EXHIBIT 3.1
Xxxxxx Holdings L.L.C.
Operating Agreement
Amended and Restated as of May 30, 2002
Contents
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Section 1 - General ....................................................... 1
Section 2 - Definitions ................................................... 3
Section 3 - Executive Committee ........................................... 6
Section 4 - Allocation of Firm Earnings ................................... 8
Section 5 - Withdrawal of Funds ........................................... 9
Section 6 - Stock of Xxxxxx Associates, Inc. .............................. 10
Section 7 - Indemnity ..................................................... 13
Section 8 - Miscellaneous ................................................. 14
Section 1 -- General
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1.1 The name of the Firm shall be "Xxxxxx Holdings L.L.C." The Firm and
its subsidiaries shall conduct a business of providing consulting,
administration, and related services and of managing, trading in, and disposing
of the Firm's real estate assets. The Firm may exercise all powers reasonable or
necessary to pursue the same. In addition, the Firm may engage in and do any act
concerning any or all lawful businesses for which limited liability companies
may be organized under Illinois law. The principal office of the Firm shall be
in the County of Lake, State of Illinois, U.S.A., or in such other location as
may from time to time be established by the Executive Committee.
1.2 The death of an Owner shall not operate to dissolve the Firm, but
shall merely terminate the Owner's membership in the Firm.
1.3 No Owner shall, without the written consent of the Executive
Committee, take any of the following actions or permit any of them to occur
(collectively, a "transfer"): the assignment, mortgaging, sale, pledge or other
encumbrance or disposition of an Owner's ownership interest in the Firm or the
entering into of any agreement whereby any person shall acquire any interest
(whether voluntarily, involuntarily by operation of law or otherwise) with
respect to an Owner's ownership interest in the Firm; provided that, if written
consent of the Executive Committee is granted, no such person by virtue of such
transfer shall become an Owner in the Firm.
1.4 Each Owner shall have the right to inspect the books and records of
the Firm; provided however, that information about an Owner's individual
accounts or share of Firm Earnings will not be disclosed to any other Owners
other than the members of the Executive Committee and other Owners and employees
designated by the Executive Committee for administrative purposes, except as
provided herein.
1.5 This Agreement and the Articles of Organization may be amended upon
the written approval of seventy-five percent (75%) of Owners based on Sharing
Percents. Any other approval of Owners required by this Agreement shall consist
of the written acceptance of sixty-seven percent (67%) of Owners based on
Sharing Percents, except in the case of approvals required under Section Three
(Executive Committee), in which case approval shall be by a majority of Owners
based on Sharing Percents. For purposes of this Agreement, an e-mail received
from an Owner shall be deemed to be a writing through which an Owner may
indicate any approval, acceptance, or consent required by this Agreement.
1.6 This Agreement is subject to, and governed by, the Illinois Limited
Liability Company Act and the Articles of Organization of the Firm (the
"Articles") filed with the Illinois Secretary of State. This Agreement and the
Articles constitute the entire agreement among the Owners and no Owner shall
have any rights that are not specified herein. This Agreement shall be
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construed and enforced in accordance with the laws and judicial decisions of the
State of Illinois. In the event of a direct conflict between the provisions of
this Agreement and the mandatory provisions of the Illinois Limited Liability
Company Act or the provisions of the Articles, such provisions of the Illinois
Limited Liability Company Act or the Articles, as the case may be, will be
controlling.
1.7 No Owner shall be liable under a judgment, decree, or order of the
court, or in any other manner, for a debt, obligation or liability of the Firm,
except as provided by law. No Owner shall be required to loan any funds to the
Firm. Except as may be expressly provided otherwise herein, no Owner shall be
required to make any contribution to the Firm by reason of any negative balance
in such Owner's Capital Account, nor shall any negative balance in an Owner's
Capital Account create any liability on the part of the Owner to any third
party. This Agreement does not create, directly, indirectly or contingently, any
third party beneficiary rights.
