LIMITED LIABILITY COMPANY AGREEMENT
Dated as of
October 3, 2000
The undersigned (the "MEMBERS," which term shall include any Persons
hereafter admitted to the Company pursuant to Article V of this Agreement and
shall exclude any Persons who cease to be Members pursuant to Article VI of this
Agreement) hereby agree to form and hereby form, as of the date and year first
above written, a limited liability company organized in series (the "COMPANY"),
pursuant to the provisions of the Delaware Limited Liability Company Act which
shall be governed by, and operated pursuant to, the terms and provisions of this
Limited Liability Company Agreement (the "AGREEMENT").
ARTICLE I
General Provisions
Section 1.1 DEFINITIONS. For the purposes of this Agreement:
(a) "Adjusted Capital Account Deficit" shall mean, with
respect to any Member, the deficit balance, if any, in such Member's Capital
Account with respect to any class or series as of the end of the relevant Fiscal
Year, after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts which such Member
is obligated to restore or is deemed to be obligated to restore pursuant to
Treasury Regulations under Section 704 of the Code; and
(ii) Debit to such Capital Account the items described in
Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Treasury Regulations Section 1.704-l(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
(b) "Advisers Act" shall mean the Investment Advisers Act of
1940, as amended.
(c) "Affiliate" shall have the meaning as set forth in the
Investment Company Act.
(d) "Business Day" shall mean any day other than (i)
Saturday or Sunday and (ii) any other day on which banks located in New York
City are required or authorized by law to remain closed.
(e) "Agreement" shall have the meaning set forth in the
preamble.
(f) "Capital Call" shall have the meaning set forth in
Section 3.1(b).
(g) "Capital Call Date" shall have the meaning set forth in
Section 3.1(b).
(h) "Capital Call Notice" shall have the meaning set forth
in Section 3.1(b).
(i) "Capital Commitment" shall have the meaning set forth in
Section 3.1(a).
(j) "Capital Account" shall have the meaning set forth in
Section 3.2(a).
(k) "Capital Contributions" shall have the meaning set forth
in Section 1.5(a).
(l) "Closing" shall mean the Initial Closing and any date as
of which the Managing Member shall admit one or more additional members to a
class or series of the Company.
(m) "Code" shall have the meaning set forth in Section
2.2(i).
(n) "Company" shall have the meaning set forth in the
Preamble, provided, however, that references to the Company shall also be
references to the series of the Company as the context may require.
(o) "Failed Capital Call" shall have the meaning set forth
in Section 3.1(f).
(p) "Fiscal Period" shall have the meaning set forth in
Section 1.3.
(q) "Fiscal Quarter" shall have the meaning set forth in
Section 1.3.
(r) "Fiscal Year" shall have the meaning set forth in
Section 1.3.
(s) "Former Member" shall have the meaning set forth in
Section 1.5(e).
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(t) "Gross Asset Value" means, with respect to any asset,
such asset's adjusted basis for Federal income tax purposes, except as adjusted
by the Managing Member as provided in this Agreement.
(u) "Hot Issue" shall have the meaning set forth in Section
3.3(a).
(v) "Hot Issue Nonparticipant Interests" shall mean the
percentage obtained by dividing the Capital Account balance of a Member
ineligible to participate in a Hot Issue as of the date of determination by the
sum of the Capital Account balances of all Members in such class or series
ineligible to participate in such Hot Issue as of the date of determination.
(w) "Hot Issue Participant Interest" shall mean the
percentage obtained by dividing the Capital Account balance of a Member eligible
to participate in a Hot Issue as of the date of determination divided by the sum
of the Capital Account balances of all Members in such class or series eligible
to participate in such Hot Issue as of the date of determination.
(x) "Immediate Family Member" shall mean with respect to a
natural person any parent, step-parent, spouse or former spouse, lineal
descendant of such person or of any parent, step-parent, spouse or former spouse
of such person and shall include adoptive relationships.
(y) "Indemnified Persons" shall have the meaning set forth
in Section 2.7(a).
(z) "Initial Closing" means the first date as of which the
class or series of the Company receives the initial Capital Contributions from
or on behalf of Members.
(aa) "Interests" shall have the meaning set forth in Section
1.5(e).
(ab) "Investment Company Act" shall mean the Investment
Company Act of 1940, as amended.
(ac) "Managing Member" shall have the meaning set forth in
Section 1.5(b).
(ad) "Marketable Securities" shall mean securities that are
(a) traded on an established U.S. national or non-U.S. securities exchange or
(b) reported through NASDAQ or a comparable established non-U.S.
over-the-counter trading system or (c) otherwise traded over-the-counter or
purchased and sold in transactions effected pursuant to Rule 144A under the
Securities Act of 1933, as amended ("SECURITIES ACT"), in each case that the
Managing Member believes are marketable at a price approximating their value as
determined in Section 3.5 within a reasonable period of time and are not subject
to restrictions on transfer under the Securities Act or other applicable
securities laws or subject to contractual restrictions on transfer.
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(ae) "Members" shall have the meaning set forth in Section
1.5(c).
(af) "Net Income" means the net income generated by the
class or series of the Company with respect to a Fiscal Year, as determined for
Federal income tax purposes, PROVIDED that such income shall be increased by the
amount of all income earned by such class or series during such period that is
exempt from Federal income tax and decreased by the amount of all expenditures
made by the class or series of the Company during such period that are not
deductible for Federal income tax purposes and that do not constitute capital
expenditures.
(ag) "Net Loss" means the net loss generated by the class or
series of the Company with respect to a Fiscal Year, as determined for Federal
income tax purposes, PROVIDED that such loss shall be decreased by the amount of
all income earned by such class or series during such period which is exempt
from Federal income tax and increased by the amount of all expenditures made by
the class or series of the Company during such period that are not deductible
for Federal income tax purposes and that do not constitute capital expenditures.
(ah) "Nonfunding Member" shall have the meaning set forth in
Section 3.1(f).
(ai) "Nonparticipant Capital Utilization" shall mean the
product obtained by multiplying the amount of capital of a class or series
invested in a Hot Issue by the sum of the percentage of Interests of the Members
in such class or series who are not participating in the Net Income or Net Loss
realized by the class or series from such Hot Issue in accordance with the
requirements of Section 3.3(a).
(aj) "Nonrecourse Deductions" shall have the meaning set
forth in Treasury Regulations Section 1.704-2(b)(1).
(ak) "Nonrecourse Liability" shall have the meaning set
forth in Treasury Regulations Section 1.752-1(a)(2).
(al) "Organizational Expenses" shall have the meaning set
forth in Section 2.8(a).
(am) "Partner Nonrecourse Debt" shall have the meaning set
forth in Treasury Regulations Section 1.704-2(b)(4).
(an) "Partner Nonrecourse Debt Minimum Gain" shall have the
meaning set forth in Treasury Regulations Section 1.704-2(i)(2).
(ao) "Partner Nonrecourse Deductions" shall have the meaning
set forth in Treasury Regulations Section 1.704-2(i)(1).
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(ap) "Partnership Minimum Gain" shall have the meaning set
forth in Treasury Regulations Section 1.704-2(b)(2).
(aq) "Pass-Thru Member" shall have the meaning set forth in
Section 8.3.
(ar) "Person" shall mean any natural person, corporation,
partnership, trust, limited liability company or other entity.
(as) "Prime Rate" shall mean the rate of interest published
from time to time in The Wall Street Journal, Eastern Edition, designated
therein as the prime rate.
(at) "Regulatory Allocations" shall have the meaning set
forth in Section 3.3(c).
(au) "Related Person" shall mean the Managing Member, an
officer, director or employee of the Managing Member or an Immediate Family
Member of any of the foregoing, a member, shareholder, member or other equity
owner of the Managing Member or any Person substantially all of the beneficial
interests in which are owned by or for the benefit of one or more of the
foregoing.
(av) "Tax Matters Member" shall have the meaning set forth
in Section 8.3.
(aw) "Temporary Investment" shall mean investments in (a)
cash or cash equivalents, (b) marketable direct obligations issued or
unconditionally guaranteed by the United States, or issued by any agency
thereof, maturing within one year from the date of acquisition thereof, (c)
money market instruments, commercial paper or other short-term debt obligations
having at the date of purchase by the Fund the highest or second highest rating
obtainable from either Standard & Poor's Ratings Services or Xxxxx'x Investors
Services, or their respective successors, (d) interest bearing accounts at a
registered broker-dealer, (e) money market mutual funds, (f) certificates of
deposit maturing within one year from the date of acquisition thereof issued by
commercial banks incorporated under the laws of the United States or any state
thereof or the District of Columbia, each having at the date of acquisition by
the Fund combined capital and surplus of not less than $100 million, (g)
overnight repurchase agreements with primary Federal Reserve Bank dealers
collateralized by direct U.S. Government obligations, (h) short- and medium-term
fixed income investments paying interest exempt, in the opinion of counsel to
the issuer thereof, from federal income tax, (i) pooled investment funds or
accounts that invest only in securities or instruments of the type described in
(a) through (h).
(ax) "T-Xxxx Rate" shall mean the 90 day U.S. Treasury Xxxx
rate in effect from time to time as determined by the Managing Member in its
sole and absolute discretion.
