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EXHIBIT 10.3
GEOCAPITAL, LLC
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
September 30, 1997
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GEOCAPITAL, LLC
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS....................................................... 1
Section 1.1 Definitions................................................ 1
ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS............................. 13
Section 2.1 Continuation.............................................. 13
Section 2.2 Name...................................................... 13
Section 2.3 Term...................................................... 13
Section 2.4 Registered Agent and Registered Office.................... 13
Section 2.5 Principal Place of Business............................... 14
Section 2.6 Qualification in Other Jurisdictions...................... 14
Section 2.7 Purposes and Powers....................................... 14
Section 2.8 Title to Property......................................... 15
ARTICLE III - MANAGEMENT OF THE LLC.......................................... 15
Section 3.1 Management in General..................................... 15
Section 3.2 Management Board of the LLC............................... 16
Section 3.3 Officers of the LLC....................................... 18
Section 3.4 Employees of the LLC...................................... 19
Section 3.5 Operation of the Business of the LLC...................... 19
Section 3.6 Compensation and Expenses of the Members.................. 23
Section 3.7 Other Business of the Manager Member and its Affiliates... 23
Section 3.8 Non-Manager Members and Non Solicitation Agreements....... 24
Section 3.9 Non Solicitation and Non Disclosure by Non-Manager Members
and Employee Stockholders................................. 24
Section 3.10 Additional Permitted Outside Advisory Clients............. 28
Section 3.11 Remedies Upon Breach...................................... 31
Section 3.12 Repurchase Upon Termination of Employment or Transfer by
Operation of Law.......................................... 32
Section 3.13 No Employment Obligation.................................. 37
Section 3.14 Miscellaneous............................................. 37
Section 3.15 Capitalization of Excess Operating Cash Flow.............. 37
ARTICLE IV - CAPITAL CONTRIBUTIONS;
CAPITAL ACCOUNTS AND ALLOCATIONS; DISTRIBUTIONS........................ 38
Section 4.1 Capital Contributions..................................... 38
Section 4.2 Capital Accounts; Allocations............................. 38
Section 4.3 Distributions............................................. 41
(i)
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Section 4.4 Distributions Upon Dissolution; Establishment of a Reserve
Upon Dissolution................................................ 43
Section 4.5 Proceeds from Capital Contributions and the Sale of
Securities; Insurance Proceeds; Certain Special Allocations..... 43
Section 4.6 Federal Tax Allocations................................... 44
ARTICLE V - TRANSFER OF LLC INTERESTS BY NON-MANAGER
MEMBERS; RESIGNATION, REDEMPTION AND WITHDRAWAL BY
NON-MANAGER MEMBERS;
ADMISSION OF ADDITIONAL NON-MANAGER MEMBERS........................... 45
Section 5.1 Assignability of Interests................................ 45
Section 5.2 Substitute Non-Manager Members............................ 46
Section 5.3 Allocation of Distributions Between Assignor and Assignee;
Successor to Capital Accounts................................... 46
Section 5.4 Resignation, Redemptions and Withdrawals.................. 47
Section 5.5 Issuance of Additional LLC Interests...................... 47
Section 5.6 Additional Requirements................................... 48
Section 5.7 Representation of Members................................. 48
ARTICLE VI - TRANSFER OF LLC INTERESTS BY THE
MANAGER MEMBER; REDEMPTION, REMOVAL
AND WITHDRAWAL........................................................ 49
Section 6.1 Assignability of Interest................................. 49
Section 6.2 Resignation, Redemption, and Withdrawal................... 50
ARTICLE VII - PUT OF LLC INTERESTS.......................................... 50
Section 7.1 Mandatory Puts............................................ 50
Section 7.2 Election Rights of Non-Manager Members to Receive
AMG Stock....................................................... 53
Section 7.3 Registration Rights....................................... 55
Section 7.4 Restrictions.............................................. 57
Section 7.5 Limitation of Registration Rights. ....................... 58
ARTICLE VIII - DISSOLUTION AND TERMINATION.................................. 58
Section 8.1 No Dissolution............................................ 58
Section 8.2 Events of Dissolution..................................... 58
Section 8.3 Notice of Dissolution..................................... 59
Section 8.4 Liquidation............................................... 59
Section 8.5 Termination............................................... 60
Section 8.6 Claims of the Members..................................... 60
ARTICLE IX - RECORDS AND REPORTS............................................ 60
Section 9.1 Books and Records......................................... 60
Section 9.2 Accounting................................................ 60
(ii)
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Section 9.3 Financial and Compliance Reports.......................... 60
Section 9.4 Meetings.................................................. 61
Section 9.5 Tax Matters............................................... 62
ARTICLE X - LIABILITY, EXCULPATION AND INDEMNIFICATION........................ 62
Section 10.1 Liability................................................. 62
Section 10.2 Exculpation............................................... 62
Section 10.3 Fiduciary Duty............................................ 63
Section 10.4 Indemnification........................................... 64
Section 10.5 Notice; Opportunity to Defend and Expenses................ 64
Section 10.6 Miscellaneous............................................. 65
ARTICLE XI - MISCELLANEOUS.................................................... 65
Section 11.1 Notices................................................... 65
Section 11.2 Successors and Assigns.................................... 66
Section 11.3 Amendments................................................ 66
Section 11.4 No Partition.............................................. 66
Section 11.5 No Waiver; Cumulative Remedies............................ 66
Section 11.6 Dispute Resolution........................................ 66
Section 11.7 Prior Agreements Superseded............................... 67
Section 11.8 Captions.................................................. 67
Section 11.9 Counterparts.............................................. 67
Section 11.10 Applicable Law; Jurisdiction.............................. 67
Section 11.11 Interpretation............................................ 67
Section 11.12 Severability.............................................. 67
Section 11.13 Creditors................................................. 67
EXHIBITS
Exhibit A - Form of Non Solicitation/Non Disclosure Agreement for Employee
Stockholders
Exhibit B - Form of Promissory Note for Repurchases
SCHEDULES
Schedule A - LLC Points and Capital Accounts
Schedule B - Pro Forma Minnesota Calculations
Schedule C - Model Permitted Outside Advisory Client Calculation
Schedule D - Model Repurchase Calculation
(iii)
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GEOCAPITAL, LLC
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
------------------------------------
This Amended and Restated Limited Liability Company Agreement (the
"Agreement") of GeoCapital, LLC (the "LLC" or the "Company") is made and entered
into as of September 30, 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, a limited liability company has been formed pursuant to 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"), by
filing a Certificate of Formation of the LLC with the office of the Secretary of
State of the State of Delaware on August 13, 1997, and entering into a Limited
Liability Company Agreement of the LLC, dated as of August 13, 1997; and
WHEREAS, pursuant to the Merger Agreement, GeoCapital Corporation, a
Delaware corporation, is being merged with and into AMG Merger Sub, Inc., a
wholly owned subsidiary of Affiliated Managers Group, Inc. ("Merger Sub"),
effective as of the Closing (as defined in the Merger Agreement) and the Members
desire to continue the LLC as a limited liability company under the Act with
Merger Sub as Manager Member, and to amend and restate the Limited Liability
Company Agreement of the LLC, dated as of August 13, 1997 in its entirety.
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 mean 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.
"Additional Interest" shall have the meaning specified in Section 3.8
hereof.
"Additional Non-Manager Members" shall have the meaning specified in
Section 5.5.
"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.
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"Affiliate" shall mean, with respect to any person or entity (herein the
"first party"), any other person or entity that directly or indirectly controls,
or is controlled by, or is under common control with, such first party. The term
"control" as used herein (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to (a)
vote fifty percent (50%) or more of the outstanding voting securities of such
person or entity, or (b) otherwise direct the management or policies of such
person or entity by contract or otherwise.
"Agreement" shall mean this Amended and Restated Limited Liability Company
Agreement, as it may from time to time be amended, supplemented or restated.
"AMG" shall mean Affiliated Managers Group, Inc., a Delaware corporation,
and any successors or assigns thereof.
"AMG Stock" shall have the meaning specified in Section 7.2(a) hereof.
"Asset Transfer" shall have the meaning ascribed thereto in the Merger
Agreement.
"Asset Transfer Agreement" shall have the meaning ascribed thereto in the
Merger Agreement.
"Board Vote" shall have the meaning specified in Section 3.2(b)(iv)
hereof.
"Capital Account" shall mean the capital account maintained by the LLC
with respect to each Member in accordance with the capital accounting rules
described in Section 4.2 hereof.
"Capital Contribution" shall mean, as to each Member, the amount of money
and/or the agreed fair market value of any property (net of any liabilities
encumbering such property that the LLC is considered to assume or take subject
to) contributed to the capital of the LLC by such Member.
"Carried Interest" shall have the meaning specified in Section 3.10(c)
hereof.
"Certificate" shall mean the original Certificate of Formation of the LLC
required under the Act, as such Certificate may be amended and/or restated from
time to time.
"Client" shall mean all Past Clients, Present Clients and Potential
Clients, subject to the following general rules: (i) with respect to each
Client, the term shall also include any persons or entities which are known to
the Employee Stockholder to be Affiliates of such Client or persons who are
members of the Immediate Family of such Client or any of its Affiliates; and
(ii) with respect to so-called "wrap programs," both the sponsor of the program
and the underlying participants in the program (or clients who have selected the
LLC or a Controlled Affiliate under their contract with the sponsor) shall be
included as Clients.
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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 thereto,
together with all regulations promulgated thereunder.
"Collective Investment Vehicle" shall mean any limited partnership,
limited liability company, trust or any other issuer that would be an investment
company (within the meaning of the 0000 Xxx) but for the exceptions contained in
Section 3(c)(1) or Section 3(c)(7) of such Act.
"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.
"Controlling Person" shall have the meaning specified in Section 7.3(e)
hereof.
"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.
"Effective Date" shall have the meaning specified in the preamble of this
Agreement.
"Eligible Person" shall have the meaning specified in Section 3.2(b)(i)
hereof.
"Employee Stockholder" shall mean (a) in the case of a Non-Manager Member
which is not an individual, that certain employee of the LLC who is the owner of
all the issued and outstanding capital stock of such Non-Manager Member, and is
listed as such on Schedule A hereto, and (b) in the case of a Non-Manager Member
which is an individual, such Non-Manager Member.
"Employment Agreement" shall have the meaning ascribed thereto in the
Merger Agreement.
"Encumbrances" shall mean any restrictions, liens, claims, charges,
pledges or encumbrances of any kind or nature whatsoever.
"Fair Market Value" shall mean the fair market value as reasonably
determined by the Manager Member or, for purposes of Section 4.4 hereof, if
there shall be no Manager Member, the Liquidating Trustee.
"For Cause" shall mean, with respect to the termination of an Employee
Stockholder's employment with the LLC, any of the following:
(a) The Employee Stockholder has engaged in any criminal offense
which involves a violation of federal or state securities laws or
regulations (or equivalent laws or regulations of any country or political
subdivision thereof), embezzlement, fraud, wrongful taking or
misappropriation of property, theft, or any other crime involving
dishonesty and (i) 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
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such act; (ii) has entered into a settlement with or consented to the
issuance of an order by any Governmental Authority in connection with or
relating to such act; or (iii) as a result of or in relation to such act,
an event has occurred which requires an affirmative answer to any of the
questions in Item 11 of Part I of the LLC's Form ADV (or any similar or
successor provision or form);
(b) The Employee Stockholder has persistently and willfully
failed to perform his or her duties or failed to devote substantially all
of his or her working time to the performance of such duties except, in
the case of an Employee Stockholder who is a party to an Employment
Agreement or a Non-Solicitation Agreement, as may be specifically
permitted by the terms of such Employment Agreement or a Non-Solicitation
Agreement; or
(c) The Employee Stockholder has (i) engaged in a Prohibited
Competition Activity, (ii) violated or breached any material provision of
his or her Employment Agreement or Non Solicitation Agreement or (iii)
engaged in any of the activities prohibited by Section 3.9 hereof and
either (i) the activity of the Employee Stockholder has harmed or would
reasonably be expected to harm the LLC or the Manager Member (which harm
would not be immaterial), or (ii) the Employee Stockholder fails to or is
unable to cease such activity and cause any harm to the LLC and/or the
Manager Member within ten (10) days after such Employee Stockholder
becomes aware that, or the Manager Member gives such Employee Stockholder
notice that he or she has engaged in a Prohibited Competition Activity, or
violated or breached any material provision of his or her Employment
Agreement or Non-Solicitation Agreement, or engaged in any of the
activities prohibited by Section 3.7 hereof.
"Free Cash Flow" shall mean, for any period, fifty percent (50%) of the
Revenues From Operations of the LLC for such period, subject to adjustment as
contemplated in Section 3.15.
"Free Cash Flow Expenditure" shall have the meaning specified in Section
3.3(c) hereof.
"Governmental Authority" shall mean any foreign, federal, state or local
court, governmental authority or regulatory body.
"Guaranteed Interest" shall have the meaning specified in Section 3.10(c)
hereof.
"Holders" shall have the meaning specified in Section 7.3(a) hereof.
"Immediate Family" shall mean, with respect to any person, such person's
spouse, parents, grandparents, children, grandchildren and siblings.
"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
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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.
"Independent Public Accountants" shall mean any independent certified
public accountant satisfactory to the Manager Member and retained by the LLC.
"Initial Members" shall mean those Persons which are Members on the
Effective Date after the effectiveness of the Merger.
"Initial LLC Points" means, with respect to a Non-Manager Member
(including his (or its) Related Non-Manager Members) and their respective
Permitted Transferees, those LLC Points held by such Non-Manager Member and his
(or its) Related Non-Manager Members in the LLC on the Effective Date, provided
that LLC Points shall cease to be Initial LLC Points from and after the date on
which they are acquired by the Manager Member (or its assignee) pursuant to
Section 3.12 or Article VII hereof.
"Intellectual Property" shall have the meaning specified in Section 3.7(c)
hereof.
"Investment Management Services" shall mean any services which 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).
"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" means GeoCapital, LLC, the limited liability company heretofore
formed and continued under and pursuant to the Act and this Agreement, as the
same may be amended and/or restated from time to time.
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"LLC Interest" means a Member's limited liability company interest in the
LLC, which includes such Member's LLC Points as well as such Member's Capital
Account and other rights under this Agreement and the Act.
"LLC Points" shall mean, as of any date, with respect to a Member, the
number of LLC Points of such Member as set forth on Schedule A hereto, as
amended from time to time in accordance with the terms hereof, and as in effect
on such date.
"LLC Repurchase" shall have the meaning specified in Section 3.11(a)
hereof.
"Majority Vote" shall mean the affirmative approval, by vote or written
consent, of Non-Manager Members holding two-thirds of the outstanding Vested LLC
Points then held by all Non-Manager Members. For purposes of determining a
Majority Vote, all LLC Points held by a Related Non-Manager Member of Xxxxx
Xxxxxx shall be voted by Xxxxx Xxxxxx, and all LLC Points held by a Related
Non-Manager Member of Xxxxx X. Xxxxxxxxx shall be voted by Xxxxx X. Xxxxxxxxx.
"Management Board" shall have the meaning specified in Section 3.2(a)
hereof.
"Manager Member" shall mean Merger Sub, and any Person who becomes a
successor Manager Member as provided herein.
"Members" shall mean any Person admitted to the LLC as a "member" within
the meaning of the Act, which includes the Manager Member and the Non-Manager
Members, 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.
"Merger Agreement" shall mean that certain Agreement and Plan of
Reorganization dated as of August 15, 1997, by and among Affiliated Managers
Group, Inc., Merger Sub, GeoCapital Corporation, the LLC and all the
Stockholders of GeoCapital Corporation, as the same has been amended from time
to time.
"Minnesota Agreement" shall mean that certain Investment Advisory
Agreement dated as of July 1, 1993, by and between GeoCapital Corporation and
the Minnesota State Board of Investment, as the same may be amended from time to
time, and/or restated or replaced, with the prior written consent of the Manager
Member.
"NASD" shall have the meaning specified in Section 7.3(d) hereof.
"Non-Manager Member" shall mean any Person who is or becomes a Non-Manager
Member pursuant to the terms hereof, unless otherwise indicated.
"Non Solicitation Agreement" shall have the meaning set forth in Section
3.8 hereof.
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"Notice Deadline" shall have the meaning specified in Section 7.1(d)
hereof.
"Officers" shall have the meaning specified in Section 3.3(a).
"Operating Cash Flow" shall mean, for any period, an amount equal to the
positive difference, if any, between Revenues From Operations of the LLC for
such period and Free Cash Flow for such period.
"Past Client" shall mean at any particular time, any Person who at any
point prior to such time had been an advisee or investment advisory customer of,
or recipient of Investment Management Services from, the LLC (including, without
limitation, its predecessor, GeoCapital Corporation) but at such time is not an
advisee or investment advisory customer or client of, or recipient of Investment
Management Services from, the LLC.
"Permanent Incapacity" shall mean, with respect to an Employee
Stockholder, that such Employee Stockholder has been permanently and totally
unable, by reason of injury, illness or other similar cause (determined pursuant
to the process set forth in the following sentence) to have performed his or her
substantial and material duties and responsibilities for a period of three
hundred sixty-five (365) consecutive days, which injury, illness or similar
cause (as determined pursuant to such process) would render such Employee
Stockholder incapable of operating in a similar capacity in the future. The
foregoing determination shall be made reasonably by a licensed physician
selected by the Manager Member; provided, however, that if the LLC has purchased
lump-sum key-man disability insurance with respect to such Employee Stockholder,
which policy is then in effect, then such determination shall be made reasonably
either (i) by an agreement between such physician and a physician selected by
the insurance company with which the LLC has entered into a lump-sum key-man
disability policy with respect to such Employee Stockholder, 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 LLC has entered into a lump-sum key-man
disability policy with respect to such Employee Stockholder, and a different
procedure is then required under such policy, then by using such other procedure
as may then be required by such insurance company.
"Permitted Outside Advisory Client" shall mean:
(a) With respect to Xxxxx Xxxxxx, Xxxxx X. Xxxxxxxxx, Xxxx Xxxxxx
and Xxxxxxxx Xxxxxx, the following: (i) Applewood Associates, L.P., a New York
limited partnership, (ii) Xxxxxxxx Partners, L.P., a Delaware limited
partnership, (iii) Xxxxxxxx Foreign Partners, L.P., a Delaware limited
partnership, and (iv) 21st Century Communications Partners, L.P., a Delaware
limited partnership; provided, however, that if the LLC is no longer providing
Investment Management Services for compensation with respect to any Partnerships
in clause (i), (ii) or (iii), such Partnership shall cease to be a Permitted
Outside Advisory Client.
