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EXHIBIT 10.2
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST FILED WITH THE COMMISSION. ASTERISKS (*) IDENTIFY WHERE SUCH
CONFIDENTIAL INFORMATION HAS BEEN OMITTED. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE COMMISSION.
FORM OF
TWEEDY, XXXXXX COMPANY LLC
LIMITED LIABILITY COMPANY AGREEMENT
_________, 1997
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TWEEDY, XXXXXX COMPANY LLC
LIMITED LIABILITY COMPANY AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS........................................................1
Section 1.1 Definitions...................................................1
ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS..............................15
Section 2.1 Conversion; Continuation.....................................15
Section 2.2 Name.........................................................15
Section 2.3 Term.........................................................16
Section 2.4 Registered Agent and Registered Office.......................16
Section 2.5 Principal Place of Business..................................16
Section 2.6 Qualification in Other Jurisdictions.........................16
Section 2.7 Purposes and Powers..........................................16
Section 2.8 Title to Property............................................17
ARTICLE III - MANAGEMENT OF THE LLC...........................................18
Section 3.1 Manager Member...............................................18
Section 3.2 Management Board; Non-Manager Members........................22
Section 3.3 Officers.....................................................24
Section 3.4 Employees of the LLC.........................................25
Section 3.5 Operation of the Business of the LLC.........................25
Section 3.6 Compensation and Expenses of the Members.....................26
Section 3.7 Non-Manager Members and Non-Solicitation Agreements..........27
Section 3.8 Non-Solicitation and Non-Disclosure by Non-Manager Members...27
Section 3.9 Remedies Upon Breach.........................................30
Section 3.10 No Employment Obligation.....................................30
Section 3.11 Funding Obligation...........................................30
Section 3.12 Miscellaneous................................................31
Section 3.13 Members......................................................32
ARTICLE IV - CAPITAL ACCOUNTS; ALLOCATIONS; DISTRIBUTIONS.....................32
Section 4.1 Capital Accounts.............................................32
Section 4.2 Allocations..................................................33
Section 4.3 Capital Contribution for Offshore Shortfalls.................36
Section 4.4 Distributions................................................37
Section 4.5 Distributions Upon Dissolution; Establishment of a
Reserve Upon Dissolution.....................................40
(i)
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Page
Section 4.6 Proceeds from Capital Contributions and the Sale of
Securities; Insurance Proceeds; Certain Special Allocations
and Distributions............................................41
Section 4.7 Federal Tax Allocations......................................42
ARTICLE V - TRANSFER OF LLC INTERESTS BY NON-MANAGER MEMBERS;
RESIGNATION, REDEMPTION AND WITHDRAWAL BY NON-MANAGER MEMBERS;
ADMISSION OF ADDITIONAL NON-MANAGER MEMBERS................................43
Section 5.1 Assignability of LLC Interests...............................43
Section 5.2 Substitute Non-Manager Members...............................44
Section 5.3 Allocation of Distributions Between Transferor and
Transferee; Successor to Capital Accounts...................45
Section 5.4 Resignation, Redemptions and Withdrawals.....................46
Section 5.5 Issuance of Additional LLC Interests.........................46
Section 5.6 Additional Requirements......................................47
Section 5.7 Transition Planning with Respect to Certain Clients..........47
Section 5.8 Representation of Members....................................48
ARTICLE VI - TRANSFER OF LLC INTERESTS BY THE MANAGER MEMBER;
REDEMPTION, REMOVAL AND WITHDRAWAL.........................................48
Section 6.1 Assignability of Interest....................................48
Section 6.2 Resignation, Redemption, and Withdrawal......................49
ARTICLE VII - PUTS AND CALLS OF LLC INTERESTS................................50
Section 7.1 Puts.........................................................50
Section 7.2 Calls........................................................52
Section 7.3 Repurchase Upon Termination of Employment or Transfer
by Operation of Law..........................................53
Section 7.4 Election Rights of Manager Member to Pay in Shares of
AMG Stock....................................................56
Section 7.5 Class B Puts; Increase in Free Cash Flow Percentage..........57
ARTICLE VIII - DISSOLUTION AND TERMINATION....................................60
Section 8.1 No Dissolution...............................................60
Section 8.2 Events of Dissolution........................................60
Section 8.3 Notice of Dissolution........................................60
Section 8.4 Liquidation..................................................60
Section 8.5 Termination..................................................61
Section 8.6 Claims of the Members........................................61
ARTICLE IX - RECORDS AND REPORTS..............................................61
(ii)
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Page
Section 9.1 Books and Records............................................61
Section 9.2 Accounting...................................................61
Section 9.3 Financial and Compliance Reports.............................61
Section 9.4 Meetings.....................................................63
Section 9.5 Tax Matters..................................................63
ARTICLE X - LIABILITY, EXCULPATION AND INDEMNIFICATION........................64
Section 10.1 Liability...................................................64
Section 10.2 Exculpation.................................................64
Section 10.3 Fiduciary Duty..............................................64
Section 10.4 Indemnification.............................................65
Section 10.5 Notice; Opportunity to Defend and Expenses..................65
Section 10.6 Miscellaneous...............................................66
ARTICLE XI - MISCELLANEOUS....................................................67
Section 11.1 Notices.....................................................67
Section 11.2 Successors and Assigns......................................67
Section 11.3 Amendments..................................................67
Section 11.4 No Partition................................................68
Section 11.5 No Waiver; Cumulative Remedies..............................68
Section 11.6 Dispute Resolution..........................................68
Section 11.7 Prior Agreements Superseded.................................68
Section 11.8 Captions....................................................68
Section 11.9 Counterparts................................................68
Section 11.10 Applicable Law; Jurisdiction................................68
Section 11.11 Interpretation..............................................69
Section 11.12 Severability................................................69
Section 11.13 Creditors...................................................69
EXHIBITS
Exhibit A - Incentive Program of Tweedy, Xxxxxx Company LLC
Exhibit B - Form of Non-Solicitation/Non-Disclosure Agreement for
Non-Manager Members
Exhibit C - Form of Promissory Note for Repurchases
(iii)
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SCHEDULES
Schedule A - LLC Interests and Capital Accounts
Schedule B - Initial Management Board Members
Schedule C - Model Repurchase Calculation
(iv)
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TWEEDY, XXXXXX COMPANY LLC
LIMITED LIABILITY COMPANY AGREEMENT
_____________________________________________________
This Limited Liability Company Agreement of Tweedy, Xxxxxx Company LLC
(the "LLC") is made and entered into as of __________, 1997 (the "Effective
Date"), by and among the Persons identified as the Manager Member and the
Non-Manager Members on Schedule A attached hereto as Members of the LLC, and the
Persons who become Members of the LLC in accordance with the provisions hereof.
WHEREAS, the Original Principals and Xxxxx were the sole partners of
Tweedy, Xxxxxx Company L.P., a Delaware limited partnership (the "Predecessor"),
immediately prior to the Effective Date;
WHEREAS, the Original Principals and Xxxxx have converted the
Predecessor into a Delaware limited liability company pursuant to Section 18-214
of the Delaware Limited Liability Company Act, 6 Del. C. Section 18-101, et seq.
(as it may be amended from time to time and any successor to such act, the
"Act") and, in connection therewith, filed a Certificate of Conversion and a
Certificate of Formation of the LLC with the Office of the Secretary of State of
the State of Delaware as of the Effective Date;
WHEREAS, the Original Principals and Xxxxx desire to sell a majority of
their interests in the LLC to Affiliated Managers Group, Inc., a Delaware
corporation ("AMG"), and the Original Principals desire to sell a portion of
their remaining interests to Xxxxxxx and Xxxxxxx; and
WHEREAS, the Original Principals, Clark, Shrager, Xxxxxxx and AMG
desire to continue the business of the Predecessor as a limited liability
company under the Act from and after the Effective Date, with AMG designated as
the Manager Member and, in connection therewith, to enter into this Agreement,
which has heretofore been approved by the Predecessor, to set forth their
relative rights and obligations.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in consideration of the mutual
covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I - DEFINITIONS.
SECTION 1.1 DEFINITIONS. Unless the context otherwise requires, the
terms defined in this Article I shall, for the purposes of this Agreement, have
the meanings herein specified.
"1940 Act" shall mean the Investment Company Act of 1940, as it may be
amended from time to time, and any successor to such act.
"Act" shall have the meaning set forth in the preamble of this
Agreement.
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"Additional Non-Manager Members" shall have the meaning specified in
Section 5.5 hereof.
"Advisers Act" shall mean the Investment Advisers Act of 1940, as it
may be amended from time to time, and any successor to such act.
"Affiliate" shall mean, with respect to any Person (herein the "first
party"), any other Person that directly or indirectly controls, or is controlled
by, or is under common control with, such first party. The term "control" as
used herein (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power (a) to vote or
dispose of, or direct the voting or disposition of, fifty percent (50%) or more
of the outstanding voting securities of such Person or (b) otherwise to direct
the management or policies of such Person by contract or otherwise.
"Agreement" shall mean this Limited Liability Company Agreement, as it
may be amended, supplemented or restated from time to time.
"AMG" shall have the meaning set forth in the preamble of this
Agreement.
"AMG Stock" shall have the meaning specified in Section 7.4(a) hereof.
"AMG's Average Stock Price" shall have the meaning specified in Section
7.4(c)(i) hereof.
"Asserted Liability" shall have the meaning specified in Section
10.5(a) hereof.
"Board Vote" shall have the meaning specified in Section 3.2(c) hereof.
"Brokerage Services" shall mean any services that either involve the
negotiation of contracts for, and the execution of, the purchase and sale of
securities or otherwise relate to the securities brokerage business.
"Call" shall have the meaning specified in Section 7.2(a) hereof.
"Capital Account" shall mean the capital account maintained by the LLC
for each Member in accordance with the capital accounting rules described in
Section 4.2 hereof.
"Capital Contribution" shall mean, as to each Member, the aggregate
amount of cash and the Fair Market Value of any property contributed to the
capital of the LLC by such Member (or any prior holders of the Capital Account
of such Member) pursuant to Section 2.1(c) or Section 4.3 hereof or in
connection with the issuance of additional LLC Interests or otherwise.
"Certificate" shall mean the Certificate of Formation of the LLC
required under the Act, as such Certificate may be amended and/or restated from
time to time.
"Claims Notice" shall have the meaning specified in Section 10.5(a)
hereof.
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"Xxxxx" shall mean Xxxxx X. Xxxxx, Xx.
"Class B Interest" shall mean, as of a measurement date, (i) an amount
equal to ********** (**) of the Class B Profit of the LLC in the fiscal year
ended on, or most recently prior to, the measurement date, if, in each of the
two (2) fiscal years of the LLC ended on, or most recently prior to the
measurement date, the LLC had Class B Profit, or (ii) zero (0) as of that
measurement date, if, in either of such two fiscal years, the LLC did not have
Class B Profit.
"Class B Notice" shall have the meaning specified in Section 7.5(c)
hereof.
"Class B Notice Deadline" shall have the meaning specified in Section
7.5(c) hereof.
"Class B Payment" shall have the meaning specified in Section 7.5(d)
hereof.
"Class B Points" shall mean the Class B Points (or fraction thereof)
authorized by the LLC pursuant hereto, entitling the holders thereof to the
relative rights, title and interests in the LLC at any particular time as are
set forth in this Agreement, and any and all other benefits to which a holder
thereof may be entitled as provided in this Agreement. The Class B Points do not
entitle the holders thereof to any right to vote on any matter concerning the
LLC whatsoever. With respect to a Member as of any date, "Class B Points" shall
mean the number of Class B Points held by such Member as of such date as set
forth on Schedule A hereto, as amended from time to time in accordance with the
terms hereof, and as in effect on such date.
"Class B Profit" shall mean, for any period, the amount, if any, by
which Revenues From Operations for such period exceed the sum of (a) the Free
Cash Flow for such period, (b) operating expenses of the LLC incurred during or
relating to such period consistent with the then past practices of the LLC, not
including salaries, bonuses or other compensation paid or payable other than out
of Free Cash Flow to the Non-Manager Members in respect of such period or other
distributions made or makeable to the Non-Manager Members other than out of Free
Cash Flow in respect of such period and (c) **********.
"Class B Put" shall have the meaning specified in Section 7.5(a)
hereof.
"Class B Put Date" shall have the meaning specified in Section 7.5(a)
hereof.
"Class B Value" shall have the meaning specified in Section 7.5(b)
hereof.
"Client" shall mean all Past Clients, Present Clients and Potential
Clients, subject to the following general rule that with respect to each Client,
the term shall also include (i) any Persons which are known to a Non-Manager
Member to be Affiliates of such Client, (ii) Persons who are members of the
Immediate Family of such Client or any of its Affiliates or (iii) with respect
to the LLC, investors in each of the Private Funds and the Offshore Funds
(sponsored or marketed by the LLC, by any Controlled Affiliate of the LLC or
(directly or indirectly) by any Non-Manager Member).
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"Code" or "Internal Revenue Code" shall mean the United States Internal
Revenue Code of 1986, as from time to time amended, and any successor code
thereto. A reference to a specific section of the Code refers not only to such
specific section but also to any corresponding provision of any federal tax
statute enacted after the Effective Date, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Controlled Affiliate" shall mean, with respect to a Person, any
Affiliate of such Person under its "control," as the term "control" is defined
in the definition of Affiliate, but shall include, with respect to the LLC, any
of the Mutual Funds, the Offshore Funds and the Private Funds that are managed
or advised by the LLC as of the date of such determination.
"Covered Person" shall mean a Member, any Affiliate of a Member, any
officer, director, shareholder, partner, employee or member of a Member or any
of its Affiliates, or any Officer.
"Date of Default" shall have the meaning specified in Section 4.3(c)
hereof.
"Defaulting Member" shall have the meaning specified in Section 4.3(c)
hereof.
"Due Date" shall have the meaning specified in Section 4.3(b) hereof.
"Effective Date" shall have the meaning specified in the preamble of
this Agreement.
"Employment Agreement" shall have the meaning ascribed thereto in the
Purchase Agreement.
"Encumbrances" shall mean any restrictions, liens, claims, charges,
pledges or encumbrances of any kind or nature whatsoever.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Fair Market Value" shall mean the fair market value as agreed upon by
the Manager Member (or, for purposes of Section 4.5 hereof, if there shall be no
Manager Member, the Liquidating Trustee) and the Management Board or, in the
absence of such agreement, as determined by an appraiser selected by the Manager
Member (or, for purposes of Section 4.5 hereof, if there shall be no Manager
Member, the Liquidating Trustee) with the prior consent of the Management Board,
which consent will not be unreasonably withheld.
"For Cause" shall mean, with respect to the termination of a
Non-Manager Member's employment with the LLC, any of the following:
(a) The Non-Manager Member has engaged in any criminal act which is
or involves a violation of federal or state securities laws or regulations (or
equivalent laws or regulations of any country or political subdivision
thereof), embezzlement, fraud, wrongful taking or misappropriation of
property, theft or any other crime involving dishonesty or other serious felony
offense and has been convicted (whether or not subject to appeal) or pled nolo
contendere (or any similar plea) to any criminal offense in connection with or
relating to such act;
(b) The Management Board and the Manager Member, acting in good faith
and in consultation with each other, have determined that the Non-Manager
Member has persistently and willfully neglected his duties and such neglect has
continued for a period of not less than thirty (30) days following written
notice from the Manager Member or the Management Board specifying the nature of
the Non-Manager Member's neglect; or
(c) The Non-Manager Member has (i) violated or breached any material
provision of his Employment Agreement or Non-Solicitation Agreement or (ii)
engaged in any of the activities prohibited by Section 3.8 hereof and, in
each case, the Management Board or the Manager Member has determined that harm
that is not immaterial or insignificant has or is likely to occur to the LLC or
the Manager Member as a result of such violation, breach or activity.
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"Free Cash Flow" shall mean, for any period (a) the Free Cash Flow
Percentage multiplied by Revenues From Operations of the LLC for such period,
minus (b) the Free Cash Flow Expenditures for such period.
"Free Cash Flow Expenditure" shall have the meaning specified in
Section 3.5(a) hereof.
"Free Cash Flow Percentage" shall initially mean the percentage
determined pursuant to Section 1.2(a) of the Purchase Agreement, as adjusted, if
applicable, pursuant to Sections 1.2(b) through 1.2(g) of the Purchase
Agreement, subject to increase as set forth in Section 7.5 hereof.
"GCT" shall have the meaning specified in Section 4.6(g) hereof.
"Global Intrinsic Value Fund" shall mean Global Intrinsic Value Fund
Limited, an open-end investment company incorporated in Bermuda as a mutual fund
with limited liability, and any successor entities thereto.
"Governmental Authority" shall mean any foreign, federal, state or
local court, governmental authority or regulatory body.
"Immediate Family" shall mean, with respect to any individual, such
individual's spouse, former spouse, parents, grandparents, children,
grandchildren, siblings (and estates, trusts, partnerships and other entities
and legal relationships of which a substantial majority in interest of the
beneficiaries, owners, investors, members or participants at all times in
question are, directly or indirectly, one or more of the Persons described above
and/or such individual).
"Incentive Program" shall mean the Tweedy, Xxxxxx Company LLC Incentive
Program in the form attached hereto as Exhibit A.
"Income Tax Regulations" shall mean the income tax regulations,
including temporary regulations, promulgated under the Code, as such regulations
may be amended from time to time (including corresponding provisions of
succeeding regulations).
"Indebtedness" shall mean, with respect to a Person, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (c) all obligations of such Person
under any financing leases, (d) all obligations of such Person in respect of
acceptances issued or created for the account of such Person, (e) all
obligations of such Person under noncompetition agreements reflected as
liabilities on a balance sheet of such Person in accordance with generally
accepted accounting principles, (f) all liabilities secured by any Lien on any
property owned by such Persons even though such Person has not assumed or
otherwise become liable for the payment thereof, and (g) all net obligations of
such Person under interest rate, commodity, foreign currency and financial
markets swaps, options, futures and other hedging obligations.
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"Independent Public Accountants" shall mean any independent certified
public accountant satisfactory to the Manager Member and retained by the LLC.
"Ineligible Manager" shall have the meaning specified in Section 6.2(b)
hereof.
"Intellectual Property" shall have the meaning specified in Section
3.9(c) hereof.
"Investment Management Services" shall mean any services that involve
(a) the management of an investment account or fund (or portions thereof or a
group of investment accounts or funds), or (b) the giving of advice with respect
to the investment and/or reinvestment of assets or funds (or any group of assets
or funds), in each case, for compensation other than out-of-pocket expenses and
good faith director's or trustee's fees.
"IRS" shall mean the Internal Revenue Service of the United States
Department of the Treasury.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
financing lease having substantially the same economic effect as any of the
foregoing).
"Liquidating Trustee" shall have the meaning specified in Section 8.4
hereof.
"LLC" shall have the meaning set forth in the preamble of this
Agreement.
"LLC Interests" shall mean the units representing the outstanding
limited liability company interests (as defined in the Act) of the Members in
the LLC, including, without limitation, such Member's LLC Points, Class B
Points, Capital Account, voting rights and any other rights, benefits and
obligations of such Member under this Agreement and the Act.
"LLC Points" shall mean the LLC Points authorized by the LLC pursuant
hereto, entitling the holders thereof to the relative rights, title and
interests in the profits, losses, deductions and credits of the LLC at any
particular time as are set forth in this Agreement, and any and all other
benefits to which a holder thereof may be entitled as provided in this Agreement
(including, without limitation, certain limited voting rights as set forth
herein), but specifically excluding the Class B Points authorized hereunder.
With respect to a Member as of any date "LLC Points" shall mean the aggregate
number of LLC Points belonging to such Member as set forth on Schedule A hereto,
as amended from time to time in accordance with the terms hereof, and as in
effect on such date.
"LLC Repurchase" shall have the meaning specified in Section 7.3(a)
hereof.
"Management Board" shall have the meaning specified in Section 3.2(a).
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"Manager Member" shall mean AMG, and any Person who becomes a successor
Manager Member as provided herein.
"Manager Member Excess Loss Allocations" shall mean, as of any
measurement date (including, without limitation, a Put/Call Measurement Date or
a termination of employment), any amount by which the cumulative amount of items
of LLC loss and deduction allocated to the Manager Member pursuant to Sections
4.2(b)(ii), 4.2(b)(iii) and 4.2(d), hereof exceed the cumulative amount of items
of LLC income and gain allocated to the Manager Member pursuant to Sections
4.2(a)(ii) and 4.2(c)(i) hereof, in each case, calculated through the date that
is one (1) year prior to the last day of the calendar quarter in which the
measurement date occurs.
"Manager Shares" shall mean [the Manager Shares (as defined in the
respective organizational documents) of each of the Offshore Funds held, as of
the date of this Agreement, by the Offshore Related Partnerships.] [Subject to
confirmation in due diligence]
"Member" shall mean any Person admitted to the LLC as a "member" within
the meaning of the Act, which includes the Manager Member and the Non-Manager
Members (excluding, for this purpose, Transferees until admitted as Members
pursuant to the provisions hereof), unless otherwise indicated, and includes any
Person admitted as an Additional Non-Manager Member or a substitute Non-Manager
Member pursuant to the provisions of this Agreement, in such Person's capacity
as a Member of the LLC, unless otherwise indicated. For purposes of the Act, the
Members shall constitute one (1) class or group of members.