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(ay) "THL Fund V" shall mean the Xxxxxx X. Xxx Equity Fund
V, L.P.
(az) "Treasury Regulations" shall mean the income tax
regulations promulgated under the Code, as amended, reformed or otherwise
modified from time to time.
(aba) "Unaffiliated Interests" shall have the meaning set
forth in Section 1.7(b).
Section 1.2 COMPANY NAME. The Company shall do business under the name
of Xxxxxx Investments Employees' Securities Company I LLC or such other name as
the Manager may select from time to time. Each series shall do business under
any name deemed advisable by the Managing Member.
Section 1.3 FISCAL PERIODS. The fiscal year of each class or series of
the Company ("FISCAL YEAR") shall end on December 31 of each year (or such other
day as determined in the sole and absolute discretion of the Managing Member),
unless the designation of such class or series establishes a different date.
Section 1.4 PRINCIPAL OFFICE. The principal office of the Company
shall be at Xxx Xxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, or such other
place as may from time to time be designated by the Managing Member. The
Managing Member shall give prompt notice of any change to each Member.
Section 1.5 LIABILITY OF MEMBERS.
(a) The names of all of the Members and the amounts of their
respective contributions to each class or series of the Company (the "CAPITAL
CONTRIBUTIONS") for each of their Capital Accounts from time to time will be set
forth in the books and records of the Company.
(b) Subject to the obligations of the Members and former
Members pursuant to Section 1.5(c), that Member who is designated in Part I of
the Schedule as the Managing Member (the "MANAGING MEMBER") shall be liable only
to the extent of its Capital Account.
(c) The Managing Member and those Members who are designated
in Part II of the Schedule as Members of one or more series or class as to which
they have been admitted as Members (the "MEMBERS") shall be liable for the
repayment and discharge of all debts and obligations of the Company incurred
during any period during which they are or were Members of the Company only to
the extent of their respective interests in any class or series in the Company
during such period with respect to liabilities attributable to such class or
series and shall not otherwise have any liability in respect of the debts and
obligations of the Company. Notwithstanding the previous sentence, in no event
shall any Member be obligated to make any additional contribution whatsoever to
the
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Company, and in no event shall any Member or former Member have any liability
for the repayment and discharge of the debts and obligations of the Company
(apart from such Member's interest in the Company as aforesaid and in reserves
or other amounts not yet distributed in respect of such former Member's interest
in the Company) except to the extent provided by Sections 18-607(b) and (c) of
the Delaware Limited Liability Company Act.
(d) Up to the limit of their respective interests in any
class or series of the Company for a particular Fiscal Period, the Members and
all former Members shall share all losses, liabilities or expenses suffered or
incurred by virtue of the operation of the preceding paragraphs of this Section
1.5 in the proportions of their respective interests in the Company for the sets
of Capital Accounts and relevant Fiscal Period to which any debts or obligations
of such class or series are attributable. No series shall be liable for the
obligations of any other series. Series may be created in classes, with each set
of classes forming one series. The Managing Member may be the same or different
with respect to one or more classes or series. Each series shall be a separate
partnership for tax purposes and shall maintain separate books and records.
General liabilities of the Company shall be prorated across the series based on
net asset value, and all direct expenses of each series shall be charged
separately to such series.
(e) As used in this Agreement (except as otherwise
specified), the terms "INTERESTS IN THE COMPANY," "INTEREST IN THE COMPANY" and
"INTERESTS" shall mean with respect to each Member (or former Member) the
aggregate amount in all of such Member's (or former Member's) Capital Accounts
pursuant to the terms and provisions of this Agreement as of the end of a Fiscal
Period. As used in this Agreement, the term "FORMER MEMBER" refers to such
Persons as hereafter from time to time cease to be Members pursuant to the terms
and provisions of this Agreement.
Section 1.6 PURPOSES OF COMPANY.
(a) The Company is organized for the purpose of (i) making
direct, side-by-side co-investments, to the extent practicable, with the THL
Fund V ("PORTFOLIO INVESTMENTS") and (ii) engaging in all activities and
transactions as the Managing Member may deem reasonably necessary, advisable or
incidental in connection therewith, including, without limitation:
(A) to place record title to, or the right to use,
Company assets in, the name or names of one or more nominees (corporate or
otherwise) or trustees for any purpose convenient or beneficial to the
Company;
(B) to have its business and affairs managed by the
Managing Member, subject to and in accordance with Article II;
(C) to engage third parties to provide administrative
services to the Company or for any other permissible activity; and
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(D) to engage personnel and employees of the Company,
the Managing Member or its affiliates, whether part-time or full-time, to
engage attorneys, independent auditors or such other persons as the
Managing Member may deem necessary or advisable, and to do all such other
acts as the Managing Member, or such personnel or employees acting within
the scope of authority granted to them by the Managing Member or this
Agreement, may deem necessary or advisable in connection with carrying out
the business of the Company including, without limitation, subject to the
supervision of the Company, to offer and sell interests in the Company to
prospective investors in accordance with the Securities Act, as amended or
any exemption thereunder and all applicable state securities or blue sky
laws with such sales charges payable by the Managing Member and to do all
things necessary or appropriate in connection with making such offers and
sales.
Section 1.7 ASSIGNABILITY OF INTEREST.
(a) Except with the express written consent of the Managing
Member, which may be withheld in its sole and absolute discretion, a Member may
not assign, sell, transfer, pledge, hypothecate or otherwise dispose of any of
the attributes of its interest in the Company in whole or in part to any Person.
Any assignment, sale, transfer, pledge, hypothecation or other disposition made
in violation of this Section 1.7 shall be void and of no effect. Furthermore, no
transferee of an Interest shall become a Member except upon admission pursuant
to Section 5.1 upon the consent of the Managing Member which may be withheld in
its sole and absolute discretion.
(b) Without the consent of Members holding a majority of the
Unaffiliated Interests ("UNAFFILIATED INTERESTS" being all Company interests
other than those held by the Managing Member and its Affiliates and Related
Persons), the Managing Member may not assign, sell, transfer, pledge,
hypothecate or otherwise dispose of any of the attributes of its interest in the
Company, as Managing Member, as a whole or in part, to any Person, (i) unless,
immediately prior to and after such assignment, sale, transfer, pledge,
hypothecation or other disposal, such Person was controlled by the Managing
Member or by the Person or Persons who controlled the Managing Member
immediately prior to such transaction or (ii) except upon written notice given
to all Members 60 days in advance of the proposed assignment, sale, transfer,
pledge, hypothecation or other disposal.
Section 1.8 MINIMUM INITIAL INVESTMENT. The minimum initial investment
in any class or series of the Company by any Member shall be $25,000 or such
greater or lesser amount as the Managing Member shall determine from time to
time in its sole and absolute discretion.
Section 1.9 REGISTERED OFFICE AND AGENT IN DELAWARE. The address of
the Company's registered office in the State of Delaware is 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx, which may be changed by the Managing Member from time to
time in its sole and absolute discretion. The name of its registered agent at
that address is The Corporation Trust
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Company. The Company may from time to time have such other place or places of
business within or without the State of Delaware as may be designated by the
Managing Member.
ARTICLE II
Management of Company
Section 2.1 MANAGEMENT GENERALLY. The management of the Company and
each class or series thereof shall be vested exclusively in the Managing Member.
The Members shall have no part in the management of the Company, and shall have
no authority or right in their capacity as Members to act on behalf of the
Company in connection with any matter. Employees of the Company shall have
authority to act on behalf and in the name of the Company to the extent
authorized by the Managing Member acting as the equivalent of the board of
directors of a corporation or as expressly authorized by this Agreement.
