Exhibit 10.20
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
ALTUS INSURANCE HOLDINGS, LLC
TABLE OF CONTENTS
PAGE
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ARTICLE 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE 2 THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1. Formation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3. Purpose; Powers. . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4. Principal Place of Business. . . . . . . . . . . . . . . . . . . . 14
2.5. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.6. Filings; Agent for Service of Process. . . . . . . . . . . . . . . 14
2.7. Title to Property. . . . . . . . . . . . . . . . . . . . . . . . . 15
2.8. Payments of Individual Obligations . . . . . . . . . . . . . . . . 15
ARTICLE 3 MEMBERS' CAPITAL CONTRIBUTIONS . . . . . . . . . . . . . . . . . . 15
3.1. Original Capital Contributions . . . . . . . . . . . . . . . . . . 15
3.2. Interest on Capital Contributions. . . . . . . . . . . . . . . . . 15
3.3. Optional Additional Capital Contributions. . . . . . . . . . . . . 15
3.4. Withdrawal of Capital. . . . . . . . . . . . . . . . . . . . . . . 16
3.5. Loans by Members . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 4 ALLOCATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.1. Profits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.2. Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.3 Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 5 DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1. Net Cash Flow. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.2. Minimum Distributions. . . . . . . . . . . . . . . . . . . . . . . 19
5.3. Amounts Withheld . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4. Limitations on Distributions . . . . . . . . . . . . . . . . . . . 20
ARTICLE 6 MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1. Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2. Powers of Board of Managers. . . . . . . . . . . . . . . . . . . . 22
6.3. Duties and Obligations of the Managers . . . . . . . . . . . . . . 22
6.4. Reimbursements . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.5. Indemnification of the Managers. . . . . . . . . . . . . . . . . . 23
6.6. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.7. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 7 ROLE OF MEMBERS. . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.1. Rights or Powers . . . . . . . . . . . . . . . . . . . . . . . . . 26
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7.2. Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.3. Meetings of the Members. . . . . . . . . . . . . . . . . . . . . . 26
7.4. Required Member Consents . . . . . . . . . . . . . . . . . . . . . 27
7.5. Withdrawal/Resignation . . . . . . . . . . . . . . . . . . . . . . 28
7.6. Member Compensation. . . . . . . . . . . . . . . . . . . . . . . . 28
7.7. Members Liability. . . . . . . . . . . . . . . . . . . . . . . . . 28
7.8. Partition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.9. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.10. Transactions Between a Member and the Company . . . . . . . . . . 29
7.11. Other Instruments . . . . . . . . . . . . . . . . . . . . . . . . 29
7.12. Guarantee of Company Indebtedness . . . . . . . . . . . . . . . . 29
7.13 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 8 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 30
8.1. In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.2. Representations and Warranties . . . . . . . . . . . . . . . . . . 30
ARTICLE 9 ACCOUNTING, BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . 31
9.1. Accounting, Books, and Records . . . . . . . . . . . . . . . . . . 31
9.2. Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.3. Accountants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.4. Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 10 AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 11 TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.1. Restrictions on Transfers . . . . . . . . . . . . . . . . . . . . 34
11.2. Permitted Transfers . . . . . . . . . . . . . . . . . . . . . . . 34
11.3. Conditions to Permitted Transfers . . . . . . . . . . . . . . . . 34
11.4. Right of First Refusal. . . . . . . . . . . . . . . . . . . . . . 35
11.5. XXXXX Change of Control . . . . . . . . . . . . . . . . . . . . . 37
11.6 Prohibited Transfers . . . . . . . . . . . . . . . . . . . . . . . 37
11.7 Rights of Unadmitted Assignees . . . . . . . . . . . . . . . . . . 38
11.8 Admission of Substituted Members . . . . . . . . . . . . . . . . . 38
11.9 Representations Regarding Transfers; Legend. . . . . . . . . . . . 39
11.10 Distributions and Allocations in Respect of Transferred
Membership Interest . . . . . . . . . . . . . . . . . . . . . . . 39
11.11 Membership Interest . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 12 ADVERSE ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.1. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.2. Adverse Act Purchase. . . . . . . . . . . . . . . . . . . . . . . 41
12.3. Net Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12.4. Gross Appraised Value . . . . . . . . . . . . . . . . . . . . . . 43
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12.5. Extension of Time . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 13 DISSOLUTION AND WINDING UP. . . . . . . . . . . . . . . . . . . . 44
13.1. Dissolution Events. . . . . . . . . . . . . . . . . . . . . . . . 44
13.2. Winding Up. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
13.3. Compliance With Certain Requirements of Regulations;
Deficit Capital Accounts. . . . . . . . . . . . . . . . . . . . . 46
13.4. Rights of Members . . . . . . . . . . . . . . . . . . . . . . . . 46
13.5. Notice of Dissolution/Termination . . . . . . . . . . . . . . . . 46
13.6. Allocations During Period of Liquidation. . . . . . . . . . . . . 47
13.7. Character of Liquidating Distributions. . . . . . . . . . . . . . 47
13.8. The Liquidator. . . . . . . . . . . . . . . . . . . . . . . . . . 47
13.9. Form of Liquidating Distributions . . . . . . . . . . . . . . . . 47
ARTICLE 14 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . 48
14.1. Managers as Attorneys-In-Fact . . . . . . . . . . . . . . . . . . 48
14.2. Nature of Special Power . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 15 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.2. Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.3. Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.4. Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.5. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.6. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.7. Incorporation by Reference. . . . . . . . . . . . . . . . . . . . 49
15.8. Variation of Terms. . . . . . . . . . . . . . . . . . . . . . . . 50
15.9. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 50
15.10. Payment of Fees and Expenses . . . . . . . . . . . . . . . . . . 50
15.11. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . 50
15.12. Counterpart Execution. . . . . . . . . . . . . . . . . . . . . . 50
15.13. Specific Performance . . . . . . . . . . . . . . . . . . . . . . 50
EXHIBIT A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
EXHIBIT B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
EXHIBIT C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
EXHIBIT D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
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LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
ALTUS INSURANCE HOLDINGS, LLC
This OPERATING AGREEMENT is entered into as of March 12, 1999, by and
between XXXXX Financial, a Delaware corporation, R. Xxxxxx Xxxxx, an individual
resident in the State of Washington, Xxxxxx X. Xxxxx, an individual resident in
the State of Washington, Xxxxxxxx X. Xxxxx, an individual resident in the State
of Washington and Xxxx X. Xxxxxx, an individual resident in the State of
Washington, as Members pursuant to the provisions of the Act, on the following
terms and conditions:
ARTICLE 1
DEFINITIONS
1.1 Capitalized words and phrases used in this Agreement have the following
meanings:
"ACCEPTING OFFEREES" shall have the meaning set forth in Section 11.4(d)
hereof.
"ACT" means the Delaware Limited Liability Company Act, 6 Del. C. Section
18-101, ET SEQ., as amended from time to time (or any corresponding provisions
of succeeding law).
"ADDITIONAL CAPITAL CONTRIBUTIONS" means, with respect to each Member, the
Capital Contributions made by such Member pursuant to Section 3.1 and
Section 3.3 hereof.
"ADVERSE ACT" means, with respect to any Member, any of the following:
(i) a failure by such Member to make any Capital Contribution
required pursuant to any provision of the Agreement;
(ii) A determination that such Member has committed a material
breach of any material covenant contained in this Agreement or materially
defaulted on any material obligation provided for in this Agreement and such
breach or default continues for thirty (30) days after the date written notice
thereof has been given to such Member by any other Member, PROVIDED that, if
such breach or default is not a failure to pay money and is of such a nature
that it cannot reasonably be cured within such thirty (30) day period, but is
curable and such Member in good faith begins efforts to cure it within such
thirty (30) day period and continues diligently to do so, such Member shall have
a reasonable additional period thereafter to effect the cure (which shall not
exceed an additional ninety (90) days unless otherwise approved by the Board of
Managers), and PROVIDED FURTHER THAT, if within thirty (30) days after written
notice of such breach or default has been given to such Member, such Member
delivers written notice (the "CONTEST NOTICE") to each other Member and each
Manager that it contests such notice of breach or default, such breach or
default shall not constitute an Adverse Act unless and until (and assuming that
such breach or default has not theretofore been cured in full and that any
applicable grace period has expired) there is a Final Determination that such
Member's actions or failures to act constituted such a breach or default;
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(iii) A Transfer of all or any portion of such Member's Interest
except as expressly permitted or required by this Agreement; or
(iv) The Bankruptcy of such Member or the occurrence of any other
event which would permit a trustee or receiver to acquire control of the affairs
or assets of such Member.
"ADVERSE MEMBER" is any Member with respect to whom an Adverse Act has
occurred.
"AFFILIATE" means, with respect to any Person (i) any Person directly or
indirectly controlling, controlled by, or under common control with such Person
(ii) any officer, director, partner, member, or trustee of such Person or
(iii) any Person who is an officer, director, partner, member, or trustee of any
Person described in clauses (i) or (ii) of this sentence. For purposes of this
definition, the terms "controlling," "controlled by" or "under common control
with" shall mean the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person or entity,
whether through the ownership of voting securities, by contract or otherwise, or
the power to elect at least 50% of the directors, managers, or persons
exercising similar authority with respect to such Person or entities.
"AGREEMENT" means this Limited Liability Company Operating Agreement of
Altus Insurance Holdings, LLC, including all Exhibits attached hereto, as
amended from time to time. Words such as "herein," "hereinafter," "hereof,"
"hereto" and "hereunder" refer to this Agreement as a whole, unless the context
otherwise requires.
"APPROVAL OF THE MEMBERS" means the approval of a majority in interest of
the Management Members and the approval of XXXXX; provided that at such time as
XXXXX becomes entitled to be allocated seventy five percent (75%) of the Profits
pursuant to Article 4, Approval of the Members shall mean the approval of
Members entitled to be allocated a majority of the Profits pursuant to Article
4.
"BANKRUPTCY" means, with respect to any Person, a "Voluntary Bankruptcy" or
an "Involuntary Bankruptcy." A "VOLUNTARY BANKRUPTCY" means, with respect to
any Person (i) the inability of such Person generally to pay its debts as such
debts become due, or an admission in writing by such Person of its inability to
pay its debts generally or a general assignment by such Person for the benefit
of creditors, or (ii) the filing of any petition or answer by such Person
seeking to adjudicate itself as bankrupt or insolvent, or seeking for itself any
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of such Person or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking,
consenting to, or acquiescing in the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for such
Person or for any substantial part of its Property. An "INVOLUNTARY BANKRUPTCY"
means, with respect to any Person, without the consent or acquiescence of such
Person, the entering of an order for relief or approving a petition for relief
or reorganization or any other petition seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or other similar relief
under any present or future bankruptcy, insolvency or similar statute, law or
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regulation, or the filing of any such petition against such Person which
petition shall not be dismissed within ninety (90) days, or without the consent
or acquiescence of such Person, the entering of an order appointing a trustee,
custodian, receiver or liquidator of such Person or of all or any substantial
part of the Property of such Person which order shall not be dismissed within
ninety (90) days.
"BOARD OF MANAGERS" means the Board of Managers referred to in
Section 6.1(a).
"BUSINESS" means the business of managing the business of the Subsidiary
holding all of the capital stock of the Subsidiary and matters incidental
thereto.
"BUSINESS DAY" means a day of the year other than a Saturday, a Sunday, or
a banking holiday in the State of Washington or in Bermuda.
"BUY-SELL NOTICE" shall have the meaning set forth in Section 11.5(b).
"BUY-SELL PRICE" shall have the meaning set forth in Section 12.2(a)
hereof.
"CALENDAR QUARTER" means (i) the period commencing on the Effective Date
and ending on Xxxxx 00, 0000, (xx) any subsequent three-month period commencing
on each of April 1, July 1, October 1 and January 1 and ending on the last date
before the next such date, and (iii) the period commencing on the immediately
preceding January 1, April 1, July 1, or October 1, as the case may be, and
ending on the date on which all Property is distributed to the Members pursuant
to Section 13 hereof.
"CALENDAR YEAR" means (i) the period commencing on the Effective Date and
ending on December 31, 1999, (ii) any subsequent twelve (12) month period
commencing on January 1 and ending on December 31, (iii) any portion of the
period described in clauses (i) or (ii) for which the Company is required to
allocate Profits, Losses, and other items of Company income, gain, loss or
deduction pursuant to Section 4 hereof or (iv) the period commencing on the
immediately preceding January 1 and ending on the date on which all Property is
distributed to the Members pursuant to Section 13 hereof.
"CAPITAL ACCOUNT" means, with respect to any Member, the Capital Account
maintained for such Member in accordance with the following provisions:
(i) To each Member's Capital Account there shall be credited (A)
such Member's Capital Contributions, (B) such Member's distributive share of
Profits as provided for in Sections 4.1 and 4.3, and (C) the amount of any
Company liabilities assumed by such Member or which are secured by any Property
distributed to such Member;
(ii) To each Member's Capital Account there shall be debited (A)
the amount of money and the Gross Asset Value of any Property distributed to
such Member pursuant to any provision of this Agreement, (B) such Member's
distributive share of Losses as provided for in Section 4.2, and (C) the amount
of any liabilities of such Member assumed by the Company or which are secured by
any Property contributed by such Member to the Company;
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(iii) In the event a Membership Interest is Transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the Transferred
Membership Interest; and
(iv) In determining the amount of any liability for purposes of
subparagraphs (i) and (ii) above there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. In the event the Members shall determine that
it is prudent to modify the manner in which the Capital Accounts, or any debits
or credits thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Company or any Members), are computed in order to comply with
such Regulations, the Members may make such modification, PROVIDED that it is
not likely to have a material effect on the amounts distributed to any Person
pursuant to Section 13 hereof upon the dissolution of the Company. The Members
also shall (i) make any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the Members and the amount of
capital reflected on the Company's balance sheet, as computed for book purposes,
in accordance with Regulations Section 1.704-1(b)(2)(iv)(G), and (ii) make any
appropriate modifications in the event unanticipated events might otherwise
cause this Agreement not to comply with Regulations Section 1.704-1(b).
"CAPITAL CONTRIBUTIONS" means, with respect to any Member, the amount of
money contributed to the Company with respect to the Membership Interest in the
Company held or purchased by such Member, including ADDITIONAL CAPITAL
CONTRIBUTIONS.
"CAUSE" means the occurrence or existence of any of the following with
respect to an officer of the Company as determined by the Board of Managers: (i)
a material breach by the officer of any of his obligations under the then
effective employment agreement, if any, between the officer and the Company or,
in the event that there is no employment agreement, a material breach of any
duties and responsibilities assigned to the officer, PROVIDED, HOWEVER, that in
each case Cause shall not be deemed to exist until the Company shall have given
written notice specifying the claimed material breach and the officer fails to
correct the claimed breach within thirty (30) days after the receipt of the
applicable notice, PROVIDED, HOWEVER, that the failure by the Company to achieve
performance targets shall not, in and of itself, constitute Cause; (ii) any
misappropriation, embezzlement, intentional fraud or similar conduct involving
the Company; (iii) the conviction or the plea of nolo contendere or the
equivalent in respect of a felony or a crime involving moral turpitude; or (iv)
the repeated non-prescription use of any controlled substance or the repeated
use of alcohol or any other non-controlled substance which, in any case
described in this clause (iv), the Board of Managers reasonably determines
renders the officer unfit to serve in his capacity as an officer of the Company,
except to the extent such determination would be reasonably related to illness,
disability or medical emergency affecting the officer or a member of their
immediate family.