"Mutual Funds" shall mean Tweedy, Xxxxxx Global Value Fund and the
Tweedy, Xxxxxx American Value Fund, each a series of TBF, and any additional
series of TBF or any other investment company registered with the SEC as such
established after the Effective Date and any successor entities thereto.
"Non-Manager Member" shall mean any Person who is or becomes a
Non-Manager Member pursuant to the terms hereof (and, other than for purposes of
Article III hereof and any other provision hereof permitting or requiring any
action, consent or approval by a Non-Manager Member, it being understood that
the rights under such provisions shall always be exercised solely by such
Non-Manager Member and not by any Transferee), their respective Transferees, if
any, under Section 5.1(b) or Section 5.1(c) or, to the extent set forth in any
consent of the Manager Member pursuant to Section 5.1(a), their respective
Transferees under Section 5.1(a), unless otherwise indicated.
"Non-Solicitation Agreement" shall have the meaning set forth in
Section 3.8 hereof.
"Notice Deadline" shall have the meaning specified in Section 7.1(d)
hereof.
"Notices" shall have the meaning specified in Section 11.1 hereof.
"Officers" shall have the meaning specified in Section 3.3 hereof.
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"Offshore Adjustment" shall mean, with respect to each Offshore Fund
and for any period not greater than one fiscal year of such Offshore Fund, (a)
the sum of (i) the net assets in such Offshore Fund on each date as of which the
net assets are determined multiplied by (ii) the Offshore Fund Fee Rate in
effect for such Offshore Fund as of each such date during such period as of
which the net assets are determined, divided by (b) the number of times during
such period the net assets of such fund are determined, multiplied by (c) a
fraction, the numerator of which is the number of days in such period and the
denominator of which is 365 or 366, as the case may be.
"Offshore Deemed Revenues" shall mean for each Offshore Fund with
respect to each applicable period, any Performance Increment that has been
definitively calculated and booked by such Offshore Fund during such period with
respect to Manager Shares held by an Offshore Related Partnership. [Confirm the
result is net of solicitor/broker fees.]
"Offshore Fund Fee Rate" shall initially mean, for each Offshore Fund
(including the Global Intrinsic Value Fund), one and one-half percent (1.5%),
in each case, subject to adjustment as follows:
(a) On each date on which the rate applicable to the
Performance Increment payable to the LLC under the Offshore Management Agreement
for such Offshore Fund increases pursuant to Section ___ thereof, the Offshore
Fund Fee Rate for that Offshore Fund shall be decreased by an amount equal to
the product of the Offshore Fund Fee Rate then in effect and a fraction (i) the
numerator of which is the difference between the increased rate applicable to
the Performance Increment and the rate originally applicable, and (ii) the
denominator of which is the rate originally applicable to the Performance
Increment (subject to adjustment under clause (b) hereof).
(b) On each date on which the rate applicable to the
Performance Increment increases (other than for the reason described in clause
(a) of this definition) or decreases, in each case, pursuant to Section __
thereof, the Offshore Fund Fee Rate for that Offshore Fund shall, (i) in the
event of such an increase, be decreased in an amount equal to the product of the
Offshore Fund Fee Rate then in effect and a fraction (A) the numerator of which
is the difference between the increased rate applicable to the Performance
Increment and the rate originally applicable, and (B) the denominator of which
is the rate originally applicable to the Performance Increment and, (ii) in the
event of such a decrease, be increased in an amount equal to the product of the
Offshore Fund Fee Rate then in effect and a fraction (I) the numerator of which
is the difference between the rate originally applicable to the Performance
Increment and the rate applicable after the proposed decrease, and (II) the
denominator of which is the rate originally applicable to the Performance
Increment.
(c) The Management Board may give the LLC and the Manager
Member an irrevocable written notice that the Non-Manager Members who are
partners in the Offshore Related Partnerships wish to terminate the Offshore
Adjustment and related calculations. Effective for all periods after the first
calendar quarter end that is at least twenty-four (24) months after the date of
such notice (or on such earlier or later date as is agreed to by the Management
Board and the Manager Member), and conditioned upon termination of any award of
Performance Increment
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by any of the Offshore Funds to any of the Offshore Related Partnerships with
respect to any period on and after such Effective Date and upon the
corresponding increase in the Performance Increment to the LLC under the
provisions of Section __ of the applicable related Offshore Management
Agreement, the Offshore Fund Fee Rate for each of the Offshore Funds shall be
reduced to zero (0) [i.e. the LLC shall receive the amount of the actual
Performance Increment in lieu of the Offshore Fund Fee Rate]. [This provision
will be included in the Offshore Management Agreement.]
"Offshore Funds" shall mean (a) each Value Sub-Fund, (b) the Global
Intrinsic Value Fund and (c) any other investment fund organized outside the
U.S. which the Manager Member and the Management Board agree to treat as an
Offshore Fund, and any successor entities thereto, in each case so long as the
LLC or any Controlled Affiliate thereof is providing Investment Management
Services to such investment fund. Whenever a provision of this Agreement refers
to assets in an Offshore Fund, that reference shall not be deemed to include
assets in an Offshore Fund which are managed without any compensation therefor.
"Offshore Management Agreement" shall mean [__________________], as
amended, as contemplated by Section 5.7 hereof.
"Offshore Related Partnerships" shall mean Alpine Partners, L.P.,
Belgravia Partners, L.P., Genpar Partners II, L.P., Tweeco Partners, L.P. and 52
Associates, L.P., each a Delaware limited partnership, and any successors
thereto or other entities which are entitled to receive Performance Increments
with respect to one or more Offshore Funds and in which one or more of the
Non-Manager Members or the Immediate Family of any of them have an interest.
"Offshore Shortfall" shall mean the amount, if any, by which (a) the
sum of the items of LLC loss and deduction for such quarter to be allocated
under Section 4.2(b) exceeds (b) the sum of the items of LLC income and gain for
such quarter to be allocated under Section 4.2(a)(v), together with items of LLC
income earned and collected in prior quarters that was reserved for use in
paying operating expenses of the LLC, and was so used in such quarter, up to an
aggregate maximum amount for any quarter of the sum of (x) the amount of LLC
income and gain allocated to the Manager Member under clause (B) of Section
4.2(a)(i) for such quarter and (y) the amount of LLC income and gain allocated
to the Non-Manager Members under clause (B) of Section 4.2(a)(iii) for such
quarter.
"Operating Cash Flow" shall mean, for any period, an amount equal to
(a) Revenues From Operations of the LLC for such period, minus (b) Free Cash
Flow for such period.
"Operating Shortfall" shall mean, as of any measurement date
(including, without limitation, a Put/Call Measurement Date or a termination of
employment), the amount, if any, by which the actual operating expenses of the
LLC exceeded the Operating Cash Flow of the LLC (including previously reserved
Operating Cash Flow) during the twelve (12) months ending on the last day of the
calendar quarter in which the measurement date occurs.
"Option Exercise" shall have the meaning set forth in Section 7.1(c)
hereof.
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"Original Principals" shall mean each of Messrs. Xxxxxxxxxxx X. Xxxxxx,
Xxxxxxx X. Xxxxxx and Xxxx X. Xxxxxx (and, other than for purposes of Article
III hereof and any other provision hereof permitting or requiring any action,
consent or approval by a Non-Manager Member, it being understood that the rights
under such provisions shall always be exercised solely by such Non-Manager
Member and not by any Transferee), their respective Transferees, if any, under
Section 5.1(b) or Section 5.1(c) or, to the extent set forth in any consent of
the Manager Member pursuant to Section 5.1(a), their respective Transferees
under Section 5.1(a)).
"Past Client" shall mean at any particular time, any Person who at any
point prior to such time had been an investment advisory client of, or recipient
of Investment Management Services or Brokerage Services from, the LLC
(including, without limitation, the Predecessor) or any of its Controlled
Affiliates but at such time is not an advisee or investment advisory client of,
or recipient of Investment Management Services or Brokerage Services from, the
LLC or any of its Controlled Affiliates.
"Performance Increment" shall mean, with respect to Manager Shares
issued by an Offshore Fund to an Offshore Related Partnership, the Performance
Increment or similar performance fee or profit allocation as defined in the
organizational documents of such Offshore Fund or, with respect to the Offshore
Management Agreement in respect of an Offshore Fund, the Performance Increment
(or similar performance fee or profit allocation) as defined in such Offshore
Management Agreement. [Confirm the result is net of solicitor/broker fees.]
"Permanent Incapacity" shall mean, with respect to a Non-Manager
Member, that such Non-Manager Member has been permanently and totally unable, by
reason of injury, illness or other similar cause (determined pursuant to the
process set forth in the following sentence) to have performed his substantial
and material duties and responsibilities for a period of three hundred
sixty-five (365) consecutive days, which injury, illness or similar cause (as
determined pursuant to such process) would render such Non-Manager Member
incapable of operating in a similar capacity in the future. The foregoing
determination shall be made by a licensed physician selected by the Manager
Member; provided, however, that if the Manager Member or the LLC has purchased
lump-sum key-man disability insurance with respect to such Non-Manager Member,
which policy is then in effect, then such determination shall be made either (i)
by an agreement between such physician and a physician selected by the insurance
company with which the Manager Member or the LLC has entered into a lump-sum
key-man disability policy with respect to such Non-Manager Member, or, if the
two physicians cannot arrive at an agreement, a third physician will be chosen
by the first two physicians, and the majority decision of the three physicians
will then be binding), or (ii) if the Manager Member or the LLC has entered into
a lump-sum key-man disability policy with respect to such Non-Manager Member,
and a different procedure is then required under such policy, then by using such
other procedure as may then be required by such insurance policy. [UNDER REVIEW
BY INSURANCE AGENT, TO BE CONSISTENT WITH INSURANCE REQUIREMENTS]
"Person" shall mean any individual, partnership (limited or general),
corporation, limited liability company, limited liability partnership,
association, trust, joint venture, unincorporated organization or any similar
entity.
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"Potential Client" shall mean, at any particular time, any Person to
whom the LLC (including, without limitation, the Predecessor) or any of its
Controlled Affiliates, through any of their officers, employees, agents or
consultants (or persons acting in any similar capacity), has, within two years
prior to such time, offered (by means of a personal meeting, telephone call, or
a letter or a written proposal specifically directed to the particular Person)
to provide Investment Management Services or Brokerage Services, but who is not
at such time an investment advisory client of, or recipient of Investment
Management Services or Brokerage Services from, the LLC or any of its Controlled
Affiliates. The preceding sentence is meant to exclude form letters, blanket
mailings, cold calls and initial marketing efforts that do not result in a
request by the recipient for further information or a presentation.
"Predecessor" shall have the meaning set forth in the preamble of this
Agreement.
"Present Client" shall mean, at any particular time, any Person who is
at such time an investment advisory client of, or recipient of Investment
Management Services or Brokerage Services from, the LLC or any of its Controlled
Affiliates.
"Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by Chase Manhattan Bank (or any successor thereto)
as its prime rate as in effect at its principal office.
"Private Funds" shall mean TBK Partners and Vanderbilt Partners, and
any other investment funds organized within or without the United States after
the Effective Date that the Manager Member and the Management Board agree to
treat as a Private Fund, and any successor entities thereto, in each case so
long as the LLC or any Controlled Affiliate thereof is providing Investment
Management Services to such investment fund. Whenever a provision of this
Agreement refers to assets in a Private Fund, that reference shall not be deemed
to include assets in a Private Fund which are managed without any compensation
therefor.
"Public Offering" shall have the meaning specified in Section 7.4(a)
hereof.
"Purchase Agreement" shall mean that certain Purchase Agreement dated
as of August 15, 1997, by and among AMG, Tweedy, Xxxxxx Company, L.P. and all
the partners of Tweedy, Xxxxxx Company L.P., as the same has been and is
hereafter amended from time to time.
"Purchase Date" shall have the meaning specified in Section 7.1(b)
hereof.
"Put" shall have the meaning specified in Section 7.1(a) hereof.
"Put LLC Points" shall have the meaning specified in Section 7.1(d)
hereof.
"Put/Call Measurement Date" shall have the meaning specified in Section
7.1(e) hereof.
"Put Notice" shall have the meaning specified in Section 7.1(d) hereof.
"Put Price" shall have the meaning specified in Section 7.1(e) hereof.
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"Receipts Account" shall have the meaning specified in Section 4.4(c)
hereof.
"Repurchase" shall have the meaning specified in Section 7.3(a)(ii)
hereof.
"Repurchase Closing Date" shall have the meaning specified in Section
7.3(b) hereof.
"Repurchased Member" shall have the meaning specified in Section 7.3(a)
hereof.
"Repurchase Price" shall have the meaning specified in Section 7.3(c)
hereof.
"Required Capital Contributions" shall have the meaning specified in
Section 4.3(a) hereof.
"Reserved Points" shall mean the LLC Points (initially 8) reserved for
issuance pursuant to the terms of the Incentive Program but not yet issued by
the LLC.
"Retirement" shall mean, with respect to a Non-Manager Member, the
termination by such Non-Manager Member of such Non-Manager Member's employment
with the LLC and its Affiliates: (a) after the date such Non-Manager Member
shall have been continuously employed by the LLC for a period of fifteen (15)
years commencing with the later of the Effective Date or the date such
Non-Manager Member becomes a Non-Manager Member of the LLC, as applicable, or
such other period as the Management Board and the Manager Member may determine
in a writing referring to a specific Non-Manager Member and (b) pursuant to a
written notice given to the LLC not less than one (1) year prior to the date of
such termination. Notwithstanding the foregoing, with respect to each of Messrs.
Xxxxxxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx and Xxxx X. Xxxxxx, the term
"Retirement" shall mean the termination by him of his employment with the LLC
after the tenth (10th) anniversary of the Effective Date and pursuant to a
written notice given to the LLC not less than one (1) year prior to the date of
such termination.
"Revenues From Operations" shall mean, for any period, the gross
revenues of the LLC (except as set forth herein and except as otherwise agreed
by the Manager Member and the Management Board in a writing making reference to
this definition), determined on an accrual basis in accordance with generally
accepted accounting principles consistently applied; provided, however, that
Revenues From Operations shall not include (i) proceeds during such period from
the sale, exchange or other disposition of all, or a substantial portion of, the
assets of the LLC, (ii) revenues from the issuance by the LLC of additional LLC
Interests or (iii) payments received pursuant to any insurance policies other
than with respect to business interruption insurance; and, provided further,
that Revenues From Operations shall be determined net of any positive difference
between revenues from the provision of Brokerage Services and commission
expenses and clearing charges paid by the LLC during the twelve (12) month
period ending as of the end of the calendar quarter ending immediately prior to
the measurement date in connection with the provision of such Brokerage Services
(assuming for this purpose that the LLC continues to follow past practices with
respect to such revenues and charges).
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"Run-Rate Free Cash Flow" shall mean, as of any measurement date, an
amount equal to the product of (i) the Run-Rate Revenues of the LLC as of such
date and (ii) the Free Cash Flow Percentage as of such date (without giving
effect to any transactions on such date).
"Run-Rate Revenues" shall mean, as of any measurement date, the sum of
(a) the aggregate revenues from all investment accounts
(excluding the Offshore Funds) to which the LLC provides Investment Management
Services (and excluding for these purposes accounts of any Present Client of the
LLC who has not yet fully invested (except for cash balances in accordance with
customary practices of the LLC) the assets managed by the LLC as set forth in
such Client's contract with the LLC), determined by multiplying the net assets
of each such account under management by the LLC as of such date by the
applicable annualized advisory services fee rate in effect as of such date with
respect to such Client account (net of any fee reimbursements or waivers);
provided, however, that with respect to each investment account which has a
performance fee component, there shall be added to Run Rate Revenues an amount
equal to the lesser of (i) fifty percent (50%) of the fees including performance
fees that have been definitively calculated, booked and paid by such investment
account with respect to such account over the twenty-four (24) months ending as
of the end of the calendar quarter immediately prior to the measurement date and
(ii) the assets managed by the LLC as set forth in such Client's contract with
the LLC as of such date, multiplied by the prevailing advisory fee rate in
effect as of such date with respect to separate account clients of the LLC;
(b) the lesser of (i) the sum for all of the Offshore Funds,
of the product of (x) the net assets under management in each Offshore Fund as
of such date and (y) the Offshore Fund Fee Rate then in effect for each such
Offshore Fund or (ii) the sum for all of the Offshore Funds, of (A) fifty
percent (50%) of the base investment advisory fees received by the LLC from the
Offshore Funds for the twenty-four (24) months ending as of the end of the
calendar quarter immediately prior to the measurement date and (B) fifty percent
(50%) of the Offshore Deemed Revenues for each Offshore Fund in each of the last
two (2) fiscal years immediately prior to the measurement date;
(c) with respect to each Present Client of the LLC whose
commitment for assets to be managed by the LLC as set forth in such Client's
contract with the LLC has not been fully invested (except for cash balances in
accordance with customary practices of the LLC), the aggregate revenues from all
such accounts, determined to be an amount that is the greater of (i) the product
of fifty percent (50%) of the net assets of such accounts committed to be
managed by the LLC as set forth in such Client's contract with the LLC and the
applicable advisory services fee rate in effect as of such date with respect to
such account and (ii) the product of the non-cash net assets and the applicable
advisory services fee rate in effect as of such date with respect to such
account (in each case, net of any fee reimbursements or waivers); and
(d) any positive difference between revenues from the
provision of Brokerage Services during the twelve (12) month period ending as of
the end of the calendar quarter ending immediately prior to the measurement date
and commission expenses and clearing charges paid by the LLC in connection with
the provision of such Brokerage Services.
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"SEC" shall mean the Securities and Exchange Commission, and any
successor Governmental Authority thereto.
"Securities Act" shall mean the Securities Act of 1933, as it may be
amended from time to time, and any successor thereto.
"Xxxxxxx" means Xxxxxx Xxxxxxx.
"Stock Price"shall have the meaning specified in Section 7.4(c)(ii)
hereof.
"TBF" shall mean Tweedy, Xxxxxx Fund Inc., an open-end management
investment company registered under the 1940 Act.
"TBK Partners" shall mean TBK Partners, L.P., a Delaware limited
partnership, and any successor entity thereto.
"Transfer" shall mean any sale, assignment, transfer, exchange, charge,
pledge, gift, hypothecation, conveyance or encumbrance (such meaning to be
equally applicable to verb and noun forms of such term), or any offer to do any
of the foregoing.
"Tweedy, Xxxxxx Value Funds" shall mean the Tweedy, Xxxxxx Value Funds,
an investment company organized under the laws of the Grand Duchy of Luxemburg
as a Societe d'Investissement a Capital Variable (including the Value
Sub-Funds), and including any successor entities thereto.
"UBT" shall have the meaning specified in Section 4.6(g) hereof.
"Unsatisfactory Performance" shall mean a written determination by the
Management Board with the written consent of the Manager Member, that a
Non-Manager Member has failed to meet minimum requirements of satisfactory
performance of his job, after such Non-Manager Member has received written
notice that the Management Board was considering such a determination and the
Non-Manager Member has had a reasonable opportunity to respond in writing or in
person (at such Non-Manager Member's request) after his receipt of such notice.
"Value Sub-Funds" shall mean each sub-fund of the Tweedy, Xxxxxx Value
Funds, including Tweedy, Xxxxxx USA Value Fund, Tweedy, Xxxxxx International
Value Fund and Tweedy, Xxxxxx International Swiss Franc Value Fund and any
additional sub-funds thereof established after the Effective Date and any
successor entities thereto.
"Vanderbilt Partners" shall mean Vanderbilt Partners, L.P., a Delaware
limited partnership, and any successor entity thereto.
"Xxxxxxx" means Xxxxxx X. Xxxxxxx, Xx.
In addition to the foregoing, other capitalized terms used in this
Agreement shall have the meaning ascribed thereto in the text of this Agreement.
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ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS.
SECTION 2.1 CONVERSION; CONTINUATION.
(a) The Original Principals and Xxxxx have agreed to continue
the business of the Predecessor as a limited liability company under and
pursuant to the provisions of the Act, and the Members hereby agree to further
continue the business as a limited liability company under and pursuant to the
provisions of the Act, and agree that the rights, duties and liabilities of the
Members shall be as provided in the Act, except as otherwise provided herein.
(b) Upon the execution of this Agreement or a counterpart of
this Agreement, the Non-Manager Members as of the Effective Date shall continue
as members of the LLC.
(c) The name, LLC Interests and Capital Contributions of each
Member (including the Fair Market Value of such Capital Contributions) shall be
listed on Schedule A attached hereto. The Manager Member shall update Schedule A
from time to time as it deems necessary to reflect accurately the information to
be contained therein. Any amendment or revision to Schedule A shall not be
deemed an amendment to this Agreement. Any reference in this Agreement to
Schedule A shall be deemed to be a reference to Schedule A as amended and in
effect from time to time and maintained with the records of the LLC.
(d) The Manager Member, as an authorized person within the
meaning of the Act, shall execute, deliver and file any certificates required or
permitted by the Act to be filed in the office of the Secretary of State of the
State of Delaware.
SECTION 2.2 NAME. Pursuant to the conversion of the Predecessor into
the LLC, the name of the Predecessor has been changed to Tweedy, Xxxxxx Company
LLC. At any time, the Management Board, with the written consent of the Manager
Member, may change the name of the LLC. The business of the LLC may be
conducted, upon compliance with all applicable laws, under any other name
designated by the Management Board with the written consent of the Manager
Member.