Section 2.2 AUTHORITY OF MANAGING MEMBER. The Managing Member shall
have the power by itself on behalf and in the name of the Company and/or its
series to carry out any and all of the objects and purposes of the Company
and/or its series set forth in Section 1.6 or in an appendix hereto designating
the obligations, limitations and purposes of any series, and to perform all acts
and enter into and perform all contracts and other undertakings necessary or
advisable or incidental thereto, including, without limitation, the power to:
(a) exercise with full discretion to purchase, sell and
exercise voting or consent rights with respect to all instruments, investments
and other property in which the Company assets may be invested and otherwise on
such terms and conditions as the Managing Member shall determine;
(b) open, maintain and close accounts with brokers, dealers,
banks, currency dealers and others, including the Managing Member and its
affiliates, and issue all instructions and authorizations to entities regarding
the purchase and sale or entering into, as the case may be, of securities,
certificates of deposit, bankers acceptances, agreements for the borrowing and
lending of portfolio securities and other assets, instruments and investments
for the purpose of seeking to achieve the Company purposes as well as to
facilitate capital contributions, distributions, withdrawals, the payment of
Company expenses and the business and affairs of the Partnership in general;
(c) open, maintain and close bank accounts and draw checks
or other orders for the payment of monies;
(d) acquire, lease, sell, hold or dispose of any assets,
liabilities or investments in the name or for the account of the Company or
enter into any contract or endorsement in the name or for the account of the
Company with respect to any such assets or investments or in any other manner
bind the Company to acquire, lease, sell, hold or dispose of any such assets or
investments whatsoever on such terms as the Managing
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Member shall determine and to otherwise deal in any manner with the assets of
the Partnership in accordance with the purposes of the Managing Member;
(e) borrow money from any source or with any party, upon
such terms and conditions as the Managing Member may deem advisable and proper,
to execute promissory notes, drafts, bills of exchange and other instruments and
evidences of indebtedness and to secure the payment thereof by mortgage, pledge
or assignment of or security interest in all or any part of property then owned
or thereafter acquired by the Company, and refinance, recast, modify or extend
any of the obligations of the Company and the instruments securing those
obligations;
(f) borrow money or otherwise incur indebtedness on behalf
of a Member from any source upon the terms described in Section 3.1(f) in the
event that such Member fails to fund a Capital Call on a specified date;
(g) employ, retain, or otherwise secure or enter into
contracts, agreements and other undertakings with persons in connection with the
management and operation of the Company's business, including, without
limitation, any attorneys and accountants, and including, without limitation,
contracts, agreements or other undertakings and transactions with the Managing
Member, any other Member or any person controlling, under common control with or
controlled by the Managing Member or any other Member, all on such terms and for
such consideration as the Managing Member deems advisable; PROVIDED, HOWEVER,
that any such contracts, agreements or other undertakings and transactions with
the Managing Member or any other Member or any person controlling, under common
control with or controlled by the Managing Member or any other Member shall be
on terms and for consideration which are arm's-length and fair to the parties
consistent with the fiduciary standards applicable to the Managing Member and
shall also be subject to the terms of Section 2.5 to the extent applicable;
(h) take any and all action which is permitted under the
Delaware Limited Liability Company Act and which is customary or reasonably
related to the business of the Company;
(i) make such elections under the Internal Revenue Code of
1986, as amended (the "CODE"), and other relevant tax laws as to the treatment
of items of Company income, gain, loss, deduction and expense, and as to all
other relevant matters, as the Managing Member deems necessary or appropriate,
including, without limitation, elections referred to in Section 754 of the Code,
determination of which items of cash outlay are to be capitalized or treated as
current expenses, and selection of the method of accounting and bookkeeping
procedures to be used by the Company;
(j) bring or defend, pay, collect, compromise, arbitrate,
resort to legal action, or otherwise adjust claims or demands of or against the
Company;
(k) deposit, withdraw, invest, pay, retain and distribute
the Company's funds in a manner consistent with the provisions of this
Agreement;
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(l) cause the Company to carry such indemnification
insurance as the Managing Member deems necessary to protect it and any other
individual or entity entitled to indemnification by the Company pursuant to
Section 2.7;
(m) do any and all acts on behalf of the Company, and
exercise all rights and perform all obligations of the Company, with respect to
its interest in any property or any Person, including, without limitation, the
voting of securities, the filing of reports and other documents with
governmental authorities and self-regulatory organizations, participation in
arrangements with creditors, the institution and settlement or compromise of
suits and administrative proceedings and other like or similar matters;
(n) authorize any officer, director, employee or other agent
of the Managing Member or any employee or agent of the Company to act for and on
behalf of the Company in any or all of the foregoing matters and all matters
incidental thereto as fully as if such person were the Managing Member;
(o) create any classes or series of Members having such
relative rights, powers and duties as may from time to time be established by
the Managing Member, so long as such relative rights, powers and duties do not
adversely affect any of the rights, powers and duties of any Members who are
Members at the time of the creation of such classes or series, and to amend,
without the consent of any of the Members, the terms and provisions of this
Agreement to reflect such relative rights, powers and duties as are applicable
to such classes or series which have been created pursuant to this Section
2.2(o).
(p) Appoint persons to act as officers of the Company as
desirable, necessary or appropriate.
(q) make any determinations required hereunder including but
not limited to determinations of amounts attributable to Portfolio Investments;
amounts not attributable to Portfolio Investments; whether a disposition had
been complete or partial; and amounts credited or debited to each Capital
Account with respect to each Portfolio Investment.
Section 2.3 MEETINGS. There shall be no meetings of the Members unless
called by the Managing Member.
Section 2.4 RELIANCE BY THIRD PARTIES. Persons dealing with the
Company are entitled to rely conclusively upon the certificate of the Managing
Member or any officer to which it delegates authority to the effect that it is
then acting as the Managing Member of one or more classes or series or such
agent with respect to one or more classes or series and upon the power and
authority of the Managing Member and any employee or agent of the Managing
Member or the Company as herein set forth.
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Section 2.5 ACTIVITIES OF MANAGING MEMBER AND AFFILIATES; CONFLICTS OF
INTEREST.
(a) The Managing Member, its officers, directors, managers,
employees or other agents and agents and employees of the Company shall devote
so much of their time to the affairs of the Company as in their judgment the
conduct of the Company business shall reasonably require and the Managing
Member, its officers, directors, managers, employees or agents and agents and
employees of the Company shall not be obligated to do or perform any act or
thing in connection with the business of the Company not expressly set forth
herein. Notwithstanding anything to the contrary in this Agreement, the
officers, directors, managers and employees of the Managing Member and any
Person controlling, under common control with or controlled by the Managing
Member and any employees of the Company will be permitted to perform similar
duties for any entity.
(b) Nothing herein contained shall be deemed to preclude the
Managing Member or its Affiliates, its officers, directors, managers, employees
or other agents or agents of any of them or employees of the Company, from
engaging directly or indirectly in any other business or from directly or
indirectly purchasing, selling or holding securities, options, separate
accounts, investment contracts, commodities, futures, currency, currency units
and forward currency or currency unit contracts or any other asset and any
interests therein for their own accounts or for the account of any other Person,
whether as investment manager, dealer, broker or otherwise. No Member shall, by
reason of being a Member in the Company, have any right to participate in any
manner in any profits or income earned or derived by or accruing to the Managing
Member or its Affiliates, or its officers, directors, managers, employees or
other agents, from the conduct of any business other than the business of the
Company or from the conduct of any activities for any account other than that of
the Company.
(c) The Managing Member will allocate investment
opportunities that are appropriate for more than one entity or account sponsored
or managed by the Managing Member or its Affiliates in a manner determined to be
fair to such entities by the Managing Member acting in good faith in accordance
with applicable fiduciary standards. The Managing Member shall have the right to
cause the Company or other entities which the Company controls or invests in to
do business with any other investment partnership of which the Managing Member
is the General Partner or entities which such other partnership controls or
invests in, in each case on terms which are fair to the parties consistent with
the fiduciary standards applicable to the Managing Member. The Managing Member
shall have the right to cause the Company to execute trades in securities and
other instruments with or through the Managing Member or any of its affiliates
so long as such transactions substantially comply with all applicable regulatory
requirements and represent "best execution" in the good faith judgment of the
Managing Member, taking into account all factors pertinent to the transaction.
(d) Except as discussed in the offering documents provided
to investors prior to subscribing (as to which consent shall be deemed to have
been given), the Managing Member and its Affiliates may not, acting as
principal, purchase from or sell to
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the Company any securities unless the Managing Member shall have disclosed to
the Members, prior to completion of such transaction, the pertinent details
thereof and its interest therein and received the consent of Members holding a
majority of the Unaffiliated Limited Company Interests. The Managing Member and
its Affiliates may engage in agency cross transactions (as defined for purposes
of the Advisers Act) with the Company if the Managing Member and its Affiliates
comply with all pertinent provisions of such Act and the rules and regulations
thereunder and all other pertinent laws and regulations; provided, that the
Company shall have authority to revoke the foregoing authority by a resolution
adopted by Members holding a majority of the Unaffiliated Limited Liability
Company Interests.
Section 2.6 EXCULPATION. No Indemnified Person shall be liable to any
Member or the Company for any act or failure to act on behalf of the Company,
unless such act or failure to act resulted from the willful misfeasance, bad
faith or gross negligence of the Indemnified Person. Each Indemnified Person may
consult with counsel and accountants in respect of Company affairs and shall be
fully protected and justified in any action or inaction which is taken in
accordance with the advice or opinion of such counsel or accountants reasonably
selected. Notwithstanding any of the foregoing to the contrary, the provisions
of this Section 2.6 shall not be construed so as to relieve (or attempt to
relieve) any Indemnified Person of any liability, to the extent (but only to the
extent) that such liability may not be waived, modified or limited under
applicable law, but shall be construed so as to effectuate the provisions of
this Section 2.6 to the fullest extent permitted by law.
Section 2.7 INDEMNIFICATION OF MANAGING MEMBER AND OTHERS.