(b) With respect to Xxxxx Xxxxxx, Xxxxx X. Xxxxxxxxx, Xxxx Xxxxxx
and Xxxxxxxx Xxxxxx and, to the extent agreed to by the Manager Member, other
Non-Manager Members of the LLC, the following: each Collective Investment
Vehicle which is a client of the LLC as
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contemplated by Section 3.10(c), and in which the Manager Member or an Affiliate
of the Manager Member has received its Guaranteed Interest in accordance with
the provisions of Section 3.10(d) hereof, and with respect to which the Manager
Member or an Affiliate of the Manager Member has had an opportunity to purchase
its Additional Interest in accordance with the provisions of Section 3.10(e)
hereof.
"Permitted Transferee" shall mean, with respect to any Non-Manager Member,
its transferees pursuant to the provisions of Sections 5.1(b) and 5.1(c) hereof
and, to the extent set forth in any consent of the Manager Member pursuant to
Section 5.1(a), its transferees pursuant to Section 5.1(a) hereof.
"Person" means any individual, partnership (limited or general),
corporation, limited liability company, limited liability partnership,
association, trust, joint venture, unincorporated organization or any similar
entity.
"Potential Client" shall mean, at any particular time, any Person to whom
the LLC (including, without limitation, its predecessor, GeoCapital Corporation)
or any of its Controlled Affiliates, through any of their officers, employees,
agents or consultants (or persons acting in any similar capacity), has, within
five 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 serve as investment adviser or otherwise provide
Investment Management Services, but who is not at such time an advisee or
investment advisory customer of, or recipient of Investment Management Services
from, the LLC or any of its Controlled Affiliates. The preceding sentence is
meant to exclude form letters and blanket mailings.
"Present Client" shall mean, at any particular time, any Person who is at
such time an advisee or investment advisory customer of, or recipient of
Investment Management Services from, the LLC or any of its Controlled
Affiliates.
"Pro Forma Minnesota Allocation" shall mean, with respect to any period in
which a performance fee would be payable if earned (previously any twelve-month
period ended June 30), an amount equal to the difference between (a) the Pro
Forma Performance Fee, and (b) the Actual Performance Fee. Appropriate
adjustments will be made to the period and date set forth above to correspond to
any amendment in the Minnesota Agreement. As provided in Section 3.5(d), no
amendment or modification may be made to the Minnesota Agreement (other than
with respect to resetting the Option Limitation (as such term is defined in the
Minnesota Agreement)) without the prior written consent of the Manager Member.
For purposes of this definition,
the term "Actual Performance Fee" shall mean the performance fee
actually payable to the LLC under the Minnesota Agreement in respect
of a twelve-month period ended June 30 as calculated pursuant to the
provisions of Exhibit C to the Minnesota Agreement; and
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the term "Pro Forma Performance Fee" shall mean the performance fee
that would be payable to the LLC under the Minnesota Agreement in
respect of that same twelve-month period ended June 30 as calculated
pursuant to the provisions of Exhibit C to the Minnesota Agreement,
but calculated as if (i) the so-called "Residual" described in Part
B of such Exhibit C (being the residual negative performance fee
from periods ended on or prior to June 30, 1997) were zero as of the
end of the twelve-month period ended June 30, 1997, and (ii) there
were no so-called "Debits" (as such term is used in Part B of said
Exhibit C) from or attributable to any measurement periods ended on
or prior to June 30, 1997.
Set forth on Schedule B hereto are sample calculations under this definition of
Pro Forma Minnesota Allocation.
From and after the effective date of the first purchase by AMG (or its
assignee) of Initial LLC Points (whether pursuant to Section 3.12 or Article
VII), the Pro Forma Minnesota Allocation shall, with respect to any subsequent
end of a period, be equal to the Pro Forma Minnesota Allocation (determined as
set forth above) multiplied by a fraction, (x) the numerator of which is the
number of Initial LLC Points outstanding on the Effective Date (i.e. Forty LLC
Points) minus the total number of Initial LLC Points purchased by the Manager
Member (or its assignee) since the Effective Date (whether pursuant to Section
3.12 or Article VII) but prior to the effective date of the purchase with
respect to which such determination is being made, and (y) the denominator of
which is the number of Initial LLC Points outstanding on the Effective Date
(i.e. Forty LLC Points).
"Prohibited Competition Activity" shall mean any of the following
activities:
(a) directly or indirectly, whether as owner, part owner, member,
director, officer, trustee, employee, agent or consultant for or on behalf of
any Person other than the LLC: (i) diverting or taking away any funds or
investment accounts with respect to which the LLC or any Controlled Affiliate of
the LLC is performing investment management or advisory services; or (ii)
soliciting any Person to divert or take away any such funds or investment
accounts; or
(b) directly or indirectly, whether as owner, part owner, partner,
member director, officer, trustee, employee, agent or consultant, for or on
behalf of any Person other than the LLC or any Controlled Affiliate of the LLC,
performing any Investment Management Services (provided that an Employee
Stockholder who directly performs Investment Management Services for a member of
his or her Immediate Family shall not be considered to have engaged in a
Prohibited Competition Activity);
except, in the case of an Employee Stockholder who is a party to an Employment
Agreement or a Non Solicitation Agreement, with respect to the provision of
Investment Management Services to a Permitted Outside Advisory Client to the
extent (and only to the extent) specifically excluded from this definition of
Prohibited Competition Activity by the terms and conditions of such Employment
Agreement or Non Solicitation Agreement.
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"Prospect" shall have the meaning set forth in Section 3.9(b) hereof.
"Public Offering" shall have the meaning specified in Section 7.1(f)
hereof.
"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 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.
"Registrable Securities" shall have the meaning specified in Section
7.3(b) hereof.
"Registration" shall have the meaning specified in Section 7.3(a) hereof.
"Registration Expenses" shall have the meaning specified in Section 7.3(d)
hereof.
"Registration Statement" shall have the meaning specified in Section
7.3(a) hereof.
"Related Entity" shall have the meaning specified in Section 3.10(b)
hereof.
"Related Non-Manager" shall mean, (a) with respect to Xxxxx Xxxxxx, the
following: Xxxx X. Xxxxxx; and (b) with respect to Xxxxx X. Xxxxxxxxx, the
following: Xxxxxx X. Xxxxxxxxx and Xxxxxx X. Xxxxxxxxx.
"Remaining Minnesota Carryover Amount" shall mean, as of any date of
determination, the difference, if any, between the Actual Residual and the Pro
Forma Residual as of such date. Appropriate adjustments will be made to this
definition to correspond to any amendments in the Minnesota Agreement.
For purposes of this definition,
the term "Actual Residual" shall mean the so-called "Residual" described
in Part B of Exhibit C to the Minnesota Agreement (being the residual
negative performance fee from periods ended on or prior to the date of
determination); and
the term "Pro Forma Residual" shall mean the so-called "Residual"
attributable to performance for periods ended on or prior to the date of
determination, but calculated as if the Residual were zero (0) as of the
end of the twelve-month period ended June 30, 1997.
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Set forth on Schedule B hereto are sample calculations under this definition of
Remaining Minnesota Carryover Amount.
From and after the effective date of the first purchase by AMG (or its
assignee) of Initial LLC Points (whether pursuant to Section 3.12 or Article
VIII), the Remaining Minnesota Carryover Amount shall, as of any subsequent date
of determination be equal to the Remaining Minnesota Carryover Amount
(determined as set forth above) multiplied by a fraction, (x) the numerator of
which is the number of Initial LLC Points outstanding on the Effective Date
(i.e., Forty LLC Points) minus the total number of Initial LLC Points which were
purchased by AMG (or its assignee) since the Effective Date (whether pursuant to
Section 3.12 or Article VII) but prior to the effective date of the purchase
with respect to which such determination is being made, and (y) the denominator
of which is the number of Initial LLC Points outstanding on the Effective Date
(i.e., Forty LLC Points).
"Remaining Minnesota Cumulative Debits" shall mean, as of any date of
determination, the difference, if any, between the Actual Debits as of such date
and the Pro Forma Debits as of such date. Appropriate adjustments will be made
to this definition to correspond to any amendments to the Minnesota Agreement.
For purposes of this definition,
the term "Actual Debits" shall mean the sum of all so-called "Debits" and
"Credits" as such terms are used in Part B of Exhibit C to the Minnesota
Agreement (being the Debits and Credits attributable to performance prior
to the date of determination); and
the term "Pro Forma Debits" shall men the sum of all so-called Debits and
Credits attributable to performance prior to the date of determination,
but calculated as if there were no Debits or Credits as of the end of the
twelve-month period ended June 30, 1997.
Set forth on Schedule B hereto are sample calculations under this definition of
Remaining Minnesota Cumulative Debits.
From and after the effective date of the first purchase by AMG (or its
assignee) of Initial LLC Points (whether pursuant to Section 3.12 or Article
VII), the Remaining Minnesota Cumulative Debits shall, as of any subsequent date
of determination, be equal to the Remaining Minnesota Cumulative Debits
(determined as set forth above) multiplied by a fraction, (x) the numerator of
which is the number of Initial LLC Points outstanding on the Effective Date
(i.e. Forty LLC Points) minus the cumulative number Initial LLC Points which
were purchased by AMG (or its assignee) since the Effective Date (whether
pursuant to Section 3.12 or Article VII) but prior to the effective date of the
purchase with respect to which such determination is being made, and (y) the
denominator of which is the number of Initial LLC Points outstanding on the
Effective Date (i.e. Forty LLC Points).
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"Repurchase" shall mean a purchase or repurchase of LLC Interests made
pursuant to Section 3.12(a).
"Repurchase Closing Date" shall have the meaning specified in Section 3.12
hereof.
"Repurchased Member" shall have the meaning specified in Section 3.12(a).
"Repurchase Price" shall have the meaning specified in Section 3.12(c).
"Retirement" shall mean, with respect to an Employee Stockholder, the
termination by such Employee Stockholder of such Employee Stockholder's
employment with the LLC and its Affiliates: (a) after the date such Employee
Stockholder 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 Employee Stockholder commenced his or her employment with the LLC (not
including its predecessor, GeoCapital Corporation), as applicable, 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
(i) Xx. Xxxxx Xxxxxx, the term "Retirement" shall mean the termination by him of
his employment with the LLC after the seventh 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, and (ii) Xx. Xxxxx X. Xxxxxxxxx, the term
"Retirement" shall mean the termination by him of his employment with the LLC
after the ninth 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), determined on an accrual basis in
accordance with generally accepted accounting principles consistently applied;
provided, however, that Revenues From Operations shall be determined without
regard to (a) proceeds during such period from the sale, exchange or other
disposition of all, or a substantial portion of, the assets of the LLC, (b)
revenues from the issuance by the LLC of additional LLC Points, other LLC
Interests, or other securities issued by the LLC, and (c) payments received
pursuant to any insurance policies other than with respect to business
interruption insurance.
"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.
"Suspension Period" shall have the meaning specified in Section 7.4(c)
hereof.
"Transfer" shall have the meaning specified in Section 5.1 hereof.
"Unsatisfactory Performance" shall mean a written determination by a
Majority Vote with the written consent of the Manager Member, that an Employee
Stockholder has failed to meet
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minimum requirements of satisfactory performance of his or her job, after such
Employee Stockholder has received written notice that the Non-Manager Members
were considering such a determination and the Employee Stockholder has had a
reasonable opportunity to respond in writing or in person (at such Employee
Stockholder's request) after his or her receipt of such notice.
In addition to the foregoing, other capitalized terms used in this
Agreement shall have the meaning ascribed thereto in the text of this Agreement.
ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS.
SECTION 2.1 CONTINUATION.
(a) The Members hereby agree to continue the LLC as a limited
liability company under and pursuant to the provisions of the Act, and agree
that the rights, duties and liabilities of the Members shall be as provided in
the Act, except as otherwise provided herein.
(b) Upon the execution of this Agreement or a counterpart of this
Agreement, the Initial Members shall continue as members of the LLC.
(c) The name, LLC Points and Capital Contribution of each Member
(including the agreed value of such Capital Contribution) shall be listed on
Schedule A attached hereto. The Manager Member shall update Schedule A from time
to time as it deems necessary, to accurately reflect the information to be
contained therein. Any amendment or revision to Schedule A shall not be deemed
an amendment to this Agreement. Any reference in this Agreement to Schedule A
shall be deemed to be a reference to Schedule A as amended and in effect from
time to time.
(d) The Manager Member, as an authorized person within the meaning
of the Act, shall execute, deliver and file any certificates required or
permitted by the Act to be filed in the office of the Secretary of State of the
State of Delaware.
SECTION 2.2 NAME. The name of the LLC heretofore formed and continued
hereby is GeoCapital, LLC. At any time, the Manager Member may, with a Majority
Vote, 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
Manager Member.
SECTION 2.3 TERM. The term of the LLC commenced on the date the
Certificate was filed in the Office of the Secretary of State of the State of
Delaware and shall continue until the LLC is dissolved in accordance with the
provisions of this Agreement.
SECTION 2.4 REGISTERED AGENT AND REGISTERED OFFICE. The LLC's registered
agent and registered office in Delaware shall be The Corporation Trust Company,
Corporation Trust Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000. At any
time, the Manager Member may designate another registered agent and/or
registered office.
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SECTION 2.5 PRINCIPAL PLACE OF BUSINESS. The principal place of business
of the LLC shall be at 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx. At any time, the
Manager Member may change the location of the LLC's principal place of business;
provided, however, that if the principal place of business is to be located
outside of Manhattan, New York, New York, such action must be approved by a
Majority Vote.
SECTION 2.6 QUALIFICATION IN OTHER JURISDICTIONS. The Members shall cause
the LLC to be qualified or registered (under assumed or fictitious name if
necessary) in any jurisdiction in which the LLC transacts business or 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 engage in the investment advisory and
investment management business and any businesses related thereto or useful in
connection therewith. However, the business and purposes of the LLC shall not be
limited to its initial principal business activities and, unless the Manager
Member otherwise determines, it shall have authority to engage in any lawful
business, purpose or activity permitted by the Act, 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 employ Officers, employees, agents and other persons, to fix
the compensation and define the duties and obligations of such personnel, to
establish and carry out retirement, incentive and benefit plans for such
personnel, and to indemnify such personnel to the extent permitted by this
Agreement and the Act;
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(f) to make donations irrespective of benefit to the LLC for the
public welfare or for community, charitable, religious, educational, scientific,
civic or similar purposes;
(g) to institute, prosecute, and defend any legal action or
arbitration proceeding involving the LLC, and to pay, adjust, compromise,
settle, or refer to arbitration any claim by or against the LLC or any of its
assets;
(h) to indemnify any Person in accordance with the Act and to obtain
any and all types of insurance;
(i) to negotiate, enter into, renegotiate, extend, renew, terminate,
modify, amend, waive, execute, acknowledge or take any other action with respect
to any lease, contract or security agreement in respect of any assets of the
LLC;
(j) to form, sponsor, organize or enter into joint ventures, general
or limited partnerships, limited liability companies, trusts and any other
combinations or associations formed for investment purposes;
(k) to make, execute, acknowledge and file any and all documents or
instruments necessary, convenient or incidental to the accomplishment of the
purposes of the LLC; and
(l) to cease its activities and cancel its Certificate.
SECTION 2.8 TITLE TO PROPERTY. All property owned by the LLC, real or
personal, tangible or intangible, shall be deemed to be owned by the LLC as an
entity, and no Member, individually, shall have any ownership of such property.
ARTICLE III - MANAGEMENT OF THE LLC.
SECTION 3.1 MANAGEMENT IN GENERAL.
(a) The management and control of the business of the LLC shall be
vested exclusively in the Manager Member, and the Manager Member shall have
exclusive power and authority, in the name of and on behalf of the LLC, to
perform all acts and do all things which, in its sole discretion, it deems
necessary or desirable to conduct the business of the LLC; with or without the
vote or consent of the Members in their capacity as such, except as specifically
provided in this Agreement; provided, however, that the Manager Member shall not
have the power to execute, or cause the execution of, transactions in, or
exercise any powers or privileges with respect to, securities and other
instruments in accounts of clients of the LLC, which powers and privileges are
hereby delegated exclusively to the Management Board pursuant to Section 3.3
hereof. Members, in their capacity as such, shall have no right to amend or
terminate this Agreement or to appoint, select, vote for or remove the Manager
Member, the Officers or their agents or to exercise voting rights or call a
meeting of the Members, except as specifically
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provided in this Agreement. 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 a Member, but the Manager Member may delegate the power to sign for
or bind the LLC to one or more Officers.
(b) The Manager Member shall, subject to all applicable provisions
of this Agreement and the Act, be authorized in the name of and on behalf of the
LLC: (i) to enter into, execute, amend, supplement, acknowledge and deliver any
and all contracts, agreements, leases or other instruments for the operation of
the LLC's business; and (ii) in general to do all things and execute all
documents necessary or appropriate to conduct the business of the LLC as set
forth in Section 2.7 hereof, or to protect and preserve the LLC's assets. The
Manager Member may delegate any or all of the foregoing powers to one or more of
the Officers.
(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 Section 3.3.
(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 Manager
Member and 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.
SECTION 3.2 MANAGEMENT BOARD OF THE LLC.
(a) The LLC shall have a Management Board (the "Management Board"). The
Manager Member has delegated power and authority under Section 3.5(b) of this
Agreement to the Management Board to conduct the day-to-day operations, business
and activities of the LLC.
(b) The Management Board shall consist of Non-Manager Members determined
as follows:
(i) The Management Board shall initially have two (2) members and shall
initially consist of Xxxxx Xxxxxx and Xxxxx X. Xxxxxxxxx. The number
of members of the Management Board may be increased by the
Management Board, with the written consent of the Manager Member at
any time. In addition, in the event that the Management Board is
deadlocked and unable to resolve any issue that is material
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in the judgement of the Manager Member or the Management Board for a
period of five business days or more, the Manager Member may consent
or vote with respect to such issue. No Person who is not both an
active employee of the LLC and a Non-Manager Member (an "Eligible
Person") 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 Eligible Person elected by a Majority
Vote, with the written consent of the Manager Member. In lieu of
filling any such vacancy, the Management Board, with the consent of
the Manager Member, may determine to reduce the number of members of
the Management Board, but not to a number less than two (2),
provided that if at any time there are fewer than two (2) members of
the Management Board, such vacancies must be filled and no consent
or vote may be taken on any matter during the existence of such a
vacancy.
(iii) 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 or her
written resignation to any member of the Management Board and the
Manager Member. At any time that there are more than two members of
the Management Board, any member of the Management Board may be
removed from such position with cause at any time or without cause
at any time after the date that is 270 days following such Member's
appointment: (A) by the Management Board acting by a Board Vote
(with such Board Vote being calculated for all purposes as if the
member of the Management Board whose removal is being considered
were not a member of the Management Board) with the prior written
consent of the Manager Member, or (B) by the Non-Manager Members
acting by a Majority 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 active employee of the LLC or otherwise ceasing to
be a Non-Manager Member, in each case, for whatever reason.
(iv) At any meeting of the Management Board, presence in person or by
telephone (or other electronic means) of a majority 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 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 or permitted to be taken at any meeting of the
Management Board may be taken without a meeting of the Management
Board, if (A) a written consent thereto is signed by all the members
of the Management Board and (B) the Manager Member has been given a
copy of such written consent not less than forty-eight (48) hours
prior to such action. Notice of the time, date
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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 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.