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Section 2 -- Definitions
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2.1 Whenever used in this Agreement, the following terms shall have the
respective meanings set forth below unless otherwise expressly provided herein,
and when the defined meaning is intended, the term is capitalized:
(a) Beneficiary: The party or parties selected by an Owner pursuant to
Section 8.1 who are to receive payments due from the Firm in case of the Owner's
death
(b) Book Value: The book value per share of the Corporation's Class A
Common Stock as of the end of the Corporation's most recent fiscal quarter for
which financial results have been reported, determined in accordance with United
States generally accepted accounting principles.
(c) Capital: The Capital of the Firm shall consist of the excess of the
assets of the Firm business over the Firm liabilities as shown on the Firm's
books.
(d) Capital Account: The balance of an Owner's Capital Account as of
any specified time.
(e) Change in Control: The occurrence of any of the following events:
(i) The acquisition by any individual, entity, or group of
beneficial ownership of thirty percent (30%) or more of the combined voting
power of Xxxxxx Associates, Inc.'s (the "Company's") then outstanding securities
with respect to the election of directors of the Company;
(ii) The consummation of a reorganization, merger, or
consolidation of the Company or sale or other disposition of all or
substantially all of the assets of the Company (a "Corporate Transaction");
excluding, however, a Corporate Transaction pursuant to which all or
substantially all of the individuals or entities who are the beneficial owners
of the Company immediately prior to the Corporate Transaction will beneficially
own, directly or indirectly, more than sixty percent (60%) of the outstanding
shares of common stock of the resulting entity and of the combined voting power
of the outstanding securities entitled to vote for the election of directors of
such entity; or
(iii) Individuals who, as of the effective date of a transaction,
constitute the board of directors of the Company (the "Incumbent Board") cease
for any reason to constitute at least a majority of such board; provided, that
any individual who becomes a director of the Company subsequent to the effective
date, whose election, or nomination for election by the Company's stockholders,
was approved by the vote of at least a majority of the directors then comprising
the
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Incumbent Board shall be deemed a member of the Incumbent Board; and provided
further, that any individual who was initially elected as a director of the
Company as a result of an actual or threatened election contest, as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act, or
any other actual or threatened solicitation of proxies or consents by or on
behalf of any person other than the board shall not be deemed a member of the
Incumbent Board.
(f) Corporation: Xxxxxx Associates, Inc., a Delaware corporation.
(g) Disability: The meaning given thereto in the long term disability
plan of the Corporation as in effect from time to time.
(h) Firm: Xxxxxx Holdings L.L.C., the limited liability company formed
under the Illinois Limited Liability Company Act ("Act") or any successor
thereto.
(i) Firm Earnings: The consolidated net income of the Firm, determined
in accordance with generally accepted accounting principles with such exceptions
as the Firm may from time to time establish through Executive Committee
resolution.
(j) Fiscal Year: The fiscal year of the Firm, which shall commence on
October 1 and terminate on September 30 unless otherwise determined by the
Executive Committee;
(k) IPO Date: The date on which the Corporation consummates the first
public offering pursuant to an effective registration statement under the
Securities Act, other than on Form S-4 or S-8 or their then equivalents or any
successor form thereto, covering the offer and sale by the Corporation of its
shares of Class A Common Stock.
(l) Market Value: An amount per share of the Corporation's Class A
Common Stock equal to (a) the average closing sale price per share of Class A
Common Stock for the five (5) trading days immediately preceding the date as of
which the Market Value is to be determined as officially reported on the
principal national securities exchange on which the shares of Class A Common
Stock are then listed or admitted to trading; provided that if no sale takes
place on any such date, the applicable price for such date shall be the average
of the closing bid and asked prices, (b) if the shares of Class A Common Stock
are not then listed or admitted to trading on a national securities exchange but
are designated as a national market system security by the NASD, the average of
the last trading price per share of Class A Common Stock for the five (5)
trading days immediately preceding the date as of which the Market Value is to
be determined; provided that if no sale takes place on any such date, the
applicable price for such date shall be the average of the closing bid and asked
prices, or (c) if the shares of Class A Common Stock are not so designated, the
average of the closing bid and asked price per share of Class A Common Stock for
the five (5) trading days immediately preceding the date as of which the Market
Value is to be determined as shown by the NASD automated quotation system.
