing Member shall, in its sole and absolute discretion, allocate Net Profit
(and items thereof) and Net Loss (and items thereof) for any Fiscal Year in a
manner that the Managing Member deems necessary or appropriate to effectuate the
intended economic sharing arrangement of the Members as reflected in Article IV.
(b) REGULATORY AND RELATED ALLOCATIONS. Notwithstanding anything
expressed or implied to the contrary in this Agreement, the following special
allocations (the "Regulatory Allocation") shall be made to the Capital Accounts
of the Members in the following order:
(i) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Treasury Regulations Section 1.704-2, if there is a net decrease in
Partnership Minimum Gain during any Fiscal Period, each Member shall
be specially allocated items of Company income and gain for such
Fiscal Period (and, if necessary, subsequent Fiscal Periods) in an
amount equal to such Member's share of the net decrease in such
Partnership Minimum Gain, as determined in accordance with Treasury
Regulations Section 1.7042(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts
required to be allocated to the Members pursuant thereto. The items to
be so allocated shall be determined in accordance with Treasury
Regulations Section 1.7042. This Section 3.3(b)(i) is intended to
comply with the minimum gain chargeback requirement in such Treasury
Regulations and shall be interpreted consistently therewith.
(ii) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Treasury Regulations Section 1.704-2, if there is a net
decrease in Partner Nonrecourse Debt Minimum Gain attributable
18
to Partner Nonrecourse Debt during any Fiscal Period, each Member
shall be specially allocated items of Company income and gain for such
Fiscal Period (and, if necessary, subsequent Fiscal Periods) in an
amount equal to such Member's share, if any, of the net decrease in
Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, as determined in accordance with Treasury
Regulations Section 1.704-2(i). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts
required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Treasury
Regulations Section 1.704-2. This Section 3.3(b)(ii) is intended to
comply with the minimum gain chargeback requirements in such Treasury
Regulations and shall be interpreted consistently therewith.
(iii) NONRECOURSE DEDUCTIONS. Any Nonrecourse Deductions for any
Fiscal Period shall be allocated to the Members in any manner
permitted by the applicable Treasury Regulations.
(iv) PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse
Deductions for any Fiscal Period shall be allocated to the Member who
bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable in accordance with Treasury Regulations Section 1.704-2.
(c) CURATIVE ALLOCATIONS. The Regulatory Allocations are intended to
comply with certain requirements of Treasury Regulations under Section 704 of
the Code. Notwithstanding any other provision of this Article III (other than
the Regulatory Allocations), the Regulatory Allocations shall be taken into
account in allocating other Company items of income, gain, loss, deduction and
expense among the Members so that, to the extent possible, the net amount of
such allocations of other Company items and the Regulatory Allocations shall be
equal to the net amount that would have been allocated to the Members pursuant
to this Section 3.3 if the Regulatory Allocations had not been made.
(d) SECTION 754 ADJUSTMENTS. Pursuant to Treasury Regulation Section
1.7041(b)(2)(iv)(m), to the extent an adjustment to the adjusted tax basis of
any Company asset under Section 734(b) or Section 743(b) of the Code is required
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Members in a manner consistent
19
with the manner in which their Capital Accounts are required to be adjusted
pursuant to such Treasury Regulations.
(e) TRANSFER OF OR CHANGE IN INTERESTS. The Managing Member is
authorized to adopt any convention or combination of conventions likely to be
upheld for federal income tax purposes regarding the allocation and/or special
allocation of items of Company income, gain, loss, deduction and expense with
respect to a newly issued Interest, a transferred Interest and a redeemed
Interest. A transferee of an Interest shall succeed to the Capital Account of
the transferor Member to the extent it relates to the transferred Interest.
(f) CERTAIN EXPENSES. Syndication and organization expenses, as
defined in Section 709 of the Code (and to the extent necessary as determined in
the sole and absolute discretion of the Managing Member, any other items), shall
be allocated to the Capital Account of the Managing Member.