(c) Without a Board Vote and the prior written consent of the Manager
Member, the LLC will not (and will not permit any of its subsidiaries to):
(i) amend its Certificate of Formation or this Agreement, or other
organizational documents;
(ii) incur any indebtedness for borrowed money, guarantee any such
indebtedness or issue or sell any debt securities, in excess of
$10,000 in the aggregate, or prepay or refinance any indebtedness
for borrowed money;
(iii) engage in any Interested Party Transaction;
(iv) acquire any assets or properties for cash or otherwise for an amount
in excess of $25,000 in the aggregate in one year;
(v) enter into any transaction involving in excess of $10,000 other than
in the ordinary course of business;
(vi) sell or otherwise dispose of assets material to the Company and its
subsidiaries taken as a whole; or
(vii) enter into any agreement with respect to the foregoing.
SECTION 3.3 OFFICERS OF THE LLC. 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 or her successor
is designated by the Management Board or until his or her 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 from his or her office (with or without a concurrent
termination of employment) by the Management Board (excluding the Person being
considered) or by the Manager Member 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
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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.
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 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 instances, to the power of
the Management Board to revoke such delegation in whole or in part (by a Board
Vote that excludes any Person to whom such power and authority has been
delegated)), subject, in all cases, to compliance with all applicable laws,
rules and regulations and, in the case of compensation, to the provisions of
Section 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," with 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.
(c) Any Person who is a Non-Manager Member may have his or her employment
with the LLC terminated by the LLC only: (i) in the case of a termination For
Cause, either by the Manager Member or by the Management Board (excluding the
Person whose termination is being considered), with the prior written consent of
the Manager Member, or (ii) in the case of any other termination by the LLC, by
the Management Board (excluding for all purposes the Person whose termination is
being considered), with the prior written consent of the Manager Member.
SECTION 3.5 OPERATION OF THE BUSINESS OF THE LLC.
(a) Subject to the terms hereof, the Management Board is hereby
given the exclusive power and authority to execute, or cause the execution of,
transactions in, and to exercise all rights, powers and privileges with respect
to, securities and other instruments in accounts of clients of the LLC, which
power and authority may be delegated to the Officers of the LLC from time to
time in the discretion of the Management Board.
(b) Subject to the Manager Member's rights, duties and obligations
set forth in the Act and in Section 3.1 above, the Officers are hereby delegated
the power and authority from the Manager Member to manage the day-to-day
operations, business and activities of the LLC; including, without limitation,
the power and authority, in the name of and on behalf of the LLC, to:
(i) determine the use of the Operating Cash Flow as set forth
in Section 3.5(c) below;
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(ii) execute such documents and do such acts as are necessary
to register (or provide or qualify for exemptions from any such
registrations) or qualify the LLC under applicable Federal and state
securities laws;
(iii) enter into contracts and other agreements with respect
to the provision of Investment Management Services and execute other
instruments, documents or reports on behalf of the LLC in connection
therewith; and
(iv) act for and on behalf of the LLC in all matters
incidental to the foregoing and other day-to-day matters.
(c) The Operating Cash Flow of the LLC for any period 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(c)), the LLC shall not incur (and the Employee Stockholders
shall use their best efforts to prevent the LLC from incurring) any expenses or
take any action to incur other obligations which expenses and obligations are
reasonably expected to exceed the ability of the LLC to pay or provide for them
out of its Operating Cash Flow on a current or previously reserved basis. Except
to the extent otherwise required by applicable law, the LLC shall only make
payments of compensation (including bonuses) to its employees (including any
Officers) out of the balance of its Operating Cash Flow 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 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
and/or in future fiscal years in accordance with the preceding sentence. Free
Cash Flow may be used to provide for and pay the business expenses of the LLC
only to the extent specified in Section 3.5(e) with respect to key-man life
insurance and disability insurance, Section 4.3 with respect to certain
extraordinary expenses and as otherwise agreed to in writing by the Manager
Member and the Non-Manager Members acting by a Majority Vote (any such use being
referred to herein as a "Free Cash Flow Expenditure").
(d) The LLC shall not do, and the Employee Stockholders shall use
their best 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 3.5(d)):
(i) enter into, amend, modify or terminate any contract,
agreement or understanding (written or oral) if such action or the
resulting contract, agreement or understanding could reasonably be
expected to conflict with the provisions of this Section 3.5;
(ii) enter into, amend, modify or terminate any contract,
agreement or understanding (written or oral) if such action or the
resulting contract, agreement or understanding (individually or in
the aggregate) could reasonably be expected to have a material
adverse impact on the availability of Operating Cash Flow of the
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LLC in future periods (including, without limitation, long-term
leases or employment contracts);
(iii) enter into, amend, modify or terminate any contract,
agreement or understanding (written or oral) if such action or the
resulting contract, agreement or understanding has the effect of
creating a Lien upon any of the assets of the LLC or upon any of
that portion of the revenues of the LLC which is included in Free
Cash Flow (other than with respect to permitted Free Cash Flow
Expenditures hereunder);
(iv) take any action (or omit to take any action) if such
action (or omission) could reasonably be expected to result in the
termination of the employment by the LLC of any Employee Stockholder
(provided, that the foregoing shall not impose any limitation on the
ability of an Employee Stockholder to terminate his or her
employment with the LLC in accordance with the provisions hereof);
(v) create, incur, assume, or suffer to exist any
Indebtedness;
(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 is subject to ERISA, which requires
qualification under the Code, or which otherwise (A) requires the
Manager Member or any of its Affiliates to take any action which it
would not take but for the action contemplated by the LLC or the
Employee Stockholders or Officers or (B) prevents the Manager Member
or any of its Affiliates from taking any action which it would
otherwise have been able to take but for the action contemplated by
the LLC or the Employee Stockholders or Officers (and in addition,
each Employee Stockholder will use his or her 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 or modifies any significant compensation arrangement
(other than salary and cash bonuses in the ordinary course) or
program);
(vii) enter into any line of business other than the provision
of Investment Management Services;
(viii)amend or modify the Minnesota Agreement (other than with
respect to resetting the Option Limitation (as such term is defined
in the Minnesota Agreement)) or amend or modify any agreement
between the LLC and any Permitted Outside Advisory Client; or
(ix) (A) take any action which pursuant to any provision of
this Agreement other than Section 3.1 may be taken by the Manager
Member with or without the consent of the Non-Manager Members or the
Employee Stockholders,
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or (B) take any action which requires the approval or consent of the
Manager Member pursuant to any provision of this Agreement.
(e) The LLC will maintain (and the Employee Stockholders shall use
their best 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), the premiums on which will be paid out of Operating Cash
Flow. The LLC will maintain such key-man life insurance and disability insurance
policies on each Employee Stockholder as the Manager Member shall deem necessary
or desirable, from time to time, and the Employee Stockholders will use their
reasonable best efforts to effectuate the foregoing. The LLC will receive the
proceeds of the above-referenced insurance policies, and the Members agree with
each other and the LLC that the LLC will pay the premiums on such key-man life
and disability policies, as well as any reasonable additional insurance policies
that the Manager Member deems necessary, out of Free Cash Flow.
(f) In addition to, and not in limitation of, the Manager Member's
powers and authority under this Agreement (including, without limitation,
pursuant to Section 3.1(a) hereof), the Manager Member shall also have the
power, in its sole discretion, whether or not they involve day-to-day
operations, business and activities of the LLC, to take any or all of the
following actions:
(i) such actions as it deems necessary or appropriate to cause
the LLC or any Affiliate of the LLC, or any officer, employee,
member, partner, or agent thereof, to comply with applicable laws,
rules or regulations;
(ii) any other action that the Manager Member is authorized to
take pursuant to the terms of this Agreement 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) such actions as it deems necessary or appropriate to
coordinate any initiative which could materially affect the Manager
Member, AMG and/or any of its Affiliates; and
(iv) such actions as it deems necessary or appropriate to
cause the LLC to fulfill its obligations and exercise its rights
under the Merger Agreement.
(g) 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. The LLC shall have a continuing
obligation to keep AMG'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/or its Affiliates, and
the LLC's legal
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compliance activities shall be conducted and established in conjunction with
policies and procedures determined under the supervision of the Manager Member.
(h) Notwithstanding any of the provisions of this Agreement to the
contrary, the Manager Member shall have the power to establish and mandate that
the LLC 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 may establish or modify the terms
of any such plan.
(i) Notwithstanding any of the provisions of this Agreement to the
contrary, the Management Board and Officers of the LLC will cooperate with the
Manager Member and its Affiliates in implementing any initiative generally
involving a number of such Affiliates.
SECTION 3.6 COMPENSATION AND EXPENSES OF THE MEMBERS. The Manager Member
may receive compensation for services provided to the LLC to the extent approved
by a Majority Vote. The LLC shall, however, pay and/or reimburse the Manager
Member for all reasonable travel expenses incurred by the Manager Member or AMG
in accordance with Section 9.4 as well as any extraordinary expenses incurred by
the Manager Member or AMG directly in connection with the operation of the LLC.
Without limiting the generality of the foregoing, the Manager Member's and AMG's
general overhead items (including, without limitation, salaries and rent) shall
not be reimbursed by the LLC. Stockholders, officers, directors, 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 (or its
delegate(s)) pursuant to Section 3.5(c). Except in respect of their provision of
services as employees of the LLC for which they may be compensated out of
Operating Cash Flow as contemplated by the preceding sentence, Non-Manager
Members may not receive compensation on account of the provision of services to
the LLC.
SECTION 3.7 OTHER BUSINESS OF THE MANAGER MEMBER AND ITS AFFILIATES. The
Manager Member, AMG and their respective 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 other businesses that may
be competitive with the LLC's business. 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 any such activity by the Manager Member, AMG or such
Affiliates be deemed wrongful or improper or result in any liability to the
Manager Member, AMG or such Affiliates. Neither the Manager Member nor any of
its Affiliates (including, without limitation, AMG) shall 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.
Notwithstanding any provision of this Section 3.7 to the contrary, neither the
Manager Member, AMG nor any Affiliate of AMG or the Manager Member shall solicit
or induce, whether directly or indirectly, any Person for the purpose (which
need not be the sole or primary purpose) of causing any funds with respect to
which the LLC provides Investment Management Services to be withdrawn from such
management.
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SECTION 3.8 NON-MANAGER MEMBERS AND NON SOLICITATION AGREEMENTS. Each
Employee Stockholder and, if there is one, the Non-Manager Member of which it is
a stockholder (its Non-Manager Member) other than Xxxxx Xxxxxx and Xxxxx X.
Xxxxxxxxx, has provided the LLC with a Non Solicitation/Non Disclosure Agreement
in form and substance substantially similar to Exhibit A 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 (as defined in
Section 5.5 hereof) which is not already bound by a Non Solicitation Agreement,
it 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 the Manager Member may deem necessary or desirable) and
such agreements do and 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. Each of Xxxxx Xxxxxx and
Xxxxx X. Xxxxxxxxx has entered into an Employment Agreement with the LLC.
SECTION 3.9 NON SOLICITATION AND NON DISCLOSURE BY NON-MANAGER MEMBERS AND
EMPLOYEE STOCKHOLDERS.
(a) Each Non-Manager Member and each Employee Stockholder agrees,
for the benefit of the LLC and the other Members, that such Non-Manager Member
and such Employee Stockholder shall not, while employed by the LLC or any of its
Affiliates, engage in any Prohibited Competition Activity.
(b) In addition to, and not in limitation of, the provisions of
Section 3.9(a) hereto, each Non-Manager Member and each Employee Stockholder
agrees, for the benefit of the LLC and the other Members, that such Non-Manager
Member and such Employee Stockholder shall not, during the period beginning on
the date such Non-Manager Member becomes a Non-Manager Member, and until the
date which is two (2) years after the termination of such Employee Stockholder's
employment with the LLC and its Affiliates, without the express written consent
of the Manager Member, directly or indirectly, whether as owner, part-owner,
shareholder, partner, member, director, officer, trustee, employee, agent or
consultant, or in any other capacity, on behalf of himself or any firm,
corporation or other business organization other than the LLC and its Controlled
Affiliates:
(i) provide Investment Management Services to any Person that
is a Past, Present or Potential Client of the LLC (other than a Present Client
of the LLC to the extent such Present Client is also a Permitted Outside
Advisory Client of the LLC); provided, however, that this clause (i) shall not
be applicable to clients of the LLC (including Potential Clients) who are also
members of the Immediate Family of the Employee Stockholder;
(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 to be withdrawn from such management, or (B) causing any Client of the
LLC (including any Potential Clients) not to engage
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the LLC or any of its Affiliates to provide Investment Management Services for
any or additional funds;
(iii) contact or communicate with, in either case in
connection with Investment Management Services, whether directly or indirectly,
any Past, Present or Potential Clients of the LLC (other than a Present Client
of the LLC to the extent such Present Client is also a Permitted Outside
Advisory Client of the LLC); provided, however, that this clause (iii) shall not
be applicable to clients of the LLC (including Potential Clients) who are also
members of the Immediate Family of the Employee Stockholder; or
(iv) solicit or induce, or attempt to solicit or induce,
directly or indirectly, any employee or agent of, or consultant to, the LLC or
any of its Controlled Affiliates to terminate its, his or her relationship
therewith, hire any such employee, agent or consultant, or former employee,
agent or consultant, or work in any enterprise involving investment advisory
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 the Employee Stockholder's employment (excluding
for all purposes of this sentence, secretaries and persons holding other similar
positions).
For purposes of this Section 3.9(b), (x) the term "Past Client" shall be limited
to those past Clients who were advisees or investment advisory customers of, or
recipients of Investment Management Services from, the LLC and its Controlled
Affiliates (including its predecessor, GeoCapital Corporation) at the date of
termination of the Employee Stockholder's employment or at any time during the
twelve (12) months immediately preceding the date of such termination; and (y)
the term "Potential Client" shall be limited to those Persons to whom an offer
was made within two years prior to the date of termination of the Employee
Stockholder's employment.
Notwithstanding the provisions of Sections 3.9(a) and 3.9(b), any Employee
Stockholder may make passive investments in an enterprise which is competitive
with the Manager Member (certain examples of which have been provided to the
Non-Manager Members by the Manager Member) the shares or other equity interests
of which are publicly traded provided his holding therein together with any
holdings of his Affiliates and members of his Immediate Family, do not, at the
time such investments are made, exceed four and nine-tenths of one percent
(4.9%) of the outstanding shares of comparable interests in such entity. Subject
to the foregoing, an employee, Member or Employee Stockholder may engage in
investing for his personal account if (i) each such investment is made in
accordance with the Code of Ethics of the LLC, and (ii) if the aggregate amount
of any actual or proposed investment by such Person, members of his Immediate
Family and accounts for the benefit of any of the foregoing, collectively, in a
single issuer exceeds Five Hundred Thousand Dollars ($500,000) then such
investment shall be disclosed in writing to the Managing Member promptly.
Notwithstanding any other provision of this Agreement, the Members agree that
the Non-Management Members and Employee Stockholders shall be entitled to
continue to serve in their respective present capacities on the boards of
companies set forth in Schedule 3.9 of this
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Agreement, and to serve on the boards of directors of private companies and of
public companies that are not, at the time such position is accepted or while
such position is held, reasonably likely to be considered by the LLC for
investment by the LLC or by any Person or account (excluding any Controlled
Affiliates) for which the LLC provides Investment Management Services and may
receive and retain individually (and not for the benefit of the LLC or any other
Member) compensation from such companies for such service as a member of the
Board of Directors, provided that (x) prior to the acceptance of such position
or the receipt of any compensation, the Non-Manager Member or Employee
Stockholder notifies the Management Board and the Manager Member in writing of
the terms and conditions of the prospective position and compensation, including
a brief description of the Company and explanation why it is not reasonably
likely to be considered for investment as contemplated herein, and the
Management Board and the Manager Member consent in writing to the acceptance of
such position and compensation and (y) at no time during such service shall the
LLC make or recommend (for itself or any Person or account for which the LLC
directly provides Investment Management Services excluding any Controlled
Affiliates) an acquisition of any securities issued by such company.
(c) Each Member and each Employee Stockholder agrees that any and
all presently existing investment advisory businesses of the LLC and its
Controlled Affiliates (including its predecessor, GeoCapital Corporation), and
all businesses developed by the LLC and its Controlled Affiliates, including by
such Employee Stockholder or any other employee of the LLC (including, without
limitation, employees of its predecessor, GeoCapital Corporation), 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 its predecessor, GeoCapital Corporation) or its Controlled
Affiliates or earned or carried on by the Employee Stockholder for the LLC or
its predecessor, GeoCapital Corporation or their respective Controlled
Affiliates, 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,
except that the LLC has authorized another entity to use the name "GeoCapital"
for limited purposes as described in that certain Letter Agreement dated as of
the Effective Date, between GeoCapital, LLC and GeoCapital Partners. In
addition, each Member and each Employee Stockholder acknowledges and agrees that
the investment performance of the accounts managed by the LLC (and its
predecessor, GeoCapital Corporation) was attributable to the efforts of the team
of professionals of the LLC (or its predecessor, GeoCapital Corporation, as
applicable) and not to the efforts of any single individual, and that therefore,
the performance records of the accounts managed by the LLC (and its predecessor,
GeoCapital Corporation) are and shall be the exclusive property of the LLC. Each
Member and each Employee Stockholder acknowledges that, in the course of
performing services hereunder and otherwise (including, without limitation, for
the LLC's predecessor, GeoCapital Corporation), such Member and Employee
Stockholder has had, and will from time to time have, access to information of a
confidential or proprietary nature, including without limitation, all
confidential or proprietary investment methodologies, trade secrets, proprietary
or confidential plans, client identities and information, client lists, service
providers, business operations or techniques, records and data ("Intellectual
Property") owned or used in the
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course of business by the LLC or its Controlled Affiliates. Each Non-Manager
Member and each Employee Stockholder agrees always to keep secret and not ever
publish, divulge, furnish, use or make accessible to anyone (otherwise than in
the regular business of the LLC and its Controlled Affiliates or unless
compelled by judicial or administrative process) any Intellectual Property of
the LLC or any Controlled Affiliate thereof unless such information can be shown
to be (i) previously known on a nonconfidential basis by such Non-Manager Member
or Employee Stockholder, (ii) in the public domain through no fault of such
Non-Manager Member or Employee Stockholder or (iii) lawfully acquired by such
Non-Manager Member or Employee Stockholder from other sources. At the
termination of the Employee Stockholder'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 or Employee Stockholder's possession or control, shall be
returned to the LLC and remain in its possession (except where the return of
such items shall be unreasonable or impractical in relation to the importance or
confidentiality of such items). In addition, the Manager Member acknowledges
that in its capacity as Manager Member it will from time to time have access to
Intellectual Property owned or used in the business by the LLC or its Controlled
Affiliates relating to (i) investment analysis and decisions and to (ii) clients
or accounts of the LLC or its Controlled Affiliates. The Manager Member agrees
always to keep secret and not ever publish, diverge, furnish, use or make
accessible to anyone (otherwise than in the regular business of the Manager
Member or the LLC and its Controlled Affiliates) any such Intellectual Property
unless such information can be shown to be (i) previously known on a
nonconfidential basis by the Manager Member or its Affiliates, (ii) in the
public domain through no fault of the Manager Member or its Affiliates or (iii)
lawfully acquired by the Manager Member or its Affiliates from other sources;
provided, however, that nothing in this Section 3.9(c) shall prevent the Manager
Member from making such disclosures regarding the LLC and its Controlled
Affiliates as may be necessary or appropriate either at the request of the
Manager Member's lenders or other financing sources or under applicable law
(including pursuant to judicial or administrative process).
