1
EXHIBIT 4
AGREEMENT ESTABLISHING
GIDWITZ FAMILY PARTNERSHIP
THIS AGREEMENT OF PARTNERSHIP made and entered into as of the 1st day
of April, 1991, by and among each of the separate parties subscribing hereto
(which parties are sometimes hereinafter collectively referred to as "Partners"
or individually referred to as a "Partner").
R E C I T A L S:
WHEREAS, the Partners are all holders of Class B Common Stock (the
"Stock") of Xxxxxx Xxxxxx Industries, Inc., a Delaware corporation ("HCI");
WHEREAS, the Partners have determined that it is in their mutual best
interests to consolidate the decision-making with respect to the Stock;
WHEREAS, the Partners have determined that it is in their mutual best
interests to maintain control of the transfer of the Stock for the benefit of
the Partners;
WHEREAS, the Partners desire to form a general partnership pursuant to
the Uniform Partnership Act of the State of Illinois for the purposes set forth
above and to conduct business as hereinafter set forth.
2
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the Partners agree as follows:
A G R E E M E N T
1. Definitions.
1.1 Adjusted Capital Account Deficit. "Adjusted Capital Account
Deficit" means, with respect to any Partner, the deficit balance, if any, in
such Partner's Capital Account as of the end of the relevant fiscal year, after
giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such
Partner is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Sections 1.704-1(b)(4)(iv)(f) and
1.704-1T(b)(4)(iv)(h)(5) of the Regulations; and
(b) 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 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 Regulations and
shall be interpreted consistently therewith.
1.2 Agreement. "Agreement" means this Agreement Establishing
Gidwitz Family Partnership as amended from time to time.
2
3
1.3 Applicable Federal Rate. "Applicable Federal Rate" means the
appropriate rate of interest for similar obligations, then in effect, as
announced by the United States Department of the Treasury pursuant to Section
1274(d) of the Code.
1.4 Capital Account. "Capital Account" means, with respect to any
Partner, the Capital Account maintained for such Partner in accordance with the
following provisions:
(a) To each Partner's Capital Account there shall be credited
the amount of cash and the Gross Asset Value of any property
contributed by such Partner, such Partner's distributive share of
Profits and any items in the nature of income or gain which are
specially allocated to such Partner pursuant to Section 6.2 hereof,
and the amount of any Partnership liabilities assumed by such Partner
or which are secured by any property distributed to such Partner.
(b) To each Partner's Capital Account there shall be debited
the amount of cash and the Gross Asset Value of any property
distributed to such Partner pursuant to any provision of this
Agreement, such Partner's distributive share of Losses and any items
in the nature of expenses or losses which are specially allocated to
such Partner pursuant to Section 6.2 hereof, and the amount of any
liabilities of such Partner assumed by the Partnership or which are
secured by any property contributed by such Partner to the
Partnership.
(c) In the event all or a portion of an interest in the
Partnership is transferred in accordance with the terms of
3
4
this Agreement, the transferee shall succeed to the Capital Account
of the transferor to the extent it relates to the transferred interest.
(d) In determining the amount of any liability for purposes of
Section 1.4(a) and 1.4(b) hereof, there shall be taken into account
Section 752(c) of the Code and any other applicable provisions of the
Code and Regulations.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Section 1.704-1
(b) of the Regulations, and shall be interpreted and applied in a manner
consistent with such Regulations, it being the intention of the Partners to
maintain the Partners' Capital Accounts in accordance therewith.
1.5 Class A Partners. "Class A Partners" means those parties
listed as Class A Partners on Exhibit A attached hereto and hereby incorporated
by this reference, as said exhibit may be revised from time to time by the
Managing Partners.
1.6 Class B Partners. "Class B Partners" means those parties
listed as Class B Partners on Exhibit A attached hereto, as said exhibit may be
revised from time to time by the Managing Partners.
1.7 Code. "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
1.8 First Option. "First Option" means the rights and obligations
contemplated in Section 9.5 hereof.
4
5
1.9 Gross Asset Value. "Gross Asset Value" means, with respect to
any asset, the asset's adjusted basis for federal income tax purposes, except
as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of
such asset, as determined by the contributing Partner and the
Partnership;
(b) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as
determined by the Managing Partners, as of the following times: (1)
the acquisition of an additional interest in the Partnership by any
new or existing partner in exchange for more than a de minimis capital
contribution; (2) the distribution by the Partnership to a Partner of
more than a de minimis amount of Partnership property as consideration
for an interest in the Partnership if the Managing Partners reasonably
determine that such adjustment is necessary or appropriate to reflect
the relative economic interests of the Partners in the Partnership;
and (3) the liquidation of the Partnership within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Regulations;
(c) The Gross Asset Value of any Partnership asset distributed
to any Partner shall be the gross fair market value of such asset on
the date of distribution; and
(d) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the
5
6
adjusted basis of such assets pursuant to either Section 734(b)
or Section 743(b) of the Code, 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 Regulations; provided,
however, that Gross Asset Values shall not be adjusted pursuant to
this Section 1.9(d) to the extent the Managing Partners determine that
an adjustment pursuant to Section 1.9(b) above is necessary or
appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this Section 1.9(d).
1.10 Net Cash Flow. "Net Cash Flow" for any fiscal year means the
excess, if any, of:
(a) The sum of (i) all cash receipts from all sources for such
period but excluding Sale Proceeds as defined herein, and (ii) all
cash reserves at the beginning of such period; over
(b) The sum of (i) all cash expenses paid during such period,
(ii) the amount of all payments of principal on account of any
indebtedness of the Partnership or amounts due (including interest) on
such indebtedness during such period (including repayment of advances
made by the Partners pursuant to Section 7.8 hereof), (iii) cash
payments made for acquisitions and other capitalized expenditures
during such period, and (iv) such cash reserves as of the last day of
such period as the Managing Partners in their sole discretion deem
necessary to provide for the continuing conduct of the
6
7
business of the Partnership and reasonable reserves for
maturing obligations.