(m) Member: A voting member of the Executive Committee.
(n) Owner: One of the members (as defined in the Act) of the Firm
listed in Appendix A.
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(o) Previous Operating Agreement: The Xxxxxx Holdings LLC Operating
Agreement as amended March 1, 2001.
(p) Sharing Percent: An Owner's balance of Deferred Compensation
related to real estate as of September 30, 2001 under the Previous Operating
Agreement divided by the total equivalent balances of all Owners. When former
Owners are included in the allocation pursuant to Section 4.01, their percent
shall be determined based on their balance of Deferred Compensation related to
real estate at the time they ceased being Owners, with adjustments for all
Owners based on the timing or expected timing of receipt of payments and based
on other adjustments described in the IPO Plan adopted pursuant to the Previous
Operating Agreement. The Executive Committee shall notify each Owner of the
Owner's Sharing Percent but not the Sharing Percent of other Owners.
2.2 Except when otherwise indicated by the context, (i) the use of any term
in the singular may also include the plural, and (ii) any calculation with
respect to a fiscal year or other period prior to the creation of the Firm shall
be made based upon an identical calculation with respect to the Firm's general
partnership predecessor, Xxxxxx Associates, and any predecessor thereof, with
the partners in such predecessor entity being considered owners for the purposes
of such calculation.
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Section 3 -- Executive Committee
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3.1 The management functions of the business shall be vested in an
Executive Committee (the "Committee") which shall have full and complete powers
of management and administration over the affairs of the Firm, except as
otherwise provided herein. Without limiting the generality of the foregoing, the
Committee shall have authority to borrow money, to open bank accounts, to invest
in securities and other assets, to mortgage, pledge, lease, hypothecate, grant
security interests in, sell and otherwise deal with the assets of the Firm, to
guarantee indebtedness or other obligations of others, to confess judgment or to
submit a Firm claim or liability to arbitration or reference. No Owner shall
assume or exercise any such powers unless they have been specifically delegated
to such Owner by the Committee, nor shall any Owner bind the Firm without the
consent of the Committee. No Member shall be liable to any other Owner or to the
Firm by reason of the actions of the Committee except in the case of fraud or
gross negligence.
3.2 Effective October 1, 2002, the Committee shall consist of five
Members, who shall be Owners or former Owners. Prior to such date, the committee
under the Previous Operating Agreement shall continue as the Committee. The
Committee may appoint one or more Owners as non-voting members of the Committee
from time to time. Members of the Committee shall be appointed for indefinite
terms. A Member shall continue in office until such Member's successor has been
appointed.
3.3 The act of not less than three Members on the Committee at a meeting
shall be an act of the Committee. At least two days' notice must be given to
each Member of the time, place, and subject matter of a meeting; provided that
lack of such notice may be waived by a Member. Unless otherwise restricted by
the Articles or by applicable law, Members, or any participants on a committee
created by the Committee, may participate in a meeting of the Committee or such
committee thereof by means of telephonic conference or similar communications
equipment whereby all persons participating in the meeting can hear and speak to
each other, and participation in a meeting in such manner shall constitute
presence in person at such meeting. Action may be taken other than at a meeting
upon the unanimous consent of all Members to the proposed action.
3.4 The Committee shall appoint one Member as Chairman and another as
Vice Chairman. The Committee may also reappoint or remove the Chairman or Vice
Chairman.