(a) The Company, out of its own assets and not out of the
assets of any Member (except as provided in Section 2.7(b) below), shall
indemnify and hold harmless the Managing Member and any of its officers,
directors, managers, members, shareholders, members, employees or agents, and/or
the legal representatives or Affiliates of Managing Member and any officer,
employee or agent of the Company and any member of any advisory board to the
Managing Member or the Company (herein collectively called the "INDEMNIFIED
PERSONS"), to the fullest extent permitted by law from and against any loss,
expense, judgment, settlement cost, fee and related expenses (including
attorneys' fees and expenses), costs or damages suffered or sustained by reason
of being or having been the Managing Member, an officer, director, member,
employee or agent (or a legal representative or controlling person of) of the
Managing Member, or any officer, employee or agent of the Company or any member
of any advisory board to the Managing Member or the Company, or arising out of
or in connection with action or failure to act on the part of such Indemnified
Person unless such act or failure to act was the result of the willful
misfeasance, bad faith or gross negligence of such Indemnified Person. To the
extent that such costs and expenses are directly attributable to a particular
class or series, such costs and expenses shall be borne entirely by such class
or series; such costs and expenses not attributable to any one class or series
will be allocated pro rata. The Company shall, upon advice of counsel that such
Indemnified Person is not likely not to be entitled to such indemnification,
advance to any Indemnified Person reasonable attorneys' fees and other costs and
expenses incurred in connection with the defense of any action or proceeding
which arises out of conduct
13
including any costs and expenses incurred in enforcing the indemnification under
this Section 2.7. The Managing Member hereby agrees and each other Indemnified
Person shall agree in the event that such an advance is made by the Company, it
will be subject to repayment to the extent that it is finally judicially
determined that the Indemnified Person was not entitled to indemnification under
this Section 2.7.
(b) Notwithstanding any other provision of this Agreement,
the Managing Member is authorized to take any action that it determines to be
necessary or appropriate to cause the Company or any class or series of the
Company to comply with any Federal, state, local and foreign withholding
requirement with respect to any payment, allocation, or distribution by the
Company to any Member or other Person. All amounts so withheld, and, in the
manner determined by the Managing Member in its sole discretion, amounts
withheld with respect to any payment, allocation or distribution by any Person
to the Company, shall be treated as distributions under this Agreement to the
Members to which such amounts would have been distributed (under this Agreement)
but for the withholding. If any such withholding requirement with respect to any
Member exceeds the amount distributable to such Member under this Agreement, or
if any such withholding requirement was not satisfied with respect to any item
previously withheld, paid or distributed to such Member, such Member or any
successor or assignee with respect to such Member's interest hereby indemnifies
and agrees to hold harmless the other Members and the Company for such excess
amount or such withholding requirement as the case may be (including any
interest, additions and penalties).
(c) Notwithstanding any of the foregoing to the contrary,
the provisions of this Section 2.7 shall not be construed so as to provide for
the indemnification of any Indemnified Person for any liability to the extent
(but only to the extent) that such indemnification would be in violation of
applicable law or such liability may not be waived, modified or limited under
applicable law, but shall be construed so as to effectuate the provisions of
this Section 2.7 to the fullest extent permitted by law.
Section 2.8 PAYMENT OF COSTS AND EXPENSES.
(a) The Company will be responsible for all legal,
accounting, filing and other out-of-pocket expenses of organizing and raising
capital for the Company ("ORGANIZATIONAL EXPENSES").
(b) The Company or the classes and series thereof,
respectively, shall pay all taxes imposed on and payable by the Company
attributable to such classes or series, all investment expenses (i.e., expenses
which the Managing Member reasonably determines to be directly related to the
investment of the Company's assets, such as brokerage and commission expenses,
fees and expenses of open and closed-end funds, margin, premium and interest
expenses, fees and disbursements of transfer agents, registrars, custodians,
sub-custodians, administrator, investment advisors, and escrow agents and all
other investment related expenses of any type), legal expenses and external
accounting expenses related to the Company and its investments, any
extraordinary expenses (such as litigation and indemnification of the Managing
Member) and due diligence expenses. The
14
Managing Member shall pay all other operating expenses of the Company; including
all general overhead expenses of the Company, which includes the rent of the
offices which the Managing Member and Company will occupy, compensation and
benefits of the administrative staff and investment professionals of the Company
and the Managing Member, any costs or expenses of an advisory board to the
Company or the Managing Member, telephones and general purpose office equipment
of the Company and the Managing Member.
ARTICLE III
Capital Contributions; Capital Accounts; and Allocations
Section 3.1 CAPITAL CONTRIBUTIONS AND COMMITMENTS AND CAPITAL CALLS.
(a) CAPITAL CONTRIBUTIONS AND COMMITMENTS. Each Member
hereby agrees to make Capital Contributions in the amount set forth opposite its
name in the Schedule (such amount, a "CAPITAL COMMITMENT") pursuant to Capital
Calls (as defined herein) (such capital contributions agreed to be made being
referred to herein in the aggregate for one or more Members, as the context may
require, as the "Capital Contributions").
(b) CAPITAL CALLS. The Managing Member shall provide each
Member with a notice of each Capital Call (a "CAPITAL CALL NOTICE") at least 5
Business Days prior to the date on which such Capital Call is due and payable to
the Company (the "CAPITAL CALL DATE"). Each Capital Call shall be applied to
Portfolio Investments or to provide for Organizational Expenses or other Company
expenses, or shall be held in Temporary Investments pending Portfolio
Investments or application to provide for Organizational Expenses or other
Company expenses. It is anticipated that 25% of each Member's Capital Commitment
(the "INITIAL CAPITAL CONTRIBUTION") will be due at the Initial Closing at which
such Member is admitted to the Company or class or series thereof, and the
remaining 75% will be called by the Managing Member in three equal installments
on the first, second and third anniversaries of the Initial Closing, PROVIDED
that the Managing Member may accelerate or defer this anticipated schedule of
Capital Calls in its sole discretion through the issuance of Capital Call
Notices in accordance with this Section 3.1(b). If any Member fails to fund a
Capital Call, the Managing Member in its sole discretion may allocate the amount
called but not received on a pro rata basis among the other Members, and may
impose penalties it deems appropriate and reasonable to protect the interests of
the other Members pursuant to Section 3.1(f) of this Agreement.
(c) REVISED CAPITAL CALL NOTICES. Notwithstanding Section
3.1(b), if the actual Capital Contribution to be paid by a Member changes after
delivery of a Capital Call Notice (due, for example, to a default by another
Member), the Managing Member shall issue a revised Capital Call Notice to the
Members. Such Members shall pay any additional Capital Contribution thereby
required no later than the Capital Call Date specified in such revised Capital
Call Notice, PROVIDED that in no event shall any Member be obligated to
contribute any amount in excess of such Member's Capital Commitment.
15
(d) PAYMENT OF THE CAPITAL CALL. Each Member shall pay to
the Company the Capital Contributions specified in the relevant Capital Call
Notice, as the same may be revised pursuant to Section 3.1(c), by wire transfer
immediately available funds to the account specified therein. Except as
otherwise provided herein, the required Capital Contribution of each Member
shall be made no later than the Capital Call Date specified in such Capital Call
Notice and shall equal the amount, not to exceed such Member's remaining Capital
Commitment, specified in the Capital Call Notice.
(e) NO THIRD PARTY BENEFICIARIES. The provisions of this
Section 3.1 are intended solely to benefit the Company and the Members and, to
the fullest extent permitted by applicable law, shall not be construed as
conferring any benefit upon any creditor of the Company (and no such creditor
shall be a third party beneficiary of this Agreement), and no Member shall have
any duty or obligation to any creditor of the Company to make any contributions
to the Company pursuant to this Section 3.1 or to cause the Managing Member to
deliver to any Member a Capital Call Notice.
(f) FAILURE TO FUND CAPITAL CALL. If a Member fails to fund
a Capital Call (a "FAILED CAPITAL CALL") on the specified date (such Member, a
"NONFUNDING MEMBER"), the Managing Member may at its discretion impose any
penalties it deems appropriate and reasonable to protect the interests of the
other Members, including, but not limited to, (i) reduce amounts otherwise
distributable to such Nonfunding Member by 50% as of the date of such Nonfunding
and withhold the remaining 50% of any future distributions that otherwise would
be payable to such Nonfunding Member pursuant to Article IV until the
dissolution of the class or series of the Company, (ii) cease to allocate any
income and gain to such Nonfunding Member with respect to its remaining interest
in the class or series of the Company, but continue to allocate his, her or its
PRO RATA share of losses and deductions, (iii) require such Nonfunding Member to
remain fully liable for payment of up to his or her or its PRO RATA share of
Organizational Expenses and other expenses of the class or series of the Company
as if the Failed Capital Call had not occurred and (iv) if the Company borrows
money to fund the Failed Capital Call, require such Nonfunding Member to be
fully liable for any interest paid or due in connection with such borrowing. The
Managing Member may apply amounts otherwise distributable to such Nonfunding
Member in satisfaction of all amounts payable by such Nonfunding Member. In
addition, such Nonfunding Member shall have no further right to make Capital
Contributions to participate in any Portfolio Investment. The Managing Member
may charge such Nonfunding Member interest on the Failed Capital Call amount and
any other amounts not timely paid at a rate per annum equal to the Prime Rate
plus 4% from the date such amounts were due and payable through the date that
full payment of such amounts is actually made or, if such amounts are not paid,
through the end of the term, and to the extent not paid such interest charge may
be deducted from amounts otherwise distributable to such Nonfunding Member. The
Managing Member shall have the right to pursue all remedies at law or in equity
available to it with respect to the Failed Capital Call of a Nonfunding Member.