1.11 Offer Price. "Offer Price" means the aggregate cash price
in a Written Offer to purchase the interest (or any part thereof) in the
Partnership of any Transferor Partner, without regard to any stated interest
and discounted by the amount of (a) the total unstated interest, if any,
calculated in the manner provided in Section 483(b) of the Code without regard
to Section 483(d) of the Code or (b) the imputed interest calculated in the
manner provided in Section 1274 or Section 1274A of the Code, as the case
may be.
1.12 Partnership Percentages. "Partnership Percentages" means each
Partners's proportionate ownership interest in the Partnership, as reflected on
Exhibit A attached hereto and as such interest may be adjusted from time to
time by the admission or withdrawal of a Partner, upon the acquisition of an
additional interest by a Partner or a distribution to a Partner, or otherwise.
1.13 Partnership Value. "Partnership Value" means an amount equal
to eighty percent (80%) of the fair market value of the Stock owned by the
Partnership, plus any cash on hand and the fair market value of any other
assets of the Partnership, less the liabilities of the Partnership,
all as determined by the Managing Partners, calculated as of the
date notice of intent to Transfer is given under Section 9.4 hereof.
7
8
1.14 Permitted Transferee. "Permitted Transferee" has the same
meaning as that term has in Section E of Article Four of the HCI Certificate of
Incorporation, as amended from time to time.
1.15 Profits and Losses. "Profits" and "Losses" means, for each
fiscal year or other period, an amount equal to the Partnership's taxable income
or loss for such year or period, determined in accordance with Section 703(a)
of the Code (for this purpose, all items of income, gain, loss, or deduction
required to be stated separately pursuant to Section 703(a)(1) of the Code
shall be included in taxable income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from
federal income tax and not otherwise taken into account in computing
Profits or Losses pursuant to this Section 1.15 shall be added to such
taxable income or loss;
(b) Any expenditures of the Partnership described in
Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B)
expenditures pursuant to Section 1.704-1(b)(2)(iv)(1) of the
Regulations, and not otherwise taken into account in computing Profits
or Losses pursuant to this Section 1.15 shall be subtracted from such
taxable income or loss;
(c) In the event the Gross Asset Value of any Partnership
asset is adjusted pursuant to Section 1.9(b) or Section 1.9(d) hereof,
the amount of such adjustment shall be
8
9
taken into account as gain or loss from the disposition of such asset
for purposes of computing Profits and Losses;
(d) 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 Gross Asset Value
of the property disposed of, notwithstanding that the adjusted tax
basis of such property differs from its Gross Asset Value; and
(e) If the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of any
period, in lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing taxable income or
loss, there shall be taken into account depreciation, amortization or
other cost recovery which bears the same ratio to such beginning Gross
Asset Value as the federal income tax depreciation, amortization or
cost recovery for such period bears to the beginning adjusted tax
basis.
1.16 Regulations. "Regulations" means the regulations issued by the
United States Department of Treasury with respect to the Code, as amended from
time to time.
1.17 Sale Proceeds. "Sale Proceeds" means the net proceeds received
by the Partnership on account of any sale of all or any portion of the
Partnership's property, including deferred proceeds and the interest thereon,
to the extent not applied or to be applied to the reduction of Partnership
indebtedness (including
9
10
advances made by the Partners pursuant to Section 7.8 hereof) or to be retained
by the Partnership in the sole discretion of the Managing Partners, or for any
other purpose permitted under this Agreement.
1.18 Second Option. "Second Option" means the rights and
obligations contemplated in Section 9.6 hereof.
1.19 Transfer. "Transfer" means any conveyance of an interest in
the Partnership, including but not limited to sale, assignment, gift, bequest,
appointment, pledge, hypothecation or grant of a security interest, or a
withdrawal of a Partner from the Partnership.
1.20 Transferor Partner. "Transferor Partner" means any Partner who
gives notice of intent to Transfer pursuant to Section 9.4 hereof.
1.21 Transfer Price. "Transfer Price" means an amount equal to the
Partnership Value multiplied by the Transferor Partner's Partnership
Percentage, calculated as of the date notice of intent to Transfer is given
under Section 9.4 hereof.
1.22 Written Offer. "Written Offer" means a bona fide written
offer, made by a Permitted Transferee, to purchase all or a portion of a
Transferor Partner's interest in the Partnership, setting forth all material
terms and conditions of such offer.
2. Formation, Name and Office.
2.1 Formation and Name. The Partners hereby form a general
partnership pursuant to the Uniform Partnership Act of the State of
1O
11
Illinois. The name of the partnership is "Gidwitz Family Partnership" or such
other name as the Managing Partners may, from time to time, designate.
Concurrently with the execution of this Agreement, the Partners shall execute
such fictitious name certificate or other similar certificate and immediately
thereafter cause same to be filed or recorded in the appropriate office of Xxxx
County, Illinois and published, all as required by law.
2.2 Place of Business. The principal place of business of the
Partnership shall be located at 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx or
such other place or places, in the State of Illinois, as the Managing Partners
may hereafter determine.
3. Purpose and Property.
3.1 Purpose. The purpose of the Partnership shall be the business
of making, protecting, enhancing and otherwise dealing with investments of all
types, such investments to include, but not be limited to, the buying and
selling of securities of all types (including, but not limited to, common and
preferred stock, put and call options, convertible bonds, bonds and
debentures); provided, however, that nothing herein contained shall allow the
Partnership to make any investments, or do any other things, which shall not be
permitted by the Uniform Partnership Act of the State of Illinois.
3.2 Stock. Title to any Stock contributed to or acquired by the
Partnership shall be held in the name of the Partnership, and each certificate
representing shares of such stock will carry the following legend:
11
12
"Stock represented by this certificate is subject to the provisions of
the Agreement Establishing Gidwitz Family Partnership dated as of April 1, 1991
among the partners of the partnership, a copy of which agreement may be
inspected at the principal office of the partnership. Such agreement restricts
the transfer, including hypothecation, of this stock. The provisions of such
agreement are incorporated by this reference in this Certificate. The stock
represented by this certificate may only be transferred by agreement of a
majority of the managing partners of the partnership."