3.5 A Member who is appointed as Chairman shall continue as Chairman for
the remainder of such Member's term as a Member or until such earlier time as
the Chairman is removed from such position by the Committee. In the event of the
resignation, removal, or retirement of a Chairman, the Committee shall appoint
another Chairman. The Committee, in its discretion, may require that a Chairman
give six months' notice before such Chairman's resignation or retirement becomes
effective.
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3.6 A Member who is appointed Vice Chairman shall continue as Vice
Chairman for the remainder of such Member's term as Member or until such earlier
time as the Vice Chairman is removed from such position by the Committee. The
Vice Chairman shall act as Chairman in the absence of the Chairman or upon the
Chairman's inability or unwillingness to act, and shall perform such duties as
are assigned to the Vice Chairman by the Chairman. In the event of the death or
disability of the Chairman, the Vice Chairman shall become Chairman.
3.7 The Chairman, with the concurrence of the Vice Chairman, shall
appoint a Secretary of the Committee, who, if not a Member, shall have no vote
in the actions of the Committee.
3.8 Appointments to the Committee shall be by the Chairman or the
Chairman-designate, if there is to be a new Chairman, subject to the approval of
a majority of the Members and subject to approval of the Owners.
3.9 In the performance of its duties, the Committee may appoint
individuals or committees, who need not be Owners, to act in an advisory
capacity or to act in an executive capacity ("Designees"), in which case it may
delegate to such Designees such powers as may be required to perform its
functions.
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Section 4 -- Allocation of Firm Earnings
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4.1 Firm Earnings shall be allocated in proportion to Owners' Sharing
Percents until Owners have received an amount equal to 150% of their Deferred
Compensation balances related to real estate under the Previous Operating
Agreement. From that point forward, Firm Earnings shall be allocated in
proportion to Sharing Percents including former Owners.
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Section 5 -- Withdrawal of Funds
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5.1 The Committee shall by resolution establish uniform rules for the
withdrawal of funds. These rules shall be based on the Committee's determination
of the Firm's financial condition. No withdrawals shall be made without the
consent of the Committee.
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Section 6 -- Stock of Xxxxxx Associates, Inc.
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6.1 Pursuant to Section 13 of the Previous Operating Agreement, Owners
approved an IPO Plan under which the Firm owns common stock in the Corporation.
This Section 6 covers the ownership and ultimate transfer of ownership of such
stock. The Executive Committee shall have the authority to establish different
arrangements for Owners temporarily or permanently resident outside the United
States.
6.2 All common stock shall be held in the name of the Firm and allocated
to the Capital Accounts of Owners in accordance with the IPO Plan. Each Owner
shall be entitled to vote the stock included in his or her Capital Account
pursuant to the terms of the Certificate of Incorporation of Xxxxxx Associates,
Inc.
6.3 An Owner shall be entitled to all shares initially included in his or
her Capital Account, except that an Owner shall be entitled only to the Book
Value of those shares designated as goodwill shares under the IPO Plan
("Goodwill Shares") if the Owner ceases to be employed by the Corporation or its
subsidiaries before the age of 55 and 10 years of service except as a result of
death or Disability (a "Termination Event"). Upon the occurrence of a
Termination Event, each Goodwill Share in a terminated Owner's Capital Account
shall automatically be converted into a number of shares of the Corporation's
Class B common stock equal to the following, unless the Executive Committee
approves an additional entitlement:
1-(C* (1 - A / B)))
where:
A = the lesser of (i) B or (ii) the Book Value;
B = the Market Value per share of Class A Common Stock as of the date the
Terminated Owner ceases to be employed by the Corporation or its
subsidiaries; and
C = (i) prior to the first anniversary of the IPO Date, 100%;
(ii) on or after the first anniversary of the IPO Date, but prior to
the second anniversary of the IPO Date, 75%;
(iii) on or after the second anniversary of the IPO Date, but prior
to the third anniversary of the IPO Date, 50%;
(iv) on or after the third anniversary of the IPO Date, but prior to
the fourth anniversary of the IPO Date, 25%; and
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(v) on or after the fourth anniversary of the IPO Date, 0.