SECTION 2.3 TERM. As a result of the conversion of the Predecessor into
the LLC pursuant to Section 18-214 of the Act, the existence of the LLC is
deemed to have commenced as of ________, the date the Predecessor commenced its
existence. The term of the LLC shall continue in perpetuity, until the LLC is
dissolved in accordance with the provisions of this Agreement.
SECTION 2.4 REGISTERED AGENT AND REGISTERED OFFICE. The LLC's
registered agent and registered office in Delaware shall be as set forth in the
Certificate. At any time, the Manager Member may designate another registered
agent and/or registered office.
SECTION 2.5 PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the LLC shall be at 00 Xxxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx. At any
time, the Management Board may change the location of the LLC's principal place
of business; provided, however, that if the
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principal place of business is to be located outside of New York, New York, such
action must be approved by the Manager Member.
SECTION 2.6 QUALIFICATION IN OTHER JURISDICTIONS. The Management Board
shall cause the LLC to be qualified or registered (under assumed or fictitious
name if necessary) in any jurisdiction in which such qualification, formation or
registration is required.
SECTION 2.7 PURPOSES AND POWERS. The principal business activity and
purposes of the LLC shall initially be to provide Investment Management Services
and Brokerage Services, and any businesses related thereto or useful in
connection therewith. In addition, the LLC shall have the authority to engage in
any other lawful business, purpose or activity permitted by the Act which is
agreed upon in writing by the Manager Member and the Management Board, and it
shall possess and may exercise all of the powers and privileges granted by the
Act or which may be exercised by any Person, together with any powers incidental
thereto, so far as such powers or privileges are necessary or convenient to the
conduct, promotion or attainment of the business purposes or activities of the
LLC, including without limitation the following powers:
(a) to conduct its business and operations and to have and
exercise the powers granted to a limited liability company by the Act in any
state, territory or possession of the United States or in any foreign country or
jurisdiction;
(b) to purchase, receive, take, lease or otherwise acquire,
own, hold, improve, maintain, use or otherwise deal in and with, sell, convey,
lease, exchange, transfer or otherwise dispose of, mortgage, pledge, encumber or
create a security interest in all or any of its real or personal property, or
any interest therein, wherever situated;
(c) to borrow or lend money or obtain or extend credit and
other financial accommodations, to invest and reinvest its funds in any type of
security or obligation of or interest in any public, private or governmental
entity, and to give and receive interests in real and personal property as
security for the payment of funds so borrowed, loaned or invested;
(d) to make contracts, including contracts of insurance, incur
liabilities and give guaranties, including without limitation, guaranties of
obligations of other Persons who are interested in the LLC or in whom the LLC
has an interest;
(e) to guarantee the signatures of customers or others
whenever such guarantees are convenient in the conduct of the LLC's business;
(f) to employ and terminate Officers, employees, agents and
other Persons, to organize committees and boards of the LLC, to delegate to such
Persons, committees and boards any or, except as otherwise specifically set
forth in this Agreement or provided in the Act, all its power and authority, to
fix the compensation and define the duties and obligations of such personnel, to
establish and carry out retirement, incentive and benefit plans for such
personnel, and to indemnify such personnel to the extent permitted by this
Agreement and the Act;
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(g) to make donations irrespective of benefit to the LLC for
the public welfare or for community, charitable, religious, educational,
scientific, civic or similar purposes;
(h) to institute, prosecute, and defend any legal action or
arbitration proceeding involving the LLC, and to pay, adjust, compromise,
settle, or refer to arbitration any claim by or against the LLC or any of its
assets;
(i) to indemnify any Person to the fullest extent permitted by
law and to obtain any and all types of insurance;
(j) to negotiate, enter into, renegotiate, extend, renew,
terminate, modify, amend, waive, execute, acknowledge or take any other action
with respect to any lease, contract or security agreement in respect of any
assets of the LLC;
(k) to form, sponsor, organize or enter into joint ventures,
general or limited partnerships, limited liability companies, trusts and any
other combinations or associations formed for investment purposes;
(l) to make, execute, acknowledge and file any and all
documents or instruments necessary, convenient or incidental to the
accomplishment of the purposes of the LLC; and
(m) to cease its activities and cancel its Certificate.
SECTION 2.8 TITLE TO PROPERTY. All property owned by the LLC, real or
personal, tangible or intangible, shall be deemed to be owned by the LLC as an
entity, and no Member, individually, shall have any ownership of such property.
ARTICLE III - MANAGEMENT OF THE LLC.
SECTION 3.1 MANAGER MEMBER.
(a) Subject to the other terms and conditions of this
Agreement, including the delegations of power and authority set forth herein,
the management and control of the business of the LLC shall be vested
exclusively in the Manager Member, and the Manager Member shall have exclusive
power and authority, in the name of and on behalf of the LLC, to perform all
acts and do all things which, in its sole discretion, it deems necessary or
desirable to conduct the business of the LLC, without the vote or consent of the
Members in their capacity as such. No Member other than the Manager Member shall
have the power to sign for or bind the LLC to any agreement or document in its
capacity as Member, but the Manager Member may delegate the power to sign for or
bind the LLC to one or more members of the Management Board or Officers of the
LLC.
(b) The Manager Member shall, subject to all applicable
provisions of this Agreement, be authorized in the name of and on behalf of the
LLC: (i) to enter into, execute,
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amend, supplement, acknowledge and deliver any and all contracts, agreements,
leases or other instruments for the operation of the LLC's business; and (ii) in
general to do all things and execute all documents necessary or appropriate to
conduct the business of the LLC as set forth in Section 2.7 hereof, or to
protect and preserve the LLC's assets. The Manager Member may delegate any or
all of the foregoing powers.
(c) The Manager Member is required to be a Member, and shall
hold office until its resignation or removal in accordance with the provisions
hereof. The Manager Member is a "manager" (within the meaning of the Act) of the
LLC. The Manager Member shall devote such time to the business and affairs of
the LLC as it deems necessary, in its sole discretion, for the performance of
its duties, but in any event, shall not be required to devote full time to the
performance of such duties and may delegate its duties and responsibilities as
provided in this Agreement.
(d) Any action taken by the Manager Member, and the signature
of the Manager Member (or an authorized representative thereof) on any
agreement, contract, instrument or other document on behalf of the LLC, shall be
sufficient to bind the LLC and shall conclusively evidence the authority of the
LLC with respect thereto.
(e) Any Person dealing with the LLC, the Manager Member or any
Member may rely upon a certificate signed by the Manager Member as to (i) the
identity of the Manager Member or any Member; (ii) any factual matters relevant
to the affairs of the LLC; (iii) the Persons who are authorized to execute and
deliver any document on behalf of the LLC; or (iv) any action taken or omitted
by the LLC or the Manager Member.
(f) Notwithstanding the foregoing, the Manager Member shall
have no power or authority whatsoever to make recommendations with respect to or
to determine which transactions the LLC shall cause or recommend any client to
enter into, or the time at which, the party with which or the terms on which any
such transaction shall be entered into, or to exercise any right, power or
privilege with respect to the account of any Client or any of the securities or
other instruments in accounts of Clients.
(g) The LLC shall not do, and the Non-Manager Members
(including with respect to those Non-Manager Members who are members of the
Management Board or Officers, in their capacities as such) shall use all
commercially reasonable efforts to prevent the LLC from doing, any of the
following without the prior written consent of the Manager Member (which written
consent makes specific reference to this Section 3.1(g)):
(i) enter into, amend, modify or terminate any
contract, agreement or understanding (written or oral) if such
action or the resulting contract, agreement or understanding
could reasonably be expected to conflict with the provisions
of this Agreement;
(ii) take any action or series of related actions or
enter into, amend, modify or terminate any contract, agreement
or understanding (written or oral) or series of related
contracts, agreements or understandings if such action or the
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resulting contract, agreement or understanding or series
thereof could reasonably be expected to: (A) reduce the
percentage of Operating Cash Flow available in the current or
future periods for non-fixed amount bonus and incentive
payment to less than one-quarter (1/4) of Operating Cash Flow
reasonably anticipated for the relevant period or periods or
(B) effect a material reduction in the availability of Free
Cash Flow for distribution by the LLC in the then current or
future periods, or (C) have a material adverse effect on the
condition (financial or otherwise), properties, assets,
liabilities, business, operations or prospects of the LLC;
provided, however, that no consent of the Manager Member shall
be required for decisions by the Management Board in the
exercise of its reasonable good faith judgment relating to the
commencement, termination or modification of any agreement for
the provision by the LLC or any of its Controlled Affiliates
of Investment Management Services or Brokerage Services,
including rates and other terms and conditions with respect to
Investment Management Services and Brokerage Services, unless
such decision directly or indirectly benefits a Non-Manager
Member or a member of the Immediate Family of a Non-Manager
Member to the detriment of the LLC or the Manager Member;
(iii) create, incur, assume, or suffer to exist any
Indebtedness of the LLC (or its Controlled Affiliates, to the
extent such Indebtedness would be required to be included in
the consolidated balance sheet of the LLC in accordance with
GAAP), except Indebtedness of the LLC incurred to finance the
acquisition of fixed or capital assets (whether pursuant to a
deferred purchase arrangement with a vendor, a loan, a
financing lease or otherwise) in an amount outstanding at any
time not to exceed one hundred fifty thousand dollars
($150,000) (which shall be an obligation to be repaid solely
out of Operating Cash Flow); [Insert re B-D Requirement]
(iv) take any action, enter into, amend, modify or
terminate any contract, agreement or understanding (written or
oral) if such action or the resulting contract, agreement or
understanding (A) has the effect of creating a Lien upon any
of the assets of the LLC, other than Liens securing permitted
Indebtedness of the LLC incurred to finance the acquisition of
fixed or capital assets (whether pursuant to a deferred
purchase agreement with a vendor, a loan, a financing lease or
otherwise), provided that (1) such Liens shall be created
simultaneously with the acquisition of such fixed or capital
assets, (2) such Liens do not at any time encumber any
property other than the property financed by such
Indebtedness, (3) the amount of Indebtedness secured thereby
is not increased, and (4) the principal amount of Indebtedness
secured by such Lien shall at no time exceed the purchase
price of such property; or (B) has the effect of creating a
Lien upon any of that portion of the revenues of the LLC which
is included in Free Cash Flow;
(v) take any action (or omit to take any action) if
such action (or omission) could reasonably be expected to
result in the termination of the employment (including,
without limitation, a so-called constructive termination under
applicable law) by the LLC of any Non-Manager Member or enter
into,
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amend, modify or terminate any Employment Agreement or other
employment commitment or binding understanding with respect to
employment matters with any Non-Manager Member or member of
the Immediate Family of a Non-Manager Member or waive any
rights of the LLC thereunder;
(vi) establish or modify any significant compensation
arrangement (other than salary and cash bonuses in the
ordinary course) or program (whether cash or non-cash
benefits) applicable to any employee, which (A) requires the
Manager Member or any of its Affiliates (other than the LLC)
to take any action which the Manager Member views as being
contrary to the interest of the Manager Member and the
interest of any of its Affiliates and which it would not take
but for the action contemplated by the LLC or the Non-Manager
Members or Officers or (B) prevents the Manager Member or any
of its Affiliates (other than the LLC) from taking any action
which the Manager Member views as being in the interest of the
Manager Member and the interest of any of its Affiliates and
which it would otherwise have been able to take but for the
action contemplated by the LLC or the Non-Manager Members or
Officers (and in addition, each Non-Manger Member will use his
commercially reasonable efforts to cause the LLC to give the
Manager Member not less than thirty (30) days prior written
notice before the LLC establishes, terminates or modifies any
significant compensation arrangement (other than salary and
cash bonuses in the ordinary course) or program);
(vii) establish or modify any plan subject to ERISA;
(viii) enter into any line of business other than the
provision of Investment Management Services or Brokerage
Services and businesses related thereto or useful in
connection therewith;
(ix) take any action, enter into, amend, modify or
terminate any contract or agreement with any of the Offshore
Funds or the Offshore Related Partnerships (including, without
limitation, the relevant Offshore Management Agreement and the
organizational documents of such Offshore Fund) either (A)
that would have the effect of benefitting one or more of the
Non-Manager Members or members of their Immediate Family to
the detriment of the LLC or the Manager Member, or (B) that
would alter the arrangements described in Section 5.7(a); or
(x) take any action which (A) may be taken only by
the Manager Member with or without the consent of the
Non-Manager Members pursuant to any provision of this
Agreement, or (B) requires the approval or consent of the
Manager Member pursuant to any provision of this Agreement.
Whenever in this Agreement an action or determination requires the
consent of the Manager Member, such consent shall only be effective if it is
given in a writing which reasonably describes, or responds affirmatively to a
written request which reasonably describes, both the action which is proposed to
be taken and the consent which is being requested or given, and,
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unless otherwise specified in this Agreement, such consent of the Manager Member
may be given or withheld by the Manager Member acting in its reasonable
discretion.
(h) In addition to, and not in limitation of, the Manager
Member's powers and authority under this Agreement, the Manager Member shall
also have the power, in its reasonable discretion, after consultation with the
Management Board (to the extent feasible), to take any or all of the following
actions:
(i) such actions as it deems necessary or appropriate
to cause the LLC or, insofar as it is within the authority of
the LLC, any Controlled Affiliate of the LLC, or any officer,
employee, member, manager, partner, or agent thereof, to
comply with laws, rules or regulations applicable to the LLC
or such Controlled Affiliate or such Person in relation to the
LLC or such Controlled Affiliate, or any actions required by
the Manager Member in accordance with its duties hereunder;
(ii) any other action that the Manager Member is
authorized to take pursuant to the terms of this Agreement
(subject to having obtained any required Management Board
approval) and any other action necessary or appropriate to
prevent actions that require the Manager Member's consent
pursuant to the terms of this Agreement if such consent has
not then been given;
(iii) establish and mandate that the LLC participate
in employee benefit plans which are subject to ERISA or
require qualification under Section 401 of the Internal
Revenue Code in order to make the expenses of such plans
deductible and establish or modify the terms of any such plan
and take such actions as may be necessary or desirable in
connection therewith but only to the extent that the Manager
Member reasonably believes that such participation is required
by law and to the further extent the Manager Member reasonably
believes necessary to make the expense by the LLC under such
plans deductible or to comply with ERISA, as the case may be;
(iv) such actions as it deems necessary or
appropriate to coordinate any initiative which involves the
LLC (or a Controlled Affiliate of the LLC) and the Manager
Member and/or one or more of its Affiliates, but only on such
terms and conditions as the participation of the LLC in such
initiative has been approved by the Management Board; and
(v) such actions as it deems necessary or appropriate
to cause the LLC to fulfill its obligations and exercise its
rights under the Purchase Agreement.
(i) The Manager Member and its Affiliates may engage,
independently or with others, in other business ventures of every nature and
description, including the acquisition, creation, financing, trading in, and
operation and disposition of interests in, investment managers and brokers and
other businesses that may be competitive with the LLC's businesses. Neither the
LLC nor any of the Non-Manager Members shall have any right in or to any other
such ventures by virtue of this Agreement or the limited liability company
created or continued hereby, nor shall
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any such activity by the Manager Member or such Affiliates be deemed wrongful or
improper or result in any liability to the Manager Member or such Affiliates.
The Manager Member shall not be obligated to present any opportunity to the LLC
even if such opportunity is of such a character which, if presented to the LLC,
would be suitable for the LLC.
SECTION 3.2 MANAGEMENT BOARD; NON-MANAGER MEMBERS.
(a) The LLC shall have a Management Board of the LLC (the
"Management Board"). Subject to the specific rights and powers expressly
reserved to the Manager Member in this Agreement (including, without limitation,
in Sections 3.1(g) and 3.1(h) hereof), to the agreement, consent or
determination of the Manager Member in those circumstances where such agreement,
consent or determination is expressly provided for in this Agreement and to the
provisions of Section 3.1 to the extent necessary or appropriate to effectuate
the foregoing, the Manager Member hereby irrevocably delegates, to the greatest
extent permitted by applicable law, to the Management Board all of its power and
authority, in the name of and on behalf of the LLC, to perform all acts and do
all things which the Management Board, in the reasonable exercise of its good
faith judgment, deems necessary or desirable to conduct the business of the LLC,
without the vote or consent of any Member in its capacity as such. In order to
effectuate the foregoing, the Management Board shall have the rights and powers
of the Manager Member set forth in Section 3.1(b) (subject to Sections 3.1(g)
and (h)), Section 3.1(d) and Section 3.1(e) hereof. Without in any way limiting
the scope of the foregoing delegation, the Management Board shall have the sole
and exclusive power and authority to make recommendations with respect to and to
determine which transactions then Present Clients of the LLC shall enter into,
and the time at which, the parties with which and the terms on which all such
transactions shall be entered into and to exercise any rights, powers and
privileges of the LLC with respect to the accounts of Clients or any of the
securities or other instrument in accounts of Clients and shall have the power
and authority to delegate any of the powers and authorities delegated to it to
Officers and employees of the LLC as provided herein.
(b) The Management Board shall consist of Non-Manager Members
determined as follows:
(i) The Management Board shall initially have three
(3) members and shall initially consist of those Non-Manager
Members listed on Schedule B hereto. The number of members of
the Management Board may be increased by the Management Board.
No Person who is not a Non-Manager Member may be, become or
remain a member of the Management Board.
(ii) Any vacancy in the Management Board however
occurring (including a vacancy resulting from the increase in
size of the Management Board) may be filled by any other
Non-Manager Member elected by the Management Board; provided,
however, that if more than one Non-Manager Member is available
to fill such vacancy, the Manager Member shall have the right
to consent as to which Non-Manager Member shall fill such
vacancy. In lieu of filling any such vacancy, the Management
Board may determine to reduce the number of members of the
Management Board, but not, without the prior written consent
of
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the Manager Member, to a number less than three (3). If any
vacancy on the Management Board is not filled in accordance
with the first sentence of this clause (ii) and such failure
to act results in the number of members of the Management
Board being less than three (3) members for sixty (60) or more
days after the date on which the Manager Member gives the
Management Board notice of its intent to fill any such vacancy
and one (1) or more Non-Manager Members are available to fill
such vacancy, then the Manager Member may appoint one or more
Non-Manager Members to the Management Board, until the number
of members of the Management Board equals three (3), which
Person or Persons shall immediately resign if subsequent
thereto the remaining member or members of the Management
Board fill such vacancy or vacancies in the manner
contemplated by the first sentence of this clause (ii).
(iii) Non-Manager Members who are members of the
Management Board shall remain members of the Management Board
until their resignation, removal or death. Any member of the
Management Board may resign by delivering his written
resignation to any member of the Management Board and the
Manager Member. Any member of the Management Board may be
removed from such position with or without cause by the
Management Board acting by a Board Vote, with the prior
written consent of the Manager Member. Any Non-Manager Member
shall be deemed to have resigned from the Management Board and
shall no longer be a member of the Management Board
immediately upon such Non-Manager Member ceasing to be an
employee of the LLC or otherwise ceasing to be a Non-Manager
Member, in each case, for whatever reason. Any Non-Manager
Member shall be deemed to have resigned from the Management
Board and shall no longer be a member of the Management Board
immediately upon such Non-Manager Member reaching the age of
seventy (70), unless the Management Board with the prior
written consent of the Manager Member waives or modifies the
requirements of this sentence with respect to a particular
Non-Manager Member.
(c) At any meeting of the Management Board, presence in person
or by telephone (or other electronic means) of fifty percent (50%) or more of
the members of the Management Board shall constitute a quorum. At any meeting of
the Management Board at which a quorum is present, a majority of the members of
the Management Board present, which majority shall include at least fifty
percent (50%) of the Original Principals who are members of the Management Board
for so long as at least two (2) of the Original Principals are members of the
Management Board, may take any action on behalf of the Management Board (any
such action taken by such members of the Management Board is sometimes referred
to herein as a "Board Vote"). Any action required to be taken at any meeting of
the Management Board may be taken by the Management Board without a meeting of
the Management Board, if (i) a written consent thereto is signed by all the
members of the Management Board and (ii) the Manager Member has been given a
copy of such written consent not less than forty-eight (48) hours prior to such
action. Notice of the time, date and place of all meetings of the Management
Board shall be given to all members of the Management Board and, upon request,
to the Manager Member at least forty-eight (48) hours in advance of the meeting.
A representative of the Manager Member shall be entitled
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to attend each meeting of the Management Board. Notice need not be given to any
member of the Management Board or the Manager Member if a waiver of notice is
given (orally or in writing) by such member of the Management Board or the
Manager Member (as applicable), before, at or after the meeting. Members of the
Management Board are not "managers" (within the meaning of the Act) of the LLC.
SECTION 3.3 OFFICERS. The Management Board may designate employees of
the LLC as officers of the LLC (the "Officers") as it deems necessary or
desirable to carry on the business of the LLC. Any two or more offices may be
held by the same Person. New offices may be created and filled by the Management
Board. Each Officer shall hold office until his successor is designated by the
Management Board or until his earlier death, resignation or removal. Any Officer
may resign at any time upon written notice to the LLC and the Manager Member.
Any Officer designated by the Management Board may be removed by the Management
Board (excluding the Person being considered) For Cause or not For Cause at any
time, subject to the terms of such Officer's Employment Agreement with the LLC,
if any. A vacancy in any office occurring because of death, resignation, removal
or otherwise may be filled by the Management Board. Any designation of Officers,
a description of any duties delegated to such Officers, and any removal of such
Officers shall be approved by the Management Board in writing, which shall be
delivered to the Manager Member. The Officers are not "managers" (within the
meaning of the Act) of the LLC. The Management Board may delegate any or all of
the power and authority delegated to it to one or more of such Officers subject
to the right of the Management Board to modify or withdraw any or all of any
such delegation and, unless otherwise set forth in a written delegation of power
and authority by the Management Board, to the right of any member of the
Management Board to withdraw any or all of any such delegation by written notice
to the Officer or Officers in question, which notice shall, upon receipt, have
the same effect as a Board Vote.