4. Term.
The Partnership shall continue until the first to occur of:
(a) December 31, 2025;
(b) The agreement of all of the Partners; or
(c) Dissolution by operation of law;
provided, however, that in any such event, the then remaining Partners may,
within sixty (60) days of the date such event occurs, unanimously vote to
continue the Partnership business, in which case the Partnership shall continue
thereafter as agreed to by the Partners.
5. Partnership Capital - Initial Capital Accounts.
5.1 Contribution of the Partners. Simultaneously with the
execution hereof, each of the Partners shall contribute to the capital of the
Partnership the respective number of shares of Stock
12
13
set forth opposite such Partner's name in Exhibit A attached hereto. The
Partners, in exchange for their contributions to the capital of the
Partnership, shall receive an interest in the Partnership equal to the
Partnership Percentage(s) set forth opposite their names in Exhibit A. Anything
in this Agreement to the contrary notwithstanding, no person shall be deemed to
be a partner of the Partnership unless and until such person shall have made
such capital contribution.
5.2 Additional Capital Contributions of the Partners. Throughout
the term of this Agreement, the Partners shall collectively contribute, in
cash, to the capital of the Partnership, in accordance with their respective
Partnership Percentages, any additional funds required to meet Partnership cash
requirements as determined by the Managing Partners.
5.3 Additional Funds. With the consent of the Managing Partners, a
Partner may advance to the Partnership, pursuant to Section 7.8 hereof, any
additional funds required to meet Partnership cash requirements.
5.4 Interest. No interest shall be paid or accrued on the
Capital Account of any Partner.
5.5 Withdrawal of Capital Contributions. No Partner may withdraw
any capital from the Partnership except as expressly provided herein.
13
14
6. Allocation of Profits and Losses, and Distribution of Net Cash
Flow and Sale Proceeds.
6.1 Allocation of Profits and Losses. After giving effect to
the allocations set forth in Section 6.2 and Section 6.3 hereof, Profits and
Losses for any fiscal year of the Partnership shall be allocated among the
Partners in proportion to their respective Partnership Percentages.
6.2 Special Allocations.
(a) In the event any Partner unexpectedly receives any
adjustments, allocations, or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1
(b)(2)(ii)(d)(6) of the Regulations, items of Partnership income and
gain shall be specially allocated to each such Partner in an amount
and manner sufficient to eliminate, to the extent required by the
Regulations, the Adjusted Capital Account Deficit of such Partner as
quickly as possible, provided that an allocation pursuant to this
Section 6.2(a) shall be made only if and to the extent that such
Partner would have an Adjusted Capital Account Deficit after all other
allocations provided for in this Section 6 have been tentatively
made as if this Section 6.2(a) were not in the Agreement.
(b) In the event any Partner has a deficit Capital Account
at the end of any Partnership fiscal year which is in excess of the
sum of (i) the amount such Partner is obligated to restore pursuant to
any provision of this Agreement and
14
15
(ii) the amount such Partner is deemed to be obligated to restore
pursuant to the penultimate sentences of Sections 1.704-1T(b)(4)(iv)(f)
and 1.704-1T(b)(4)(iv)(h)(5) of the Regulations, each such Partner
shall be specially allocated items of Partnership income and
gain in the amount of such excess as quickly as possible, provided
that an allocation pursuant to this Section 6.2(b) shall be made
only if and to the extent that such Partner would have a deficit
Capital Account in excess of such sum after all other allocations
provided for in this Section 6 have been made as if Section 6.2(a)
hereof and this Section 6.2(b) were not in the Agreement.
(c) To the extent an adjustment to the adjusted tax basis of
any Partnership asset pursuant to Section 734(b) or Section 743(b) of
the Code is required, pursuant to Section 1.704-1(b)(2)(iv)(m) of the
Regulations, 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 Partners in a manner
consistent with the manner in which the Capital Accounts are required
to be adjusted pursuant to such Section of the Regulations.
6.3 Tax Allocations: Code Section 704(c). In accordance with
Section 704(c) of the Code and the Regulations thereunder, income,
15
16
gain, loss and deduction with respect to any property contributed to the
capital of the Partnership shall, solely for tax purposes, be allocated among
the Partners so as to take account of any variation between the adjusted basis
of such property to the Partnership for federal income tax purposes and its
initial Gross Asset Value.
In the event the Gross Asset Value of any Partnership asset is
adjusted, subsequent allocations of income, gain, loss and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and its Gross Asset Value
in the same manner as under Section 704(c) of the Code and the Regulations
thereunder.
Any elections or other decisions relating to such allocations shall be
made by the Managing Partners in any manner that reasonably reflects the
purpose and intention of this Agreement. Allocations pursuant to this Section
6.3 are solely for purposes of federal, state and local taxes and shall not
affect, or in any way be taken into account in computing, any Partner's Capital
Account or share of distributions pursuant to any provision of this Agreement.
6.4 Intervals of Determination of Profits and Losses. For purposes
of determining the Profits, Losses, or any other items allocable to any period,
Profits, Losses, and any such other items shall be determined on a monthly
basis or any other basis, as determined by the Managing Partners using any
permissible method under Section 706 of the Code and the Regulations
thereunder.
16
17
6.5 Distribution of Net Cash Flow. The Net Cash Flow of the
Partnership shall be distributed to the Partners, from time to time as
determined by the Managing Partners in their sole discretion, in proportion to
the Partners' respective Partnership Percentages.
6.6 Distribution of Sale Proceeds. Sale Proceeds shall be
distributed among the Partners as soon as is practicable in proportion to
the Partners' respective Partnership Percentages.