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"CERTIFICATE" means the certificate of formation filed with the Secretary
of State of the State of Delaware pursuant to the Act to form the Company, as
originally executed and amended, modified, supplemented or restated from time to
time, as the context requires.
"CERTIFICATE OF CANCELLATION" means a certificate filed in accordance with
6 Del. C. Section 18-203.
"CHIEF EXECUTIVE OFFICER" means the Chief Executive Officer of the Company,
including any interim Chief Executive Officer.
"XXXXX" means R. Xxxxxx Xxxxx, an individual resident in the State of
Washington.
"CODE" means the United States Internal Revenue Code of 1986, as amended
from time to time.
"COMPANY" means the limited liability company formed pursuant to this
Agreement and the Certificate and the limited liability company continuing the
business of this Company in the event of dissolution of the Company as herein
provided.
"DEPARTING MEMBERS" shall have the meaning set forth in Section 6.6(f)
hereof.
"DEPRECIATION" means, for each Calendar Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Calendar Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Calendar Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Calendar
Year bears to such beginning adjusted tax basis; PROVIDED, HOWEVER, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such Calendar Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
Members.
"DISSOLUTION EVENT" shall have the meaning set forth in Section 13.1(a)
hereof.
"EFFECTIVE DATE" shall have the meaning set forth in Section 2.5 hereof.
"ELECTION NOTICE" shall have the meaning set forth in Section 12.2(a)
hereof.
"EXECUTIVE COMMITTEE" means the Executive Committee of the Board of
Managers.
"FINAL DETERMINATION" means (i) a determination set forth in a binding
settlement agreement between the Company and the Member alleged to have
committed an ADVERSE ACT, which settlement agreement has been approved by the
Board of Managers, or (ii) a final judicial determination, not subject to
further appeal, by a court of competent jurisdiction.
"FIRM OFFER" shall have the meaning set forth in Section 11.4(b) hereof.
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"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"GROSS APPRAISED VALUE" shall have the meaning set forth in Section 12.4(a)
hereof.
"GROSS ASSET VALUE" means with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(i) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values (taking Code Section
7701(g) into account), as determined by the Board of Managers as of the
following times: (A) the acquisition of a Membership Interest in the Company by
any new or existing Member in exchange for more than a DE MINIMIS Capital
Contribution; (B) the distribution by the Company to a Member of more than a DE
MINIMIS amount of Company property as consideration for Membership Interest; (C)
the liquidation of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g)[; and (D) the happening of a Valuation Event,] PROVIDED
that an adjustment described in clauses (A) and (B) of this paragraph shall be
made only if the Board of Managers reasonably determines that such adjustment is
necessary to reflect the relative economic interests of the Members in the
Company;
(ii) The Gross Asset Value of any item of Company assets
distributed to any Member shall be adjusted to equal the gross fair market value
(taking Code Section 7701(g) into account) of such asset on the date of
distribution as determined by the Board of Managers; and
(iii) The Gross Asset Values of Company assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of
the definition of "PROFITS" and "LOSSES"; PROVIDED, HOWEVER, that Gross Asset
Values shall not be adjusted pursuant to this subparagraph (iii) to the extent
that an adjustment pursuant to subparagraph (ii) is required in connection with
a transaction that would otherwise result in an adjustment pursuant to this
subparagraph (iii).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to subparagraph (ii) or (iii), such Gross Asset Value shall thereafter
be adjusted by the Depreciation taken into account with respect to such asset,
for purposes of computing Profits and Losses.
"INVESTED CAPITAL" means with respect to each Member the Capital
Contributions made by such Member, net of any liabilities assumed by the Company
as a result of such Capital Contribution or to which any contributed Property is
subject.
"INVOLUNTARY BANKRUPTCY" has the meaning set forth in the definition of
Bankruptcy.
"LIQUIDATION PERIOD" has the meaning set forth in Section 13.6 hereof.
"LIQUIDATOR" has the meaning set forth in Section 13.8(a) hereof.
9
"LOPIT" means Xxxxxx X. Xxxxx, an individual resident in the State of
Washington.
"LOSSES" has the meaning set forth in the definition of "Profits" and
"Losses."
"MANAGEMENT MEMBERS" means Clark, Lopit, Xxxxx and Xxxxxx.
"MANAGEMENTS' INCENTIVE INTEREST" shall be expressed as a percentage and
calculated as set forth on EXHIBIT A and is intended to represent Management's
interest in the Company derived from the performance of the Company and to be
independent of Management's interest in the Company derived from its Proportion
of Capital.
"MANAGEMENTS' INITIAL INTEREST" shall be calculated as set forth on
EXHIBIT A.
"MANAGEMENTS' TOTAL INTEREST" has the meaning set forth in Section 4.3(b).
"MANAGER" means any of the individuals elected to serve as a Manager
pursuant to the terms of this Agreement and "MANAGERS" means all of such
individuals.
"MEMBER" means any Person (i) who is referred to as such on EXHIBIT B to
this Agreement, or who has become a substituted Member pursuant to the terms of
this Agreement and (ii) who has not ceased to be a Member.
"MEMBERS" means all such Persons.
"MEMBERSHIP INTEREST" means an ownership interest in the Company by a
Member as reflected on EXHIBIT B, including any and all benefits to which the
holder of such Membership Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply with the terms
and provisions of this Agreement.
"NET CASH FLOW" means the gross cash proceeds of the Company less the
portion thereof used to pay or establish reserves for all Company expenses, debt
payments, capital improvements, replacements, and contingencies, all as
determined by the Board of Managers. "Net Cash Flow" shall not be reduced by
depreciation, amortization, cost recovery deductions, or similar allowances, but
shall be increased by any reductions of reserves previously established pursuant
to the first sentence of this definition.
"NET EQUITY" shall have the meaning set forth in Section 12.3 hereof.
"NET EQUITY NOTICE" shall have the meaning set forth in Section 12.3
hereof.
"OFFER NOTICE" shall have the meaning set forth in Section 11.4(b) hereof.
"OFFER PERIOD" shall have the meaning set forth in Section 11.4(c) hereof.
"OFFER PRICE" shall have the meaning set forth in Section 11.4(a) hereof.
"OFFERED INTEREST" shall have the meaning set forth in Section 11.4 hereof.
10
"OFFEREES" shall have the meaning set forth in Section 11.4(b) hereof.
"XXXXX" means XXXXX Financial, a Delaware corporation.
"XXXXX CHANGE OF CONTROL" means with respect to XXXXX (i) any sale,
transfer, or other conveyance, whether direct or indirect, of all or
substantially all of the assets of XXXXX, on a consolidated basis, in one
transaction or a series of related transactions, (ii) any transaction as a
result of which any "Person" or "group" (as such terms are used for the purposes
of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, whether or
not applicable) obtains possession of fifty percent (50%) of the voting
securities of XXXXX by contract, family relationship, or otherwise, (iii) a
reorganization, merger (not including a merger to effectuate a reincorporation
of XXXXX) or consolidation of XXXXX as a result of which all the outstanding
voting securities of XXXXX are exchanged for or converted into cash, property
and/or securities not issued by XXXXX, or (iv) a point in time at which Xxxxxxx
X. Xxxxxx and any one of Xxxxx X. Xxxxxxxxx, Xxxxxx X. Xxxxxxx or Xxxxxxx X.
Xxxxxx are no longer members of the XXXXX Board of Directors; and the date of
any such XXXXX Change of Control shall be the closing date of the transaction(s)
that constitute the XXXXX Change of Control.
"PERMITTED TRANSFER" has the meaning set forth in Section 11.2 hereof.
"PERSON" means any individual, partnership, limited liability company,
corporation, trust, estate, association, nominee, or other entity.
"PROFITS" and "LOSSES" mean, for each Calendar Year, an amount equal to the
Company's taxable income or loss for such Calendar Year, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments (without duplication):
(i) Any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Profits or Losses pursuant
to this definition of "Profits" and "Losses" shall be added to such taxable
income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Profits or Losses pursuant to this definition of "Profits" and
"Losses" shall be subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraphs (i) or (ii) of the definition of Gross Asset
Value, the amount of such adjustment shall be treated as an item of gain (if the
adjustment increases the Gross Asset Value of the asset) or an item of loss (if
the adjustment decreases the Gross Asset Value of the asset) from the
disposition of such asset and shall be taken into account for purposes of
computing Profits or Losses;
11
(iv) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the Property disposed
of, notwithstanding that the adjusted tax basis of such Property differs from
its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Calendar Year, computed
in accordance with the definition of Depreciation; and
(vi) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Section 734(b) is required, pursuant to
Regulations Section 1.704-(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as a result of a distribution other than in
liquidation of a Member's interest in the Company, the amount of such adjustment
shall be treated as an item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases such basis) from the disposition
of such asset and shall be taken into account for purposes of computing Profits
or Losses.
"PROPERTY" means all real and personal property acquired by the Company,
including cash, and any improvements thereto, and shall include both tangible
and intangible property.
"PROPORTION OF CAPITAL" means for each Member the ratio the numerator of
which is such Member's Invested Capital and the denominator of which is the
Invested Capital of all Members.
"PURCHASE NOTICE" shall have the meaning set forth in Section 12.2(b)
hereof.
"PURCHASE OFFER" shall have the meaning set forth in Section 11.4(a)
hereof.
"PURCHASER" shall have the meaning set forth in Section 11.4(a) hereof.
"PURCHASING MEMBERS" shall have the meaning set forth in Section 12.2(b)
hereof.
"RECIPIENT" shall have the meaning set forth in Section 11.5(c).
"RECONSTITUTION PERIOD" has the meaning set forth in Section 13.1(b)
hereof.
"REGULATIONS" means the Income Tax Regulations, including temporary
regulations, promulgated under the Code, as such regulations are amended from
time to time.
"RELATIONSHIP" has the meaning set forth in Section 6.6(f) hereof.
"XXXXX" means Xxxxxxxx X. Xxxxx, an individual resident in the State of
Washington.
"SELLER" shall have the meaning set forth in Section 11.4 hereof.
"SENDER" shall have the meaning set forth in Section 11.5(c) hereof.
12
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"XXXXXX" means Xxxx X. Xxxxxx, an individual resident in the State of
Washington
"SUBSIDIARY" means Altus Casualty Company Ltd., a Bermuda company.
"TAX MATTERS MEMBER" has the meaning set forth in Section 9.4(a) hereof.
"TRANSFER" means, as a noun, any voluntary or involuntary transfer, sale,
pledge or hypothecation or other disposition and, as a verb, voluntarily or
involuntarily to transfer, sell, pledge or hypothecate or otherwise dispose of.
"VALUATION EVENT" means (i) any Dissolution Event; (ii) the sale of all or
substantially all the assets of the Company; or (iii) any other event determined
to be a Valuation Event by the Board of Managers.
"VOLUNTARY BANKRUPTCY" has the meaning set forth in the definition of
"Bankruptcy."
"WHOLLY OWNED AFFILIATE" of any Person means an Affiliate of such Person
(i) one hundred percent (100%) of the voting stock or beneficial ownership of
which is owned directly by such Person, or by any Person who, directly or
indirectly, owns one hundred percent (100%) of the voting stock or beneficial
ownership of such Person, (ii) an Affiliate to such Person who, directly or
indirectly, owns one hundred percent (100%) of the voting stock or beneficial
ownership of such Person, and (iii) any Wholly Owned Affiliate of any Affiliate
described in clause (i) or clause (ii).
ARTICLE 2
THE COMPANY
2.1 FORMATION. The Members hereby agree to form the Company as a
limited liability company under and pursuant to the provisions of the Act and
upon the terms and conditions set forth in this Agreement. The fact that the
Certificate is on file in the office of the Secretary of State, State of
Delaware, shall constitute notice that the Company is a limited liability
company. Simultaneously with the execution of this Agreement and the formation
of the Company, each of the Members shall be admitted as members of the Company.
The rights and liabilities of the Members shall be as provided under the Act,
the Certificate and this Agreement.
2.2 NAME. The name of the Company shall be Altus Insurance Holdings,
LLC and all business of the Company shall be conducted in such name. The
Managers may change the name of the Company upon ten (10) Business Days notice
to the Members.
2.3 PURPOSE; POWERS.
(a) The purposes of the Company are (i) to operate the Business, (ii) to
engage in any and all activities related or incidental to the purposes set forth
in clause (i). The purposes of the Company may be supplemented or changed by
Approval of the Members.
13
(b) The Company has the power to do any and all acts necessary,
appropriate, proper, advisable, incidental or convenient to or in furtherance of
the purposes of the Company set forth in Section 2.3 hereof and has, without
limitation, any and all powers that may be exercised on behalf of the Company by
the Managers pursuant to Article 6 hereof.
2.4 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the
Company shall be at Bellevue, Washington or at such other location determined by
the Board of Managers. The Board of Managers may change the principal place of
business of the Company to any other place within or without the State of
Delaware upon ten (10) Business Days notice to the Members. The registered
office of the Company in the State of Delaware initially is located at National
Registered Agents, Inc., 0 Xxxx Xxxxxxxxxx Xxxxxx, Xxxxx, Xxxxxx xx Xxxx, XX
00000.
2.5 TERM. The term of the Company shall commence from the date of
filing the Certificate in the office of the Secretary of State of the State of
Delaware in accordance with the Act (the "EFFECTIVE DATE") and shall continue
until the winding up and liquidation of the Company and its business is
completed following a Dissolution Event, as provided in Section 13 hereof.
2.6 FILINGS; AGENT FOR SERVICE OF PROCESS.
(a) The Board of Managers are hereby authorized to and shall cause the
Certificate to be filed in the office of the Secretary of State of the State of
Delaware in accordance with the Act. The Managers shall take any and all other
actions reasonably necessary to perfect and maintain the status of the Company
as a limited liability company under the laws of the State of Delaware,
including the preparation and filing of such amendments to the Certificate and
such other assumed name certificates, documents, instruments and publications as
may be required by law, including, without limitation, action to reflect:
(i) a change in the Company name;
(ii) a correction of false or erroneous statements in the
Certificate or the desire of the Members to make a change in any statement
therein in order that it shall accurately represent the agreement among the
Members; or
(iii) a change in the time for dissolution of the Company as stated
in the Certificate and in this Agreement.
(b) The Members and the Board of Managers shall execute and cause to be
filed original or amended certificates and shall take any and all other actions
as may be reasonably necessary to perfect and maintain the status of the Company
as a limited liability company or similar type of entity under the laws of any
other jurisdictions in which the Company engages in business.
14
(c) The registered agent for service of process on the Company in the
State of Delaware shall be National Registered Agents, Inc. or any successor as
appointed by the Members in accordance with the Act.