(d) Each Non-Manager Member and each Employee Stockholder
acknowledges that, in the course of entering into this Agreement, the
Non-Manager Member and the Employee Stockholder have had and, in the course of
the operation of the LLC, the Non-Manager Member and Employee Stockholder will
from time to time have, access to Intellectual Property owned by or used in the
course of business by AMG. Each Non-Manager Member and each Employee Stockholder
agrees, for the benefit of the LLC and its Members, and for the benefit of the
Manager Member and AMG, always to keep secret and not ever publish, divulge,
furnish, use or make accessible to anyone (otherwise than at the Manager
Member's request) any knowledge or information regarding Intellectual Property
(including, by way of example and not of limitation, the transaction structures
utilized by the Manager Member) of AMG unless such information can be shown to
be (i) previously known on a nonconfidential basis by such Non-Manager Member or
Employee Stockholder, (ii) in the public domain through no fault of such
Non-Manager Member or Employee Stockholder or (iii) lawfully acquired by such
Non-Manager Member or Employee Stockholder from other sources. At the
termination of the Employee Stockholder'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
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or Employee Stockholder's possession or control shall be returned to the Manager
Member and remain in its possession.
(e) The provisions of this Section 3.9 shall not be deemed to limit
any of the rights of the LLC or the Members 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 3.10 ADDITIONAL PERMITTED OUTSIDE ADVISORY CLIENTS. If an Employee
Stockholder wishes to cause a Collective Investment Vehicle to become a
Permitted Outside Advisory Client of such Employee Stockholder under the
provisions of paragraph (b) of the definition of Permitted Outside Advisory
Client, then such Employee Stockholder shall so notify the Manager Member and
such Collective Investment Vehicle shall be designated as a "Permitted Outside
Advisory Client" of that Employee Stockholder, provided that the Employee
Stockholder and the Collective Investment Vehicle comply with the conditions set
forth in this Section 3.10. Each Employee Stockholder hereby covenants and
agrees to take no action as a partner, member, equityholder or other Affiliate
of a Permitted Outside Advisory Client that would authorize or permit the
termination of any agreement between such Permitted Outside Advisory Client (or
between a partner, member or manager of such Permitted Outside Advisory Client)
and the LLC or the Manager Member or Affiliates of the Manager Member; provided,
however, that each Employee Stockholder may take such action as may be required
by applicable law if such Employee Stockholder provides the Manager Member with
an opinion of counsel, reasonably satisfactory in form and substance to the
Manager Member, to the effect that such action is required under applicable law.
(a) Such Employee Stockholder and such Collective Investment Vehicle
shall provide the LLC and the Manager Member and AMG with such information
regarding the Collective Investment Vehicle as the Manager Member or AMG may
reasonably request (including, by way of example and not of limitation, the
organizational documents, financial statements (if any) and offering materials
of the Collective Investment Vehicle and any other material or related documents
and agreements), as well as such evidence as the Manager Member or AMG may
reasonably request (including, without limitation, opinions of counsel
reasonably acceptable to the Manager Member or AMG) regarding the compliance of
such Collective Investment Vehicle with applicable laws, rules and regulations
(including, by way of example and not of limitation, the compliance of the
Collective Investment Vehicle after giving effect to the arrangements
contemplated by this Section 3.10).
(b) If, after the date hereof, any Employee Stockholder or any
entity in which such Employee Stockholder is or becomes an owner, part-owner,
shareholder, partner, member, director, officer, trustee, employee, agent or
consultant (or with respect to which he serves in any similar capacity) (a
"Related Entity"), is or becomes entitled to receive from such Collective
Investment Vehicle any consulting, administrative, advisory, management or
similar fee or allocation (other than a Carried Interest (as defined below)),
then such fee or allocation shall be transferred or assigned to the LLC on such
terms and conditions (which shall be substantially
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similar to the terms and conditions applicable to the Employee Stockholder and
Related Entity) and pursuant to such agreements, documents and instruments, all
as may be reasonably satisfactory to the Employee Stockholder or Related Entity
and the Manager Member or AMG.
(c) If, after the date hereof, any one or more Employee
Stockholder(s) or any Related Entities is or becomes entitled to receive any
"carried interest" or other items of gain allocated (directly or indirectly) to
such Employee Stockholder(s) or Related Entities (other than allocations which
are made pro-rata based on contributed capital to all partners, members,
beneficiaries or other holders of similar economic interests in the Collective
Investment Vehicle (together a "Carried Interest"), then, unless the Manager
Member waives the provisions of this Section 3.10(c) with respect to that
Collective Investment Vehicle, ten percent (10%) of the rights with respect to
such Carried Interest (the "Guaranteed Interest") shall be issued, transferred,
assigned or allocated to the Manager Member (or an Affiliate of the Manager
Member which is selected by the Manager Member and of which the Employee
Stockholder is given notice) for nominal consideration or other remuneration and
otherwise on such other terms and conditions presented to the Manager Member
(which shall be substantially similar to the other terms and conditions
applicable to the Employee Stockholder and Related Entity) and pursuant to such
agreements, documents and instruments as, all as may be reasonably satisfactory
to the Employee Stockholder or Related Entity and the Manager Member, provided
that such terms and conditions (i) shall permit the Manager Member (or such
selected Affiliate) to retain limited liability (with no liability for any
"clawback," deficit restoration or similar obligation), and (ii) shall not
require the Manager Member to devote any specified resources to, perform any
obligations for, or be bound by any restrictive covenants for the benefit of,
such Collective Investment Vehicle; provided, however, that if the conditions
contemplated by this Section 3.10 with respect to issuance, transfer, assignment
or allocation of the Guaranteed Interest to the order of the Manager Member are
not satisfied, then no Non-Manager Member, Employee Stockholder or Related
Entity shall be permitted to acquire a Carried Interest in such Collective
Investment Vehicle and such Collective Investment Vehicle shall not be a
Permitted Outside Advisory Client.
(d) The Manager Member (or an Affiliate of the Manager Member which
is selected by the Manager Member and of which the Employee Stockholder is given
notice) shall be granted an option to purchase additional portions of the
Carried Interest (its "Additional Interest") on such terms and conditions
presented to the Manager Member and pursuant to such agreements, documents and
instruments, all as may be reasonably satisfactory to the Employee Stockholder
or Related Entity and the Manager Member in accordance with the following:
(i) Prior to any Employee Stockholder or Related Entity
receiving (or being granted the option or right to receive) a
Carried Interest in a Collective Investment Vehicle, the Employee
Stockholder shall give notice to the Manager Member (which notice
shall be acknowledged by the Collective Investment Vehicle) of the
terms (including any amendments or modifications thereto) on which
the Carried Interest and any other interests in the Collective
Investment Vehicle are expected to be received by or granted to the
Employee Stockholder or a Related Entity (including, without
limitation, a complete description of the Carried Interest and such
other interests, and the price, if any, being paid for such
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Carried Interest and such other interests) which notice shall
constitute an irrevocable offer by the Collective Investment Vehicle
to transfer or issue to the Manager Member such portion of the
Carried Interest and other such interests as is equal to:
(A x B) - C
where
A = (i) a fraction, the numerator of which is the number of LLC
Points held by the Manager Member on the date Carried
Interests in that Collective Investment Vehicle are first
received by or granted to such Employee Stockholder and his
Related Entities, and the denominator of which is the total
number of LLC Points then outstanding, multiplied by (ii) that
percentage Free Cash Flow then constitutes of Revenues From
Operations;
B = the Carried Interest which is then held (or being received)
by or granted to the Employee Stockholder and his Related
Entities (or which such Employee Stockholder and his Related
Entities have (or will receive) the option or right to
acquire) before giving effect to the Guaranteed Interest that
may then be held (or is to be received) by the Manager Member
(or a Related Entity) pursuant to the provisions of paragraph
(c) above; and
C = the Guaranteed Interest then to be held (or to be received)
by the Manager Member (or an Affiliate of the Manager Member)
pursuant to the provisions of paragraph (c) above.
at a price (the "Purchase Price") equal to the cash purchase price
which is proportionate to the price which the Employee Stockholder
or his or her Related Entity would have to pay for the Carried
Interest and such other related interests in the Collective
Investment Vehicle which the Employee Stockholder or his or her
Related Entity would have to purchase in order to receive the
Carried Interest, based on the portion of the Carried Interest being
offered to the Manager Member under this Section 3.10(d).
(ii) At any time within thirty (30) days after the date on
which the Manager Member receives the notice described in clause (i)
above, the Manager Member (or any Affiliate of the Manager Member
selected by the Manager Member with notice to the Employee
Stockholder) may accept the offer set forth in the notice by
agreeing to pay the Collective Investment Vehicle the Purchase Price
at the same time and in the same proportionate amounts as the
Employee Stockholder or a Related Entity. Notwithstanding the
foregoing sentence, if the Manager Member has been kept apprised of
all negotiations and has been provided all drafts relating to the
terms of the offer, and the offer contained in the notice described
in clause (i) is substantially the same as that contained in prior
drafts and
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the initial draft of the terms was distributed to the Manager Member
not less than twenty-one (21) days before the date of the notice
described in clause (i), then the Manager Member shall have ten (10)
days to accept the offer set forth in the notice.
(iii) At any time when subsequent interests are granted or
made available to any Employee Stockholder or Related Entity, and at
any time when the terms and conditions upon which interests are
granted or made available to any Employee Stockholder or Related
Entity change or are modified in any respect, appropriate provisions
will be made to give effect to the intent of this Section 3.10, in
order to permit the relevant Collective Investment Vehicle to remain
a Permitted Outside Advisory Client under this Section 3.10 and, if
appropriate provisions are not made to the reasonable satisfaction
of the Manager Member, then either (x) such change or modification
shall not be made at all or (y) if any change or modification is
made, then such Collective Investment Vehicle shall cease to be a
Permitted Outside Advisory Client effective upon the effectiveness
of such change or modification.
(iv) It is agreed and acknowledged, in furtherance and not in
limitation of the foregoing, that if the Manager Member (or an
Affiliate of the Manager Member as contemplated by this paragraph
(d)) exercises its option under this paragraph (d) to acquire any
additional Carried Interest (and any other interests in the
Collective Investment Vehicle), such acquisition shall be on the
same terms (including any amendments or modifications thereto) on
which the Carried Interest and any other interests in the Collective
Investment Vehicle are received by or granted to the Employee
Stockholder or a Related Entity and the Purchase Price paid by the
Manager Member (or such Affiliate) shall be a cash purchase price
which is proportionate to the price paid by the Employee Stockholder
or Related Entity based on the portion of the Carried Interest
acquired pursuant to such option under this Section 3.10(d).
Attached hereto as Schedule C are sample calculations under this Section
3.10.
SECTION 3.11 REMEDIES UPON BREACH.
(a) In the event that a Member or its Employee Stockholder (i)
breaches any of the provisions of Section 3.9 or 3.10 hereof, or (ii) breaches
any of the provisions of the Employment Agreement or Non Solicitation Agreement
to which it or he is a party (in each case, including, without limitation,
following the termination of his or her employment with the LLC), then (A) such
Non-Manager Member shall forfeit its right to receive any payment for its LLC
Interests under Section 3.12, and (B) AMG (or its assignees) shall have no
further obligations under any promissory note theretofore issued to such
Non-Manager Member pursuant to Section 3.12(e).
(b) Each Member and each Employee Stockholder agrees that any breach
of the provisions of Section 3.9 of this Agreement or of the provisions of the
Employment Agreement
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or Non Solicitation Agreement by such Member or Employee Stockholder could cause
irreparable damage to the LLC and the other Members. The LLC and/or the
applicable Member, shall have the right to an injunction or other equitable
relief (in addition to other legal remedies) to prevent any violation of a
Member's or Employee Stockholder's obligations hereunder or thereunder.
SECTION 3.12 REPURCHASE UPON TERMINATION OF EMPLOYMENT OR TRANSFER BY
OPERATION OF LAW.
(a) In the event that the employment by the LLC of any Employee
Stockholder terminates for any reason, then:
(i) if the termination of the Employee Stockholder occurred
because of the death or Permanent Incapacity of such Employee
Stockholder, the LLC shall purchase and the Non-Manager Member (or
the Non-Manager Member of which such Employee Stockholder was the
owner, as applicable) (as indicated on Schedule A hereto) and his
(or its) Related Non-Manager Members (and their respective Permitted
Transferees, if any) (each a "Repurchased Member") shall sell to the
LLC for cash, LLC Points up to the portion of the Repurchase Price
(as such term is defined below) 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 Employee Stockholder (an "LLC Repurchase"), and
(ii) in each other such case (and, in the case of the death or
Permanent Incapacity of an Employee Stockholder, to the extent the
Repurchase Price (as such term is defined in Section 3.12(c) below)
exceeds the proceeds described in clause (i) of this Section 3.12(a)
(determined after all such proceeds have been collected)), AMG shall
purchase and the Non-Manager Member (or the Non-Manager Member of
which such Employee Stockholder was the owner, as applicable) (as
indicated on Schedule A hereto) and his (or its) Related Non-Manager
Members (and their respective Permitted Transferees) (each a
"Repurchased Member") shall sell (each a "Manager Member
Repurchase") all (or, in the case of the death or Permanent
Incapacity of an Employee Stockholder, such portion as is not
required to be purchased by the LLC under clause (i) of this Section
3.12(c)) of the LLC Interests held by the Repurchased Member, in
each case, pursuant to the terms of this Section 3.12. 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 after the last
day of the calendar quarter in which the Employee Stockholder's employment with
the LLC is terminated but which is not more than one hundred eighty (180) days
after the date on which the termination of the employment by the LLC of the
relevant Employee Stockholder occurred; provided, however, that (i) if the
employment by the LLC of such Employee Stockholder is terminated because of the
death
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or Permanent Incapacity of such Employee Stockholder, then the Repurchase
Closing Date shall be a date set by the Manager Member which is as soon as
reasonably practicable after the later of (A) one hundred eighty (180) days
after the death or Permanent Incapacity, as applicable, of such Employee
Stockholder or (B) ninety (90) days after the LLC has received the 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 Employee
Stockholder.
(c) The purchase price for the Repurchase (the "Repurchase Price")
shall be determined as follows:
(i) If the Employee Stockholder's employment with the LLC is
terminated because of the death, Permanent Incapacity or Retirement
of the Employee Stockholder or if such Employee Stockholder's
employment with the LLC was terminated by the LLC on such date other
than For Cause, then the Repurchase Price shall equal (A) six (6)
times (x) fifty percent (50%) of the LLC's Free Cash Flow for the
twenty-four (24) months ending on the last day of the calendar
quarter in which the termination of such Employee Stockholder's
employment occurs minus (y) fifty percent (50%) of the amount by
which the actual expenses of the LLC exceeded the Operating Cash
Flow of the LLC (including previously reserved Operating Cash Flow)
during the twenty-four (24) months ending the last day of the
calendar quarter in which the termination of such Employee
Stockholder's employment occurs, multiplied by (B) a fraction, the
numerator of which is the number of LLC Points being purchased in
the Repurchase, and the denominator of which is the number of LLC
Points outstanding on the date of the closing of the Repurchase
(before giving effect to any issuance or redemption of LLC Points on
such date) minus (C) (1) the sum of the Remaining Minnesota
Carryover Amount and the Remaining Minnesota Cumulative Debits
multiplied by (2) a fraction, the numerator of which is the number
of Initial LLC Points being purchased in the Repurchase, and the
denominator of which is the number of Initial LLC Points outstanding
on the date of the closing of the Repurchase (before giving effect
to any issuance or redemption of LLC Points on such date).
(ii) In all other cases, (including, without limitation, the
resignation of an Employee Stockholder or the termination of such
Employee Stockholder For Cause or for Unsatisfactory Performance),
the Repurchase Price shall equal (A) three (3) times (x) fifty
percent (50%) of the LLC's Free Cash Flow for the twenty-four (24)
months ending on the last day of the calendar quarter in which the
termination of such Employee Stockholder's employment occurs minus
(y) fifty percent (50%) of the amount by which the actual expenses
of the LLC exceeded the Operating Cash Flow of the LLC (including
previously reserved Operating Cash Flow) during the twenty-four (24)
months ending the last day of the calendar quarter in which the
termination of such Employee Stockholder's employment occurs,
multiplied by (B) a fraction, the numerator of which is the number
of LLC Points being purchased in the Repurchase, and the denominator
of which is the
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number of LLC Points outstanding as of the date of the closing of
the Repurchase (before giving effect to any issuance or redemption
of LLC Points on such date) minus (C) (1) the sum of the Remaining
Minnesota Carryover Amount and the Remaining Minnesota Cumulative
Debits multiplied by (2) a fraction, the numerator of which is the
number of Initial LLC Points being purchased in the Repurchase, and
the denominator of which is the number of Initial LLC Points
outstanding on the date of the closing of the Repurchase (before
giving effect to any issuance or redemptions of LLC Points on such
date); provided, however, that for any such Repurchase within the
first five (5) years after the Effective Date, the Repurchase Price
shall equal the Capital Account which the Repurchased Member would
have if the LLC had sold all its assets for a price equal to three
(3) times fifty percent (50%) of the LLC's Free Cash Flow for the
twenty-four (24) months ending on the last day of the calendar
quarter in which the termination of such Employee Stockholder's
employment occurs, and the gain or loss therefrom (in excess of the
sum of the Members Capital Accounts on such day without giving
effect to any such allocation) was allocated in accordance with
Section 4.2(d) hereof. A sample calculation under this Section
3.12(c)(ii) is attached as Schedule D hereto.
If a Repurchase Price must be determined prior to twenty-four (24) months
after the Effective Date, then the amount of the LLC's Free Cash Flow for the
portion of the relevant twenty-four (24) month period before the Effective Date
shall be calculated on a pro-forma basis such that the Free Cash Flow of the LLC
shall be deemed to be equal to fifty percent (50%) of the Revenues From
Operations of the LLC's predecessor, GeoCapital Corporation attributable to the
assets transferred to the LLC pursuant to the Asset Transfer.