SECTION 3.4 EMPLOYEES OF THE LLC.
(a) The terms of employment of any employee of the LLC who is
not a Non-Manager Member (including, without limitation, with respect to the
hiring, promoting, demoting and terminating of such employees), shall be
determined by the Management Board or such Person or Persons to whom the
Management Board may delegate such power and authority, subject, in all cases,
to compliance with all applicable laws, rules and regulations and, in the case
of compensation, to the provisions of 3.5 hereof. Notwithstanding the foregoing,
the Manager Member may terminate the employment by the LLC of any employee who
has engaged in any activity included in the definition of "For Cause;" (subject,
in the case of clause (b) of the definition of For Cause to the joint
determination of the Management Board and the Manager Member as set forth
therein) provided, however, that the Manager Member may not so terminate the
employment of any such employee without having first consulted with the
Management Board and given written notice to the Management Board specifying the
reasons for such decision.
(b) The granting or Transferring of LLC Interests in
connection with any hiring or promotion of an employee shall be subject to the
terms and conditions set forth in Articles V and VI hereof.
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(c) Any Person who is a Non-Manager Member may have his
employment with the LLC terminated by the LLC only: (i) in the case of a
termination For Cause, by either the Manager Member or the Management Board
acting with the prior written consent of the Manager Member, or (ii) in the case
of any other termination by the LLC, by the Management Board with the prior
written consent of the Manager Member.
(d) Subject to the other provisions of this Agreement
(including, without limitation, Section 3.5), the compensation and other terms
of employment of an employee who is a Non-Manager Member shall be set by the
Management Board.
SECTION 3.5 OPERATION OF THE BUSINESS OF THE LLC.
(a) The Operating Cash Flow of the LLC for any period (reduced
by any portion thereof attributable to performance fees accrued in such period
but not paid in such period and increased by the portion of any performance fees
paid in such period that were included in Operating Cash Flow of a previous
quarter) shall be used by the LLC to provide for and pay its business expenses
and expenditures as determined by the Management Board; including, without
limitation, compensation and benefits to its employees, including the Officers.
Without the prior written consent of the Manager Member (which written consent
makes specific reference to this Section 3.5(a)), the LLC shall not incur (and
the Non-Manager Members shall use all commercially reasonable efforts to prevent
the LLC from incurring) any expenses or obligations that exceed its ability to
pay or provide for them out of its Operating Cash Flow (as adjusted in
accordance with the parenthetical set forth in the first sentence of this
Section 3.5(a)) on a current or previously reserved basis. Except to the extent
otherwise required by applicable law, the LLC shall only make payments of
compensation to the Non-Manager Members who are employees of the LLC out of the
balance of its Operating Cash Flow (as adjusted in accordance with the
parenthetical set forth in the first sentence of this Section 3.5(a)) remaining
after the payment (or reservation for payment) of all the other business
expenses and expenditures for the applicable period. Any excess Operating Cash
Flow (as adjusted in accordance with the parenthetical set forth in the first
sentence of this Section 3.5(a)) remaining for any fiscal year following the
payment (or reservation for payment) of all business expenses and expenditures
may be used by the LLC in such fiscal year or any or all of such excess
Operating Cash Flow may be reserved for use in future fiscal years for any
permissible purpose. Revenues From Operations other than the portion which
constitutes Operating Cash Flow may be used to provide for and pay the business
expenses of the LLC only to the extent agreed to in writing by the Manager
Member and the Management Board (any such use being referred to herein as a
"Free Cash Flow Expenditure").
(b) The LLC will maintain (and the Non-Manager Members shall
use all commercially reasonable efforts to cause the LLC to maintain), in full
force and effect, such insurance as is customarily maintained by companies of
similar size in the same or similar businesses (including, without limitation,
errors and omissions liability insurance but excluding key-man life insurance),
the premiums on which will be paid out of Operating Cash Flow. The LLC may or
the Manager Member may maintain key-man life insurance and disability insurance
policies on each Non-Manager Member, from time to time, and the Non-Manager
Members will use all commercially reasonable efforts to cooperate with the
Manager Member and the LLC to effectuate the foregoing; provided, however, that
the LLC shall not maintain such insurance unless
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the Management Board and the Manager Member so agree, in which case, they may
also agree to treat the premiums thereon as a Free Cash Flow Expenditure.
(c) Notwithstanding any of the provisions of this Agreement to
the contrary, all accounting, financial reporting and bookkeeping procedures of
the LLC shall be established in conjunction with policies and procedures
determined under the supervision of the Manager Member in connection with
similar matters for other Affiliates of the Manager Member. The LLC shall have a
continuing obligation to keep the Manager Member's chief financial officer
informed of material financial developments with respect to the LLC.
Notwithstanding any of the provisions of this Agreement to the contrary, all
legal, compliance and regulatory matters of the LLC shall be coordinated with
the Manager Member, and the LLC shall have an ongoing obligation to keep the
Manager Member informed of all legal, compliance and related activities, in
accordance with procedures to be established by the Manager Member and the
Management Board.
(d) Notwithstanding any of the provisions of this Agreement to
the contrary, the Non-Manager Members will cooperate with the Manager Member and
its Affiliates in implementing any initiative which involves the LLC (or a
Controlled Affiliate of the LLC) and the Manager Member and/or one or more of
its other Affiliates, but only on such terms and conditions as the participation
of the LLC in such initiative has been approved by the Management Board.
SECTION 3.6 COMPENSATION AND EXPENSES OF THE MEMBERS. The Manager
Member may receive compensation for services provided to the LLC only to the
extent approved by the Management Board. The LLC shall, however, pay and/or
reimburse the Manager Member for all reasonable travel expenses incurred by the
Manager Member in accordance with Section 9.4 as well as (i) any expenses
incurred by the Manager Member in connection with the operation of the LLC as
approved or directed by the Management Board or any duly authorized Officer,
(ii) the applicable portion of any expenses incurred by the Manager Member in
connection with any initiative which involves the LLC and/or one or more of the
Manager Member's other Affiliates, but only on such terms and conditions as the
participation of the LLC in such initiative has been approved by the Management
Board, and (iii) any expenses incurred by the Manager Member in connection with
its exercise of its powers under Section 3.1(h)(i) of this Agreement. Without
limiting the generality of the foregoing, the Manager Member's general overhead
items (including, without limitation, salaries and rent) shall not be reimbursed
by the LLC. Stockholders, officers, directors, managers, members and agents of
Members may serve as employees of the LLC and be compensated therefor out of
Operating Cash Flow as determined by the Management Board.
SECTION 3.7 NON-MANAGER MEMBERS AND NON-SOLICITATION AGREEMENTS. Each
of the Original Principals has entered into an Employment Agreement with the LLC
as of the Effective Date in the form attached to the Purchase Agreement as
Exhibit 8.9 thereto. Each of the Members hereby consents to each such Employment
Agreement. Each Non-Manager Member, other than such Original Principals and
Xxxxx, has provided the LLC with a Non-Solicitation/Non-Disclosure Agreement in
form and substance substantially similar to Exhibit B hereto (the
"Non-Solicitation Agreement") (and, in the case of any substitute Non-Manager
Member (pursuant to Section 5.2 hereof) or Additional Non-Manager Member who is
not already bound by a Non-Solicitation Agreement, he shall, prior to and as a
condition precedent to becoming a Non-Manager Member, provide the LLC with such
an agreement (together with any changes or modifications thereto as
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the Manager Member with the consent of the Management Board may deem necessary
or desirable) and such agreements shall, at all times, provide that each of the
LLC and the Manager Member shall be entitled to enforce the provisions of such
agreements on its own behalf and that the Manager Member shall be entitled to
enforce the provisions of such agreements on behalf of the LLC.
SECTION 3.8 NON-SOLICITATION AND NON-DISCLOSURE BY NON-MANAGER MEMBERS.
(a) Each Non-Manager Member (other than Xxxxx) agrees, for the
benefit of the LLC and the other Members, that such Non-Manager Member shall
not, while employed by the LLC or any of its Affiliates, without the express
written consent of the Manager Member and the Management Board, directly or
indirectly, whether as owner, part-owner, shareholder, partner, member,
director, officer, manager, trustee, employee, agent or consultant, or in any
other capacity, on behalf of himself or any firm, corporation or other business
organization other than the LLC and its Controlled Affiliates, engage in any
activity described in Section 3.8(b), including, with respect to Section
3.8(b)(i), without regard to whether any such Person is a Client.
(b) In addition to, and not in limitation of, the provisions
of Section 3.8(a) hereto, each Non-Manager Member (other than Xxxxx) agrees, for
the benefit of the LLC and the other Members, that such Non-Manager Member shall
not, during the period beginning on the date such Non-Manager Member becomes a
Non-Manager Member, and continuing until the date which is two (2) years after
the termination of such Non-Manager Member's employment with the LLC and its
Controlled Affiliates (unless a different period is agreed to by the Manager
Member and the Management Board in a writing making specific reference to this
Section 3.8(b) and naming the Manager Member to whom such different period is to
apply), without the express written consent of the Manager Member and the
Management Board, directly or indirectly, whether as owner, part-owner,
shareholder, partner, member, director, officer, manager, trustee, employee,
agent or consultant, or in any other capacity, on behalf of himself or any firm,
corporation or other business organization other than the LLC and its Controlled
Affiliates:
(i) provide Investment Management Services or
Brokerage Services to any Person that is a Client of the LLC or any of
its Controlled Affiliates;
(ii) solicit or induce, whether directly or
indirectly, any Person for the purpose (which need not be the sole or
primary purpose) of (A) causing any funds with respect to which the LLC
provides Investment Management Services or Brokerage Services to be
withdrawn from such management, or (B) causing any Client of the LLC
(including any Potential Clients) not to engage the LLC or any of its
Controlled Affiliates to provide Investment Management Services or
Brokerage Services for any additional funds;
(iii) contact or communicate with, in either case in
connection with Investment Management Services or Brokerage Services,
whether directly or indirectly, any Client of the LLC; or
(iv) solicit or induce, or attempt to solicit or
induce, directly or indirectly, any employee or agent of, or consultant
to, the LLC or any of its Controlled
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Affiliates to terminate its, his relationship therewith, hire any such
employee, agent or consultant, or former employee, agent or consultant,
or work in any enterprise involving Investment Management Services or
Brokerage Services with any employee, agent or consultant or former
employee, agent or consultant, of the LLC or its Controlled Affiliates
who was employed by or acted as an agent or consultant to the LLC or
its Controlled Affiliates at any time preceding the termination of such
Non-Manager Member's employment (excluding for all purposes of this
sentence, secretaries and individuals holding other similar positions).
(c) For purposes of Sections 3.8(a) and 3.8(b), in determining
who is included in the definition of "Client" of the LLC, (x) the term "Past
Client" shall be limited to those Past Clients who were advisees or investment
advisory clients of, or recipients of Investment Management Services or
Brokerage Services from, the LLC and its Controlled Affiliates (including the
Predecessor) at the date of termination of such Non-Manager Member's employment
or at any time during the twelve (12) months immediately preceding the date of
such termination, (y) the term "Potential Client" shall be limited to those
Persons to whom an offer was made within two (2) years prior to the date of
termination of such Non-Manager Member's employment, and (z) neither the term
"Client" nor the term "Person" shall include any Person who is included in the
definition of "Immediate Family" with respect to such Non-Manager Member.
Notwithstanding the provisions of Sections 3.8(a) and 3.8(b) hereof,
any Non-Manager Member may make passive investments in the Manager Member or in
a competitive enterprise the shares or other equity interests of which are (A)
publicly traded, provided his holding therein, together with any holdings of his
Affiliates and members of his Immediate Family, are less than five percent (5%)
of the outstanding shares of comparable interests in such entity at the time
such investments are made or (B) not publicly traded, provided such holdings do
not at any time exceed such percentage, and such enterprise, either by itself or
together with its Affiliates does not derive more than 20% of its gross revenues
from competitive activities.
(d) Each Non-Manager Member agrees that any and all presently
existing investment advisory businesses of the LLC and its Controlled Affiliates
(including the Predecessor), and all businesses developed by the LLC and its
Controlled Affiliates, including by such Non-Manager Member or any other
employee of the LLC (including the Predecessor), including without limitation,
all investment methodologies, all investment advisory contracts, fees and fee
schedules, commissions, records, data, client lists, agreements, trade secrets,
and any other incident of any business developed by the LLC (or the Predecessor)
or its Controlled Affiliates or earned or carried on by the Non-Manager Member
for the LLC or the Predecessor or their respective Controlled Affiliates other
than any such matters that are in the public record (unless they are so
available by virtue of a breach of the provisions of this Section 3.8), and all
trade names, service marks and logos under which the LLC or its Affiliates do
business, and any combinations or variations thereof and all related logos, are
and shall be the exclusive property of the LLC or such Controlled Affiliate, as
applicable, for its or their sole use, and (where applicable) shall be payable
directly to the LLC or such Controlled Affiliate. In addition, each Non-Manager
Member acknowledges and agrees that the investment performance of the accounts
managed by the LLC (and the Predecessor) was attributable to the efforts of the
team of professionals of the LLC (or the Predecessor, as applicable) and not to
the efforts of any single
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individual, and that therefore, the performance records of the accounts managed
by the LLC (and the Predecessor) are and shall be the exclusive property of the
LLC. Each Non-Manager Member acknowledges that, in the course of performing
services hereunder and otherwise (including, without limitation, for the
Predecessor), the Non-Manager Member has had, and will from time to time have,
access to information of a confidential or proprietary nature, including without
limitation, confidential or proprietary investment methodologies, trade secrets,
proprietary or confidential plans, client identities and information, client
lists, service providers, business operations or techniques, records and data
("Intellectual Property") owned or used in the course of business by the LLC or
its Controlled Affiliates. Each Non-Manager Member agrees always to keep secret
and not ever publish, divulge, furnish, use or make accessible to anyone
(otherwise than in the regular business of the LLC) any Intellectual Property of
the LLC or any Controlled Affiliate thereof that is not otherwise publicly
available (other than Intellectual Property that is publicly available by virtue
of a breach of the provisions of this Section 3.8). At the termination of the
Non-Manager Member's services to the LLC, all data, memoranda, client lists,
notes, programs and other papers, items and tangible media, and reproductions
thereof relating to the foregoing matters in the Non-Manager Member's possession
or control, shall be returned to the LLC and remain in the LLC's possession
(except where the return of such items shall be unreasonable or impractical in
relation to the importance or confidentiality of such items).
(e) Each Non-Manager Member acknowledges that, in the course
of entering into this Agreement, the Non-Manager Member has had and, in the
course of the operation of the LLC, the Non-Manager Member will from time to
time have, access to Intellectual Property owned by or used in the course of
business by the Manager Member. Each Non-Manager Member agrees, for the benefit
of the LLC and its Members, and for the benefit of the Manager Member, always to
keep secret and not ever publish, divulge, furnish, use or make accessible to
anyone (otherwise than with the Manager Member's consent) any knowledge or
information regarding Intellectual Property of the Manager Member that is not
otherwise publicly available (other than Intellectual Property that is publicly
available by virtue of a breach of the provisions of this Section 3.8). At the
termination of the Non-Manager Member's service to the LLC, all data, memoranda,
documents, notes and other papers, items and tangible media, and reproductions
thereof relating to the foregoing matters in the Non-Manager Member's possession
or control shall be returned to the Manager Member and remain in its possession.
(f) The provisions of this Section 3.8 shall not be deemed to
limit any of the rights of the LLC or the Manager Member under any of the
Employment Agreements, Non-Solicitation Agreements or under applicable law, but
shall be in addition to the rights set forth in each of the Employment
Agreements and Non-Solicitation Agreements, and those which arise under
applicable law.
SECTION 3.9 REMEDIES UPON BREACH.
(a) In the event that, following the termination of his
employment with the LLC, a Non-Manager Member (i) breaches any of the provisions
of Section 3.8 hereof, or (ii) breaches any of the provisions of the Employment
Agreement or Non-Solicitation Agreement to which he is a party (in each case, in
a manner that causes or could reasonably be expected to cause harm that is not
immaterial or insignificant to the LLC or the Manager Member), then (A) such
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Non-Manager Member shall forfeit its right to receive any distributions under
Section 4.4 hereof not yet received, (B) such Non-Manager Member shall forfeit
its right to receive any payment for its LLC Interests under Sections 7.1, 7.2,
7.3 or 7.4 hereof if such payment has not yet been received, and (C) the Manager
Member (or its assignees) shall have no further obligations under any promissory
note theretofore issued to such Non-Manager Member pursuant to Section 7.3(e)
hereof, and such promissory note shall be deemed to be canceled as of such
breach.
(b) Each Non-Manager Member agrees that any breach of the
provisions of Section 3.8 of this Agreement or of the provisions of the
Employment Agreement or Non-Solicitation Agreement by such Non-Manager Member
could cause irreparable damage to the LLC, the other Non-Manager Members and the
Manager Member. The LLC and the Manager Member, shall have the right to an
injunction or other equitable relief (in addition to other legal remedies) to
prevent any violation of a Non-Manager Member's obligations hereunder or
thereunder.
SECTION 3.10 NO EMPLOYMENT OBLIGATION. Each Non-Manager Member
acknowledges that neither this Agreement nor the provisions of the
Non-Solicitation Agreement create an obligation on the part of the LLC to
continue the employment of such Non-Manager Member with the LLC, and that such
Non-Manager Member, unless he is a party to an Employment Agreement, is an
employee at will of the LLC.
SECTION 3.11 FUNDING OBLIGATION. Each of the Original Principals
covenants and agrees to place under investment management of the LLC either
directly or in one or more of the Mutual Funds, Private Funds or Offshore Funds,
as such Original Principal may select, an additional (i.e., in addition to those
amounts which such Original Principals currently have, directly or indirectly,
under investment management of the LLC at the Effective Date) aggregate amount
equal to [_____%] of that portion of the LLC Interest Purchase Price (as defined
in the Purchase Agreement) paid by AMG to that Original Principal, and to
maintain such additional invested amount for a period of time not shorter than
that period commencing on the date such additional funds are placed under
investment management of the LLC and ending on the later of (i) the tenth (10th)
anniversary of the Effective Date or (ii) the termination of employment of such
Original Principal with the LLC for any reason or, if earlier, the date on which
(A) there shall have occurred a change in control of the Manager Member as a
result of an unaffiliated third party acquiring in excess of forty percent (40%)
of the outstanding capital stock of the Manager Member other than in the
context of an acquisition by the Manager Member, (B) all of the Original
Principals shall have ceased to be Members other than as a result of their
resignation or termination For Cause prior to the stated terms of the Employment
Agreements, or (C) such Original Principal shall have died or become Permanently
Incapacitated. The Original Principals, the LLC and the other Members of the LLC
hereby acknowledge and agree that none of the Original Principals may withdraw
any such additional invested amount until expiration of the applicable period
set forth in the preceding sentence, unless such amount is simultaneously placed
under management of the LLC by such Original Principal either directly or in one
or more of the Mutual Funds, Private Funds or Offshore Funds as such Original
Principal may select; provided, however, that an Original Principal is permitted
to withdraw from the management of the LLC any amounts representing amounts
which such Original Principal has, directly or indirectly, under management of
the LLC at the Effective Date, any appreciation thereon, any appreciation over
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such Original Principal's additional invested amount and any amounts necessary
to pay taxes on any gains realized with respect to investments made with such
additional amount, provided, further, however, that (i) such amounts shall not
be withdrawn from the escrow established pursuant to Section 8.15 of the
Purchase Agreement except as set forth in the Escrow Agreement (as defined in
the Purchase Agreement) and (ii) with respect to such amounts as may be
withdrawn for purposes of paying taxes, such amounts shall not be withdrawn
except to the extent the realized appreciation on the additional invested amount
available for distribution is insufficient to pay such taxes. Each Original
Principal shall place the required amount of funds under management of the LLC
during the first twelve (12) months after the Effective Date at a rate not less
than twenty-five percent (25%) of such amount per three-month period. All funds
of Xxxxx, each of the Original Principals and each Person treated as a member of
the Immediate Family of any of the foregoing placed under direct or indirect
management of the LLC may, in the sole discretion of the Management Board, be
managed by the LLC and its Controlled Affiliates without the imposition of any
investment advisory fees or profit allocations or similar costs by the LLC with
respect to any account of any such Person or with respect to the interest of any
such Person in any Private Fund, Offshore Fund or, to the extent not
inconsistent with the tax status thereof and subject to the consent of the
Manager Member (which consent shall not be unreasonably withheld), Mutual Fund
to which the LLC provides Investment Management Services.