(d) Upon the dissolution and completion of the winding up and
liquidation of the Company in accordance with Section 13, the Board of Managers
shall promptly cause to be executed and cause to be filed a certificate of
cancellation in accordance with the Act and the laws of any other jurisdictions
in which the Board of Managers deem such filing necessary or advisable.
2.7 TITLE TO PROPERTY. All Property owned by the Company shall be owned
by the Company as an entity and no Member shall have any ownership interest in
such Property in such Member's individual name, and each Member's interest in
the Company shall be personal property for all purposes. At all times after the
Effective Date, the Company shall hold title to all of its Property in the name
of the Company and not in the name of any Member.
2.8 PAYMENTS OF INDIVIDUAL OBLIGATIONS. The Company's credit and assets
shall be used solely for the benefit of the Company, and no asset of the Company
shall be Transferred or encumbered for, or in payment of, any individual
obligation of any Member.
ARTICLE 3
MEMBERS' CAPITAL CONTRIBUTIONS
3.1 ORIGINAL CAPITAL CONTRIBUTIONS. Each Member shall forthwith deliver
to the Company the money, set forth beside such Member's name on EXHIBIT B.
3.2 INTEREST ON CAPITAL CONTRIBUTIONS. No Member shall be entitled to
receive any interest on such Member's Capital Contribution.
3.3 OPTIONAL ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) XXXXX shall have the option to make each of the following additional
capital contributions:
(i) $2 million at any time between January 1, 2000 and
December 31, 2000;
(ii) $5 million at any time between January 1, 2001 and
December 31, 2001;
(iii) $5 million at any time between January 1, 2002 and
December 31, 2002;
(iv) $5 million at any time between January 1, 2003 and
December 31, 2003;
(v) $2.5 million at any time between January 1, 2004 and
December 31, 2004;
and each such option shall be distinct and may be exercised at any time prior to
the expiration time noted by delivering a certified check for its Additional
Capital Contribution and a written notice of exercise to the principal place of
business of the Company. The Members acknowledge their intent that during the
course of the year during which a foregoing option may be exercised, XXXXX will
not be expected to consider exercising such option unless and until the
Company's operating needs indicate that the Additional Capital Contribution is
required by the Company.
15
If agreed by XXXXX and the Company, the exercise dates of the foregoing options
may be accelerated so that XXXXX may provide the Company with an Additional
Capital Contribution on an as needed basis. In the event that XXXXX does not
exercise a particular option at a time that the Board of Managers determines
that the Company needs to raise the additional funds which would have been
provided by PAULA's exercise of such option, the Members each agree to cooperate
fully with the Company's efforts to raise such funds from other sources.
Further, the Members acknowledge that in such event no Member has any right of
first refusal to match any third party investment proposal.
(b) Each of Clark, Lopit, Xxxxx and Xxxxxx shall have the option to make
an Additional Capital Contribution of $10,000 for each $1 million Capital
Contribution that XXXXX makes pursuant to an option referred to in Section
3.3(a). The Company shall provide each of Clark, Lopit, Xxxxx and Xxxxxx with
notice of any Capital Contribution made by XXXXX pursuant to Section 3.3(a) and
they shall each have a period of 30 days from the date such notice is sent to
them to exercise the option granted to each of them pursuant to this Section
3.3(b) by delivering a certified check for their Additional Capital Contribution
and a written notice of exercise to the principal place of business of the
Company. In the event that any or all of Clark, Lopit, Xxxxx or Xxxxxx do not
exercise a particular option at a time that the Board of Managers determines
that the Company needs to raise the additional funds which would have been
provided by the exercise of such respective options, the Members each agree to
cooperate fully with the Company's efforts to raise such funds from other
sources. Further, the Members acknowledge that in such event no Member has any
right of first refusal to match any third party investment proposal.
(c) Provided that the Management Member in question is not in default of
any terms or conditions of this Agreement, XXXXX agrees to loan to each
Management Member a sum equal to 80% of any amount that the Management Member
agrees to contribute pursuant to Section 3.3(b). Such loan shall (i) have a
ten-year term with no principal payments due until maturity; (ii) shall provide
for the acceleration of the maturity of the principal amount thereof to the
earlier of (A) the closing date of any Dissolution Event or (B) the closing of
any sale of the Membership Interest purchased by the Management Member borrower
in part with the funds provided by the applicable loan; (iii) bear market rates
of interest for corporate ten-year term loans which interest shall be payable
quarterly in arrears; (iv) secured by the Membership Interest held by the Member
in form and substance satisfactory to XXXXX; (v) be a personal obligation of the
Member with full recourse to other assets of the Member; (vi) be documented and
executed in form and substance satisfactory to XXXXX; (vii) be subject to the
irrevocable exercise by such Management Member of the option in Section 3.3(b)
of this Agreement to which the loan relates; and (viii) be available to a
Management Member on written notice on the business day following satisfaction
of the foregoing terms and conditions:
3.4 WITHDRAWAL OF CAPITAL. Except in connection with proceedings to
dissolve the Company in accordance with the procedures set forth in Section 13
of this Agreement, no Member may withdraw any portion of such Member's Capital
Contribution, or any portion of such Member's Capital Account, from the Company
without the approval of the Board of Managers.
16
3.5 LOANS BY MEMBERS. A Member may take a loan or advance money or
property to or on behalf of the Company, only upon such terms that have received
the Approval of the Members. Such loan or advance shall not increase the
lending Member's Capital Account, entitle the lending Member to any greater
share of Company distributions or entitle or subject such lending Member to any
greater proportion of Company Profits or Losses. The amount of such loans or
advances shall be a debt owed by the Company to the lending Member, and any
interest paid to the lending Member shall be charged as any other expense
against income of the Company.
ARTICLE 4
ALLOCATIONS
4.1 PROFITS. Subject to adjustment pursuant to Section 4.3, Profits for
any Calendar Year shall be allocated to the Members as follows:
(i) first, to the Members up to and in proportion to Losses
allocated to the Members pursuant to clause 4.2(ii) for all prior periods; and
(ii) second, to the Members as set out on EXHIBIT B.
4.2 LOSSES. Losses for any Calendar Year shall be allocated to the
Members as follows:
(i) first, to the Members up to and in proportion to Profits
allocated to the Members pursuant to clause 4.1(ii) for all prior periods; and
(ii) second, to the Members in proportion to their Capital Account
balances in effect immediately before any allocations under this clause 4.2(ii).
4.3 ADJUSTMENTS.
(a) For each $960,000 Additional Capital Contribution that XXXXX makes
pursuant to the exercise of the options granted in Section 3.3(a) of this
Agreement in excess of any Additional Capital Contributions made by the
Management Members pursuant to Section 3.3(b), the allocation of Profits set out
on EXHIBIT B shall be adjusted such that PAULA's allocation of Profits shall be
increased by an aggregate of 3.104% and each Management Member's allocation of
Profits shall be decreased by 0.776%. In the case of Additional Capital
Contributions by XXXXX in an amount in excess of that made by the Management
Members that is less than or greater than $960,000 the adjustments referred to
in this Section 4.3(a) shall be decreased or increased proportionally. The
Members acknowledge that the following example represents the intended operation
of the foregoing adjustment provision: if XXXXX exercises the option referred
to in Section 3.3(a)(i) and makes an additional capital contribution of $2
million and each of the Management Members exercise their corresponding option
in Section 3.3(b) and the Management Members collectively make an aggregate
Additional Capital Contribution of $80,000, PAULA's allocation of Profits shall
each be increased by 6.208% to a total of 27.416%
17
and each Management Member's allocation of Profits shall be decreased by 1.552%
to a total of 18.146%.
(b) Upon the happening of a Valuation Event, the Profits for the current
Calendar Year shall be allocated as follows:
(i) First, the Management Members shall be allocated an amount of
Profit equal to: (A) the product of aggregate Net Equity, measured as of the
date of the Valuation Event, and Management's Incentive Interest, plus
(B) Losses allocated to the Management Members pursuant to clause 4.2(ii) for
all prior Calendar Years, minus (C) Profits allocated to the Management Members
pursuant to clause 4.1(ii) for all prior Calendar Years (this aggregate amount
of Profit to be allocated among the Management Members equally); and
(ii) Second, any remaining Profits shall be allocated to the
Members on the basis of each Member's Proportion of Capital.
The ratio, the numerator of which is the sum of each Management Members
Capital Account following the allocations provided for in this Section 4.3(b),
and the denominator of which is the sum of each Members Capital Account
following the allocations provided for in this Section 4.3(b) is hereinafter
referred to as "MANAGEMENTS' TOTAL INTEREST."
(c) Following the happening of a Valuation Event, the allocation of
Profits shall henceforth be adjusted such that: (i) PAULA's allocation shall be
equal to the percentage equal to one hundred percent (100%) minus Managements'
Total Interest; and (ii) each Management Member's allocation shall be equal to
the percentage equal to the product of (A) .25 and (B) Managements' Total
Interest.
(d) In the event that an officer who was a Management Member was
terminated for Cause or voluntarily terminated his employment with the Company
during the periods set out below, such Member's allocation of Profits,
determined following the application of the adjustments provided for in this
Section 4.3 shall be reduced by the following proportion of the amounts
allocated to such Member in relation to such Members share of Managements'
Incentive Interest pursuant to clause 4.3(b)(i).
Reduction of Member's Managements'
Date of Termination Incentive Interest
------------------- ----------------------------------
(i) Prior to January 1, 2000 100%
(ii) After December 31, 1999 and 80%
prior to January 1, 2001
(iii) After December 31, 2000 and 60%
prior to January 1, 2002
(iv) After December 31, 2001 and 40%
18
prior to January 1, 2003
(v) After December 31, 2002 and 20%
prior to January 1, 2004
(vi) After January 1, 2004 No adjustment
provided that no adjustments shall be made pursuant to this Section 4.3(d) in
the event that the officer in question was terminated without Cause, died, was
permanently disabled or retired at the Company's regular retirement age. The
unallocated proportion of Profits resulting from the operation of the
adjustments provided for in this Section 4.3(d) shall be allocated to the
Members not subject to the adjustments provided for in this Section 4.3(d) on a
basis proportional to the then existing allocation of Profits specified in
Section 4.3(c).
(e) In the event that any Dissolution Event referred in Section
13.1(a)(iv) occurs, each Management Members allocation of Profits shall be
reduced to such Member's Proportion of Capital and PAULA's allocation of Profits
shall be increased by the same aggregate amount.
(f) The adjustments provided for in this Section 4.3 are to be
cumulative and shall apply to successive events resulting in any adjustment
pursuant to this Section 4.3.
(g) The examples set out on EXHIBIT C represent the intended operation
of the adjustments provided for by Section 4.3(b) and Section 4.3(d).
ARTICLE 5
DISTRIBUTIONS
5.1 NET CASH FLOW. Except as otherwise provided in Article 13 hereof,
Net Cash Flow, if any, shall be distributed to the Members in the proportions
that Profits are allocated to Members pursuant to Article 4 at such times as
approved by the Board of Managers.
5.2 MINIMUM DISTRIBUTIONS. Notwithstanding Section 5.1 hereof, prior to
April 15th (or March 15th in the case of a Member that is a Subchapter C
Corporation) following the Calendar Year to which the taxes contemplated by this
Section 5.2 relate, the Company shall distribute to each Member an amount of Net
Cash Flow equal to the product of the highest United States federal tax rate for
individuals and the Profits and other items of Company income and gains
allocated to such Member for the Calendar Year pursuant to Section 4 hereof.
The aggregate amounts distributed to a Member under this Section 5.2 will reduce
the amounts otherwise distributable to the Member under Section 5.1.
5.3 AMOUNTS WITHHELD. All amounts withheld pursuant to the Code or any
provision of any state, local, or foreign tax law with respect to any payment,
distribution, or allocation to the Company or the Members shall be treated as
amounts paid or distributed, as the case may be, to the Members with respect to
which such amount was withheld pursuant to this Section 5.3 for all purposes
under this Agreement. The Company is authorized to withhold from payments and
distributions, or with respect to allocations to the Members, and to pay over to
any federal,
19
state and local government or any foreign government, any amounts required to be
so withheld pursuant to the Code or any provisions of any other federal, state
or local law or any foreign law, and shall allocate any such amounts to the
Members with respect to which such amount was withheld.
5.4 LIMITATIONS ON DISTRIBUTIONS.
(a) The Company shall make no distributions to the Members except as
provided in this Section 5 and Article 13 hereof.
(b) A Member may not receive a distribution from the Company to the
extent that, after giving effect to the distribution, all liabilities of the
Company, other than liabilities to Members on account of their Capital
Contributions, would exceed the lower of the book value or the fair value of the
Company's assets.
ARTICLE 6
MANAGEMENT
6.1 MANAGERS.
(a) The management of the Company shall be vested in a Board of eight
Managers, seven of whom will be voting and one of whom will be non-voting.
Managers may, but need not be, Members of the Company. The Management Members
shall have the right to appoint four voting Managers. XXXXX shall have the
right to appoint three voting Managers and one non-voting Manager. The
non-voting Manager shall have all of the rights and responsibilities of a voting
Manager except that the non-voting Manager shall not be entitled to vote at
meetings of or proceedings of the Board of Managers.
(b) The initial Managers of the Company shall be Clark, Lopit, Riggs,
Snyder, Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxxxx and Xxxxxxx X.
Xxxxxx. Xxxxxxx X. Xxxxxx shall serve as the non-voting Manager. Clark, Lopit,
Xxxxx and Xxxxxx shall be considered nominees of the Management Members on the
board of Managers. Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxxxx and
Xxxxxxx X. Xxxxxx shall be considered nominees of XXXXX on the Board of
Managers. In the event that the Management Members cease to hold the right to
be allocated a majority of Profits pursuant to Article 4, then: (i) the
Management Members shall then be entitled to appoint three voting Managers and
one non-voting Manager, (ii) XXXXX shall be entitled to appoint four voting
Managers, and (iii) the non-voting Manager appointed by XXXXX shall be entitled
to voting rights as a Manager without the need for any further action on the
seventh day following such event; and (iv) the Management Members shall notify
the Company and XXXXX in writing within seven days of such event which of their
nominees to the Board of Managers will serve as a non-voting Manager and failing
which the nominee Manager of the Management Members that is youngest in age
shall become the non-voting Manager.
(c) The Board of Managers shall have the following Committees and the
initial members of such committees shall be as follows:
20
Committee Members
------------------------- ---------------------------------------
(i) Executive: Xxxxx and Xxxxxxx X. Xxxxxx;
(ii) Audit: Xxxxxx and Xxxxx X. Xxxxxxxxx;
(iii) Compensation: Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxxx and
Xxxxx (ex officio basis); and
(iv) Investment/M&A/Capital Riggs, Snyder, Xxxxxxx X. Xxxxxx and
Planning: Xxxxx X. Xxxxxxxxx;
and such Committees will continue to exist and perform the delegated functions
so long as this Agreement continues in force or until they are changed in
accordance with the terms hereof.