7. Management.
7.1 General Management. Except as otherwise specifically provided
herein, decisions concerning the management and control of the business affairs
of the Partnership and the investment of the property of the Partnership shall
be made by the majority decision of the Managing Partners (hereinafter
described). The Managing Partners shall each be entitled to one vote on any
issue requiring their decision. The Partnership shall reimburse any Managing
Partner for all direct and reasonable out-of-pocket expenses incurred on behalf
of the Partnership. Except for acts of willful misconduct or gross negligence,
the Partnership shall reimburse, indemnify and hold harmless any Managing
Partner for and from any expense or liability incurred by him for and on behalf
of the Partnership or its property while acting in good faith.
The Managing Partners shall at all times be five in number and shall
initially be Xxxxxx X. Xxxxxxx, Xxxxxx Xxxxxxx, Xxxxxx X. Xxxxxxx, Xxxxx X.
Xxxxxxx and Xxxxx X. Xxxxxxx (sometimes hereinafter each individually referred
to as a "Managing Partner").
17
18
Any vacancy among the Managing Partners, by disability, death, withdrawal or
resignation, shall be filled by a Partner, as set forth herein. In the event of
a vacancy by the disability, death, withdrawal or resignation of Xxxxxx
Xxxxxxx, Xxxxxx X. Xxxxxxx or Xxxxx X. Xxxxxxx, or any successor thereto, the
following, one at a time and in the order named, shall be successor Managing
Partner: (a) Xxxxx X. Xxxxxxx; (b) Xxxxx Xxxxxxx; (c) Xxxxxx X. Xxxxxxx; and
(d) a Class A Partner designated by the majority decision of all of the Class A
Partners. In the event of a vacancy by the disability, death, withdrawal or
resignation of Xxxxxx X. Xxxxxxx or Xxxxx X. Xxxxxxx, or any successor
thereto, the following, one at a time, and in the order named, shall be
successor Managing Partner: (a) Xxxxx X. Xxxxxxx; and (b) a Class B Partner
designated by the majority decision of all of the Class B Partners.
7.2 Powers of the Managing Partners. Subject to such limitations
as may be imposed pursuant to the terms of this Agreement or by operation of
law, the Managing Partners are hereby authorized and empowered to carry out and
implement any and all of the purposes of the Partnership. In that connection,
the powers of the Managing Partners shall include, but not be limited to, the
following:
(a) To employ, on behalf of the Partnership, such persons,
firms or corporations as they, in their sole judgment, shall deem
advisable for the operation and management of the business of the
Partnership, including such brokers, investment advisors, accountants
and attorneys, on
18
19
such terms and for such compensation as they, in their sole judgment,
shall determine. The fact that a Partner or a member of his family
(or the trustee or a beneficiary of a trust which is a Partner)
is directly or indirectly interested in or connected with any person,
firm or corporation employed by the Partnership to render or perform a
service or from which or whom the Partnership may buy merchandise or
other property shall not preclude the Partnership from employing such
person, firm or corporation or from otherwise dealing with him or it,
and neither the Partnership nor the Partners thereof shall have any
rights in or to any income or profits derived therefrom;
(b) To authorize or approve all actions with respect to
distributions by the Partnership, dispositions of the assets of the
Partnership, borrowing of funds, contracts, guarantees, notes, and
other instruments on behalf of the Partnership; provided, however,
that the Managing Partners may not enter into an agreement involving a
sale or exchange of more than 50 percent of the Partnership's property
(other than financing arrangements requiring that Partnership property
be pledged or otherwise used as security) without first obtaining the
written consent of Partners owning at least 51 percent of the
Partnership Percentages;
(c) To acquire and convey corporate stock and partnership
interests, including, but not limited to, partnership interests
pursuant to Section 9 hereof;
19
20
(d) To open, maintain, and close bank accounts and to draw
checks and other orders for the payment of money as provided in
Section 8.3 hereof; and
(e) To take such other actions and to incur such expenses on
behalf of the Partnership as may be necessary or advisable in
connection with the conduct of the affairs of the Partnership.
7.3 Duties of Managing Partners. The Managing Partners shall
manage, or cause to be managed, the affairs of the Partnership in a prudent and
businesslike manner and shall devote such part of their time to the Partnership
affairs as is reasonably necessary for the conduct of such affairs; provided,
however, that it is expressly understood and agreed that neither any Managing
Partner nor any other Partner shall be required to devote his entire time or
attention to the business of the Partnership, and no Partner shall be
restricted in any manner from participating in other businesses or activities.
Without limiting the generality of the foregoing, the Managing Partners' duties
shall include the following:
(a) To render periodic progress reports to the Partners with
respect to the operations of the Partnership;
(b) To furnish financial statements on an annual basis, which,
upon the request of any Partner, shall be prepared by a recognized
firm of independent public accountants;
20
21
(c) To deposit all funds of the Partnership in one or more
separate bank accounts with such banks or trust companies as provided
in Section 8.3 hereof;
(d) To maintain complete and accurate records as provided in
Section 8.1 hereof;
(e) To prepare and distribute to all Partners all reasonable
tax reporting information as provided in Section 8.2 hereof; and
(f) To cause to be filed such certificates and to do such other
acts as may be required by law to qualify and maintain the Partnership
as a partnership.
7.4 Reliance on Act of Managing Partners. Third parties dealing
with the Partnership shall be entitled to rely conclusively upon the power and
authority of the Managing Partners. Any business entity called upon to transfer
any property to or from the name or account of the Partnership shall be
entitled to rely on instructions or assignments signed or purporting to be
signed by the Managing Partners, without inquiry as to the authority of the
person signing or purporting to sign such instructions or assignments and
without inquiry as to the validity of any transfer to or from the name of the
Partnership.
7.5 Outside Activities. It is expressly agreed that the
Partners, or any of them, may engage in other business ventures of every nature
and description, independently or with others, whether or not it is in
competition with the Partnership, and neither the Partnership nor the Partners
thereof shall have any rights in and
21
22
to any independent venture or activity or the income or profits derived
therefrom.