SECTION 3.12 MISCELLANEOUS. Each Non-Manager Member agrees that the
enforcement of the provisions of Sections 3.8 and 3.9 hereof, and the
enforcement of the provisions of the Employment Agreements and Non-Solicitation
Agreements are necessary to ensure the protection and continuity of the
business, goodwill and confidential business information of the LLC for the
benefit of each of the Members. Each Non-Manager Member agrees that, due to the
proprietary nature of the LLC's business, the restrictions set forth in Section
3.8 hereof and in the Employee Agreements and Non-Solicitation Agreements are
reasonable as to duration and scope. If any provision contained in this Article
III shall for any reason be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Article III. It is the intention of the parties hereto
that if any of the restrictions or covenants contained herein is held to cover a
geographic area or to be for a length of time that is not permitted by
applicable law, or is any way construed to be too broad or to any extent
invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would then be valid or enforceable
under applicable law, such provision shall be construed and interpreted or
reformed to provide for a restriction or covenant having the maximum enforceable
geographic area, time period and other provisions as shall be valid and
enforceable under applicable law.
Each Non-Manager Member acknowledges that the obligations and rights
under Sections 3.8, 3.9 and 3.11 hereof and this Section 3.12 shall survive the
termination of the employment of such Non-Manager Member with the LLC and/or the
withdrawal or removal of such Non-Manager Member from the LLC, regardless of the
manner of such termination, withdrawal or removal in accordance with the
provisions hereof and of the relevant Employment Agreement or Non-Solicitation
Agreement. Except as agreed to by the Manager Member, in advance, in a writing
making specific reference to this Article III, no Non-Manager Member shall enter
into any agreement or arrangement which is inconsistent with the terms and
provisions of this Agreement.
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SECTION 3.13 MEMBERS. Members, in their capacity as such, shall have no
right to amend or terminate this Agreement or to appoint, select, vote for or
remove the Manager Member, the Officers or their agents or to exercise voting
rights or call a meeting of the Members, except as specifically provided in this
Agreement.
ARTICLE IV - CAPITAL ACCOUNTS; ALLOCATIONS; DISTRIBUTIONS.
SECTION 4.1 CAPITAL ACCOUNTS.
(a) There shall be established for each Member a Capital
Account which shall initially be equal to the Capital Account of such Member as
set forth on Schedule A hereto. No Member shall have the right to withdraw any
part of his (including their predecessors in interest) Capital Account
(including, without limitation, such Member's Capital Contributions) until the
dissolution and winding up of the LLC, except as distributions pursuant to this
Article IV may represent returns of capital, in whole or in part. No Member
shall be entitled to receive any interest on any Capital Account balance
(including, without limitation, such Member's Capital Contributions). No Member
shall have any personal liability for the repayment of any Capital Contribution
of any other Member. Except as may be agreed to in connection with the issuance
of additional LLC Interests, as specifically set forth herein (including,
without limitation in Section 4.3 hereof), or as may be required under
applicable law, the Members shall not be required to make any further
contributions to the LLC. No Member shall make any contribution to the LLC
without the prior consent of the Manager Member, except Required Capital
Contributions pursuant to Section 4.3 hereof, reservations of Operating Cash
Flow not utilized in a particular fiscal year or, at the option of any
Non-Manager Member, to fund any portion of any amounts by which regular
operating expenses exceed Operating Cash Flow.
(b) The Capital Account of each Member shall be adjusted in
the following manner. Each Capital Account shall be increased by such Member's
allocable share of income and gain, if any, of the LLC (as well as the Capital
Contributions made by a Member after the Effective Date) and shall be decreased
by such Member's allocable share of deductions and losses, if any, of the LLC,
and by the amount of all distributions made to such Member. The amount of any
distribution of assets other than cash shall be deemed to be the Fair Market
Value of such assets (net of any liabilities encumbering such property that the
distributee Member is considered to assume or take subject to). Capital Accounts
shall also be adjusted upon the issuance of additional LLC Interests as set
forth in Section 5.5(c) hereof. Capital Accounts may also be adjusted upon the
Transfer of LLC Interests as set forth in Section 5.2(b).
SECTION 4.2 ALLOCATIONS.
(a) Subject to Sections 4.2 (c), 4.2(e) and 4.6 hereof, all
items of LLC income and gain shall be allocated among the Members' Capital
Accounts at the end of every quarter as follows: *** [The remainder of this
section (approximately 3 pages) has been omitted pursuant to the confidential
treatment request referenced on the cover page hereto. The omitted portion has
been filed separately with the Commission.] ***
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SECTION 4.3 CAPITAL CONTRIBUTION FOR OFFSHORE SHORTFALLS.
(a) By no later than the thirtieth (30th) day (the "Due Date")
following the end of each fiscal quarter of the LLC, each Original Principal and
Xxxxx shall be required to make a Capital Contribution to the LLC in an amount
equal to his Offshore Shortfall for that quarter (the "Required Capital
Contributions"). Unless otherwise determined by a writing signed by each of the
Original Principals and Xxxxx who is then a Member (and delivered to the LLC and
the Manager Member), the Offshore Shortfall for each Original Principal or Xxxxx
shall equal the product of the aggregate Offshore Shortfall and a fraction the
numerator of which is the number of LLC Points held by such Original Principal
and Xxxxx on the first day of such quarter and the denominator of which is the
number of LLC Points held by all Original Principals or Xxxxx on the first day
of such quarter. For purposes hereof, each Original Principal and Xxxxx will be
treated as if he holds, in addition to his LLC Points, that number of LLC Points
equal to the number of Reserved Points set forth opposite his name on Schedule A
hereto as of the effective date of the transaction.
(b) All Required Capital Contributions shall be paid to the
LLC by transfer (by wire or otherwise) of immediately available funds (or by
such other means as an Original Principal or Xxxxx and the Manager Member may
agree) on or before the Due Date for that Required Capital Contribution.
(c) If an Original Principal or Xxxxx fails to pay his
Required Capital Contribution under this Section 4.3 on the Due Date therefor,
then the LLC or the Manager Member shall notify such Original Principal or Xxxxx
of such failure within two (2) days after such payment is due (which notice may
be by telephone followed by confirmation by telecopy (receipt confirmed),
overnight carrier or registered or certified mail), provided that the failure to
give such notice shall not affect the liability of such Original Principal or
Xxxxx to make such Required Capital Contribution or subject the LLC or any
Member (including, without limitation, the Manager Member, but excluding such
Original Principal or Xxxxx) to any liability hereunder or otherwise. An
Original Principal or Xxxxx who fails to make Required Capital Contribution
prior to the expiration of seven (7) days after such notice (the "Date of
Default") shall be a "Defaulting Member." The obligation of a Defaulting Member
to make a Required Capital Contribution shall bear interest from and after the
Date of Default at a rate equal to the Prime Rate plus five percent (5%) per
annum, which interest shall compound quarterly. Any distributions or other
payments by the LLC or the Manager Member to which the Defaulting Member would
otherwise be entitled pursuant to this Agreement (including, without limitation,
pursuant to Sections 4.4, 4.5 and 4.6 hereof) shall be applied by the LLC or the
Manager Member to the debt of the Defaulting Member hereunder until such debt
shall be repaid and any such distribution or other payment shall be deemed to
have been distributed or paid to the Defaulting Member. In addition, any
discretionary bonus or other discretionary payment (as opposed to regular
salary) to which the Defaulting Member would otherwise be entitled pursuant to
the provisions of Section 3.3 or otherwise, shall be applied by the LLC to the
debt of the Defaulting Member hereunder until such debt shall be repaid.
Any Defaulting Member shall also pay, on demand, all costs, including
court costs and reasonable attorneys' fees, paid or incurred by the LLC or the
Manager Member in collecting a
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Required Capital Contribution from a Defaulting Member. If the Defaulting Member
fails to make such payments immediately after the demand for payment thereof,
then provisions of the foregoing paragraph shall apply to such amounts as if the
demand were a notice of default (and the date thereof were the Date of Default),
with the seventh day preceding such notice being the Due Date.
The provisions of this Section 4.3(c) are hereby expressly limited so
that in no contingency or event whatsoever shall the amount paid or agreed to be
paid to the LLC exceed the maximum amount of interest permitted by law, and in
the event any interest hereunder were to exceed the maximum amount of interest
permitted by law, such excess interest shall be deemed to be a mistake and shall
either be reduced immediately and automatically to the maximum amount permitted
by law or, if required to comply with applicable law, be canceled automatically
and, if theretofore paid, be credited on the principal amount of the obligation
of the Defaulting Member for his share of a Offshore Shortfall outstanding and,
to the extent such a credit is insufficient, be refunded.
SECTION 4.4 DISTRIBUTIONS.
****************[This section (approximately 3 pages) has been omitted
pursuant to the confidential treatment request referred to on the cover page
hereto. The omitted portions have been filed separately with the
Commission.]***************
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SECTION 4.5 DISTRIBUTIONS UPON DISSOLUTION; ESTABLISHMENT OF A RESERVE
UPON DISSOLUTION. Upon the dissolution of the LLC, after payment (or the making
of reasonable provision for the payment) of all liabilities of the LLC owing to
creditors, the Manager Member, or if there is none, the Liquidating Trustee
appointed as set forth in Section 8.4 hereof, shall set up such reserves as it
deems reasonably necessary for any contingent, conditional or unmatured
liabilities or other obligations of the LLC. Such reserves may be paid over by
the Manager Member or Liquidating Trustee to a bank (or other third party), to
be held in escrow for the purpose of paying any such contingent, conditional or
unmatured liabilities or other obligations. At the expiration of such period(s)
as the Manager Member or Liquidating Trustee may deem advisable, such reserves,
if any (and any other assets available for distribution), or a portion thereof,
shall be distributed to the Members (i) in accordance with the positive balance
(if any) in their respective Capital Accounts (as determined immediately prior
to each such distribution) until all such positive Capital Account balances have
been reduced to zero (0), and (ii) thereafter, among the Members as of the date
of dissolution in accordance with their respective numbers of LLC Points as of
the date of dissolution. If any assets of the LLC are to be distributed in kind
in connection with such liquidation, such assets shall be distributed on the
basis of their Fair Market Value net of any liabilities encumbering such assets
and, to the greatest extent possible, shall be distributed pro-rata in
accordance with the total amounts to be distributed to each Member. Immediately
prior to the effectiveness of any such distribution-in-kind, each item of gain
and loss that would have been recognized by the LLC had the property being
distributed been sold at Fair Market Value shall be determined and allocated to
those persons who were Members immediately prior to the effectiveness of such
distribution in accordance with Sections 4.3(c) and 4.3(d) hereof.
SECTION 4.6 PROCEEDS FROM CAPITAL CONTRIBUTIONS AND THE SALE OF
SECURITIES; INSURANCE PROCEEDS; CERTAIN SPECIAL ALLOCATIONS AND DISTRIBUTIONS.
(a) Capital Contributions made by any Member after the
Effective Date other than Required Capital Contributions from Original
Principals, and other proceeds from the issuance of securities by the LLC may,
in the sole discretion of the Manager Member, be used for the benefit of the LLC
(including, without limitation, the repurchase or redemption of LLC Interests),
or, may be distributed by the LLC, in which case, any such proceeds shall be
allocated and distributed among the Members in accordance with their respective
LLC Points immediately prior to the date of such contribution or issuance of
securities; it being understood that in the case the proceeds are a note
receivable, any such distribution shall only occur, if at all, upon receipt by
the LLC of any cash in respect thereof.
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(b) In the event of the death or Permanent Incapacity of a
Non-Manager Member covered by key-man life or disability insurance, as
applicable, the premiums on which have been paid by the LLC, the proceeds of any
such policy shall first be used by the LLC to fund (to the extent thereof) the
Repurchase of LLC Interests from the Non-Manager Member in accordance with
Section 7.3 hereof and, if the proceeds exceed the amounts so required to effect
such Repurchase, then the amount of such excess proceeds may, in the sole
discretion of the Manager Member, be used for the benefit of the LLC, or, may be
distributed by the LLC, in which case, any such proceeds shall be allocated and
distributed among the Members in accordance with their respective LLC Points
immediately following the Repurchase of the LLC Interests from such Non-Manager
Member.
(c) Items of depreciation or amortization (as calculated for
book purposes in accordance with generally accepted accounting principles,
consistently applied, except that the gross book value of the property of the
LLC on the Effective Date shall be marked to the fair market value of such
property based upon the purchase price paid by the Manager Member for its LLC
Interest as reflected on Schedule A) on account of the property of the LLC on
the Effective Date, shall be specially allocated among the Members in accordance
with Capital Accounts on the Effective Date. All items of depreciation or
amortization (as calculated for book purposes in accordance with generally
accepted accounting principles, consistently applied) on account of property
purchased out of Operating Cash Flow (other than Free Cash Flow Expenditures)
shall be allocated as set forth in Section 4.2(b) hereof, and all items of
depreciation or amortization (as calculated for book purposes in accordance with
generally accepted accounting principles, consistently applied) on account of
property purchased out of Free Cash Flow Expenditures shall be allocated among
the Members [other than Xxxxx] in the same proportion as such Members' allocated
portions of Free Cash Flow were reduced in order to reserve funds for the
purchase of such property.
(d) All items of LLC loss and deduction on account of Free
Cash Flow Expenditures (other than those covered by Section 4.6(c)) shall be
allocated among the Members in amounts equal to the amounts that Free Cash Flow
to be distributed under Section 4.4(c) was reduced for the purpose of making
such Free Cash Flow Expenditure.
(e) All items of LLC deduction arising in connection with any
Offshore Shortfall shall be specially allocated in their entirety solely to the
Original Principals and Xxxxx who are then Members of the LLC in proportion to
their respective contributions making up such Offshore Shortfall.
(f) The amount, if any, of income and gain allocated to the
LLC on account of the performance of Investment Management Services by the LLC
on behalf of the Offshore Funds (other than any such income or gain equal to the
amounts actually accrued and paid under the terms of the Offshore Management
Agreements), shall be (i) allocated to the Original Principals and Xxxxx in
proportion to their LLC Points and Reserved Points and (ii) shall be deemed to
have been distributed to such Original Principals and Xxxxx, reducing the
Capital Accounts of such Original Principals and Xxxxx in accordance with
Section 4.1(b) hereof.
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(g) All items of LLC loss and deduction on account of New York
City unincorporated business tax payable by the LLC ("UBT") shall be specially
allocated on a quarterly basis to each Member in an amount equal to the amount
of such UBT multiplied by a fraction the numerator of which is total net income
of the LLC allocated (after taking into account any losses, deductions or
expenses allocated under Article IV), and guaranteed payments and bonus payments
made by the LLC, to such Member, and the denominator of which is total net
income of the LLC allocated (after taking into account any losses, deductions or
expenses allocated under Article IV), and guaranteed payments and bonus payments
made by the LLC, to all Members for such period; provided, however, that if the
provisions of [New York City Administrative Code Section 11-604(18)] or any
successor or analog provision thereof providing for the right of corporate
partners (or corporate members of limited liability companies) to claim their
allocable portion of such UBT as a credit for purposes of New York City general
corporation tax ("GCT") are changed so as to reduce or eliminate the right of
corporations organized in the state in which the Manager Member is organized and
doing business in the states in which the Manager Member does business and that
have sufficient GCT liability against which to apply such credit for purposes of
the GCT, then the portion of such UBT no longer so claimable as a credit because
of such change in law shall be allocated pursuant to Section 4.2(b) rather than
pursuant to this Section 4.6(g). In the event that the UBT otherwise payable by
the LLC is reduced by reason of the step-up in the tax basis of the property of
the LLC that is triggered under Section 754 of the Code upon the purchase by the
Manager Member of its LLC Interest, the Manager Member's share of the UBT of the
LLC otherwise determined under this Section 4.6(g) shall be reduced by the same
amount.
SECTION 4.7 FEDERAL TAX ALLOCATIONS. The Manager Member shall, in its
reasonable discretion, allocate the ordinary income and losses and capital gains
and losses of the LLC as determined for U.S. Federal income tax purposes (and
each item of income, gain, loss, deduction or credit entering into the
computation thereof), as the case may be, among the Members for tax purposes in
a manner that, to the greatest extent possible: (a) reflects the economic
arrangement of the Members under this Agreement (determined after taking into
account the allocation provisions of Sections 4.2, 4.5 and 4.6 hereof, and the
distribution provisions of Sections 4.4, 4.5 and 4.6 hereof) and (b) is
consistent with the principles of Sections 704(b) and 704(c) of the Code. The
Members understand and agree that, with respect to any item of property (other
than cash) contributed (or deemed to be contributed for U.S. federal income tax
purposes) by a Member to the capital of the LLC, the initial tax basis of such
property in the hands of the LLC will be the same as the tax basis of such
property in the hands of such Member at the time so contributed. The Members
further understand and agree that the taxable income and taxable loss of the LLC
is to be computed for Federal income tax purposes by reference to the initial
tax basis to the LLC of any assets and properties contributed by the Members
(and not by reference to the Fair Market Value of such assets and properties at
the time contributed). The Members also understand that, pursuant to Section
704(c) of the Code, all taxable items of income, gain, loss and deduction with
respect to such assets and properties shall be allocated among the Members for
Federal income tax purposes so as to take account of any difference between the
initial tax basis of such assets and properties to the LLC and their Fair Market
Values at the time contributed, using any method authorized by the Income Tax
Regulations under Section 704(c) and selected by the Manager Member, in its
reasonable discretion. For purposes of maintaining the Capital Accounts of the
Members, items of income, gain, loss and deduction relating to any asset or
property contributed
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to the LLC that are required to be allocated for tax purposes pursuant to
Section 704(c) of the Code shall not be reflected in the Capital Accounts of the
Members.
ARTICLE V - TRANSFER OF LLC INTERESTS BY NON-MANAGER
MEMBERS; RESIGNATION, REDEMPTION AND WITHDRAWAL BY
NON-MANAGER MEMBERS;
ADMISSION OF ADDITIONAL NON-MANAGER MEMBERS.
SECTION 5.1 ASSIGNABILITY OF LLC INTERESTS. No LLC Interests held by
any Non-Manager Member may be Transferred and no Transfer by a Non-Manager
Member shall be binding upon the LLC or any Member, unless, in each case, it is
expressly permitted by this Article V and the Manager Member receives an
executed copy of the documents effecting such Transfer, which shall be in form
and substance reasonably satisfactory to the Manager Member. A Transferee of LLC
Interests may become a substitute Non-Manager Member only upon the terms and
conditions set forth in Section 5.2 hereof. If a Transferee of LLC Interests of
a Non-Manager Member in the LLC does not become (and until any such Transferee
becomes) a substitute Non-Manager Member in accordance with the provisions of
Section 5.2 hereof, such Person shall not be entitled to exercise or receive any
of the rights, powers or benefits of a Non-Manager Member other than the right,
if any, to receive allocations of profits and losses and distributions which
have been Transferred to such Person. No Non-Manager Member's LLC Interests may
be Transferred except:
(a) with the prior written consent of the Manager Member,
which consent may be granted or withheld by the Manager Member in its reasonable
discretion (provided, that the Manager Member may not withhold its consent in
the case of a proposed Transfer to a bona-fide charitable organization in an
amount that will be required to be Put on account of a Put Notice, for such
twelve-month period previously given by the Transferring Non-Manager Member);
(b) upon the death of such Non-Manager Member, his LLC
Interests may be Transferred by will or the laws of descent and distribution
without the consent of the Manager Member, but subject to the provisions of
Section 7.3 hereof; and
(c) a Non-Manager Member may Transfer LLC Interests to members
of his Immediate Family (excluding for this purpose former spouses) without the
consent of the Manager Member;
provided, that in each case, (i) the Transferee enters into an agreement with
the LLC agreeing to be bound by the provisions hereof (and if such Transferee
is, or in connection with such Transfer is becoming, an employee of the LLC and
is not already a party to a Non-Solicitation Agreement, the Transferee enters
into a Non-Solicitation Agreement) and (ii) whether or not the Transferee enters
into such an agreement, the Transferred LLC Interests shall thereafter remain
subject to this Agreement (and, if applicable, the relevant Non-Solicitation
Agreement) to the same extent they would be if held by such Non-Manager Member;
provided, however, that the provisions of Sections 3.7, 3.8 and 3.9 will not,
solely by virtue of such Transfer, apply to any Transferee unless such
Transferee is an employee of the LLC (or any of its Controlled Affiliates) or
such
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Transferee is a Controlled Affiliate of such an employee or the LLC (although if
such provisions were otherwise applicable to such Transferee, they will continue
to apply to such Person).
For all purposes of this LLC Agreement, any Transfers of LLC Interests
shall be deemed to occur as of the end of the last day of the calendar quarter
in which any such Transfer would otherwise have occurred. Upon any Transfer of
LLC Interests, the Manager Member shall make the appropriate revisions to
Schedule A hereto.
No LLC Interests of a Non-Manager Member in the LLC may be pledged,
hypothecated, optioned or encumbered, nor may any offer to do any of the
foregoing be made without the prior consent of the Management Board and the
Manager Member; provided that the consent of the Manager Member will not be
unreasonably withheld if the purpose of any such pledge or encumbrance is to
secure financing to enable the Transferee to purchase LLC Interests.
SECTION 5.2 SUBSTITUTE NON-MANAGER MEMBERS.
(a) No Transferee of LLC Interests of a Non-Manager Member
shall become a Member except in accordance with this Section 5.2. The Manager
Member may admit, in its sole discretion as a substitute Non-Manager Member
(with respect to all or a portion of the LLC Interests held by a Person), any
Person that acquires LLC Interests by Transfer from another Non-Manager Member
pursuant to Section 5.1 hereof, or that acquires LLC Interests from the Manager
Member pursuant to Section 6.1 hereof. The admission of a Transferee as a
substitute Non-Manager Member shall, in all events, be conditioned upon the
execution of an instrument satisfactory to the Manager Member whereby such
Transferee becomes a party to this Agreement as a Non-Manager Member as well as
compliance by such Transferee with the provisions of Section 3.7 hereof. Upon
the admission of a Transferee as a substitute Non-Manager Member, the Manager
Member shall make the appropriate revisions to Schedule A hereto, and such
Person shall cease to be a "Transferee" for purposes of this Agreement.