If a Termination Event occurs and, in the opinion of the Board of
Directors of the Corporation or the subsidiary of the Corporation by which the
Owner was employed, the terminated Owner violates the terms of his or her
noncompetition agreement with the Corporation within two years after so leaving,
then any shares held by the Firm shall be available to satisfy the Owner's
obligations pursuant to such agreement.
During the four years following the IPO Date and with twelve (12) months notice
to the Executive Committee, an Owner may retire as early as age 52 with all
shares at market value except for the following percentage of the Owner's
Goodwill Shares to which the Owner would otherwise be entitled only to Book
Value according to the formula above. The percentage is six percent (6%) less
two-tenths of one percent (.2%) per full year of ownership over ten years times
the number of years (including fractional years determined in whole months) the
Owner is retiring before the month the Owner reaches age 55.
(Percentage = (6% - .2% x (full years of ownership over 10)) x years before age
55)
Any distributions of shares while an Owner is still employed by the
Corporation shall be deemed to be taken first from shares to which the Owner is
entitled to full value.
At the end of each year following the IPO Date, any Goodwill Shares that
have been surrendered pursuant to the formula above together with any shares of
restricted stock forfeited by employees of the Corporation, shall be allocated
as full value shares among Owners who are actively employed by the Corporation
at that time and among retired and deceased Owners based on their original
relative Goodwill Shares.
6.4 The Firm shall not sell, transfer, pledge or otherwise dispose,
whether directly or indirectly, whether or not for value, or distribute shares
of Class B Common Stock of the Corporation for a period of two years from the
date of the initial public offering of the Corporation's common stock (the
"IPO"), except: (a) with the approval of the independent directors of the
Corporation, on the basis of a determination that such action is in the best
interests of the Corporation or is otherwise appropriate in light of a
particular individual's economic hardship or (b) distributions to Owners
resident outside of North America upon approval of the Firm's Executive
Committee or (c) distributions to Owners after the first anniversary of the IPO.
Any distribution to an Owner of shares of Class B Common Stock of the
Corporation prior to the second anniversary of the date of the IPO will be
subject to the condition that each such Owner agrees not to sell, transfer,
pledge or otherwise dispose, whether directly or indirectly, whether or not for
value, or distribute such shares prior to the second anniversary of the date of
the IPO, unless otherwise approved by the independent directors of the
Corporation, on the basis of a determination that such action is in the best
interests of the Corporation or is otherwise appropriate in light of a
particular individual's economic hardship.
6.5 In order to ensure an orderly flow of the Corporation's shares to the
public market following the IPO Date, all shares allocated to the Capital
Accounts of Owners and former Owners
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will be subject to a registration rights agreement between the Firm and the
Corporation that permits the sale in a registered, underwritten offering of up
to approximately twelve percent (12%) of such shares after the first anniversary
of the IPO Date and in two additional underwritten offerings prior to the third
anniversary of the IPO Date, subject to the reasonable judgment of the
Corporation's Board of Directors based upon factors including the post-IPO share
price performance, equity market conditions, other issuances of the
Corporation's securities, and operating results for the Corporation. Sales after
the third anniversary of the IPO may also be restricted based on the reasonable
judgment of the Corporation's Board of Directors.
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Section 7 -- Indemnity
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7.1 In this Section 7, "Loss" means any: (i) claim, action, proceeding,
judgment, fine or penalty involving any judicial or administrative proceeding,
arbitration or other so-called alternative dispute resolution mechanism (whether
civil, criminal or administrative) and any (ii) damage, loss, liability or
expense of any kind, including but not limited to legal fees, out-of-pocket
expenses, court costs and other costs.