7.6 Actions Requiring Concurrence of the Partners. Notwith-
standing anything in this Agreement to the contrary, no Partner or Managing
Partner, without the prior written consent of all of the other Partners, shall
have the authority to:
(a) Expend or use Partnership funds or Partnership property
except upon the account and for the benefit of the Partnership;
(b) Confess a judgment against the Partnership;
(c) Possess Partnership property, or assign rights in specific
Partnership property for other than a Partnership purpose; or
(d) Transfer Stock held by the Partnership to any person other
than a Permitted Transferee of the Partnership, or acquire Stock from
a person as to which the Partnership is not a Permitted Transferee,
and any such attempted transfer or acquisition contrary to this clause
(d) shall be null and void.
7.7 Compensation of the Partners. Notwithstanding anything herein
contained, the Partnership shall have authority to pay to any Partner a
reasonable annual salary for his or its services to the Partnership. It is
understood that the salary paid to any Partner under the provisions of this
Section 7.7 shall be considered as an operating expense of the Partnership and
shall be
22
23
deducted as an expense item in determining Profits or Losses of the
Partnership.
7.8 Advances. With the consent of the Managing Partners, the
Partners may loan or advance funds to the Partnership. Such loans or advances
shall bear interest at the prime rate of interest charged, from time to time,
by The First National Bank of Chicago and shall be payable out of the first
available funds of the Partnership prior to any distributions to the Partners.
8. Accounting, Tax Provisions and Banking
8.1 Books and Records. The Partnership shall maintain, or cause to
be maintained, full and accurate books and records in accordance with generally
accepted accounting principles. The Partnership shall maintain its books and
records and file its tax returns utilizing a calendar year. The Partnership's
books and records shall be kept at the principal office of the Partnership and
each Partner shall, at reasonable times, have free access thereto. The Managing
Partners shall determine the methods of accounting to be employed for purposes
of the Partnership's books of account and federal income tax reporting
purposes.
8.2 Tax Returns. The Partnership shall prepare, or cause to be
prepared, all required returns of income. All decisions and elections as are
necessary or available with respect to the preparation of such returns shall be
made by the Managing Partners. As soon as is reasonably practical after the
close of each fiscal year, the Partnership shall furnish each Partner with a
statement
23
24
(which may be in the form of a duplicate Schedule K-1 of the Form 1065 required
to be filed by the Partnership with the Internal Revenue Service, or such other
comparable form at any time hereafter required to be so filed) showing the
contributions, withdrawals, income, gains, deductions, losses and credits
charged or credited to such Partner and so allocated to him for such fiscal
year.
Xxxxxx X. Xxxxxxx is hereby appointed the tax matters partner pursuant
to Sections 6221-6231 of the Code. In the event that Xxxxxx X. Xxxxxxx is
unable or unwilling to so serve, the Managing Partners shall designate a new
tax matters partner for the Partnership.
8.3 Banking. All funds of the Partnership shall be deposited in
the Partnership's name in accounts at such bank or banks as shall be determined
by the Managing Partners who shall have the right to designate their agents to
execute checks for withdrawals and make, deliver, accept and endorse commercial
paper in connection with the Partnership business.
9. Transfer of Partnership Interests and Limitations Thereon.
9.1 Exclusive Procedure. Except as otherwise provided herein, each
Partner agrees that he will not Transfer all or any part of his interest in the
Partnership other than in strict compliance with this Agreement. In no event
shall a Partner Transfer his interest in the Partnership to a transferee who is
not a Permitted Transferee of such Partner. This Agreement states the
24
25
exclusive procedure for Transfer of an interest in the Partnership. Any
attempted Transfer of an interest in the Partnership other than in strict
compliance with this Agreement shall be null and void.
9.2 Permitted Transfer. Subject to the First Option and the Second
Option, any Partner transferring an interest in the Partnership to a Permitted
Transferee of such Partner shall give written notice of any such Transfer to
the Managing Partners, who shall thereupon revise the Partnership Percentages
to reflect the Transfer. With the consent of the Managing Partners, the
transferee (if he is not already a Partner) may be admitted as an additional
Partner in the Partnership.
9.3 Transfer of Title. All Transfers of an interest in the
Partnership to any Partner pursuant to the First Option, and to the Partnership
pursuant to the Second Option, shall be transferred and delivered to such
Partners or the Partnership, as the case may be, free and clear of all liens,
claims and encumbrances of every kind and description.
9.4 Notice of Intent to Transfer. Any Transferor Partner who
desires to Transfer all or any portion of his interest in the Partnership shall
give notice of his intent to Transfer, in writing, to the Managing Partners. In
the event that the Transferor Partner has received a Written Offer for the
purchase of his interest in the Partnership, said notice shall include a copy
of such Written Offer and shall set forth the Offer Price. The Managing
Partners shall promptly notify the other Partners of the
25
26
Transferor Partner's intent to Transfer, which notice shall include a copy of
any Written Offer.
9.5 First Option. The Partners, other than the Transferor Partner,
shall have an option (but not the obligation) to purchase all or any portion of
the interest in the Partnership proposed to be sold by the Transferor Partner
at the Offer Price or, if the Transferor Partner did not submit a Written
Offer, at the Transfer Price and, in either case, in accordance with the
provisions of this Section 9. This option shall first be available to Partners
of the same class as, and who are Permitted Transferees of, the Transferor
Partner (the "Same Class Partners"). The Same Class Partners may exercise the
option by giving notice to the Managing Partners of their intention to do so
within sixty (60) days of the date of the Transferor Partner's notice. The Same
Class Partners may purchase the offered interest in proportion to their
relative Partnership Percentages of the same class or as they may otherwise
agree. If and to the extent that the Same Class Partners fail to elect to
purchase all of the offered interest, the Managing Partners shall give prompt
notice thereof to the Partners of the other class who are Permitted Transferees
of the Transferor Partner (the "Other Class Partners"). The Other Class
Partners shall have the option to purchase all or part of any remaining
interest proposed to be sold. The Other Class Partners may exercise their
option by giving notice to the Managing Partners of their intention to do so
within sixty (60) days after the expiration of the Same Class Partners' sixty
(60) day option period. The Other Class
26
27
Partners may purchase the offered interest in proportion to their relative
Partnership Percentages of the same class or as they may otherwise agree. The
interest in the Partnership so purchased will be added to the interest in the
Partnership of the Partners who have purchased said interest, as an interest of
the same class as that held by each respective purchasing Partner, and their
Partnership Percentages and Capital Accounts shall be adjusted accordingly by
the Managing Partners.