(g) ALLOCATION PERIODS AND UNREALIZED ITEMS. Subject to applicable
Treasury Regulations and other applicable law notwithstanding anything expressed
or implied to the contrary in this Agreement, the Managing Member may, in its
sole and absolute discretion, determine allocations to Capital Accounts based on
an annual, quarterly or other period and/or on realized and unrealized net
increases or net decreases (as the case may be) in fair market value of Company
property.
Section 3.4 TAX ALLOCATIONS.
(a) Items of Company income, gain, loss, deduction and expense shall
be allocated, for federal, state and local income tax purposes, among the
Members in the same manner as the Net Profit (and items thereof) and Net Loss
(and items thereof) of which such items are components were allocated pursuant
to Section 3.3; provided, however, that tax purposes allocations shall be made
in accordance with Section 704(c) of the Code and the Treasury Regulations
promulgated thereunder, to the extent so required thereby.
(b) Allocations pursuant to this Section 3.4 are solely for federal,
state and local income tax purposes and shall not affect, or in any way be taken
into account in computing, any Member's Capital Account or share of Net Profit
(and items thereof) or Net Loss (and items thereof).
(c) The Members are aware of the tax consequences of the allocations
made by this Section 3.4 and hereby agree to be bound by the provisions of this
Section 3.4 in reporting their shares of items of Company income, gain, loss,
deduction and expense.
20
Section 3.5 DETERMINATIONS BY MANAGING MEMBER. All matters concerning
the computation of Capital Accounts, the allocation of Net Profit (and items
thereof) and Net Loss (and items thereof), the allocation of items of Company
income, gain, loss, deduction and expense for tax purposes and the adoption of
any accounting procedures not expressly provided for by the terms of this
Agreement shall be determined by the Managing Member in its sole and absolute
discretion. Such determination shall be final and conclusive as to all the
Members. Notwithstanding anything expressed or implied to the contrary in this
Agreement, in the event the Managing Member shall determine, in its sole and
absolute discretion, that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto, are computed in order to
effectuate the intended economic sharing arrangement of the Members as reflected
in Article IV, the Managing Member may make such modification without the
approval of Profits Members.
Section 3.6 VALUATION. For Capital Account and tax purposes, subject
to the discretion of the Managing Member, Company assets will be valued at their
respective cost bases until sale, disposition or other taxable event. Whenever
valuation of Company assets or net assets is required by this Agreement, the
Managing Member shall determine the fair market value thereof in good faith in
accordance with the following description:
(a) Valuation shall be determined with respect to Marketable
Securities (i) that are primarily traded on a securities exchange, at the
average of their closing sale prices on the principal securities exchange for
which they are traded for the five Business Days immediately preceding and
including the date of determination and the five Business Days after the date of
the determination or, if no sales occurred on any such day, the mean between the
closing "bid" and "asked" prices on such day; and (ii) the principal market for
which is or is deemed to be the over-the-counter market, at the average of their
closing sales prices on each Business Day during such period, as published by
NASDAQ or any similar organization, or if such price is not so published on any
such day, the mean between their closing "bid" and "asked" prices, if available,
on such day, which prices may be obtained from any reputable pricing service,
broker or dealer, and
(b) Valuation shall be determined with respect to all other securities
or other assets or interests in the Company, other than cash and securities, at
the value determined by the Managing Member in good faith considering all
factors, information and data determined to be pertinent.
21
ARTICLE IV
Withdrawals and Distributions of Capital
Section 4.1 WITHDRAWALS AND DISTRIBUTIONS IN GENERAL.(a) No Member
shall have the right to withdraw or demand distributions of any amount in its
Capital Account, except as expressly provided in this Article IV and in Article
VII.
Section 4.2 CURRENT DISTRIBUTIONS OR PLAN.
(a) CASH DISTRIBUTIONS. The Company may make distributions of cash
revenues, reduced, in the sole and absolute discretion of the Managing Member,
by reserves, expenses, fees and taxes, if any, of the Company.