(d) Committees of the Board of Managers shall have the responsibilities
set out below and such other responsibilities as may be determined by the Board
of Managers from time to time:
(i) the Audit Committee shall recommend to the Board of Managers
whether the financial statements of the Company and the
Subsidiary are to be reviewed or audited and which firm of
accountants is to be engaged as the Company's auditor or
accounting advisors and shall monitor compliance with
relevant standards and policies;
(ii) The Investment/M&A/Capital Planning Committee will recommend
standards to the Board of Managers to be utilized by the
Company's management to evaluate potential transactions prior
to bringing any such transactions forward to the Board of
Managers for approval and;
(iii) the Compensation Committee will review and recommend to the
Board of Managers compensation packages for the officers of
the Company;
(e) A Manager shall serve as such until the earliest of (i) the
resignation of such Manager for any reason, or (ii) the removal of such Manager
from that position by the Members so entitled.
(f) Each Manager shall perform his duties as a Manager in good faith, in
a manner that is in the best interests of the Company and the Members, and with
such care as an ordinarily prudent person in a like position would use under
similar circumstances. A Manager shall not be liable to the Company or the
Members for monetary damages for breach of any duty as a Manager unless it is
demonstrated by way of a final judicial determination, not subject to further
appeal, by a court of competent jurisdiction that such breach of duty involved
fraud, intentional misconduct, gross negligence or a knowing violation of any
law or regulation material to the breach of duty.
21
(g) A Manager shall not be liable under a judgment, decree or order of
court, or in any other manner, for a debt, obligation or liability of the
Company.
6.2 POWERS OF BOARD OF MANAGERS.
(a) Except as otherwise provided in this Agreement, the Board of
Managers shall have the powers to control and manage the Business and affairs of
the Company and may exercise all powers of the Company and take all actions
that the Board of Managers deem necessary, useful, or appropriate for the
management and conduct of the Business, provided that the power of the Board of
Managers shall in all cases be subject to approval by the Members as required by
statute, the Certificate or this Agreement.
(b) The Board of Managers shall act by majority consent, and no
individual Manager may act on behalf of the Company without the approval of the
Board of Managers by majority consent.
(c) The Board of Managers shall have the power to delegate authority to
officers, employees, agents, and representatives of the Company as they may from
time to time deem appropriate. Any delegation of authority to take any action
must be approved in the same manner as would be required for the Board of
Managers to approve such action directly.
(d) The Board of Managers may establish policies and guidelines for the
hiring of employees to permit the Company to act as an operating company with
respect to its Business. The Board of Managers may adopt appropriate management
incentive plans and employee benefit plans.
(e) The Board of Managers shall have the power to approve any
non-typical excess of loss reinsurance treaty arrangements.
6.3 DUTIES AND OBLIGATIONS OF THE MANAGERS.
(a) The Board of Managers shall cause the Company to conduct its
Business and operations separate and apart from that of any Member, Manager, or
any Affiliate of any Member or Manager, including, without limitation,
(i) segregating Company assets and not allowing funds or other assets of the
Company to be commingled with the funds or other assets of, held by, or
registered in the name of, any Member, Manager, or any Affiliate of any Member
or Manager, (ii) maintaining books and financial records of the Company separate
from the books and financial records of any Member, Manager, or any Affiliate of
any Member or Manager, and observing all Company procedures and formalities,
including, without limitation, maintaining minutes of Company meetings and
acting on behalf of the Company when required only pursuant to due authorization
of the Members, (iii) causing the Company to pay its liabilities from assets of
the Company, and (iv) causing the Company to conduct its dealings with third
parties in its own name and as a separate and independent entity.
(b) The Board of Managers shall take all actions that may be necessary
or appropriate (i) for the continuation of the Company's valid existence as a
limited liability company under the
22
laws of the State of Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the Members or to
enable the Company to conduct the Business and (ii) for the accomplishment of
the Company's purposes, including the acquisition, development, maintenance,
preservation, and operation of the Business or Property in accordance with the
provisions of this Agreement and applicable laws and regulations.
6.4 REIMBURSEMENTS. The Company shall reimburse the Members and
Managers for all reasonable expenses incurred and paid by any of them in the
organization of the Company and in the conduct of the Company's business. Such
expenses shall not include any expenses incurred in connection with a Member's
or Manager's exercise of its rights as a Member or a Manager apart from the
authorized conduct of the Company's business. Such reimbursement shall be
treated as expenses of the Company and shall not be deemed to constitute
distributions to any Member of Profit, Loss or capital of the Company.
6.5 INDEMNIFICATION.
(a) Unless otherwise provided in Section 6.5(d) hereof, the Company, its
receiver, or its trustee (in the case of its receiver or trustee, to the extent
of Company Property) shall indemnify, save harmless, and pay all judgments and
claims against any Manager or officer of the Company relating to any liability
or damage incurred by such Manager or officer by reason of any act performed or
omitted to be performed by any Manager or officer of the Company in connection
with the Business, including reasonable attorneys' fees incurred by the Manager
or officer in connection with the defense of any action based on any such act or
omission, which attorneys' fees may be paid as incurred.
(b) Unless otherwise provided in Section 6.5(d) hereof, in the event of
any action by a Member against any Manager or officer of the Company, including
a Company derivative suit, the Company shall indemnify, save harmless, and pay
all expenses of such Manager or officer, including reasonable attorneys' fees
incurred in the defense of such action.
(c) Unless otherwise provided in Section 6.5(d) hereof, the Company
shall indemnify, save harmless, and pay all expenses, costs, or liabilities of
any Manager or officer of the Company, if for the benefit of the Company and in
accordance with this Agreement said Manager or officer makes any deposit or
makes any other similar payment of personal funds or assumes any personal
obligation in connection with any Property proposed to be acquired by the
Company and suffers any personal financial loss as the result of such action.
(d) Notwithstanding the provisions of Sections 6.5(a), 6.5(b) and 6.5(c)
above, no Manager or officer of the Company shall be indemnified or held
harmless pursuant to this Section 6.5 if it is demonstrated by way of a final
judicial determination, not subject to further appeal, by a court of competent
jurisdiction that the fraud, intentional misconduct, gross negligence or knowing
violation of any law or regulation by such Manager or officer of the Company
contributed materially to such liability or claim. Any reduction in the
indemnification otherwise provided for in this Section 6.5 by virtue of the
operation of this Section 6.5(d) shall be
23
made in proportion to the contribution of the fraud, intentional misconduct,
gross misconduct or knowing violation of law or regulation to the aggregate
liability or damage in question.
6.6 OFFICERS.
(a) The officers of the Company, the holders of such offices and the
duties associated with such offices shall be determined by the Board of Managers
of the Company from time to time. Until the Board of Managers of the Company
otherwise determines the offices of the Company, the holders of such offices and
the duties associated with such offices shall be as provided in this Section
6.6.
(b) The initial offices of the Company shall include a Chief Executive
Officer, President, Executive Vice President, Senior Vice President -
Operations, Chief Financial Officer, Treasurer and Corporate Secretary. Xxxxx
shall be the initial President and Chief Executive Officer of the Company.
Xxxxxx shall be the initial Chief Financial Officer and Treasurer of the
Company. Xxxxx shall be the initial Executive Vice President of the Company.
Lopit shall be the initial Senior Vice President - Operations of the Company.
Xxxxxxx X. Xxxxxx shall be the initial Secretary of the Company. Only the Board
of Managers can remove or otherwise change such officers.
(c) The officers of the Company shall be responsible for the day-to-day
operations of the Company including without limitation matters related to:
(i) underwriting, (ii) claims, (iii) distribution force, (iv) investments within
investment guidelines approved by the Board of Managers, (v) hiring and
termination of employees subject to any guidelines approved by the Board of
Managers; (vi) reinsurance arrangements within guidelines approved by the Board
of Managers; (vii) quota-share reinsurance arrangements with XXXXX; (viii) the
submission of a monthly financial report to the Board of Managers consisting of
a statement of profit and loss, balance sheet and managements' discussion and
analysis; and (ix) the preparation and submission to the Board of Managers for
approval of an annual business plan relating to the budget, planned acquisitions
and capital expenditures.
(d) The Company will purchase life insurance in respect of each of the
officers of the Company on terms determined by the Executive Committee of the
Board of Managers. Each Management Member represents and warrants that to the
best of their knowledge any such life insurance can be obtained by the Company
on commercially reasonable terms.
(e) At such time as XXXXX acquires the right to be allocated a majority
of the Profits pursuant to Article 4, XXXXX and each Management Member who is an
officer of the Company shall commence good faith negotiations related to a
separation agreement that will govern the relationship between such officer and
the Company in the event that such officer ceases to be an employee of the
Company. Subject to the terms of any such separation agreement, in the event
that a Dissolution Event specified in Section 13.1(a)(iv)(A) of this Agreement
takes place, the Company shall pay each Management Member who ceases to be an
officer of the Company severance of not less than an amount equal to ninety days
pay. In the event that a Dissolution Event specified in Section 13.1(a)(iv)(B)
or (C) of this Agreement takes place, the Company
24
may, but shall not be obligated to, pay to each Management Member who ceases to
be an officer of the Company severance equal to ninety days pay.
(f) In the event that:
(i) a majority of the Management Members ("DEPARTING MEMBERS")
cease to be officers of the Company and become employees of,
consultants to or enter into a similar relationship
(collectively a "RELATIONSHIP") with any entity or entities
engaged in the casualty insurance business; and
(ii) customers of the Company who were customers of the Company
when any such Departing Members were officers of the Company
do not renew any insurance policies with the Company and
place such insurance with an entity that a Departing Member
has a Relationship with within thirteen months of the date
that the Departing Member in question ceased to be an officer
of the Company,
then the Departing Members on a joint and several basis shall pay to the Company
compensation for the lost business determined through a procedure to be agreed
upon within 90 days of the date that the Department Members ceased to be
officers of the Company. Such procedure will be agreed upon by one
representative of the Departing Members and one representative of the Company.
In the event that such persons cannot agree on a procedure during the 90 day
period, they must agree on a third person or entity which will make the
procedural determination on behalf of the parties within the 90 day period. The
Departing Members on the one hand and the Company on the other will split the
cost of any such necessary third party. Such third party will be asked to
render its determination within 30 days after his, her or its appointment.
6.7. MISCELLANEOUS.
(a) The parties acknowledge that they each contemplate and expect that:
(i) the Subsidiary and XXXXX Insurance Company, an Affiliate of XXXXX, will
enter into a quota - share reinsurance agreement following the Effective Date on
commercially reasonable terms for the purpose of providing underwriting capacity
and surplus to the Subsidiary, and (ii) the Subsidiary will operate at
approximately a 2.5:1 net writings to surplus ratio. Any such agreement
approved by the Board of Managers shall be deemed to have received the Approval
of the Members.
(b) Each of the Management Members and XXXXX shall have the right to
request that the Executive Committee of the Board of Managers review any of the
terms of this Agreement if such Member believes that such term(s) are materially
unfair to the requesting Member. In order to exercise such right a Member shall
submit a written request for review to each member of the Executive Committee
specifying the terms that such Member believes to be unfair and the reasons
related thereto. The Executive Committee shall respond in writing to all
Members and to the Board of Managers within 30 days of receipt of such written
request. The response of the Executive Committee shall be non-binding but all
Members and the Board of
25
Managers shall make reasonable best efforts to consider such response including
the commencement of good faith negotiations to implement the recommendations
contained in such response.
(c) It is the intention of the Members that the Subsidiary will be
continued or reincorporated in a United States jurisdiction as soon as
practicable following the Effective Date.
(d) To the extent practicable, the board of directors of the Subsidiary
shall be organized in the same fashion as the Board of Managers, including
without limitation the membership thereof.
ARTICLE 7
ROLE OF MEMBERS
7.1 RIGHTS OR POWERS. Except as specifically set forth herein, the
Members as such shall not have any right or power to take part in the management
or control of the Company or its business and affairs or to act for or bind the
Company in any way. Notwithstanding the foregoing, the Members have all the
rights and powers specifically set forth in this Agreement and, to the extent
not inconsistent with this Agreement, in the Act.
7.2 VOTING RIGHTS.
(a) No Member has any voting right except with respect to those matters
specifically reserved for a Member vote which are set forth in this Agreement
and as required in the Act.
(b) Unless a provision of this Agreement specifically provides
otherwise, matters that may or must be approved by the Members pursuant to this
Agreement will be approved upon a vote in favor that constitutes the Approval of
the Members.
7.3 MEETINGS OF THE MEMBERS.
(a) Meetings of the Members may be called upon the written request of
any Member. The call shall state the location of the meeting and the nature of
the business to be transacted. Notice of any such meeting shall be given to all
Members not less than seven (7) Business Days nor more than thirty (30) days
prior to the date of such meeting. Members may vote in person, by proxy or by
telephone at such meeting and may waive advance notice of such meeting.
Whenever the vote or consent of Members (whether Extraordinary or otherwise) is
permitted or required under the Agreement, such vote or consent may be given at
a meeting of the Members or may be given in accordance with the procedure
prescribed in this Section 7.3.
(b) Each Member may authorize any Person or Persons to act for it by
proxy on all matters in which a Member is entitled to participate, including
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Member or its attorney-in-fact. No proxy shall be
valid after the expiration of eleven (11) months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the Member executing it.
26
(c) Notwithstanding this Section 7.3, the Company may take any action
contemplated under this Agreement as approved by the Members in writing, or by
telephone or facsimile, if such telephone conversation or facsimile is followed
by a written summary of the telephone conversation or facsimile communication
sent by registered or certified mail, postage and charges prepaid, addressed as
described in Section 15.1 hereof, or to such other address as such Person may
from time to time specify by notice to the Members and Managers.
7.4 REQUIRED MEMBER CONSENTS.
(a) Notwithstanding any other provision of this Agreement, no action may
be taken by the Company (whether by the Board of Managers, or otherwise) in
connection with any of the following matters without the Approval of the
Members:
(i) Any activity that is not consistent with the purposes of the
Company as set forth in Section 2.3 hereof;
(ii) Any act in contravention of this Agreement;
(iii) Confession of a judgment against the Company (other than in
the ordinary course of business);
(iv) A material change in the nature of the Business;
(v) a material change in the manner in which the Business is
conducted, including without limitation any amendment to the Memorandum of
Association or By-Laws of the Subsidiary or any change in the composition of the
Board of Directors of the Subsidiary;
(vi) Any sale of assets of the Company not in the ordinary course
of business or involving total consideration in excess of $100,000;
(vii) Issuance of additional Membership Interests or any other
equity or any equity-based security by the Company other than any adjustment to
Capital Accounts and allocations of Profits, Losses or Net Cash Flow contained
in this Agreement;
(viii) Any capital expenditures in excess of $250,000;
(ix) Any transaction in excess of $10,000 between the Company and
any Member, Manager, or Affiliate thereof; or
(x) Any acquisition by the Company not in the ordinary course of
business or involving total consideration in excess of $500,000.