(d) The rights of AMG, the Manager Member, the LLC and their
assignees hereunder are in addition to and shall not affect any other rights
which AMG, 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, AMG and/or the LLC or their
respective assignees (as applicable) shall pay to the Repurchased Member the
Repurchase Price for the LLC Interests repurchased in the manner set forth in
this Section 3.12, 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 this
Article III shall continue as set forth in Section 3.12 below. On the Repurchase
Closing Date, the Repurchased Member and the LLC (and if AMG is purchasing LLC
Interests from the Repurchased Member, AMG) (or their assignees) shall execute
an agreement reasonably acceptable to the Repurchased Member and the Manager
Member in which the Repurchased Member represents and warrants to the Manager
Member and/or AMG and/or the LLC, as applicable (or their assignees), that it
has sole record and beneficial title to the Repurchased
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Interest, free and clear of any Encumbrances 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 because of
death or Permanent Incapacity (to the extent of the collected proceeds of any
disability insurance policies under which the LLC is the beneficiary upon the
permanent incapacity of such Employee Stockholder), by wire-transfer of
immediately available funds to an account designated by the Repurchased Member
at least three (3) business days prior to the Repurchase Closing Date, and (ii)
in the case of any other termination of employment 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), (A) in the case of a termination by the LLC other
than For Cause, on the Repurchase Date; and (B) in the case of any other
termination, on the later to occur of (x) the Repurchase Date or (y) the date
which is the first business day after the fifth anniversary of the Effective
Date (provided, that such obligation shall bear interest at a rate equal to that
set forth in Section 1(b) of Exhibit B, from and after the Repurchase Date)
provided that for each Non-Manager Member that is not a Member as of the date of
this Agreement, such payment may be made with a promissory note in the form
attached hereto as Exhibit B, the principal of which promissory note would be
paid in four (4) equal (except as contemplated by Section 3.12(f)) installments,
the first installment would be paid (A) in the case of a termination by the LLC
other than For Cause, on the Repurchase Date; and (B) in the case of any other
termination, on the later to occur of (x) the Repurchase Date or (y) the date
which is the first business day after the fifth anniversary of the Effective
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) If an Employee Stockholder's employment with the LLC is
terminated because such Employee Stockholder has resigned or was terminated For
Cause or for Unsatisfactory Performance, then the amounts of the second, third
and fourth installments of the promissory note set forth in Section 3.12(e)
above shall equal the lesser of (i) twenty-five percent (25%) of the Repurchase
Price (determined as set forth in Section 3.12(c) hereof) on the Repurchase
Closing Date, or (ii) twenty-five percent (25%) of the Repurchase Price,
determined as if the Repurchase Closing Date were taking place on the second,
third or fourth anniversary of the Repurchase Closing Date, respectively (in
each case, together with interest computed on the principal amount of such
promissory note (determined as set forth in this Section 3.12(f)) from the date
of issuance of such promissory note through the date of payment of such
installment as set forth on Exhibit B). At least forty-five (45) days prior to
the date an installment to which this Section 3.12(f) applies would be paid, the
Manager Member shall cause the LLC to certify to the Repurchased Member who is
to receive such installment, in writing, a calculation setting forth the amount
of such installment based on clauses (i) and (ii) in the preceding sentence.
Each Repurchased Member to whom this Section 3.12(f) applies, may defer receipt
of an installment on one (1) occasion, by written notice received by the LLC and
the Manager Member not less than fifteen (15) days prior to the date an
installment is due to be paid. If a Repurchased Member defers an installment,
the due date of each remaining installment of the promissory note issued to such
Repurchased Member pursuant to Section 3.12(e) above shall be extended by twelve
(12) months.
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(g) AMG may assign and/or delegate any or all of its rights and
obligations under this Section 3.12, in one or more instances, to the Manager
Member; provided, however, that no such assignment or delegation shall relieve
AMG of its obligation to make payment of a Repurchase Price. AMG may, with a
Majority Vote (excluding, for purposes of determining such Majority Vote, the
Non-Manager Member whose interest is being repurchased), assign any or all of
its rights and obligations under this Section 3.12, in one or more instances, to
the LLC; provided, that (i) AMG shall guarantee the performance of such
obligations by the LLC, and (ii) the foregoing limitation shall have no effect
on the LLC's obligation set forth in Section 3.12(a)(i) regarding the use of the
proceeds of a key-man life or disability insurance policy.
(h) In the event that a Non-Manager Member or Employee Stockholder
(i) has filed a voluntary petition under the bankruptcy laws or a petition for
the appointment of a receiver or makes any assignment for the benefit of
creditors, (ii) is subject involuntarily to such a petition or assignment or to
an attachment or other legal or equitable interest with respect to any of its
LLC Interests or, in the case of an Employee Stockholder which is not a
Non-Manager Member, its interests in the Non-Manager Member which it owns, and
such involuntary petition or assignment or attachment is not discharged within
sixty (60) days after its effective date, or (iii) is subject to a transfer of
any of its LLC Interests or, in the case of an Employee Stockholder which is not
a Non-Manager Member, its interests in the Non-Manager Member which it owns, by
court order or decree or by operation of law, then AMG shall purchase all the
LLC Interests held by such Non-Manager Member (including the Non-Manager Member
through which such Employee Stockholder holds his or her interest in the LLC)
pursuant to the terms of this Section 3.12 as if such Non-Manager Member was a
Repurchased Member with the purchase price determined pursuant to Section
3.12(c)(ii) and the date of the closing to be determined by the Manager Member
in its discretion. In order to give effect to clause (iii) of the foregoing, if
any of the interests of a Non-Manager Member in the LLC, or of an Employee
Stockholder in a Non-Manager Member, become subject to transfer (or purport to
be or have been transferred) by a court order or decree or by operation of law,
the Non-Manager Member (whose interest in the LLC or the interests in which are
subject to such transfer) shall cease to be a Member of the LLC, and the
transferee by court order or decree or by operation of law shall not become a
Member, and AMG shall have the right to purchase from the Non-Manager Member
which has ceased to be a Non-Manager Member, all his, her or its interest in the
LLC as set forth in the preceding sentence.
(i) In the event that a Non-Manager Member is required to sell its
LLC Interests pursuant to the provisions of this Section 3.12, and in the
further event that such Non-Manager Member refuses to, is unable to, or for any
reason fails to, execute and deliver the agreements required by this Section
3.12, the LLC or AMG, as applicable (or their respective assigns) 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 the Non-Manager Member, to be held by such bank or accounting firm
for the benefit of and for delivery to such Non-Manager Member. Upon such
deposit by the LLC or AMG (or their respective assigns) and upon notice thereof
given to the Non-Manager Member, such Non-Manager Member's LLC Interests shall
be deemed to have been sold, transferred, conveyed and assigned to the LLC or
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AMG (or their assigns), as applicable, the Non-Manager Member shall have no
further rights with respect thereto (other than the right to withdraw the
payment therefor, if any, held in escrow), and the Manager Member shall record
such transfer or repurchase on Schedule A hereto.
SECTION 3.13 NO EMPLOYMENT OBLIGATION. Each Non-Manager Member and each
Employee Stockholder acknowledges that neither this Agreement nor the provisions
of the Non Solicitation Agreement creates an obligation on the part of the LLC
to continue the employment of an Employee Stockholder with the LLC, and that
such Employee Stockholder, unless he or she is a party to an Employment
Agreement, is an employee at will of the LLC.
SECTION 3.14 MISCELLANEOUS. Each Member and each Employee Stockholder
agrees that the enforcement of the provisions of Sections 3.8, 3.9, 3.10, and
3.12 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 Member and each Employee
Stockholder agrees that, due to the proprietary nature of the LLC's business,
the restrictions set forth in Section 3.9 hereof and in the Employment
Agreements and the 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 Member and Employee Stockholder acknowledges that the obligations and
rights under Sections 3.8, 3.9, 3.10, 3.11 and 3.12 and this Section 3.14 shall
survive the termination of the employment of an Employee Stockholder with the
LLC and/or the withdrawal or removal of a Member from the LLC, regardless of the
manner of such termination, withdrawal or removal in accordance with the
provisions hereof and of the relevant Employment or Non Solicitation Agreement.
Moreover, each Member agrees that the remedies provided herein, are reasonably
related to the anticipated loss that the LLC and the Members (including, without
limitation, the Manager Member which would be purchasing LLC Interests from a
Non-Manager Member) would suffer upon a breach of such provisions. Except as
agreed to by the Manager Member, in advance, in a writing making specific
reference to this Article III, no Employee Stockholder or Non-Manager Member
shall enter into any agreement or arrangement which is inconsistent with the
terms and provisions hereof.
SECTION 3.15 CAPITALIZATION OF EXCESS OPERATING CASH FLOW. At any time the
Management Board believes that the Operating Cash Flow of the LLC will exceed
the actual expenses of the LLC (taking into account business conditions at the
time and including both a reasonable allowance for executive compensation
increases, and a reasonable allowance for either
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a loss of business or a change in margins in the business) at the request of the
Management Board, representatives of the Manager Member shall meet with the
Management Board for the purpose of considering an appropriate means to permit
the Non-Manager Members to utilize such excess Operating Cash Flow, while
retaining sufficient Operating Cash Flow (including reserves) to operate the
business of the LLC consistent with past practices. Such appropriate means may
include (but shall not be limited to) the following: an increase in the
percentage of Revenues from Operations that constitutes Free Cash Flow (together
with the grant of put rights applicable to such adjusted Free Cash Flow on terms
comparable to those set forth in Article VII), the purchase of all or a portion
of any excess by AMG or the Manager Member (or its designee(s)) on terms
comparable to the terms set forth in Article VII with respect to Puts or Section
3.10 with respect to Repurchases or any combination of the foregoing.
ARTICLE IV - CAPITAL CONTRIBUTIONS;
CAPITAL ACCOUNTS AND ALLOCATIONS; DISTRIBUTIONS.
SECTION 4.1 CAPITAL CONTRIBUTIONS.
(a) On September 23, 1997, GeoCapital Corporation contributed to the
LLC certain of its assets, properties, rights, powers, privileges and business
(and the goodwill associated therewith), and the Members agree that such Capital
Contribution had a value of $24,000,000. Except as may be agreed to in
connection with the issuance of additional LLC Points, as specifically set forth
herein, 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.
(b) No Member shall have the right to withdraw any part of his, her
or its (or their predecessors in interest) Capital Contribution 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 Contribution made by it
(or its predecessors in interest) to the LLC. No Member shall have any personal
liability for the repayment of any Capital Contribution of any other Member.
(c) Simultaneous with the effectiveness of this Agreement, Merger
Sub is acquiring by means of the Merger all of the right, title and interest of
GeoCapital Corporation in and to interests in the LLC (including all Capital
Account and LLC Points and other LLC Interests), and GeoCapital Corporation is
merging with and into Merger Sub and will cease to exist.
SECTION 4.2 CAPITAL ACCOUNTS; ALLOCATIONS.
(a) There shall be established for each Member a Capital Account (a
"Capital Account") which, in the case of each Member, shall initially be equal
to the Capital Contribution of such Member as set forth on Schedule A hereto.
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(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) and upon the redemption of LLC Interests.
(c) Subject to Sections 4.2(e), 4.2(g) and 4.5 hereof, all items of
LLC income and gain shall be allocated among the Members' Capital Accounts at
the end of every quarter as follows:
(i) first, items of income and gain shall be allocated to the
Manager Member in an amount equal to (A) the sum of (x) the Free
Cash Flow (net of Free Cash Flow Expenditures) for such quarter plus
(y) that percentage which Free Cash Flow then constitutes of
Revenues From Operations, multiplied by the Pro Forma Minnesota
Allocation, if any, for such quarter, multiplied by (B) a fraction,
(1) the numerator of which is the sum of the number of LLC Points
held by the Manager Member on the first day of such quarter and (2)
the denominator of which is the number of LLC Points outstanding on
the first day of such quarter;
(ii) second, the Manager Member shall be allocated items of
income and gain until the Manager Member has been allocated
cumulative income and gain under this Section 4.2(c)(ii) equal to
the cumulative amount of losses and deductions allocated to the
Manager Member under Sections 4.2(d)(ii) and 4.2(d)(iii), if any;
(iii) third, items of income and gain, if any, shall be
allocated among all Non-Manager Members in accordance with (and in
proportion to) each Non-Manager Member's respective number of LLC
Points on the first day of such quarter, until the aggregate amount
of such items allocated to the Members (including both the Manager
Member and the Non-Manager Members) pursuant to Sections 4.2(c)(i)
and 4.2(c)(ii) and this 4.2(c)(iii) for such quarter equal the
aggregate amount of Free Cash Flow (net of Free Cash Flow
Expenditures) for such quarter; and
(iv) finally, all remaining items of LLC income and gain shall
be allocated among the Non-Manager Members in accordance with (and
in proportion to) each Non-Manager Member's respective number of LLC
Points on the first day of such quarter.
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(d) Subject to Sections 4.2(f), 4.2(g) and 4.5, all items of LLC
loss and deduction shall be allocated among the Members' Capital Accounts at the
end of every quarter as follows:
(i) first, all items of LLC loss and deduction for such
quarter shall be allocated among the Non-Manager Members in
accordance with (and in proportion to) their respective numbers of
LLC Points on the first day of such quarter after giving effect to
the allocation of the items of income and gain for such quarter
under Section 4.2(c), until all such Capital Accounts have been
reduced to zero (0), provided that no additional loss or deduction
shall be allocated to any Non-Manager Member once its Capital
Account has been reduced to zero (0);
(ii) second, all items of LLC loss and deduction for such
quarter not allocated to the Non-Manager Members under Section
4.2(d)(i) shall be allocated to the Manager Member until its Capital
Account shall have been reduced to zero (0); and
(iii) finally, all items of LLC loss and deduction for such
quarter not allocated to the Member under Sections 4.2(d)(i) and
4.2(d)(ii) shall be allocated among all Members in accordance with
(and in proportion to) each Members' respective number of LLC Points
on the first day of such quarter.
(e) If the LLC has a net gain from any sale, exchange or disposition
of all, or substantially all, of the assets of the LLC, then that net gain shall
be allocated among the Members as follows:
(i) first, gain shall be allocated to the Manager Member until
the Manager Member has been allocated cumulative gain which,
together with income and gain previously allocated to the Manager
Member under Section 4.2(c)(ii) hereof, equals the cumulative amount
of losses and deductions allocated to the Manager Member under
Sections 4.2(d)(ii) and 4.2(d)(iii);
(ii) thereafter, gain shall be allocated among the Members in
accordance with (and in proportion to) their respective number of
LLC Points as of the date of the transaction.
(f) If the LLC has a net loss from any sale, exchange or other
disposition of all, or substantially all, of the assets of the LLC, then that
net loss shall be allocated among the Members in accordance with (and in
proportion to) their respective number of LLC Points as of the date of the
transaction provided that no additional losses shall be allocated to a Member
once its Capital Account has been reduced to zero (0), unless all Members'
Capital Accounts have then been reduced to zero (0).
(g) In the event that during any calendar quarter (or any fiscal
year) there is any change of Members or LLC Points (whether as a result of the
admission of an Additional
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Non-Manager Member, the redemption by the LLC of all (or any portion of) any
Non-Manager Member's LLC Points, a transfer of any LLC Points or otherwise), the
following shall apply: (i) such transfer shall be deemed to have occurred as of
the end of the last day of the quarter in which such change occurred, (ii) the
books of account of the LLC shall be closed effective as of the close of
business on the effective date of any such change as set forth in clause (i) and
such fiscal year shall thereupon be divided into two or more portions, (iii)
each item of income, gain, loss and deduction shall be determined (on the
closing of the books basis) for the portion of such fiscal year ending with the
date on which the books of account of the LLC are so closed, and (iv) each such
item for such portion of such fiscal year shall be allocated (pursuant to the
provisions of Sections 4.2(c) and (d) hereof) to those persons who were Members
during such portion of such fiscal year in accordance with their respective LLC
Points during such period.
SECTION 4.3 DISTRIBUTIONS.
(a) Subject to Section 4.4 hereof, from and after the date hereof,
within thirty (30) days after the end of each calendar quarter, the Manager
Member shall, to the extent cash is available therefor, and based on the
unaudited financial statements for such calendar quarter prepared in accordance
with Section 9.3 hereof (after approval thereof by the Manager Member), cause
the LLC to (i) distribute to the Manager Member an amount equal to the portion
of the Free Cash Flow allocated to the Manager Member pursuant to Section
4.2(c)(i) for such calendar quarter (less the Manager Member's pro-rata portion
of any reservation from Free Cash Flow pursuant to the last sentence of this
Section 4.3(a)), and then (ii) distribute to the Non-Manager Members (and each
Person who was a Non-Manager Member for such calendar month) an amount equal to
(A) the portion of the Free Cash Flow allocated to such Non-Manager Member
pursuant to Section 4.2(c)(iii) for such calendar quarter and any previous
calendar quarter to the extent not then distributed (less each such Person's
pro-rata portion of any reservation from Free Cash Flow pursuant to the last
sentence of this Section 4.3(a)) minus (B) the amount, if any, by which the
operating expenses for the LLC for the calendar quarter exceeded the Operating
Cash Flow of the LLC for such calendar quarter multiplied by a fraction, the
numerator of which is the number of LLC Points held by such Non-Manager Member,
and the denominator of which is the number of LLC Points held by all the
Non-Manager Members, in accordance with (and in proportion to) their respective
number of LLC Points for such preceding calendar month, in each case, if and to
the extent each such Member (and each Person who was a Non-Manager Member for
any portion of any applicable portion of any applicable calendar month) has a
positive balance in its Capital Account. After the end of each fiscal year of
the LLC, the Manager Member shall, based on the audited financial statements
prepared in accordance with Section 9.3 hereof, cause the LLC to make a
distribution of the remaining Free Cash Flow, if any, for the preceding fiscal
year which was allocated pursuant to Sections 4.2(c)(i) and 4.2(c)(iii) but not
previously distributed, in accordance with the foregoing clauses (i) and (ii)
whenever, and to the extent, cash is available therefor. The Manager Member may
with either a Majority Vote or the consent of the Management Board, from time to
time, reserve and not distribute portions of Free Cash Flow for LLC purposes;
including, without limitation, to increase the net worth of the LLC, to make
capital expenditures (such as the creation of or investment in a Controlled
Affiliate) or to create a reserve for anticipated repurchases of LLC Interests.
Any such reservation would be made from all
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Members pro-rata in proportion to LLC Points. Such funds shall be maintained in
the Receipts Account (as defined below) pending expenditure thereof.