(b) GENERAL DISTRIBUTIONS. Subject to Section 4.4, net proceeds
attributable to the disposition of a Portfolio Investment, together with any
dividends or interest income earned with respect to such Portfolio Investment,
shall be distributed as follows:
(i) 100% to the Managing Member until the cumulative amount
distributed to the Managing Member pursuant to this clause (i) is
equal to the sum of (y) the aggregate Capital Contributions of the
Managing Member used to fund the cost of such Portfolio Investment and
each other Portfolio Investment previously disposed of and (z) such
additional amount as is necessary to provide the Managing Member with
a rate of return on the amount of such Capital Contributions equal to
the AFR Rate on each such Capital Contribution (such sum of clauses
(y) and (z), the "AFR Return"); and
(ii) the remainder to the Profits Members pro rata in accordance
with their respective Capital Commitments.
Section 4.3 DEEMED SALE OF ASSETS. Prior to the dissolution of the
Company, the Managing Member intends generally to avoid making in-kind
distributions of non-marketable securities. For all purposes of this Agreement,
(i) any property (other than United States dollars) that is distributed in kind
to one or more Members with respect to a Fiscal Period (including, without
limitation, any such in-kind property that is distributed upon the dissolution
and winding up of the Company) shall be deemed to have been sold for an amount
of cash equal to its fair market value as determined under Section 3.6, (ii) the
unrealized gain or loss inherent in such property shall be treated as recognized
gain or loss for purposes of determining Net Profit and Net Loss, (iii) such
gain or loss shall be allocated pursuant to Section
22
3.3 for such Fiscal Period and (iv) such in-kind distribution shall be made
after giving effect to such allocation.
Section 4.4 RESTRICTIONS ON DISTRIBUTIONS. The foregoing provisions of
this Article IV to the contrary notwithstanding, no distribution shall be made:
(a) if such distribution would violate any contract or agreement to which the
Company is then a party or any law, rule, regulation, order or directive of any
governmental authority then applicable to the Company; (b) to the extent that
the Managing Member, in its sole and absolute discretion, determines that any
amount otherwise distributable should be retained by the Company to pay, or to
establish a reserve for the payment of, any liability or obligation of the
Company, whether liquidated, fixed, contingent or otherwise; (c) to hedge an
existing investment; or (d) to the extent that the Managing Member, in its sole
and absolute discretion, determines that the cash available to the Company is
insufficient to permit such distribution.
Section 4.5 DEFICIT RESTORATION AND CLAWBACK BY PROFITS MEMBERS.
(a) IN GENERAL. If, as of the date of the dissolution of the Company
(but in any event not later than 90 days after the last day of the Company's
last taxable year), but prior to the application of this Section 4.5, the
aggregate amount distributed pursuant to Article IV and Article VII to the
Managing Member is not sufficient to provide for the AFR Return, each Profits
Member shall, subject to Section 4.5(b), contribute to the Company, an amount
that equals the amount of such shortfall determined by the Managing Member to be
attributable to the Capital Contributions made by the Managing Member that
relate to the Capital Commitment of such Profit Member and the Company shall,
subject to applicable law, distribute such amount to the Managing Member.
(b) CERTAIN TERMINATIONS OF EMPLOYMENT. If a Profits Member forfeits
any portion of his Profits Interest pursuant to Section 6.1, such Profits Member
shall be required to contribute to the Company an amount equal to the product of
(i) the amount determined under Section 4.5(a) and (ii) the percentage
determined under the following table:
Full years since grant of Profits Interest Percentage
Less than 1 0%
1 25%
2 50%
3 75%
4 or more 100%
23
provided that if the Profits Member forfeits his Profits Interest as a result of
a termination of employment for Cause or subsequent violation of the Profit
Member's Non-Solicitation Agreement or Confidentiality Agreement with Xxxxxx,
the percentage shall be 0% (zero).
Section 4.6 EXCUSE OF MEMBERS FROM A PORTFOLIO INVESTMENT. If the
Managing Member, in its sole discretion, determines that it is in the best
interests of the Company, the Members or a portfolio company that one or more
Members should be excused from participating in a Portfolio Investment, the
Managing Member shall modify the terms and provisions of this Article IV as it
determines, in its sole and absolute discretion, to be appropriate and
equitable.