Notwithstanding any other provision of this Agreement, each Member agrees to pay
on demand all costs and expenses (including attorneys' fees) incurred by or on
behalf of the Company in connection with the enforcement of this Agreement
against such Member sustained as a result of a Failed Capital
16
Call by such Member and that any such payment shall not constitute a Capital
Contribution to the Company.
(g) FUNDING OF FAILED CAPITAL CALL. With respect to any
Failed Capital Call, the Managing Member may (i) increase the Capital
Contributions of the Members that have funded their PRO RATA share of such
Capital Call Notice in proportion to, but not in excess of, their remaining
Capital Commitments to the extent necessary to fund the Failed Capital Call, as
contemplated by Section 3.1(c), or (ii) cause the Company to borrow such amounts
as are necessary to fund the Failed Capital Call. In the event that the Company
borrows money from the Managing Member or any of its Affiliates pursuant to
clause (ii) of this Section 3.1(g), the Managing Member or any such Affiliate
shall receive interest on such amounts at the Prime Rate plus 4%.
(h) REMAINING CAPITAL COMMITMENT. With respect to the
remaining Capital Commitment of any Nonfunding Member (the "REMAINING CAPITAL
COMMITMENT"), the Managing Member, any Affiliate of the Managing Member, and/or
any other Person designated by the Managing Member may purchase such Remaining
Capital Commitment at a purchase price equal to 75% of the Nonfunding Member's
PRO RATA share of all Portfolio Investments then held by the Company, valued at
cost. The Managing Member shall make such revisions to the books and records of
the Company as may be necessary to reflect the change in Members and Capital
Commitments contemplated by this Section 3.1(h).
(i) CONSENTS. Whenever the vote, consent or decision of a
Member is required or permitted pursuant to this Agreement or under the Act, a
Nonfunding Member shall not be entitled to participate in such vote or consent,
or to make such decision, and such vote, consent or decision shall be tabulated
or made as if such Nonfunding Member were not a Member.
(j) Notwithstanding anything herein to the contrary, upon
the liquidation of the Company, no Member shall be required to make any Capital
Contribution to the Company in respect of any deficit in such Member's Capital
Account.
Section 3.2 CAPITAL ACCOUNTS.
(a) ESTABLISHMENT AND MAINTENANCE OF CAPITAL ACCOUNTS. The
Company shall establish and maintain a separate account for each Member with
respect to each class or series in which it has invested (each, a "CAPITAL
ACCOUNT"). The initial balance of the Capital Account shall be such Member's
Initial Capital Contribution to the Company. The Capital Account of each Member
shall be increased by (i) the dollar amount of any additional Capital
Contributions made by such Member in cash, (ii) the fair market value of any
property (other than cash) contributed to the Company by such Member (net of
liabilities to which such property is subject for purposes of Section 752 of the
Code), and (iii) allocations to such Member of Net Income (and items thereof).
The Capital Account of each Member shall be decreased by (i) the dollar amount
of any distributions made to such Member in cash, (ii) the fair market value of
any property (other than cash) distributed to
17
such Member (net of any liabilities to which such property is subject for
purposes of Section 752 of the Code) and (iii) allocations to such Member of Net
Loss (and items thereof).
(b) COMPLIANCE WITH REGULATIONS. Notwithstanding any other
provision of this Agreement to the contrary, the foregoing provisions of Section
3.2(a) regarding the maintenance of Capital Accounts shall be construed so as to
comply with the provisions of the Treasury Regulations promulgated pursuant to
Section 704 of the Code. The Managing Member is hereby authorized to modify the
foregoing provisions to the minimum extent necessary to comply with such law or
any changes thereto in the event unanticipated events occur that might otherwise
cause this Agreement not to comply with applicable law.
Section 3.3 ALLOCATIONS TO CAPITAL ACCOUNTS.
(a) GENERAL RULE. Except as provided in this Agreement or as
otherwise designated in any supplement hereto creating any class or series, Net
Income (and items thereof) and Net Loss (and items thereof) for any Fiscal Year
shall be allocated among the Members in a manner such that the Capital Account
of each Member, immediately after giving effect to such allocation, is, as
nearly as possible, equal (proportionately) to the amount of the distributions
that would be made to such Member during such Fiscal Year pursuant to Article
IV, if (i) the class or series of the Company were dissolved and terminated;
(ii) its affairs were wound up and each asset of such class or series was sold
for cash equal to its book value to the Company (except that any Company asset
that is sold in such Fiscal Year shall be treated as if sold for an amount of
cash equal to the sum of (x) the amount of any net cash proceeds actually
received by the Company in connection with such disposition and (y) the fair
market value of any property actually received by the Company in connection with
such disposition); (iii) liabilities of the class or series were satisfied
(limited with respect to each Nonrecourse Liability to the book value of the
assets securing such liability); and (iv) the net assets of the class or series
were distributed in accordance with Article VII to the Members immediately after
giving effect to such allocation; PROVIDED, HOWEVER, that the Net Income or Net
Loss associated, in the judgment of the Managing Member in its sole and absolute
discretion, with any investment by the class or series that the Managing Member
determines in its sole and absolute discretion to be a "hot issue" for purposes
of the Conduct Rules of the National Association of Securities Dealers, Inc. (a
"HOT ISSUE") for the period such investment is treated as a Hot Issue, shall be
provisionally allocated solely among the Members in such class or series to whom
a member of the National Association of Securities Dealers, Inc. would not be
prohibited from selling such investment in accordance with such Members'
respective Hot Issue Participation Interests and an interest charge at the
T-Xxxx Rate of the Nonparticipant Capital Utilization may in the sole and
absolute discretion of the Managing Member be provisionally allocated from the
Capital Accounts of the Members in such class or series participating in such
Hot Issues to the Capital Accounts of the Members in such class or series not
participating in such Hot Issue in accordance with their respective Hot Issue
Nonparticipant Interests. The Managing Member may, in its sole and absolute
discretion, make such other assumptions (whether or not consistent with the
above assumptions) as it deems necessary or appropriate in order to effectuate
the intended economic arrangement of the Members as reflected in Article IV.
18
(b) REGULATORY AND RELATED ALLOCATIONS. Notwithstanding any
other provision in this Article III to the contrary, the following special
allocations shall be made to the Capital Accounts of the Members in the
following order:
(i) MINIMUM GAIN CHARGEBACK. Notwithstanding any other provision
of this Article III, if there is a net decrease in Partnership Minimum Gain
during any Fiscal Year, each Member shall be specially allocated items of
Company income and gain, with respect to any series or class, for such
Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal
to such Member's share of the net decrease in such series' or class'
Minimum Gain, determined in accordance with Treasury Regulations Section
1.704-2(g). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to the
Members pursuant thereto. The items to be so allocated shall be determined
in accordance with Treasury Regulations Section 1.704-2. This Section
3.3(b)(i) is intended to comply with the minimum gain charge back
requirement in such section of the Treasury Regulations and shall be
interpreted consistently therewith. To the extent permitted by such section
of the Treasury Regulations and for purposes of this Section 3.3(b)(i)
only, each Member's Adjusted Capital Account Deficit shall be determined
prior to any other allocations pursuant to this Article III with respect to
such Fiscal Year.
(ii) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Treasury Regulations Section 1.704-2(i)(4), notwithstanding any
other provision of this Article III, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to a Partner Nonrecourse Debt
during any Fiscal Year, each Member who has a share of the Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Treasury Regulations Section
1.704-2(i)(5), shall be specially allocated items of Partnership income and
gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in
an amount equal to such Member's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with Treasury Regulations Section
1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made
in proportion to the respective amounts required to be allocated to each
Member pursuant thereto. The items to be so allocated shall be determined
in accordance with Treasury Regulations Sections 1.704-2(i)(4) and
1.704(j)(2). This Section 3.3(b)(ii) is intended to comply with the minimum
gain chargeback requirement in Treasury Regulations Section 1.704-2(i)(4)
and shall be interpreted consistently therewith.
(iii) QUALIFIED INCOME OFFSET. In the event any Member
unexpectedly receives any adjustments, allocations, or distributions
described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or
(6) with respect
19
to such Member's Capital Accounts, items of Company income and gain shall
be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Treasury
Regulations, the Adjusted Capital Account Deficit of such Member as quickly
as possible; PROVIDED that an allocation pursuant to this Section
3.3(b)(iii) shall be made only if and to the extent that such Member would
have an Adjusted Capital Account Deficit after all other allocations
provided for in this Article III have been tentatively made as if this
Section 3.3(b)(ii) were not in this Agreement. This Section 3.3(b)(ii) is
intended to constitute a "qualified income offset" within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and should be interpreted
consistently therewith.
(iv) NONRECOURSE DEDUCTIONS. Any Nonrecourse Deductions for any
Fiscal Year or other period shall be allocated to the Members in accordance
with their respective Capital Accounts.
(v) PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse
Deductions for any Fiscal Year shall be specially allocated to the Member
who bears the economic risk of loss with respect to the Partner Nonrecourse
Debt to which such Partner Nonrecourse Deductions are attributable in
accordance with Treasury Regulations Section 1.704-2(i)(1).