(b) To give effect to the foregoing, the LLC shall have two (2) bank
accounts. The first account (the "Receipts Account") shall have as its
authorized signatures such representatives of the Manager Member as the Manager
Member shall deem appropriate or desirable. All the LLC's receipts shall be paid
into the Receipts Account; provided, however, that on a weekly basis, the
Manager Member shall forward the revenues of the LLC with respect to the
accruals for a given month from this account to the second account (described
below) until the revenues so forwarded equal the Operating Cash Flow of the LLC
for such month (and previous months to the extent not so forwarded or used to
pay expenses of the LLC which are other than Free Cash Flow Expenditures) and,
thereafter, revenues with respect to that month shall be retained in the
Receipts Account pending distribution or such other use thereof as may be
permitted under this Agreement. The Manager Member shall use the Receipts
Account to make all distributions of Free Cash Flow pursuant to Section 4.3(a)
above and to fund all Free Cash Flow Expenditures. The Manager Member shall
retain in the Receipts Account the amount which gives rise to the right to make
distributions pursuant to Section 4.3(c) hereof (including, without limitation,
the proceeds of sales of assets, insurance proceeds and the proceeds of issuance
of additional LLC Interests). The second account shall have as its authorized
signatures such Officers as may be agreed to by a Majority Vote, and one (1)
designee of the Manager Member. This second account shall be used by the
Officers to make all operating expense payments (including payments of salaries
and bonuses) out of Operating Cash Flow.
Within thirty (30) days after the end of each calendar quarter, based on
the unaudited financial statements for such calendar quarter prepared in
accordance with Section 9.3 hereof, and within ninety-five (95) days after the
end of each fiscal year of the LLC, based on the audited financial statements
prepared in accordance with Section 9.3 hereof, the Manager Member shall cause
such transfers between the accounts to be made as may be necessary to reconcile
the accounts with the amounts of revenue designated as Operating Cash Flow and
Free Cash Flow.
(c) Except as otherwise set forth herein, all other amounts or
proceeds available for distribution, if any, shall be distributed to the Members
at such time as may be determined by the Manager Member; provided that any such
distribution shall be made among the Members (i) in accordance with (and in
proportion to) the positive balances (if any) in their respective Capital
Accounts (as determined immediately prior to such distribution) until all such
positive Capital Account balances have been reduced to zero, and (ii) thereafter
among all Members in accordance with (and in proportion to) their respective
numbers of LLC Points at the time of such distribution (provided, however, that
if a Member makes a Capital Contribution after the Effective Date, the Manager
Member may cause the LLC to make a priority return of such Capital Contribution
if such priority return was agreed to in writing by the LLC and the Member
making such Capital Contribution at the time of such Capital Contribution).
(d) Notwithstanding any other provision of this Agreement, neither
the LLC, nor the Manager Member on behalf of the LLC, shall make a distribution
to any Member on account of its LLC Interest if such distribution would violate
the Act or other applicable law.
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SECTION 4.4 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 (and in proportion
to) 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, 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 Section
4.2(d).
SECTION 4.5 PROCEEDS FROM CAPITAL CONTRIBUTIONS AND THE SALE OF
SECURITIES; INSURANCE PROCEEDS; CERTAIN SPECIAL ALLOCATIONS.
(a) Capital Contributions made by any Member after the Effective
Date, 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.
(b) In the event of the death or Permanent Incapacity of an Employee
Stockholder 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 Employee Stockholder or Non-Manager Member through which
such Employee Stockholder holds or held his or her interest in the LLC in
accordance with Section 3.12 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
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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) on account of the property of the LLC on the Effective
Date, shall be specially allocated to the Manager Member. 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 shall be allocated as set forth in
Section 4.2(c)(iii), 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 shall be allocated among the Members in accordance with their
respective numbers of LLC Points on the date the property was purchased.
SECTION 4.6 FEDERAL TAX ALLOCATIONS. The Manager Member shall, in its sole
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, 4.4 and 4.5 hereof, and the distribution provisions
of Sections 4.3, 4.4 and 4.5 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 sole 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
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.
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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 INTERESTS. No interest of a Non-Manager
Member in the LLC may be sold, assigned, transferred, gifted or exchanged, nor
may any Non-Manager Member offer to do any of them (each, a "Transfer"), nor may
any interest in any Non-Manager Member be Transferred, nor may any stockholder
in any Non-Manager Member which is not an individual offer to do any of them,
and no Transfer by a Non-Manager Member or stockholder of a Non-Manager Member
shall be binding upon the LLC or any Non-Manager Member unless 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. The assignee of such interest in
the LLC may become a substitute Non-Manager Member only upon the terms and
conditions set forth in Section 5.2. If an assignee or transferee of an interest
of a Non-Manager Member in the LLC does not become (and until any such assignee
or transferee becomes) a substitute Non-Manager Member, in accordance with the
provisions of Section 5.2, such Person shall not be entitled to exercise or
receive any of the rights, powers or benefits of a Non-Manager Member other than
the right to receive distributions which the assigning Non-Manager Member has
sold, transferred or assigned to such Person. No Non-Manager Member's interest
in the LLC or, in the case of a Non-Manager Member which is not an individual,
none of the direct and indirect interests of a beneficial owner of such
Non-Manager Member, 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 sole discretion;
(b) upon the death of such beneficial owner, their interests in the
LLC or in the Non-Manager Member may be Transferred by will or the laws of
descent and distribution (subject, in all cases, to the provisions of Section
3.12 hereof); and
(c) a Non-Manager Member (and its beneficial owners) may Transfer
interests in the LLC or in such Non-Manager Member to members of his or her
Immediate Family (or trusts for their benefit and of which the beneficial owner
is the settlor and/or trustee, provided that any such trust does not require or
permit distribution of such interests).
provided, that in the case of (b) or (c) above, (i) the transferee enters into
an agreement with the LLC agreeing to be bound by the provisions hereof (and if
such transferee is not already a party to a Non Solicitation Agreement, the
transferee enters into a Non Solicitation Agreement) (to the extent such Person
then would hold any interest in the LLC), and (ii) whether or not the transferee
enters into such an agreement, such LLC Interests, and interests in such
Non-Manager Member, 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 or beneficial owner, as applicable.
Notwithstanding the foregoing, no Non-Manager Member's interest in the LLC may
be Transferred if, giving effect to such Transfer, the total number of Members
of the
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LLC would exceed one hundred (100) (as determined in accordance with Treasury
Regulation Section 1.7704-1(h)(3), which provides, in general, that under
certain circumstances a Person owning an interest in (A) a partnership for
federal income tax purposes, (B) a "grantor trust," any portion of which is
treated as owned by the grantor(s) or other person(s) under sections 671-679 of
the Code, or (C) an "S corporation" within the meaning of section 1361(a) of the
Code (each, a "flow-through entity") that owns, directly or through other
flow-through entities, an interest in the LLC shall be treated as a Member),
unless either such Transfer is a Transfer described in Treasury Regulation
Section 1.7704-1(e) or such Transfer is pursuant to a Put right under Article
VII and the sum of the percentage interests in profits or capital of the LLC
Transferred during the taxable year of the LLC (other than in Transfers
described in Treasury Regulation Section 1.7704-1(e)) would, taking the Transfer
in question into account and assuming the maximum exercise of the Non-Manager
Members' Put rights under Article VII, exceed ten percent (10%) of the total
interests in profits or capital of the LLC.
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 month 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 interests of a Non-Manager Member in the LLC may be pledged,
hypothecated, optioned or encumbered, nor may any interests in a Non-Manager
Member be pledged, hypothecated, optioned or encumbered, nor may any offer to do
any of the foregoing be made.
SECTION 5.2 SUBSTITUTE NON-MANAGER MEMBERS. No transferee of 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 an LLC Interest by
Transfer from another Non-Manager Member pursuant to Section 5.1 hereof, or that
acquires an LLC Interest from the Manager Member pursuant to Section 6.1 hereof.
The admission of an assignee 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 assignee becomes a party to this Agreement as a
Non-Manager Member as well as compliance by such assignee with the provisions of
Section 3.6 hereof. Upon the admission of a substitute Non-Manager Member, the
Manager Member shall make the appropriate revisions to Schedule A hereto.
SECTION 5.3 ALLOCATION OF DISTRIBUTIONS BETWEEN ASSIGNOR AND ASSIGNEE;
SUCCESSOR TO CAPITAL ACCOUNTS. Upon the Transfer of an LLC Interest pursuant to
this Article V, distributions pursuant to Article IV shall be made to the Person
owning the LLC Interest at the date of distribution, unless the assignor and
assignee otherwise agree and so direct the LLC and the Manager Member in a
written statement signed by both the assignor and assignee. In connection with a
Transfer by a Member of LLC Points, the assignee shall succeed to a pro-rata
(based on the percentage of such Person's LLC Points transferred) portion of the
assignor's Capital Account, unless the assignor and assignee otherwise agree and
so direct the LLC and the
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Manager Member in a written statement signed by both the assignor and assignee
and consented to by the Manager Member.
SECTION 5.4 RESIGNATION, REDEMPTIONS AND WITHDRAWALS. No Non-Manager
Member shall have the right to resign, to cause the redemption of its interest
in the LLC, in whole or in part, or to withdraw from the LLC, except (a) with
the consent of the Manager Member, (b) as is expressly provided for in Section
3.12 hereof; or (c) as is expressly provided for in Section 7.1 hereof. Upon any
resignation, redemption or withdrawal, the Non-Manager Member shall only be
entitled to the consideration, if any, provided for by Section 3.12 or Section
7.1 hereof, if and to the extent that one of such Sections is applicable. Upon
the resignation, redemption or withdrawal, in whole or in part, by a Non-Manager
Member, the Manager Member shall make the appropriate revisions to Schedule A
hereto.
SECTION 5.5 ISSUANCE OF ADDITIONAL LLC INTERESTS.
(a) 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 Points, only upon
receipt of a Majority Vote and the consent of the Manager Member and upon such
terms and conditions as may be established by the Manager Member with a Majority
Vote (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 such
Person's compliance with the provisions of Section 3.6 hereof).
(b) Existing Non-Manager Members may be issued additional LLC Points
(or other LLC Interests), only by the LLC with the consent of, and upon such
terms and conditions as may be established by, the Manager Member. The Manager
Member may only be issued new additional LLC Points (or other LLC Interests)
upon the receipt of a Majority Vote.
(c) Each time additional LLC Interests are issued (including,
without limitation, additional LLC Points), the Capital Accounts of all the
Members shall be adjusted as follows: (i) the Manager Member shall determine the
proceeds which would be realized if the LLC sold all its assets at such time for
a price equal to the Fair Market Value of such assets, and (ii) the Manager
Member shall allocate amounts equal to the gain or loss which would have been
realized upon such a sale to the Capital Accounts of all the Members immediately
prior to such issuance in accordance with Section 4.2(d) hereof.
(d) Upon the issuance of additional LLC Interests, the Manager
Member shall make the appropriate revisions to Schedule A hereto.
(e) Notwithstanding anything in this Agreement to the contrary, (i)
no additional LLC Interests may be issued if, giving effect to such Transfer,
the total number of Members would exceed one hundred (100) as determined in
accordance with Treasury Regulation Section 1.7704-1(h)(3)) and (ii) no LLC
Interests may be issued (A) in a transaction that is required to be registered
under the Securities Act or (B) in a transaction that is not required to be
registered
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under the Securities Act by reason of Regulation S thereunder unless the
offering and sale of the LLC Interests would not have been required to be
registered under the Securities Act if the LLC Interests had been offered and
sold within the United States.
SECTION 5.6 ADDITIONAL REQUIREMENTS. As additional conditions to the
validity of (x) any Transfer of a Non-Manager Member's interest in the LLC (or,
in the case of a Non-Manager Member which is not an individual, the interests of
the direct and indirect beneficial owners of such Non-Manager Member) (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 to become subject to regulation as
an "investment company" under the 1940 Act, and the rules and regulations of the
SEC thereunder, including by resulting in there being one hundred (100) or more
beneficial holders of interests in the LLC, (iii) 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 is material),
or (iv) result in the treatment of the LLC as an association taxable as a
corporation or as a "publicly traded partnership" for Federal income tax
purposes.
The Manager Member may require reasonable evidence as to the foregoing,
including, without limitation, a favorable opinion of counsel, 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 REPRESENTATION OF MEMBERS. The Manager Member and each
Non-Manager Member (including each Additional Non-Manager Member) hereby
represents and warrants to the 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 equity interests
in the LLC have not been registered under the securities laws of any
jurisdiction and cannot be disposed of unless they are subsequently registered
and/or qualified under applicable securities laws and the provisions of this
Agreement have been complied with, and (e) the execution, delivery and
performance of this Agreement 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, any provision of its charter, by-laws or other governing documents or any
agreement or instrument to which it is a party or by which it is bound.
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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 a Majority Vote
the Manager Member's interest in the LLC may not be Transferred; provided,
however, (i) it is understood and agreed that, in connection with the operation
of the business of AMG and the Manager Member (including, without limitation,
the financing of its interest herein and direct or indirect interests in
additional investment management companies), the Manager Member's interest in
the LLC will be pledged and encumbered and lien holders of the Manager Member's
interest shall have and be able to exercise the rights of secured creditors with
respect to such interest, (ii) the Manager Member may sell some (but not all or
substantially all) 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 all or substantially
all) 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 an Affiliate of the
Manager Member. Notwithstanding the foregoing, the Manager Member's interest in
the LLC may not be Transferred if, giving effect to such Transfer, the total
number of Members of the LLC would exceed one hundred (100) (as determined in
accordance with Treasury Regulation Section 1.7704-1(h)(3), which provides, in
general, that under certain circumstances a Person owning an interest in (A) a
partnership for federal income tax purposes, (B) a "grantor trust," any portion
of which is treated as owned by the grantor(s) or other person(s) under sections
671-679 of the Code, or (C) an "S corporation" within the meaning of section
1361(a) of the Code (each, a "flow-through entity") that owns, directly or
through other flow-through entities, an interest in the LLC shall be treated as
a Member), unless such Transfer is a Transfer described in Treasury Regulation
Section 1.7704-1(e). Notwithstanding anything else set forth herein, the Manager
Member may, with a Majority Vote, sell or transfer as a result of a merger or
consolidation all its interests in the LLC in a single transaction or a series
of related transactions, and, in any such case, each of the Non-Manager Members
shall be required to sell or transfer, in the same transaction or transactions,
all their interests in the LLC; provided, that the price to be received by all
the Members shall be allocated among the Members as follows: (a) an amount equal
to the sum of the positive balances, if any, in positive 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.
(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
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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. To the fullest extent
permitted by law, except as set forth in Section 6.1, without a prior Majority
Vote, the Manager Member shall not have the right to resign or withdraw from the
LLC as Manager Member. With a prior Majority Vote, the Manager Member may resign
or withdraw as Manager Member upon prior written notice to the LLC. Without a
prior Majority Vote, the Manager Member shall have no right to have all or any
portion of its interest in the LLC redeemed. Any resigned, withdrawn or removed
Manager Member shall retain its interest in the capital of the LLC and its other
economic rights under this Agreement as a Non-Manager Member having the number
of LLC Points held by the Manager Member prior to its resignation, withdrawal or
removal. If a Manager Member who has resigned, withdrawn or been removed no
longer has any economic interest in the LLC, then upon such resignation,
withdrawal or removal such Person shall cease to be a Member of the LLC.
ARTICLE VII - PUT OF LLC INTERESTS
SECTION 7.1 MANDATORY PUTS.
(a) Each Non-Manager Member may, at such Non-Manager Member's
option, subject to the terms and conditions set forth in this Section 7.1, cause
AMG to purchase portions of the LLC Points held by such Non-Manager Member in
the LLC (a "Put").
(b) Each Non-Manager Member (other than Xx. Xxxxx Xxxxxx or Xx.
Xxxxx X. Xxxxxxxxx or their Related Non-Manager Members and their respective
Permitted Transferees) may, subject to the terms and conditions set forth in
this Agreement, cause AMG to purchase up to ten percent (10%) of the Initial LLC
Points of such Non-Manager Member from such Non-Manager Member (and/or any
Permitted Transferee of such Non-Manager Member), on the last business day in
September (each a "Purchase Date") (but only up to an aggregate of fifty (50%)
of such Non-Manager Member's Initial LLC Points) starting with the last business
day in September, 2002 and ending with the last business day in September, 2012.
(c) Xx. Xxxxx Xxxxxx (and each of his Related Non-Management
Members) and any of their respective Permitted Transferees may cause AMG to
purchase from them collectively twenty-five percent (25%) of the Initial LLC
Points of Xx. Xxxxx Xxxxxx (and his Related Xxx-
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Management Members), on the Purchase Date occurring on the last business day in
September, 2001 or any Purchase Date thereafter. Xx. Xxxxx X. Xxxxxxxxx and each
of his Related Non-Management Members) and any of their respective Permitted
Transferees may cause AMG to purchase from them collectively twenty percent
(20%) of the Initial LLC Points of Xx. Xxxxx X. Xxxxxxxxx (and his Related
Non-Manager Members), on the Purchase Date occurring on the last business day in
September, 2002 or any Purchase Date thereafter.
(d) If a Non-Manager Member desires to exercise its rights under
Section 7.1(b) or 7.1(c) above, it and its Employee Stockholder shall give the
Manager Member, AMG, each other Employee Stockholder and the LLC irrevocable
written notice (a "Put Notice") on or prior to the preceding May 31 (the "Notice
Deadline"), stating that it 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: AMG shall purchase from each
Non-Manager Member (and his (or its) Related Non-Manager Members) and their
respective Permitted Transferees that number of Put LLC Points as is equal to
the number of Put LLC Points designated in the Put Notice, up to the maximum
number permitted by Section 7.1(b) or Section 7.1(c) above with respect to that
year and the aggregate number of Initial LLC Points that may be Put by the
Non-Manager Member (and his (or its) Related Non-Manager Members) and their
respective Permitted Transferees.
(e) The purchase price for a Put (the "Put Price") shall be an
amount equal to (i) six (6) times (x) fifty percent (50%) of the LLC's Free Cash
Flow for the twenty-four (24) months ending on June 30 prior to the date of the
closing of such Put minus (y) fifty percent (50%) of the amount by which the
actual expenses of the LLC exceeded the Operating Cash Flow of the LLC
(including previously reserved Operating Cash Flow) during the twenty-four (24)
months ending on June 30 prior to the date of the closing of such Put (in each
case determined by reference to the most recent audited financial statements
supplied to the Manager Member pursuant to Section 9.3) multiplied by (ii) a
fraction, the numerator of which is the number of LLC Points to be purchased
from such Non-Manager Member on the Purchase Date and the denominator of which
is the number of LLC Points outstanding on the Purchase Date before giving
effect to any Puts or any issuances or redemptions of LLC Points on such date
minus (iii) in the case of a Put including Initial LLC Points, (A) the sum of
the Remaining Minnesota Carryover Amount and the Remaining Minnesota Cumulative
Debits, multiplied by (B) a fraction, the numerator of which is the number of
Initial LLC Points being purchased in the Put, and the denominator of which is
the number of Initial LLC Points outstanding on the date of the closing of the
Put (before giving effect to any issuance or redemption of LLC Points on such
date).