Section 4.7 INTEREST. No interest shall be paid or credited to the
Members with respect to their Capital Contributions, their Capital Accounts or
upon any undistributed funds left on deposit with the Company.
ARTICLE V
Admission of New Members
Section 5.1 ADMISSION OF MEMBERS.
(a) Members will be admitted to the Company (i) as of the Initial
Closing and (ii) at any time after the Initial Closing at the sole and absolute
discretion of the Managing Member, subject only to the condition that each new
Member agrees to be bound by the terms and provisions hereof. Such agreement to
be bound shall be deemed to occur upon admission of such Member, which shall
occur as of the date such person is named in the books and records of the
Company. Such new Members will have the same rights and obligations of all the
Members admitted at the Initial Closing except that such new Members will not
participate in Portfolio Investments made prior to their investment in the
Company. The Managing Member, in its sole and absolute discretion, may at any
time admit or refuse to admit a transferee of an interest as a Member or a
substituted Member, or it may replace a terminated Member under Section 6.1(b)
with a substituted Member. Such agreement to be bound shall be deemed to occur
upon admission of such Member, which shall occur as of the date such person is
named in the books and records of the Company. Such substituted Members will
have the same rights and obligations of all the Members admitted at the Initial
Closing except that such substituted Members will not participate in Portfolio
Investments made prior to their investment in the Company. The Managing Member,
in its sole and absolute discretion, may at any time admit or refuse to admit a
transferee of an interest as a Member or a substitute Mem-
24
ber, or it may replace a terminated Member under Section 6.1(b) with a
substitute Member.
(b) The Managing Member may appoint and admit a new Managing Member
immediately prior to its transfer of its interest if such new Managing Member
satisfies the requirements set forth in Section 1.7(b).
ARTICLE VI
Withdrawal, Termination of Employment, Death, Incompetency
Section 6.1 WITHDRAWAL OF MEMBERS; TERMINATION OF EMPLOYMENT.
(a) A Member shall not have the right to withdraw from the Company
except with the prior written consent of the Managing Member, which consent may
be granted or withheld in its sole and absolute discretion.
(b) If the employment of a Profits Member by the Managing Member or an
Affiliate thereof terminates for any reason other than a Special Termination
prior to the earlier of (i) the eighth anniversary of the date of this Agreement
or (ii) the date of a Change in Control of MMC or a Change in Control of Xxxxxx,
such Profits Member shall forfeit his Profits Interest to the extent described
in Section 6.1(f).
(c) Unless otherwise determined by the Managing Member (such
determination to occur only in individual isolated situations), in the case of
any Special Termination any Profits Interest held by the Member shall be fully
vested as of the date of such termination and shall not be forfeited, subject to
compliance with the terms of any Non-Solicitation or Confidentiality Agreement
with Xxxxxx.
(d) Unless otherwise determined by the Managing Member, in the event
that a Profits Member breaches such Profits Member's Non-Solicitation Agreement
with Xxxxxx, such Profits Member shall: (i) forfeit his Profits Interests to the
extent described in Section 6.1(f) and (ii) be required promptly to repay 50% of
all amounts previously distributed to such Profits Member pursuant to this
Agreement.
(e) Unless otherwise determined by the Managing Member, in the event
that a Profits Member breaches such Profits Member's Confidentiality Agreement
with Xxxxxx, such Profits Member shall forfeit his Profits Interests to the
extent described in Section 6.1(f).
25
(f) Notwithstanding any other term or provision of this Agreement, if
a Profits Member forfeits his interest pursuant to this Section 6.1, (i) such
Profits Member shall have no further right to receive distributions of any kind
from the Company pursuant to this Agreement or to consent to or vote on any
matter requiring the consent or vote of any member of the Company; (ii) such
Profits Member shall continue to have the obligation set forth in Section 4.5;
and (iii) the Managing Member shall receive all distributions that previously
would have been made to such Profits Member. The Managing Member shall have the
right, in its sole and absolute discretion, to cause a Profits Member to forfeit
a portion rather than all of his Profits Interest pursuant to this Section 6.1.