9.6 Second Option. The Partnership shall have an additional sixty
(60) days after the expiration of the two option periods set forth in Section
9.5 to elect to purchase all or part of the interest in the Partnership of the
Transferor Partner not purchased pursuant to the First Option, at the Offer
Price or, if there is no Written Offer, at the Transfer Price. The interest in
the Partnership so purchased from a Transferor Partner, including the related
Partnership Percentage and Capital Account, shall be allocated among all of the
then remaining Partners, who shall succeed to such interest as an interest of
the same class held by such remaining Partners.
In the event a Transferor Partner has given notice of his intention to
sell his entire interest in the Partnership without a Written Offer, it being
the Transferor Partner's intention to withdraw from the Partnership, the
exercise of the Second Option shall be mandatory with respect to any portion of
the Transferor Partner's interest in the Partnership not purchased pursuant to
the First Option, and the Partnership shall exercise its Second Option
27
28
with respect to any portion of the Transferor Partner's interest in the
Partnership not purchased pursuant to the First Option.
9.7 Exercise of Entire Option. In the event that the Transferor
Partner has given notice of a Written Offer, then, if the option to purchase
all of the subject interest is not exercised pursuant to the First Option and
the Second Option, the Transferor Partner shall no longer be under an
obligation to sell such interest pursuant to the First Option and the Second
Option and, during the ninety (90) day period following the termination of the
Second Option, the Transferor Partner may sell the offered interest to the
Permitted Transferee making the Written Offer at the Offer Price or on other
terms no more favorable than the terms contained in the Written Offer. No
Transfer may be consummated after such ninety (90) day period or on terms more
favorable than those set forth in the Written Offer without first again
complying with this Section 9. Any Permitted Transferee who acquires an
interest in the Partnership pursuant to this Section 9 shall become a party
hereto and be subject to the terms of this Agreement.
9.8 Terms of Purchase. Any interest in the Partnership to be sold
pursuant to the First Option or the Second Option shall be purchased at the
price provided in Section 9.5 or Section 9.6 hereof, as the case may be.
Subject to Section 9.12 hereof, the closing of the purchase and sale shall take
place at the Partnership's office within thirty (30) days following the
expiration of the applicable option periods. Notwithstanding any provision to
the contrary contained in a Written Offer and subject
28
29
to the provisions of Section 9.9 hereof, payment for the interest in the
Partnership purchased pursuant to the First Option or the Second Option shall
be made in ten (10) equal installments of principal. The first installment
shall be made contemporaneously with the Transfer and each succeeding payment
shall be made on the annual anniversary date thereof. The Partnership or any
Partner purchasing an interest of the Transferor Partner may, however, prepay
all or part of the purchase price at the time of the Transfer or at any time
thereafter without premium or penalty. Each deferred payment shall bear
interest at the lesser of eight percent (8%) per annum or the prime or base
rate of interest charged by The First National Bank of Chicago. Said rate of
interest shall be determined at the time of Transfer and shall be adjusted on
each annual anniversary date thereof. In no event, however, shall the rate of
interest be less than the Applicable Federal Rate determined at the time of the
Transfer.
9.9 Maximum Obligation of the Partnership. If the Partnership
purchases the interest of one or more Transferor Partners pursuant to the
Second Option, the Partnership shall not be obligated to pay, in the aggregate
in any calendar year, pursuant to Section 9.8 hereof an aggregate amount
exceeding the greater of (a) the annual dividends received by the Partnership
with respect to the Stock or (b) two percent (2%) of the Partnership Value (the
"Redemption Cap"). If, as a result of the application of the Redemption Cap,
amounts otherwise due are not paid to a Transferor Partner, such unpaid amounts
shall be due and
29
30
payable in the following year; provided, however, that the Redemption Cap as
determined in the following year shall continue to limit the aggregate
obligation of the Partnership during such year so that any unpaid amounts
continue to be deferred until such time as the total payments to Transferor
Partners during a year are within the Redemption Cap determined for such year.
In the event that there are two (2) or more Transferor Partners at any one time
and the payments due from the Partnership to the Transferor Partners exceed the
Redemption Cap, then payments to such Transferor Partners shall be reduced
proportionately, from time to time and at any time, based on the outstanding
principal owed to each Transferor Partner.
9.10 Admission of Partners. Except as otherwise provided in Section
9.2, no additional Partners shall be admitted to the Partnership without first
obtaining the written consent of all Partners. Notwithstanding the foregoing,
no additional Partner shall be admitted to the Partnership unless at the time
that the proposed additional Partner is to be admitted to the Partnership (a)
the Partnership is a Permitted Transferee of such proposed additional Partner
and (b) the addition to the Partnership of such proposed additional Partner
would not cause the Partnership to cease being a Permitted Transferee of any or
all of the then Partners of the Partnership. Upon the admission of an
additional Partner, all references in this Agreement to the Partners shall be
30
31
deemed to include the new Partner. The Partners shall determine what rights and
voice an additional Partner shall have in the management and conduct of the
Partnership.
9.11 Distribution of a Partner's Interest. The termination of any
trust which is a Partner shall not terminate the Partnership. Upon the
allocation or distribution of all or any portion of the Partnership interest of
a trust which is a Partner pursuant to the exercise of any power of
appointment, or otherwise, to a beneficiary of such trust or to another
person or persons or to another trust or trusts, whether or not such
distribution shall terminate such distributing trust, each such distributee,
notwithstanding the provisions hereof, shall become a Partner hereunder to the
extent of the proportionate share of the Partnership interest distributed to
him, subject to all the terms and conditions of this Agreement, provided
however, that such distributee must, in all events, be a Permitted Transferee.