(f) In the case of any Put pursuant to the provisions of Section
7.1(b) hereof, the Put Price shall be paid by AMG (or, if AMG shall have
assigned its obligation to the Manager Member or the LLC pursuant to paragraph
(h) below, the Manager Member or the LLC) (or their respective assigns) on the
relevant Purchase Date by certified check issued to such Non-Manager Member, in
each case, against delivery of such documents or instruments of transfer as may
reasonably be requested by AMG, the Manager Member or the LLC, as applicable,
and in each case including representations that the transferring Non-Manager
Member is the record and beneficial owner of the LLC Interests being Put, free
and clear of any Encumbrances other than
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those imposed by this Agreement. In the case of any Put pursuant to the
provisions of Section 7.1(c) hereof: (i) if AMG has, at that time, not 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 affected solely to implement 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
Put Price shall be paid by AMG (or, if AMG shall have assigned its obligations
to the Manager Member or the LLC pursuant to paragraph (h) below, the Manager
Member or the LLC) (or their respective assigns) on the relevant Purchase Date
by certified check issued to such Non-Manager Member, or (ii) if AMG has, at
that time, completed a Public Offering, then the Put Price shall be paid by AMG
on the relevant Purchase Date by issuing to such Non-Manager Member, that number
of shares of AMG Stock (as such term is defined in Section 7.2(a) hereof) as is
equal to the Put Price divided by AMG's Average Stock Price (as such term is
defined in Section 7.2(c) hereof) on the relevant Purchase Date.
(g) Notwithstanding any other provision of this Section 7.1 to the
contrary, no purchase by AMG pursuant to this Section 7.1 (or, upon assignment
of any of AMG's obligations to the Management Member or the LLC pursuant to
paragraph (h) hereof, purchase by the Manager Member or redemption by the LLC)
shall occur if it would result in the Manager Member and AMG (taken together)
owning, directly or indirectly, in excess of eighty percent (80%) of the LLC
Points outstanding after giving effect to any such sale or redemption. If some,
but not all, of the LLC Points which Non-Manager Members have requested be
purchased can be so purchased without the Manager Member's and AMG's (taken
together) ownership, directly or indirectly, exceeding eighty percent (80%) of
the outstanding LLC Points, then AMG or the Manager Member shall purchase, or
shall assign their obligations to the LLC, and the LLC shall redeem, LLC Points
from the Non-Manager Members having Put LLC Interests in proportion to the LLC
Points then held by such Non-Manager Members up to the maximum extent that would
not cause the Manager Member and AMG (taken together) to own, directly or
indirectly, in excess of eighty percent (80%) of the outstanding LLC Points (in
each case, subject to the maximum amount set forth in Sections 7.1(b), 7.1(c)
and 7.1(d) hereof).
(h) AMG may assign and/or delegate any or all of its rights and
obligations to purchase LLC Points under this Section 7.1, in one or more
instances, to the Manger Member; provided that no such assignment or delegation
shall relieve AMG of its obligation to make the payment for a Put as required by
this Section 7.1 (or the method of payment (i.e., AMG Stock) to be used). The
Manager Member may, only with a Majority Vote, assign any or all of its rights
and obligations to purchase LLC Points under this Section 7.1, in one or more
instances, to the LLC.
(i) As of any Purchase Date, the Non-Manager Member shall cease to
hold the LLC Points 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.
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SECTION 7.2 ELECTION RIGHTS OF NON-MANAGER MEMBERS TO RECEIVE AMG STOCK.
(a) If AMG has, at the time of a Put, completed a Public Offering,
then the Non-Manager Member which is exercising a Put may elect to cause AMG to
pay all or a portion of the Put Price (as such term is defined in Section 7.1(e)
above) for the relevant Put in shares of AMG's Common Stock, $.01 par value per
share (the "AMG Stock") in accordance with the provisions of this Section 7.2.
If the Non-Manager Member elects to cause AMG to pay a portion of the Put Price
in shares of AMG Stock in accordance with the provisions of this Section 7.2,
the portion of the consideration which is paid in AMG Stock shall reduce the
cash portion of the Put Price pursuant to Section 7.1(e) and shall eliminate any
obligation to make any payments under Section 7.1(f).
(b) An election under this Section 7.2 must be made by the
Non-Manager Member at least sixty (60) days prior to the relevant Purchase Date,
by giving written notice to the LLC, AMG and the Manager Member of such
election, which election, once made, shall be irrevocable without the prior
written consent of AMG.
(c) The number of shares of AMG Stock to be issued upon exercise of
the Put shall be determined in accordance with the following formula:
Number of Shares of AMG Stock = FCF x Percentage Put x AMG's EBITDA Multiple x .75
--------------------------------------------------
AMG's Average Stock Price
Where:
FCF = an amount equal to fifty percent (50%) of the LLC's
Free Cash Flow for the twenty-four (24) months
ending on the December 31 prior to the date of the
closing of such Put minus fifty percent (50%) of
the amount, if any, by which the actual expenses of
the LLC exceeded the Operating Cash Flow of the LLC
(including previously reserved Operating Cash Flow)
during the twenty-four (24) months ending on the
December 31 prior to the date of the closing of
such Put.
Percentage Put = a fraction, the numerator of which is
the number of LLC Points to be purchased
from the Non-Manager Member on the Purchase
Date, and the denominator of which is the
number of LLC Points outstanding on the
Purchase Date before giving effect to any
Puts or any issuances or redemptions of LLC
Points on such date.
AMG's EBITDA Multiple = a fraction, the numerator of which is (a) the
number of shares of AMG Stock issued and
outstanding immediately prior to the closing
of the Put, multiplied
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by AMG's Average Stock Price, plus (b) the
long-term indebtedness (including the
current portion thereof) of AMG as of the
date of its most recent public financial
reports prior to the closing of the Put, and
the denominator of which is AMG's earnings
before interest, taxes, depreciation and
amortization for the twelve (12) month
period ending on December 31 prior to the
date of the closing of the Put.
AMG's Average Stock Price = 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.
The term "Stock Price" shall mean the
closing price for each day 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 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.
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.
(d) If AMG completes a Public Offering, AMG shall, as soon as
reasonably practicable, provide notice thereof to each Employee Stockholder.
(e) If requested in writing by the managing underwriter(s), if any,
of any underwritten public offering of AMG Stock, each Non-Manager Member and
each Employee Stockholder agrees not to offer, sell, contract to sell or
otherwise dispose of any shares of AMG Stock (or any securities convertible into
or exchangeable for AMG Stock) except as part of such
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underwritten public offering within thirty (30) days before or one hundred and
eighty (180) days after the effective date of the registration statement filed
with respect to said offering.
SECTION 7.3 REGISTRATION RIGHTS.
(a) If at any time or times following the completion of its initial
public offering, AMG shall determine to file a registration statement
("Registration Statement") (which excludes a registration on Form S-8 (or its
then equivalent form) or a registration statement filed solely to implement 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
statement on a form not available for registering securities for sale to the
public) other than on Form S-4 (or its then equivalent form) and other than with
respect to securities to be issued solely in connection with any acquisition of
any securities or assets of any entity or business, then AMG will give written
notice thereof to the Non-Manager Members which are holders of Registrable
Securities (as hereinafter defined) then outstanding (the "Holders") at least
twelve (12) days prior to the filing of a registration statement with the SEC,
and, subject to the terms and conditions of this Section 7.3, will use
commercially reasonable efforts to effect the registration under the Securities
Act (a "Registration") of all Registrable Securities which the Holders request
in a writing delivered to AMG within ten (10) days after the notice given by
AMG. AMG shall have the right to postpone or withdraw any Registration without
any obligation to any Holder.
(b) For the purposes of this Section 7.3, the term "Registrable
Securities" shall mean any AMG Stock held by a Non-Manager Member which was
acquired by such Non-Manager Member pursuant to the Merger Agreement and any
equity securities issued or issuable with respect to such AMG Stock by way of a
stock dividend or stock split or in connection with a combination of shares.
(c) Whenever under the preceding provisions of this Section 7.3, AMG
is required hereunder to register Registrable Securities, AMG agrees that it
shall also do the following:
(i) use commercially reasonable efforts to prepare diligently
for filing with the SEC a Registration Statement and such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary for the duration of such
Registration;
(ii) use commercially reasonable efforts to maintain the
effectiveness of any Registration Statement pursuant to which any of the
Registrable Securities are being sold on a delayed or continuous basis
under Rule 415 (or any successor or similar rule) under the Securities Act
(other than a registration statement in connection with an underwritten
offering) until the earlier of (A) the completion of the distribution of
all Registrable Securities offered pursuant thereto or (B) ninety (90)
days after the effective date of such Registration Statement, provided
that if a Suspension Period (as defined below) has occurred during the
pendency of a Registration, AMG shall in good faith use reasonable efforts
to extend the effectiveness of such Registration so that there are ninety
(90) days during which such Registration is effective and a Suspension
Period is not in effect; and
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(iii) furnish to each selling Holder such copies of each
preliminary and final prospectus and such other documents as such Holder
may reasonably request to facilitate the public offering of its
Registrable Securities in accordance with customary practices.
(d) All reasonable expenses incident to AMG's performance of or
compliance with this Section 7.3, including SEC and securities exchange or
National Association of Securities Dealers, Inc. ("NASD") registration and
filing fees, fees and expenses of compliance with securities or blue sky laws,
printing expenses, fees and disbursements of counsel for AMG and its independent
certified public accountants incurred in connection with each registration
hereunder (excluding any fees or disbursements of counsel for the Holders, or
any underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities, which shall be borne by each applicable Holder) (all
such included expenses being herein called "Registration Expenses"), will be
borne by AMG; provided, however, that if AMG is not selling securities in such
offering, then each Holder shall bear a portion of such expenses equal to such
expenses multiplied by a fraction, the numerator of which is the number of
shares sold by such Holder and the denominator of which is the total number of
shares sold in the offering.
(e) (i) Incident to any registration statement referred to in this
Section 7.3(e), and subject to applicable law, AMG will indemnify each
underwriter, each Holder of Registrable Securities so registered, and each
person controlling any of them ("Controlling Person") against all claims,
losses, damages and liabilities, including legal and other expenses
reasonably incurred in investigating or defending against the same,
arising out of any untrue statement of a material fact contained therein,
or any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or
arising out of any violation by AMG of the Securities Act, any other
federal securities laws, any state securities or "blue-sky" laws or any
rule or regulation thereunder in connection with such registration, except
insofar as the same may have been caused by an untrue statement or
omission based upon information furnished to AMG by or on behalf of such
underwriter, Holder or Controlling Person expressly for use therein, and
with respect to such untrue statement or omission in the information
furnished to AMG by or on behalf of such underwriter, Holder or
Controlling Person, such underwriter, Holder or Controlling Person so
providing such information to AMG (or on whose behalf such information was
so provided) will indemnify AMG, its directors and officers, and the other
underwriters, Holders and Controlling Persons against any losses, claims,
damages, expenses or liabilities to which any of them may become subject
to the same extent.
(ii) If the indemnification provided for in this Section 7.3(e) from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred
to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities
or expenses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified parties in connection with
the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified parties shall be
determined by
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reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact, has
been made by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to
include any reasonable legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.3(e) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 7.3(e)(ii), no Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Holder were offered to the
public exceeds the amount of any damages which such Holder has otherwise been
required to pay by reason of such untrue statement or omission. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 7.3(e), the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Section 7.3(e)(i) without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 7.3(e)(ii).
SECTION 7.4 RESTRICTIONS. Notwithstanding anything herein to the contrary,
the parties agree as follows:
(a) In the event that in connection with an underwritten public
offering, the managing underwriter(s) shall in good faith impose a limitation on
the number of securities which may be included in such Registration for
marketing purposes, AMG shall not be required to register Registrable Securities
in excess of such limitation, provided that the reduction in the number of
securities which may be included in such Registration to comply with such
limitation is imposed pro rata (based either (as determined by AMG, in its sole
discretion) on relative number of securities held or relative number of
securities sought to be included in such Registration) with respect to the
Holders and all managers of companies providing Investment Management Services
in which AMG may invest after the date hereof and which have so-called
incidental or piggyback registration rights (it being understood that such
limitation may be imposed as to all holders of such securities and the Holders
prior to the imposition of any limitation on other holders of AMG securities).
(b) If requested in writing by the managing underwriter(s), if any,
of any underwritten public offering of AMG Stock, each Non-Manager Member and
each Employee Stockholder agrees not to offer, sell, contract to sell or
otherwise dispose of any shares of AMG Stock (or any securities convertible into
or exchangeable for AMG Stock) except as part of such
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underwritten public offering within thirty (30) days before or one hundred and
eighty (180) days after the effective date of the registration statement filed
with respect to said offering.
(c) Following the effectiveness of a Registration (including,
without limitation a Registration for sale on a delayed or continuous basis
under Rule 415 under the Securities Act), each Holder and each Employee
Stockholder agrees not to effect any sales of AMG Stock after they have received
notice from AMG to suspend sales as a result of the commencement of any
Suspension Period. Each Holder may recommence effecting sales of AMG Stock
following further notice to such effect from AMG, which shall be given by AMG
not later than five (5) business days after the conclusion of each Suspension
Period. For purposes hereof, a "Suspension Period" shall mean the pendency or
occurrence of an event that would make it impractical or inadvisable (i) to
cause a Registration Statement to remain in effect or (ii) to permit the sale of
AMG Stock by Holders and by limited partners, members or management employees of
other entities in which AMG is a general partner or manager member (without
prejudice to any particular holder), and shall include, without limitation,
pending negotiations relating to, or consummation of, a transaction or the
pendency or occurrence of any other event that would require additional
disclosure of material information by AMG in a registration statement as to
which AMG has a bona fide business purpose for preserving confidentiality or
which renders AMG unable to comply with applicable legal requirements.
SECTION 7.5 LIMITATION OF REGISTRATION RIGHTS. Notwithstanding the
foregoing, AMG shall not be required to effect a Registration of Registrable
Securities under this Agreement if, in the written opinion of counsel for AMG,
the Holders of Registrable Securities may then sell all the Registrable
Securities proposed to be sold without registration under the Securities Act.
SECTION 7.6 OPTION OF RECEIVING FUTURE PIGGYBACK REGISTRATION RIGHTS.
Notwithstanding any provisions of this Section 7, if AMG offers to any Person
engaged in the business of providing Investment Management Services in which AMG
may invest pursuant to an acquisition or investment transaction closing after
the date hereof any form of piggyback registration rights ("New Registration
Rights"), AMG agrees that at each such occasion it shall provide Holders of
Registrable Securities with the option of either retaining the registration
rights then in force for such Registrable Securities or replacing such
registration rights with the New Registration Rights, subject to the limitation
set forth in Section 7.5.
ARTICLE VIII - DISSOLUTION AND TERMINATION.
SECTION 8.1 NO DISSOLUTION. The LLC shall not be dissolved by the
admission of Additional Non-Manager Members or substitute Non-Manager Members or
substitute Manager Members in accordance with the Act and the provisions of this
Agreement.
SECTION 8.2 EVENTS OF DISSOLUTION.
(a) The LLC shall be dissolved and its affairs wound up upon the
occurrence of any of the following events:
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(i) a date designated in writing by the Manager Member with
the consent of the Non-Manager Members acting by a Majority Vote; or
(ii) upon the entry of a decree of judicial dissolution under
Section 18-802 of the Act.
(b) Each Non-Manager Member and each Employee Stockholder and each
other Person who accepts LLC Interests constitutes and appoints each of the
Manager Member (and any successor thereof by merger, transfer, election or
otherwise), and each of the Manager Member's authorized officers and
attorneys-in-fact, with full power of substitution, as its, his or her true and
lawful agents and attorneys-in-fact, with full power and authority in its, his
or her name, place and xxxxx to: execute, swear to, acknowledge, deliver, file
and record in the appropriate public offices all certificates and other
instruments including, at the option of the Manager Member, this Agreement and
the Certificate and all amendments and restatements thereof or any of the
foregoing relating to the continuation of the LLC as contemplated by paragraph
(a)(ii) above, that the Manager Member reasonably deems appropriate or necessary
to exercise any powers of the Manager Member or to carry out the purposes of
this Agreement and to continue the existence or operation of the continuing LLC
as a Limited Liability Company in the State of Delaware and under the Act and in
all jurisdictions in which the LLC may or may wish to conduct business or own
property.
The foregoing power of attorney is hereby declared to be irrevocable and a
power coupled with an interest, and it shall survive, and shall not be affected
by, the subsequent death, incompetence, dissolution, disability, incapacity,
bankruptcy or termination of any grantor and the transfer of all or any portion
of his LLC Interest and shall extend to such Person's heirs, successors and
assigns. Each Person who accepts LLC Interests is deemed to consent to be bound
by any representations made by the Manager Member or the authorized officers and
attorneys-in-fact thereof, acting in good faith pursuant to such power of
attorney. Each Person who accepts LLC Interests is deemed to consent to and
waive any and all defenses that may be available to contest, negate or disaffirm
any action of the Manager Member or the authorized officers and
attorneys-in-fact thereof, taken in good faith under such power of attorney.
Each Non-Manager Member shall execute and deliver to the Manager Member within
fifteen (15) days after receipt of the Manager Member's request therefor, such
further designations, powers of attorney and other instruments as the Manager
Member deems necessary to effectuate this Section 8.2(b).
SECTION 8.3 NOTICE OF DISSOLUTION. Upon the dissolution of the LLC the
Manager Member shall promptly notify the Members of such dissolution.
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"), 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
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specified in Article IV hereof, as before liquidation. The proceeds of
liquidation shall be distributed as set forth in Section 4.4 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 4.4 and the Certificate shall have been canceled in the
manner required by the Act.
SECTION 8.6 CLAIMS OF THE MEMBERS. The Members and former Members shall
look solely to the LLC's assets for the return of their Capital Contributions,
and 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 Officers and the Manager Member shall
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 interests in the LLC have not been registered under
the Securities Act, and that the interests may not be sold or transferred
without registration under the Securities Act or exemption therefrom and without
compliance with Article V or Article VI of this Agreement. Such books shall be
maintained at the principal office of the LLC in New York, New York or at such
other place as the Manager Member shall determine.
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 and shall be maintained for each fiscal year in a manner
consistent with the manner in which the LLC's books were maintained during the
fiscal year ended December 31, 1997, except to the extent otherwise determined
by the Management Board, with the written consent of the Manager Member or as
otherwise required in accordance with changes in generally accepted accounting
principles or policies of AMG applied consistently with respect to its
Controlled Affiliates so long as no such change in policies affects the
calculation of the Repurchase Price or the Put Price (or, if it does, only after
appropriate provision is made to hold the Non-Manager Members harmless from the
effect of any such change). The taxable year of the LLC shall be the twelve
months ending December 31 or such other taxable year as the Manager Member may
designate, with the written advice of the Independent Public Accountants.