Section 6.2 EFFECT OF DEATH, ETC. The death, disability, incapacity,
incompetency, bankruptcy, insolvency or dissolution of a Member shall not
dissolve the Company or class thereof. The legal representatives, if any, of a
Member shall succeed as assignee to the Member's interest in the Company upon
the death, incapacity, incompetency, bankruptcy, insolvency or dissolution of a
Member, but shall not be admitted as a substituted member without the consent of
the Managing Member in its sole and absolute discretion.
Section 6.3 LIMITATIONS ON WITHDRAWAL OF CAPITAL ACCOUNTS. The right
of any Member or the legal representatives of such Member to have distributed
any of such Member's Capital Accounts pursuant to this Article VI is subject to
the provision by the Managing Member for all Company liabilities in accordance
the Delaware Limited Liability Company Act, and for reserves for contingencies
established by the Managing Member in good faith.
Section 6.4 WITHDRAWAL, REMOVAL OR REPLACEMENT OF MANAGING MEMBER. The
Managing Member may resign or withdraw effective at any time upon 30 days' prior
written notice to the Members. The Profits Members shall have no right to remove
or replace the Managing Member or to continue the Company upon the resignation,
withdrawal, bankruptcy or insolvency of the Managing Member.
ARTICLE VII
Duration and Termination of Company
Section 7.1 DURATION. The term of the Company will be unlimited unless
terminated in accordance with the Delaware Limited Liability Company Act. There
shall be a dissolution of a class of the Company and its affairs shall be wound
up upon the first to occur of any of the following events:
26
(i) The termination or liquidation of the THL Fund V, subject to
extension in the sole discretion of the Managing Member; or
(ii) The withdrawal or dissolution and commencement of winding up
of the Managing Member, or the assignment by the Managing Member of
its entire interest in the Company in contravention of this Agreement,
or the occurrence of any other event that causes the Managing Member
to cease to be a managing member of the Company under the Delaware
Limited Liability Company Act unless, within 90 calendar days after
the occurrence of such event, a substitute managing member is
appointed by the Managing Member effective as of such event; or
(iii) A decision, made by the Managing Member in its sole and
absolute discretion, to dissolve the Company; or
(iv) The entry of a decree of judicial dissolution.
Section 7.2 TERMINATION. On termination of the business of the
Company, the Managing Member shall, within no more than 30 days after completion
of a final audit of the Company's books and records (which shall be performed
within 90 days of such termination), make distributions, out of Company assets
in the following manner and order:
(a) to payment and discharge of the claims of all creditors of the
Company who are not Members;
(b) to payment and discharge of the claims of all creditors of the
Company who are Members;
(c) to the Members or their respective legal representatives in
accordance with the positive balances in their respective Capital Accounts,
after taking into account all adjustments to Capital Accounts for all periods.
ARTICLE VIII
Accounting, Tax Returns; Reports to Members
Section 8.1 ACCOUNTING.
(a) The books and records of the Company shall be kept on the cash
basis or the accrual basis, as determined by the Managing Member in its sole
27
and absolute discretion. The Company shall report its operations for tax
purposes on the cash method or the accrual method, as determined by the Managing
Member in its sole and absolute discretion. The taxable year of the Company
shall be the calendar year, unless the Managing Member shall designate another
taxable year for the Company that is a permissible taxable year under the Code.
(b) The books and records of the Company shall be audited by
independent certified accountants selected by the Managing Member, as of the end
of each Fiscal Year.
Section 8.2 FILING OF TAX RETURNS. The appropriate officers of the
Company shall prepare and file, or cause the Company's accountants to prepare
and file, a federal information tax return and any required state and local
income tax and information returns for each taxable year of the Company. The
Managing Member has sole and absolute discretion as to whether or not to prepare
and file (or cause its accountants to prepare and file) composite, group or
similar state, local and foreign tax returns on behalf of the Members where and
to the extent permissible under applicable law. Each Member hereby agrees to
execute any relevant documents (including a power of attorney authorizing such a
filing), to furnish any relevant information and otherwise to do anything
necessary in order to facilitate any such composite, group or similar filing.