(vi) GROSS INCOME ALLOCATION. In the event any Member has an
Adjusted Capital Account Deficit, items of Company income and gain, with
respect to series or classes, shall be specially allocated to such Member
in an amount and manner sufficient to eliminate such Member's Adjusted
Capital Account Deficit as quickly as possible; PROVIDED that an allocation
pursuant to this Section 3.3(b)(vi) shall be made only if and to the extent
that such Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article III (other than Section
3.3(b)(iii)) have been tentatively made as if this Section 3.3(b)(iv) were
not in this Agreement.
(vii) LOSS ALLOCATION LIMITATION. No allocation of Net Loss (or
items thereof) shall be made to any Member to the extent that such
allocation would create or increase an Adjusted Capital Account Deficit
with respect to such Member.
(c) CURATIVE ALLOCATIONS. The allocations set forth in
Section 3.3(b) (the "REGULATORY ALLOCATIONS") are intended to comply with
certain requirements of Treasury Regulations under Section 704 of the Code.
Notwithstanding any other provision of this Article III (other than the
Regulatory Allocations), the Regulatory Allocations shall be taken into account
in allocating other Company items of income, gain, loss, deduction and expense
among the Members with respect to each series or class so that, to the extent
possible, the net amount of such allocations of other Company items and the
Regulatory
20
Allocations shall be equal to the net amount that would have been allocated to
the Members pursuant to this Article III if the Regulatory Allocations had not
been made.
(d) SECTION 754 ADJUSTMENTS. Pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(m), to the extent an adjustment to the
adjusted tax basis of any Company asset under Code Section 734(b) or 743(b) is
required to be taken into account in determining Capital Accounts, the amount of
such adjustment to the Capital Accounts shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Members in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such Treasury Regulations.
(e) TRANSFER OF OR CHANGE IN INTERESTS. The Managing Member
is authorized to adopt any convention or combination of conventions likely to be
upheld for federal income tax purposes regarding the allocation and/or special
allocation of items of Company income, gain, loss, deduction and expense with
respect to a newly issued interest in the Company, a transferred interest in the
Company and a redeemed interest in the Company. A transferee of an interest in
the Company shall succeed to the Capital Account of the transferor Member to the
extent it relates to the transferred interest.
(f) SYNDICATION AND ORGANIZATION EXPENSES. Syndication and
organization expenses as defined in Section 709 of the Code (and to the extent
necessary, as determined in the sole discretion of the Managing Member, any
other items) shall be allocated to the Capital Accounts of the Members so that,
as nearly as possible, the amount of such syndication and organization expenses
(and other items, if relevant) allocated with respect to each dollar of Capital
Commitment for each Member is the same amount.
(g) ALLOCATION PERIODS AND UNREALIZED ITEMS. Subject to
applicable Treasury Regulations and notwithstanding anything expressed or
implied to the contrary in this Agreement, the Managing Member may, in its sole
discretion, determine allocations to Capital Accounts based on an annual,
quarterly or other period and/or on realized and unrealized net increases or net
decreases (as the case may be) in the fair market value of Company property.
Section 3.4 TAX ALLOCATIONS.
(a) Items of Company income, gain, loss, deduction and
expense shall be allocated, for federal, state and local income tax purposes,
among the Members in the same manner as the Net Income (and items thereof) and
Net Loss (and items thereof) of which such items are components were allocated
pursuant to Section 3.3; PROVIDED, HOWEVER, that solely for federal, state and
local income tax purposes, allocations shall be made in accordance with Section
704(c) of the Code and the Treasury Regulations promulgated thereunder, to the
extent so required thereby. Such allocations shall be made in such manner and
utilizing such permissible tax elections as determined in the sole discretion of
the Managing Member.
21
(b) Allocations pursuant to this Section 3.4 are solely for
federal, state and local tax purposes and shall not affect, or in any way be
taken into account in computing, any Member's Capital Account or share of Net
Income (and items thereof) or Net Loss (and items thereof).
(c) The Members are aware of the tax consequences of the
allocations made by this Section 3.4 and hereby agree to be bound by the
provisions of this Section 3.4 in reporting their shares of items of Company
income, gain, loss, deduction and expense.
Section 3.5 VALUATION. For Capital Account and tax purposes, subject
to the discretion of the Managing Member, Company assets will be valued at their
respective cost bases until sale, disposition or other taxable event. Whenever
valuation of Company assets or net assets is required by this Agreement, the
Managing Member shall determine the fair market value thereof in good faith in
accordance with the following description:
(a) Valuation shall be determined with respect to Marketable
Securities (i) that are primarily traded on a securities exchange, at the
average of their closing sale prices on the principal securities exchange for
which they are traded for the five Business Days immediately preceding and
including the date of determination and the five Business Days after the date of
the determination or, if no sales occurred on any such day, the mean between the
closing "bid" and "asked" prices on such day; and (ii) the principal market for
which is or is deemed to be the over-the-counter market, at the average of their
closing sales prices on each Business Day during such period, as published by
NASDAQ or any similar organization, or if such price is not so published on any
such day, the mean between their closing "bid" and "asked" prices, if available,
on such day, which prices may be obtained from any reputable pricing service,
broker or dealer, and
(b) Valuation shall be determined with respect to all other
securities or other assets or interests in the Fund, other than cash and
securities, at the value determined by the Managing Member in good faith
considering all factors, information and data determined to be pertinent.
Section 3.6 DETERMINATION BY MANAGING MEMBER OF CERTAIN MATTERS. All
matters concerning the computation of Capital Accounts and tax basis accounts,
the allocation of Gross Asset Values of Company assets, the allocation of items
of Company income, gain, loss, deduction and expense for tax purposes and the
adoption of any accounting procedures not expressly provided for by the terms of
this Agreement shall be determined by the Managing Member in its sole and
absolute discretion. Such determination shall be final and conclusive as to all
Members. Notwithstanding anything expressed or implied to the contrary in this
Agreement, in the event the Managing Member shall determine, in its sole and
absolute discretion, that it is prudent to modify the manner in which the
Capital Accounts and tax basis accounts, or any debits or credits thereto, are
computed in order to effectuate the intended economic sharing arrangement of the
Members as reflected in Article IV, the Managing Member may make such
modification.
22
ARTICLE IV
Withdrawals and Distributions of Capital
Section 4.1 WITHDRAWALS AND DISTRIBUTIONS IN GENERAL. (a) No Member
shall have the right to withdraw or demand distributions of any amount in its
Capital Account, except as expressly provided in this Article IV and in Article
VII.
(b) The Managing Member may withdraw any amount from its
Capital Account at any time.
Section 4.2 CURRENT DISTRIBUTIONS OR PLAN.
(a) CASH DISTRIBUTIONS. The Company may make distributions
of cash revenues, reduced, in the sole and absolute discretion of the Managing
Member, by reserves, expenses, fees and taxes, if any, of the Company.
(b) GENERAL DISTRIBUTIONS. Subject to Section 4.3, net
proceeds attributable to the disposition of a Portfolio Investment, together
with any dividends or interest income earned with respect to such Portfolio
Investment, shall be distributed to all Members participating in such investment
PRO RATA in accordance with each Member's Capital Account after giving effect to
Organizational Expenses and any necessary reserves. Any return of capital
received by any class or series of the Company on or prior to the second
anniversary of the final closing date of THL Fund V may, in the discretion of
the Managing Partner, not be distributed, but may be treated, for all purposes,
as though such amounts had been distributed to, then recontributed by, the
Members.
(c) DISTRIBUTIONS IN KIND. The Managing Member intends
generally to avoid making in kind distributions of non-marketable securities. In
the event that at any time or from time to time the Managing Member makes a
distribution of property other than cash, such property shall be deemed to be
sold for its fair market value on the date of such distribution, and any gain or
loss attributable to such deemed sale shall be included in determining Net
Income or Net Loss for the applicable Fiscal Year for purposes of Article III.
Any in kind distribution shall be made pursuant to Section 4.2(b) after giving
effect to the allocation of Net Income or Net Loss pursuant to Article III.
Section 4.3 RESTRICTIONS ON DISTRIBUTIONS. The foregoing provisions of
this Article IV to the contrary notwithstanding, no distribution shall be made:
(a) if such distribution would violate any contract or agreement to which the
Company is then a party or any law, rule, regulation, order or directive of any
governmental authority then applicable to the Company; (b) to the extent that
the Managing Member, in its sole and absolute discretion, determines that any
amount otherwise distributable should be retained by the Company to pay, or to
establish a reserve for the payment of, any liability or obligation of the
Company, whether liquidated, fixed, contingent or otherwise; (c) to hedge an
existing investment; or (d) to the extent that the Managing Member, in its sole
and absolute discre-
23
tion, determines that the cash available to the Company is insufficient to
permit such distribution.
ARTICLE V
Admission of New Members
Section 5.1 ADMISSION OF MEMBERS.