If any such intended distributee is not a Permitted Transferee, the trustee (or
any other Partner) shall give notice thereof to the Managing Partners,
whereupon the Partners and the Partnership shall have the rights set forth in
Sections 9.5 and 9.6 hereof to purchase the interest in the Partnership owned
by the trust.
9.12 Transfer Date Restrictions. Notwithstanding anything in this
Article 9 to the contrary, no Transfer, acquisition or redemption of an
interest in the Partnership shall be made and no adjustment to the Partners'
interests in the Partnership shall be effective, and no transferee of an
interest in the Partnership
31
32
shall be admitted as a Partner, during any period between the record date and
payment date of a dividend declared to be paid with respect to shares of the
Stock. Any such purported Transfer, acquisition or redemption shall be
effective and reflected in the books of the Partnership on and as of the first
day following the dividend payment date.
10. Withdrawal, Death or Bankruptcy of a Partner.
10.1 Withdrawal. Any Partner, including a trust which is a Partner
hereunder, shall have the right to withdraw from the Partnership at any time
upon giving notice thereof in writing to the Managing Partners pursuant to
Section 9.4 hereof, and the provisions of Section 9 hereof shall be applicable.
In the event of such withdrawal, the Partnership shall not be wound up or
liquidated and the withdrawing Partner shall not have the right to compel
liquidation of the Partnership. The payments to the withdrawing Partner
pursuant to Section 9 hereof shall be in lieu of any amount payable pursuant to
Section 42 of the Uniform Partnership Act including any interest or profits
payable pursuant to that section.
10.2 Death of a Partner. Upon the death of a Partner during the
term of the Partnership, the Partnership business shall not be wound up or
terminated, but shall be continued by the remaining Partners. The executor or
administrator (the "Personal Representative") of the estate of the deceased
Partner, notwithstanding Section 9 hereof, shall immediately succeed to the
32
33
interest of the deceased Partner in the Partnership, and such Personal
Representative shall have the same rights and obligations in the Partnership as
the deceased Partner would have had, had he survived (such rights and
obligations shall include, but shall not be limited to, rights to participate
in the conduct of Partnership business and to share in the profits and losses
of the Partnership) except that, if the deceased Partner was a Managing
Partner, the Personal Representative shall not have the right to become a
Managing Partner. The Personal Representative shall, if at all possible,
transfer its interest to a Permitted Transferee and, to the extent that
transfer to a Permitted Transferee is not possible, shall, promptly upon
discovery thereof, give notice to the Partnership pursuant to Section 9.4
hereof of its intention to withdraw from the Partnership. The Personal
Representative shall not have the right to compel liquidation of the
Partnership. The rights of the Personal Representative set forth in this
Section 10.2 and the payments, if any, to a Personal Representative that
withdraws from the Partnership are in lieu of any amount payable pursuant to
Section 42 of the Uniform Partnership Act including any interest or profits
payable pursuant thereto.
10.3 Bankruptcy, etc. In the event the interest of a Partner in
the Partnership shall be attached or taken in execution, or in the event a
Partner shall be adjudicated a bankrupt or make an assignment for the benefit
of creditors, or in the event its interest is made subject to a charging order,
the Partnership shall not be wound up or terminated and the Partnership's
business shall
33
34
be continued, except that upon notice thereof to that Partner, the other
Partners and the Partnership shall have the rights set forth in Sections 9.5
and 9.6 hereof to purchase the interest in the Partnership of such Partner.
11. Dissolution and Liquidation.
The dissolution of the Partnership shall occur as provided in Section
4 hereof; provided, however, if an event specified in Section 4 hereof occurs,
the Partners may, within sixty (60) days of the date such event occurs,
unanimously vote to continue the Partnership business, in which case the
Partnership shall continue thereafter as agreed to by the Partners. Unless
otherwise provided herein or otherwise agreed by all of the Partners, upon
dissolution of the Partnership, the Partnership shall be terminated and the
remaining Managing Partners shall become the liquidating trustees. The
liquidating trustees shall take full account of the Partnership's assets and
liabilities and the receivables of the Partnership shall be collected and its
assets liquidated as promptly as is consistent with obtaining the fair market
value therefor. If the liquidating trustees reasonably determine that it would
be in the best interests of the Partners to do so, all or any portion of the
assets of the Partnership shall be distributed in kind. The proceeds from the
liquidation of the assets of the Partnership and collection of the
Partnership's receivables, together with the property distributed in kind, to
the extent
34
35
sufficient therefor, shall be applied and distributed in the following order of
priority:
(a) To the payment and discharge of all of the Partnership's
debts and liabilities, except (i) the claims of secured creditors
whose obligations will be assumed or otherwise transferred on the
liquidation of Partnership assets and (ii) the payment of all debts
and liabilities of the Partnership due to the Partners;
(b) To the payment of all debts and liabilities of the
Partnership due to Partners;
(c) To the establishment of reserves which the liquidating
trustees reasonably determine to be necessary; and
(d) The balance, if any, to the Partners in accordance with the
positive balances in their Capital Accounts after giving effect to all
contributions, distributions and allocations for all periods.
12. Trust Partners.
12.1 Trustee Liability. When this Agreement is executed by the
trustee of any trust, such execution is, and shall be, by the trustee, not
individually but solely as trustee in the exercise and under the power of
authority conferred upon and vested in such trustee. It is expressly understood
and agreed that nothing herein contained shall be construed as creating any
liability on any such trustee personally to pay any amounts required to be paid
hereunder, or to perform any covenant, either express or implied,
35
36
contained herein, all such liability, if any, being expressly waived by the
parties hereto by their execution hereof. Any liability of any Partner which is
a trust to the Partnership or to any third person shall be only that of such
trust to the full extent of its trust estate and shall not be a personal
liability of any trustee, grantor or beneficiary thereof.