Any taxes paid by the Company in connection with any such composite, group or
similar filing shall be treated as an advance to the relevant Members (with
interest being charged thereon) and shall be recouped by the Company out of any
distributions subsequently made to such relevant Members. Such advances may be
funded by Company borrowing. Both the deduction for interest payable by the
Company with respect to any such borrowing, and the corresponding income from
interest received by the Company from the relevant Members, shall be
specifically allocated to such Members. The books and records of the Company
shall be audited by independent certified accountants selected by the Managing
Member, as of the end of each Fiscal Year.
Section 8.3 TAX MATTERS MEMBER. The Managing Member shall be
designated as the tax matters partner for the Company (the "Tax Matters Member")
as provided in Section 6231(a)(7) of the Code. Each Person (for purposes of this
Section 8.3, called a "PassThru Member") that holds or controls an Interest on
behalf of, or for the benefit of another Person or Persons, or which PassThru
Member is beneficially owned (directly or indirectly) by another Person or
Persons shall, within 30 days following receipt from the Tax Matters Member of a
notice or document, convey such notice or other document in writing to all
holders of beneficial interests in the Company holding such interest through
such PassThru Member. In the event that the Company shall be the subject of an
income tax audit by any federal, state or local authority, to the extent such
class of the Company is treated as an entity for
28
purposes of such audit, including administrative settlement and judicial review,
the Tax Matters Member shall be authorized to act for, and its decision shall be
final and binding upon, the Company and each Member. All expenses incurred in
connection with any such audit, investigation, settlement or review shall be
borne by the Company.
Section 8.4 ANNUAL REPORTS TO MEMBERS. Within 90 days after the end of
each Fiscal Year (or as soon thereafter as practicable), the Company shall
prepare and mail to each Person who was a Member during such Fiscal Year, or
shall cause others to do so, a financial report setting forth the following:
(a) a balance sheet of the Company as of the close of such Fiscal
Year; and
(b) a statement showing the Net Income or Net Loss for such Fiscal
Year in reasonable detail.
The financial report for the Company for each Fiscal Year shall be
accompanied by the report thereon of the independent accountants selected by the
Managing Member and a statement, addressed separately to each Member, of the
amount of each of the Capital Accounts of such Member as of the close of such
Fiscal Year. The Company shall not be required to provide to any Member in
writing any listing of its assets or liabilities or any portion thereof.
Section 8.5 TAX INFORMATION. Within 90 days after the end of each
taxable year of the Company or as soon thereafter as practicable, the Company
shall prepare and distribute to each Member and, to the extent necessary each
former Member (or such Member's legal representatives), at the expense of the
Company, a report setting forth in sufficient detail such information as shall
enable such Member or former Member (or such Member's legal representatives) to
prepare its respective federal, state and local income tax returns in accordance
with the laws, rules and regulations then prevailing. The Company shall also
provide Schedules K-1 to Members as soon as practicable after the end of each
taxable year of the Company.
ARTICLE IX
Miscellaneous
Section 9.1 GENERAL. This Agreement: (i) shall be binding on the
executors, administrators, estates, heirs, and legal successors and
representatives of the Members; and (ii) may be executed, through the use of
separate signature pages or in any number of counterparts with the same effect
as if the parties executing such counterparts had all executed one counterpart;
provided, however, that each such
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counterpart shall have been executed by the Managing Member and that the
counterparts, in the aggregate, shall have been signed by all of the Members.