7.2 The Firm shall defend, indemnify and hold harmless (the
"Indemnification") the following persons ("Indemnitees"):
(i) each Member of the Executive Committee; and
(ii) any Designee of and the Secretary of the Executive Committee
against any Loss arising out of the performance of their duties
relating to the Executive Committee or the Firm, provided that the
Indemnification shall not include any Loss arising from acts or failures to act
which constitute gross negligence or fraud or breach of a fiduciary duty to the
Firm.
7.3 For the purpose of Section 7, a "Designee" includes any Owner serving
at the specific written request of the Firm as a director, officer, trustee,
fiduciary, partner, employee or agent of an entity other than the Firm
(including, but not limited to, service with respect to any subsidiary or
employee benefit plan).
7.4 As soon as any Indemnitee receives notice of any Loss for which the
Indemnitee has the right to claim Indemnification, within 30 days thereafter,
such Indemnitee shall give notice in writing both to the Committee and to the
General Counsel of the Firm.
7.5 The rights conferred on any person by this Section shall not be
exclusive of any rights which such person may have or hereafter acquire under
any statute, provision of the Articles, Agreement, vote of the Committee or
otherwise.
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Section 8 -- Miscellaneous
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8.1 Each Owner shall designate in writing a Beneficiary to receive any
distributions under this Agreement in the event of such Owner's death. The
designation may be changed from time to time by a further designation in writing
submitted to the Committee. If an Owner fails to designate a Beneficiary, or if
the Beneficiary predeceases the Owner or dies simultaneously with the Owner,
then payments shall be made to such person or persons from among the natural
objects of the Owner's bounty, the Owner's dependents, or the Owner's estate as
the Committee in its sole discretion shall elect.
8.2 "Work Product" shall mean information treated as proprietary, secret,
or confidential by the Firm or any client or information which is not generally
known to those outside the Firm relating to (i) the business, conduct or
operations of the Firm or any of the Firm's clients, or (ii) any research,
publications, processes, methods, techniques, computer programs, client lists,
client requirements, reports, report formats, discussion guides, or similar
material used in connection with the Firm's business, or (iii) the enhancement
of, or possible new uses or applications for, any such item or service.
While an Owner and at all times thereafter, each Owner agrees to
respect the confidentiality of any information received as a result of such
Owner's association with the Firm and agrees not to disclose to others or
publish any Work Product. Each Owner further agrees that each Work Product
conceived, developed, or improved upon solely by such Owner or in conjunction
with other Firm personnel or by other Owners or associates shall be the
exclusive property of the Firm; and upon ceasing to be an Owner for any reason
whatsoever, such Owner will not, without the written consent of the Executive
Committee, take any such Work Product or copies thereof, nor will such Owner
attempt to use or duplicate such Work Product, nor will such Owner reveal it to
anyone.
8.3 Limitation on Authority of Owners. No Owner is an agent of the Firm
solely by virtue of being a member of a limited liability company, and no Owner
has authority to act for the Firm solely by virtue of being a member of a
limited liability company. This Section supersedes any authority granted to the
Owners pursuant to the Act. Notwithstanding any other provision contained
herein, any Owner who takes any action or binds the Firm in violation of this
Section shall be solely responsible for any loss, cost and expense incurred by
the Firm (including, without limitation, reasonable attorneys' fees) as a result
of the unauthorized action and such Owner shall indemnify and hold the Firm and
its officers harmless with respect to all such loss, cost or expense.
8.4 Fiduciary Duties of the Committee. Notwithstanding anything expressly
or implicitly contained in this Agreement to the contrary, it is understood and
agreed that, pursuant to the provisions of this Agreement and the Act, the
committee has a fiduciary duty to the Owners to manage and operate the Firm and
the Firm's business and to perform its respective duties as a Committee in the
best interests of the Firm and its Owners and with such care as an ordinarily
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prudent person in a like position would use under similar circumstances, and, in
exercising the rights, powers and authority granted to the Committee under this
Agreement, the Committee is bound to act at all times in accordance with such
fiduciary duties.
8.5 This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and together such counterparts shall be
deemed one and the same instrument.
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