SECTION 9.3 FINANCIAL AND COMPLIANCE REPORTS. The LLC shall furnish to the
Manager Member, each of the following:
(a) Within five (5) days after the end of each month and each fiscal
quarter, an unaudited financial report of the LLC, which report shall be
prepared in accordance with generally
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accepted accounting principles using the accrual method of accounting,
consistently applied (except that the financial report may (i) be subject to
normal year-end audit adjustments which are neither individually nor in the
aggregate material and (ii) not contain all notes thereto which may be required
in accordance with generally accepted accounting principles) and shall be
certified by the most senior financial officer of the LLC to have been so
prepared, and which shall include the following:
(i) Statements of operations, changes in members' capital and
cash flows for such month or quarter, together with a cumulative income
statement from the first day of the then-current fiscal year to the last
day of such month or quarter;
(ii) a balance sheet as of the last day of such month or
quarter; and
(iii) with respect to the quarterly financial report, a
detailed computation of Free Cash Flow for such quarter.
(b) Within fifteen (15) days after the end of each fiscal year of
the LLC, audited financial statements of the LLC, which shall include statements
of operations, changes in members' capital and cash flows for such year and a
balance sheet as of the last day thereof, each prepared in accordance with
generally accepted accounting principles, using the accrual method of
accounting, consistently applied, certified by Independent Public Accountants
satisfactory to the Manager Member.
(c) 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, certified by the most
senior financial officer of the LLC.
(d) Copies of all financial statements, reports, notices, press
releases and other documents released to the public.
(e) 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, in each case certified by the most senior financial officer of the
LLC if such a certification is requested by the Manager Member.
(f) 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 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 requested by the Manager
Member or any of the Officers.
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(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. The Manager Member,
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, 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 Employee Stockholder or Non-Manager Member shall do anything or take any
action which would be inconsistent with the foregoing or with the Manager
Member's actions as authorized by the foregoing provisions of this Section
9.5(a). Each Non-Manager Member shall cooperate with the Manager Member in
causing the LLC to make an election under Section 754 or the Code with respect
to the LLC's fiscal year ended as of the date of this Agreement.
(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, willful misconduct or a breach of this Agreement, the Merger
Agreement or, in the case of a Non-Manager Member or Employee Stockholder, the
Non Solicitation Agreement to which he, she or it is a party.
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(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.
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, 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. 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 unless the Managing Member did
not act in good faith.
(c) Whenever in this Agreement the Manager Member is permitted or
required to make a decision (i) in its "discretion" or 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" 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; provided, however, that if such standard
is qualified by "reasonable," then the Manager Member shall exercise its
discretion or good faith only in a reasonable manner.
(d) Wherever in this Agreement a factual determination is called for
and the applicable provision of this Agreement does not indicate what party or
parties are to make the applicable factual determination, and/or the applicable
standard to be used in making the factual determination, such determination
shall be made by the Manager Member in the exercise of reasonable discretion.
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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 Person by reason of any action or inaction of
such Covered Person which constituted fraud, gross negligence, willful
misconduct or a breach of this Agreement, the Merger Agreement or, in the case
of the Non-Manager Member or Employee Stockholder, the Non Solicitation
Agreement to which he, she or it is a party; provided, however, that any
indemnity under this Section 10.4 shall be provided out of and to the extent of
Company 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,
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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 defend 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 by applicable law, expenses
(including legal fees) incurred by a Covered Person in defending any Asserted
Liability, shall, from time to time, be advanced by the LLC prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
the LLC of an undertaking by or on behalf of the Covered Person to repay such
amount if it shall be determined that the Covered Person is not entitled to be
indemnified as authorized in Section 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 or her 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 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 Chairman 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)
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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 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) a Majority
Vote of the Non-Manager Members; 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, no amendment may be made to this
Agreement which materially and adversely affects a Non-Manager Member in a
manner different from all the other Non-Manager Members, without the prior
written consent of the Non-Manager Member which would be so affected.
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 the Employee
Stockholders 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 assign, transfer, sell 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.
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
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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, (ii) any
Employee Stockholder or (iii) the LLC, other than a Member who is also a
creditor of the LLC.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF the Initial Non-Manager Members and the Manager Member
have executed and delivered this Amended and Restated Limited Liability Company
Agreement as of the day and year first above written.
MANAGER MEMBER
Name and Signature Address
GEOCAPITAL CORPORATION Two International Place, 23rd Floor
(formerly known as Merger Sub) Xxxxxx, XX 00000
By: /s/ Xxxx X. Xxxxxx
------------------
Name:
Title:
NON-MANAGER MEMBERS
Name and Signature Address
/s/ Xxxxx Xxxxxx c/o GeoCapital, LLC
-------------------------- 767 Fifth Avenue, 00xx Xxxxx
Xxxxx Xxxxxx Xxx Xxxx, XX 00000-0000
/s/ Xxxxx X. Xxxxxxxxx c/o GeoCapital, LLC
-------------------------- 767 Fifth Avenue, 45th Floor
Xxxxx X. Xxxxxxxxx Xxx Xxxx, XX 00000-0000
/s/ Xxxx X. Xxxxxx c/o GeoCapital, LLC
-------------------------- 000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxx X. Xxxxxx Xxx Xxxx, XX 00000-0000
/s/ Xxxxxxxx X. Xxxxxx c/o GeoCapital, LLC
-------------------------- 000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx X. Xxxxxx Xxx Xxxx, XX 00000-0000
/s/ Xxxx X. Xxxxxx c/o GeoCapital, LLC
-------------------------- 767 Fifth Avenue, 00xx Xxxxx
Xxxx X. Xxxxxx Xxx Xxxx, XX 00000-0000
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/s/ Xxxxxx X. Xxxxxxxxx c/o GeoCapital, LLC
-------------------------- 000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx X. Xxxxxxxxx Xxx Xxxx, XX 00000-0000
/s/ Xxxxxx X. Xxxxxxxxx c/o GeoCapital, LLC
-------------------------- 000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx X. Xxxxxxxxx Xxx Xxxx, XX 00000-0000
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ACKNOWLEDGMENT
The undersigned is executing this Agreement solely (i) to acknowledge and
agree to be bound by the provisions of Section 3.12, Article VII and the
relevant provisions of Article XI hereof (ii) to represent that the undersigned
is the sole owner of all of the outstanding capital stock of the Managing
Member, and (iii) to agree that, without a Majority Vote, for so long as Merger
Sub is the Managing Member of the LLC, the undersigned shall not in any manner
directly or indirectly sell, transfer, assign, pledge, hypothecate or otherwise
encumber or dispose of any of the capital stock of the Managing Member, subject
to the exceptions set forth in clause (i) and clause (ii) of Section 6.1(a).
AFFILIATED MANAGERS GROUP, INC.
Xxx Xxxxxxxxxxxxx Xxxxx
00xx Xxxxx
Xxxxxx, XX 00000
By: /s/ Xxxx X. Xxxxxx
------------------------
Name:
----------------------
Title:
----------------------
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SCHEDULE A
Member LLC Points Capital Contribution
------ ---------- --------------------
GeoCapital Corporation 60.0000 $24,000,000
Xxxxx Xxxxxx 19.9479 $ 0
Xxxxx X. Xxxxxxxxx 13.9246 $ 0
Xxxx Xxxxxx 1.3107 $ 0
Xxxxxxxx X. Xxxxxx 1.3107 $ 0
Xxxx X. Xxxxxx 1.1687 $ 0
Xxxxxx X. Xxxxxxxxx 1.1687 $ 0
Xxxxxx X. Xxxxxxxxx 1.1687 $ 0
------ -----------
TOTAL 100.0000 $24,000,000
Addresses
GeoCapital Corporation
c/o Affiliated Managers Group, Inc.
Xxx Xxxxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Each of the above individuals can be contacted at:
c/o GeoCapital, LLC
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
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SCHEDULE B
ACTUAL PERFORMANCE FEE CALCULATION AS OF THE DATE HEREOF
--------------------------------------------------------
(a) (b) (c) (d) (e) (f)
Performance
Fee for the Performance Option Cumulative
current Fee after Limitation Option Residual
Year measurement adjusting for Base (as a percent Limitation ("Carryover")
Ended period Carryover Fee of Base Fee) ($) ((b)-(e))
-----------------------------------------------------------------------------------
Jun-94 (1,291,129) (1,291,129) 1,220,846 50% (610,423) (680,706)
Jun-95 (1,847,065) (2,527,771) 1,284,778 50% (642,389) (1,885,382)
Jun-96 (2,193,110) (4,078,492) 1,580,134 50% (790,067) (3,288,426)
Jun-97 635,197 (2,653,229) 1,647,874 50% (823,937) (1,829,292)
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Debits (Option Limitation/5)
----------------------------------------------------------------------------------
Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Total
----------------------------------------------------------------------------------
(122,085) (122,085)
(128,478) (128,478) (256,956)
(158,013) (158,013) (158,013) (474,040)
(164,787) (164,787) (164,787) (164,787) (659,150)
--
----------------------------------------------------------------------------------
(573,363) (451,279) (322,801) (164,787) -- (1,512,230)
----------------------------------------------------------------------------------
Page 1
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SCHEDULE B
sample Actual Performance Fee Calculation (For Illustration Purposes Only) The
Actual calculations shall be done as set forth in the text of the Amended and
Restated Limited Liability Company Agreement
(a) (b) (c) (d) (e) (f)
Performance
Fee for the Performance Option Cumulative
current Fee after Limitation Option Residual
Year measurement adjusting for Base (as a percent Limitation ("Carryover")
Ended period Carryover Fee of Base Fee) ($) ((b)-(e))
-----------------------------------------------------------------------------------
Jun-94 (1,291,129) (1,291,129) 1,220,846 50% (610,423) (680,706)
Jun-95 (1,847,065) (2,527,771) 1,284,778 50% (642,389) (1,885,382)
Jun-96 (2,193,110) (4,078,492) 1,580,134 50% (790,067) (3,288,425)
Jun-97 635,197 (2,653,228) 1,647,874 50% (823,937) (1,829,291)
Jun-98 250,000 (1,579,291) 1,500,000 50% (750,000) (829,291)
Jun-99 -- (829,291) 1,500,000 50% (750,000) (79,291)
Jun-00 500,000 420,709 1,500,000 50% 420,709 --
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Debits/Credits (Option Limitation/5)
------------------------------------------------------------------------------------
Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04
------------------------------------------------------------------------------------
(122,084)
(128,477) (128,477)
(158,013) (158,013) (158,013)
(164,787) (164,787) (164,787) (164,787)
(150,000) (150,000) (150,000) (150,000) (150,000)
(150,000) (150,000) (150,000) (150,000) (150,000)
84,142 84,142 84,142 84,142 84,142
------------------------------------------------------------------------------------
(723,361) (751,277) (538,659) (380,646) (215,858) (65,858) 84,142
------------------------------------------------------------------------------------
sample Pro-Forma Performance Fee Calculation (For Illustration Purposes Only)
The Actual calculations shall be done as set forth in the text of the Amended
and Restated Limited Liability Company Agreement - calculated as if
(i) the Carryover at June 1997 (being the residual negative performance
fee from periods ended on or prior to June 30, 1997) was zero, and
(ii) there were no so-called "Debits" from or attributable to any
measurement periods ended on or prior June 30, 1997.
(a) (b) (c) (d) (e) (f)
Performance
Fee for the Performance Option Cumulative
current Fee after Limitation Option Residual
Year measurement adjusting for Base (as a percent Limitation ("Carryover")
Ended period Carryover Fee of Base Fee) ($) ((b)-(e))
-----------------------------------------------------------------------------------
Jun-94 (1,291,129) (1,291,129) 1,220,846 50% (610,423) (680,706)
Jun-95 (1,847,065) (2,527,771) 1,284,778 50% (642,389) (1,885,382)
Jun-96 (2,193,110) (4,078,492) 1,580,134 50% (790,067) (3,288,425)
Jun-97 635,197 (2,653,228) 1,647,874 50% (823,937) ZERO
Jun-98 250,000 250,000 1,500,000 50% 250,000 --
Jun-99 -- -- 1,500,000 50% -- --
Jun-00 500,000 500,000 1,500,000 50% 500,000 --
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Debits/Credits (Option Limitation/5)
------------------------------------------------------------------------------------
Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04
------------------------------------------------------------------------------------
ZERO
ZERO ZERO
ZERO ZERO ZERO
ZERO ZERO ZERO ZERO
50,000 50,000 50,000 50,000 50,000
-- -- -- -- --
100,000 100,000 100,000 100,000 100,000
-----------------------------------------------------------------------------------
50,000 50,000 150,000 150,000 150,000 100,000 100,000
-----------------------------------------------------------------------------------
Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04
-----------------------------------------------------------------------------------
$ 773,361 $ 801,277 $ 688,659 $530,646 $365,858 $165,858 $15,858
$ 829,291 $ 79,291 $ -- $ -- $ -- $ -- --
$ 2,568,156 $1,766,879 $1,078,220 $547,575 $181,716 $15,858 --
-----------------------------------------------------------------------------------
PRO FORMA MINNESOTA ALLOCATION (calculated as Sample Pro-Forma minus Sample
Actual)
REMAINING MINNESOTA CARRYOVER AMOUNT (calculated as Sample Actual minus Sample
Pro-Forma)
REMAINING MINNESOTA CUMULATIVE DEBITS(1) (calculated as Sample Actual minus
Sample Pro-Forma)
(1) Calculated as of June 30, but assuming that the June payment had already
been made and that AMG had received its portion of the Pro Forma Minnesota
Allocation for that year
Page 2
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SCHEDULE C
The provisions of this Schedule C are merely illustrative examples and are not a
part of the agreement between the parties to the Amended and Restated Limited
Liability Company Agreement of GeoCapital, LLC (the "LLC Agreement").
Capitalized terms used in this Schedule have the meanings set forth in the LLC
Agreement.
1. Assumptions
Free Cash Flow = 50.00% of Revenues From Operations
Ownership of GeoCapital LLC
--------------------------------------------------------
Member Points
--------------------------------------------------------
GeoCapital Corporation 60.0000
Xxxxx Xxxxxx 19.9479
Xxxxx Xxxxxxxxx 13.9246
Xxxx Xxxxxx 1.3107
Xxxxxxxx Xxxxxx 1.3107
Xxxx Xxxxxx 1.1687
Xxxxxx Xxxxxxxxx 1.1687
Xxxxxx Xxxxxxxxx 1.1687
--------
TOTAL 100.0000
--------------------------------------------------------
2. Scenario
Messrs. Xxxxx Xxxxxx and Xxxxx Xxxxxxxxx launch a $100 million hedge fund with a
1% fee based on assets under management and a carried interest equal to 20% of
any net gain. To launch the fund and receive the carry, they must, because of
marketing factors, invest $ 2,000,000 for which they also receive limited
partnership interests totaling 2.00%
(i) Pursuant to Section 3.10(b), the management fee must be paid over
to GeoCapital LLC
(ii) Pursuant to Section 3.10(c), the Manager Member or Affiliated
Managers Group, Inc. (or any other Affiliate of Affiliated Managers
Group, Inc. as selected by the Manager Member) is entitled to 10% of
the 20% carry, or 2% of the net gain in the hedge fund. The Manager
Member or such Affiliate receives this interest for no, or nominal,
consideration. In addition, this portion of the carry would have to be
structured in accordance with the provisions of Section 3.10(c).
(iii) If the Manager Member (or one of its Affiliates as selected by
the Manager Member) determines to exercise its rights under Section
3.10(d), then, for the consideration required by such Section, the
Manager Member may purchase a portion of the carried interest
determined as follows:
(A x B) = C where
A = 30.00% or 60/100 x 50%
B = 20.00% (the 20% carry to which Messrs. Xxxxxx
and Fingerhut would be entitled prior to
taking into account the operation of
Section 3.10(c) as described in (ii)
above)
C = 2.00% (the 2% of net gain to which the Manager
Member is entitled pursuant to Section
3.10(c) as described in (ii) above)
or a total of
4.00% of the net gain in the hedge fund (pursuant to
Section 3.10(d))
The cost to the Manager Member or its selected Affiliate
would be is equal to 20% of the total investment required in
respect of the total carried interests, or: $400,000
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SCHEDULE C
In addition, the portion of the carry purchased by the
Manager Member would have to be structured in accordance
with the provisions of Section 3.10(c).
Because, in connection with obtaining the carried interests,
Messrs. Xxxxxx and Fingerhut also received other limited
partnership interests, for its $400,000 investment, the
Manager Member or its selected Affiliate would also receive
20.00% of the limited partnership interests or 0.4% of the
limited partnership interests in the hedge fund.
3. Conclusion
-----------------------------------------------------------------------------
Percent Carried
Holder Interest Percent LP Interest Investment
-----------------------------------------------------------------------------
Manager Member 6.00% 0.40% $ 400,000
Xxxxxx and Fingerhut 14.00% 1.60% $ 1,600,000
Investors -- 98.00% $ 98,000,000
----- ----- ------------
20.00% 100.0% $100,000,000
-----------------------------------------------------------------------------
Page 2
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SCHEDULE D
The provisions of this Schedule D are merely illustrative examples and are not a
part of the agreement between the parties to the Amended and Restated Limited
Liability Company Agreement of GeoCapital, LLC (the "LLC Agreement").
Capitalized terms used in this Schedule have the meanings set forth in the LLC
Agreement.
This example assumes that the termination of employment occurs at September 30,
1997, but that GeoCapital had been operating under the LLC structure under the
Amended and Restated LLC Agreement.
This example further assumes that operating expenses did not exceed Operating
Cash Flow
1) Assumed Revenues for the 24 months ending the last day of the calendar
quarter in which the termination of an Employee Stockholder's employment
occurs because of resignation, termination For Cause or termination for
Unsatisfactory Performance
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R E V E N U E S F R E E C A S H F L O W
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Year Ended
9/30/96 $10,567,586 =TOTAL *.5 $ 5,283,793.00
12/31/97 $13,500,000 =TOTAL *.5 $ 6,750,000.00
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Subtotals $24,067,586 $12,033,793.00
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FIFTY PERCENT 50%
TOTAL $ 6,016,897
Multiple 3
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Hypothetical Sale Price $18,050,690
2) Calculation of Repurchase Price using the methodology in Section 3.11(c)(ii)
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Starting Percentage Allocation of Purchase Price for
Member Capital Partnership Points Ownership Gain or Loss 100% of Points
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AMG $24,000,000 60.0000 60.0000% $(3,569,586)
X. Xxxxxx 0.00 19.9479 19.9479% (1,186,763) 0.00
X. Xxxxxxxxx 0.00 13.9246 13.9246% (828,418) 0.00
X. Xxxxxx 0.00 1.3107 1.3107% (77,978) 0.00
X. Xxxxxx 0.00 1.3107 1.3107% (77,978) 0.00
X. Xxxxxx 0.00 1.1687 1.1687% (69,530) 0.00
X. Xxxxxxxxx 0.00 1.1687 1.1687% (69,530) 0.00
X. Xxxxxxxxx 0.00 1.1687 1.1687% (69,530) 0.00
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$24,000,000 100.00 100.0000% $(5,949,311)
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