Section 9.2 POWER OF ATTORNEY. Each of the Members hereby appoints the
Managing Member, or any of its officers, if any, (and any substitute or
successor managing member or any officer thereof or of the Company) each acting
individually, as the true and lawful representative of such Member and
attorney-in-fact, in such Member's name, place and stead:
(a) to receive and pay over to the Company on behalf of such Member,
to the extent set forth in this Agreement, all funds received hereunder;
(b) to complete or correct, on behalf of such Member and in accordance
with such Member's instructions, all documents to be executed by such Member in
connection with such Member's subscription for an interest in the Company,
including, without limitation, filling in or amending amounts, dates, and other
pertinent information; and
(c) to make, execute, sign, acknowledge, swear to and file: (i) a
Certificate of Limited Company of the Company and all amendments thereto as may
be required under the Delaware Limited Liability Company Act including, without
limitation, any such filing for the purpose of admitting the undersigned and
others as Members and describing their initial or any increased Capital
Contributions; (ii) any and all instruments, certificates, and other documents
which may be deemed necessary or desirable to effect the winding-up and
termination of the Company (including, but not limited to, a Certificate of
Cancellation of the Certificate of Limited Liability Company); (iii) any
business certificate, fictitious name certificate, amendment thereto, or other
instrument, agreement or document of any kind necessary or desirable to
accomplish the business, purpose and objectives of the Company, or required by
any applicable federal, state or local law; (iv) any counterparts of this
Agreement and any amendments to which such Member is a signatory which have been
adopted as provided in this Agreement; (v) any amendments to any such amendments
(as provided in this Agreement); and (vi) all other filings with agencies of the
federal government, of any state or local government, or of any other
jurisdiction, which the Managing Member considers necessary or desirable to
carry out the purposes of this Agreement, and the business of the Company.
The power of attorney hereby granted by each of the Members is coupled
with an interest, is irrevocable, shall survive the transfer of the Member's
interest in the Company and shall survive, and shall not be affected by, the
subsequent death, disability, incapacity, incompetency, termination, bankruptcy,
insolvency or dissolution of such Member.
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Such representative and attorney-in-fact shall not have any right,
power or authority to amend or modify this Agreement when acting in such
capacity.
Section 9.3 AMENDMENTS TO AGREEMENT. The terms and provisions of this
Agreement may be modified or amended at any time and from time to time (i)(A)
with the written consent of Members holding a Majority of the Unaffiliated
Interests or (B) by notice mailed to the address of record of each Member which
is not objected to in writing within 30 days of mailing by Members holding a
Majority of the Unaffiliated Interests and (ii) with the written consent of the
Managing Member; provided, however, that without the consent of the Members the
Managing Member may amend the Agreement or the Schedule hereto to (i) reflect
changes validly made in the membership of the Company and the Capital
Contributions of the Members; (ii) reflect a change in the name of the Company;
(iii) make a change that is necessary or, in the opinion of the Managing Member,
advisable to qualify the Company as a limited liability company in which the
Members have limited liability under the laws of any state, or ensure that the
Company will not be treated as an association taxable as a corporation for
federal income tax purposes; (iv) make a change that does not adversely affect
the Members in any material respect; (v) make a change that is necessary or
desirable to cure any ambiguity or mistake, or to correct or supplement any
provision in this Agreement that would be inconsistent with any other provision
in this Agreement or that is necessary or desirable to satisfy any requirements,
conditions or guidelines contained in any opinion, directive, order, ruling or
regulation of any federal or state statute, so long as such change is made in a
manner which minimizes any adverse effect on the Members; or that is required or
contemplated by this Agreement; (vi) make a change in any provision of this
Agreement that requires any action to be taken by or on behalf of the Managing
Member or the Company pursuant to the requirements of applicable Delaware law if
the provisions of applicable Delaware law are amended, modified or revoked so
that the taking of such action is no longer required; (vii) prevent the Company
or the Managing Member from in any manner being (A) deemed an "investment
company" subject to registration and regulation under the provisions of the
Investment Company Act, (B) treated as a "publicly traded partnership" for
purposes of Section 7704 of the Code, or (C) subject to federal income tax as an
association taxable as a corporation; or (viii) make any amendment necessary to
give effect to the terms of, and amendments agreed to by investors in THL Fund
V; or (ix) make any other amendments similar to the foregoing. To the extent an
amendment relates to particular classes only those classes affected shall vote
thereon, with such determination to be made by the Managing Member in its sole
discretion. The same voting procedures shall apply to class specific amendments
as above. Each affected Member, however, must consent to any amendment which
would (a) reduce such Member's Capital Account or rights of contribution or
withdrawal; (b) reduce the protections provided by this sentence and the
following sentence to such Member; (c) result in the Company being treated as an
31
association taxable as a corporation for federal income tax purposes; (d) reduce
the right of such Member to share in the profits of the Company; or (e) increase
such Member's liability with respect to losses and expenses of the Company.