(a) Members will be admitted to the Company (i) as of the
Initial Closing and (ii) at any time after the Initial Closing at the sole and
absolute discretion of the Managing Member, subject only to the condition that
each new Member agrees to be bound by the terms and provisions hereof, including
the requirement that such new Member pay its allocable portion of Organizational
Expenses and, in the discretion of the Managing Member, an implied interest
charge at a rate of 10% per annum assessed on the amount of such Capital
Commitment which will be for the benefit of the other Members. Such agreement to
be bound shall be deemed to occur upon admission of such Member, which shall
occur as of the date such person is named in the books and records of the
Company. Such new Members will have the same rights and obligations of all the
Members admitted at the Initial Closing except that such new Members will not
participate in Portfolio Investments made prior to their investment in the
Company. The Managing Member, in its sole and absolute discretion, may at any
time admit or refuse to admit a transferee of an interest as a Member or a
substitute Member, or it may replace a terminated Member pursuant to Section
6.1(b) with a substitute Member. Such agreement to be bound shall be deemed to
occur upon admission of such Member, which shall occur as of the date such
person is named in the books and records of the Company. Such new Members will
have the same rights and obligations of all the Members admitted at the Initial
Closing except that such new Members will not participate in Portfolio
Investments made prior to their investment in the Company. The Managing Member,
in its sole and absolute discretion, may at any time admit or refuse to admit a
transferee of an interest as a Member or a substitute Member, or it may replace
a terminated Member pursuant to Section 6.1(b) with a substitute Member.
(b) The Managing Member may appoint and admit a new Managing
Member immediately prior to its transfer of its interest if such new Managing
Member satisfies the requirements set forth in Section 1.7(b).
24
ARTICLE VI
Withdrawal, Death, Incompetency
Section 6.1 WITHDRAWAL OF MEMBERS.
(a) A Member shall not have the right to withdraw from the
Company except with the prior written consent of the Managing Member, which
consent may be granted or withheld in its sole and absolute discretion.
(b) The Managing Member may terminate all or any portion of
the interest of any Member in the Company or any class or series thereof, upon
at least 30 days' prior written notice, at the end of any Fiscal Quarter in
which such notice is given. In such an instance the terminated Member shall not
contribute additional capital and will retain only a PRO RATA economic interest
in invested capital less fees and expenses with respect to such capital. In the
event of the termination of a Member by the Managing Member, in accordance with
this Section 6.1, 90% of such Member's Capital Account balance on the date of
termination of such Member shall be paid within 90 days thereof or as soon
thereafter as the Company has funds available therefor. The remaining 10% of the
balance of such Member's Capital Account shall be paid upon completion of the
next year-end audit. Notwithstanding the foregoing, a Nonfunding Member shall be
treated as set forth in Section 3.1(f). The Manager may, in the alternative,
sell the terminated Member's interest to a non-Member or offer to sell it to one
or more existing Members in its sole discretion.
Section 6.2 EFFECT OF DEATH, ETC.
(a) The death, disability, incapacity, incompetency,
bankruptcy, insolvency or dissolution of a Member shall not dissolve the Company
or series or class thereof. The legal representatives, if any, of a Member shall
succeed as assignee to the Member's interest in the Company upon the death,
incapacity, incompetency, bankruptcy, insolvency or dissolution of a Member, but
shall not be admitted as a substituted member without the consent of the
Managing Member in its sole and absolute discretion.
(b) From and after the effective date of withdrawal of a
Member the interest of a such Member, including without limitation, any interest
held by the legal representative of such Member, shall not be included in
calculating the Company interests of the Members required to take any action
under this Agreement.
Section 6.3 LIMITATIONS ON WITHDRAWAL OF CAPITAL ACCOUNTS. The right
of any Member or the legal representatives of such Member to have distributed
any of such Member's Capital Accounts pursuant to this Article VI is subject to
the provision by the Managing Member for all Company liabilities in accordance
the Delaware Limited Liability Company Act, and for reserves for contingencies
established by the Managing Member in good faith.
25
Section 6.4 WITHDRAWAL, REMOVAL OR REPLACEMENT OF MANAGING MEMBER. The
Managing Member may resign or withdraw effective at any time upon 30 days' prior
written notice to the Members. The Members shall have no right to remove or
replace the Managing Member or to continue the Company upon the resignation,
withdrawal, bankruptcy or insolvency of the Managing Member.
ARTICLE VII
Duration and Termination of Company
Section 7.1 DURATION. The term of the Fund will be unlimited unless
terminated in accordance with the Delaware Limited Liability Company Act. There
shall be a dissolution of a class or a series of the Company and its affairs
shall be wound up upon the first to occur of any of the following events:
(i) The termination or liquidation of the THL Fund V; or
(ii) The withdrawal or dissolution and commencement of winding up
of the Managing Member, or the assignment by the Managing Member of its
entire interest in the class or series Company in contravention of this
Agreement, or the occurrence of any other event that causes the Managing
Member to cease to be a managing member of the class or series under the
Act UNLESS, within 90 calendar days after the occurrence of such event, a
substitute managing member is appointed by the Managing Member effective as
of such event; or
(iii) A decision, made by the Managing Member in its sole
discretion, to dissolve the class or series; or
(iv) The entry of a decree of judicial dissolution.
Section 7.2 TERMINATION. On termination of the business of the Company
(or any class or series thereof), the Managing Member shall, within no more than
30 days after completion of a final audit of the Company's books and records
(which shall be performed within 90 days of such termination), make
distributions, out of Company assets, with respect to each class or series, in
the following manner and order:
(a) to payment and discharge of the claims of all creditors
of the class or series of the Company who are not Members;
(b) to payment and discharge of the claims of all creditors
of the class or series of the Company who are Members;
26
(c) to the Members of such class or series or their legal
representatives in accordance with the positive balances in their respective
Capital Accounts as determined after taking into account all adjustments to
Capital Accounts for all periods.
In the event that the Company is terminated on a date other than the
last day of a Fiscal Year, the date of such termination shall be deemed to be
the last day of a Fiscal Year for purposes of adjusting the Capital Accounts of
the Members pursuant to Article III of this Agreement.
Section 7.3 LIQUIDATING DISTRIBUTIONS IN KIND. Any property other than
cash distributed pursuant to Section 7.2 shall be deemed to be sold for its fair
market value on the date of such distribution, and any gain or loss attributable
to such deemed sale shall be included in determining Net Income or Net Loss for
the Fiscal Year of termination for purposes of Article III. Any in kind
distribution shall be made pursuant to Section 7.2 after giving effect to the
allocation of Net Income or Net Loss pursuant to Article III.
ARTICLE VIII
Tax Returns; Reports to Members
Section 8.1 INDEPENDENT ACCOUNTANTS. The books and records of the
Company shall be audited by independent certified accountants selected by the
Managing Member, as of the end of each Fiscal Year.
Section 8.2 FILING OF TAX RETURNS. The Managing Member shall prepare
and file, or cause the accountants of each class or series of the Company to
prepare and file, all information tax returns required by federal, state, local
and foreign income tax law for each taxable year of the Company.
Section 8.3 TAX MATTERS MEMBER. The Managing Member shall be
designated as the tax matters member for each class or series of the Company
(the "TAX MATTERS MEMBER") as provided in Section 6231(a)(7) of the Code. Each
Person (for purposes of this Section 8.3, called a "PASS-THRU MEMBER") that
holds or controls an Interest on behalf of, or for the benefit of another Person
or Persons, or which Pass-Thru Member is beneficially owned (directly or
indirectly) by another Person or Persons shall, within 30 days following receipt
from the Tax Matters Member of a notice or document, convey such notice or other
document in writing to all holders of beneficial interests in any class or
series of the Company holding such interest through such Pass-Thru Member. In
the event that a class or series of the Company shall be the subject of an
income tax audit by any federal, state or local authority, to the extent such
class or series of the Company is treated as an entity for purposes of such
audit, including administrative settlement and judicial review, the Tax Matters
Member shall be authorized to act for, and its decision shall be final and
binding upon, the Company and each Member thereof. All expenses incurred in
connection with any such audit, investigation, settlement or review shall be
borne by the Company.
27
Section 8.4 ANNUAL REPORTS TO MEMBERS. Within 90 days after the end of
each Fiscal Year (which period may be extended to 180 days), the Company shall
prepare and mail to each Person who was a Member during such Fiscal Year, or
shall cause others to do so, a financial report setting forth the following:
(a) a balance sheet of the Company as of the close of such
Fiscal Year; and
(b) a statement showing the Net Income or Net Loss for such
Fiscal Year in reasonable detail.
The financial report for the Company for each Fiscal Year shall be
accompanied by the report thereon of the independent accountants selected by the
Managing Member and a statement, addressed separately to each Member, of the
amount of each of the Capital Accounts of such Member as of the close of such
Fiscal Year. The Company shall not be required to provide to any Member in
writing any listing of its assets or liabilities or any portion thereof.
Section 8.5 TAX REPORTS AND MONTHLY LETTERS TO MEMBERS. Within 90 days
after the end of each Fiscal Year (which period may be extended to 120 days) the
Company shall prepare and mail, or cause its accountants to prepare and mail, to
each Person who was a Member during such Fiscal Year (or such Member's legal
representatives), a report setting forth in sufficient detail such information
as shall enable such Member (or such Member's legal representatives) to prepare
their respective federal, state and local income tax returns in accordance with
the laws, rules and regulations then prevailing.
ARTICLE IX
Miscellaneous
Section 9.1 GENERAL. This Agreement: (i) shall be binding on the
executors, administrators, estates, heirs, and legal successors and
representatives of the Members; and (ii) may be executed, through the use of
separate signature pages or in any number of counterparts with the same effect
as if the parties executing such counterparts had all executed one counterpart;
PROVIDED, HOWEVER, that each such counterpart shall have been executed by the
Managing Member and that the counterparts, in the aggregate, shall have been
signed by all of the Members.