(b) Immediately prior to the effectiveness of (x) the
admission of a Transferee of LLC Interests of a Non-Manager Member as a
substitute Non-Manager Member with respect to such LLC Interests pursuant to the
provisions of this Section 5.2, or (y) the admission of a Transferee of LLC
Interests from the Manager Member as an additional Non-Manager Member with
respect to such LLC Interests, the Manager Member may, in its sole discretion,
elect to revalue the Capital Accounts of all the Members effective immediately
prior to such admission. If the Manager Member elects, in its sole discretion,
to revalue the Capital Accounts of all the Members, then the Capital Accounts of
all the Members shall be adjusted as follows:
(i) the Manager Member shall determine the proceeds
which would be realized if the LLC sold all its assets
immediately prior to the effectiveness of such admission, for
a price equal to the Fair Market Value of such assets
determined as provided for herein, and
(ii) The Manager Member shall allocate amounts equal
to the net gain or net loss which would have been realized
upon such a sale to the Capital Accounts of all the Members
immediately prior to the effectiveness of such
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admission, in accordance with the provisions of Section 4.2(c)
or Section 4.2(d) hereof, as applicable.
SECTION 5.3 ALLOCATION OF DISTRIBUTIONS BETWEEN TRANSFEROR AND
TRANSFEREE; SUCCESSOR TO CAPITAL ACCOUNTS.
(a) Upon the Transfer of LLC Interests pursuant to this
Article V, distributions pursuant to Article IV after the date of such Transfer
shall be made to the Transferee at the date of distribution, unless the
Transferor and Transferee otherwise agree and so direct the LLC and the Manager
Member in a written statement signed by both the Transferor and Transferee. In
connection with a Transfer by a Member of LLC Points, the Transferee shall
succeed to a pro-rata (based on the percentage of such Member's LLC Points
Transferred) portion of the Transferor's Capital Account, unless the Transferor
and Transferee otherwise agree and so direct the LLC and the Manager Member in a
written statement signed by both the Transferor and Transferee and, unless such
agreement makes no change other than to reserve to the Transferor all or a
portion of distributions pursuant to Article IV or sales price pursuant to
Article VII, consented to by the Manager Member.
(b) Upon a Transfer of LLC Interests but prior to the
Transferee being admitted as a substitute Member with respect to such LLC
Interests, the Transferee shall receive allocations and distributions pursuant
to the provisions of Sections 4.2, 4.4, 4.5, 4.6 and 4.7 hereof as if such
Transferee were a Manager Member, Non-Manager Member who is an Original
Principal or Non-Manager Member who is not an Original Principal to the same
extent and proportionately with the Transferor of such LLC Interests. For all
other purposes of this Agreement (including, without limitation, the provisions
of Section 4.3, Article VII (except to the extent the LLC and the Manager Member
have been directed in writing to make payments of the proceeds of a Put, a Call
or a Repurchase to the Transferee of such LLC Interests)), upon a Transfer of
LLC Interests but prior to the Transferee being admitted as a substitute Member
with respect to such LLC Interests, the Transferor shall be treated as holding
the LLC Interests so Transferred.
SECTION 5.4 RESIGNATION, REDEMPTIONS AND WITHDRAWALS. No Non-Manager
Member shall have the right to resign, to cause the redemption of its LLC
Interests, in whole or in part, or to withdraw from the LLC, except (a) with the
consent of the Manager Member, or (b) as is expressly provided for in Article
VII hereof. Upon any resignation, redemption or withdrawal, the Non-Manager
Member shall only be entitled to the consideration, if any, provided for by
Article VII hereof. Upon the resignation, redemption or withdrawal, in whole or
in part, by a Non-Manager Member, the Manager Member shall make the appropriate
revisions to Schedule A hereto. Notwithstanding the foregoing, without any
action on his part or on the part of the LLC, the Management Board or any
Member, effective March 31, 1999, Xxxxx shall automatically cease to be a Member
of the LLC and his interest in the LLC shall be reallocated among the Original
Principals who are Members at such time, in proportion to their respective LLC
Point and Reserved Points, and the Manager Member shall make appropriate
revisions to Schedule A hereto.
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SECTION 5.5 ISSUANCE OF ADDITIONAL LLC INTERESTS.
(a) Additional Non-Manager Members (the "Additional
Non-Manager Members" and each an "Additional Non-Manager Member") may be
admitted to the LLC and such Additional Non-Manager Members may be issued LLC
Interests, only upon approval of the Management Board and the consent of the
Manager Member and upon such terms and conditions as may be established by the
Manager Member with the consent of the Management Board (including, without
limitation, upon such Additional Non-Manager Member's execution of an instrument
satisfactory to the Manager Member whereby such Person becomes a party to this
Agreement as a Non-Manager Member as well as, in the case of employees of the
LLC (or its Controlled Affiliates) or any Controlled Affiliate of any such
employee, such Person's compliance with the provisions of Section 3.7 hereof);
provided, that, the Management Board and the Manager Member shall take all
commercially reasonable steps to ensure that there are at least three (3)
Non-Manager Members at all times.
(b) Except as provided by Section 5.4, existing Non-Manager
Members may be issued additional LLC Interests by the LLC only with the consent
of, and upon such terms and conditions as may be established by the Management
Board with the consent of the Manager Member. The Manager Member may only be
issued additional LLC Interests by the LLC upon approval by the Management
Board.
(c) Each time other than as provided by Section 5.4 additional
LLC Interests are issued, the Capital Accounts of all the Members (other than
Xxxxx) shall be adjusted as follows: (i) the Manager Member shall determine the
proceeds which would be realized if the LLC sold all its assets at such time for
a price equal to the Fair Market Value of such assets determined as provided
herein, and (ii) the Manager Member shall allocate amounts equal to the net gain
or net loss which would have been realized upon such a sale to the Capital
Accounts of all the Members immediately prior to the effectiveness of such
issuance in accordance with the provisions of Section 4.2(c) or Section 4.2(d)
hereof, as applicable (provided, that LLC Points and Reserved Points of Xxxxx
shall be deemed to have been allocated in accordance with the last sentence of
Section 5.4 at the time provided therein).
(d) Upon the issuance of additional LLC Interests, the Manager
Member shall make the appropriate revisions to Schedule A hereto.
SECTION 5.6 ADDITIONAL REQUIREMENTS. As additional conditions to the
validity of (x) any Transfer of a Non-Manager Member's LLC Interests (pursuant
to Section 5.1 above), or (y) the issuance of additional LLC Interests (pursuant
to Section 5.5 above), such Transfer or issuance shall not: (i) violate the
registration provisions of the Securities Act or the securities laws of any
applicable jurisdiction, (ii) cause the LLC or any class of its securities to
become subject to registration under the Exchange Act, (iii) cause the LLC to
become subject to regulation as an "investment company" under the 1940 Act and
the rules and regulations of the SEC thereunder, (iv) result in the termination
of any contract to which the LLC is a party and which individually or in the
aggregate are material (it being understood and agreed that any contract
pursuant to which the LLC provides Investment Management Services or Brokerage
Services is material), or
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(v) result in the treatment of the LLC as an association taxable as a
corporation or as a "publicly traded partnership" for Federal or state income
tax purposes.
The Manager Member may require reasonable evidence as to the foregoing,
including, without limitation, a favorable opinion of counsel, which expense
shall be borne by the parties to such transaction (and to the extent the LLC is
such a party, shall be paid from Operating Cash Flow).
To the fullest extent permitted by law, any Transfer that violates the
conditions of this Section 5.6 shall be null and void.
SECTION 5.7 TRANSITION PLANNING WITH RESPECT TO CERTAIN CLIENTS.
(a) It shall be a condition precedent to the exercise by any
Original Principal of a Put of any of his or its LLC Interests or a Repurchase
upon termination of employment from an Original Principal, that each Offshore
Management Agreement shall provide that, effective upon completion of a sale of
LLC Points by such Original Principal or Transferee thereof pursuant to Article
VII, the formulas for determination of the Performance Increment payable to the
LLC pursuant to such agreements shall be increased by an amount correlative to
the proportion of the amount allocable to Manager Shares or other profit
allocation or performance fee structure represented by a fraction, the numerator
of which is the number of LLC Points being sold at that time by such Original
Principal or Transferee, and the denominator of which is the number of LLC
Points of the Original Principals and their Transferees at the time of the first
such sale by any of the Original Principals or their Transferees. The LLC and
each of the Non-Manager Members shall use all commercially reasonable efforts to
cause the LLC and each of the Offshore Funds to comply with this Section 5.7.
Notwithstanding any other provision of this Agreement to the contrary, this
covenant shall survive the withdrawal or removal of a Non-Manager Member from
the LLC. No Non-Manager Member shall enter into any agreement or arrangement or
take any action which is inconsistent with the terms of this Section 5.7, and
the Non-Manager Members shall use all commercially reasonable efforts to prevent
the LLC or any of the Offshore Funds from entering into any agreement or
arrangement or taking any action which is inconsistent with the terms of this
Section 5.7.
(b) Each of the Original Principals hereby covenants and
agrees that, without the prior written consent of the Manager Member, such
Original Principal shall not permit any Offshore Related Partnership to cause or
otherwise permit the Offshore Fund in which any such Offshore Related
Partnership holds interests to (A) terminate the LLC as Investment Advisor to
such Offshore Fund (B) or otherwise modify the LLC's relationship with such
Offshore Fund (including, without limitation, any amendment to the relevant
Offshore Management Agreement or organizational documents of such Offshore Fund)
either (I) in a manner that would have the effect of benefitting one or more of
the Non-Manager Members or members of their Immediate Family to the detriment of
the LLC or the Manager Member or (II) under any circumstances, to effect any
change in the arrangements described in Section 5.7(a).
SECTION 5.8 REPRESENTATION OF MEMBERS. The Manager Member and each
Non-Manager Member (including each Additional Non-Manager Member) hereby
represents and warrants to the
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LLC and each other Member, and acknowledges, that (a) it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the LLC and making an informed
investment decision with respect thereto, (b) it is able to bear the economic
and financial risk of an investment in the LLC for an indefinite period of time,
(c) it is acquiring an interest in the LLC for investment only and not with a
view to, or for resale in connection with, any distribution to the public or
public offering thereof, (d) the LLC Interests have not been registered under
the securities laws of any jurisdiction and cannot be disposed of unless they
are subsequently registered and/or qualified under applicable securities laws
and the provisions of this Agreement have been complied with, and (e) the
execution, delivery and performance of this Agreement by such Member do not
require it to obtain any consent or approval that has not been obtained and do
not contravene or result in a default under any provision of any existing law or
regulation applicable to it, or any agreement or instrument to which it is a
party or by which it is bound.
ARTICLE VI - TRANSFER OF LLC INTERESTS BY THE
MANAGER MEMBER; REDEMPTION, REMOVAL
AND WITHDRAWAL
SECTION 6.1 ASSIGNABILITY OF INTEREST.
(a) Except as set forth in this Section 6.1, without the
approval of the Management Board, the Manager Member's LLC Interests may not be
Transferred; provided, however, (i) it is understood and agreed that, in
connection with the operation of the business of the Manager Member (including,
without limitation, the financing of its LLC Interests and direct or indirect
interests in additional investment management companies), the Manager Member's
LLC Interests will be pledged and encumbered, and lien holders of the Manager
Member's LLC Interests shall have, and be able to exercise, the rights of
secured creditors with respect to such LLC Interests, (ii) the Manager Member
may sell some (but not a majority) of its LLC Interests to a Person who is not a
Member but who is an Officer or employee of the LLC or who becomes an Officer or
employee of the LLC in connection with such issuance, or a Person wholly owned
by any such Person, (iii) the Manager Member may sell some (but not a majority)
of its LLC Interests to existing Non-Manager Members, and (iv) the Manager
Member may sell all or any portion of its LLC Interests to a wholly-owned
Controlled Affiliate of the Manager Member. Notwithstanding anything else set
forth herein, the Manager Member may, with the approval of the Management Board,
sell all its LLC Interests in a single transaction or a series of related
transactions, and, in any such case, each of the Non-Manager Members shall be
required to sell, in the same transaction or transactions, all their LLC
Interests; provided, that the price to be received by all the Members shall be
allocated among the Members as follows: (a) an amount equal to the sum of the
positive balances, if any, of the Capital Accounts shall be allocated among the
Members having such Capital Accounts in proportion to such positive balances,
and (b) the excess, if any, shall be allocated among all Members in accordance
with their respective number of LLC Points at the time of such sale. Upon any of
the foregoing transactions, the Manager Member shall make the appropriate
revisions to Schedule A hereto. Solely for purposes of the foregoing sentence,
Xxxxx shall, for as long as he is a Member, be deemed to have a Capital Account
equal to the sum of the Capital Accounts of the Original Principals multiplied
by a
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fraction, the numerator of which is the number of LLC Points held by him at the
time of such transaction or transactions and the denominator of which is the
total number of LLC Points then held by Original Principals and each other
Original Principal shall be deemed to have a Capital Account, equal to his
Capital Account multiplied by a fraction which is one (1) minus the fraction
determined above with respect to Xxxxx.
(b) In the case of any Transfer upon foreclosure pursuant to
Section 6.1(a)(i) above, each Transferee shall sign a counterpart signature page
to this Agreement agreeing thereby to become either a Non-Manager Member or a
Manager Member (provided, however, that once one such other Transferee elects to
become a Manager Member, no Transferee (other than a subsequent Transferee of
such new Manager Member) may elect to be a Manager Member hereunder). If the
Transferees pursuant to Section 6.1(a)(i) above receive all the Manager Member's
LLC Interests, and none of such Transferees elects to become a Manager Member,
then that shall be deemed to be an event of withdrawal by the Manager Member.
If, however, one of the Transferees elects to become a Manager Member, and
executes a counterpart signature page to this Agreement agreeing thereby to
become a Manager Member, then notwithstanding any other provision hereof to the
contrary, the old Manager Member shall thereupon be permitted to withdraw from
the LLC as Manager Member.
(c) In the case of a Transfer pursuant to the penultimate
sentence of Section 6.1(a) above, the Manager Member shall be deemed to have
withdrawn, and its Transferee shall be deemed to have become the Manager Member.
SECTION 6.2 RESIGNATION, REDEMPTION, AND WITHDRAWAL.
(a) To the fullest extent permitted by law, except as set
forth in Section 6.1 hereof, without approval by the Management Board, the
Manager Member shall not have the right to resign or withdraw from the LLC as
Manager Member. With approval by the Management Board, the Manager Member may
resign or withdraw as Manager Member upon prior written notice to the LLC.
Without approval by the Management Board, the Manager Member shall have no right
to have all or any portion of its LLC Interests redeemed. Any resigned or
withdrawn Manager Member shall retain its interest in the capital of the LLC and
its other economic rights under this Agreement as a Non-Manager Member having
the number of LLC Points held by the Manager Member prior to its resignation or
withdrawal. If a Manager Member who has resigned or withdrawn no longer has any
economic interest in the LLC, then upon such resignation or withdrawal, such
Person shall cease to be a Member of the LLC. The Manager Member may not be
removed by the Members of the LLC for any reason.
(b) *** [This subsection has been omitted pursuant to the
confidential treatment request referenced on the cover page hereto. The omitted
portion has been filed separately with the Commission.] ***
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ARTICLE VII - PUTS AND CALLS OF LLC INTERESTS
SECTION 7.1 PUTS.
(a) Each Non-Manager Member may, subject to the terms and
conditions set forth in this Section 7.1, cause the Manager Member to purchase
portions of the LLC Interests held by such Non-Manager Member in the LLC (each a
"Put").
(b) Each Original Principal may, subject to the terms and
conditions set forth in this Agreement, cause the Manager Member to purchase
from such Original Principal on the last business day in February (or, if later
in any year starting in the year 2003, the month end after which the Manager
Member has had the information necessary to determine the Put Price for a period
of not less than fifteen (15) days) starting with such date in the year 2003
(each a "Purchase Date"), all or a portion of the LLC Interests held by such
Original Principal as of the Effective Date. It is a condition precedent to the
exercise by any Original Principal of a Put that such Original Principal, the
LLC, the Offshore Related Partnerships and the Offshore Funds shall have
complied with the provisions of Section 5.7 hereof.
(c) Each Non-Manager Member who is not entitled to any rights
under Section 7.1(b) may, subject to the terms and conditions set forth in this
Agreement, cause the Manager Member to purchase from such Non-Manager Member any
number of LLC Points that is less than or equal to ten percent (10%) of the LLC
Points issued or Transferred to such Non-Manager Member at any time (including,
without limitation, pursuant to the Incentive Program or upon the exercise of
any options granted under the Incentive Program) as of any five (5) separate
Purchase Dates (but only up to an aggregate of a number of LLC Points as is
equal to fifty percent (50%) of the LLC Points issued or Transferred to such
Non-Manager Member), starting on the first Purchase Date which is at least five
(5) years following the date of a particular issuance or Transfer (with LLC
Interests acquired upon exercise of an option being deemed to have been acquired
on the date of grant of such option).
(d) If a Non-Manager Member desires to exercise his rights
under Section 7.1(b) or 7.1(c) above, he shall give the Manager Member, each
other Non-Manager Member and the LLC irrevocable written notice (a "Put Notice")
on or prior to the preceding December 31 (the "Notice Deadline"), stating that
he is electing to exercise such rights and the number of LLC Points (the "Put
LLC Points") to be sold in the Put. Puts in any given calendar year for which
Put Notices are received before the Notice Deadline for that calendar year shall
be completed as follows: the Manager Member shall purchase from each Non-Manager
Member that number of Put LLC Points designated in the Put Notice; provided,
however, that, prior to the tenth (10th) anniversary of the Effective Date, in
no event shall the aggregate number of LLC Points the Manager Member is required
to purchase on any Purchase Date under Section 7.1(b) and Section 7.1(c),
together with all LLC Points purchased by the Manager Member pursuant to Puts
under Section 7.1(b) and Section 7.1(c) within twelve (12) months prior to such
Purchase Date, exceed two and one-half (2.5) LLC Points; and, provided further,
that in the case of a Put under Section 7.1(c) above, in no event shall the
Manager Member be required to purchase LLC Points in excess of either (A) the
maximum number permitted by Section 7.1(c) above with respect to that
Non-Manager Member, that portion of his LLC Points and that year, or (B) the
aggregate number
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of LLC Points that may be Put by that Non-Manager Member with respect to that
portion of the LLC Points issued or transferred to him. If the number of LLC
Points for which Put Notices are received under Section 7.1(b) and Section
7.1(c) before the Notice Deadline for any such twelve (12) month period prior to
the tenth (10th) anniversary of the Effective Date exceeds two and one-half
(2.5) LLC Points, then the Manager Member shall purchase an aggregate of two and
one-half (2.5) LLC Points from among all Non-Manager Members who have provided
timely Put Notices in such proportion as shall result in each such Non-Manager
Member (together with his Transferees) having sold under Section 7.1(b) and
Section 7.1(c) an aggregate percentage of the highest number of LLC Points held
by such Member and his Transferees at any time after the Effective Date that is
as nearly the same as practicable.
(e) The purchase price for a Put (the "Put Price") shall be an
amount equal to (A) ********** (**) multiplied by the amount, if any, equal to
*** [The remainder of this subsection has been omitted pursuant to the
confidential treatment request referenced on the cover page hereto. The omitted
portion has been filed separately with the Commission.] ***
(f) In the case of any Put pursuant to the provisions of
Section 7.1(b) or Section 7.1(c) hereof, the Put Price shall be paid by the
Manager Member (or, if the Manager Member shall have assigned its obligation
pursuant to paragraph (h) below, the assignee(s) thereof) on the relevant
Purchase Date by wire transfer or certified check issued to such Non-Manager
Member or Transferee, in each case, against delivery of such documents or
instruments of Transfer as may reasonably be requested by the Manager Member or
the assignee or assignees thereof, as applicable, and in each case including
representations that at the effective time of such transaction the Non-Manager
Member or Transferee thereof making such Transfer is the record and beneficial
owner of the LLC Interests being Put, free and clear of any Encumbrances other
than those imposed by this Agreement.
(g) The Manager Member may, with consent of the Management
Board, assign any or all of its rights and obligations to purchase LLC Interests
under this Section 7.1, in one or more instances, to the LLC or, if the Manager
Member shall have made a pro-rata offer to the Non-Manager Members, to such
Non-Manager Members as accept such offer.
(h) As of any Purchase Date, the Non-Manager Member or
Transferee thereof making such Transfer shall cease to hold the LLC Interests
purchased on the Purchase Date, and shall cease to hold a pro-rata portion of
such Non-Manager Member's Capital Account and shall no longer have any rights
with respect to such portion of his LLC Interests. Each Transferee of a
Non-Manager Member shall be required to Put such number of LLC Points at such
times as may be directed by the Transferor Non-Manager Member (subject to the
restrictions set forth in Sections 7.1(b), 7.1(c) and 7.1(d) which shall
continue to apply as if the LLC Points were held by the Transferor Non-Manager
Member.
SECTION 7.2 CALLS.