(xi) Any transaction by the Company involving the incurrence of
any indebtedness for borrowed money not in the ordinary course of business or in
excess of $250,000 or any guaranty or other contingent liability of the Company
in respect of any obligation of any third party (other than in the ordinary
course of business);
27
(xii) the payment of any distribution to the Members;
(xiii) Dissolution, liquidation, or winding up of the Company; or
(xiv) Merger or consolidation of the Company, or sale of the
Company or all or substantially of all of its assets; provided however that such
transaction will not be consummated until after the expiration of the Management
Members' rights under Section 11.4(g) below.
7.5 WITHDRAWAL/RESIGNATION. Except as otherwise provided in Articles 5
and 13 hereof, no Member shall demand or receive a return on or of such Member's
Capital Contributions or withdraw from the Company without the consent of all
Members. Under circumstances requiring a return of any Capital Contributions,
no Member has the right to receive Property other than cash except as may be
specifically provided herein.
7.6 MEMBER COMPENSATION. No Member shall receive any interest, salary,
or drawing with respect to its Capital Contributions or its Capital Account or
for services rendered on behalf of the Company, or otherwise, in its capacity as
a Member, except as otherwise provided in this Agreement.
7.7 MEMBERS LIABILITY. No Member shall be liable under a judgment,
decree or order of a court, or in any other manner for the debts or any other
obligations or liabilities of the Company. A Member shall be liable only to
make its Capital Contributions and shall not be required to restore a deficit
balance in its Capital Account or to lend any funds to the Company or, after its
Capital Contributions have been made, to make any additional contributions,
assessments, or payments to the Company, provided that a Member may be required
to repay distributions made to it as provided in Section 18-607 of the Act. The
Managers shall not have any personal liability for the repayment of any Capital
Contributions of any Member.
7.8 PARTITION. While the Company remains in effect or is continued,
each Member agrees and waives its rights to have any Company Property
partitioned, or to file a complaint or to institute any suit, action or
proceeding at law or in equity to have any Company Property partitioned, and
each Member, on behalf of itself, its successors and its assigns hereby waives
any such right.
7.9 CONFIDENTIALITY. Except as contemplated hereby or required by a
court of competent authority, each Member shall keep confidential and shall not
disclose to others and shall use its reasonable efforts to prevent such Member's
Affiliates, and any present or former employees, agents, and representatives of
such Member or such Member's Affiliates from disclosing to others without the
prior written consent of all Members any information that (i) pertains to this
Agreement, any negotiations pertaining thereto, any of the transactions
contemplated hereby,
28
or the Business of the Company, or (ii) pertains to confidential or proprietary
information of any Member or the Company or that any Member has labeled in
writing as confidential or proprietary. No Member shall use, and each Member
shall use its best efforts to prevent any Affiliate of such Member from using,
any information that (i) pertains to this Agreement, any negotiations pertaining
hereto, any of the transactions contemplated hereby, or the Business of the
Company, or (ii) pertains to the confidential or proprietary information of any
Member or the Company or which any Member has labeled in writing as confidential
or proprietary, except in connection with the transactions contemplated hereby.
The term "confidential information" is used in this Section 7.9 to describe
information that is confidential, non-public, or proprietary in nature, was
provided to such Member or its representatives by the Company, any other Member,
or such Persons' agents, representatives and employees, and relates either
directly, or indirectly to the Company or the Business. Information which (i) is
available, or becomes available, to the public through no fault or action by
such Member, its agents, representatives or employees or (ii) becomes available
on non-confidential basis from any source other than the Company, any other
Member, or such Persons' agents, representatives or employees and such source is
not prohibited from disclosing such information, shall not be deemed
confidential information.
7.10 TRANSACTIONS BETWEEN A MEMBER AND THE COMPANY. Except as otherwise
provided by applicable law and as otherwise provided herein, any Member may upon
the approval of the Members, but shall not be obligated to, lend money to the
Company, act as surety for the Company, and transact other business with the
Company. A Member has the same rights and obligations when transacting business
with the Company as a Person or entity who is not a Member. A Member, any
Affiliate thereof, or an employee, stockholder, agent, director or officer of a
Member or any Affiliate thereof, may also be an employee or be retained as an
agent of the Company. The existence of these relationships and acting in such
capacities will not result in the Member being deemed to be participating in the
control of the business of the Company or otherwise affect the limited liability
of the Member.
7.11 OTHER INSTRUMENTS. Each Member hereby agrees to execute and deliver
to the Company within five (5) days after receipt of a written request therefor,
such other and further documents and instruments, statements of interest and
holdings, designations, powers of attorney and other instruments and to take
such other action as may be necessary, useful or appropriate to comply with any
laws, rules or regulations as may be necessary to enable the Company to fulfill
its responsibilities under this Agreement.
7.12 GUARANTEE OF COMPANY INDEBTEDNESS. Except for arrangements
expressly described in this Agreement, no Member shall enter into (or permit any
Person related to the Member to enter into) any arrangement with respect to any
liability of the Company that would result in such Member (or a Person related
to such Member under Regulations Section 1.752-4(b)) bearing the economic risk
of loss (within the meaning of Regulations Section 1.752-2) with respect to such
liability unless such arrangement has received the Approval of the Members. To
the extent a Member is permitted to guarantee the repayment of any Company
indebtedness under this Agreement, each of the other Members shall be afforded
the opportunity to guarantee such Members pro rata share of such indebtedness.
This Section 7.12 shall not prohibit a Member from making a loan described in
Section 3.5.
7.13 LITIGATION. If the Company and any Member are joint defendants in
litigation relating to the Company, the Company shall pay the legal fees and
expenses of one counsel for the Company and the Member or Members in question to
the extent that the claim asserted
29
against the Company is also asserted against the Member. To the extent that the
claim asserted against a Member is materially different from that asserted
against the Company and results from such Member's willful or grossly negligent
failure to act in conformity with Company policies or procedures, the Member
shall be responsible for retaining independent counsel and for paying the fees
and expenses of such counsel. In the event any Management Member recovers the
cost of counsel or judgments or settlements through indemnification from third
parties, such Management Member will share such recoveries with the Company to
offset the Company's defense costs on a proportionate basis.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
8.1 IN GENERAL. As of the date hereof, each Member hereby makes each of
the representations and warranties applicable to such Member as set forth in
Section 8.2 hereof, and such warranties and representations shall survive the
execution of this Agreement.
8.2 REPRESENTATIONS AND WARRANTIES. Each Member hereby represents and
warrants that:
(a) Such Member understands and acknowledges that such Member's
Membership Interest has not been registered under the Securities Act of 1933 or
any state securities laws.
(b) Such Member understands and acknowledges that Membership Interests
may not be sold unless they are registered under the Securities Act of 1933 and
applicable state securities laws, or pursuant to an exemption from such
registration requirements.
(c) The limitations on transfer contained in this Section 8.2 and in
Article 11 of this Agreement create an economic risk that such Member is capable
of bearing.
(d) Except for an action by Lumbermen's Mutual against the Company and
the Management Members in the Superior Court of Washington for King County,
there are no actions, suits, proceedings, or investigations pending or, to the
knowledge of such Member, threatened against or affecting such Member or any of
his properties, assets, or businesses in any court or before or by any
governmental department, board, agency, or instrumentality, domestic or foreign,
or any arbitrator which could, if adversely determined (or, in the case of an
investigation could lead to any action, suit, or proceeding, which if adversely
determined could) reasonably be expected to materially impair such Member's
ability to perform its obligations under this Agreement or to have a material
adverse effect on the financial condition of such Member.
(e) Such Member is acquiring its Membership Interest based upon its own
investigation, and the exercise by such Member of its rights and the performance
of its obligations under this Agreement will be based upon its own
investigation, analysis, and expertise. Such Member's acquisition of its
Membership Interest is being made for its own account for investment, and not
with a view to the sale or distribution thereof. Such Member is a
30
sophisticated investor possessing an expertise in analyzing the benefits and
risks associated with acquiring investments that are similar to the acquisition
of its Membership Interest.
(f) Such Member understands that taxable income and gain allocated to
such Member by the Company under this Agreement and the tax on the portion
thereof allocated to such Member hereunder for any Calendar Year may exceed the
cash distributions from the Company to such Member and, that such Member may
have to look to sources other than distributions from the Company to pay such
tax.
ARTICLE 9
ACCOUNTING, BOOKS AND RECORDS
9.1 ACCOUNTING, BOOKS, AND RECORDS.
(a) The Company shall keep on site at its principal place of business
each of the following:
(i) Separate books of account for the Company which shall show a
true and accurate record of all costs and expenses incurred, all charges made,
all credits made and received, and all income derived in connection with the
conduct of the Company and the operation of the Business in accordance with this
Agreement.
(ii) A current list of the full name and last known business,
residence, or mailing address of each Member and Manager, both past and present;
(iii) A copy of the Certificate and all amendments thereto,
together with executed copies of any powers of attorney pursuant to which any
amendment has been executed;
(iv) Copies of the Company's federal, state, and local income tax
returns and reports, if any, for the three most recent years;
(v) Copies of this Agreement;
(vi) Copies of any writings permitted or required under Section
18-502 of the Act regarding the obligation of a Member to perform any
enforceable promise to contribute cash or property or to perform services as
consideration for such Member's Capital Contribution;
(vii) Unless contained in this Agreement, a statement prepared and
certified as accurate by the Managers of the Company which describes:
(A) The amount of cash and a description and statement of
the agreed value of the other property or services contributed by each Member
and which each Member has agreed to contribute in the future;
(B) The times at which or events on the happening of which
any Additional Capital Contributions agreed to be made by each Member are to be
made;
31
(C) If agreed upon, the time at which or the events on the
happening of which a Member may terminate his Membership Interest in the Company
and the amount of, or the method of determining, the distribution to which he
may be entitled respecting his Membership Interest and the terms and conditions
of the termination and distribution;
(D) Any right of a Member to receive distributions, which
include a return of all or any part of a Member's contribution;
(viii) Any written consents obtained from Members pursuant to
Section 18-302 of the Act regarding action taken by Members without a meeting.
(b) The Company shall use the accrual method of accounting in
preparation of its financial reports and for tax purposes and shall keep its
books and records accordingly. Any Member or its designated representative has
the right to have reasonable access to and inspect and copy the contents of such
books or records and shall also have reasonable access during normal business
hours to such additional financial information, documents, books and records.
The rights granted to a Member pursuant to this Section 9.1 are expressly
subject to compliance by such Member with the safety, security, and
confidentiality procedures and guidelines of the Company, as such procedures and
guidelines may be established from time to time.
9.2 REPORTS.
(a) The chief financial officer (or other officer appointed by the
Managers) of the Company shall be responsible for causing the preparation of
financial reports of the Company and the coordination of financial matters of
the Company with the Company's accountants.
(b) The Company shall cause to be delivered to each Member the financial
statements listed in clauses (i) and (ii) below, prepared, in each case (other
than with respect to Member's Capital Accounts, which shall be prepared in
accordance with this Agreement) in accordance with GAAP consistently applied and
such other reports as any Member may reasonably request from time to time;
PROVIDED THAT, if the Board of Managers so determine within thirty (30) days
thereof, such other reports shall be provided at such requesting Member's sole
cost and expense. The quarterly financial statements referred to in clause (ii)
below may be subject to normal year-end audit adjustments.
(i) As soon as practicable following the end of each Calendar
Year (and in any event not later than sixty (60) days after the end of such
Calendar Year) and at such time as distributions are made to the Members
pursuant to Section 13 hereof following the occurrence of a Dissolution Event, a
balance sheet of the Company as of the end of such Calendar Year and the related
statements of operations, Members' Capital Accounts and changes therein, and
cash flows for such Calendar Year, together with appropriate notes to such
financial statements and supporting schedules, all of which shall be audited and
certified, or not audited but reviewed, by the Company's accountants, as
determined by the Board of Managers following receipt of the recommendation of
the Audit Committee, and in each case, to the extent the Company was in
existence, setting forth in comparative form the corresponding figures for the
immediately
32
preceding Calendar Year end (in the case of the balance sheet) and the two (2)
immediately preceding Calendar Years (in the case of the statements).
(ii) As soon as practicable following the end of each of the first
three Calendar Quarters of each Calendar Year (and in any event not later than
thirty (30) days after the end of each such Calendar Quarter), a balance sheet
of the Company as of the end of such Calendar Quarter and the related statements
of operations and cash flows for such Calendar Quarter and for the Calendar Year
to date, in each case, to the extent the Company was in existence, setting forth
in comparative form the corresponding figures for the prior Calendar Year's
Calendar Quarter and the interim period corresponding to the Calendar Quarter
and the interim period just completed.
The quarterly statements described in clause (ii) above shall be
accompanied by a written certification of the chief financial officer (or other
officer appointed by the Managers)of the Company that such statements have been
prepared in accordance with GAAP consistently applied or this Agreement, as the
case may be.
9.3 ACCOUNTANTS. The Company's and the Subsidiary's accountants shall
be such accountants approved by the Board of Managers following receipt of a
recommendation of the Audit Committee of the Board of Managers.
9.4 TAX MATTERS.
(a) TAX ELECTIONS. The Board of Managers shall, without any further
consent of the Members being required (except as specifically required herein),
make or delegate responsibility to the officers of the Company to make any and
all elections for federal, state, local, and foreign tax purposes including,
without limitation, any election, if permitted by applicable law: (i) to adjust
the basis of Property pursuant to Code Sections 754, 734(b) and 743(b), or
comparable provisions of state, local or foreign law, in connection with
Transfers of Membership Interest and Company distributions; (ii) with the
consent of all of the Members, to extend the statute of limitations for
assessment of tax deficiencies against the Members with respect to adjustments
to the Company's federal, state, local or foreign tax returns; and (iii) to the
extent provided in Code Sections 6221 through 6231 and similar provisions of
federal, state, local, or foreign law, to represent the Company and the Members
before taxing authorities or courts of competent jurisdiction in tax matters
affecting the Company or the Members in their capacities as Members, and to file
any tax returns and execute any agreements or other documents relating to or
affecting such tax matters, including agreements or other documents that bind
the Members with respect to such tax matters or otherwise affect the rights of
the Company and the Members. Xxxxxx is specifically authorized to act as the
"Tax Matters Member" under the Code and in any similar capacity under state or
local law until such time as XXXXX is entitled to be allocated a majority of the
Profits pursuant to Article 4, and thereafter XXXXX is specifically authorized
to act as the "Tax Matters Member" under the Code.
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(b) TAX INFORMATION. Necessary tax information shall be delivered to
each Member as soon as practicable after the end of each Calendar Year of the
Company but not later than two and one-half (21/2) months after the end of each
Calendar Year.
(c) PARTNERSHIP TREATMENT. It is the intention of the Members that the
Company shall be treated as a partnership for tax purposes.
ARTICLE 10
AMENDMENTS
10.1 AMENDMENTS.
(a) Amendments to this Agreement may be proposed by the Board Managers
or any Member. Following such proposal, the Board of Managers shall submit to
the Members a verbatim statement of any proposed amendment, providing that
counsel for the Company shall have approved of the same in writing as to form,
and the Board of Managers shall include in any such submission a recommendation
as to the proposed amendment. The Board of Managers shall seek the written vote
of the Members on the proposed amendment or shall call a meeting to vote thereon
and to transact any other business that it may deem appropriate. A proposed
amendment shall be adopted and be effective as an amendment hereto if it
receives the Approval of the Members.