Notwithstanding any provision in this Agreement to the contrary, no amendment to
this Agreement shall increase the liability of a Member without such Member's
consent.
Section 9.4 CHOICE OF LAW. Notwithstanding the place where this
Agreement may be executed by any of the parties thereto, the parties expressly
agree that all the terms and provisions hereof shall be construed under the laws
of the State of Delaware and, without limitation thereof, that the Delaware
Limited Liability Company Act as now adopted or as may be hereafter amended
shall govern the limited liability company aspects of the Agreement.
Section 9.5 SURVIVAL. All indemnities and reimbursement obligations
made pursuant to this Agreement shall survive dissolution and liquidation of the
Company until expiration of the longest applicable statute of limitations
(including extensions and waivers) with respect to the matter for which a party
would be entitled to be indemnified or reimbursed, as the case may be.
Section 9.6 NOTICES. Each notice relating to this Agreement shall be
in writing and delivered in person, by facsimile, by courier, Federal Express or
similar delivery service or by registered or certified mail. The receipt of any
notice transmitted by facsimile must be confirmed by any means acceptable in the
preceding sentence to be effective, provided, however, that such a confirmation
does not, in turn, have to be confirmed. All notices to the Company shall be
addressed to its principal office and place of business. All notices addressed
to a Member shall be addressed to such Member at the address provided to the
Company by such Member and set forth in the books and records of the Company.
Any Member may designate a new address by notice to that effect given to the
Company. Unless otherwise specifically provided in this Agreement, a notice
shall be deemed to have been effectively given when faxed or mailed by
registered or certified mail to the proper address, the Business Day after
deposit with an overnight courier or when delivered in person.
Section 9.7 GOODWILL. No value shall be placed on the name or goodwill
of the Company, which shall belong exclusively to the Managing Member.
Section 9.8 HEADINGS. The titles of the Articles and the headings of
the Sections of this Agreement are for convenience of reference only, and are
not to be considered in constructing the terms and provisions of this Agreement.
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Section 9.9 CONSTRUCTION AND INTERPRETATION. If any question should
arise with respect to the operation of the Company, which is not otherwise
specifically provided for in this Agreement, or with respect to the
interpretation of this Agreement, the Managing Member is hereby authorized to
make a final determination with respect to any such question and to interpret
this agreement in such a manner as it shall deem fair and equitable, and its
determination and interpretations so made shall be final and binding on all
parties. Whenever possible, the provisions of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be unenforceable or invalid under
said applicable law, such provision shall be ineffective only to the extent of
such unenforceability or invalidity, and the remaining provisions of this
Agreement shall continue to be binding and in full force and effect.
Section 9.10 CONFIDENTIALITY. No Member shall have the right to
inspect the books and records of the Company with respect to another Member's
Capital Account. Nothing in this Section 9.10 shall prevent a Member from
inspecting the books and records with respect to the Member's own Capital
Account.
Section 9.11 CONSENT TO JURISDICTION. All Members expressly agree that
all disputes hereunder with respect to the Company's interpretation of this
Agreement or any other matters related to the Company or this Agreement shall be
brought in the Court of Chancery, New Castle County, Delaware.
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IN WITNESS WHEREOF, the undersigned have hereunto set their
hands as of the date first set forth above.
MANAGING MEMBER: PROFITS MEMBER:
------------------------------------
Xxxxxx Investment Holdings, LLC Signature of Profits Member
By: ------------------------------------
-------------------------------------- Print Name of Profits Member
Name:
------------------------------------
Title:
-----------------------------------
34
Xxxxxx Investments Employees' Securities Company II LLC
SCHEDULE A
Dated: June 15, 2001
Part I
MANAGING MEMBER
Amount of Capital Total Capital
Name and Address Commitment Contributions
Xxxxxx Investment Holdings, LLC
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
PART II
PROFITS MEMBERS
Name and Address
[See attached Schedule]