(a) The Manager Member may, subject to the terms and
conditions set forth in this Section 7.2, cause each Non-Manager Member to sell
portions of the LLC Interests held by each such Non-Manager Member in the LLC
(each a "Call").
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(b) The Manager Member may cause each Non-Manager Member (and
any Transferee thereof) to sell up to twenty percent (20%) of the highest total
number of LLC Points (excluding any Reserved Points) held by such Non-Manager
Member at any time, to the Manager Member on any Purchase Date starting with the
first Purchase Date which is after the 65th birthday of such Non-Manager Member.
(c) If the Manager Member desires to exercise its rights under
Section 7.2(b), it shall give each Non-Manager Member and the LLC irrevocable
written notice (a "Call Notice") on or prior to the immediately preceding Notice
Deadline, stating that it is electing to exercise such rights, the Non-Manager
Member with respect to whom the Call is being exercised and the number of LLC
Points to be purchased in the Call.
(d) The purchase price for a Call (the "Call Price") shall be
an amount equal to (A) ********** (**) multiplied by the amount, if any, equal
to *** [The remainder of this subsection has been omitted pursuant to the
confidential treatment request referenced on the cover page hereto. The omitted
portion has been filed separately with the Commission.] ***
(e) As of any Purchase Date, the Non-Manager Member (and its
Transferees to the extent applicable) selling LLC Points under this Section 7.2
shall cease to hold the LLC Interests purchased on the Purchase Date, and shall
cease to hold a pro-rata portion of such Non-Manager Member's Capital Account
and shall no longer have any rights with respect to such portion of its LLC
Interests.
SECTION 7.3 REPURCHASE UPON TERMINATION OF EMPLOYMENT OR TRANSFER BY
OPERATION OF LAW.
(a) In the event that the employment by the LLC of any
Non-Manager Member other than Xxxxx terminates for any reason, then:
(i) if the termination of the Non-Manager Member
occurred because of the death or Permanent Incapacity of such
Non-Manager Member and the LLC has purchased key-man life or
lump-sum disability insurance on such Non-Manager Member, the
LLC shall purchase and the Non-Manager Member (and any
Transferees thereof who have not been admitted as Non-Manager
Members) (together a "Repurchased Member") shall sell to the
LLC for cash, that number of LLC Points then held by such
Repurchased Member (before taking into account any Repurchase
hereunder) the Repurchase Price of which is equal to the cash
proceeds of any key-man life insurance policies or lump-sum
disability insurance policies, as applicable, maintained by
the LLC on the life or health of such Non-Manager Member (an
"LLC Repurchase"), and
(ii) in each other such case (and, in the case of the
death or Permanent Incapacity of a Non-Manager Member, to the
extent the Repurchase Price exceeds the proceeds described in
clause (i) of this Section 7.3(a) (determined after all such
proceeds have been collected)), the Manager Member shall
purchase and the Repurchased Member shall sell (each a
"Manager Member Repurchase") all (or,
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in the case of the death or Permanent Incapacity of a
Non-Manager Member, such remaining portion as is not required
to be purchased by the LLC under clause (i) of this Section
7.3(a)) of the LLC Points held by the Repurchased Member, in
each case, pursuant to the terms of this Section 7.3. For
purposes hereof, each LLC Repurchase and each Manager Member
Repurchase together with the related LLC Repurchase, if any,
is referred to as a "Repurchase."
(b) The closing of the Repurchase will take place on a date
set by the Manager Member (the "Repurchase Closing Date"), which shall be within
sixty (60) days after the last day of the calendar quarter in which the
Non-Manager Member's employment with the LLC is terminated or, if longer,
fifteen (15) days after the Manager Member receives the information necessary to
calculate the Repurchase Price; provided, however, that if the employment by the
LLC of such Non-Manager Member is terminated because of the death or Permanent
Incapacity of such Non-Manager Member and the LLC or the Manager Member has
purchased key-man life or lump-sum disability insurance on such Non-Manager
Member, then the Repurchase Closing Date shall be a date set by the Manager
Member which is as soon as reasonably practicable after the LLC or the Manager
Member has received all proceeds of all key-man life insurance policies or
disability insurance policies, as applicable, maintained by the LLC on the life
or health of such Non-Manager Member; and, provided, further, that it shall be a
condition precedent to any Repurchase of LLC Interests from an Original
Principal that such Non-Manager Member (or his heirs and assigns), the LLC and
the Offshore Funds shall have complied with the provisions of Section 5.7
hereof.
(c) The purchase price for the Repurchase (the "Repurchase
Price") shall be determined as follows: the Repurchase Price shall be calculated
as of the last day of the calendar quarter in which the termination of such
Non-Manager Member's employment occurs and shall equal (A) ********** (**)
multiplied by the amount, if any, equal to *** [The remainder of this subsection
has been omitted pursuant to the confidential treatment request referenced on
the cover page hereto. The omitted portion has been filed separately with the
Commission.] ***
(d) The rights of the Manager Member, the LLC and their
assignees hereunder are in addition to and shall not affect any other rights
which the Manager Member, the LLC or their assigns may otherwise have to
repurchase LLC Interests (including, without limitation, pursuant to any
agreement entered into by an Additional Non-Manager Member which provides for
the vesting of LLC Points).
(e) On the Repurchase Closing Date, the Manager Member and/or
the LLC (as applicable) shall pay to the Repurchased Member the Repurchase Price
for the LLC Interests repurchased in the manner set forth in this Section 7.3,
and upon such payment the Repurchased Member shall cease to hold any LLC
Interests, and such Repurchased Member shall be deemed to have withdrawn from
the LLC and shall cease to be a Member of the LLC and shall no longer have any
rights hereunder; provided, however, that the provisions of Article III and
Sections 10.4, 10.5 and 10.6 shall continue as set forth therein. On the
Repurchase Closing Date, the Repurchased Member and the LLC (and if the Manager
Member is purchasing LLC Interests from the Repurchased Member, the Manager
Member) (or their assignees) shall execute an agreement reasonably acceptable to
the Manager Member in which the Repurchased Member represents and
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warrants to the Manager Member and/or the LLC, as applicable (or their
assignees), that it has sole record and beneficial title to the Repurchased
Interest, free and clear of any Encumbrances at the date of the transaction
other than those imposed by this Agreement. Payment of the Repurchase Price
shall be made on the Repurchase Closing Date as follows: (i) in the case of
termination of employment of an Original Principal or, in the case of any other
Non-Manager Member, because of death or Permanent Incapacity of such Non-Manager
Member (to the extent of the collected proceeds of any insurance policies under
which the LLC or the Manager Member is the beneficiary upon the death or
Permanent Incapacity of such Non-Manager Member), by wire transfer of
immediately available funds to an account designated by the Repurchased Member
in writing at least three (3) business days prior to the Repurchase Closing
Date, and (ii) in the case of any other termination of employment of a
Non-Manager Member who is not an Original Principal other than a Retirement (but
including a termination of employment because of Permanent Incapacity to the
extent the obligation exceeds the proceeds of any key-man disability insurance
policies described above), with a promissory note in the form attached hereto as
Exhibit C, the principal of which promissory note would be paid in four (4)
equal installments, the first installment would be paid on the Repurchase Date,
and the second, third and fourth installments would be paid fourteen (14)
months, twenty-six (26) months and thirty-eight (38) months, respectively, after
the first installment.
(f) The Manager Member may, with the consent of the Management
Board, assign any or all of its rights and obligations under this Section 7.3,
in one or more instances, to the LLC; provided, that the foregoing shall have no
effect on the LLC's obligation set forth in Section 7.3(a)(i) regarding the use
of the proceeds of a key-man life or disability insurance policy.
(g) In the event that a Non-Manager Member or a Transferee
thereof is required to sell its LLC Interests pursuant to the provisions of this
Section 7.3, and in the further event that such Non-Manager Member or any
Transferee thereof refuses to, is unable to, or for any reason fails to, execute
and deliver the documents required by this Section 7.3, the LLC or the Manager
Member, as applicable (or their respective assign(s)) may deposit the purchase
price, if any, therefor (including cash and/or promissory notes) with any bank
doing business within fifty (50) miles of the LLC's principal place of business,
or with the LLC's accounting firm, as agent or trustee, or in escrow, for such
Non-Manager Member or Transferee, to be held by such bank or accounting firm for
the benefit of and for delivery to such Non-Manager Member or Transferee. Upon
such deposit by the LLC or the Manager Member (or their respective assign(s))
and upon notice thereof given to such Non-Manager Member or Transferee, such
Non-Manager Member's LLC Interests shall be deemed to have been Transferred to
the LLC or the Manager Member (or their assign(s)), as applicable, the
Non-Manager Member and/or any such Transferee shall have no further rights with
respect thereto (other than the right to withdraw any payment therefor held in
escrow), and the Manager Member shall record such Transfer or repurchase on
Schedule A hereto.
SECTION 7.4 ELECTION RIGHTS OF MANAGER MEMBER TO PAY IN SHARES OF AMG
STOCK.
(a) If the Manager Member has, at the time of a Put or a
Repurchase completed a registration of shares of its common stock for sale under
the Securities Act (other than a registration on Form S-8 or its then equivalent
form) or a registration effected solely to implement
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an employee benefit plan, a transaction under Rule 145 or to which any other
similar rule of the SEC under the Securities Act is applicable or registration
on a form not available for registering securities for sale to the public (a
"Public Offering"), then the Manager Member may elect to pay all or a portion of
the Put Price for the relevant Put, or Repurchase Price for the Repurchase in
shares of the Manager Member's Common Stock (the "AMG Stock") in accordance with
the provisions of this Section 7.4. If the Manager Member elects to pay a
portion of the Put Price or Repurchase Price in shares of AMG Stock in
accordance with the provisions of this Section 7.4, the portion of the
consideration which is paid in AMG Stock shall reduce the cash portion of the
Put Price or Repurchase Price.
(b) An election under this Section 7.4 must be made by the
Manager Member at least sixty (60) days prior to the relevant Purchase Date, by
giving written notice to the LLC and the Non-Manager Member who has exercised a
Put (or with respect to whom a Call is being exercised) or Repurchased Member,
as applicable, of such election, which election, once made, shall only be
revocable within thirty (30) days after being made.
(c) The number of shares of AMG Stock to be issued upon
exercise of the Put, or upon the Repurchase shall equal the quotient obtained by
dividing the portion of the Put Price or Repurchase Price (as applicable)
payable in AMG Stock by AMG's Average Stock Price, where:
(i) "AMG's Average Stock Price" is defined to mean
the average (arithmetic mean) Stock Price of AMG Stock during
the forty (40) trading days prior to the date of the closing
of the Put or Call or Repurchase; and
(ii) "Stock Price" is defined to mean, for any day,
the closing price for the AMG Stock, which shall be the last
sale price or, in the case no such sale takes place on such
day, the average of the closing bid and asked prices, in
either case as reported in the principal consolidated
transaction reporting system with respect to securities listed
on the principal national securities exchange or other market
on which the AMG Stock is listed or admitted to trading; or,
if not listed or admitted to trading on any national
securities exchange, the last quoted price (or, if not so
quoted, the average of the last quoted high bid and low asked
prices) in the over-the-counter market, as reported by NASDAQ
or such other system then in use; or, if on any such date no
bids are quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional
market maker making a market in such security reasonably
selected by the Board of Directors of AMG; PROVIDED, HOWEVER,
that if at the time AMG makes such election, the product of
AMG's Average Stock Price multiplied by the number of shares
of AMG Stock owned beneficially by persons who are not
executive officers or directors of AMG or entities which are
currently beneficial owners of more than ten percent (10%) of
AMG Stock within the meaning of Rule 16a-1 of the Exchange Act
does not exceed five hundred million dollars ($500,000,000),
then the Stock Price shall be reduced by an illiquidity
factor, if any, determined by an investment banking firm
reasonably acceptable to the Manager Member and the Management
Board.
In the event that there is any stock split (or reverse stock split), stock
dividend or other similar event, equitable and appropriate adjustments shall be
made in the application of the foregoing calculation of AMG's Average Stock
Price to take account of such event.
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(d) The maximum portion of the Put Price or Repurchase Price
payable in AMG Stock without the consent of the Non-Manager Member (or his
estate or representative) shall be 100% minus the maximum combined federal,
state and local marginal tax rate applicable to sales of capital assets held by
such Non-Manager Member for the period he held such interests; provided,
however, that such portion shall be 0% if a stockholder of the Manager Member on
the Effective Date beneficially has purchased more than 40% of the outstanding
AMG Stock other than in connection with an investment (by merger or otherwise)
by the Manager Member or if the Non-Manager Member has died and the AMG Stock to
be received by his estate, heirs, beneficiaries or Transferees is not
immediately salable without registration or any other restriction.
SECTION 7.5 CLASS B PUTS; INCREASE IN FREE CASH FLOW PERCENTAGE.
(a) Each Non-Manager Member holding Class B Points may cause
the Manager Member to purchase all (and not less than all) of such Class B
Points for the Class B Payment on any one Purchase Date on or after the tenth
(10th) anniversary of the Effective Date (a "Class B Put Date"), subject to and
in accordance with the terms and conditions set forth in this Section 7.5 (each,
a "Class B Put"). Upon the closing of any such Class B Put as of the Class B Put
Date, the Class B Points purchased by the Manager Member shall be automatically
converted into that number of new LLC Points as is specified below, and the Free
Cash Flow Percentage shall thereafter be increased as provided herein.
(b) Each Non-Manager Member who has been issued Class B Points
pursuant to this Agreement, as set forth on Schedule A hereto (and as amended
from time to time), is entitled, upon exercise of the Class B Put, to the
corresponding Class B Value. For purposes of this Section 7.5, the "Class B
Value" shall mean, as of any Class B Put Date, (i) the Class B Interest as of
the end of the fiscal year ending on or most recently prior to the applicable
Class B Put Date, if any, multiplied by (ii) a fraction, the numerator of which
is the total number of Class B Points held by such Non-Manager Member, and the
denominator of which is the aggregate number of Class B Points outstanding as of
such Class B Put Date immediately prior to exercise of such Class B Put.
(c) If a Non-Manager Member desires to exercise its Class B
Put, it shall give the Manager Member, each other Non-Manager Member and the LLC
irrevocable written notice (a "Class B Notice") (together, in the case of an
Original Principal, with his notice of Retirement) on or prior to the preceding
December 31 (the "Class B Notice Deadline") stating that he is electing to
exercise such Class B Put.
(d) Upon the first Class B Put Date immediately following
delivery of a Class B Notice, the Manager Member shall pay the Non-Manager
Member exercising his Class B Put an amount (the "Class B Payment") equal to
such Non-Manager Member's Class B Value as of such Class B Put Date multiplied
by ********** (**). Upon payment of the Class B Payment as of such Class B Put
Date, the Non-Manager Member who has exercised his Class B Put shall cease to
hold any Class B Points and shall no longer have any rights hereunder with
respect to such Class B Points.
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(e) Immediately upon payment of the Class B Put Payment to the
Non-Manager Member exercising his Class B Put,
(i) the Class B Points purchased by the Manager
Member shall automatically convert into that number of new LLC
Points equal to the product of (x) the aggregate number of LLC
Points (excluding Reserved Points, if any) outstanding
immediately prior to the applicable Class B Put Date and (y) a
fraction, the numerator of which is such Non-Manager Member's
Class B Value as of such Class B Put Date, and the denominator
of which is the Free Cash Flow for the preceding fiscal year;
and
(ii) the Free Cash Flow Percentage shall be increased
to an amount equal to the sum of (x) the Free Cash Flow
Percentage immediately prior to the applicable Class B Put
Date and (y) a fraction, the numerator of which is such
Non-Manager Member's Class B Value as of such Class B Put
Date, and the denominator of which is the Revenues From
Operations for the preceding fiscal year.
(f) The Class B Payment shall be paid by the Manager Member
(or its assigns) on the relevant Class B Put Date either (i) by wire transfer or
certified check issued to such Non-Manager Member, or (ii) subject to the
limitations set forth in Section 7.4 with respect to Puts, at the election of
the Manager Member if the Manager Member has, at that time, completed a Public
Offering, by the delivery to such Non-Manager Member of that number of shares of
AMG Stock as it would be required to deliver under Section 7.4(c) if the Class B
Payment were the Put Price and the Class B Put Date were the Purchase Date, in
each case, immediately following the Manager Member's receipt of any
documentation it may deem necessary to evidence the conversion of the Class B
Point into additional LLC Points and the increase in the Free Cash Flow
Percentage, including, without limitation, an acknowledgment of the foregoing
executed by each of the Members of the LLC.
(g) In the event that the employment by the LLC of any
Non-Manager Member terminates for any reason at any time on or after the tenth
(10th) anniversary of the Effective Date, then such Non-Manager Member (or his
or her estate, heirs or legal representatives, as the case may be) may cause the
Manager Member to purchase all (and not less than all) of the Class B Points
held by such Non-Manager Member as of the date of such termination (with respect
to which no Class B Notice had previously been given to the Manager Member) for
the Class B Payment on the Class B Put Date immediately following the date of
such termination, subject to and in accordance with the terms and conditions set
forth herein. For purposes of applying this clause (g) only, each reference to
"Non-Manager Member" in the other clauses of this Section 7.5 (other than clause
(h) of this Section 7.5) shall be deemed to include the estate, heirs and legal
representatives of any such Non-Manager Member, and, except for purposes of
Section 7.5(h) hereof, any purchase of Class B Points pursuant to this clause
(g) shall be included within the definition of "Class B Put." In the event that
the employment by the LLC of any Non-Manager Member terminates for any reason at
any time prior to the tenth (10th) anniversary of the Effective Date, then any
Class B Points held by such Non-Manager Member as of the date of such
termination shall be automatically canceled and shall be null and void, and such
Non-Manager
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Member (and his or her estate, heirs or legal representatives, as applicable)
shall no longer have any rights hereunder with respect to such Class B Points.
(h) If a Non-Manager Member who has previously exercised his
Class B Put thereafter (i) exercises a Put under Section 7.1 hereof, (ii) is
subject to a Call under Section 7.2 hereof, or (iii) is subject to a Repurchase
under Section 7.3 hereof, then, the following shall occur:
(i) The Manager Member shall determine whether, as of
the effective date of such Put, Call or Repurchase after
giving pro-forma effect to such Put, Call or Repurchase, the
Class B Interest in the aggregate (the "Pro-Forma Class B
Interest") is greater than zero (0);
(ii) If the Pro-Forma Class B Interest is greater
than zero (0), then on the first Class B Put Date following
the closing of such Put, Call or Repurchase, the Manager
Member shall pay to such Non-Manager Member an amount equal to
(x) ********** (**), multiplied by (y) such Pro-Forma Class B
Interest minus the actual Class B Interest as of the effective
date of such Put, Call or Repurchase, multiplied by (z) a
fraction, the numerator of which is the number of Class B
Points held by such Non-Manager Member immediately prior to
his Class B Put, and the denominator of which is the sum of
the number of Class B Points outstanding as of the effective
date of such Put, Call or Repurchase together with the number
of Class B Points held by such Non-Manager Member immediately
prior to his Class B Put;
(iii) Upon such payment, a number of new LLC Points
shall be issued to the Manager Member as is equal to (x) the
product of the aggregate number of LLC Points (and Reserved
Points, if any) outstanding and (y) a fraction, the numerator
of which is the product of subclauses (y) and (z) under clause
(ii) above, and the denominator of which is such product, plus
the Free Cash Flow for the fiscal year preceding the date of
the payment under clause (ii) above; and
(iv) The Free Cash Flow Percentage shall than also be
increased to an amount equal to the sum of (x) the Free Cash
Flow Percentage immediately prior to the payment under clause
(ii) above and (y) a fraction (expressed as a percentage), the
numerator of which is the product of subclauses (y) and (z)
under clause (ii) above, and the denominator of which is
Revenues From Operations for the preceding fiscal year.
ARTICLE VIII - DISSOLUTION AND TERMINATION.
SECTION 8.1 NO DISSOLUTION. The LLC shall not be dissolved by the
admission of Additional Non-Manager Members, substitute Non-Manager Members or
substitute Manager Members or by the death, retirement, resignation, expulsion,
bankruptcy or dissolution of any Member of the LLC.
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SECTION 8.2 EVENTS OF DISSOLUTION. The LLC shall be dissolved and its
affairs wound up upon the occurrence of any of the following events:
(a) a date designated in writing by the Manager Member with
the consent of the Management Board; or
(b) upon the entry of a decree of judicial dissolution under
Section 18-802 of the Act.
SECTION 8.3 NOTICE OF DISSOLUTION. The Manager Member shall promptly
notify the Members of any dissolution of the LLC pursuant to Section 8.2 hereof
or otherwise pursuant to the Act.
SECTION 8.4 LIQUIDATION. Upon the dissolution of the LLC, the Manager
Member, or if there is none, the Person or Persons approved by the holders of
more than fifty percent (50%) of the LLC Points then outstanding (including the
Person that was the Manager Member) shall carry out the winding up of the LLC
(in such capacity, the "Liquidating Trustee") and shall immediately commence to
wind up the LLC's affairs; provided, however, that a reasonable time shall be
allowed for the orderly liquidation of the assets of the LLC and the
satisfaction of liabilities to creditors so as to enable the Members to minimize
the normal losses attendant upon a liquidation. The Members shall continue to
share in allocations and distributions during liquidation in the same
proportions, as specified in Article IV hereof, as before liquidation. The
proceeds of liquidation shall be distributed as set forth in Section 4.5 hereof.