(b) Notwithstanding Section 10.1(a) hereof, this Agreement shall not be
amended without the consent of each Member adversely affected if such amendment
would modify the limited liability of a Member, or (ii) alter the interest of a
Member in Profits, Losses, other items, or any Company distributions.
ARTICLE 11
TRANSFERS
11.1 RESTRICTIONS ON TRANSFERS. Except as otherwise permitted by this
Agreement, no Member shall Transfer all or any portion of such Member's
Membership Interest or any other interest in the Company.
11.2 PERMITTED TRANSFERS. Subject to the conditions and restrictions set
forth in Section 11.3 hereof, a Member may at any time Transfer all or any
portion of its Membership Interest to (a) any Wholly Owned Affiliate of the
transferor Member, (b) any Purchaser in accordance with Section 11.4 hereof, and
(c) as provided in Section 11.5 hereof (any such Transfer being referred to in
this Agreement as a "PERMITTED TRANSFER").
11.3 CONDITIONS TO PERMITTED TRANSFERS. A Transfer shall not be treated
as a Permitted Transfer under Section 11.2 hereof unless and until the following
conditions are satisfied:
(a) The transferor and transferee shall execute and deliver to the
Company (i) such documents and instruments of conveyance as may be necessary or
appropriate in the opinion of
34
counsel to the Company to effect such Transfer. In all cases, the Company shall
be reimbursed by the transferor and/or transferee for all costs and expenses
that it reasonably incurs in connection with such Transfer.
(b) The transferor and transferee shall furnish the Company with the
transferee's taxpayer identification number, sufficient information to determine
the transferee's initial tax basis in the Membership Interest transferred, and
any other information reasonably necessary to permit the Company to file all
required federal and state tax returns and other legally required information
statements or returns. Without limiting the generality of the foregoing, the
Company shall not be required to make any distribution otherwise provided for in
this Agreement with respect to any transferred Membership Interest until it has
received such information.
(c) The Transfer would not cause the Company to be (i) treated as a
"publicly traded partnership" within the meaning of Code Section 7704 or
(ii) classified as a corporation for state income tax purposes within the
meaning of Code Section 7701(a) or any similar state tax provision.
(d) Unless otherwise approved by all the Members, no Transfer of a
Membership Interest shall be made except upon terms which would not, in the
opinion of counsel chosen by and mutually acceptable to all the Members, result
in the termination of the Company within the meaning of Section 708 of the Code
or cause the application of the rules of Sections 168(f)(5) and 168(i)(7) of the
Code or similar rules to apply to the Company.
(e) No notice or request initiating the procedures contemplated by
Section 11.4 may be given by any Member, while any notice, purchase or Transfer
is pending under Section 11.4 or Section 12, as the case may be, or after a
Dissolution Event has occurred. If any Member is an Adverse Member, the other
Members shall not be offered any portion of the Adverse Member's Membership
Interest pursuant to Section 11.4, during the period that the Company is
pursuing any remedy specified in Section 12.1 with respect to such Member's
status as an Adverse Member. No Member may sell any portion of its Membership
Interest pursuant to Section 11.4 during any period that, as provided above, it
may not give the notice initiating the procedures contemplated by such
Section or thereafter until it has given such notice and otherwise complied with
the provisions of such Section.
11.4 RIGHT OF FIRST REFUSAL. In addition to the other limitations and
restrictions set forth in this Section 11, except as permitted by Section 11.2
hereof, no Member shall Transfer all or any portion of its Membership Interest
(the "OFFERED INTEREST") unless such Member (the "SELLER") first offers to sell
the Offered Interest pursuant to the terms of this Section 11.4.
(a) LIMITATION ON TRANSFERS. No Transfer may be made under this Section
11.4 unless the Seller has received a bona fide written offer (the "PURCHASE
OFFER") from a Person (the "PURCHASER") to purchase the Offered Interest for a
purchase price (the "OFFER PRICE") denominated and payable in United States
dollars at closing or according to specified terms, with or without interest,
which offer shall be in writing signed by the Purchaser and shall be
35
irrevocable for a period ending no sooner than the Business Day following the
end of the Offer Period, as hereinafter defined.
(b) OFFER NOTICE. Prior to making any Transfer that is subject to the
terms of this Section 11.4, the Seller shall, subject to the terms and
conditions of this Agreement, give to the Company and each other Member written
notice (the "OFFER NOTICE") which shall include a copy of the Purchase Offer and
an offer (the "FIRM OFFER") to sell the Offered Membership Interest to the other
Members (the "OFFEREES") for the Offer Price, payable according to the same
terms as (or more favorable terms than) those contained in the Purchase Offer,
PROVIDED that the Firm Offer shall be made without regard to the requirement of
any xxxxxxx money or similar deposit required of the Purchaser prior to closing,
and without regard to any security (other than the Offered Interest) to be
provided by the Purchaser for any deferred portion of the Offer Price.
(c) OFFER PERIOD. The Firm Offer shall be irrevocable for a period (the
"OFFER PERIOD") ending at 11:59 P.M., local time at the Company's principal
place of business, on the thirtieth (30th) day following the day of the Offer
Notice.
(d) ACCEPTANCE OF FIRM OFFER. At any time during the Offer Period, any
Offeree may accept the Firm Offer as to all or any portion of the Offered
Interest, by giving written notice of such acceptance to the Seller and each
other Offeree, which notice shall indicate the maximum proportion of the Offered
Interest that such Offeree is willing to purchase. If the Seller is a Management
Member, Members who are Management Members shall have a first priority on a pro
rata basis to purchase all of the Offered Interest, PROVIDED that if Management
Members do not agree to purchase all of the Offered Interest, the Company shall
have the right to purchase any of the Offered Interest that Management Members
have not agreed to purchase, and PROVIDED FURTHER that if Management Members and
the Company do not agree to purchase all of the Offered Interest, XXXXX shall
have the right to purchase any of the Offered Interest that the Management and
the Company have not agreed to purchase. If the Seller is XXXXX, the Management
Members shall have the right to purchase the Offered Interest on a pro rata
basis. In the event that Offerees ("ACCEPTING OFFEREES"), in the aggregate,
accept the Firm Offer with respect to all of the Offered Interest, the Firm
Offer shall be deemed to be accepted and each Accepting Offeree shall be deemed
to have accepted the Firm Offer to the extent set out above. If Offerees do not
accept the Firm Offer as to all of the Offered Interest during the Offer Period,
the Firm Offer shall be deemed to be rejected only with respect to the Offered
Interest that the Offerees have declined to purchase.
(e) CLOSING OF PURCHASE PURSUANT TO FIRM OFFER. In the event that any
portion of the Firm Offer is accepted, the closing of the sale of the Offered
Interest shall take place within thirty (30) days after the Firm Offer is
accepted or, if later, the date of closing set forth in the Purchase Offer. The
Seller and all Accepting Offerees shall execute such documents and instruments
as may be necessary or appropriate to effect the sale of the Offered Interest
pursuant to the terms of the Firm Offer and this Section 11.
(f) SALE PURSUANT TO PURCHASE OFFER IF FIRM OFFER REJECTED. If any
portion of the Firm Offer is not accepted in the manner hereinabove provided,
the Seller may sell the remaining
36
Offered Interest to the Purchaser at any time within sixty (60) days after the
last day of the Offer Period, provided that such sale shall be made on terms no
more favorable to the Purchaser than the terms contained in the Purchase Offer
and provided further that such sale complies with other terms, conditions, and
restrictions of this Agreement that are not expressly made inapplicable to sales
occurring under this Section 11.4. In the event that the Offered Interest is not
sold in accordance with the terms of the preceding sentence, the Offered
Interest shall again become subject to all of the conditions and restrictions of
this Section 11.4.
(g) FIRST REFUSAL RIGHTS UPON MERGER PROPOSAL. In the event the Company
entertains a BONA FIDE offer to merge, consolidate, sell or sell substantially
all of the assets of, the Company in a transaction which will not trigger rights
under Section 11.5 below, the Management Members shall have a right of first
refusal to match such offer in accordance with the applicable notice and timing
provisions of this Section 11.4.
11.5 XXXXX CHANGE OF CONTROL.
(a) In the event that a XXXXX Change of Control occurs, XXXXX shall
forthwith give notice of such occurrence to all the Management Members.
(b) At any time up to thirty days, following the occurrence of a XXXXX
Change of Control, either XXXXX or, the Management Members if the Management
Members unanimously agree, may deliver, in the case of XXXXX to the Management
Members collectively, and in the case of the Management Members to XXXXX, a
notice in writing ("BUY-SELL NOTICE") offering to purchase such Member or
Members Membership Interest at the purchase price and on the terms specified in
the Buy-Sell Notice.
(c) The recipient of the Buy-Sell Notice (the "RECIPIENT") may accept
the Buy-Sell Notice by delivering to the sender of the Buy-Sell Notice (the
"SENDER") written notice of acceptance. The Recipients may reject the Buy-Sell
Notice by delivering written notice of rejection to the Sender, whereupon the
Recipient shall be deemed to have agreed to purchase and the Sender shall be
deemed to have agreed to sell all of the Sender's Membership Interest based on
the terms specified in the Buy-Sell Notice. If the Management Members are
deemed to have agreed to purchase PAULA's Membership Interest pursuant to this
Section 11.5(c) they shall do so on a pro rata basis, unless a different
proportion is unanimously agreed upon by the Management Members and communicated
in writing to XXXXX.
(d) If the Recipient fails to accept or reject the Buy-Sell Notice
within fifteen days of receipt of the Buy-Sell Notice, the Recipient shall be
deemed to have accepted the Buy-Sell Notice and the Recipient shall be deemed to
have agreed to sell and the Sender shall be deemed to have agreed to purchase
all of the Recipient's Membership Interest on the terms specified in the
Buy-Sell Notice.
(e) Unless otherwise agreed by the Sender and the Recipient, the
transaction related to the Buy-Sell Notice shall in all events be completed
within forty five (45) days of the date that the Buy-Sell Notice is accepted,
rejected or deemed accepted pursuant to this Section 11.5.
37
11.6 PROHIBITED TRANSFERS. Any purported Transfer of Membership Interest
that is not a Permitted Transfer shall be null and void and of no force or
effect whatever; PROVIDED that, if the Company is required to recognize a
Transfer that is not a Permitted Transfer (or if all of the Managers, in their
sole discretion, elect to recognize a Transfer that is not a Permitted
Transfer), the Membership Interest Transferred shall be strictly limited to the
transferor's rights to allocations and distributions as provided by this
Agreement with respect to the transferred Membership Interest, which allocations
and distributions may be applied (without limiting any other legal or equitable
rights of the Company) to satisfy any debts, obligations, or liabilities for
damages that the transferor or transferee of such Membership Interest may have
to the Company.
In the case of a Transfer or attempted Transfer of Membership Interest that
is not a Permitted Transfer, the parties engaging or attempting to engage in
such Transfer shall be liable to indemnify and hold harmless the Company and the
other Members from all cost, liability, and damage that any of such indemnified
Members may incur (including, without limitation, incremental tax liabilities,
lawyers' fees, and expenses) as a result of such Transfer or attempted Transfer
and efforts to enforce the indemnity granted hereby.
11.7 RIGHTS OF UNADMITTED ASSIGNEES. A Person who acquires a Membership
Interest but who is not admitted as a substituted Member pursuant to Section
11.8 hereof shall be entitled only to allocations and distributions with respect
to such Membership Interest in accordance with this Agreement, and shall have no
right to any information or accounting of the affairs of the Company, shall not
be entitled to inspect the books or records of the Company, and shall not have
any of the rights of a Member under the Act or this Agreement.
11.8 ADMISSION OF SUBSTITUTED MEMBERS. Subject to the other provisions
of this Article 11, a transferee of a Membership Interest may be admitted to the
Company as a substituted Member only upon satisfaction of the conditions set
forth in this Section 11.8:
(a) The Membership Interest with respect to which the transferee is
being admitted was acquired by means of a Permitted Transfer;
(b) The transferee of the Membership Interest (other than, with respect
to clauses (i) and (ii) below, a transferee that was a Member prior to the
Transfer) shall, by written instrument in form and substance reasonably
satisfactory to the Board of Managers (and, in the case of clause (iii) below,
the transferor Member), (i) make representations and warranties to each
nontransferring Member equivalent to those set forth in Article 8, (ii) accept
and adopt the terms and provisions of this Agreement, including this Article 11,
and (iii) assume the obligations of the transferor Member under this Agreement
with respect to the transferred Membership Interest. The transferor Member
shall be released from all such assumed obligations except (x) those obligations
or liabilities of the transferor Member arising out of a breach of this
Agreement, (y) in the case of a Transfer to any Person other than a Member or
any of its Wholly Owned Affiliates, those obligations or liabilities of the
transferor Member based on events occurring, arising, or maturing prior to the
date of Transfer, and (z) in the case of a Transfer to any of its Wholly Owned
Affiliates, any Capital Contribution or other financing obligation of the
transferor Member under this Agreement;
38
(c) The transferee pays or reimburses the Company for all reasonable
legal, filing, and publication costs that the Company incurs in connection with
the admission of the transferee as a Member with respect to the Transferred
Membership Interest; and
(d) If required by the Board of Managers, the transferee (other than a
transferee that was a Member prior to the Transfer) shall deliver to the Company
evidence of the authority of such Person to become a Member and to be bound by
all of the terms and conditions of this Agreement, and the transferee and
transferor shall each execute and deliver such other instruments as the Board of
Managers reasonably deems necessary or appropriate to effect, and as a condition
to, such Transfer, including amendments to the Certificate or any other
instrument filed with the State of Delaware or any other state or governmental
authority.
11.9 REPRESENTATIONS REGARDING TRANSFERS; LEGEND.
(a) Each Member hereby represents and warrants to the Company and the
Members that such Member's acquisition of a Membership Interest hereunder is
made as principal for such Member's own account and not for resale or
distribution of such Membership Interest. Each Member further hereby agrees
that the following legend may be placed upon any counterpart of this Agreement,
the Certificate, or any other document or instrument evidencing ownership of
Membership Interests:
The Company Membership Interests represented by this document have
not been registered under any securities laws and the transferability of such
Membership Interests are restricted. Such Membership Interests may not be sold,
assigned, or transferred, nor will any assignee, vendee, transferee, or endorsee
thereof be recognized as having acquired any such Membership Interest by the
Company for any purposes, unless (1) a registration statement under the
Securities Act of 1933, as amended, with respect to such Membership Interest
shall then be in effect and such transfer has been qualified under all
applicable state securities laws, or (2) the availability of an exemption from
such registration and qualification shall be established to the satisfaction of
counsel to the Company.
The Membership Interests represented by this document are subject to
further restriction as to their sale, transfer, hypothecation, or assignment as
set forth in this Agreement and agreed to by each Member. Said restriction
provides, among other things, that no Membership Interest may be transferred
without first offering such Membership Interest to the other Members.