Section 9.2 POWER OF ATTORNEY. Each of the Members hereby appoints the
Managing Member, or any of its officers, if any, (and any substitute or
successor managing member or any officer thereof or of the Company) each acting
individually, as the true and lawful representative of such Member and
attorney-in-fact, in such Member's name, place and stead:
28
(a) to receive and pay over to the Company on behalf of such
Member, to the extent set forth in this Agreement, all funds received hereunder,
(b) to complete or correct, on behalf of such Member and in
accordance with such Member's instructions, all documents to be executed by such
Member in connection with such Member's subscription for an interest in the
Company, including, without limitation, filling in or amending amounts, dates,
and other pertinent information,
(c) to make, execute, sign, acknowledge, swear to and file:
(i) a Certificate of Limited Company of the Company and all amendments thereto
as may be required under the Delaware Limited Liability Company Act including,
without limitation, any such filing for the purpose of admitting the undersigned
and others as Members and describing their initial or any increased Capital
Contributions; (ii) any and all instruments, certificates, and other documents
which may be deemed necessary or desirable to effect the winding-up and
termination of the Company (including, but not limited to, a Certificate of
Cancellation of the Certificate of Limited Liability Company); (iii) any
business certificate, fictitious name certificate, amendment thereto, or other
instrument, agreement or document of any kind necessary or desirable to
accomplish the business, purpose and objectives of the Company, or required by
any applicable federal, state or local law; (iv) any counterparts of this
Agreement and any amendments to which such Member is a signatory which have been
adopted as provided in this Agreement, (v) any amendments to any such amendments
(as provided in the Company Agreement); and (vi) all other filings with agencies
of the federal government, of any state or local government, or of any other
jurisdiction, which the Managing Member considers necessary or desirable to
carry out the purposes of this Agreement, and the business of the Company, and
(d) to borrow money on behalf of a Nonfunding Member
pursuant to Section 3.1(f).
The power of attorney hereby granted by each of the Members is coupled
with an interest, is irrevocable, shall survive the transfer of the Member's
interest in the Company and shall survive, and shall not be affected by, the
subsequent death, disability, incapacity, incompetency, termination, bankruptcy,
insolvency or dissolution of such Member.
Such representative and attorney-in-fact shall not have any right,
power or authority to amend or modify this Agreement when acting in such
capacity.
Section 9.3 AMENDMENTS TO AGREEMENT. The terms and provisions of this
Agreement may be modified or amended at any time and from time to time (i)(A)
with the written consent of Members holding a majority of the Unaffiliated
Limited Liability Company Interests or (B) by notice mailed to the address of
record of each Member which is not objected to in writing within 30 days of
mailing by Members holding a majority of the Unaffiliated Limited Liability
Company Interests and (ii) with the written consent of the Managing Member;
PROVIDED, HOWEVER, that without the consent of the Members the Managing Member
may amend the Agreement or the Schedule hereto to (i) reflect changes
29
validly made in the membership of the Company and the Capital Contributions of
the Members; (ii) reflect a change in the name of the Company; (iii) make a
change that is necessary or, in the opinion of the Managing Member, advisable to
qualify the Company as a limited liability company in which the Members have
limited liability under the laws of any state, or ensure that the Company will
not be treated as an association taxable as a corporation for federal income tax
purposes; (iv) make a change that does not adversely affect the Members in any
material respect; (v) make a change that is necessary or desirable to cure any
ambiguity or mistake, or to correct or supplement any provision in this
Agreement that would be inconsistent with any other provision in this Agreement
or that is necessary or desirable to satisfy any requirements, conditions or
guidelines contained in any opinion, directive, order, ruling or regulation of
any federal or state statute, so long as such change is made in a manner which
minimizes any adverse effect on the Members; or that is required or contemplated
by this Agreement; (vi) make a change in any provision of this Agreement that
requires any action to be taken by or on behalf of the Managing Member or the
Company pursuant to the requirements of applicable Delaware law if the
provisions of applicable Delaware law are amended, modified or revoked so that
the taking of such action is no longer required; (vii) prevent the Company or
the Managing Member from in any manner being (A) deemed an "investment company"
subject to registration and regulation under the provisions of the Investment
Company Act, (B) treated as a "publicly traded partnership" for purposes of
Section 7704 of the Code, or (C) subject to federal income tax as an association
taxable as a corporation; or (viii) make any other amendments similar to the
foregoing. To the extent an amendment relates to particular classes or series
only those classes or series affected shall vote thereon, with such
determination to be made by the Managing Member in its sole discretion. The same
voting procedures shall apply to class specific amendments as above. Each
affected Member, however, must consent to any amendment which would (a) reduce
such Member's Capital Account or rights of contribution or withdrawal; (b)
reduce the protections provided by this sentence and the following sentence to
such Member; (c) result in the Company being treated as an association taxable
as a corporation for federal income tax purposes; (d) reduce the right of such
Member to share in the profits of the Company; or (e) increase such Member's
liability with respect to losses and expenses of the Company. Notwithstanding
any provision in this Agreement to the contrary, no amendment to this Agreement
shall increase the liability of a Member without such Member's consent.
Section 9.4 CHOICE OF LAW. Notwithstanding the place where this
Agreement may be executed by any of the parties thereto, the parties expressly
agree that all the terms and provisions hereof shall be construed under the laws
of the State of Delaware and, without limitation thereof, that the Delaware
Limited Liability Company Act as now adopted or as may be hereafter amended
shall govern the limited liability company aspects of the Agreement.
Section 9.5 SURVIVAL. All indemnities and reimbursement obligations
made pursuant to this Agreement shall survive dissolution and liquidation of the
Company until expiration of the longest applicable statute of limitations
(including extensions and waivers) with respect to the matter for which a party
would be entitled to be indemnified or reimbursed, as the case may be.
30
Section 9.6 NOTICES. Each notice relating to this Agreement shall be
in writing and delivered in person, by facsimile, by courier, Federal Express or
similar delivery service or by registered or certified mail. The receipt of any
notice transmitted by facsimile must be confirmed by any means acceptable in the
preceding sentence to be effective, PROVIDED, HOWEVER, that such a confirmation
does not, in turn, have to be confirmed. All notices to the Company shall be
addressed to its principal office and place of business. All notices addressed
to a Member shall be addressed to such Member at the address provided to the
Company by such Member and set forth in the books and records of the Company.
Any Member may designate a new address by notice to that effect given to the
Company. Unless otherwise specifically provided in this Agreement, a notice
shall be deemed to have been effectively given when faxed or mailed by
registered or certified mail to the proper address, the Business Day after
deposit with an overnight courier or when delivered in person.
Section 9.7 GOODWILL. No value shall be placed on the name or goodwill
of the Company, which shall belong exclusively to the Managing Member.
Section 9.8 HEADINGS. The titles of the Articles and the headings of
the Sections of this Agreement are for convenience of reference only, and are
not to be considered in constructing the terms and provisions of this Agreement.
Section 9.9 CONSTRUCTION AND INTERPRETATION. If any question should
arise with respect to the operation of the Company, which is not otherwise
specifically provided for in this Agreement, or with respect to the
interpretation of this Agreement, the Managing Member is hereby authorized to
make a final determination with respect to any such question and to interpret
this agreement in such a manner as it shall deem fair and equitable, and its
determination and interpretations so made shall be final and binding on all
parties. Whenever possible, the provisions of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be unenforceable or invalid under
said applicable law, such provision shall be ineffective only to the extent of
such unenforceability or invalidity, and the remaining provisions of this
Agreement shall continue to be binding and in full force and effect.
Section 9.10 CONFIDENTIALITY. No Member shall have the right in
inspect the books and records of the Company with respect to another Member's
Capital Account. Nothing in this Section 9.10 shall prevent a Member from
inspecting the books and records with respect to the Member's own Capital
Account.
Section 9.11 CONSENT OF JURISDICTION. All Members expressly agree that
all disputes hereunder with respect to the Company's interpretation of this
Agreement or any other matters related to the Company or this Agreement shall be
brought in the Court of Chancery, New Castle County, Delaware.
31
IN WITNESS WHEREOF, the undersigned have hereunto set their
hands as of the date first set forth above.
MANAGING MEMBER: MEMBER:
Xxxxxx Investment Holdings, LLC
-------------------------------------
Print Name of Member
By: By:
------------------------------- -------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx Signature of Member
Title: Vice President or Authorized signatory
-------------------------------------
Print Name of Authorized Signatory
-------------------------------------
Title of Authorized Signatory
Xxxxxx Investments Employees' Securities Company I LLC
SCHEDULE OF CAPITAL CONTRIBUTIONS
Dated ______________, _______
Part I
MANAGING MEMBER
Amount of Total
Capital Capital
Name and Address Commitment Contributions
---------------- ---------- -------------
Xxxxxx Investment Holdings, LLC
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
PART II
MEMBERS
Amount of Total
Capital Capital
Name and Address Commitment Contributions
---------------- ---------- -------------