SECTION 8.5 TERMINATION. The LLC shall terminate when all of the assets
of the LLC, after payment of or due provision for all debts, liabilities and
obligations of the LLC, shall have been distributed to the Members in the manner
provided for in Section 4.5 hereof and the Certificate shall have been canceled
in the manner required by the Act.
SECTION 8.6 CLAIMS OF THE MEMBERS. All Members and former Members shall
look solely to the LLC's assets for any return of their Capital Contributions
and if the assets of the LLC remaining after payment of or due provision for all
debts, liabilities and obligations of the LLC are insufficient to return such
Capital Contributions, the Members and former Members shall have no recourse
against the LLC or any other Member.
ARTICLE IX - RECORDS AND REPORTS.
SECTION 9.1 BOOKS AND RECORDS. The LLC shall, and the Non-Manager
Members who are members of the Management Board shall use all commercially
reasonable efforts to cause the LLC to, keep complete and accurate books of
account with respect to the operations of the LLC, prepared in accordance with
generally accepted accounting principles, using the accrual method of
accounting, consistently applied. Such books shall reflect that the LLC
Interests have not been registered under the Securities Act, and that the LLC
Interests may not be Transferred without registration under the Securities Act
or exemption therefrom and without compliance with Article V or Article VI of
this Agreement, as applicable. Such books shall be maintained at the principal
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office of the LLC in New York, New York or at such other principal place of
business as determined pursuant to Section 2.5 hereof.
SECTION 9.2 ACCOUNTING. The LLC's books of account shall be kept on the
accrual method of accounting, or on such other method of accounting as the
Manager Member may from time to time determine, with the advice of the
Independent Public Accountants, and shall be closed and balanced at the end of
each LLC fiscal year. The taxable year of the LLC shall be the twelve (12)
months ended December 31 or such other taxable year as the Manager Member may
designate, with the written advice of the Independent Public Accountants.
SECTION 9.3 FINANCIAL AND COMPLIANCE REPORTS. The LLC shall, and each
Non-Manager Member who is a member of the Management Board shall use all
commercially reasonable efforts to cause the LLC to, furnish to the Manager
Member each of the following:
(a) within ten (10) days after the end of each month and each
fiscal quarter, an unaudited financial report of the Revenues From Operations of
the LLC and the net assets of each Offshore Fund on each date as of which the
net assets thereof were determined during such period, which report shall be
prepared in accordance with generally accepted accounting principles using the
accrual method of accounting, consistently applied (except that the financial
report may (i) be based on estimates to the extent actual data is not available
and be subject to adjustments of such estimates within seventeen (17) days after
the end of each month and each fiscal quarter, (ii) be subject to normal
year-end audit adjustments which are neither individually nor in the aggregate
material and (iii) not contain all notes thereto which may be required in
accordance with generally accepted accounting principles) and shall be certified
by the most senior financial Officer of the LLC to have been so prepared;
(b) as soon as practicable and in any event within seventeen
(17) days after the end of each month and each fiscal quarter, a report prepared
in a similar manner and certified by the most senior financial Officer of the
LLC to have been so prepared, which shall include:
(i) statements of operations, changes in Members'
Capital Accounts and cash flows for such month or quarter, together
with a cumulative income statement from the first day of the
then-current fiscal year to the last day of such month or quarter;
(ii) a balance sheet as of the last day of such month
or quarter; and
(iii) with respect to the quarterly financial report,
a detailed computation of Free Cash Flow for such quarter;
(c) within fifteen (15) days after the end of each fiscal year
of the LLC, a financial report of Revenues From Operations of the LLC for such
year and the net assets of each Offshore Fund on each date as of which the net
assets thereof were determined during such year, in each case, as to which the
audit procedures applicable to such item shall have been performed by
Independent Public Accountants satisfactory to the Manager Member;
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(d) within seventeen (17) days after the end of each fiscal
year of the LLC or within such other time as the Manager Member and the
Management Board agree, audited financial statements of the LLC, which shall
include statements of operations, changes in Members' Capital Accounts and cash
flows for such year and a balance sheet as of the last day thereof, each
prepared in accordance with generally accepted accounting principles, using the
accrual method of accounting, consistently applied, certified by Independent
Public Accountants satisfactory to the Manager Member;
(e) if requested by the Manager Member, within twenty-five
(25) days after the end of each calendar quarter, the LLC's operating budget for
each of the next four (4) fiscal quarters, in such form and containing such
estimates as may be requested by the Manager Member from time to time;
(f) copies of all financial statements, reports, notices,
press releases and other documents released to the public;
(g) as promptly as is reasonably possible following request by
the Manager Member from time to time, such operations and/or performance data as
may be requested; and
(h) any other financial or other information available to the
Officers as the Manager Member shall have reasonably requested on a timely
basis.
SECTION 9.4 MEETINGS.
(a) The LLC and its Officers shall hold such regular meetings
at the LLC's principal place of business with representatives of the Manager
Member not more frequently than quarterly (except in special circumstances) as
may be reasonably requested by the Manager Member from time to time. These
meetings shall be attended (either in person or by telephone) by such of the
Officers and other employees of the LLC as may be reasonably requested by the
Manager Member or any of the Officers. The LLC will reimburse the reasonable
travel expenses of any representative of the Manager Member who attends each
such meeting.
(b) At each meeting, the Officers shall make such
presentations regarding the LLC and its performance, operations and/or budgets
as may be reasonably requested by the Manager Member, and each of the attendees
(whether in person or by telephone) at such meeting shall have the right to
submit proposals and suggestions regarding the LLC, and the attendees at the
meeting shall discuss and consider such proposals and suggestions.
SECTION 9.5 TAX MATTERS.
(a) The Manager Member shall cause to be prepared and filed on
or before the due date (or any extension thereof) Federal, state, local and
foreign tax or information returns required to be filed by the LLC and shall
provide to the other Members, as soon as reasonably practicable following the
close of each taxable year of the LLC, any information which the Manager Member
has which is necessary to allow the Members to timely prepare and file any
federal, state or local income tax returns (including IRS Schedule K-1). The
Manager Member,
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to the extent that LLC funds are available, shall cause the LLC to pay any taxes
payable by the LLC (it being understood that the expenses of preparation and
filing of such tax returns, and the amounts of such taxes (except that UBT shall
be paid out of Free Cash Flow prior to the distribution thereof, except to the
extent UBT is allocated pursuant to the provisions of Section 4.6(g) hereof to
Non-Manager Members in respect of such guaranteed payments and bonus payments or
by operation of the proviso of the first sentence of Section 4.6(g)), are to be
treated as operating expenses of the LLC to be paid from Operating Cash Flow);
provided that the Manager Member shall not be required to cause the LLC to pay
any tax so long as the Manager Member or the LLC is in good faith and by
appropriate legal proceedings contesting the validity, applicability or amount
thereof and such contest does not materially endanger any right or interest of
the LLC and adequate reserves therefor have been set aside by the LLC. Neither
the LLC nor any Non-Manager Member shall do anything or take any action which
would be inconsistent with the foregoing or with the Manager Member's actions as
authorized by the foregoing provisions of this Section 9.5(a). Each Non-Manager
Member shall cooperate with the Manager Member in causing the LLC to make an
election under Section 754 of the Code with respect to its fiscal year ended
Effective Date.
(b) The Manager Member shall be the "tax matters partner" for
the LLC pursuant to Sections 6221 through 6233 of the Code.
ARTICLE X - LIABILITY, EXCULPATION AND INDEMNIFICATION.
SECTION 10.1 LIABILITY. Except as otherwise provided by the Act, the
debts, obligations and liabilities of the LLC, whether arising in contract, tort
or otherwise, shall be solely the debts, obligations and liabilities of the LLC,
and no Covered Person shall be obligated personally for any such debt,
obligation or liability of the LLC solely by reason of being a Covered Person.
SECTION 10.2 EXCULPATION.
(a) No Covered Person shall be liable to the LLC or any other
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Covered Person in good faith on behalf of
the LLC and in a manner reasonably believed to be within the scope of authority
conferred on such Covered Person by this Agreement, except that a Covered Person
shall be liable for any such loss, damage or claim incurred by reason of any
action or inaction of such Covered Person which constituted fraud, gross
negligence, bad faith, willful misconduct or a breach of this Agreement or, in
the case of a Non-Manager Member, the Non-Solicitation Agreement to which he is
a party.
(b) A Covered Person shall be fully protected in relying in
good faith upon the records of the LLC and upon such information, opinions,
reports or statements presented to the Covered Person by any Person as to
matters the Covered Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the LLC of such Covered Person.
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SECTION 10.3 FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, a Covered Person
has duties (including fiduciary duties) and liabilities relating thereto to the
LLC or to any Member, a Covered Person acting under this Agreement shall not be
liable to the LLC or to any Member for its good faith reliance on the provisions
of this Agreement. The provisions of this Agreement, to the extent that they
restrict the duties and liabilities of a Covered Person otherwise existing at
law or in equity, are agreed by the parties hereto to replace such other duties
and liabilities of such Covered Person.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between the Manager Member and any other
Member the resolution or manner of resolution of which is not specifically
provided for herein, or (ii) whenever this Agreement or any other agreement
contemplated herein or therein provides that the Manager Member shall act in a
manner that is, or provides terms that are, fair and reasonable to the LLC or
any Member, the Manager Member shall resolve such conflict of interest, take
such action or provide such terms, considering in each case the relative
interest of each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such
interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles. In the absence of bad
faith by the Manager Member, the resolution, action or term so made, taken or
provided by the Manager Member shall not constitute a breach of this Agreement
or any other agreement contemplated herein or of any duty or obligation of the
Manager Member at law or in equity or otherwise.
(c) Whenever in this Agreement the Manager Member is permitted
or required to make a decision (i) in its "sole discretion" or under a grant of
similar authority or latitude, the Manager Member shall be entitled to consider
such interests and factors as it desires, including its own interests, and shall
have no duty or obligation to give any consideration to any interest of or
factors affecting the LLC or any other Person, or (ii) in its "good faith",
"reasonable discretion" or under another express standard, the Manager Member
shall act under such express standard and shall not be subject to any other or
different standard imposed by this Agreement or other applicable law.
(d) Wherever in this Agreement a factual determination is
called for and the applicable provision of this Agreement does not indicate what
party or parties are to make the applicable factual determination, and/or the
applicable standard to be used in making the factual determination, such
determination shall be made by the Manager Member in the exercise of its good
faith discretion.
SECTION 10.4 INDEMNIFICATION. To the fullest extent permitted by
applicable law, a Covered Person shall be entitled to indemnification from the
LLC for any loss, damage or claim (including any amounts paid in settlement of
any such claims) incurred by such Covered Person by reason of any act or
omission performed or omitted by such Covered Person in good faith on behalf of
the LLC and in a manner reasonably believed to be within the scope of authority
conferred on such Covered Person by this Agreement, except that no Covered
Person shall be entitled to be indemnified in respect of any loss, damage or
claim incurred by such Covered
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Person by reason of any action or inaction of such Covered Person which
constituted fraud, gross negligence, bad faith, willful misconduct or a breach
of this Agreement, the Purchase Agreement or, in the case of the Non-Manager
Member, the Non-Solicitation Agreement to which he is a party; provided,
however, that any indemnity under this Section 10.4 shall be provided out of and
to the extent of LLC assets only, and no Covered Person shall have any personal
liability to provide indemnity on account thereof.
SECTION 10.5 NOTICE; OPPORTUNITY TO DEFEND AND EXPENSES.
(a) Promptly after receipt by any Covered Person from any
third party of notice of any demand, claim or circumstance that, immediately or
with the lapse of time, would reasonably be expected to give rise to a claim or
the commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that could reasonably be expected to
result in any loss, damage or claim with respect to which the Covered Person
might be entitled to indemnification from the LLC under Section 10.4, the
Covered Person shall give notice thereof (the "Claims Notice") to the LLC;
provided, however, that a failure to give such notice shall not prejudice the
Covered Person's right to indemnification hereunder except to the extent that
the LLC is actually prejudiced thereby. The Claims Notice shall describe the
Asserted Liability in such reasonable detail as is practicable under the
circumstances, and shall, to the extent practicable under the circumstances,
indicate the amount (estimated, if necessary) of the loss or damage that has
been or may be suffered by the Covered Person.
(b) The LLC may elect to compromise or defend, at its own
expense and by its own counsel, any Asserted Liability; provided, however, that
if the named parties to any action or proceeding include (or could reasonably be
expected to include) both the LLC and a Covered Person, or more than one Covered
Persons, and the LLC is advised that representation of both parties by the same
counsel would be inappropriate under applicable standards of professional
conduct, the Covered Person may engage separate counsel at the expense of the
LLC. If the LLC elects to compromise or defend such Asserted Liability, it shall
within twenty (20) business days (or sooner, if the nature of the Asserted
Liability so requires) notify the Covered Person of its intent to do so, and the
Covered Person shall cooperate, at the expense of the LLC, in the compromise of,
or defense against, such Asserted Liability. If the LLC elects not to compromise
or defend the Asserted Liability, fails to notify the Covered Person of its
election as herein provided, contests its obligation to provide indemnification
under this Agreement, or fails to make or ceases making a good faith and
diligent defense, the Covered Person may pay, compromise or defend such Asserted
Liability all at the expense of the Covered Person. Except as set forth in the
preceding sentence, neither the LLC nor the Covered Person may settle or
compromise any claim over the objection of the other; provided, however, that
consent to settlement or compromise shall not be unreasonably withheld. In any
event, the LLC and the Covered Person may participate at their own expense, in
the defense of such Asserted Liability. If the Covered Person chooses to
participate in the defense of any claim, the Covered Person shall make available
to the LLC any books, records or other documents within its control that are
necessary or appropriate for such defense, all at the expense of the LLC.
(c) If the LLC elects not to compromise or defend an Asserted
Liability, or fails to notify the Covered Person of its election as above
provided, then, to the fullest extent permitted
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by applicable law, expenses (including legal fees) incurred by a Covered Person
in defending any Asserted Liability, shall, from time to time, be advanced by
the LLC prior to the final disposition of such claim, demand, action, suit or
proceeding upon satisfaction of any conditions required by applicable law and
receipt by the LLC of an undertaking by or on behalf of the Covered Person to
repay such amount if it shall be determined that the Covered Person is not
entitled to be indemnified as authorized in Section 10.4 hereof. The LLC may, if
the Manager Member deems it appropriate, require any Covered Person for whom
expenses are advanced, to deliver adequate security to the LLC for his
obligation to repay such indemnification.
SECTION 10.6 MISCELLANEOUS.
(a) The right of indemnification hereby provided shall not be
exclusive of, and shall not affect, any other rights to which a Covered Person
may be entitled. Nothing contained in this Article X shall limit any lawful
rights to indemnification existing independently of this Article X.
(b) The indemnification rights provided by this Article X
shall also inure to the benefit of the heirs, executors, administrators,
successors and assigns of a Covered Person and any officers, directors,
partners, shareholders, employees and Affiliates of such Covered Person (and any
former officer, director, member, shareholder or employee of such Covered
Person, if the loss, damage or claim was incurred while such person was an
officer, director, member, shareholder or employee of such Covered Person). The
Manager Member or the Management Board may extend the indemnification called for
by Section 10.4 to non-employee agents of the LLC, the Manager Member or its
Affiliates.
ARTICLE XI - MISCELLANEOUS.
SECTION 11.1 NOTICES. All notices, requests, elections, consents or
demands permitted or required to be made under this Agreement ("Notices") shall
be in writing, signed by the Person or Persons giving such notice, request,
election, consent or demand and shall be delivered personally or by confirmed
facsimile, or sent by registered or certified mail, or by commercial courier to
the other Members, at their addresses set forth on the signature pages hereof or
on Schedule A hereto, or at such other addresses as may be supplied by written
notice given in conformity with the terms of this Section 11.1. All Notices to
the LLC shall be made to the Manager Member at the address set forth on the
signature pages hereof or on Schedule A hereto, with a copy (which shall not
constitute notice) to the President of the LLC at the principal offices of the
LLC. The date of any such personal or facsimile delivery or the date of delivery
by an overnight courier or the date five (5) days after the date of mailing by
registered or certified mail, as the case may be, shall be the date of such
notice.
SECTION 11.2 SUCCESSORS AND ASSIGNS. Subject to the restrictions on
Transfer set forth herein, this Agreement shall be binding upon and shall inure
to the benefit of the Members, their respective successors, successors-in-title,
heirs and assigns, and each and every successors-in-interest to any Member,
whether such successor acquires such interest by way of
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gift, purchase, foreclosure or by any other method, and each shall hold such
interest subject to all of the terms and provisions of this Agreement.
SECTION 11.3 AMENDMENTS. No amendments may be made to this Agreement
without the prior written consent of (i) the Manager Member and (ii) the
Management Board; provided, however, that, without the vote, consent or approval
of any other Member, the Manager Member shall make such amendments and additions
to Schedule A hereto as are required by the provisions hereof; and, provided
further, that the Manager Member may amend this Agreement to correct any
printing, stenographic or clerical errors or omissions. Except as otherwise
specifically provided for herein, (a) an amendment or modification changing
adversely the rights of a Non-Manager Member with respect to distributions or
allocations or Puts, Calls or Repurchases (on a basis that is disproportionate
to any changes effected with respect to the rights of other Non-Manager Members
holding LLC Interests of the same class) shall be effective only with that
Non-Manager Member's consent (unless such change is expressly provided for by
this Agreement), (b) an amendment or a modification increasing any liability of
a Non-Manager Member to the LLC or the other Members, or adversely affecting the
limitation of the liability of a Non-Manager Member with respect to the LLC,
shall be effective only with that Non-Manager Member's consent, (c) an amendment
or modification reducing the required percentage of LLC Points for any consent
or vote in this Agreement shall be effective only with the consent or vote of
Members having the percentage of LLC Points theretofore required. and (d) an
amendment or modification which significantly and adversely affects a particular
Non-Manager Member differently from some other Non-Manager Member, shall be
effective only with the prior written consent of the Member which would be so
affected or with the vote or consent of three quarters (3/4) of the Management
Board.
SECTION 11.4 NO PARTITION. No Member nor any successor-in-interest to
any Member, shall have the right while this Agreement remains in effect to have
the property of the LLC partitioned, or to file a complaint or institute any
proceeding at law or in equity to have the property of the LLC partitioned, and
each Member, on behalf of himself, his successors, representatives, heirs and
assigns, hereby waives any such right. It is the intent of the Members that
during the term of this Agreement, the rights of the Members and their
successors-in-interest, as among themselves, shall be governed by the terms of
this Agreement, and that the right of any Member or successors-in-interest to
Transfer or otherwise dispose of his interest in the LLC shall be subject to the
limitations and restrictions of this Agreement.
SECTION 11.5 NO WAIVER; CUMULATIVE REMEDIES. The failure of any Member
to insist upon strict performance of a covenant hereunder or of any obligation
hereunder, irrespective of the length of time for which such failure continues,
shall not be a waiver of such Member's right to demand strict compliance in the
future. No consent or waiver, express or implied, to or of any breach or default
in the performance of any obligation hereunder, shall constitute a consent or
waiver to or of any other breach or default in the performance of the same or
any other obligation hereunder. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other rights the parties may
have by law, statute, ordinance or otherwise.
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SECTION 11.6 DISPUTE RESOLUTION. All disputes arising in connection
with this Agreement shall be resolved by binding arbitration in accordance with
the applicable rules of the American Arbitration Association. The arbitration
shall be held in Massachusetts before a single arbitrator selected in accordance
with Section 12 of the American Arbitration Association Commercial Arbitration
Rules who shall have substantial business experience in the investment advisory
industry, and shall otherwise be conducted in accordance with the American
Arbitration Association Commercial Arbitration Rules.
SECTION 11.7 PRIOR AGREEMENTS SUPERSEDED. This Agreement and the
schedules and exhibits hereto supersede the prior understandings and agreements
among the parties with respect to the subject matter hereof and thereof.
SECTION 11.8 CAPTIONS. Titles or captions of Articles or Sections
contained in this Agreement are inserted as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof.
SECTION 11.9 COUNTERPARTS. This Agreement may be executed in a number
of counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the Members notwithstanding that all Members have not
signed the same counterpart.
SECTION 11.10 APPLICABLE LAW; JURISDICTION. This Agreement and the
rights and obligations of the parties hereunder shall be governed by and
interpreted, construed and enforced in accordance with the laws of the State of
Delaware, without applying the choice of law or conflicts of law provisions
thereof.
SECTION 11.11 INTERPRETATION. All terms herein using the singular shall
include the plural; all terms using the plural shall include the singular; in
each case, the term shall be as appropriate to the context of each sentence.
Throughout this Agreement, nouns, pronouns and verbs shall be construed as
masculine, feminine and neuter, whichever shall be applicable.
SECTION 11.12 SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
SECTION 11.13 CREDITORS. None of the provisions of this Agreement shall
be for the benefit of or enforceable by any creditor of (i) any Member or (ii)
the LLC, other than a Member who is also a creditor of the LLC.
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IN WITNESS WHEREOF the Non-Manager Members and the Manager Member have
executed and delivered this Limited Liability Company Agreement as of the day
and year first above written.
MANAGER MEMBER
Name and Signature Address
AFFILIATED MANAGERS GROUP, INC. Xxx Xxxxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Telephone: (000) 000-0000
By:________________________________ Facsimile: (000) 000-0000
Name:
Title:
NON-MANAGER MEMBERS
Name and Signature Address