11.10 DISTRIBUTIONS AND ALLOCATIONS IN RESPECT OF TRANSFERRED MEMBERSHIP
INTEREST. If any Membership Interest is Transferred during any Calendar Year in
compliance with the provisions of this Article 11, Profits, Losses, and all
other items attributable to the Transferred Membership Interest for such
Calendar Year shall be divided and allocated between the transferor and the
transferee by taking into account their varying Percentage Interests during the
Calendar Year in accordance with Code Section 706(d), using any conventions
permitted by law and selected by the Board of Managers. All distributions on or
before the date of such Transfer shall be made to the transferor, and all
distributions thereafter shall be made to the
39
transferee. Solely for purposes of making such allocations and distributions,
the Company shall recognize such Transfer not later than the end of the calendar
month during which it is given notice of such Transfer, PROVIDED that, if the
Company is given notice of a Transfer at least ten (10) Business Days prior to
the Transfer, the Company shall recognize such Transfer as of the date of such
Transfer, and PROVIDED FURTHER that if the Company does not receive a notice
stating the date such Membership Interest were transferred and such other
information as the Managers may reasonably require within thirty (30) days after
the end of the Calendar Year during which the Transfer occurs, then all such
items shall be allocated, and all distributions shall be made, to the Person
who, according to the books and records of the Company, was the owner of the
Membership Interest on the last day of such Calendar Year. Neither the Company
nor any Member shall incur any liability for making allocations and
distributions in accordance with the provisions of this Section 11.10, whether
or not any Manager or the Company has knowledge of any Transfer of ownership of
any Membership Interest.
11.11 MEMBERSHIP INTEREST. Any sale, transfer or other disposition of a
Membership Interest pursuant to Article 11 and Article 12 must be with respect
to the same proportion of a Member's Capital Account and allocation of Profits.
ARTICLE 12
ADVERSE ACT
12.1 REMEDIES.
(a) If an Adverse Act has occurred or is continuing with respect to any
Member, any non-Adverse Member may elect:
(i) To cause the Company to commence the procedures specified in
Section 12.2 for the purchase of the Adverse Member's Membership Interest; or
(ii) To seek to enjoin such Adverse Act or to obtain specific
performance of the Adverse Member's obligations or Damages (as defined and
subject to the limitations specified below) in respect of such Adverse Act.
The foregoing remedies shall not be deemed to be mutually exclusive, and,
subject to the requirements of this Section 12.1(a) regarding the timing of the
election of such remedies, selection or resort to any thereof shall not
preclude selection or resort to the others.
Notwithstanding anything to the contrary contained in this Article 12, the
remedy specified in clause (i) above and the right to seek Damages under clause
(ii) above may not be pursued and Section 12.1(b) will not apply to an Adverse
Act specified in clause (ii) of the term "Adverse Act" in Section 1 until such
time as there is a Final Determination that the Member's actions or failure to
act constituted an Adverse Act, if the affected Member timely delivered a
Contest Notice.
The election of a remedy specified in clause (i) or (ii) above may be
exercised by notice given to the Adverse Member within ninety (90) days after
the Member making such election
40
obtains actual knowledge of the occurrence of such Adverse Act, including, if
applicable, that any cure period has expired; PROVIDED that, if an election
pursuant to clause (ii) above is made to seek an injunction, specific
performance or other equitable relief and a final judgment in such action is
rendered denying such equitable remedy and no election was made pursuant to
clause (i) above, then, by notice given within ten (10) days after such final
judgment is rendered, the non-Adverse Member may elect to pursue the remedies
specified in clause (i) above unless (x) prior to the giving of such notice, the
Adverse Member has cured in full (or caused to be cured in full) the Adverse Act
in question and no other Adverse Act with respect to such Adverse Member has
occurred and is continuing or (y) the final judgment denying equitable relief
specifically held that there was no Adverse Act.
Except as provided in Section 12.1(b), the failure to elect a remedy with
respect to the subject Adverse Act within the time periods provided in the
preceding paragraph shall be conclusively presumed to be a waiver of the
remedies provided in this Section 12 with respect to the subject Adverse Act.
Unless resort to such remedy has been waived as set forth in the
immediately preceding paragraph, the Company shall be entitled to recover from
the Adverse Member in an appropriate proceeding any and all damages, losses and
expenses (including reasonable attorneys' fees and disbursements) (collectively,
"DAMAGES") suffered or incurred by the Company as a result of such Adverse Act;
PROVIDED that the Company shall not have or assert any claim against the Adverse
Member for punitive Damages or for indirect, special, or consequential Damages
suffered or incurred by the Company as a result of an Adverse Act; and PROVIDED
FURTHER that the amount the Company may recover in any action for Damages shall
be reduced by an amount equal to any positive difference between the Net Equity
of the Adverse Member's Membership Interest and the applicable Buy-Sell Price.
The resort to any remedy pursuant to this Section 12.1(a) shall not for any
purpose be deemed to be a waiver of any remedy not described in this Section
12.1(a) and otherwise available hereunder or under applicable law.
(b) If the Company is dissolved pursuant to Section 13.1(a) at any time
as a result of a Dissolution Event that occurs prior to a remedy having been
elected pursuant to Section 12.1(a) with respect to any Adverse Member, the time
periods for such election shall thereupon expire and the Liquidator shall deduct
from any amounts to be paid to such Adverse Member pursuant to Section 13.2 that
amount which it reasonably estimates to be sufficient to compensate the
non-Adverse Members for Damages incurred by them as a result of the Adverse Act
(subject to the limitations of Section 12.1(a)) and shall pay the same to the
non-Adverse Members on behalf of the Adverse Member.
12.2 ADVERSE ACT PURCHASE.
(a) DETERMINATION OF NET EQUITY OF ADVERSE MEMBER'S MEMBERSHIP INTEREST.
If any Member makes an election pursuant to Section 12.1(a)(i) to commence the
purchase procedures set forth in this Section 12.2, the Net Equity of the
Adverse Member's Membership Interest shall
41
be determined in accordance with this Section 12.2 as of the last day of the
Calendar Quarter immediately preceding the Calendar Quarter in which notice of
such election (the "ELECTION NOTICE") was given to the Adverse Member, and the
Adverse Member shall be obligated to sell to the Members in the manner provided
herein all but not less than all of the Adverse Member's Membership Interest in
accordance with this Section 12.2 at a purchase price (the "BUY-SELL PRICE")
equal to (A) in the case of any Adverse Act other than an Adverse Act identified
in clause (iv) of the definition of "Adverse Act" in Section 1, ninety percent
(90%) of the Net Equity thereof as so determined, and (B) in the case of an
Adverse Act specified in clause (iv), the Net Equity thereof.
(b) ELECTION TO PURCHASE MEMBERSHIP INTEREST OF ADVERSE MEMBER. For a
period ending at 11:59 p.m. (local time at the Company's principal office) on
the thirtieth (30th) day following the day on which notice of the Adverse
Member's Net Equity is given pursuant to Section 12.3 (the "ELECTION PERIOD"),
each Member who is not an Adverse Member, may elect, by notice to the Adverse
Member (the "PURCHASE NOTICE"), to purchase, or designate a third party to
purchase, all or any portion of the Membership Interest of the Adverse Member,
which notice shall state the maximum Membership Interest that such non-Adverse
Member, or such designated third party (in each case, the "PURCHASING MEMBER"),
is willing to purchase (each a "PURCHASE COMMITMENT"). If the aggregate
Purchase Commitments made by the Purchasing Members are equal to at least one
hundred percent (100%) of the Adverse Member's Membership Interest, then subject
to Section 11.12 and the following sentence, each Purchasing Member shall be
obligated to purchase, and the Adverse Member shall be obligated to sell to such
Purchasing Member, that portion of the Adverse Member's Membership Interest that
corresponds to the ratio of the allocation of Profits to such Purchasing Member
to the aggregate allocation of Profits to all Purchasing Members; PROVIDED that,
if any Purchasing Member's Purchase Commitment was for an amount less than its
proportionate share of the Adverse Member's Membership Interest as so
determined, the portion of the Adverse Member's Membership Interest not so
committed to be purchased shall be allocated to the other Purchasing Members;
and PROVIDED FURTHER, that each other Purchasing Member shall not be obligated
to purchase in excess of the proportion of the Membership Interest set forth in
the Purchase Commitment delivered by such other Purchasing Member. If the other
Members do not elect to purchase the entire Membership Interest of the Adverse
Member, the Adverse Member shall be under no obligation to sell any portion of
its Membership Interest to any Member.
(c) TERMS OF PURCHASE; CLOSING. Unless the Purchasing Members and the
Adverse Member otherwise agree, the closing of the purchase and sale of the
Adverse Member's Membership Interest shall occur at the principal office of the
Company at 10:00 a.m. (local time at the place of the closing) on the first
Business Day occurring on or after the thirtieth (30th) day following the last
day of the Election Period (subject to Section 12.5). At the closing, the
Purchasing Members shall pay to the Adverse Member, by cash or other immediately
available funds, the purchase price for the Adverse Member's Membership Interest
and the Adverse Member shall deliver to the Purchasing Members good title, free
and clear of any liens or encumbrances (other than those created by this
Agreement) to the Adverse Member's Membership Interest thus purchased.
42
At the closing, the Members shall execute such documents and instruments of
conveyance as may be necessary or appropriate to effectuate the transactions
contemplated hereby, including the Transfer of the Adverse Member's Membership
Interest to the Purchasing Members and the assumption by each Purchasing Member
of the Adverse Member's obligations with respect to the Adverse Member's
Membership Interest Transferred to such Purchasing Member. The Company and each
Member shall bear its own costs of such Transfer and closing, including
attorneys' fees and filing fees. The cost of determining Net Equity shall be
borne one-half by the Adverse Member and one-half by the Purchasing Member.
12.3 NET EQUITY. The "Net Equity" of a Member's Membership Interest, as
of any day, shall be the amount that would be distributed to such Member in
liquidation of the Company pursuant to Section 13.2 if (i) the Company's
business were sold substantially as an entirety for Gross Appraised Value,
(ii) the Company paid, or established reserves pursuant to Section 13.2 for the
payment of, all Company liabilities and (iii) the Company distributed the
remaining proceeds to the Members in liquidation, all as of such day.
The Net Equity of a Member's Membership Interest shall be determined,
without audit or certification, from the books and records of the Company by the
Company's accountants. The Net Equity of a Member's Membership Interest shall
be determined within thirty (30) days of the day upon which the accountants are
apprised in writing of the Gross Appraised Value of the Company's Property, and
the amount of such Net Equity shall be disclosed to the Company and each of the
Members by written notice ("NET EQUITY NOTICE"). The Net Equity determination
of the accountants shall be final and binding in the absence of a showing of
manifest error.
12.4 GROSS APPRAISED VALUE.
(a) "GROSS APPRAISED VALUE," as of any day, shall be equal to the fair
market value of Company Property as of such day. As used herein, as of any day,
"fair market value" of the Property means the price at which a willing seller
would sell, and a willing buyer would buy, the Property, free and clear of all
liens, security interests or other encumbrances, in an arm's length transaction
for cash, without time constraints and without being under any compulsion to buy
or sell.
(b) The Executive Committee shall retain a qualified and independent
valuer to make a determination of Gross Appraised Value when any such
determination is required hereunder and to report thereon to the Executive
Committee. Such report will not be binding on the Executive Committee who shall
make the final determination of the Gross Appraised Value within 30 days of
receipt of the report of the valuer. Notwithstanding, the foregoing provisions
of this Section 12.4(b), in the event that an independent transaction has taken
place within the previous twelve months which in the reasonable opinion of the
Executive Committee establishes a reasonable basis for the determination of the
Gross Appraised Value, the Executive Committee shall not be required to retain a
valuer and shall independently establish the Gross Appraised Value within 60
days of a request to do so hereunder. The Executive Committee shall apprise the
Company's accountants in writing of the Gross Appraised Value forthwith after it
is determined.
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12.5 EXTENSION OF TIME. If any Transfer of a Member's Membership
Interest in accordance with this Article 12 or Article 11 requires the consent,
approval, waiver, or authorization of any governmental authority or of the
stockholders of a Member or any of its Affiliates as a condition to the lawful
and valid Transfer of such Member's Membership Interest to the proposed
transferee thereof, then each of the time periods provided in this Article 12 or
Article 11, as applicable, for the closing of such Transfer shall be suspended
for the period of time during which any such consent, approval, waiver, or
authorization is being diligently pursued; PROVIDED HOWEVER, that in no event
shall the suspension of any time period pursuant to this Section 12.5 extend for
more than three hundred sixty-five (365) days other than in the case of a
purchase of an Adverse Member's Membership Interest. Each Member agrees to use
its diligent efforts to obtain, or to assist the affected Member or the Managers
in obtaining, any such consent, approval, waiver, or authorization and shall
cooperate and use its diligent efforts to respond as promptly as practicable to
all inquiries received by it, by the affected Member or by the Managers from any
governmental authority for initial or additional information or documentation in
connection therewith. Any extension of time pursuant to this Section 12.5 will
not otherwise effect the terms of the Transfer in question including without
limitation any determination of Gross Appraised Value or Net Equity in
connection therewith and any such determination shall remain in effect and will
be utilized in connection with the ultimate completion of the Transfer in
question.
ARTICLE 13
DISSOLUTION AND WINDING UP
13.1 DISSOLUTION EVENTS.
(a) DISSOLUTION. The Company shall dissolve and shall commence winding
up and liquidating upon the first to occur of any of the following (each a
"DISSOLUTION EVENT"):
(i) A judicial determination that an event has occurred that
makes it unlawful, impossible, or impractical to carry on the Business;
(ii) The Bankruptcy, dissolution, retirement, resignation, or
expulsion of any Member; PROVIDED that any such event will not be deemed a
Dissolution Event in the event that there are at least two remaining Members and
each remaining Member agrees to continue the business of the Company within
ninety (90) days after the occurrence of such an event.
(iii) The Approval of the Members; or
(iv) If the Subsidiary has not:
(A) recorded premium income in excess of $0.00 for the six
month period following the Effective Date;
(B) recorded premium income in excess of $5 million for
the twelve month period following the Effective Date; or
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(C) recorded premium income in excess of $10 million for
the eighteen month period following the Effective Date.
The Members hereby agree that, notwithstanding any provision of the Act,
the Company shall not dissolve prior to the occurrence of a Dissolution Event.