12.2 Status of Successor Trustees as Partner. Any successor trustee
or trustees of any trust as a Partner herein shall be entitled to exercise the
same rights and privileges and be subject to the same duties and obligations as
his predecessor trustee. As used in this Agreement, the term "trustee" shall
include any or all such successor trustees.
13. Notices.
All notices, demands and communications required to be given under the
terms of this Agreement shall be in writing and shall be served by personal
service or by mailing a copy thereof by certified or registered mail, postage
prepaid, with return receipt requested to the address of the Partner to whom
the notice, demand or communication is directed as set forth on the books and
records of the Partnership. In case of service by mail, it shall be deemed
complete on the day of actual delivery, or if delivery is refused on the date
of such refusal, as shown by the return receipt. The addresses to which
notices, demands and other communications to a Partner shall be delivered or
sent may be changed from time to time by notice served as hereinabove provided
by the Partner upon the
36
37
other Partners. Any payment required or permitted to be made to any Partner
under any provision of this Agreement shall be deemed to have been made if
delivered or mailed in the manner hereinabove provided to the address to which
notices, demands and other communications to such Partners are to be delivered
pursuant to the foregoing.
14. Miscellaneous Provisions.
14.1 Amendments. Any and all agreements hereafter made by the
Partners to amend, extend, revise, change or discharge this Agreement, in whole
or in part and on one or more occasions, shall not be invalid or unenforceable
because of the lack of legal consideration so long as the same shall be in
writing and signed by Partners owning 51 percent or more of the Partnership
Percentages, and shall be binding on all Partners, except that without
unanimous written consent, no amendment to Partnership Percentages, Capital
Accounts, or distributions of Net Cash Flow or Sale Proceeds shall be
effective.
14.2 Further Assurances. The Partners shall execute and deliver
such further instruments and do such further acts and things as may be required
by law or may be appropriate in order to carry out the intent and purpose of
this Agreement.
14.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois.
14.4 Headings. Section headings are for convenience of reference
only and shall have no legal effect.
37
38
14.5 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which, when taken
together, shall be deemed to be one Agreement.
14.6 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, their successors, assigns, heirs and
legal representatives and any person who shall have acquired any of the
interests or rights of any Partner in accordance with this Agreement.
14.7 Severability. In the event any provision of this Agreement is
held to be invalid, the remainder of this Agreement shall nevertheless be
deemed to be valid and effective.
14.8 Nouns, Pronouns and Gender. As used herein, all pronouns shall
include the masculine, feminine, neuter, singular, and plural thereof whenever
the context and facts require such construction.
14.9 Waiver of Action for Partition. Each of the Partners
irrevocably waives any right that it may have to maintain any action for
partition with respect to any of the Partnership's property.
14.10 Entire Agreement. This Agreement constitutes the entire
agreement and understanding among the parties and may not be amended or
modified except as provided herein.
14.11 Intent to be Bound. Each of the parties subscribing hereto
intend to be fully bound by this Agreement whether or not all of the other
persons listed on the signature pages hereto execute this Agreement. All
persons who execute this Agreement, or any counterpart hereof, shall become
Partners and shall be bound
38
39
hereby. If any person listed on the signature pages hereto fails to sign this
Agreement, the Partnership Percentages shall be recomputed by the Managing
Partners based on the number of shares of Stock and cash actually contributed
to the Partnership.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
/s/ Xxxxx X. Xxxxxxx /s/ Xxxxxx Xxxxxxx
-------------------- ------------------
Xxxxx X. Xxxxxxx Xxxxxx Xxxxxxx
/s/ Xxxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxxxx
-------------------- ---------------------
Xxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx
/s/ Xxxx Xxxxxxx Xxxxxxx /s/ Xxxxx Xxxxxxx
------------------------ -----------------
Xxxx Xxxxxxx Xxxxxxx Xxxxx Xxxxxxx
/s/ Xxxxx X. Xxxxxxx
----------------- --------------------
Xxxxxx X. Xxxxxxx Xxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxxxx
-------------------- ---------------------
Xxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx
/s/ Xxxxxx X. Xxxxxxx
--------------- ---------------------
Xxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx
------------------
Xxxxx X. Xxxxxxxxx
39
40
EXHIBIT A
Number of Shares
of Partnership
Name of Partner Stock Contributed Percentage
---------------- ----------------- -----------
Class A Partners:
------------------
Xxxxxx Xxxxxxx 6,356 0.3023%
Xxxxx X. Xxxxxxx 320,284 15.2320%
Xxxx Xxxxxxx Xxxxxxx 1,500 0.0713%
Xxxxx Xxxxxxx 305,028 14.5065%
Xxxxxx X. Xxxxxxx 4,168 0.1982%
Xxxxx X. Xxxxxxx 304,056 14.4602%
Xxxxxx X. Xxxxxxx 318,694 15.1564%
Xxxxxx X. Xxxxxxx 200 0.0095%
Xxxxxx Xxxxxxx Revocable
Trust 72,640 3.4546%
Xxxx X. Xxxxxxx Revocable
Trust 500 0.0238%
Xxxxxx X. Xxxxxxx
Irrevocable Trust
(u/a/d 9/15/90) 306,812 14.5913%
Credesco, Inc. 30,000 1.42675%
Class B Partners:
------------------
Xxxxx X. Xxxxxxx 200 0.0095%
Xxxxxx X. Xxxxxxx 200 0.0095%
41
Xxxxx X. Xxxxxxx 25,052 1.1914%
Xxxx X. Xxxxxxx 69,804 3.3197%
Xxxxx X. Xxxxxxxxx 71,604 3.4053%
Xxxxx X. Xxxxxxx
Irrevocable Trust
(u/a/d 9/15/90) 151,172 7.1894%
Xxxxxx X. Xxxxxxx
Revocable Trust 84,436 4.0156%
Credesco, Inc. 30,000 1.42675%
------ --------
2,102,706 100.0000%
========= =========