(b) RECONSTITUTION. If it is determined, by a court of competent
jurisdiction, that the Company has dissolved prior to the occurrence of a
Dissolution Event, then within an additional ninety (90) days after such
determination (the "RECONSTITUTION PERIOD"), all of the Members may elect to
reconstitute the Company and continue its business on the same terms and
conditions set forth in this Agreement by forming a new limited liability
company on terms identical to those set forth in this Agreement. Unless such an
election is made within the Reconstitution Period, the Company shall liquidate
and wind up its affairs in accordance with Section 13.2 hereof. If such an
election is made within the Reconstitution Period, then:
(i) The reconstituted limited liability company shall continue
until the occurrence of a Dissolution Event as provided in this Section 13.1(a);
(ii) Unless otherwise agreed by way of an Approval of the Members,
the Certificate and this Agreement shall automatically constitute the
Certificate and Agreement of such new Company. All of the assets and
liabilities of the dissolved Company shall be deemed to have been automatically
assigned, assumed, conveyed and transferred to the new Company. No bond,
collateral, assumption or release of any Member's or the Company's liabilities
shall be required; PROVIDED that the right of the Members to select successor
managers and to reconstitute and continue the Business shall not exist and may
not be exercised unless the Company has received an opinion of counsel that the
exercise of the right would not result in the loss of limited liability of any
Member and neither the Company nor the reconstituted limited liability company
would cease to be treated as a partnership for federal income tax purposes upon
the exercise of such right to continue.
13.2 WINDING UP. Upon the occurrence of (i) a Dissolution Event or
(ii) the determination by a court of competent jurisdiction that the Company has
dissolved prior to the occurrence of a Dissolution Event (unless the Company is
reconstituted pursuant to Section 13.1(b) hereof), the Company shall continue
solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Members,
and no Member shall take any action that is inconsistent with, or not necessary
to or appropriate for, the winding up of the Company's business and affairs,
PROVIDED that all covenants contained in this Agreement and obligations provided
for in this Agreement shall continue to be fully binding upon the Members until
such time as the Property has been distributed pursuant to this Section 13.2 and
the Certificate has been canceled pursuant to the Act. The Liquidator shall be
responsible for overseeing the winding up and dissolution of the Company, which
winding up and dissolution shall be completed as soon as practicable after the
occurrence of the applicable Dissolution Event. The Liquidator shall take full
account of the Company's liabilities and Property and shall cause the Property
or the proceeds from the sale
45
thereof (as determined pursuant to Section 13.9 hereof), to the extent
sufficient therefor, to be applied and distributed, to the maximum extent
permitted by law, in the following order:
(a) First, to creditors (including Members and Managers who are
creditors, to the extent otherwise permitted by law) in satisfaction of all of
the Company's debts and other liabilities (whether by payment or the making of
reasonable provision for payment thereof), other than liabilities for which
reasonable provision for payment has been made and liabilities for distribution
to Members under Section 18-601 or 18-604 of the Act;
(b) Second, except as provided in this Agreement, to Members and former
Members of the Company in satisfaction of liabilities for distribution under
Sections 18-601 or 18-604 of the Act; and
(c) The balance, if any, to the Members in accordance with the positive
balance in their Capital Accounts, after giving effect to all contributions,
distributions, and allocations for all periods.
No Member or Manager shall receive additional compensation for any services
performed pursuant to this Section 13.
13.3 COMPLIANCE WITH CERTAIN REQUIREMENTS OF REGULATIONS; DEFICIT CAPITAL
ACCOUNTS. In the event the Company is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the Members who have positive Capital Accounts, in
proportion to each Members Capital Account balance, in compliance with
Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any Member has a deficit
balance in his Capital Account (after giving effect to all contributions,
distributions, and allocations for all Calendar Years, including the Calendar
Year during which such liquidation occurs), such Member shall have no obligation
to make any contribution to the capital of the Company with respect to such
deficit, and such deficit shall not be considered a debt owed to the Company or
to any other Person for any purpose whatsoever. In the discretion of the
Liquidator, a pro rata portion of the distributions that would otherwise be made
to the Members pursuant to this Article 13 may be:
(a) Distributed to a trust established for the benefit of the Members
for the purposes of liquidating Company assets, collecting amounts owed to the
Company, and paying any contingent or unforeseen liabilities or obligations of
the Company. The assets of any such trust shall be distributed to the Members
from time to time, in the reasonable discretion of the Liquidator, in the same
proportions as the amount distributed to such trust by the Company would
otherwise have been distributed to the Members pursuant to Section 13.2 hereof;
or
(b) Withheld to provide a reasonable reserve for Company liabilities
(contingent or otherwise) and to reflect the unrealized portion of any
installment obligations owed to the Company, PROVIDED that such withheld amounts
shall be distributed to the Members as soon as practicable.
46
13.4 RIGHTS OF MEMBERS. Except as otherwise provided in this Agreement,
each Member shall look solely to the Property of the Company for the return of
its Capital Contribution and has no right or power to demand or receive Property
other than cash from the Company. If the assets of the Company remaining after
payment or discharge of the debts or liabilities of the Company are insufficient
to return such Capital Contribution, the Members shall have no recourse against
the Company or any other Member or Manager for the deficiency.
13.5 NOTICE OF DISSOLUTION/TERMINATION.
(a) In the event a Dissolution Event occurs or an event occurs that
would, but for provisions of Section 13.1, result in a dissolution of the
Company, the Managers shall, within thirty (30) days thereafter, provide written
notice thereof to each of the Members and to all other parties with whom the
Company regularly conducts business (as determined in the discretion of the
Managers) and shall publish notice thereof in a newspaper of general circulation
in each place in which the Company regularly conducts business (as determined in
the discretion of the Managers).
(b) Upon completion of the distribution of the Company's Property as
provided in this Article 13, the Company shall be terminated, and the Liquidator
shall cause the filing of the Certificate of Cancellation pursuant to Section
18-203 of the Act and shall take all such other actions as may be necessary to
terminate the Company.
13.6 ALLOCATIONS DURING PERIOD OF LIQUIDATION. During the period
commencing on the first day of the Calendar Year during which a Dissolution
Event occurs and ending on the date on which all of the assets of the Company
have been distributed to the Members pursuant to Section 13.2 hereof (the
"LIQUIDATION PERIOD"), the Members shall continue to share Profits, Losses,
gain, loss and other items of Company income, gain, loss or deduction in the
manner provided in Section 4 hereof.
13.7 CHARACTER OF LIQUIDATING DISTRIBUTIONS. All payments made in
liquidation of the interest of a Member in the Company shall be made in exchange
for the interest of such Member in Property pursuant to Section 736(b)(1) of the
Code, including the interest of such Member in Company goodwill.
13.8 THE LIQUIDATOR.
(a) DEFINITION. The "LIQUIDATOR" shall mean a Person appointed by the
Board of Managers to oversee the liquidation of the Company.
(b) FEES. The Company is authorized to pay a reasonable fee to the
Liquidator for its services performed pursuant to this Article 13 and to
reimburse the Liquidator for its reasonable costs and expenses incurred in
performing those services unless the liquidator is a Manager or a Member, in
which case such Manager or Member shall receive no fee.
(c) INDEMNIFICATION. The Company shall indemnify, save harmless, and
pay all judgments and claims against such Liquidator or any officers, directors,
agents or employees of
47
the Liquidator relating to any liability or damage incurred by reason of any act
performed or omitted to be performed by the Liquidator, or any officers,
directors, agents or employees of the Liquidator in connection with the
liquidation of the Company, including reasonable attorneys' fees incurred by the
Liquidator, officer, director, agent or employee in connection with the defense
of any action based on any such act or omission, which attorneys' fees may be
paid as incurred, except to the extent such liability or damage is caused by the
fraud, intentional misconduct of, or a knowing violation by the Liquidator of
the applicable laws or regulations or terms of the Liquidation's engagement
which violation was material to the cause of action.
13.9 FORM OF LIQUIDATING DISTRIBUTIONS. For purposes of making
distributions required by Section 13.2 hereof, the Liquidator shall sell all of
the Property and distribute the proceeds therefrom unless the Liquidator and the
Managers agree on the distribution of any Property in-kind, in which case the
Liquidator shall proceed as agreed with the Managers in such regard.
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ARTICLE 14
POWER OF ATTORNEY
14.1 MANAGERS AS ATTORNEYS-IN-FACT. Each Member hereby makes,
constitutes, and appoints Xxxxxxx X. Xxxxxx and R. Xxxxxx Xxxxx, either of whom
may act alone, with full power of substitution and resubstitution, such Member's
true and lawful attorneys-in-fact for it and in its name, place, and stead and
for its use and benefit, to sign, execute, certify, acknowledge, swear to, file,
publish and record (i) all certificates of formation, amended name or similar
certificates, and other certificates and instruments (including counterparts of
this Agreement) which the Board Managers may deem necessary to be filed by the
Company under the laws of the State of Delaware or any other jurisdiction in
which the Company is doing or intends to do business; (ii) any and all
amendments, restatements or changes to this Agreement and the instruments
described in clause (i), as now or hereafter amended, which the Board Managers
may deem necessary to effect a change or modification of the Company in
accordance with the terms of this Agreement, including, without limitation,
amendments, restatements or changes to reflect (A) any amendments adopted by the
Members in accordance with the terms of this Agreement, (B) the admission of any
substituted Member and (C) the disposition by any Member of his interest in the
Company; (iii) all certificates of cancellation and other instruments which the
Board Managers deem necessary or appropriate to effect the dissolution and
termination of the Company pursuant to the terms of this Agreement and (iv) any
other instrument which is now or may hereafter be required by law to be filed on
behalf of the Company or is deemed necessary by the Board Managers to carry out
fully the provisions of this Agreement in accordance with its terms. Each
Member authorizes each such attorneys-in-fact to take any further action which
such attorneys-in-fact shall consider necessary in connection with any of the
foregoing, hereby giving such attorneys-in-fact full power and authority to do
and perform each and every act or thing whatsoever requisite to be done in
connection with the foregoing as fully as such Member might or could do
personally, and hereby ratify and confirm all that any such attorneys-in-fact
shall lawfully do, or cause to be done, by virtue thereof or hereof.
14.2 NATURE OF SPECIAL POWER. The power of attorney granted to Xxxxxxx
X. Xxxxxx and R. Xxxxxx Xxxxx pursuant to this Article 14:
(a) Is a special power of attorney coupled with an interest and is
irrevocable;
(b) May be exercised by any such attorneys-in-fact by listing the
Members executing any agreement, certificate, instrument, or other document with
the single signature of any such attorney-in-fact acting as attorney-in-fact for
such Members; and
(c) Shall survive and not be affected by the subsequent Bankruptcy,
insolvency, dissolution, or cessation of existence of a Member and shall survive
the delivery of an assignment by a Member of the whole or a portion of its
interest in the Company (except that where the assignment is of such Member's
entire interest in the Company and the assignee, with the consent of the other
Members as provided herein, is admitted as a substituted Member, the power of
attorney shall survive the delivery of such assignment for the sole purpose of
enabling
49
any such attorney-in-fact to effect such substitution) and shall extend to such
Member's, or assignee's successors and assigns.
ARTICLE 15
MISCELLANEOUS
15.1 NOTICES. Any notice, payment, demand, or communication required or
permitted to be given by any provision of this Agreement shall be in writing and
shall be deemed to have been delivered, given, and received for all purposes
(i) if delivered personally to the Person or to an officer of the Person to whom
the same is directed, or (ii) when the same is actually received, if sent either
by registered or certified mail, postage and charges prepaid, or by facsimile,
if such facsimile is followed by a hard copy of the facsimile communication sent
promptly thereafter by registered or certified mail, postage and charges
prepaid, addressed as follows, or to such other address as such Person may from
time to time specify by notice to the Members and Managers:
(a) If to the Company, to the address determined pursuant to Section 2.4
hereof;
(b) If to the Managers, to the address set forth in EXHIBIT D hereto;
(c) If to a Member, to the address set forth in EXHIBIT B hereto.
15.2 BINDING EFFECT. Except as otherwise provided in this Agreement,
every covenant, term, and provision of this Agreement shall be binding upon and
inure to the benefit of the Members and their respective successors,
transferees, and assigns.
15.3 CONSTRUCTION. Every covenant, term, and provision of this Agreement
shall be construed simply according to its fair meaning and not strictly for or
against any Member.
15.4 TIME. In computing any period of time pursuant to this Agreement,
the day of the act, event or default from which the designated period of time
begins to run shall not be included, but the time shall begin to run on the next
succeeding day. The last day of the period so computed shall be included,
unless it is a Saturday, Sunday or legal holiday, in which event the period
shall run until the end of the next day which is not a Saturday, Sunday or legal
holiday.
15.5 HEADINGS. Section and other headings contained in this Agreement
are for reference purposes only and are not intended to describe, interpret,
define, or limit the scope, extent, or intent of this Agreement or any provision
hereof.
15.6 SEVERABILITY. Except as otherwise provided in the succeeding
sentence, every provision of this Agreement is intended to be severable, and, if
any term or provision of this Agreement is illegal or invalid for any reason
whatsoever, such illegality or invalidity shall not affect the validity or
legality of the remainder of this Agreement. The preceding sentence of this
Section 15.6 shall be of no force or effect if the consequence of enforcing the
remainder of this Agreement without such illegal or invalid term or provision
would be to cause any Member to lose the material benefit of its economic
bargain.
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15.7 INCORPORATION BY REFERENCE. Every exhibit, schedule, and other
appendix attached to this Agreement and referred to herein is not incorporated
in this Agreement by reference unless this Agreement expressly otherwise
provides.
15.8 VARIATION OF TERMS. All terms and any variations thereof shall be
deemed to refer to masculine, feminine, or neuter, singular or plural, as the
identity of the Person or Persons may require.
15.9 GOVERNING LAW. The laws of the State of Delaware shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties arising hereunder.
15.10 PAYMENT OF FEES AND EXPENSES. The Company shall pay all expenses
incurred with respect to this Agreement. If any remedy at law or in equity is
necessary to enforce the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
15.11 WAIVER OF JURY TRIAL. Each of the Members irrevocably waives to the
extent permitted by law, all rights to trial by jury and all rights to immunity
by sovereignty or otherwise in any action, proceeding or counterclaim arising
out of or relating to this Agreement.
15.12 COUNTERPART EXECUTION. This Agreement may be executed in any number
of counterparts with the same effect as if all of the Members had signed the
same document. All counterparts shall be construed together and shall
constitute one agreement.
15.13 SPECIFIC PERFORMANCE. Each Member agrees with the other Members
that the other Members would be irreparably damaged if any of the provisions of
this Agreement are not performed in accordance with their specific terms and
that monetary damages would not provide an adequate remedy in such event.
Accordingly, it is agreed that, in addition to any other remedy to which the
nonbreaching Members may be entitled, at law or in equity, the nonbreaching
Members shall be entitled to injunctive relief to prevent breaches of the
provisions of this Agreement and specifically to enforce the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having subject matter jurisdiction thereof.
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IN WITNESS WHEREOF, the parties have executed and entered into this
Operating Agreement as of the day first above set forth.
/s/ R. Xxxxxx Xxxxx
----------------------------------------
R. XXXXXX XXXXX
/s/ Xxxxxx X. Xxxxx
----------------------------------------
XXXXXX X. XXXXX
/s/ Xxxxxxxx X.Xxxxx
----------------------------------------
XXXXXXXX X. XXXXX
/s/ Xxxx X. Xxxxxx
----------------------------------------
XXXX X. XXXXXX
XXXXX FINANCIAL, a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Sr. V.P.
52
